##### 



CREDIT AGREEMENT
  INTEROIL CORPORATION
 The LENDERS Party Hereto
 MERRILL LYNCH CAPITAL CORPORATION
 MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED   CLARION FINANZ AG
 MERRILL LYNCH CAPITAL CORPORATION




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##### 



PageARTICLE 1 DEFINITIONS
    
    
    1Section 1.1
    
    Definitions
    
    
    1Section 1.2
    
    Accounting Terms and Determinations
    
    
    18Section 1.3
    
    Types of Borrowings
    
    
    18ARTICLE 2 THE LOANS
    
    
    19Section 2.1
    
    Commitments to Lend
    
    
    19Section 2.2
    
    Loans and Borrowings
    
    
    20Section 2.3
    
    Notice of Borrowing
    
    
    20Section 2.4
    
    Notice to Lenders; Funding of Loans
    
    
    20Section 2.5
    
    Administration of Notes
    
    
    21Section 2.6
    
    Maturity of Loans
    
    
    21Section 2.7
    
    Interest Rates
    
    
    21Section 2.8
    
    Fees
    
    
    22Section 2.9
    
    Termination or Reduction of Commitment
    
    
    22Section 2.10
    
    Optional Prepayments
    
    
    22Section 2.11
    
    Mandatory Prepayment
    
    
    23Section 2.12
    
    General Provisions as to Payments
    
    
    23Section 2.13
    
    Funding Losses
    
    
    24Section 2.14
    
    Computation of Interest and Fees
    
    
    24ARTICLE 3 CONDITIONS
    
    
    24Section 3.1
    
    Closing
    
    
    24Section 3.2
    
    Each Credit Event
    
    
    25ARTICLE 4 REPRESENTATIONS AND WARRANTIES
    
    
    26Section 4.1
    
    Existence and Business; Power and Authorization; Enforceable Obligations
    
    
    26Section 4.2
    
    No Violation
    
    
    27Section 4.3
    
    Litigation
    
    
    27Section 4.4
    
    Financial Information
    
    
    27Section 4.5
    
    Material Adverse Change
    
    
    27Section 4.6
    
    Use of Proceeds; Margin Regulations
    
    
    27Section 4.7
    
    Governmental Approvals
    
    
    27Section 4.8
    
    Investment Company Act
    
    
    28Section 4.9
    
    No Default
    
    
    28Section 4.10
    
    Taxes
    
    
    28Section 4.11
    
    Foreign Taxes
    
    
    28Section 4.12
    
    Ownership of Property; Liens
    
    
    28Section 4.13
    
    Accuracy and Completeness of Information
    
    
    28Section 4.14
    
    Environmental Matters
    
    
    28Section 4.15
    
    Significant Subsidiaries
    
    
    29Section 4.16
    
    Solvency
    
    
    29
 i




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##### 



PageSection 4.17
    
    Existing Committed Facilities; Existing Clarion Facility
    
    
    29Section 4.18
    
    Capitalization and Assets of Certain Subsidiaries
    
    
    29ARTICLE 5 AFFIRMATIVE COVENANTS
    
    
    29Section 5.1
    
    Information Covenants
    
    
    30Section 5.2
    
    Books, Records and Inspections
    
    
    31Section 5.3
    
    Payment of Taxes
    
    
    31Section 5.4
    
    Compliance with Law
    
    
    31Section 5.5
    
    Existence, Etc
    
    
    32Section 5.6
    
    Insurance
    
    
    32Section 5.7
    
    Maintenance of Property
    
    
    32Section 5.8
    
    Ownership of Subsidiaries
    
    
    32Section 5.9
    
    Repayment of Existing Clarion Facility
    
    
    32Section 5.10
    
    New Subsidiaries
    
    
    32Section 5.11
    
    Performance of LNG/NGL Project MOU
    
    
    33Section 5.12
    
    IPL Secutrity Documents and SPI Pledge Agreement
    
    
    33ARTICLE 6 NEGATIVE COVENANTS
    
    
    33Section 6.1
    
    Restriction on Fundamental Changes
    
    
    33Section 6.2
    
    Transactions with Affiliates
    
    
    34Section 6.3
    
    Indebtedness
    
    
    34Section 6.4
    
    Liens
    
    
    34Section 6.5
    
    Use of Proceeds; Margin Regulations
    
    
    34Section 6.6
    
    Environmental Matters
    
    
    34Section 6.7
    
    Leverage Ratio
    
    
    34Section 6.8
    
    Fixed Charge Coverage Ratio
    
    
    34Section 6.9
    
    S.P.I. Distribution Limited Accounts
    
    
    35ARTICLE 7 LNG/NGL PROJECT PARTICIPATION
    
    
    35Section 7.1
    
    LNG/NGL Project MOU
    
    
    35Section 7.2
    
    Definitive LNG/NGL Project Agreement
    
    
    35ARTICLE 8 NOTICE OF AMENDMENTS AND WAIVERS
    
    
    35Section 8.1
    
    Solicitation of Lenders
    
    
    35ARTICLE 9 EVENTS OF DEFAULT; REMEDIES
    
    
    36Section 9.1
    
    Events of Default
    
    
    36Section 9.2
    
    Rights and Remedies
    
    
    37Section 9.3
    
    Additional Rights and Remedies
    
    
    37ARTICLE 10 THE AGENTS
    
    
    38Section 10.1
    
    Appointment and Authorization
    
    
    38Section 10.2
    
    Administrative Agent and Affiliates
    
    
    38Section 10.3
    
    Action by Administrative Agent
    
    
    38Section 10.4
    
    Consultation with Experts
    
    
    38Section 10.5
    
    Liability of Administrative Agent
    
    
    39Section 10.6
    
    Indemnification
    
    
    39
 ii




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##### 



PageSection 10.7
    
    Credit Decision
    
    
    39Section 10.8
    
    Successor Administrative Agent
    
    
    39Section 10.9
    
    Agents/Fees
    
    
    40Section 10.10
    
    Other Agents
    
    
    40ARTICLE 11 CHANGE IN CIRCUMSTANCES
    
    
    40Section 11.1
    
    Increased Cost and Reduced Return
    
    
    40Section 11.2
    
    Taxes
    
    
    41ARTICLE 12 MISCELLANEOUS
    
    
    42Section 12.1
    
    Notices
    
    
    42Section 12.2
    
    No Waivers
    
    
    43Section 12.3
    
    Expenses; Indemnification
    
    
    43Section 12.4
    
    Sharing of Set-offs
    
    
    43Section 12.5
    
    Amendments and Waivers
    
    
    44Section 12.6
    
    Successors and Assigns
    
    
    44Section 12.7
    
    Collateral
    
    
    46Section 12.8
    
    Governing Law; Submission to Jurisdiction
    
    
    46Section 12.9
    
    Counterparts; Integration; Effectiveness
    
    
    46Section 12.10
    
    WAIVER OF JURY TRIAL
    
    
    46Section 12.11
    
    Usury Savings Clause
    
    
    46
 Schedules
 Commitment Schedule
 Schedule 1.1
    
    
    Significant SubsidiariesSchedule 2.2(c)
    
    
    Use of ProceedsSchedule 4.3
    
    
    LitigationSchedule 4.7
    
    
    Governmental ApprovalsSchedule 6.2
    
    
    Transactions With Affiliates
 Exhibits
 Exhibit A-1
    
    
    
    Form of Tranche A NoteExhibit A-2
    
    
    
    Form of Tranche B NoteExhibit B
    
    
    
    Form of Assignment and Assumption AgreementExhibit C
    
    
    
    Form of Engagement LetterExhibit D-1
    
    
    
    Form of Guaranty AgreementExhibit D-2
    
    
    
    Form of IPL Guaranty AgreementExhibit E
    
    
    
    Form of Pledge AgreementExhibit F
    
    
    
    Form of IPL Security Agreement (Fixed and Floating Charge)Exhibit G
    
    
    
    Form of LNG/NGL Project MOU
 iii




---



##### 



RECITALS
    ARTICLE 1
 Definitions
 Adjusted Consolidated Debt
 Administrative Questionnaire
 Affiliate




---



##### 



Administrative Agent
 Agent
 Applicable Interest Rate provided however
 Applicable Lending Office
 Approved Private Offering
 Approved Public Offering
 Assignee
 Authorized Officer
 Bankruptcy Law et seq.
 Beneficiary
 Borrower
 2




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##### 



Borrower Pledge Agreement Exhibit E
 Borrowers 2005 Form 40-F
 Borrowing
 Business Day
 Capital Lease
 Change of Control Group
 Clarion Finanz
 Closing Date
 Code
 Collateral Agency Agreement
 Collateral Agent
 Commitment
 Commitment Fee
 3




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##### 



Commitment Increase
 Consolidated Cash Interest Expense
 Consolidated EBITDA
 Consolidated Interest Expense
 Consolidated Net Income provided
 Consolidated Net Tangible Assets
 Consolidated Net Worth
 Consolidated Subsidiary
 Contest
 4




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##### 



Contingent Obligation provided
 Currency Agreement
 Day Daily
 Debt Service Reserve Account
 Debt Service Reserve Amount
 Debt Service Reserve Agent
 Default
 Default Rate
 Definitive LNG/NGL Project Agreement
 Dollars US$
 5




---



##### 



Effective Date
 Engagement Letter Exhibit C
 Environmental Approvals
 Environmental Claim
 Environmental Laws
 Equity Interests
 Event of Bankruptcy
    6




---



##### 



Event of Default
 Existing Clarion Facility
 Existing Committed Facilities
 Existing OPIC Facility
 Existing Revolver Facility
 Facility Agency Fee
 Federal Funds Rate
 7




---



##### 



provided
 Fiscal Quarter
 Fiscal Year
 Fixed Charge Coverage Ratio
 GAAP
 Governmental Approval
 Governmental Authority
 Group of Loans
 Guarantors
 Guaranty Agreements
 Highest Lawful Rate
 8




---



##### 



Indebtedness
 Indemnitee
 Interest Rate Agreement
 Investment
 IPI Agreements
 IPL Guaranty Exhibit D-2
 IPL Security Agreement Exhibit F
 IPL Security Documents
 Law
 9




---



##### 



Lender
 Lien
 LNG/NGL Project
 LNG/NGL Project MOU
 Loan
 Loan Documents
 Majority Lenders
 Margin Stock
 Material Adverse Effect
 Material Financial Obligation
 Materials of Environmental Concern
 10




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##### 



Maturity Date
 Measurement Date
 Measurement Period
 Merrill Lynch
 Moodys
 Net Cash Proceeds
 Notes
 Notice of Borrowing
 Obligations
 OPIC
 Parent
 Participant
 11




---



##### 



Permitted Commitment Increase
 Permitted Indebtedness provided provided
however
 Permitted Liens
 12




---



##### 



provided provided provided
 Permitted Transaction
 Person
 Pledge Agreements
 PNG Government
 Prepayment Event
  13




---



##### 



provided
  provided however
   provided however
 provided however
 14




---



##### 



ProjectCo
 Quarterly Payment Dates
 Regulation S-X
 Required Lenders
 Restricted Lender
 S & P
 SEC
 Secured Parties
 Securities Exchange Act
 Security Documents
 Significant Subsidiary Schedule
1.1
 Solvent
 15




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##### 



SPI Guaranty Agreement Exhibit D-1
 SPI Pledge Agreement Exhibit
 Subsidiary
 Tranche A Lender
 Tranche A Loan
 Tranche A Loan Advance
 Tranche A Loan Commitment Commitment
Schedule
 Tranche A Loan Commitment Percentage provided,
 16




---



##### 



Tranche A Loan Commitment Period
 Tranche A Loan Notes
 Tranche A Loan Maturity Date
 Total Tranche A Loan Commitment
 Tranche B Lender
 Tranche B Loan
 Tranche B Loan Advance
 Tranche B Loan Commitment Commitment
Schedule
 Tranche B Loan Commitment Percentage provided,
 Tranche B Loan Commitment Period
 Tranche B Loan Notes
 17




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##### 



Tranche B Loan Maturity Date
 Transaction Documents
 Tri-Party Agreement
 Tri-Party Agreement Effective Date
 Total Tranche B Loan Commitment
 United States
 U.S.A. PATRIOT Act
 Accounting Terms and Determinations provided
 Types of Borrowings Borrowing e.g.
 18




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##### 



ARTICLE 2
 Commitments to Lend
 Tranche A Loans Tranche A Loan Initial Tranche A Loan
Borrowing Tranche A Loan Note Exhibit A-1
 Tranche B Loans Tranche B Loan Tranche B Note Exhibit A-2
 19




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##### 



Loans and Borrowings
 provided
  Schedule 2.2(c) Schedule 2.2(c) Schedule 2.2(c)
 Notice of Borrowing Notice of Borrowing
    Notice to Lenders; Funding of Loans
   20




---



##### 



Administration of Notes provided
 Maturity of Loans
 Interest Rates
 21




---



##### 



Fees
   Termination or Reduction of Commitment
 provided
   Optional Prepayments
  22




---



##### 



Mandatory Prepayment
   provided
 General Provisions as to Payments
   23




---



##### 



Funding Losses provided
 Computation of Interest and Fees
 ARTICLE 3
 Closing
    24




---



##### 



Exhibit G
  Each Credit Event.
      25




---



##### 



ARTICLE 4
  Existence and Business; Power and Authorization; Enforceable Obligations
     26




