-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, K8rYbGSAASmybFxKNF8PWpBN8g0f9ZlwqWdfXAg5LdD6MFSOS59JEvm5tSJzV3La rCAb1EhAv2Hb18xlf8r6IQ== 0000950129-95-000821.txt : 19950731 0000950129-95-000821.hdr.sgml : 19950731 ACCESSION NUMBER: 0000950129-95-000821 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 17 CONFORMED PERIOD OF REPORT: 19950630 FILED AS OF DATE: 19950727 SROS: NYSE SROS: PSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: UNION TEXAS PETROLEUM HOLDINGS INC CENTRAL INDEX KEY: 0000774214 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 760040040 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-09019 FILM NUMBER: 95556659 BUSINESS ADDRESS: STREET 1: 1330 POST OAK BLVD CITY: HOUSTON STATE: TX ZIP: 77056 BUSINESS PHONE: 7136236544 MAIL ADDRESS: STREET 1: 1330 POST OAK BLVD CITY: HOUSTON STATE: TX ZIP: 77056 10-Q 1 UNION TEXAS PETROLEUM HOLDINGS, INC. - 06/30/95 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1995 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _________ TO __________ COMMISSION FILE NUMBER 1-9019 UNION TEXAS PETROLEUM HOLDINGS, INC. (Exact name of registrant as specified in its charter) DELAWARE 76-0040040 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 1330 POST OAK BLVD. HOUSTON, TEXAS 77056 (Address of principal executive offices and zip code) (713) 623-6544 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ----- As of July 21, 1995, there were 87,756,733 shares of Union Texas Petroleum Holdings, Inc. $.05 par value Common Stock issued and outstanding. 2 FORM 10-Q PART I-FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS UNION TEXAS PETROLEUM HOLDINGS, INC. CONSOLIDATED BALANCE SHEET (DOLLARS IN THOUSANDS)
JUNE 30, DECEMBER 31, 1995 1994 ---------- ------------ ASSETS (UNAUDITED) Current assets: Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . $ 14,687 $ 8,389 Accounts and notes receivable, less allowance for doubtful accounts . . . . . 73,262 54,773 Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40,252 43,228 Prepaid expenses and other current assets . . . . . . . . . . . . . . . . . . 45,437 30,675 ---------- ---------- Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . 173,638 137,065 Equity investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111,846 114,505 Property, plant and equipment, at cost, less accumulated depreciation, depletion and amortization* . . . . . . . . . . . . . . . . . . 1,282,175 1,286,278 Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,894 6,786 ---------- ---------- Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,577,553 $1,544,634 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current portion of long-term debt . . . . . . . . . . . . . . . . . . . . . $ 2,292 $ 2,292 Short-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71,603 106,032 Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89,582 89,281 Taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54,779 48,069 Other current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . 34,012 41,862 ---------- ---------- Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . 252,268 287,536 Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 430,362 430,085 Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 363,032 365,777 Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115,451 111,737 ---------- ---------- Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,161,113 1,195,135 ---------- ---------- Stockholders' equity: Common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,391 4,391 Paid in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,408 19,889 Cumulative foreign exchange translation adjustment and other . . . . . . . . (59,108) (65,476) Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 452,817 394,806 Common stock held in treasury, at cost: 57,550 shares at June 30, 1995 and 221,565 shares at December 31, 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,068) (4,111) ---------- ---------- Total stockholders' equity . . . . . . . . . . . . . . . . . . . . . . . 416,440 349,499 ---------- ---------- Total liabilities and stockholders' equity . . . . . . . . . . . . . . . $1,577,553 $1,544,634 ========== ==========
* The Company follows the successful efforts method of accounting for oil and gas activities. The accompanying notes are an integral part of this financial statement. 2 3 FORM 10-Q UNION TEXAS PETROLEUM HOLDINGS, INC. CONSOLIDATED STATEMENT OF OPERATIONS (DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS) (UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED ------------------ ---------------- JUNE 30, JUNE 30, -------- -------- 1995 1994 1995 1994 ---- ---- ---- ---- Revenues: Sales and operating revenues . . . . . . . . . . . . . $ 200,425 $ 145,608 $ 439,982 $ 339,705 Interest income and other revenues . . . . . . . . . . (377) 30 330 123 Net earnings of equity investee . . . . . . . . . . . 5,533 3,392 10,941 10,179 --------- ---------- --------- ---------- 205,581 149,030 451,253 350,007 Costs and other deductions: Product costs and operating expenses . . . . . . . . . 74,386 69,892 153,563 133,945 Exploration expenses . . . . . . . . . . . . . . . . . 22,099 11,443 37,649 24,327 Depreciation, depletion and amortization . . . . . . . 38,102 28,213 84,647 75,042 Selling, general and administrative expenses . . . . . 6,111 6,260 12,281 11,904 Interest expense . . . . . . . . . . . . . . . . . . . 5,242 3,355 10,510 4,538 --------- ---------- --------- ---------- Income before income taxes . . . . . . . . . . . . . . . . 59,641 29,867 152,603 100,251 Income taxes . . . . . . . . . . . . . . . . . . . . . . . 39,539 21,571 85,825 65,340 --------- ---------- --------- ---------- Net income . . . . . . . . . . . . . . . . . . . . . . . . $ 20,102 $ 8,296 $ 66,778 $ 34,911 ========= ========== ========= ========== Earnings per share of common stock . . . . . . . . . . . . $ .23 $ .09 $ .76 $ .40 ========= ========== ========= ========== Dividends per share of common stock . . . . . . . . . . . . $ .05 $ .05 $ .10 $ .10 ========= ========== ========= ========== Weighted average number of shares outstanding (000s) . . . 87,735 87,711 87,687 87,696 ========= ========== ========= ==========
The accompanying notes are an integral part of this financial statement. 3 4 FORM 10-Q UNION TEXAS PETROLEUM HOLDINGS, INC. CONSOLIDATED STATEMENT OF CASH FLOWS (Dollars in thousands) (Unaudited)
SIX MONTHS ENDED JUNE 30, ------------------------- 1995 1994 ---- ---- CASH FLOWS FROM OPERATING ACTIVITIES: Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 66,778 $ 34,911 Adjustment to reconcile net income to net cash provided by operating activities: Depreciation, depletion and amortization . . . . . . . . . . . . . . . . 84,647 75,042 Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . (3,192) 685 Net income of equity investee . . . . . . . . . . . . . . . . . . . . . . (10,941) (10,179) Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,566 2,260 ----------- --------- Net cash provided by operating activities before changes in other assets and liabilities . . . . . . . . . . . . . . . . . . . . . . . 138,858 102,719 Increase in accounts and notes receivable . . . . . . . . . . . . . . . . (18,431) (14,129) (Increase) decrease in inventories . . . . . . . . . . . . . . . . . . . 3,226 (4,100) Increase in prepaid expenses and other assets . . . . . . . . . . . . . . (16,281) (2,250) Increase (decrease) in accounts payable and other liabilities . . . . . . (8,711) 7,616 Increase (decrease) in income taxes payable . . . . . . . . . . . . . . . 2,202 (30,007) ----------- --------- Net cash provided by operating activities . . . . . . . . . . . . . . 100,863 59,849 ----------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Additions to property, plant and equipment . . . . . . . . . . . . . . . . . (60,788) (63,790) Cash provided (required) by equity investee . . . . . . . . . . . . . . . . 13,600 (6,950) Net cash required by sale of businesses . . . . . . . . . . . . . . . . . . (772) (1,091) ----------- --------- Net cash required by investing activities . . . . . . . . . . . . . . . . (47,960) (71,831) ----------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Net proceeds from issuance of long-term notes . . . . . . . . . . . . . . . 197,713 Payments to settle long-term debt . . . . . . . . . . . . . . . . . . . . . (36,146) Net payments under credit facilities . . . . . . . . . . . . . . . . . . . . (201,353) (20,000) Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (8,767) (8,770) Proceeds from issuance of common stock . . . . . . . . . . . . . . . . . . . 311 Proceeds from issuance of treasury stock . . . . . . . . . . . . . . . . . . 1,407 Purchase of treasury stock . . . . . . . . . . . . . . . . . . . . . . . . . (2,779) Net (payments) proceeds from short-term borrowings . . . . . . . . . . . . . (35,605) 70,434 ----------- --------- Net cash (required) provided by financing activities . . . . . . . . . . (46,605) 3,050 ----------- --------- Net increase (decrease) in cash and cash equivalents . . . . . . . . . . . 6,298 (8,932) Cash and cash equivalents at beginning of period . . . . . . . . . . . . . . 8,389 18,143 ----------- --------- Cash and cash equivalents at end of period . . . . . . . . . . . . . . . . . $ 14,687 $ 9,211 =========== ========= SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for: Interest (net of amount capitalized) . . . . . . . . . . . . . . . . . . $ 11,906 $ 5,645 Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87,197 87,738
The accompanying notes are an integral part of this financial statement. 4 5 FORM 10-Q UNION TEXAS PETROLEUM HOLDINGS, INC. NOTES TO FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS) NOTE 1 - BASIS OF PRESENTATION - These consolidated financial statements should be read in the context of the consolidated financial statements and notes thereto filed with the Commission in the Company's 1994 annual report on Form 10-K. In the opinion of management, the accompanying unaudited consolidated financial statements reflect all adjustments, consisting only of normal adjustments, necessary to present fairly the financial position of Union Texas Petroleum Holdings, Inc. and its consolidated subsidiaries at June 30, 1995, and the results of operations and cash flows for the three and six months ended June 30, 1995 and 1994. The results of operations for the six months ended June 30, 1995, should not necessarily be taken as indicative of the results of operations that may be expected for the entire year 1995. Certain prior period amounts have been reclassified for comparative purposes. NOTE 2 - ALBA ACQUISITION - On July 18, 1995, the Company, through its subsidiary, Union Texas Petroleum Limited ("UTPL"), acquired from Oryx UK Energy Company ("Oryx") their 15.5% working interest in Block 16/26 in the central United Kingdom North Sea, which includes the Alba field. UTPL paid Oryx approximately $270 million for the interest. The effective date of the transaction was July 1, 1995. NOTE 3 - SECONDARY PUBLIC OFFERING - In May 1995, pursuant to a secondary public offering registered by the Company under the Securities Act of 1933 as amended, 11.5 million shares of the 33.3 million shares of the Company's common stock owned by partnerships affiliated with Kohlberg Kravis Roberts & Co. ("KKR") were sold in the open market. The Company did not receive any proceeds from the offering. NOTE 4 - CREDIT FACILITIES - The Company currently has three unsecured bank credit facilities (the "Credit Facilities"). One of the Credit Facilities is a $100 million revolver that provides for conversion of amounts outstanding on April 15, 1996 to a one-year term loan maturing April 15, 1997. Another Credit Facility is a $450 million revolver that reduces quarterly by $35 million beginning July 31, 1998, with a final maturity of April 30, 1999. In June 1995, the Company entered into a $100 million revolver that provides for conversion of amounts outstanding on June 15, 1996 to a one-year term loan maturing June 15, 1997. In addition to such Credit Facilities, the Company has the ability to obtain short-term borrowings on uncommitted and unsecured lines of credit established with several banks. In May 1995, the Company's indirect subsidiary, Union Texas Britannia Limited, which is a wholly owned subsidiary of Union Texas Petroleum Limited, entered into a 150 million pounds sterling secured financing. The financing will be used to fund the Company's share of the cost of developing the Britannia field to production. NOTE 5 - DEBT OFFERINGS - In March 1995, the Company publicly issued $125 million principal amount of 8-3/8% Senior Notes due 2005 (the "8-3/8% Senior Notes") at an initial public offering price of 99.431%. In April 1995, the Company publicly issued $75 million principal amount of 8-1/2% Senior Notes due 2007 (the "8-1/2% Senior Notes") at an initial public offering price of 99.658%. The net proceeds from the sale of the 8-3/8% Senior Notes and the 8-1/2% Senior Notes were approximately $123.5 million and $74.2 million, respectively (after deducting underwriting discount, commissions and offering expenses). The Company used such proceeds to reduce debt under its existing credit facility and its uncommitted and unsecured lines of credit. NOTE 6 - ACCOUNTING PRONOUNCEMENTS RECENTLY ISSUED - In March 1995, the Financial Accounting Standards Board ("FASB") released Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," which set forth the criteria for impairment of plant, property and equipment and other long-lived assets. Adoption of the Statement is required for years beginning after December 15, 1995. The Company is still reviewing the Statement; however, the Company believes its current policy on oil and gas asset impairment is consistent with this pronouncement and that the pronouncement will have no material impact on the Company. 5 6 NOTE 7 - CONTINGENCIES - The Company and its subsidiaries and related companies are named defendants in a number of lawsuits and named parties in numerous government proceedings arising in the ordinary course of business. While the outcome of contingencies, lawsuits or other proceedings against the Company cannot be predicted with certainty, management expects that any liability, to the extent not provided for through insurance or otherwise, will not have a material adverse effect on the financial statements of the Company. 6 7 UNION TEXAS PETROLEUM HOLDINGS, INC. With respect to the unaudited consolidated financial information of Union Texas Petroleum Holdings, Inc. for the three and six month periods ended June 30, 1995 and 1994, Price Waterhouse LLP reported that they have applied limited procedures in accordance with professional standards for a review of such information. However, their separate report dated July 25, 1995 appearing below, states that they did not audit and they do not express an opinion on that unaudited consolidated financial information. Price Waterhouse LLP has not carried out any significant or additional audit tests beyond those which would have been necessary if their report had not been included. Accordingly, the degree of reliance on their report on such information should be restricted in light of the limited nature of the review procedures applied. Price Waterhouse LLP is not subject to the liability provisions of section 11 of the Securities Act of 1933 for their report on the unaudited consolidated financial information because that report is not a "report" prepared or certified by Price Waterhouse LLP within the meaning of sections 7 and 11 of the Act. REPORT ON REVIEW BY INDEPENDENT ACCOUNTANTS To the Board of Directors of Union Texas Petroleum Holdings, Inc. We have reviewed the accompanying consolidated balance sheet of Union Texas Petroleum Holdings, Inc. and consolidated subsidiaries as of June 30, 1995 and the related consolidated statements of operations for the three and six month periods ended June 30, 1995 and 1994 and of cash flows for the six month periods ended June 30, 1995 and 1994. This financial information is the responsibility of the Company's management. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical review procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to the accompanying financial information for it to be in conformity with generally accepted accounting principles. We previously audited in accordance with generally accepted auditing standards, the consolidated balance sheet as of December 31, 1994, and the related consolidated statements of operations, of cash flows, and of stockholders' equity for the year then ended (not presented herein), and in our report dated January 25, 1995 we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet information as of December 31, 1994, is fairly stated in all material respects in relation to the consolidated balance sheet from which it has been derived. PRICE WATERHOUSE LLP Houston, Texas July 25, 1995 7 8 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion should be read in conjunction with the financial statements, notes, and management's discussion contained in the registrant's 1994 annual report on Form 10-K, and condensed financial statements and notes contained in this report. RESULTS OF OPERATIONS THREE MONTHS ENDED JUNE 30, 1995 COMPARED WITH THREE MONTHS ENDED JUNE 30, 1994 Net income for the three months ended June 30, 1995, was $20 million, or $.23 per share as compared to net income of $8 million, or $.09 per share reported for the same period in 1994. The current quarter was favorably impacted by higher U.S. ethylene margins and sales volumes, higher oil and gas prices, higher volumes in the U.K. and higher Indonesian LNG volumes, partially offset by higher exploration expenses. Sales and operating revenues for the three months ended June 30, 1995, were $200 million, up from $146 million for the second quarter of 1994. International revenues totaled $145 million as compared to $109 million for the second quarter of 1994. In the U.K., sales and operating revenues increased by $15 million due to higher prices and increased sales volumes. In Indonesia, sales increased $19 million due to higher LNG volumes and sales prices for LNG and crude oil. In Pakistan, sales were $3 million above 1994 primarily due to higher prices and higher crude oil volumes. Average prices received and volumes sold by the Company's major operations during the second quarter of 1995 and 1994, respectively, were as follows:
PRICES VOLUMES (000S PER DAY) 1995 1994 1995 1994 ---- ---- ---- ---- Crude oil (barrels): U.K. $17.79 $14.74 29 26 Pakistan 14.90 13.41 6 5 Indonesia 17.85 15.33 6 6 Indonesian LNG (Mcf) 3.19 2.68 202 170 Pakistan natural gas (Mcf) 1.30 1.10 45 47 U.K. natural gas (Mcf) 2.85 1.65 24 7 U.S. ethylene (pounds) .28 .17 1,298 1,247
Petrochemical revenues totaled $55 million as compared to $36 million in the second quarter of 1994, while operating profit was $19 million as compared to $3 million in the prior period. The increase was primarily due to higher ethylene sales prices, which resulted in an increase in ethylene margins to 16 cents per pound in 1995 vs. 3 cents per pound in 1994. Higher ethylene sales volumes also contributed to the increased operating profit. Exploration expenses increased by $11 million primarily due to drilling expenditures in Argentina and Ireland. Interest expense increased by $2 million during the period due to higher levels of debt and higher interest rates. The effective tax rate decreased from the prior year due primarily to the increase in U.S. petrochemical income, which is taxed at lower rates, partially offset by higher new venture exploration expenses, most of which generate no tax benefits. 8 9 SIX MONTHS ENDED JUNE 30, 1995 COMPARED WITH SIX MONTHS ENDED JUNE 30, 1994 Net income for the six months ended June 30, 1995, was $67 million, or $.76 per share as compared to net income of $35 million, or $.40 per share reported for the same period in 1994. The current period was favorably impacted by higher U.S. ethylene margins and sales volumes and higher oil and gas prices, partially offset by higher exploration expenses and lower Indonesian volumes. Sales and operating revenues for the six months ended June 30, 1995, were $440 million, up from $340 million in the prior year. International revenues totaled $329 million as compared to $272 million for the first six months of 1994. In the U.K., sales and operating revenues increased by $34 million due to higher prices and increased sales volumes. In Indonesia, sales increased $18 million as compared to 1994 due to higher crude oil and LNG prices, which were partially offset by lower volumes. Lower LNG volumes are attributable to a lower average participation interest in cargoes delivered for the period and it is anticipated that LNG sales volumes for the remainder of 1995 will continue to be lower as compared to 1994. In Pakistan, sales were $5 million above 1994 primarily due to higher prices and higher crude oil volumes. Average prices received and volumes sold by the Company's major operations during the first six months of 1995 and 1994, respectively, were as follows:
PRICES VOLUMES (000S PER DAY) 1995 1994 1995 1994 ---- ---- ---- ---- Crude oil (barrels): U.K. $16.98 $13.83 33 30 Pakistan 14.77 13.10 6 4 Indonesia 17.56 15.01 6 7 Indonesian LNG (Mcf) 3.13 2.70 222 225 Pakistan natural gas (Mcf) 1.30 1.10 44 46 U.K. natural gas (Mcf) 2.96 2.71 34 23 U.S. ethylene (pounds) .28 .16 1,318 1,077
Petrochemical revenues totaled $110 million as compared to $68 million in the first half of 1994, while operating profit was $38 million as compared to $3 million in the prior period. The increase was primarily due to higher ethylene sales prices, which resulted in an increase in ethylene margins to 16 cents per pound in 1995 vs. 2 cents per pound in 1994, and due to higher volumes. Exploration expenses increased by $13 million primarily due to drilling expenditures in Argentina and Ireland. Interest expense increased by $6 million during the period due to higher levels of debt and to higher interest rates. The effective tax rate decreased from the prior year due primarily to the increase in U.S. petrochemical income, which is taxed at lower rates, partially offset by higher new venture exploration expenses, most of which generate no tax benefits. 9 10 FINANCIAL CONDITION Cash flow from operations: Net cash provided by operating activities was $101 million in the first six months of 1995, an increase of $41 million from the same period in the prior year. The increase was primarily the result of improved ethylene margins and sales volumes and higher international oil and gas prices, partially offset by lower Indonesian volumes. Ethylene margins have averaged approximately 16 cents per pound in the first half of 1995. The Company cannot predict the duration of the favorable trends in the ethylene business. The ethylene business is cyclical and there can be no assurances that margins will remain at their current levels over the near term. The prices the Company receives for its ethylene are sensitive to many factors beyond the control of the Company, such as worldwide and U.S. demand for petrochemicals, inventory levels, feedstock costs and availability, plant utilization rates, plant operations and costs and competitive capacity expansion. Capital resources: Capital expenditures for the first half of 1995 were $90 million including capitalized interest of $11 million. Capital expenditures for the first half of 1994 were $64 million including capitalized interest of $9 million. The increase is principally due to development costs for the Britannia field and increased exploration spending. On July 18, 1995, the Company, through its subsidiary, Union Texas Petroleum Limited ("UTPL"), acquired from Oryx UK Energy Company ("Oryx") their 15.5% working interest in Block 16/26 in the central United Kingdom North Sea, which includes the Alba field. UTPL paid Oryx approximately $270 million for the interest. The effective date of the transaction was July 1, 1995. The Company funded the acquisition under its bank credit facilities and its uncommitted and unsecured lines of credit. As a result of the acquisition, the Company expects to record approximately 45 million barrels of oil as proved reserves. The Alba field commenced production in January 1994. The Company expects to spend about $25 million to $30 million net over the next five years for future development expenditures. The Alba field is operated by Chevron U.K. Ltd. The Company's plans in the near term are to focus on integrating the interests in Alba as well as the undeveloped Britannia field acquired in late 1994 into its existing North Sea program while utilizing any excess cash flow for the reduction of debt. The Company will also continue to emphasize developing its core holdings and conducting an active exploration program as well as controlling costs. Financing activities: The Company has three unsecured credit facilities (the "Credit Facilities"). One of the Credit Facilities is a $100 million unsecured credit agreement with NationsBank of Texas, N.A. ("NationsBank"), as agent, Bank of America National Trust and Savings Association ("Bank of America") and Union Bank of Switzerland, Houston Agency ("UBS"), as co-agents, and certain other banks, that provides for conversion of amounts outstanding on April 15, 1996 to a one-year term loan maturing April 15, 1997. This Credit Facility replaced a prior $200 million revolver. Another Credit Facility is with NationsBank, as agent, Bank of America and UBS, as co-agents, and certain other banks. Initially this Credit Facility was a $350 million revolver that in April 1995 was amended to increase the amount of the facility to $450 million and to provide that the amount of the facility would reduce quarterly by $35 million beginning July 31, 1998, with a final maturity of April 30, 1999. The $450 million revolver allows the Company to obtain up to $300 million of availability thereunder in U.S. dollar loans that bear interest at a rate determined in a competitive bid process. Loans under the $450 million revolver may be made in both pounds sterling and U.S. dollars at the option of the Company. In June 1995, the Company executed an amendment to eliminate the total indebtedness restriction under such two Credit Facilities, which was a $775 million limitation. In June 1995, the Company entered into an additional $100 million unsecured credit agreement with NationsBank, as agent, and Bank of America and UBS, as co-agents. This Credit Facility is a revolver that provides for conversion of amounts outstanding on June 15, 1996 to a one-year term loan maturing June 15, 1997. Loans under the Credit Facilities bear interest at floating market rates based on, at the Company's option, the agent bank's base rate or LIBOR, plus applicable margins, subject to increase in certain events. Borrowings under the Credit Facilities are guaranteed by certain subsidiaries of the Company that also guarantee the Company's senior notes. The Credit Facilities contain restrictive covenants, including maintenance of certain coverage ratios related to the incurrence of additional indebtedness and limitations on asset sales and mergers or consolidations. The covenants also require maintenance of a certain level of stockholders' equity. Under the terms of the Credit Facilities, the Company may pay dividends and make stock repurchases, provided that such level of minimum stockholders' equity is maintained and the Company complies with the other covenants 10 11 in the Credit Facilities. Based on current conditions, the Company expects to pay dividends without restriction under the Credit Facilities. At June 30, 1995, $116 million was outstanding under the Credit Facilities bearing interest at a weighted average rate of 6.8% per annum. At June 30, 1995, $72 million was outstanding under the Company's uncommitted and unsecured lines of credit. These amounts outstanding bear interest at a weighted average rate of 7.2% per annum and do not reduce amounts available under the Company's Credit Facilities. In May 1995, the Company's indirect subsidiary, Union Texas Britannia Limited ("UTBL"), which is a wholly owned subsidiary of UTPL, entered into a 150 million pounds sterling secured financing from Chemical Bank, NationsBank N.A. (Carolinas), National Westminster Bank plc and certain other banks. The financing will be used to fund the Company's share of the cost of developing the Britannia field to production (including interest and other financing costs incurred prior to completion and potential cost overruns), and any remaining availability after completion may, subject to certain coverage ratios being met, be used for UTBL's general corporate purposes. Except for certain support by UTPL related to any potential cost overruns in excess of the facility amount (limited to 30 million pounds sterling), insurance, tax benefits and administrative services, the lenders' recourse will be limited to the Britannia field project assets and is nonrecourse to the Company. The financing has a final maturity in September 2005. At June 30, 1995, 7 million pounds sterling ($11 million) was outstanding under UTBL's financing. In May 1995, pursuant to a secondary public offering registered by the Company under the Securities Act of 1933 as amended, 11.5 million shares of the 33.3 million shares of the Company's common stock owned by partnerships affiliated with Kohlberg Kravis Roberts & Co. ("KKR") were sold in the open market. The Company did not receive any proceeds from the offering. In March 1995, the Company publicly issued $125 million principal amount of 8-3/8% Senior Notes due 2005 (the "8-3/8% Senior Notes") at an initial public offering price of 99.431%. In April 1995, the Company publicly issued $75 million principal amount of 8-1/2% Senior Notes due 2007 (the "8-1/2% Senior Notes") at an initial public offering price of 99.658%. The net proceeds from the sale of the 8-3/8% Senior Notes and the 8-1/2% Senior Notes were approximately $123.5 million and $74.2 million, respectively (after deducting underwriting discount, commissions and offering expenses). The Company used such proceeds to reduce debt under its existing credit facility and its uncommitted and unsecured lines of credit. The Company's $100 million principal amount of 8.25% Senior Notes due 1999 ("the 8.25% Senior Notes) together with the 8-1/2% Senior Notes and the 8-3/8% Senior Notes are referred to herein as the "Senior Notes." The Senior Notes represent general unsecured obligations of the Company and rank pari passu in right of payment with the Company's obligations under its Credit Facilities, and senior in right of payment to subordinated indebtedness, if any, of the Company. The Senior Notes are guaranteed by the subsidiaries of the Company that are also guarantors under the Company's Credit Facilities and the two recent issuances contain restrictive covenants similar to the Company's 8.25% Senior Notes. The Senior Notes are redeemable at any time, at the option of the Company, in whole or in part, at a price equal to 100% of their principal amount plus accrued interest plus a make whole premium relating to the then-prevailing Treasury Yield and the remaining life of the Senior Notes. In addition, at the 1995 Annual Meeting of Stockholders held May 10, 1995, the Company's stockholders approved the authorization of a new class of 15 million shares of preferred stock. The new preferred stock provides the Company additional financing flexibility to issue from time to time this form of equity based on current market conditions. On April 27, 1994, the Company's Board of Directors authorized the repurchase of up to 2,000,000 shares of the Company's common stock and pursuant thereto, the Company had repurchased 307,500 shares as of December 31, 1994. The repurchased stock will be used for general corporate purposes, including fulfilling employee benefit program obligations. No repurchases were made by the Company during the first half of 1995. As of June 30, 1995, 57,550 shares of common stock were held, at cost, as treasury shares. 11 12 Financial condition: In the second quarter of 1995, the Company declared and paid a dividend of approximately $4.4 million on its common stock. On July 19, 1995, the Company announced a dividend on its common stock of $.05 per share to stockholders of record as of July 31, 1995, payable on August 15, 1995. In March 1995, the Financial Accounting Standards Board ("FASB") released Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," which set forth the criteria for impairment of plant, property and equipment and other long-lived assets. Adoption of the Statement is required for years beginning after December 15, 1995. The Company is still reviewing the Statement; however, the Company believes its current policy on oil and gas asset impairment is consistent with this pronouncement and that the pronouncement will have no material impact on the Company. 12 13 FORM 10-Q PART II - OTHER INFORMATION ITEM 1 - LEGAL PROCEEDINGS The Company and its subsidiaries and related companies are named defendants in numerous lawsuits and named parties in numerous governmental proceedings arising in the ordinary course of business. While the outcome of lawsuits or other proceedings against the Company cannot be predicted with certainty, management does not expect these matters to have a material adverse effect on the financial position of the Company. (See Item 3 in the Company's 1994 annual report on Form 10-K.) ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS On May 10, 1995, the 1995 Annual Meeting of Stockholders of the Company was held. The following persons were elected as proposed in the proxy solicitation issued pursuant to Regulation 14A of the Securities Exchange Act of 1934, as amended, to serve as directors until the next Annual Meeting of Stockholders or until their successors are elected and qualified: A. Clark Johnson, Stanley P. Porter, Henry R. Kravis, George R. Roberts, Michael W. Michelson, Saul A. Fox, Sellers Stough, Richard R. Shinn, James H. Greene, Jr., Edward A. Gilhuly and Glenn A. Cox. Stockholders ratified the appointment of Price Waterhouse LLP as the Company's independent accountants for the fiscal year ending December 31, 1995. The stockholders also approved the amendment to the Company's Restated Certificate of Incorporation to provide for a new class of preferred stock, the 1994 Incentive Plan and the amendment to the 1992 Stock Option Plan. There were 79,914,814 shares voted for the election of directors with 332,872 withholding votes and no abstentions or broker non-votes. Results by nominated director were:
VOTED AUTHORITY FOR WITHHELD A. Clark Johnson 79,150,234 1,097,452 Stanley P. Porter 79,860,163 387,523 Henry R. Kravis 76,718,269 3,529,417 George R. Roberts 76,723,688 3,523,998 Michael W. Michelson 79,127,436 1,120,250 Saul A. Fox 77,069,033 3,178,653 Sellers Stough 79,864,090 383,596 Richard R. Shinn 79,855,690 391,996 James H. Greene, Jr. 79,129,826 1,117,860 Edward A. Gilhuly 79,126,826 1,120,860 Glenn A. Cox 79,893,331 354,355
There were 80,087,552 shares voted for the ratification of the appointment of Price Waterhouse LLP as the Company's independent public accountants, with 28,355 shares voted against, 131,779 abstentions and no broker non-votes. There were 71,869,719 shares voted for the approval of the proposed amendment to the Restated Certificate of Incorporation of the Company relating to preferred stock, with 4,786,269 shares voted against, 359,807 abstentions and 3,231,891 broker non-votes. There were 74,189,858 shares voted for the approval of the 1994 Incentive Plan, with 5,669,005 shares voted against, 388,823 abstentions and no broker non-votes. There were 75,254,028 shares voted for the approval of the proposed amendment to the 1992 Stock Option Plan, with 4,600,586 shares voted against, 393,072 abstentions and no broker non-votes. 13 14 ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits Exhibit No. Description ----------- ----------- 10.1 Third Amendment Agreement dated as of April 24, 1995, to the Amended and Restated Credit Agreement dated as of May 13, 1994, as amended, among Union Texas Petroleum Holdings, Inc., the Banks and Co-Agents listed therein and NationsBank of Texas, N.A., as Agent. 10.2 Second Amendment to Amended and Restated Subsidiary Guaranty Agreement dated as of April 24, 1995, among Union Texas Petroleum Energy Corporation, Union Texas Products Corporation, Union Texas East Kalimantan Limited, Union Texas International Corporation and Unistar, Inc., and NationsBank of Texas, N.A., as Agent. 10.3 $100,000,000 Credit Agreement dated as of April 24, 1995, among Union Texas Petroleum Holdings, Inc., the Banks and Co-Agents listed therein and NationsBank of Texas, N.A., as Agent. 10.4 Subsidiary Guaranty Agreement dated as of April 24, 1995, among Union Texas Petroleum Energy Corporation, Union Texas Products Corporation, Union Texas East Kalimantan Limited, Union Texas International Corporation and Unistar, Inc., and NationsBank of Texas, N.A., as Agent. 10.5 Fourth Amendment Agreement dated as of June 16, 1995, to the Amended and Restated Credit Agreement dated as of May 13, 1994, as amended, among Union Texas Petroleum Holdings, Inc., the Banks and Co-Agents listed therein and NationsBank of Texas, N.A., as Agent. 10.6 First Amendment Agreement dated as of June 16, 1995, to the Credit Agreement dated as of April 24, 1995, as amended, among Union Texas Petroleum Holdings, Inc., the Banks and Co-Agents listed therein and NationsBank of Texas, N.A., as Agent. 10.7 $100,000,000 Credit Agreement dated as of June 30, 1995, among Union Texas Petroleum Holdings, Inc., the Co-Agents listed therein and NationsBank of Texas, N.A., as Agent. 10.8 Subsidiary Guaranty Agreement dated as of June 30, 1995, among Union Texas Petroleum Energy Corporation, Union Texas Products Corporation, Union Texas East Kalimantan Limited, Union Texas International Corporation and Unistar, Inc., and NationsBank of Texas, N.A., as Agent. 10.9 Facility Agreement, dated May 26, 1995, among Union Texas Britannia Limited ("UTBL"), Chemical Bank, as Arranger, NationsBank, N.A. Carolinas ("NationsBank"), as Facility Agent, National Westminster Bank plc, as Funding Agent, and the Co-Arrangers, Technical Agents, Account Bank and Banks named therein. 14 15 10.10 Sponsor Direct Agreement, dated May 26, 1995, among Union Texas Petroleum Limited ("UTPL"), UTBL and NationsBank, as Facility Agent. 10.11 Sponsor Support Agreement, dated May 26, 1995, between UTPL and UTBL. 10.12 Union Texas Petroleum Holdings, Inc. 1994 Incentive Plan. 10.13 First Amendment to Union Texas Petroleum Holdings, Inc. 1992 Stock Option Plan. 10.14 Sale and Purchase Agreement dated May 31, 1995, between Union Texas Petroleum Limited and Oryx U.K. Energy Company. 15 Independent Accountants' Awareness Letter. 27.1 Financial Data Schedule for the six-month period ended June 30, 1995. (b) Reports on Form 8-K The Company filed a Form 8-K dated April 10, 1995 to attach a schedule showing the calculation of the proforma ratio of earnings to fixed charges with respect to the issuance of $75 million of 8-1/2% Senior Notes due 2007 (the "8-1/2% Notes") and a press release announcing the pricing of the Company's offering of the 8-1/2% Notes. The Company filed a Form 8-K dated April 28, 1995 to disclose certain amendments to its Credit Facilities, to include an Independent Accountants' Awareness Letter and to attach press releases announcing the Company's filing of a secondary offering of certain shares of the Company's stock held by KKR, the Company's first quarter earnings and an update of the offshore Argentina drilling program. The Company filed a Form 8-K dated May 4, 1995 to disclose an update of the Company's drilling program in the Colville Delta area of Alaska. The Company filed a Form 8-K dated May 18, 1995 to attach a form of U.S. and international underwriting agreements, to attach a Restated Certificate of Incorporation of the Company, as amended through May 10, 1995 and to attach a press release reporting the results of the Company's Annual Stockholders Meeting. The Company filed a Form 8-K dated June 28, 1995 to disclose the Company's agreement to acquire Block 16/26 in the North Sea, to disclose an update on the Company's financing activities and to attach press releases announcing the pricing and closing of the secondary offering of 11.5 million shares of the Company's common stock held by KKR and a conference update of operations activities. The Company filed a Form 8-K dated July 14, 1995 to disclose completion of financing on Train G in Indonesia and an update of the offshore Ireland drilling activities. The Company filed a Form 8-K dated July 25, 1995 to attach a press release announcing the Company's second quarter earnings. 15 16 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. UNION TEXAS PETROLEUM HOLDINGS, INC. Date: July 27, 1995 By: /s/ DONALD M. MCMULLAN ---------------------- Donald M. McMullan Vice President and Controller (Chief Accounting Officer and officer duly authorized to sign on behalf of the registrant) 16 17 EXHIBIT INDEX
Exhibit Number Description - ------ ----------- 10.1 Third Amendment Agreement dated as of April 24, 1995, to the Amended and Restated Credit Agreement dated as of May 13, 1994, as amended, among Union Texas Petroleum Holdings, Inc., the Banks and Co-Agents listed therein and NationsBank of Texas, N.A., as Agent. 10.2 Second Amendment to Amended and Restated Subsidiary Guaranty Agreement dated as of April 24, 1995, among Union Texas Petroleum Energy Corporation, Union Texas Products Corporation, Union Texas East Kalimantan Limited, Union Texas International Corporation and Unistar, Inc., and NationsBank of Texas, N.A., as Agent. 10.3 $100,000,000 Credit Agreement dated as of April 24, 1995, among Union Texas Petroleum Holdings, Inc., the Banks and Co-Agents listed therein and NationsBank of Texas, N.A., as Agent. 10.4 Subsidiary Guaranty Agreement dated as of April 24, 1995, among Union Texas Petroleum Energy Corporation, Union Texas Products Corporation, Union Texas East Kalimantan Limited, Union Texas International Corporation and Unistar, Inc., and NationsBank of Texas, N.A., as Agent. 10.5 Fourth Amendment Agreement dated as of June 16, 1995, to the Amended and Restated Credit Agreement dated as of May 13, 1994, as amended, among Union Texas Petroleum Holdings, Inc., the Banks and Co-Agents listed therein and NationsBank of Texas, N.A., as Agent. 10.6 First Amendment Agreement dated as of June 16, 1995, to the Credit Agreement dated as of April 24, 1995, as amended, among Union Texas Petroleum Holdings, Inc., the Banks and Co-Agents listed therein and NationsBank of Texas, N.A., as Agent. 10.7 $100,000,000 Credit Agreement dated as of June 30, 1995, among Union Texas Petroleum Holdings, Inc., the Co-Agents listed therein and NationsBank of Texas, N.A., as Agent. 10.8 Subsidiary Guaranty Agreement dated as of June 30, 1995, among Union Texas Petroleum Energy Corporation, Union Texas Products Corporation, Union Texas East Kalimantan Limited, Union Texas International Corporation and Unistar, Inc., and NationsBank of Texas, N.A., as Agent. 10.9 Facility Agreement, dated May 26, 1995, among Union Texas Britannia Limited ("UTBL"), Chemical Bank, as Arranger, NationsBank, N.A. Carolinas ("NationsBank"), as Facility Agent, National Westminster Bank plc, as Funding Agent, and the Co-Arrangers, Technical Agents, Account Bank and Banks named therein. 10.10 Sponsor Direct Agreement, dated May 26, 1995, among Union Texas Petroleum Limited ("UTPL"), UTBL and NationsBank, as Facility Agent. 10.11 Sponsor Support Agreement, dated May 26, 1995, between UTPL and UTBL.
18
Exhibit Number Description - ------ ----------- 10.12 Union Texas Petroleum Holdings, Inc. 1994 Incentive Plan. 10.13 First Amendment to Union Texas Petroleum Holdings, Inc. 1992 Stock Option Plan. 10.14 Sale and Purchase Agreement dated May 31, 1995, between Union Texas Petroleum Limited and Oryx U.K. Energy Company. 15 Independent Accountants' Awareness Letter. 27.1 Financial Data Schedule for the six-month period ended June 30, 1995.
EX-10.1 2 THIRD AMENDMENT AGREEMENT CREDIT AGREEMENT 1 Exhibit 10.1 THIRD AMENDMENT AGREEMENT This Third Amendment Agreement, effective as of April 24, 1995 ("Amendment"), is by and among Union Texas Petroleum Holdings, Inc., a Delaware corporation ("Company"), the Banks and Co-Agents party to the Agreement (defined below) and NationsBank of Texas, N.A., as Agent ("Agent"). In consideration of the mutual covenants contained herein, the Company, the Banks, the Co-Agents and the Agent agree as set forth herein. 1. Amendments to Credit Agreement. The Amended and Restated Credit Agreement dated as of May 13, 1994, as amended by the First Amendment Agreement dated as of November 21, 1994 and the Second Amendment Agreement dated as of January 31, 1995 (as so amended, the "Agreement") among the Company, the Banks, the Co-Agents and the Agent, is hereby amended as follows: 1.1. Section 1.01. The following respective definitions set forth in Section 1.01 of the Agreement are hereby amended to read as follows: "Commitment" means, with respect to each Bank, the amount set forth opposite the name of such Bank on the signature pages of the Third Amendment (or, if such Bank is an Assignee and its name is not set forth on the signature pages of the Third Amendment, the amount of its Commitment as set forth in the Assignment pursuant to which it became a Bank), as such amount may be reduced from time to time pursuant to Sections 2.09 and 2.10 or reduced or increased from time to time pursuant to any Assignment to which it is a party. "Current Exchange Rate" means the arithmetic average of the respective spot exchange rates determined by each of the Reference Banks (i) for converting Sterling into Dollars (in an amount substantially equal to the aggregate outstanding principal amount of the Sterling Loans of such Reference Bank or pound sterling 1,000,000 if no such amount is outstanding) or (ii) in the case of a Conversion of a Base Rate Loan or a Euro-Dollar Loan into a Sterling Loan, for converting Dollars into Sterling (in an amount substantially equal to the aggregate outstanding principal amount of the Base Rate Loans and Euro-Dollar Loans of such Reference Bank or $1,000,000 if no such amount is outstanding), in each case in the interbank eurocurrency market where the foreign currency and exchange operations of such Reference Bank's Sterling Lending Office are customarily conducted with respect to Sterling, at 10:00 A.M. (London time) or as near thereto as practicable on the date that is two Sterling Business Days prior to the date of determination, as determined by the Agent in accordance with Section 2.19(a), which determination shall be conclusive in the absence of manifest error. The Current Exchange Rate shall be determined for, and shall take effect on, each Adjustment Date and shall remain in effect until any 2 subsequent determination of the Current Exchange Rate. Any Conversion of a Base Rate Loan or a Euro-Dollar Loan into a Sterling Loan or of a Sterling Loan into a Base Rate Loan or a Euro-Dollar Loan shall be made at the Current Exchange Rate in effect on the date of such Conversion. "Short-Term Credit Agreement" means the Credit Agreement dated as of April 24, 1995 among the Company, NationsBank of Texas, N.A., as agent, and the co-Agents and the banks parties thereto, providing a $100,000,000 credit facility to the Company, as may be amended from time to time. Section 1.01 of the Agreement is hereby further amended by (i) changing the date "April 30, 1999" set forth in the definitions of "Excluded Subordinated Debt" and "Restricted Preferred Stock" to "April 30, 2000", and (ii) changing the date "April 30, 1998" set forth in the definition of "Termination Date" to "April 30, 1999". Section 1.01 of the Agreement is hereby further amended by adding the following new definition in the appropriate alphabetical order: "Third Amendment" means the Third Amendment Agreement effective as of April 24, 1995 executed by the Company, the Agent, the Co-Agents and various Banks. 1.2. Section 2.03. Section 2.03(b) of the Agreement is hereby amended by changing the amount "$200,000,000" set forth therein to "$300,000,000". 1.3. Section 5.05. Section 5.05(a) of the Agreement is hereby amended by changing the amount "$750,000,000" set forth therein to "$775,000,000". 1.4. Section 5.19. Section 5.19 of the Agreement is hereby amended by adding the following sentence at the end thereof: The Company will cause Union Texas East Kalimantan Limited, as promptly as reasonably practicable following execution from time to time of amendments hereto or to the Subsidiary Guaranty Agreement, (i) to report the execution and delivery of such amendments to the Team and (ii) to deliver copies of such amendments to the Team and to Bank Indonesia. 1.5. Section 9.06. The last sentence of Section 9.06(c) of the Agreement is hereby amended by changing the date "May 1, 1996" therein to "April 16, 1997". 1.6. Schedule I. Schedule I to the Agreement is hereby replaced with Schedule I hereto. -2- 3 2. Effectiveness. The effectiveness of this Amendment is subject to the receipt by the Agent of: 2.1. counterparts of this Amendment signed by each of the parties hereto (or, in the case of any party as to which an executed counterpart shall not have been received, receipt by the Agent in form satisfactory to it of telegraphic, telex or other written confirmation from such party of execution of a counterpart hereof by such party); 2.2. the Second Amendment to Amended and Restated Subsidiary Guaranty Agreement dated as of the date hereof (the "Guaranty Amendment"), duly executed by each of the Required Guarantors, substantially in the form of Exhibit A hereto; 2.3. an opinion of Newton W. Wilson, III, General Counsel of the Company, substantially in the form of Exhibit B hereto; 2.4. an opinion of Andrews & Kurth L.L.P., special counsel for the Obligors, substantially in the form of Exhibit C hereto; 2.5. opinions of local counsel, substantially in the forms of Exhibits D-1 and D-2 hereto; 2.6. an opinion of Bracewell & Patterson, L.L.P., special counsel for the Agent, substantially in the form of Exhibit E hereto; and 2.7. all documents which the Agent may reasonably request relating to the existence of the Obligors, the corporate authority for and the validity of this Amendment and the Guaranty Amendment and any other matters relevant thereto, all in form and substance satisfactory to the Agent. 3. Miscellaneous. 3.1. Bank Consent. Each of the undersigned Banks hereby consents to the amendment of the Subsidiary Guaranty Agreement pursuant to the terms and provisions of the Guaranty Amendment. 3.2. Amendments, Etc. No amendment or waiver of any provision of this Amendment, nor consent to any departure by the Company therefrom, shall in any event be effective unless effected in accordance with Section 9.05 of the Agreement. 3.3. Governing Law. This Amendment and the Agreement as amended hereby shall be construed in accordance with and governed by the laws of the State of Texas. -3- 4 3.4. Preservation. Except as specifically modified by the terms of this Amendment or the Guaranty Amendment, all of the terms, provisions, covenants, warranties and agreements contained in the Agreement (including, without limitation, exhibits thereto) or any other Financing Document remain in full force and effect. Undefined capitalized terms used herein are used herein as defined in the Agreement as amended hereby. 3.5. Execution in Counterparts. This Amendment may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. 3.6. Representations and Warranties. The Company hereby represents and warrants to the Banks, the Co-Agent and the Agent that (i) the representations and warranties contained in Article IV of the Agreement (other than the representations and warranties contained in Sections 4.04(a) and 4.04(c) thereof) are correct on and as of the date hereof as though made on and as of the date hereof, with this Amendment, the Agreement as amended hereby, the Guaranty Amendment and the Subsidiary Guaranty Agreement as amended by the Guaranty Amendment constituting "Financing Documents" for purposes thereof, and (ii) no event has occurred and is continuing which constitutes a Default or an Event of Default. 3.7. Default. Without limiting any other event which may constitute an Event of Default, in the event that any representation or warranty set forth herein shall be incorrect or misleading in any material respect when made, such event shall constitute an "Event of Default" under the Agreement, as amended hereby. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their respective officers thereunto duly authorized, as of the date first above written. UNION TEXAS PETROLEUM HOLDINGS, INC. By: /s/ M.N. MARKOWITZ --------------------------------- M.N. Markowitz Vice President and Treasurer 1330 Post Oak Blvd. Houston, Texas 77056 Telex number: 762255 -4- 5 Commitments - ----------- $36,818,181.81 NATIONSBANK OF TEXAS, N.A. By: /s/ PAUL A. SQUIRES ---------------------------------- Paul A. Squires Senior Vice President $28,636,363.63 BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION By: /s/ LAURA B. SHEPARD ---------------------------------- Authorized Officer $28,636,363.63 UNION BANK OF SWITZERLAND, HOUSTON AGENCY By: /s/ EVANS SWANN ---------------------------------- Evans Swann Managing Director By: /s/ JAN BUETTGEN ---------------------------------- Jann Buettgen Vice President Corporate Banking $24,545,454.55 THE BANK OF NOVA SCOTIA By: /s/ A.S. NORSWORTHY ---------------------------------- A.S. Norsworthy Assistant Agent $24,545,454.55 CHEMICAL BANK By: /s/ [Illegible] ---------------------------------- Authorized Officer -5- 6 Commitments - ----------- $24,545,454.55 CREDIT LYONNAIS CAYMAN ISLAND BRANCH By: /s/ XAVIER RATOUIS ---------------------------------- Authorized Officer $24,545,454.55 THE FIRST NATIONAL BANK OF CHICAGO By: /s/ [Illegible] ---------------------------------- Authorized Officer $24,545,454.55 MELLON BANK, N.A. By: /s/ A. GARY CHACE ---------------------------------- A. Gary Chace Senior Vice President $24,545,454.55 MORGAN GUARANTY TRUST COMPANY OF NEW YORK By: /s/ PHILIP W. MCNEAL ---------------------------------- Philip W. McNeal Vice President $20,454,545.45 BANQUE NATIONALE DE PARIS, HOUSTON AGENCY By: /s/ [Illegible] ---------------------------------- Authorized Officer -6- 7 Commitments - ----------- $20,454,545.45 LTCB TRUST COMPANY By: /s/ [Illegible] ------------------------------- Authorized Officer $20,454,545.45 SOCIETE GENERALE, SOUTHWEST AGENCY By: /s/ [Illegible] ------------------------------- Authorized Officer $14,318,181.82 THE BANK OF TOKYO, LTD., DALLAS AGENCY By: /s/ JOHN M. MCINTYRE ------------------------------- Authorized Officer $14,318,181.82 BANQUE PARIBAS, HOUSTON AGENCY By: /s/ [Illegible] ------------------------------- Authorized Officer By: /s/ BART SCHOUEST ------------------------------- Authorized Officer -7- 8 Commitments - ----------- $14,318,181.82 CHRISTIANIA BANK By: /s/ JAHN O. ROISING ---------------------------------- Authorized Officer By: /s/ [Illegible] ---------------------------------- Authorized Officer $14,318,181.82 CITIBANK, N.A. By: /s/ BARBARA A. COHEN ---------------------------------- Barbara A. Cohen Vice President $14,318,181.82 DRESDNER BANK AG, NEW YORK AND GRAND CAYMAN BRANCHES By: /s/ B. C. ERICKSON ---------------------------------- Authorized Officer By: /s/ [Illegible] ---------------------------------- Authorized Officer $14,318,181.82 THE MITSUBISHI TRUST & BANKING CORPORATION By: /s/ [Illegible] ---------------------------------- Authorized Officer -8- 9 Commitments - ----------- $14,318,181.82 NATIONAL WESTMINSTER BANK PLC (NEW YORK BRANCH) By: /s/ DAVID L. SMITH ---------------------------------- David L. Smith Vice President NATIONAL WESTMINSTER BANK PLC (NASSAU BRANCH) By: /s/ DAVID L. SMITH ---------------------------------- David L. Smith Vice President $14,318,181.82 THE YASUDA TRUST AND BANKING COMPANY, LIMITED, NEW YORK BRANCH By: /s/ NEIL T. CHAU ---------------------------------- Neil T. Chau First Vice President $8,181,818.18 BANK OF TAIWAN By: /s/ [Illegible] ---------------------------------- Authorized Officer $8,181,818.18 BANQUE FRANCAISE DU COMMERCE EXTERIEUR By: /s/ IAIN A. WHYTE ---------------------------------- Authorized Officer By: /s/ [Illegible] ---------------------------------- Authorized Officer -9- 10 Commitments - ----------- $8,181,818.18 DEN NORSKE BANK AS By: /s/ [Illegible] ---------------------------------- Authorized Officer By: /s/ FRAN MEYERS ---------------------------------- Fran Meyers Vice President $8,181,818.18 FIRST INTERSTATE BANK OF TEXAS, N.A. By: /s/ COLLIE C. MICHAELS ---------------------------------- Authorized Officer Total Commitments: $450,000,000 ------------ -10- 11 NATIONSBANK OF TEXAS, N.A., as Agent By: /s/ PAUL A. SQUIRES ---------------------------------------- Paul A. Squires Senior Vice President BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Co-Agent By: /s/ LAURA B. SHEPARD ---------------------------------------- Authorized Officer UNION BANK OF SWITZERLAND, HOUSTON AGENCY, as Co-Agent By: /s/ EVANS SWANN ---------------------------------------- Evans Swann Managing Director By: /s/ JAN BUETTGEN ---------------------------------------- Jan Beuttgen Vice President Corporate Banking -11- 12 SCHEDULE I COMMITMENT REDUCTION SCHEDULE Date Maximum Aggregate Commitments ---- ----------------------------- July 31, 1998 $415,000,000 October 31, 1998 380,000,000 January 31, 1999 345,000,000 April 30, 1999 -0- 13 EXHIBIT A SECOND AMENDMENT TO AMENDED AND RESTATED SUBSIDIARY GUARANTY AGREEMENT This Second Amendment to Amended and Restated Subsidiary Guaranty dated as of April 24, 1995 (this "Guaranty Amendment") is among each of the Subsidiary Guarantors listed on the signature pages hereof under the caption "Subsidiary Guarantors" and NationsBank of Texas, N.A. (the "Agent"), as agent for the banks under the Amended and Restated Credit Agreement dated as of May 13, 1994 as amended by the First Amendment Agreement dated as of November 21, 1994 and the Second Amendment Agreement dated as of January 31, 1995 (as the same may be further amended or modified from time to time, the "Credit Agreement") among Union Texas Petroleum Holdings, Inc. (the "Company"), the Co-Agents and lenders parties thereto ("Banks") and the Agent. In consideration of the mutual covenants contained herein, the parties hereto agree as follows: 1. Amendment to the Guaranty Agreement. The fourth recital to the Amended and Restated Subsidiary Guaranty Agreement dated as of May 13, 1994 as amended by the First Amendment to Amended and Restated Subsidiary Guaranty dated as of November 21, 1994 (as so amended, the "Guaranty Agreement") executed by the Subsidiary Guarantors and the Agent is hereby amended by deleting the dollar amount "$350,000,000" therein and inserting in lieu thereof the dollar amount "$450,000,000". 2. Acknowledgement and Consent. To induce the Agent and the Banks to execute the Third Amendment Agreement dated of even date herewith among the Company, the Banks and Co-Agents parties thereto, and the Agent (the "Credit Agreement Amendment") and other Financing Documents, each of the undersigned Subsidiary Guarantors hereby (a) consents to and agrees to the terms of the Credit Agreement Amendment and the Credit Agreement as amended thereby and the other Financing Documents, (b) agrees that (i) none of such Subsidiary Guarantor's obligations under or in connection with the Financing Documents and none of the Banks' or the Agent's rights and remedies with respect to any Subsidiary Guarantor is released, impaired or affected thereby or by the foregoing, (ii) neither the Guaranty Agreement as amended hereby nor any other Financing Document provided by any Subsidiary Guarantor is released, impaired or affected thereby or by any of the foregoing, and (iii) this acknowledgement shall not be construed as requiring the consent or agreement of any Subsidiary Guarantor in any circumstance, (c) ratifies and confirms all provisions of all Financing Documents executed by such Subsidiary Guarantor and all documents pertaining thereto or referred to therein, and (d) agrees that none of such Subsidiary Guarantor's obligations, none of the Banks' or the Agent's rights and remedies and neither the Guaranty Agreement as amended hereby, nor any 14 other Financing Document, would be released, impaired or affected if such Subsidiary Guarantor had not acknowledged the Credit Agreement Amendment and other Financing Documents. 3. Miscellaneous. 3.1. Amendments, Etc. No amendment or waiver of any provision of this Guaranty Amendment, and no consent to any departure by any Subsidiary Guarantor, any Bank or the Agent herefrom, shall in any event be effective unless effected in accordance with Section 3.03 of the Guaranty Agreement. This Guaranty Amendment shall become effective upon the execution of this Guaranty Amendment by the Subsidiary Guarantors and the Agent. 3.2. Texas Law. This Guaranty Amendment, and the Guaranty Agreement as amended hereby, shall be construed in accordance with and governed by the laws of the State of Texas. 3.3. Preservation. Except as specifically modified by the terms of this Amendment, all of the terms, provisions, covenants, warranties and agreements contained in the Guaranty Agreement remain in full force and effect. Each of the undersigned Subsidiary Guarantors hereby ratifies and confirms the Guaranty Agreement as amended hereby. Terms used herein which are not defined herein and are defined in the Credit Agreement, as amended by the Credit Agreement Amendment, are used herein as defined in the Credit Agreement, as amended by the Credit Agreement Amendment. References in the Guaranty Agreement as amended hereby to "the Agreement", "the Guaranty Agreement", "this Guaranty Agreement" or to "this Agreement" or to words of similar effect (such as "herein") shall mean the Guaranty Agreement as amended hereby. 3.4. Execution in Counterparts. This Guaranty Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. 3.5. Authority, etc. Each of the undersigned Subsidiary Guarantors hereby represents and warrants to the Agent and each of the Banks that (a) the execution and delivery by such Subsidiary Guarantor of the Guaranty Agreement and this Guaranty Amendment, and the performance of the Guaranty Agreement as amended hereby and this Guaranty Amendment, (i) are within such Subsidiary Guarantor's corporate powers, (ii) have been duly authorized by all necessary corporate action of such Subsidiary Guarantor, (iii) do not contravene or constitute a default under any provision of applicable law or regulation and (iv) require no authorization, consent or approval of any governmental body, agency or official other than those authorizations, consents and approvals that have been obtained and are in full force and effect, and (b) the Guaranty Agreement and this Guaranty Amendment have been duly executed -2- 15 and delivered by such Subsidiary Guarantor and this Guaranty Amendment and the Guaranty Agreement as amended hereby constitute legal, valid and binding obligations of such Subsidiary Guarantor. IN WITNESS WHEREOF, the parties hereto have caused this Guaranty Amendment to be duly executed and delivered by their respective officers thereunto duly authorized, as of the date first above written. SUBSIDIARY GUARANTORS: UNION TEXAS PETROLEUM ENERGY CORPORATION By: ____________________________________ Name: __________________________________ Title: _________________________________ UNION TEXAS PRODUCTS CORPORATION By: ____________________________________ Name: __________________________________ Title: _________________________________ UNION TEXAS EAST KALIMANTAN LIMITED By: ____________________________________ Name: __________________________________ Title: _________________________________ UNION TEXAS INTERNATIONAL CORPORATION By: ____________________________________ Name: __________________________________ Title: _________________________________ -3- 16 UNISTAR, INC. By: ____________________________________ Name: __________________________________ Title: _________________________________ AGENT: NATIONSBANK OF TEXAS, N.A., as Agent By: ____________________________________ Name: __________________________________ Title: _________________________________ -4- 17 EXHIBIT B OPINION OF GENERAL COUNSEL April 24, 1995 To the Banks and the Agent Referred to Below c/o NationsBank of Texas, N.A., as Agent 700 Louisiana Street Houston, Texas 77002 Dear Sirs: I am General Counsel, Vice President-Administration, and Secretary of Union Texas Petroleum Holdings, Inc., a Delaware corporation (the "Company"), and have acted as counsel (i) for the Company in connection with the Third Amendment Agreement dated as of April 24, 1995 (the "Credit Amendment") among the Company, the Banks and Co-Agents party to the Credit Agreement (as defined below) and the Agent (as defined below), which Credit Amendment amends the Amended and Restated Credit Agreement dated as of May 13, 1994, as amended by the First Amendment Agreement dated as of November 21, 1994 and the Second Amendment Agreement dated as of January 31, 1995 (as so amended, the "Credit Agreement"; and as further amended by the Credit Amendment, the Amended Credit Agreement"), among the Company, the Banks and Co-Agents listed on the signature pages thereof and NationsBank of Texas, N.A., as Agent (the "Agent"), and (ii) for Union Texas Petroleum Energy Corporation, a Delaware corporation, Union Texas International Corporation, a Delaware corporation, Unistar, Inc., a Delaware corporation, Union Texas East Kalimantan Limited, a Bahamian corporation, and Union Texas Products Corporation, a Delaware corporation (collectively, the "Subsidiary Guarantors" and together with the Company, the "Obligors"), in connection with the Second Amendment to Amended and Restated Subsidiary Guaranty Agreement dated as of April 24, 1995 (the "Guaranty Amendment") among the Subsidiary Guarantors and the Agent, which Guaranty Amendment amends the Amended and Restated Subsidiary Guaranty Agreement dated as of May 13, 1994 as amended by the First Amendment to Amended and Restated Subsidiary Guaranty Agreement dated as of November 21, 1994 (as so amended and as amended by the Guaranty Amendment, the "Amended Guaranty Agreement"), among the Subsidiary Guarantors and the Agent. Terms defined in the Amended Credit Agreement and not otherwise defined herein are used herein as therein defined. In connection with the opinions expressed below, I have examined or caused to be examined executed counterparts of the following (collectively, the "Financing Documents"): 18 To the Banks and the Agent Referred to Below c/o NationsBank of Texas, N.A., as Agent April 24, 1995 Page 2 (a) the Amended Credit Agreement and the Credit Amendment, (b) the Amended Guaranty Agreement and the Guaranty Amendment, and (c) twenty four (24) promissory notes, each substantially in the form of Exhibit A to the Amended Credit Agreement, one payable to each Bank. I have also examined or caused to be examined originals or copies, certified or otherwise identified to my satisfaction, of such other instruments, documents and records as I deemed necessary to express the opinions hereinafter set forth. To the extent relevant to my opinion, I have assumed, without independent verification, (i) the due execution and delivery of each Financing Document by each party thereto (other than the Obligors), (ii) the genuineness of all signatures on all documents submitted to me, (iii) that each party (other than the Obligors) to each of the Financing Documents is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization and has full power and authority to enter into and to carry out its obligations under such Financing Documents, (iv) that the execution and delivery of each of the Financing Documents by each party thereto (other than the Obligors) and the performance of its obligations under such Financing Documents have been duly authorized by all necessary proceedings and actions, (v) that each of the Financing Documents is the legal, valid and binding obligation of each party thereto (other than the Obligors), enforceable against such party in accordance with the terms of such Financing Documents, subject to limitations of the types described in the opinion of Andrews & Kurth L.L.P. delivered to you pursuant to the Financing Documents, and (vi) the authenticity of all documents submitted to me as originals and the conformity to authentic original documents of all documents submitted to me as certified, conformed or photostatic copies. I have relied, to the extent that I deem such reliance proper, upon certificates of officers of one or more of the Obligors and of governmental officials as to matters of fact not independently established by me. For purposes of the opinion set forth in paragraph 2 below, I have (i) relied on the opinion of Andrews & Kurth L.L.P. with respect to the agreements and instruments identified on Schedule I thereto, and (ii) examined or caused to be examined each other agreement or other instrument binding upon any Obligor, a breach of or default under which would, in my judgment, have a material adverse effect upon the Company and its Subsidiaries taken as a whole. As to other agreements and instruments, I have not undertaken such a review for purposes of this opinion, given the volume of such documents and given the fact that by virtue of the character of such 19 To the Banks and the Agent Referred to Below c/o NationsBank of Texas, N.A., as Agent April 24, 1995 Page 3 documents and the historical practices of the Company with respect thereto, I have no reason to believe that a breach of or default under any such document would arise by virtue of the execution, delivery and performance of the Financing Documents. Based on the foregoing and subject to the qualifications and limitations set forth below, I am of the opinion that: 1. Each of the Obligors has all material governmental licenses, authorizations, consents and approvals required to own its assets and to carry on its business as now conducted. 2. To the best of my knowledge, the execution, delivery and performance by each Obligor of each Financing Document to which it is a party do not constitute a breach of or default under, or result in the creation or imposition of any Lien on any material asset of the Company or any Subsidiary under, any provision of any instrument or agreement evidencing or governing Debt binding upon such Obligor or any other material agreement, judgment, injunction, order, decree or other instrument binding upon such Obligor. However, please be advised that the Company currently has an aggregate $300 million principal amount of its senior notes outstanding (individually referred to as the $100 million 8.25% Senior Notes due 1999, the $125 million 8 3/8% Senior Notes due 2005 and the $75 million 8 1/2% Senior Notes due 2007, and collectively referred to as the "Senior Notes"), and that the sum of the Senior Notes, the Commitments and the commitments under the Short-Term Credit Agreement equals $850 million, while the total amount of debt permitted under Section 5.05(a) of the Amended Credit Agreement and the Short-Term Credit Agreement may not exceed $775 million. 3. To the best of my knowledge, there is no action, suit or proceeding pending against, threatened against or affecting the Company or any of its Subsidiaries or any of their respective properties or interests, at law or in admiralty or equity, before any court or arbitrator or any governmental body, agency or official, foreign or domestic, in which there is a reasonable possibility of an adverse decision which could materially adversely affect the business, financial position or results of operations of the Company and its Subsidiaries, taken as a whole, or which in any manner draws into question the validity of any Financing Document. My opinions in paragraph 1 are rendered only with respect to the constitutions, laws, rules and regulations which are currently in effect and applicable court rulings and orders which have been published and are generally available. In 20 To the Banks and the Agent Referred to Below c/o NationsBank of Texas, N.A., as Agent April 24, 1995 Page 4 addition, the foregoing opinions are rendered only as of the date hereof, and I disclaim any obligation to advise you of changes thereafter. I am a member of the bar of the State of Texas only, and this opinion is limited in all respects to the laws of the State of Texas, the General Corporation Law of Delaware and federal law of the United States of America, and, to the limited extent described below, the laws of The Commonwealth of The Bahamas and The Republic of Indonesia. In rendering certain of the opinions expressed above, I have relied, with your approval, upon an opinion, dated the date hereof, of Andrews & Kurth L.L.P., a copy of which has been furnished to you. My opinion in paragraph 1 addresses, with respect to Union Texas East Kalimantan Limited, the laws of The Commonwealth of The Bahamas and The Republic of Indonesia and such opinion with respect to such laws is, with your permission and without independent investigation, given solely in reliance upon and limited in scope to the opinions of Graham, Thompson & Co. and Mochtar, Karuwin & Komar, respectively, copies of which have been furnished to you, and my opinion incorporates by reference all qualifications, exceptions and limitations set forth therein. This opinion is for the benefit of and may be relied upon by the Banks, the Agent, the Co-Agents, their respective successors and assigns, their respective counsel and participants in connection with the transactions contemplated by the Credit Amendment and the Amended Credit Agreement. Otherwise, this opinion may not be used, published, circulated or relied upon by any other Person for any purpose without my prior written consent. Very truly yours, Newton W. Wilson, III 21 EXHIBIT C OPINION OF ANDREWS & KURTH L.L.P. April 24, 1995 To the Banks and the Agent Referred to Below c/o NationsBank of Texas, N.A., as Agent 700 Louisiana Street Houston, Texas 77002 Dear Sirs: We have acted as special counsel (i) to Union Texas Petroleum Holdings, Inc., a Delaware corporation (the "Company"), in connection with the Third Amendment Agreement dated as of April 24, 1995 (the "Credit Amendment") among the Company, the Banks and Co-Agents party to the Credit Agreement (as defined below) and the Agent (as defined below), which Credit Amendment amends the Amended and Restated Credit Agreement dated as of May 13, 1994, as amended by the First Amendment Agreement dated as of November 21, 1994 and the Second Amendment Agreement dated as of January 31, 1995 (as so amended, the "Credit Agreement"; and as further amended by the Credit Amendment, the "Amended Credit Agreement"), among the Company, the Banks and Co-Agents listed on the signature pages thereof and NationsBank of Texas, N.A., as Agent (the "Agent"), and (ii) for Union Texas Petroleum Energy Corporation, a Delaware corporation, Union Texas International Corporation, a Delaware corporation, Unistar, Inc., a Delaware corporation, Union Texas East Kalimantan Limited, a Bahamian corporation, and Union Texas Products Corporation, a Delaware corporation (collectively, the "Subsidiary Guarantors" and together with the Company, the "Obligors"), in connection with the Second Amendment to Amended and Restated Subsidiary Guaranty Agreement dated as of April 24, 1995 (the "Guaranty Amendment") among the Subsidiary Guarantors and the Agent, which Guaranty Amendment amends the Amended and Restated Subsidiary Guaranty Agreement dated as of May 13, 1994, as amended by the First Amendment to Amended and Restated Subsidiary Guaranty Agreement dated as of November 21, 1994 (as so amended and as amended by the Guaranty Amendment, the "Amended Guaranty Agreement"), among the Subsidiary Guarantors and the Agent. Terms defined in the Amended Credit Agreement and not otherwise defined herein are used herein as therein defined. In connection with the opinions expressed below, we have examined executed counterparts of the following (collectively, the "Financing Documents"): (a) the Amended Credit Agreement and the Credit Amendment, 22 To the Banks and the Agent Referred to Below c/o NationsBank of Texas, N.A., as Agent April 24, 1995 Page 2 (b) the Amended Guaranty Agreement and the Guaranty Amendment, and (c) twenty four (24) promissory notes, each substantially in the form of Exhibit A to the Amended Credit Agreement, one payable to each Bank (collectively, the "Notes"). We have also examined originals or copies, certified or otherwise identified to our satisfaction, of such other instruments, documents and records as we deemed necessary to express the opinions hereinafter set forth. To the extent relevant to our opinion, we have assumed, without independent verification, (i) the due execution and delivery of each Financing Document by each party thereto (other than the Obligors), (ii) the genuineness of all signatures on all documents submitted to us, (iii) that each party (other than the Obligors) to each of the Financing Documents is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization and has full power and authority to enter into and to carry out its obligations under such Financing Documents, (iv) that the execution and delivery of each of the Financing Documents by each party thereto (other than the Obligors) and the performance of its obligations under such Financing Documents have been duly authorized by all necessary proceedings and actions, (v) that each of the Financing Documents is the legal, valid and binding obligation of each party thereto (other than the Obligors) enforceable against such party in accordance with the terms of such Financing Documents, subject to limitations of the types described herein, and (vi) the authenticity of all documents submitted to us as originals and the conformity to authentic original documents of all documents submitted to us as certified, conformed or photostatic copies. We have relied, to the extent that we deem such reliance proper, upon certificates of officers of one or more of the Obligors and of governmental officials as to matters of fact not independently established by us. We have also examined the representations and warranties of the Company contained in the Credit Amendment, the Amended Credit Agreement, the Guaranty Amendment and the Amended Guaranty Agreement and have relied, to the extent we deem such reliance proper, upon the relevant facts stated therein. Based on the foregoing and subject to the qualifications and limitations set forth below, we are of the opinion that: 1. (a) Each of the Obligors is a corporation duly incorporated, validly existing and in good standing under the laws of its jurisdiction of incorporation, 23 To the Banks and the Agent Referred to Below c/o NationsBank of Texas, N.A., as Agent April 24, 1995 Page 3 and has all corporate power and authority required to own its assets and to carry on its business as now conducted. (b) The execution, delivery and performance by each Obligor of each Financing Document to which it is a party will not violate the Public Utility Holding Company Act of 1935, the Investment Company Act of 1940 or the Interstate Commerce Act. 2. The execution, delivery and performance by each Obligor of each Financing Document to which it is a party are within such Obligor's corporate powers, have been duly authorized by all necessary corporate action, and do not constitute a breach or default under, any provision of applicable law or regulation known to us after reasonable inquiry or the certificate of incorporation or bylaws of such Obligor. 3. To the best of our knowledge, the execution, delivery and performance by each Obligor of each Financing Document to which it is a party do not constitute a breach of or default under, or result in the creation or imposition of any Lien on any material asset of the Company or any Subsidiary under, any provision of the instruments and agreements identified in Schedule I hereto. However, please be advised that the Company currently has an aggregate $300 million principal amount of its senior notes outstanding (individually referred to as the $100 million 8.25% Senior Notes due 1999, the $125 million 8 3/8% Senior Notes due 2005 and the $75 million 8 1/2% Senior Notes due 2007, and collectively referred to as the "Senior Notes"), and that the sum of the Senior Notes, the Commitments and the commitments under the Short-Term Credit Agreement equals $850 million, while the total amount of debt permitted under Section 5.05(a) of the Amended Credit Agreement and the Short-Term Credit Agreement may not exceed $775 million. 4. No authorization, consent or approval of any governmental body, agency or official is required in connection with the execution, delivery or performance by any Obligor of any of the Financing Documents to which it is a party. 5. (a) The Credit Amendment and the Notes have been duly executed and delivered by the Company, and the Credit Amendment, the Notes and the Amended Credit Agreement constitute legal, valid and binding obligations of the Company, enforceable against the Company in accordance with their respective terms. (b) The Guaranty Amendment has been duly executed and delivered by each of the Subsidiary Guarantors, and the Guaranty Amendment and the Amended 24 To the Banks and the Agent Referred to Below c/o NationsBank of Texas, N.A., as Agent April 24, 1995 Page 4 Guaranty Agreement constitute legal, valid and binding obligations of each of the Subsidiary Guarantors, enforceable against each of the Subsidiary Guarantors in accordance with their respective terms. 6. If all material facts (as we understand them) and issues of law were presented and properly argued, a Texas court or a federal court sitting in the State of Texas and applying the laws of the State of Texas should hold that the consent by the Company in Section 9.09 of the Amended Credit Agreement, and by each Subsidiary Guarantor in Section 3.05 of the Amended Guaranty Agreement, to the non-exclusive personal jurisdiction of the courts of the State of Texas and of any federal court located in the State of Texas is valid. In this regard we call to your attention that such consents to non-exclusive jurisdiction are not effective to (1) confer subject matter jurisdiction that does not otherwise exist in such court or (2) establish diversity jurisdiction that does not otherwise exist in an action brought in federal court. 7. Neither the execution, delivery and performance by any Obligor of the Financing Documents to which it is a party, nor the use of the proceeds of the Loans in accordance with Section 5.09 of the Amended Credit Agreement, will violate the provisions of Regulations G, T, U or X of the Board of Governors of the Federal Reserve System. The opinions set forth above are subject to the following additional assumptions, limitations and qualifications: (a) Our opinions with respect to the enforceability of the Financing Documents are subject to the qualification that such enforceability may be (i) limited by applicable bankruptcy, insolvency, reorganization, fraudulent transfer, moratorium or similar laws affecting the rights of creditors generally, (ii) subject to general principles of equity (regardless of whether such enforceability is considered in a proceeding at law or in equity), including, without limitation, concepts of materiality, reasonableness, good faith and fair dealing, and (iii) limited by the power of a court to award damages in lieu of equitable remedies (including specific performance or injunctive relief) or otherwise to refuse to grant a particular remedy sought by the parties to the Financing Documents. (b) We express no opinion herein as to (1) the right of any Bank to set-off against funds held in any special account maintained by the Company with such Bank or which are otherwise subject to special agreement between the Company and such Bank; (2) whether the provisions of the Amended Credit Agreement which permit 25 To the Banks and the Agent Referred to Below c/o NationsBank of Texas, N.A., as Agent April 24, 1995 Page 5 the Agent, the Co-Agents or any Bank to take action or make determinations may be subject to a requirement that such action be taken or such determination be made in good faith; (3) whether the holder of a Note may, under certain circumstances, be called upon to prove the outstanding principal amount of the loans evidenced thereby; (4) the effect of the law of any jurisdiction (other than Texas) wherein any Bank may be located which limits rates of interest which may be charged or collected by such Bank; and (5) the enforceability of any provision in the Financing Documents that purports to (i) require indemnification for the negligence or wilful misconduct of the indemnitee or to otherwise require any Obligor to provide indemnification to the extent the same may be in conflict with public policy, (ii) limit the effect of any delay or omission of enforcement of rights or remedies or any course of performance or course of dealing between the parties, (iii) create an agreement to agree, (iv) fix evidentiary standards or venue of any proceeding, (v) waive rights to a trial by jury, or (vi) waive rights to notices, legal defenses or other benefits that cannot, as a matter of law, be effectively waived. (c) Whenever this opinion states the existence or absence of any fact to the best of our knowledge, such statement is intended to convey that, during the course of our representation of the Obligors with respect to matters addressed herein, no information has come to our attention which has given us actual knowledge of facts contrary to the statements so expressed herein. (d) In rendering our opinions in paragraph 1 we have relied upon the description of the properties, assets and businesses of the Obligors set forth in the Report on Form 10-K for the year ended December 31, 1994 filed by the Company with the Securities and Exchange Commission. (e) In rendering the opinions in paragraphs 2 and 5, we have assumed that (i) there are no fees, points, premiums or other sums contracted for, charged to or paid or to be paid by the Company to the Banks on account of the transactions described in the Amended Credit Agreement other than those described in the Amended Credit Agreement and those described in the letters dated May 13, 1994 from the Agent to us and (ii) the parties to the Financing Documents will comply strictly with the precise terms of the Financing Documents, including, without limitation, the usury savings clauses set forth therein with respect to any consideration contemplated by Financing Documents that will constitute interest under Texas law. 26 To the Banks and the Agent Referred to Below c/o NationsBank of Texas, N.A., as Agent April 24, 1995 Page 6 (f) In rendering our opinions in paragraph 7 we have assumed that the representations of the Company and the Banks set forth in Sections 4.12 and 9.07, respectively, of the Amended Credit Agreement will be true and correct at all times. (g) The foregoing opinions are rendered only with respect to the constitutions, laws, rules and regulations which are currently in effect and applicable court rulings and orders which have been published and are generally available. In addition, the foregoing opinions are rendered only as of the date hereof, and we disclaim any obligation to advise you of changes thereafter. This opinion is limited in all respects to the laws of the State of Texas, the General Corporation Law of Delaware and federal law of the United States of America, and, to the limited extent described below, the laws of The Commonwealth of The Bahamas and The Republic of Indonesia. Insofar as our opinion relates to the laws of The Commonwealth of The Bahamas and The Republic of Indonesia it is, with your permission and without independent investigation, given solely in reliance upon and limited in scope to the opinions of Graham, Thompson & Co. and Mochtar, Karuwin & Komar, respectively, copies of which have been furnished to you, and our opinion incorporates by reference all qualifications, exceptions and limitations set forth therein. This opinion is for the benefit of and may be relied upon by the Banks, the Agent, the Co-Agents, their respective successors and assigns, their respective counsel and Participants in connection with the transactions contemplated by the Credit Amendment and the Amended Credit Agreement and may be relied upon by Newton W. Wilson, III, General Counsel of the Company, in rendering his opinion to the Banks and the Agent in connection with such transactions. Otherwise, this opinion may not be used, published, circulated or relied upon by any other Person for any purpose without our prior written consent. Very truly yours, ANDREWS & KURTH L.L.P. 27 SCHEDULE I I. UNION TEXAS PETROLEUM HOLDINGS, INC. ("UTPH") A. Indenture dated as of November 15, 1992 between UTPH, the guarantors named therein, and State Street Bank and Trust Company, as trustee, relating to the $100,000,000 8.25% Senior Notes due November 15, 1999 issued by UTPH. B. Indenture dated as of March 15, 1995 between UTPH, the guarantors named therein, and The First National Bank of Chicago, as trustee, relating to the $125,000,000 8 3/8% Senior Notes due 2005 issued by UTPH and the $75,000,000 8 1/2% Senior Notes due 2007 issued by UTPH. C. $450,000,000 Amended and Restated Credit Agreement dated as of May 13, 1994 among UTPH, the Banks and Co-Agents listed on the signature pages thereof and NationsBank of Texas, N.A., as Agent, as amended by the First Amendment Agreement dated as of November 21, 1994, the Second Amendment Agreement dated as of January 31, 1995 and the Third Amendment Agreement dated as of April 24, 1995. D. $100,000,000 Credit Agreement dated as of April 24, 1995 among UTPH, the Banks and Co-Agents listed on the signature pages thereof and NationsBank of Texas, N.A., as Agent. II. UNION TEXAS PAKISTAN, INC. ("UT PAKISTAN") A. Finance Agreement dated as of December 20, 1988 between UT Pakistan and Overseas Private Investment Corporation ("OPIC"). B. Issuing and Paying Agency Agreement dated as of December 20, 1988 among First Trust New York National Association (as successor to Morgan Guaranty Trust Company of New York), as issuing and paying agent, OPIC, and UT Pakistan, relating to the Promissory Note dated December 20, 1988 issued by UT Pakistan to Liberty U.S. Government Money Market Trust in the original principal amount of US$21,250,000. C. Guaranty Agreement dated as of December 20, 1988 between UTPH and OPIC. D. Deed of Floating Charge dated December 20, 1988 by UT Pakistan in favor of OPIC. III. UNISTAR, INC. ("UNISTAR") AND UNIMAR COMPANY ("UNIMAR") A. Amended and Restated Agreement of General Partnership of Unimar entered into as of September 11, 1990. B. Indenture dated as of September 25, 1984 between Unimar and Irving Trust Company, as trustee, relating to 14,077,747 Indonesian Participating Units, as supplemented by the First Supplemental Indenture dated as of October 31, 1986 between such parties. 28 C. Shareholders Agreement dated as of September 11, 1990 among UTPH, Unistar, Ultramar America Limited, Ultramar Indonesia Limited and Ultrastar, Inc. D. Second Shareholders Agreement dated as of August 26, 1993 among UTPH, Unistar, LASMO America Limited, LASMO Sanga Sanga Limited and LASMO (USTAR) Inc. (formerly Ultrastar, Inc.) IV. UNION TEXAS EAST KALIMANTAN LIMITED ("UTEK") A. Production Sharing Contract and related Agreements. 1. Amended and Restated Production Sharing Contract dated April 23, 1990, but effective as of August 8, 1968 among Perusahaan Pertambangan Minyak Dan Gas Bumi Negara ("Pertamina"), and Roy M. Huffington, Inc., Virginia Indonesia Company, Virginia International Company, Ultramar Indonesia Limited, Union Texas East Kalimantan Limited, Universe Gas & Oil Company, Inc. and Huffington Corporation (all such parties and their predecessors and successors in interest are herein collectively referred to as the "IJV Contractors"), and Production Sharing Contract dated April 23, 1990, but effective as of August 8, 1998 among Pertamina and the IJV Contractors. 2. Joint Venture Agreement effective as of August 8, 1968 by and between Roy M. Huffington, Inc., Virginia International Company, Austral Petroleum Gas Corporation, Golden Eagle Indonesia Limited and Union Texas Far East Corporation, as amended by a Settlement Agreement dated as of January 16, 1976 among these parties and Universe Tankships, Inc., an Agreement dated as of October 1, 1979 among Roy M. Huffington, Inc., Virginia International Company, Austral Petroleum Gas Corporation, Golden Eagle Indonesia Limited, Universe Tankships, Inc. and Union Texas Far East Corporation and a Letter dated October 1, 1979 from Roy M. Huffington, Inc. to Virginia International Company, Austral Petroleum Gas Corporation, Golden Eagle Indonesia Limited, Universe Tankships, Inc. and Union Texas Far East Corporation. 3. Operating Agreement dated as of August 8, 1968 between Roy M. Huffington, Inc., as operator, and Union Texas Far East Corporation, Golden Eagle Indonesia Limited, Virginia International Company and Austral Petroleum Gas Corporation, as non-operators, as amended by a letter agreement effective September 15, 1973 among these parties and an Amendment to Operating Agreement dated as of April 1, 1990 among Roy M. Huffington, Inc., Ultramar Indonesia Limited, Virginia Indonesia Company, Virginia International Company, Union Texas East Kalimantan Limited, and Universe Gas & Oil Company, Inc. and a Letter dated February 8, 1990 from the IJV Contractors to Pertamina. 4. Amended and Restated Bontang Processing Agreement dated as of February 9, 1988 among Pertamina, the IJV Contractors, Total Indonesie, Indonesia Petroleum, Ltd., Unocal Indonesia, Ltd., and P. T. Badak. B. Supply Agreements. 1. Amended and Restated Supply Agreement (In support of the Amended and Restated 1973 LNG Sales Contract) dated September 22, 1993, but effective as of December 3, 1973, between Pertamina and the IJV Contractors. 