##### 



E.P.
 InterOil, Ltd
 Attn:
    
    Mr Christian Vinson, Chief Operating Officer
Mr Tom Donovan, Chief Financial Officer
  RE:
    
    USD 150,000,000.00 (UNITED STATES DOLLARS ONE HUNDRED AND FIFTY MILLION ONLY) SECURED
REVOLVING CRUDE OIL IMPORT FACILITY
   1.
    
    BorrowerE.P.  InterOil, Ltd
C/o InterOil Australia Pty Ltd
PO Box 6567
Suite 2, Level 2 79-87 Abbott Street
Cairns QLD 4870
Australia(the Borrower)2.
    
    AmountUSD 150,000,000.00 (United States Dollars One Hundred and Fifty Million only),
subject to the Price Escalation Provision defined in Clause 10(a) below.3.
    
    FacilitiesThe purpose of the Facilities is to finance the Borrowers ongoing purchase of crude
oil/petroleum products pre-sold to InterOil Limited (the Refiner or IOL), including related
hedging requirements. The Refiner will process the crude oil into petroleum products (the
Products) in its refinery located at Napa Napa, Fairfax
Harbour near Port Moresby, Papua
 
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(i)
    
    all distributors in the Independent State of Papua New Guinea (the State) that
distribute the petroleum products (the Products) to retailers of the Products.(ii)
    
    The Borrower under the IOL Export Contract.
  Facility 1:
  Sublimit under Facility 1: USD 6,500,000.00 (United States Dollars Six Million Five Hundred
Thousand only) for Hedging Transactions via BNP Paribas Energy Indexed Transaction Group or other
acceptable counter parties
  Facility 2:
   (a)
    
    the extension of cash-secured short-term advances (Advances) on a fully
cash-covered basis at the sole discretion of the Bank for such period(s) as the Bank may
deem fit, provided that the Bank is in full receipt of additional pledged cash deposits
equivalent to 100% of such Advance made by Interoil Corporation, to
be utilised to
refinance any outstanding under Facility 1. Such additional pledged cash deposits shall be
subject to the Charge on Cash Amounts dated 31 May 2004 executed by IOC in favour of the
Bank and placed in such account(s) of IOC as the Bank may deem fit; and
 (b)
    
    the discounting of any monetary receivables (Discount) arising pursuant to or in
connection with the SIETCO Export Contract and the SIETCO Naphtha Contract, or such other
sales contracts which are acceptable to the Bank.
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(LOGO)
 thereof, may be reduced, increased added to or otherwise adjusted and reviewed by the Bank from
time to time at the Banks sole and absolute discretion (whether pursuant to the Borrowers request
or otherwise and whether subject to such additional collateral pricing and conditions as the Bank
may deem fit to impose) (the Adjustment). Accordingly, any notice issued by the Bank to the
Borrower advising on an Adjustment shall take effect in accordance with such notice (which is in
any event, no later than thirty (30) days from the date of such
notice, unless otherwise agreed by the Bank and the Borrower in writing), which shall be fully binding upon the Borrower and
automatically constitute a supplement to this Letter Agreement upon such issuance by the Bank.In the event of any reduction in the credit limit of the
Facilities or any part thereof pursuant to
an Adjustment, the Borrower undertakes to make such repayment of the
outstandings under the Facilities
as the Bank may require to comply with the reduced credit limits. In the event of any increase in
the Facilities or any part thereof or any additional credit limit
granted pursuant to an Adjustment, the grant and utilisation of such
increased or additional credit limit shall be subject to the terms and
conditions of this Letter Agreement. The Borrower further undertakes to comply with the additional
collateral and conditions imposed by the Bank in the said notice relating to an Adjustment provided
that any additional collateral to be given shall be subject to the Inter-creditor Deed (defined
below).4.
    
    Commission & ChargesThe Borrower shall pay to the Bank the fees set out in the fee letter of the even
date issued by the Bank together with this Letter Agreement (the Fee Letter). The Borrowers acceptance
of this Letter Agreement shall be deemed as also acceptance of the Fee
Letter.5.
    
    Interest for Short Term Loans(a)
    
    The rate of interest applicable to any Advance under the Short Term Loans during each
Interest Period relating thereto shall be 2.5% per annum above LIBOR. Interest on each Advance
shall be payable at the end of such Interest Period to which that Advance relates.(b)
    
    The Interest Period for each Advance under the Short Term Loans to which an LC
relates, shall be 1 (one) week, or any other period as notified by the Borrower to the
Bank in writing not less than 2 (two) Business Days prior to the date of drawing or (as
the case may be) expiry of the current Interest Period and agreed by the Bank. Any
Interest Period of any Advance under a Short Term Loan to which an LC
relates which ends after the Maturity Date of that Short Term Loan or
which ends after the Demand Date, shall be automatically abridged to end on the earlier of that Maturity Date of that Short
Term Loan or (as the case may be) the Demand Date.(c)
    
    All interest (including default interest) shall be calculated on the basis of a year
of 365 days for Singapore Dollar and Sterling Pound, and on the basis of a year
of 360 days for all other currencies.LIBOR means, in respect of any interest period or
other period and in relation to any Advance or unpaid sum, the rate per annum
determined by the Bank to be the rate which appears under the Reuters LIBOR01 or Telerate
Page 3750 (or such other page or service as may replace the Reuters, Telerate or such
other system) at or about 11 am, London time, two (2) London Business Days prior to the commencement
of such interest period or other period.In the absence of the above mentioned rate for determining LIBOR and at the Banks sole
discretion, LIBOR means, in respect of any Interest Period or other period and in
relation to any Advance or unpaid sum, the rate per annum determined by the Bank to be
the rate at which deposits denominated in the currency of the Advance or unpaid sum for
the relevant Advance or other such sum (as the case may be) were offered to the Bank by
leading banks in the London
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Interbank Market at or about 7 pm, Singapore time, two (2) Business Days prior to the
commencement of such Interest Period or other period.5A.
    
    Interest for Advances and Discounts under Facility 2(a)
    
    The rate of interest applicable to any Advance under Facility 2 during each applicable
Interest Period relating thereto shall be LIBOR. The rate of interest applicable to each
Discount under Facility 2 shall be 0.50% per annum above LIBOR calculated on the amount of
the relevant Receivables for the period commencing on the proposed value date of the
discounting until the date of actual receipt by the Bank of full payment of the Receivables
from the relevant counterparty. Interest on each Advance under Facility 2 shall be payable
at the end of such Interest Period to which that Advance relates.
Interest and fees from each
Discount may either be (1) deducted upfront from the funds made available by the Bank under
the relevant Discount; or (II) from the proceeds of the
Receivable received from the relevant
counterparty, such deduction to be made at the Banks sole discretion.(b)
    
    The Interest Period for each Advance under Facility 2 shall be 1 (one) week, or any
other period as notified by the Borrower to the Bank in writing not less than 2
(two) Business Days prior to the date of drawing or (as the case may be) expiry of the
current Interest Period and agreed by the Bank.6.
    
    CurrencyIn United States Dollars (USD) only.7.
    
    Availability and Tenor; Repayment(a)
    
    The Facilities shall be available from the date of acceptance hereof subject to
fulfilment of all conditions precedent and Clause 10 until 30 June 2006 (the
Availability Period). No drawings or utilisation shall be permitted after the
Availability Period. Notwithstanding the foregoing, the Bank may within its sole discretion
decide whether to extend the Availability Period. For the avoidance of doubt, any
utilisation under the Facilities requested within the Availability Period but which has a
maturity date ending beyond the Availability Period shall, subject to the terms of this
Letter Agreement, be permitted so long as that utilisation is fully repaid by such maturity
date.(b)
    
    Without prejudice to the Banks right of review:
 (i)
    
    the Borrower shall repay each Advance under the Short Term Loans on the last day of
the Interest Period relating to that Advance together with all unpaid interest accrued on
that Advance, unless otherwise earlier demanded by the Bank in which
event the Borrower shall pay such Advance upon such demand (the Demand Date). Any Advance so repaid
prior to the Maturity
Date of the Short Term Loan to which such Advance relates, may be reborrowed during the
Availability Period subject to fulfilment of the conditions in Clause 10(b) which shall
apply to such reborrowing; and(ii)
    
    all outstandings under the Facility 1 (other than the Short Term Loans ) shall
mature and be repayable upon the respective maturity dates, being (in relation to each
transaction financed and LC issued) on later than 90 days from bill of lading date to
which that LC relates. No amount repaid may be reborrowed.(iii)
    
    the Borrower shall repay each Advance under Facility 2 on the last day of the
Interest Period relating to the Advance, unless otherwise earlier demanded by the Bank in
which case the Borrower shall pay such Advance on the Demand Date. Any amount repaid may
not be reborrowed.
 (c)
    
    No later than 3 months before the end of the Availability Period, the Bank and the
Borrower shall meet to consider and discuss the renewal of the Facilities for another 12
months beyond
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(d)
    
    Notwithstanding any provision to the contrary herein, nothing herein shall oblige the Bank to
grant or continue to grant the Facilities unless the Bank in its sole discretion agrees. The
Facilities granted herein shall be deemed to be granted on a fully uncommitted basis. In particular
but without prejudice to the foregoing, each utilisation under the facilities for any transaction
is subject to the Banks approval of that transaction.
 8. Review
  (a)
    
    declare all or any part of the unutilised portions of the Facilities to be
immediately cancelled whereupon they shall become so cancelled;(b)
    
    declare all or any part of the amounts outstanding under such Facilities to be
immediately due and payable whereupon they shall become so due and payable;(c)
    
    enforce its rights under any security documents; and/or(d)
    
    if the Banks obligations under any notes or bills (accepted, endorsed or
discounted), bonds, guarantees, indemnities, documentary or other credits or any
instruments issued by the Bank have not been fully discharged, require the Borrower to
immediately pay to the Bank such amount of monies as may be necessary to enable the Bank
to apply the same to obtain a full discharge of its liabilities, actual or contingent,
under such notes, bills, bonds, guarantees, indemnities, documentary or other credits or
any instruments.
 9. Security; Collateral and Security Margin
  From the Borrower
 (a)
    
    Deed of Charge (limited debenture) dated 9 June 2004.(b)
    
    Deed of Assignment of Proceeds dated 9 June 2004 in respect of:
 (i)
    
    hedging contracts between the Borrower and acceptable counter parties for the
protection of the refinery crack spreads (the Hedging Contracts), including all
proceeds thereunder;(ii)
    
    crude oil sale and purchase contracts between the Borrower (as seller) and
the Refiner (as buyer) dated 31 May 2004 (the IOL Crude Oil Contract), including all
proceeds thereunder,(iii)
    
    petroleum products sale and purchase contract between the Borrower (as
buyer) and the Refiner (as seller) dated 31 May 2004 (the IOL Export Contract),
including all proceeds thereunder.(iv)
    
    Export Marketing and Shipping Agreement between the Borrower and Shell
International Eastern Trading Company dated 23 March 2001 (the SIETCO Export
Contract), including all proceeds thereunder.
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(v)
    
    Agreement for the Sale and Purchase of Naphtha between the Borrower and Shell
International Eastern Trading Company dated 8 February 2001 (the SIETCO Naphtha Export
Contract) including ail proceeds thereunder,(vi)
    
    all other sale contracts entered into by the Borrower with any other
buyers, in respect of the Products, including all proceeds thereunder.
 (c)
    
    Charge On Cash Amounts dated 9 June 2004 on all account(s) held by the Borrower
with the Bank, including but not limited to the EPI Collection Account and the EPI Security
Margin Account.
 From InterOil Limited (IOL)
 (d)
    
    Corporate guarantee from IOL(e)
    
    Mortgage of Contractual Rights in respect of;
 (i)
    
    the Domestic Sales Contract between the Refiner and Shell Papua New
Guinea Limited dated 9 April 2001 (the Shell Domestic Contract), including all
proceeds thereunder.(ii)
    
    the Domestic Sales Contract between the Refiner and BP Papua
New Guinea Limited (now known as InterOil Products Limited since 29 April. 2004) dated 27 April
2004 (the BP Domestic Contract), including all proceeds thereunder.(iii)
    
    sale and purchase contract between the Refiner and Niugini Oil
Services Limited dated 28 May 2004 (the Niugini Domestic Contract), including all
proceeds thereunder.(iv)
    
    the IOL Export Contract, including all proceeds thereunder.(v)
    
    the IOL Crude Oil Contract, including all proceeds thereunder.(vi)
    
    all other sale contracts entered into by the Refiner with any other buyers in
respect of the Products (including but not limited to the sale and purchase contract between the
Refiner and Mobil Oil New Guinea Limited. (the Mobil Domestic
Contract)),
including all proceeds thereunder.
 (f)
    
    Fixed Charge over acceptable insurance policy covering any losses to crude oil and the
Products located in the Refiners storage facilities, with the Bank nominated as sole named
loss payee including all proceeds thereunder.(g)
    
    Fixed or floating charge dated 9 June 2004 on all crude oil and the Products located
in the Refiners IOL Refinery,as the case may be.(h)
    
    Fixed Charge over all amounts standing to the credit of the IOL Collection Account and
IOL Operating Account dated 9 June 2004.(i)
    
    Charge On Cash Amounts of all accounts(s) held by the Refiner
with the Bank, including
but not limited to the IOL Account dated 9 June 2004.(j)
    
