SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, For Use of the Com-mission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Materials Pursuant to Rule 14a-11(c) or Rule 14a-12
CANARGO ENERGY CORPORATION
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, If Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
---------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
---------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee
is calculated and state how it was determined):
---------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
---------------------------------------------------------------------------
(5) Total fee paid:
---------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials:
---------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
(1) Amount previously paid:
---------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement no.:
---------------------------------------------------------------------------
(3) Filing Party:
---------------------------------------------------------------------------
(4) Date Filed:
---------------------------------------------------------------------------
CANARGO ENERGY CORPORATION
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 14, 2000
________________________________________
To The Stockholders:
The Annual Meeting of Stockholders of CanArgo Energy Corporation
("CanArgo") will be held at the McMurray Room, Calgary Petroleum Club, 319 5th
Avenue SW, Calgary, Alberta, Canada, on Wednesday, June 14, 2000 at 3:00 P.M.
for the following purposes:
1. To elect five directors to serve until the next Annual Meeting of
Stockholders or until their successors are duly elected and qualified;
2. To ratify the selection of PricewaterhouseCoopers LLP as independent
public accountants of CanArgo for the year ending December 31, 2000;
3. To approve a proposed increase in CanArgo's authorized Common Stock from
50,000,000 to 150,000,000 shares; and
4. To transact such other business as may properly come before the Annual
Meeting and any adjournments thereof.
The Board of Directors has fixed the close of business on May 2, 2000 as
the record date for determination of the stockholders entitled to notice of and
to vote at the Annual Meeting.
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE COMPLETE,
DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD PROMPTLY TO ENSURE THAT YOUR
SHARES WILL BE REPRESENTED AT THE ANNUAL MEETING. THE PROXY CARD MAY BE
RETURNED IN THE ACCOMPANYING ENVELOPE TO WHICH NO POSTAGE NEED BE AFFIXED IF
MAILED IN THE UNITED STATES. IF YOU ATTEND THE ANNUAL MEETING, YOU MAY VOTE IN
PERSON EVEN IF YOU HAVE SENT IN YOUR PROXY CARD.
MARIA REES
Secretary
May 12, 2000
CANARGO ENERGY CORPORATION
1580 Guinness House
727 - 7th Avenue SW
Calgary, Alberta, Canada T2P 0Z5
---------------
PROXY STATEMENT
---------------
GENERAL INFORMATION
SOLICITATION, REVOCATION AND VOTING OF PROXIES
The accompanying proxy is solicited by and on behalf of the Board of
Directors of CanArgo Energy Corporation ("CanArgo"), in connection with the
Annual Meeting of Stockholders to be held at 3:00 PM on Wednesday, June 14,
2000, at the McMurray Room, Calgary Petroleum Club, 319 5th Avenue SW, Calgary,
Alberta, Canada and at any and all adjournments thereof, for the purposes set
forth herein and in the accompanying Notice of Annual Meeting. It is
anticipated that this Proxy Statement and accompanying proxy will first be
mailed to stockholders entitled to vote at the Annual Meeting on or about May
12, 2000.
The accompanying proxy, if properly executed and returned, will be voted as
specified by the stockholder or, if no vote is indicated, the proxy will be
voted FOR each matter specified. As to any other matter of business which may
be brought before the Annual Meeting, a vote may be cast pursuant to the
accompanying proxy in accordance with the judgment of the persons voting the
same, but management does not know of any such other matter of business. A
stockholder may revoke his proxy at any time prior to the voting of shares by
voting in person at the Annual Meeting or by filing with the Secretary of
CanArgo a duly executed proxy bearing a later date or an instrument revoking the
proxy.
The costs of solicitation of proxies will be paid by CanArgo. The
solicitation shall be by means of mail, telephone and personal contact. In
addition to utilizing its directors, officers, and other regular employees to
solicit proxies, CanArgo has engaged Gambit AS to assist with the solicitation
of proxies from stockholders residing in Norway. CanArgo pays Gambit a quarterly
fee of $7,700 for investor relations' services and the solicitation of proxies
is included in these services. Banks, brokers, fiduciaries and other custodians
and nominees who forward proxy soliciting material to their principals will be
reimbursed their customary and reasonable out-of-pocket expenses.
VOTING RIGHTS AND RECORD DATE
The voting securities of CanArgo consist of Common Stock, par value $0.10
per share, and Series Voting Preferred Stock ("Special Voting Stock"), par value
$0.10 per share. Generally, the Common Stock and Special Voting Stock vote as a
single class on all matters. The Common Stock is entitled to one vote per
share. Each of the one hundred (100) shares of Special Voting Stock is entitled
to that number of votes as is equal to one-one hundredth (1/100th) of the number
of Exchangeable Shares ("Exchangeable Shares") issued by CanArgo Oil & Gas Inc.,
a subsidiary of CanArgo, as are then outstanding, rounded down to the nearest
whole number. The Special Voting Stock is held of record by Montreal Trust
Company of Canada, which holds such stock in trust for the benefit of the
holders of the Exchangeable Shares. The Special Voting Stock is voted in the
manner directed by the holders of the Exchangeable Shares. The Exchangeable
Shares may be exchanged for shares of Common Stock on a share-for-share basis.
The term "Voting Securities" refers to the Common Stock and the Special Voting
Stock as though they were a single class of voting securities.