29 2. Supply Agreement for Badak LNG Expansion Project dated as of April 14, 1981 among Pertamina and the IJV Contractors, as supplemented by the Memorandum of Understanding dated as of April 14, 1981 among Pertamina, the IJV Contractors, Total Indonesie, and Union Oil Company of Indonesia, and the Supplemental Memorandum dated August 24, 1983 among Pertamina and the IJV Contractors and as amended by the Memorandum dated December 1, 1988 among Pertamina and the IJV Contractors. 3. Badak III LNG Sales Contract Supply Agreement executed October 19, 1987, but effective as of March 19, 1987 among Pertamina and the IJV Contractors, as supplemented by the Supplemental Memorandum dated as of January 1, 1990 among Pertamina and the IJV Contractors. 4. Amended and Restated Second Supply Agreement for Excess Sales (Quantities In Kind and LNG Amounts Under Amended and Restated Invoice Settlement Agreements) dated as of January 19, 1990, but effective December 1, 1988, among Pertamina and the IJV Contractors, as supplemented by the Supplemental Memorandum dated as of January 1, 1990 among Pertamina and the IJV Contractors. 5. Badak IV LNG Sales Contract Supply Agreement dated as of August 12, 1991, but effective as of October 23, 1990, among Pertamina and the IJV Contractors, as supplemented by the Memorandum of Understanding Re: Supply Agreements and Package IV Sales dated as of August 12, 1991, but effective as of July 1, 1990, and the Supplemental Memorandum of Understanding dated as of January 31, 1994, but effective as of July 1, 1990, each among Pertamina, the IJV Contractors, Total Indonesie, Unocal Indonesia, Ltd., and Indonesia Petroleum, Ltd., and the Addendum to Badak IV LNG Sales Contract Supply Agreement dated as of January 31, 1994, but effective as of October 23, 1990 among Pertamina and the IJV Contractors. C. Miscellaneous Agreements. 1. Amended and Restated Bontang II Trustee and Paying Agent Agreement dated as of July 15, 1991 among the IJV Contractors, Pertamina, Total Indonesie, Unocal Indonesia, Ltd., and Indonesia Petroleum Ltd., and Continental Bank International ("CBI"), as trustee. 2. Amended and Restated Debt Service Allocation Agreement dated as of February 9, 1988 among Pertamina, the IJV Contractors, Total Indonesie, Indonesia Petroleum, Ltd. and Unocal Indonesia, Ltd. 3. Amended and Restated Badak Trustee and Paying Agent Agreement dated as of February 9, 1988 among Pertamina, the IJV Contractors, Total Indonesie, Unocal Indonesia, Ltd., Indonesia Petroleum, Ltd., and CBI, as trustee ("Bontang I Trustee"). D. Bontang Capital Project Financing Tier III-2. 1. Producers Agreement No. 2 dated as of June 9, 1987 among the IJV Contractors, the lenders named therein, and The Industrial Bank of Japan Trust Company ("IBJ Trust"), as agent for such lenders, as amended by the Amendment No. 1 to Producers Agreement No. 2 dated as of February 9, 1988 and Amendment No. 2 to Producers Agreement No. 2 dated as of May 31, 1988, each among the IJV Contractors, the lenders named therein, and IBJ Trust, as agent for such lenders. 30 2. Bontang Capital Projects Loan Agreement No. 2 dated as of June 9, 1987 among the Bontang I Trustee, the lenders named therein, and IBJ Trust, as agent for such lenders, as amended by the Amendment No. 1 to Bontang Capital Projects Loan Agreement No. 2 dated as of February 9, 1988 among the Bontang I Trustee, the lenders named therein, and IBJ Trust, as agent for such lenders. E. Train E Financing. 1. Bontang III Producers Agreement dated as of February 9, 1988 among Pertamina, the IJV Contractors, Total Indonesie, Indonesia Petroleum, Ltd., and Unocal Indonesia, Ltd. in favor of Train-E Finance Co., Ltd., as Tranche A Lender, the banks named therein as Tranche B Lenders and IBJ Trust as Agent for such Tranche B Lenders, as amended by Amendment No. 1 dated as of May 31, 1988 among Pertamina, the IJV Contractors, Total Indonesie, Indonesia Petroleum, Ltd., and Unocal Indonesia, Ltd. in favor of Train-E Finance Co., Ltd., as Tranche A Lender, the banks named therein as Tranche B Lenders and IBJ Trust as Agent for such Tranche B Lenders. 2. Bontang III Trustee and Paying Agent Agreement dated as of February 9, 1988 among Pertamina, the IJV Contractors, Total Indonesie, Indonesia Petroleum, Ltd., Unocal Indonesia, Ltd. and CBI, as trustee (the "Bontang III Trustee"), as amended by Amendment No.1 dated as of December 11, 1992 among Pertamina, the IJV Contractors, Total Indonesie, Indonesia Petroleum, Ltd., Unocal Indonesia, Ltd. and the Bontang III Trustee. 3. Amended and Restated Bontang Excess Sales Trustee and Paying Agent Agreement dated as of February 9, 1988 among Pertamina, the IJV Contractors, Total Indonesie, Indonesia Petroleum, Ltd., Unocal Indonesia, Ltd. and CBI, as trustee. 4. Bontang III Loan Agreement dated as of February 9, 1988 among the Bontang III Trustee, Train-E Finance Co., Ltd., as Tranche A Lender, the banks named therein as Lead Managers and Tranche B Lenders and IBJ Trust as Agent for such Tranche B Lenders. F. LPG Financing. 1. Amended and Restated Bontang LPG Trustee and Paying Agent Agreement dated as of December 31, 1991 among Pertamina, the IJV Contractors, Total Indonesie, Indonesia Petroleum, Ltd., Unocal Indonesia, Ltd. and CBI, as trustee. 2. Advance Payment Agreement dated as of February 18, 1987 between Pertamina and Arun Bontang Project Finance Co., Ltd. G. Train F Financing. 1. Bontang IV Producers Agreement dated as of August 26, 1991 among Pertamina, the IJV Contractors, Total Indonesie, Indonesia Petroleum, Ltd., and Unocal Indonesia, Ltd. in favor of the lenders named therein and The Chase Manhattan Bank, N.A. as agent for such lenders. 31 2. Bontang IV Trustee and Paying Agent Agreement dated as of August 26, 1991 among Pertamina, the IJV Contractors, Total Indonesie, Indonesia Petroleum, Ltd., Unocal Indonesia, Ltd. and CBI, as trustee (the "Bontang IV Trustee"). 3. Bontang IV Loan Agreement dated as of August 26, 1991 among the Bontang IV Trustee, the lenders named therein and The Chase Manhattan Bank, N.A. as agent for such lenders. 32 EXHIBIT D-1 OPINION OF SPECIAL INDONESIAN COUNSEL April 24, 1995 To the Banks and the Agent Referred to Below c/o NationsBank of Texas, N.A., as Agent 700 Louisiana Street Houston, Texas 77002 Dear Sirs: We have acted as special Indonesian counsel to Union Texas Petroleum Holdings, Inc., a Delaware corporation (the "Company"), in connection with the Third Amendment Agreement dated as of April 24, 1995 (the "Credit Amendment") among the Company, the Banks and Co-Agents party to the Credit Agreement (as defined below) and the Agent (as defined below), which Credit Amendment amends the Amended and Restated Credit Agreement dated as of May 13, 1994, as amended by the First Amendment Agreement dated as of November 21, 1994 and the Second Amendment Agreement dated as of January 31, 1995 (as so amended, the "Credit Agreement"), among the Company, the Banks and Co-Agents listed on the signature pages thereof and NationsBank of Texas, N.A., as Agent (the "Agent"), and to Union Texas East Kalimantan Limited, a Bahamian corporation (the "Guarantor"), in connection with the Second Amendment to Amended and Restated Subsidiary Guaranty dated as of April 24, 1995 (the "Guaranty Amendment") among the Guarantor, the Other Guarantors (defined below) and the Agent, which Guaranty Amendment amends the Amended and Restated Subsidiary Guaranty Agreement dated as of May 13, 1994, as amended by the First Amendment to Amended and Restated Subsidiary Guaranty dated as of November 21, 1994 (as so amended, the "Subsidiary Guaranty Agreement"), among Union Texas Petroleum Energy Corporation, a Delaware corporation, Union Texas Products Corporation, a Delaware corporation, Union Texas International Corporation, a Delaware corporation, Unistar, Inc., a Delaware corporation (collectively, the "Other Guarantors"), the Guarantor and the Agent. Terms defined in the Credit Agreement as amended by the Credit Amendment (the "Amended Credit Agreement") and not otherwise defined herein are used herein as therein defined. In connection with the opinions expressed below, we have examined the Credit Agreement, the April 3, 1995 draft of the Credit Amendment, the Subsidiary Guaranty Agreement and the April 3, 1995 draft of the Guaranty Amendment. We have also examined copies, certified or otherwise identified to our satisfaction, of the Production Sharing Contracts described in Exhibit "A" attached hereto and such other instruments, documents and records as we have deemed necessary to express the opinions hereinafter set forth. We have relied, to the extent that we deem such reliance 33 To the Banks and the Agent Referred to Below c/o NationsBank of Texas, N.A., as Agent April 24, 1995 Page 2 proper, upon certificates of officers of the Guarantor as to matters of fact not independently established by us. For purposes of this opinion, we have assumed the genuineness of all signatures appearing on the documents examined by us, the authenticity of all documents submitted to us as originals, the conformity with the original documents of all documents submitted to us, or otherwise in our possession, as copies, and the due authorization, execution and delivery of all such documents. Wherever the phrase "to the best of our knowledge" appears in this opinion, its use reflects that we have no actual knowledge to the contrary, that we have made due inquiry of the Guarantor, but that we have not made any independent investigation into any of the matters to which we refer. Based on the foregoing, and subject to the qualifications and limitations set forth below, we are of the opinion so far as the laws of the Republic of Indonesia are concerned that: 1. The Guarantor is duly qualified as a foreign corporation under the laws of the Republic of Indonesia, to the extent required by Indonesian law and to the extent necessary to carry out its obligations under the Production Sharing Contracts, and has all material governmental licenses, authorizations, consents and approvals required to own property and assets situated in Indonesia and to carry on business in the Republic of Indonesia in accordance with the terms of the Production Sharing Contracts. 2. The execution, delivery and performance by the Guarantor of the Guaranty Amendment and the performance by the Guarantor of the Subsidiary Guaranty Agreement as amended by the Guaranty Amendment (the "Amended Guaranty Agreement") do not constitute a breach of or default under any provision of applicable law or regulation of the Republic of Indonesia. 3. To the best of our knowledge, the execution, delivery and performance by the Guarantor of the Guaranty Amendment and the performance by the Guarantor of the Amended Guaranty Agreement do not constitute a breach of or default under, or result in the creation or imposition of any Lien on any material asset of the Guarantor under, any judgment, injunction, order or decree of any court or governmental instrumentality of the Republic of Indonesia binding upon the Guarantor. 4. No authorization, consent or approval of any Indonesian governmental body, agency or official is required in connection with the execution, 34 To the Banks and the Agent Referred to Below c/o NationsBank of Texas, N.A., as Agent April 24, 1995 Page 3 delivery or performance by the Guarantor of the Guaranty Amendment and the performance by the Guarantor of the Amended Guaranty Agreement. [The Guarantor is obligated to report the execution and delivery of the Guaranty Amendment to the Foreign Commercial Loan Team (the "Team") established pursuant to Presidential Decree No. 39 of 1991 and to deliver to the Team and to Bank Indonesia copies of the Credit Amendment and the Guaranty Amendment.] 5. To the best of our knowledge, there is no action, suit or proceeding pending against, threatened against or affecting the Guarantor or any of its properties or interests, at law or in admiralty or equity, before any court, arbitrator, governmental body, agency or official of the Republic of Indonesia. 6. The choice of Texas law as the proper law of the Guaranty Amendment and the Amended Guaranty Agreement would be upheld as a valid choice of law by the courts of the Republic of Indonesia, and the submission by the Guarantor to the nonexclusive jurisdiction of the courts referred to in Section 3.05 of the Amended Guaranty Agreement with respect to proceedings in connection with the Amended Guaranty Agreement would be treated by the courts of the Republic of Indonesia as legal, valid, binding and enforceable in accordance with the terms of such Section 3.05. We note, however, that judgments of foreign courts are not enforceable in Indonesia. 7. All amounts payable by the Guarantor under the Guaranty Amendment and the Amended Guaranty Agreement may be made free and clear of and without deduction for or on account of any taxes, imposts, withholdings or other deductions imposed, assessed or levied by the Republic of Indonesia or any department, agency, political subdivision, instrumentality or authority thereof or therein, irrespective of the fact that the Agent or any of the Banks may have a representative office or subsidiary in Indonesia, except that to the extent any payments of interest and other payments in the nature of interest made by the Guarantor under the Guaranty Amendment and the Amended Guaranty Agreement are recognized as being effectively connected with the carrying on of the Guarantor's business in the Republic of Indonesia, Indonesian withholding tax is payable at a rate of 20% thereof, except where a recipient qualifies for a lower rate under a bilateral tax treaty and an approval pursuant to the Circular Letter of the Director General of Taxation No. SE-22/PJ.35/1993 dated August 31, 1993, has been obtained from the Indonesian tax authorities acknowledging that the recipient is entitled to the benefits of the treaty. 35 To the Banks and the Agent Referred to Below c/o NationsBank of Texas, N.A., as Agent April 24, 1995 Page 4 8. No stamp or registration duty or similar taxes or charges are payable in the Republic of Indonesia in respect of the Guaranty Amendment and the Amended Guaranty Agreement, except nominal stamp taxes. 9. Under the laws of the Republic of Indonesia, neither the Agent nor any Bank will be deemed to be resident, domiciled or carrying on any commercial activity in the Republic of Indonesia or, except as provided in subparagraph 7 above, subject to any Indonesian taxes, imposts or duties as a result only of the entry into and performance of the Guaranty Amendment and the Amended Guaranty Agreement or the transactions contemplated thereby. This opinion is limited in all respects to the laws of the Republic of Indonesia. This opinion is for the benefit of and may be relied upon by the Company, the Guarantor, the Banks, the Agent, the Co-Agents, their respective successors and assigns, their respective counsel and Participants in connection with the transactions contemplated by the Amended Credit Agreement and may be relied upon by Newton W. Wilson, III, General Counsel of the Company, and Andrews & Kurth L.L.P., special counsel to the Company, in rendering their respective opinions to the Banks and the Agent in connection with such transactions. Otherwise, this opinion may not be used, published, circulated or relied upon by any other person for any purpose without our prior written consent. Very truly yours, MOCHTAR, KARUWIN & KOMAR 36 EXHIBIT A PRODUCTION SHARING CONTRACTS 1. Amended and Restated Production Sharing Contract dated April 23, 1990, but effective as of August 8, 1968 among Perusahaan Pertambangan Minyak Dan Gas Bumi Negara, and Roy M. Huffington, Inc., Virginia Indonesia Company, Virginia International Company, Ultramar Indonesia Limited, Union Texas East Kalimantan Limited, Universe Gas & Oil Company, Inc. and Huffington Corporation. 2. Production Sharing Contract dated April 23, 1990, but effective as of August 8, 1998 among Perusahaan Pertambangan Minyak Dan Gas Bumi Negara, and Roy M. Huffington, Inc., Virginia Indonesia Company, Virginia International Company, Ultramar Indonesia Limited, Union Texas East Kalimantan Limited, Universe Gas & Oil Company, Inc. and Huffington Corporation. 37 EXHIBIT D-2 OPINION OF SPECIAL BAHAMIAN COUNSEL April 24, 1995 To the Banks and the Agent Referred to Below c/o NationsBank of Texas, N.A., as Agent 700 Louisiana Street Houston, Texas 77002 Dear Sirs: We have acted as special Bahamian counsel to Union Texas Petroleum Holdings, Inc., a Delaware corporation (the "Company"), in connection with the Third Amendment Agreement dated as of April 24, 1995 (the "Credit Amendment") among the Company, the Banks and Co-Agents party to the Credit Agreement (as defined below) and the Agent (as defined below), which Credit Amendment amends the Amended and Restated Credit Agreement dated as of May 13, 1994, as amended by the First Amendment Agreement dated as of November 21, 1994 and the Second Amendment Agreement dated as of January 31, 1995 (as so amended, the "Credit Agreement"), among the Company, the Banks and Co-Agents listed on the signature pages thereof and NationsBank of Texas, N.A., as Agent (the "Agent"), and to Union Texas East Kalimantan Limited, a Bahamian corporation (the "Guarantor") in connection with the Second Amendment to Amended and Restated Subsidiary Guaranty Agreement dated as of April 24, 1995 (the "Guaranty Amendment") among the Guarantor, the Other Guarantors (defined below) and the Agent, which Guaranty Amendment amends the Amended and Restated Subsidiary Guaranty Agreement dated as of May 13, 1994, as amended by the First Amendment to Amended and Restated Subsidiary Guaranty Agreement dated as of November 21, 1994 (as so amended, the "Subsidiary Guaranty Agreement"), among Union Texas Petroleum Energy Corporation, a Delaware corporation, Union Texas Products Corporation, a Delaware corporation, Union Texas International Corporation, a Delaware corporation, Unistar, Inc., a Delaware corporation (collectively, the "Other Guarantors"), the Guarantor and the Agent. Terms defined in the Credit Agreement as amended by the Credit Amendment (the "Amended Credit Agreement") and not otherwise defined herein are used herein as therein defined. In connection with the opinions expressed below, we have examined the Credit Agreement, the April 3, 1995 draft of the Credit Amendment, the Subsidiary Guaranty Agreement and the April 3, 1995 draft of the Guaranty Amendment. We have also examined copies, certified or otherwise identified to our satisfaction, of such other instruments, documents and records as we have deemed necessary to express the opinions hereinafter set forth. We have relied, to the extent that we deem such reliance 38 To the Banks and the Agent Referred to Below c/o NationsBank of Texas, N.A., as Agent April 24, 1995 Page 2 proper, upon certificates of officers of the Guarantor as to matters of fact not independently established by us. For purposes of this opinion, we have assumed the genuineness of all signatures appearing on the documents examined by us, the authenticity of all documents submitted to us as originals, the conformity with the original documents of all documents submitted to us, or otherwise in our possession, as copies, and the due authorization, execution and delivery of all such documents (other than the Subsidiary Guaranty Agreement and the Guaranty Amendment insofar as such documents relate to the Guarantor). Wherever the phrase "to the best of our knowledge" appears in this opinion, its use reflects that we have no actual knowledge to the contrary, that we have made due inquiry of the Guarantor, but that we have not made any independent investigation into any of the matters to which we refer. Based on the foregoing and subject to the qualifications and limitations set forth below, we are of the opinion that: 1. The Guarantor is a corporation duly organized, validly existing and in good standing, and has all corporate power and authority and all material governmental licenses, authorizations, consents and approvals required to own its assets and to carry on its business as now conducted. 2. The execution, delivery and performance by the Guarantor of the Guaranty Amendment and the performance by the Guarantor of the Subsidiary Guaranty Agreement as amended by the Guaranty Amendment (the "Amended Guaranty Agreement") are within the Guarantor's corporate powers, have been duly authorized by all necessary corporate action, and do not constitute a breach of or default under any provision of applicable law or regulation of The Bahamas or the Memorandum of Association or the Articles of Association of the Guarantor. 3. To the best of our knowledge, the execution, delivery and performance by the Guarantor of the Guaranty Amendment and the performance by the Guarantor of the Amended Guaranty Agreement do not constitute a breach of or default under, or result in the creation or imposition of any Lien on any material asset of the Company or the Guarantor under, any judgment, injunction, order or decree of any court or governmental instrumentality of The Bahamas binding upon the Guarantor. 4. No authorization, consent or approval of any Bahamian governmental body, agency or official is required in connection with the execution, 39 To the Banks and the Agent Referred to Below c/o NationsBank of Texas, N.A., as Agent April 24, 1995 Page 3 delivery or performance by the Guarantor of the Guaranty Amendment and the performance by the Guarantor of the Amended Guaranty Agreement. 5. To the best of our knowledge, there is no pending or threatened action, suit or proceeding before any court or any governmental agency or body or any arbitrator in The Bahamas involving the Guarantor. 6. The choice of Texas law as the proper law of the Guaranty Amendment and the Amended Guaranty Agreement would be upheld as a valid choice of law by the courts of The Bahamas, and the submission by the Guarantor to the nonexclusive jurisdiction of the courts referred to in Section 3.05 of the Amended Guaranty Agreement with respect to proceedings in connection with the Amended Guaranty Agreement is legal, valid, binding and enforceable in accordance with the terms of such Section 3.05. 7. (a) Any of William M. Krips, President, Larry D. Kalmbach, Vice President, Johnnie J. Cox, Vice President, James E. Knight, Vice President, Newton W. Wilson, III, Secretary, Michael N. Markowitz, Treasurer, Robert V. Deere, Controller, Alan R. Crain, Assistant Secretary, and Luis H. Derrota, Assistant Secretary (collectively, the "Authorized Officers") of the Guarantor has been duly authorized to sign the Guaranty Amendment and any other required documents on behalf of the Guarantor and will bind the Guarantor by their actions. (b) Upon execution and delivery of the Guaranty Amendment by any Authorized Officer, the Guaranty Amendment and the Amended Guaranty Agreement will constitute legal, valid and binding obligations of the Guarantor enforceable against the Guarantor in accordance with their respective terms, subject, as to enforcement, to bankruptcy, insolvency, reorganization and other similar laws affecting creditors' rights generally and to general principles of equity, and the Guaranty Amendment and the Amended Guaranty Agreement are in proper form for their enforcement in the courts of The Bahamas. 8. All amounts payable by the Guarantor under the Guaranty Amendment and the Amended Guaranty Agreement may be made free and clear of and without deduction for or on account of any taxes, imposts, withholdings or deductions of any kind imposed, assessed or levied by The Bahamas or any authority thereof or therein, irrespective of the fact that the Agent or any of the Banks may have a representative office or subsidiary in The Bahamas. 40 To the Banks and the Agent Referred to Below c/o NationsBank of Texas, N.A., as Agent April 24, 1995 Page 4 9. A stamp duty of Ten dollars Bahamian currency (B$10.00) is payable in The Bahamas in respect of the Guaranty Amendment. No other duty, tax or charge is payable in The Bahamas in respect of the Guaranty Amendment. The required stamp duty has been paid in The Bahamas in respect of the Subsidiary Guaranty Agreement. No other duty, tax or charge is payable in respect of the Subsidiary Guaranty Agreement. 10. Under the laws of The Bahamas, neither the Agent nor any Bank will be deemed to be resident, domiciled or carrying on any commercial activity in The Bahamas or subject to any Bahamian taxes, imposts or duties as a result only of the entry into and performance of the Guaranty Amendment and the Amended Guaranty Agreement or the transactions contemplated thereby. This opinion is limited in all respects to the laws of The Bahamas. This opinion is for the benefit of and may be relied upon by the Company, the Guarantor, the Banks, the Agent, the Co-Agents, their respective successors and assigns, their respective counsel and Participants in connection with the transactions contemplated by the Amended Credit Agreement and may be relied upon by Newton W. Wilson, III, General Counsel of the Company, and Andrews & Kurth L.L.P., special counsel to the Company, in rendering their respective opinions to the Banks and the Agent in connection with such transactions. Otherwise, this opinion may not be used, published, circulated or relied upon by any other person for any purpose without our prior written consent. Yours faithfully, GRAHAM, THOMPSON & CO. 41 EXHIBIT E OPINION OF SPECIAL COUNSEL TO THE AGENT April 24, 1995 To NationsBank of Texas, N.A., as Agent, and to each of the Banks referred to below Ladies and Gentlemen: We have acted as special counsel to NationsBank of Texas, N.A., acting for itself and as Agent ("Agent"), in connection with the preparation, execution and delivery of the Third Amendment Agreement dated as of April 24, 1995 (the "Credit Amendment") among Union Texas Petroleum Holdings, Inc., a Delaware corporation (the "Company"), the Banks and Co-Agents party to the Credit Agreement (defined below) and the Agent, which Credit Amendment amends the Amended and Restated Credit Agreement dated as of May 13, 1994 as amended by the First Amendment Agreement dated November 21, 1994 and the Second Amendment Agreement dated as of January 31, 1995 (as so amended, the "Credit Agreement") among the Company, the banks listed on the signature pages thereof (the "Banks"), the Agent and the Co-Agents. Capitalized terms defined in the Credit Agreement as amended by the Credit Amendment (the "Amended Credit Agreement") and not defined herein are used herein as therein defined. In that connection, we have examined counterparts of the Credit Amendment executed by the Agent and the Company respectively and the following documents: (1) The Notes delivered to the Agent on the date hereof. (2) The Second Amendment to Amended and Restated Subsidiary Guaranty Agreement delivered to the Agent on the date hereof (the "Guaranty Amendment"). (3) The legal opinions delivered to the Agent pursuant to Sections 2.3, 2.4 and 2.5 of the Credit Amendment. In our examination of the documents referred to above, we have assumed the authenticity of all such documents submitted to us as originals, the genuineness of all signatures and the conformity to the originals of all such documents submitted to us as copies. We have also assumed the accuracy of all matters set forth in the certificates delivered to the Agent in connection with the Credit Amendment or the Credit Agreement and assumed that each of Company, the Banks, the Agent and the Co-Agents has duly executed and delivered, with all necessary power and authority 42 To the Banks and the Agent Referred to Below c/o NationsBank of Texas, N.A., as Agent April 24, 1995 Page 2 (corporate and otherwise), the Credit Amendment and the Credit Agreement, that the Company has duly executed and delivered, with all necessary power and authority (corporate and otherwise), the respective Notes, and that each of the Required Guarantors and the Agent has duly executed and delivered, with all necessary power and authority (corporate and otherwise), the Subsidiary Guaranty Agreement and the Guaranty Amendment. We have also assumed that no Bank has requested multiple Notes pursuant to Section 2.05(b) of the Amended Credit Agreement. Based upon the foregoing examination of documents and assumptions and upon such other investigation as we have deemed necessary, we are of the opinion that the documents referred to in items (1), (2) and (3) above are substantially responsive to the requirements of the Credit Amendment. This opinion is delivered to you only in connection with the transactions contemplated by the Credit Amendment, the Amended Credit Agreement, the Guaranty Amendment and the Subsidiary Guaranty Agreement and may not be quoted, circulated or published, in whole or in part, or furnished to any Person, other than your respective successors and assigns and Participants, without our written consent. Very truly yours, Bracewell & Patterson, L.L.P. EX-10.2 3 SECOND AMENDMENT TO SUBSIDIARY GUARANTY AGMT 1 Exhibit 10.2 SECOND AMENDMENT TO AMENDED AND RESTATED SUBSIDIARY GUARANTY AGREEMENT This Second Amendment to Amended and Restated Subsidiary Guaranty dated as of April 24, 1995 (this "Guaranty Amendment") is among each of the Subsidiary Guarantors listed on the signature pages hereof under the caption "Subsidiary Guarantors" and NationsBank of Texas, N.A. (the "Agent"), as agent for the banks under the Amended and Restated Credit Agreement dated as of May 13, 1994 as amended by the First Amendment Agreement dated as of November 21, 1994 and the Second Amendment Agreement dated as of January 31, 1995 (as the same may be further amended or modified from time to time, the "Credit Agreement") among Union Texas Petroleum Holdings, Inc. (the "Company"), the Co-Agents and lenders parties thereto ("Banks") and the Agent. In consideration of the mutual covenants contained herein, the parties hereto agree as follows: 1. Amendment to the Guaranty Agreement. The fourth recital to the Amended and Restated Subsidiary Guaranty Agreement dated as of May 13, 1994 as amended by the First Amendment to Amended and Restated Subsidiary Guaranty dated as of November 21, 1994 (as so amended, the "Guaranty Agreement") executed by the Subsidiary Guarantors and the Agent is hereby amended by deleting the dollar amount "$350,000,000" therein and inserting in lieu thereof the dollar amount "$450,000,000". 2. Acknowledgement and Consent. To induce the Agent and the Banks to execute the Third Amendment Agreement dated of even date herewith among the Company, the Banks and Co-Agents parties thereto, and the Agent (the "Credit Agreement Amendment") and other Financing Documents, each of the undersigned Subsidiary Guarantors hereby (a) consents to and agrees to the terms of the Credit Agreement Amendment and the Credit Agreement as amended thereby and the other Financing Documents, (b) agrees that (i) none of such Subsidiary Guarantor's obligations under or in connection with the Financing Documents and none of the Banks' or the Agent's rights and remedies with respect to any Subsidiary Guarantor is released, impaired or affected thereby or by the foregoing, (ii) neither the Guaranty Agreement as amended hereby nor any other Financing Document provided by any Subsidiary Guarantor is released, impaired or affected thereby or by any of the foregoing, and (iii) this acknowledgement shall not be construed as requiring the consent or agreement of any Subsidiary Guarantor in any circumstance, (c) ratifies and confirms all provisions of all Financing Documents executed by such Subsidiary Guarantor and all documents pertaining thereto or referred to therein, and (d) agrees that none of such Subsidiary Guarantor's obligations, none of the Banks' or the Agent's rights and remedies and neither the Guaranty Agreement as amended hereby, nor any 2 other Financing Document, would be released, impaired or affected if such Subsidiary Guarantor had not acknowledged the Credit Agreement Amendment and other Financing Documents. 3. Miscellaneous. 3.1. Amendments, Etc. No amendment or waiver of any provision of this Guaranty Amendment, and no consent to any departure by any Subsidiary Guarantor, any Bank or the Agent herefrom, shall in any event be effective unless effected in accordance with Section 3.03 of the Guaranty Agreement. This Guaranty Amendment shall become effective upon the execution of this Guaranty Amendment by the Subsidiary Guarantors and the Agent. 3.2. Texas Law. This Guaranty Amendment, and the Guaranty Agreement as amended hereby, shall be construed in accordance with and governed by the laws of the State of Texas. 3.3. Preservation. Except as specifically modified by the terms of this Amendment, all of the terms, provisions, covenants, warranties and agreements contained in the Guaranty Agreement remain in full force and effect. Each of the undersigned Subsidiary Guarantors hereby ratifies and confirms the Guaranty Agreement as amended hereby. Terms used herein which are not defined herein and are defined in the Credit Agreement, as amended by the Credit Agreement Amendment, are used herein as defined in the Credit Agreement, as amended by the Credit Agreement Amendment. References in the Guaranty Agreement as amended hereby to "the Agreement", "the Guaranty Agreement", "this Guaranty Agreement" or to "this Agreement" or to words of similar effect (such as "herein") shall mean the Guaranty Agreement as amended hereby. 3.4. Execution in Counterparts. This Guaranty Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. 3.5. Authority, etc. Each of the undersigned Subsidiary Guarantors hereby represents and warrants to the Agent and each of the Banks that (a) the execution and delivery by such Subsidiary Guarantor of the Guaranty Agreement and this Guaranty Amendment, and the performance of the Guaranty Agreement as amended hereby and this Guaranty Amendment, (i) are within such Subsidiary Guarantor's corporate powers, (ii) have been duly authorized by all necessary corporate action of such Subsidiary Guarantor, (iii) do not contravene or constitute a default under any provision of applicable law or regulation and (iv) require no authorization, consent or approval of any governmental body, agency or official other than those authorizations, consents and approvals that have been obtained and are in full force and effect, and (b) the Guaranty Agreement and this Guaranty Amendment have been duly executed -2- 3 and delivered by such Subsidiary Guarantor and this Guaranty Amendment and the Guaranty Agreement as amended hereby constitute legal, valid and binding obligations of such Subsidiary Guarantor. IN WITNESS WHEREOF, the parties hereto have caused this Guaranty Amendment to be duly executed and delivered by their respective officers thereunto duly authorized, as of the date first above written. SUBSIDIARY GUARANTORS: UNION TEXAS PETROLEUM ENERGY CORPORATION By: /s/ M.N. MARKOWITZ ----------------------------------- M.N. Markowitz Treasurer UNION TEXAS PRODUCTS CORPORATION By: /s/ M.N. MARKOWITZ ----------------------------------- M.N. Markowitz Treasurer UNION TEXAS EAST KALIMANTAN LIMITED By: /s/ M.N. MARKOWITZ ----------------------------------- M.N. Markowitz Treasurer UNION TEXAS INTERNATIONAL CORPORATION By: /s/ M.N. MARKOWITZ ----------------------------------- M.N. Markowitz Treasurer -3- 4 UNISTAR, INC. By: /s/ M.N. MARKOWITZ ---------------------------------- M.N. Markowitz Vice President AGENT: NATIONSBANK OF TEXAS, N.A., as Agent By: /s/ PAUL A. SQUIRES ---------------------------------- Paul A. Squires Senior Vice President -4- EX-10.3 4 $100,000,000 CREDIT AGREEMENT DATED 04/24/95 1 Exhibit 10.3 $100,000,000 CREDIT AGREEMENT dated as of April 24, 1995 among UNION TEXAS PETROLEUM HOLDINGS, INC. The BANKS Listed Herein and NATIONSBANK OF TEXAS, N.A. as Agent and BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION UNION BANK OF SWITZERLAND, HOUSTON AGENCY as Co-Agents THE INDEMNIFICATION PROVISIONS OF SECTIONS 7.06 AND 9.03(B) OF THIS AGREEMENT INCLUDE INDEMNIFICATION FROM THE CONSEQUENCES OF THE NEGLIGENCE OF THE PERSONS INDEMNIFIED THEREBY TO THE EXTENT SET FORTH THEREIN 2 TABLE OF CONTENTS
Page ARTICLE I DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . 1 SECTION 1.01. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 SECTION 1.02. Accounting Terms and Determinations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 SECTION 1.03. Types of Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 SECTION 1.04. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 SECTION 1.05. Unimar. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 SECTION 1.06. Ratings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 ARTICLE II THE CREDITS . . . . . . . . . . . . . . . . . . . . . . . . . 22 SECTION 2.01. Commitments to Lend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 SECTION 2.02. Notice of Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 SECTION 2.03. Conversions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 SECTION 2.04. Notice to Banks; Funding of Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 SECTION 2.05. Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 SECTION 2.06. Maturity of Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 SECTION 2.07. Interest Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 SECTION 2.08. Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 SECTION 2.09. Optional Termination or Reduction of Commitments . . . . . . . . . . . . . . . . . . . . . . 28 SECTION 2.10. Mandatory Termination or Reduction of Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 SECTION 2.11. Optional Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 SECTION 2.12. General Provisions as to Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 SECTION 2.13. Funding Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 SECTION 2.14. Computation of Interest and Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 SECTION 2.15. Chapter 15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 SECTION 2.16. Maximum Interest Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 SECTION 2.17. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 ARTICLE III CONDITIONS . . . . . . . . . . . . . . . . . . . . . . . . . 34 SECTION 3.01. Initial Borrowing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 SECTION 3.02. All Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
-i- 3 ARTICLE IV REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . 36 SECTION 4.01. Corporate Existence and Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 SECTION 4.02. Corporate and Governmental Authorization; Contravention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 SECTION 4.03. Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 SECTION 4.04. Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 SECTION 4.05. Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 SECTION 4.06. Compliance with ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 SECTION 4.07. Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 SECTION 4.08. Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 SECTION 4.09. Ownership of Restricted Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 SECTION 4.10. Title to Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 SECTION 4.11. Taxes and Other Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 SECTION 4.12. Regulation U . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 SECTION 4.13. Certain Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 SECTION 4.14. United Kingdom Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 ARTICLE V COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . 40 SECTION 5.01. Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 SECTION 5.02. Affirmative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 SECTION 5.03. Primary Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 SECTION 5.04. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 SECTION 5.05. Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 SECTION 5.06. Restricted Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 SECTION 5.07. Negative Pledge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 SECTION 5.08. Consolidations and Mergers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 SECTION 5.09. Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 SECTION 5.10. Parties to Subsidiary Guaranty Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . 48 SECTION 5.11. Restrictions on Dividends, Intercompany Loans, or Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 SECTION 5.12. Loans and Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 SECTION 5.13. Cross-Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 SECTION 5.14. Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 SECTION 5.15. Adjusted Equity and Interest Coverage . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 SECTION 5.16. Excluded Subordinated Debt and Preferred Stock . . . . . . . . . . . . . . . . . . . . . . . 50 SECTION 5.17. Certain Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 SECTION 5.18. Restrictions on Asset Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 SECTION 5.19. UTEK Guaranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 SECTION 5.20. Conversion to Unrestricted Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
-ii- 4 ARTICLE VI DEFAULTS . . . . . . . . . . . . . . . . . . . . . . . . . . 51 SECTION 6.01. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 SECTION 6.02. Notice of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 ARTICLE VII THE AGENT . . . . . . . . . . . . . . . . . . . . . . . . . 54 SECTION 7.01. Appointment and Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 SECTION 7.02. Agent and Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 SECTION 7.03. Action by Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 SECTION 7.04. Consultation with Experts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 SECTION 7.05. Liability of Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 SECTION 7.06. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 SECTION 7.07. Credit Decision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 SECTION 7.08. Successor Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 SECTION 7.09. Agent's Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 ARTICLE VIII CHANGE IN CIRCUMSTANCES . . . . . . . . . . . . . . . . . . . . . . 56 SECTION 8.01. Basis for Determining Interest Rate Inadequate or Unfair . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 SECTION 8.02. Illegality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57 SECTION 8.03. Increased Cost and Reduced Return . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 SECTION 8.04. Base Rate Loans Substituted for Affected Euro-Dollar Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 SECTION 8.05. Substitution of Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 ARTICLE IX MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . 60 SECTION 9.01. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 SECTION 9.02. No Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61 SECTION 9.03. Expenses; Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61 SECTION 9.04. Sharing of Set-Offs, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62 SECTION 9.05. Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62 SECTION 9.06. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 SECTION 9.07. Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 SECTION 9.08. Texas Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 SECTION 9.09. CONSENT TO JURISDICTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 SECTION 9.10. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
-iii- 5 SECTION 9.11. WAIVER OF JURY TRIAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66 SECTION 9.12. COMPLETE AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66 SECTION 9.13. Liability of Co-Agents and Arranger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66 SECTION 9.14. Termination of 1994 Short-Term Commitments . . . . . . . . . . . . . . . . . . . . . . . . . 66
-iv- 6 Schedule I - [Not used] Schedule II - Existing Subsidiaries Schedule III - Existing Liens Schedule IV - Existing Restrictions Schedule V - Joint Venture Debt Agreements Schedule VI - Outstanding Options Exhibit A - Note Exhibit B - Subsidiary Guaranty Agreement Exhibit C - Opinion of General Counsel of the Company Exhibit D - Opinion of Special Counsel for the Company Exhibit E - Opinion of Special Counsel for the Agent Exhibit F - Assignment and Assumption Agreement Exhibits G-1 and G-2 - Forms of Local Counsel Opinions -v- 7 CREDIT AGREEMENT Credit Agreement dated as of April 24, 1995 among Union Texas Petroleum Holdings, Inc., the Banks party hereto, NationsBank of Texas, N.A., as Agent, and Bank of America National Trust and Savings Association and Union Bank of Switzerland, Houston Agency, as Co-Agents. The parties hereto agree as follows: ARTICLE I DEFINITIONS SECTION 1.01. Definitions. The following terms, as used herein, have the following meanings: "Acceptable Engineer" means DeGolyer & MacNaughton or such other independent engineering firm that is mutually acceptable to the Agent and the Company. "Additional Margin Increase Condition" exists at all times during which any senior unsecured long-term debt of the Company is rated below BBB- by S&P. "Adjusted Equity" means the consolidated stockholders equity of the Company and its Consolidated Subsidiaries, as determined on a consolidated basis in accordance with generally accepted accounting principles, adjusted to exclude (i) any cumulative foreign exchange translation adjustments, (ii) any non-cash write-up or writedown of any assets of the Company and its Consolidated Subsidiaries made after March 31, 1992 in accordance with generally accepted accounting principles, and (iii) the non-cash effect of the adoption of any change after March 31, 1992 required by generally accepted accounting principles. "Administrative Questionnaire" means, with respect to each Bank, an administrative questionnaire in the form requested by the Agent submitted to the Agent (with a copy to the Company) duly completed by such Bank. "Affiliate" means (i) any Person holding 5% or more of any class of capital stock of the Company, and (ii) any Person (other than the Company, a Subsidiary or a Partnership) directly or indirectly controlling, controlled by or under common control with any Person described in clause (i). As used in this definition of "Affiliate", the term "control" means the possession, directly or indirectly, of the power 8 to direct or cause the direction of the management and policies of a Person, whether through ownership of voting securities, by contract or otherwise. "Agent" means NationsBank in its capacity as agent for the Banks hereunder and any successor in such capacity. "Agreement" means this Credit Agreement dated as of April 24, 1995 among the Company, the Banks, the Agent and the Co-Agents, as amended from time to time in accordance with the terms hereof. "Applicable Lending Office" means, with respect to any Bank, (i) in the case of its Base Rate Loans, its Domestic Lending Office, and (ii) in the case of its Euro-Dollar Loans, its Euro-Dollar Lending Office. "Arranger" means NationsBanc Capital Markets, Inc. "Asset Sale" means any sale, lease, transfer or other disposition of any Restricted Asset by the Company or any Restricted Subsidiary, whether such sale, lease, transfer or other disposition is direct or indirect (such as by selling capital stock of the Subsidiary that owns such Restricted Asset, but excluding sales of capital stock of the Company), other than (i) farm-outs in the ordinary course of business of properties containing substantially no proved reserves at the time of the farm-out, (ii) sales in the ordinary course of business of Hydrocarbons after severance, (iii) sales, transfers, leases or other dispositions of inventory and obsolete or surplus equipment in the ordinary course of business, and (iv) sales, transfers, leases or other dispositions to the Company or any Restricted Subsidiary if no Default then exists or would result therefrom. "Assignee" has the meaning set forth in Section 9.06(c). "Assignment" means an Assignment and Assumption Agreement in substantially the form of Exhibit F hereto. "Bank" means each bank listed on the signature pages hereof, each Assignee which becomes a Bank pursuant to Section 9.06(c), and their respective successors. "Base Rate" means, for any day, a rate per annum equal to the higher of (i) the Corporate Base Rate for such day and (ii) the sum of 1/2 of 1% plus the Federal Funds Rate for such day. "Base Rate Loan" means a Loan which bears interest as provided in Section 2.07(a). -2- 9 "Benefit Arrangement" means at any time an employee benefit plan within the meaning of Section 3(3) of ERISA which is not a Plan or a Multiemployer Plan and which is maintained or otherwise contributed to by any member of the ERISA Group. "Borrowing" has the meaning set forth in Section 1.03. "Cash Interest Expense" means, for any period, the sum of (i) the aggregate amount accrued during such period by the Company and its Consolidated Subsidiaries for interest determined on a consolidated basis, but excluding interest on Non-Recourse Debt and interest on Debt of Unrestricted Subsidiaries to the extent such Debt does not constitute Debt of the Company or any Restricted Subsidiary plus (ii) the aggregate amount paid during such period by the Company and its Consolidated Subsidiaries for dividends on Restricted Preferred Stock, determined on a consolidated basis. "Co-Agents" means Bank of America National Trust and Savings Association and Union Bank of Switzerland, Houston Agency in their capacities as Co-Agents hereunder. "Commitment" means, with respect to each Bank, the amount set forth opposite the name of such Bank on the signature pages hereof (or, if such Bank is an Assignee and its name is not set forth on the signature pages hereof, the amount of its Commitment as set forth in the Assignment pursuant to which it became a Bank), as such amount may be reduced from time to time pursuant to Sections 2.09 and 2.10 or reduced or increased from time to time pursuant to any Assignment to which it is a party. "Company" means Union Texas Petroleum Holdings, Inc., a Delaware corporation. "Company's 1993 Form 10-K" means the Company's annual report on Form 10-K for 1993, as filed with the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934. "Company's 1994 Form 10-K" means the Company's annual report on Form 10-K for 1994, as filed with the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934. "Consolidated Debt" means, at any date, an amount equal to (a) the sum (without duplication) of (i) the aggregate amount of Debt (other than Defeased Debt, Excluded Subordinated Debt not exceeding $100,000,000 and Debt that would not constitute Debt of the Company or any of its Consolidated Subsidiaries if clause (viii) -3- 10 were not included in the definition herein of Debt) of the Company and its Consolidated Subsidiaries, determined on a consolidated basis as of such date, plus (ii) the Unimar Percentage at such date of the aggregate Debt (other than Defeased Debt and Debt that would not constitute Debt of Unimar or any of the Unimar Restricted Subsidiaries if clause (viii) were not included in the definition herein of Debt) of Unimar and the Unimar Restricted Subsidiaries, determined on a consolidated basis as of such date, plus (iii) the Excess Letter of Credit/Guarantee Amount at such date, minus (b) the sum (without duplication and only to the extent that any of the following are included in the foregoing clause (a)) at such date of (1) Debt of Unrestricted Subsidiaries to the extent such Debt does not constitute Debt of the Company or any Restricted Subsidiary plus (2) Non-Restricted Asset Non-Recourse Debt plus (3) Existing Pakistan Non-Recourse Debt. "Consolidated Subsidiary" means at any date any Subsidiary or other entity the accounts of which would be consolidated with those of the Company in its consolidated financial statements as of such date. "Convert", "Conversion" and "Converted" each refers to (i) the change of Loans of one Type into Loans of the other Type pursuant to Section 2.03 or Article VIII, (ii) the continuation of all Euro-Dollar Loans comprising the same Borrowing as such for an additional Interest Period pursuant to Section 2.03, and (iii) an election to change, pursuant to Section 2.03, the Interest Period applicable to all Euro-Dollar Loans comprising the same Borrowing prior to the end of the Interest Period then applicable thereto. "Corporate Base Rate" means a fluctuating interest rate per annum as shall be in effect from time to time equal to the rate of interest publicly announced by NationsBank as its base rate, whether or not the Company has notice thereof. Such rate is set by NationsBank as a general reference rate of interest, taking into account such factors as NationsBank may deem appropriate, it being understood that many of NationsBank's commercial or other loans are priced in relation to such rate, that it is not necessarily the lowest or best rate actually charged to any customer and that NationsBank may make various commercial or other loans at rates of interest having no relationship to such rate. "Debt" of any Person means at any date, without duplication, (i) all obligations of such Person for borrowed money, (ii) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments, (iii) all obligations of such Person to pay the deferred purchase price of property or services, except accrued expenses, trade accounts payable and taxes payable arising in the ordinary course of business, (iv) the present value, determined in accordance with generally accepted accounting principles, of the obligations of such Person to make payments under capital leases, (v) all obligations of such Person which shall have been -4- 11 outstanding for more than five days owed to a bank or other Person in respect of amounts theretofore paid under a letter of credit or similar instrument, (vi) all Debt of others secured by a Lien on any asset owned by such Person whether or not such Debt is assumed by such Person (except that Joint Venture Debt shall for purposes of this Agreement be deemed to be Debt of Pertamina and not of the Company or a Subsidiary), (vii) all Restricted Preferred Stock issued by such Person or as to which such Person is otherwise liable, (viii) all Debt of others Guaranteed by such Person, to the extent of such Guarantee, and (ix) all obligations of such Person which have been outstanding for more than five days to pay any margin call (or similar requirement) on any Derivative Transaction (excluding, in the case of the Company and its Subsidiaries, such obligations not exceeding $5,000,000 in the aggregate); provided that, neither Debt nor Guarantee includes (a) obligations under leases other than capital leases and under bona fide Derivative Transactions (except as provided in clause (ix) above) and obligations with respect to take-or-pay payments theretofore received which remain subject to cash settlement or make-up; (b) Debt of the Company or a Subsidiary owing to the Company or a Subsidiary, except for Debt not eliminated in consolidation pursuant to the proviso in Section 1.02; (c) obligations under the Indonesian Participating Units; (d) any preferred stock that does not constitute Restricted Preferred Stock; and (e) the existing agreements relating to Joint Venture Debt set forth in the contracts described on Schedule V of the parties thereto as to allocation of responsibility for damages caused by reason of an act or failure to act by, or otherwise related to, any such party, or any similar agreement hereafter entered into providing for a similar allocation of liability in respect of similar actions or failures to act. The amount of Debt attributable to any Restricted Preferred Stock shall be the maximum consideration required to be paid upon the purchase, retirement, redemption, exchange, or conversion of the portion thereof constituting Debt (such consideration, if other than cash, to be valued at the fair market value thereof); provided that, in computing such consideration there shall be excluded (A) any consideration payable solely in common stock of the Company, (B) dividends to the extent such dividends do not materially exceed the generally prevailing market rate (at the time of issuance of such Restricted Preferred Stock) on preferred stock of comparable risk and maturity; and (C) any premium payable upon any such purchase, retirement, redemption, exchange or conversion only as a result of the exercise by the issuer of a call provision exercisable only at the option of the issuer, if failure to exercise such option would not have an adverse effect on the Company or any Subsidiary pursuant to the terms of any such Restricted Preferred Stock or any documents related thereto. "Default" means any condition or event which constitutes an Event of Default or which with the giving of notice or lapse of time or both would, unless cured or waived, become an Event of Default. "Defeased Debt" means any Debt of the Company or any Subsidiary (i) which has been defeased in accordance with the terms of the applicable Debt -5- 12 instruments, (ii) which is deemed to be extinguished under generally accepted accounting principles applicable to the Company or such Subsidiary, and (iii) with respect to which the Agent has received a certificate of an officer of the Company or such Subsidiary to the effect that the requirements of clauses (i) and (ii) of this definition have been met as to such Debt and such evidence, if any, in support of such certificate as the Agent may reasonably request. "Derivative Transactions" means foreign exchange transactions and commodity, currency and interest rate swaps, floors, caps, collars, forward sales, options, other similar transactions and combinations of the foregoing. "Domestic Business Day" means any day except a Saturday, Sunday or other day on which commercial banks in New York City, San Francisco or Houston are authorized by law to close. "Domestic Lending Office" means, as to each Bank, its office located at its address set forth in its Administrative Questionnaire (or identified in its Administrative Questionnaire as its Domestic Lending Office) or such other office as such Bank may hereafter designate as its Domestic Lending Office by notice to the Company and the Agent. "EBITDA" means, for any period, the sum of (i) the consolidated net income of the Company and its Consolidated Subsidiaries for such period before non-cash non-recurring items, gains or losses on dispositions of assets and the cumulative effect of changes in accounting principles plus (ii) to the extent included in the determination of such income, the consolidated charges for such period for interest, depreciation, depletion and amortization plus (or, if there is a benefit from income taxes, minus) (iii) to the extent included in the determination of such income, the amount of the provision for or benefit from income taxes; provided that in determining such consolidated net income, such consolidated charges and such provision for or benefit from income taxes, there shall be excluded therefrom (to the extent otherwise included therein) (a) the net income (or loss) of, charges for interest, depreciation, depletion and amortization of, and such provision for or benefit from income taxes of, any Person acquired by the Company or a Subsidiary in a pooling-of-interest transaction for any period prior to the date of such transaction, and (b) the net income (but not loss) of, charges for interest, depreciation, depletion and amortization of, and such provision for (but not benefit from) income taxes of, any Person which is subject to any contractual restriction which prevents the payment of dividends or the making of distributions on the capital stock or other ownership interests of such Person to the extent of such contractual restrictions. "Effective Date" means the date of this Agreement, which is April 24, 1995. -6- 13 "Engineering Report" means a report of an Acceptable Engineer providing an estimate of the proved reserves of Hydrocarbons attributable to the properties of the Company and the Restricted Subsidiaries. "Environmental Laws" means any and all federal, state, local and foreign statutes, laws, regulations, ordinances, rules, judgments, orders, decrees, permits, concessions, grants, franchises, licenses, agreements or other governmental restrictions relating to the environment or to emissions, discharges or releases of pollutants, contaminants, petroleum or petroleum products, chemicals or industrial, toxic or hazardous substances or wastes into the environment including, without limitation, ambient air, surface water, ground water, or land, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of pollutants, contaminants, petroleum or petroleum products, chemicals or industrial, toxic or hazardous substances or wastes or the clean-up or other remediation thereof, including, without limitation, the Comprehensive Environmental Response, Compensation, and Liability Act, the Resource Conservation and Recovery Act, the Oil Pollution Act, and their state analogs, in each case as they have been or may be amended. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended, or any successor statute. "ERISA Group" means the Obligors and all members of a controlled group of corporations and all trades or businesses (whether or not incorporated) under common control which, together with any Obligor, are treated as a single employer under Section 414 of the Internal Revenue Code. "Euro-Dollar Business Day" means any Domestic Business Day on which commercial banks are open for international business (including dealings in dollar deposits) in London. "Euro-Dollar Lending Office" means, as to each Bank, its office, branch or affiliate located at its address set forth in its Administrative Questionnaire (or identified in its Administrative Questionnaire as its Euro- Dollar Lending Office) or such other office, branch or affiliate of such Bank as it may hereafter designate as its Euro-Dollar Lending Office by notice to the Company and the Agent. "Euro-Dollar Loan" means a Loan which bears interest as provided in Section 2.07(b). "Event of Default" has the meaning set forth in Section 6.01. "Excess Letter of Credit/Guarantee Amount" means, at any date, the excess of (a) the sum of (i) the aggregate undrawn amount, at such date, of all letters -7- 14 of credit as to which the Company or any Restricted Subsidiary (other than Unimar and the Unimar Restricted Subsidiaries) is the account party or in respect of which the Company or any Restricted Subsidiary (other than Unimar and the Unimar Restricted Subsidiaries) has Guaranteed payment plus the unpaid drawn portions, at such date, of all such letters of credit to the extent such drawn portions do not constitute Debt of the Company or a Restricted Subsidiary (other than Unimar and the Unimar Restricted Subsidiaries), plus (ii) the Unimar Percentage of the aggregate undrawn amount, at such date, of all letters of credit as to which Unimar or any of the Unimar Restricted Subsidiaries is the account party or in respect of which Unimar or any of the Unimar Restricted Subsidiaries has Guaranteed payment plus the unpaid drawn portions, at such date, of such letters of credit to the extent such drawn portions do not constitute Debt of Unimar or any of the Unimar Restricted Subsidiaries, plus (iii) Debt that constitutes Debt of the Company or any Restricted Subsidiary (other than Unimar or any Unimar Restricted Subsidiary) pursuant to clause (viii) of the definition herein of Debt, plus (iv) the Unimar Percentage at such date of Debt that constitutes Debt of Unimar or any of the Unimar Restricted Subsidiaries pursuant to clause (viii) of the definition herein of Debt, over (b) $50,000,000. "Excess Net Sales Proceeds" means (i) with respect to any Asset Sale involving, directly or indirectly, a UK Asset (a "UK Asset Sale"), (a) if, after giving effect to such Asset Sale, the aggregate Net Sales Proceeds from all UK Asset Sales since December 31, 1993 would be less than or equal to $50,000,000 and the aggregate Net Sales Proceeds from all Asset Sales since such date would be less than or equal to $100,000,000, zero; or (b) if, after giving effect to such Asset Sale, the aggregate Net Sales Proceeds from all UK Asset Sales since December 31, 1993 ("UK Aggregate Amount") would be greater than $50,000,000 or the aggregate Net Sales Proceeds from all Asset Sales since such date ("Total Aggregate Amount") would be greater than $100,000,000, the lesser of (1) the greater of the amount by which the UK Aggregate Amount exceeds $50,000,000 or the amount by which the Total Aggregate Amount exceeds $100,000,000 or (2) the Net Sales Proceeds from such Asset Sale; and (ii) with respect to any Asset Sale not involving, directly or indirectly, a UK Asset, -8- 15 (a) if, after giving effect to such Asset Sale, the aggregate Net Sales Proceeds from all Asset Sales since December 31, 1993 would be less than or equal to $100,000,000, zero; or (b) if, after giving effect to such Asset Sale, the aggregate Net Sales Proceeds from all Asset Sales since December 31, 1993 would be greater than $100,000,000, the lesser of (1) the amount by which such aggregate Net Sales Proceeds exceeds $100,000,000 or (2) the Net Sales Proceeds from such Asset Sale. "Excluded Subordinated Debt" means Debt that (i) is subordinate and junior, on terms reasonably satisfactory to the Agent, to the Loans in all respects and (ii) has no requirement, absent a default under such Debt, that any principal thereof be paid, purchased, redeemed, defeased, acquired, exchanged or converted (other than exchange for or conversion to common stock of the Company) prior to April 30, 2000. "Existing Pakistan Non-Recourse Debt" means the Debt, not exceeding the principal amount of $9,500,000, evidenced by that certain promissory note dated December 20, 1988, issued by UT Pakistan in the original principal amount of $21,250,000, the related Finance Agreement between UT Pakistan and the Overseas Private Investment Corporation ("OPIC") and the related Issuing and Paying Agency Agreement among First Trust New York National Association (as successor to Morgan Guaranty Trust Company of New York) as issuing and paying agent, OPIC and UT Pakistan. "Fair Market Value" means with respect to any asset of the Company or any Subsidiary at any date the open market cash purchase price that an informed and willing purchaser would pay for such asset in an arm's length transaction to a willing and informed owner under no compulsion to sell, all as reasonably determined in good faith by the Company. "Federal Funds Rate" means, for any day, the rate per annum (rounded upwards, if necessary, to the nearest 1/100th of 1%) equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Domestic Business Day next succeeding such day; provided that (i) if such day is not a Domestic Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Domestic Business Day, as so published on the next succeeding Domestic Business Day, and (ii) if no such rate is so published on such next succeeding Domestic Business Day, the Federal Funds Rate for such day shall be the average rate quoted to NationsBank on such day on such transactions as determined by the Agent. -9- 16 "Financing Documents" means this Agreement, the Notes and the Subsidiary Guaranty Agreement. "Guarantee" by any Person means any obligation, contingent or otherwise (including, without limitation, any obligation to repay to a payor or creditor of a payor amounts previously paid to such Person by such payor), of such Person directly or indirectly guaranteeing any Debt of any other Person or otherwise incurred for the purpose of assuring the holder of payment of any such Debt; provided that (i) the obligations of any Person in respect of Debt of any Partnership in which such Person is a general partner shall not constitute a Guarantee of such Debt so long as substantially all assets of such Person are comprised of its Investment in such Partnership, (ii) the obligation of a Person to transfer or restore cash to the account of a Partnership, Subsidiary or Affiliate pursuant to periodic settlements or adjustments under cash management practices of such Persons shall not constitute a Guarantee, (iii) the contractual obligation of a Person to assure that a Subsidiary, Partnership or Affiliate conducts its operations as a prudent operator shall not constitute a Guarantee of indebtedness of the Subsidiary, Partnership or Affiliate, (iv) the obligation of a Person to cause net amounts of cash owned by a Subsidiary, Partnership or Affiliate to be applied to payment of indebtedness of such Subsidiary, Partnership or Affiliate shall not constitute a Guarantee of such indebtedness and (v) the reaffirmation to or for the benefit of a lender of contractual obligations (as, for example, those set forth in the Production Sharing Contracts) previously entered into in good faith and not in contemplation of the incurrence of Debt shall not constitute a Guarantee so long as the other arrangements entered into in connection with such reaffirmation do not increase the likelihood that additional funds will be required to meet such obligations (as would be the case, for example, if revenues otherwise available to meet such obligations were dedicated to such lender). "HPG Plant" means the five-twelfths interest in the Geismar, Louisiana olefins plant owned by UTPC and its subsidiaries, the supply and distribution assets related to such plant and all other operating assets of UTPC and its subsidiaries as of December 31, 1993. "Hydrocarbons" means crude oil, including all kinds of hydrocarbons and bitumens in solid or liquid form, and natural gas, including all gaseous hydrocarbons produced from wells, and liquefied natural gas and liquefied petroleum gases. "Indonesian Participating Units" means the Indonesian Participating Units issued by Unimar pursuant to the Indenture dated as of September 24, 1984 between Unimar and Irving Trust Company, Trustee, as amended and in effect on the date hereof, and as hereafter amended to the extent such subsequent amendments do not change the term thereof, provide additional security therefor, or increase the payments to be made to holders thereof. -10- 17 "Interest Period" means, with respect to each Euro-Dollar Loan comprising part of the same Borrowing, the period commencing on the date of such Loan or the date of the Conversion of any Base Rate Loan into such Euro-Dollar Loan and ending on the last day of the period selected by the Company pursuant to the provisions below and, thereafter, each subsequent period commencing on the last day of the immediately preceding Interest Period (or on any other date selected by the Company pursuant to Section 2.03) and ending on the last day of the period selected by the Company pursuant to the provisions below and Section 2.03. The duration of each such Interest Period shall be 1, 2, 3 or 6 months or (subject to Section 2.02(b)) 9 or 12 months, in each case as the Company may, upon notice received by the Agent not later than 10:00 a.m. (Houston time) on the third Euro-Dollar Business Day prior to the first day of such Interest Period, select; provided that: (a) any Interest Period which would otherwise end on a day which is not a Euro-Dollar Business Day shall be extended to the next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Euro-Dollar Business Day; (b) any Interest Period which begins on the last Euro-Dollar Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Euro-Dollar Business Day of a calendar month; (c) the Company may not select an Interest Period for any Loan if the last day of such Interest Period would be after April 15, 1997; and (d) Interest Periods for all Loans comprising the same Borrowing shall commence on the same date and shall be of the same duration. "Internal Revenue Code" means the Internal Revenue Code of 1986, as amended, or any successor statute. "Investment" means any investment in any Person, whether by means of share purchase, capital contribution, loan, advance, Guarantee or otherwise. It is understood that a joint operating agreement or similar arrangement with respect to Hydrocarbon properties or the HPG Plant does not constitute a Person and hence that payments in respect of the acquisition or maintenance of an interest in such Hydrocarbon properties or the HPG Plant do not constitute an Investment. -11- 18 "Joint Venture Debt" means obligations secured by a Lien on the interests of the Company or a Subsidiary, as the case may be, arising under either of the Production Sharing Contracts or any related supply contracts, if such Lien covers ratably the interests of Pertamina and all production sharing contractors thereunder. "Lien" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset (including, without limitation, any production payment, advance payment or similar arrangement with respect to minerals in place), whether or not filed, recorded or otherwise perfected under applicable law. For the purposes of this Agreement, the Company or any Subsidiary shall be deemed to own subject to a Lien any asset which it has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, capital lease or other title retention agreement relating to such asset. The right of set-off, whether by operation of law or by contract, does not constitute a Lien unless there is a related obligation to maintain a deposit of cash or other assets in respect of which such right of set-off may be exercised. "Loan" means a loan made by a Bank to the Company pursuant to section 2.01 and refers to a Base Rate Loan or a Euro-Dollar Loan (each of which shall be a "Type" of Loan), and "Loans" means Base Rate Loans or Euro-Dollar Loans or any combination of the foregoing. "London Interbank Offered Rate" has the meaning set forth in Section 2.07(b). "Margin Increase Condition" exists at all times during any Margin Period if the aggregate outstanding amount of Consolidated Debt on the last day of the calendar quarter immediately preceding the first day of such Margin Period exceeded 300% of Operating Cash Flow for the four calendar quarter period ending on the last day of such calendar quarter. "Margin Period" means each period commencing on and including the 61st day of each calendar quarter and ending on and including the 60th day of the next calendar quarter, with the first such period commencing on May 31, 1995. "material" means, with respect to any matter so characterized herein, that such matter would reasonably be expected to be significant to a Bank in determining whether to enter into this Agreement or to extend credit hereunder. "Material Debt" means Debt of the Company and/or any one or more Restricted Subsidiaries (other than Non-Recourse Debt) in an aggregate principal amount equal to or greater than $15,000,000, whether incurred under one or more related or unrelated documents or instruments. -12- 19 "Material Plan" means at any time a Plan or Plans having aggregate Unfunded Liabilities in excess of $15,000,000. "Multiemployer Plan" means at any time an employee pension benefit plan within the meaning of Section 4001(a)(3) of ERISA to which any member of the ERISA Group is then making or accruing an obligation to make contributions or has within the preceding five plan years made contributions, including for these purposes any Person which ceased to be a member of the ERISA Group during such five year period. "NationsBank" means NationsBank of Texas, N.A., a national banking association. "Net Sales Proceeds" means, with respect to any Asset Sale, the Fair Market Value of the Restricted Asset that is sold, leased, transferred or otherwise disposed of in such Asset Sale, minus the sum of (i) all reasonable fees, commissions and expenses incurred by the Company or any Subsidiary as a result of or in connection with such Asset Sale and (ii) all taxes required to be paid by the Company or any Subsidiary as a result of such Asset Sale. "Non-Recourse Debt" means, at any date, (a) the aggregate amount at such date of Debt of the Company or a Subsidiary (other than Unimar and each Unimar Subsidiary) and (b) the Unimar Percentage of the aggregate amount at such date of all Debt of each of Unimar and each Unimar Subsidiary, in respect of which in the case of either (a) or (b) (i) the recourse of the holder of such Debt, whether direct or indirect and whether contingent or otherwise, shall be effectively limited to Non-Restricted Assets (or, in the case of the Existing Pakistan Non-Recourse Debt, the assets described in Schedule III) and (ii) in the case of any such Debt incurred after the date of this Agreement, the Company shall have, at or prior to the time of incurrence thereof, notified the Agent of such incurrence and delivered to the Agent a certificate of an officer of the Company certifying that such Debt constitutes Non-Recourse Debt (or that such Debt will be converted into Non-Recourse Debt at some specified time or upon the occurrence of some specified event); provided that, if any such Debt is secured by any interest in a license, concession, production sharing contract or other right and any of the Restricted Assets consists of an interest in such license, concession, production sharing contract or other right, then the agreements evidencing such Debt must provide that default under such Debt will not impair or affect such license, concession, production sharing contract or other right. In the case of any Non-Recourse Debt incurred after the date of this Agreement, such limitation on recourse (i) must be set forth in the instrument evidencing such Debt, and (ii) must be on terms acceptable to the Agent as evidenced by the written approval thereof by the Agent (which approval will not be unreasonably withheld, and in deciding whether to approve such terms the Agent will, if requested by the Company, take into account what terms are usual and -13- 20 customary in non-recourse financings) and in any event must provide that the holder of such Debt waives, to the extent such holder may effectively do so, such holder's right to elect recourse treatment under 11 U.S.C. Section 1111(b) unless such holder obtains the prior written consent of the Required Banks. For avoidance of doubt, (a) if any such Debt is Guaranteed by the Company or a Restricted Subsidiary in a limited amount, the excess over such amount (but only the excess) constitutes Non-Recourse Debt, and (b) Debt shall not be determined to not be Non-Recourse Debt solely as a result of the existence of either of the following: (i) an agreement by a direct or indirect parent corporation to repay to a subsidiary amounts received by such parent corporation from such subsidiary in the event such subsidiary has a need for such amounts in future periods or (ii) an agreement by a direct or indirect parent corporation to cause a subsidiary to comply with such subsidiary's contractual obligations so long as the parent corporation is not obligated to contribute funds to the subsidiary to enable it to comply with such contractual obligations and has not otherwise Guaranteed such obligations. "Non-Restricted Asset Non-Recourse Debt" means, at any date, the aggregate amount at such date of Non- Recourse Debt as to which the recourse of the holder is limited exclusively to Non-Restricted Assets as contemplated by clause (i) of the first sentence of the definition of Non-Recourse Debt. "Non-Restricted Assets" means all assets of the Company and its Subsidiaries other than Restricted Assets. "Non-UK Asset" means any Restricted Asset other than a UK Asset. "Notes" means promissory notes of the Company, substantially in the form of Exhibit A hereto, evidencing the obligation of the Company to repay the Loans made to it, and "Note" means any one of such promissory notes issued hereunder. "Notice of Borrowing" has the meaning specified in Section 2.02. "Obligors" means the Company and the Required Guarantors, and "Obligor" means any one of them. "Operating Cash Flow" means, with respect to any period, an amount equal to (i) the "net cash (required) provided by operating activities before changes in other assets and liabilities" of the Company and its Consolidated Subsidiaries for such period, that should be reflected in the consolidated statement of cash flows of the Company and its Consolidated Subsidiaries for such period prepared in accordance with generally accepted accounting principles on substantially the same basis -14- 21 as the consolidated statement of cash flows of the Company and its Consolidated Subsidiaries for the year ended December 31, 1993 as set forth in the Company's 1993 Form 10-K; provided that in determining such "net cash (required) provided by operating activities before changes in other assets and liabilities" there shall be excluded therefrom (to the extent otherwise included therein) (a) the portion of such net cash provided by assets securing any Non-Recourse Debt other than the Existing Pakistan Non-Recourse Debt, (b) the net cash provided or required by operating activities before changes in other assets and liabilities of any Person acquired by the Company or a Subsidiary in a pooling-of-interest transaction for any period prior to the date of such transaction, and (c) the net cash provided by operating activities before changes in other assets and liabilities of any Person which is subject to any contractual restriction which prevents the payment of dividends or the making of distributions on the capital stock or other ownership interests of such Person to the extent of such contractual restrictions, plus (ii) to the extent included in the determination of the "net cash (required) provided by operating activities before changes in other assets and liabilities" for such period in accordance with the foregoing clause (i), exploration expenses incurred by the Company or any Consolidated Subsidiary during such period other than (a) exploration expenses incurred in connection with assets securing any Non-Recourse Debt other than the Existing Pakistan Non-Recourse Debt, (b) the exploration expenses of any Person acquired by the Company or a Subsidiary in a pooling-of-interest transaction for any period prior to the date of such transaction, and (c) the exploration expenses of any Person which is subject to any contractual restriction which prevents the payment of dividends or the making of distributions on the capital stock or other ownership interests of such Person to the extent of such contractual restrictions, plus (or, if cash is required by equity investee, minus) (iii) the amount of the "cash (required) provided by equity investee" of the Company and its Consolidated Subsidiaries for such period, that should be reflected in the consolidated statement of cash flows of the Company and its Consolidated Subsidiaries for such period prepared in accordance with generally accepted accounting principles on substantially the same basis as the consolidated statement of cash flows of the Company and its Consolidated Subsidiaries for the year ended December 31, 1993 as set forth in the Company's 1993 Form 10-K, excluding the effect of any cash required by such equity investee for the payment of the principal of -15- 22 its Debt and any cash provided by such equity investee from incurrence of its Debt, minus (iv) dividends on preferred stock paid during such period by the Company or any Consolidated Subsidiary, determined on a consolidated basis. "Other Credit Agreement" means the Amended and Restated Credit Agreement dated as of May 13, 1994 among the Company, NationsBank, as agent, and the co-agents and the banks parties thereto, as amended from time to time, providing a $450,000,000 credit facility to the Company. "Other Credit Agreement Commitments" means the "Commitments" as defined in the Other Credit Agreement. "Parent" means, with respect to any Bank, any Person controlling such Bank. "Participant" has the meaning set forth in Section 9.06(b). "Partnership" means any general or limited partnership which is accounted for on the equity method in the Company's consolidated financial statements and in which the Company or a Subsidiary is a general partner. "PBGC" means the Pension Benefit Guaranty Corporation or any entity succeeding to any or all of its functions under ERISA. "Person" means an individual, a corporation, a partnership, an association, a trust or any other entity or organization, including a government or political subdivision or an agency or instrumentality thereof. It is understood that a joint operating agreement or similar arrangement with respect to Hydrocarbon properties or the HPG Plant does not constitute a Person. "Plan" means at any time an employee pension benefit plan (other than a Multiemployer Plan) which is covered by Title IV of ERISA or subject to the minimum funding standards under Section 412 of the Internal Revenue Code and either (i) is maintained, or contributed to, by any member of the ERISA Group for employees of any member of the ERISA Group or (ii) has at any time within the preceding five years been maintained, or contributed to, by any Person which was at such time a member of the ERISA Group for employees of any Person which was at such time a member of the ERISA Group. -16- 23 "Production Sharing Contracts" means the production sharing contracts pertaining to certain operations in Indonesia filed as Exhibits 10.102 and 10.103 to the Company's quarterly report on Form 10-Q for the quarter ending June 30, 1990, as filed with the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934. "Reference Banks" means the principal London offices of NationsBank, Bank of America National Trust and Savings Association and Union Bank of Switzerland and such substitute Bank or Banks as may be mutually agreed to by the Company and the Agent, and "Reference Bank" means any one of such Reference Banks. "Regulation G" means Regulation G of the Board of Governors of the Federal Reserve System, as in effect from time to time. "Regulation U" means Regulation U of the Board of Governors of the Federal Reserve System, as in effect from time to time. "Required Banks" means at any time Banks having at least 51% of the aggregate amount of the Commitments or, if the Commitments shall have been terminated, holding Notes evidencing at least 51% of the aggregate unpaid principal amount of the Loans. "Required Guarantors" means (a) each of Union Texas Petroleum Energy Corporation, UTPC, Union Texas East Kalimantan Limited, Union Texas International Corporation and Unistar, Inc. and (b) any Subsidiary that acquires a Restricted Asset (other than any Restricted Asset in Pakistan or, if such Subsidiary's entering into the Subsidiary Guaranty Agreement would have a material adverse tax consequence on the Company, in the United Kingdom (including the United Kingdom Sector of the North Sea)) after December 31, 1993 or the capital stock of any Required Guarantor after December 31, 1993. Each Required Guarantor shall continue to be a Required Guarantor unless released from its obligations under the Subsidiary Guaranty Agreement in accordance with the terms of the Financing Documents. "Restricted Assets" means (1) all proved reserves of the Company and the Subsidiaries as of December 31, 1993 in Indonesia, the United Kingdom (including the United Kingdom Sector of the North Sea) and Pakistan, (2) all licenses, concessions, production sharing contracts and other rights pertaining to any such proved reserves (excluding the portion thereof that does not pertain to any of such proved reserves, if such portion can be severed without material adverse consequences on the portion pertaining to such proved reserves), (3) equipment used in the production of any such proved reserves or in the transportation of production from any such proved reserves if such equipment is a fixture or otherwise attached to realty, constitutes all or a part -17- 24 of any pipeline or related equipment, is all or part of a production platform or related equipment or is equipment similar to any of the foregoing or used for a similar purpose, and (4) the HPG Plant. "Restricted Payment" means (i) any dividend or other distribution on any shares of the Company's capital stock (except dividends payable solely in shares of its common stock), or (ii) any payment on account of the purchase, redemption, retirement or acquisition of (a) any shares of the Company's capital stock or (b) any option, warrant or other right to acquire shares of the Company's capital stock (except any such payment made solely in shares of its common stock); provided that payments of stock-related and other employee benefits (including purchases by the Company of its common stock in connection with the payment of such benefits) in the ordinary course of business to employees of the Company or a Subsidiary shall not be deemed Restricted Payments. "Restricted Preferred Stock" means (i) all preferred stock which (a) is subject to purchase, retirement, redemption, exchange or conversion (other than exchange for or conversion to common stock of the Company), in whole or in part under any circumstance whatsoever (other than purchase, retirement, redemption, exchange or conversion by the issuer thereof, at the sole option of such issuer, if failure to exercise such option would not have an adverse effect on the Company or any Subsidiary pursuant to the terms of any such preferred stock or any documents related thereto) and (b) provides for dividends materially in excess of the generally prevailing market dividend rate (at the time of issuance of such preferred stock) for preferred stock of comparable risk and maturity, and (ii) the portion of all other preferred stock which is subject to purchase, retirement, redemption, exchange or conversion (other than exchange for or conversion to common stock of the Company) at any date or dates on or prior to April 30, 2000 under any circumstance whatsoever (other than purchase, retirement, redemption, exchange or conversion by the issuer thereof, at the sole option of such issuer, if failure to exercise such option would not have an adverse effect on the Company or any Subsidiary pursuant to the terms of any such preferred stock or any documents related thereto). For avoidance of doubt, to the extent that any shares of Restricted Preferred Stock are exchanged for or converted to common stock of the Company and as a consequence such shares of Restricted Preferred Stock are cancelled, such shares shall no longer constitute Restricted Preferred Stock. "Restricted Subsidiaries Recourse Debt" means, at any date, the sum of (a) the aggregate amount of all Debt (other than (i) Non-Recourse Debt, (ii) any Guarantee of Debt of the Company (including the Loans) and (iii) the amount, if any, by which the Guarantees of the Restricted Subsidiaries (other than Unimar and the Unimar Restricted Subsidiaries) included in the determination of Excess Letter of Credit/Guarantee Amount exceeds the Excess Letter of Credit/Guarantee Amount) of each Restricted Subsidiary (other than Unimar and the Unimar Restricted Subsidiaries), -18- 25 determined on a consolidated basis as of such date, and (b) the Unimar Percentage of the aggregate amount of all Debt (other than (i) Non-Recourse Debt, (ii) any Guarantee of Debt of the Company and (iii) the amount, if any, by which the Unimar Percentage of the Guarantees of Unimar and the Unimar Restricted Subsidiaries included in the determination of Excess Letter of Credit/Guarantee Amount exceeds the Excess Letter of Credit/Guarantee Amount) of Unimar and the Unimar Restricted Subsidiaries, determined on a consolidated basis as of such date. "Restricted Subsidiary" means each Person listed in Part B of Schedule II hereto and each Subsidiary that owns directly or indirectly any interest in any Restricted Assets or any Restricted Subsidiary; provided that a Restricted Subsidiary shall cease to be such at such time as it is converted to an Unrestricted Subsidiary pursuant to Section 5.20 or ceases to be a Subsidiary as a result of a transaction permitted by Section 5.14. "Restricted Transfer" means (i) any Investment in an Affiliate, any Unrestricted Subsidiary or any subsidiary of an Unrestricted Subsidiary, but excluding to the extent otherwise included in the foregoing, Investments in Unimar and the Unimar Subsidiaries, or (ii) any payment by the Company or any Subsidiary, directly or indirectly, in respect of Non-Recourse Debt to the extent such Person is not legally obligated to make such payment by the terms of such Debt, or solely in the case of Unimar, Unistar, Inc. or any of the Unimar Subsidiaries, to the extent such Person is not legally obligated to fund such payment under the terms of the Unimar Partnership Agreement. "Revolving Credit Period" means the period from and including the Effective Date to but not including the Termination Date. "S&P" means Standard & Poor's Ratings Group, a division of McGraw-Hill, Inc. on the date hereof. "Subsidiary" means (a) Unimar and the Unimar Subsidiaries (except at such times as the Company does not own, directly or indirectly, any of the ownership interest in Unimar) and (b) any corporation or other entity of which securities or other ownership interests having ordinary voting power to elect a majority of the board of directors or other persons performing similar functions are at the time directly or indirectly owned by the Company, it being understood that the power to elect exactly 50% of the board of directors or such other persons does not constitute a "majority" as used herein. "Subsidiary Guarantors" means the Subsidiaries from time to time parties to the Subsidiary Guaranty Agreement, and their respective successors. -19- 26 "Subsidiary Guaranty Agreement" means the Subsidiary Guaranty Agreement dated as of April 24, 1995 among the Subsidiary Guarantors and NationsBank, as Agent, substantially in the form of Exhibit B hereto, as the same may be amended from time to time in accordance with the terms thereof. "Termination Date" means April 15, 1996, or, if such day is not a Euro-Dollar Business Day, the Termination Date shall be the next preceding Euro-Dollar Business Day. "Type" has the meaning specified in the definition of Loan. "UK Assets" means all Restricted Assets of UTPL as of December 31, 1993. "Unfunded