Transmeridian Exploration (TMY)

Note 8. Commitments and Contingencies

In July 2007, Canam Services, Inc. (“Canam”), a supplier of tubing products, filed suit in the 151^st Judicial District Court of Harris County, Texas asserting a cause of action against us based upon alleged breach of a guaranty agreement covering certain accounts payable of Caspi Neft. The suit initially sought recovery from us in the amount of $2.0 million plus fees and costs. On September 5, 2007, we filed an answer denying each and every material allegation contained in the Canam complaint. Subsequently, Canam reduced the recovery amount to $757,000 plus interest, fees and costs. In July 2008, we entered into a settlement agreement with Canam, pursuant to which we paid a total of $832,000, and all claims were relinquished.

We are subject, through our subsidiary Caspi Neft, to the terms of License 1557 and the related exploration and production contracts covering 14,111 acres in the Field in Kazakhstan. The exploration and production contracts provide, among other things, certain minimum levels of capital expenditures for the continued development of the Field.

Purchase commitments are made from time to time in the ordinary course of business in connection with ongoing operations in the Field.

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Note 9. Commitments and Contingencies

In July 2007, Canam Services, Inc. (“Canam”), a supplier of tubing products, filed suit in the 151^st Judicial District Court of Harris County, Texas asserting a cause of action against us based upon alleged breach of a guaranty agreement covering certain accounts payable of Caspi Neft. The suit initially sought recovery from us in the amount of $2.0 million plus fees and costs. On September 5, 2007, we filed an answer denying each and every material allegation contained in the Canam complaint. Subsequently, Canam reduced the recovery amount to $757,000 plus interest, fees and costs. In July 2008, we entered into a settlement agreement with Canam, pursuant to which we paid a total of $832,000 and all claims were relinquished.

We are subject, through our subsidiary Caspi Neft, to the terms of License 1557 and the related exploration and production contracts covering 14,111 acres in the Field in Kazakhstan. The exploration and production contracts provide, among other things, certain minimum levels of capital expenditures for the continued development of the Field.

Purchase commitments are made from time to time in the ordinary course of business in connection with ongoing operations in the Field.

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Note 7. Commitments and Contingencies

In July 2007, Canam Services, Inc. (“Canam”), a supplier of tubing products, filed suit in the 151^st Judicial District Court of Harris County, Texas asserting a cause of action against us based upon alleged breach of a guaranty agreement covering certain accounts payable of Caspi Neft. The suit initially sought recovery from us in the amount of $1,986,633 plus fees and costs. We denied all of Canam’s material allegations and on September 5, 2007, filed an answer denying each and every material allegation contained in the Canam complaint. Subsequently, Canam reduced the recovery amount to $756,727 plus interest, fees and costs. We plan to vigorously defend this claim and have not recorded any reserve above our recorded accounts payable as of March 31, 2008.

We are subject, through our subsidiary Caspi Neft, to the terms of License 1557 and the related exploration and production contracts covering 14,111 acres in the Field in Kazakhstan. The exploration and production contracts provide, among other things, certain minimum levels of capital expenditures for the continued development of the Field, which have been met as of March 31, 2008.

Purchase commitments are made from time to time in the ordinary course of business in connection with ongoing operations in the South Alibek Field.

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Note 8. Commitments and Contingencies

Note 7. Commitments and Contingencies

We are subject, through our subsidiary Caspi Neft, to the terms of License 1557 and the related exploration and production contracts with the government of Kazakhstan covering 14,111 acres in the Field in Kazakhstan. The exploration and production contracts provide for, among other things, certain minimum levels of capital expenditures for the continued development of the Field.

Purchase commitments are made from time to time in the ordinary course of business in connection with ongoing operations in the Field.

On July 18, 2007, Canam Services, Inc. (“Canam”), a supplier of tubing products, filed suit in the 151^st Judicial District Court of Harris County, Texas asserting a cause of action against us based upon alleged breach of a guaranty agreement covering certain accounts payable of Caspi Neft. Canam seeks recovery from us in the amount of $1,986,633.95 plus fees and costs. We denied all of Canam’s material allegations and on September 5, 2007, filed an answer denying each and every material allegation contained in the Canam complaint. We plan to vigorously defend this claim and have not recorded any reserve above our recorded accounts payable as of September 30, 2007.

Note 8. Commitments and Contingencies

We are subject, through our subsidiary Caspi Neft, to the terms of License 1557 and the related exploration and production contracts with the government of Kazakhstan covering 14,111 acres in the Field in Kazakhstan. The exploration and production contracts provide for, among other things, certain minimum levels of capital expenditures for the continued development of the Field.

Purchase commitments are made from time to time in the ordinary course of business in connection with ongoing operations in the Field.

