EXECUTION COPY

 

REGISTRATION RIGHTS AGREEMENT

by and between

CASPIAN SERVICES INC.

and

GREAT CIRCLE ENERGY SERVICES LLC

 

Dated as of September 3, 2008

 

 

 

 

 

 

 

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EXECUTION COPY

 

REGISTRATION RIGHTS AGREEMENT

This Registration Rights Agreement,dated as of September 3, 2008, is entered
into by and between Caspian Services Inc., a Nevada corporation (the “Company”)
and Great Circle Energy Services LLC, a Delaware limited liability company
(“Great Circle”).

RECITALS:

WHEREAS, Great Circle and the Company have entered into the Facility Agreement
(as defined below);

WHEREAS, Great Circle desires to have certain rights to register Registrable
Shares (as defined below) which it may hereafter acquire or into which the Loan
(as defined below) may be converted pursuant to the Facility Agreement, and the
Company is willing to grant such rights, subject to the terms and conditions
hereof;

NOW, THEREFORE, in consideration of the promises and the mutual representations,
warranties and covenants and agreements contained herein, the receipt and
sufficiency of which are hereby acknowledged, the Parties (as defined below)
hereby agree as follows:

Section 1.        Definitions. As used in this Agreement, the following terms
shall have the meanings specified or referred to in this Section 1:

“Affiliate” means, as applied to any Person, any other Person directly or
indirectly controlling (including, but not limited to, all directors and
officers of such Person), controlled by, or under direct or indirect common
control with, such Person. A Person shall be deemed to “control” another Person
if such Person possesses, directly or indirectly, the power to direct or cause
the direction of the management and policies of such other Person, whether
through the ownership of voting securities, by contract or otherwise.

“Agreement” means this Registration Rights Agreement, as amended, restated,
modified or supplemented from time to time.

“Business Day” means any day except a Saturday, a Sunday or a day on which banks
located in New York, New York, shall be authorized or required by law to close.

“Capital Stock” means the authorized capital stock of the Company, including all
classes of common, preferred, voting and nonvoting capital stock.

“Commission” means the Securities and Exchange Commission or any other
U.S. Federal agency at the time administering the Securities Act.

“Common Stock” means the shares of the common stock of the Company, par value
$.001 per share.

“Exchange Act” means the United States Securities Exchange Act of 1934, as
amended.

 

 

 

 

 

 

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“Facility Agreement” means that certain Facility Agreement, dated as of
September 3, 2008, by and between Great Circle and the Company.

“Governmental or Regulatory Authority” means any United States or foreign
government, instrumentality, subdivision, court, administration, agency,
commission, official or other authority or entity exercising executive,
legislative, judicial, arbitral, regulatory or administrative functions of, or
pertaining to, government, regulation or compliance, of any country, state,
province, city, prefect, municipality, locality or any other government or
political subdivision thereof and any Person owned or controlled, through stock
or capital ownership or otherwise, by any of the foregoing.

“Holders” means the beneficial owners, from time to time, of Registrable Shares.

“Information” is defined in Section 4(a)(ix).

“Inspectors” is defined in Section 4(a)(ix).

“Loan” has the meaning given to such term in the Facility Agreement.

“Notice and Questionnaire” means a written questionnaire containing such
information as the Company may reasonably request for use in connection with a
registration statement or prospectus and in any application to be filed with or
under state securities laws.

“Parties” means the Company and Great Circle.

“Person” means any individual, sole proprietorship, partnership, joint venture,
trust, unincorporated organization, association, corporation, limited liability
company, limited liability partnership, institution, entity, party, or
Governmental or Regulatory Authority.

“Records” is defined in Section 4(a)(ix).

“Registrable Shares” during the term of this Agreement, with respect to Great
Circle, its assignees and the Affiliates of either, the shares of Capital Stock
held of record by Great Circle, its assignees or the Affiliates of either, which
constitute Restricted Shares including but not limited to:

 

(i)

the Common Stock issuable or issued upon conversion of the Loan;

(ii) any Capital Stock issued as (or issuable upon the conversion or exercise of
any warrant, right or other security that is issued as) a stock dividend, split
or similar event;

(iii)such other distribution with respect to, or in exchange for, or in
replacement of, the shares referenced in (i) above, and

(iv)any shares of Capital Stock acquired directly from the Company in a private
transaction, except for shares of Capital Stock acquired by Great Circle in a
private transaction in which other

 

 

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purchasers, which are not receiving registration rights and which do not
otherwise have the right to freely transfer such shares of Capital Stock to the
public, are also purchasing shares of Capital Stock on the same terms as the
purchase by Great Circle, provided that in any event, shares of Capital Stock
purchased by Great Circle for a purchase price of up to ten million dollars
(US$10,000,000) to finance a potential purchase of KazakhstanCaspiShelf or other
corporate purposes, shall be Registrable Shares even if another purchaser which
does not get the benefit of registration rights is purchasing shares of Capital
Stock at the same time, in connection therewith or in a related transaction;

excluding in all cases, however, any Registrable Shares sold by Great Circle,
its assignees or the Affiliates in a transaction in which its rights to register
such Registrable Shares are not assigned, until the earliest of:

 

(a)

the date on which such Registrable Shares have been effectively registered under
the Securities Act and disposed of in accordance with the registration statement
relating thereto;

 

(b)

the date on which such Registrable Shares may be resold without restriction
pursuant to Rule 144(b)(1) promulgated under the Securities Act, or any
successor provision thereto; and

 

(c)

the date on which such security has been publicly sold pursuant to Rule 144 or
any successor provision thereto.

