Document:

Schedule 4

                                                                   Translation

Conditions  on  gigantissimo  2321  AB  to be  renamed  narvarme acquisition iii
AB's  Convertible DEBENTURE Loan 2002 - 2027

1.       Definitions

         All the references to the following definitions in these terms and
         conditions shall have the meaning presented below:

           "Banking             day" a day, which is not a Sunday or other
                                public holiday in Sweden, or which, with respect
                                to the payment of debt instruments, is not the
                                equivalent of a public holiday under Swedish
                                law.

           "Board"              the board of the Company

           "Company"            Gigantissimo  2321 AB, to be  renamed  Narvarme
                                Acquisition  III AB, company registration number
                                55614-6642

           "Conversion"         the exchange of the convertible claim for new
                                shares in the Company

           "Creditor"           a person in possession of the convertible claim

2.       Amount of loan, interest rate and payment undertaking

         The loan amounts to SEK 470,000,000.

           The loan is evidenced by convertible debenture certificates, a copy
           of which is attached hereto as appendix 1.The debentures shall, at
           the time of issue, have a par value of SEK 37,600 or whole multiples
           thereof. The Company covenants and agrees to exchange the
           subordinated debentures at the request of a holder thereof.

           The Company undertakes to effect payment in accordance with the
           conditions stated herein.

<PAGE>

           The Company shall pay to the creditor the aggregate principal amount
           - except to the extent of prior conversions or prepayment pursuant to
           item 3 and 4 below - in the following instalments and on the
           following dates:

           Date                                        Amount
           ----                                        ------
           2012-02-20                                  253,800
           2012-05-20                                  253,800
           2012-08-20                                  253,800
           2012-11-20                                  253,800
           2013-03-20                                  498,200
           2013-05-20                                  498,200
           2013-08-20                                  498,200
           2013-11-30                                  498,200
           2014-02-20                                  1,504,000
           2014-05-20                                  1,504,000
           2014-08-20                                  1,504,000
           2014-11-30                                  1,504,000
           2015-02-20                                  2,500,400
           2015-05-20                                  2,500,400
           2015-08-20                                  2,500,400
           2015-11-30                                  2,500,400
           2016-02-20                                  3,496,800
           2016-05-20                                  3,496,800
           2016-08-20                                  3,496,800
           2016-11-30                                  3,496,800
           2017-02-20                                  4,502,600
<PAGE>

           2017-05-20                                  4,502,600
           2017-08-20                                  4,502,600
           2017-11-30                                  4,502,600
           2018-02-20                                  5,000,800
           2018-05-20                                  5,000,800
           2018-08-20                                  5,000,800
           2018-11-30                                  5,000,800
           2019-02-20                                  2,500,400
           2019-05-20                                  2,500,400
           2019-08-20                                  2,500,400
           2019-11-30                                  2,500,400
           2020-02-20                                  2,500,400
           2020-05-20                                  2,500,400
           2020-08-20                                  2,500,400
           2020-11-30                                  2,500,400
           2021-02-20                                  2,500,400
           2021-05-20                                  2,500,400
           2021-08-20                                  2,500,400
           2021-11-30                                  2,500,400
           2022-02-20                                  2,500,400
           2022-05-20                                  2,500,400
           2022-08-20                                  2,500,400
           2022-11-30                                  2,500,400
           2023-02-20                                  2,500,400
           2023-05-20                                  2,500,400
           2023-08-20                                  2,500,400

<PAGE>
           2023-11-30                                  2,500,400
           2024-02-20                                  2,500,400
           2024-05-20                                  2,500,400
           2024-08-20                                  2,500,400
           2024-11-30                                  2,500,400
           2025-02-20                                  2,500,400
           2025-05-20                                  2,500,400
           2025-08-20                                  2,500,400
           2025-11-30                                  2,500,400

           The annual interest rate shall equal to the sum of (i) a fixed real
           interest rate plus (ii) an inflation premium. The fixed real interest
           rate is as following:

           Calendar year 2002:           2,98 %

           Calendar year 2003:           2,98 %

           Calendar year 2004 - 2027     5,98 %

           The inflation premium equals to the percentage-change of the Swedish
           consumer price index (konsumentprisindex, KPI) of the calendar year
           preceding the calculation period.

           Interest will be based on the from time to time outstanding principle
           amount from March 11 2002, which falls due for payment quarterly in
           arrears on February 20, May 20, August 20 and November 20 each year
           beginning May 20 2002.

           The Company shall be entitled to postpone the payment of interest if
           on an interest payment date the Company does not have sufficient
           available cash to pay. Should the payment of interest be delayed due
           to such occurrence, the postponed interest shall be paid on the
           following payment date on which there is available cash to make such
           payment. The company shall make partial payments on the dates
           described above in the event it has available cash to make a portion
           of, but not all of, the interest payments described above. An
           interest rate equal to a fixed interest rate of 10% plus a inflation
<PAGE>

           premium calculated as above will be charged on any unpaid amount.
           Such interest shall be charged quarterly.