Only stockholders of record of CanArgo's Voting Securities as of the close
of business on May 2, 2000 (the "Record Date") will be entitled to vote at the
Annual Meeting. On the Record Date, 40,664,263 shares of Common Stock were
issued and outstanding, each of which is entitled to one vote per share. On the
Record Date, 523,659 Exchangeable Shares were issued and outstanding, and
accordingly each share of Special Voting Stock is entitled to 5,236 votes.
Voting Securities representing a majority of the votes entitled to be cast at
the Annual Meeting, represented in person or by proxy, constitutes a quorum at
the Annual Meeting. Abstentions and broker non-votes are counted as present for
purposes of determining the existence of a quorum.
ELECTION OF DIRECTORS
The Board of Directors has nominated five persons to be elected directors
at the Annual Meeting to hold office until the next Annual Meeting of
Stockholders and until the election of their respective successors. Directors
are elected by a plurality of votes cast; broker non-votes and votes withheld
have no effect on the vote. All proxies received by the Board of Directors will
be voted for the nominees listed below if no direction to the contrary is given.
In the event that any nominee is unable or declines to serve, an event that is
not anticipated, the proxies will be voted for the election of any alternate
nominee who is designated by the Board of Directors.
The nominees for director are:
<TABLE>
<CAPTION>
Name Age Principal Occupation
- ------------------------ --- ----------------------------------------------
<S> <C> <C>
Michael R. Binnion . . . 39 President and Chief Financial Officer
J.F. Russell Hammond (2) 58 Investment Advisor, Provincial Securities Ltd.
Peder Paus (1)(2). . . . 54 Independent Consultant
David Robson . . . . . . 42 Chairman and Chief Executive Officer
Nils N. Trulsvik (1)(2). 51 Independent Consultant
</TABLE>
_____________
(1) Member of Audit Committee.
(2) Member of Compensation Committee.
MICHAEL R. BINNION was elected a Director, President and Chief Financial
Officer on July 15, 1998. He has also served as a Director, Chief Financial
Officer and Secretary of the Company's subsidiary, CanArgo Oil & Gas Inc., since
March 1997. Mr. Binnion is also President and a director of Terrenex Acquisition
Corporation, an Alberta Stock Exchange listed investment company which is the
Company's largest stockholder, and sole director of Rupert's Crossing, a private
investment company. He is also a director of Fintech Services Ltd. Prior to
April 1997, he served as Chief Financial Officer and a Director of
Trans-Dominion Energy Company, a Toronto Stock Exchange listed international oil
and gas exploration and production company, for four years.
J.F. RUSSELL HAMMOND was elected a Director on July 15, 1998. He has also
served as a Director of the Company's subsidiary, CanArgo Oil & Gas Inc., since
June 1997. For over five years, Mr. Hammond has been an investment advisor to
Provincial Securities Ltd., a private investment company. Mr. Hammond has been
Chairman of Terrenex Acquisition Corporation since 1992 and a director of Cadiz
Inc., a Nasdaq National Market listed company, from 1989 to Jan 1999.
PEDER PAUS was elected a Director on July 15, 1998 and is an independent
businessman based in Oslo, Norway. Since 1995, he has been a consultant on
investor relations for various companies. From 1981 to 1995, Mr. Paus was Chief
Executive Officer of North Venture Ltd., a shipping and offshore consulting firm
based in London, England.
DAVID ROBSON was elected a Director, Chairman of the Board and Chief
Executive Officer on July 15, 1998. He has also served as a Director, Chairman
of the Board and Chief Executive Officer of the Company's subsidiary, CanArgo
Oil & Gas Inc., since July 1997, as President of CanArgo Oil & Gas Inc.'s
subsidiary, Ninotsminda Oil Company, since 1996, and as Managing Director and
sole owner of Vazon Energy Limited, a company which provides consulting services
to the energy industry, since March 1997. From April 1992 until March 1997, Dr.
Robson was a senior officer of JKX Oil &Gas plc, including Managing Director and
Chief Executive Officer. He holds a B.Sc. (Hon) in Geology and a Ph.D. in
Geochemistry from the University of Newcastle upon Tyne, and an MBA from the
University of Strathclyde. He is the energy sector representative on the United
Kingdom government's East European Trade Council.
NILS N. TRULSVIK was elected a Director of the Company on August 17, 1994.
He has served the Company as President and Chief Executive Officer from February
4, 1997 to July 15, 1998 and from November 21, 1994 to March 9, 1995; and as
Executive Vice President from March 9, 1995 to February 4, 1997 and from
September 8, 1994 until November 21, 1994. In August 1998, Mr. Trulsvik became a
partner in a consulting company, The Bridge Group, located in Norway. Mr.
Trulsvik is a petroleum explorationist with extensive experience in petroleum
exploration and development throughout the world. Prior to joining the Company,
he held various positions with Nopec AS, a Norwegian petroleum consultant group
of companies of which he was a founder, including Managing Director from 1987 to
1993 and Special Advisor from 1993 to August 1994.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF EACH NAMED NOMINEE.
