Exhibit 10.2
REGISTRATION RIGHTS AGREEMENT
     This REGISTRATION RIGHTS AGREEMENT (“Agreement”), dated as of June 5, 2007,
is made and entered into by and between CanArgo Energy Corporation, a Delaware
corporation (“Company”) and the Purchasers listed on Schedule A attached hereto
(each a “Purchaser” collectively, the “Purchasers”).
RECITALS
     A. Purchasers have acquired and Company has issued warrants to purchase up
to 10 million shares of the Company’s common stock, par value $0.10 per share
(“Common Stock”) expiring on the July 25, 2009 (the “Warrants”) pursuant to the
Conversion Agreement (“Conversion Agreement”) of even date herewith by and among
the Company, the Purchasers and the other parties thereto.
     B. Pursuant to the terms of the Warrants, the Purchasers acquired the
rights to purchase shares of Common Stock upon exercise thereof in accordance
with the terms of the Warrants (an “Exercise”);
     C. Upon the closing of an Exercise, the Company shall authorize and issue
to such Purchasers electing so to exercise its Warrants, respectively, one or
more certificates representing the applicable number of shares of Common Stock
issuable upon such Exercise of the Warrants (“Warrant Shares”);
     D. The Company has agreed to provide the Purchasers with certain rights
with respect to all Warrant Shares issuable upon Exercise to register such
shares under the Securities Act (as hereinafter defined) for resale. All Warrant
Shares issued as of the date of this Agreement or issued or issuable at any time
by the Company to Purchasers upon Exercise of the Warrants, other than shares
which cease to be Restricted Securities (as hereinafter defined), shall be
referred to for the purposes of this Agreement as the “Registrable Securities” ;
and
     E. For the avoidance of doubt, nothing in this Agreement or in the
Conversion Agreement or the Warrants shall obligate the Company to register the
Warrants or any securities of Tethys Petroleum Limited under the Securities Act
or any other foreign or domestic securities laws.
     NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration the receipt and sufficiency of which are hereby
acknowledged and confirmed, the parties, intending to be legally bound, agree as
follows:
ARTICLE 1
REGISTRATION RIGHTS AND PROCEDURES
     Section 1.1 Definitions.
(a) As used in this Agreement, the following terms shall have the meanings:
     (i) “Affiliate” of any specified Person means any other Person who
directly, or indirectly through one or more intermediaries, is in control of, is
controlled by, or is under common control with, such specified Person. For
purposes of this definition, control of a Person means the power, directly or
indirectly, to direct or cause the direction of the management and

 

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policies of such Person whether by contract, securities, ownership or otherwise;
and the terms “controlling” and “controlled” have the respective meanings
correlative to the foregoing.

  (i)   “Commission” means the United States Securities and Exchange Commission.
    (ii)   “Common Stock” has the meaning ascribed thereto in the Recitals.    
(iii)   “Conversion Agreement” has the meaning ascribed thereto in the Recitals.
    (iv)   “Exchange Act” means the Securities Exchange Act of 1934, as amended,
and the rules and regulations of the Commission thereunder, or any similar
successor statute.     (v)   “Exercise” has the meaning ascribed thereto in the
Recitals.     (vi)   “Holder” means a Purchaser so long as the Purchaser holds
Registrable Securities and each subsequent holder of Registrable Securities who
agrees to become bound by all of the terms and provisions of this Agreement in
accordance with Section 4.2 hereof.     (vii)   “Note Purchase Agreement” means
the Note and Warrant Purchase Agreement dated as of July 25, 2005, as amended,
by and among the Company and Persistency.     (viii)   “Person” means any
individual, partnership, corporation, limited liability company, joint stock
company, association, trust, unincorporated organization, or a government or
agency or political subdivision thereof.     (ix)   “Prospectus” means the
prospectus (including, without limitation, any preliminary prospectus and any
final prospectus filed pursuant to Rule 424(b) under the Securities Act,
including any prospectus that discloses information previously omitted from a
prospectus filed as part of an effective registration statement in reliance on
Rule 430A under the Securities Act) included in the Registration Statement, as
amended or supplemented by any prospectus supplement with respect to the terms
of the offering of any portion of the Registrable Securities covered by the
Registration Statement and by all other amendments and supplements to such
prospectus, including all material incorporated by reference in such prospectus
and all documents filed after the date of such prospectus by the Company under
the Exchange Act and incorporated by reference therein.     (x)   “Registrable
Securities” has the meaning ascribed thereto in the Recitals.     (xi)  
“Registration Statement” means a registration statement of the Company filed on
Form S-1 or S-3 or such other appropriate form under the Securities Act
providing for the registration of, and the sale of Registrable Securities,
including without limitation any Registration Statement providing for the
registration of, and sale on a continuous or delayed basis by the holders of,
the Registrable Securities pursuant to Rule 415 under the Securities Act,
including the Prospectus contained therein and forming a part thereof, any
amendments to such

