EX-10.1






Exhibit 10.1




PLAN SUPPORT AND LOCK-UP AGREEMENT




     This Plan Support and Lock-Up Agreement (together with the Exhibits and Schedules attached
hereto, this “Agreement”), dated as of August 6, 2009, by and among (i) CanArgo Energy
Corporation (the “Company”); (ii) Persistency (“Persistency”); (iii) Thomas L.
Gipson (“TLG”), Robert L. Gipson (“RLG”) and Yvonne Koenig (“YK,” and
together with TLG and RLG, collectively, the “I&S Parties” and together with Persistency,
the “Noteholders” ); (iv) Weus Holdings, Inc. and its affiliates (collectively,
“Weatherford”) and (v) each holder (or investment managers or advisors having authority to
act on behalf of the beneficial owners) of a General Unsecured Claim (as defined in the Term Sheet
attached as Exhibit A (the “Term Sheet”) that is a signatory hereto (each such holder of
such claims collectively, the “General Unsecured Creditors”; and together with the
Noteholders and Weatherford, collectively, the “Supporting Creditors”). The Company and the
Supporting Creditors are referred to herein collectively as the “Parties,” and sometimes
individually as a “Party.”



RECITALS:




     WHEREAS, the Company contemplates a restructuring of the financial obligations of the Company
(the “Restructuring”) through a pre-packaged or pre-negotiated chapter 11 plan (the
“Plan”) in a chapter 11 bankruptcy case (the “Chapter 11 Case”) under title 11 of
the United States Code (as amended, the “Bankruptcy Code”), which shall be filed in the
United States Bankruptcy Court for the Southern District of New York (the “Bankruptcy
Court”);



     WHEREAS, certain of the Supporting Creditors have engaged in negotiations with the Company
with the objective of reaching an agreement regarding the principal terms of the Restructuring and
have reached an agreement in principle on the terms and conditions set forth in the Term Sheet;



     WHEREAS, the Term Sheet provides that the Restructuring will be effectuated through the
transactions set forth therein;



     WHEREAS, in order to implement the Restructuring, the Company is in the process of preparing
the Plan, consistent in all material respects with the Term Sheet, and a supporting disclosure
statement (the “Disclosure Statement”), and the Company: (a) upon receipt of signatures to
this Agreement by Supporting Creditors, who if they voted on the Plan such votes would be legally
sufficient to confirm the Plan, and provided that such Supporting Creditors have received the Plan
and Disclosure Statement; or (b) will solicit acceptances to the Plan in accordance with the
Disclosure Statement and the ballots (the “Consent Solicitation”), to be used in connection
with voting on the Plan (the “Ballots”) and subject to receiving properly executed and
timely Ballots from the Supporting Creditors in an amount and number confirming that each impaired
class under the Plan has accepted the Plan (other than existing equity holders) (or agreement from
such Supporting Creditors that this Agreement may be treated as their vote and ballot); intends to
(i) commence the Chapter 11 Case in the Bankruptcy Court, (ii) on the date of commencement of the
Chapter 11 Case, file the Plan and Disclosure Statement with the Bankruptcy Court, and (iii) use
commercially reasonable efforts to have the Disclosure Statement approved and the Plan confirmed by
the Bankruptcy Court, in each case, as



 









 







expeditiously as reasonably practicable under the Bankruptcy Code and the Federal Rules of
Bankruptcy Procedure and consistent with the timing set forth herein and in the Term Sheet;



     WHEREAS, each Supporting Creditor holds or is the legal or beneficial holder of, or the
investment manager with discretionary authority with respect to, the aggregate principal amount of
applicable claims set forth below each such Supporting Creditor’s signature attached hereto (the
“Claim Amount”) and, to facilitate the implementation of the Restructuring, each of the
Supporting Creditors is prepared to support the approval of the Disclosure Statement and
confirmation of the Plan, on the terms and subject to the conditions of this Agreement, the Term
Sheet and applicable law, and, if and when solicited to do so in accordance with applicable law, to
vote (or, in the case of managed or advised accounts, instruct its custodial agents to vote) to
accept the Plan; and



     WHEREAS, the Company desires to obtain the commitment of the Supporting Creditors to negotiate
the Plan in good faith and to support and vote for the Plan, subject to the terms and conditions
set forth herein, and agrees and acknowledges that the Claim Amount for each Supporting Creditor is
a legal, valid and binding obligation of the Company, to which the Company has no defense or right
of offset.



     NOW, THEREFORE, in consideration of the premises and mutual covenants and agreements set forth
herein, and for other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, each of the Parties hereby agrees as follows:



     1. Incorporation of Recitals. The recitals set forth above are expressly incorporated
herein and made an integral part of this Agreement; provided that each Supporting Creditor hereto
severally and not jointly makes each and any representation or warranty hereunder as to itself
only.



     2. Definitions. Capitalized terms used herein but not otherwise defined herein shall
have the meanings ascribed to such terms in the Term Sheet.



     3. Providing Plan to Supporting Creditors. On or before October 21, 2009, the Company
shall provide each Supporting Creditor a copy of the Plan (which Plan shall have been agreed to by
the Company and Persistency), which Plan shall be consistent in all material respects with the Term
Sheet.



     4. Creditor Support of Restructuring.




     (a) As long as the Company has satisfied its obligations pursuant to this Agreement and
this Agreement has not been terminated pursuant to Section 8 hereof, each Supporting
Creditor severally agrees with each other Supporting Creditor and with the Company that, if
the Company proposes the Plan, such Supporting Creditor (i) shall, subject to receipt of the
Plan and the Disclosure Statement and a request that such Supporting Creditor vote in favor
of the Plan, as soon as practicable (but in no case later than any voting deadline stated
therein), vote all of its impaired claims (as such term is defined under section 101 of the
Bankruptcy Code, “Claim”), and equity interests in the



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Company, as applicable, whether now owned or hereafter acquired, to accept the Plan and
otherwise support and take all reasonable actions to facilitate the proposal, solicitation,
confirmation, and consummation of the Plan; (ii) shall not object to confirmation of, or
vote to reject, the Plan or otherwise commence or participate in any proceeding directly or
indirectly for the purpose of opposing or altering the Plan, the Disclosure Statement, the
solicitation of acceptances of the Plan or any other reorganization documents containing
terms and conditions consistent in all material respects with the Term Sheet, the Plan and
this Agreement; (iii) shall vote against any restructuring, workout, or plan of
reorganization relating to the Company other than the Plan; (iv) shall not directly or
indirectly seek, solicit, support, encourage, vote for, consent to, or participate in the
negotiation or formulation of (x) any plan or reorganization, proposal, offer, dissolution,
winding up, liquidation, reorganization, merger, or restructuring for the Company other than
the Plan, (y) any disposition outside of the Plan of all or any substantial portion of the
assets of the Company and any of their subsidiaries or (z) any other action (including any
request to terminate exclusivity) that is inconsistent with, or that would delay or obstruct
the proposed solicitation, confirmation, or consummation of the Plan; and (v) shall support
the releases, through the Plan, of the Company, the Supporting Creditors and their
respective counsel and advisors.




     (b) Notwithstanding the foregoing, each Supporting Creditor may raise and be heard on
any issue arising in the Chapter 11 Case so long as such Supporting Creditor is not
attempting to oppose or alter the Plan or the Disclosure Statement approved by it, or
otherwise breach any of the provisions of this Agreement.




     (c) Each Supporting Creditor agrees that until this Agreement has been terminated in
accordance with Section 8, it shall not as against the Company or its direct or indirect
subsidiaries (i) take any action or otherwise pursue any right or remedy under applicable
law, any agreement, contract, loan document or indenture, as applicable, or (ii) initiate,
or have initiated on its behalf, any litigation or proceeding of any kind with respect to
its Claims other than to enforce this Agreement.



     5. Conditions to Effectiveness of this Agreement. This Agreement shall not become
effective until such time as each of the following conditions have been satisfied:




     (a) The execution and delivery of this Agreement to the Company by the Supporting
Creditors; and




     (b) The execution and delivery of this Agreement by the Company.



     6. Pursuit of Restructuring. The Company shall use its commercially reasonable
efforts to effectuate the Restructuring, including commencing the Chapter 11 Case (the date on
which the Chapter 11 Case is commenced shall be defined as the “Commencement Date”) to
implement the Restructuring, using its commercially reasonable efforts to obtain approval of the
Disclosure Statement, support the Plan, obtain confirmation of the Plan and consummate the Plan
promptly after confirmation. The Chapter 11 Case, if filed, will be filed before the Bankruptcy
Court.



