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Exhibit 4.1
INVESTOR RIGHTS AGREEMENT
This Investor Rights Agreement (this "Agreement") is made and
entered into as of March 15, 2007 among Transmeridian
Exploration Incorporated, a Delaware corporation (the "Company"),
and each of the purchasers executing this Agreement and listed on
Schedule 1 attached hereto (collectively, the
"Purchasers").
This Agreement is being entered into pursuant to the Warrant
Purchase Agreement, dated as of the date hereof, by and among the
Company and the Purchasers (the "Purchase Agreement").
The Company and the Purchasers hereby agree as follows:
1. Definitions .
Capitalized terms used and not otherwise defined herein shall
have the meanings given such terms in the Purchase Agreement. As
used in this Agreement, the following terms shall have the
following meanings:
" Advice " shall have the meaning set forth in
Section 3(m).
" Affiliate " means, with respect to any Person, any
other Person that directly or indirectly controls or is controlled
by or under common control with such Person. For the purposes of
this definition, "control," when used with respect to any Person,
means the possession, direct or indirect, of the power to direct or
cause the direction of the management and policies of such Person,
whether through the ownership of voting securities, by contract or
otherwise; and the terms "affiliated," "controlling" and
"controlled" have meanings correlative to the foregoing.
" Blackout Period " shall have the meaning set forth in
Section 3(n).
" Board " shall have the meaning set forth in
Section 3(n).
" Business Day " means any day except Saturday, Sunday
and any day which shall be a legal holiday or a day on which
banking institutions in the State of Texas generally are authorized
or required by law or other government actions to close.
" Closing Date " means the Closing Date as defined in the
Purchase Agreement.
" Commission " means the Securities and Exchange
Commission.
" Common Stock " means the Company’s Common Stock,
par value $0.0006 per share.
" Effectiveness Period " shall have the meaning set forth
in Section 2.
" Event " shall have the meaning set forth in
Section 7(e).
" Exchange Act " means the Securities Exchange Act of
1934, as amended.
" Filing Date " means the date that is 30
days following the Closing Date.
" Holder " or " Holders " means the holder or
holders, as the case may be, from time to time of Registrable
Securities, including without limitation the Purchasers and their
assignees.
" Indemnified Party " shall have the meaning set forth in
Section 5(c).
" Indemnifying Party " shall have the meaning set forth
in Section 5(c).
" Losses " shall have the meaning set forth in
Section 5(a).
" Person " means an individual or a corporation,
partnership, trust, incorporated or unincorporated association,
joint venture, limited liability company, joint stock company,
government (or an agency or political subdivision thereof) or other
entity of any kind.
" Proceeding " means an action, claim, suit,
investigation or proceeding (including, without limitation, an
investigation or partial proceeding, such as a deposition), whether
commenced or threatened.
" Prospectus " means the prospectus included in any
Registration Statement (including, without limitation, a prospectus
that includes any information previously omitted from a prospectus
filed as part of an effective registration statement in reliance
upon Rule 430A promulgated under the Securities Act), as amended or
supplemented by any prospectus supplement, with respect to the
terms of the offering of any portion of the Registrable Securities
covered by such Registration Statement, and all other amendments
and supplements to the Prospectus, including post-effective
amendments, and all material incorporated by reference in such
Prospectus.
" Registrable Securities " means (a) the Warrant
Shares (without regard to any limitations on beneficial ownership
contained therein) or other securities issued or issuable to each
Purchaser or its transferee or designee (i) upon exercise of
the Warrants, or (ii) upon any dividend or distribution with
respect to, any exchange for or any replacement of such Warrants or
(iii) upon any conversion, exercise or exchange of any
securities issued in connection with any such distribution,
exchange or replacement; (b) securities issued or issuable
upon any stock split, stock dividend, recapitalization or similar
event with respect to the foregoing; and (c) any other
security issued as a dividend or other distribution with respect
to, in exchange for, in replacement or redemption of, or in
reduction of the liquidation value of, any of the securities
referred to in the preceding clauses; provided, however, that such
securities shall cease to be Registrable Securities when such
securities have been sold to or through a broker or dealer or
underwriter in a public distribution or a public securities
transaction or when such securities may be sold without any
restriction pursuant to Rule 144(k) as determined by the counsel to
the Company pursuant to a written opinion letter, addressed to the
Company’s transfer agent to such effect as described in
Section 2 of this Agreement. In any case where the consent or
approval of a majority of outstanding Registrable Securities is
required pursuant to this Agreement, Registrable Securities
issuable upon exercise of the Warrants (or any replacement
therefor) shall be treated as "outstanding" for such purposes.
