PURCHASE AGREEMENT
Exhibit 4.1
EXECUTION VERSION
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT (this “Agreement”) is made as of this 23rd day of May, 2006, by and among Transmeridian Exploration Incorporated (the “Parent”), a Delaware corporation, with its principal offices located at 397 N. Sam Houston Parkway E., Suite 300, Houston, Texas 77060, Transmeridian Exploration Inc., an international business company incorporated under the laws of the British Virgin Islands (the “Issuer”), the subsidiaries of the Parent and the Issuer that are signatories hereto (the “Subsidiary Guarantors”), and the purchaser whose name and address are set forth on the signature pages hereof (the “Purchaser”). Jefferies & Company, Inc. joins this Agreement only for purposes of Section 3 and Section 20 hereof and solely in its capacity as Closing Agent (as defined in Section 3(c)).
IN CONSIDERATION of the mutual covenants contained in this Agreement, the Parent, the Issuer, the Subsidiary Guarantors and the Purchaser agree as follows:
SECTION 1. The Securities. Subject to the terms and conditions herein contained, the Parent and the Issuer propose to issue and sell to the Purchaser and the Other Purchasers (as defined below) in a direct private placement an aggregate of (i) $40,000,000 aggregate principal amount of Senior Secured Notes due 2010 of the Issuer (the “Notes”), and (ii) approximately $10,000,000 of shares (the “Shares”) of the Parent’s Common Stock, par value $0.0006 per share (the “Common Stock”). The Notes are to be issued under the indenture dated as of December 12, 2005, as supplemented by the First Supplemental Indenture dated as of December 22, 2005 and the Second Supplemental Indenture thereto dated as of or prior to the Closing Date and as otherwise supplemented or amended from time to time, (the “Indenture”) by and among the Issuer, the Parent, the Subsidiary Guarantors and The Bank of New York, as Trustee (the “Trustee”). The Notes will have the terms set forth in the Indenture and in the “Description of the Notes” attached hereto as Exhibit A, and will be secured obligations of the Issuer, unconditionally guaranteed (the “Guarantees”) on a joint and several basis by the Parent and the Subsidiary Guarantors and secured by pledges of all of the stock or other ownership interests held by the Parent and the Issuer in their direct and indirect subsidiaries (but excluding the stock or other ownership interest held by the Parent or the Issuer in any “Unrestricted Subsidiary” (as defined in the Indenture)). The Notes, the Guarantees and the Shares are collectively referred to herein as the “Securities.” The Parent, the Issuer and the Subsidiary Guarantors propose to enter into purchase agreements substantially in the same form as this Agreement with certain other investors (the “Other Purchasers”) pursuant to which it expects to complete sales of the Securities. The Purchaser and the Other Purchasers are hereinafter sometimes collectively referred to as the “Purchasers,” and this Agreement and the agreements executed by the Other Purchasers are hereinafter sometimes collectively referred to as the “Agreements.” The Agreements, the Notes, the Shares, the Indenture, the Notes Registration Rights Agreement (as defined below) and the security and collateral documents contemplated hereby or thereby are sometimes collectively referred to as the “Transaction Documents.”
The Securities will be offered and sold to the Purchasers without registration under the Securities Act of 1933, as amended (the “Act”), in reliance on an exemption pursuant to Section 4(2) in accordance with Rule 506 under the Act.
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In connection with the sale of the Securities, the Parent and the Issuer have prepared a Confidential Information Memorandum dated May 10, 2006 (as supplemented, the “Information Memorandum”), setting forth or incorporating by reference a description of the terms of the Securities, the terms of the offering of the Securities, and a description of the business of the Parent and the Issuer. Any references herein to the Information Memorandum shall be deemed to include all amendments and supplements thereto.
The Purchasers will be entitled to the benefits of (i) the Notes Registration Rights Agreement, substantially in the form attached hereto as Exhibit B (the “Notes Registration Rights Agreement”), pursuant to which the Issuer, the Parent and the Subsidiary Guarantors shall agree, among other things, to file a registration statement or a pre-effective amendment to an existing registration statement (collectively referred to herein as the “Registration Statement”) with the Securities and Exchange Commission (the “Commission”) registering the Exchange Notes (as defined in the Notes Registration Rights Agreement) under the Act; and (ii) the registration rights contained in Section 7 of this Agreement pursuant to which the Parent has agreed, among other things, to file a registration statement with the Commission registering the resale of the Shares by the Purchasers.
SECTION 2. Agreement to Sell and Purchase the Securities. At the Closing (as defined herein), the Parent and the Issuer will issue and sell to the Purchaser, and the Purchaser will buy from the Parent and the Issuer, upon the terms and conditions set forth herein, the principal amount of Notes and the number of Shares set forth on the signature page hereto at a price per $1,000.00 principal amount of Notes and per share as specified on the signature page hereto. The purchase price for all the Securities to be purchased by the Purchaser at the Closing (the “Purchase Price”) shall be the Total Purchase Price as set forth on the signature page hereto; provided, however, that if the Purchaser defaults on its obligation to purchase the Securities on the Closing Date (as defined below), and the Closing Agent (as defined below) determines in its sole discretion to purchase the Securities on behalf of the Purchaser as permitted by Section 3(c)(iv), the Purchase Price for the Securities shall be as specified in Section 3(c)(v).
The Notes and the Shares that are sold pursuant to this Agreement will be evidenced by one or more certificates registered in the name of the Purchaser, or, if so indicated on the Securities Certificate and Registration Statement Questionnaire attached hereto as Appendix I, in such nominee name(s) as designated by the Purchaser, representing the principal amount of the Notes and the number of Shares purchased by the Purchaser and bearing an appropriate legend referring to the fact that the Notes and the Shares were sold in reliance upon the exemption from registration under the Act provided by Section 4(2) thereof and Rule 506 promulgated thereunder; provided that the Issuer may elect to cause the Notes to be evidenced by one or more global notes in book-entry form deposited, on behalf of the Issuer, with The Depository Trust Company (“DTC”) or its designated custodian, and registered in the name of its nominee, which is expected to be Cede & Co. and delivered to the Purchaser through the facilities of DTC. Any physical Notes issued will be eligible for exchange with the Trustee for beneficial interest in one or more global notes in book-entry form deposited, on behalf of the Issuer, with DTC or its designated custodian, and registered in the name of its nominee, which is expected to be Cede & Co.
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SECTION 3. Delivery of the Securities at the Closing. (a) The completion of the purchase and sale of the Securities (the “Closing”) shall occur at the New York, New York offices of Akin Gump Strauss Hauer & Feld LLP (or at such different location as the parties shall agree upon in writing) on May 26, 2006 (the “Closing Date”); provided, however, that the Issuer and the Parent shall have the right to extend the Closing Date upon written notice to the Purchasers given prior to 5:00 p.m., New York time, on the scheduled Closing Date stating (x) that one or more of the conditions to the Issuer’s and the Parent’s obligations to consummate the purchase and sale of the Securities set forth in Section 3(e) have not been satisfied, or that the conditions to the Purchaser’s obligation to consummate the purchase and sale of the Securities set forth in Section 3(f) cannot or will not be satisfied by the originally scheduled Closing Date; and (y) the Closing Date as so extended; provided further, however, that the Closing Date as so extended by the Issuer and the Parent shall not be later than June 9, 2006. As used herein, “Business Day” means any day other than a Saturday, a Sunday or a day on which the American Stock Exchange is closed or on which banks in the City of New York, New York are required or authorized by law to be closed.
(b) On the Closing Date, (i) subject to the satisfaction (or waiver by the Purchaser) of the conditions to Closing described in Section 3(f) of this Agreement, the Purchaser shall pay on such date the Purchase Price to the Closing Agent by wire transfer of immediately available funds in accordance with the wire instructions provided by the Closing Agent and (ii) the Parent and the Issuer shall deliver or cause to be delivered the Securities that the Purchaser is purchasing to the Purchaser (for the account of the Purchaser as the Purchaser shall instruct) duly executed on behalf of the Parent and the Issuer and registered in the name of the Purchaser or its designee or, in the case of the Notes, DTC.
(c) (i) Prior to the Closing, Jefferies & Company, Inc., as closing agent (in such capacity, the “Closing Agent”), will contact the contact person for the Purchaser listed on Appendix I hereto to confirm (i) that the Closing is to take place, the wire transfer instructions and the closing mechanics set forth herein, (ii) the receipt from the Parent and the Issuer of duly executed certificates for the Securities as contemplated by Section 3(c)(ii) below and (iii) the receipt from the Issuer, the Parent and each of the Subsidiary Guarantors of duly executed signature pages to the Notes Registration Rights Agreement.
(ii) Prior to the Closing, the Parent and the Issuer will deliver to the Closing Agent duly executed certificates for the physical Securities being purchased by the Purchaser, registered in the name(s) set forth on Appendix I hereto. The Closing Agent shall hold such certificates in escrow for the benefit of the Parent and the Issuer until released by the Parent and the Issuer for issuance and sale as provided in Section 3(b).
(iii) On or before 12:00 p.m., New York City time, on the Closing Date, and subject to the satisfaction (or waiver by the Purchaser) of the conditions to Closing described in Section 3(f) of this Agreement, the Purchaser will pay the Purchase Price to the Closing Agent as required by Section 3(b), upon receipt of which the Closing Agent will deliver or cause to be delivered to the Purchaser the certificates for the Securities to be purchased by the Purchaser at the address specified on Appendix I hereto or through DTC, if applicable.
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(iv) In the event that the Purchaser shall fail to deliver all or any portion of the Purchase Price on or before 12:00 p.m., New York City time, on the Closing Date as required by Section 3(b), the Closing Agent shall be permitted (but shall not be obligated), in its sole discretion, to fund the Purchase Price of the Securities on behalf of the Purchaser; provided, however, that the funding of the Purchase Price of any Securities by the Closing Agent pursuant to this Section 3(c)(iv) shall not relieve the Purchaser of any liability that it may have to the Parent, the Issuer or the Closing Agent pursuant to this Agreement or for the breach of its obligations under this Agreement. In any such case in which the Closing Agent, in its sole discretion, has elected to fund the Purchase Price of the Securities on behalf of the Purchaser, if the Purchaser has not fulfilled its obligation to purchase the Securities as set forth herein within two Business Days after the Closing Date, the Closing Agent shall thereafter be entitled to retain the certificates representing the Securities and, if so requested by the Closing Agent, the Parent and the Issuer shall transfer registration of such Securities to or as directed by the Closing Agent.
(v) In the event that the Closing Agent shall have funded the Purchase Price of the Securities on behalf of the Purchaser under the circumstances set forth in clause (iv) above, the Purchaser shall be obligated to repay the Closing Agent in exchange for the release of the Securities to the Purchaser at a purchase price for the Securities equal to the Total Purchase Price set forth on the signature page hereto, plus accrued interest on the Notes from the Closing Date through the date of payment by the Purchaser; provided, however, that if the Closing Agent has funded the Purchase Price on behalf of the Purchaser, and the Purchaser subsequently makes payment to the Closing Agent on or before 11:59 p.m., New York City time, on the Closing Date, such purchase price shall equal the Total Purchase Price set forth on the signature page hereto plus an amount equal to the Closing Agent’s cost of intraday funds for such Purchase Price.