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      registration statement and supplements to such Prospectus, and all
exhibits and other material incorporated by reference in such registration
statement and Prospectus.     (xii)   “Restricted Security” means any share of
Common Stock issued upon Exercise of the Warrants or held by any Person, except
for any such share that (i) has been registered pursuant to an effective
Registration Statement under the Securities Act and sold in a manner
contemplated by the Prospectus included in the Registration Statement, (ii) has
been freely transferred in compliance with the resale provisions of Rule 144
under the Securities Act (or any successor provision thereto) or is freely
transferable, together with all other Restricted Securities in one transaction,
pursuant to paragraph (k) of Rule 144 under the Securities Act (or any successor
provision thereto), or (iii) otherwise has been transferred and a new share of
Common Stock not subject to any transfer restrictions under the Securities Act
has been delivered by or on behalf of the Company.     (xiii)   “Required
Majority” means the Holders of a majority of the number of Registrable
Securities then outstanding.     (xiv)   “Securities Act” means the Securities
Act of 1933, as amended, and the rules and, regulations of the Commission
thereunder, or any similar successor statute.     (xv)   “Warrants” has the
meaning ascribed thereto in the Recitals.     (xvi)   “Warrant Shares” has the
meaning ascribed thereto in the Recitals.

     (b) All capitalized terms used and not defined herein have the respective
meaning assigned to them in the Conversion Agreement.
     Section 1.2 Registration Rights.
          (a). Initial Filing. The Company shall use all commercially reasonable
efforts to file a Registration Statement on Form S-3 with respect to all
Registrable Securities by July 31, 2007 and have such Registration Statement
declared effective pursuant to this Agreement. In the event the Company is not
eligible to file a Registration Statement on Form S-3, the Company shall file a
Registration Statement on Form S-1 no later than December 31, 2007 (provided, if
such registration is made on Form S-1, such Registration Statement need only be
effective for a period of 180 consecutive days). Failure so to file timely any
such Registration Statement shall not result in the application of any liquidity
or other penalty.
          (b). Piggyback Registration Rights. Subject to the terms and
conditions of this Agreement, if the Company intends to file or desires to file
a Registration Statement providing for the offering or resale of (i) Common
Stock or (ii) any Registrable Securities (other than a registration (A) on Form
S-8 or S-4 or any successor or similar forms, (B) relating to Common Stock or
any other shares of capital stock of the Company issuable upon exercise of
employee share options or in connection with any employee benefit or similar
plan of the Company or (C) in connection with a direct or indirect acquisition
by the Company of another Person or any transaction with respect to which
Rule 145 (or any successor provision) under the Securities Act applies), the
Company will notify the Holders of the proposed filing at least 30 days prior to
the filing of the Registration Statement, and will afford each Holder an
opportunity to include in such Registration Statement all or any part of the
Registrable

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Securities then held by such Holder. If any Holder desires to include in any
such Registration Statement all or part of the Registrable Securities held by
such Holder, such Holder shall, within 15 days after receipt of the
above-described notice from the Company, so notify the Company in writing, and
in such notice, if the Holder has not already done so, shall inform the Company
that the Holder has elected to exercise some or all of its Warrants, and of the
number of Registrable Securities such Holder wishes to include in such
Registration Statement.
          (c). Demand Registration Rights.
               (i) Requests for Registration. Subject to Section 1.2(c)(ii), the
Holders may request registration on a Registration Statement under the
Securities Act of all or part of their Registrable Securities, as the case may
be, at any time after December 31, 2007 (a “Demand Registration”). Within ten
days after receipt of any request pursuant to this Section 1.2(c)(i), the
Company shall give written notice of such request to all other Holders and will
include in such registration all Registrable Securities with respect to which
the Company has received written requests for inclusion therein within 21 days
after the Company’s notice has been given.
               (ii) Limits on the Number of Demand Registrations. The Holders
may request only five (5) Demand Registrations and not more than one Demand
Registration in any twelve month period. A registration will not count as a
Demand Registration hereunder (x) (i) until it has become effective and
(ii) unless the Holders of Registrable Securities requested to be included in
such Demand Registration are able to register and sell all of the Registrable
Securities requested to be included in such registration (provided, if such
registration is made on Form S-1, such Registration Statement need only be
effective for a period of 180 consecutive days) or (y) if the Company shall sell
any Common Stock in the registration resulting from such Demand Registration (in
which case the request for a Demand Registration shall be deemed a request for a
Piggyback Registration pursuant to Section 1.2(a)). The Company will pay all
registration expenses in connection with (x) any Demand Registration requested
hereunder and (y) any registration initiated as a Demand Registration requested
hereunder which subsequently becomes other than a Demand Registration.
          (d) Qualification for Form S-3. The Company represents and warrants
that it currently is eligible to use Form S-3 and meets all applicable
requirements for its use. The Company shall use its commercially reasonable
efforts not take any willful and discretionary action that will limit, impair or
otherwise prevent it from being able to use Form S-3 or any successor thereto
once eligibility for such use has been established.
          (e) Effectiveness of Registration Statement. The Company shall use all
commercially reasonable efforts to have any Registration Statement filed
pursuant to this Agreement (other than a Registration Statement on Form S-1 or
any successor form) declared effective by the Commission no later than 120 days
after the filing thereof. All Registration Statements filed pursuant to this
Agreement, other than any Registration Statement on Form S-1 (or any successor
form thereto), shall be maintained in effect by the Company until the earlier of
two years or the date on which all Registrable Securities cease to be Restricted
Securities. The Company shall maintain the effectiveness of any registration
statement on Form S-1 (or any successor form thereto) for a period of 180
consecutive days.
     Section 1.3 Information and Copies.
          (a) The Company shall furnish to each Holder electing to include its
Common Stock in the Registration Statement such number of copies of the
Registration Statement, each amendment and supplement thereto, the Prospectus,
and such other documents as such Holder may reasonably request in order to
facilitate the disposition of the Registrable Securities owned by it.

