<PAGE>
 
EXHIBIT 10.9

                            STOCKHOLDERS' AGREEMENT
                                        
     THIS STOCKHOLDERS' AGREEMENT is made effective as of the 7th day of
November, 1994, by and among SOCO International, Inc., a corporation organized
under the laws of the State of Delaware ("SOCO"), PT. BIP Energimas, a
corporation organized under the laws of the Republic of Indonesia ("BIP"),
Corbin Associates Limited, a corporation organized under the laws of the
Territories of the British Virgin Islands ("Corbin"), and SOCO Tamtsag Mongolia,
Inc., a Delaware close corporation (the "Company").

                                    RECITALS
                                        
     1.  Pursuant to the provisions of this Agreement, the Stockholders have
caused the organization and formation of the Company for the purpose of
consummating the transactions to be performed by the Company as set forth in
that certain Stock Purchase Agreement (the "Stock Purchase Agreement") of even
date herewith by and among the Company, SOCO, BIP, Corbin and the other Persons
named as parties therein.

     2.  The Stockholders desire to enter this Agreement to provide for the
management of the business and affairs of the Company and for other matters
concerning the Company about which the Stockholders desire to have a written
agreement.

                                   ARTICLE I
                                        
                                  DEFINITIONS
                                        
     In consideration of the mutual covenants and agreements between and among
the Parties contained herein, the Parties agree as follows:

     SECTION 1.1 DEFINITIONS. When used in this Agreement, the following words
and terms shall have the following respective definitions (and such definitions
shall be equally applicable to the singular and plural forms, and all
grammatical variations, of such terms):

     (a) "Advance Date" has the meaning ascribed thereto in Section 6.3(c).

     (b) "Advancing Stockholder Loan" has the meaning ascribed thereto in
Section 6.3(c).
 
     (c) "Advancing Stockholder Loan Note" has the meaning ascribed thereto  in
Section 6.3(c).
<PAGE>
 
     (d) "Agreement" means this Stockholders' Agreement and the Exhibits.

     (e) "Affiliate" means with respect to any Person, any other Person that
directly, or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with such Person. For the purposes of
this definition of Affiliate, "control" shall mean the possession, direct or
indirect, of the power to direct or cause direction of the management or
policies of such Person and, without limitation, a Person shall be deemed to
have such power if it owns 50% or more of such other Person's equity and voting
securities.

     (f) "Aggrieving Party" has the meaning ascribed thereto in Section 8.2.

     (g) "Annual Budget" means a document in the form approved by the Board of
Directors.

     (h) "Approved Annual Budget" has the meaning ascribed thereto in Section
4.6.

     (i) "Arbitration Act" has the meaning ascribed thereto in Section 7.1.

     (j) "Assumption Agreement" means a document in the form of Exhibit F.

     (k) "BIP" means PT. BIP Energimas, a corporation organized under the laws
of the Republic of Indonesia.


     (l) "Close Corporation Provisions" has the meaning ascribed thereto in
Section 9.1.

     (m) "Closing Date" means the date that the Closing (as defined in the Stock
Purchase Agreement) occurs.

     (n) "CNUOC" means China National United Oil Corporation, a joint venture
established under the laws of the People's Republic of China between China
National Petroleum Corporation and Sino Chemical Import & Export Corporation.

     (o) "Code" means the Internal Revenue Code of 1986, as amended, and the
Treasury Regulations issued thereunder.

     (p) "Common Stock" means the $.00l par value, common stock of the Company
as authorized by its Certificate of Incorporation.

                                       2
<PAGE>
 
     (q) "Company" means SOCO Tamtsag Mongolia, Inc., a Delaware close
corporation.

     (r) "Company Office" has the meaning ascribed thereto in Section 3.1.

     (s) "Contract Area" has the meaning ascribed thereto in the PSC.

     (t) "Controversy" or "Controversies" has the meaning ascribed thereto in
Section 7.1.

     (u) "Corbin" means Corbin Associates Limited, a corporation organized under
the laws of the Territories of the British Virgin Islands.

     (v) "Covered Parties" has the meaning ascribed thereto in Section 7.1.

     (w) "Default Rate" means the Loan Rate plus four per cent (4%).

     (x) "Deferred Payment" has the meaning ascribed thereto in the Stock
Purchase Agreement.

     (y) "Designating Stockholder" has the meaning ascribed thereto in Section
4.1(b).

     (z) "Designation" has the meaning ascribed thereto in Section 3.5.

     (aa) "Director's Proxy" means a proxy granted by a Director to another
Director or any adviser pursuant to and in accordance with Section 4.5(e).

     (ab) "Director's Proxy Holder" means the Director or any adviser designated
as the person authorized, on behalf of the Director granting the Director's
Proxy, to exercise the powers and rights granted in the Director's Proxy.

     (ac) "Disposition" means any sale, assignment, transfer, conveyance,
donation, contribution, granting of a direct equity interest in, distribution or
other alienation or disposition (not including a Pledge or divestiture resulting
from the exercise of remedies after default pursuant to a Pledge), of all or any
of the Shares (or right thereto).

     (ad) "Eligible Investments" means one or more of the following obligations
or securities:


        (i)     direct obligations of, and obligations fully guaranteed by, the
    United States of America, the United Kingdom or Hong Kong, or any agency or

                                       3
<PAGE>
 
    instrumentality of the United States of America, the United Kingdom or Hong
    Kong, the obligations of which are backed by the full faith and credit of
    the United States of America, the United Kingdom or Hong Kong, as the case
    may be; or

        (ii)     demand and time deposits in, certificates of deposits of,
    banker's acceptances issued by, or federal funds sold by, or any other
    commercial security issued by any recognized financial institution located
    in (and fully regulated by the authorities in) the United States of America,
    the United Kingdom or Hong Kong.

     (ae) "Expenses" means all expenses of the Company of whatever nature
incurred in connection with the conduct of its business activities.

     (af) "Fiscal Year" has the meaning ascribed thereto in Section 5.4.

     (ag) "Formation Date" means November 7, 1994.

     (ah) "IRS" means the Internal Revenue Service.

     (ai) "JOA" means the Joint Operating Agreement, if any, that the Company
and any other working interest owners may enter into with respect to a Contract
Area.

     (aj) "Loan Rate" means, from time to time, a rate equal to the London
Interbank Offer Rate for maturities of 90 days, plus two per cent (2%).

     (ak) "Major Decision" has the meaning ascribed thereto in Section 4.4(b).

     (al) "Mandatory Loan" has the meaning ascribed thereto in Section 6.2.

     (am) "Mandatory Loan Date" has the meaning ascribed thereto in Section
6.2.

     (an) "Mandatory Loan Note" means a document in the form of Exhibit E.

     (ao) "Mandatory Loan Notice" has the meaning ascribed thereto in Section
6.2.

     (ap) "Mandatory Loan Obligation" has the meaning ascribed thereto in
Section 6.2.

     (aq) "Mandatory Loan Obligation Default" has the meaning ascribed thereto
in Section 6.3.

                                       4
<PAGE>
 
     (ar) "Maturity Date" has the meaning ascribed thereto in Section 6.2.


     (as) "MGT" means the Petroleum Authority of Mongolia

     (at) "MMOC" means Medallion Mongolia Oil Company, a corporation organized
under the laws of the State of Texas.

     (au) "MMOC PSC" means that certain Production Sharing Contract entered into
on the 26th day of April, 1993 by and between MGT and MMOC.

     (av) "Non-defaulting Stockholders" has the meaning ascribed thereto in
Section 6.3.

     (aw)  "Notice" has the meaning ascribed thereto in Section 12.2.

     (ax)  "Party" means any, and "Parties" means all, of the Stockholders and
the Company.

     (ay)  "Person" means an individual, partnership, corporation, limited
liability company, business trust, joint stock company, trust, unincorporated
association, joint venture, governmental authority or other entity of whatever
nature.

     (az)  "Pledge" means any mortgage, pledge, hypothecation, encumbrance or
security interest of or in all or any portion of the interest of a Stockholder
in any Shares (or right thereto) which is collateral security for any obligation
or indebtedness of such Stockholder, and which may be accompanied by
constitutional, statutory or contractual powers of sale.


     (ba)  "Proposed Price" means an amount which:


         (i)     is expressed in terms of dollars per Share (which price must be
    equal for each Share in the class of such Shares);

         (ii)     provides for payment of such amount in cash, or by issuance of
    a single promissory note, or a combination of cash and a single promissory
    note; and

        (iii)     if evidenced by a promissory note, does not provide that such
note:

        (A)     be made, guaranteed, endorsed or otherwise insured by anyone
             other than the proposed Transferee; or

                                       5
<PAGE>
 
        (B)     be secured by any collateral other than all or a portion of the
               Shares.

     (bb) "Proposed  Transferor"  has  the  meaning  ascribed  thereto  in
Section 11.3(a).

     (bc) "PSC" means collectively the MMOC PSC and the SOCO Mongolia PSC.

     (bd) "Qualified Affiliate" means the sole stockholder or wholly owned
subsidiary of a Stockholder.

     (be)  "Relevant Time" has the meaning ascribed thereto in Section 6.3(g).


     (bf)  "Representative" has the meaning ascribed thereto in Section 3.5.


     (bg)  "Rules" has the meaning ascribed thereto in Section 7.1.


     (bh)  "Seismic Agreement" means a document in the form of Exhibit I.


     (bi)   "Shares" means:


        (i)     all shares of capital stock of the Company (including the Common
    Stock) issued to or otherwise owned or held, legally or beneficially,
    directly or indirectly, of record or otherwise, by a Stockholder;


        (ii)     any additional shares of capital stock of the Company which may
    be issued to or otherwise owned, held or acquired by a Stockholder, whether
    issued incident to any stock split, stock dividend, increase in
    capitalization, recapitalization, or in any manner, and whether held legally
    or beneficially, directly or indirectly, of record or otherwise, at any time
    during the term of this Agreement; and


      (iii)     all shares of capital stock or any other voting security of any
    entity issued incident to any merger, consolidation or other reorganization
    or like transaction by the Company, and received or acquired with respect to
    any shares of capital stock of the Company.

                                       6
<PAGE>
 
     (bj) "SOCO" means SOCO International, Inc., a corporation organized under
the laws of the State of Delaware.


     (bk) "SOCO Mongolia" means SOCO Mongolia, Inc., a corporation organized
under the laws of the State of Delaware.