    Deposit Agreement between the Bank, IOL and the Australia and New Zealand Banking Group
(PNG) Limited (ANZ PNG).(k)
    
    Irrevocable Letter of Authorisation in respect of the IOL Account dated 10 June 2004.
 From InterOil Corporation (IOC)
 (l)
    
    Corporate guarantee dated 9 June 2004 from InterOil Corporation (IOC).
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(m)
    
    Charge on Cash Amounts of all account(s) held by IOC with the Bank, including
but not limited to the IOC Security Margin Account dated 9 June 2004.
 From Other Parties/Other Documents
 (n)
    
    Corporate guarantee dated 9 June 2004 from SP InterOiL LDC.(o)
    
    Original bills of lading made to the order or endorsed to the Bank.(p)
    
    Intercreditor Agreement between the Borrower, the Refiner, Overseas Private
Investment Corporation (OPIC) and the Bank.(q)
    
    Letter of Acknowledgement by Petrofac Niugini Limited in respect of the Banks
security interest in and to the crude oil and Products in the Refinery dated 9 June 2004.(r)
    
    Notice of Priority Charge by OPIC to ANZ PNG dated 10 June 2004 notifying the
Banks priority security and interest inrespect of the IOL Operating Account
pursuant to the Intercreditor Agreement.(s)
    
    Any other security which may be reasonably requested by the Bank or advised by
the Banks legal counsels.
   Security Margin
 
  (a)
    
    all current and not overdue USD receivables under the SIETCO Export Contract and the
SIETCO Naphtha Export Contract and any other USD receivables, in each case acceptable
and assigned to the Bank to be deposited into the EPI Collection Account; and(b)
    
    all USD cash deposits standing to the credit of the IOC
Security Margin Account, EPI Security Margin Account, EPI Collection Account
the IOL Account. (the Cash Deposit),
   Collateral Value Ratio (CVR)
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IV + AR + CH + HGSLC + LN + HGD
 where:IV
    
    =
    
    aggregate of marked-to-market value of crude oil and the
Products inventories financed
under Facility 1.AR
    
    =
    
    aggregate of all current and not
overdue receivables of (a)
the Refiner under the shell
Domestic Contract, the BP Domestic Contract, the Mobil
Domestic Contract and the
Niugini Domestic Contract, and all other domestic sate
contracts entered into by the
Refiner with any other buyers from time to time in respect
of the Products and (b) all
receivables of the Borrower under the SIETCO Export
Contract and the SIETCO
Naphtha Export Contract and all
other sale contracts entered into by the Borrower with any other
buyers from time to time in respect of the
Products, in each case to be
acceptable to the Bank at its sole discretion (including
the USD receivables).CH
    
    =
    
    aggregate of all credit balances in the IOC Security Margin
Account, EPI Security
Margin Account, EPI Collection Account, the IOL Collection
Account and the IOL
Account.LC
    
    =
    
    aggregate of all principal outstandings (whether actual or
contingent) under or pursuant
to all documentary letters of credit and / or standby
letters of credit / bank guarantees
issued by the Bank under facility 1.LN
    
    =
    
    aggregate of all principal outstandings under the Short
Term Loans.HGS
    
    =
    
    aggregate of all marked-to-market hedging gains under the
Hedging Contracts.HGD
    
    =
    
    aggregate of all marked-to-market
hedging losses under the Hedging
Cotratcts.
  10.
    
    Utilisation of the Facilities
  (a)
    
    the issuance of each LC shall be subject to:-
 (i)
    
    receipt in advance of the Banks standard application form from the Borrower,
duly executed and lodged with the Bank no later than 3 Business Days before the date of issuance of each LC;(ii)
    
    receipt in advance of satisfactory provisional economics related to the
LC lodged with the Bank nolater than 3 Business Days before the date of
issuance of each LC, which takes into account any dead stock in the IOL Refinery;(iii)
    
    receipt by the Bank of the Minimum Cash Deposit;(iv)
    
    the Security Margin being complied with at all times;(v)
    
    the CVR being at least equal to 1.20 at all times;
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(vi)
    
    receipt by the Bank of such sale contracts and other documents at
such time and in such form as the Bank may require in respect of the
transaction to be financed by the Bank under each utilisation; and(vii)
    
    notwithstanding the Facility Amount set out in Clause 2, the
face amount of the LC
shall be subject to the price escalation provision as defined in the price
formula in the
LC and in such event, the Facility Amount shall be automatically
increased to include
such price escalation (the Price Escalation Provision);
 (b)
    
    drawings of the Short Term Loans shall be subject to:-
 (i)
    
    receipt by the Bank of not less than two (2) Business
Days prior written drawing notice in the form of Annex A or such other
From acceptable to the Bank, prescribed in the Standard Terms of each
proposed drawing date;(ii)
    
    the Minimum Cash Deposit being complied with at all times;(iii)
    
    the Security Margin being complied with at all times;(iv)
    
    the CVR being at least equal to 1.20 at all times;(v)
    
    the Short Term Loans being used only for the purpose of refinancing any
LC / SBLC/ bank guarantee issued by the Bank under this Letter Agreement; and(vi)
    
    the amount of each drawing under the Short Term Loan shall not exceed the
amount drawn in relation to any LC/SBLC/bank guarantee to which such drawing
relates.
 (c)
    
    Issuance of each SBLC and / or bank guarantees shall be subject to:
 (i)
    
    receipt in advance of the Banks standard application form
from the Borrower, duly executed and lodged with the Bank no later than 3 Business
Days before the date of issuance of each SBLC / bank guarantee;(ii)
    
    receipt by the Bank of acceptable hedging contracts with acceptable counter parties;(iii)
    
    the Minimum Cash Deposit being complied with at all times;(iv)
    
    the Security Margin being complied with at all times; and(v)
    
    the CVR being at least equal to 1.20 at all times.
  (d)
    
    Utilisation of any commodity derivatives facility is subject to the Banks
receipt of the following documents in form and substance satisfactory to the
Bank;
 (i)
    
    duly executed Consent for Disclosure Form as per the Banks
prescribed form;(ii)
    
    duly executed Risk Disclosure Statement as per the Banks
prescribed form; and(iii)
    
    such other documents as the Bank may require or request.
 (e)
    
    Advance under Facility 2 shall be subject to;
 (i)
    
    receipt by the Bank of not less than two (2) Business Days prior written drawing
notice in the form of Annex A prescribed in the Standard Terms of
each proposed drawing date; and
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(ii)
    
    full receipt by of the Bank of additional new pledged cash
deposits equivalent to at least 100% of the amount of each drawing and
estimated interest payable under each relevant drawing.
 (f)
    
    Discounting shall be subject to:
 (i)
    
    Receipt by the Bank of an acceptable commercial invoice and
respective copy bills of lading issued by the Borrower to SIETCO with respect to
deliveries of the Products
under the SIETCO Export Contract and the SIETCO Naphtha Export Contract, or
any
other commercial invoice acceptable to the Bank, as determined by the Bank at
its sole discretion; and(ii)
    
    Execution of request for Discount, in the form and substance satisfactory to
the bank.
 11.
    
    Additional Covenants & Undertakings
 (a)
    
    The Borrower undertakes that, in the event the IOL
Refinerys capacity utilisation at any time is less than 50% (excluding
planned shutdowns for which prior notice is given to the Bank) for more
than a period of 10 consecutive days, it shall hedge or procure the
Refiner to hedge, all crude oil sold
to the Refiner by the Borrower in such manner acceptable to the Bank so
as to mitigate any potential adverse oil price exposure that may result
from the Refinerys non-operation.(b)
    
    The Borrower undertakes to provide to the Bank a
reconciliation of the provisional economics related to each crude oil
cargo financed, in accordance to Clause to 14.2 below.(c)
    
    The Borrower undertakes to ensure that the Refinery
Contractor and / or an acceptable inspection company (including but
not limited to SGS PNG)
issues weekly reports directly to the Bank, confirming the volume (among
other information) of the crude oil and the Products located in the IOL
Refinery and charged to the Bank.(d)
    
    The Borrower undertakes to provide to the Bank its
weekly receivables ageing report.(e)
    
    The Borrower undertakes to provide to the Bank the
Refiners weekly receivables ageing report.(f)
    
    In addition to any other accounts required to be
furnished by the Borrower set out in the Standard Terms, the Borrower
undertakes to provide to the Bank;
 (i)
    
    at the end of each quarter of each
calendar year, a copy of the Borrowers consolidated accounts including
the auditors Report of Factual Findings and certified by the Chief
Financial Officer of the Borrower; and(ii)
    
    at the end of each calendar
year, a copy of the Borrowers audited accounts duly certified by its
auditors.
 (g)
    
    The Borrower undertakes to provide, and procure
that the Refiner provides, to the Bank at the beginning of each quarter
of each calendar year, an operating expenses budget (for expenses
denominated in Kina, USD and any other currency) for the following
quarter.(h)
    
    The Borrower undertakes not to create any future
charge, mortgage, pledge or lien in respect of any of the properties or assets
charged or to be charged to the Bank under the Security Documents nor assign any of its
account receivables which have been or are to be charged to the Bank
under the Security Documents, without the prior written consent of the
Bank, save and except for such existing security interest in favour of
OPIC and notified to the Bank as at the date of this Letter Agreement.
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(i)
    
    The Borrower shall not, and shall procure that the Refiner and each of the Guarantors
shall not, whether by a single transaction or by a number of transactions, whether related
or not (other than in the ordinary course of business and at arms length for valuable
consideration), sell, transfer, assign, lease out, grant licenses over, alienate, lend or
otherwise dispose of (whether outright by a 
sale-and-repurchase or sale-and-lease-back
arrangement or otherwise) or cease to exercise direct control over all or any part of its
assets, without the prior written consent of the Bank.(j)
    
    The Borrower undertakes to immediately notify the Bank of any notice
of default or termination it receives from OPIC or from any party under the
Project Agreement.11A.Additional Terms Relating to the Discounting under Facility 2(a)
    
    Any Discount shall be subject to a right of limited recourse giving the Bank the
right to require the Borrower to repay the Bank (in full or in part, as the Bank may in
its sole discretion determine) any Receivable which is the subject of any Discount, if any
of the following events occurs in relation to such Receivable (each, a Recourse Event);
 (i)
    
    the relevant counterparty fails or Refuses or is unable to pay the Receivable or any
part thereof, or such Receivable or any part thereof is not received by the Bank on its
relevant due date, for any reason whatsoever (including but not limited to whether due to
force majeure or a right of set-off or a contractual breach, etc. or otherwise and whether
due to a default by the Borrower or any party or otherwise);(ii)
    
    the relevant counterparty has paid the relevant Receivable or any part thereof to the
Borrower;(iii)
    
    the relevant sales contract to which such Receivable relates is terminated, aborted,
repudiated, invalid, illegal or otherwise unenforceable for any reason whatsoever, or the
relevant counterparty makes any prepayment of such Receivable which has the effect of
decreasing the amount of such Receivable;(iv)
    
    the Borrower has been or is in breach of any of its representations or undertakings
under this Letter Agreement or an Event of Default or a Potential Event of Default has
occurred;(v)
    
    the monetary value of the Receivable as calculated by the
Borrower, or otherwise notified (in whatever manner) to the Bank by the Borrower, prior to any Discount of such
Receivable (the Initial Receivable Value) is less than the amount of such Receivable
which is actually received by the Bank on its due date (the Actual Receivable Value),
provided that the recourse of the Bank in such event shall only be in respect of the
amount equal to the
difference between the Initial Receivable Value and the Actual Receivable Value (the
Excess Payment).
 (b)
    
    On the occurrence of any Recourse Event, the Borrower shall by no later than two (2)
Business Days of the demand by the Bank:
 (i)
    
    pay in full, the amount equal to the relevant Receivable or (where the Recourse Event
solely relates to Clause 11A(v)) the Excess Payment, which is the subject of any Discount
and to which such Recourse Event relates (such amount, the Recourse Amount); and(ii)
    
    indemnify the Bank against any cost, expenses (including legal expenses on a full
indemnity basis), loss or liability incurred by the Bank as a result of the occurrence of
any Recourse Event (including, without limitation, any costs of funding and related
charges).
 (c)
    
    If the Borrower does not pay the Recourse Amount on the due date pursuant to Clause
11A(b), then interest shall accrue on the Recourse Amount (or part outstanding) from such
date up to
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the date of its actual payment at a rate equal to the aggregate of the interest rate as set out in
Clause 5A(a) applicable to the Discounting Facility and the margin of 5.5% per annum. Such interest
shall be immediately due and payable by the Borrower to the Bank, whether demanded or not.(d)
    
    The Borrower hereby irrevocably undertakes to the Bank that:
 (i)
    
    it shall at the request of the Bank, take all such steps, actions and/or proceedings
as shall be necessary, including but not limited to the institution of legal proceedings
against the relevant counterparty in the name of the Bank or in its own name or otherwise,
and in such manner and at such time as the Bank shall deem necessary, with a view to
assisting the Bank to recover the Receivable due by the relevant counterparty under the
relevant sales contracts to which a Discount relates;(ii)
    
    in the event that the Borrower recovers, directly or indirectly, from the relevant
counterparty any Receivable to which a Discount relates, by whatever means (including but
not limited to legal proceedings, set-off, counterclaim or any other form of compensation
or through any other method whatsoever), the Borrower shall hold these amounts in trust
for the Bank and shall forthwith pay/refund the Bank any amounts so recovered, up to the
amount of the relevant Receivable which is the subject of such Discount;(iii)
    
    it shall take such actions and execute such documents and deeds as the Bank may
require to enable the Bank to obtain full and unencumbered rights to each relevant
Receivable from the relevant counterparty;(iv)
    
    it will duly perform all its obligations under each relevant sales contract to which
a Discount relates;(v)
    
    it has not and will not create any security interest over any Receivable which is the
subject of a Discount or any of its rights, title and interest and to
such Receivable, save
in favour of the Bank;(vi)
    
    it shall not make any amendment to or release any counterparty under any relevant
sale contract to which a Discount relates, from such counterpartys obligations to pay the
Receivable or any part thereof, or otherwise enter into any compromise with such
counterparty in respect of such obligation, without the prior written consent of the Bank;
and(vii)
    
    it shall forthwith inform the Bank if any Recourse Event
occurs or will occur.
 12.
    