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          (b) The Company shall promptly notify each Holder whose Registrable
Securities are included in the Registration Statement of the happening of any
event as a result of which the Prospectus contains an untrue statement of a
material fact or omits to state any material fact required to be stated therein
or necessary to make the statements therein not misleading in light of the
circumstances under which it is made and shall use commercially reasonable
efforts to prepare and file with the Commission, and promptly notify such
Holders of the filing of, a supplement to such Prospectus or an amendment to the
Registration Statement so that, as thereafter delivered to the purchasers of
Registrable Securities, such Prospectus will not contain an untrue statement of
a material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading in light of the
circumstances under which they were made and in the case of an amendment to the
Registration Statement, use reasonable best efforts to cause it to become
effective as soon as possible. Each Holder shall promptly notify the Company of
the happening of any event applicable to it, as a result of which the Prospectus
contains an untrue statement of a material fact or omits to state any material
fact stated therein or necessary to make the statements therein in relation to
such Holder not misleading in light of the circumstances under which it is made.
Upon receipt of any notice from the Company, or provision of any notice to the
Company by any Holder, of the happening of any event of the kind described
above, such Holder will forthwith discontinue disposition of Registrable
Securities pursuant to the Registration Statement until such Holder’s receipt of
the copies of the supplemented or amended Prospectus, or until such Holder is
advised in writing by the Company that the use of the Prospectus may be resumed.
          (c) The Company shall make available for inspection by each Holder,
any underwriter participating in any disposition pursuant to the Registration
Statement, and any attorney, accountant, or other agent retained by any Holder
or any underwriter, all financial and other records of the Company (reasonably
requested), the Company’s applicable corporate documents and contracts as shall
be reasonably necessary to enable them to exercise their due diligence
responsibility, and cause the Company’s officers, directors, employees, and
independent accountants to supply all information reasonably requested by any
such Holder, as well as any underwriter, attorney, accountant, or agent in
connection with the Registration Statement; provided, however, that each Holder
agrees that information obtained by such Holder as a result of such inspections
which constitutes confidential information is subject to the confidentiality
provisions of Section 21 of the Note Purchase Agreement and is deemed
confidential shall not be used by such Holder as the basis for any market
transaction in the Company’s securities unless and until such information is
made generally available to the public, and each Holder shall use its best
efforts to cause any attorney, accountant, or agent retained by such Holder to
keep confidential any such information.
          (d) In the event of the issuance of any stop order suspending the
effectiveness of the Registration Statement, or of any order suspending or
preventing the use of any related Prospectus or suspending the qualification of
any Common Stock included in the Registration Statement for sale in any
jurisdiction, the Company will promptly notify Holders of such and will use
reasonable efforts to obtain the withdrawal of such order.
     Section 1.4 Listing of Registrable Securities. The Company shall use its
commercially reasonable efforts to cause all Registrable Securities to be listed
on each securities exchange or other quotation service on which the Common Stock
is then listed.
     Section 1.5 Underwritten Offering. If the registration of which the Company
gives notice is for a registered public offering involving an underwriting, the
Company shall include such information in the notice given pursuant to
Section 1.2. In such event, the right of each Holder to registration pursuant to
Section 1.2 shall be conditioned upon such Holder agreeing to participate in
such underwriting and upon the inclusion of the Registrable Securities in the
underwriting to the extent provided herein. Each Holder