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" Registration Statement " means the
registration statements and any additional registration statements
contemplated by Section 2, Section 3 and
Section 7(d), including (in each case) the Prospectus,
amendments and supplements to such registration statement or
Prospectus, including pre- and post-effective amendments, all
exhibits thereto, and all material incorporated by reference in
such registration statement.
" Rule 144 " means Rule 144 promulgated by the Commission
pursuant to the Securities Act, as such Rule may be amended from
time to time, or any similar rule or regulation hereafter adopted
by the Commission having substantially the same effect as such
Rule.
" Rule 158 " means Rule 158 promulgated by the Commission
pursuant to the Securities Act, as such Rule may be amended from
time to time, or any similar rule or regulation hereafter adopted
by the Commission having substantially the same effect as such
Rule.
" Rule 415 " means Rule 415 promulgated by the Commission
pursuant to the Securities Act, as such Rule may be amended from
time to time, or any similar rule or regulation hereafter adopted
by the Commission having substantially the same effect as such
Rule.
" Securities Act " means the Securities Act of 1933, as
amended.
" Special Counsel " means Wiggin and Dana LLP.
" Warrants " means the Common Stock purchase warrants
issued pursuant to the Purchase Agreement.
" Warrant Shares " means the shares of Common Stock
issued or issuable upon the exercise of the Warrants.
2. Registration . As soon as practicable following the
Closing Date (but not later than the Filing Date), the Company
shall prepare and file with the Commission a "shelf" Registration
Statement covering all Registrable Securities for a secondary or
resale offering to be made on a continuous basis pursuant to Rule
415. The Registration Statement shall be on Form S-3 (or if such
form is not available to the Company on another form appropriate
for such registration in accordance herewith). The Company shall
use its reasonable best efforts to cause the Registration Statement
to be declared effective under the Securities Act not later than
sixty (60) days after the Filing Date (including filing with
the Commission a request for acceleration of effectiveness in
accordance with Rule 461 promulgated under the Securities Act
within five (5) Business Days of the date that the Company is
notified (orally or in writing, whichever is earlier) by the
Commission that a Registration Statement will not be "reviewed," or
not be subject to further review) and to keep such Registration
Statement continuously effective under the Securities Act until
such date as is the earlier of (x) the date when all
Registrable Securities covered by such Registration Statement have
been sold or (y) with respect to any Holder, such time as all
Registrable Securities held by such Holder may be sold without any
restriction pursuant to Rule 144(k) as determined by the counsel to
the Company pursuant to a written opinion letter, addressed to the
Company’s transfer agent to
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such effect (the " Effectiveness Period
"). For purposes of the obligations of the Company under this
Agreement, no Registration Statement shall be considered
"effective" with respect to any Registrable Securities unless such
Registration Statement lists the Holders of such Registrable
Securities as "Selling Stockholders" and includes such other
information as is required to be disclosed with respect to such
Holders to permit them to sell their Registrable Securities
pursuant to such Registration Statement, unless any such Holder is
not included as a "Selling Stockholder" pursuant to
Section 3(m). Such Registration Statement also shall cover, to
the extent allowable under the Securities Act and the Rules
promulgated thereunder (including Securities Act Rule 416), such
indeterminate number of additional shares of Common Stock resulting
from stock splits, stock dividends or similar transactions with
respect to the Registrable Securities.
