INVESTMENT AGREEMENT between UNITED ENERGY GROUP LIMITED and TRANSMERIDIAN EXPLORATION INCORPORATED Dated as of June 11, 2008
between
UNITED
ENERGY GROUP LIMITED
and
TRANSMERIDIAN
EXPLORATION INCORPORATED
Dated as
of June 11, 2008
TABLE OF CONTENTS | ||
Page
|
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ARTICLE
I
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||
DEFINITIONS
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||
SECTION
1.01
|
Definitions
|
2
|
ARTICLE
II
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||
THE
TENDER OFFER
|
||
SECTION
2.01
|
The
Tender Offer
|
15
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SECTION
2.02
|
Company
Action
|
17
|
ARTICLE
III
|
||
THE
EXCHANGE OFFER AND NOTE CONSENT SOLICITATION
|
||
SECTION
3.01
|
The
Exchange Offer and Note Consent Solicitation
|
17
|
ARTICLE
IV
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||
ISSUANCE
OF NEW PREFERRED STOCK, COMMON STOCK AND WARRANTS
|
||
SECTION
4.01
|
Issuance
of New Preferred Stock
|
20
|
SECTION
4.02
|
Issuance
of Common Stock
|
20
|
SECTION
4.03
|
Issuance
of Warrants
|
21
|
SECTION
4.04
|
Closing
of the Swap
|
21
|
SECTION
4.05
|
Closing
Deliveries by the Company
|
21
|
SECTION
4.06
|
Closing
Deliveries by Purchaser
|
23
|
SECTION
4.07
|
Escrow
|
23
|
ARTICLE
V
|
||
REPRESENTATIONS
AND WARRANTIES OF THE COMPANY
|
||
SECTION
5.01
|
Organization
and Qualification; Subsidiaries
|
24
|
SECTION
5.02
|
Certificate
of Incorporation and By-laws
|
24
|
SECTION
5.03
|
Capitalization
|
24
|
SECTION
5.04
|
Authority
Relative to the Transaction Agreements
|
25
|
SECTION
5.05
|
No
Conflict; Required Filings and Consents
|
26
|
SECTION
5.06
|
Permits;
Compliance
|
27
|
SECTION
5.07
|
SEC
Filings; Financial Statements
|
27
|
SECTION
5.08
|
Absence
of Certain Changes or Events
|
30
|
SECTION
5.09
|
Absence
of Litigation
|
30
|
SECTION
5.10
|
Employee
Benefit Plans
|
30
|
SECTION
5.11
|
Labor
and Employment Matters
|
33
|
SECTION
5.12
|
Offer
Documents; Proxy Statement and Registration Statement
|
34
|
SECTION
5.13
|
Real
Property; Title to Assets
|
35
|
SECTION
5.14
|
Intellectual
Property
|
36
|
i
SECTION
5.15
|
Taxes
|
37
|
SECTION
5.16
|
Environmental
Matters
|
37
|
SECTION
5.17
|
Material
Contracts
|
38
|
SECTION
5.18
|
Insurance
|
40
|
SECTION
5.19
|
Certain
Business Practices
|
41
|
SECTION
5.20
|
Interested
Party Transactions
|
41
|
SECTION
5.21
|
Reserve
Reports
|
42
|
SECTION
5.22
|
Hedging.
|
42
|
SECTION
5.23
|
Assets
|
42
|
SECTION
5.24
|
Oil
and Gas Operations
|
43
|
SECTION
5.25
|
S-3
Registration Statements
|
44
|
SECTION
5.26
|
Additional
Returns
|
44
|
SECTION
5.27
|
Company
Action
|
44
|
SECTION
5.28
|
Brokers
|
44
|
ARTICLE
VI
|
||
REPRESENTATIONS
AND WARRANTIES OF PURCHASER
|
||
SECTION
6.01
|
Corporate
Organization
|
45
|
SECTION
6.02
|
Authority
Relative to the Transaction Agreements
|
45
|
SECTION
6.03
|
No
Conflict; Required Filings and Consents
|
45
|
SECTION
6.04
|
Financing
|
46
|
SECTION
6.05
|
Offer
Documents; Proxy Statement
|
46
|
SECTION
6.06
|
Brokers
|
46
|
SECTION
6.07
|
Investment
Status
|
46
|
ARTICLE
VII
|
||
ADDITIONAL
AGREEMENTS
|
||
SECTION
7.01
|
Conduct
of Business
|
47
|
SECTION
7.02
|
Common
Stockholders Meeting and Written Consent of Preferred
Stockholders
|
49
|
SECTION
7.03
|
Filing
of Proxy Statement; Registration Statement
|
50
|
SECTION
7.04
|
Access
to Information; Confidentiality
|
50
|
SECTION
7.05
|
No
Solicitation of Transactions
|
51
|
SECTION
7.06
|
Notification
of Certain Matters
|
52
|
SECTION
7.07
|
Regulatory
and Other Authorizations; Notices and Consents
|
53
|
SECTION
7.08
|
Subsequent
Financial Statements
|
53
|
SECTION
7.09
|
Public
Announcements
|
54
|
SECTION
7.10
|
General
Release from Initial Investors of Junior Preferred Stock
|
54
|
SECTION
7.11
|
Existing
Warrants
|
54
|
SECTION
7.12
|
Use
of Proceeds
|
54
|
SECTION
7.13
|
AMEX
Listing
|
54
|
SECTION
7.14
|
Cancellation
of Preferred Shares
|
55
|
SECTION
7.15
|
Registration
Statement
|
55
|
SECTION
7.16
|
Redemption
of Remaining Preferred Stock
|
55
|
SECTION
7.17
|
Withholding
Rights
|
55
|
SECTION
7.18
|
Alternative
Transaction Structures
|
56
|
SECTION
7.19
|
Employment
Agreements
|
56
|
SECTION
7.20
|
Pre-Closing
Funding
|
56
|
SECTION
7.21
|
Issuance
of Additional Series B-1 Preferred Stock
|
57
|
ARTICLE
VIII
|
||
CONDITIONS
TO THE SWAP CLOSING
|
||
SECTION
8.01
|
Conditions
to Obligations of the Company
|
57
|
SECTION
8.02
|
Conditions
to Obligations of Purchaser
|
57
|
ARTICLE
IX
|
||
INDEMNIFICATION
|
||
SECTION
9.01
|
Survival
of Representations and Warranties
|
58
|
SECTION
9.02
|
Indemnification
by the Company
|
59
|
SECTION
9.03
|
Indemnification
by Purchaser
|
59
|
SECTION
9.04
|
Limits
on Indemnification
|
60
|
SECTION
9.05
|
Notice
of Loss; Third Party Claims
|
60
|
SECTION
9.06
|
Payment
in Common Stock
|
61
|
ARTICLE
X
|
||
TERMINATION,
AMENDMENT AND WAIVER
|
||
SECTION
10.01
|
Termination
|
61
|
SECTION
10.02
|
Effect
of Termination
|
62
|
SECTION
10.03
|
Fees
and Expenses
|
62
|
SECTION
10.04
|
Amendment
|
64
|
SECTION
10.05
|
Waiver
|
64
|
ARTICLE
XI
|
||
GENERAL
PROVISIONS
|
||
SECTION
11.01
|
Notices
|
64
|
SECTION
11.02
|
Severability
|
65
|
SECTION
11.03
|
Entire
Agreement; Assignment
|
65
|
SECTION
11.04
|
Parties
in Interest and Assignment
|
66
|
SECTION
11.05
|
Specific
Performance
|
66
|
SECTION
11.06
|
Governing
Law
|
66
|
SECTION
11.07
|
Headings
|
66
|
SECTION
11.08
|
Counterparts
|
67
|
SECTION
11.09
|
Waiver
of Jury Trial
|
67
|
Annex
A
|
List
of Key Senior Preferred Stockholders
|
Annex
B
|
List
of Key Junior Preferred Stockholders
|
Annex
C
|
Conditions
to the Tender Offer
|
Annex
D
|
Proposed
Terms and Conditions of the Exchange Offer
|
Annex
E
|
Disclosure
Schedule
|
Exhibit
1.01
|
Initial
Investors of Junior Preferred Stock and Additional
Returns
|
Exhibit
4.01(d)(i)
|
Certificate
of Designations of Series B-1 Preferred Stock
|
Exhibit
4.01(d)(ii)
|
Certificate
of Designations of Series B-2 Preferred Stock
|
Exhibit
4.03(a)
|
Form
of Mandatory Warrants
|
Exhibit
4.03(b)
|
Form
of Optional Warrants
|
Exhibit
4.05(i)
|
Amended
and Restated By-laws
|
Exhibit
4.07
|
Form
of Escrow Agreement
|
Exhibit
7.01
|
Approved
Conduct between Signing and Swap Closing
|
Exhibit
7.02(a)(i)
|
Amendment
to the Certificate of Incorporation
|
Exhibit 7.02(a)(iii)
|
Amendment
to the Certificate of Designations of the Senior Preferred
Stock
|
Exhibit 7.02(a)(iv)
|
Amendment
to the Certificate of Designations of the Junior Preferred
Stock
|
Exhibit
7.10
|
Form
of Release Letter
|
Exhibit
7.12
|
Capital
Requirements Schedule
|
i
INVESTMENT
AGREEMENT, dated as of June 11, 2008 (this “Agreement”), between
United Energy Group Limited, an exempted company with limited liability existing
under the laws of Bermuda (“Purchaser”), and
Transmeridian Exploration Incorporated, a Delaware corporation (the “Company”).
WHEREAS,
the Boards of Directors of Purchaser and the Company have each determined that
it is in the best interests of their respective stockholders to restructure the
Company’s ownership and capital structure through a series of transactions as
contemplated in this Agreement and the Ancillary Documents (as defined
below);
WHEREAS,
Purchaser and each of the Persons (as defined below) listed on Annex A (the
“Key Senior Preferred
Stockholders”) have entered into a Rollover Agreement or a Stock Purchase
Agreement, dated as of the date hereof (collectively, the “Senior Preferred Stock
Purchase Agreements”), pursuant to which Purchaser has agreed to purchase
from each of the Key Senior Preferred Stockholders, and each Key Senior
Preferred Stockholder has agreed to sell to Purchaser, all of the shares of 15%
senior redeemable convertible preferred stock, par value US$0.0006 per share, of
the Company (the “Senior Preferred
Stock”) owned of record and beneficially by such Key Senior Preferred
Stockholder in exchange for (a) the convertible bonds issued by Purchaser (the
“Purchaser Convertible
Bonds”), (b) US$76 per share in cash or (c) a combination of
US$76 per share in cash and the Purchaser Convertible Bonds, upon the terms and
subject to the conditions set forth in the respective Senior Preferred Stock
Purchase Agreement (collectively, the “Rollover
Transactions”);
WHEREAS,
Purchaser and the Persons listed on Annex B (the “Key Junior Preferred
Stockholders”) have entered into a Stock Purchase Agreement, dated as of
the date hereof (the “Junior Preferred Stock
Purchase Agreement”), pursuant to which Purchaser has agreed to purchase
from each of the Key Junior Preferred Stockholders, and each Key Junior
Preferred Stockholder has agreed to sell to Purchaser, all of the shares of 20%
junior redeemable convertible preferred stock, par value US$0.0006 per share, of
the Company (the “Junior Preferred
Stock”; together with the Senior Preferred Stock, the “Preferred Stock”)
owned of record and beneficially by such Key Junior Preferred Stockholder at a
price of US$76 per share in cash or a combination of cash and Common Stock, upon
the terms and subject to the conditions set forth in the Junior Preferred Stock
Purchase Agreement (collectively, the “Sale and Purchase
Transactions”);
WHEREAS,
Purchaser intends to make a tender offer (the “Tender Offer”) to
acquire (a) all outstanding shares of the Senior Preferred Stock that are not
owned by the Key Senior Preferred Stockholders (the “Remaining Shares of Senior
Preferred Stock”) for US$76 in cash per share, and (b) all outstanding
shares of the Junior Preferred Stock that are not owned by the Key Junior
Preferred Stockholders (the “Remaining Shares of Junior
Preferred Stock”) for US$76 in cash per share, upon the terms and subject
to the conditions set forth in this Agreement;
WHEREAS,
the Company intends to cause the 12% Senior Notes Issuer (as defined below) to
(a) conduct an offer to exchange New Senior Notes (as defined below) and the 12%
Senior Notes Cash Payments (as defined below) for the 12% Senior Notes (as
defined below) and (b) concurrently with the exchange offer, solicit consents
from holders of the 12%
D-1
WHEREAS,
upon the consummation of the Offers, the Rollover Transactions, and the Sale and
Purchase Transactions, the Company intends to issue to Purchaser, (a) 1,512,158
shares (the “First
Tranche Shares”) of series B-1 redeemable convertible preferred stock,
par value US$0.0006 per share, of the Company (the “Series B-1 Preferred
Stock”); (b) 622,897 shares of series B-2 redeemable convertible
preferred stock, par value US$0.0006 per share, of the Company (the “Series B-2 Preferred
Stock”) and (c) the Warrants (as defined below) in exchange for (i) the
Preferred Stock tendered pursuant to the Tender Offer, (ii) the Senior Preferred
Stock purchased by Purchaser pursuant to the Senior Preferred Stock Purchase
Agreements, (iii) the Junior Preferred Stock purchased by Purchaser pursuant to
the Junior Preferred Stock Purchase Agreement, (iv) the First Tranche Price (as
defined below), (v) the Second Tranche Price (as defined below) and (vi) the
Additional Returns (as defined below), in each case upon the terms and subject
to the conditions set forth herein (collectively, the “Swap”, and together
with the Rollover Transactions, the Sale and Purchase Transactions and the
Offers, the “Transactions”);
WHEREAS,
the Board of Directors of the Company (the “Board”) has
unanimously approved this Agreement and the Ancillary Documents to which the
Company or any Subsidiary (as defined below) is a party, declared their
advisability and approved the Transactions in accordance with the General
Corporation Law of the State of Delaware (the “DGCL”) and other
applicable Law and has resolved to recommend to the holders of the Preferred
Stock that they tender their shares pursuant to the Tender Offer and the holders
of the 12% Senior Notes that they tender their 12% Senior Notes for exchange
pursuant to the Exchange Offer; and
WHEREAS,
the Board of Directors of Purchaser has approved this Agreement and the
Ancillary Documents and declared their advisability and approved the
Transactions.
NOW,
THEREFORE, in consideration of the foregoing and the mutual covenants and
agreements herein contained, and intending to be legally bound hereby, Purchaser
and the Company hereby agree as follows:
ARTICLE
I
DEFINITIONS
SECTION
1.01 Definitions. (a) For
purposes of this Agreement:
“12% Senior Notes”
means the outstanding 12% senior secured notes due 2010 issued by the 12% Senior
Notes Issuer and guaranteed by the Company and certain of the Company’s other
subsidiaries pursuant to the Indenture.
“12% Senior Notes Cash
Payments” means the cash payments to be made to the holders of the 12%
Senior Notes tendered for exchange and accepted in the Exchange
Offer.
D-2
“12% Senior Notes
Issuer” means Transmeridian Exploration Inc., a British Virgin Islands
company and a wholly owned subsidiary of the Company.
“Additional Return
Agreements” means (a) the 20% Junior Redeemable Convertible Preferred
Stock Additional Return Agreement dated June 18, 2007 among the Company, Kenmont
Special Opportunities Master Fund, L.P. and other investors and (b) the 20%
Junior Redeemable Convertible Preferred Stock Additional Return Agreement dated
June 26, 2007 among the Company, Capital Ventures International and others
investors.
“Additional Returns”
means the amount to be paid by Purchaser to the Initial Investors of Junior
Preferred Stock provided in Exhibit 1.01 attached hereto, except as otherwise
provided in the Junior Preferred Stock Purchase Agreement.
“Affiliate” of a
specified Person means a Person who, directly or indirectly through one or more
intermediaries, controls, is controlled by, or is under common control with,
such specified Person.
“Ancillary Documents”
means the Investor Rights Agreement, Senior Preferred Stock Purchase Agreements,
Junior Preferred Stock Purchase Agreement, the Escrow Agreement, the Certificate
of Designations of Series B-1 Preferred Stock, the Certificate of Designations
of Series B-2 Preferred Stock, the New Indenture, the Amendment to the
Certificate of Incorporation, the Amended and Restated By-laws, the Amendment to
the Certificate of Designations of the Senior Preferred Stock, the Amendment to
the Certificate of Designations of the Junior Preferred Stock, the Warrants, the
Purchaser Convertible Bonds and the instrument creating the Purchaser
Convertible Bonds.
“Anti-trust Laws”
means any applicable Law regulating antitrust, competition or merger control
matters, including, without limitation, the Law of the Republic of Kazakhstan On
Competition and Limitation of Monopolistic Activities dated January 19, 2001 and
the Law of the Republic of Kazakhstan On Competition and Limitation of
Monopolistic Activities subsequently adopted in 2006 and Russian Federal law
26.07.2006 No. 135-FZ “On Protection of Competition”, to the extent
applicable.
“Article 71 Waiver”
means one or more written notifications from MEMR waiving Kazakhstan
government’s pre-emptive right under Article 71 of the Subsoil Use Law or
confirming that Kazakhstan government will not exercise its pre-emptive right in
respect of the Transactions or consenting to the Transactions.
“beneficial owner” or
“beneficially
own”, with respect to any shares of the Company, has the meaning ascribed
to such term under Rule 13d-3(a) of the Exchange Act.
“Business Day” means
any day on which the principal offices of the SEC in Washington, D.C. are open
to accept filings, or, in the case of determining a date when any payment is
due, any day (other than a Saturday or Sunday) on which banks are not required
or authorized to close in Hong Kong and New York.
D-3
“Certificates of Designations
of the Preferred Stock” means the Certificate of Designations of the
Senior Preferred Stock and the Certificate of Designations of the Junior
Preferred Stock.
“Closing Date” means
the date of the Swap Closing.
“Common Stock” means
the common stock, par value US$0.0006 per share, of the Company.
“Company Licensed
Intellectual Property” means each item of Intellectual Property licensed
to the Company or a Subsidiary pursuant to a License.
“Company Owned Intellectual
Property” means Intellectual Property owned by the Company or a
Subsidiary.
“Company Software”
means Software (a) material to the operation of the business of the Company or a
Subsidiary, including all computer software and databases operated by the
Company or a Subsidiary on its web sites or used by the Company or a Subsidiary
in connection with processing customer orders, storing customer information, or
storing or archiving data and (b) owned, manufactured, distributed, sold,
licensed or marketed by the Company or any Subsidiary.
“Company Stock Plans”
means (a) the 2006 Incentive Plan of the Company and (b) the Amended and
Restated 2003 Stock Compensation Plan of the Company.
“Competing
Transaction” means any of the following (other than the
Transactions): (a) any merger, consolidation, share exchange,
business combination, recapitalization, liquidation, dissolution or other
similar transaction involving the Company or any Subsidiary; (b) any sale,
lease, exchange, transfer or other disposition of a material part of the assets
of the Company or of any Subsidiary; (c) any sale, exchange, transfer or other
disposition of 15% or more of any class or series of equity securities of the
Company or of any Subsidiary; (d) any tender offer or exchange offer that, if
consummated, would result in any Person beneficially owning 15% or more of any
class or series of equity securities of the Company or of any Subsidiary; (e)
any solicitation in opposition to approval and adoption of this Agreement by the
Company’s stockholders; or (f) any other similar transaction the consummation of
which would reasonably be expected to impede, interfere with, prevent or
materially delay any of the Transactions.
“control” (including
the terms “controlled
by” and “under
common control with”) means the possession, directly or indirectly, or as
trustee or executor, of the power to direct or cause the direction of the
management and policies of a Person, whether through the ownership of voting
securities, as trustee or executor, by contract or credit arrangement or
otherwise.
“Data Room” means the
electronic data room established by the Company for the purposes of Purchaser
undertaking due diligence in connection with the Transactions accessible to
Purchaser via xxx://xxx.xxxxxxxxxx.xxx from April 3, 2008 to June 11,
2008.
D-4
“Determination Date”
means (a) the date of the written agreement between the parties hereto with
respect to the amount of (i) the indemnifiable Losses payable to the Purchaser
Indemnified Party or (ii) the Unpaid Fees payable to Purchaser, as the case may
be, or (b) the date of the applicable court order under Section 11.06 (prior to
any appeal thereof) with respect to the amount of (i) the indemnifiable Losses
payable to the Purchaser Indemnified Party hereunder or (ii) the Unpaid Fees
payable to Purchaser, as the case may be.
“Disclosure Schedule”
means the Disclosure Schedule attached hereto as Annex E, dated as of the date
hereof, delivered by the Company to Purchaser in connection with this
Agreement.
“Environmental Claims”
means any and all actions, suits, demands, demand letters, claims, liens,
notices of noncompliance or violation, notices of liability or potential
liability, investigations, proceedings, consent orders or consent agreements
relating in any way to any Environmental Law, any Environmental Permit or any
Hazardous Substances.
“Environmental Laws”
means any United States or non-United States federal, state, common, provincial,
municipal or local laws statutes regulations, rules, codes, orders or
requirements relating to (a) Releases or threatened Releases of Hazardous
Substances or materials containing Hazardous Substances; (b) the manufacture,
handling, transport, use, treatment, exposure to, storage or disposal of
Hazardous Substances or materials containing Hazardous Substances; (c) pollution
or protection of the environment, health, safety or Natural Resources; or (d)
gas flaring.
“Environmental Permit”
means any permit, approval, identification number, license or other
authorization required under any applicable Environmental Law.
“Escrow Account” means
the bank account established by the Escrow Agent for the purpose of holding the
Escrow Funds (as defined in the Escrow Agreement).
“Escrow Agent” means a
reputable international bank jointly designated by the Company and
Purchaser.
“Exchange Act” means
the Securities Exchange Act of 1934, as amended, and all rules and regulations
promulgated thereunder.
“Exchange Approvals”
means (a) any consent, approval, waiver or confirmation under the AMEX rules or
otherwise required by AMEX officials, including, without limitation, the AMEX
Listing Approval; and (b) any consent, approval (including approval for the
listing of shares in the capital of Purchaser issuable upon the conversion of
the Purchaser Convertible Bonds), waiver or confirmation under the HKSE Listing
Rules or otherwise required by the HKSE officials, in connection with the
Transactions.
“Exchange Offer Minimum
Condition” means at least 90% of the outstanding principal amount of the
12% Senior Notes validly tendered and not withdrawn pursuant to the Exchange
Offer.
D-5
“Existing Warrants”
means the warrants issued by the Company pursuant to (a) the Convertible
Promissory Note and Warrant Purchase Agreement, dated as of August 30, 2005, by
and among the Company, North Sound Legacy Institutional Fund LLC, North Sound
Legacy International, Ltd., and Royal Bank of Canada; (b) the Common Stock
Purchase Warrant, dated December 1, 2006, by and between the Company and
Xxxxxxxxx & Company, Inc.; (c) the Common Stock Purchase Warrant dated as of
July 9, 2007, by and between the Company and Xxxxxxxxx & Company, Inc.; (d)
the Warrant Purchase Agreement, dated as of March 15, 2007, by and among the
Company, North Sound Legacy International Ltd and North Sound Legacy
Institutional Fund LLC; (e) the Preferred Stock and Warrant Purchase Agreement,
dated November 12, 2004, by and between the Company and each of the purchasers
party thereto; (f) Warrant Agreement, dated as of December 12, 2005 by and
between the Company and The Bank of New York; (g) Allonge to Common Stock
Purchase Warrant (Warrant No. NS2007-1), in favor of North Sound Legacy
Institutional Fund LLC, dated May 30, 2007; and (h) Allonge to Common Stock
Purchase Warrant (Warrant No. NS2007-2), in favor of North Sound Legacy
International Ltd., dated May 30, 2007.
“Exon-Xxxxxx
Provisions” means the provisions of Section 721 of Title VII of the
Defense Production Act of 1950, as amended, and the regulations promulgated
thereunder.
“Fair Market Value”
means the price that would be negotiated in an arm’s-length transaction for cash
between a willing seller and a willing buyer, neither of which is under any
compulsion to complete the transaction, as such price is determined by an
accounting, appraisal or investment banking firm of national standing jointly
appointed by the Company and Purchaser.
“First Tranche Price”
means an amount equal to the difference between (a) US$151,215,804 and (b) the
aggregate of (i) the Total Preferred Stock Value and (ii) the Additional
Returns.
“Governmental
Authority” means any United States or non-United States federal, state or
local or government, governmental, regulatory or administrative authority,
agency or commission or any court, tribunal, or judicial or arbitral
body.