---



##### 



No Violation
 Litigation Schedule 4.3
 Financial Information
 Material Adverse Change
 Use of Proceeds; Margin Regulations.
 Governmental Approvals Schedule 4.7
 27




---



##### 



Investment Company Act
 No Default
 Taxes
 Foreign Taxes
 Ownership of Property; Liens
 Accuracy and Completeness of Information
 Environmental Matters
   28




---



##### 



Significant Subsidiaries
 Solvency
 Existing Committed Facilities; Existing Clarion Facility.
 Capitalization and Assets of Certain Subsidiaries
   ARTICLE 5
  29




---



##### 



Information Covenants.
 Quarterly Financial Statements
 Annual Financial Statements
 Officers Certificate
 Notice of Default, Litigation or Other Event
 Environmental Matters
 30




---



##### 



Other Information
 Document Delivery
 Books, Records and Inspections
 Payment of Taxes
 Compliance with Law
  31




---



##### 



Existence, Etc. provided
 Insurance
 Maintenance of Property provided
 Ownership of Subsidiaries.
 Repayment of Existing Clarion Facility
 New Subsidiaries Exhibit D-1 Exhibit F
 32




---



##### 



Exhibit E
 Performance of LNG/NGL Project MOU
 IPL Security Documents and SPI Pledge Agreement. Bank of PNG Central Banking (Foreign Exchange and Gold) Regulation
 ARTICLE 6
  Restriction on Fundamental Changes
 provided Permitted
Transaction
  33




---



##### 



Transactions with Affiliates Schedule 6.2
 Indebtedness.
 Liens
 Use of Proceeds; Margin Regulations
 Environmental Matters
 Leverage Ratio
 Fixed Charge Coverage Ratio Measurement Date Measurement Period
 Measurement Date
    
    Measurement Period
    
    Minimum RatioDecember 31, 2006
    
    Quarter then ended
    
    1.10:1.00March 31, 2007
    
    Two quarters then ended
    
    1.20:1.00June 30, 2007
    
    Three quarters then ended
    
    1.30:1.00September 30, 2007, and each
Fiscal Quarter thereafter
    
    Four quarters then ended
    
    1.40:1.00
 34




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##### 



S.P.I. Distribution Limited Accounts
 
 LNG/NGL Project MOU LNG/NGL Project MOU Exhibit G LNG/NGL Project PNG Government
 Definitive LNG/NGL Project Agreement Definitive LNG/NGL Project Agreement ProjectCo
 
 Solicitation of Lenders
 35




---



##### 



Events of Default
 Failure to Make Payments
 Breach of Representation or Warranty
 Breach of Covenants
 Default Under Other Agreements provided however
 36




---



##### 



Bankruptcy, Etc.
 Dissolution
 Judgments
 Change of Control
 Rights and Remedies
   Additional Rights and Remedies
 37




---



##### 



Approved Private Offering Approved Public
Offering
 
 Appointment and Authorization
 Administrative Agent and Affiliates
 Action by Administrative Agent
 Consultation with Experts
 38




---



##### 



Liability of Administrative Agent
 Indemnification
 Credit Decision
 Successor Administrative Agent
 39




---



##### 



Agents/Fees.
 Other Agents
 
 Increased Cost and Reduced Return
   40




---



##### 



Taxes.
  Taxes excluding
 Other Taxes
 provided
 41




---



##### 



provided
  
 Notices
 42




---



##### 



provided
 No Waivers
 Expenses; Indemnification
  Indemnitee provided
 Sharing of Set-offs
 43




---



##### 



provided
 Amendments and Waivers provided
 Successors and Assigns
  Participant
 44




---



##### 



provided
 Assignee Exhibit
B provided
   45




---



##### 



Collateral
 Governing Law; Submission to Jurisdiction
 Counterparts; Integration; Effectiveness
 WAIVER OF JURY TRIAL . EACH OF THE BORROWER, THE AGENTS AND THE LENDERS HEREBY
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
 Usury Savings Clause.
 46




---



##### 



signatures on following pages
 47




---



##### 



INTEROIL CORPORATION, as BorrowerBy:Name:Title:Address:[][][]Facsimile: []




---



##### 



MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED,
 By:Name:Title:Address:[][][]




---



##### 



CLARION FINANZ AG,
 By:Name:Title:Address:Gerbergasse 5P.O. Box 7427CH-8023 ZurichSwitzerlandFacsimile: +41-1-227-6010




---



##### 



MERRILL LYNCH CAPITAL CORPORATION
 By:Name:Title:Address:[][][]Facsimile: []




---



##### 



COMMITMENT SCHEDULE
Tranche A Loans:
 Name of Lender
    
    CommitmentMerrill Lynch
    
    $
    50,000,000Clarion Finanz
    
    $
    50,000,000Total:
    
    $
    100,000,000
 Tranche B Loans:
 Name of Lender
    
    CommitmentMerrill Lynch
    
    $
    20,000,000Clarion Finanz
    
    $
    10,000,000Total:
    
    $
    30,000,000




---



##### 



SCHEDULE 1.1
Significant Subsidiaries




---



##### 



SCHEDULE 2.2(c)
USE OF PROCEEDS
 Part 1
 Tranche A Use of Funds (figures in US$millions)Acquisition of Shell Assets and
downstream working capital:
    
    
    30.0Repayment of Existing Clarion Facility:
    
    
    23.5Refinery Revamp works:
    
    
    10.0Midstream and downstream working capital:
    
    
    20.0Tranche A general corporate uses:
    
    
    14.0LNG/NGL Project Development Costs:
    
    
    2.5TOTAL:
    
    
    100.00
 SCHEDULE 2.2(c)
USE OF PROCEEDS
 Part 2
 Tranche B Use of Funds (figures in US$ millions)LNG/NGL Project Development Costs:
    
    
    22.5Tranche B General Corporate Purposes:
    
    
    7.5TOTAL:
    
    
    30.0




---



##### 



SCHEDULE 4.3
LITIGATION
 1.
    
    Ongoing arbitration between InterOil Limited and Clough Niugini Limited.2.
    
    Warranty dispute between InterOil Limited and Clough Niugini Limited.3.
    
    Incentive payment dispute between InterOil Corporation and Clough Niugini Limited.




---



##### 



SCHEDULE 4.7
GOVERNMENTAL APPROVALS
 Central Banking (Foreign Exchange and
Gold) Regulation




---



##### 



SCHEDULE 6.2
TRANSACTIONS WITH AFFILIATES
 1.
    
    Petroleum Independent and Exploration Corporation, a company controlled by Mr. Mulacek, the
Borrowers Chief Executive Officer, was paid a management fee of $150,000, $150,410, and
$150,000 during 2005, 2004 and 2003, respectively. This management fee relates to Petroleum
Independent and Exploration Corporation being appointed the General Manager of S.P. InterOil,
LDC. The Borrower will continue to pay this management fee to Petroleum Independent and
Exploration Corporation.
 2.
    
    Breckland Limited (Breckland) provides technical and advisory services to the
Borrower and its Subsidiaries on normal commercial terms. Roger Grundy, one of the Borrowers
directors, is also a director of Breckland and he provides consulting services to the Borrower
and its Subsidiaries as an employee of Breckland. Breckland was paid $179,608, $120,426 and
$131,250 during 2005, 2004 and 2003, respectively. The Borrower and its Subsidiaries
anticipate that they will continue to retain Breckland for these technical and advisory
services.




---



##### 



EXHIBIT A-1
Tranche A Loan Note
 US$[]
    
    New York, New York
    
    May [], 2006
 Borrower  Lender
 provided
 Loan Agreement
 INTEROIL CORPORATIONBy:Name:Title:




---



##### 



Amount
    
    Type
    
    Amount ofof
    
    of
    
    Principal
    
    NotationDate
    
    Loan
    
    Loan
    
    Repaid
    
    Made By




---



##### 



EXHIBIT A-2
Tranche B Loan Note
 US$[]
    
    New York, New York
    
    [], 2006
 Borrower  Lender
 provided
 Loan Agreement
 INTEROIL CORPORATIONBy:Name:Title:




---



##### 



Amount
    
    Type
    
    Amount ofof
    
    of
    
    Principal
    
    NotationDate
    
    Loan
    
    Loan
    
    Repaid
    
    Made By




---



##### 



EXHIBIT B
 Form of Assignment and Assumption Agreement
 ASSIGNMENT AND ASSUMPTION AGREEMENT
 Agreement  Assignor Assignee Borrower Administrative Agent
 Loan
Agreement
 
 
 Assigned Amount
  Definitions
 Assignment




---



##### 



Payments
 Consent of the [Borrower and the Administrative Agent]
 Non-reliance on Assignor
  Governing Law
 Counterparts




---



##### 



[NAME OF ASSIGNOR]By:Name:Title:[NAME OF ASSIGNEE]By:Name:Title:INTEROIL CORPORATIONBy:Name:Title:MERRILL LYNCH CAPITAL CORPORATION,as Administrative AgentBy:Name:Title:




---



##### 



EXHIBIT C
 Form of Engagement Letter
   
 Attention:
    
    Mr. Phil E. Mulacek,Chairman of the Board,Chief Executive Officer and President
  Offering Merrill Lynch Company ML-IOC Credit Agreement Offering Securities provided however
 1




---



##### 



Clarion Finanz provided however
 Third Party Proposed
Offering
 2




---



##### 



Fees and Expenses
 Fees / Underwriting Discounts. excluding,
however Annex B excluding, however
 Reimbursement of Expenses.
 Payments in U.S. Dollars.
 Information
 3




---



##### 



Information
 Indemnity Annex A Annex
A
 Independent Contractor
 Public Announcements
 Term and Termination Term
 Acknowledgements
 4




---



##### 



Miscellaneous
       5




---



##### 



Very
truly yours,MERRILL LYNCH, PIERCE, FENNER &
SMITH INCORPORATEDBy:Name:Title: 
 INTEROIL CORPORATIONBy:Name:
Title:
 6




---



##### 



ANNEX A
 Indemnified Party
  A-1




---



##### 



provided however
   Judgment Currency rate of exchange
  A-2




---



##### 



ANNEX B
  Registration
    
    Fees / Underwriting DiscountOffering Type
    
    Rights (Y/N)
    
    (% of Proceeds Received by the Company)Private*Equity Securities Offering
    
    N
    
    6%Convertible Securities Offering
    
    N
    
    5%Debt Securities Offering
    
    N
    
    3%Public**Equity Securities Offering
    
    Y
    
    6%Convertible Securities Offering
    
    Y
    
    3%Debt Securities Offering
    
    Y
    
    3%Other***
    
    [?]
    
    Market fee /underwriting
discount in an
amount comparable
to recent similar
transactions, as
agreed by Merrill
Lynch and the
Company
 NOTES:
 
 *
    
    Private Offering in the U.S. or Canadian Securities markets of shares
or any convertible Securities or other rights to acquire shares, for cash
through an investment bank acting as initial purchaser (in the case of a U.S.
offering exempt from registration under Rule 144A of the Securities Act) or
using an investment bank as placement agent (in the case of a U.S offering
exempt from registration under Section 4(2) of the Securities Act or Regulation
D promulgated thereunder).**
    
    Firm commitment underwritten public Offering in the U.S. or Canadian
Securities markets pursuant to a Registration Statement that became effective
after the date of this letter agreement covering the offer and sale of shares
for the account of the Company to the public.***
    
    Any other contemplated Securities Offering that does not fit within the
categories set forth in this pricing grid.




