Exhibit 10.2

 

INVESTOR RIGHTS AGREEMENT

 

This Investor Rights Agreement (this “Agreement”) is made and entered into as of
August 30, 2005 among Transmeridian Exploration Incorporated, a Delaware
corporation (the “Company”), and each of the purchasers executing this Agreement
and listed on Schedule 1 attached hereto (collectively, the “Purchasers”).

 

This Agreement is being entered into pursuant to the Convertible Promissory Note
and Warrant Purchase Agreement, dated as of [the date hereof,] by and among the
Company and the Purchasers (the “Purchase Agreement”).

 

The Company and the Purchasers hereby agree as follows:

 

  1. Definitions.

 

Capitalized terms used and not otherwise defined herein shall have the meanings
given such terms in the Purchase Agreement. As used in this Agreement, the
following terms shall have the following meanings:

 

“Advice” shall have the meaning set forth in Section 3(m).

 

“Affiliate” means, with respect to any Person, any other Person that directly or
indirectly controls or is controlled by or under common control with such
Person. For the purposes of this definition, “control,” when used with respect
to any Person, means the possession, direct or indirect, of the power to direct
or cause the direction of the management and policies of such Person, whether
through the ownership of voting securities, by contract or otherwise; and the
terms “affiliated,” “controlling” and “controlled” have meanings correlative to
the foregoing.

 

“Blackout Period” shall have the meaning set forth in Section 3(n).

 

“Board” shall have the meaning set forth in Section 3(n).

 

“Business Day” means any day except Saturday, Sunday and any day which shall be
a legal holiday or a day on which banking institutions in the State of Texas
generally are authorized or required by law or other government actions to
close.

 

“Closing Date” means the Closing Date as defined in the Purchase Agreement.

 

“Commission” means the Securities and Exchange Commission.

 

“Common Stock” means the Company’s Common Stock, par value $0.0006 per share.

 

“Demand Notice” has the meaning set forth in Section 2(a).

 

“Effectiveness Period” means the period after a Registration Statement becomes
effective until such date as is the earlier of (x) the date when all Registrable
Securities

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covered by such Registration Statement have been sold or (y) the date on which
the Registrable Securities may be sold without any restriction pursuant to Rule
144(k) as determined by the counsel to the Company pursuant to a written opinion
letter, addressed to the Company’s transfer agent to such effect.

 

“Event” shall have the meaning set forth in Section 8(e).

 

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

 

“Filing Date” means the 45th day following the date of receipt by the Company of
a Demand Notice, or in the case of a Registration Statement pursuant to Section
8(d) the 45th day following receipt by the Holder of written notice of the
Company’s determination to proceed with such a Registration Statement.

 

“Holder” or “Holders” means the holder or holders, as the case may be, from time
to time of Registrable Securities, including without limitation the Purchasers
and their assignees.

 

“Indemnified Party” shall have the meaning set forth in Section 5(c).

 

“Indemnifying Party” shall have the meaning set forth in Section 5(c).

 

“Initiating Holders” has the meaning set forth in Section 2(a).

 

“Losses” shall have the meaning set forth in Section 5(a).

 

“Notes” means the Convertible Promissory Notes issued pursuant to the Purchase
Agreement.

 

“Person” means an individual or a corporation, partnership, trust, incorporated
or unincorporated association, joint venture, limited liability company, joint
stock company, government (or an agency or political subdivision thereof) or
other entity of any kind.

 

“Proceeding” means an action, claim, suit, investigation or proceeding
(including, without limitation, an investigation or partial proceeding, such as
a deposition), whether commenced or threatened.

 

“Prospectus” means the prospectus included in any Registration Statement
(including, without limitation, a prospectus that includes any information
previously omitted from a prospectus filed as part of an effective registration
statement in reliance upon Rule 430A promulgated under the Securities Act), as
amended or supplemented by any prospectus supplement, with respect to the terms
of the offering of any portion of the Registrable Securities covered by such
Registration Statement, and all other amendments and supplements to the
Prospectus, including post-effective amendments, and all material incorporated
by reference in such Prospectus.

 

“Registrable Securities” means (a) the Warrant Shares (without regard to any
limitations on beneficial ownership contained therein) or other securities
issued or issuable

 

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to each Purchaser or its transferee or designee (i) upon exercise of the
Warrants, or (ii) upon any dividend or distribution with respect to, any
exchange for or any replacement of such Warrants or (iii) upon any conversion,
exercise or exchange of any securities issued in connection with any such
distribution, exchange or replacement; (b) securities issued or issuable upon
any stock split, stock dividend, recapitalization or similar event with respect
to the foregoing; and (c) any other security issued as a dividend or other
distribution with respect to, in exchange for, in replacement or redemption of,
or in reduction of the liquidation value of, any of the securities referred to
in the preceding clauses; provided, however, that such securities shall cease to
be Registrable Securities when such securities have been sold to or through a
broker or dealer or underwriter in a public distribution or a public securities
transaction or when such securities may be sold without any restriction pursuant
to Rule 144(k) as determined by the counsel to the Company pursuant to a written
opinion letter, addressed to the Company’s transfer agent to such effect as
described in Section 2 of this Agreement.

 

“Registration Statement” means the registration statements and any additional
registration statements contemplated by Section 2 and Section 8(d), including
(in each case) the Prospectus, amendments and supplements to such registration
statement or Prospectus, including pre- and post-effective amendments, all
exhibits thereto, and all material incorporated by reference in such
registration statement.

 

“Rule 144” means Rule 144 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same effect as such Rule.

 

“Rule 158” means Rule 158 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same effect as such Rule.

 

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

 

“Special Counsel” means Wiggin and Dana LLP.

 

“Warrant Shares” means the shares of Common Stock issuable upon the exercise of
the warrants issued or to be issued to the Purchasers or their assignees or
designees in connection with the offering consummated under the Purchase
Agreement.

 

  2. Registration.

 

(a) At any time on or after the date that is the earlier of (i) three months
after the Closing Date or (ii) the date on which the Notes are converted into
New Securities (as defined in the Purchase Agreement), a Holder or Holders
holding in the aggregate at least 50% of the Registrable Securities then
outstanding (the “Initiating Holders”) may request, in writing (a “Demand
Notice”), that the Company effect the registration on Form S-3 (or if such form
is not available to the Company on another form appropriate for such
registration in accordance herewith) of any Registrable Securities owned by such
Initiating Holders.

 

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(b) Upon receipt of any request for registration pursuant to this Section 2, the
Company shall promptly give written notice of such proposed registration to all
other Holders. Such Holders shall have the right, by giving written notice to
the Company within ten (10) days after the Company provides its notice, to elect
to have included in such registration such of their Registrable Securities as
such Holders may request in such notice of election, subject in the case of an
underwritten offering to the terms of Section 2(c). Thereupon, the Company
shall, as expeditiously as possible, use its best efforts to effect the
registration of all Registrable Securities which the Company has been requested
to so register (including filing with the Commission a request for acceleration
of effectiveness in accordance with Rule 461 promulgated under the Securities
Act within five (5) Business Days of the date that the Company is notified
(orally or in writing, whichever is earlier) by the Commission that a
Registration Statement will not be “reviewed,” or not be subject to further
review) and to keep such Registration Statement continuously effective under the
Securities Act during the Effectiveness Period. Such Registration Statement also
shall cover, to the extent allowable under the Securities Act and the Rules
promulgated thereunder (including Securities Act Rule 416), such indeterminate
number of additional shares of Common Stock resulting from stock splits, stock
dividends or similar transactions with respect to the Registrable Securities.