Liabilities" means, with respect to any Plan at any time, the amount (if any) by which (i) the present value of all benefits under such Plan as determined by such Plan's actuary exceeds (ii) the fair market value of all Plan assets allocable to such benefits (excluding any accrued but unpaid contributions), all determined as of the then most recent valuation date for such Plan, but only to the extent that such excess represents a potential liability of a member of the ERISA Group to the PBGC or any other Person under Title IV of ERISA if such Plan terminated as of such date. "Unimar" means Unimar Company, a partnership organized and existing under the laws of Texas. "Unimar Partnership Agreement" means the Amended and Restated Agreement of General Partnership of Unimar dated as of September 11, 1990 between Unistar, Inc. and Ultrastar, Inc., as amended from time to time. "Unimar Percentage" means, at any date, the aggregate percentage ownership interest in Unimar owned at such date by the Company and the Subsidiaries. "Unimar Restricted Subsidiary" means any Unimar Subsidiary that is also a Restricted Subsidiary at the relevant date. "Unimar Subsidiary" means any corporation or other entity of which securities or other ownership interests having ordinary voting power to elect a majority of the board of directors or other persons performing similar functions are at the time directly or indirectly owned by Unimar, it being understood that the power to elect exactly 50% of the board of directors or such other persons does not constitute a majority as used herein. -20- 27 "Unrestricted Subsidiary" means any Subsidiary which is not a Restricted Subsidiary. "UT Pakistan" means Union Texas Pakistan, Inc., a Delaware corporation. "UTPC" means Union Texas Products Corporation, a Delaware corporation. "UTPL" means Union Texas Petroleum Limited, an English company. SECTION 1.02. Accounting Terms and Determinations. Unless otherwise specified herein, all accounting terms used herein shall be interpreted, all accounting determinations hereunder shall be made, and all financial statements required to be delivered hereunder shall be prepared in accordance with generally accepted accounting principles as in effect from time to time, applied on a basis consistent with the most recent audited consolidated financial statements of the Company and its Consolidated Subsidiaries delivered to the Banks (except for changes concurred in by the Company's independent public accountants); provided that in any determination of Consolidated Debt if (i) the Company or any Restricted Subsidiary owes any Debt to an Unrestricted Subsidiary which would otherwise be eliminated in such determination of Consolidated Debt (the "intercompany Debt") (other than Debt in an amount not exceeding $10,000,000 in the aggregate at any time and representing advances by the Unrestricted Subsidiaries to the Company or a Restricted Subsidiary made in the ordinary course of the cash management practices of the Company and its Subsidiaries) and (ii) such Unrestricted Subsidiary owes, at the date of determination, any Debt for borrowed money to a Person other than the Company or a Subsidiary (the "third party Debt") (other than any such Debt that also constitutes Debt of the Company or a Restricted Subsidiary), then an amount equal to the lesser of (1) such intercompany Debt and (2) such third party Debt, shall not be eliminated in such determination of Consolidated Debt. SECTION 1.03. Types of Borrowings. The term "Borrowing" denotes the aggregate of Loans made by Banks to the Company pursuant to Article II on a single date, of a single Type and, if such Loans are Euro-Dollar Loans, for a single Interest Period. Borrowings are classified for purposes of this Agreement by reference to the pricing of Loans comprising such Borrowing (e.g., a "Euro-Dollar Borrowing" is a Borrowing comprised of Euro-Dollar Loans). SECTION 1.04. Miscellaneous. The words "hereof", "herein" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and Article, Section, Schedule and Exhibit references are to Articles and Sections of and Schedules and Exhibits to this Agreement, unless otherwise specified. The term -21- 28 "including" as used herein means "including without limitation". Definitions of terms defined herein shall be applicable to both the singular and plural forms of the terms defined as appropriate. References to "directly or indirectly" in respect of ownership of any interest in any assets shall include, without limitation, direct ownership, indirect ownership through capital stock or other ownership interest (whether through one or more levels of subsidiaries, affiliates or other Persons) and any other direct or indirect ownership arrangement. SECTION 1.05. Unimar. To the extent this Agreement or any other Financing Document obligates the Company or a Subsidiary to cause Unimar and the Unimar Subsidiaries to take any action, such obligation shall be satisfied if (a) the Company votes (or causes a Subsidiary to vote) the Unimar Percentage in a manner consistent with the obligations of the Company and the Subsidiaries under the Financing Documents and (b) any representative of the Company sitting on any management board or board of directors of Unimar or any of the Unimar Subsidiaries votes, as a member of such management board or board of directors, in a manner consistent with the obligations of the Company and the Subsidiaries under the Financing Documents. SECTION 1.06. Ratings. A rating, whether public or private, by S&P shall be deemed to be in effect on the date of announcement or publication by S&P, as the case may be, of such rating or, in the absence of such announcement or publication, on the effective date of such rating and will remain in effect until the effective date of any change in such rating. In the event the standards for any rating by S&P are revised, or such rating is designated differently (such as by changing letter designations to numerical designations), then the references herein to such rating shall be changed to the revised or redesignated rating for which the standards are closest to, but not lower than, the standards at the date hereof for the rating which has been revised or redesignated, all as determined by the Agent in good faith. Long-term debt supported by a letter of credit, guaranty (other than guaranties of Subsidiaries) or other similar credit enhancement mechanism shall not be considered as senior unsecured long-term debt. ARTICLE II THE CREDITS SECTION 2.01. Commitments to Lend. During the Revolving Credit Period each Bank severally agrees, on the terms and conditions set forth in this Agreement, to make loans to the Company pursuant to this Section from time to time in amounts such that the aggregate principal amount of Loans by such Bank at any one time outstanding to the Company shall not exceed the amount of such Bank's Commitment at such time. Each Borrowing under this Section shall be in an aggregate -22- 29 principal amount of $10,000,000 or any larger multiple of $1,000,000 (except that any such Borrowing may be, subject to the other terms hereof, in the aggregate amount of the remaining unused Commitments) and shall be made from the several Banks ratably in proportion to their respective Commitments. Within the foregoing limits, the Company may borrow under this Section, repay (whether pursuant to Section 2.10 or otherwise), or to the extent permitted by Section 2.11, prepay Loans and reborrow at any time during the Revolving Credit Period under this Section. SECTION 2.02. Notice of Borrowings. (a) The Company shall give the Agent notice (a "Notice of Borrowing") not later than 10:00 A.M. (Houston time) on (x) the date of each Base Rate Borrowing, and (y) the third Euro-Dollar Business Day before each Euro-Dollar Borrowing, specifying: (i) the date of such Borrowing, which shall be a Domestic Business Day in the case of a Base Rate Borrowing or a Euro-Dollar Business Day in the case of a Euro-Dollar Borrowing, (ii) the aggregate amount of such Borrowing, (iii) whether the Loans comprising such Borrowing are to be Base Rate Loans or Euro-Dollar Loans, and (iv) in the case of a Euro-Dollar Borrowing, the duration of the initial Interest Period applicable thereto, subject to the provisions of the definition of Interest Period. Notwithstanding the foregoing, not more than ten Euro-Dollar Borrowings shall be outstanding at any one time, and any Borrowing which would exceed such limitation shall be made as a Base Rate Borrowing. (b) If requested to do so by the Company through the Agent at least ten Euro-Dollar Business Days before the first day of a proposed Interest Period for Euro-Dollar Loans, each Bank will advise the Agent before 10:00 A.M. (Houston time) on the sixth Euro-Dollar Business Day preceding the date of such proposed Interest Period as to whether, if the Company selects a specified duration of nine or twelve months for such Interest Period, such Bank expects that deposits in dollars with a corresponding term will be available to it in the relevant market on the first day of such Interest Period in the amount required to fund its Loan to which such Interest Period would apply. Unless a Bank responds by such time to the effect that it expects such deposits will not be available to it, the Company shall be entitled to select such proposed duration for such Interest Period. -23- 30 SECTION 2.03. Conversions. (a) The Company may on any Euro-Dollar Business Day, upon notice given to the Agent no later than 10:00 a.m. (Houston time) on the third Euro-Dollar Business Day prior to the date of the proposed Conversion and subject to the provisions of Section 2.02 and Article VIII and the other provisions hereof, Convert all Loans comprising one or more Borrowings; provided that (i) Loans comprising a Borrowing may not be Converted if after giving effect to such Conversion, such Borrowing would be a Euro-Dollar Borrowing and the outstanding principal amount of such Borrowing would be less than $10,000,000 and (ii) no Conversion (other than changing Euro-Dollar Loans into Base Rate Loans) may be made if any Event of Default is then existing. Each such notice of a Conversion shall, within the restrictions specified above, specify (i) the date of such Conversion, (ii) the Loans to be Converted, (iii) if after giving effect to such Conversion, such Borrowing would be a Euro-Dollar Borrowing, the commencement date and duration of the proposed Interest Period for each Loan comprising such Borrowing, and (iv) the nature of such Conversion (i.e., whether such Conversion is a change of Loans of one Type into another Type, a continuation of Euro-Dollar Loans as such for an additional Interest Period or an election to change an Interest Period). Each such notice shall be irrevocable. (b) If the aggregate unpaid principal amount of Euro-Dollar Loans comprising any Borrowing shall be reduced by payment or prepayment or otherwise, to less than $10,000,000, such Loans shall automatically, on the last day of the then existing Interest Period therefor, Convert into Base Rate Loans. (c) If the Company shall fail to select the duration of any Interest Period for any Euro-Dollar Loans in accordance with the provisions contained in the definition of "Interest Period" in Section 1.01, or if there shall be any Event of Default, such Loans will automatically on the last day of the then existing Interest Period therefor, Convert into Base Rate Loans. SECTION 2.04. Notice to Banks; Funding of Loans. (a) Upon receipt of a Notice of Borrowing, the Agent shall promptly, (by no later than 10:30 A.M. (Houston time) by telephone or facsimile transmission) notify each Bank of the contents thereof and of such Bank's share of such Borrowing and such Notice of Borrowing shall not thereafter be revocable by the Company. (b) Not later than 12:00 Noon (Houston time) on the date of each Borrowing, each Bank shall (except as provided in subsection (c) of this Section) make available its share of such Borrowing, in Federal or other funds immediately available in Houston, to the Agent at its address specified in or pursuant to Section 9.01. Unless the Agent determines that any applicable condition specified in Article III has not been -24- 31 satisfied, the Agent will make the funds so received from the Banks available to the Company at the Agent's aforesaid address. (c) If any Bank makes a new Loan hereunder to the Company on a day on which the Company is to repay all or any part of an outstanding Loan from such Bank, such Bank shall apply the proceeds of its new Loan to make such repayment and only an amount equal to the difference (if any) between the amount being borrowed by the Company and the amount being repaid shall be made available by such Bank to the Agent as provided in subsection (b), or remitted by the Company to the Agent as provided in Section 2.12, as the case may be. (d) Unless the Agent shall have received notice from a Bank prior to the date of any Borrowing that such Bank will not make available to the Agent such Bank's share of such Borrowing, the Agent may assume that such Bank has made such share available to the Agent on the date of such Borrowing in accordance with subsections (b) and (c) of this Section 2.04 and the Agent may, in reliance upon such assumption, make available to the Company on such date a corresponding amount. If and to the extent that such Bank shall not have so made such share available to the Agent, such Bank and the Company severally agree to repay to the Agent forthwith on demand such corresponding amount together with interest thereon, for each day from the date such amount is made available to the Company until the date such amount is repaid to the Agent, at (i) in the case of the Company, a rate per annum equal to the higher of the Federal Funds Rate and the interest rate applicable thereto pursuant to Section 2.07 and (ii) in the case of such Bank, the Federal Funds Rate. If such Bank shall repay to the Agent such corresponding amount, such amount so repaid shall constitute such Bank's Loan included in such Borrowing for purposes of this Agreement. SECTION 2.05. Notes. (a) The Loans of each Bank to the Company shall be evidenced by a single Note of the Company payable to the order of such Bank for the account of its Applicable Lending Office in an amount equal to the aggregate unpaid principal amount of such Bank's Loans to the Company. (b) Each Bank may, by notice to the Company and the Agent, request that its Loans of a particular Type payable to such Bank (or such lending office, agency or branch of such Bank as such Bank may specify in such request) be evidenced by a separate Note of the Company in an amount equal to the aggregate unpaid principal amount of such Loans. Each such Note shall be in substantially the form of Exhibit A hereto with appropriate modifications to reflect the fact that it evidences solely Loans of the relevant Type. Any Bank that receives multiple Notes pursuant to this Section 2.05(b) agrees that: (1) the aggregate principal amount payable by the Company under such Notes shall never exceed the aggregate principal amount of the Loans owed to such Bank (including, if applicable, the separate lending offices, agencies or branches -25- 32 of such Bank) and (2) the payees of the Notes issued at the request of such Bank shall enjoy no greater rights (voting or otherwise) than such Bank would enjoy in the absence of such request and such payees (including, if applicable, the separate lending offices, agencies or branches of such Bank) shall be considered a single Bank for purposes of this Agreement. Each reference in this Agreement to the "Note" of such Bank shall be deemed to refer to and include any or all of such Notes, as the context may require. (c) Upon receipt of each Bank's Note pursuant to Section 3.01(b), the Agent shall mail or send by private delivery service such Note to such Bank. Each Bank shall record the date, amount and Type of each Loan made by it to the Company and the date and amount of each payment of principal made with respect thereto, and prior to any transfer of its Note shall endorse on the schedule forming a part thereof appropriate notations to evidence the foregoing information with respect to each such Loan then outstanding; provided that the failure of any Bank to make any such recordation or endorsement shall not affect the obligations of any Obligor under any of the Financing Documents. Each Bank is hereby irrevocably authorized by the Company so to endorse any Note and to attach to and make a part of any Note a continuation of any such schedule as and when required. SECTION 2.06. Maturity of Loans. Each Loan shall mature, and the principal amount thereof shall be due and payable, on April 15, 1997. SECTION 2.07. Interest Rates. The Company shall pay interest on the unpaid principal amount of each Loan from the date of such Loan until such principal amount shall be paid in full, at the following rates per annum: (a) If such Loan is a Base Rate Loan, for each day that such Loan is a Base Rate Loan, at a rate per annum equal to the sum of (i) the Base Rate for such day plus (ii) at such times as the Margin Increase Condition exists and the Additional Margin Increase Condition does not exist, 1/8% plus (iii) at such times as the Additional Margin Increase Condition exists, 1/4% plus (iv) at such times as any Event of Default exists, 1%. Such interest shall be payable quarterly on each March 31, June 30, September 30 and December 31 and on the date such Base Rate Loan is Converted or paid in full. Any overdue interest on any Base Rate Loan shall bear interest, payable on demand, for each day until paid at a rate per annum equal to the sum of 1% plus the otherwise applicable rate for such day. (b) If such Loan is a Euro-Dollar Loan, at a rate per annum equal at all times during any Interest Period for such Loan to the sum of (i) 0.6875% plus (ii) the applicable London Interbank Offered Rate plus (iii) at such times as the Margin Increase Condition exists and the Additional Margin Increase Condition does not exist, 1/8% plus (iv) at such times as the Additional Margin Increase Condition exists, 1/4% plus (v) at such times as any Event of Default exists, 1%; provided that any overdue -26- 33 principal of or interest on any Euro-Dollar Loan shall bear interest, payable on demand, for each day from and including the date payment thereof was due to but excluding the date of actual payment, at a rate per annum equal to the sum of 1% plus the higher of (i) the sum of 0.6875% plus the London Interbank Offered Rate applicable to such Loan plus at such times as the Margin Increase Condition exists and the Additional Margin Increase Condition does not exist, 1/8% plus at such times as the Additional Margin Increase Condition exists, 1/4% and (ii) the sum of (1) 0.6875% plus (2) the average (rounded upward, if necessary, to the next higher 1/16 of 1%) of the respective rates per annum at which one day (or, if such amount due remains unpaid more than three Euro-Dollar Business Days, then for such other period of time not longer than three months as the Agent may select) deposits in dollars in an amount approximately equal to such overdue payment due to each of the Reference Banks are offered to such Reference Bank in the London interbank market for the applicable period determined as provided above plus (3) at such times as the Margin Increase Condition exists and the Additional Margin Increase Condition does not exist, 1/8% plus (4) at such times as the Additional Margin Increase Condition exists, 1/4% (or, if the circumstances described in clause (a) or (b) of Section 8.01 shall exist, at a rate per annum equal to the sum of 1% plus the rate applicable to Base Rate Loans for such day). Such interest shall be payable for each Interest Period on the last day thereof and, if such Interest Period is longer than three months, at intervals of three months after the first day thereof. The "London Interbank Offered Rate" applicable to any Interest Period means the arithmetic average (rounded upward, if necessary, to the next higher 1/16 of 1%) of the respective rates per annum at which deposits in dollars are offered to each of the Reference Banks in the London interbank market at approximately 11:00 A.M. (London time) two Euro-Dollar Business Days before the first day of such Interest Period in an amount approximately equal to the principal amount of the Euro-Dollar Loan of such Reference Bank to which such Interest Period is to apply and for a period of time comparable to such Interest Period. (c) The Agent shall determine each interest rate applicable to the Loans hereunder. The Agent shall give prompt notice to the Company and the participating Banks of each rate of interest so determined, and its determination thereof shall be conclusive in the absence of manifest error. Upon request of the Company, the Agent shall furnish to it such information as to its determinations hereunder as the Company may reasonably request. (d) Each Reference Bank agrees to use its best efforts to furnish quotations to the Agent as contemplated by this Section. If any Reference Bank does not furnish a timely quotation, the Agent shall determine the relevant interest rate on the basis of the quotation or quotations furnished by the remaining Reference Bank or -27- 34 Banks or, if none of such quotations is available on a timely basis, the provisions of Section 8.01 shall apply. (e) This Section 2.07 and each other provision in any of the Financing Documents or in any other agreement executed in connection herewith are specifically made subject to Section 2.16. SECTION 2.08. Fees. (a) During the Revolving Credit Period, the Company shall pay to the Agent for the account of the Banks ratably in proportion to their Commitments a commitment fee at a rate per annum equal to 0.1875% on the daily average amount by which the aggregate amount of the Commitments exceed the aggregate outstanding principal amount of the Loans. Such commitment fee shall accrue from and including the Effective Date to but excluding the Termination Date. Additionally, the Company shall pay to the Agent for the account of the Banks ratably a facility fee at a rate per annum equal to 0.1875% on the daily average aggregate outstanding principal amount of the Loans. Such facility fee shall accrue from and including the Effective Date to but excluding the date the Loans shall be repaid in their entirety. (b) Payments. Accrued fees under this Section 2.08 shall be payable quarterly on each March 31, June 30, September 30 and December 31 and upon the date of termination of the Commitments in their entirety (and, if later, the date the Loans shall be repaid in their entirety). SECTION 2.09. Optional Termination or Reduction of Commitments. The Company may, upon at least three Domestic Business Days' notice to the Agent, (i) terminate the Commitments at any time, if no Loans are outstanding at such time, or (ii) ratably reduce from time to time by an aggregate amount of $10,000,000 or any larger multiple of $5,000,000 the aggregate amount of the Commitments in excess of the aggregate outstanding principal amount of the Loans. SECTION 2.10. Mandatory Termination or Reduction of Commitments. (a) The Commitments shall terminate on the Termination Date. (b) On the fifth Domestic Business Day following any Asset Sale that results in positive Excess Net Sales Proceeds, (i) the Company will deliver to each of the Banks a certificate of the chief financial officer, the chief accounting officer or the treasurer of the Company certifying the amount of such Excess Net Sales Proceeds from such Asset Sale, (ii) the Commitments shall be automatically reduced ratably by an amount equal to (a) 100% of the amount of such Excess Net Sales Proceeds minus (b) the amount, if any, by which the Other Credit Agreement Commitments are reduced pursuant to Section 2.10(d)(ii) of the Other Credit Agreement as a result of such Excess Net Sales Proceeds from such Asset Sale, and (iii) the Company shall be obligated to -28- 35 repay such principal amount (together with accrued interest thereon) of each Bank's outstanding Loans, if any, as may be necessary so that after such repayment the aggregate outstanding principal amount of such Bank's Loans does not exceed the amount of such Bank's Commitment as then reduced. SECTION 2.11. Optional Prepayments. (a) The Company may, upon at least one Domestic Business Day's notice to the Agent, prepay any Borrowing in whole at any time, or from time to time in part in amounts aggregating $10,000,000 or any larger multiple of $1,000,000, by paying the principal amount to be prepaid together with accrued interest thereon to the date of prepayment; provided that no partial prepayment of a Euro-Dollar Borrowing shall be made if after giving effect thereto the principal amount of such Borrowing would be less than $10,000,000. Each such optional prepayment shall be applied to prepay ratably the Loans of the several Banks included in such Borrowing. (b) Upon receipt of a notice of prepayment pursuant to this Section, the Agent shall promptly notify each Bank of the contents thereof and of such Bank's ratable share (if any) of such prepayment and such notice shall not thereafter be revocable by the Company. SECTION 2.12. General Provisions as to Payments. (a) The Company shall make each payment of principal of, and interest on, the Loans and of fees hereunder, not later than 12:00 Noon (Houston time) on the date when due, in Federal or other funds immediately available in Houston, to the Agent at its address referred to in Section 9.01. The Agent will promptly distribute to each Bank its ratable share of each such payment received by the Agent for the account of the Banks. Whenever any payment of principal of, or interest on, the Base Rate Loans or of fees shall be due on a day which is not a Domestic Business Day, the date for payment thereof shall be extended to the next succeeding Domestic Business Day. Whenever any payment of principal of, or interest on, the Euro-Dollar Loans shall be due on a day which is not a Euro-Dollar Business Day, the date for payment thereof shall be extended to the next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in another calendar month, in which case the date for payment thereof shall be the next preceding Euro-Dollar Business Day. If the date for any payment of principal is extended by operation of law or otherwise, interest thereon shall be payable for such extended time. (b) Unless the Agent shall have received notice from the Company prior to the date on which any payment is due from the Company to the Banks hereunder that the Company will not make such payment in full, the Agent may assume that the Company has made such payment in full to the Agent on such date and the Agent may, in reliance upon such assumption, cause to be distributed to each Bank on such due date an amount equal to the amount then due such Bank. If and to the extent -29- 36 that the Company shall not have so made such payment, each Bank shall repay to the Agent forthwith on demand such amount distributed to such Bank together with interest thereon, for each day from the date such amount is distributed to such Bank until the date such Bank repays such amount to the Agent, at the Federal Funds Rate. SECTION 2.13. Funding Losses. If any Obligor makes any payment of principal with respect to any Euro-Dollar Loan (pursuant to Article II, VI or VIII or otherwise) on any day other than the last day of an Interest Period applicable thereto, or the end of an applicable period fixed pursuant to the proviso to Section 2.07(b), or if the Company fails to borrow any Euro-Dollar Loan after notice has been given to any Bank in accordance with Section 2.04(a), or if any Conversion of any Euro-Dollar Loan occurs on any day other than the last day of an Interest Period applicable thereto, the Company shall reimburse each Bank within 15 days after demand for any resulting loss or expense incurred by it (or by an existing or prospective Participant in the related Loan), including (without limitation) any loss incurred in obtaining, liquidating or employing deposits from third parties, but excluding loss of margin from the period after any such payment or failure to borrow; provided that such Bank shall have delivered to the Company a certificate as to the amount of such loss or expense, which certificate shall be conclusive in the absence of manifest error. SECTION 2.14. Computation of Interest and Fees. Interest based on the Base Rate hereunder shall be computed on the basis of a year of 365 days (or 366 days in a leap year) and paid for the actual number of days elapsed (including the first day but excluding the last day). All other interest and fees shall be computed on the basis of a year of 360 days and paid for the actual number of days elapsed (including the first day but excluding the last day). SECTION 2.15. Chapter 15. In no event shall the provisions of Article 5069, Chapter 15 of the Revised Civil Statutes of Texas (which regulates certain revolving credit loan accounts and revolving tri-party accounts) apply to any Loan made hereunder. SECTION 2.16. Maximum Interest Rate. (a) Nothing contained in this Agreement or the Notes shall require the Company to pay interest at a rate exceeding the maximum rate permitted without penalty by applicable law. Each provision in the Financing Documents and any other agreement executed in connection herewith is expressly limited so that in no event whatsoever shall the amount paid thereunder, or otherwise paid, by the Company for the use, forbearance or detention of the money to be loaned under this Agreement, exceed that amount of money which would cause the effective rate of interest thereon to exceed the maximum rate of interest permitted without penalty under applicable law, and all amounts payable under the Financing Documents or any other agreement executed in connection herewith, or otherwise payable in connection therewith, shall be subject to reduction so that such amounts paid -30- 37 or payable for the use, forbearance or detention of money to be loaned under this Agreement shall not exceed that amount of money which would cause the effective rate of interest thereon to exceed the maximum rate of interest permitted without penalty under applicable law. (b) If the amount of interest payable for the account of any Bank on any interest payment date in respect of the immediately preceding interest computation period, computed pursuant to Section 2.07, would exceed the maximum amount permitted without penalty by applicable law to be charged by such Bank, the amount of interest payable for its account on such interest payment date shall be automatically reduced to such maximum permissible amount. (c) If the amount of interest payable for the account of any Bank in respect of any interest computation period is reduced pursuant to clause (b) of this Section and the amount of interest payable for its account in respect of any subsequent interest computation period, computed pursuant to Section 2.07, would be less than the maximum amount permitted without penalty by applicable law to be charged by such Bank, then the amount of interest payable for its account in respect of such subsequent interest computation period shall be automatically increased to such maximum permissible amount; provided that at no time shall the aggregate amount by which interest paid for the account of any Bank has been increased pursuant to this clause (c) exceed the aggregate amount by which interest paid for its account has theretofore been reduced pursuant to clause (b) of this Section. (d) In the event that maturity of the Loans is accelerated for any reason, or in the event of any required or permitted prepayment of the Loans, then such consideration that constitutes interest payable for the account of any Bank shall never include more than the maximum amount allowed without penalty by applicable law to be charged by such Bank and excess interest, if any, payable for the account of such Bank pursuant to its Note, this Agreement or otherwise shall be cancelled automatically as of the date of such acceleration or prepayment and, if theretofore paid, shall be credited on the Loans of such Bank (or, to the extent in excess of such Loans, refunded by such Bank to the Company). (e) It is further agreed that, without limitation of the foregoing, all calculations of the rate of interest contracted for, charged or received for the account of any Bank under the Note held by it, under this Agreement, under any other agreement executed in connection herewith or otherwise in connection with the Loans or the Commitment of such Bank for the purpose of determining whether such rate exceeds the maximum nonusurious interest rate applicable to such Bank, shall be made, to the extent permitted by usury laws applicable to such Bank (now or hereafter enacted), by amortizing, prorating and spreading in equal parts during the period of the -31- 38 full stated terms of the Loans evidenced by such Note all interest at any time contracted for, charged or received by such Bank in connection therewith. (f) To the extent that any Bank may be subject to Texas law limiting the amount of interest payable for its account, such Bank shall utilize the indicated (weekly) rate ceiling from time to time in effect as provided in Article 5069-1.04 of the Revised Civil Statutes of Texas, as amended. SECTION 2.17. Taxes. (a) Any and all payments by the Company hereunder or under the Notes shall be made, in accordance with Section 2.12, free and clear of and without deduction for any and all present or future taxes, levies, imposts, deductions, charges and withholdings, and all liabilities with respect thereto, excluding (i) in the case of the Agent, each Co-Agent and each Bank, United States federal income taxes and, without duplication, any taxes imposed on its income, and franchise taxes imposed on it, by the jurisdiction under the laws of which the Agent, such Co-Agent or such Bank, as the case may be, is organized or any political subdivision thereof and (ii) in the case of each Bank, taxes imposed on its income, and franchise taxes imposed on it, by the jurisdiction of such Bank's Applicable Lending Office or any political subdivision thereof (all such non-excluded taxes, levies, imposts, deductions, charges, withholdings and liabilities being hereinafter referred to as "Taxes"). If the Company shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder or under any Note to any Bank, any Co-Agent or the Agent, (i) the sum payable shall be increased as may be necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 2.17) such Bank, such Co-Agent or the Agent (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Company shall make such deductions and (iii) the Company shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law. (b) In addition, the Company agrees to pay any present or future stamp or documentary taxes or any other excise or property taxes, assessments, charges or similar levies which arise from any payment made hereunder or under the Notes or from the execution, delivery or registration of, or otherwise with respect to, this Agreement, any of the Notes or the Subsidiary Guaranty Agreement (hereinafter referred to as "Other Taxes"). (c) The Company will indemnify each Bank, each Co-Agent and the Agent for the full amount of Taxes and Other Taxes (including, without limitation, any Taxes or Other Taxes imposed by any jurisdiction on amounts payable under this Section 2.17) paid by such Bank, such Co-Agent or the Agent (as the case may be) and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto, whether or not such Taxes or Other Taxes were correctly or legally asserted. -32- 39 Payments under any indemnification provided for in this Section 2.17(c) shall be made within 30 days from the date such Bank, such Co-Agent or the Agent (as the case may be) makes written demand therefor. (d) Within 30 days after the date of any payment of Taxes, the Company will furnish to the Agent, at its address referred to in Section 9.01, the original or a certified copy of a receipt evidencing payment thereof. Should any Bank, any Co-Agent or the Agent ever receive any refund, credit or deduction from any taxing authority to which such Bank, such Co-Agent or the Agent, as the case may be, would not be entitled but for the payment by the Company of Taxes as required by this Section 2.17 (it being understood that the decision as to whether or not to claim, and if claimed, as to the amount of any such refund, credit or deduction shall be made by such Bank, such Co-Agent or the Agent, as the case may be, in its sole discretion), such Bank, such Co-Agent or the Agent, as the case may be, thereupon shall repay to the Company an amount with respect to such refund, credit or deduction equal to any net reduction in taxes actually obtained by such Bank, such Co-Agent or the Agent, as the case may be, and reasonably determined by such Bank, such Co-Agent or the Agent, as the case may be, to be attributable to such refund, credit or deduction. (e) Each Bank represents that it is either (i) a corporation, association or other entity organized under the laws of the United States or any state thereof or (ii) entitled to complete exemption from United States withholding tax imposed on or with respect to any payments, including fees, to be made to it pursuant to this Agreement or the Notes. Each Bank that is not organized under the laws of the United States or any state thereof (a "Foreign Bank") agrees to provide to the Company and the Agent, on or prior to the date of this Agreement in the case of each Foreign Bank signatory hereto, and on the date of the Assignment pursuant to which it became a Bank in the case of each other Foreign Bank, two duly completed copies of United States Internal Revenue Service Form 1001 or 4224, certifying in either case that such Foreign Bank is entitled to receive payments from the Company under this Agreement and the Notes without deduction or withholding of any United States federal income taxes. Each Foreign Bank which so delivers a Form 1001 or 4224 further undertakes to deliver to each of the Company and the Agent two additional copies of such form (or a successor form) on or before the date that such form expires or becomes obsolete or after the occurrence of any event requiring a change in the most recent form so delivered by it, and such amendments thereto or extensions or renewals thereof as may be reasonably requested by the Company or the Agent, in each case certifying that such Foreign Bank is entitled to receive payments from the Company under this Agreement and the Notes without deduction or withholding of any United States federal income taxes, unless an event (including without limitation any change in treaty, law or regulation) has occurred prior to the date on which any such delivery would otherwise be required which renders all such forms inapplicable or which would prevent such Foreign Bank from duly completing and delivering any such form with respect to it and -33- 40 such Foreign Bank advises the Company and the Agent that it is not capable of receiving such payments without any deduction or withholding of United States federal income tax. Each Bank agrees to indemnify and hold the Company and the Agent harmless from any United States taxes, penalties, interest and other expenses, costs and losses incurred or payable by them as a result of either (a) such Bank's failure to submit any form that it is required to provide pursuant to this Section 2.17(e) or (b) the Agent's and the Company's reliance on any such form which such Bank has provided to them, or on the representation of such Bank made to them pursuant to this Section 2.17(e). (f) If any Taxes are paid by the Company pursuant to this Section 2.17 in respect of the Applicable Lending Office of any Bank, such Bank will, if requested to do so by the Company, designate a different Applicable Lending Office if such designation will avoid the need to pay, or reduce the amount of, such Taxes and will not, in the judgment of such Bank, be otherwise disadvantageous to such Bank. ARTICLE III CONDITIONS SECTION 3.01. Initial Borrowing. The obligation of any Bank to make a Loan on the occasion of the initial Borrowing is subject to the satisfaction (or waiver in accordance with Section 9.05) of each of the following conditions: (a) receipt by the Agent of counterparts hereof signed by each of the parties hereto (or, in the case of any party as to which an executed counterpart shall not have been received, receipt by the Agent in form satisfactory to it of telegraphic, telex or other written confirmation from such party of execution of a counterpart hereof by such party); (b) receipt by the Agent for the account of each Bank of a duly executed Note of the Company dated on the date of this Agreement complying with the provisions of Section 2.05; (c) receipt by the Agent of the Subsidiary Guaranty Agreement, duly executed by each of the Required Guarantors; (d) receipt by the Agent of an opinion of Newton W. Wilson, III, General Counsel of the Company, substantially in the form of Exhibit C hereto; -34- 41 (e) receipt by the Agent of an opinion of Andrews & Kurth L.L.P., special counsel for the Obligors, substantially in the form of Exhibit D hereto; (f) receipt by the Agent of an opinion of Bracewell & Patterson, L.L.P., special counsel for the Agent, substantially in the form of Exhibit E hereto; (g) receipt by the Agent of opinions of local counsel, substantially in the forms of Exhibits G-1 and G-2 hereto; (h) receipt by the Agent of all documents it may reasonably request relating to the existence of the Obligors, the corporate authority for and the validity of each of the Financing Documents, and any other matters relevant thereto, all in form and substance satisfactory to the Agent; (i) receipt by the Agent of a certificate of an officer of the Company stating the rating by S&P of all senior unsecured long-term debt of the Company as in effect on the date of this Agreement; and (j) receipt by the Agent of a certificate of the chief financial officer, the chief accounting officer or the treasurer of the Company certifying, as of the Effective Date, that no Default exists and certifying the aggregate outstanding amount of Consolidated Debt as of December 31, 1994 and the Operating Cash Flow for the four calendar quarter period ending on December 31, 1994. SECTION 3.02. All Borrowings. The obligation of any Bank to make a Loan on the occasion of any Borrowing is subject to the satisfaction of the following conditions (in addition to the conditions set forth in Section 3.01): (a) receipt by the Agent of a Notice of Borrowing as required by Section 2.02; (b) the fact that immediately prior to and immediately after such Borrowing, no Default shall have occurred and be continuing; and (c) the fact that the representations and warranties of the Company contained in this Agreement (except, in the case of any Borrowing subsequent to the first Borrowing, the representations and warranties set forth in Section 4.04(a) or (c)) shall be true and correct in all material respects on and as of the date of such Borrowing. -35- 42 Each Borrowing hereunder shall be deemed to be a representation and warranty by the Company on the date of such Borrowing as to the facts specified in this Section. ARTICLE IV REPRESENTATIONS AND WARRANTIES The Company represents and warrants that: SECTION 4.01. Corporate Existence and Power. Each of the Obligors is a corporation duly incorporated, validly existing and in good standing under the laws of its jurisdiction of incorporation, and has all corporate powers and all material governmental licenses, authorizations, consents and approvals required to own its assets and to carry on its business as now conducted and is duly qualified as a foreign corporation in good standing in each jurisdiction where the nature of its business or the ownership or leasing of its properties requires such qualification and where the failure so to qualify could have a material adverse effect on the business, financial position, results of operations or prospects of the Company and its Subsidiaries, taken as a whole. Neither the Company nor any Subsidiary or Affiliate is subject to regulation under the Public Utility Holding Company Act of 1935, the Investment Company Act of 1940, the Interstate Commerce Act or any other law or regulation which limits the incurrence by the Company or any Subsidiary of Debt, including, but not limited to, laws relating to common or contract carriers or the sale of electricity, gas, steam, water or other public utility services. SECTION 4.02. Corporate and Governmental Authorization; Contravention. The execution, delivery and performance by each Obligor of each Financing Document to which it is shown as being a party are within such Obligor's corporate powers, have been duly authorized by all necessary corporate action, and do not contravene, or constitute a default under, any provision of applicable law or regulation (including, without limitation, Regulations G, T, U and X of the Board of Governors of the Federal Reserve System) or the certificate of incorporation, by-laws or other charter documents of such Obligor or of any instrument or agreement evidencing or governing Debt or any other material agreement, judgment, injunction, order, decree or other instrument binding upon such Obligor or result in the creation or imposition of any material Lien on any asset of the Company or any Subsidiary. All authorizations, consents and approvals of governmental bodies, agencies or officials required in connection with the execution, delivery and performance by each Obligor of the Financing Documents to which it is shown as being a party have been obtained and are in full force and effect. SECTION 4.03. Binding Effect. This Agreement and each of the Notes have been duly executed and delivered by the Company and constitute legal, valid and -36- 43 binding agreements of the Company, and the Subsidiary Guaranty Agreement has been duly executed and delivered by each Required Guarantor and constitutes a legal, valid and binding obligation of each Required Guarantor. SECTION 4.04. Information. (a) The consolidated balance sheet of the Company and its Consolidated Subsidiaries as of December 31, 1994 and the related consolidated statements of operations, cash flows and common stock and other shareholders' equity for the fiscal year then ended, reported on by Price Waterhouse and set forth in the Company's 1994 Form 10-K, a copy of which has been delivered to each of the Banks, fairly present, in conformity with generally accepted accounting principles, the consolidated financial position of the Company and its Consolidated Subsidiaries as of such date and their consolidated results of operations and cash flows for such fiscal year. (b) To the best knowledge of the Company, there are no statements or conclusions in any Engineering Report delivered pursuant hereto which are based upon or include misleading information or fail to take into account material information regarding the matters reported therein, it being understood that such statements and conclusions are necessarily based upon professional opinions, estimates and forecasts, and the Company does not warrant that such opinions, estimates and forecasts will ultimately prove to have been accurate. (c) The Company's 1994 Form 10-K does not contain any untrue statement of material fact or omit to state a material fact necessary in order to make the statements contained therein not misleading. Except for matters of general public knowledge with respect to the oil and gas industry, the Company has disclosed to the Banks in writing any and all facts which materially and adversely affect or may be reasonably expected so to affect (to the extent the Company can now reasonably foresee), the business, assets, operations, prospects or condition, financial or otherwise, of the Company and its Subsidiaries or the ability of any Obligor to perform its obligations under the Financing Documents. (d) Since December 31, 1994 there has been no material adverse change in the business, financial position, results of operations or prospects of the Company and its Subsidiaries, taken as a whole. (e) No Default exists. SECTION 4.05. Litigation. There is no action, suit or proceeding pending against, or to the knowledge of the Company threatened against or affecting, the Company or any of its Subsidiaries or any of their respective properties or interests -37- 44 at law or in admiralty or equity, before any court or arbitrator or any governmental body, agency or official, foreign or domestic, in which there is a reasonable possibility of an adverse decision which could materially adversely affect the business, financial position or results of operations of the Company and its Subsidiaries, taken as a whole, or which in any manner draws into question the validity of any Financing Document. SECTION 4.06. Compliance with ERISA. Each member of the ERISA Group has fulfilled its obligations under the minimum funding standards of ERISA and the Internal Revenue Code with respect to each Plan and is in compliance in all material respects with the presently applicable provisions of ERISA and the Internal Revenue Code with respect to each Plan. No member of the ERISA Group has (i) sought a waiver of the minimum funding standard under Section 412 of the Internal Revenue Code in respect of any Plan, (ii) failed to make any contribution or payment to any Plan or Multiemployer Plan or in respect of any Benefit Arrangement, or made any amendment to any Plan or Benefit Arrangement, which has resulted or could result in the imposition of a Lien or the posting of a bond or other security under ERISA or the Internal Revenue Code or (iii) incurred any liability under Title IV of ERISA other than a liability to the PBGC for premiums under Section 4007 of ERISA. SECTION 4.07. Environmental Matters. In the ordinary course of its business, the Company conducts an ongoing review of the effect of existing Environmental Laws on the business, operations and properties of the Company and the Subsidiaries, in the course of which it attempts to identify and evaluate associated liabilities and costs (including, without limitation, any capital or operating expenditures required for clean-up or closure of properties presently or previously owned, any capital or operating expenditures required to achieve or maintain compliance with environmental protection standards imposed by law or as a condition of any license, permit or contract, any related constraints on operating activities, including any periodic or permanent shutdown of any facility or reduction in the level of or change in the nature of operations conducted thereat and any actual or potential liabilities to third parties, including employees, and any related costs and expenses). On the basis of this review, the Company has reasonably concluded that existing Environmental Laws are unlikely to have a material adverse effect on the business, financial condition, results of operations or prospects of the Company and its Subsidiaries, taken as a whole. SECTION 4.08. Subsidiaries. All Restricted Assets are owned as of the date of this Agreement by the Company and the Persons listed in Part B of Schedule II hereto or, in the case of Restricted Assets sold since December 31, 1993, by Persons other than Unrestricted Subsidiaries. The list of entities under the caption "Subsidiary Guarantors" on the signature pages of the Subsidiary Guaranty Agreement constitutes a true, complete and accurate list of all Required Guarantors as of the date of this Agreement. Part A of Schedule II hereto contains a true, complete and accurate list of -38- 45 all Unrestricted Subsidiaries, and Part B of Schedule II hereto contains a true, complete and accurate list of all Restricted Subsidiaries as of the date of this Agreement. SECTION 4.09. Ownership of Restricted Subsidiaries. The Company or a Restricted Subsidiary is the record and beneficial owner, free and clear of all Liens (other than those permitted by Section 5.07), of (i) all of the issued and outstanding capital stock (other than directors' qualifying shares and shares beneficially owned by the Company or a Restricted Subsidiary and held by nominees of the Company or a Restricted Subsidiary solely to satisfy requirements of local law) and other ownership interests of each Restricted Subsidiary (except Unimar and the Unimar Restricted Subsidiaries and any other Restricted Subsidiary the capital stock of which is sold pursuant to a sale permitted by Section 5.14) and (ii) except during any period during which Unimar is an Unrestricted Subsidiary or ceases to be a Subsidiary, at least 50% of the ownership interest in Unimar and the Unimar Restricted Subsidiaries. Except as disclosed on Schedule VI, there are no outstanding options, warrants or other rights to acquire any capital stock or other ownership interest of any Restricted Subsidiary. SECTION 4.10. Title to Properties. The Company and each of the Subsidiaries have good title, free and clear of all Liens, claims, burdens and title defects, to all of the material assets reflected in the Company's or such Subsidiary's books and records as being owned by them except Liens permitted by this Agreement and claims, burdens and title defects not materially adverse in the aggregate. SECTION 4.11. Taxes and Other Obligations. Consolidated United States Federal income tax returns of the Company and the Subsidiaries have been examined by the Internal Revenue Service, or the statutory period for such examination has expired, for all years up to and including the year ended December 31, 1989, and all assessed deficiencies resulting from such examination have been discharged or reserved against as required by generally accepted accounting principles. The Company and the Subsidiaries have filed all United States Federal, state and local income tax returns and all other material domestic tax returns which are required to be filed by them and have paid, or provided for the payment before the same became delinquent of, all taxes due pursuant to such returns or pursuant to any assessment received by the Company or any Subsidiary, other than those taxes being diligently contested in good faith by appropriate proceedings. The charges, accruals and reserves on the books of the Company and the Subsidiaries in respect of taxes are, in the opinion of the Company, adequate. The Company and the Subsidiaries have set up such reserves as are required by generally accepted accounting principles for the payment of additional taxes for years which have not been audited by the respective tax authorities. The Company and the Subsidiaries have paid all other material obligations when due other than those being contested in good faith by appropriate proceedings. -39- 46 SECTION 4.12. Regulation U. Neither the Company nor any Subsidiary is engaged in the business of extending credit for the purpose of purchasing or carrying margin stock (within the meaning of Regulation G) or margin stock (within the meaning of Regulation U). Following the application of the proceeds of each Loan, not more than 25% of the value of the assets of the Company, or of the Company and its Subsidiaries, which are subject to any arrangement with the Agent or any Bank (herein or otherwise) whereby the Company's or any Subsidiary's right or ability to sell, pledge or otherwise dispose of assets is in any way restricted will be any such margin stock. SECTION 4.13. Certain Obligations. Neither the Company nor any Subsidiary has any obligation to make payments on the Joint Venture Debt other than those permitted by Section 5.17. The only Non-Recourse Debt existing on the date of this Agreement is the Existing Pakistan Non-Recourse Debt. SECTION 4.14. United Kingdom Assets. Substantially all of the Restricted Assets located in the United Kingdom (including the United Kingdom Sector of the North Sea) are directly owned by UTPL as of the date of this Agreement. ARTICLE V COVENANTS The Company agrees that, so long as any Bank has any Commitment hereunder or any amount payable under any Note remains unpaid: SECTION 5.01. Information. The Company will deliver to each of the Banks: (a) as soon as available and in any event within 100 days after the end of each fiscal year of the Company, a consolidated balance sheet of the Company and its Consolidated Subsidiaries as of the end of such fiscal year and the related consolidated statements of operations, cash flows and common stock and other shareholders' equity for such fiscal year, setting forth in each case in comparative form the figures for the previous fiscal year, all reported on in a manner acceptable to the Securities and Exchange Commission by Price Waterhouse or other independent public accountants of nationally recognized standing; (b) as soon as available and in any event within 60 days after the end of each of the first three quarters of each fiscal year of the Company, a consolidated balance sheet of the Company and its Consolidated Subsidiaries as -40- 47 of the end of such quarter and the related consolidated statements of operations and cash flows for such quarter and for the portion of the Company's fiscal year ended at the end of such quarter, setting forth in each case in comparative form the figures for the corresponding quarter and the corresponding portion of the Company's previous fiscal year, all certified (subject to normal year-end adjustments) as to preparation in accordance with generally accepted accounting principles and consistency by the chief financial officer, the chief accounting officer or the treasurer of the Company; (c) simultaneously with the delivery of each set of financial statements referred to in clauses (a) and (b) above, a certificate of the chief financial officer, the chief accounting officer or the treasurer of the Company (i) setting forth in reasonable detail the calculations required to establish whether the Company was in compliance with the requirements of Sections 5.05 and 5.15 on the date of such financial statements and (ii) stating whether any Default exists on the date of such certificate and, if any Default then exists, setting forth the details thereof and the action which the Company and its Subsidiaries are taking or propose to take with respect thereto; (d) as soon as available and in any event within 60 days after the end of each fiscal quarter of the Company, a certificate of the chief financial officer, the chief accounting officer or the treasurer of the Company certifying (i) whether the Margin Increase Condition will exist during the Margin Period commencing 61 days following the end of such fiscal quarter and (whether or not any will exist) setting forth the computation of each amount referred to in the definition thereof as of the relevant dates or for the relevant periods, (ii) whether the Additional Margin Increase Condition exists as of the date of such certificate, (iii) the Unimar Percentage as of the end of such quarter and the amounts as of the end of such quarter of Consolidated Debt, Defeased Debt, Excluded Subordinated Debt, Debt of the Company and its Consolidated Subsidiaries determined on a consolidated basis, Debt of the Company and the Restricted Subsidiaries determined on a consolidated basis, Debt of Unimar, Debt of Unrestricted Subsidiaries, Excess Letter of Credit/Guarantee Amount, Non-Restricted Asset Non-Recourse Debt, Non-Recourse Debt of the Company and the Restricted Subsidiaries, and Restricted Subsidiaries Recourse Debt, and (iv) each Asset Sale that has been consummated during such quarter, the Fair Market Value of the Restricted Assets subject thereto, the amount of fees, commissions, expenses and taxes related thereto, the Net Sales Proceeds therefrom and the cumulative amount of the Excess Net Sales Proceeds from all Assets Sales since December 31, 1993; (e) within five days after the chief financial officer, the chief accounting officer or treasurer of the Company obtains knowledge of any -41- 48 Default, if such Default is then continuing, a certificate of the chief financial officer, the chief accounting officer or the treasurer of the Company setting forth the details thereof and the action which the Company and its Subsidiaries are taking or propose to take with respect thereto; (f) immediately upon the filing of, or any material development in, any litigation or the occurrence of any other event or contingency, if such development, litigation, event or contingency could reasonably be expected to have a material adverse effect on the business, assets, operations, prospects or condition, financial or otherwise, of the Company and its Subsidiaries, taken as a whole, a certificate of the chief financial officer, the chief accounting officer or the treasurer of the Company setting forth the details of such development, litigation, event or contingency and the action which the Company and its Subsidiaries are taking or propose to take with respect thereto; (g) as soon as available and in any event within 100 days after the end of each fiscal year of each Restricted Subsidiary (other than the Unimar Restricted Subsidiaries), a consolidated balance sheet of such Restricted Subsidiary and its consolidated subsidiaries as of the end of such fiscal year and the related consolidated statements of operations, cash flows and common stock and other shareholders' equity for such fiscal year, setting forth in each case in comparative form the figures for the previous fiscal year, all certified as to preparation in accordance with generally accepted accounting principles and consistency by the chief financial officer, the chief accounting officer or the treasurer of such Restricted Subsidiary; (h) as soon as available and in any event within 60 days after the end of the first three quarters of each fiscal year of each Restricted Subsidiary (other than the Unimar Restricted Subsidiaries, Union Texas Petroleum Energy Corporation and Union Texas International Corporation), a consolidated balance sheet of such Restricted Subsidiary and its consolidated subsidiaries as of the end of such quarter and the related consolidated statements of operations and cash flows for such quarter and for the portion of such Restricted Subsidiary's fiscal year ended at the end of such quarter, setting forth in each case in comparative form the figures for the corresponding quarter and the corresponding portion of such Restricted Subsidiary's previous fiscal year, all certified (subject to normal year-end adjustments) as to preparation in accordance with generally accepted accounting principles and consistency by the chief financial officer, the chief accounting officer or the treasurer of such Restricted Subsidiary; -42- 49 (i) promptly upon the mailing thereof to the shareholders of the Company generally, copies of all financial statements, reports and proxy statements so mailed; (j) promptly upon the filing thereof, copies of all registration statements (other than the exhibits thereto and any registration statements on Form S-8 or its equivalent) and reports on Forms 10-K, 10-Q and 8-K (or their equivalents) which the Company shall have filed with the Securities and Exchange Commission; (k) at least 45 days prior to the closing of each Asset Sale that will result in aggregate Net Sales Proceeds (for such sale or, if such sale is one of a series of related sales, for all sales and contemplated sales in such series) of $50,000,000 or more, notice of such sale describing the assets to be sold and the estimated Net Sales Proceeds thereof; (l) if and when any member of the ERISA Group (i) gives or is required to give notice to the PBGC of any "reportable event" (as defined in Section 4043 of ERISA) (other than a "reportable event" not subject to the provisions for 30-day notice to the PBGC under the regulations issued under Section 4043 of ERISA) with respect to any Plan which might constitute grounds for a termination of such Plan under Title IV of ERISA, or knows that the plan administrator of any Plan has given or is required to give notice of any such reportable event, a copy of the notice of such reportable event given or required to be given to the PBGC; (ii) receives notice of complete or partial withdrawal liability under Title IV of ERISA or notice that any Multiemployer Plan is in reorganization, is insolvent or has been terminated, a copy of such notice; (iii) receives notice from the PBGC under Title IV of ERISA of an intent to terminate, impose liability (other than for premiums under Section 4007 of ERISA) in respect of, or appoint a trustee to administer, any Plan, a copy of such notice; (iv) applies for a waiver of the minimum funding standard under Section 412 of the Internal Revenue Code, a copy of such application; (v) gives notice of intent to terminate any Plan under Section 4041(c) of ERISA, a copy of such notice and other information filed with the PBGC; (vi) gives notice of withdrawal from any Plan pursuant to Section 4063 of ERISA, a copy of such notice; or (vii) fails to make any payment or contribution to any Plan or Multiemployer Plan or in respect of any Benefit Arrangement which has resulted or could result in the imposition of a Lien or the posting of a bond or other security, a certificate of the chief financial officer, the chief accounting officer or the treasurer of the Company setting forth details as to such occurrence and action, if any, which the Company or applicable member of the ERISA Group is required or proposes to take; -43- 50 (m) within 5 days after the chief financial officer, the Vice President-Finance, the treasurer or the controller of the Company has knowledge of any filing under Rule 13d of the Securities and Exchange Commission, promulgated under the Securities Exchange Act of 1934, as amended, a copy thereof; (n) within 5 days after receipt by the Company of any written agreement of the type referred to in Section 6.01(k)(iii)(c), (A) a copy thereof except that (i) if such written agreement has not been filed with the Securities and Exchange Commission and is not otherwise public information, each Bank as a condition to receiving a copy of such written agreement may be required to sign, prior to receipt thereof, a confidentiality agreement pursuant to which it agrees that it will treat such written agreement in a confidential manner until such written agreement otherwise becomes public, except for disclosure (a) to counsel for and other advisors, accountants and auditors of such Bank, (b) as may be required by statute, decision, order, rule, regulation or other law, (c) to regulatory authorities, (d) in connection with any litigation involving such written agreement, such confidentiality agreement or any of the Financing Documents, and (e) in connection with any assignment, prospective assignment, sale, prospective sale, participation or prospective participation or other transfer or prospective transfer of any of such Bank's interests hereunder; provided that any such assignee, prospective assignee, purchaser, prospective purchaser, participant, prospective participant, transferee, or prospective transferee shall have entered into a confidentiality agreement for the benefit of the Company substantially upon the terms of this Section 5.01(n), and (ii) if the Company is contractually prohibited from delivering a copy of such written agreement to the Banks, the Company shall not be required to deliver such written agreement unless such prohibition has been waived, but the Company shall use reasonable efforts to obtain such waiver or if it is a party to such written agreement to prevent any such prohibition from being included therein, and (B) if the Company is a party to such written agreement, but is excused pursuant to clause (A)(ii) of this Section 5.01(n) from delivering a copy thereof to the Banks, the Company shall notify the Banks of the existence of such written agreement (but not the content thereof or other parties thereto), but as a condition to receiving such notice the Banks may be required to sign, prior to receipt of such notice, a confidentiality agreement conforming to clause (A)(i) of this Section 5.01(n); (o) by May 1 of each year, an Engineering Report as of the last day of the immediately preceding year; (p) promptly upon the closing of the sale or other disposition of any capital stock of UTPC or any option, warrant or other right to acquire any such capital stock, notice thereof; -44- 51 (q) promptly after any change in or termination of the rating of any senior unsecured long-term debt of the Company by S&P, notice thereof. (r) from time to time such additional information regarding the financial position or business of the Company or any Subsidiary as the Agent, at the request of any Bank, may reasonably request. SECTION 5.02. Affirmative Covenants. The Company will maintain its existence and cause each Restricted Subsidiary to maintain its existence except in the case of (i) a merger of a Restricted Subsidiary into the Company in a merger permitted by Section 5.08 hereof, (ii) the merger of a Restricted Subsidiary into another Restricted Subsidiary, if immediately after such merger (and giving effect thereto), no Default shall have occurred and be continuing, and (iii) any Asset Sale in the form of the merger of a Restricted Subsidiary into another Person, if immediately after such merger (and giving effect thereto), no Event of Default shall have occurred and be continuing. The Company and each Subsidiary shall: (a) Conduct of Business; Property. Cause all material property useful and necessary in its business to be maintained in good working order and condition and to be operated prudently in accordance with good industry practice; and to the extent consistent with prudent business practices, defend its right, title and interest in its material properties against all adverse claims. (b) Compliance with Laws. Comply with all applicable laws, ordinances, rules, regulations and reporting, filing and other requirements of governmental authorities (including, without limitation, Environmental Laws and ERISA and the rules and regulations thereunder), except where the necessity of compliance therewith is contested in good faith by appropriate proceedings or where the failure to so comply would not have a material adverse effect on the Company and its Subsidiaries, taken as a whole. (c) Inspection of Property, Books and Records. Keep proper books of record and account in accordance with sound accounting practices; and permit representatives of any Bank, at such Bank's sole risk and expense, to visit and inspect any of its properties (subject to obtaining any required consent of third-party operators), to examine and make abstracts and copies from any of its books and records and to discuss its affairs, finances and accounts with its officers and employees, and use its best efforts to make its independent public accountants available to discuss the affairs, finances and accounts of the Company -45- 52 and any of its Subsidiaries, all at such reasonable times and as often as may reasonably be desired. SECTION 5.03. Primary Business. The exploration for, and production and marketing of, Hydrocarbons will continue to be the primary business of the Company and its Subsidiaries taken as whole. SECTION 5.04. Insurance. The Company will maintain, and will cause each Subsidiary to maintain (either in the name of the Company or in such Subsidiary's own name) with financially sound and reputable insurance companies, insurance on their property in at least such amounts and against at least such risks as are usually insured against in the same general area by companies of established repute engaged in the same or similar business; and will furnish to the Banks, upon written request from the Agent, full information as to the insurance carried. SECTION 5.05. Debt. (a) Consolidated Debt will at no time exceed $775,000,000 minus the aggregate of all Excess Net Sales Proceeds with respect to all Asset Sales made at or prior to such time. (b) At no time will Restricted Subsidiaries Recourse Debt exceed $75,000,000. (c) Consolidated Debt will not, on the last day of any calendar quarter, exceed 3.75 times Operating Cash Flow for the four calendar quarters ending on such day. (d) Neither the Company nor any Restricted Subsidiary will create, assume or otherwise incur any Debt if at the time of creation, assumption or incurrence of such Debt or after giving effect to the creation, assumption or incurrence of such Debt, any Event of Default would exist; provided that the Company or any Restricted Subsidiary may renew or extend (but not increase) its own Debt. SECTION 5.06. Restricted Payments. Neither the Company nor any Subsidiary shall declare or make any Restricted Payment unless, immediately prior thereto and immediately thereafter, no Event of Default shall have occurred and be continuing. Neither the Company nor any Subsidiary shall make any Restricted Transfer unless, immediately prior thereto and immediately thereafter, no Event of Default shall have occurred and be continuing; provided that the Company or any Subsidiary can make Restricted Transfers in the form of Investments in an Affiliate, Unrestricted Subsidiary or subsidiary of an Unrestricted Subsidiary if (i) such Affiliate, Unrestricted Subsidiary or subsidiary, as the case may be, has no outstanding Debt at the time of such Investment and does not thereafter create, assume or otherwise incur any Debt while any Event of Default is continuing and (ii) the Company notifies the -46- 53 Banks of any such Investment in excess of $5,000,000 at least ten days prior to such Investment. Nothing in this Section shall prohibit the payment of any dividend or distribution within 45 days after the declaration thereof if payment of such dividend or distribution was not prohibited by this Agreement at the time such declaration was made. SECTION 5.07. Negative Pledge. Neither the Company nor any Restricted Subsidiary will create, assume or suffer to exist (i) any Lien on any capital stock or other ownership interest of any Restricted Subsidiary now owned or hereafter acquired by it or any Lien on any option, warrant or other right to acquire any capital stock or other ownership interest of any Restricted Subsidiary now owned or hereafter acquired by it, other than those described in Part A of Schedule III or (ii) any Lien on any other asset now owned or hereafter acquired by it, except for the following Liens on assets not referred to in the foregoing clause (i) of this Section: (a) Liens existing on the date of this Agreement, securing Debt outstanding and other obligations (including contractual obligations) existing on the date of this Agreement and, except in the case of inchoate operator's Liens, described in Part B of Schedule III hereto; (b) any Lien (i) on any Non-Restricted Asset securing only Non-Restricted Asset Non-Recourse Debt of the Company or any Restricted Subsidiary or (ii) on any asset of Virginia Indonesia Company, Virginia International Company or Union Texas East Kalimantan Limited securing Joint Venture Debt; (c) mechanics', materialmen's, carriers' and other statutory Liens, but only if arising, and only so long as continuing, in the ordinary course of business; or deposits or pledges to obtain the release of any such Lien; or easements, encroachments or other title defects which do not materially detract from the value of its assets or materially impair the use thereof in the operation of its business; (d) Liens arising in the ordinary course of its business which (i) do not secure Debt, (ii) do not secure any obligation in an amount exceeding $15,000,000 and (iii) do not in the aggregate materially detract from the value of its assets or materially impair the use thereof in the operation of its business; (e) Liens on any interest in a Partnership arising under any agreement creating or governing such Partnership (including Unimar) and securing only obligations of the members of such Partnership to make Investments in such Partnership; -47- 54 (f) Liens arising under any customary provision of any joint operating agreement or similar agreement relating to the exploration, production, development or transportation of oil and gas; (g) Liens not otherwise permitted by the foregoing clauses of this Section on assets (other than any of the Restricted Assets) securing Debt in an aggregate principal amount at any time outstanding not to exceed $20,000,000; and (h) any Lien securing the refinancing, extension, renewal or refunding of any Debt secured by any Lien permitted by the foregoing subsection (a) of this Section; provided that such Debt is not increased from the lesser of the amount of such Debt set forth on Schedule III hereto or the amount of such Debt outstanding immediately prior to such refinancing, extension, renewal or refunding, and such Lien does not cover any property that is not described on Schedule III hereto as securing such Debt. SECTION 5.08. Consolidations and Mergers. The Company will not consolidate or merge with or into any Person; provided that the Company may merge with another Person if the Company is the surviving corporation and, immediately after such merger (and giving effect thereto), no Default shall have occurred and be continuing. SECTION 5.09. Use of Proceeds. The proceeds of the Loans made under this Agreement will be used by the Company for general corporate purposes; provided that none of such proceeds will be used in any manner or for any purpose that results in any violation of any applicable law or regulation (including, without limitation, Regulations G, T, U and X of the Board of Governors of the Federal Reserve System). SECTION 5.10. Parties to Subsidiary Guaranty Agreement. The Company shall cause each Person that shall at any time after the date of this Agreement become a Required Guarantor to enter into the Subsidiary Guaranty Agreement and deliver, not later than 30 days after the date on which such Person shall have become a Required Guarantor, to the Agent, in addition to a duly executed counterpart of the Subsidiary Guaranty Agreement, duly executed documents, in form and substance satisfactory to the Agent, of the type referred to in Section 3.01(c), (d), (e), (g) and (h) pertaining to such Required Guarantor and the Subsidiary Guaranty Agreement executed by it. Upon any sale or other disposition of all of the capital stock of a Required Guarantor in an Asset Sale permitted by Section 5.14, so long as no Default exists, such Required Guarantor shall be released from its obligations under the Subsidiary Guaranty Agreement, and the Agent shall execute such releases and other documents as such Subsidiary or the Company may reasonably request to further evidence such release. -48- 55 SECTION 5.11. Restrictions on Dividends, Intercompany Loans, or Investments. The Company will not create or otherwise cause or permit to exist or become effective, or permit any Subsidiary to create or otherwise cause or permit to exist or become effective, any consensual encumbrance or restriction (other than the Financing Documents) on the ability of any Restricted Subsidiary to (i) pay dividends or make any other distributions on its capital stock or other ownership interests or pay any Debt or other obligation owed to the Company or any Restricted Subsidiary, or (ii) make any loans or advances to or other Investments in the Company or any Restricted Subsidiary, except any encumbrance or restriction in effect on the date of this Agreement and described on Schedule IV hereto. SECTION 5.12. Loans and Advances. The Company will not make or permit to remain outstanding any cash loan or advance to any Person, or permit any Restricted Subsidiary to make or permit to remain outstanding any cash loan or advance to any Person, except (i) loans and advances to Subsidiaries or joint ventures, partnerships or other business ventures in which the Company or any Subsidiary has or is contemporaneously acquiring an interest or participation; and (ii) other loans and advances not exceeding $10,000,000 at any time outstanding. SECTION 5.13. Cross-Default. The Company will not create, assume, otherwise incur or suffer to exist, or permit any Restricted Subsidiary to create, assume, otherwise incur or suffer to exist, any Debt if the maturity of such Debt is or may be accelerated (assuming the giving of notice or lapse of time or both), in whole or in part, as a result of any default under, or acceleration of (i) any Non-Recourse Debt of the Company or any Restricted Subsidiary or (ii) any Debt of any Unrestricted Subsidiary, unless the Required Banks shall have given their prior written consent to such Debt of the Company or Restricted Subsidiary to be so created, assumed or otherwise incurred, which consent will not be unreasonably withheld; provided that this Section 5.13 shall not prohibit a provision in a Guarantee of the Company or a Restricted Subsidiary Guaranteeing Debt of an Unrestricted Subsidiary that provides that the payment obligation under such Guarantee may be accelerated upon default under or acceleration of such Debt. SECTION 5.14. Subsidiaries. The Company will at all times own, either directly or through one or more Restricted Subsidiaries, free and clear of all Liens (other than those permitted by Section 5.07), 100% of all issued and outstanding capital stock (other than directors' qualifying shares and shares beneficially owned by the Company or a Restricted Subsidiary and held by nominees of the Company or a Restricted Subsidiary solely to satisfy requirements of local law) and other ownership interests of each Restricted Subsidiary and all options, warrants and other rights to acquire any such capital stock or any such ownership interest, except for (i) Unimar and the Unimar Restricted Subsidiaries, (ii) any Restricted Subsidiary sold or otherwise disposed of pursuant to an Asset Sale, if after giving effect to such Asset Sale, the -49- 56 Company does not own, directly or indirectly, any interest in such Restricted Subsidiary, and (iii) those options described on Schedule VI. The Company will at all times own, either directly or through one or more Restricted Subsidiaries, free and clear of all Liens (other than those permitted by Section 5.07), 50% or more of the ownership interest in Unimar and the Unimar Restricted Subsidiaries and all options, warrants and other rights to acquire any such ownership interest (other than those described on Schedule VI); provided that the Company and the Restricted Subsidiaries may sell all of their ownership interest in Unimar and the Unimar Restricted Subsidiaries and such options, warrants and other rights if, after giving effect to such sale, the Company does not own, directly or indirectly, any interest in Unimar, the Unimar Restricted Subsidiaries or any such option, warrant or other right. The Company will not at any time permit any Restricted Subsidiary that is not a Unimar Restricted Subsidiary to become a Unimar Restricted Subsidiary. The Company will not permit any Restricted Asset to be sold, leased, transferred or otherwise disposed of to any Person that was an Unrestricted Subsidiary immediately prior thereto if any Default then exists or would result. The Company will not permit any Restricted Subsidiary to issue any preferred stock unless such preferred stock at all times is owned only by the Company. The Company will not permit any Restricted Subsidiary to own, directly, both (a) any UK Asset and (b) any Non-UK Asset. SECTION 5.15. Adjusted Equity and Interest Coverage. The Company will at all times maintain Adjusted Equity of $300,000,000 or more. The Company will cause EBITDA for each period of four consecutive calendar quarters to exceed 4.00 times Cash Interest Expense for such period. SECTION 5.16. Excluded Subordinated Debt and Preferred Stock. Neither the Company nor any Subsidiary will pay, prepay, purchase, redeem, defease, acquire, exchange or convert any preferred stock (other than Restricted Preferred Stock) or any Excluded Subordinated Debt, except (a) exchanges for or conversions to common stock of the Company, (b) payments of interest when due required by the terms of any such Excluded Subordinated Debt as such terms are in effect on the date such Excluded Subordinated Debt is incurred and (c) if no Event of Default exists, payments of ordinary periodic dividends (excluding liquidating dividends) on such preferred stock in accordance with the terms thereof as such terms are in effect on the date such preferred stock is issued. SECTION 5.17. Certain Obligations. Neither the Company nor any Subsidiary will create, incur, assume or suffer to exist any obligation on its part to make any payment on the Joint Venture Debt other than (a) the obligations set forth in the agreements listed on Schedule V hereto with respect to Joint Venture Debt in existence on the date of this Agreement and (b) obligations substantially similar to those referred to in clause (a) with respect to Joint Venture Debt created, incurred, assumed or arising after the date of this Agreement. -50- 57 SECTION 5.18. Restrictions on Asset Sales. (a) The Company will not and will not permit any of its Restricted Subsidiaries to enter into any Asset Sale if after giving effect thereto any Event of Default would exist. (b) The Company will not permit to occur any Asset Sale involving, directly or indirectly, any UK Assets if the aggregate Net Sales Proceeds of all Asset Sales involving, directly or indirectly, UK Assets since December 31, 1993 would exceed $250,000,000. SECTION 5.19. UTEK Guaranty. The Company will cause Union Texas East Kalimantan Limited to report, as promptly as reasonably practicable, the execution and delivery of the Subsidiary Guaranty Agreement to the Indonesian Foreign Commercial Loan Team ("Team") established pursuant to Indonesian Presidential Decree No. 39 of 1991 and to deliver, as promptly as reasonably practicable, to the Team and to Bank Indonesia copies of this Agreement and the Subsidiary Guaranty Agreement. The Company will cause Union Texas East Kalimantan Limited, as promptly as reasonably practical following execution from time to time of amendments hereto or to the Subsidiary Guaranty Agreement, (i) to report and (ii) to deliver copies of such amendments both to the Team and to Bank Indonesia. SECTION 5.20. Conversion to Unrestricted Subsidiary. The Company may convert a Restricted Subsidiary into an Unrestricted Subsidiary by giving the Agent notice of such conversion at least 5 Domestic Business Days prior to such conversion; provided that (i) no Restricted Subsidiary shall be so converted so long as it owns directly or indirectly any interest in any Restricted Asset and (ii) no such conversion shall be made if at the time of such notice or after giving effect to such conversion, any Default would exist. Upon any such conversion of a Required Guarantor to an Unrestricted Subsidiary such Subsidiary shall be released from its obligations under the Subsidiary Guaranty Agreement, and the Agent shall execute such releases and other documents as such Subsidiary or the Company may reasonably request to further evidence such release. ARTICLE VI DEFAULTS SECTION 6.01. Events of Default. If one or more of the following events ("Events of Default") shall have occurred and be continuing: (a) the Company shall fail to pay when due any principal of any Loan, or shall fail to pay within five days of the due date thereof any interest on any Loan, any fees or any other amount payable hereunder; -51- 58 (b) the Company or any Subsidiary shall fail to observe or perform any covenant contained in Sections 5.05 to 5.18, inclusive; (c) the Company or any Subsidiary shall fail to observe or perform any covenant or agreement contained in this Agreement (other than those covered by clause (a) or (b) above) or in the Subsidiary Guaranty Agreement for 30 days after written notice thereof has been given to the Company by the Agent at the request of any Bank; (d) any representation, warranty, certification or statement made by the Company or any Subsidiary in this Agreement or in the Subsidiary Guaranty Agreement or made in any certificate, financial statement or other document delivered pursuant to this Agreement shall prove to have been incorrect in any material respect when made (or deemed made); (e) the Company or any Restricted Subsidiary shall fail to make any payment in respect of any Material Debt (other than the Notes) when due or within any applicable grace period; (f) any event or condition shall occur which results in the acceleration of the maturity of any Material Debt of the Company or any Restricted Subsidiary (other than the Notes) or enables (or, with the giving of notice or lapse of time or both, would enable) the holder of such Material Debt or any Person acting on such holder's behalf to accelerate the maturity thereof; (g) the Company or any Restricted Subsidiary shall commence a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, or shall consent to any such relief or to the appointment of or taking possession by any such official in an involuntary case or other proceeding commenced against it, or shall make a general assignment for the benefit of creditors, or shall fail generally to pay its debts as they become due, or shall take any corporate action to authorize any of the foregoing; (h) an involuntary case or other proceeding shall be commenced against the Company or any Restricted Subsidiary seeking liquidation, reorganization or other relief with respect to it or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, and such involuntary case or other proceeding shall remain undismissed and unstayed for a period of 60 days; or -52- 59 an order for relief shall be entered against the Company or any Restricted Subsidiary under the federal bankruptcy laws as now or hereafter in effect; (i) any member of the ERISA Group shall fail to pay when due an amount or amounts aggregating in excess of $5,000,000 which it shall have become liable to pay under Title IV of ERISA; or notice of intent to terminate a Material Plan shall be filed under Title IV of ERISA by any member of the ERISA Group, any plan administrator or any combination of the foregoing; or the PBGC shall institute proceedings under Title IV of ERISA to terminate, to impose liability (other than for premiums under Section 4007 of ERISA) in respect of, or to cause a trustee to be appointed to administer any Material Plan; or a condition shall exist by reason of which the PBGC would be entitled to obtain a decree adjudicating that any Material Plan must be terminated; or there shall occur a complete or partial withdrawal from, or a default, within the meaning of Section 4219(c)(5) of ERISA, with respect to, one or more Multiemployer Plans which could cause one or more members of the ERISA Group to incur a current payment obligation in excess of $5,000,000; (j) a judgment or order for the payment of money in excess of $15,000,000 (net of applicable insurance coverage which is acknowledged by the insurer) shall be rendered against the Company or any Restricted Subsidiary and such judgment or order shall continue unsatisfied and unstayed for a period of 30 days; (k) any Person or two or more Persons acting in concert, together with any affiliates thereof, (i) shall have acquired beneficial ownership, directly or indirectly, (a) within any 12 month period, of (1) more than 25% of the Company's common stock or (2) securities representing more than 25% of the combined voting power of all securities of the Company entitled to vote in the election of directors (other than securities having such power only by reason of the happening of a contingency) ("Voting Securities"), or (b) within any 24 month period, of (1) more than 40% of the Company's common stock or (2) more than 40% of the Company's Voting Securities, (ii) owns a higher percentage of the Company's common stock or Voting Securities than the percentage owned by Kohlberg Kravis Roberts & Co. and/or non-operating investment entities it controls, and (iii) either (a) owns 50% or more of the Company's common stock or Voting Securities, (b) directly or indirectly elects or causes the election of Persons constituting in the aggregate a majority of the Board of Directors of the Company or any Restricted Subsidiary, or (c) exercises, directly or indirectly, by written agreement, control over the Company or any Restricted Subsidiary; provided that no Default or Event of Default shall occur under this subsection (k) until the Agent, following request by the Required Banks, gives notice to the Company that such an Event of -53- 60 Default is declared, and such notice may not be given after the date which is 45 days after the Banks actually receive notice from the Company to the effect that the matters set forth in clauses (i), (ii) and (iii) have occurred (for purposes of this provision, "beneficial ownership" shall mean beneficial ownership within the meaning of Rule 13d-3 of the Securities and Exchange Commission promulgated under the Securities Exchange Act of 1934, as amended, and the number and percentage of securities beneficially owned by any Person or Persons shall be calculated in accordance with such Rule); or (l) any "Event of Default", as defined in the Other Credit Agreement, shall occur; then, and in every such event, the Agent shall (i) if requested by Banks having at least 51% in the aggregate amount of the Commitments, by notice to the Company terminate the Commitments and, upon the giving of such notice by the Agent, they shall thereupon terminate, and (ii) if requested by Banks holding Notes evidencing at least 51% in aggregate principal amount of the Loans, by notice to the Company declare the Notes (together with accrued interest thereon) to be, and, upon the giving of such notice by the Agent, the Notes shall thereupon become, immediately due and payable without notice of intent to accelerate, notice of acceleration, presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Company; provided that in the case of any of the Events of Default specified in clause (g) or (h) above, without any notice to the Company or any other act by the Agent or the Banks, the Commitments shall thereupon terminate and the Notes (together with accrued interest thereon) shall become immediately due and payable without notice of intent to