---



##### 



EXHIBIT D-1
 Form of Guaranty Agreement
 GUARANTY
 THIS GUARANTY Guaranty Effective
Date [  ] Guarantor MERRILL LYNCH CAPITAL
CORPORATION Merrill Lynch Administrative Agent
 W I T N E S S E T H :
 WHEREAS Borrower Lenders Administrative Agent Co-Arrangers Collateral Agent Credit Agreement Beneficiaries
 WHEREAS
 WHEREAS
 NOW, THEREFORE
 Definitions .
 Guaranty of the Obligations Guaranteed Obligations
 1




---



##### 



Payment by Guarantor
 Liability of Guarantor Absolute
      2




---



##### 



3




---



##### 



Waivers by Guarantor
 Guarantors Rights of Subrogation, Contribution, etc
 4




---



##### 



Subordination of Other Obligations
 Continuing Guaranty
 Authority of Guarantor
 Financial Condition of the Guarantor
 5




---



##### 



Bankruptcy, etc
    6




---



##### 



Governing Law; Jurisdiction; Waiver of Jury Trial .
   Representations and Warranties of Guarantor
     7




---



##### 



8




---



##### 



Implied Waiver
 Survival of Representations
 Severable Provisions
 Integration
 No Third-Party Beneficiaries
 9




---



##### 



Amendments Only in Writing
 Notices
 [Guarantor][][]Attn: []Fax No. []
  No Assignment.
 IN WITNESS WHEREOF
 [GUARANTOR]By:Name:Title:
 10




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##### 



EXHIBIT D-2
 Form of IPL Guaranty Agreement
 GUARANTY
 THIS GUARANTY Guaranty Effective
Date INTEROIL PRODUCTS LIMITED Guarantor MERRILL LYNCH
CAPITAL CORPORATION Merrill Lynch Administrative
Agent
 W I T N E S S E T H :
 WHEREAS Borrower Lenders Administrative Agent Co-Arrangers Collateral Agent Credit Agreement Beneficiaries
 WHEREAS
 WHEREAS
 NOW, THEREFORE
 Definitions .
 Guaranty of the Obligations Guaranteed Obligations
 1




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Payment by Guarantor
 Liability of Guarantor Absolute
     2




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3




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Waivers by Guarantor
 Guarantors Rights of Subrogation, Contribution, etc
 4




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Subordination of Other Obligations
 Continuing Guaranty
 Authority of Guarantor
 Financial Condition of the Guarantor
 5




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Bankruptcy, etc
    6




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Governing Law; Jurisdiction; Waiver of Jury Trial .
   Representations and Warranties of Guarantor
     7




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8




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Implied Waiver
 Survival of Representations
 Severable Provisions
 Integration
 No Third-Party Beneficiaries
 9




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Amendments Only in Writing
 Notices
 InterOil Products Limited[]Port MoresbyPapua New GuineaAttn: []Fax No. []
  No Assignment.
 IN WITNESS WHEREOF
 10




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THE COMMON SEALof INTEROIL PRODUCTS
LIMITED, the fixing of which was
witnessed by:Signature of director
    
    Signature of director/secretaryName
    

NameORSIGNED, SEALEDand DELIVERED
for INTEROIL PRODUCTS LIMITED
under
power of attorney in the presence
of:Signature
of attorneySignature of witness
    

NameName
    

Date
of power of attorney
 11




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EXHIBIT E
 Form of Pledge Agreement
 PLEDGE AND SECURITY AGREEMENT
 Credit Agreement Lenders
 W I T N E S S E T H
 Loans
  [ ] Shares
   ARTICLE 1
  1




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Agreement
 Credit Agreement
 Investment Property
 
 Organic Documents
 Shares
 Lenders
 Loans
 Pledged Collateral Section 2
 Pledged Interests Section 2
 Pledgor
 Proceeds
 New York UCC
 Securities Act
 USA PATRIOT Act
   2




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Pledged
Collateral
 Schedule l Pledged Interests
    ARTICLE
2
  3




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4




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5




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Schedule
1
   ARTICLE
3
         6




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7




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8




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ARTICLE
4
  provided
 Exhibit A
  9




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pro rata
 pro rata
   Section 4.3
 10




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Section 4.4
 Section 4.4(a)
 ARTICLE 5 Section 4.4(b) Section 4.4(c)
  11




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Section 4.4
   ARTICLE 4
 12




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Section 4.5
 ARTICLE 4 ARTICLE 4
 ARTICLE
5
   13




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Section 4.4
  Section 5.1(a) Section 5.1(a)
 14




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Section 5.1
      15




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ARTICLE
6
      Section 5.1
 16




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17




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Section 6.4
     18




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19




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GOVERNING LAW.
 THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW
OF THE STATE OF NEW YORK, EXCEPT AS REQUIRED BY MANDATORY PROVISIONS OF LAW AND EXCEPT TO THE
EXTENT THE VALIDITY, PERFECTION OR PRIORITY OF THE SECURITY INTERESTS HEREUNDER ARE GOVERNED BY THE
LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF NEW YORK.
     20




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Section 6.2
           21




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WAIVER OF JURY TRIAL.
 THE PLEDGOR HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR
PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.
     22




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[PLEDGOR]By:Name:Title:Address for Notices:Attention:Phone:Fax:MERRILL LYNCH CAPITAL CORPORATION,
as Collateral AgentBy:Name:Title:By:Name:Title:Address for Notices:Attention:Phone:Fax:




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EXHIBIT A
  Pledgor Collateral
Agent
 
 [PLEDGOR]By:Name:Title:




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SCHEDULE 1
  Owner
    
    Ownership Interest in [__] Shares[Pledgor]
    
    100%




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SCHEDULE 2
   SCHEDULE 3




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Form of IPL Security Agreement (Fixed and Floating Charge)
 Fixed and Floating
Charge
 InterOil Products Limited
 Merrill Lynch Capital Corporation
 
 © Blake Dawson Waldron 2006




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##### 



CONTENTS
 1. INTERPRETATION
    
    
    01.1 Definitions
    
    
    01.2 Rules for interpreting this document
    
    
    71.3 Business Days
    
    
    82. CHARGE
    
    
    82.1 Charging provision
    
    
    82.2 Priority
    
    
    82.3 Fixed and floating charge
    
    
    82.4 Licence to deal with Floating Charge Property
    
    
    82.5 Crystallisation
    
    
    92.6 Floating nature of charge restored
    
    
    92.7 Priorities
    
    
    102.8 Exception
    
    
    103. RESTRICTIONS ON DEALING WITH CHARGED PROPERTY
    
    
    104. REPRESENTATIONS AND WARRANTIES
    
    
    104.1 General representations and warranties
    
    
    104.2 Representations and warranties regarding Charged Property
    
    
    124.3 Repetition of representations and warranties
    
    
    124.4 Reliance on representations and warranties
    
    
    124.5 No representations by the Chargee
    
    
    135. CHARGORS UNDERTAKINGS
    
    
    135.1 General undertakings
    
    
    135.2 Financial undertakings
    
    
    145.3 Undertakings regarding Charged Property
    
    
    146. CHARGEES POWERS
    
    
    156.1 Chargee may exercise powers without notice
    
    
    156.2 Chargee's right to make good a default
    
    
    166.3 Powers on enforcement
    
    
    166.4 Inspection
    
    
    166.5 Calls
    
    
    167. POWER OF ATTORNEY
    
    
    177.1 Appointment of Attorneys
    
    
    177.2 General
    
    
    188. ENFORCEMENT
    
    
    198.1 Circumstances when this document may be enforced
    
    
    198.2 Enforcement despite earlier payment
    
    
    199. DEFAULT INTEREST
    
    
    199.1 Chargor must pay interest
    
    
    199.2 Interest after judgment
    
    
    199.3 Accrual and calculation of interest
    
    
    2010. APPOINTMENT OF RECEIVER
    
    
    2010.1 Appointment
    
    
    2010.2 Receiver other than as
Chargors agent
    
    
    2010.3 Powers of Receiver
    
    
    2111. PROTECTION OF CHARGEE AND APPOINTEES
    
    
    2311.1 Protection of Chargee and Receiver
    
    
    2311.2 Conflict of interests
    
    
    2311.3 Liability for loss
    
    
    2412. PROTECTION OF THIRD PARTIES
    
    
    24




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12.1 Dealings under this document
    
    
    2412.2 Receipts
    
    
    2413.APPLICATION OF MONEY
    
    
    2513.1 Order
    
    
    2513.2 Only actual receipts credited
    
    
    2513.3 Compensation
    
    
    2614.CONTINUING SECURITY AND THIRD PARTY PROVISIONS
    
    
    2614.1 Nature of obligations and enforcement
    
    
    2614.2 Preservation of Chargors obligations
    
    
    2614.3 Continuity
    
    
    2814.4 Limitations on Chargors rights
    
    
    2814.5 No marshalling
    
    
    2914.6 Effect of Insolvency Event
    
    
    2915.INDEMNITIES
    
    
    3015.1 Indemnity for breach or preservation of rights
    
    
    3015.2 Indemnity for exercise of rights or proceedings
    
    
    3015.3 Recovery from Charged Property
    
    
    3116.DISCHARGE
    
    
    3117.CONSENT TO DISCLOSURE
    
    
    3118.NOTICES
    
    
    3218.1 How to give a notice
    
    
    3218.2 When a notice is given
    
    
    3218.3 Address for notices
    
    
    3319.AMENDMENT AND ASSIGNMENT
    
    
    3319.1 Amendment
    
    
    3319.2 Assignment
    
    
    3320.GENERAL
    
    
    3420.1 Governing law
    
    
    3420.2 Liability for expenses
    
    
    3420.3 Giving effect to this document
    
    
    3420.4 Waiver of rights
    
    
    3520.5 Operation of this document
    
    
    3520.6 Operation of indemnities
    
    
    3520.7 Consents
    
    
    3620.8 Statements by Chargee
    
    
    3620.9 Set-off
    
    
    3620.10                                 No merger
    
    
    3620.11                                 Exclusion of contrary legislation
    
    
    3620.12                                 Tax
    
    
    3720.13                                 Counterparts
    
    
    3720.14                                 Attorneys
    
    
    37




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FIXED AND FLOATING CHARGE
 DATE
    
    
    2006
 PARTIES
 InterOil Products Limited Chargor
 Merrill Lynch Capital Corporation Chargee
 OPERATIVE PROVISIONS
 INTERPRETATION
 Definitions
  Accounts
 Attorney
 Authorisation
 (a)
    
    an authorisation, consent, declaration, exemption, notarisation or waiver,
however it is described;(b)
    
    in relation to anything that could be prohibited or restricted by law if a
Government Agency acts in any way within a specified period, the expiry of that period
without that action being taken,
  Authorised Representative
 (c)
    
    a company secretary or director of the party or an employee of the party
whose title includes the word manager or director;(d)
    
    a person who is acting temporarily in one of those positions; or




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(e)
    
    a person, or a person holding a position, nominated by the party to the other
party.
 Business Day
 (f)
    
    for determining when a notice, consent or other communication is given, a day
that is not a Saturday, Sunday or public holiday in the place to which the notice,
consent or other communication is sent; and(g)
    
    for any other purpose, a day (other than a Saturday, Sunday or public
holiday) on which banks are open for general banking business and the Chargee is open
for business in Port Moresby.
 Charge
 Charged Property
 Chargee
 Collateral Security
 Companies Act Companies Act 1997
 Controller
 (h)
    
    a receiver or receiver and manager of that property; or(i)
    
    anyone else who (whether or not as agent for the person) is in possession, or
has control, of that property to enforce an Encumbrance.
 Credit Agreement
 Encumbrance Income Tax Act 1959
 Event of Default
 1.




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Excluded Tax
 (a)
    
    a Tax that is calculated on or by reference to the gross amount of any
payment derived by a party under a IPL Document, or the transactions that a IPL
Document contemplates; or(b)
    
    a Tax that is imposed because a party is regarded as being subject to tax in
a jurisdiction solely because it is a party to a IPL Document or because it is
participating in the transactions that a IPL Document contemplates.
 Financial Indebtedness
 (j)
    
    money borrowed or raised;(k)
    
    redeemable or repurchaseable share or stock;(l)
    
    bill of exchange, promissory note or other financial instrument (whether or
not transferable or negotiable);(m)
    
    put option or buyback or discounting arrangement in respect of any property;(n)
    
    lease, licence or other arrangement in respect of any property entered into
primarily to raise finance or to finance the acquisition of that property (other than
a lease, licence or arrangement which may be accounted for as an operating lease under
applicable generally accepted accounting principles);(o)
    
    hire purchase or deferred payment obligation for any property or service;(p)
    
    interest or currency swap or hedge arrangement, financial option, futures
contract or analogous transaction; or(q)
    
    arrangement which achieves the same or a similar commercial effect as or to
any of the above,
  Fixed Charge Property
 (r)
    
    all real property (freehold and leasehold), all buildings and Fixtures on
real property and all proceeds of sale of any of them;(s)
    
    fixed plant, machinery and equipment;(t)
    
    uncalled or unpaid capital;
 2.




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(u)
    
    goodwill;(v)
    
    any marketable securities other than marketable securities that are acquired
and disposed of in the course of the ordinary day to day business of the Chargor;(w)
    
    all benefits, claims and returns of premiums relating to Insurances;(x)
    
    all rights under documents or agreements of any kind, any Guarantee issued in
its favour, all bills of exchange and other negotiable instruments held by it, and any
Records concerning the Chargors business transactions;(y)
    
    all book and other debts payable to the Chargor, including the proceeds of
those debts;(z)
    
    all Intellectual Property; and(aa)
    
    all money (including interest) standing to the credit of the Proceeds Account
and the debt represented by that account.
 Fixtures
 Floating Charge Property
 Government Agency
 (bb)
    
    a government or government department or other body;(cc)
    
    a governmental, semi-governmental or judicial person; or(dd)
    
    a person (whether autonomous or not) who is charged with the administration
of a law.
 Guarantee
 (ee)
    
    to provide funds (including by the purchase of property), or otherwise to
make property available, in or to enable payment or discharge of;(ff)
    
    to indemnify against the consequences of default in the payment of; or(gg)
    
    otherwise to be responsible for,
  3.




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Guarantor
 Insolvency Event
 (hh)
    
    an order being made, or the person passing a resolution, for its winding up;(ii)
    
    an application being made to a court for an order for its winding up;(jj)
    
    an administrator being appointed to the person;(kk)
    
    (i) the person resolving to appoint a Controller or analogous person to the
person or any of the persons property;
 (ii)
    
    an application being made to a court for an order to appoint
a Controller, provisional liquidator, trustee for creditors or in insolvency
or bankruptcy or analogous person to the person or any of the persons
property; or(iii)
    
    an appointment of the kind referred to in subparagraph (ii)
being made (whether or not following a resolution or application);
 (ll)
    
    the holder of a Security Interest taking possession of any of the persons
property;(mm)
    
    the person being taken under section 335 of the Companies Act to have failed
to comply with a statutory demand;(nn)
    
    the person:
 (i)
    
    suspending payment of its debts, ceasing (or threatening to
cease) to carry on all or a material part of its business, stating that it is
unable to pay its debts or being or becoming otherwise insolvent; or(ii)
    
    being taken by applicable law to be (or if a court would be
entitled or required to presume that the person is) unable to pay its debts or
otherwise insolvent;
 (oo)
    
    the process of any court or authority being invoked against the person or any
of its property to enforce any judgment or order for the payment of money or the
recovery of any property;(pp)
    
    the person dying, ceasing to be of full legal capacity or otherwise becoming
incapable of managing its own affairs for any reason;(qq)
    
    being adjudicated an insolvent under the Insolvency Act Chapter No. 253or
bankrupt under any analogous legislation;
 4.




