Exhibit 10.1
CLIFFORD CLIFFORD CHANCE, LLP
CHANCE CONFORMED COPY
BMB MUNAI, INC.
U.S.$60,000,000 5.0 per cent. Convertible Notes due 2012
PLACEMENT AGREEMENT
CONTENTS
Clause Page
1. Interpretation.......................................................2
2. Issue Of The Notes...................................................4
3. Representations And Warranties By The Issuer.........................5
4. Undertakings By The Issuer..........................................13
5. Selling Restrictions................................................15
6. Indemnification.....................................................16
7. Fees And Expenses...................................................17
8. Closing.............................................................19
9. Termination.........................................................21
10. Survival............................................................22
11. Time................................................................22
12. Notices.............................................................22
13. Law And Jurisdiction................................................23
14. Rights Of Third Parties.............................................23
15. Counterparts........................................................24
SCHEDULE 1 SELLING RESTRICTIONS............................................25
SCHEDULE 2 WARRANTS AND OPTIONS GRANTED BY THE ISSUER......................29
SCHEDULE 3 FORM OF LOCK-UP LETTER..........................................30
THIS AGREEMENT is made on 4 July 2007
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BETWEEN
(1) BMB MUNAI, INC. (the "Issuer"); and
(2) BAYERISCHE HYPO-UND VEREINSBANK AG as sole bookrunner (the
"Bookrunner").
WHEREAS
(A) The Issuer has authorised the creation and issue of U.S.$60,000,000 in
aggregate principal amount of 5.0 per cent. Convertible Notes due 2012
(the "Notes") convertible into common shares, currently of U.S.$0.001
par value each, in the share capital of the Issuer (the "Shares").
(B) The Notes are being offered outside the United States in reliance on
Regulation S ("Regulation S") under the U.S. Securities Act of 1933, as
amended (the "Securities Act").
(C) The Notes will be issued in registered form and in the denomination of
U.S.$100,000. The Notes will be represented by individual note
certificates (the "Note Certificates"). Each Note Certificate will bear
the legend set forth in "Investor Restrictions" in the Term Sheet, as
defined herein.
(D) The Notes will be constituted by a trust deed (the "Trust Deed"), a
draft of which is in the agreed form and to which will be scheduled the
forms of the Note Certificates. The Trust Deed will be made between the
Issuer and BNY Corporate Trustee Services Limited (the "Trustee") as
trustee for the holders of the Notes from time to time.
(E) The Issuer will, in relation to the Notes, enter into an agency
agreement (the "Agency Agreement") with The Bank of New York as
registrar (the "Registrar"), The Bank of New York as principal paying
and conversion agent (the "Principal Paying and Conversion Agent"), the
transfer agents named therein (the "Transfer Agents"), the other paying
and conversion agents named therein and the Trustee.
(F) The Issuer will also, in relation to the Notes, enter into a
registration rights agreement (the "Registration Rights Agreement") with
the Bookrunner.
IT IS AGREED as follows:
1. INTERPRETATION
1.1 Definitions
In this Agreement the following expressions have the following meanings:
"American Stock Exchange" means the American Stock Exchange LLC;
"Amex Listing Approval" means the approval of the American Stock
Exchange for the listing of the Shares to be issued on exercise of any
Conversion Right;
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"Closing Date" means, subject to Clause 8.2 (Postponed closing), 10 July
2007;
"Commission" means the Securities and Exchange Commission;
"Conditions" means the terms and conditions of the Notes as scheduled to
the agreed form of the Trust Deed as the same may be modified prior to
the Closing Date, and any reference to a numbered "Condition" is to the
correspondingly numbered provision thereof;
"Conversion Date" has the meaning given to such term in Condition 13(d)
(Procedure for Conversion-Conversion Date);
"Conversion Price" has the meaning given to such term in Condition 12(d)
(Conversion Price);
"Conversion Right" has the meaning given to such term in Condition 2
(Interpretation);
"Event of Default" means one of those circumstances described in
Condition 11 (Events of Default);
"Exchange Act" means the United States Securities Exchange Act of 1934,
as amended.
"FSMA" means the Financial Services and Markets Act 2000;
"Group" means the Issuer and the Subsidiaries of the Issuer taken as a
whole;
"Issue Documents" means the Trust Deed, the Agency Agreement and the
Registration Rights Agreement;
"Issue Price" means 100 per cent. of the aggregate principal amount of
the Notes;
"Loss" means any liability, damages, cost, loss or expense (including,
without limitation, legal fees, costs and expenses and any value added
tax thereon);
"person" means any individual, company, corporation, firm, partnership,
joint venture, association, organisation, state or agency of a state or
other entity, whether or not having separate legal personality;
"Related Party" means, in respect of any person, any affiliate of that
person or any officer, director, employee or agent of that person or any
such affiliate or any person by whom any of them is controlled (where
the terms "affiliate" and "controlled" have the meanings given to them
by the Securities Act and the regulations thereunder);
"Regulation D" means Regulation D under the Securities Act;
"Rules and Regulations" means the rules and regulations of the
Commission;
"Securities Laws" means, collectively, the Sarbanes-Oxley Act of 2002
("Sarbanes-Oxley"), the Securities Act, the Exchange Act, the Rules and
Regulations, the auditing principles, rules, standards and practices
applicable to auditors of "issuers" (as defined in Sarbanes-Oxley)
promulgated or approved by the Public Company Accounting Oversight Board
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and, as applicable, the rules of the American Stock Exchange, the New
York Stock Exchange and the NASDAQ Stock Market ("Exchange Rules").
"Subsidiary" means, in respect of any person (the "first person") at any
particular time, any other person (the "second person"):
(a) Control: whose affairs and policies the first person controls or
has the power to control (directly or indirectly), whether by
ownership of share capital, contract, the power to appoint or
remove members of the governing body of the second person or
otherwise; or
(b) Consolidation: whose financial statements are, in accordance
with applicable law and generally accepted accounting
principles, consolidated with those of the first person;
"Term Sheet" means the indicative term sheet for the Notes dated 28 June
2007;
"U.S.$" and "U.S. dollars" denote the lawful currency for the time being
of the United States of America; and
"U.S. GAAP" means accounting principles generally accepted in the United
States;
"United States" means the United States of America.
1.2 Clauses and Schedules
Any reference in this Agreement to a Clause, a sub-clause or a Schedule
is, unless otherwise stated, to a clause or sub-clause hereof or a
schedule hereto.
1.3 Legislation
Any reference in this Agreement to any legislation (whether primary
legislation or regulations or other subsidiary legislation made pursuant
to primary legislation) shall be construed as a reference to such
legislation as the same may have been, or may from time to time be,
amended or re-enacted.
1.4 Headings
Headings and sub-headings are for ease of reference only and shall not
affect the construction of this Agreement.
1.5 Agreed Form
Any reference herein to a document being in "agreed form" means that the
document in question has been agreed between the proposed parties
thereto, subject to any amendments that the parties may agree upon prior
to the Closing Date.
2. ISSUE OF THE NOTES
2.1 Undertaking to issue
The Issuer undertakes to the Bookrunner that:
2.1.1 Issue of Notes: subject to and in accordance with the provisions
of this Agreement, the Notes will be issued on the Closing Date,
in accordance with this Agreement and the Trust Deed; and
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2.1.2 Issue documentation: it will on or before the Closing Date,
execute the Issue Documents.
2.2 Undertaking to procure subscribers for the Notes
The Bookrunner undertakes to the Issuer that, subject to and in
accordance with the provisions of this Agreement, it will use all
reasonable efforts to procure subscribers for the Notes on the Closing
Date at the Issue Price.