     (bl) "SOCO Mongolia PSC" means that certain Production Sharing Contract
entered into on the 29th day of March, 1993 by and between MGT and SOCO
Mongolia.

     (bm) "SOCO Mongolia Stock" means the common capital stock, $1.00 par value
per share, of SOCO Mongolia.

     (bn) "Stock Purchase Agreement" has the meaning ascribed thereto in the
recitals.

     (bo) "Stockholder" means any, and "Stockholders" means all, of the
stockholders of the Company from time to time, whether such Persons are Parties
or their permitted Transferees.

     (bp) "Stockholder's Proxy" has the meaning ascribed thereto in Section 4.6.

     (bq) "Stockholder's Proxy Holder" has the meaning ascribed thereto in
Section 4.6.

     (br) "Story" means Edward T. Story, Jr., the President of SOCO.

     (bs) "Technical and Administrative Services Agreement" means the Technical
and Administrative Services Agreement by and between the Company and SOCO, as
approved by the Board of Directors in accordance with the provisions of Section
4.4(b).

     (bt) "Transfer" means a Disposition or Pledge.

     (bu) "Transferee" means any Person to whom a Transfer is made, or who
acquires an interest as the result of the exercise of remedies after default
pursuant to a Pledge, or who acquires an interest by operation of law or in any
other lawful manner.

     (bv) "Transferor" means any Person who makes a Transfer.

     (bw) "Well Agreement" means a document in the form of Exhibit H.

                                       7
<PAGE>
 
     SECTION 1.2 DEFINITIONS APPEARING ELSEWHERE IN THIS AGREEMENT. The terms
used in this Agreement which are defined in (a) the introductory paragraph of
this Agreement, (b) the recitals of this Agreement and (c) the further Sections
of this Agreement shall have the respective definitions therein ascribed to
them.

     SECTION 1.3 ACCOUNTING PRINCIPLES AND TERNS. The reference to generally
accepted accounting principles in this Agreement, and any other accounting terms
not specifically defined herein, shall, to the extent not inconsistent with
specific definitions herein, be construed in accordance with generally accepted
accounting principles in the United States, consistently applied, as such
principles are in effect from time to time, including, without limitation,
applicable statements, bulletins, and interpretations issued by the Financial
Accounting Standards Board and bulletins, opinions, interpretations, and
statements issued by the American Institute of Certified Public Accountants or
its committees. If, however, any changes in accounting principles from those
presently in effect are hereafter occasioned by the promulgation of rules,
regulations, pronouncements, or opinions of or required by the Financial
Accounting Standards Board or the American Institute of Certified Public
Accountants (or successors thereto or agencies with similar functions), or there
shall occur any change in the Company's fiscal or tax years and, as a result of
any such changes, there shall be a change in the meaning or effect of any terms
or conditions found in this Agreement, then the Parties agree to enter into
negotiations in order to amend such provisions so as equitably to reflect such
changes, with the desired result that the criteria for evaluating events or
conditions shall be the same after such changes as if such changes had not been
made.  The accounting principles, as so changed, may be referenced in this
Agreement as "generally accepted accounting principles".

     SECTION 1.4 DEFINITIONS NOT APPEARING IN THIS AGREEMENT. Any terms used in
this Agreement which are not defined herein but which are defined in the Stock
Purchase Agreement shall have the same meanings in this Agreement as provided in
such documents, unless the context otherwise requires.

                                   ARTICLE H
                                        
                          ORGANIZATION OF THE COMPANY
                                        
     SECTION 2.1  CERTIFICATE OF INCORPORATION. The Stockholders approve the
form of the Certificate of Incorporation for the Company which is attached to
this Agreement as Exhibit "A".

     SECTION 2.2  FORMATION OF THE COMPANY. On or before the Closing Date, SOCO
has caused the Certificate of Incorporation of the Company to be filed in the
appropriate public offices of the State of Delaware, and shall take such other
actions as shall be necessary to cause the Company to be formed as a Delaware
close corporation.

                                       8
<PAGE>
 
  SECTION 2.3  ORGANIZATION OF THE COMPANY AND DIRECTORS' AND STOCKHOLDERS'
RESOLUTIONS.   The Stockholders approve the forms of Directors' and
Stockholders' Resolutions providing for the organization of the Company in
accordance with the terms of this Agreement, copies of which are attached as
Exhibits "C" and "D", respectively. On the Closing Date, the Stockholders agree
to cause the Directors of the Company to adopt such Directors' Resolutions by
unanimous written consent, and agree to adopt the Stockholders' Resolutions by
unanimous written consent.   Among other matters, such Directors' Resolutions
provide for the adoption of the Bylaws, the approval of this Agreement and the
issuance of Shares to the Stockholders as contemplated hereby.

                                  ARTICLE III
                                        
                            BUSINESS OF THE COMPANY
                                        
  SECTION 3.1 PLACE OF BUSINESS. The Company's place of business (the "Company
Office") shall be located in Houston, Texas, or at such other place or places as
the Board of Directors may from time to time designate.

  SECTION 3.2  PURPOSES AND OBJECTIVE.  The purposes of the Company are to
consummate the transactions provided for in the Stock Purchase Agreement that
are to be performed by the Company, including, without limitation, the purchase
of the SOCO Mongolia Stock and thereby acquiring SOCO Mongolia, and thereby
participating indirectly in Blocks XIX, XXI and XXII in accordance with the
provisions of the PSC; to own and hold the SOCO Mongolia Stock; and to manage
SOCO Mongolia, to exercise the rights and privileges of SOCO Mongolia as
provided in the PSC and to provide financial, management and consulting services
to SOCO Mongolia.  The objective of the Company shall be to operate profitably
and for the economic benefit and in the best interest of the Stockholders.

  SECTION 3.3  BUSINESS OPPORTUNITIES AS PROPERTY OF THE COMPANY.  Except as
expressly provided to the contrary in the further provisions of this Section
3.3, each Stockholder agrees that any business or investment opportunity
identified by such Stockholder or any Affiliate thereof, that is within the
purposes of the Company as set forth in Section 3.2, shall be the property of
the Company; that the Company shall have the exclusive right to pursue such
opportunity; and that such opportunity shall be referred to the Company promptly
after being identified. This covenant shall be binding on the Stockholders and
their successors and assigns; provided, however, the Parties specifically
recognize and agree that each Stockholder is currently engaged in the
exploration for and the production of oil, gas and other minerals, and each
Stockholder shall have the right to continue or initiate such further
activities, individually, jointly with others, or as a part of any other joint
venture, limited or general partnership or other entity in which it is or may
become a party, in the Republic of Mongolia or in 

                                       9
<PAGE>
 
any other locale, except for those specific licenses or concessions in which
either the Company or SOCO Mongolia owns an interest. No provision of this
Agreement shall be construed as requiring a Stockholder to permit the Company,
SOCO Mongolia or another Stockholder to participate in any of its operations in
which such Stockholder may now or hereafter be interested.

     SECTION 3.4 ADOPTION OF BYLAWS. The Stockholders hereby approve and adopt
the Bylaws in the form attached hereto as Exhibit "B" as the Bylaws of the
Company.  In addition, such Bylaws are incorporated by reference herein and
shall have the force and effect of a covenant and agreement contained herein. If
the Stockholders amend or modify this Agreement, then the Stockholders agree to
amend, modify or replace the Certificate of Incorporation and/or the Bylaws as
may be necessary to describe accurately the agreement of the Stockholders
regarding the matters addressed in the Bylaws.

     SECTION 3.5 STOCKHOLDERS' REPRESENTATIVES. At the request of the Managing
Director, each Stockholder shall designate in writing (the "Designation"),
those individuals, any one of which (which individual shall be referred to as
the "Representative"), is from the date thereof duly authorized to act on
behalf of and bind such Stockholder with regard to all Company matters and
affairs, including, without limitation, Major Decisions. The other Stockholders
and the Managing Director shall be entitled to rely for all purposes hereof upon
any communication or instruments in writing, issued or executed by any such
Representative of a Stockholder as being binding upon, and made on the behalf
of, that Stockholder, until receipt by the Managing Director of a new
Designation designating another Representative. Unless otherwise provided in the
Designation or unless a proxy is otherwise granted with respect to a meeting or
meetings, any such Stockholder's Representative shall be deemed to have all
rights, powers and privileges of a proxy of such Stockholder, with full power to
exercise all voting powers attributable to the Shares held by such Stockholder
and to execute written consents on the Stockholder's behalf. A Designation may
not be made irrevocable, but it shall not be deemed to be revoked merely by the
grant of a proxy. Nothing contained in this Section 3.5 shall be deemed to limit
or affect the power of Stockholders to grant proxies or the scope and terms of
such proxies.  Additional provisions, not inconsistent with the foregoing,
concerning Representatives may be set forth in the Bylaws.

     SECTION 3.6  STOCKHOLDER'S PROXY. A Stockholder may grant a Stockholder's
Proxy to another Stockholder or to any adviser designated in writing by a
Representative. Any such Stockholder who has granted a Stockholder's Proxy shall
be deemed present at a meeting for quorum purposes if his Stockholder's Proxy
Holder attends such meeting. A Stockholder's Proxy may be irrevocable, shall be
in writing, shall be dated and shall not confer any power on the Stockholder's
Proxy Holder to make a decision on behalf of a Stockholder to approve any Major
Decision unless the Stockholder's Proxy is specifically given to make such Major
Decision with respect to the specific event giving 

                                       10
<PAGE>
 
rise to such Major Decision. In addition, the Stockholder's Proxy may provide
that the Stockholder's Proxy Holder may execute written consents in the name of
and on the behalf of the Stockholder granting such Stockholder's Proxy, and any
such written consent executed by such Stockholder's Proxy Holder will be treated
as if the Stockholder granting such Stockholder's Proxy had executed such
written consent. Also, the Stockholder's Proxy may provide that delivery of
notices of Stockholders' meetings and any other notices required or permitted by
law to be given to the Stockholder granting the Stockholder's Proxy will be
sufficient if given to the Stockholder's Proxy Holder. The Stockholder granting
any Stockholder's Proxy, however, shall be responsible for all decisions made
and actions taken by the Stockholder's Proxy Holder in the exercise of such
Stockholder's Proxy to the same extent as he would be responsible if he had
participated in the decision or had taken the action himself.