           If the date on which a payment of principal or interest falls due is
           not a banking day the payment in question shall be made on the next
           succeeding day which is a banking day.

           The right to interest on the converted amount cease the day
           conversion is requested.

3.         Conversion

           The Creditor shall have the right, during the period beginning March
           11, 2002 up to and including March 11, 2027 to request the conversion
           of the claim under the debt instrument to new shares in the Company
           at a conversion rate of SEK 37,600 per share.
           A request for conversion shall be made in writing and be submitted to
           the Company together with the convertible subordinated debenture
           certificate in original.

           New shares corresponding to the amount are entered in the Company on
           an interim basis. Once registration has taken place at the Patent-
           and Registration Office, the registration will become final.

4.       Prepayment

          a)     The principal, together with any accrued interest thereon, may
                 be prepaid, in full or in part, at any time. The Company shall
                 give the creditor written notice of a prepayment thirty (30)
                 days in advance. The Creditor shall be entitled to request
                 conversion notwithstanding the notice of prepayment.

           b)    The Creditor shall, after giving the Company a termination in
                 writing thirty (30) days in advance, be entitled to request
                 that the loan and accrued interest is prepaid wholly or
                 partly.

5.       Adjustment of conversion price

           The following shall apply with respect to the rights that shall apply
           to creditors in the situation described in Chapter 5, ss. 4, first
           paragraph, point 8 of Swedish Companies Act and in certain other
           situations.

<PAGE>

           a)     If the Company effects a bonus issue of shares, conversion
                  requested on a date does not permit it to be effected prior to
                  or on the tenth calendar day preceding the General Meeting of
                  Shareholders to approve the issue will not be carried out
                  until after the Meeting has approved this matter. Shares
                  arising from conversions effected the following approval of
                  the bonus issue are not entitled to participate in the issue.
                  In connection with conversions effected following approval of
                  the bonus issue an adjusted conversion price is applied in
                  accordance with the following formula.

                  Adjusted                Preceding conversion price x
                  Conversion            = number of shares prior to bonus issue
                                          ------------------------------------
                  Price                   Number of shares following bonus issue

           b)     If the Company  executes a  consolidation  or a split of its
                  shares,  subsection a) shall be correspondingly applicable.

           Subsections c), d) and e) apply only if the share is listed on the
           Stockholm Stock Exchange or any comparable list.

           c)     If the Company issues new shares - with preferential rights to
                  its shareholders to subscribe for new shares for cash - the
                  following shall apply with respect to the rights to
                  participate in the issue that accrue to shares arising from
                  the conversion:
                  1. If the new issue is resolved by the Board subject to the
                  approval of the General Meeting of Shareholders or as
                  authorised by the meeting, the Board's resolution and the
                  announcement of the new issue shall specify the latest date
                  when conversion shall have been effected in order that shares
                  arising from conversion shall carry rights to participate in
                  the new issue. Such date may not be earlier than the tenth
                  calendar day following the date of the notice.

                  2. If the new issue is to be approved by the General Meeting
                  of Shareholders, conversion requested on such a date that
                  conversion cannot be effected at the latest on the tenth
                  calendar day prior to the date of the General Meeting of
                  Shareholders that approves the issue - will not be effected
                  until the meeting has voted on the new issue. Shares arising
                  through such conversions are entered into the share account on
                  an interim basis, which means that they do not carry
                  entitlement to participate in the issue.
<PAGE>

                  In connection with conversion effected on a date such that
                  rights to participate in the new issue do not accrue, the
                  following applies.

                  The conversion price shall be adjusted by the Board in
                  accordance with the following formula:

<TABLE>
<CAPTION>
<S>                                    <C>
                                        Preceding conversion price x
                  Adjusted             average market price of the shares during the subscription
                  Conversion           period specified in the resolution authorizing the issue
                  Price                (average share price)
                                       Average share price increased by the theoretical value of the
                                       subscription right based on this price
</TABLE>

                  The average price shall be considered to correspond to the
                  average of the mean of the highest and lowest prices paid in
                  transactions as recorded in the Stockholm Stock Exchange's
                  official list of prices. In the absence of a quotation of
                  selling price, the last bid quoted shall be used in the
                  calculation. If neither a selling price nor a bid price is
                  quoted on a given day, that day shall be excluded from
                  calculation of the average price.

                  The theoretical value of subscription rights is calculated in
                  accordance with the following formula:

<TABLE>
<CAPTION>
<S>                                    <C>

                                       Maximum number of new shares that can be issued in
                                       accordance with the resolution approving the new
                  Value of a           issue x (average share price minus the price at
                  subscription         which the new shares are being issued)
                  right                Number of shares outstanding prior to the resolution
                                       authorizing new shares
</TABLE>

                  If a negative value arises in connection with this
                  calculation, the theoretical value of the subscription rights
                  shall be fixed at zero.

                  The adjusted conversion price calculated and described above
                  shall be decided by the Board two Banking days following
                  expiration of the subscription period and shall be applied in
                  any conversion effected thereafter.