accelerate, notice of acceleration, presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Company. SECTION 6.02. Notice of Default. The Agent shall give notice to the Company under Section 6.01(c) promptly upon being requested to do so by any Bank and shall thereupon notify all the Banks thereof. ARTICLE VII THE AGENT SECTION 7.01. Appointment and Authorization. Each Bank irrevocably appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers under the Financing Documents as are delegated to the Agent by the terms hereof or thereof, together with all such powers as are reasonably incidental thereto. Each Bank hereby consents and agrees to the terms of, and authorizes and directs the Agent to enter into, the Subsidiary Guaranty Agreement. -54- 61 SECTION 7.02. Agent and Affiliates. NationsBank shall have the same rights and powers under the Financing Documents as any other Bank and may exercise or refrain from exercising the same as though it were not the Agent, and NationsBank and its affiliates may accept deposits from, lend money to, and generally engage in any kind of business with the Company or any Subsidiary or other affiliate of the Company as if it were not the Agent hereunder. SECTION 7.03. Action by Agent. The obligations of the Agent under the Financing Documents are only those expressly set forth herein. Without limiting the generality of the foregoing, the Agent shall not be required to take any action with respect to any Default, except as expressly provided in Article VI. SECTION 7.04. Consultation with Experts. The Agent may consult with legal counsel (who may be counsel for the Company or any Subsidiary), independent public accountants, independent petroleum engineers and other experts selected by it and the Agent shall not be liable for any action taken or omitted to be taken by it in good faith in accordance with the advice of such counsel, accountants, engineers or experts. SECTION 7.05. Liability of Agent. Neither the Agent nor any of its directors, officers, agents or employees shall be liable for any action taken or not taken by it in connection herewith (i) with the consent or at the request of the Required Banks or (ii) in the absence of its own gross negligence or willful misconduct. Neither the Agent nor any of its directors, officers, agents or employees shall be responsible for or have any duty to ascertain, inquire into or verify (i) any statement, warranty or representation made in connection with this Agreement or any borrowing hereunder; (ii) the performance or observance of any of the covenants or agreements of the Company or any Subsidiary; (iii) the satisfaction of any condition specified in Article III, except receipt of items required to be delivered to the Agent; (iv) the validity, effectiveness or genuineness of the Financing Documents or any other instrument or writing furnished in connection herewith; or (v) the accuracy of any Engineering Report. The Agent shall not incur any liability by acting in reliance upon any notice, consent, certificate, statement, or other writing (which may be a bank wire, telex or similar writing) believed by it to be genuine or to be signed by the proper party or parties. SECTION 7.06. Indemnification. Each Bank shall, ratably in accordance with its Commitment, indemnify the Agent (to the extent not reimbursed by the Company) against any cost, expense (including counsel fees and disbursements), claim, demand, action, loss or liability (except such as result from the Agent's gross negligence or willful misconduct) that the Agent may suffer or incur in connection with the Financing Documents or any action taken or omitted by the Agent hereunder (IT BEING EXPRESSLY UNDERSTOOD AND AGREED THAT, EXCEPT FOR -55- 62 SUCH NEGLIGENCE AS IS SO DETERMINED TO CONSTITUTE GROSS NEGLIGENCE, SUCH INDEMNIFICATION DOES EXTEND TO THE CONSEQUENCES OF THE ORDINARY NEGLIGENCE, WHETHER SOLE OR CONTRIBUTORY, OF THE AGENT). SECTION 7.07. Credit Decision. Each Bank acknowledges that it has, independently and without reliance upon the Agent or any other Bank, and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Bank also acknowledges that it will, independently and without reliance upon the Agent or any other Bank, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking any action under this Agreement. SECTION 7.08. Successor Agent. The Agent may resign at any time by giving written notice thereof to the Banks and the Company and may be removed at any time with or without cause by the Required Banks. Upon any such resignation or removal, the Company shall have the right, with the consent of the Required Banks, to appoint a successor Agent. If no successor Agent shall have been so appointed with the consent of the Required Banks, and shall have accepted such appointment, within 30 days after the retiring Agent's giving of notice of resignation or the Required Banks' removal of the retiring Agent, then the retiring Agent may, on behalf of the Banks, appoint a successor Agent, which shall be a commercial bank organized or licensed under the laws of the United States of America or of any State thereof and having a combined capital and surplus of at least $50,000,000. Upon the acceptance of its appointment as Agent hereunder by a successor Agent, such successor Agent shall thereupon succeed to and become vested with all the rights and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations under the Financing Documents. After any retiring Agent's resignation or removal hereunder as Agent, the provisions of this Article VII shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent. SECTION 7.09. Agent's Fees. The Company shall pay to the Agent for its own account fees in the amounts and at the times previously agreed upon between the Company and the Agent. ARTICLE VIII CHANGE IN CIRCUMSTANCES SECTION 8.01. Basis for Determining Interest Rate Inadequate or Unfair. If on or prior to the first day of any Interest Period: -56- 63 (a) the Agent is advised by the Reference Banks that deposits in dollars (in the applicable amounts) are not being offered to the Reference Banks in the relevant market for such Interest Period, or (b) Banks having 50% or more of the aggregate amount of the Commitments advise the Agent that the London Interbank Offered Rate as determined by the Agent will not adequately and fairly reflect the cost to such Banks of funding their Euro-Dollar Loans for such Interest Period, the Agent shall forthwith give notice thereof to the Company and the Banks, whereupon until the Agent notifies the Company that the circumstances giving rise to such suspension no longer exist, (i) the obligations of the Banks to make Euro-Dollar Loans, or make any Conversion (other than changing Euro-Dollar Loans into Base Rate Loans), shall be suspended, and (ii) unless the Company notifies the Agent at least two Domestic Business Days before the date of any Euro-Dollar Borrowing for which a Notice of Borrowing has previously been given that it elects not to borrow on such date, such Borrowing shall instead be made as a Base Rate Borrowing. SECTION 8.02. Illegality. If, after the date of this Agreement, the adoption of any applicable law, rule or regulation, or any change therein, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Bank (or its Euro-Dollar Lending Office) with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency shall make it unlawful or impossible for any Bank (or its Euro-Dollar Lending Office) to make, maintain or fund its Euro-Dollar Loans, or make any Conversion (other than changing Euro-Dollar Loans into Base Rate Loans), and such Bank shall so notify the Agent, the Agent shall forthwith give notice thereof to the other Banks and the Company, whereupon until such Bank notifies the Company and the Agent that the circumstances giving rise to such suspension no longer exist, the obligation of such Bank to make Euro-Dollar Loans, or make any Conversion (other than changing Euro-Dollar Loans into Base Rate Loans), as the case may be, shall be suspended. Before giving any notice to the Agent pursuant to this Section, such Bank shall designate a different Euro-Dollar Lending Office if such designation will avoid the need for giving such notice and will not, in the judgment of such Bank, be otherwise disadvantageous to such Bank. If such Bank shall determine that it may not lawfully continue to maintain and fund any of its outstanding Euro-Dollar Loans to maturity and shall so specify in such notice, each such Euro-Dollar Loan shall be immediately and automatically Converted into a Base Rate Loan (on which interest and principal shall be payable contemporaneously with the related Euro-Dollar Loans of the other Banks). -57- 64 SECTION 8.03. Increased Cost and Reduced Return. (a) If after the date hereof, the adoption of any applicable law, rule or regulation, or any change therein, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Bank (or its Applicable Lending Office) with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency: (i) shall subject any Bank (or its Applicable Lending Office) to any tax, duty or other charge with respect to its Euro-Dollar Loans, its Note or its obligation to make Euro-Dollar Loans, or shall change the basis of taxation of payments to any Bank (or its Applicable Lending Office) of the principal of or interest on its Euro-Dollar Loans or any other amounts due under this Agreement in respect of its Euro-Dollar Loans or its obligation to make Euro-Dollar Loans (except for changes in the rate of tax on the overall net income of such Bank or its Applicable Lending Office imposed by the jurisdiction in which such Bank's principal executive office or Applicable Lending Office is located); or (ii) shall impose, modify or deem applicable any reserve, special deposit or similar requirement (including, without limitation, any such requirement imposed by the Board of Governors of the Federal Reserve System against assets of, deposits with or for the account of, or credit extended by, any Bank (or its Applicable Lending Office) or on the United States market for certificates of deposit or the London interbank market any other condition affecting its Euro-Dollar Loans, its Note or its obligation to make Euro-Dollar Loans; and the result of any of the foregoing is to increase the cost to such Bank (or its Applicable Lending Office) of making or maintaining any Euro-Dollar Loan or making any Conversion (other than changing Euro-Dollar Loans into Base Rate Loans), or to reduce the amount of any sum received or receivable by such Bank (or its Applicable Lending Office) under this Agreement or under its Note with respect thereto, by an amount deemed by such Bank to be material, then, within 15 days after demand by such Bank (with a copy to the Agent), the Company shall pay to such Bank such additional amount or amounts as will compensate such Bank for such increased cost or reduction; provided that the Company shall not be obligated to compensate any Bank for any such reduction attributable to a period (i) more than 90 days prior to the giving of notice by such Bank to the Company of its intention to seek compensation under this subsection (a) or (ii) more than six months prior to the making of demand by such Bank for payment thereof in accordance herewith. -58- 65 (b) If any Bank shall have determined that the adoption of any applicable law, rule or regulation regarding capital adequacy, or any change therein, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or any request or directive regarding capital adequacy (whether or not having the force of law) of any such authority, central bank or comparable agency, has or would have the effect of reducing the rate of return on capital of such Bank (or its Parent) as a consequence of such Bank's obligations hereunder to a level below that which such Bank (or its Parent) could have achieved but for such adoption, change, request or directive (taking into consideration its policies with respect to capital adequacy) by an amount deemed by such Bank to be material, then from time to time, within 15 days after demand by such Bank (with a copy to the Agent), the Company shall pay to such Bank such additional amount or amounts as will compensate such Bank (or its Parent) for such reduction; provided that the Company shall not be obligated to compensate any Bank for any such reduction attributable to a period (i) more than 90 days prior to the giving of notice by such Bank to the Company of its intention to seek compensation under this subsection (b) or (ii) more than six months prior to the making of demand by such Bank for payment thereof in accordance therewith. (c) Each Bank will promptly notify the Company and the Agent of any event of which it has knowledge, occurring after the date hereof, which will entitle such Bank to compensation pursuant to this Section and will designate a different Applicable Lending Office if such designation will avoid the need for, or reduce the amount of, such compensation and will not, in the judgment of such Bank, be otherwise disadvantageous to such Bank. A certificate of any Bank claiming compensation under this Section and setting forth the additional amount or amounts to be paid to it hereunder shall be conclusive in the absence of manifest error. In determining such amount, such Bank may use any reasonable averaging and attribution methods. SECTION 8.04. Base Rate Loans Substituted for Affected Euro-Dollar Loans. If (i) the obligation of any Bank to make Euro-Dollar Loans to the Company has been suspended pursuant to Section 8.02 or (ii) any Bank has demanded compensation under Section 8.03(a) and the Company shall, by at least five Euro-Dollar Business Days' prior notice to such Bank through the Agent, have elected that the provisions of this Section shall apply to such Bank, then, unless and until such Bank notifies the Company that the circumstances giving rise to such suspension or demand for compensation no longer apply: (a) all Loans to the Company which would otherwise be made by such Bank as, or be Converted by such Bank as or into, Euro-Dollar Loans shall instead be made as, or Converted into, Base Rate Loans (on which interest and -59- 66 principal shall be payable contemporaneously with the related Euro-Dollar Loans of the other Banks), and (b) after each of its Euro-Dollar Loans to the Company has been repaid, all payments of principal which would otherwise be applied to repay such Euro-Dollar Loans shall be applied to repay its Base Rate Loans instead. SECTION 8.05. Substitution of Bank. If (i) the obligation of any Bank to make Euro-Dollar Loans has been suspended pursuant to Section 8.02, (ii) any Bank has demanded compensation under Section 8.03 or payment of Taxes or Other Taxes under Section 2.17, or (iii) after satisfaction of all applicable conditions precedent, any Bank fails to fund when due any Loan it is obligated to fund under this Agreement, the Company shall have the right, with the assistance of the Agent, to seek a mutually satisfactory substitute bank or banks (which may be one or more of the Banks) to purchase the Notes and assume the Commitment of such Bank (any such Bank is herein called an "Affected Bank"). Each Affected Bank agrees to sell, without recourse, all of its Commitment, its interest in this Agreement and its Note to any such bank for an amount equal to the sum of the outstanding unpaid principal of and accrued interest on the Loans of such Affected Bank and all commitment fees and other fees and amounts due such Affected Bank hereunder, calculated, in each case, to the date such Commitment, interest in this Agreement and Note are purchased. ARTICLE IX MISCELLANEOUS SECTION 9.01. Notices. All notices, requests and other communications to any party hereunder shall be in writing (including bank wire, telex, facsimile transmission or similar writing) and shall be given to such party: (x) in the case of the Company or the Agent, at its address or telex number set forth on the signature pages hereof, (y) in the case of any Bank, at its address or telex number set forth in its Administrative Questionnaire or (z) in the case of any party, such other address or telex number as such party may hereafter specify for the purpose by notice to the Agent and the Company. Each such notice, request or other communication shall be effective (i) if given by telex, when such telex is transmitted to the telex number specified in this Section and the appropriate answer-back is received, (ii) if given by mail, 72 hours after such communication is deposited in the mails with first class postage prepaid, addressed as aforesaid, (iii) if given by facsimile transmission, when such facsimile is transmitted and accompanied by a telephone call to the party receiving such transmission or (iv) if given by any other means, when delivered at the address specified in this Section; provided that notices to the Agent shall not be effective until received. -60- 67 SECTION 9.02. No Waivers. No failure or delay by the Agent or any Bank in exercising any right, power or privilege under any Financing Document shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies provided in the Financing Documents shall be cumulative and not exclusive of any rights or remedies provided by law. SECTION 9.03. Expenses; Indemnification. (a) The Company shall pay (i) all reasonable documented out-of-pocket costs and expenses of the Agent and the Arranger incurred in connection with the syndication of this Agreement or the preparation of the Financing Documents, any waiver or consent thereunder or any amendment thereof or any Default or alleged Default hereunder and (ii) if an Event of Default occurs, all reasonable out-of-pocket costs and expenses incurred by the Agent or incurred by any Bank, including fees and disbursements of counsel, in connection with such Event of Default and collection and other enforcement proceedings resulting therefrom. (b) The Company agrees to indemnify the Agent, each Co-Agent, the Arranger and each Bank and hold the Agent, each Co-Agent, the Arranger and each Bank harmless from and against any and all liabilities, losses, damages, costs and expenses of any kind (including, without limitation, the reasonable fees and disbursements of counsel for the Agent, any Co-Agent, the Arranger or any Bank in connection with any investigative, administrative or judicial proceedings, whether or not the Agent, such Co-Agent, the Arranger or such Bank, as the case may be, shall be designated a party thereto) which may be incurred by the Agent, any Co-Agent, the Arranger or any Bank, relating to or arising out of this Agreement or any actual or proposed use of proceeds of Loans hereunder, including specifically, without limitation, all liabilities, losses, damages, costs and expenses arising out of a violation of any Environmental Law; provided that neither the Agent nor any Co-Agent nor the Arranger nor any Bank shall have the right to be indemnified hereunder for its own gross negligence or willful misconduct as determined by a court of competent jurisdiction (IT BEING EXPRESSLY UNDERSTOOD AND AGREED THAT, EXCEPT FOR SUCH NEGLIGENCE AS IS SO DETERMINED TO CONSTITUTE GROSS NEGLIGENCE, SUCH INDEMNIFICATION DOES EXTEND TO THE CONSEQUENCES OF THE ORDINARY NEGLIGENCE, WHETHER SOLE OR CONTRIBUTORY, OF THE INDEMNITEE). (c) Within a reasonable period of time after any Person entitled to indemnification under Section 9.03(b) (an "Indemnified Person") receives actual notice of the assertion of any claim or the commencement of any action, or any threatened claim or action, covered by Section 9.03(b), such Indemnified Person shall, if indemnification with respect thereof is to be sought from the Company under Section 9.03(b), notify the Company in writing of such claim or action; provided that the failure -61- 68 to so notify the Company shall not relieve the Company from any liability which the Company may have to the Indemnified Person under Section 9.03(b) unless the obligations of the Company under Section 9.03(b) have been significantly increased as a result of such failure. The Company and such Indemnified Person shall cooperate in the defense of any such claim or action and shall take those actions reasonably within their power to take which are necessary to preserve any legal defenses to such matters. If any such claim or action shall be brought or threatened against an Indemnified Person, so long as no Event of Default exists, the Company shall be entitled to participate in the defense thereof, and, with the consent of such Indemnified Person, to assume the defense thereof with counsel reasonably satisfactory to the Indemnified Person. Notwithstanding any provision hereof to the contrary, no consent order or settlement shall be entered into in any such claim or action unless both the Company and such Indemnified Person have given their prior written consent thereto; provided that such consent of the Company shall not be required if any Event of Default exists. (d) All obligations of the Company to indemnify or otherwise to make payments to the Agent, any Co-Agent, the Arranger or any Bank provided in this Agreement shall survive any termination of the Commitments and the repayment of the Loans. SECTION 9.04. Sharing of Set-Offs, Etc. Each Bank agrees that if it shall, by exercising any right of set-off or counterclaim or otherwise, receive payment of a proportion of the aggregate amount of principal and interest due with respect to any Note held by it which is greater than the proportion received by any other Bank in respect of the aggregate amount of principal and interest due with respect to any Note held by such other Bank, the Bank receiving such proportionately greater payment shall purchase such participations in the Notes held by the other Banks, and such other adjustments shall be made, as may be required so that all such payments of principal and interest with respect to the Notes held by the Banks shall be shared by the Banks pro rata; provided that nothing in this Section shall impair the right of any Bank to exercise any right of set-off or counterclaim it may have and to apply the amount subject to such exercise to the payment of indebtedness of the Company other than its indebtedness under the Notes. The Company agrees, to the fullest extent it may effectively do so under applicable law, that any holder of a participation in a Note, whether or not acquired pursuant to the foregoing arrangements, may exercise rights of set-off or counterclaim and other rights with respect to such participation as fully as if such holder of a participation were a direct creditor of the Company in the amount of such participation. SECTION 9.05. Amendments and Waivers. Any provision of this Agreement or the Notes may be amended or waived, if, but only if, such amendment or waiver is in writing and is signed by the Company and the Required Banks (and, if the rights or duties of the Agent are affected thereby, by the Agent); provided that no -62- 69 such amendment or waiver shall, unless signed by all the Banks, (i) increase or decrease the Commitment of any Bank or subject any Bank to any additional obligation, (ii) reduce the principal of or rate of interest on any Loan or any fees hereunder, (iii) postpone the date fixed for any payment of principal of or interest on any Loan or any fees hereunder or for any reduction or termination of any Commitment, or (iv) change the percentage of the Commitments or of the aggregate unpaid principal amount of the Notes, or the number of Banks, which shall be required for the Banks or any of them to take any action under this Section or any other provision of this Agreement; provided further that no such amendment or waiver shall amend or waive Section 5.05(a) or any of the definitions relevant to Section 5.05(a) unless signed by Banks having at least 66-2/3% of the aggregate amount of the Commitments or, if the Commitments shall have been terminated, holding Notes evidencing at least 66-2/3% of the aggregate unpaid principal amount of the Loans. SECTION 9.06. Successors and Assigns. (a) The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, except that the Company may not assign or otherwise transfer any of its rights under this Agreement without the prior written consent of all Banks. (b) Any Bank may at any time and from time to time grant to one or more banks or other institutions (each a "Participant") participating interests in its Commitment or any or all of its Loans. In the event of any such grant by a Bank of a participating interest to a Participant, whether or not upon notice to the Company and the Agent, such Bank shall remain responsible for the performance of its obligations hereunder, and the Company and the Agent shall continue to deal solely and directly with such Bank in connection with such Bank's rights and obligations under this Agreement. Any agreement pursuant to which any Bank may grant such a participating interest shall provide that such Bank shall retain the sole right and responsibility to enforce the obligations of the Company hereunder including, without limitation, the right to approve any amendment, modification or waiver of any provision of this Agreement; provided that such participation agreement may provide that such Bank will not agree to any modification, amendment or waiver of this Agreement described in clause (i), (ii) or (iii) of Section 9.05 without the consent of the Participant. The Company agrees that each Participant shall, to the extent provided in its participation agreement, be entitled to the benefits of Article VIII with respect to its participating interest. An assignment or other transfer which is not permitted by subsection (c) or (d) below shall be given effect for purposes of this Agreement only to the extent of a participating interest granted in accordance with this subsection (b). (c) Any Bank may at any time assign to one or more banks or other institutions (each an "Assignee") a proportionate part of all of its rights and obligations under this Agreement and the Notes in an amount which, when added to the amount -63- 70 of the rights and obligations under the Other Credit Agreement contemporaneously assigned by such transferor Bank to such Assignee pursuant to the second proviso to the first sentence of Section 9.06(c) of the Other Credit Agreement, equals $10,000,000 or more, and such Assignee shall assume such rights and obligations under this Agreement and the Notes, pursuant to an Assignment executed by such Assignee and such transferor Bank, with (and subject to) the subscribed consent of the Company and the Agent (which such consents shall not be unreasonably withheld); provided that if an Assignee is an affiliate of such transferor Bank or is another Bank, no such consent of the Company shall be required; provided further that each such assignment shall be of a constant, and not a varying, percentage of all rights and obligations under this Agreement and the Notes, and the same constant percentage of all rights and obligations of such transferor Bank under the Other Credit Agreement and the notes thereunder shall be contemporaneously assigned by such transferor Bank to such Assignee pursuant to Section 9.06(c) of the Other Credit Agreement. Upon execution and delivery of such instrument (and delivery to the Agent of an Administrative Questionnaire with respect to such Assignee, if such Assignee has not already done so) and payment by such Assignee to such transferor Bank of an amount equal to the purchase price agreed between such transferor Bank and such Assignee, such Assignee shall be a Bank party to this Agreement and shall have all the rights and obligations of a Bank with a Commitment as set forth in such instrument of assumption, and the transferor Bank shall be released from its obligations hereunder to a corresponding extent, and no further consent or action by any party shall be required. Upon the consummation of any assignment pursuant to this subsection (c), the transferor Bank, the Agent and the Company shall make appropriate arrangements so that, if required, a new Note is issued to the Assignee. In connection with any such assignment, the transferor Bank shall pay to the Agent for its account an administrative fee for processing such assignment in the amount of $2,500 less any administrative processing fee paid to the Agent on the same date under Section 9.06(c) of the Other Credit Agreement as a result of the contemporaneous assignment to such Assignee by such transferor Bank under the Other Credit Agreement pursuant to the second proviso to the first sentence of this Section 9.06(c). If the Assignee is not incorporated under the laws of the United States of America or a state thereof, it shall, prior to the first date on which interest or fees are payable hereunder for its account, deliver to the Company and the Agent certification as to exemption from deduction or withholding of any United States federal income taxes in accordance with Section 2.17. Notwithstanding the first sentence of this subsection (c), a Bank may not make an assignment pursuant to this subsection (c) if after giving effect thereto such Bank would hold less than 1.5% (or until April 16, 1997, 3% in the case of NationsBank, Bank of America National Trust and Savings Association and Union Bank of Switzerland, Houston Agency) of the Commitments (for this purpose such Bank shall be deemed to hold any participating interests granted by such Bank pursuant to subsection (b) above and any rights assigned pursuant to subsection (d) below). -64- 71 (d) Any Bank may at any time assign all or any portion of its rights under this Agreement and its Note to a Federal Reserve Bank. No such assignment shall release the transferor Bank from its obligations hereunder. (e) No Assignee, Participant or other transferee of any Bank's rights shall be entitled to receive any greater payment under Section 8.03 than such Bank would have been entitled to receive with respect to the rights transferred, unless such transfer is made with the Company's prior written consent or by reason of the provisions of Section 8.02 or 8.03 requiring such Bank to designate a different Applicable Lending Office under certain circumstances or at a time when the circumstances giving rise to such greater payment did not exist. SECTION 9.07. Collateral. Each of the Banks represents to each Agent and each of the other Banks that it in good faith is not relying upon any margin stock (as defined in Regulation G) or any margin stock (as defined in Regulation U) as collateral in the extension or maintenance of the credit provided for in this Agreement. SECTION 9.08. Texas Law. This Agreement and each Note shall be construed in accordance with and governed by the law of the State of Texas. SECTION 9.09. CONSENT TO JURISDICTION. THE COMPANY HEREBY IRREVOCABLY CONSENTS TO THE NONEXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF TEXAS AND OF ANY FEDERAL COURT LOCATED IN SUCH STATE OVER IT IN CONNECTION WITH ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO ANY FINANCING DOCUMENT AND, TO THE FULLEST EXTENT PERMITTED BY LAW, FURTHER AGREES (AND SHALL NOT CONTEST) THAT THE PROPER VENUE FOR FILING AND MAINTAINING ANY SUCH ACTION OR PROCEEDING SHALL BE IN THE STATE OF TEXAS. IN ANY SUCH ACTION OR PROCEEDING, THE COMPANY WAIVES PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS OR NOTICE AND AGREES THAT SERVICE BY FIRST CLASS MAIL, RETURN RECEIPT REQUESTED, TO THE COMPANY AT ITS ADDRESS FOR NOTICES HEREUNDER, OR ANY FORM OF SERVICE PROVIDED FOR IN THE TEXAS CIVIL PRACTICE AND REMEDIES CODE THEN IN EFFECT SHALL CONSTITUTE GOOD AND SUFFICIENT SERVICE UPON THE COMPANY. SECTION 9.10. Counterparts. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. -65- 72 SECTION 9.11. WAIVER OF JURY TRIAL. THE COMPANY, THE AGENT, THE CO-AGENTS AND THE BANKS HEREBY IRREVOCABLY WAIVE 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. SECTION 9.12. COMPLETE AGREEMENT. THIS WRITTEN CREDIT AGREEMENT AND THE OTHER FINANCING DOCUMENTS REPRESENT THE FINAL AGREEMENT AMONG THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES. SECTION 9.13. Liability of Co-Agents and Arranger. Neither the Arranger nor either Co-Agent, in its capacity as Co-Agent hereunder, shall have any duty or responsibility hereunder. SECTION 9.14. Termination of 1994 Short-Term Commitments. Each of the parties hereto agrees that all "Commitments" (as defined in the $200,000,000 Credit Agreement dated as of May 13, 1994 among the Company, NationsBank, as agent and the co-agent and lenders parties thereto) are hereby terminated effective as of the close of business on April 23, 1995 (and the fees under Section 2.08(a) of such Credit Agreement shall accrue through such date), and the Company has no further right to borrow thereunder. The Company represents and warrants that all principal, interest and fees owed thereunder have been paid in full. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written. UNION TEXAS PETROLEUM HOLDINGS, INC. By: /s/ M.N. MARKOWITZ ----------------------------------- M.N. Markowitz Vice President and Treasurer 1330 Post Oak Blvd. Houston, Texas 77056 Telex number: 762255 -66- 73 Commitments $8,181,818.19 NATIONSBANK OF TEXAS, N.A. By: /s/ PAUL A. SQUIRES ---------------------------------- Paul A. Squires Senior Vice President $6,363,636.37 BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION By: /s/ LAURA B. SHEPARD ---------------------------------- Authorized Officer $6,363,636.37 UNION BANK OF SWITZERLAND, HOUSTON AGENCY By: /s/ EVANS SWANN ---------------------------------- Evans Swann Managing Director By: /s/ JAN BUETTGEN ---------------------------------- Jan Beuttgen Vice President Corporate Banking $5,454,545.45 THE BANK OF NOVA SCOTIA By: /s/ A.S. NORSWORTHY ---------------------------------- A.S. Norsworthy Assistant Agent $5,454,545.45 CHEMICAL BANK By: /s/ [Illegible] ---------------------------------- Authorized Officer -67- 74 Commitments $5,454,545.45 CREDIT LYONNAIS CAYMAN ISLAND BRANCH By: /s/ XAVIER RATOUIS ---------------------------------- Authorized Officer $5,454,545.45 THE FIRST NATIONAL BANK OF CHICAGO By: /s/ [Illegible] ---------------------------------- Authorized Officer $5,454,545.45 MELLON BANK, N.A. By: /s/ A. GARY CHACE ---------------------------------- A. Gary Chace Senior Vice President $5,454,545.45 MORGAN GUARANTY TRUST COMPANY OF NEW YORK By: /s/ PHILIP W. MCNEAL ---------------------------------- Philip W. McNeal Vice President $4,545,454.55 BANQUE NATIONALE DE PARIS, HOUSTON AGENCY By: /s/ [Illegible] ---------------------------------- Authorized Officer -68- 75 Commitments $4,545,454.55 LTCB TRUST COMPANY By: /s/ [Illegible] ------------------------------- Authorized Officer $4,545,454.55 SOCIETE GENERALE, SOUTHWEST AGENCY By: /s/ [Illegible] ------------------------------- Authorized Officer $3,181,818.18 THE BANK OF TOKYO, LTD., DALLAS AGENCY By: /s/ JOHN M. MCINTYRE ------------------------------- Authorized Officer $3,181,818.18 BANQUE PARIBAS, HOUSTON AGENCY By: /s/ [Illegible] ------------------------------- Authorized Officer By: /s/ BART SCHOUEST ------------------------------- Authorized Officer -69- 76 Commitments $3,181,818.18 CHRISTIANIA BANK By: /s/ JAHN O. ROISING ---------------------------------- Authorized Officer By: /s/ [Illegible] ---------------------------------- Authorized Officer $3,181,818.18 CITIBANK, N.A. By: /s/ BARBARA A. COHEN ---------------------------------- Barbara A. Cohen Vice President $3,181,818.18 DRESDNER BANK AG, NEW YORK AND GRAND CAYMAN BRANCHES By: /s/ B. C. ERICKSON ---------------------------------- Authorized Officer By: /s/ [Illegible] ---------------------------------- Authorized Officer $3,181,818.18 THE MITSUBISHI TRUST & BANKING CORPORATION By: /s/ [Illegible] ---------------------------------- Authorized Officer -70- 77 Commitments $3,181,818.18 NATIONAL WESTMINSTER BANK PLC (NEW YORK BRANCH) By: /s/ DAVID L. SMITH ---------------------------------- David L. Smith Vice President NATIONAL WESTMINSTER BANK PLC (NASSAU BRANCH) By: /s/ DAVID L. SMITH ---------------------------------- David L. Smith Vice President $3,181,818.18 THE YASUDA TRUST AND BANKING COMPANY, LIMITED, NEW YORK BRANCH By: /s/ NEIL T. CHAU ---------------------------------- Neil T. Chau First Vice President $1,818,181.82 BANK OF TAIWAN By: /s/ [Illegible] ---------------------------------- Authorized Officer $1,818,181.82 BANQUE FRANCAISE DU COMMERCE EXTERIEUR By: /s/ IAIN A. WHYTE ---------------------------------- Authorized Officer By: /s/ [Illegible] ---------------------------------- Authorized Officer -71- 78 Commitments $1,818,181.82 DEN NORSKE BANK AS By: /s/ [Illegible] ---------------------------------- Authorized Officer By: /s/ FRAN MEYERS ---------------------------------- Fran Meyers Vice President $1,818,181.82 FIRST INTERSTATE BANK OF TEXAS, N.A. By: /s/ COLLIE C. MICHAELS ---------------------------------- Authorized Officer Total Commitments: $100,000,000.00 --------------- -72- 79 NATIONSBANK OF TEXAS, N.A., as Agent By: /s/ PAUL A. SQUIRES ------------------------------------------ Paul A. Squires Senior Vice President 700 Louisiana Street Houston, Texas 77002 Telex Number: 163244 Answerback: NCNBTEXDAL BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Co-Agent By: /s/ LAURA B. SHEPARD ------------------------------------------ Authorized Officer UNION BANK OF SWITZERLAND, HOUSTON AGENCY, as Co-Agent By: /s/ EVANS SWANN ------------------------------------------ Evans Swann Managing Director By: /s/ JAN BUETTGEN ------------------------------------------ Jan Buettgen Vice President Corporate Banking -73- 80 SCHEDULE II EXISTING SUBSIDIARIES PART A
EXISTING UNRESTRICTED SUBSIDIARIES JURISDICTION - ---------------------------------- ------------ Four Oaks Insurance, Ltd. Bermuda Unicon Producing Company [Partnership] Texas Union Texas I Corporation Delaware Union Texas Adriatic, Inc. Delaware Union Texas (Argentina) Ltd. Delaware Union Texas Asia Corporation Delaware Union Texas Barakan, Inc. Delaware Union Texas Brasil, Inc. Delaware Union Texas Britannia Limited England Union Texas Carthage, Inc. Delaware Union Texas Development Corporation Delaware Union Texas Egypt, Inc. Delaware Union Texas Espana, Inc. Delaware Union Texas Finance, Inc. Delaware Union Texas (Kai) Limited Bahamas Union Texas Maghreb, Inc. Delaware Union Texas Methane, Inc. Delaware Union Texas Metropole, S.A. France Union Texas PNG, Inc. Delaware Union Texas Petrochemicals Pipeline, Inc. Delaware Union Texas Petroleum Alaska Corporation Delaware Union Texas Petroleum Europe and Middle East, Inc. Delaware Union Texas Petroleum Services Corporation Delaware Union Texas (Rebi) Limited Bahamas Union Texas (South East Asia) Inc. Delaware Union Texas (Tanimbar) Limited Bahamas Union Texas Trading Corporation Delaware Union Texas (Transnational) Limited Bahamas Union Texas Tunisia, Inc. Delaware West Gemsa Petroleum Company Egypt
81
EXISTING UNIMAR UNRESTRICTED SUBSIDIARIES JURISDICTION - ----------------------------------------- ------------ AKI International Finance, N.V. Netherlands Antilles Alaska Interstate International Finance, B.V. Netherlands Alaska Interstate International Finance, N.V. Netherlands Antilles ENSTAR Petroleum, Ltd. Canada Purchasing Services, Inc. Delaware Unimar Financing Corporation Delaware VICO Services, Inc. Delaware VICO Trading, Inc. Delaware Virginia Services, Ltd. Delaware
PART B
EXISTING RESTRICTED SUBSIDIARIES - -------------------------------- Union Texas East Kalimantan Limited Bahamas Union Texas International Corporation Delaware Union Texas Pakistan, Inc. Delaware Union Texas Petroleum Energy Corporation Delaware Union Texas Petroleum Limited England Union Texas Products Corporation Delaware Unistar, Inc. Delaware
OTHER RESTRICTED SUBSIDIARY - --------------------------- Unimar Company [Partnership] Texas
EXISTING UNIMAR RESTRICTED SUBSIDIARIES - --------------------------------------- ENSTAR Corporation Delaware ENSTAR Indonesia, Inc. Delaware VICO 7.5, Inc. Delaware Virginia Indonesia Company Delaware Virginia International Company Delaware
82 SCHEDULE III CERTAIN EXISTING LIENS PART A: LIENS ON OWNERSHIP INTERESTS 1. Amended and Restated Agreement of General Partnership of Unimar Company ("Unimar"), dated as of September 11, 1990, between Unistar, Inc. ("Unistar") and LASMO (USTAR) Inc. ("USTAR," formerly Ultrastar, Inc.) (the "Unimar Partnership Agreement"): As security for the payment of all contributions to be made by each partner pursuant to the Unimar Partnership Agreement, each of Unistar and USTAR has created a security interest in its partnership interest in Unimar in favor of the other partner. 2. Articles of Association of Union Texas East Kalimantan Limited ("UTEK") dated October 26, 1983. As security for the debts, liabilities and engagements of each member solely or jointly with any other person to or with UTEK, UTEK has a first and paramount lien upon all the shares registered in the name of each member, which lien extends to all dividends from time to time declared in respect of such shares. 3. Articles of Association of Union Texas Petroleum Limited ("UTPL"). UTPL has a lien under English law that will attach to fully paid shares and to all shares registered in the name of any person indebted or under liability to UTPL. 83 SCHEDULE III CERTAIN EXISTING LIENS PART B: OTHER EXISTING LIENS
AMOUNT OF DEBT AS OF DOCUMENT AND LIEN 3/31/95 ----------------- -------------------- 1. Pledge Agreement dated as of September 25, 1984 by Virginia Indonesia No set amount Company in favor of Irving Trust Company (the "Pledge Agreement"), and the Indenture, dated as of September 25, 1984 between Unimar, as Issuer, and Irving Trust Company, as Trustee, providing for 14,077,747 Indonesian Participating Units (the "IPU Indenture"), as supplemented by the Supplemental Indenture dated as of October 31, 1986: As security for performance of the obligations of Unimar under the IPU Indenture, Section 2 of the Pledge Agreement sets forth a first lien and security interest granted by Virginia Indonesia Company (the "Pledgor") in all of the Pledgor's rights to receive payments from the Joint Venture Paying Agent pursuant to the Joint Venture Paying Agency Agreements, each as defined in the IPU Indenture, and in all proceeds therefrom. This lien and security interest only becomes effective upon the occurrence of certain events specified in the IPU Indenture. As of December 31, 1994, this lien and security interest is not effective.
84
AMOUNT OF DEBT AS OF DOCUMENT AND LIEN 3/31/95 ----------------- -------------------- 2. Deed of Floating Charge dated December 20, 1988 (the "Deed of $6,874,000 Floating Charge") by Union Texas Pakistan, Inc. ("UT Pakistan") in favor of the Overseas Private Investment Corporation ("OPIC"), in connection with the Finance Agreement dated as of December 20, 1988 between UT Pakistan and OPIC (the "OPIC Finance Agreement") and one or more Notes (the "Notes") issued pursuant to the Issuing and Paying Agency Agreement of even date: As security for the obligations of UT Pakistan under the OPIC Finance Agreement and the Notes, Section 2 of the Deed of Floating Charge sets forth a first floating charge in favor of OPIC in UT Pakistan's (i) 30% share as a working interest owner of all crude oil and natural gas produced or to be produced from the Dedicated Areas, as defined in the Deed of Floating Charge, and being in transit from the well head to the various points of delivery, (ii) 30% share as a working interest owner of all crude oil produced or to be produced from the Dedicated Areas, and being under storage in tank batteries in the Dedicated Areas, as defined in the Deed of Floating Charge, (iii) rights and benefits under certain sale agreements relating to the sale of crude oil or natural gas and (iv) accounts receivable under such sales agreements. OPIC's recourse is limited to the assets of UT Pakistan described in Section 8.2(b) of the OPIC Finance Agreement.
85 SCHEDULE IV CERTAIN EXISTING RESTRICTIONS 1. Finance Agreement dated as of December 20, 1988 between Union Texas Pakistan, Inc. ("UT Pakistan") and the Overseas Private Investment Corporation: a. Negative covenant of UT Pakistan set forth in Section 7.3 restricting, in the event of a default, payment of dividends, purchases of capital stock and payments to the Company on any intercorporate line of credit, among other restrictions. b. Negative covenant of UT Pakistan set forth in Section 7.5(e) restricting, among other things, certain loans, advances and guarantees of loans to persons other than the Company. 2. Amended and Restated Agreement of General Partnership of Unimar Company ("Unimar"), dated as of September 11, 1990 between Unistar, Inc. and LASMO (USTAR) Inc. (formerly Ultrastar, Inc.) (the "Unimar Partnership Agreement"): a. Restrictions resulting from provisions of Article IV regarding the management of Unimar and shareholder action of certain Unimar Restricted Subsidiaries. b. Restrictions resulting from provisions of Article X with respect to dissolution and liquidation of Unimar. 86 SCHEDULE V JOINT VENTURE DEBT AGREEMENTS 1. Producers Agreement No. 2 dated as of June 9, 1987 among Pertamina, Roy M. Huffington, Inc., Virginia International Company, Ultramar Indonesia Limited, Virginia Indonesia Company, Union Texas East Kalimantan Limited, Universe Tankships, Inc., and Huffington Corporation, as Producers, in favor of The Industrial Bank of Japan Trust Company ("IBJ Trust"), as Agent and Lender, and the other Lenders named therein, as amended by Amendment No. 1 to Producers Agreement No. 2, dated as of February 9, 1988 and Amendment No. 2 to Producers Agreement No. 2 dated as of May 31, 1988, each among the Producers, the Lenders named therein and IBJ Trust, as Agent, relating to the Bontang Capital Projects Loan Agreement No. 2 dated as of June 9, 1987 among Continental Bank International, as Trustee, and the other parties named therein. 2. Bontang III Producers Agreement dated as of February 9, 1988 among Pertamina, Roy M. Huffington, Inc., Huffington Corporation, Virginia International Company, Virginia Indonesia Company, Ultramar Indonesia Limited, Union Texas East Kalimantan Limited, Universe Tankships, Inc., Total Indonesie, Unocal Indonesia, Ltd. and Indonesia Petroleum, Ltd., as Producers, in favor of Train-E Finance Co., Ltd., as Tranche A Lender, the Banks named therein as Tranche B Lenders and IBJ Trust as Tranche B Lender and as Agent for such Tranche B Lenders, as amended by Amendment No. 1 dated as of May 31, 1988, relating to the Bontang III Loan Agreement dated as of February 9, 1988 among Continental Bank International, as Trustee, and the other parties named therein. 3. Bontang IV Producers Agreement dated as of August 26, 1991 among Pertamina, Virginia Indonesia Company, OPICOIL Houston, Inc., Virginia International Company, Ultramar Indonesia Limited, Union Texas East Kalimantan Limited, Universe Gas & Oil Company, Inc., Total Indonesie, Unocal Indonesia, Ltd., and Indonesia Petroleum, Ltd., as Producers, in favor of The Chase Manhattan Bank, N.A., as Lender and as Agent for the Lenders, and the other Lenders named therein, relating to the Bontang IV Loan Agreement dated as of August 26, 1991 among Continental Bank International, as Trustee, and the other parties named therein. 87 SCHEDULE VI OUTSTANDING OPTIONS 1. Preferential right of purchase, and right to reasonably nullify a proposed disposition, in favor of each of Unistar, Inc. ("Unistar") and LASMO (USTAR) Inc. ("USTAR," formerly Ultrastar, Inc.), set forth in Article VIII of the Amended and Restated Agreement of General Partnership of Unimar Company, dated as of September 11, 1990, between Unistar and USTAR (the "Unimar Partnership Agreement"). 2. Buy-sell option that may be invoked by either Unistar or USTAR in the event of irreconcilable differences or continued deadlocks, set forth in Article IX of the Unimar Partnership Agreement. 88 EXHIBIT A NOTE Houston, Texas $____________________ April __, 1995 For value received, Union Texas Petroleum Holdings, Inc., a Delaware corporation (the "Company"), promises to pay to the order of ___________ ________________________ (the "Bank"), for the account of its Applicable Lending Office, the unpaid principal amount of each Loan owed to the Bank on April 15, 1997 or as otherwise required by the Credit Agreement. The Company promises to pay interest on the unpaid principal amount of each such Loan on the dates and at the rate or rates provided for in the Credit Agreement (including, without limitation, Section 2.16 thereof). All such payments of principal and interest shall be made in lawful money of the United States in Federal or other immediately available funds at the office of NationsBank of Texas, N.A., 700 Louisiana St., Houston, Texas 77002. All Loans made by the Bank and the respective Types thereof and all repayments of the principal thereof shall be recorded by the Bank and, prior to any transfer hereof, appropriate notations to evidence the foregoing information with respect to each such Loan then outstanding shall be endorsed by the Bank on the schedule attached hereto, or on a continuation of such schedule attached to and made a part hereof; provided that the failure of the Bank to make any such recordation or endorsement shall not affect the obligations of the Company hereunder or under the Credit Agreement. This note is one of the Notes referred to in the Credit Agreement dated as of April 24, 1995 among the Company, the lenders and Co-Agents parties thereto and NationsBank of Texas, N.A., as Agent (as the same may be amended from time to time, the "Credit Agreement"). Terms not defined herein and defined in the Credit Agreement are used herein with the same meanings. Reference is made to the Credit Agreement for provisions for the prepayment hereof and the acceleration of the maturity hereof. This note shall be construed in accordance with and governed by the law of the State of Texas. UNION TEXAS PETROLEUM HOLDINGS, INC. By: ________________________________ Name: ______________________________ Title: _____________________________ 89 Note (cont'd) LOANS AND PAYMENTS OF PRINCIPAL
Amount of Amount of Type of Principal Date of Notation Date Loan Loan Repaid Payment Made By ---- ---- ---- ------ ------- ------- __________________________________________________________________________________________________________ __________________________________________________________________________________________________________ __________________________________________________________________________________________________________ __________________________________________________________________________________________________________ __________________________________________________________________________________________________________ __________________________________________________________________________________________________________ __________________________________________________________________________________________________________ __________________________________________________________________________________________________________ __________________________________________________________________________________________________________ __________________________________________________________________________________________________________ __________________________________________________________________________________________________________ __________________________________________________________________________________________________________ __________________________________________________________________________________________________________ __________________________________________________________________________________________________________ __________________________________________________________________________________________________________ __________________________________________________________________________________________________________ __________________________________________________________________________________________________________ __________________________________________________________________________________________________________
90 EXHIBIT B SUBSIDIARY GUARANTY AGREEMENT GUARANTY dated as of April 24, 1995 ("Agreement") among each of the Subsidiary Guarantors listed on the signature pages hereof under the caption "Subsidiary Guarantors" or which hereafter becomes a party hereto pursuant to Section 3.08(b) (collectively, the "Subsidiary Guarantors") and NationsBank of Texas, N.A., as agent for the banks under the Credit Agreement referred to below (the "Agent"). W I T N E S S E T H: WHEREAS, pursuant to a Credit Agreement dated as of April 24, 1995 among Union Texas Petroleum Holdings, Inc. (the direct or indirect parent of each of the Subsidiary Guarantors) (the "Company"), the Banks and Co-Agents parties thereto and the Agent (the "Credit Agreement"), the Company is entitled, subject to certain conditions, to borrow up to $100,000,000; WHEREAS, as a condition to borrowings under the Credit Agreement, each Required Guarantor is required to execute and deliver to the Agent this Agreement whereby such entity shall, subject to Section 2.08 hereof, guarantee the payment when due of the principal of and interest on all Loans and all other amounts payable at any time by any Obligor under any of the Financing Documents, including, without limitation, interest which accrues during a proceeding which occurs under the U.S. Bankruptcy Code or which would otherwise accrue under the terms of any of the Financing Documents, but for a proceeding under the U.S. Bankruptcy Code (such principal, interest and other amounts being herein called the "Guaranteed Amounts"); WHEREAS, in consideration of the financial and other support that the Company has provided, and such financial and other support as the Company may in the future provide, to the Subsidiary Guarantors and in order to induce the Banks to enter into the Credit Agreement and to consider requests to extend financial accommodations to the Company, the Subsidiary Guarantors are willing to guarantee, subject to Section 2.08 hereof, the Guaranteed Amounts; NOW, THEREFORE, the parties hereto agree as follows: ARTICLE I DEFINITIONS SECTION 1.01. Definitions. Terms defined in the Credit Agreement and not otherwise defined herein are used herein as therein defined. 91 ARTICLE II GUARANTEES SECTION 2.01. The Guarantees. Subject to Section 2.08, the Subsidiary Guarantors hereby jointly, severally, unconditionally and irrevocably guarantee to the Agent, for the ratable benefit of the Banks, the full and punctual payment of all present and future Guaranteed Amounts as and when the same shall become due and payable, whether at maturity, by declaration or otherwise, according to the terms thereof. In case of failure by the Company punctually to pay any Guaranteed Amount, the Subsidiary Guarantors hereby jointly, severally and unconditionally agree, forthwith upon demand by the Agent, to make payment thereof to the Agent at the place and in the manner specified in the Credit Agreement. SECTION 2.02. Guarantees Unconditional. Subject to Section 2.08, the obligations of each Subsidiary Guarantor under this Article II shall be unconditional and absolute and, without limiting the generality of the foregoing, shall not be released, discharged or otherwise affected by: (a) any extension, renewal, settlement, compromise, waiver or release in respect of any obligation of the Company or any other Subsidiary Guarantor under any Financing Document or any Guaranteed Amount; (b) any modification or amendment of or supplement to (i) this Agreement insofar as the same does not purport to modify the rights or obligations of such Subsidiary Guarantor hereunder or (ii) any other Financing Document; (c) any modification, amendment, waiver, release, non-perfection or invalidity of any direct or indirect security, or of any guarantee or other liability of any third party, for any obligation of the Company or any Subsidiary Guarantor under any Financing Document or any Guaranteed Amount; (d) any change in the corporate existence, structure or ownership of the Company or any Subsidiary, or any insolvency, bankruptcy, reorganization or other similar proceeding affecting the Company or any other Subsidiary or their respective assets; (e) the existence of any claim, set-off or other rights which any Subsidiary Guarantor may have at any time against the Company or any Subsidiary Guarantor, the Agent, any Bank or any other Person, 92 whether or not arising in connection with any Financing Document or any Guaranteed Amount;provided that nothing herein shall prevent the assertion of any such claim by separate suit or compulsory counterclaim; (f) any invalidity or unenforceability relating to or against the Company or any Subsidiary Guarantor for any reason of any Financing Document or any Guaranteed Amount, or any provision of applicable law or regulation purporting to prohibit the payment by the Company or any Subsidiary Guarantor of any Guaranteed Amount; or (g) any other act or omission to act or delay of any kind by the Company or any Subsidiary Guarantor, the Agent, any Bank or any other Person or any other circumstances whatsoever that might, but for the provisions of this paragraph, constitute a legal or equitable discharge of the obligations of a Subsidiary Guarantor under this Article II. SECTION 2.03. Discharge; Reinstatement in Certain Circumstances. Subject to Section 2.08, each Subsidiary Guarantor's obligations under this Article II shall remain in full force and effect until all of the Commitments shall have been terminated in their entirety and the Guaranteed Amounts shall have been paid in full. If at any time any payment of or any amount payable by the Company or any Subsidiary Guarantor in respect of any Guaranteed Amount is rescinded or must be otherwise restored or returned upon the insolvency, bankruptcy or reorganization of such Person or otherwise, each Subsidiary Guarantor's obligations under this Article II with respect to such payment shall be reinstated at such time as though such payment had become due but had not been made at such time. SECTION 2.04. Waiver. Each Subsidiary Guarantor irrevocably waives acceptance hereof, presentment, demand, protest and any notice not provided for herein, as well as any requirement that at any time any action be taken by any Person against the Company or any other Subsidiary Guarantor or any other Person. Each Subsidiary Guarantor hereby irrevocably waives each and every right to which it may be entitled by virtue of the suretyship laws of the State of Texas, including, without limitation, any and all rights it may have pursuant to Rule 31 or Rule 32, Texas Rules of Civil Procedure, Section 17.001 of the Texas Civil Practice and Remedies Code and Chapter 34 of the Texas Business and Commerce Code. SECTION 2.05. Subrogation and Contribution. Each Subsidiary Guarantor irrevocably waives any and all rights to which it may be entitled, by operation of law or otherwise, upon making any payment hereunder (i) to be subrogated to the rights of the payee against the Company with respect to such payment or otherwise to be reimbursed, indemnified or exonerated by the Company in respect thereof or (ii) to receive any payment, in the nature of contribution or for any other reason, from any other Obligor with respect to such payment, in each case until such time as all of the 93 Commitments shall have been terminated in their entirety and the Guaranteed Amounts shall have been paid in full. SECTION 2.06. Stay of Acceleration. If acceleration of the time for payment of any amount payable by the Company or any Subsidiary Guarantor in respect of any Guaranteed Amount is stayed upon the insolvency, bankruptcy or reorganization of such Person, all such amounts otherwise subject to acceleration under the terms of the Credit Agreement or any other agreement or instrument evidencing such Guaranteed Amount shall nonetheless be payable by each other Subsidiary Guarantor hereunder forthwith on demand by the Agent. SECTION 2.07. Representations and Warranties. Each Subsidiary Guarantor represents and warrants that as of the date hereof, and after giving effect to this Agreement and the contingent obligations evidenced hereby (including any limitation on the amount payable under this Agreement pursuant to Section 2.08), it is and will be solvent, and has and will have assets which, fairly valued, exceed its obligations, liabilities and debts, and has and will have property and assets sufficient to satisfy and repay its obligations, liabilities and debts when the same become due. SECTION 2.08. Limit of Liability. Each Subsidiary Guarantor shall be liable under this Agreement only for amounts aggregating up to the largest amount that would not render its obligations hereunder subject to avoidance under Section 548 of the United States Bankruptcy Code or any comparable provisions of any applicable state or foreign law. ARTICLE III MISCELLANEOUS SECTION 3.01. Notices. All notices, requests and other communications to any party hereunder shall be in writing (including telecopy, telex, facsimile transmission or similar writing) and (i) in the case of a Subsidiary Guarantor, shall be given to such Subsidiary Guarantor at c/o Union Texas Petroleum Holdings, Inc., 1330 Post Oak Boulevard, Houston, Texas 77056 (telex number: 762255) and (ii) in the case of the Company or the Agent, at its address or telex number set forth on the signature pages of the Credit Agreement or in any case at such other address or telex number as such party may hereafter specify for the purpose by notice to the Agent and the Company. Each such notice, request or other communication shall be effective (i) if given by telex, when such telex is transmitted to the telex number specified in this Section and the appropriate answer is received, (ii) if given by mail, 72 hours after such communication is deposited in the mails with first class postage prepaid, addressed as aforesaid or (iii) if given by any other means, when delivered at the address specified in this Section; provided that notices to the Agent shall not be effective until received. 94 SECTION 3.02. No Waiver; Exercise of Remedies. No failure or delay by the Agent in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law. In exercising the rights and remedies herein provided, the Agent shall act at the instructions of the Required Banks or, failing such instruction, at its discretion. SECTION 3.03. Amendments and Waivers. Any provision of this Agreement may be amended or waived, and any Subsidiary Guarantor may be released from any of its obligations hereunder, if, and only if, such amendment, waiver or release is in writing and is signed by (i) each Subsidiary Guarantor affected thereby and (ii) the Agent with the consent of Banks at the time having at least 66-2/3% of the aggregate amount of the Commitments or, if the Commitments shall have been terminated, holding Notes evidencing at least 66-2/3% of the aggregate unpaid principal amount of the Loans; provided that any Subsidiary Guarantor shall be released from its obligations hereunder upon the terms set forth in Section 5.10 or Section 5.20 of the Credit Agreement. SECTION 3.04. Texas Law. This Agreement shall be construed in accordance with and governed by the law of the state of Texas. SECTION 3.05. CONSENT TO JURISDICTION AND SERVICE OF PROCESS. EACH SUBSIDIARY GUARANTOR HEREBY IRREVOCABLY CONSENTS TO THE NONEXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF TEXAS AND OF ANY FEDERAL COURT LOCATED IN SUCH STATE OVER EACH OF THEM IN CONNECTION WITH ANY ACTION, SUIT OR PROCEEDING ARISING OUT OF OR RELATING TO ANY FINANCING DOCUMENT AND, TO THE FULLEST EXTENT PERMITTED BY LAW, FURTHER AGREES (AND SHALL NOT CONTEST) THAT THE PROPER VENUE FOR FILING AND MAINTAINING ANY SUCH ACTION, SUIT OR PROCEEDING SHALL BE IN THE STATE OF TEXAS. IN ANY SUCH ACTION, SUIT OR PROCEEDING, EACH SUBSIDIARY GUARANTOR WAIVES PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS OR NOTICE AND AGREES THAT SERVICE BY FIRST CLASS MAIL, RETURN RECEIPT REQUESTED, TO SUCH SUBSIDIARY GUARANTOR AT ITS ADDRESS FOR NOTICES HEREUNDER, OR ANY FORM OF SERVICE PROVIDED FOR IN THE TEXAS CIVIL PRACTICE AND REMEDIES CODE THEN IN EFFECT SHALL CONSTITUTE GOOD AND SUFFICIENT SERVICE UPON SUCH SUBSIDIARY GUARANTOR. EACH SUBSIDIARY GUARANTOR THAT IS NOT ORGANIZED UNDER THE LAWS OF THE UNITED STATES OR A STATE THEREOF (EACH A "NON-U.S. GUARANTOR") HEREBY APPOINTS THE PRINCIPAL OFFICE OF CT CORPORATION SYSTEM IN HOUSTON, TEXAS, WHICH, ON THE DATE HEREOF, IS LOCATED AT 911 DALLAS STREET, HOUSTON, TEXAS 77002, AS THE AUTHORIZED AGENT THEREOF (THE "AUTHORIZED AGENT") UPON WHOM PROCESS MAY BE SERVED IN ANY SUCH 95 ACTION, SUIT OR PROCEEDING WHICH MAY BE INSTITUTED IN THE STATE OF TEXAS. SUCH APPOINTMENT SHALL BE IRREVOCABLE UNLESS AND UNTIL THE APPOINTMENT OF A SUCCESSOR AUTHORIZED AGENT FOR SUCH PURPOSE, AND SUCH SUCCESSOR'S ACCEPTANCE OF SUCH APPOINTMENT, SHALL HAVE OCCURRED AND THE AGENT SHALL HAVE BEEN NOTIFIED THEREOF. EACH NON-U.S. GUARANTOR AGREES TO TAKE ANY AND ALL ACTIONS, INCLUDING, WITHOUT LIMITATION, THE FILING OF ANY AND ALL DOCUMENTS AND INSTRUMENTS, THAT MAY BE NECESSARY TO CONTINUE SUCH APPOINTMENT IN FULL FORCE AND EFFECT AS AFORESAID. SERVICE OF PROCESS UPON THE AUTHORIZED AGENT WITH RESPECT TO ANY SUCH ACTION, SUIT OR PROCEEDING SHALL BE DEEMED, IN EVERY RESPECT, EFFECTIVE SERVICE OF PROCESS UPON ANY SUCH NON-U.S. GUARANTOR. EACH NON-U.S. GUARANTOR SHALL REQUIRE THE AUTHORIZED AGENT TO AGREE IN WRITING TO ACCEPT THE FOREGOING APPOINTMENT AS AGENT FOR SERVICE OF PROCESS. SECTION 3.06. WAIVER OF JURY TRIAL. EACH SUBSIDIARY GUARANTOR 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. SECTION 3.07. WAIVER OF SOVEREIGN IMMUNITY. TO THE EXTENT THAT ANY SUBSIDIARY GUARANTOR HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY COURT OR FROM ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION, EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, SUCH SUBSIDIARY GUARANTOR HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY LEGALLY DO SO, SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THIS AGREEMENT AND, WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, AGREES, TO THE FULLEST EXTENT IT MAY LEGALLY DO SO, THAT THE WAIVERS SET FORTH IN THIS SECTION 3.07 SHALL HAVE THE FULLEST SCOPE PERMITTED UNDER THE FOREIGN SOVEREIGN IMMUNITIES ACT OF 1976 OF THE UNITED STATES AND ARE INTENDED TO BE IRREVOCABLE FOR PURPOSES OF SUCH ACT. SECTION 3.08. Successors and Assigns. (a) All of the provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, except that no Subsidiary Guarantor may assign or transfer any of its rights or obligations under this Agreement. (b) Any Subsidiary may become a party hereto and a Subsidiary Guarantor hereunder, without any further action by any other party, by executing and delivering a counterpart hereof to the Agent. 96 SECTION 3.09. Counterparts. This Agreement may be signed in any number of counterparts, each of which shall be an original, and all of which taken together shall constitute a single instrument, with the same effect as if the signatures thereto and hereto were upon the same instrument. SECTION 3.10. Judgment Currency. Each Non-U.S. Guarantor agrees to indemnify the Agent and each Bank against any loss incurred by it as a result of any judgment or order being given or made and expressed and paid in a currency (the "Judgment Currency") other than United States dollars and as a result of any variation as between (i) the rate of exchange at which the United States dollar amount is converted into the Judgment Currency for the purpose of such judgment or order and (ii) the spot rate of exchange in The City of New York at which the Agent or such Bank on the date of payment of such judgment or order is able to purchase United States dollars with the amount of the Judgment Currency actually received by the Agent or such Bank. The foregoing indemnity shall constitute a separate and independent obligation of each Non-U.S. Guarantor and shall continue in full force and effect notwithstanding any such judgment or order as aforesaid. The term "spot rate of exchange" shall include any premiums and costs of exchange payable in connection with the purchase of, or conversion into, United States dollars. SECTION 3.11. Existence. Each Subsidiary Guarantor agrees to maintain its existence except as permitted by Section 5.02 of the Credit Agreement. SECTION 3.12. Taxes. (a) Any and all payments by any Subsidiary Guarantor hereunder shall be made free and clear of and without deduction for any and all present or future taxes, levies, imposts, deductions, charges and withholdings, and all liabilities with respect thereto, excluding (i) in the case of the Agent, each Co-Agent and each Bank, United States federal income taxes and, without duplication, any taxes imposed on its income, and franchise taxes imposed on it, by the jurisdiction under the laws of which the Agent, such Co-Agent or such Bank, as the case may be, is organized or any political subdivision thereof and (ii) in the case of each Bank, taxes imposed on its income, and franchise taxes imposed on it, by the jurisdiction of such Bank's Applicable Lending Office or any political subdivision thereof (all such non-excluded taxes, levies, imposts, deductions, charges, withholdings and liabilities being hereinafter referred to as "Taxes"). If any Subsidiary Guarantor shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder to any Bank, any Co-Agent or the Agent, (i) the sum payable shall be increased as may be necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 3.12) such Bank, such Co-Agent or the Agent (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made, (ii) such Subsidiary Guarantor shall make such deductions and (iii) such Subsidiary Guarantor shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law. 97 (b) Each Subsidiary Guarantor will indemnify each Bank, each Co-Agent and the Agent for the full amount of Taxes (including, without limitation, any Taxes imposed by any jurisdiction on amounts payable under this Section 3.12) paid by such Bank, such Co-Agent or the Agent (as the case may be) and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto, whether or not such Taxes were correctly or legally asserted. Payments under any indemnification provided for in this Section 3.12(b) shall be made within 30 days from the date such Bank, such Co-Agent or the Agent (as the case may be) makes written demand therefor. (c) Within 30 days after the date of any payment of Taxes by a Subsidiary Guarantor, such Subsidiary Guarantor will furnish to the Agent, at its address referred to in Section 9.01 of the Credit Agreement, the original or a certified copy of a receipt evidencing payment thereof. Should any Bank, any Co-Agent or the Agent ever receive any refund, credit or deduction from any taxing authority to which such Bank, such Co-Agent or the Agent, as the case may be, would not be entitled but for the payment by a Subsidiary Guarantor of Taxes as required by this Section 3.12 (it being understood that the decision as to whether or not to claim, and if claimed, as to the amount of any such refund, credit or deduction shall be made by such Bank, such Co-Agent or the Agent, as the case may be, in its sole discretion), such Bank, such Co-Agent or the Agent, as the case may be, thereupon shall repay to such Subsidiary Guarantor an amount with respect to such refund, credit or deduction equal to any net reduction in taxes actually obtained by such Bank, such Co-Agent or the Agent, as the case may be, and reasonably determined by such Bank, such Co-Agent or the Agent, as the case may be, to be attributable to such refund, credit or deduction. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the date first above written. SUBSIDIARY GUARANTORS: UNION TEXAS PETROLEUM ENERGY CORPORATION By: ____________________________________ Name: __________________________________ Title: _________________________________ 98 UNION TEXAS PRODUCTS CORPORATION By: _______________________________ Name: _____________________________ Title: ____________________________ UNION TEXAS EAST KALIMANTAN LIMITED By: _______________________________ Name: _____________________________ Title: ____________________________ UNION TEXAS INTERNATIONAL CORPORATION By: _______________________________ Name: _____________________________ Title: ____________________________ UNISTAR, INC. By: _______________________________ Name: _____________________________ Title: ____________________________ AGENT: NATIONSBANK OF TEXAS, N.A., as Agent By: _______________________________ Name: _____________________________ Title: ____________________________ 99 EXHIBIT C OPINION OF GENERAL COUNSEL April 24, 1995 To the Banks and the Agent Referred to Below c/o NationsBank of Texas, N.A., as Agent 700 Louisiana Street Houston, Texas 77002 Dear Sirs: I am General Counsel, Vice President-Administration, and Secretary of Union Texas Petroleum Holdings, Inc., a Delaware corporation (the "Company"), and have acted as counsel (i) for the Company in connection with the Credit Agreement dated as of April 24, 1995 (the "Credit Agreement") among the Company, the Banks and Co-Agents listed on the signature pages thereof and NationsBank of Texas, N.A., as Agent (the "Agent"), and (ii) for Union Texas Petroleum Energy Corporation, a Delaware corporation, Union Texas International Corporation, a Delaware corporation, Unistar, Inc., a Delaware corporation, Union Texas East Kalimantan Limited, a Bahamian corporation, and Union Texas Products Corporation, a Delaware corporation (collectively, the "Subsidiary Guarantors" and together with the Company, the "Obligors"), in connection with the Subsidiary Guaranty Agreement dated as of April 24, 1995 (the "Subsidiary Guaranty Agreement") among the Subsidiary Guarantors and the Agent. Terms defined in the Credit Agreement and not otherwise defined herein are used herein as therein defined. In connection with the opinions expressed below, I have examined or caused to be examined executed counterparts of the following (collectively, the "Financing Documents"): (a) the Credit Agreement, (b) the Subsidiary Guaranty Agreement, and (c) twenty four (24) promissory notes, each substantially in the form of Exhibit A to the Credit Agreement, one payable to each Bank. I have also examined or caused to be examined originals or copies, certified or otherwise identified to my satisfaction, of such other instruments, documents and records as I deemed necessary to express the opinions hereinafter set forth. To the extent relevant to my opinion, I have assumed, without independent verification, (i) the 100 To the Banks and the Agent Referred to Below c/o NationsBank of Texas, N.A. as Agent April 24, 1995 Page 2 due execution and delivery of each Financing Document by each party thereto (other than the Obligors), (ii) the genuineness of all signatures on all documents submitted to me, (iii) that each party (other than the Obligors) to each of the Financing Documents is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization and has full power and authority to enter into and to carry out its obligations under such Financing Documents, (iv) that the execution and delivery of each of the Financing Documents by each party thereto (other than the Obligors) and the performance of its obligations under such Financing Documents have been duly authorized by all necessary proceedings and actions, (v) that each of the Financing Documents is the legal, valid and binding obligation of each party thereto (other than the Obligors), enforceable against such party in accordance with the terms of such Financing Documents, subject to limitations of the types described in the opinion of Andrews & Kurth L.L.P. delivered to you pursuant to the Financing Documents, and (vi) the authenticity of all documents submitted to me as originals and the conformity to authentic original documents of all documents submitted to me as certified, conformed or photostatic copies. I have relied, to the extent that I deem such reliance proper, upon certificates of officers of one or more of the Obligors and of governmental officials as to matters of fact not independently established by me. For purposes of the opinion set forth in paragraph 2 below, I have (i) relied on the opinion of Andrews & Kurth L.L.P. with respect to the agreements and instruments identified on Schedule I thereto, and (ii) examined or caused to be examined each other agreement or other instrument binding upon any Obligor, a breach of or default under which would, in my judgment, have a material adverse effect upon the Company and its Subsidiaries taken as a whole. As to other agreements and instruments, I have not undertaken such a review for purposes of this opinion, given the volume of such documents and given the fact that by virtue of the character of such documents and the historical practices of the Company with respect thereto, I have no reason to believe that a breach of or default under any such document would arise by virtue of the execution, delivery and performance of the Financing Documents. Based on the foregoing and subject to the qualifications and limitations set forth below, I am of the opinion that: 1. Each of the Obligors has all material governmental licenses, authorizations, consents and approvals required to own its assets and to carry on its business as now conducted. 101 To the Banks and the Agent Referred to Below c/o NationsBank of Texas, N.A. as Agent April 24, 1995 Page 3 2. To the best of my knowledge, the execution, delivery and performance by each Obligor of each Financing Document to which it is a party do not constitute a breach of or default under, or result in the creation or imposition of any Lien on any material asset of the Company or any Subsidiary under, any provision of any instrument or agreement evidencing or governing Debt binding upon such Obligor or any other material agreement, judgment, injunction, order, decree or other instrument binding upon such Obligor. However, please be advised that the Company currently has an aggregate $300 million principal amount of its senior notes outstanding (individually referred to as the $100 million 8.25% Senior Notes due 1999, the $125 million 8 3/8% Senior Notes due 2005 and the $75 million 8 1/2% Seniior Notes due 2007, and collectively referred to as the "Senior Notes"), and that the sum of the Senior Notes, the Commitments and the commitments under the Other Credit Agreement equals $850 million, while the total amount of debt permitted under Section 5.05(a) of the Credit Agreement and the Other Credit Agreement may not exceed $775 million. 3. To the best of my knowledge, there is no action, suit or proceeding pending against, threatened against or affecting the Company or any of its Subsidiaries or any of their respective properties or interests, at law or in admiralty or equity, before any court or arbitrator or any governmental body, agency or official, foreign or domestic, in which there is a reasonable possibility of an adverse decision which could materially adversely affect the business, financial position or results of operations of the Company and its Subsidiaries, taken as a whole, or which in any manner draws into question the validity of any Financing Document. My opinions in paragraph 1 are rendered only with respect to the constitutions, laws, rules and regulations which are currently in effect and applicable court rulings and orders which have been published and are generally available. In addition, the foregoing opinions are rendered only as of the date hereof, and I disclaim any obligation to advise you of changes thereafter. I am a member of the bar of the State of Texas only, and this opinion is limited in all respects to the laws of the State of Texas, the General Corporation Law of Delaware and federal law of the United States of America, and, to the limited extent described below, the laws of The Commonwealth of The Bahamas and The Republic of Indonesia. In rendering certain of the opinions expressed above, I have relied, with your approval, upon an opinion, dated the date hereof, of Andrews & Kurth L.L.P., a copy of which has been furnished to you. My opinion in paragraph 1 addresses, with respect to Union Texas East Kalimantan Limited, the laws of The Commonwealth of 102 To the Banks and the Agent Referred to Below c/o NationsBank of Texas, N.A. as Agent April 24, 1995 Page 4 The Bahamas and The Republic of Indonesia and such opinion with respect to such laws is, with your permission and without independent investigation, given solely in reliance upon and limited in scope to the opinions of Graham, Thompson & Co. and Mochtar, Karuwin & Komar, respectively, copies of which have been furnished to you, and my opinion incorporates by reference all qualifications, exceptions and limitations set forth therein. This opinion is for the benefit of and may be relied upon by the Banks, the Agent, the Co-Agents, their respective successors and assigns, their respective counsel and Participants in connection with the transactions contemplated by the Credit Agreement. Otherwise, this opinion may not be used, published, circulated or relied upon by any other Person for any purpose without my prior written consent. Very truly yours, Newton W. Wilson, III 103 EXHIBIT D OPINION OF ANDREWS & KURTH L.L.P. April 24, 1995 To the Banks and the Agent Referred to Below c/o NationsBank of Texas, N.A., as Agent 700 Louisiana Street Houston, Texas 77002 Dear Sirs: We have acted as special counsel (i) to Union Texas Petroleum Holdings, Inc., a Delaware corporation (the "Company"), in connection with the Credit Agreement dated as of April 24, 1995 (the "Credit Agreement") among the Company, the Banks and Co-Agents listed on the signature pages thereof and NationsBank of Texas, N.A., as Agent (the "Agent"), and (ii) to Union Texas Petroleum Energy Corporation, a Delaware corporation, Union Texas International Corporation, a Delaware corporation, Unistar, Inc., a Delaware corporation, Union Texas East Kalimantan Limited, a Bahamian corporation, and Union Texas Products Corporation, a Delaware corporation (collectively, the "Subsidiary Guarantors" and together with the Company, the "Obligors"), in connection with the Subsidiary Guaranty Agreement dated as of April 24, 1995 (the "Subsidiary Guaranty Agreement") among the Subsidiary Guarantors and the Agent. Terms defined in the Credit Agreement and not otherwise defined herein are used herein as therein defined. In connection with the opinions expressed below, we have examined executed counterparts of the following (collectively, the "Financing Documents"): (a) the Credit Agreement, (b) the Subsidiary Guaranty Agreement, and (c) twenty four (24) promissory notes, each substantially in the form of Exhibit A to the Credit Agreement, one payable to each Bank (collectively, the "Notes"). We have also examined originals or copies, certified or otherwise identified to our satisfaction, of such other instruments, documents and records as we deemed necessary to express the opinions hereinafter set forth. To the extent relevant to our opinion, we have assumed, without independent verification, (i) the due execution and delivery of each Financing Document by each party thereto (other than the 104 To the Banks and the Agent Referred to Below c/o NationsBank of Texas, N.A. as Agent April 24, 1995 Page 2 Obligors), (ii) the genuineness of all signatures on all documents submitted to us, (iii) that each party (other than the Obligors) to each of the Financing Documents is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization and has full power and authority to enter into and to carry out its obligations under such Financing Documents, (iv) that the execution and delivery of each of the Financing Documents by each party thereto (other than the Obligors) and the performance of its obligations under such Financing Documents have been duly authorized by all necessary proceedings and actions, (v) that each of the Financing Documents is the legal, valid and binding obligation of each party thereto (other than the Obligors) enforceable against such party in accordance with the terms of such Financing Documents, subject to limitations of the types described herein, and (vi) the authenticity of all documents submitted to us as originals and the conformity to authentic original documents of all documents submitted to us as certified, conformed or photostatic copies. We have relied, to the extent that we deem such reliance proper, upon certificates of officers of one or more of the Obligors and of governmental officials as to matters of fact not independently established by us. We have also examined the representations and warranties of the Company contained in the Credit Agreement and have relied, to the extent we deem such reliance proper, upon the relevant facts stated therein. Based on the foregoing and subject to the qualifications and limitations set forth below, we are of the opinion that: 1. (a) Each of the Obligors is a corporation duly incorporated, validly existing and in good standing under the laws of its jurisdiction of incorporation, and has all corporate power and authority required to own its assets and to carry on its business as now conducted. (b) The execution, delivery and performance by each Obligor of each Financing Document to which it is a party will not violate the Public Utility Holding Company Act of 1935, the Investment Company Act of 1940 or the Interstate Commerce Act. 2. The execution, delivery and performance by each Obligor of each Financing Document to which it is a party are within such Obligor's corporate powers, have been duly authorized by all necessary corporate action, and do not constitute a breach or default under, any provision of applicable law or regulation known to us after reasonable inquiry or the certificate of incorporation or bylaws of such Obligor. 105 To the Banks and the Agent Referred to Below c/o NationsBank of Texas, N.A. as Agent April 24, 1995 Page 3 3. To the best of our knowledge, the execution, delivery and performance by each Obligor of each Financing Document to which it is a party do not constitute a breach of or default under, or result in the creation or imposition of any Lien on any material asset of the Company or any Subsidiary under, any provision of the instruments and agreements identified in Schedule I hereto. However, please be advised that the Company currently has an aggregate $300 million principal amount of its senior notes outstanding (individually referred to as the $100 million 8.25% Senior Notes due 1999, the $125 million 8 3/8% Senior Notes due 2005 and the $75 million 8 1/2% Senior Notes due 2007, and collectively referred to as the "Senior Notes"), and that the sum of the Senior Notes, the Commitments and the commitments under the Other Credit Agreement equals $850 million, while the total amount of debt permitted under Section 5.05(a) of the Credit Agreement and the Other Credit Agreement may not exceed $775 million. 4. No authorization, consent or approval of any governmental body, agency or official is required in connection with the execution, delivery or performance by any Obligor of any of the Financing Documents to which it is a party. 5. (a) The Credit Agreement and the Notes have been duly executed and delivered by the Company, and constitute legal, valid and binding obligations of the Company, enforceable against the Company in accordance with their respective terms. (b) The Subsidiary Guaranty Agreement has been duly executed and delivered by each of the Subsidiary Guarantors, and constitutes a legal, valid and binding obligation of each of the Subsidiary Guarantors, enforceable against each of the Subsidiary Guarantors in accordance with its terms. 6. If all material facts (as we understand them) and issues of law were presented and properly argued, a Texas court or a federal court sitting in the State of Texas and applying the laws of the State of Texas should hold that the consent by the Company in Section 9.09 of the Credit Agreement, and by each Subsidiary Guarantor in Section 3.05 of the Subsidiary Guaranty Agreement, to the non-exclusive personal jurisdiction of the courts of the State of Texas and of any federal court located in the State of Texas is valid. In this regard we call to your attention that such consents to non-exclusive jurisdiction are not effective to (1) confer subject matter jurisdiction that does not otherwise exist in such court or (2) establish diversity jurisdiction that does not otherwise exist in an action brought in federal court. 106 To the Banks and the Agent Referred to Below c/o NationsBank of Texas, N.A. as Agent April 24, 1995 Page 4 7. Neither the execution, delivery and performance by any Obligor of the Financing Documents to which it is a party, nor the use of the proceeds of the Loans in accordance with Section 5.09 of the Credit Agreement, will violate the provisions of Regulations G, T, U or X of the Board of Governors of the Federal Reserve System. The opinions set forth above are subject to the following additional assumptions, limitations and qualifications: (a) Our opinions with respect to the enforceability of the Financing Documents are subject to the qualification that such enforceability may be (i) limited by applicable bankruptcy, insolvency, reorganization, fraudulent transfer, moratorium or similar laws affecting the rights of creditors generally, (ii) subject to general principles of equity (regardless of whether such enforceability is considered in a proceeding at law or in equity), including, without limitation, concepts of materiality, reasonableness, good faith and fair dealing, and (iii) limited by the power of a court to award damages in lieu of equitable remedies (including specific performance or injunctive relief) or otherwise to refuse to grant a particular remedy sought by the parties to the Financing Documents. (b) We express no opinion herein as to (1) the right of any Bank to set-off against funds held in any special account maintained by the Company with such Bank or which are otherwise subject to special agreement between the Company and such Bank; (2) whether the provisions of the Credit Agreement which permit the Agent, the Co-Agents or any Bank to take action or make determinations may be subject to a requirement that such action be taken or such determination be made in good faith; (3) whether the holder of a Note may, under certain circumstances, be called upon to prove the outstanding principal amount of the loans evidenced thereby; (4) the effect of the law of any jurisdiction (other than Texas) wherein any Bank may be located which limits rates of interest which may be charged or collected by such Bank; and (5) the enforceability of any provision in the Financing Documents that purports to (i) require indemnification for the negligence or wilful misconduct of the indemnitee or to otherwise require any Obligor to provide indemnification to the extent the same may be in conflict with public policy, (ii) limit the effect of any delay or omission of enforcement of rights or remedies or any course of performance or course of dealing between the parties, (iii) create an agreement to agree, (iv) fix evidentiary standards or venue of any proceeding, (v) waive rights to a trial by jury, or (vi) waive rights to notices, legal defenses or other benefits that cannot, as a matter of law, be effectively waived. 