<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 29, 1999
FILE NO. 333-72295
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------------
Post-Effective Amendment No. 1 to
Form S-1
REGISTRATION STATEMENT
UNDER THE
SECURITIES ACT OF 1933
------------------------------------
CANARGO ENERGY CORPORATION
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 1311 91-0881481
(State or other jurisdiction (Primary Standard Industrial (IRS Employer Identification
of incorporation or Classification Code Number) No.)
organization)
</TABLE>
SUITE 1580, 727 - 7TH AVENUE S.W., CALGARY, ALBERTA T2P 0Z5 TELEPHONE (403)
777-1185
(Address and telephone number of principal executive offices)
------------------------------------
SUSAN E. PALMER
CANARGO ENERGY CORPORATION
1400 BROADFIELD BOULEVARD, SUITE 100, HOUSTON, TEXAS 77084 TELEPHONE (281)
492-6992
(Name, address and telephone number of agent for service)
------------------------------------
Please forward a copy of all correspondence to:
ALAN D. JACOBSON, ESQ.
KELLY LYTTON MINTZ & VANN LLP
1900 AVENUE OF THE STARS, SUITE 1450, LOS ANGELES, CALIFORNIA 90067 TELEPHONE
(310) 277-5333
------------------------------------
Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [X]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration for the same
offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
------------------------------------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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- --------------------------------------------------------------------------------
<PAGE> 2
Prospectus Supplement dated July ___, 1999
CANARGO ENERGY CORPORATION
Common Stock
Minimum - 11,500,000 Shares
Maximum - 21,264,643 Shares
This prospectus supplement provides information which supplements the
information contained in CanArgo's prospectus dated June 10, 1999.
ESCROW AGENT
CanArgo has entered into an escrow agreement with Continental Stock
Transfer & Trust Company, 2 Broadway, New York, New York 10004, which will serve
as escrow agent for subscriptions solicited by National Securities Corporation.
Subscription payments sent to Continental Stock Transfer & Trust Company should
be made payable to "Continental Stock Transfer & Trust Company, as Agent for
CanArgo Energy Corporation." Payment may be made by wire transfer in accordance
with the instructions set forth in the subscription agreement. The escrow
arrangements and subscription procedures for the offering are described in the
prospectus under the heading "The Offering."
SOLICITATIONS BY DEALERS
CanArgo Energy Corporation has entered into a selling agent agreement with
National Securities Corporation. As a dealer, National Securities Corporation
will solicit subscribers for shares in a limited number of states of the United
States in which this offering is permitted. The terms of the agreement with
National Securities Corporation and other dealers in this offering are described
in the prospectus under the heading "The Offering - Solicitations by Dealers."
TERMINATION DATE OF OFFERING
The offering of up to 21, 264,643 shares of common stock by CanArgo will
terminate on the earlier of:
- the time when all the shares are sold, or
- 9:00 a.m. Texas local time and 4:00 p.m. Norway local time on August
6, 1999.
BRIDGE LOAN
Due to CanArgo's urgent need for cash pending the closing of this offering,
on July 19, 1999, CanArgo obtained a $500,000 loan from Terrenex Acquisition
Corporation, CanArgo's largest stockholder. These funds will be used for working
capital purposes. The loan is to be paid in full on or before September 21,
1999, with compound interest payable at the rate of 1% per calendar month.
CanArgo paid Terrenex a financing fee of 50,000 shares, or about 4%, of Uentech
International Corp., a majority owned subsidiary of CanArgo which holds the
rights to CanArgo's enhanced oil recovery technology. This technology is
described in the prospectus under the heading "Business - Technology for
Enhanced Recovery of Heavy Oil." CanArgo also granted Terrenex an option to
purchase CanArgo's oil and gas interests in Canada for a price of Canadian
$1,000,000. This option is exercisable after October 1, 1999, but only if the
loan has not been repaid. In addition, as security for the loan, CanArgo
granted Terrenex a security interest in the balance of the shares of Uentech
owned by CanArgo.
This loan is expected to be repaid from the proceeds of the offering or
from the sale of assets, including oil and gas properties in Canada, which are
not central to CanArgo's business plan, as described in the prospectus under the
heading "Use of Proceeds."
Other transactions with Terrenex and its relationship to CanArgo are
described in the prospectus under the heading "Related Transactions."
<PAGE> 3
OPTION GRANTS
On July 16, 1999, CanArgo's board of directors amended the 1995 Long-Term
Incentive Plan to terminate annual automatic option grants to non-employee
directors and to permit non-employee directors to participate generally in the
plan. On July 21, 1999, the compensation committee of the board of directors
approved option grants to officers and directors as set forth below:
<TABLE>
<S> <C>
Name Number of Shares Optioned
---- -------------------------
Michael Binnion 18,000
David Robson 30,000
Ron Gerlitz 16,166
Russell Hammond 7,500
Peder Paus 67,500
Nils N. Trulsvik 71,250
</TABLE>
These options have an exercise price of $0.275 per share, which was the
fair market value of the shares on the date of grant. The options vest in three
equal annual installments beginning one year after the date of grant and the
options expire on July 20, 2004. The amendment to the 1995 Long-Term Incentive
Plan is subject to stockholder approval and the exercisability of the options
granted to non-employee directors is conditioned on that stockholder approval.
DIRECTOR COMPENSATION
Beginning July 1, 1999, non-employee directors of CanArgo will receive
directors fees of $12,000 per year, payable quarterly in arrears.
RECENT STOCKHOLDER ACTION
At the annual meeting of stockholders held on June 16, 1999, CanArgo's
stockholders approved the following:
- Michael R. Binnion, J.F. Russell Hammond, Peder Paus, David Robson and
Nils N. Trulsvik were elected directors.
- The stockholders approved a 1-for-25 reverse stock split of the
outstanding common stock. The board of directors intends to effectuate
the reverse stock split promptly after termination of this offering.
For more information about the reasons for the reverse stock split,
see "Market for Common Stock and Dividend Policy - Plans to Seek
Readmission to Nasdaq" in the prospectus.
- The stockholders approved an amendment of CanArgo's 1995 Long-Term
Incentive Plan to increase the number of shares issuable thereunder.
This amendment is described in the prospectus, under the heading
"Management - Stock Option Plans."
<PAGE> 4
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
In June 1999, CanArgo issued 10,000 shares of Common Stock to one party in
consideration for financial consulting services valued at $0.2812 per share.
The offer and sale of the shares was exempt from the registration
requirements of the Securities Act of 1993, as amended (the "Act") under
Section 4(2) of the Act as a transaction by an issuer not involving a public
offering. The purchaser of the shares represented to CanArgo, among other
things, that it was acquiring the shares for its own account; that it was
acquiring the shares for investment and not with a view toward the distribution
thereof; and that it would not sell the shares without registration under the
Act or an applicable exemption from such registration requirement. The
certificate representing the shares has a restrictive legend endorsed thereon
reflecting the restrictions on transferability arising out of the foregoing
matters, and CanArgo has issued "stop transfer" instructions to its transfer
agent with respect to such shares.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) The following exhibits are filed herewith or incorporated herein by
reference:
(*) Management Contracts, Compensation Plans and Arrangements are
identified by an asterisk.
1(1) Escrow Agreement with Signature Stock Transfer, Inc.(4)
1(2) Selling Agent Agreement with each of Credifinance Securities
Limited, David Williamson Associates Limited, and Orkla Finans
(Fondsmegling) ASA.(4)
1(3) Escrow Agreement with Orkla Finans (Fondsmegling) ASA.(4)
1(4) Selling Agent Agreement with National Securities Corporation.
1(5) Escrow Agreement with Continental Stock Transfer & Trust
Company.
2(1) Amended and Restated Combination Agreement between Fountain Oil
Incorporated and CanArgo Energy Inc. dated as of February 2,
1998 (Incorporated herein by reference from Form S-3
Registration Statement, File No. 333-48287 filed on June 9,
1998).
2(2) Voting, Support and Exchange Trust Agreement (Incorporated
herein by reference as Annex G from Form S-3 Registration
Statement, File No. 333-48287 filed on June 9, 1998).
3(1) Registrant's Certificate of Incorporation and amendments
thereto (Incorporated herein by reference from July 15, 1998
Form 8-K).
3(2) Registrant's Bylaws.
4(1) Form of 8% Convertible Subordinated Debenture (Incorporated
herein by reference from February 29, 1996 Form 10-QSB).
4(2) Form of Stock Certificate(3)
5(1) Opinion of Kelly Lytton Mintz & Vann LLP.(4)
*10(1) Securities Compensation Plan (Incorporated herein by reference
from August 31, 1994 Form 10-KSB, filed by Electromagnetic Oil
Recovery, Inc., the Company's predecessor).
*10(2) Form of Certificate for Common Stock Purchase Warrants issued
pursuant to the Securities Compensation Plan (Incorporated
herein by reference from Form S-8 Registration Statement, File
No. 33-82944 filed on August 17, 1994, filed by Electromagnetic
Oil Recovery, Inc., the Company's predecessor).
*10(3) Form of Option Agreement for options granted to certain
persons, including Directors (Incorporated herein by reference
from August 31, 1994 Form 10-KSB, filed by Electromagnetic Oil
Recovery, Inc., the Company's predecessor).
*10(4) Form of Certificate for Common Stock Purchase Warrants issued
to certain investors in August 1994, including Directors
(Incorporated
S-1
<PAGE> 5
herein by reference from August 31, 1994 Form 10-KSB, filed
by Electromagnetic Oil Recovery, Inc., the Company's
predecessor).
*10(5) Restated Employment Agreement between Fountain Oil Incorporated
and Nils N. Trulsvik (Incorporated herein by reference from
December 31, 1997 Form 10-K/A).
*10(6) Employment Agreement between Fountain Oil Incorporated and
Ravinder S. Sierra (Incorporated herein by reference from
August 31, 1995 Form 10-KSB).
*10(7) Amended and Restated 1995 Long-Term Incentive Plan.
*10(8) Fee Agreement dated November 15, 1995 between Fountain Oil
Incorporated and Robert A. Halpin (Incorporated herein by
reference from August 31, 1996 Form 10-KSB).
*10(9) Fee Agreement between Fountain Oil Incorporated and Eugene J.
Meyers (Incorporated herein by reference from August 31, 1996
Form 10-KSB).
*10(10) Amended Fee Agreement dated December 10, 1996 between Fountain
Oil Incorporated and Robert A. Halpin (Incorporated herein by
reference from December 31, 1996 Form 10-K).
*10(11) Employment Agreement between Fountain Oil Incorporated and
Alfred Kjemperud (Incorporated herein by reference from March
31, 1997 Form 10-Q).
*10(12) Employment Agreement between Fountain Oil Norway AS and Rune
Falstad (Incorporated herein by reference from December 31,
1997 Form 10-K/A).
*10(13) Amended and Restated CanArgo Energy Inc. Stock Option Plan
(Incorporated herein by reference from September 30, 1998 Form
10-Q).
*10(14) Workorder between CanArgo Energy Inc. and Nils N. Trulsvik as
Consultant (Incorporated herein by reference from September 30,
1998 Form 10-Q).
*10(15) Consultancy Agreement between CanArgo Energy Corporation and
Fincom AS, Norway (Incorporated herein by reference from
September 30, 1998 Form 10-Q).
*10(16) Employment Contract between CanArgo Energy Inc. and Anthony J.
Potter (Incorporated herein by reference from September 30,
1998 Form 10-Q).
*10(17) Workorder between CanArgo Energy Inc. and Alfred Kjemperud as
Consultant.(1)
10(18) Convertible Loan Agreement between Ninotsminda Oil Company
(NOC) and International Finance Corporation (IFC) dated
December 17, 1998.(1)
S-2
<PAGE> 6
10(19) Put Option Agreement between CanArgo Energy Corporation, JKX
Oil & Gas PLC. and IFC dated December 17, 1998.(1)
10(20) Guarantee Agreement between CanArgo Energy Corporation and IFC
dated December 17, 1998.(1)
10(21) Agreement between Georgian Oil Refinery Company and CanArgo
Petroleum Products Ltd. dated September 26, 1998.(1)
10(22) Terrenex Acquisition Corporation Option regarding CanArgo
(Nazvrevi) Limited.(1)
10(23) Production Sharing Contract between (1) Georgia and (2)
Georgian Oil and JKX Navtobi Ltd. dated February 15, 1996.(3)
10(24) Agreement and Promissory Note dated July 19, 1999, with
Terrenex Acquisition Corporation.
21 List of Subsidiaries.(1)
23(1) Consent of PricewaterhouseCoopers LLP.
23(2) Consent of Ernst & Young, Chartered Accountants, Calgary,
Canada.
23(3) Consent of Ernst & Young, Chartered Accountants, Limassol,
Cyprus.
23(4) Consent of AMH Group Ltd.(1)
23(5) Consent of Kelly Lytton Mintz & Vann LLP, contained in Exhibit
5(1).(4)
24(1) Power of Attorney.(1)
24(2) Power of Attorney of Robert A. Halpin(2)
27(1) Restated Financial Data Schedule for the fiscal year ended
December 31, 1997.(1)
27(2) Restated Financial Data Schedule for the four-month period
ended December 31, 1996.(1)
27(3) Restated Financial Data Schedule for the fiscal year ended
August 31, 1996.(1)
27(4) Restated Financial Data Schedule for the fiscal year ended
August 31, 1995.(1)
27(5) Restated Financial Data Schedule for the quarter ended March
31, 1998.(1)
27(6) Restated Financial Data Schedule for the quarter ended June 30,
1998.(1)
27(7) Restated Financial Data Schedule for the quarter ended March
31, 1997.(1)
27(8) Restated Financial Data Schedule for the quarter ended June 30,
1997.(1)
27(9) Restated Financial Data Schedule for the quarter ended
September 30, 1997.(1)
S-3
<PAGE> 7
(b) No financial statement schedules are required to be filed
herewith.
- ---------------
(1) Previously filed on February 12, 1999.
(2) Previously filed on May 19, 1999.
(3) Previously filed on June 7, 1999.
(4) Previously filed on June 9, 1999.
S-4
<PAGE> 8
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant has
duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in Calgary, Alberta, Canada, on July 28,
1999.
CANARGO ENERGY CORPORATION
By: /s/ MICHAEL BINNION
--------------------------------
Michael Binnion,
President
Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed by the following persons in the capacities and on the
date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<C> <S> <C>
/s/ DAVID ROBSON Chief Executive Officer and July 28, 1999
- --------------------------------------------- Director (Principal Executive
David Robson* Officer)
/s/ MICHAEL BINNION President, Chief Financial July 28, 1999
- --------------------------------------------- Officer and Director
Michael Binnion (Principal Financial Officer)
/s/ J.F. RUSSELL HAMMOND Director July 28, 1999
- ---------------------------------------------
J.F. Russell Hammond
/s/ PEDER PAUS Director July 28, 1999
- ---------------------------------------------
Peder Paus*
/s/ NILS N. TRULSVIK Director July 28, 1999
- ---------------------------------------------
Nils N. Trulsvik*
/s/ ANTHONY J. POTTER Controller (Principal July 28, 1999
- --------------------------------------------- Accounting Officer)
Anthony J. Potter*
</TABLE>
*By /s/ MICHAEL BINNION
------------------------------
Michael Binnion
Attorney-in-fact
S-5
<PAGE> 9
CANARGO ENERGY CORPORATION
POST-EFFECTIVE AMENDMENT NO. 1 TO REGISTRATION STATEMENT
ON FORM S-1
EXHIBIT INDEX
<TABLE>
<CAPTION>
FILED
HEREWITH
- --------
<C> <C> <S>
(*) Management Contracts, Compensation Plans and Arrangements
are identified by an asterisk.
1(1) Escrow Agreement with Signature Stock Transfer, Inc.(4)
1(2) Selling Agent Agreement with each of Credifinance Securities
Limited, David Williamson Associates Limited, and Orkla
Finans (Fondsmegling) ASA.(4)
1(3) Escrow Agreement with Orkla Finans (Fondsmegling) ASA.(4)
X 1(4) Selling Agent Agreement with National Securities Corporation.
X 1(5) Escrow Agreement with Continental Stock Transfer & Trust Company.
2(1) Amended and Restated Combination Agreement between Fountain
Oil Incorporated and CanArgo Energy Inc. dated as of
February 2, 1998 (Incorporated herein by reference from Form
S-3 Registration Statement, File No. 333-48287 filed on June
9, 1998).
2(2) Voting, Support and Exchange Trust Agreement (Incorporated
herein by reference as Annex G from Form S-3 Registration
Statement, File No. 333-48287 filed on June 9, 1998).
3(1) Registrant's Certificate of Incorporation and amendments
thereto (Incorporated herein by reference from July 15, 1998
Form 8-K).
X 3(2) Registrant's Bylaws.
4(1) Form of 8% Convertible Subordinated Debenture (Incorporated
herein by reference from February 29, 1996 Form 10-QSB).
4(2) Form of Stock Certificate(3)
5(1) Opinion of Kelly Lytton Mintz & Vann LLP(4)
*10(1) Securities Compensation Plan (Incorporated herein by
reference from August 31, 1994 Form 10-KSB, filed by
Electromagnetic Oil Recovery, Inc., the Company's
predecessor).
*10(2) Form of Certificate for Common Stock Purchase Warrants
issued pursuant to the Securities Compensation Plan
(Incorporated herein by reference from Form S-8 Registration
Statement, File No. 33-82944 filed on August 17, 1994, filed
by Electromagnetic Oil Recovery, Inc., the Company's
predecessor).
