EXHIBIT 10.18
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SHAREHOLDER AGREEMENT
dated as of
October 15, 1997
among
KHANTY MANSIYSK OIL CORPORATION
and
KHANTY HOLDINGS LLC
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TABLE OF CONTENTS Page
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ARTICLE I
Definitions
SECTION 1.1. Definitions .............................................. 1
ARTICLE II
Transfer Restrictions
SECTION 2.1. Restrictions ............................................. 4
SECTION 2.2. Right of First Offer ..................................... 5
SECTION 2.3. Legend ................................................... 7
SECTION 2.4. Compliance with Applicable Law, Etc. ..................... 7
SECTION 2.5. Effect ................................................... 8
ARTICLE III
Preemptive Rights
SECTION 3.1. Preemptive Rights ........................................ 8
ARTICLE IV
Termination
SECTION 4.1. Termination .............................................. 9
ARTICLE V
Miscellaneous
SECTION 5.1. Effectiveness ............................................ 9
SECTION 5.2. Notices .................................................. 9
SECTION 5.3. Interpretation ........................................... 11
SECTION 5.4. Severability ............................................. 11
SECTION 5.5. Counterparts ............................................. 11
SECTION 5.6. Entire Agreement; No Third Party
Beneficiaries ............................................ 11
SECTION 5.7. Further Assurances ....................................... 11
SECTION 5.8. Governing Law; Equitable Remedies ........................ 11
SECTION 5.9. Amendments; Waivers ...................................... 12
SECTION 5.10. Assignment ............................................... 12
ii
SHAREHOLDER AGREEMENT, dated as of October 15, 1997, among Khanty
Mansiysk Oil Corporation (formerly known as Ural Petroleum Corporation), a
Delaware corporation ("KMOC") and Khanty Holdings LLC, a Delaware limited
liability company ("Holdings").
WHEREAS KMOC and Holdings are parties to a Note and Warrant Purchase
Agreement, dated as of October 10, 1997, (the "Purchase Agreement"), pursuant to
which KMOC, in exchange for a $30 million dollar capital investment by Holdings,
has agreed to issue to Holdings one or more notes and 66,667 warrants to
purchase common stock, no par value, of KMOC at an exercise price of $450.00 per
share (the "Holdings Warrants"), all upon the terms and conditions set forth in
the Purchase Agreement; and
WHEREAS the parties hereto wish to set forth their agreement
concerning certain matters relating to Holdings's ownership and disposition of
any shares of common stock, no par value, of KMOC acquired by Holdings pursuant
to its exercise of the Holdings Warrants or by any other means subsequent to the
Effective Date (collectively, the "Shares").
NOW, THEREFORE, in consideration of the mutual agreements and
covenants contained herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
ARTICLE I
Definitions
SECTION 1.1. Definitions. As used in this Agreement, the following
terms shall have the following meanings:
An "affiliate" of any Person means any other Person that directly or
indirectly through one or more intermediaries, controls, is controlled by, or is
under common control with, such first Person. For purposes of the definition of
affiliate, "control" has the meaning specified in Rule 12b-2 under the Exchange
Act as in effect on the date of this Agreement.
"Applicable Law" shall mean, with respect to any Person, any
statute, law, regulation, ordinance, rule, judgment, rule of common law,
order, decree, award, Governmental Approval, concession, grant, franchise,
license, agreement, directive, guideline, policy, requirement, or other
governmental
restriction or any similar form of decision of, or determination by, or any
interpretation or administration of any of the foregoing by, any Governmental
Authority, whether in effect as of the date hereof or thereafter and in each
case as amended, applicable to such Person or its subsidiaries or their
respective assets.
A Person shall be deemed to "Beneficially Own", to have "Beneficial
Ownership" of, or to be "Beneficially Owning" any securities (which securities
shall also be deemed "Beneficially Owned" by such Person) that such Person is
deemed to "beneficially own" within the meaning of Rule 13d-3 under the Exchange
Act as in effect on the date of this Agreement.
"Effective Date" means the date of the closing of the transactions
contemplated by the Purchase Agreement.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"First Offer Price" has the meaning set forth in Section 2.2(a).
"Governmental Approval" means any action, order, authorization,
consent, approval, license, lease, ruling, permit, tariff, rate, certification,
exemption, filing or registration by or with any Governmental Authority.
"Governmental Authority" means any government or political
subdivision thereof, governmental department, commission, board, bureau, agency,
regulatory authority, instrumentality, judicial or administrative body having
jurisdiction over the matter or matters in question.