INFORMATION CONCERNING BOARD AND COMMITTEE MEETINGS
CanArgo's Board of Directors held 8 meetings during the year ended December
31, 1999. The members of the Audit Committee at the end of 1999 were Peder Paus
and Nils N. Trulsvik. The members of the Compensation Committee at the end of
1999 were J.F. Russell Hammond, Nils N. Trulsvik and Peder Paus. The Audit
Committee is responsible for reviewing CanArgo's financial statements, audit
results, internal controls, and accounting principles, policies and practices.
The Audit Committee also recommends to the Board the selection of CanArgo's
outside accounting firm and approves the fees of such firm. The Audit Committee
held 4 meetings during the year ended December 31, 1999. The Compensation
Committee approves the compensation of CanArgo's executive officers, oversees
the compensation scheme for other Company employees, administers and grants
awards under stock option and other compensation plans, and recommends to the
Board the adoption of retirement and other employee benefits plans. The
Compensation Committee held three meetings during the year ended December 31,
1999. The Board of Directors has not designated a nominating committee. No
director has attended less than 75% of all the meetings of the Board and those
Committees on which he served in 1999.
DIRECTORS' COMPENSATION
The Company pays directors' fees on a quarterly basis at a rate of $12,000
per year, as of July 1999. The Company also reimburses ordinary out-of-pocket
expenses for attending Board and Committee meetings.
Prior to July 16, 1999, the Company provided automatic grants of options to
non-employee directors pursuant to the 1995 Long-Term Incentive Plan. Pursuant
to the Plan, a non-qualified option to purchase 3,750 shares of Common Stock was
granted automatically to each non-employee director on each (i) date of each
meeting of stockholders at which such non-employee was elected or re-elected as
a director or, if in any fiscal year directors are not elected at a meeting of
stockholders, on the last date of such fiscal year and (ii) date such
non-employee was first elected as a director, if not at a meeting of
stockholders. In addition, a non-employee director automatically was granted a
non-qualified option to purchase 3,750 shares of Common Stock on each date on
which such non-employee director was elected or re-elected by the Board of
Directors as Chairman of the Board of Directors or if the Chairman of the Board
was then an employee of the Company, as Vice Chairman of the Board of Directors.
The exercise price of each option was equal to 100% of the fair market value of
the Common Stock on the date of grant. Each option so granted was 100% vested
six months after the date of grant. Options expired on the first to occur of
three years from the date of grant or the first anniversary of the date that the
director ceased to be a director for any reason. Non-employee directors were
not eligible to receive other options pursuant to the 1995 Long-Term Incentive
Plan. The Company terminated the Automatic Grant Sub-Plan for Outside Directors
as of July 16, 1999. The Company amended the Plan in 1999 to permit outside
directors to participate generally in the Plan.
The following table shows the compensation paid to all persons who were
non-employee directors, including their respective affiliates, during the year
ended December 31, 1999:
<TABLE>
<CAPTION>
DIRECTORS FEES AND
OTHER CONSULTING OPTIONS
NAME COMPENSATION PAYMENTS GRANTED
- ------------------------ ------------------- ----------- -------
<S> <C> <C> <C>
$ $
J.F. Russell Hammond (1) 6,000 -- 100,000
Peder Paus (2) . . . . . 6,000 -- 300,000
Nils N. Trulsvik (3) . . 6,000 -- 100,000
</TABLE>
__________
(1) Options were granted on June 16, 1999 3,750 at an exercise price of
$0.31, expire on June 16, 2002 and will be 100% vested on December 16
1999. Options were granted on July 21, 1999 7,500 at an exercise price
of $0.275, expire on July 20, 2004 and will be 100% vested on July
20, 2002. Options granted on August 23, 1999, 25,000 at an exercise
price of $0.36, expire on August 22, 2004 and will be 100% vested on
August 22, 2002. Options granted on August 26, 1999, 63,750 at an
exercise price of $0.36, expire on August 25, 2004 and will be 100%
vested on August 25, 2002.
(2) Options were granted on June 16, 1999 3,750 at an exercise price of
$0.31, expire on June 16, 2002 and will be 100% vested on December
16 1999. Options were granted on July 21, 1999 67,500 at an exercise
price of $0.275, expire on July 20, 2004 and will be 100% vested on
July 20, 2002. Options granted on August 23, 1999, 25,000 at an exercise
price of $0.36, expire on August 22, 2004 and will be 100% vested on
August 22, 2002. Options granted on August 26, 1999 3,750 at an exercise
price of $0.36, expire on August 25, 2004 and will be 100% vested on
August 25, 2002. Options granted on September 23, 1999, 200,000 at an
exercise price of $0.45, expire on September 22, 2004 and will be 100%
vested on September 22, 2002.
(3) Options were granted on June 16, 1999 3,750 at an exercise price of
$0.31, expire on June 16, 2002 and will be 100% vested on December
16 1999. Options were granted on July 21, 1999 71,250 at an exercise
price of $0.275, expire on July 20, 2004 and will be 100% vested on
July 20, 2002. Options granted on August 23, 1999, 25,000 at an exercise
price of $0.36, expire on August 22, 2004 and will be 100% vested on
August 22, 2002.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table shows all compensation paid or accrued by the Company
and its subsidiaries during the years ended December 31, 1999, 1998 and 1997 to
certain executive officers of the Company (the "Named Officers").