Note 5. Commitments and Contingencies

We are subject, through our subsidiary Caspi Neft, to the terms of License 1557 and the related exploration and production contracts covering 14,111 acres in the Field in Kazakhstan. The exploration and production contracts provide, among other things, certain minimum levels of capital expenditures for the continued development of the Field.

Purchase commitments are made from time to time in the ordinary course of business in connection with ongoing operations in the South Alibek Field.

Note 7. Commitments and Contingencies

We are subject, through our subsidiary Caspi Neft, to the terms of License 1557 and the related Exploration Contract covering 14,111 acres in the Field in Kazakhstan. In October 2006, we were granted an additional two-year extension of the Exploration Contract through April 2009. In connection with this extension, we committed to spend an additional $28.1 million on development of the Field.

Purchase commitments are made from time to time in the ordinary course of business in connection with ongoing operations in the South Alibek Field.

Note 6. Commitments and Contingencies

We are subject, through our subsidiary Caspi Neft, to the terms of License 1557 and the related Exploration Contract covering 14,111 acres in the Field in Kazakhstan. In connection with the Exploration Contract, we committed to spend approximately $18.0 million on development of the Field through April 2005, which has been satisfied. In connection with the granting of a two-year extension of the Exploration Contract through April 2007, we have committed to spend an additional $30.6 million on development of the Field. We expect that we will meet the additional spending commitments required by the extension.

Purchase commitments are made from time to time in the ordinary course of business in connection with ongoing operations in the South Alibek Field.

Note 5. Commitments and Contingencies

We are subject, through our subsidiary Caspi Neft, to the terms of License 1557 and the related Exploration Contract covering 14,111 acres in the Field in Kazakhstan. In connection with the Exploration Contract, we committed to spend approximately $18.0 million on development of the Field through April 2005, which has been satisfied. In connection with the granting of a two-year extension of the Exploration Contract through April 2007, we have committed to spend an additional $30.6 million on development of the Field. We expect that we will meet the additional spending commitments required by the extension.

Purchase commitments are made from time to time in the ordinary course of business in connection with ongoing operations in the South Alibek Field.

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Note 6. Commitments and Contingencies

Drilling Rig Dispute

In December 2001, the Company purchased a drilling rig for $5.3 million through the issuance to the rig’s seller of a note payable for $3.3 million and 1.0 million shares of redeemable common stock. In July 2003, the Company

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was notified by the holder of an apparent first lien on the drilling rig (the “First Lien Holder”) that the seller of the rig was in default under its note payable obligation to the First Lien Holder. The Company was not informed of the existence of the First Lien Holder in the asset purchase agreement related to the acquisition of the drilling rig. During 2003, the Company held discussions with the First Lien Holder with the intent to resolve the seller’s default and began making certain payments directly to the First Lien Holder.

In December 2003, the seller filed suit in Harris County, Texas alleging default by the Company under the note payable and redeemable common stock agreements with the seller. At that time, the Company ceased installment payments to the First Lien Holder, as it had not been able to successfully negotiate a settlement agreement with both the seller and the First Lien Holder. In February 2004, the First Lien Holder filed suit in United States District Court, Southern District of Texas, against the seller, and named the Company and two of its affiliates as additional defendants. This action seeks payment of amounts owed to the First Lien Holder by the seller related to the drilling rig. The Company filed a counterclaim and third-party claim against the seller and certain of its affiliates, seeking recovery of repair costs incurred by the Company in connection with undisclosed latent defects in the drilling rig, recovery of payments made to the seller, including the common stock, and recovery of additional costs associated with the drilling rig.

In August 2004, the Company and the seller entered into a settlement and release agreement, pursuant to which the remaining balance on the note of $1.6 million, plus accrued interest of $550,000 was cancelled. The Company agreed to endeavor to negotiate a settlement with the First Lien Holder pursuant to which, if successful, the Company would assume the obligation of the seller to the First Lien Holder. The seller also was required to return 200,000 of the 1.0 million shares of common stock issued in connection with the original sale. The Company has estimated the liability of the seller to the First Lien Holder to be approximately $2.9 million, including accrued and unpaid interest. The Company also agreed to pay $120,000 of the legal fees incurred by the seller of the rig in its lawsuit with the First Lien Holder. Settlement discussions are continuing with respect to the lawsuit.