A "group" has the meaning set forth in Section 13(d)(3) of the
Exchange Act as in effect on the date of this Agreement.
"Holdings" has the meaning set forth in the recitals to this
Agreement.
"Holdings Entities" means, collectively, Holdings and any Permitted
Transferee that holds Shares.
"Holdings Warrants" has the meaning set forth in the recitals to
this Agreement.
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"Initial Public Offering" means the closing of the initial public
offering of KMOC Common Stock pursuant to an effective registration statement on
Form S-1 (or any successor form other than a special purpose form) under the
Securities Act, as amended, and the rules and regulations of the Securities and
Exchange Commission promulgated thereunder, all as from time to time in effect.
"KMOC" has the meaning set forth in the recitals to this Agreement.
"KMOC Common Stock" means common stock, no par value, of KMOC.
"KMOC Voting Securities" means KMOC Common Stock and any other
issued and outstanding securities of KMOC generally entitled to vote in the
election of directors of KMOC.
"Note and Warrant Purchase Agreements" means the Note and Warrant
Purchase Agreements pursuant to which investors purchased from KMOC (x) notes in
an aggregate principal amount of $50,000,000 and (y) warrants to purchase KMOC
Common Stock at an exercise price of $450.00.
"Notes" means the notes issued pursuant to the Note and Warrant
Purchase Agreements.
"Offered Shares" has the meaning set forth in Section 2.2(a).
"Permitted Transferee" has the meaning set forth in Section 2.1(c).
"Person" means any individual, group, corporation, firm,
partnership, joint venture, trust, business association, organization,
governmental entity or other entity.
"Proposed Issuance" has the meaning set forth in Section 3.1.
"Public Offering" means any offering of stock registered under the
Securities Act.
"Purchase Agreement" has the meaning set forth in the recitals to
this Agreement.
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"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of October 15, 1997, by and between KMOC and Holdings.
"Response Period" has the meaning set forth in Section 2.2(b).
"Securities Act" means the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder.
"Shares" has the meaning set forth in the recitals to this
Agreement.
"Transfer" has the meaning set forth in Section 2.1.
"Transfer Notice" has the meaning set forth in Section 2.2(a).
"Voting Agreement" means the Voting and Transfer Agreement, dated as
of October 15, 1997, between KMOC, Holdings, Waldo Securities S.A., an
international business company organized under the laws of the British Virgin
Islands and Brunswick ▇▇▇▇▇▇▇▇▇▇▇ Trust Company LLC, a Delaware limited
liability company.
"Warrants" means the warrants issued pursuant to the Note and
Warrant Purchase Agreements.
"Wholly Owned Subsidiary" means, with respect to any Person, as of
any date of determination, any other Person as to which such Person owns,
directly or indirectly, or otherwise controls, 100% of the voting shares or
other similar interests.
ARTICLE II
Transfer Restrictions
SECTION 2.1. Restrictions. During the period commencing from the
Effective Date and ending on the date of an Initial Public Offering, no Holdings
Entity shall, except in connection with (i) a registered Public Offering
pursuant to the Registration Rights Agreement or (ii) tag-along rights or
drag-along rights pursuant to Articles VII and VIII of the Voting Agreement,
sell, pledge, assign, grant a participation interest in. encumber or otherwise
transfer or dispose of any Shares to any other Person, whether directly,
indirectly, voluntari-
4
ly, involuntarily, by operation of law, pursuant to judicial process or
otherwise (a "Transfer") without the prior written consent of KMOC, which shall
not be unreasonably withheld, except in accordance with one of the following:
(a) subject to compliance with the provisions of Section 2.2.
