Document:

exv10w3

 

Exhibit 10.3

CONVERSION AGREEMENT

This CONVERSION AGREEMENT (this “Agreement”) is made and entered into as of the 5th day
of June, 2007 by and among:

	(1)	 	CANARGO ENERGY CORPORATION, a Delaware Corporation (the “Company”);
	 
	(2)	 	PERSISTENCY, a company incorporated under the laws of the Cayman Islands (“Persistency”); and
	 
	(3)	 	CANARGO LIMITED, a company incorporated under the laws of Guernsey (“CanArgo Limited”).

WHEREAS

	(A)	 	On 28 June 2006 Persistency and the Subordinated Noteholders entered into an agreement
pursuant to which the Subordinated Noteholders sold to Persistency US$5 million of the
principal amount of the Senior Subordinated Convertible Guaranteed Notes due 1 September 2009
(the “Subordinated Notes”) issued under and pursuant to that certain Note and Warrant Purchase
Agreement (the “NWPA”) dated as of 3 March 2006, as amended, by and among the Company and the
Subordinated Noteholders.
	 
	(B)	 	The Subordinated Noteholders and Persistency have certain rights under the NWPA and the
ancillary documents associated therewith, which include, without limitation the right pursuant
to Section 11.7 of the NWPA to convert the principal amount of each Subordinated Note from
time to time in whole or in part into Tethys Common Stock (as defined in the NWPA).
	 
	(C)	 	To the extent that they hold Subordinated Notes, Persistency are willing to agree to convert
their Subordinated Notes into Tethys Common Stock in accordance with Section 11.7 of the NWPA
at a price of US$2.50 per share of Tethys Common Stock on the terms and subject to the
conditions set out in this Agreement.

IT IS AGREED as follows:

	1	 	DEFINITIONS AND INTERPRETATION
	 
	1.1	 	In this Agreement the following words and expressions shall, unless the context otherwise
requires, have the following meanings:
	 
	 	 	“Business Day” means any day other than a Saturday, a Sunday or a day on which commercial
banks in New York City, Toronto or London are required or authorized to be closed;
	 
	 	 	“Conversion” has the meaning ascribed in Clause 3.1 of this Agreement;
	 
	 	 	“Conversion Date” means the date five Business Days from the date of satisfaction of the
conditions specified in Clause 2.1 of this Agreement;
	 
	 	 	“Conversion Stock” has the meaning ascribed to it in Clause 3.1 of this Agreement;

 

 

	 	 	“Note Purchase Agreement” means the Note Purchase Agreement dated as of 25 July 2005 by
and among the Company, Ingalls & Snyder Value Partners L.P. and the Purchasers (as defined
therein);
	 
	 	 	“12% Note Purchase Agreement” means the Note Purchase Agreement dated as of 28 June 2006
by and between the Company and Persistency;
	 
	 	 	“Senior Noteholders” means the holders of the Senior Secured Notes;
	 
	 	 	“Senior Secured Notes” means the Senior Secured Notes due 25 July 2009;
	 
	 	 	“Subordinated Noteholders” means the holders of the Subordinated Notes;
	 
	 	 	“Tethys” means Tethys Petroleum Limited, a company incorporated under the laws of the
Bailiwick of Guernsey and an indirect subsidiary of the Company;
	 
	 	 	“Tethys Common Stock” means the ordinary shares with a nominal value of $0.10 each in the
capital of Tethys; and
	 
	 	 	“Tethys Share Pledge” means the pledge over certain of the Tethys Common Stock granted to
the Senior Noteholders pursuant to the Security Interest Agreement dated 9 February 2007
by and among CanArgo Limited, Tethys, Ingalls & Snyder LLC and others party thereto.
	 
	1.2	 	Words and expressions defined in the NWPA shall have the same meanings herein except in so
far as expressly varied by or inconsistent with the provisions of this Agreement.
	 
	2	 	CONDITIONS PRECEDENT
	 
	2.1	 	Persistency agrees that it shall convert the entire principal amount outstanding under its
Subordinated Note into shares of Tethys Common Stock pursuant to Section 11.7 of the NWPA
conditional upon the prior or contemporaneous satisfaction or waiver of the following
conditions:

	 	(a)	 	The Senior Noteholders and the Company shall have entered into a letter
agreement releasing certain rights and providing certain consents under the Note
Purchase Agreement to permit the Conversion and the transactions contemplated thereby
in compliance with the terms of the Note Purchase Agreement; and
	 
	 	(b)	 	Ingalls & Snyder LLC, as the Security Agent, shall have provided the
requisite consent to release the Conversion Stock from the Tethys Share Pledge.

	2.2	 	Persistency agrees to provide a guaranty in substantially the form of Schedule 2 attached
hereto (the “Senior Note Guaranty”) to the Senior Noteholders.
	 
	2.3	 	Notwithstanding Clause 2.1 the Required Holders (as defined in the NWPA) shall be entitled by
notice in writing given to the Company to waive (to such extent as they may think fit)
compliance with the conditions stated in Clauses 2.1(a) and (b).
	 
	2.4	 	If any of the conditions in Clause 2.1 has not been satisfied or waived by 8 June 2007 (or by
such later date as may be agreed in writing between Persistency, and the Company), then,

2

 

	 	 	without prejudice to any accrued
rights of the parties arising in
respect of any of the provisions of
this Agreement, this Agreement
shall, thereupon cease to have
effect.
	 
	3	 	CONVERSION
	 
	3.1	 	Subject to the terms of Clause 2, on and with effect from the Conversion Date, Persistency
shall convert the entire outstanding principal amount of the Subordinated Notes held by them
into 2 million shares of Tethys Common Stock (the “Conversion Stock”) pursuant to the NWPA
(the “Conversion”).
	 