(d) Funds received by the Closing Agent on behalf of the Parent and the Issuer pursuant to this Section 3 (or funded by the Closing Agent in its sole discretion pursuant to Section 3(c)(iv)) will be held in trust and not as property of the Closing Agent. The receipt of funds by the Closing Agent from the Purchaser shall be deemed to be irrevocable instructions from the Purchaser to the Closing Agent that, upon receipt by the Closing Agent of the officer’s certificate provided for in Section 4.23, the Closing Agent shall effect the Closing. In accordance with the foregoing, the Closing Agent shall disburse the funds referred to above (net of the fees and expenses of the Closing Agent set forth on the Funds Flow Statement agreed to prior to the Closing among the Parent and the Issuer and the Closing Agent (the “Funds Flow Statement”)) by wire transfers of immediately available funds, in accordance with the Funds Flow Statement, on the Closing Date if practicable or within one Business Day thereafter. Also on the Closing Date, the Closing Agent shall deliver to the Purchaser, or as otherwise instructed in writing by the Purchaser, the Securities and the duly executed signature pages to the Notes Registration Rights Agreement of the Issuer, the Parent and each Subsidiary Guarantor.
(e) The Parent’s and the Issuer’s obligation to complete the purchase and sale of the Securities being purchased by the Purchaser at the Closing and deliver the Notes and the Shares to the Purchaser shall be subject to the following conditions, any one or more of which may be waived by the Parent and the Issuer in their sole and absolute discretion:
(i) receipt by the Parent and the Issuer of immediately available funds in the full amount of the Purchase Price for the Securities being purchased hereunder;
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(ii) the accuracy in all material respects of the representations and warranties made by the Purchasers (as if such representations and warranties were made on the Closing Date) and the fulfillment of those undertakings of the Purchasers to be fulfilled prior to the Closing; and
(iii) receipt by the Parent and the Issuer of the Purchaser’s duly executed signature page to the Notes Registration Rights Agreement.
(f) The Purchaser’s obligation to accept delivery of and to pay for the Securities shall be subject to the following conditions, any one or more of which may be waived by the Purchaser in its sole and absolute discretion:
(i) each of the representations and warranties of the Parent and the Issuer made herein shall be accurate in all material respects as of the Closing Date;
(ii) the receipt by the Parent of written waivers from each holder of the Parent’s outstanding Series A Cumulative Convertible Preferred Stock of such holder’s participation and anti-dilution rights with respect to the issuance of the Securities, and copies of such waivers shall have been delivered to the Purchaser;
(iii) the delivery to the Purchaser (w) by U.S. counsel to the Parent and TMEI Operating, Inc., a Texas corporation (“TMEI”), of a legal opinion addressing the matters set forth on Exhibit C hereto, (x) by the General Counsel of the Parent of a legal opinion addressing the matters set forth on Exhibit D hereto, (y) by British Virgin Islands counsel to the Issuer, Transmeridian (Kazakhstan) Incorporated, a British Virgin Islands international business company (“Transmeridian Kazakhstan”), and Bramex Management, Inc., a British Virgin Islands international business company (“Bramex”), of a legal opinion addressing the matters set forth on Exhibit E hereto, and (z) by Kazakhstan Counsel to JSC Caspi Neft TME, a company formed in the Republic of Kazakhstan (“Caspi Neft”), of a legal opinion addressing the matters set forth on Exhibit F hereto;
(iv) the delivery to the Purchaser of the officer’s certificates described in Section 4.23 of this Agreement;
(v) the delivery to the Purchaser of certificates of good standing (or photocopies thereof) from the respective states or jurisdictions of incorporation or formation of the Issuer, the Parent and the Subsidiary Guarantors, dated as of a recent date prior to the Closing;
(vi) the fulfillment in all material respects of those undertakings of the Parent, the Issuer and the Subsidiary Guarantors contained in this Agreement that are to be fulfilled prior to the Closing;
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(vii) there shall not have been a loss, revocation or expiration of Caspi Neft’s exploration contract with the government of Kazakhstan or Caspi Neft’s production contract with the government of Kazakhstan (to the extent such production contract has become effective), provided that if Caspi Neft’s new production contract with the government of Kazakhstan has become effective, the maintenance of Caspi Neft’s exploration contract with the government of Kazakhstan will no longer be a condition to the Purchaser’s obligations under this Section 3(f);
(viii) there shall not have been an increase in the overall statutory tax rate in Kazakhstan to a rate greater than or equal to 50% of income before taxes;
(ix) there shall not have been a material adverse change in the governmental status of Kazakhstan, including, but not limited to, a downgrade of Kazakhstan’s sovereign debt to a rating that is at or below B1 or B+ by Moody’s or Standard & Poor’s, respectively;
(x) the delivery to the Purchaser of the Notes and duly executed stock certificates representing the Shares, and copies (certified by an officer of the Parent) of the fully-executed Indenture and Notes Registration Rights Agreement;
(xi) the Common Stock, including the Shares, shall be listed on the American Stock Exchange, and there shall then be no suspension of trading of the Common Stock on the American Stock Exchange; and
(xii) there shall be no injunction, restraining order or decree of any nature of any court or government authority of competent jurisdiction that is in effect that restrains or prohibits the consummation of the transactions contemplated by the Transaction Documents.
The Purchaser’s obligations hereunder are expressly not conditioned on the purchase by any Other Purchaser of any Securities.
SECTION 4. Representations, Warranties and Covenants of the Issuer, the Parent and the Subsidiary Guarantors. The Issuer, the Parent and the Subsidiary Guarantors hereby jointly and severally represent and warrant to, and covenant with, the Purchaser as follows:
4.1 Organization and Qualification. The Parent is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware and is qualified to do business as a foreign corporation in each jurisdiction in which such qualification is required, except where failure to so qualify would not reasonably be expected to have a Material Adverse Effect (as defined herein). The Issuer is an international business company duly incorporated, validly existing and in good standing under the laws of the British Virgin Islands and is qualified to do business as a foreign entity in each jurisdiction in which such qualification is required, except where failure to so qualify would not reasonably be expected to have a Material Adverse Effect. Each Subsidiary Guarantor is a direct or indirect wholly-owned subsidiary of the Parent. Each Subsidiary Guarantor is duly incorporated, validly existing and in good standing under the laws of its jurisdiction of incorporation or formation and is qualified to do business as a foreign entity in each jurisdiction in which such qualification is
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required, except where failure to so qualify would not reasonably be expected to have a Material Adverse Effect. For purposes of this Agreement, the term “Material Adverse Effect” shall mean a material adverse effect upon the business, condition (financial or otherwise), properties or results of operations of the Parent and its subsidiaries, taken as a whole, or the ability of the Parent, the Issuer and the Subsidiary Guarantors to satisfy their obligations under this Agreement or any of the other Transaction Documents. Each of TMEI Operating, Inc., a Texas corporation (“TMEI Operating”), Transmeridian Caspian Petroleum LLP, a Kazakhstan limited liability partnership, Transmeridian Kazakhstan and Emba-Trans LLP, a Kazakhstan limited liability partnership, has no operations as of the date hereof, and the fair market value of the assets of these entities as of the date hereof does not exceed $500,000 in the aggregate.
4.2 Authorized Capital Stock. As of the date hereof, the Parent is authorized to issue up to 205,000,000 shares of stock, including up to 200,000,000 shares of the Common Stock and up to 5,000,000 shares of preferred stock, par value of $0.0006 per share. As of May 5, 2006, the Parent had (i) 90,073,430 shares of the Common Stock outstanding, and (ii) 1,419.167 shares of its Series A Cumulative Convertible Preferred Stock (the “Preferred Stock”) outstanding and convertible into approximately 14,572,200 shares of the Common Stock. All the issued and outstanding shares of the Parent’s Common Stock and Preferred Stock have been duly authorized and validly issued, are fully paid and nonassessable, have been issued in compliance with all federal and state securities laws, were not issued in violation of any preemptive rights or other rights to subscribe for or purchase securities, and conform in all material respects to the description thereof contained in the Information Memorandum. Except as disclosed in the Information Memorandum as of the date set forth therein or in the Parent’s filings with the Commission available on EDGAR at least five Business Days prior to the date hereof, the Parent does not have outstanding any options to purchase, or any preemptive rights or other rights to subscribe for or to purchase, any securities or obligations convertible into, or any contracts or commitments to issue or sell, shares of its capital stock or any such options, rights, convertible securities or obligations. The description of the Parent’s stock, stock bonus and other stock plans or arrangements and the options or other rights granted and exercised thereunder set forth in the Information Memorandum or in the Parent’s filings with the Commission accurately and fairly presents all material information with respect to such plans, arrangements, options and rights. With respect to the Issuer and each Subsidiary Guarantor, (i) all the issued and outstanding shares of capital stock or other equity interests of the Issuer or the Subsidiary Guarantor, as the case may be, have been duly authorized and validly issued, are fully paid and nonassessable, are owned by the Parent, the Issuer or a Subsidiary Guarantor, have been issued in compliance with applicable federal and state securities laws and were not issued in violation of or subject to any preemptive rights or other rights to subscribe for or purchase securities, and (ii) there are no outstanding options to purchase, or any preemptive rights or other rights to subscribe for or to purchase, any securities or obligations convertible into, or any contracts or commitments to issue or sell, shares of capital stock or other equity interests of the Issuer or any Subsidiary Guarantor or any such options, rights, convertible securities or obligations. Except as set forth on Schedule 4.2 hereto, neither the Parent nor the Issuer has any subsidiaries as of the date hereof other than the Issuer and the Subsidiary Guarantors.
4.3 Issuance, Sale and Delivery of the Notes. The Issuer has all requisite corporate power and authority to execute, deliver and perform each of its obligations under the Notes and the Exchange Notes (as defined in the Notes Registration Rights Agreement). The
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Notes and the Exchange Notes have each been duly and validly authorized by the Issuer and, when executed by the Issuer and authenticated by the Trustee in accordance with the provisions of the Indenture and, in the case of the Notes, when delivered to and paid for by the Purchaser in accordance with the terms of this Agreement, will have been duly executed, issued and delivered and will constitute valid and legally binding obligations of the Issuer, entitled to the benefits of the Indenture and enforceable against the Issuer in accordance with their terms, except to the extent the enforcement thereof may be subject to (i) bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other similar laws now or hereafter in effect relating to creditors’ rights generally and (ii) general principles of equity (whether applied by a court of law or equity) and the discretion of the court before which any proceeding therefor may be brought.
4.4 Validity of Guarantees. Each of the Parent and the Subsidiary Guarantors has all requisite corporate power and authority to execute, deliver and perform each of its obligations under the Guarantees. The Guarantees to be endorsed on each of the Notes and the Exchange Notes have been duly and validly authorized by each of the Parent and the Subsidiary Guarantors and, when the Notes and the Exchange Notes are executed by the Issuer and authenticated by the Trustee in accordance with the provisions of the Indenture and, in the case of the Notes, delivered to and paid for by the Purchaser in accordance with the terms of this Agreement, will constitute a valid and legally binding obligation of each of the Parent and the Subsidiary Guarantors, entitled to the benefits of the Indenture and enforceable against the Parent and each Subsidiary Guarantor in accordance with their terms, except to the extent the enforcement thereof may be subject to (i) bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect relating to creditors’ rights generally and (ii) general principles of equity (whether applied by a court of law or equity) and the discretion of the court before which any proceeding therefor may be brought.