3. REPRESENTATIONS AND WARRANTIES BY THE ISSUER
3.1 Issuer's representations
The Issuer represents and warrants to the Bookrunner that:
3.1.1 Incorporation, capacity and authorisation: the Issuer is duly
incorporated and is existing and in good standing under the laws
of the State of Nevada with power and authority (corporate and
other) to own its property and assets and conduct its business;
and the Issuer is duly qualified to do business as a foreign
corporation in good standing in all other jurisdictions in which
its ownership or lease of property or the conduct of its
business requires such qualification; all of the issued and
outstanding capital stock of the Issuer has been duly authorised
and validly issued and is fully paid and nonassessable; the
Issuer has full power and capacity to create and issue the
Notes, to execute this Agreement and the Issue Documents and to
undertake and perform the obligations expressed to be assumed by
it herein and therein, and the Issuer has taken all necessary
action to approve and authorise the same;
3.1.2 No winding-up, etc.: no meeting has been convened and no order
has been made or resolution passed for the winding-up,
amalgamation, reconstruction, reorganisation, administration,
dissolution, liquidation, demerger or consolidation or analogous
procedure of the Issuer or any other member of the Group, and no
notice of appointment of a liquidator, receiver, administrative
receiver, administrator or special officer has been served under
any applicable law in respect of the Issuer or any other member
of the Group and no such steps are intended as at the date
hereof in respect of or by the Issuer or any other member of the
Group;
3.1.3 Subsidiaries: each Subsidiary of the Issuer has been duly
incorporated and is existing and in good standing under the laws
of the jurisdiction of its incorporation, with power and
authority (corporate and other) to own its property and assets
and conduct its business; and each Subsidiary of the Issuer is
duly qualified to do business as a foreign corporation in good
standing in all other jurisdictions in which its ownership or
lease of property or the conduct of its business requires such
qualification; all of the issued and outstanding capital stock
of each Subsidiary of the Issuer has been duly authorised and
validly issued and is fully paid and nonassessable; and the
capital stock of each Subsidiary owned by the Issuer, directly
or through Subsidiaries, is owned free from liens, encumbrances
and defects;
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3.1.4 No Finder's Fee: with the exception (for the avoidance of any
doubt) of any agreement between the Bookrunner and Aton Capital,
there are no contracts, agreements or understandings between the
Issuer and any person that would give rise to a valid claim
against the Issuer or the Bookrunner for a brokerage commission,
finder's fee or other like payment in connection with this
offering;
3.1.5 Registration Rights: with the exception of the Registration
Rights Agreement, there are no contracts, agreements or
understandings between the Issuer and any person granting such
person the right to require the Issuer to file a registration
statement under the Securities Act with respect to any
securities of the Issuer owned or to be owned by such person or
to require the Issuer to include such securities in the
securities registered pursuant to a registration statement or in
any securities being registered pursuant to any other
registration statement filed by the Issuer under the Securities
Act (collectively, "registration rights");
3.1.6 Absence of Defaults and Conflicts Resulting from Transaction:
the execution, delivery and performance of this Agreement, and
the issuance and sale of the Notes and Shares will not result in
a breach or violation of any of the terms and provisions of, or
constitute a default or a Debt Repayment Triggering Event (as
defined below) under, or result in the imposition of any lien,
charge or encumbrance upon any property or assets of the Issuer
or any other member of the Group pursuant to, the charter or
by-laws of the Issuer or any other member of the Group, any
statute, rule, regulation or order of any governmental agency or
body or any court, domestic or foreign, having jurisdiction over
the Issuer or any other member of the Group or any of their
properties, or any agreement or instrument to which the Issuer
or any other member of the Group is a party or by which the
Issuer or any other member of the Group is bound or to which any
of the properties of the Issuer or any other member of the Group
is subject; a "Debt Repayment Triggering Event" means any event
or condition that gives, or with the giving of notice or lapse
of time would give, the holder of any note, debenture, or other
evidence of indebtedness (or any person acting on such holder's
behalf) the right to require the repurchase, redemption or
repayment of all or a portion of such indebtedness by the Issuer
or any other member of the Group;
3.1.7 Absence of Existing Defaults and Conflicts: neither the Issuer
nor any other member of the Group is in violation of its
respective charter or by-laws or in default (or with the giving
of notice or lapse of time would be in default) under any
existing obligation, agreement, covenant or condition contained
in any indenture, loan agreement, mortgage, lease or other
agreement or instrument to which any of them is a party or by
which any of them is bound or to which any of the properties of
any of them is subject, except such defaults that would not,
individually or in the aggregate, result in a material adverse
effect on the condition (financial or otherwise), results of
operations, business, properties or prospects of the Issuer and
other member of the Group taken as a whole ("Material Adverse
Effect");
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3.1.8 Compliance with OFAC: none of the Issuer, any other member of
the Group, or any director, officer, agent, employee or
affiliate of the Issuer or any other member of the Group is
currently subject to any U.S. sanctions administered by the
Office of Foreign Assets Control of the U.S. Department of the
Treasury ("OFAC"); and none of the Issuer or other member of the
Group will directly or indirectly use the proceeds of the
offering of the Notes hereunder, or lend, contribute or
otherwise make available such proceeds to any subsidiary, joint
venture partner or other person or entity, for the purpose of
financing the activities of any person currently subject to any
U.S. sanctions administered by OFAC;
3.1.9 Legal, valid, binding and enforceable: this Agreement
constitutes and, upon due execution by or on behalf of the
Issuer, the Issue Documents will constitute and upon due
execution of the Trust Deed and the Note Certificates by or on
behalf of the Issuer and due authentication of the Note
Certificates, the Notes will constitute legal, valid, binding
and enforceable obligations of the Issuer;
3.1.10 Status: the Notes will constitute direct, general and
unconditional obligations of the Issuer which (i) rank pari
passu among themselves and (ii) will at all times rank at least
pari passu with all other present and future unsecured
obligations of the Issuer, save for such obligations as may be
preferred by provisions of law that are both mandatory and of
general application;
3.1.11 Approvals in connection with the Notes: all filings,
authorisations, consents and approvals required by the Issuer in
connection with the creation, issue and sale of the Notes, the
execution of this Agreement and the Issue Documents, the
performance by the Issuer of the obligations expressed to be
undertaken by it herein and therein have been (or will, in the
case of the Amex Listing Approval only, within 30 days after the
Closing Date, be) obtained and are (or will, in the case of the
Amex Listing Approval only, within 30 days after the Closing
Date, be) in full force and effect;
3.1.12 Taxation: all payments in respect of the Notes and all payments
by the Issuer under this Agreement and the Issue Documents will
be made free and clear of, and without withholding or deduction
for or on account of, any taxes, duties, assessments or
governmental charges of whatsoever nature imposed, levied,
collected, withheld or assessed by or on behalf of the
government of the United States or the Republic of Kazakhstan,
or any political subdivision or authority thereof or therein
having power to tax;
3.1.13 Stamp duty: no stamp, registration or other taxes, duties,
assessments or governmental charges of whatsoever nature are
payable in the United States or the Republic of Kazakhstan, upon
or in connection with (a) this Agreement or the Issue Documents
or their execution or delivery; (b) the creation, issue,
offering, sale or conversion of the Notes; or (c) the creation
and issue of the Shares;
3.1.14 Financial Statements: the Issuer's consolidated audited
financial statements for the years ending 31 March 2006 and 31
March 2007 and the related notes thereto, present fairly the
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financial position of the Issuer and any other member of the
Group as of the dates indicated and their respective results of
operations and statements of changes in financial position, for
the periods specified; and such financial statements have been
prepared in conformity with U.S. GAAP applied on a consistent
basis;
3.1.15 Material Adverse Change: since 31 March 2007, there has not been
any material adverse change, or any development involving a
prospective material adverse change, in or affecting the general
affairs, business, prospects, management, financial position,
stockholders' equity or results of operations of either the
Issuer or any other member of the Group and, since 31 March
2007, neither the Issuer nor any other member of the Group has
entered into any transaction or agreement (whether or not in the
ordinary course of business) that is material to either the
Issuer or any other member of the Group and, in the context of