 

(c) If the Initiating Holders intend to distribute the Registrable Securities
covered by their request by means of an underwriting, they shall so advise the
Company as a part of their request made pursuant to Section 2(a) and the Company
shall include such information in its written notice referred to in Section
2(b). In such event, (i) the right of any other Holder to include its
Registrable Securities in such registration pursuant to Section 2(a) shall be
conditioned upon such other Holder’s participation in such underwriting on the
terms set forth herein, and (ii) all Holders including Registrable Securities in
such registration shall enter into an underwriting agreement upon customary
terms with the underwriter or underwriters managing the offering. The Initiating
Holders shall have the right to select the managing underwriter(s) for any
underwritten offering requested pursuant to Section 2(a) subject to the approval
of the Company, which approval will not be unreasonably withheld, conditioned or
delayed. If any Holder who has requested inclusion of its Registrable Securities
in such registration as provided above disapproves of the terms of the
underwriting, such person may elect, by written notice to the Company, to
withdraw its Registrable Securities from such Registration Statement and
underwriting. If the managing underwriter advises the Company in writing that
marketing factors require a limitation on the number of shares to be
underwritten, the number of Registrable Securities to be included in the
Registration Statement and underwriting shall be allocated among all Holders
requesting registration in proportion, as nearly as practicable, to the
respective number of Registrable Securities held by them on the date of the
request for registration made by the Initiating Holders pursuant to Section
2(a). If any Holder would thus be entitled to include more Registrable
Securities than such Holder requested to be registered, the excess shall be
allocated among other requesting Holders pro rata in the manner described in the
preceding sentence.

 

(d) The Company shall not be required to effect more than one registration
pursuant to Section 2(a). For purposes of this Section 2(d), a Registration
Statement shall not be counted until such time as such Registration Statement
has been declared effective by

 

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the Commission. For purposes of this Section 2(d), a Registration Statement
shall not be counted if, as a result of an exercise of the underwriters’
cut-back provisions as set forth in Section 2(c), less than 50% of the total
number of Registrable Securities that Holders have requested to be included in
such Registration Statement are so included.

 

  3. Registration Procedures.

 

In connection with the Company’s registration obligations hereunder, the Company
shall:

 

(a) Prepare and file with the Commission on or prior to the Filing Date, a
Registration Statement on Form S-3 (or if such form is not available to the
Company on another form appropriate for such registration in accordance
herewith) (which shall include a Plan of Distribution substantially in the form
of Exhibit A attached hereto), and cause the Registration Statement to become
effective and remain effective as provided herein; provided, however, that not
less than three (3) Business Days prior to the filing of the Registration
Statement or any related Prospectus or any amendment or supplement thereto, the
Company shall (i) furnish to the Special Counsel, copies of all such documents
proposed to be filed, which documents (other than those incorporated by
reference) will be subject to the review of such Special Counsel, and (ii) at
the request of any Holder cause its officers and directors, counsel or
independent certified public accountants, as applicable, to respond to such
inquiries as shall be necessary, in the reasonable opinion of counsel to such
Holders, to conduct a reasonable investigation within the meaning of the
Securities Act. The Company shall not file the Registration Statement or any
such Prospectus or any amendments or supplements thereto to which the Holders of
a majority of the Registrable Securities or the Special Counsel shall reasonably
object within three (3) Business Days after the Special Counsel’s receipt
thereof.

 

(b) (i) Prepare and file with the Commission such amendments, including
post-effective amendments, to the Registration Statement as may be necessary to
keep the Registration Statement continuously effective as to the applicable
Registrable Securities for the Effectiveness Period and to the extent any
Registrable Securities are not included in such Registration Statement for
reasons other than the failure of the Holder to comply with Section 3(m) hereof,
shall prepare and file with the Commission such additional Registration
Statements in order to register for resale under the Securities Act all
Registrable Securities; (ii) cause the related Prospectus to be amended or
supplemented by any required Prospectus supplement, and as so supplemented or
amended to be filed pursuant to Rule 424 (or any similar provisions then in
force) promulgated under the Securities Act; (iii) respond as promptly as
possible, and in no event later than ten (10) Business Days, to any comments
received from the Commission with respect to the Registration Statement or any
amendment thereto and as promptly as possible provide the Holders true and
complete copies of all correspondence from and to the Commission relating to the
Registration Statement; and (iv) comply in all material respects with the
provisions of the Securities Act and the Exchange Act with respect to the
disposition of all Registrable Securities covered by the Registration Statement
during the Effectiveness Period in accordance with the intended methods of
disposition by the Holders thereof set forth in the Registration Statement as so
amended or in such Prospectus as so supplemented.

 

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(c) Notify the Holders of Registrable Securities to be sold and the Special
Counsel as promptly as possible (A) when a Prospectus or any Prospectus
supplement or post-effective amendment to the Registration Statement is proposed
to be filed (but in no event in the case of this subparagraph (A), less than
three (3) Business Days prior to date of such filing); (B) when the Commission
notifies the Company whether there will be a “review” of such Registration
Statement and whenever the Commission comments in writing on such Registration
Statement; and (C) with respect to the Registration Statement or any
post-effective amendment, when the same has become effective, and after the
effectiveness thereof: (i) of any request by the Commission or any other Federal
or state governmental authority for amendments or supplements to the
Registration Statement or Prospectus or for additional information; (ii) of the
issuance by the Commission of any stop order suspending the effectiveness of the
Registration Statement covering any or all of the Registrable Securities or the
initiation of any Proceedings for that purpose; (iii) if at any time any of the
representations and warranties of the Company contained in any agreement
contemplated hereby ceases to be true and correct in all material respects; (iv)
of the receipt by the Company of any notification with respect to the suspension
of the qualification or exemption from qualification of any of the Registrable
Securities for sale in any jurisdiction, or the initiation or threatening of any
Proceeding for such purpose; and (v) if the financial statements included in the
Registration Statement become ineligible for inclusion therein or of the
occurrence of any event that makes any statement made in the Registration
Statement or Prospectus or any document incorporated or deemed to be
incorporated therein by reference untrue in any material respect or that
requires any revisions to the Registration Statement, Prospectus or other
documents so that, in the case of the Registration Statement or the Prospectus,
as the case may be, it will not contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading.

 

(d) Use its best efforts to avoid the issuance of, or, if issued, use best
efforts to obtain the withdrawal of, (i) any order suspending the effectiveness
of the Registration Statement or (ii) any suspension of the qualification (or
exemption from qualification) of any of the Registrable Securities for sale in
any jurisdiction, at the earliest practicable moment.

 

(e) If reasonably requested by the Holders of a majority in interest of the
Registrable Securities, (i) promptly incorporate in a Prospectus supplement or
post-effective amendment to the Registration Statement such information as the
Company reasonably agrees should be included therein and (ii) make all required
filings of such Prospectus supplement or such post-effective amendment as soon
as practicable after the Company has received notification of the matters to be
incorporated in such Prospectus supplement or post-effective amendment;
provided, however, that the Company shall not be required to take any action
pursuant to this Section 3(e) that would, in the written opinion of counsel for
the Company (addressed to the Special Counsel), violate applicable law.

 

(f) Furnish to each Holder and the Special Counsel, without charge, at least one
conformed copy of each Registration Statement and each amendment thereto,
including financial statements and schedules, and all exhibits to the extent
requested by such Person (including those previously furnished or incorporated
by reference) promptly after the filing of such documents with the Commission.

 

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(g) Promptly deliver to each Holder and the Special Counsel, without charge, as
many copies of the Prospectus or Prospectuses (including each form of
prospectus) and each amendment or supplement thereto as such Persons may
reasonably request; and the Company hereby consents to the use of such
Prospectus and each amendment or supplement thereto by each of the selling
Holders in connection with the offering and sale of the Registrable Securities
covered by such Prospectus and any amendment or supplement thereto.

