Document:

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                                                                   EXHIBIT 10.18

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                              SHAREHOLDER AGREEMENT

                                   dated as of

                                October 15, 1997

                                      among

                         KHANTY MANSIYSK OIL CORPORATION

                                       and

                               KHANTY HOLDINGS LLC

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                                TABLE OF CONTENTS                           Page
                                                                            ----

                                    ARTICLE I
                                   Definitions

SECTION 1.1.      Definitions ..............................................   1

                                   ARTICLE II
                              Transfer Restrictions

SECTION 2.1.      Restrictions .............................................   4
SECTION 2.2.      Right of First Offer .....................................   5
SECTION 2.3.      Legend ...................................................   7
SECTION 2.4.      Compliance with Applicable Law, Etc. .....................   7
SECTION 2.5.      Effect ...................................................   8

                                   ARTICLE III
                                Preemptive Rights

SECTION 3.1.      Preemptive Rights ........................................   8

                                   ARTICLE IV
                                   Termination

SECTION 4.1.      Termination ..............................................   9

                                    ARTICLE V
                                  Miscellaneous

SECTION 5.1.      Effectiveness ............................................   9
SECTION 5.2.      Notices ..................................................   9
SECTION 5.3.      Interpretation ...........................................  11
SECTION 5.4.      Severability .............................................  11
SECTION 5.5.      Counterparts .............................................  11
SECTION 5.6.      Entire Agreement; No Third Party
                  Beneficiaries ............................................  11
SECTION 5.7.      Further Assurances .......................................  11
SECTION 5.8.      Governing Law; Equitable Remedies ........................  11
SECTION 5.9.      Amendments; Waivers ......................................  12
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SECTION 5.10.     Assignment ...............................................  12

                                       ii
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            SHAREHOLDER AGREEMENT, dated as of October 15, 1997, among Khanty
Mansiysk Oil Corporation (formerly known as Ural Petroleum Corporation), a
Delaware corporation ("KMOC") and Khanty Holdings LLC, a Delaware limited
liability company ("Holdings").

            WHEREAS KMOC and Holdings are parties to a Note and Warrant Purchase
Agreement, dated as of October 10, 1997, (the "Purchase Agreement"), pursuant to
which KMOC, in exchange for a $30 million dollar capital investment by Holdings,
has agreed to issue to Holdings one or more notes and 66,667 warrants to
purchase common stock, no par value, of KMOC at an exercise price of $450.00 per
share (the "Holdings Warrants"), all upon the terms and conditions set forth in
the Purchase Agreement; and

            WHEREAS the parties hereto wish to set forth their agreement
concerning certain matters relating to Holdings's ownership and disposition of
any shares of common stock, no par value, of KMOC acquired by Holdings pursuant
to its exercise of the Holdings Warrants or by any other means subsequent to the
Effective Date (collectively, the "Shares").

            NOW, THEREFORE, in consideration of the mutual agreements and
covenants contained herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:

                                    ARTICLE I
                                   Definitions

            SECTION 1.1. Definitions. As used in this Agreement, the following
terms shall have the following meanings:

            An "affiliate" of any Person means any other Person that directly or
indirectly through one or more intermediaries, controls, is controlled by, or is
under common control with, such first Person. For purposes of the definition of
affiliate, "control" has the meaning specified in Rule 12b-2 under the Exchange
Act as in effect on the date of this Agreement.

            "Applicable Law" shall mean, with respect to any Person, any
statute, law, regulation, ordinance, rule, judgment, rule of common law,
order, decree, award, Governmental Approval, concession, grant, franchise,
license, agreement, directive, guideline, policy, requirement, or other
governmental
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restriction or any similar form of decision of, or determination by, or any
interpretation or administration of any of the foregoing by, any Governmental
Authority, whether in effect as of the date hereof or thereafter and in each
case as amended, applicable to such Person or its subsidiaries or their
respective assets.

            A Person shall be deemed to "Beneficially Own", to have "Beneficial
Ownership" of, or to be "Beneficially Owning" any securities (which securities
shall also be deemed "Beneficially Owned" by such Person) that such Person is
deemed to "beneficially own" within the meaning of Rule 13d-3 under the Exchange
Act as in effect on the date of this Agreement.

            "Effective Date" means the date of the closing of the transactions
contemplated by the Purchase Agreement.

            "Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.

            "First Offer Price" has the meaning set forth in Section 2.2(a).

            "Governmental Approval" means any action, order, authorization,
consent, approval, license, lease, ruling, permit, tariff, rate, certification,
exemption, filing or registration by or with any Governmental Authority.

            "Governmental Authority" means any government or political
subdivision thereof, governmental department, commission, board, bureau, agency,
regulatory authority, instrumentality, judicial or administrative body having
jurisdiction over the matter or matters in question.

            A "group" has the meaning set forth in Section 13(d)(3) of the
Exchange Act as in effect on the date of this Agreement.

            "Holdings" has the meaning set forth in the recitals to this
Agreement.

            "Holdings Entities" means, collectively, Holdings and any Permitted
Transferee that holds Shares.

            "Holdings Warrants" has the meaning set forth in the recitals to
this Agreement.

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            "Initial Public Offering" means the closing of the initial public
offering of KMOC Common Stock pursuant to an effective registration statement on
Form S-1 (or any successor form other than a special purpose form) under the
Securities Act, as amended, and the rules and regulations of the Securities and
Exchange Commission promulgated thereunder, all as from time to time in effect.

            "KMOC" has the meaning set forth in the recitals to this Agreement.

            "KMOC Common Stock" means common stock, no par value, of KMOC.

            "KMOC Voting Securities" means KMOC Common Stock and any other
issued and outstanding securities of KMOC generally entitled to vote in the
election of directors of KMOC.

            "Note and Warrant Purchase Agreements" means the Note and Warrant
Purchase Agreements pursuant to which investors purchased from KMOC (x) notes in
an aggregate principal amount of $50,000,000 and (y) warrants to purchase KMOC
Common Stock at an exercise price of $450.00.

            "Notes" means the notes issued pursuant to the Note and Warrant
Purchase Agreements.

            "Offered Shares" has the meaning set forth in Section 2.2(a).

            "Permitted Transferee" has the meaning set forth in Section 2.1(c).

            "Person" means any individual, group, corporation, firm,
partnership, joint venture, trust, business association, organization,
governmental entity or other entity.

            "Proposed Issuance" has the meaning set forth in Section 3.1.

            "Public Offering" means any offering of stock registered under the
Securities Act.

            "Purchase Agreement" has the meaning set forth in the recitals to
this Agreement.

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            "Registration Rights Agreement" means the Registration Rights
Agreement, dated as of October 15, 1997, by and between KMOC and Holdings.

            "Response Period" has the meaning set forth in Section 2.2(b).

            "Securities Act" means the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder.

            "Shares" has the meaning set forth in the recitals to this
Agreement.

            "Transfer" has the meaning set forth in Section 2.1.

            "Transfer Notice" has the meaning set forth in Section 2.2(a).

            "Voting Agreement" means the Voting and Transfer Agreement, dated as
of October 15, 1997, between KMOC, Holdings, Waldo Securities S.A., an
international business company organized under the laws of the British Virgin
Islands and Brunswick Fitzgibbons Trust Company LLC, a Delaware limited
liability company.

            "Warrants" means the warrants issued pursuant to the Note and
Warrant Purchase Agreements.

            "Wholly Owned Subsidiary" means, with respect to any Person, as of
any date of determination, any other Person as to which such Person owns,
directly or indirectly, or otherwise controls, 100% of the voting shares or
other similar interests.

