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EXHIBIT 4.2    
    

THIS WARRANT AND THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE OFFERED, SOLD, ASSIGNED OR TRANSFERRED,
IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SAID ACT OR UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT REGISTRATION UNDER SAID ACT IS
NOT REQUIRED.

Warrant
No. W-            

COMMON
STOCK PURCHASE WARRANT

   

To Purchase                        Shares of Common Stock of

TRANSMERIDIAN EXPLORATION, INC. 

        THIS
IS TO CERTIFY THAT                        , or registered assigns (the "Holder"), is entitled, during the Exercise Period (as
hereinafter defined), to purchase from Transmeridian
Exploration, Inc., a Delaware corporation (the "Company"), the Warrant Stock (as hereinafter defined and subject to adjustment as provided herein), in whole or in part, at a purchase price of
$1.55 per share, all on and subject to the terms and conditions hereinafter set forth. 

        1.     Definitions. As used in this Warrant, the following terms have the respective meanings set forth below: 

        "Additional Shares of Common Stock" means any shares of Common Stock issued by the Company after the Closing Date other than:
(i) Warrant Shares; (ii) shares issued or issuable pursuant to anti-dilution provisions of the Preferred Stock; (iii) shares issued or issuable upon the conversion of
the Preferred Stock; (iv) shares issued or issuable upon the exercise of any warrants or options outstanding as of the Closing Date; (v) shares of Common Stock or Common Stock
Equivalents issued in connection with a bona-fide strategic transaction, partnership, joint venture or acquisition or (vi) shares of Common Stock issued in connection with any
stock-based compensation
plans of the Company in existence as of the Closing Date, or any issuance (at issuance or exercise prices at or above fair market value) of Common Stock, stock awards or options under, or the exercise
of options granted pursuant to, any Board approved employee stock option or similar plan for the issuance of options or capital stock of the Company, or (vii) the issuance of shares of Common
Stock in connection with a bona-fide underwritten public offering. 

        "Affiliate" means any person or entity that, directly or indirectly through one or more intermediaries, controls or is controlled by or is
under common control with a person or entity, as such terms are used in and construed under Rule 144 under the Securities Act. With respect to a Holder of Warrants, any investment fund or
managed account that is managed on a discretionary basis by the same investment manager as such Holder will be deemed to be an Affiliate of such Holder. 

        "Appraised Value" means, in respect of any share of Common Stock on any date herein specified, the fair saleable value of such share of
Common Stock (determined without giving effect to the discount for (i) a minority interest or (ii) any lack of liquidity of the Common Stock or to the fact that the Company may have no
class of equity registered under the Exchange Act) as of the last day of the most recent fiscal month ending prior to such date specified, based on the value of the Company on a fully-diluted basis,
as determined by a nationally recognized investment banking firm selected by the Company's Board of Directors and having no prior relationship with the Company. 

        "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. 

        "Change of Control" means the (i) acquisition by an individual or legal entity or group (as set forth in Section 13(d) of
the Exchange Act) of more than one-half of the voting rights or equity interests in 

 

the
Company; or (ii) sale, conveyance, or other disposition of all or substantially all of the assets, property or business of the Company or the merger into or consolidation with any other
corporation (other than a wholly owned subsidiary corporation) or effectuation of any transaction or series of related transactions where holders of the Company's voting securities prior to such
transaction or series of transactions fail to continue to hold at least 50% of the voting power of the Company. 

        "Closing Date" means November    , 2004. 

        "Commission" means the Securities and Exchange Commission or any other federal agency then administering the Securities Act and other
federal securities laws. 

        "Common Stock" means (except where the context otherwise indicates) the Common Stock, $0.0006 par value per share, of the Company as
constituted on the Closing Date, and any capital stock into which such Common Stock may thereafter be changed or converted, and shall also include (i) capital stock of the Company of any other
class (regardless of how denominated) issued to the holders of shares of Common Stock upon any reclassification thereof which is also not preferred as to dividends or assets on liquidation over any
other class of stock of the Company and which is not subject to redemption and (ii) shares of common stock of any successor or acquiring corporation received by or distributed to the holders of
Common Stock of the Company in the circumstances contemplated by Section 4.7. 

        "Common Stock Equivalents" has the meaning set forth in Section 4.4. 

        "Current Market Price" means, in respect of any share of Common Stock on any date herein specified, 

        (1)   if
there shall not then be a public market for the Common Stock, the higher of 

        (a)   the
book value per share of Common Stock at such date, and 

        (b)   the
Appraised Value per share of Common Stock at such date, 

        or

        (2)   if
there shall then be a public market for the Common Stock, the higher of (x) the book value per share of Common Stock at such date, and (y) the average
of the daily market prices for the 20 consecutive trading days immediately before such date. The daily market price for each such trading day shall be (i) the closing price on such day on the
principal stock exchange (including Nasdaq) on which such Common Stock is then listed or admitted to trading, or quoted, as applicable, (ii) if no sale takes place on such day on any such
exchange, the last reported closing price on such day as officially quoted on any such exchange (including Nasdaq), (iii) if the Common Stock is not then listed or admitted to trading on any
stock exchange, the last reported closing bid price on such day in the over-the-counter market, as furnished by the National Association of Securities Dealers Automatic
Quotation System or the National Quotation Bureau, Inc., (iv) if neither such corporation at the time is engaged in the business of reporting such prices, as furnished by any similar
firm then engaged in such business, or (v) if there is no such firm, as furnished by any member of the National Association of Securities Dealers, Inc. (the "NASD") selected mutually by
the holder of this Warrant and the Company or, if they cannot agree upon such selection, as selected by two such members of the NASD, one of which shall be selected by holder of this Warrant and one
of which shall be selected by the Company. 

        "Current Warrant Price" means, in respect of a share of Common Stock at any date herein specified, the price at which a share of Common
Stock may be purchased pursuant to this Warrant on such date. Until the Current Warrant Price is adjusted pursuant to the terms herein, the initial Current Warrant Price shall be $1.55 per share of
Common Stock. 

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        "Exchange Act" means the Securities Exchange Act of 1934, as amended, or any similar federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect from time to time. 

        "Exercise Period" means the period during which this Warrant is exercisable pursuant to Section 2.1. 

        "Expiration Date" means November    , 2009.[Date that is 5 years following the
Closing Date.] 

        "GAAP" means generally accepted accounting principles in the United States of America as from time to time in effect. 

        "NASD" means the National Association of Securities Dealers, Inc., or any successor corporation thereto. 

        "Other Property" has the meaning set forth in Section 4.7. 

        "Person" means any individual, sole proprietorship, partnership, joint venture, trust, incorporated organization, association,
corporation, limited liability company, institution, public benefit corporation, entity or government (whether federal, state, county, city, municipal or otherwise, including, without limitation, any
instrumentality, division, agency, body or department thereof). 

        "Preferred Stock" means the Company's Series A Cumulative Convertible Preferred stock, par value $0.0006 per share. 

        "Purchase Agreement" means that certain Preferred Stock and Warrant Purchase Agreement dated as of November    , 2004 among the
Company and the other parties named therein, pursuant to which this Warrant was originally issued. 

        "Restricted Common Stock" means shares of Common Stock which are, or which upon their issuance upon the exercise of any Warrant would be
required to be, evidenced by a certificate bearing the restrictive legend set forth in Section 3.2. 

        "Securities Act" means the Securities Act of 1933, as amended, or any similar federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time. 

        "Trading Day" means any day on which the primary market on which shares of Common Stock are listed is open for trading. 

        "Transfer" means any disposition of any Warrant or Warrant Stock or of any interest in either thereof, which would constitute a sale
thereof within the meaning of the Securities Act. 

        "Warrants" means this Warrant and all warrants issued upon transfer, division or combination of, or in substitution for, any thereof. All
Warrants shall at all times be identical as to terms and conditions and date, except as to the number of shares of Common Stock for which they may be exercised. 

        "Warrant Price" means an amount equal to (i) the number of shares of Common Stock being purchased upon exercise of this Warrant
pursuant to Section 2.1, multiplied by (ii) the Current Warrant Price. 

        "Warrant Stock" means the                        shares of Common Stock to be purchased upon the
exercise hereof, subject to adjustment as
provided herein. 

        "Warrant Shares" means the shares of Common Stock issued or issuable upon conversion of the Warrants issued pursuant to the Purchase
Agreement. 

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        2.     Exercise of Warrant. 

        2.1.  Manner of Exercise. From and after the Closing Date, and until 5:00 P.M., New York time, on the Expiration Date
(the "Exercise Period"), the Holder may exercise this Warrant, on any Business Day, for all or any part of the number of shares of Warrant Stock purchasable hereunder. 

        In
order to exercise this Warrant, in whole or in part, the Holder shall deliver to the Company at its principal office or at the office or agency designated by the Company pursuant to
Section 12, (i) a written notice of Holder's election to exercise this Warrant, which notice shall specify the number of shares of Warrant Stock to be purchased, (ii) payment of
the Warrant Price as provided herein, and (iii) this Warrant. Such notice shall be substantially in the form of the subscription form appearing at the end of this Warrant as  Exhibit A, duly
executed by the Holder or its agent or attorney. Upon receipt thereof, the Company shall, as promptly as practicable, and in any
event within three Business Days thereafter, execute or cause to be executed and deliver or cause to be delivered to the Holder a certificate or certificates representing the aggregate number of full
shares of Warrant Stock issuable upon such exercise, together with cash in lieu of any fraction of a share, as hereinafter provided. The stock certificate or certificates so delivered shall be, to the
extent possible, in such denomination or denominations as the Holder shall request in the notice and shall be registered in the name of the Holder or such other name as shall be designated in the
notice. This Warrant shall be deemed to have been exercised and such certificate or certificates shall be deemed to have been issued, and the Holder or any other Person so designated to be named
therein shall be deemed to have become a Holder of record of such shares for all purposes, as of the date when the notice, together with the payment of the Warrant Price and this Warrant, is received
by the Company as described above. If this Warrant shall have been exercised in part, the Company shall, at the time of delivery of the certificate or certificates representing Warrant Stock, deliver
to the Holder a new Warrant evidencing the rights of the Holder to purchase the unpurchased shares of Common Stock called for by this Warrant, which new Warrant shall in all other respects be
identical with this Warrant, or at the request of the Holder, appropriate notation may be made on this Warrant and the same returned to the Holder. 

        If
the Company intentionally and willfully fails to deliver to the holder such certificate or certificates pursuant to this Section 2.1 (free of any restrictions on transfer or
legends, if such shares have been registered) in accordance herewith, prior to the tenth (10th) trading day after the receipt by the Company of (i) a written notice of Holder's
election to exercise this Warrant, which notice shall specify
the number of shares of Warrant Stock to be purchased, (ii) payment of the Warrant Price as provided herein, and (iii) this Warrant (the "Date of Receipt"), the Company shall pay to such
Holder, in cash, on a per diem basis, an amount equal to 2% of the value of the undelivered Warrant Stock (based on the Current Market Price of the Common Stock on the Date of Receipt) per month until
such delivery takes place. 

        Payment
of the Warrant Price may be made at the option of the Holder by: (i) certified or official bank check payable to the order of the Company, (ii) wire transfer to the
account of the Company or (iii) if at any time or from time to time following the date that is 12 months after the Closing Date, the Warrant Stock issuable upon exercise of this Warrant
are not registered pursuant to an effective Registration Statement (as defined in the Investor Rights Agreement) pursuant to which sales may be made, the surrender and cancellation of a portion of
shares of Common Stock then held by the Holder or issuable upon such exercise of this Warrant, which shall be valued and credited toward the total Warrant Price due the Company for the exercise of the
Warrant based upon the Current Market Price of the Common Stock. All shares of Common Stock issuable upon the exercise of this Warrant pursuant to the terms hereof shall be validly issued and, upon
payment of the Warrant Price, shall be fully paid and nonassessable and not subject to any preemptive rights. 

        2.2.  Fractional Shares. The Company shall not be required to issue a fractional share of Common Stock upon exercise of any
Warrant. As to any fraction of a share which the Holder of one or more Warrants, the rights under which are exercised in the same transaction, would otherwise be entitled to 

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purchase
upon such exercise, the Company shall pay an amount in cash equal to the Current Market Price per share of Common Stock on the date of exercise multiplied by such fraction. 

        2.3.  Continued Validity. A Holder of shares of Common Stock issued upon the exercise of this Warrant, in whole or in part
(other than a Holder who acquires such shares after the same have been publicly sold pursuant to a Registration Statement under the Securities Act or sold pursuant to Rule 144 thereunder),
shall continue to be entitled with respect to such shares to all rights to which it would have been entitled as the Holder under Sections 10 and 13 of this Warrant. 

        2.4.  Restrictions on Exercise Amount. 

        (i)    Unless
a Holder delivers to the Company irrevocable written notice (x) prior to the date of issuance hereof or sixty-one days prior to the effective
date of such notice that this Section 2.4(i) shall not apply to such Holder or (y) prior to a Change of Control the terms of which require the conversion of the Preferred Stock
into Common Stock, the Holder may not acquire a number of shares of Warrant Stock to the extent that, upon such exercise, the number of shares of Common Stock then beneficially owned by such holder
and its Affiliates and any other persons or entities whose beneficial ownership of Common Stock would be aggregated with the Holder's for purposes of Section 13(d) of the Exchange Act
(including shares held by any "group" of which the holder is a member, but excluding shares beneficially owned by virtue of the ownership of securities or rights to acquire securities that have
limitations on the right to convert, exercise or purchase similar to the limitation set forth herein) exceeds 4.999% of the total number of shares of Common Stock of the Company then issued and
outstanding. For purposes hereof, "group" has the meaning set forth in Section 13(d) of the Exchange Act and applicable regulations of the Securities and Exchange Commission, and the percentage
held by the holder shall be determined in a manner consistent with the provisions of Section 13(d) of the Exchange Act. Each delivery of a notice of exercise by a Holder will constitute a
representation by such Holder that it has evaluated the limitation set forth in this paragraph and determined, based on the most recent public filings by the Company with the Commission, that the
issuance of the full number of shares of Warrant Stock requested in such notice of exercise is permitted under this paragraph. 

        (ii)   In
the event the Company is prohibited from issuing shares of Warrant Stock as a result of any restrictions or prohibitions under applicable law or the rules or
regulations of any stock exchange, interdealer quotation system or other self-regulatory organization, the Company shall as soon as possible seek the approval of its stockholders and take
such other action to authorize the issuance of the full number of shares of Common Stock issuable upon exercise of this Warrant. 