*10(3) Form of Option Agreement for options granted to certain
persons, including Directors (Incorporated herein by
reference from August 31, 1994 Form 10-KSB, filed by
Electromagnetic Oil Recovery, Inc., the Company's
predecessor).
*10(4) Form of Certificate for Common Stock Purchase Warrants
issued to certain investors in August 1994, including
Directors (Incorporated herein by reference from August 31,
1994 Form 10-KSB, filed by Electromagnetic Oil Recovery,
Inc., the Company's predecessor).
</TABLE>
<PAGE> 10
<TABLE>
<CAPTION>
FILED
HEREWITH
- --------
<C> <C> <S>
*10(5) Restated Employment Agreement between Fountain Oil
Incorporated and Nils N. Trulsvik (Incorporated herein by
reference from December 31, 1997 Form 10-K/A).
*10(6) Employment Agreement between Fountain Oil Incorporated and
Ravinder S. Sierra (Incorporated herein by reference from
August 31, 1995 Form 10-KSB).
X *10(7) Amended and Restated 1995 Long-Term Incentive Plan.
*10(8) Fee Agreement dated November 15, 1995 between Fountain Oil
Incorporated and Robert A. Halpin (Incorporated herein by
reference from August 31, 1996 Form 10-KSB).
*10(9) Fee Agreement between Fountain Oil Incorporated and Eugene
J. Meyers (Incorporated herein by reference from August 31,
1996 Form 10-KSB).
*10(10) Amended Fee Agreement dated December 10, 1996 between
Fountain Oil Incorporated and Robert A. Halpin (Incorporated
herein by reference from December 31, 1996 Form 10-K).
*10(11) Employment Agreement between Fountain Oil Incorporated and
Alfred Kjemperud (Incorporated herein by reference from
March 31, 1997 Form 10-Q).
*10(12) Employment Agreement between Fountain Oil Norway AS and Rune
Falstad (Incorporated herein by reference from December 31,
1997 Form 10-K/A).
*10(13) Amended and Restated CanArgo Energy Inc. Stock Option Plan
(Incorporated herein by reference from September 30, 1998
Form 10-Q).
*10(14) Workorder between CanArgo Energy Inc. and Nils N. Trulsvik
as Consultant (Incorporated herein by reference from
September 30, 1998 Form 10-Q).
*10(15) Consultancy Agreement between CanArgo Energy Corporation and
Fincom AS, Norway (Incorporated herein by reference from
September 30, 1998 Form 10-Q).
*10(16) Employment Contract between CanArgo Energy Inc. and Anthony
J. Potter (Incorporated herein by reference from September
30, 1998 Form 10-Q).
*10(17) Workorder between CanArgo Energy Inc. and Alfred Kjemperud
as Consultant.(1)
10(18) Convertible Loan Agreement between Ninotsminda Oil Company
(NOC) and International Finance Corporation (IFC) dated
December 17, 1998.(1)
10(19) Put Option Agreement between CanArgo Energy Corporation, JKX
Oil & Gas PLC. and IFC dated December 17, 1998.(1)
10(20) Guarantee Agreement between CanArgo Energy Corporation and
IFC dated December 17, 1998.(1)
10(21) Agreement between Georgian Oil Refinery Company and CanArgo
Petroleum Products Ltd. dated September 26, 1998.(1)
</TABLE>
<PAGE> 11
<TABLE>
<CAPTION>
FILED
HEREWITH
- --------
<C> <C> <S>
10(22) Terrenex Acquisition Corporation Option regarding CanArgo
(Nazvrevi) Limited.(1)
10(23) Production Sharing Contract between (1) Georgia and (2)
Georgian Oil and JKX Navtobi Ltd. dated February 15,
1996.(3)
X 10(24) Agreement and Promissory Note dated July 19, 1999, with
Terrenex Acquisition Corporation.
21 List of Subsidiaries.(1)
X 23(1) Consent of PricewaterhouseCoopers LLP.
X 23(2) Consent of Ernst & Young, Chartered Accountants, Calgary,
Canada.
X 23(3) Consent of Ernst & Young, Chartered Accountants, Limassol,
Cyprus.
23(4) Consent of AMH Group Ltd.(1)
23(5) Consent of Kelly Lytton Mintz & Vann LLP, contained in
Exhibit 5(1).(4)
24(1) Power of Attorney.(1)
24(2) Power of Attorney of Robert A. Halpin(2)
27(1) Restated Financial Data Schedule for the fiscal year ended
December 31, 1997.(1)
27(2) Restated Financial Data Schedule for the four-month period
ended December 31, 1996.(1)
27(3) Restated Financial Data Schedule for the fiscal year ended
August 31, 1996.(1)
27(4) Restated Financial Data Schedule for the fiscal year ended
August 31, 1995.(1)
27(5) Restated Financial Data Schedule for the quarter ended March
31, 1998.(1)
27(6) Restated Financial Data Schedule for the quarter ended June
30, 1998.(1)
27(7) Restated Financial Data Schedule for the quarter ended March
31, 1997.(1)
27(8) Restated Financial Data Schedule for the quarter ended June
30, 1997.(1)
27(9) Restated Financial Data Schedule for the quarter ended
September 30, 1997.(1)
</TABLE>
- ---------------
(1) Previously filed on February 12, 1999.
(2) Previously filed on May 19, 1999.
(3) Previously filed on June 7, 1999.
(4) Previously filed on June 9, 1999.
<PAGE> 1
EXHIBIT 1(4)
CANARGO ENERGY CORPORATION
21,264,643 Shares of Common Stock
SELLING AGENT AGREEMENT
July 26, 1999
National Securities Corporation
875 North Michigan Avenue
Suite 1560
Chicago, Illinois 60611
Facsimile: (312) 751-0769
Gentlemen:
1. CanArgo Energy Corporation (the "Company") proposes to offer and
sell a minimum of 11,500,000 shares and a maximum of 21,264,643 shares of its
common stock, $0.10 par value per share (the "Shares") on the terms set forth in
the Prospectus described below (the "Offering"). Subject to the terms and
conditions set forth herein, you agree to use your best efforts as sales agent
to solicit purchasers of the Shares on the terms set forth in the Prospectus.
2. The Company has filed with the Securities and Exchange Commission
(the "Commission") a registration statement on Form S-1 (No. 333-72295) and a
related preliminary prospectus for the registration of the Shares under the
Securities Act of 1933, as amended (the "Act"), and has filed such amendments
thereto and such amended preliminary prospectuses as may have been required to
the date hereof. Such registration statement as amended and the amended
prospectus on file with the Commission at the time the registration statement
becomes effective are hereinafter called the "Registration Statement" and the
"Prospectus", respectively, except that (i) if the Company files a
post-effective amendment to such registration statement, then the term
"Registration Statement" shall, from and after the declaration of the
effectiveness of such post-effective amendment, refer to such registration
statement as amended by such post-effective amendment thereto, and the term
"Prospectus" shall refer to the amended prospectus then on file with the
Commission and (ii) if the prospectus filed by the Company pursuant to either
Rule 424(b) or (c) of the rules and regulations of the Commission under the Act
(the "Regulations") shall differ from the prospectus on file at the time the
Registration Statement became, or any post-effective amendment thereto shall
have become, effective, the term "Prospectus" shall refer to the prospectus
filed pursuant to Rule 424(b) or (c) from and after the date on which it shall
have been filed.
3. The Offering shall commence at 9:00 a.m. Texas, U.S.A. time or
4:00 p.m. Norway time on the date, as advised by the Company, that prospectuses
are available for distribution in Norway and continue until 9:00 a.m. Texas,
U.S.A. time or 4:00 p.m. Oslo time on the earlier of: (i) the date on which
subscriptions for all Shares shall have been received and
<PAGE> 2
accepted by the Company and paid for; or (ii) June 30, 1999, unless the Company
extends this date without notice to subscribers to a date not later than August
6, 1999 (the "Offering Termination Date"). The Company will advise you of any
extension of the Offering Termination Date beyond June 30, 1999.
4. You represent that you are a broker-dealer registered with the
Commission and with each state in which you intend to offer the Shares as set
forth in paragraph 5 hereof and a member in good standing of the National
Association of Securities Dealers, Inc. (the "NASD"). You agree to comply with
the Rules of Fair Practice of the NASD, and each of your sales representatives
making offers of Shares will be properly licensed to sell securities in the
state where such representative makes offers or sales.
5. You agree that you will not solicit purchasers of the Shares in
any jurisdiction except New York, Illinois and Nevada. You will not deliver
subscription agreements or accept subscription monies from any person in the
foregoing jurisdictions until we have advised you that the Shares have been
qualified for sale under the respective securities or blue sky laws of the such
jurisdictions, and you shall be solely responsible for compliance with the
applicable laws of such jurisdictions as they relate to your solicitation
activities.
6. You will deliver a copy of the Prospectus to each person whom you
solicit. You will not deliver any subscription agreement to any person unless it
is preceded or accompanied by a Prospectus. Neither you nor any other person is
or has been authorized to give any information or to make any representations in
connection with the sale of the Shares other than as contained in the
Prospectus. The Company will deliver to you from time to time such number of
copies of the Prospectus and subscription agreement as you may reasonably
request to enable you to solicit purchasers of the Shares.
The Company will promptly notify you upon the happening of any event as a
result of which the Prospectus as then in effect includes an untrue statement of
a material fact or omits to state a material fact required to be stated therein
or necessary to make the statements therein not misleading in light of the
circumstances then existing. Upon receipt of such notice you will forthwith
discontinue solicitations of purchasers until you have received a supplemental
or amended Prospectus or the Company has advised you that you may resume use of
the Prospectus in effect at the time of its notice.
7. Each subscriber for the Shares will be required to enter into a
subscription agreement in the form approved by the Company and make payment for
the Shares in the manner set forth in the subscription agreement. Each payment
for Shares must be accompanied by a completed and originally executed
subscription agreement. All subscription agreements and payments for Shares
received by you shall be forwarded to the offices of an escrow agent identified
in the subscription agreement by noon of the next business day after receipt by
you. The escrow agents will deposit all subscription payments in bank accounts
in accordance with the terms of their agreements with the Company.
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<PAGE> 3
8. No subscription agreement shall be effective unless and until
accepted by the Company, and the Company reserves the right, in its sole
discretion, to refrain from accepting, in whole or in part, any Subscription
Agreement submitted.
9. During the Offering, you and the Company will comply with all
applicable requirements of the Act, the Securities Exchange Act of 1934, and the
laws of the jurisdictions in which the offering is being made so as to permit
the offer and sale of the Shares in accordance with applicable law, the
provisions hereof and as set forth in the Prospectus.
10. As compensation for your services in soliciting and obtaining
purchasers of the Shares, the Company will pay you as follows:
(i) a commission of eight percent (8%) of the total purchase
price for all Shares sold through your efforts evidenced by the appearance
in each purchaser's subscription agreement of your name as the "Soliciting
Dealer." All such compensation will be paid to you concurrently with the
disbursement of funds from an escrow account to the Company.
(ii) reimbursement of those bona fide out-of-pocket expenses
associated with soliciting and obtaining subscriptions for Shares incurred
with the prior written consent of the Company, in an amount not to exceed
2% of the total purchase price of all Shares sold through your efforts
evidenced in the manner described above, payable after the Offering
Termination Date within two (2) days of written request made to the
Company.
Notwithstanding the foregoing, no compensation or reimbursement will be
paid by the Company (a) in respect of subscriptions (or portions thereof) which
have been rejected by the Company, or (b) in the event that at least 11,500,000
Shares are not sold, or (c) with respect to Shares sold directly through the
Company's officers or directors or (d) until the Company receives the relevant
subscription payments from the Escrow Agent.
11. Indemnification and Contribution.
(a) The Company agrees to indemnify and hold harmless you (the
"Selling Agent"), its officers, directors, partners, employees, agents, and
counsel, and each person, if any, who controls the Selling Agent within the
meaning of Section 15 of the Act or Section 20(a) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), against any and all loss, liability,
claim, damage, and expense whatsoever (which shall include, for all purposes of
this paragraph (a), but not be limited to, attorneys' fees and any and all
expense whatsoever incurred in investigating, preparing, or defending against
any litigation, commenced or threatened, or any claim whatsoever and any and all
amounts paid in settlement of any claim or litigation) as and when incurred
arising out of, based upon, or in connection with (i) any untrue statement or
alleged untrue statement of a material fact contained in the Prospectus or
Registration Statement, or in any application or other document or communication
(in this paragraph 11 collectively called an "application") executed by or on
behalf of the Company filed in any jurisdiction in order to register or qualify
the Shares under the "blue sky" or securities laws thereof; (ii) an
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<PAGE> 4
omission or alleged omission to state a material fact required to be stated
therein or necessary to make the statements therein not misleading, unless such
statement or omission was made in reliance upon and in conformity with written
information furnished to the Company as stated in paragraph (b) below with
respect to the Selling Agent expressly for inclusion in the Prospectus or
Registration Statement or in any application, as the case may be; (iii) any
breach of any representation, warranty, covenant, or agreement of the Company
contained in this Agreement; or (iv) except as provided in paragraph (b) below,
any violation by the Company of any federal or state securities law.
(b) The Selling Agent agrees to indemnify and hold harmless the
Company, its officers, directors, employees, agents and counsel, and each other
person, if any, who controls the Company within the meaning of Section 15 of the
Act or Section 20(a) of the Exchange Act, to the same extent as the foregoing
indemnity from the Company to the Selling Agent in paragraph (a) above, with
respect to any and all loss, liability, claim, damage, and expense whatsoever
(which shall include, for all purposes of this paragraph (b), but not limited
to, attorneys' fees and any and all expense whatsoever incurred in
investigating, preparing, or defending against any litigation, commenced or
threatened, or any claim whatsoever and any and all amounts paid in settlement
of any claim or litigation) as and when incurred arising out of, based upon, or
in connection with (i) statements or omissions, if any, made in the Prospectus,
Registration Statement or an application in reliance upon and in conformity with
written information furnished to the Company with respect to the Selling Agent
expressly for inclusion in the Prospectus, Registration Statement or any
application, as the case may be; (ii) the failure of the Selling Agent to comply
with the "blue sky" or securities laws of the jurisdictions in which the Selling
Agent solicits offers to buy any Shares or (iii) any breach of any
representation, warranty, covenant or agreement of the Selling Agent contained
in this Agreement.
(c) If any action is brought against the Selling Agent or the
Company or any of their respective officers, directors, partners, employees,
agents, or counsel, or any controlling persons of the Selling Agent or the
Company (each an "indemnified party"), in respect of which indemnity may be
sought against the Company or the Selling Agent pursuant to paragraphs (a) and
(b) hereof, as the case may be, such indemnified party or parties shall promptly
notify the Company or the Selling Agent (each an "indemnifying party"), as the
case may be, in writing of the institution of such action (but the failure so to
notify shall not relieve the indemnifying party from any liability it may have
other than pursuant to this paragraph (c)) and the indemnifying party shall
promptly assume the defense of such action, including the employment of counsel
(reasonably satisfactory to such indemnified party or parties) and payment of
expenses. Such indemnified party shall have the right to employ its own counsel
in any such case, but the fees and expense of such counsel shall be at the
expense of such indemnified party unless (i) the employment of such counsel
shall have been authorized in writing by the indemnifying party in connection
with the defense of such action or (ii) the indemnifying party shall not have
promptly employed counsel satisfactory to such indemnified party or parties to
have charge of the defense of such action or (iii) such indemnified party or
parties shall have reasonably concluded that there may be one or more legal
defenses available to it or them or to other indemnified parties which are
different from or additional to those available to one or more of the
indemnifying parties, in any of which events such fees and expenses of one such
counsel shall be borne by the
4
<PAGE> 5
indemnifying party and the indemnifying party shall not have the right to direct
the defense of such action on behalf of the indemnified party or parties.
Anything in this paragraph to the contrary notwithstanding, the indemnifying
party shall not be liable for any settlement of any such claim or action
effected without its written consent.
(d) To provide for just and equitable contribution, if (i) an
indemnified party makes a claim for indemnification pursuant to paragraph (a) or
(b) but it is found in a final judicial determination, not subject to further
appeal, that such indemnification may not be enforced in such case, even though
this Agreement expressly provides for indemnification in such case, or (ii) any
indemnifying party seeks contribution under the Act, the Exchange Act, or
otherwise, then the Company (including for this purpose any contribution made by
or on behalf of any officer, director, employee, agent, or counsel of the
Company, or any controlling person of the Company), on the one hand, and the
Selling Agent (including for this purpose any contribution by or on behalf of
any officer, director, employee, agent, or counsel of the Selling Agent, or any
controlling person of the Selling Agent), on the other hand, shall contribute to
the losses, liabilities, claims, damages and expenses whatsoever to which any of
them may be subject, in such proportions as are appropriate to reflect the
relative benefits received by the Company, on the one hand, and the Selling
Agent, on the other hand; provided, however, that if applicable law does not
permit such allocation, then other relevant equitable considerations such as the
relative fault of the Company and the Selling Agent in connection with the facts
which resulted in such losses, liabilities, claims, damages, and expenses shall
also be considered. The relative benefits received by the Company, on the one
hand, and the Selling Agent, on the other hand, shall be deemed to be in the
same proportion as (x) the total proceeds from the Offering (net of compensation
payable to the Selling Agent pursuant to paragraph 10(i) hereof but before
deducting expenses) received by the Company, and (y) the compensation received
by the Selling Agent pursuant to paragraph 10(i) hereof.