“Hazardous Substance”
means any contaminant, substance, dangerous goods or pollutant or any other
substance that when released to the natural environment is reasonably likely to
cause, at some immediate or future time, harm or material degradation to the
natural environment or risk to human health, including, without limitation: (a)
any petrochemical or petroleum products, by-products or breakdown products,
radioactive materials, asbestos in any form that is or could become friable,
transformers or other equipment that contains dielectric fluid containing
polychlorinated biphenyls, mold and radon gas; (b) any chemicals, materials or
substances defined as or included in the definition of “hazardous substances”,
“hazardous wastes”, “hazardous materials”, “restricted hazardous materials”,
“extremely hazardous substances”, “toxic substances”, “contaminants” or
“pollutants” or words of similar meaning and regulatory
D-6
effect or
(c) any other chemical, material or substance, exposure to which is prohibited,
limited, or regulated by any applicable Environmental Law.
“Hedge” means a
derivative transaction within the coverage of SFAS No. 133, including any swap
transaction, option, warrants, forward purchase or sale transaction, futures
transaction, cap transaction, floor transaction or collar transaction relating
to one or more currencies, commodities, bonds, equity securities, loans,
interest rates, credit-related events or conditions or any indexes, or any other
similar transaction (including any option with respect to any of these
transactions) or combination of any of these transactions, including
collateralized mortgage obligations or other similar instruments or any debt or
equity instruments evidencing or embedding any such types of transactions, and
any related credit support, collateral, transportation or other similar
arrangements related to such transactions.
“HKSE” means The Stock
Exchange of Hong Kong Limited.
“HKSE Listing Rules”
means the Rules Governing the Listing of Securities on the Main Board of
HKSE.
“Hydrocarbon Contract”
means any Hydrocarbon production sharing contract, lease or license, permit or
other similar agreement or right permitting the Company or any Subsidiary to
explore for, develop, use, produce, sever, process, operate and occupy
Hydrocarbon interests and associated fixtures or structures for a specified
period of time, including any farm-out or farm-in agreement, operating
agreement, unit agreement, pooling or communitization agreement, declaration or
order, joint venture, option or acquisition agreement, any oil and gas
production, sales, marketing, transportation, exchange and processing contract
and agreement, or any other contract affecting the ownership or operation of
properties held for exploration or production of Hydrocarbons, or the
disposition of the Hydrocarbons produced therefrom, in each case to which the
Company or any of the Subsidiaries is a party.
“Hydrocarbons” means,
with respect to any Person, crude oil, natural gas, casinghead gas, condensate,
sulphur, natural gas liquids, plant products and other liquid or gaseous
hydrocarbons produced in association therewith (including coalbed gas and carbon
dioxide), and all other minerals of every kind and character which may be
covered by or included in or attributable to any of the properties of such
Person or any of such Person’s Subsidiaries.
“Indemnified Party”
means a Purchaser Indemnified Party or a Company Indemnified Party, as the case
may be.
“Indemnifying Party”
means the Company pursuant to Section 9.02 and Purchaser pursuant to Section
9.03, as the case may be.
“Indenture” means the
Indenture in respect of the 12% Senior Notes, dated as of December 12, 2005,
among the 12% Senior Notes Issuer, the Company and certain of the Company’s
other Subsidiaries, as guarantors, and the Indenture Trustee, as
supplemented
D-7
by the
First Supplemental Indenture, dated as of December 22, 2005, and the Second
Supplemental Indenture, dated as of May 24, 2006.
“Indenture Trustee”
means The Bank of New York, trustee under the Indenture and the anticipated
trustee under the New Indenture.
“Initial Investors of Junior
Preferred Stock” means the initial purchasers of the Junior Preferred
Stock listed in Exhibit 1.01 attached hereto.
“Intellectual
Property” means (a) United States and non-United States patents, patent
applications and invention registrations of any type; (b) trademarks, service
marks, domain names, trade dress, logos, trade names, corporate names and other
source identifiers, and registrations and applications for registration thereof;
(c) copyrightable works, copyrights, and registrations and applications for
registration thereof; (d) Software; (e) confidential and proprietary
information, including trade secrets and know-how and (f) rights of privacy,
publicity and endorsement, and all other rights associated therewith in any
jurisdiction.
“Investor Rights
Agreement” means the investor rights agreement, dated as of the date
hereof, between the Company and Purchaser, which shall become effective as of
the Swap Closing in accordance with the terms thereof.
“knowledge of the
Company” means the knowledge of any director or officer of the Company
and in the case of an officer, after the exercise of reasonable
investigation.
“Law” means any United
States or non-United States federal, national, supranational, state, provincial,
local or similar statute, law, ordinance, regulation, rule, code, order,
requirement or rule of law (including common law).
“Licenses” mean (a)
licenses of Intellectual Property by the Company or a Subsidiary to third
parties; (b) licenses of Intellectual Property by third parties to the Company
or a Subsidiary; and (c) agreements between the Company or a Subsidiary and
third parties relating to the development or use of Intellectual Property or the
development or transmission of data.
“Material Adverse
Effect” means, when used in connection with the Company or any
Subsidiary, any event, circumstance, change or effect that, individually or in
the aggregate with any other events, circumstances, changes and effects
occurring after the date hereof, is or is likely to be materially adverse to (a)
the business, condition (financial or otherwise), assets, liabilities, prospects
or results of operations of the Company and the Subsidiaries taken as a whole or
(b) the ability of the Company to consummate the Transactions, it being
understood that none of the following alone or in combination shall be deemed,
in and of itself, to constitute a Material Adverse Effect: (i) changes
attributable to the public announcement or pendency of the Transactions or
compliance with this Agreement, (ii) changes in general United States or foreign
economic, financial or geopolitical conditions, (iii) changes in applicable Law
or GAAP, (iv) changes in interest rates, (v) events, circumstances, changes or
effects affecting the securities markets generally, (vi) changes in the
Company’s and the Subsidiaries’ industries in
D-8
general,
or (vii) military conflicts or acts of foreign or domestic terrorism; provided,
however,
that (A) any change, effect, development, event or occurrence described in each
of clauses (iii) and (vi) above shall not constitute or give rise to a Material
Adverse Effect only if and to the extent that such change, effect, development,
event or occurrence does not specifically relate to the Company or the
Subsidiaries and does not have a disproportionate effect on the Company and the
Subsidiaries relative to other companies in the oil and gas industry and (B)
none of the clauses (i) through (vii) above shall in any way limit the scope or
application of the conditions to the Tender Offer or the Exchange Offer
specified in Annex C or in the caption “—Conditions to the Exchange Offer” of
Annex D respectively, or Purchaser’s ability to rely on or invoke any such
conditions, except to the extent the term “Material Adverse Effect” as defined
is used therein.
“MEMR” means the
Ministry of Energy and Mineral Resources of the Republic of
Kazakhstan.
“Natural Resources”
means land, fish, wildlife, biota, air, water, ground water, drinking water
supplies, and other such resources.
“New Indenture” means
the indenture, to be dated as of the date of its execution, by and among the 12%
Senior Notes Issuer, the Company and those Subsidiaries (as defined below) who
guarantee the 12% Senior Notes, respectively, as guarantors, and the Indenture
Trustee, pursuant to which the New Senior Notes are expected to be
issued.
“New Preferred Stock”
means the Series B-1 Preferred Stock and the Series B-2 Preferred
Stock.
“New Senior Notes”
means the new senior secured notes of the 12% Senior Notes Issuer proposed to be
issued pursuant to the Exchange Offer, to be fully and unconditionally
guaranteed by the Company and those of the Subsidiaries (as defined below) who
guarantee the 12% Senior Notes, respectively, and whose terms, conditions and
covenants shall be as provided in the New Indenture and which shall be
reasonably satisfactory to Purchaser and shall include such terms, conditions
and covenants as Purchaser shall deem desirable or necessary to effect the
Transactions (which shall either not include a right of holders to have their
New Senior Notes repurchased upon a change of control of the Company or the 12%
Senior Notes Issuer, or, if such repurchase right is included, shall carve-out
any change of control that would result from the consummation of the
Transactions).
“Offer Documents”
means the Tender Offer Documents and the Exchange Offer Documents.
“Oil and Gas
Interests” means (a) interests in, and rights to, the following oil and
gas properties: (i) 100% working interest in South Alibek Field, Kazakhstan
under a 57.1 Km 2 subsoil use license (License 1557) and (ii) the 50% working
interest in Gasha Field, Dagestan, Russia under a 71.6 Km 2 subsoil use license,
(b) Hydrocarbons and other minerals or revenues therefrom, all contracts in
connection therewith and claims and rights thereto (including all oil and gas
leases, operating agreements, unitization and
D-9
pooling
agreements and orders, division orders, transfer orders, mineral deeds, royalty
deeds, oil and gas sales, exchange and processing contracts and agreements,
agreements on transfer of geological information, and in each case, interests
thereunder), surface interests, fee interests, reversionary interests,
reservations, and concessions and (c) all easements, rights of way, licenses,
permits, leases, and other interests associated with, appurtenant to, or
necessary for the operation of any of the foregoing; and all interests in
equipment and machinery (including xxxxx, well equipment and machinery), oil and
gas production, gathering, transmission, treating, processing and storage
facilities (including tanks, tank batteries, pipelines, and gathering systems),
pumps, water plants, electric plants, gasoline and gas processing plants,
refineries, and other tangible personal property and fixtures associated with,
appurtenant to, or necessary for the operation of any of the
foregoing.
“Person” means an
individual, corporation, partnership, limited partnership, limited liability
company, syndicate, person (including, without limitation, a “person” as defined
in Section 13(d)(3) of the Exchange Act), trust, association or entity or
government, political subdivision, agency or instrumentality of a
government.
“PRC” means the
People’s Republic of China, including Hong Kong.
“Purchaser Shareholders
Approval” means the requisite approval of the Transactions and the
Transaction Agreements by the shareholders of Purchaser.
“Release” means
disposing, discharging, injecting, spilling, leaking, leaching, dumping,
emitting, escaping, emptying, seeping, placing and the like into or upon any
land or water or air or otherwise entering into the
environment.
“Remaining Shares of the
Preferred Stock” means the Remaining Shares of Senior
Preferred Stock and the Remaining Shares of Junior Preferred Stock.
“Remedial Action”
means all action to (a) clean up, remove, treat or handle in any other way
Hazardous Substances in the environment; (b) restore or reclaim the environment
or Natural Resources; (c) prevent the Release of Hazardous Substances so that
they do not migrate, endanger or threaten to endanger public health or the
environment or (d) perform remedial investigations, feasibility studies,
corrective actions, closures and postremedial or postclosure studies,
investigations, operations, maintenance and monitoring on, about or in any real
property.
“Requisite Noteholder
Consent” means the consent of the holders of a majority of the
outstanding principal amount of the 12% Senior Notes voting together as a single
class pursuant to the terms set forth in the Exchange Offer.
“Securities Act” means
the Securities Act of 1933, as amended, and all rules and regulations
promulgated thereunder.
D-10
“Securities Laws”
means the Securities Act, the Exchange Act, the HKSE Listing Rules, the listing
rules of, or any listing agreement with AMEX and any other applicable Law
regulating securities or takeover matters.
“Software” means
computer software, programs and databases in any form, including Internet web
sites, web content and links, all versions, updates, corrections, enhancements,
and modifications thereof, and all related documentation.
“Stockholders
Approvals” means the approvals of all matters that are required to be
approved by the Common Stockholders Meeting as provided in Section
7.02(a).
“subsidiary” or “subsidiaries” of the
Company, Purchaser or any other Person means an Affiliate controlled by such
Person, directly or indirectly, through one or more intermediaries.
“Subsoil Use Law”
means Republic of Kazakhstan Law No. 2828 “On Subsoil and Subsoil Use”, as
amended by, among other things (a) Kazakhstan Law on Introduction of Amendments
and Additions into Certain Legal Acts on Subsoil Use and Subsoil Operations
(effective on 8 December, 2004) and (b) Kazakhstan Law on Amendments and
Additions to certain Legislative Acts of the Republic of Kazakhstan Regarding
Matters of Subsoil Use and Conduct of Petroleum Operations in the Republic of
Kazakhstan (effective on 18 October, 2005).
“Superior Proposal”
means an unsolicited written bona fide offer made by a third party to consummate
any of the following transactions: (a) a merger, consolidation, share
exchange, business combination or other similar transaction involving the
Company pursuant to which the stockholders of the Company immediately preceding
such transaction would hold less than 50% of the equity interests in the
surviving or resulting entity of such transaction; or (b) the acquisition by any
Person or group (including by means of a tender offer or an exchange offer or a
two-step transaction involving a tender offer followed with reasonable
promptness by a cash-out merger involving the Company), directly or indirectly,
of ownership of 50% of the then outstanding shares of stock of the Company, in
each case on terms that the Board determines, in its good faith judgment (after
having received the advice of a financial advisor of nationally recognized
reputation, which may include Xxxxxxxxx & Company, Inc. or an Affiliate or
division thereof), to be more favorable to the Company’s stockholders from a
financial point of view than the Transactions and for which financing, to the
extent required, is then committed.
“Taxes” means any and
all taxes, fees, levies, duties, tariffs, imposts and other similar charges of
any kind (together with any and all interest, penalties, additions to tax and
additional amounts imposed with respect thereto) imposed by any Governmental
Authority or taxing authority, including, without limitation: taxes
or other charges on or with respect to income, franchise, windfall or other
profits, gross receipts, property, sales, use, capital stock, payroll,
employment, social security, workers’ compensation, unemployment compensation or
net worth; taxes or other charges in the nature of excise, withholding, ad
valorem, stamp, transfer, value-added or gains taxes; license,
registration
D-11
and
documentation fees; customers’ duties, tariffs and similar charges; and subsoil
user’s taxes and payments.
“Tender Offer Price”
means the total consideration paid by Purchaser to the holders of the Remaining
Shares of the Preferred Stock to acquire the Remaining Shares of the Preferred
Stock validly tendered and not withdrawn pursuant to the Tender
Offer. The Tender Offer Price shall include any amounts withheld by
Purchaser pursuant to Section 7.17.
“Termination Date”
means December 31, 2008.
“Total Preferred Stock
Value” means an amount equal to US$100 multiplied by the number of shares
of the Preferred Stock surrendered by Purchaser to the Company at the Swap
Closing.
“Transaction
Agreements” means this Agreement and the Ancillary
Documents.
“Volume Weighted Average
Price” means, with respect to the Common Stock as of any date, the dollar
volume-weighted average price per share on AMEX during the period beginning at
9:30:01 a.m., New York City time (or such other time as AMEX publicly announces
is the official open of trading), and ending at 4:00:00 p.m., New York City time
(or such other time as AMEX publicly announces is the official close of trading)
as reported by Bloomberg through its “Volume at Price” functions, or, if the
foregoing does not apply, the dollar volume/weighted average price per share in
the over-the-counter market on the electronic bulletin board for the Common
Stock during the period beginning at 9:30:01 a.m., New York City time (or such
other time as AMEX publicly announces is the official open of trading), and
ending at 4:00:00 p.m., New York City time (or such other time as AMEX publicly
announces is the official close of trading) as reported by Bloomberg, or, if no
dollar/volume weighted average price is reported for the Common Stock by
Bloomberg for such hours, the average of the highest closing bid price and the
lowest closing ask price of any of the market makers for the Common Stock as
reported in the “pink sheets” by Pink Sheets LLC (formerly the National
Quotation Bureau, Inc.). All such determinations are to be appropriately
adjusted for any stock dividend, stock split, stock combination or other similar
transaction during the applicable calculation period.
(b) The
following terms have the meaning set forth in the Sections set forth
below:
Defined
Term
|
Location of
Definition
|
Action
|
§
5.09
|
Agents
|
§
3.01(f)
|
Agreement
|
Preamble
|
Amended
and Restated By-laws
|
§
4.05(i)
|
Amendment
to the Certificate of Designations of the Junior Preferred
Stock
|
§
7.02(a)
|
Amendment
to the Certificate of Designations of the Senior
|
|
D-12
Defined
Term
|
Location of
Definition
|
Preferred Stock |
§
7.02(a)
|
Amendment
to the Certificate of Incorporation
|
§
7.02(a)
|
Amendment
to the Indenture
|
§
3.01(b)
|
AMEX
|
§
2.01(a)
|
AMEX
Listing Approval
|
§
7.13
|
Balance
Sheet
|
§
5.07(c)
|
Board
|
Recitals
|
Capital
Excess
|
§
4.01(b)
|
Change
in the Company Recommendation
|
§
7.05(c)
|
Code
|
§
7.17
|
Common
Stockholder Approvals
|
§
7.02(a)
|
Common
Stockholders Meeting
|
§
7.02(a)
|
Company
|
Preamble
|
Company
Fundamental Representations
|
§
9.01(a)
|
Company
Indemnified Party
|
§
9.03
|
Company
Reserve Reports
|
§
5.21
|
Confidential
Information
|
§
7.04(b)
|
D&O
Insurance
|
§
7.01(f)
|
DGCL
|
Recitals
|
Environmental
Representations
|
§
9.01(a)
|
ERISA
|
§
5.10(a)
|
Escrow
Agreement
|
§
4.07
|
Exchange
Offer
|
Recitals
|
Exchange
Offer Documents
|
§
3.01(a)
|
Exercising
Junior Preferred Stockholder(s)
|
§
4.02
|
Existing
Warrants Waiver
|
§
7.11
|
Expenses
|
§
10.03(b)
|
FCPA
|
§
5.19
|
Fee
|
§
10.03(a)
|
First
Tranche Shares
|
Recitals
|
Fundamental
Representations
|
§
9.01(b)
|
Funding
Requirement
|
§
7.20
|
GAAP
|
§
5.07(b)
|
Improper
Payment Laws
|
§
5.19
|
IRS
|
§
5.10(a)
|
Junior
Preferred Stock
|
Recitals
|
Junior
Preferred Stock Purchase Agreement
|
Recitals
|
Key
Junior Preferred Stockholders
|
Recitals
|
Key
Senior Preferred Stockholders
|
Recitals
|
Lease
Documents
|
§
5.13(b)
|
Liens
|
§
5.13(a)
|
Loss
|
§
9.02
|
Mandatory
Warrants
|
§
4.03(a)
|
Material
Contracts
|
§
5.17(a)
|
Maximum
Amount
|
§
7.01(f)
|
D-13
Defined
Term
|
Location of
Definition
|
Minimum
Condition
|
§
2.01(a)
|
Multiemployer
Plan
|
§
5.10(b)
|
Multiple
Employer Plan
|
§
5.10(b)
|
New
Common Shares
|
§
7.13
|
Non-U.S.
Benefit Plan
|
§
5.10(h)
|
Notice
of Change in Recommendation
|
§
7.05(c)
|
Offer
to Purchase
|
§
2.01(c)
|
Offers
|
Recitals
|
Optional
Warrants
|
§
4.03(b)
|
Permits
|
§
5.06
|
Permitted
Liens
|
§
5.13(a)
|
Plans
|
§
5.10(a)
|
Preferred
Stock
|
Recitals
|
Preferred
Stockholder Consents
|
§
7.02(b)
|
Proceeds
|
§
7.12
|
Proxy
Statement
|
§
7.02(a)
|
Purchaser
|
Preamble
|
Purchaser
Convertible Bonds
|
Recitals
|
Purchaser
Election Notice
|
§
4.02
|
Purchaser
Fundamental Representations
|
§
9.01(b)
|
Purchaser
Indemnified Party
|
§
9.02
|
Registration
Statement
|
§
7.15
|
Release
Letter
|
§
7.10
|
Remaining
12% Senior Notes
|
§
3.01(g)
|
Remaining
Preferred Stock
|
§
7.16
|
Remaining
Shares of Junior Preferred Stock
|
Recitals
|
Remaining
Shares of Senior Preferred Stock
|
Recitals
|
Representatives
|
§
5.19
|
Rollover
Transactions
|
Recitals
|
S-3
Registration Statements
|
§
5.25
|
Sale
and Purchase Transactions
|
Recitals
|
SEC
|
§
2.01(a)
|
SEC
Reports
|
§
5.07(a)
|
Second
Tranche Price
|
§
4.01(b)
|
Second
Tranche Shares
|
§
4.01(b)
|
Senior
Notes Repurchase Payment
|
§
3.01(g)
|
Senior
Preferred Stock
|
Recitals
|
Senior
Preferred Stock Purchase Agreements
|
Recitals
|
Series
B-1 Preferred Stock
|
Recitals
|
Series
B-2 Preferred Stock
|
Recitals
|
Shares
of Newly Issued Common Stock
|
§
4.02
|
Stockholder
Consent Materials
|
§
5.12(b)
|
Subsidiary
|
§
5.01(a)
|
Swap
|
Recitals
|
Swap
Closing
|
§
4.04
|
D-14
Defined
Term
|
Location of
Definition
|
Tax
Representations
|
§
9.01(a)
|
Tender
Offer
|
Recitals
|
Tender
Offer Documents
|
§
2.01(c)
|
Tender
Offer Expiration Date
|
§
2.01(a)
|
Tender
Offer Initial Expiration Date
|
§
2.01(a)
|
Tender
Offer Statement
|
§
2.01(c)
|
Third
Party Claim
|
§
9.05(b)
|
Transactions
|
Recitals
|
Unpaid
Fees
|
§
10.03(e)
|
Warrants
|
§
4.03(b)
|
ARTICLE
II
THE
TENDER OFFER
SECTION
2.01 The Tender
Offer. (a) Provided that none of the events set
forth in clauses (i) through (xi) of Annex C hereto shall have occurred or be
continuing, Purchaser shall commence the Tender Offer at a time satisfactory to
it after the date hereof; provided that at least five (5) Business Days’ notice
shall have been provided to the Company. The obligation of Purchaser
to accept for payment the Remaining Shares of the Preferred Stock tendered
pursuant to the Tender Offer shall be subject to (i) the condition (the “Minimum Condition”) that at least such
number of the Remaining Shares of Senior Preferred Stock and the Remaining
Shares of Junior Preferred Stock, which, together with the shares of the Senior
Preferred Stock and the Junior Preferred Stock to be purchased by Purchaser
pursuant to the Senior Preferred Stock Purchase Agreements and the Junior
Preferred Stock Purchase Agreement, represents at least 90% of the outstanding
shares of each of the Senior Preferred Stock and Junior Preferred Stock,
respectively, and (ii) the satisfaction of each of the other conditions set
forth in Annex C hereto. Purchaser expressly reserves the right to
waive any such condition (except as expressly provided otherwise in Annex C
hereto), to increase the price per share payable in the Tender Offer, and to
make any other changes in the terms and conditions of the Tender Offer; provided,
however,
that no change may be made which decreases the price per share payable in the
Tender Offer or which imposes conditions to the Tender Offer in addition to
those set forth in Annex C hereto. Notwithstanding the foregoing,
Purchaser may, without the consent of the Company, extend the Tender Offer (i)
for one or more periods of not more than 20 Business Days each beyond the
scheduled expiration date, which initially shall be 20 Business Days following
the commencement of the Tender Offer (the “Tender Offer Initial Expiration
Date”), if, at any scheduled expiration of the Tender Offer, any of the
conditions to Purchaser’s obligation to accept for payment the Remaining Shares
of the Preferred Stock, shall not be satisfied or waived and (ii) for any period
required by any rule, regulation or interpretation of the Securities and
Exchange Commission (the “SEC”),
or the staff thereof, or the American Stock Exchange (“AMEX”) applicable to the Tender Offer
(any expiration time and date established pursuant to any extension of the
Tender Offer under this Agreement, as so extended, the “Tender Offer Expiration
Date”). Purchaser shall pay for all Remaining Shares of the
Preferred Stock validly tendered and not withdrawn promptly following the
acceptance of the Remaining Shares of the Preferred Stock for payment pursuant
to the Tender Offer. Notwithstanding the immediately
D-15
preceding
sentence and subject to the applicable rules of the SEC and the terms and
conditions of the Tender Offer, Purchaser expressly reserves the right to delay
payment for the Remaining Shares of the Preferred Stock in order to comply in
whole or in part with applicable Laws. Any such delay shall be
effected in compliance with Rule 14e-1(c) under the Exchange
Act. Purchaser may extend the Tender Offer after the acceptance of
the Remaining Shares of the Preferred Stock thereunder for a further period of
time by means of a subsequent offering period of not more than 20 Business Days
to meet the objective that there be validly tendered, in accordance with the
terms of the Tender Offer, prior to the expiration of the Tender Offer (as so
extended), and not withdrawn a number of the Remaining Shares of Senior
Preferred Stock and the Remaining Shares of Junior Preferred Stock, which,
together with the shares of the Senior Preferred Stock and the shares of the
Junior Preferred Stock to be purchased by Purchaser pursuant to the Senior
Preferred Stock Purchase Agreements and the Junior Preferred Stock Purchase
Agreement, represents at least 90% of the outstanding shares of each of the
Senior Preferred Stock and the Junior Preferred Stock,
respectively. If any payment of the Tender Offer Price is to be made
to a Person other than the Person in whose name the surrendered certificate
formerly evidencing the Preferred Stock is registered on the stock transfer
books of the Company, it shall be a condition of payment that the certificate so
surrendered shall be endorsed properly or otherwise be in proper form for
transfer and that the Person requesting such payment shall have paid all
transfer and other taxes required by reason of any payment of the Tender Offer
Price to a Person other than the registered holder of the certificate
surrendered, or shall have established to the satisfaction of Purchaser that
such taxes either have been paid or are not applicable. No dividends,
whether or not declared, will be paid by Purchaser on any shares of Preferred
Stock tendered into the Tender Offer.