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(rr)
    
    the person taking any step toward entering into a compromise or arrangement
with, or assignment for the benefit of, any of its members or creditors; or(ss)
    
    any analogous event,
  Insurances
 Intellectual Property
 (tt)
    
    registered;(uu)
    
    protected by statute; or(vv)
    
    reduced to writing.
 IPL Document
 (a)
    
    this document;(b)
    
    the IPL Guaranty Agreement (as defined in the Credit Agreement);(c)
    
    any document that amends, supplements, replaces or novates any of the above; and(ww)
    
    any undertaking (whether or not in writing) by or to a party or its lawyers
that is given under or relates to any of the above.
 Material Adverse Effect
 Permitted Encumbrance
 (xx)
    
    an Encumbrance created under a IPL Document;(yy)
    
    a lien that arises by operation of law in the ordinary course of ordinary
business, where the amount secured is not overdue or is being diligently contested in
good faith;
 5.




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(zz)
    
    an Encumbrance that the Chargee approves before it arises, where the amount
secured does not increase, and the time for payment of that amount is not extended
beyond the amount and time approved by the Chargee; or(aaa)
    
    any Permitted Lien as defined in the Credit Agreement.
 Receiver
 Records records
 Relevant Person
 Secured Money
 (bbb)
    
    present or future, actual or contingent;(ccc)
    
    incurred alone, jointly, severally or jointly and severally;(ddd)
    
    the Chargor is liable on its own account or the account of, or as surety
for, another person and without regard to the capacity in which the Chargor is liable;(eee)
    
    due to the Chargee alone or with another person;(fff)
    
    the Chargee is entitled for its own account or the account of another
person;(ggg)
    
    arising from a banker and customer relationship or any other relationship;(hhh)
    
    originally contemplated by the Chargor or the Chargee or not; and(iii)
    
    the Chargee is the original person in whose favour the undertakings in this
document or the Agreement were given or an assignee and, if the Chargee is an
assignee:
 (i)
    
    whether or not the Chargor consented to or knew of the
assignment;(ii)
    
    no matter when the assignment occurred; and(iii)
    
    whether or not the entitlements of that original person were
assigned with the Charge.
 Security Interest
 6.




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Tax
 1.2
    
    Rules for interpreting this document
  (a)
    
    A reference to:
 (i)
    
    legislation (including subordinate legislation) is to that
legislation as amended, re-enacted or replaced, and includes any subordinate
legislation issued under it;(ii)
    
    a document or agreement, or a provision of a document or
agreement, is to that document, agreement or provision as amended,
supplemented, replaced or novated;(iii)
    
    a party to this document or to any other document or
agreement includes a permitted substitute or a permitted assign of that party;(iv)
    
    a person includes any type of entity or body of persons,
whether or not it is incorporated or has a separate legal identity, and any
executor, administrator or successor in law of the person; and(v)
    
    anything (including a right, obligation or concept) includes
each part of it.
 (b)
    
    A singular word includes the plural, and vice versa.(c)
    
    A word which suggests one gender includes the other genders.(d)
    
    If a word is defined, another part of speech has a corresponding meaning.(e)
    
    If an example is given of anything (including a right, obligation or
concept), such as by saying it includes something else, the example does not limit the
scope of that thing.(f)
    
    The word agreementincludes an undertaking or other binding arrangement or
understanding, whether or not in writing.(g)
    
    The words subsidiary, holding companyand related corporationhave the same
meanings as in the Companies Act.(h)
    
    A reference to kinaor Kis to an amount in Papua New Guinea currency.
 7.




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(i)
    
    A reference to USDis to an amount in the currency of the United States of
America.(j)
    
    In the event of any inconsistency between this document and the Credit
Agreement, the Credit Agreement prevails to the extent of the inconsistency.
 1.3
    
    Business Days
  (a)
    
    if the act involves a payment that is due on demand, the person must do it on
or by the next Business Day; and(b)
    
    in any other case, the person must do it on or by the previous Business Day.
 2.
    
    CHARGE
 2.1
    
    Charging provision
  2.2
    
    Priority
  2.3
    
    Fixed and floating charge
  (a)
    
    as a fixed charge over all Fixed Charge Property; and(b)
    
    subject to clause 2.5, as a floating charge over all Floating Charge
Property.
 2.4
    
    Licence to deal with Floating Charge Property
  8.




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2.5
    
    Crystallisation
  (a)
    
    in relation to all Floating Charge Property, if:
 (i)
    
    the Chargor ceases or threatens to cease to carry on its
business;(ii)
    
    an Insolvency Event occurs in respect of the Chargor; or(iii)
    
    this document is enforced;
 (b)
    
    in relation to part of the Floating Charge Property, if:
 (i)
    
    the Chargor creates or takes any step towards creating any
Encumbrance over that part of the Floating Charge Property in breach of clause
3;(ii)
    
    the Chargor disposes of or deals with or takes any step
towards disposing of or dealing with that part of the Floating Charge Property
in breach of clause 3;(iii)
    
    any step is taken to levy or enforce any distress or other
execution on or against that part of the Floating Charge Property or to
enforce any Encumbrance relating to that part of the Floating Charge Property;
or(iv)
    
    after an Event of Default, the Chargee gives notice to the
Chargor that the Charge is to crystallise in relation to that part of the
Floating Charge Property;
 (c)
    
    in relation to any proceeds of any debt or other money included in Floating
Charge Property that may be or become payable for any reason to the Chargor, if after
the occurrence of an Event of Default the Chargee gives notice to the Chargor that the
Charge is to crystallise in relation to those proceeds; or(d)
    
    in relation to any money included in Floating Charge Property that may now or
in the future be or become due to or held for the Chargor, or any other part of the
Floating Charge Property that any Government Agency may in any way rank for payment of
Taxes ahead of a floating charge, when the Chargor fails to pay any Taxes.
 2.6
    
    Floating nature of charge restored
  9.




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2.7
    
    Priorities
  2.8
    
    Exception
  3.
    
    RESTRICTIONS ON DEALING WITH CHARGED PROPERTY
  (a)
    
    create, attempt to create or permit to exist any Encumbrance in relation to
the Charged Property (whether ranking ahead of, equally with or after, the Charge); or(b)
    
    subject to clause 2.4, dispose of, declare a trust over or otherwise create
or permit the creation or existence of any interest in, or part with possession of,
any Charged Property,
  4.
    
    REPRESENTATIONS AND WARRANTIES4.1
    
    General representations and warranties
  (a)
    
    (status) it and each of its subsidiaries is a company under the Companies
Act;(b)
    
    (power) it has full legal capacity and power to:
 (i)
    
    own its property and to carry on its business; and
 10.




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(ii)
    
    enter into this document and to carry out the transactions
that it contemplates;
 (c)
    
    (corporate authority) it has taken all corporate action that is necessary or
desirable to authorise its entry into this document and its carrying out the
transactions that it contemplates;(d)
    
    (Authorisations) it holds each Authorisation that is necessary or desirable
to:
 (i)
    
    enable it to properly execute this document and to carry out
the transactions that they contemplate;(ii)
    
    ensure that this document is legal, valid, binding and
admissible in evidence; or(iii)
    
    enable it to properly carry on its business,
  (e)
    
    (documents effective) this document constitutes its legal, valid and binding
obligations, enforceable against it in accordance with its terms (except to the extent
limited by equitable principles and laws affecting creditors rights generally), and
the Charge and each Collateral Security is an effective Security Interest over the
property that is stated to be subject to it with the priority that it contemplates,
subject to any necessary stamping or registration;(f)
    
    (ranking) its payment obligations under this document rank ahead of all its
unsecured and unsubordinated payment obligations (whether present or future, actual or
contingent), other than obligations that are mandatorily preferred by law;(g)
    
    (no contravention) neither its execution of this document, nor the carrying
out by it of the transactions that they contemplate, does or will:
 (i)
    
    contravene any law to which it or its property is subject or
any order of any Government Agency that is binding on it or its property;(ii)
    
    contravene any Authorisation;(iii)
    
    contravene any undertaking or instrument binding on it or
its property;(iv)
    
    contravene its constitution; or(v)
    
    require it to make any payment or delivery in respect of any
Financial Indebtedness before it would otherwise be obliged to do so;
 11.




---



##### 



(h)
    
    (no litigation) no litigation, arbitration, mediation, conciliation or
administrative proceedings are taking place, pending, or to the knowledge of any of
its officers after due inquiry, threatened which, if adversely decided, could have a
Material Adverse Effect on it or any of its subsidiaries;(i)
    
    (no filings or Taxes) it is not necessary or desirable, to ensure that this
document is legal, valid, binding or admissible in evidence, that this document or any
other document be filed or registered with any Government Agency, or that any Taxes be
paid (other than registration of this document with the Registrar of Companies and the
payment of stamp duty on this document);(j)
    
    (no default) no Event of Default has occurred and is continuing, and it is
not in breach of any document or agreement in a manner that could have a Material
Adverse Effect on it;(k)
    
    (no Encumbrance) none of its property is subject to an Encumbrance other than
a Permitted Encumbrance;(l)
    
    (no Controller) no Controller is currently appointed in relation to any of
its property, or any property of any of its subsidiaries; and(m)
    
    (no trust) it is not entering into this document as trustee of any trust or
settlement.
 4.2
    
    Representations and warranties regarding Charged Property
  (a)
    
    (title) it has good and full legal and beneficial right and title to, and
full power to charge, the Charged Property in the manner provided in this document;
and(b)
    
    (no Encumbrance) the Charged Property is free from all Encumbrances other
than Permitted Encumbrances.
 4.3
    
    Repetition of representations and warranties
  4.4
    
    Reliance on representations and warranties
  12.




---



##### 



4.5
    
    No representations by the Chargee
  5.
    
    CHARGORS UNDERTAKINGS
 5.1
    
    General undertakings
  (a)
    
    (obligation to pay) punctually pay the Secured Money when it becomes payable
in accordance with the terms of any written agreement between the Chargor and the
Chargee or, in the absence of any agreement or after default under any agreement, on
demand by the Chargee;(b)
    
    (maintain status) maintain, and ensure that each of its subsidiaries
maintains, its status as a company under the Companies Act;(c)
    
    (comply with law) comply with, and ensure that each of its subsidiaries
complies with, all applicable law including by paying when due all Taxes for which it
or its property is assessed or liable (except to the extent that these are being
diligently contested in good faith and by appropriate proceedings and it or the
relevant subsidiary has made adequate reserves for them);(d)
    
    (hold Authorisations) obtain and maintain each Authorisation that is
necessary or desirable to:
 (i)
    
    execute this document and to carry out the transactions that
they contemplate;(ii)
    
    ensure that this document is legal, valid, binding and
admissible in evidence; or(iii)
    
    enable it to properly carry on its business,
  (e)
    
    (registration and stamping) immediately at its own cost:
 (i)
    
    ensure that this document is registered (and not just
provisionally) under section 222 of the Companies Act;(ii)
    
    register this document in any other places which the Chargee
notifies to the Chargor if the Chargee is reasonably satisfied that
registration is
 13.




---



##### 



necessary or desirable to perfect the Charge or to protect the
rights of the Chargee under this document; and
 (iii)
    
    ensure that this document is stamped for the proper amount
in Papua New Guinea and in each jurisdiction in which this document is
required to be stamped.
 Financial undertakings
  (a)
    
    (negative pledge) not create or permit to exist any Encumbrance over any
Charged Property, other than a Permitted Encumbrance;(b)
    
    (no Financial Indebtedness) not incur Financial Indebtedness, and must ensure
that none of its subsidiaries incurs Financial Indebtedness, without the consent of
the Chargee; and(c)
    
    (no disposal of property) not dispose of, declare a trust over or otherwise
create an interest in, and must ensure that none of its subsidiaries disposes of,
declares a trust over or otherwise creates an interest in, all or a substantial part
of its property (either in one or several transactions, whether or not related)
except:
 (i)
    
    as permitted by paragraph (a);(ii)
    
    with the consent of the Chargee;(iii)
    
    at arms length and for full value in a transaction that is
entered into in the ordinary course of its ordinary business; or
 5.3
    
    Undertakings regarding Charged Property
  (a)
    
    (outgoings):
 (i)
    
    punctually pay all outgoings (including rent and Taxes)
payable or deductible from it, other than any amount which it is contesting in
good faith where failure to pay that amount will not have a Material Adverse
Effect on it or prejudice the Charged Property;(ii)
    
    pay the contested amount after the final determination or
settlement of the relevant contest; and(iii)
    
    on request by the Chargee, immediately hand to the Chargee
evidence of every payment covered by this undertaking;
 14.