Former Chief Financial Officer

In May 2003, Jim W. Tucker (the “Plaintiff”), the former chief financial officer of the Company, filed suit in Montgomery County, Texas against Transmeridian Exploration, Inc., in connection with his separation from service with the Company in January 2003. The suit alleged breach of an oral employment agreement. The Company was never served with notice and had no knowledge of this suit. Counsel for the Plaintiff claimed they were unable to serve the Company’s registered agent with notice of this suit. Based on these representations, the Court awarded the Plaintiff a default judgment in November 2003 in the amount of $922,276. The Company was notified of a writ of garnishment and writ of execution in March and April 2004, respectively. In May 2004, the court granted a motion to vacate the writ of garnishment and in February 2005, granted a motion to vacate the default judgment. The Plaintiff subsequently passed away in July 2005. The case may still be reinstated by the deceased’s estate and, if so, would begin as if the Company had just been served notice. The Company believes it has meritorious defenses to the allegations in the underlying suit and intends to vigorously contest this matter and pursue all legal remedies available to it.

International Commitments

The Company, through its subsidiary Caspi Neft, is subject to the terms of License 1557 and the related Exploration Contract covering 14,111 acres in the South Alibek Field in Kazakhstan. In connection with the Exploration Contract, the Company committed to spend approximately $18.0 million on development of the Field through April 2005, which has been satisfied. In connection with granting of a two-year extension of the Exploration Contract through April 2007, the Company has committed to spend an additional $30.6 million on development of the Field. Management expects that the Company will meet the additional spending commitments required by the extension.

Purchase commitments are made from time to time in the ordinary course of business in connection with ongoing operations in the South Alibek Field.

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Note 5.          Commitments and Contingencies

Drilling Rig Dispute

In December 2001, the Company purchased a drilling rig for $5.3 million through the issuance to the seller of a note payable for $3.3 million and 1.0 million shares of redeemable common stock. In July 2003, the Company was notified by the holder of an apparent first lien on the drilling rig (the “First Lien Holder”) that the seller of the rig was in default under its note payable obligation to the First Lien Holder.  The Company was not informed of the existence of the First Lien Holder in the asset purchase agreement related to the acquisition of the drilling rig.  The note payable and the redeemable common stock are now in dispute as a result of the seller’s default to the First Lien Holder.  During 2003, the Company held discussions with the First Lien Holder with the intent to resolve the seller’s default by making certain payments directly to the First Lien Holder.  During the year ended December 31, 2003, the Company made installment payments to the First Lien Holder totaling $688,400.

Discussions with the seller of the rig became increasing adversarial during late 2003 and in December 2003, the seller filed suit in the 334th District Court, Harris County, Texas, alleging default by the Company under the note payable and redeemable common stock agreements with the seller.  At that time, the Company ceased installment payments to the First Lien Holder, as it had not been able to successfully negotiate a settlement agreement with both the seller and the First Lien Holder.  In February 2004, the First Lien Holder filed suit in United States District Court, Southern District of Texas, against the seller, and named the Company and two of its affiliates as additional defendants.  This action seeks payment of amounts owed to the First Lien Holder by the seller related to the drilling rig.

In April 2004, the Company filed a counterclaim and third-party claim against the seller and certain of its affiliates, seeking recovery of repair costs incurred by the Company in connection with undisclosed latent defects in the drilling rig, recovery of payments made to the seller, including the redeemable common stock, and recovery of additional costs associated with the drilling rig.

In August 2004, the Company and the seller of the rig entered into a settlement and release agreement, pursuant to which the remaining balance on the note of $1.6 million, plus accrued interest of $550,000 was cancelled, and the Company agreed to endeavor to negotiate a settlement with the First Lien Holder pursuant to which, if successful, the Company would assume the obligation of the seller of the rig to the First Lien Holder.  The seller also was required to return 200,000 of the 1.0 million shares of redeemable common stock issued in connection with the original sale.  The Company has estimated the liability of the seller to the First Lien Holder to be approximately $2.9 million, including accrued and unpaid interest.  The Company also agreed to pay $120,000 of the legal fees incurred by the seller of the rig in its lawsuit with the First Lien Holder.  In an effort to promote negotiation of a settlement with the First Lien Holder, the Company resumed making installment payments to the First Lien Holder in December 2004.  In June 2005, the Company received notification that the successor in interest to the original seller had purchased the note payable to the First Lien Holder and was substituted as the plaintiff under the First Lien Holder’s lawsuit.  Settlement discussions are continuing with respect to the lawsuit.

Former Chief Financial Officer

In May 2003, Jim W. Tucker (the “Plaintiff”), the former chief financial officer of the Company, filed suit in the 359th District Court, Montgomery County, Texas, against Transmeridian Exploration, Inc., in connection with his separation from service with the Company in January 2003.  The suit alleged breach of an oral employment

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Note 5 — Commitments and Contingencies

Drilling Rig Dispute

In December 2001, the Company purchased a drilling rig for $5.3 million through the issuance to the seller of a note payable for $3.3 million and 1.0 million shares of redeemable common stock. In July 2003, the Company was

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