                  During the period until the adjusted conversion price is set,
                  only a preliminary conversion is effected, in connection with
                  the full number of shares according to the as yet unadjusted
                  conversion price shall be entered in the share account on an
                  interim basis. Final registration in the share account takes
                  place after the adjusted conversion price has been
                  established.
<PAGE>

           d)     If the Company effects - in return for cash payment and with
                  preferential rights for the shareholders - an issue as
                  referred to in Chapter 5 of the Swedish Companies Act, the
                  provision in Subsection c), first paragraph, Points 1 and 2,
                  above shall apply correspondingly to the right of shares
                  issued in connection with conversion to participate in the
                  issue.
                  In connection with the conversion effected on a date such that
                  rights to participate in the issue do not accrue, the
                  following shall apply:

                  The conversion price shall be adjusted by the Board in
                  accordance with the following formula:

<TABLE>
<CAPTION>
<S>              <C>
                          Preceding conversion price x
                                       average market price of the shares during the subscription
                  Adjusted             period specified in the resolution authorizing the issue
                  Conversion           (average share price)
                  Price                Average share price increased by the theoretical value of the
                               subscription rights

</TABLE>
                  The average price is calculated as stated in Subsection c).

                  The value of subscription rights shall be considered to
                  correspond to the average of the mean of the highest and
                  lowest prices paid in the transactions in subscription rights
                  between members of the Stockholm Stock Exchange each trading
                  day during the subscription period. In the absence of a
                  quotation of a selling price, the last bid price quoted shall
                  be included in the calculation. If neither a selling price nor
                  a bid price is quoted on a given day, that day shall be
                  excluded from calculation of the value of subscription rights.

                  The adjusted conversion price is set by the Board, as
                  described above, two banking days following expiration of the
                  subscription period and shall be applied in connection with
                  conversions made thereafter.

                  In connection with a conversion effected during the period
                  until the adjusted conversion price is set, the rules stated
                  in Subsection c), in the last paragraph, shall apply
                  correspondingly.

           e)     If the Company - in other cases than those set forth in
                  Subsections a) through d) above - should make an offer to its
                  shareholders to acquire on a preferential basis securities or
                  rights of any type from the Company in accordance with the
                  principle stated in Chapter 4, ss. 2 of the Swedish Companies
                  Act, the provision in Subsection c), first paragraph, Points 1

<PAGE>

                  and 2 above shall apply correspondingly to the right of shares
                  issued in connection with conversion to participate in the
                  issue.

<TABLE>
<CAPTION>
<S>               <C>
                          Preceding conversion price x
                  Adjusted             average market value of the shares during the application
                  Conversion     =     period specified in the offer (average share price)
                  Price          Average share price increased by the value of rights to
                                       participate in the offer (purchase rights)
</TABLE>
                  The average price is calculated as stated in Subsection c).

                  The value of purchase rights shall be considered to correspond
                  to the average of the mean of the highest and lowest prices
                  paid each trading day in transactions in trading rights
                  between members if the Stockholm Stock Exchange during the
                  subscription period. In the absence of a quotation of a
                  selling price, the last bid price quoted shall be included in
                  the calculation. If neither a selling price nor a bid price is
                  quoted on a given day, that day shall be excluded from
                  calculation of the value of the purchase rights. The
                  calculation shall be based on the selling prices and bids on a
                  list prepared by the Board.

                  In the event that trading in purchase rights as referred to in
                  the preceding paragraph has not taken place, the adjustment of
                  the conversion price shall be calculated by applying in so far
                  as is possible the principles indicated above in this
                  Subsection e). The conversion price adjusted in the manner
                  described above will be set out by the Board as soon as
                  possible following expiration of the offering period and shall
                  be applied in conversions effected after the adjusted price
                  has been set.

                  In connection with conversions effected during the period
                  until the adjusted conversion price has been set, the rules
                  stated in Subsection c), in the last paragraph, shall apply
                  correspondingly.

                  Subsection f) applies only if the share is not listed on the
                  Stockholm Stock Exchange or any other comparable list.

           f)     If the Company - in return for cash  payment and with
                  preferential  rights for the shareholders  - effects a new
                  share issue or an issue  pursuant to Chapter 5 of the Swedish
                  Companies  Act,  the  Company  shall  give  all the creditors
                  the  same preferential  rights as have been granted to the
                  shareholders.  In this connection, every  creditor,
                  notwithstanding  the fact that  conversion has not been
                  effected, shall be  considered  to own the number of shares

<PAGE>

                  that it would have  received  if conversion  had been made at
                  the conversion  price  applicable on the date when the  new
                  issue was approved.  No adjustment of the conversion  price in
                  accordance  with subsections c), d) or e) shall be made.