107 To the Banks and the Agent Referred to Below c/o NationsBank of Texas, N.A. as Agent April 24, 1995 Page 5 (c) Whenever this opinion states the existence or absence of any fact to the best of our knowledge, such statement is intended to convey that, during the course of our representation of the Obligors with respect to matters addressed herein, no information has come to our attention which has given us actual knowledge of facts contrary to the statements so expressed herein. (d) In rendering our opinions in paragraph 1 we have relied upon the description of the properties, assets and businesses of the Obligors set forth in the Report on Form 10-K for the year ended December 31, 1994, filed by the Company with the Securities and Exchange Commission. (e) In rendering the opinions in paragraphs 2 and 5, we have assumed that (i) there are no fees, points, premiums or other sums contracted for, charged to or paid or to be paid by the Company to the Banks on account of the transactions described in the Credit Agreement other than those described in the Credit Agreement and those described in the letters of even date herewith from the Agent to us and (ii) the parties to the Financing Documents will comply strictly with the precise terms of the Financing Documents, including, without limitation, the usury savings clauses set forth therein with respect to any consideration contemplated by the Financing Documents that will constitute interest under Texas law. (f) In rendering our opinions in paragraph 7 we have assumed that the representations of the Company and the Banks set forth in Sections 4.12 and 9.07, respectively, of the Credit Agreement will be true and correct at all times. (g) The foregoing opinions are rendered only with respect to the constitutions, laws, rules and regulations which are currently in effect and applicable court rulings and orders which have been published and are generally available. In addition, the foregoing opinions are rendered only as of the date hereof, and we disclaim any obligation to advise you of changes thereafter. This opinion is limited in all respects to the laws of the State of Texas, the General Corporation Law of Delaware and federal law of the United States of America, and, to the limited extent described below, the laws of The Commonwealth of The Bahamas and The Republic of Indonesia. Insofar as our opinion relates to the laws of The Commonwealth of The Bahamas and The Republic of Indonesia it is, with your permission and without independent investigation, given solely in reliance upon and limited in scope to the opinions of Graham, Thompson & Co. and Mochtar, Karuwin & Komar, respectively, copies of which have been furnished to you, and our 108 To the Banks and the Agent Referred to Below c/o NationsBank of Texas, N.A. as Agent April 24, 1995 Page 6 opinion incorporates by reference all qualifications, exceptions and limitations set forth therein. This opinion is for the benefit of and may be relied upon by the Banks, the Agent, the Co-Agents, their respective successors and assigns, their respective counsel and Participants in connection with the transactions contemplated by the Credit Agreement and may be relied upon by Newton W. Wilson, III, General Counsel of the Company, in rendering his opinion to the Banks and the Agent in connection with such transactions. Otherwise, this opinion may not be used, published, circulated or relied upon by any other Person for any purpose without our written consent. Very truly yours, ANDREWS & KURTH L.L.P. 109 SCHEDULE I I. UNION TEXAS PETROLEUM HOLDINGS, INC. ("UTPH") A. Indenture dated as of November 15, 1992 between UTPH, the guarantors named therein, and State Street Bank and Trust Company, as trustee, relating to the $100,000,000 8.25% Senior Notes due November 15, 1999 issued by UTPH. B. Indenture dated as of March 15, 1995 between UTPH, the guarantors named therein, and The First National Bank of Chicago, as trustee, relating to the $125,000,000 8 3/8% Senior Notes due 2005 issued by UTPH and the $75,000,000 8 1/2% Senior Notes due 2007 issued by UTPH. C. $450,000,000 Amended and Restated Credit Agreement dated as of May 13, 1994 among UTPH, the Banks and Co-Agents listed on the signature pages thereof and NationsBank of Texas, N.A., as Agent, as amended by the First Amendment Agreement dated as of November 21, 1994, the Second Amendment Agreement dated as of January 31, 1995 and the Third Amendment Agreement dated as of April 24, 1995. D. $100,000,000 Credit Agreement dated as of April 24, 1995 among UTPH, the Banks and Co-Agents listed on the signature pages thereof and NationsBank of Texas, N.A., as Agent. II. UNION TEXAS PAKISTAN, INC. ("UT PAKISTAN") A. Finance Agreement dated as of December 20, 1988 between UT Pakistan and Overseas Private Investment Corporation ("OPIC"). B. Issuing and Paying Agency Agreement dated as of December 20, 1988 among First Trust New York National Association (as successor to Morgan Guaranty Trust Company of New York), as issuing and paying agent, OPIC, and UT Pakistan, relating to the Promissory Note dated December 20, 1988 issued by UT Pakistan to Liberty U.S. Government Money Market Trust in the original principal amount of US$21,250,000. C. Guaranty Agreement dated as of December 20, 1988 between UTPH and OPIC. D. Deed of Floating Charge dated December 20, 1988 by UT Pakistan in favor of OPIC. III. UNISTAR, INC. ("UNISTAR") AND UNIMAR COMPANY ("UNIMAR") A. Amended and Restated Agreement of General Partnership of Unimar entered into as of September 11, 1990. B. Indenture dated as of September 25, 1984 between Unimar and Irving Trust Company, as trustee, relating to 14,077,747 Indonesian Participating Units, as supplemented by the First Supplemental Indenture dated as of October 31, 1986 between such parties. 110 C. Shareholders Agreement dated as of September 11, 1990 among UTPH, Unistar, Ultramar America Limited, Ultramar Indonesia Limited and Ultrastar, Inc. D. Second Shareholders Agreement dated as of August 26, 1993 among UTPH, Unistar, LASMO America Limited, LASMO Sanga Sanga Limited and LASMO (USTAR) Inc. (formerly Ultrastar, Inc.) IV. UNION TEXAS EAST KALIMANTAN LIMITED ("UTEK") A. Production Sharing Contract and related Agreements. 1. Amended and Restated Production Sharing Contract dated April 23, 1990, but effective as of August 8, 1968 among Perusahaan Pertambangan Minyak Dan Gas Bumi Negara ("Pertamina"), and Roy M. Huffington, Inc., Virginia Indonesia Company, Virginia International Company, Ultramar Indonesia Limited, Union Texas East Kalimantan Limited, Universe Gas & Oil Company, Inc. and Huffington Corporation (all such parties and their predecessors and successors in interest are herein collectively referred to as the "IJV Contractors"), and Production Sharing Contract dated April 23, 1990, but effective as of August 8, 1998 among Pertamina and the IJV Contractors. 2. Joint Venture Agreement effective as of August 8, 1968 by and between Roy M. Huffington, Inc., Virginia International Company, Austral Petroleum Gas Corporation, Golden Eagle Indonesia Limited and Union Texas Far East Corporation, as amended by a Settlement Agreement dated as of January 16, 1976 among these parties and Universe Tankships, Inc., an Agreement dated as of October 1, 1979 among Roy M. Huffington, Inc., Virginia International Company, Austral Petroleum Gas Corporation, Golden Eagle Indonesia Limited, Universe Tankships, Inc. and Union Texas Far East Corporation and a Letter dated October 1, 1979 from Roy M. Huffington, Inc. to Virginia International Company, Austral Petroleum Gas Corporation, Golden Eagle Indonesia Limited, Universe Tankships, Inc. and Union Texas Far East Corporation. 3. Operating Agreement dated as of August 8, 1968 between Roy M. Huffington, Inc., as operator, and Union Texas Far East Corporation, Golden Eagle Indonesia Limited, Virginia International Company and Austral Petroleum Gas Corporation, as non-operators, as amended by a letter agreement effective September 15, 1973 among these parties and an Amendment to Operating Agreement dated as of April 1, 1990 among Roy M. Huffington, Inc., Ultramar Indonesia Limited, Virginia Indonesia Company, Virginia International Company, Union Texas East Kalimantan Limited, and Universe Gas & Oil Company, Inc. and a Letter dated February 8, 1990 from the IJV Contractors to Pertamina. 4. Amended and Restated Bontang Processing Agreement dated as of February 9, 1988 among Pertamina, the IJV Contractors, Total Indonesie, Indonesia Petroleum, Ltd., Unocal Indonesia, Ltd., and P. T. Badak. B. Supply Agreements. 1. Amended and Restated Supply Agreement (In support of the Amended and Restated 1973 LNG Sales Contract) dated September 22, 1993, but effective as of December 3, 1973, between Pertamina and the IJV Contractors. 111 2. Supply Agreement for Badak LNG Expansion Project dated as of April 14, 1981 among Pertamina and the IJV Contractors, as supplemented by the Memorandum of Understanding dated as of April 14, 1981 among Pertamina, the IJV Contractors, Total Indonesie, and Union Oil Company of Indonesia, and the Supplemental Memorandum dated August 24, 1983 among Pertamina and the IJV Contractors and as amended by the Memorandum dated December 1, 1988 among Pertamina and the IJV Contractors. 3. Badak III LNG Sales Contract Supply Agreement executed October 19, 1987, but effective as of March 19, 1987 among Pertamina and the IJV Contractors, as supplemented by the Supplemental Memorandum dated as of January 1, 1990 among Pertamina and the IJV Contractors. 4. Amended and Restated Second Supply Agreement for Excess Sales (Quantities In Kind and LNG Amounts Under Amended and Restated Invoice Settlement Agreements) dated as of January 19, 1990, but effective December 1, 1988, among Pertamina and the IJV Contractors, as supplemented by the Supplemental Memorandum dated as of January 1, 1990 among Pertamina and the IJV Contractors. 5. Badak IV LNG Sales Contract Supply Agreement dated as of August 12, 1991, but effective as of October 23, 1990, among Pertamina and the IJV Contractors, as supplemented by the Memorandum of Understanding Re: Supply Agreements and Package IV Sales dated as of August 12, 1991, but effective as of July 1, 1990, and the Supplemental Memorandum of Understanding dated as of January 31, 1994, but effective as of July 1, 1990, each among Pertamina, the IJV Contractors, Total Indonesie, Unocal Indonesia, Ltd., and Indonesia Petroleum, Ltd., and the Addendum to Badak IV LNG Sales Contract Supply Agreement dated as of January 31, 1994, but effective as of October 23, 1990 among Pertamina and the IJV Contractors. C. Miscellaneous Agreements. 1. Amended and Restated Bontang II Trustee and Paying Agent Agreement dated as of July 15, 1991 among the IJV Contractors, Pertamina, Total Indonesie, Unocal Indonesia, Ltd., and Indonesia Petroleum Ltd., and Continental Bank International ("CBI"), as trustee. 2. Amended and Restated Debt Service Allocation Agreement dated as of February 9, 1988 among Pertamina, the IJV Contractors, Total Indonesie, Indonesia Petroleum, Ltd. and Unocal Indonesia, Ltd. 3. Amended and Restated Badak Trustee and Paying Agent Agreement dated as of February 9, 1988 among Pertamina, the IJV Contractors, Total Indonesie, Unocal Indonesia, Ltd., Indonesia Petroleum, Ltd., and CBI, as trustee ("Bontang I Trustee"). D. Bontang Capital Project Financing Tier III-2. 1. Producers Agreement No. 2 dated as of June 9, 1987 among the IJV Contractors, the lenders named therein, and The Industrial Bank of Japan Trust Company ("IBJ Trust"), as agent for such lenders, as amended by the Amendment No. 1 to Producers Agreement No. 2 dated as of February 9, 1988 and Amendment No. 2 to Producers Agreement No. 2 dated as of May 31, 1988, each among the IJV Contractors, the lenders named therein, and IBJ Trust, as agent for such lenders. 112 2. Bontang Capital Projects Loan Agreement No. 2 dated as of June 9, 1987 among the Bontang I Trustee, the lenders named therein, and IBJ Trust, as agent for such lenders, as amended by the Amendment No. 1 to Bontang Capital Projects Loan Agreement No. 2 dated as of February 9, 1988 among the Bontang I Trustee, the lenders named therein, and IBJ Trust, as agent for such lenders. E. Train E Financing. 1. Bontang III Producers Agreement dated as of February 9, 1988 among Pertamina, the IJV Contractors, Total Indonesie, Indonesia Petroleum, Ltd., and Unocal Indonesia, Ltd. in favor of Train-E Finance Co., Ltd., as Tranche A Lender, the banks named therein as Tranche B Lenders and IBJ Trust as Agent for such Tranche B Lenders, as amended by Amendment No. 1 dated as of May 31, 1988 among Pertamina, the IJV Contractors, Total Indonesie, Indonesia Petroleum, Ltd., and Unocal Indonesia, Ltd. in favor of Train-E Finance Co., Ltd., as Tranche A Lender, the banks named therein as Tranche B Lenders and IBJ Trust as Agent for such Tranche B Lenders. 2. Bontang III Trustee and Paying Agent Agreement dated as of February 9, 1988 among Pertamina, the IJV Contractors, Total Indonesie, Indonesia Petroleum, Ltd., Unocal Indonesia, Ltd. and CBI, as trustee (the "Bontang III Trustee"), as amended by Amendment No.1 dated as of December 11, 1992 among Pertamina, the IJV Contractors, Total Indonesie, Indonesia Petroleum, Ltd., Unocal Indonesia, Ltd. and the Bontang III Trustee. 3. Amended and Restated Bontang Excess Sales Trustee and Paying Agent Agreement dated as of February 9, 1988 among Pertamina, the IJV Contractors, Total Indonesie, Indonesia Petroleum, Ltd., Unocal Indonesia, Ltd. and CBI, as trustee. 4. Bontang III Loan Agreement dated as of February 9, 1988 among the Bontang III Trustee, Train-E Finance Co., Ltd., as Tranche A Lender, the banks named therein as Lead Managers and Tranche B Lenders and IBJ Trust as Agent for such Tranche B Lenders. F. LPG Financing. 1. Amended and Restated Bontang LPG Trustee and Paying Agent Agreement dated as of December 31, 1991 among Pertamina, the IJV Contractors, Total Indonesie, Indonesia Petroleum, Ltd., Unocal Indonesia, Ltd. and CBI, as trustee. 2. Advance Payment Agreement dated as of February 18, 1987 between Pertamina and Arun Bontang Project Finance Co., Ltd. G. Train F Financing. 1. Bontang IV Producers Agreement dated as of August 26, 1991 among Pertamina, the IJV Contractors, Total Indonesie, Indonesia Petroleum, Ltd., and Unocal Indonesia, Ltd. in favor of the lenders named therein and The Chase Manhattan Bank, N.A. as agent for such lenders. 113 2. Bontang IV Trustee and Paying Agent Agreement dated as of August 26, 1991 among Pertamina, the IJV Contractors, Total Indonesie, Indonesia Petroleum, Ltd., Unocal Indonesia, Ltd. and CBI, as trustee (the "Bontang IV Trustee"). 3. Bontang IV Loan Agreement dated as of August 26, 1991 among the Bontang IV Trustee, the lenders named therein and The Chase Manhattan Bank, N.A. as agent for such lenders. 114 EXHIBIT E OPINION OF SPECIAL COUNSEL TO THE AGENT April 24, 1995 To NationsBank of Texas, N.A., as Agent, and to each of the Banks referred to below Ladies and Gentlemen: We have acted as special counsel to NationsBank of Texas, N.A., acting for itself and as Agent, in connection with the preparation, execution and delivery of the Credit Agreement dated as of April 24, 1995 (the "Credit Agreement") among Union Texas Petroleum Holdings, Inc., a Delaware corporation (the "Company"), the banks listed on the signature pages thereof (the "Banks"), NationsBank of Texas, N.A., as Agent (the "Agent"), and the Co-Agents. Capitalized terms defined in the Credit Agreement and not defined herein are used herein as therein defined. In that connection, we have examined counterparts of the Credit Agreement executed by the Agent and the Company respectively and the following documents: (1) The Notes delivered to the Agent on the date hereof. (2) The Subsidiary Guaranty Agreement delivered to the Agent on the date hereof. (3) The legal opinions delivered to the Agent pursuant to Sections 3.01(d), 3.01(e) and 3.01(g) of the Credit Agreement. In our examination of the documents referred to above, we have assumed the authenticity of all such documents submitted to us as originals, the genuineness of all signatures and the conformity to the originals of all such documents submitted to us as copies. We have also assumed the accuracy of all matters set forth in the certificates delivered to the Agent on the date hereof in connection with the Credit Agreement and assumed that each of Company, the Banks, the Agent and the Co-Agents has duly executed and delivered, with all necessary power and authority (corporate and otherwise), the Credit Agreement, that the Company has duly executed and delivered, with all necessary power and authority (corporate and otherwise), the respective Notes, and that each of the Required Guarantors and the Agent has duly executed and delivered, with all necessary power and authority (corporate and otherwise), the Subsidiary Guaranty Agreement. We have also assumed that no Bank has requested multiple Notes pursuant to Section 2.05(b) of the Credit Agreement. 115 To the Banks and the Agent Referred to Below c/o NationsBank of Texas, N.A. as Agent April 24, 1995 Page 2 Based upon the foregoing examination of documents and assumptions and upon such other investigation as we have deemed necessary, we are of the opinion that the documents referred to in items (1), (2) and (3) above are substantially responsive to the requirements of the Credit Agreement. This opinion is delivered to you only in connection with the transactions contemplated by the Credit Agreement, and may not be quoted, circulated or published, in whole or in part, or furnished to any Person, other than your respective successors and assigns and Participants, without our written consent. Very truly yours, Bracewell & Patterson, L.L.P. 116 EXHIBIT F ASSIGNMENT AND ASSUMPTION AGREEMENT AGREEMENT dated as of _____________, 19__ among [ASSIGNOR] (the "Assignor"), [ASSIGNEE] (the "Assignee"), [Union Texas Petroleum Holdings, Inc. (the "Company")] and NationsBank of Texas, N.A., as Agent (the "Agent"). W I T N E S S E T H: WHEREAS, this Assignment and Assumption Agreement (this "Agreement") relates to the Credit Agreement dated as of April 24, 1995 among the Company, the Banks (including Assignor) and Co-Agents parties thereto and the Agent (such Credit Agreement, as amended from time to time, is hereinafter referred to as the "Credit Agreement"); WHEREAS, as provided under the Credit Agreement, the Assignor has a Commitment to make Loans in an aggregate principal amount at any time outstanding not to exceed $____________; WHEREAS, Loans made by the Assignor under the Credit Agreement in the aggregate principal amount of $_____________ are outstanding at the date hereof; and WHEREAS, the Assignor proposes to assign to the Assignee all of the rights of the Assignor under the Credit Agreement in respect of a portion of its Commitment thereunder in an amount equal to $__________ (the "Assigned Amount"), together with a corresponding portion of its outstanding Loans, and the Assignee proposes to accept assignment of such rights and assume the corresponding obligations from the Assignor on such terms; NOW, THEREFORE, in consideration of the foregoing and the mutual agreements contained herein, the parties hereto agree as follows: SECTION 1. Definitions. All capitalized terms not otherwise defined herein shall have the respective meanings set forth in the Credit Agreement. SECTION 2. Assignment. The Assignor hereby assigns and sells to the Assignee all of the rights of the Assignor under the Credit Agreement to the extent of the Assigned Amount, and the Assignee hereby accepts such assignment from the Assignor and assumes all of the obligations of the Assignor under the Credit Agreement to the extent of the Assigned Amount, including the purchase from the Assignor of the corresponding portion of the principal amount of the Loans made by the Assignor outstanding at the date hereof. Upon the execution and delivery hereof by the Assignor, 117 the Assignee[, the Company] and the Agent and the payment of the amounts specified in Section 3 required to be paid on the date hereof, (i) the Assignee shall, as of the date hereof, succeed to the rights and be obligated to perform the obligations of a Bank under the Credit Agreement with a Commitment in an amount equal to the Assigned Amount plus the amount of the Commitment, if any, of the Assignee immediately prior to the effectiveness of this Agreement, and (ii) the Commitment of the Assignor shall, as of the date hereof, be reduced by an amount equal to the Assigned Amount, and the Assignor shall, as of the date hereof, be released from its obligations under the Credit Agreement to the extent such obligations have been assumed by the Assignee. The assignment provided for herein shall be without recourse to the Assignor. The Assignor hereby certifies that after giving effect to this Agreement, the Assignor will be in compliance with the last sentence of Section 9.06(c) of the Credit Agreement. [The Assignor and the Assignee hereby certify that the Assignee is [an affiliate of the Assignor/another Bank,] and accordingly, the Company's consent hereto is not required.] SECTION 3. Payments. As consideration for the assignment and sale contemplated in Section 2 hereof, the Assignee shall pay to the Assignor on the date hereof in Federal funds an amount equal to $__________*. It is understood that commitment and/or facility fees accrued to the date hereof are for the account of the Assignor and such fees accruing from and including the date hereof are for the account of the Assignee. Each of the Assignor and the Assignee hereby agrees that if it receives any amount under the Credit Agreement which is for the account of the other party hereto, it shall receive the same for the account of such other party to the extent of such other party's interest therein and shall promptly pay the same to such other party. As contemplated by Section 9.06(c) of the Credit Agreement, the Assignor agrees to pay to the Agent for its account on the date hereof in Federal funds an amount equal to $2,500 as an administrative fee for processing this Agreement less any administrative processing fee paid to the Agent on the date hereof under Section 9.06(c) of the Other Credit Agreement as a result of the contemporaneous assignment to the Assignee made by the Assignor under the Other Credit Agreement pursuant to the second proviso to the first sentence of Section 9.06(c) of the Credit Agreement. SECTION 4. Consent. This Agreement is conditioned upon the consent of [the Company and] the Agent pursuant to Section 9.06(c) of the Credit Agreement. The execution of this Agreement by [the Company and] the Agent is evidence of this consent. Pursuant to Section 9.06(c) the Company agrees to execute and deliver a Note payable to the order of the Assignee to evidence the assignment and assumption provided for herein. __________________________________ * Amount should combine principal together with accrued interest and breakage compensation, if any, to be paid by the Assignee, net of any portion of any upfront fee to be paid by the Assignor to the Assignee. It may be preferable in an appropriate case to specify these amounts generically or by formula rather than as a fixed sum. 118 SECTION 5. Non-Reliance on Assignor. The Assignor makes no representation or warranty in connection with, and shall have no responsibility with respect to, the solvency, financial condition, or statements of the Company or any other Obligor, the validity and enforceability of the obligations of the Company or any other Obligor in respect of the Credit Agreement, any Note or the Subsidiary Guaranty Agreement or the accuracy of any Engineering Report. The Assignee acknowledges that it has, independently and without reliance on the Assignor, and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement and will continue to be responsible for making its own independent appraisal of the business, affairs and financial condition of the Company and the other Obligors, the Engineering Reports and other relevant matters. SECTION 6. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Texas. SECTION 7. Counterparts. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. SECTION 8. Representation and Agreement. The Assignee represents that it is either (i) a corporation, association or other entity organized under the laws of the United States or any state thereof or (ii) entitled to complete exemption from United States withholding tax imposed on or with respect to any payments, including fees, to be made to it pursuant to the Credit Agreement or the Notes. If the Assignee is not organized under the laws of the United States or any state thereof, it agrees to provide to the Company and the Agent, on or prior to the date of this Agreement, two duly completed copies of United States Internal Revenue Service Form 1001 or 4224, certifying in either case that the Assignee is entitled to receive payments from the Company under the Credit Agreement and the Notes without deduction or withholding of any United States federal income taxes. IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and delivered by their duly authorized officers as of the date first above written. [ASSIGNOR] By: _________________________ Name: _______________________ Title: ______________________ 119 [ASSIGNEE] By: __________________________________ Name: ________________________________ Title: _______________________________ [UNION TEXAS PETROLEUM HOLDINGS, INC. By: __________________________________ Name: ________________________________ Title: _______________________________] NATIONSBANK OF TEXAS, N.A., as Agent By: __________________________________ Name: ________________________________ Title: _______________________________ 120 EXHIBIT G-1 OPINION OF SPECIAL INDONESIAN COUNSEL April 24, 1995 To the Banks and the Agent Referred to Below c/o NationsBank of Texas, N.A. as Agent 700 Louisiana Street Houston, Texas 77002 Dear Sirs: We have acted as special Indonesian counsel to Union Texas Petroleum Holdings, Inc., a Delaware corporation (the "Company"), in connection with the Credit Agreement dated as of April 24, 1995 (the "Credit Agreement") among the Company, the Banks and Co-Agents listed on the signature pages thereof and NationsBank of Texas, N.A., as Agent (the "Agent"), and to Union Texas East Kalimantan Limited, a Bahamian corporation (the "Guarantor"), in connection with the Subsidiary Guaranty Agreement dated as of April 24, 1995 (the "Subsidiary Guaranty Agreement") among Union Texas Petroleum Energy Corporation, Union Texas Products Corporation, the Guarantor, Union Texas International Corporation, Unistar, Inc. and the Agent. Terms defined in the Credit Agreement and not otherwise defined herein are used herein as therein defined. In connection with the opinions expressed below, we have examined the April 3, 1995 draft of the Credit Agreement and the April 3, 1995 draft of the Subsidiary Guaranty Agreement. We have also examined copies, certified or otherwise identified to our satisfaction, of the Production Sharing Contracts described in Exhibit "A" attached hereto and such other instruments, documents and records as we have deemed necessary to express the opinions hereinafter set forth. We have relied, to the extent that we deem such reliance proper, upon certificates of officers of the Guarantor as to matters of fact not independently established by us. For purposes of this opinion, we have assumed the genuineness of all signatures appearing on the documents examined by us, the authenticity of all documents submitted to us as originals, the conformity with the original documents of all documents submitted to us, or otherwise in our possession, as copies, and the due authorization, execution and delivery of all such documents. Wherever the phrase "to the best of our knowledge" appears in this opinion, its use reflects that we have no actual knowledge to the contrary, that we have made due inquiry of the Guarantor, but that we have not made any independent investigation into any of the matters to which we refer. 121 To the Banks and the Agent Referred to Below c/o NationsBank of Texas, N.A. as Agent April 24, 1995 Page 2 Based on the foregoing, and subject to the qualifications and limitations set forth below, we are of the opinion so far as the laws of the Republic of Indonesia are concerned that: 1. The Guarantor is duly qualified as a foreign corporation under the laws of the Republic of Indonesia, to the extent required by Indonesian law and to the extent necessary to carry out its obligations under the Production Sharing Contracts, and has all material governmental licenses, authorizations, consents and approvals required to own property and assets situated in Indonesia and to carry on business in the Republic of Indonesia in accordance with the terms of the Production Sharing Contracts. 2. The execution, delivery and performance by the Guarantor of the Subsidiary Guaranty Agreement do not constitute a breach of or default under any provision of applicable law or regulation of the Republic of Indonesia. 3. To the best of our knowledge, the execution, delivery and performance by the Guarantor of the Subsidiary Guaranty Agreement do not constitute a breach of or default under, or result in the creation or imposition of any Lien on any material asset of the Guarantor under, any judgment, injunction, order or decree of any court or governmental instrumentality of the Republic of Indonesia binding upon the Guarantor. 4. No authorization, consent or approval of any Indonesian governmental body, agency or official is required in connection with the execution, delivery or performance by the Guarantor of the Subsidiary Guaranty Agreement. The Guarantor is obligated to report the execution and delivery of the Subsidiary Guaranty Agreement to the Foreign Commercial Loan Team (the "Team") established pursuant to Presidential Decree No. 39 of 1991 and to deliver to the Team and to Bank Indonesia copies of the Credit Agreement and the Subsidiary Guaranty Agreement. 5. To the best of our knowledge, there is no action, suit or proceeding pending against, threatened against or affecting the Guarantor or any of its properties or interests, at law or in admiralty or equity, before any court, arbitrator, governmental body, agency or official of the Republic of Indonesia. 6. The choice of Texas law as the proper law of the Subsidiary Guaranty Agreement would be upheld as a valid choice of law by the courts of the Republic of Indonesia, and the submission by the Guarantor to the nonexclusive jurisdiction of the courts referred to in Section 3.05 of the Subsidiary Guaranty 122 To the Banks and the Agent Referred to Below c/o NationsBank of Texas, N.A. as Agent April 24, 1995 Page 3 Agreement with respect to proceedings in connection with the Subsidiary Guaranty Agreement would be treated by the courts of the Republic of Indonesia as legal, valid, binding and enforceable in accordance with the terms of such Section 3.05. We note, however, that judgments of foreign courts are not enforceable in Indonesia. 7. All amounts payable by the Guarantor under the Subsidiary Guaranty Agreement may be made free and clear of and without deduction for or on account of any taxes, imposts, withholdings or other deductions imposed, assessed or levied by the Republic of Indonesia or any department, agency, political subdivision, instrumentality or authority thereof or therein, irrespective of the fact that the Agent or any of the Banks may have a representative office or subsidiary in Indonesia, except that to the extent any payments of interest and other payments in the nature of interest made by the Guarantor under the Subsidiary Guaranty Agreement are recognized as being effectively connected with the carrying on of the Guarantor's business in the Republic of Indonesia, Indonesian withholding tax is payable at a rate of 20% thereof, except where a recipient qualifies for a lower rate under a bilateral tax treaty and an approval pursuant to the Circular Letter of the Director General of Taxation No. SE-22/PJ.35/1993 dated August 31, 1993, has been obtained from the Indonesian tax authorities acknowledging that the recipient is entitled to the benefits of the treaty. 8. No stamp or registration duty or similar taxes or charges are payable in the Republic of Indonesia in respect of the Subsidiary Guaranty Agreement, except nominal stamp taxes. 9. Under the laws of the Republic of Indonesia, neither the Agent nor any Bank will be deemed to be resident, domiciled or carrying on any commercial activity in the Republic of Indonesia or, except as provided in subparagraph 7 above, subject to any Indonesian taxes, imposts or duties as a result only of the entry into and performance of the Subsidiary Guaranty Agreement or the transactions contemplated thereby. This opinion is limited in all respects to the laws of the Republic of Indonesia. This opinion is for the benefit of and may be relied upon by the Company, the Guarantor, the Banks, the Agent, the Co-Agents, their respective successors and assigns, their respective counsel and Participants in connection with the transactions contemplated by the Credit Agreement and may be relied upon by Newton W. Wilson, III, General Counsel of the Company, and Andrews & Kurth L.L.P., special counsel to the Company, in rendering their respective opinions to the Banks and the Agent in connection with such transactions. Otherwise, this opinion may not be used, 123 To the Banks and the Agent Referred to Below c/o NationsBank of Texas, N.A. as Agent April 24, 1995 Page 4 published, circulated or relied upon by any other person for any purpose without our prior written consent. Very truly yours, MOCHTAR, KARUWIN & KOMAR 124 EXHIBIT A PRODUCTION SHARING CONTRACTS 1. Amended and Restated Production Sharing Contract dated April 23, 1990, but effective as of August 8, 1968 among Perusahaan Pertambangan Minyak Dan Gas Bumi Negara, and Roy M. Huffington, Inc., Virginia Indonesia Company, Virginia International Company, Ultramar Indonesia Limited, Union Texas East Kalimantan Limited, Universe Gas & Oil Company, Inc. and Huffington Corporation. 2. Production Sharing Contract dated April 23, 1990, but effective as of August 8, 1998 among Perusahaan Pertambangan Minyak Dan Gas Bumi Negara, and Roy M. Huffington, Inc., Virginia Indonesia Company, Virginia International Company, Ultramar Indonesia Limited, Union Texas East Kalimantan Limited, Universe Gas & Oil Company, Inc. and Huffington Corporation. 125 EXHIBIT G-2 OPINION OF SPECIAL BAHAMIAN COUNSEL April 24, 1995 To the Banks and the Agent Referred to Below c/o NationsBank of Texas, N.A., as Agent 700 Louisiana Street Houston, Texas 77002 Dear Sirs: We have acted as special Bahamian counsel to Union Texas Petroleum Holdings, Inc., a Delaware corporation (the "Company"), in connection with the Credit Agreement dated as of April 24, 1995 (the "Credit Agreement") among the Company, the Banks and Co-Agents listed on the signature pages thereof and NationsBank of Texas, N.A., as Agent (the "Agent"), and to Union Texas East Kalimantan Limited, a Bahamian corporation (the "Guarantor") in connection with the Subsidiary Guaranty Agreement dated as of April 24, 1995 (the "Subsidiary Guaranty Agreement") among Union Texas Petroleum Energy Corporation, Union Texas Products Corporation, the Guarantor, Union Texas international Corporation, Unistar, Inc. and the Agent. Terms defined in the Credit Agreement and not otherwise defined herein are used herein as therein defined. In connection with the opinions expressed below, we have examined the April 3, 1995 draft of the Credit Agreement and the April 3, 1995 draft of the Subsidiary Guaranty Agreement. We have also examined copies, certified or otherwise identified to our satisfaction, of such other instruments, documents and records as we have deemed necessary to express the opinions hereinafter set forth. We have relied, to the extent that we deem such reliance proper, upon certificates of officers of the Guarantor as to matters of fact not independently established by us. For purposes of this opinion, we have assumed the genuineness of all signatures appearing on the documents examined by us, the authenticity of all documents submitted to us as originals, the conformity with the original documents of all documents submitted to us, or otherwise in our possession, as copies, and the due authorization, execution and delivery of all such documents (other than the Subsidiary Guaranty Agreement insofar as it relates to the Guarantor). Wherever the phrase "to the best of our knowledge" appears in this opinion, its use reflects that we have no actual knowledge to the contrary, that we have made due inquiry of the Guarantor, but that we have not made any independent investigation into any of the matters to which we refer. 126 To the Banks and the Agent Referred to Below c/o NationsBank of Texas, N.A. as Agent April 24, 1995 Page 2 Based on the foregoing and subject to the qualifications and limitations set forth below, we are of the opinion that: 1. The Guarantor is a corporation duly organized, validly existing and in good standing, and has all corporate power and authority and all material governmental licenses, authorizations, consents and approvals required to own its assets and to carry on its business as now conducted. 2. The execution, delivery and performance by the Guarantor of the Subsidiary Guaranty Agreement are within the Guarantor's corporate powers, have been duly authorized by all necessary corporate action, and do not constitute a breach of or default under any provision of applicable law or regulation of The Bahamas or the Memorandum of Association or the Articles of Association of the Guarantor. 3. To the best of our knowledge, the execution, delivery and performance by the Guarantor of the Subsidiary Guaranty Agreement do not constitute a breach of or default under, or result in the creation or imposition of any Lien on any material asset of the Company or the Guarantor under, any judgment, injunction, order or decree of any court or governmental instrumentality of The Bahamas binding upon the Guarantor. 4. No authorization, consent or approval of any Bahamian governmental body, agency or official is required in connection with the execution, delivery or performance by the Guarantor of the Subsidiary Guaranty Agreement. 5. To the best of our knowledge, there is no pending or threatened action, suit or proceeding before any court or any governmental agency or body or any arbitrator in The Bahamas involving the Guarantor. 6. The choice of Texas law as the proper law of the Subsidiary Guaranty Agreement would be upheld as a valid choice of law by the courts of The Bahamas, and the submission by the Guarantor to the nonexclusive jurisdiction of the courts referred to in Section 3.05 of the Subsidiary Guaranty Agreement with respect to proceedings in connection with the Subsidiary Guaranty Agreement is legal, valid, binding and enforceable in accordance with the terms of such Section 3.05. 7. (a) Any of William M. Krips, President, Larry D. Kalmbach, Vice President, Johnnie J. Cox, Vice President, James E. Knight, Vice President, Newton W. Wilson, III, Secretary, Michael N. Markowitz, Treasurer, Robert V. Deere, 127 To the Banks and the Agent Referred to Below c/o NationsBank of Texas, N.A. as Agent April 24, 1995 Page 3 Controller, Alan R. Crain, Assistant Secretary, and Luis H. Derrota, Assistant Secretary (collectively, the "Authorized Officers") of the Guarantor has been duly authorized to sign the Subsidiary Guaranty Agreement and any other required documents on behalf of the Guarantor and will bind the Guarantor by such Authorized Officer's actions. (b) Upon execution and delivery of the Subsidiary Guaranty Agreement by any Authorized Officer, the Subsidiary Guaranty Agreement will constitute a legal, valid and binding obligation of the Guarantor enforceable against the Guarantor in accordance with its terms, subject, as to enforcement, to bankruptcy, insolvency, reorganization and other similar laws affecting creditors' rights generally and to general principles of equity, and the Subsidiary Guaranty Agreement is in proper form for its enforcement in the courts of The Bahamas. 8. All amounts payable by the Guarantor under the Subsidiary Guaranty Agreement may be made free and clear of and without deduction for or on account of any taxes, imposts, withholdings or deductions of any kind imposed, assessed or levied by The Bahamas or any authority thereof or therein, irrespective of the fact that the Agent or any of the Banks may have a representative office or subsidiary in The Bahamas. 9. A stamp duty of Ten dollars Bahamian currency (B$10.00) is payable in The Bahamas in respect of the Subsidiary Guaranty Agreement. No other duty, tax or charge is payable in The Bahamas in respect of the Subsidiary Guaranty Agreement. 10. Under the laws of The Bahamas, neither the Agent nor any Bank will be deemed to be resident, domiciled or carrying on any commercial activity in The Bahamas or subject to any Bahamian taxes, imposts or duties as a result only of the entry into and performance of the Subsidiary Guaranty Agreement or the transactions contemplated thereby. This opinion is limited in all respects to the laws of The Bahamas. This opinion is for the benefit of and may be relied upon by the Company, the Guarantor, the Banks, the Agent, the Co-Agents, their respective successors and assigns, their respective counsel and Participants in connection with the transactions contemplated by the Credit Agreement and may be relied upon by Newton W. Wilson, III, General Counsel of the Company, and Andrews & Kurth L.L.P., special counsel to the Company, in rendering their respective opinions to the Banks and the Agent in connection with such transactions. Otherwise, this opinion may not be used, published, 128 To the Banks and the Agent Referred to Below c/o NationsBank of Texas, N.A. as Agent April 24, 1995 Page 4 circulated or relied upon by any other person for any purpose without our prior written consent. Yours faithfully, GRAHAM, THOMPSON & CO. EX-10.4 5 SUBSIDIARY GUARANTY AGREEMENT DATED 04/24/95 1 Exhibit 10.4 SUBSIDIARY GUARANTY AGREEMENT GUARANTY dated as of April 24, 1995 ("Agreement") among each of the Subsidiary Guarantors listed on the signature pages hereof under the caption "Subsidiary Guarantors" or which hereafter becomes a party hereto pursuant to Section 3.08(b) (collectively, the "Subsidiary Guarantors") and NationsBank of Texas, N.A., as agent for the banks under the Credit Agreement referred to below (the "Agent"). W I T N E S S E T H: WHEREAS, pursuant to a Credit Agreement dated as of April 24, 1995 among Union Texas Petroleum Holdings, Inc. (the direct or indirect parent of each of the Subsidiary Guarantors) (the "Company"), the Banks and Co-Agents parties thereto and the Agent (the "Credit Agreement"), the Company is entitled, subject to certain conditions, to borrow up to $100,000,000; WHEREAS, as a condition to borrowings under the Credit Agreement, each Required Guarantor is required to execute and deliver to the Agent this Agreement whereby such entity shall, subject to Section 2.08 hereof, guarantee the payment when due of the principal of and interest on all Loans and all other amounts payable at any time by any Obligor under any of the Financing Documents, including, without limitation, interest which accrues during a proceeding which occurs under the U.S. Bankruptcy Code or which would otherwise accrue under the terms of any of the Financing Documents, but for a proceeding under the U.S. Bankruptcy Code (such principal, interest and other amounts being herein called the "Guaranteed Amounts"); WHEREAS, in consideration of the financial and other support that the Company has provided, and such financial and other support as the Company may in the future provide, to the Subsidiary Guarantors and in order to induce the Banks to enter into the Credit Agreement and to consider requests to extend financial accommodations to the Company, the Subsidiary Guarantors are willing to guarantee, subject to Section 2.08 hereof, the Guaranteed Amounts; NOW, THEREFORE, the parties hereto agree as follows: ARTICLE I DEFINITIONS SECTION 1.01. Definitions. Terms defined in the Credit Agreement and not otherwise defined herein are used herein as therein defined. 2 ARTICLE II GUARANTEES SECTION 2.01. The Guarantees. Subject to Section 2.08, the Subsidiary Guarantors hereby jointly, severally, unconditionally and irrevocably guarantee to the Agent, for the ratable benefit of the Banks, the full and punctual payment of all present and future Guaranteed Amounts as and when the same shall become due and payable, whether at maturity, by declaration or otherwise, according to the terms thereof. In case of failure by the Company punctually to pay any Guaranteed Amount, the Subsidiary Guarantors hereby jointly, severally and unconditionally agree, forthwith upon demand by the Agent, to make payment thereof to the Agent at the place and in the manner specified in the Credit Agreement. SECTION 2.02. Guarantees Unconditional. Subject to Section 2.08, the obligations of each Subsidiary Guarantor under this Article II shall be unconditional and absolute and, without limiting the generality of the foregoing, shall not be released, discharged or otherwise affected by: (a) any extension, renewal, settlement, compromise, waiver or release in respect of any obligation of the Company or any other Subsidiary Guarantor under any Financing Document or any Guaranteed Amount; (b) any modification or amendment of or supplement to (i) this Agreement insofar as the same does not purport to modify the rights or obligations of such Subsidiary Guarantor hereunder or (ii) any other Financing Document; (c) any modification, amendment, waiver, release, non-perfection or invalidity of any direct or indirect security, or of any guarantee or other liability of any third party, for any obligation of the Company or any Subsidiary Guarantor under any Financing Document or any Guaranteed Amount; (d) any change in the corporate existence, structure or ownership of the Company or any Subsidiary, or any insolvency, bankruptcy, reorganization or other similar proceeding affecting the Company or any other Subsidiary or their respective assets; (e) the existence of any claim, set-off or other rights which any Subsidiary Guarantor may have at any time against the Company or any Subsidiary Guarantor, the Agent, any Bank or any other Person, whether or not arising in connection with any Financing Document or -2- 3 any Guaranteed Amount; provided that nothing herein shall prevent the assertion of any such claim by separate suit or compulsory counterclaim; (f) any invalidity or unenforceability relating to or against the Company or any Subsidiary Guarantor for any reason of any Financing Document or any Guaranteed Amount, or any provision of applicable law or regulation purporting to prohibit the payment by the Company or any Subsidiary Guarantor of any Guaranteed Amount; or (g) any other act or omission to act or delay of any kind by the Company or any Subsidiary Guarantor, the Agent, any Bank or any other Person or any other circumstances whatsoever that might, but for the provisions of this paragraph, constitute a legal or equitable discharge of the obligations of a Subsidiary Guarantor under this Article II. SECTION 2.03. Discharge; Reinstatement in Certain Circumstances. Subject to Section 2.08, each Subsidiary Guarantor's obligations under this Article II shall remain in full force and effect until all of the Commitments shall have been terminated in their entirety and the Guaranteed Amounts shall have been paid in full. If at any time any payment of or any amount payable by the Company or any Subsidiary Guarantor in respect of any Guaranteed Amount is rescinded or must be otherwise restored or returned upon the insolvency, bankruptcy or reorganization of such Person or otherwise, each Subsidiary Guarantor's obligations under this Article II with respect to such payment shall be reinstated at such time as though such payment had become due but had not been made at such time. SECTION 2.04. Waiver. Each Subsidiary Guarantor irrevocably waives acceptance hereof, presentment, demand, protest and any notice not provided for herein, as well as any requirement that at any time any action be taken by any Person against the Company or any other Subsidiary Guarantor or any other Person. Each Subsidiary Guarantor hereby irrevocably waives each and every right to which it may be entitled by virtue of the suretyship laws of the State of Texas, including, without limitation, any and all rights it may have pursuant to Rule 31 or Rule 32, Texas Rules of Civil Procedure, Section 17.001 of the Texas Civil Practice and Remedies Code and Chapter 34 of the Texas Business and Commerce Code. SECTION 2.05. Subrogation and Contribution. Each Subsidiary Guarantor irrevocably waives any and all rights to which it may be entitled, by operation of law or otherwise, upon making any payment hereunder (i) to be subrogated to the rights of the payee against the Company with respect to such payment or otherwise to be reimbursed, indemnified or exonerated by the Company in respect thereof or (ii) to receive any payment, in the nature of contribution or for any other reason, from any other Obligor with respect to such payment, in each case until such time as all of the -3- 4 Commitments shall have been terminated in their entirety and the Guaranteed Amounts shall have been paid in full. SECTION 2.06. Stay of Acceleration. If acceleration of the time for payment of any amount payable by the Company or any Subsidiary Guarantor in respect of any Guaranteed Amount is stayed upon the insolvency, bankruptcy or reorganization of such Person, all such amounts otherwise subject to acceleration under the terms of the Credit Agreement or any other agreement or instrument evidencing such Guaranteed Amount shall nonetheless be payable by each other Subsidiary Guarantor hereunder forthwith on demand by the Agent. SECTION 2.07. Representations and Warranties. Each Subsidiary Guarantor represents and warrants that as of the date hereof, and after giving effect to this Agreement and the contingent obligations evidenced hereby (including any limitation on the amount payable under this Agreement pursuant to Section 2.08), it is and will be solvent, and has and will have assets which, fairly valued, exceed its obligations, liabilities and debts, and has and will have property and assets sufficient to satisfy and repay its obligations, liabilities and debts when the same become due. SECTION 2.08. Limit of Liability. Each Subsidiary Guarantor shall be liable under this Agreement only for amounts aggregating up to the largest amount that would not render its obligations hereunder subject to avoidance under Section 548 of the United States Bankruptcy Code or any comparable provisions of any applicable state or foreign law. ARTICLE III MISCELLANEOUS SECTION 3.01. Notices. All notices, requests and other communications to any party hereunder shall be in writing (including telecopy, telex, facsimile transmission or similar writing) and (i) in the case of a Subsidiary Guarantor, shall be given to such Subsidiary Guarantor at c/o Union Texas Petroleum Holdings, Inc., 1330 Post Oak Boulevard, Houston, Texas 77056 (telex number: 762255) and (ii) in the case of the Company or the Agent, at its address or telex number set forth on the signature pages of the Credit Agreement or in any case at such other address or telex number as such party may hereafter specify for the purpose by notice to the Agent and the Company. Each such notice, request or other communication shall be effective (i) if given by telex, when such telex is transmitted to the telex number specified in this Section and the appropriate answer is received, (ii) if given by mail, 72 hours after such communication is deposited in the mails with first class postage prepaid, addressed as aforesaid or (iii) if given by any other means, when delivered at the address specified in this Section; provided that notices to the Agent shall not be effective until received. -4- 5 SECTION 3.02. No Waiver; Exercise of Remedies. No failure or delay by the Agent in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law. In exercising the rights and remedies herein provided, the Agent shall act at the instructions of the Required Banks or, failing such instruction, at its discretion. SECTION 3.03. Amendments and Waivers. Any provision of this Agreement may be amended or waived, and any Subsidiary Guarantor may be released from any of its obligations hereunder, if, and only if, such amendment, waiver or release is in writing and is signed by (i) each Subsidiary Guarantor affected thereby and (ii) the Agent with the consent of Banks at the time having at least 66-2/3% of the aggregate amount of the Commitments or, if the Commitments shall have been terminated, holding Notes evidencing at least 66-2/3% of the aggregate unpaid principal amount of the Loans; provided that any Subsidiary Guarantor shall be released from its obligations hereunder upon the terms set forth in Section 5.10 or Section 5.20 of the Credit Agreement. SECTION 3.04. Texas Law. This Agreement shall be construed in accordance with and governed by the law of the state of Texas. SECTION 3.05. CONSENT TO JURISDICTION AND SERVICE OF PROCESS. EACH SUBSIDIARY GUARANTOR HEREBY IRREVOCABLY CONSENTS TO THE NONEXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF TEXAS AND OF ANY FEDERAL COURT LOCATED IN SUCH STATE OVER EACH OF THEM IN CONNECTION WITH ANY ACTION, SUIT OR PROCEEDING ARISING OUT OF OR RELATING TO ANY FINANCING DOCUMENT AND, TO THE FULLEST EXTENT PERMITTED BY LAW, FURTHER AGREES (AND SHALL NOT CONTEST) THAT THE PROPER VENUE FOR FILING AND MAINTAINING ANY SUCH ACTION, SUIT OR PROCEEDING SHALL BE IN THE STATE OF TEXAS. IN ANY SUCH ACTION, SUIT OR PROCEEDING, EACH SUBSIDIARY GUARANTOR WAIVES PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS OR NOTICE AND AGREES THAT SERVICE BY FIRST CLASS MAIL, RETURN RECEIPT REQUESTED, TO SUCH SUBSIDIARY GUARANTOR AT ITS ADDRESS FOR NOTICES HEREUNDER, OR ANY FORM OF SERVICE PROVIDED FOR IN THE TEXAS CIVIL PRACTICE AND REMEDIES CODE THEN IN EFFECT SHALL CONSTITUTE GOOD AND SUFFICIENT SERVICE UPON SUCH SUBSIDIARY GUARANTOR. EACH SUBSIDIARY GUARANTOR THAT IS NOT ORGANIZED UNDER THE LAWS OF THE UNITED STATES OR A STATE THEREOF (EACH A "NON-U.S. GUARANTOR") HEREBY APPOINTS THE PRINCIPAL OFFICE OF CT CORPORATION SYSTEM IN HOUSTON, TEXAS, WHICH, ON THE DATE HEREOF, IS LOCATED AT 911 DALLAS STREET, HOUSTON, TEXAS 77002, AS THE AUTHORIZED AGENT THEREOF (THE "AUTHORIZED AGENT") UPON WHOM PROCESS MAY BE SERVED IN ANY SUCH -5- 6 ACTION, SUIT OR PROCEEDING WHICH MAY BE INSTITUTED IN THE STATE OF TEXAS. SUCH APPOINTMENT SHALL BE IRREVOCABLE UNLESS AND UNTIL THE APPOINTMENT OF A SUCCESSOR AUTHORIZED AGENT FOR SUCH PURPOSE, AND SUCH SUCCESSOR'S ACCEPTANCE OF SUCH APPOINTMENT, SHALL HAVE OCCURRED AND THE AGENT SHALL HAVE BEEN NOTIFIED THEREOF. EACH NON-U.S. GUARANTOR AGREES TO TAKE ANY AND ALL ACTIONS, INCLUDING, WITHOUT LIMITATION, THE FILING OF ANY AND ALL DOCUMENTS AND INSTRUMENTS, THAT MAY BE NECESSARY TO CONTINUE SUCH APPOINTMENT IN FULL FORCE AND EFFECT AS AFORESAID. SERVICE OF PROCESS UPON THE AUTHORIZED AGENT WITH RESPECT TO ANY SUCH ACTION, SUIT OR PROCEEDING SHALL BE DEEMED, IN EVERY RESPECT, EFFECTIVE SERVICE OF PROCESS UPON ANY SUCH NON-U.S. GUARANTOR. EACH NON-U.S. GUARANTOR SHALL REQUIRE THE AUTHORIZED AGENT TO AGREE IN WRITING TO ACCEPT THE FOREGOING APPOINTMENT AS AGENT FOR SERVICE OF PROCESS. SECTION 3.06. WAIVER OF JURY TRIAL. EACH SUBSIDIARY GUARANTOR 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. SECTION 3.07. WAIVER OF SOVEREIGN IMMUNITY. TO THE EXTENT THAT ANY SUBSIDIARY GUARANTOR HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY COURT OR FROM ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION, EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, SUCH SUBSIDIARY GUARANTOR HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY LEGALLY DO SO, SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THIS AGREEMENT AND, WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, AGREES, TO THE FULLEST EXTENT IT MAY LEGALLY DO SO, THAT THE WAIVERS SET FORTH IN THIS SECTION 3.07 SHALL HAVE THE FULLEST SCOPE PERMITTED UNDER THE FOREIGN SOVEREIGN IMMUNITIES ACT OF 1976 OF THE UNITED STATES AND ARE INTENDED TO BE IRREVOCABLE FOR PURPOSES OF SUCH ACT. SECTION 3.08. Successors and Assigns. (a) All of the provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, except that no Subsidiary Guarantor may assign or transfer any of its rights or obligations under this Agreement. (b) Any Subsidiary may become a party hereto and a Subsidiary Guarantor hereunder, without any further action by any other party, by executing and delivering a counterpart hereof to the Agent. -6- 7 SECTION 3.09. Counterparts. This Agreement may be signed in any number of counterparts, each of which shall be an original, and all of which taken together shall constitute a single instrument, with the same effect as if the signatures thereto and hereto were upon the same instrument. SECTION 3.10. Judgment Currency. Each Non-U.S. Guarantor agrees to indemnify the Agent and each Bank against any loss incurred by it as a result of any judgment or order being given or made and expressed and paid in a currency (the "Judgment Currency") other than United States dollars and as a result of any variation as between (i) the rate of exchange at which the United States dollar amount is converted into the Judgment Currency for the purpose of such judgment or order and (ii) the spot rate of exchange in The City of New York at which the Agent or such Bank on the date of payment of such judgment or order is able to purchase United States dollars with the amount of the Judgment Currency actually received by the Agent or such Bank. The foregoing indemnity shall constitute a separate and independent obligation of each Non-U.S. Guarantor and shall continue in full force and effect notwithstanding any such judgment or order as aforesaid. The term "spot rate of exchange" shall include any premiums and costs of exchange payable in connection with the purchase of, or conversion into, United States dollars. SECTION 3.11. Existence. Each Subsidiary Guarantor agrees to maintain its existence except as permitted by Section 5.02 of the Credit Agreement. SECTION 3.12. Taxes. (a) Any and all payments by any Subsidiary Guarantor hereunder shall be made free and clear of and without deduction for any and all present or future taxes, levies, imposts, deductions, charges and withholdings, and all liabilities with respect thereto, excluding (i) in the case of the Agent, each Co-Agent and each Bank, United States federal income taxes and, without duplication, any taxes imposed on its income, and franchise taxes imposed on it, by the jurisdiction under the laws of which the Agent, such Co-Agent or such Bank, as the case may be, is organized or any political subdivision thereof and (ii) in the case of each Bank, taxes imposed on its income, and franchise taxes imposed on it, by the jurisdiction of such Bank's Applicable Lending Office or any political subdivision thereof (all such non-excluded taxes, levies, imposts, deductions, charges, withholdings and liabilities being hereinafter referred to as "Taxes"). If any Subsidiary Guarantor shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder to any Bank, any Co-Agent or the Agent, (i) the sum payable shall be increased as may be necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 3.12) such Bank, such Co-Agent or the Agent (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made, (ii) such Subsidiary Guarantor shall make such deductions and (iii) such Subsidiary Guarantor shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law. -7- 8 (b) Each Subsidiary Guarantor will indemnify each Bank, each Co-Agent and the Agent for the full amount of Taxes (including, without limitation, any Taxes imposed by any jurisdiction on amounts payable under this Section 3.12) paid by such Bank, such Co-Agent or the Agent (as the case may be) and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto, whether or not such Taxes were correctly or legally asserted. Payments under any indemnification provided for in this Section 3.12(b) shall be made within 30 days from the date such Bank, such Co-Agent or the Agent (as the case may be) makes written demand therefor. (c) Within 30 days after the date of any payment of Taxes by a Subsidiary Guarantor, such Subsidiary Guarantor will furnish to the Agent, at its address referred to in Section 9.01 of the Credit Agreement, the original or a certified copy of a receipt evidencing payment thereof. Should any Bank, any Co-Agent or the Agent ever receive any refund, credit or deduction from any taxing authority to which such Bank, such Co-Agent or the Agent, as the case may be, would not be entitled but for the payment by a Subsidiary Guarantor of Taxes as required by this Section 3.12 (it being understood that the decision as to whether or not to claim, and if claimed, as to the amount of any such refund, credit or deduction shall be made by such Bank, such Co-Agent or the Agent, as the case may be, in its sole discretion), such Bank, such Co-Agent or the Agent, as the case may be, thereupon shall repay to such Subsidiary Guarantor an amount with respect to such refund, credit or deduction equal to any net reduction in taxes actually obtained by such Bank, such Co-Agent or the Agent, as the case may be, and reasonably determined by such Bank, such Co-Agent or the Agent, as the case may be, to be attributable to such refund, credit or deduction. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the date first above written. SUBSIDIARY GUARANTORS: UNION TEXAS PETROLEUM ENERGY CORPORATION By: /s/ M.N. MARKOWITZ ------------------------------------- M.N. Markowitz Treasurer -8- 9 UNION TEXAS PRODUCTS CORPORATION By: /s/ M.N. MARKOWITZ --------------------------------- M.N. Markowitz Treasurer UNION TEXAS EAST KALIMANTAN LIMITED By: /s/ M.N. MARKOWITZ --------------------------------- M.N. Markowitz Treasurer UNION TEXAS INTERNATIONAL CORPORATION By: /s/ M.N. MARKOWITZ --------------------------------- M.N. Markowitz Treasurer UNISTAR, INC. By: /s/ M.N. MARKOWITZ --------------------------------- M.N. Markowitz Vice President AGENT: NATIONSBANK OF TEXAS, N.A., as Agent By: /s/ PAUL A. SQUIRES --------------------------------- Paul A. Squires Senior Vice President -9- EX-10.5 6 FOURTH AMEND. TO CREDIT AGREEMENT 06/16/95 1 Exhibit 10.5 FOURTH AMENDMENT AGREEMENT This Fourth Amendment Agreement, effective as of June 16, 1995 ("Amendment"), is by and among (i) Union Texas Petroleum Holdings, Inc., a Delaware corporation ("Company"), (ii) the undersigned lenders ("Banks") which are parties to the Amended and Restated Credit Agreement dated as of May 13, 1994, as amended by the First Amendment Agreement dated as of November 21, 1994, the Second Amendment Agreement dated as of January 31, 1995 and the Third Amendment Agreement dated as of April 24, 1995 (as so amended, the "Agreement") among the Company, the lenders party thereto, NationsBank of Texas, N.A., as agent ("Agent"), and the Co-Agents named therein, (iii) the Agent and (iv) the Co-Agents. In consideration of the mutual covenants contained herein, the Company, the Banks, the Co-Agents and the Agent agree as set forth herein. 1. Amendments to Credit Agreement. The Agreement is hereby amended as follows: 1.1. Section 1.01. The following respective definitions set forth in Section 1.01 of the Agreement are hereby amended to read as follows: "Adjusted Equity" means the consolidated stockholders equity of the Company and its Consolidated Subsidiaries, as determined on a consolidated basis in accordance with generally accepted accounting principles, adjusted to exclude (i) any cumulative foreign exchange translation adjustments, (ii) any non-cash write-up or writedown of any assets of the Company and its Consolidated Subsidiaries made after March 31, 1995 in accordance with generally accepted accounting principles, and (iii) the non-cash effect of the adoption of any change after March 31, 1995 required by generally accepted accounting principles. "Margin Increase Condition" exists at all times during which any senior unsecured long-term debt of the Company is rated below BBB- by S&P. Section 1.01 of the Agreement is hereby further amended by deleting therefrom the definitions of "Additional Margin Increase Condition" and "Margin Period". 1.2. Section 2.07(a). The first sentence of Section 2.07(a) of the Agreement is hereby amended to read as follows: (a) If such Loan is a Base Rate Loan, for each day that such Loan is a Base Rate Loan, at a rate per annum equal to the sum of (i) the Base Rate for such day plus (ii) at such times as the Margin Increase Condition exists, 1/4% plus (iii) at such times as any Event of Default exists, 1%. 2 1.3. Section 2.07(b). The first sentence of Section 2.07(b) is hereby amended to read as follows: (b) If such Loan is a Euro-Dollar Loan, at a rate per annum equal at all times during any Interest Period for such Loan to the sum of (i) 0.575% plus (ii) the applicable London Interbank Offered Rate plus (iii) at such times as the Margin Increase Condition exists, 1/4% plus (iv) at such times as any Event of Default exists, 1%; provided that if any Euro-Dollar Loan or any portion thereof shall, as a result of clause (1)(c)(i) of the definition herein of "Interest Period", have an Interest Period of less than one month, such portion shall bear interest during such Interest Period at the rate applicable to Base Rate Loans during such period. 1.4. Section 2.07(c). The first sentence of Section 2.07(c) is hereby amended to read as follows: (c) If such Loan is a Sterling Loan, at a rate per annum equal at all times during any Interest Period for such Loan to the sum of (i) 0.575% plus (ii) the applicable Sterling Interbank Offered Rate plus (iii) at such times as the Margin Increase Condition exists, 1/4% plus (iv) at such times as any Event of Default exists, 1%; provided that if any Sterling Loan or any portion thereof shall, as a result of clause (4)(c)(i) of the definition herein of "Interest Period", have an Interest Period of less than one month, such portion shall bear interest during such Interest Period at the rate otherwise applicable to such Sterling Loans during such period plus 1/2%. 1.5. Section 2.07(d). Section 2.07(d) is hereby amended to read as follows: (d) Any overdue principal of or interest on any Euro-Dollar Loan shall bear interest, payable on demand, for each day from and including the date payment thereof was due to but excluding the date of actual payment, at a rate per annum equal to the sum of 1% plus the higher of (i) the sum of 0.575% plus the London Interbank Offered Rate applicable to such Loan plus at such times as the Margin Increase Condition exists, 1/4% and (ii) the sum of (1) 0.575% plus (2) the average (rounded upward, if necessary, to the next higher 1/16 of 1%) of the respective rates per annum at which one day (or, if such amount due remains unpaid more than three Euro-Dollar Business Days, then for such other period of time not longer than three months as the Agent may select) deposits in Dollars in an amount approximately equal to such overdue payment due to each of the Reference Banks are offered to such Reference Bank in the London interbank market for the applicable period determined as provided above plus (3) at such times as the Margin Increase Condition exists, 1/4% (or, if the circumstances described in clause (i) or (ii) of Section 8.01(a) shall exist, at a rate per annum equal to the sum of 1% plus the rate applicable to Base Rate Loans for such day). -2- 3 1.6. Section 2.07(e). Section 2.07(e) is hereby amended to read as follows: (e) Any overdue principal of or interest on any Sterling Loan shall bear interest, payable on demand, for each day from and including the date payment thereof was due to but excluding the date of actual payment, at a rate per annum equal to the sum of 1% plus the higher of (i) the sum of 0.575% plus the Sterling Interbank Offered Rate applicable to such Loan plus at such times as the Margin Increase Condition exists, 1/4% and (ii) the sum of (1) 0.575% plus (2) the average (rounded upward, if necessary, to the next higher 1/16 of 1%) of the respective rates per annum at which one day (or, if such amount due remains unpaid more than three Sterling Business Days, then for such other period of time not longer than three months as the Agent may select) deposits in Sterling in an amount approximately equal to such overdue payment due to each of the Reference Banks are offered to such Reference Bank in the London interbank market for the applicable period determined as provided above plus (3) at such times as the Margin Increase Condition exists, 1/4% (or, if the circumstances described in clause (i) or (ii) of Section 8.01(b) shall exist, at a rate per annum equal to the sum of 1% plus the rate applicable to Base Rate Loans for such day). 1.7. Section 5.01(d). Section 5.01(d) of the Agreement is hereby amended to read as follows: (d) as soon as available and in any event within 60 days after the end of each fiscal quarter of the Company, a certificate of the chief financial officer, the chief accounting officer or the treasurer of the Company certifying (i) whether the Margin Increase Condition exists as of the date of such certificate, (ii) the Unimar Percentage as of the end of such quarter and the amounts as of the end of such quarter of Consolidated Debt, Defeased Debt, Excluded Subordinated Debt, Debt of the Company and its Consolidated Subsidiaries determined on a consolidated basis, Debt of the Company and the Restricted Subsidiaries determined on a consolidated basis, Debt of Unimar, Debt of Unrestricted Subsidiaries, Excess Letter of Credit/Guarantee Amount, Non-Restricted Asset Non-Recourse Debt, Non-Recourse Debt of the Company and the Restricted Subsidiaries, and Restricted Subsidiaries Recourse Debt, and (iii) each Asset Sale that has been consummated during such quarter, the Fair Market Value of the Restricted Assets subject thereto, the amount of fees, commissions, expenses and taxes related thereto, the Net Sales Proceeds therefrom and the cumulative amount of the Excess Net Sales Proceeds from all Assets Sales since December 31, 1993; 1.8. Section 5.05(a). Section 5.05(a) of the Agreement is hereby deleted from the Agreement. -3- 4 1.9. Section 5.15. Section 5.15 of the Agreement is hereby amended by changing the amount "$300,000,000" set forth therein to "$350,000,000". 1.10. Section 8.01(a). Clause (y) of Section 8.01(a) of the Agreement is hereby amended to read as follows: (y) if such Fixed Rate Borrowing is a Money Market LIBOR Borrowing, the Money Market LIBOR Loans comprising such Borrowing shall bear interest for each day from and including the first day to but excluding the last day of the Interest Period applicable thereto at the sum of the Base Rate for such day plus at such times as the Margin Increase Condition exists, 1/4% plus at such times as any Event of Default exists, 1%. 1.11. Section 9.05. Section 9.05 of the Agreement is hereby amended by deleting the second proviso thereof (which pertains to amendments to or waivers of Section 5.05(a)). 2. Effectiveness. The effectiveness of this Amendment is subject to the receipt by the Agent of: 2.1. counterparts of this Amendment signed by each of the parties hereto (or, in the case of any party as to which an executed counterpart shall not have been received, receipt by the Agent in form satisfactory to it of telegraphic, telex or other written confirmation from such party of execution of a counterpart hereof by such party); and 2.2. a consent, duly executed by each of the Required Guarantors, substantially in the form of Exhibit A hereto. 3. Miscellaneous. 3.1. Amendments, Etc. No amendment or waiver of any provision of this Amendment, nor consent to any departure by the Company therefrom, shall in any event be effective unless effected in accordance with Section 9.05 of the Agreement. 3.2. Governing Law. This Amendment and the Agreement as amended hereby shall be construed in accordance with and governed by the laws of the State of Texas. 3.3. Preservation. Except as specifically modified by the terms of this Amendment, all of the terms, provisions, covenants, warranties and agreements contained in the Agreement (including, without limitation, exhibits thereto) or any other -4- 5 Financing Document remain in full force and effect. Undefined capitalized terms used herein are used herein as defined in the Agreement as amended hereby. 3.4. Execution in Counterparts. This Amendment may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. 3.5. Representations and Warranties. The Company hereby represents and warrants to the Banks, the Co-Agents and the Agent that (i) the representations and warranties contained in Article IV of the Agreement (other than the representations and warranties contained in Sections 4.04(a) and 4.04(c) thereof) are correct on and as of the date hereof as though made on and as of the date hereof, with this Amendment and the Agreement as amended hereby, constituting "Financing Documents" for purposes thereof, and (ii) no event has occurred and is continuing which constitutes a Default or an Event of Default. 3.6. Default. Without limiting any other event which may constitute an Event of Default, in the event that any representation or warranty set forth herein shall be incorrect or misleading in any material respect when made, such event shall constitute an "Event of Default" under the Agreement, as amended hereby. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their respective officers thereunto duly authorized, as of the date first above written. UNION TEXAS PETROLEUM HOLDINGS, INC. By: /s/ M.N. MARKOWITZ --------------------------------- M.N. Markowitz Vice President and Treasurer BANKS: NATIONSBANK OF TEXAS, N.A. BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION By: /s/ PAUL A. SQUIRES By: /s/ LAURA B. SHEPARD ------------------------------ -------------------------------- Paul A. Squires Authorized Officer Senior Vice President -5- 6 UNION BANK OF SWITZERLAND, MELLON BANK, N.A. HOUSTON AGENCY By: /s/ EVANS SWANN By: /s/ A. J. SABATELLE ------------------------ ---------------------- Evans Swann Managing Director Authorized Officer By: /s/ DAN O. BOYLE ------------------------ Dan O. Boyle Vice President THE BANK OF NOVA SCOTIA MORGAN GUARANTY TRUST COMPANY OF NEW YORK By: /s/ [Illegible] By: /s/ JOHN KOWALCZUK ------------------------ ---------------------- Authorized Officer Authorized Officer CHEMICAL BANK BANQUE NATIONALE DE PARIS, HOUSTON AGENCY By: /s/ [Illegible] By: /s/ [Illegible] ------------------------ ---------------------- Authorized Officer Authorized Officer CREDIT LYONNAIS CAYMAN LTCB TRUST COMPANY ISLAND BRANCH By: /s/ XAVIER RATOUIS By: /s/ [Illegible] ------------------------ ---------------------- Authorized Officer Authorized Officer THE FIRST NATIONAL BANK OF SOCIETE GENERALE, SOUTHWEST CHICAGO AGENCY By: /s/ [Illegible] By: /s/ [Illegible] ------------------------ ---------------------- Authorized Agent Authorized Officer THE BANK OF TOKYO, LTD., DALLAS AGENCY By: /s/ JOHN M. MCINTYRE ---------------------- Authorized Officer -6- 7 BANQUE PARIBAS, HOUSTON THE MITSUBISHI TRUST & AGENCY BANKING CORPORATION By: /s/ [Illegible] By: /s/ [Illegible] ------------------------ ---------------------- Authorized Officer Authorized Officer By: /s/ BART SCHOUEST ------------------------ Authorized Officer CHRISTIANIA BANK NATIONAL WESTMINSTER BANK PLC (NEW YORK BRANCH) By: /s/ JAHN O. ROISING By: /s/ [Illegible] ------------------------ ---------------------- Authorized Officer Authorized Officer By: /s/ [Illegible] ------------------------ Authorized Officer CITIBANK, N.A. NATIONAL WESTMINSTER BANK PLC (NASSAU BRANCH) By: /s/ BARBARA A. COHEN By: /s/ [Illegible] ------------------------ ---------------------- Barbara A. Cohen Authorized Officer Vice President DRESDNER BANK AG, NEW YORK THE YASUDA TRUST AND BANKING AND GRAND CAYMAN BRANCHES COMPANY, LIMITED, NEW YORK BRANCH By: /s/ [Illegible] By: /s/ GERARD GILL ------------------------ ---------------------- Authorized Officer Authorized Officer By: /s/ B. C. ERICKSON ------------------------ Authorized Officer BANK OF TAIWAN By: /s/ [Illegible] ---------------------- Authorized Officer -7- 8 BANQUE FRANCAISE DU DEN NORSKE BANK AS COMMERCE EXTERIEUR By: /s/ IAIN A. WHYTE By: /s/ EDWARD L. METE ------------------------ ------------------------ Iain A. Whyte Edward L. Mete Assistant Vice President Senior Vice President By: /s/ MARK A. HARRINGTON By: /s/ FRAN MEYERS ------------------------ ------------------------ Mark A. Harrington Fran Meyers Vice President & Vice President Regional Manager FIRST INTERSTATE BANK OF TEXAS, N.A. By: /s/ COLLIE C. MICHAELS ------------------------ Authorized Officer NATIONSBANK OF TEXAS, N.A., as Agent By: /s/ PAUL A. SQUIRES ------------------------ Paul A. Squires Senior Vice President BANK OF AMERICA NATIONAL UNION BANK OF SWITZERLAND, TRUST AND SAVINGS HOUSTON AGENCY, as Co-Agent ASSOCIATION, as Co-Agent By: /s/ LAURA B. SHEPARD By: /s/ EVANS SWANN ------------------------ ------------------------ Authorized Officer Evans Swann Managing Director By: /s/ DAN O. BOYLE ------------------------ Dan O. Boyle Vice President -8- 9 EXHIBIT A ACKNOWLEDGEMENT AND CONSENT June 16, 1995 Reference is made to the Amended and Restated Credit Agreement dated as of May 13, 1994, as amended by the First Amendment Agreement dated as of November 21, 1994, the Second Amendment Agreement dated as of January 31, 1995, and the Third Amendment Agreement dated as of April 24, 1995 (as so amended, the "Credit Agreement"), among Union Texas Petroleum Holdings, Inc., a Delaware corporation ("Company"), the Banks and Co-Agents parties thereto, and NationsBank of Texas, N.A., as Agent ("Agent") and to the Fourth Amendment Agreement dated as of June 16, 1995 (the "Amendment") among the Company, the Banks and Co-Agents parties thereto, and the Agent. Undefined capitalized terms are used herein as defined in the Credit Agreement as amended by the Amendment (the "Amended Credit Agreement"). To induce the Agent and the Banks to execute the Amendment, each of the undersigned Subsidiary Guarantors hereby (a) acknowledges the execution, delivery and performance of the Amendment by the Company, (b) agrees that (i) none of such Subsidiary Guarantor's obligations under or in connection with the Subsidiary Guaranty Agreement and none of the Banks' or the Agent's rights and remedies with respect to any Subsidiary Guarantor is released, impaired or affected thereby or by the foregoing, (ii) the Subsidiary Guaranty Agreement is not released, impaired or affected thereby or by any of the foregoing, and (iii) this acknowledgement shall not be construed as requiring the consent or agreement of any Subsidiary Guarantor in any circumstance, (c) ratifies and confirms all provisions of the Subsidiary Guaranty Agreement, and (d) agrees that none of such Subsidiary Guarantor's obligations, none of the Banks' or the Agent's rights and remedies nor the Subsidiary Guaranty Agreement, would be released, impaired or affected if such Subsidiary Guarantor had not executed this Acknowledgment and Consent. IN WITNESS WHEREOF, the parties hereto have caused this Acknowledgement and Consent to be duly executed and delivered by their respective officers thereunto duly authorized, as of the 16th day of June, 1995. SUBSIDIARY GUARANTORS: UNION TEXAS PETROLEUM ENERGY UNION TEXAS PRODUCTS CORPORATION CORPORATION By: By: ----------------------- ------------------- M.N. Markowitz M.N. Markowitz Treasurer Treasurer 10 EXHIBIT A UNION TEXAS EAST KALIMANTAN UNION TEXAS INTERNATIONAL LIMITED CORPORATION By: By: ----------------------- ----------------------- M.N. Markowitz M.N. Markowitz Treasurer Treasurer UNISTAR, INC. By: ------------------------ M.N. Markowitz Vice President -2- EX-10.6 7 FIRST AMEND. CREDIT AGREEMENT 06/16/95 1 Exhibit 10.6 FIRST AMENDMENT AGREEMENT This First Amendment Agreement, effective as of June 16, 1995 (this "Amendment"), is by and among (i) Union Texas Petroleum Holdings, Inc., a Delaware corporation ("Company"), (ii) the undersigned lenders ("Banks") which are parties to the Credit Agreement dated as of April 24, 1995 (the "Agreement") among the Company, the lenders party thereto, NationsBank of Texas, N.A., as agent ("Agent"), and the Co-Agents named therein, (iii) the Agent and (iv) the Co-Agents. In consideration of the mutual covenants contained herein, the Company, the Banks, the Co-Agents and the Agent agree as set forth herein. 1. Amendments to Credit Agreement. The Agreement is hereby amended as follows: 1.1. Section 1.01. The following respective definitions set forth in Section 1.01 of the Agreement are hereby amended to read as follows: "Adjusted Equity" means the consolidated stockholders equity of the Company and its Consolidated Subsidiaries, as determined on a consolidated basis in accordance with generally accepted accounting principles, adjusted to exclude (i) any cumulative foreign exchange translation adjustments, (ii) any non-cash write-up or writedown of any assets of the Company and its Consolidated Subsidiaries made after March 31, 1995 in accordance with generally accepted accounting principles, and (iii) the non-cash effect of the adoption of any change after March 31, 1995 required by generally accepted accounting principles. "Margin Increase Condition" exists at all times during which any senior unsecured long-term debt of the Company is rated below BBB- by S&P. Section 1.01 of the Agreement is hereby further amended by deleting therefrom the definitions of "Additional Margin Increase Condition" and "Margin Period". 1.2. Section 2.07(a). The first sentence of Section 2.07(a) of the Agreement is hereby amended to read as follows: (a) If such Loan is a Base Rate Loan, for each day that such Loan is a Base Rate Loan, at a rate per annum equal to the sum of (i) the Base Rate for such day plus (ii) at such times as the Margin Increase Condition exists, 1/4% plus (iii) at such times as any Event of Default exists, 1%. 1.3. Section 2.07(b). The first sentence of Section 2.07(b) is hereby amended to read as follows: 2 (a) If such Loan is a Euro-Dollar Loan, at a rate per annum equal at all times during any Interest Period for such Loan to the sum of (i) 0.6875% plus (ii) the applicable London Interbank Offered Rate plus (iii) at such times as the Margin Increase Condition exists, 1/4% plus (iv) at such times as any Event of Default exists, 1%; provided that any overdue principal of or interest on any Euro-Dollar Loan shall bear interest, payable on demand, for each day from and including the date payment thereof was due to but excluding the date of actual payment, at a rate per annum equal to the sum of 1% plus the higher of (i) the sum of 0.6875% plus the London Interbank Offered Rate applicable to such Loan plus at such times as the Margin Increase Condition exists, 1/4% and (ii) the sum of (1) 0.6875% plus (2) the average (rounded upward, if necessary, to the next higher 1/16 of 1%) of the respective rates per annum at which one day (or, if such amount due remains unpaid more than three Euro-Dollar Business Days, then for such other period of time not longer than three months as the Agent may select) deposits in dollars in an amount approximately equal to such overdue payment due to each of the Reference Banks are offered to such Reference Bank in the London interbank market for the applicable period determined as provided above plus (3) at such times as the Margin Increase Condition exists, 1/4% (or, if the circumstances described in clause (a) or (b) of Section 8.01 shall exist, at a rate per annum equal to the sum of 1% plus the rate applicable to Base Rate Loans for such day). 1.4. Section 5.01(d). Section 5.01(d) of the Agreement is hereby amended to read as follows: (d) as soon as available and in any event within 60 days after the end of each fiscal quarter of the Company, a certificate of the chief financial officer, the chief accounting officer or the treasurer of the Company certifying (i) whether the Margin Increase Condition exists as of the date of such certificate, (ii) the Unimar Percentage as of the end of such quarter and the amounts as of the end of such quarter of Consolidated Debt, Defeased Debt, Excluded Subordinated Debt, Debt of the Company and its Consolidated Subsidiaries determined on a consolidated basis, Debt of the Company and the Restricted Subsidiaries determined on a consolidated basis, Debt of Unimar, Debt of Unrestricted Subsidiaries, Excess Letter of Credit/Guarantee Amount, Non-Restricted Asset Non-Recourse Debt, Non-Recourse Debt of the Company and the Restricted Subsidiaries, and Restricted Subsidiaries Recourse Debt, and (iii) each Asset Sale that has been consummated during such quarter, the Fair Market Value of the Restricted Assets subject thereto, the amount of fees, commissions, expenses and taxes related thereto, the Net Sales Proceeds therefrom and the cumulative amount of the Excess Net Sales Proceeds from all Assets Sales since December 31, 1993; 1.5. Section 5.05(a). Section 5.05(a) of the Agreement is hereby deleted from the Agreement. -2- 3 1.6. Section 5.15. Section 5.15 of the Agreement is hereby amended by changing the amount "$300,000,000" set forth therein to "$350,000,000". 1.7. Section 9.05. Section 9.05 of the Agreement is hereby amended by deleting the second proviso thereof (which pertains to amendments to or waivers of Section 5.05(a)). 2. Effectiveness. The effectiveness of this Amendment is subject to the receipt by the Agent of: 2.1. counterparts of this Amendment signed by each of the parties hereto (or, in the case of any party as to which an executed counterpart shall not have been received, receipt by the Agent in form satisfactory to it of telegraphic, telex or other written confirmation from such party of execution of a counterpart hereof by such party); and 2.2. a consent, duly executed by each of the Required Guarantors, substantially in the form of Exhibit A hereto. 3. Miscellaneous. 3.1. Amendments, Etc. No amendment or waiver of any provision of this Amendment, nor consent to any departure by the Company therefrom, shall in any event be effective unless effected in accordance with Section 9.05 of the Agreement. 3.2. Governing Law. This Amendment and the Agreement as amended hereby shall be construed in accordance with and governed by the laws of the State of Texas. 3.3. Preservation. Except as specifically modified by the terms of this Amendment, all of the terms, provisions, covenants, warranties and agreements contained in the Agreement (including, without limitation, exhibits thereto) or any other Financing Document remain in full force and effect. Undefined capitalized terms used herein are used herein as defined in the Agreement as amended hereby. 3.4. Execution in Counterparts. This Amendment may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. 3.5. Representations and Warranties. The Company hereby represents and warrants to the Banks, the Co-Agents and the Agent that (i) the representations and warranties contained in Article IV of the Agreement (other than the representations and -3- 4 warranties contained in Sections 4.04(a) and 4.04(c) thereof) are correct on and as of the date hereof as though made on and as of the date hereof, with this Amendment and the Agreement as amended hereby, constituting "Financing Documents" for purposes thereof, and (ii) no event has occurred and is continuing which constitutes a Default or an Event of Default. 3.6. Default. Without limiting any other event which may constitute an Event of Default, in the event that any representation or warranty set forth herein shall be incorrect or misleading in any material respect when made, such event shall constitute an "Event of Default" under the Agreement, as amended hereby. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their respective officers thereunto duly authorized, as of the date first above written. UNION TEXAS PETROLEUM HOLDINGS, INC. By: /s/ M.N. MARKOWITZ ---------------------------- M.N. Markowitz Vice President and Treasurer BANKS: NATIONSBANK OF TEXAS, N.A. UNION BANK OF SWITZERLAND, HOUSTON AGENCY By: /s/ PAUL A. SQUIRES ----------------------------- Paul A. Squires By: /s/ EVANS SWANN Senior Vice President ---------------------------- Evans Swann Managing Director BANK OF AMERICA NATIONAL By: /s/ DAN O. BOYLE TRUST AND SAVINGS ASSOCIATION ---------------------------- Dan O. Boyle Vice President By: /s/ LAURA B. SHEPARD ----------------------------- THE BANK OF NOVA SCOTIA Authorized Officer By: /s/ [Illegible] ---------------------------- Authorized Officer -4- 5 CHEMICAL BANK BANQUE NATIONALE DE PARIS, HOUSTON AGENCY By: /s/ [Illegible] By: /s/ [Illegible] --------------------------- ----------------------- Authorized Officer Authorized Officer CREDIT LYONNAIS CAYMAN ISLAND BRANCH LTCB TRUST COMPANY By: /s/ XAVIER RATOUIS By: /s/ [Illegible] --------------------------- ----------------------- Authorized Officer Authorized Officer THE FIRST NATIONAL BANK OF SOCIETE GENERALE, SOUTHWEST CHICAGO AGENCY By: /s/ [Illegible] By: /s/ [Illegible] --------------------------- ----------------------- Authorized Agent Authorized Officer MELLON BANK, N.A. THE BANK OF TOKYO, LTD., DALLAS AGENCY By: /s/ A. J. SABATELLE By: /s/ JOHN M. MCINTYRE --------------------------- ----------------------- Authorized Officer Authorized Officer MORGAN GUARANTY TRUST COMPANY OF NEW YORK BANQUE PARIBAS, HOUSTON AGENCY By: /s/ JOHN KOWALCZUK By: /s/ [Illegible] --------------------------- ----------------------- Authorized Officer Authorized Officer By: /s/ BART SCHOUEST ----------------------- Authorized Officer -5- 6 CHRISTIANIA BANK NATIONAL WESTMINSTER BANK PLC (NEW YORK BRANCH) By: /s/ JAHN O. ROISING By: /s/ [Illegible] --------------------------- --------------------------- Authorized Officer Authorized Officer By: /s/ [Illegible] --------------------------- NATIONAL WESTMINSTER BANK Authorized Officer PLC (NASSAU BRANCH) CITIBANK, N.A. By: /s/ [Illegible] -------------------------- Authorized Officer By: /s/ BARBARA A. COHEN THE YASUDA TRUST AND BANKING --------------------------- COMPANY, LIMITED, NEW YORK Barbara A. Cohen BRANCH Vice President DRESDNER BANK AG, NEW YORK By: /s/ GERALD GILL AND GRAND CAYMAN BRANCHES --------------------------- Authorized Officer By: /s/ [Illegible] BANK OF TAIWAN --------------------------- Authorized Officer By: /s/ [Illegible] --------------------------- By: /s/ B. C. ERICKSON Authorized Officer --------------------------- Authorized Officer BANQUE FRANCAISE DU THE MITSUBISHI TRUST & COMMERCE EXTERIEUR BANKING CORPORATION By: /s/ IAIN A. WHYTE --------------------------- By: /s/ [Illegible] Iain A. Whyte --------------------------- Assistant Vice President Authorized Officer By: /s/ MARK A. HARRINGTON --------------------------- Mark A. Harrington Vice President & Regional Manager -6- 7 DEN NORSKE BANK AS FIRST INTERSTATE BANK OF TEXAS, N.A. By: /s/ EDWARD L. METE By: /s/ COLLIE C. MICHAELS --------------------------- ------------------------- Edward L. Mete Authorized Officer Senior Vice President By: /s/ FRAN MEYERS --------------------------- Fran Meyers Vice President NATIONSBANK OF TEXAS, N.A., as Agent By: /s/ PAUL A. SQUIRES ------------------------- Paul A. Squires Senior Vice President BANK OF AMERICA NATIONAL UNION BANK OF SWITZERLAND, TRUST AND SAVINGS HOUSTON AGENCY, as ASSOCIATION, as Co-Agent Co-Agent By: /s/ LAURA B. SHEPARD By: /s/ EVANS SWANN --------------------------- ------------------------- Authorized Officer Evans Swann Managing Director By: /s/ DAN O. BOYLE ------------------------- Dan O. Boyle Vice President -7- 8 EXHIBIT A ACKNOWLEDGEMENT AND CONSENT June 16, 1995 Reference is made to the Credit Agreement dated as of April 24, 1995 (the "Credit Agreement"), among Union Texas Petroleum Holdings, Inc., a Delaware corporation ("Company"), the Banks and Co-Agents parties thereto, and NationsBank of Texas, N.A., as Agent ("Agent") and to the First Amendment Agreement dated as of June 16, 1995 (the "Amendment") among the Company, the Banks and Co-Agents parties thereto, and the Agent. Undefined capitalized terms are used herein as defined in the Credit Agreement as amended by the Amendment (the "Amended Credit Agreement"). To induce the Agent and the Banks to execute the Amendment, each of the undersigned Subsidiary Guarantors hereby (a) acknowledges the execution, delivery and performance of the Amendment by the Company, (b) agrees that (i) none of such Subsidiary Guarantor's obligations under or in connection with the Subsidiary Guaranty Agreement and none of the Banks' or the Agent's rights and remedies with respect to any Subsidiary Guarantor is released, impaired or affected thereby or by the foregoing, (ii) the Subsidiary Guaranty Agreement is not released, impaired or affected thereby or by any of the foregoing, and (iii) this acknowledgement shall not be construed as requiring the consent or agreement of any Subsidiary Guarantor in any circumstance, (c) ratifies and confirms all provisions of the Subsidiary Guaranty Agreement, and (d) agrees that none of such Subsidiary Guarantor's obligations, none of the Banks' or the Agent's rights and remedies nor the Subsidiary Guaranty Agreement, would be released, impaired or affected if such Subsidiary Guarantor had not executed this Acknowledgment and Consent. IN WITNESS WHEREOF, the parties hereto have caused this Acknowledgement and Consent to be duly executed and delivered by their respective officers thereunto duly authorized, as of the 16th day of June, 1995. SUBSIDIARY GUARANTORS: UNION TEXAS PETROLEUM UNION TEXAS PRODUCTS ENERGY CORPORATION CORPORATION By: By: --------------------------- ---------------------- M.N. Markowitz M.N. Markowitz Treasurer Treasurer -1- 9 EXHIBIT A UNION TEXAS EAST UNION TEXAS INTERNATIONAL KALIMANTAN LIMITED CORPORATION By: By: --------------------------- -------------------- M.N. Markowitz M.N. Markowitz Treasurer Treasurer UNISTAR, INC. By: -------------------- M.N. Markowitz Vice President -2- EX-10.7 8 $100,000,000 CREDIT AGREEMENT DATED 06/30/95 1 Exhibit 10.7 ================================================================================ $100,000,000 CREDIT AGREEMENT dated as of June 30, 1995 among UNION TEXAS PETROLEUM HOLDINGS, INC. The BANKS Listed Herein and NATIONSBANK OF TEXAS, N.A. as Agent and BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION UNION BANK OF SWITZERLAND, HOUSTON AGENCY as Co-Agents THE INDEMNIFICATION PROVISIONS OF SECTIONS 7.06 AND 9.03(b) OF THIS AGREEMENT INCLUDE INDEMNIFICATION FROM THE CONSEQUENCES OF THE NEGLIGENCE OF THE PERSONS INDEMNIFIED THEREBY TO THE EXTENT SET FORTH THEREIN ================================================================================ 2 TABLE OF CONTENTS
Page ARTICLE I DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . 1 SECTION 1.01. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 SECTION 1.02. Accounting Terms and Determinations . . . . . . . . . . . . . . . 20 SECTION 1.03. Types of Borrowings . . . . . . . . . . . . . . . . . . . . . . . 21 SECTION 1.04. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . 21 SECTION 1.05. Unimar. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 SECTION 1.06. Ratings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 ARTICLE II THE CREDITS . . . . . . . . . . . . . . . . . . . . . 22 SECTION 2.01. Commitments to Lend . . . . . . . . . . . . . . . . . . . . . . . 22 SECTION 2.02. Notice of Borrowings . . . . . . . . . . . . . . . . . . . . . . 22 SECTION 2.03. Conversions . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 SECTION 2.04. Notice to Banks; Funding of Loans . . . . . . . . . . . . . . . . 24 SECTION 2.05. Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 SECTION 2.06. Maturity of Loans . . . . . . . . . . . . . . . . . . . . . . . . 25 SECTION 2.07. Interest Rates . . . . . . . . . . . . . . . . . . . . . . . . . 26 SECTION 2.08. Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 SECTION 2.09. Optional Termination or Reduction of Commitments . . . . . . . . 27 SECTION 2.10. Mandatory Termination or Reduction of Commitments . . . . . . . . 28 SECTION 2.11. Optional Prepayments . . . . . . . . . . . . . . . . . . . . . . 28 SECTION 2.12. General Provisions as to Payments . . . . . . . . . . . . . . . . 28 SECTION 2.13. Funding Losses . . . . . . . . . . . . . . . . . . . . . . . . . 29 SECTION 2.14. Computation of Interest and Fees . . . . . . . . . . . . . . . . 30 SECTION 2.15. Chapter 15 . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 SECTION 2.16. Maximum Interest Rate . . . . . . . . . . . . . . . . . . . . . . 30 SECTION 2.17. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 ARTICLE III CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . 34 SECTION 3.01. Initial Borrowing . . . . . . . . . . . . . . . . . . . . . . . . 34 SECTION 3.02. All Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . 35 ARTICLE IV REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . 35 SECTION 4.01. Corporate Existence and Power . . . . . . . . . . . . . . . . . . 35