The relative fault, in the case of an untrue statement, alleged
untrue statement, omission, or alleged omission, shall be determined by, among
other things, whether such statement, alleged statement, omission, or alleged
omission relates to information supplied by the Company or by the Selling Agent,
and the parties' relative intent, knowledge, access to information, and
opportunity to correct or prevent such statement, alleged statement, omission,
or alleged omission. The Company and the Selling Agent agree that it would be
unjust and inequitable if the respective obligations of the Company and the
Selling Agent for contribution were determined by pro rata or per capita
allocation of the aggregate losses, liabilities, claims, damages, and expenses
or by any other method of allocation and that does not reflect the equitable
considerations referred to in this paragraph (d). In no case shall the Selling
Agent be responsible for a portion of the contribution obligation in excess of
the compensation received by it pursuant to paragraph 10(i) hereof. No person
guilty of a fraudulent misrepresentation shall be entitled to contribution from
any person who is not guilty of such fraudulent misrepresentation. For purposes
of this paragraph (d), each person, if any, who controls the Selling Agent
within the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act
and each officer, director, partner, employee, agent and counsel of the Selling
Agent, shall have the same rights to contribution as the Company, subject in
each case to the provisions of this paragraph (d). Anything in this paragraph
(d) to the contrary notwithstanding, no party shall be liable for
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<PAGE> 6
contribution with respect to the settlement of any claim or action effected
without its written consent. This paragraph (d) is intended to supersede any
right to contribution under the Act, the Exchange Act, or otherwise.
12. This Agreement will become effective at the time the Registration
Statement first becomes effective, or, if later, the date of this Agreement. You
or the Company may prevent this Agreement from becoming effective without
liability of any other party by giving notice prior to the time when this
Agreement would otherwise become effective as herein provided. This Agreement
will terminate when the Offering is terminated. The Company will give you prompt
notice of the effectiveness of the Registration Statement and the termination of
the Offering.
13. All communications hereunder shall be in writing and sent by
facsimile to you at the address on the first page hereof, or to the Company at
CanArgo Energy Corporation, Suite 1580, 727 - 7th Avenue, S.W., Calgary, Alberta
T2P OZ5, Canada, at (403) 777-1578, with a copy to Helen W. Melman, Esq., 815
Moraga Drive, Los Angeles, California 90049, at (310) 472-4091.
14. This Agreement shall be governed by and construed in accordance
with the laws of the State of Delaware.
15. You and each other selling agent of the Company shall act as
independent contractors, and nothing herein contained shall constitute you or
such other selling agents as agents of the Company or constitute the other
selling agents as your agents in connection with the solicitation of
subscriptions for the Shares. You shall be under no liability to the Company for
any act or omission of any selling agent other than yourself, and you shall not
be liable hereunder except for the obligations you expressly assume hereunder or
for liabilities which may be incurred by you under the Act or the laws of the
jurisdictions set forth in paragraph 5 hereof.
If the foregoing is in accordance with our agreement, kindly sign and
return to us a counterpart hereof, whereupon this instrument along with all
counterparts will become a binding agreement in accordance with its terms.
Very truly yours,
CANARGO ENERGY CORPORATION
By /S/ Michael Binnion
---------------------------
Michael Binnion, President
Confirmed and accepted as of
the date first above written:
NATIONAL SECURITIES CORPORATION
By /S/ Steven A. Rothstein
------------------------------
Steven A. Rothstein,
Chairman
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<PAGE> 1
Exhibit 1(5)
ESCROW AGREEMENT
AGREEMENT made as of this 28th day of July, 1999 by and among CanArgo
Energy Corporation (the "Issuer" or "Company") and Continental Stock Transfer &
Trust Company (the "Escrow Agent"), whose addresses appear on the Information
Sheet attached to this Agreement.
WITNESSETH:
WHEREAS, the Issuer has filed Registration Statement No. 333-72295 (the
"Registration Statement") with the Securities and Exchange Commission (the
"SEC") on Form S-1 to register under the Securities Act of 1933, 21,264,643
shares (the "Securities") of the Common Stock, par value $.10 per share
("Common Stock"), of the Issuer;
WHEREAS, the SEC declared the Registration Statement effective on June 10,
1999;
WHEREAS, following the declaration by the SEC of the effectiveness of the
Registration Statement the Issuer commenced an offering of the Securities for
sale on an "all or none" basis with respect to 11,500,000 shares of Common
Stock (the "Minimum Securities Amount") which are to be sold at a price of U.S.
Thirty Cents ($.30) or 2.35 NOK (Norwegian Kroner) per share of Common Stock,
all as set forth on the Information Sheet (the "Information Sheet") attached
hereto as Exhibit A and incorporated herein by this reference;
WHEREAS, the Issuer proposes to establish an escrow account (the "Escrow
Account"), to which subscription monies which are received by the Escrow Agent
directly or indirectly from subscribers solicited by National Securities
Corporation ("NSC"), as soliciting dealer, in connection with such offering are
to be credited, and the Escrow Agent is willing to establish the Escrow Account
on the terms and subject to the conditions hereinafter set forth;
WHEREAS, the Escrow Agent has established or will establish a special bank
account with Chase Manhattan Bank (the "Bank") into which the subscription
monies, which are received by the Escrow Agent directly or indirectly from
subscribers and credited to the Escrow Account, are to be deposited; and
WHEREAS, subscription monies will also be deposited into bank accounts
maintained by Orkla Finans (Fondsmegling) ASA ("Orkla Finans") as escrow agent
(the "Norway Account") and Signature Stock Transfer, Inc. ("SST") as escrow
agent (the "Texas Account" and together with the Norway Account the "Other
Accounts").
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, the parties hereto hereby agree as follows:
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<PAGE> 2
1. Information Sheet. Each capitalized term not otherwise defined in this
Agreement shall have the meaning set forth for such term on the Information
Sheet.
2. Establishment of the Bank Account.
2.1 The Escrow Agent shall establish a non-interest-bearing bank account
at the branch of the Bank selected by the Escrow Agent and bearing the
designation set forth on the Information Sheet (heretofore defined as the "Bank
Account"). The purpose of the Bank Account is for (a) the deposit of all
subscription monies (checks, bank drafts, money orders or wire transfers) which
are received from prospective purchasers of the Securities and are delivered to
the Escrow Agent, (b) the holding of amounts of subscription monies which are
collected through the banking system, and (c) the disbursement of collected
funds, all as described herein.
2.2 The Offering Period shall consist of the period set forth on the
Information Sheet. The last day of the Offering Period is referred to herein
as the "Termination Date". After the Termination Date, subscribers shall not
deposit, and the Escrow Agent shall not accept, any additional amounts
representing payments by prospective purchasers.
3. Deposits to the Bank Account.
3.1 Prospective purchasers of the Securities may deliver to the Escrow
Agent monies representing the purchase price of the Securities, which monies
shall be in the form of checks, bank drafts, money orders or wire transfers.
Upon the Escrow Agent's receipt of such monies, they shall be credited to the
Escrow Account. All checks, bank drafts or money orders (referred to as
"checks" herein) delivered to the Escrow Agent shall be made payable to
"Continental Stock Transfer & Trust Company, as Agent for CanArgo Energy
Corporation". Any check payable other than to the Escrow Agent as required
hereby shall be returned to the prospective purchaser, or if the Escrow Agent
has insufficient information to do so, then to the Company (together with any
Subscription Information, as defined below or other documents delivered
therewith) by noon of the next business day following receipt of such check by
the Escrow Agent, and such check shall be deemed not to have been delivered to
the Escrow Agent pursuant to the terms of this Agreement.
3.2 Promptly after receiving subscription monies as described in Section
3.1, the Escrow Agent shall deposit the same into the Bank Account. Amounts of
monies so deposited are hereinafter referred to as "Escrow Amounts". The
Escrow Agent shall cause the Bank to process all Escrow Amounts for collection
through the banking system. Simultaneously with each deposit to the Escrow
Account, the prospective purchaser shall inform the Escrow Agent in writing of
its name, address, taxpayer identification number (if any), the amount of
Securities subscribed for by such
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<PAGE> 3
prospective purchaser, and the aggregate dollar amount of such subscription
(collectively, the "Subscription Information"). The Escrow Agent shall mark all
Subscription Information with the date and time it is received by the Escrow
Agent.
3.3 The Escrow Agent shall not be required to accept for credit to the
Escrow Account or for deposit into the Bank Account checks which are not
accompanied by the appropriate Subscription Information. Wire transfers
representing payments by prospective purchasers shall not be deemed deposited in
the Escrow Account until the Escrow Agent has received in writing the
Subscription Information required with respect to such payments.
3.4 The Escrow Agent shall not be required to accept in the Escrow Account
any amounts representing payments by prospective purchasers, whether by check or
wire, except during the Escrow Agent's regular business hours.
3.5 Only those Escrow Amounts which have been deposited in the Bank
Account and subscription monies which have been deposited in the Norway Account
or the Texas Account and which have cleared the banking system and have been
collected in such Accounts are herein referred to as the "Fund".
3.6 The Escrow Agent shall advise Orkla Finans and SST daily as to the
amount of the Fund held in the Bank Account and Orkla Finans and SST shall
advise Escrow Agent daily as to the amount held in the Norway Account and Texas
Account, respectively. The aggregate Fund in the Norway Account, Texas Account
and Bank Account is referred to herein as the "Total Fund."
4. Disbursement from the Bank Account.
4.1 If by 9:00 a.m. Central Daylight Time on the Termination Date the
amount of the Total Fund is less than the aggregate Offering Price in U.S.
dollars and/or Norwegian kroner necessary to purchase the Minimum Securities
Amount, as indicated by the Subscription Information submitted to the Escrow
Agent, Orkla Finans and SST, then in such case the Escrow Agent shall promptly
refund to each prospective purchaser the amount of payment received from such
prospective purchaser which is then held in the Bank Account or which thereafter
clears the banking system, without interest thereon or deduction therefrom, by
drawing checks on the Bank Account for the amounts of such payments and
transmitting them to the purchasers. In such event, the Escrow Agent shall
promptly notify the Issuer of its distribution of the Fund.
4.2 If at any time up to 9:00 a.m. Central Daylight Time on the Termination
Date, the amount of the Total Fund is at least equal to the aggregate Offering
Price in U.S. dollars and/or Norwegian kroner necessary to represent the
consideration for the purchase of not less than the Minimum Securities Amount,
as indicated by the Subscription Information submitted to the Escrow Agent,
Orkla Finans and SST, based in part on certification provided to the Escrow
Agent by Orkla and SST, the Escrow Agent shall promptly notify the Issuer of
such fact in writing. The
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<PAGE> 4
Escrow Agent shall promptly disburse the Fund, by drawing checks on or making
wire transfers from the Bank Account in accordance with instructions in writing
signed by the Issuer as to the disbursement of the Fund, promptly after the
Escrow Agent receives such instructions and confirmation from SST of the
concurrent issuance to the purchasers of the Securities being purchased with the
funds being disbursed.
4.3 In the event the Issuer determines to reject in whole or in part the
subscription of any prospective purchaser for whose account Escrow Amounts have
been deposited in the Escrow Account, the Issuer shall promptly notify the
Escrow Agent of such determination. Upon receipt of such notification, the
Escrow Agent shall promptly refund to such prospective purchaser the amount of
payment received from such purchaser attributable to the rejected subscription
which is then held in the Fund or which thereafter clears the banking system,
without interest thereon or deduction therefrom, by drawing checks on the Bank
Account for the amounts of such payments and transmitting them to such
purchaser.
4.4 Upon disbursement of the Fund pursuant to the terms of this Article 4,
the Escrow Agent shall be relieved of all further obligations and released from
all liability under this Agreement. It is expressly agreed and understood that
in no event shall the aggregate amount of payments made by the Escrow Agent
exceed the amount of the Fund.
5. Rights, Duties and Responsibilities of Escrow Agent. It is understood
and agreed that the duties of the Escrow Agent are purely ministerial in
nature, and that:
5.1 The Escrow Agent shall notify the Issuer, on a daily basis, of the
Escrow Amounts which have been deposited in the Bank Account and of the
amounts, constituting the Fund, which have cleared the banking system and have
been collected by the Escrow Agent. The Issuer will receive similar
information from Orkla Finans and SST.
5.2 The Escrow Agent shall not be responsible for the performance by the
Issuer of its obligations under this Agreement, or for any obligations of Orkla
Finans or SST.
5.3 The Escrow Agent shall not be required to accept from the Issuer any
Subscription Information pertaining to prospective purchasers unless such
Subscription Information is accompanied by checks or wire transfers meeting the
requirements of Section 3.1, nor shall the Escrow Agent be required to keep
records of any information with respect to payments deposited by the Issuer
except as to the amount of such payments; however, the Escrow Agent shall
notify the Issuer within a reasonable time of any discrepancy between the
amount set forth in any Subscription Information and the amount delivered to
the Escrow Agent therewith. Such amount
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<PAGE> 5
need not be accepted for deposit in the Escrow Account until such discrepancy
has been resolved.
5.4 The Escrow Agent shall be under no duty or responsibility to enforce
collection of any check delivered to it hereunder. The Escrow Agent, within a
reasonable time, shall return to the Issuer any check received which is
dishonored, together with the Subscription Information, if any, which
accompanied such check.
5.5 The Escrow Agent shall be entitled to rely upon the accuracy, act in
reliance upon the contents, and assume the genuineness of any notice,
instruction, certificate, signature, instrument or other document (including
specifically certifications received from Orkla Finans and SST) which is
given to the Escrow Agent pursuant to this Agreement without the necessity of
the Escrow Agent verifying the truth or accuracy thereof. The Escrow Agent
shall not be obligated to make any inquiry as to the authority, capacity,
existence or identity of any person purporting to give any such notice or
instructions or to execute any such certificate, instrument or other document.
5.6 If the Escrow Agent is uncertain as to its duties or rights hereunder
or shall receive instructions with respect to the Bank Account, the Escrow
Amounts or the Fund which, in its sole determination, are in conflict either
with other instructions received by it or with any provision of this Agreement,
it shall be entitled to hold the Escrow Amounts, the Fund, or a portion
thereof, in the Bank Account pending the resolution of such uncertainty to the
Escrow Agent's sole satisfaction, by final judgment of a court or courts of
competent jurisdiction or otherwise; or the Escrow Agent, at its sole option,
may deposit the Fund (and any other Escrow Amounts that thereafter become part
of the Fund) with the Clerk of a court of competent jurisdiction in a
proceeding to which all parties in interest are joined. Upon the deposit by
the Escrow Agent of the Fund with the Clerk of any court, the Escrow Agent
shall be relieved of all further obligations and released from all liability
hereunder.
5.7 The Escrow Agent shall not be liable for any action taken or omitted
hereunder, or for the misconduct of any employee, agent or attorney appointed
by it, except in the case of willful misconduct or gross negligence. The
Escrow Agent shall be entitled to consult with counsel of its own choosing and
shall not be liable for any action taken, suffered or omitted by it in
accordance with the advice of such counsel.
5.8 The Escrow Agent shall have no responsibility at any time to ascertain
whether or not any security interest exists in the Escrow Amounts, the Fund or
any part thereof or to file any financing statement under the Uniform
Commercial Code with respect to the Fund or any part thereof.
6. Amendment; Resignation. This Agreement may be altered or amended only
with the written consent of the Issuer and the Escrow Agent. The Escrow Agent
may resign for any reason upon three (3) business days' written notice to the
Issuer. Should the Escrow Agent resign as herein provided, it shall not be
required to accept any deposit, make any disbursement or otherwise dispose of
the Escrow
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<PAGE> 6
Amounts or the Fund, but its only duty shall be to hold the Escrow Amounts until
they clear the banking system and the Fund for a period of notmore than five (5)
business days following the effective date of such resignation, at which time
(a) if a successor escrow agent shall have been appointed and written notice
thereof (including the name and address of such successor escrow agent) shall
have been given to the resigning Escrow Agent by the Issuer and such successor
escrow agent, then the resigning Escrow Agent shall pay over to the successor
escrow agent the Fund, less any portion thereof previously paid out in
accordance with this Agreement; or (b) if the resigning Escrow Agent shall not
have received written notice signed by the Issuer and a successor escrow agent,
then the resigning Escrow Agent shall promptly refund the amount in the Fund to
each prospective purchaser, without interest thereon or deduction therefrom, and
the resigning Escrow Agent shall promptly notify the Issuer in writing of its
liquidation and distribution of the Fund; whereupon, in either case, the Escrow
Agent shall be relieved of all further obligations and released from all
liability under this Agreement. Without limiting the provisions of Section 8
hereof, the resigning Escrow Agent shall be entitled to be reimbursed by the
Issuer for any expenses incurred in connection with its resignation, transfer of
the Fund to a successor escrow agent or distribution of the Fund pursuant to
this Section 6.
7. Representations and Warranties. The Issuer hereby represents and
warrants to Escrow Agent that:
7.1 No party other than the parties hereto and the prospective purchasers
have, or shall have, any lien, claim or security interest in the Escrow Amounts
or the Fund or any part thereof.
7.2 No financing statement under the Uniform Commercial Code is on file
in any jurisdiction claiming a security interest in or describing (whether
specifically or generally) the Escrow Amounts or the Fund or any part thereof.
7.3 The Subscription Information submitted with each deposit shall, at the
time of submission and at the time of the disbursement of the Fund, be deemed a
representation and warranty that such deposit represents a bona fide payment by
the purchaser described therein for the amount of Securities set forth in such
Subscription Information.
7.4 All of the information contained in the Information Sheet is, as of
the date hereof, and will be, at the time of any disbursement of the Fund, true
and correct.