        3.     Transfer, Division and Combination. 

        3.1.  Transfer. The Warrants and the Warrant Stock shall be freely transferable, subject to compliance with all applicable
laws, including, but not limited to the Securities Act. If, at the time of the surrender of this Warrant in connection with any transfer of this Warrant or the resale of the Warrant Stock, this
Warrant or the Warrant Stock, as applicable, shall not be registered under the Securities Act, the Company may require, as a condition of allowing such transfer (i) that the Holder or
transferee of this Warrant or the Warrant Stock 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 substantially in the form attached as Exhibit C hereto and (iii) that the transferee be an "accredited investor" as defined in
Rule 501(a) promulgated under the Securities Act. Transfer of this Warrant and all rights hereunder, in whole or in part, in accordance with the foregoing provisions, shall be registered on the
books of the Company to be maintained for such purpose, upon surrender of this Warrant at the principal office of the Company referred to in Section 2.1 or the office or agency designated by
the Company pursuant to Section 12, together with a written assignment of this Warrant substantially in the form of Exhibit B hereto duly
executed by the Holder or its agent or attorney and funds sufficient to pay any transfer taxes payable upon the making of such transfer. Upon such surrender and, if required, 

5

 

such
payment, the Company shall execute and deliver a new Warrant or Warrants in the name of the assignee or assignees and in the denomination specified in such instrument of assignment, and shall
issue to the assignor a new Warrant evidencing the portion of this Warrant not so assigned, and this Warrant shall promptly be cancelled. Following a transfer that complies with the requirements of
this Section 3.1, the Warrant may be exercised by a new Holder for the purchase of shares of Common Stock regardless of whether the Company issued or registered a new Warrant on the books of
the Company. 

        3.2.  Restrictive Legends. Each certificate for Warrant Stock initially issued upon the exercise of this Warrant, and each
certificate for Warrant Stock issued to any subsequent transferee of any such certificate, unless, in each case, such Warrant Stock is eligible for resale without registration pursuant to
Rule 144(k) under the Exchange Act or such Warrant Stock has been sold pursuant to an effective Registration Statement (as defined in the Investor Rights Agreement), shall be stamped or
otherwise imprinted with legends in substantially the following form: 

"THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AS AMENDED, AND MAY NOT BE OFFERED, SOLD, ASSIGNED OR TRANSFERRED, IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT UNDER SAID ACT OR UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT REGISTRATION UNDER SAID ACT IS NOT REQUIRED." 

        3.3.  Division and Combination; Expenses; Books. This Warrant may be divided or combined with other Warrants upon presentation
hereof at the aforesaid office or agency of the Company, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by the Holder or its agent
or attorney. Subject to compliance with Section 3.1 as to any transfer which may be involved in such division or combination, the Company shall execute and deliver a new Warrant or Warrants in
exchange for the Warrant or Warrants to be divided or combined in accordance with such notice. The Company shall prepare, issue and deliver at its own expense the new Warrant or Warrants under this
Section 3. The Company agrees to maintain, at its aforesaid office or agency, books for the registration and the registration of transfer of the Warrants. 

        4.     Adjustments. The number of shares of Common Stock for which this Warrant is exercisable, and the price at which such
shares may be purchased upon exercise of this Warrant, shall be subject to adjustment from time to time as set forth in this Section 4. The Company shall give the Holder notice of any event
described below which requires an adjustment pursuant to this Section 4 in accordance with Sections 5.1 and 5.2. 

        4.1.  Stock Dividends, Subdivisions and Combinations. If at any time while this Warrant is outstanding the Company shall: 

          (i)  declare
a dividend or make a distribution on its outstanding shares of Common Stock in shares of Common Stock, 

         (ii)  subdivide
its outstanding shares of Common Stock into a larger number of shares of Common Stock, or 

        (iii)  combine
its outstanding shares of Common Stock into a smaller number of shares of Common Stock, then: 

        (1)   the
number of shares of Common Stock acquirable upon exercise of this Warrant immediately after the occurrence of any such event shall be adjusted to equal the number of
shares of Common Stock which a record holder of the same number of shares of Common Stock that would have been acquirable under this Warrant immediately prior to the record date for such dividend or
distribution or 

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the
effective date of such subdivision or combination would own or be entitled to receive after such record date or the effective date of such subdivision or combination, as applicable, and 

        (2)   the
Current Warrant Price shall be adjusted to equal: 

        (A)  the
Current Warrant Price in effect at the time of the record date for such dividend or distribution or of the effective date of such subdivision or combination,
multiplied by the number of shares of Common Stock into which this Warrant is exercisable immediately prior to the adjustment, divided by 

        (B)  the
number of shares of Common Stock into which this Warrant is exercisable immediately after such adjustment. 

        Any
adjustment made pursuant to clause (i) of this paragraph shall become effective immediately after the record date for the determination of stockholders entitled to receive
such dividend or distribution, and any adjustment pursuant to clauses (ii) or (iii) of this paragraph shall become effective immediately after the effective date of such subdivision or
combination. 

        4.2.  Certain Other Distributions. If at any time while this Warrant is outstanding the Company shall cause the holders of its
Common Stock to be entitled to receive any dividend or other distribution of: 

          (i)  cash,

         (ii)  any
evidences of its indebtedness, any shares of stock of any class or any other securities or property or assets of any nature whatsoever (other than cash or
additional shares of Common Stock as provided in Section 4.1 hereof), or 

        (iii)  any
warrants or other rights to subscribe for or purchase any evidences of its indebtedness, any shares of stock of any class or any other securities or property or
assets of any nature whatsoever, then: 

        (1)   the
number of shares of Common Stock acquirable upon exercise of this Warrant shall be adjusted to equal the product of the number of shares of Common Stock acquirable
upon exercise of this Warrant immediately prior to the record date for such dividend or distribution, multiplied by a fraction (x) the numerator of which shall be the Current Warrant Price per
share of Common Stock at the date of taking such record and (y) the denominator of which shall be such Current Warrant Price minus the amount allocable to one share of Common Stock of any such
cash so distributable and of the fair value (as determined in good faith by the Board of Directors of the Company) of any and all such evidences of indebtedness, shares of stock, other securities or
property or warrants or other subscription or purchase rights so distributable; and 

        (2)   the
Current Warrant Price in effect immediately prior to the record date fixed for determination of stockholders entitled to receive such distribution shall be adjusted
to equal (x) the Current Warrant Price multiplied by the number of shares of Common Stock acquirable upon exercise of this Warrant immediately prior to the adjustment, divided by (y) the
number of shares of Common Stock acquirable upon exercise of this Warrant immediately after such adjustment. A reclassification of the Common Stock (other than a change in par value, or from par value
to no par value or from no par value to par value) into shares of Common Stock and shares of any other class of stock shall be deemed a distribution by the Company to the holders of its Common Stock
of such shares of such other class of stock within the meaning of this Section 4.2 and, if the outstanding shares of Common Stock shall be changed into a larger or smaller number of shares of
Common Stock as a part of such reclassification, such change shall be deemed a subdivision or combination, as the case may be, of the outstanding shares of Common Stock within the meaning of
Section 4.1. 

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        4.3.  Issuance of Additional Shares of Common Stock. 

        (i)    If
at any time while this Warrant is outstanding the Company shall issue or sell any Additional Shares of Common Stock in exchange for consideration in an amount per
Additional Share of Common Stock less than the Current Warrant Price at the time the Additional Shares of Common Stock are issued or sold, then: 

        (A)  the
Current Warrant Price immediately prior to such issue or sale shall be reduced to a price determined by dividing 

        (1)   an
amount equal to the sum of (a) the number of shares of Common Stock outstanding immediately prior to such issue or sale multiplied by the then existing Current
Warrant Price, plus (b) the consideration, if any, received by the Company upon such issue or sale, by 

        (2)   the
total number of shares of Common Stock outstanding immediately after such issue or sale; and 

        (B)  the
number of shares of Common Stock acquirable upon exercise of this Warrant shall be adjusted to equal the amount obtained by 

        (1)   multiplying
the Current Warrant Price in effect immediately prior to such issue or sale by the number of shares of Common Stock acquirable upon exercise of this Warrant
immediately prior to such issue or sale and 

        (2)   dividing
the product thereof by the Current Warrant Price resulting from the adjustment made pursuant to clause (A). 

         (ii)  The
provisions of paragraph 4.3(i) shall not apply to any issuance of Additional Shares of Common Stock for which an adjustment is provided under
Section 4.1 or 4.2. No adjustment of the number of shares of Common Stock acquirable upon exercise of this Warrant shall be made under paragraph 4.3(i) upon the issuance of any
Additional Shares of Common Stock which are issued pursuant to the exercise of any warrants or other subscription or purchase rights or pursuant to the exercise of any conversion or exchange rights in
any convertible securities, if any such adjustment shall previously have been made upon the issuance of such warrants or other rights or upon the issuance of such convertible securities (or upon the
issuance of any warrant or other rights therefor) pursuant to Section 4.4. 

        4.4.  Issuance of Common Stock Equivalents. If at any time while this Warrant is outstanding the Company shall issue or sell
any warrants or other rights to subscribe for or purchase any additional shares of Common Stock or any securities convertible into shares of Common Stock (collectively, "Common Stock Equivalents"),
whether or not the rights to exchange or convert thereunder are immediately exercisable, and the effective price per share for which Common Stock is issuable upon the exercise, exchange or conversion
of such Common Stock Equivalents shall be less than the Current Warrant Price in effect immediately prior to the time of such issue or sale, then the number of shares of Warrant Stock acquirable upon
the exercise of this Warrant and the Current Warrant Price shall be adjusted as provided in Section 4.3 on the basis that the maximum number of additional shares of Common Stock issuable
pursuant to all such Common Stock Equivalents shall be deemed to have been issued and outstanding and the Company shall have received all of the consideration payable therefor, if any, as of the date
of the actual issuance of such Common Stock Equivalents. No further adjustments to the current Warrant Price shall be made under this Section 4.4 upon the actual issue of such Common Stock upon
the exercise, conversion or exchange of such Common Stock Equivalents. 

        4.5.  Superseding Adjustment. 

          (i)  If,
at any time after any adjustment of the number of shares of Common Stock into which this Warrant is exercisable and the Current Warrant Price shall have been made
pursuant to Section 4.4 as the result of any issuance of Common Stock Equivalents, (x) the right to exercise, convert or exchange 

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all
or a portion of such Common Stock Equivalents shall expire unexercised, or (y) the conversion rate or consideration per share for which shares of Common Stock are issuable pursuant to such
Common Stock Equivalents shall be increased solely by virtue of provisions therein contained for an automatic increase in such conversion rate or consideration per share upon the occurrence of a
specified date or event, then any such previous adjustments to the Current Warrant Price and the number of shares of Common Stock for which this Warrant is exercisable shall be rescinded and annulled
and the additional shares of Common Stock which were deemed to have been issued by virtue of the computation made in connection with the adjustment so rescinded and annulled shall no longer be deemed
to have been issued by virtue of such computation. 

         (ii)  Upon
the occurrence of an event set forth in Section 4.5(i) above there shall be a recomputation made of the effect of such Common Stock Equivalents on
the basis of: (i) treating the number of additional shares of Common Stock or other property, if any, theretofore actually issued or issuable pursuant to the previous exercise, conversion or
exchange of such Common Stock Equivalents, as having been issued on the date or dates of any such exercise, conversion or exchange and for the consideration actually received and receivable therefor,
and (ii) treating any such Common Stock Equivalents which then remain outstanding as having been granted or issued immediately after the time of such increase of the conversion rate or
consideration per share for which shares of Common Stock or other property are issuable under such Common Stock Equivalents; whereupon a new adjustment to the number of shares of Common Stock for
which this Warrant is exercisable and the Current Warrant Price shall be made, which new adjustment shall supersede the previous adjustment so rescinded and annulled. 

        4.6.  Other Provisions Applicable to Adjustments. The following provisions shall be applicable to the making of adjustments of
the number of shares of Common Stock into which this Warrant is exercisable and the Current Warrant Price provided for in Section 4: 

        (a)   When Adjustments to Be Made. The adjustments required by Section 4 shall be made whenever and as often as any
specified event requiring an adjustment shall occur, except that any that would otherwise be required may be postponed (except in the case of a subdivision or combination of shares of the Common
Stock, as provided for in Section 4.1) up to, but not beyond the date of exercise if such adjustment either by itself or with other adjustments not previously made adds or subtracts less than
1% of the shares of Common Stock into which this Warrant is exercisable immediately prior to the making of such adjustment. Any adjustment representing a change of less than such minimum amount
(except as aforesaid) which is postponed shall be carried forward and made as soon as such adjustment, together with other adjustments required by this Section 4 and not previously made, would
result in a minimum adjustment or on the date of exercise. For the purpose of any adjustment, any specified event shall be deemed to have occurred at the close of business on the date of its
occurrence. 

        (b)   Fractional Interests. In computing adjustments under this Section 4, fractional interests in Common Stock shall be
taken into account to the nearest 1/100th of a share. 

        (c)   When Adjustment Not Required. If the Company undertakes a transaction contemplated under this Section 4 and as a
result takes a record of the holders of its Common Stock for the purpose of entitling them to receive a dividend or distribution or subscription or purchase rights or other benefits contemplated under
this Section 4 and shall, thereafter and before the distribution to stockholders thereof, legally abandon its plan to pay or deliver such dividend, distribution, subscription or purchase rights
or other benefits contemplated under this Section 4, then thereafter no adjustment shall be required by reason of the taking of such record and any such adjustment previously made in respect
thereof shall be rescinded and annulled. 

        (d)   Escrow of Stock. If after any property becomes distributable pursuant to Section 4 by reason of the taking of any
record of the holders of Common Stock, but prior to the occurrence of the event for which such record is taken, a holder of this Warrant exercises the Warrant during such time, then 

9

 

such
holder shall continue to be entitled to receive any shares of Common Stock issuable upon exercise hereunder by reason of such adjustment and such shares or other property shall be held in escrow
for the holder of this Warrant by the Company to be issued to holder of this Warrant upon and to the extent that the event actually takes place. Notwithstanding any other provision to the contrary
herein, if the event for which such record was taken fails to occur or is rescinded, then such escrowed shares shall be canceled by the Company and escrowed property returned to the Company. 

        4.7.  Reorganization, Reclassification, Merger, Consolidation or Disposition of Assets. If there shall occur a Change of
Control which is approved by the Company's Board of Directors, then the Holder of this Warrant shall be entitled, at such Holder's option, either: 

        (a)   upon
request of Holder delivered to the Company within 10 days of receipt of notice of such Change of Control pursuant to Section 5.2, to have the Company
(or any such successor or surviving entity) purchase this Warrant from the Holder for an aggregate purchase price, payable in cash on the effective date of consummation of such Change of Control,
equal to the product of (i) the difference between the Current Market Price and the Current Warrant Price, multiplied by (ii) the number of shares of Common Stock issuable upon exercise
of this Warrant immediately prior to the consummation of such Change of Control; or 

        (b)   if
pursuant to the terms of such Change of Control, shares of common stock of the successor or acquiring corporation, or any cash, shares of stock or other securities or
property of any nature whatsoever (including warrants or other subscription or purchase rights) in addition to or in lieu of common stock of the successor or acquiring corporation ("Other Property"),
are to be received by or distributed to the holders of Common Stock of the Company, and the Holder shall not have elected to have this Warrant purchased by the Company pursuant to
Section 4.7(a) above, then the Holder of this Warrant shall have the right thereafter to receive, upon the exercise of the Warrant, the number of shares of common stock of the successor or
acquiring corporation or of the Company, if it is the surviving corporation, and the Other Property receivable upon or as a result of such Change of Control by a holder of the number of shares of
Common Stock into which this Warrant is exercisable immediately prior to such event. 