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##### 



(b)
    
    (maintenance):
 (i)
    
    maintain the Charged Property in good condition; and(ii)
    
    promptly remedy every material defect in the condition of the
Charged Property (fair wear and tear excepted) if required to do so by the
Chargee;
 acquisition of real property
 (i)
    
    if it becomes bound to complete the acquisition of any real
property (freehold or leasehold), promptly notify the Chargee; and(ii)
    
    if it receives any deed or document of title relating to the
real property, promptly hand them to the Chargee;
 (d)
    
    (preserve and protect security) promptly do everything necessary or
reasonably required by the Chargee to:
 (i)
    
    preserve and protect the value of Charged Property; or(ii)
    
    protect and enforce its title and the Chargees title as
chargee to Charged Property;
 (e)
    
    (exercise rights) at the Chargees request, take any action reasonably
required against any person to protect and enforce its rights relating to the Charged
Property; and(f)
    
    (comply with obligations) do everything the Chargor is required to do under
or in connection with Charged Property.
 6.
    
    CHARGEES POWERS
 6.1
    
    Chargee may exercise powers without notice
  (a)
    
    enforcing an IPL Document;(b)
    
    appointing a Receiver; or(c)
    
    exercising any power, right, discretion or remedy given to the Chargee by any
law,
  15.




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##### 



6.2
    
    Chargees right to make good a default
 (a)
    
    If the Chargor breaches this document, the Chargee may do everything it
considers to be necessary or desirable to attempt to remedy the breach to the
Chargees satisfaction. The Chargee is not obliged to do so.(b)
    
    Paragraph (a) does not limit any other right the Chargee has under this
document or at law.
 6.3
    
    Powers on enforcement
  6.4
    
    Inspection
  (a)
    
    inspect their state and condition; and(b)
    
    inspect and take copies of or extracts from any Records that in any way
relate to Charged Property or the Chargors business.
 6.5
    
    Calls
 (a)
    
    If this document has become enforceable, the Chargor authorises the Chargee,
each of the Chargees Authorised Representatives and any Receiver to:
 (i)
    
    make calls on the members of the Chargor in relation to the
Chargors uncalled capital;(ii)
    
    sue (in the name of the Chargor or otherwise) to recover
money due in relation to calls; and(iii)
    
    give valid receipts for that money.
  (b)
    
    This authority is not terminated by any change in the Chargors directors and
is assignable by the Chargee.
 16.




---



##### 



7.
    
    POWER OF ATTORNEY
 7.1
    
    Appointment of Attorneys
  (a)
    
    (all acts necessary) do anything necessary or desirable in the opinion of the
Chargee or the Attorney to:
 (i)
    
    give full effect to this document;(ii)
    
    better secure the Charged Property to the Chargee in a manner
consistent with this document; or(iii)
    
    assist in the execution or exercise of any power,
  (b)
    
    (recover Charged Property) demand, sue for, recover and give discharge for
Charged Property;(c)
    
    (commence actions) commence, carry on , enforce, settle, arrange and
compromise any proceedings to obtain or enforce the payment or delivery of Charged
Property;(d)
    
    (insolvency and winding up) take any necessary proceedings to procure a
declaration of insolvency or the winding up of any Borrower of the Chargor in
connection with the Charged Property, and attend and vote at meetings of creditors,
receive dividends in any insolvency or winding up or appoint a proxy for any of these
things;(e)
    
    (compound debts) compound, settle or compromise any debt of the Chargor in
connection with the Charged Property;(f)
    
    (execute deeds) execute any deed of assignment, composition or release in
connection with the Charged Property;(g)
    
    (exercise rights) exercise all or any powers, rights, discretions and
remedies available under or in connection with the Charged Property (including rights
available under the Companies Act or any other statute);
 17.




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##### 



(h)
    
    (sell) sell or agree to sell (whether or not the Attorney has taken
possession), exchange or otherwise dispose of(absolutely or conditionally) Charged
Property (or agree to do so):
 (i)
    
    by public auction, private sale or tender for cash or on
credit;(ii)
    
    with or without special conditions,(such as conditions as to
title or time or methos of payment of purchase money) including by allowing
the money to remain:
 (A)
    
    outstanding on the security of a mortgage
over the property sold or over any other property; or(B)
    
    owing without any security;(C)
    
    on other terms as the Attorney considers
desirable,
 (i)
    
    without being responsible for any loss;and(j)
    
    (general) do anything else that the Chargor must or may do, or that the
Chargee may do, under this document or by law,
   7.2
    
    General
 (a)
    
    An Attorney may do anything contemplated by this clause even if the Attorney
is affected by an actual or potential conflict of interest or duty, or might benefit
from doing it.(b)
    
    An Attorney may do anything contemplated by this clause in its name, in the
name of the Chargor or in the name of both of them.(c)
    
    The Chargor must ratify anything done by an Attorney under this clause.(d)
    
    The Chargor gives the power of attorney in this clause:
 (i)
    
    to secure performance by the Chargor of its obligations to
the Chargee under this document and any property interest of the Chargee under
this document; and(ii)
    
    for valuable consideration, receipt of which is acknowledged
by the Chargor,
 18.




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##### 



(e)
    
    The powers of attorney and authorisations given in this clause shall be in
addition to and shall not in any way prejudice or affect or be in any way prejudiced
or affected by all other powers of attorney and authorisations given to the Chargee or
the Receiver (as the case may be) under the other provisions herein and under the
other IPL Documents and under law.
 8.
    
    ENFORCEMENT
 8.1
    
    Circumstances when this document may be enforced
  8.2
    
    Enforcement despite earlier payment
  (a)
    
    even if the Chargee accepts a payment of interest or other amount after any
default; and(b)
    
    without the need for any notice to, or of any consent or agreement of, or
enforcement of any rights against the Chargor or any other person.
 9.
    
    DEFAULT INTEREST
 9.1
    
    Chargor must pay interest
  9.2
    
    Interest after judgment
  19.




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##### 



9.3
    
    Accrual and calculation of interestInterest under this clause:
 (a)
    
    accrues daily; and(b)
    
    is calculated on the basis of the actual number of days on which interest has
accrued and of a 365 day year.
 10.
    
    APPOINTMENT OF RECEIVER
 10.1
    
    AppointmentIf this document has become enforceable (whether or not the Chargee has entered into
possession of all or any of the Charged Property) the Chargee or any Authorised
Representative of the Chargee may at any time:
 (a)
    
    appoint any person or any 2 or more persons jointly and severally to be a
receiver or receiver and manager (or an additional receiver or receiver and manager) of
Charged Property;(b)
    
    remove the Receiver and in case of the removal, retirement or death of any
Receiver appoint another as a replacement; and(c)
    
    fix the remuneration of the Receiver.Subject to clause 10.2 and the next sentence, every Receiver appointed under this
subclause will be the Chargors agent and the Chargor alone will be responsible for
his acts and defaults and remuneration. The Chargee may by notice to the Chargor
and the Receiver require the Receiver to act as the Chargees agent.
 10.2
    
    Receiver other than as Chargors agentThe power to appoint a Receiver under this clause may be exercised even though:
 (a)
    
    at the time when this document becomes enforceable or when an appointment is
made, an order may have been made or a resolution may have been passed to wind up the
Chargor; or(b)
    
    a Receiver appointed in the circumstances specified in the preceding paragraph
may not, or may not in some respects, act as the Chargors agent.
 20.




---



##### 



10.3
    
    Powers of ReceiverThe Receiver will have full power to do all or any of the following:
 (a)
    
    (take possession) take possession of, collect and get in Charged Property and
for that purpose to take proceedings (in the name of the Chargor or otherwise);(b)
    
    (give up possession) give up possession of Charged Property;(c)
    
    (exercise Chargees rights):
 (i)
    
    exercise all or any of the Chargees powers, rights,
discretions and remedies under this document; andcomply with the directions given by the Chargee;
 (d)
    
    (borrow from Chargee):
 (i)
    
    borrow from the Chargee any money that may be required for any
of the purposes mentioned in paragraph (c); and(ii)
    
    (in the name of the Chargor or otherwise) secure any money
borrowed by mortgage or charge over Charged Property so that the mortgage or
charge may rank in priority to, equally with or after the Charge,
 without the Chargee being bound to enquire whether the borrowing is necessary or
proper or responsible for the misapplication or non-application of any money
borrowed;(e)
    
    (exercise rights) exercise all or any powers, rights, discretions and remedies
available under or in connection with the Charged Property (including rights available
under the Companies Act or any other statute);(f)
    
    (registration) do everything necessary to obtain registration of the Charged
Property in the Chargees name or in the name of the Chargees nominee;(g)
    
    (settle disputes):
 (i)
    
    settle, arrange and compromise any accounts, claims, questions
or disputes that may arise in connection with the Charged Property or in any
way relating to this document; and(ii)
    
    execute releases or other discharges in relation to the
settlement, arrangement, or compromise;
 21.




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##### 



(h)
    
    (sell) sell or agree to sell (whether or not the Receiver has taken
possession), exchange or otherwise dispose of (absolutely or conditionally) Charged
Property (or agree to do so):
 (i)
    
    by public auction, private sale or tender for cash or on
credit;(ii)
    
    in one lot or in parcels;(iii)
    
    with or without special conditions, (such as conditions as to
title or time or method of payment of purchase money) including by allowing the
purchase money to remain:
 (A)
    
    outstanding on the security of a mortgage over
the property sold or over any other property; or(B)
    
    owing without any security; and
 (iv)
    
    on other terms the Receiver considers desirable,without being responsible for any loss;
 (i)
    
    (transfer on sale) execute transfers and assignments of Charged Property
(including in the name of the Chargor), and do everything to complete any sale under
paragraph (h) that the Receiver thinks necessary;
 (j)
    
    (insure) insure Charged Property that is of an insurable nature against risks
of destruction, loss or damage for the amounts and on the terms that the Receiver
thinks appropriate;
 (k)
    
    (employees and agents) engage employees, agents, advisers and contractors for
any of the purposes of this clause on terms that the Receiver thinks appropriate;
 (l)
    
    (give receipts) give receipts for all money and other property that may come
into the hands of the Receiver in exercise of any power given by this document;
 (m)
    
    (enforce contracts) carry out and enforce or otherwise obtain the benefit of
all contracts:
 (i)
    
    entered into or held by the Chargor in connection with the
Charged Property; or(ii)
    
    entered into in exercise of the powers given by this document;
 (n)
    
    (have Borrowers declared insolvent) have Borrowers declared insolvent and wind
up companies and do everything in connection with any insolvency or winding up that the
Receiver thinks desirable to recover or protect Charged Property;
 22.




---



##### 



(o)
    
    (perform undertakings) do everything necessary to perform any undertaking of
the Chargor in this document;(p)
    
    (receive money) receive all money or other property payable or deliverable to
the Chargor from Charged Property;(q)
    
    (desirable or incidental matters):
 (i)
    
    do or cause to be done everything that the Receiver thinks
desirable in the interests of the Chargee; and(ii)
    
    do anything incidental to the exercise of any other power;
 (r)
    
    (take legal proceedings) take proceedings (including in the name of the
Chargor) in connection with any of the above; and(s)
    
    (delegate) with the Chargees consent delegate any of the powers given to the
Receiver by this clause to any person.
 11.
    
    PROTECTION OF CHARGEE AND APPOINTEES
 11.1
    
    Protection of Chargee and Receiver
 (a)
    
    The Chargee is not obliged to:
 (i)
    
    notify any Borrower or member of the Chargor or any other
person of this document; or(ii)
    
    enforce payment of any money payable to the Chargor, or take
any step or proceeding for any similar purpose,but may do so if it so deems fit.
 (b)
    
    None of the Chargee, any of its Authorised Representatives or any Receiver is
liable for any omission or delay in exercising any power, right, discretion or remedy
under this document or for any involuntary loss or irregularity that may occur in
relation to the exercise or non-exercise of any of them except to the extent of its own
fraud, gross negligence or wilful misconduct.
 11.2
    
    Conflict of interestsThe Chargee, an Authorised Representative of the Chargee or other person appointed by the
Chargee under this document, an administrator of the Chargor appointed by the Chargee, an
Attorney and a Receiver may exercise or agree to exercising a power given by this document
or by law even though that person may have a conflict of interests in exercising the power.
 23.




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##### 



11.3
    
    Liability for loss
 (a)
    
    The Chargee is not liable for any loss that the Chargor suffers as a direct or
indirect result of:
 (i)
    
    the exercise or attempted exercise of, or failure to exercise,
any of its rights contained in this document; and(ii)
    
    any release or dealing with any other Guarantee or Encumbrance
(including any prejudice to or loss of the Chargors rights of subrogation),except to the extent of its own fraud, gross negligence or wilful misconduct.
 (b)
    
    If the Chargee or a Receiver enters into possession of Charged Property, none
of the Chargee, any of its Authorised Representatives or any Receiver is liable:
 (i)
    
    to account as mortgagee in possession or for anything except
actual receipts; or(ii)
    
    for any loss on realisation or for any default or omission for
which a mortgagee in possession might be liable,except to the extent of its own fraud, gross negligence or wilful misconduct.
 12.
    