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electing to include its Registrable Securities in such registration shall
(together with the Company and other participating shareholders) enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected by the Company. Notwithstanding any other provision of this Section
1.5, if the underwriter shall, in good faith, advise the Company in writing that
the offering contemplated thereby will be materially adversely affected by the
inclusion of Registrable Securities, then the Company shall so advise such
Holder and the other participating shareholders, and the number of shares of
Registrable Securities and Common Stock (collectively, “Underwritten
Securities”) that may be included in the registration and underwriting shall be
allocated first to the Company, if it is participating in such registration and
underwriting, second, pro rata among such Holders and other parties having
registration rights previously granted by the Company, and, third, pro rata
among the other participating shareholders, if any, in each case in proportion,
as nearly as practicable, to the respective amounts of Underwritten Securities
held by such Holder and participating shareholders at the time of filing the
Registration Statement. The Company may only exercise this right once within any
twelve-month period without the consent of the Required Majority.
     If such Holder disapproves of the terms of any such underwriting, it may
elect to withdraw therefrom by written notice to the Company and the
underwriter. The Registrable Securities so withdrawn shall also be withdrawn
from registration.
     Section 1.6 Market Stand Off Agreement. If the Company intends to make an
underwritten public offering of its securities, the Holders agree to consider
and negotiate in good faith with the Company and its underwriters, any requests
regarding market stand off arrangements. The Holders will consider arrangements
that are in the interests of the Company and an orderly market for the Company’s
securities. This agreement amend and supersedes all prior agreements by the
Holders a party hereto as to market stand off arrangements and all such prior
provisions are cancelled, null and void.
     Section 1.7 Nature of Sale. Notwithstanding any other provision of this
Agreement, Common Stock shall only be treated as Registrable Securities if and
so long as it remains a Restricted Security.
     Section 1.8 Reports under the Exchange Act. With a view to making available
to the Holders the benefits of Rule 144 promulgated under the Securities Act, or
any other similar rule or regulation of the Commission that may at any time
permit the Holders to sell securities of the Company to the public without
registration (“Rule 144”), the Company agrees to use its commercially reasonable
efforts to:
          (a) make and keep public information available, as those terms are
understood and defined in Rule 144;
          (b) file with the Commission in a timely manner all reports and other
documents required of the Company under the Securities Act and Exchange Act;
          (c) furnish to each Holder, so long as such Holder owns Registrable
Securities, promptly upon request, (i) a written statement by the Company that
it has complied with the reporting requirements of the Securities Act and the
Exchange Act, and (ii) a copy of the most recent annual or periodic report of
the Company and such other reports and documents so filed by the Company, unless
such reports and documents are publicly available on EDGAR; and
          (d) such other information as may be reasonably requested to permit
such Holder to sell such securities pursuant to Rule 144 without registration
unless such information is publicly available on EDGAR.

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     Section 1.9 Expenses of Registration. The Company agrees to pay any and all
expenses of preparing and filing all Registration Statements under this
Agreement, and of having such Registration Statements declared effective and of
maintaining the effectiveness thereof. For the avoidance of doubt, the Holders
shall be responsible for payment of their own fees and expenses incurred in
connection with the preparation, filing, review, declaration of effectiveness
and maintenance of effectiveness of any Registration Statement filed pursuant to
this Agreement, including, without limitation, legal and accounting fees and
expenses.
     Section 1.10 Other Securities. Nothing in this Agreement shall prevent the
Company from registering securities other than Common Stock by filing a
Registration Statement with the Commission.
ARTICLE 2
PURCHASER’S RIGHTS AND UNDERTAKINGS
     Section 2.1 Rights. Holders shall have the absolute right to exercise or
refrain from exercising any right or rights they may have by reason of this
Agreement, including, without limitation, the right to consent to the waiver or
modification of any obligation under this Agreement, and Holders shall not incur
any liability to any other holder of any of the Company’s securities as a result
of exercising or refraining from exercising any such right or rights.
     Section 2.2 Suspension of Sales. If any Registrable Securities are included
in a Registration Statement pursuant to the terms of this Agreement, Holders
will not (until further notice) effect sales thereof after receipt of written
notice from the Company of the occurrence of an event specified in such notice
in order to permit the Company to correct or update the Registration Statement
or Prospectus.
     Section 2.3 Compliance. If any Registrable Securities are being registered
in any registration pursuant to this Agreement, Holders will comply with all
anti-stabilization, manipulation, and similar provisions of Section 10 of the
Exchange Act, and any rules promulgated thereunder by the Commission and, at the
Company’s request, will execute and deliver to the Company and to any
underwriter participating in such offering an appropriate agreement to such
effect.
     Section 2.4 Termination of Effectiveness. Following the end of the period
during which the Company is obligated to keep the Registration Statement current
and effective as described herein, to the extent Holders’ Registrable Securities
are included in the Registration Statement, Holders shall discontinue sales
thereof pursuant to such Registration Statement, unless Holders have received
written notice from the Company of its intention to continue the effectiveness
of such Registration Statement with respect to any of such securities which
remain unsold.
     Section 2.5 Furnish Information. It shall be a condition precedent to the
Company’s obligations to take any action pursuant to this Agreement with respect
to the Registrable Securities that Holders shall furnish to the Company such
information regarding Holders, the Registrable Securities held by Holders, and
the intended method of disposition of such securities and such other information
as shall be required to effect the registration of Holders’ Registrable
Securities or as the Company shall otherwise reasonably request. The obligations
of the Company under this Agreement with respect to any Holder shall be
suspended unless and until such Holder complies with this Section 2.5. In
connection with Holders’ obligation to provide information the Company may
request and the Holders agree to complete, execute and deliver to the Company a
Stockholders Questionnaire providing the information required to register their
Registrable Securities under the Securities Act for resale.