                  Should the Company decide to make an offer such as the one
                  described in subsection E above, what is stated in the
                  preceding paragraph shall be applicable correspondingly,
                  except that the number of shares the creditor shall be
                  considered to own shall, in such case, be determined on the
                  basis of the conversion price at the time of the resolution
                  approving the offer.

           g)     If the Company's share capital should be reduced by repayments
                  to its shareholders, the conversion price shall be adjusted by
                  the Board in accordance with the following formula:
<TABLE>
<CAPTION>
<S>                                           <C>

                                             Preceding conversion price x
                                             average market price of the shares during a
                  Adjusted                   period of 25 trading days beginning on the date
                  Conversion =               when the shares  were  quoted  without  repayment  rights
                  Price                      (average share price)
                                             Average share price increased by the amount
                                             being repaid per share

</TABLE>
                  The average price is calculated as stated in Subsection C.

                  The conversion price, adjusted as stated above, is set by the
                  Board two banking days following the expiration of the stated
                  period of 25 trading days and shall be applied in connection
                  with conversions effected thereafter.

                  If the share of the Company is not listed on the Stockholm
                  Stock Exchange or any comparable list, the real value of the
                  share, as determined by the Company's auditors apply instead
                  of the average share price.

                  No conversions will be effected during the period from the
                  date of the decision to reduce the share capital up to and
                  including the date when the adjusted conversion price is set
                  as stated above.

           h)     In adjusting the conversion price as described above, the
                  price shall be rounded off in units of 10 ore, with 5 ore
                  rounded upward.

<PAGE>
           i)     If the  General  Meeting of  Shareholders,  in accordance with
                  Chapter 14 of the Swedish  Companies  Act,  should  approve a
                  merger plan  whereby the Company  would become part of another
                  Company,  conversion may not thereafter be requested. However,
                  the  creditor  has the right,  during a period of two  months
                  calculated from the date of such approval, to demand immediate
                  payment of the outstanding principle amount of the convertible
                  subordinated  debenture plus interest accrued to date of
                  payment.  The Company shall notify the creditors,  advising
                  them of this right,  not later than one week  following the
                  beginning of the period.  The above does not impair  rights
                  that may legally  accrue to the  creditors  in  conjunction
                  with a merger.

                  Not later than two months before the Company takes a final
                  decision on the matter of a merger as described above, the
                  creditors shall be informed by notice. The notice shall
                  present a report on the principal content in the merger plan
                  and shall remind the creditors, as stated in the preceding
                  paragraph, that conversion may not be requested once the
                  merger has been finally approved.

                  Should the Company give notice of the planned merger as stated
                  above, the creditors shall have the right to request
                  conversion from the date when the notice of merger plans was
                  issued, provided that conversion can be effected not later
                  than the tenth calendar day prior to the General Meeting of
                  Shareholders at which the merger plan, whereby the Company
                  shall become part of another company, is to be.

           j)     If it is decided  that the  Company is to enter into
                  liquidation,  conversion  may not be requested  thereafter,
                  regardless of the ground for liquidation. The right to request
                  conversion  ceases  simultaneously  with the  decision  to
                  liquidate, notwithstanding  the fact that the decision may not
                  have come into  legal  force. However,  the creditor has the
                  right,  in such cases, to demand  immediate  payment of the
                  outstanding  amount of the convertible subordinated  debenture
                  plus accrued interest  to the  date  of  payment.  If the
                  decision  to  liquidate  is made at a General Meeting of
                  Shareholders  this right becomes  effective on the day
                  following the Meeting or  otherwise  on the day  following the
                  date on which the court order or liquidation has come into
                  legal  force.  The Company shall immediately thereafter notify
                  the  creditors  in  writing,  advising  them of their right to
                  demand immediate payment.

<PAGE>
                  Not later than two months before the General Meeting of the
                  Shareholders determines whether the Company should enter into
                  liquidation, as provided in Chapter 13, ss. 1 of the Swedish
                  Companies Act, the creditors shall be informed of the planned
                  liquidation. The notice shall include a reminder that
                  conversion may not be requested after the Meeting has voted to
                  liquidate.

                  If the Company gives notice of planned liquidation as stated
                  above, creditors are entitled to request conversion provided
                  that the conversion can be effected not later than the tenth
                  calendar day prior to the General Meeting of Shareholders at
                  which the question of the Company's liquidation is to be
                  considered.

           k)     Notwithstanding the statements under Subsections i) and j)
                  that conversion may not be requested after a decision is made
                  to merge or liquidate, rights to request conversion shall be
                  reinstated in cases when the agreement to merge is not
                  implemented or the liquidation is not carried out.

           l)     In the event the Company goes into bankruptcy, conversion may
                  not be requested from that point onwards. If however, the
                  bankruptcy is revoked by a higher court of law, conversion may
                  again be requested.

6.         Statute of limitations

           The creditor shall lose all rights to payment 10 years after the
           maturity date of the loan. The right to receive interest payment will
           be lost 10 years after each interest payment date.

7.         Consequences of failure to fulfil obligations

           The creditor is entitled to declare the loan and interest payable
           immediately, in the event that:

           a)  the Company  does not pay on the due date the amounts of interest
           or  principal  that have fallen due for payment unless the Company is
           entitled to postpone the payment, or

           b)  the Company, in any other respect than stated under point a)
           above, should fail to fulfil its obligations under these terms - or
           otherwise act in conflict with them - and if such failure is capable
           of being remedied the Company has not cured such failure within 30
           days after receiving notice of such failure from the Creditor, or

<PAGE>

           c) the Company is declared  bankrupt upon  application  from another
           person and such bankruptcy declaration has not been discharged within
           15 days, or

           d) the Company suspends its payments, or

           e) the Company experience a change in control, or

           f) the Company changes the direction of its activities.