4.5 Collateral. The Security Documents (as defined in the Indenture) have each been duly and validly authorized by the Parent, the Issuer and the Subsidiary Guarantors party thereto and constitute valid and legally binding obligations of each of the Parent, the Issuer and the Subsidiary Guarantors party thereto, enforceable against each of them in accordance with their respective terms except to the extent the enforcement thereof may be subject to (i) bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other similar laws now or hereafter in effect relating to creditors’ rights generally and (ii) general principles of equity (whether applied by a court of law or equity) and the discretion of the court before which any proceeding therefor may be brought. The Security Documents grant and create, in favor of the Trustee for the benefit of the Purchaser as security for all of the Secured Obligations (as defined in the Indenture), a valid and enforceable security interest in the Collateral (as defined in the Indenture), and such security interests are perfected first priority security interests.
4.6 Authorization of the Indenture. The Issuer, the Parent and each of the Subsidiary Guarantors have all requisite corporate power and authority to execute, deliver and perform each of their obligations under the Indenture. The Indenture meets the requirements for qualification under the Trust Indenture Act of 1939, as amended (the “TIA”). The Indenture has been duly and validly authorized by the Issuer, the Parent and each of the Subsidiary Guarantors and the Parent and each of the Subsidiary Guarantors constitutes a valid and legally binding agreement of the Issuer, the Parent and each of the Subsidiary Guarantors, enforceable against the Issuer, the Parent and each of the Subsidiary Guarantors in accordance with its terms, except
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to the extent the enforcement thereof may be subject to (i) bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect relating to creditors’ rights generally and (ii) general principles of equity (whether applied by a court of law or equity) and the discretion of the court before which any proceeding therefor may be brought.
4.7 Notes Registration Rights Agreement. The Issuer, the Parent and each of the Subsidiary Guarantors have all requisite corporate power and authority to execute, deliver and perform each of their obligations under the Notes Registration Rights Agreement. The Notes Registration Rights Agreement has been duly and validly authorized by the Issuer, the Parent and each of the Subsidiary Guarantors and, when executed and delivered by the Issuer, the Parent and each of the Subsidiary Guarantors (assuming the due authorization, execution and delivery by the Purchaser), will constitute a valid and legally binding agreement of the Issuer, the Parent and each Subsidiary Guarantor, enforceable against the Issuer, the Parent and each Subsidiary Guarantor in accordance with its terms, except to the extent (i) the enforcement thereof may be subject to (A) bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect relating to creditors’ rights generally and (B) general principles of equity (whether applied by a court of law or equity) and the discretion of the court before which any proceeding therefor may be brought and (ii) any rights to indemnity or contribution thereunder may be limited by federal and state securities laws and public policy considerations.
4.8 Shares. The Shares have been duly and validly authorized for issuance by the Parent and when issued in accordance with the terms and conditions contained herein, the Shares will be duly authorized, validly issued, fully paid and non-assessable and will not be subject to any preemptive or similar rights. Except as set forth on Schedule 4.8 hereto, no stockholder of the Parent has any right (which has not been waived or has not expired by reason of lapse of time following notification of the Parent’s intent to file the Equity Registration Statement to be filed by it pursuant to Section 7.1 hereof) to require the Parent to register the sale of any shares owned by such stockholder under the Act in the Equity Registration Statement. Except as disclosed on Schedule 4.8 hereto, the issuance of the Shares will not result in any adjustment to the conversion or exercise price of any outstanding security of the Parent that is convertible into or exercisable for shares of Common Stock.
4.9 Due Execution, Delivery and Performance of this Agreement. Each of the Issuer, the Parent and the Subsidiary Guarantors has full legal right, corporate power and authority to enter into this Agreement, the Indenture and the other Transaction Documents to which they are a party and perform the transactions contemplated hereby and thereby, and this Agreement, the Indenture and the other Transaction Documents to which they are a party have been duly authorized, executed and delivered by each of them. The execution, delivery and performance of this Agreement, the Indenture and the other Transaction Documents by the Issuer, the Parent and the Subsidiary Guarantors and the consummation of the transactions herein and therein contemplated will not violate any provision of the certificate of incorporation, bylaws or equivalent organizational documents, as applicable, of the Parent, the Issuer or any of the Subsidiary Guarantors and will not result in the creation of any lien, charge, security interest or encumbrance upon any assets of the Parent, the Issuer or any of the Subsidiary Guarantors pursuant to the terms or provisions thereof and will not conflict with, result in the breach or violation of, or constitute, either by itself or upon notice or the passage of time or both, a default
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under (i) any agreement, lease, franchise, license, permit or other instrument to which the Parent, the Issuer or any of the Subsidiary Guarantors is a party or by which the Parent, the Issuer or any of the Subsidiary Guarantors or any of their respective properties may be bound or affected and in each case which would have a Material Adverse Effect; or (ii) any statute or any judgment, decree, order, rule or regulation of any court or any regulatory body, administrative agency or other governmental body applicable to the Parent, the Issuer or any of the Subsidiary Guarantors or any of their respective properties. No consent, approval, authorization or other order of any court, regulatory body, administrative agency or other governmental body is required for the execution and delivery of this Agreement or the consummation of the transactions contemplated by this Agreement, except for compliance with the blue sky laws and federal securities laws applicable to the offering of the Securities. Upon the execution and delivery of this Agreement, and assuming the valid execution thereof by the Purchaser, this Agreement will constitute a valid and binding obligation of the Parent, the Issuer and the Subsidiary Guarantors enforceable against the each of them in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ and contracting parties’ rights generally and except as enforceability may be subject to general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law) and except as the indemnification agreements of the Parent and the Issuer in Section 7.3 hereof may be limited by federal or state securities laws or the public policy underlying such laws. Neither the Agreements with the Other Purchasers taken as a whole nor any of their respective specific provisions, when compared to this Agreement and the provisions contained herein, is or shall be at any time after the date hereof, (x) more beneficial in any material respect to any of the Other Purchasers under such other Agreements than this Agreement is to the Purchaser, or (y) more adverse in any material respect to the Parent, the Issuer or any Subsidiary Guarantor than this Agreement is to the Parent, the Issuer or any Subsidiary Guarantor.
4.10 Accountants. The firm of UHY Mann Frankfort Stein & Lipp CPAs, LLP, which has expressed an opinion with respect to the audited consolidation financial statements of the Parent included or incorporated by reference in the Information Memorandum, is an independent accountant as required by the Act and the rules and regulations promulgated thereunder (the “Rules and Regulations”).
4.11 No Defaults. Except as disclosed in the Information Memorandum or in the Parent’s filings with the Commission available on EDGAR at least five Business Days prior to the date hereof, neither the Issuer, the Parent nor any of their respective subsidiaries is in violation or default of any provision of its certificate of incorporation, bylaws or equivalent organizational documents, or in breach of or in default with respect to any provision of any agreement, judgment, decree, order, lease, franchise, license, permit or other instrument to which it is a party or by which it or any of its properties are bound which would reasonably be expected to have a Material Adverse Effect and there does not exist any state of facts which, with notice or lapse of time or both, would constitute an event of default on the part of the Issuer, the Parent or any of their respective subsidiaries as defined in such documents and which would reasonably be expected to have a Material Adverse Effect.
4.12 Contracts. Except as otherwise disclosed in the Information Memorandum or in the Parent’s filings with the Commission available on EDGAR at least five Business Days
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prior to the date hereof and except for the indemnity agreements by and between the Parent and each of the officers and directors of the Parent, the Issuer, the Parent and their respective subsidiaries have no material contracts. Any contracts described in the Information Memorandum or in the Parent’s filings with the Commission that are material to the Issuer, the Parent and their respective subsidiaries are in full force and effect on the date hereof; and neither the Issuer, the Parent nor any of their respective subsidiaries is, nor, to the Parent’s knowledge, is any other party in breach of or in default under any of such contracts which would reasonably be expected to have a Material Adverse Effect.
4.13 No Actions. Except as otherwise disclosed in the Information Memorandum or in the Parent’s filings with the Commission available on EDGAR at least five Business Days prior to the date hereof, (i) there are no legal or governmental actions, suits, proceedings, investigations or inquiries pending and (ii) to the Parent’s knowledge, there are no legal or governmental actions, suits or proceedings threatened, to which the Issuer, the Parent or any of their respective subsidiaries is or may be a party or of which property owned or leased by the Issuer, the Parent or any of their respective subsidiaries is or may be the subject, or related to environmental or discrimination matters, which actions, suits or proceedings, individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect; and no labor disturbance by the employees of the Parent exists or, to the Parent’s knowledge, is imminent which would reasonably be expected to have a Material Adverse Effect. Neither the Issuer, the Parent nor any of their respective subsidiaries is party to or subject to the provisions of any injunction, judgment, decree or order of any court, regulatory body, administrative agency or other governmental body which would reasonably be expected to have a Material Adverse Effect.
4.14 Properties. The Issuer, the Parent and each of their respective subsidiaries have good and indefeasible title with respect to all of their respective real property, and have good and marketable title to all of their respective properties and assets (other than real property), reflected as owned in the financial statements included in the Information Memorandum, subject in each case to liens in favor of lenders or as set forth in the Parent’s filings with the Commission available on EDGAR at least five Business Days prior to the date hereof. Each of the Issuer, the Parent and their respective subsidiaries holds its leased properties under valid and binding leases, with such exceptions as are not materially significant in relation to the business of the Issuer, the Parent and their respective subsidiaries taken as a whole. The description of the rights, licenses and agreements of the Parent and its subsidiaries related to its Kazakhstan operations contained in the Information Memorandum fairly and accurately describes such operations.
4.15 No Material Change. Since December 31, 2005, and except as described in the Information Memorandum or in the Parent’s filings with the Commission available on EDGAR at least five Business Days prior to the date hereof, (i) the Issuer, the Parent and their respective subsidiaries have not incurred any material liabilities or obligations, indirect or contingent, or entered into any material oral or written agreement or other material transaction which is not in the ordinary course of business; (ii) the Issuer, the Parent and their respective subsidiaries have not sustained any material loss or interference with their businesses or properties from fire, flood, windstorm, accident or other calamity not covered by insurance; (iii) the Parent has not paid or declared any dividends or other distributions with respect to its capital
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stock, other than with respect to the Preferred Stock, and neither the Issuer, the Parent nor any of their respective subsidiaries is in default in the payment of principal or interest on any outstanding debt obligations; (iv) there has not been any material change in the capital stock of the Issuer, the Parent or any of their respective subsidiaries other than the sale of the Securities hereunder, issuance of shares or options issued pursuant to equity incentive plans or purchase plans approved by the Parent’s Board of Directors, repurchases of shares or options pursuant to repurchase plans already approved by the Parent’s Board of Directors, and issuances of shares pursuant to the exercise of warrants or upon conversion of Preferred Stock, in each case outstanding on December 31, 2005; and (v) there has not been any other event which has caused or could reasonably be expected to have a Material Adverse Effect.