“Registration Date” means the date on which any registration statement pursuant
to which the Company shall have registered shares of Capital Stock under the
Securities Act, or any equivalent legislation of a non-U.S. jurisdiction, for
sale to the public shall have been declared effective by the Commission or an
equivalent authority in any other jurisdiction.

“Registration Expenses” means all expenses incident to the Company’s performance
of or compliance with this Agreement and the completion of transactions relating
thereto including, without limitation, all registration and filing fees, all
fees and expenses of complying with securities or blue sky laws, all printing
expenses, the fees and disbursements of the Company’s independent public
accountants, including the expenses of any special audits, reviews, compilations
or other reports or information required by or incident to such performance and
compliance, and any fees or expenses of Shareholder’s Counsel and reasonable
fees and expenses in connection with the review of the registration statement
and all other documents referred to in this Agreement.

“Requesting Shareholder”is defined in Section 2(a).

“Restricted Shares” means at any time, with respect to any Person, the shares of
Capital Stock, any other securities which by their terms are exercisable or
exchangeable for or convertible into Capital Stock, and any securities of the
Company received in respect thereof, which are held by such Person or its
Affiliates and which have not previously been sold to the public pursuant to a
registration statement under the Securities Act, or are able to be sold at such
time under Rule 144.

 

 

 

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“Rule 144” means Rule 144 promulgated under the Securities Act or any successor
rule thereto.

“Securities Act” means the United States Securities Act of 1933, as amended.

“Shareholder’s Counsel” means one counsel for the sellers of Registrable Shares
selected by the Holders of a majority of the Registrable Shares being sold at
that time, which counsel shall be reasonably satisfactory to the Company.

Section 2.        Registration on Request. (a) Subject to the terms and
conditions hereof, upon the written request by Holders of a majority of the
Registrable Shares requesting that the Company effect the registration under the
Securities Act of all or part of the Registrable Shares held by such Holders
(the “Requesting Shareholder”), the Company shall use its best efforts to
effect, at the earliest possible date, the registration, under the Securities
Act, of the Registrable Shares which the Company has been so requested to
register by the Requesting Shareholder; provided, that (i) the Company shall
effect no less than two (2) such registrations requested by the Requesting
Shareholder, for which it shall pay all related Registration Expenses, and (ii)
the Company shall effect no less than two (2) additional registrations at the
Requesting Shareholder’s request in writing, if the Requesting Shareholder has
agreed in writing to pay the Registration Expenses for each such registration in
excess of the two (2) registrations referred to in Section 2(a)(i); provided,
that the Requesting Shareholder may request a maximum of two (2) registrations
in any given calendar year. Each registration requested pursuant to this Section
2 shall be (A) effected by the filing of a registration statement on Form S-1,
Form S-3 or Form SB-1 (or any successor or other form which the Company is
qualified to use) as shall be selected by the Company and its counsel, (B) if
the Company is qualified and if requested or agreed to in writing by the
Requesting Shareholder, filed pursuant to Rule 415 under the Securities Act (or
equivalent rule then in effect), and (C) if the Registrable Shares are
registered in any jurisdiction outside the United States or are listed on any
exchange outside the United States, effected as required by the laws and rules
of such jurisdiction or exchange, as the case may be.

(b)       Subject to Sections 2(a)(ii) and 2(c), the Company shall pay all
Registration Expenses in connection with each registration of Registrable Shares
effected by the Company pursuant to this Section 2.

 

 

 

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(c)       If, at any time after requesting registration pursuant to Section 2(a)
and prior to the effective date of the registration statement filed in
connection with such registration request, the Requesting Shareholder determines
for any reason not to register such Registrable Shares, the Requesting
Shareholder shall give written notice of such determination to the Company. Upon
receipt of such notice, the Company shall then be relieved of its obligations to
register the Registrable Shares in connection with such Requesting Shareholder’s
registration request, and the Requesting Shareholder shall pay the Registration
Expenses in connection therewith, unless the Requesting Shareholder states in
writing that such request shall count as one of the two (2) requests permitted
by Section 2(a)(i). Nothing in this Section 2(c) shall preclude the Requesting
Shareholder from making another registration request with respect to the
Registrable Shares referred to in this Section 2(c).