	3.2	 	Accrued interest through the Conversion Date in respect of the Subordinated Notes held by
Persistency shall be payable by the Company in cash to Persistency on the Conversion Date.
	 
	3.3	 	The Conversion Stock to be issued to Persistency pursuant to this Clause 3 to affect the
Conversion shall be satisfied by the transfer on the Conversion Date by CanArgo Limited of the
requisite amount of the Conversion Stock due to Persistency with full title guarantee in
consideration for the cancellation of the Subordinated Note held by Persistency.
	 
	4	 	WARRANTS
	 
	4.1	 	The consideration payable to Persistency for the conversion of their Subordinated Note into
Tethys Common Stock pursuant to Clause 3 shall be the issue by the Company of warrants (the
“Compensation Warrants”) to purchase up to an aggregate of 5 million shares, at an exercise
price of $1.00 per share (subject to adjustment), of the Company’s common stock par value
$0.10 per share (the “Compensation Warrants Shares”). The Compensation Warrants issuable to
Persistency pursuant to this Clause 4.1 shall be issued to Persistency on the Conversion Date.
	 
	4.2	 	The Compensation Warrants to be issued to Persistency shall be substantially in the form set
out in Schedule 1, with such changes thereto, if any, as may be approved by Persistency and
the Company.
	 
	5	 	GENERAL
	 
	5.1	 	Representations and Warranties
	 
	 	 	Persistency hereby repeats its representations and warranties to the Company set forth in
the 12% Note Purchase Agreement with the same effect as if set forth in full herein, and,
in connection therewith, Persistency hereby further represents, warrants, acknowledges and
agrees with the Company that neither the Conversion Stock, the Compensation Warrants nor
the Compensation Warrant Shares (collectively the “Securities”) have been registered under
the United States Securities Act of 1933, as amended (the “Securities Act”) or any other
state, provincial or foreign securities laws (such laws together with the Securities Act
being collectively referred to herein as “Securities Laws”), the Securities are
“restricted securities” as defined in Rule 144 promulgated under the Securities Act and
the Securities may not be sold, transferred or offered for sale except in compliance with
all applicable Securities Laws and the rules and regulations promulgated thereunder. The
certificates evidencing the Securities shall be imprinted with suitable restrictive
legends reflecting the foregoing.

3

 

	5.2	 	Further Assurance
	 
	 	 	The parties shall at their own cost do or procure the doing of all such acts and things
and/or execute or procure the execution of all such documents as are reasonably required
to give effect to the provisions of this Agreement.
	 
	5.3	 	Assignment
	 
	 	 	No party shall be entitled to assign in whole or in part any rights and/or obligations
arising under this Agreement to a third party without the prior written consent of the
other parties.
	 
	5.4	 	Entire Agreement
	 
	 	 	This Agreement together with the NWPA constitute the entire agreement among the parties
with respect to the matters dealt with herein and supersedes any previous agreement among
the parties in relation to such matters.
	 
	5.5	 	Variation
	 
	 	 	No variation of this Agreement shall be valid or effective unless made by an instrument in
writing signed by the parties hereto.
	 
	5.6	 	Waiver
	 
	 	 	No waiver by either party of any of the requirements hereof or of any of its rights
hereunder shall be effective unless given in writing and signed by or on behalf of that
party and no forbearance, delay or indulgence by either party in enforcing the provisions
of this Agreement shall prejudice or restrict the rights of that party nor shall any
waiver by that party of any of the requirements hereof or any of its rights hereunder
release the other from full performance of its remaining obligations stated herein.
	 
	5.7	 	Severability
	 
	 	 	Each provision of this Agreement shall be construed separately and (save as otherwise
expressly provided herein) none of the provisions hereof shall limit or govern the extent,
application or construction of any other of them and notwithstanding that any provision of
this Agreement may prove to be illegal or unenforceable the remaining provisions of this
Agreement shall continue in full force and effect.
	 
	5.8	 	Counterparts, Facsimile Execution and Delivery
	 
	 	 	This Agreement may be executed in any number of counterparts and by each of the parties on
separate counterparts each of which when executed and delivered shall be deemed to be an
original, but all the counterparts together shall constitute one and the same agreement.
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.
	 
	5.9	 	Law and Jurisdiction
	 
	5.9.1	 	This Agreement shall be governed by and construed in accordance with the law of the State of
New York.

4

 

	5.9.2	 	Each party hereby submits to the non-exclusive jurisdiction of the Courts of New York as
regards any claim, dispute or matter arising out of or in connection with this Agreement and
its implementation and effect.
	 
	5.10	 	Binding Effect
	 
	 	 	This Agreement shall be binding upon the parties hereto and their successors in interest
and assigns.
	 
	5.11	 	Notices
	 
	 	 	All notices, demands, elections, requests and communications provided for hereunder shall
be in writing and sent: (a) by telefacsimile if the sender on the same day sends a
confirming copy of such notice by a recognized overnight delivery service (charges
prepaid), or (b) by registered or certified mail with return receipt requested (postage
prepaid), or (c) by a recognized overnight delivery service (with charges prepaid). Any
such notice must be sent:

	 	(i)	 	if to Persistency, to Persistency at their address as set
forth on the books maintained by the Company, or at such other address as
Persistency shall have specified to the Company in writing,
	 
	 	(ii)	 	if to the Company, to the Company at its principal
executive office to the attention of Chief Executive Officer, or at such
other address as the Company shall have specified to Persistency in writing;
	 
	 	(iii)	 	if to CanArgo Limited, to CanArgo Limited at its
principal executive office for the attention of the Chief Executive Officer,
or at such other address as CanArgo Limited shall have specified to the
Company in writing.