  SECTION 3.7  STOCKHOLDERS' VOTING. In respect of any matter to be
determined by the Stockholders, the vote required for its approval shall, unless
otherwise specified in the Certificate of Incorporation, the Bylaws or this
Agreement, be the same as if such matter was to be voted on by the Board of
Directors.

                                   ARTICLE IV
                                        
                     CONTROL AND MANAGEMENT OF THE COMPANY
                                        
  SECTION 4.1  BOARD OF DIRECTORS.

     (a) The Stockholders agree that the Board of Directors of the Company shall
have no more than six positions (the persons from time to time elected to fill
such positions being herein referred to as "Directors" and collectively referred
to herein as the "Board of Directors"). Until the Stockholders otherwise
unanimously amend this Agreement or the Certificate of Incorporation, or this
Agreement is terminated, the Board of Directors shall not include more than six
members without the unanimous agreement of all Stockholders.  Subject to the
foregoing, the size of the Board of Directors shall be established by the Board
from time to time but it shall not be more nor less than the aggregate number of
Directors the Stockholders are empowered to appoint.


     (b) Each Stockholder owning 25% or more of the outstanding Shares shall
have the right and power to appoint and elect two persons to the Board of
Directors at each annual meeting of the Stockholders and to remove any person so
appointed.  Each Stockholder owning less than 25% of the outstanding Shares
shall have the right and power to appoint and elect one person to the Board of
Directors at each such meeting and to remove any person so appointed. (Each
Stockholder exercising the right and power to appoint and elect person(s) to the
Board of Directors is a "Designating 

                                       11
<PAGE>
 
Stockholder".) If a vacancy occurs on the Board of Directors for any reason
whatsoever (other than by an increase in directorships, which shall be governed
by Article III, Section 3 of the Bylaws), then the Stockholder which shall have
appointed and caused the election of the Director whose departure has occasioned
the vacancy shall have the right to appoint and elect a replacement for such
vacating Director, which replacement shall serve for the remainder of the term
of such vacating Director. During the term of this Agreement, no Director shall
be removed from the Board of Directors without his written consent except, as
provided above, by the Stockholder that appointed him and caused his election.
Each Stockholder agrees to take such action as necessary to approve the
appointment and election of each of the Director(s) the Designating Stockholder
appoints and elects to be Director(s) as provided above, although such approval
shall not be a condition to the exercise of any right, power or privilege by the
Director(s) that the Designating Stockholder is entitled to appoint and elect
and the failure of any other Stockholder to grant such formal approval shall not
disqualify any Director so appointed and elected. Notwithstanding the foregoing,
at such time as the number of Shares held by a Designating Stockholder is
reduced to a level such that it would no longer be entitled to appoint the
person or persons then serving on the Board of Directors on behalf of such
Designating Stockholder, it hereby covenants and agrees that it shall
immediately remove any and all such persons it is not entitled to appoint.

     (c) At all meetings of the Board of Directors the Director or Directors
appointed by each Designating Stockholder shall vote as a single group and such
group shall be entitled to cast one vote for each Share owned by such
Stockholder.

     (d) The Managing Director shall cause minutes of the meetings of the
Stockholders and the Board of Directors to be kept and circulated to the
Stockholders and the Directors, respectively, within 21 days after a meeting.
The minutes of each meeting shall be deemed to be accepted by the Stockholders
or the Directors, as the case may be, unless a written objection is received by
the Managing Director within 20 days of a Stockholder's or Director's receipt,
as the case may be, of the draft circulated by the Managing Director.

     (e) The Stockholders agree that the Board of Directors may in its
discretion appoint an Advisory Board of Directors in accordance with the
provisions of Article III, Section 7 of the Bylaws.

  SECTION 4.2 MANAGING DIRECTOR; SECRETARY AND ASSISTANT SECRETARY.

     (a) The Managing Director shall be Story, who is deemed to be appointed by
SOCO, which appointment shall have been ratified and approved as provided in the
Directors' Resolutions and Stockholders' Resolutions.

     (b) The Managing Director shall not be removed except (i) as a Major
Decision taken pursuant to Section 4.4, (ii) pursuant to Section 4.7, or (iii)
if the 

                                       12
<PAGE>
 
Stockholder who appointed and elected him is in default in accordance with
Section 6.4. Appointment of a successor Managing Director in replacement of one
who has vacated such position (whether by removal as aforesaid or otherwise)
shall be a Major Decision taken pursuant to Section 4.4.

     (c) The Secretary shall be appointed by the Board of Directors and the
Assistant Secretary appointed by the BIP.

     SECTION 4.3 RESPONSIBILITY FOR MANAGEMENT. Subject to Section 4.4, the
Managing Director shall:

     (a) be responsible for managing the Company's business and affairs;

     (b) cause the Company's and SOCO Mongolia's respective business and affairs
to be conducted in a good and workmanlike manner in accordance with good
international oil and gas industry practice and in compliance with the
provisions of the PSC and this Agreement;

     (c) regularly consult with the other officers concerning operations and
keep the Board of Directors currently advised of all important matters arising
in connection therewith;

     (d) or his designee, be the SOCO Mongolia representative on any joint
operating committee, exploration advisory committee, operating committee or such
other committee as may be established for the Contract Area (such representation
to be in accordance with the determinations of the Board of Directors);

     (e) shall use his reasonable best efforts to ensure that each Stockholder
shall:

        (i)     have free access at its own risk and expense to the area of
    joint operations at any reasonable time, with right to follow as observer
    any current operations and the right to inspect all materials, equipment and
    property, and all available information pertaining to joint operations
    provided that such rights are not exercised in such manner that they might
    interfere with the operations conducted by the operator;

        (ii)     obtain reports on the operations issued by the operator;

        (iii)   obtain, upon request and, subject to Section 5.3(g), at its own
    expense, copies of any documentation concerning joint operations, as well
    as, to the extent available, samples, cores and cuttings; and

                                       13
<PAGE>
 
        (iv)     have the right (if requested by such Stockholder) to be present
    as an observer at all meetings of any joint operating committee, exploration
    advisory committee, operating committee or other committee and all technical
    or other sub-committees of any thereof;

     (f) promptly deliver to each Stockholder a copy of each document SOCO
Mongolia or the Company receives from or sends to MGT; and

     (g) at the expense of the Company, provide each Stockholder (unless
otherwise requested by such Stockholder) with a copy of all proprietary data
relating directly or indirectly to the PSC (including, without limitation, all
geological and geophysical data, well logs, test information, technical reports,
maps, models and interpretations relating to or derived from operations under
the PSC or data and information traded for PSC related data and information).

  SECTION 4.4 RESPONSIBILITY FOR DAY-TO-DAY OPERATIONS AND MAJOR DECISIONS.

     (a) The Managing Director shall manage the day-to-day operations of the
Company and implement the decisions of the Board of Directors, including Major
Decisions.  The Managing Director is authorized, empowered and obligated to pay
all costs and expenses which are necessary or appropriate to the furtherance of
the purposes and objectives of the Company and payment of which will not
constitute a Major Decision.

     (b) No Major Decision may be made and no action shall be taken with respect
to any matter that is within the scope of a Major Decision unless it has been
approved by the Directors as provided below in Section 4.5. The Major Decisions
are:

        (i)     approving the Annual Budget, any amendment thereto or making a
    deviation of more than 10% from the aggregate expenditures authorized by an
    Approved Annual Budget, as may be amended;

       (ii)    any commitment under the PSC by the Company and/or SOCO Mongolia,
    in which the financial commitment of either the Company and/or SOCO Mongolia
    therein shall exceed $150,000.00;

        (iii)     the obtaining of any loan or other credit facility (in
    addition to loans or other credit facilities forming part of an Approved
    Annual Budget or as part of a commitment described in (ii)), whether or not
    secured by assets of the Company and/or SOCO Mongolia, for which the credit
    of the Company and/or SOCO Mongolia will be committed in a sum greater than
    $50,000.00, except for any loans made pursuant to Article VI,

                                       14
<PAGE>
 
        (iv)    entering into by the Company and/or SOCO Mongolia of any
    contract calling for the Company and/or SOCO Mongolia to provide or receive
    services for a term longer than twelve (12) months (unless the Company
    and/or SOCO Mongolia may cancel such contract, without penalty, on not more
    than sixty (60) days notice);

        (v)     issuance of Shares or other securities by the Company or SOCO
    Mongolia;

        (vi)    selection of legal counsel and the accounting and auditing firm
    of the Company and/or SOCO Mongolia, and any change in such selection;

        (vii)   selection of depositories for the funds of the Company and/or
    SOCO Mongolia;

        (viii)  approval of the foreign, federal and any state income tax
    returns of the Company and/or SOCO Mongolia;

        (ix)    approval of the Technical and  Administrative Services
    Agreement and the rates for services to be rendered thereunder or any
    renewal, termination or amendment of such agreement or any increase in such
    rates;

        (x)     directly or indirectly entering into any contract or arrangement
    between the Company and/or SOCO Mongolia and a Stockholder or an Affiliate
    thereof;

        (xi)    removal or replacement of the Managing Director (other than as
    provided in Section 4.7);

        (xii)   payment of any dividends or other distributions (whether in
    cash or in kind) in respect of the Shares, except as otherwise provided in
    Section 6.4;

        (xiii)  repayment of any loans made by the Stockholders to the
    Company, except as otherwise provided in Section 6.4;

        (xiv)   determining the working capital reserve of the Company and/or
    SOCO Mongolia and any revision to such amount;

        (xv)    determining whether SOCO Mongolia should exercise any rights
    of pre-emption under a JOA;

                                       15
<PAGE>
 
        (xvi)   any decision that SOCO Mongolia should withdraw from a JOA or
    PSC, or exercise any right of relinquishment under the PSC;

        (xvii)  any sale or other disposal of assets of the Company and/or
    SOCO Mongolia other than in the ordinary course of business;

        (xviii) the payment to or reimbursement of any Stockholder for any
expenses or other liability incurred and paid on behalf of the Company;

        (xix)   determining SOCO Mongolia's position in respect of any of the
matters referred to in a JOA which require for their implementation the
unanimous vote of the parties to the JOA;

        (xx)    the selection of all exploratory well locations (but not the
conduct of operations pursuant to the Well Agreement);

        (xxi)   the selection of all seismic locations (but not the conduct of
operations pursuant to the Seismic Agreement);

        (xxii)  the selection and appointment of the members of the Boards of
Directors of SOCO Mongolia and any other subsidiaries of the Company;

        (xxiii) the sale or disposition (through farm out or otherwise) of any
interest in the PSC;

        (xxiv)  any amendment to or modification of the PSC, except as provided
in Section 3.16 of the Stock Purchase Agreement; and

        (xxv)   any amendment to or modification of any material contracts of
the Company.