<TABLE>
<CAPTION>
ANNUAL LONG-TERM
COMPENSATION COMPENSATION
------------ -------------
SECURITIES
NAME AND YEAR UNDERLYING ALL OTHER
PRINCIPAL POSITION ENDED SALARY ($) OPTIONS/SARS (#) COMPENSATION ($) (6)
- ---------------------- ------------ ------------- ---------------- --------------------
<S> <C> <C> <C> <C>
David Robson (1) 12/99 144,000 1,000,000 ---
12/98 82,500 390,000 ---
Michael R. Binnion (2) 12/99 127,200 750,000 2,458
12/98 87,376 --- 3,681
Nils N. Trulsvik (3) 12/97 140,333 --- 6,653
Rune Falstad (4) . . . 12/98 112,852 25,000 3,786
12/97 82,952 15,000 3,825
12/98 133,338 50,000 3,124
Alfred Kjemperud (5) . 12/97 101,296 5,000 5,014
</TABLE>
(1) Mr. Robson has served as Chief Executive Officer since July 15, 1998 and
provides services to the Company through Vazon Energy Limited.
(2) Mr. Binnion has served as President and Chief Financial Officer since
July 15, 1998.
(3) Mr. Trulsvik served as President and Chief Executive Officer from
February 4, 1997 to July 15, 1998 and as Executive Vice President from
March 9, 1995 to February 4, 1997.Included in 1998 salary is $1,671 paid
as non-employee director's fees subsequent to July 31, 1998. See
"Directors' Compensation"
(4) Mr. Falstad has served as Vice President since June 3, 1997, but has not
been deemed an executive officer of the Company since October 1998.
Included in 1998 salary are payments for consulting services rendered
to the Company subsequent to July 31, 1998 pursuant to a contract with
FinCom AS, of which Mr. Falstad is a partner.
(5) Mr. Kjemperud resigned as Vice President on September 3, 1998. Included
in 1998 salary are payments for consulting services rendered to the
Company subsequent to September 3, 1998 pursuant to a contract with The
Bridge Group.
(6) Represents the Company's contributions to or accruals with respect to
individual retirement and pension plans.
OPTION GRANTS DURING THE YEAR ENDED DECEMBER 31, 1999
The following table sets forth information concerning options granted to
the Named Officers during the year ended December 31, 1999.
<TABLE>
<CAPTION>
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO GRANT DATE
OPTIONS EMPLOYEES EXERCISE EXPIRATION PRESENT VALUE (2)
NAME GRANTED (1) IN FY 12/99 PRICE DATE --------------------------
PER SHARE TOTAL
- ------------------ ----------- ------------ ----------- ---------- --------------------------
<S> <C> <C> <C> <C> <C> <C>
David Robson . . . 30,000 1.17% $ 0.275 7/20/04 $ 0.17 $ 5,100
David Robson . . . 400,000 15.54% $ 0.36 8/22/04 0.22 88,000
David Robson . . . 570,000 22.15% $ 0.36 8/25/04 0.22 125,400
Michael R. Binnion 18,000 0.70% $ 0.275 7/20/04 0.17 3,060
Michael R. Binnion 350,000 13.60% $ 0.36 8/22/04 0.22 77,000
Michael R. Binnion 382,000 14.84% $ 0.36 8/25/04 0.22 84,040
</TABLE>
________
(1) The options granted to both Mr. Robson and Mr. Binnion vest in three
equal installments commencing on the first anniversary of the grant
date and were granted at an exercise price equal to the fair market
value of the Company's Common Stock on the date of grant. Pursuant to
the terms of the Company's various stock option plans, the Compensation
Committee may, subject to each plan's limits, modify the terms of
outstanding options, including the exercise price and vesting schedule
thereof.
(2) These values were derived using the Black-Scholes option pricing model
applying the following assumptions:
<TABLE>
<CAPTION>
RISK-FREE
INTEREST
EXERCISE PRICE DIVIDEND YIELD VOLATILITY RATE EXPECTED TERM
- --------------- --------------- ----------- ----- -------------
<S> <C> <C> <C> <C>
0.275. . . . . 0% 79.98% 5.63% 4 years
0.36 . . . . . 0% 79.98% 5.94% 4 years
0.36 . . . . . 0% 79.98% 5.82% 4 years
</TABLE>
These values are not intended to forecast future appreciation of the
Company's stock price. The actual value, if any, that an executive
officer may realize from his options (assuming that they are exercised)
will depend solely on the increase in the market price of the shares
acquired through option exercises over the exercise price, measured when
the shares are sold.
OPTION VALUES AT DECEMBER 31, 1999
The following table sets forth information concerning the number and
hypothetical value of stock options held by the Named Officers at December 31,
1999. There were no option exercises in 1999 by the Named Officers.
<TABLE>
<CAPTION>
NUMBER OF SHARES
UNDERLYING UNEXERCISED
OPTIONS HELD AT FISCAL VALUE OF UNEXERCISED IN-THE-MONEY
YEAR END OPTIONS AT FISCAL YEAR END
-------------------------------------------------------------
EXERCISABLE UNEXERCISABLE
NAME EXERCISABLE UNEXERCISABLE ($) ($)
- ------------------ ----------- ------------- ---------------- ---------------
<S> <C> <C> <C> <C>
David Robson 265,000 1,305,000 0 278,890
Michael R. Binnion 105,000 785,000 0 268,090
</TABLE>
COMPENSATION COMMITTEE REPORT
General
- -------
The Compensation Committee of the Board of Directors of the Company is
composed of non-employee directors. The Compensation Committee, as part of its
review and consideration of executive compensation, takes into account, among
other things, the following goals:
- - Provision of incentives and rewards that will attract and retain highly
qualified and productive people;
- - Motivation of employees to high levels of performance;
- - Differentiation of individual pay based on performance;
- - Ensuring external competitiveness and internal equity; and
- - Alignment of Company, employee and shareholder interests.