    Demand Under LC(a)
    
    If any demand is made of the Bank under any LC,
the Borrower shall upon receipt of the Banks notice make immediate
payment to the Bank or any account as directed by the Bank, of an amount
equal to the amount so demanded or as otherwise stipulated by the Bank.(b)
    
    The Bank shall at all times be entitled to make
any payment under any LC for which a demand has been made without
further investigation or enquiry and need not concern itself
with the propriety of any claim made or purported to be made under
and in the manner required by the terms of such LC. Accordingly it
shall not be a defence to any demand made on the Borrower under this
Letter Agreement, nor shall the Borrowers obligations hereunder be
affected or impaired by the fact that the Bank was or might have
been justified in refusing payment in whole or in part of the
amounts so claimed.
 12




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13. Prepayment
  14.
    
    Accounts14.1
    
    General(a)
    
    Until such time that all actual and contingent obligations and liabilities of the Borrower
hereunder have been fully discharged, no amount standing to the credit of each of the accounts
set out in Clauses 14.2 to 14.9 (collectively referred to as the Accounts) shall be
repayable to the Borrower or the Refiner, unless prior written consent is given by the Bank.(b)
    
    Subject to the following provisions in this clause 14, the Bank shall at all times be
entitled (but not obliged) to apply the whole or any part of amounts standing to the credit of
the Accounts or any one or more of them, in or towards payment or satisfaction of any sums at
any time due under this Letter Agreement or any other liabilities (whether actual or
contingent, present or future and expressed in whatever currency) owing from the Borrower
under this Letter Agreement.14.2
    
    EPI Collection Account(a)
    
    The Borrower shall open with the Bank a USD account to be designated as the EPI Collection
Account in the name of the Borrower for the purpose of this Letter Agreement.(b)
    
    The Borrower shall ensure that all payments and sales proceeds under the IOL Crude Oil
Contract, the SIETCO Export Contract, the SIETCO Naphtha Export Contract and any other
contract entered into by the Borrower with any other buyer for the sale of the Products, are
paid into the EPI Collection Account.(c)
    
    Prior to the occurrence of an Event of Default (including but not limited to any of the
additional Events of Default as defined in Schedule 3 of this Letter Agreement), without
prejudice to the Borrowers repayment obligations under this Letter Agreement, the credit
balance of the EPI Collection Account shall be applied at the end of each Interest Period or
the date on which the Borrower requests a transfer pursuant to Clause 14.2(d) or any other date as selected by the Bank,
in the following priority:
 (i)
    
    Settlement of hedging contracts financed under this Letter Agreement;(ii)
    
    Fees and expenses due and payable under the Letter Agreement including the
all in financing fee and any other costs;(iii)
    
    Interest (including default interest) due and payable under this Letter
Agreement;(iv)
    
    Outstanding principal amount of the Facilities which is due and payable under
this Letter Agreement (excluding any Short Term Loans which are reborrowed pursuant to
the terms of this Letter Agreement);(v)
    
    For transfer as Cash Deposit only to the EPI Security Margin Account solely
for the purpose of complying with the Security Margin; and(vi)
    
    Any other sums due to the Bank under this Letter Agreement.
 (d)
    
    Prior to the occurrence of an Event of Default (including but not limited to any of
the additional Events of Default as defined in Schedule 3 of this Letter Agreement), after
the application of the credit balances in the order of priority indicated in Clause 14.2(c)
above, and strictly conditional upon:
 (i)
    
    the CVR being at least equal to 1.20 at all times (whether
prior to, at the time of or
following the transfer mentioned hereafter);
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(ii)
    
    the Security Margin being complied with at all times (whether prior to, at the
time of or following the transfer mentioned hereafter);(iii)
    
    the provisions of this Letter Agreement being fully complied
with;(iv)
    
    no Event of Default has occurred or will occur as a result of the transfer
mentioned hereafter;
   (aa)
    
    all net receivables and net sales proceeds derived from that crude oil cargo to which it
relates (being the gross receivables less an amount equal to the amount transferred under
clause 14.5(c )(i) but excluding excise duties and Goods and Service Tax; and(bb)
    
    all hedging gains under the Hedging Contracts to which that
crude oil cargo relates, less the aggregate of the following:
 (cc)
    
    the costs of the crude oil financed under the Facilities to which that crude oil cargo
relates;(dd)
    
    any losses/consumption of crude in the refining process to which that crude oil cargo
relates;(ee)
    
    any foreign exchange losses to which that crude oil cargo relates;(ff)
    
    all financing costs related to the procurement of that crude oil cargo; and(gg)
    
    all hedging losses under the Hedging Contracts to which that crude oil cargo relates.
    (e)
    
    Upon the occurrence of an Event of Default, the manner of allocation set out in
Clause 14.2(c ) and Clause 14.2(d) shall forthwith automatically cease and the Bank shall
be entitled to utilise all amounts standing to the credit of the EPI Collection Account
towards sole satisfaction of the Facilities in such manner and at such time(s) as the Bank
may in its sole discretion deem fit.
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(f)
    
    There shall be no withdrawal of EPI Collection Account save as provided expressly in this
Letter Agreement.(g)
    
    At the end of every quarter commencing from 30 June 2005, the Borrower shall submit to the Bank
a report on the reconciliation of the aggregate of the actual cash profit and the respective NACP
of all cargoes financed by the Bank pursuant to the Facilities during the immediately preceding
quarter that identifies and includes the amount standing to the credit of the EPI Security Margin
Account to be transferred to the EPI Collection Account, to the extent that such NACP had not
previously been taken into account in the calculation made pursuant to Clause 14.2(d). Upon the
Banks approval of such report and amount, and prior to the occurrence of an Event of Default
(including but not limited to any of the additional Events of Default as defined in Schedule 3 of
this Letter Agreement) and strictly conditional upon:
 (i)
    
    the CVR being at least equal to 1.20 at all times (whether prior to, at the time of
or following the transfer mentioned hereafter);(ii)
    
    the Security Margin being complied with at all times (whether prior to, at the time
of or following the transfer mentioned hereafter);(iii)
    
    the provisions of this Letter Agreement being fully complied with;(iv)
    
    no Event of Default has occurred or will occur as a result of the transfer mentioned
hereafter.
  (h)
    
    Upon the occurrence of an Event of Default, the manner of allocation set out in Clause 14.2(g)
shall forthwith automatically cease and the Bank shall be entitled to
utilise all amounts standing
to the credit of the EPI Security Margin Account towards sole satisfaction of the Facilities in
such manner and at such time(s) as the Bank may in its sole discretion deem fit.
 14.3 EPI Operational Account
 (a)
    
    The Borrower has opened, and shall maintain, a USD account no. 1001517679 with Wells
Fargo Bank Texas, N.A. (the EPI Operational Account).(b)
    
    The Borrower shall ensure that all USD operating expenses and repayments of principal
and interest as required under the Loan Agreement between the Borrower and OPIC dated as
of 12 June 2001, and all amendments, supplemental agreements thereafter (the OPIC
Agreement) are paid from the EPI Operational Account.
 14.4 EPI Security Margin Account
 (a)
    
    The Borrower has opened and shall maintain a USD account no: 00050-038065-002-31USD
with the Bank to be designated the EPI Security Margin Account for the purpose of
receiving the Cash Deposit to be deposited by the Borrower as part of the Security Margin,
including but not limited to the Minimum Cash Deposit.(b)
    
    Provided that:
 (i)
    
    the Security Margin being complied with at all times (whether prior to, at the time
of or following the transfer mentioned hereafter);(ii)
    
    the provisions of this Letter Agreement being fully complied with;(iii)
    
    no Event of Default has occurred or will occur as a result of the transfer
mentioned hereafter,
  15




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(c)
    
    There shall be no withdrawal from the EPI Security Margin Account save as provided
expressly in this Letter Agreement (including, for the avoidance of doubt, Clauses 14.4(b) and
14.2(g).14.5
    
    IOL Collection Account(a)
    
    The Borrower shall procure that the Refiner opens and maintains in the Refiners name a
Kina account with ANZ Papua New Guinea Branch (existing account
number 11895250), to be
designated as the IOL Collection Account for the purpose of this Letter Agreement.
Additional IOL Collection Accounts may also be maintained by the Refiner with another bank
or financial institution acceptable to the Bank, subject to such further documentation as
the Bank may require. All such IOL Collection Accounts maintained by the Refiner shall be
subject to the terms of this Letter of Agreement and, in particular, this Clause 14.5, and
all references herein to the IOL Collection Account shall be deemed to be references to
each IOL Collection Account maintained by the Refiner from time to time. The Borrower shall
procure IOLs compliance with this Clause.(b)
    
    The Borrower shall procure that the Refiner direct the
following payments to the IOL
Collection Account:
 (i)
    
    all payments under any domestic sales contract for the sale of the
Products by the Refiner to any buyer, including but not limited to the
respective Shell Domestic Contract, the BP Domestic Contract, the Mobil Domestic
Contract and the Niugini Domestic Contract; and(ii)
    
    all payments under any other contract entered into by the Refiner with
any other buyer acceptable to the Bank, for the sale of the Products for consumption
in the Papua New Guinea market.
 (c)
    
    Prior to the occurrence of an Event of Default (including but not limited to any of the
additional Events of Default as defined in Schedule 3 of this Letter Agreement, the credit
balance of the IOL Collection Account shall be applied at least once a week as follows;
 (i)
    
    95% of the accumulated sales proceeds from IOLs commercial sales invoice
(net of goods and services tax (GST) and duties) related to the sales of the
Products by IOL; to be converted from Kina to USD and transferred to the EPI
Collection Account for purposes defined in Clause 14.2(c) above.(ii)
    
    the aggregate of (aa) 5% of the accumulated sales proceeds from the IOLs
commercial sales invoice (net of GST and duties) related to the sales
of the Products by IOL; and (bb) accumulated GST and duties related to the sales of the Products by IOL, to be transferred to the IOL Operating Account for settlement of Kina
operating expenses pre-approved by the Bank, GST and duties, related to the sales of
the Products by IOL, Any transfer of amounts in excess of the amounts
defined in this Clause 14.5(c)(ii) is subject to the prior written approval of the
Bank.
 (d)
    
    Upon occurrence of an Event of Default, the above manner of allocation shall cease and
the Bank shall be entitled to utilise all amount standing to the credit of the IOL
Collection Account towards sole satisfaction of the Facilities in such manner as the Bank
may in its sole discretion deem fit.(e)
    
    The Borrower shall procure that there shall be no withdrawal of IOL Collection Account
save as provided expressly in this Letter Agreement.
 16




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14.6
    
    IOL Account(a)
    
    The Borrower shall procure that the Refiner open in its name a USD account with the
Bank to be designated the IOL Account for the purpose of this Letter Agreement.(b)
    
    The Borrower shall procure that the Refiner directs all payments under the IOL Export
Contract into the IOL Account.(c)
    
    The Borrower shall procure that, on the same day as payments are made into the IOL
Account pursuant to Clause 14.6(b) above, the Refiner transfers all outstanding credit
balances in the IOL Account to the EPI Collection Account for purposes defined in Clause
14.2 above.(d)
    
    There shall be no withdrawal from the IOL Account save as provided expressly in this
Letter Agreement.14.7
    
    IOL Operating Account(a)
    
    The Borrower shall procure that the Refiner opens and maintains in the Refiners name an
account in Kina with ANZ Papua New Guinea Branch (the IOL Operating Account) (account no. 1096477) for the sole purpose of settlement of Kina domestic expenses
preapproved by the Bank.(b)
    
    At the end of every quarter commencing from the date of this Letter Agreement, the Borrower
shall procure that IOL submits to the Bank a report on the reconciliation of the aggregate of
the actual cash profit and the respective NACP of all cargoes financed by the Bank pursuant to
the Facilities during the immediately preceding quarter to identify the amount standing to the
credit of the IOL Operating Account to be transferred to the EPI Collection Account, to the
extent that such NACP had not previously been taken into account in the calculation made
pursuant to Clause 14.2(d). Upon the Banks approval of such report and amount, and prior to
the occurrence of an Event of Default (including but not limited to any of the additional
Events of Default as defined in Schedule 3 to this Letter Agreement) and strictly conditional
upon:
 (i)
    
    the CVR being at least equal to 1.20 at all times (whether prior to , at
the time of or following the transfer mentioned hereafter);(ii)
    
    the Security Margin being complied with at all times (whether prior to at
the time of or following the transfer mentioned hereafter);(iii)
    
    the provisions of this Letter Agreement being fully complied with;(iv)
    
    no Event of Default has occurred or will occur as a result of the
transfer mentioned hereafter,
  (c)
    