3. Registration Procedures .
In connection with the Company’s registration obligations
hereunder, the Company shall:
(a) Prepare and file with the Commission on or prior to the
Filing Date, a Registration Statement on Form S-3 (or if such form
is not available to the Company on another form appropriate for
such registration in accordance herewith) (which shall include a
Plan of Distribution substantially in the form of Exhibit A
attached hereto), and cause the Registration Statement to become
effective and remain effective as provided herein; provided,
however, that not less than three (3) Business Days prior to
the filing of the Registration Statement or any related Prospectus
or any amendment or supplement thereto, the Company shall
(i) furnish to the Special Counsel, copies of all such
documents proposed to be filed, which documents (other than those
incorporated by reference) will be subject to the review of such
Special Counsel, and (ii) at the request of any Holder cause
its officers and directors, counsel or independent certified public
accountants, as applicable, to respond to such inquiries as shall
be necessary, in the reasonable opinion of counsel to such Holders,
to conduct a reasonable investigation within the meaning of the
Securities Act. The Company shall not file the Registration
Statement or any such Prospectus or any amendments or supplements
thereto to which the Holders of a majority of the Registrable
Securities or the Special Counsel shall reasonably object within
three (3) Business Days after the Special Counsel’s
receipt thereof.
(b) (i) Prepare and file with the Commission such amendments,
including post-effective amendments, to the Registration Statement
as may be necessary to keep the Registration Statement continuously
effective as to the applicable Registrable Securities for the
Effectiveness Period and to the extent any Registrable Securities
are not included in such Registration Statement for reasons other
than the failure of the Holder to comply with Section 3(m)
hereof, shall prepare and file with the Commission such additional
Registration Statements as may be appropriate in order to register
for resale under the Securities Act all Registrable Securities;
(ii) cause the related Prospectus to be amended or
supplemented by any required Prospectus supplement, and as so
supplemented or amended to be filed pursuant to Rule 424 (or any
similar provisions then in force) promulgated under the Securities
Act; (iii) respond as promptly as possible, and in no event
later than ten (10) Business Days, to any comments received
from the Commission with respect to the
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Registration Statement or any amendment thereto
and as promptly as possible provide the Holders true and complete
copies of all correspondence from and to the Commission relating to
the Registration Statement, but not, without the prior written
consent of the Holders, any comments that would result in the
disclosure to the Holders of material and non-public information
concerning the Company; and (iv) comply in all material
respects with the provisions of the Securities Act and the Exchange
Act with respect to the disposition of all Registrable Securities
covered by the Registration Statement during the Effectiveness
Period in accordance with the intended methods of disposition by
the Holders thereof set forth in the Registration Statement as so
amended or in such Prospectus as so supplemented.
(c) Notify the Holders of Registrable Securities to be sold and
the Special Counsel as promptly as possible (A) when a
Prospectus or any Prospectus supplement or post-effective amendment
to the Registration Statement is proposed to be filed (but in no
event in the case of this subparagraph (A), less than three
(3) Business Days prior to date of such filing); (B) when
the Commission notifies the Company whether there will be a
"review" of such Registration Statement and whenever the Commission
comments in writing on such Registration Statement; and
(C) with respect to the Registration Statement or any
post-effective amendment, when the same has become effective, and
after the effectiveness thereof: (i) of any request by the
Commission or any other Federal or state governmental authority for
amendments or supplements to the Registration Statement or
Prospectus or for additional information; (ii) of the issuance
by the Commission of any stop order suspending the effectiveness of
the Registration Statement covering any or all of the Registrable
Securities or the initiation of any Proceedings for that purpose;
(iii) if at any time any of the representations and warranties
of the Company contained in any agreement contemplated hereby
ceases to be true and correct in all material respects;
(iv) of the receipt by the Company of any notification with
respect to the suspension of the qualification or exemption from
qualification of any of the Registrable Securities for sale in any
jurisdiction, or the initiation or threatening of any Proceeding
for such purpose; and (v) if the financial statements included
in the Registration Statement become ineligible for inclusion
therein or of the occurrence of any event that makes any statement
made in the Registration Statement or Prospectus or any document
incorporated or deemed to be incorporated therein by reference
untrue in any material respect or that requires any revisions to
the Registration Statement, Prospectus or other documents so that,
in the case of the Registration Statement or the Prospectus, as the
case may be, it will not contain any untrue statement of a material
fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading.