                                   ARTICLE II
                              Transfer Restrictions

            SECTION 2.1. Restrictions. During the period commencing from the
Effective Date and ending on the date of an Initial Public Offering, no Holdings
Entity shall, except in connection with (i) a registered Public Offering
pursuant to the Registration Rights Agreement or (ii) tag-along rights or
drag-along rights pursuant to Articles VII and VIII of the Voting Agreement,
sell, pledge, assign, grant a participation interest in. encumber or otherwise
transfer or dispose of any Shares to any other Person, whether directly,
indirectly, voluntari-

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ly, involuntarily, by operation of law, pursuant to judicial process or
otherwise (a "Transfer") without the prior written consent of KMOC, which shall
not be unreasonably withheld, except in accordance with one of the following:

            (a) subject to compliance with the provisions of Section 2.2.
pursuant to a sale to any one Person or group in an amount less than 5% of the
outstanding securities of any class of KMOC; provided, however, that the
aggregate of such sales made by the Holdings Entities as a group in any one year
shall not exceed 10% of the outstanding securities of any class of KMOC;

            (b) pursuant to a merger, consolidation or other business
combination involving Holdings, where Holdings is not the surviving entity, or a
sale of all or substantially all of Holdings's assets; provided, however, that
the surviving or purchasing entity agrees to be bound by the terms of this
Agreement and the Voting Agreement; or

            (c) pursuant to a Transfer of Shares by Holdings to a Wholly Owned
Subsidiary, from a Wholly Owned Subsidiary of Holdings to Holdings or between
Wholly Owned Subsidiaries of Holdings (any such transferee shall be referred to
herein as a "Permitted Transferee"). provided that in the case of any such
Transfer, Holdings shall have provided KMOC with written notice of such proposed
Transfer at least 15 days prior to consummating such Transfer stating the name
and address of the Permitted Transferee, the relationship between Holdings and
the Permitted Transferee, and the Permitted Transferee shall have executed a
copy of this Agreement as a shareholder of KMOC. If any Permitted Transferee to
whom Shares have been Transferred pursuant to this Section 2.1 by Holdings
ceases to be a Permitted Transferee, such Shares shall be Transferred back to
Holdings immediately prior to the time such Person ceases to be a Permitted
Transferee of Holdings. Holdings and such Permitted Transferee shall be jointly
and severally liable for any breach of this Agreement by such Permitted
Transferee.

            SECTION 2.2. Right of First Offer.

            (a) If a Holdings Entity desires to transfer any Shares other than
pursuant to the provisions of Sections 2.1(b) or 2.1(c) or pursuant to a
registered Public Offering in accordance with the Registration Rights Agreement,
such Holdings Entity shall first give written notice (a "Transfer Notice") to
that effect to KMOC containing (i) the number of Shares proposed to be
transferred

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(the "Offered Shares"), and (ii) the purchase price (the "First Offer Price")
which the Holdings Entity proposes to be paid for the Offered Shares.

            (b) KMOC shall have a period of 30 days after the date of receipt of
the Transfer Notice (the "Response Period") to accept the offer made pursuant to
the Transfer Notice to purchase all of the Offered Shares (on its own behalf or
on the behalf of others) at the First Offer Price by delivering written notice
of acceptance to the Holdings Entity within the Response Period.

            (c) If KMOC elects to purchase (on its behalf or on the behalf of
others) all of the Offered Shares, the closing of the sale of the Offered Shares
will be held at KMOC's principal office in New York on a date to be specified by
KMOC which is not less than 10 days nor more than 60 days after the end of the
Response Period. At the closing, KMOC will deliver the consideration in
accordance with the terms of the offer set forth in the Transfer Notice, and the
Holdings Entity will deliver the Offered Shares to KMOC, duly indorsed for
transfer, free and clear of all liens, claims and encumbrances.

            (d) If, at the end of the Response Period, KMOC has not given notice
of its decision to purchase all of the Offered Shares, then the Holdings Entity
shall be entitled for a period of 90 days beginning the day after the expiration
of the Response Period to sell the Offered Shares at a price not lower than the
First Offer Price and on terms not more favorable to the transferee than were
contained in the Transfer Notice. Promptly after any sale pursuant to this
Section 2.2, the Holdings Entity shall notify KMOC of the consummation thereof
and shall furnish such evidence of the completion (including time of completion)
of such sale and of the terms thereof as KMOC may request.

            (e) If, at the end of any such 90-day period provided for in this
Section 2.2, the Holdings Entity has not completed the sale of the Offered
Shares, the Holdings Entity shall no longer be permitted to sell any of such
Offered Shares pursuant to this Section 2.2 without again fully complying with
the provisions of this Section 2.2 and all the restrictions on sale, transfer,
assignment or other disposition contained in this Agreement shall again be in
effect.

            (f) Notwithstanding the foregoing, in the event that KMOC fails to
close the purchase of the Offered Shares on the date specified in its notice of
acceptance, the Holdings Entity shall be entitled, for a period of 120 days from
the closing date originally set by KMOC in its offer of acceptance, to sell the
Offered Shares at any reasonably negotiated price to any third party without

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having to further comply with the provisions of this Section 2.2; provided,
however, that in the event that KMOC's failure to close the purchase is due to
an order, injunction or other similar mandate from a regulatory body of
competent jurisdiction and KMOC is using its best efforts to cause such order,
injunction or mandate, as the case may be, to not apply to the purchase of the
Offered Shares then KMOC shall have until the earlier of (i) the expiration of
30 days from the closing date originally set by KMOC in its acceptance or (ii)
such time as the order, injunction or mandate becomes final and non-appealable,
in which to close the purchase of the Offered Shares before the provisions of
this clause (f) become applicable.

            SECTION 2.3. Legend. Each certificate representing the Shares shall
be stamped or otherwise imprinted with a legend in substantially the following
form:

            RESTRICTIONS ON TRANSFER OF SECURITIES: THE SECURITIES REPRESENTED
            BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
            ACT OF 1933, AS AMENDED, OR UNDER STATE SECURITIES LAWS. THE
            TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE IS
            SUBJECT TO THE CONDITIONS SPECIFIED IN (I) A SHAREHOLDER AGREEMENT
            DATED OCTOBER 15, 1997 AND (II) A VOTING AND TRANSFER AGREEMENT
            DATED OCTOBER 15, 1997. A COPY OF SUCH CONDITIONS WILL BE FURNISHED
            BY THE CORPORATION TO THE HOLDER HEREOF UPON WRITTEN REQUEST AND
            WITHOUT CHARGE. THESE SECURITIES MAY NOT BE RESOLD OR TRANSFERRED
            UNLESS SUCH CONDITIONS ARE COMPLIED WITH AND UNLESS REGISTERED OR
            EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933 AND
            APPLICABLE STATE SECURITIES LAWS.

            SECTION 2.4. Compliance with Applicable Law, Etc. The exercise of
the right of first offer set forth in Section 2.2 and the completion of any
transfer or sale of Shares contemplated hereunder shall be subject to compliance
with Applicable Law. KMOC and the Holdings Entities shall cooperate with each
other and shall take all such action, including, without limitation, obtaining
all Governmental Approvals required to comply with Applicable Law in connection
with the sale or transfer of the Shares pursuant to this Agreement.

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Each of KMOC and the Holdings Entities shall bear its own costs and expenses in
connection with obtaining any such Governmental Approvals.

            SECTION 2.5. Effect. Any purported transfer of securities that is
inconsistent with the provisions of this Article II shall be null and void and
of no force or effect and will not be registered on the stock transfer books of
KMOC.