    Upon the occurrence of an Event of Default, the manner of allocation set out in Clause
14.7(b) shall forthwith automatically cease and the Bank shall be entitled to utilise all
amounts standing to the credit of the IOL Operating Account towards sole satisfaction of the
Facilities in such manner and at such time(s) as the Bank may in its sole discretion deem fit.(d)
    
    The Borrower shall procure that there shall be no withdrawal of IOL Operating Account save as
provided expressly in this Letter Agreement,14.8
    
    IOC Security Margin Account(a)
    
    The Borrower shall procure that InterOil Corporation open in its name a USD account
with the Bank to be designated the IOC Security Margin Account for the purpose of receiving
the funds referred to in Clause 14.9(b).
 17




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(b)
    
    To the extent that credit balances in the DPI Security Margin Account, together with
any credit balances in the IOC Security Margin Account, do not in aggregate equal the
required Cash Deposit for the purpose of compliance with the Security Margin, the Borrower
shall procure that InterOil Corporation make additional deposits (including but not limited
to the Minimum Cash Deposit) into the IOC Security Margin Account in order for the Security
Margin to be complied with.(c)
    
    To the extent that credit balances in the EPI Security Margin Account and the IOC
Security Margin Account are in excess of the amount required under Clause 14.8(b) and
strictly conditional upon:
 (i)
    
    the CVR being at least equal to 1,20 at all times (whether prior to, at
the time of or following the transfer mentioned hereafter);(ii)
    
    the Security Margin being complied with at all times (whether prior to,
at the time of or following the transfer mentioned hereafter);(iii)
    
    the provisions of this Letter Agreement being fully complied with;(iv)
    
    no Event of Default has occurred or will occur as a result of the
transfer mentioned hereafter,
  (d)
    
    Upon the occurrence of an Event of Default, the manner of allocation set out in Clause
14.8(c) shall forthwith automatically cease and the Bank shall be entitled to utilise all
amounts standing to the credit of the IOC Security Margin Account towards sole satisfaction
of the Facilities in such manner and at such time(s) as the Bank may in its sole discretion
deem fit.
 (e)
    
    There shall be no withdrawal of IOC Security Margin Account save as provided expressly
in this Letter Agreement (including for the avoidance of doubt, Clause 14.8(c)).
 14.9 IOC Account
 (a)
    
    The Borrower shall procure that InterOil Corporation open in its name a USD account
with the Bank to be designated the IOC Account for the purposes of receiving the additional
pledged cash deposits referred to in Facility 2 in Clause 3. The IOC Account shall be
subject to the Charge on Cash Amounts dated 31 May 2004 executed by IOC in favour of the
Bank.
 (b)
    
    To the extent that the credit balances in the IOC Account are in excess of the
principal and interest payable under all outstanding Advances under Facility 2 and that
conditions stipulated in Clause 14.8(c)(i) to (iv) have been fulfilled, the Bank shall upon
IOCs request, transfer any such funds from the IOC Account to an account nominated by the
IOC.
 (c)
    
    Upon the occurrence of an Event of Default, the manner of allocation set out in Clause
17.9(b) shall forthwith automatically cease and the Bank shall be entitled to utilise all
amounts standing to the credit of the IOC Account towards sole satisfaction of the
Facilities in such manner and at such time(s) as the Bank may in its sole discretion deem
fit.
 (d)
    
    There shall be no withdrawal of IOC Account save as provided expressly in this Letter
Agreement (including for the avoidance of doubt, Clause 14.9(b)).
 15. Additional Indemnity; Expenses
 (a)
    
    The Borrower further unconditionally and irrevocably agrees with the Bank that it
will at all times fully indemnify and save harmless the Bank from and against any
claims, demands, losses, damages, charges, costs and expenses of whatever nature which
the Bank may at any time and from time to time sustain, incur or suffer by reason of the
issue of any LC or its payment of any claim or liability hereunder or otherwise in
connection with or arising in any
 18




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way whatsoever out of any LC, unless arising by reason of the Banks fraud, gross
negligence or wilful misconduct.(b)
    
    The Borrower shall pay all stamp duties (if any) in connection with this Letter
Agreement, the Security Documents and any related instruments, shall reimburse the Bank
for all costs and expenses (including but not limited to legal costs on a full indemnity
basis) in preparing, negotiating, executing, perfecting, administering and/or enforcing
any of the foregoing, and shall indemnify and hold harmless the Bank form and against
all other cost, losses, damages, liabilities and expenses incurred or
suffered by the
Bank in connection with the Facilities, this Letter Agreement and the Security
Documents, but excluding such costs, losses damages, liabilities and expenses (including
fines and penalties) arising by reason of the Banks fraud, gross negligence or wilful
misconduct.
 16. Business Day Adjustment
  17.
Rights Cumulative Waivers
 (a)
    
    The Bank rights under this Letter Agreement are cumulative, which
may be exercised as often as the Bank considers appropriate, and are in addition
to the Banks rights under the general law.
 (b)
    
    The Banks rights (whether arising under this Letter Agreement, any
LC or any related documents, or under the general law) shall not be capable of
being waived or varied otherwise than by an express waiver or variation in
writing.
 (c)
    
    Any failure by the Bank to exercise any of its rights under this
Letter Agreement or any delay in exercising such right shall not operate as a
waiver or variation of that or any other such right.
 18. Agent for Service of Process
   19. Standard Terms
  19




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20. Additional Terms Relating to the Commodity Derivative Facility
 (a)
    
    For the avoidance of doubt, the Borrower may enter into commodity derivative
facilities with any third party provided that:
 (i)
    
    the Borrower has granted to the Bank a right of first refusal to tender for such
commodity derivative facilities, as long as it does not affect the competitiveness of the
market; and(ii)
    
    such third party is acceptable to the Bank and the commodity derivative facilities
entered into with such third party are on terms no more favourable than those offered to
the Bank pursuant to the right of first refusal under Clause 20(a)(i).
 (b)
    
    The terms and conditions governing any commodity derivative facility shall also
include that set forth in (amongst other agreements), the International Swaps and
Derivatives Association Inc. (ISDA) Master Agreement 1992 (Multicurrency Cross Border) (or
such other derivative documentation as the Bank may determine) which the Borrower and the
Bank hereby undertake to negotiate in good faith as soon as possible and in any event
within six (6) months from the date of this Letter Agreement.
 (c)
    
    The Borrower hereby acknowledges that it has understood and has considered the
various risks involved in any transaction/contract entered or to be entered into under a
commodity derivative facility, including but not limited to the risks set out in the Risk
Disclosure Statement signed or to be signed by the Borrower, and further confirms that it
is willing to assume (financially and otherwise) those risks.
 21. Full and Final Agreement
  22. Consent to Disclosure
   (a)
    
    your acceptance hereunder and the written confirmation of each of (i)
IOC, (ii) IOL and (iii) SP Interoil, LDC as set out below and
 (b)
    
    the written consent of Overseas Private Investment Corporation to the
Letter Agreement as abovementioned, in form and substance satisfactory to the
Bank.
 20




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##### 



-s- Antoine Ragniez
    

-s- Philippe De GentileAntoine Fagniez
    
    Philippe De GentileHead
    
    Regional Head for Asia PacificCommodity Structure Finance, Asia Pacific
    
    Energy Commodities Export Project
  ACCEPTANCE
 E.P. InterOil, Ltd,
 E.P. InterOil, Ltd
 /s/ Christian Vinson

Name of Authorised SignatoriesDesignation:Companys StampDate: 12 August 2005
 21




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AGREEMENT AND CONFIRMATION
 InterOil Limited
 InterOil Limited
 /s/ Christian Vinson

Name:Designation:Date: 12 August 2005
 InterOil Corporation,
 InterOil Corporation
 /s/ Christian Vinson

Name:Designation:Date: 12 August 2005
 SP
InterOil, LDC
 SP InterOil, LDC
 /s/ Christian Vinson

Name:Designation:Date: 12 August 2005
 22




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##### 



SCHEDULE 1
 STANDARD
TERMS AND CONDITIONS GOVERNING BANKING FACILITIES (REF: BNPP 11/2004-GeneralCorp-EPI
Modified)
 A
    
    GENERAL TERMS AND CONDITIONS1
    
    INTEREST
 1.1
    
    All interest (including default interest) shall be calculated on the basis of a year of 360
days unless otherwise stated in the Facility Letter.1.2
    
    Interest on an Overdraft Facility (the Overdraft Facility) shall accrue from day to day and
shall be calculated on the basis of the actual number of days elapsed and a year of 360 days.
Interest accrued on the Overdraft Facility at the applicable rate shall be added to the
Overdraft Facility and shall be debited to the overdraft account on the last Business Day of
each calendar month in accordance with the normal practice of the Bank or on any earlier date
on which the Overdraft Facility is cancelled in whole. In addition, if the Borrower shall fail
to pay to the Bank any other sum payable by it in relation to or in connection with the
Overdraft Facility when due, the Bank shall have the right forthwith and at any time
thereafter without any notice to the Borrower and without any restriction whatsoever to debit
any such overdue sum to the overdraft account without prejudice to any other rights and
remedies of the Bank against the Borrower and also without prejudice to the rights of the Bank
to enforce any security held by the Bank.1.3
    
    The Banks prime lending rate is subject to fluctuation without prior notice but changes are
featured in the Banks statements of account.1.4
    
    The interest rates (including additional interest) and Interest Periods (whether in respect
of interest of additional interest) may be varied by the Bank from time to time at its sole
discretion.
 2
    
    ADDITIONAL INTEREST
 2.1
    
    Additional interest shall be charged on all overdue sums ( whether of principal, interest or
otherwise) which shall be payable from time to time on demand on the whole of such unpaid
amount calculated from the due date thereof up to and including the date of actual payment (as
well after as before judgment) at the rate of 5.5% per annum above LIBOR or such other rate
or rates as may be determined by the Bank at its sole discretion from time to time for such
successive periods as the Bank may determine from time to time at its sole discretion. Any
unpaid interest or additional interest shall be added onto all overdue sums and itself bear
interest on a compounded basis.2.2
    
    For overdraft not paid on demand and utilisation in excess of the approved limit, interest
shall be charged at 5.5% per annum over LIBOR or such other rate or rates as the Bank may
determine from time to time at its sole discretion.2.3
    
    Notwithstanding any provision to the contrary and without prejudice to the Banks other
rights and remedies, the Bank reserves the right to debit the current account of
the Borrower for all or any unpaid interest or additional interest
and upon such debiting, the
same shall accrue interest at the applicable rate chargeable to such current account and for
such successive periods as the Bank may in its sole discretion determine from time to time.
 3
    
    REPAYMENT AND PAYMENTS
 3.1
    
    Subject to Clause 3.2, all payments to be made under the Facility Letter or hereunder must be
made in the currency in which the drawing was denominated (Currency of Drawing), and shall
be remitted in that currency to the account and bank which are specified by the Bank from time
to time.3.2
    
    All payments to be made under the Facility Letter or hereunder shall be made in freely
transferable and convertible funds, free and clear of and without any set-off, counterclaim,
deduction or withholding whatsoever. Should there be any restrictions imposed whether by
changes in law or otherwise, or any changes in national or international financial or
political or economic conditions which affect the transferability and/or the convertibility of
the Currency of Drawing or any monies which have become due and payable under the Facility
Letter or hereunder then the Advance(s) to which the Currency of Drawing relates or such monies
due and payable for which payments are to be made may at the option of the Bank be converted in
accordance with Clause 4.3. The Borrower shall at the request of the Bank repay or make all
payments under the Facility Letter or hereunder in the currency so selected by the Bank.3.3
    
    If under any applicable law whether as a result of a judgment or an order of Court of any
jurisdiction against the Borrower or the liquidation of the Borrower or for any other reason
any payment under or in connection with the Facility Letter or the Security Documents is made
or is recovered in a currency (the Other Currency) other than the Currency of Drawing, then
to the extent that, the payment (when converted at the Rate of Exchange on the date of payment
or in the case of liquidation the latest date for the determination of liabilities permitted
by the applicable law) falls short of the amount in the Currency of Drawing remaining
unpaid under the Facility Letter or the Security Documents, the Borrower shall as a separate
and independent obligation fully indemnify the Bank against the amount of shortfall.This indemnity shall give rise to a separate and independent cause of action and shall apply
irrespective of any indulgence granted by the Bank and shall continue in full force and effect
despite any judgment, order, claim or proof for a liquidated amount in respect of any sum due
under the Facilities or any judgment or order.
Rate of Exchange means the rate at which the Bank is able on the relevant date to purchase
the Currency of Drawing in such foreign exchange market as it may reasonably select with the
Other Currency.
 4
    
    AVAILABILITY AND ALTERNATE CURRENCIES
 4.1
    
    In this Clause, Reference Currency means the currency in which the Facility or Facilities
are denominated and Alternate Currency and Alternate Currencies mean a currency or
currencies other than the Reference Currency.4.2
    
    Where the Bank has agreed that the Borrower may make drawings in Alternate Currencies.
 (i)
    
    drawings or utilisation of the Facilities in Alternate Currencies are subject to the
availability of funds, and subject to the Borrower giving to the Bank, not less than two(2)
Business Days prior to the date of drawing written notice of drawing, specifying the amount, date
of drawing and Interest and Interest Period;