        (c)   In
case of any such Change of Control described above, to the extent this Warrant has not been fully purchased by the Company pursuant to Section 4.7(a) above,
the successor or acquiring corporation (if other than the Company) and, if an entity different from the successor or surviving entity, the entity whose capital stock or assets the holders of Common
Stock are entitled to receive as a result of such transaction, shall expressly assume the due and punctual observance and performance of each and every covenant and condition of contained in this
Warrant to be performed and observed by the Company and all the obligations and liabilities hereunder, subject to such modifications as may be deemed appropriate (as determined by resolution of the
Board of Directors of the Company) in order to provide for adjustments of shares of the Common Stock into which this Warrant is exercisable which shall be as nearly equivalent as practicable to the
adjustments provided for in Section 4. For purposes of Section 4, common stock of the successor or acquiring corporation shall include stock of such corporation of any class which is not
preferred as to dividends or assets on liquidation over any other class of stock of such corporation and which is not subject to redemption and shall also include any evidences of indebtedness, shares
of stock or other securities which are convertible into or exchangeable for any such stock, either immediately or upon the arrival of a specified date or the happening of a specified event and any
warrants or other rights to subscribe for or purchase any such stock. The foregoing provisions of this Section 4 shall similarly apply to successive Change of Control transactions. 

        4.8.  Other Action Affecting Common Stock. In case at any time or from time to time the Company shall take any action in
respect of its Common Stock, other than the payment of dividends permitted by Section 4 or any other action described in Section 4, then, unless such action will not have a materially 

10

 

adverse
effect upon the rights of the holder of this Warrant, the number of shares of Common Stock or other stock into which this Warrant is exercisable and/or the purchase price thereof shall be
adjusted in such manner as may be equitable in the circumstances. 

        4.9.  Certain Limitations. Notwithstanding anything herein to the contrary, the Company agrees not to enter into any
transaction which, by reason of any adjustment hereunder, would cause the Current Warrant Price to be less than the par value per share of Common Stock. 

        4.10. Stock Transfer Taxes. The issue of stock certificates upon exercise of this Warrant shall be made without charge to the
holder for any tax in respect of such issue. The Company shall not, however, be required to pay any tax which may be payable in respect of any transfer involved in the issue and delivery of shares in
any name other than that of the holder of this Warrant, and the Company shall not be required to issue or deliver any such stock certificate unless and until the person or persons requesting the issue
thereof shall have paid to the Company the amount of such tax or shall have established to the satisfaction of the Company that such tax has been paid. 

        5.     Notices to Warrant Holders. 

        5.1.  Certificate as to Adjustments. Upon the occurrence of each adjustment or readjustment of the Current Warrant Price, the
Company, at its expense, shall promptly compute such adjustment or readjustment in accordance with the terms hereof and prepare and furnish to the Holder of this Warrant a certificate setting forth
such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based. The Company shall, upon the written request at any time of the Holder of this
Warrant, furnish or cause to be furnished to such Holder a like certificate setting forth (i) such adjustments and readjustments, (ii) the Current Warrant Price at the time in effect and
(iii) the number of shares of Common Stock and the amount, if any, or other property which at the time would be received upon the exercise of Warrants owned by such Holder. 

        5.2.  Notice of Corporate Action. If at any time: 

        (a)   the
Company shall take a record of the holders of its Common Stock for the purpose of entitling them to receive a dividend (other than a cash dividend payable out of
earnings or earned surplus legally available for the payment of dividends under the laws of the jurisdiction of incorporation of the Company) or other distribution, or any right to subscribe for or
purchase any evidences of its indebtedness, any shares of stock of any class or any other securities or property, or to receive any other right, or 

        (b)   there
shall be any capital reorganization of the Company, any reclassification or recapitalization of the capital stock of the Company or any consolidation or merger of
the Company with, or any sale, transfer or other disposition of all or substantially all the property, assets or business of the Company to, another corporation, or 

        (c)   there
shall be a voluntary or involuntary dissolution, liquidation or winding up of the Company; 

then,
in any one or more of such cases, the Company shall give to the Holder (i) at least 20 days' prior written notice of the date on which a record date shall be selected for such
dividend, distribution or right or for determining rights to vote in respect of any such reorganization, reclassification, merger, consolidation, sale, transfer, disposition, dissolution, liquidation
or winding up, and (ii) in the case of any such reorganization, reclassification, merger, consolidation, sale, transfer, disposition, dissolution, liquidation or winding up, at least
20 days' prior written notice of the date when the same shall take place. Such notice in accordance with the foregoing clause also shall specify (i) the date on which any such record is
to be taken for the purpose of such dividend, distribution or right, the date on which the holders of Common Stock shall be entitled to any such dividend, distribution or right, and the amount and
character thereof, and (ii) the date on which any such reorganization, reclassification, merger, consolidation, sale, transfer, disposition, dissolution, liquidation or winding up is to take
place and the 

11

 

time,
if any such time is to be fixed, as of which the holders of Common Stock shall be entitled to exchange their shares of Common Stock for securities or other property deliverable upon such
reorganization, reclassification, merger, consolidation, sale, transfer, disposition, dissolution, liquidation or winding up. Each such written notice shall be sufficiently given if addressed to the
Holder at the last address of the Holder appearing on the books of the Company and delivered in accordance with Section 15.2. 

        5.3.  No Rights as Stockholder. This Warrant does not entitle the Holder to any voting or other rights as a stockholder of the
Company prior to exercise and payment for the Warrant Price in accordance with the terms hereof. 

        6.     No Impairment. The Company shall not by any action, including, without limitation, amending its articles of incorporation
or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance
of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to
protect the rights of the Holder against impairment. Without limiting the generality of the foregoing, the Company will (a) not increase the par value of any shares of Common Stock receivable
upon the exercise of this Warrant above the amount payable therefor upon such exercise immediately prior to such increase in par value, (b) take all such action as may be necessary or
appropriate in order that the Company may validly and legally issue fully paid and nonassessable shares of Common Stock upon the exercise of this Warrant, and (c) use its best efforts to obtain
all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof as may be necessary to enable the Company to perform its obligations under this Warrant.
Upon the request of the Holder, the Company will at any time during the period this Warrant is outstanding acknowledge in writing, in form satisfactory to the Holder, the continuing validity of this
Warrant and the obligations of the Company hereunder. 

        7.     Reservation and Authorization of Common Stock; Registration With Approval of Any Governmental Authority. From and after
the Closing Date, the Company shall at all times reserve and keep available for issue upon the exercise of Warrants such number of its authorized but unissued shares of Common Stock as will be
sufficient to permit the exercise in full of all outstanding Warrants (without regard to any ownership limitations provided in Section 2.4(i)). All shares of Common Stock which shall be so
issuable, when issued upon exercise of any Warrant and payment therefor in accordance with the terms of such Warrant, shall be duly and validly issued and fully paid and nonassessable, and not subject
to preemptive rights. Before taking any action which would cause an adjustment reducing the Current Warrant Price below the then par value, if any, of the shares of Common Stock issuable upon exercise
of the Warrants, the Company shall take any corporate action which may be necessary in order that the Company may validly and legally issue fully paid and non-assessable shares of such
Common Stock at such adjusted Current Warrant Price. Before taking any action which would result in an adjustment in the number of shares of Common Stock for which this Warrant is exercisable or in
the Current Warrant Price, the Company shall obtain all such authorizations or exemptions thereof, or consents thereto, as may be necessary from any public regulatory body or bodies having
jurisdiction thereof. If any shares of Common Stock required to be reserved for issuance upon exercise of Warrants require registration or qualification with any governmental authority under any
federal or state law before such shares may be so issued (other than as a result of a prior or contemplated distribution by the Holder of this Warrant), the Company will in good faith and as
expeditiously as possible and at its expense endeavor to cause such shares to be duly registered. 

        8.     Taking of Record; Stock and Warrant Transfer Books. In the case of all dividends or other distributions by the Company to
the holders of its Common Stock with respect to which any provision of Section 4 refers to the taking of a record of such holders, the Company will in each such case take 

12

 

such
a record and will take such record as of the close of business on a Business Day. The Company will not at any time, except upon dissolution, liquidation or winding up of the Company, close its
stock transfer books or Warrant transfer books so as to result in preventing or delaying the exercise or transfer of any Warrant. 

        9.     Registration Rights. The resale of the Warrant Stock shall be registered in accordance with the terms and conditions
contained in that certain Investor Rights Agreement dated of even date hereof, among the Holder, the Company and the other parties named therein (the "Investor Rights Agreement"). The Holder
acknowledges that pursuant to the Investor Rights Agreement, the Company has the right to request that the Holder furnish information regarding such Holder and the distribution of the Warrant Stock as
is required by law or the Commission to be disclosed in the Registration Statement (as such term is defined in the Investor Rights Agreement), and the Company may exclude from such registration the
shares of Warrant Stock acquirable hereunder if Holder fails to furnish such information within a reasonable time prior to the filing of each Registration Statement, supplemented prospectus included
therein and/or amended Registration Statement. 

        10.   Supplying Information. Upon any default by the Company of its obligations hereunder or under the Investor Rights
Agreement, the Company shall cooperate with the Holder in supplying such information as may be reasonably necessary for such Holder to complete and file any information reporting forms presently or
hereafter required by the Commission as a condition to the availability of an exemption from the Securities Act for the sale of any Warrant or Restricted Common Stock. 

        11.   Loss or Mutilation. Upon receipt by the Company from the Holder of evidence reasonably satisfactory to it of the
ownership of and the loss, theft, destruction or mutilation of this Warrant and indemnity or security reasonably satisfactory to it and reimbursement to the Company of all reasonable expenses
incidental thereto and in case of mutilation upon surrender and cancellation hereof, the Company will execute and deliver in lieu hereof a new Warrant of like tenor to the Holder; provided, however,
that in the case of mutilation, no indemnity shall be required if this Warrant in identifiable form is surrendered to the Company for cancellation. 

        12.   Office of the Company. As long as any of the Warrants remain outstanding, the Company shall maintain an office or agency
(which may be the principal executive offices of the Company) where the Warrants may be presented for exercise, registration of transfer, division or combination as provided in this Warrant. 

        13.   Financial and Business Information. 

        13.1. Quarterly Information. The Company will deliver to the Holder, as soon as available and in any event within
45 days after the end of each of the first three quarters of each fiscal year of the Company, one copy of an unaudited consolidated balance sheet of the Company and its subsidiaries as at the
end of such quarter, and the related unaudited consolidated statements of income, retained earnings and cash flow of the Company and its subsidiaries for such quarter and, in the case of the second
and third quarters, for the portion of the fiscal year ending with such quarter, setting forth in each case in comparative form the figures for the corresponding periods in the previous fiscal year.
Such financial statements shall be prepared by the Company in accordance with GAAP and accompanied by the certification of the Company's chief executive officer or chief financial officer that such
financial statements present fairly the consolidated financial position, results of operations and cash flow of the Company and its subsidiaries as at the end of such quarter and for such
year-to-date period, as the case may be; provided, however, that the Company shall have no obligation to deliver such quarterly information under this Section 13.1 to
the extent it is publicly available; and provided further, that if such information contains material non-public information, the Company shall so notify the Holder prior to delivery
thereof and the Holder shall have the right to refuse delivery of such information. 

13

 

        13.2. Annual Information. The Company will deliver to the Holder as soon as available and in any event within 90 days
after the end of each fiscal year of the Company, one copy of an audited consolidated balance sheet of the Company and its subsidiaries as at the end of such year, and audited consolidated statements
of income, retained earnings and cash flow of the Company and its subsidiaries for such year; setting forth in each case in comparative form the figures for the corresponding periods in the previous
fiscal year; all prepared in accordance with GAAP, and which audited financial statements shall be accompanied by an opinion thereon of the independent certified public accountants regularly retained
by the Company, or any other firm of independent certified public accountants of recognized national standing selected by the Company; provided, however, that the Company shall have no obligation to
deliver such annual information under this Section 13.2 to the extent it is publicly available; and provided further, that if such information contains material non-public
information, the Company shall so notify the Holder prior to delivery thereof and the Holder shall have the right to refuse delivery of such information. 

        13.3. Filings. The Company will file on or before the required date all regular or periodic reports (pursuant to the Exchange
Act) with the Commission and will deliver to Holder promptly upon their becoming available one copy of each report, notice or proxy statement sent by the Company to its stockholders generally. 

        14.   Limitation of Liability. No provision hereof, in the absence of affirmative action by the Holder to purchase shares of
Common Stock, and no enumeration herein of the rights or privileges of the Holder hereof, shall give rise to any liability of the Holder for the purchase price of any Common Stock, whether such
liability is asserted by the Company or by creditors of the Company. 

        15.   Miscellaneous. 

        15.1. Nonwaiver and Expenses. No course of dealing or any delay or failure to exercise any right hereunder on the part of the
Holder shall operate as a waiver of such right or otherwise prejudice Holder's rights, powers or remedies. If the Company fails to make, when due, any payments provided for hereunder, or fails to
comply with any other provision of this Warrant, the Company shall pay to the Holder such amounts as shall be sufficient to cover any third party costs and expenses including, but not limited to,
reasonable attorneys' fees, including those of appellate proceedings, incurred by the Holder in collecting any amounts due pursuant hereto or in otherwise enforcing any of its rights, powers or
remedies hereunder. 

        15.2. Notice Generally. All notices, requests, demands or other communications provided for herein shall be in writing and
shall be given in the manner and to the addresses set forth in the Purchase Agreement. 

        15.3. Successors and Assigns. Subject to compliance with the provisions of Section 3.1, this Warrant and the rights
evidenced hereby shall inure to the benefit of and be binding upon the successors of the Company and the successors and assigns of the Holder. The provisions of this Warrant are intended to be for the
benefit of all Holders from time to time of this Warrant, and shall be enforceable by any such Holder. 

        15.4. Amendment. This Warrant may be modified or amended or the provisions of this Warrant waived with the written consent of
both the Company and the Holder. 

        15.5. Severability. Wherever possible, each provision of this Warrant shall be interpreted in such manner as to be effective
and valid under applicable law, but if any provision of this Warrant shall be prohibited by or invalid under applicable law, such provision shall be modified to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or the remaining provisions of this Warrant. 

        15.6. Headings. The headings used in this Warrant are for the convenience of reference only and shall not, for any purpose,
be deemed a part of this Warrant. 

        15.7. Governing Law. This Warrant and the transactions contemplated hereby shall be deemed to be consummated in the State of
New York and shall be governed by and interpreted in accordance with the local laws of the State of New York without regard to the provisions thereof relating to conflicts of laws. The Company hereby
irrevocably consents to the exclusive jurisdiction of the State and Federal courts located in New York City, New York in connection with any action or proceeding arising out of or relating to this
Warrant. In any such litigation the Company agrees that the service thereof may be made by certified or registered mail directed to the Company pursuant to Section 15.2. 

[Signature
Page Follows] 

14

 

        IN
WITNESS WHEREOF, Transmeridian Exploration, Inc. has caused this Warrant to be executed by its duly authorized officer and attested by its Secretary. 

Dated:
November 12, 2004 

	 	 	TRANSMERIDIAN EXPLORATION, INC.
	

 	
 	

By: /s/ EARL W. MCNIEL

Name: Earl W. McNiel

Title: Vice President, Chief Financial Officer

Attest:

By:
/s/ JEFFREY S. TUCKER

Name: Jeffrey S. Tucker

Title: Assistant Secretary 

15

 
EXHIBIT
A 

SUBSCRIPTION
FORM 

[To
be executed only upon exercise of Warrant] 

        1.     The
undersigned hereby elects to purchase            shares of the Common Stock of Transmeridian Exploration, Inc. pursuant to the terms of the attached
Warrant, and tenders herewith payment of the purchase price of such shares in full. 