     (c) Approval of the Annual Budget by the Board of Directors shall
constitute authorization for the Managing Director, and he shall be obligated,
to carry out and undertake on behalf of the Company and SOCO Mongolia the work
and expenditures provided for in such Approved Annual Budget and it shall not be
necessary for the Managing Director to obtain any further authority from the
Board of Directors for expenditures thereunder.

  Section 4.5 QUORUM; ACTION AND VOTING.

     (a) A quorum of the Board of Directors shall exist only if at least three
of the Directors are present.

                                       16
<PAGE>
 
     (b) A Major Decision shall require the approval of Directors holding more
than 55% of all votes entitled to be cast by all Directors (whether present or
not) at a duly called meeting at which a quorum is present. All other action to
be taken by the Board of Directors shall require the approval of Directors
holding more than 50% of all votes entitled to be cast by all Directors (whether
present or not) at such meeting.

     (c) The Directors appointed and elected by each Designating Stockholder
shall vote together as a single group and the aggregate number of votes each
such Director group may cast shall be equal to one vote for each Share owned by
such Designating Stockholder.

     (d) In lieu of a meeting, a unanimous written consent executed by all
Directors may be prepared and executed in accordance with the applicable
sections of the General Corporation law of Delaware, the Bylaws and, if
applicable, Section 4.5(e) of this Agreement, and any such written consent shall
have the same force and effect as a unanimous affirmative vote by the Board of
Directors taken at a meeting duly convened and held.

     (e) A Director may grant a Director's Proxy to another Director or any
adviser. Any such Director who has granted a Director's Proxy shall be deemed
present at a meeting for quorum purposes if his Director's Proxy Holder attends
such meeting. A Director's Proxy may be irrevocable, shall be in writing, shall
be dated and shall not confer any power on the Director's Proxy Holder to make a
decision on behalf of a Director to approve any Major Decision unless the
Director's Proxy is specifically given to make such Major Decision with respect
to the specific event giving rise to such Major Decision. In addition, the
Director's Proxy may provide that the Director's Proxy Holder may execute
written consents in the name of and on the behalf of the Director granting such
Director's Proxy, and any such written consent executed by such Director's Proxy
Holder will be treated as if the Director granting such Director's Proxy had
executed such written consent. Also, the Director's Proxy may provide that
delivery of notices of Directors' meetings and any other notices required or
permitted by law to be given to the Director granting the Director's Proxy will
be sufficient if given to the Director's Proxy Holder. The Director granting any
Director's Proxy, however, shall be responsible for all decisions made and
actions taken by the Director's Proxy Holder in the exercise of such Director's
Proxy to the same extent as he would be responsible if he had participated in
the decision or had taken the action himself.

  SECTION 4.6 APPROVAL OF ANNUAL BUDGET. By August 1 of each Fiscal Year, the
Managing Director shall prepare and deliver to the Board of Directors a proposed
Annual Budget for the business of the Company for the next Fiscal Year. When
approved pursuant to Section 4.5, such Annual Budget shall be an "Approved
Annual Budget". Annual Budgets shall be submitted for Fiscal Years in the
format, form and content approved by the Board of Directors from time to time.

                                       17
<PAGE>
 
  SECTION 4.7 REMOVAL OF MANAGING DIRECTOR OR ANY OTHER OFFICER.   Upon the
occurrence of wilful misconduct, gross negligence or breach of duty of loyalty
that has had a continuing material and adverse effect on the Company, either the
Managing Director or any officer may be removed from his position as such of the
Company (but in any such case he shall be and remain as a Director). Such
removal shall be made only by an action taken by the unanimous agreement of the
Stockholders who did not appoint such Director.  The Managing Director may also
be removed at any time without the need to show cause by an action approved by
all of the Stockholders who did not appoint such Director.  If the Managing
Director is removed, and if following such removal, the Board of Directors is
unable by unanimous agreement to select a successor Managing Director of the
Company, then the entirety of the business and affairs of the Company, including
both Major Decisions and the day-to-day operations of the Company, shall be
governed and managed by the Board of Directors as a whole, with the same
requirements for a quorum and action as are set forth in Section 4.5 of this
Agreement.

  SECTION 4.8  INDEMNITY OF DIRECTORS AND OFFICERS. In addition to the
indemnification provisions contained in the Bylaws, the Directors and the
officers, individually and collectively, shall be indemnified and held harmless
by the Company (but not by any Stockholder) from and against any and all claims,
demands, liabilities, costs, damages, and causes of action of any nature
whatsoever arising out of or incidental to the management of the Company affairs
by the Board of Directors and the officers in accordance with the terms of this
Agreement and in furtherance of the objectives and purposes of the Company;
provided, however, that a Director or an officer shall not be indemnified if,
upon final adjudication, it is determined that such Director or officer has
engaged in wilful misconduct, gross negligence, or breach of duty of loyalty
that has had a material adverse effect on the Company.

     The indemnification authorized by this Section 4.8 shall include payment of
reasonable attorneys' fees and other expenses as incurred in connection with any
settlement or any finally adjudicated legal proceeding.

     The indemnification rights contained in this Section 4.8 shall be
cumulative of, and in addition to, any and all rights, remedies, and recourse to
which the Directors and the officers shall be entitled under the Bylaws, at law,
or in equity. Indemnifications hereunder shall be made from assets of the
Company and no Stockholder shall be personally liable to any indemnitee.

                                   ARTICLE V
                                        
                        BOOKS AND RECORDS AND ACCOUNTING
                                        
  SECTION 5.1  ACCOUNTING METHOD.  The Company shall keep proper and complete
books of account, in accordance with generally accepted accounting 

                                       18
<PAGE>
 
principles, on the accrual method of accounting consistently applied at all
times during its existence.

     SECTION 5.2  DELIVERY OF STATEMENTS.

     (a) Notwithstanding any other provision of this Agreement that may appear
to be to the contrary, the Company will promptly furnish to each Stockholder
from time to time upon request such information regarding the business and
affairs and financial condition of the Company and its subsidiaries as the
Stockholder may reasonably request.

     (b) The Company will also furnish to each Stockholder promptly after
becoming available and in any event within 90 days after the close of each
Fiscal Year, the audited consolidated balance sheets of the Company and its
subsidiaries as at the end of such year, the audited consolidated statements of
reconciliation of capital accounts of the Company and its subsidiaries for such
year, and the audited consolidated statement of changes in financial position of
the Company and its subsidiaries for such year, setting forth in each case for
Fiscal Years ending after December 31, 1994 in comparative form the
corresponding figures for the preceding Fiscal Year, accompanied by the related
report of the independent public accountants of the Company which report shall
be to the effect that such statements have been prepared in accordance with
generally accepted accounting principles consistently followed throughout the
period indicated except for such changes in such principles with which the
independent public accountants shall have concurred.

     (c) The Company will also furnish to each Stockholder promptly after
becoming available and in any event within 60 days after the end of each
quarterly period in each Fiscal Year, the unaudited consolidated balance sheets
of the Company and its subsidiaries as at the end of such quarter, the unaudited
consolidated statement of changes in financial position of the Company and its
subsidiaries as of such quarter, the unaudited consolidated statements of profit
and loss of the Company and its subsidiaries for such quarter and for the
quarter from the beginning of the Fiscal Year to the close of such quarter, and
the unaudited consolidated statement of reconciliation of capital accounts of
the Company and its subsidiaries for such quarter and for the period from the
beginning of the Fiscal Year to the close of such quarter, setting forth in each
case for Fiscal Years ending after December 31, 1994 in comparative form the
corresponding figures for the corresponding period of the preceding Fiscal Year.

     (d) In addition, the Managing Director will also furnish each Stockholder
with a monthly management report in the form and content from time to time
approved by the Board of Directors, with such monthly management report to be
delivered not later than the 20th day of the month following the month covered
by such report.

                                       19
<PAGE>
 
   SECTION 5.3  RIGHT TO EXAMINE BOOKS AND RECORDS. At any time and from time
to time while the Company continues and until its complete liquidation (but only
after written notice to the Managing Director and only during normal business
hours), each Stockholder or its agent may fully examine and audit the Company's
and/or SOCO Mongolia's books, records, accounts and assets, including bank
balances, and to this end may cause such examination or audit to be made by any
certified public accountant employed by such Stockholder at such Stockholder's
expense. The Parties shall use their reasonable best efforts to coordinate any
such examination so as to minimize expense and disruption.  Such examination
shall be conducted in accordance with the provisions of Section 7 of Article VI
of the Bylaws.

  SECTION 5.4 FISCAL YEAR. The fiscal year ("Fiscal Year") of the Company shall
end December 31.

                                   ARTICLE VI
                                        
                     FINANCING THE EXPENSES OF THE COMPANY
                                        
  SECTION 6.1 APPROVED ANNUAL BUDGETS.  In accordance with the provisions of
Section 4.6, the Managing Director will prepare and deliver to the Board of
Directors for its review and approval an Annual Budget for each Fiscal Year.
When an Annual Budget is approved pursuant to Section 4.5, the Stockholders
promise, covenant and agree to promptly pay all Expenses incurred pursuant to an
Approved Annual Budget in the manner set forth in Section 6.2.

  SECTION 6.2  MANDATORY LOANS.

     (a)   Each loan made to the Company by a Stockholder pursuant to this
Section 6.2 is referred to in this Agreement as a "Mandatory Loan".

     (b)   If, at any time or from time to time on or after the date hereof and
prior to the conclusion of petroleum operations in a Contract Area (but not
after such date), funds are needed by the Company in order to pay or discharge
any Expenses, then upon the election of the Managing Director (as evidenced by
the Mandatory Loan Notice), the Stockholders shall be obligated (the "Mandatory
Loan Obligation") to loan to the Company, pro rata, in accordance with the ratio
from time to time of their respective Shares, that amount (a "Mandatory Loan
Amount") which is the amount necessary to pay such Expense.  The Managing
Director shall send a Notice (a "Mandatory Loan Notice") to each Stockholder
identifying the Expenses which will be paid with the proceeds of such Mandatory
Loan and stating the due date for each such Expense. The Mandatory Loan for each
such Expense shall be advanced to the Company in good funds in such account as
the Managing Director may designate on or before that date (a "Mandatory Loan
Date") which is the later of (i) five (5) days prior to the due date for such
Expense as specified in the Mandatory Loan Notice or (ii) five 

                                       20
<PAGE>
 
(5) business days after receipt by each Stockholder of the related Mandatory
Loan Notice. No Stockholder shall ever be obligated to make a Mandatory Loan to
the Company for any purpose other than to permit the Company to pay Expenses.