8. Fees and Expenses. The Escrow Agent shall be entitled to the Escrow
Agent Fees set forth on the Information Sheet, payable as and when stated
therein. In addition, the Issuer agrees to reimburse the Escrow Agent for any
reasonable expenses incurred in connection with this Agreement, including, but
not limited to, reasonable counsel fees.
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<PAGE> 7
9. Indemnification and Contribution.
9.1 The Issuer ( the "Indemnitor") agrees to indemnify the Escrow Agent
and its officers, directors, employees, agents and shareholders (collectively
referred to as the "Indemnitees") against, and hold them harmless of and from,
any and all loss, liability, cost, damage and expense, including without
limitation, reasonable counsel fees, which the Indemnitees may suffer or incur
by reason of any action, claim or proceeding brought against the Indemnitees
arising out of or relating in any way to this Agreement or any transaction to
which this Agreement relates, unless such action, claim or proceeding is the
result of the willful misconduct or gross negligence of the Indemnitees.
9.2 If the indemnification provided for in Section 9.1 is applicable, but
for any reason is held to be unavailable, the Indemnitor shall contribute such
amounts as are just and equitable to pay, or to reimburse the Indemnitees for,
the aggregate of any and all losses, liabilities, costs, damages and expenses,
including counsel fees, actually incurred by the Indemnitees as a result of or
in connection with, and any amount paid in settlement of, any action, claim or
proceeding arising out of or relating in any way to any actions or omissions of
the Indemnitor.
9.3 The provisions of this Article 9 shall survive any termination of this
Agreement, whether by disbursement of the Fund, resignation of the Escrow Agent
or otherwise.
10. Governing Law and Assignment. This Agreement shall be construed in
accordance with and governed by the laws of the State of New York and shall be
binding upon the parties hereto and their respective successors and assigns;
provided, however, that any assignment or transfer by any party of its rights
under this Agreement or with respect to the Escrow Amounts or the Fund shall be
void as against the Escrow Agent unless (a) written notice thereof shall be
given to the Escrow Agent; and (b) the Escrow Agent shall have consented in
writing to such assignment or transfer.
11. Notices. All notices required to be given in connection with this
Agreement shall be sent by registered or certified mail, return receipt
requested, or by hand delivery with receipt acknowledged, or by the Express
Mail service offered by the United States Post Office, and addressed, if to the
Issuer at its address set forth on the Information Sheet, and if to the Escrow
Agent, at its address set forth on the Information Sheet.
12. Severability. If any provision of this Agreement or the application
thereof to any person or circumstance shall be determined to be invalid or
unenforceable, the remaining provisions of this Agreement or the application of
such provision to persons or circumstances other than those to which it is held
invalid or
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unenforceable shall not be affected thereby and shall be valid and enforceable
to the fullest extent permitted by law.
13. Execution in Several Counterparts. This Agreement may be executed in
several counterparts or by separate instruments, and all of such counterparts
and instruments shall constitute one agreement, binding on all of the parties
hereto.
14. Entire Agreement. This Agreement constitutes the entire agreement
between the parties hereto with respect to the subject matter hereof and
supersedes all prior agreements and understandings (written or oral) of the
parties in connection therewith.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
day and year first above written.
CanArgo Energy Corporation
By: /s/ Michael Binnion
----------------------------------------
Michael Binnion, President
Continental Stock Transfer & Trust Company
By: /s/ Steven G. Nelson
----------------------------------------
Steven G. Nelson, Chairman
ESCROW AGREEMENT INFORMATION SHEET
1. The Issuer
Name: CanArgo Energy Corporation
Address: 1400 Broadfield Boulevard, Suite 100, Houston, Texas 77084
State of incorporation or organization: Delaware
2. The Escrow Agent
Name: Continental Stock Transfer & Trust Company
Address: 2 Broadway - 19th Floor, New York, New York 10004
3. The Securities
Description of the Securities to be offered: up to 21,264,643 shares of
Common Stock, par value $.10 per share, of CanArgo Energy Corporation
Offering Price per share: U.S. $0.30 or NOK 2.35 (Norwegian kroner)
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<PAGE> 9
4. Minimum Amount Required for Disbursement of the Escrow Account
The total amount of securities which must be subscribed for and for which
Total Funds have been deposited at the applicable Offering Price based on
each subscription before the Escrow Account may be disbursed to the
Issuer is 11,500,000 shares ("Minimum Securities Amount").
5. Offering Period
Through 9:00 a.m. Central Daylight Time on August 6, 1999
6. Title of Escrow Account: Continental Stock Transfer & Trust Company as
Agent for CanArgo Energy Corporation
7. Wire Instructions
Bank Name: Chase Manhattan Bank
Bank Address: 52 Broadway, New York, New York 10004
Account Name: Continental Stock Transfer & Trust Company as Agent for
CanArgo Energy Corporation
Account Number: ___________
ABA Routing No.: 021000021
8. Escrow Agent Fees
Amount due on execution of the Escrow Agreement: $1,500
Fee for initial closing of at least Minimum Securities Amount: $1,500
Fee for each additional closing: $500
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Exhibit 3(2)
BYLAWS OF
CANARGO ENERGY CORPORATION
A DELAWARE CORPORATION
(As Amended Through July 9, 1999)
ARTICLE I
STOCKHOLDERS
Section 1. Place of Meetings. Meetings of the stockholders shall be held
at such place either within or without the State of Delaware as shall be
designated from time to time by the board of directors or stated in the notice
of the meeting.
Section 2. Annual Meeting. Annual meetings of stockholders shall be as
designated from time to time by the board of directors (which shall be in the
case of the first annual meeting not more than thirteen (13) months after the
organization of the corporation and in the case of all other annual meetings,
no more than thirteen (13) months after the date of the prior annual meeting)
and stated in the notice of the meeting, at which they shall elect by a
plurality vote a board of directors, and transact such other business as may
properly be brought before the meeting.
Section 3. Notice of Annual Meeting. Written notice of the annual meeting
stating the place, date and hour of the meeting shall be given to each
stockholder entitled to vote at such meeting not less than ten nor more than
sixty days before the date of the meeting.
Section 4. Stockholder List. The officer who has charge of the stock
ledger of the corporation shall prepare and make, at least ten days before
every meeting of stockholders, a complete list of the stockholders entitled to
vote at the meeting, arranged in alphabetical order, and showing the address of
each stockholder and the number of shares registered in the name of each
stockholder. Such list shall be open to the examination of any stockholder,
for any purpose germane to the meeting, during ordinary business hours, for a
period of at least ten days prior to the meeting, either at a place within the
city where the meeting is to be held, which place shall be specified in the
notice of the meeting, or, if not so specified, at the place where the meeting
is to be held. The list shall also be produced and kept at the time and place
of the meeting during the whole time thereof, and may be inspected by any
stockholder who is present. The list shall presumptively determine the
identity of the stockholders entitled to vote at the meeting and the number of
shares held by each of them.
Section 5. Special Meetings. Special meetings of the stockholders, for
any purpose or purposes, unless otherwise prescribed by statute or by the
certificate of incorporation, may be called by the chairman of the board, the
president or the secretary and shall be called by the chairman of the board,
the president or the secretary at the request in writing of a majority of the
board of directors, or at the request in writing of stockholders owning 10% or
more of the
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entire capital stock of the corporation issued and outstanding and entitled to
vote. Such request shall state the purpose or purposes of the proposed
meeting.
Section 6. Notice of Special Meetings. Written notice of a special
meeting stating the place, date and hour of the meeting and the purpose or
purposes for which the meeting is called, shall be given not less than ten nor
more than sixty days before the date of the meeting, to each stockholder
entitled to vote at such meeting.
Section 7. Quorum. The holders of a majority of the stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business except as otherwise provided by statute or by the
certificate of incorporation. If, however, such quorum shall not be present or
represented at any meeting of the stockholders, the stockholders entitled to
vote thereat, present in person or represented by proxy, shall have power to
adjourn the meeting from time to time, without notice other than announcement
at the meeting, until a quorum shall be present or represented. At such
adjourned meeting at which a quorum shall be present or represented any
business may be transacted which might have been transacted at the meeting as
originally notified. If the adjournment is for more than thirty days, or if
after the adjournment a new record date is fixed for the adjourned meeting, a
notice of the adjourned meeting shall be given to each stockholder of record
entitled to vote at the meeting.
Section 8. Voting and Proxies. When a quorum is present at any meeting,
except with respect to the election of directors, the vote of the holders of a
majority of the stock having voting power present in person or represented by
proxy shall decide any question brought before such meeting, unless the
question is one upon which by express provision of the statutes or of the
certificate of incorporation, a different vote is required in which case such
express provision shall govern and control the decision of such question.
Directors shall be elected by a plurality of the votes cast. Unless otherwise
provided in the certificate of incorporation, each stockholder shall be
entitled to one vote for each share of the capital stock having voting power
held by such stockholder. Each stockholder entitled to vote may vote in person
or by a proxy granted in accordance with Delaware law, but no proxy shall be
voted on after three years from its date, unless the proxy provides for a
longer period.
Section 9. Conduct of Meeting. At every meeting of stockholders, the
chairman of the board of directors, or, if a chairman has not been appointed or
is absent, the president, or, if the president is absent, the most senior vice
president present, or in the absence of any such officer, a chairman of the
meeting chosen by a majority in interest of the stockholders entitled to vote,
present in person or by proxy, shall act as chairman. The secretary, or, in
his absence, the person appointed by the chairman of the meeting, shall act as
secretary of the meeting. The chairman of the meeting shall have the right and
authority to prescribe such rules, regulations and procedures and to do all
such acts as, in the judgment of such chairman, are necessary, appropriate or
convenient for the proper conduct of the meeting. Unless and to the extent
determined by the board of directors or the chairman of the meeting, meetings
of stockholders shall not be required to be held in accordance with rules of
parliamentary procedure.
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Section 10. Inspectors of Election. In advance of any meeting of
stockholders, the board of directors, or if they do not do so, the chairman of
the meeting, shall appoint one or more inspectors to act at the meeting and
make a written report thereof. Each inspector, before entering upon the
discharge of his duties, shall take and sign an oath faithfully to execute the
duties of inspector with strict impartiality and according to the best of his
ability. The inspectors shall: (1) ascertain the number of shares outstanding
and the voting power of each; (2) determine the shares represented at a meeting
and the validity of proxies and ballots; (3) count all votes and ballots; (4)
determine and retain for a reasonable period a record of the disposition of any
challenges made to any determination by the inspectors; and (5) certify their
determination of the number of shares represented at the meeting, and their
count of all votes and ballots. The inspectors may appoint or retain other
persons or entities to assist the inspectors in the performance of the duties
of the inspectors.
The date and time of the opening and the closing of the polls for each
matter upon which the stockholders will vote at a meeting shall be announced at
the meeting. No ballot, proxies or votes, nor any revocations thereof or
changes thereto, shall be accepted by the inspectors after the closing of the
polls unless the Court of Chancery upon application by a stockholder shall
determine otherwise.
This Section 10 shall not apply to the corporation if it does not have a
class of voting stock that is: (1) listed on a national securities exchange;
(2) authorized for quotation on an inter-dealer quotation system of a
registered national securities association; or (3) held of record by more than
2,000 stockholders.
Section 11. Written Consent. Unless otherwise provided in the certificate
of incorporation, any action required to be taken at any annual or special
meeting of stockholders of the corporation, or any action which may be taken at
any annual or special meeting of such stockholders, may be taken without a
meeting, without prior notice and without a vote, if a consent in writing,
setting forth the action so taken, shall be signed by the holders of
outstanding stock having not less than the minimum number of votes that would
be necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted. Prompt notice of the taking
of the corporate action without a meeting by less than unanimous written
consent shall be given to those stockholders who have not consented in writing.
ARTICLE II
DIRECTORS
Section 1. Number and Term of Office. The number of directors which shall
constitute the whole board shall be not less than three (3) nor more than nine
(9) until changed by amendment to the certificate of incorporation or by a
bylaw amending this Section duly adopted by the stockholders entitled to vote
or by the board of directors. The exact number of directors shall be fixed
from time to time, within the limits specified herein or in the certificate of
incorporation, by a bylaw or amendment thereof duly adopted by the stockholders
or the board of directors. Subject to the foregoing provisions for changing
the number of directors, the number of directors of the corporation is fixed at
five (5). The directors shall be elected at the annual
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meeting of the stockholders, except as provided in Section 2 of this Article,
and each director elected shall hold office until his successor is elected and
qualified. Directors need not be stockholders.
Section 2. Vacancies. Vacancies and newly created directorships
resulting from any increase in the authorized number of directors may be filled
by a majority of the directors then in office, though less than a quorum, or by
a sole remaining director, and the directors so chosen shall hold office until
the next annual election and until their successors are duly elected and shall
qualify, unless sooner displaced. A vacancy in the board of directors shall be
deemed to exist under this Section in the case of the death, resignation or
removal of any director and no decrease in the number of directors shall
shorten the term of any incumbent director.
Section 3. Powers. The business and affairs of the corporation shall be
managed by or under the direction of its board of directors which may exercise
all such powers of the corporation and do all such lawful acts and things as
are not by statute or by the certificate of incorporation or by these bylaws
directed or required to be exercised or done by the stockholders.
Section 4. Regular Meetings. Regular meetings of the board of directors
may be held without notice at such time and at such place as shall from time to
time be determined by the board.
Section 5. Special Meetings. Special meetings of the board of directors
for any purpose or purposes may be called at any time by one-third of the
directors then in office (rounded up to the nearest whole number) or by the
chairman of the board, the president or the secretary. Notice of the time and
place of special meetings shall be given orally or in writing, by telephone,
facsimile, telegraph or telex, during normal business hours, at least
forty-eight (48) hours before the date and time of the meeting; or if in
writing to each director by first class mail, charges prepaid, at least five
(5) days, or by air courier, charges prepaid, at least three (3) days, before
the date of the meeting. A notice need not specify the purpose of any regular
or special meeting of the board of directors.
Section 6. Quorum. At all meetings of the board a majority of the
authorized number of directors shall constitute a quorum for the transaction of
business and the act of a majority of the directors present at any meeting at
which there is a quorum shall be the act of the board of directors, except as
may be otherwise specifically provided by statute or by the certificate of
incorporation. If a quorum shall not be present at any meeting of the board of
directors, the directors present thereat may adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum
shall be present.
Section 7. Written Consent. Unless otherwise restricted by the
certificate of incorporation or these bylaws, any action required or permitted
to be taken at any meeting of the board of directors or of any committee
thereof may be taken without a meeting, if all members of the board or
committee, as the case may be, consent thereto in writing, and the writing or
writings are filed with the minutes of proceedings of the board or committee.
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Section 8. Participation in Meetings by Conference Telephone. Unless
otherwise restricted by the certificate of incorporation or these bylaws,
members of the board of directors, or any committee designated by the board of
directors, may participate in a meeting of the board of directors, or any
committee, by means of conference telephone or similar communications equipment
by means of which all persons participating in the meeting can hear each other,
and such participation in a meeting shall constitute presence in person at the
meeting.
Section 9. Committees of the Board of Directors. The board of directors
may, by resolution passed by a majority of the whole board, designate one or
more committees, each committee to consist of one or more of the directors of
the corporation. The board may designate one or more directors as alternate
members of any committee, who may replace any absent or disqualified member at
any meeting of the committee.
In the absence or disqualification of a member of a committee, the member
or members thereof present at any meeting and not disqualified from voting,
whether or not he or they constitute a quorum, may unanimously appoint another
member of the board of directors to act at the meeting in the place of any such
absent or disqualified member.
Any such committee, to the extent provided in the resolution of the board
of directors, shall have and may exercise all the powers and authority of the
board of directors in the management of the business and affairs of the
corporation, and may authorize the seal of the corporation to be affixed to all
papers which may require it; but no such committee shall have the power or
authority in reference to amending the certificate of incorporation, adopting
an agreement of merger or consolidation, recommending to the stockholders the
sale, lease or exchange of all or substantially all of the corporation's
property and assets, recommending to the stockholders a dissolution of the
corporation or a revocation of a dissolution, or amending the bylaws of the
corporation; and, unless the resolution or the certificate of incorporation
expressly so provide, no such committee shall have the power or authority to
declare a dividend or to authorize the issuance of stock. Such committee or
committees shall have such name or names as may be determined from time to time
by resolution adopted by the board of directors. Each committee shall keep
regular minutes of its meetings and report the same to the board of directors
when required.
Section 10. Compensation Of Directors. Unless otherwise restricted by
the certificate of incorporation or these bylaws, the board of directors shall
have the authority to fix the compensation of directors. No such compensation
shall preclude any director from serving the corporation in any other capacity
and receiving compensation therefor. Members of special or standing committees
may be allowed like compensation for attending committee meetings or serving on
such committees.
Section 11. Removal Of Directors. Unless otherwise restricted by the
certificate of incorporation or by law, any director or the entire board of
directors may be removed, with or without cause, by the holders of a majority
of shares entitled to vote at an election of directors.
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ARTICLE III
NOTICES
Section 1. Notices. Whenever, under the provisions of the statutes or of
the certificate of incorporation or of these bylaws, notice is required to be
given to any director or stockholder, such notice may be given in writing, by
mail, addressed to such director or stockholder, at his address as it appears
on the records of the corporation, with postage thereon prepaid, and such
notice shall be deemed to be given at the time when the same shall be deposited
in the United States mail. Notice to directors may also be given in the manner
set forth in Section 5 of Article 11 of these bylaws.