(b) Notwithstanding
anything to the contrary in this Agreement, Purchaser may, in its sole
discretion, provide the holders of the Remaining Shares of Senior Preferred
Stock the right to receive, as an alternative to the per share cash
consideration payable in the Tender Offer, Purchaser Convertible Bonds in
exchange for the Remaining Shares of Senior Preferred Stock validly tendered and
not withdrawn in the Tender Offer. The Purchaser Convertible Bonds
would be offered to holders of the Remaining Shares of Senior Preferred Stock on
the same commercial terms as those provided to the Key Senior Preferred
Stockholders under the Senior Preferred Stock Purchase Agreements, subject to
applicable Law, including available exemptions for registration under the
Securities Act.
(c) At
a time satisfactory to it after the date hereof but no later than the date of
commencement of the Tender Offer, Purchaser shall deliver and, to the extent
required, file with the SEC, a tender offer statement or statements (together
with all amendments and supplements thereto, the “Tender Offer
Statement”) with respect to the Tender Offer to holders pursuant to
applicable U.S. federal securities laws (which may include the filing of a
Schedule TO and/or Schedule 13E-4F or any successor form
thereto). The Tender Offer Statement shall contain or shall
incorporate by reference, to the extent required by applicable U.S. federal
securities laws, an offer to purchase (the “Offer to Purchase”)
and forms of the related letter of transmittal (the Tender Offer Statement, the
Offer to Purchase and such other documents, together with all supplements and
amendments thereto, being referred to herein collectively as the “Tender Offer
Documents”). Each of Purchaser and the Company agrees to
correct promptly any information provided by it for use in the Tender Offer
Documents that shall have become false or misleading in any material respect,
and Purchaser further agrees to take all steps necessary to cause
the
D-16
Tender
Offer Documents, as so corrected, to be disseminated to holders of the Remaining
Shares of the Preferred Stock and, if required, filed with the SEC, in each case
as and to the extent required by applicable U.S. federal securities
laws.
SECTION
2.02 Company
Action. The Company shall promptly furnish Purchaser with
mailing labels containing the names and addresses of all record holders of the
Remaining Shares of the Preferred Stock and with security position listings of
shares held in stock depositories, each as of a recent date, together with all
other available listings and computer files containing names, addresses and
security position listings of record holders and beneficial owners of the
Remaining Shares of the Preferred Stock. The Company shall promptly
furnish Purchaser with such additional information, including, without
limitation, updated listings and computer files of stockholders, mailing labels
and security position listings, and such other assistance in disseminating the
Tender Offer Documents to holders of the Remaining Shares of the Preferred Stock
as Purchaser may reasonably request.
ARTICLE
III
THE
EXCHANGE OFFER AND NOTE CONSENT SOLICITATION
SECTION
3.01 The Exchange Offer and Note
Consent Solicitation. (a) Provided that none of the
events set forth in the caption “—Conditions to the Exchange Offer” of Annex D
hereto shall have occurred or be continuing, promptly after the receipt of a
written request from Purchaser to do so and the receipt of the Exchange Offer
Documents (as defined below) from Purchaser, the Company shall cause the 12%
Senior Notes Issuer to commence the Exchange Offer on terms consistent with
Annex D. The Company shall cooperate, and shall cause its
Subsidiaries to cooperate, with the reasonable requests of Purchaser in
connection with the Exchange Offer. The Exchange Offer shall be
conducted on the terms and subject to the conditions set forth in the offer to
exchange and consent solicitation statement, the letter of transmittal and other
related documents (collectively, the “Exchange Offer Documents”) and/or on
such other terms as may be agreed by Purchaser and the Company as necessary or
appropriate in order to facilitate obtaining the Requisite Noteholder Consents,
including, without limitation, with regard to the amount of the 12% Senior Notes
Cash Payments. The Exchange Offer shall require that each holder of
12% Senior Notes accepting the New Senior Notes and the 12% Senior Notes Cash
Payments in exchange for such holder’s 12% Senior Notes must also consent to the
Amendment to the Indenture.
(b) As
part of the Exchange Offer, the Company shall cause the 12% Senior Notes Issuer
to solicit consents and waivers from holders of 12% Senior Notes to adopt the
amendment to the Indenture and to waive the matters described under the caption
“—Consents and Waivers” in Annex D hereto (the “Amendment to the
Indenture”).
(c) The
obligation of the Company to cause the 12% Senior Notes Issuer to accept for
exchange and payment the 12% Senior Notes tendered pursuant to the Exchange
Offer shall be subject to (i) its obtaining the Requisite Noteholder Consent and
(ii) the satisfaction of each of the other conditions to the Exchange Offer, as
set forth in the Exchange Offer Documents. The Company shall cause
the 12% Senior Notes Issuer to waive any of the conditions to the Exchange Offer
as may be requested by Purchaser, subject to compliance with applicable Laws,
and shall not, without the consent of Purchaser, cause the 12% Senior
Notes
D-17
Issuer to
waive any condition to the Exchange Offer or make any changes to the terms and
conditions of the Exchange Offer other than as agreed between Purchaser and the
Company. Notwithstanding the immediately preceding sentence, the
Company need not cause the 12% Senior Notes Issuer to make any change to the
terms and conditions of the Exchange Offer requested by Purchaser that decreases
the consideration per 12% Senior Note payable in the Exchange Offer or imposes
conditions to the Exchange Offer or related consent solicitation in addition to
those set forth in Annex D hereto that are materially adverse to holders of the
12% Senior Notes, unless such change is approved by the Company in
writing. The Company shall cause the 12% Senior Notes Issuer to
extend the expiration date and consent deadline of the Exchange Offer as may be
reasonably requested by Purchaser.
(d) The
Company covenants and agrees that, promptly following the consent deadline
specified in the Exchange Offer Documents, assuming the Requisite Noteholder
Consent is received, the Company shall, and shall cause the 12% Senior Notes
Issuer and other Subsidiaries who are guarantors of the 12% Senior Notes under
the Indenture to (and shall use its reasonable best efforts to cause the
Indenture Trustee to), execute a supplement to the Indenture implementing the
Amendment to the Indenture, which shall be in a form reasonably satisfactory to
Purchaser and which shall implement the amendments and waivers described in the
Exchange Offer Documents and shall become operative at the closing of the
Exchange Offer, subject to the terms and conditions of this Agreement (including
the conditions to the Exchange Offer). The Company shall cause the
12% Senior Notes Issuer, concurrent with the closing of the Exchange Offer, to
(i) accept for exchange the 12% Senior Notes that have been validly tendered and
not withdrawn pursuant to and in accordance with the terms and conditions of the
Exchange Offer, (ii) promptly execute the New Indenture (which shall be in a
form reasonably satisfactory to Purchaser) and execute and issue (and in the
case of the Indenture Trustee, authenticate) the New Senior Notes, (iii)
promptly deliver the New Senior Notes and pay the 12% Senior Notes Cash Payments
(using funds provided by or at the direction of Purchaser) (including the
payment of an early consent payment specified in the Exchange Offer Documents to
holders who validly tendered and did not validly withdraw their 12% Senior Notes
prior to the consent deadline) to holders of 12% Senior Notes that have been
accepted for exchange in the Exchange Offer.
(e) Purchaser
shall prepare all necessary and appropriate documentation in connection with the
Exchange Offer, including the Exchange Offer Documents. The Company
shall, and shall cause the 12% Senior Notes Issuer and other Subsidiaries to,
cooperate with Purchaser in preparing the Exchange Offer Documents, in preparing
and issuing any press release announcing the commencement, results, modification
or extension of the Exchange Offer, and in preparing and disseminating any
amendments or supplements to the Exchange Offer Documents. The
Exchange Offer Documents (including all amendments or supplements) and all
mailings to the holders of the 12% Senior Notes in connection with the Exchange
Offer shall be subject to the prior review of, and comment by, the Company and
Purchaser and shall be reasonably acceptable to each of them. If at
any time prior to the closing of the Exchange Offer any information in the
Exchange Offer Documents should be discovered by the Company or the 12% Senior
Notes Issuer, on the one hand, or Purchaser, on the other hand, which should be
set forth in an amendment or supplement to the Exchange Offer Documents so that
the Exchange Offer Documents shall not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of circumstances
under which they are made, not misleading, the party that discovers
such
D-18
information
shall promptly notify the other party, and the Company shall cause the 12%
Senior Notes Issuer to disseminate to the holders of the 12% Senior Notes an
appropriate amendment or supplement prepared by Purchaser describing such
information. Notwithstanding anything to the contrary in this Section
3.01, Purchaser, the Company and the Subsidiaries shall comply with the
requirements of Rule 14e-1 under the Exchange Act, any U.S. state securities or
“Blue Sky” laws and any other applicable Law to the extent such Law is
applicable in connection with the Exchange Offer and such compliance will not be
deemed a breach hereof.
(f) In
connection with the Exchange Offer, Purchaser may select one or more dealer
managers, information agents, depositaries and other agents (collectively,
“Agents”) to
provide assistance in connection therewith, and the Company shall, and/or shall
cause the 12% Senior Notes Issuer to, enter into customary agreements (including
indemnities) with such parties so selected. Purchaser shall reimburse
the Company and the 12% Senior Notes Issuer for the reasonable fees and
out-of-pocket expenses paid to any Agent retained in connection with the
Exchange Offer, which fees and expenses shall, after the Swap Closing, be paid
out of the Proceeds in accordance with Section 7.12. The Company
shall provide to Purchaser, and shall cause its Subsidiaries to, and shall use
its best efforts to cause the respective officers, employees and advisors,
including legal and accounting, of the Company and its Subsidiaries to, provide
to Purchaser and its affiliates, its legal counsel and the Agents cooperation
reasonably requested by Purchaser or such affiliates, such legal counsel or the
Agents in connection with the Exchange Offer, including (i) participating in
meetings, presentations, due diligence sessions and drafting sessions, (ii)
executing and delivering any legal opinions, comfort letters (10b-5 letters) or
documents as may be reasonably requested by Purchaser or the Agents, and (iii)
using best efforts to obtain accountants’ comfort letters, consents and legal
opinions, as reasonably requested by Purchaser or the Agents.
(g) If
the 12% Senior Notes validly tendered for exchange in the Exchange Offer are
accepted for exchange by the 12% Senior Notes Issuer pursuant to Section 3.01(d)
above, the Company shall, promptly after the Swap Closing, cause the 12% Senior
Notes Issuer to deliver, in the manner specified in the Indenture, a notice to
holders of outstanding 12% Senior Notes that were not accepted for exchange in
the Exchange Offer (the “Remaining 12% Senior
Notes”) offering to repurchase, in accordance with and at the price
specified in Section 4.11 of the Indenture, the Remaining 12% Senior
Notes. On the repurchase date specified in the repurchase notice
referred to in the immediately preceding sentence, the Company shall cause the
12% Senior Notes Issuer to repurchase the Remaining 12% Senior Notes using funds
provided by Purchaser or at the direction of Purchaser (the “Senior Notes Repurchase
Payment”).
(h) Purchaser
shall not be responsible or liable for, any payment (including with respect to
the 12% Senior Notes Cash Payments or with respect to the repurchase of the
Remaining 12% Senior Notes), damages or obligation arising from the failure of
the Company and its Subsidiaries to comply with the provisions of this Section
3.01, including, without limitation, any such failure which would result in the
closing of the Exchange Offer without the consent of Purchaser.
D-19
ARTICLE
IV
ISSUANCE
OF NEW PREFERRED STOCK, COMMON STOCK AND WARRANTS
SECTION
4.01 Issuance of New Preferred
Stock. (a)
Upon the terms and subject to the conditions of this Agreement, at the Swap
Closing, the Company shall issue to Purchaser, and Purchaser shall subscribe for
and purchase from the Company, the First Tranche Shares. In
consideration for the issuance of the First Tranche Shares to Purchaser,
Purchaser shall (i) surrender to the Company all of the shares of Senior
Preferred Stock acquired by Purchaser pursuant to the Senior Preferred Stock
Purchase Agreements and the Tender Offer, (ii) surrender to the Company all of
the shares of Junior Preferred Stock acquired by Purchaser pursuant to the
Junior Preferred Stock Purchase Agreement and the Tender Offer, (iii) pay the
First Tranche Price into the Escrow Account and (iv) pay to each Initial
Investor of Junior Preferred Stock the applicable Additional Returns set forth
opposite the name of each Initial Investor of Junior Preferred Stock as provided
in Exhibit 1.01.
(b) Upon
the terms and subject to the conditions of this Agreement, at the Swap Closing,
the Company shall issue to Purchaser, and Purchaser shall subscribe for and
purchase from the Company, 622,897 shares of Series B-2 Preferred Stock (the
“Second Tranche
Shares”) in consideration for the payment by Purchaser of US$62,289,696
(“Second Tranche
Price”) in cash into the Escrow Account; provided,
however,
that if the aggregate of the First Tranche Price and US$62,289,696 exceeds
US$75,000,000 (such excess being referred to herein as the “Capital Excess”), the
Second Tranche Price may, in the sole discretion of Purchaser upon written
notice to the Company, be reduced by an amount equal to or less than the Capital
Excess and the number of the Second Tranche Shares shall be reduced
proportionally.
(c) The
Company shall execute and file with the Secretary of State of the State of
Delaware (i) the Certificate of Designations of Series B-1 Preferred Stock
attached hereto as Exhibit 4.01(c)(i), subject to any revisions required by AMEX
pursuant to Section 7.13, and (ii) the Certificate of Designations of Series B-2
Preferred Stock attached hereto as Exhibit 4.01(c)(ii), subject to any revisions
required by AMEX pursuant to Section 7.13, on the Closing Date and prior to the
issuance of the First Tranche Shares and Second Tranche Shares.
SECTION
4.02 Issuance of Common
Stock. If Purchaser receives the Stockholder Election Notice
(as defined in the Junior Preferred Stock Purchase Agreement) pursuant to the
Junior Preferred Stock Purchase Agreement, it shall deliver a written notice
(the “Purchaser Election
Notice”) to the Company prior to the Swap Closing stating the number of
shares of Common Stock that each Key Junior Preferred Stockholder (the “Exercising Junior Preferred
Stockholder(s)”) is entitled to receive. Upon receipt of the
Purchaser Election Notice, at the Swap Closing, the Company shall issue to
Purchaser, and Purchaser shall subscribe for and purchase from the Company, at a
price of US$1.40 per share of Common Stock, such number of shares of Common
Stock in the name of Purchaser or in the name of the Key Junior Preferred
Stockholders, as is designated by Purchaser in the Purchaser Election Notice
(the shares of Common Stock issued by the Company to the Exercising Junior
Preferred Stockholder(s) being referred to herein as the “Shares of Newly Issued Common
Stock”). The aggregate purchase price for such shares of
Common Stock shall be paid by Purchaser at the Swap Closing by wire transfer in
immediately funds into a bank account designated by the
Company. Purchaser shall promptly deliver to each Exercising Junior
Preferred Stockholder such number of shares of
D-20
Common
Stock as are set forth in the Purchaser Election Notice. The issuance
of the Shares of Newly Issued Common Stock shall be conditioned upon receiving
the following representations and warranties from the Exercising Junior
Preferred Stockholder(s) for the benefit of the Company:
(a) such
Exercising Junior Preferred Stockholder(s) is an “accredited investor” (within
the meaning of Rule 501(a) under the Securities Act);
(b) such
Exercising Junior Preferred Stockholder(s) is acquiring the Shares of Newly
Issued Common Stock for its own account for investment purposes and not with a
view to, or for offer or sale in connection with, any distribution thereof, and
such Exercising Junior Preferred Stockholder(s) has such knowledge and
experience in financial and business matters that he, she or it is capable of
evaluating the merits and risks of investing in the Company;
(c) such
Exercising Junior Preferred Stockholder(s) is not purchasing the Shares of Newly
Issued Common Stock as a result of any general solicitation or general
advertising (as those terms are used in Regulation D of the Securities Act);
and
(d) the
offer and sale of the Shares of Newly Issued Common Stock to such Exercising
Junior Preferred Stockholder(s) is in compliance with all applicable
Laws.
SECTION
4.03 Issuance of
Warrants. (a) Upon the terms and subject to the
conditions of this Agreement, at the Swap Closing, the Company shall issue to
Purchaser warrants, in the form attached hereto as Exhibit 4.03(a), providing
for Purchaser’s right to purchase 33,653,960 shares of Common Stock, subject to
adjustment in accordance with the terms thereof (the “Mandatory Warrants”).
(b) Upon
the terms and subject to the conditions of this Agreement, at the Swap Closing,
the Company shall issue to Purchaser warrants, in the form attached hereto as
Exhibit 4.03(b), providing for Purchaser’s right to purchase 5,000,000 shares of
Common Stock, subject to adjustment in accordance with the terms thereof (the
“Optional
Warrants”; together with the
Mandatory Warrants, the “Warrants”); provided,
however,
that if the June 15, 2008 or the September 15, 2008 interest payment under the
12% Senior Notes is not made by the Company and this Agreement is not terminated
by the Company pursuant to Section 7.20, the Company shall not be required to
issue the Optional Warrants.
SECTION
4.04 Closing of the
Swap. Upon the terms and subject to the conditions of this
Agreement, the closing of the Swap, including the sale and purchase of the New
Preferred Stock and the issuance of the Warrants, shall take place at a closing
(the “Swap Closing”) at Shearman
& Sterling LLP, 12/F Gloucester Tower, the Landmark, 15 Queen’s Road,
Central, Hong Kong, immediately following the satisfaction or waiver of each of
the conditions to the obligations of the parties hereto set forth in Section
8.01 and Section 8.02 or at such other place or on such other date as the
parties may mutually agree upon in writing.
SECTION
4.05 Closing Deliveries
by the
Company. At the Swap Closing, the Company shall deliver to
Purchaser:
(a) stock
certificates evidencing the First Tranche Shares;
D-21
(b) stock
certificates evidencing the Second Tranche Shares;
(c) the
Warrants duly executed by the Company;
(d) original
counterparts of the Investor Rights Agreement duly executed by the
Company;
(e) a
true and complete copy, certified by the Secretary or an Assistant Secretary of
the Company, of the resolutions duly and validly adopted by the Board evidencing
(i) their authorization of the execution and delivery of this Agreement and the
Ancillary Documents to which the Company or any of its Subsidiaries is a party,
(ii) the consummation of the Transactions applicable to the Company or any of
its Subsidiaries, (iii) the decrease in the number of total members of the Board
from eight (8) to seven (7), (iv) the appointment of four (4) directors of the
Board nominated by Purchaser and (v) amendments to the charters for the
nominating and governance committee and the compensation committee of the Board
to remove any requirements regarding the minimum number of independent directors
on such committees to the extent permitted by Law, in the case of (iii), (iv)
and (v) above, effective upon the Swap Closing;
(f) a
certificate of the Secretary or an Assistant Secretary of the Company certifying
the names and signatures of the officers of the Company authorized to sign this
Agreement and the Ancillary Documents to which the Company or any of its
Subsidiaries is a party and the other documents to be delivered hereunder and
thereunder by the Company or any of its Subsidiaries;
(g) the
resignations, effective as of the Swap Closing, of the four directors of the
Company appointed by the holders of the Junior Preferred Stock and one
additional director to be identified by the Company at least five (5) Business
Days prior to the Swap Closing as the directors of the Company;
(h) a
copy of (i) the Certificate of Incorporation, as amended, of the Company,
certified by the Secretary of State of the State of Delaware, as of a date not
earlier than five Business Days prior to the Swap Closing and accompanied by a
certificate of the Secretary or Assistant Secretary of the Company, dated as of
the Swap Closing, stating that no amendments have been made to such Certificate
of Incorporation since such date other than as contemplated by this Agreement
and (ii) the amended and restated by-laws of the Company in the form
attached hereto as Exhibit 4.05(i) (the “Amended and Restated
By-laws”), effective upon the Swap Closing, duly adopted by the Board and
certified by the Secretary or Assistant Secretary of the Company;
(i) certified
copies of (i) the Certificate of Designations of Series B-1 Preferred Stock,
(ii) the Certificate of Designations of Series B-2 Preferred Stock, (iii) the
Amendment to the Certificate of Designations of Senior Preferred Stock, (iv) the
Amendment to the Certificate of Designations of Junior Preferred Stock and (v)
the Amendment to the Certificate of Incorporation, in each case, duly filed with
the Secretary of State of the State of Delaware on the Closing
Date;
D-22
(j) a
good standing certificate for the Company from the Secretary of State of the
State of Delaware dated as of a date not earlier than five Business Days prior
to the Swap Closing;
(k) a
receipt for the First Tranche Price and the Second Tranche Price;
(l) original
copies of the Release Letter executed by each of the Initial Investors of Junior
Preferred Stock that is not a Key Junior Preferred Stockholder;
(m) a
copy of each of (i) the Amendment to the Indenture, (ii) the New Indenture, and
(iii) the New Senior Notes, in each case, duly executed by the Company and the
Indenture Trustee (or authenticated by the Indenture Trustee, in the case of the
New Senior Notes) and a certificate of a duly authorized officer of the Company
certifying that the Amendment to the Indenture and the New Indenture have each
become effective;
(n) a
certificate of the Chief Financial Officer of the Company certifying that the
Company has sufficient “surplus” (as defined in Section 154 of the DGCL) to
redeem the Remaining Preferred Stock pursuant to Section 7.16; and
(o) a
certificate of the Secretary or an Assistant Secretary of the Company certifying
that the Common Stockholder Approvals and the Preferred Stockholder Consents
have been obtained.
SECTION
4.06 Closing Deliveries by
Purchaser. At the Swap Closing, Purchaser shall deliver to the
Company:
(a) original
counterparts of the Investor Rights Agreement duly executed by
Purchaser;
(b) a
certificate of the Secretary or an Assistant Secretary of Purchaser certifying
the names and signatures of the officers of Purchaser authorized to sign this
Agreement and the Ancillary Documents to which Purchaser is a party and the
other documents to be delivered hereunder and thereunder by Purchaser;
and
(c) a
receipt for the Warrants and the New Preferred Stock.
SECTION
4.07 Escrow. Prior
to the Swap Closing, the Company and Purchaser shall enter into an Escrow
Agreement with the Escrow Agent substantially in the form of Exhibit 4.07
(the “Escrow
Agreement”). In accordance with the terms of the Escrow
Agreement, Purchaser shall deposit the First Tranche Price and Second Tranche
Price to be managed and paid out by the Escrow Agent in accordance with the
terms of the Escrow Agreement.
ARTICLE
V
REPRESENTATIONS
AND WARRANTIES OF THE COMPANY
As an
inducement to Purchaser to enter into this Agreement, the Company hereby
represents and warrants to Purchaser that:
D-23
SECTION
5.01 Organization and
Qualification; Subsidiaries. (a) Each of the
Company and each subsidiary of the Company (each a “Subsidiary”) is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has the requisite corporate power and
authority and all necessary governmental approvals to own, lease and operate its
properties and to carry on its business as it is now being
conducted. The Company and each Subsidiary is, in all material
respects, duly qualified or licensed as a corporation to do business, and is in
good standing, in each jurisdiction where the character of the properties owned,
leased or operated by it or the nature of its business makes such qualification
or licensing necessary.
(b) A
true and complete list of all the Subsidiaries, together with the jurisdiction
of incorporation of each Subsidiary, the percentage of the outstanding capital
stock of each Subsidiary owned by the Company and each other Subsidiary, and the
names of the directors and officers of each Subsidiary, is set forth in Section
5.01(b) of the Disclosure Schedule. Except as disclosed in Section
5.01(b) of the Disclosure Schedule, the Company does not directly or indirectly
own any equity or similar interest in, or any interest convertible into or
exchangeable or exercisable for any equity or similar interest in, any
corporation, partnership, joint venture or other business association or
entity.
SECTION
5.02 Certificate of Incorporation
and By-laws. The Company has heretofore furnished to Purchaser
a complete and correct copy of the Certificate of Incorporation and the By-laws
or equivalent organizational documents, each as amended to date, of the Company
and each Subsidiary. Such Certificates of Incorporation, By-laws or
equivalent organizational documents are in full force and
effect. Except as disclosed in Section 5.02 of the Disclosure
Schedule, neither the Company nor any Subsidiary is in violation of any of
the provisions of its Certificate of Incorporation, By-laws or equivalent
organizational documents.