        2.     The
undersigned hereby elects to convert the attached Warrant into Common Stock of Transmeridian Exploration, Inc. through "cashless exercise" in the manner
specified in the Warrant. This conversion is exercised with respect to                        of the Shares covered by the
Warrant. 

        3.     Please
issue a certificate or certificates representing said shares in the name of the undersigned or in such other name as is specified below: 

	 	    
 (Name)
	

 	

    

	

 	

	

 	

 (Address)

        [and,
if such shares of Common Stock shall not include all of the shares of Common Stock issuable as provided in this Warrant, that a new Warrant of like tenor and date for
the balance of the shares of Common Stock issuable hereunder be delivered to the undersigned.] 

	    
 (Name of Registered Owner)	 
	

    
 (Signature of Registered Owner)	

 
	

    
 (Street Address)	

 
	

    
 (State) (Zip Code)	

 

NOTICE: The signature on this subscription must correspond with the name as written upon the face of the Warrant in every particular, without alteration or enlargement or any
change whatsoever. 

16

 
EXHIBIT
B 

ASSIGNMENT
FORM 

FOR
VALUE RECEIVED the undersigned registered owner of this Warrant for the purchase of shares of common stock of Transmeridian Exploration, Inc. hereby sells, assigns and transfers unto the
Assignee named below all of the rights of the undersigned under this Warrant, with respect to the number of shares of common stock set forth below: 

	    
	 
	

    
	

 
	

    
 (Name and Address of Assignee)	

 
	

    
 (Number of Shares of Common Stock)	

 

and does hereby irrevocably constitute and appoint                        attorney-in-fact to register such
transfer on the books of the Company, maintained
for the purpose, with full power of substitution in the premises. 

	Dated:	 	    
	 
	

    
 (Print Name and Title)	

 
	

    
 (Signature)	

 
	

    
 (Witness)	

 

NOTICE: The signature on this assignment must correspond with the name as written upon the face of the Warrant in every particular, without alteration or enlargement or any
change whatsoever. 

17

 
EXHIBIT
C 

FORM
OF INVESTMENT REPRESENTATION LETTER 

In
connection with the acquisition of [warrants (the "Warrants") to purchase            shares of common stock of Transmeridian Exploration, Inc. (the "Company"), par value
$0.0006 per share (the
"Common Stock")][    shares of common stock of Transmeridian Exploration, Inc. (the "Company"), par value $0.0006 per share (the "Common Stock") upon the
exercise of warrants by            ], by                        (the
"Holder") from                        , the Holder hereby represents and warrants to the Company as follows: 

The
Holder (i) is an "Accredited Investor" as that term is defined in Rule 501 of Regulation D promulgated under the Securities Act of 1933, as amended (the "Act"); and
(ii) has the ability to bear the economic risks of such Holder's prospective investment, including a complete loss of Holder's investment in the Warrants and the shares of Common Stock issuable
upon the exercise thereof (collectively, the "Securities"). 

The
Holder, by acceptance of the Warrants, represents and warrants to the Company that the Warrants and all securities acquired upon any and all exercises of the Warrants are purchased for the
Holder's own account, and not with view to distribution of either the Warrants or any securities purchasable upon exercise thereof in violation of applicable securities laws. 

The
Holder acknowledges that (i) the Securities have not been registered under the Act, (ii) the Securities are "restricted securities" and the certificate(s) representing the Securities
shall bear the following legend, or a similar legend to the same effect, until (i) in the case of the shares of Common Stock underlying the Warrants, such shares shall have been registered for
resale by the Holder under the Act and effectively been disposed of in accordance with a registration statement that has been declared effective; or (ii) in the opinion of counsel for the
Company such Securities may be sold without registration under the Act: 

"[NEITHER]
THE SECURITIES REPRESENTED BY THIS CERTIFICATE [NOR THE SECURITIES INTO WHICH THEY ARE EXERCISABLE] HAVE [NOT] BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND ALL SUCH SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AS SET FORTH IN THIS CERTIFICATE.
[NEITHER] THE SECURITIES REPRESENTED HEREBY [NOR THE SECURITIES INTO WHICH THEY ARE EXERCISABLE] MAY [NOT] BE SOLD, TRANSFERRED,
OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR AN OPINION OF COUNSEL, REASONABLY ACCEPTABLE TO COUNSEL FOR THE COMPANY, TO THE EFFECT THAT THE PROPOSED
SALE, TRANSFER, OR DISPOSITION MAY BE EFFECTUATED WITHOUT REGISTRATION UNDER THE ACT." 

IN
WITNESS WHEREOF, the Holder has caused this Investment Representation Letter to be executed in its corporate name by its duly authorized officer this    day
of                        
200            . 

[Name]

	By:

Name:

Title:	 	    
	 	 

18

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EXHIBIT 10.1    
    

	

	

PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT
	

by and among
	

Transmeridian Exploration, Inc., as Issuer and Seller
	

and
	

the parties named herein, as Purchasers
	

with respect to Seller's
	

Series A Cumulative Convertible Preferred Stock
	

and Warrants to Purchase Common Stock
	

November 12, 2004
	

Table of Exhibits and Schedules

	

Exhibit A	
 	

Form of Certificate of Designation of the Series A Cumulative Convertible Preferred Stock
	

Exhibit B	
 	

Form of Warrant
	

Exhibit C	
 	

Form of Investor Rights Agreement
	

Exhibit D	
 	

Form of Opinion of Seller's Counsel
	

Exhibit E	
 	

Form of Closing Escrow Agreement
	

Schedule 1	
 	

Purchasers and Shares of Preferred Stock and Warrants Purchased

        PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT (the "Agreement") dated as of November 12, 2004, by and among Transmeridian
Exploration, Inc., a Delaware corporation (the "Seller") and each of the persons listed on  Schedule 1 hereto (each is individually referred to as
a "Purchaser" and collectively, as the
"Purchasers"). 

        WHEREAS,
each of the Purchasers is willing to purchase from the Seller, and the Seller desires to sell to the Purchasers, (i) up to an aggregate of 1,785.714 shares of its
Series A Cumulative Convertible Preferred Stock, $14,000 liquidation preference per share, par value $0.0006 per share (the "Preferred Stock")
and (ii) Common Stock Purchase Warrants (the "Warrants") entitling the holders thereof to purchase up to 4,464,286 shares of the Seller's common
stock, $0.0006 par value (the "Common Stock") as more fully set forth herein. 

        NOW
THEREFORE, in consideration of the mutual promises and representations, warranties, covenants and agreements set forth herein, the parties hereto, intending to be legally bound,
hereby agree as follows: 

 
 

ARTICLE I—PURCHASE AND SALE    
    

         1.1   Purchase and Sale.

        (a)   On
the terms and subject to the conditions set forth in this Agreement, at the Closing (as defined in Section 2.2), the Seller will sell and each of the
Purchasers will purchase a number of shares of Preferred Stock and Warrants to purchase a number of shares of Common Stock as set forth on  Schedule 1. 

        (b)   The
shares of Common Stock issuable upon conversion of the Preferred Stock or upon payment of dividends on the Preferred Stock are referred to herein as the
"Conversion Shares," and the shares of Common Stock issuable upon exercise of the Warrants are referred to herein as the
"Warrant Shares." 

        1.2   Terms of the Preferred Stock and Warrants. The terms and provisions of the
Preferred Stock are
set forth in the form of Certificate of Designations, Rights and Preferences of Series A Cumulative Convertible Preferred Stock, attached hereto as  Exhibit A (the "Certificate of Designation"). The terms and provisions of the Warrants are more
fully set forth in the form of Common Stock Purchase Warrant, attached hereto as Exhibit B. 

         1.3   Transfers; Legends.  

        (a)   (i) Except as required by federal securities laws and the securities law of any state or other jurisdictions, the Preferred
Stock,
Conversion Shares, Warrants and Warrant Shares (collectively, the "Securities") may be transferred, in whole or in part, by any of the Purchasers at any
time. In the case of Preferred Stock, such transfer may be effected by delivering written transfer instructions to the Seller, and the Seller shall reflect such transfer on its books and records and
reissue certificates evidencing the Preferred Stock upon surrender of certificates evidencing the Preferred Stock being transferred. Any such transfer shall be made by a Purchaser in accordance with
applicable law. Any transferee shall agree to be bound by the terms of the Investor Rights Agreement and this Agreement. The Seller shall reissue certificates evidencing the Securities upon surrender
of certificates evidencing the Securities being transferred in accordance with this Section 1.3(a). 

         (ii)  In
connection with any transfer of Securities other than pursuant to an effective registration statement under the Securities Act of 1933, as amended (the
"Securities Act"), or to the Seller, the Seller may require the transferor thereof to furnish to the Seller an opinion of counsel selected by the
transferor, such counsel and the form and substance of which opinion shall be reasonably satisfactory to the Seller and Seller's counsel, to the effect that such transfer does not require registration
under the Securities Act; provided, however, that in the case of a transfer pursuant to Rule 144 under the Securities Act, no opinion shall be
required if the transferor provides the Company with a customary seller's representation letter, and, if such sale is not pursuant to subsection (k) of Rule 144, a customary broker's
representation letter and Form 144. Notwithstanding the foregoing, the Seller hereby consents to and agrees to register on the books of the Seller and with any transfer agent for the 

 

securities
of the Seller, without any such legal opinion, any transfer of Securities by a Purchaser to an Affiliate of such Purchaser, provided that the transferee certifies to the Seller that it is
an "accredited investor" as defined in Rule 501(a) under the Securities Act and that it is acquiring the Securities solely for investment purposes (subject to the qualifications hereof) and not
with a view to, or for, resale, distribution or fractionalization thereof in whole or in part in violation of the Securities Act. 

        (iii)  An
"Affiliate" means any Person (as such term is defined below) that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common control with a Person, as such terms are used in and construed under Rule 144 under the Securities Act. With respect to a
Purchaser, any investment fund or managed account that is managed on a discretionary basis by the same investment manager as such Purchaser will be deemed to be an Affiliate of such Purchaser. A
"Person" means any individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company,
joint stock company, government (or an agency or subdivision of any thereof) or other entity of any kind. 

        (b)   The
certificates representing the Preferred Stock and the Conversion Shares, unless, with respect to such Conversion Shares, the Conversion Shares are eligible for
resale without registration pursuant to Rule 144(k) under the Exchange Act or have been sold pursuant to an effective registration statement under the Securities Act, shall bear the following
legend: 

"THE
SHARES REPRESENTED BY, OR ISSUABLE UPON CONVERSION OR EXERCISE OF SECURITIES EVIDENCED BY, THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE
OFFERED OR SOLD IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SAID ACT UNLESS, IN THE OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY, SUCH REGISTRATION IS NOT REQUIRED." 

ARTICLE II—PURCHASE PRICE AND CLOSING  

         2.1   Purchase Price. The purchase price (the "Purchase
Price") to be paid by each of the Purchasers to the Seller to acquire the Preferred Stock and the applicable Warrants shall be as set forth beside the name of such Purchaser on  Schedule 1 hereto. The Purchase Price paid by each Purchaser shall be placed in escrow pending the Closing as provided in Article 6.1(b)
hereof. 

         2.2   The Closing. The closing of the transactions contemplated under this
Agreement (the
"Closing") will take place as promptly as practicable, but no later than two (2) business days following satisfaction or waiver of the conditions
set forth in Article 6.1(a) and (b) and 6.2(a) (other than those conditions which by their terms are not to be satisfied or waived until the Closing), at the offices of Wiggin and Dana
LLP, 400 Atlantic Street, Stamford, Connecticut 06901. The date on which the Closing occurs is the "Closing Date." 

ARTICLE III—REPRESENTATIONS AND WARRANTIES OF THE SELLER  

        The Seller represents and warrants to the Purchasers as follows:

         3.1   Corporate Existence and Power; Subsidiaries. The Seller and its Subsidiaries
are corporations
duly incorporated, validly existing and in good standing under the laws of the jurisdiction in which they are incorporated or continued, and have all corporate powers required to carry on their
business as now conducted. The Seller and its Subsidiaries are duly qualified to do business as a foreign corporation and are in good standing in each jurisdiction where the character of the property
owned or leased by them or the nature of their activities makes such qualification necessary, except for those jurisdictions where the failure to be so qualified would not have a Material Adverse
Effect on the Seller or any of its Subsidiaries. For purposes of this Agreement, the term "Material Adverse Effect" means, with respect to any person or
entity, a material adverse effect on its and its Subsidiaries' 

2

 

condition
(financial or otherwise), business, properties, assets, liabilities (including contingent liabilities), results of operations or current prospects, taken as a whole. True and complete copies
of the Seller's Certificate of Incorporation, as amended, and Bylaws, as amended, as currently in effect and as will be in effect on the Closing Date (collectively, the
"Certificate and Bylaws"), have previously been provided or made available to the Purchasers. For purposes of this Agreement, the term
"Subsidiary" or "Subsidiaries" means, with respect to any entity, any corporation or other organization of which securities or other ownership interests
having ordinary voting power to elect a majority of the board of directors or other persons performing similar functions are directly or indirectly owned by such entity or of which such entity is a
partner or is, directly or indirectly, the beneficial owner of 50% or more of any class of equity securities or equivalent profit participation interests. The Seller has no Subsidiaries other than as
set forth on Schedule 3.1, each of which, unless otherwise indicated on Schedule 3.1, is wholly-owned by the Seller. 

        3.2   Corporate Authorization; Enforceability. The execution, delivery and
performance by the Seller of
this Agreement, and the Warrants, the Closing Escrow Agreement (as defined below), the Certificate of Designation, the Investor Rights Agreement, and each of the other documents executed pursuant to
and in connection with this Agreement (collectively, the "Related Documents"), and the consummation of the transactions contemplated hereby and thereby
(including, but not limited to, the sale and delivery of the Preferred Stock and the Warrants, and the subsequent issuance of the Conversion Shares upon conversion of the Preferred Stock and the
Warrant Shares upon exercise of the Warrants) have been duly authorized, and no additional corporate or stockholder action is required pursuant to the rules of any stock exchange, market or bulletin
board on which the Common Stock is traded or otherwise for the approval of this Agreement, the Related Documents or the consummation of the transactions contemplated hereby or thereby. The Conversion
Shares and the Warrant Shares have been duly reserved for issuance by the Seller. This Agreement and the Related Documents have been or, to the extent contemplated hereby or by the Related Documents,
will be duly executed and delivered and constitute the legal, valid and binding agreement of the Seller, enforceable against the Seller in accordance with their terms, except as may be limited by
bankruptcy, reorganization, insolvency, moratorium and similar laws of general application relating to or affecting the enforcement of rights of creditors, and except as enforceability of its
obligations hereunder are subject to general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). 

         3.3   Charter, Bylaws and Corporate Records. The minute books of the Seller and
its Subsidiaries
contain complete and accurate records of all meetings and other corporate actions of the board of directors, committees of the board of directors, incorporators and stockholders of the Seller and its
Subsidiaries from the date of incorporation of each such entity to the date hereof. All material corporate decisions and actions have been validly made or taken. All corporate books, including without
limitation the share transfer register, comply with applicable laws and regulations and have been regularly updated. 