    PROTECTION OF THIRD PARTIES12.1
    
    Dealings under this documentA purchaser or other party to a disposal or dealing in attempted exercise of a power
contained in this document is not:
 (a)
    
    bound to enquire whether there has been a default, whether a Receiver has been
properly appointed or about the propriety or regularity of a sale, disposal or dealing;
or(b)
    
    affected by notice that a sale, disposal or dealing is unnecessary or improper.Despite any irregularity or impropriety in a sale, disposal or dealing, it is to be
treated, for the protection of the purchaser or other party to the disposal or
dealing, as being authorised by this document and valid.
 12.2
    
    ReceiptsA receipt that the Chargee, one of its Authorised Representatives or a Receiver gives for
any money payable to or receivable by the Chargee or the Receiver because of this document
will:
 24.




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##### 



(a)
    
    relieve the person paying or handing over money or other property from all
liability:
 (i)
    
    for the application (or any loss or misapplication) of the
money or other property;(ii)
    
    to enquire whether the Secured Money has become payable; and(iii)
    
    (where appropriate) as to the propriety or regularity of the
appointment of the Receiver; and
 (b)
    
    discharge the person paying that money from its liability to pay that money.
 13.
    
    APPLICATION OF MONEY13.1
    
    Order
 (a)
    
    Money that the Chargee or a Receiver receives under or because of this document
is to be applied in the following order:
 (i)
    
    (expenses) first in payment of all expenses that the Chargee or
a Receiver incurs in or incidental to the exercise or attempted exercise of a
power or otherwise in relation to any IPL Document;(ii)
    
    (outgoings) then in payment of any other outgoings that the
Receiver or the Chargee thinks it appropriate to pay;(iii)
    
    (Receiver) then in payment to the Receiver of any remuneration
(whether by way of commission or otherwise);(iv)
    
    (indemnities) then in payment to the Chargee or a Receiver of
any amount necessary to give effect to any indemnity contained in this
document; and(v)
    
    (Secured Money) then in payment to the Chargee of the Secured
Money in such order and manner as the Chargee shall in its sole discretion deem
fit.
 (b)
    
    Any surplus will belong to the Chargor or other persons entitled to it. The
Chargee or Receiver may pay the surplus to the credit of a bank account in the name of
the Chargor or other person entitled to it and will then be under no further liability
in relation to it. The surplus will not accrue interest.
 13.2
    
    Only actual receipts creditedIn applying any money towards the Secured Money, the Chargors account will be credited only
with the amount of the money that the Chargee actually receives for that purpose. The
credit will date from the time of receipt.
 25.




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##### 



13.3
    
    CompensationIf any compensation becomes payable for Charged Property, the Chargee may:
 (a)
    
    apply the sum received on account of any compensation, at the Chargees option,
in or towards repayment of the Secured Money;(b)
    
    make, enforce, settle or compromise any claims relating to compensation; and(c)
    
    execute any necessary assurances and releases in the names of the Chargor and
the Chargee.If any compensation comes into the hands of the Chargor before a final irrevocable
discharge of this document, the Chargor must immediately pay it to the Chargee and
pending such payment, shall hold the same on trust for and on behalf and for the
sole benefit of the Chargee.
 14.
    
    CONTINUING SECURITY AND THIRD PARTY PROVISIONS14.1
    
    Nature of obligations and enforcementThe Chargors obligations in this document:
 (a)
    
    are principal obligations, and not ancillary or collateral to any other right
or obligation; and
 (i)
    
    may be enforced against the Chargor without the Chargee first
being required to(ii)
    
    enforce the Secured Money or any security it may hold relating
to the Secured Money, against the Chargor or any other person.
 14.2
    
    Preservation of Chargors obligationsThe Chargors obligations in this document are absolute, unconditional and irrevocable. The
liability of the Chargor under this document extends to and is not affected by any
circumstance, act or omission which, but for this subclause, might otherwise affect it at
law or in equity including:
 (a)
    
    the grant of any time, waiver or other indulgence or concession;(b)
    
    the discharge or release of the Chargor or any other person;(c)
    
    any transaction or arrangement that may take place between the Chargee and the
Chargor or any other person;
 26.




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##### 



(d)
    
    the occurrence of an Insolvency Event in relation to the Chargor or any other
person;(e)
    
    the Chargee or any other person dealing or not dealing in any way with any
other Guarantee, Encumbrance, document or agreement;(f)
    
    the Chargee or any other person:
 (i)
    
    exercising or not exercising any other Guarantee or Encumbrance
or any right or remedy conferred on it by law or in equity or by any document
or agreement; or(ii)
    
    not recovering any money owing by the Borrower;
 (g)
    
    any variation (including a variation which increases, or extends the duration
of, the Secured Money), replacement, extinguishment, unenforceability, failure, loss,
abandonment or transfer of any document or agreement relating to the Secured Money
(including this document and any other Guarantee or Encumbrance held by the Chargee
from any person at any time);
 (h)
    
    the obligations of the Chargor or any other person under this document or any
other document or agreement relating to the Secured Money or this document (including
any other Guarantee or Encumbrance) being or becoming illegal, void, voidable,
unenforceable or disclaimed by a liquidator or trustee for creditors or in insolvency;
 (i)
    
    the Chargee not giving the Chargor notice of any default by any person;
 (j)
    
    the Chargee not disclosing any information to the Chargor;
 (k)
    
    any representation made or information given by the Chargee to the Chargor;
 (l)
    
    any change in the legal capacity, rights or obligations of, or other
circumstance related to, the Chargor or any other person;
 (m)
    
    any legal limitation, disability, incapacity or other circumstance related to
the Chargor or any other person;
 (n)
    
    any invalidity or irregularity in the execution of any IPL Document or any
deficiency in the powers of the Chargor;
 (o)
    
    any assignment by the Chargee, with or without the knowledge of or the Chargor;
 (p)
    
    any obligation of the Chargor being discharged by operation of law;
 (q)
    
    any person who was intended to be bound as a guarantor or surety in relation to
the Secured Money not becoming bound or ceasing to be bound;
 27.




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##### 



(r)
    
    any laches, acquiescence, delay, act, omission or mistake on the part of, or
suffered by, the Chargee or any other person, in relation to this document or any other
Guarantee, Encumbrance, document or agreement;(s)
    
    the receipt by the Chargee or any other person of any dividend or money after
an Insolvency Event in relation to the Chargor or any other person;(t)
    
    any judgment or right which the Chargee may have or exercise against the
Chargor or any other person;(u)
    
    the opening or operation of a new account by the Chargee or any other person;(v)
    
    the amendment of the constitution, trust deed or other constituent document of
the Chargor;(w)
    
    if the Borrower or the Chargor is a member of a partnership, firm, joint
venture or association, any change in the structure, membership, name or business of
that partnership, firm, joint venture or association; and(x)
    
    if the or the Chargor is a trustee of a trust, any breach or variation of the
terms of that trust.
 14.3
    
    ContinuityThe Charge:
 (a)
    
    is a continuing security, and remains in full force until a final irrevocable
discharge of the Charge is given to the Chargor despite any transaction or other thing
(including a settlement of account or intervening payment); and(b)
    
    will apply to the present and future balance of the Secured Money.
 14.4
    
    Limitations on Chargors rightsUntil the Secured Money has been irrevocably paid and discharged in full, the Chargor may
not:
 (a)
    
    share in any Guarantee, Encumbrance or money received or receivable by the
Chargee in relation to the Secured Money or stand in the place of the Chargee in
relation to any Guarantee, Encumbrance or right to receive money;(b)
    
    take any steps to enforce a right or claim against the Borrower relating to any
money paid by the Chargor to the Chargee under this document;(c)
    
    have or exercise any rights as surety in competition with the Chargee;
 28.




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(d)
    
    receive, claim or have the benefit of any payment (including a payment under a
Guarantee), distribution or Encumbrance from or on account of the Chargor or any other
person;(e)
    
    in reduction of its liability under this document, raise a defence, set off or
counterclaim available to itself, or a co-surety or co-indemnifier against the Chargee
or claim a set off or make a counterclaim against the Chargee; or(f)
    
    claim to be entitled by way of contribution, indemnity, subrogation,
marshalling or otherwise to the benefit of any document or agreement to which the
Chargee is a party or under which the Chargee has an interest.
 14.5
    
    No marshallingThe Chargee is not under any obligation to marshal or appropriate in favour of the Chargor
or to exercise, apply, perfect or recover any Encumbrance that the Chargee holds at any time
or any funds or property that the Chargee may be entitled to receive or have a claim on.
 14.6
    
    Effect of Insolvency Event
 (a)
    
    If an Insolvency Event has occurred in relation to a Relevant Person, any
amount paid by that Relevant Person (as the case may be) within the preceding 6 months
(relevant payment) will only be applied against any Secured Money if:
 (i)
    
    the Chargee forms the opinion in good faith (which will be
conclusively binding on the Chargor) that it will not be required to pay the
relevant payment to any person under any law relating to insolvency, winding up
or the protection of creditors; or(ii)
    
    a final judgment is given by a court of competent jurisdiction
in favour of the Chargee that it is not required to pay the relevant payment to
any person under any law relating to insolvency, winding up or the protection
of creditors.
 (b)
    
    If an amount is applied against any Secured Money and the Chargee forms the
opinion in good faith that it is obliged to pay the relevant payment to any person
under any law relating to insolvency, winding up or the protection of creditors:
 (i)
    
    the Chargees rights are to be reinstated and will be the same
in relation to that amount as if the application, or the payment or transaction
giving rise to it, had not been made; and(ii)
    
    the Chargor must immediately do anything (including the signing
of documents) required by the Chargee to restore to the Chargee any Guarantee
or Encumbrance to which it was entitled immediately before that application or
the payment or transaction giving rise to it.
 29.




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##### 



(c)
    
    Any discharge or release between the Chargee and the Chargor is subject to
reinstatement of the Chargees rights under this subclause.
 15.
    
    INDEMNITIES15.1
    
    Indemnity for breach or preservation of rightsThe Chargor must indemnify the Chargee against, and must pay the Chargee on demand the
amount of, all losses, liabilities, expenses and Taxes (other than Excluded Taxes) incurred
in connection with:
 (a)
    
    any Event of Default;(b)
    
    the administration, and any actual or attempted preservation or enforcement, of
any rights under any IPL Document;(c)
    
    any amount required to be paid under any IPL Document not being paid on its due
date including because of:
 (i)
    
    the cancellation, termination or alteration of any swap or
other arrangement made by the Chargee to fund that amount; or(ii)
    
    any liquidation or re-employment of deposits or other funds
acquired by the Chargee to fund that amount.
 15.2
    
    Indemnity for exercise of rights or proceedingsTo the extent permitted by law, the Chargor must indemnify each of the Chargee, each
Authorised Representative of the Chargee and each Receiver, Attorney, agent, administrator
of the Chargor or other person appointed under this document or the Companies Act by or on
behalf of the Chargee as chargee under this document against, and must pay each of them on
demand the amount of all losses, liabilities, expenses and Taxes (other than Excluded Taxes)
that they each incur:
 (a)
    
    (directly or indirectly) in the exercise or attempted exercise of any of the
powers, rights, discretions or remedies (express or implied) vested in them under this
document or the Companies Act; and(b)
    
    in connection with all proceedings, expenses, claims and demands in relation to
anything done or omitted in any way relating to Charged Property,including legal expenses on a full indemnity basis and expenses incurred in engaging
consultants.
 30.




---



##### 



15.3
    
    Recovery from Charged PropertyA person who is entitled to be indemnified for a loss, liability, expense or Tax under
clause 15.1 or 15.2 may recover the amount to be indemnified direct from the Charged
Property.16.
    
    DISCHARGEThe Chargee shall at the request and sole cost and expense of the Chargor reconvey,
surrender or release any remaining Charged Property (as appropriate) to the Chargor and the
Charged Property will then be discharged from the Charge:
 (a)
    
    when the Chargee is satisfied that:
 (i)
    
    all the Secured Money has been irrevocably and unconditionally
paid and discharged in full or satisfied in accordance with this document and
(without limiting this) that clause 14.6 will not later apply; and(ii)
    
    no amount remains contingently payable or may become payable on
the security of the Charge (including under an indemnity) with respect to any
losses, liabilities, expenses or Taxes arising from any then known claim or
demand asserted against or threatened to be asserted against the Chargee or any
other person entitled to indemnity hereunder; and
 (b)
    
    on payment or retention of all expenses incurred by or payable to the Chargee,
its Authorised Representatives or any Receiver or Attorney.
 Any discharge is subject to clause 14.6.17.
    
    CONSENT TO DISCLOSUREThe Chargor hereby irrevocably consents to and authorises the Chargee to disclose any
information relating to the Chargor, the Charged Property, this document and the
transactions contemplated herein under each of the following circumstances:
 (a)
    
    (permitted by documents) the disclosure is expressly permitted by a IPL
Document;(b)
    
    (public domain) the information is already in the public domain, unless it
entered the public domain because of a breach of confidentiality by the Chargee
hereunder;(c)
    
    (employees and advisers) the disclosure is made on a confidential basis to the
partys officers, employees, agents, financiers or professional advisers, and is
necessary for the Chargees business;
 31.




---



##### 



(d)
    
    (comply with laws) the disclosure is necessary to comply with any applicable
law, or an order of a court or tribunal;(e)
    
    (comply with directives) the disclosure is necessary to comply with a directive
or request of any Government Agency or stock exchange (whether or not having the force
of law);(f)
    
    (obtain Authorisations) the disclosure is necessary or desirable to obtain an
Authorisation from any Government Agency or stock exchange; or(g)
    
    (discovery and litigation) the disclosure is necessary or desirable in relation
to any discovery of documents, or any proceedings before a court, tribunal, other
Government Agency or stock exchange.
 18.
    
