CANARGO ENERGY CORP
EX-10.1
<DOCUMENT>
<TYPE>EX-10.1
<SEQUENCE>2
<FILENAME>u47804exv10w1.htm
<DESCRIPTION>EX-10.1
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<P align="left" style="font-size: 10pt"><B>THIS AMENDED AND RESTATED AGREEMENT </B>is made as a Deed the 27th day of August
2004:-


<P align="left" style="font-size: 10pt"><B>BETWEEN</B>



<P>
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<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">(1)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>CANARGO ENERGY CORPORATION</B>, a company registered in Delaware, USA and
having a place of business at PO Box 291, St Peter Port, Guernsey GY1 3RR
(the &#147;<B>Company</B>&#148;); and</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">(2)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>SALAHI OZTURK </B>residing at 30, Tuna Street, Lefkosa, Mersin, 10, Turkey
(the &#147;<B>Lender</B>&#148;);</TD>
</TR>

</TABLE>
<P align="left" style="font-size: 10pt"><B>WHEREAS</B>:-



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<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">(A)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>On 26 April&nbsp;2004, the Lender and the Company entered into a loan and
warrant agreement (&#147;<B>Original Agreement</B>&#148;) in which the parties recorded,
inter alia, the terms on which the Lender agreed to advance to the Company
the Loan (as defined herein) in consideration for which the Company issued
to the Lender a warrant to subscribe for 1,000,000 shares of the Company&#146;s
common stock of par value US$0.10 each in the capital of the Company (the
&#147;<B>Original Warrant</B>&#148;);</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">(B)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The parties have agreed to amend and restate the Original Agreement on
the terms set out herein.</TD>
</TR>

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<P align="left" style="font-size: 10pt"><B>NOW THEREFORE IT IS IT IS AGREED </B>as follows:-



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    <TD width="2%" nowrap align="left">1</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>DEFINITIONS AND INTERPRETATION</B></TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">1.1</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In this Agreement unless the context otherwise requires</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>&#147;<B>Additional Loan</B>&#148; means the additional sum of US$1,050,000 including the
Fee;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>&#147;<B>Auditors</B>&#148; means the auditors of the Company from time to time;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>&#147;<B>Commission</B>&#148; means the United States Securities and Exchange Commission;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>&#147;<B>Common Stock</B>&#148; means the common stock of the Company of par value
US$0.10 in the capital of the Company;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>&#147;<B>Cornell Facility</B>&#148; means a Standby Equity Distribution Agreement between
Cornell Capital Partners, L.P. and the Company dated 11th February&nbsp;2004;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>&#147;<B>Default Interest Rate</B>&#148; means fifteen per cent (15%) per annum;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>&#147;<B>Equity Conversion Rate</B>&#148; means 15% above the Market Price;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>&#147;<B>Exercise Notice</B>&#148; means a notice in writing in the form set out in Part
2 of the Schedule served by the Lender on the Company pursuant to Clause
7.2;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>&#147;<B>Exchange Act</B>&#148; means the United States Securities Exchange Act of 1934,
as amended;</TD>
</TR>

</TABLE>
<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

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<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>&#147;<B>Extraordinary Resolution</B>&#148; for the purposes of Clause 11 means a
resolution proposed at a meeting of the holders of outstanding warrants
to subscribe for shares of Common Stock duly convened and held and
passed by a majority consisting of warrant holders entitled to subscribe
for not less than 50 per cent of the shares of Common Stock which are
subject to outstanding warrants;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>&#147;<B>Exercise Period</B>&#148; means the period of 4&nbsp;years commencing one year from
the date of this Agreement;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>&#147;<B>Exercise Price</B>&#148; means a price of 105% of the Market Price;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>&#147;<B>Fee</B>&#148; means the corporate finance fee payable by the Company to the
Lender in accordance with Clause 16;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>&#147;<B>Initial Default Period</B>&#148; means a period of one month commencing on the
date of expiry of either Term A or Term B as the case may be;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>&#147;<B>Interest Rate</B>&#148; means seven and a half per cent (7.5%) per annum;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>&#147;<B>Market Price</B>&#148; means $0.60;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>&#147;<B>New Securities</B>&#148; means the shares of Common Stock issued to the Lender
upon conversion of the Additional Loan in accordance with Clause 5;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>&#147;<B>Original Loan</B>&#148; has the meaning ascribed to it in Recital (A);</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>&#147;<B>Penalty Interest Rate</B>&#148; means twenty per cent (20%) per annum;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>&#147;<B>Regulation&nbsp;S</B>&#148; means Regulation&nbsp;S promulgated under the Securities Act;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>&#147;<B>Rules and Regulations</B>&#148; means the rules and regulations adopted by the
Commission under either the Securities Act or the Exchange Act, as
applicable;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>&#147;<B>Schedule</B>&#148; means the schedule in three parts attached to and forming
part of this Agreement;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>&#147;<B>Securities Act</B>&#148; means the United States Securities Act of 1933, as
amended;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>&#147;<B>Subsidiary</B>&#148; means, for the purposes of Clause 13, Ninotsminda Oil
Company Limited or such other subsidiary of the Company which is a party
to an oil sales contract in relation to the sale of the Profit Oil (as
defined in the PSC) from time to time;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>&#147;<B>Term A</B>&#148; means a period of one year and one day commencing on the date
of draw down by the Company of the Loan or any part thereof;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>&#147;<B>Term B</B>&#148; means a period of two years and one day commencing on the date
of drawdown by the Company of the Additional Loan or any part thereof;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>&#147;<B>Warrant</B>&#148; means a warrant to subscribe for the Warrant Shares pursuant
to Clause 6.1;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>&#147;<B>Warrant Certificate</B>&#148; means a certificate in the form set out in Part&nbsp;1
of the Schedule; and</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>&#147;<B>Warrant Shares</B>&#148; means up to 2,000,0000 shares of Common Stock issuable
upon exercise of the Warrant.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">1.2</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In this Agreement, unless otherwise specified or the context otherwise
requires:-</TD>
</TR>