         3.4   Regulatory Authorization. Except as otherwise specifically contemplated in
this Agreement and the
Related Documents, and except for: (i) the filings referenced in Section 5.11; (ii) the filing of a Form D with respect to the Preferred Stock and Warrants under
Regulation D under the Securities Act; (iii) the filing of the Registration Statement with the Commission; and (iv) any filings required under state or provincial securities laws
that are permitted to be made after the date hereof, the execution, delivery and performance by the Seller of this Agreement and the Related Documents, and the consummation of the transactions
contemplated hereby and thereby (including, but not limited to, the sale and delivery of the Preferred Stock and Warrants and the subsequent issuance of the Conversion Shares and Warrant Shares upon
conversion of the Preferred Stock or otherwise or exercise of the Warrants, as applicable) by the Seller require no action by or in respect of, or filing with, any governmental or regulatory body,
agency, official or authority. The Conversion Shares and the Warrant 

3

 

Shares,
and all shares of Common Stock to be issued as dividends on the Preferred Stock have been approved for listing on all exchanges, bulletin boards and market systems on which any shares of
Common Stock are currently listed. 

         3.5   Non-Contravention. The execution, delivery and performance by the Seller of
this
Agreement and the Related Documents, and the consummation by the Seller of the transactions contemplated hereby and thereby (including the issuance of the Conversion Shares and Warrant Shares) do not
and will not (a) contravene or conflict with the Certificate (as amended by the Certificate of Designation) and Bylaws of the Seller and its Subsidiaries or any material agreement to which the
Seller is a party or by which it is bound; (b) contravene or conflict with or constitute a violation of any provision of any law, regulation, judgment, injunction, order or decree binding upon
or applicable to the Seller or its Subsidiaries; (c) constitute a default (or would constitute a default with notice or lapse of time or both) under or give rise to a right of termination,
cancellation or acceleration or loss of any benefit under any material agreement, contract or other instrument binding upon the Seller or its Subsidiaries or under any material license, franchise,
permit or other similar authorization held by the Seller or its Subsidiaries; or (d) result in the creation or imposition of any Lien (as defined below) on any asset of the Seller or its
Subsidiaries. For purposes of this Agreement, the term "Lien" means, with respect to any material asset, any mortgage, lien, pledge, charge, security
interest, claim or encumbrance of any kind in respect of such asset. 

         3.6   SEC Documents. The Seller is obligated under the Securities Exchange Act of
1934, as amended (the
"Exchange Act") to file reports pursuant to Sections 13 or 15(d) thereof (all such reports filed or required to be filed by the Seller, including all
exhibits thereto or incorporated therein by reference, and all documents filed by the Seller under the Securities Act hereinafter called the "SEC
Documents"). The Seller has filed all reports or other documents required to be filed under the Exchange Act. All SEC Documents filed by the Seller (i) were prepared in
all material respects in accordance with the requirements of the Exchange Act and (ii) did not at the time they were filed (or, if amended or superseded by a filing prior to the date hereof,
then on the date of such filing) contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading. The Seller has previously delivered or made available to the Purchasers a correct and complete copy of each report which the
Seller filed with the Securities and Exchange Commission (the "SEC" or the "Commission") under the
Exchange Act for any period ending on or after December 31, 2003 (the "Recent Reports"). None of the information about the Seller or any of its
Subsidiaries which has been disclosed to the Purchasers herein or in the course of discussions and negotiations with respect hereto which is not disclosed in the Recent Reports is or was required to
be so disclosed, and no material non-public information has been disclosed to the Purchasers. 

         3.7   Financial Statements. Each of the (i) Seller's audited consolidated
balance sheet and
related consolidated statements of income, cash flows and changes in stockholders' equity (including the related notes) as of and for the years ended December 31, 2003 and December 31,
2002, as contained in the Recent Reports for such periods and (ii) the Seller's unaudited consolidated balance sheet and related consolidated statements of income, cash flows and changes in
stockholders' equity as of and for the six months ended June 30, 2004 as contained in the Recent Reports (both of (i) and (ii), collectively, the "Seller's
Financial Statements" or the "Financial Statements") (x) present fairly in all material respects the financial position
of the Seller and its Subsidiaries on a consolidated basis as of the dates thereof and the results of operations, cash flows and stockholders' equity as of and for each of the periods then ended,
except that the unaudited financial statements are subject to normal year-end adjustments, and (y) were prepared in accordance with United States generally accepted accounting
principals ("GAAP") applied on a consistent basis throughout the periods involved, in each case, except as otherwise indicated in the notes thereto. 

4

 

         3.8   Compliance with Law. The Seller and its Subsidiaries are in compliance and
have conducted their
business so as to comply with all laws, rules and regulations, judgments, decrees or orders of any court, administrative agency, commission, regulatory authority or other governmental authority or
instrumentality, domestic or foreign, applicable to their operations, the impact of which would have a Material Adverse Effect. There are no judgments or orders, injunctions, decrees, stipulations or
awards (whether rendered by a court or administrative agency or by arbitration), against the Seller or its Subsidiaries or against any of their properties or businesses, the impact of which would have
a Material Adverse Effect. 

         3.9   No Defaults. The Seller and its Subsidiaries are not, nor have they received
notice that they
would be with the passage of time, giving of notice, or both, (i) in violation of any provision of their respective Certificates and Bylaws (or other applicable organizational
documents) (ii) in default or violation of any material term, condition or provision of (A) any judgment, decree, order, injunction or stipulation applicable to the Seller or its
Subsidiaries or (B) any material agreement, note, mortgage, indenture, contract, lease or instrument, permit, concession, franchise or license to which the Seller or its Subsidiaries are a
party or by which the Seller or its Subsidiaries or their properties or assets may be bound, and no circumstances exist which would entitle any party to any material agreement, note, mortgage,
indenture, contract, lease or instrument to which such Seller or its Subsidiaries are a party, to terminate such, as a result of such Seller or its Subsidiaries having failed to meet any provision
thereof including, but not limited to, meeting any applicable milestone described therein, which individually, or in the aggregate, could reasonably be expected to have a Material Adverse Effect. 

         3.10 Litigation. Except as disclosed in the Recent Reports or on  Schedule 3.10, there is no action, suit, proceeding, judgment, claim or investigation pending or, to the best knowledge of the Seller, threatened
against the Seller or its Subsidiaries which could, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on the Seller or its Subsidiaries or which in any manner
challenges or seeks to prevent, enjoin, alter or materially delay any of the transactions contemplated hereby, and to the knowledge of the Seller or its Subsidiaries, there is no basis for the
assertion of any of the foregoing. There are no claims or complaints existing or, to the knowledge of the Seller or its Subsidiaries, threatened for product liability in respect of any product of the
Seller or its Subsidiaries, and the Seller and its Subsidiaries are not aware of any basis for the assertion of any such claim. 

         3.11 Absence of Certain Changes. Since December 31, 2003, the Seller has conducted its
business only in the ordinary course, consistent with past practice, and there has not occurred, except as set forth in the Recent Reports or any exhibit thereto or incorporated by reference therein: 

        (a)   any
event that could reasonably be expected to have a Material Adverse Effect on the Seller or any of its Subsidiaries; 

        (b)   any
amendments or changes in the Certificate or Bylaws (or equivalent organizational documents, as applicable) of the Seller and its Subsidiaries, other than on account
of the filing of the Certificate of Designation; 

        (c)   any
damage, destruction or loss, whether or not covered by insurance, that would, individually or in the aggregate, have or would be reasonably likely to have, a
Material Adverse Effect on the Seller or its Subsidiaries; 

        (d)   except
as set forth on Schedule 3.11(d), any 

          (i)  incurrence,
assumption or guarantee by the Seller or its Subsidiaries of any debt for borrowed money other than for equipment leases made in the ordinary course of
business, consistent with past practice; 

5

 

         (ii)  issuance
or sale of any securities convertible into or exchangeable for securities of the Seller other than to directors, employees and consultants pursuant to existing
equity compensation or stock option plans of the Seller; 

        (iii)  issuance
or sale of options or other rights to acquire from the Seller or its Subsidiaries, directly or indirectly, securities of the Seller or any securities
convertible into or exchangeable for any such securities, other than options issued to directors, employees and consultants in the ordinary course of business, consistent with past practice; 

        (iv)  issuance
or sale of any stock, bond or other corporate security; 

         (v)  discharge
or satisfaction of any material Lien; 

        (vi)  declaration
or making any payment or distribution to stockholders or purchase or redemption of any share of its capital stock or other security; 

       (vii)  sale,
assignment or transfer of any of its intangible assets except in the ordinary course of business, consistent with past practice, or cancellation of any debt or
claim except in the ordinary course of business, consistent with past practice; 

      (viii)  waiver
of any right of substantial value whether or not in the ordinary course of business; 

        (ix)  material
change in officer compensation, except in the ordinary course of business and consistent with past practice; or 

         (x)  other
commitment (contingent or otherwise) to do any of the foregoing. 

        (e)   any
creation, sufferance or assumption by the Seller or any of its Subsidiaries of any Lien on any asset (other than in connection with equipment leases and working
capital lines of credit set forth on Schedule 3.11(e)) or any making of any loan, advance or capital contribution to or investment in any Person,
in an aggregate amount which exceeds $25,000 outstanding at any time; 

        (f)    any
entry into, amendment of, relinquishment, termination or non-renewal by the Seller or its Subsidiaries of any material contract, license, lease,
transaction, commitment or other right or obligation, other than in the ordinary course of business, consistent with past practice; or 

        (g)   any
transfer or grant of a right with respect to the patents, trademarks, trade names, service marks, trade secrets, copyrights or other intellectual property rights
owned or licensed by the Seller or its Subsidiaries, except as among the Seller and its Subsidiaries. 

         3.12 No Undisclosed Liabilities. Except as set forth in the Recent Reports, and except for
liabilities and obligations incurred since December 31, 2003 in the ordinary course of business, consistent with past practice, as of the date hereof, (i) the Seller and its Subsidiaries
do not have any material liabilities or obligations (absolute, accrued, contingent or otherwise), and (ii) there has not been any aspect of the prior or current conduct of the business of the
Seller or its Subsidiaries which may form the basis for any material claim by any third party which if asserted could result in any such material liabilities or obligations. 

         3.13 Taxes. All tax returns and tax reports required to be filed with respect to the income,
operations, business or assets of the Seller and its Subsidiaries have been timely filed (or appropriate extensions have been obtained) with the appropriate governmental agencies in all jurisdictions
in which such returns and reports are required to be filed, and all of the foregoing as filed are correct and complete in all material respects, reflect accurately all liability for taxes of the
Seller and its Subsidiaries for the periods to which such returns relate, and all amounts shown as owing thereon have been paid. All income, profits, franchise, sales, use, value added, occupancy,
property, excise, payroll, withholding, FICA, FUTA and other taxes (including interest and penalties), if any, collectible or payable by the Seller and its Subsidiaries or relating to or chargeable
against any of its material assets, 

6

 

revenues
or income or relating to any employee, independent contractor, creditor, stockholder or other third party through the Closing Date, were fully collected and paid by such date if due by such
date or provided for by adequate reserves in the Financial Statements as of and for the periods ended December 31, 2003 (other than taxes accruing after such date) and all similar items due
through to the Closing Date will have been fully paid by that date or provided for by adequate reserves, whether or not any such taxes were reported or reflected in any tax returns or filings. Except
as described on Schedule 3.13, no taxation authority has sought to audit the records of the Seller or any of its Subsidiaries for the purpose of
verifying or disputing any tax returns, reports or related information and disclosures provided to such taxation authority, or for the Seller's or any of its Subsidiaries' alleged failure to provide
any such tax returns, reports or related information and disclosure. No material claims or deficiencies have been asserted against or inquiries raised with the Seller or any of its Subsidiaries with
respect to any taxes or other governmental charges or levies which have not been paid or otherwise satisfied, including claims that, or inquiries whether, the Seller or any of its Subsidiaries has not
filed a tax return that it was required to file, and, to the best of the Seller's knowledge, there exists no reasonable basis for the making of any such claims or inquiries. Neither the Seller nor any
of its Subsidiaries has waived any restrictions on assessment or collection of taxes or consented to the extension of any statute of limitations relating to taxation. 

         3.14 Interests of Officers, Directors and Other Affiliates. The description of any interest
held,
directly or indirectly, by any officer, director or other Affiliate of Seller (other than the interests of the Seller and its Subsidiaries in such assets) in any property, real or personal, tangible
or intangible, used in or pertaining to Seller's business, including any interest in the Intellectual Property (as defined in Section 3.15 hereof), as set forth in the Recent Reports, is true
and complete, and no officer, director or other Affiliate of the Seller has any interest in any property, real or personal, tangible or intangible, used in or pertaining to the Seller's business,
including the Seller's Intellectual Property, other than as set forth in the Recent Reports. 

         3.15 Intellectual Property. Other than as set forth in the Recent Reports: 

        (a)   the
Seller or a Subsidiary thereof has the right to use or is the sole and exclusive owner of all right, title and interest in and to all material foreign and domestic
patents, patent rights, trademarks, service marks, trade names, brands and copyrights (whether or not registered and, if applicable, including pending applications for registration) owned, used or
controlled by the Seller and its Subsidiaries (collectively, the "Rights") and in and to each material invention, software, trade secret, technology,
product, composition, formula and method of process used by the Seller or its Subsidiaries (the Rights and such other items, the "Intellectual
Property"), and, to the Seller's knowledge, has the right to use the same, free and clear of any claim or conflict with the rights of others; 

        (b)   no
royalties or fees (license or otherwise) are payable by the Seller or its Subsidiaries to any Person by reason of the ownership or use of any of the Intellectual
Property except as set forth on Schedule 3.15; 

        (c)   there
have been no claims made against the Seller or its Subsidiaries asserting the invalidity, abuse, misuse, or unenforceability of any of the Intellectual Property,
and, to its knowledge, there are no reasonable grounds for any such claims; 

        (d)   neither
the Seller nor its Subsidiaries have made any claim of any violation or infringement by others of its rights in the Intellectual Property, and to the best of the
Seller's knowledge, no reasonable grounds for such claims exist; and 

        (e)   neither
the Seller nor its Subsidiaries have received notice that it is in conflict with or infringing upon the asserted rights of others in connection with the
Intellectual Property. 

         3.16 Restrictions on Business Activities. Other than as set forth in the Recent Reports,
there is no
agreement, judgment, injunction, order or decree binding upon the Seller or its Subsidiaries which has 

7

 

or
could reasonably be expected to have the effect of prohibiting or materially impairing any business practice of the Seller or its Subsidiaries, any acquisition of property by the Seller or its
Subsidiaries or the conduct of business by the Seller or its Subsidiaries as currently conducted or as currently proposed to be conducted by the Seller. 

        3.17 Preemptive Rights. No Person possesses any right of first refusal, preemptive rights or
similar
rights in respect of the Preferred Stock or Warrants or the Conversion Shares or Warrant Shares to be issued to the Purchasers upon conversion of the Preferred Stock or otherwise or upon exercise of
the Warrants, as applicable. 