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(ii)
    
    drawings will be in the amount of the relevant Alternate Currency converted from the
Reference Currency at the relevant rate of exchange, as determined by the Bank, on the
date of drawing;(iii)
    
    if at any time the sums outstanding under the Facilities in any Alternate Currency(ies),
when converted into the Reference Currency at the relevant rate of exchange determined by the Bank,
exceed the amount of the Facilities in the Reference Currency, the Borrower shall forthwith upon
demand by the Bank, repay the amount in excess thereof;(iv)
    
    the Banks calculations as to amounts outstanding and/or the rate of exchange used by
the Bank for purposes of conversion shall, in the absence of manifest error, be conclusive
and binding upon the Borrower; and(v)
    
    the Borrower shall on demand indemnify the Bank against all
losses, costs and expenses incurred
by the Bank in liquidating or employing deposits in an Alternate Currency acquired or contracted
for by the Bank in order to fund the drawing.
 4.3
    
    In the event the Bank is unable or it is impracticable for the Bank to grant or continue to
grant all or any part of the Facility or Facilities in the Reference Currency by reason of any
of the following:
 (i)
    
    changes in national or international financial, political or economic
conditions or currency availability or exchange rates or exchange controls; or(ii)
    
    it becomes unlawful, illegal or contrary to or additional conditions have
been imposed by any laws, regulations, directives, ruling or guidelines of any
governmental or non-governmental or statutory authority in Singapore or elsewhere for
the Bank to grant or continue to grant the Facility or Facilities in
the Reference Currency;
 then without prejudice to the Banks right under Clause 9 and Clause 10, the Bank shall
have the right in its absolute discretion to convert the Reference Currency into an
Alternate Currency as selected by the Bank. For this purpose, the amount outstanding in the
Reference Currency shall be converted into the said Alternate Currency selected by the
Bank at such rate as the Bank deems to be most appropriate and Clause 4.2 (iii) to (v)
shall apply mutatis mutandis to the Facility or Facilities.
 5
    
    SECURITY MARGIN


In the event that the cumulative value of the assets of the Borrower or Surety
covered by the Security Documents at any time and subject to Schedule 3 of the
Facility Letter, as conclusively determined by the Bank, falls below the Security
Margin, the Bank shall be entitled without prejudice to any other rights that the
Bank may have, to reduce the credit limits and/or withhold further disbursement
and/or to require repayment of
such amount as the Bank may specify including prepayment of any
Advance(s) and/or
to require additional security (acceptable to the Bank) to be furnished.6
    
    CONDITIONS PRECEDENT
 6.1
    
    No request for the utilisation of any
Facility shall be made by the Borrower unless all the following
documents are delivered to the Bank and found satisfactory by the
Bank:-
 (i)
    
    (where the Borrower is a corporation) a
copy, certified as a true copy by a duly authorised officer of the
Borrower, of the Memorandum and Articles, of Association together
with all other documents evidencing the legality of the existence
of the Borrower and its activities as may be required by the Bank;(ii)
    
    (where the Borrower is a corporation) a
copy, certified as a true copy by a duly authorised
officer of the Borrower, of the corporate Resolutions of the
Borrower for the transactions contemplated herein, authorising the
acceptance of the offer comprised in the Facility Letter and the
execution hereof and of the Security Documents and all other
related documents;(iii)
    
    a certified list of the specimen
signatures of the authorised signatories to operate the Facilities;(iv)
    
    (where the Surety is a corporation) a
copy, certified as a true copy by a duly authorised officer of the
Surety, of the Memorandum and Articles of Association together with
all other documents evidencing the legality of the existence of the Surety and its activities as may be required by the Bank;(v)
    
    (where the Surety is a corporation) a copy, certified as a true copy by a duly authorised officer of the
Surety, of the Corporate Resolutions of the surety for the
transactions contemplated herein, authorising the provision by the
Surety of the security, for the repayment of all sums owing under the
Facilities by the Borrower;(vi)
    
    a certified list of the specimen
signatures of the authorised signatories to execute and deliver the
Security Documents and to take any action contemplated in the
Security documents;(vii)
    
    the Security Documents duly executed
by the Borrower and by the Surety and duly stamped and registered,
if necessary with the relevant authorities in Singapore and/or in
other relevant jurisdiction(s);
 PROVIDED ALWAYS the bank reserves the right to waive or defer compliance with the whole or any part
of this Clause 6.1.
 6.2
    
    The utilisation of any Facilities is
further conditional upon, at the proposed date of the utilisation:-
 (i)
    
    no Event of Default or Potential Event
of Default has occur and is continuing or will occur as a
result of the making of the Facility or each Advance by the Bank;(ii)
    
    all representations and warranties
remaining true and correct in all respects by reference to the
circumstances then existing; and(iii)
    
    the Bank being satisfied that there is
no material adverse change in the operations or financial condition
of the Borrower and the Surety.
 7
    
    REPRESENTATIONS AND WARRANTIES
 7.1
    
    The Borrower acknowledges that the Bank
has made available all facilities contemplated in the Facility
Letter in full reliance on the following representations and
warranties of Borrower:-
 (a)
    
    all approvals of any
governmental or other authority which are required to
authorise the Borrower to own its assets, carry on its
business as it is being conducted as of the date of the
Facility Letter have been duly and unconditionally obtained
and are in full force and effect;(b)
    
    all acts, conditions and
things required to be done and performed by the Borrower
precedent to the acceptance of the Facility Letter and
execution of the Security Documents to constitute them
valid obligations of the




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Borrower in accordance with their respective terms have been done and performed in due and
strict compliance with all applicable laws and regulations;(c)
    
    each of the Facility Letters when accepted and the Security Documents when executed will
constitute the legal, valid and binding obligations of the Borrower and the Surety (as the case may
be) and be enforceable in accordance with its terms;(d)
    
    (where the Borrower is a corporation) the execution, delivery and performance by the Borrower
of the transactions contemplated in the Facility Letter and the Security Documents are within the
Borrowers corporate powers and have been duly authorized by all necessary corporate action;(e)
    
    (where the Borrower is a corporation) the certified true copies of the Memorandum and Articles
of Association, or other corporate constitutional documents, of the
Borrower and the Shareholders, and Board Resolutions of the Borrower relating to the approval and acceptance of the Facility
Letter and execution of the Security Documents, are true and accurate copies of the corporate
records of the Borrower;(f)
    
    the acceptance and performance of the Facility Letter and the Security Documents do not and
will not:-
 (i)
    
    contravene or constitute a default or breach under any provision contained in any
agreement, instrument, law, judgment, order, licence, permit or consent by which the
Borrower or any of its assets is bound or affected;(ii)
    
    cause any limitation on the Borrower or the powers of its directors (where
applicable), whether imposed by or contained in any law, order, judgment, agreement,
instrument or otherwise to be exceeded; or(iii)
    
    result in the creation or imposition of any lien, charge, security, interest or other
encumbrance over any assets of the Borrower other than those created by the Security
Documents.
 (g)
    
    neither the Borrower nor any Surety is in default in the payment or performance of any of their
respective obligations for borrowed money or under any instrument or agreement binding on the
Borrower or any Surety or any of their respective assets which may have a material adverse effect
on their respective business, assets or financial condition or their ability to perform or observe
their respective obligations under the Facility Letter or the Security Documents;(h)
    
    there are no litigation, arbitration or other proceedings or claims pending or threatened
against the Borrower or any Surety or any of their assets which may have a material adverse effect
on their respective business assets, or financial condition or ability to perform their respective
obligations under the Facility Letter or the Security Documents;(i)
    
    no steps have been taken or are being taken to appoint a receiver and/or manager or
judicial manager, liquidator of the Borrower or the Surety or (where the Surety is an
individual) trustee in bankruptcy or official assignee or any other such official of the
Surety or over any part of the assets of the Borrower or the Surety or to wind up the
Borrower or the Surety;(j)
    
    the Borrower has fully disclosed in writing to the Bank all facts and information relating to
the Borrower which the Borrower knows or should reasonably know and which are material for
disclosure to the Bank in the context of the Facility Letter;(k)
    
    the Borrower has not acted and is not acting in contravention of any law which may result in
third parties obtaining priority over the Bank in respect of the security granted herein or such
security being illegal, unenforceable, altered, affected, discharged or revoked;(l)
    
    the Borrower has the power and authority to own assets and to conduct the business which the
Borrower conducts and/or purports to conduct; and(m)
    
    there exists no Event of Default or Potential Event of
Default.
 7.2
    
    The Borrower agrees that the above mentioned representations and warranties shall be deemed to
be repeated upon each drawing of the Facilities.7.3
    
    Each of the representations and warranties contained in this Clause 7 shall survive and
continue in full force and effect after the acceptance of the Facility Letter and the Execution of
the Security Documents and the Borrower hereby warrants to the Bank that the above representations
and warranties will be true and correct and fully observed at all times during the continuance of
the Facility(ies) as if repeated during such period by reference to the then existing
circumstances.
 8
    
    COVENANTS
 8.1
    
    The Borrower hereby covenants with the Bank for as long as any of the Facilities are available
or any sum remains payable or unpaid under the Facility Letter that it shall:-
 (a)
    
    deliver to the Bank at the end of each fiscal year a duly signed certificate that the
Borrower has not committed any default in relation to any of its obligations;(b)
    
    deliver to the Bank (i) audited balance sheets, profit and loss account and annual
report of the Borrower and the Surety (as the case may be) every year within 180 days of
the end of the fiscal year, such balance sheets and accounts shall have been duly audited
by the auditor, (ii) a statement of the Borrowers preliminary
financial figures not later than 90 days after the end of each
financial year, (iii) receivables listing/aging list;(c)
    
    furnish such other financial information and information on the operations of the
Borrower as may be reasonably required by the Bank from time to time;(d)
    
    notify the Bank of the occurrence of any Event of Default or Potential Event of
Default immediately upon becoming aware of it and from time to time on request deliver to
the Bank a certificate confirming that no Event of Default or Potential Event of Default
has occurred or, if it has occurred, setting out the details thereof and the action taken
or proposed to be taken to remedy it;(e)
    
    maintain its corporate existence in good standing in compliance with all applicable
laws and maintain the present character of its business and conduct its business and
operations in accordance with all applicable laws and other governmental directives,
guidelines and policies applicable to it, and shall pay all of its indebtedness




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and perform all of its contractual obligations promptly pursuant to all
agreements and instruments by which it is bound at any time during the term of the
Facility Letter and the Security Documents;(f)
    
    ensure that all its obligations under the Facility Letter rank and will
rank at least pari passu in priority of payment and all other respects with all its
other present and future unsecured and unsubordinated
obligations;(g)
    
    immediately notify the Bank of any material adverse change in the
conditions (financial or otherwise) of the Borrower or the Surety and of any
litigation or proceedings initiated against the Borrower or the Surety before any
court or administration agency, which might materially affect the operations of
financial condition of the Borrower or the Surety;(h)
    
    Immediately inform the Bank of any change in the shareholding of the
Borrower or the beneficial holding thereof, exceeding twenty percent (20%) of the
total share equity of the Borrower and in such event, the Bank hereby reserves the
right to review and if necessary cancel the Facilities, in which case, all outstanding
monies shall become due and payable immediately;(i)
    
    not without the prior written consent of the Bank undertake or permit any
arrangement or reconstruction of the present constitution or directorship of the
Borrower or any other scheme or compromise or arrangement affecting the Borrower;(j)
    
    not without the prior written consent of the Bank either in a single
transaction or in a series of transactions whether related or not and whether
voluntarily or involuntarily, sell, transfer or otherwise dispose of
all or a substantial part of its assets save in; the normal and ordinary course of its
business;(k)
    
    shall perform and observe all of the undertakings
obligations, covenants,
terms and conditions on its part to be performed and observed herein;(l)
    
    if so required, make any disclosure, announcement or report pursuant to any
legislation, laws, rules and regulations or otherwise to the relevant authorities; and(m)
    