  (c)   Upon the receipt of the funds constituting a Mandatory Loan under
this Section 6.2, the Company shall promptly record in its books the amount of
the Mandatory Loan so loaned by such Stockholder to the Company. Each Mandatory
Loan shall bear interest at the Loan Rate (or at such other rate as may be set
forth in the applicable Mandatory Loan Note referred to below) with effect from
the Mandatory Loan Date until repayment.  Each Mandatory Loan shall constitute
and be a debt of the Company maturing December 31, 2009, ("Maturity Date") and
payable prior to maturity only from the funds and at the level of priority
established for payment of Mandatory Loans in Section 6.4. No Stockholder or its
Affiliates shall ever have any personal liability (joint, several or joint and
several) for repayment of all or any portion of any Mandatory Loan, whether
principal thereof or interest thereon.

  (d)   The Mandatory Loan Obligation of each Stockholder shall expire and
terminate on the Maturity Date; provided, however, that the occurrence of the
Maturity Date shall not discharge any Mandatory Loan Obligation Default that may
have occurred prior to the Maturity Date.

  (e)   At any time and from time to time any Stockholder may request the
Company to issue it with one or more Mandatory Loan Notes in respect of all of
its Mandatory Loans to that date. In the absence of any such request, the
Company shall issue such Mandatory Loans to the Stockholders no less frequently
than once a calendar quarter.

  SECTION 6.3  FAILURE TO MAKE MANDATORY LOANS.

  (a)   In the event of a default by a Stockholder in advancing a Mandatory Loan
on or before the applicable Mandatory Loan Date (a "Mandatory Loan Obligation
Default"), upon the election of the Managing Director, the Company shall have
and may pursue, subject to the further provisions of this Section 6.3, any and
all remedies available to the Company under this Agreement, at law or in equity,
all of which remedies shall be cumulative and non-exclusive. Notwithstanding
anything to the contrary contained in this Agreement, but subject to the further
provisions of this Section 6.3, the decisions as to whether the Company will
pursue available remedies on account of a Mandatory Loan Obligation Default and
as to which remedies the Company will pursue and the manner and method of
pursuit of such remedies (including any settlement of claims against a
Stockholder on account of such Mandatory Loan Obligation Default) shall be
vested solely in the Managing Director (or the Board of Directors in the event
that the Stockholder who appointed the Managing Director is in default and
further references in this Section 6.3 to the Managing Director shall, in such
circumstances, mean the Board of Directors).

                                       21
<PAGE>
 
  (b)   Immediately upon the occurrence of a Mandatory Loan Obligation Default,
and continuing thereafter unless and until such Mandatory Loan Obligation
Default is cured and remedied by or on behalf of such Stockholder, (i) such
Stockholder shall have no rights, powers or authority as a Stockholder under
this Agreement, except for those rights, powers or authority which pursuant to
the Delaware General Corporation law (the "ACT") or other applicable law may not
be waived, negated or relinquished by a Stockholder in a Delaware close
corporation (and such Stockholder shall be deemed to have fully waived, negated
and relinquished all rights, powers and authority otherwise available to a
Stockholder as a Stockholder hereunder to the fullest extent permitted by the
Act and other applicable law), (ii) the person or persons appointed to the Board
of Directors by such Stockholder shall not have the right, power or authority to
vote on or consent to any action taken by the Board of Directors; (iii) such
Stockholder shall remain bound and obligated to perform and observe all
provisions of this Agreement providing for performance or observance thereof by
such Stockholder; and (iv) the Company shall not pay to such Stockholder any
payments of interest or principal on outstanding Mandatory Loans or Advancing
Stockholder Loans or any distributions of dividends on its Shares.

  (c)   If a Mandatory Loan Obligation Default occurs, then the other
Stockholders (the "Non-defaulting Stockholders") shall have the obligation,
within three business days after the relevant Mandatory Loan Date(s), to make
advances to the Company in an aggregate amount equal to the amount of the
Mandatory Loan as to which such Mandatory Loan Obligation Default occurred, pro
rata, in accordance with the ratio from time to time of their respective Shares
(or in such other proportions as the Non-defaulting Stockholders may between
themselves determine).  Any such advance by a Non-defaulting Stockholder (an
"Advancing Stockholder") shall constitute a loan (an "Advancing Stockholder
Loan") from the date made ("Advance Date") by such Advancing Stockholder to the
Company, which loan shall be evidenced by a loan note in a form reasonably
satisfactory to the Advancing Stockholder and the Managing Director (an
"Advancing Stockholder Loan Note") and be payable on the terms and provisions
contained in this Section 6.3(c) and Section 6.4. Upon the receipt of the funds
constituting an Advancing Stockholder Loan, the Company shall promptly issue an
Advancing Stockholder Loan Note to the Advancing Stockholder in the amount of
the Advancing Stockholder Loan so loaned by the Advancing Stockholder to the
Company. The making of an Advancing Stockholder Loan by an Advancing Stockholder
will not in any manner be deemed a satisfaction or cure of the Mandatory Loan
Obligation Default nor in any manner prohibit or limit any remedies available to
the Company on account of such Mandatory Loan Obligation Default.

  An Advancing Stockholder Loan shall bear interest on the principal balance
thereof at the Default Rate from the Advance Date therefor through the date such
Advancing Stockholder Loan (principal and accrued interest) is fully repaid to
the Advancing Stockholder by the Company. An Advancing Stockholder Loan shall
constitute and be a debt of the Company payable by the Company only from time to
time from the funds 

                                       22
<PAGE>
 
and at the level of priority established for payment of Advancing Stockholder
Loans in Section 6.4, and no Stockholder or its Affiliates shall ever have any
personal liability (joint, several or joint and several) for repayment of all or
any portion of such Advancing Stockholder Loan, whether principal thereof or
interest thereon.

  (d)   A defaulting Stockholder shall have a period of 60 days after receipt of
Notice of default from the Managing Director within which to cure a default by
paying in full to the Company all amounts for which it is in default, plus
interest at the Default Rate (including all Advancing Stockholder Loans plus
interest thereon which arose as a result of its default). Failure to cure a
default in such manner shall result in the application of sub-paragraph (e)
below.

  (e)   In addition to all remedies available to the Company at law or in equity
on account of a Mandatory Loan Obligation Default, upon the election of the
Managing Director, and following the period of 60 days referred to in sub-
paragraph (d) above, the Company may elect by written notice to such Stockholder
to cancel and terminate the Shares of such Stockholder, in which event (i) the
number of Shares of such Stockholder will be reduced to zero (0), (ii) any
Mandatory Loans or Advancing Stockholder Loans (outstanding principal and
accrued and unpaid interest) previously made by such Stockholder to the Company
will be deemed canceled and discharged, (iii) the right of such Stockholder to
receive distributions and dividends and participate in Company affairs will be
terminated, and (iv) such Stockholder will cease to be a Stockholder for any
purpose under this Agreement. Cancellation and termination of the Shares and
Mandatory Loans and Advancing Stockholder Loans of such Stockholder as above
provided will not in any manner be construed as liquidated damages paid to the
Company for a Mandatory Loan Obligation Default and, upon the election of the
Managing Director, the Company will remain entitled to pursue any and all other
remedies available to the Company hereunder, or at law or in equity, with
respect to such Mandatory Loan Obligation Default.

  (f)   In the event of cancellation and termination of the Shares of the
Stockholder in accordance with the foregoing, such Stockholder will be obligated
to return to the Company the stock certificate evidencing its Shares and all
Mandatory Loan Notes and Advancing Stockholder Loan Notes evidencing outstanding
Mandatory Loans and Advancing Stockholder Loans (marked to indicate cancellation
and discharge) and also, upon the request of the Company, to execute such
instruments as may be necessary or appropriate to confirm such cancellation and
termination of its Shares and cancellation and discharge of any outstanding
Mandatory Loans and Advancing Stockholder Loans and Mandatory Loan Notes and
Advancing Stockholder Loan Notes. If such Stockholder fails to execute such
instruments, then the Company (acting through the Managing Director) may
execute, acknowledge and deliver such instruments for, on behalf of, and in the
stead of such Stockholder and such execution, acknowledgment and delivery by the
Company shall be for all purposes as effective against and binding upon such
Stockholder as though such execution, acknowledgment and delivery had 

                                       23
<PAGE>
 
been by such Stockholder. Each Stockholder does hereby irrevocably constitute
and appoint the Company as the true and lawful attorney in fact of such
Stockholder and its successors and assigns, in the name, place and stead of such
Stockholder or its successors or assigns, as the case may be, to execute,
acknowledge and deliver such instruments as may be required to be executed by or
on behalf of such Stockholder under this Section 6.3(f). It is expressly
understood, intended and agreed by each Stockholder, for itself and its
successors and assigns, that the grant of the power of attorney to the Company
pursuant to this Section 6.3(f) is coupled with an interest, is irrevocable, and
shall survive the dissolution or other liquidation or termination of such
Stockholder, its successors or assigns, as applicable, or the transfer of the
Shares of such Stockholder in the Company, or the dissolution of the Company.