(d)       In connection with any request for registration pursuant to Section
2(a)(i), the Company may, within fifteen (15) days after its receipt of such
request, request to issue and register securities under the Securities Act for
sale for its own account. Thereafter, subject to written approval by the
Requesting Shareholder of such issuance and registration, which approval shall
not be unreasonably withheld, the provisions of Section 3 shall govern, and the
Requesting Shareholder’s registration request under Section 2(a)(i) shall be
deemed not to have been made. The Requesting Shareholder shall again be entitled
to request such registration under Section 2(a)(i), and the Requesting
Shareholder’s rescinded request under this Section 2(d) shall not count for the
purposes of the Requesting Shareholder’s right to request two (2) registrations
by the Company, the Registration Expenses of which shall be borne by the Company
as described in Section 2(a)(i).

(e)       The Requesting Shareholder agrees that, if such Holder wishes to sell
Registrable Shares pursuant to a registration statement and related prospectus,
it will do so only in accordance with this Section 2 and Section 4(xi). The
Requesting Shareholder also agrees to deliver a completed and executed Notice
and Questionnaire to the Company at the time registration is requested pursuant
to thisSection 2.

Section 3.        Incidental Registrations. (a) If, at any time, the Company
proposes to register any of its Capital Stock under the Securities Act, whether
or not for sale for its own account, it shall each such time give prompt written
notice to the Requesting Shareholder of its intention to do so, describing such
securities and specifying the form and manner and the other relevant facts
involved in such proposed registration, and upon the written request of the
Requesting Shareholder delivered to the Company within thirty (30) days after
the giving of any such notice (which request shall specify the Registrable
Shares intended to be disposed of by the Requesting Shareholder and the intended
method of disposition thereof), the Company shall use its best efforts to effect
the registration, bearing all related Registration Expenses, under the
Securities Act of all Registrable Shares which the Company has been so requested
to register by the Requesting Shareholder, to the extent required to permit the
disposition (in accordance with the intended methods thereof as aforesaid) of
the Registrable Shares so to be registered, provided that:

(i)  if the registration so proposed by the Company involves an underwritten
offering of the securities  so  being  registered,  whether   or  not  for  
sale  for  the   account  of  the  Company,  to  be

 

 

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distributed by or through one or more underwriters, who are reasonably
acceptable to the Requesting Shareholder, under underwriting terms appropriate
for such a transaction, and the managing underwriter of such underwritten
offering shall advise the Company in writing that, in its opinion, the
distribution of all or a specified portion of the Registrable Shares which the
Requesting Shareholder has requested the Company to register in accordance with
this Section 3(a) concurrently with the securities being distributed by such
underwriters will materially and adversely affect the distribution of such
securities by such underwriters (such opinion to state the reasons therefor),
then the Company will promptly furnish each holder of Registrable Shares with a
copy of such opinion and may deny, by written notice to each such holder
accompanying such opinion, the registration of all or a specified portion of
such Registrable Shares (in case of a denial as to a portion of such Registrable
Shares, such portion shall be allocated first to holders other than the
Requesting Shareholder); and

(ii) the Company shall not be obligated to effect any registration of
Registrable Shares under this Section 3 incidental to the registration of any of
its securities in connection with dividend reinvestment plans or stock option or
other employee benefit plans.

(b)       The Company shall pay all Registration Expenses in connection with
each registration of Registrable Shares requested pursuant to this Section 3.

Section 4.        Registration Procedures. (a) If and whenever the Company is
under an obligation pursuant to the provisions of this Agreement to use its best
efforts to effect the registration of any Registrable Shares under the
Securities Act, the Company shall, as soon as practicable:

(i)  promptly prepare, file and use its best efforts to cause a registration
statement that registers such Registrable Shares to become effective and remain
so for a period of ninety (90) days or until all of such Registrable Shares have
been disposed of (if earlier);

(ii) furnish, at least ten (10) Business Days before filing a registration
statement that registers such Registrable Shares, a draft of the prospectus
proposed to be included in such registration statement or any amendments or
supplements relating to such a registration statement or prospectus, to
Shareholder’s Counsel, and copies of all such documents proposed to be filed (it
being understood that such ten-Business-Day period need not apply to successive
drafts of the same document proposed to be filed so long as such successive
drafts are supplied to such counsel in advance of the proposed filing by a
period of time that is customary and reasonable under the circumstances);

(iii)prepare and file with the Commission such amendments and supplements to
such registration statement and the prospectus used in connection therewith, as
may be necessary to keep such registration statement effective for a period of
ninety (90) days or until all of such Registrable Shares have been disposed of
(if earlier) and to comply with the provisions of the Securities Act applicable
to it with respect to the sale or other disposition of such Registrable Shares,
including but not limited to Rules 424, 430A and 462, as applicable;

 

 

 