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<P align="center" style="font-size: 10pt">&nbsp;
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    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">(a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>words importing the singular only and shall include the
plural and vice versa;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">(b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>words importing any gender shall include all other genders;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">(c)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>reference to a Clause or Recital is to a clause or recital
of this Agreement;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">(d)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>reference to the Schedule is to the schedule to this
Agreement;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">(e)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>words importing the whole shall be treated as including a
reference to any part thereof;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">(f)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>reference to a &#147;person&#148; includes any individual, firm,
company or other body corporate wherever incorporated or
established, corporation, government, state or agency of state,
trust or foundation, or any association, partnership or
unincorporated body (whether or not having separate legal
personality) or two or more of the foregoing; and</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">(g)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>reference to this Agreement or to any other document shall
be construed as references to this Agreement or to that other
document as modified, amended, varied, supplemented, assigned,
novated or replaced from time to time.</TD>
</TR>

</TABLE>

<P>
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<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">1.3</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Headings used in this Agreement shall not affect its construction or
interpretation.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">1.4</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Schedule and Recitals form part of this Agreement and have the same
full force and effect as if expressly set out in their entirety in the
operative part of this Agreement.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">2</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>THE LOAN</B></TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">2.1</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Lender hereby agrees to advance the Loan and the Additional Loan to
the Company on the terms and subject to the conditions set out in this
Agreement.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">2.2</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Loan was drawn down by the Company in full on or around 26th April
2004 and the Additional Loan shall be made available to the Company in
immediately available funds and the Company shall be entitled to draw down
all or any part of the Additional Loan immediately following the execution
of this Agreement.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">2.3</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Additional Loan shall be made available and drawn down in one
tranche, and upon draw down in immediately available funds shall be wire
transferred for deposit in the Company&#146;s bank account the details of which
are as follows:-</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>US Dollar Account:<BR>
Correspondent Bank:<BR>
Bankers Trust Company<BR>
1 Bankers Trust Plaza<BR>
Liberty Street<BR>
New York NY 10006<BR>
A/C No: 04082437<BR>
SWIFT: BKTRUS33<BR></TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>For further credit of:<BR>
CanArgo Energy Corporation USD Account<BR>
Account Number: 011-660859-360<BR>
HSBC Bank International Limited<BR>
PO Box 315<BR>
St Peter Port<BR>
Guernsey GY1 3JQ</TD>
</TR>

</TABLE>
<P align="center" style="font-size: 10pt">&nbsp;
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    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Channel Islands<BR>
SWIFT: MIDLJESH<BR></TD>
</TR>

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    <TD width="2%" nowrap align="left">3</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>INTEREST</B></TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">3.1</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Subject to Clause 3.2, the Loan and the Additional Loan shall bear
interest at the Interest Rate. Such interest shall accrue from day to day
from the respective dates of drawdown of the Loan and the Additional Loan
until the date of payment (both dates inclusive) and shall be calculated
on the basis of actual days elapsed and a 365&nbsp;day year.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">3.2</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Interest due from the Company under this Agreement shall be paid by the
Company to the Lender quarterly in arrears, the first payment being due
and payable on 31st December&nbsp;2004 (the &#147;<B>First Interest Payment Date</B>&#148;).</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">3.3</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Interest paid by the Company to the Lender on the First Interest Payment
Date shall include any rolled up interest accrued in respect of the Loan
for the period from 26th April&nbsp;2004 until 31st December&nbsp;2004 (both dates
inclusive).</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">3.4</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In the event that the Company shall fail to repay the Loan and all
interest accrued thereon in full on or before the expiry of Term A then:-</TD>
</TR>