Notices under this Section 5.10 will be deemed given only when actually received.

[signature pages follows]

5

 

IN WITNESS of which the parties have executed and delivered this document as a deed on the date
first before written.

SIGNED by

	 	 	 	 	 
	 
	 	 	 
	For and on behalf of CANARGO
ENERGY CORPORATION	 	 
	 
	 	 	 	 
	Name:
	 	 	 	 
	 

	 	 

	 	 
	 
	 	 	 	 
	Title:
	 	 	 	 
	 

	 	 

	 	 
	 
	 	 	 	 
	 	 	 
	For and on behalf of PERSISTENCY	 	 
	 
	 	 	 	 
	Name:
	 	 	 	 
	 

	 	 

	 	 
	 
	 	 	 	 
	Title:
	 	 	 	 
	 

	 	 

	 	 
	 
	 	 	 	 
	SIGNED by	 	 
	 
	 	 	 
	For and on behalf of
CANARGO LIMITED	 	 
	 
	 	 	 	 
	Name:
	 	 	 	 
	 

	 	 

	 	 
	 
	 	 	 	 
	Title:
	 	 	 	 
	 

	 	 

	 	 

6

 

	 	 	 	 	 
	AGREED AND ACKNOWLEDGED	 	 
	 
	 	 	 	 
	INGALLS & SNYDER LLC	 	 
	 
	 	 	 	 
	By:
	 	 	 	 
	 

	 	 

	 	 
	 
	 	 	 	 
	Name:
	 	 	 	 
	 

	 	 

	 	 
	 
	 	 	 	 
	Title:
	 	 	 	 
	 

	 	 

	 	 
	 
	 	 	 	 
	INGALLS & SNYDER VALUE PARTNERS L.P.
	 
	 	 	 	 
	By:
	 	 	 	 
	 

	 	 

	 	 
	 
	 	 	 	 
	Name:
	 	 	 	 
	 

	 	 

	 	 
	 
	 	 	 	 
	Title:
	 	 	 	 
	 

	 	 

	 	 
	 
	 	 	 	 
	PENRITH LTD	 	 
	 
	 	 	 	 
	By:
	 	 	 	 
	 

	 	 

	 	 
	 
	 	 	 	 
	Name:
	 	 	 	 
	 

	 	 

	 	 
	 
	 	 	 	 
	Title:
	 	 	 	 
	 

	 	 

	 	 
	 
	 	 	 	 
	 	 	 
	THOMAS GIPSON	 	 
	 
	 	 	 	 
	 	 	 
	ROBERT GIPSON	 	 

7

 

SCHEDULES

SCHEDULE 1

Form of Warrant Certificate

8

 

SCHEDULE 1

FORM OF WARRANT

THE WARRANTS REPRESENTED HEREBY AND THE COMMON STOCK ISSUABLE UPON EXERCISE OF THE WARRANTS
(COLLECTIVELY, THE “WARRANT SECURITIES”), HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE “ACT”), OR REGISTERED OR QUALIFIED UNDER THE SECURITIES LAWS OF ANY OTHER
JURISDICTION IN RELIANCE UPON EXEMPTIONS FROM SUCH REGISTRATION AFFORDED UNDER THE ACT AND
APPLICABLE SECURITIES LAWS OF OTHER JURISDICTIONS. THE WARRANT SECURITIES REPRESENTED HEREBY MAY
NOT BE OFFERED, SOLD, HYPOTHECATED OR OTHERWISE TRANSFERRED UNLESS REGISTERED UNDER THE ACT OR AN
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE ACT IS APPLICABLE (IN WHICH CASE THE ISSUER
SHALL HAVE RECEIVED AN OPINION OF COUNSEL IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO THE
ISSUER TO SUCH EFFECT) AND THE PROVISIONS OF ALL OTHER APPLICABLE SECURITIES LAWS ARE OBSERVED.

CANARGO ENERGY CORPORATION

Incorporated Under the Laws of the State of Delaware

	 	 	 	 	 	 	 	 	 
	 	 	No.                     	 	 	 	5,000,000 Common
	 

	 	 	 	 	 	 	 	Stock Purchase Warrants

CERTIFICATE FOR COMMON STOCK

PURCHASE WARRANTS

1. Warrant, This Warrant Certificate certifies that Persistency, a company incorporated
under the laws of the Cayman Islands (“Persistency”), or registered assigns (the “Registered
Holder”), is the registered owner of the above indicated number of Warrants expiring on the
Expiration Date, as hereinafter defined. One (1) Warrant entitles the Registered Holder to purchase
one (1) share of the common stock, $.10 par value (a “Share”), of CanArgo Energy Corporation, a
Delaware corporation (the “Company”), from the Company at a purchase price of One Dollar ($1.00)
(the “Exercise Price”) at any time during the Exercise Period, as hereinafter defined, upon
surrender of this Warrant Certificate with the exercise form hereon duly completed and executed and
accompanied by payment of the Exercise Price at the principal office of the Company.

     Upon due presentment for transfer or exchange of this Warrant Certificate at the principal
office of the Company, a new Warrant Certificate or Warrant Certificates of like tenor and
evidencing in the aggregate a like number of Warrants shall be issued in exchange for this Warrant
Certificate, subject to the limitations provided herein, upon payment of any tax or governmental
charge imposed in connection with such transfer. Subject to the terms hereof the Company shall
deliver Warrant Certificates in required whole number denominations to Registered Holders in
connection with any transfer or exchange permitted hereunder.