an investment in the Notes;
3.1.16 Contingent liabilities: there are no outstanding guarantees or
contingent payment obligations of the Issuer or any other member
of the Group in respect of indebtedness of third parties and the
Issuer and each other member of the Group is in compliance with
all of its obligations under any outstanding guarantees or
contingent obligations;
3.1.17 Off-balance Sheet Arrangements: as at the date hereof, there are
no material off-balance sheet transactions, arrangements and
obligations that the Issuer has not disclosed to the Bookrunner
and neither the Issuer nor any other member of the Group has any
material relationships with unconsolidated entities that are
contractually limited to narrow activities that facilitate the
transfer of or access to assets by the Issuer, such as
structured finance entities and special purpose entities that
are reasonably likely to have a material effect on the liquidity
of the Issuer or the requirements of the Issuer for capital
resources;
3.1.18 Related Party Transactions: no transaction has been entered into
between the Issuer and its affiliates that was not on an arm's
length basis on normal commercial terms;
3.1.19 Environmental compliance: the Issuer and each other member of
the Group is (i) in compliance with any and all applicable
Environmental Laws, (ii) has received and is in compliance with
all permits, licenses or other approvals required of it under
applicable Environmental Laws to conduct its respective
businesses; and (iii) has not received notice of any actual or
potential liability under any Environmental Laws, except where
such non compliance with Environmental Laws, failure to receive
required permits, licenses or other approvals, or liability
would not, individually or in the aggregate, have a material
adverse effect on the condition (financial or otherwise),
prospects, results of operations, general affairs or properties
of the Group taken as a whole;
In the ordinary course of its business, the Issuer and each
other member of the Group periodically reviews the effect of
Environmental Laws on the business, operations and properties of
the Group, in the course of which it identifies and evaluates
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associated costs and liabilities (including, without limitation,
any capital or operating expenditures required for clean up,
closure of properties or compliance with Environmental Laws, or
any permit, license or approval, any related constraints on
operating activities and any potential liabilities to third
parties); on the basis of such review, the Issuer has reasonably
concluded that such associated costs and liabilities would not,
singly or in the aggregate, be material in the context of the
offering of the Notes;
For the purpose of this sub clause, "Environmental Laws" means
any and all national, state and local statutes, laws,
regulations, ordinances, rules, judgments, orders, decrees,
permits, concessions, grants, franchises, licenses, agreements
or other governmental restrictions relating to the protection of
the environment (including, without limitation, human, animal
and plant life, ambient air, surface water, ground water, or
land), the protection of property and proprietary rights or for
the compensation of harm to the environment whether by clean up,
remediation, containment or other treatment or the payment of
monies to any competent authority;
3.1.20 Insurance: (i) as at the date hereof, the material assets
employed to conduct the principal business activities of the
Issuer and each other member of the Group have been furnished by
independent subcontractors or leased by the Issuer or its
Subsidiaries, with the exception of a gas utilisation facility
and pipeline system currently under construction by a
third-party contractor; (ii) the Issuer or its relevant
Subsidiary will obtain, on or before completion and operation of
the gas utilisation facility and pipeline, adequate insurance
coverage against accident, damage, injury and third party loss
in such amounts as are prudent and customary in the business in
which the Group is engaged; and (iii) the Issuer has no reason
to believe that it or any other member of the Group will not be
able to obtain such insurance coverage at a cost that would not
have a material adverse effect on the condition (financial or
otherwise), prospects, results of operations, general affairs or
properties of the Group taken as a whole;
3.1.21 Borrowings: no event of default or any other event or
circumstance which would entitle any person to call for the
early repayment under any agreement relating to any material
borrowing or material indebtedness of any member of the Group
(or, in either case, any event or circumstance which with the
giving of notice and/or the lapse of time and/or a relevant
determination would constitute such an event or circumstance)
has occurred and is continuing;
3.1.22 The Shares:
(a) the Shares to be issued on conversion of the Notes have
been duly authorised and will be validly issued, will be
fully paid and non-assessable and will be listed on the
American Stock Exchange;
(b) all fillings, consents and approvals required by the
Issuer in connection with the issue of the Shares upon
conversion of the Notes in accordance with the
Conditions have been (or will, in the case of the Amex
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Listing Approval only, within 30 days after the Closing
Date, be) obtained and are (or will, in the case of the
Amex Listing Approval only, within 30 days after the
Closing Date, be) in full force and effect;
(c) there are no restrictions on the voting of the Shares
under the laws of the United States; nor are there any
restrictions under the laws or regulations of the United
States on the holding of such Shares by persons resident
or domiciled outside the United States,
(d) except as specified in Schedule 2 or in relation to the
Issuer's Stock Incentive Plan in favour of the Issuer's
employees, there are no outstanding securities
convertible into or exchangeable for, or warrants,
rights or options to purchase from the Issuer, or
obligations or commitments of the Issuer to create,
issue, sell or otherwise dispose of, any Shares, or
other securities (or any such shares, warrants, rights,
options or obligations) of the Issuer;
(e) neither of the Notes, nor the Shares to be issued upon
conversion of the Notes in accordance with the
Conditions, will be issued in violation of the pre
emptive rights of any holder of Shares;
(f) the Shares to be delivered on conversion of the Notes
will, subject as provided in the Conditions, rank pari
passu with the other outstanding fully paid Shares of
the Issuer in issue on the relevant Conversion Date (as
defined in the Conditions); the Shares to be issued upon
conversion of the Notes will be issued credited as fully
paid and will not be subject to calls for further funds;
3.1.23 Dividends: (a) there are no restrictions under United States law
or the rules and regulations thereunder or any approvals
currently required in the United States (including any foreign
exchange or foreign currency approvals) in order for the Issuer
to pay dividends or other distributions declared by the Issuer
to the holders of Shares;
3.1.24 Properties: (i) the Issuer and each other member of the Group
has good and marketable title to all properties and to all
assets owned by it in each case free from liens, encumbrances
and title defects that would materially affect the value thereof
or materially interfere with the use made or to be made thereof
by it; and (ii) any real property and buildings held under lease
by the Issuer or any other member of the Group is held by it
under valid, existing and enforceable leases with such
exceptions as are not material and do not interfere with the use
made or proposed to be made of such property and buildings by
the Issuer or such other member of the Group;
3.1.25 Litigation: except as described in the Issuer's quarterly report
for the period ended 31 March 2007 on Form 10-K filed by the
Issuer pursuant to the Exchange Act on 14 June 2007, there are
no pending actions, suits or proceedings (including any
inquiries or investigations by any court or governmental agency
or body, domestic or foreign) against or affecting the Issuer,
any other member of the Group or any of their respective
properties that, if determined adversely to the Issuer or any
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other member of the Group, would individually or in the
aggregate have a Material Adverse Effect, or would materially
and adversely affect the ability of the Issuer to perform its
obligations under this Agreement, or which are otherwise
material in the context of the sale of the Notes; and no such
actions, suits or proceedings (including any inquiries or
investigations by any court or governmental agency or body,
domestic or foreign) are threatened or, to the Issuer's
knowledge, contemplated;
3.1.26 No material change: since 31 March 2007, (i) there has been no
change, nor any development or event involving a prospective
change, in the condition (financial or otherwise), results of
operations, business, properties or prospects of the Issuer or
any other member of the Group, taken as a whole that is material
and adverse, (ii) there has been no dividend or distribution of
any kind declared, paid or made by the Issuer on any class of
its capital stock and (iii) there has been no material adverse
change in the capital stock, short-term indebtedness, long-term
indebtedness, net current assets or net assets of the Issuer or
any other member of the Group;
3.1.27 No immunity: neither the Issuer nor any other member of the
Group is entitled to immunity, whether characterised as
sovereign immunity or otherwise, from suit, attachment, or other
legal process in the United States;
3.1.28 No Event of Default: no event has occurred which is or would
(with the passage of time, the giving of notice or the making of