</TABLE>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">(a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the outstanding balance of the Loan and all accrued
interest shall bear interest at the Default Interest Rate which
shall accrue from day to day from the date of the expiry of Term A
until the date of payment (both dates inclusive) during the Initial
Default Period; and</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">(b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>any amount of the Loan and all accrued interest which
remains outstanding following the expiry of the Initial Default
Period shall bear interest at the Penalty Interest Rate which shall
accrue from day to day from the date of the expiry of the Initial
Default Period until the date of payment (both dates inclusive) and
shall be calculated on the basis of actual days elapsed and a 365
day year.</TD>
</TR>

</TABLE>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">3.5</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In the event that the Company shall fail to repay the Additional Loan and
all interest accrued thereon in full on or before the expiry of Term B
then:-</TD>
</TR>

</TABLE>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">(a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the outstanding balance of the Additional Loan and all
accrued interest shall bear interest at the Default Interest Rate
which shall accrue from day to day from the date of the expiry of
Term B until the date of payment (both dates inclusive) during the
Initial Default Period; and</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">(b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>any amount of the Additional Loan and all accrued interest
which remains outstanding following the expiry of the Initial
Default Period shall bear interest at the Penalty Interest Rate
which shall accrue from day to day from the date of the expiry of
the Initial Default Period until the date of payment (both dates
inclusive) and shall be calculated on the basis of actual days
elapsed and a 365&nbsp;day year.</TD>
</TR>

</TABLE>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">4</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>REPAYMENT</B></TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">4.1</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Repayment of the Loan</B></TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">4.1.1</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Loan together with all interest accrued thereon shall be repaid in
full by the Company to the Lender on or before the date of expiry of Term
A. In the event that the Company raises in excess of US$10,000,000 by way
of an equity offering(s) the Loan shall be repayable within 7&nbsp;days of
receipt by the Company of the proceeds of that offering.</TD>
</TR>

</TABLE>
<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


</TABLE>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">4.1.2</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In the event that the Company shall be unable to repay the Loan and all
interest accrued thereon in accordance with Clause 4.1.1, the Company
hereby unconditionally and irrevocably undertakes to the Lender that it
shall use all reasonable endeavours to draw down sufficient funds from the
Cornell Facility in order to repay such sums as soon as reasonably
practicable following the expiry of Term A.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">4.2</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Repayment of Additional Loan</B></TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">4.2.1</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In the event that the Additional Loan has not previously been converted
pursuant to Clause 5, the Additional Loan together with all interest
accrued thereon shall be repaid in full by the Company to the Lender on or
before the date of expiry of the Term B.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">4.2.2</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In the event that the Company is unable to repay the Additional Loan and
all interest accrued thereon in accordance with Clause 4.2.1 and the
Additional Loan has not previously been converted in accordance with
Clause 5, the Company hereby unconditionally and irrevocably undertakes to
the Lender that it shall use all reasonable endeavours to drawdown
sufficient funds from the Cornell Facility in order to repay such sums as
soon as reasonably practicable following expiry of Term B.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">5</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>CONVERSION OF ADDITIONAL LOAN</B></TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">5.1</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Subject to Clause 5.4, the Lender may require the Company to convert into
Common Stock all of the Additional Loan then outstanding together with all
accrued but unpaid interest thereon by giving not less than 30&nbsp;days prior
notice in writing to the Company (the &#147;<B>Conversion Notice</B>&#148;).</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">5.2</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In the event that prior to the expiry of Term B, the closing price of the
Company&#146;s Common Stock as reported on the American Stock Exchange
Composite Transactions Tape exceeds the Market Price by 60% for a period
of 20 consecutive trading days then the Company may require the Lender to
convert into the Company&#146;s Common Stock all of the Additional Loan then
outstanding together with all accrued but unpaid interest thereon by
giving the Lender not less than 30&nbsp;days prior notice in writing (the
&#147;<B>Forced Conversion Notice</B>&#148;).</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">5.3</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>For the purposes of Clause 5.1 and 5.2, the number of New Securities to
be allotted and issued fully paid upon conversion to the Lender shall be
calculated by dividing the sum of the outstanding amount of the Additional
Loan together with all accrued but unpaid interest thereon by the Equity
Conversion Rate rounded down to the nearest number of whole New Securities
and such allotment and issue shall be in full satisfaction and discharge
of the Additional Loan so converted.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">5.4</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Notwithstanding the provisions of Clauses 5.1 and 5.2, the Lender and the
Company are specifically prohibited from requiring the conversion of any
sums outstanding under this Agreement into Common Stock for a period of
one year from the date of this Agreement (&#147;<B>Hold Period</B>&#148;).</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">5.5</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Once the Hold Period has elapsed, the Company hereby undertakes to use
its reasonable endeavours to procure the registration of the underlying
stock for resale pursuant to the provisions of the Securities Act.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">5.6</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Upon conversion of the Additional Loan pursuant to Clause 5.1 or 5.2,
interest shall cease to accrue in relation to the Additional Loan which is
converted in respect of any period after the date of such conversion. The
Common Stock resulting from such conversion will carry the right to
receive all dividends and other distributions declared, made or paid on
the Common Stock after the applicable conversion date and will rank
otherwise <I>pari passu </I>in all regards with the shares of Common Stock in
issue on the date of such allotment.</TD>
</TR>

