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EXHIBIT 1(2)
CANARGO ENERGY CORPORATION
21,264,643 Shares of Common Stock
SELLING AGENT AGREEMENT
June 3, 1999
[Note 1]
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
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the earlier of: (i) the date on which subscriptions for all Shares shall have
been received and 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 foreign dealer or institution ineligible
for membership in the NASD, and that you and your employees who solicit
subscriptions are properly licensed to sell securities in each of the
jurisdictions in which you intend to offer the Shares as set forth in paragraph
5 hereof. You agree that you will not solicit purchasers of Shares from persons
who are present in the United States or otherwise within the definition of "U.S.
person" contained in Rule 901 under the Act, and you will not direct any selling
efforts towards identifiable groups of U.S. citizens resident outside of the
United States.
5. You agree that you will not solicit purchasers of the Shares in any
jurisdiction except [Note 2]. You acknowledge and understand that no action has
been or, prior to the completion of the distribution of the Shares, will be
taken by the Company in any jurisdiction outside the United States or Norway
that would permit a public offering of the Shares, or possession or distribution
of the Prospectus, or any amendment or supplement thereto, or any related
preliminary prospectus issued in connection with the Offering, or any other
offering material, in any country or jurisdiction where action for that purpose
is required and you shall be solely responsible for compliance with applicable
laws of any jurisdiction 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
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completed and originally executed subscription agreement. All subscription
agreements and payments for Shares received by you shall be forwarded promptly
to the offices of an escrow agent identified in the subscription agreement, as
follows: (a) if, pursuant to your internal supervisory procedures, internal
supervisory review is conducted at the same location at which subscription
documents are received from subscribers, such documents and payments shall be
transmitted by the end of the business day next following the day of receipt; or
(b) if, pursuant to your internal supervisory procedures, final internal
supervisory review is conducted at a different location, such documents and
payments shall be transmitted to your final review office by the end of the
business day next following the day of receipt and the final review office
shall, by the end of the business day next following the day on which it
receives the documents and payment, transmit the documents and payments to the
offices of an escrow agent. The escrow agents will deposit all subscription
payments in bank accounts in accordance with the terms of their agreements with
the Company.
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.
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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 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; or (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 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 an application, and (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 officers to by any
Shares or (iii) any breach of any representation, warranty, covenant or
agreement of the Selling Agent contained in this Agreement.
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(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 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
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(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 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, Xxxxx 0000, 000 - 0xx Xxxxxx, X.X., Xxxxxxx, Xxxxxxx
X0X OZ5, Canada, at (000) 000-0000, with a copy to Xxxxx X. Xxxxxx, Esq., 000
Xxxxxx Xxxxx, Xxx Xxxxxxx, Xxxxxxxxxx 00000, at (000) 000-0000.
14. This Agreement shall be governed by and construed in accordance with
the laws of the State of Delaware.
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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/ Xxxxxxx Xxxxxxx
---------------------------------
Xxxxxxx Xxxxxxx, President
Confirmed and accepted as of the date first above written:
[Note 3]
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NOTES TO SELLING AGENT AGREEMENT
(1) The Selling Agent Agreement was entered into between CanArgo Energy
Corporation and each of the following:
Credifinance Securities Limited
Suite 3303, 000 Xxxxxxxx Xxxxxx Xxxx
Xxxxxxx, Xxxxxxx X0X 0X0
XXXXXX
Xxxxx Xxxxxxxxxx Associates Limited
00 Xx. Xxxxx'x Xxxxx
Xxxxxx XX0X 0XX
XXXXXX XXXXXXX
Orkla Finans (Fondsmegling) ASA
Tordenskioldsgt. 8/10
X.X. Xxx 0000 Xxxx
X-0000 Xxxx
XXXXXX
(2) Credifinance: Europe and Switzerland
Xxxxx Xxxxxxxxxx: United Kingdom, European Union and Switzerland
Orkla Finans: Norway
(3) The Selling Agent Agreements were executed as follows:
Credifinance Securities Limited
By /s/ Xxxxxx Xxxxxxxxx
----------------------------------
Chairman
Xxxxx Xxxxxxxxxx Associates Limited
By /s/ Xxxxxx Xxxxxx
----------------------------------
Deputy Managing Director
Orkla Finans (Fondsmegling) ASA
By /s/ Jan-Xxxx Xxxxxx
----------------------------------
Director