any determination) become an Event of Default or require an
adjustment to the initial Conversion Price;
3.1.29 No market manipulation: none of the Issuer, any of its
affiliates or any person acting on behalf of the Issuer or any
affiliate of the Issuer has, directly or indirectly, carried out
any act or engaged in any course of conduct, or will carry out,
directly or indirectly, any act or engage in any course of
conduct, (i) which creates a false or misleading impression as
to the market in or the value of the Shares and the Notes and
any associated securities; or (ii) the purpose of which is to
create actual or apparent active trading in or to raise the
price of the Shares and/or the Notes;
3.1.30 Internal Controls and Compliance with the Sarbanes-Oxley Act:
the Issuer, any other member of the Group and the Issuer's Board
of Directors (the "Board") are in compliance with Sarbanes-Oxley
and all applicable Exchange Rules. The Issuer maintains a system
of internal controls, including, but not limited to, disclosure
controls and procedures, internal controls over accounting
matters and financial reporting, an internal audit function and
legal and regulatory compliance controls (collectively,
"Internal Controls") that comply with the Securities Laws and
are sufficient to provide reasonable assurances that (i)
transactions are executed in accordance with management's
general or specific authorisations, (ii) transactions are
recorded as necessary to permit preparation of financial
statements in conformity with U.S. GAAP and to maintain
accountability for assets, (iii) access to assets is permitted
only in accordance with management's general or specific
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authorisation 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
Internal Controls are, or upon consummation of the offering of
the Notes and the underlying Shares will be, overseen by the
Audit Committee (the "Audit Committee") of the Board in
accordance with Exchange Rules. The Issuer has not publicly
disclosed or reported to the Audit Committee or the Board, and
within the next 90 days the Issuer does not reasonably expect to
publicly disclose or report to the Audit Committee or the Board,
a significant deficiency, material weakness, change in Internal
Controls or fraud involving management or other employees who
have a significant role in Internal Controls (each, an "Internal
Control Event"), any violation of, or failure to comply with,
the Securities Laws, or any matter which, if determined
adversely, would have a Material Adverse Effect;
3.1.31 Investment Company Act: the Issuer is not and, after giving
effect to the offering and sale of the Notes and the application
of the proceeds thereof, will not be an "investment company" as
defined in the Investment Company Act of 1940, as amended (the
"Investment Company Act");
3.1.32 Ratings: no "nationally recognised statistical rating
organisation" as such term is defined for purposes of Rule
436(g)(2) (i) has imposed (or has informed the Issuer that it is
considering imposing) any condition (financial or otherwise) on
the Issuer's retaining any rating assigned to the Issuer or any
securities of the Issuer or (ii) has indicated to the Issuer
that it is considering any of the following actions: downgrading
in the rating of any debt securities of the Issuer by any
"nationally recognised statistical rating organisation" (as
defined for purposes of Rule 436(g)), or any public announcement
that any such organisation has under surveillance or review its
rating of any debt securities of the Issuer (other than an
announcement with positive implications of a possible upgrading,
and no implication of a possible downgrading, of such rating) or
any announcement that the Issuer has been placed on negative
outlook;
3.1.33 PFIC Status: the Issuer was not a "passive foreign investment
company" ("PFIC") as defined in Section 1297 of the United
States Internal Revenue Code of 1986, as amended, for its most
recently completed taxable year and, based on the Issuer's
current projected income, assets and activities, the Issuer does
not expect to be classified as a PFIC for any subsequent taxable
year;
3.1.34 Tax Status: the Issuer and any other member of the Group have
filed all federal, state, local and non-U.S. tax returns that
are required to be filed or have requested extensions thereof
(except in any case in which the failure so to file would not
have a Material Adverse Effect); and the Issuer and any other
member of the Group have paid all taxes (including any
assessments, fines or penalties) required to be paid by them,
except for any such taxes, assessments, fines or penalties
currently being contested in good faith or as would not,
individually or in the aggregate, have a Material Adverse
Effect; and
3.1.35 Covenants: there has been no breach of Condition 6 (Negative
Pledge).
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3.2 Change in matters represented
The Issuer shall forthwith notify the Bookrunner of anything which at
any time prior to the Closing Date has or may have rendered, or will or
may render, untrue or incorrect in any respect any representation and
warranty by the Issuer in this Agreement as if it had been made or given
at such time with reference to the facts and circumstances then
subsisting.
3.3 Representations repeated
The representations and warranties in Clause 3.1 (Issuer's
representations) shall be deemed to be repeated (with reference to the
facts and circumstances then subsisting) on each date falling on or
before the Closing Date.
4. UNDERTAKINGS BY THE ISSUER
4.1 No announcements
From the date of this Agreement to (and including) the Closing Date, the
Issuer shall not, without the prior written consent of the Bookrunner,
make:
4.1.1 any announcement which might reasonably be expected to have an
adverse effect on the marketability of the Notes or the Shares;
or
4.1.2 any communication which might reasonably be expected to
prejudice the ability of the Bookrunner lawfully to procure
subscribers for the Notes in accordance with the provisions set
out in the Schedule.
4.2 Delivery of Note Certificates
The Issuer shall make arrangements reasonably satisfactory to the
Bookrunner to ensure that the Note Certificates are delivered to the
Registrar for authentication in the form required by, and otherwise in
accordance with, the Trust Deed and the Agency Agreement.
4.3 Listing of the Shares
The Issuer shall use all reasonable efforts to maintain the listing of
the Shares on the American Stock Exchange until none of the Notes is
outstanding; provided, however, that, if it is impracticable or unduly
burdensome to maintain such listing, the Issuer shall use all reasonable
endeavours to procure and maintain as aforesaid the admission to
listing, trading and/or quotation for the Shares by such other listing
authorities, stock exchanges and/or quotation systems as it may (with
the approval of the Bookrunner and the Trustee) decide and, further, the
Issuer shall be responsible for any fees incurred in connection
therewith.
4.4 Listing of Shares issued upon conversion
The Issuer shall use all reasonable endeavours to procure and maintain a
listing on the American Stock Exchange (and/or such other listing
authorities, stock exchanges and/or quotation systems by which the
Shares are then admitted to listing, trading and/or quotation) of any
Shares issued upon conversion of the Notes in accordance with the
Conditions.
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4.5 Notification of changes
The Issuer will notify the Bookrunner promptly of any change affecting
any of its representations, warranties, agreements and indemnities
herein at any time prior to payment being made to the Issuer on the
Closing Date and take such steps as may be reasonably requested by the
Bookrunner to remedy and/or publicise the same.
4.6 Filings
The Issuer will promptly make all required notifications, registrations
and filings and obtain, comply with and maintain in force all approvals
as may from time to time be required in relation to the Notes and the
Shares.
So long as any of the Notes remains outstanding, the Issuer will furnish
to the Bookrunner copies of each document filed by it with the American
Stock Exchange or any other stock exchange on which the Shares are for
the time being listed, and copies of financial statements and other
periodic reports that the Issuer may furnish generally to holders of its
debt securities or to holders of its Shares.
4.7 Use of net proceeds
The Issuer will use the net proceeds received by it from the issue of
the Notes predominately for investment purposes.
4.8 Lock-up
For a period of 90 days after Closing Date the Issuer shall not, and the
Issuer shall procure that none of its respective Subsidiaries or
affiliates over which it exercises management or voting control will:
4.8.1 Shares: issue, offer, sell, transfer, pledge or otherwise
dispose of any Shares, whether directly or indirectly, or enter
into any agreement to do so;
4.8.2 Rights to Shares: issue or offer any other securities which
confer a right to Shares (or any interest therein) or enter into
any agreement to do so;
4.8.3 Economic ownership of Shares: enter into any agreement that
transfers or might transfer any of the economic consequences of
ownership of the Shares (including, but not limited to, stock
lending, derivative or hedging transactions); or
4.8.4 publicly announce any intention to do any one or more things
described in sub-clauses 4.8.1 to 4.8.3,
other than, in each case:
(a) with the prior consent of the Bookrunner;
(b) grants of employee stock options in respect of the
Shares pursuant to the terms of any plan or arrangement,
or issuance of Shares pursuant to the exercise of such
options;
(c) to satisfy the Issuer's obligations arising upon
conversion of any Note in accordance with the
Conditions; or
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(d) the issue of Shares to shareholders electing to receive
annual dividends in the form of Shares.