The principal components of executive compensation are base pay,
discretionary bonus, and long-term incentives in the form of stock options. Each
element has a somewhat different purpose and all of the determinations of the
Compensation Committee regarding the appropriate form and level of executive
compensation, including the compensation of the Chief Executive Officer are
based on the Compensation Committee's ongoing assessment and understanding of
the oil and gas business and the Company's relative position in that business.
Management Compensation for 1999
- -----------------------------------
In early 1999, management presented to the Board, and the Board approved, a
strategy to maximize the value of the Company to its shareholders through
controlling costs, prioritizing exploration and development activities, raising
and conserving capital and strategically growing the Company through selective
acquisitions and/or internally generated growth. During 1999, the Compensation
Committee believes that management successfully executed that strategy by
accomplishing the following goals:
- - Improved cash flow - while the Company benefited from improved oil prices,
the Committee determined that management successfully reduced operating
and general and administrative expenses, and capital expenditures;
- - Rationalized the Company's exploration and development portfolio;
- - Raised additional capital for exploration and development activities
through a registered public offering and private placement;
- - Tested and placed on production natural gas from the Company's interest in
the Ninotsminda field in the Republic of Georgia;
- - Executed a gas sales arrangement relating to the natural gas produced from
the Ninotsminda field;
- - Settled outstanding litigation against the Company for significantly
reduced cash and share consideration
Accordingly, the Compensation Committee approved salary increases and
bonuses, and the grant of stock options, for the executive officers and senior
management, as well as for substantially all of the Company's employees. The
accomplishment of any one of the above goals was not, however, given greater
weight than any other in determining salary, bonus or stock option amounts. In
determining salary increases and bonuses, in general, management recommended to
the Compensation Committee that it approve increases based on their subjective
determinations regarding individual performance. In determining the level of
stock options to be granted to executive officers, in general, the Compensation
Committee approved the grants recommended by management, subject to adjustment
by the Committee based on the Committee's subjective judgment as to individual
performance. The Compensation Committee continues to believe that an emphasis on
equity compensation is in the best interests of shareholders because it more
closely aligns management and shareholder interests and maximizes the
availability of cash for significant capital expenditures.
Chief Executive Officer's 1999 Compensation
- -----------------------------------------------
The Compensation Committee determines the compensation of David Robson, the
Company's Chairman and Chief Executive Officer, and is responsible for making
all decisions with regard to his compensation. In 1999, the Committee approved
the grant of 1,000,000 stock options at an exercise price equal to the fair
market value of the Company's Common Stock on the date of grant. These options
were granted to Mr. Robson in accordance with the goals of the long-term
incentive plan and the Committee's assessment of Mr. Robson's performance to
date with respect to the performance goals set out above. Between the goals of
the long-term incentive plan and performance goals, the goals of the long-term
incentive plan including the motivation of employees to high levels of
performance and alignment of Company, employee and shareholder interests, was
given the greater weight.
Compensation Committee Members
- --------------------------------
This report is submitted by the members of the Compensation Committee :
Peder Paus (Chairman), Nils Trulsvik, J.F. Russell Hammond.
Peder Paus, Chairman
Nils Trulsvik
J. F. Russell Hammond
Compensation Committee Interlocks and Insider Participation
- ----------------------------------------------------------------
During 1999, CanArgo's Compensation Committee consisted of Messrs. Hammond,
Trulsvik and Paus, all of whom are non-employee directors. Messrs. Hammond and
Paus are also directors of Terrenex Acquisition Corporation. Mr. Binnion,
President and Chief Financial Officer of CanArgo, is also the President, Chief
Financial Officer and a director of Terrenex Acquisition Corporation.
PERFORMANCE MEASUREMENT COMPARISON
The chart set forth below shows the value of an investment of $100 on
December 31, 1995 in each of CanArgo's Common Stock, the NASDAQ Composite Index
and a peer group of certain oil and gas exploration and development companies.
All values assume reinvestment of the pre-tax value of dividends paid by
companies included in these indices and are calculated as of December 31 of each
year. The historical stock price performance of the Common Stock shown in the
performance graph below is not necessarily indicative of future stock price
performance.
GRAPHIC
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
DECEMBER 31 CANARGO ENERGY NASDAQ COMPOSITE CUSTOM COMPOSITE
CORPORATION INDEX INDEX
- --------------- -------------- ---------------- ----------------
<S> <C> <C> <C>
1995 100 100 100
1996 176 123 143
1997 23 149 161
1998 4 208 100
1999 9 387 108
</TABLE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of May 2, 2000 with respect
to aggregate beneficial ownership of Common Stock outstanding including Common
Stock underlying presently exercisable options, by each person known by the
Company to be the beneficial owner of more than 5% of the aggregate of such
shares, by each Director and Named Officer of the Company and by all Directors
and executive officers of the Company as a group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT
NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS
- --------------------------------- ------------------------- -------
<S> <C> <C> <C>
Terrenex Acquisition Corporation
1580, 727 - 7th Avenue SW
Calgary, AB, Canada T2P 0Z5. . 3,712,546 9.02%
Michael R. Binnion. . . . . . . . 4,210,180 (1) 10.23%
Peder Paus. . . . . . . . . . . . 4,333,475 (2) 10.53%
David Robson. . . . . . . . . . . 385,000 (3) 1.02%
Nils N. Trulsvik. . . . . . . . . 73,450 (4) *
J.F. Russell Hammond. . . . . . . 3,765,046 (5) 9.15%
All executive officers and
Directors as a group (7 persons). 5,399,752 (6) 13.12%
</TABLE>
* Less than 1%.