4.16 Compliance. Except as disclosed in the Information Memorandum, neither the Issuer, the Parent nor any of their respective subsidiaries has been advised, nor has reason to believe, that it is not conducting its business in compliance with all applicable laws, rules and regulations of the jurisdictions in which it is conducting its business, including, without limitation, all applicable local, state and federal environmental laws and regulations, except where failure to be so in compliance would not reasonably be expected to have a Material Adverse Effect.
4.17 Taxes. Each of the Issuer, the Parent and their respective subsidiaries has filed all necessary federal, state and foreign income and franchise tax returns and has paid or accrued all taxes shown as due thereon, except where the failure to so file or to so pay or accrue would not reasonably be expected to have a Material Adverse Effect, and neither the Issuer, the Parent nor any of their respective subsidiaries has knowledge of a tax deficiency which has been or might be asserted or threatened against it which would reasonably be expected to have a Material Adverse Effect.
4.18 Investment Company. The Parent is not, and will not be upon the consummation of the transactions contemplated by the Agreements, an “investment company” or an “affiliated person” of, or “promoter” or “principal underwriter” for, an investment company, within the meaning of the Investment Company Act of 1940, as amended.
4.19 Registration under the Securities Act. Neither the Issuer, the Parent nor any person acting on its or their behalf has in the past or will hereafter take any action to sell, offer for sale or solicit offers to buy any securities of the Parent or the Issuer which would subject the offer, issuance or sale of the Notes or the Shares, as contemplated by this Agreement, to the registration requirements of Section 5 of the Act.
4.20 Insurance. The Parent and its subsidiaries maintain insurance of the types and in the amounts that the Parent reasonably believes are adequate for their respective businesses, including, but not limited to, insurance covering commercial liability, directors’ and officers’ liability and all real and personal property owned or leased by the Parent and its subsidiaries against damage and destruction, all of which insurance is in full force and effect.
4.21 Additional Information. The information contained in the Information Memorandum, other than the information in the documents filed with the Commission which form a part of the Information Memorandum, does not, as of the date of the Information
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Memorandum, include any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading.
The information contained in the following documents which form part of the Information Memorandum does not, as of their respective dates of filing with the Commission, include any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading:
(a) the Parent’s Annual Report on Form 10-K for the fiscal year ended December 31, 2005;
(b) the Parent’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2006;
(c) the Parent’s Current Reports on Form 8-K filed on March 23, 2006, May 1, 2006, May 9, 2006 and May 10, 2006; and
(d) the Parent’s definitive Proxy Statement for its Annual Meeting of Stockholders to be held on May 30, 2006.
4.22 Price of Common Stock. The Parent has not taken, and will not take, directly or indirectly, any action designed to cause or result in, or which has constituted or which would reasonably be expected to constitute, the stabilization or manipulation of the price of the Common Stock to facilitate the sale or resale of the Shares.
4.23 Certificate. At the Closing, the Parent will deliver to the Purchaser (i) a certificate executed by an officer of the Parent, dated as of the Closing Date, to the effect that the representations and warranties of the Parent and the Issuer set forth in this Section 4 are true and correct as of the date of this Agreement and as of the Closing Date, that each of the conditions set forth in Section 3(f) have been satisfied (except to the extent any such condition has been waived by the Purchaser in accordance therewith) and that each of the Parent, the Issuer and the Subsidiary Guarantors has complied with all the agreements and satisfied all the conditions herein on its part to be performed or satisfied on or prior to the Closing Date (except to the extent any such condition has been waived by the Purchaser in accordance therewith); and (ii) a certificate of an officer of the Parent certifying as to the certificate of incorporation, bylaws or equivalent organizational documents of the Parent, the Issuer and each of the Subsidiary Guarantors each as in effect at the Closing, and the Board of Directors’ or similar resolutions for each such entity approving the transactions contemplated by this Agreement.
4.24 Reporting Company; Form S-3. The Parent is subject to the reporting requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The Parent is eligible to register the resales of the Shares by the Purchasers on a registration statement on Form S-3 under the Act. There exist no facts or circumstances (including without limitation any required approvals or waivers or any circumstances that may delay or prevent the obtaining of accountant’s consents) that reasonably would be expected to prohibit or delay the
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preparation and filing of a registration statement on Form S-3 that will be available to register the resale of the Shares by the Purchasers.
4.25 Use of Proceeds. (a) The Parent and the Issuer agree to use the net proceeds from the sale of the Securities as described under “Sources and Uses of Funds” in the Information Memorandum.
(b) The Parent, the Issuer and each of the Subsidiary Guarantors further covenant that they will not knowingly or recklessly, and that they will use their reasonable best efforts to ensure that each director, officer, agent or employee of the Parent, the Issuer and each Subsidiary Guarantor will not knowingly or recklessly, use any part of the net proceeds from the sale of the Securities for any payments to: (i) any individual or entity listed on the Specially Designated Nationals and Blocked Persons List administered by the United States Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) and/or any other similar lists administered by OFAC pursuant to any authorizing statute, Executive Order or regulation; (ii) the government of any country subject to an OFAC Sanctions Program; (iii) any individual or entity included on any list of terrorists or terrorist organizations maintained by the United Nations, the European Union and or the countries in which Parent, the Company or any Subsidiary Guarantor operate; or (iv) any governmental official or employee, political party, official of a political party, candidate for political office, anyone else acting in an official capacity, or any agent of any such individual or entity, in order to obtain, retain or direct business or obtain any improper advantage, in violation of the FCPA.
4.26 Use of Purchaser Name. Except in the Equity Registration Statement (as defined in Section 7 hereof) and in any related Prospectus (as defined in Section 7 hereof), and as may be required by this Agreement, Form 8-K under the Exchange Act, otherwise under the Act or the Exchange Act or by other applicable law or regulation, Parent and the Issuer shall not use the Purchaser’s name or the name of any of its affiliates in any advertisement, announcement, press release or other similar public communication unless it has received the prior written consent of the Purchaser for the specific use contemplated.
4.27 Related Party Transactions. No transaction has occurred between or among the Parent, any of its subsidiaries and their affiliates, officers or directors or any affiliate or affiliates of any such officer or director that is required to have been described under applicable securities laws in the Parent’s Exchange Act filings and is not so described in such filings.
4.28 Off-Balance Sheet Arrangements. There is no transaction, arrangement or other relationship between the Parent and an unconsolidated or other off-balance sheet entity that is required to be disclosed by the Parent in its Exchange Act filings and is not so disclosed or that otherwise would reasonably be expected to have a Material Adverse Effect.
4.29 Governmental Permits, Etc. Each of the Issuer, the Parent and their respective subsidiaries has all franchises, licenses, certificates and other authorizations from such federal, state or local government or governmental agency, department or body that are currently required for the operation of the business of the Issuer, the Parent and their respective subsidiaries as currently conducted, except where the failure to possess currently such franchises,
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licenses, certificates and other authorizations would not reasonably be expected to have a Material Adverse Effect. The Issuer, the Parent and their respective subsidiaries have not received any notice of proceedings relating to the revocation or modification of any such franchise, license, certificate or other authorization which, if the subject of an unfavorable decision, ruling or finding, would reasonably be expected to have a Material Adverse Effect.
4.30 Financial Statements. The consolidated financial statements of the Parent and the related notes contained or incorporated by reference in the Information Memorandum (i) comply in all material respects with applicable accounting requirements and the rules and regulations of the Commission with respect thereto at the time of filing; and (ii) present fairly, in accordance with generally accepted accounting principles, the consolidated financial position of the Parent and its subsidiaries as of the dates indicated, and the results of their operations, cash flows and the changes in shareholders’ equity for the periods therein specified, subject, in the case of unaudited financial statements for interim periods, to normal year end audit adjustments. Except as otherwise indicated therein or in the footnotes thereto, such consolidated financial statements (including the related notes) have been prepared in accordance with generally accepted accounting principles applied on a consistent basis throughout the periods therein specified, except that unaudited financial statements may not contain all footnotes required by generally accepted accounting principles.
4.31 Listing. The Parent is in compliance in all material respects with all requirements of the American Stock Exchange, and has not received any notice which is unresolved from the American Stock Exchange that the listing of the Common Stock is in any way threatened. The Parent shall comply with all requirements of the American Stock Exchange with respect to the issuance of the Shares. Each of the Parent, the Issuer and the Subsidiary Guarantors will use its reasonable best efforts to (i) permit the Notes to be designated PORTAL securities in accordance with the rules and regulations adopted by the National Association of Securities Dealers, Inc. relating to trading in the Private Offerings, Resales and Trading through Automated Linkages market and (ii) permit the Notes to be eligible for clearance and settlement through DTC.
4.32 Trust Indenture Act. Assuming the accuracy of the representations and warranties of the Purchaser in Section 5 hereof, it is not necessary in connection with the offer, sale and delivery of the Securities to the Purchaser in the manner contemplated by this Agreement to register any of the Securities under the Act or to qualify the Indenture under the TIA.
4.33 144A. No securities of the Parent, the Issuer or any Subsidiary Guarantor are of the same class (within the meaning of Rule 144A under the Act) as the Notes and listed on a national securities exchange registered under the Exchange Act, or quoted in a U.S. automated inter-dealer quotation system.
4.34 Filings.
(a) The Parent and the Issuer shall file a Form D with respect to the Securities issued at the Closing as and when required by Regulation D under the Act and provide a copy thereof to the Purchaser promptly after such filing at the Purchaser’s request.
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(b) The Parent and the Issuer shall take such action as they deem to be necessary or advisable with respect to the offering and sale hereunder of the Securities under applicable state or “blue-sky” laws, and shall promptly provide evidence of any such action taken to the Purchaser at the Purchaser’s request.
(c) The Parent shall (i) on or prior to 8:30 a.m. (eastern time) on the Business Day immediately following the date of this Agreement, issue a press release regarding the entering into of this Agreement and the other Agreements with the Other Purchasers, and (ii) on or prior to 5:30 p.m. (eastern time) on the Business Day immediately following the date of this Agreement, file with the Commission a Current Report on Form 8-K disclosing the material terms of this Agreement and the other Agreements with the Other Purchasers. Thereafter, the Parent shall timely issue such press releases, deliver such notes and make such filings as are required by the Commission or applicable law with respect to the transactions contemplated hereby.
4.35 Disclosure of Information. The Parent agrees that it will not at any time following the date hereof intentionally disclose material non-public information to the Purchaser without first obtaining the Purchaser’s written consent to such disclosure.