                                   ARTICLE III
                                Preemptive Rights

            SECTION 3.1. Preemptive Rights. Prior to an Initial Public Offering,
Holdings shall be entitled to participate in all future sales or issuances by
KMOC of KMOC Common Stock (or rights to acquire KMOC Common Stock or securities
convertible into, or exchangeable for, KMOC Common Stock) to the extent
necessary to maintain its proportionate fully diluted equity interest in KMOC as
that interest exists at the time of such issuance. KMOC will provide Holdings
with at least 30 days advance written notice of any such proposed sale or
issuance (a "Proposed Issuance"), which notice shall contain all relevant
information pertaining thereto (including without limitation the identity of the
proposed beneficial and record owners of the KMOC Common Stock to be issued or
sold and the purchase price per share) and an offer to Holdings to participate
in the Proposed Issuance (at a price per share and upon terms and conditions no
less favorable than those provided to other offerees or purchasers of KMOC
Common Stock in the Proposed Issuance) to the extent necessary for Holdings to
maintain its proportionate fully diluted equity interest in KMOC. At Holdings'
sole option, Holdings may participate in the Proposed Issuance by purchasing the
full number of KMOC Common Stock necessary to maintain its proportionate equity
interest or any lesser number thereof. In the event the terms of the Proposed
Issuance change, KMOC will provide Holdings with a new 20-day advance notice
period prior to consummating the transaction contemplated by the Proposed
Issuance. All of Holdings's rights under this Section 3.1 shall cease at such
time as Holdings's Beneficial Ownership percentage of KMOC Voting Securities is
less than five percent. These preemptive rights shall not apply to the following
sales or issuances: (i) pursuant to an employee stock option plan, stock
purchase plan or similar benefit program, agreement or sale or issuance to
directors, employees or consultants which sales or issuances do not exceed 15%,
on a fully diluted basis, of the then outstanding capitalization of KMOC; (ii)
as consideration for the acquisition by KMOC or any of its affiliates of all or
a part of

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another business or the merger of any business entity with or into KMOC or any
of its affiliates: (iii) in connection with the exercise of the conversion
rights granted pursuant to Section 2.6 of the Acquisition Agreement, dated as of
December 16, 1996, between Chelsea Corporation, R.H. Smith International
Corporation and Ural Petroleum Corporation: (iv) the issuance of shares of KMOC
Common Stock pursuant to the exercise of the Warrants; (v) the issuance of
additional Warrants pursuant to (y) the warrant adjustment mechanism contained
in the Note and Warrant Purchase Agreements or (z) the warrant adjustment
mechanism contained in the certificates underlying the Warrants; or (vi) the
issuance of shares of KMOC Common Stock for the purpose of paying interest on
the Notes.

                                   ARTICLE IV
                                   Termination

            SECTION 4.1. Termination. Except with respect to Sections of this
Agreement which shall terminate on an earlier date as expressly provided herein,
this Agreement shall automatically terminate, with respect to each Holdings
Entity, on the later of (i) the date on which the Holdings Entities collectively
Beneficially Own less than 5% of the outstanding common stock of KMOC or (ii)
the date of an Initial Public Offering.

                                    ARTICLE V
                                  Miscellaneous

            SECTION 5.1. Effectiveness. This Agreement shall be effective as of
the Effective Date.

            SECTION 5.2. Notices. All notices, requests and other communications
hereunder shall be in writing and shall be delivered by hand, by nationally
recognized courier service, by facsimile transmission, receipt confirmed or
certified mail (postage prepaid, return receipt requested, if available):

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            If to KMOC, to:

                  Khanty-Mansiysk Oil Corporation
                  125 Park Avenue, 8th Floor
                  New York, New York 10017
                  Attention: John B. Fitzgibbons
                  Phone: (212) 479-2398
                  Fax: (212) 479-2505

            with a copy to:

                  Skadden, Arps, Slate, Meagher & Flom LLP
                  919 Third Avenue
                  New York, New York 10022
                  Attention: Eric L. Cochran
                  Phone: (212) 735-3000
                  Fax: (212) 735-2000

            If to a Holdings Entity, to:

                  Khanty Holdings LLC
                  c/o The Beacon Group
                  399 Park Avenue
                  17th Floor
                  New York, New York 10022
                  Attention: John J. MacWilliams
                  Phone: (212) 339-9100
                  Fax: (212) 339-9109

Each such notice, request or communication shall be effective (A) if delivered
by hand or by nationally recognized courier service, when delivered at the
address specified in this Section 5.2 (or in accordance with the latest
unrevoked written direction from such party), (B) if given by fax, when such fax
is transmitted to the fax number specified in this Section 5.2 (or in accordance
with the latest unrevoked written direction from such party), and the
appropriate confirmation is received or (C) if by certified mail, upon mailing.

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            SECTION 5.3. Interpretation. The headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. Whenever the words "included,"
"includes" or "including" are used in this Agreement, they shall be deemed to be
followed by the words "without limitation."

            SECTION 5.4. Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstances, is
held invalid, illegal or unenforceable in any respect for any reason, the
parties shall negotiate in good faith with a view to the substitution therefor
of a suitable and equitable solution in order to carry out, so far as may be
valid and enforceable, the intent and purpose of such invalid provision;
provided, however, that the validity, legality and enforceability of any such
provision in every other respect and of the remaining provisions contained
herein shall not be in any way impaired thereby, it being intended that all of
the rights and privileges of the parties hereto shall be enforceable to the
fullest extent permitted by law.

            SECTION 5.5. Counterparts. This Agreement may be executed in two
counterparts, each of which shall be deemed an original and all of which shall,
taken together, be considered one and the same agreement, it being understood
that both parties need not sign the same counterpart.

            SECTION 5.6. Entire Agreement; No Third Party Beneficiaries. This
Agreement (a) constitutes the entire agreement and supersedes all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof and (b) is not intended to confer upon any
Person, other than the parties hereto, any rights or remedies hereunder.

            SECTION 5.7. Further Assurances. Each party shall execute, deliver,
acknowledge and file such other documents and take such further actions as may
be reasonably requested from time to time by the other party hereto to give
effect to and carry out the transactions contemplated herein.

            SECTION 5.8. Governing Law; Equitable Remedies. This Agreement shall
be governed by and construed in accordance with the laws of the State of
Delaware, regardless of the laws that might otherwise govern under applicable
principles of conflicts of law. The parties hereto agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the parties hereto shall be entitled to

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equitable relief, including in the form of injunctions, in order to enforce
specifically the provisions of this Agreement, in addition to any other remedy
to which they are entitled at law or in equity.

            SECTION 5.9. Amendments; Waivers.

            (a) No provision of this Agreement may be amended or waived unless
such amendment or waiver is in writing and signed, in the case of an amendment,
by the parties hereto, or in the case of a waiver, by the party against whom the
waiver is to be effective.

            (b) No failure or delay by any party in exercising any right, power
or privilege hereunder shall operate as waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law.

            SECTION 5.10. Assignment. Neither this Agreement nor any of the
rights or obligations hereunder shall be assigned by either of the parties
hereto without the prior written consent of the other party, except that either
party may assign all its rights and obligations to the assignee of all or
substantially all of the assets of such party including an acquisition through
merger, provided that such party shall in no event be released from its
obligations hereunder without the prior written consent of the other party.
Subject to the preceding sentence, this Agreement will be binding upon, inure to
the benefit of and be enforceable by the parties and their respective successors
and assigns. Any attempted assignment in contravention hereof shall be null and
void.

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            IN WITNESS WHEREOF, the parties have caused this Agreement to be
duly executed and delivered, all as of the date first set forth above.