     This Warrant is issued pursuant to the provisions of that certain Conversion Agreement dated
June 4, 2007 by and among the Company, CanArgo Limited (a company incorporated under the laws of

9

 

the Island of Guernsey), and Persistency (the “Conversion Agreement”). Any capitalized terms not
otherwise expressly defined herein shall have the meaning ascribed thereto in the Conversion
Agreement.

2. Restrictive Legends. Each Warrant Certificate shall bear legends substantially in the
form of the legends that appear at the beginning of this Warrant Certificate. Each certificate
representing Shares issued upon exercise of a Warrant, unless such Shares are then registered under
the Securities Act of 1933, as amended (the “Act”), shall bear a legend in substantially the
following form:

“THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITES ACT OF
1933, AS AMENDED (THE“ACT”) OR REGISTERED OR QUALIFIED UNDER THE SECURITIES LAWS OF ANY OTHER
JURISDICTION IN RELIANCE UPON EXEMPTIONS FROM SUCH REGISTRATION AFFORDED UNDER THE ACT AND SUCH
APPLICABLE LAWS OF OTHER JURISDICTIONS. THE SHARES REPRESENTED HEREBY MAY NOT BE OFFERED, SOLD,
HYPOTHECATED OR OTHERWISE TRANSFERRED UNLESS REGISTERED UNDER THE ACT OR AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS UNDER THE ACT IS APPLICABLE (IN WHICH CASE THE ISSUER SHALL HAVE RECEIVED
AN OPINION OF COUNSEL IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO THE ISSUER TO SUCH EFFECT)
AND THE PROVISIONS OF ALL OTHER APPLICABLE SECURITIES LAWS ARE OBSERVED.”

Each such certificate representing Shares may also bear such legend relating to the issuance of
such Shares pursuant to any applicable securities laws as counsel for the Company shall reasonably
deem appropriate.

3. Exercise. Subject to the terms hereof: the Warrants, evidenced by this Warrant
Certificate, may be exercised at the Exercise Price in whole or in part at any time during the
period (the “Exercise Period”) commencing on the next Business Day after the first anniversary of
the Conversion Date as contemplated by Section 4 of the Conversion Agreement and terminating at the
close of business on the earlier of: (i) September 1, 2009; or (ii) or shall be exercised on such
sooner date at the election of the Company and upon at least thirty (30) days prior written notice
to the Registered Holder in the event that: (a) the Manavi M12 well indicates, by way of an
independent engineering report, sustainable production, if developed, in excess of 7,500 barrels of
oil per day or (b) all the warrants originally issued under that certain Note and Warrant Purchase
Agreement dated as of March 3, 2006 by and among the Company and the purchasers listed therein are
exercised by the holders thereof and the average closing price for the Company’s Common Stock on
the American Stock Exchange or, if the Common Stock is not then listed for trading on the American
Stock Exchange (“AMEX”) then the Oslo Stock Exchange, is above U.S. $2.00 (or its equivalent in
NOK, and in any case adjusted for any stock dividends, stock split, its reverse split,
recapitalization or reorganization) for a period of five consecutive trading days (the “Expiration
Date”). The Exercise Period may also be extended by the Company’s Board of Directors.

     A Warrant shall be deemed to have been exercised in immediately prior to the close of business
on the date (the “Exercise Date”) of the surrender to the Company at its principal offices of this
Warrant Certificate with the exercise form attached hereto executed by the Registered Holder and
accompanied by payment to the Company, in cash or by official bank or certified check, of an amount
equal to the aggregate Exercise Price, in lawful money of the United States of America.

     The person entitled to receive the Shares issuable upon exercise of a Warrant or Warrants
(“Warrant Shares”) shall be treated for all purposes as the holder of such Warrant Shares as of the
close of business on the Exercise Date. The Company shall not be obligated to issue any fractional
share interests in Warrant Shares issuable or deliverable on the exercise of any Warrant or script
or cash with respect thereto, but, if Company elects not to issue a fractional share, the Company
will pay a cash

10

 

adjustment in respect of any fraction of a Warrant Share which would otherwise be issuable in an
amount equal to the same fraction of the amount by which the market price of a Share on the date of
exercise exceeds the Exercise Price, such market price to be determined in good faith by the Board
of Directors of the Company. If more than one Warrant shall be exercised at one time by the same
Registered Holder, the number of full Shares which shall be issuable on exercise thereof shall be
computed on the basis of the aggregate number of full shares issuable on such exercise.

     Promptly, and in any event within ten business days after the Exercise Date, the Company shall
cause to be issued and delivered to the person or persons entitled to receive the same, a
certificate or certificates for the number of Warrant Shares deliverable on such exercise.

     The Company may deem and treat the Registered Holder of the Warrants at any time as the
absolute owner thereof for all purposes, and the Company shall not be affected by any notice to the
contrary. The Warrants shall not entitle the Registered Holder thereof to any of the rights of
shareholders or to any dividend declared on the Shares unless the Registered Holder shall have
exercised the Warrants and thereby purchased the Warrant Shares prior to the record date for the
determination of holders of Shares entitled to such dividend or other right.

4. Net Issue Conversion. Notwithstanding anything in this Warrant to the contrary, the
Registered Holder hereof may, subject to the prior concurrence of the Company, in lieu of
exercising this Warrant in the manner provided above in Section 3, elect to convert this Warrant
into Warrant Shares equal in number to the value of the exercised Warrants by so indicating on the
Form of Election to Purchase attached hereto, in which event the Registered Holder shall receive a
number of Warrant Shares equal to following shall occur.