4.36 Indemnification of the Purchaser. The Parent, the Issuer and the Subsidiary Guarantors (each, an “Indemnifying Party”) will jointly and severally indemnify and hold the Purchaser and its directors, managers, officers, shareholders, members, partners, employees and agents (each, an “Indemnified Party”) harmless from any and all losses, liabilities, obligations, claims, contingencies, damages, costs and expenses, including all judgments, amounts paid in settlements, court costs and reasonable attorneys’ fees and costs of investigation that any such Indemnified Party may suffer or incur as a result of or relating to (a) any breach of any of the representations, warranties, covenants or agreements made by an Indemnifying Party in this Agreement or in the other Transaction Documents or (b) any action instituted against any Indemnified Party by any shareholder of an Indemnifying Party who is not an affiliate of the Purchaser, with respect to any of the transactions contemplated by the Transaction Documents (unless such action is based upon a breach of the Purchaser’s representation, warranties or covenants under any of the Transaction Documents or any agreements or understandings the Purchaser may have with any such shareholder or any violations by the Purchaser of state or federal securities laws or any conduct by the Purchaser which constitutes fraud, gross negligence, willful misconduct or malfeasance); provided, however, that in no event shall the Parent, the Issuer or a Subsidiary Guarantor be liable for any indirect, incidental, special or consequential damages or damages for loss of profits incurred by an Indemnified Party, whether in an action in contract or tort, even if the Parent, the Issuer and the Subsidiary Guarantors have been advised of the possibility of such damages. If any action shall be brought against any Indemnified Party in respect of which indemnity may be sought pursuant to this Section 4.36, such Indemnified Party shall promptly notify the Parent in writing, and the Indemnifying Party shall have the right to assume the defense thereof with counsel of its own choosing. Any Indemnified Party shall have the right to employ separate counsel in any such action and participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Indemnified Party except to the extent that (i) the employment thereof has been specifically authorized by the Parent in writing, (ii) the Parent has failed after a reasonable period of time following such Indemnified Party’s written request that it do so, to
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assume such defense and to employ counsel or (iii) in such action there is, in the reasonable opinion of such separate counsel, a material conflict on any material issue between the position of the Indemnifying Party and the position of such Indemnified Party. The Indemnifying Party will not be liable to any Indemnified Party under this Agreement (i) for any settlement by an Indemnified Party effected without the Parent’s prior written consent, which shall not be unreasonably withheld or delayed; or (ii) to the extent, but only to the extent, that a loss, claim, damage or liability is attributable to such Indemnified Party’s wrongful actions or omissions or gross negligence, or to such Indemnified Party’s breach of any of the representations, warranties, covenants or agreements made by such Indemnified Party in this Agreement or in the other Transaction Documents.
4.37 Fees. Except with respect to the Closing Agent and with respect to Jefferies & Company, Inc. as financial advisor to the Parent, none of the Parent, the Issuer nor any Subsidiary Guarantor is obligated to pay any brokers, finders or financial advisory fees or commissions to any underwriter, broker, agent or other representative in connection with the transactions contemplated hereby. The Parent will indemnify and hold harmless the Purchaser from and against any claim by any such underwriter, broker, agent or other representative alleging that the Purchaser is obligated to pay any such brokers, finders or financial advisory fees or commissions in connection with the transactions contemplated hereby.
4.38 Foreign Corrupt Practices Act. To the best of the Issuer’s knowledge, none of the Parent, the Issuer, any Subsidiary Guarantor or any director, officer, agent or employee of the Parent, the Issuer or any Subsidiary Guarantor has made, directly or indirectly, any payment or promise to pay, or gift or promise to give, or authorized such a promise or gift, of any money or anything of value, directly or indirectly, to (i) any foreign official (as such term is defined in the United States Foreign Corrupt Practices Act of 1977 (as amended, the “FCPA”)) for the purpose of influencing any official act or decision of such official or inducing him or her to use his or her influence to affect any act or decision of a governmental authority, or (ii) any foreign political party or official thereof or candidate for foreign political office for the purpose of influencing any official act or decision of such party, official or candidate or inducing such party, official or candidate to use his, her or its influence to affect any act or decision of a foreign governmental authority, in the case of both (i) and (ii) above, in order to assist the Parent or the Issuer or any Subsidiary Guarantor to obtain or retain business for, or direct business to the Parent, the Issuer or any of the Subsidiary Guarantors, as applicable, and under circumstances which would subject the Parent, the Issuer or any of the Subsidiary Guarantors to liability under the FCPA or any corresponding foreign laws. To the best of the Issuer’s knowledge, neither the Parent, the Issuer nor any of the Subsidiary Guarantors has made any bribe, rebate, payoff, influence payment, kickback or other unlawful payment of funds or received or retained any funds in violation of any law, rule or regulation.
SECTION 5. Representations, Warranties and Covenants of the Purchaser.
(a) The Purchaser represents and warrants to, and covenants with, the Parent and the Issuer that: (i) the Purchaser is knowledgeable, sophisticated and experienced in making, and is qualified to make, decisions with respect to investments in securities representing an investment decision similar to that involved in the purchase of the Securities and has had the opportunity to request, receive, review and consider all information it deems relevant in making an informed
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decision to purchase the Securities; (ii) the Purchaser is acquiring the Securities set forth on Appendix I attached hereto in the ordinary course of its business and for its own account for investment only and with no present intention of distributing any of the Notes or Shares or entering into any arrangement or understanding with any other persons regarding the distribution of such Securities; provided, however, that by making the representations in this clause (ii), the Purchaser does not agree to hold any of the Notes or Shares for any minimum or other specific term and the representations in this clause (ii) shall in no way limit the Purchaser’s right to sell the Notes or Shares pursuant to the Registration Statement or the Equity Registration Statement (as defined in Section 7.1(a) hereof), as the case may be, or otherwise in compliance with the Act and the Rules and Regulations; provided, further, however, that the representations made by the Purchaser in this clause (ii) shall not limit the Purchaser’s right to indemnification under Section 7.3, other than with respect to any claim arising out of a breach of the representation in this clause (ii); (iii) the Purchaser will not, directly or indirectly, offer, sell, pledge, transfer or otherwise dispose of (or solicit any offers to buy, purchase or otherwise acquire or take a pledge of) any of the Notes or Shares, nor will the Purchaser engage in any short sale that results in a disposition of any of the Notes or Shares by the Purchaser, except in compliance with the Act and the Rules and Regulations and any applicable state securities laws; (iv) the Purchaser has completed or caused to be completed the Securities Certificate and Registration Statement Questionnaire attached hereto as part of Appendix I, for use in preparation of the Equity Registration Statement, and the answers thereto are true and correct as of the date hereof and will be true and correct as of the effective date of such registration statement and the Purchaser will notify the Parent immediately of any material change in any such information provided in each such Securities Certificate and Registration Statement Questionnaire until such time as the Purchaser has sold all of its Shares or the Parent is no longer required to keep the Equity Registration Statement effective; (v) the Purchaser has, in connection with its decision to purchase the number of Securities set forth on Appendix I attached hereto, relied solely upon the Information Memorandum and the documents included therein or incorporated by reference and the representations and warranties of the Parent and the Issuer contained herein; (vi) the Purchaser has had an opportunity to discuss this investment with representatives of the Parent and the Issuer and ask questions of them and has received satisfactory answers and all information requested; (vii) the Purchaser is an “accredited investor” within the meaning of Rule 501(a) of Regulation D promulgated under the Act; and (viii) the Purchaser agrees to notify the Parent immediately of any change in any of the foregoing information until such time as the Purchaser has sold all of its Shares or the Parent is no longer required to keep the Equity Registration Statement effective.
(b) The Purchaser understands that the Securities are being offered and sold to it in reliance upon specific exemptions from the registration requirements of the Act, the Rules and Regulations and applicable state securities laws and that the Parent is relying upon the truth and accuracy of, and the Purchaser’s compliance with, the representations, warranties, agreements, acknowledgments and understandings of the Purchaser set forth herein in order to determine the availability of such exemptions and the eligibility of the Purchaser to acquire the Securities.
(c) The Purchaser understands that its investment in the Notes and the Shares involves a significant degree of risk, including a risk of total loss of the Purchaser’s investment. The Purchaser has full cognizance of and understands all the risk factors set forth in the section “Risk Factors” in the Information Memorandum. The Purchaser understands that the market
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price of the Common Stock has been volatile and that no representation is being made as to the future value of the Common Stock. The Purchaser understands that there is no established trading market for the Notes. The Purchaser has the knowledge and experience in financial and business matters so as to be capable of evaluating the merits and risks of an investment in the Securities and has the ability to bear the economic risks of an investment in the Securities. The Purchaser acknowledges that Jefferies & Company, Inc., financial advisor of the Parent, has undertaken no duty to perform any due diligence or similar investigation with respect to the Parent, the Issuer or any Subsidiary Guarantor and the Purchaser represents that it has not relied on any analysis, investigation or advice prepared or made by Jefferies & Company, Inc. in making its investment decision. The parties agree that Jefferies & Company, Inc. may rely on the representations, warranties and covenants of the Purchaser contained in this Section 5 and in Section 7.2 as a third party beneficiary.
(d) The Purchaser understands that no United States federal or state agency or any other government or governmental agency has passed upon or made any recommendation or endorsement of the Securities.
(e) The Purchaser understands that the Notes and the Shares will bear a restrictive legend in substantially the following form:
“The securities evidenced by this certificate have not been registered under the Securities Act of 1933, as amended (the “Securities Act”), or the securities laws of any state or other jurisdiction. The securities may not be offered, sold, pledged or otherwise transferred except (1) pursuant to an exemption from registration under the Securities Act or (2) pursuant to an effective registration statement under the Securities Act, in each case in accordance with all applicable securities laws of the states and other jurisdictions, and in the case of a transaction exempt from registration, unless the Issuer has received an opinion of counsel reasonably satisfactory to it that such transaction does not require registration under the Securities Act and such other applicable laws.”
(f) The Purchaser’s principal executive offices are in the jurisdiction set forth immediately below the Purchaser’s name on the signature pages hereto.
(g) The Purchaser further represents and warrants to, and covenants with, the Parent and the Issuer that (i) the Purchaser has full right, power, authority and capacity to enter into this Agreement and to consummate the transactions contemplated hereby and has taken all necessary action to authorize the execution, delivery and performance of this Agreement, (ii) the making and performance of this Agreement by the Purchaser and the consummation of the transactions herein contemplated will not violate any provision of the organizational documents of the Purchaser or conflict with, result in the breach or violation of, or constitute, either by itself or upon notice or the passage of time or both, a default under any material agreement, mortgage, deed of trust, lease, franchise, license, indenture, permit or other instrument to which the Purchaser is a party, or any statute or any authorization, judgment, decree, order, rule or regulation of any court or any regulatory body, administrative agency or other governmental body applicable to the Purchaser, (iii) no consent, approval, authorization or other order of any court, regulatory body, administrative agency or other governmental body is required on the part
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of the Purchaser for the execution and delivery of this Agreement or the consummation of the transactions contemplated by this Agreement, (iv) upon the execution and delivery of this Agreement, this Agreement shall constitute a legal, valid and binding obligation of the Purchaser, enforceable in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ and contracting parties’ rights generally and except as enforceability may be subject to general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law) and except to the extent enforcement of the indemnification provisions set forth in Section 7.3 of this Agreement, may be limited by federal or state securities laws or the public policy underlying such laws, and (v) there is not in effect any order enjoining or restraining the Purchaser from entering into or engaging in any of the transactions contemplated by this Agreement.
SECTION 6. Survival of Representations, Warranties and Agreements. Notwithstanding any investigation made by any party to this Agreement or by any of the Parent’s advisors, all representations and warranties made by the Issuer, the Parent, the Subsidiary Guarantors and the Purchaser herein and in the certificates evidencing the Notes and the Shares delivered pursuant hereto shall survive the execution of this Agreement, the delivery to the Purchaser of the Notes and the Shares being purchased and the payment therefor for a period of five years, whereupon such representations and warranties will terminate and expire. All covenants and agreements made by the Issuer, the Parent, the Subsidiary Guarantors and the Purchaser herein and in the certificates evidencing the Notes and the Shares delivered pursuant hereto shall survive by their own terms until satisfied in accordance therewith.