________
(1) Includes 105,000 shares underlying presently exercisable options
beneficially owned by Mr. Binnion. Also includes 3,712,546 shares
beneficially owned by Terrenex Acquisition Corporation of which Mr.
Binnion is President, a director and an approximately 7.51%
shareholder. Mr. Binnion disclaims beneficial ownership of all shares
beneficially owned by Terrenex.
(2) Includes 7,500 shares underlying presently exercisable options
beneficially owned by Mr. Paus. Also includes 3,712,546 shares
beneficially owned by Terrenex Acquisition Corporation of which Mr.
Paus is a director and an approximately 12.23% shareholder. Mr. Paus
disclaims beneficial ownership of all shares beneficially owned by
Terrenex
(3) Includes 265,000 shares underlying presently exercisable options
(4) Includes 3,750 share underlying presently exercisable options.
(5) Includes 52,500 share underlying presently exercisable options.
Includes 3,712,546 shares owned by Terrenex Acquisition Corporation of
which Mr. Hammond is Chairman. Mr. Hammond does not own any shares of
Terrenex Acquisition Corporation and disclaims beneficial ownership
of the shares held by Terrenex.
(6) See Notes 1-5; also includes 47,277 shares underlying presently
exercisable options held by executive officers not named in the
foregoing table.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Nicholas G. Dobrotwir served as Vice President of the Company from
September 1997 until January 26, 1998. He continues to provide consulting
services to the Company. Pursuant to a Memorandum of Agreement dated May 16,
1995 between Fielden Management Services Pty, Ltd. ("Fielden") and the Company,
under which the Company acquired its interest in the Stynawske field, in the
first quarter of 1997 the Company paid $500,000 and issued 87,500 shares of
Common Stock having a value of $1,060,938 to Fielden in connection with an
agreement to develop and operate the Stynawske field project. Mr. Dobrotwir has
indirect beneficial ownership of the 87,500 shares of Common Stock owned by
Fielden. Under the agreement, Fielden has the contingent right to receive up to
an additional 187,500 shares of the Company's Common Stock subject to the
satisfaction of conditions related to the achievement of specified performance
standards by the Stynawske field project.
The Company is a 50% shareholder of CanArgo Power Corporation, which in
turn owns 85% of a Georgian private power company. The other 50% of CanArgo
Power is owned by Terrenex Acquisition Corporation, an entity that is affiliated
with three of the Company's directors and is itself a principal stockholder of
the Company. Michael R. Binnion is President and a director of both the Company
and Terrenex; J. F. Russell Hammond is a director of the Company and Chairman of
Terrenex; and Peder Paus, a director of the Company, is a 12% stockholder of
Terrenex. During the first half of 1998, Terrenex, on behalf of both itself and
the Company, provided all of the funds required by CanArgo Power. After the
July 1998 business combination between the Company and CanArgo Oil & Gas Inc.
was completed, the Company reimbursed Terrenex $398,000, representing half of
the amount that had been advanced through that time. The Company and Terrenex
have funded CanArgo Power equally since that time.
In May 1998, Terrenex agreed to lend CanArgo Oil & Gas Inc. up to
$1,000,000 through August 31, 1998 and subsequently advanced the $1,000,000.
CanArgo Oil & Gas Inc. paid Terrenex a $10,000 commitment fee, $50,000 in draw
down fees and interest at the rate of % per month. In addition, CanArgo Oil &
Gas Inc. granted Terrenex options exercisable until December 31, 1998 to acquire
12 % of the stock of CanArgo's subsidiary that holds a production sharing
contract for the Nazvrevi and Block XIII areas in the Republic of Georgia and
15% of CanArgo Oil & Gas Inc.'s position in any license received as a result of
a consortium submission in certain offshore drilling and production rights that
CanArgo might acquire in the Russian Republic of Dagestan. Either option could
be exercised by Terrenex paying CanArgo that percentage of all amounts expended
by CanArgo through the exercise date on the relevant project equal to the
percentage of the project being acquired by Terrenex through exercise of the
option. The terms of the loan, including the option terms, were negotiated and
approved by the directors of CanArgo Oil & Gas Inc. who had no affiliation with
Terrenex. CanArgo subsequently extended the options through March 31, 1999 in
consideration of the efforts of Terrenex in attempting to arrange financing for
CanArgo. CanArgo repaid the Terrenex loan following completion of the business
combination in July 1998. In light of the relationship between Terrenex and
CanArgo, Terrenex decided that any investment related to CanArgo that it would
make at this time should be in the entity CanArgo Energy Corporation and not in
specific CanArgo projects, and accordingly, Terrenex permitted the options to
expire unexercised.