 

(h) Prior to any public offering of Registrable Securities, use its reasonable
commercial efforts to register or qualify or cooperate with the selling Holders
and the Special Counsel in connection with the registration or qualification (or
exemption from such registration or qualification) of such Registrable
Securities for offer and sale under the securities or Blue Sky laws of such
jurisdictions within the United States as any Holder requests in writing, to
keep each such registration or qualification (or exemption therefrom) effective
during the Effectiveness Period and to do any and all other acts or things
necessary or advisable to enable the disposition in such jurisdictions of the
Registrable Securities covered by a Registration Statement; provided, however,
that the Company shall not be required to qualify generally to do business in
any jurisdiction where it is not then so qualified or to take any action that
would subject it to general service of process in any jurisdiction where it is
not then so subject or subject the Company to any material tax in any such
jurisdiction where it is not then so subject.

 

(i) Cooperate with the Holders to facilitate the timely preparation and delivery
of certificates representing Registrable Securities to be sold pursuant to a
Registration Statement, which certificates shall be free, to the extent
permitted by applicable law and the Purchase Agreement, of all restrictive
legends, and to enable such Registrable Securities to be in such denominations
and registered in such names as any Holder may request at least two (2) Business
Days prior to any sale of Registrable Securities. In connection therewith, the
Company shall promptly after the effectiveness of the Registration Statement
cause an opinion of counsel to be delivered to and maintained with its transfer
agent, together with any other authorizations, certificates and directions
required by the transfer agent, which authorize and direct the transfer agent to
issue such Registrable Securities without legend upon sale by the Holder of such
shares of Registrable Securities under the Registration Statement.

 

(j) Upon the occurrence of any event contemplated by Section 3(c)(C)(v), as
promptly as possible, prepare a supplement or amendment, including a
post-effective amendment, to the Registration Statement or a supplement to the
related Prospectus or any document incorporated or deemed to be incorporated
therein by reference, and file any other required document so that, as
thereafter delivered, neither the Registration Statement nor such Prospectus
will contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading.

 

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(k) Cause all Registrable Securities relating to such Registration Statement to
be listed on any United States securities exchange, quotation system, market or
over-the-counter bulletin board, if any, on which similar securities issued by
the Company are then listed as and when required pursuant to the Purchase
Agreement.

 

(l) Comply in all material respects with all applicable rules and regulations of
the Commission and make generally available to its security holders earning
statements satisfying the provisions of Section 11(a) of the Securities Act and
Rule 158 not later than 45 days after the end of any 3-month period (or 90 days
after the end of any 12-month period if such period is a fiscal year) commencing
on the first day of the first fiscal quarter of the Company after the effective
date of the Registration Statement, which statement shall conform to the
requirements of Rule 158.

 

(m) Request each selling Holder to furnish to the Company information regarding
such Holder and the distribution of such Registrable Securities as is required
by law or the Commission to be disclosed in the Registration Statement, and the
Company may exclude from such registration the Registrable Securities of any
such Holder who fails to furnish such information within a reasonable time prior
to the filing of each Registration Statement, supplemented Prospectus and/or
amended Registration Statement.

 

If the Registration Statement refers to any Holder by name or otherwise as the
holder of any securities of the Company, then such Holder shall have the right
to require (if such reference to such Holder by name or otherwise is not
required by the Securities Act or any similar federal statute then in force) the
deletion of the reference to such Holder in any amendment or supplement to the
Registration Statement filed or prepared subsequent to the time that such
reference ceases to be required.

 

Each Holder agrees by its acquisition of such Registrable Securities that, upon
receipt of a notice from the Company of the occurrence of any event of the kind
described in Section 3(c)(C)(i), 3(c)(C)(ii), 3(c)(C)(iii), 3(c)(C)(iv),
3(c)(C)(v) or 3(n), such Holder will forthwith discontinue disposition of such
Registrable Securities under the Registration Statement until such Holder’s
receipt of the copies of the supplemented Prospectus and/or amended Registration
Statement contemplated by Section 3(j), or until it is advised in writing (the
“Advice”) by the Company that the use of the applicable Prospectus may be
resumed, and, in either case, has received copies of any additional or
supplemental filings that are incorporated or deemed to be incorporated by
reference in such Prospectus or Registration Statement.

 

(n) If (i) there is material non-public information regarding the Company which
the Company’s Board of Directors (the “Board”) reasonably determines not to be
in the Company’s best interest to disclose and which the Company is not
otherwise required to disclose, or (ii) there is a significant business
opportunity (including, but not limited to, the acquisition or disposition of
assets (other than in the ordinary course of business) or any merger,
consolidation, tender offer or other similar transaction) available to the
Company which the Board reasonably determines not to be in the Company’s best
interest to disclose and which the Company would be required to disclose under
the Registration Statement, then the Company may postpone or suspend filing or
effectiveness of a registration statement for a period not to exceed 30
consecutive days, provided that the Company may

 

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not postpone or suspend its obligation under this Section 3(n) for more than 45
days in the aggregate during any 12 month period (each, a “Blackout Period”).
The payment requirements set forth in Sections 8(e) and (f) shall be tolled
during and shall not be applicable with respect to any Blackout Period.

 

  4. Registration Expenses.

 

All fees and expenses incident to the performance of or compliance with this
Agreement by the Company shall be borne by the Company whether or not the
Registration Statement is filed or becomes effective and whether or not any
Registrable Securities are sold pursuant to the Registration Statement. The fees
and expenses referred to in the foregoing sentence shall include, without
limitation, (i) all registration and filing fees (including, without limitation,
fees and expenses (A) with respect to filings required to be made with each
securities exchange, quotation system, market or over-the-counter bulletin board
on which Registrable Securities are required hereunder to be listed, (B) with
respect to filings required to be made with the Commission, and (C) in
compliance with state or provincial securities or Blue Sky laws (including,
without limitation, fees and disbursements of Special Counsel in connection with
Blue Sky qualifications of the Registrable Securities and determination of the
eligibility of the Registrable Securities for investment under the laws of such
jurisdictions as the Holders of a majority of Registrable Securities may
designate)), (ii) printing expenses (including, without limitation, expenses of
printing certificates for Registrable Securities and of printing or photocopying
prospectuses), (iii) messenger, telephone and delivery expenses, (iv) Securities
Act liability insurance, if the Company desires such insurance, (v) fees and
expenses of all other Persons retained by the Company in connection with the
consummation of the transactions contemplated by this Agreement, including,
without limitation, the Company’s independent public accountants (including, in
the case of an underwritten offering, the expenses of any comfort letters or
costs associated with the delivery by independent public accountants of a
comfort letter or comfort letters) and legal counsel, and (vi) fees and expenses
of the Special Counsel in connection with any Registration Statement hereunder.
In addition, the Company shall be responsible for all of its internal expenses
incurred in connection with the consummation of the transactions contemplated by
this Agreement (including, without limitation, all salaries and expenses of its
officers and employees performing legal or accounting duties), the expense of
any annual audit and the fees and expenses incurred in connection with the
listing of the Registrable Securities on any securities exchange as required
hereunder. Notwithstanding the foregoing, the Holders shall pay all underwriting
discounts or commissions, selling commissions and stock transfer taxes
attributable to any sale of Registrable Securities.