8.         Miscellaneous

           The Company shall indemnify any cost a creditor has in connection
           with collecting of the loan in whole or in part.

9.        Notification

          Notices concerning the loan shall be issued to each creditor having
          informed the Company of its address.

10.      Governing law

         These terms and conditions and any legal matters relating to the
         convertible subordinated debenture shall be governed by Swedish law.

                              ____________________Subordinated Loan Agreement

                                     between

          Gigantissimo 2324 AB to be renamed Narvarme Acquisition I AB
                                                  as Borrower

                                       and

                       Scandinavian Energy Finance Limited
                                    as Lender

                     ______________________________________

                          Subordinated Loan Agreement

THIS AGREEMENT is dated March 11, 2002 and made

BETWEEN:

(1)      Scandinavian Energy Finance Limited (SEFL)

         and

(2)      Gigantissimo 2324 AB to be renamed Narvarme Acquisition I AB (the
         "Borrower")

WHEREAS:

1.       Definitions

<TABLE>
<CAPTION>
<S>                                             <C>

           "Agreement"                          means this subordinated loan agreement;

           "Available Cash"                     means all cash from all  sources  held by the  Company and
                                                its  affiliates   (the  "Group")  which  may  be  used  to  pay
                                                interest  and  principal  under  the  loans  described   herein
                                                without  violating  applicable law, any  contractual  covenants
                                                binding  on the  Group  consented  to by SEFL and  which is not
                                                required   to  pay  future   expenses   of  the  Group  in  the
                                                reasonable judgement of the Borrower;

           "Business Day"                            means a day  (other  than a  Saturday  or Sunday) on which
                                                banks in Stockholm are generally open for business;

           "Drawdown"                                means  the  draw  down  made  by  the  Borrower  hereunder
                                                pursuant to clause 2.2;

           "Drawdown Date"                      means  the  date  the  draw  down  is  made  by  the   Borrower
                                                hereunder pursuant to Clause 2.2 below;

</TABLE>
<PAGE>

<TABLE>
<CAPTION>
<S>                                             <C>

           "Events of Default"                  means an event specified in Clause 11;

           "Interest Payment Day"               means   February  20,  May  20,  August  20  and  November  20,
                                                provided  that if any day so  indicated  is not a Business  Day
                                                then  that  Interest  Payment  date  shall  fall  on  the  next
                                                Business  Day in the same  calendar  month  or,  if there is no
                                                such  Business  Day, on the nearest  preceding  Business Day in
                                                the same calendar month;

           "Loan"                               means  the   principal   amount   advanced   pursuant  to  this
                                                Agreement and for the time being outstanding;

           "Repayment Date"                     means  the day  falling  twenty  five  years  after the date of
                                                this  Agreement  provided  that if that  day is not a  Business
                                                Day,  then the  Repayment  Day shall fall on the next  Business
                                                Day  in the  same  calendar  month  or,  if  there  is no  such
                                                Business  Day, the nearest  preceding  Business Day in the same
                                                calendar month.

</TABLE>

2.       Amount and Drawdown

2.1      The Lender  agrees to lend to the Borrower and the Borrower  agrees to
         borrow from the Lender up to an amount of SEK 129.000.000.

2.2      The Drawdown shall take place in one or more tranches, of which the
         first tranch for initial funding shall be SEK 115.300.000.

2.3      The loan shall be repaid on the Repayment Date.

3.       Interest

3.1      The Loan will carry interest as from and excluding the Drawdown Date
         up to and including the Repayment Date at an annual interest rate
         that equals to the sum of (i) a fixed real interest rate of 10% plus
         (ii) an inflation premium. The inflation premium equals the
         percentage-change of the Swedish consumer price index
         (konsumentprisindex, KPI) of the calendar year preceding the
         calculation period.. The interest will be simple, calculated on the
         basis of 360 days in a year of 360 days. Subject to Clause 4 below
         the interest shall be paid in arrears on each Interest Payment Date.
<PAGE>

4.       Postponement

           The Company shall be entitled to postpone the payment of interest or
           principal if on an interest payment date or the Repayment Date (as
           applicable) if and to the extent the Company does not have sufficient
           Available Cash to pay interest or principal amounts. Should the
           payment of interest be delayed due to such occurrence, the postponed
           interest shall be paid on the following interest payment date on
           which there is Available Cash to make such payment. Should the
           repayment of principal be delayed due to such occurrence, the
           postponed principal shall be delayed until the Company has Available
           Cash to repay the principal. The Company shall make partial payments
           on the dates described above in the events it has Available Cash to
           make a portion of, but not all of, the interest and principal
           payments as described herein. Any postponed payments of principal or
           interest shall continue to accrue interest at the rate set forth in
           section 3 hereof until such payment is made. Such interest shall be
           charged quarterly. If the date on which a payment of principal or
           interest falls due is not a banking day the payment in question shall
           be made on the next succeeding day which is a banking day.

