Consulting Agreement with Boris Cherdabayev

On December 31, 2009 the Company entered into a Consulting Agreement with Boris Cherdabayev, the Chairman of the Company’s board of directors. The Consulting Agreement became effective on January 1, 2010. Pursuant to the Consulting Agreement, in addition to his services as Chairman of the board of directors, Mr. Cherdabayev was to provide such consulting and other services as may reasonably be requested by Company management.

The Consulting Agreement provides for an extraordinary event payment equal to the greater of $5,000,000 or the base compensation fee for the remaining initial term of the Consulting Agreement. Pursuant to the terms of the Consulting Agreement the Sale constituted an extraordinary event.

In February 2011 Mr. Cherdabayev agreed to an amendment to his Consulting Agreement that will defer, until the escrow amount is released, the $5,000,000 extraordinary event payment that would otherwise have been payable to him in connection with the Sale.  The amendment provides further, that the extraordinary event payment will be limited to the amount remaining in escrow if less than $5,000,000, with the possibility of it being reduced to $0 if the escrow amount is depleted entirely.  Payment of this liability will be paid to Mr. Cherdabayev, if at all, before any escrow funds are otherwise distributed, as would have been the case had Mr. Cherdabayev not agreed to the amendment. As of September 30, 2011, the $5,000,000 has been accrued and included in accrued consulting and severance payments on the balance sheet.

Extraordinary Event Payment Obligations to Executive Officers, Certain Employees and Other Consultants

On December 31, 2009, the Company entered into employment agreements with executive officers of the Company. These agreements contained confidentiality, non-competition and non-interference provisions and provided for those individuals to receive payments upon termination or upon the occurrence of an extraordinary event.  The Company also had agreements with certain employees and other consultants, in addition to Mr. Cherdabayev, that provided for payments upon the occurrence of an extraordinary event.  The Sale constitutes an extraordinary event under the agreements discussed herein.  Upon consummation of the Sale of Emir Oil, the Company became obligated to pay extraordinary event payments totaling $7,886,648, including $4,111,958 to executive officers and $3,774,690 to certain employees and consultants, in addition to the payment to Mr. Cherdabayev discussed above. As of September 30, 2011, $4,995,710 has been paid.  The remaining $2,890,938 is included in accrued consulting and extraordinary payments on the balance sheet.

Litigation

In December 2003, Brian Savage, Thomas Sinclair and Sokol Holdings, Inc. filed complaints against the Company, its founders, and former directors, Georges Benarroch and Alexandre Agaian.  The complaints all arose from the acquisition of a controlling interest in Emir Oil.  After a complicated procedural history that has previously been described in the Company’s annual and quarterly reports, the case was set for trial in the United States District Court for the Southern District of New York.

The Court scheduled a jury trial to begin on October 5, 2010.  However, in a series of rulings on motions in limine and pursuant to the Court's Order to Show Cause in advance of trial, the Court granted summary judgment dismissing all remaining claims after plaintiffs agreed with respect to their unfair competition claim that plaintiffs had no evidence of damages other than the evidence the District Court had excluded pursuant to its ruling on a motion in limine.

On February 8, 2011, the Trial Court signed a final Order granting judgment against plaintiffs and in favor of the Company and all other BMB defendants.  The judgment was based on the Court's prior Orders and the stipulations of the parties entered on the record on October 5, 2010. The judgment was filed on February 9, 2011.

Plaintiffs filed a Notice of Appeal on February 22, 2011, and the appeal was docketed with the United States Court of Appeals for the Second Circuit.  After full briefing and oral argument, the United States Court of Appeals for the Second Circuit summarily affirmed the decision of the trial court, dismissing Plaintiffs’ entire case on September 26, 2011.  Plaintiffs did not seek reconsideration and the time to do so has expired.  The Company has sought an award of costs against Plaintiffs of $26,207. That request to recover costs will be heard on November 30, 2011.