SECTION
5.03 Capitalization. (a) The
authorized capital stock of the Company consists of (i) 200,000,000 shares of
Common Stock, of which, as of the date of this Agreement, 117,012,229 shares are
issued and outstanding; (ii) 5,000,000 shares of preferred stock, par value
US$0.0006 per share, of which (1) 1,111,282 have been designated as Senior
Preferred Stock, of which, as of the date of this Agreement, 482,999 shares are
issued and outstanding; (2) 2,755,319 shares have been designated as Junior
Preferred Stock, of which, as of the date of this Agreement, 710,741 shares are
issued and outstanding; and (3) 1,785,714 shares have been designated as Series
A Cumulative Convertible Preferred Stock, of which, as of the date of this
Agreement, no shares are issued and outstanding. All issued and
outstanding shares of the Company are validly issued, fully paid and
nonassessable. As of the date of this Agreement, no shares of capital
stock are held in treasury and no shares of capital stock are reserved for
future issuance except as provided in the Certificates of Designations of the
Preferred Stock, the Existing Warrants and the Company Stock
Plans. Except for the Senior Preferred Stock, the Junior Preferred
Stock, the Existing Warrants and the Company Stock Plans, there are no options,
warrants or other rights, agreements, arrangements or commitments of any
character relating to the issued or unissued capital stock of the Company or any
Subsidiary or obligating the Company or any Subsidiary to issue or sell any
shares of capital stock of, or other equity interests in, the Company or any
Subsidiary. Section 5.03(a) of the Disclosure Schedule sets forth,
for each holder of Existing Warrants or options, the following information with
respect to each of the Existing Warrants and Company Stock Plans: (i)
the name of each holder thereof;
D-24
(ii) the
number of shares of capital stock subject to such Existing Warrants or
outstanding awards under Company Stock Plans, and the number of shares of
capital stock subject to Company Stock Plans; (iii) the exercise or purchase
price of the warrants, options or stock rights; (iv) the date on which the
warrants, options or stock rights were granted; (v) the date on which the
warrants, options or stock rights can be exercised or vest; and (vi) the date on
which the warrants or options expire. The Company has made available
to Purchaser accurate and complete copies of all Existing Warrants, Company
Stock Plans and the form of award agreements under Company Stock
Plans. Except as set forth in Section 5.03(a) of the Disclosure
Schedule, all shares of Common Stock subject to issuance as aforesaid, upon
issuance on the terms and subject to the conditions specified in the instruments
pursuant to which they are issuable, will be duly authorized, validly issued,
fully paid and nonassessable. Except as provided in the Certificates
of the Designations of the Preferred Stock, there are no outstanding contractual
obligations of the Company or any Subsidiary to repurchase, redeem or otherwise
acquire any capital stock of the Company or any Subsidiary or to provide funds
to, or make any investment (in the form of a loan, capital contribution or
otherwise) in, any Subsidiary or any other Person. Except as set
forth in Section 5.03(a)(i) of the Disclosure Schedule, there are no commitments
or agreements of any character to which the Company is bound obligating the
Company to accelerate the exercisability or vesting of any Existing Warrants or
outstanding awards under Company Stock Plans as a result of the
Transactions. All outstanding shares of capital stock of the Company,
all Existing Warrants and all outstanding awards under Company Stock Plans and
all outstanding shares of capital stock of each Subsidiary have been issued and
granted in compliance with (i) all applicable Securities Laws and other
applicable Laws and (ii) all requirements set forth in applicable
contracts. Except for the 12% Senior Notes and the financed insurance
premiums incurred in the ordinary course of business by the Company or its
Subsidiaries as described in Schedule 5.03(a)(ii) of the Disclosure Schedule,
the Company or any Subsidiary has not issued any notes, bonds or other debt
securities, or any option, warrant or other right to acquire the same, of the
Company or any Subsidiary.
(b) Except
as provided in Section 5.03(b) of the Disclosure Schedule, each outstanding
share of capital stock of each Subsidiary is duly authorized, validly issued,
fully paid and nonassessable, and each such share is owned by the Company or
another Subsidiary free and clear of all security interests, liens, claims,
pledges, options, rights of first refusal, agreements, limitations on the
Company’s or any Subsidiary’s voting rights, charges and other encumbrances of
any nature whatsoever.
SECTION
5.04 Authority Relative to the
Transaction Agreements. Each of the Company and its
Subsidiaries has all necessary corporate power and authority to execute and
deliver each of the Transaction Agreements to which it is a party, to perform
its obligations thereunder and to consummate the Transactions applicable to the
Company or such Subsidiary, except for the Stockholders Approvals and Preferred
Stockholder Consents. The execution and delivery by the Company or
any of its Subsidiaries of each of the Transaction Agreements to which it is a
party and the consummation by the Company or any of its Subsidiaries of the
Transactions applicable to the Company or such Subsidiary have been duly and
validly authorized by all necessary corporate action on the part of the Company
or such Subsidiary, as the case may be, and no other corporate proceedings on
the part of the Company or such Subsidiary are necessary to authorize any of the
Transaction Agreements to which it is a party or to consummate the Transactions
applicable to the Company or such Subsidiary, except for the
D-25
Stockholders
Approvals and Preferred Stockholder Consents. Each of the Transaction
Agreements to which the Company or any Subsidiary is a party has been or, upon
execution, shall have been duly and validly executed and delivered by the
Company or such Subsidiary and, assuming the due authorization, execution and
delivery by the other parties thereto, constitute legal, valid and binding
obligations of the Company and such Subsidiaries, enforceable against the
Company and each such Subsidiary, as the case may be, in accordance with their
terms, except as may be limited by bankruptcy, insolvency, reorganization or
other similar laws affecting the enforcement of creditors’ rights generally and
by general principles of equity. The Board has unanimously approved
each of the Transaction Agreements to which the Company is a party and the
Transactions applicable to the Company and such approvals are sufficient so that
the restrictions on business combinations set forth in Section 203(a) of the
DGCL shall not apply to the Transactions and the Transaction Documents or such
restrictions are otherwise inapplicable to the Transactions and the Transaction
documents.
SECTION
5.05 No Conflict; Required
Filings and Consents. (a) The execution and
delivery of each of the Transaction Agreements to which the Company or any
Subsidiary is a party by the Company or such Subsidiary do not, and the
performance of each of the Transaction Agreements by the Company or any
Subsidiary will not, and the consummation of the Transactions applicable to the
Company or any Subsidiary by the Company or such Subsidiary (as the case may be)
will not, (i) conflict with or violate the Certificate of Incorporation or
By-laws or any equivalent organizational documents of the Company or any
Subsidiary taking into account the assumptions set forth in clause (iii) below,
(ii) assuming that all consents, approvals and other authorizations described in
Section 5.05(b) have been obtained and that all filings and other actions
described in Section 5.05(b) have been made or taken, conflict with or violate,
in any material respect, any Law applicable to the Company or any Subsidiary or
by which any property or asset of the Company or any Subsidiary is bound or
affected, or (iii) assuming each of the Amendment to the Certificate of
Incorporation, the Amended and Restated By-laws, the Amendment to the
Certificate of Designations of the Senior Preferred Stock, the Amendment to the
Certificate of Designations of Junior Preferred Stock, and the Amendment to the
Indenture has become effective, result in any material breach of or constitute a
material default (or an event which, with notice or lapse of time or both, would
become a material default) under, or give to others any right of termination,
amendment, acceleration or cancellation of, or result in the creation of a lien
or other encumbrance on any material property or asset of the Company or any
Subsidiary pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which the Company or any Subsidiary is a party or by which the Company or a
Subsidiary or any property or asset of the Company or any Subsidiary is bound or
affected.
(b) The
execution and delivery of each of the Transaction Agreements by the Company or
any Subsidiary do not, the performance by the Company or any Subsidiary of its
obligations thereunder will not, and the consummation of the Transactions by the
Company or any Subsidiary will not, require any consent, approval, authorization
or permit of, or filing with or notification to, any Governmental Authority,
except for (i) the requirements of Exon-Xxxxxx Provisions, to the extent
applicable; (ii) the requirements of applicable Securities Laws; (iii) the
requirements of applicable Anti-trust Laws; (iv) the filing and recordation of
appropriate documents as required by the DGCL; (v) the Article 71 Waiver; (vi)
Exchange Approvals; and (vii) as would not, individually or in the aggregate,
prevent or materially delay consummation of
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any of
the Transactions or otherwise prevent or materially delay the Company from
performing its obligations under this Agreement and would not, individually or
in the aggregate, have a Material Adverse Effect.
SECTION
5.06 Permits;
Compliance. Each of the Company and the Subsidiaries is in
possession of all franchises, grants, authorizations, licenses, permits,
easements, variances, exceptions, consents, certificates, approvals and orders
of any Governmental Authority necessary for each of the Company or the
Subsidiaries to own, lease and operate its properties or to carry on its
business as it is now being conducted or presently contemplated to be conducted,
including, without limitation, all necessary waivers from MEMR waiving
Kazakhstan government’s pre-emptive rights under Article 71 of the Subsoil Use
Law and all necessary consents or permits required under Anti-trust Laws and the
spouses’ consents required under applicable Law in connection with any prior
acquisition, purchase, sale, transfer or other disposal by the Company or any
Subsidiary of any assets or equity interests (the “Permits”), except where the failure to
have, or the suspension or cancellation of, any of the Permits would not,
individually or in the aggregate, prevent or materially delay consummation of
any of the Transactions or otherwise prevent or materially delay the Company
from performing its obligations under this Agreement and would not, individually
or in the aggregate, have a Material Adverse Effect. No suspension or
cancellation of any of the Permits is pending or, to the knowledge of the
Company, threatened. Neither the Company nor any Subsidiary is in
conflict with, or in default, breach or violation of, (a) any Law applicable to
the Company or any Subsidiary or by which any property or asset of the Company
or any Subsidiary is bound or affected, except for any such conflicts, defaults,
breaches or violations that would not, individually or in the aggregate, prevent
or materially delay consummation of any of the Transactions or otherwise prevent
or materially delay the Company from performing its obligations under this
Agreement and would not, individually or in the aggregate, have a Material
Adverse Effect, or (b) except as disclosed in Section 5.06 of the Disclosure
Schedule, any material note, bond, mortgage, indenture, contract, agreement,
lease, license, Permit, franchise or other instrument or obligation to which the
Company or any Subsidiary is a party or by which the Company or any Subsidiary
or any property or asset of the Company or any Subsidiary is bound in any
material respect.
SECTION
5.07 SEC Filings; Financial
Statements. (a) The Company has filed all forms,
reports and documents required to be filed by it with the SEC since January 1,
2005, including (i) its Annual Reports on Form 10-K for the fiscal years
ended December 31, 2005, 2006 and 2007, respectively, (ii) its Quarterly Report
on Form 10-Q for the period ended Xxxxx 00, 0000, (xxx) all proxy statements
relating to the Company’s meetings of stockholders (whether annual or special)
held since January 1, 2005 and (iv) all other forms, reports and other
registration statements (other than Quarterly Reports on Form 10-Q not referred
to in clause (ii) above) filed by the Company with the SEC since January 1,
2005 (the forms, reports and other documents referred to in clauses (i),
(ii), (iii) and (iv) above being, collectively, the “SEC Reports”). The SEC
Reports (i) were prepared in accordance with either the Securities Act, or the
Exchange Act, as the case may be, and the rules and regulations promulgated
thereunder, and (ii) did not, at the time they were filed, or, if amended, as of
the date of such amendment, 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 made therein, in the light of the
D-27
circumstances
under which they were made, not misleading. No Subsidiary is required
to file any form, report or other document with the SEC.
(b) Each
of the consolidated financial statements (including, in each case, any notes
thereto) contained in the SEC Reports was prepared in accordance with United
States generally accepted accounting principles (“GAAP”) applied on a
consistent basis throughout the periods indicated (except as may be indicated in
the notes thereto) and each fairly presents, in all material respects, the
consolidated financial position, results of operations and cash flows of the
Company and its consolidated Subsidiaries as at the respective dates thereof and
for the respective periods indicated therein (subject, in the case of unaudited
statements, to normal year-end adjustments which would not have had, and would
not have, individually or in the aggregate, a Material Adverse
Effect).
(c) Except
as and to the extent set forth on the audited consolidated balance sheet of the
Company and the consolidated Subsidiaries as at December 31, 2007, including the
notes thereto (the “Balance Sheet”),
neither the Company nor any Subsidiary has any liability or obligation of any
nature (whether accrued, absolute, contingent or otherwise) that would be
required to be disclosed in accordance with GAAP, except for liabilities and
obligations, incurred in the ordinary course of business consistent with past
practice since December 31, 2007, which would not, individually or in the
aggregate, prevent or materially delay consummation of any of the Transactions
or otherwise prevent or materially delay the Company from performing its
obligations under this Agreement and would not, individually or in the
aggregate, have a Material Adverse Effect.
(d) The
Company has heretofore furnished to Purchaser complete and correct copies of all
material amendments and modifications that have not been filed by the Company
with the SEC to all agreements, documents and other instruments that previously
had been filed by the Company with the SEC and are currently in
effect.
(e) The
Company has made available to Purchaser all comment letters received by the
Company from the SEC or the staff thereof since December 31, 2006 and all
responses to such comment letters filed by or on behalf of the
Company.
(f) To
the Company’s knowledge, except as disclosed in the SEC Reports, each director
and executive officer of the Company has filed with the SEC on a timely basis
all statements required by Section 16(a) of the Exchange Act and the rules and
regulations thereunder since January 1, 2005.
(g) The
Company has timely filed and made available to Purchaser all certifications and
statements required by (x) Rule 13a-14 or Rule 15d-14 under the Exchange Act or
(y) 18 U.S.C. Section 1350 (Section 906 of the Xxxxxxxx-Xxxxx Act of 2002) with
respect to any Company SEC Report. The Company maintains disclosure
controls and procedures required by Rule 13a-15 or Rule 15d-15 under the
Exchange Act; such controls and procedures are effective to ensure that all
material information concerning the Company and its Subsidiaries is made known
on a timely basis to the individuals responsible for the preparation of the
Company’s SEC filings and other public disclosure documents. The
Company has made available to Purchaser in the Data Room, complete and correct
copies of, all written descriptions
D-28
of, and
all policies, manuals and other documents promulgating, such disclosure controls
and procedures. As used in this Section 5.07, the term “file” shall
be broadly construed to include any manner in which a document or information is
furnished, supplied or otherwise made available to the SEC.
(h) The
Company maintains and will continue to maintain a standard system of accounting
established and administered in accordance with GAAP. The Company and
its Subsidiaries maintain a system of internal accounting controls sufficient to
provide reasonable assurance that (i) transactions are executed in accordance
with management’s general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with GAAP and to maintain asset accountability, (iii) access to
assets is permitted only in accordance with management’s general or specific
authorization, and (iv) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken with
respect to any differences. The Company has made available to
Purchaser in the Data Room, complete and correct copies of, all written
descriptions of, and all policies, manuals and other documents promulgating,
such internal accounting controls.
(i) Since
January 1, 2005, neither the Company nor any Subsidiary nor, to the Company’s
knowledge, any director, officer, employee, auditor, accountant or
representative of the Company or any Subsidiary, has received or otherwise had
or obtained knowledge of any complaint, allegation, assertion or claim, whether
written or oral, regarding the accounting or auditing practices, procedures,
methodologies or methods of the Company or any Subsidiary or their respective
internal accounting controls, including any complaint, allegation, assertion or
claim that the Company or any Subsidiary has engaged in questionable accounting
or auditing practices. No attorney representing the Company or any
Subsidiary, whether or not employed by the Company or any Subsidiary, has
reported evidence of a material violation of the Securities Laws, breach of
fiduciary duty or similar violation by the Company or any of its officers,
directors, employees or agents to the Company Board or any committee thereof or
to any director or officer of the Company. Since January 1, 2005,
there have been no internal investigations regarding accounting or revenue
recognition discussed with, reviewed by or initiated at the direction of the
chief executive officer, chief financial officer, general counsel, the Board or
any committee thereof.
(j) To
the knowledge of the Company, no employee of the Company or any Subsidiary has
provided or is providing information to any law enforcement agency regarding the
commission or possible commission of any crime or the violation or possible
violation of any applicable Law. Neither the Company nor any
Subsidiary nor, to the knowledge of the Company, any officer, employee,
contractor, subcontractor or agent of the Company or any such Subsidiary has
discharged, demoted, suspended, threatened, harassed or in any other manner
discriminated against an employee of the Company or any Subsidiary in the terms
and conditions of employment because of any act of such employee described in 18
U.S.C. § 1514A(a).
(k) All
accounts receivable of the Company and its Subsidiaries reflected on the Balance
Sheet or arising thereafter have arisen from bona fide transactions in the
ordinary course of business consistent with past practices and in accordance
with SEC regulations and GAAP applied on a consistent basis and are not subject
to valid defenses, setoffs or counterclaims. The Company’s reserve
for contractual allowances and doubtful accounts, to the knowledge of
the
D-29
Company,
is adequate and has been calculated in a manner consistent with past
practices. Since the date of the Balance Sheet, neither the Company
nor any of its Subsidiaries has modified or changed in any material respect its
sales practices or methods including, without limitation, such practices or
methods in accordance with which the Company or any of its Subsidiaries sell
goods, fill orders or record sales.
(l) All
accounts payable of the Company and its Subsidiaries reflected on the Balance
Sheet or arising thereafter are the result of bona fide transactions in the
ordinary course of business. Since the date of the Balance Sheet, the
Company and its Subsidiaries have not altered in any material respects their
practices for the payment of such accounts payable, including the timing of such
payment.
SECTION
5.08 Absence of Certain Changes
or Events. Since December 31, 2007, except as set forth in
Section 5.08 of the Disclosure Schedule, or as expressly contemplated by this
Agreement, or specifically disclosed in the SEC Reports filed since December 31,
2007 and prior to the date of this Agreement, (a) the Company and the
Subsidiaries have conducted their businesses only in the ordinary course and in
a manner consistent with past practice, (b) there has not been any Material
Adverse Effect, and (c) none of the Company or any Subsidiary has taken any
action that, if taken after the date of this Agreement, would constitute a
material breach of any of the covenants set forth in Section 7.01.
SECTION
5.09 Absence of
Litigation. Except as set forth in Section 5.09 of the
Disclosure Schedule, there is no material litigation, suit, claim, action,
proceeding or investigation (an “Action”) pending or, to the knowledge
of the Company, threatened against the Company or any Subsidiary, or any
property or asset of the Company or any Subsidiary, before any Governmental
Authority. Neither the Company nor any Subsidiary nor any material
property or asset of the Company or any Subsidiary is subject to any continuing
order of, consent decree, settlement agreement or similar written agreement
with, or, to the knowledge of the Company, continuing investigation by, any
Governmental Authority, or any order, writ, judgment, injunction, decree,
determination or award of any Governmental Authority.
SECTION
5.10 Employee Benefit
Plans. (a) Section 5.10(a) of the Disclosure
Schedule lists (i) all employee benefit plans (as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended (“ERISA”)) and all bonus, stock option,
stock purchase, restricted stock, incentive, deferred compensation, retiree
medical or life insurance, supplemental retirement, severance or other benefit
plans, programs or arrangements, and all employment, termination, severance or
other contracts or agreements, whether legally enforceable or not, to which the
Company or any Subsidiary is a party, with respect to which the Company or any
Subsidiary has any obligation or which are maintained, contributed to or
sponsored by the Company or any Subsidiary for the benefit of any current or
former employee, officer or director of, or any current or former consultant to,
the Company or any Subsidiary, (ii) each employee benefit plan for which the
Company or any Subsidiary could incur liability under Section 4069 of ERISA in
the event such plan has been or were to be terminated, (iii) any plan in respect
of which the Company or any Subsidiary could incur liability under Section
4212(c) of ERISA, and (iv) any contracts, arrangements or understandings between
the Company or any Subsidiary and any employee of the Company or any Subsidiary
including, without limitation, any contracts, arrangements or understandings
relating in any way to a sale of the Company or
D-30
any
Subsidiary (collectively, the “Plans”). Each Plan is in
writing and the Company has furnished to Purchaser a true and complete copy of
each Plan and has delivered to Purchaser a true and complete copy of each
material document, if any, prepared in connection with each such Plan,
including, without limitation, (i) a copy of each trust or other funding
arrangement, (ii) each summary plan description and summary of material
modifications, (iii) the most recently filed Internal Revenue Service (“IRS”) Form 5500, if any, (iv) the most
recently received IRS determination letter for each such Plan that is intended
to qualify under Section 401(a) of the Code, and (v) the most recently prepared
actuarial report and financial statement in connection with each such
Plan. Neither the Company nor any Subsidiary has any express or
implied commitment, whether legally enforceable or not, (i) to create, incur
liability with respect to or cause to exist any other employee benefit plan,
program or arrangement, (ii) to enter into any contract or agreement to provide
compensation or benefits to any individual, or (iii) to modify, change or
terminate any Plan, other than with respect to a modification, change or
termination required by ERISA or the Code.
(b) None
of the Plans is a multiemployer plan (within the meaning of Section 3(37) or
4001(a)(3) of ERISA) (a “Multiemployer Plan”)
or a single employer pension plan (within the meaning of Section 4001(a)(15) of
ERISA) for which the Company or any Subsidiary could incur liability under
Section 4063 or 4064 of ERISA (a “Multiple Employer
Plan”). Except as set forth in Section 5.10(b) of the
Disclosure Schedule, none of the Plans (i) provides for the payment of
separation, severance, termination or similar-type benefits to any Person, (ii)
obligates the Company or any Subsidiary to pay separation, severance,
termination or similar-type benefits solely or partially as a result of any
transaction contemplated by this Agreement, or (iii) obligates the Company or
any Subsidiary to make any payment or provide any benefit as a result of a
“change in control”, within the meaning of such term under Section 280G of the
Code. None of the Plans provides for or promises retiree medical,
disability or life insurance benefits to any current or former employee, officer
or director of the Company or any Subsidiary. Each of the Plans,
other than the Non-U.S. Benefit Plans (as defined below), is subject only to the
Laws of the United States or a political subdivision thereof.
(c) Each
Plan is now and always has been operated in all material respects in accordance
with its terms and the requirements of all applicable Laws including, without
limitation, ERISA and the Code. The Company and the Subsidiaries have
performed all material obligations required to be performed by them under, are
not in any respect in material default under or in violation of, and have no
knowledge of any default or violation by any party to, any Plan. No
Action is pending or, to the knowledge of the Company, threatened with respect
to any Plan (other than claims for benefits in the ordinary course) and no fact
or event exists that could give rise to any such Action.
(d) Each
Plan that is intended to be qualified under Section 401(a) of the Code or
Section 401(k) of the Code has timely received a favorable determination letter
from the IRS covering all of the provisions applicable to the Plan for which
determination letters are currently available that the Plan is so qualified and
each trust established in connection with any Plan which is intended to be
exempt from federal income taxation under Section 501(a) of the Code has
received a determination letter from the IRS that it is so exempt, and no fact
or event has occurred since the date of such determination letter or letters
from the IRS to adversely affect the qualified status of any such Plan or the
exempt status of any such trust.
D-31
(e) There
has not been any prohibited transaction (within the meaning of Section 406 of
ERISA or Section 4975 of the Code) with respect to any Plan. Neither
the Company nor any Subsidiary has incurred any liability under, arising out of
or by operation of Title IV of ERISA (other than liability for premiums to the
Pension Benefit Guaranty Corporation arising in the ordinary course), including,
without limitation, any liability in connection with (i) the termination or
reorganization of any employee benefit plan subject to Title IV of ERISA, or
(ii) the withdrawal from any Multiemployer Plan or Multiple Employer Plan, and
no fact or event exists which could give rise to any such
liability. Neither the Company nor any Subsidiary has incurred any
liability for any penalty or tax arising under Section 4971, 4972, 4980, 4980B
or 6652 of the Code or any liability under Section 502 of ERISA, and no fact or
event exists that could give rise to any such liability. No complete
or partial termination has occurred within the five-years preceding the date
hereof with respect to any Plan. None of the assets of the Company or
any Subsidiary is the subject of any lien arising under Section 302(f) of ERISA
or Section 412(n) of the Code. Neither the Company nor any Subsidiary
has been required to post any security under Section 307 of ERISA or Section
401(a)(29) of the Code. No fact or event exists that could give rise
to such lien or requirement to post any such security.
(f) All
contributions, premiums or payments required to be made with respect to any Plan
have been made on or before their due dates. All such contributions
have been fully deducted for income tax purposes and no such deduction has been
challenged or disallowed by any Governmental Authority and no fact or event
exists which could give rise to any such challenge or disallowance.
(g) Except
as set forth in Section 5.10(g) of the Disclosure Schedule, all directors,
officers, management employees, and technical and professional employees of the
Company and the Subsidiaries are under written obligation to the Company and the
Subsidiaries to maintain in confidence all confidential or proprietary
information acquired by them in the course of their employment.