           After January 1, 2005 the Company may at its own discretion prepay
           all or part of the Loan to the Lender on 30 days advance written
           notice.

5.       Subordinated debt

           Should the Company go into liquidation or be declared bankrupt, the
           debt instruments shall entail the right to payment from the Company's
           assets after the Company's nonsubordinated obligations and pari passu
           with other subordinated obligations which are not expressly
           subordinated this loan.

6.       Reporting Covenants

6.1        The Borrower shall provide unaudited consolidated quarterly financial
           statements within 45 days of quarter end and audited annual
           consolidated financial statements within 120 days of each fiscal year
           end. In each case including balance sheets, profit and loss
           statements and cash flow statement. All quarterly financial

<PAGE>

           statements to be accompanied by a Certificate of No Default setting
           out compliance calculations. In addition, the Borrower shall deliver
           monthly operating statements within 15 days of months end for each
           district heating project operated by the Borrower or its direct or
           indirect subsidiaries.

7.         Positive covenants

7.1        So long as any amounts remain outstanding and unpaid under the loan
           the Borrower will, and will ensure that its direct and indirect
           subsidiaries will:

7.1.1      Subject to Section 4 hereof pay all amounts of principal and interest
           on the dates, times and at the place specified in the Terms or under
           any other agreement between the Lender and the Borrower.

7.1.2      Advise Lender of any change in the amount and the terms of any credit
           arrangement made with other permitted lenders or any action taken by
           another lender to recover amounts outstanding with such other lender.

7.1.3      Advise promptly after the happening of any event which will result in
           a material adverse change in the financial condition, business,
           operations, or prospects of the Borrower or the occurrence of any
           Event of Default.

7.1.4      Do all things necessary to maintain in good standing its corporate
           existence and preserve and keep all material agreements, rights,
           franchises, licences, permits, operations, contracts or other
           arrangements in full force and effect and comply with their terms and
           conditions.

7.1.5      Pay all taxes, assessments and government charges, unless such taxes,
           assessments, or charges are being contested in good faith and
           appropriate reserves shall be made with funds set aside in a separate
           trust fund.

7.1.6      Provide Lender and its representatives, including without limitation
           EIC Partners AG with information and financial date as it may
           reasonably request from time to time.

7.1.7      Maintain property, plant and equipment in good repair and working
           condition with reasonable wear and tear excepted.

7.1.8      Inform Lender of any actual or threatened litigation and furnish the
           Lender with copies of details of any litigation or other proceedings,
           which might materially and adversely affect the financial condition,
           business, operations, or prospects of the Borrower.
<PAGE>

7.1.9      Continue to carry on the business substantially currently being
           carried on by the Borrower and its subsidiaries at the date hereof.

7.1.10     Maintain adequate insurance on all of its assets, undertakings, and
           business risks.

7.1.11     Permit Lender or its  authorised  representatives  including  without
           limitation EIC Partners AG full and reasonable advance notice to its
           premises, business, financial and computer records and allow the
           duplication or extraction of adequate information therefrom.

7.1.12     Comply with all applicable laws and regulations, including without
           limitation, all environmental regulations at all times.

7.1.13     Maintain the legally required ratio between equity and registered
           share capital.

7.1.14     Comply and cause its direct and indirect subsidiaries to comply with
           all obligations to Lantbrukskredit relating to loans made by
           Lantbrukskredit to the Borrower and/or its subsidiaries.

7.1.15     Comply with the reasonable request for co-operation from Lender's
           financial services consultant EIC Partners AG.

7.2        The Borrower and its subsidiaries has acquired certain shares from
           Narvarme Sverige AB and Varmeland Teknik AB and their Affiliates
           pursuant to a Share Sale and Purchase Agreement by and among
           Varmeland Teknik AB and Gigantissimo 2324 AB and related agreements
           including without limitation an Indemnification and Escrow Agreement
           by and among the parties to the aforementioned agreements
           (collectively the "Acquisition Agreements"). the Borrower shall
           enforce all of its rights against the respective Sellers under such
           Acquisition Agreements in a diligent manner and shall keep Lender
           fully informed respecting such enforcement actions.

<PAGE>

8.         Negative covenants

8.1        So long as any amounts remain outstanding under the convertible loans
           the Borrower will not and will ensure that its direct and indirect
           subsidiaries do not without the consent of the Borrower:

8.1.1      Merge or consolidate with any other outside Person, or acquire all or
           substantially all of the shares, assets or business of any other
           Person.

8.1.2      Sell, lease, assign, transfer, convey or otherwise dispose of any of
           its now owned or hereafter acquired assets (including, without
           limitation, shares of stock and indebtedness of subsidiaries,
           receivables and leasehold interests), except for inventory disposed
           of in the ordinary course of business and replacement of equipment in
           the ordinary course of business.

