1
Exhibit 10(28)
SHARE EXCHANGE AGREEMENT
This Share Exchange Agreement [the "Agreement"] is entered into and
effective as of November 10, 2000 by and between Argonaut Oil and Gas Limited, a
Cyprus corporation ["Argonaut"], CanArgo Energy Corporation, a Delaware
corporation ["CanArgo"], and the shareholders of Argonaut [the "Argonaut
Shareholders"].
RECITALS
A. Argonaut is the owner of an undivided 28.7% interest in and to Georgian
American Oil Refinery Company Ltd., a corporation formed and operated
under the laws of the Republic of Georgia ["GAOR"]. Pursuant to the
Foundation Agreement and Charter of GAOR, Argonaut is entitled to
receive shares of stock in GAOR as evidence of its ownership interest
in GAOR. However, to date, GAOR has not issued or delivered such shares
to Argonaut. Nor has GAOR issued or delivered shares of its stock to
its other owners. Argonaut's ownership interest in GAOR, and its right
to receive shares of GAOR stock as evidence of such ownership interest,
are referred to collectively below as the "Interest".
B. Argonaut desires to transfer the Interest to CanArgo, and CanArgo
desires to acquire the Interest from Argonaut, solely in exchange for
shares of the common stock of CanArgo [the "CanArgo Common Stock"].
C. The transfer of the Interest from Argonaut to CanArgo is subject to the
other owners of GAOR consenting to such transfer, which shall be
considered a condition subsequent to the execution of this Agreement.
PROVISIONS
In consideration of the foregoing Recitals and the parties' respective
representations, warranties and covenants set forth below, the parties agree as
follows:
1. Exchange. For and in consideration of the issuance and delivery by
CanArgo of one million one hundred and sixty four thousand three hundred and
fifty six (1,164,356) shares [the "CanArgo Shares"] of CanArgo Common Stock,
Argonaut hereby assigns, transfers and conveys to CanArgo, and CanArgo hereby
accepts, the Interest. The transfer of the Interest to CanArgo shall be deemed
to occur as of 12:01 a.m., Eastern Standard time, on the date first written
above. Argonaut hereby nominates and designates the Argonaut Shareholders to
receive the CanArgo Shares on Argonaut's behalf. In this regard, CanArgo shall
issue and deliver the CanArgo Shares directly to the individual Argonaut
Shareholders (in the amounts specified on the signature page of this Agreement)
immediately after the transfer of the Interest to CanArgo.
2
CanArgo hereby nominates CanArgo Petroleum Products Limited as its nominee to
receive the Interest.
2. Representations, Warranties and Disclosure(s). The parties
represent, warrant and disclose the following:
(a) Argonaut represents and warrants to and for the benefit of
CanArgo that, to the best of Argonaut's current knowledge and without further
research or investigation, immediately prior to the transfer of the Interest to
CanArgo (i) Argonaut will not be in default, nor after notice or lapse of time
or both would Argonaut have been in default, under the GAOR Charter or
Foundation Agreement; (ii) Argonaut has not previously transferred to any other
party or encumbered, voluntarily or involuntarily, all or any part of the
Interest; (iii) subject to the matters set forth in this Agreement and
applicable law, Argonaut holds title to the Interest, and will transfer the
Interest to CanArgo, free and clear of any mortgages, liens, charges,
encumbrances or title defects of any nature whatsoever; and (iv) subject to the
matters set forth in this Agreement and applicable law, CanArgo shall receive
good and marketable title to the Interest.
(b) CanArgo represents and warrants to and for the benefit of
Argonaut and the Argonaut shareholders that (i) the CanArgo Shares are fully
paid for, are not assessable and are not subject to any resale or transfer
restrictions or limitations except as provided by applicable law; (ii) the
CanArgo Shares have been issued to Argonaut from authorized but unissued CanArgo
Common Stock and have not been encumbered, voluntarily or involuntarily, by
CanArgo; (iii) subject to the matters set forth in this Agreement and applicable
law, CanArgo will deliver the CanArgo Shares free and clear of any mortgages,
pledges, liens, charges, encumbrances or title defects of any nature whatsoever;
(iv) subject to the matters set forth in this Agreement and applicable law, the
Argonaut Shareholders will receive good and marketable title to CanArgo Shares.
(c) Each party represents and warrants to and for the benefit of the
other party that, subject to the conditions expressed in Recital C above; (i)
the execution and delivery of this Agreement by such party and the consummation
by such party of the transactions contemplated by this Agreement will not
violate any statute or law or any judgement, decree, order, regulation or rule
of any court or governmental authority by which such party is bound or the
charter, bylaws or other instruments under which such party is formed and its
activities are governed; (ii) this Agreement has been duly authorized, executed
and delivered by such party; and (iii) this Agreement constitutes a valid and
binding agreement of such party and is enforceable against such party in
accordance with the terms hereof (subject to applicable bankruptcy laws and
similar laws granting relief to debtors or affecting the rights of creditors,
and the equitable powers of court with proper jurisdiction).