Without limitation to any remedies to which the Holders may be
entitled under this Agreement, if any of the events described in
Section 3(c)(C)(i), 3(c)(C)(ii), 3(c)(C)(iii) 3(c)(C)(iv) or
3(c)(C)(v) occur, the Company shall use its reasonable best efforts
to respond to and correct the event.
(d) Use its reasonable best efforts to avoid the issuance of,
or, if issued, use reasonable best efforts to obtain the withdrawal
of, (i) any order suspending the effectiveness of the
Registration Statement or (ii) any suspension of the
qualification (or exemption from qualification) of any of the
Registrable Securities for sale in any jurisdiction, at the
earliest practicable moment.
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(e) If reasonably requested by the Holders of a
majority in interest of the Registrable Securities,
(i) promptly incorporate or include in a Prospectus
supplement, post-effective amendment to the Registration Statement
or other appropriate filing under the Exchange Act such information
as the Company reasonably agrees should be included therein and
(ii) make all required filings of such Prospectus supplements,
such post-effective amendments or Exchange Act filings as soon as
practicable after the Company has received notification of the
matters to be incorporated in such Prospectus supplement,
post-effective amendment or Exchange Act filing; provided, however,
that the Company shall not be required to take any action pursuant
to this Section 3(e) that would, in the written opinion of
counsel for the Company (addressed to the Special Counsel), violate
applicable law.
(f) Furnish to each Holder and the Special Counsel, without
charge, at least one conformed copy of each Registration Statement
and each amendment thereto, including financial statements and
schedules, and all exhibits to the extent requested by such Person
(including those previously furnished or incorporated by reference)
promptly after the filing of such documents with the
Commission.
(g) Promptly deliver to each Holder and the Special Counsel,
without charge, as many copies of the Prospectus or Prospectuses
(including each form of prospectus) and each amendment or
supplement thereto as such Persons may reasonably request; and the
Company hereby consents to the use of such Prospectus and each
amendment or supplement thereto by each of the selling Holders in
connection with the offering and sale of the Registrable Securities
covered by such Prospectus and any amendment or supplement
thereto.
(h) Prior to any public offering of Registrable Securities, use
its reasonable commercial efforts to register or qualify or
cooperate with the selling Holders and the Special Counsel in
connection with the registration or qualification (or exemption
from such registration or qualification) of such Registrable
Securities for offer and sale under the securities or Blue Sky laws
of such jurisdictions within the United States as any Holder
requests in writing, to keep each such registration or
qualification (or exemption therefrom) effective during the
Effectiveness Period and to do any and all other acts or things
necessary or advisable to enable the disposition in such
jurisdictions of the Registrable Securities covered by a
Registration Statement; provided, however, that the Company shall
not be required to qualify generally to do business in any
jurisdiction where it is not then so qualified or to take any
action that would subject it to general service of process in any
jurisdiction where it is not then so subject or subject the Company
to any material tax in any such jurisdiction where it is not then
so subject.
(i) Cooperate with the Holders to facilitate the timely
preparation and delivery of certificates representing Registrable
Securities to be sold pursuant to a Registration Statement, which
certificates shall be free, to the extent permitted by applicable
law and the Purchase Agreement, of all restrictive legends, and to
enable such Registrable Securities to be in such denominations and
registered in such names as any Holder may request at least two
(2) Business Days prior to any sale of Registrable Securities;
provided, however, that the Holder or its transferee may elect or
consent to the receipt of such Registrable Securities in
uncertificated form in accordance with the policies and procedures
of the transfer agent
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and registrar for the Registrable Securities. In
connection therewith, the Company shall promptly after the
effectiveness of the Registration Statement cause such opinion of
counsel as may be required by the transfer agent to be delivered to
and maintained with its transfer agent, together with any other
authorizations, certificates and directions required by the
transfer agent, which authorize and direct the transfer agent to
issue such Registrable Securities without legend upon sale by the
Holder of such shares of Registrable Securities under the
Registration Statement.