8.1.3      Cease to carry on the business currently being carried on by each of
           the Borrower and its direct or indirect subsidiaries at the date
           hereof.

8.1.4      Permit any change of ownership or change in the capital structure of
           the Borrower or its direct or indirect subsidiaries.

8.1.5      Effect a change in control of the Borrower or its direct or indirect
           subsidiaries.

8.1.6      Pledge any security to any other party.

8.1.7      Permit any amendment or termination of material  contracts  [other]
           than in connection  with the 193.8 MSEK loan from Lantbrukskredit to
           the Production Companies.

8.1.8      Enter into any agreement regarding related party transactions.

8.1.9      Replace, amend or alter the Articles of Association of the Borrower
           or its direct or indirect subsidiaries.

8.1.10     Enter into or grant any options to subscribe for shares or issue any
           securities convertible into shares or enter into any agreement for
           the same.

8.1.11   Voluntarily liquidate or wind-up the Company.

8.1.12   Change the place of the registered office of the Company.

<PAGE>

8.1.13     Enter into any agreement which would likely have a material effect on
           the Company other than in connection with the loan from
           Lantbrukskredit to the Borrower's subsidiaries. Material for these
           purposes is an agreement that has gross revenues or costs of more
           than SEK 500,000 per annum or which otherwise would likely have a
           material effect on the operations financial conditions, assets,
           business or prospects of the Borrower or its direct or indirect
           subsidiaries.

8.1.14     Enter into, terminate or modify any agreement between the Borrower,
           its direct or indirect subsidiaries on the one hand and any managing
           director, shareholder (other than a Group Company), employee or
           affiliate of the same on the other hand.

8.1.15     Agree or commit to do any of the foregoing

9.         Representations and warranties

9.1        The Borrower hereby represents and warrants, which representations
           and warranties shall be deemed to be continually repeated so long as
           any amounts remain outstanding and unpaid:

9.1.1      The Borrower and its direct and indirect subsidiaries are
           corporations duly incorporated and organised, validly existing and in
           good standing under the laws of Sweden and have adequate corporate
           power and authority to carry on their businesses, own property,
           borrow monies and enter into agreements therefor and observe and
           perform the terms and provisions of this Agreement and the
           Convertibles to the extent they are parties thereof.

9.1.2      There are no laws, statutes or regulations applicable to or binding
           upon the Borrower and no provisions in its charter documents or in
           any by laws, resolutions, contracts, agreements, or arrangements
           which would be contravened, breached, or violated as a result of the
           execution, delivery, performance, observance, of any terms of this
           Agreement.

9.1.3      No Event of Default has occurred nor has any event occurred which,
           with the passage of time or the giving of notice, would constitute a
           default under any other agreement for borrowed money upon the
           Borrower or its direct or indirect subsidiaries in excess of SEK
           500,000.
<PAGE>

9.1.4      There are no actions, suits, or proceedings, including appeals or
           applications for review, or any knowledge of pending actions, suits,
           or proceedings against the Borrower and/or its subsidiaries, before
           any court or administrative agency which would result in any material
           adverse change in the property, assets, financial condition, business
           or operations of the Borrower or its direct and indirect
           subsidiaries.

9.1.5      All material authorisations, approvals, consents, licenses,
           exemptions, filings, registrations and other requirements of
           governmental, judicial and public bodies and authorities required to
           carry on the business of the Borrower and its direct and indirect
           subsidiaries have been or will be obtained or affected and are or
           will be in full force and effect.

9.1.6      The financial statements delivered to Lender fairly present the
           financial position of the Borrower and its direct and indirect
           subsidiaries on a consolidated basid as at the dates and with respect
           to the periods applicable to such financial statements, and have been
           prepared by the Borrower in accordance with Swedish Generally
           Accepted Accounting Principles consistently applied.

9.1.7      All of the remittances required to be made by the Borrower to the
           government and all county and municipal governments have been made,
           are currently up to date and there are no outstanding affairs.
           Without limiting the foregoing, all employee source deductions, sales
           taxes, corporate income taxes, corporate capital taxes, payroll taxes
           and workers' compensation dues are currently paid and up to date
           except for those remittances being contested in good faith and
           adequately reserved for.

10.        Payments

           Subject to Section 4 hereof all payments to be made under this
           Agreement will be made on the due date in SEK and in freely
           transferable same day funds. If the due date is not a Banking Day the
           payment will be made on the following Banking Day.
<PAGE>

11.       Events of Default

11.1      Each of the following is an Event of Default:

11.1.1

(i)                 Non-Payment: Except as permitted in Subject to Section 4
                    hereof the Borrower fails to pay when due any amount payable
                    to the Lender hereunder within five business days after the
                    Lender has provided written notice to the Borrower of such
                    non-payment; or

(ii)                Breach of obligations: the Borrower fails to comply with any
                    obligations or covenants set forth in this Agreement and
                    such failure, if capable or remedy, shall not be remedied
                    within 30 days after the Lender has provided written notice
                    thereof to the Borrower; or

(iii)               Bankruptcy: the Borrower becomes unable to pay its debts as
                    they fall due and such inability is not only temporary or
                    proceedings are initiated against the Borrower and are not
                    dismissed within 60 days or by the Borrower under any
                    applicable liquidation, bankruptcy, composition,
                    reorganisation or other similar laws; or

11.2       If there exists a suspension of business of the Borrower or its
           direct or indirect subsidiaries for a period equal to 20 calendar
           days.