    Deleted.
 8.2
    
    Negative Pledge:The Borrower shall not create any future charge, mortgage, pledge or lien in
respect of any of its properties and assets nor factor nor assign any of its accounts
receivable without the prior consent of the Bank, such consent not to be unreasonably
withheld.
 9 EVENTS OF DEFAULT
 9.1
    
    if any of the following events shall occur:-
 (a)
    
    the Borrower fails to pay any sum due within three (3) Business Days from
its due date under the Facility Letter;(b)
    
    any representation, warranty, covenant or undertaking made by the Borrower
or the Surety, herein or in the Facility Letter, the Security Documents or otherwise
shall prove to have been incorrect in any material respect when made or when deem to
be repeated with reference to the facts and circumstance then
existing;(c)
    
    there occurs any breach of provisions or conditions herein or in the
Facility Letter or any default in the performance by the Borrower or
the Surety of any other provisions herein or in the Facility Letter or the Security
Documents;(d)
    
    any other indebtedness of the Borrower or the Surety for amounts equal to
or greater than USD 500,000.00 in aggregate (i) is not paid when due or within any
applicable grace period in any agreement relating to that indebtedness or (ii)
becomes due and payable before its normal maturity by reason of any actual or
potential default or event of default or the like, however described;(e)
    
    any event has occurred which could, in the reasonable opinion of the Bank,
prejudice the ability of the Borrower or the Surety to perform their respective
obligations under the Facility Letter or the Security Documents;(f)
    
    the Borrower or the Surety takes any corporate action or other steps are
taken or legal proceedings are started for its winding-up, dissolution,
administration or bankruptcy (as the case may be) or reorganization or for the
appointment of a receiver, administrator, administrative receiver, trustee or similar
officer of the Borrower or of any or all of its revenues and assets;(g)
    
    the Borrower or the Surety is (or could be, deemed by law or a court to
be) insolvent or unable to pay its debts, stops, suspends or threatens to stop or
suspend payment of all or a material part of (or of a particular type of ) its
indebtedness, begins negotiations or takes any other step with a view to the
deferral, rescheduling or other readjustment of all of (or all of a particular type
of) its indebtedness (or of any part which it will or might otherwise be unable to pay
when due), proposes or makes a general assignment or an arrangement or composition
with or for the benefit of the relevant creditors or a moratorium is agreed or
declared in respect of or affecting all or a material part of (or of a particular
type of) the indebtedness of the Borrower of the Surety;(h)
    
    a distress, attachment, execution or other legal process is levied,
enforced or sued out on or against the assets of the Borrower or the Surety for
amounts equal to or greater than USD 500,000.00 in aggregate and is not discharged or
stayed within 14 days;(i)
    
    any security on or over the assets of the Borrower or the Surety becomes
enforceable;(j)
    
    the Borrower ceases or threatens to cease to carry on the business it
carries on at the date hereof;(k)
    
    the Borrower repudiates the Facility Letter or the Surety repudiates any of
the Security Documents or does or causes to be done any act or thing evidencing an
intention to repudiate the facility Letter or any of the Security Documents;(l)
    
    any provision of the Facility Letter or the Security Documents is or
becomes for any reason invalid or unenforceable;(m)
    
    in the reasonable opinion of the Bank, any security created under any of
the Security Documents is in jeopardy;(n)
    
    it is or will become unlawful, illegal or contrary to any laws,
regulations, directives, ruling or guidelines of any governmental or statutory
authority in Singapore or elsewhere for the Bank to grant or continue to grant the
Facility to the Borrower;




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##### 



(o)
    
    where the Borrower or the Surety is an individual, the
Borrower or the Surety dies or is declared by a court of
competent jurisdiction to be of unsound mind or becomes incapacitated to such an extent as
to give the Bank reasonable grounds for believing that the Borrower or the Surety may not
(or may be unable to) perform or comply with its obligations under
the Facility Letter,
the Security Documents or herein as the case may be; or(p)
    
    any of the events stipulated in Clause 11.4, Clause 11.5 and Clause 11.6 shall occur
and/or the Bank exercises any of its rights under one or more of such
aforesaid Clauses.
  (i)
    
    declare the Facility of Facilities to be cancelled or
terminated whereupon it shall
be cancelled or terminated;(ii)
    
    declare all monies owing under the Facility Letter or hereunder to be immediately due
and payable, whereupon they shall become so due and payable;(iii)
    
    enforce its rights under the Security Documents; and(iv)
    
    if the Banks obligation under any notes or bills (accepted, endorsed or discounted),
bonds guarantees, indemnities, documentary or other credits or any instruments issued by
the Bank have not been fully discharged, require the Borrower to immediately pay to the
Bank such amount of monies as may be necessary to enable the Bank to apply the same to
obtain a full discharge of its liabilities, actual or contingent, under such notes, bills,
bonds, guarantees, indemnities, documentary or other credits or any instruments.
 9.2
    
    Each decision of the Bank with respect to Clause 9.1(e) and (m) shall be binding and
conclusive on the Borrower.9.3
    
    Upon the occurrence of any Event of Default as specified herein and or the Security
Documents, the Bank shall have the overriding right (without
any obligation) to cover and/or revise any or all transactions
outstanding under the Facilities at such rate of exchange as the Bank is able on the relevant
date to obtain in such foreign exchange market as it may reasonable select which rates
shall be binding and conclusive on the Borrower.
 10
    
    CHANGES IN APPLICABLE LAW OR CIRCUMSTANCES OR MARKET CONDITIONS
 10.1
    
    Illegality:If the Bank shall have determined that
the introduction of, or a change in,
any applicable law or regulation or a change in the interpretation or application thereof
by any governmental or other regulatory authority charged with the administration thereof
or a court of competent jurisdiction makes it unlawful for the Bank to make or maintain
the whole or any part of the Facilities or otherwise to give effect to or maintain its
obligations as contemplated by the Facility Letter or the Bank is prevented, hindered or
delayed by any of the foregoing changes to perform its obligations under the Facility
letter or hereunder or additional conditions are imposed on the Bank by such changes with
respect to the Facility or Facilities, the available Facility or
Facilities (if any) shall at the option
of the Bank be cancelled forthwith and all monies owing hereunder may at the option of the
Bank be declared immediately due and payable, whereupon they shall become so due and
payable and the Security Documents shall immediately become enforceable by the Bank and if the Banks obligations under any
notes or bills (accepted, endorsed or discounted), bonds, guarantees, indemnities,
documentary or other credits or any instruments issued by the Bank have not been
fully discharged, the Borrower shall immediately pay to the Bank such amount of
monies as may necessary to enable the Bank to apply the same to obtain a full
discharge of its liabilities, actual or contingent, under notes, bills, bonds,
guarantees, indemnities, documentary or other credits or any instruments.10.2
    
    Increased Costs:If the Bank shall have determined that the introduction of, or a
change in, any applicable law or regulation (whether having the force of law or not) or a
change in the interpretation or application thereof by any governmental or other
regulatory authority charged with the administration thereof or court of competent
jurisdiction or that compliance by it with any request or directive (whether having the
force of law or not) of any governmental or other regulatory
authority:-
 (i)
    
    subjects the Bank to taxation or changes the basis of taxation of the Bank (other
than on the overall net income of the Bank imposed by the jurisdiction in which its
principal office or lending office is situated) in respect of payments of principal,
interest of other sums under the Facility Letter and/or any of the Security Documents;(ii)
    
    imposes, modifies or deems applicable any reserve or deposit requirements against any
assets or liabilities of, deposits with or for the account of, or loans by the Bank; or(iii)
    
    imposes on the Bank any other condition with respect to loans and commitments
generally;
  (a)
    
    increase the cost of the Bank of making, maintaining of funding the whole or any part
of the Facilities; or(b)
    
    reduce the whole or any part of any amount of principal, interest or other sum
received of receivable by the Bank under the Facility Letter and/or any of the Security
Documents; or(c)
    
    reduce the rate of return on its overall capital as the result of a change in the
manner in which its capital resources are allocated to its obligations under the
Facility Letter; or(d)
    
    otherwise reduce the profitability to the Bank in relation to the Facilities granted
under the Facility Letter, then and in any such case, the Borrower shall pay to the Bank
from time to time on demand such amount as the Bank certifies to be the amount which will
compensate it for such additional cost or reduction and if the Banks obligations under
any notes or bills (accepted, endorsed or discounted), bonds, guarantees, indemnities,
documentary or other credits or any instruments issued by the Bank have not been fully
discharged the Borrower shall immediately pay to the Bank such amount of monies as may be
necessary to enable the Bank to apply the same to obtain a full discharge of its
liabilities actual or contingent, under notes, bills, bonds, guarantees indemnities
documentary or other credits or any other instruments. The Borrower shall have the option
in such event to pre-pay in whole or in part of the loan within 30 days of receiving such
certification.
 10.3
    
    Market Disruption:If in relation to any Interest
Period, the Bank determines (which
determination shall be conclusive and binding) that:
 (a)
    
    by reason of circumstances affecting the relevant interbank
market generally, adequate
and fair means do not exist for ascertaining the Banks cost of funding the Advance(s) or
any part thereof for the relevant Interest Period; or




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(b)
    
    deposits in the Currency of the Advance in the required amount for the relevant
Interest Period are not available to the Bank in the relevant interbank market; or(c)
    
    the relevant interbank rate does not represent its effective cost of funding the
Advance(s) or any part thereof,
  11
    
    INDEMNITY & DISCRETIONS OF THE BANK
 11.1
    
    Without prejudice to any of the foregoing provisions, the Borrower shall indemnify the Bank on
demand against any claim, cost, loss, expense, demand, liability, proceeding and action
whatsoever sustained or incurred by the Bank (as conclusively certified by the Bank) howsoever
arising from or otherwise in connection with:-
 (i)
    
    the making, funding and maintaining by the Bank of any of the Facilities;(ii)
    
    any default by the Borrower in relation to any of its obligations;(iii)
    
    the occurrence of any Event of Default or Potential Event of Default;
and/or(iv)
    
    any Facility not being made for any reason after request for the
utilization thereof has been given;
 11.2
    
    The Borrower shall also indemnify and hold the Bank harmless against any and all costs and
expenses (including any goods and services or other similar taxes payable on such costs and
expenses) incurred by the Bank in connection with the preservation or enforcement of the
Facility Letter and the Security Documents including those incurred in the collection of
monies owed by the Borrower to the Bank and in the preservation or enforcement of the rights
of the Bank under the Facility Letter and the Security Documents as well as any present or
future stamp duties, notarial fees, lawyers fees, registration fees or similar fees, and the
Borrower will pay all such sums to the Bank forthwith upon demand.11.3
    
    The Borrower shall on demand reimburse the Bank for all costs and expenses (including any
goods and services or other similar taxes payable on such costs and expenses) incurred by the
Bank in the negotiation, preparation, execution and perfection of the Facility Letter and the
Security Documents.11.4
    
    The Borrower shall fully indemnify and keep indemnified the Bank (at its head office and any
and all branches of the Bank), its agents, sub-agents, Affiliates and every director, officer,
employee or agent of any of the foregoing against any and all losses, damages, reasonable
costs and expenses (including but not limited to legal costs on a full indemnity basis),
charges, actions, suits, proceedings, orders, warrants, injunctions, claims or demands which
may be brought against any of them or which any of them may suffer or incur in connection with
or arising from (i) the provision of any Facilities or the Borrowers accounts(s) held with
the Bank or its Affiliates, or (ii) any transaction referable to, involving or relating to the
Borrower or the Facilities or the Borrowers account(s) held with the Bank or its Affiliates
(Borrower Transaction), including but without limitation, any forfeiture, restraint or
seizure of any funds of the bank made or issued pursuant to the USA PATRIOT Act (or any
equivalent or similar law, regulation or legislation made pursuant to or which revises or
replaces such Act) applicable to or affecting the Borrower, the Facilities or the Borrower Transaction(s) save where the
same arises directly from their respective gross negligence, willful misconduct or fraud.
Each of the terms law and regulation when used herein shall include sanctions, directives
governmental notices or declarations (whether having the force of law or not). For this
purpose, the Bank may at its sole discretion debit any of the Borrowers account(s) held with
the Bank or its Affiliates at any time without prior notice to the
Borrower.11.5
    
    In the case where:
 (a)
    
    the Bank is served with or notified of or otherwise in any way affected by any
law, directive, regulation, rule, judicial or administrative order, judgment,
injunction, government act, sanction, decree, writ or other form of judicial or
administrative process (including, but not limited to, orders of attachment or
forfeiture, confiscation, garnishment, freezing or restraining orders, warrants or
injunctions or levies of any form or stays of whatsoever nature and whether having the
force of law or not) (collectively, the Process), which may affect or relate or
referable to, or appear to affect or relate or referable to, the Borrower, the Borrower
Transaction (s), or its account(s) held with the Bank or its Affiliates or any interbank
account of the Bank or its Affiliates; or(b)
    
    the Bank in its opinion considers that it is necessary under any applicable
Process to which the bank or its Affiliates are subject or affected by or under any
non-statutory practice, procedures or guidelines (whether having the force of law or
not) with which it is the Banks or its Affiliates
practice or policy to comply, the
Bank and its Affiliates may, and the Borrower hereby irrevocably authorise them to
comply therewith in any manner or to take any action in relation thereto as it or its
lawyers deem appropriate, including freezing, blocking and/or suspending or withholding
payment of all or any amount(s) standing to the credit of the Borrowers account(s) held
with the Bank or such Affiliates and /or terminating or suspending the Facilities or any
part thereof, Neither the Bank nor any of its Affiliates shall be liable to the Borrower
or any other person or entity in any manner whatsoever for such compliance or taking
such action even if such Process or non-statutory practice, procedures or guidelines may
be subsequently modified or vacated or determined to have been without legal force or
binding effect or not referable to the Borrower or not required to be complied by the
Bank.
 11.6
    
    Neither the Bank nor any of its Affiliates shall be required to do anything or refrain from
doing anything which would in its opinion infringe any applicable laws, directives, rules, decrees,
orders, sanctions, government act, custom, procedure, practice,
policy, regulations or guidelines. Further, neither the Bank nor any of its Affiliates shall be obliged in any way whatsoever to take
or refrain from taking any action which is beyond its power to take or refrain from taking, in
whole or in part as a result of any event or state of affairs of any kind whatsoever which is
beyond its reasonable power to avoid. In particular but without prejudice to the generality of the
foregoing, the Bank and/or any of its Affiliates may at their sole discretion suspend any dealing
or withdrawal from any of the Borrowers account(s) and/or terminate or suspend the availability of
the Facilities or any part thereof notwithstanding any instruction to the contrary given by the
Borrower. Neither the Bank nor any of its Affiliates shall be liable to the Borrower or any other
person of entity in any manner whatsoever for any action or omission taken by the Bank or its
Affiliates pursuant to this Clause.




