Arrow Exploration Renegotiates Debt, Appoints Canacol VP To Board of Directors

Carrao Energy parent Arrow Exploration Corp. (TSXV: AXL) has announced that it has negotiated an amendment and extension to its $5 million USD promissory note with Canacol Energy Ltd. (TSX: CNE, BVC: CNE.C, OTCQX: CNNEF) Under terms of the amended note, Arrow agreed to appoint VP of Business Development and General Counsel at Canacol, Anthony Zaidi to the board of directors of Arrow to fill an existing vacancy, subject to regulatory approvals including the TSX Venture Exchange.

Revised Canacol Promissory Note Terms

Arrow and Canacol have agreed to a third amendment and extension to the existing $5 million Canacol promissory note, effective December 31, 2019. Under terms of the amended note, repayment of the principal and accrued and outstanding interest, which now total $5.6 million, has been deferred an additional six months to commence on April 1, 2021 with the outstanding interest to be paid in full at that time and the principal to be fully paid in six monthly installments by September 1, 2021.

The amended note provides Arrow with additional flexibility to manage its long-dated payables while the strategic alternatives process progresses, with support from Arrow’s financial advisor, Stifel FirstEnergy.

Key terms under the Amended Note are as follows:

• On or before April 1, 2021 Arrow Exploration shall pay in full all accrued and outstanding interest owing on the principal sum of $5 million from the origination date of the promissory note to July 31, 2019 being $628,767 plus interest on such sum at a rate equal to 15.0% per annum accruing as of December 31, 2019 until the date of payment (the “Interim Accrued Interest”).
• Commencing September 1, 2019 and on the first day of each month thereafter until no further obligations are owing, Arrow Exploration shall make interest-only monthly payments equal to the total amount of the outstanding interest on the principal sum and the Interim Accrued Interest.
• Commencing April 1, 2021 and on the first day of each of the following six months thereafter Arrow Exploration shall make equal monthly payments of the balance of the Principal Sum which remains outstanding as of April 1, 2021, amortized over such six month period, such that all remaining obligations are paid in full on or before September 1, 2021.
• At any time, all or any portion of the obligations then outstanding, may be prepaid by Arrow Exploration to Canacol without penalty or prepayment fee.
• In case of a change in control of Arrow Exploration, all of the amended note obligations shall be immediately due and payable to Canacol. For purposes of the amended note, a change in control means:
  1. Any direct or indirect change in control of Arrow Exploration (whether through merger, sale of shares or other equity interest, or otherwise through a single transaction or series of related transactions, from one or more transferors to one or more transferee or
  2. Any change in the composition of the board of directors of Arrow Exploration where the majority of the current directors of Arrow Exploration are replaced (whether at the same time or separately) at any time within a time period of 12 months from December 31, 2019. Control means the ownership directly or indirectly of more than 50% of the voting rights in a legal entity.
• Until all Amended Note obligations are paid in full, Arrow Exploration shall arrange to appoint two Canacol employees of Canacol´s choice to sit on Arrow’s board of directors at all times. In the normal course such appointments are subject to approval of regulatory authorities including the TSX Venture Exchange.
• The general security agreement granted to Canacol as part of the second amendment to the Canacol promissory note in July 31, 2019 remains in place as updated to reflect linkage to this third amendment.
• Other terms of the original Canacol promissory note remain unchanged.

Appointment of New Director

Under terms of the Amended Note, Arrow has agreed to appoint Anthony Zaidi, VP Business Development and General Counsel at Canacol, to the board of directors of Arrow to fill an existing vacancy, subject to regulatory approvals. With this appointment, Canacol will have two of its executives on the Arrow Board of Directors also including Mr. Ravi Sharma, the Chief Operating Officer of Canacol and a founding director of Arrow. Dr. Luis Baena, a founding director of Arrow originally nominated by Canacol, is no longer an employee of Canacol. The Arrow Board of Directors will now include Mr. Dominic Dacosta (Chair), Dr. Luis Baena, Mr. James McFarland, Mr. Juan Carlos Salazar, Mr. Ravi Sharma, Mr. Steve Smith and Mr. Anthony Zaidi.

Mr. Zaidi is a lawyer and businessman with significant experience in corporate finance and in the mining and energy sector in Colombia. Prior to joining Canacol, Mr. Zaidi was the President and General Counsel of Carrao Energy Ltd., a private oil and gas exploration company he co-founded and co-managed until its acquisition by the Canacol in November 2011 and in turn by Arrow in September 2018. Prior to this time, he had been an officer or director of several private and public companies, including Integral Oil Services, Pacific Rubiales Energy, Petro Magdalena Energy, Medora Resources and others, as well as a securities lawyer at Blake, Cassels & Graydon LLP. Mr. Zaidi holds a Juris Doctor degree from the University of Toronto as well as a Bachelor of Commerce (Finance) degree from McGill University.

All dollar amounts: US Dollars

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