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     7. Holdings and Transfers. As long as this Agreement has not been terminated pursuant
to Section 8 hereof:




     (a) Each Supporting Creditor severally represents and warrants to the Company that it
holds or is the legal or beneficial holder of, or the investment adviser or manager with
discretionary authority with respect to, the aggregate amount of unsecured claims set forth
below each such Supporting Creditor’s signature attached hereto (the “Holdings”) and
has the power to vote and dispose of the Holdings in accordance with this Agreement on
behalf of such beneficial owners, and that the amount of the Holdings constitutes the entire
amount of all of such Supporting Creditor’s Claims against the Company at the time this
Agreement becomes effective;




     (b) Each Supporting Creditor severally agrees that it will not sell, pledge, assign,
hypothecate, or otherwise transfer any Holdings, and any such attempted sale, pledge,
assignment, hypothecation, or other transfer shall be void and without effect, unless the
transferee executes and there is delivered to the Company and to the other notice parties
listed in Section 25 hereof, within three (3) business days after such transfer, a written
undertaking (in the form of the Transferee Undertaking attached hereto as Schedule 1)
agreeing to become a party to, and bound by all the terms of, this Agreement, other than
Section 13 hereof (Appointment to a Statutory Committee; Absolute Discretion to Exercise
Fiduciary Responsibilities), with respect to the Holdings being transferred, and such
transferee (hereinafter a “Transferee”) shall thereupon be deemed to be a Supporting
Creditor with respect to the amount of such transferred Holdings for purposes of this
Agreement, other than Section 13 hereof, and the transferor shall no longer be a Supporting
Creditor with respect to such transferred Holdings. The Company hereby agrees that any
Transferee executing such an undertaking shall be entitled to the benefits of this
Agreement;




     (c) This Agreement shall in no way be construed to preclude a Supporting Creditor from
acquiring additional unsecured claims provided that such Supporting Creditor (other than a
Transferee) shall vote, and take such other actions in respect of, such additional unsecured
claims as is provided for herein; and




     (d) This Agreement shall in no way be construed to preclude Persistency from providing
Debtor in Possession financing to the Company upon the terms and subject to the conditions
contemplated by the Term Sheet (“DIP Financing”).



     8. Termination.




     (a) This Agreement may be terminated if any of the following events (any such event, a
“Termination Event”) occurs and is not waived in accordance with Section 15:




     (i) By a Supporting Creditor if it has not received a copy of the proposed Plan
consistent in all material respects with the Term Sheet as required in Section 3;



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     (ii) By a Supporting Creditor if the Company shall (A) fail to comply with the
Budget attached to the Term Sheet (except as same may be permitted under the DIP
Financing), (B) undertake any related party expenditures, transfers or transactions
(other than the payment of ordinary course salaries and professional fees in
accordance with the Budget attached to the Term Sheet) (1) in connection with any
pending or threatened criminal or civil litigation (other than in connection with
the prosecution of the Company’s claims against certain standby underwriters
identified in its Current Report on Form 8-K filed with the Securities and Exchange
Commission on December 5, 2008), or (2) otherwise outside the ordinary course of the
Company’s business, including, without limitation, the collection of its outstanding
receivables and intercompany advances, without first obtaining the affirmative
written consent of Persistency;




     (iii) By a Supporting Creditor if the Company has not commenced the Chapter 11
Case in the Bankruptcy Court, together with the filing of the Plan and Disclosure
Statement with the Bankruptcy Court, on or before October 31, 2009;




     (iv) By a Supporting Creditor if the Plan or the Disclosure Statement has been
amended, modified or supplemented, such that the Plan and Disclosure Statement is
not consistent in all material respects with the Term Sheet;




     (v) By a Supporting Creditor if the business, properties, assets or financial
condition of the Company and any of its direct or indirect subsidiaries taken as a
whole shall have been materially and adversely affected since the date of this
Agreement;




     (vi) By a Supporting Creditor if the Plan shall not have become effective on or
before the date which is 90 calendar days after the Commencement Date (unless the
time for effectiveness had been extended as permitted under the DIP Financing);




     (vii) By any Party if another Party has materially breached its obligations
hereunder;




     (viii) By any Party if once filed, and prior to the confirmation of the Plan,
the Chapter 11 Case shall have been converted to a case under Chapter 7 of the
Bankruptcy Code, or dismissed (provided that the terminating Party did not seek or
support such conversion or dismissal);




     (ix) By any Party if an examiner is appointed pursuant to section 1104(c)(1) of
the Bankruptcy Code with expanded powers to run the business of the Company, or a
trustee under chapter 11 of the Bankruptcy Code is appointed for the Company in the
Chapter 11 Case (other than the Trustee of the Liquidating Trust as contemplated in
the Term Sheet and the Plan) (provided that the terminating Party did not seek or
support such appointment);



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     (x) By any Party if any court of competent jurisdiction shall enter a final
nonappealable judgment or order declaring this Agreement to be unenforceable
(provided that the terminating Party did not seek or support such appeal);




     (xi) By any Party upon the entry of an order in the Chapter 11 Case rejecting
this Agreement (provided that the terminating Party did not seek or support such
order);




     (xii) By any Party upon the commencement of an involuntary bankruptcy
proceeding against the Company that is not dismissed or converted to a voluntary
proceeding within 10 business days (provided that the terminating Party did not seek
or support such order);




     (xiii) By Persistency if (A) the DIP Financing is not approved by the
Bankruptcy Court, or (B) if the DIP Financing is approved by the Bankruptcy Court,
upon an Event of Default under the DIP Financing that is not waived by Persistency
or cured by the Company within any applicable grace period; or




     (xiv) By Persistency if the Company does not, in connection with confirmation
of the Plan, execute and deliver to Persistency a Certificate of Representations and
Warranties in form and substance acceptable to Persistency, which representations
and warranties shall be true and correct in all material respects at and as of the
date of delivery of the Certificate, except for representations and warranties that
are made as of a specific date or time other than such date, which shall be true and
correct as of such specific date or time;




provided, however, that no Party shall have the right to so terminate its obligations under
this Agreement upon the occurrence of any of the events and conditions described above (the
“Termination Events”) unless such Party has given written notice (‘‘Notice of
Termination”) thereof to each of the other Parties hereto specifically identifying the
basis upon which such Party is exercising its right to terminate, and the event or condition
giving rise to such right is not cured within five (5) Business Days of such written notice
(provided that this cure period shall not extend any grace or cure period provided under the
DIP Financing); provided, further, that in the event that any Party terminates this
Agreement with respect to such Party, following the effectiveness of such termination, this
Agreement will be of no further force and effect against any Party, except that the
Company’s acknowledgement that the Claim Amount of each Supporting Creditor is the legal,
valid and binding obligation of the Company, to which the Company has no defense or right of
offset, shall survive termination of this Agreement.




     (b) The Supporting Creditors shall have no liability to the Company or each other in
respect of any termination of this Agreement in accordance with the terms hereof. The
Company shall have no liability to the Supporting Creditors in respect of any termination of
this Agreement in accordance with the terms hereof.



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     9. Representations and Warranties. Each Supporting Creditor, severally and not
jointly, and the Company, hereby represents and warrants to the others that:




     (a) It has the requisite corporate power and authority to enter into this Agreement and
to carry out the transactions contemplated by, and perform its respective obligations under,
this Agreement;




     (b) The execution and delivery of this Agreement and the performance of its obligations
hereunder have been duly authorized by all necessary corporate or other organizational
action on its part;




     (c) The execution, delivery, and performance by it of this Agreement does not and shall
not (i) violate any provision of law, rule, or regulation applicable to it or any of its
affiliates, or its certificate of incorporation or bylaws or other organizational documents
or those of any of its affiliates, or (ii) conflict with, result in a breach of, or
constitute (with due notice or lapse of time or both) a default under any material
contractual obligation to which it or any of its affiliates is a party;




     (d) The execution, delivery, and performance by it of this Agreement does not and shall
not require any registration or filing with, the consent or approval of, notice to, or any
other action with any federal, state, or other governmental authority or regulatory body;




     (e) This Agreement is the legally valid and binding obligation of it, enforceable
against it in accordance with its terms, except as enforcement may be limited by bankruptcy,
insolvency, reorganization, moratorium, or other similar laws relating to or limiting
creditors’ rights generally, or by equitable principles relating to enforceability;




     (f) Each Supporting Creditor severally represents and warrants that (i) it is an
“accredited investor” within the meaning of Rule 501 of the Securities and Exchange
Commission under the Securities Act, with sufficient knowledge and experience to evaluate
properly the terms and conditions of the Term Sheet and this Agreement, and has been
afforded the opportunity to discuss the Term Sheet and other information concerning the
Company with the Company’s representatives, and to consult with its legal and financial
advisors with respect to its investment decision to execute this Agreement, and (ii) it has
made its own analysis and decision to enter into this Agreement and otherwise investigated
this matter to its full satisfaction and will not seek rescission or revocation of this
Agreement;




     (g) The Company represents and warrants that (i) it has been advised by professionals
of nationally recognized standing and experience in transactions of this nature, and has
been afforded the opportunity to discuss and evaluate the terms and conditions of the Term
Sheet and this Agreement, and to consult with its legal and financial advisors with respect
to its decision to execute this Agreement, and (ii) it has made its own analysis and
decision to enter into this Agreement and otherwise



7









 







investigated this matter to its full satisfaction and will not seek rescission or
revocation of this Agreement; and




     (h) Except as expressly set forth in this Agreement, none of the Parties hereto makes
any representation or warranty, written or oral, express or implied.



     10. Public Disclosures. Prior to the issuance of any public disclosures regarding the
Restructuring, the Company shall consult with Persistency as to the form and substance of such
public disclosures, provided that at all times the Company shall be solely responsible for each
public disclosure made by it. Nothing in this Agreement shall preclude or prohibit any Supporting
Creditor from issuing its own public disclosure (consistent with the Term Sheet) regarding the
Restructuring; provided, however, that such Supporting Creditor shall first consult with the
Company prior to any such issuance. Without limiting the generality of the foregoing, and other
than in connection with the Disclosure Statement, unless required by law, including, without
limitation, pursuant to the requirements of the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder, or a lawful subpoena issued by a court of
competent jurisdiction following the Company’s good faith efforts to quash such subpoena, or unless
the identity of any Supporting Creditor and its respective Holdings have previously been publicly
disclosed through no breach by the Company of its confidentiality obligation herein set forth, the
Company shall not disclose (a) any Supporting Creditor’s identity or (b) the amount of such
holder’s respective Holdings, without the prior written consent of such Supporting Creditor in each
case; and, if such announcement or disclosure is so required, the Company shall afford the
Supporting Creditors a reasonable opportunity to first quash such subpoena and, if unsuccessful, to
review and comment upon any such announcement or disclosure prior to the applicable announcement or
disclosure.