Section 2. Waiver. Whenever any notice is required to be given under the
provisions of the statutes or of the certificate of incorporation or of these
bylaws, a waiver thereof, in writing, signed by the person or persons entitled
to said notice, whether before or after the time stated therein, shall be
deemed equivalent thereto.
ARTICLE IV
OFFICERS
Section 1. General. The officers of the corporation shall be chosen by
the Board of Directors and shall be a Chairman of the Board of Directors (who
must be a director), a President, a Chief Executive Officer, a Chief Financial
Officer, and a Secretary. The Board of Directors, in its discretion, may also
choose a Vice Chairman of the Board of Directors (who must be a director), one
or more Vice Presidents, a Treasurer and other officers. Any number of offices
may be held by the same person, unless otherwise prohibited by law, the
Certificate of Incorporation or these Bylaws. The officers of the corporation
need not be stockholders of the corporation nor, except in the case of the
Chairman of the Board of Directors and the Vice Chairman of the Board of
Directors, need such officers be directors of the corporation.
Section 2. Election. The Board of Directors shall elect the officers of
the corporation, who shall hold their offices for such terms and shall exercise
such powers and perform such duties as shall be determined from time to time by
the Board of Directors; and all officers of the corporation shall hold office
until their successors are elected and qualified, or until their earlier
resignation or removal. Any officer may be removed at any time by the Board of
Directors. Any vacancy occurring or existing in any office of the corporation
may be filled by the Board of Directors. The salaries of all executive
officers of the corporation shall be fixed by the Board of Directors or a duly
constituted committee of the Board of Directors to which such authority is
delegated.
Section 3. Chairman of the Board of Directors. The Chairman of the Board
of Directors shall preside at all meetings of the stockholders and of the Board
of Directors. The Chairman of the Board of Directors shall have such other
powers and duties as may be assigned to him or her or prescribed for such
office from time to time by the Board of Directors.
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Section 4. Vice Chairman of the Board of Directors. The Vice Chairman of
the Board of Directors shall, in the absence of the Chairman of the Board of
Directors, preside at all meetings of the stockholders and of the Board of
Directors and shall have such other powers and duties as may be assigned to him
or her or prescribed for such office from time to time by the Board of
Directors.
Section 5. Chief Executive Officer. The Chief Executive Officer of the
corporation shall have general supervision, direction and control of the
business and affairs of the corporation. The Chief Executive Officer shall
have such other powers and duties as may be assigned to him or her or
prescribed for such office from time to time by the Board of Directors. Except
as otherwise provided in these Bylaws or as delegated by the Chief Executive
Officer, all other officers of the corporation shall report to the Chief
Executive Officer.
Section 6. President. The President shall be the Chief Operating Officer
of the corporation and, as such, shall have the general powers and duties of
management associated with the day-to-day operations of the corporation and
shall have such other powers and duties as may be assigned to him or her or
prescribed for such office from time to time by the Board of Directors or the
Chief Executive Officer, if the President is not then serving as such.
Section 7. Vice Presidents. Each Vice President shall have such powers
and duties as may be assigned to him or her from time to time by the Board of
Directors or the Chief Executive Officer. Any Vice President may be designated
by the Board as an Executive Vice President, Senior Vice President, Assistant
Vice President or any other classification of Vice President.
Section 8. Chief Financial Officer. The Chief Financial Officer shall
have the general powers and duties of management associated with the general
supervision, direction and control of the financial affairs of the corporation,
including financial planning and budgeting and accounting for the conduct of
the corporation's operations, and such other powers and duties as may be
assigned to him or her or prescribed for such office from time to time by the
Board of Directors or the Chief Executive Officer. In the absence of a
Treasurer, the Chief Financial Officer shall perform the duties of the
Treasurer.
Section 9. Secretary. The Secretary shall keep minutes of all meetings
of the Board of Directors, committees of the Board of Directors and
stockholders of the corporation and any action taken by the Board of Directors
or stockholders other than in a meeting. The Secretary shall give, or cause to
be given, notice of all meetings of the stockholders and special meetings of
the Board of Directors, and shall have such other powers and duties as may be
assigned to him or her or prescribed for such office by the Board of Directors
or the Chief Executive Officer. If the Secretary shall be unable or shall
refuse to cause to be given notice of all meetings of the stockholders and
special meetings of the Board of Directors, then the Board of Directors or the
Chairman of the Board of Directors or the Vice Chairman of the Board of
Directors or the President may choose another officer to cause such notice to
be given. The Secretary shall have custody of the seal of the corporation, and
the Secretary or any Assistant Secretary, if there is one, shall have authority
to affix the same to any instrument requiring it and
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when so affixed, it may be attested by the signature of the Secretary or by the
signature of any such Assistant Secretary. The Board of Directors may give
general authority to any other officer to affix the seal of the corporation and
to attest the affixing by his or her signature.
Section 10. Treasurer. The Treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the corporation and shall
deposit all moneys and other valuable effects in the name and to the credit of
the corporation in such depositories as may be designated by the Board of
Directors. The Treasurer shall disburse the funds of the corporation as may be
ordered by the Board of Directors or the Chief Executive Officer, taking proper
vouchers for such disbursements, and shall render to the Chief Executive
Officer, the Chief Financial Officer and the Board of Directors, when
requested, an accounting of all his transactions as Treasurer and of the
financial condition of the corporation. The Treasurer shall have such other
powers and duties as may be assigned to him or her or prescribed for such
office from time to time by the Board of Directors, the Chief Executive Officer
or the Chief Financial Officer. The Treasurer shall report to the Chief
Executive Officer and to the Chief Financial Officer.
Section 11. Other Officers. The Board of Directors may designate such
other offices and elect such other officers and prescribe for such offices and
assign to such officers such powers and duties as the Board of Directors may
from time to time deem appropriate. The Chief Executive Officer may also
assign to such officers such powers and duties as the Chief Executive Officer
deems appropriate. The Board of Directors may delegate to the Chief Executive
Officer of the corporation the power to choose and to prescribe the respective
powers and duties of other officers who are not executive officers of the
corporation, such as Assistant Secretaries and Assistant Treasurers.
ARTICLE V
STOCK
Section 1. Certificates of Stock. Every holder of stock in the
corporation shall be entitled to have a certificate signed by or in the name of
the corporation by the chairman of the board, the chief executive officer, the
president or a vice-president and the treasurer or an assistant treasurer or
the secretary or an assistant secretary of the corporation, certifying the
number of shares owned by him in the corporation.
Certificates may be issued for partly paid shares and in such case upon
the face or back of the certificates issued to represent any such partly paid
shares, the total amount of the consideration to be paid therefor, and the
amount paid thereon shall be specified. Upon the declaration of any dividend
upon fully paid shares, the corporation shall declare a dividend on partly paid
shares of the same class, but only upon the basis of the percentage of the
consideration actually paid thereon.
If the corporation shall be authorized to issue more than one class of
stock or more than one series of any class, the powers, designations,
preferences and relative,
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participating, optional or other special rights of each class of stock or
series thereof and the qualification, limitations or restrictions of such
preferences and/or rights shall be set forth in full or summarized on the face
or back of the certificate which the corporation shall issue to represent such
class or series of stock, provided that, except as otherwise required by law,
in lieu of the foregoing requirements, there may be set forth on the face or
back of the certificate which the corporation shall issue to represent such
class or series of stock, a statement that the corporation will furnish without
charge to each stockholder who so requests the powers, designations,
preferences and relative, participating, optional or other special rights of
each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights.
Section 2. Facsimile Signatures. Any of or all the signatures on the
certificate may be facsimile. In case any officer, transfer agent or registrar
who has signed or whose facsimile signature has been placed upon a certificate
shall have ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the corporation with the same effect
as if he were such officer, transfer agent or registrar at the date of issue.
Section 3. Transfer of Stock. Transfers of stock shall be made only upon
the transfer books of the corporation kept at an office of the corporation or
by transfer agents designated to transfer shares of the stock of the
corporation. Except where a certificate is issued in accordance with Section 4
of this Article V, an outstanding certificate for the number of shares involved
shall be surrendered for cancellation before a new certificate is issued
therefor.
Section 4. Lost, Stolen or Destroyed Certificates. In the event of the
loss, theft or destruction of any certificate of stock, another may be issued
in its place pursuant to such regulations as the board of directors may
establish concerning proof of such loss, theft or destruction and concerning
the giving of a satisfactory bond or bonds of indemnity.
Section 5. Regulations. The issue, transfer, conversion and registration
of certificates of stock shall be governed by such other regulations as the
board of directors may establish.
Section 6. Record Date. In order that the corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of
any other lawful action, the board of directors may fix, in advance, a record
date, which shall not be more than sixty nor less than ten days before the date
of such meeting, nor more than sixty days prior to any other action. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the board of directors may fix a new record date for
the adjourned meeting.
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ARTICLE VI
INDEMNIFICATION OF OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS
Section 1. Right to Indemnification. The corporation shall indemnify and
hold harmless, to the fullest extent permitted by applicable law as it
presently exists or may hereafter be amended, any person who was or is made or
is threatened to be made a party or is otherwise involved in any action, suit
or proceeding, whether civil, criminal, administrative or investigative (a
"proceeding") by reason of the fact that he, or a person for whom he is the
legal representative, is or was a director or officer of the corporation or is
or was serving at the request of the corporation as a director, officer,
trustee, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, including service with respect to employee benefit
plans, against all liability and loss suffered and expenses reasonably incurred
by such person in connection therewith. The corporation shall indemnify a
person in connection with a proceeding initiated by such person only if the
proceeding was authorized by the board of directors of the corporation. The
corporation may provide indemnification to employees and agents of the
corporation with the same scope and effect as the indemnification and
advancement of expenses provided in this Article.
Section 2. Payment of Expenses. The corporation shall pay the expenses
incurred by a director or officer of the corporation in defending any
proceeding in advance of its final disposition, provided, however, that the
payment of expenses incurred by a director or officer in his capacity as a
director or officer in advance of the final disposition of the proceeding shall
be made only upon receipt of an undertaking by the director or officer to repay
all amounts advanced if it should be ultimately determined that the director or
officer is not entitled to be indemnified under this Article or otherwise.
Section 3. Right to Bring Suit. If a claim for indemnification or payment
of expenses under this Article by a director or officer of the corporation is
not paid in full within 30 days after a written claim therefor has been
received by the corporation the claimant may file suit to recover the unpaid
amount of such claim and, if successful in whole or in part, shall be entitled
to be paid the expense of prosecuting such claim. In any such action the
corporation shall have the burden of proving that the claimant was not entitled
to the requested indemnification or payment of expenses under applicable law.
Section 4. Rights Not Exclusive. The rights conferred on any person by
this Article shall not be exclusive of any other rights which such person may
have or hereafter acquire under any statute, provision of the corporation's
certificate of incorporation, these bylaws, agreement, vote of stockholders or
disinterested directors or otherwise. The corporation shall have the authority
to enter into such agreements as the board of directors deems appropriate for
the indemnification of present or future directors, officers, employees and
agents of the corporation in connection with their service to the corporation
or any other corporation, partnership, joint venture, trust or other
enterprise, including any employee benefit plan, to which such person is
providing services at the request of the corporation.
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Section 5. Effect or Modification. Any repeal or modification of the
foregoing provisions of this Article shall not adversely affect any right or
protection hereunder of any person in respect of any act or omission occurring
prior to the time of such repeal or modification.
Section 6. Successors. The rights conferred on any person by this
Article shall continue as to a person who has ceased to be a director, officer,
employee or agent of the corporation and shall inure to the benefit of such
person's heirs, executors and administrators.
Section 7. Definition of Corporation. For purposes of this Article,
reference to "the corporation" shall include, in addition to the resulting
corporation, any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors, officers, and employees or agents, so that any person who is or was
a director, officer, employee or agent of such constituent corporation, or is
or was serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, shall stand in the same position under the
provisions of this Article with respect to the resulting or surviving
corporation as he would have with respect to such constituent corporation if
its separate existence had continued.
ARTICLE VII
AMENDMENTS
These bylaws may be altered, amended or repealed or new bylaws may be
adopted by the stockholders or, if provided in the certificate of
incorporation, by the board of directors. If the power to adopt, amend or
repeal bylaws is conferred upon the board of directors by the certificate of
incorporation it shall not divest or limit the power of the stockholders to
adopt, amend or repeal bylaws.
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Exhibit 10(17)
CANARGO ENERGY CORPORATION
1995 LONG-TERM INCENTIVE PLAN
(EFFECTIVE NOVEMBER 14, 1995)
(AMENDED AND RESTATED AS OF JULY 16, 1999)
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
1. PURPOSE 1
2. DEFINITIONS 1
(a) "Award" 1
(b) "Award Agreement" 1
(c) "Board" 1
(d) "Code" 1
(e) "Committee" 1
(f) "Common Stock" 1
(g) "Compensation Committee" 1
(h) "Corporation" 1
(i) "Director" 1
(j) "Employee" 1
(k) "Exchange Act" 2
(l) "Exercise Price" 2
(m) "Fair Market Value" 2
(n) "For Cause" 2
(o) "Incentive Stock Option" 3
(p) "Non-qualified Stock Option" 3
(q) "Option" 3
(r) "Participant" 3
(s) "Plan" 3
(t) "Purchase Price" 3
(u) "Pyramiding" 3
(v) "Reload" 3
(w) "Share" 3
(x) "Stock Appreciation Right" 3
(y) "Subsidiary" 4
(z) "Ten Percent Stockholder" 4
(aa) "Total and Permanent Disability" 4
(bb) "Vest" or "Vesting" 4
(cc) "Voting Power" 4
3. EFFECTIVE DATE 4
4. ADMINISTRATION 5
(a) Administration by the Board or the Committee 5
(b) The Committee 5
(c) Powers of the Committee 5
(d) Committee's Interpretation of the Plan 6
5. PARTICIPATION 6
(a) Eligibility for Participation 6
(b) Eligibility for Awards 6
</TABLE>
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<TABLE>
<S> <C>
6. SHARES OF STOCK OF THE CORPORATION 6
(a) Shares Subject to This Plan 6
(b) Adjustment of Shares 7
(c) Awards Not to Exceed 10% of Corporation's Common Stock 7
(d) Awards Not to Exceed Shares Available 7
7. TERMS AND CONDITIONS OF OPTIONS 7
(a) Eligibility for Incentive Stock Options 7
(b) Award Agreements 8
(c) Number of Shares Covered by an Option 8
(d) Exercise of Options 8
(e) Vesting of Options 8
(f) Term and Expiration of Options 8
(g) Exercise Price 9
(h) Medium and Time of Payment of Purchase ice 9
(i) Nontransferability of Options 9
(j) Termination of Employee, Director, Independent Contractor or
Consultant Status for Any Reason Other Than Death, Total and
Permanent Disability or For Cause 9
(k) Death of Participant 10
(l) Total and Permanent Disability of Participant 10
(m) Termination For Cause 11
(n) Rights as a Stockholder 11
(o) Modification, Extension, and Renewal of Options 11
(p) Other Provisions 11
(q) No Disqualification of Incentive Stock Options 12
(r) Limitation on Incentive Stock Options 12
8. STOCK APPRECIATION RIGHTS 12
(a) Stock Appreciation Right Award Agreements 12
(b) Number of Shares Covered by a Stock Appreciation Right 12
(c) Stock Appreciation Rights Issued and Exercised Without Payment of
Consideration 12
(d) Exercise of Stock Appreciation Rights 13
(e) Vesting of Stock Appreciation Rights 13
(f) Term and Expiration of Stock Appreciation Rights 13
(g) Exercise and Settlement of a Stock Appreciation Right 13
(h) Nontransferability of Stock Appreciation Rights 14
(i) Termination of Employee, Director, Independent Contractor or
Consultant Status for any Reason Other Than Death, Total and
Permanent Disability or For Cause 14
(j) Death of Participant 14
(k) Total and Permanent Disability of Participant 15
(l) Termination For Cause 15
(m) Rights as a Stockholder 15
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C>
(n) Modification, Extension, and Renewal of Stock Appreciation Rights 15
(o) Other Provisions 16
9. TERM OF PLAN 16
10. RECAPITALIZATION, DISSOLUTION, AND CHANGE OF CONTROL 16
(a) Recapitalization 16
(b) Dissolution, Merger, Consolidation, or Sale or Lease of Assets 16
(c) Determination by the Committee 17
(d) Limitation on Rights of Participants 17
(e) No Limitation on Rights of Corporation 17
11. SECURITIES LAW REQUIREMENTS 17
(a) Legality of Issuance 17
(b) Restrictions on Transfer; Representations of Participant; Legends 17
(c) Registration or Qualification of Securities 18
(d) Exchange of Certificates 18
12. EXERCISE OF UNVESTED OPTIONS 18
(a) Purpose of Section 12 18
(b) Exercise of Non-Vested Awards and Issuance of Restricted Stock 19
13. AMENDMENT OF THE PLAN 19
14. PAYMENT FOR SHARE PURCHASES 20
15. APPLICATION OF FUNDS 21
16. APPROVAL OF SHAREHOLDERS 21
17. WITHHOLDING OF TAXES 21
(a) General 21
(b) Stock Withholding 21
18. RIGHTS AS AN EMPLOYEE, DIRECTOR, INDEPENDENT CONTRACTOR OR CONSULTANT 22
19. INSPECTION OF RECORDS 22
</TABLE>
iii
<PAGE> 5
CANARGO ENERGY CORPORATION
1995 LONG-TERM INCENTIVE PLAN
1. PURPOSE.
This Plan is intended to provide employees and directors of CanArgo Energy
Corporation ("Corporation") and advisors and consultants rendering services to
the Corporation (collectively "Participants") an opportunity to acquire an
equity interest in the Corporation. The Corporation intends to use the Plan to
attract and retain Participants' services, motivate Participants to increase
the Corporation's value, and have flexibility in compensating Participants.