    NOTICES18.1
    
    How to give a noticeWithout limiting the means by which service may be effected on a company pursuant to the
Companies Act, a notice, consent or other communication under this document is only
effective if it is :
 (a)
    
    in writing, signed by or on behalf of the person giving it;(b)
    
    addressed to the person to whom it is to be given; and(c)
    
    served by being:
 (i)
    
    left at the address of the person;(ii)
    
    delivered or sent by pre-paid mail (by airmail, if the
addressee is overseas) to that persons postal address; or(iii)
    
    sent by fax to the fax number of that person and the machine
from which it is sent produces a report that states that it was sent in full.
 18.2
    
    When a notice is givenA notice, consent or other communication that complies with this clause is regarded as given
and received:
 (a)
    
    if any of the requirements of section 436(1) of the Companies Act apply, when
those requirements are satisfied; or(b)
    
    in any other case if it is:
 (i)
    
    delivered to a person or left at an address:
 32.




---



##### 



(A)
    
    by 5.00 pm (local time in the place of receipt)
on a Business Day  on that day; or(B)
    
    after 5.00 pm (local time in the place of
receipt) on a Business Day, or on a day that is not a Business Day  on
the next Business Day;
 (ii)
    
    sent by mail  5 days after it is posted; or(iii)
    
    sent by fax  on the day following the day on which it was sent.
 18.3
    
    Address for noticesA persons address, postal address, and fax number are those set out below, or as the person
notifies the sender:
 Chargor
    
    InterOil Products LimitedAddress:
    
    Level 6, Defens Haus, cnr Champion Parade & Hunter Street, Port Moresby, National
Capital District, Papua New GuineaFax number:
    
    (675) 320 2599Attention:Chargee
    
    Merrill Lynch Capital CorporationAddress:
    
    [Fax number:Attention:
    
    ]
 or such other address as either party may notify the other or (in the case of notice,
consent or communication to the Chargor) such address of the Chargor last known to the
Chargee.19.
    
    AMENDMENT AND ASSIGNMENT19.1
    
    AmendmentThis document can only be amended, supplemented, replaced or novated by another document
signed by the parties.19.2
    
    AssignmentSubject to the provisions of the Credit Agreement:
 (a)
    
    the Chargor may only assign, transfer, dispose of, declare a trust over or
otherwise create an interest in its rights under any IPL Document with the prior
consent consent of the Chargee; and
 33.




---



##### 



(b)
    
    the Chargee may assign, transfer, dispose of, declare a trust over or otherwise
create an interest in its rights under any IPL Document without the consent of the
Chargor, and may disclose to any potential holder of the right or interest any
information relating to any IPL Document or any party to any of them.
 20.
    
    GENERAL20.1
    
    Governing law
 (a)
    
    This document is governed by the law in force in Papua New Guinea.(b)
    
    Each party submits to the non-exclusive jurisdiction of the courts exercising
jurisdiction in Papua New Guinea for any proceedings in connection with any IPL
Document, and waives any right it might have to claim that those courts are an
inconvenient forum. Provided that the Chargee shall have full liberty to resort to the
courts of any other country where jurisdiction may exist or be established and the
Chargor hereby further irrevocably agrees to submit to the jurisdiction of the courts
in such other country. The Chargor hereby irrevocably waives any objections on the
ground of venue or forum non conveniens or any other similar grounds in respect of any
action or proceeding in any court brought or instituted by the Chargee.
 20.2
    
    Liability for expensesSubject to the provisions of the Credit Agreement, the Chargor must indemnify the Chargee
against, and must pay the Chargee on demand the amount of, all Taxes and expenses incurred
in connection with:
 (a)
    
    the negotiation, preparation, execution, stamping, perfection and registration
of each this document;(b)
    
    the transactions that this document contemplates; and(c)
    
    any enforcement, preservation, amendment to, or any consent, approval, waiver,
release or discharge of or under this document,including legal expenses on a full indemnity basis and expenses incurred in engaging
consultants.
 20.3
    
    Giving effect to this documentThe Chargor must do anything, and must ensure that its employees and agents do anything,
that the Chargee may reasonably require to:
 (a)
    
    give full effect to this document;
 34.




---



##### 



(b)
    
    better secure the Charged Property to the Chargee in a manner consistent with
this document; or(c)
    
    assist in the execution or exercise of any power,including execute any transfer (including any transfer in blank) or other document.
 20.4
    
    Waiver of rightsA right may only be waived in writing, signed by the Chargee, and:
 (a)
    
    no other conduct of the Chargee (including a failure to exercise, or delay in
exercising, the right) operates as a waiver of the right or otherwise prevents the
exercise of the right;(b)
    
    a waiver of a right on one or more occasions does not operate as a waiver of
that right if it arises again; and(c)
    
    the exercise of a right does not prevent any further exercise of that right or
of any other right.
 20.5
    
    Operation of this document
 (a)
    
    This document contains the entire agreement between the parties about its
subject matter. Any previous understanding, agreement, representation or warranty
relating to that subject matter is replaced by this document and has no further effect.(b)
    
    Any right that the Chargee may have under this document is in addition to, and
does not replace or limit, any other right that the Chargee may have.(c)
    
    Any provision of this document which is unenforceable or partly unenforceable
is, where possible, to be severed to the extent necessary to make this document
enforceable, unless this would materially change the intended effect of this document.
 20.6
    
    Operation of indemnities
 (a)
    
    Each indemnity in this document survives the expiry or termination of this
document.(b)
    
    The Chargee may recover a payment under an indemnity in this document before it
makes the payment in respect of which the indemnity is given.
 35.




---



##### 



20.7
    
    ConsentsWhere this document contemplates that the Chargee may agree or consent to something (however
it is described), the consent must be in writing and the Chargee may:
 (a)
    
    agree or consent, or not agree or consent, in its absolute discretion; and(b)
    
    agree or consent subject to conditions,unless this document expressly contemplates otherwise.
 20.8
    
    Statements by ChargeeA statement by an Authorised Representative of the Chargee on any matter relating to this
document (including any amount owing by the Chargor) is conclusive unless clearly wrong on
its face.
 20.9
    
    Set-offThe Chargee may, without consent of or notice to the Chargor after the occurrence of an
Event of Default, combine any account that the Chargor holds with the Chargee at any branch
in any part of the world with, or set off any amount that is or may become owing by the
Chargee to the Chargor against, any amount owing by the Chargor to the Chargee under any IPL
Document. For this purpose the Chargee may:
 (a)
    
    change the terms (including the repayment date) of any account or other payment
obligation between the parties;(b)
    
    convert amounts into different currencies in accordance with the Chargees
usual practice; and(c)
    
    do anything (including execute any document) in the name of the Chargor that
the Chargee considers necessary or desirable.This subclause overrides any other document or agreement to the contrary.
 20.10
    
    No mergerNothing in this document merges with any other Security Interest, or any Guarantee, judgment
or other right or remedy, that the Chargee may hold at any time.
 20.11
    
    Exclusion of contrary legislationAny legislation that adversely affects an obligation of the Chargor, or the exercise by the
Chargee of a right or remedy, under or relating to this document is excluded to the full
extent permitted by law.
 36.




---



##### 



20.12
    
    TaxAll payments made by the Chargor to the Chargee hereunder shall be made without any
restriction, condition, set-off or counterclaim and shall be free and clear of any Tax. In
the event that any Tax is required to be deducted or withheld from any payment made under
this document, the Chargor shall pay to the Chargee such additional amount so as to ensure
that the net amount received and retained by the Chargee will be the full amount which the
Chargee would have received had no such deduction or withholding been made or required.20.13
    
    CounterpartsThis document may be executed in counterparts.20.14
    
    AttorneysEach person who executes this document on behalf of a party under a power of attorney
declares that he or she is not aware of any fact or circumstance that might affect his or
her authority to do so under that power of attorney.
 37.




---



##### 



EXECUTEDas a deed.[Alternative execution blocks for Chargor]THE COMMON SEALof INTEROIL PRODUCTSLIMITED, the fixing of which waswitnessed by:Signature of director
    
    
    
    
    
    Signature of director/secretaryName
    
    
    
    
    
    NameSIGNED, SEALEDand DELIVEREDfor INTEROIL PRODUCTS LIMITEDunderpower of attorney in the presence of:Signature of attorneySignature of witness
    
    
    
    
    
    NameName
    
    
    
    
    
    Date of power of attorney
 38.




---



##### 



SIGNEDfor MERRILL LYNCH CAPITALCORPORATION, by its duly authorisedofficer, in the presence of:Signature of officeSignature of witness
    
    
    
    NameName
 39.




---



##### 



Form of LNG/NGL Project MOU
 MEMORANDUM OF UNDERSTANDING
 MOU IOC Clarion" Merrill" Party Parties
 PNG NGL LNG Project
 
    
    National Gas Development Company, a company which will be owned by the Parties in
proportion to their ownership interests in the Project will seek to build and develop a
natural gas liquids facility (NGL) and an onshore liquid natural gas (LNG) facility in
Papua New Guinea.
    
    Execution of agreements with the Government of PNG and PNG gas producers providing the
Project with irrevocable access, at fair market value, to sufficient gas supplies,
currently estimated to be between 3.5 tcf to 7.0 tcf.
    
    Construction of a NGL extraction facility at Kopi, Gulf Province, PNG utilizing feed
wet gas from the planned PNG gas pipeline project. The proposed NGL extraction facility
is currently projected to have a capacity of 1.1 billion scf/d, and a by-pass system
permitting 10% of the gas transported via the planned pipeline to pass through the
extraction plant unstripped.
    
    Construction of a pipeline from Kopi to Napa Napa, PNG.
    
    Construction of a LNG facility at Napa Napa, PNG with a base load of 450 to 750 mm
scf/d, which shall be operated by Natural Gas Development Companys PNG subsidiary.
    
    International marketing and sales of LNG.
 (Premise
 WHEREAS
 1.




---



##### 



(A)
    
    IOC wishes to perform a final study of the economic and technical feasibility (the Final
Study) of developing a LNG facility and related infrastructure needed to develop the Project
in PNG.(B)
    
    Merrill and Clarion desire to participate in the Project and to assist IOC in the preparation
of the Final Study.(C)
    
    Merrill has developed particular expertise in LNG projects, particularly in the areas of
transportation, financing and marketing, as well as having business relationships with
reliable international LNG operators.(D)
    
    IOC wishes to create a practical plan for the Project as well as an initial pricing structure
of LNG from the Project as promptly as possible. The Project plan and pricing structure will
be further developed and refined during the Final Study and during the negotiation of a final
contract. Merrill has financial expertise in developing LNG projects as well as the key
pricing structure of LNG and, therefore, is able to provide such information regarding LNG
projects and to provide advice based on its commercial background in dealing with existing LNG
pricing formulas.(E)
    
    The Parties, or their Affiliates, have executed that certain Credit Agreement of even date
herewith, wherein Merrill and Clarion (or their Affiliates) have agreed to extend loans to IOC
totaling US$130,000,000 in the aggregate (Facility), with Merrill or its Affiliates
committed to make US$70,000,000 available to IOC and Clarion or its Affiliates committed to
make the remaining US$60,000,000 available to IOC. The proceeds of the Facility will be used
for the purposes described in the Facility and will not be used to finance any portion of the
Project other than any amounts allocated to the Final Study. In addition to the base rate of
interest payable to the lenders under the Facility, the Facility gives Merrill and Clarion the
right to participate in the Project based on the amounts loaned to IOC pursuant to the
Facility. Based on the amounts Merrill and Clarion will make available to IOC under the
Facility, the Parties will have the following interests in the Project:
 IOC
    
    
    35 %Merrill
    
    
    35 %Clarion
    
    
    30 %
 Notwithstanding the foregoing, Clarion and IOC have separately agreed that if Clarion makes
a payment to IOC in the amount of US$10,000,000 in addition to the amounts agreed to be
provided by Clarion under the Facility, then IOC will transfer a 5% ownership interest in
the Project to Clarion so that thereafter IOC will have a 30% ownership interest in the
Project and Clarion will have a 35% ownership interest in the Project.(F)
    
    In addition to the rights described in Recital (E), Merrill and Clarion may be granted an
option to acquire, in exchange for any amounts they loan to IOC (and, in the case of Clarion,
the payment described in Recital (E)) pursuant to the Facility, to the extent permitted by
IOCs existing agreements, up to a 15% participation interest in IOCs future exploration and
development programs related to its Petroleum Prospecting Licenses in PNG, subject to pro rata
dilution in the event that the PNG Government exercises its backing or participation rights.
 2.