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     Section 2.6 Underwritten Registration. Holders may not participate in any
registration hereunder which is underwritten unless Holders: (a) agree to sell
their securities on the basis provided in any customary underwriting
arrangements approved by the Company; (b) complete and execute all customary
questionnaires, powers of attorney, indemnities, underwriting agreements, and
other documents reasonably required under the terms of such underwriting
arrangements; and (c) agree to pay their pro rata share of all underwriting
discounts and commissions and their own expenses (including, without limitation,
counsel fees).
     Section 2.7 Delay of Registration. Holders shall not have any right to
obtain or seek an injunction restraining or otherwise delaying the preparation
of, or declaration of the effectiveness of, any Registration Statement initiated
in accordance with the terms of this Agreement if such injunction is the result
of any controversy that might arise with respect to the interpretation or
implementation of these provisions.
ARTICLE 3
INDEMNIFICATION
     Section 3.1 Indemnification by the Company. The Company shall indemnify and
hold harmless, with respect to any Registration Statement filed by it pursuant
to this Agreement, to the fullest extent permitted by law, each Holder, as well
as each Holder’s agents, representatives and Affiliates (collectively, the
“Holder Indemnified Parties”) against all losses, claims, damages, liabilities,
and expenses joint or several (including reasonable fees of counsel and any
amounts paid in settlement effected with the Company’s consent, which consent
shall not be unreasonably withheld) (collectively, “Losses”) to which any such
Holder Indemnified Party may become subject under the Securities Act, the
Exchange Act, any other federal law, any state or common law, any rule or
regulation promulgated thereunder, or otherwise, insofar as such Losses (or
actions or proceedings, whether commenced or threatened, in respect thereof) are
caused by (a) any untrue statement or alleged untrue statement of a material
fact contained in any Registration Statement in which such Registrable
Securities were included as contemplated hereby or the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, (b) any untrue
statement or alleged untrue statement of a material fact contained in any
Prospectus, together with the documents incorporated by reference therein (as
amended or supplemented if the Company shall have filed with the Commission any
amendment thereof or supplement thereto), or the omission or alleged omission to
state therein a material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading, or (c) any violation by the Company of the
Securities Act, the Exchange Act, any other federal law, any state or common
law, or any rule or regulation promulgated thereunder in connection with any
such registration; provided, however, that the Company shall not be liable to
any such Holder Indemnified Party in any such case to the extent that any such
Loss (or action or proceeding, whether commenced or threatened, in respect
thereof) arises out of or is based upon any untrue statement or alleged untrue
statement or omission or alleged omission made in such Registration Statement or
amendment thereof or supplement thereto or in any such Prospectus in reliance
upon and in conformity with written information furnished to the Company by or
on behalf of any such Holder Indemnified Party relating to such Holder
Indemnified Party for use in the preparation thereof; and provided further, that
the Company shall not be liable to any such Holder Indemnified Party with
respect to any Prospectus to the extent that any such Loss of such Holder
Indemnified Party results from the fact that such Holder Indemnified Party sold
Registrable Securities to a person to whom there was not sent or given, at or
before the written confirmation of such sale, a copy of the Prospectus
(excluding documents incorporated by reference) or of the Prospectus as then
amended or supplemented (excluding documents incorporated by reference) if the
Company previously furnished copies thereof to such Holder