(d) Subject to the representations and other matters set forth in
this Agreement, Argonaut and the Argonaut Shareholders are accepting the CanArgo
Shares, and CanArgo is accepting the Interest, on an AS IS, WHERE IS basis with
all faults and defects.
(e) In connection with the proposed issuance of the CanArgo Shares,
Argonaut and the Argonaut Shareholders hereby acknowledge, represent and warrant
to and covenant and agree with CanArgo that:
2
3
(i) Argonaut's Shareholders are "accredited investors", as defined
in Rule 501 of Regulation D promulgated under the United States Securities Act
of 1933, as amended (the "Securities Act"). The Argonaut Shareholders are
acquiring the CanArgo Shares for their own account and not for the account or
benefit of any other person. The CanArgo shares will be acquired by the Argonaut
Shareholders in good faith for investment and not with a view to the
distribution thereof. The Argonaut Shareholders do not presently intend to sell
or otherwise dispose of all or any part of the CanArgo Shares and do not now
have in mind the sale or other disposition of all or any part of the CanArgo
Shares upon the occurrence or nonoccurrence of any predetermined event.
(ii) The Argonaut Shareholders are willing and able to bear the
economic risk of an investment in the CanArgo Shares, and the Argonaut
Shareholders have adequate means of providing for current needs and reasonably
anticipated contingencies and have no need for liquidity in such investment. In
making these statements, the Argonaut Shareholders have taken into account that
(i) they may have to hold the CanArgo Shares for an indefinite period and (ii)
they could experience a complete loss of their investment in the CanArgo Shares.
By reason of the business and financial experience of the Argonaut Shareholders,
they have such knowledge, sophistication and experience in business and
financial matters to enable them to evaluate the merits and risks of the
investment in the CanArgo Shares.
(iii) Argonaut and the Argonaut Shareholders:
(A) have carefully read and considered CanArgo's Joint Management
Information Circular and Proxy Statement/Prospectus dated 9 June 1998, 10 June
1999, 15 August 2000 and 20 September 2000 (the "Prospectus"), Quarterly Reports
on Form 10-Q for the three month periods ended 31 March 2000 and 30 June 2000,
Current Report on From 8-K dated on or about 20 July 2000, 28 July 2000, 24
August 2000 and 7 September 2000, in each case as filed with the Securities and
Exchange Commission and, where appropriate, as amended to date, and Press
Releases dated 9 May 2000, 11 May 2000, 19 May 2000, 5 June 2000, 6 June 2000,
28 June 2000, 20 July 2000, 24 July 2000, 26 July 2000, 1 August 2000, 14 August
2000, 16 August 2000, 18 August 2000, 31 August, 2000, 11 September 2000, 22
September 2000, 29 September 2000, 11 October 2000, and 19 October 2000
[collectively, the "Disclosure Documents"], receipt of which is hereby
acknowledged by Argonaut and the Argonaut Shareholders; understand and have
evaluated the risks of an investment in the CanArgo Shares; and have relied on
no information supplied by or on behalf of CanArgo other than the information
contained in such Disclosure Documents;
(B) have been given the opportunity to ask questions of CanArgo
and its management concerning CanArgo, the CanArgo Shares, and other matters
pertaining to this investment, in order for Argonaut and the Argonaut
Shareholders to evaluate the merits and risks of an investment in the CanArgo
Shares, and Argonaut and the Argonaut Shareholders have received satisfactory
written responses to all such questions, if any;
(C) confirm that the CanArgo Shares were not offered to Argonaut
or the Argonaut Shareholders by way of any general solicitation or advertising
and at no time was Argonaut or the Argonaut Shareholders presented with or
solicited by means of any leaflet, public promotional meeting, circular, radio
or television advertisement, newspaper or magazine article, or other written
material; and
3
4
(D) acknowledge that neither the Securities and Exchange
Commission nor any state securities commission or regulatory authority has
passed upon or endorsed the merits of the CanArgo Shares.
(iv) Since the offer and sale of the CanArgo Shares have not been
registered under the Securities Act in reliance upon Section 4(2) among other
provisions of the Securities Act and the rules and regulations promulgated under
the Securities Act, the Argonaut Shareholders will only offer or resell the
CanArgo Shares in compliance with the provisions of all applicable securities
laws and regulations. The CanArgo Shareholders will offer or resell the CanArgo
Shares only if the CanArgo Shares are registered under the Securities Act or an
exemption from such registration is available. Unless such registration has been
effected or such an exemption is available, CanArgo shall not permit the
transfer of the CanArgo Shares.