                  KHANTY MANSIYSK OIL CORPORATION

                  By:  /s/ John B. Fitzgibbons
                      ---------------------------------
                      Name: John B. Fitzgibbons
                      Title: Chief Executive Officer

                  KHANTY HOLDINGS LLC

                  By: The Beacon Group Energy Investment Fund, L.P.

                  By: Beacon Energy Investors, L.L.C., its General Partner

                  By: Energy Fund GP, Inc., a member

                  By: /s/ John J. MacWilliams
                      ---------------------------------
                      Name: John J. MacWilliams
                      Title: Managing Director<PAGE>

                                                                   EXHIBIT 10.19

                         REGISTRATION RIGHTS AGREEMENT

      THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made and entered
into as of October 15, 1997, by and between Khanty Mansiysk Oil Corporation, a
Delaware corporation (the "Company"), and Khanty Holdings LLC, a Delaware
limited liability company ("Holdings").

      This Agreement is made in connection with the Note and Warrant Purchase
Agreement (the "Note and Warrant Purchase Agreement"), dated as of October 10,
1997, between the Company and Holdings for the purchase by Holdings from the
Company of one or more notes in the aggregate principal amount of $30 million
and warrants (the "Warrants") to acquire 66.667 shares of Common Stock (as
defined below) at an exercise price of $450 per share. In connection with the
Note and Warrant Purchase Agreement, the Company has agreed to provide Holdings
with the registration rights set forth in this Agreement.

      In consideration of the foregoing, the parties hereto agree as follows:

SECTION 1. Certain Definitions:

      "Affiliate" means, with respect to any Person, any Person that, directly
or indirectly, controls, is controlled by or is under common control with such
Person. For the purposes of this definition, "control" (including, with its
correlative meanings, the terms "controlled by" and "under common control
with"), as used with respect to any Person, means the possession, either
directly or indirectly, of the power to direct or cause the direction of the
management or policies of such Person, whether through the ownership of voting
securities, by contract or otherwise.

      "Common Stock" shall mean the common stock of the Company, no par value
per share.

      "Demand" shall have the meaning set forth in Section 3(a)(ii).

      "Eligible Common Stock" shall mean (i) shares of Common Stock acquired by
Holdings pursuant to the Note and Warrant Purchase Agreement or pursuant to
Holdings' exercise of its preemptive rights under the Shareholder Agreement and
held by either Holdings or a transferee or assignee of Holdings pursuant to
Section 10(d) hereof on the date of determination and (ii) shares of Common
Stock underlying the warrants acquired by Holdings pursuant to the Note and
Warrant Purchase Agreement, and held by either Holdings or a transferee or
assignee of Holdings pursuant to Section 10(d) hereof on the date of
determination, to the extent such warrants are exercised in connection with the
Demand Registration Rights or Piggyback Registration Rights hereunder.

      "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended,
and the rules and regulations thereunder.

      "Initial Public Offering" shall mean the initial underwritten offering of
Common Stock.

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                                                                               2

      "Long form Demand" shall have the meaning set forth in Section 3(a)(i).

      "Permitted Transferee" shall mean a Person (i) to whom Holdings has
transferred either Common Stock acquired by Holdings pursuant to the Note and
Warrant Purchase Agreement or pursuant to Holdings' exercise of its preemptive
rights under the Shareholder Agreement or warrants acquired by Holdings pursuant
to the Note and Warrant Purchase Agreement and (ii) who has executed and
delivered to the Company an Additional Party Counterpart in the form set forth
in Exhibit A.

      "Person" shall mean any individual, partnership, corporation, trust,
limited liability company or unincorporated organization, or a government or
agency or political subdivision thereof.

      "Prospectus" shall mean the prospectus included in a Registration
Statement, including any preliminary prospectus, and any such prospectus as
amended or supplemented by any prospectus Supplement with respect to the terms
of the offering of the Common Stock covered by the Registration Statement, and
by all other amendments and supplements to such Prospectus, including
Post-effective amendments, and in each case including all materials incorporated
by reference therein.

      "Registration Statement" shall mean any registration statement of the
Company on an appropriate form under the Securities Act (other than any
registration statement with respect to equity securities filed on a Form S-4 or
S-8 or any other forms prescribed for the same or similar Purposes) and all
amendments and supplements to such registration statement, including
post-effective amendments, in each case including the Prospectus contained
therein, all materials incorporated by reference therein and all exhibits
thereto.

      "Requisite Common Stock" shall mean (i) in connection with the first Long
Form Demand, shares of Eligible Common Stock aggregating the greater of $25
million or 25% of the aggregate of Holdings' and each Permitted Transferee's
interest in the Company at the date of such Long Form Demand and, (ii) in
connection with the second Long Form Demand, shares of Eligible Common Stock
aggregating the greater of $10 million or 25% of the aggregate of Holdings' and
each Permitted Transferee's interest in the Company at the date of such Demand.

      "SEC" shall mean the Securities and Exchange Commission.

      "Securities Act" shall mean the Securities Act of 1933, as amended, and
the rules and regulations thereunder.

      "Shareholder Agreement" shall mean the Shareholder Agreement between the
Company and Holdings dated as of October 15, 1997.

      "Short Form Demand" shall have the meaning set forth in Section 3(a)(ii).

<PAGE>
                                                                               3

      "underwritten registration" or "underwritten offering" shall mean an
offering of the Common Stock pursuant to a Registration Statement in which the
Common Stock of the Company is sold to the public by one or more underwriters.

SECTION 2. Common Stock Subject to Registration Rights.

      All Eligible Common Stock will cease to be Eligible Common Stock when (i)
a Registration Statement covering such Eligible Common Stock has been declared
effective by the SEC and such Eligible Common Stock has been disposed of
pursuant to such effective Registration Statement, (ii) it is distributed to the
public pursuant to Rule 144 (or any similar provision then in force) under the
Securities Act or (iii) it has otherwise been transferred and it may be resold
by such transferee without registration under the Securities Act and without
restriction under Rule 144.

SECTION 3. Registration Rights.

      (a)   Demand Registration.

            (i) At any time after the date hereof Holdings shall have the right
      to make up to two (2) written requests (each, a "Long Form Demand") on the
      Company to cause the Company to make reasonable efforts to file and cause
      to be declared effective a Registration Statement on Form S-1 or any other
      appropriate form under the Securities Act with respect to the Requisite
      Common Stock commencing on the earlier of (A) two years following the
      closing date of the Note and Warrant Purchase Agreement or (B) six months
      following the closing date of the Initial Public Offering; provided, that
      the Company has not consummated an underwritten offering within the six
      consecutive months (or such longer period requested by the managing
      underwriters but not to exceed 12 consecutive months) prior to the date of
      a Long Form Demand.

            (ii) At any time after an Initial Public Offering, if the Company
      and the Common Stock meet the eligibility requirements for such forms,
      Holdings shall have the right to make an unlimited number of written
      requests (each, a "Short Form Demand" and, together with Long Form
      Demands, "Demands") on the Company to cause the Company to make reasonable
      efforts to file and cause to be declared effective a Registration
      Statement on Form S-3 or any other similar short form registration under
      the Securities Act with respect to the Eligible Common Stock, provided,
      that the expected offering price of the Eligible Common Stock requested to
      be registered is at least $7,500,000 or such lesser amount if all the
      remaining shares of Eligible Common Stock held by Holdings are registered,
      and provided further that Holdings shall use reasonable efforts to sell
      such Eligible Common Stock requested to be registered. This Section
      3(a)(ii) shall be applicable for so long as the Eligible Common Stock
      cannot be freely transferred pursuant to Rule 144 under the Securities Act
      without the imposition of volume, price and holding period limitations.