[(X multiplied by (Y minus Z)] divided by Y;

where:

X = Number of Warrants Converted

Y = Fair Market Value of one share of Common Stock

Z = Exercise Price

For purposes of the above, “Fair Market Value” shall equal the closing price for the Company’s
Common Stock on the Exercise Date, as reported on the AMEX or, if the Common Stock is not then
listed for trading on the AMEX, then the dollar equivalent of such closing price as reported on the
Oslo Stock Exchange on the Exercise Date.

5. Reservation of Shares and Payment of Taxes. The Company covenants that it will at all
times reserve and have available from its authorized Common Stock such number of shares as shall
then be issuable on the exercise of outstanding Warrants. The Company covenants that all Warrant
Shares which shall be so issuable shall be duly and validly issued, fully paid and nonassessable,
and free from all taxes, liens and charges with respect to the issue thereof.

     The Registered Holder shall pay all documentary, stamp or similar taxes and other government
charges that may be imposed with respect to the issuance, transfer or delivery of any Warrants and
Warrant Shares on exercise of the Warrants. In the event the Warrants or Warrant Shares are to be
delivered in a name other than the name of the Registered Holder of the Warrant Certificate, no
such

11

 

delivery shall be made unless the person requesting the same has paid the amount of any such taxes
or charges incident thereto.

     6. Registration of Transfer. The Warrant Certificates may be transferred in whole or
in part, provided any such transfer complies with all applicable foreign and United States federal
and state securities laws and, if requested by the Company, the Registered Holder delivers to the
Company an opinion of counsel to that effect, in form and substance reasonably acceptable to the
Company. Warrant Certificates to be transferred shall be surrendered to the Company at its
principal office. The Company shall execute, issue and deliver in exchange therefore the Warrant
Certificate or Certificates which the Registered Holder making the transfer shall be entitled to
receive.

     The Company shall keep transfer books at its principal office which shall register Warrant
Certificates and the transfer thereof. On due presentment of any Warrant Certificate for
registration of transfer at such office, the Company shall execute, issue and deliver to the
transferee or transferees a new Warrant Certificate or Certificates representing an equal aggregate
number of Warrants. All Warrant Certificates presented for registration of transfer or exercise
shall be duly endorsed or be accompanied by a written instrument or instruments of transfer in form
and substance satisfactory to the Company. The Company may require payment of a sum sufficient to
cover any tax or other government charge that may be imposed in connection therewith.

     All Warrant Certificates so surrendered, or surrendered for exercise, or for exchange in case
of mutilated Warrant Certificates, shall be promptly cancelled by the Company and thereafter
retained by the Company until the Expiration Date. Prior to due presentment for registration of
transfer thereof the Company may treat the Registered Holder of any Warrant Certificate as the
absolute owner thereof (notwithstanding any notations of ownership or writing thereon made by
anyone other than the Company), and the Company shall not be affected by any notice to the
contrary.

7. Loss or Mutilation. On receipt by the Company of evidence satisfactory as to the
ownership of and the loss, theft, destruction or mutilation of this Warrant Certificate, the
Company shall execute and deliver, in lieu thereof a new Warrant Certificate representing an equal
aggregate number of Warrants. In the case of loss, theft or destruction of any Warrant Certificate,
the individual requesting issuance of a new Warrant Certificate shall be required to indemnify the
Company in an amount satisfactory to the Company. In the event a Warrant Certificate is mutilated,
such Certificate shall be surrendered and canceled by the Company prior to delivery of a new
Warrant Certificate. Applicants for a new Warrant Certificate shall also comply with such other
reasonable regulations as the Company may prescribe.

8. Adjustment of Shares. The number and kind of securities issuable upon exercise of a
Warrant or to be delivered upon the redemption of Warrants hereunder shall be subject to adjustment
from time to time upon the happening of certain events (“Adjustment Event”), as follows:

     (a) If the Company shall, at any time prior to the complete exercise of the Warrants evidenced
hereby, declare or pay to the holders of its outstanding Shares, a dividend payable in any kind of
shares of stock or other securities of the Company, or in property, or otherwise than in cash, the
Registered Holder upon thereafter exercising the Warrants evidenced hereby as herein provided shall
be entitled to receive for the Exercise Price, in addition to one Warrant Share, such additional
share or shares of stock or scrip representing fractions of a share or other securities or property
as the Registered Holder would have received in the form of such dividend if he had been the holder
of record of such Warrant Share on the record date for the determination of common stockholders
entitled to receive such dividend.

     (b) If the Company shall, while any Warrants evidenced hereby remain in force, effect a
recapitalization of such character that the Shares covered hereby shall be changed into or become

12

 

exchangeable for a larger or smaller number of shares, then thereafter, the number of Shares which
the Registered Holder shall be entitled to purchase hereunder, shall be increased or decreased, as
the case may be, in direct proportion to the increase or decrease in the number of Shares of the
Company by reason of such recapitalization, and the Exercise Price (per Share) shall in the case of
an increase in the number of Shares be proportionately reduced, and in the case of a decrease in
the number of shares be proportionately increased.