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(iv)notify in writing the Shareholder’s Counsel promptly (A) of the receipt by
the Company of any notification with respect to any comments by the Commission
with respect to such registration statement or prospectus or any amendment or
supplement thereto or any request by the Commission for the amending or
supplementing thereof or for additional information with respect thereto, (B) of
the receipt by the Company of any notification with respect to the issuance by
the Commission of any stop order suspending the effectiveness of such
registration statement or prospectus or any amendment or supplement thereto or
the initiation or threatening of any proceeding for that purpose and (C) of the
receipt by the Company of any notification with respect to the suspension of the
qualification of such Registrable Shares for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purposes;

(v) use its best efforts to register or qualify such Registrable Shares under
such other securities or blue sky laws of such jurisdictions as any seller of
Registrable Shares reasonably requests in writing and do any and all other acts
and things which may be reasonably necessary or advisable to enable the
disposition in such jurisdictions of such Registrable Shares in the manner set
forth in the relevant registration statement and the related prospectus.
Notwithstanding the above, the Company will not be required to register or
qualify generally to do business, subject itself to general taxation or consent
to personal jurisdiction or general service of process in any jurisdiction where
it would not otherwise be required so to do but for this paragraph (v);

(vi)furnish to each seller of such Registrable Shares such reasonable number of
copies of a summary prospectus or other prospectus, including a preliminary
prospectus, in conformity with the requirements of the Securities Act, and such
other documents prepared by the Company in connection with such registration as
the Requesting Shareholder may request in order to facilitate the public sale or
other disposition of such Registrable Shares;

(vii)     use its best efforts to cause such Registrable Shares to be registered
with or approved by such other Governmental or Regulatory Authorities as may be
necessary by virtue of the business and operations of the Company to enable the
seller or sellers thereof to consummate the disposition of such Registrable
Shares;

(viii)    notify the Requesting Shareholder on a timely basis at any time when a
prospectus relating to such Registrable Shares is required to be delivered under
the Securities Act within the appropriate period mentioned in paragraph (i) of
this Section 4(a), of the happening of any event as a result of which the
prospectus included in such registration statement, 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 and, at the request of
such seller, prepare and furnish to such seller a reasonable number of copies of
a supplement to or an amendment of such prospectus as may be necessary so that,
as thereafter delivered to the offerees of such shares, such prospectus shall
not include an untrue statement of a material fact or omit 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;

 

 

 

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(ix)make available for inspection during normal business hours by any one lead
underwriter participating in any such registration and its attorneys,
accountants or other agent retained by it (collectively, the “Inspectors”), all
pertinent financial and other records, pertinent corporate documents and
properties of the Company (collectively, the “Records”), as shall be necessary
to enable it, for itself and on behalf of the underwriters, to exercise its due
diligence responsibility under the Securities Act, and cause the Company’s
officers, directors and employees to supply all information (together with the
Records, the “Information”) requested by any such Inspector in connection with
the preparation and filing of such registration statement. Any of the
Information which the Company determines in good faith to be confidential, and
of which determination the Inspectors are so notified, shall not be disclosed by
the Inspectors unless (A) the disclosure of such Information is necessary to
avoid or correct a misstatement or omission in the registration statement, (B)
the release of such Information is ordered pursuant to a subpoena or other order
from a court of competent jurisdiction or (C) such Information has been made
generally available to the public. The seller of Registrable Shares agrees that
it will, upon learning that disclosure of such Information is sought in a court
of competent jurisdiction, give notice to the Company and allow the Company, at
the Company’s expense, to undertake appropriate action to prevent disclosure of
the Information deemed confidential;

(x)       to the extent necessary to ensure that any registration statement made
pursuant to Rule 415 of the Securities Act is available for sales of Registrable
Shares by the Requesting Shareholder, the Company shall use its best efforts to
keep any such registration statement continuously effective, supplemented,
amended and current as required by the provisions of this Agreement, the
Securities Act and the policies, rules and regulations of the Commission as
announced from time to time, until the expiration for all Registrable Shares of
the holding period prior to a sale permitted under Rule 144, as such period may
be extended pursuant to this Agreement, including Section 4(a)(iii), until the
Registrable Shares included in the registration statement have been sold by the
Requesting Shareholder or for a period of one (1) year from the date the
registration statement is first declared effective by the Commission, whichever
occurs first;

(xi)upon: (A) the occurrence or existence of any pending corporate development
that the Company’s legal or financial advisors advise the Company in writing
makes it appropriate to suspend the availability of any registration statement
and related prospectus (a “Material Event”); (B) the issuance by the SEC of a
stop order suspending the effectiveness of any registration statement or the
initiation of proceedings with respect to any registration statement under
Section 8(d) or 8(e) of the Securities Act; or (C) the occurrence of any event
or the existence of any fact as a result of which any registration statement
shall contain any 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, or any prospectus shall contain any untrue statement of
a material fact or omit to state any material fact necessary in order to make
the statements therein, in the light of the circumstances under which they were
made, not misleading,

 

 

 