SECTION 7. Registration of the Shares; Compliance with the Securities Act; Indemnification.
7.1 Registration Procedures and Expenses. The Parent shall:
(a) as soon as reasonably practicable, but in no event later than 30 days following the Closing Date, prepare and file with the Commission a registration statement on Form S-3 relating to the resale of the Shares by the Purchaser and the Other Purchasers from time to time (the “Equity Registration Statement”);
(b) use its reasonable best efforts, subject to receipt of necessary information from the Purchasers, to cause the Equity Registration Statement to be declared effective under the Act by the earlier of (i) 90 days after the Closing Date or (ii) the fifth (5th) Business Day after the Parent learns that no review of the Equity Registration Statement will be made by the staff of the Commission or that the staff of the Commission has no further comments to the Equity Registration Statement (the “Required Effective Date”);
(c) use reasonable best efforts to prepare and file with the Commission such amendments, including post-effective amendments, and supplements to the Equity Registration Statement and the prospectus forming a part of the Equity Registration Statement (the “Prospectus”) as may be necessary to keep the Equity Registration Statement effective as to the Shares until the earliest of (i) such time that all of the Shares have been sold pursuant to the Equity Registration Statement, (ii) the seventh anniversary of the original effective date of the
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Equity Registration Statement, or (iii) such time as each of the Shares become eligible for resale by non-affiliates pursuant to Rule 144(k) under the Act;
(d) furnish to the Purchaser with respect to the Shares registered under the Equity Registration Statement (and to each underwriter, if any, of such Shares) such number of copies of prospectuses and such other documents as the Purchaser may reasonably request, in order to facilitate the public sale or other disposition of all or any of the Shares held by the Purchaser;
(e) file documents required of the Parent for normal Blue Sky clearance in states specified in writing by the Purchaser; provided, however, that the Parent shall not be required to qualify to do business or consent to service of process in any jurisdiction in which it is not now so qualified or has not so consented;
(f) bear all expenses in connection with the procedures of this Section 7.1 and the registration of the Shares pursuant to the Equity Registration Statement, other than fees and expenses, if any, of counsel or other advisers to the Purchaser or the Other Purchasers or underwriting discounts, brokerage fees and commissions incurred by the Purchaser or the Other Purchasers, if any; and
(g) make available, while the Equity Registration Statement is effective and available for resale, one or more officers of the Parent for questions regarding the ability of the Purchasers to use the Equity Registration Statement or Prospectus; provided, however, that such information may not include material, non-public information.
The Parent understands that the Purchaser disclaims being an underwriter, but the Purchaser being deemed an underwriter shall not relieve the Parent of any obligations it has hereunder.
7.2 Transfer of Shares After Registration. The Purchaser agrees that it will not effect any disposition of the Shares that would constitute a sale within the meaning of the Act or any applicable state securities laws, except as contemplated in the Equity Registration Statement or as otherwise permitted by law, and that it will promptly notify the Parent of any changes in the information set forth in the Equity Registration Statement regarding the Purchaser or its plan of distribution.
7.3 Indemnification.
(a) For purposes of this Section 7.3, (i) the term “Purchaser/Affiliate” shall mean the officers, directors, agents and employees of the Purchaser, each person who controls the Purchaser (within the meaning of Section 15 of the Act or Section 20 of the Exchange Act) and the officers, directors, agents and employees of each such controlling person; (ii) the term “Company/Affiliate” shall mean the officers, directors, agents and employees of the Parent, each person who controls the Parent (within the meaning of Section 15 of the Act or Section 20 of the Exchange Act) and the officers, directors, agents and employees of each such controlling person; and (iii) the term “Equity Registration Statement” shall include any preliminary prospectus, final prospectus, exhibit, supplement or amendment included in or relating to, and any document incorporated by reference in, the Equity Registration Statement referred to in Section 7.1.
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(b) The Parent, the Issuer and the Subsidiary Guarantors agree to indemnify and hold harmless the Purchaser and each Purchaser/Affiliate against any losses, claims, damages, liabilities or expenses, joint or several, to which the Purchaser or Purchaser/Affiliate may become subject, under the Act, the Exchange Act, or any other federal or state statutory law or regulation, or at common law or otherwise (including in settlement of any litigation, if such settlement is effected with the prior written consent of the Parent), insofar as such losses, claims, damages, liabilities or expenses (or actions in respect thereof as contemplated below) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the Equity Registration Statement, including the Prospectus, financial statements and schedules, and all other documents filed as a part thereof, as amended at the time of effectiveness of the Equity Registration Statement, including any information deemed to be a part thereof as of the time of effectiveness pursuant to paragraph (b) of Rule 430A, or pursuant to Rule 430B or 430C, of the Rules and Regulations, or the Prospectus, in the form first filed with the Commission pursuant to Rule 424(b) of the Regulations, or filed as part of the Equity Registration Statement at the time of effectiveness if no Rule 424(b) filing is required, or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state in the Equity Registration Statement or Prospectus or any amendment or supplement thereto a material fact required to be stated therein or necessary to make the statements in the Equity Registration Statement or Prospectus or any amendment or supplement thereto, in light of the circumstances under which they were made, not misleading, or arise out of or are based in whole or in part on any inaccuracy in the representations or warranties of the Parent contained in this Agreement, or any failure of the Parent, the Issuer or any Subsidiary Guarantor to perform its obligations hereunder or under law, and will promptly reimburse the Purchaser and each such Purchaser/Affiliate for any legal and other expenses as such expenses are reasonably incurred by the Purchaser or such Purchaser/Affiliate in connection with investigating, defending or preparing to defend, settling, compromising or paying any such loss, claim, damage, liability, expense or action; provided, however, that neither the Parent, the Issuer nor any Subsidiary Guarantor will not be liable in any such case to the extent, but only to the extent, that any such loss, claim, damage, liability or expense arises out of or is based upon (i) an untrue statement or alleged untrue statement or omission or alleged omission made in the Equity Registration Statement, the Prospectus or any amendment or supplement thereto in reliance upon and in conformity with written information furnished to the Parent by or on behalf of the Purchaser expressly for use therein, or (ii) the failure of the Purchaser to comply with the covenants and agreements contained in Sections 5 or 7.2, or (iii) the inaccuracy of any representation or warranty made by the Purchaser herein or (iv) any statement or omission in any Prospectus that is corrected in any subsequent Prospectus that was delivered to the Purchaser prior to the pertinent sale or sales by the Purchaser.
(c) The Purchaser will indemnify and hold harmless the Parent, the Issuer, the Subsidiary Guarantors and each Company/Affiliate against any losses, claims, damages, liabilities or expenses to which the Parent, the Issuer, the Subsidiary Guarantors and each Company/Affiliate may become subject, under the Securities Act, the Exchange Act, or any other federal or state statutory law or regulation, or at common law or otherwise (including in settlement of any litigation, if such settlement is effected with the written consent of the Purchaser) insofar as such losses, claims, damages, liabilities or expenses (or actions in respect thereof as contemplated below) arise out of or are based upon (i) any failure by the Purchaser to comply with the covenants and agreements contained in Section 5 or 7.2 hereof, or (ii) the
22
inaccuracy of any representation or warranty made by the Purchaser herein, or (iii) any untrue or alleged untrue statement of any material fact contained in the Equity Registration Statement, the Prospectus, or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in the Equity Registration Statement, the Prospectus, or any amendment or supplement thereto, solely in reliance upon and in conformity with written information furnished to the Parent by or on behalf of the Purchaser expressly for use therein, and will reimburse the Parent, the Issuer, the Subsidiary Guarantors and each Company/Affiliate for any legal and other expense reasonably incurred by the Parent, the Issuer, the Subsidiary Guarantors and each Company/Affiliate in connection with investigating, defending, settling, compromising or paying any such loss, claim, damage, liability, expense or action; provided, however, in no event shall any indemnity under this Section 7.3(c) exceed the net proceeds resulting from the sale of the Shares sold by the Purchaser under the Equity Registration Statement.
(d) Promptly after receipt by an indemnified party under this Section 7.3 of notice of the threat or commencement of any action, such indemnified party will, if a claim in respect thereof is to be made against an indemnifying party under this Section 7.3, promptly notify the indemnifying party in writing thereof; but the indemnified party’s failure so to notify will not relieve the indemnifying party from any liability which it may have to any indemnified party for contribution or otherwise pursuant to this Section 7.3 to the extent the indemnifying party is not materially prejudiced as a result of such failure. In case any such action is brought against any indemnified party and such indemnified party seeks or intends to seek indemnity from an indemnifying party, the indemnifying party will be entitled to participate in, and, to the extent that it may wish, jointly with all other indemnifying parties similarly notified, to assume the defense thereof with counsel reasonably satisfactory to such indemnified party; provided, however, if the defendants in any such action include both the indemnified party and the indemnifying party and the indemnified party shall have reasonably concluded, based on an opinion of counsel reasonably satisfactory to the indemnifying party, that there may be a conflict of interest between the positions of the indemnifying party and the indemnified party in conducting the defense of any such action or that there may be legal defenses available to it and/or other indemnified parties which are different from or additional to those available to the indemnifying party, the indemnified party or parties shall have the right to select separate counsel to assume such legal defense and to otherwise participate in the defense of such action on behalf of such indemnified party or parties. Upon receipt of notice from the indemnifying party to such indemnified party of the indemnifying party’s election to assume the defense of such action, the indemnifying party will not be liable to such indemnified party under this Section 7.3 for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof unless (i) the indemnified party shall have employed counsel in accordance with the proviso to the preceding sentence (it being understood, however, that the indemnifying party shall not be liable for the expenses of more than one separate counsel, reasonably satisfactory to such indemnifying party, representing all of the indemnified parties who are parties to such action) or (ii) the indemnifying party shall not have employed counsel to represent the indemnified party within a reasonable time after notice of commencement of action, in each of which cases the reasonable fees and expenses of counsel shall be at the expense
23
of the indemnifying party. In no event shall any indemnifying party be liable in respect of any amounts paid in settlement of any action unless the indemnifying party shall have approved in writing the terms of such settlement; provided that such consent shall not be unreasonably withheld. No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement of any pending or threatened proceeding in respect of which any indemnified party is or could have been a party and indemnification could have been sought hereunder by such indemnified party from all liability on claims that are the subject matter of such proceeding, unless the terms of such settlement include a complete release of such indemnified party with respect to the underlying claim or claims. In no event shall any contribution obligation of the Purchaser under this Section 7.3(d), when added to any indemnity obligation of the Purchaser under Section 7.3(c), exceed the net proceeds resulting from the sale of the Shares sold by the Purchaser under the Equity Registration Statement.
(e) If the indemnification provided for in this Section 7.3 is required by its terms but is for any reason held to be unavailable to, or otherwise insufficient to hold harmless, an indemnified party under paragraphs (b), (c) or (d) of this Section 7.3 in respect to any losses, claims, damages, liabilities or expenses referred to herein, then each relevant indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of any losses, claims, damages, liabilities or expenses referred to herein (i) in such proportion as is appropriate to reflect the relative benefits received by the Parent, the Issuer and the Subsidiary Guarantors on the one hand, and the Purchaser on the other, from the private placement of the Securities hereunder or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above, but also the relative fault of the Parent, the Issuer and the Subsidiary Guarantors on the one hand, and the Purchaser on the other, in connection with the statements or omissions or inaccuracies in the representations and warranties in this Agreement and/or the Equity Registration Statement or Prospectus which resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations. With respect to an indemnification related to the sale of Shares under the Equity Registration Statement, the respective relative benefits received by the Parent on the one hand and the Purchaser on the other shall be deemed to be in the same proportion as (A) the Aggregate Purchase Price of such Shares (as set forth on the signature page) paid by the Purchaser to the Parent pursuant to this Agreement (the “Share Consideration”) bears to (B) the difference (the “Share Difference”) between (i) the Share Consideration and (ii) the amount received by the Purchaser from such sale of Shares under the Equity Registration Statement. The relative fault of the Parent, on the one hand, and the Purchaser on the other shall be determined by reference to, among other things, whether the untrue or alleged statement of a material fact, the omission or alleged omission to state a material fact or the inaccurate or the alleged inaccurate representation and/or warranty relates to information supplied by the Parent or by the Purchaser and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The amount paid or payable by a party as a result of the losses, claims, damages, liabilities and expenses referred to above shall be deemed to include, subject to the limitations set forth in paragraph (d) of this Section 7.3, any legal or other fees or expenses reasonably incurred by such party in connection with investigating or defending any action or claim. The provisions set forth in paragraph (d) of this Section 7.3 with respect to the notice of the threat or commencement of any threat or action shall apply if a claim for contribution is to be made under this paragraph (e); provided, however, that no additional notice shall be required with respect to
24
any threat or action for which notice has been given under paragraph (d) for purposes of indemnification. The Parent and the Purchaser agree that it would not be just and equitable if contributions pursuant to this Section 7.3 were determined solely by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to in this paragraph. Notwithstanding the provisions of this Section 7.3, no Purchaser shall be required to contribute any amount in excess of the amount by which the Share Difference exceeds the amount of any damages that the Purchaser has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Purchasers’ obligations to contribute pursuant to this Section 7.3 are several and not joint.
7.4 Delay in Effectiveness of Registration Statement. If (i) (A) the Equity Registration Statement filed hereunder is not declared effective by the Commission by the 30th day following the Required Effective Date, the Parent shall issue to the Purchaser, promptly following the 30th day following the Required Effective Date, additional shares of Common Stock in an amount equal to 0.0588 times the number of Shares originally purchased, and (B) for each period of 30 consecutive days that the Equity Registration Statement filed hereunder remains ineffective after the 180th day following the Closing Date, the Parent shall issue to the Purchaser additional shares of Common Stock in an amount equal to 1% of the sum of the number of Shares purchased by the Purchaser pursuant to Section 2 hereof and the number of additional shares of Common Stock issued under the preceding clause (i)(A) (any such issuance under this clause (i)(B) to be pro rated for any partial period of 30 consecutive days during which the Equity Registration Statement remains ineffective), provided that in no event shall the aggregate number of shares of Common Stock issued pursuant to this clause (i)(B) exceed 3% of the sum of the number of Shares purchased by the Purchaser pursuant to Section 2 hereof and the number of additional shares of Common stock issued under the preceding clause (i)(A), and (ii) the Purchaser shall be prohibited from selling the Shares under the Equity Registration Statement as a result of a Suspension (as defined below) of more than 30 days or one or more Suspensions in any 365-day period exceeding in the aggregate a total of 60 days, then for each period of 30 consecutive days in which a Suspension is in effect, that exceeds the maximum allowed period for a Suspension or Suspensions, the Parent shall issue to the Purchaser additional shares of Common Stock in an amount equal to 1% of the sum of the Shares purchased by the Purchaser pursuant to Section 2 and the additional shares of Common Stock issued under the preceding clause (i) (if any) (any such issuance under this clause (ii) to be pro rated for any partial period of 30 consecutive days during which a Suspension Period extends beyond the maximum allowed period hereunder). Notwithstanding the foregoing, in no event shall the Parent be obligated to issue additional shares of Common Stock pursuant to this Section 7.4 to more than one Purchaser in respect of the same Shares. Any issuance pursuant to clause (i) of this Section 7.4 shall be made no later than the fifth Business Day after the 30th day following the Required Effective Date and any issuance pursuant to clause (ii) of this Section 7.4 shall be made no later than the fifth Business Day following the date the obligation to make such issuance accrues. No fractional shares shall be issued under this Section 7.4; any fractional share shall be rounded to the nearest whole share, with .50 being rounded upward.
7.5 Suspension of Equity Registration Statement. Subject to the provisions of this Section 7, the Parent, for such times as the Parent reasonably may determine is necessary
25
and advisable and in accordance with this Section 7, (x) may delay the filing of the Equity Registration Statement, any amendment thereof or any supplement to the related prospectus, (y) may withhold efforts to cause the Equity Registration Statement to become effective, and (z) may prohibit offers and sales of the Shares pursuant to the Equity Registration Statement at any time (each a “Suspension”) if (i) the Board of Directors of Parent shall have determined in good faith that such filing or effectiveness of, or offers or sales pursuant to, the Equity Registration Statement (or any amendment thereof or any supplement to the related prospectus) would materially impede, delay or interfere with any financing, offer or sale of securities, acquisition, merger, tender offer, business combination, corporate reorganization, consolidation or other significant transaction involving the Parent or and of its affiliates (whether or not planned, proposed or authorized prior to the date by which the Equity Registration Statement must be filed or declared effective, as the case may be), (ii) (A) the Parent is in possession of material non-public information, (B) the Board of Directors of the Parent determines in good faith that such Suspension is necessary in order to avoid an obligation to disclose such information and (C) the Board of Directors of the Parent determines in good faith that the Parent has a bona fide business purpose for preserving the confidentiality of such information, or (iii) the Board of Directors of the Parent shall have determined in good faith, after the advice of counsel, that it is required by law, rule or regulation to supplement the Equity Registration Statement or file a post-effective amendment to the Equity Registration Statement in order to incorporate information into the Equity Registration Statement for the purpose of (1) including in the Equity Registration Statement any prospectus required under Section 10(a)(3) of the Act, (2) reflecting in the prospectus included in the Equity Registration Statement any facts or events arising after the effective date of the Equity Registration Statement (or of the most-recent post-effective amendment) that, individually or in the aggregate, represents a fundamental change in the information set forth therein, or (3) including in the prospectus included in the Registration Statement any material information with respect to the plan of distribution not disclosed in the Registration Statement or any material change to such information; provided, however, that the duration of any such Suspension in which the Shares may not be sold pursuant to an effective Equity Registration Statement shall not extend past the earlier to occur of (A) 15 days after cessation of the circumstances on which such Suspension is based and (B) 120 days after the date of the determination of the Board of Directors of the Parent on which such specific delay, withholding, prohibition, suspension or postponement is based. Upon the occurrence of any such Suspension, the Parent shall use its reasonable best efforts to cause the Equity Registration Statement to become effective or to promptly amend or supplement the Equity Registration Statement on a post-effective basis or to take such action as is necessary to make resumed use of the Equity Registration Statement compatible with the Parent’s best interests, as applicable, so as to permit the holders of the Shares to resume sales of the Shares as soon as possible.
7.6 For the avoidance of doubt, the registration requirements contemplated by this Section 7 shall be deemed to include the registration of the additional shares of Common Stock issued pursuant to Section 7.4 (if any).
SECTION 8. Original Issue Discount. For United States federal income tax purposes, the Parent, the Issuer and the Purchaser agree that the Notes are to be treated as having an “adjusted issue price” on the date of issuance equal to $879.85 per $1,000 principal amount of Notes, plus accrued original issued discount from the deemed issuance date of December 12, 2005. Neither the Parent nor the Issuer shall assume any liability whatsoever under this
26
Agreement or any of the other Transaction Documents for the Purchaser’s use of the allocation set forth in the preceding sentence.
SECTION 9. Notices. All notices required or permitted hereunder shall be in writing and shall be deemed effectively given: (i) upon delivery to the party to be notified; (ii) when sent by confirmed facsimile; or (iii) one (1) Business Day after timely deposit with a nationally recognized overnight carrier, specifying next Business Day delivery, with written verification of receipt. All communications shall be sent to the Parent and the Purchaser as follows or at such other address as the Parent or the Purchaser may designate upon ten (10) days advance written notice to the other party:
(a) if to the Parent, to:
Transmeridian Exploration Incorporated
397 N. Sam Houston Parkway East, Suite 300
Houston, Texas 77060
Attn: Earl W. McNiel
Fax: (281) ###-###-####
with a copy to:
Akin Gump Strauss Hauer & Feld LLP
1111 Louisiana Street, 44th Floor
Houston, Texas 77002
Attn: James L. Rice III
Fax: (713) ###-###-####
(b) if to the Purchaser, at its address as set forth at the end of this Agreement.
SECTION 10. Termination. The Purchaser may terminate this Agreement at any time prior to the Closing Date by written notice to the Parent if any of the following has occurred:
(a) since the date hereof, any Material Adverse Effect or development involving or reasonably expected to result in a Material Adverse Effect;
(b) the failure of the conditions to the Purchaser’s obligations to purchase the Securities contained in Section 3(f) hereof to be satisfied on or prior to June 9, 2006; or
(c) the suspension or limitation of trading generally in securities on the New York Stock Exchange, the American Stock Exchange or the Nasdaq National Market or any setting of limitations on prices for securities on any such exchange or Nasdaq National Market.
SECTION 11. Changes. This Agreement may not be modified or amended except pursuant to an instrument in writing signed by the Parent and the Purchaser. No provision hereunder may be waived other than in a written instrument executed by the waiving party.
27
SECTION 12. Headings. The headings of the various sections of this Agreement have been inserted for convenience of reference only and shall not be deemed to be part of this Agreement.
SECTION 13. Severability. In case any provision contained in this Agreement should be invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby.
SECTION 14. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York and the federal law of the United States of America applicable to contracts made and to be performed entirely within the State of New York.
SECTION 15. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall constitute an original, but all of which, when taken together, shall constitute but one instrument, and shall become effective when one or more counterparts have been signed by each party hereto and delivered (including by facsimile) to the other parties.
SECTION 16. Entire Agreement. This Agreement and the instruments referenced herein contain the entire understanding of the parties with respect to the matters covered herein and therein and, except as specifically set forth herein or therein, neither the Parent, the Issuer, the Subsidiary Guarantors nor the Purchaser makes any representation, warranty, covenant or undertaking with respect to such matters.
SECTION 17. Assignment. The provisions hereof shall inure to the benefit of, and be binding upon, the parties hereto and their respective permitted successors, assigns, heirs, executors and administrators. In connection with a transfer of Notes or Shares (other than a transfer of Exchange Notes pursuant to the Registration Statement, a transfer of Shares pursuant to the Equity Registration Statement or a transfer of Exchange Notes or Shares in a broker transaction pursuant to Rule 144 under the Act) in compliance with applicable federal and state securities laws, the Purchaser may assign any or all of its rights under this Agreement to any person, provided such transferee agrees in writing to be bound, with respect to the transferred Notes or Shares (as the case may be), by the provisions hereof that apply to the Purchaser.
SECTION 18. Further Assurances. Each party agrees to cooperate fully with the other parties and to execute such further instruments, documents and agreements and to give such further written assurance as may be reasonably requested by any other party to evidence and reflect the transactions described herein and contemplated hereby and to carry into effect the intents and purposes of this Agreement.
SECTION 19. Purchasers’ Trading Activity. The Parent acknowledges that, following the Closing and the Form 8-K filing and press release regarding the Closing contemplated by Section 4.34(c) above, the Purchaser shall have the right, subject to applicable law, to purchase or sell, long or short, the Common Stock and instruments or contracts whose value is derived from the market value of the Common Stock, and that sales of or certain derivative transactions relating to the Common Stock may have a negative impact on the market price of the Common Stock.
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SECTION 20. Closing Agent Matters. (a) The Closing Agent shall have no duties or obligations other than those specifically set forth herein. The Closing Agent shall not be liable for any improper payment made in accordance with the information provided by the Parent and the Issuer pursuant to Section 3 hereof.
(b) The Closing Agent shall not be required to make any representations or have any responsibilities as to the validity, accuracy, value or genuineness of any certificates or documentation delivered by the Parent and the Issuer pursuant to this Agreement.
(c) The Closing Agent shall be able to rely on, and shall be protected in acting upon, any certificate, instrument, opinion, notice, letter or any other document or security delivered to it by the Parent and/or the Issuer.
(d) The Closing Agent shall not be liable for any action taken, suffered or omitted by it in good faith and reasonably believed by it to be authorized or within the discretion or rights or powers conferred upon it by this Agreement and shall not be liable for anything which it may do or refrain from doing in connection with this Agreement except for its own gross negligence, willful misconduct or bad faith.
(e) The Parent and the Issuer agree to indemnify and hold harmless Jefferies & Company, Inc. for acting as Closing Agent hereunder from any and all reasonable costs and expenses (including reasonable fees and expenses of counsel and other professionals) that may be paid or incurred or suffered by it or to which it may become subject without gross negligence, willful misconduct or bad faith on its part by reason of or as a result of its compliance with the instructions set forth herein or which may arise out of or in connection with the administration and performance of its duties under this Agreement.
[Remainder of Page Left Intentionally Blank]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized representatives as of the day and year first above written.
| PARENT: | ||
| TRANSMERIDIAN EXPLORATION INCORPORATED | ||
| By: | ||
| Name: | Earl W. McNiel | |
| Title: | Vice President and Chief Financial Officer | |
| ISSUER: | ||
| TRANSMERIDIAN EXPLORATION INC. | ||
| By: | ||
| Name: | Earl W. McNiel | |
| Title: | Vice President | |
| SUBSIDIARY GUARANTORS: | ||
| TMEI OPERATING, INC. | ||
| By: | ||
| Name: | Earl W. McNiel | |
| Title: | Vice President | |
| TRANSMERIDIAN (KAZAKHSTAN) INCORPORATED | ||
| By: | ||
| Name: | Earl W. McNiel | |
| Title: | Vice President | |
| BRAMEX MANAGEMENT, INC. | ||
| By: | ||
| Name: | Earl W. McNiel | |
| Title: | Vice President | |
Signature Page to Purchase Agreement
| JSC CASPI NEFT TIME | ||
| By: | ||
| Name: | Serik Kozhakov | |
| Title: | President | |
| By: | ||
| Rakhmet Khairullayev | ||
| Vice President, Economics & Finance | ||
| CLOSING AGENT: | ||
| JEFFERIES & COMPANY, INC. | ||
| By: | ||
| Name: | ||
| Title: | ||
Signature Page to Purchase Agreement
| Print or Type: | ||||||
| Name of Purchaser (Individual or Institution): | ||||||
| Name of Individual representing Purchaser (if an Institution): | ||||||
| Title of Individual representing Purchaser (if an Institution) | ||||||
| Signature by: | ||||||
| Individual Purchaser or Individual representing institutional Purchaser: | ||||||
| [Sign Here] | ||||||
| Address: | ||||||
| Telephone: | ||||||
| Telecopier: | ||||||
Securities to be purchased:
| I. | (a) Principal Amount of Notes: |
$
(b) Aggregate Purchase Price for Notes:
$
| Price: | $970 per $1,000 Note plus Accrued Interest at 12.0% per annum from and excluding March 15, 2006 (the most recent interest payment date on the existing Notes) to and including the Closing Date |
(c) Global Note Designation
¨ 144A ¨ Regulation S ¨ IAI
| II. | (a) Number of Shares: |
________________________
(b) Aggregate Purchase Price for Shares:
$
| Price: | $5.50 per share |
| III. | Total Purchase Price for Securities (Notes and Shares): |
$
Signature Page to Purchase Agreement
SUMMARY INSTRUCTION SHEET FOR PURCHASER
(to be read in conjunction with the entire
Purchase Agreement which this follows)
| A. | Please sign separate Purchase Agreements and complete separate Appendices for each managed fund purchasing the Securities. |
| B. | Complete the following items on Purchase Agreements (Please sign two originals): |
| 1. | Signature Page: |
| (i) | Name of Purchaser (Individual or Institution) |
| (ii) | Name of Individual representing Purchaser (if an Institution) |
| (iii) | Title of Individual representing Purchaser (if an Institution) |
| (iv) | Signature of Individual Purchaser or Individual representing institutional Purchaser |
| 2. | Appendix I - Securities Certificate and Registration Statement Questionnaire: |
Provide the information requested by the Securities Certificate and Registration Statement Questionnaire.
| 3. | Return: |
| (i) | properly completed and signed Purchase Agreements (2 copies), |
| (ii) | properly completed Appendix I, and |
| (iii) | original W-8 or W-9 tax form |
initially by facsimile, with hand copy by overnight delivery, to:
Jefferies & Company, Inc.
51 JFK Parkway, 3rd Floor
Short Hills, NJ 07078
Attn: Ryan Borcherdt
***@***
Phone: (973) ###-###-####
Fax: (973) ###-###-####
| C. | Instructions regarding the transfer of funds for the purchase of Securities will be sent by facsimile to the Purchaser at a later date. |
X-1
| D. | Upon the resale of the Shares by the Purchasers after the Equity Registration Statement is effective, as described in the Purchase Agreement, the Purchaser: |
| (i) | must deliver a current prospectus of the Parent to the buyer, if required under the Securities Act (prospectuses must be obtained from the Parent at the Purchaser’s request); and |
| (ii) | must send a letter in the form of Appendix II to the Parent so that the Shares may be properly transferred. |
X-2
Appendix I
Transmeridian Exploration Incorporated
Transmeridian Exploration Inc.
SECURITIES CERTIFICATE AND REGISTRATION STATEMENT QUESTIONNAIRE
Pursuant to Section 3 of the Agreement, please provide us with the following information:
| 1. | The exact name that your Shares and Notes are to be registered in. You may use a nominee name if appropriate: | |||
| 2. | The relationship between the Purchaser of the Securities and the Registered Holder listed in response to item 1 above: | |||
| 3. | The mailing address of the Registered Holder listed in response to item 1 above: | |||
| 4. | Delivery address for the certificate, if different than address in item 3 above: | |||
| 5. | The Social Security Number or Tax Identification Number of the Registered Holder listed in response to item 1 above: | |||
| 6. | Name, telephone number and email address of your contact person: | |||
For purposes of the Equity Registration Statement, please provide us with the following information:
SECTION 1. Pursuant to the “Selling Shareholder” section of the Equity Registration Statement, please state your or your organization’s name exactly as it should appear in the Equity Registration Statement:
_________________________________________________________
calculation therefor.
I-1
Appendix I
Transmeridian Exploration Incorporated
Transmeridian Exploration Inc.
SECURITIES CERTIFICATE AND REGISTRATION STATEMENT QUESTIONNAIRE
SECTION 2. Please provide the number of shares of Common Stock that you, your organization or any affiliates own immediately prior to the date of the Purchase Agreement:
| Your Name (or name of Affiliated Entity) | Number of Shares Owned |
SECTION 3. Have you or your organization had any position, office or other material relationship within the past three years with the Parent or its affiliates?
¨ Yes ¨ No
If yes, please indicate the nature of any such relationships below:
SECTION 4. (a) Are you (i) an NASD Member (see definition), (ii) a Controlling (see definition) shareholder of an NASD Member, (iii) a Person Associated with a Member of the NASD (see definition), or (iv) an Underwriter or a Related Person (see definition) with respect to the proposed offering; or (b) do you own any shares or other securities of any NASD Member not purchased in the open market; or (c) have you made any outstanding subordinated loans to any NASD Member?
Answer: ¨ Yes ¨ No If “yes”, please describe below.
I-2
Appendix I
Transmeridian Exploration Incorporated
Transmeridian Exploration Inc.
SECURITIES CERTIFICATE AND REGISTRATION STATEMENT QUESTIONNAIRE
NASD Member. The term “NASD member” means either any broker or dealer admitted to membership in the National Association of Securities Dealers, Inc. (“NASD”). (NASD Manual, By-laws Article I, Definitions)
Control. The term “control” (including the terms “controlling”, “controlled by” and “under common control with”) means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, by contract, or otherwise. (Rule 405 under the Securities Act of 1933, as amended)
Person Associated with a member of the NASD. The term “person associated with a member of the NASD” means (i) a natural person who is registered or has applied for registration under the Rules of the Association set forth in the NASD manual or (ii) a sole proprietor, partner, officer, director, or branch manager of a member, or other natural person occupying a similar status or performing similar functions, or a natural person engaged in the investment banking or securities business who is directly or indirectly controlling or controlled by a NASD Member, whether or not such person is registered or exempt from registration with the NASD pursuant to its bylaws or the Rules of the Association set forth in the NASD manual. (NASD Manual, By-laws Article I, Definitions)
Underwriter or a Related Person. The term “underwriter or a related person” means, with respect to a proposed offering, underwriters, underwriters’ counsel, financial consultants and advisors, finders, members of the selling or distribution group, and any and all other persons associated with or related to any of such persons. (NASD Interpretation)
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APPENDIX II
[Transfer Agent]
[Address]
Attention:
PURCHASER’S CERTIFICATE OF SUBSEQUENT SALE
The undersigned, [an officer of, or other person duly authorized by]
| hereby certifies that he/she [said institution] is the | ||
| [fill in official name of individual or institution] |
| Purchaser of the shares evidenced by the attached certificate, and as such, sold such shares on | ||
| [date] |
in accordance with the terms of the Purchase Agreement and in accordance with Registration Statement number
| or otherwise in accordance with the Securities Act of 1933, | ||
| [fill in the number of or otherwise identify Registration Statement] |
as amended, and, in the case of a transfer pursuant to the Registration Statement, the requirement of delivering a current prospectus by the Parent has been complied with in connection with such sale.
Print or Type:
| Name of Purchaser (Individual or Institution): | ||
| Name of Individual representing Purchaser (if an Institution): | ||
| Title of Individual representing Purchaser (if an Institution): | ||
| Signature by: Individual Purchaser or Individual representing Purchaser: | ||
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