     (c) In case of any reorganization of the Company (or any other corporation the stock or other
securities of which are at the time receivable upon exercise of a Warrant) or in case the Company
(or any such other corporation) shall merge into or with or consolidate with another corporation or
convey all or substantially all of its assets to another corporation or enter into a business
combination of any form as a result of which the Shares or other securities receivable upon
exercise of a Warrant are converted into other stock or securities of the same or another
corporation, then and in each such case, the Registered Holder of a Warrant, upon exercise of the
purchase right at any time after the consummation of such reorganization, consolidation, merger,
conveyance or combination, shall be entitled to receive, in lieu of the Shares or other securities
to which such Registered Holder would have been entitled had he exercised the purchase right
immediately prior thereto, such stock and securities which such Registered Holder would have owned
immediately after such event with respect to the Shares and other securities for which a Warrant
may have been exercised immediately before such event had the Registered Holder exercised the
Warrant immediately prior to such event.

     (d) In case the Company shall at any time prior to the exercise of a Warrant evidenced hereby
make any distribution of its assets to holders of its Shares by way of a liquidating or partial
liquidating dividend or by way of a return of capital, or other than as a dividend payable out of
earnings or any surplus legally available for dividends under the laws of the state of its
incorporation, then the Registered Holder upon thereafter exercising such Warrant as herein
provided after the date of record for the determination of those holders of Shares entitled to such
distribution of assets, shall be entitled to receive for the Exercise Price, in addition to a
Warrant Share, the amount of such assets (or at the option of the Company, a sum equal to the value
thereof at the time of such distribution to holders of Shares as such value is determined by the
Board of Directors of the Company in good faith) which would have been payable to the Registered
Holder had he been the holder of record of such Warrant Share receivable upon exercise of such
Warrant on the record date for the determination of those entitled to such distribution.

     The Company shall mail to the holder of this Certificate at least twenty (20) days prior to
any Adjustment Event a notice specifying the date on which any such Adjustment Event is to occur
together with a description thereof.

     In each case of an adjustment in the Shares or other securities receivable upon the exercise
of a Warrant, the Company shall promptly notify the Registered Holder of such adjustment. Such
notice shall set forth the facts upon which such adjustment is based.

9. Reduction in Exercise Price .

     The Company’s Board of Directors may, at its sole discretion, reduce the Exercise Price of the
Warrants in effect at any time either for the life of the Warrants or any shorter period of time
determined by the Company’s Board of Directors. The Company shall promptly notify the Registered
Holders of any such reduction in the Exercise Price. Notwithstanding the foregoing, in no event
shall the number of Shares issuable to the holders of the Warrants pursuant to this Section 9 cause
the holders of the Warrants collectively to own in excess of 19.9% of the outstanding Common Stock
of the Company as at the date of the Note Purchase Agreement unless the Company has obtained the
prior approval of its stockholders as required by Section 713 of the AMEX Company Guide as in
effect from time to time, provided,

13

 

however, that the Company shall use commercially reasonable efforts to diligently seek to obtain
such approval of its stockholders.

10. Notices. All notices, demands, elections, requests and communications provided for
hereunder shall be in writing and sent

     (a) by telefacsimile if the sender on the same day sends a confirming copy of such notice by a
recognized overnight delivery service (charges prepaid), or

     (b) by registered or certified mail with return receipt requested (postage prepaid), or

     (c) by a recognized overnight delivery service (with charges prepaid). Any such notice must
be sent:

          (i) if to the Registered Holder or its nominee, to the Registered Holder or its nominee at the
address of the Registered Holder as set forth on the books maintained by the Company, or at such
other address as such Registered Holder or nominee shall have specified to the Company in writing,

          (ii) if to the Company, to the Company at its principal executive office to the attention of
Chief Executive Officer, or at such other address as the Company shall have specified to the holder
of each Warrant in writing.

     Notices under this Section 10 will be deemed given only when actually received.

11. General Provisions. This Warrant Certificate shall be construed and enforced in
accordance with, and governed by, the laws of the State of Delaware, where the Company maintains
its registered offices. Except as otherwise expressly stated herein, time is of the essence in
performing hereunder. The headings of this Warrant Certificate are for convenience in reference
only and shall not limit or otherwise affect the meaning hereof.

     IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be duly executed as of
the ___ day of ___, 2007.

	 	 	 	 	 	 	 	 	 
	 	 	CanArgo Energy Corporation  
	 
	 	 	 	 	 	 	 	 
	 

	 	By:	 	 	 	 	 	 
	 	 	 	 	 
	 

	 	Title:	 	 	 	 	 	 
	 	 	 	 	 

14

 

CanArgo Energy Corporation

     The following abbreviations, when used in the inscription on the face of this instrument,
shall be construed as though they were written out in full according to applicable laws or
regulations:

	 	 	 	 
	TEN COM — as tenants in common

TEN ENT — as tenants by the entireties

JR TEN — as joint tenants with right of survivorship and not as tenants in common

	 	 	UNIF GIFT MIN ACT-
Custodian

 

(Cust)       (Minor)

under Uniform Gifts
to Minor Act                     .

                    (State)
	 	 	 	 

Additional abbreviations may also be used though not in the above list.

FORM OF ASSIGNMENT

(To be Executed by the Registered Holder if He

Desires to Assign Warrants Evidenced by the

Within Warrant Certificate)

     FOR VALUE RECEIVED                                          hereby sells,
assigns and transfers (                    ) Warrants, evidenced by the within Warrant Certificate, and does
hereby irrevocably constitute and appoint                                          Attorney to transfer the said
Warrants evidenced by the within Warrant Certificates on the books of the Company, with full power
of substitution.

	 
	Dated:
                                                            .         
                                                                                                               .

                                                                                                                        Signature

Notice: The above signature must correspond with the name as written upon the Face of the
Warrant Certificate in every particular, without alteration or enlargement or any change
whatsoever.