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(i) in the case of clause (A) or (C) above, subject to the next sentence, as
promptly as practicable, prepare and file, if necessary pursuant to applicable
law, a post-effective amendment to such registration statement or a supplement
to such prospectus or any document incorporated therein by reference or file any
other required document that would be incorporated by reference into such
registration statement and prospectus so that such registration statement does
not contain any 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, and so that such prospectus does not contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading, as thereafter delivered to the purchasers
of the Registrable Shares being sold thereunder, and, in the case of a
post-effective amendment to a registration statement, subject to the next
sentence, use its best efforts to cause it to become effective under the
Securities Act as promptly as practicable, and

(ii) give notice to the Requesting Shareholder and Shareholder’s Counsel that
the availability of the registration statement is suspended (a “Suspension
Notice”) (and, upon receipt of any Suspension Notice, the Requesting Shareholder
agrees not to sell any Registrable Shares pursuant to such registration
statement until such Requesting Shareholder receives copies of the supplemented
or amended prospectus provided for in clause (i) above or until such Requesting
Shareholder is advised in writing by the Company that the prospectus may be
used).

The Company will use its best efforts to ensure that the use of the prospectus
may be resumed (x) in the case of clause (A) above, as soon as, in the
reasonable discretion of the Company, such suspension is no longer appropriate,
(y) in the case of clause (B) above, as promptly as is practicable, and (z) in
the case of clause (C) above, as soon as, in the reasonable judgment of the
Company, the registration statement does not contain any 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 and the prospectus
does not contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading. The effectiveness
period of the registration statement shall be extended by the number of days
from and including the date on which the Company notifies the Requesting
Shareholder that the registration statement or prospectus has been suspended to
and including the date on which the Requesting Shareholder receives copies of
the supplemented or amended prospectus provided in clause (i) above, or the date
on which it is advised in writing by the Company that the prospectus may be used
and has received copies of any additional or supplemental filings that are
incorporated or deemed incorporated by reference in such prospectus. If a
prospectus is suspended, and is not resumed within four (4) months, then the
related registration shall not count against the number of registration requests
permitted the Holders under any provision of Section 2(a), and if the related
registration was requested pursuant to Section 2(a)(ii), then the Company shall
also reimburse the Requesting Shareholder for its Registration Expenses incurred
to date.

 

 

 

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(xii)        obtain from its independent certified public accountants “cold
comfort” letters in customary form and at customary times and covering matters
of the type customarily covered by cold comfort letters in each case as may be
reasonably requested by the underwriters in similar underwritten offerings;

 

(xiii)

obtain from its counsel an opinion or opinions in customary form;

(xiv)        provide a transfer agent and registrar (which may be the same
entity and which may be the Company) for such Registrable Shares to the extent
not already provided;

(xv)         provide a CUSIP number for all Registrable Shares covered by the
registration statement not later than the effective date of a registration
statement covering such shares;

(xvi)         use its best efforts to list such Registrable Shares on any
securities exchange or automated quotation system on which any shares of Capital
Stock are listed or, if the shares of Capital Stock are not so listed, use its
best efforts to qualify such Registrable Shares for inclusion on the automated
quotation system of the National Association of Securities Dealers, Inc. or such
other securities exchange as the Company shall reasonably determine;

(xvii)       otherwise use its best efforts to comply with all applicable rules
and regulations of the Commission and make available to its security holders, as
soon as reasonably practicable, earnings statements (which need not be audited)
covering a period of twelve (12) months beginning within three (3) months after
the effective date of the registration statement, which earnings statements
shall satisfy the provisions of Section 11(a) of the Securities Act and Rule 158
promulgated thereunder; and

(xviii)      use its best efforts to take all other steps necessary to effect
the registration of such Registrable Shares contemplated hereby.

(b)       If the Company at any time proposes to register any of its securities
under the Securities Act (other than pursuant to a request made under Section
2), whether or not for sale for its own account, and such securities are to be
distributed by or through one or more underwriters, the Company shall use its
reasonable efforts, if requested by the Requesting Shareholder pursuant to
Section 3, to arrange for such underwriters to include such Registrable Shares
among those securities to be distributed by or through such underwriters. If
Registrable Shares are included among the securities to distributed by or
through one or more underwriters, the Requesting Shareholder shall be a party to
any such underwriting agreement and the representations and warranties by, and
the other agreements on the part of, the Company to and for the benefit of such
underwriters, shall also be made to and for the benefit of the Requesting
Shareholder, and the Requesting Shareholder shall make such representations,
warranties and covenants to such underwriters and the Company as may be
reasonably requested and as are customary in such offerings.

 

 

 

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(c)       In the event any registration pursuant to Section 2 shall be for an
underwritten offering, the underwriters of such offering shall be one or more
underwriting firms selected by the Requesting Shareholder and reasonably
acceptable to the Company.