  (g)   Notwithstanding the generality of the provisions of Section 6.3(a), if
upon the occurrence of a Mandatory Loan Obligation Default (i) the Company
exercises its right under Section 6.3(e) to cancel and terminate the Shares and
Mandatory Loans and Advancing Stockholder Loans of such Stockholder and (ii)
upon Notice to such Stockholder of such exercise, such Stockholder shall, on
demand, (A) fully comply with its obligations under such Section 6.3(f) and (B)
without limitation, deliver to the Company a written release, reasonably
satisfactory to the Company, by which such Stockholder, for itself, its
successors, legal representatives and assigns, forever releases, acquits and
relinquishes any right, title or interest whatsoever in its Shares, Mandatory
Loans and Advancing Stockholder Loans and any right or cause of action
whatsoever, at law or in equity, to contest, oppose, seek to have declared
unenforceable, set aside or rescind the right of the Company under Section
6.3(e) to cancel and terminate such Stockholder's Shares, Mandatory Loans and
Advancing Stockholder Loans, then after that time (the "Relevant Time") (i) the
Managing Director shall have no further right to elect to cause the Company to
call for Mandatory Loans with a Mandatory Loan Date falling on or after the
Relevant Time to the Company from such Stockholder under Section 6.2 and the
Maturity Date shall be deemed to have occurred in respect of all Mandatory Loans
outstanding at the Relevant Time (but the deemed occurrence of the Maturity Date
shall not discharge any Mandatory Loan Obligation Default that may have occurred
prior to the Maturity Date) and (ii) the Company shall not be entitled to
recover damages as a consequence of such Mandatory Loan Obligation Default in
excess of the sum of (A) the Mandatory Loan Amount as to which such Mandatory
Loan Obligation Default occurred, (B) prejudgment interest on such Mandatory
Loan Amount from the applicable Mandatory Loan Date at the Default Rate and (C)
all reasonable costs of collection thereof (including, without limitation, costs
of court and reasonable attorneys' fees). Nothing in this Section 6.3(g) shall
limit the right of the Company to recover damages (as limited by this Section
6.3(g), if applicable) for each Mandatory Loan Obligation Default.

  (h)   The Company shall have and is hereby granted by each Stockholder a
security interest in such Stockholder's Shares and in any Mandatory Loan Notes
and Advancing 

                                       24
<PAGE>
 
Stockholder Loan Notes issued by the Company to such Stockholder. In order to
enforce the rights of the Company under this Section 6.3, but without prejudice
to any other remedy that may be available to the Company in the event of a
Mandatory Loan Obligation Default, the Company shall have all the rights and
remedies available to a secured party under the Uniform Commercial Code as
adopted in the State of Delaware.

  (i)   Each Stockholder acknowledges that it is familiar with the terms of the
PSC; that the Company is dependent on each Stockholder performing its Mandatory
Loan Obligation in order to permit the Company and/or SOCO Mongolia to meet its
obligations under the PSC, to preserve and protect the Company's assets and to
enable the Company to make such expenditures and investments as shall be
necessary or appropriate to achieve its purposes and objectives; that, as a
consequence of the foregoing, a default by a Stockholder in the performance of
its Mandatory Loan Obligation could have grave consequences to the Company,
including, without limitation, the Company's and/or SOCO Mongolia's loss of its
interest in the Contract Area; and that the potential for such grave
consequences to the Company justify and make reasonable all of the remedies
available to the Company under this Section 6.3 in the event of a Mandatory Loan
Obligation Default.

  SECTION 6.4 REPAYMENT OF MANDATORY LOANS AND ADVANCING STOCKHOLDER LOANS.  The
Parties agree that the gross receipts of the Company for any period shall be
applied as promptly as practicable to the following (without duplication):

     (a) first, to the payment of Expenses incurred in such period;

     (b) then, to the establishment or restoration of such working capital
reserves as the Board of Directors may establish from time to time;

     (c) then, to the repayment or prepayment of Advancing Stockholder Loans (if
any) and interest thereon owed by the Company in the order such loans were made,
pro rata, on the basis of the relative amounts (principal and accrued interest)
thereof;

     (d) then, to the repayment or prepayment of Mandatory Loans (if any) and
interest thereon owed by the Company in the order such loans were made, pro
rata, on the basis of the relative amounts (principal and accrued interest)
thereof; and

     (e) finally, to the Stockholders, pro rata, on the basis of their
respective Share ownership.

                                       25
<PAGE>
 
                                  ARTICLE VII
                                        
                                  ARBITRATION
                                        
  SECTION 7.1  OBLIGATION TO ARBITRATE.  The Parties each agree that any
material controversy or claim (a "Controversy" or "Controversies") as between or
among the Stockholders and/or the Company (the "Covered Parties") arising out of
or relating to this Agreement, the Stock Purchase Agreement or any other
document or instrument executed pursuant to or made effective as a result of the
foregoing agreements (collectively the "Governing Agreements"), or the breach
thereof by any of the Covered Parties, shall be resolved or settled by
arbitration in accordance with and governed by the provisions of the Texas
General Arbitration Act, Articles 224 et. seq. of the Revised Civil Statutes of
Texas, as such statutes may be amended or supplemented from time to time and any
successor statutes (the "Arbitration Act"), except as the matters or scope of
the provisions of such Arbitration Act are limited or modified by the provisions
hereof. The arbitration proceedings shall be conducted according to the
Commercial Arbitration Rules of the American Arbitration Association (the
"Rules") except to the extent provided in this Agreement and except to the
extent the Arbitration Act expressly requires a procedure or provides a remedy
that cannot be modified or waived by agreement. If, for any reason, the
Arbitration Act is held to be inapplicable to any such controversy or claim, the
Federal Arbitration Act, 9 U.S.C. (S)1 et. seq., as such act may be amended or
supplemented from time to time and any successor statute, shall apply except as
limited or modified by the terms hereof; provided that the provisions of the
Texas General Arbitration Act also apply to the extent that they are not in
direct conflict with the Federal Arbitration Act. In such case, the term
"Arbitration Act" as used herein shall be deemed to consist of the Federal
Arbitration Act and such non-conflicting provisions of the Texas Arbitration
Act. No claim, demand, challenge or cause of action may be asserted, whether in
arbitration or in judicial proceedings, if the Governing Agreements require such
claim, demand or challenge to be raised within a certain period and such claims
have not been raised within such period. In addition, the arbitration provisions
hereof shall not, unless the Parties otherwise consent in writing at the time
the Controversy arises, apply with respect to an action to enforce the
obligations of a Stockholder to reimburse another Stockholder for payment of
amounts advanced on its behalf or the exercise of any remedies for a failure to
pay such reimbursable amounts or to make a Mandatory Loan or an Advancing
Stockholder Loan and the consequences of a failure to make a Mandatory Loan or
an Advancing Stockholder Loan, all as provided in Article VI.

  SECTION 7.2 INITIATION OF ARBITRATION PROCEEDINGS. Any Stockholder or the
Company may initiate arbitration proceedings as provided in the Rules; for the
purposes of determining whether arbitration proceedings have been timely
instituted pursuant to the terms hereof, a Party shall be deemed to have
initiated arbitration on the day it sends notice (regardless of whether such
notice is deemed given pursuant to Section 12.2 hereof) of such initiation to
the other Party.  A Party may, pending the 

                                       26
<PAGE>
 
appointment of arbitrator(s) seek and obtain any preliminary relief available at
law or in equity for the purpose of preserving the status quo pending the
outcome of arbitration or preserving the Company's close corporation status as
provided in Section 9.1, although the Managing Director, officers and Directors
of the Company shall continue to exercise such powers and perform such
responsibilities as are entrusted to them. Once arbitrators are appointed, such
arbitrators shall have the power to issue temporary orders and grant preliminary
relief pending the outcome of arbitration.

  SECTION 7.3  SELECTION AND QUALIFICATIONS OF ARBITRATORS.

     (a) The Parties may agree upon one arbitrator, but in the event that they
cannot so agree within eight business days after a Party has received notice
that arbitration proceedings have been instituted by another Party, there shall
be three arbitrators, one named in writing by each of the Stockholders within
ten business days after demand for arbitration is made (or if there are less
than three Stockholders, then one named by each Stockholder, and a third to be
chosen by the two so named within ten days after the appointment of the second
arbitrator). If any Party (or the two arbitrators) should refuse or neglect to
join in the appointment of the arbitrators, they (or the third arbitrator) shall
be appointed in accordance with the provisions of the Rules.

     (b) Each arbitrator appointed hereunder shall be "neutral" within the
meaning of the Rules and shall have had arbitration experience in a minimum of
five years with respect to resolving disputes of the nature submitted in each
instance hereunder.

  SECTION 7.4  PROCEDURAL RULES. To the extent not modified hereby and not
otherwise required by the Arbitration Act, the Rules shall apply to the conduct
of the arbitration, including (without limitation) the necessity of maintaining
a stenographic record, representation by counsel, order or proceedings,
rendering decisions by majority vote, inspection and investigations, matters of
evidence, closing and opening of hearings, extensions of time, time, scope and
form of award and so forth. However, hearings shall be held on consecutive days
to the extent practicable and, in any event, shall not be adjourned or postponed
for more than two consecutive week periods at any given time or from time to
time, unless the parties otherwise agree. Moreover, although the arbitrators
generally shall have such discretion with respect to discovery as is provided in
the Arbitration Act and the Rules, the Parties intend that discovery be
liberally permitted, and so the arbitrators shall provide for a schedule of
discovery prior to the hearing and issue orders for discovery upon any Party's
reasonable request.

  SECTION 7.5 PROCEEDINGS. All arbitration hearings conducted hereunder shall
take place in Houston, Harris County, Texas; however, all judicial proceedings
to enforce any of the provisions hereof shall be in accordance with the
provisions of Section 12.13.  Such hearings shall be at the time and place
within said city as is selected by 

                                       27
<PAGE>
 
the arbitrators. Notice shall be given and the hearing conducted in accordance
with, and the arbitrators shall have the powers described in, the provisions of
Articles 228, 229 and 230 of the Arbitration Act as supplemented by the Rules.
At the hearing any relevant evidence may be presented by any Party, and the
formal rules of evidence applicable to judicial proceedings shall not govern.
Evidence may be admitted or excluded in the sole discretion of the arbitrators.

  SECTION 7.6 AWARD. If there is only one arbitrator, his decision shall be
binding and conclusive on the Parties. If there are three arbitrators, the
decision of any two shall be binding and conclusive. The arbitrators shall hear
and determine the matter and shall execute and acknowledge their award in
writing and deliver a copy thereof to each of the Parties by registered or
certified mail and by fax. The award of the arbitrator(s) shall be reached as
provided in the Arbitration Act and the Rules. Upon the request of a Party, the
arbitrator(s) shall set forth the reasons for his (their) decision in writing at
the time of the rendering of the award.  A judgment confirming, vacating,
modifying or correcting the award of the arbitrators may be rendered by any
court having jurisdiction in accordance with the provisions of the Arbitration
Act; provided, that in addition to grounds provided for limiting, modifying or
vacating an award in the Arbitration Act, a court may limit, modify or vacate an
award if it was rendered upon the basis, in whole or in material part, upon a
clearly erroneous conclusion of law.