(h) In
addition to the foregoing, with respect to each Plan that is not subject to
United States law (a “Non-U.S. Benefit
Plan”):
(i) all
employer and employee contributions to each Non-U.S. Benefit Plan required by
law or by the terms of such Non-U.S. Benefit Plan have been made, or, if
applicable, accrued in accordance with normal accounting practices, and a pro
rata contribution for the period prior to and including the date of this
Agreement has been made or accrued;
(ii) the
fair market value of the assets of each funded Non-U.S. Benefit Plan, the
liability of each insurer for any Non-U.S. Benefit Plan funded through insurance
or the book reserve established for any Non-U.S. Benefit Plan, together with any
accrued contributions, is sufficient to procure or provide for the benefits
determined on any ongoing basis (actual or contingent) accrued to the date of
this Agreement with respect to all current and former participants under such
Non-U.S. Benefit Plan according to the actuarial assumptions and valuations most
recently used to determine employer contributions to such Non-U.S. Benefit Plan,
and no Transaction shall cause such assets or insurance obligations to be less
than such benefit obligations; and
D-32
(iii) each
Non-U.S. Benefit Plan required to be registered has been registered and has been
maintained in good standing with applicable regulatory
authorities. Each Non-U.S. Benefit Plan has been operated in full
compliance with all applicable non-United States laws.
(i) The
consummation of the Transactions will not, either alone or in combination with
another event, (i) entitle any current or former employee, officer or director
of the Company or any Subsidiary to severance pay, unemployment compensation or
any other payment, or (ii) accelerate the time of payment or vesting, or
increase the amount of compensation (in cash or otherwise) due any such
employee, officer or director (except as required under Code Section
411(d)(3)). Without regard to any determination made under Section
280G(b)(4), no payment or benefit (whether under a Plan, a contract, agreement,
arrangement or otherwise), which will or may be made by the Company, any
Subsidiary or any of their respective Affiliates with respect to any current,
former or retired employee, officer or director of the Company or any
Subsidiary, will be characterized as an “excess parachute payment” within the
meaning of Section 280G(b)(2).
SECTION
5.11 Labor and Employment
Matters. (a) (i) There are no material
controversies pending or, to the knowledge of the Company, threatened between
the Company or any Subsidiary and any of their respective employees; (ii)
neither the Company nor any Subsidiary is a party to any collective bargaining
agreement or other labor union contract applicable to Persons employed by the
Company or any Subsidiary, nor, to the knowledge of the Company, are there any
activities or proceedings of any labor union to organize any such employees;
(iii) neither the Company nor any Subsidiary has, in any material respect,
breached or otherwise failed to comply with any provision of any such agreement
or contract, and there are no grievances outstanding against the Company or any
Subsidiary under any such agreement or contract; (iv) there are no material
unfair labor practice complaints pending against the Company or any Subsidiary
before the National Labor Relations Board or any current union representation
questions involving employees of the Company or any Subsidiary; and (v) there is
no strike, slowdown, work stoppage or lockout, or, to the knowledge of the
Company, threat thereof, by or with respect to any employees of the Company or
any Subsidiary.
(b) The
Company and the Subsidiaries are in compliance with all applicable Laws relating
to the employment of labor, including those related to wages, hours,
immigration, work permits and naturalization, collective bargaining and the
payment and withholding of taxes and other sums as required by the appropriate
Governmental Authority in all material respects, and have withheld and paid to
the appropriate Governmental Authority or are holding for payment not yet due to
such Governmental Authority all amounts required to be withheld from employees
of the Company or any Subsidiary and are not liable for any arrears of wages,
taxes, penalties or other sums for failure to comply with any of the
foregoing. The Company and the Subsidiaries have paid in full to all
employees or adequately accrued for in accordance with GAAP consistently applied
all wages, salaries, commissions, bonuses, benefits and other compensation due
to or on behalf of such employees and there is no claim with respect to payment
of wages, salary or overtime pay that has been asserted or is now pending or
threatened before any Governmental Authority with respect to any Persons
currently or formerly employed by the Company or any
Subsidiary. Neither the Company nor any Subsidiary is a party to, or
otherwise bound by, any consent decree with, or citation by, any Governmental
Authority
D-33
relating
to employees or employment practices. There is no charge or
proceeding with respect to a violation of any occupational safety or health
standards that has been asserted or is now pending or threatened with respect to
the Company. There is no charge of discrimination in employment or
employment practices, for any reason, including, without limitation, age,
gender, race, religion or other legally protected category, which has been
asserted or is now pending or, to the Company’s knowledge, threatened before the
United States Equal Employment Opportunity Commission, or any other Governmental
Authority in any jurisdiction in which the Company or any Subsidiary has
employed or employ any Person.
(c) The
Company’s Annual Report on Form 10-K/A filed April 29, 2008 and Definitive Proxy
Statement on Schedule 14A filed April 17, 2007 contains, with respect to the
named executive officers therein and the Company’s directors (to the extent
applicable), with respect to the prior fiscal year, the annual salary, bonuses,
deferred or contingent compensation, perquisites, “golden parachute” and other
like benefits paid or payable (in cash or otherwise) for 2007 and 2006,
respectively, and the date of employment and job position of such named
executive officers, all to the extent required under applicable SEC rules and
regulations.
SECTION
5.12 Offer Documents; Proxy
Statement and
Registration Statement. (a) The Exchange Offer
Documents (assuming any changes requested by the Company so that the Exchange
Offer Documents shall not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of circumstances under which they
are made, not misleading, have been accepted for inclusion in the Exchange Offer
Documents) and the information supplied by the Company for inclusion in the
Tender Offer Documents shall not, at the times the Offer Documents or any
amendments or supplements thereto are first published, sent or given to the
holders of the 12% Senior Notes or the holders of the Remaining Shares of the
Preferred Stock, as the case may be, 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.
(b) The
Proxy Statement to be sent to the holders of Common Stock of the Company in
connection with the Common Stockholders Meeting, shall, at the date the Proxy
Statement (or any amendment or supplement thereto) is first mailed to
stockholders of the Company, at the time of the Common Stockholders Meeting and
at the Closing Date, not contain any statement which, at the time and in light
of the circumstances under which it was made, is false or misleading with
respect to any material fact, or which omits to state any material fact
necessary in order to make the statements therein not false or misleading or
necessary to correct any statement in any earlier communication with respect to
the solicitation of proxies for the Common Stockholders Meeting which shall have
become false or misleading in any material respect. The Proxy
Statement shall comply in all material respects as to form with the requirements
of the Exchange Act. The consent solicitation documents to be sent to
the holders of the Preferred Stock, at the request of Purchaser pursuant to
Section 7.02(b) hereof, in connection with the Preferred Stockholder Consents
(the “Stockholder Consent
Materials”), shall, at the date such documents (or any amendment or
supplement thereto) are first mailed to the holders of the Preferred Stock, and
at the Closing Date, not contain any statement which, at the time and in light
of the circumstances under which it was made, is false or misleading with
respect to any material fact, or which omits to state any material fact
necessary in order to make
D-34
the
statements therein not false or misleading or necessary to correct any statement
in any earlier communication with respect to the solicitation of the Preferred
Stockholder Consents which shall have become false or misleading in any material
respect.
(c) To
the extent applicable, the Registration Statement (as defined below), at the
date such document (or any amendment or supplement thereto) is first filed with
the SEC, and at the Closing Date, shall not contain any 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 not misleading.
SECTION
5.13 Real Property; Title to
Assets. (a) Section 5.13(a) of the Disclosure
Schedule lists each parcel of real property (except Oil and Gas Interests)
currently owned by the Company or any Subsidiary. Each parcel of real
property (except Oil and Gas Interests) owned by the Company or any Subsidiary,
except as set forth on Section 5.13(a) of the Disclosure Schedule, (i) is owned
free and clear of all mortgages, pledges, liens, security interests, conditional
and installment sale agreements, encumbrances, charges or other claims of third
parties of any kind, including, without limitation, any easement, right of way
or other encumbrance to title, or any option, right of first refusal, or right
of first offer (collectively, “Liens”), other than (A) Liens for
current Taxes and assessments not yet past due, (B) inchoate mechanics’ and
materialmen’s Liens for construction in progress, (C) workmen’s, repairmen’s,
warehousemen’s and carriers’ Liens arising in the ordinary course of business of
the Company or such Subsidiary consistent with past practice, and (D) all
matters of record, Liens and other imperfections of title and encumbrances that,
would not, individually or in the aggregate, have a Material Adverse Effect
(collectively, “Permitted
Liens”), and (ii) is neither subject to any governmental decree or order
to be sold nor is being condemned, expropriated or otherwise taken by any public
authority with or without payment of compensation therefor, nor, to the
knowledge of the Company, has any such condemnation, expropriation or taking
been proposed.
(b) Section 5.13(b)
of the Disclosure Schedule lists each material parcel of real property (except
Oil and Gas Interests) currently leased or subleased by the Company or any
Subsidiary, with the name of the lessor and the date of the lease, sublease,
assignment of the lease, any guaranty given or leasing commissions payable by
the Company or any Subsidiary in connection therewith and each amendment to any
of the foregoing (collectively, the “Lease
Documents”). True, correct and complete copies of all Lease
Documents have been delivered to Purchaser. All such current leases
and subleases are in full force and effect, are valid and effective in
accordance with their respective terms, and there is not, under any of such
leases, any existing material default or event of default (or event which, with
notice or lapse of time, or both, would constitute a material default) by the
Company or any Subsidiary or, to the Company’s knowledge, by the other party to
such lease or sublease, or Person in the chain of title to such leased
premises.
(c) Except
as set forth on Sections 5.13(a) and 5.13(b) of the Disclosure Schedule, neither
the Company nor any Subsidiary has leased any parcel or any portion of any
parcel of real property owned by the Company or any Subsidiary or subleased
any portion of any real property leased or subleased by the Company or any
Subsidiary to any other Person and no other Person has any rights to the use,
occupancy or enjoyment thereof pursuant to any lease, sublease, license,
occupancy or other agreement to which the Company or any Subsidiary is
a
D-35
party,
nor has the Company or any Subsidiary assigned its interest under any lease
listed on Section 5.13(b) of the Disclosure Schedule to any third
party.
(d) Each
parcel of real property owned or leased by the Company or any Subsidiary
currently has access to public roads or valid easements over private streets or
private property for such ingress to and egress from such parcel in each case as
is necessary for the conduct of the business of the Company or such Subsidiary
as it has heretofore been conducted and as presently planned to be conducted by
the Company and any Subsidiary in the future.
(e) There
are no contractual or legal restrictions that preclude or restrict the ability
to use any material real property (except Oil and Gas Interests) owned or leased
by the Company or any Subsidiary for the purposes for which it is currently
being used. There are no material latent defects or material adverse
physical conditions affecting the real property (except Oil and Gas Interests),
and improvements thereon, owned or leased by the Company or any Subsidiary other
than those that would not, individually or in the aggregate, prevent or
materially delay consummation of any of the Transactions or otherwise prevent or
materially delay the Company or any Subsidiary from performing its obligations
under this Agreement and would not, individually or in the aggregate have a
Material Adverse Effect.
(f) Each
of the Company and the Subsidiaries has good and valid title to, or, in the case
of leased properties and assets, valid leasehold or subleasehold interests in,
all of its material properties and assets, tangible and intangible, real,
personal and mixed, used or held for use in its business, free and clear of any
Liens, except as set forth in Section 5.13(a) or (b) of the Disclosure Schedule
and except for such imperfections of title, if any, that do not materially
interfere with the present value of the subject property.
SECTION
5.14 Intellectual
Property. (a) (i) The conduct of the business
of the Company and the Subsidiaries as currently conducted and as currently
contemplated to be conducted and the use of the Company Owned Intellectual
Property and the Company Licensed Intellectual Property in connection therewith
do not conflict with, infringe upon, misappropriate or otherwise violate the
Intellectual Property rights of any third party in any material respect, and no
claim has been asserted to the Company or any Subsidiary that the conduct of the
business of the Company and the Subsidiaries as currently conducted or as
currently contemplated to be conducted conflicts with, infringes upon or may
infringe upon, misappropriates or otherwise violates the Intellectual Property
rights of any third party; (ii) with respect to each item of Company Owned
Intellectual Property, the Company or a Subsidiary is the exclusive owner of the
entire unencumbered right, title and interest in and to such Company Owned
Intellectual Property and is entitled to use such Company Owned Intellectual
Property in the continued operation of its respective business without
limitation in any material respect; (iii) with respect to each item of Company
Licensed Intellectual Property, the Company or a Subsidiary has the valid right
to use such Company Licensed Intellectual Property in the continued operation of
its respective business in accordance with the terms of the license agreement
governing such Company Licensed Intellectual Property; (iv) to the knowledge of
the Company, the Company Owned Intellectual Property is valid and enforceable,
and has not been adjudged invalid or unenforceable in whole or in part; (v) to
the knowledge of the Company, no Person is engaging in any activity that
infringes upon or misappropriates the Company Owned Intellectual Property; (vi)
to the knowledge of the Company, each license of the Company Licensed
Intellectual
D-36
Property
is valid and enforceable (except as may be limited by bankruptcy, insolvency,
reorganization or other similar laws affecting the enforcement of creditors’
rights generally and by general principles of equity), is binding on all parties
to such license, and is in full force and effect; (vii) to the knowledge of the
Company, no party to any license of the Company Licensed Intellectual Property
is in breach thereof or default thereunder; and (viii) neither the execution of
this Agreement nor the consummation of the Transactions shall adversely affect
any of the rights of the Company or any Subsidiary with respect to the Company
Owned Intellectual Property or the Company Licensed Intellectual Property in any
material respect.
(b) The
Company and the Subsidiaries have taken reasonable steps in accordance with
normal industry practice to maintain the confidentiality of their trade secrets
and other confidential Intellectual Property and the validity of their other
Intellectual Property.
SECTION
5.15 Taxes. The
Company and the Subsidiaries have filed all United States federal, state, local
and non-United States Tax returns and reports required to be filed by them and
have paid and discharged all Taxes required to be paid or discharged, other than
such payments as are being contested in good faith by appropriate
proceedings. All such Tax returns are true, accurate and complete in
all material respects. Neither the IRS nor any other United States or
non-United States taxing authority or agency is now asserting or, to the
knowledge of the Company, threatening to assert against the Company or any
Subsidiary any deficiency or claim for any Taxes or interest thereon or
penalties in connection therewith. Neither the Company nor any
Subsidiary has granted any waiver of any statute of limitations with respect to,
or any extension of a period for the assessment of, any Tax. The
accruals and reserves for Taxes reflected in the Balance Sheet are adequate to
cover all Taxes accruable through such date (including interest and penalties,
if any, thereon) in accordance with GAAP. There are no material Tax
liens upon any property or assets of the Company or any of the Subsidiaries
except liens for current Taxes not yet due. Neither the Company nor
any of the Subsidiaries has been required to include in income any adjustment
pursuant to Section 481 of the Code (or any corresponding or similar provision
of state, local or non-United States Tax law) by reason of a voluntary change in
accounting method initiated by the Company or any of the Subsidiaries, and
neither the IRS nor any other United States or non-United States taxing
authority or agency has given a written or formal oral notice of the initiation
or proposal of any such adjustment or change in accounting
method. Except as set forth in the financial statements described in
Section 5.07, neither the Company nor any of the Subsidiaries has entered into a
transaction which is being accounted for under the installment method of Section
453 of the Code (or any corresponding or similar provision of state, local or
non-United States Tax law), which would, individually or in the aggregate,
prevent or materially delay consummation of any of the Transactions or otherwise
prevent or materially delay the Company from performing its obligations under
this Agreement. There is not outstanding any claim by a taxing
authority or agency in a jurisdiction where the Company or a Subsidiary does not
file Tax returns that the Company or a Subsidiary is or may be subject to Tax in
that jurisdiction.
SECTION
5.16 Environmental
Matters. Except as described in Section 5.16 of the Disclosure
Schedule, (a) both the Company and its Subsidiaries are in compliance with and
for the past four years, have been in compliance with all applicable
Environmental Law and Environmental Permits in all material respects; (b) all
past non-compliance with Environmental Laws or Environmental Permits has been
resolved without any material pending, on-going or
D-37
future
obligation, cost or liability; (c) none of the properties currently or formerly
owned, leased or operated by the Company or any Subsidiary (including, without
limitation, soils and surface and ground waters) are contaminated with any
Hazardous Substance or otherwise in material violation of Environmental Law; (d)
none of the Company or any of the Subsidiaries is actually or allegedly liable
for any off-site contamination by Hazardous Substances; (e) none of the Company
or any of the Subsidiaries is actually or allegedly liable under any
Environmental Law (including, without limitation, pending or threatened liens);
(f) each of the Company and each Subsidiary has all material Environmental
Permits; (g) each of the Company and each Subsidiary is in compliance with its
Environmental Permits in all material respects; (h) to the knowledge of the
Company, neither the execution of this Agreement nor the consummation of the
Transactions will require any investigation, remediation or other action with
respect to Hazardous Substances, or any notice to or consent of Governmental
Authorities or third parties, pursuant to any applicable Environmental Law or
Environmental Permit; (i) there are no underground storage tanks in which
Hazardous Substances are being or have been treated, stored or disposed on any
of the Oil and Gas Interests or, to its knowledge, on any property formerly
owned, leased, used or occupied by the Company or any of its Subsidiaries; (j)
none of the Company or any of its Subsidiaries are conducting, and have not
undertaken or completed, any Remedial Action relating to any Release or
threatened Release of Hazardous Substances at any location, either voluntarily
or pursuant to the order of any Governmental Authority or the requirements of
any Environmental Law or Environmental Permit; (k) there are no material
Environmental Claims pending or, to the knowledge of the Company, threatened
against the Company, its Subsidiaries, or the Oil and Gas Interests, and to its
knowledge, there are no circumstances that can reasonably be expected to form
the basis of any such Environmental Claim; and (l) the Company has provided
Purchaser with copies of (i) any material environmental assessment or audit
reports or other similar studies or analyses relating to the Oil and Gas
Interests, the Company or any Subsidiary prepared within the last three years
and (ii) all insurance policies issued at any time that may provide coverage to
the Company or any Subsidiary for environmental matters.
SECTION
5.17 Material
Contracts. (a) Section 5.17(a) of the Disclosure
Schedule lists the following types of contracts and agreements to which the
Company or any Subsidiary is a party (such contracts and agreements as are
required to be set forth in Section 5.17(a) of the Disclosure Schedule being the
“Material
Contracts”):
(i) each
“material contract” (as such term is defined in Item 610(b)(10) of Regulation
S-K of the SEC) with respect to the Company and its Subsidiaries;
(ii) each
material Hydrocarbon Contract;
(iii) each
material license and permit required under applicable Law in connection with the
conduct of oil and gas exploration and production by the Company and the
Subsidiaries;
(iv) each
material Software license relating to primary geological and financial processes
to which the Company or any Subsidiary is subject;
D-38
(v) each
contract and agreement, whether or not made in the ordinary course of business,
that contemplates an exchange of consideration with a value of more than
US$200,000, in the aggregate, over the term of such contract or
agreement;
(vi) all
contracts and agreements evidencing indebtedness in excess of
US$200,000;
(vii) all
joint venture, partnership, strategic alliance and business acquisition or
divestiture agreements (and all letters of intent, term sheets and draft
agreements relating to any such pending transactions);
(viii) all
agreements relating to issuances of securities of the Company or any Subsidiary
(and all letters of intent, term sheets and draft agreements relating to any
such pending transactions);
(ix) all
framework agreements to which the Company or any Subsidiary is a party relating
to purchases of goods or services from the Company or any
Subsidiary;
(x) all
exclusive distribution contracts to which the Company or any Subsidiary is a
party;
(xi) all
leases of real property leased for the use or benefit of the Company or any
Subsidiary requiring rental payments in excess of US$200,000 over the period of
the lease;
(xii) all
contracts relating in whole or in part to Intellectual Property pursuant to
which the Company or any Subsidiary obtains from any third party any material
Intellectual Property rights or the right to manufacture, distribute or sell any
product of the Company or such third party;
(xiii) all
contracts relating in whole or in part to Intellectual Property pursuant to
which the Company or any Subsidiary grants to any third party any material
Intellectual Property rights or the right to manufacture, distribute or sell any
product of the Company or such third party;
(xiv) all
management contracts (excluding contracts for employment) and contracts with
other consultants, including any contracts involving the payment of royalties or
other amounts calculated based upon the revenues or income of the Company or any
Subsidiary or income or revenues related to any product of the Company or any
Subsidiary to which the Company or any Subsidiary is a party;
(xv) all
contracts and agreements with any Governmental Authority to which the Company or
any Subsidiary is a party;
(xvi) all
contracts and agreements that limit, or purport to limit, the ability of the
Company or any Subsidiary to compete in any line of business or with any Person
or entity or in any geographic area or during any period of time;
D-39
(xvii) all
contracts and agreements providing for benefits under any Plan;
(xviii) all
material contracts or arrangements that result in any Person or entity holding a
power of attorney from the Company or any Subsidiary that relates to the
Company, any Subsidiary or their respective businesses;
(xix) all
agreements related to professional services rendered to the Company or any
Subsidiary in connection with the Transactions;
(xx) all
contracts for employment required to be listed in Section 5.10 of the Disclosure
Schedule; and
(xxi) all
other contracts and agreements, whether or not made in the ordinary course of
business, which are material to the Company, any Subsidiary or the conduct of
their businesses.
(b) Except
as set forth in Section 5.17(b) of the Disclosure Schedule, (i) each Material
Contract is a legal, valid and binding agreement, (ii) none of the Company or
any Subsidiary has received any claim of default under or cancellation of any
Material Contract and none of the Company or any Subsidiary is in material
breach or violation of, or material default under, any Material Contract; (iii)
to the Company’s knowledge, no other party is in breach or violation of, or
default under, any Material Contract; and (iv) neither the execution of this
Agreement nor the consummation of any Transaction shall constitute a default
under, give rise to cancellation rights under, or otherwise adversely affect any
of the rights of the Company or any Subsidiary under any Material
Contract. The Company has furnished or made available to Purchaser
true and complete copies of all Material Contracts, including any amendments
thereto.
(c) Neither
the Company nor any Subsidiary is a party to or bound by any agreement or other
arrangement that limits or otherwise restricts the Company or any Subsidiary or
any successor thereto, or that would, after the Swap Closing, to the knowledge
of the Company, materially limit or restrict the Company, Purchaser or any of
their subsidiaries or any successor thereto, from engaging or competing in its
business in any geographic area.
SECTION
5.18 Insurance. (a) Section
5.18(a) of the Disclosure Schedule sets forth, with respect to each insurance
policy under which the Company or any Subsidiary has been an insured, a named
insured or otherwise the principal beneficiary of coverage at any time within
the past three years, (i) the names of the insurer, the principal insured and
each named insured, (ii) the policy number, (iii) the period, scope and amount
of coverage and (iv) the premium charged. The Company and the
Subsidiaries are in compliance with all mandatory insurance requirements in each
jurisdiction that the Company or any Subsidiary has business
operations.
(b) With
respect to each such insurance policy: (i) the policy is legal,
valid, binding and enforceable (except as may be limited by bankruptcy,
insolvency, reorganization or other similar laws affecting the enforcement of
creditors’ rights generally and by general principles of equity) in accordance
with its terms and, except for policies that have expired under their terms in
the ordinary course, is in full force and effect; (ii) neither the Company nor
any Subsidiary is in material breach or default (including any such breach or
default with respect to
D-40
the
payment of premiums or the giving of notice), and no event has occurred which,
with notice or the lapse of time, would constitute such a material breach or
default, or permit termination or material modification, under the policy; and
(iii) to the knowledge of the Company, no insurer on the policy has been
declared insolvent or placed in receivership, conservatorship or
liquidation.
(c) At
no time subsequent to December 31, 2004 has the Company or any Subsidiary (i)
been denied any insurance or indemnity bond coverage which it has requested,
(ii) made any material reduction in the scope or amount of its insurance
coverage, or (iii) received notice from any of its insurance carriers that any
insurance premiums will be subject to increase in an amount materially
disproportionate to the amount of the increases with respect thereto (or with
respect to similar insurance) in prior years or that any insurance coverage
listed in Section 5.18(a) of the Disclosure Schedule will not be available in
the future substantially on the same terms as are now in effect.
SECTION
5.19 Certain Business
Practices. None of the Company, any Subsidiary, or any of the
respective directors, officers or employees, or to the knowledge of the Company,
its or any Subsidiary’s agents, advisors or representatives (such directors,
officers, employees, agents, advisors and representatives, collectively, “Representatives”), thereof has offered
or given anything of value to: (a) any foreign official, any foreign political
party or official thereof or any candidate for political office; or (b) any
Person, while knowing that all or a portion of such thing of value will be
offered, given, or promised, directly or indirectly, to any foreign official, to
any foreign political party or official thereof, or to any candidate for foreign
political office for the purpose of the following: (i) influencing any act or
decision of such foreign official, political party, party official, or candidate
in his or its official capacity, inducing such foreign official, political
party, party official, or candidate to do or omit to do any act in violation of
the lawful duty of such foreign official, political party, party official, or
candidate, or securing any improper advantage or (ii) inducing such foreign
official, political party, party official, or candidate to use his or its
influence with a foreign government or instrumentality thereof to affect or
influence any act or decision of such government or instrumentality, in order to
assist the Company, any Subsidiary, or any of their Representatives, in
obtaining or retaining business for or with, or directing business to, any
Person, or has taken any step that has violated or could violate the United
States Foreign Corrupt Practices Act (the “FCPA”) or any other applicable Law
involving improper payments including, but not limited to, the Laws of the
Republic of Kazakhstan and the Russian Federation (together with the FCPA,
“Improper Payment Laws”). None
of the Company or any Subsidiary, or, to the knowledge of the Company, any of
their Representatives has received notice from, or otherwise been in contact
with, the SEC or any other Governmental Authority with respect to any violation
or alleged violation (whether by such Person or by a third party) of any
Improper Payment Law.