pursuant to a sale to any one Person or group in an amount less than 5% of the
outstanding securities of any class of KMOC; provided, however, that the
aggregate of such sales made by the Holdings Entities as a group in any one year
shall not exceed 10% of the outstanding securities of any class of KMOC;
(b) pursuant to a merger, consolidation or other business
combination involving Holdings, where Holdings is not the surviving entity, or a
sale of all or substantially all of Holdings's assets; provided, however, that
the surviving or purchasing entity agrees to be bound by the terms of this
Agreement and the Voting Agreement; or
(c) pursuant to a Transfer of Shares by Holdings to a Wholly Owned
Subsidiary, from a Wholly Owned Subsidiary of Holdings to Holdings or between
Wholly Owned Subsidiaries of Holdings (any such transferee shall be referred to
herein as a "Permitted Transferee"). provided that in the case of any such
Transfer, Holdings shall have provided KMOC with written notice of such proposed
Transfer at least 15 days prior to consummating such Transfer stating the name
and address of the Permitted Transferee, the relationship between Holdings and
the Permitted Transferee, and the Permitted Transferee shall have executed a
copy of this Agreement as a shareholder of KMOC. If any Permitted Transferee to
whom Shares have been Transferred pursuant to this Section 2.1 by Holdings
ceases to be a Permitted Transferee, such Shares shall be Transferred back to
Holdings immediately prior to the time such Person ceases to be a Permitted
Transferee of Holdings. Holdings and such Permitted Transferee shall be jointly
and severally liable for any breach of this Agreement by such Permitted
Transferee.
SECTION 2.2. Right of First Offer.
(a) If a Holdings Entity desires to transfer any Shares other than
pursuant to the provisions of Sections 2.1(b) or 2.1(c) or pursuant to a
registered Public Offering in accordance with the Registration Rights Agreement,
such Holdings Entity shall first give written notice (a "Transfer Notice") to
that effect to KMOC containing (i) the number of Shares proposed to be
transferred
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(the "Offered Shares"), and (ii) the purchase price (the "First Offer Price")
which the Holdings Entity proposes to be paid for the Offered Shares.
(b) KMOC shall have a period of 30 days after the date of receipt of
the Transfer Notice (the "Response Period") to accept the offer made pursuant to
the Transfer Notice to purchase all of the Offered Shares (on its own behalf or
on the behalf of others) at the First Offer Price by delivering written notice
of acceptance to the Holdings Entity within the Response Period.
(c) If KMOC elects to purchase (on its behalf or on the behalf of
others) all of the Offered Shares, the closing of the sale of the Offered Shares
will be held at KMOC's principal office in New York on a date to be specified by
KMOC which is not less than 10 days nor more than 60 days after the end of the
Response Period. At the closing, KMOC will deliver the consideration in
accordance with the terms of the offer set forth in the Transfer Notice, and the
Holdings Entity will deliver the Offered Shares to KMOC, duly indorsed for
transfer, free and clear of all liens, claims and encumbrances.
(d) If, at the end of the Response Period, KMOC has not given notice
of its decision to purchase all of the Offered Shares, then the Holdings Entity
shall be entitled for a period of 90 days beginning the day after the expiration
of the Response Period to sell the Offered Shares at a price not lower than the
First Offer Price and on terms not more favorable to the transferee than were
contained in the Transfer Notice. Promptly after any sale pursuant to this
Section 2.2, the Holdings Entity shall notify KMOC of the consummation thereof
and shall furnish such evidence of the completion (including time of completion)
of such sale and of the terms thereof as KMOC may request.
(e) If, at the end of any such 90-day period provided for in this
Section 2.2, the Holdings Entity has not completed the sale of the Offered
Shares, the Holdings Entity shall no longer be permitted to sell any of such
Offered Shares pursuant to this Section 2.2 without again fully complying with
the provisions of this Section 2.2 and all the restrictions on sale, transfer,
assignment or other disposition contained in this Agreement shall again be in
effect.
(f) Notwithstanding the foregoing, in the event that KMOC fails to
close the purchase of the Offered Shares on the date specified in its notice of
acceptance, the Holdings Entity shall be entitled, for a period of 120 days from
the closing date originally set by KMOC in its offer of acceptance, to sell the
Offered Shares at any reasonably negotiated price to any third party without
6
having to further comply with the provisions of this Section 2.2; provided,
however, that in the event that KMOC's failure to close the purchase is due to
an order, injunction or other similar mandate from a regulatory body of
competent jurisdiction and KMOC is using its best efforts to cause such order,
injunction or mandate, as the case may be, to not apply to the purchase of the
Offered Shares then KMOC shall have until the earlier of (i) the expiration of
30 days from the closing date originally set by KMOC in its acceptance or (ii)
such time as the order, injunction or mandate becomes final and non-appealable,
in which to close the purchase of the Offered Shares before the provisions of
this clause (f) become applicable.