  SECTION 7.7 COSTS AND EXPENSES. The costs and expenses of arbitration,
including the fees of the arbitrators, shall be borne by the losing Party or
Parties or in such proportions among the Parties to the Controversy as the
arbitrators shall determine according to the Rules.

  SECTION 7.8 TERMINATION OF ARBITRATION PROCEEDINGS.  If the arbitrators have
not delivered an award within 60 days (unless such period is extended by the
mutual agreement of the parties to the Controversy) of the initiation of the
arbitration proceedings with respect to a Controversy, the arbitration
proceeding may be terminated by any Party not predominantly (as among the
parties to the Controversy) at fault for delays that prevented the arbitration
proceedings from concluding with an award within such period, and such
determination of fault shall be made in preference to any other matter and at
the request of any Party by the arbitrators as expeditiously as possible. Upon
any such termination, the parties to the Controversy may seek such remedies as
may be available to them at law or in equity by judicial means or otherwise.

                                  ARTICLE VIII
                                        
                           INTERDEPENDENCE; REMEDIES
                                        
  SECTION 8.1  INTERDEPENDENCE. Corbin, BIP and SOCO each acknowledge and agree
that each of the others is and will be materially relying upon the full
performance by it 

                                       28
<PAGE>
 
of each of the covenants and agreements set forth in this Agreement in entering
into the covenants and agreements set forth herein and contemplated by this
Agreement and that without such covenants and agreements and the full
performance thereof by Corbin, BIP and/or SOCO, as the case may be, the other
Parties would not have entered into this Agreement. Corbin, BIP and SOCO are
intended third party beneficiaries of each other's obligations in favor of the
Company as set forth in this Agreement and, unless this Agreement provides for
the enforcement of such obligations by the Managing Director or the Board of
Directors, Corbin, BIP and SOCO agree that each of them may enforce such
obligations as if it were the direct obligee of such obligations.

  SECTION 8.2 REMEDIES. The rights of each Party created hereby are acknowledged
by each of the other Parties to be unique rights, the loss of which would be
impossible fully to compensate with monetary damages.  Consequently, each Party
hereto agrees that in the event of a breach or threatened breach of this
Agreement by another Party (the "Aggrieving Party"), any aggrieved party shall
be entitled to an injunction restraining the Aggrieving Party from said breach
or threatened breach, or an order or other court decree requiring specific
performance.  Nothing herein shall be construed as prohibiting any Party from
pursuing any other remedies available to it for such breach or threatened
breach, including the recovery of damages, subject, however, to the provisions
of Article VII and Section 12.13 of this Agreement.

                                   ARTICLE IX
                                        
                                  TERMINATION
                                        
  SECTION 9.1  TERMINATION OF CLOSE CORPORATION STATUS.  The Company's close
corporation status shall not be terminated without the unanimous approval of the
Stockholders.  Any amendment deleting or terminating the effectiveness of
Article V, Sections 1, 2 or 3 (the "Close Corporation Provisions") of the
Certificate of Incorporation shall be deemed to be a termination of such status,
and any proposal to delete or terminate such provisions shall, to be effective,
be approved by all of the Stockholders. Termination of such status shall be
deemed to be effective as of the date on which a certificate of amendment
deleting (or amending, as provided above) such Close Corporation Provisions is
filed with the Secretary of State of the State of Delaware, as provided in
Section 345 of the General Corporation law of the State of Delaware, as amended.
Prior to the termination of close corporation status in accordance with the
foregoing provisions, the Stockholders agree not to take any action that could
jeopardize the close corporation status of the Company. In addition to any other
remedies the Company and the Stockholders may have pursuant to the provisions of
the General Corporation law of the State of Delaware, the Company and the
Stockholders shall be entitled to seek the equitable remedies of injunction to
prevent a breach of such agreement and of specific performance to enforce such
agreement as provided in Section 8.2 (even prior to the initiation of
arbitration proceedings pursuant to Article VII of this Agreement).

                                       29
<PAGE>
 
  SECTION 9.2 DISSOLUTION. No Stockholder shall have the individual or separate
power to dissolve the Company. Any proposal to dissolve the Company must be
approved by the holders of all of the Shares.

  SECTION 9.3  TERMINATION OF THIS AGREEMENT.  This Agreement shall be deemed
terminated on the day that the close corporation status of the Company is
terminated as provided in Section 9.1 hereof or, if earlier to occur, the
dissolution of the Company, or if earlier to occur, if the holders of all of the
issued and outstanding Shares execute an instrument specifically terminating
this Agreement and deliver such instrument to the Company's principal office.

                                   ARTICLE X
                                        
                      TRANSFERS OF SHARES OF COMMON STOCK
                                        
  SECTION 10.1 NO UNPERMITTED TRANSFERS.  Except pursuant to the provisions of
Article VI or this Article X, no Stockholder may make a Transfer of all or any
portion of its Shares (or right thereto). Any Transfer in violation of Article
VI or this Article X shall be null and void as against the Company and the
Stockholders, except as otherwise provided by law.

  SECTION 10.2 PERMITTED TRANSFERS.

     (a) Without the consent of the other Stockholders, but only after 30 days
prior Notice thereof to the other Stockholders, and subject to the further
applicable provisions of this Article X, a Stockholder may from time to time
Transfer all or any of its Shares (i) to a Qualified Affiliate of the
Stockholder, or (ii) from such Qualified Affiliate back to the Stockholder or to
another Qualified Affiliate of the Stockholder, or (iii) in connection with a
bona fide reorganization, recapitalization, acquisition, or merger of the
Stockholder.

     (b) The effectiveness of any Transfer permitted in this Section 10.2 may be
conditioned, in the discretion of the Managing Director, upon receipt by the
Company of an opinion of legal counsel (the cost of which shall be borne by the
Transferor), to the effect that such transaction will not violate the Securities
Act of 1933 or any other applicable securities laws.

     (c) No Stockholder shall Transfer all or any portion of its Shares pursuant
to this Article X without first delivering to the Managing Director the
agreement of the proposed Transferee that it accepts such Shares subject to the
provisions of this Agreement as evidenced by the execution and delivery of an
Assumption Agreement.

                                       30
<PAGE>
 
     (d) The provisions of Section 10.3 below shall apply to any proposed
Transfer other than those Transfers permitted under Sections 10.2(a) or 10.4.

     (e) The effectiveness of any Transfer permitted in this Section 10.2 shall
be conditioned upon payment by the Proposed Transferor of all costs of the
Company reasonably incurred with respect to the Transfer.

  SECTION 10.3 RIGHT OF FIRST REFUSAL.

     (a) Except for Transfers permitted under Section 10.2(a) or 10.4 or Article
VI, no Stockholder shall make a Disposition of his Shares, unless such
Stockholder (a "Proposed Transferor") first, by Notice, offers to the other
Stockholders, pro rata, according to their relative ownership percentages
(determined without reference to the ownership percentage of the Proposed
Transferor), the right of first refusal to acquire such Shares on the same terms
that the Proposed Transferor offers or intends to offer such Shares to such
other person.

     (b) Each such offer to the other Stockholders shall be in writing, shall
state the terms and conditions of the Disposition the Proposed Transferor
desires to make (including, without limitation, the number of Shares, the
closing schedule agreed upon by the Proposed Transferor with a bona fide third
party proposed Transferee, or, if there is then no proposed Transferee, a
closing schedule proposed by the Proposed Transferor (which shall provide for a
closing not sooner than 60 days or later than 90 days after the date such offer
is submitted to the other Stockholders), shall state the Proposed Price, shall
state (if known) the person or persons to whom the Disposition contemplated by
such Proposed Transferor is to be made and shall give to such other Stockholders
a period of 20 business days after receipt of such Notice within which to elect
to consummate the proposed Disposition (which must be of the entirety of the
interest offered by the Proposed Transferor) upon such terms and conditions, and
within the closing schedule agreed upon by the Proposed Transferor with a bona
fide third party proposed Transferee or, if there is no proposed Transferee, as
proposed by the Proposed Transferor in accordance with the foregoing.

     (c) Each of the other Stockholders shall be deemed to have decided not to
acquire the interest under any such offer unless, within 20 business days from
the date of receipt of such offer, such other Stockholders give Notice to the
Proposed Transferor that such other Stockholders desire to acquire the entirety
of such interest. In the event that the other Stockholders do not elect to
accept the offer made as above provided then the Proposed Transferor may
consummate the proposed Disposition with any person or persons upon the terms
and conditions specified in such offer to the other Stockholders or on such
other terms and conditions as are not more favorable to such proposed Transferee
than such terms and conditions specified in such offer to the other
Stockholders.

                                       31
<PAGE>
 
     (d) Upon such consummation, the Proposed Transferor shall provide all other
Stockholders with copies of appropriate written evidence of the material terms
of the Disposition.  If the Proposed Transferor does not consummate the
originally proposed Disposition within 90 days after the termination of the
offering period to the other Stockholders, then all rights of the other
Stockholders in this Section 10.3 shall apply as though no written notice and
offer had been given.

  SECTION 10.4 PLEDGE.

     (a) After September 30, 1995, each Stockholder may Pledge its Shares as
security for the payment or performance of its obligations if but only if the
instrument creating the Pledge provides that the exercise of any power of sale
or enforcement in respect of the Shares and the exercise of any right, remedy or
power conferred on the secured party shall be subject to and strictly in
accordance with the provisions of this Agreement and such Pledge ranks in
priority at law and in equity in all instances after and subject to in every
respect to the security given by each Stockholder in accordance with the
provisions of this Agreement, including without limitation the provisions of
Article VI.

     (b) No Pledge purportedly made or given by a Stockholder pursuant to
Section 10.4(a) shall be effective or binding upon the Company or the other
Stockholders until the Managing Director has received a copy of an executed
instrument evidencing such Pledge and, if not evidenced thereby, an executed
instrument evidencing that the secured party accepts such Pledge subject to and
in accordance with the provisions of this Agreement.

                                   ARTICLE XI
                                        
                 CONFIDENTIAL INFORMATION/PUBLIC ANNOUNCEMENTS
                                        
  SECTION 11.1 CONFIDENTIAL INFORMATION.