</TABLE>
<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">5.7</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Once lodged a Conversion Notice or Forced Conversion Notice shall be
irrevocable save with the consent of the directors of the Company.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">6</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>GRANT OF WARRANT</B></TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">6.1</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In consideration of and subject only to the Lender advancing the Loan and
the Additional Loan to the Company and other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged and confirmed, the Company hereby issues the Warrant to the
Lender to subscribe for any or all of the Warrant Shares at the Exercise
Price on the terms set out in this Agreement and the Warrant Certificate.
The Original Warrant issued by the Company to the Lender (or his nominee)
on or around 26th April&nbsp;2004 shall be deemed to be cancelled and the
Lender shall deliver the Original Warrant to the Company upon execution of
this Agreement.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">6.2</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Immediately following the execution of this Agreement the Company shall
deliver to the Lender a Warrant Certificate in respect of the Warrant
Shares.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">6.3</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In the event of any capitalisation issue, rights issue, open offer,
consolidation, sub-division or reduction or other variation of share
capital by the Company the number of Warrant Shares and/or the Exercise
Price in relation to each Warrant Share may, if the Board of the Company
considers it appropriate, be adjusted in such manner as the Auditors
confirm in writing to be fair and reasonable.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">6.4</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Company shall promptly after any adjustment has been made pursuant to
this clause give notice thereof to each Warrant Holder.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">7</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>EXERCISE OF WARRANT</B></TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">7.1</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Warrant may be exercised by the Lender or any permitted holder of any
Warrant (herein referred to as a &#147;<B>Holder</B>&#148;) at any time during the
Exercise Period.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">7.2</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Warrant shall be exercised by the Holder by executing and delivering
to the Company the Exercise Notice intimating that he wishes to exercise
the Warrant and specifying the number of Warrant Shares which he then
wishes to subscribe for.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">7.3</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Once lodged, an Exercise Notice shall be irrevocable save with the
consent of the directors of the Company. An Exercise Notice that is
completed and lodged otherwise than in accordance with this Clause 7 shall
be of no effect.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">7.4</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>On receipt of an Exercise Notice the Company shall, subject to receipt by
the Company of:-</TD>
</TR>

</TABLE>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">(a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>an amount equal to the aggregate of the Exercise Price due
in respect of the number of Warrant Shares specified in the
Exercise Notice; and</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">(b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the Warrant Certificate;</TD>
</TR>

</TABLE>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>and subject to compliance by the Company with the terms of Clause 7.5,
issue and allot to the Holder the number of Warrant Shares specified in
the Exercise Notice as soon as reasonably practicable thereafter.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">7.5</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Company hereby unconditionally and irrevocably undertakes and
confirms to the Holder that it shall, prior to the issue and allotment of
any Warrant Shares pursuant to Clause 7.4 ensure that it has complied in
all respects with the Rules and Regulations, the listing requirements of
the American Stock Exchange and the Rules of the Oslo Stock Exchange and
in order to use its reasonable efforts to ensure that the Warrant Shares
allotted</TD>
</TR>

</TABLE>
<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt"><TR valign="top" style="font-size: 10pt; color: #textcolor#; background: #bgcolor#">
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>to the Holder are freely tradable and not restricted as at the date of
issue. To the extent that it is not possible and the Warrant Shares so
issued are restricted, the Company shall use its best efforts to
register for resale the said restricted stock under the Securities Act
as soon as possible thereafter.</TD>
</TR>


<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">7.6</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In the event that the Holder serves an Exercise Notice in respect of some
only of the Warrant Shares (the &#147;<B>Exercise Shares</B>&#148;) the Company shall at
the time of issue and allotment of the Exercise Shares issue to the Holder
a new Warrant Certificate of like tenor in respect of the balance of
Warrant Shares remaining available to the Lender under the Warrant.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">8</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>REGISTER</B></TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">8.1</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Company shall keep a register of warrants (the &#147;<B>Register</B>&#148;) at its
registered office for the time being in which shall be entered:-</TD>
</TR>

</TABLE>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">(a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the name and address of the Holder from time to time of any
warrants;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">(b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the date at which the Holder is entered in the Register
respect of the warrant standing in his name; and</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">(c)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the serial number of each warrant certificate issued by the
Company and the date of issue thereof.</TD>
</TR>