SECTION 2.3. Legend. Each certificate representing the Shares shall
be stamped or otherwise imprinted with a legend in substantially the following
form:
RESTRICTIONS ON TRANSFER OF SECURITIES: THE SECURITIES REPRESENTED
BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR UNDER STATE SECURITIES LAWS. THE
TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE IS
SUBJECT TO THE CONDITIONS SPECIFIED IN (I) A SHAREHOLDER AGREEMENT
DATED OCTOBER 15, 1997 AND (II) A VOTING AND TRANSFER AGREEMENT
DATED OCTOBER 15, 1997. A COPY OF SUCH CONDITIONS WILL BE FURNISHED
BY THE CORPORATION TO THE HOLDER HEREOF UPON WRITTEN REQUEST AND
WITHOUT CHARGE. THESE SECURITIES MAY NOT BE RESOLD OR TRANSFERRED
UNLESS SUCH CONDITIONS ARE COMPLIED WITH AND UNLESS REGISTERED OR
EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933 AND
APPLICABLE STATE SECURITIES LAWS.
SECTION 2.4. Compliance with Applicable Law, Etc. The exercise of
the right of first offer set forth in Section 2.2 and the completion of any
transfer or sale of Shares contemplated hereunder shall be subject to compliance
with Applicable Law. KMOC and the Holdings Entities shall cooperate with each
other and shall take all such action, including, without limitation, obtaining
all Governmental Approvals required to comply with Applicable Law in connection
with the sale or transfer of the Shares pursuant to this Agreement.
7
Each of KMOC and the Holdings Entities shall bear its own costs and expenses in
connection with obtaining any such Governmental Approvals.
SECTION 2.5. Effect. Any purported transfer of securities that is
inconsistent with the provisions of this Article II shall be null and void and
of no force or effect and will not be registered on the stock transfer books of
KMOC.
ARTICLE III
Preemptive Rights
SECTION 3.1. Preemptive Rights. Prior to an Initial Public Offering,
Holdings shall be entitled to participate in all future sales or issuances by
KMOC of KMOC Common Stock (or rights to acquire KMOC Common Stock or securities
convertible into, or exchangeable for, KMOC Common Stock) to the extent
necessary to maintain its proportionate fully diluted equity interest in KMOC as
that interest exists at the time of such issuance. KMOC will provide Holdings
with at least 30 days advance written notice of any such proposed sale or
issuance (a "Proposed Issuance"), which notice shall contain all relevant
information pertaining thereto (including without limitation the identity of the
proposed beneficial and record owners of the KMOC Common Stock to be issued or
sold and the purchase price per share) and an offer to Holdings to participate
in the Proposed Issuance (at a price per share and upon terms and conditions no
less favorable than those provided to other offerees or purchasers of KMOC
Common Stock in the Proposed Issuance) to the extent necessary for Holdings to
maintain its proportionate fully diluted equity interest in KMOC. At Holdings'
sole option, Holdings may participate in the Proposed Issuance by purchasing the
full number of KMOC Common Stock necessary to maintain its proportionate equity
interest or any lesser number thereof. In the event the terms of the Proposed
Issuance change, KMOC will provide Holdings with a new 20-day advance notice
period prior to consummating the transaction contemplated by the Proposed
Issuance. All of Holdings's rights under this Section 3.1 shall cease at such
time as Holdings's Beneficial Ownership percentage of KMOC Voting Securities is
less than five percent. These preemptive rights shall not apply to the following
sales or issuances: (i) pursuant to an employee stock option plan, stock
purchase plan or similar benefit program, agreement or sale or issuance to
directors, employees or consultants which sales or issuances do not exceed 15%,
on a fully diluted basis, of the then outstanding capitalization of KMOC; (ii)
as consideration for the acquisition by KMOC or any of its affiliates of all or
a part of
8
another business or the merger of any business entity with or into KMOC or any
of its affiliates: (iii) in connection with the exercise of the conversion
rights granted pursuant to Section 2.6 of the Acquisition Agreement, dated as of
December 16, 1996, between Chelsea Corporation, ▇.▇. ▇▇▇▇▇ International
Corporation and Ural Petroleum Corporation: (iv) the issuance of shares of KMOC
Common Stock pursuant to the exercise of the Warrants; (v) the issuance of
additional Warrants pursuant to (y) the warrant adjustment mechanism contained
in the Note and Warrant Purchase Agreements or (z) the warrant adjustment
mechanism contained in the certificates underlying the Warrants; or (vi) the
issuance of shares of KMOC Common Stock for the purpose of paying interest on
the Notes.