     (a) All plans, programs, maps, records, reports, scientific and technical
data and any other information provided or delivered in connection with the
business of the Company shall be treated confidentially by all Parties in the
sense that their contents or effects shall not, subject to the requirements of
the PSC and this Agreement, be disclosed by any of the Parties to any third
party without the written consent of the other Parties except:

          (i) to the extent any such information is required to be furnished in
any legal proceedings under the PSC, this Agreement or the Stock Purchase
Agreement or is to be furnished because of any applicable legal or governmental
requirements;

                                       32
<PAGE>
 
          (ii)  to the extent such information is required to be disclosed in
accordance with the rules and regulations of any stock exchange to which such
Party is subject;

          (iii)  to the extent any such information is required to be disclosed
by any Party to any contractor, consultant, financial institution or other third
party in connection with the business of the Company provided such third party
executes an undertaking to keep such information confidential;

          (iv)  to an Affiliate of any of the Parties, provided such Affiliate
executes an undertaking to keep such information confidential;

          (v)  to the extent any such information becomes a matter of public
knowledge without disclosure by any of the Parties.

     (b) In the event that any Stockholder ceases to hold Shares, such
Stockholder shall nevertheless continue to hold all such data and information
confidential until such time as such data and information otherwise becomes
publicly available.

  SECTION 11.2 ANNOUNCEMENTS.

     (a) No press release or other public announcement concerning this Agreement
and/or the business of the Company shall be made by any of the Parties without
the contents thereof having been approved in advance by all of the Stockholders
except that any Party may without such approval make such announcements as may
be required pursuant to any applicable legal or governmental requirements or
pursuant to the rules and regulations of any stock exchange to which such Party
is subject.

     (b) A Stockholder shall be deemed to have approved an announcement proposed
by another Party if it has not responded to such other Party within three
business days of its receipt of the text of such proposed announcement.

                                  ARTICLE XII
                                        
                                 MISCELLANEOUS
                                        
  SECTION 12.1  BANKING; ELIGIBLE INVESTMENT; LOANS.

     (a) Except as provided in Section 12.1(b), all funds of the Company shall
be deposited in such depositories as shall have been approved by the Board of
Directors as acceptable depositories for funds of the Company.

                                       33
<PAGE>
 
     (b) The Managing Director shall have the power to invest funds of the
Company, in the Company's name and on its behalf, in Eligible Investments.

     (c) Without the prior unanimous written consent of all Stockholders, the
Company shall not make any loan or advance to any Stockholder, any Affiliate of
any Stockholder or any officer or employee thereof.

  SECTION 12.2  NOTICES.  Unless otherwise specified in this Agreement, all
notices, demands, requests, certificates or other communications which any of
the Parties may desire or be required to give hereunder (herein referred to
collectively as "Notices") shall be in writing and shall be given by (a)
personal delivery to the party to whom addressed, (b) first-class registered or
certified mail (return receipt requested), postage prepaid or (c) electronic
facsimile addressed to the Company and/or to the Stockholders at their
respective addresses and numbers set forth below, or at such other address and
number as may be designated by the Company or a Stockholder by like notice.
Notices sent by mail in compliance with the provisions of this Section 12.2
shall be deemed given on the fifth (5th) business day succeeding the day on
which they are placed in the mail. Notices sent by personal delivery or fax in
compliance with the provisions of this Section 12.2 shall be deemed given when
personally delivered to the addressee.

     SECTION 12.3 APPLICABLE LAW. This Agreement shall be governed by and
construed according to the General Corporation law of the State of Delaware, as
amended from time to time. In addition, to the extent that matters concerning
the governance or operations of the Company are not covered by this Agreement or
the Bylaws, the provisions of the General Corporation law of the State of
Delaware, as am ended from time to time, shall govern. Moreover, to the extent
that the provisions in such documents are inconsistent with the provisions of
the General Corporation law of the State of Delaware, as amended, the provisions
of such laws shall apply to the extent that they may not legally be superseded
or supplemented by this Agreement or the Bylaws.

  SECTION 12.4  SEVERABILITY.  If any provision of this Agreement shall be or be
determined to be unenforceable, void or otherwise contrary to law, such
condition shall in no manner operate to render any other provision of this
Agreement unenforceable, void or contrary to law, and this Agreement shall
continue to be operative and enforceable in accordance with the remaining terms
and provisions hereof.

  SECTION 12.5  SUCCESSORS AND ASSIGNS.

     (a) Except as otherwise provided in this Agreement, no rights, benefits or
obligations under this Agreement may be assigned by any Party without the prior
written consent of the other Parties hereto.

                                       34
<PAGE>
 
     (b) This Agreement shall be binding upon the Parties and their respective
permitted successors, assigns and Transferees, and shall inure to the benefit of
the Parties and, except as otherwise provided herein, to their respective
successors, assigns and Transferees.

  SECTION 12.6  ENTIRE AGREEMENT. This Agreement, the Certificate of
Incorporation and the Bylaws contain the entire agreement among the Parties (or
any of them) relating to the subject matter hereof. Amendments, variations,
modifications or changes herein may be effective and binding upon the Parties
by, and only by, setting forth the same in a document duly adopted and executed
in accordance with the terms of this Agreement by each Party, or his duly
authorized agent, and any alleged amendment, variation, modification or change
herein which is not so documented shall not be so effective as to any Party. In
the case of conflict between this Agreement and the Bylaws of the Company, then
as between the Stockholders this Agreement shall control.

  SECTION 12.7 CAPTIONS.  Captions and headings of articles, sections,
subsections, paragraphs or subparagraphs of this Agreement are solely for the
convenience of the Parties and are not a part of this Agreement, and shall not
be used for the interpretation or determination of the conditions of this
Agreement or any provision hereof.

  SECTION 12.8  NUMBER AND GENDER. Unless the context clearly indicates
otherwise, where appropriate in this Agreement, the singular shall include the
plural and the masculine shall include the feminine and the neuter, and vice
versa, to the extent necessary to give the terms defined and used in this
Agreement their proper meanings. In this Agreement, each Stockholder has been
generally referred to as though singular in number and neuter in gender
regardless of the actual number or gender of such Stockholder.

  SECTION 12.9  COUNTERPARTS. This Agreement is being signed in several
counterparts, each of which shall be deemed an original, and all of which shall
together constitute but one and the same Agreement.


  SECTION 12.10 EXHIBITS. Exhibits "A", "B", "C", D", "E", "F", "G", "H", and
"I" attached hereto are hereby incorporated herein and made a part hereof for
all purposes, and references herein thereto shall be deemed to include this
reference and incorporation.

  SECTION 12.11 U.S. DOLLARS. All amounts of money specified or referred to in
or contemplated by this Agreement shall mean U.S. Dollars.

  SECTION 12.12 LEGENDS.  All stock certificates issued by the Company will bear
legends set forth in Exhibit G.

                                       35
<PAGE>
 
  SECTION 12.13 SUBMISSION TO JURISDICTION. Each Party hereby irrevocably
submits to the jurisdiction of any state or federal court located in Houston,
Texas over any action, suit or proceeding (i) to enforce or defend any right
under this Agreement, or (ii) arising from any other relationship existing in
connection with this Agreement, and each Party hereby irrevocably agrees that
all claims in respect of any such action or proceeding may be heard or
determined in such state or federal court. Each Party hereby irrevocably waives,
to the fullest extent permitted by applicable law, the defense of an
inconvenient forum to the maintenance of any such action or proceeding or any
other substantive or procedural rights or remedies it may have with respect to
the maintenance of any such action or proceeding in any such forum. To the
fullest extent permitted by applicable law, each Party hereby agrees that a
final judgment, that is, a judgment as to which all rights of appeal have been
exhausted or the time for taking same has expired, in any such action or
proceeding, shall be conclusive and may be enforced in any other jurisdiction by
suit on the judgment or in any other manner provided by law.  Each Party agrees
not to institute any legal actions or proceedings against the other Parties or
any Affiliate thereof or any director, officer, shareholder, employee, attorney
or agent thereof, or any property of the other Parties or any such Affiliate,
arising out of or relating to this Agreement or any other document referred to
herein or entered into in connection with this Agreement, in any court other
than as hereinabove specified in this Section 12.13.

  SECTION 12.14 INDEMNIFICATION. Subject to any specific provisions in this
Agreement to the contrary, each of the Stockholders agrees to indemnify and hold
the other Stockholders harmless, to the extent of that Stockholder's percentage
ownership of Shares, from all liabilities which may arise directly or indirectly
under this Agreement.

  EXECUTED to be effective as of the date first written above.

[SEPARATE SIGNATURE PAGES ARE ATTACHED.]


                                     SOCO INTERNATIONAL, INC.,
                                     a Delaware corporation

Address for Notices:

SOCO International, Inc.             By:/s/ Edward T. Story, Jr.
1100 Louisiana                          Edward T. Story, Jr.
Suite 900                               President
Houston, Texas 77002
Attention:  Edward T. Story, Jr.

                                       36
<PAGE>
 
Facsimile: (713) 528-4015

with a copy to:

Woodard, Hall & Primm, P.C.
7000 Texas Commerce Tower
Houston, Texas 77002
Attention:  Mr. Ralph K. Miller, Jr.

Facsimile:  (713) 221-1802
                                           PT. BIP ENERGIMAS
                                           an Indonesian corporation

Address for Notices:

PT. BIP Energimas                          By:/s/Bambang Soerjantono Soerjo
Gedung Bank Niaga                             Bambang Soerjantono Soerjo
Lanti 4                                       President Director
Jl. M.H. Thamrin No. 55
Jakarta 10350
Republic of Indonesia
Attention:  Bambang Soeijantono Soeijo

Facsimile:  6221-230-1272

                                           CORBIN ASSOCIATES LIMITED
                                           a British Virgin Islands corporation

Address for Notices:

Corbin Associates Limited                  By:/s/Mark E. Horak
1301 McKinney                                 Mark E. Horak
Houston, Texas 77010                          Agent and Attorney-in-Fact

Attention:  Mark E. Horak
Facsimile: (713) 651-5246

                                       37
<PAGE>
 
                                           SOCO TAMTSAG MONGOLIA, INC.,
                                           a Delaware corporation

Address for Notices:

c/o SOCO International, Inc.               By: /s/ Edward T. Story, Jr.
1100 Louisiana                                 Edward T. Story, Jr.
Suite 900                                      Managing Director
Houston, Texas 77002
Attention:  Edward T. Story, Jr.

Facsimile:  (713) 528-4015

with a copy to:

Woodard, Hall & Primm, P.C.
7000 Texas Commerce Tower
Houston, Texas 77002
Attention:  Mr. Ralph K. Miller, Jr.

Facsimile:  713-221-1802

                                       38