The Plan allows the Corporation to reward Participants with (i) options to
purchase shares of common stock of the Corporation, and (ii) stock appreciation
rights with respect to shares of common stock of the Corporation. All awards
shall be subject to the terms and conditions provided in this Plan.
2. DEFINITIONS.
(a) "Award" shall mean any award granted under the Plan, including any
Option or Stock Appreciation Right.
(b) "Award Agreement" shall mean, with respect to each Award granted to a
Participant, the signed written agreement between the Corporation and the
Participant setting forth the terms and conditions of the Award.
(c) "Board" shall mean the Board of Directors of the Corporation.
(d) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(e) "Committee" shall mean the committee appointed by the Board in
accordance with Section 4(a) to administer the Plan, or the Board, if it
administers the Plan as provided in Section 4(a).
(f) "Common Stock" shall mean the voting common stock of the Corporation.
(g) "Compensation Committee" shall mean the Compensation Committee
appointed by the Board.
(h) "Corporation" shall mean CanArgo Energy Corporation (formerly Fountain
Oil Incorporated).
(i) "Director" shall mean a member of the Board.
(j) "Employee" shall mean any individual who is employed, within the
meaning of Section 3401 of the Code and the regulations thereunder, by the
Corporation or any Subsidiary.
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The Committee shall be responsible for determining when an Employee's period of
employment is deemed to be continued during an approved leave of absence.
(k) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
(l) "Exercise Price" shall mean:
(i) With respect to an Option, the price per Share at which the
Option may be exercised, as determined by the Committee and as specified in the
Participant's Award Agreement; or
(ii) With respect to a Stock Appreciation Right, the price per Share
which is the base price for determining the future value of the Stock
Appreciation Right, as determined by the Committee and as specified in the
Participant's Award Agreement.
(m) "Fair Market Value" shall mean the value of each Share determined as
of any specified date as follows:
(i) If the Shares are traded on any recognized United States
securities exchange, the value per Share shall be the closing price of the
Common Stock on the business day immediately preceding such specified date (or,
if there are no sales on that day the last preceding day on which there was a
sale) on the principal exchange on which the Common Stock is traded;
(ii) If the Shares are not traded on any United States securities
exchange but are traded on any formal over-the-counter quotation system in
general use in the United States, the value per Share shall be the mean between
the closing bid and asked quotations of the Common Stock on the business day
immediately preceding such specified date (or, if there are no such quotations
on that day, the last preceding day on which there were such quotations) on the
principal system on which the Common Stock is traded; or
(iii) If neither Paragraph (i) nor (ii) applies, the value per Share
shall be determined by the Committee in good faith and based on uniform
principles consistently applied. Such determination shall be conclusive and
binding on all persons.
(n) "For Cause" shall mean the termination of a Participant's status with
the Corporation as an Employee, Director, advisor or consultant for any of the
following reasons, as determined by the Committee:
(i) The Participant commits a violation of any law, a breach of any
fiduciary duty or an act of dishonesty, fraud, misrepresentation or moral
turpitude which may have a material detrimental impact on the Corporation's
business or prevent the Participant from effectively performing his or her
duties as an Employee, Director, advisor or consultant for the Corporation; or
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<PAGE> 7
(ii) The Participant, as determined in the sole discretion of the
Committee, willfully and habitually neglects to perform the duties which the
Participant is required to perform for the Corporation or performs such duties
other than in good faith and the Participant fails to correct such conduct
within ten (10) days following the Corporation's delivery to the Participant of
a written notice describing such conduct; or
(iii) The Committee determines that the reason for terminating the
Participant's status with the Corporation constitutes "for cause" under the
Corporation's policies or under any contract between the Participant and the
Corporation.
(o) "Incentive Stock Option" shall mean an Option of the type which is
described in Section 422(b) of the Code.
(p) "Non-qualified Stock Option" shall mean an Option which is not of the
type described in Section 422(b) or 423(b) of the Code.
(q) "Option" shall mean any Option which is granted pursuant to the Plan
to purchase Shares of Common Stock, whether granted as an Incentive Stock
Option or as a Non-qualified Stock Option.
(r) "Participant" shall mean any individual to whom an Award has been
granted under the Plan, and such term shall include where appropriate the duly
appointed conservator or other legal representative of a mentally incompetent
Participant and the allowable transferee of a deceased Participant as provided
in Sections 7(i) and/or 8(h).
(s) "Plan" shall mean this CanArgo Energy Corporation 1995 Long-Term
Incentive Plan, as amended. The Plan is effective November 14, 1995.
(t) "Purchase Price" shall mean, at any specified time, the Exercise Price
of an Option to purchase one Share times the number of Shares subject to such
Option being exercised.
(u) "Pyramiding" shall mean, if the Committee in its sole discretion
permits, a Participant's payment, in whole or in part, of the Exercise Price of
an Option made by exchanging a Share or Share(s) of Common Stock that the
Participant had acquired pursuant to the exercise of another Option during the
preceding six months (under this Plan or any other plan or program of the
Corporation) or had otherwise acquired from the Corporation during the
preceding six months without paying full consideration for such Share(s).
(v) "Reload" shall mean the grant of new Options to a Participant who
exercises an Option with previously acquired Shares, with the number of new
Options being equal to the number of Shares the Participant submits to the
Corporation to pay for Options just exercised.
(w) "Share" shall mean one authorized share of Common Stock.
(x) "Stock Appreciation Right" shall mean a right issued to a Participant
to receive all or any portion of the future appreciation in the Fair Market
Value of one Share of Common
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<PAGE> 8
Stock over the Exercise Price of such right. A Stock Appreciation Right may be
settled in cash or Shares in accordance with the terms and conditions set forth
in Section 8.
(y) "Subsidiary" shall mean any corporation (other than the Corporation)
in an unbroken chain of corporations beginning with the Corporation if, at the
time of granting an Option, each of the corporations (other than the last
corporation in the unbroken chain) owns stock possessing 50% or more of the
voting power in one of the other corporations in such chain.
(z) "Ten Percent Stockholder" shall mean, for purposes of granting
Incentive Stock Options, any person who owns stock of the Corporation
possessing more than 10% of the combined voting power of all classes of
outstanding stock of the Corporation or any Subsidiary. For purposes of
determining whether a person is a Ten Percent Stockholder:
(i) A person shall be considered the owner of stock that is owned,
directly or indirectly, by or for his or her brothers or sisters, spouse,
ancestors, and lineal descendants;
(ii) Stock owned, directly or indirectly, by or for a corporation,
partnership, estate or trust shall be considered as being owned proportionally
by or for its shareholders, partners or beneficiaries, respectively; and
(iii) The term "outstanding stock" shall include all shares of stock
actually issued and outstanding, but shall not include any shares of stock
subject to stock options.
(aa) "Total and Permanent Disability" shall mean with respect to a
Participant who is either an Employee or Director:
(i) The mental or physical disability, either occupational or
non-occupational in cause, which satisfies the definition of "total disability"
in the disability policy or plan provided by the Corporation covering the
Participant; or
(ii) If no such policy or plan is then covering the Participant, the
mental or physical disability which, in the opinion of the Committee, on the
basis of medical evidence satisfactory to it, prevents the Participant from
indefinitely performing the principal duties of the position the Participant
performed when the disability commenced.
(bb) "Vest" or "Vesting" shall mean the date, event or act prior to which
an Award, in whole or in part, is not exercisable, and as a consequence of
which the Award, in whole or in part, becomes exercisable for the first time.
(cc) "Voting Power" shall mean the total combined rights to cast votes at
elections for members of the Corporation's Board of Directors.
3. EFFECTIVE DATE.
The Plan was adopted by the Corporation effective November 14, 1995,
subject to the approval of the Corporation's shareholders in accordance with
Section 16.
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<PAGE> 9
4. ADMINISTRATION.
(a) Administration by the Board or the Committee.
The Board may appoint a Committee of not less than two Directors, which
may be the Compensation Committee or another Committee, to administer the Plan.
In the event the Board elects to administer the Plan, the Board shall have the
powers and authority otherwise delegated to the Committee in this Plan and all
acts to be performed by the Committee under this Plan shall be performed by the
Board.
(b) The Committee.
The Committee shall hold meetings at such times and places as it may
determine. For a Committee meeting, if the Committee has two members, both
members must be present to constitute a quorum, and if the Committee has three
or more members, a majority of the Committee shall constitute a quorum. Acts
by a majority of the members present at a meeting at which a quorum is present
and acts approved in writing by all the members of the Committee shall
constitute valid acts of the Committee.
(c) Powers of the Committee.
On behalf of the Corporation and subject to the provisions of the Plan,
the Committee shall have the authority and discretion to:
(i) Prescribe, amend and rescind rules and regulations relating to
the Plan;
(ii) Select Participants to receive Awards;
(iii) Determine the form and terms of Awards;
(iv) Determine the number of Shares or other consideration subject to
Awards;
(v) Determine whether Awards will be granted singly, in combination
or in tandem with, in replacement of, or as alternatives to, other Awards under
the Plan or any other incentive or compensation plan of the Corporation;
(vi) Construe and interpret the Plan, any Award Agreement and any
other agreement or document executed pursuant to the Plan;
(vii) Correct any defect or omission, or reconcile any inconsistency
in the Plan, any Award or any Award Agreement;
(viii) Determine whether an Award has been earned and/or Vested;
(ix) Determine whether a Participant who is either an Employee or a
Director has incurred a Total and Permanent Disability;
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<PAGE> 10
(x) Accelerate or, with the consent of the Participant, defer the
Vesting of any Award and/or the exercise date of any Award;
(xi) Determine if a period of service performed by a consultant, an
advisor or a Director is "continuous" for purposes of the Plan;
(xii) Determine whether a Participant's status with the Corporation as
an Employee, Director, advisor, or consultant has been terminated For Cause;
(xiii) Authorize any person to execute on behalf of the Corporation any
instrument required to effectuate the grant of an Award as made by the
Committee;
(xiv) With the consent of the Participant, reprice, cancel and reissue,
or otherwise adjust the terms of an Award previously issued to the Participant;
(xv) Determine, upon review of relevant information, the Fair Market
Value of the Common Stock; and
(xvi) Make all other determinations deemed necessary or advisable for
the administration of the Plan.
(d) Committee's Interpretation of the Plan.
The Committee's interpretation and construction of any provision of the
Plan, of any Award granted under the Plan, or of any Award Agreement shall be
final and binding on all persons claiming an interest in an Award granted or
issued under the Plan. No member of the Committee nor any Director shall be
liable for any action or determination made in good faith with respect to the
Plan, and the Corporation shall indemnify and defend a member of the Committee
to the fullest extent provided by law.
5. PARTICIPATION
(a) Eligibility for Participation. Subject to the conditions of Section
5(b), all Employees, Directors, consultants, and advisors of the Corporation
are eligible to be selected as Participants by the Committee, in its
discretion. The Committee's determination of an individual's eligibility for
participation shall be final.
(b) Eligibility for Awards. The Committee has the authority, in its
discretion, to grant Awards to Participants. A Participant may be granted more
than one Award under the Plan.
6. SHARES OF STOCK OF THE CORPORATION.
(a) Shares Subject to This Plan.
Awards which are granted or issued under this Plan shall be with respect
to the authorized but unissued or reacquired Shares of the Corporation's Common
Stock. The
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aggregate number of Shares which may be issued upon the exercise of Options
and/or which may be utilized with respect to Stock Appreciation Rights settled
in cash or in Shares under this Plan shall not exceed four million (4,000,000)
Shares, subject to adjustment under Section 10.
(b) Adjustment of Shares.
In the event of an adjustment described in Section 10, then (i) the number
of Shares reserved for issuance under the Plan, (ii) the Exercise Prices of and
number of Shares subject to outstanding Options, (iii) the Exercise Price of
and number of Shares with respect to which there are outstanding Stock
Appreciation Rights, and (iv) any other factor pertaining to outstanding Awards
shall be duly and proportionately adjusted, subject to any required action by
the Board or the shareholders of the Corporation and compliance with applicable
securities laws; provided, however, that fractions of a Share shall not be
issued but shall either be paid in cash at Fair Market Value or shall be
rounded up to the nearest Share, as determined by the Committee; and provided,
further, that the Exercise Price of any Option may not be decreased to below
the par value, if any, of the Shares.
(c) Awards Not to Exceed 10% of Corporation's Common Stock.
The number of Shares subject to Awards which are outstanding from time to
time under this Plan shall not exceed an amount equal to 10% of the then
outstanding shares of the Corporation's Common Stock.
(d) Awards Not to Exceed Shares Available.
The number of Shares subject to Awards which have been granted under this
Plan at any time during the Plan's term shall not, in the aggregate at any
time, exceed the number of Shares authorized for issuance under the Plan. The
number of Shares subject to a Stock Appreciation Right that is settled in cash
shall count as Shares issued under the Plan and shall not again be available
for grant or issuance under the Plan. The number of Shares subject to an Award
which expires, is canceled, is forfeited or is terminated for any reason, shall
again be available for issuance under the Plan.
7. TERMS AND CONDITIONS OF OPTIONS.
(a) Eligibility for Incentive Stock Options.
(i) Subject to Section 7(a)(ii), Incentive Stock Options may be granted
only to Employees (irrespective of whether an Employee is also a Director).
Advisors, consultants and Directors who are not also Employees are not eligible
to be awarded Incentive Stock Options.
(ii) Any Employee who is a Ten Percent Stockholder is eligible to be
granted an Incentive Stock Option only if: (A) the Exercise Price of each Share
subject to such Incentive Stock Option, when granted, is equal to or exceeds
110% of the Fair Market Value of a Share; and (B) the term of the Incentive
Stock Option does not exceed five years.
<PAGE> 12
(b) Stock Option Award Agreements.
Each Option shall be evidenced by a written Award Agreement which shall
set forth the terms and conditions pertaining to such Option, provided that all
such terms shall be subject to and consistent with this Plan.
(c) Number of Shares Covered by an Option.
Each Option Award Agreement shall state the number of Shares for which the
Option is exercisable, subject to adjustment of such Shares pursuant to Section
10.
(d) Exercise of Options.
Only a Participant may exercise an Option, and the Participant may
exercise an Option only on or after the date on which the Option Vests, as
provided in Section 7(e) below, and only on or before the date on which the term
of the Option expires, as provided in Section 7(f) below.
(e) Vesting of Options.
Each Award Agreement shall include a Vesting schedule describing the date,
event or act upon which an Option shall Vest, in whole or in part, with respect
to all or a specified portion of the Shares covered by such Option. The
condition shall not impose upon the Corporation any obligation to retain the
Participant in its employ for any period.
(f) Term and Expiration of Options.
Subject to Section 7(q), except as otherwise specifically provided in a
Participant's Award Agreement, the term of an Option shall expire on the first
to occur of the following events:
(i) The tenth anniversary of the date the Option was granted
(substituting "fifth anniversary" for "tenth anniversary" for an Incentive Stock
Option granted to a Ten Percent Stockholder);
(ii) The date determined under Section 7(j)(ii) for a Participant who
ceases to be an Employee, Director, advisor, or consultant of the Corporation
for any reason, other than by reason of death, Total and Permanent Disability or
For Cause;
(iii) The date determined under Section 7(k) for a Participant who ceases
to be an Employee, Director, advisor or consultant of the Corporation by reason
of the Participant's death;
(iv) The date determined under Section 7(l) for a Participant who ceases
to be an Employee or Director of the Corporation by reason of the Participant's
Total and Permanent Disability;
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(v) The date determined under Section 7(m) for a Participant who ceases
to be an Employee, Director, advisor or consultant For Cause;
(vi) On the effective date of a transaction described in Section 10(b);
or
(vii) The expiration date specified in the Award Agreement pertaining to
the Option.
(g) Exercise Price.
Each Award Agreement shall state the Exercise Price for the Shares to
which the Option pertains, subject to the following conditions:
(i) The Exercise Price of an Incentive Stock Option shall not be less
than 100% of the Fair Market Value of the Shares on the date the Option is
granted (substituting "110%" for "100%" for any Incentive Stock Option granted
to a Ten Percent Stockholder); and
(ii) Notwithstanding Section 7(g)(i) above, the Exercise Price of an
Option may not be below the par value, if any, of the Shares.
(h) Medium and Time of Payment of Purchase Price.
A Participant may exercise an Option by delivering notice to the
Corporation. A Participant exercising an Option shall pay the Purchase Price
for the Shares to which such exercise pertains in full in cash (in U.S. dollars)
as a condition of such exercise, unless the Committee in its discretion allows
the Participant to pay the Purchase Price in a manner allowed under Section 14,
so long as the sum of cash so paid and such other consideration equals the
Purchase Price. The sequential exercise of an Option through Pyramiding is
specifically allowable under the Plan, subject to the consent of the Committee,
in its discretion. The granting of Reload Options is also allowable under the
Plan, subject to the consent of the Committee, in its discretion.
(i) Nontransferability of Options.
An Option granted to a Participant shall, during the lifetime of the
Participant, be exercisable only by the Participant and shall not be assignable
or transferable. In the event of the Participant's death, an Option is
transferable by the Participant only by will or the laws of descent and
distribution.
(j) Termination of Employee, Director, Advisor or Consultant Status for
Any Reason Other Than Death, Total and Permanent Disability or For Cause.