Signature Guaranteed:

SIGNATURE MUST BE GUARANTEED BY A COMMERCIAL BANK OR MEMBER FIRM OF ONE OF THE FOLLOWING STOCK
EXCHANGES: NEW YORK STOCK EXCHANGE, PACIFIC COAST STOCK EXCHANGE, AMERICAN STOCK EXCHANGE, OR
MIDWEST STOCK EXCHANGE.

15

 

FORM OF ELECTION TO PURCHASE

(To be Executed by the Holder if he Desires to Exercise

the Warrants Evidenced by the Warrant Certificate)

To CanArgo Energy Corporation:

     [The
undersigned hereby irrevocably elects to exercise                                         (     ) Warrants, evidenced by the within
Warrant Certificate for, and to purchase thereunder,                                         
(                    ) full shares of Common Stock issuable upon exercise of said
Warrants and delivery of $                     and payment of any applicable taxes.

     OR

     [The
undersigned hereby irrevocably elects to convert                                          (     ) Warrants, evidenced by the within
Warrant Certificate, and to acquire Warrant Shares pursuant to the “Net Issue Conversion” provision
in Section 4 thereof, and, upon payment of any applicable taxes, to acquire Warrant Shares
thereunder.]

     The undersigned hereby warrants and represents that he/it is an “accredited investor” as
defined under Rule 501(a) of the Securities Act of 1933, as amended and accordingly the Warrants
being exercised and the securities deliverable upon exercise thereof have been registered under the
Act or are exempt from registration thereunder.

     Please register the certificates for such share as follows:

Please insert taxpayer identification

Or social security number (if any)                                                            .

 

(Please print name)

 

(Please print address)

     If said number of Warrants shall not be all the Warrants evidenced by the within Warrant
Certificate, the undersigned requests that a new Warrant Certificate evidencing the Warrants not so
exercised be registered in the name of the undersigned at the following address and deliver the
Certificate to that address:

 

(Please print address)

(SIGNATURES CONTINUED ON FOLLOWING PAGE)

     Dated:                           Signature:                                                            .

16

 

NOTICE: The above signature must correspond with the name as written upon the face of the
within Warrant Certificate in every particular, without alteration or enlargement or any change
whatsoever. If the certificate representing the shares is to be registered in a name other than
that in which the within Warrant Certificate is registered, the signature of the holder hereof must
be guaranteed.

Signature
Guaranteed:                                                                     
            .

SIGNATURE MUST BE GUARANTEED BY A COMMERCIAL BANK OR MEMBER FIRM OF ONE OF THE FOLLOWING STOCK
EXCHANGES: NEW YORK STOCK EXCHANGE, PACIFIC COAST STOCK EXCHANGE, AMERICAN STOCK EXCHANGE, OR
MIDWEST STOCK EXCHANGE.

17

 

SCHEDULE 2

Form of Senior Note Guaranty

GUARANTY AGREEMENT

__, 2007

This Guaranty Agreement (the “Agreement”) is made as of ___, 2007 by and among Persistency, a
Cayman Islands partnership (“Persistency”), each of the holders of Senior Indebtedness (as defined
below) that are a signatory hereto, and Ingalls & Snyder LLC (“I&S”) as agent for the Senior
Indebtedness holders. Capitalized terms not defined herein shall have the meanings ascribed to
them in that certain Note and Warrant Purchase Agreement dated June 28, 2006 by and among CanArgo
Energy Corporation (“CanArgo”) and Persistency.

WHEREAS, holders of the Senior Subordinated Notes of CanArgo have been given an exchange offer in
which such holders exchange such Senior Subordinated Notes for shares of capital stock of Tethys
Petroleum Limited (“Tethys”) and Persistency has agreed to exchange $5 million in aggregate
principal amount of its Senior Subordinated Notes for 2,000,000 shares of Tethys (the “Tethys
Shares”).

NOWWHEREFORE, the parties agree as follows:

	 	1.	 	Guaranty. In the event that (i) an Event of Default has occurred and is
continuing in respect of the Senior Secured Notes (“Senior Indebtedness”) purchased
pursuant to that certain Note Purchase Agreement dated as of July 25, 2005, and (ii) as a
result of such Event of Default any Senior Indebtedness is accelerated by the holders
thereof (a “Trigger Event”), I&S may require that Persistency purchase from I&S, within
thirty business days from delivery of notice by I&S to Persistency, an amount of Senior
Secured Notes with an aggregate principal amount equal to the Note Amount, for an aggregate
purchase price of $5 million in immediately available funds (the “Senior Note Purchase”).
For the purpose of clarity, under no circumstances shall the Senior Note Purchase apply to
Senior Subordinated Notes owned by any of the parties. The “Note Amount” shall be equal to
$5 million minus all accrued but unpaid interest and other amounts owing on the date Senior
Note Purchase takes place in respect of an aggregate principal amount of the Senior Secured
Notes equal to the Note Amount. Notwithstanding the foregoing, Persistency may choose to
deliver to I&S the Tethys Shares in lieu of effecting the Senior Note Purchase. In
addition, if the fair market value of Persistency’s assets fall below $50 million,
Persistency shall notify I&S of such event and, regardless of whether (i) through (ii)
above have occurred, I&S may require Persistency to effect the Senior Note Purchase or
deliver the Tethys Shares within thirty business days.
	 
	 	2.	 	Agreement to Subordinate Right of Payment. In the event that Persistency
effects the Senior Note Purchase, Persistency agrees that amounts owing on the portion of
the Senior Indebtedness purchased by Persistency pursuant to the Senior Note Purchase shall
be junior in right of payment to the Senior Secured Notes owned by I&S (but shall remain
senior to all other indebtedness of CanArgo).
	 