     11. Fiduciary Duties. Notwithstanding anything to the contrary herein, nothing in
this Agreement shall require the Company or any directors or officers of the Company (in such
person’s capacity as a director or officer of the Company) to take any action, or to refrain from
taking any action, to the extent required to comply with his fiduciary obligations under applicable
law.



     12. Specific Performance. It is understood and agreed by each of the Parties that
money damages would not be a sufficient remedy for any breach of this Agreement by any Party, and
each non-breaching Party shall be entitled to seek specific performance and injunctive or other
equitable relief as a remedy for such breach.



     13. Appointment to a Statutory Committee; Absolute Discretion to Exercise
Fiduciary Responsibilities. Anything else in this Agreement to the contrary notwithstanding,
if a Supporting Creditor is appointed to and serves on a statutory committee established in the
Chapter 11 Case, the terms of this Agreement shall not be construed to limit such Party’s exercise,
in its sole discretion, of its fiduciary duties to any person arising from its service on such
committee, and any exercise of such fiduciary duties shall not be deemed to constitute a breach of
the terms of this Agreement. To the extent that the United States Trustee declines to appoint a
Supporting Creditor to any such statutory committee based upon such Supporting



8









 







Creditor’s execution of this Agreement, this Agreement shall be deemed to be terminated as to
one or more such Supporting Creditors so as to allow such Supporting Creditor to be appointed to
such statutory committee, but only to the extent that after giving effect to such termination(s),
the holders of at least 2/3 in amount and a majority in number of holders of unsecured claims
remain in support of the Plan and bound by this Agreement.



     14. Successors and Assigns. Except as otherwise provided in this Agreement, this
Agreement is intended to and shall bind and inure to the benefit of each of the Parties and each of
their respective successors, assigns, heirs, executors, administrators, and representatives.



     15. Amendments and Waivers. This Agreement may not be modified, amended, or
supplemented except in a writing signed by the Company and Supporting Creditors who are not then in
breach hereof; provided, however, that any modification of, or amendment or supplement to, this
Agreement that materially and adversely affects any Party shall require the written consent of the
Party so affected; provided, further, that any modification of, or amendment or supplement to, this
Section 15 shall require the written consent of all of the Parties.



     16. Additional Claims or Equity Interests. To the extent any Supporting Creditor (a)
acquires additional Holdings, (b) holds or acquires any other claims against the Company entitled
to vote on the Plan or (c) holds or acquires equity interests in the Company entitled to vote on
the Plan, such Supporting Creditor agrees that such Claims, other claims and equity interests shall
be subject to this Agreement and that it shall vote (or cause to be voted) any such additional
Claims, other claims or equity interests (in each case, to the extent still held by it or on its
behalf at the time of such vote) in a manner consistent with Section 4(a).



     17. No Third-Party Beneficiaries. Nothing contained in this Agreement is intended to
confer any rights or remedies under or by reason of, this Agreement on any person or entity other
than the Parties hereto, or is anything in this Agreement intended to relieve or discharge the
obligation or liability of any third party to any Party to this Agreement, nor shall any provision
give any third party any right of subrogation or action over or against any Party to this
Agreement.



     18. Good Faith Cooperation; Further Assurances; Acknowledgment; Definitive Documents.
The Parties shall cooperate with each other in good faith and shall coordinate their activities (to
the extent practicable and subject to the terms hereof) in respect of (a) all matters relating to
their rights in respect of the Company or otherwise in connection with their relationship with the
Company, (b) all matters concerning the implementation of the Restructuring, and (c) the pursuit
and support of the Restructuring. Furthermore, subject to the terms hereof, each of the Parties
shall take such action as may be reasonably necessary to carry out the purposes and intent of this
Agreement, including making and filing any required regulatory filings and voting any equity
securities of the Company in favor of the Restructuring (provided that no Supporting Creditor shall
be required to incur any expense, liability, or other obligation), and shall refrain from taking
any action that would frustrate the purposes and intent of this Agreement, including proposing a
plan of reorganization or liquidation that is not the Plan or otherwise consistent with the Term
Sheet. This Agreement is not and shall not be deemed a



9









 







solicitation for consents of the Plan or a solicitation to tender or exchange any Holdings.
Each Party hereby covenants and agrees (a) to negotiate in good faith the Plan and the Disclosure
Statement, including all exhibits, supplements and annexes thereto, (b) to negotiate in good faith
the definitive documents implementing, achieving, and relating to the Restructuring, including the
order of the Bankruptcy Court confirming the Plan, each of which is to be specifically described in
the Plan (collectively, the “Definitive Documents”), shall contain terms and conditions
consistent in all material respects with the Plan, and shall otherwise be reasonably satisfactory
in form and substance to the Supporting Creditors, and (c) to execute (to the extent they are a
party thereto) and otherwise support the Definitive Documents.



     19. Severability. If any portion of this Agreement shall be held to be invalid or
unenforceable, then that portion shall be deemed modified (only to the extent necessary and in a
manner consistent with the remainder of this Agreement) so as to be valid and enforceable, or if
such modification is not reasonably feasible, shall be deemed to have been severed out of this
Agreement, and the Parties acknowledge that the balance of this Agreement shall in any event be
valid and enforceable unless the effect shall be to materially alter the terms and conditions of
this Agreement.



     20. Prior Agreements. This Agreement represents the entire agreement of the Parties
with respect to the subject matter of this Agreement, and supersedes all prior negotiations and
agreements among the Parties with respect to the matters set forth herein.



     21. Governing Law. This Agreement shall be governed by, and construed in accordance
with, the laws of the State of New York, regardless of the laws that might otherwise govern under
applicable principles of conflicts of law of the State of New York.



     22. Venue. By execution and delivery of this Agreement, each of the Parties
irrevocably and unconditionally agrees that any legal action, suit, or proceeding with respect to
any matter under or arising out of or in connection with this Agreement, or for recognition or
enforcement of any judgment rendered in any such action, suit, or proceeding, shall be brought (a)
in the Bankruptcy Court if the Chapter 11 Case has been commenced, or (b) in a court of competent
jurisdiction located in The City of New York if the Chapter 11 Case has not been commenced. Each
Party irrevocably waives any objection it may have to the venue of any action, suit, or proceeding
brought in such court or to the convenience of the forum.



     23. Personal Jurisdiction. By execution and delivery of this Agreement, each of the
Parties irrevocably and unconditionally submits to the personal jurisdiction of (a) the Bankruptcy
Court if the Chapter 11 Case has been commenced, or (b) a court of competent jurisdiction located
in The City of New York if the Chapter 11 Case has not been commenced, for purposes of any action,
suit, or proceeding arising out of or relating to this Agreement.



     24. Notices. All notices (including, without limitation, any Notice of Termination)
and other communications hereunder shall be in writing and shall be deemed to have been duly given
if personally delivered by courier service, messenger, or facsimile to the following addresses, or
such other addresses as may be furnished hereafter by notice in writing:



10









 






     (a) If to the Company, to counsel for the Company:


Satterlee Stephens Burke & Burke LLP

230 Park Avenue

New York, New York 10169

Attention: Peter A. Basilevsky, Esq.

Facsimile: (212) 818-9606





     (b) If to Persistency:


Persistency Capital LLC

1270 Avenue of the Americas

Suite 2100

New York, New York 10020

Attention: Andrew James Morris

Facsimile: (646) 619-4642





     (c) With a copy to its counsel:


Seward & Kissel LLP

One Battery Park Plaza

New York, New York 10004

Attention: John R. Ashmead, Esq.

Facsimile: (212) 480-8421





     (d) If to the I&S Parties, to:


Ingalls & Snyder, LLC

61 Broadway

New York, New York 10006

Attention: Thomas D. Boucher

Facsimile: (212) 269-4177





     (e) If to any other Supporting Creditor, to the address provided under their authorized
signature;



     or to such other address as any such party may give to all the other parties hereto in
accordance with the notice provisions hereof.



     25. Headings. The section headings of this Agreement are for convenience of reference
only and shall not, for any purpose, be deemed a part of this Agreement.



     26. Counterparts; Fax Signatures. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of which shall constitute one and
the same Agreement. Delivery of an executed signature page of this Agreement by facsimile shall be
effective as delivery of a manually executed signature page of this Agreement.



11









 





     27. No Waiver of Participation and Reservation of Rights. Except as expressly
provided in this Agreement and in any amendment among the Parties, nothing herein is intended to,
or does, in any manner waive, limit, impair, or restrict the ability of any Supporting Creditor to
protect and preserve its rights, remedies and interests, including, without limitation, its Claims
against the Company or its full participation in any bankruptcy case filed by the Company, or any
of its affiliates and subsidiaries, including, without limitation, the Chapter 11 Case. The Parties
full reserve any and all of their rights in the event the transactions contemplated by this
Agreement or in the Plan are not consummated or this Agreement is terminated.



     28. Interpretation. This Agreement is the product of negotiations among the
Supporting Creditors and the Company, and in the enforcement or interpretation hereof, is to be
interpreted in a neutral manner, and any presumption with regard to interpretation for or against
any Party by reason of that Party having drafted or caused to be drafted this Agreement, or any
portion hereof: shall not be effective in regard to the interpretation hereof.



     29. Acknowledgement. This Agreement is not and shall not be deemed to be a
solicitation of votes for the acceptance of the Plan. Each Supporting Creditor’s vote will not be
solicited until such Supporting Creditor has been provided with the Disclosure Statement.