(i) For purposes of this Section 7(j), Employee, Director, advisor or
consultant status will be treated as continuing intact while the Participant is
an Employee, Director, advisor or consultant or is on military leave, sick leave
or other bona fide leave of absence, as determined by the Committee, in its
discretion in accordance with Sections 2(j) or
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4(c)(xi). The preceding sentence notwithstanding, for determinations
pertaining to Incentive Stock Options, Employee status shall be deemed to
terminate on the date that a Participant is no longer eligible to receive an
Incentive Stock Option pursuant to Section 7(a).
(ii) If a Participant ceases to be an Employee, Director, advisor or
consultant for any reason other than death, Total and Permanent Disability or
For Cause, then: (A) the Participant's Options which are not Vested at the time
that the Participant ceases to be an Employee, Director, advisor or consultant
shall be forfeited; and (B) the Participant's Options which are Vested at the
time the Participant ceases to be an Employee, Director, advisor or consultant
shall expire at 12:00 Midnight on the 30th day following the date that the
Participant ceases to be an Employee, Director, advisor or consultant (but not
beyond the date that the term of the Option would earlier have expired pursuant
to Section 7(f)), subject to the following:
(A) Pursuant to Section 4(c)(iii), the Committee may provide in
a Director's Award Agreement that a longer specified period may be substituted
for the thirty-day period described above;
(B) Pursuant to Section 7(o), the Committee may, in its sole
discretion, grant an extension of the thirty-day expiration period described
above in order to favor a Participant, provided that such extension shall be
made in writing and shall provide that all unexercised Options shall expire at
12:00 Midnight on the last day of such extension; and
(C) Any unexercised Incentive Stock Option shall in any event
expire at 12:00 Midnight on the three month anniversary of the date the
Participant ceases to be an Employee.
(k) Death of Participant.
If a Participant dies while an Employee, Director, advisor or consultant,
any Option granted to the Participant may be exercised, to the extent it was
Vested on the date of the Participant's death or became Vested as a result of
the Participant's death, at any time within six (6) months after the
Participant's death (but not beyond the date that the term of the Option would
earlier have expired pursuant to Section 7(f) had the Participant's death not
occurred), subject to the following:
(i) Pursuant to Section 7(o), the Committee may, in its sole
discretion, grant an extension of the six-month expiration period described
above in order to favor a Participant, provided that such extension shall be
made in writing and shall provide that all unexercised Options shall expire at
12:00 Midnight on the last day of such extension; and
(ii) Any unexercised Incentive Stock Option shall in any event expire at
12:00 Midnight on the one year anniversary of the Participant's death.
(l) Total and Permanent Disability of Participant.
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If a Participant ceases to be an Employee or Director as a consequence of
Total and Permanent Disability, any Option granted to the Participant may be
exercised, to the extent it was Vested on the date that the Participant ceased
to be an Employee or Director or became Vested as a result of Participant's
Total and Permanent Disability, at any time within six (6) months after such
date (but not beyond the date that the term of the Option would earlier have
expired pursuant to 7(f) had the Participant's Total and Permanent Disability
not occurred), subject to the following:
(i) Pursuant to Section 7(o), the Committee may, in its sole
discretion, grant an extension of the six-month expiration period described
above in order to favor a Participant, provided that such extension shall be
made in writing and shall provide that any unexercised Option shall expire at
12:00 Midnight on the last day of such extension; and
(ii) Any unexercised Incentive Stock Option shall expire at 12:00
Midnight on the one year anniversary of the date the Participant ceases to be an
Employee by reason of Total and Permanent Disability.
(m) Termination For Cause.
If a Participant ceases to be an Employee, Director, advisor or consultant
For Cause, any Vested Option granted to the Participant may be exercised no
later than 12:00 Midnight on the date such termination For Cause occurs.
(n) Rights as a Stockholder.
A Participant shall have no rights as a stockholder of the Corporation
with respect to any Shares for which an Option is exercisable or has been
exercised until the date a stock certificate for such Shares is issued to the
Participant. No adjustment shall be made for dividends (ordinary or
extraordinary or whether in currency, securities, or other property),
distributions, or other rights for which the record date is prior to the date
such stock certificate is issued.
(o) Modification, Extension, and Renewal of Options.
Within the limitations of the Plan, the Committee may, in its discretion,
modify, extend or renew any outstanding Option or accept the cancellation of
outstanding Options for the granting of a new Option in substitution therefore.
Notwithstanding the preceding sentence, no modification of an Option shall:
(i) Without the consent of the Participant, alter or impair any rights
or obligations under any Option previously granted or cause an Incentive Stock
Option previously granted to fail to satisfy all the conditions required to
qualify as an Incentive Stock Option; or
(ii) Exceed or otherwise violate any limitation set forth in this
Section 7.
(p) Other Provisions.
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An Award Agreement may contain such other provisions as the Committee in
its discretion deems advisable which are not inconsistent with the terms of the
Plan, including but not limited to:
(i) Restrictions on the exercise of the Option;
(ii) Submission by the Participant of such forms and documents as the
Committee may require; and/or
(iii) Procedures to facilitate the payment of the Exercise Price of an
Option under any method allowable under Section 14.
(q) No Disqualification of Incentive Stock Options.
Notwithstanding any other provision of the Plan, the Plan shall not be
interpreted, amended or altered, nor shall any discretion or authority granted
under the Plan be exercised, so as to disqualify the Plan under Section 422 of
the Code or, without the consent of the Participant affected, disqualify any
Incentive Stock Option under Section 422 of the Code (except as provided in
Section 7(r)).
(r) Limitation on Incentive Stock Options.
The aggregate Fair Market Value (determined with respect to each Incentive
Stock Option as of such Incentive Stock Option's date of grant) of all Shares
with respect to which a Participant's Incentive Stock Options become Vested
during any calendar year (under the Plan and under other incentive stock option
plans of the Corporation, if any) shall not exceed US$100,000. Any purported
Incentive Stock Options in excess of such limitation shall be recharacterized as
Non-qualified Stock Options.
8. STOCK APPRECIATION RIGHTS.
(a) Stock Appreciation Right Award Agreements.
Each Stock Appreciation Right shall be evidenced by a written Award
Agreement which shall set forth the terms and conditions pertaining to such
Stock Appreciation Right, provided that all such terms shall be subject to and
consistent with this Plan.
(b) Number of Shares Covered by a Stock Appreciation Right.
Each Stock Appreciation Right Award Agreement shall state the number of
Shares to which it pertains and the Exercise Price which is the basis for
determining future appreciation, subject to adjustment pursuant to Section 10.
(c) Stock Appreciation Rights Issued and Exercised Without Payment of
Consideration.
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A Stock Appreciation Right shall be issued to and exercised by a
Participant without payment by the Participant of any consideration.
(d) Exercise of Stock Appreciation Rights.
Only a Participant may exercise a Stock Appreciation Right, and the
Participant may exercise a Stock Appreciation Right only on or after the date on
which the Stock Appreciation Right vests, as provided in Section 8(e), below,
and only on or before the date on which the Stock Appreciation Right expires, as
provided in Section 8(f) below.
(e) Vesting of Stock Appreciation Rights.
Each Award Agreement shall include a Vesting schedule describing the date,
event or act upon which the Stock Appreciation Right to which it pertains Vests,
in whole or in part. This condition shall not impose upon the Corporation any
obligation to retain the Participant in its employ for any period.
(f) Term and Expiration of Stock Appreciation Rights.
Except as otherwise specifically provided in a Participant's Award
Agreement, the term of a Stock Appreciation Right shall expire on the first to
occur of the following events:
(i) The tenth anniversary of the date the Right was granted;
(ii) The date determined under Section 8(i)(ii) for a Participant who
ceases to be an Employee, Director, advisor or consultant for any reason, other
than by reason of death, Total and Permanent Disability or For Cause;
(iii) The date determined under Section 8(j) for a Participant who ceases
to be an Employee, Director, advisor or consultant of the Corporation by reason
of the Participant's death;
(iv) The date determined under Section 8(k) for a Participant who ceases
to be an Employee or Director of the Corporation by reason of the Participant's
Total and Permanent Disability;
(v) The date determined under Section 8(l) for a Participant who ceases
to be an Employee, Director, advisor or consultant For Cause;
(vi) On the effective date of a transaction described in Section 10(b);
or
(vii) The expiration date specified in the Award Agreement pertaining to
the Stock Appreciation Right.
(g) Exercise and Settlement of a Stock Appreciation Right.
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A Participant may exercise a Vested Stock Appreciation Right by delivering
notice to the Corporation. The Stock Appreciation Right may be settled in the
form of cash (either in a lump sum payment or in installments), whole Shares, or
a combination thereof, as the Award Agreement prescribes.
(h) Nontransferability of Stock Appreciation Rights.
A Stock Appreciation Right granted to a Participant shall, during the
lifetime of the Participant, be exercisable only by the Participant and shall
not be assignable or transferable. In the event of the Participant's death, a
Stock Appreciation Right is transferable by the Participant only by will or the
laws of descent and distribution.
(i) Termination of Employee, Director, Advisor or Consultant Status for
any Reason Other Than Death, Total and Permanent Disability or For Cause.
(i) For purposes if this Section 8(i)(i), Employee, Director, advisor
or consultant status will be treated as continuing intact while the Participant
is an Employee, Director, advisor or consultant or is on military leave, sick
leave or other bona fide leave of absence, as determined by the Committee, in
its discretion in accordance with Sections 2(j) or 4(c)(xi).
(ii) If a Participant ceases to be an Employee, Director, advisor or
consultant for any reason other than death, Total and Permanent Disability or
For Cause, then: (A) the Participant's Stock Appreciation Rights which are not
Vested at the time that the Participant ceases to be an Employee, Director,
advisor or consultant shall be forfeited; and (B) the Participant's Stock
Appreciation Rights which are Vested at the time the Participant ceases to be an
Employee, Director, advisor or consultant shall expire at 12:00 Midnight on the
30th day following the date that the Participant ceases to be an Employee,
Director, advisor or consultant (but not beyond the date that the term of the
Stock Appreciation Right would earlier have expired pursuant to Section 8(f),
subject to the following:
(A) Pursuant to Section 4(c)(iii), the Committee may provide in
a Director's Award Agreement that a longer specified period may be substituted
for the thirty-day period described above; and
(B) Pursuant to Section 8(n), the Committee may, in its sole
discretion, grant an extension of the thirty-day expiration period described
above in order to favor a Participant, provided that such extension shall be
made in writing and shall provide that all unexercised Stock Appreciation Rights
shall expire at 12:00 Midnight on the last day of such extension.
(j) Death of Participant.
If a Participant dies while an Employee, Director, advisor or consultant,
any Stock Appreciation Right granted to the Participant may be exercised, to the
extent it was Vested on the date of the Participant's death or became Vested as
a consequence of the Participant's death,
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at any time within six (6) months after the Participant's death (but not beyond
the date that the term of the Stock Appreciation Right would earlier have
expired pursuant to Section 8(f) had the Participant's death not occurred),
provided that pursuant to Section 8(n), the Committee may, in its sole
discretion, grant an extension of the six-month expiration period described
above in order to favor a Participant, provided that such extension shall be
made in writing and shall provide that all unexercised Stock Appreciation
Rights shall expire at 12:00 Midnight on the last day of such extension.
(k) Total and Permanent Disability of Participant.
If a Participant ceases to be an Employee or Director as a consequence of
Total and Permanent Disability, any Stock Appreciation Right granted to the
Participant may be exercised, to the extent it was Vested on the date that the
Participant ceased to be an Employee or Director or became Vested as a
consequence of the Participant's Total and Permanent Disability, at any time
within six (6) months after such date (but not beyond the date that the term of
the Stock Appreciation Right would earlier have expired pursuant to 8(f) had the
Participant's Total and Permanent Disability not occurred), provided that
pursuant to Section 8(n), the Committee may, in its sole discretion, grant an
extension of the six-month expiration period described above in order to favor a
Participant, provided that such extension shall be made in writing and shall
provide that any unexercised Option shall expire at 12:00 Midnight on the last
day of such extension.
(l) Termination For Cause.
If a Participant ceases to be an Employee, Director, advisor or consultant
For Cause, any Vested Stock Appreciation Right granted to the Participant may be
exercised no later than 12:00 Midnight on the date such termination For Cause
occurs.
(m) Rights as a Stockholder.
A Participant shall have no rights as a shareholder of the Corporation
with respect to any Shares to which a Stock Appreciation Right pertains, except
for Stock Appreciation Rights settled in Shares and then not until the date a
stock certificate for such Shares is issued to the Participant. No adjustment
shall be made for dividends (ordinary or extraordinary or whether in currency,
securities, or other property), distributions, or other rights for which the
record date is prior to the date such stock certificate is issued.
(n) Modification, Extension, and Renewal of Stock Appreciation Rights.
Within the limitations of the Plan, the Committee may, in its discretion,
modify, extend or renew any outstanding Stock Appreciation Right or accept the
cancellation of an outstanding Stock Appreciation Right for the granting of a
new Stock Appreciation Right in substitution therefore. Notwithstanding the
preceding sentence, no modification of a Stock Appreciation Right shall, without
the consent of the Participant, alter or impair any rights or obligations under
any Stock Appreciation Right previously granted.
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(o) Other Provisions.
An Award Agreement may contain such other provisions as the Committee in
its discretion deems advisable which are not inconsistent with the terms of the
Plan, including but not limited to:
(i) Restrictions on the exercise of the Stock Appreciation Right;
and/or
(ii) Submission by the Participant of such forms and documents as the
Committee may require.
9. TERM OF PLAN.
Awards may be granted pursuant to the Plan through the period ending on
November 13, 2005. All Awards which are outstanding on such date shall remain
in effect until they are exercised or expire by their terms. The Plan shall
expire for all purposes on November 13, 2015. The Board is authorized to extend
the Plan for an additional term at any time; however, no Incentive Stock Options
may be granted under the Plan during a term resulting from such extension unless
the extension is approved by the stockholders of the Corporation within one year
of such extension.
10. RECAPITALIZATION, DISSOLUTION, AND CHANGE OF CONTROL.
(a) Recapitalization.
Notwithstanding any other provision of the Plan to the contrary, but
subject to any required action by the stockholders of the Corporation and
compliance with any applicable securities laws, the Committee shall make any
adjustments to the class and/or number of Shares covered by the Plan, the number
of Shares for which each outstanding Award pertains, the Exercise Price of an
Option, the Exercise Price of a Stock Appreciation Right, and/or any other
aspect of this Plan to prevent the dilution or enlargement of the rights of
Participants under this Plan in connection with any increase or decrease in the
number of issued Shares resulting from the payment of a Common Stock dividend,
stock split, reverse stock split, recapitalization, combination, or
reclassification or any other event which results in an increase or decrease in
the number of issued Shares without receipt of adequate consideration by the
Corporation (as determined by the Committee).
(b) Dissolution, Merger, Consolidation, or Sale or Lease of Assets.
Upon the (i) dissolution or liquidation of the Corporation, (ii) merger of
consolidation of the Corporation with another corporation or other entity
pursuant to which the Corporation is not the surviving entity, (iii) sale or
lease of all or substantially all the business assets of the Corporation, or
(iv) the sale of more than 80% of the outstanding Common Stock of the
Corporation, unless the surviving or acquiring corporation or entity agrees to
assume outstanding Awards, each Award granted hereunder shall expire as of the
effective date of such transaction; provided, however, that the Committee may,
in its discretion, give written notice of
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such event to any Participant who shall then have the right to exercise his or
her Vested Awards prior to the effective date of such transaction, subject to
earlier expiration pursuant to Sections 7 or 8 (as applicable).
(c) Determination by the Committee.
All adjustments described in this Section 10 shall be made by the
Committee in its discretion, and such determination shall be conclusive and
binding on all persons.
(d) Limitation on Rights of Participants.
Except as expressly provided in this Section 10, no Participant shall have
any rights by reason of any reorganization, dissolution, change of control,
merger or acquisition. Any issuance by the Corporation of Awards shall not
affect, and no adjustment by reason thereof shall be made with respect to, any
Awards previously issued under the Plan.
(e) No Limitation on Rights of Corporation.
The grant of an Award pursuant to the Plan shall not affect in any way the
right or power of the Corporation to make adjustments, reclassifications,
reorganizations, or changes of its capital or business structure, or to merge or
consolidate, or to dissolve, liquidate, sell or transfer all or any part of its
business or assets.
11. SECURITIES LAW REQUIREMENTS.
(a) Legality of Issuance.
No Share shall be issued upon the exercise of any Award unless and until
the Committee has determined that:
(i) The Corporation and the Participant have taken all actions required
to register the Shares under the Securities Act of 1933, as amended (the "Act"),
or to perfect an exemption from registration requirements of the Act, or to
determine that the registration requirements of the Act do not apply to such
exercise;
(ii) Any applicable listing requirement of any stock exchange on which
the Share is listed has been satisfied; and
(iii) Any other applicable provision of state, federal or foreign law has
been satisfied.
(b) Restrictions on Transfer; Representations of Participant; Legends.