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Indemnified Party in compliance with this Agreement and the Loss of such Holder
Indemnified Party results from an untrue statement or omission of a material
fact contained in such Prospectus which was subsequently corrected in the
Prospectus (or the Prospectus as amended or supplemented) or such Holder
Indemnified Party otherwise breached the provisions of this Agreement in a
manner which resulted in the Loss of such Holder Indemnified Party. Such
indemnity and reimbursement of expenses and obligations shall remain in full
force and effect regardless of any investigation made by or on behalf of the
Holder Indemnified Parties and shall survive the transfer of such securities by
such Holder Indemnified Parties.
     Section 3.2 Indemnification by Holders. Each Holder shall indemnify and
hold harmless, to the fullest extent permitted by law, the Company, its
directors, officers, employees, and agents, and each person who controls the
Company (within the meaning of the Securities Act) (collectively, “Company
Indemnified Parties”) against all Losses to which any Company Indemnified Party
may become subject under the Securities Act, the Exchange Act, any other federal
law, any state or common law, any rule or regulation promulgated thereunder, or
otherwise, insofar as such Losses (or actions or proceedings, whether commenced
or threatened, in respect thereof) are caused by (a) any untrue statement or
alleged untrue statement of a material fact contained in any Registration
Statement in which such Registrable Securities were included as contemplated
hereby or the omission or alleged omission to state therein a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, (b) any untrue statement or alleged untrue statement of a material
fact contained in any Prospectus, together with the documents expressly
incorporated by reference therein (as amended or supplemented if the Company
shall have filed with the Commission any amendment thereof or supplement
thereto), or the omission or alleged omission to state therein a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, and in the cases described in clauses (a) and (b) of this
Section 3.2, to the extent, but only to the extent, that such untrue statement
or omission is contained in any information furnished in writing by or on behalf
of such Holder relating to such Holder for use in the preparation of the
documents described in clauses (a) and (b), (c) any violation by such Holder of
the Securities Act, the Exchange Act, any other federal law, any state or common
law, or any rule or regulation promulgated thereunder applicable to such Holder
and relating to action of or inaction by such Holder in connection with any such
registration, and (d) with respect to any Prospectus, the fact that such Holder
sold Registrable Securities to a person to whom there was not sent or given, at
or before the written confirmation of such sale, a copy of any subsequent
Prospectus (excluding the documents incorporated by reference) or of the
Prospectus as then amended or supplemented (excluding documents incorporated by
reference) if the Company has previously furnished copies thereof to such Holder
in compliance with this Agreement and the Loss of such Company Indemnified Party
results from an untrue statement or omission of a material fact relating to
information provided by such Holder contained in such Prospectus which was
corrected in the Prospectus (or the Prospectus as amended or supplemented). Such
indemnity and reimbursement of expenses and obligations shall remain in full
force and effect regardless of any investigation made by or on behalf of the
Company Indemnified Parties and shall survive the transfer of securities by such
Holder Indemnified Parties.
     Section 3.3 Conduct of Indemnification Proceedings. Promptly after receipt
by an identified party hereunder of written notice of the commencement of any
action, suit, proceeding, investigation, or threat thereof with respect to which
a claim for indemnification may be made pursuant hereto, such indemnified party
shall, if a claim in respect thereto is to be made against an indemnifying
party, give written notice to the indemnifying party of the threat or
commencement thereof; provided, however, that the failure to so notify the
indemnifying party shall not relieve it from any liability which it may have to
any indemnified party except to the extent that the indemnifying party is
actually prejudiced by such failure to give notice. If any such claim or action
referred to hereunder is brought against any indemnified party and it then
notifies the indemnifying party of the threat or commencement thereof, the
indemnifying party shall be entitled to participate therein and, to the extent
that it wishes, jointly with any

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other indemnifying party similarly notified, to assume the defense thereof with
counsel reasonably satisfactory to such indemnified party (which counsel shall
not, except with the consent of the indemnified party, be counsel to the
indemnifying party). The indemnifying party shall not be liable to an
indemnified party hereunder for any legal expenses of counsel or any other
expenses incurred by such indemnified party in connection with the defense
thereof, unless the indemnifying party has failed to assume the defense of such
claim or action or to employ counsel reasonably satisfactory to such indemnified
party. Notwithstanding the foregoing, the indemnified party shall have the right
to retain its own counsel, with the fees and expenses to be paid by the
indemnified party, if representation of such indemnified party by the counsel
retained by the indemnifying party would be inappropriate due to actual or
potential differing interests between such indemnified party and any other party
represented by such counsel in such action. The indemnifying party shall not be
required to indemnify the indemnified party with respect to any amounts paid in
settlement of any action, proceeding, or investigation entered into without the
written consent of the indemnifying party, which consent shall not be
unreasonably withheld, conditioned or delayed. No indemnifying party shall
consent to the entry of any judgment or enter into any settlement without the
consent of the indemnified party unless (a) such judgment or settlement does not
impose any obligation or liability upon the indemnified party other than the
execution, delivery, or approval thereof, and (b) such judgment or settlement
includes as an unconditional term thereof the giving by the claimant or
plaintiff to such indemnified party of a full release and discharge from all
liability in respect of such claim and a full release of all persons that may be
entitled to or obligated to provide indemnification or contribution under this
Article.
     Section 3.4 Contribution. If the indemnification provided for herein is
unavailable to or insufficient to hold harmless an indemnified party hereunder,
then each indemnifying party shall contribute to the amount paid or payable by
such indemnified party as a result of the Losses (or actions or proceedings in
respect thereof) referred to herein in such proportion as is appropriate to
reflect the relative fault of the indemnifying party on the one hand and the
indemnified party on the other in connection with the statements, omissions,
actions, or inactions which resulted in such Losses. The relative fault of the
indemnifying party and the indemnified party shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to information supplied by the indemnifying party or the indemnified
party, any action or inaction by any such party, and the parties’ relative
intent, knowledge, access to information, and opportunity to correct or prevent
such statement, omission, action, or inaction. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. Promptly after receipt by an indemnified party
hereunder of written notice of the commencement of any action, suit, proceeding,
investigation, or threat thereof with respect to which a claim for contribution
may be made against an indemnifying party hereunder, such indemnified party
shall, if a claim for contribution in respect thereto is to be made against an
indemnifying party, give written notice to the indemnifying party of the
commencement thereof (if the notice specified herein has not been given with
respect to such action); provided, however, that the failure to so notify the
indemnifying party shall not relieve it from any obligation to provide
contribution which it may have to any indemnified party hereunder, except to the
extent that the indemnifying party is actually prejudiced by the failure to give
notice. The parties hereto agree that it would not be just and equitable if
contribution pursuant hereto were determined by pro rata allocation or by any
other method of allocation which does not take account of equitable
considerations referred to herein.
     If indemnification is available hereunder, the indemnifying parties shall
indemnify each indemnified party to the fullest extent provided herein, without
regard to the relative fault of said indemnifying party or indemnified party or
any other equitable consideration provided for herein. The provisions hereof
shall be in addition to any other rights to indemnification or contribution
which any indemnified party may have pursuant to law or contract shall remain in
full force and effect regardless of