     30. Recourse. Subject to Section 12 of this Agreement and provided specific
performance is not sought under Section 12 of this Agreement, the only other remedy of a Supporting
Creditor and the Company with respect to a breach of this Agreement by the Company or a Supporting
Creditor, as applicable, is to terminate this Agreement in accordance with its terms.



12









 




     IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed and delivered
by their respective officers thereunto duly authorized, as of the date first written above,


	 	 	 	 	 	 	 
	 	 	CanArgo Energy Corporation	 	 
	 
	 	 	 	 	 	 
	 
	 	By:	 	 	 	 
	 
	 	 	 	 	 	 
	 
	 	 	 	Name: Vincent McDonnell	 	 
	 
	 	 	 	Title:   C.E.O.	 	 
	 
	 	 	 	 	 	 
	 	 	Persistency	 	 
	 
	 	 	 	 	 	 
	 
	 	By:	 	 	 	 
	 
	 	 	 	 	 	 
	 
	 	 	 	Name:	 	 
	 
	 	 	 	Title:	 	 





	 	 	 	 	 	 	 
	 	 	Aggregate principal amount of	 	 
	 
	 	Existing Unsecured Claims:	 	 	 	 
	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	 
	 	 	Thomas L. Gipson	 	 
	 
	 	 	 	 	 	 
	 	 	Aggregate principal amount of	 	 
	 
	 	Existing Unsecured Claims:	 	 	 	 
	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	 
	 	 	Robert L. Gipson	 	 
	 
	 	 	 	 	 	 
	 	 	Aggregate principal amount of	 	 
	 
	 	Existing Unsecured Claims:	 	 	 	 
	 
	 	 	 	 	 	 




13








 





	 	 	 	 	 	 	 
	 	 	 	 	 
	 	 	Yvonne Koenig	 	 
	 
	 	 	 	 	 	 
	 	 	Aggregate principal amount of	 	 
	 

	 	Existing Unsecured Claims:	 	 	 	 
	 

	 	 	 	 	 	 





	 	 	 	 	 	 	 
	 	 	Weus Holdings, Ltd.	 	 
	 
	 	 	 	 	 	 
	 	 	Aggregate principal amount of	 	 
	 

	 	Existing Unsecured Claims:	 	 	 	 
	 

	 	 	 	 	 	 





	 	 	 	 	 	 	 
	 	 	Address for Notices:	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	Attention:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Facsimile:	 	 	 	 
	 

	 	 	 	 	 	 





	 	 	 	 	 	 	 
	 	 	R.S. Platou Markets AS	 	 
	 
	 	 	 	 	 	 
	 	 	Aggregate principal amount of	 	 
	 

	 	Existing Unsecured Claims:	 	 	 	 
	 

	 	 	 	 	 	 





	 	 	 	 	 	 	 
	 	 	Address for Notices:	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	Attention:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Facsimile:	 	 	 	 
	 

	 	 	 	 	 	 





14









 




Schedule I to the Plan Support Agreement


Transferee Undertaking

By signing in the space provided below and returning a copy of this Transferee Undertaking to the
Company and to the other notice parties listed in Section 25 of the Plan Support Agreement, the
undersigned, as Transferee, (a) represents and warrants that it has received (i) the Plan Support
Agreement (attached hereto as Exhibit A), and (ii) the Term Sheet (attached hereto as Exhibit B);
(b) indicates its agreement to be bound by (i) the Plan Support Agreement (other than with respect
to Section 13 thereof (Appointment to a Statutory Committee; Absolute Discretion to Exercise
Fiduciary Responsibilities)), and (ii) the Term Sheet, with respect to the Holdings being
transferred (but not any Claims against the Company previously owned by the Transferee or
thereafter acquired by the Transferee). Capitalized terms used in this Transferee Undertaking and
not defined herein shall have the meanings ascribed to them in the Plan Support Agreement,
including by reference therein.


It is a precondition to any transfer of the Holdings that an executed Transferee Undertaking be
delivered to the Company. Delivery of an executed Transferee Undertaking by facsimile to the
Company shall be effective for such delivery. Upon receipt by the Company of an executed Transferee
Undertaking, the undersigned Transferee shall thereupon be deemed to be a Supporting Creditor with
respect to the amount of such transferred Holdings for purposes of the Plan Support Agreement
(other than Section 13 thereof), and the undersigned transferor shall no longer be a Supporting
Creditor with respect to such transferred Holdings.


Aggregate amount of:


     Existing Secured Debt:                                                      


     Unsecured Claims:                                                             


ACCEPTED AND AGREED


	 	 	 	 	 
	[NAME OF TRANSFEREE]	 	 
	 
	 	 	 	 
	By:
	 	 	 	 
	 
	 	 	 	 
	 
	 	Name:	 	 
	 
	 	Title:	 	 





ACCEPTED AND AGREED



	 	 	 	 	 
	[NAME OF TRANSFEROR]	 	 
	 
	 	 	 	 
	By:
	 	 	 	 
	 
	 	 	 	 
	 
	 	Name:	 	 
	 
	 	Title:	 	 




Address for Notices:
[Insert Address]


15







 





Exhibit A to the Transferee Undertaking 




Plan Support Agreement




16









 





Exhibit A to Plan Support and Lock-Up Agreement




Plan Term Sheet




17









 





CANARGO ENERGY CORP.




Plan Term Sheet




August 6, 2009




     The following is a summary (the “Plan Term Sheet”) of certain indicative terms of a
proposed plan of reorganization (the “Plan”) for the Company (as defined below). The
transactions contemplated by this Plan Term Sheet are subject to further terms and conditions to be
set forth in the Plan and other definitive documents. This Plan Term Sheet is the result of
extensive, good faith, arm’s-length discussions between the Company and Persistency (as defined
below) to settle and resolve the Company’s obligations to its creditors, and is entitled to
protection from any use or disclosure to any party or person pursuant to Federal Rule of Evidence
408 and any other rule of similar import, as well as the common interest, confidentiality and
non-disclosure agreements previously entered into between the Company and certain of its creditors
receiving copies of this Plan Term Sheet. This Plan Term Sheet and the information contained
herein are strictly confidential. This Plan Term Sheet does not constitute an offer of securities
or a solicitation of offers to purchase securities, nor is it an offer or solicitation for any
chapter 11 plan, and is being presented for discussion and settlement purposes only. This Plan
Term Sheet does not create or impose any commitment or obligation, express or implied, on any party
in any respect regarding a definitive agreement or otherwise. Any such binding agreement or
commitment between the parties would result only, following the completion of due diligence review
by Persistency, from the execution and delivery by each party of a definitive agreement, when and
if executed and delivered, containing such terms and conditions satisfactory to the parties
regarding the implementation of the Plan Term Sheet (a “Plan Support and Lock-Up
Agreement”). No party shall have any obligation, express or implied, to negotiate with respect
to the transactions contemplated by this term sheet or to negotiate or enter into any definitive
agreement.



I. Parties




	 	 	 
	Debtor:

	 	CanArgo Energy Corp., a Delaware
corporation (“CanArgo” or the
“Company”). CanArgo, together with
its direct and indirect subsidiaries
(as fully described in Exhibit I),
are collectively referred to herein
as the “CanArgo Group.”
	 
	 	 
	Senior Lenders:

	 	Thomas L. Gipson, Robert L. Gipson
and Yvonne Koenig (including their
respective successors and assigns
and any other person that holds the
2009 Notes, the “Senior Lenders”),
who are the present holders of the
Senior Subordinated Convertible
Guaranteed Notes due September 1,
2009 (“2009 Notes”), issued pursuant
to a Note Purchase Agreement as of
March 3, 2006 by and among the
Company and the purchasers named
therein, which 2009 Notes are
guaranteed by CanArgo’s subsidiaries
under the






1









 






	 	 	 
	 

	 	Subordinated Guaranty
Agreement dated March 3, 2006 (the
“2009 Guaranty”). The total
obligations outstanding and now due
and payable under the 2009 Notes,
including principal, interest,
default interest and reimbursable
fees and expenses, to which the
Company has no defense to payment,
is US $5,258,072 as of August 1,
2009 (such obligations as of the
date of the filing of the Plan, the
“Senior Lender Claims”).
	 
	 	 
	Senior Subordinate Lender:

	 	Persistency, a Cayman Islands
limited company (“Persistency”),
holder of CanArgo’s 12% Subordinated
Convertible Guaranteed Notes, due
June 28, 2010 (the “2010 Notes”)
issued under a Note and Warrant
Purchase Agreement dated June 28,
2006, which 2010 Notes are
guaranteed by CanArgo’s subsidiaries
under the Subordinated Guaranty
Agreement dated June 28, 2006 (the
“2010 Guaranty”).  The total
obligations outstanding and now due
and payable under the 2010 Notes,
including principal, interest and
default interest through August 1,
2009, and reimbursable fees and
expenses through February 5, 2009
(fees and expenses thereafter are
treated separately elsewhere in this
Term Sheet) to which the Company has
no defense to payment, is US
$12,293,296 (such obligations as of
the date of the filing of the Plan,
the “Senior Subordinate Lender
Claims”).
	 
	 	 
	Weatherford:

	 	Weus Holdings, Inc. and its
affiliates (together,
“Weatherford”), with whom CanArgo
has entered into a Settlement
Agreement dated February 9, 2009,
requiring CanArgo’s payment to
Weatherford of US$1.2 Million (the
“Weatherford Claim”).
	 