SECTION
5.20 Interested Party
Transactions. Except as disclosed in Section 5.20 of the
Disclosure Schedule, no director or officer of the Company or any Subsidiary has
or has had, directly or indirectly, (a) an economic interest in any Person that
has furnished or sold, or furnishes or sells, services or products that the
Company or any Subsidiary furnishes or sells, or proposes to furnish or sell;
(b) an economic interest in any Person that purchases from or sells or furnishes
to, the Company or any Subsidiary, any goods or services; (c) a beneficial
interest in any contract or agreement disclosed in Sections 5.17 of the
Disclosure Schedule or (d) any contractual or other arrangement with the Company
or any Subsidiary; provided,
however,
that
D-41
ownership
of no more than one percent (1%) of the outstanding voting stock of a publicly
traded corporation shall not be deemed an “economic interest in any Person” for
purposes of this Section 5.20. The Company and the Subsidiaries
have not, since December 31, 2007, (a) extended or maintained credit, arranged
for the extension of credit or renewed an extension of credit in the form of a
personal loan to or for any director or executive officer (or equivalent
thereof) of the Company or (b) materially modified any term of any such
extension or maintenance of credit.
SECTION
5.21 Reserve
Reports. Except as disclosed in Section 5.21 of the Disclosure
Schedule, all information (excluding estimates but including the statement of
the percentage of reserves from the oil and gas xxxxx and other interests
evaluated therein to which the Company or the Subsidiaries are entitled and the
percentage of the costs and expenses related to such xxxxx or interests to be
borne by the Company or the Subsidiaries) that was material to the Company’s
estimates of proved oil and gas reserves attributable to the Oil and Gas
Interests of the Company in connection with the preparation of the proved oil
and gas reserve reports concerning the Oil and Gas Interests of the Company and
the Subsidiaries and prepared by the Company, including, without limitation, the
reserve reports provided in the Data Room and the government reserve reports
filed in Kazakhstan (the “Company Reserve
Reports”) was (at the time included or as modified or amended prior to
the issuance of the Company Reserve Reports), true and accurate in all material
respects (or, in the case of projected revenues, expenses and abandonment costs,
to the knowledge of the Company, true and accurate in all material respects) and
the Company has no knowledge of any material errors in such information. Except
as disclosed in Section 5.21 of the Disclosure Schedule, there has been no
change in respect of the matters addressed in the Company Reserve Reports that
would have a Material Adverse Effect. Except as disclosed in Section
5.21 of the Disclosure Schedule, the Company is not aware of any material
assumption set forth in any Company Reserve Reports not being reasonable and
based on a good faith judgment in all respects.
SECTION
5.22 Hedging. There
exist no outstanding Hydrocarbon and financial Hedging positions entered into by
the Company or any Subsidiary as of the date of this Agreement.
SECTION
5.23 Assets. (a)
All major items of operating equipment owned or leased by the Company or any
Subsidiary (i) are in reasonably operable condition, taken as a whole and (ii),
taken as a whole, are adequate, together with all other properties of the
Company and the Subsidiaries, to comply in all material respects with the
requirements of all applicable contracts, including sales contracts, and the
conduct of the business of the Company and Subsidiaries.
(b) The
Company has good and marketable title for oil and gas purposes to all of the Oil
and Gas Interests, and to all other properties, interests in properties and
assets, real and personal, free and clear of any Lien, except: (i) Liens
reflected in the Balance Sheet; and (ii) Permitted Liens.
(c) The
Company has not received any material advance, take-or-pay or other similar
payments that entitle purchasers of production to receive deliveries of
Hydrocarbons after the date hereof without paying therefor, and on a net,
company wide basis, the Company is
D-42
neither
underproduced or overproduced, in either case to any material extent, under gas
balancing or similar arrangements, except for the contracts and agreements
provided in Section 5.23(c) of the Disclosure Schedule.
SECTION
5.24 Oil and Gas
Operations.
(a) All
xxxxx included in the Oil and Gas Interests have been drilled, and if completed,
completed, operated and produced in accordance with prudent oil and gas field
practices applicable to the geographical area where located and in compliance in
all material respects with applicable Oil and Gas Interests and Hydrocarbon
Contracts and applicable Laws governing such xxxxx in the Republic of Kazakhstan
and the Russian Federation.
(b) The
Oil and Gas Interests entitle the Company and the Subsidiaries (individually or
collectively) to receive not less than the undivided net revenue interest set
forth (or derived from) the Company Reserve Report of all Hydrocarbons produced,
saved or sold from or attributable to such Oil and Gas Interests, and the
portion of the costs and expenses of operation and development of such Oil and
Gas Interest through plugging, abandonment and salvage of such Oil and Gas
Interest, that is borne or is to be borne by the Company or any Subsidiary
(individually or collectively) is not greater than the undivided working
interest set forth in (or derived from) the Company Reserve Report.
(c) Sales
of all Hydrocarbons produced from the Oil and Gas Interests have been made in
the ordinary course of business on an arms-length basis.
(d) Proceeds
from the sale of Hydrocarbons produced from the Oil and Gas Interests are being
received by the Company and the Subsidiaries in a timely manner and are not
being held in suspense for any reason (except in the ordinary course of
business).
(e) Except
as disclosed in Section 5.24(e) of the Disclosure Schedule, the Company and the
Subsidiaries have properly and timely paid all Taxes, royalties, overriding
royalties, rentals and other burdens on production due by any of them with
respect to the Oil and Gas Interests.
(f) Except
as arising under Article 71 of the Subsoil Use Law, none of the Oil and Gas
Interests are subject to any preferential purchase or similar rights which may
become operative as a result of the Transactions.
(g) The
Company and the Subsidiaries are, in all respects, in compliance with all
licenses, permits and production contracts in connection with the oil and gas
exploration and production operations of the Company and the Subsidiaries,
including, without limitation, (i) the License 1557 issued by the government of
the Republic of Kazakhstan to Caspi Neft TME LLP on April 29, 1999; (ii) the
Exploration Contract by and between Caspi Neft TME LLP and Republic of
Kazakhstan Agency on Investments, dated March 7, 2000 and (iii) Production
Contract by and between Caspi Neft TME LLP and MEMR, dated December 29, 2006,
and no events, condition or changes have occurred that may give any Government
Authority any right to rescind, withdraw, cancel or modify, in a manner adverse
to the Company and the Subsidiaries, any such license and
contracts.
D-43
SECTION
5.25 S-3 Registration
Statements. The Company has filed with the SEC registration
statements on Form S-3 (“S-3
Registration Statements”) relating to the offer and sale of all issued
and outstanding shares of Preferred Stock. The S-3 Registration
Statements with respect to the Senior Preferred Stock has been declared
effective by the SEC. The failure by the Company to have an effective
S-3 Registration Statement with respect to the Junior Preferred Stock will not
impede, prevent, impair or otherwise adversely impact the holders of the Junior
Preferred Stock from selling or otherwise transferring their shares of Junior
Preferred Stock to Purchaser pursuant to the Junior Preferred Stock Purchase
Agreement or the Tender Offer, as the case may be, assuming that Purchaser’s
representations and warranties in Section 6.07 are true, correct and
complete. The shares of Junior Preferred Stock are “restricted
securities” under Rule 144(a)(3) under the Securities Act and any offer or sale
of the Junior Preferred Stock may not be made other than pursuant to an
effective registration statement or pursuant to an available exemption from
registration.
SECTION
5.26 Additional
Returns. Exhibit 1.01 sets forth a true and complete list of all
Persons that are entitled to receive additional returns from the Company
pursuant to the Additional Return Agreements.
SECTION
5.27 Company
Action. The Board, at a meeting duly called and held on June
10, 2008, has unanimously (i) determined that the Transaction Agreements to
which the Company or any Subsidiary is a party and the Transactions applicable
to the Company or any Subsidiary are in the best interests of the Company and
the Subsidiaries, (ii) approved, adopted and declared advisable the Transaction
Agreements to which the Company or any Subsidiary is a party and the
Transactions applicable to the Company or any Subsidiary, including the
amendments set forth in the Amendment to the Certificate of Incorporation, the
Amended and Restated By-laws, the Amendment to the Certificate of Designations
of the Senior Preferred Stock and the Amendment to the Certificate of
Designations of the Junior Preferred Stock (such approval and adoption having
been made in accordance with the DGCL, subject to any additional Board approvals
as may be necessary in connection with Section 7.13 to approve and adopt, if
applicable, the final form of Certificate of Designations of Series B-1
Preferred Stock and the Certificate of Designations of Series B-2 Preferred
Stock ), (iii) approved Purchaser and its “affiliates” and “associates” (each as
defined in Section 203 of the DGCL) becoming “interested shareholders” within
the meaning of Section 203 of the DGCL, (iv) resolved to recommend to the
holders of the Remaining Shares of the Preferred Stock that they accept the
Tender Offer and tender their shares pursuant to the Tender Offer, (v) resolved
to recommend to the holders of the 12% Senior Notes that they accept the
Exchange Offer and tender their notes pursuant to the Exchange Offer, and (vi)
resolved to recommend to the stockholders of the Company to approve and adopt
the Transaction Agreements to which the Company or any Subsidiary is a party and
the Transactions applicable to the Company or any Subsidiary, including the
amendments set forth in the Amendment to the Certificate of Incorporation, the
Amended and Restated By-laws, the Amendment to the Certificate of Designations
of the Senior Preferred Stock and the Amendment to the Certificate of
Designations of the Junior Preferred Stock.
SECTION
5.28 Brokers. Other
than Xxxxxxxxx, Xxxxxxx & Xxxxx, a division of Xxxxxxxxx & Company, Inc.
and as otherwise expressly provided in this Agreement, no broker, finder or
investment banker is entitled to any brokerage, finder’s or other fee
or
D-44
commission
in connection with the Transactions based upon arrangements made by or on behalf
of the Company.
ARTICLE
VI
REPRESENTATIONS
AND WARRANTIES OF PURCHASER
As an
inducement to the Company to enter into this Agreement, Purchaser hereby,
represents and warrants to the Company that:
SECTION
6.01 Corporate
Organization. Purchaser is a corporation duly organized,
validly existing and in good standing under the laws of Bermuda and has the
requisite corporate power and authority and all necessary governmental approvals
to own, lease and operate its properties and to carry on its business as it is
now being conducted, except where the failure to be so organized, existing or in
good standing or to have such power, authority and governmental approvals would
not, individually or in the aggregate, prevent or materially delay consummation
of any of the Transactions or otherwise prevent Purchaser from performing its
obligations under the Transaction Agreements.
SECTION
6.02 Authority Relative to the
Transaction Agreements. Purchaser has all necessary corporate
power and authority to execute and deliver each of the Transaction Agreements,
to perform its obligations thereunder and to consummate the Transactions except
for the Purchaser Shareholders Approval. The execution and delivery
of the Transaction Agreements by Purchaser and the consummation by Purchaser of
the Transactions have been duly and validly authorized by all necessary
corporate action on the part of Purchaser, and no other corporate proceedings on
the part Purchaser are necessary to authorize any of the Transaction Agreements
or to consummate the Transactions except for the Purchaser Shareholders
Approval. The Transaction Agreements have been duly and validly
executed and delivered by Purchaser and, assuming due authorization, execution
and delivery by the Company, constitute legal, valid and binding obligations of
Purchaser enforceable against Purchaser in accordance with their
terms.
SECTION
6.03 No Conflict; Required
Filings and Consents. (a) The execution and
delivery of the Transaction Agreements by Purchaser do not, and the performance
of the Transaction Agreements by Purchaser will not, and the consummation of the
Transactions by Purchaser will not, (i) assuming the Purchaser Shareholders
Approval has been obtained, conflict with or violate the Memorandum of
Association and By-laws of Purchaser, (ii) assuming that all consents, approvals
and other authorizations described in Section 6.03(b) have been obtained, that
all filings and other actions described in Section 6.03(b) have been made or
taken, and that the Purchaser Shareholders Approval has been obtained, conflict
with or violate, in any material respect, any Law applicable to Purchaser or by
which any property or asset of Purchaser is bound or affected, or (iii) result
in any material breach of, or constitute a material default (or an event which,
with notice or lapse of time or both, would become a material default) under, or
give to others any rights of termination, amendment, acceleration or
cancellation of, or result in the creation of a lien or other encumbrance on any
material property or asset of Purchaser pursuant to, any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which Purchaser is a party or by which Purchaser or
any property or asset of Purchaser is bound or affected.
D-45
(b) The
execution and delivery of the Transaction Agreements by Purchaser do not, and
the performance of the Transaction Agreements by Purchaser will not, require any
consent, approval, authorization or permit of, or filing with or notification
to, any Governmental Authority, except for (i) the requirements of Exon-Xxxxxx
Provisions, to the extent applicable, (ii) the requirements of applicable
Securities Laws, (iii) the requirements of applicable Anti-trust Laws, (iv) the
filing and recordation of appropriate documents as required by the DGCL, (v) the
Article 71 Waiver, (vi) the Exchange Approvals and (vii) as would not prevent or
materially delay consummation of any of the Transactions or otherwise prevent or
materially delay Purchaser from performing its obligations under this
Agreement.
SECTION
6.04 Financing. Purchaser
has sufficient funds to consummate the Transactions, including, without
limitation, payment for acquiring the Junior Preferred Stock owned by the Key
Junior Preferred Stockholders, and payment of the Tender Offer Price, the 12%
Senior Notes Cash Payments, the First Tranche Price, the Second Tranche Price
and the Additional Returns.
SECTION
6.05 Offer Documents; Proxy
Statement. The Tender Offer Documents and the information
supplied by Purchaser for inclusion in the Exchange Offer Documents, shall not,
at the time the Offer Documents are first published, sent or given to the
holders of the Preferred Stock or the holders of the 12% Senior Notes, as the
case may be, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements made therein, in the light of the circumstances under which they
were made, not misleading. The information supplied by Purchaser for
inclusion in the Proxy Statement shall not, at the date the Proxy Statement (or
any amendment or supplement thereto) is first mailed to holders of Common Stock
of the Company or at the time of the Common Stockholders Meeting, contain any
untrue statement of a material fact, or omit to state any 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 false or misleading,
or necessary to correct any statement in any earlier communication with respect
to the solicitation of proxies for the Common Stockholders Meeting which shall
have become false or misleading. Notwithstanding the foregoing,
Purchaser makes no representation or warranty with respect to any information
supplied by the Company or any of its representatives for inclusion in any of
the foregoing documents or the Offer Documents. The Tender Offer
Documents shall comply in all material respects as to form with the applicable
requirements of the Exchange Act.
SECTION
6.06 Brokers. No
broker, finder or investment banker (other than Citigroup Global Markets Inc.)
is entitled to any brokerage, finder’s or other fee or commission in connection
with the Transactions based upon arrangements made by or on behalf of
Purchaser.
SECTION
6.07 Investment
Status. Purchaser is an “accredited investor” as defined in
Rule 501(a) under the Securities Act:
(a) Purchaser
has such knowledge, skill and experience in business, financial and investment
matters that it is capable of evaluating the merits and risks of an investment
in the New Preferred Stock and Warrants which it is acquiring hereunder;
and
D-46
(b) Purchaser
is acquiring the New Preferred Stock and Warrants solely for its beneficial
account, for investment purposes, and not with a view to, or for resale in
connection with, any distribution of such New Preferred Stock or Warrants in
violation of applicable U.S. securities laws.
ARTICLE
VII
ADDITIONAL
AGREEMENTS
SECTION
7.01 Conduct of
Business. The Company agrees that, between the date of this
Agreement and the Closing Date, unless Purchaser shall otherwise agree in
writing (or unless the Company has provided written notice of such desired
action and Purchaser shall not have objected within five (5) Business Days of
receipt thereof), the businesses of the Company and the Subsidiaries shall be
conducted only in, and the Company and the Subsidiaries shall not take any
action except in, the ordinary course of business and in a manner consistent
with past practice; and the Company shall use its reasonable best efforts to
preserve substantially intact the business organization of the Company and the
Subsidiaries, to keep available the services of the current officers, employees
and consultants of the Company and the Subsidiaries and to preserve the current
relationships of the Company and the Subsidiaries with customers, suppliers and
other Persons with which the Company or any Subsidiary has significant business
relations. By way of amplification and not limitation, except as
expressly contemplated by the Transaction Agreements and Exhibit 7.01 attached
hereto, neither the Company nor any Subsidiary shall, between the date of this
Agreement and the Closing Date, directly or indirectly, do, or propose to do,
any of the following without the prior written consent of Purchaser (or unless
the Company has provided written notice of such desired action and Purchaser
shall not have objected within five (5) Business Days of receipt
thereof):
(a) amend
or otherwise change its Certificate of Incorporation or By-laws or equivalent
organizational documents;
(b) issue,
sell, pledge, dispose of, grant or encumber, or authorize the issuance, sale,
pledge, disposition, grant or encumbrance of, (i) any shares of any class of
capital stock of the Company or any Subsidiary, or any options, warrants,
convertible securities or other rights of any kind to acquire any shares of such
capital stock, or any other ownership interest (including, without limitation,
any phantom interest), of the Company or any Subsidiary (except for (x) shares
of Common Stock issuable upon conversion of the Preferred Stock and (y) shares
of Common Stock issuable pursuant to the Existing Warrants and the Company Stock
Plans outstanding on the date hereof) or (ii) any assets of the Company or
any Subsidiary, except in the ordinary course of business and in a manner
consistent with past practice;
(c) declare,
set aside, make or pay any dividend or other distribution, payable in cash,
stock, property or otherwise, with respect to any of its capital stock except
for dividends by any direct or indirect wholly owned Subsidiary to the Company
or any other Subsidiary;
(d) reclassify,
combine, split, subdivide or redeem, or purchase or otherwise acquire, directly
or indirectly, any of its capital stock;
D-47
(e) (i)
acquire (including, without limitation, by merger, consolidation, or acquisition
of stock or assets or any other business combination) any corporation,
partnership, other business organization or any division thereof or any material
amount of assets; (ii) incur any indebtedness for borrowed money or issue any
debt securities or assume, guarantee or endorse, or otherwise become responsible
for, the obligations of any Person, or make any loans or advances, or grant any
security interest in any of its assets except in the ordinary course of business
and consistent with past practice; (iii) authorize, or make any commitment with
respect to, any single capital expenditure which is in excess of US$200,000 or
capital expenditures which are, in the aggregate, in excess of US$2,000,000 for
the Company and the Subsidiaries taken as a whole; or (v) enter into or amend
any contract, agreement, commitment or arrangement with respect to any matter
set forth in this Section 7.01(e);
(f) hire
additional employees or increase the compensation payable or to become payable
or the benefits provided to its directors, officers or employees, except for
increases in the ordinary course of business and consistent with past practice
in salaries, wages, bonuses, incentives or benefits of employees of the Company
or any Subsidiary who are not directors or officers of the Company or any
Subsidiary, or grant any severance or termination pay to, or enter into any
employment or severance agreement with, any director, officer or other employee
of the Company or of any Subsidiary (except as provided in Section 7.19), or
establish, adopt, enter into, accelerate the vesting of or amend any collective
bargaining, bonus, profit-sharing, thrift, compensation, stock option,
restricted stock, pension, retirement, deferred compensation, employment,
termination, severance or other plan, agreement, trust, fund, policy or
arrangement for the benefit of any director, officer or employee, except that
the Company may take actions to maintain the Company’s officers’ and directors’
liability insurance policies, in effect on the date of this Agreement (the
“D&O
Insurance”), for a period of not less than six years after the Swap
Closing, but only to the extent related to actions or omissions prior to the
Swap Closing; provided,
however,
that the Company may substitute therefor policies of at least the same coverage
and amounts containing terms no less advantageous to such former directors or
officers which shall not result in gaps or lapses of coverage with respect to
matters occurring prior to the Swap Closing; provided,
further,
that in no event may the Company expend more than an amount per year equal to
150% (the “Maximum
Amount”) of the current annual premiums paid by the Company for such
insurance to maintain or procure insurance coverage pursuant hereto, and if the
amount of the annual premiums necessary to maintain or procure such insurance
coverage exceeds the Maximum Amount, the Company may procure and maintain for
such six-year period as much coverage as reasonably practicable for the Maximum
Amount; provided,
further,
that the Company shall have the right to cause coverage to be extended under the
D&O Insurance by obtaining a six-year “tail” policy on terms and conditions
no less advantageous than the Company’s existing D&O Insurance, and such
“tail” policy shall satisfy the foregoing provisions;
(g) take
any action, other than reasonable and usual actions in the ordinary course of
business and consistent with past practice, with respect to accounting policies
or procedures;
D-48
(h) make
any tax election or settle or compromise any United States federal, state, local
or non-United States income tax liability;
(i) amend,
terminate, cancel or compromise any material claims of the Company or any
Subsidiary or waive any other rights of substantial value to the Company or any
Subsidiary;
(j) amend,
modify or consent to the termination of any Material Contract, or amend, waive,
modify or consent to the termination of any rights of the Company or any
Subsidiary thereunder;
(k) commence
or settle any material Action;
(l) enter
into any agreement, arrangement or transaction with any of its directors,
officers, employees or stockholders (or with any relative, beneficiary, spouse
or Affiliate of such Persons);
(m) fail
to make in a timely manner any filings with the SEC required under the
Securities Act or the Exchange Act or the rules and regulations promulgated
thereunder; or
(n) announce
an intention, enter into any formal or informal agreement or otherwise make a
commitment, to do any of the foregoing.
SECTION
7.02 Common Stockholders
Meeting and
Written Consent of Preferred Stockholders. (a) Notwithstanding
any Change in the Company Recommendation, the Company, acting through the Board,
shall, in accordance with applicable Law and the Company’s Certificate of
Incorporation and By-laws, duly call, give notice of, convene and hold an annual
or special meeting of the holders of Common Stock as soon as practicable
following the date hereof (the “Common
Stockholders Meeting”) to vote on, among other matters, (i) an amendment
to the Company’s Certificate of Incorporation in the form attached hereto as
Exhibit 7.02(a)(i) (the “Amendment
to the Certificate of Incorporation”); (ii) an increase of authorized
shares of Common Stock and Preferred Stock to 500,000,000 shares and 15,000,000
shares, respectively; (iii) an amendment to the Certificate of Designations of
the Senior Preferred Stock in the form attached hereto as
Exhibit 7.02(a)(iii), subject to any revisions required by AMEX pursuant to
Section 7.13 (the “Amendment to the
Certificate of Designations of the Senior Preferred Stock”); (iv) an
amendment to the Certificate of Designations of the Junior Preferred Stock in
the form attached hereto as Exhibit 7.02(a)(iv), subject to any revisions
required by AMEX pursuant to Section 7.13 (the “Amendment to the Certificate of Designations
of the Junior Preferred Stock”); and (v) any other matters, if any,
required by applicable Law or reasonably requested by Purchaser to
approve and adopt the Transaction Agreements and to consummate the Transactions
contemplated thereby (collectively, the “Common Stockholder Approvals”). The
Company shall (i) include in (A) the proxy statement to be sent to the holders
of Common Stock of the Company in connection with the Common Stockholders
Meeting or other information statement to be sent to such holders (such proxy
statement or information statement, as amended or supplemented, being referred
to herein as the “Proxy
Statement”) and (B) the Stockholder Consent Materials, and in each case
not subsequently withdraw or modify in
D-49
any
manner adverse to Purchaser, the unanimous recommendation of the Board that the
holders of Common Stock approve the matters listed in this paragraph, except as
set forth in Section 7.05(b) or (c) and (ii) use its best efforts to obtain
such approval, adoption or waiver.
(b) At
Purchaser’s reasonable request, the Company shall, in accordance with Section
7.15 to the extent applicable, promptly solicit written consents (the
“Preferred Stockholder
Consents”) from the holders of each series of Preferred Stock to (i)
approve (A) the Amendment to the Certificate of Designations of the Senior
Preferred Stock or the Amendment to the Certificate of Designations of the
Junior Preferred Stock, as the case may be, and (B) the issuance of the New
Preferred Stock and (ii) approve any other matters, if any, required by
applicable Law or reasonably required to approve and adopt the Transaction
Agreements and to consummate the Transactions contemplated
thereby. In connection with the Preferred Stockholder Consents,
Purchaser may execute written consents with respect to any shares of Preferred
Stock it may hold either directly or indirectly, beneficially or of
record.