</TABLE>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">8.2</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Holder shall be entitled at all reasonable times during normal
business hours to inspect and take copies of the Register.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">9</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>LAPSE OF WARRANT</B></TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">9.1</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Time shall be of the essence for the purposes of the exercise of the
Warrant.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">9.2</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>To the extent not already exercised before the expiry of the Exercise
Period, the Warrant shall automatically lapse on the expiry of the
Exercise Period.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">10</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>RANKING OF WARRANT SHARES</B></TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">10.1</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Warrant Shares issued and allotted to the Holder pursuant to Clause 7.4
will rank for all dividends or other distributions declared on the shares
of Common Stock after the date of allotment of such shares (but not
before such date) and otherwise <I>pari passu </I>in all respects with the shares
of Common Stock in issue on the date of such allotment.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">11</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>VARIATION OF RIGHTS</B></TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">11.1</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>All or any of the rights for the time being attached to the Warrant may
from time to time (whether or not the Company is being wound up) be
altered or abrogated with the consent in writing of the Company and with
either the consent in writing of all registered Holders entitled to
subscribe for not less than 50 per cent of the shares of Common Stock
which are subject to outstanding warrants or with the sanction of an
Extraordinary Resolution of the Holders.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">12</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>LOST OR DAMAGED WARRANT CERTIFICATES</B></TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">12.1</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>If any Warrant Certificate is worn out or defaced then upon production of
such certificate to the directors of the Company they may cancel the same
and may issue a new certificate in lieu thereof.</TD>
</TR>


</TABLE>
<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">12.2</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>If any Warrant Certificate is lost or destroyed then upon proof thereof
to the reasonable satisfaction of the directors of the Company (or in
default of proof, on such indemnity as the directors of the Company may
deem adequate, being given) a new certificate in lieu thereof may be given
to the Holder free of charge (save as regards any payment pursuant to any
such indemnity).</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">12.3</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>An entry as to the issue of any new Warrant Certificate and indemnity (if
any) shall be made in the Register.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">13</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>SECURITY</B></TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>As security for the Loan the Company will, within three months of the
date hereof, deliver or procure the delivery of a lien over 50% of the
revenues received by the Company through its Subsidiary from the sale of
its Profit Oil as defined in the Production Sharing Agreement dated 15th
February&nbsp;1996 (the &#147;<B>PSC</B>&#148;) to which it is Party in relation to <I>inter alia</I>
the Ninotsminda Field in Georgia. Such security shall only remain in
place while the Loan is outstanding and shall be immediately discharged
in the event that the Loan is repaid in accordance with Clause 4.1.1.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">14</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>COMPANY UNDERTAKINGS</B></TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">14.1</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Company undertakes to the Holder that it shall throughout the
Exercise Period keep available for issue sufficient authorised but
unissued shares of Common Stock necessary to satisfy in full all
subscription rights exercisable by the Holder pursuant to the Warrant.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">14.2</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>If an offer or invitation is made to all holders of shares of Common
Stock to acquire the whole or any part of such shares and the Company
becomes aware that as a result of such offer or invitation the right to
cast a majority of votes which may ordinarily be cast at a general meeting
of the Company has become or may become vested in the offeror and/or
persons acting in concert with the offeror, the Company shall, so far as
it is able, procure that a like offer or invitation is made or extended at
the same time to the Holder as if the Warrant had been exercised in full
and as if the Warrant Shares issued pursuant to such exercise had been
issued immediately prior to the record date for such an offer or
invitation.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">14.3</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>For so long as the Warrant shall remain exercisable by the Holder the
Company shall send to each registered Holder a copy of every document sent
to all the holders of shares of Common Stock at the same time as it is
sent to such holders.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">15</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>REPRESENTATIONS AND WARRANTIES</B></TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Lender by signing this Agreement makes the representations and
warranties set out in Part&nbsp;3 of the Schedule.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">16</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>FEES</B></TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In consideration for the Lender advancing to the Company the additional
sum of $1,000,000 pursuant to Clause 2, the Company shall pay to the
Lender a non-refundable corporate finance fee of $50,000 (the &#147;<B>Fee</B>&#148;).</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">17</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>NOTICE</B></TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">17.1</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Any notice to be given under, or in connection with the matters
contemplated by, this Agreement shall be in writing and signed by or on
behalf of the party giving it and shall be served by delivering it
personally or sending it by pre-paid recorded delivery or registered post
or by facsimile to the address and for the attention of the relevant party
set out below</TD>
</TR>

</TABLE>
<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt"><TR valign="top" style="font-size: 10pt; color: #textcolor#; background: #bgcolor#">
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>(or as otherwise notified by that party hereunder). Any such notice
shall be deemed to have been received:-</TD>
</TR>

</TABLE>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">(a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>if delivered personally, at the time of delivery; and</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">(b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>in the case of pre-paid recorded delivery or registered
post, 48 hours from the date of posting;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">(c)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>in the case of fax, at the time of transmission;</TD>
</TR>