         3.18 Insurance. The insurance policies providing insurance coverage to the Seller or its
Subsidiaries, including the policies in respect of product liability, are, in the reasonable opinion of Seller, adequate for the business conducted by the Seller and its Subsidiaries and are
sufficient for compliance by the Seller and its Subsidiaries with all requirements of law and all material agreements to which the Seller or its Subsidiaries are a party or by which any of their
assets are bound. All of such policies are in full force and effect and are valid and enforceable in accordance with their terms, and the Seller and its Subsidiaries have complied with all material
terms and conditions of such policies, including premium payments. None of the insurance carriers has indicated to the Seller or its Subsidiaries an intention to cancel any such policy. 

         3.19 Subsidiaries and Investments. Except as set forth in the Recent Reports or on 
Schedule 3.19, the Seller has no Subsidiaries or Investments. For purposes of this Agreement, the term
"Investments" shall mean, with respect to any Person, all advances, loans or extensions of credit to any other Person, all purchases or commitments to
purchase any stock, bonds, notes, debentures or other securities of any other Person, and any other investment in any other Person, including partnerships or joint ventures (whether by capital
contribution or otherwise) or other similar arrangement (whether written or oral) with any Person, including but not limited to arrangements in which (i) the Person shares profits and losses,
(ii) any such other Person has the right to obligate or bind the Person to any third party, or (iii) the Person may be wholly or partially liable for the debts or obligations of such
partnership, joint venture or other arrangement. 

        3.20 Capitalization. (a) The authorized capital stock of the Seller consists of
200,000,000
shares of common stock, $0.0006 par value per share, of which 79,619,851 shares are issued and outstanding as of the date hereof, and 5,000,000 shares of preferred stock, issuable in one or more
classes or series, with such relative rights and preferences as the Board of Directors may determine, none of which has been authorized for issuance other than a number of shares equal to the number
set forth on Schedule 1 hereto which will be, immediately prior to the Closing of this Agreement, designated as the Series A Cumulative
Convertible Preferred Stock, of which no shares are issued and outstanding immediately prior to the execution of this Agreement. 

        (b)   All
shares of the Seller's issued and outstanding capital stock have been duly authorized, are validly issued and outstanding, and are fully paid and
non-assessable. No securities issued by the Seller from the date of its incorporation to the date hereof were issued in violation of any statutory or common law preemptive rights. There
are no dividends which have accrued or been declared but are unpaid on the capital stock of the Seller. All taxes required to be paid by Seller in connection with the issuance and any transfers of the
Seller's capital stock have been paid. Except as set forth on Schedule 3.20, all permits or authorizations required to be obtained from, or
registrations required to be effected with, any Person in connection with any and all issuances of securities of the Seller from the date of the Seller's incorporation to the date hereof have been
obtained or effected, and all securities of the Seller have been issued and are held in accordance with the provisions of all applicable securities and other laws. 

         3.21 Options, Warrants, Rights. Except as set forth on  Schedule 3.21, there are no outstanding (a) securities, notes or instruments convertible into or exercisable for any of the capital stock
or other 

8

 

equity
interests of the Seller or its Subsidiaries; (b) options, warrants, subscriptions or other rights to acquire capital stock or other equity interests of the Seller or its Subsidiaries; or
(c) commitments, agreements or understandings of any kind, including employee benefit arrangements, relating to the issuance or repurchase by the Seller or its Subsidiaries of any capital stock
or other equity interests of the Seller or its Subsidiaries, any such securities or instruments convertible or exercisable for securities or any such options, warrants or rights. Other than the rights
of the Purchasers under the Preferred Stock and the Warrants, and except as set forth on Schedule 3.21, neither the Seller nor the Subsidiaries
have granted anti-dilution rights to any person or entity in connection with any outstanding option, warrant, subscription or any other instrument convertible or exercisable for the
securities of the Seller or any of its Subsidiaries. Other than the rights granted to the Purchasers under the Investor Rights Agreement, there are no outstanding rights which permit the holder
thereof to cause the Seller or the Subsidiaries to file a registration statement under the Securities Act or which permit the holder thereof to include securities of the Seller or any of its
Subsidiaries in a registration statement filed by the Seller or any of its Subsidiaries under the Securities Act, and there are no outstanding agreements or other commitments which otherwise relate to
the registration of any securities of the Seller or any of its Subsidiaries for sale or distribution in any jurisdiction, except as set forth on  Schedule 3.21. 

         3.22 Employees, Employment Agreements and Employee Benefit Plans. Except as set forth in the
Recent
Reports or on Schedule 3.22, there are no employment, consulting, severance or indemnification arrangements, agreements or understandings between
the Seller or its Subsidiaries and any officer, director, consultant or employee of the Seller or its Subsidiaries (the "Employment Agreements"). No
Employment Agreement provides for the acceleration or change in the award, grant, vesting or determination of options, warrants, rights, severance payments or other contingent obligations of any
nature whatsoever of the Seller or its Subsidiaries in favor of any such parties in connection with the transactions contemplated by this Agreement. 

         3.23 Absence of Certain Business Practices. Neither the Seller, nor any Affiliate of the
Seller, nor
to the knowledge of the Seller, any agent or employee of the Seller, any other Person acting on behalf of or associated with the Seller, or any individual related to any of the foregoing Persons,
acting alone or together, has: (a) received, directly or indirectly, any rebates, payments, commissions, promotional allowances or any other economic benefits, regardless of their nature or
type, from any customer, supplier, trading company, shipping company, governmental employee or other Person with whom the Seller has done business directly or indirectly; or (b) directly or
indirectly, given or agreed to give any gift or similar benefit to any customer, supplier, trading company, shipping company, governmental employee or other Person who is or may be in a position to
help or hinder the business of the Seller (or assist the Seller in connection with any actual or proposed transaction) which (i) may subject the Seller to any damage or penalty in any civil,
criminal or governmental litigation or proceeding, (ii) if not given in the past, may have had an adverse effect on the Seller or (iii) if not continued in the future, may adversely
affect the assets, business, operations or prospects of the Seller or subject the Seller to suit or penalty in any private or governmental litigation or proceeding. 

         3.24 Products and Services. To the knowledge of the Seller and except as disclosed in the
Recent
Reports, there exists no set of facts (i) which could furnish a basis for the withdrawal, suspension or cancellation of any registration, license, permit or other governmental approval or
consent of any governmental or regulatory agency with respect to any product or service developed or provided by the Seller or its Subsidiaries, (ii) which could furnish a basis for the
withdrawal, suspension or cancellation by order of any state, federal or foreign court of law of any product or service, or (iii) which could have a Material Adverse Effect on the continued
operation of any facility of the Seller or its Subsidiaries or which could otherwise cause the Seller or its Subsidiaries to withdraw, suspend or cancel any such product or service from the market or
to change the marketing classification of any such product or service. Each product or service provided by Seller or its Subsidiaries has been provided in 

9

 

accordance
in all material respects with the specifications under which such product or service normally is and has been provided and the provisions of all applicable laws or regulations. 

         3.25 Environmental Matters. None of the premises or any properties owned, occupied or leased
by the
Seller or its Subsidiaries (the "Premises") has been used by the Seller or the Subsidiaries or, to the Seller's knowledge, by any other Person, to
manufacture, treat, store, or dispose of any substance that has been designated to be a "hazardous substance" under applicable Environmental Laws (hereinafter defined)
("Hazardous Substances") in violation of any applicable Environmental Laws, violation of which would have a Material Adverse Effect. To its knowledge,
the Seller has not disposed of, discharged, emitted or released any Hazardous Substances which would require, under applicable Environmental Laws, remediation, investigation or similar response
activity. No Hazardous Substances are present as a result of the actions of the Seller or, to the Seller's knowledge, any other Person, in, on or under the Premises which would give rise to any
liability or clean-up obligations of the Seller under applicable Environmental Laws, the impact of which would have a Material Adverse Effect. The Seller and, to the Seller's knowledge,
any other Person for whose conduct it may be responsible pursuant to an agreement or by operation of law, are in compliance with all laws, regulations and other federal, state or local governmental
requirements (foreign and domestic), and all applicable judgments, orders, writs, notices, decrees, permits, licenses, approvals, consents or injunctions in effect on the date of this Agreement
relating to the generation, management, handling, transportation, treatment, disposal, storage, delivery, discharge, release or emission of any Hazardous Substance (the
"Environmental Laws"). Neither the Seller nor, to the Seller's knowledge, any other Person for whose conduct it may be responsible pursuant to an
agreement or by operation of law has received any written complaint, notice, order, or citation of any actual, threatened or alleged noncompliance with any of the Environmental Laws, and there is no
proceeding, suit or investigation pending or, to the Seller's knowledge, threatened against the Seller or, to the Seller's knowledge, any such Person with respect to any violation or alleged violation
of the Environmental Laws, and, to the knowledge of the Seller, there is no basis for the institution of any such proceeding, suit or investigation, the violation of which would have a Material
Adverse Effect. 

         3.26 Licenses; Compliance With Regulatory Requirements.  

        Except as disclosed in the Recent Reports, the Seller holds all material authorizations, consents, approvals, franchises, licenses and permits required under
applicable law or regulation for the operation of the business of the Seller and its Subsidiaries as presently operated (the "Governmental
Authorizations"). All the Governmental Authorizations have been duly issued or obtained and are in full force and effect, and the Seller and its Subsidiaries are in material
compliance with the terms of all the Governmental Authorizations. The Seller's and its Subsidiaries' direct and indirect operating activities in Kazakhstan are subject to the Model 1 royalty regime in
effect as of the date hereof, and the Seller has no knowledge of any fact or circumstances which could reasonably be expected to cause the Seller to believe that such royalty regime will be revoked or
materially amended. The Seller and its Subsidiaries have not engaged in any activity that, to their knowledge, would cause revocation or suspension of any such Governmental Authorizations. The Seller
has no knowledge of any facts which could reasonably be expected to cause the Seller to believe that the Governmental Authorizations will not be renewed by the appropriate governmental authorities in
the ordinary course. Neither the execution, delivery nor performance of this Agreement shall adversely affect the status of any of the Governmental Authorizations. 

         3.27 Brokers. No broker, finder or investment banker is entitled to any brokerage, finder's
or other
fee or commission in connection with the transactions contemplated by this Agreement, based upon any arrangement made by or on behalf of the Seller, which would make any Purchaser liable for any fees
or commissions. 

10

 

         3.28 Securities Laws. Neither the Seller nor its Subsidiaries, nor any agent acting on
behalf of the
Seller or its Subsidiaries, has taken or will take any action which might cause this Agreement or the Preferred Stock or Warrants to violate the Securities Act or the Exchange Act or any rules or
regulations promulgated thereunder, as in effect on the Closing Date. Assuming that all of the representations and warranties of the Purchasers set forth in Article IV are true, all offers and
sales of the Preferred Stock and Warrants were conducted and completed in compliance with the Securities Act. All shares of capital stock and other securities issued by the Seller and its Subsidiaries
prior to the date hereof have been issued in transactions that were either registered offerings or were exempt from the registration requirements under the Securities Act and all applicable state
securities or "blue sky" laws and in compliance with all applicable corporate laws. 

         3.29 Disclosure. No representation or warranty made by the Seller in this Agreement or the
Related
Documents or in any Schedule or Exhibit hereto or thereto, contains or will contain any untrue statement of a material fact, or omits to state a material fact necessary to make the statements or facts
contained herein or therein not misleading in light of the circumstances under which they were furnished. 

         3.30 Poison Pill. Except as otherwise provided for in Section 203 of the Delaware General Corporation Law, the
Seller
and its Board of Directors have taken all necessary action, if any, in order to render inapplicable any control share acquisition, business combination, poison pill (including any distribution under a
rights agreement) or other similar anti-takeover provision under the Seller's Certificate of Incorporation (or similar charter documents) or the laws of its state of incorporation that is
or could become applicable to the Purchasers as a result of the Purchasers and the Seller fulfilling their obligations or exercising their rights under this Agreement and the Related Documents,
including without limitation the Company's issuance of the Securities and the Purchasers' ownership of the Securities. 

ARTICLE IV—REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS  

        Each Purchaser, for itself only, severally and not jointly, hereby represents and warrants to the Seller as follows:

         4.1   Existence and Power. The Purchaser, if not a natural person, is duly
organized, validly existing
and in good standing under the laws of the jurisdiction of such Purchaser's organization. Such Purchaser has all powers required to bind it to the representations, warranties and covenants set forth
herein. 

         4.2   Authorization. The execution, delivery and performance by the Purchaser of
this Agreement, the
Related Documents to which such Purchaser is a party, and the consummation by the Purchaser of the transactions contemplated hereby and thereby have been duly authorized, and no additional action is
required for the approval of this Agreement or such Related Documents. This Agreement and the Related Documents to which the Purchaser is a party have been or, to the extent contemplated hereby, will
be duly executed and delivered and constitute valid and binding agreements of the Purchaser, enforceable against such Purchaser in accordance with their terms, except as may be limited by bankruptcy,
reorganization, insolvency, moratorium and similar laws of general application relating to or affecting the enforcement of rights of creditors and except that enforceability of their obligations
thereunder are subject to general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). 

         4.3   Investment. The Purchaser is acquiring the securities described herein for
the Purchaser's own
account and not with a view to, or for sale in connection with, any distribution thereof, nor with the intention of distributing or reselling the same; provided,
however, that by making the representation in this Section 4.3, the Purchaser does not agree to hold any of the securities for any minimum or other specific term, and
reserves the right to dispose of the securities at any time in accordance with or 

11

 

pursuant
to a registration statement or an exemption under the Securities Act. The Purchaser is aware that none of the securities has been registered under the Securities Act or under applicable state
securities or blue sky laws. The Purchaser is an "Accredited Investor" as such term is defined in Rule 501 of Regulation D, as promulgated
under the Securities Act. 

         4.4   Reliance on Exemptions. The Purchaser understands that the Preferred Stock
and Warrants are being
offered and sold to such Purchaser in reliance upon specific exemptions from the registration requirements of United States federal and state securities laws and that the Seller is relying upon the
truth and accuracy of, and such Purchaser's compliance with, the representations, warranties, agreements, acknowledgments and understandings of such Purchaser set forth herein in order to determine
the availability of such exemptions and the eligibility of such Purchaser to acquire the securities. 

         4.5   Experience of the Purchaser. The Purchaser, either alone or together with
its representatives,
has such knowledge, sophistication and experience in business and financial matters so as to be capable of evaluating the merits and risks of the prospective investment in the Securities, and has so
evaluated the merits and risks of such investment. The Purchaser is able to bear the economic risk of an investment in the securities and, at the present time, is able to afford a complete loss of
such investment. 

         4.6   General Solicitation. The Purchaser is not purchasing the securities as a
result of any
advertisement, article, notice or other communication regarding the securities published in any newspaper, magazine or similar media or broadcast over television or radio or presented at any seminar
or any other general solicitation or general advertisement. 

ARTICLE V—COVENANTS OF THE SELLER AND PURCHASERS  

         5.1   Insurance. The Seller and its Subsidiaries shall maintain insurance policies
such that the
representations contained in the first sentence of Section 3.18 hereof continue to be true and correct and shall, from time to time upon the written request of the Purchasers, promptly furnish
or cause to be furnished to the Purchasers evidence, in form and substance reasonably satisfactory to the Purchasers, of the maintenance of all insurance maintained by it. 