	 	 
	General Unsecured Claims:

	 	Any unsecured claim against the
Company, including any intercompany
claim, that is not a priority tax
claim, administrative claim, accrued
professional compensation claim,
other priority claim, Senior
Subordinate Lender Claims, Senior
Lender Claims or Weatherford Claim
and which is not subject to bona
fide dispute (collectively, the
“General Unsecured Claims”). All
General Unsecured Claims known to
the Company as of the date hereof
have been disclosed to Persistency
and are set forth on Appendix A
hereto. (The Company shall update
Appendix A before the Bankruptcy
Filing (defined below).)
	 
	 	 
	Restructuring Transaction:

	 	Subject to the terms of this Plan
Term Sheet, which terms shall be
embodied in the Plan, a chapter 11
plan, that will be filed with the
United States Bankruptcy Court for
the Southern District of New York
(the “Bankruptcy Court”) as a
prepackaged/pre-negotiated Plan with
solicitation commencing prior to the
date of the bankruptcy filing (the
“Bankruptcy Filing”), whereby the
Company will restructure and satisfy
all its debt and other creditor
claims by the creditors’ receipt of
(i) cash (in the case of convenience
class claims) or (ii) debt (in the
case of Senior Lender Claims) or
equity






2









 





	 	 	 
	 
	 	interests and the opportunity
to acquire equity interests (in the
case of all other creditors) in a
newly-formed entity (“NewCo”) that
will own, amongst other assets, the
CGuern Group (as hereinafter
defined), the details of which are
more fully described below. The
“CGuern Group” means CanArgo Ltd.
(Guernsey) (“CGuern”) and the direct
and indirect subsidiaries of CGuern,
which constitute all of the
Company’s operating subsidiaries,
all of which are identified in
Exhibit II.





II. Treatment of Claims and Interests



	 	 	 
	Administrative, Priority Tax, and
Other Priority Claims:
	 	On or as soon as practicable after
the effective date of the Plan
(which shall be the first date
after confirmation of the Plan
that all conditions to
effectiveness of the Plan shall
have been satisfied or waived, the
“Effective Date”) or such date as
agreed to by any such holder, each
holder of an administrative
expense, priority tax, or other
priority claim will receive cash
equal to the full amount of its
claim, or will otherwise be left
unimpaired, unless the holder and
the Company otherwise agree to a
different treatment, subject to
the approval of Persistency. (The
Company has identified to
Persistency all anticipated
priority claims and they are
included in the Budget.)
	 
	 	 
	Convenience Claims:
	 	The Plan shall establish a
convenience class for claims of
$20,000 or less (including claims
which holders agree to reduce to
$20,000), and such claims will be
paid in full in cash on the
Effective Date or such other date
as agreed to by any such holder.
	 
	 	 
	Senior Lender Claims:
	 	In full and final satisfaction of
all Senior Lender Claims, the
Senior Lenders shall receive
$5,367,116 in aggregate of new
notes issued by NewCo (“NewCo
Notes”), which shall be guaranteed
by each of NewCo’s material direct
and indirect subsidiaries (to
replicate the guarantees of the
Senior Lender Claims presently in
place). The terms of the NewCo
Notes are described in Appendix B
hereto.
	 
	 	 
	Senior Subordinate Lender Claims:
	 	In full and final satisfaction of
Senior Subordinate Lender Claims,
and in recognition that the Senior
Subordinate Lender Claims are
structurally senior to the General
Unsecured Claims (and Weatherford
Claim) by virtue of the guarantees
of the Senior Subordinate Lender
Claims, Persistency (i) shall be
entitled to receive 100% of the
common shares of NewCo (“NewCo
Common Shares”), but should the
class of General Unsecured Claims
(including Weatherford) vote to
accept the Plan (including all
holders entitled to vote in such
class, the “GUC Class”),





3








 






	 	 	 
	 

	 	Persistency shall, and shall be
deemed to have, gifted to the GUC
Class, such class’ pro rata share
(determined by calculating the
combined Senior Subordinate Lender
Claims and the claims of the GUC
Class) of the NewCo Common Shares;
and (ii) shall be entitled to
receive a pro rata share of the
Tranche A Trust Interests, which
shall be contributed to NewCo by
operation of the Plan.
	 
	 	 
	 

	 	One NewCo Common Share shall be
issued for every $1 of Senior
Subordinate Lender Claims.
	 
	 	 
	 

	 	In addition, the Senior
Subordinate Lender Claims shall be
entitled to participate in the
Rights Offering (as defined and as
provided below).
	 
	 	 
	Weatherford and General Unsecured
Claims (GUC Class):

	 	In full and final satisfaction of
all other claims, and
notwithstanding the fact that the
Senior Subordinate Lender Claims
are structurally senior to the
claims in this category by virtue
of the guarantees of the Senior
Subordinate Lender Claims, the GUC
Class, provided that the GUC Class
votes to accept the Plan, (i)
shall, and shall be deemed to
have, received from Persistency,
as holder of the Senior
Subordinate Lender Claims, such
class’ pro rata share (determined
by calculating the combined Senior
Subordinate Lender Claims and the
claims of the GUC Class) of the
NewCo Common Shares (the “GUC
Class NewCo Distribution”), and
(ii) shall be entitled to receive
a pro rata share of the Tranche A
Trust Interests, which shall be
contributed to NewCo by operation
of the Plan.
	 
	 	 
	 

	 	Each of the holders of claims in
the GUC Class shall receive NewCo
Common Shares from the GUC Class
NewCo Distribution in proportion
to the allowed amount of their
claims (“Allowed Claims”) in
relation to the other allowed
claims in the GUC Class.
One NewCo Common Share shall be
issued for every $1 of Allowed
Claims. The NewCo Common Shares
will be subject to a stockholders
agreement with customary tag-along
rights and drag-along rights, and
preemptive rights to protect
minority shareholders, as well as
a right of first refusal for
Persistency as majority
shareholder.
	 
	 	 
	 

	 	In addition, the holders of
Allowed Claims in the GUC Class
shall be entitled to participate
in the Rights Offering (as defined
and as provided below).
	 
	 	 
	Intercompany Clean-Up Transactions:

	 	As a result of transactions being
undertaken by the Company and
several of its subsidiaries prior
to the bankruptcy filing, (i) the
Company shall at the time of the
bankruptcy filing directly own all






4









 






	 	 	 
	 

	 	of the outstanding equity of
CGuern and (ii) no CGuern Group
entity will owe any amounts to, or
have any receivable from, any
entity in the CanArgo Group other
than entities within the CGuern
Group. (After NewCo is formed by
the Company, it shall hold the
outstanding equity of CGuern.)
	 
	 	 
	Equity:

	 	In full and final satisfaction of
their rights in respect of their
shares, the Company’s shareholders
shall receive, on a pro rata
basis, Tranche B Trust Interests
(as defined below).






III. Plan Implementation




	 	 	 
	NewCo:

	 	No later than 15 days before the hearing on confirmation of the Plan
(the “Confirmation Hearing”), NewCo shall be formed by the Company in
Guernsey, as a wholly-owned subsidiary of the Company, under
applicable corporate organizational documents satisfactory to
Persistency in its sole discretion (Persistency’s counsel shall draft
the NewCo documents). Pursuant to the Plan, and on or before the
Effective Date, full ownership of the following assets shall be
transferred to NewCo (or CGuern, as the case may be):







	 	•	 	All of the equity interests in CGuern (and thereby full
ownership of the CGuern Group).
	 
	 	•	 	All of the Tranche A Trust Interests (as described below).
	 
	 	•	 	All of the CNR Name Rights (as defined below).
	 
	 	•	 	All available cash within the CanArgo Group other than amounts
specified herein to be used to fund the Liquidating Trust and for
payments required for confirmation of the Plan, all as provided for in
the Budget.
	 
	 	•	 	Such other assets as are identified by Persistency prior to
the Effective Date (e.g., advantageous executory contracts, etc.).





	 	 	 
	 

	 	The Rights Offering shall be for the benefit of, and the proceeds of
the Rights Offering shall be distributed to, NewCo.
	 
	 	 
	 

	 	On the Effective Date, (i) NewCo shall have no liabilities (save any
guarantee of the DIP Loan (defined below)), and (ii) NewCo shall issue
the NewCo Common Shares, Convertible Preferred Stock and NewCo Notes,
as more fully set forth herein.






5









 





	 	 	 	 	 
	Material Terms of
DIP Financing:

	 	•
	 	The Company shall abide by the budget outlined in Appendix C
hereto before and during the chapter 11 case (the “Budget”), as may be
amended pursuant to the DIP documentation. The Budget is intended to
minimize any financing required during and to exit the chapter 11
case.







	 	•	 	To the extent there is a cash shortfall during the chapter 11
case (having taken into account all cash from CGuern Group
operations), administrative expenses that are consistent with the
Budget will be funded through a debtor in possession loan facility
from Persistency (“DIP Loan”) not to exceed $1.2 million (the
“Commitment”), with each drawing subject to the terms and conditions
below.






DIP Loan




	 	•	 	Borrower: The Company.
	 
	 	•	 	Guarantors: All material subsidiaries of the Company will
provide guarantees (“Plan Guarantees”). Such guarantees shall be pari
passu with the pre-petition guarantees held by the Senior Lenders (the
“Pre-Petition Guarantees”).
	 
	 	•	 	Rate: 0% per annum through 90 days from the Bankruptcy Filing
(or for up to an additional 30 day extension under certain
circumstances) and 15% per annum from the date that the Company is in
default of the DIP Loan.
	 