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##### 



12
    
    TAXES
 12.1
    
    All payments to be made by the Borrower under the Facility Letter and all
payments to be made by the Borrower under each of the Security Documents shall be made
without any set-off or counterclaim and free and clear of and without deduction for all
present or future taxes, levies, deductions or withholdings or charges whatsoever (all
such taxes, levies, deductions, withholdings and charges being hereinafter referred to
as Taxes). If the Borrower is required by any law to deduct any Taxes from any amount
payable under the Facility Letter and/or any of the Security Documents, the amount
payable by the Borrower shall be increased as may be necessary so that after making all
required deductions, the Bank receives an amount equal to the amount it would have
received had no such deductions been made and the Borrower shall furnish to the Bank
within the period for payment permitted by the applicable law an official receipt of the
relevant taxation or other authorities for the amounts deducted or withheld as
aforesaid.12.2
    
    If at any time the Borrower is required by law to make any deduction or
withholding from any sum payable by it under the Facility Letter and/or any of the
Security Documents (or if subsequently there is any change in the rates at which or the
manner in which such deductions or withholdings are calculated), it
shall:-
 (i)
    
    promptly notify the Bank upon becoming aware of the same;(ii)
    
    pay the full amount required to be deducted or withheld to the
relevant authorities within the time allowed for such payment under the
applicable law; and(iii)
    
    within thirty (30) days after any such deduction or withholding,
furnish to the Bank evidence, including original or authenticated copies of tax
receipts, that it has made the required deductions or withholdings.
 12.3
    
    The obligations of the Borrower under this Clause 12 shall survive and be and remain in full force and effect notwithstanding the repayment of all sums owing
under or in connection with the Facilities.12.4
    
    The amounts stated in the Facility Letter and/or Security Documents to be payable
by the Borrower are exclusive of Singapore goods and services tax (GST) which shall be
for the account of the Borrower and accordingly the Borrower shall pay and indemnify the
Bank against any GST chargeable in respect of or under or in connection with the
Facility Letter and/or Security Documents at any time arising and howsoever arising.
 13
    
    SET-OFF AND CONSOLIDATIONThe Bank shall, so long as any part of the obligations and liabilities of the Borrower to
the Bank (whether under the Facility Letter or otherwise) remains unpaid or undischarged,
have a lien or a right of set-off over all or any of the accounts of the Borrower
(whether solely or jointly with any other person or persons and
whether current or deposit or of whatsoever type or nature) with the
Bank whether in Singapore or
elsewhere, and the Bank may at any time without notice to the Borrower combine,
consolidate or merge all or any of such accounts with, and liabilities to, the Bank and may
set-off, apply or transfer any sum standing to the credit of any such accounts
(notwithstanding that any fixed deposit has not matured or any of the special conditions
applicable to the deposit have not been satisfied) in or towards the
satisfaction of such obligations and liabilities, and may do so
whether such obligations and liabilities be present, future, actual, contingent,
primary, collateral, several or joint and notwithstanding that the balances in such
accounts and such obligations and liabilities may not be expressed in the same currency,
and the Bank is hereby authorised to effect any necessary conversions at the Banks own
rate of exchange then prevailing. In addition, the Bank shall also have a lien over all
securities from time to time in the possession of the Bank, whether
the same be held for safe custody or otherwise, and if the Borrower
defaults in punctual payment of any of its obligations and
liabilities to the Bank as aforesaid when due, the
Bank shall have a power of sale in respect of such securities, to the extent permitted by
applicable law, and shall be entitled to apply the proceeds of such sale in or towards
the satisfaction of such obligations and liabilities. The rights of the Bank under this
Clause 13 shall be in addition to any other right of lien and set-off which the Bank may
be entitled under law, agreement or otherwise.14
    
    CHANGE IN CONSTITUTIONThe obligations of the Borrower shall continue to be valid and binding notwithstanding
any change in its constitution, whether by, if it is a corporation, amalgamation,
consolidation, reconstruction or otherwise, and if it is a firm, by retirement,
expulsion, death, admission, accession or change of any partner or otherwise.15
    
    APPLICATION OF MONEYSIf any sum paid or recovered in respect of the Borrowers liabilities is less than the
amount then owing, the Bank shall be entitled to apply that sum to interest, fees,
charges, expenses, principal or any amount due in such proportions
and order and
generally in such manner as the Bank shall in its sole discretion think fit or to credit
the same or part thereof to a suspense account as the Bank shall in its sole discretion
think fit.16
    
    JOINT BORROWERSWhere there are more than one Borrower, the liabilities of all the Borrowers for all
monies owing to the Bank shall be joint and several and all the terms relating to each of
the Facilities shall apply to the Borrowers jointly and severally.17
    
    AUTHORISATIONThe Borrower hereby irrevocably and expressly in writing consents to, authorises and
permits the Bank and its employees and agents at any time to disclose such information
relating to the Borrower and/or the Facilities (including but not limited to details of
the Borrowers account relationship with the Bank) and any other customer information (as
defined in the Banking Act. (Cap. 19) of Singapore (the Banking Act) to its head
office, other branches, regional offices, representative offices or affiliated companies
or any governmental or regulatory agencies or authorities or supranational entity or
body, administrative, fiscal or judicial body, courts and tribunals or any other
authorities of whatsoever nature (in each case whether within or outside Singapore) or
any potential assignee or transferee or persons who have entered into or who are
proposing to enter into contractual arrangements with the Bank in relation to the banking
facilities between the Borrower and the Bank, including without limitation, any Sureties
(as defined in the Standard Terms) or any other person from time to time as the Bank
shall in its sole discretion deem fit. Nothing in this paragraph
shall constitute, nor be deemed to constitute, an express or implied
agreement by the Bank and the Borrower for a
higher degree of confidentiality than that prescribed in Section 47 of the Banking Act
and in the Third Schedule thereto.




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##### 



18
    
    EVIDENCEA written statement, including reasonable supporting documentation, from the Bank duly
signed by its authorised officer shall in any proceedings arising from or in connection
with the Facility Letter and/or the Security Documents, in the absence of manifest error,
constitute conclusive and binding evidence of any amount appearing therefrom to be due
and outstanding thereunder.19
    
    ASSIGNMENT AND FACILITY OFFICES
 19.1
    
    The Borrower may not assign or otherwise transfer any of its rights, benefits or
obligations under the Facility Letter and/or any of the Security Documents.19.2
    
    The Bank may at any time without the consent of the Borrower assign and/or
transfer and/or novate all or any of its rights, benefits and obligations hereunder,
under the Facility Letter and/or any of the Security Documents and may for this purpose
disclose to a potential assignee or transferee such information about the Borrower as
may have been available to the Bank. The Bank may also from time to time change its
facility office in relation to all or a specified part of the Facilities outstanding or
committed herein by notifying the Borrower thereof.
 20
    
    REMEDIES AND WAIVERSNo failure, delay or indulgence of whatsoever nature by the Bank in exercising any right,
power or remedy herein or under the Facility Letter and/or the Security Documents or in
respect of the Borrowers obligations hereunder and hereunder shall operate as a waiver
thereof nor shall any single or partial exercise of any right, power or remedy preclude
any other or further exercise thereof or the exercise of any other right or remedy. The
rights, powers and remedies provided are cumulative and do not exclude any other rights,
powers and remedies provided by law generally.21
    
    COMMUNICATIONSAny communication, notice or document to be made or delivered by one party to the other
party under the Facility Letter shall be in writing and shall be made or delivered to
that other party at the address mentioned below and shall be deemed to have been made or
delivered when despatched (in the case of any communication made by facsimile or telex)
or (in the case of any communication made by letter) when left at that address or as the
case may be one day (if within Singapore) or five days (if outside Singapore) after being
deposited in the post, postage prepaid, in an envelope addressed to it at that address or
such change of address as the parties hereto may notify of in writing, in the manner
described above, to one another Provided that any communication, notice or document to be
made or delivered by the Borrower to the Bank shall be effective only when received by
the Bank.
 Address of the Bank
    
    :
    
    
    
    BNP PARIBASTUNG CENTER20 COLLYER QUAYSINGAPORE 0493Address
of the Borrower
    
    :
    
    such address is specified in the Facility Letter or last known to the Bank
 Any service of process on the Borrower in respect of any legal proceedings in Singapore
shall be deemed to be sufficiently served if sent by registered mail to the Borrowers
registered address or address last known to the Bank, provided nothing herein shall limit
the right of the Bank to effect service of process in any other manner permitted by law.22
    
    SEVERANCEIf at any time any of the provisions herein or in the Facility Letter is or becomes
illegal, invalid or unenforceable in any respect under any law or regulation, the
validity, legality and enforceability of the remaining provisions shall not be in any way
affected or impaired.23
    
    LAW AND JURISDICTIONThe Facility Letter shall be governed, interpreted and construed in accordance with the
laws of Singapore and the Borrower hereby submits to the non-exclusive jurisdiction of
the courts of Singapore but agrees that the Bank will be at liberty to proceed against
the Borrower in any court in any other jurisdiction.24
    
    REVIEWDeleted.25
    
SURVIVING PROVISIONSClauses 11, 12, 13 and 17, and this Clause 25, shall survive and continue in full force and
effect for the benefit of the Bank notwithstanding the repayment, cancellation or
termination of the Facilities or any part thereof and/or the termination of one or more
types of banker-customer relationships between the Borrower and Bank.B TERMS AND CONDITIONS RELATING TO SPECIFIC FACILITIES1.
    
    LOANS
 (i)
    
    ROLLOVER
 (a)
    
    Subject to the terms of the Facility Letter and such other terms as
stated herein, each Advance may be renewed for a further period as may be
selected by the Borrower upon written notice in substantially the form in ANNEX B
or such form as may be required by the Bank and given at least two (2) clear
business days prior to the last day of the preceding Interest Period relating to
such Advance.(b)
    
    All the terms and conditions herein and in the Facility Letter
relating to the making of an Advance and/or the selection of an Interest Period
shall apply mutatis mutandis to a renewed Advance and the new Interest Period
relating thereto.(c)
    
    For any late notification of the Selected Interest Period the
Borrower shall indemnify the Bank for all losses, fees ad expenses incurred by
the Bank, arising from the disruption in its funding. A certificate by an
officer of the Bank as to the amount of such funding losses shall be binding and
conclusive on the Borrower.
 (ii)
    
    PREPAYMENTS
 (a)
    
    Upon giving notice of not less than the number of days indicated in
the Facility Letter to that effect to the Bank, the Borrower may prepay any part
of the Loan in whole or in part on any Interest Payment Date relating to that
Loan in accordance with the provisions of this Clause I together with accrued
interest thereon up to the date of prepayment and a prepayment fee at the rate
indicated in the Facility Letter on the amount prepaid.




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##### 



(b)
    
    No partial prepayment of the Loan shall relieve the Borrower of its obligation under
the Facility Letter except to the extent of the amount repaid.(c)
    
    Notice of prepayment once having been given by the Borrower shall be irrevocable and
it shall be obligatory on the Borrower to make prepayment in accordance with the notice.(d)
    
    Save as expressly provided in this Clause 1, no prepayment of the Loan or part
thereof is allowed.(e)
    
    Without prejudice to sub-Clause (a) above, the Borrower shall on demand indemnify the
Bank against any funding or other cost, loss, expense or liability sustained or incurred by
the Bank (including without limitation, any cost, loss, expense or liability incurred in
liquidating or otherwise re-employing deposits from third parties acquired to fund the
making of the Loan at rates lower than the cost of such funds and any such costs, losses,
expenses and liabilities suffered by any third party for which the Bank is liable) in the
event of a prepayment pursuant to this Clause 1.
 2
    
    OVERDRAFTThe Overdraft Facility shall be subject to periodic review and all sums outstanding under
this Facility shall be repayable on demand notwithstanding anything contained herein or in
the Facility Letter or in the Security Documents.3
    
    GUARANTEES, LETTERS OF CREDIT AND ALL OTHER TRADE FACILITIESThe Borrower hereby unconditionally and irrevocably undertakes to and agrees with the Bank
that it will at all times fully indemnify and save harmless the Bank from and against any
and all actions, proceedings, liabilities, claims, demands, losses, damages, charges, costs
and expenses of whatever nature which the Bank may at any time and from time to time
directly or indirectly sustain, incur or suffer (a) by reason of the issue of any Bankers
Guarantee of Letter of Credit or Performance Bond or shipping Guarantee or its payment of
any claim or liability thereunder or otherwise in connection with or arising in any way
whatsoever out of any Bankers Guarantee or Letter of Credit or Performance Bond or
Shipping Guarantee and (b) by reason of the Facility letter. Without prejudice to the
generality of the foregoing, the Borrower covenants and undertakes to pay to the Bank by
way of indemnity at any time and from time to time immediately upon first demand by the
Bank all moneys and liabilities whatsoever which may from time to time be claimed or
demanded from the Bank or which the Bank may pay or which it determines it may be or become
liable to pay or sustain, incur or suffer under or by reason of or in connection with any
Bankers Guarantee or Letter or Credit or Performance Bond or Shipping Guarantee. The
Borrower shall make payment to the Bank following such claim or demand notwithstanding that
at the time of the claim or demand the Bank is not liable under or required by law to make
any payment under or in connection with the Bankers Guarantee or Letter of Credit or
Performance Bond or Shipping Guarantee and notwithstanding any
other fact or circumstances which may constitute a defence or discharge to the Bank in
respect of the claim or demand made against it under or in connection with the Bankers
Guarantee or Letter of Credit or Performance Bond or Shipping Guarantee.The Bank hereby shall have the right to, at any time, without notice to the Borrower, debit
the current account of the Borrower and set aside the amount debited to cover the
contingent liabilities of the Borrower to the Bank whether on performance guarantees,
bonds, trust receipts, term bills, letters of credit or in any other manner whatsoever.
 C
    