(j) Upon the occurrence of any event contemplated by
Section 3(c)(C)(v), as promptly as possible, prepare a
supplement or amendment, including a post-effective amendment, to
the Registration Statement or a supplement to the related
Prospectus or any Exchange Act filing or other document
incorporated or deemed to be incorporated therein by reference, and
file any other required document so that, as thereafter delivered,
neither the Registration Statement nor such Prospectus will contain
an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which
they were made, not misleading.
(k) Cause all Registrable Securities relating to such
Registration Statement to be listed on any United States securities
exchange, quotation system, market or over-the-counter bulletin
board, if any, on which similar securities issued by the Company
are then listed.
(l) Comply in all material respects with all applicable rules
and regulations of the Commission and make generally available to
its security holders earning statements satisfying the provisions
of Section 11(a) of the Securities Act and Rule 158 not later
than 45 days after the end of any 3-month period (or 90 days after
the end of any 12-month period if such period is a fiscal year)
commencing on the first day of the first fiscal quarter of the
Company after the effective date of the Registration Statement,
which statement shall conform to the requirements of Rule 158.
(m) Request each selling Holder to furnish to the Company
information regarding such Holder and the distribution of such
Registrable Securities as is required by law or the Commission to
be disclosed in the Registration Statement, and the Company may
exclude from such registration the Registrable Securities of any
such Holder who fails to furnish such information within a
reasonable time prior to the filing of each Registration Statement,
supplemented Prospectus and/or amended Registration Statement.
If the Registration Statement refers to any Holder by name or
otherwise as the holder of any securities of the Company, then such
Holder shall have the right to require (if such reference to such
Holder by name or otherwise is not required by the Securities Act
or any similar federal statute then in force) the deletion of the
reference to such Holder in any amendment or supplement to the
Registration Statement filed or prepared subsequent to the time
that such reference ceases to be required.
Each Holder agrees by its acquisition of such Registrable
Securities that, upon receipt of a notice from the Company of the
occurrence of any event of the kind described in
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Section 3(c)(C)(i), 3(c)(C)(ii),
3(c)(C)(iii), 3(c)(C)(iv), 3(c)(C)(v) or 3(n), such Holder will
forthwith discontinue disposition of such Registrable Securities
under the Registration Statement until such Holder’s receipt
of the copies of the supplemented Prospectus, amended Registration
Statement and/or Exchange Act filing or other document contemplated
by Section 3(j), or until it is advised in writing (the
"Advice") by the Company that the use of the applicable Prospectus
may be resumed, and, in either case, has received copies of any
additional or supplemental filings that are incorporated or deemed
to be incorporated by reference in such Prospectus or Registration
Statement.
(n) If (i) there is material non-public information
regarding the Company which the Company’s Board of Directors
(the "Board") reasonably determines not to be in the
Company’s best interest to disclose and which the Company is
not otherwise required to disclose, or (ii) there is a
significant business opportunity (including, but not limited to,
the acquisition or disposition of assets (other than in the
ordinary course of business) or any merger, consolidation, tender
offer or other similar transaction) available to the Company which
the Board reasonably determines not to be in the Company’s
best interest to disclose and which the Company would be required
to disclose under the Registration Statement, then the Company may
postpone or suspend filing or effectiveness of a registration
statement for a period not to exceed 30 consecutive days, provided
that the Company may not postpone or suspend its obligation under
this Section 3(n) for more than 45 days in the aggregate
during any 12 month period (each, a "Blackout Period"). The payment
requirements set forth in Sections 7(e) and (f) shall be
tolled during and shall not be applicable with respect to any
Blackout Period.