	 	•	 	Final Maturity and Amortization: The DIP Loan will mature on
the date that is 90 days from the bankruptcy filing date, with the
possibility of a 30 day extension if among other things a hearing on
confirming the plan contemplated by this term sheet has been scheduled
before the 90th day to occur on or before the 120th day
from the bankruptcy filing date. There will be no amortization before
such date and, subject to the DIP Loan Conversion (as defined below),
the full amount of the DIP Loan shall become due at maturity or upon
acceleration.
	 
	 	•	 	Security: The DIP Loan will have security interests in, and
liens on, the Company’s assets, including the equity interests in
CGuern (the “DIP Lien”).
	 
	 	•	 	Carve-Out. To ensure certain protections to pay certain
chapter 11 expenses, the DIP Lien, Plan Guarantees, and Pre-Petition
Guarantees shall be subordinate to a carve-out 




6









 






	 	 	 	of defined scope for
the Company’s bankruptcy professionals as approved by the Bankruptcy
Court and Lender. The carve-out shall be net of any cash retainers
held by Professionals. Lender shall deposit the amount budgeted for
the carve-out into a separate account maintained by Lender, so that it
will be available for payment upon Bankruptcy Court approval of fees
and expenses. The amount so deposited shall reduce Availability
(defined below).






	 	•	 	Covenants/Reps/Wttys: Customary.
	 
	 	•	 	Advances: The DIP Loan shall be funded in multiple advances,
with each advance based on the Company’s adherence to the Budget and
the Company meeting other customary drawing conditions and
Plan-related milestones (among other things, to ensure that all
parties are moving toward confirming the Plan). The Company shall
upstream from its subsidiaries that cash, but only that cash, needed
to meet budgeted expense items and to meet any unforeseen reasonable
operational expenditures as set forth in the DIP documentation, and
shall do so before drawing on the DIP Loan.
	 
	 	•	 	Exit Advance. If required for the Bankruptcy Court to confirm
the Plan, an exit advance under the DIP Loan, in an amount, if any,
that in all cases shall be less than or equal to the remaining amount
available under the Commitment at the Effective Date and immediately
prior to making such advance (“Availability”), shall be permitted at
the Effective Date upon satisfaction of the following conditions: (i)
the exit advance not exceeding the Availability on such date; (ii) the
Company having complied in all respects with DIP Loan documentation
through the date of the exit advance and with respect to the exit
advance; and (iii) the prior entry of a final order confirming the
Plan. For the avoidance of doubt, the exit advance shall only be made
and used for payment of amounts set forth in the Budget or otherwise
disclosed to and expressly agreed to by Persistency (Company to
disclose anticipated Plan cash requirements (convenience claims,
priority claims, etc.)).
	 
	 	•	 	Defaults/Acceleration Events: Customary for loans of this
kind, including (i) CanArgo withdraws the Plan or does not in good
faith seek its timely confirmation; (ii) CanArgo’s 




7









 






	 	 	 	chapter 11 case is
converted or dismissed or a chapter 11 trustee or examiner appointed;
(iii) confirmation of the Plan is denied; (iv) claims are asserted in
the bankruptcy case against Persistency by any person; (v) breach of
covenant; and (vi) such other customary items as required by
Persistency.






	 	•	 	Satisfaction of the DIP Loan: If the Plan is confirmed within
90 days of the Bankruptcy Filing (or within 120 days if an extension
has been triggered), then the DIP Loan shall be converted under the
Plan into Convertible Preferred Stock of NewCo (the terms of which are
described below), at the rate of one share of Convertible Preferred
Stock for each $1 of outstanding amount of the DIP Loan (the “DIP Loan
Conversion”); otherwise, it will mature on the 90th day (or
120th day if an extension has been triggered) or upon
earlier acceleration and be payable in cash.





	 	 	 	 	 
	Fees and Expenses:

	 	•
	 	Expenses: Borrower shall pay in full in cash all of
Persistency’s reasonable expenses (including professional fees and
expenses) incurred from February 5, 2009 onward, including for the
period after the Bankruptcy Filing, in connection with the 2010 Notes,
the DIP Loan, this Plan Term Sheet, the Plan, the bankruptcy case and
the preparation of NewCo corporate and loan documentation (An estimate
of these is included in the budget in Appendix C).







	 	•	 	Structuring Fee: In connection with confirmation of the Plan,
for risking the time and expenses associated with negotiating and
structuring the reorganization, committing to extend the DIP Loan, and
backstopping the Rights Offering, Persistency shall receive a non-cash
structuring fee of $500,000 payable in NewCo Common Shares at a price
of $0.40 per share.





	 	 	 
	Rights Offering:

	 	In connection with the Plan, there will be a rights offering of
$2,000,000 of NewCo Convertible Preferred Stock (the “Rights
Offering”). The proceeds of the Rights Offering shall be used for
NewCo working capital. Persistency will backstop the Rights Offering
and Persistency’s backstop obligation will be satisfied in part by the
amount of Convertible Preferred Stock previously acquired by
Persistency through the DIP Loan Conversion. All creditors (including
Persistency) receiving NewCo Common Shares shall be entitled to
participate in the






8









 





	 	 	 
	 
	 	Rights Offering on a pro rata basis according to
their ownership of NewCo Common Shares. Closings of the rights
offering other than conversion of the DIP Loan in connection with the
Effective Date shall be at the mutual discretion of the investors and
NewCo during the nine-month period after the Effective Date. For
illustrative purposes, if the DIP Loan is fully funded, the amount of
Persistency’s remaining backstop obligation would be $800,000, and
$800,000 would be the amount available for subscription, although the
pro rata shares of participating creditors would be determined based
on the full $2,000,000.
	 
	 	 
	 
	 	It is expected that the Rights Offering would enjoy the exemptions
provided by Section 1145 of the Bankruptcy Code.
	 
	 	 
	 
	 	Persistency’s counsel shall draft the Rights Offering documentation
and related disclosures for the Plan and related documents.
	 
	 	 
	Convertible
Preferred Stock
	 	The terms of the Convertible Preferred Stock of NewCo shall include the following:





	 	•	 	Purchase Price: $1.00 per Convertible Preferred Share
	 
	 	•	 	Ranking: Senior to NewCo Common Shares
	 
	 	•	 	Conversion Price: $0.40 per Common Share.
	 
	 	•	 	Liquidation preference: Equal to Purchase Price.
	 
	 	•	 	Conversion: Converts into NewCo Common Shares at a conversion
rate equal to the aggregate Purchase Price divided by the Conversion
Price.
	 
	 	•	 	Voting: On an as-converted basis.




	 	 	 
	Transferability
	 	The Common and Preferred Shares shall be freely transferable, subject
to compliance with applicable law and Persistency’s right of first
refusal.





	 	 	 	 	 
	Liquidating Trust:
	 	•
	 	As of the Effective Date, a liquidating trust shall be
established for purposes of pursuing the litigation against the
Company’s underwriters in connection with 2008 failed securities
offering and customary administrative activities (the “Liquidating
Trust”).






	 	•	 	NewCo shall receive all of the Tranche A Trust Interests.
	 
	 	•	 	Tranche A Trust Interests will entitle the holder thereof to
payment of up to $7,000,000, which shall have distribution priority to
Tranche B Trust Interests.




9







 





	 	•	 	The Company’s shareholders shall receive pro rata shares of
the Tranche B Trust Interests.
	 
	 	•	 	Tranche B Trust Interests will entitle the holders thereof to
any value remaining in the Liquidating Trust after payment in full of
Tranche A Trust Interests and all operating expenses of the
Liquidating Trust.
	 
	 	•	 	The Liquidating Trust will be funded by the creation of a cash
reserve on the Effective Date (the “Operating Reserve”).
	 
	 	•	 	The documents creating and governing the Liquidating Trust
will be customary for transactions of this type and be satisfactory to
Persistency.




	 	 	 	 	 
	Asset Assignment
	 	•
	 	The Company, prior to dissolution, shall assign, and shall
cause each of the entities within the CanArgo Group other than NewCo
and the entities within the CGuern Group, to assign, (i) all right and
title to the names CanArgo, CanArgo Energy Corporation, CNR, all other
CanArgo corporate and brand names, logos, trade dress and other
associated intellectual property (collectively the “CNR Name Rights”),
and (ii) the other assets identified in the section entitled “NewCo”
above, to NewCo or CGuern (as determined by Persistency) effective as
of the Effective Date.
	 
	 	 	 	 
	Operating Reserve
	 	•
	 	The amount to be funded for the Operating Reserve shall be an
amount that, in Persistency’s discretion, is sufficient to cover
expected expenses of the Liquidating Trust as outlined below
(currently estimated to be approximately $100,000 less amounts paid
toward the underwriter litigation prior to the Effective Date). Any
additional funding after the Effective Date shall be at the sole
discretion of NewCo on appropriate terms. The expected expenses of
the Trust are:





	 	 	 	 	 
	 
	 	o
	 	Costs of the Liquidating Trustee (No salaries or directors costs).
	 
	 	 	 	 
	 
	 	o
	 	Legal costs for the litigation of underwriters.
	 
	 	 	 	 
	 
	 	o
	 	Legal costs for claims objections, if any
	 
	 	 	 	 
	 
	 	o
	 	De minimis administrative expenses associated with maintaining the
Liquidating Trust and for necessary reporting.





	 	 	 	 	 
	Bar Date and
Disputed Claims:
	 	•
	 	If requested by Persistency, the Company shall request that
the Bankruptcy Court set a deadline for the filing of claims, with





10








 






	 	 	 	 	 
	 

	 	 	 	such requested deadline being at least ten (10) days prior to the
proposed Confirmation Hearing.