        5.2   Reporting Obligations. So long as any of the Preferred Stock is outstanding,
and so long as any
Warrant has not been exercised and has not expired by its terms, the Seller shall furnish to the Purchasers, or any other persons who hold any of the Preferred Stock or Warrants (provided that such
subsequent holders give notice to the Seller that they hold Preferred Stock or Warrants and furnish their addresses) promptly upon their becoming available one copy of (A) each report, notice
or proxy statement sent by the Seller to its stockholders generally, and of each regular or periodic report (pursuant to the Exchange Act) and (B) any registration statement, prospectus or
written communication pursuant to the Securities Act relating to the issuance or registration of Conversion Shares and the Warrant Shares and filed by the Seller with the Commission or any securities
market or exchange on which shares of Common Stock are listed; provided, however, that the Company shall have no obligation to deliver periodic reports
(pursuant to the Exchange Act) under this Section 5.2 to the extent such reports are publicly available. 

        The
Purchasers are hereby authorized to deliver a copy of any financial statement or any other information relating to the business, operations or financial condition of the Seller which
may have been furnished to the Purchasers hereunder, to any regulatory body or agency having jurisdiction over the Purchasers or to any Person which shall, or shall have the right or obligation to
succeed to all or any part of the Purchasers' interest in the Seller or this Agreement. 

         5.3   Investigation. The representations, warranties, covenants and agreements set
forth in this
Agreement shall not be affected or diminished in any way by any investigation (or failure to 

12

 

investigate)
at any time by or on behalf of any party for whose benefit such representations, warranties, covenants and agreements were made. Without limiting the generality of the foregoing, the
inability or failure of the Purchasers to discover any breach, default or misrepresentation by the Seller under this Agreement or the Related Documents (including under any certificate furnished
pursuant to this Agreement), notwithstanding the exercise by the Purchasers or other holders of the Preferred Stock of their rights hereunder to conduct an investigation, shall not in any way diminish
any liability hereunder. 

         5.4   Further Assurances. The Seller shall, at its cost and expense, upon written
request of Purchasers
holding a majority of the Preferred Stock, duly execute and deliver, or cause to be duly executed and delivered, to the Purchasers such further instruments and do and cause to be done such further
acts as may be necessary, advisable or proper, in the absolute discretion of the Purchasers, to carry out more effectually the provisions and purposes of this Agreement. The parties shall use their
best efforts to timely satisfy each of the conditions described in Article VI of this Agreement. 

         5.5   Use of Proceeds. The Seller covenants and agrees that the proceeds of the
Purchase Price paid by
each Purchaser shall be used by the Seller for working capital and general corporate purposes; under no circumstances shall any portion of the proceeds be applied to: 

          (i)  accelerated
repayment of debt existing on the date hereof; 

         (ii)  the
payment of dividends or other distributions on any capital stock of the Seller, other than the Preferred Stock; 

        (iii)  increased
executive compensation or loans to officers, employees, stockholders or directors, unless approved by a majority of the disinterested members of the Board of
Directors; 

        (iv)  the
purchase of debt or equity securities of any Person, including the Seller and its Subsidiaries, except in connection with investment of excess cash in high quality
(A1/P1 or better) money market instruments having maturities of one year or less; or 

         (v)  any
investment not directly related to the business of the Seller. 

         5.6   Corporate Existence. So long as a Purchaser owns Preferred Stock, Warrants,
Conversion Shares or
Warrant Shares, the Seller shall preserve and maintain and cause its Subsidiaries to preserve and maintain their corporate existence and good standing in the jurisdiction of their incorporation and
the rights, privileges and franchises of the Seller and its Subsidiaries (except, in each case, in the event of a merger or consolidation in which the Seller or its Subsidiaries, as applicable, is not
the surviving entity) in each case where the failure to so preserve or maintain could have a Material Adverse Effect on the financial condition, business or operations of the Seller and its
Subsidiaries taken as a whole. 

         5.7   Licenses. The Seller shall, and shall cause its Subsidiaries to, maintain at
all times all
material licenses or permits necessary to the conduct of its business and as required by any governmental agency or instrumentality thereof. 

         5.8   Like Treatment of Purchasers and Holders. Neither the Seller nor any of its
affiliates shall,
directly or indirectly, pay or cause to be paid any consideration (immediate or contingent), whether by way of interest, fee, payment for redemption, conversion or exercise of the Securities, or
otherwise, to any Purchaser or holder of Securities, for or as an inducement to, or in connection with the solicitation of, any consent, waiver or amendment to any terms or provisions of this
Agreement or the Related Documents, unless such consideration is required to be paid to all Purchasers or holders of Securities bound by such consent, waiver or amendment. The Seller shall not,
directly or indirectly, redeem any Securities unless such offer of redemption is made pro rata to all Purchasers or holders of Securities, as the case may be, on identical terms. 

         5.9   Taxes and Claims. The Seller and its Subsidiaries shall duly pay and
discharge (a) all
taxes, assessments and governmental charges upon or against the Seller or its properties or assets prior to the 

13

 

date
on which penalties attach thereto, unless and to the extent that such taxes are being diligently contested in good faith and by appropriate proceedings, and appropriate reserves therefor have
been established, and (b) all lawful claims, whether for labor, materials, supplies, services or anything else which might or could, if unpaid, become a lien or charge upon the properties or
assets of the Seller or its Subsidiaries, unless and to the extent only that the same are being diligently contested in good faith and by appropriate proceedings and appropriate reserves therefor have
been established. 

         5.10 Perform Covenants. The Seller shall (a) make full and timely payment of any and
all
payments on the Preferred Stock, and all other obligations of the Seller to the Purchasers in connection therewith, whether now existing or hereafter arising, and (b) duly comply with all the
terms and covenants contained herein and in each of the instruments and documents delivered to the Purchasers in connection with or pursuant to this Agreement, all at the times and places and in the
manner set forth herein or therein. 

        5.11 Additional Covenants.  

         (a)   Except for transactions approved by a majority of the disinterested members of the Board of Directors, neither the Seller nor any
of its
Subsidiaries shall enter into any transaction with any (i) director, officer, employee or holder of more than 5% of the outstanding capital stock of any class or series of capital stock of the
Seller or any of its Subsidiaries, (ii) member of the family of any such person, or (iii) corporation, partnership, trust or other entity in which any such person, or member of the
family of any such person, is a director, officer, trustee, partner or holder of more than 5% of the outstanding capital stock thereof. 

        (b)   The
Seller shall timely prepare and file with the Securities and Exchange Commission the form of notice of the sale of securities pursuant to the requirements of
Regulation D regarding the sale of the Preferred Stock and Warrants under this Agreement. 

        (c)   The
Seller shall timely prepare and file such applications, consents to service of process (but not including a general consent to service of process) and similar
documents and take such other steps and perform such further acts as shall be required by the state securities law requirements of each jurisdiction where a Purchaser resides, as indicated on  Schedule 1, with respect to the sale of the Preferred Stock and Warrants under this Agreement.
 

        (d)   State Securities Law Compliance—Resale. Beginning no later than 60 days following the date of this
Agreement and continuing until either (i) the purchasers have sold all of their Registrable Securities (as defined in the Investor Rights Agreement) under a registration statement pursuant to
the Investor Rights Agreement or (ii) the Common Stock becomes a "covered security" under Section 18(b)(1)(A) of the Securities Act, the Seller shall maintain within either Moody's
Industrial Manual or Standard and Poor's Standard Corporation Descriptions (or any successors to these manuals which are similarly qualified as "recognized securities manuals" under state Blue Sky
laws) an updated listing containing (i) the names of the officers and directors of the Seller, (ii) a balance sheet of the Seller as of a date that is at no time older than eighteen
months and (iii) a profit and loss statement of the Seller for either the preceding fiscal year or the most recent year of operations. 

         5.12 Securities Laws Disclosure; Publicity. The Seller shall (i) on or promptly after
the
Closing Date, issue a press release acceptable to North Sound Capital, LLC disclosing the transactions contemplated hereby, and (ii) within four business days after the Closing Date, file with
the Commission a Report on Form 8-K disclosing the transactions contemplated hereby. Except as provided in the preceding sentence, neither the Company nor the Purchasers shall make
any press release or other public announcement of the terms of this Agreement or the transactions contemplated hereby without the prior approval of the other, unless otherwise required by applicable
law or the rules of the Commission or other applicable regulatory authority. 

14

 

ARTICLE VI—CONDITIONS TO CLOSING  

         6.1   Conditions to Obligations of Purchasers to Effect the Closing. The
obligations of a Purchaser to
effect the Closing and the transactions contemplated by this Agreement shall be subject to the satisfaction at or prior to the Closing, of each of the following conditions, any of which may be waived,
in writing, by a Purchaser: 

        (a)   The
Seller shall deliver or cause to be delivered to each of the Purchasers the following: 

        1.     (i)
One or more certificates evidencing the aggregate number of shares of the Preferred Stock, duly authorized, issued, fully paid and non-assessable, as is
indicated on Schedule 1 to be purchased at the Closing by such Purchaser, registered in the name of such Purchaser, in such denominations as is
indicated on Schedule 1 for such Purchaser; and 

         (ii)  One
or more certificates evidencing the Warrants, registered in the name of such Purchaser, in such denominations as is indicated on  Schedule 1 for such Purchaser, pursuant to which such Purchaser
shall be initially entitled to purchase that number of shares of Common Stock as
is indicated on Schedule 1. 

        2.     The
Investor Rights Agreement, in the form attached hereto as Exhibit C (the "Investor
Rights Agreement"), duly executed by the Seller. 

        3.     A
legal opinion from each of Weycer, Kaplan, Pulaski & Zuber, P.C. and [Kazakhstan
Counsel], counsels to the Seller, collectively in the form attached hereto as Exhibit D. 

        4.     A
certificate of the Secretary of the Seller (the "Secretary's Certificate"), in form and substance satisfactory to the
Purchasers, certifying as follows: 

          (i)  that
the Certificate of Designation authorizing the Preferred Stock has been duly filed in the office of the Secretary of State of the State of Delaware, and that
attached to the Secretary's Certificate are true and complete copy of the Certificate of Incorporation of the Seller, as amended, and the Certificate of Designation; 

         (ii)  that
a true copy of the Bylaws of the Seller, as amended to the Closing Date, is attached to the Secretary's Certificate; 

        (iii)  that
attached thereto are true and complete copies of the resolutions of the Board of Directors of the Seller authorizing the execution, delivery and performance of
this Agreement and the Related Documents, instruments and certificates required to be executed by it in connection herewith and approving the consummation of the transactions in the manner
contemplated hereby including, but not limited to, the authorization and issuance of the Preferred Stock and Warrants and that such resolutions are in full force and effect as of the Closing Date and
that no other resolutions exist regarding the subject matter thereof; 

        (iv)  the
names and true signatures of the officers of the Seller signing this Agreement and all other documents to be delivered in connection with this Agreement; 

         (v)  such
other matters as required by this Agreement; and 

        (vi)  such
other matters as the Purchasers may reasonably request. 

        5.     A
wire transfer representing the Purchasers' legal fees and other third-party expenses as described in Section 8.2 hereof; such fee may, at the election of the
Purchasers, be paid out of the funds due from the Purchasers at the Closing. 

        6.     Proof
of due filing with the Secretary of State of the State of Delaware of the Certificate of Designation authorizing the Preferred Stock. 

        7.     Such
other documents as the Purchasers shall reasonably request. 

15

 

        (b)   The
Seller shall have entered into a Closing Escrow Agreement with Wiggin and Dana LLP (the "Escrow Agent") in the form
attached hereto as Exhibit E (the "Closing Escrow Agreement") pursuant to which the Escrow Agent
shall hold certain funds and documents described therein. 

         6.2   Conditions to Obligations of the Seller to Effect the Closing. The
obligations of the Seller to
effect the Closing and the transactions contemplated by this Agreement shall be subject to the satisfaction at or prior to the Closing of each of the following conditions, any of which may be waived,
in writing, by the Seller: 

        (a)   Each
of the Purchasers shall deliver or cause to be delivered to the Seller (i) payment of the Purchase Price set forth opposite such Purchaser's name on  Schedule 1, in cash by wire transfer of
immediately available funds in accordance with the Escrow Agreement; (ii) an executed copy of this
Agreement; (iii) an executed copy of the Investor Rights Agreement; and (iv) such other documents as the Seller shall reasonably request. 

ARTICLE VII—INDEMNIFICATION, TERMINATION AND DAMAGES  

        7.1   Survival of Representations. Except as otherwise provided herein, the
representations and
warranties of the Seller and the Purchasers contained in or made pursuant to this Agreement shall survive the execution and delivery of this Agreement and the Closing Date and shall continue in full
force and effect for a period of three (3) years from the Closing Date; provided, however, that the Seller's warranties and representations under Sections 3.13 (Taxes), 3.19 (Subsidiaries and
Investments), 3.20 (Capitalization), and 3.21 (Options, Warrants, Rights), shall survive the Closing Date and continue in full force and effect until the expiration of all applicable statutes of
limitation; and further provided that the Seller's warranties and representations under Section 3.25 (Environmental Matters) shall survive the Closing Date and continue in full force and effect
for a period of six (6) years from the Closing Date. The Seller's and the Purchasers' warranties and representations shall in no way be affected or diminished in any way by any investigation of
(or failure to investigate) the subject matter thereof made by or on behalf of the Seller or the Purchasers. 

         7.2   Indemnification.

        (a)   The
Seller agrees to indemnify and hold harmless the Purchasers, their Affiliates, each of their officers, directors, partners, employees and agents and their respective
successors and assigns, from and against any losses, damages, or expenses which are caused by or arise out of (i) any breach or default in the performance by the Seller of any covenant or
agreement made by the Seller in this Agreement or in any of the Related Documents; (ii) any breach of warranty or representation made by the Seller in this Agreement or in any of the Related
Documents (iii) any and all third party actions, suits, proceedings, claims, demands, judgments, costs and expenses (including reasonable legal fees and expenses) incident to any of the
foregoing. 

        (b)   The
Purchasers, severally and not jointly, agree to indemnify and hold harmless the Seller, its Affiliates, each of their officers, directors, employees and agents and
their respective successors and assigns, from and against any losses, damages, or expenses which are caused by or arise out of (A) any breach or default in the performance by the Purchasers of
any covenant or agreement made by the Purchasers in this Agreement or in any of the Related Documents; (B) any breach of warranty or representation made by the Purchasers in this Agreement or
in any of the Related Documents; and (C) any and all third party actions, suits, proceedings, claims, demands, judgments, costs and expenses (including reasonable legal fees and expenses)
incident to any of the foregoing; provided, however, that a Purchaser's liability under this Section 7.2(b) shall not exceed the Purchase Price
paid by such Purchaser hereunder less any amounts paid to such Purchaser pursuant to any redemption of the Preferred Stock. 