Argonaut and the Argonaut Shareholders understand and agree that
CanArgo may take such reasonable steps as it deems appropriate to ensure
compliance with the offer, resale and other restrictions on transfer contained
in this Agreement or arising under applicable securities laws, including
instituting "stop transfer" instructions with respect to the CanArgo Shares and
endorsing restrictive legends, such as the following, on certificates
representing the CanArgo Shares:
The shares represented by this Certificate have not been registered
under the Securities Act of 1933, as amended (the "Securities Act") and
are "restricted securities" as that term is defined in Rule 144 under
the Securities Act. The Shares may not be offered for sale, sold or
otherwise transferred except pursuant to an effective registration
statement under the Securities Act or pursuant to an exemption from
registration under the Securities Act, the availability of which is to
be established to the satisfaction of the Issuer.
The Argonaut Shareholders further agree that they will not transfer
CanArgo Shares to any person under circumstances in which such CanArgo Shares
remain restricted securities, as defined in Rule 144 issued under the Securities
Act, in the hands of such transferee without first obtaining for the benefit of
CanArgo and transmitting to CanArgo the written undertaking (in form
satisfactory to CanArgo) of such transferee to observe the obligations of the
Argonaut Shareholders pursuant to this subsection (e)(iv) of this Section 2.
(f) In connection with the proposed transfer to it of the Interest,
CanArgo hereby acknowledges, represents and warrants to and covenants and agrees
with Argonaut and the Argonaut Shareholders that:
(i) CanArgo is an "accredited investor", as defined in Rule 501
of Regulation D promulgated under the Securities Act, by reason of CanArgo being
a corporation with total assets in excess of $5,000,000 not formed for the
specific purpose of acquiring the Interest. CanArgo is acquiring the Interest
for CanArgo's own account and not for the account or benefit of any other
person. The Interest will be acquired by CanArgo in good faith for investment
and not with a view to the distribution thereof. CanArgo does not presently
intend to sell or otherwise dispose of all or any part of the Interest upon the
occurrence or nonoccurrence of any predetermined event.
4
5
(ii) CanArgo is willing and able to bear the economic risk of an
investment in the Interest, and CanArgo has adequate means of providing for
current needs and reasonably anticipated contingencies and has no need for
liquidity in such investment. In making these statements, CanArgo has taken into
account that (i) CanArgo may have to hold the Interest for an indefinite period
and (ii) CanArgo could experience a complete loss of CanArgo's investment in the
Interest. By reason of the business and financial experience of CanArgo and its
officers and directors, CanArgo has such knowledge, sophistication and
experience in business and financial matters to enable CanArgo to evaluate the
merits and risks of the investment in the Interest.
(iii) Since the offer and sale of the Interest has not been
registered under the Securities Act in reliance upon Section 4(2) among other
provisions of the Securities Act and the rules and regulations promulgated under
the Securities Act, CanArgo will only offer or resell the Interest in compliance
with the provisions of all applicable securities laws and regulations. CanArgo
will offer or resell the Interest only if the Interest is registered under the
Securities Act or an exemption from such registration is available.
(iv) CanArgo is already an owner of GAOR, and has ready access to
the management and books and records of GAOR, and is familiar with the business
operations and financial condition of GAOR. CanArgo is acquiring the Interest in
exchange for the CanArgo Shares as part of a plan of reorganization.
(v) CanArgo:
(A) understands and has evaluated the risks of an investment in
the Interest; and has relied on no information supplied by or on behalf of
Argonaut other than the information set forth in representations and warranties
by Argonaut in this Agreement;
(B) has been given the opportunity to ask questions of GAOR and
its management concerning GAOR, the Interest, and other matters pertaining to
CanArgo's investment in the Interest, in order for CanArgo to evaluate the
merits and risks of an investment in the Interest, and CanArgo has received
satisfactory written responses to all such questions, if any; and
(C) acknowledges that neither the Securities and Exchange
Commission nor any state securities commission or regulatory authority has
passed upon or endorsed the merits of the Interest.
3. Indemnification. Argonaut shall indemnify, defend, protect and hold
harmless CanArgo from and against any and all claims, suits, causes of action,
liabilities, losses, damages and related costs and expenses (including
litigation costs and attorney fees) to the extent caused by the breach of this
Agreement by Argonaut or the Argonaut Shareholders or the breach of any of their
respective representations or warranties set forth in this Agreement. However,
Argonaut's and the Argonaut Shareholder's aggregate liability with respect to
any claim for indemnification shall never exceed an amount computed as (i) the
fair market value of the CanArgo Shares held by them, on the date a claim is
asserted hereunder, plus (ii) the net proceeds (or the fair market value of the
consideration) received by them, respectively, from the arms-length sale,
exchange or other
5
6
disposition of CanArgo Shares prior to such date, plus (iii) the fair market
value of CanArgo Shares disposed of by them, respectively, prior to such date
other than in arms-length transactions, with such value measured on the date or
dates of such dispositions, less (iv) all amounts previously paid by them,
receptively, as indemnification hereunder.