(d)       Whenever a registration pursuant to Section 3 is for an underwritten
offering, the underwriters of such offering shall be one or more underwriting
firms selected by the Company and reasonably acceptable to the Requesting
Shareholder.

Section 5.        Requesting Shareholder’s Obligations. Each Requesting
Shareholder agrees, by acquisition of the Registrable Shares, that no Requesting
Shareholder shall be entitled to sell any of such Registrable Shares pursuant to
a registration statement or to receive a prospectus relating thereto, unless
such Requesting Shareholder has furnished the Company with a Notice and
Questionnaire as required pursuant to Section 2(e) hereof (including the
information required to be included in such Notice and Questionnaire) and the
information set forth in the next sentence. Each Requesting Shareholder agrees
promptly to furnish to the Company all information required to be disclosed in
order to make the information previously furnished to the Company by such
Requesting Shareholder not misleading. Any sale of any Registrable Securities by
any Requesting Shareholder shall constitute a representation and warranty by
such Requesting Shareholder that the information of such Requesting Shareholder
furnished in writing by or on behalf of such Requesting Shareholder to the
Company specifically for inclusion in the prospectus does not include an untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements in such Holder Information, in the light of the
circumstances under which they were made, not misleading.

Section 6.        Indemnification. (a) In connection with any registration of
any Registrable Shares under the Securities Act pursuant to this Agreement, the
Company shall indemnify and hold harmless the Requesting Shareholder and any
Affiliate of the Requesting Shareholder and any other Person acting on behalf of
the Requesting Shareholder and each other Person, if any, who controls any of
the foregoing Persons within the meaning of Rule 405 promulgated under the
Securities Act against any losses, claims, damages or liabilities, joint or
several, (or actions in respect thereof) to which any of the foregoing Persons
may become subject under the Securities Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon an untrue statement or alleged untrue statement of a
material fact contained in the registration statement under which such
Registrable Shares were registered under the Securities Act, any preliminary
prospectus or final prospectus contained therein or otherwise filed with the
Commission, any amendment or supplement thereto or any document incident to
registration or qualification of any Registrable Shares, or arise out of or are
based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading or, with respect to any prospectus, necessary to make the statements
therein in light of the circumstances under which they were made not misleading,
or any violation by the Company of the Securities Act or state securities or
blue sky laws applicable to the Company and relating to action or inaction
required of the Company in connection with such registration or qualification
under such state securities or blue sky laws. The Company shall reimburse the
Requesting Shareholder, any Affiliate of the Requesting Shareholder, such other
Person acting on behalf of the Requesting Shareholder and each such controlling
Person for any legal or other expenses reasonably incurred by any of them in
connection with investigating or defending any such loss, claim, damage,
liability or action;

 

 

 

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provided, however, that the Company shall not be required to provide any
indemnification pursuant to this Section 5(a) in any such case to the extent
that any such loss, claim, damage, liability or action arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission knowingly made by the Requesting Shareholder or any of its Affiliates
in said registration statement, preliminary prospectus, final prospectus,
amendment, supplement or document incident to registration or qualification of
any Registrable Shares in reliance upon and in conformity with written
information furnished to the Company through an instrument executed by or on
behalf of the Requesting Shareholder, its Affiliates, any Person acting on
behalf of the Requesting Shareholder, each such controlling Person or the
underwriter specifically for use in the preparation thereof; and provided,
further, that, as to any underwriter or any Person controlling any underwriter,
this indemnity does not apply to any losses, claims, damages or liabilities
arising out of or based upon any untrue statement or alleged untrue statement or
omission or alleged omission in any preliminary prospectus if a copy of a
prospectus was not sent or given by or on behalf of an underwriter to such
Person asserting such loss, claim, damage, liability or action at or prior to
the written confirmation of the sale of the Registrable Shares as required by
the Securities Act and such untrue statement or omission had been corrected in
such prospectus.

(b)       In connection with any registration of any Registrable Shares under
the Securities Act pursuant to this Agreement, the Requesting Shareholder shall
indemnify and hold harmless (in the same manner and to the same extent as set
forth in the preceding paragraph of this Section) the Company, each director of
the Company, each officer of the Company who shall sign such registration
statement, each underwriter, broker or other Person acting on behalf of the
Company, each other Person, if any, who controls any of the foregoing Persons
within the meaning of Rule 405 promulgated under the Securities Act with respect
to any statement or omission from such registration statement, any preliminary
prospectus or final prospectus contained therein or otherwise filed with the
Commission, any amendment or supplement thereto or any document incident to
registration or qualification of any Registrable Shares, if such statement or
omission was made in reliance upon and in conformity with written information
furnished to the Company or such underwriter through an instrument executed by
or on behalf of the Requesting Shareholder specifically for use in connection
with the preparation of such registration statement, preliminary prospectus,
final prospectus, amendment, supplement or document; provided that the maximum
amount of liability in respect of such indemnification shall be limited, in the
case of the Requesting Shareholder, to an amount equal to the net proceeds
actually received by the Requesting Shareholder from the sale of Registrable
Shares effected pursuant to such registration; and provided, further, that, as
to any underwriter or any Person controlling any underwriter, this indemnity
does not apply to any losses, claims, damages or liabilities arising out of or
based upon any untrue statement or alleged untrue statement or omission or
alleged omission in any preliminary prospectus if a copy of a prospectus was not
sent or given by or on behalf of an underwriter to such Person asserting such
loss, claim, damage, liability or action at or prior to the written confirmation
of the sale of the Registrable Shares as required by the Securities Act and such
untrue statement or omission had been corrected in such prospectus.