<PAGE>
                                                                               4

            (iii) Each Demand will set forth the number of shares of Eligible
      Common Stock proposed to be sold by Holdings and the intended method of
      distribution of such shares.

            (iv) If any offering or sale of Common Stock by Holdings pursuant to
      a Registration Statement is not consummated due to any failure by the
      Company to perform its obligations under this Agreement, the Long Form
      Demand with respect to which such Registration Statement was filed shall
      not be included among the Long Form Demands contemplated by Section
      3(a)(i) above.

      (b)   Piggyback Registration.

            (i) In the event the Company proposes to file a Registration
      Statement with respect to its Common Stock, it will give written notice to
      Holdings of the Company's intention to do so and, upon the written request
      of Holdings given within 20 days after receipt of such notice, the Company
      will make reasonable efforts to effect the registration of the Eligible
      Common Stock of Holdings (the "Piggyback Securities") which it shall have
      been so requested to register by including such Piggyback Securities in
      the Registration Statement ("Piggyback Registration Rights"). Piggyback
      Securities are to be included in the Registration Statement on the same
      terms and conditions as the shares of Common Stock of the Company
      otherwise being sold through underwriters under such Registration
      Statement; provided however, that if the managing underwriter or
      underwriters of any proposed underwritten offering determines and advises
      the Company in writing that the inclusion in the Registration Statement of
      all Piggyback Securities proposed to be included would adversely affect
      the success of the proposed underwritten offering, the Company shall
      include in such registration such number (if any) of the Piggyback
      Securities so requested to be included which in the opinion of such
      managing underwriter or underwriters can be sold by the Company, but (i)
      only after the inclusion in such registration of Common Stock being sold
      by the Company and (ii) only after the inclusion in such registration of
      Common Stock being sold by persons exercising any demand registration
      rights they may have in respect of the Company. If, in the opinion of such
      managing underwriter or underwriters, some but not all of the Piggyback
      Securities requested to be included may be included in such registration,
      all holders of Piggyback Securities requested to be included therein, and
      any other holders of Common Stock that have substantially similar
      registration rights to the holders of Piggyback Securities and have
      requested registration of such shares, shall share pro rata in the number
      of such shares requested to be included therein based on the number of
      such shares so requested to be included by such persons. The rights set
      forth in this Section 3(b) shall be exercisable in connection with any
      Registration Statement covering Common Stock.

            (ii) In connection with any offering by the Company to which
      Holdings has Piggyback Registration Rights, the Company, in its sole
      discretion, shall determine (A) whether to initiate, proceed with or
      terminate such registration, (B) the pricing (including underwriting
      discounts and commissions) for such offering and (C) the timing of such
      offering. The Company may withdraw any Registration Statement and abandon
      any

<PAGE>
                                                                               5

      proposed sale of Common Stock without the consent of Holdings,
      notwithstanding the request of Holdings to participate therein in
      accordance with this Agreement, if the Company determines in its sole
      discretion to so withdraw and abandon such proposed sale.

            (iii) In the event that Holdings does not seek to exercise its Piggy
      Back Registration Rights, a Permitted Transferee who holds more than 5% of
      the outstanding Common Stock of the Company shall be entitled to exercise
      the Piggyback Registration Rights on its own behalf, subject to all the
      restrictions and limitations set forth herein.

SECTION 4. Holdback Agreements.

      (a) Holdings agrees, and any transferee of Holdings, by acceptance of any
Eligible Common Stock agrees that if it is requested by the managing underwriter
or underwriters in an underwritten offering, not to effect any public sale or
distribution of securities of the Company of the same class as the securities
included in the Registration Statement, during the 15 day period prior to, and
during the 90 day period (or such longer period requested by the managing
underwriters but not to exceed 270 days) beginning on, the effective date of
such Registration Statements, including a sale pursuant to Rule 144 under the
Securities Act, to the extent timely notified in writing by the Company or the
managing underwriters.

      (b) The Company agrees (i) if requested by the managing underwriter or
underwriters of an underwritten public offering pursuant to Section 3(a) not to
effect a public or private sale or distribution of its Common Stock, or any
securities convertible into or exchangeable for such securities (other than any
such sale or distribution of such securities in connection with any merger or
consolidation by the Company or a subsidiary thereof or the acquisition by the
Company or a subsidiary thereof of the capital stock or substantially all of the
assets of any other Person) during the 15 day period prior to, and during the 90
day period (or such longer period requested by the managing underwriters but not
to exceed 270 days) beginning on, the effective date of any Registration
Statement filed pursuant to Section 3(a) hereof and (ii) that any agreement
entered into after the date hereof pursuant to which the Company issues or
agrees to issue any privately placed Common Stock or securities convertible into
or exchangeable for Common Stock shall contain a provision under which holders
of such securities agree that if it is requested by the managing underwriter or
underwriters in an underwritten offering not to effect any public sale or
distribution of any such securities during the 30 day period prior to, and
during the 180 day period beginning on, the effective date of any Registration
Statement, including a sale pursuant to Rule 144 under the Securities Act
(except pursuant to a Registration Statement); provided, however, that the
provisions of this paragraph (b) shall not prevent (i) the conversion or
exchange of any securities, (ii) the exercise of options or warrants by the
holders thereof and (iii) grants of options pursuant to stock option plans of
the Company. Notwithstanding the foregoing provisions of this Section 4(b), in
the event that the Company exercises its right pursuant to the last paragraph of
Section 5 to (i) delay the filing of any Registration Statement, (ii) withhold
efforts to cause any Registration Statement to become effective or (iii) request
that Eligible Common Stock not be sold pursuant to an effective Registration
Statement, the holdback limitations set forth in this Section 4(b) shall cease
to be effective during the period in which the Company shall have exercised such
right.

<PAGE>
                                                                               6

SECTION 5. Registration Procedures.

      In connection with the Company's registration obligations pursuant to
Section 3 hereof, the Company will make reasonable efforts to effect the
registration of the Eligible Common Stock in accordance with the intended method
or methods of distribution thereof, and pursuant thereto the Company shall:

            (a) prepare and file with the SEC, as soon as practicable, a
      Registration Statement relating to the appropriate form under the
      Securities Act, which form shall be available for the sale of the Eligible
      Common Stock in accordance with the intended method or methods of
      distribution thereof and shall include all financial statements and other
      information required by the SEC to be filed therewith, and make reasonable
      efforts to cause such Registration Statement to become effective;

            (b) prepare and file with the SEC such amendments to the
      Registration Statement as may be necessary to keep the Registration
      Statement effective until the distribution of the Eligible Common Stock
      under the Registration Statement is complete (which period shall not
      exceed 180 days from the date the Registration Statement is declared
      effective); cause the Prospectus to be supplemented by any required
      prospectus supplement, and as so supplemented to be filed pursuant to Rule
      424 under the Securities Act; and comply with the provisions of the
      Securities Act with respect to the disposition of all securities covered
      by such Registration Statement;

            (c) notify Holdings and the managing underwriters, if any, promptly,
      and (if requested by any such Person) confirm such advice in writing, (i)
      when the Registration Statement has become effective and when any
      post-effective amendment or supplements thereto become effective, (ii) of
      the issuance by the SEC of any stop order suspending the effectiveness of
      the Registration Statement or the initiation of any proceedings for the
      purpose, (iii) if between the effective date of the Registration Statement
      and the closing of the sale of the securities covered thereby, the
      representations and warranties of the Company contemplated by paragraph
      5(m) below cease to be true and correct, (iv) of the receipt by the
      Company of any notification with respect to the suspension of the
      qualification of the Eligible Common Stock for sale in any jurisdiction or
      the initiation or threatening of any proceeding for such purpose and (v)
      of the happening of any event which makes any statement made in the
      Registration Statement or the Prospectus or any document incorporated
      therein by reference untrue or misleading or which requires the making of
      any changes in the Registration Statement or the Prospectus or any
      document incorporated therein by reference to make the statements therein
      not misleading;