	 	•	 	Within thirty (30) days following the Effective Date (unless
extended by the Bankruptcy Court with the consent of Persistency), the
Liquidating Trust must file any and all objections to claims.





	 	 	 	 	 
	Treatment of
Executory Contracts
and Unexpired
Leases:

	 	•
	 	The Plan shall schedule any executory contracts and unexpired
leases that will be assumed, if any, which will only be upon agreement
by Persistency. The Company shall provide to Persistency a schedule
of all contracts so that Persistency can determine whether any of them
should be assumed and assigned. All other executory contracts and
unexpired leases shall be rejected.
	 
	 	 	 	 
	Conditions to Plan
Support Agreement
and Plan
Confirmation:

	 	•
	 	The Plan and related documentation, including related motions
and orders, exhibits, and the disclosure statement, shall be in form
and substance acceptable to Persistency and the other terms and
conditions set forth in the draft Plan Support and Lock-Up Agreement
and Plan of Reorganization.
	 
	 	 	 	 
	Conditions to the
Effective Date:

	 	•
	 	Allowed General Unsecured Claims (including Weatherford) are
not more than $2,000,000.







	 	•	 	The Confirmation Order shall be in form and substance
reasonably acceptable to Persistency and it shall contain provisions,
among others:





	 	 	 	 	 
	 

	 	o
	 	Exculpating Persistency pursuant to section 1125(e) of the
Bankruptcy Code.
	 
	 	 	 	 
	 

	 	o
	 	All creditors and their affiliates being released from any and all
claims in connection with the Company’s bankruptcy case.
	 
	 	 	 	 
	 

	 	o
	 	Customary releases for directors and officers of the Company.
	 
	 	 	 	 
	 

	 	o
	 	Transfers free of stamp and similar taxes pursuant to section 1146
of the Bankruptcy Code.







	 	•	 	Appropriate representations and warranties regarding the
Company and its subsidiaries shall be provided to Persistency;
however, claims related thereto will expire on the Effective Date in
the absence of fraud, willful misconduct or gross negligence.





11









 






	 	•	 	Other customary conditions for a transaction of this type.
	 
	 	•	 	Confirmation Order entered within 80 days of the Bankruptcy
Filing and becoming final 10 days thereafter (unless the Final
Maturity of the DIP Loan is extended to 120 days in which case the
Confirmation Order is entered within 110 days of the Bankruptcy Filing
and becomes final 10 days thereafter).





	 	 	 	 	 
	Plan Support:

	 	•
	 	In addition to Persistency, the Company shall receive Plan
Support Agreements from the Senior Lenders and other creditors
sufficient to cause confirmation of the Plan, wherein they agree to
vote their allowed claims to accept the Plan and to otherwise support
confirmation of the Plan.
	 
	 	 	 	 
	Management:	 	Vincent McDonnell, current CEO of the Company, and Jeffrey Wilkins,
current CFO of the Company, will be appointed by NewCo to continue in
the roles of CEO and CFO, respectively, under new
agreements/arrangements in lieu of their existing
agreements/arrangements. NewCo employee benefits and management
incentive programs (including an equity plan for up to 5% of NewCo),
the terms as determined by Persistency, shall also be established.
The Board of NewCo will be appointed according to the terms of its
governing documents.
	 
	 	 	 	 
	General Info/Aspects:

	 	•
	 	The Company shall continue to promptly :






	 	 	 	 	 
	 

	 	o
	 	cooperate with Persistency to refine the Plan and other
documentation;
	 
	 	 	 	 
	 

	 	o
	 	provide all financial and business information about itself and its
subsidiaries to Persistency;
	 
	 	 	 	 
	 

	 	o
	 	respond in a timely manner to any inquiries from Persistency or any
other creditor; and
	 
	 	 	 	 
	 

	 	o
	 	cooperate with any diligence requests at both the Company and
subsidiary levels.







	 	•	 	In addition to the other conditions described herein,
Persistency’s obligations that are described in this Plan Term Sheet
will be subject to the Company conducting its operations in the
ordinary course of business pursuant to the most recent budgets and
projections prepared by the Company and approved by Persistency, and
the Company shall provide to Persistency weekly updates on its
financial position.






All documents relating to the transactions described herein shall be
acceptable to Persistency.



12









 




EXHIBIT I


CanArgo Energy Corporation and Its Direct and Indirect Subsidiaries


	 	 	 	 	 
	 	 	Legal Name	 	Incorporation
	 
	1
	 	CanArgo Energy Corporation
	 	Delaware
	2
	 	CanArgo Oil & Gas Inc
	 	Ontario, Canada
	3
	 	CanArgo Limited
	 	Ontario, Canada
	4
	 	Fountain Oil Ukraine Limited
	 	New Brunswick, Canada
	5
	 	UK-RAN Oil Corporation
	 	New Brunswick, Canada
	6
	 	Fountain Oil Canada Limited
	 	New Brunswick, Canada
	7
	 	Focan Limited
	 	New Brunswick, Canada
	8
	 	EOR Canada Limited
	 	New Brunswick, Canada
	9
	 	CanArgo Acquisition Corporation
	 	New Brunswick, Canada
	10
	 	Ninotsminda Oil Company Limited
	 	Cyprus
	11
	 	CanArgo Oil Boryslaw Limited
	 	Cyprus
	12
	 	CanArgo Norio Limited
	 	Cyprus
	13
	 	Groundline Limited
	 	Cyprus
	14
	 	Lateral Vector Resources Limited
(formerly Longtex Limited)
	 	Cyprus
	15
	 	Courtway Limited
	 	Cyprus
	16
	 	CanArgo Limited
	 	Guernsey
	17
	 	CanArgo (Nazvrevi) Limited
	 	Guernsey
	18
	 	CanArgo Power Corporation Limited
	 	Guernsey
	19
	 	CanArgo (Kaspi) Limited
	 	Guernsey
	20
	 	Argonaut Well Services Limited
	 	Guernsey
	21
	 	CanArgo Samgori Limited
	 	Guernsey
	22
	 	CanArgo Services (UK) Limited
	 	England
	23
	 	Sagarejo Power Corporation Limited
	 	Georgia
	24
	 	Georgian British Oil Co Ninotsminda
	 	Georgia
	25
	 	Georgian British Oil Company Nazvrevi
	 	Georgia
	26
	 	Georgian British Oil Company Norio
	 	Georgia
	27
	 	Ninotsminda Services Limited
	 	Georgia
	28
	 	CanArgo Georgia Limited
	 	Georgia
	29
	 	Ninotsminda Oil Company Limited
	 	Jersey
	30
	 	CanArgo Norio Limited
	 	Jersey





13








 





EXHIBIT II




CGUERN and its Direct and Indirect Subsidiaries




	 	 	 	 	 
	 	 	Legal Name	 	Incorporation
	 
	1

	 	Ninotsminda Oil Company Limited
	 	Cyprus
	2

	 	CanArgo Oil Boryslaw Limited
	 	Cyprus
	3

	 	CanArgo Norio Limited
	 	Cyprus
	4

	 	Groundline Limited
	 	Cyprus
	5

	 	Lateral Vector Resources Limited (formerly Longtex Limited)
	 	Cyprus
	6

	 	Courtway Limited
	 	Cyprus
	7

	 	CanArgo Limited
	 	Guernsey
	8

	 	CanArgo (Nazvrevi) Limited
	 	Guernsey
	9

	 	CanArgo Power Corporation Limited
	 	Guernsey
	10

	 	CanArgo (Kaspi) Limited
	 	Guernsey
	11

	 	Argonaut Well Services Limited
	 	Guernsey
	12

	 	CanArgo Samgori Limited
	 	Guernsey
	13

	 	CanArgo Services (UK) Limited
	 	England
	14

	 	Sagarejo Power Corporation Limited
	 	Georgia
	15

	 	Georgian British Oil Co Ninotsminda
	 	Georgia
	16

	 	Georgian British Oil Company Nazvrevi
	 	Georgia
	17

	 	Georgian British Oil Company Norio
	 	Georgia
	18

	 	Ninotsminda Services Limited
	 	Georgia
	19

	 	CanArgo Georgia Limited
	 	Georgia
	20

	 	Ninotsminda Oil Company Limited
	 	Jersey
	21

	 	CanArgo Norio Limited
	 	Jersey






14









 




APPENDIX A — CLAIMS



	 	 	 	 	 
	Name	 	Amount	 
	 
	General Unsecured Claims
	 	 	 	 
	 
	Weatherford
	 	$	1,200,000	 
	 
	RS Platou
	 	$	291,060	 
	 
	Ernst & Young Ukraine
	 	$	75,000	 
	 
	Gambit
	 	$	50,112	 
	 
	Dnb NOR Bank
	 	$	28,571	 
	 
	 	 	 
	 
	 	$	1,644,743	 
	 
	 	 	 	 
	Convenience Claims (in Budget)
	 	 	 	 
	 
	NY Alternext
	 	$	10,000	 
	 
	OPC
	 	$	4,750	 
	 
	PCAOB
	 	$	500	 
	 
	FASB
	 	$	100	 
	 
	 	 	 
	 
	 	$	15,350	 




15







 




APPENDIX B — TERMS OF THE NEWCO NOTES



	 	 	 
	Principal:
	 	$[     ]
	 
	 	 
	Priority:
	 	Senior to all other securities of NewCo.
	 
	 	 
	Coupon:
	 	8% per annum PIK from the Effective Date (no cash).
Default interest will be 15%.
	 