4.9 Adjustments to Conversion Price
From the date of this Agreement to (and including) the Closing Date, the
Issuer shall not, without the prior written consent of the Bookrunner,
do anything which would result in an adjustment to the Conversion Price
(as defined in the Conditions).
4.10 Compliance with Regulation S
The Issuer acknowledges and covenants that (i) the offering of the Notes
and the underlying Shares are being coordinated in compliance with Rule
903(b)(3)(i) and Rule 903(b)(3)(iii) of Regulation S and (ii) during the
one year distribution compliance period mandated by Rule 903(b)(3)(iii),
it will refuse to register any transfer of the Notes not made in
accordance with the provisions of Regulation S (Rule 901 through 905,
and Preliminary Notes), pursuant to registration under the Securities
Act, or pursuant to an available exemption from registration.
4.11 No Resales by the Issuer
The Issuer will not, and will not permit any of its affiliates (as
defined in Rule 144 under the Securities Act) to, resell any of the
Notes or the underlying Shares that have been acquired by any of them,
except for the Notes or the underlying Shares purchased by the Issuer or
any of its affiliates (as defined in Rule 144 under the Securities Act)
and resold in a transaction registered under the Securities Act.
4.12 No Integration
Neither the Issuer nor any of its affiliates (as defined in Rule 501(b)
of Regulation D under the Securities Act) will, directly or through any
agent, sell, offer for sale, solicit offers to buy or otherwise
negotiate in respect of, any security, that is or will be integrated
with the sale of the Notes in a manner that would require registration
of the Notes under the Securities Act.
4.13 No General Solicitation or Directed Selling Efforts
Neither of the Issuer nor any of its affiliates (as defined in Rule
501(b) of Regulation D under the Securities Act) or any other person
acting on its or their behalf (other than the Bookrunner, as to which no
covenant is given) will (i) solicit offers for, or offer or sell, the
Notes or the underlying Shares by means of any form of general
solicitation or general advertising within the meaning of Rule 502(c) of
Regulation D or in any manner involving a public offering within the
meaning of Section 4(2) of the Securities Act or (ii) engage in any
directed selling efforts within the meaning of Regulation S.
4.14 Absence of Manipulation
The Issuer will not take, directly or indirectly, any action designed to
or that would constitute or that might reasonably be expected to cause
or result in, stabilisation or manipulation of the price of any
securities of the Issuer to facilitate the sale or resale of the Notes.
5. SELLING RESTRICTIONS
Each of the parties to this Agreement represents, warrants and
undertakes as set out in the Schedule 1.
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6. INDEMNIFICATION
6.1 Indemnity by Issuer
The Issuer undertakes to the Bookrunner that if the Bookrunner or any of
the Bookrunner's Related Parties incurs any Loss arising out of, in
connection with or based on:
6.1.1 Misrepresentation: any inaccuracy or alleged inaccuracy of any
representation and warranty by the Issuer in this Agreement (on
the date of this Agreement or on any date when it is deemed to
be repeated); or
6.1.2 Breach: any breach or alleged breach by the Issuer of any of its
undertakings in this Agreement;
the Issuer shall pay to the Bookrunner on demand an amount equal to such
Loss. The Bookrunner shall not have any duty or other obligation,
whether as fiduciary or trustee for any of its Related Parties or
otherwise, to recover any such payment or to account to any other person
for any amounts paid to it under this Clause.
6.2 Conduct of claims
If any claim, demand or action is brought or asserted in respect of
which one or more persons (each, an "Indemnified Person") is entitled to
be paid by another person (the "Indemnifier") under Clause 6.1
(Indemnity by Issuer) (each a "Claim"), the following provisions shall
apply:
6.2.1 Notification: each Indemnified Person shall promptly notify the
Indemnifier in writing (but failure to do so shall not relieve
the Indemnifier from liability);
6.2.2 Assumption of defence: the Indemnified Person shall procure that
the Indemnifier shall, subject to Clause 6.3 (Conduct by
Indemnified Person), be entitled to assume the defence of the
relevant Claim including the retention of legal advisers
approved by each Indemnified Person, subject to the payment by
the Indemnifier of all legal and other expenses of such defence;
6.2.3 Separate representation: if the Indemnifier assumes the defence
of the relevant Claim, each Indemnified Person and its Related
Parties shall be entitled to retain separate legal advisers and
to participate in such defence but the legal or other expenses
incurred in so doing shall, subject to Clause 6.3 (Conduct by
Indemnified Person), be borne by such Indemnified Person or
Related Party (as the case may be) unless the Indemnifier has
specifically authorised such retention or participation.
6.3 Conduct by Indemnified Person
Notwithstanding Clause 6.2 (Conduct of claims), an Indemnified Person
and/or its Related Parties may retain separate legal advisers in each
relevant jurisdiction and direct the defence of the relevant Claim and
the Indemnifier shall reimburse such Indemnified Person for any legal or
other expenses reasonably so incurred if:
6.3.1 Indemnifier's failure: the Indemnifier (having assumed such
defence) fails properly to make such defence or to retain for
such purpose legal advisers approved by such Indemnified Person;
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6.3.2 Conflict of interest: such Indemnified Person has reasonably
concluded that the use of any legal advisers chosen by the
Indemnifier to represent such Indemnified Person and/or Related
Party may present such legal advisers with a conflict of
interest; or
6.3.3 Different defences: the actual or potential defendants in, or
targets of, such Claim include both the Indemnifier and such
Indemnified Person and/or Related Party and such Indemnified
Person has reasonably concluded that there may be legal defences
available to it which are different from or additional to those
available to the Indemnifier.
6.4 Settlement
The Indemnifier shall not, without the prior written consent of each
Indemnified Party, settle or compromise, or consent to the entry of
judgement with respect to, any pending or threatened Claim (irrespective
of whether any Indemnified Person is an actual or potential defendant
in, or target of, such Claim) unless such settlement, compromise or
consent includes an unconditional release of each Indemnified Person and
each of its Related Parties from all liability arising out of the
matters which are the subject of such Claim. The Indemnifier shall not
be liable to indemnify any Indemnified Person where the relevant Claim
has been settled or compromised without its prior written consent (which
shall not be unreasonably withheld or delayed).
7. FEES AND EXPENSES
7.1 Base fee
The Issuer shall, on the Closing Date, pay to the Bookrunner a base fee
of 3.75 per cent. of the aggregate principal amount of the Notes.
Such fee shall be deducted from the Issue Price of the Notes.
7.2 Success Fee
The Issuer shall (at its sole discretion) on the Closing Date, pay to
the Bookrunner a success fee of 0.5 per cent. of the aggregate principal
amount of the Notes. Such fee (if payable) shall be deducted from the
Issue Price of the Notes.
7.3 Transaction costs and expenses
The Issuer is responsible for paying:
7.3.1 Professional advisers: the fees and expenses of the legal and
other professional advisers instructed by the Issuer in
connection with the creation and issue of the Notes and the
preparation of the Conditions;
7.3.2 Legal documentation: the costs incurred in connection with the
preparation and execution of this Agreement and the Issue
Documents;
7.3.3 Printing: the cost of setting, proofing, printing and delivering
the Note Certificates;
7.3.4 Trustee and Agents: the fees and expenses of the other parties
to the Issue Documents; and
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7.3.5 Advertising and Roadshow: the cost of any advertising and
roadshow agreed between the Issuer and the Bookrunner.
If the Bookrunner incurs any of such fees, costs and expenses on behalf
of the Issuer, the Issuer shall on demand reimburse the Bookrunner for
the same. Any amount due to the Bookrunner under this sub-clause may be
deducted from the Issue Price.