 

  5. Indemnification.

 

(a) Indemnification by the Company. The Company shall, notwithstanding any
termination of this Agreement, indemnify and hold harmless each Holder, the
officers, directors, partners, agents, brokers (including brokers who offer and
sell Registrable Securities as principal as a result of a pledge or any failure
to perform under a margin call of Common Stock), investment advisors and
employees of each of them, each Person who controls any such Holder (within the
meaning of Section 15 of the Securities Act or Section

 

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20 of the Exchange Act) and the officers, directors, agents and employees of
each such controlling Person, to the fullest extent permitted by applicable law,
from and against any and all losses, claims, damages, liabilities, costs
(including, without limitation, costs of preparation and reasonable attorneys’
fees) and expenses (collectively, “Losses”), as incurred, arising out of or
relating to any untrue or alleged untrue statement of a material fact contained
or incorporated by reference in the Registration Statement, any Prospectus or
any form of prospectus or in any amendment or supplement thereto or in any
preliminary prospectus, or arising out of or relating to any omission or alleged
omission of a material fact required to be stated therein or necessary to make
the statements therein (in the case of any Prospectus or form of prospectus or
amendment or supplement thereto, in the light of the circumstances under which
they were made) not misleading, except to the extent, but only to the extent,
that (i) such untrue statements or omissions are based solely upon information
regarding such Holder furnished in writing to the Company by such Holder
expressly for use therein, which information was reasonably relied on by the
Company for use therein or to the extent that such information relates to (x)
such Holder and was reviewed and expressly approved in writing by such Holder
expressly for use in the Registration Statement, such Prospectus or such form of
prospectus or in any amendment or supplement thereto or (y) such Holder’s
proposed method of distribution of Registrable Securities as set forth in
Exhibit A (or as such Holder otherwise informs the Company in writing); or (ii)
in the case of an occurrence of an event of the type described in Section
3(c)(C)(ii), 3(c)(C)(iii), 3(c)(C)(iv), 3(c)(C)(v) or 3(n), the use by a Holder
of an outdated or defective Prospectus after the delivery to the Holder of
written notice from the Company that the Prospectus is outdated or defective and
prior to the receipt by such Holder of the Advice contemplated in Section 3(m).
The Company shall notify the Holders promptly of the institution, threat or
assertion of any Proceeding of which the Company is aware in connection with the
transactions contemplated by this Agreement. Such indemnity shall remain in full
force and effect regardless of any investigation made by or on behalf of an
Indemnified Party (as defined in Section 5(c) to this Agreement) and shall
survive the transfer of the Registrable Securities by the Holders.

 

(b) Indemnification by Holders. Each Holder shall, severally and not jointly,
indemnify and hold harmless the Company, its directors, officers, agents and
employees, each Person who controls the Company (within the meaning of Section
15 of the Securities Act and Section 20 of the Exchange Act), and the directors,
officers, agents and employees of such controlling Persons, to the fullest
extent permitted by applicable law, from and against all Losses, as incurred,
arising solely out of or based solely upon any untrue statement of a material
fact contained in the Registration Statement, any Prospectus, or any form of
prospectus, or in any amendment or supplement thereto, or arising solely out of
or based solely upon any omission of a material fact required to be stated
therein or necessary to make the statements therein (in the case of any
Prospectus or form of prospectus or supplement thereto, in the light of the
circumstances under which they were made) not misleading, to the extent, but
only to the extent, that (i) such untrue statement or omission is contained in
or omitted from any information so furnished in writing by such Holder to the
Company specifically for inclusion in the Registration Statement or such
Prospectus and that such information was reasonably relied upon by the Company
for use in the Registration Statement, such Prospectus, or in any amendment or
supplement thereto, or to the extent that such information relates to (x) such
Holder and was reviewed and expressly approved in

 

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writing by such Holder expressly for use in the Registration Statement, such
Prospectus, or such form of prospectus or in any amendment or supplement thereto
or (y) such Holder’s proposed method of distribution of Registrable Securities
as set forth in Exhibit A (or as such Holder otherwise informs the Company in
writing) or (ii) in the case of an occurrence of an event of the type described
in Section 3(c)(C)(ii), 3(c)(C)(iii), 3(c)(C)(iv), 3(c)(C)(v) or 3(n), the use
by a Holder of an outdated or defective Prospectus after the delivery to the
Holder of written notice from the Company that the Prospectus is outdated or
defective and prior to the receipt by such Holder of the Advice contemplated in
Section 3(m); provided, however, that the indemnity agreement contained in this
Section 5(b) shall not apply to amounts paid in settlement of any Losses if such
settlement is effected without the prior written consent of the Holder, which
consent shall not be unreasonably withheld. Notwithstanding anything to the
contrary contained herein, the Holder shall be liable under this Section 5(b)
for only that amount as does not exceed the net proceeds to such Holder as a
result of the sale of Registrable Securities pursuant to such Registration
Statement.

 

(c) Conduct of Indemnification Proceedings. If any Proceeding shall be brought
or asserted against any Person entitled to indemnity hereunder (an “Indemnified
Party”), such Indemnified Party promptly shall notify the Person from whom
indemnity is sought (the “Indemnifying Party”) in writing, and the Indemnifying
Party shall assume the defense thereof, including the employment of counsel
reasonably satisfactory to the Indemnified Party and the payment of all
reasonable fees and expenses incurred in connection with defense thereof;
provided, that the failure of any Indemnified Party to give such notice shall
not relieve the Indemnifying Party of its obligations or liabilities pursuant to
this Agreement, except (and only) to the extent that it shall be finally
determined by a court of competent jurisdiction (which determination is not
subject to appeal or further review) that such failure shall have proximately
and materially adversely prejudiced the Indemnifying Party.

 

An Indemnified Party shall have the right to employ separate counsel in any such
Proceeding and to participate in the defense thereof, but the fees and expenses
of such counsel shall be at the expense of such Indemnified Party or Parties
unless: (1) the Indemnifying Party has agreed in writing to pay such fees and
expenses; or (2) the Indemnifying Party shall have failed promptly to assume the
defense of such Proceeding and to employ counsel reasonably satisfactory to such
Indemnified Party in any such Proceeding; or (3) the named parties to any such
Proceeding (including any impleaded parties) include both such Indemnified Party
and the Indemnifying Party, and such Indemnified Party shall have been advised
by counsel that a conflict of interest is likely to exist if the same counsel
were to represent such Indemnified Party and the Indemnifying Party (in which
case, if such Indemnified Party notifies the Indemnifying Party in writing that
it elects to employ separate counsel at the expense of the Indemnifying Party,
the Indemnifying Party shall not have the right to assume the defense thereof
and such counsel shall be at the reasonable expense of the Indemnifying Party).
The Indemnifying Party shall not be liable for any settlement of any such
Proceeding effected without its written consent, which 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
Proceeding in respect of which any Indemnified Party is a party, unless such
settlement includes an unconditional release of such Indemnified Party from all
liability on claims that are the subject matter of such Proceeding and does not
impose any monetary or other obligation or restriction on the Indemnified Party.

 

11

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The Indemnifying Party shall pay all reasonable fees and expenses of the
Indemnified Party (including reasonable fees and expenses to the extent incurred
in connection with investigating or preparing to defend such Proceeding in a
manner not inconsistent with this Section), as incurred, within ten (10)
Business Days of written notice thereof to the Indemnifying Party, which notice
shall be delivered no more frequently than on a monthly basis (regardless of
whether it is ultimately determined that an Indemnified Party is not entitled to
indemnification hereunder; provided, that the Indemnifying Party may require
such Indemnified Party to undertake to reimburse all such fees and expenses to
the extent it is finally judicially determined that such Indemnified Party is
not entitled to indemnification hereunder).