SECTION
7.03 Filing of Proxy
Statement;
Registration Statement. To the extent applicable and in
accordance with Sections 7.02 and 7.15, the Company shall file the Proxy
Statement and the Registration Statement (as defined below) with the SEC under
the Exchange Act, and shall use its best efforts to have the Proxy Statement and
the Registration Statement cleared by the SEC as promptly as
practicable. Purchaser and the Company shall cooperate with each
other in the preparation of the Proxy Statement and the Registration Statement
(if applicable). The Company shall notify Purchaser of the receipt of
any comments of the SEC with respect to the Proxy Statement or the Registration
Statement (if applicable) and of any requests by the SEC for any amendment or
supplement thereto or for additional information and shall provide to Purchaser
promptly copies of all correspondence between the Company or any representative
of the Company and the SEC with respect thereto. The Company shall
give Purchaser and its counsel a reasonable opportunity to review and comment on
the Proxy Statement and the Registration Statement (if applicable) including all
amendments and supplements thereto, prior to such documents being filed with the
SEC or disseminated to the stockholders of the Company and shall give Purchaser
and its counsel a reasonable opportunity to review and comment on all responses
to requests for additional information and replies to comments prior to their
being filed with, or sent to, the SEC. Each of the Company and
Purchaser agrees to use its reasonable best efforts, after consultation with the
other parties hereto, to respond promptly to all such comments of and requests
by the SEC and to cause the Proxy Statement or the Registration Statement (if
applicable), as the case may be, and all required amendments and supplements
thereto to be mailed to the stockholders of the Company entitled to vote at the
Common Stockholders Meetings, or filed with the SEC, as the case may be, at the
earliest practicable time.
SECTION
7.04 Access to Information;
Confidentiality. (a) From the date hereof until the
Closing Date, the Company shall, and shall cause the Subsidiaries and the
officers, directors, employees, auditors and agents of the Company and the
Subsidiaries to, afford the officers, employees and agents of Purchaser
reasonable access during normal business hours to the officers, employees,
agents, properties, offices, plants and other facilities, books and records of
the Company and each Subsidiary, and shall furnish Purchaser with such
financial, operating and other data and information in the Company’s or any
Subsidiary’s possession,
D-50
disclosure
of which is permitted by applicable Law, as Purchaser, through its officers,
employees or agents, may reasonably request.
(b) Purchaser
shall, and shall cause its Affiliates and their respective directors, officers,
employees and agents to, keep confidential, not disclose in any manner and use
only in connection with the Transactions all data and information obtained by
them from the Company and the Subsidiaries and their respective directors,
officers, employees, auditors and agents (other than data or information that is
or becomes ascertainable from public or published information or trade sources,
except as a result of disclosure by Purchaser in violation of this Section
7.04(b)) (“Confidential
Information”) and shall insure that such directors, officers, employees
and agents do not disclose Confidential Information to third parties, other than
in connection with the Transactions, without the prior written consent of the
Company, unless disclosure of Confidential Information is required by Law or any
order, decree or ruling by Governmental Authorities.
(c) No
investigation pursuant to this Section 7.04 shall affect any representation or
warranty in this Agreement of any party hereto or any condition to the
obligations of the parties hereto or any condition to the Offers.
SECTION
7.05 No Solicitation of
Transactions. (a) The Company agrees that neither
it nor any Subsidiary nor any of the directors, officers or employees of it or
any Subsidiary will, and that it will cause its and its Subsidiaries’ agents,
advisors and other representatives (including, without limitation, any
investment banker, attorney or accountant retained by it or any Subsidiary) not
to, directly or indirectly, (i) solicit, initiate or encourage (including by way
of furnishing nonpublic information), or take any other action to facilitate,
any inquiries or the making of any proposal of offer (including, without
limitation, any proposal or offer to its stockholders) that constitutes, or may
reasonably be expected to lead to, any Competing Transaction, or (ii) enter into
or maintain or continue discussions or negotiations with any Person or entity in
furtherance of such inquiries or to obtain a proposal or offer for a Competing
Transaction, or (iii) agree to, approve, endorse or recommend any Competing
Transaction or enter into any letter of intent or other contract, agreement or
commitment contemplating or otherwise relating to any Competing Transaction, or
(iv) authorize or permit any of the officers, directors or employees of the
Company or any of its Subsidiaries, or any investment banker, financial advisor,
attorney, accountant or other representative retained by the Company or any of
its Subsidiaries, to take any such action. The Company shall notify
Purchaser as promptly as practicable (and in any event within one (1) Business
Day after the Company attains knowledge thereof), orally and in writing, if any
proposal or offer, or any inquiry or contact with any Person with respect
thereto, regarding a Competing Transaction is made, specifying the material
terms and conditions thereof and the identity of the party making such proposal
or offer or inquiry or contact (including material amendments or proposed
material amendments). The Company shall, and shall direct or cause
its and its Subsidiaries’ directors, officers, employees, representatives and
agents to, immediately cease and cause to be terminated any discussions or
negotiations with any parties that may have been conducted heretofore with
respect to a Competing Transaction. The Company shall not release any
third party from, or waive any provision of, any confidentiality or standstill
agreement to which it is a party and the Company also agrees to promptly request
each Person that has heretofore executed a confidentiality agreement in
connection with its consideration of acquiring (whether by merger,
D-51
acquisition
of stock or assets or otherwise) the Company or any Subsidiary, if any, to
return (or if permitted by the applicable confidentiality agreement, destroy)
all confidential information heretofore furnished to such Person by or on behalf
of the Company or any Subsidiary and, if requested by Purchaser and at
Purchaser’s expenses, to enforce such Person’s obligation to do
so. The Company shall not take any action to make the provisions of
Section 203 of the DGCL inapplicable to any transaction other than the
Transactions.
(b) Notwithstanding
anything to the contrary in this Section 7.05, the Board may furnish information
to, and enter into discussions with, a Person who has made an unsolicited,
written, bona fide proposal or offer regarding a Competing Transaction, and the
Board has (i) determined, in its good faith judgment (after having consulted
with a financial advisor of nationally recognized reputation, which may include
Xxxxxxxxx & Company, Inc. or an Affiliate or division thereof), that such
proposal or offer constitutes a Superior Proposal, or in the absence of a
Superior Proposal, determined, in its good faith judgment after consultation
with independent legal counsel, that the furnishing of such information or
entering into discussions is required to comply with its fiduciary obligations
to the Company and its stockholders under applicable Law, (ii) provided written
notice to Purchaser of its intent to furnish information or enter into
discussions with such Person at least two Business Days prior to taking any such
action, and (iii) obtained from such Person an executed confidentiality
agreement on customary terms (it being understood that such confidentiality
agreement and any related agreements shall not include any provision calling for
any exclusive right to negotiate with such party or having the effect of
prohibiting the Company from satisfying its obligations under this
Agreement).
(c) Except
as set forth in this Section 7.05(c), neither the Board nor any committee
thereof shall withdraw or modify, or propose to withdraw or modify, in a manner
adverse to Purchaser, the approval or recommendation by the Board or any such
committee of any Transaction Agreement or any of the Transactions (a “Change in the Company
Recommendation”) or approve or recommend, or cause or permit the Company
to enter into any letter of intent, agreement or obligation with respect to, any
Competing Transaction. Notwithstanding the foregoing, if the Board
determines, in its good faith judgment prior to the Swap Closing and after
consultation with independent legal counsel, that it is required to make a
Change in the Company Recommendation to comply with its fiduciary obligations to
the Company and its stockholders under applicable Law, the Board may make a
Change in the Company Recommendation, but only (i) after providing written
notice to Purchaser (a “Notice of Change in
Recommendation”) advising Purchaser that the Board intends to effect a
Change in the Company Recommendation and the manner in which it intends (or may
intend) to do so, and (ii) if Purchaser does not, within five (5) Business Days
of Purchaser’s receipt of the Notice of Change in Recommendation, make an offer
that the Board determines, in its good faith judgment that it is no longer
required by its fiduciary duties to make a Change in the Company
Recommendation.
SECTION
7.06 Notification of
Certain Matters. The Company shall give prompt notice to
Purchaser, and Purchaser shall give prompt notice to the Company, of (a) the
occurrence, or non-occurrence, of any event the occurrence, or non-occurrence,
of which reasonably could be expected to cause (i) any representation or
warranty contained in this Agreement to be untrue or inaccurate in any material
respect or (ii) any condition set forth in Annex C or Annex D not be satisfied,
(b) any failure of the Company or Purchaser, as the case
D-52
may be,
to comply with or satisfy any covenant or agreement to be complied with or
satisfied by it hereunder and (c) any other material development relating to the
business, prospects, financial condition or results of operations of the Company
and the Subsidiaries; provided,
however,
that the delivery of any notice pursuant to this Section 7.06 shall not limit or
otherwise affect the remedies available hereunder to the party receiving such
notice.
SECTION
7.07 Regulatory and Other
Authorizations; Notices and Consents. (a) Each of
Purchaser and the Company shall use its reasonable best efforts to obtain all
authorizations, consents, orders and approvals of all Governmental Authorities
and officials that may be or become necessary for its execution and delivery of,
and the performance of its obligations pursuant to, the Transaction Agreements
and will cooperate fully with the other party in promptly seeking to obtain all
such authorizations, consents, orders and approvals. The Company
shall, and shall cause the applicable Subsidiaries to (i) submit complete
application documents for the Article 71 Waiver within two (2) Business Days
after the date hereof; (ii) supply as promptly as practicable to MEMR or other
Government Authorities any additional information and documentary material that
may be requested by MEMR or other Government Authorities; and (iii) at
Purchaser’s request, provide or make available as promptly as practicable all
information and documentary materials to enable Purchaser to make appropriate
filings under the Anti-trust Laws in connection with the
Transactions.
(b) The
Company shall give promptly such notices to third parties and use its reasonable
best efforts to obtain such third party consents and estoppel certificates as
Purchaser may in its reasonable discretion deem necessary or desirable in
connection with the Transactions.
(c) Purchaser
shall cooperate and use its reasonable best efforts to assist the Company in
giving such notices and obtaining such consents and estoppel certificates; provided, however, that
Purchaser shall have no obligation to give any guarantee or other consideration
of any nature in connection with any such notice, consent or estoppel
certificate or to consent to any change in the terms of any agreement or
arrangement which Purchaser in its sole discretion may deem adverse to the
interests of Purchaser, the Company, any Subsidiary or their respective
businesses.
(d) Company
shall, and shall cause the Subsidiaries to, provide all such information,
analysis, technical and other reports and documents and execute all such
applications, documents and other things as may be required by the HKSE, any
other Governmental Authority or Purchaser for the purposes of obtaining the
Purchaser Shareholders Approval, the Exchange Approvals and any consent or
waiver from the HKSE required under the HKSE Listing Rules and/or
facilitating Purchaser to prepare and issue any announcement and circular
in connection with the Transactions.
SECTION
7.08 Subsequent Financial
Statements. The Company shall, if practicable, consult with
Purchaser prior to making publicly available its financial results for any
period after the date of this Agreement and prior to filing any report or
document with the SEC after the date of this Agreement, it being understood that
Purchaser shall have no liability by reason of such consultation.
D-53
SECTION
7.09 Public
Announcements. Purchaser and the Company agree that no public
release or announcement concerning the Transactions shall be issued by either
party without the prior consent of the other party (which consent shall not be
unreasonably withheld), except as such release or announcement may be required
by Law, or to the extent applicable, the AMEX rules or the HKSE Listing Rules,
in which case the party required to make the release or announcement shall use
its reasonable best efforts to allow the other party reasonable time to comment
on such release or announcement in advance of such issuance.
SECTION
7.10 General Release from Initial
Investors of Junior Preferred Stock. The Company shall use its
reasonable best efforts to cause each Initial Investor of Junior Preferred Stock
that is not a Key Junior Preferred Stockholder, on or prior to the Swap Closing,
to execute and deliver to Purchaser, for the benefit of the Company and each
Subsidiary, a general release and discharge, in a form attached hereto as
Exhibit 7.10 (the “Release
Letter”), waiving certain rights under the Additional Return
Agreements.
SECTION
7.11 Existing
Warrants. The Company shall use reasonable best efforts and
take any and all steps necessary to obtain a waiver (the “Existing Warrants Waiver”) of the
20-day prior notice requirement triggered by the Transactions from each of the
holders of the Existing Warrants except for any warrants issued pursuant to the
Warrant Agreement, dated as of December 12, 2005 by and between the Company and
The Bank of New York.
SECTION
7.12 Use of
Proceeds. The proceeds (the “Proceeds”) received by the Company
from the Transactions, including the First Tranche Price and the Second Tranche
Price, shall be used solely to fund the capital requirements specified in the
schedule attached hereto as Exhibit 7.12. The Proceeds shall be paid
to the Company by the Escrow Agent in accordance with the terms of the Escrow
Agreement and the Investor Rights Agreement.
SECTION
7.13 AMEX
Listing. The Company shall promptly prepare and submit to the
AMEX a listing application covering (a) the shares of Common Stock issuable upon
the conversion of the New Preferred Stock pursuant to the terms and conditions
set forth in the Certificate of Designations of Series B-1 Preferred Stock and
Certificate of Designations of Series B-2 Preferred Stock and (b) the shares of
Common Stock issuable under the Warrants (collectively, the “New Common Shares”) and shall use its
reasonable best efforts to obtain, prior to the Swap Closing, approval for the
listing of such New Common Shares (the “AMEX Listing Approval”), and Purchaser
shall cooperate with the Company with respect to such listing. The
parties acknowledge that in order to obtain the AMEX Listing Approval or other
Exchange Approvals necessary to consummate the Transactions, the parties may be
required by AMEX to revise or amend the Transaction Agreements and, in
particular, the Certificate of Designations of Series B-1 Preferred Stock and
the Certificate of Designations of Series B-2 Preferred Stock, and the parties
agree to use their reasonable best efforts to cooperate with AMEX to obtain the
AMEX Listing Approval and other necessary Exchange Approvals, including by
effecting modifications to: (i) the conversion voting feature of the New
Preferred Stock to offset a potential decline in the price of the Common Stock
(provided that no such modification shall affect the conversion price of the New
Preferred Stock); (ii) the board designation rights of the New Preferred Stock
to correspond to Purchaser’s equity investment in the Company; and (iii) the
board observer and director designee rights to be consistent with the director
independence requirements for committees of the Board, to the extent a Purchaser
director designee would not
D-54
be
considered independent under relevant AMEX rules. Notwithstanding the
foregoing, if any revision or amendment required by AMEX, other than with
respect to the matters set forth in (i) through (iii) above, materially and
adversely impacts the rights or benefits to be received by Purchaser under the
Transaction Agreements, as reasonably determined by Purchaser, then the AMEX
Listing Approval shall be deemed not to have been satisfied for purposes of the
condition set forth in subsection (g) of Annex C.
SECTION
7.14 Cancellation of Preferred
Shares. The Company shall take all necessary actions to
restore to the status of authorized but unissued shares of Preferred Stock
without designation as to series by retiring all shares of Preferred Stock
acquired from Purchaser pursuant to the Swap immediately following the Swap
Closing.
SECTION
7.15 Registration
Statement. The parties hereto shall use reasonable best
efforts to structure the Transactions as transactions exempt from the
registration requirements of the Securities Act; and the parties hereto
acknowledge that it is currently contemplated that the Transactions will be
structured as exempt from the registration requirements of the Securities
Act. Subject to the foregoing, if required by U.S.
securities Laws, the Company shall file with the SEC a registration statement on
an appropriate registration statement form (the “Registration Statement”) that will
cover the amendments of the terms of the Senior Preferred Stock and Junior
Preferred Stock in connection with the Transactions and shall use its reasonable
best efforts to cause such registration statement to become effective as soon as
practicable and prior to the closing of the Offers. If required by
the U.S. securities Laws and the Shares of Newly Issued Common Stock to be
delivered to the Exercising Junior Preferred Stockholder(s) pursuant to Section
4.02 are not transferable without restriction pursuant to Rule 144 under the
Securities Act at the time such shares are delivered, the Company shall file a
shelf registration statement with the SEC with respect to the resale of such
shares by such Exercising Junior Preferred Stockholder(s) within 30 days
following the Swap Closing and shall use its reasonable best efforts to cause
such registration statement to become effective as soon as practicable, in any
event within 90 days, following the Swap Closing. Additionally, if
Purchaser is required by U.S. securities Laws to file with the SEC a
registration statement on an appropriate registration statement form that will
cover the issuance of the Purchaser Convertible Bonds in connection with the
Transactions, the Company shall cooperate with the reasonable requests of
Purchaser in connection with such registration, which for the avoidance of doubt
shall include cooperating in the manner set forth in Section 3.01(e) and (f)
hereof to the extent applicable.
SECTION
7.16 Redemption of Remaining
Preferred Stock. Immediately following the Swap Closing, the
Company shall redeem, pursuant to the Amendment to the Certificate of
Designations of the Senior Preferred Stock or the Amendment to the Certificate
of Designations of the Junior Preferred Stock, as the case may be, all of the
then-outstanding shares of Preferred Stock (the “Remaining Preferred Stock”), using
funds provided by, or at the direction of, Purchaser. The Company
shall take all necessary actions to cancel all of the Remaining Preferred Stock
immediately following such redemption.
SECTION
7.17 Withholding
Rights. Purchaser shall be entitled to deduct and withhold
from the consideration otherwise payable pursuant to this Agreement, including
the Additional Returns, to any holder of Preferred Stock, any holder of the 12%
Senior Notes or any Initial Investor of Junior Preferred Stock such amounts as
it is required to deduct and withhold
D-55
with
respect to the making of such payment under the Internal Revenue Code of 1986,
as amended (the “Code”) and the
U.S. Treasury regulations promulgated thereunder, or any provision of state,
local or non-United States Tax law. To the extent that amounts are so
withheld by Purchaser, such withheld amounts shall be treated for all purposes
of this Agreement as having been paid to the holder of Preferred Stock, any
holder of the 12% Senior Notes or Initial Investor of Junior Preferred Stock, as
the case may be, in respect of which such deduction and withholding was made by
Purchaser.
SECTION
7.18 Alternative Transaction
Structures. Purchaser shall have the right to propose
alternative structures for the transactions contemplated in this Agreement and
the Ancillary Documents in order to structure such transactions in a more
tax-efficient manner. Purchaser’s direct and indirect economic and
voting interests in any alternative structure shall be equivalent to its
economic and voting interests in the structure contemplated in this
Agreement. Such alternative structures may include, but are not
limited to, (a) acquiring stock directly in the 12% Senior Notes Issuer and may
involve transferring assets of the Company and the Subsidiaries, including stock
of Subsidiaries, to the 12% Senior Notes Issuer; (b) investing directly in
preferred stock and warrants of the 12% Senior Notes Issuer instead of preferred
stock and warrants of the Company; and (c) transferring funds from the 12%
Senior Notes Issuer to the Company to permit the Company to conduct the Tender
Offer and the Exchange Offer directly. Any preferred stock or
warrants of the 12% Senior Notes Issuer issued to Purchaser shall have rights
and terms that are equivalent to the rights and terms of the First Tranche
Shares and Second Tranche Shares and the Warrants, respectively. The
Company agrees to accept and cooperate in implementing any such alternative
structures as long as such structures do not have adverse consequences for the
Company and do not materially delay the transactions contemplated in this
Agreement and the Ancillary Documents.
SECTION
7.19 Employment
Agreements. Notwithstanding anything to the contrary in this
Article 7, the Company agrees that, prior to the Swap Closing, the Company (at
the direction of Purchaser) will negotiate and use its reasonable best efforts
to amend and restate the employment agreements and change in control agreements
listed in Section 5.10(b) of the Disclosure Schedule to the reasonable
satisfaction of Purchaser, which amended and restated agreements shall be
effective immediately prior to the Swap Closing.
SECTION
7.20 Pre-Closing
Funding. Following the date hereof, the Company shall be required
to apply any funds received by the Company (a) through sales of surplus or
obsolete equipment, (b) pursuant to oil sales or collection of trade
receivables, or (c) through other means, towards the payment of the June 15,
2008 and September 15, 2008 interest payments under the 12% Senior Notes or
otherwise in accordance with Section 7.01 hereof. If by June 26,
2008, the Company shall not have received at least US$11,000,000 in cash (the
“Funding Requirement”) by any of
the means set forth in (a) through (c) above, then the Company may terminate
this Agreement, provided,
however,
the Company may not terminate this Agreement if (i) the Company is in breach of
this Agreement, (ii) the Company is in breach of any agreement with any Person
which agreement contemplates or provides for the payment of cash to the Company
in an amount at least equal to the Funding Requirement or (iii) the June 15,
2008 or September 15, 2008 interest payment, as the case may be, will be made by
the Company, including through a payment in kind of the interest payment; provided
further,
however,
that the Company may terminate this Agreement under this subsection (iii) if the
June 15, 2008 or
D-56
September
15, 2008 interest payment must be paid using cash solely derived from operating
cash flow generated through the normal course of business or from proceeds of
oil sales contracts with a term of less than three months as a result of the
Company’s failure to generate cash by other means. The Company shall
notify Purchaser promptly (and in any event within one day) of any receipt by
the Company of funds by any of the means set forth in (a) through (c) above (but
with respect to (b) above, the Company’s obligation to provide notice shall not
arise with respect to any oil sales contracts with a term of less than three
months) and Purchaser shall be entitled to direct, in its sole discretion, the
allocation of such funds by the Company, including, without limitation, the use
of such funds to pay interest under the 12% Senior Notes or to fund past due
obligations, working capital requirements or otherwise.
SECTION
7.21 Issuance of Additional
Series B-1 Preferred Stock. (a) Notwithstanding anything
to the contrary in this Agreement, Purchaser shall have the right, at or
following the Swap Closing and upon delivery of written notice five (5) Business
Days in advance to the Company, to surrender to the Company any 12% Senior Notes
or New Senior Notes, as the case may be, held by Purchaser or its Affiliates, in
exchange for such number of shares of Series B-1 Preferred Stock to be
determined based on the ratio of US$100 principal amount of 12% Senior Notes or
New Senior Notes, as the case may be, for one (1) share of Series B-1 Preferred
Stock (in the case of any fractional share of Series B-1 Preferred Stock, the
Company shall issue one full share of Series B-1 Preferred Stock to Purchaser in
lieu of such fractional share).
(b) In
the event that Purchaser provides or otherwise guarantees funding for the Senior
Notes Repurchase Payment pursuant to Section 3.01(g), if so requested by
Purchaser, the Company shall issue to Purchaser a number of shares of Series B-1
Preferred Stock equal to (i) the amount of the Senior Notes Repurchase Payment,
divided by (ii) US$100, with the purchase price for such issued shares of Series
B-1 Preferred Stock to be satisfied by Purchaser’s funding of the Senior Notes
Repurchase Payment. In the case that the quotient above results in
any fractional share of Series B-1 Preferred Stock, the Company shall issue one
full share of Series B-1 Preferred Stock to Purchaser in lieu of such fractional
share.
(c) Notwithstanding
the foregoing, the maximum total number of shares of Series B-1 Preferred Stock
to be issued to Purchaser pursuant to Sections 7.21(a) and (b) shall be
580,000.
ARTICLE
VIII
CONDITIONS
TO THE SWAP CLOSING
SECTION
8.01 Conditions to Obligations of
the Company. The obligations of the Company to effect the Swap
shall be subject to the satisfaction or written waiver, at or prior to the
Closing Date, of the condition that the closing of the Exchange Offer and the
Tender Offer shall have occurred pursuant to this Agreement.
SECTION
8.02 Conditions to Obligations of
Purchaser. The obligations of Purchaser to effect the Swap
shall be subject to the satisfaction or written waiver, at or prior to the
Closing Date, of each of the following conditions:
D-57
(a) Rollover
Transactions. The closing of the Rollover Transactions shall
have occurred pursuant to the Senior Preferred Stock Purchase
Agreements;
(b) Sale and Purchase
Transactions. The closing of the Sale and Purchase
Transactions shall have occurred pursuant to the Junior Preferred Stock Purchase
Agreement;
(c) Tender
Offer. The closing of the Tender Offer shall have occurred
pursuant to this Agreement;
(d) Exchange
Offer. The closing of the Exchange Offer shall have occurred
pursuant to this Agreement; and
(e) Preferred Stockholder
Consents. The Preferred Stockholder Consents shall have been
obtained to the extent and only if Purchaser does not “beneficially own” at
least 66 2/3% of the outstanding shares of Senior Preferred Stock or the Junior
Preferred Stock, as the case may be, at the closing of the Tender
Offer.