7.4 Management expenses
In addition, the Issuer shall reimburse the Bookrunner on demand for all
legal fees and expenses and any travelling, communication, courier,
postage and other out-of-pocket expenses incurred by it (with the prior
approval of the Issuer if any such expenses shall exceed (pound)5,000)
in connection with the placing of the Notes, completion of the Exchange
Offer as defined in clause 6 of the Conditions (the "Exchange Offer")
and all matters in connection with the Registration Rights Agreement.
Any amount due to the Bookrunner under this sub-clause may (at the
discretion of the Bookrunner) be deducted from the Issue Price.
7.5 Trustee Expenses
In addition, the Issuer shall reimburse the Trustee on demand for all
legal fees and expenses and any travelling, communication, courier,
postage and other out-of-pocket expenses incurred by it in connection
with the placing of the Notes and completion of Exchange Offer. Any
amount due to the Trustee under this sub-clause may (at the discretion
of the Trustee) be deducted from the Issue Price by the Bookrunner who
will pay the same to the Trustee.
7.6 Taxes
All payments in respect of the obligations of the Issuer under this
Agreement shall be made free and clear of, and without withholding or
deduction for or on account of, any taxes, duties, assessments or
governmental charges of whatever nature imposed, levied, collected,
withheld or assessed by or on behalf of the United States or the
Republic of Kazakhsatan, or any political subdivision or any authority
thereof or therein having power to tax, unless such withholding or
deduction is required by law. In that event, the Issuer shall pay such
additional amounts as will result in the receipt by the Bookrunner of
such amounts as would have been received by it if no such withholding or
deduction had been required.
7.7 Stamp duty
The Issuer will pay any stamp, issue, registration, documentary or other
taxes and duties, including interest and penalties in the United States
or the Republic of Kazakhstan, and all other relevant jurisdictions
payable on or in connection with the creation, issue, offering, sale or
conversion of the Notes or the creation or issue of the Shares or the
execution or delivery of this Agreement or the Issue Documents; and any
value added, turnover or similar tax payable in respect thereof (and
references in this Agreement to such amount shall be deemed to include
any such taxes so payable in addition to it).
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8. CLOSING
8.1 Closing
Subject to Clause 8.3 (Conditions precedent), the closing of the issue
shall take place on the Closing Date, whereupon:
8.1.1 Note Certificates: the Issuer shall:
(a) Registration: cause each individual holding of the Notes
to be registered in the name of the person designated
for the purpose by the Bookrunner, provided that each
such holding must be in a principal amount of U.S.
$100,000 or a higher integral multiple thereof; and
(b) Delivery: cause a Note Certificate in respect of each
initial holding of the Notes, each duly executed on
behalf of the Issuer and authenticated in accordance
with the Agency Agreement and the Trust Deed, to be
delivered to, or to the order of, the Bookrunner; and
8.1.2 Payment of net issue proceeds: against such delivery, and
provided and to the extent that the Bookrunner has received the
full amount due, to be paid by the subscribers in respect of the
Notes to be subscribed for by them, for value prior to the
Closing Date, the Bookrunner shall procure the payment of the
net proceeds of the issue of the Notes (namely the Issue Price
less the fees and expenses referred to in Clause 7) to the
Issuer by credit transfer in U.S. dollars for same day value to
such account as the Issuer has designated to the Bookrunner.
8.2 Postponed closing
The Issuer and the Bookrunner may agree to postpone the Closing Date to
another date not later than 31 July 2007, whereupon all references
herein to the Closing Date shall be construed as being to that later
date.
8.3 Conditions precedent
The Bookrunner shall only be under obligation to make payment of the
issue proceeds in respect of the Notes if:
8.3.1 Closing documents: the Bookrunner receives on the Closing Date:
(a) Legal opinions: legal opinions dated the Closing Date
and addressed to the Bookrunner and the Trustee from
legal counsel, approved by the Bookrunner, as to the
laws of Kazakhstan, Poulton & Yordan, Attorneys at Law
as to the laws of the State of Nevada and the federal
laws of the United States and Clifford Chance LLP as to
English law, each in a form acceptable to the
Bookrunner;
(b) Closing certificate: a closing certificate dated the
Closing Date, addressed to the Bookrunner and signed by
a duly authorised signatory on behalf of the Issuer in a
form acceptable to the Bookrunner; and
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(c) Process agents' acceptances: evidence that the persons
mentioned in Clause 13.5 (Process Agents) have agreed to
receive process in the manner specified therein.
(d) No registration opinion: no registration opinion dated
the Closing Date and addressed to the Bookrunner from
Clifford Chance LLP, legal advisors to the Bookrunner,
in a form acceptable to the Bookrunner;
(e) Incumbency certificate: a certificate dated the Closing
Date from the Issuer setting out the names and
signatures of the persons authorised to sign, on behalf
of the Issuer, this Agreement, the Issue Documents and
any other documents to be delivered by the Issuer in
connection with the offering of the Notes.
8.3.2 Issue documentation: the Issue Documents are executed on or
before the Closing Date by or on behalf of all parties thereto;
8.3.3 Accuracy of representations: the representations and warranties
by the Issuer in this Agreement are true and correct on the date
of this Agreement and on each date on which they are deemed to
be repeated and would be true and correct if they were repeated
on the Closing Date with reference to the facts and
circumstances then subsisting; and
8.3.4 Regulatory approvals: all required government and/or regulatory
approvals having been obtained as necessary for the Issuer to
issue and offer the Notes and meet its obligations under this
Agreement, the Issue Documents and the Notes;
8.3.5 Board and shareholder approvals: on or before the Closing Date,
there shall have been delivered to the Bookrunner certified
copies of the resolutions of the board of directors and the
shareholders of the Issuer approving the issue of the Notes
8.3.6 Lock-up Letter: the Issuer shall have executed a lock-up letter,
in the form set out in Schedule 3 (Form of Lock-Up Letter) (the
a "Lock-Up Letter") and delivered a copy of the same to the
Bookrunner on or prior to the Closing Date;
8.3.7 Other obligations: the Issuer is in compliance with all of its
obligations under this Agreement and the Issue Documents,
8.3.8 No material adverse change: there has in the reasonable opinion
of the Bookrunner, since the date of this Agreement, been no
adverse change, or any development reasonably likely to involve
an adverse change, in the condition (financial or otherwise) or
general affairs of the Issuer or any other member of the Group
that is material in the context of the issue of the Notes;
provided, however, that the Bookrunner may, at its discretion, waive
satisfaction of any of the conditions specified in this Clause 8.3.
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9. TERMINATION
9.1 Bookrunner' right to terminate
The Bookrunner may give a termination notice to the Issuer at any time
prior to the payment to the Issuer of the net proceeds of the issue of
the Notes on the Closing Date if:
9.1.1 Inaccuracy of representation: any representation and warranty by
the Issuer in this Agreement is or proves to be untrue or
incorrect on the date of this Agreement or on any date on which
it is deemed to be repeated;
9.1.2 Breach of obligation: the Issuer fails to perform any of its
obligations under this Agreement;
9.1.3 Failure of condition precedent: any of the conditions in Clause
8.3 (Conditions precedent) is not satisfied or waived by the
Bookrunner on the Closing Date; or
9.1.4 Force majeure: since the date of this Agreement:
(a) there has been, in the reasonable opinion of the
Bookrunner, such a change in national or international
financial, political or economic conditions or currency
exchange rates or exchange controls as would in its view
be likely to prejudice materially the success of the
subscription of the Notes or dealings in the Notes in
the secondary market.