 

(d) Contribution. If a claim for indemnification under Section 5(a) or 5(b) is
unavailable to an Indemnified Party because of a failure or refusal of a
governmental authority to enforce such indemnification in accordance with its
terms (by reason of public policy or otherwise), then each Indemnifying Party,
in lieu of indemnifying such Indemnified Party, shall contribute to the amount
paid or payable by such Indemnified Party as a result of such Losses, in such
proportion as is appropriate to reflect the relative fault of the Indemnifying
Party and Indemnified Party in connection with the actions, statements or
omissions that resulted in such Losses as well as any other relevant equitable
considerations. The relative fault of such Indemnifying Party and Indemnified
Party shall be determined by reference to, among other things, whether any
action in question, including any untrue or alleged untrue statement of a
material fact or omission or alleged omission of a material fact, has been taken
or made by, or relates to information supplied by, such Indemnifying Party or
Indemnified Party, and the parties’ relative intent, knowledge, access to
information and opportunity to correct or prevent such action, statement or
omission. The amount paid or payable by a party as a result of any Losses shall
be deemed to include, subject to the limitations set forth in Section 5(c), any
reasonable attorneys’ or other reasonable fees or expenses incurred by such
party in connection with any Proceeding to the extent such party would have been
indemnified for such fees or expenses if the indemnification provided for in
this Section was available to such party in accordance with its terms.
Notwithstanding anything to the contrary contained herein, the Holder shall be
required to contribute under this Section 5(d) for only that amount as does not
exceed the net proceeds to such Holder as a result of the sale of Registrable
Securities pursuant to such Registration Statement.

 

The parties hereto agree that it would not be just and equitable if contribution
pursuant to this Section 5(d) were determined by pro rata allocation or by any
other method of allocation that does not take into account the equitable
considerations referred to in the immediately preceding paragraph. No Person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any Person who was
not guilty of such fraudulent misrepresentation.

 

The indemnity and contribution agreements contained in this Section are in
addition to any liability that the Indemnifying Parties may have to the
Indemnified Parties. The indemnity and contribution agreements herein are in
addition to and not in diminution or limitation of any indemnification
provisions under the Purchase Agreement.

 

12

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  6. Rule 144.

 

As long as any Holder owns Warrants or Warrant Shares, the Company covenants to
timely file (or obtain extensions in respect thereof and file within the
applicable grace period) all reports required to be filed by the Company after
the date hereof pursuant to Section 13(a) or 15(d) of the Exchange Act. As long
as any Holder owns Warrants or Warrant Shares, if the Company is not required to
file reports pursuant to Section 13(a) or 15(d) of the Exchange Act, it will
prepare and furnish to the Holders and make publicly available in accordance
with Rule 144(c) promulgated under the Securities Act annual and quarterly
financial statements, together with a discussion and analysis of such financial
statements in form and substance substantially similar to those that would
otherwise be required to be included in reports required by Section 13(a) or
15(d) of the Exchange Act, as well as any other information required thereby, in
the time period that such filings would have been required to have been made
under the Exchange Act. The Company further covenants that it will take such
further action as any Holder may reasonably request in writing, all to the
extent required from time to time to enable such Person to sell Warrant Shares
without registration under the Securities Act within the limitation of the
exemptions provided by Rule 144 promulgated under the Securities Act, including
compliance with the provisions of the Purchase Agreement relating to the
transfer of the Conversion Shares and Warrant Shares. Upon the request of any
Holder, in writing, the Company shall deliver to such Holder a written
certification of a duly authorized officer as to whether it has complied with
such requirements.

 

  7. Approval of Certain Transactions.

 

(a) As long as at least 20% of the aggregate principal amount of Notes are
outstanding, the consent of the holders of at least 75% of the aggregate
principal amount of such Notes, at the time outstanding, given in accordance
with the Certificate of Incorporation and Bylaws of the Company, as amended,
shall be necessary for effecting or validating (whether by merger, consolidation
or otherwise) any restructuring, incurrence, creation or assumption by the
Company of, or the Company otherwise becoming or remaining liable with respect
to, any Indebtedness, including guarantees of Indebtedness of others and
reimbursement obligations, whether contingent or matured, under letters of
credit or other financial guarantees by third parties (or becoming contractually
committed to doing so) in excess of $1,000,000 in the aggregate. For purposes of
this Section 7, “Indebtedness” means all funding obligations, contingent or
otherwise.

 

(b) The approval of the holders of Notes required by Section 7(a), to the extent
required thereby, of any financing and /or restructuring of debt of any joint
venture or subsidiary in which the Company is a shareholder or partner as of the
date hereof which debt is jointly and severally guaranteed or secured by the
Company up to a maximum exposure of the Company of $50 million (or $120 million
in the event the excess proceeds of such financing or restructuring are to be
used to fund a potential transaction involving the purchase of equity securities
of the entity that, as of the date of the Purchase Agreement, owns a 50%
interest in the Seller’s principal operating subsidiary in Kazakhstan) shall not
be unreasonably withheld or delayed.

 

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(c) The holders of Notes shall, in connection with the approvals required by
Sections 7(a) and 7(b), review the terms and conditions of any other asset-based
bank financing proposed by the Company in good faith and with the objective of
maximizing the Company’s value.

 

  8. Miscellaneous.

 

(a) Remedies. In the event of a breach by the Company or by a Holder, of any of
their obligations under this Agreement, each Holder or the Company, as the case
may be, in addition to being entitled to exercise all rights granted by law and
under this Agreement, including recovery of damages, will be entitled to seek
specific performance of its rights under this Agreement. The Company and each
Holder agree that monetary damages would not provide adequate compensation for
any losses incurred by reason of a breach by it of any of the provisions of this
Agreement and hereby further agrees that, in the event of any action for
specific performance in respect of such breach, it shall waive the defense that
a remedy at law would be adequate.

 

(b) No Inconsistent Agreements. Except as otherwise disclosed in the Purchase
Agreement, neither the Company nor any of its subsidiaries is a party to an
agreement currently in effect, nor shall the Company or any of its subsidiaries,
on or after the date of this Agreement, enter into any agreement with respect to
its securities that is inconsistent with the rights granted to the Holders in
this Agreement or otherwise conflicts with the provisions hereof. Without
limiting the generality of the foregoing, without the written consent of the
Holders of a majority of the then outstanding Registrable Securities, the
Company shall not grant to any Person the right to request the Company to
register any securities of the Company under the Securities Act unless the
rights so granted are subject in all respects to the prior rights in full of the
Holders set forth herein, and are not otherwise in conflict with the provisions
of this Agreement.

 

(c) Notice of Effectiveness. Within two (2) Business Days after the Registration
Statement which includes the Registrable Securities is ordered effective by the
Commission, the Company shall deliver, and shall cause legal counsel for the
Company to deliver, to the transfer agent for such Registrable Securities (with
copies to the Holders whose Registrable Securities are included in such
Registration Statement) confirmation that the Registration Statement has been
declared effective by the Commission in the form attached hereto as Exhibit B.

 

(d) Piggy-Back Registrations. If at any time when there is not an effective
Registration Statement covering all of the Registrable Securities, the Company
shall determine to prepare and file with the Commission a registration statement
relating to an offering for its own account or the account of others under the
Securities Act of any of its equity securities, other than on Form S-4 or Form
S-8 (each as promulgated under the Securities Act) or its then equivalents
relating to equity securities to be issued solely in connection with any
acquisition of any entity or business or equity securities issuable in
connection with stock option or other employee benefit plans, the Company shall
send to each Holder of Registrable Securities written notice of such
determination and, if within seven (7) Business Days after receipt of such
notice, any such Holder shall so request in

 