</TABLE>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Provided that if deemed receipt occurs before 9am on a business day the
notice shall be deemed to have been received at 9am on that day and if
deemed receipt occurs after 5pm on a business day, or on a day which is
not a business day, the notice shall be deemed to have been received at
9am on the next business day. For the purpose of this Clause 17
&#147;<B>business day</B>&#148; means a day, other than a Saturday or a Sunday, on which
clearing banks are open for commercial business in London.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">17.2</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The addresses and facsimile numbers of the parties for the purposes of
this Clause 17 are:-</TD>
</TR>

</TABLE>
<DIV align="right">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="97%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="27%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="70%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Company:
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">CanArgo Energy Corporation</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Address:
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">P.O. Box 291, St Peter Port, Guernsey GY1 3RR</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">For the attention of:
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Dr David Robson</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Fax number:
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">01481 729982</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Lender:
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Salahi Ozturk</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Address:
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">30, Tuna Street, Lefkosa, Mersin, 10, Turkey</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Fax number:
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&#043;41 22 73 90415</TD>
</TR>

<!-- End Table Body --></TABLE>
</DIV>



<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left"></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>or such other address or facsimile number as may be notified in writing
from time to time by the relevant party to the other party.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">17.3</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>For the avoidance of doubt notice given under this Agreement shall not be
validly served if sent by e-mail.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">18</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>FURTHER ASSURANCE</B></TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>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.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">19</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>ASSIGNMENT</B></TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Neither party shall be entitled to assign in whole or in part any rights
and/or obligations arising under this Agreement (including any
assignment of the Warrant or any interest therein by Lender) to a third
party without the prior written consent of the other party.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">20</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>ENTIRE AGREEMENT</B></TD>
</TR>

</TABLE>
<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>This Agreement constitutes the entire agreement between the parties with
respect to the matters dealt with herein and supersedes any previous
agreement between the parties in relation to such matters.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">21</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>VARIATION</B></TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>No variation of this Agreement shall be valid or effective unless made
by an instrument in writing signed by both of the parties.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">22</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>WAIVER</B></TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>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.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">23</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>SEVERABILITY</B></TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>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.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">24</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>COUNTERPARTS</B></TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>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.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">25</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>LAW AND JURISDICTION</B></TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">25.1</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>This Agreement shall be governed by and construed in accordance with the
law of England.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">25.2</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Each party hereby submits to the non-exclusive jurisdiction of the Courts
of England as regards any claim, dispute or matter arising out of or in
connection with this Agreement and its implementation and effect.</TD>
</TR>

</TABLE>
<P align="left" style="font-size: 10pt"><B>IN WITNESS </B>of which the parties have executed and delivered this document as a
deed on the date first before written.



<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<P align="center" style="font-size: 10pt"><B>SCHEDULE</B>



<P align="center" style="font-size: 10pt"><B>Part 1</B>



<P align="center" style="font-size: 10pt"><B>Warrant Certificate</B>


<P align="left" style="font-size: 10pt"><B>CANARGO ENERGY CORPORATION (the &#147;Company&#148;)</B>



<P align="left" style="font-size: 10pt">P.O. Box 291<BR>
Commerce House<BR>
Les Banques<BR>
St Peter Port<BR>
GUERNSEY<BR>
GY1 3RR

<P align="left" style="font-size: 10pt"><B>Warrant representing subscription rights for shares of common stock of par
value of US$0.10 in the capital of the Company</B>


<P align="left" style="font-size: 10pt">This is to certify that &#091;Salahi Ozturk of 30, Tuna Street, Lefkosa, Mersin, 10,
Turkey&#093; (the &#147;<B>Holder</B>&#148;) is the registered holder of a Warrant which entitles the
holder to subscribe for 2,000,000 shares of common stock of par value of
US$0.10 in the capital of the Company fully paid (the &#147;<B>Warrant Shares</B>&#148;) at a
price of 105% of the Market Price (as defined in the agreement between the
Company and Salahi Ozturk dated &#091; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &#093; (the
&#147;<B>Agreement</B>&#148;)) per Warrant Share subject to the terms of the Agreement, the
relevant provisions of which are incorporated herein by reference as if fully
set forth herein. Subject as aforesaid the Holder shall be entitled to
subscribe for the Warrant Shares upon exercise of the Warrant and may exercise
the Warrant in whole or in part and from time to time.


<P align="left" style="font-size: 10pt">THE WARRANTS REPRESENTED HEREBY AND THE COMMON STOCK ISSUABLE UPON EXERCISE OF
THE WARRANTS (COLLECTIVELY, THE &#147;WARRANT SECURITIES&#148;), HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE &#147;ACT&#148;), 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.