         7.3   Indemnity Procedure. A party or parties hereto agreeing to be responsible
for or to indemnify
against any matter pursuant to this Agreement is referred to herein as the "Indemnifying Party" and the 

16

 

other
party or parties claiming indemnity is referred to as the "Indemnified Party". An Indemnified Party under this Agreement shall, with respect to
claims asserted against such party by any third party, give written notice to the Indemnifying Party of any liability which might give rise to a claim for indemnity under this Agreement within thirty
(30) business days of the receipt of any written claim from any such third party, but not later than twenty (20) days prior to the date any answer or responsive pleading is due, and with
respect to other matters for which the Indemnified Party may seek indemnification, give prompt written notice to the Indemnifying Party of any liability which might give rise to a claim for indemnity;  provided,
however, that any failure to give such notice will not waive any rights of the Indemnified Party except to the extent the rights of the
Indemnifying Party are materially prejudiced. 

        The
Indemnifying Party shall have the right, at its election, to take over the defense or settlement of such claim by giving written notice to the Indemnified Party at least fifteen
(15) days prior to the time when an answer or other responsive pleading or notice with respect thereto is required. If the Indemnifying Party makes such election, it may conduct the defense of
such claim through counsel of its choosing (subject to the Indemnified Party's approval of such counsel, which approval shall not be unreasonably withheld), shall be solely responsible for the
expenses of such defense and shall be bound by the results of its defense or settlement of the claim. The Indemnifying Party shall not settle any such claim without prior notice to and consultation
with the Indemnified Party, and no such settlement involving any equitable relief or which might have an adverse effect on the Indemnified Party may be agreed to without the written consent of the
Indemnified Party (which consent shall not be unreasonably withheld). So long as the Indemnifying Party is diligently contesting any such claim in good faith, the Indemnified Party may pay or settle
such claim only at its own expense and the Indemnifying Party will not be responsible for the fees of separate legal counsel to the Indemnified Party, unless the named parties to any proceeding
include both parties or representation of both parties by the same counsel would be inappropriate in the reasonable opinion of the Indemnified Party, due to conflicts of interest or otherwise. If the
Indemnifying Party does not make such election, or having made such election does not, in the reasonable opinion of the Indemnified Party proceed diligently to defend such claim, then the Indemnified
Party may (after written notice to the Indemnifying Party), at the expense of the Indemnifying Party, elect to take over the defense of and proceed to handle such claim in its discretion and the
Indemnifying Party shall be bound by any defense or settlement that the
Indemnified Party may make in good faith with respect to such claim. In connection therewith, the Indemnifying Party will fully cooperate with the Indemnified Party should the Indemnified Party elect
to take over the defense of any such claim. The parties agree to cooperate in defending such third party claims and the Indemnified Party shall provide such cooperation and such access to its books,
records and properties as the Indemnifying Party shall reasonably request with respect to any matter for which indemnification is sought hereunder; and the parties hereto agree to cooperate with each
other in order to ensure the proper and adequate defense thereof. 

        With
regard to claims of third parties for which indemnification is payable hereunder, such indemnification shall be paid by the Indemnifying Party upon the earlier to occur of:
(i) the entry of a judgment against the Indemnified Party and the expiration of any applicable appeal period, or if earlier, five (5) days prior to the date that the judgment creditor
has the right to execute the judgment; (ii) the entry of an unappealable judgment or final appellate decision against the Indemnified Party; or (iii) a settlement of the claim.
Notwithstanding the foregoing, the reasonable expenses of counsel to the Indemnified Party shall be reimbursed on a current basis by the Indemnifying Party. With regard to other claims for which
indemnification is payable hereunder, such indemnification shall be paid promptly by the Indemnifying Party upon demand by the Indemnified Party. 

17

 

ARTICLE VIII—MISCELLANEOUS  

         8.1   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 assurances as may be reasonably requested by any other party to better evidence and reflect the transactions
described herein and contemplated hereby and to carry into effect the intents and purposes of this Agreement, and further agrees to take promptly, or cause to be taken, all actions, and to do
promptly, or cause to be done, all things necessary, proper or advisable under applicable law to consummate and make effective the transactions contemplated hereby, to obtain all necessary waivers,
consents and approvals, to effect all necessary registrations and filings, and to remove any injunctions or other impediments or delays, legal or otherwise, in order to consummate and make effective
the transactions contemplated by this Agreement for the purpose of securing to the parties hereto the benefits contemplated by this Agreement. 

         8.2   Fees and Expenses. The Seller shall be responsible for the payment of the
Purchasers' actual and
reasonable legal fees and other third-party expenses relating to the preparation, negotiation and execution of this Agreement and the Related Documents and the consummation of the transactions
contemplated herein and therein. 

         8.3   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 earliest of (a) the date of transmission, if such notice or communication is delivered via facsimile at the
facsimile number specified in this Section prior to 5:00 p.m. (New York City time) on a business day, (b) 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 business day,
or (c) the business day following the date of mailing, if sent by U.S. nationally recognized overnight courier service such as Federal Express. The address for such notices and communications
shall be as follows: 

        If
to the Purchasers at each Purchaser's address set forth under its name on Schedule 1 attached hereto, or with respect to the
Seller, addressed to: 

Transmeridian
Exploration, Inc.

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
Seller 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 Purchaser shall be sent to the addresses, if any, listed on Schedule 1 attached
hereto. 

        Unless
otherwise stated above, such communications shall be effective when they are received by the addressee thereof in conformity with this section. Any party may change its address
for such communications by giving notice thereof to the other parties in conformity with this section. 

         8.4   Governing Law. All questions concerning the construction, validity,
enforcement and
interpretation of this Agreement shall be governed by and enforced in accordance with the laws of the State of New York without reference to the conflicts of laws principles thereof. 

        8.5   Jurisdiction and Venue. This Agreement shall be subject to the exclusive
jurisdiction of the
Federal District Court, Southern District of New York and if such court does not have proper jurisdiction, the State Courts of New York County, New York. The parties to this Agreement agree that 

18

 

any
breach of any term or condition of this Agreement shall be deemed to be a breach occurring in the State of New York by virtue of a failure to perform an act required to be performed in the State
of New York and irrevocably and expressly agree to submit to the jurisdiction of the Federal District Court, Southern District of New York and if such court does not have proper jurisdiction, the
State Courts of New York County, New York for the purpose of resolving any disputes among the parties relating to this Agreement or the transactions contemplated hereby. The parties irrevocably waive,
to the fullest extent permitted by law, any objection which they may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement, or any
judgment entered by any court in respect hereof brought in New York County, New York, and further irrevocably waive any claim that any suit, action or proceeding brought in Federal District Court,
Southern District of New York and if such court does not have proper jurisdiction, the State Courts of New York County, New York has been brought in an inconvenient forum. Each of the parties hereto
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 8.5 shall affect or limit any right to serve process in any other manner permitted by
law. 

         8.6   Successors and Assigns. This Agreement is personal to each of the parties
and may not be assigned
without the written consent of the other parties; provided, however, that any of the Purchasers shall be
permitted to assign this Agreement to any Person to whom it assigns or transfers securities issued or issuable pursuant to this Agreement in compliance with applicable securities laws. Any assignee
must be an "accredited investor" as defined in Rule 501(a) promulgated under the Securities Act. 

         8.7   Severability. If any provision of this Agreement, or the application thereof,
 shall for any
reason or to any extent be invalid or unenforceable, the remainder of this Agreement and application of such provision to other persons or circumstances shall continue in full force and effect and in
no way be affected, impaired or invalidated. 

        8.8   Entire Agreement. This Agreement, the Related Documents and the other
agreements and instruments
referenced herein constitute the entire understanding and agreement of the parties with respect to the subject matter hereof and supersede all prior agreements and understandings. 

         8.9   Other Remedies. Except as otherwise provided herein, any and all remedies
herein expressly
conferred upon a party shall be deemed cumulative with and not exclusive of any other remedy conferred hereby or by law, or in equity on such party, and the exercise of any one remedy shall not
preclude the exercise of any other. 

         8.10 Amendment and Waivers. Any term or provision of this Agreement may be amended, and the
observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively) only by a writing signed by the Seller and the holders
of at least a majority of the Preferred Stock then outstanding, and such waiver or amendment, as the case may be, shall be binding upon all Purchasers. The waiver by a party of any breach hereof or
default in the performance hereof shall not be deemed to constitute a waiver of any other default or any succeeding breach or default. This Agreement may not be amended or supplemented by any party
hereto except pursuant to a written amendment executed by the Seller and the holders of at least a majority of the Preferred Stock then outstanding. No amendment shall be effected to impact a holder
of Preferred Stock in a disproportionately adverse fashion without the consent of such individual holder of Preferred Stock. 

         8.11 No Waiver. The failure of any party to enforce any of the provisions hereof shall not
be
construed to be a waiver of the right of such party thereafter to enforce such provisions. 

19

 

         8.12 Counterparts; Interpretation. This Agreement may be executed in any number of
counterparts, each
of which shall be an original as against any party whose signature appears thereon and all of which together shall constitute one and the same instrument. This Agreement shall become binding when one
or more counterparts hereof, individually or taken together, shall bear the signatures of all of the parties reflected hereon as signatories. In the event that any signature is delivered by electronic
means, including electronic mail or facsimile transmission, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the
same force and effect as if such facsimile signature page were an original thereof. Headings used in this Agreement are for convenience only, and will not affect the interpretation of this Agreement.
Any form of the word "include" used in this Agreement shall be deemed to be followed by the phrase "without limitation." 

        8.13 No Third Party Beneficiary. Nothing expressed or implied in this Agreement is intended,
or shall
be construed, to confer upon or give any person other than the parties hereto and their respective heirs, personal representatives, legal representatives, successors and permitted assigns, any rights
or remedies under or by reason of this Agreement. 

         8.14 Waiver of Trial by Jury. THE PARTIES HERETO IRREVOCABLY WAIVE TRIAL BY JURY IN ANY SUIT,
 ACTION
OR PROCEEDING RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. 

        8.15 Independent Nature of Purchasers' Obligations and Rights. The obligations of each
Purchaser
under this Agreement or any Related Documents are several and not joint with the obligations of any other Purchaser, and no Purchaser shall be responsible in any way for the performance of the
obligations of any other Purchaser under any such agreement. Nothing contained herein or in any Related Documents, and no action taken by any Purchaser pursuant thereto, 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 by such agreement. Each Purchaser shall be entitled to independently protect and enforce its rights, including without limitation, the rights arising
out of this Agreement or out of the other Related Documents, 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 represents that it has been represented by its own separate legal counsel in its review and negotiation of this Agreement and the Related Documents. For reasons of administrative convenience
only, the Purchasers acknowledge and agree that they and their respective counsel have chosen to communicate with the Company through Wiggin and Dana LLP, but Wiggin and Dana LLP does not represent
any of the Purchasers in this transaction other than North Sound Capital, LLC. 

20

 

        IN
WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. 

SELLER:  

TRANSMERIDIAN EXPLORATION, INC.

By:
/s/ EARL W. MCNIEL

Name: Earl W. McNiel

Title: Vice President, Chief Financial Officer 

21

 

PURCHASERS:

CONCENTRATED ALPHA PARTNERS, L.P.

By: /s/ WILLIAM O. REIMANN

Name: William O. Reimann

Title: Vice President 

BBT FUND, L.P.

By: /s/ WILLIAM O. REIMANN

Name: William O. Reimann

Title: Vice President 

M AND M CAPITAL, LLC

By: /s/ JOHN D. CRANMER

Name: John D. Cranmer

Title: Manager 

NORTH SOUND LEGACY FUND LLC

By: /s/ THOMAS MCAULEY

Name: Thomas McAuley

Title: Manager 

NORTH SOUND LEGACY INSTITUTIONAL FUND LLC

By: /s/ THOMAS MCAULEY

Name: Thomas McAuley

Title: Manager 

NORTH SOUND LEGACY INTERNATIONAL LTD

By: /s/ THOMAS MCAULEY

Name: Thomas McAuley

Title: Manager 

RIDGEWOOD LIMITED

By: /s/ NEAL J. FIORE

Name: Neal J. Fiore

Title: General Partner 

SDS CAPITAL GROUP SPC, LTD

By: /s/ KEVIN JOHNSON

Name: Kevin Johnson

Title: Trading Director 

WILLEMSTAD MANAGEMENT & CONSULTING CORP

By: /s/ MICHAEL KRALAND

Name: Michael Kraland

Title: Investment Advisor 

[Omnibus
Transmeridian Exploration, Inc. Preferred Stock and Warrant Purchase Agreement Signature Page] 

22

 
Schedule 1

to
Preferred Stock and Warrant Purchase Agreement 

Purchasers
and Shares of Preferred Stock and Warrants 

	Name, Address and Fax Number of Purchaser and Registration Instructions
	 	Copies of Notices to
	 	Shares of Series A Preferred Stock Purchased
	 	Common Stock Underlying Warrants
	 	Purchase Price

	Concentrated Alpha Partners, L.P.

c/o CAP Genpar, L.P.

201 Main Street, Suite 3200

Fort Worth, TX 76102

Attn: Brad Donley	 	 	 	43.000	 	107,500	 	$	602,000
	
BBT Fund, L.P.

c/o BBT Genpar, L.P.

201 Main Street, Suite 3200

Fort Worth, TX 76102

Attn: Brad Donley	
 	

 	
 	

171.286	
 	

428,214	
 	
$	

2,398,000
	
M and M Capital, LLC

c/o John D. Cranmer, Manager

P.O. Box 562

Moorestown, NJ 08057	
 	

 	
 	

3.571	
 	

8,929	
 	
$	

50,000
	
North Sound Legacy Fund LLC

c/o North Sound Capital LLC

53 Forest Avenue, Suite 202

Old Greenwich, CT 06870

Attn: Andrew David	
 	

 	
 	

23.786	
 	

59,464	
 	
$	

333,000
	
North Sound Legacy Institutional Fund LLC

c/o North Sound Capital LLC

53 Forest Avenue, Suite 202

Old Greenwich, CT 06870

Attn: Andrew David	
 	

Wiggin and Dana LLP

400 Atlantic Street

Stamford, CT 06901

Attn: Michael Grundei	
 	

333.000	
 	

832,500	
 	
$	

4,662,000
	
North Sound Legacy International, Ltd.

c/o North Sound Capital LLC

53 Forest Avenue, Suite 202

Old Greenwich, CT 06870

Attn: Andrew David	
 	

Wiggin and Dana LLP

400 Atlantic Street

Stamford, CT 06901

Attn: Michael Grundei	
 	

832.500	
 	

2,081,250	
 	
$	

11,655,000
	
Ridgewood Limited

c/o Neil Fiore, General Partner

763 Upper Boulevard

Ridgewood, NJ 07450	
 	

Wiggin and Dana LLP

400 Atlantic Street

Stamford, CT 06901

Attn: Michael Grundei	
 	

17.857	
 	

44,643	
 	
$	

250,000
	
SDS Capital Group SPC, Ltd.

SDS Capital Group SPC, Ltd.

c/o SDS Management, LLC

53 Forest Avenue, 2nd Floor

Old Greenwich, CT 06870	
 	

 	
 	

357.143	
 	

892,857	
 	
$	

5,000,000
	
Willemstad Management & Consulting Corp.

c/o Michael Kraland, Investment Advisor

POB 837, Willemstad

Curaçao, Netherlands Antilles	
 	

 	
 	

3.571	
 	

8,929	
 	
$	

50,000
	

Totals:	
 	

 	
 	

1,785.714	
 	

4,464,286	
 	
$	

25,000,000

23

QuickLinks

EXHIBIT 10.1

ARTICLE I—PURCHASE AND SALE

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