4. Registration Expenses .
All fees and expenses incident to the performance of or
compliance with this Agreement by the Company shall be borne by the
Company whether or not the Registration Statement is filed or
becomes effective and whether or not any Registrable Securities are
sold pursuant to the Registration Statement. The fees and expenses
referred to in the foregoing sentence shall include, without
limitation, (i) all registration and filing fees (including,
without limitation, fees and expenses (A) with respect to
filings required to be made with each securities exchange,
quotation system, market or over-the-counter bulletin board on
which Registrable Securities are required hereunder to be listed,
(B) with respect to filings required to be made with the
Commission, and (C) in compliance with state or provincial
securities or Blue Sky laws (including, without limitation, fees
and disbursements of Special Counsel in connection with Blue Sky
qualifications of the Registrable Securities and determination of
the eligibility of the Registrable Securities for investment under
the laws of such jurisdictions as the Holders of a majority of
Registrable Securities may designate)), (ii) printing expenses
(including, without limitation, expenses of printing certificates
for Registrable Securities and of printing or photocopying
prospectuses), (iii) messenger, telephone and delivery
expenses, (iv) Securities Act liability insurance, if the
Company desires such insurance, (v) fees and expenses of all
other Persons retained by the Company in connection with the
consummation of the transactions contemplated by this Agreement,
including, without limitation, the Company’s independent
public accountants (including, in the case of an underwritten
offering, the expenses of any comfort letters or costs associated
with the delivery by independent public accountants of a comfort
letter or
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comfort letters) and legal counsel, and
(vi) the reasonable fees and expenses of the Special Counsel
in connection with any Registration Statement hereunder. In
addition, the Company shall be responsible for all of its internal
expenses incurred in connection with the consummation of the
transactions contemplated by this Agreement (including, without
limitation, all salaries and expenses of its officers and employees
performing legal or accounting duties), the expense of any annual
audit and the fees and expenses incurred in connection with the
listing of the Registrable Securities on any securities exchange as
required hereunder. Notwithstanding the foregoing, the Holders
shall pay all underwriting discounts or commissions, selling
commissions and stock transfer taxes attributable to any sale of
Registrable Securities.
5. Indemnification .
(a) Indemnification by the Company . The Company shall,
notwithstanding any termination of this Agreement, indemnify and
hold harmless each Holder, the officers, directors, partners,
agents, brokers (including brokers who offer and sell Registrable
Securities as principal as a result of a pledge or any failure to
perform under a margin call of Common Stock), investment advisors
and employees of each of them, each Person who controls any such
Holder (within the meaning of Section 15 of the Securities Act
or Section 20 of the Exchange Act) and the officers,
directors, agents and employees of each such controlling Person, to
the fullest extent permitted by applicable law, from and against
any and all losses, claims, damages, liabilities, costs (including,
without limitation, costs of preparation and reasonable
attorneys’ fees) and expenses (collectively, "Losses"), as
incurred, arising out of or relating to any untrue or alleged
untrue statement of a material fact contained or incorporated by
reference in the Registration Statement, any Prospectus or any form
of prospectus or in any amendment or supplement thereto or in any
preliminary prospectus, or arising out of or relating to any
omission or alleged omission of a material fact required to be
stated therein or necessary to make the statements therein (in the
case of any Prospectus or form of prospectus or amendment or
supplement thereto, in the light of the circumstances under which
they were made) not misleading, except to the extent, but only to
the extent, that (i) such untrue statements or omissions are
based solely upon information regarding such Holder furnished in
writing to the Company by such Holder expressly for use therein,
which information was reasonably relied on by the Company for use
therein or to the extent that such information relates to
(x) such Holder and was reviewed and expressly approved in
writing by such Holder expressly for use in the Registration
Statement, such Prospectus or such form of prospectus or in any
amendment or supplement thereto or (y) such Holder’s
proposed method of distribution of Registrable Securities as set
forth in Exhibit A (or as such Holder otherwise informs the Company
in writing); or (ii) in the case of an occurrence of an event
of the type described in Section 3(c)(C)(ii), 3(c)(C)(iii),
3(c)(C)(iv), 3(c)(C)(v) or 3(n), the use by a Holder of an outdated
or defective Pro
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