<P align="left" style="font-size: 10pt">THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE COMMON STOCK ISSUABLE UPON
EXERCISE OF THE WARRANTS HAVE NOT BEEN REGISTERED UNDER THE ACT IN RELIANCE
UPON THE PROVISIONS OF REGULATION S PROMULGATED UNDER SAID ACT. ACCORDINGLY,
THE WARRANTS MAY NOT BE EXERCISED IN THE &#147;UNITED STATES&#148; OR BY OR ON BEHALF OF
ANY &#147;U.S PERSON&#148; AND THE WARRANT SECURITIES MAY NOT BE DELIVERED WITHIN THE
UNITED STATES OTHER THAN IN OFFERINGS DEEMED TO MEET THE DEFINITION OF AN
&#147;OFFSHORE TRANSACTION&#148; (AS ALL SUCH TERMS ARE DEFINED IN REGULATION S) EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SAID ACT OR PURSUANT TO
AN EXEMPTION FROM REGISTRATION UNDER SAID ACT.


<P align="left" style="font-size: 10pt"><B>Dated</B>



<P align="left" style="font-size: 10pt">EXECUTED AND DELIVERED AS A DEED


<P align="left" style="font-size: 10pt">by CANARGO ENERGY CORPORATION acting by

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="37%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="60%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">_____________________________
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">_____________________________
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Full Name</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">_____________________________
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director/Secretary</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">_____________________________
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Full Name</TD>
</TR>

<!-- End Table Body --></TABLE>
</DIV>


<P align="left" style="font-size: 10pt"><B><I>Note: No transfer of any or all of the subscription rights represented by this
Warrant will be registered without the prior written consent of the Company and
production of this Warrant or an indemnity satisfactory to the Company.</I></B>



<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<P align="center" style="font-size: 10pt"><B>Part 2</B>



<P align="center" style="font-size: 10pt"><B>Exercise Notice</B>



<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="5%" nowrap align="left"><B>To:</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>The Directors</B><BR><B>
Canargo Energy Corporation (the &#147;Company&#148;)</B></TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="5%" nowrap align="left"><B>From:</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>&#091;Warrantholder&#093;</B><BR><B>
&#091;address&#093;</B></TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="5%" nowrap align="left"><B>Date:</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>&#091;</B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>&#093; 200&#091; &#093;</B></TD>
</TR>

</TABLE>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">1</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>I/We, the registered holder(s) of this Warrant hereby:-</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">1.1</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>give notice of my/our wish to exercise my/our subscription rights in respect &#091; &#093; shares of common stock of par value
of US$0.10 in the capital of the
Company (the &#147;Warrant Shares&#148;) in
accordance with the particulars
below;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">1.2</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>certify that (i)&nbsp;the undersigned is not a &#147;U.S. person&#148; (as defined in
Regulation&nbsp;S promulgated under the Securities Act of 1933, as amended),
(ii)&nbsp;the undersigned is not exercising any Warrants on behalf of a U.S.
person, (iii)&nbsp;no U.S. person has any interest in the Warrants being
exercised or the securities to be issued upon their exercise, and (iv)
that the undersigned is exercising the Warrants outside the United States.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">1.3</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>confirm that US$&#091; &#093; has been transferred to the bank account notified to
me/us by the Company being payment in full at a price of &#091; &#093; per share for
the total number of Warrant Shares for which I/we wish to subscribe;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">1.4</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>request that all of such Warrant Shares be registered in my/our name(s)
and authorise the entry of my/our name(s) in the register of members in
respect thereof;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">1.5</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>authorise the despatch of the Certificate in respect of the Warrant
Shares to be allotted to me/us and a Warrant in my/our name(s) for any
balance of my/our subscription rights remaining exercisable by post at
my/our risk to the address shown above.</TD>
</TR>

</TABLE>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="49%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">_______________________________
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">_______________________________</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>

<TR>
<TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">_______________________________
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">_______________________________</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>



<TR>
<TD>&nbsp;</TD>
</TR>


<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B>Signature(s) of registered Warrantholder(s)</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="3" align="center" valign="top"><B>Date(s)</B>
</TD>
</TR>

<!-- End Table Body --></TABLE>
</DIV>



<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="center" style="font-size: 10pt"><B>Part 3</B>



<P align="center" style="font-size: 10pt"><B>Representations and Warranties</B>


<P align="left" style="font-size: 10pt">The Lender hereby represents, warrants and covenants to the Company as follows:



<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left"><B>1.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Compliance with United States Securities Laws</B></TD>
</TR>