CanArgo shall indemnify, defend, protect and hold harmless Argonaut and
the Argonaut Shareholders from and against any and all claims, suits, causes of
action, liabilities, losses, damages and related costs and expenses (including
litigation costs and attorney fees) to the extent caused by the breach of this
Agreement by CanArgo or the breach of any of CanArgo's representations or
warranties set forth in this Agreement. However, CanArgo's aggregate liability
with respect to any claim for indemnification shall never exceed US $1,257,505.
4. Board Approval. Upon the request of any party, each corporate party
shall deliver to the others a certified copy of resolutions adopted by its board
of directors approving the terms and conditions of this Agreement and
authorizing one or more of its executive officers to execute and enter into this
Agreement on behalf of such party.
5. Miscellaneous.
5.1 This Agreement shall be governed by the laws of the State of
Delaware applicable to agreements executed, delivered in and wholly performed in
such state without reference to its choice of laws principles.
5.2 Subject to applicable limitation of actions periods (statutes of
limitations), all representations, warranties and covenants contained in this
Agreement shall survive the execution of this Agreement and shall continue in
full force and effect until two (2) years after the date of this Agreement.
5.3 If any provision of this Agreement is for any reason and to any
extent determined to be invalid or unenforceable, such provision shall, if
possible, be deemed modified to the minimum extent necessary to render it valid
and enforceable, and the remainder of this Agreement will remain in full force
and effect.
5.4 This Agreement may be executed in any number of counterparts,
each of which shall be deemed an original and all of which together shall
constitute one and the same instrument.
5.5 Any terms or provisions of this Agreement may be amended, and
the observance of any term of this Agreement may be waived, only by a writing
signed by the party to be bound thereby. The waiver by any party of any breach
or default hereunder shall not be deemed a waiver of any other default or
breach, whether of a similar or dissimilar nature.
5.6 All notices and other communications under this Agreement shall
be in writing and shall be given by delivery in person, by facsimile, by
registered or certified mail (postage prepaid and return receipt requested), or
by courier or overnight delivery service addressed to the party
6
7
to which it is directed at its principal executive offices. Notice shall be
deemed given upon actual receipt.
5.7 Each of the parties shall bear its own expenses incurred in
connection with the negotiation, preparation and consummation of this Agreement.
5.8 This Agreement may not be assigned by any party without the
prior written consent of the other parties, except for assignments by operation
of law. Except as expressly provided otherwise in this Agreement, this Agreement
is not intended to confer any rights or benefits upon any person not a party
hereto. Subject to the foregoing, this Agreement shall be binding on, and shall
inure to the benefit of, the parties hereto and their respective successors and
permitted assigns.
5.9 This Agreement constitutes the entire understanding and
agreement of the parties with respect to the subject matter hereof and
supersedes all prior and contemporaneous agreements and understandings, written
or oral, regarding the Interest and the CanArgo Shares.
5.10 In the event of any litigation between the parties concerning
this Agreement, the prevailing party in such litigation shall be entitled to
recover all of its related and reasonable costs and expenses, including attorney
fees, from the party which does not prevail, regardless of whether or not
recovery of such costs, expenses and/or fees is provided for by statute.
As confirmation of the above, the parties have executed and entered
into this Share Exchange Agreement as of the date first written above.
CanArgo Shares
CanArgo Energy Corporation Argonaut Shareholders to be received
By: /s/Xxxxx Xxxxxx /s/ Xxxxxx X. Xxxxxxxxx 327,184
---------------------------------- --------------------------
Name: Xxxxx Xxxxxx Xxxxxx X. Xxxxxxxxx
--------------------------------
Title: Chief Executive Officer
------------------------------- /s/ Xxxxx X. Xxxxxxxxx 327,184
--------------------------
Xxxxx X. Xxxxxxxxx
Argonaut Oil and Gas Ltd.
/s/ H.MikeFreeny 365,708
By: /s/ Xxxxxx X. Xxxxxxxxx --------------------------
---------------------------------- H. Xxxx Xxxxxx
Name: Xxxxxx X. Xxxxxxxxx
--------------------------------
Title: President
------------------------------- /s/ Xxxx X. Xxxxxx 144,380
--------------------------
Xxxx X. Xxxxxx
The above Share Exchange Agreement is hereby consented to by the
following owners and founders of Georgian American Oil Refinery Company Ltd.
Georgian Oil Georgian-British Oil Service Company
By: /s/Gia Makaradze By: /s/Shaikh Bakhtadze
---------------------------------- -----------------------
Name: Gia Makaradze Name: Shaikh Bakhtadze
-------------------------------- ---------------------
7
8
Title: General Director Title: General Director
------------------------------- --------------------
8