	 	3.	 	Termination of Guaranty
	 
	 	 	 	At any time after the occurrence of a Trigger Event, Persistency may give notice to I&S that
the guaranty must be exercised or will terminate on the twentieth day after such notice. If
such notice

18

 

	 	 	 	is given, the Purchase Option granted in the Intercreditor Agreement will also terminate on
the thirtieth day after the date of such notice.
	 
	 	 	 	In addition, the Guaranty shall automatically terminate and be of no further force and
effect if (i) the conversion of Persistency’s senior subordinated indebtedness into Tethys
Shares is subject to a successful claim of fraudulent conveyance or (ii) Persistency
exercises its Purchase Option (as that term is defined in the Intercreditor Agreement of
even date hereof) set forth in such Intercreditor Agreement.
	 
	 	4.	 	Representations and Warranties.

	 	a.	 	Persistency. Persistency represents to each I&S that:

	 	i.	 	it has full legal capacity, power and authority to
execute, deliver and perform this Agreement;
	 
	 	ii.	 	the execution, delivery and performance by
Persistency of this Agreement have been duly authorized by all necessary
legal action on the part of Persistency; the execution, delivery and
performance of this Agreement will not (a) conflict with any provision of
any governing instrument applicable to Persistency or (b) result in any
Material breach of any terms or provisions of, or constitute a Material
default under, any Material contract, agreement or instrument to which
Persistency is a party or by which Persistency is bound;
	 
	 	iii.	 	this Agreement constitutes a legal, valid and
binding obligation enforceable against Persistency in accordance with its
terms, except as such enforceability may be limited by (a) applicable
bankruptcy, insolvency, reorganization, moratorium, or other similar laws
affecting the enforcement of creditors’ rights generally and (b) general
principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law); and
	 
	 	iv.	 	Persistency is an institutional accredited
investor.

	 	b.	 	 I&S. I&S represents to Persistency that:

	 	i.	 	it has full legal capacity, power and authority to
execute, deliver and perform this Agreement;
	 
	 	ii.	 	the execution, delivery and performance by it of
this Agreement have been duly authorized by all necessary legal action on
its part;
	 
	 	iii.	 	the execution, delivery and performance of this
Agreement will not (a) conflict with any provision of any governing
instrument applicable to it or (b) result in any Material breach of any
terms or provisions of, or constitute a Material default under, any
Material contract, agreement or instrument to which it is a party or by
which it is bound;
	 
	 	iv.	 	this Agreement constitutes a legal, valid and
binding obligation enforceable against it in accordance with its terms,
except as such enforceability may be limited by (a) applicable
bankruptcy, insolvency, reorganization, moratorium, or other similar laws
affecting the enforcement of creditors’ rights generally and (b) general
principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law);
	 
	 	v.	 	it is an institutional accredited investor; and
	 
	 	vi.	 	it owns the Senior Indebtedness set forth opposite
such Senior Indebtedness Holder’s name on Exhibit A hereto.

	 	5.	 	Indemnification.

	 	a.	 	Persistency indemnifies and agrees to hold I&S harmless from damages
arising from any Material breach of any of Persistency’s representations and
warranties contained in this Agreement.

19

 

	 	b.	 	I&S indemnifies and agrees to hold Persistency harmless from damages
arising from any Material breach of any of its representations and warranties
contained in this Agreement.

	 	6.	 	Severability. Any provision of this Agreement that is prohibited or
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.
	 
	 	7.	 	Counterparts. 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.
	 
	 	8.	 	Governing Law. 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.
	 
	 	9.	 	Submission to Jurisdiction. For the purposes of any action or proceeding
involving this Agreement, Persistency and each Senior Indebtedness Holder shall cause its
Subsidiaries to, expressly submit 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. Each
party 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, the
Notes 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.

20exv10w4

 

Exhibit 10.4

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 Purchaser listed on Schedule A attached hereto ( the
“Purchaser”).

RECITALS

     A. Purchaser has acquired and Company has issued warrants to purchase up to 5 million shares
of the Company’s common stock, par value $0.10 per share (“Common Stock”) expiring on the
September 1, 2009 (the “Warrants”) pursuant to the Conversion Agreement (“Conversion
Agreement”) of even date herewith by and among the Company, the Purchaser and the other parties
thereto.

     B. Pursuant to the terms of the Warrants, the Purchaser acquired the right 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 Purchaser
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 Purchaser 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 Purchaser 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 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 the 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 June 28, 2006, 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 registration statement and supplements to such
Prospectus, and all exhibits and other material incorporated by reference in
such registration statement and Prospectus.

 - 2 - 

 

	 	(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 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

 - 3 - 

 

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.

               (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

 - 4 - 

 

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 22 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 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

 - 5 - 

 

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 amends 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.

     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

 - 6 - 

 

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.

     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

 - 7 - 

 

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 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

 - 8 - 

 

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 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

 - 9 - 

 

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 any investigation made by or on behalf of any indemnified party, and
shall survive the transfer of securities by any such party.

 - 10 - 

 

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.

     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

 - 11 - 

 

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 Counterparts, 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)

 - 12 - 

 

     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	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	PURCHASER:
	 
	 	 	 	 	 	 	 	 
	 	 	Persistency 
	 
	 	 	 	 	 	 	 	 
	 

	 	By:	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 

	 	Name:	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 

	 	Title:	 	 	 	 	 	 
	 	 	 	 	 	 	 

 - 13 - 

 

SCHEDULE A

	 	 	 	 	 
	NAME OF PURCHASER	 	ADDRESS	 
	 
	PERSISTENCY

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00124-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00124-of-00352.parquet"}]]