(b) (i) trading in the Shares or any depositary receipts
exchangeable for Shares shall have been suspended by the
American Stock Exchange (and/or such other listing
authorities, stock exchanges and/or quotation systems by
which such securities are then admitted to listing,
trading and/or quotation); (ii) trading in securities
generally on the New York Stock Exchange shall have been
suspended or limited or minimum prices shall have been
established on any such exchanges; (iii) a banking
moratorium shall have been declared either by U.S.
federal or New York State authorities; or (iv) there
shall have occurred any outbreak or escalation of
hostilities, declaration by the United States of a
national emergency or war or other calamity or crisis
the effect of which on financial markets is such as to
make it, in the sole judgment of the Bookrunner,
impractical or inadvisable to proceed with the offering
or delivery of the Notes.
9.2 Consequences
Upon the giving of a termination notice under Clause 9.1 (Bookrunner's
right to terminate) and subject to Clause 9.3 (Saving):
9.2.1 Discharge of Issuer: the Issuer shall be discharged from
performance of its obligations under Clauses 2.1 (Undertaking to
issue) sub-clause 7.1 (Placement Fee) and sub-clause 8.1.1 (Note
Certificates); and
9.2.2 Discharge of Bookrunner: the Bookrunner shall be discharged from
performance of its obligations under Clause 2.2 (Undertaking to
procure subscribers for the Notes) and sub-clause 8.1.2 (Payment
of issue proceeds).
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9.3 Saving
A discharge pursuant to Clause 9.2 (Consequences) shall not affect the
other obligations of the parties to this Agreement and shall be without
prejudice to accrued liabilities.
10. SURVIVAL
The provisions of this Agreement shall continue in full force and effect
notwithstanding the completion of the arrangements set out herein for
the issue of the Notes and regardless of any investigation by any party
to this Agreement.
11. TIME
Any date or period specified herein may be postponed or extended by
mutual agreement among the parties but, as regards any date or period
originally fixed or so postponed or extended, time shall be of the
essence.
12. NOTICES
12.1 Addresses for notices
All notices and other communications hereunder shall be made in writing
and in English (by letter or fax) and shall be sent as follows:
12.1.1 Issuer: if to the Issuer, to it at:
BMB Munai, Inc.
202, Dostyk Avenue, 4th Floor
Business Centre "Forum"
050051, Almaty
Kazakhstan
Fax: +7 3272 375 131
Attention: Askar Tashtitov
12.1.2 Bookrunner: if to the Bookrunner, to it at:
Investment Markets and Investment Banking
Bayerische Hypo-und Vereinsbank AG
Moor House
120 London Wall
London EC2Y 5ET
Fax: +44 (0)207 826 1614
Attention: Equity Capital Markets
12.2 Effectiveness
Every notice or other communication sent in accordance with Clause 12.1
(Addresses for notices) shall be effective upon receipt by the
addressee; provided, however, that any such notice or other
communication which would otherwise take effect after 4.00 p.m. on any
particular day shall not take effect until 10.00 a.m. on the immediately
succeeding business day in the place of the addressee.
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13. LAW AND JURISDICTION
13.1 Governing law
This Agreement is governed by, and shall be construed in accordance
with, English law.
13.2 English courts and New York courts
The courts of (a) England and (b) the State of New York located in the
City and County of New York or in the United States District Court for
the Southern District of New York have exclusive jurisdiction to settle
any dispute (a "Dispute"), arising from or connected with this Agreement
(including a dispute regarding the existence, validity or termination of
this Agreement) or the consequences of its nullity.
13.3 Appropriate forum
The parties agree that the courts referred to in Clause 13.2 (English
courts and New York courts) are the most appropriate and convenient
courts to settle any Dispute and, accordingly, that they will not argue
that any other courts are more appropriate or convenient.
13.4 Rights of the Bookrunner to take proceedings outside England and the
State of New York Clause 13.2 (English courts and New York courts) is
for the benefit of the Bookrunner only. As a result, nothing in this
Clause 13 (Law and jurisdiction) prevents the Bookrunner from taking
proceedings relating to a Dispute ("Proceedings") in any other courts
with jurisdiction. To the extent allowed by law, the Bookrunner may take
concurrent Proceedings in any number of jurisdictions.
13.5 Process agent
The Issuer agrees that the documents which start any Proceedings and any
other documents required to be served in relation to those Proceedings
may be served on it by being delivered to (a) in connection with any
Proceedings in England, to Clifford Chance Secretaries Limited at 10
Upper Bank Street, London EC14 5JJ or, if different, its registered
office for the time being or at any address of the Issuer in Great
Britain at which process may be served on it in accordance with Part
XXIII of the Companies Act 1985 and (b) in connection with any
Proceedings in the County of New York to CT Corporation System at 111
Eighth Avenue, 13th Floor, New York, New York 10011 or, if different, it
principal place of business in the County of New York for the time
being. If either such person is not or ceases to be effectively
appointed to accept service of process on behalf of the Issuer, the
Issuer shall, on the written demand of the Bookrunner addressed to the
Issuer and delivered to the Issuer appoint a further person in England
or (as the case may be) the County of New York to accept service of
process on its behalf and, failing such appointment within 15 days, the
Bookrunner shall be entitled to appoint such a person by written notice
addressed to the Issuer and delivered to the Issuer. Nothing in this
paragraph shall affect the right of the Bookrunner to serve process in
any other manner permitted by law. This clause applies to Proceedings in
England and in the County of New York and to Proceedings elsewhere.
14. RIGHTS OF THIRD PARTIES
A person who is not a party to this Agreement has no right under the
Contracts (Rights of Third Parties) Act 1999 to enforce any term of this
Agreement.
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15. COUNTERPARTS
This Agreement may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original and all of which when so
executed shall constitute one and the same binding agreement between the
parties.
AS WITNESS the hands of the duly authorised representatives of the parties to
this Agreement the day and year first before written.
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SCHEDULE 1
SELLING RESTRICTIONS
1. GENERAL
1.1 No action to permit public offering
The Bookrunner acknowledges that no action has been or will be taken in
any jurisdiction by the Issuer that would permit a public offering of
the Notes, or possession or distribution of any offering material in
relation thereto, in any country or jurisdiction where action for that
purpose is required.
1.2 Bookrunner's compliance with applicable laws
The Bookrunner undertakes to the Issuer that it will comply with all
applicable laws and regulations in each country or jurisdiction in which
it purchases, offers, sells or delivers Notes or has in its possession
or distributes such offering material, in all cases at its own expense.
2. UNITED STATES
2.1 No registration under Securities Act
The Notes, and the Shares to be issued on conversion of the Notes, have
not been and will not be registered under the Securities Act and may not
be offered or sold within the United States or to, or for the benefit
of, U.S. persons except pursuant to an exemption from, or in a
transaction not subject to, the registration requirements of the
Securities Act.
2.2 Compliance by Issuer with United States securities laws
The Issuer represents, warrants and undertakes to the Bookrunner that
neither it nor any of its affiliates (including any person acting on
behalf of the Issuer or any of its affiliates) has offered or sold, or
will offer or sell, any Notes in any circumstances which would require
the registration of any of the Notes under the Securities Act or the
qualification of the Trust Deed as an indenture under the United States
Trust Indenture Act of 1939 and, in particular, that:
2.2.1 No General Solicitation or Directed Selling Efforts: Neither,
the Issuer nor any person acting on its behalf (other than the
Bookrunner, as to which no representation is made) has (i)
solicited offers for, or offered or sold, the Notes by means of
any form of general solicitation or general advertising within
the meaning of Rule 502(c) of Regulation D or in any manner
involving a public offering within the meaning of Section 4(2)
of the Securities Act or (ii) engaged in any directed selling
efforts within the meaning of Regulation S, and all such persons
have complied with the offering restrictions requirement of
Regulation S.
2.2.2 Compliance with Regulation S: The offering of the Notes and the
Shares are (i) being coordinated (i) in an "offshore
transaction" within the meaning of Regulation S and (ii) in
accordance with Rule 903(b)(3)(i) and Rule 903(b)(3)(iii) of
Regulation S.