---



##### 



(G)
    
    Merrill and Clarion will work with IOC to ensure that IOC has the financial capability to
enter into an agreement with an EPC contractor for the Project. The funding details, which
will include funding mechanisms for cost overruns that avoid dilution of equity participants,
will be mutually agreed in the final project agreement (Definitive LNG/NGL Project
Agreement) to be entered into between the Parties.(H)
    
    Merrill will look for opportunities for forward gas sales of the LNG products. In addition,
Merrill will review the available options for securing the best pricing for the LNG to be
produced pursuant to the Project, including the price estimates that can be secured by basing
gas sales on securing gas contracts from the Atlantic basin. IOC is requesting a draft S
curve pricing structure and core contract outlines for LNG offtakes using historical contract
pricing and terms as a base starting point from Merrill. The pricing material provided by
Merrill will include the old base contract formats from any other LNG projects with the
pricing curves which they may have, and secure current pricing from regional projects
including an estimated base pricing outline for current regional LNG estimates. Merrill will
use its reasonable commercial efforts to secure the highest net back price for gas sales from
the proposed LNG facility through Merrills marketing Affiliates.(I)
    
    In connection with the Project, the Parties are proposing to enter into an agreement whereby
Merrill would commit to offtake a base volume of 1.75 million tones to 5 million tones per
annum of LNG from the proposed LNG facility at market related prices for sale in Japan and/or
the US markets. Notwithstanding the above, each Party will have the right to offtake
quantities of LNG in proportion to their equity ownership in the Project, subject to the
minimum credit requirements for offtake agreements imposed upon the Project by any potential
lenders. Notwithstanding the foregoing, in the event any Party does not elect to enter into
an offtake agreement, the quantity of LNG that such Party would have the right to offtake will
vest pro rata in the other Parties who have entered into off-take agreements. The actual
offtake amount of each Party will be determined in the definitive agreements and is subject to
the size of the LNG facility.(J)
    
    Merrill and Clarion will use reasonable efforts to assist IOC in obtaining competitive
financing needed to acquire producing gas properties in PNG that would be used to provide IOC
with current cash flow and gas reserves to support the Project. Potential parties from whom
IOC may acquire gas producing properties in PNG include, but are not limited to, Exxon-Mobil
and Santos of Australia.NOW IT IS DECLARED AND AGREED AS FOLLOWS:1.
    
    General Principles for Cooperation.
 1-1
    
    The Parties agree to exchange information regarding the Project, the Final
Study and the Parties activities relating to the Project to the extent that
exchanging such information shall not violate any existing confidentiality agreement
which any Party has entered into, or enters into in the future, with any third party.1-2
    
    Merrill and Clarion agree (i) to use commercially reasonable efforts to
assist IOC in connection with the Final Study and (ii) to independently conduct their
own studies of the feasibility of the Project and share such
 3.




---



##### 



results with the other Parties. The Parties shall work together to review and
evaluate the viability of the Project which shall be determined principally on the
economic, strategic, technical and commercial feasibility of the Project.1-3
    
    The Parties shall promptly negotiate a Definitive LNG/NGL Project Agreement
that will provide the definitive contractual terms and conditions under which the
Parties will undertake the formation of a new, special purpose joint venture project
company (ProjectCo") in order to pursue the Project, and which contains the
respective rights and obligations of the ProjectCo shareholders in connection with
such matters as capital funding, equity issuances, corporate governance, share
transfers, development budgeting, and other matters to be mutually agreed.1-4
    
    During the currency of this MOU, IOC shall not be free to undertake
independent discussions with other potential participant(s) in the Project (other than
Sumitomo) and may not provide information to such third parties (other than Sumitomo)
regarding Clarions and Merrills potential involvement without the prior written
consent of Clarion and Merrill, such consent not to be unreasonably withheld. Neither
Clarion nor Merrill shall enter into discussions or negotiations, or execute
agreements with any other party regarding equity or debt participation in the
construction or operation of a NGL extraction facility, LNG facility, or other
facility similar to the proposed Project in PNG, without the prior written consent of
IOC, such consent not to be unreasonably withheld.1-5
    
    Unless otherwise agreed to in writing by the Parties, each Party shall bear
its own costs and expenses incurred in connection with or as a result of the
transactions contemplated by this MOU.
 2.
    
    Cooperation.
 2-1
    
    Unless the Parties agree otherwise, the Parties will use reasonable efforts
to hold monthly meetings in Cairns, or Houston, or such other location as is agreed to
between the Parties. The purpose of such meetings will be to (i) develop a common
view with respect to the implementation of the Project, and (ii) exchange data,
information and views of the Parties about particular technical and commercial
subjects, such as the implementation plan for the Project, the development plan for
any gas fields associated with the Project, engineering studies, potential
participants in the Project, potential operators for the liquefaction plant
contemplated by the Project, the preparation of an information memorandum relating to
the Project, and LNG shipping issues.2-2
    
    The Parties agree to exchange information regarding the Project, the Final
Study and the Parties activities relating to the Project to the extent that
exchanging such information shall not violate any existing confidentiality agreement
which any Party has entered into, or enters into in the future, with any third party.2-3
    
    The Parties will negotiate in good faith with an intention to agree upon and
execute a Definitive LNG/NGL Project Agreement as to the scope of the Project and
their respective participations, and that of relevant third parties, if any.
 4.




---



##### 



2-4
    
    The Parties will endeavour to work in good faith to obtain all necessary
information needed in connection with the evaluation of and development of the
Project, including without limitation, information related to: (i) the base reserves
necessary to start the project and the reserves needed to expand the Project over the
development period; (ii) the contractual framework for the Project; (iii) ownership;
(iv) governmental relationships; (v) commercial/pricing/royalty terms; (vi) feed;
(vii) environmental risks; (viii) political risks; (ix) security risks; (x) tax risks;
(xi) NGLs; (xii) marketing strategies and studies; (xiv) outline consents; and (xv)
necessary approvals and licenses. The Parties will endeavour to agree upon how any
gaps in the available information may be filled and at whose risk and cost. The
Parties will explore the optimum means from a commercial, legal and tax perspective of
owning the Project assets, whether via a jointly owned corporation or unincorporated
joint venture relationship. The anticipated equity participants in the Project, and
their interests, are set forth in Recital E. If either Clarion or Merrill elect not
to acquire an interest in the Project, other parties to be mutually agreed upon
between IOC and the remaining Party that has elected to acquire an interest in the
Project following the finalization of participation terms between IOC and the
remaining Party will be given the opportunity to acquire an interest in the Project.
 3.
    
    Confidential Information.
 3-1
    
    Without prejudice to Sections 3-2, 3-3 and 3-4 below, and notwithstanding any
conflicting provision of the Confidentiality Agreement entered into between IOC and an
Affiliate of Merrill dated in or about January 2006 (Confidentiality Agreement), all
information exchanged and/or developed under this MOU shall be regarded as
confidential between the Parties and shall not be disclosed to any third party or used
for any other purpose other than as contemplated by this MOU without the prior written
consent of the other Parties. The confidentiality obligations of the Parties shall be
effective for the period of this MOU and for 2 years thereafter. If the Parties
extend their co-operation under this MOU, the confidentiality obligations of the
Parties under this MOU and the Confidentiality Agreement shall be automatically extend
during the term of any extension of this MOU. In particular, no information provided
to IOC or Clarion by Merrill regarding LNG pricing or other information whether or not
contemplated by Recitals (D), (H), and (I) shall be disclosed by IOC or Clarion to any
third party without the written consent of Merrill, unless the disclosure of such
information is required by applicable securities laws or regulations, the rules of any
stock exchange on which a Party is listed, or is properly in the public domain. In
regards to public disclosure, Merrill recognizes that IOC is a public-traded company
and Merrill will assist IOC in preparing, and consents to the release by IOC of, a
press release of mutually agreed content, which may be a joint disclosure with
Merrill, or other legally-required disclosure that discloses the basic terms of any
agreement entered into between the Parties.3-2
    
    It is recognized that information of a confidential nature may be disclosed
by the Parties in the course of discussions held hereunder. In consideration of any
Party (the Owner) making available to the any other Party (the Recipient)
information which is not publicly known concerning the Owner and its Affiliates (as
defined below) and its and
 5.




---



##### 



their respective businesses, future projects, and financial and other affairs, in
whatever form supplied to the Recipient, whether orally or in writing,
(collectively, Confidential Information), the Recipient agrees and undertakes as
follows:
 (i)
    
    Confidential Information will only be used by it for its
participation in bona fide discussions hereunder and for its assessment of any
opportunities identified and for any associated negotiations; and(ii)
    
    Confidential Information will only be disclosed to such of
the Recipients, or its Affiliates, directors, officers, employees,
professional advisers, counsel and lenders or other providers of funds (a) who
are directly concerned with the matters referred to herein or in any
associated negotiations, and (b) whose knowledge of such information is
essential for such involvement, and (c) who agree to comply with the
provisions of this MOU in respect of Confidential Information. The Recipient
undertakes to use its reasonable endeavours to enforce such compliance.
 3-3
    
    The undertaking in Section 3-2 does not apply to Confidential Information (i)
which, after disclosure to the Recipient, becomes generally available to third
parties, other than through breach by the Recipient of any obligation arising from
this MOU, or (ii) which was lawfully in the Recipients possession prior to such
disclosure (as evidenced by its or its advisers written records) and which was not
acquired directly or indirectly from it or an Affiliate, or (iii) which is lawfully
received or obtained by the Recipient from a third party which has acquired it
lawfully and is not bound by an obligation of confidentiality to the Owner or an
Affiliate, or (iv) which the Recipient is obliged to disclose by law or by a regulator
or other body or competent authority with jurisdiction over the Recipient concerned or
the rules of a stock exchange upon which its, or an Affiliates, shares are listed or
traded, in which case it shall, so far as practicable, consult with the Owner and take
account of its reasonable requirements before making such disclosure.3-4
    
    No public announcement, communication or circular concerning any of the
matters referred to in this MOU shall be made or dispatched at any time by any Party
without the prior written consent of the other Parties (such consent not to be
unreasonably withheld or delayed), save where such Party is required to make any
announcement by law or by a regulator or other body of competent authority with
jurisdiction over the Party concerned or the rules of a stock exchange upon which its,
or an Affiliates, shares are listed or traded, in which case it shall, so far as
practicable, consult with the other Parties and take account of its reasonable
requirements before making or dispatching such announcement, communication or
circular.
 4.
    
    Limitation.No Party shall be liable to the other Parties for damages of whatsoever nature,
including, without limitation, indirect or consequential losses or damages (including, without
limitation, loss of profit or loss of business opportunity) that may arise in connection with
or result from this MOU.5.
    
    Assignment.Without the prior consent of the other Parties, no Party may assign
 6.




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any of its rights or obligations hereunder other than to such Partys Affiliates.
Affiliateshall mean any company or legal entity which (a) controls, either directly or
indirectly, a Party, or (b) which is controlled, directly or indirectly, by such Party, or
(c) is, directly or indirectly, controlled by a company or entity which directly or
indirectly controls such Party. Controlshall mean the right to exercise more than 50%
of the voting rights in the appointment of the directors or similar body of such company.6.
    
    Termination.This MOU shall remain effective for a period of one (1) year from the date
hereof. Notwithstanding the above, the Parties may agree in writing to extend or shorten the
term of this MOU.7.
    
    Settlement of Dispute.The Parties shall use all reasonable efforts to settle amicably,
through negotiations, any dispute arising out of or in connection with this MOU or any breach,
termination or invalidity thereof.8.
    
    Legal Effect.Except for the provisions of Section 1-4, Section 1-5, and Sections 3 through
11, which are legally binding on the Parties with effect from the date hereof, this MOU is not
legally binding. Any legal obligations with respect to the transactions contemplated
hereunder shall be subject to the negotiation and execution following respective board
approvals of mutually acceptable definitive agreements relating to the Project.9.
    
    Business Principles. In relation to the Project, the Parties shall comply with the US
Foreign Corrupt Practices Act and any sanctions imposed by law or executive order in respect
of doing business with governments, corporations or nationals of any territory. Mindful of
the principles of the US Foreign Corrupt Practices Act, no Party shall, and shall procure that
its Affiliates and their respective employees shall not, make or cause to be made, in
connection with the Project or the transaction referred to herein, any payments, loans or
gifts or promises or offer of payments, loans or gifts of any money or anything of value,
directly or indirectly:
 (i)
    
    to or for the use or benefit of any official or employee of any government,
or the agency or instrumentalities of any such government;(ii)
    
    to any political party or official or candidate thereof;(iii)
    
    to any other person either as an advance or as a reimbursement if it knows
or has reason to suspect that any part of such payment, loan or gift will be directly
or indirectly given or paid by such other person, or will reimburse such other person
for payments, gifts or loans previously made, to any such governmental official or
political party or candidate or official thereof; or(iv)
    
    to any other person or entity if such payment would violate either the laws,
decrees, regulations or policies having the force of law of England, PNG, the United
States of America or any other relevant jurisdiction.
 10.
    
    Authority.Nothing in this MOU shall be construed to give any Party the authority or right
to enter into any obligation on behalf of the other Parties unless specifically authorized by
the other Parties in advance in writing.11.
    
    Governing law and Arbitration.This MOU shall be governed by and
 7.




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construed in accordance with the laws of England. Subject to Section 7, all disputes
arising in connection with this Memorandum of Understanding shall be finally settled by
arbitration under the Arbitration Act 1996 by one arbitrator, appointed by agreement or if
not so agreed, in accordance with the said Act. The language to be used in the arbitral
proceedings shall be English.
  INTER OIL CORPORATIONBy:Name:Title:CLARION FINANZ AGBy:Name:Title:MERRILL LYNCH COMMODITIES (EUROPE) LIMITEDBy:Name:Title: