Contract analysis

I. EXECUTIVE SUMMARY This memorandum analyzes the obligations of our client, Dunmore Energy Holdings Ltd. ("DEH" or the "Company"), to indemnify and advance defense costs for three key individuals who are or may become subjects or targets of a criminal inquiry opened by the U.S. Department of Justice on April 19, 2022. On that date, the National Security Division, Counterintelligence and Export Control Section ("CES"

II. FACTUAL BACKGROUND A. The DOJ Inquiry and the Individuals' Roles On April 19, 2022, the Department of Justice, through its National Security Division, Counterintelligence and Export Control Section, opened a formal criminal inquiry into the activities of Dunmore Energy Holdings Ltd. and its subsidiaries. The lead prosecutor assigned to the matter is Assistant United States Attorney Meredith Calloway of the U.S. A

III. LEGAL FRAMEWORK — INDEMNIFICATION AND ADVANCEMENT UNDER CAYMAN ISLANDS LAW A. Cayman Islands Companies Act (as Revised) Dunmore Energy Holdings Ltd. is incorporated as an exempted company with limited liability under the laws of the Cayman Islands, registration number MC-334821, with its registered office at Harbour Place, 4th Floor, 103 South Church Street, George Town, Grand Cayman KY1-1002. As a Cayman Island

Article 168.1 provides, in relevant part: "The Company shall indemnify every Director, officer, and employee of the Company and of each subsidiary of the Company (each, an 'Indemnified Person') against all actions, proceedings, costs, charges, losses, damages, and expenses which such Indemnified Person may incur or sustain by reason of any act done, concurred in, or omitted in or about the execution of his or her dut

Article 168.2 addresses advancement specifically: "The Company shall advance to each Indemnified Person defense costs reasonably incurred in connection with any proceeding referred to in Article 168.1, as and when such costs are incurred, upon receipt by the Company of a written undertaking by or on behalf of such Indemnified Person to repay all amounts so advanced if it shall ultimately be determined that such Indem

IV. INDIVIDUAL EMPLOYMENT AGREEMENTS In addition to the indemnification and advancement rights established by the DEH Articles, each of the three individuals has specific indemnification provisions in his or her individual employment agreement. These contractual provisions provide a separate and parallel source of the Company's obligations. A. Gerald Fisk's Employment Agreement Fisk is employed under a written employ

Section 9 of the Fisk Employment Agreement contains a specific indemnification clause, which provides, in relevant part: "The Company shall indemnify the Employee and advance to the Employee all reasonable legal fees, costs, and expenses incurred by the Employee in connection with any governmental investigation, civil action, criminal proceeding, or administrative action arising from or relating to the Employee's dut

Section 9.2 sets forth the undertaking-to-repay requirement: "The Employee's right to advancement of defense costs under this Section 9 shall be conditioned upon the Employee's execution of a written undertaking to repay all amounts advanced if a final, non-appealable determination is made by a court of competent jurisdiction that the Employee acted with willful misconduct or in bad faith." Several features of the Fi

Article 11 of the Sorokin Employment Agreement contains an indemnification provision that extends advancement of defense costs for proceedings arising from Sorokin's employment with DTI. Importantly, the provision specifies that the parent company, Dunmore Energy Holdings Ltd., is the entity responsible for funding any advanced defense costs. This intercompany allocation of responsibility reflects the economic realit

V. ANALYSIS OF WHETHER THE WILLFUL MISCONDUCT / FRAUD EXCEPTION BARS ADVANCEMENT A. Standard for Denial of Advancement The central question in determining whether the Company may lawfully withhold advancement of defense costs is whether the willful misconduct / fraud exception contained in the DEH Articles and the individual employment agreements has been triggered. Under both the Articles and the employment agreemen

1. A recital of the individual's status as an Indemnified Person under the DEH Articles and the relevant employment agreement;

2. A description of the proceeding or investigation giving rise to the advancement request (the DOJ inquiry, grand jury subpoena GJ No. 22-418);

3. The individual's agreement to repay all amounts advanced by the Company if it is determined by final, non-appealable adjudication (or by settlement to which the Company consents) that the individual is not entitled to indemnification under the DEH Articles or the applicable employment agreement;

4. A specification that the undertaking is an unsecured, personal obligation of the individual—that is, the Company will not require the individual to post collateral, provide a guarantee, or demonstrate financial capacity to repay as a condition of receiving advancement;

5. An acknowledgment by the individual that the advancement of defense costs does not constitute a determination by the Company that the individual is entitled to indemnification, and that the Company reserves all rights with respect to the ultimate indemnification determination; and

6. Standard representations and warranties, including the individual's agreement to cooperate with the Company's internal investigation and to provide such information as may reasonably be required for the Company to comply with its document production obligations under the grand jury subpoena, subject to the individual's own Fifth Amendment and other constitutional rights. The undertaking should be unsecured and per

VI. D&O INSURANCE COVERAGE FOR INDIVIDUAL DEFENSE COSTS A. Garrison Mutual Insurance Co. Policy Dunmore Energy Holdings Ltd. maintains a Directors and Officers Liability Insurance policy (the "D&O Policy") issued by Garrison Mutual Insurance Co. The relevant policy details are as follows: The D&O Policy provides coverage for defense costs incurred by the Company or by individual directors and officers in connection w

VII. COORDINATION WITH INDIVIDUAL COUNSEL A. Current Status As of the date of this memorandum (May 5, 2022), none of the three individuals at issue has yet retained personal counsel. We anticipate that each individual will retain separate counsel in the near term, as the nature and trajectory of the DOJ inquiry make the retention of individual counsel both prudent and necessary. The individuals' anticipated counsel s