ARTICLE IV
Termination
SECTION 4.1. Termination. Except with respect to Sections of this
Agreement which shall terminate on an earlier date as expressly provided herein,
this Agreement shall automatically terminate, with respect to each Holdings
Entity, on the later of (i) the date on which the Holdings Entities collectively
Beneficially Own less than 5% of the outstanding common stock of KMOC or (ii)
the date of an Initial Public Offering.
ARTICLE V
Miscellaneous
SECTION 5.1. Effectiveness. This Agreement shall be effective as of
the Effective Date.
SECTION 5.2. Notices. All notices, requests and other communications
hereunder shall be in writing and shall be delivered by hand, by nationally
recognized courier service, by facsimile transmission, receipt confirmed or
certified mail (postage prepaid, return receipt requested, if available):
9
If to KMOC, to:
Khanty-Mansiysk Oil Corporation
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
If to a Holdings Entity, to:
Khanty Holdings LLC
c/o The Beacon Group
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Each such notice, request or communication shall be effective (A) if delivered
by hand or by nationally recognized courier service, when delivered at the
address specified in this Section 5.2 (or in accordance with the latest
unrevoked written direction from such party), (B) if given by fax, when such fax
is transmitted to the fax number specified in this Section 5.2 (or in accordance
with the latest unrevoked written direction from such party), and the
appropriate confirmation is received or (C) if by certified mail, upon mailing.
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SECTION 5.3. Interpretation. The headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. Whenever the words "included,"
"includes" or "including" are used in this Agreement, they shall be deemed to be
followed by the words "without limitation."
SECTION 5.4. Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstances, is
held invalid, illegal or unenforceable in any respect for any reason, the
parties shall negotiate in good faith with a view to the substitution therefor
of a suitable and equitable solution in order to carry out, so far as may be
valid and enforceable, the intent and purpose of such invalid provision;
provided, however, that the validity, legality and enforceability of any such
provision in every other respect and of the remaining provisions contained
herein shall not be in any way impaired thereby, it being intended that all of
the rights and privileges of the parties hereto shall be enforceable to the
fullest extent permitted by law.
SECTION 5.5. Counterparts. This Agreement may be executed in two
counterparts, each of which shall be deemed an original and all of which shall,
taken together, be considered one and the same agreement, it being understood
that both parties need not sign the same counterpart.
SECTION 5.6. Entire Agreement; No Third Party Beneficiaries. This
Agreement (a) constitutes the entire agreement and supersedes all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof and (b) is not intended to confer upon any
Person, other than the parties hereto, any rights or remedies hereunder.
SECTION 5.7. Further Assurances. Each party shall execute, deliver,
acknowledge and file such other documents and take such further actions as may
be reasonably requested from time to time by the other party hereto to give
effect to and carry out the transactions contemplated herein.
SECTION 5.8. Governing Law; Equitable Remedies. This Agreement shall
be governed by and construed in accordance with the laws of the State of
Delaware, regardless of the laws that might otherwise govern under applicable
principles of conflicts of law. The parties hereto agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the parties hereto shall be entitled to
11
equitable relief, including in the form of injunctions, in order to enforce
specifically the provisions of this Agreement, in addition to any other remedy
to which they are entitled at law or in equity.
SECTION 5.9. Amendments; Waivers.
(a) No provision of this Agreement may be amended or waived unless
such amendment or waiver is in writing and signed, in the case of an amendment,
by the parties hereto, or in the case of a waiver, by the party against whom the
waiver is to be effective.
(b) No failure or delay by any party in exercising any right, power
or privilege hereunder shall operate as waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law.
SECTION 5.10. Assignment. Neither this Agreement nor any of the
rights or obligations hereunder shall be assigned by either of the parties
hereto without the prior written consent of the other party, except that either
party may assign all its rights and obligations to the assignee of all or
substantially all of the assets of such party including an acquisition through
merger, provided that such party shall in no event be released from its
obligations hereunder without the prior written consent of the other party.
Subject to the preceding sentence, this Agreement will be binding upon, inure to
the benefit of and be enforceable by the parties and their respective successors
and assigns. Any attempted assignment in contravention hereof shall be null and
void.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be
duly executed and delivered, all as of the date first set forth above.
KHANTY MANSIYSK OIL CORPORATION
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
---------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
Title: Chief Executive Officer
KHANTY HOLDINGS LLC
By: The Beacon Group Energy Investment Fund, L.P.
By: Beacon Energy Investors, L.L.C., its General Partner
By: Energy Fund GP, Inc., a member
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
---------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
Title: Managing Director