-i- 3 SECTION 4.02. Corporate and Governmental Authorization; Contravention . . . . . 36 SECTION 4.03. Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . 36 SECTION 4.04. Information . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 SECTION 4.05. Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 SECTION 4.06. Compliance with ERISA . . . . . . . . . . . . . . . . . . . . . . 37 SECTION 4.07. Environmental Matters . . . . . . . . . . . . . . . . . . . . . . 38 SECTION 4.08. Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . 38 SECTION 4.09. Ownership of Restricted Subsidiaries . . . . . . . . . . . . . . 38 SECTION 4.10. Title to Properties . . . . . . . . . . . . . . . . . . . . . . . 39 SECTION 4.11. Taxes and Other Obligations . . . . . . . . . . . . . . . . . . . 39 SECTION 4.12. Regulation U . . . . . . . . . . . . . . . . . . . . . . . . . . 39 SECTION 4.13. Certain Obligations . . . . . . . . . . . . . . . . . . . . . . . 39 SECTION 4.14. United Kingdom Assets . . . . . . . . . . . . . . . . . . . . . . 40 ARTICLE V COVENANTS . . . . . . . . . . . . . . . . . . . . . . . 40 SECTION 5.01. Information . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 SECTION 5.02. Affirmative Covenants . . . . . . . . . . . . . . . . . . . . . . 44 SECTION 5.03. Primary Business . . . . . . . . . . . . . . . . . . . . . . . . 45 SECTION 5.04. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 SECTION 5.05. Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 SECTION 5.06. Restricted Payments . . . . . . . . . . . . . . . . . . . . . . . 46 SECTION 5.07. Negative Pledge . . . . . . . . . . . . . . . . . . . . . . . . . 46 SECTION 5.08. Consolidations and Mergers . . . . . . . . . . . . . . . . . . . 47 SECTION 5.09. Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . 47 SECTION 5.10. Parties to Subsidiary Guaranty Agreement . . . . . . . . . . . . 48 SECTION 5.11. Restrictions on Dividends, Intercompany Loans, or Investments . . 48 SECTION 5.12. Loans and Advances . . . . . . . . . . . . . . . . . . . . . . . 48 SECTION 5.13. Cross-Default . . . . . . . . . . . . . . . . . . . . . . . . . . 48 SECTION 5.14. Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . 49 SECTION 5.15. Adjusted Equity and Interest Coverage . . . . . . . . . . . . . . 49 SECTION 5.16. Excluded Subordinated Debt and Preferred Stock . . . . . . . . . 50 SECTION 5.17. Certain Obligations . . . . . . . . . . . . . . . . . . . . . . . 50 SECTION 5.18. Restrictions on Asset Sales . . . . . . . . . . . . . . . . . . . 50 SECTION 5.19. UTEK Guaranty . . . . . . . . . . . . . . . . . . . . . . . . . . 50 SECTION 5.20. Conversion to Unrestricted Subsidiary . . . . . . . . . . . . . . 50 ARTICLE VI DEFAULTS . . . . . . . . . . . . . . . . . . . . . . . 51
-ii- 4 SECTION 6.01. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . 51 SECTION 6.02. Notice of Default . . . . . . . . . . . . . . . . . . . . . . . . 54 ARTICLE VII THE AGENT . . . . . . . . . . . . . . . . . . . . . . . 54 SECTION 7.01. Appointment and Authorization . . . . . . . . . . . . . . . . . . 54 SECTION 7.02. Agent and Affiliates . . . . . . . . . . . . . . . . . . . . . . 54 SECTION 7.03. Action by Agent . . . . . . . . . . . . . . . . . . . . . . . . . 54 SECTION 7.04. Consultation with Experts . . . . . . . . . . . . . . . . . . . . 54 SECTION 7.05. Liability of Agent . . . . . . . . . . . . . . . . . . . . . . . 54 SECTION 7.06. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . 55 SECTION 7.07. Credit Decision . . . . . . . . . . . . . . . . . . . . . . . . . 55 SECTION 7.08. Successor Agent . . . . . . . . . . . . . . . . . . . . . . . . . 55 SECTION 7.09. Agent's Fees . . . . . . . . . . . . . . . . . . . . . . . . . . 56 ARTICLE VIII CHANGE IN CIRCUMSTANCES . . . . . . . . . . . . . . . . 56 SECTION 8.01. Basis for Determining Interest Rate Inadequate or Unfair . . . . 56 SECTION 8.02. Illegality . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 SECTION 8.03. Increased Cost and Reduced Return . . . . . . . . . . . . . . . . 57 SECTION 8.04. Base Rate Loans Substituted for Affected Euro-Dollar Loans . . . 59 SECTION 8.05. Substitution of Bank . . . . . . . . . . . . . . . . . . . . . . 59 ARTICLE IX MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . 59 SECTION 9.01. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 SECTION 9.02. No Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 SECTION 9.03. Expenses; Indemnification . . . . . . . . . . . . . . . . . . . . 60 SECTION 9.04. Sharing of Set-Offs, Etc. . . . . . . . . . . . . . . . . . . . . 61 SECTION 9.05. Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . 62 SECTION 9.06. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . 62 SECTION 9.07. Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 SECTION 9.08. Texas Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 SECTION 9.09. CONSENT TO JURISDICTION . . . . . . . . . . . . . . . . . . . . . 64 SECTION 9.10. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . 64 SECTION 9.11. WAIVER OF JURY TRIAL . . . . . . . . . . . . . . . . . . . . . . 64 SECTION 9.12. COMPLETE AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . 64 SECTION 9.13. Liability of Co-Agents . . . . . . . . . . . . . . . . . . . . . 64
-iii- 5 Schedule I - [Not used] Schedule II - Existing Subsidiaries Schedule III - Existing Liens Schedule IV- Existing Restrictions Schedule V - Joint Venture Debt Agreements Schedule VI- Outstanding Options Exhibit A - Note Exhibit B - Subsidiary Guaranty Agreement Exhibit C - Opinion of General Counsel of the Company Exhibit D - Opinion of Special Counsel for the Company Exhibit E - Opinion of Special Counsel for the Agent Exhibit F - Assignment and Assumption Agreement -iv- 6 CREDIT AGREEMENT Credit Agreement dated as of June 30, 1995 among Union Texas Petroleum Holdings, Inc., the Banks party hereto, NationsBank of Texas, N.A., as Agent, and Bank of America National Trust and Savings Association and Union Bank of Switzerland, Houston Agency, as Co-Agents. The parties hereto agree as follows: ARTICLE I DEFINITIONS SECTION 1.01. Definitions. The following terms, as used herein, have the following meanings: "Acceptable Engineer" means DeGolyer & MacNaughton or such other independent engineering firm that is mutually acceptable to the Agent and the Company. "Adjusted Equity" means the consolidated stockholders equity of the Company and its Consolidated Subsidiaries, as determined on a consolidated basis in accordance with generally accepted accounting principles, adjusted to exclude (i) any cumulative foreign exchange translation adjustments, (ii) any non-cash write-up or writedown of any assets of the Company and its Consolidated Subsidiaries made after March 31, 1995 in accordance with generally accepted accounting principles, and (iii) the non-cash effect of the adoption of any change after March 31, 1995 required by generally accepted accounting principles. "Administrative Questionnaire" means, with respect to each Bank, an administrative questionnaire in the form requested by the Agent submitted to the Agent (with a copy to the Company) duly completed by such Bank. "Affiliate" means (i) any Person holding 5% or more of any class of capital stock of the Company, and (ii) any Person (other than the Company, a Subsidiary or a Partnership) directly or indirectly controlling, controlled by or under common control with any Person described in clause (i). As used in this definition of "Affiliate", the term "control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through ownership of voting securities, by contract or otherwise. "Agent" means NationsBank in its capacity as agent for the Banks hereunder and any successor in such capacity. 7 "Agreement" means this Credit Agreement dated as of June 30, 1995 among the Company, the Banks, the Co-Agents and the Agent, as amended from time to time in accordance with the terms hereof. "Applicable Lending Office" means, with respect to any Bank, (i) in the case of its Base Rate Loans, its Domestic Lending Office, and (ii) in the case of its Euro-Dollar Loans, its Euro-Dollar Lending Office. "Asset Sale" means any sale, lease, transfer or other disposition of any Restricted Asset by the Company or any Restricted Subsidiary, whether such sale, lease, transfer or other disposition is direct or indirect (such as by selling capital stock of the Subsidiary that owns such Restricted Asset, but excluding sales of capital stock of the Company), other than (i) farm-outs in the ordinary course of business of properties containing substantially no proved reserves at the time of the farm-out, (ii) sales in the ordinary course of business of Hydrocarbons after severance, (iii) sales, transfers, leases or other dispositions of inventory and obsolete or surplus equipment in the ordinary course of business, and (iv) sales, transfers, leases or other dispositions to the Company or any Restricted Subsidiary if no Default then exists or would result therefrom. "Assignee" has the meaning set forth in Section 9.06(c). "Assignment" means an Assignment and Assumption Agreement in substantially the form of Exhibit F hereto. "Bank" means each bank listed on the signature pages hereof, each Assignee which becomes a Bank pursuant to Section 9.06(c), and their respective successors. "Base Rate" means, for any day, a rate per annum equal to the higher of (i) the Corporate Base Rate for such day and (ii) the sum of 1/2 of 1% plus the Federal Funds Rate for such day. "Base Rate Loan" means a Loan which bears interest as provided in Section 2.07(a). "Benefit Arrangement" means at any time an employee benefit plan within the meaning of Section 3(3) of ERISA which is not a Plan or a Multiemployer Plan and which is maintained or otherwise contributed to by any member of the ERISA Group. "Borrowing" has the meaning set forth in Section 1.03. "Cash Interest Expense" means, for any period, the sum of (i) the aggregate amount accrued during such period by the Company and its Consolidated Subsidiaries for interest determined on a consolidated basis, but excluding interest on -2- 8 Non-Recourse Debt and interest on Debt of Unrestricted Subsidiaries to the extent such Debt does not constitute Debt of the Company or any Restricted Subsidiary plus (ii) the aggregate amount paid during such period by the Company and its Consolidated Subsidiaries for dividends on Restricted Preferred Stock, determined on a consolidated basis. "Co-Agents" means Bank of America National Trust and Savings Association and Union Bank of Switzerland, Houston Agency in their capacities as Co-Agents hereunder. "Commitment" means, with respect to each Bank, the amount set forth opposite the name of such Bank on the signature pages hereof (or, if such Bank is an Assignee and its name is not set forth on the signature pages hereof, the amount of its Commitment as set forth in the Assignment pursuant to which it became a Bank), as such amount may be reduced from time to time pursuant to Sections 2.09 and 2.10 or reduced or increased from time to time pursuant to any Assignment to which it is a party. "Company" means Union Texas Petroleum Holdings, Inc., a Delaware corporation. "Company's 1993 Form 10-K" means the Company's annual report on Form 10-K for 1993, as filed with the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934. "Company's 1994 Form 10-K" means the Company's annual report on Form 10-K for 1994, as filed with the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934. "Consolidated Debt" means, at any date, an amount equal to (a) the sum (without duplication) of (i) the aggregate amount of Debt (other than Defeased Debt, Excluded Subordinated Debt not exceeding $100,000,000 and Debt that would not constitute Debt of the Company or any of its Consolidated Subsidiaries if clause (viii) were not included in the definition herein of Debt) of the Company and its Consolidated Subsidiaries, determined on a consolidated basis as of such date, plus (ii) the Unimar Percentage at such date of the aggregate Debt (other than Defeased Debt and Debt that would not constitute Debt of Unimar or any of the Unimar Restricted Subsidiaries if clause (viii) were not included in the definition herein of Debt) of Unimar and the Unimar Restricted Subsidiaries, determined on a consolidated basis as of such date, plus (iii) the Excess Letter of Credit/Guarantee Amount at such date, minus (b) the sum (without duplication and only to the extent that any of the following are included in the foregoing clause (a)) at such date of (1) Debt of Unrestricted Subsidiaries to the extent such Debt does not constitute Debt of the Company or any Restricted Subsidiary, plus (2) Non-Restricted Asset Non-Recourse Debt, plus (3) Existing Pakistan Non-Recourse Debt. -3- 9 "Consolidated Subsidiary" means at any date any Subsidiary or other entity the accounts of which would be consolidated with those of the Company in its consolidated financial statements as of such date. "Convert", "Conversion" and "Converted" each refers to (i) the change of Loans of one Type into Loans of the other Type pursuant to Section 2.03 or Article VIII, (ii) the continuation of all Euro-Dollar Loans comprising the same Borrowing as such for an additional Interest Period pursuant to Section 2.03, and (iii) an election to change, pursuant to Section 2.03, the Interest Period applicable to all Euro-Dollar Loans comprising the same Borrowing prior to the end of the Interest Period then applicable thereto. "Corporate Base Rate" means a fluctuating interest rate per annum as shall be in effect from time to time equal to the rate of interest publicly announced by NationsBank as its base rate, whether or not the Company has notice thereof. Such rate is set by NationsBank as a general reference rate of interest, taking into account such factors as NationsBank may deem appropriate, it being understood that many of NationsBank's commercial or other loans are priced in relation to such rate, that it is not necessarily the lowest or best rate actually charged to any customer and that NationsBank may make various commercial or other loans at rates of interest having no relationship to such rate. "Debt" of any Person means at any date, without duplication, (i) all obligations of such Person for borrowed money, (ii) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments, (iii) all obligations of such Person to pay the deferred purchase price of property or services, except accrued expenses, trade accounts payable and taxes payable arising in the ordinary course of business, (iv) the present value, determined in accordance with generally accepted accounting principles, of the obligations of such Person to make payments under capital leases, (v) all obligations of such Person which shall have been outstanding for more than five days owed to a bank or other Person in respect of amounts theretofore paid under a letter of credit or similar instrument, (vi) all Debt of others secured by a Lien on any asset owned by such Person whether or not such Debt is assumed by such Person (except that Joint Venture Debt shall for purposes of this Agreement be deemed to be Debt of Pertamina and not of the Company or a Subsidiary), (vii) all Restricted Preferred Stock issued by such Person or as to which such Person is otherwise liable, (viii) all Debt of others Guaranteed by such Person, to the extent of such Guarantee, and (ix) all obligations of such Person which have been outstanding for more than five days to pay any margin call (or similar requirement) on any Derivative Transaction (excluding, in the case of the Company and its Subsidiaries, such obligations not exceeding $5,000,000 in the aggregate); provided that neither Debt nor Guarantee includes (a) obligations under leases other than capital leases and under bona fide Derivative Transactions (except as provided in clause (ix) above) and obligations with respect to take-or-pay payments theretofore received which remain subject to cash settlement or make-up; (b) Debt of the -4- 10 Company or a Subsidiary owing to the Company or a Subsidiary, except for Debt not eliminated in consolidation pursuant to the proviso in Section 1.02; (c) obligations under the Indonesian Participating Units; (d) any preferred stock that does not constitute Restricted Preferred Stock; and (e) the existing agreements relating to Joint Venture Debt set forth in the contracts described on Schedule V of the parties thereto as to allocation of responsibility for damages caused by reason of an act or failure to act by, or otherwise related to, any such party, or any similar agreement hereafter entered into providing for a similar allocation of liability in respect of similar actions or failures to act. The amount of Debt attributable to any Restricted Preferred Stock shall be the maximum consideration required to be paid upon the purchase, retirement, redemption, exchange, or conversion of the portion thereof constituting Debt (such consideration, if other than cash, to be valued at the fair market value thereof); provided that in computing such consideration there shall be excluded (A) any consideration payable solely in common stock of the Company, (B) dividends to the extent such dividends do not materially exceed the generally prevailing market rate (at the time of issuance of such Restricted Preferred Stock) on preferred stock of comparable risk and maturity; and (C) any premium payable upon any such purchase, retirement, redemption, exchange or conversion only as a result of the exercise by the issuer of a call provision exercisable only at the option of the issuer, if failure to exercise such option would not have an adverse effect on the Company or any Subsidiary pursuant to the terms of any such Restricted Preferred Stock or any documents related thereto. "Default" means any condition or event which constitutes an Event of Default or which with the giving of notice or lapse of time or both would, unless cured or waived, become an Event of Default. "Defeased Debt" means any Debt of the Company or any Subsidiary (i) which has been defeased in accordance with the terms of the applicable Debt instruments, (ii) which is deemed to be extinguished under generally accepted accounting principles applicable to the Company or such Subsidiary, and (iii) with respect to which the Agent has received a certificate of an officer of the Company or such Subsidiary to the effect that the requirements of clauses (i) and (ii) of this definition have been met as to such Debt and such evidence, if any, in support of such certificate as the Agent may reasonably request. "Derivative Transactions" means foreign exchange transactions and commodity, currency and interest rate swaps, floors, caps, collars, forward sales, options, other similar transactions and combinations of the foregoing. "Dollar" (whether or not capitalized) and "$" mean lawful money of the United States of America. -5- 11 "Domestic Business Day" means any day except a Saturday, Sunday or other day on which commercial banks in New York City, San Francisco or Houston are authorized by law to close. "Domestic Lending Office" means, as to each Bank, its office located at its address set forth in its Administrative Questionnaire (or identified in its Administrative Questionnaire as its Domestic Lending Office) or such other office as such Bank may hereafter designate as its Domestic Lending Office by notice to the Company and the Agent. "EBITDA" means, for any period, the sum of (i) the consolidated net income of the Company and its Consolidated Subsidiaries for such period before non-cash non-recurring items, gains or losses on dispositions of assets and the cumulative effect of changes in accounting principles, plus (ii) to the extent included in the determination of such income, the consolidated charges for such period for interest, depreciation, depletion and amortization plus (or, if there is a benefit from income taxes, minus) (iii) to the extent included in the determination of such income, the amount of the provision for or benefit from income taxes; provided that in determining such consolidated net income, such consolidated charges and such provision for or benefit from income taxes, there shall be excluded therefrom (to the extent otherwise included therein) (a) the net income (or loss) of, charges for interest, depreciation, depletion and amortization of, and such provision for or benefit from income taxes of, any Person acquired by the Company or a Subsidiary in a pooling-of-interest transaction for any period prior to the date of such transaction, and (b) the net income (but not loss) of, charges for interest, depreciation, depletion and amortization of, and such provision for (but not benefit from) income taxes of, any Person which is subject to any contractual restriction which prevents the payment of dividends or the making of distributions on the capital stock or other ownership interests of such Person to the extent of such contractual restrictions. "Effective Date" means the date of this Agreement, which is June 30, 1995. "Engineering Report" means a report of an Acceptable Engineer providing an estimate of the proved reserves of Hydrocarbons attributable to the properties of the Company and the Restricted Subsidiaries. "Environmental Laws" means any and all federal, state, local and foreign statutes, laws, regulations, ordinances, rules, judgments, orders, decrees, permits, concessions, grants, franchises, licenses, agreements or other governmental restrictions relating to the environment or to emissions, discharges or releases of pollutants, contaminants, petroleum or petroleum products, chemicals or industrial, toxic or hazardous substances or wastes into the environment including, without limitation, ambient air, surface water, ground water, or land, or otherwise relating to the -6- 12 manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of pollutants, contaminants, petroleum or petroleum products, chemicals or industrial, toxic or hazardous substances or wastes or the clean-up or other remediation thereof, including, without limitation, the Comprehensive Environmental Response, Compensation, and Liability Act, the Resource Conservation and Recovery Act, the Oil Pollution Act, and their state analogs, in each case as they have been or may be amended. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended, or any successor statute. "ERISA Group" means the Obligors and all members of a controlled group of corporations and all trades or businesses (whether or not incorporated) under common control which, together with any Obligor, are treated as a single employer under Section 414 of the Internal Revenue Code. "Euro-Dollar Business Day" means any Domestic Business Day on which commercial banks are open for international business (including dealings in dollar deposits) in London. "Euro-Dollar Lending Office" means, as to each Bank, its office, branch or affiliate located at its address set forth in its Administrative Questionnaire (or identified in its Administrative Questionnaire as its Euro-Dollar Lending Office) or such other office, branch or affiliate of such Bank as it may hereafter designate as its Euro-Dollar Lending Office by notice to the Company and the Agent. "Euro-Dollar Loan" means a Loan which bears interest as provided in Section 2.07(b). "Event of Default" has the meaning set forth in Section 6.01. "Excess Letter of Credit/Guarantee Amount" means, at any date, the excess of (a) the sum of (i) the aggregate undrawn amount, at such date, of all letters of credit as to which the Company or any Restricted Subsidiary (other than Unimar and the Unimar Restricted Subsidiaries) is the account party or in respect of which the Company or any Restricted Subsidiary (other than Unimar and the Unimar Restricted Subsidiaries) has Guaranteed payment plus the unpaid drawn portions, at such date, of all such letters of credit to the extent such drawn portions do not constitute Debt of the Company or a Restricted Subsidiary (other than Unimar and the Unimar Restricted Subsidiaries), plus (ii) the Unimar Percentage of the aggregate undrawn amount, at such date, of all letters of credit as to which Unimar or any of the Unimar Restricted Subsidiaries is the account party or in respect of which Unimar or any of the Unimar Restricted Subsidiaries has Guaranteed payment plus the unpaid drawn portions, at such date, of such letters of credit to the extent such drawn portions do not constitute Debt of Unimar or any of the -7- 13 Unimar Restricted Subsidiaries, plus (iii) Debt that constitutes Debt of the Company or any Restricted Subsidiary (other than Unimar or any Unimar Restricted Subsidiary) pursuant to clause (viii) of the definition herein of Debt, plus (iv) the Unimar Percentage at such date of Debt that constitutes Debt of Unimar or any of the Unimar Restricted Subsidiaries pursuant to clause (viii) of the definition herein of Debt, over (b) $50,000,000. "Excess Net Sales Proceeds" means (i) with respect to any Asset Sale involving, directly or indirectly, a UK Asset (a "UK Asset Sale"), (a) if, after giving effect to such Asset Sale, the aggregate Net Sales Proceeds from all UK Asset Sales since December 31, 1993 would be less than or equal to $50,000,000 and the aggregate Net Sales Proceeds from all Asset Sales since such date would be less than or equal to $100,000,000, zero; or (b) if, after giving effect to such Asset Sale, the aggregate Net Sales Proceeds from all UK Asset Sales since December 31, 1993 ("UK Aggregate Amount") would be greater than $50,000,000 or the aggregate Net Sales Proceeds from all Asset Sales since such date ("Total Aggregate Amount") would be greater than $100,000,000, the lesser of (1) the greater of the amount by which the UK Aggregate Amount exceeds $50,000,000 or the amount by which the Total Aggregate Amount exceeds $100,000,000 or (2) the Net Sales Proceeds from such Asset Sale; and (ii) with respect to any Asset Sale not involving, directly or indirectly, a UK Asset, (a) if, after giving effect to such Asset Sale, the aggregate Net Sales Proceeds from all Asset Sales since December 31, 1993 would be less than or equal to $100,000,000, zero; or (b) if, after giving effect to such Asset Sale, the aggregate Net Sales Proceeds from all Asset Sales since December 31, 1993 would be greater than $100,000,000, the lesser of (1) the amount by which such aggregate Net Sales Proceeds exceeds $100,000,000 or (2) the Net Sales Proceeds from such Asset Sale. "Excluded Subordinated Debt" means Debt that (i) is subordinate and junior, on terms reasonably satisfactory to the Agent, to the Loans in all respects and -8- 14 (ii) has no requirement, absent a default under such Debt, that any principal thereof be paid, purchased, redeemed, defeased, acquired, exchanged or converted (other than exchange for or conversion to common stock of the Company) prior to April 30, 2000. "Existing Pakistan Non-Recourse Debt" means the Debt, not exceeding the principal amount of $9,500,000, evidenced by that certain promissory note dated December 20, 1988, issued by UT Pakistan in the original principal amount of $21,250,000, the related Finance Agreement between UT Pakistan and the Overseas Private Investment Corporation ("OPIC") and the related Issuing and Paying Agency Agreement among First Trust New York, National Association (as successor to Morgan Guaranty Trust Company of New York) as issuing and paying agent, OPIC and UT Pakistan. "Fair Market Value" means with respect to any asset of the Company or any Subsidiary at any date the open market cash purchase price that an informed and willing purchaser would pay for such asset in an arm's length transaction to a willing and informed owner under no compulsion to sell, all as reasonably determined in good faith by the Company. "Federal Funds Rate" means, for any day, the rate per annum (rounded upwards, if necessary, to the nearest 1/100th of 1%) equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Domestic Business Day next succeeding such day; provided that (i) if such day is not a Domestic Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Domestic Business Day, as so published on the next succeeding Domestic Business Day, and (ii) if no such rate is so published on such next succeeding Domestic Business Day, the Federal Funds Rate for such day shall be the average rate quoted to NationsBank on such day on such transactions as determined by the Agent. "Financing Documents" means this Agreement, the Notes and the Subsidiary Guaranty Agreement. "Guarantee" by any Person means any obligation, contingent or otherwise (including, without limitation, any obligation to repay to a payor or creditor of a payor amounts previously paid to such Person by such payor), of such Person directly or indirectly guaranteeing any Debt of any other Person or otherwise incurred for the purpose of assuring the holder of payment of any such Debt; provided that (i) the obligations of any Person in respect of Debt of any Partnership in which such Person is a general partner shall not constitute a Guarantee of such Debt so long as substantially all assets of such Person are comprised of its Investment in such Partnership, (ii) the obligation of a Person to transfer or restore cash to the account of a Partnership, -9- 15 Subsidiary or Affiliate pursuant to periodic settlements or adjustments under cash management practices of such Persons shall not constitute a Guarantee, (iii) the contractual obligation of a Person to assure that a Subsidiary, Partnership or Affiliate conducts its operations as a prudent operator shall not constitute a Guarantee of indebtedness of the Subsidiary, Partnership or Affiliate, (iv) the obligation of a Person to cause net amounts of cash owned by a Subsidiary, Partnership or Affiliate to be applied to payment of indebtedness of such Subsidiary, Partnership or Affiliate shall not constitute a Guarantee of such indebtedness and (v) the reaffirmation to or for the benefit of a lender of contractual obligations (as, for example, those set forth in the Production Sharing Contracts) previously entered into in good faith and not in contemplation of the incurrence of Debt shall not constitute a Guarantee so long as the other arrangements entered into in connection with such reaffirmation do not increase the likelihood that additional funds will be required to meet such obligations (as would be the case, for example, if revenues otherwise available to meet such obligations were dedicated to such lender). "HPG Plant" means the five-twelfths interest in the Geismar, Louisiana olefins plant owned by UTPC and its subsidiaries, the supply and distribution assets related to such plant and all other operating assets of UTPC and its subsidiaries as of December 31, 1993. "Hydrocarbons" means crude oil, including all kinds of hydrocarbons and bitumens in solid or liquid form, and natural gas, including all gaseous hydrocarbons produced from wells, and liquefied natural gas and liquefied petroleum gases. "Indonesian Participating Units" means the Indonesian Participating Units issued by Unimar pursuant to the Indenture dated as of September 24, 1984 between Unimar and Irving Trust Company, Trustee, as amended and in effect on April 24, 1995, and as thereafter amended to the extent such subsequent amendments do not change the term thereof, provide additional security therefor, or increase the payments to be made to holders thereof. "Interest Period" means, with respect to each Euro-Dollar Loan comprising part of the same Borrowing, the period commencing on the date of such Loan or the date of the Conversion of any Base Rate Loan into such Euro-Dollar Loan and ending on the last day of the period selected by the Company pursuant to the provisions below and, thereafter, each subsequent period commencing on the last day of the immediately preceding Interest Period (or on any other date selected by the Company pursuant to Section 2.03) and ending on the last day of the period selected by the Company pursuant to the provisions below and Section 2.03. The duration of each such Interest Period shall be 1, 2, 3 or 6 months or (subject to Section 2.02(b)) 9 or 12 months, in each case as the Company may, upon notice received by the Agent not later than 10:00 a.m. (Houston -10- 16 time) on the third Euro-Dollar Business Day prior to the first day of such Interest Period, select; provided that: (a) any Interest Period which would otherwise end on a day which is not a Euro-Dollar Business Day shall be extended to the next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Euro-Dollar Business Day; (b) any Interest Period which begins on the last Euro-Dollar Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Euro-Dollar Business Day of a calendar month; (c) the Company may not select an Interest Period for any Loan if the last day of such Interest Period would be after June 15, 1997; and (d) Interest Periods for all Loans comprising the same Borrowing shall commence on the same date and shall be of the same duration. "Internal Revenue Code" means the Internal Revenue Code of 1986, as amended, or any successor statute. "Investment" means any investment in any Person, whether by means of share purchase, capital contribution, loan, advance, Guarantee or otherwise. It is understood that a joint operating agreement or similar arrangement with respect to Hydrocarbon properties or the HPG Plant does not constitute a Person and hence that payments in respect of the acquisition or maintenance of an interest in such Hydrocarbon properties or the HPG Plant do not constitute an Investment. "Joint Venture Debt" means obligations secured by a Lien on the interests of the Company or a Subsidiary, as the case may be, arising under either of the Production Sharing Contracts or any related supply contracts, if such Lien covers ratably the interests of Pertamina and all production sharing contractors thereunder. "Lien" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset (including, without limitation, any production payment, advance payment or similar arrangement with respect to minerals in place), whether or not filed, recorded or otherwise perfected under applicable law. For the purposes of this Agreement, the Company or any Subsidiary shall be deemed to own subject to a Lien any asset which it has acquired or -11- 17 holds subject to the interest of a vendor or lessor under any conditional sale agreement, capital lease or other title retention agreement relating to such asset. The right of set-off, whether by operation of law or by contract, does not constitute a Lien unless there is a related obligation to maintain a deposit of cash or other assets in respect of which such right of set-off may be exercised. "Loan" means a loan made by a Bank to the Company pursuant to section 2.01 and refers to a Base Rate Loan or a Euro-Dollar Loan (each of which shall be a "Type" of Loan), and "Loans" means Base Rate Loans or Euro-Dollar Loans or any combination of the foregoing. "London Interbank Offered Rate" has the meaning set forth in Section 2.07(b). "Margin Increase Condition" exists at all times during which any senior unsecured long-term debt of the Company is rated below BBB- by S&P. "material" means, with respect to any matter so characterized herein, that such matter would reasonably be expected to be significant to a Bank in determining whether to enter into this Agreement or to extend credit hereunder. "Material Debt" means Debt of the Company and/or any one or more Restricted Subsidiaries (other than Non-Recourse Debt) in an aggregate principal amount equal to or greater than $15,000,000, whether incurred under one or more related or unrelated documents or instruments. "Material Plan" means at any time a Plan or Plans having aggregate Unfunded Liabilities in excess of $15,000,000. "Multiemployer Plan" means at any time an employee pension benefit plan within the meaning of Section 4001(a)(3) of ERISA to which any member of the ERISA Group is then making or accruing an obligation to make contributions or has within the preceding five plan years made contributions, including for these purposes any Person which ceased to be a member of the ERISA Group during such five year period. "NationsBank" means NationsBank of Texas, N.A., a national banking association. "Net Sales Proceeds" means, with respect to any Asset Sale, the Fair Market Value of the Restricted Asset that is sold, leased, transferred or otherwise disposed of in such Asset Sale, minus the sum of (i) all reasonable fees, commissions and expenses incurred by the Company or any Subsidiary as a result of or in connection with -12- 18 such Asset Sale and (ii) all taxes required to be paid by the Company or any Subsidiary as a result of such Asset Sale. "Non-Recourse Debt" means, at any date, (a) the aggregate amount at such date of Debt of the Company or a Subsidiary (other than Unimar and each Unimar Subsidiary) and (b) the Unimar Percentage of the aggregate amount at such date of all Debt of each of Unimar and each Unimar Subsidiary, in respect of which, in the case of either (a) or (b), (i) the recourse of the holder of such Debt, whether direct or indirect and whether contingent or otherwise, shall be effectively limited to Non-Restricted Assets (or, in the case of the Existing Pakistan Non-Recourse Debt, the assets described in Schedule III) and (ii) in the case of any such Debt incurred after April 24, 1995, the Company shall have, at or prior to the time of incurrence thereof or at or prior to the date of this Agreement, notified the Agent of such incurrence and delivered to the Agent a certificate of an officer of the Company certifying that such Debt constitutes Non-Recourse Debt (or that such Debt will be converted into Non-Recourse Debt at some specified time or upon the occurrence of some specified event); provided that if any such Debt is secured by any interest in a license, concession, production sharing contract or other right and any of the Restricted Assets consists of an interest in such license, concession, production sharing contract or other right, then the agreements evidencing such Debt must provide that default under such Debt will not impair or affect such license, concession, production sharing contract or other right. In the case of any Non-Recourse Debt incurred after April 24, 1995, such limitation on recourse (i) must be set forth in the instrument evidencing such Debt, and (ii) must be on terms acceptable to the Agent as evidenced by the written approval thereof by the Agent (which approval will not be unreasonably withheld, and in deciding whether to approve such terms the Agent will, if requested by the Company, take into account what terms are usual and customary in non-recourse financings) and in any event must provide that the holder of such Debt waives, to the extent such holder may effectively do so, such holder's right to elect recourse treatment under 11 U.S.C. Section 1111(b) unless such holder obtains the prior written consent of the Required Banks. For avoidance of doubt, (a) if any such Debt is Guaranteed by the Company or a Restricted Subsidiary in a limited amount, the excess over such amount (but only the excess) constitutes Non-Recourse Debt, and (b) Debt shall not be determined to not be Non-Recourse Debt solely as a result of the existence of either of the following: (i) an agreement by a direct or indirect parent corporation to repay to a subsidiary amounts received by such parent corporation from such subsidiary in the event such subsidiary has a need for such amounts in future periods or (ii) an agreement by a direct or indirect parent corporation to cause a subsidiary to comply with such subsidiary's contractual obligations so long as the parent corporation is not obligated to contribute funds to the subsidiary to enable it to comply with such contractual obligations and has not otherwise Guaranteed such obligations. "Non-Restricted Asset Non-Recourse Debt" means, at any date, the aggregate amount at such date of Non-Recourse Debt as to which the recourse of the -13- 19 holder is limited exclusively to Non-Restricted Assets as contemplated by clause (i) of the first sentence of the definition of Non-Recourse Debt. "Non-Restricted Assets" means all assets of the Company and its Subsidiaries other than Restricted Assets. "Non-UK Asset" means any Restricted Asset other than a UK Asset. "Notes" means promissory notes of the Company, substantially in the form of Exhibit A hereto, evidencing the obligation of the Company to repay the Loans made to it, and "Note" means any one of such promissory notes issued hereunder. "Notice of Borrowing" has the meaning specified in Section 2.02. "Obligors" means the Company and the Required Guarantors, and "Obligor" means any one of them. "Operating Cash Flow" means, with respect to any period, an amount equal to (i) the "net cash (required) provided by operating activities before changes in other assets and liabilities" of the Company and its Consolidated Subsidiaries for such period, that should be reflected in the consolidated statement of cash flows of the Company and its Consolidated Subsidiaries for such period prepared in accordance with generally accepted accounting principles on substantially the same basis as the consolidated statement of cash flows of the Company and its Consolidated Subsidiaries for the year ended December 31, 1993 as set forth in the Company's 1993 Form 10-K; provided that in determining such "net cash (required) provided by operating activities before changes in other assets and liabilities" there shall be excluded therefrom (to the extent otherwise included therein) (a) the portion of such net cash provided by assets securing any Non-Recourse Debt other than the Existing Pakistan Non-Recourse Debt, (b) the net cash provided or required by operating activities before changes in other assets and liabilities of any Person acquired by the Company or a Subsidiary in a pooling-of-interest transaction for any period prior to the date of such transaction, and (c) the net cash provided by operating activities before changes in other assets and liabilities of any Person which is subject to any contractual restriction which prevents the payment of dividends or the making of distributions on the capital stock or other ownership interests of such Person to the extent of such contractual restrictions, -14- 20 plus (ii) to the extent included in the determination of the "net cash (required) provided by operating activities before changes in other assets and liabilities" for such period in accordance with the foregoing clause (i), exploration expenses incurred by the Company or any Consolidated Subsidiary during such period other than (a) exploration expenses incurred in connection with assets securing any Non-Recourse Debt other than the Existing Pakistan Non-Recourse Debt, (b) the exploration expenses of any Person acquired by the Company or a Subsidiary in a pooling-of-interest transaction for any period prior to the date of such transaction, and (c) the exploration expenses of any Person which is subject to any contractual restriction which prevents the payment of dividends or the making of distributions on the capital stock or other ownership interests of such Person to the extent of such contractual restrictions, plus (or, if cash is required by equity investee, minus) (iii) the amount of the "cash (required) provided by equity investee" of the Company and its Consolidated Subsidiaries for such period, that should be reflected in the consolidated statement of cash flows of the Company and its Consolidated Subsidiaries for such period prepared in accordance with generally accepted accounting principles on substantially the same basis as the consolidated statement of cash flows of the Company and its Consolidated Subsidiaries for the year ended December 31, 1993 as set forth in the Company's 1993 Form 10-K, excluding the effect of any cash required by such equity investee for the payment of the principal of its Debt and any cash provided by such equity investee from incurrence of its Debt, minus (iv) dividends on preferred stock paid during such period by the Company or any Consolidated Subsidiary, determined on a consolidated basis. "Other Credit Agreements" means the Amended and Restated Credit Agreement dated as of May 13, 1994, as amended and as may be further amended or modified from time to time, among the Company, NationsBank, as agent, and the co-agents and banks party thereto currently providing a $450,000,000 credit facility to the Company and the Credit Agreement dated as of April 24, 1995, as amended and as may be further amended or modified from time to time, among the Company, NationsBank, as agent, and the co-agents and banks party thereto currently providing a $100,000,000 credit facility to the Company. "Other Credit Agreement Commitments" means the aggregate amount of the "Commitments" as defined in the Other Credit Agreements. -15- 21 "Parent" means, with respect to any Bank, any Person controlling such Bank. "Participant" has the meaning set forth in Section 9.06(b). "Partnership" means any general or limited partnership which is accounted for on the equity method in the Company's consolidated financial statements and in which the Company or a Subsidiary is a general partner. "PBGC" means the Pension Benefit Guaranty Corporation or any entity succeeding to any or all of its functions under ERISA. "Person" means an individual, a corporation, a partnership, an association, a trust or any other entity or organization, including a government or political subdivision or an agency or instrumentality thereof. It is understood that a joint operating agreement or similar arrangement with respect to Hydrocarbon properties or the HPG Plant does not constitute a Person. "Plan" means at any time an employee pension benefit plan (other than a Multiemployer Plan) which is covered by Title IV of ERISA or subject to the minimum funding standards under Section 412 of the Internal Revenue Code and either (i) is maintained, or contributed to, by any member of the ERISA Group for employees of any member of the ERISA Group or (ii) has at any time within the preceding five years been maintained, or contributed to, by any Person which was at such time a member of the ERISA Group for employees of any Person which was at such time a member of the ERISA Group. "Production Sharing Contracts" means the production sharing contracts pertaining to certain operations in Indonesia filed as Exhibits 10.102 and 10.103 to the Company's quarterly report on Form 10-Q for the quarter ending June 30, 1990, as filed with the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934. "Reference Banks" means the principal London offices of NationsBank, Bank of America National Trust and Savings Association and Union Bank of Switzerland and such substitute Bank or Banks as may be mutually agreed to by the Company and the Agent, and "Reference Bank" means any one of such Reference Banks. "Regulation G" means Regulation G of the Board of Governors of the Federal Reserve System, as in effect from time to time. "Regulation U" means Regulation U of the Board of Governors of the Federal Reserve System, as in effect from time to time. -16- 22 "Required Banks" means at any time Banks having at least 51% of the aggregate amount of the Commitments or, if the Commitments shall have been terminated, holding Notes evidencing at least 51% of the aggregate unpaid principal amount of the Loans. "Required Guarantors" means (a) each of Union Texas Petroleum Energy Corporation, UTPC, Union Texas East Kalimantan Limited, Union Texas International Corporation and Unistar, Inc. and (b) any Subsidiary that acquires a Restricted Asset (other than any Restricted Asset in Pakistan or, if such Subsidiary's entering into the Subsidiary Guaranty Agreement would have a material adverse tax consequence on the Company, in the United Kingdom (including the United Kingdom Sector of the North Sea)) after December 31, 1993 or the capital stock of any Required Guarantor after December 31, 1993. Each Required Guarantor shall continue to be a Required Guarantor unless released from its obligations under the Subsidiary Guaranty Agreement in accordance with the terms of the Financing Documents. "Restricted Assets" means (1) all proved reserves of the Company and the Subsidiaries as of December 31, 1993 in Indonesia, the United Kingdom (including the United Kingdom Sector of the North Sea) and Pakistan, (2) all licenses, concessions, production sharing contracts and other rights pertaining to any such proved reserves (excluding the portion thereof that does not pertain to any of such proved reserves, if such portion can be severed without material adverse consequences on the portion pertaining to such proved reserves), (3) equipment used in the production of any such proved reserves or in the transportation of production from any such proved reserves if such equipment is a fixture or otherwise attached to realty, constitutes all or a part of any pipeline or related equipment, is all or part of a production platform or related equipment or is equipment similar to any of the foregoing or used for a similar purpose, and (4) the HPG Plant. "Restricted Payment" means (i) any dividend or other distribution on any shares of the Company's capital stock (except dividends payable solely in shares of its common stock), or (ii) any payment on account of the purchase, redemption, retirement or acquisition of (a) any shares of the Company's capital stock or (b) any option, warrant or other right to acquire shares of the Company's capital stock (except any such payment made solely in shares of its common stock); provided that payments of stock-related and other employee benefits (including purchases by the Company of its common stock in connection with the payment of such benefits) in the ordinary course of business to employees of the Company or a Subsidiary shall not be deemed Restricted Payments. "Restricted Preferred Stock" means (i) all preferred stock which (a) is subject to purchase, retirement, redemption, exchange or conversion (other than exchange for or conversion to common stock of the Company), in whole or in part under any circumstance whatsoever (other than purchase, retirement, redemption, exchange or -17- 23 conversion by the issuer thereof, at the sole option of such issuer, if failure to exercise such option would not have an adverse effect on the Company or any Subsidiary pursuant to the terms of any such preferred stock or any documents related thereto) and (b) provides for dividends materially in excess of the generally prevailing market dividend rate (at the time of issuance of such preferred stock) for preferred stock of comparable risk and maturity, and (ii) the portion of all other preferred stock which is subject to purchase, retirement, redemption, exchange or conversion (other than exchange for or conversion to common stock of the Company) at any date or dates on or prior to April 30, 2000 under any circumstance whatsoever (other than purchase, retirement, redemption, exchange or conversion by the issuer thereof, at the sole option of such issuer, if failure to exercise such option would not have an adverse effect on the Company or any Subsidiary pursuant to the terms of any such preferred stock or any documents related thereto). For avoidance of doubt, to the extent that any shares of Restricted Preferred Stock are exchanged for or converted to common stock of the Company and as a consequence such shares of Restricted Preferred Stock are cancelled, such shares shall no longer constitute Restricted Preferred Stock. "Restricted Subsidiaries Recourse Debt" means, at any date, the sum of (a) the aggregate amount of all Debt (other than (i) Non-Recourse Debt, (ii) any Guarantee of Debt of the Company (including the Loans) and (iii) the amount, if any, by which the Guarantees of the Restricted Subsidiaries (other than Unimar and the Unimar Restricted Subsidiaries) included in the determination of Excess Letter of Credit/Guarantee Amount exceeds the Excess Letter of Credit/Guarantee Amount) of each Restricted Subsidiary (other than Unimar and the Unimar Restricted Subsidiaries), determined on a consolidated basis as of such date, and (b) the Unimar Percentage of the aggregate amount of all Debt (other than (i) Non-Recourse Debt, (ii) any Guarantee of Debt of the Company and (iii) the amount, if any, by which the Unimar Percentage of the Guarantees of Unimar and the Unimar Restricted Subsidiaries included in the determination of Excess Letter of Credit/Guarantee Amount exceeds the Excess Letter of Credit/Guarantee Amount) of Unimar and the Unimar Restricted Subsidiaries, determined on a consolidated basis as of such date. "Restricted Subsidiary" means each Person listed in Part B of Schedule II hereto and each Subsidiary that owns directly or indirectly any interest in any Restricted Assets or any Restricted Subsidiary; provided that a Restricted Subsidiary shall cease to be such at such time as it is converted to an Unrestricted Subsidiary pursuant to Section 5.20 or ceases to be a Subsidiary as a result of a transaction permitted by Section 5.14. "Restricted Transfer" means (i) any Investment in an Affiliate, any Unrestricted Subsidiary or any subsidiary of an Unrestricted Subsidiary, but excluding to the extent otherwise included in the foregoing, Investments in Unimar and the Unimar Subsidiaries, or (ii) any payment by the Company or any Subsidiary, directly or -18- 24 indirectly, in respect of Non-Recourse Debt to the extent such Person is not legally obligated to make such payment by the terms of such Debt, or solely in the case of Unimar, Unistar, Inc. or any of the Unimar Subsidiaries, to the extent such Person is not legally obligated to fund such payment under the terms of the Unimar Partnership Agreement. "Revolving Credit Period" means the period from and including the Effective Date to but not including the Termination Date. "S&P" means Standard & Poor's Ratings Group, a division of McGraw-Hill, Inc. on the date hereof. "Subsidiary" means (a) Unimar and the Unimar Subsidiaries (except at such times as the Company does not own, directly or indirectly, any of the ownership interest in Unimar) and (b) any corporation or other entity of which securities or other ownership interests having ordinary voting power to elect a majority of the board of directors or other persons performing similar functions are at the time directly or indirectly owned by the Company, it being understood that the power to elect exactly 50% of the board of directors or such other persons does not constitute a "majority" as used herein. "Subsidiary Guarantors" means the Subsidiaries from time to time parties to the Subsidiary Guaranty Agreement, and their respective successors. "Subsidiary Guaranty Agreement" means the Subsidiary Guaranty Agreement dated as of June 30, 1995 among the Subsidiary Guarantors and NationsBank, as Agent, substantially in the form of Exhibit B hereto, as the same may be amended from time to time in accordance with the terms thereof. "Termination Date" means June 15, 1996, or, if such day is not a Euro-Dollar Business Day, the Termination Date shall be the next preceding Euro-Dollar Business Day. "Type" has the meaning specified in the definition of Loan. "UK Assets" means all Restricted Assets of UTPL as of December 31, 1993. "Unfunded Liabilities" means, with respect to any Plan at any time, the amount (if any) by which (i) the present value of all benefits under such Plan as determined by such Plan's actuary exceeds (ii) the fair market value of all Plan assets allocable to such benefits (excluding any accrued but unpaid contributions), all determined as of the then most recent valuation date for such Plan, but only to the extent -19- 25 that such excess represents a potential liability of a member of the ERISA Group to the PBGC or any other Person under Title IV of ERISA if such Plan terminated as of such date. "Unimar" means Unimar Company, a partnership organized and existing under the laws of Texas. "Unimar Partnership Agreement" means the Amended and Restated Agreement of General Partnership of Unimar dated as of September 11, 1990 between Unistar, Inc. and Ultrastar, Inc., as amended from time to time. "Unimar Percentage" means, at any date, the aggregate percentage ownership interest in Unimar owned at such date by the Company and the Subsidiaries. "Unimar Restricted Subsidiary" means any Unimar Subsidiary that is also a Restricted Subsidiary at the relevant date. "Unimar Subsidiary" means any corporation or other entity of which securities or other ownership interests having ordinary voting power to elect a majority of the board of directors or other persons performing similar functions are at the time directly or indirectly owned by Unimar, it being understood that the power to elect exactly 50% of the board of directors or such other persons does not constitute a majority as used herein. "Unrestricted Subsidiary" means any Subsidiary which is not a Restricted Subsidiary. "UT Pakistan" means Union Texas Pakistan, Inc., a Delaware corporation. "UTPC" means Union Texas Products Corporation, a Delaware corporation. "UTPL" means Union Texas Petroleum Limited, an English company. SECTION 1.02. Accounting Terms and Determinations. Unless otherwise specified herein, all accounting terms used herein shall be interpreted, all accounting determinations hereunder shall be made, and all financial statements required to be delivered hereunder shall be prepared in accordance with generally accepted accounting principles as in effect from time to time, applied on a basis consistent with the most recent audited consolidated financial statements of the Company and its Consolidated Subsidiaries delivered to the Banks (except for changes concurred in by the Company's independent public accountants); provided that in any determination of Consolidated Debt if (i) the Company or any Restricted Subsidiary owes any Debt to an -20- 26 Unrestricted Subsidiary which would otherwise be eliminated in such determination of Consolidated Debt (the "intercompany Debt") (other than Debt in an amount not exceeding $10,000,000 in the aggregate at any time and representing advances by the Unrestricted Subsidiaries to the Company or a Restricted Subsidiary made in the ordinary course of the cash management practices of the Company and its Subsidiaries) and (ii) such Unrestricted Subsidiary owes, at the date of determination, any Debt for borrowed money to a Person other than the Company or a Subsidiary (the "third party Debt") (other than any such Debt that also constitutes Debt of the Company or a Restricted Subsidiary), then an amount equal to the lesser of (1) such intercompany Debt and (2) such third party Debt, shall not be eliminated in such determination of Consolidated Debt. SECTION 1.03. Types of Borrowings. The term "Borrowing" denotes the aggregate of Loans made by Banks to the Company pursuant to Article II on a single date, of a single Type and, if such Loans are Euro-Dollar Loans, for a single Interest Period. Borrowings are classified for purposes of this Agreement by reference to the pricing of Loans comprising such Borrowing (e.g., a "Euro-Dollar Borrowing" is a Borrowing comprised of Euro-Dollar Loans). SECTION 1.04. Miscellaneous. The words "hereof", "herein" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and Article, Section, Schedule and Exhibit references are to Articles and Sections of and Schedules and Exhibits to this Agreement, unless otherwise specified. The term "including" as used herein means "including without limitation". Definitions of terms defined herein shall be applicable to both the singular and plural forms of the terms defined as appropriate. References to "directly or indirectly" in respect of ownership of any interest in any assets shall include, without limitation, direct ownership, indirect ownership through capital stock or other ownership interest (whether through one or more levels of subsidiaries, affiliates or other Persons) and any other direct or indirect ownership arrangement. SECTION 1.05. Unimar. To the extent this Agreement or any other Financing Document obligates the Company or a Subsidiary to cause Unimar and the Unimar Subsidiaries to take any action, such obligation shall be satisfied if (a) the Company votes (or causes a Subsidiary to vote) the Unimar Percentage in a manner consistent with the obligations of the Company and the Subsidiaries under the Financing Documents and (b) any representative of the Company sitting on any management board or board of directors of Unimar or any of the Unimar Subsidiaries votes, as a member of such management board or board of directors, in a manner consistent with the obligations of the Company and the Subsidiaries under the Financing Documents. -21- 27 SECTION 1.06. Ratings. A rating, whether public or private, by S&P shall be deemed to be in effect on the date of announcement or publication by S&P, as the case may be, of such rating or, in the absence of such announcement or publication, on the effective date of such rating and will remain in effect until the effective date of any change in such rating. In the event the standards for any rating by S&P are revised, or such rating is designated differently (such as by changing letter designations to numerical designations), then the references herein to such rating shall be changed to the revised or redesignated rating for which the standards are closest to, but not lower than, the standards at the date hereof for the rating which has been revised or redesignated, all as determined by the Agent in good faith. Long-term debt supported by a letter of credit, guaranty (other than guaranties of Subsidiaries) or other similar credit enhancement mechanism shall not be considered as senior unsecured long-term debt. ARTICLE II THE CREDITS SECTION 2.01. Commitments to Lend. During the Revolving Credit Period each Bank severally agrees, on the terms and conditions set forth in this Agreement, to make loans to the Company pursuant to this Section 2.01 from time to time in amounts such that the aggregate principal amount of Loans by such Bank at any one time outstanding to the Company shall not exceed the amount of such Bank's Commitment at such time. Each Borrowing under this Section 2.01 shall be in an aggregate principal amount of $10,000,000 or any larger multiple of $1,000,000 (except that any such Borrowing may be, subject to the other terms hereof, in the aggregate amount of the remaining unused Commitments) and shall be made from the several Banks ratably in proportion to their respective Commitments. Within the foregoing limits, the Company may borrow under this Section 2.01, repay (whether pursuant to Section 2.10 or otherwise), or to the extent permitted by Section 2.11, prepay Loans and reborrow at any time during the Revolving Credit Period under this Section 2.01. SECTION 2.02. Notice of Borrowings. (a) The Company shall give the Agent notice (a "Notice of Borrowing") not later than 10:00 A.M. (Houston time) on (x) the date of each Base Rate Borrowing, and (y) the third Euro-Dollar Business Day before each Euro-Dollar Borrowing, specifying: (i) the date of such Borrowing, which shall be a Domestic Business Day in the case of a Base Rate Borrowing or a Euro-Dollar Business Day in the case of a Euro-Dollar Borrowing, (ii) the aggregate amount of such Borrowing, -22- 28 (iii) whether the Loans comprising such Borrowing are to be Base Rate Loans or Euro-Dollar Loans, and (iv) in the case of a Euro-Dollar Borrowing, the duration of the initial Interest Period applicable thereto, subject to the provisions of the definition of Interest Period. Notwithstanding the foregoing, not more than ten Euro-Dollar Borrowings shall be outstanding at any one time, and any Borrowing which would exceed such limitation shall be made as a Base Rate Borrowing. (b) If requested to do so by the Company through the Agent at least ten Euro-Dollar Business Days before the first day of a proposed Interest Period for Euro-Dollar Loans, each Bank will advise the Agent before 10:00 A.M. (Houston time) on the sixth Euro-Dollar Business Day preceding the date of such proposed Interest Period as to whether, if the Company selects a specified duration of nine or twelve months for such Interest Period, such Bank expects that deposits in dollars with a corresponding term will be available to it in the relevant market on the first day of such Interest Period in the amount required to fund its Loan to which such Interest Period would apply. Unless a Bank responds by such time to the effect that it expects such deposits will not be available to it, the Company shall be entitled to select such proposed duration for such Interest Period. SECTION 2.03. Conversions. (a) The Company may on any Euro-Dollar Business Day, upon notice given to the Agent no later than 10:00 a.m. (Houston time) on the third Euro-Dollar Business Day prior to the date of the proposed Conversion and subject to the provisions of Section 2.02 and Article VIII and the other provisions hereof, Convert all Loans comprising one or more Borrowings; provided that (i) Loans comprising a Borrowing may not be Converted if after giving effect to such Conversion, such Borrowing would be a Euro-Dollar Borrowing and the outstanding principal amount of such Borrowing would be less than $10,000,000 and (ii) no Conversion (other than changing Euro-Dollar Loans into Base Rate Loans) may be made if any Event of Default is then existing. Each such notice of a Conversion shall, within the restrictions specified above, specify (i) the date of such Conversion, (ii) the Loans to be Converted, (iii) if after giving effect to such Conversion, such Borrowing would be a Euro-Dollar Borrowing, the commencement date and duration of the proposed Interest Period for each Loan comprising such Borrowing, and (iv) the nature of such Conversion (i.e., whether such Conversion is a change of Loans of one Type into another Type, a continuation of Euro-Dollar Loans as such for an additional Interest Period or an election to change an Interest Period). Each such notice shall be irrevocable. (b) If the aggregate unpaid principal amount of Euro-Dollar Loans comprising any Borrowing shall be reduced by payment or prepayment or otherwise, to -23- 29 less than $10,000,000, such Loans shall automatically, on the last day of the then existing Interest Period therefor, Convert into Base Rate Loans. (c) If the Company shall fail to select the duration of any Interest Period for any Euro-Dollar Loans in accordance with the provisions contained in the definition of "Interest Period" in Section 1.01, or if there shall be any Event of Default, such Loans will automatically on the last day of the then existing Interest Period therefor, Convert into Base Rate Loans. SECTION 2.04. Notice to Banks; Funding of Loans. (a) Upon receipt of a Notice of Borrowing, the Agent shall promptly, (by no later than 10:30 A.M. (Houston time) by telephone or facsimile transmission) notify each Bank of the contents thereof and of such Bank's share of such Borrowing and such Notice of Borrowing shall not thereafter be revocable by the Company. (b) Not later than 12:00 Noon (Houston time) on the date of each Borrowing, each Bank shall (except as provided in subsection (c) of this Section 2.04) make available its share of such Borrowing, in Federal or other funds immediately available in Houston, to the Agent at its address specified in or pursuant to Section 9.01. Unless the Agent determines that any applicable condition specified in Article III has not been satisfied, the Agent will make the funds so received from the Banks available to the Company at the Agent's aforesaid address. (c) If any Bank makes a new Loan hereunder to the Company on a day on which the Company is to repay all or any part of an outstanding Loan from such Bank, such Bank shall apply the proceeds of its new Loan to make such repayment and only an amount equal to the difference (if any) between the amount being borrowed by the Company and the amount being repaid shall be made available by such Bank to the Agent as provided in subsection (b), or remitted by the Company to the Agent as provided in Section 2.12, as the case may be. (d) Unless the Agent shall have received notice from a Bank prior to the date of any Borrowing that such Bank will not make available to the Agent such Bank's share of such Borrowing, the Agent may assume that such Bank has made such share available to the Agent on the date of such Borrowing in accordance with subsections (b) and (c) of this Section 2.04 and the Agent may, in reliance upon such assumption, make available to the Company on such date a corresponding amount. If and to the extent that such Bank shall not have so made such share available to the Agent, such Bank and the Company severally agree to repay to the Agent forthwith on demand such corresponding amount together with interest thereon, for each day from the date such amount is made available to the Company until the date such amount is repaid to the Agent, at (i) in the case of the Company, a rate per annum equal to the higher of -24- 30 the Federal Funds Rate and the interest rate applicable thereto pursuant to Section 2.07 and (ii) in the case of such Bank, the Federal Funds Rate. If such Bank shall repay to the Agent such corresponding amount, such amount so repaid shall constitute such Bank's Loan included in such Borrowing for purposes of this Agreement. SECTION 2.05. Notes. (a) The Loans of each Bank to the Company shall be evidenced by a single Note of the Company payable to the order of such Bank for the account of its Applicable Lending Office in an amount equal to the aggregate unpaid principal amount of such Bank's Loans to the Company. (b) Each Bank may, by notice to the Company and the Agent, request that its Loans of a particular Type payable to such Bank (or such lending office, agency or branch of such Bank as such Bank may specify in such request) be evidenced by a separate Note of the Company in an amount equal to the aggregate unpaid principal amount of such Loans. Each such Note shall be in substantially the form of Exhibit A hereto with appropriate modifications to reflect the fact that it evidences solely Loans of the relevant Type. Any Bank that receives multiple Notes pursuant to this Section 2.05(b) agrees that: (1) the aggregate principal amount payable by the Company under such Notes shall never exceed the aggregate principal amount of the Loans owed to such Bank (including, if applicable, the separate lending offices, agencies or branches of such Bank) and (2) the payees of the Notes issued at the request of such Bank shall enjoy no greater rights (voting or otherwise) than such Bank would enjoy in the absence of such request and such payees (including, if applicable, the separate lending offices, agencies or branches of such Bank) shall be considered a single Bank for purposes of this Agreement. Each reference in this Agreement to the "Note" of such Bank shall be deemed to refer to and include any or all of such Notes, as the context may require. (c) Upon receipt of each Bank's Note pursuant to Section 3.01(b), the Agent shall mail or send by private delivery service such Note to such Bank. Each Bank shall record the date, amount and Type of each Loan made by it to the Company and the date and amount of each payment of principal made with respect thereto, and prior to any transfer of its Note shall endorse on the schedule forming a part thereof appropriate notations to evidence the foregoing information with respect to each such Loan then outstanding; provided that the failure of any Bank to make any such recordation or endorsement shall not affect the obligations of any Obligor under any of the Financing Documents. Each Bank is hereby irrevocably authorized by the Company so to endorse any Note and to attach to and make a part of any Note a continuation of any such schedule as and when required. SECTION 2.06. Maturity of Loans. Each Loan shall mature, and the principal amount thereof shall be due and payable, on June 15, 1997. -25- 31 SECTION 2.07. Interest Rates. The Company shall pay interest on the unpaid principal amount of each Loan from the date of such Loan until such principal amount shall be paid in full, at the following rates per annum: (a) If such Loan is a Base Rate Loan, for each day that such Loan is a Base Rate Loan, at a rate per annum equal to the sum of (i) the Base Rate for such day, plus (ii) at such times as the Margin Increase Condition exists, 1/4%, plus (iii) at such times as any Event of Default exists, 1%. Such interest shall be payable quarterly on each March 31, June 30, September 30 and December 31 and on the date such Base Rate Loan is Converted or paid in full. Any overdue interest on any Base Rate Loan shall bear interest, payable on demand, for each day until paid at a rate per annum equal to the sum of 1% plus the otherwise applicable rate for such day. (b) If such Loan is a Euro-Dollar Loan, at a rate per annum equal at all times during any Interest Period for such Loan to the sum of (i) 0.6875% plus (ii) the applicable London Interbank Offered Rate plus (iii) at such times as the Margin Increase Condition exists, 1/4% plus (iv) at such times as any Event of Default exists, 1%; provided that any overdue principal of or interest on any Euro-Dollar Loan shall bear interest, payable on demand, for each day from and including the date payment thereof was due to but excluding the date of actual payment, at a rate per annum equal to the sum of 1% plus the higher of (i) the sum of 0.6875% plus the London Interbank Offered Rate applicable to such Loan plus at such times as the Margin Increase Condition exists, 1/4% and (ii) the sum of (1) 0.6875% plus (2) the average (rounded upward, if necessary, to the next higher 1/16 of 1%) of the respective rates per annum at which one day (or, if such amount due remains unpaid more than three Euro-Dollar Business Days, then for such other period of time not longer than three months as the Agent may select) deposits in dollars in an amount approximately equal to such overdue payment due to each of the Reference Banks are offered to such Reference Bank in the London interbank market for the applicable period determined as provided above plus (3) at such times as the Margin Increase Condition exists, 1/4% (or, if the circumstances described in clause (a) or (b) of Section 8.01 shall exist, at a rate per annum equal to the sum of 1% plus the rate applicable to Base Rate Loans for such day). Such interest shall be payable for each Interest Period on the last day thereof and, if such Interest Period is longer than three months, at intervals of three months after the first day thereof. The "London Interbank Offered Rate" applicable to any Interest Period means the arithmetic average (rounded upward, if necessary, to the next higher 1/16 of 1%) of the respective rates per annum at which deposits in dollars are offered to each of the Reference Banks in the London interbank market at approximately 11:00 A.M. (London time) two Euro-Dollar Business Days before the first day of such Interest Period in an amount approximately equal to the principal amount of the Euro-Dollar Loan of -26- 32 such Reference Bank to which such Interest Period is to apply and for a period of time comparable to such Interest Period. (c) The Agent shall determine each interest rate applicable to the Loans hereunder. The Agent shall give prompt notice to the Company and the participating Banks of each rate of interest so determined, and its determination thereof shall be conclusive in the absence of manifest error. Upon request of the Company, the Agent shall furnish to it such information as to its determinations hereunder as the Company may reasonably request. (d) Each Reference Bank agrees to use its best efforts to furnish quotations to the Agent as contemplated by this Section 2.07. If any Reference Bank does not furnish a timely quotation, the Agent shall determine the relevant interest rate on the basis of the quotation or quotations furnished by the remaining Reference Bank or Banks or, if none of such quotations is available on a timely basis, the provisions of Section 8.01 shall apply. (e) This Section 2.07 and each other provision in any of the Financing Documents or in any other agreement executed in connection herewith are specifically made subject to Section 2.16. SECTION 2.08. Fees. (a) During the Revolving Credit Period, the Company shall pay to the Agent for the account of the Banks ratably in proportion to their Commitments a commitment fee at a rate per annum equal to 0.1875% on the daily average amount by which the aggregate amount of the Commitments exceed the aggregate outstanding principal amount of the Loans. Such commitment fee shall accrue from and including the Effective Date to but excluding the Termination Date. Additionally, the Company shall pay to the Agent for the account of the Banks ratably a facility fee at a rate per annum equal to 0.1875% on the daily average aggregate outstanding principal amount of the Loans. Such facility fee shall accrue from and including the Effective Date to but excluding the date the Loans shall be repaid in their entirety. (b) Payments. Accrued fees under this Section 2.08 shall be payable quarterly on each March 31, June 30, September 30 and December 31 and upon the date of termination of the Commitments in their entirety (and, if later, the date the Loans shall be repaid in their entirety). SECTION 2.09. Optional Termination or Reduction of Commitments. The Company may, upon at least three Domestic Business Days' notice to the Agent, (i) terminate the Commitments at any time, if no Loans are outstanding at such time or (ii) ratably reduce from time to time by an aggregate amount of $10,000,000 or any -27- 33 larger multiple of $5,000,000 the aggregate amount of the Commitments in excess of the aggregate outstanding principal amount of the Loans. SECTION 2.10. Mandatory Termination or Reduction of Commitments. (a) The Commitments shall terminate on the Termination Date. (b) On the fifth Domestic Business Day following any Asset Sale that results in positive Excess Net Sales Proceeds, (i) the Company will deliver to each of the Banks a certificate of the chief financial officer, the chief accounting officer or the treasurer of the Company certifying the amount of such Excess Net Sales Proceeds from such Asset Sale, (ii) the Commitments shall be automatically reduced ratably by an amount equal to (a) 100% of the amount of such Excess Net Sales Proceeds minus (b) the amount by which the Other Credit Agreement Commitments are reduced, pursuant to Section 2.10(d)(ii) of the Other Credit Agreement that provides a $450,000,000 credit facility to the Company or pursuant to Section 2.10(b)(ii) of the Other Credit Agreement that provides a $100,000,000 credit facility to the Company, as a result of such Excess Net Sales Proceeds from such Asset Sale, (iii) the Company shall be obligated to repay such principal amount (together with accrued interest thereon) of each Bank's outstanding Loans, if any, as may be necessary so that after such repayment the aggregate outstanding principal amount of such Bank's Loans does not exceed the amount of such Bank's Commitment as then reduced. SECTION 2.11. Optional Prepayments. (a) The Company may, upon at least one Domestic Business Day's notice to the Agent, prepay any Borrowing in whole at any time, or from time to time in part in amounts aggregating $10,000,000 or any larger multiple of $1,000,000, by paying the principal amount to be prepaid together with accrued interest thereon to the date of prepayment; provided that no partial prepayment of a Euro-Dollar Borrowing shall be made if after giving effect thereto the principal amount of such Borrowing would be less than $10,000,000. Each such optional prepayment shall be applied to prepay ratably the Loans of the several Banks included in such Borrowing. (b) Upon receipt of a notice of prepayment pursuant to this Section 2.11, the Agent shall promptly notify each Bank of the contents thereof and of such Bank's ratable share (if any) of such prepayment and such notice shall not thereafter be revocable by the Company. SECTION 2.12. General Provisions as to Payments. (a) The Company shall make each payment of principal of, and interest on, the Loans and of fees hereunder, not later than 12:00 Noon (Houston time) on the date when due, in Federal or other funds immediately available in Houston, to the Agent at its address referred to in Section 9.01. The Agent will promptly distribute to each Bank its ratable -28- 34 share of each such payment received by the Agent for the account of the Banks. Whenever any payment of principal of, or interest on, the Base Rate Loans or of fees shall be due on a day which is not a Domestic Business Day, the date for payment thereof shall be extended to the next succeeding Domestic Business Day. Whenever any payment of principal of, or interest on, the Euro-Dollar Loans shall be due on a day which is not a Euro-Dollar Business Day, the date for payment thereof shall be extended to the next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in another calendar month, in which case the date for payment thereof shall be the next preceding Euro-Dollar Business Day. If the date for any payment of principal is extended by operation of law or otherwise, interest thereon shall be payable for such extended time. (b) Unless the Agent shall have received notice from the Company prior to the date on which any payment is due from the Company to the Banks hereunder that the Company will not make such payment in full, the Agent may assume that the Company has made such payment in full to the Agent on such date and the Agent may, in reliance upon such assumption, cause to be distributed to each Bank on such due date an amount equal to the amount then due such Bank. If and to the extent that the Company shall not have so made such payment, each Bank shall repay to the Agent forthwith on demand such amount distributed to such Bank together with interest thereon, for each day from the date such amount is distributed to such Bank until the date such Bank repays such amount to the Agent, at the Federal Funds Rate. (c) At the time of each payment of principal of any Loan, the Company shall specify, by notice to the Agent, the Loan or Loans to which such payment shall be applied. If the Company fails to so specify, the Agent shall apply such payment to the Loans as the Agent may select. SECTION 2.13. Funding Losses. If any Obligor makes any payment of principal with respect to any Euro-Dollar Loan (pursuant to Article II, VI or VIII or otherwise) on any day other than the last day of an Interest Period applicable thereto, or the end of an applicable period fixed pursuant to the proviso to Section 2.07(b), or if the Company fails to borrow any Euro-Dollar Loan after notice has been given to any Bank in accordance with Section 2.04(a), or if any Conversion of any Euro-Dollar Loan occurs on any day other than the last day of an Interest Period applicable thereto or fails to occur as contemplated herein, the Company shall reimburse each Bank within 15 days after demand for any resulting loss or expense incurred by it (or by an existing or prospective Participant in the related Loan), including (without limitation) any loss incurred in obtaining, liquidating or employing deposits from third parties, but excluding loss of margin from the period after any such payment or failure to borrow; provided that such Bank shall have delivered to the Company a certificate as to the amount of such loss or expense, which certificate shall be conclusive in the absence of manifest error. -29- 35 SECTION 2.14. Computation of Interest and Fees. Interest based on the Base Rate hereunder shall be computed on the basis of a year of 365 days (or 366 days in a leap year) and paid for the actual number of days elapsed (including the first day but excluding the last day). All other interest and fees shall be computed on the basis of a year of 360 days and paid for the actual number of days elapsed (including the first day but excluding the last day). SECTION 2.15. Chapter 15. In no event shall the provisions of Article 5069, Chapter 15 of the Revised Civil Statutes of Texas (which regulates certain revolving credit loan accounts and revolving tri-party accounts) apply to any Loan made hereunder. SECTION 2.16. Maximum Interest Rate. (a) Nothing contained in this Agreement or the Notes shall require the Company to pay interest at a rate exceeding the maximum rate permitted without penalty by applicable law. Each provision in the Financing Documents and any other agreement executed in connection herewith is expressly limited so that in no event whatsoever shall the amount paid thereunder, or otherwise paid, by the Company for the use, forbearance or detention of the money to be loaned under this Agreement, exceed that amount of money which would cause the effective rate of interest thereon to exceed the maximum rate of interest permitted without penalty under applicable law, and all amounts payable under the Financing Documents or any other agreement executed in connection herewith, or otherwise payable in connection therewith, shall be subject to reduction so that such amounts paid or payable for the use, forbearance or detention of money to be loaned under this Agreement shall not exceed that amount of money which would cause the effective rate of interest thereon to exceed the maximum rate of interest permitted without penalty under applicable law. (b) If the amount of interest payable for the account of any Bank on any interest payment date in respect of the immediately preceding interest computation period, computed pursuant to Section 2.07, would exceed the maximum amount permitted without penalty by applicable law to be charged by such Bank, the amount of interest payable for its account on such interest payment date shall be automatically reduced to such maximum permissible amount. (c) If the amount of interest payable for the account of any Bank in respect of any interest computation period is reduced pursuant to clause (b) of this Section 2.16 and the amount of interest payable for its account in respect of any subsequent interest computation period, computed pursuant to Section 2.07, would be less than the maximum amount permitted without penalty by applicable law to be charged by such Bank, then the amount of interest payable for its account in respect of such subsequent interest computation period shall be automatically increased to such maximum permissible amount; provided that at no time shall the aggregate amount by which -30- 36 interest paid for the account of any Bank has been increased pursuant to this clause (c) exceed the aggregate amount by which interest paid for its account has theretofore been reduced pursuant to clause (b) of this Section 2.16. (d) In the event that maturity of the Loans is accelerated for any reason, or in the event of any required or permitted prepayment of the Loans, then such consideration that constitutes interest payable for the account of any Bank shall never include more than the maximum amount allowed without penalty by applicable law to be charged by such Bank and excess interest, if any, payable for the account of such Bank pursuant to its Note, this Agreement or otherwise shall be cancelled automatically as of the date of such acceleration or prepayment and, if theretofore paid, shall be credited on the Loans of such Bank (or, to the extent in excess of such Loans, refunded by such Bank to the Company). (e) It is further agreed that, without limitation of the foregoing, all calculations of the rate of interest contracted for, charged or received for the account of any Bank under the Note held by it, under this Agreement, under any other agreement executed in connection herewith or otherwise in connection with the Loans or the Commitment of such Bank for the purpose of determining whether such rate exceeds the maximum nonusurious interest rate applicable to such Bank, shall be made, to the extent permitted by usury laws applicable to such Bank (now or hereafter enacted), by amortizing, prorating and spreading in equal parts during the period of the full stated terms of the Loans evidenced by such Note all interest at any time contracted for, charged or received by such Bank in connection therewith. (f) To the extent that any Bank may be subject to Texas law limiting the amount of interest payable for its account, such Bank shall utilize the indicated (weekly) rate ceiling from time to time in effect as provided in Article 5069-1.04 of the Revised Civil Statutes of Texas, as amended. SECTION 2.17. Taxes. (a) Any and all payments by the Company hereunder or under the Notes shall be made, in accordance with Section 2.12, free and clear of and without deduction for any and all present or future taxes, levies, imposts, deductions, charges and withholdings, and all liabilities with respect thereto, excluding (i) in the case of the Agent, each Co-Agent and each Bank, United States federal income taxes and, without duplication, any taxes imposed on its income, and franchise taxes imposed on it, by the jurisdiction under the laws of which the Agent, such Co-Agent or such Bank, as the case may be, is organized or any political subdivision thereof and (ii) in the case of each Bank, taxes imposed on its income, and franchise taxes imposed on it, by the jurisdiction of such Bank's Applicable Lending Office or any political subdivision thereof (all such non-excluded taxes, levies, imposts, deductions, charges, withholdings and liabilities being hereinafter referred to as "Taxes"). If the Company shall be required by law to deduct any Taxes -31- 37 from or in respect of any sum payable hereunder or under any Note to any Bank, any Co-Agent or the Agent, (i) the sum payable shall be increased as may be necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 2.17) such Bank, such Co-Agent or the Agent (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Company shall make such deductions and (iii) the Company shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law. (b) In addition, the Company agrees to pay any present or future stamp or documentary taxes or any other excise or property taxes, assessments, charges or similar levies which arise from any payment made hereunder or under the Notes or from the execution, delivery or registration of, or otherwise with respect to, this Agreement, any of the Notes or the Subsidiary Guaranty Agreement (hereinafter referred to as "Other Taxes"). (c) The Company will indemnify each Bank, each Co-Agent and the Agent for the full amount of Taxes and Other Taxes (including, without limitation, any Taxes or Other Taxes imposed by any jurisdiction on amounts payable under this Section 2.17) paid by such Bank, such Co-Agent or the Agent (as the case may be) and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto, whether or not such Taxes or Other Taxes were correctly or legally asserted. Payments under any indemnification provided for in this Section 2.17(c) shall be made within 30 days from the date such Bank, such Co-Agent or the Agent (as the case may be) makes written demand therefor. (d) Within 30 days after the date of any payment of Taxes, the Company will furnish to the Agent, at its address referred to in Section 9.01, the original or a certified copy of a receipt evidencing payment thereof. Should any Bank, any Co-Agent or the Agent ever receive any refund, credit or deduction from any taxing authority to which such Bank, such Co-Agent or the Agent, as the case may be, would not be entitled but for the payment by the Company of Taxes as required by this Section 2.17 (it being understood that the decision as to whether or not to claim, and if claimed, as to the amount of any such refund, credit or deduction shall be made by such Bank, such Co-Agent or the Agent, as the case may be, in its sole discretion), such Bank, such Co-Agent or the Agent, as the case may be, thereupon shall repay to the Company an amount with respect to such refund, credit or deduction equal to any net reduction in taxes actually obtained by such Bank, such Co-Agent or the Agent, as the case may be, and reasonably determined by such Bank, such Co-Agent or the Agent, as the case may be, to be attributable to such refund, credit or deduction. (e) Each Bank represents that it is either (i) a corporation, association or other entity organized under the laws of the United States or any state thereof or (ii) entitled -32- 38 to complete exemption from United States withholding tax imposed on or with respect to any payments, including fees, to be made to it pursuant to this Agreement or the Notes. Each Bank that is not organized under the laws of the United States or any state thereof (a "Foreign Bank") agrees to provide to the Company and the Agent, on or prior to the date of this Agreement in the case of each Foreign Bank signatory hereto, and on the date of the Assignment pursuant to which it became a Bank in the case of each other Foreign Bank, two duly completed copies of United States Internal Revenue Service Form 1001 or 4224, certifying in either case that such Foreign Bank is entitled to receive payments from the Company under this Agreement and the Notes without deduction or withholding of any United States federal income taxes. Each Foreign Bank which so delivers a Form 1001 or 4224 further undertakes to deliver to each of the Company and the Agent two additional copies of such form (or a successor form) on or before the date that such form expires or becomes obsolete or after the occurrence of any event requiring a change in the most recent form so delivered by it, and such amendments thereto or extensions or renewals thereof as may be reasonably requested by the Company or the Agent, in each case certifying that such Foreign Bank is entitled to receive payments from the Company under this Agreement and the Notes without deduction or withholding of any United States federal income taxes, unless an event (including without limitation any change in