(c)       Promptly after receipt by an indemnified party of notice of the
commencement of any action involving a claim referred to in Section 5(a) and
5(b), such indemnified party will, if a claim in respect thereof is made 
against an indemnifying  party,  give written  notice to the latter  of the 
commencement  of  such

 

 

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action. In case any such action is brought against an indemnified party, the
indemnifying party will be entitled to participate in and to assume the defense
thereof, jointly with any other indemnifying party similarly notified to the
extent that it may wish, with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party shall not be responsible for any legal or other expenses
subsequently incurred by the latter in connection with the defense thereof;
provided that if any indemnified party shall have reasonably concluded that
there may be one or more legal or equitable defenses available to such
indemnified party which are additional to or conflict with those available to
the indemnifying party, or that such claim or litigation involves or could have
an effect upon matters beyond the scope of the indemnity agreement provided in
this Section 5, the indemnifying party shall not have the right to assume the
defense of such action on behalf of such indemnified party and such indemnifying
party shall reimburse such indemnified party and any Person controlling such
indemnified party for the reasonable fees and expenses of any one law firm or
counsel (as well as the reasonable fees and expenses of reasonably necessary
local counsel) retained collectively by the indemnified parties subject to such
proceeding which is reasonably related to the matters covered by this Section 5.
No indemnifying party shall, without the prior written consent of the
indemnified party, effect any settlement of any pending or threatened proceeding
in respect of which such indemnified party is or could have been a party and
indemnity could have been sought hereunder by such indemnified party, unless
such settlement includes an unconditional release of such indemnified party from
all liability on claims that are the subject matter of such proceedings and does
not include an admission of fault or culpability or a failure to act on behalf
of such indemnified party.

(d)       If the indemnification provided for in this Section 5 is held by a
court of competent jurisdiction to be unavailable to an indemnified party with
respect to any loss, claim, damage, liability or action referred to herein, then
the indemnifying party, in lieu of indemnifying such indemnified party
hereunder, shall contribute to the amounts paid or payable by such indemnified
party as a result of such loss, claim, damage, liability or action in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party on the one hand and of the indemnified party on the other in connection
with the statements or omissions which resulted in such loss, claim, damage or
liability as well as any other relevant equitable considerations. The relative
fault of the indemnifying party and of 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 by
the indemnified party and the parties’ relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.

Section 7.        Exchange Act Compliance. The Company shall, so long as the
Requesting Shareholder holds any shares of its Capital Stock, (i) comply in a
timely manner with all of the reporting requirements of the Exchange Act, (ii)
comply in a timely manner with all other public information reporting
requirements of the Commission in order to minimize the holding period under
Rule 144 under the Securities Act for the sale of such Capital Stock thereunder,
and (iii) provide the Requesting Shareholder and any prospective purchaser
designated by the Requesting Shareholder with such information as the Requesting
Shareholder shall request in connection with any prospective sale of the Capital
Stock, including but not limited to the information required by Rule 144A(d)(4)
under the Securities Act.

 

 

 

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Section 8.        No Conflict of Rights. The Company represents and warrants to
the Requesting Shareholder that the registration rights granted to the
Requesting Shareholder hereby do not conflict with any other registration rights
granted by the Company. The Company shall not, after the date hereof, grant any
registration rights that conflict with or impair the registration rights granted
hereby without the prior written consent of the Requesting Shareholder.

Section 9.        Notices. Unless otherwise specified herein, all notices,
consents, approvals, reports, designations, requests, waivers, elections and
other communications authorized or required to be given pursuant to this
Agreement shall be in writing and shall be given or made (and shall be deemed to
have been duly given or made upon receipt) by facsimile transmission (receipt
confirmed) or by a courier guaranteeing overnight delivery, sent to a party and
its legal counsel at the addresses set forth below for such party and its legal
counsel hereto or such other addresses as such party may specify by notice to
the other party:

if to the Company, to:

Caspian Services Inc.