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2.3 Bookrunner's compliance with United States securities laws
2.3.1 The Bookrunner acknowledges that the Notes and the underlying
Shares have not been and will not be registered under the
Securities Act and may not be offered or sold within the United
States or to, or for the account or benefit of, U.S. Persons
except pursuant to an exemption from, or in transactions not
subject to, the registration requirements of the Securities Act.
2.3.2 The Bookrunner represents, warrants and undertakes to the Issuer
that:
2.3.2.1 it has not offered or sold the Notes, and will not offer
or sell the Notes prior to the expiration of a one-year
"Distribution Compliance Period" within the meaning of
Regulation S, to a "U.S. Person" within the meaning of
Regulation S, or for the account or benefit of a U.S.
Person.
2.3.2.2 Offshore Transaction: neither it nor any of its
affiliates (including any person acting on behalf of the
Bookrunner or any of its affiliates) has made or will
make any offer to a person in the United States and at
the time the buy order for the Notes is originated, the
buyer will be outside of the United States or the
Bookrunner and each of its affiliates (including any
person acting on behalf of the Bookrunner or any of its
affiliates) will have a reasonable belief that the buyer
is outside the United States;
2.3.2.3 No directed selling efforts: neither it nor any of its
affiliates (including any person acting on behalf of the
Bookrunner or any of its affiliates) has engaged or will
engage in any directed selling efforts with respect to
the Notes or the Shares; and
2.3.2.4 No solicitation: neither it nor any of its affiliates
(including any person acting on behalf of the Bookrunner
or any of its affiliates) has solicited or will solicit
any offer to buy or offer to sell the Notes by any form
of general solicitation or general advertising (as those
terms are used in Rule 502(c) under the Securities Act)
in the United States.
2.3.3 The Bookrunner acknowledges and agrees that (A) the offer and
sale of the Notes prior to the expiration of the Distribution
Compliance Period shall be made only (i) in accordance with the
provisions of (a) Rule 903 (b)(3)(iii) or (b) Rule 904 and Rule
905; (ii) pursuant to registration of the Notes under the
Securities Act; or (iii) pursuant to an available exemption from
the registration requirements of the Securities Act; (B) it will
not engage in hedging transactions with regard to such Notes
prior to the expiration of the Distribution Compliance Period
unless in compliance with the Securities Act; and (C) all
offering materials and documents (other than press releases)
used in connection with offers and sales of the Notes prior to
the expiration of the Distribution Compliance Period shall
include statements to the effect that (i) the Notes have not
been registered under the Securities Act and may not be offered
or sold in the Unite States or to U.S. Persons (other than
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distributors) unless the Notes are registered under the
Securities Act, or an exemption from the registration
requirements of the Securities Act is available and (ii) hedging
transactions involving these Notes may not be conducted unless
in compliance with the Securities Act.
2.3.4 Prescribed form of confirmation: undertakes to the Issuer that,
at or prior to confirmation of sale, it will have sent to each
distributor, dealer or person receiving a selling concession,
fee or other remuneration which purchases Notes from it during
the distribution compliance period a confirmation or notice in
substantially the following form:
"The securities covered hereby have not been registered under
the United States Securities Act of 1933, as amended (the
"Securities Act") and are being offered outside the United
States in accordance with Rule 903(b)(3)(iii) ("Category 3") of
the Securities Act. Accordingly, (A) the securities may not be
offered or sold within the United States or to, or for the
account or benefit of, U.S. persons, (a) as part of their
distribution at any time except in accordance with Regulation S
under the Securities Act or (b) otherwise until one year after
the later of the commencement of the offering and the closing
date, except in accordance with the provisions of Regulation S
(Rule 901 through Rule 905, and Preliminary Notes), pursuant to
registration under the Securities Act, or pursuant to an
available exemption from registration; (B) hedging transactions
involving such securities may not be conducted unless in
compliance with the Securities Act; and (C) during the
Distribution Compliance Period each purchaser or acquirer of the
securities covered hereby must provide a certificate to the
Issuer that (i) it is not a U.S. Person, as defined in
Regulation S under the Securities Act and is not acquiring the
securities for the account or benefit of any U.S. Person; (ii)
(a) it agrees to resell such securities only in accordance with
the provisions of Regulation S (Rule 901 through Rule 905, and
Preliminary Notes), pursuant to registration under the
Securities Act, or pursuant to an available exemption from
registration and (b) it agrees not to engage in hedging
transactions with regard to such securities unless in compliance
with the Securities Act; and (iii) and that it acknowledges and
agrees that it will provide a substantially similar form of
certificate as set forth herein to any person that acquires or
purchases such security from it."
2.4 Interpretation
Terms used in clauses 2.2 and 2.3 above have the meanings given to them
by Regulation S under the Securities Act.
3. UNITED KINGDOM
The Bookrunner represents, warrants and undertakes to the Issuer that:
3.1 Financial promotion: it has only communicated or caused to be
communicated, and will only communicate or cause to be communicated, any
invitation or inducement to engage in investment activity (within the
meaning of section 21 of the FSMA) received by it in connection with the
issue or sale of any Notes in circumstances in which section 21(1) of
the FSMA does not apply to the Issuer.
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3.2 General compliance: it has complied and will comply with all applicable
provisions of the FSMA with respect to anything done by it in relation
to the Notes in, from or otherwise involving the United Kingdom.
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SCHEDULE 2
WARRANTS AND OPTIONS GRANTED BY THE ISSUER
Options outstanding as of 31/03/07 Issue Date # of shares Date of expiry
Gary Lerner - stock options 12-Nov-04 52,800 12-Nov-09
Stock options issued on July 18, 2005 18-Jul-05 820,783 18-Jul-10
Anuar Kulmagambetov - stock options 1-Feb-06 100,000 1-Feb-09
Stock options on June 20, 2006 20-Jun-06 200,000 20-Jun-09
1,173,583
Warrants outstanding as of 31/03/07 Date
Warrants aggr. #1 for merger 26-Nov-03 142,857 26-Nov-08
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SCHEDULE 3
FORM OF LOCK-UP LETTER
Unicredit Markets & Investment Banking
Bayerische Hypo - und Vereinsbank AG
Moor House
120 London Wall
London EC2Y 5ET
United Kingdom
[Insert date]
Dear Sirs
BMB Munai, Inc. U.S.$60,000,000 5.0 per cent. Convertible Notes due 2012
I/We refer to the placement agreement dated 4 July 2007 and entered into between
BMB Munai, Inc. and Bayerische Hypo-und Vereinsbank AG in respect of the above
Notes (the "Placement Agreement"). Expressions which are given defined meanings
in the Placement Agreement shall have the same meanings in this letter.
For good and valuable consideration received, this letter is to confirm that
neither I/we nor any person acting on our behalf will:
(a) issue, offer, sell, contract to sell, transfer, pledge or otherwise
dispose of any Shares, whether directly or indirectly, or enter into any
agreement to do so;
(b) issue or offer any other securities which confer a right to Shares (or
any interest therein) or enter into any agreement to do so;
(c) enter into any agreement that transfers or might transfer any of the
economic consequences of ownership of the Shares (including, but not
limited to, stock lending, derivative or hedging transactions); or
(d) publicly announce any intention to enter into any of the aforementioned
transactions,
except, in each case, to the extent that any such action or transaction is
permitted under Clause 4.8 (Lock-Up) of the Placement Agreement.
This letter is being furnished to you by me/us as a condition precedent to the
closing of the Notes pursuant to Clause 8.3.7 (Lock-Up Letters) of the Placement
Agreement.
This letter shall be governed by, and construed in accordance with, English law
and we agree that this letter shall be construed as if Clause 13 (Law and
Jurisdiction) of the Placement Agreement were set out in this letter in full but
with references to the Placement Agreement being deemed to be references to this
letter and references to the Issuer being deemed to be references to me/us.
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Yours faithfully
BMB MUNAI, INC.
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SIGNATURES
BMB MUNAI, INC.
By:
BAYERISCHE HYPO-UND VEREINSBANK AG
By: By:
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