ARTICLE
IX
INDEMNIFICATION
SECTION
9.01 Survival of Representations
and Warranties. (a) The representations and
warranties of the Company contained in this Agreement shall survive the Swap
Closing for eighteen (18) months following the Swap Closing; provided,
however,
that (i) the representations and warranties made pursuant to
Sections 5.01, 5.02, 5.03, 5.04, 5.06, 5.26, 5.27 and 5.28 (the “Company Fundamental Representations”)
shall survive indefinitely, (ii) the representations and warranties dealing
with Tax matters (the “Tax
Representations”) shall survive until 120 days after the expiration of
the relevant statute of limitations for the Tax liabilities in question, and
(iii) insofar as any claim is made by Purchaser for the breach of any
representation or warranty of the Company contained herein relating to
environmental matters (the “Environmental Representations”), such
representations and warranties shall, for purposes of such claims by Purchaser,
survive the Swap Closing until the tenth anniversary of the Swap
Closing. Neither the period of survival nor the liability of the
Company with respect to the Company’s representations and warranties shall be
reduced by any investigation made at any time by or on behalf of
Purchaser. If written notice of a claim has been given prior to the
expiration of the applicable representations and warranties by Purchaser to the
Company, then the relevant representations and warranties shall survive as to
such claim, until such claim has been finally resolved.
(b) The
representations and warranties of Purchaser contained in this Agreement shall
survive the Swap Closing for eighteen (18) months following the Swap Closing;
provided,
however,
that the representations and warranties made pursuant to Sections 6.01, 6.02 and
6.06 (the “Purchaser
Fundamental Representations”; together with the Company Fundamental
Representations, the “Fundamental
Representations”) shall survive indefinitely. Neither the
period of survival nor the liability of Purchaser with respect to Purchaser’s
representations and warranties shall be reduced by any investigation made at any
time by or on
D-58
behalf of
the Company. If written notice of a claim has been given prior to the
expiration of the applicable representations and warranties by the Company to
Purchaser, then the relevant representations and warranties shall survive as to
such claim, until such claim has been finally resolved.
SECTION
9.02 Indemnification by the
Company. Purchaser
and its Affiliates, officers, directors, employees, agents, successors and
assigns (each a “Purchaser Indemnified
Party”) shall be indemnified and held harmless by the Company for and
against any and all liabilities, losses, damages, claims, costs and expenses,
interest, awards, judgments and penalties (including attorneys’ and consultants’
fees and expenses) suffered or incurred by them (including any Action brought or
otherwise initiated by any of them) (hereinafter a “Loss”), arising out of or resulting
from:
(a) the
breach of any representation or warranty made by the Company in
this Agreement (it being understood that such representations and
warranties shall be interpreted without giving effect to any limitations or
qualifications as to “materiality” (including the word “material”) or “Material
Adverse Effect” set forth therein);
(b) the
breach of any covenant or agreement by the Company contained in this
Agreement;
(c) liabilities
of the Company or any Subsidiary arising from or relating to any breach of any
covenant or agreement or non-performance of any obligation by the Company or any
Subsidiary with respect to (i) the Certificates of Designations of the Preferred
Stock, (ii) the Indenture, or (iii) the Existing Warrants, to the extent such
breach or non-performance occurred prior to the Swap Closing and not due to any
act or omission of Purchaser after the date hereof; and
(d) liabilities
of the Company or any Subsidiary arising from or relating to any of the Actions
disclosed in Section 5.09 of the Disclosure Schedule (i) to the extent not
reflected in the Company’s financial statements appearing in the most recent SEC
Reports prior to the date hereof or (ii) if so reflected, to the extent that any
such liabilities so reflected are in excess of US$1,000,000, in the aggregate,
of the reported amounts.
To the
extent that the Company’s undertakings set forth in this Section 9.02 may
be unenforceable, the Company shall contribute the maximum amount that it is
permitted to contribute under applicable Law to the payment and satisfaction of
all Losses incurred by the Purchaser Indemnified Parties.
SECTION
9.03 Indemnification by
Purchaser. The Company and its successors and assigns (each a
“Company Indemnified Party”)
shall be indemnified and held harmless by Purchaser for and against any and all
Losses, arising out of or resulting from:
(a) the
breach of any representation or warranty made by Purchaser contained in this
Agreement (it being understood that such representations and warranties shall be
interpreted without giving effect to any limitations or qualifications as to
“materiality” (including the word “material”) or “Material Adverse Effect” set
forth therein); or
D-59
(b) the
breach of any covenant or agreement by Purchaser contained in this
Agreement.
To the
extent that Purchaser’s undertakings set forth in this Section 9.03 may be
unenforceable, Purchaser shall contribute the maximum amount that it is
permitted to contribute under applicable Law to the payment and satisfaction of
all Losses incurred by the Company Indemnified Parties.
SECTION
9.04 Limits on
Indemnification. Notwithstanding anything to the contrary
contained in this Agreement: (a) an Indemnifying Party shall not be liable
for any claim for indemnification pursuant to Section 9.02(a) or 9.03(a),
unless and until the aggregate amount of indemnifiable Losses which may be
recovered from the Indemnifying Party equals or exceeds US$1,000,000 whereupon
the Indemnified Party shall be entitled to indemnification for the full amount
of such Losses; and (b) the maximum amount of indemnifiable Losses which may be
recovered from an Indemnifying Party arising out of or resulting from the causes
set forth in Section 9.02(a) or 9.03(a), as the case may be, shall be an
amount equal to US$75,000,000. Notwithstanding the foregoing, the
provisions of this Section 9.04 shall not apply with respect to the Fundamental
Representations, Tax Representations and Environmental Representations, which
shall not be subject to any limitations on indemnification.
SECTION
9.05 Notice of Loss; Third Party
Claims. (a) An Indemnified Party shall give the
Indemnifying Party notice of any matter that an Indemnified Party has determined
has given or could give rise to a right of indemnification under this Agreement,
within 60 days of such determination, stating the amount of the Loss, if known,
and method of computation thereof, and containing a reference to the provisions
of this Agreement in respect of which such right of indemnification is claimed
or arises.
(b) If
an Indemnified Party shall receive notice of any Action, audit, demand or
assessment (each, a “Third Party Claim”)
against it or which may give rise to a claim for Loss under this Article IX,
within 60 days of the receipt of such notice, the Indemnified Party shall give
the Indemnifying Party notice of such Third Party Claim; provided,
however,
that the failure to provide such notice shall not release the Indemnifying Party
from any of its obligations under this Article IX except to the extent that the
Indemnifying Party is materially prejudiced by such failure and shall not
relieve the Indemnifying Party from any other obligation or liability that it
may have to any Indemnified Party otherwise than under this Article
IX. The Indemnifying Party shall be entitled to assume and control
the defense of such Third Party Claim at its expense and through counsel of its
choice if it gives notice of its intention to do so to the Indemnified Party
within five days of the receipt of notice from the Indemnified Party of such
Third Party Claim; provided,
however,
that if there exists or is reasonably likely to exist a conflict of interest
that would make it inappropriate in the judgment of the Indemnified Party in its
sole and absolute discretion for the same counsel to represent both the
Indemnified Party and the Indemnifying Party, then the Indemnified Party shall
be entitled to retain its own counsel in each jurisdiction for which the
Indemnified Party determines counsel is required, at the expense of the
Indemnifying Party. In the event that the Indemnifying Party
exercises the right to undertake any such defense against any such Third Party
Claim as provided above, the Indemnified Party shall cooperate with the
Indemnifying Party in such defense and make available to the Indemnifying Party,
at the Indemnifying Party’s expense, all witnesses, pertinent records, materials
and
D-60
information
in the Indemnified Party’s possession or under the Indemnified Party’s control
relating thereto as is reasonably required by the Indemnifying
Party. Similarly, in the event the Indemnified Party is, directly or
indirectly, conducting the defense against any such Third Party Claim, the
Indemnifying Party shall cooperate with the Indemnified Party in such defense
and make available to the Indemnified Party, at the Indemnifying Party’s
expense, all such witnesses, records, materials and information in the
Indemnifying Party’s possession or under the Indemnifying Party’s control
relating thereto as is reasonably required by the Indemnified
Party. No such Third Party Claim may be settled by the Indemnified
Party without the prior written consent of the Indemnifying Party, which may not
be unreasonably withheld.
SECTION
9.06 Payment in Common
Stock. In the event any Losses are payable by the Company to
any Purchaser Indemnified Party hereunder, upon written notice to the Company,
such Purchaser Indemnified Party shall be entitled to receive, in lieu of
payment in cash, payment of such Losses in the form of shares of Common
Stock. The number of shares of Common Stock to be issued to such
Purchaser Indemnified Party hereunder shall be determined by dividing the total
amount of the applicable indemnifiable Losses by the average of the Volume
Weighted Average Stock Price over the 30 consecutive trading days immediately
prior to the Determination Date. If the Volume Weighted Average Price
cannot be calculated due to the absence of a trading market in the Common Stock,
the number of shares issuable shall be determined by dividing the total amount
of the applicable indemnifiable Losses by the Fair Market Value of the Common
Stock on the Determination Date.
ARTICLE
X
TERMINATION,
AMENDMENT AND WAIVER
SECTION
10.01 Termination. This
Agreement may be terminated and the Transactions may be abandoned at any time by
action taken or authorized by the Board of Directors of the terminating party,
notwithstanding any requisite approval and adoption of this Agreement and the
Ancillary Documents and the Transactions by the stockholders of the
Company:
(a) By
mutual written consent of each of Purchaser and the Company duly authorized by
the Boards of Directors of Purchaser and the Company; or
(b) By
either Purchaser or the Company if the Swap Closing shall not have occurred on
or before the Termination Date; provided,
however,
that the right to terminate this Agreement under this Section 10.01(b) shall not
be available to any party whose failure to fulfill any obligation under this
Agreement has been the cause of, or resulted in, the failure of the Swap Closing
to occur on or before such date; or
(c) By
Purchaser if (i) any of the Senior Preferred Stock Purchase Agreements or the
Junior Preferred Stock Purchase Agreement is terminated without any material
breach by Purchaser, (ii) due to an occurrence or circumstance that would result
in a failure to satisfy any condition set forth in Annex C or Annex D hereto
(expect to the extent such condition is waived by the parties pursuant to this
Agreement), Purchaser or the 12% Senior Notes Issuer shall have (A) failed to
commence the Tender Offer or the Exchange Offer, as the case may be, within 60
days following the date of this Agreement,
D-61
(B)
terminated the Tender Offer or the Exchange Offer, as the case may be, without
having accepted any shares of Preferred Stock or 12% Senior Notes, as the case
may be, for payment thereunder or (C) failed to accept the Preferred Stock or
12% Senior Notes for payment pursuant to the Tender Offer or the Exchange Offer,
as the case may be, within 90 days following the commencement of the relevant
Offer (provided,
however,
that the applicable time period specified in (A) and (C) above shall be extended
until the earlier to occur of (x) the fifth Business Day following expiration or
termination of any applicable waiting period under the applicable Anti-trust
Laws, obtaining of requisite clearance or approval under the applicable
Anti-trust Laws, and obtaining the Purchaser Shareholders Approval, the Common
Stockholder Approvals, the Preferred Stockholder Consents, the effectiveness of
the Registration Statement (if applicable), the Existing Warrants Waiver and the
Article 71 Waiver and (y) the Termination Date), unless such action or inaction
under (A), (B) or (C) shall have been caused by or resulted from the failure of
Purchaser to perform, in any material respect, any of its material covenants or
agreements contained in this Agreement, or the material breach by Purchaser of
any of its material representations or warranties contained in this Agreement or
(iii) the Board or any committee thereof shall have made a Change in the Company
Recommendation that is adverse to Purchaser, or shall have recommended or
approved any Competing Transaction, or shall have resolved to do any of the
foregoing; or
(d) By
the Company, upon approval of the Board, if (i) due to a material breach by
Purchaser of its representations or warranties or covenants contained in this
Agreement that would result in a failure to satisfy any condition set forth in
Annex C or D hereto, Purchaser or the 12% Senior Notes Issuer shall have (A)
failed to commence the Offers within 60 days following the date of this
Agreement, (B) terminated the Tender Offer or the Exchange Offer, as the case
may be, without having accepted any Preferred Stock or 12% Senior Notes, as the
case may be, for payment thereunder or (C) failed to accept any Preferred Stock
or 12% Senior Notes for payment pursuant to the Offers within 90 days following
the commencement of the relevant Offer, provided,
however,
that the applicable time period specified in (A) and (C) above shall be extended
until the earlier to occur of (x) the fifth Business Day following expiration or
termination of any applicable waiting period under the applicable Anti-trust
Laws, obtaining of requisite clearance or approval under the applicable
Anti-trust Laws, and obtaining the Purchaser Shareholders Approval, the Common
Stockholder Approvals, the Preferred Stockholder Consents, the Existing Warrants
Waiver and the Article 71 Waiver and (y) the Termination Date or (ii) pursuant
to Section 7.20.
SECTION
10.02 Effect of
Termination. In the event of the termination of this Agreement
pursuant to Section 10.01, this Agreement shall forthwith become void, and there
shall be no liability on the part of any party hereto, except (a) as set forth
in Section 10.03 (including the relevant defined terms in Section 1.01), which
shall survive any termination of this Agreement and (b) nothing herein
shall relieve any party from liability for any breach hereof prior to the date
of such termination; provided,
however,
that the terms of Sections 7.04(b) and (c) and Article XI shall survive any
termination of this Agreement.
SECTION
10.03 Fees and
Expenses. (a) In the event that
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(i) this
Agreement is terminated (A) pursuant to Section 10.01(c)(iii) or (B) pursuant to
Section 10.01(c)(i) or 10.01(c)(ii), to the extent that the termination of this
Agreement, any of the Senior Preferred Stock Purchase Agreements or the Junior
Preferred Stock Purchase Agreement is caused by the Company due to the failure
of the Company to perform, in any material respect, any of its covenants or
agreements contained in this Agreement or the material breach by the Company of
any of its representations or warranties contained in this Agreement or that the
failure to commence, the termination or the failure to accept any Remaining
Share of the Preferred Stock or 12% Senior Notes for payment, as set forth in
Section 10.01(c)(ii), shall relate to the failure of the Company to perform, in
any material respect, any of its covenants or agreements contained in this
Agreement or the material breach by the Company of any of its representations or
warranties contained in this Agreement; or
(ii) the
Company enters into an agreement with respect to a Competing Transaction, or a
Competing Transaction is consummated, in each case within 18 months after the
termination of this Agreement (A) as a result of a material or intentional
breach by the Company of Section 7.05 or (B) the Company was involved in
discussions or negotiations with respect to such Competing Transaction prior to
the termination of this Agreement, and the Company shall not theretofore have
been required to pay the Fee to Purchaser pursuant to Section
10.03(a)(i);
then, in
any such event, the Company shall pay Purchaser promptly (but in no event later
than one Business Day after the first of such events shall have occurred) a fee
equal to US$10,000,000 (the “Fee”), which amount
shall be payable in immediately available funds.
(b) If
this Agreement is terminated for any reason other than a termination (i) solely
as a result of the failure of the parties hereto to obtain (A) the clearance or
approval under Exon-Xxxxxx Provisions or the applicable Anti-trust Laws, (B) the
AMEX Listing Approval or other Exchange Approvals, (C) the Article 71 Waiver or
(D) the Purchaser Shareholders Approval, (ii) solely as a result
of the non-satisfaction of the Minimum Condition or the Exchange
Offer Minimum Condition, or (iii) by the Company pursuant to Section 7.20, and
Purchaser is not in material breach of its material covenants and agreements
contained in this Agreement or its representations and warranties contained in
this Agreement, the Company shall, whether or not any payment is made pursuant
to Section 10.03(a), reimburse Purchaser (not later than five Business Days
after submission of statements therefor) for all out-of-pocket expenses and fees
up to US$3,000,000 in the aggregate (including, without limitation, fees and
expenses payable to all banks, investment banking firms, other financial
institutions, and other Persons and their respective agents and counsel, for
arranging, committing to provide or providing any financing for the Transactions
or structuring the Transactions, and all fees of counsel, accountants, experts
and consultants to Purchaser, and all printing and advertising expenses and
filing fees) actually incurred or accrued by either of them or on their behalf
in connection with the Transactions, including, without limitation, the
financing thereof, and actually incurred or accrued by banks, investment banking
firms, other financial institutions and other Persons, and for which Purchaser
is liable in connection with the negotiation, preparation, execution and
performance of this Agreement, the structuring and financing of the Transactions
and any financing commitments or agreements relating thereto (all the foregoing
being referred to herein collectively as the “Expenses”).
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(c) Except
as set forth in this Section 10.03, all costs and expenses incurred in
connection with this Agreement and the Transactions shall be paid by the party
incurring such expenses, whether or not any Transaction is
consummated.
(d) In
the event that the Company shall fail to pay the Fee or any Expenses when due,
unless such Fees and Expenses are being contested in good faith, the term
“Expenses” shall be deemed to include the costs and expenses actually incurred
or accrued by Purchaser (including, without limitation, fees and expenses of
counsel) in connection with the collection under and enforcement of this Section
10.03, together with interest on such unpaid Fee and Expenses, commencing on the
date that the Fee or such Expenses became due, at a rate equal to the rate of
interest publicly announced by Citibank, N.A., from time to time, in the City of
New York, as such bank’s Base Rate.
(e) In
the event any Fee or Expenses, including any applicable interest accrued thereon
pursuant to Section 10.03(d) (collectively, the “Unpaid Fees”), are
payable by the Company to Purchaser hereunder, upon written notice to the
Company, Purchaser shall be entitled to receive, in lieu of payment in cash,
payment of such Unpaid Fees in the form of shares of Common
Stock. The number of shares of Common Stock to be issued to Purchaser
hereunder shall be determined by dividing the total amount of the applicable
Unpaid Fees by the average of the Volume Weighted Average Stock Price over the
30 consecutive trading days immediately prior to the Determination
Date. If the Volume Weighted Average Price can not be calculated due
to the absence of a trading market in the Common Stock, the number of shares
issuable shall be determined by dividing the total amount of the applicable
indemnifiable Losses by the Fair Market Value of the Common Stock on the
Determination Date.
SECTION
10.04 Amendment. This
Agreement may be amended by the parties hereto by action taken by or on behalf
of their respective Boards of Directors at any time prior to the Swap
Closing. This Agreement may not be amended except by an instrument in
writing signed by each of the parties hereto.
SECTION
10.05 Waiver. At
any time prior to the Swap Closing, any party hereto may (a) extend the time for
the performance of any obligation or other act of any other party hereto, (b)
waive any inaccuracy in the representations and warranties of any other party
contained herein or in any document delivered pursuant hereto and (c) waive
compliance with any agreement of any other party or any condition to its own
obligations contained herein. Any such extension or waiver shall be
valid if set forth in an instrument in writing signed by the party or parties to
be bound thereby.
ARTICLE
XI
GENERAL
PROVISIONS
SECTION
11.01 Notices. All
notices, requests, claims, demands and other communications hereunder shall be
in writing and shall be given (and shall be deemed to have been duly given upon
receipt) by delivery in Person, by overnight courier, by facsimile upon written
confirmation of delivery or by registered or certified mail (postage prepaid,
return receipt requested) to the respective parties at the following addresses
(or at such other address for a party as shall be specified in a notice given in
accordance with this Section 11.01):
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if to
Purchaser:
United
Energy Group Limited
Xxxx
0000, Xxx Xxxxxxx Xxxxx
00
Xxxxxxxxx
Xxxxxxx,
Xxxx Xxxx
Attention:
Xxxxxx Xxxxx
Facsimile
No.: x000 0000 0000
with a
copy to:
Shearman
& Sterling LLP
12th Floor
Gloucester Tower
The
Landmark, 00 Xxxxxx Xxxxxx
Xxxxxxx,
Xxxx Xxxx
Attention:
Xxxx Xxxxxxxx
Facsimile
No.: x000 0000 0000
if to the
Company:
Transmeridian
Exploration Incorporated
0000 Xxx
Xxxxxx, Xxxxx 0000
Xxxxxxx,
Xxxxx 00000
Attention:
Chief Financial Officer
Facsimile
No.: x0 000 000 0000
with a
copy to:
Akin Gump
Xxxxxxx Xxxxx & Xxxx LLP
0000
Xxxxxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxx,
Xxxxx 00000-0000
Attention: Xxxxx
X. Xxxx III
Facsimile
No.: x0 000 000 0000
SECTION
11.02 Severability. If
any term or other provision of this Agreement is invalid, illegal or incapable
of being enforced by any rule of law, or public policy, all other conditions and
provisions of this Agreement shall nevertheless remain in full force and effect
so long as the economic or legal substance of the Transactions is not affected
in any manner adverse to any party. Upon such determination that any
term or other provision is invalid, illegal or incapable of being enforced, the
parties hereto shall negotiate in good faith to modify this Agreement so as to
effect the original intent of the parties as closely as possible in a mutually
acceptable manner in order that the Transactions be consummated as originally
contemplated to the fullest extent possible.
SECTION
11.03 Entire Agreement;
Assignment. This Agreement and the Ancillary Documents
constitute the entire agreement among the parties with respect to the subject
matter hereof and supersede all prior agreements and undertakings, both written
and oral,
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among the
parties, or any of them, with respect to the subject matter
hereof. This Agreement and the Ancillary Documents shall not be
assigned (whether pursuant to a merger, by operation of law or otherwise),
except that Purchaser may assign all or any of their rights and obligations
hereunder to any Affiliate of Purchaser, provided that no such assignment shall
relieve the assigning party of its obligations hereunder if such assignee does
not perform such obligations. For the avoidance of doubt, Purchaser
shall be entitled to conduct the Transactions through a wholly owned subsidiary
of Purchaser; provided,
however,
that Purchaser shall guarantee the obligations of such subsidiary in connection
therewith.
SECTION
11.04 Parties in
Interest and
Assignment. This Agreement shall be binding upon and inure
solely to the benefit of each party hereto, and nothing in this Agreement,
express or implied, is intended to or shall confer upon any other Person any
right, benefit or remedy of any nature whatsoever under or by reason of this
Agreement; provided,
however,
that Purchaser may assign all or any of its rights and obligations hereunder to
any of its Affiliates, provided that no such assignment shall relieve Purchaser
of its obligations hereunder if such assignee does not perform such
obligations.
SECTION
11.05 Specific
Performance. The parties hereto agree that irreparable damage
would occur in the event any provision of this Agreement were not performed in
accordance with the terms hereof and that the parties shall be entitled to
specific performance of the terms hereof, in addition to any other remedy at law
or equity.
SECTION
11.06 Governing
Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York applicable to contracts
executed in and to be performed in that State (other than those provisions set
forth herein that are required to be governed by the DGCL). All
actions and proceedings arising out of or relating to this Agreement shall be
heard and determined exclusively in any New York state or federal court sitting
in The City of New York. The parties hereto hereby (a) submit to the
exclusive jurisdiction of any state or federal court sitting in The City of New
York for the purpose of any Action arising out of or relating to this Agreement
brought by any party hereto, and (b) irrevocably waive, and agree not to assert
by way of motion, defense, or otherwise, in any such Action, any claim that it
is not subject personally to the jurisdiction of the above-named courts, that
its property is exempt or immune from attachment or execution, that the Action
is brought in an inconvenient forum, that the venue of the Action is improper,
or that this Agreement or the Transactions may not be enforced in or by any of
the above-named courts. Purchaser hereby irrevocably appoints CT
Corporation to receive service of process on its behalf as its respective
authorized agent for service of process in any state or federal court sitting in
The City of New York. If for any reason such agent shall cease to be
such agent for service of process, Purchaser shall forthwith appoint a new agent
for service of process and deliver to the Company a copy of the new agent’s
acceptance of appointment within 30 days. Nothing in this Agreement
shall affect the right to serve process in any other manner permitted by
law.
SECTION
11.07 Headings. The
descriptive headings contained in this Agreement are included for convenience of
reference only and shall not affect in any way the meaning or interpretation of
this Agreement.
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SECTION
11.08 Counterparts. This
Agreement may be executed and delivered (including by facsimile transmission) in
one or more counterparts, and by the different parties hereto in separate
counterparts, each of which when executed shall be deemed to be an original but
all of which taken together shall constitute one and the same
agreement.
SECTION
11.09 Waiver of Jury
Trial. Each of the parties hereto hereby waives to the fullest
extent permitted by applicable law any right it may have to a trial by jury with
respect to any litigation directly or indirectly arising out of, under or in
connection with this Agreement or the Transactions. Each of the
parties hereto (a) certifies that no representative, agent or attorney of any
other party has represented, expressly or otherwise, that such other party would
not, in the event of litigation, seek to enforce that foregoing waiver and (b)
acknowledges that it and the other hereto have been induced to enter into this
Agreement and the Transactions, as applicable, by, among other things, the
mutual waivers and certifications in this Section 11.09.
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IN
WITNESS WHEREOF, Purchaser and the Company have caused this Agreement to be
executed as of the date first written above by their respective officers
thereunto duly authorized.
UNITED
ENERGY GROUP LIMITED
|
||||
|
By:
|
/s/
Xxxxx
Xxxxxxx
|
||
Name:
|
Xxxxx Xxxxxxx | |||
Title:
|
Chairman and Executive Director | |||
TRANSMERIDIAN
EXPLORATION INCORPORATED
|
||||
|
By:
|
/s/
Xxxxxx X.
Xxxxxxx
|
||
Name:
|
Xxxxxx X. Xxxxxxx | |||
Title:
|
Chairman and CEO | |||
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