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any investigation made by or on behalf of any indemnified party, and shall
survive the transfer of securities by any such party.
ARTICLE 4
MISCELLANEOUS
     Section 4.1 Termination. The obligations under Article 1 shall terminate on
the earlier of the date on which all Registrable Securities have been sold
pursuant to a Registration Statement or all Warrant Shares are no longer
Restricted Securities. Holders whose shares of Common Stock are sold pursuant to
a Registration Statement shall reasonably inform the Company of sales of such
shares and shall provide all such other information as the Company may
reasonably request in order to comply with the requirements of the Securities
Act and the rules and regulations promulgated thereunder, including, without
limitation, Regulation S-K.
     Section 4.2 Assignment; Successors and Assigns. Holders may assign their
rights hereunder with respect to any permitted assignee all or any portion of
the Registrable Securities provided that (a) the Company is furnished with
written notice of the name and address of the assignee and the securities with
respect to which such rights are being assigned and all such other information
as may be reasonably requested by the Company in order for the Company to be
able to comply with applicable requirements of the Securities Act and the
Exchange Act and the rules and regulations promulgated thereunder, and (b) the
Company shall have the right to require any holder of Registrable Securities to
execute a counterpart of this Agreement as a condition to such holder’s right to
claim any rights hereunder. This Agreement and all provisions thereof shall be
binding upon, inure to the benefit of, and are enforceable by the parties hereto
and their respective successors and permitted assigns.
     Section 4.3 Notices. All notices, requests, and other communications
hereunder shall be in writing and will be deemed to have been duly given and
received (a) when personally delivered, (b) when sent by facsimile upon
confirmation of receipt, (c) four business days after the day on which the same
has been delivered prepaid to a nationally recognized courier service, or
(d) ten business days after the deposit in the United States mail, registered or
certified, return receipt requested, postage prepaid, in each case addressed as
follows:
          (a) if to the Company: then at CanArgo Energy Corporation, P.O. Box
291, St. Peter Port, Guernsey, Channel Islands, Attn: Corporate Secretary,
facsimile number: +44 1481 729982 (with a copy to McGrigors, Pacific House, 70
Wellington Street, Glasgow G2 6SB, UK, Attn: Rosalie Mackay, Esq., facsimile
number +44 141 204 1351); or
          (b) if addressed to a Holder, then at the address set forth on
Schedule A attached hereto opposite such Holder’s name.
     Holders or the Company may agree to accept notices and other communications
to it hereunder by electronic communications pursuant to procedures reasonably
approved by it; provided that approval of such procedures may be limited to
particular notices or communications. Any party hereto from time to time may
change its address, facsimile number, or other information for the purpose of
notices to that party by giving notice specifying such change to the other
parties hereto.
     Section 4.4 Public Announcements. Except as otherwise required by law,
Holders shall not issue any press release or make any other public announcement
with respect to the transactions contemplated hereby without the approval of the
Company, which approval shall not be unreasonably withheld or delayed.