On July 14, 1998, CanArgo Oil & Gas Inc. issued to Peder Paus but retained
in escrow 225,000 of its common shares, which were issued to Mr. Paus for
financial services rendered in connection with the business combination that had
been negotiated between CanArgo, then known as Fountain Oil Incorporated, and
CanArgo Oil & Gas Inc. Upon the consummation of the business combination, Mr.
Paus became a director of CanArgo, and the 225,000 common shares of CanArgo Oil
& Gas Inc. were converted into 180,000 CanArgo Oil & Gas Inc. exchangeable
shares, each of which could be exchanged for a share of CanArgo common stock.
The shares were issued to Mr. Paus subject to the condition that the financial
services rendered by Mr. Paus result in completed transactions. Although the
business combination closed, post-combination financing that had been
contemplated did not take place. As a result, Mr. Paus and CanArgo Oil & Gas
Inc. agreed in September 1998 that since the condition had not been satisfied,
the shares were not earned and should be canceled. The 180,000 exchangeable
shares were subsequently canceled.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires CanArgo 's executive officers and directors, and
persons who own more than 10% of the registered class of CanArgo's equity
securities ("Reporting Persons"), to file reports of ownership and changes of
ownership with the Securities and Exchange Commission. Reporting Persons are
required by SEC Regulations to furnish CanArgo with copies of all forms they
file pursuant to Section 16(a). Based solely on its review of copies of such
forms received by it, and written representations from certain Reporting Persons
that no other reports were required for those persons, CanArgo believes that,
during the year ended December 31, 1999, the Reporting Persons complied with all
Section 16(a) filing requirements applicable to them.
RATIFICATION OF SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
At the recommendation of the Audit Committee, the Board of Directors has
selected PricewaterhouseCoopers LLP, independent public accountants, to audit
the financial statements of CanArgo for the year ending December 31, 2000 and to
perform other appropriate services. PricewaterhouseCoopers LLP audited
CanArgo's financial statements for the year ended December 31, 1999.
Representatives of PricewaterhouseCoopers LLP are expected to be present at the
Meeting, with the opportunity to make a statement if they desire to do so, and
are expected to be available to respond to appropriate questions.
Stockholder ratification of the selection of auditors is not required under
the laws of the State of Delaware, under which CanArgo is incorporated, but the
Board has determined to ascertain the position of the stockholders on the
selection. The Board of Directors will reconsider the appointment if it is not
ratified by the stockholders. This proposal requires for approval the
affirmative vote of a majority of the Voting Securities present in person or by
proxy and entitled to vote. Abstentions have the effect of a vote against the
proposal and broker non-votes have no effect on the vote.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF SUCH SELECTION.
INCREASE OF AUTHORIZED SHARE CAPITAL TO 150,000,000 COMMON SHARES
The Board of Directors has adopted a resolution authorizing an amendment to
CanArgo's Certificate of Incorporation (the "Certificate"); to increase
CanArgo's authorized number of shares of Common Stock from 50,000,000 shares to
150,000,000 shares. The proposed amendment is subject to approval by CanArgo's
stockholders. The Common Stock, including the additional shares proposed for
authorization, do not have preemptive or similar rights, which means that
current stockholders do not have a prior right to purchase any new issue of
capital stock of CanArgo in order to maintain their proportionate ownership
thereof. Thus, the issuance of additional shares of Common Stock might dilute,
under certain circumstances, the ownership and voting rights of stockholders.
Each of the additional authorized shares of Common Stock will have the same
rights and privileges as the currently authorized Common Stock.
The proposed amendment will modify the first sentence of paragraph (a) of
Article Four of the Certificate to read as follows:
"(a) The total number of shares of all classes of stock which the
Corporation shall have authority to issue is one hundred and fifty-five million
(155,000,000), in two (2) classes consisting of: (1) A class consisting of five
million (5,000,000) shares of Preferred Stock, par value ten cents ($.10) per
share (the "Preferred Stock"); and (2) A class consisting of one hundred fifty
million (150,000,000) shares of Common Stock, par value ten cents ($.10) per
share (the "Common Stock")."
CanArgo is currently authorized to issue 55,000,000 shares of capital
stock, of which 50,000,000 are designated as Common Stock and 5,000,000 shares
are designated as Preferred Stock. The proposed amendment would increase the
total number of shares of authorized capital stock to 155,000,000 shares and the
number of shares of Common Stock authorized to 150,000,000. As of May 12, 2000,
40,664,263 shares of Common Stock were issued and outstanding, 523,659 shares
were reserved for issuance in connection with the exchange of Exchangeable
Shares, 4,988,000 additional shares of Common Stock were reserved for issuance
upon exercise of outstanding stock options , 187,500 shares were reserved for
issuance in connection with contingent rights to acquire Common Stock, and an
additional 700,000 shares were reserved for issuance as consideration for
services rendered or to be rendered to CanArgo. As of May 12, 2000, 100 shares
of Series Voting Preferred Stock were issued and outstanding and the proposed
amendment would not change the authorized number of shares of Preferred Stock.
If the proposed amendment is adopted, it will become effective upon filing of
the proposed amendment with the Delaware Secretary of State.