treaty, law or regulation) has occurred prior to the date on which any such delivery would otherwise be required which renders all such forms inapplicable or which would prevent such Foreign Bank from duly completing and delivering any such form with respect to it and such Foreign Bank advises the Company and the Agent that it is not capable of receiving such payments without any deduction or withholding of United States federal income tax. Each Bank agrees to indemnify and hold the Company and the Agent harmless from any United States taxes, penalties, interest and other expenses, costs and losses incurred or payable by them as a result of either (a) such Bank's failure to submit any form that it is required to provide pursuant to this Section 2.17(e) or (b) the Agent's and the Company's reliance on any such form which such Bank has provided to them, or on the representation of such Bank made to them pursuant to this Section 2.17(e). (f) If any Taxes are paid by the Company pursuant to this Section 2.17 in respect of the Applicable Lending Office of any Bank, such Bank will, if requested to do so by the Company, designate a different Applicable Lending Office if such designation will avoid the need to pay, or reduce the amount of, such Taxes and will not, in the judgment of such Bank, be otherwise disadvantageous to such Bank. -33- 39 ARTICLE III CONDITIONS SECTION 3.01. Initial Borrowing. The obligation of any Bank to make a Loan on the occasion of the initial Borrowing is subject to the satisfaction (or waiver in accordance with Section 9.05) of each of the following conditions: (a) receipt by the Agent of counterparts hereof signed by each of the parties hereto (or, in the case of any party as to which an executed counterpart shall not have been received, receipt by the Agent in form satisfactory to it of telegraphic, telex or other written confirmation from such party of execution of a counterpart hereof by such party); (b) receipt by the Agent for the account of each Bank of a duly executed Note of the Company dated on the date of this Agreement complying with the provisions of Section 2.05; (c) receipt by the Agent of the Subsidiary Guaranty Agreement, duly executed by each of the Required Guarantors; (d) receipt by the Agent of an opinion of Newton W. Wilson, III, General Counsel of the Company, substantially in the form of Exhibit C hereto; (e) receipt by the Agent of an opinion of Andrews & Kurth L.L.P., special counsel for the Obligors, substantially in the form of Exhibit D hereto; (f) receipt by the Agent of an opinion of Bracewell & Patterson, special counsel for the Agent, substantially in the form of Exhibit E hereto; (g) receipt by the Agent of all documents it may reasonably request relating to the existence of the Obligors, the corporate authority for and the validity of each of the Financing Documents, and any other matters relevant thereto, all in form and substance satisfactory to the Agent; (h) receipt by the Agent of a certificate of an officer of the Company stating the rating by S&P of all senior unsecured long-term debt of the Company as in effect on the date of this Agreement; and -34- 40 (i) receipt by the Agent of a certificate of the chief financial officer, the chief accounting officer or the treasurer of the Company certifying, as of the Effective Date, that no Default exists. SECTION 3.02. All Borrowings. The obligation of any Bank to make a Loan on the occasion of any Borrowing is subject to the satisfaction of the following conditions (in addition to the conditions set forth in Section 3.01): (a) receipt by the Agent of a Notice of Borrowing as required by Section 2.02; (b) the fact that immediately prior to and immediately after such Borrowing, no Default shall have occurred and be continuing; and (c) the fact that the representations and warranties of the Company contained in this Agreement (except, in the case of any Borrowing subsequent to the first Borrowing, the representations and warranties set forth in Section 4.04(a), (c) or (f)) shall be true and correct in all material respects on and as of the date of such Borrowing. Each Borrowing hereunder shall be deemed to be a representation and warranty by the Company on the date of such Borrowing as to the facts specified in this Section 3.02. ARTICLE IV REPRESENTATIONS AND WARRANTIES The Company represents and warrants that: SECTION 4.01. Corporate Existence and Power. Each of the Obligors is a corporation duly incorporated, validly existing and in good standing under the laws of its jurisdiction of incorporation, and has all corporate powers and all material governmental licenses, authorizations, consents and approvals required to own its assets and to carry on its business as now conducted and is duly qualified as a foreign corporation in good standing in each jurisdiction where the nature of its business or the ownership or leasing of its properties requires such qualification and where the failure so to qualify could have a material adverse effect on the business, financial position, results of operations or prospects of the Company and its Subsidiaries, taken as a whole. Neither the Company nor any Subsidiary or Affiliate is subject to regulation under the Public Utility Holding Company Act of 1935, the Investment Company Act of 1940, the Interstate Commerce Act or any other law or regulation which limits the incurrence by the Company or any Subsidiary of Debt, including, but not limited to, laws relating to -35- 41 common or contract carriers or the sale of electricity, gas, steam, water or other public utility services. SECTION 4.02. Corporate and Governmental Authorization; Contravention. The execution, delivery and performance by each Obligor of each Financing Document to which it is shown as being a party are within such Obligor's corporate powers, have been duly authorized by all necessary corporate action, and do not contravene, or constitute a default under, any provision of applicable law or regulation (including, without limitation, Regulations G, T, U and X of the Board of Governors of the Federal Reserve System) or the certificate of incorporation, by-laws or other charter documents of such Obligor or of any instrument or agreement evidencing or governing Debt or any other material agreement, judgment, injunction, order, decree or other instrument binding upon such Obligor or result in the creation or imposition of any material Lien on any asset of the Company or any Subsidiary. All authorizations, consents and approvals of governmental bodies, agencies or officials required in connection with the execution, delivery and performance by each Obligor of the Financing Documents to which it is shown as being a party have been obtained and are in full force and effect. SECTION 4.03. Binding Effect. This Agreement and each of the Notes have been duly executed and delivered by the Company and constitute legal, valid and binding agreements of the Company, and the Subsidiary Guaranty Agreement has been duly executed and delivered by each Required Guarantor and constitutes a legal, valid and binding obligation of each Required Guarantor. SECTION 4.04. Information. (a) The consolidated balance sheet of the Company and its Consolidated Subsidiaries as of December 31, 1994 and the related consolidated statements of operations, cash flows and common stock and other shareholders' equity for the fiscal year then ended, reported on by Price Waterhouse and set forth in the Company's 1994 Form 10-K, a copy of which has been delivered to each of the Banks, fairly present, in conformity with generally accepted accounting principles, the consolidated financial position of the Company and its Consolidated Subsidiaries as of such date and their consolidated results of operations and cash flows for such fiscal year. (b) To the best knowledge of the Company, there are no statements or conclusions in any Engineering Report delivered pursuant hereto which are based upon or include misleading information or fail to take into account material information regarding the matters reported therein, it being understood that such statements and conclusions are necessarily based upon professional opinions, estimates and forecasts, and the Company does not warrant that such opinions, estimates and forecasts will ultimately prove to have been accurate. -36- 42 (c) The Company's 1994 Form 10-K, as supplemented by the Company reports on Form 10-Q for the fiscal quarter ended March 31, 1995 and its reports on Form 8-K filed during 1995, a copy of each of which has been delivered to each of the Banks, does not contain any untrue statement of material fact or omit to state a material fact necessary in order to make the statements contained therein not misleading. Except for matters of general public knowledge with respect to the oil and gas industry, the Company has disclosed to the Banks in writing any and all facts which materially and adversely affect or may be reasonably expected so to affect (to the extent the Company can now reasonably foresee), the business, assets, operations, prospects or condition, financial or otherwise, of the Company and its Subsidiaries or the ability of any Obligor to perform its obligations under the Financing Documents. (d) Since December 31, 1994 there has been no material adverse change in the business, financial position, results of operations or prospects of the Company and its Subsidiaries, taken as a whole. (e) No Default exists. (f) The unaudited consolidated balance sheet of the Company and its Consolidated Subsidiaries as of March 31, 1995 and the related unaudited consolidated statements of operations and cash flows for the three months then ended, set forth in the Company's quarterly report for the fiscal quarter ended March 31, 1995 as filed with the Securities and Exchange Commission on Form 10-Q, a copy of which has been delivered to each of the Banks, fairly present, in conformity with generally accepted accounting principles (except for the absence of footnotes) applied on a basis consistent with the financial statements referred to in subsection (a) of this Section 4.04, the consolidated financial position of the Company and its Consolidated Subsidiaries as of such date and their consolidated results of operations and cash flows for such six month period (subject to normal year-end adjustments). SECTION 4.05. Litigation. There is no action, suit or proceeding pending against, or to the knowledge of the Company threatened against or affecting, the Company or any of its Subsidiaries or any of their respective properties or interests at law or in admiralty or equity, before any court or arbitrator or any governmental body, agency or official, foreign or domestic, in which there is a reasonable possibility of an adverse decision which could materially adversely affect the business, financial position or results of operations of the Company and its Subsidiaries, taken as a whole, or which in any manner draws into question the validity of any Financing Document. SECTION 4.06. Compliance with ERISA. Each member of the ERISA Group has fulfilled its obligations under the minimum funding standards of ERISA and the Internal Revenue Code with respect to each Plan and is in compliance in all material respects with the presently applicable provisions of ERISA and the Internal Revenue -37- 43 Code with respect to each Plan. No member of the ERISA Group has (i) sought a waiver of the minimum funding standard under Section 412 of the Internal Revenue Code in respect of any Plan, (ii) failed to make any contribution or payment to any Plan or Multiemployer Plan or in respect of any Benefit Arrangement, or made any amendment to any Plan or Benefit Arrangement, which has resulted or could result in the imposition of a Lien or the posting of a bond or other security under ERISA or the Internal Revenue Code or (iii) incurred any liability under Title IV of ERISA other than a liability to the PBGC for premiums under Section 4007 of ERISA. SECTION 4.07. Environmental Matters. In the ordinary course of its business, the Company conducts an ongoing review of the effect of existing Environmental Laws on the business, operations and properties of the Company and the Subsidiaries, in the course of which it attempts to identify and evaluate associated liabilities and costs (including, without limitation, any capital or operating expenditures required for clean-up or closure of properties presently or previously owned, any capital or operating expenditures required to achieve or maintain compliance with environmental protection standards imposed by law or as a condition of any license, permit or contract, any related constraints on operating activities, including any periodic or permanent shutdown of any facility or reduction in the level of or change in the nature of operations conducted thereat and any actual or potential liabilities to third parties, including employees, and any related costs and expenses). On the basis of this review, the Company has reasonably concluded that existing Environmental Laws are unlikely to have a material adverse effect on the business, financial condition, results of operations or prospects of the Company and its Subsidiaries, taken as a whole. SECTION 4.08. Subsidiaries. All Restricted Assets are owned as of the date of this Agreement by the Company and the Persons listed in Part B of Schedule II hereto or, in the case of Restricted Assets sold since December 31, 1993, by Persons other than Unrestricted Subsidiaries. The list of entities under the caption "Subsidiary Guarantors" on the signature pages of the Subsidiary Guaranty Agreement constitutes a true, complete and accurate list of all Required Guarantors as of the date of this Agreement. Part A of Schedule II hereto contains a true, complete and accurate list of all Unrestricted Subsidiaries, and Part B of Schedule II hereto contains a true, complete and accurate list of all Restricted Subsidiaries as of the date of this Agreement. SECTION 4.09. Ownership of Restricted Subsidiaries. The Company or a Restricted Subsidiary is the record and beneficial owner, free and clear of all Liens (other than those permitted by Section 5.07), of (i) all of the issued and outstanding capital stock (other than directors' qualifying shares and shares beneficially owned by the Company or a Restricted Subsidiary and held by nominees of the Company or a Restricted Subsidiary solely to satisfy requirements of local law) and other ownership interests of each Restricted Subsidiary (except Unimar and the Unimar Restricted Subsidiaries and any other Restricted Subsidiary the capital stock of which is sold -38- 44 pursuant to a sale permitted by Section 5.14) and (ii) except during any period during which Unimar is an Unrestricted Subsidiary or ceases to be a Subsidiary, at least 50% of the ownership interest in Unimar and the Unimar Restricted Subsidiaries. Except as disclosed on Schedule VI, there are no outstanding options, warrants or other rights to acquire any capital stock or other ownership interest of any Restricted Subsidiary. SECTION 4.10. Title to Properties. The Company and each of the Subsidiaries have good title, free and clear of all Liens, claims, burdens and title defects, to all of the material assets reflected in the Company's or such Subsidiary's books and records as being owned by them except Liens permitted by this Agreement and claims, burdens and title defects not materially adverse in the aggregate. SECTION 4.11. Taxes and Other Obligations. Consolidated United States Federal income tax returns of the Company and the Subsidiaries have been examined by the Internal Revenue Service, or the statutory period for such examination has expired, for all years up to and including the year ended December 31, 1989, and all assessed deficiencies resulting from such examination have been discharged or reserved against as required by generally accepted accounting principles. The Company and the Subsidiaries have filed all United States Federal, state and local income tax returns and all other material domestic tax returns which are required to be filed by them and have paid, or provided for the payment before the same became delinquent of, all taxes due pursuant to such returns or pursuant to any assessment received by the Company or any Subsidiary, other than those taxes being diligently contested in good faith by appropriate proceedings. The charges, accruals and reserves on the books of the Company and the Subsidiaries in respect of taxes are, in the opinion of the Company, adequate. The Company and the Subsidiaries have set up such reserves as are required by generally accepted accounting principles for the payment of additional taxes for years which have not been audited by the respective tax authorities. The Company and the Subsidiaries have paid all other material obligations when due other than those being contested in good faith by appropriate proceedings. SECTION 4.12. Regulation U. Neither the Company nor any Subsidiary is engaged in the business of extending credit for the purpose of purchasing or carrying margin stock (within the meaning of Regulation G) or margin stock (within the meaning of Regulation U). Following the application of the proceeds of each Loan, not more than 25% of the value of the assets of the Company, or of the Company and its Subsidiaries, which are subject to any arrangement with the Agent or any Bank (herein or otherwise) whereby the Company's or any Subsidiary's right or ability to sell, pledge or otherwise dispose of assets is in any way restricted will be any such margin stock. SECTION 4.13. Certain Obligations. Neither the Company nor any Subsidiary has any obligation to make payments on the Joint Venture Debt other than -39- 45 those permitted by Section 5.17. The only Non-Recourse Debt existing on the date of this Agreement is the Existing Pakistan Non-Recourse Debt. SECTION 4.14. United Kingdom Assets. Substantially all of the Restricted Assets located in the United Kingdom (including the United Kingdom Sector of the North Sea) are directly owned by UTPL as of the date of this Agreement. ARTICLE V COVENANTS The Company agrees that, so long as any Bank has any Commitment hereunder or any amount payable under any Note remains unpaid: SECTION 5.01. Information. The Company will deliver to each of the Banks: (a) as soon as available and in any event within 100 days after the end of each fiscal year of the Company, a consolidated balance sheet of the Company and its Consolidated Subsidiaries as of the end of such fiscal year and the related consolidated statements of operations, cash flows and common stock and other shareholders' equity for such fiscal year, setting forth in each case in comparative form the figures for the previous fiscal year, all reported on in a manner acceptable to the Securities and Exchange Commission by Price Waterhouse or other independent public accountants of nationally recognized standing; (b) as soon as available and in any event within 60 days after the end of each of the first three quarters of each fiscal year of the Company, a consolidated balance sheet of the Company and its Consolidated Subsidiaries as of the end of such quarter and the related consolidated statements of operations and cash flows for such quarter and for the portion of the Company's fiscal year ended at the end of such quarter, setting forth in each case in comparative form the figures for the corresponding quarter and the corresponding portion of the Company's previous fiscal year, all certified (subject to normal year-end adjustments) as to preparation in accordance with generally accepted accounting principles and consistency by the chief financial officer, the chief accounting officer or the treasurer of the Company; (c) simultaneously with the delivery of each set of financial statements referred to in clauses (a) and (b) above, a certificate of the chief financial officer, the chief accounting officer or the treasurer of the Company (i) setting forth in reasonable detail the calculations required to establish whether the Company was -40- 46 in compliance with the requirements of Sections 5.05 and 5.15 on the date of such financial statements and (ii) stating whether any Default exists on the date of such certificate and, if any Default then exists, setting forth the details thereof and the action which the Company and its Subsidiaries are taking or propose to take with respect thereto; (d) as soon as available and in any event within 60 days after the end of each fiscal quarter of the Company, a certificate of the chief financial officer, the chief accounting officer or the treasurer of the Company certifying (i) whether the Margin Increase Condition exists as of the date of such certificate, (ii) the Unimar Percentage as of the end of such quarter and the amounts as of the end of such quarter of Consolidated Debt, Defeased Debt, Excluded Subordinated Debt, Debt of the Company and its Consolidated Subsidiaries determined on a consolidated basis, Debt of the Company and the Restricted Subsidiaries determined on a consolidated basis, Debt of Unimar, Debt of Unrestricted Subsidiaries, Excess Letter of Credit/Guarantee Amount, Non-Restricted Asset Non-Recourse Debt, Non-Recourse Debt of the Company and the Restricted Subsidiaries, and Restricted Subsidiaries Recourse Debt, and (iii) each Asset Sale that has been consummated during such quarter, the Fair Market Value of the Restricted Assets subject thereto, the amount of fees, commissions, expenses and taxes related thereto, the Net Sales Proceeds therefrom and the cumulative amount of the Excess Net Sales Proceeds from all Assets Sales since December 31, 1993; (e) within five days after the chief financial officer, the chief accounting officer or treasurer of the Company obtains knowledge of any Default, if such Default is then continuing, a certificate of the chief financial officer, the chief accounting officer or the treasurer of the Company setting forth the details thereof and the action which the Company and its Subsidiaries are taking or propose to take with respect thereto; (f) immediately upon the filing of, or any material development in, any litigation or the occurrence of any other event or contingency, if such development, litigation, event or contingency could reasonably be expected to have a material adverse effect on the business, assets, operations, prospects or condition, financial or otherwise, of the Company and its Subsidiaries, taken as a whole, a certificate of the chief financial officer, the chief accounting officer or the treasurer of the Company setting forth the details of such development, litigation, event or contingency and the action which the Company and its Subsidiaries are taking or propose to take with respect thereto; (g) as soon as available and in any event within 100 days after the end of each fiscal year of each Restricted Subsidiary (other than the Unimar Restricted Subsidiaries), a consolidated balance sheet of such Restricted -41- 47 Subsidiary and its consolidated subsidiaries as of the end of such fiscal year and the related consolidated statements of operations, cash flows and common stock and other shareholders' equity for such fiscal year, setting forth in each case in comparative form the figures for the previous fiscal year, all certified as to preparation in accordance with generally accepted accounting principles and consistency by the chief financial officer, the chief accounting officer or the treasurer of such Restricted Subsidiary; (h) as soon as available and in any event within 60 days after the end of the first three quarters of each fiscal year of each Restricted Subsidiary (other than the Unimar Restricted Subsidiaries, Union Texas Petroleum Energy Corporation and Union Texas International Corporation), a consolidated balance sheet of such Restricted Subsidiary and its consolidated subsidiaries as of the end of such quarter and the related consolidated statements of operations and cash flows for such quarter and for the portion of such Restricted Subsidiary's fiscal year ended at the end of such quarter, setting forth in each case in comparative form the figures for the corresponding quarter and the corresponding portion of such Restricted Subsidiary's previous fiscal year, all certified (subject to normal year-end adjustments) as to preparation in accordance with generally accepted accounting principles and consistency by the chief financial officer, the chief accounting officer or the treasurer of such Restricted Subsidiary; (i) promptly upon the mailing thereof to the shareholders of the Company generally, copies of all financial statements, reports and proxy statements so mailed; (j) promptly upon the filing thereof, copies of all registration statements (other than the exhibits thereto and any registration statements on Form S-8 or its equivalent) and reports on Forms 10-K, 10-Q and 8-K (or their equivalents) which the Company shall have filed with the Securities and Exchange Commission; (k) at least 45 days prior to the closing of each Asset Sale that will result in aggregate Net Sales Proceeds (for such sale or, if such sale is one of a series of related sales, for all sales and contemplated sales in such series) of $50,000,000 or more, notice of such sale describing the assets to be sold and the estimated Net Sales Proceeds thereof; (l) if and when any member of the ERISA Group (i) gives or is required to give notice to the PBGC of any "reportable event" (as defined in Section 4043 of ERISA) (other than a "reportable event" not subject to the provisions for 30-day notice to the PBGC under the regulations issued under Section 4043 of ERISA) with respect to any Plan which might constitute grounds -42- 48 for a termination of such Plan under Title IV of ERISA, or knows that the plan administrator of any Plan has given or is required to give notice of any such reportable event, a copy of the notice of such reportable event given or required to be given to the PBGC; (ii) receives notice of complete or partial withdrawal liability under Title IV of ERISA or notice that any Multiemployer Plan is in reorganization, is insolvent or has been terminated, a copy of such notice; (iii) receives notice from the PBGC under Title IV of ERISA of an intent to terminate, impose liability (other than for premiums under Section 4007 of ERISA) in respect of, or appoint a trustee to administer, any Plan, a copy of such notice; (iv) applies for a waiver of the minimum funding standard under Section 412 of the Internal Revenue Code, a copy of such application; (v) gives notice of intent to terminate any Plan under Section 4041(c) of ERISA, a copy of such notice and other information filed with the PBGC; (vi) gives notice of withdrawal from any Plan pursuant to Section 4063 of ERISA, a copy of such notice; or (vii) fails to make any payment or contribution to any Plan or Multiemployer Plan or in respect of any Benefit Arrangement which has resulted or could result in the imposition of a Lien or the posting of a bond or other security, a certificate of the chief financial officer, the chief accounting officer or the treasurer of the Company setting forth details as to such occurrence and action, if any, which the Company or applicable member of the ERISA Group is required or proposes to take; (m) within 5 days after the chief financial officer, the Vice President-Finance, the treasurer or the controller of the Company has knowledge of any filing under Rule 13d of the Securities and Exchange Commission, promulgated under the Securities Exchange Act of 1934, as amended, a copy thereof; (n) within 5 days after receipt by the Company of any written agreement of the type referred to in Section 6.01(k)(iii)(c), (A) a copy thereof except that (i) if such written agreement has not been filed with the Securities and Exchange Commission and is not otherwise public information, each Bank as a condition to receiving a copy of such written agreement may be required to sign, prior to receipt thereof, a confidentiality agreement pursuant to which it agrees that it will treat such written agreement in a confidential manner until such written agreement otherwise becomes public, except for disclosure (a) to counsel for and other advisors, accountants and auditors of such Bank, (b) as may be required by statute, decision, order, rule, regulation or other law, (c) to regulatory authorities, (d) in connection with any litigation involving such written agreement, such confidentiality agreement or any of the Financing Documents, and (e) in connection with any assignment, prospective assignment, sale, prospective sale, participation or prospective participation or other transfer or prospective transfer of any of such Bank's interests hereunder; provided that any -43- 49 such assignee, prospective assignee, purchaser, prospective purchaser, participant, prospective participant, transferee, or prospective transferee shall have entered into a confidentiality agreement for the benefit of the Company substantially upon the terms of this Section 5.01(n), and (ii) if the Company is contractually prohibited from delivering a copy of such written agreement to the Banks, the Company shall not be required to deliver such written agreement unless such prohibition has been waived, but the Company shall use reasonable efforts to obtain such waiver or if it is a party to such written agreement to prevent any such prohibition from being included therein, and (B) if the Company is a party to such written agreement, but is excused pursuant to clause (A)(ii) of this Section 5.01(n) from delivering a copy thereof to the Banks, the Company shall notify the Banks of the existence of such written agreement (but not the content thereof or other parties thereto), but as a condition to receiving such notice the Banks may be required to sign, prior to receipt of such notice, a confidentiality agreement conforming to clause (A)(i) of this Section 5.01(n); (o) by May 1 of each year, an Engineering Report as of the last day of the immediately preceding year; (p) promptly upon the closing of the sale or other disposition of any capital stock of UTPC or any option, warrant or other right to acquire any such capital stock, notice thereof; (q) promptly after any change in or termination of the rating of any senior unsecured long-term debt of the Company by S&P, notice thereof. (r) from time to time such additional information regarding the financial position or business of the Company or any Subsidiary as the Agent, at the request of any Bank, may reasonably request. SECTION 5.02. Affirmative Covenants. The Company will maintain its existence and cause each Restricted Subsidiary to maintain its existence except in the case of (i) a merger of a Restricted Subsidiary into the Company in a merger permitted by Section 5.08 hereof, (ii) the merger of a Restricted Subsidiary into another Restricted Subsidiary, if immediately after such merger (and giving effect thereto), no Default shall have occurred and be continuing, and (iii) any Asset Sale in the form of the merger of a Restricted Subsidiary into another Person, if immediately after such merger (and giving effect thereto), no Event of Default shall have occurred and be continuing. The Company and each Subsidiary shall: (a) Conduct of Business; Property. Cause all material property useful and necessary in its business to be maintained in good working order and condition and to be operated prudently in accordance with good -44- 50 industry practice; and to the extent consistent with prudent business practices, defend its right, title and interest in its material properties against all adverse claims. (b) Compliance with Laws. Comply with all applicable laws, ordinances, rules, regulations and reporting, filing and other requirements of governmental authorities (including, without limitation, Environmental Laws and ERISA and the rules and regulations thereunder), except where the necessity of compliance therewith is contested in good faith by appropriate proceedings or where the failure to so comply would not have a material adverse effect on the Company and its Subsidiaries, taken as a whole. (c) Inspection of Property, Books and Records. Keep proper books of record and account in accordance with sound accounting practices; and permit representatives of any Bank, at such Bank's sole risk and expense, to visit and inspect any of its properties (subject to obtaining any required consent of third-party operators), to examine and make abstracts and copies from any of its books and records and to discuss its affairs, finances and accounts with its officers and employees, and use its best efforts to make its independent public accountants available to discuss the affairs, finances and accounts of the Company and any of its Subsidiaries, all at such reasonable times and as often as may reasonably be desired. SECTION 5.03. Primary Business. The exploration for, and production and marketing of, Hydrocarbons will continue to be the primary business of the Company and its Subsidiaries taken as whole. SECTION 5.04. Insurance. The Company will maintain, and will cause each Subsidiary to maintain (either in the name of the Company or in such Subsidiary's own name) with financially sound and reputable insurance companies, insurance on their property in at least such amounts and against at least such risks as are usually insured against in the same general area by companies of established repute engaged in the same or similar business; and will furnish to the Banks, upon written request from the Agent, full information as to the insurance carried. SECTION 5.05. Debt. (a) [intentionally deleted] (b) At no time will Restricted Subsidiaries Recourse Debt exceed $75,000,000. -45- 51 (c) Consolidated Debt will not, on the last day of any calendar quarter, exceed 3.75 times Operating Cash Flow for the four calendar quarters ending on such day. (d) Neither the Company nor any Restricted Subsidiary will create, assume or otherwise incur any Debt if at the time of creation, assumption or incurrence of such Debt or after giving effect to the creation, assumption or incurrence of such Debt, any Event of Default would exist; provided that the Company or any Restricted Subsidiary may renew or extend (but not increase) its own Debt. SECTION 5.06. Restricted Payments. Neither the Company nor any Subsidiary shall declare or make any Restricted Payment unless, immediately prior thereto and immediately thereafter, no Event of Default shall have occurred and be continuing. Neither the Company nor any Subsidiary shall make any Restricted Transfer unless, immediately prior thereto and immediately thereafter, no Event of Default shall have occurred and be continuing; provided that the Company or any Subsidiary can make Restricted Transfers in the form of Investments in an Affiliate, Unrestricted Subsidiary or subsidiary of an Unrestricted Subsidiary if (i) such Affiliate, Unrestricted Subsidiary or subsidiary, as the case may be, has no outstanding Debt at the time of such Investment and does not thereafter create, assume or otherwise incur any Debt while any Event of Default is continuing and (ii) the Company notifies the Banks of any such Investment in excess of $5,000,000 at least ten days prior to such Investment. Nothing in this Section 5.06 shall prohibit the payment of any dividend or distribution within 45 days after the declaration thereof if payment of such dividend or distribution was not prohibited by this Agreement at the time such declaration was made. SECTION 5.07. Negative Pledge. Neither the Company nor any Restricted Subsidiary will create, assume or suffer to exist (i) any Lien on any capital stock or other ownership interest of any Restricted Subsidiary now owned or hereafter acquired by it or any Lien on any option, warrant or other right to acquire any capital stock or other ownership interest of any Restricted Subsidiary now owned or hereafter acquired by it, other than those described in Part A of Schedule III or (ii) any Lien on any other asset now owned or hereafter acquired by it, except for the following Liens on assets not referred to in the foregoing clause (i) of this Section 5.07: (a) Liens existing on the date of this Agreement, securing Debt outstanding and other obligations (including contractual obligations) existing on the date of this Agreement and, except in the case of inchoate operator's Liens, described in Part B of Schedule III hereto; (b) any Lien (i) on any Non-Restricted Asset securing only Non-Restricted Asset Non-Recourse Debt of the Company or any Restricted Subsidiary or (ii) on any asset of Virginia Indonesia Company, Virginia International Company or Union Texas East Kalimantan Limited securing Joint Venture Debt; -46- 52 (c) mechanics', materialmen's, carriers' and other statutory Liens, but only if arising, and only so long as continuing, in the ordinary course of business; or deposits or pledges to obtain the release of any such Lien; or easements, encroachments or other title defects which do not materially detract from the value of its assets or materially impair the use thereof in the operation of its business; (d) Liens arising in the ordinary course of its business which (i) do not secure Debt, (ii) do not secure any obligation in an amount exceeding $15,000,000 and (iii) do not in the aggregate materially detract from the value of its assets or materially impair the use thereof in the operation of its business; (e) Liens on any interest in a Partnership arising under any agreement creating or governing such Partnership (including Unimar) and securing only obligations of the members of such Partnership to make Investments in such Partnership; (f) Liens arising under any customary provision of any joint operating agreement or similar agreement relating to the exploration, production, development or transportation of oil and gas; (g) Liens not otherwise permitted by the foregoing clauses of this Section 5.07 on assets (other than any of the Restricted Assets) securing Debt in an aggregate principal amount at any time outstanding not to exceed $20,000,000; and (h) any Lien securing the refinancing, extension, renewal or refunding of any Debt secured by any Lien permitted by the foregoing subsection (a) of this Section 5.07; provided that such Debt is not increased from the lesser of the amount of such Debt set forth on Schedule III hereto or the amount of such Debt outstanding immediately prior to such refinancing, extension, renewal or refunding, and such Lien does not cover any property that is not described on Schedule III hereto as securing such Debt. SECTION 5.08. Consolidations and Mergers. The Company will not consolidate or merge with or into any Person; provided that the Company may merge with another Person if the Company is the surviving corporation and, immediately after such merger (and giving effect thereto), no Default shall have occurred and be continuing. SECTION 5.09. Use of Proceeds. The proceeds of the Loans made under this Agreement will be used by the Company for general corporate purposes; provided that none of such proceeds will be used in any manner or for any purpose that results in -47- 53 any violation of any applicable law or regulation (including, without limitation, Regulations G, T, U and X of the Board of Governors of the Federal Reserve System). SECTION 5.10. Parties to Subsidiary Guaranty Agreement. The Company shall cause each Person that shall at any time after the date of this Agreement become a Required Guarantor to enter into the Subsidiary Guaranty Agreement and deliver, not later than 30 days after the date on which such Person shall have become a Required Guarantor, to the Agent, in addition to a duly executed counterpart of the Subsidiary Guaranty Agreement, duly executed documents, in form and substance satisfactory to the Agent, of the type referred to in Section 3.01(c), (d), (e) and (g) pertaining to such Required Guarantor and the Subsidiary Guaranty Agreement executed by it. Upon any sale or other disposition of all of the capital stock of a Required Guarantor in an Asset Sale permitted by Section 5.14, so long as no Default exists, such Required Guarantor shall be released from its obligations under the Subsidiary Guaranty Agreement, and the Agent shall execute such releases and other documents as such Subsidiary or the Company may reasonably request to further evidence such release. SECTION 5.11. Restrictions on Dividends, Intercompany Loans, or Investments. The Company will not create or otherwise cause or permit to exist or become effective, or permit any Subsidiary to create or otherwise cause or permit to exist or become effective, any consensual encumbrance or restriction (other than the Financing Documents) on the ability of any Restricted Subsidiary to (i) pay dividends or make any other distributions on its capital stock or other ownership interests or pay any Debt or other obligation owed to the Company or any Restricted Subsidiary, or (ii) make any loans or advances to or other Investments in the Company or any Restricted Subsidiary, except any encumbrance or restriction in effect on the date of this Agreement and described on Schedule IV hereto. SECTION 5.12. Loans and Advances. The Company will not make or permit to remain outstanding any cash loan or advance to any Person, or permit any Restricted Subsidiary to make or permit to remain outstanding any cash loan or advance to any Person, except (i) loans and advances to Subsidiaries or joint ventures, partnerships or other business ventures in which the Company or any Subsidiary has or is contemporaneously acquiring an interest or participation; and (ii) other loans and advances not exceeding $10,000,000 at any time outstanding. SECTION 5.13. Cross-Default. The Company will not create, assume, otherwise incur or suffer to exist, or permit any Restricted Subsidiary to create, assume, otherwise incur or suffer to exist, any Debt if the maturity of such Debt is or may be accelerated (assuming the giving of notice or lapse of time or both), in whole or in part, as a result of any default under, or acceleration of (i) any Non-Recourse Debt of the Company or any Restricted Subsidiary or (ii) any Debt of any Unrestricted Subsidiary, unless the Required Banks shall have given their prior written consent to such Debt of -48- 54 the Company or Restricted Subsidiary to be so created, assumed or otherwise incurred, which consent will not be unreasonably withheld; provided that this Section 5.13 shall not prohibit a provision in a Guarantee of the Company or a Restricted Subsidiary Guaranteeing Debt of an Unrestricted Subsidiary that provides that the payment obligation under such Guarantee may be accelerated upon default under or acceleration of such Debt. SECTION 5.14. Subsidiaries. The Company will at all times own, either directly or through one or more Restricted Subsidiaries, free and clear of all Liens (other than those permitted by Section 5.07), 100% of all issued and outstanding capital stock (other than directors' qualifying shares and shares beneficially owned by the Company or a Restricted Subsidiary and held by nominees of the Company or a Restricted Subsidiary solely to satisfy requirements of local law) and other ownership interests of each Restricted Subsidiary and all options, warrants and other rights to acquire any such capital stock or any such ownership interest, except for (i) Unimar and the Unimar Restricted Subsidiaries, (ii) any Restricted Subsidiary sold or otherwise disposed of pursuant to an Asset Sale, if after giving effect to such Asset Sale, the Company does not own, directly or indirectly, any interest in such Restricted Subsidiary, and (iii) those options described on Schedule VI. The Company will at all times own, either directly or through one or more Restricted Subsidiaries, free and clear of all Liens (other than those permitted by Section 5.07), 50% or more of the ownership interest in Unimar and the Unimar Restricted Subsidiaries and all options, warrants and other rights to acquire any such ownership interest (other than those described on Schedule VI); provided that the Company and the Restricted Subsidiaries may sell all of their ownership interest in Unimar and the Unimar Restricted Subsidiaries and such options, warrants and other rights if, after giving effect to such sale, the Company does not own, directly or indirectly, any interest in Unimar, the Unimar Restricted Subsidiaries or any such option, warrant or other right. The Company will not at any time permit any Restricted Subsidiary that is not a Unimar Restricted Subsidiary to become a Unimar Restricted Subsidiary. The Company will not permit any Restricted Asset to be sold, leased, transferred or otherwise disposed of to any Person that was an Unrestricted Subsidiary immediately prior thereto if any Default then exists or would result. The Company will not permit any Restricted Subsidiary to issue any preferred stock unless such preferred stock at all times is owned only by the Company. The Company will not permit any Restricted Subsidiary to own, directly, both (a) any UK Asset and (b) any Non-UK Asset. SECTION 5.15. Adjusted Equity and Interest Coverage. The Company will at all times maintain Adjusted Equity of $350,000,000 or more. The Company will cause EBITDA for each period of four consecutive calendar quarters to exceed 4.00 times Cash Interest Expense for such period. -49- 55 SECTION 5.16. Excluded Subordinated Debt and Preferred Stock. Neither the Company nor any Subsidiary will pay, prepay, purchase, redeem, defease, acquire, exchange or convert any preferred stock (other than Restricted Preferred Stock) or any Excluded Subordinated Debt, except (a) exchanges for or conversions to common stock of the Company, (b) payments of interest when due required by the terms of any such Excluded Subordinated Debt as such terms are in effect on the date such Excluded Subordinated Debt is incurred and (c) if no Event of Default exists, payments of ordinary periodic dividends (excluding liquidating dividends) on such preferred stock in accordance with the terms thereof as such terms are in effect on the date such preferred stock is issued. SECTION 5.17. Certain Obligations. Neither the Company nor any Subsidiary will create, incur, assume or suffer to exist any obligation on its part to make any payment on the Joint Venture Debt other than (a) the obligations set forth in the agreements listed on Schedule V hereto with respect to Joint Venture Debt in existence on April 24, 1995 and (b) obligations substantially similar to those referred to in clause (a) with respect to Joint Venture Debt created, incurred, assumed or arising after April 24, 1995. SECTION 5.18. Restrictions on Asset Sales. (a) The Company will not and will not permit any of its Restricted Subsidiaries to enter into any Asset Sale if after giving effect thereto any Event of Default would exist. (b) The Company will not permit to occur any Asset Sale involving, directly or indirectly, any UK Assets if the aggregate Net Sales Proceeds of all Asset Sales involving, directly or indirectly, UK Assets since December 31, 1993 would exceed $250,000,000. SECTION 5.19. UTEK Guaranty. The Company will cause Union Texas East Kalimantan Limited to report, as promptly as reasonably practicable, the execution and delivery of the Subsidiary Guaranty Agreement to the Indonesian Foreign Commercial Loan Team ("Team") established pursuant to Indonesian Presidential Decree No. 39 of 1991 and to deliver, as promptly as reasonably practicable, to the Team and to Bank Indonesia copies of this Agreement and the Subsidiary Guaranty Agreement. The Company will cause Union Texas East Kalimantan Limited, as promptly as reasonably practical following execution from time to time of amendments hereto or to the Subsidiary Guaranty Agreement, (i) to report the execution and delivery of such amendments to the Team and (ii) to deliver copies of such amendments to the Team and to Bank Indonesia. SECTION 5.20. Conversion to Unrestricted Subsidiary. The Company may convert a Restricted Subsidiary into an Unrestricted Subsidiary by giving the Agent notice of such conversion at least 5 Domestic Business Days prior to such conversion; -50- 56 provided that (i) no Restricted Subsidiary shall be so converted so long as it owns directly or indirectly any interest in any Restricted Asset and (ii) no such conversion shall be made if at the time of such notice or after giving effect to such conversion, any Default would exist. Upon any such conversion of a Required Guarantor to an Unrestricted Subsidiary such Subsidiary shall be released from its obligations under the Subsidiary Guaranty Agreement, and the Agent shall execute such releases and other documents as such Subsidiary or the Company may reasonably request to further evidence such release. ARTICLE VI DEFAULTS SECTION 6.01. Events of Default. If one or more of the following events ("Events of Default") shall have occurred and be continuing: (a) the Company shall fail to pay when due any principal of any Loan, or shall fail to pay within five days of the due date thereof any interest on any Loan, any fees or any other amount payable hereunder; (b) the Company or any Subsidiary shall fail to observe or perform any covenant contained in Sections 5.05 to 5.18, inclusive; (c) the Company or any Subsidiary shall fail to observe or perform any covenant or agreement contained in this Agreement (other than those covered by clause (a) or (b) above) or in the Subsidiary Guaranty Agreement for 30 days after written notice thereof has been given to the Company by the Agent at the request of any Bank; (d) any representation, warranty, certification or statement made by the Company or any Subsidiary in this Agreement or in the Subsidiary Guaranty Agreement or made in any certificate, financial statement or other document delivered pursuant to this Agreement shall prove to have been incorrect in any material respect when made (or deemed made); (e) the Company or any Restricted Subsidiary shall fail to make any payment in respect of any Material Debt (other than the Notes) when due or within any applicable grace period; (f) any event or condition shall occur which results in the acceleration of the maturity of any Material Debt of the Company or any Restricted Subsidiary (other than the Notes) or enables (or, with the giving of notice or lapse of time -51- 57 or both, would enable) the holder of such Material Debt or any Person acting on such holder's behalf to accelerate the maturity thereof; (g) the Company or any Restricted Subsidiary shall commence a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, or shall consent to any such relief or to the appointment of or taking possession by any such official in an involuntary case or other proceeding commenced against it, or shall make a general assignment for the benefit of creditors, or shall fail generally to pay its debts as they become due, or shall take any corporate action to authorize any of the foregoing; (h) an involuntary case or other proceeding shall be commenced against the Company or any Restricted Subsidiary seeking liquidation, reorganization or other relief with respect to it or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, and such involuntary case or other proceeding shall remain undismissed and unstayed for a period of 60 days; or an order for relief shall be entered against the Company or any Restricted Subsidiary under the federal bankruptcy laws as now or hereafter in effect; (i) any member of the ERISA Group shall fail to pay when due an amount or amounts aggregating in excess of $5,000,000 which it shall have become liable to pay under Title IV of ERISA; or notice of intent to terminate a Material Plan shall be filed under Title IV of ERISA by any member of the ERISA Group, any plan administrator or any combination of the foregoing; or the PBGC shall institute proceedings under Title IV of ERISA to terminate, to impose liability (other than for premiums under Section 4007 of ERISA) in respect of, or to cause a trustee to be appointed to administer any Material Plan; or a condition shall exist by reason of which the PBGC would be entitled to obtain a decree adjudicating that any Material Plan must be terminated; or there shall occur a complete or partial withdrawal from, or a default, within the meaning of Section 4219(c)(5) of ERISA, with respect to, one or more Multiemployer Plans which could cause one or more members of the ERISA Group to incur a current payment obligation in excess of $5,000,000; (j) a judgment or order for the payment of money in excess of $15,000,000 (net of applicable insurance coverage which is acknowledged by the insurer) shall be rendered against the Company or any Restricted Subsidiary and -52- 58 such judgment or order shall continue unsatisfied and unstayed for a period of 30 days; (k) any Person or two or more Persons acting in concert, together with any affiliates thereof, (i) shall have acquired beneficial ownership, directly or indirectly, (a) within any 12 month period, of (1) more than 25% of the Company's common stock or (2) securities representing more than 25% of the combined voting power of all securities of the Company entitled to vote in the election of directors (other than securities having such power only by reason of the happening of a contingency) ("Voting Securities"), or (b) within any 24 month period, of (1) more than 40% of the Company's common stock or (2) more than 40% of the Company's Voting Securities, (ii) owns a higher percentage of the Company's common stock or Voting Securities than the percentage owned by Kohlberg Kravis Roberts & Co. and/or non-operating investment entities it controls, and (iii) either (a) owns 50% or more of the Company's common stock or Voting Securities, (b) directly or indirectly elects or causes the election of Persons constituting in the aggregate a majority of the Board of Directors of the Company or any Restricted Subsidiary, or (c) exercises, directly or indirectly, by written agreement, control over the Company or any Restricted Subsidiary; provided that no Default or Event of Default shall occur under this subsection (k) until the Agent, following request by the Required Banks, gives notice to the Company that such an Event of Default is declared, and such notice may not be given after the date which is 45 days after the Banks actually receive notice from the Company to the effect that the matters set forth in clauses (i), (ii) and (iii) have occurred (for purposes of this provision, "beneficial ownership" shall mean beneficial ownership within the meaning of Rule 13d-3 of the Securities and Exchange Commission promulgated under the Securities Exchange Act of 1934, as amended, and the number and percentage of securities beneficially owned by any Person or Persons shall be calculated in accordance with such Rule); or (l) any "Event of Default", as defined in either of the Other Credit Agreements, shall occur; then, and in every such event, the Agent shall (i) if requested by Banks having at least 51% in the aggregate amount of the Commitments, by notice to the Company terminate the Commitments and, upon the giving of such notice by the Agent, they shall thereupon terminate, and (ii) if requested by Banks holding Notes evidencing at least 51% in aggregate principal amount of the Loans, by notice to the Company declare the Notes (together with accrued interest thereon) to be, and, upon the giving of such notice by the Agent, the Notes shall thereupon become, immediately due and payable without notice of intent to accelerate, notice of acceleration, presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Company; provided that in the case of any of the Events of Default specified in clause (g) or (h) above, without any -53- 59 notice to the Company or any other act by the Agent or the Banks, the Commitments shall thereupon terminate and the Notes (together with accrued interest thereon) shall become immediately due and payable without notice of intent to accelerate, notice of acceleration, presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Company. SECTION 6.02. Notice of Default. The Agent shall give notice to the Company under Section 6.01(c) promptly upon being requested to do so by any Bank and shall thereupon notify all the Banks thereof. ARTICLE VII THE AGENT SECTION 7.01. Appointment and Authorization. Each Bank irrevocably appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers under the Financing Documents as are delegated to the Agent by the terms hereof or thereof, together with all such powers as are reasonably incidental thereto. Each Bank hereby consents and agrees to the terms of, and authorizes and directs the Agent to enter into, the Subsidiary Guaranty Agreement. SECTION 7.02. Agent and Affiliates. NationsBank shall have the same rights and powers under the Financing Documents as any other Bank and may exercise or refrain from exercising the same as though it were not the Agent, and NationsBank and its affiliates may accept deposits from, lend money to, and generally engage in any kind of business with the Company or any Subsidiary or other affiliate of the Company as if it were not the Agent hereunder. SECTION 7.03. Action by Agent. The obligations of the Agent under the Financing Documents are only those expressly set forth herein. Without limiting the generality of the foregoing, the Agent shall not be required to take any action with respect to any Default, except as expressly provided in Article VI. SECTION 7.04. Consultation with Experts. The Agent may consult with legal counsel (who may be counsel for the Company or any Subsidiary), independent public accountants, independent petroleum engineers and other experts selected by it and the Agent shall not be liable for any action taken or omitted to be taken by it in good faith in accordance with the advice of such counsel, accountants, engineers or experts. SECTION 7.05. Liability of Agent. Neither the Agent nor any of its directors, officers, agents or employees shall be liable for any action taken or not taken by it in connection herewith (i) with the consent or at the request of the Required Banks or (ii) in the absence of its own gross negligence or willful misconduct. Neither the -54- 60 Agent nor any of its directors, officers, agents or employees shall be responsible for or have any duty to ascertain, inquire into or verify (i) any statement, warranty or representation made in connection with this Agreement or any borrowing hereunder; (ii) the performance or observance of any of the covenants or agreements of the Company or any Subsidiary; (iii) the satisfaction of any condition specified in Article III, except receipt of items required to be delivered to the Agent; (iv) the validity, effectiveness or genuineness of the Financing Documents or any other instrument or writing furnished in connection herewith; or (v) the accuracy of any Engineering Report. The Agent shall not incur any liability by acting in reliance upon any notice, consent, certificate, statement, or other writing (which may be a bank wire, telex or similar writing) believed by it to be genuine or to be signed by the proper party or parties. SECTION 7.06. Indemnification. Each Bank shall, ratably in accordance with its Commitment, indemnify the Agent (to the extent not reimbursed by the Company) against any cost, expense (including counsel fees and disbursements), claim, demand, action, loss or liability (except such as result from the Agent's gross negligence or willful misconduct) that the Agent may suffer or incur in connection with the Financing Documents or any action taken or omitted by the Agent hereunder (IT BEING EXPRESSLY UNDERSTOOD AND AGREED THAT, EXCEPT FOR SUCH NEGLIGENCE AS IS SO DETERMINED TO CONSTITUTE GROSS NEGLIGENCE, SUCH INDEMNIFICATION DOES EXTEND TO THE CONSEQUENCES OF THE ORDINARY NEGLIGENCE, WHETHER SOLE OR CONTRIBUTORY, OF THE AGENT). SECTION 7.07. Credit Decision. Each Bank acknowledges that it has, independently and without reliance upon the Agent or any other Bank, and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Bank also acknowledges that it will, independently and without reliance upon the Agent or any other Bank, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking any action under this Agreement. SECTION 7.08. Successor Agent. The Agent may resign at any time by giving written notice thereof to the Banks and the Company and may be removed at any time with or without cause by the Required Banks. Upon any such resignation or removal, the Company shall have the right, with the consent of the Required Banks, to appoint a successor Agent. If no successor Agent shall have been so appointed with the consent of the Required Banks, and shall have accepted such appointment, within 30 days after the retiring Agent's giving of notice of resignation or the Required Banks' removal of the retiring Agent, then the retiring Agent may, on behalf of the Banks, appoint a successor Agent, which shall be a commercial bank organized or licensed under the laws of the United States of America or of any State thereof and having a combined capital and surplus of at least $50,000,000. Upon the acceptance of its appointment as Agent -55- 61 hereunder by a successor Agent, such successor Agent shall thereupon succeed to and become vested with all the rights and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations under the Financing Documents. After any retiring Agent's resignation or removal hereunder as Agent, the provisions of this Article VII shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent. SECTION 7.09. Agent's Fees. The Company shall pay to the Agent for its own account fees in the amounts and at the times previously agreed upon between the Company and the Agent. ARTICLE VIII CHANGE IN CIRCUMSTANCES SECTION 8.01. Basis for Determining Interest Rate Inadequate or Unfair. If on or prior to the first day of any Interest Period: (a) the Agent is advised by the Reference Banks that deposits in dollars (in the applicable amounts) are not being offered to the Reference Banks in the relevant market for such Interest Period, or (b) Banks having 50% or more of the aggregate amount of the Commitments advise the Agent that the London Interbank Offered Rate as determined by the Agent will not adequately and fairly reflect the cost to such Banks of funding their Euro-Dollar Loans for such Interest Period, the Agent shall forthwith give notice thereof to the Company and the Banks, whereupon until the Agent notifies the Company that the circumstances giving rise to such suspension no longer exist, (i) the obligations of the Banks to make Euro-Dollar Loans, or make any Conversion (other than changing Euro-Dollar Loans into Base Rate Loans), shall be suspended, and (ii) unless the Company notifies the Agent at least two Domestic Business Days before the date of any Euro-Dollar Borrowing for which a Notice of Borrowing has previously been given that it elects not to borrow on such date, such Borrowing shall instead be made as a Base Rate Borrowing. SECTION 8.02. Illegality. If, after the date of this Agreement, the adoption of any applicable law, rule or regulation, or any change therein, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Bank (or its Euro-Dollar Lending Office) with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency shall make it unlawful or impossible for any Bank (or its Euro-Dollar -56- 62 Lending Office) to make, maintain or fund its Euro-Dollar Loans, or make any Conversion (other than changing Euro-Dollar Loans into Base Rate Loans), and such Bank shall so notify the Agent, the Agent shall forthwith give notice thereof to the other Banks and the Company, whereupon until such Bank notifies the Company and the Agent that the circumstances giving rise to such suspension no longer exist, the obligation of such Bank to make Euro-Dollar Loans, or make any Conversion (other than changing Euro-Dollar Loans into Base Rate Loans), as the case may be, shall be suspended. Before giving any notice to the Agent pursuant to this Section 8.02, such Bank shall designate a different Euro-Dollar Lending Office if such designation will avoid the need for giving such notice and will not, in the judgment of such Bank, be otherwise disadvantageous to such Bank. If such Bank shall determine that it may not lawfully continue to maintain and fund any of its outstanding Euro-Dollar Loans to maturity and shall so specify in such notice, each such Euro-Dollar Loan shall be immediately and automatically Converted into a Base Rate Loan (on which interest and principal shall be payable contemporaneously with the related Euro-Dollar Loans of the other Banks). SECTION 8.03. Increased Cost and Reduced Return. (a) If after the date hereof, the adoption of any applicable law, rule or regulation, or any change therein, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Bank (or its Applicable Lending Office) with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency: (i) shall subject any Bank (or its Applicable Lending Office) to any tax, duty or other charge with respect to its Euro-Dollar Loans, its Note or its obligation to make Euro-Dollar Loans, or shall change the basis of taxation of payments to any Bank (or its Applicable Lending Office) of the principal of or interest on its Euro- Dollar Loans or any other amounts due under this Agreement in respect of its Euro-Dollar Loans or its obligation to make Euro-Dollar Loans (except for changes in the rate of tax on the overall net income of such Bank or its Applicable Lending Office imposed by the jurisdiction in which such Bank's principal executive office or Applicable Lending Office is located); or (ii) shall impose, modify or deem applicable any reserve, special deposit or similar requirement (including, without limitation, any such requirement imposed by the Board of Governors of the Federal Reserve System against assets of, deposits with or for the account of, or credit extended by, any Bank (or its Applicable Lending Office) or on the United States market for certificates of deposit or the London interbank market any other condition affecting its Euro-Dollar Loans, its Note or its obligation to make Euro-Dollar Loans; -57- 63 and the result of any of the foregoing is to increase the cost to such Bank (or its Applicable Lending Office) of making or maintaining any Euro-Dollar Loan or making any Conversion (other than changing Euro-Dollar Loans into Base Rate Loans), or to reduce the amount of any sum received or receivable by such Bank (or its Applicable Lending Office) under this Agreement or under its Note with respect thereto, by an amount deemed by such Bank to be material, then, within 15 days after demand by such Bank (with a copy to the Agent), the Company shall pay to such Bank such additional amount or amounts as will compensate such Bank for such increased cost or reduction; provided that the Company shall not be obligated to compensate any Bank for any such reduction attributable to a period (i) more than 90 days prior to the giving of notice by such Bank to the Company of its intention to seek compensation under this subsection (a) or (ii) more than six months prior to the making of demand by such Bank for payment thereof in accordance herewith. (b) If any Bank shall have determined that the adoption of any applicable law, rule or regulation regarding capital adequacy, or any change therein, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or any request or directive regarding capital adequacy (whether or not having the force of law) of any such authority, central bank or comparable agency, has or would have the effect of reducing the rate of return on capital of such Bank (or its Parent) as a consequence of such Bank's obligations hereunder to a level below that which such Bank (or its Parent) could have achieved but for such adoption, change, request or directive (taking into consideration its policies with respect to capital adequacy) by an amount deemed by such Bank to be material, then from time to time, within 15 days after demand by such Bank (with a copy to the Agent), the Company shall pay to such Bank such additional amount or amounts as will compensate such Bank (or its Parent) for such reduction; provided that the Company shall not be obligated to compensate any Bank for any such reduction attributable to a period (i) more than 90 days prior to the giving of notice by such Bank to the Company of its intention to seek compensation under this subsection (b) or (ii) more than six months prior to the making of demand by such Bank for payment thereof in accordance therewith. (c) Each Bank will promptly notify the Company and the Agent of any event of which it has knowledge, occurring after the date hereof, which will entitle such Bank to compensation pursuant to this Section 8.03 and will designate a different Applicable Lending Office if such designation will avoid the need for, or reduce the amount of, such compensation and will not, in the judgment of such Bank, be otherwise disadvantageous to such Bank. A certificate of any Bank claiming compensation under this Section 8.03 and setting forth the additional amount or amounts to be paid to it hereunder shall be conclusive in the absence of manifest error. In determining such amount, such Bank may use any reasonable averaging and attribution methods. -58- 64 SECTION 8.04. Base Rate Loans Substituted for Affected Euro-Dollar Loans. If (i) the obligation of any Bank to make Euro-Dollar Loans to the Company has been suspended pursuant to Section 8.02 or (ii) any Bank has demanded compensation under Section 8.03(a) and the Company shall, by at least five Euro-Dollar Business Days' prior notice to such Bank through the Agent, have elected that the provisions of this Section 8.04 shall apply to such Bank, then, unless and until such Bank notifies the Company that the circumstances giving rise to such suspension or demand for compensation no longer apply: (a) all Loans to the Company which would otherwise be made by such Bank as, or be Converted by such Bank as or into, Euro-Dollar Loans shall instead be made as, or Converted into, Base Rate Loans (on which interest and principal shall be payable contemporaneously with the related Euro-Dollar Loans of the other Banks), and (b) after each of its Euro-Dollar Loans to the Company has been repaid, all payments of principal which would otherwise be applied to repay such Euro-Dollar Loans shall be applied to repay its Base Rate Loans instead. SECTION 8.05. Substitution of Bank. If (i) the obligation of any Bank to make Euro-Dollar Loans has been suspended pursuant to Section 8.02, (ii) any Bank has demanded compensation under Section 8.03 or payment of Taxes or Other Taxes under Section 2.17, or (iii) after satisfaction of all applicable conditions precedent, any Bank fails to fund when due any Loan it is obligated to fund under this Agreement, the Company shall have the right, with the assistance of the Agent, to seek a mutually satisfactory substitute bank or banks (which may be one or more of the Banks) to purchase the Notes and assume the Commitment of such Bank (any such Bank is herein called an "Affected Bank"). Each Affected Bank agrees to sell, without recourse, all of its Commitment, its interest in this Agreement and its Note to any such bank for an amount equal to the sum of the outstanding unpaid principal of and accrued interest on the Loans of such Affected Bank and all commitment fees and other fees and amounts due such Affected Bank hereunder, calculated, in each case, to the date such Commitment, interest in this Agreement and Note are purchased. ARTICLE IX MISCELLANEOUS SECTION 9.01. Notices. All notices, requests and other communications to any party hereunder shall be in writing (including bank wire, telex, facsimile transmission or similar writing) and shall be given to such party: (x) in the case of the Company or the Agent, at its address or telex number set forth on the signature pages hereof, (y) in the case of any Bank, at its address or telex number set forth in its -59- 65 Administrative Questionnaire or (z) in the case of any party, such other address or telex number as such party may hereafter specify for the purpose by notice to the Agent and the Company. Each such notice, request or other communication shall be effective (i) if given by telex, when such telex is transmitted to the telex number specified in this Section 9.01 and the appropriate answer-back is received, (ii) if given by mail, 72 hours after such communication is deposited in the mails with first class postage prepaid, addressed as aforesaid, (iii) if given by facsimile transmission, when such facsimile is transmitted and accompanied by a telephone call to the party receiving such transmission or (iv) if given by any other means, when delivered at the address specified in this Section 9.01; provided that notices to the Agent shall not be effective until received. SECTION 9.02. No Waivers. No failure or delay by the Agent or any Bank in exercising any right, power or privilege under any Financing Document shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies provided in the Financing Documents shall be cumulative and not exclusive of any rights or remedies provided by law. SECTION 9.03. Expenses; Indemnification. (a) The Company shall pay (i) all reasonable documented out-of-pocket costs and expenses of the Agent incurred in connection with the syndication of this Agreement or the preparation of the Financing Documents, any waiver or consent thereunder or any amendment thereof or any Default or alleged Default hereunder and (ii) if an Event of Default occurs, all reasonable out-of-pocket costs and expenses incurred by the Agent or incurred by any Bank, including fees and disbursements of counsel, in connection with such Event of Default and collection and other enforcement proceedings resulting therefrom. (b) The Company agrees to indemnify the Agent, each Co-Agent and each Bank and hold the Agent, each Co-Agent and each Bank harmless from and against any and all liabilities, losses, damages, costs and expenses of any kind (including, without limitation, the reasonable fees and disbursements of counsel for the Agent, any Co-Agent or any Bank in connection with any investigative, administrative or judicial proceedings, whether or not the Agent, such Co-Agent or such Bank, as the case may be, shall be designated a party thereto) which may be incurred by the Agent, any Co-Agent or any Bank, relating to or arising out of this Agreement or any actual or proposed use of proceeds of Loans hereunder, including specifically, without limitation, all liabilities, losses, damages, costs and expenses arising out of a violation of any Environmental Law; provided that neither the Agent nor any Co-Agent nor any Bank shall have the right to be indemnified hereunder for its own gross negligence or willful misconduct as determined by a court of competent jurisdiction (IT BEING EXPRESSLY UNDERSTOOD AND AGREED THAT, EXCEPT FOR SUCH NEGLIGENCE AS IS SO DETERMINED TO CONSTITUTE GROSS NEGLIGENCE, SUCH INDEMNIFICATION DOES EXTEND TO THE CONSEQUENCES OF THE -60- 66 ORDINARY NEGLIGENCE, WHETHER SOLE OR CONTRIBUTORY, OF THE INDEMNITEE). (c) Within a reasonable period of time after any Person entitled to indemnification under Section 9.03(b) (an "Indemnified Person") receives actual notice of the assertion of any claim or the commencement of any action, or any threatened claim or action, covered by Section 9.03(b), such Indemnified Person shall, if indemnification with respect thereof is to be sought from the Company under Section 9.03(b), notify the Company in writing of such claim or action; provided that the failure to so notify the Company shall not relieve the Company from any liability which the Company may have to the Indemnified Person under Section 9.03(b) unless the obligations of the Company under Section 9.03(b) have been significantly increased as a result of such failure. The Company and such Indemnified Person shall cooperate in the defense of any such claim or action and shall take those actions reasonably within their power to take which are necessary to preserve any legal defenses to such matters. If any such claim or action shall be brought or threatened against an Indemnified Person, so long as no Event of Default exists, the Company shall be entitled to participate in the defense thereof, and, with the consent of such Indemnified Person, to assume the defense thereof with counsel reasonably satisfactory to the Indemnified Person. Notwithstanding any provision hereof to the contrary, no consent order or settlement shall be entered into in any such claim or action unless both the Company and such Indemnified Person have given their prior written consent thereto; provided that such consent of the Company shall not be required if any Event of Default exists. (d) All obligations of the Company to indemnify or otherwise to make payments to the Agent, any Co-Agent or any Bank provided in this Agreement shall survive any termination of the Commitments and the repayment of the Loans. SECTION 9.04. Sharing of Set-Offs, Etc. Each Bank agrees that if it shall, by exercising any right of set-off or counterclaim or otherwise, receive payment of a proportion of the aggregate amount of principal and interest due with respect to any Note held by it which is greater than the proportion received by any other Bank in respect of the aggregate amount of principal and interest due with respect to any Note held by such other Bank, the Bank receiving such proportionately greater payment shall purchase such participations in the Notes held by the other Banks, and such other adjustments shall be made, as may be required so that all such payments of principal and interest with respect to the Notes held by the Banks shall be shared by the Banks pro rata; provided that nothing in this Section 9.04 shall impair the right of any Bank to exercise any right of set-off or counterclaim it may have and to apply the amount subject to such exercise to the payment of indebtedness of the Company other than its indebtedness under the Notes. The Company agrees, to the fullest extent it may effectively do so under applicable law, that any holder of a participation in a Note, whether or not acquired pursuant to the foregoing arrangements, may exercise rights of -61- 67 set-off or counterclaim and other rights with respect to such participation as fully as if such holder of a participation were a direct creditor of the Company in the amount of such participation. SECTION 9.05. Amendments and Waivers. Any provision of this Agreement or the Notes may be amended or waived, if, but only if, such amendment or waiver is in writing and is signed by the Company and the Required Banks (and, if the rights or duties of the Agent are affected thereby, by the Agent); provided that no such amendment or waiver shall, unless signed by all the Banks, (i) increase or decrease the Commitment of any Bank or subject any Bank to any additional obligation, (ii) reduce the principal of or rate of interest on any Loan or any fees hereunder, (iii) postpone the date fixed for any payment of principal of or interest on any Loan or any fees hereunder or for any reduction or termination of any Commitment, or (iv) change the percentage of the Commitments or of the aggregate unpaid principal amount of the Notes, or the number of Banks, which shall be required for the Banks or any of them to take any action under this Section 9.05 or any other provision of this Agreement. SECTION 9.06. Successors and Assigns. (a) The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, except that the Company may not assign or otherwise transfer any of its rights under this Agreement without the prior written consent of all Banks. (b) Any Bank may at any time and from time to time grant to one or more banks or other institutions (each a "Participant") participating interests in its Commitment or any or all of its Loans. In the event of any such grant by a Bank of a participating interest to a Participant, whether or not upon notice to the Company and the Agent, such Bank shall remain responsible for the performance of its obligations hereunder, and the Company and the Agent shall continue to deal solely and directly with such Bank in connection with such Bank's rights and obligations under this Agreement. Any agreement pursuant to which any Bank may grant such a participating interest shall provide that such Bank shall retain the sole right and responsibility to enforce the obligations of the Company hereunder including, without limitation, the right to approve any amendment, modification or waiver of any provision of this Agreement; provided that such participation agreement may provide that such Bank will not agree to any modification, amendment or waiver of this Agreement described in clause (i), (ii) or (iii) of Section 9.05 without the consent of the Participant. The Company agrees that each Participant shall, to the extent provided in its participation agreement, be entitled to the benefits of Article VIII with respect to its participating interest. An assignment or other transfer which is not permitted by subsection (c) or (d) below shall be given effect for purposes of this Agreement only to the extent of a participating interest granted in accordance with this subsection (b). -62- 68 (c) Any Bank may at any time assign to one or more banks or other institutions (each an "Assignee") a proportionate part of all of its rights and obligations under this Agreement and the Notes in an amount which equals $10,000,000 or more, and such Assignee shall assume such rights and obligations under this Agreement and the Notes, pursuant to an Assignment executed by such Assignee and such transferor Bank, with (and subject to) the subscribed consent of the Company and the Agent (which such consents shall not be unreasonably withheld); provided that if an Assignee is an affiliate of such transferor Bank or is another Bank, no such consent of the Company shall be required; provided, further, that each such assignment shall be of a constant, and not a varying, percentage of all rights and obligations under this Agreement and the Notes. Upon execution and delivery of such instrument (and delivery to the Agent of an Administrative Questionnaire with respect to such Assignee, if such Assignee has not already done so) and payment by such Assignee to such transferor Bank of an amount equal to the purchase price agreed between such transferor Bank and such Assignee, such Assignee shall be a Bank party to this Agreement and shall have all the rights and obligations of a Bank with a Commitment as set forth in such instrument of assumption, and the transferor Bank shall be released from its obligations hereunder to a corresponding extent, and no further consent or action by any party shall be required. Upon the consummation of any assignment pursuant to this subsection (c), the transferor Bank, the Agent and the Company shall make appropriate arrangements so that, if required, a new Note is issued to the Assignee. In connection with any such assignment, the transferor Bank shall pay to the Agent for its account an administrative fee in the amount of $2,500 for processing such assignment. If the Assignee is not incorporated under the laws of the United States of America or a state thereof, it shall, prior to the first date on which interest or fees are payable hereunder for its account, deliver to the Company and the Agent certification as to exemption from deduction or withholding of any United States federal income taxes in accordance with Section 2.17. (d) Any Bank may at any time assign all or any portion of its rights under this Agreement and its Note to a Federal Reserve Bank. No such assignment shall release the transferor Bank from its obligations hereunder. (e) No Assignee, Participant or other transferee of any Bank's rights shall be entitled to receive any greater payment under Section 8.03 than such Bank would have been entitled to receive with respect to the rights transferred, unless such transfer is made with the Company's prior written consent or by reason of the provisions of Section 8.02 or 8.03 requiring such Bank to designate a different Applicable Lending Office under certain circumstances or at a time when the circumstances giving rise to such greater payment did not exist. SECTION 9.07. Collateral. Each of the Banks represents to the Agent and each of the other Banks that it in good faith is not relying upon any margin stock (as -63- 69 defined in Regulation G) or any margin stock (as defined in Regulation U) as collateral in the extension or maintenance of the credit provided for in this Agreement. SECTION 9.08. Texas Law. This Agreement and each Note shall be construed in accordance with and governed by the law of the State of Texas. SECTION 9.09. CONSENT TO JURISDICTION. THE COMPANY HEREBY IRREVOCABLY CONSENTS TO THE NONEXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF TEXAS AND OF ANY FEDERAL COURT LOCATED IN SUCH STATE OVER IT IN CONNECTION WITH ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO ANY FINANCING DOCUMENT AND, TO THE FULLEST EXTENT PERMITTED BY LAW, FURTHER AGREES (AND SHALL NOT CONTEST) THAT THE PROPER VENUE FOR FILING AND MAINTAINING ANY SUCH ACTION OR PROCEEDING SHALL BE IN THE STATE OF TEXAS. IN ANY SUCH ACTION OR PROCEEDING, THE COMPANY WAIVES PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS OR NOTICE AND AGREES THAT SERVICE BY FIRST CLASS MAIL, RETURN RECEIPT REQUESTED, TO THE COMPANY AT ITS ADDRESS FOR NOTICES HEREUNDER, OR ANY FORM OF SERVICE PROVIDED FOR IN THE TEXAS CIVIL PRACTICE AND REMEDIES CODE THEN IN EFFECT SHALL CONSTITUTE GOOD AND SUFFICIENT SERVICE UPON THE COMPANY. SECTION 9.10. Counterparts. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. SECTION 9.11. WAIVER OF JURY TRIAL. THE COMPANY, THE AGENT, THE CO-AGENTS AND THE BANKS HEREBY IRREVOCABLY WAIVE 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. SECTION 9.12. COMPLETE AGREEMENT. THIS WRITTEN CREDIT AGREEMENT AND THE OTHER FINANCING DOCUMENTS REPRESENT THE FINAL AGREEMENT AMONG THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES. SECTION 9.13. Liability of Co-Agents. No Co-Agent, in its capacity as a Co-Agent hereunder, shall have any duty or responsibility hereunder. -64- 70 [THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.] -65- 71 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written. UNION TEXAS PETROLEUM HOLDINGS, INC. By /s/ M.N. MARKOWITZ ---------------------------------- M.N. Markowitz Vice President and Treasurer 1330 Post Oak Blvd. Houston, Texas 77056 Telex number: 762255 Commitments $40,000,000 NATIONSBANK OF TEXAS, N.A. By /s/ PAUL A. SQUIRES ---------------------------------- Paul A. Squires Senior Vice President $30,000,000 BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION By /s/ LAURA B. SHEPARD ---------------------------------- Laura B. Shepard Vice President By /s/ JOHN M. ROBINSON ---------------------------------- John M. Robinson Managing Director -66- 72 $30,000,000 UNION BANK OF SWITZERLAND, HOUSTON AGENCY By /s/ EVANS R. SWANN ---------------------------------- Evans R. Swann Managing Director By /s/ ALFRED IMHOLZ ---------------------------------- Alfred Imholz Managing Director Total Commitments: $100,000,000 ================================ NATIONSBANK OF TEXAS, N.A., as Agent By /s/ PAUL A. SQUIRES ---------------------------------- Paul A. Squires Senior Vice President 700 Louisiana Street, 8th Floor Houston, Texas 77002 Telex Number: 163244 Answerback: NCNBTEXDAL BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Co-Agent By /s/ LAURA B. SHEPARD ---------------------------------- Laura B. Shepard Vice President By /s/ JOHN M. ROBINSON ---------------------------------- John M. Robinson Managing Director -67- 73 UNION BANK OF SWITZERLAND, HOUSTON AGENCY, as Co-Agent By /s/ EVANS R. SWANN ---------------------------------- Evans R. Swann Managing Director By /s/ ALFRED IMHOLZ ---------------------------------- Alfred Imholz Managing Director -68- 74 SCHEDULE II EXISTING SUBSIDIARIES PART A EXISTING UNRESTRICTED SUBSIDIARIES JURISDICTION - ---------------------------------- ------------ Four Oaks Insurance, Ltd. Bermuda Unicon Producing Company [Partnership] Texas Union Texas I Corporation Delaware Union Texas Adriatic, Inc. Delaware Union Texas (Argentina) Ltd. Delaware Union Texas Asia Corporation Delaware Union Texas Barakan, Inc. Delaware Union Texas Brasil, Inc. Delaware Union Texas Britannia Limited England Union Texas Carthage, Inc. Delaware Union Texas Development Corporation Delaware Union Texas Egypt, Inc. Delaware Union Texas Espana, Inc. Delaware Union Texas Finance, Inc. Delaware Union Texas (Kai) Limited Bahamas Union Texas Maghreb, Inc. Delaware Union Texas Methane, Inc. Delaware Union Texas Metropole, S.A. France Union Texas PNG, Inc. Delaware Union Texas Petrochemicals Pipeline, Inc. Delaware Union Texas Petroleum Alaska Corporation Delaware Union Texas Petroleum Europe and Middle East, Inc. Delaware Union Texas Petroleum Services Corporation Delaware Union Texas (Rebi) Limited Bahamas Union Texas (South East Asia) Inc. Delaware Union Texas (Tanimbar) Limited Bahamas Union Texas Trading Corporation Delaware Union Texas (Transnational) Limited Bahamas Union Texas Tunisia, Inc. Delaware West Gemsa Petroleum Company Egypt 75 EXISTING UNIMAR UNRESTRICTED SUBSIDIARIES JURISDICTION - ----------------------------------------- ------------ AKI International Finance, N.V. Netherlands Antilles Alaska Interstate International Finance, B.V. Netherlands Alaska Interstate International Finance, N.V. Netherlands Antilles ENSTAR Petroleum, Ltd. Canada Purchasing Services, Inc. Delaware Unimar Financing Corporation Delaware VICO Services, Inc. Delaware VICO Trading, Inc. Delaware Virginia Services, Ltd. Delaware PART B EXISTING RESTRICTED SUBSIDIARIES - -------------------------------- Union Texas East Kalimantan Limited Bahamas Union Texas International Corporation Delaware Union Texas Pakistan, Inc. Delaware Union Texas Petroleum Energy Corporation Delaware Union Texas Petroleum Limited England Union Texas Products Corporation Delaware Unistar, Inc. Delaware OTHER RESTRICTED SUBSIDIARY - --------------------------- Unimar Company [Partnership] Texas EXISTING UNIMAR RESTRICTED SUBSIDIARIES - --------------------------------------- ENSTAR Corporation Delaware ENSTAR Indonesia, Inc. Delaware VICO 7.5, Inc. Delaware Virginia Indonesia Company Delaware Virginia International Company Delaware 76 SCHEDULE III CERTAIN EXISTING LIENS PART A: LIENS ON OWNERSHIP INTERESTS 1. Amended and Restated Agreement of General Partnership of Unimar Company ("Unimar"), dated as of September 11, 1990, between Unistar, Inc. ("Unistar") and LASMO (USTAR) Inc. ("USTAR," formerly Ultrastar, Inc.) (the "Unimar Partnership Agreement"): As security for the payment of all contributions to be made by each partner pursuant to the Unimar Partnership Agreement, each of Unistar and USTAR has created a security interest in its partnership interest in Unimar in favor of the other partner. 2. Articles of Association of Union Texas East Kalimantan Limited ("UTEK") dated October 26, 1983. As security for the debts, liabilities and engagements of each member solely or jointly with any other person to or with UTEK, UTEK has a first and paramount lien upon all the shares registered in the name of each member, which lien extends to all dividends from time to time declared in respect of such shares. 3. Articles of Association of Union Texas Petroleum Limited ("UTPL"). UTPL has a lien under English law that will attach to fully paid shares and to all shares registered in the name of any person indebted or under liability to UTPL. 77 SCHEDULE III CERTAIN EXISTING LIENS PART B: OTHER EXISTING LIENS
DOCUMENT AND LIEN AMOUNT OF DEBT AS ----------------- OF 3/31/95 ----------------- 1. Pledge Agreement dated as of September 25, 1984 by No set amount Virginia Indonesia Company in favor of Irving Trust Company (the "Pledge Agreement"), and the Indenture, dated as of September 25, 1984 between Unimar, as Issuer, and Irving Trust Company, as Trustee, providing for 14,077,747 Indonesian Participating Units (the "IPU Indenture"), as supplemented by the Supplemental Indenture dated as of October 31, 1986: As security for performance of the obligations of Unimar under the IPU Indenture, Section 2 of the Pledge Agreement sets forth a first lien and security interest granted by Virginia Indonesia Company (the "Pledgor") in all of the Pledgor's rights to receive payments from the Joint Venture Paying Agent pursuant to the Joint Venture Paying Agency Agreements, each as defined in the IPU Indenture, and in all proceeds therefrom. This lien and security interest only becomes effective upon the occurrence of certain events specified in the IPU Indenture. As of December 31, 1994, this lien and security interest is not effective.
78
DOCUMENT AND LIEN AMOUNT OF DEBT AS ----------------- OF 6/30/95 ------------------ 2. Deed of Floating Charge dated December 20, 1988 (the $5,728,000 "Deed of Floating Charge") by Union Texas Pakistan, Inc. ("UT Pakistan") in favor of the Overseas Private Investment Corporation ("OPIC"), in connection with the Finance Agreement dated as of December 20, 1988 between UT Pakistan and OPIC (the "OPIC Finance Agreement") and one or more Notes (the "Notes") issued pursuant to the Issuing and Paying Agency Agreement of even date: As security for the obligations of UT Pakistan under the OPIC Finance Agreement and the Notes, Section 2 of the Deed of Floating Charge sets forth a first floating charge in favor of OPIC in UT Pakistan's (i) 30% share as a working interest owner of all crude oil and natural gas produced or to be produced from the Dedicated Areas, as defined in the Deed of Floating Charge, and being in transit from the well head to the various points of delivery, (ii) 30% share as a working interest owner of all crude oil produced or to be produced from the Dedicated Areas, and being under storage in tank batteries in the Dedicated Areas, as defined in the Deed of Floating Charge, (iii) rights and benefits under certain sale agreements relating to the sale of crude oil or natural gas and (iv) accounts receivable under such sales agreements. OPIC's recourse is limited to the assets of UT Pakistan described in Section 8.2(b) of the OPIC Finance Agreement.