257 East 200 South

Suite 340

Salt Lake City, Utah 84111

Attention: Alexey Kotov

Facsimile: (801) 746-3701

with a copy to:

Poulton & Yordan

324 South 400 West, Suite 250

Salt Lake City, Utah 84101

Attention: Richard Ludlow

Facsimile: (801) 355-2990

 

if to Great Circle, to:

Great Circle Energy Services LLC

c/o Great Circle Capital LLC

One Atlantic Street

Stamford, Connecticut 06901

Attention: Paul Rapello

Facsimile: (203) 323-4363

with a copy to:

White & Case LLP

1155 Avenue of the Americas

New York, NY 10036

Attention: Alison M. Dreizen, Esq.

Facsimile: (212) 354-8113

 

 

 

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Any party hereto may change the address to which notice to it, or copies
thereof, shall be addressed, by giving notice thereof to the other parties
hereto in conformity with this Section 9.

Section 10.      Successors; Assigns; Transferees. This Agreement shall inure to
the benefit of and be binding upon, and enforceable by, the successors and
permitted assigns of the Parties. Subject to applicable securities laws, the
Requesting Shareholder may assign any of its rights under this Agreement, in
whole or in part to any Person in connection with an assignment of the Facility
Agreement or transfer of the Requesting Shareholder. Except as to successors of
the Company, the Company may not assign any of its rights, or delegate any of
its obligations, under this Agreement without the prior written consent of the
Requesting Shareholder, and any such purported assignment by the Company without
the written consent of the Requesting Shareholder shall be void and of no
effect.

Section 11.      No Third Party Beneficiaries. Except as set forth in Section 5,
nothing expressed by or mentioned in this Agreement is intended or shall be
construed to give any Person, other than the Parties and their respective
successors or permitted assigns and transferees, any legal or equitable right,
remedy or claim under or in respect of this Agreement or any provision herein
contained, this Agreement and all conditions and provisions hereof being
intended to be and being for the sole and exclusive benefit of the Parties and
their respective successors and permitted assigns and transferees, and for the
benefit of no other Person.

Section 12.      Entire Agreement. This Agreement constitutes the entire
agreement and supersedes all prior agreements and understandings, both written
and oral, between the Parties with respect to the subject matter hereof. This
Agreement may be executed by facsimile and in counterparts, each of which shall
be deemed to be an original and shall be binding on the party who executed the
same, but all of which together shall constitute one and the same instrument.

Section 13.      Amendments; Waivers. This Agreement cannot be changed or
amended orally, but only by an agreement in writing signed by the Parties. Any
failure on the part of a party to enforce at any time, or for any period of
time, any of the provisions of this Agreement shall not be deemed or construed
to be a waiver of such provisions or of the right of such party thereafter to
enforce each and every such provision.

Section 14.      Severability. If any term, provision, agreement, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, agreements, covenants and restrictions of this Agreement
shall remain in full force and effect and shall in no way be affected, impaired
or invalidated so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner materially adverse to any
party hereto. Upon such determination, the parties shall negotiate in good faith
to modify this Agreement so as to effect the original intent of the parties as
closely as possible in a reasonably acceptable manner in order that the
transactions contemplated hereby may be consummated as originally contemplated
to the fullest extent possible.

 

 

 

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Section 15.      Headings. The Article and Section headings in this Agreement
are included for convenience of reference only and shall be disregarded in the
interpretation of this Agreement.

Section 16.      Counterparts. This Agreement may be signed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same document.

Section 17.      Governing Law. THIS AGREEMENT SHALL BE GIVEN EFFECT AND
CONSTRUED BY APPLICATION OF THE LAWS OF THE STATE OF NEW YORK (WITHOUT REGARD TO
THE PRINCIPLES THEREOF GOVERNING CONFLICTS OF LAWS), AND ANY ACTION OR
PROCEEDING ARISING HEREUNDER SHALL ONLY BE BROUGHT IN THE COURTS OF THE STATE OF
NEW YORK SITTING IN MANHATTAN OR IN THE UNITED STATES DISTRICT COURT FOR THE
SOUTHERN DISTRICT OF NEW YORK. THE PARTIES HERETO CONSENT TO THE JURISDICTION OF
THE COURTS OF THE STATE OF NEW YORK SITTING IN MANHATTAN AND/OR THE UNITED
STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK.

Section 18.      Equitable Relief. The Parties agree that legal remedies may be
inadequate to enforce the provisions of this Agreement and that equitable
relief, including specific performance and injunctive relief, may be used to
enforce the provisions of this Agreement.

Section 19.      Applicability. This Agreement applies to all Registrable Shares
whether acquired by Great Circle before or after the date of this Agreement.

 

[Signature Page Follows]

 

 

 

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EXECUTION COPY

 

IN WITNESS WHEREOF, the parties have executed this Registration Rights Agreement
on the date first above written.

THE COMPANY

CASPIAN SERVICES INC.

 

 

 

By: /s/ Alexey Kotov

Name: Alexey Kotov

Title: Corporate Secretary

THE SHAREHOLDER

GREAT CIRCLE ENERGY SERVICES LLC

 

 

 

By: /s/ Paul Rapello

Name: Paul Rapello

Title: Authorized Signatory