The Board of Directors believes that it is advisable and in the best
interests of CanArgo to have available additional authorized but unissued shares
of Common Stock in an amount adequate to provide for the future needs of
CanArgo. The increase in authorized Common Stock will not have any immediate
effect on the rights of existing stockholders. However, the additional shares
will be available for issuance from time to time by CanArgo, in the discretion
of the Board of Directors, without further authorization by vote of the
stockholders unless applicable law or regulation otherwise requires such
authorization. These shares may be issued for any proper corporate purpose
including, without limitation: acquiring other businesses in exchange for shares
of Common Stock; entering into joint venture arrangements with other companies
in which Common Stock or the right to acquire Common Stock are part of the
consideration; stock splits or stock dividends; raising capital through the sale
of Common Stock; and attracting and retaining valuable employees and consultants
by the issuance of additional stock, stock options or use of stock-based plans.
Although CanArgo may engage in the foregoing actions in the future, except for
the issuance of additional stock options under CanArgo's Long-Term Incentive
Plan and the possible sale of shares of common stock to raise additional
capital, no such actions involving the issuance of additional shares of Common
Stock are pending as of the date hereof. If the proposed amendment is approved,
the Board of Directors would be able to authorize the issuance of shares of
Common Stock without the necessity, and related costs and delays, of either
calling a special stockholders' meeting or waiting for the next regularly
scheduled meeting of stockholders in order to increase the authorized shares of
Common Stock.
The issuance of the additional shares of Common Stock could have the effect
of diluting earnings per share and book value per share, which could adversely
affect CanArgo's existing stockholders. Issuing additional shares of common
stock may also have the effect of delaying or preventing a change of control of
CanArgo. CanArgo's authorized but unissued Common Stock could be issued in one
or more transactions that would make more difficult or costly, and less likely,
a takeover of CanArgo. The proposed amendment to the Certificate is not being
recommended in response to any specific effort of which CanArgo is aware to
obtain control of CanArgo, and the Board of directors has no present intention
to use the additional shares of Common Stock in order to impede a takeover
attempt.
The affirmative vote of a majority of the outstanding shares of Voting
Securities of CanArgo entitled to vote at the Annual Meeting is required for
approval of this Amendment to the Certificate to increase CanArgo's authorized
shares of Common Stock.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF THIS PROPOSAL.
STOCKHOLDER PROPOSALS
Any stockholder intending to submit to CanArgo a proposal for inclusion in
CanArgo's Proxy Statement and proxy for the 2001 Annual Meeting must submit such
proposal so that it is received by CanArgo no later than January 13, 2001, and
such proposal must otherwise comply with Rule 14a-8 under the Exchange Act.
DISCRETIONARY AUTHORITY
While the Notice of Annual Meeting of Stockholders calls for the
transaction of such other business as may properly come before the Meeting, the
Board of Directors has no knowledge of any matters to be presented for action by
the stockholders other than as set forth above. The enclosed proxy gives
discretionary authority, however, to the persons named in the accompanying proxy
to vote the shares represented thereby on all such additional matters properly
brought before the Annual Meeting in accordance with their best judgment.
By Order of the Board of Directors
MARIA REES
Secretary
May 12, 2000
<PAGE>
CANARGO ENERGY CORPORATION
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
JUNE 14, 2000
The undersigned hereby constitutes and appoints David Robson and
Michael Binnion, and each of them, the attorneys and proxies of the undersigned
with full power of substitution to appear and to vote all of the shares of the
Voting Securities of CanArgo Energy Corporation held of record by the
undersigned on May 2, 2000 at the Annual Meeting of Stockholders to be held on
June 14, 2000, or any adjournment or postponement thereof, as designated below:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
(1) ELECTION OF DIRECTORS: [ ] FOR all nominees [ ] WITHOLD AUTHORITY
listed below (except to vote for all
as indicated to the nominees listed
contrary below) below
Michael R. Binnion, J.F. Russell Hammond, Peder Paus, David Robson, Nils N.
Trulsvik
(INSTRUCTION: To withhold authority to vote for any nominee, line through his
name above.)
</TABLE>
(2) To ratify the selection of PricewaterhouseCoopers LLP as independent
public accountants of CanArgo for the year ending December 31, 2000.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(3) To approve an amendment to the Certificate of Incorporation to increase
the authorized common share capital to 150,000,000.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(4) IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE ON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE ANNUAL MEETING OR ANY
ADJOURNMENT THEREOF.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF CANARGO ENERGY
CORPORATION. IF NO VOTE IS INDICATED, THIS PROXY WILL BE VOTED "FOR" EACH OF
THE PROPOSALS.
YOU ARE URGED TO DATE, SIGN AND RETURN PROMPTLY THIS PROXY IN THE ENVELOPE
PROVIDED. IT IS IMPORTANT FOR YOU TO BE REPRESENTED AT THE ANNUAL MEETING. THE
EXECUTION OF YOUR PROXY WILL NOT AFFECT YOUR RIGHT TO VOTE IN PERSON IF YOU ARE
PRESENT AT THE ANNUAL MEETING.
Dated: ____________________, 2000 ________________________________________
Signature(s)
IMPORTANT: please sign exactly as your name or names appear on this proxy, and
when signing as an attorney, executor, administrator, trustee or guardian, give
your full title as such. If the signatory is a corporation, sign the full
corporate name by duly authorized officer, or if a partnership, sign in
partnership name by authorized person.