            (d) make reasonable efforts to obtain the withdrawal of any order
      suspending the effectiveness of the Registration Statement at the earliest
      possible time;

            (e) as promptly as practicable prior to the filing of any document
      which is to be incorporated by reference into the Registration Statement
      or the Prospectus (after initial

<PAGE>
                                                                               7

      filing of the Registration Statement), provide copies of such document to
      Holdings and to the managing underwriters, if any, make the Company's
      representatives available for discussion of such document and make such
      changes in such document prior to the filing thereof as Holdings or
      underwriters may reasonably request;

            (f) upon request, furnish to each managing underwriter, if any, and
      Holdings, without charge, at least one signed copy of the Registration
      Statement and any post-effective amendment thereto, including financial
      statements and schedules, all documents incorporated therein by reference
      and all exhibits (including those incorporated by reference);

            (g) deliver to Holdings and each underwriter, if any, without
      charge, as many copies of the Prospectus (including each preliminary
      prospectus) and any amendment or supplement thereto as Holdings may
      reasonably request; the Company consents to the use of the Prospectus or
      any amendment or supplement thereto by Holdings and the underwriters, if
      any, in connection with the offering and sale of the Eligible Common Stock
      covered by the Prospectus or any amendment or supplement thereto;

            (h) prior to any public offering of Eligible Common Stock, make
      reasonable efforts to register or qualify or cooperate with Holdings, the
      underwriters, if any, and their respective counsel in connection with the
      registration or qualification of such Eligible Common Stock for offer and
      sale under the securities or blue sky laws of such jurisdictions as
      Holdings or any underwriter reasonably requests in writing and do any and
      all other reasonable acts or things necessary or advisable to enable the
      underwriters or Holdings, as the case may be, to consummate the
      disposition in such jurisdictions of the Eligible Common Stock covered by
      the Registration Statement; provided that the Company will not be required
      to (i) qualify generally to do business in any jurisdiction where it is
      not then so qualified: (ii) subject itself to taxation in any such
      jurisdiction; or (iii) take any action which would subject it to general
      service of process in any such jurisdiction where it is not then so
      subject;

            (i) cooperate with Holdings and the managing underwriters, if any,
      to facilitate the timely preparation and delivery of certificates
      representing the Eligible Common Stock to be sold and not bearing any
      restrictive legends; and enable such Eligible Common Stock to be in such
      denominations and registered in such names as the managing underwriters or
      Holdings, as the case may be, may request at least two business days prior
      to any sale of the Eligible Common Stock;

            (j) as promptly as practicable following the occurrence of any event
      contemplated by Section 5(c)(v) above, make reasonable efforts to prepare
      a supplement or post-effective amendment to the Registration Statement or
      the related Prospectus or any document incorporated therein by reference
      or file any other required document so that, as thereafter delivered to
      the purchasers of the Eligible Common Stock, the Prospectus will not
      contain an untrue statement of a material fact or omit to state any
      material fact required

<PAGE>
                                                                               8

      to be stated therein or necessary to make the statements therein, in the
      light of the circumstances under which they were made, not misleading;

            (k) make reasonable efforts to cause all the Eligible Common Stock
      covered by the Registration Statement to be listed on each securities
      exchange or automated quotation system, if any, on which similar
      securities issued by the Company are then listed if requested by Holdings
      or by the managing underwriters, if any;

            (l) provide a CUSIP number for all Eligible Common Stock, not later
      than the effective date of the applicable Registration Statement;

            (m) if requested by Holdings, enter into an underwriting agreement
      with an underwriter or underwriters providing for the sale of such
      Eligible Common Stock in an underwritten offering which shall be customary
      in form, substance and scope and shall contain customary requirements for
      representations, warranties, covenants and opinions of counsel;

            (n) make available for inspection by a representative of Holdings
      and an underwriter, if any, participating in any disposition pursuant to
      the Registration Statement, and any attorney or accountant retained by
      Holdings or an underwriter, all relevant financial and other records,
      pertinent corporate documents and properties of the Company, and cause the
      Company's officers, directors and employees to supply all information
      reasonably requested by any such representative, underwriter, attorney or
      accountant in connection with such Registration Statement; provided,
      however, that any records, information or documents that are designated by
      the Company in writing as confidential shall be kept confidential by such
      representative, underwriter, counsel or accountant unless disclosure of
      such records, information or documents is required by court or
      administrative order; and provided, further, if such representative,
      underwriter, counsel or accountant is ordered to disclose any of such
      records, documents or information, such representative, underwriter,
      counsel or accountant will provide the Company with prompt written notice
      of such requirement so that the Company at its expense may seek a
      protective order or other appropriate remedy and/or waive compliance with
      this Agreement. In the event that such protective order or other remedy is
      not obtained, or that the Company waives compliance with the provisions
      hereof, such representative, underwriter, counsel or accountant agrees to
      furnish only that portion of such records, documents or information which
      such representative, underwriter, counsel or accountant is legally
      required to disclose in the opinion of the special counsel or counsel
      representing such representative, underwriter or accountant;

            (o) otherwise make reasonable efforts to comply with all applicable
      rules and regulations of the SEC, and make generally available to its
      security holders earnings statements no later than 45 days after the end
      of any 12-month period (or 90 days, if such period is a fiscal year)
      commencing at the end of any fiscal quarter in which Eligible

<PAGE>
                                                                               9

      Common Stock is sold to underwriters in an underwritten offering, which
      statements shall cover said l2-month period; and

            (p) make reasonable efforts to obtain any customary opinions of
      counsel or customary accountants' "cold comfort" letters that might be
      required by Holdings in connection with any registration of Eligible
      Common Stock in a Registration Statement and enter into such customary
      agreements and take all such other reasonable actions in connection with
      such registration to expedite or facilitate the disposition of the
      Eligible Common Stock as contemplated by the Registration Statement.

      The Company may require Holdings (i) to furnish to the Company such
information regarding Holdings and the distribution of the Eligible Common Stock
as the Company may from time to time reasonably request in writing and (ii) to
enter into an underwriting agreement in the form contemplated by Section 5(m).

      Holdings agrees that, upon receipt of any notice from the Company of the
happening of any event of the kind described in Section 5(c)(v) hereof, Holdings
will forthwith discontinue the offering and disposition of Eligible Common Stock
until Holdings' receipt of the copies of the supplemented or amended Prospectus
contemplated by Section 5(j) hereof; or until it is advised in writing (the
"Advice") by the Company that the use of the Prospectus may be resumed, and has
received copies of any additional or supplemental filings which are incorporated
by reference in the Prospectus, and, if so directed by the Company, Holdings
will deliver to the Company (at the Company's expense) all copies, other than
permanent file copies then in Holdings' possession, of the Prospectus covering
such Eligible Common Stock current at the time of receipt of such notice. In the
event the Company shall give any such notice to suspend the offering and
disposition of the Eligible Common Stock, the time periods regarding the
maintenance of the applicable Registration Statement shall be extended by the
number of days during the period from and including the date of the giving of
such notice pursuant to Section 5(c)(v) hereof to and including the date when
Holdings shall have received the copies of the supplemented or amended
Prospectus contemplated by Section 5(j) hereof or the Advice.