    DEFINITIONS AND INTERPRETATIONS
 (a)
    
    Unless the context otherwise requires, the following words and expressions
used herein shall have the following meanings:-Advance means an advance made or to be made by the Bank to the Borrower under the
Facility Letter or as the case may be the outstanding principal amount.Affiliates means any branch of BNP Paribas, and any company in which BNP Paribas
from time to time, directly or indirectly, has or controls a shareholding which
represents 10% or more of the issued share capital of such company and any company
in which any of them is beneficial owner.Business Day means a day (other than a Saturday or Sunday) on which commercial
banks are open for business in Singapore and if on that day a payment or transfer
of funds is to be made in United States Dollars, commercial banks and foreign
exchange markets are open for business in New York City and Singapore and/or if on
that day a payment or transfer of funds to be made in an Alternative Currency,
commercial banks and foreign exchange markets are open for business in the
principal financial centre of the country of the currency and Singapore.Event of Default means any of the events mentioned in Clause 9 of Part A hereof.Facility Letter means the letter from the Bank granting the Facilities to the
Borrower (as the same may be renewed, varied, extended or otherwise amended from
time to time) to which these terms and conditions are annexed.Facility or Facilities means such facility or facilities granted by the Bank to
the Borrower pursuant to the Facility Letter.Interest Period means, in relation to the Loan, a period mutually agreed between
the Borrower and the Bank. In the event the Borrower fails to select the Interest
Period, the Bank shall have the option to select the Interest Period.Interest Payment Date means the last day of the Interest Period or such other
date as may be mutually agreed between the Borrower and the Bank.Loan means the term loan facility granted by the Bank under the Facility Letter.Potential Event of Default means any event which with the giving of notice, lapse
of time or making of any determination or the satisfaction of any other condition
(or any combination thereof), might/would constitute an Event of Default.Security Documents means any and every document, agreement or memorandum from
time to time executed by the Borrower and/or the Surety to secure the obligations
of the Borrower to the Bank (as may from time to time be amended, supplemented or
modified, and includes any document that amends, supplements or modifies that
Security Document).Security Margin means the margin mentioned as such in the Facility Letter.Surety means a party to a Security Document other
than the Bank and the Borrower.(b)
    
    References to Facility Letter shall, unless the context otherwise requires,
include all its schedules, attachments and annexures, as the same may be renewed,
varied, extended or otherwise amended from time to time.




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##### 



(c)
    
    Words importing the singular shall include the plural and vice versa.(d)
    
    Headings used herein are for case of reference only and shall not affect its
interpretation.(e)
    
    A person who is not a party to any agreement incorporating these terms and
conditions has no rights under the Contracts (Rights of Third Parties) Act 2001, (Cap.
53B) 2001 of Singapore to enforce or enjoy the benefit of any provision of such
agreement and these terms and conditions.
 ***********************************




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##### 



ANNEX A
 
   FACILITY
LETTER REF:[      
] DATED [      ]
  (Currency
and amount in
figures)  (Currency
and amount in words)




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##### 



ANNEX B
 
  ADVANCE *USD/SGD
MATURITY




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##### 



SCHEDULE 2
 Additional
Conditions Precedent
  1.
    
    Receipt by the Bank of all the documents listed in Clause 9 of the Letter Agreement
duly executed in form and substance satisfactory to the Bank.2.
    
    Receipt by the Bank of the Letter Agreement dated 12 Aug 2005 duly accepted by the
Borrower.3.
    
    Receipt by the Bank of certified true copy of the duly signed Supply Agency and Sales
Agreement between BP Singapore Pte Ltd and the Borrower dated 21 December 2001 and the Bank
being satisfied with the same.4.
    
    Receipt by the Bank of certified true copy of the duly signed crude oil sales and
purchases contract between the Borrower (as seller) and the Refiner (as buyer) dated 31 May
2004 (the IOL Crude Oil Contract) and the Bank being satisfied with the same.5.
    
    Receipt by the Bank of certified true copy of the duly signed petroleum products sales
and purchase contract between the Borrower (as buyer) and the Refiner (as seller) dated 31
May 2004 (the IOL Export Contract) and the Bank being satisfied with the same.6.
    
    Receipt by the Bank of certified true copy of the duly signed Export Marketing and
Shipping Agreement between the Borrower and Shell International Eastern Trading Company
dated 23 March 2001 (the SIETCO Export Contract) and the Bank being satisfied with the
same.7.
    
    Receipt by the Bank of certified true copy of the duly signed Agreement for the Sale
and Purchase of Naphtha between the Borrower and Shell International Eastern Trading
Company dated 8 February 2001 (the SIETCO Naphtha Export Contract) and the Bank being
satisfied with the same.8.
    
    Receipt by the Bank of certified true copy of the duly signed Domestic Sales Contract
between the Refiner and Shell Papua New Guinea Limited dated 9 April 2001 (the Shell
Domestic Contract) and the Bank being satisfied with the same.9.
    
    Receipt by the Bank of certified true copy of all duly signed Domestic Sales Contract
for the sale of the Products by the Refiner to any buyer, including
but not limited to the BP
Domestic Sale Contract, the Mobil Domestic Contract and the Niugini Domestic, and the Bank
being satisfied with the same.10.
    
    Receipt by the Bank of certified true copy of the Refinery Management Contract executed
between the Refiner and Petrofac Niugini on 9 November 2003 and the Bank being satisfied
with the same.11.
    
    Receipt by the Bank of such documentary evidence satisfactory to the Bank issued by
Clough Niugini Limited, certifying that the IOL Refinery is ready to accept the first crude
oil for refining.12.
    
    Receipt by the Bank of a signed acceptable insurance policy covering any losses to
crude oil and petroleum products located in the Refiners storage facilities, with the Bank
nominated as loss payee, and evidence of payment of the related insurance premium, the Bank
being satisfied with the same.13.
    
    Receipt by the Bank of an acceptable hedging policy of the Borrower and the Refiner
designed to ensure that the Borrower and the Refiner are not exposed to adverse oil price
movements, and the Bank being satisfied with the same.14.
    
    Receipt by the Bank of a certified true copy by or on behalf of the Borrower and the
Refiner, of each such law, decree, consent, license, approval, registration or declaration
as is, in the opinion of the legal counsel to the Bank, necessary to perfect the Security
Documents and to render this Letter Agreement and all Security Documents legal, valid,
blinding and enforceable, to make this Letter Agreement and all Security Documents
admissible in evidence in its jurisdiction of incorporation and to enable the Borrower and
the Refiner to perform their obligations hereunder




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##### 



including, without limitation (a) the approval of the Bank of Papua New Guinea to the
entry into by the Borrower and the Refiner of this Facility Agreement and the opening of
the IOL Collection Account, the IOL, Account and the IOL Operating Account (b) the prior
written consent of OPIC to the creation of, and priority of the Bank under, the security
interests described in the Security Documents executed or to be
executed by the Refiner;
and (c) the written consent of all counterparties to the sale and purchase contracts
assigned under the Security Documents, where applicable.15.
    
    Receipt by the Bank of documentary evidence on the continued application as force of
law in respect of [the authority from The Independent Consumer & Competition Commission
(Oil Refining Facility State Agreement Exception) Regulation 2003 as gazetted in the
National Gazette on 25 September 2003 relation to the domestic price formula for all
petroleum products], and the Bank being satisfied with the same.16.
    
    Receipt by the Bank of the appointment of a process agent in Singapore, by the
Borrower, the Refiner and IOC, together with the acceptance by such process agents of
their respective appointment, each in form and substance satisfactory to the Bank.17.
    
    Receipt by the Bank of a legal opinion of the Banks Papua New Guinea legal counsel
in form and substance satisfactory to the Bank.18.
    
    Receipt by the Bank of a legal opinion of the Banks
Cayman Island legal counsel in
form and substance satisfactory to the Bank.19.
    
    Receipt by the Bank of a legal opinion of the Banks Canadian legal counsel in form
and substance satisfactory to the Bank.20.
    
    Receipt by the Bank of a legal opinion of the Banks Bahamas legal counsel in form
and substance satisfactory to the Bank.21.
    
    Receipt by the Bank of a legal opinion of the Banks Singapore legal counsel in form
and substance satisfactory to the Bank.22.
    
    Receipt by the Bank of the PNG Regulation and the Project Agreement (as each is
defined in Schedule 2).23.
    
    Execution of all Security Documents, the Letter Agreement and
all documents defined in
Letter Agreement.24.
    
    Establishment of the Accounts as defined in Clause 14 of the Letter Agreement.25.
    
    Receipt by the Bank of documentary evidence containing clear identification of the
dead stock levels in the Refiners refinery and storage facilities and issued by Petrofac
Niugini.26.
    
    Payment by the Borrower of the legal and other expenses incurred by the Bank in the
preparation negotiation, execution and perfection of the Letter Agreement, the Security
Documents and the transactions contemplated therein.27.
    
    Such other documents reasonably required by the Bank related to the Letter Agreement,
the Facilities and/or the Security Documents, and notified to the Borrower.




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##### 



SCHEDULE
3
 Events
of Default
   1.
    
    Each of the events set out in Section A, Clause 9.1 of the Standard Terms.2.
    
    Non-compliance of the Independent Consumer and Competition Commission (Oil Refining
Facility State Agreement Exception) Regulation 2003 as gazetted in the Papua New Guinea
National Gazette on 25 September 2003 whereby the Independent State of Papua New Guinea
(the State) shall ensure that the Domestic Distributors shall first purchase the
petroleum products for Papua New Guinea domestic consumption from the Refiner at the
Import Parity Price formula (the PNG Regulation), and such non-compliance is not
rectified by the Borrower to the complete satisfaction of the Bank within thirty (30) days
from the date of its occurrence.Import Parity Price means in respect to a
petroleum products, its import parity price as
determined in accordance with the provisions of the agreement dated 29 May 1997 between the
State and the Borrower and the Refiner (as varied by an extension deed dated 1 July 1999
between the Appendix A of the State and the Borrower and the Refiner), as attached to the
petroleum processing facility license granted to the Refiner pursuant to Papua New Guinea
Oil and Gas Act 1998 (the Project Agreement).Domestic Distributors means all distributors in
the State that distribute petroleum
products to retailers of such petroleum product.3.
    
    Any amendment, revocation or termination of the PNG Regulation for any reason
whatsoever, and such amendment, revocation or termination is not rectified by the Borrower
or such relevant parties to the complete satisfaction of the Bank within thirty (30) days
from the date of its occurrence.4.
    
    Any amendment, breach, revocation or termination of the Project Agreement, including
but not limited to the States covenant to ensure that the Domestic Distributors first
purchase the Products from domestic refineries including the Refiner at the Import Parity
Price formula, and such amendment, breach, revocation or termination is not rectified by
the Borrower or such relevant parties to the complete satisfaction of the Bank within
thirty (30) days from the date of the its occurrence.Project Agreement means the Agreement dated 29 May 1997 between the State of Papua New
Guinea, the Borrower and the Refiner (as varied by an extension deed dated 1 July 1999
between the Appendix A of the State of Papua New Guinea, the Borrower and the Refiner), as
attached to the petroleum processing facility license granted to the Refiner pursuant to
Papua New Guinea Oil and Gas Act 1998.5.
    
    Any change in control and/or ownership of the Borrower and/or the Refiner and/or any
Guarantor (excluding IOC) from the control/ownership structure existing as at the date of
the Letter Agreement, without the Prior written consent of the Bank, such written consent
not to be unreasonably withheld.




---



##### 



6.
    
    Any change in control and/or ownership of IOC from the control/ownership structure
existing as at the date of the Letter Agreement in excess of 50% in aggregate, without the
prior written consent of the Bank, such written consent not to be unreasonably withheld.7.
    
    Any merger or amalgamation of the Borrower and/or the Refiner and/or any Guarantor
without the prior written consent of the Bank, such written consent not to be unreasonably
withheld.8.
    
    Any breach in the Security Margin, and such breach is not cured within three (3)
Business Days from the date written notice from the Bank.9.
    
    The CVR being less than 1.20, and such shortfall is not cured within three (3) Business
Days from the date written notice from the Bank.10.
    
    Any material adverse development in the financial, economic or political condition in
Papua New Guinea which, in the opinion of the Bank, may have a material adverse effect on
the Borrower and/or the Refiner and/or any Guarantor.11.
    
    Any material change or proposed change the nature and/or scope of the Borrowers
business, save with the prior written consent of the Bank.12.
    
    The government of Papua New Guinea or Singapore or any of the respective countries in
which the Borrower, the Refiner and the respective Guarantor is incorporated or any agency
thereof, imposes or declares that it will impose any form of exchange control or any law is
passed or any other event occurred that will prohibit, substantially prevent or impair the
ability of the Borrower, the Refiner and/or any Guarantor to pay remit when due, the
principal, interest, fees under the Facilities or to otherwise perform its respective
obligations under the Letter Agreement, the Security Documents and/or the sale contracts
referred to in the Letter Agreement to which it is a party.