Regardless of whether the offering and sale of Shares under the Plan have
been registered under the Act or have been registered or qualified under the
securities laws of any state, the Corporation may impose restrictions upon the
sale, pledge, or other transfer of such
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Shares (including the placement of appropriate legends on stock certificates)
if, in the judgment of the Corporation and its counsel, such restrictions are
necessary or desirable to achieve compliance with the provisions of the Act,
the securities laws of any state, or any other law. If the offering and/or
sale of Shares under the Plan is not registered under the Act and the
Corporation determines that the registration requirements of the Act apply but
an exemption is available which requires an investment representation or other
representation, the Participant shall be required, as a condition to acquiring
such Shares, to represent that such Shares are being acquired for investment,
and not with a view to the sale or distribution thereof, except in compliance
with the Act, and to make such other representations as are deemed necessary or
appropriate by the Corporation and its counsel. Stock certificates evidencing
Shares acquired pursuant to an unregistered transaction to which the Act
applies shall bear a restrictive legend substantially in the following form and
such other restrictive legends as are required or deemed advisable under the
Plan or the provisions of any applicable law:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933 ("ACT"). THEY MAY NOT BE TRANSFERRED, SOLD OR OFFERED FOR
SALE UNLESS A REGISTRATION STATEMENT UNDER THE ACT IS IN EFFECT AS
TO SUCH TRANSFER OR IN THE OPINION OF COUNSEL FOR THE ISSUER EITHER
SUCH REGISTRATION IS UNNECESSARY IN ORDER FOR SUCH TRANSFER TO
COMPLY WITH THE ACT OR THE REGISTRATION PROVISIONS OF THE ACT DO NOT
APPLY TO SUCH PROPOSED TRANSFER.
Any determination by the Corporation and its counsel in connection with any of
the matters set forth in this Section 11 shall be conclusive and binding on all
persons.
(c) Registration or Qualification of Securities.
The Corporation may, but shall not be obligated to, register or qualify
the offering or sale of Shares under the Act or any other applicable law.
(d) Exchange of Certificates.
If, in the opinion of the Corporation and its counsel, any legend placed
on a stock certificate representing Shares issued pursuant to the Plan is no
longer required, the Participant or the holder of such certificate shall be
entitled to exchange such certificate for a certificate representing the same
number of Shares but lacking such legend.
12. EXERCISE OF UNVESTED OPTIONS.
(a) Purpose of Section 12.
This Section 12 is intended to apply for the benefit of a Participant
prior to the time Shares held by the Participant are freely transferable under
applicable federal and state securities laws without the Participant holding the
Shares for a minimum period of time (such as the holding period requirement of
Rule 144 adopted by the Securities and Exchange Commission
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under the Act). It provides that a Participant with a non-Vested Award may
commence this holding period for the Shares subject to the Award by exercising
the non-Vested Award and receiving Shares of restricted stock which will Vest
on the same date as the Award would have Vested. Any restricted stock issued
under this Section 12 for non-vested Awards which expire pursuant to Section 7
or Section 8, as applicable, shall be reconveyed to the Corporation at the
Exercise Price, if any, paid by the Participant to the Corporation to acquire
such Shares (in cash and/or in Shares as paid by the Participant), subject,
however, to complying with any legal requirement relating to the Corporation's
ability to repurchase its own securities. In this way, the Participant is able
to begin the holding period for the Shares prior to the date the Award would
have Vested.
(b) Exercise of Unvested Awards and Issuance of Restricted Stock.
The Committee, in its sole discretion may:
(i) Grant any Participant the right to exercise any Award prior to the
Vesting of such Award, provided that the Shares issued upon such exercise shall
remain subject to Vesting, as restricted stock, at the same rate as under the
Award so exercised; and/or
(ii) Require the Corporation and the Participant to establish an escrow
arrangement to facilitate the re-transfer to the Corporation of any Shares of
restricted stock which are not Vested and are to be reconveyed, on or before the
applicable date described in Section 7 or 8, as applicable, for determining the
expiration of the Award pursuant to which such Shares were issued under this
Section 12.
13. AMENDMENT OF THE PLAN.
The Committee may, from time to time, terminate, suspend or discontinue
the Plan, in whole or in part, or revise or amend it in any respect whatsoever
including, but not limited to, the adoption of any amendment deemed necessary or
advisable to qualify the Awards under rules and regulations promulgated by the
Securities and Exchange Commission with respect to Employees who are subject to
the provisions of Section 16 of the Exchange Act, or to correct any defect or
supply any omission or reconcile any inconsistency in the Plan or in any Award
granted under the Plan, with or without approval of the stockholders of the
Corporation, but if any such action is taken without the approval of the
Corporation's stockholders, no such revision or amendment shall:
(a) Increase the number of Shares subject to the Plan, other than any
increase pursuant to Section 10;
(b) Change the designation of the class of persons eligible to receive
Incentive Stock Options; or
(c) Amend this Section 13 to defeat its purpose.
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No amendment, termination or modification of the Plan shall, without the
consent of a Participant, adversely affect the Participant with respect to any
Award previously granted to the Participant.
14. PAYMENT FOR SHARE PURCHASES.
Payment of the Purchase Price for any Shares purchased pursuant to the
Plan may be made in cash (in U.S. dollars) or, where expressly approved for the
Participant by the Committee, in its discretion, and where permitted by law:
(a) By check;
(b) By cancellation of indebtedness of the Corporation to the
Participant;
(c) By surrender of Shares that either: (A) have been owned by
Participant for more than six months (unless the Committee permits a Participant
to exercise an Option by Pyramiding, in which event the six months holding
period shall not apply) and have been "paid for" within the meaning of SEC Rule
144 (and, if such shares were purchased from the Corporation by use of a
promissory note, such note has been fully paid with respect to such Shares); or
(B) were obtained by Participant in the public market;
(d) By tender of a full recourse promissory note having such terms as
may be approved by the Committee and bearing interest at a rate sufficient to
avoid imputation of income under Sections 483 and 1274 of the Code; provided,
however, that Participants who are not Employees shall not be entitled to
purchase Shares with a promissory note unless the note is adequately secured by
collateral other than the Shares; provided, further, that the portion of the
Purchase Price equal to the par value of the Shares, if any, must be paid in
cash if required by state law;
(e) By waiver of compensation due or accrued to Participant for
services rendered;
(f) With respect only to purchases upon exercise of an Option, and
provided that a public market for the Corporation's stock exists:
(i) Through a "same day sale" commitment from the Participant
and a broker-dealer that is a member of the National Association of Securities
Dealers (an "NASD Dealer") whereby the Participant irrevocably elects to
exercise the Option and to sell a portion of the Shares so purchased to pay for
the Exercise Price, and whereby the NASD Dealer irrevocably commits upon receipt
of such Shares to forward the Exercise Price directly to the Corporation; or
(ii) Through a "margin" commitment from the Participant and an
NASD Dealer whereby the Participant irrevocably elects to exercise the Option
and to pledge the Shares so purchased to the NASD Dealer in a margin account as
security for a loan from the NASD Dealer in the amount of the Exercise Price,
and whereby the NASD Dealer irrevocably commits upon receipt of such Shares to
forward the Exercise Price directly to the Corporation; or
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(iii) By any combination of the foregoing.
15. APPLICATION OF FUNDS.
The proceeds received by the Corporation from the sale of Common Stock
pursuant to the exercise of an Option shall be used for general corporate
purposes.
16. APPROVAL OF SHAREHOLDERS.
The Plan shall be subject to approval by the affirmative vote of the
holders of a majority of the outstanding shares present and entitled to vote at
the first annual meeting of shareholders of the Corporation following the
adoption of the Plan by the Board, and in no event later than November 13, 1996.
Prior to such approval, Options and/or Stock Appreciation Rights may be granted
but may not be exercised or settled. Pursuant to Section 13, certain amendments
shall also be subject to approval by the Corporation's shareholders.
17. WITHHOLDING OF TAXES.
(a) General.
Whenever Shares are to be issued under the Plan, the Corporation may
require the Participant to remit to the Corporation an amount sufficient to
satisfy foreign, federal, state and local withholding tax requirements prior to
the delivery of any certificate or certificates for such Shares. Whenever,
under the Plan, payments in satisfaction of Stock Appreciation Rights are to be
made in cash, such payment shall be net of an amount sufficient to satisfy
foreign, federal, state, and local withholding tax requirements.
(b) Stock Withholding.
When, under applicable tax laws, a Participant incurs tax liability in
connection with the exercise of any Option or the exercise of a Stock
Appreciation Right that is settled in Shares that is subject to tax withholding
and the Participant is obligated to pay the Corporation the amount required to
be withheld, the Committee may at its sole discretion allow the Participant to
satisfy the minimum withholding tax obligation by electing to have the
Corporation withhold from the Shares to be issued the specific number of Shares
having a Fair Market Value equal to the minimum amount required to be withheld,
determined on the date that the amount of tax to be withheld is to be determined
(the "Tax Date"). All elections by a Participant to have Shares withheld for
this purpose shall be made in writing in a form acceptable to the Committee and
shall be subject to the following restrictions:
(i) The election must be made on or prior to the applicable Tax Date;
(ii) Once made, then except as provided below, the election shall be
irrevocable as to the particular Shares as to which the election is made;
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(iii) All elections shall be subject to the consent or disapproval of the
Committee; and
(iv) In the event that the Tax Date is deferred until six months after
the delivery of Shares under Section 83(b) of the Code, the Participant shall
receive the full number of Shares with respect to which the exercise occurs, but
(A) such Participant shall be unconditionally obligated to tender back to the
Corporation the proper number of Shares on the Tax Date, and (B) the Committee
may require the Corporation and the Participant to establish an escrow
arrangement to facilitate the re-transfer of such re-tendered Shares to the
Corporation.
18. RIGHTS AS AN EMPLOYEE, DIRECTOR, ADVISOR OR CONSULTANT.
The Plan shall not be construed to give any individual the right to remain
in the employ of the Corporation (or a Subsidiary) or to affect the right of the
Corporation (or such Subsidiary) to terminate such individual's status as an
Employee, Director, advisor or consultant at any time, with or without cause.
The grant of an Award shall not entitle the Participant to, or disqualify the
Participant from, participation in the grant of any other Award under the Plan
or participation in any other plan maintained by the Corporation.
19. INSPECTION OF RECORDS.
Copies of the Plan, records reflecting each Participant's Awards and any
other documents and records which a Participant is entitled by law to inspect
shall be open to inspection by the Participant and his or her duly authorized
representative at the office of the Corporation at any reasonable business hour
upon reasonable advance notice from the Participant.
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CANARGO ENERGY CORPORATION
1995 LONG-TERM INCENTIVE PLAN
SUB-PLAN FOR UNITED KINGDOM PARTICIPANTS
(EFFECTIVE NOVEMBER 14, 1995)
(AMENDED AND RESTATED AS OF JULY 15, 1998)
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CANARGO ENERGY CORPORATION
1995 LONG-TERM INCENTIVE PLAN
SUB-PLAN FOR UNITED KINGDOM PARTICIPANTS
1. PURPOSE.
This Sub-Plan for United Kingdom Participants (the "United Kingdom
Sub-Plan") is established under the CanArgo Energy Corporation 1995 Long-Term
Incentive Plan (the "Plan"). This Sub-Plan sets forth special terms and
restrictions which apply to all Stock Options granted to a covered Participant
who, on the date the Award is granted, is a "United Kingdom Participant," as
defined as in Section 2(a) of this Sub-Plan. The Corporation has adopted this
Sub-Plan to provide United Kingdom Participants an opportunity to be granted
Stock Option(s) under the Plan which qualify for favorable tax treatment under
current Inland Revenue provisions.
All Stock Options granted pursuant to this Sub-Plan shall be subject to
the terms and conditions provided in the Plan and in this Sub-Plan; provided,
however that except as otherwise specifically provided or as the context
otherwise requires, the terms and conditions of this Sub-Plan shall govern in
the event of a conflict with the terms and conditions of the Plan.
2. DEFINITIONS.
Capitalized terms shall have the meanings set forth in Section 2 of the
Plan, and the following additional terms shall have the meanings specified
below:
(a) "United Kingdom Participant" shall mean a Participant who, on the date
a Stock Option is granted to the Participant, is domiciled in the United
Kingdom, is subject to taxation under Inland Revenue provisions as an "employee
resident" or an "ordinarily resident" individual, as such terms are defined for
Inland Revenue purposes, and elects to be covered by this Sub-Plan with respect
to such Stock Option.
(b) "United Kingdom Sub-Plan" shall mean this Sub-Plan covering Awards
granted to United Kingdom Participants, as amended.
3. EFFECTIVE DATE.
This United Kingdom Sub-Plan was adopted by the Board effective November
14 , 1995, as part of and subject to the terms of the Plan.
4. ADMINISTRATION.
This United Kingdom Sub-Plan shall be administered in accordance with
Section 4 of the Plan.
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5. COVERAGE OF THE UNITED KINGDOM SUB-PLAN.
The terms and conditions of this United Kingdom Sub-Plan shall apply only
to United Kingdom Participants who consent in writing to such coverage. A
United Kingdom Participant shall provide such written consent in the Award
Agreement issued with respect to the Award governed by this Sub-Plan, and such
consent shall be irrevocable with respect to such Award, except as specifically
authorized by the Committee in its discretion.
6. MAXIMUM TERM FOR STOCK OPTIONS.
All Stock Options which are granted to the United Kingdom Participants and
which are covered by this Sub-Plan shall have a maximum term which in no event
exceeds seven years from the date of the grant of such Stock Options. This
restriction shall be set forth in the Award Agreements issued with respect to
such Stock Options.
7. AMENDMENTS.
The Committee may amend the terms of this United Kingdom Sub-Plan at such
time or times as it deems advisable. If the Committee determines that any
amendment may be applied retroactively or prospectively to an outstanding Stock
Option subject to the terms of this Sub-Plan, the Committee shall first obtain
the written consent of a United Kingdom Participant prior to applying such
amendment to a Stock Option previously issued to such Participant.
25
<PAGE> 1
Exhibit 10(24)
AGREEMENT
Between
Terrenex Acquisition Corporation
and
CanArgo Energy Corporation
Whereas, CanArgo has experienced delays in its proposed prospectus financing
and in the sale of assets;
And whereas, CanArgo requires on an urgent basis additional financing;
And whereas, Terrenex as a significant shareholder is prepared to extend
temporary financial assistance to CanArgo;
Now therefore, the parties agree to the following:
Terrenex will lend $500,000 US to CanArgo on request made after the execution
of this agreement;
CanArgo will repay this loan on or before September 21, 1999;
CanArgo will pay interest at 1% per calendar month or part thereof that the
loan is outstanding;
CanArgo will pay a financing fee to Terrenex of 50,000 shares of Uentech upon
execution of this agreement;
CanArgo hereby grants an option to Terrenex to purchase its oil & gas interests
in Canada being known as Sylvan Lake, Frog Lake, Skiff and Beaver Dam for a
price of $1,000,000 Cdn. This option may be exercised by Terrenex after
October 1, 1999 if and only if the principal amount of the loan has not been
repaid prior to this date.
1
<PAGE> 2
As security for repayment of the principal and interest CanArgo grants to
Terrenex a security interest in its shares held in Uentech. CanArgo hereby
directs Laws, Crooks Orsinski to hold in trust all of its shares in Uentech on
the trust condition that they not be released without confirmation from
Terrenex that the loan principal has been repaid.
The parties hereto acknowledge that there is a relationship between CanArgo and
Terrenex. Each party represents and warrants that it has received approval for
this transaction from the independent members of their respective boards of
directors.
Agreed to this 19th day of July, 1999.
CanArgo Energy Corporation Terrenex Acquisition Corporation
Per: /s/David Robson Per: /s/Michael Binnion
David Robson
/s/ Nils Trulsvik
2
<PAGE> 3
PROMISSORY NOTE
For good and valuable consideration CanArgo Energy Corporation hereby promises
to pay $500,000 US together with interest at the rate of 1% compounding each
calendar month or part thereof on or before September 21, 1999.
Dated this 19th day of July, 1999
CanArgo Energy Corporation
Per: /s/David Robson
David Robson
/s/ Nils Trulsvik
3
<PAGE> 1
Exhibit 23(1)
[ PricewaterhouseCoopers Letterhead ]
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this Registration Statement of CanArgo Energy
Corporation on Form S-1, of our report which includes a paragraph regarding the
ability of CanArgo Energy Corporation to continue as a going concern, dated
March 5, 1999 (except for Note 20, as to which the date is March 29, 1999) on
our audit of the consolidated financial statements of CanArgo Energy
Corporation as of December 31, 1998 and 1997, and for the years ended December
31, 1998, 1997 and August 31, 1996 and the four-month period ended December 31,
1996. We also consent to the reference to our firm under the caption "Experts."
/s/ PricewaterhouseCoopers LLP
Houston, Texas
July 27, 1999
<PAGE> 1
Exhibit 23(2)
REPORT OF INDEPENDENT CHARTERED ACCOUNTANTS
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated February 18, 1998 with respect to the consolidated
financial statements of CanArgo Oil and Gas Inc. (formerly "CanArgo Energy
Inc.") incorporated by reference in the Post-effective Amendment No. 1 to the
Registration Statement (Form S-1) and related prospectus of CanArgo Energy
Corporation for the registration of up to 21,264,643 shares of its common stock.
Calgary, Canada /s/ Ernst & Young LLP
July 27, 1999 Chartered Accountants
<PAGE> 1
Exhibit 23(3)
[ERNST & YOUNG LETTERHEAD]
Consent of Independent Chartered Accountants
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated February 18, 1998 with respect to the consolidated
financial statements of Ninotsminda Oil Company (formerly "JKX (Ninotsminda)
Limited) included in the Registration Statements (Form S-1) and related
prospectus of CanArgo Energy Corporation.
/s/ Ernst & Young
- ----------------------------
Ernst & Young
Chartered Accountants
Limassol, Cyprus
27 July, 1999