      Notwithstanding the foregoing, (a) the Company may delay the filing of any
Registration Statement, any amendment thereof or any supplement to the related
Prospectus, and may withhold efforts to cause any Registration Statement to
become effective, and (b) in the case of an effective Registration Statement,
upon the request of the Company the holders of Eligible Common Stock
participating in such registration shall refrain from selling any shares
pursuant to such Registration Statement, if (i) the Company determines in good
faith that such registration or sale would (A) interfere with or adversely
affect the negotiation or completion of any material transaction that is being
contemplated by the Company at the time the right to delay is exercised or a
request is made or (B) involve initial or continuing disclosure obligations not
otherwise required by law or and regulations of the SEC, which disclosure would
have a material adverse effect on the Company or (ii) in the written opinion of
an internationally recognized investment bank with experience in both the former
Soviet Union and the energy industry, that the Company is unable to consummate
an underwritten offering due to then currently prevailing market conditions;

<PAGE>
                                                                              10

provided however, that the duration of any such delay or period in which shares
of Eligible Common Stock may not be sold pursuant to an effective Registration
Statement shall not exceed a period of 180 days.

SECTION 6. Registration Expenses.

      All expenses incident to the Company's performance of or compliance with
this Agreement, including without limitation SEC registration and filing fees,
fees with respect to filings required to be made with the National Association
of Securities Dealers, Inc., printing expenses, and fees and disbursements of
counsel for the Company and of all independent certified public accountants of
the Company (including the expenses of any special audit and "cold comfort"
letters required by or incident to such performance) and the fees and expenses
incurred in connection with the listing of the securities to be registered on
each securities exchange on which similar securities issued by the Company are
then listed, in connection with the Demand Registration and Piggyback
Registration will be borne by the Company whether or not any such Registration
Statement becomes effective, provided that all underwriting discounts and
selling commissions applicable to the sale of the Eligible Common Stock and all
other expenses of Holdings incurred in connection with the distribution of
Eligible Common Stock (including all salaries of its officers and employees, all
fees and expenses of Holdings' auditors, consultants, advisors, attorneys,
special experts and other Persons and all relevant taxes, including transfer
taxes) will be borne by Holdings.

SECTION 7. Indemnification; Contribution.

      (a) Indemnification by the Company. The Company agrees to indemnify and
hold harmless each Person who participates as an underwriter (any such Person
being an "Underwriter"), Holdings and each Person, if any, who controls Holdings
or any Underwriter within the meaning of the Securities Act as follows: (i)
against any and all loss, claim, damage and expense whatsoever, as incurred,
arising out of any untrue statement or alleged untrue statement of a material
fact contained in any Registration Statement (or any amendment thereto) pursuant
to which Eligible Common Stock was registered under the Securities Act,
including all documents incorporated therein by reference, or the omission or
alleged omission therefrom of a material fact required to be stated therein or
necessary to make the statements therein not misleading or arising out of any
untrue statement or alleged untrue statement of a material fact contained in any
Prospectus (or any amendment or supplement thereto), including all documents
incorporated therein by reference, or the omission or alleged omission therefrom
of a material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading; (ii)
against any and all loss, liability, claim, damage and expense whatsoever, as
incurred, to the extent of the aggregate amount paid in settlement of any
litigation, or investigation or proceeding by any governmental agency or body,
commenced or threatened, or of any claim whatsoever based upon any such untrue
statement or omission, or any such alleged untrue statement or omission, if such
settlement is effected with the written consent of the Company; and (iii)
against any and all expense whatsoever, as incurred (including, subject to the
provisions of Section 7(c), fees and disbursements of counsel), reasonably
incurred in investigating, preparing or defending against any litigation, or
investigation or proceeding by any governmental agency or body,

<PAGE>
                                                                              11

commenced or threatened, in each case whether or not a party, or any claim
whatsoever based upon any such untrue statement or omission, or any such alleged
untrue statement or omission, to the extent that any such expense is not paid
under (i) or (ii) above; provided, however, that the Company shall not be liable
in any such case to the extent that any such loss, claim, damage, liability or
expense arises out of or is based upon an untrue statement or alleged untrue
statement or alleged omission in a Prospectus, if such untrue statement or
alleged untrue statement, omission or alleged omission is corrected in an
amendment or supplement to such Prospectus and Holdings or the Underwriter, as
the case may be, thereafter fails to deliver such Prospectus as so amended or
supplemented prior to or concurrently with the sale by Holdings or the
Underwriter, as the case may be, of the Eligible Common Stock to the Person
asserting such loss, claim, damage, liability or expense if the Company had
furnished Holdings or the Underwriter, as the case may be, within a reasonable
period of time prior to such sale with the number of copies of such amended or
supplemented Prospectus requested by Holdings or the Underwriter, as the case
may be; and provided, further, that this indemnity agreement does not apply to
Holdings or any Underwriter with respect to any loss, liability, claim, damage
or expense to the extent arising our of any untrue statement or omission or
alleged untrue statement or omission made in reliance upon and in conformity
with written information furnished to the Company by Holdings or any Underwriter
expressly for use in a Registration Statement (or any amendment thereto) or any
Prospectus (or any amendment or supplement thereto).

      (b) Indemnification by Holdings. In connection with the applicable
Registration Statement, Holdings will furnish to the Company in writing such
information and affidavits as the Company reasonably requests for use in
connection with the Registration Statement or Prospectus and agrees to indemnify
and hold harmless the Company and each Underwriter, if any, and each of their
respective directors and officers (including each officer of the Company who
signed the Registration Statement), and each Person, if any, who controls the
Company or any Underwriter within the meaning of the Securities Act, against any
and all loss, liability, claim, damage and expense described in the indemnity
contained in Section 7(a) hereof, as incurred, but only with respect to untrue
statements or omissions, or alleged untrue statements or omissions, made in a
Registration Statement (or any amendment thereto) or any Prospectus (or any
amendment or supplement thereto) in reliance upon and in conformity with written
information regarding Holdings furnished to the Company by Holdings expressly
for use in such Registration Statement (or any amendment thereto) or such
Prospectus (or any amendment or supplement thereto).

      (c) Conduct of Indemnification Proceedings. Each indemnified party
shall give reasonably prompt notice to each indemnifying party of any action
or proceeding commenced against it in respect of which indemnity may be
sought hereunder, but failure to so notify an indemnifying party shall not
relieve it from any liability which it may have under this indemnity
agreement unless the indemnifying party is materially prejudiced by such
failure. If the indemnifying party so elects within a reasonable time after
receipt of such notice, the indemnifying party may assume the defense of such
action or proceeding at such indemnifying party's own expense with counsel
chosen by the indemnifying party and approved by the indemnified parties
defendant in such action or proceeding, which approval shall not be
unreasonably withheld; provided however, that, if such indemnified party or
parties reasonably determine that a conflict

<PAGE>
                                                                              12

of interest exists where it is advisable for such indemnified party or parties
to be represented by separate counsel or that, upon advice of counsel, there may
be legal defenses available to them which are different from or in addition to
those available to the indemnifying party, then the indemnifying party shall not
be entitled to assume the defense and the indemnified party or parties shall be
entitled to one separate counsel at the indemnifying party's expense. If an
indemnifying party is not entitled to assume the defense of such action or
proceeding as a result of the proviso to the preceding sentence, such
indemnifying party's counsel shall be entitled to conduct such indemnifying
party's defense and counsel for the indemnified party or parties shall be
entitled to conduct the defense of such indemnified party or parties, it being
understood that both such counsel will cooperate with each other to conduct the
defense of such action or proceeding as efficiently as possible. If an
indemnifying party is nor so entitled to assume the defense of such action or
does nor assume such defense, after having received the notice referred to in
the first sentence of this paragraph, the indemnifying party or parties will pay
the reasonable fees and expenses of counsel for the indemnified party or
parties. In such event, however, no indemnifying party will be liable for any
settlement effected without the written consent of such indemnifying party. If
an indemnifying party is entitled to assume, and assumes, the defense of such
action or proceeding in accordance with this paragraph, such indemnifying party
shall not be liable for any fees and expenses of counsel for the indemnified
parties incurred thereafter in connection with such action or proceeding.