	 	 
	Mandatory Prepayments:
	 	Quarterly mandatory prepayments of the following amounts
until full repayment:






	 	•	 	75% of:




	 	 	 	 	 
	 
	 	o  
	 	the proceeds from the sale of any assets (other
than ordinary course sale of current oil and
gas inventory); 
	 
	 	 	 	 
	 
	 	o
	 	up front farm-out fees; and
	 
	 	 	 	 
	 
	 	o
	 	proceeds from the Tranche A Trust Interests (as defined
below).






	 	•	 	50% of the positive difference, if any, between $65
and the contracted Brent reference price for oil sales of
the Company times number of barrels sold.




	 	 	 
	Minimum Redemption 

Payment Schedule:
	 	The NewCo Notes shall be redeemed on the following

redemption schedule less any amount received as a Mandatory

Prepayment during the applicable period:






	 	•	 	At 9 months from the Effective Date, a Redemption
Payment of $1,000,000.
	 
	 	•	 	Thereafter, a Redemption Payment of $1,000,000
every 3 months until the  total amount of the NewCo Notes
have been redeemed/repaid (or, as may be the case, such
lesser amount that fully repays the outstanding balance).





A scheduled redemption payment may be deferred, according to
the chart below, for a quarterly cash fee of 2.5% of the of
the deferred amount. The fee will be due on the date of
deferral.


	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Month
	 	 	9	 	 	 	10	 	 	 	11	 	 	 	12	 	 	 	13	 	 	 	14	 	 	 	15	 	 	 	16	 	 	 	17	 	 	 	18	 	 	 	19	 	 	 	20	 	 	 	21	 	 	 	22	 	 	 	23	 	 	 	24	 
	Current  
	 	 	1m	 	 	 	 	 	 	 	 	 	 	 	1m	 	 	 	 	 	 	 	 	 	 	 	1m	 	 	 	 	 	 	 	 	 	 	 	1m	 	 	 	 	 	 	 	 	 	 	 	1m	 	 	 	 	 	 	 	 	 	 	bal	 
	Potential    
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 		 	 	 	2m	 	 	 	 	 	 	 	 	 	 	 	1m	 	 	 	 	 	 	 	 	 	 	 	2m	 	 	 	 	 	 	 	 	 	 	bal	 





16








 





	 	 	 
	Prepayment:

	 	At any time without penalty or notice. If the note is
prepaid in full by 12/31/09, a discount of 25% of principal
plus interest through the settlement date will be applied.
Notice must be given no later then December 15, 2009.
	 
	 	 
	Change of Control of
NewCo:

	 	NewCo Note becomes immediately due and payable without
penalty or premium.
	 
	 	 
	Debt Covenant:

	 	For so long as the NewCo Note remains outstanding, no senior
or pari passu indebtedness for borrowed money; provided,
that, NewCo shall be permitted to put in place a revolving
working capital facility (“Revolver”) of up to $500,000 with
Persistency that shall be permitted to be paid up and down
for so long as there is no default or deferment of the NewCo
note, and shall be pari passu with the NewCo Note upon a
default of the NewCo Note. The interest on the Revolver
will be 8%.
	 
	 	 
	 

	 	The revolver can only be drawn if the Rights Issue has been
fully funded up to $2,000,000.
	 
	 	 
	Default and Acceleration
of NewCo Notes:

	 	Upon failure to make Mandatory Prepayments, failure to make
Redemption Payments, violation of the Debt Covenant or
default of the Revolver.
	 
	 	 
	Cooperation on Default:

	 	If NewCo defaults on the NewCo Notes and any grace or cure
period has expired, NewCo and Senior Lenders shall cooperate
in promptly retaining appropriate advisors to market NewCo
and its assets for sale or other action as mutually agreed.
From and after an uncured event of default, the Senior
Lenders may appoint an observer to NewCo’s Board of
Directors.
	 
	 	 
	No Dividends and
Distributions, Other:

	 	So long as the NewCo Notes are outstanding: no cash
dividends or distributions may be paid on junior
securities, no cash management fees payable to related
parties, no cash interest paid on related party debt. 
Other than the foregoing, the NewCo Notes will contain no
other rights, covenants or restrictions.






17









 




APPENDIX C — BUDGET


Summary Budget*



	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Jun-09	 	Jul-09	 	Aug-09	 	Sep-09	 	Oct-09	 	Nov-09
	Revenue
	 	 	 	 	 	$	366,000	 	 	$	394,500	 	 	$	773,332	 	 	$	60,060	 	 	$	745,087	 
	Operating Expenses
	 	 	 	 	 	$	(194,582	)	 	$	(267,100	)	 	$	(228,697	)	 	$	(302,657	)	 	$	(222,051	)
	General & Administrative
	 	 	 	 	 	$	(116,766	)	 	$	(216,381	)	 	$	(111,900	)	 	$	(164,516	)	 	$	(108,739	)
	 
	Cash Flow From Operations
	 	 	 	 	 	$	54,652	 	 	$	(88,981	)	 	$	432,735	 	 	$	(407,113	)	 	$	414,297	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Capital Expenditures
	 	 	 	 	 	$	(14,000	)	 	$	(49,845	)	 	$	(14,000	)	 	$	(49,845	)	 	$	(14,000	)
	 
	Cash flow net Capital
Expenditures
	 	 	 	 	 	$	40,652	 	 	$	(138,826	)	 	$	418,735	 	 	$	(456,958	)	 	$	400,297	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Beginning Cash
	 	 	 	 	 	$	405,022	 	 	$	412,970	 	 	$	(185,693	)	 	$	185,166	 	 	$	(940,802	)
	Ending Cash Consolidated
	 	$	405,022	 	 	$	412,970	 	 	$	(185,693	)	 	$	185,166	 	 	$	(940,802	)	 	$	(540,505	)
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Restricted Cash
	 	$	(131,000	)	 	$	(131,000	)	 	$	(131,000	)	 	$	(131,000	)	 	$	(131,000	)	 	$	(131,000	)
	Cash At Sub
	 	$	(93,022	)	 	$	(91,988	)	 	$	(34,688	)	 	$	(34,688	)	 	$	(34,688	)	 	$	(34,688	)
	 
	Ending Available Cash at HO
	 	$	181,000	 	 	$	189,982	 	 	$	(351,381	)	 	$	19,478	 	 	$	(1,106,490	)	 	$	(706,193	)





	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Legal Fees	 	 	 	 	 	 	 	 	 	 
	Chapter 11 related costs	 	Paid to 6/30	 	Jul-09	 	Aug-09	 	Sep-09	 	Oct-09	 	Nov-09
	Rights offering litigation (Selmer) — Direct
	 	$	(29,937	)	 	$	0	 	 	$	(28,553	)	 	$	(20,000	)	 	$	(21,510	)	 	$	0	 
	Rights offering litigation (Selmer) — indirect
	 	$	(15,513	)	 	$	0	 	 	$	(19,517	)	 	$	(20,376	)	 	$	0	 	 	$	0	 
	Chapter 11 Legal Fees — SSBB
	 	$	(169,147	)	 	$	0	 	 	$	(334,691	)	 	$	0	 	 	$	(95,000	)	 	$	0	 
	Chapter 11 Legal Fees — McGrigors
	 	$	(22,977	)	 	$	0	 	 	$	(9,000	)	 	$	(5,000	)	 	$	(5,000	)	 	$	0	 
	Chapter 11 Liquidating Trust Operating Reserve
	 	$	(124,798	)	 	$	0	 	 	$	0	 	 	$	0	 	 	$	(15,000	)	 	$	0	 
	Chapter 11 Advisor
	 	$	(7,500	)	 	$	(12,704	)	 	$	(2,500	)	 	$	(2,500	)	 	$	(2,500	)	 	$	0	 
	Chapter 11 Legal Fees — US Tax advice
	 	$	0	 	 	$	(20,000	)	 	$	0	 	 	$	0	 	 	$	0	 	 	$	0	 
	Chapter 11 Legal Fees — Canadian Tax advice
	 	$	0	 	 	$	0	 	 	$	(10,000	)	 	$	0	 	 	$	0	 	 	$	0	 
	Chapter 11 Legal Fees — Canadian Clean Up
	 	$	(15,000	)	 	$	0	 	 	$	(35,326	)	 	$	0	 	 	$	0	 	 	$	0	 
	Chapter 11 Legal Fees — Cyprus Clean Up
	 	$	(5,000	)	 	$	0	 	 	$	(5,000	)	 	$	0	 	 	$	0	 	 	$	0	 
	Chapter 11 Litigation — S & K (Persistency)
	 	$	0	 	 	$	0	 	 	$	0	 	 	$	0	 	 	$	(355,000	)	 	$	0	 
	Chapter 11 Litigation — (Persistency)
	 	$	0	 	 	$	0	 	 	$	0	 	 	$	0	 	 	$	(175,000	)	 	$	0	 
	Chapter 11 Convenience Claims
	 	$	0	 	 	$	0	 	 	$	(15,250	)	 	$	0	 	 	$	0	 	 	$	0	 
	 
	Total Ch 11 Legal Fees
	 	$	(389,872	)	 	$	(32,704	)	 	$	(459,837	)	 	$	(47,876	)	 	$	(669,010	)	 	$	0	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Funding Surplus/Liability
	 	$	181,000	 	 	$	189,982	 	 	$	(351,381	)	 	$	19,478	 	 	$	(1,106,490	)	 	$	(706,193	)
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Gross Oil (Barrels of Oil per day)
	 	 	358	 	 	 	351	 	 	 	344	 	 	 	337	 	 	 	330	 	 	 	323	 







 



			
	*	 	assumes $60 Brent Oil, Sale assumed to occur mid-month