</TABLE>
<P align="left" style="font-size: 10pt">The Lender understands and acknowledges that (a)&nbsp;the Warrants and the Warrants
Shares to be issued in respect thereof and the shares of Common Stock (the
&#147;Conversion Stock&#148;) to be issued upon conversion of the Loan and Additional
Loan (collectively, the &#147;Loans&#148;) have not been and, except as provided in the
Agreement, will not be registered under the Securities Act, and may not be
offered or sold in the United States or to, or for the account or benefit of,
any &#147;U.S. person&#148; (as defined in Regulation&nbsp;S), unless such Warrants or, in the
event that the Warrants have been exercised, the Warrant Shares or the
Conversion Stock, as the case may be, are registered under the US Securities
Act and any applicable state securities or blue sky laws or such offer or sale
is made pursuant to exemptions from the registration requirements of such laws,
(b)&nbsp;the Warrants and upon exercise, the Warrant shares, and upon conversion of
the Loans, the conversion Stock, are being issued pursuant to the terms of
Regulation&nbsp;S under the Securities Act, which permits securities to be sold to
non-&#147;U.S. persons&#148; in &#147;offshore transactions&#148; (as defined in Regulation&nbsp;S),
subject to certain terms and conditions, (c)&nbsp;the Company is relying upon the
truth and accuracy of the representations, warranties, agreements,
acknowledgements and understandings of the Lender set forth herein in order to
determine the availability of the exemptions from registration under the
Securities Act relied upon by the Company and the suitability of the Lender to
acquire the Warrant, Warrants Shares and the Conversion Stock; (d)&nbsp;the Warrants
have been issued, and the Warrant Shares and the Conversion Stock will be
issued, to the Lender in an &#147;offshore transaction&#148; and Lender has not engaged
in, nor will the Lender engage in any &#147;directed selling efforts&#148;, as each such
term is defined in Regulation&nbsp;S, and (e)&nbsp;in the view of the Commission, the
statutory basis for the exemption from registration claimed for this issue
would not be present if the issue of the Warrants, Warrant Shares and
Conversion Stock although in technical compliance with Regulation&nbsp;S, is part of
a plan or scheme to evade the registration provisions of the Securities Act
and, accordingly, the Lender is making the representations and warranties in
this schedule to evidence its compliance with the applicable requirements of
the Securities Act and that its participation in such offering is not a part of
any such plan or scheme.



<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left"><B>2.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Status of Lender</B>.</TD>
</TR>

</TABLE>
<P align="left" style="font-size: 10pt">The Lender is receiving the Warrants and subsequently purchasing the Warrant
Shares and, upon conversion of the Loans, the Conversion Stock, for its own
account or for persons or accounts as to which it exercises investment
discretion. Neither the Lender nor such person or account is a &#147;U.S. person&#148;
(as defined in Regulation&nbsp;S) and neither the Lender nor such other person or
account has any present intention to sell either the Warrants or, upon exercise
of the Warrants, the Warrant Shares, or upon conversion of the Loans, the
Conversion Stock, in the United States or to a U.S. person or for the account
or benefit of a U.S. person either now or promptly after expiration of the
first anniversary of the date of delivery of the Warrants or, with respect to
the Loans, the first anniversary of the execution and delivery of the Agreement
(&#147;Restricted Period&#148;).



<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left"><B>3.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Restrictions on Re-sale</B></TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">(a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>During the Restricted Period, Lender shall not engage in any activity for
the purpose of, or which may reasonably be expected to have the effect of,
conditioning the market in the United States for the Warrants or the
underlying Warrant Shares or the Conversion Stock,</TD>
</TR>

</TABLE>
<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt"><TR valign="top" style="font-size: 10pt; color: #textcolor#; background: #bgcolor#">
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>or directly or indirectly offer, sell, transfer, pledge or otherwise
dispose of the Warrants or the Warrant Shares, or Conversion Stock or
any interest therein in the United States or to, or for the account or
benefit of, a &#147;U.S. person&#148; (as defined in Regulation&nbsp;S). The Lender
hereby also agrees that it shall not, either directly or indirectly,
sell short any shares of Common Stock in the over-the-counter market or
otherwise in the United States or engage in any other hedging activities
in the United States during the Restricted Period and it has not made
any such sale in anticipation of acquiring the Warrant Shares or the
Conversion Stock.</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">(b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Lender will not, directly or indirectly, voluntarily offer, sell,
pledge, transfer or otherwise dispose of (or solicit any offers to buy,
purchase or otherwise acquire or take a pledge of) its rights under this
Agreement or the Warrants or any interest therein, including the Warrant
Shares and Conversion Stock otherwise than in compliance with the
Securities Act, any applicable state securities or blue sky laws and any
applicable securities laws of jurisdictions outside the United States, and
the rules and regulations promulgated thereunder.</TD>
</TR>

</TABLE>
<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


</TABLE>

<P align="left" style="font-size: 10pt">EXECUTED AND DELIVERED AS A DEED


<P align="left" style="font-size: 10pt">by <B>CANARGO ENERGY CORPORATION </B>acting by

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="49%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="49%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><I>/s/: </I>D Robson
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Dr David Robson
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Full Name</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><I>/s/: </I>E A Landles
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Secretary</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Elizabeth Anne Landles
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Full Name</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD colspan="3" valign="top" align="left">EXECUTED AND DELIVERED AS A DEED</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">by <B>SALAHI OZTURK</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><I>/s/: </I>S Ozturk</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">before this witness</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><I>/s/: </I>T Smales
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Witness</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Tamara Smales
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Full Name</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">68 Ralph Court
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Address</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Queensway, London</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<!-- End Table Body --></TABLE>
</DIV>




<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

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</TEXT>
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