      (d) Contribution. If for any reason the indemnification provided for in
the preceding subsections (a) and (b) of this Section 7 is unavailable to an
indemnified party or insufficient to hold it harmless as contemplated by such
preceding subsections, then the indemnifying party shall contribute to the
amount paid or payable by the indemnified party as a result of such
unavailability or insufficiency in proportion as is appropriate to reflect not
only the relative benefits received by the indemnified party and the
indemnifying party, but also the relative fault of the indemnified party and the
indemnifying party, as well as any other relevant equitable considerations,
provided that Holdings shall not be required to contribute in any amount greater
than the dollar amount of the proceeds received by Holdings with respect to the
sale of any Eligible Common Stock. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.

SECTION 8. Rule 144.

      The Company covenants that it will provide the information required
pursuant to Rule 144(c) under the Securities Act upon the request of Holdings
and it will take such further action as Holdings may reasonably request, all to
the extent required from time to time to enable Holdings to sell its Eligible
Common Stock without registration under the Securities Act within the
limitations of the exemptions provided by Rule 144 under the Securities Act, as
such Rule may be amended from time to time or any similar rules or regulations
hereafter adopted by the SEC. Upon the request of Holdings, the Company will
deliver to Holdings a written statement as to whether it has complied with such
requirements.

<PAGE>
                                                                              13

SECTION 9. Participation in Underwritten Registrations.

      The investment banker or investment bankers and manager or managers, if
any, that will administer the registration of the Eligible Common Stock pursuant
to a Demand will be selected by the Company; provided that such investment
bankers and managers must be reasonably satisfactory to Holdings.

      No person may participate in any underwritten registration hereunder
unless such Person (a) agrees to sell such Person's securities on the basis
provided in any underwriting arrangements approved by the Persons entitled
hereunder to approve such arrangements and (b) completes and executes all
questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents required under the terms of such underwriting arrangements.
Nothing in this Section 9 shall be construed to create any additional rights
regarding the registration of Eligible Common Stock in any Person otherwise than
as set forth herein.

SECTION 10. Miscellaneous.

      (a) No Inconsistent Agreements. The Company will not on or after the date
of this Agreement enter into any agreement with respect to its securities which
is inconsistent with the rights granted to Holdings in this Agreement or
otherwise conflicts with the provisions hereof.

      (b) Amendments and Waivers. The provisions of this Agreement, including
the provisions of this sentence, may not be amended, modified or supplemented,
and waivers or consents to departures from the provisions hereof may not be
given without the prior written consent of both parties.

      (c) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand delivery, registered
first-class mail, telex, telecopier, or air courier guaranteeing overnight
delivery:

            (i) if to Holdings, initially at 399 Park Avenue, 17th Floor, New
      York, New York 10022, Attention: John J. MacWilliams and thereafter at
      such other address, notice of which is given in accordance with the
      provisions of this Section 10(c), with a copy to King & Spalding, 1185
      Avenue of the Americas, New York, New York 10036, Attention: Mark
      Zvonkovic, Esq.

            (ii) if to the Company, initially at 125 Park Avenue, Suite 800, New
      York, New York, 10017, Attention: John B. Fitzgibbons and thereafter at
      such other address, notice of which is given in accordance with the
      provisions of this Section 10(c), with a copy to Skadden, Arps, Slate,
      Meagher & Flom LLP, 919 Third Avenue, New York, New York 10022, Attention:
      Eric L. Cochran, Esq.

      All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five business
days after being deposited in the mail,

<PAGE>
                                                                              14

postage prepaid, if mailed; when answered back, if telexed; when receipt
acknowledged, if telecopied; and on the next business day, if timely delivered
to any air courier guaranteeing overnight delivery.

      (d) Assignment of Registration Rights. Except as otherwise provided below,
neither party may assign this Agreement or any of the rights and obligations of
the parties hereunder without the prior written consent of the other party:

            (i) Holdings may assign to a Permitted Transferee the right to
      participate with Holdings in any registration of Eligible Common Stock
      held by Holdings pursuant to Section 3 hereof;

            (ii) Holdings may assign this Agreement and all of its rights and
      obligations hereunder to a Permitted Transferee who acquires from Holdings
      all of the shares of Eligible Common Stock owned by Holdings; or

            (iii) either party may assign this Agreement and all its rights and
      obligations under this Agreement to the assignee of all or substantially
      all of the assets of such party including an acquisition through merger,
      provided that such party shall in no event be released from its
      obligations hereunder without the prior written consent of the other
      party.

      (e) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.

      (f) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.

      (g) Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without giving effect to such
jurisdiction's conflicts of law provisions.

      (h) Severability. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
such provision in every other respect and of the remaining provisions contained
herein shall not be affected or impaired thereby.

      (i) Entire Agreement. This Agreement is intended by the parties as a final
expression of their agreement and intended to be complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. This Agreement supersedes all prior
agreements and understandings between the parties with respect to such subject
matter.

<PAGE>
                                                                              15

      (j) Confidentiality. The parties hereto agree, and will cause all Persons
under their control to agree, to maintain the confidentiality of any material,
non-public information with respect to the Company that they may obtain pursuant
to the terms of this Agreement, and not to use, or permit the use of, such
information for any improper purpose or in any manner that might be detrimental
to the Company.

      (k) Termination. This Agreement and the respective obligations and
agreements of the parties hereto, except as otherwise expressly provided herein,
shall terminate on the date that Holdings is no longer the beneficial owner of
5% or more of the outstanding Common Stock.

<PAGE>
                                                                              16

      IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.

                               KHANTY MANSIYSK OIL CORPORATION

                               By: /s/ [ILLEGIBLE]
                                   ---------------------------------------------
                                   Name:
                                   Title:

                               KHANTY HOLDINGS LLC

                               By: The Beacon Group Energy Investment Fund, L.P.

                               By: Beacon Energy Investors, L.L.C.,
                                      its General Partner

                               By: Energy Fund GP, Inc.,
                                      a Member

                               By:  /s/ Robert F. Semmens
                                   ---------------------------------------------
                                   Name:  Robert F. Semmens
                                   Title: Managing Director

<PAGE>
                                                                              16

                                    Exhibit A

                          ADDITIONAL PARTY COUNTERPART

      The undersigned, after having received and reviewed to its satisfaction a
copy of the Registration Rights Agreement, dated as of October 15, 1997 (the
"Registration Rights Agreement"), by and between Khanty Mansiysk Oil Corporation
(the "Company") and Khanty Holdings, LLC, does hereby agree to become party to
the Registration Rights Agreement thereby accepting all the rights, benefits and
obligations of a holder of Eligible Common Stock thereunder. The Company may
attach this page as a counterpart to the Registration Rights Agreement and the
undersigned agrees that such attachment shall be deemed conclusive evidence of
its acknowledgment and acceptance of the terms thereof.

      Defined terms used herein and not otherwise defined herein shall have the
meaning given such terms in the Registration Rights Agreement.

Dated:

                                       [NAME]
                                       [ADDRESS FOR NOTICES]

                                       By:
                                           ---------------------------
                                           Name:
                                           Title:
Acknowledged and Accepted By:

KHANTY MANSIYSK OIL CORPORATION

By:
    ----------------------------
    Name:
    Title:

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