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     Section 4.5 Governing Law; Jurisdiction. This Agreement shall be construed
and enforced in accordance with, and the rights of the parties shall be governed
by, the law of the State of New York excluding choice of law principles of the
law of such State that would require the application of the laws of a
jurisdiction other than such State. For the purposes of any action or proceeding
involving this Agreement or any other agreement or document referred to herein
or therein, the Company hereby, and shall cause its subsidiaries to, expressly
submits to the nonexclusive jurisdiction of all federal and state courts sitting
in the Borough of Manhattan, City and State of New York and consents that any
order, process, notice of motion or other application to or by any of said
courts or a judge thereof may be served within or without such court’s
jurisdiction by registered mail or by personal service, provided that a
reasonable time for appearance is allowed. The Company hereby, and shall cause
its subsidiaries to, irrevocably waives any objection that it may now or
hereafter have to the laying of venue of any suit, action or proceeding arising
out of or relating to this Agreement or any other agreement or document referred
to herein or therein brought in any federal or state court sitting in the City
and State of New York, and hereby further irrevocably waives any claim that any
such suit, action or proceeding brought in any such court has been brought in an
inconvenient forum.
     Section 4.6 No Third Party Beneficiary. This Agreement shall not confer any
rights or remedies upon any person other than the parties hereto and their
respective successors and permitted assigns.
     Section 4.7 Severability. In the event that any provision of this Agreement
or the application of any provision hereof is declared to be illegal, invalid,
or otherwise unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall (to the full extent permitted by law)
not invalidate or render unenforceable such provision in any other jurisdiction.
     Section 4.8 Headings. The headings in this Agreement are for convenience of
reference only and shall not constitute a part of this Agreement, nor shall they
affect its meaning, construction, or effect.
     Section 4.9 Counterpart, Facsimile Execution and Delivery. This Agreement
may be executed in any number of counterparts, each of which shall be an
original but all of which together shall constitute one instrument. Each
counterpart may consist of a number of copies hereof, each signed by less than
all, but together signed by all, of the parties hereto. Delivery of an executed
counterpart of a signature page to this Agreement by telecopy shall be equally
effective as the delivery of a manually executed counterpart of this Agreement.
     Section 4.10 Entire Agreement. This Agreement embodies the entire
understanding and agreement between the parties hereto with respect to the
subject matter hereof and supersedes all prior agreements and understandings
relating to the subject matter hereof.
     Section 4.11 Amendment; Waiver. The provisions of this Agreement, including
the provisions of this sentence, may not be amended, modified or supplemented,
and waivers or consents to or departures from the provisions hereof may not be
given, without the written consent of the Company and a Required Majority of
Holders.
     Section 4.12 Further Assurances. Each party shall cooperate and take such
action as may be reasonably requested by another party in order to carry out the
provisions and purposes of this Agreement and the transactions contemplated
hereby.
(Signature pages follow)

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     IN WITNESS WHEREOF, the parties have caused this Agreement to be signed by
the undersigned, thereto duly authorized, as of the date first set forth above.

                      CanArgo Energy Corporation    
 
               
 
  By:                          
 
      Its        
 
         
 
        PURCHASERS:    
 
                INGALLS & SNYDER VALUE PARTNERS L.P.    
 
           
 
  By:        
 
     
 
   
 
  Name:        
 
     
 
   
 
  Title:        
 
     
 
   

         
 
 
 
NIKOLAOS D MONOYIOS    
 
       
 
 
 
THOMAS L GIPSON    
 
       
 
 
 
ARTHUR KOENIG    
 
       
 
 
 
THOMAS L GIPSON IRA    
 
       
 
 
 
EVAN JANOVIC    
 
       
 
 
 
ARTHUR ABLIN    

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FLEDGLING ASSOCIATES, INC
 
  BY: HARTZ TRADING INC., MANAGER
 
  By:        
 
     
 
   
 
           
 
  Name:        
 
     
 
   
 
           
 
  Title:        
 
     
 
   
 
 
 
ADAM JANOVIC    
 
       
 
 
 
NEIL JANOVIC    
 
       
 
 
 
ANTHONY CORSO    
 
       
 
 
 
JOHN GILMER    
 
       
 
 
 
MARTIN SOLOMON    

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SCHEDULE A

      NAME OF PURCHASER   ADDRESS
INGALLS & SNYDER VALUE PARTNERS L.P.
  c/o Thomas Boucher Jr
Ingalls & Snyder LLC
61 Broadway
New York, NY 10006
 
   
NIKOLAOS D MONOYIOS
  c/o Thomas Boucher Jr
Ingalls & Snyder LLC
61 Broadway
New York, NY 10006
 
   
THOMAS L GIPSON
  c/o Thomas Boucher Jr
Ingalls & Snyder LLC
61 Broadway
New York, NY 10006
 
   
ARTHUR KOENIG
  c/o Thomas Boucher Jr
Ingalls & Snyder LLC
61 Broadway
New York, NY 10006
 
   
THOMAS L GIPSON IRA
  c/o Thomas Boucher Jr
Ingalls & Snyder LLC
61 Broadway
New York, NY 10006
 
   
EVAN JANOVIC
  c/o Thomas Boucher Jr
Ingalls & Snyder LLC
61 Broadway
New York, NY 10006
 
   
ARTHUR ABLIN
  c/o Thomas Boucher Jr
Ingalls & Snyder LLC
61 Broadway
New York, NY 10006
 
   
FLEDGLING ASSOCIATES LLC
  c/o Thomas Boucher Jr
Ingalls & Snyder LLC
61 Broadway
New York, NY 10006
 
   
ADAM JANOVIC
  c/o Thomas Boucher Jr
Ingalls & Snyder LLC
61 Broadway
New York, NY 10006

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      NAME OF PURCHASER   ADDRESS
NEIL JANOVIC
  c/o Thomas Boucher Jr
Ingalls & Snyder LLC
61 Broadway
New York, NY 10006
 
   
ANTHONY CORSO
  c/o Thomas Boucher Jr
Ingalls & Snyder LLC
61 Broadway
New York, NY 10006
 
   
JOHN GILMER
  c/o Thomas Boucher Jr
Ingalls & Snyder LLC
61 Broadway
New York, NY 10006
 
   
MARTIN SOLOMON
  c/o Thomas Boucher Jr
Ingalls & Snyder LLC
61 Broadway
New York, NY 10006

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