11.2.1     If action is taken by an encumbrancer against the Borrower or any of
           its subsidiaries to take possession of property or enforce
           proceedings against any material assets.

11.2.2     If any material final judgement for the payment of monies is made
           against the Borrower or any of its subsidiaries and it is not
           discharged within 20 Business Days from the imposition of such
           judgement.

11.2.3     If there exists any event, the effect of which with lapse of time or
           giving of notice, will constitute an event of default or a default
           under any other agreement for borrowed money in excess or SEK 500,000
           entered into by the Borrower or any of its subsidiaries.

<PAGE>

11.2.4     If there exists any state of facts which have or are reasonably
           likely to have a material adverse effect on the business, operations,
           assets, financial condition or prospects of the Borrower or its
           subsidiaries such that their ability to comply with this Agreement is
           materially impaired.

11.3       If an Event of Default occurs and is continuing the Lender may
           subject to Section 4 by notice to the Borrower demand immediate
           repayment of the Loan, and the Borrower agrees subject to Section 4
           hereof to pay the Loan in accordance with the notice.

11.4       Lender's Costs and Expenses
           The Borrower shall compensate the Lender for any reasonable costs
           arising in relation to any breach or non-observance or
           non-performance by the Borrower hereunder unless arising out of
           failure by the Lender to exercise its rights, or comply with its
           obligations, hereunder.

12.        Additional Transactions
           It is the intention of the parties that the Lender and the Borrower
           shall enter into additional transactions on substantially the same
           terms and conditions as set forth in this Agreement except as agreed
           by the parties to help fund the capital needs of the Borrower subject
           to there being no Events of Default for grounds for same under this
           Loan or the Convertibles and such other conditions as Lender may
           impose.

13.      Expenses
           The Borrower shall reimburse the Lender for all of its reasonable
           external and internal costs, on a fully loaded basis, without profit
           relating to the transaction covered by this Agreement including the
           cost relating prior to signing this Agreement, the future
           administration of the Subordinated Loan and the enforcement of its
           rights hereunder.

14.      Notices

14.1       Any notice or other communication under or in connection with this
           Agreement shall be given in writing or by facsimile to the Party due
           to receive such notice. Any such notice will be deemed to be given as
           follows:
           a) if in writing, when delivered; and

           b) if by facsimile, when received.

<PAGE>
           However, a notice given in accordance with the above but received on
           a non-working day or after business hours in the place of receipt
           will only be deemed to be given at the opening of business on the
           next working day in that place.

14.2     The  addresses and  facsimile  numbers of each Party for all notices
         under or in connection  with this Agreement are:

           a) in the case of the Lender;

           c/o Michael Ryan
           Mc Cann Fitzgerald
           2 Harbourmaster Place
           International Financial Service Centre
           Dublin 1, Ireland
           353 1 824 0010

           with a copy to

           President
           US Energy Systems Inc.
           One Lexington
           Fourth Floor
           White Plains N.Y. 10601
           Fax: 914 993 5190

           With a copy to

           EIC Partners AG
           Generale-Wille Strasse 59 P.O. Box 35
           CH-8706 Feldmeilen Switzerland
           Fax: 41 1318 3411 until 15 April 2002

                  41 4384 410 01 after 15 April 2002

           b) in the case of the Borrower;

           Gigantissimo 2324 AB
           to be renamed Narvarme
           Acquisition I AB
           Kanalvagen 15
           183 85 Taby
           Sweden
<PAGE>

           or such other as a Party may notify to the other Party by no less
           than five (5) business day's notice .

           All notices and communication between the Parties shall be in English
unless otherwise agreed.

15.      Governing Law and Disputes

15.1     This Agreement shall be governed by and construed in accordance with
         the laws of Sweden.

15.2     Any  dispute,  controversy  or claim  arising  out of or in  connection
         with this  Agreement,  or the breach, termination or invalidity thereof
         shall be finally settled by arbitration in accordance with the rules of
         the Arbitration Institute of the Stockholm Chamber of Commerce. The
         number of arbitrators shall be three (3), whereof one shall be
         appointed by the Borrower, one by the Lender and the third by the
         Arbitration Institute in accordance with the said rules. The place of
         arbitration shall be in Stockholm. The language to be used in the
         arbitration proceedings shall be English.

                            ________________________

           IN WITNESS WHEREOF the parties hereto have caused this Agreement to
           be duly executed the day and year first above written in two original
           copies

           __________________________
           Gigantissimo 2324 AB

           PRESENT when the Common Seal of SCANDINAVIA ENERGY FINANCE LIMITED
was affixed hereto:

           _____________________________________

           Director

           _____________________________________

           Director/Secretary

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