14

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writing (which request shall specify the Registrable Securities intended to be
disposed of by the Holder), the Company will cause the registration under the
Securities Act of all Registrable Securities which the Company has been so
requested to register by the Holder, to the extent required to permit the
disposition of the Registrable Securities so to be registered, provided that if
at any time after giving written notice of its intention to register any
securities and prior to the effective date of the registration statement filed
in connection with such registration, the Company shall determine for any reason
not to register or to delay registration of such securities, the Company may, at
its election, give written notice of such determination to such Holder and,
thereupon, (i) in the case of a determination not to register, shall be relieved
of its obligation to register any Registrable Securities in connection with such
registration (but not from its obligation to pay expenses in accordance with
Section 4 hereof), and (ii) in the case of a determination to delay registering,
shall be permitted to delay registering any Registrable Securities being
registered pursuant to this Section 8(d) for the same period as the delay in
registering such other securities. The Company shall include in such
registration statement all or any part of such Registrable Securities such
Holder requests to be registered; provided, however, that the Company shall not
be required to register any Registrable Securities pursuant to this Section 8(d)
that are eligible for sale pursuant to Rule 144(k) of the Securities Act. In the
case of an underwritten public offering, if the managing underwriter(s) or
underwriter(s) should reasonably object to the inclusion of the Registrable
Securities in such registration statement, then if the Company after
consultation with the managing underwriter should reasonably determine that the
inclusion of such Registrable Securities would materially adversely affect the
offering contemplated in such registration statement, and based on such
determination recommends inclusion in such registration statement of fewer or
none of the Registrable Securities of the Holders, then (x) the number of
Registrable Securities of the Holders included in such registration statement
shall be reduced pro-rata among such Holders (based upon the number of
Registrable Securities requested to be included in the registration), if the
Company after consultation with the underwriter(s) recommends the inclusion of
fewer Registrable Securities, or (y) none of the Registrable Securities of the
Holders shall be included in such registration statement, if the Company after
consultation with the underwriter(s) recommends the inclusion of none of such
Registrable Securities; provided, however, that if securities are being offered
for the account of other persons or entities as well as the Company, such
reduction shall not represent a greater fraction of the number of Registrable
Securities intended to be offered by the Holders than the fraction of similar
reductions imposed on such other persons or entities (other than the Company).

 

(e) Failure to File Registration Statement and Other Events. The Company and the
Holders agree that the Holders will suffer damages if the Registration Statement
is not filed on or prior to the Filing Date and maintained in the manner
contemplated herein during the Effectiveness Period. The Company and the Holders
further agree that it would not be feasible to ascertain the extent of such
damages with precision. Accordingly, if (i) the Registration Statement is not
filed on or prior to the Filing Date, or (ii) except as otherwise permitted
herein, the Company intentionally and willfully fails to file with the
Commission a request for acceleration in accordance with Rule 461 promulgated
under the Securities Act within five (5) Business Days of the date that the
Company is notified (orally or in writing, whichever is earlier) by the
Commission that a Registration Statement will not be “reviewed,” or not subject
to further review, or (iii) the Registration Statement is filed with

 

15

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and declared effective by the Commission but thereafter ceases to be effective
as to all Registrable Securities at any time prior to the expiration of the
Effectiveness Period due to an intentional and willful act by the Company,
without being succeeded immediately by a subsequent Registration Statement filed
with the Commission, except as otherwise permitted by this Agreement, including
pursuant to Section 3(n), or (iv) trading in the Common Stock shall be suspended
or if the Common Stock is delisted from any securities exchange, quotation
system, market or over-the-counter bulletin board on which Registrable
Securities are listed (each an “Exchange”), without immediately being listed on
any other Exchange, for any reason for more than one (1) Business Day, other
than pursuant to Section 3(n), due to an intentional and willful act by the
Company, or (v) the exercise rights of the Holders under the Warrant are
suspended due to an intentional and willful act by the Company without the
consent of the particular Holder other than as set forth in the Warrant or (vi)
the Company has breached Section 3(n) of this Agreement (any such failure or
breach being referred to as an “Event”), the Company shall pay in cash as
liquidated damages for such failure and not as a penalty to each Holder an
amount equal to (A) $150,000, multiplied by such Holder’s pro-rata portion of
all of the Warrants purchased and then outstanding pursuant to the Purchase
Agreement and (B) $75,000, multiplied by such Holder’s pro-rata portion of all
of the Warrants purchased and then outstanding pursuant to the Purchase
Agreement for each subsequent thirty (30) day period until the applicable Event
has been cured which shall be pro rated for such periods less than thirty days
(the “Periodic Amount”). Payments to be made pursuant to this Section 8(e) shall
be due and payable immediately upon demand in immediately available cash funds.
The parties agree that the Periodic Amount represents a reasonable estimate on
the part of the parties, as of the date of this Agreement, of the amount of
damages that will be incurred by the Holders if the Registration Statement is
not filed on or prior to the Filing Date and maintained in the manner
contemplated herein during the Effectiveness Period or if any other Event as
described herein has occurred. Notwithstanding the foregoing, the Company shall
remain obligated to cure the breach or correct the condition that caused the
Event, and the Holder shall have the right to take any action necessary or
desirable to enforce such obligation.

 

(f) Failure of Registration Statement to Become Effective. The Company and the
Holders agree that the Holders will suffer damages if the Registration Statement
is not declared effective on or prior to the seventy-fifth (75th) day following
the Filing Date. The Company and the Holders further agree that it would not be
feasible to ascertain the extent of such damages with precision. Accordingly, if
the Registration Statement is not declared effective within seventy-five (75)
days after the Filing Date, the Company shall pay in cash as liquidated damages
for such failure and not as a penalty to each Holder an amount equal to (i)
$150,000, multiplied by such Holder’s pro-rata portion of all of the Warrants
purchased and then outstanding pursuant to the Purchase Agreement and (ii)
$75,000, multiplied by such Holder’s pro-rata portion of all of the Warrants
purchased and then outstanding pursuant to the Purchase Agreement for each
subsequent thirty (30) day period (which shall be pro rated for such periods
less than thirty (30) days) until the Registration Statement is declared
effective. Payments to be made pursuant to this Section 8(f) shall be due and
payable immediately upon demand in immediately available cash funds. The parties
agree that the amounts set forth in this Section 8(f) represent a reasonable
estimate on the part of the parties, as of the date of this Agreement, of the
amount of damages that will be incurred by the Holders if the Registration
Statement is not declared effective on or prior to

 

16

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the seventy-fifth (75th) day following the Filing Date. Notwithstanding the
foregoing, the Company shall remain obligated to cause the Registration
Statement to become effective, and the Holder shall have the right to take any
action necessary or desirable to enforce such obligation.

 

(g) Specific Enforcement, Consent to Jurisdiction.

 

(i) The Company and the Holders acknowledge and agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the parties shall be entitled to seek an injunction
or injunctions to prevent or cure breaches of the provisions of this Agreement
and to enforce specifically the terms and provisions hereof, this being in
addition to any other remedy to which any of them may be entitled by law or
equity.

 

(ii) Each of the Company and the Holders (i) hereby irrevocably submits to the
exclusive jurisdiction of the state and federal courts located in New York City,
New York for the purposes of any suit, action or proceeding arising out of or
relating to this Agreement and (ii) hereby waives, and agrees not to assert in
any such suit, action or proceeding, any claim that it is not personally subject
to the jurisdiction of such court, that the suit, action or proceeding is
brought in an inconvenient forum or that the venue of the suit, action or
proceeding is improper. Each of the Company and the Holders consents to process
being served in any such suit, action or proceeding by mailing a copy thereof to
such party at the address in effect for notices to it under this Agreement and
agrees that such service shall constitute good and sufficient service of process
and notice thereof. Nothing in this Section 8(g) shall affect or limit any right
to serve process in any other manner permitted by law.

 

(h) Amendments and Waivers. The provisions of this Agreement, including the
provisions of this sentence, may not be amended, modified or supplemented, and
waivers or consents to departures from the provisions hereof may not be given,
unless the same shall be in writing and signed by the Company and the Holders of
at least a majority of the Registrable Securities. Notwithstanding the
foregoing, a waiver or consent to depart from the provisions hereof with respect
to a matter that relates exclusively to the rights of Holders and that does not
directly or indirectly affect the rights of other Holders may be given by
Holders of the Registrable Securities to which such waiver or consent relates;
provided, however, that the provisions of this sentence may not be amended,
modified, or supplemented except in accordance with the provisions of the
immediately preceding sentence.

 

(i) Notices. Any and all notices or other communications or deliveries required
or permitted to be provided hereunder shall be in writing and shall be deemed
given and effective on the earlier of (i) the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile telephone
number specified for notice prior to 5:00 p.m., New York City time, on a
Business Day, (ii) the next Business Day after the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile number
specified in this Section on a day that is not a Business Day or later than 5:00
p.m., New York City time, on any date and earlier than 11:59 p.m., New York City
time, on such

 

17

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date, (iii) the Business Day following the date of mailing, if sent by
nationally recognized overnight courier service such as Federal Express or (iv)
actual receipt by the party to whom such notice is required to be given. The
addresses for such communications shall be with respect to each Holder at its
address set forth under its name on Schedule 1 attached hereto, or with respect
to the Company, addressed to:

 

Transmeridian Exploration Incorporated

397 N. Sam Houston Pkwy E, Suite 300

Houston, Texas 77060

Attention: Chief Financial Officer

Facsimile No.: 281-999-9094

 

or to such other address or addresses or facsimile number or numbers as any such
party may most recently have designated in writing to the other parties hereto
by such notice. Copies of notices to the Company shall be sent to Weycer,
Kaplan, Pulaski & Zuber, P.C., 1400 Summit Tower, Eleven Greenway Plaza,
Houston, Texas 77046, Attention: Robert Beasley, Esq, Facsimile: 713-961-5341.
Copies of notices to any Holder shall be sent to the addresses, if any, listed
on Schedule 1 attached hereto.

 

(j) Successors and Assigns. This Agreement shall be binding upon and inure to
the benefit of the parties and their successors and permitted assigns and shall
inure to the benefit of each Holder and its successors and assigns; provided,
that the Company may not assign this Agreement or any of its rights or
obligations hereunder without the prior written consent of Holders holding a
majority of the Registrable Securities; and provided, further, that each Holder
may assign its rights hereunder in the manner and to the Persons as permitted
under the Purchase Agreement.

 

(k) Assignment of Registration Rights. The rights of each Holder hereunder,
including the right to have the Company register for resale Registrable
Securities in accordance with the terms of this Agreement, shall be
automatically assignable by each Holder to any transferee of such Holder of all
or a portion of the Warrants or the Registrable Securities if: (i) the Holder
agrees in writing with the transferee or assignee to assign such rights, and a
copy of such agreement is furnished to the Company within a reasonable time
after such assignment, (ii) the Company is, within a reasonable time after such
transfer or assignment, furnished with written notice of (a) the name and
address of such transferee or assignee, and (b) the securities with respect to
which such registration rights are being transferred or assigned, (iii)
following such transfer or assignment the further disposition of such securities
by the transferee or assignees is restricted under the Securities Act and
applicable state securities laws, (iv) at or before the time the Company
receives the written notice contemplated by clause (ii) of this Section 8(k),
the transferee or assignee agrees in writing with the Company to be bound by all
of the provisions of this Agreement, and (v) such transfer shall have been made
in accordance with the applicable requirements of the Purchase Agreement and
applicable securities legislation. The rights to assignment shall apply to the
Holders (and to subsequent) successors and assigns.

 

The Company may require, as a condition of allowing such assignment in
connection with a transfer of Warrants or Registrable Securities (i) that the
Holder or transferee of all or

 

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a portion of the Warrants or the Registrable Securities as the case may be,
furnish to the Company a written opinion of counsel that is reasonably
acceptable to the Company to the effect that such transfer may be made without
registration under the Securities Act, (ii) that the Holder or transferee
execute and deliver to the Company an investment letter in form and substance
acceptable to the Company and (iii) that the transferee be an “accredited
investor” as defined in Rule 501(a) promulgated under the Securities Act.

 

(l) Counterparts; Facsimile. This Agreement may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an original
and, all of which taken together shall constitute one and the same Agreement. In
the event that any signature is delivered by facsimile transmission, such
signature shall create a valid binding obligation of the party executing (or on
whose behalf such signature is executed) the same with the same force and effect
as if such facsimile signature were the original thereof.

 

(m) Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without regard to principles
of conflicts of law thereof.

 

(n) Cumulative Remedies. The remedies provided herein are cumulative and not
exclusive of any remedies provided by law.

 

(o) Severability. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, illegal,
void or unenforceable in any respect, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their reasonable efforts to find and employ an alternative
means to achieve the same or substantially the same result as that contemplated
by such term, provision, covenant or restriction. It is hereby stipulated and
declared to be the intention of the parties that they would have executed the
remaining terms, provisions, covenants and restrictions without including any of
such that may be hereafter declared invalid, illegal, void or unenforceable.

 

(p) Headings; Interpretation. The headings herein are for convenience only, do
not constitute a part of this Agreement and shall not be deemed to limit or
affect any of the provisions hereof. Any form of the word “include” as used in
this Agreement shall be deemed to be followed by the phrase “without
limitation”.

 

(q) Registrable Securities Held by the Company and its Affiliates. Whenever the
consent or approval of Holders of a specified percentage of Registrable
Securities is required hereunder, Registrable Securities held by the Company or
its Affiliates (other than any Holder or transferees or successors or assigns
thereof if such Holder is deemed to be an Affiliate solely by reason of its
holdings of such Registrable Securities) shall not be counted in determining
whether such consent or approval was given by the Holders of such required
percentage.

 

(r) Obligations of Purchasers. The Company acknowledges that the obligations of
each Purchaser under this Agreement, are several and not joint with the
obligations of any

 

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other Purchaser, and no Purchaser shall be responsible in any way for the
performance of the obligations of any other Purchaser under this Agreement. The
decision of each Purchaser to enter into this Agreement has been made by such
Purchaser independently of any other Purchaser. The Company further acknowledges
that nothing contained in this Agreement, and no action taken by any Purchaser
pursuant hereto, shall be deemed to constitute the Purchasers as a partnership,
an association, a joint venture or any other kind of entity, or create a
presumption that the Purchasers are in any way acting in concert or as a group
with respect to such obligations or the transactions contemplated hereby. Each
Purchaser shall be entitled to independently protect and enforce its rights,
including without limitation, the rights arising out of this Agreement, and it
shall not be necessary for any other Purchaser to be joined as an additional
party in any proceeding for such purpose.

 

Each Purchaser has been represented by its own separate legal counsel in its
review and negotiation of this Agreement and with respect to the transactions
contemplated hereby. For reasons of administrative convenience only, this
Agreement has been prepared by Special Counsel (counsel for North Sound Capital
LLC) and the Special Counsel will perform certain duties under this Agreement.
Such counsel does not represent all of the Purchasers but only North Sound
Capital LLC. The Company has elected to provide all Purchasers with the same
terms and Agreement for the convenience of the Company and not because it was
required or requested to do so by the Purchasers. The Company acknowledges that
such procedure with respect to this Agreement in no way creates a presumption
that the Purchasers are in any way acting in concert or as a group with respect
to this Agreement or the transactions contemplated hereby or thereby.

 

[signature page follows]

 

20

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IN WITNESS WHEREOF, the parties hereto have caused this Investor Rights
Agreement to be duly executed by their respective authorized persons as of the
date first indicated above.

 

COMPANY: TRANSMERIDIAN EXPLORATION INCORPORATED By:    

Name:

   

Title:

   

 

21

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PURCHASERS: Print Exact Name:    

By:    

Name:

   

Title:

   

 

[Omnibus Transmeridian Investor Rights Agreement Signature Page]

 

22

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SCHEDULE 1

 

PURCHASERS

 

Name and Address

--------------------------------------------------------------------------------

 

Copy of Notice to:

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North Sound Legacy Institutional Fund LLC

c/o North Sound Capital LLC

53 Forest Avenue, Suite 202

Old Greenwich, CT 06870

Attn: Andrew David

Tel: (203) 967-5784 or (203) 340-5784

Fax: (203) 967-5701 or (203) 340-5701

Email: andrew.david@northsound.com

 

Wiggin and Dana LLP

400 Atlantic Street

Stamford, CT 06901

Attn: Michael Grundei

Tel: (203) 363-7630

Fax: (203) 363-7676

mgrundei@wiggin.com

North Sound Legacy International, Ltd.

c/o North Sound Capital LLC

53 Forest Avenue, Suite 202

Old Greenwich, CT 06870

Attn: Andrew David

Tel: (203) 967-5784 or (203) 340-5784

Fax: (203) 967-5701 or (203) 340-5701

Email: andrew.david@northsound.com

 

Wiggin and Dana LLP

400 Atlantic Street

Stamford, CT 06901

Attn: Michael Grundei

Tel: (203) 363-7630

Fax: (203) 363-7676

mgrundei@wiggin.com

Royal Bank of Canada

c/o RBC Capital Markets Corporation

One Liberty Plaza

165 Broadway

New York, NY 10006

Attn: Joe Muskatel

Tel: (212) 858-7492

Fax: (212) 858-7439

   

 

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EXHIBIT A

 

PLAN OF DISTRIBUTION

 

We are registering the shares of common stock on behalf of the selling security
holders. Sales of shares may be made by selling security holders, including
their respective donees, transferees, pledgees or other successors-in-interest
directly to purchasers or to or through underwriters, broker-dealers or through
agents. Sales may be made from time to time on the American Stock Exchange or
any exchange upon which our shares may trade in the future, in the
over-the-counter market or otherwise, at market prices prevailing at the time of
sale, at prices related to market prices, or at negotiated or fixed prices. The
shares may be sold by one or more of, or a combination of, the following:

 

  •   a block trade in which the broker-dealer so engaged will attempt to sell
the shares as agent but may position and resell a portion of the block as
principal to facilitate the transaction (including crosses in which the same
broker acts as agent for both sides of the transaction);

 

  •   purchases by a broker-dealer as principal and resale by such
broker-dealer, including resales for its account, pursuant to this prospectus;

 

  •   ordinary brokerage transactions and transactions in which the broker
solicits purchases;

 

  •   through options, swaps or derivatives;

 

  •   in privately negotiated transactions;

 

  •   in making short sales or in transactions to cover short sales; and

 

  •   put or call option transactions relating to the shares.

 

The selling security holders may effect these transactions by selling shares
directly to purchasers or to or through broker-dealers, which may act as agents
or principals. These broker-dealers may receive compensation in the form of
discounts, concessions or commissions from the selling security holders and/or
the purchasers of shares for whom such broker-dealers may act as agents or to
whom they sell as principals, or both (which compensation as to a particular
broker-dealer might be in excess of customary commissions). The selling security
holders have advised us that they have not entered into any agreements,
understandings or arrangements with any underwriters or broker-dealers regarding
the sale of their securities.

 

The selling security holders may enter into hedging transactions with
broker-dealers or other financial institutions. In connection with those
transactions, the broker-dealers or other financial institutions may engage in
short sales of the shares or of securities convertible into or exchangeable for
the shares in the course of hedging positions they assume with the selling
security holders. The selling security holders may also enter into options or
other

 

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transactions with broker-dealers or other financial institutions which require
the delivery of shares offered by this prospectus to those broker-dealers or
other financial institutions. The broker-dealer or other financial institution
may then resell the shares pursuant to this prospectus (as amended or
supplemented, if required by applicable law, to reflect those transactions).

 

The selling security holders and any broker-dealers that act in connection with
the sale of shares may be deemed to be “underwriters” within the meaning of
Section 2(11) of the Securities Act of 1933, and any commissions received by
broker-dealers or any profit on the resale of the shares sold by them while
acting as principals may be deemed to be underwriting discounts or commissions
under the Securities Act. The selling security holders may agree to indemnify
any agent, dealer or broker-dealer that participates in transactions involving
sales of the shares against liabilities, including liabilities arising under the
Securities Act. We have agreed to indemnify each of the selling security holders
and each selling security holder has agreed, severally and not jointly, to
indemnify us against some liabilities in connection with the offering of the
shares, including liabilities arising under the Securities Act.

 

The selling security holders will be subject to the prospectus delivery
requirements of the Securities Act. We have informed the selling security
holders that the anti-manipulative provisions of Regulation M promulgated under
the Securities Exchange Act of 1934 may apply to their sales in the market.

 

Selling security holders also may resell all or a portion of the shares in open
market transactions in reliance upon Rule 144 under the Securities Act, provided
they meet the criteria and conform to the requirements of Rule 144.

 

Upon being notified by a selling security holder that a material arrangement has
been entered into with a broker-dealer for the sale of shares through a block
trade, special offering, exchange distribution or secondary distribution or a
purchase by a broker or dealer, we will file a supplement to this prospectus, if
required pursuant to Rule 424(b) under the Securities Act, disclosing:

 

  •   the name of each such selling security holder and of the participating
broker-dealer(s);

 

  •   the number of shares involved;

 

  •   the initial price at which the shares were sold;

 

  •   the commissions paid or discounts or concessions allowed to the
broker-dealer(s), where applicable;

 

  •   that such broker-dealer(s) did not conduct any investigation to verify the
information set out or incorporated by reference in this prospectus; and

 

  •   other facts material to the transactions.

 

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In addition, if required under applicable law or the rules or regulations of the
Commission, we will file a supplement to this prospectus when a selling security
holder notifies us that a donee or pledgee intends to sell more than 500 shares
of common stock.

 

We are paying all expenses and fees in connection with the registration of the
shares. The selling security holders will bear all brokerage or underwriting
discounts or commissions paid to broker-dealers in connection with the sale of
the shares.

 

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EXHIBIT B

 

FORM OF NOTICE OF EFFECTIVENESS OF REGISTRATION STATEMENT

 

[Name and Address of Transfer Agent]

 

Re: Transmeridian Exploration Incorporated

 

Dear [            ]:

 

We are counsel to Transmeridian Exploration Incorporated, a Delaware corporation
(the “Company”), and have represented the Company in connection with that
certain Convertible Promissory Note and Warrant Purchase Agreement (the
“Purchase Agreement”) dated as of                         , 2005 by and among
the Company and the buyers named therein (collectively, the “Holders”) pursuant
to which the Company issued to the Holders its Convertible Promissory Notes and
Warrants (“Warrants”) to purchase shares of the Company’s common stock, par
value $0.0006 per share (the “Common Stock”). Pursuant to the Purchase
Agreement, the Company has also entered into an Investor Rights Agreement with
the Holders (the “Investor Rights Agreement”) pursuant to which the Company
agreed, among other things, to register the shares of Common Stock issuable upon
exercise of the Warrants, under the Securities Act of 1933, as amended (the
“1933 Act”). In connection with the Company’s obligations under the Investor
Rights Agreement, on                                      ,             , the
Company filed a Registration Statement on Form S-         (File No.
333-            ) (the “Registration Statement”) with the Securities and
Exchange Commission (the “SEC”) relating to the Registrable Securities which
names each of the Holders as a selling securityholder thereunder.

 

In connection with the foregoing, we advise you that a member of the SEC’s staff
has advised us by telephone that the SEC has entered an order declaring the
Registration Statement effective under the 1933 Act at [ENTER TIME OF
EFFECTIVENESS] on [ENTER DATE OF EFFECTIVENESS] and we have no knowledge, after
telephonic inquiry of a member of the SEC’s staff, that any stop order
suspending its effectiveness has been issued or that any proceedings for that
purpose are pending before, or threatened by, the SEC and the Registrable
Securities are available for resale under the 1933 Act pursuant to the
Registration Statement.

 

Very truly yours,

By:    

cc:

 

[LIST NAMES OF HOLDERS]

 

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