79 SCHEDULE IV CERTAIN EXISTING RESTRICTIONS 1. Finance Agreement dated as of December 20, 1988 between Union Texas Pakistan, Inc. ("UT Pakistan") and the Overseas Private Investment Corporation: a. Negative covenant of UT Pakistan set forth in Section 7.3 restricting, in the event of a default, payment of dividends, purchases of capital stock and payments to the Company on any intercorporate line of credit, among other restrictions. b. Negative covenant of UT Pakistan set forth in Section 7.5(e) restricting, among other things, certain loans, advances and guarantees of loans to persons other than the Company. 2. Amended and Restated Agreement of General Partnership of Unimar Company ("Unimar"), dated as of September 11, 1990 between Unistar, Inc. and LASMO (USTAR) Inc. (formerly Ultrastar, Inc.) (the "Unimar Partnership Agreement"): a. Restrictions resulting from provisions of Article IV regarding the management of Unimar and shareholder action of certain Unimar Restricted Subsidiaries. b. Restrictions resulting from provisions of Article X with respect to dissolution and liquidation of Unimar. 80 SCHEDULE V JOINT VENTURE DEBT AGREEMENTS 1. Producers Agreement No. 2 dated as of June 9, 1987 among Pertamina, Roy M. Huffington, Inc., Virginia International Company, Ultramar Indonesia Limited, Virginia Indonesia Company, Union Texas East Kalimantan Limited, Universe Tankships, Inc., and Huffington Corporation, as Producers, in favor of The Industrial Bank of Japan Trust Company ("IBJ Trust"), as Agent and Lender, and the other Lenders named therein, as amended by Amendment No. 1 to Producers Agreement No. 2, dated as of February 9, 1988 and Amendment No. 2 to Producers Agreement No. 2 dated as of May 31, 1988, each among the Producers, the Lenders named therein and IBJ Trust, as Agent, relating to the Bontang Capital Projects Loan Agreement No. 2 dated as of June 9, 1987 among Continental Bank International, as Trustee, and the other parties named therein. 2. Bontang III Producers Agreement dated as of February 9, 1988 among Pertamina, Roy M. Huffington, Inc., Huffington Corporation, Virginia International Company, Virginia Indonesia Company, Ultramar Indonesia Limited, Union Texas East Kalimantan Limited, Universe Tankships, Inc., Total Indonesie, Unocal Indonesia, Ltd. and Indonesia Petroleum, Ltd., as Producers, in favor of Train-E Finance Co., Ltd., as Tranche A Lender, the Banks named therein as Tranche B Lenders and IBJ Trust as Tranche B Lender and as Agent for such Tranche B Lenders, as amended by Amendment No. 1 dated as of May 31, 1988, relating to the Bontang III Loan Agreement dated as of February 9, 1988 among Continental Bank International, as Trustee, and the other parties named therein. 3. Bontang IV Producers Agreement dated as of August 26, 1991 among Pertamina, Virginia Indonesia Company, OPICOIL Houston, Inc., Virginia International Company, Ultramar Indonesia Limited, Union Texas East Kalimantan Limited, Universe Gas & Oil Company, Inc., Total Indonesie, Unocal Indonesia, Ltd., and Indonesia Petroleum, Ltd., as Producers, in favor of The Chase Manhattan Bank, N.A., as Lender and as Agent for the Lenders, and the other Lenders named therein, relating to the Bontang IV Loan Agreement dated as of August 26, 1991 among Continental Bank International, as Trustee, and the other parties named therein. 81 SCHEDULE VI OUTSTANDING OPTIONS 1. Preferential right of purchase, and right to reasonably nullify a proposed disposition, in favor of each of Unistar, Inc. ("Unistar") and LASMO (USTAR) Inc. ("USTAR," formerly Ultrastar, Inc.), set forth in Article VIII of the Amended and Restated Agreement of General Partnership of Unimar Company, dated as of September 11, 1990, between Unistar and USTAR (the "Unimar Partnership Agreement"). 2. Buy-sell option that may be invoked by either Unistar or USTAR in the event of irreconcilable differences or continued deadlocks, set forth in Article IX of the Unimar Partnership Agreement. 63 82 EXHIBIT A NOTE Houston, Texas _________, 199_ For value received, Union Texas Petroleum Holdings, Inc., a Delaware corporation (the "Company"), promises to pay to the order of__________________ ______________(the "Bank"), for the account of its Applicable Lending Office, the unpaid principal amount of each Loan owed to the Bank on June 15, 1997 or as otherwise required by the Credit Agreement. The Company promises to pay interest on the unpaid principal amount of each such Loan on the dates and at the rate or rates provided for in the Credit Agreement (including, without limitation, Section 2.16 thereof). All such payments of principal and interest shall be made in lawful money of the United States in Federal or other immediately available funds at the office of NationsBank of Texas, N.A., 700 Louisiana Street, Houston, Texas 77002. All Loans made by the Bank and the respective Types thereof and all repayments of the principal thereof shall be recorded by the Bank and, prior to any transfer hereof, appropriate notations to evidence the foregoing information with respect to each such Loan then outstanding shall be endorsed by the Bank on the schedule attached hereto, or on a continuation of such schedule attached to and made a part hereof; provided that the failure of the Bank to make any such recordation or endorsement shall not affect the obligations of the Company hereunder or under the Credit Agreement. This note is one of the Notes referred to in the Credit Agreement dated as of June 30, 1995 among the Company, the lenders and Co-Agents parties thereto and NationsBank of Texas, N.A., as Agent (as the same may be amended from time to time, the "Credit Agreement"). Terms not defined herein and defined in the Credit Agreement are used herein with the same meanings. Reference is made to the Credit Agreement for provisions for the prepayment hereof and the acceleration of the maturity hereof. This note shall be construed in accordance with and governed by the law of the State of Texas. UNION TEXAS PETROLEUM HOLDINGS, INC. By:___________________________________ M.N. Markowitz Vice President and Treasurer 83 Note (cont'd) LOANS AND PAYMENTS OF PRINCIPAL Amount of Amount of Type of Principal Date of Notation Date Loan Loan Repaid Payment Made By - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 84 EXHIBIT B SUBSIDIARY GUARANTY AGREEMENT SUBSIDIARY GUARANTY AGREEMENT dated as of June 30, 1995 (as may be amended or otherwise modified from time to time in accordance with the terms hereof, this "Agreement") among each of the Subsidiary Guarantors listed on the signature pages hereof under the caption "Subsidiary Guarantors" or which hereafter becomes a party hereto pursuant to Section 3.08(b) (collectively, the "Subsidiary Guarantors") and NationsBank of Texas, N.A., as agent for the banks under the Credit Agreement referred to below (the "Agent"). W I T N E S S E T H: WHEREAS, pursuant to the Credit Agreement dated as of June 30, 1995 among Union Texas Petroleum Holdings, Inc. (the direct or indirect parent of each of the Subsidiary Guarantors) (the "Company"), the Banks and Co-Agents parties thereto and the Agent (as may be amended or otherwise modified from time to time, the "Credit Agreement"), the Company is entitled, subject to certain conditions, to borrow up to $100,000,000 or such other amount as may be available pursuant thereto; WHEREAS, as a condition to borrowings under the Credit Agreement, each Required Guarantor is required to execute and deliver to the Agent this Agreement whereby such entity shall, subject to Section 2.08 hereof, guarantee the payment when due of the principal of and interest on all Loans and all other amounts payable at any time by any Obligor under any of the Financing Documents, including, without limitation, interest which accrues during a proceeding which occurs under the U.S. Bankruptcy Code or which would otherwise accrue under the terms of any of the Financing Documents, but for a proceeding under the U.S. Bankruptcy Code (such principal, interest and other amounts being herein called the "Guaranteed Amounts"); WHEREAS, in consideration of the financial and other support that the Company has provided, and such financial and other support as the Company may in the future provide, to the Subsidiary Guarantors and in order to induce the Banks to enter into the Credit Agreement and to consider requests to extend financial accommodations to the Company, the Subsidiary Guarantors are willing to guarantee, subject to Section 2.08 hereof, the Guaranteed Amounts; NOW, THEREFORE, the parties hereto agree as follows: 85 ARTICLE I DEFINITIONS SECTION 1.01. Definitions. Terms defined in the Credit Agreement and not otherwise defined herein are used herein as therein defined. ARTICLE II GUARANTEES SECTION 2.01. The Guarantees. Subject to Section 2.08, the Subsidiary Guarantors hereby jointly, severally, unconditionally and irrevocably guarantee to the Agent, for the ratable benefit of the Banks, the full and punctual payment of all present and future Guaranteed Amounts as and when the same shall become due and payable, whether at maturity, by declaration or otherwise, according to the terms thereof. In case of failure by the Company punctually to pay any Guaranteed Amount, the Subsidiary Guarantors hereby jointly, severally and unconditionally agree, forthwith upon demand by the Agent, to make payment thereof to the Agent at the place and in the manner specified in the Credit Agreement. SECTION 2.02. Guarantees Unconditional. Subject to Section 2.08, the obligations of each Subsidiary Guarantor under this Article II shall be unconditional and absolute and, without limiting the generality of the foregoing, shall not be released, discharged or otherwise affected by: (a) any extension, renewal, settlement, compromise, waiver or release in respect of any obligation of the Company or any other Subsidiary Guarantor under any Financing Document or any Guaranteed Amount; (b) any modification or amendment of or supplement to (i) this Agreement insofar as the same does not purport to modify the rights or obligations of such Subsidiary Guarantor hereunder or (ii) any other Financing Document; (c) any modification, amendment, waiver, release, non-perfection or invalidity of any direct or indirect security, or of any guarantee or other liability of any third party, for any obligation of the Company or any Subsidiary Guarantor under any Financing Document or any Guaranteed Amount; -2- 86 (d) any change in the corporate existence, structure or ownership of the Company or any Subsidiary, or any insolvency, bankruptcy, reorganization or other similar proceeding affecting the Company or any other Subsidiary or their respective assets; (e) the existence of any claim, set-off or other rights which any Subsidiary Guarantor may have at any time against the Company or any Subsidiary Guarantor, the Agent, any Bank or any other Person, whether or not arising in connection with any Financing Document or any Guaranteed Amount, provided that nothing herein shall prevent the assertion of any such claim by separate suit or compulsory counterclaim; (f) any invalidity or unenforceability relating to or against the Company or any Subsidiary Guarantor for any reason of any Financing Document or any Guaranteed Amount, or any provision of applicable law or regulation purporting to prohibit the payment by the Company or any Subsidiary Guarantor of any Guaranteed Amount; or (g) any other act or omission to act or delay of any kind by the Company or any Subsidiary Guarantor, the Agent, any Bank or any other Person or any other circumstances whatsoever that might, but for the provisions of this paragraph, constitute a legal or equitable discharge of the obligations of a Subsidiary Guarantor under this Article II. SECTION 2.03. Discharge; Reinstatement in Certain Circumstances. Subject to Section 2.08, each Subsidiary Guarantor's obligations under this Article II shall remain in full force and effect until all of the Commitments shall have been terminated in their entirety and the Guaranteed Amounts shall have been paid in full. If at any time any payment of or any amount payable by the Company or any Subsidiary Guarantor in respect of any Guaranteed Amount is rescinded or must be otherwise restored or returned upon the insolvency, bankruptcy or reorganization of such Person or otherwise, each Subsidiary Guarantor's obligations under this Article II with respect to such payment shall be reinstated at such time as though such payment had become due but had not been made at such time. SECTION 2.04. Waiver. Each Subsidiary Guarantor irrevocably waives acceptance hereof, presentment, demand, protest and any notice not provided for herein, as well as any requirement that at any time any action be taken by any Person against the Company or any other Subsidiary Guarantor or any other Person. Each Subsidiary Guarantor hereby irrevocably waives each and every right to which it may be entitled by virtue of the suretyship laws of the State of Texas, including, without limitation, any and all rights it may have pursuant to Rule 31 or Rule 32, Texas Rules of Civil Procedure, Section 17.001 of the Texas Civil Practice and Remedies Code and Chapter 34 of the Texas Business and Commerce Code. -3- 87 SECTION 2.05. Subrogation and Contribution. Each Subsidiary Guarantor irrevocably waives any and all rights to which it may be entitled, by operation of law or otherwise, upon making any payment hereunder (i) to be subrogated to the rights of the payee against the Company with respect to such payment or otherwise to be reimbursed, indemnified or exonerated by the Company in respect thereof or (ii) to receive any payment, in the nature of contribution or for any other reason, from any other Obligor with respect to such payment, in each case until such time as all of the Commitments shall have been terminated in their entirety and the Guaranteed Amounts shall have been paid in full. SECTION 2.06. Stay of Acceleration. If acceleration of the time for payment of any amount payable by the Company or any Subsidiary Guarantor in respect of any Guaranteed Amount is stayed upon the insolvency, bankruptcy or reorganization of such Person, all such amounts otherwise subject to acceleration under the terms of the Credit Agreement or any other agreement or instrument evidencing such Guaranteed Amount shall nonetheless be payable by each other Subsidiary Guarantor hereunder forthwith on demand by the Agent. SECTION 2.07. Representations and Warranties. Each Subsidiary Guarantor represents and warrants that as of the date hereof, and after giving effect to this Agreement and the contingent obligations evidenced hereby (including any limitation on the amount payable under this Agreement pursuant to Section 2.08), it is and will be solvent, and has and will have assets which, fairly valued, exceed its obligations, liabilities and debts, and has and will have property and assets sufficient to satisfy and repay its obligations, liabilities and debts when the same become due. SECTION 2.08. Limit of Liability. Each Subsidiary Guarantor shall be liable under this Agreement only for amounts aggregating up to the largest amount that would not render its obligations hereunder subject to avoidance under Section 548 of the United States Bankruptcy Code or any comparable provisions of any applicable state or foreign law. ARTICLE III MISCELLANEOUS SECTION 3.01. Notices. All notices, requests and other communications to any party hereunder shall be in writing (including telecopy, telex, facsimile transmission or similar writing) and (i) in the case of a Subsidiary Guarantor, shall be given to such Subsidiary Guarantor at c/o Union Texas Petroleum Holdings, Inc., 1330 Post Oak Boulevard, Houston, Texas 77056 (telex number: 762255) and (ii) in the case of the Company or the Agent, at its address or telex number set forth on the signature pages of the Credit Agreement or in any case at such other address or telex -4- 88 number as such party may hereafter specify for the purpose by notice to the Agent and the Company. Each such notice, request or other communication shall be effective (i) if given by telex, when such telex is transmitted to the telex number specified in this Section and the appropriate answer is received, (ii) if given by mail, 72 hours after such communication is deposited in the mails with first class postage prepaid, addressed as aforesaid or (iii) if given by any other means, when delivered at the address specified in this Section; provided that notices to the Agent shall not be effective until received. SECTION 3.02. No Waiver; Exercise of Remedies. No failure or delay by the Agent in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law. In exercising the rights and remedies herein provided, the Agent shall act at the instructions of the Required Banks or, failing such instruction, at its discretion. SECTION 3.03. Amendments and Waivers. Any provision of this Agreement may be amended or waived, and any Subsidiary Guarantor may be released from any of its obligations hereunder, if, and only if, such amendment, waiver or release is in writing and is signed by (i) each Subsidiary Guarantor affected thereby and (ii) the Agent with the consent of Banks at the time having at least 66-2/3% of the aggregate amount of the Commitments or, if the Commitments shall have been terminated, holding Notes evidencing at least 66-2/3% of the aggregate unpaid principal amount of the Loans; provided that any Subsidiary Guarantor shall be released from its obligations hereunder upon the terms set forth in Section 5.10 or Section 5.20 of the Credit Agreement. SECTION 3.04. Texas Law. This Agreement shall be construed in accordance with and governed by the law of the state of Texas. SECTION 3.05. CONSENT TO JURISDICTION AND SERVICE OF PROCESS. EACH SUBSIDIARY GUARANTOR HEREBY IRREVOCABLY CONSENTS TO THE NONEXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF TEXAS AND OF ANY FEDERAL COURT LOCATED IN SUCH STATE OVER EACH OF THEM IN CONNECTION WITH ANY ACTION, SUIT OR PROCEEDING ARISING OUT OF OR RELATING TO ANY FINANCING DOCUMENT AND, TO THE FULLEST EXTENT PERMITTED BY LAW, FURTHER AGREES (AND SHALL NOT CONTEST) THAT THE PROPER VENUE FOR FILING AND MAINTAINING ANY SUCH ACTION, SUIT OR PROCEEDING SHALL BE IN THE STATE OF TEXAS. IN ANY SUCH ACTION, SUIT OR PROCEEDING, EACH SUBSIDIARY GUARANTOR WAIVES PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS OR NOTICE AND AGREES THAT SERVICE BY FIRST CLASS MAIL, RETURN RECEIPT REQUESTED, TO SUCH SUBSIDIARY -5- 89 GUARANTOR AT ITS ADDRESS FOR NOTICES HEREUNDER, OR ANY FORM OF SERVICE PROVIDED FOR IN THE TEXAS CIVIL PRACTICE AND REMEDIES CODE THEN IN EFFECT SHALL CONSTITUTE GOOD AND SUFFICIENT SERVICE UPON SUCH SUBSIDIARY GUARANTOR. EACH SUBSIDIARY GUARANTOR THAT IS NOT ORGANIZED UNDER THE LAWS OF THE UNITED STATES OR A STATE THEREOF (EACH A "NON-U.S. GUARANTOR") HEREBY APPOINTS THE PRINCIPAL OFFICE OF CT CORPORATION SYSTEM IN HOUSTON, TEXAS, WHICH, ON THE DATE HEREOF, IS LOCATED AT 911 DALLAS ST., HOUSTON, TEXAS 77002, AS THE AUTHORIZED AGENT THEREOF (THE "AUTHORIZED AGENT") UPON WHOM PROCESS MAY BE SERVED IN ANY SUCH ACTION, SUIT OR PROCEEDING WHICH MAY BE INSTITUTED IN THE STATE OF TEXAS. SUCH APPOINTMENT SHALL BE IRREVOCABLE UNLESS AND UNTIL THE APPOINTMENT OF A SUCCESSOR AUTHORIZED AGENT FOR SUCH PURPOSE, AND SUCH SUCCESSOR'S ACCEPTANCE OF SUCH APPOINTMENT, SHALL HAVE OCCURRED AND THE AGENT SHALL HAVE BEEN NOTIFIED THEREOF. EACH NON-U.S. GUARANTOR AGREES TO TAKE ANY AND ALL ACTIONS, INCLUDING, WITHOUT LIMITATION, THE FILING OF ANY AND ALL DOCUMENTS AND INSTRUMENTS, THAT MAY BE NECESSARY TO CONTINUE SUCH APPOINTMENT IN FULL FORCE AND EFFECT AS AFORESAID. SERVICE OF PROCESS UPON THE AUTHORIZED AGENT WITH RESPECT TO ANY SUCH ACTION, SUIT OR PROCEEDING SHALL BE DEEMED, IN EVERY RESPECT, EFFECTIVE SERVICE OF PROCESS UPON ANY SUCH NON-U.S. GUARANTOR. EACH NON-U.S. GUARANTOR SHALL REQUIRE THE AUTHORIZED AGENT TO AGREE IN WRITING TO ACCEPT THE FOREGOING APPOINTMENT AS AGENT FOR SERVICE OF PROCESS. SECTION 3.06. WAIVER OF JURY TRIAL. EACH SUBSIDIARY GUARANTOR 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. SECTION 3.07. WAIVER OF SOVEREIGN IMMUNITY. TO THE EXTENT THAT ANY SUBSIDIARY GUARANTOR HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY COURT OR FROM ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION, EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, SUCH SUBSIDIARY GUARANTOR HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY LEGALLY DO SO, SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THIS AGREEMENT AND, WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, -6- 90 AGREES, TO THE FULLEST EXTENT IT MAY LEGALLY DO SO, THAT THE WAIVERS SET FORTH IN THIS SECTION 3.07 SHALL HAVE THE FULLEST SCOPE PERMITTED UNDER THE FOREIGN SOVEREIGN IMMUNITIES ACT OF 1976 OF THE UNITED STATES AND ARE INTENDED TO BE IRREVOCABLE FOR PURPOSES OF SUCH ACT. SECTION 3.08. Successors and Assigns. (a) All of the provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, except that no Subsidiary Guarantor may assign or transfer any of its rights or obligations under this Agreement. (b) Any Subsidiary may become a party hereto and a Subsidiary Guarantor hereunder, without any further action by any other party, by executing and delivering a counterpart hereof to the Agent. SECTION 3.09. Counterparts. This Agreement may be signed in any number of counterparts, each of which shall be an original, and all of which taken together shall constitute a single instrument, with the same effect as if the signatures thereto and hereto were upon the same instrument. SECTION 3.10. Judgment Currency. Each Non-U.S. Guarantor agrees to indemnify the Agent and each Bank against any loss incurred by it as a result of any judgment or order being given or made and expressed and paid in a currency (the "Judgment Currency") other than United States dollars and as a result of any variation as between (i) the rate of exchange at which the United States dollar amount is converted into the Judgment Currency for the purpose of such judgment or order and (ii) the spot rate of exchange in The City of New York at which the Agent or such Bank on the date of payment of such judgment or order is able to purchase United States dollars with the amount of the Judgment Currency actually received by the Agent or such Bank. The foregoing indemnity shall constitute a separate and independent obligation of each Non-U.S. Guarantor and shall continue in full force and effect notwithstanding any such judgment or order as aforesaid. The term "spot rate of exchange" shall include any premiums and costs of exchange payable in connection with the purchase of, or conversion into, United States dollars. SECTION 3.11. Existence. Each Subsidiary Guarantor agrees to maintain its existence except as permitted by Section 5.02 of the Credit Agreement. SECTION 3.12. Taxes. (a) Any and all payments by any Subsidiary Guarantor hereunder shall be made free and clear of and without deduction for any and all present or future taxes, levies, imposts, deductions, charges and withholdings, and all liabilities with respect thereto, excluding (i) in the case of the Agent, each Co-Agent -7- 91 and each Bank, United States federal income taxes and, without duplication, any taxes imposed on its income, and franchise taxes imposed on it, by the jurisdiction under the laws of which the Agent, such Co-Agent or such Bank, as the case may be, is organized or any political subdivision thereof and (ii) in the case of each Bank, taxes imposed on its income, and franchise taxes imposed on it, by the jurisdiction of such Bank's Applicable Lending Office or any political subdivision thereof (all such non-excluded taxes, levies, imposts, deductions, charges, withholdings and liabilities being hereinafter referred to as "Taxes"). If any Subsidiary Guarantor shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder to any Bank, any Co-Agent or the Agent, (i) the sum payable shall be increased as may be necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 3.12) such Bank, such Co-Agent or the Agent (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made, (ii) such Subsidiary Guarantor shall make such deductions and (iii) such Subsidiary Guarantor shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law. (b) Each Subsidiary Guarantor will indemnify each Bank, each Co-Agent and the Agent for the full amount of Taxes (including, without limitation, any Taxes imposed by any jurisdiction on amounts payable under this Section 3.12) paid by such Bank, such Co-Agent or the Agent (as the case may be) and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto, whether or not such Taxes were correctly or legally asserted. Payments under any indemnification provided for in this Section 3.12(b) shall be made within 30 days from the date such Bank, such Co-Agent or the Agent (as the case may be) makes written demand therefor. (c) Within 30 days after the date of any payment of Taxes by a Subsidiary Guarantor, such Subsidiary Guarantor will furnish to the Agent, at its address referred to in Section 9.01 of the Credit Agreement, the original or a certified copy of a receipt evidencing payment thereof. Should any Bank, any Co-Agent or the Agent ever receive any refund, credit or deduction from any taxing authority to which such Bank, such Co-Agent or the Agent, as the case may be, would not be entitled but for the payment by a Subsidiary Guarantor of Taxes as required by this Section 3.12 (it being understood that the decision as to whether or not to claim, and if claimed, as to the amount of any such refund, credit or deduction shall be made by such Bank, such Co-Agent or the Agent, as the case may be, in its sole discretion), such Bank, such Co-Agent or the Agent, as the case may be, thereupon shall repay to such Subsidiary Guarantor an amount with respect to such refund, credit or deduction equal to any net reduction in taxes actually obtained by such Bank, such Co-Agent or the Agent, as the case may be, and reasonably determined by such Bank, such Co-Agent or the Agent, as the case may be, to be attributable to such refund, credit or deduction. -8- 92 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the date first above written. SUBSIDIARY GUARANTORS: UNION TEXAS PETROLEUM ENERGY UNION TEXAS EAST KALIMANTAN CORPORATION LIMITED By:_________________________ By:_________________________ M.N. Markowitz M.N. Markowitz Treasurer Treasurer UNION TEXAS PRODUCTS UNION TEXAS INTERNATIONAL CORPORATION CORPORATION By:_________________________ By:_________________________ M.N. Markowitz M.N. Markowitz Treasurer Treasurer UNISTAR, INC. By:_________________________ M.N. Markowitz Vice President AGENT: NATIONSBANK OF TEXAS, N.A., as Agent By:_________________________ Paul A. Squires Senior Vice President -9- 93 EXHIBIT C OPINION OF GENERAL COUNSEL June 30, 1995 To the Banks and the Agent Referred to Below c/o NationsBank of Texas, N.A., as Agent 700 Louisiana Street Houston, Texas 77002 Dear Sirs: I am General Counsel, Vice President-Administration, and Secretary of Union Texas Petroleum Holdings, Inc., a Delaware corporation (the "Company"), and have acted as counsel for the Company in connection with the Credit Agreement dated as of June 30, 1995 (the "Credit Agreement") among the Company, the Banks and Co-Agents listed on the signature pages thereof and NationsBank of Texas, N.A., as Agent (the "Agent"), and for Union Texas Petroleum Energy Corporation, a Delaware corporation, Union Texas International Corporation, a Delaware corporation, Unistar, Inc., a Delaware corporation, Union Texas East Kalimantan Limited, a Bahamian corporation, and Union Texas Products Corporation, a Delaware corporation (collectively, the "Subsidiary Guarantors" and together with the Company, the "Obligors"), in connection with the Subsidiary Guaranty Agreement dated as of June 30, 1995 (the "Subsidiary Guaranty Agreement") among the Subsidiary Guarantors and the Agent. Terms defined in the Credit Agreement and not otherwise defined herein are used herein as therein defined. In connection with the opinions expressed below, I have examined or caused to be examined executed counterparts of the following (collectively, the "Financing Documents"): (a) the Credit Agreement, (b) the Subsidiary Guaranty Agreement, and (c) three (3) promissory notes, each substantially in the form of Exhibit A to the Credit Agreement, one payable to each Bank. I have also examined or caused to be examined originals or copies, certified or otherwise identified to my satisfaction, of such other instruments, documents 94 To the Banks and the Agent Referred to Below c/o NationsBank of Texas, N.A., as Agent June 30, 1995 Page 2 and records as I deemed necessary to express the opinions hereinafter set forth. To the extent relevant to my opinion, I have assumed, without independent verification, (i) the due execution and delivery of each Financing Document by each party thereto (other than the Obligors), (ii) the genuineness of all signatures on all documents submitted to me, (iii) that each party (other than the Obligors) to each of the Financing Documents is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization and has full power and authority to enter into and to carry out its obligations under such Financing Documents, (iv) that the execution and delivery of each of the Financing Documents by each party thereto (other than the Obligors) and the performance of its obligations under such Financing Documents have been duly authorized by all necessary proceedings and actions, (v) that each of the Financing Documents is the legal, valid and binding obligation of each party thereto (other than the Obligors), enforceable against such party in accordance with the terms of such Financing Documents, subject to limitations of the types described in the opinion of Andrews & Kurth L.L.P. delivered to you pursuant to the Financing Documents, and (vi) the authenticity of all documents submitted to me as originals and the conformity to authentic original documents of all documents submitted to me as certified, conformed or photostatic copies. I have relied, to the extent that I deem such reliance proper, upon certificates of officers of one or more of the Obligors and of governmental officials as to matters of fact not independently established by me. For purposes of the opinion set forth in paragraph 2 below, I have (i) relied on the opinion of Andrews & Kurth L.L.P. with respect to the agreements and instruments identified on Schedule I thereto, and (ii) examined or caused to be examined each other agreement or other instrument binding upon any Obligor, a breach of or default under which would, in my judgment, have a material adverse effect upon the Company and its Subsidiaries taken as a whole. As to other agreements and instruments, I have not undertaken such a review for purposes of this opinion, given the volume of such documents and given the fact that by virtue of the character of such documents and the historical practices of the Company with respect thereto, I have no reason to believe that a breach of or default under any such document would arise by virtue of the execution, delivery and performance of the Financing Documents. Based on the foregoing and subject to the qualifications and limitations set forth below, I am of the opinion that: 95 To the Banks and the Agent Referred to Below c/o NationsBank of Texas, N.A., as Agent June 30, 1995 Page 3 1. Each of the Obligors has all material governmental licenses, authorizations, consents and approvals required to own its assets and to carry on its business as now conducted. 2. To the best of my knowledge, the execution, delivery and performance by each Obligor of each Financing Document to which it is a party do not constitute a breach of or default under, or result in the creation or imposition of any Lien on any material asset of the Company or any Subsidiary under, any provision of any instrument or agreement evidencing or governing Debt binding upon such Obligor or any other material agreement, judgment, injunction, order, decree or other instrument binding upon such Obligor. 3. To the best of my knowledge, there is no action, suit or proceeding pending against, threatened against or affecting the Company or any of its Subsidiaries or any of their respective properties or interests, at law or in admiralty or equity, before any court or arbitrator or any governmental body, agency or official, foreign or domestic, in which there is a reasonable possibility of an adverse decision which could materially adversely affect the business, financial position or results of operations of the Company and its Subsidiaries, taken as a whole, or which in any manner draws into question the validity of any Financing Document. My opinions in paragraph 1 are rendered only with respect to the constitutions, laws, rules and regulations which are currently in effect and applicable court rulings and orders which have been published and are generally available. In addition, the foregoing opinions are rendered only as of the date hereof, and I disclaim any obligation to advise you of changes thereafter. I am a member of the bar of the State of Texas only, and this opinion is limited in all respects to the laws of the State of Texas, the General Corporation Law of Delaware and federal law of the United States of America, and, to the limited extent described below, the laws of The Commonwealth of The Bahamas and The Republic of Indonesia. In rendering certain of the opinions expressed above, I have relied, with your approval, upon an opinion, dated the date hereof, of Andrews & Kurth L.L.P., a copy of which has been furnished to you. My opinion in paragraph 1 addresses, with respect to Union Texas East Kalimantan Limited, the laws of The Commonwealth of The Bahamas and The Republic of Indonesia, and such opinion with respect to such laws is, with your permission and without independent investigation, given solely in reliance upon and limited in scope to the opinions of Graham, Thompson & Co. and Mochtar, Karuwin 96 To the Banks and the Agent Referred to Below c/o NationsBank of Texas, N.A., as Agent June 30, 1995 Page 4 & Komar, respectively, dated April 24, 1995 (the "Foreign Opinions") addressed to each of you as "Banks" under the Credit Agreement dated as of April 24, 1995 among the Company, the banks and co-agents listed on the signature pages thereof and NationsBank of Texas, N.A., as agent, copies of which Foreign Opinions have been furnished to you, and my opinion incorporates by reference all qualifications, exceptions and limitations set forth therein. As you know, neither Graham, Thompson & Co. nor Mochtar, Karuwin & Komar have reviewed the Financing Documents, nor have they updated their respective opinions since April 24, 1995. I have assumed, with your permission and without independent investigation, that the Foreign Opinions are true and correct as of the date hereof as if such opinions were published on the date hereof and the Financing Documents were the "Financing Documents" referred to therein. This opinion is for the benefit of and may be relied upon by the Banks, the Agent, the Co-Agents, their respective successors and assigns, their respective counsel and Participants in connection with the transactions contemplated by the Credit Agreement. Otherwise, this opinion may not be used, published, circulated or relied upon by any other Person for any purpose without my prior written consent. Very truly yours, Newton W. Wilson, III 97 EXHIBIT D OPINION OF ANDREWS & KURTH L.L.P. June 30, 1995 To the Banks and the Agent Referred to Below c/o NationsBank of Texas, N.A., as Agent 700 Louisiana Street Houston, Texas 77002 Dear Sirs: We have acted as special counsel to Union Texas Petroleum Holdings, Inc., a Delaware corporation (the "Company"), in connection with the Credit Agreement dated as of June 30, 1995 (the "Credit Agreement") among the Company, the Banks and Co-Agents listed on the signature pages thereof and NationsBank of Texas, N.A., as Agent (the "Agent"), and to Union Texas Petroleum Energy Corporation, a Delaware corporation, Union Texas International Corporation, a Delaware corporation, Unistar, Inc., a Delaware corporation, Union Texas East Kalimantan Limited, a Bahamian corporation, and Union Texas Products Corporation, a Delaware corporation (collectively, the "Subsidiary Guarantors" and together with the Company, the "Obligors"), in connection with the Subsidiary Guaranty Agreement dated as of June 30, 1995 (the "Subsidiary Guaranty Agreement") among the Subsidiary Guarantors and the Agent. Terms defined in the Credit Agreement and not otherwise defined herein are used herein as therein defined. In connection with the opinions expressed below, we have examined executed counterparts of the following (collectively, the "Financing Documents"): (a) the Credit Agreement, (b) the Subsidiary Guaranty Agreement, and (c) three (3) promissory notes, each substantially in the form of Exhibit A to the Credit Agreement, one payable to each Bank (collectively, the "Notes"). We have also examined originals or copies, certified or otherwise identified to our satisfaction, of such other instruments, documents and records as we deemed necessary to express the opinions hereinafter set forth. To the extent relevant 98 To the Banks and the Agent Referred to Below c/o NationsBank of Texas, N.A. as Agent June 30, 1995 Page 2 to our opinion, we have assumed, without independent verification, (i) the due execution and delivery of each Financing Document by each party thereto (other than the Obligors), (ii) the genuineness of all signatures on all documents submitted to us, (iii) that each party (other than the Obligors) to each of the Financing Documents is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization and has full power and authority to enter into and to carry out its obligations under such Financing Documents, (iv) that the execution and delivery of each of the Financing Documents by each party thereto (other than the Obligors) and the performance of its obligations under such Financing Documents have been duly authorized by all necessary proceedings and actions, (v) that each of the Financing Documents is the legal, valid and binding obligation of each party thereto (other than the Obligors) enforceable against such party in accordance with the terms of such Financing Documents, subject to limitations of the types described herein, and (vi) the authenticity of all documents submitted to us as originals and the conformity to authentic original documents of all documents submitted to us as certified, conformed or photostatic copies. We have relied, to the extent that we deem such reliance proper, upon certificates of officers of one or more of the Obligors and of governmental officials as to matters of fact not independently established by us. We have also examined the representations and warranties of the Company contained in the Credit Agreement and have relied, to the extent we deem such reliance proper, upon the relevant facts stated therein. Based on the foregoing and subject to the qualifications and limitations set forth below, we are of the opinion that: 1. (a) Each of the Obligors is a corporation duly incorporated, validly existing and in good standing under the laws of its jurisdiction of incorporation, and has all corporate power and authority required to own its assets and to carry on its business as now conducted. (b) The execution, delivery and performance by each Obligor of each Financing Document to which it is a party will not violate the Public Utility Holding Company Act of 1935, the Investment Company Act of 1940 or the Interstate Commerce Act. 2. The execution, delivery and performance by each Obligor of each Financing Document to which it is a party are within such Obligor's corporate powers, have been duly authorized by all necessary corporate action, and do not constitute a 99 To the Banks and the Agent Referred to Below c/o NationsBank of Texas, N.A. as Agent June 30, 1995 Page 3 breach or default under, any provision of applicable law or regulation known to us after reasonable inquiry or the certificate of incorporation or bylaws of such Obligor. 3. To the best of our knowledge, the execution, delivery and performance by each Obligor of each Financing Document to which it is a party do not constitute a breach of or default under, or result in the creation or imposition of any Lien on any material asset of the Company or any Subsidiary under, any provision of the instruments and agreements identified in Schedule I hereto. 4. No authorization, consent or approval of any governmental body, agency or official is required in connection with the execution, delivery or performance by any Obligor of any of the Financing Documents to which it is a party. 5. (a) The Credit Agreement and the Notes have been duly executed and delivered by the Company, and constitute legal, valid and binding obligations of the Company, enforceable against the Company in accordance with their respective terms. (b) The Subsidiary Guaranty Agreement has been duly executed and delivered by each of the Subsidiary Guarantors, and constitutes a legal, valid and binding obligation of each of the Subsidiary Guarantors, enforceable against each of the Subsidiary Guarantors in accordance with its terms. 6. If all material facts (as we understand them) and issues of law were presented and properly argued, a Texas court or a federal court sitting in the State of Texas and applying the laws of the State of Texas should hold that the consent by the Company in Section 9.09 of the Credit Agreement, and by each Subsidiary Guarantor in Section 3.05 of the Subsidiary Guaranty Agreement, to the non-exclusive personal jurisdiction of the courts of the State of Texas and of any federal court located in the State of Texas is valid. In this regard we call to your attention that such consents to non-exclusive jurisdiction are not effective to (1) confer subject matter jurisdiction that does not otherwise exist in such court or (2) establish diversity jurisdiction that does not otherwise exist in an action brought in federal court. 7. Neither the execution, delivery and performance by any Obligor of the Financing Documents to which it is a party, nor the use of the proceeds of the Loans in accordance with Section 5.09 of the Credit Agreement, will violate the 100 To the Banks and the Agent Referred to Below c/o NationsBank of Texas, N.A. as Agent June 30, 1995 Page 4 provisions of Regulations G, T, U or X of the Board of Governors of the Federal Reserve System. The opinions set forth above are subject to the following additional assumptions, limitations and qualifications: (a) Our opinions with respect to the enforceability of the Financing Documents are subject to the qualification that such enforceability may be (i) limited by applicable bankruptcy, insolvency, reorganization, fraudulent transfer, moratorium or similar laws affecting the rights of creditors generally, (ii) subject to general principles of equity (regardless of whether such enforceability is considered in a proceeding at law or in equity), including, without limitation, concepts of materiality, reasonableness, good faith and fair dealing, and (iii) limited by the power of a court to award damages in lieu of equitable remedies (including specific performance or injunctive relief) or otherwise to refuse to grant a particular remedy sought by the parties to the Financing Documents. (b) We express no opinion herein as to (1) the right of any Bank to set-off against funds held in any special account maintained by the Company with such Bank or which are otherwise subject to special agreement between the Company and such Bank; (2) whether the provisions of the Credit Agreement which permit the Agent, the Co-Agents or any Bank to take action or make determinations may be subject to a requirement that such action be taken or such determination be made in good faith; (3) whether the holder of a Note may, under certain circumstances, be called upon to prove the outstanding principal amount of the loans evidenced thereby; (4) the effect of the law of any jurisdiction (other than Texas) wherein any Bank may be located which limits rates of interest which may be charged or collected by such Bank; and (5) the enforceability of any provision in the Financing Documents that purports to (i) require indemnification for the negligence or wilful misconduct of the indemnitee or to otherwise require any Obligor to provide indemnification to the extent the same may be in conflict with public policy, (ii) limit the effect of any delay or omission of enforcement of rights or remedies or any course of performance or course of dealing between the parties, (iii) create an agreement to agree, (iv) fix evidentiary standards or venue of any proceeding, (v) waive rights to a trial by jury, or (vi) waive rights to notices, legal defenses or other benefits that cannot, as a matter of law, be effectively waived. (c) Whenever this opinion states the existence or absence of any fact either to the best of our knowledge or known to us, such statement is intended to convey that, during the course of our representation of the Obligors with respect to matters 101 To the Banks and the Agent Referred to Below c/o NationsBank of Texas, N.A. as Agent June 30, 1995 Page 5 addressed herein, no information has come to our attention which has given us actual knowledge of facts contrary to the statements so expressed herein. (d) In rendering our opinions in paragraph 1 we have relied upon the description of the properties, assets and businesses of the Obligors set forth in the Report on Form 10-K for the year ended December 31, 1994, and on Form 10-Q for the three months ended on March 31, 1995, filed by the Company with the Securities and Exchange Commission. (e) In rendering the opinions in paragraphs 2 and 5, we have assumed that (i) there are no fees, points, premiums or other sums contracted for, charged to or paid or to be paid by the Company to the Banks on account of the transactions described in the Credit Agreement other than those described in the Credit Agreement and those described in the letters of even date herewith from the Agent to the Company and (ii) the parties to the Financing Documents will comply strictly with the precise terms of the Financing Documents, including, without limitation, the usury savings clauses set forth therein with respect to any consideration contemplated by the Financing Documents that will constitute interest under Texas law. (f) In rendering our opinions in paragraph 7 we have assumed that the representations of the Company and the Banks set forth in Sections 4.12 and 9.07, respectively, of the Credit Agreement will be true and correct at all times. (g) The foregoing opinions are rendered only with respect to the constitutions, laws, rules and regulations which are currently in effect and applicable court rulings and orders which have been published and are generally available. In addition, the foregoing opinions are rendered only as of the date hereof, and we disclaim any obligation to advise you of changes thereafter. (h) Insofar as our opinion relates to the laws of The Commonwealth of The Bahamas and The Republic of Indonesia it is, with your permission and without independent investigation, and subject to the other qualifications set forth in this paragraph (h), given solely in reliance upon and limited in scope to the opinions of Graham, Thompson & Co. and Mochtar, Karuwin & Komar, respectively, dated April 24, 1995 (the "Foreign Opinions") addressed to each of you as "Banks" under the Credit Agreement dated as of April 24, 1995 among the Company, the banks and co-agents listed on the signature pages thereof and NationsBank of Texas, N.A., as agent, copies of which Foreign Opinions have been furnished to each of you, and our opinion 102 To the Banks and the Agent Referred to Below c/o NationsBank of Texas, N.A. as Agent June 30, 1995 Page 6 incorporates by reference all qualifications, exceptions and limitations set forth therein. As you know, neither Graham, Thompson & Co. nor Mochtar, Karuwin & Komar have reviewed the Financing Documents, nor have they updated their respective opinions since April 24, 1995. We have assumed, with your permission and without independent investigation, that the Foreign Opinions are true and correct as of the date hereof as if such opinions were published on the date hereof and the Financing Documents were the "Financing Documents" referred to therein. This opinion is limited in all respects to the laws of the State of Texas, the General Corporation Law of Delaware and federal law of the United States of America, and, to the limited extent described in paragraph (h) above, the laws of The Commonwealth of The Bahamas and The Republic of Indonesia. This opinion is for the benefit of and may be relied upon by the Banks, the Agent, the Co-Agents, their respective successors and assigns, their respective counsel and Participants in connection with the transactions contemplated by the Credit Agreement and may be relied upon by Newton W. Wilson, III, General Counsel of the Company, in rendering his opinion to the Banks and the Agent in connection with such transactions. Otherwise, this opinion may not be used, published, circulated or relied upon by any other Person for any purpose without our prior written consent. Very truly yours, ANDREWS & KURTH L.L.P. 103 SCHEDULE I I. UNION TEXAS PETROLEUM HOLDINGS, INC. ("UTPH") A. Indenture dated as of November 15, 1992 between UTPH, the guarantors named therein, and State Street Bank and Trust Company, as trustee, relating to the $100,000,000 8.25% Senior Notes due November 15, 1999 issued by UTPH. B. Indenture dated as of March 15, 1995 between UTPH, the guarantors named therein, and The First National Bank of Chicago, as trustee, relating to the $125,000,000 8 3/8% Senior Notes due 2005 issued by UTPH and the $75,000,000 8 1/2% Senior Notes due 2007 issued by UTPH. C. $450,000,000 Amended and Restated Credit Agreement dated as of May 13, 1994 among UTPH, the Banks and Co-Agents listed on the signature pages thereof and NationsBank of Texas, N.A., as Agent, as amended by the First Amendment Agreement dated as of November 21, 1994, the Second Amendment Agreement dated as of January 31, 1995, the Third Amendment Agreement dated as of April 24, 1995, and the Fourth Amendment Agreement dated as of June 16, 1995. D. $100,000,000 Credit Agreement dated as of April 24, 1995 among UTPH, the Banks and Co-Agents listed on the signature pages thereof and NationsBank of Texas, N.A., as Agent, as amended by the First Amendment Agreement dated as of June 16, 1995. E. $100,000,000.00 Credit Agreement dated as of June 30, 1995 among UTPH, the Banks and Co-Agents listed therein and NationsBank of Texas, N.A., as Agent. II. UNION TEXAS PAKISTAN, INC. ("UT PAKISTAN") A. Finance Agreement dated as of December 20, 1988 between UT Pakistan and Overseas Private Investment Corporation ("OPIC"). B. Issuing and Paying Agency Agreement dated as of December 20, 1988 among First Trust New York National Association (as successor to Morgan Guaranty Trust Company of New York), as issuing and paying agent, OPIC, and UT Pakistan, relating to the Promissory Note dated December 20, 1988 issued by UT Pakistan to Liberty U.S. Government Money Market Trust in the original principal amount of US$21,250,000. C. Guaranty Agreement dated as of December 20, 1988 between UTPH and OPIC. D. Deed of Floating Charge dated December 20, 1988 by UT Pakistan in favor of OPIC. III. UNISTAR, INC. ("UNISTAR") AND UNIMAR COMPANY ("UNIMAR") A. Amended and Restated Agreement of General Partnership of Unimar entered into as of September 11, 1990. 104 B. Indenture dated as of September 25, 1984 between Unimar and Irving Trust Company, as trustee, relating to 14,077,747 Indonesian Participating Units, as supplemented by the First Supplemental Indenture dated as of October 31, 1986 between such parties. C. Shareholders Agreement dated as of September 11, 1990 among UTPH, Unistar, Ultramar America Limited, Ultramar Indonesia Limited and Ultrastar, Inc. D. Second Shareholders Agreement dated as of August 26, 1993 among UTPH, Unistar, LASMO America Limited, LASMO Sanga Sanga Limited and LASMO (USTAR) Inc. (formerly Ultrastar, Inc.) IV. UNION TEXAS EAST KALIMANTAN LIMITED ("UTEK") A. Production Sharing Contract and related Agreements. 1. Amended and Restated Production Sharing Contract dated April 23, 1990, but effective as of August 8, 1968 among Perusahaan Pertambangan Minyak Dan Gas Bumi Negara ("Pertamina"), and Roy M. Huffington, Inc., Virginia Indonesia Company, Virginia International Company, Ultramar Indonesia Limited, Union Texas East Kalimantan Limited, Universe Gas & Oil Company, Inc. and Huffington Corporation (all such parties and their predecessors and successors in interest are herein collectively referred to as the "IJV Contractors"), and Production Sharing Contract dated April 23, 1990, but effective as of August 8, 1998 among Pertamina and the IJV Contractors. 2. Joint Venture Agreement effective as of August 8, 1968 by and between Roy M. Huffington, Inc., Virginia International Company, Austral Petroleum Gas Corporation, Golden Eagle Indonesia Limited and Union Texas Far East Corporation, as amended by a Settlement Agreement dated as of January 16, 1976 among these parties and Universe Tankships, Inc., an Agreement dated as of October 1, 1979 among Roy M. Huffington, Inc., Virginia International Company, Austral Petroleum Gas Corporation, Golden Eagle Indonesia Limited, Universe Tankships, Inc. and Union Texas Far East Corporation and a Letter dated October 1, 1979 from Roy M. Huffington, Inc. to Virginia International Company, Austral Petroleum Gas Corporation, Golden Eagle Indonesia Limited, Universe Tankships, Inc. and Union Texas Far East Corporation. 3. Operating Agreement dated as of August 8, 1968 between Roy M. Huffington, Inc., as operator, and Union Texas Far East Corporation, Golden Eagle Indonesia Limited, Virginia International Company and Austral Petroleum Gas Corporation, as non-operators, as amended by a letter agreement effective September 15, 1973 among these parties and an Amendment to Operating Agreement dated as of April 1, 1990 among Roy M. Huffington, Inc., Ultramar Indonesia Limited, Virginia Indonesia Company, Virginia International Company, Union Texas East Kalimantan Limited, and Universe Gas & Oil Company, Inc. and a Letter dated February 8, 1990 from the IJV Contractors to Pertamina. 4. Amended and Restated Bontang Processing Agreement dated as of February 9, 1988 among Pertamina, the IJV Contractors, Total Indonesie, Indonesia Petroleum, Ltd., Unocal Indonesia, Ltd., and P. T. Badak. 105 B. Supply Agreements. 1. Amended and Restated Supply Agreement (In support of the Amended and Restated 1973 LNG Sales Contract) dated September 22, 1993, but effective as of December 3, 1973, between Pertamina and the IJV Contractors. 2. Supply Agreement for Badak LNG Expansion Project dated as of April 14, 1981 among Pertamina and the IJV Contractors, as supplemented by the Memorandum of Understanding dated as of April 14, 1981 among Pertamina, the IJV Contractors, Total Indonesie, and Union Oil Company of Indonesia, and the Supplemental Memorandum dated August 24, 1983 among Pertamina and the IJV Contractors and as amended by the Memorandum dated December 1, 1988 among Pertamina and the IJV Contractors. 3. Badak III LNG Sales Contract Supply Agreement executed October 19, 1987, but effective as of March 19, 1987 among Pertamina and the IJV Contractors, as supplemented by the Supplemental Memorandum dated as of January 1, 1990 among Pertamina and the IJV Contractors. 4. Amended and Restated Second Supply Agreement for Excess Sales (Quantities In Kind and LNG Amounts Under Amended and Restated Invoice Settlement Agreements) dated as of January 19, 1990, but effective December 1, 1988, among Pertamina and the IJV Contractors, as supplemented by the Supplemental Memorandum dated as of January 1, 1990 among Pertamina and the IJV Contractors. 5. Badak IV LNG Sales Contract Supply Agreement dated as of August 12, 1991, but effective as of October 23, 1990, among Pertamina and the IJV Contractors, as supplemented by the Memorandum of Understanding Re: Supply Agreements and Package IV Sales dated as of August 12, 1991, but effective as of July 1, 1990, and the Supplemental Memorandum of Understanding dated as of January 31, 1994, but effective as of July 1, 1990, each among Pertamina, the IJV Contractors, Total Indonesie, Unocal Indonesia, Ltd., and Indonesia Petroleum, Ltd., and the Addendum to Badak IV LNG Sales Contract Supply Agreement dated as of January 31, 1994, but effective as of October 23, 1990 among Pertamina and the IJV Contractors. 6. Package V Supply Agreement for Natural Gas in support of the 1973 LNG Sales Contract Extension, dated June 16, 1995, effective October 6, 1994, between Pertamina and Virginia Indonesia Company, LASMO Sanga Sanga Limited, OPICOIL Houston, Inc., Union Texas East Kalimantan Limited, Universe Gas & Oil Company, Inc. and Virginia International Company. 7. Package V Supply Agreement (1995 - 1999 LNG Sales to Korea Gas Corporation), dated June 16, 1995, effective September 30, 1994, between Pertamina and Virginia Indonesia Company, LASMO Sanga Sanga Limited, OPICOIL Houston, Inc., Union Texas East Kalimantan Limited, Universe Gas & Oil Company, Inc. and Virginia International Company. 8. Package V Supply Agreement (1998 - 1999 LNG Sales to Chinese Petroleum Corporation), dated June 16, 1995, effective December 6, 1994, between Pertamina and Virginia Indonesia Company, LASMO Sanga Sanga Limited, OPICOIL Houston, Inc., Union Texas East Kalimantan Limited, Universe Gas & Oil Company, Inc. and Virginia International Company. 106 C. Miscellaneous Agreements. 1. Amended and Restated Bontang II Trustee and Paying Agent Agreement dated as of July 15, 1991 among the IJV Contractors, Pertamina, Total Indonesie, Unocal Indonesia, Ltd., and Indonesia Petroleum Ltd., and Continental Bank International ("CBI"), as trustee. 2. Amended and Restated Debt Service Allocation Agreement dated as of February 9, 1988 among Pertamina, the IJV Contractors, Total Indonesie, Indonesia Petroleum, Ltd. and Unocal Indonesia, Ltd. 3. Amended and Restated Badak Trustee and Paying Agent Agreement dated as of February 9, 1988 among Pertamina, the IJV Contractors, Total Indonesie, Unocal Indonesia, Ltd., Indonesia Petroleum, Ltd., and CBI, as trustee ("Bontang I Trustee"). D. Bontang Capital Project Financing Tier III-2. 1. Producers Agreement No. 2 dated as of June 9, 1987 among the IJV Contractors, the lenders named therein, and The Industrial Bank of Japan Trust Company ("IBJ Trust"), as agent for such lenders, as amended by the Amendment No. 1 to Producers Agreement No. 2 dated as of February 9, 1988 and Amendment No. 2 to Producers Agreement No. 2 dated as of May 31, 1988, each among the IJV Contractors, the lenders named therein, and IBJ Trust, as agent for such lenders. 2. Bontang Capital Projects Loan Agreement No. 2 dated as of June 9, 1987 among the Bontang I Trustee, the lenders named therein, and IBJ Trust, as agent for such lenders, as amended by the Amendment No. 1 to Bontang Capital Projects Loan Agreement No. 2 dated as of February 9, 1988 among the Bontang I Trustee, the lenders named therein, and IBJ Trust, as agent for such lenders. E. Train E Financing. 1. Bontang III Producers Agreement dated as of February 9, 1988 among Pertamina, the IJV Contractors, Total Indonesie, Indonesia Petroleum, Ltd., and Unocal Indonesia, Ltd. in favor of Train-E Finance Co., Ltd., as Tranche A Lender, the banks named therein as Tranche B Lenders and IBJ Trust as Agent for such Tranche B Lenders, as amended by Amendment No. 1 dated as of May 31, 1988 among Pertamina, the IJV Contractors, Total Indonesie, Indonesia Petroleum, Ltd., and Unocal Indonesia, Ltd. in favor of Train-E Finance Co., Ltd., as Tranche A Lender, the banks named therein as Tranche B Lenders and IBJ Trust as Agent for such Tranche B Lenders. 2. Bontang III Trustee and Paying Agent Agreement dated as of February 9, 1988 among Pertamina, the IJV Contractors, Total Indonesie, Indonesia Petroleum, Ltd., Unocal Indonesia, Ltd. and CBI, as trustee (the "Bontang III Trustee"), as amended by Amendment No.1 dated as of December 11, 1992 among Pertamina, the IJV Contractors, Total Indonesie, Indonesia Petroleum, Ltd., Unocal Indonesia, Ltd. and the Bontang III Trustee. 3. Amended and Restated Bontang Excess Sales Trustee and Paying Agent Agreement dated as of February 9, 1988 among Pertamina, the IJV Contractors, 107 Total Indonesie, Indonesia Petroleum, Ltd., Unocal Indonesia, Ltd. and CBI, as trustee. 4. Bontang III Loan Agreement dated as of February 9, 1988 among the Bontang III Trustee, Train-E Finance Co., Ltd., as Tranche A Lender, the banks named therein as Lead Managers and Tranche B Lenders and IBJ Trust as Agent for such Tranche B Lenders. F. LPG Financing. 1. Amended and Restated Bontang LPG Trustee and Paying Agent Agreement dated as of December 31, 1991 among Pertamina, the IJV Contractors, Total Indonesie, Indonesia Petroleum, Ltd., Unocal Indonesia, Ltd. and CBI, as trustee. 2. Advance Payment Agreement dated as of February 18, 1987 between Pertamina and Arun Bontang Project Finance Co., Ltd. G. Train F Financing. 1. Bontang IV Producers Agreement dated as of August 26, 1991 among Pertamina, the IJV Contractors, Total Indonesie, Indonesia Petroleum, Ltd., and Unocal Indonesia, Ltd. in favor of the lenders named therein and The Chase Manhattan Bank, N.A. as agent for such lenders. 2. Bontang IV Trustee and Paying Agent Agreement dated as of August 26, 1991 among Pertamina, the IJV Contractors, Total Indonesie, Indonesia Petroleum, Ltd., Unocal Indonesia, Ltd. and CBI, as trustee (the "Bontang IV Trustee"). 3. Bontang IV Loan Agreement dated as of August 26, 1991 among the Bontang IV Trustee, the lenders named therein and The Chase Manhattan Bank, N.A. as agent for such lenders. V. UNION TEXAS PETROLEUM LIMITED ("UTPL") A. Britannia financing. 1. Facility Agreement dated May 26, 1995, between Union Texas Britannia Limited ("UTBL") and the Arranger, Co-Arrangers, Facility Agent, Technical Agents, Funding Agent, Account Bank and the Banks named therein. 2. Administrative Services Agreement dated May 26, 1995, between UTPL and UTBL. 3. Sponsor Direct Agreement dated May 26, 1995, between UTPL, as Sponsor, UTBL, as Borrower, and NationsBank N.A. (Carolinas), as Facility Agent. 4. Sponsor Support Agreement dated May 26, 1995, between UTBL, as Borrower, and UTPL, as Sponsor. 108 EXHIBIT E OPINION OF SPECIAL COUNSEL TO THE AGENT June 30, 1995 To NationsBank of Texas, N.A., as Agent, and to each of the Banks referred to below Ladies and Gentlemen: We have acted as special counsel to NationsBank of Texas, N.A., acting for itself and as Agent, in connection with the preparation, execution and delivery of the Credit Agreement dated as of June 30, 1995 (the "Credit Agreement"), among Union Texas Petroleum Holdings, Inc., a Delaware corporation (the "Company"), the banks listed on the signature pages thereof (the "Banks"), NationsBank of Texas, N.A., as Agent, and the Co-Agents. Capitalized terms defined in the Credit Agreement and not defined herein are used herein as therein defined. In that connection, we have examined counterparts of the Credit Agreement executed by the Agent and the Company respectively and the following documents: (1) The Notes delivered to the Agent on the date hereof. (2) The Subsidiary Guaranty Agreement delivered to the Agent on the date hereof. (3) The legal opinions delivered to the Agent pursuant to Sections 3.01(d) and 3.01(e) of the Credit Agreement. In our examination of the documents referred to above, we have assumed the authenticity of all such documents submitted to us as originals, the genuineness of all signatures and the conformity to the originals of all such documents submitted to us as copies. We have also assumed the accuracy of all matters set forth in the certificates delivered to the Agent on the date hereof in connection with the Credit Agreement and assumed that each of Company, the Banks, the Agent and the Co-Agents has duly executed and delivered, with all necessary power and authority (corporate and otherwise), the Credit Agreement, that the Company has duly executed and delivered, with all necessary power and authority (corporate and otherwise), the respective Notes and that each of the Required Guarantors and the Agent has duly executed and delivered, with all necessary power and authority (corporate and otherwise), the Subsidiary Guaranty Agreement. We have also 109 NationsBank of Texas, N.A., as Agent and the Banks June 30, 1995 Page 2 assumed that no Bank has requested multiple Notes pursuant to Section 2.05(b) of the Credit Agreement. Based upon the foregoing examination of documents and assumptions and upon such other investigation as we have deemed necessary, we are of the opinion that the documents referred to in items (1), (2) and (3) above are substantially responsive to the requirements of the Credit Agreement. This opinion is delivered to you only in connection with the transactions contemplated by the Credit Agreement and may not be quoted, circulated or published, in whole or in part, or furnished to any Person, other than your respective successors and assigns and Participants, without our prior written consent. Very truly yours, Bracewell & Patterson, L.L.P. 110 EXHIBIT F ASSIGNMENT AND ASSUMPTION AGREEMENT AGREEMENT dated as of _____________, 19__ among [ASSIGNOR] (the "Assignor"), [ASSIGNEE] (the "Assignee"), [UNION TEXAS PETROLEUM HOLDINGS, INC. (the "Company")] and NATIONS BANK OF TEXAS, N.A., as Agent (the "Agent"). W I T N E S S E T H: WHEREAS, this Assignment and Assumption Agreement (this "Agreement") relates to the Credit Agreement dated as of June 30, 1995 among the Company, the Banks (including Assignor) and Co-Agents parties thereto and the Agent (such Credit Agreement, as amended from time to time, is hereinafter referred to as the "Credit Agreement"); WHEREAS, as provided under the Credit Agreement, the Assignor has a Commitment to make Loans in an aggregate principal amount at any time outstanding not to exceed $____________; WHEREAS, Loans made by the Assignor under the Credit Agreement in the aggregate principal amount of $_____________ are outstanding at the date hereof; and WHEREAS, the Assignor proposes to assign to the Assignee all of the rights of the Assignor under the Credit Agreement in respect of a portion of its Commitment thereunder in an amount equal to $__________ (the "Assigned Amount"), together with a corresponding portion of its outstanding Loans, and the Assignee proposes to accept assignment of such rights and assume the corresponding obligations from the Assignor on such terms; NOW, THEREFORE, in consideration of the foregoing and the mutual agreements contained herein, the parties hereto agree as follows: SECTION 1. Definitions. All capitalized terms not otherwise defined herein shall have the respective meanings set forth in the Credit Agreement. SECTION 2. Assignment. The Assignor hereby assigns and sells to the Assignee all of the rights of the Assignor under the Credit Agreement to the extent of the Assigned Amount, and the Assignee hereby accepts such assignment from the Assignor and assumes all of the obligations of the Assignor under the Credit Agreement to the extent of the Assigned Amount, including the purchase from the Assignor of the 111 corresponding portion of the principal amount of the Loans made by the Assignor outstanding at the date hereof. Upon the execution and delivery hereof by the Assignor, the Assignee[, the Company] and the Agent and the payment of the amounts specified in Section 3 required to be paid on the date hereof, (i) the Assignee shall, as of the date hereof, succeed to the rights and be obligated to perform the obligations of a Bank under the Credit Agreement with a Commitment in an amount equal to the Assigned Amount plus the amount of the Commitment, if any, of the Assignee immediately prior to the effectiveness of this Agreement, and (ii) the Commitment of the Assignor shall, as of the date hereof, be reduced by an amount equal to the Assigned Amount, and the Assignor shall, as of the date hereof, be released from its obligations under the Credit Agreement to the extent such obligations have been assumed by the Assignee. The assignment provided for herein shall be without recourse to the Assignor. [The Assignor and the Assignee hereby certify that the Assignee is [an affiliate of the Assignor/another Bank,] and accordingly, the Company's consent hereto is not required.] SECTION 3. Payments. As consideration for the assignment and sale contemplated in Section 2 hereof, the Assignee shall pay to the Assignor on the date hereof in Federal funds an amount equal to $__________ *. It is understood that commitment and/or facility fees accrued to the date hereof are for the account of the Assignor and such fees accruing from and including the date hereof are for the account of the Assignee. Each of the Assignor and the Assignee hereby agrees that if it receives any amount under the Credit Agreement which is for the account of the other party hereto, it shall receive the same for the account of such other party to the extent of such other party's interest therein and shall promptly pay the same to such other party. As contemplated by Section 9.06(c) of the Credit Agreement, the Assignor agrees to pay to the Agent for its account on the date hereof in Federal funds an amount equal to $2,500 as an administrative fee for processing this Agreement. SECTION 4. Consent. This Agreement is conditioned upon the consent of [the Company and] the Agent pursuant to Section 9.06(c) of the Credit Agreement. The execution of this Agreement by [the Company and] the Agent is evidence of this consent. Pursuant to Section 9.06(c) the Company agrees to execute and deliver a Note payable to the order of the Assignee to evidence the assignment and assumption provided for herein. SECTION 5. Non-Reliance on Assignor. The Assignor makes no representation or warranty in connection with, and shall have no responsibility with respect to, the solvency, financial condition, or statements of the Company or any other Obligor, the validity and enforceability of the obligations of the Company or any other ________________ *Amount should combine principal together with accrued interest and breakage compensation, if any, to be paid by the Assignee, net of any portion of any upfront fee to be paid by the Assignor to the Assignee. It may be preferable in an appropriate case to specify these amounts generically or by formula rather than as a fixed sum. -2- 112 Obligor in respect of the Credit Agreement, any Note or the Subsidiary Guaranty Agreement or the accuracy of any Engineering Report. The Assignee acknowledges that it has, independently and without reliance on the Assignor, and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement and will continue to be responsible for making its own independent appraisal of the business, affairs and financial condition of the Company and the other Obligors, the Engineering Reports and other relevant matters. SECTION 6. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Texas. SECTION 7. Counterparts. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. SECTION 8. Representation and Agreement. The Assignee represents that it is either (i) a corporation, association or other entity organized under the laws of the United States or any state thereof or (ii) entitled to complete exemption from United States withholding tax imposed on or with respect to any payments, including fees, to be made to it pursuant to the Credit Agreement or the Notes. If the Assignee is not organized under the laws of the United States or any state thereof, it agrees to provide to the Company and the Agent, on or prior to the date of this Agreement, two duly completed copies of United States Internal Revenue Service Form 1001 or 4224, certifying in either case that the Assignee is entitled to receive payments from the Company under the Credit Agreement and the Notes without deduction or withholding of any United States federal income taxes. IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and delivered by their duly authorized officers as of the date first above written. [ASSIGNOR] By:__________________________ Title: [ASSIGNEE] By:__________________________ Title: -3- 113 [UNION TEXAS PETROLEUM HOLDINGS, INC. By:___________________________ Title:] NATIONSBANK OF TEXAS, N.A., as Agent By:___________________________ Title: -4- EX-10.8 9 SUBSIDIARY GUARANTY AGMT. DATED 06/30/95 1 Exhibit 10.8 SUBSIDIARY GUARANTY AGREEMENT SUBSIDIARY GUARANTY AGREEMENT dated as of June 30, 1995 (as may be amended or otherwise modified from time to time in accordance with the terms hereof, this "Agreement") among each of the Subsidiary Guarantors listed on the signature pages hereof under the caption "Subsidiary Guarantors" or which hereafter becomes a party hereto pursuant to Section 3.08(b) (collectively, the "Subsidiary Guarantors") and NationsBank of Texas, N.A., as agent for the banks under the Credit Agreement referred to below (the "Agent"). W I T N E S S E T H: WHEREAS, pursuant to the Credit Agreement dated as of June 30, 1995 among Union Texas Petroleum Holdings, Inc. (the direct or indirect parent of each of the Subsidiary Guarantors) (the "Company"), the Banks and Co-Agents parties thereto and the Agent (as may be amended or otherwise modified from time to time, the "Credit Agreement"), the Company is entitled, subject to certain conditions, to borrow up to $100,000,000 or such other amount as may be available pursuant thereto; WHEREAS, as a condition to borrowings under the Credit Agreement, each Required Guarantor is required to execute and deliver to the Agent this Agreement whereby such entity shall, subject to Section 2.08 hereof, guarantee the payment when due of the principal of and interest on all Loans and all other amounts payable at any time by any Obligor under any of the Financing Documents, including, without limitation, interest which accrues during a proceeding which occurs under the U.S. Bankruptcy Code or which would otherwise accrue under the terms of any of the Financing Documents, but for a proceeding under the U.S. Bankruptcy Code (such principal, interest and other amounts being herein called the "Guaranteed Amounts"); WHEREAS, in consideration of the financial and other support that the Company has provided, and such financial and other support as the Company may in the future provide, to the Subsidiary Guarantors and in order to induce the Banks to enter into the Credit Agreement and to consider requests to extend financial accommodations to the Company, the Subsidiary Guarantors are willing to guarantee, subject to Section 2.08 hereof, the Guaranteed Amounts; NOW, THEREFORE, the parties hereto agree as follows: ARTICLE I DEFINITIONS SECTION 1.01. Definitions. Terms defined in the Credit Agreement and not otherwise defined herein are used herein as therein defined. 2 ARTICLE II GUARANTEES SECTION 2.01. The Guarantees. Subject to Section 2.08, the Subsidiary Guarantors hereby jointly, severally, unconditionally and irrevocably guarantee to the Agent, for the ratable benefit of the Banks, the full and punctual payment of all present and future Guaranteed Amounts as and when the same shall become due and payable, whether at maturity, by declaration or otherwise, according to the terms thereof. In case of failure by the Company punctually to pay any Guaranteed Amount, the Subsidiary Guarantors hereby jointly, severally and unconditionally agree, forthwith upon demand by the Agent, to make payment thereof to the Agent at the place and in the manner specified in the Credit Agreement. SECTION 2.02. Guarantees Unconditional. Subject to Section 2.08, the obligations of each Subsidiary Guarantor under this Article II shall be unconditional and absolute and, without limiting the generality of the foregoing, shall not be released, discharged or otherwise affected by: (a) any extension, renewal, settlement, compromise, waiver or release in respect of any obligation of the Company or any other Subsidiary Guarantor under any Financing Document or any Guaranteed Amount; (b) any modification or amendment of or supplement to (i) this Agreement insofar as the same does not purport to modify the rights or obligations of such Subsidiary Guarantor hereunder or (ii) any other Financing Document; (c) any modification, amendment, waiver, release, non-perfection or invalidity of any direct or indirect security, or of any guarantee or other liability of any third party, for any obligation of the Company or any Subsidiary Guarantor under any Financing Document or any Guaranteed Amount; (d) any change in the corporate existence, structure or ownership of the Company or any Subsidiary, or any insolvency, bankruptcy, reorganization or other similar proceeding affecting the Company or any other Subsidiary or their respective assets; (e) the existence of any claim, set-off or other rights which any Subsidiary Guarantor may have at any time against the Company or any Subsidiary Guarantor, the Agent, any Bank or any other Person, whether or not arising in connection with any Financing Document or any Guaranteed Amount, provided that nothing herein shall prevent the assertion of any such claim by separate suit or compulsory counterclaim; -2- 3 (f) any invalidity or unenforceability relating to or against the Company or any Subsidiary Guarantor for any reason of any Financing Document or any Guaranteed Amount, or any provision of applicable law or regulation purporting to prohibit the payment by the Company or any Subsidiary Guarantor of any Guaranteed Amount; or (g) any other act or omission to act or delay of any kind by the Company or any Subsidiary Guarantor, the Agent, any Bank or any other Person or any other circumstances whatsoever that might, but for the provisions of this paragraph, constitute a legal or equitable discharge of the obligations of a Subsidiary Guarantor under this Article II. SECTION 2.03. Discharge; Reinstatement in Certain Circumstances. Subject to Section 2.08, each Subsidiary Guarantor's obligations under this Article II shall remain in full force and effect until all of the Commitments shall have been terminated in their entirety and the Guaranteed Amounts shall have been paid in full. If at any time any payment of or any amount payable by the Company or any Subsidiary Guarantor in respect of any Guaranteed Amount is rescinded or must be otherwise restored or returned upon the insolvency, bankruptcy or reorganization of such Person or otherwise, each Subsidiary Guarantor's obligations under this Article II with respect to such payment shall be reinstated at such time as though such payment had become due but had not been made at such time. SECTION 2.04. Waiver. Each Subsidiary Guarantor irrevocably waives acceptance hereof, presentment, demand, protest and any notice not provided for herein, as well as any requirement that at any time any action be taken by any Person against the Company or any other Subsidiary Guarantor or any other Person. Each Subsidiary Guarantor hereby irrevocably waives each and every right to which it may be entitled by virtue of the suretyship laws of the State of Texas, including, without limitation, any and all rights it may have pursuant to Rule 31 or Rule 32, Texas Rules of Civil Procedure, Section 17.001 of the Texas Civil Practice and Remedies Code and Chapter 34 of the Texas Business and Commerce Code. SECTION 2.05. Subrogation and Contribution. Each Subsidiary Guarantor irrevocably waives any and all rights to which it may be entitled, by operation of law or otherwise, upon making any payment hereunder (i) to be subrogated to the rights of the payee against the Company with respect to such payment or otherwise to be reimbursed, indemnified or exonerated by the Company in respect thereof or (ii) to receive any payment, in the nature of contribution or for any other reason, from any other Obligor with respect to such payment, in each case until such time as all of the Commitments shall have been terminated in their entirety and the Guaranteed Amounts shall have been paid in full. SECTION 2.06. Stay of Acceleration. If acceleration of the time for payment of any amount payable by the Company or any Subsidiary Guarantor in respect of any Guaranteed Amount is stayed upon the insolvency, bankruptcy or reorganization of such Person, all such amounts otherwise subject to acceleration under the terms of the Credit Agreement or any other -3- 4 agreement or instrument evidencing such Guaranteed Amount shall nonetheless be payable by each other Subsidiary Guarantor hereunder forthwith on demand by the Agent. SECTION 2.07. Representations and Warranties. Each Subsidiary Guarantor represents and warrants that as of the date hereof, and after giving effect to this Agreement and the contingent obligations evidenced hereby (including any limitation on the amount payable under this Agreement pursuant to Section 2.08), it is and will be solvent, and has and will have assets which, fairly valued, exceed its obligations, liabilities and debts, and has and will have property and assets sufficient to satisfy and repay its obligations, liabilities and debts when the same become due. SECTION 2.08. Limit of Liability. Each Subsidiary Guarantor shall be liable under this Agreement only for amounts aggregating up to the largest amount that would not render its obligations hereunder subject to avoidance under Section 548 of the United States Bankruptcy Code or any comparable provisions of any applicable state or foreign law. ARTICLE III MISCELLANEOUS SECTION 3.01. Notices. All notices, requests and other communications to any party hereunder shall be in writing (including telecopy, telex, facsimile transmission or similar writing) and (i) in the case of a Subsidiary Guarantor, shall be given to such Subsidiary Guarantor at c/o Union Texas Petroleum Holdings, Inc., 1330 Post Oak Boulevard, Houston, Texas 77056 (telex number: 762255) and (ii) in the case of the Company or the Agent, at its address or telex number set forth on the signature pages of the Credit Agreement or in any case at such other address or telex number as such party may hereafter specify for the purpose by notice to the Agent and the Company. Each such notice, request or other communication shall be effective (i) if given by telex, when such telex is transmitted to the telex number specified in this Section and the appropriate answer is received, (ii) if given by mail, 72 hours after such communication is deposited in the mails with first class postage prepaid, addressed as aforesaid or (iii) if given by any other means, when delivered at the address specified in this Section; provided that notices to the Agent shall not be effective until received. SECTION 3.02. No Waiver; Exercise of Remedies. No failure or delay by the Agent in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law. In exercising the rights and remedies herein provided, the Agent shall act at the instructions of the Required Banks or, failing such instruction, at its discretion. -4- 5 SECTION 3.03. Amendments and Waivers. Any provision of this Agreement may be amended or waived, and any Subsidiary Guarantor may be released from any of its obligations hereunder, if, and only if, such amendment, waiver or release is in writing and is signed by (i) each Subsidiary Guarantor affected thereby and (ii) the Agent with the consent of Banks at the time having at least 66-2/3% of the aggregate amount of the Commitments or, if the Commitments shall have been terminated, holding Notes evidencing at least 66-2/3% of the aggregate unpaid principal amount of the Loans; provided that any Subsidiary Guarantor shall be released from its obligations hereunder upon the terms set forth in Section 5.10 or Section 5.20 of the Credit Agreement. SECTION 3.04. Texas Law. This Agreement shall be construed in accordance with and governed by the law of the state of Texas. SECTION 3.05. CONSENT TO JURISDICTION AND SERVICE OF PROCESS. EACH SUBSIDIARY GUARANTOR HEREBY IRREVOCABLY CONSENTS TO THE NONEXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF TEXAS AND OF ANY FEDERAL COURT LOCATED IN SUCH STATE OVER EACH OF THEM IN CONNECTION WITH ANY ACTION, SUIT OR PROCEEDING ARISING OUT OF OR RELATING TO ANY FINANCING DOCUMENT AND, TO THE FULLEST EXTENT PERMITTED BY LAW, FURTHER AGREES (AND SHALL NOT CONTEST) THAT THE PROPER VENUE FOR FILING AND MAINTAINING ANY SUCH ACTION, SUIT OR PROCEEDING SHALL BE IN THE STATE OF TEXAS. IN ANY SUCH ACTION, SUIT OR PROCEEDING, EACH SUBSIDIARY GUARANTOR WAIVES PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS OR NOTICE AND AGREES THAT SERVICE BY FIRST CLASS MAIL, RETURN RECEIPT REQUESTED, TO SUCH SUBSIDIARY GUARANTOR AT ITS ADDRESS FOR NOTICES HEREUNDER, OR ANY FORM OF SERVICE PROVIDED FOR IN THE TEXAS CIVIL PRACTICE AND REMEDIES CODE THEN IN EFFECT SHALL CONSTITUTE GOOD AND SUFFICIENT SERVICE UPON SUCH SUBSIDIARY GUARANTOR. EACH SUBSIDIARY GUARANTOR THAT IS NOT ORGANIZED UNDER THE LAWS OF THE UNITED STATES OR A STATE THEREOF (EACH A "NON-U.S. GUARANTOR") HEREBY APPOINTS THE PRINCIPAL OFFICE OF CT CORPORATION SYSTEM IN HOUSTON, TEXAS, WHICH, ON THE DATE HEREOF, IS LOCATED AT 911 DALLAS ST., HOUSTON, TEXAS 77002, AS THE AUTHORIZED AGENT THEREOF (THE "AUTHORIZED AGENT") UPON WHOM PROCESS MAY BE SERVED IN ANY SUCH ACTION, SUIT OR PROCEEDING WHICH MAY BE INSTITUTED IN THE STATE OF TEXAS. SUCH APPOINTMENT SHALL BE IRREVOCABLE UNLESS AND UNTIL THE APPOINTMENT OF A SUCCESSOR AUTHORIZED AGENT FOR SUCH PURPOSE, AND SUCH SUCCESSOR'S ACCEPTANCE OF SUCH APPOINTMENT, SHALL HAVE OCCURRED AND THE AGENT SHALL HAVE BEEN NOTIFIED THEREOF. EACH NON-U.S. GUARANTOR AGREES TO TAKE ANY AND ALL ACTIONS, INCLUDING, WITHOUT LIMITATION, THE FILING OF ANY AND ALL DOCUMENTS AND INSTRUMENTS, THAT MAY BE NECESSARY TO CONTINUE SUCH APPOINTMENT IN FULL FORCE AND EFFECT AS AFORESAID. SERVICE -5- 6 OF PROCESS UPON THE AUTHORIZED AGENT WITH RESPECT TO ANY SUCH ACTION, SUIT OR PROCEEDING SHALL BE DEEMED, IN EVERY RESPECT, EFFECTIVE SERVICE OF PROCESS UPON ANY SUCH NON-U.S. GUARANTOR. EACH NON-U.S. GUARANTOR SHALL REQUIRE THE AUTHORIZED AGENT TO AGREE IN WRITING TO ACCEPT THE FOREGOING APPOINTMENT AS AGENT FOR SERVICE OF PROCESS. SECTION 3.06. WAIVER OF JURY TRIAL. EACH SUBSIDIARY GUARANTOR 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. SECTION 3.07. WAIVER OF SOVEREIGN IMMUNITY. TO THE EXTENT THAT ANY SUBSIDIARY GUARANTOR HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY COURT OR FROM ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION, EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, SUCH SUBSIDIARY GUARANTOR HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY LEGALLY DO SO, SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THIS AGREEMENT AND, WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, AGREES, TO THE FULLEST EXTENT IT MAY LEGALLY DO SO, THAT THE WAIVERS SET FORTH IN THIS SECTION 3.07 SHALL HAVE THE FULLEST SCOPE PERMITTED UNDER THE FOREIGN SOVEREIGN IMMUNITIES ACT OF 1976 OF THE UNITED STATES AND ARE INTENDED TO BE IRREVOCABLE FOR PURPOSES OF SUCH ACT. SECTION 3.08. Successors and Assigns. (a) All of the provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, except that no Subsidiary Guarantor may assign or transfer any of its rights or obligations under this Agreement. (b) Any Subsidiary may become a party hereto and a Subsidiary Guarantor hereunder, without any further action by any other party, by executing and delivering a counterpart hereof to the Agent. SECTION 3.09. Counterparts. This Agreement may be signed in any number of counterparts, each of which shall be an original, and all of which taken together shall constitute a single instrument, with the same effect as if the signatures thereto and hereto were upon the same instrument. -6- 7 SECTION 3.10. Judgment Currency. Each Non-U.S. Guarantor agrees to indemnify the Agent and each Bank against any loss incurred by it as a result of any judgment or order being given or made and expressed and paid in a currency (the "Judgment Currency") other than United States dollars and as a result of any variation as between (i) the rate of exchange at which the United States dollar amount is converted into the Judgment Currency for the purpose of such judgment or order and (ii) the spot rate of exchange in The City of New York at which the Agent or such Bank on the date of payment of such judgment or order is able to purchase United States dollars with the amount of the Judgment Currency actually received by the Agent or such Bank. The foregoing indemnity shall constitute a separate and independent obligation of each Non-U.S. Guarantor and shall continue in full force and effect notwithstanding any such judgment or order as aforesaid. The term "spot rate of exchange" shall include any premiums and costs of exchange payable in connection with the purchase of, or conversion into, United States dollars. SECTION 3.11. Existence. Each Subsidiary Guarantor agrees to maintain its existence except as permitted by Section 5.02 of the Credit Agreement. SECTION 3.12. Taxes. (a) Any and all payments by any Subsidiary Guarantor hereunder shall be made free and clear of and without deduction for any and all present or future taxes, levies, imposts, deductions, charges and withholdings, and all liabilities with respect thereto, excluding (i) in the case of the Agent, each Co-Agent and each Bank, United States federal income taxes and, without duplication, any taxes imposed on its income, and franchise taxes imposed on it, by the jurisdiction under the laws of which the Agent, such Co-Agent or such Bank, as the case may be, is organized or any political subdivision thereof and (ii) in the case of each Bank, taxes imposed on its income, and franchise taxes imposed on it, by the jurisdiction of such Bank's Applicable Lending Office or any political subdivision thereof (all such non-excluded taxes, levies, imposts, deductions, charges, withholdings and liabilities being hereinafter referred to as "Taxes"). If any Subsidiary Guarantor shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder to any Bank, any Co-Agent or the Agent, (i) the sum payable shall be increased as may be necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 3.12) such Bank, such Co-Agent or the Agent (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made, (ii) such Subsidiary Guarantor shall make such deductions and (iii) such Subsidiary Guarantor shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law. (b) Each Subsidiary Guarantor will indemnify each Bank, each Co-Agent and the Agent for the full amount of Taxes (including, without limitation, any Taxes imposed by any jurisdiction on amounts payable under this Section 3.12) paid by such Bank, such Co-Agent or the Agent (as the case may be) and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto, whether or not such Taxes were correctly or legally asserted. Payments under any indemnification provided for in this Section 3.12(b) shall be made -7- 8 within 30 days from the date such Bank, such Co-Agent or the Agent (as the case may be) makes written demand therefor. (c) Within 30 days after the date of any payment of Taxes by a Subsidiary Guarantor, such Subsidiary Guarantor will furnish to the Agent, at its address referred to in Section 9.01 of the Credit Agreement, the original or a certified copy of a receipt evidencing payment thereof. Should any Bank, any Co-Agent or the Agent ever receive any refund, credit or deduction from any taxing authority to which such Bank, such Co-Agent or the Agent, as the case may be, would not be entitled but for the payment by a Subsidiary Guarantor of Taxes as required by this Section 3.12 (it being understood that the decision as to whether or not to claim, and if claimed, as to the amount of any such refund, credit or deduction shall be made by such Bank, such Co-Agent or the Agent, as the case may be, in its sole discretion), such Bank, such Co-Agent or the Agent, as the case may be, thereupon shall repay to such Subsidiary Guarantor an amount with respect to such refund, credit or deduction equal to any net reduction in taxes actually obtained by such Bank, such Co-Agent or the Agent, as the case may be, and reasonably determined by such Bank, such Co-Agent or the Agent, as the case may be, to be attributable to such refund, credit or deduction. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the date first above written. SUBSIDIARY GUARANTORS: UNION TEXAS PETROLEUM ENERGY UNION TEXAS EAST KALIMANTAN CORPORATION LIMITED By: /S/ M.N. MARKOWITZ By: /S/ M.N. MARKOWITZ ----------------------------------- ----------------------------------- M.N. Markowitz M.N. Markowitz Treasurer Treasurer UNION TEXAS PRODUCTS UNION TEXAS INTERNATIONAL CORPORATION CORPORATION By: /S/ M.N. MARKOWITZ By: /S/ M.N. MARKOWITZ ----------------------------------- ----------------------------------- M.N. Markowitz M.N. Markowitz Treasurer Treasurer UNISTAR, INC. By: /S/ M.N. MARKOWITZ ----------------------------------- M.N. Markowitz Vice President -8- 9 AGENT: NATIONSBANK OF TEXAS, N.A., as Agent By: /S/ PAUL A. SQUIRES ----------------------------------- Paul A. Squires Senior Vice President -9- EX-10.9 10 FACILITY AGREEMENT DATED 05/26/95 1 EXHIBIT 10.9 CONFORMED COPY FACILITY AGREEMENT between UNION TEXAS BRITANNIA LIMITED as borrower CHEMICAL BANK as arranger NATIONSBANK, N.A. (CAROLINAS) and NATIONAL WESTMINSTER BANK PLC as co-arrangers NATIONSBANK, N.A. (CAROLINAS) as facility agent NATIONSBANK, N.A. (CAROLINAS) and CHEMICAL BANK as technical agents NATIONAL WESTMINSTER BANK PLC as funding agent and OTHERS Clifford Chance London 2 CONTENTS PART 1 INTERPRETATION 1. INTERPRETATION . . . . . . . . . . . . . . . . . . . . . . 1 PART 2 THE FACILITY 2. THE FACILITY . . . . . . . . . . . . . . . . . . . . . . . 27 3. PURPOSE . . . . . . . . . . . . . . . . . . . . . . . . . 27 4. CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . 28 5. NATURE OF BANKS' OBLIGATIONS . . . . . . . . . . . . . . . 29 PART 3 AVAILABILITY OF THE FACILITY 6. AVAILABILITY OF THE FACILITY . . . . . . . . . . . . . . . 30 PART 4 INTEREST 7. INTEREST PERIODS . . . . . . . . . . . . . . . . . . . . . 33 8. INTEREST . . . . . . . . . . . . . . . . . . . . . . . . . 34 9. ALTERNATIVE INTEREST RATES . . . . . . . . . . . . . . . . 34 PART 5 REPAYMENT, CANCELLATION AND PREPAYMENT 10. REPAYMENT OF THE LOAN . . . . . . . . . . . . . . . . . . 36 11. CANCELLATION AND PREPAYMENT . . . . . . . . . . . . . . . 37 PART 6 CHANGES IN CIRCUMSTANCES 12. TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . 40 13. TAX RECEIPTS . . . . . . . . . . . . . . . . . . . . . . . 41
3 14. INCREASED COSTS . . . . . . . . . . . . . . . . . . . . . 42 15. ILLEGALITY . . . . . . . . . . . . . . . . . . . . . . . . 44 16. MITIGATION . . . . . . . . . . . . . . . . . . . . . . . . 44 PART 7 INFORMATION AND FORECASTS 17. FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . 46 18. PROJECT EXPENDITURE AND OTHER REPORTS . . . . . . . . . . 47 19. BANKING CASES . . . . . . . . . . . . . . . . . . . . . . 48 20. ENGINEERING REPORTS . . . . . . . . . . . . . . . . . . . 55 21. COMPLETION CERTIFICATES . . . . . . . . . . . . . . . . . 56 PART 8 REPRESENTATIONS, COVENANTS AND SECURITY 22. REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . 58 23. POSITIVE COVENANTS . . . . . . . . . . . . . . . . . . . . 63 24. NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . 68 25. SECURITY . . . . . . . . . . . . . . . . . . . . . . . . . 72 PART 9 INSURANCES 26. INSURANCES . . . . . . . . . . . . . . . . . . . . . . . . 74 27. INSURANCE COVENANTS . . . . . . . . . . . . . . . . . . . 76 PART 10 DEFAULT 28. EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . 80 29. DEFAULT INTEREST AND INDEMNITY . . . . . . . . . . . . . . 87 PART 11 PAYMENTS 30. CURRENCY OF ACCOUNT AND PAYMENT . . . . . . . . . . . . . 90 31. PAYMENTS . . . . . . . . . . . . . . . . . . . . . . . . . 90 32. SET-OFF . . . . . . . . . . . . . . . . . . . . . . . . . 92 33. REDISTRIBUTION OF PAYMENTS . . . . . . . . . . . . . . . . 92
4 PART 12 PROJECT ACCOUNTS 34. THE PROJECT ACCOUNTS . . . . . . . . . . . . . . . . . . . 93 35. AUTHORISED INVESTMENTS . . . . . . . . . . . . . . . . . . 100 36. UTPL CREDIT TEST . . . . . . . . . . . . . . . . . . . . . 103 PART 13 FEES, COSTS AND EXPENSES 37. FEES . . . . . . . . . . . . . . . . . . . . . . . . . . . 105 38. COSTS AND EXPENSES . . . . . . . . . . . . . . . . . . . . 105 PART 14 AGENCY PROVISIONS 39. THE AGENTS, THE ARRANGER, THE CO-ARRANGERS AND THE FINANCE PARTIES . . . . . . . . . . . . . . . . 107 40. THE FACILITY AGENT AS TRUSTEE . . . . . . . . . . . . . . 111 41. THE ACCOUNT BANK . . . . . . . . . . . . . . . . . . . . . 114 42. THE TECHNICAL AGENTS . . . . . . . . . . . . . . . . . . . 116 PART 15 ASSIGNMENTS AND TRANSFERS 43. BENEFIT OF AGREEMENT . . . . . . . . . . . . . . . . . . . 117 44. ASSIGNMENTS AND TRANSFERS BY THE BORROWER . . . . . . . . 117 45. ASSIGNMENTS AND TRANSFERS BY BANKS . . . . . . . . . . . . 117 46. DISCLOSURE OF INFORMATION . . . . . . . . . . . . . . . . 118 PART 16 MISCELLANEOUS 47. CALCULATIONS AND EVIDENCE OF DEBT . . . . . . . . . . . . 120 48. REMEDIES AND WAIVERS . . . . . . . . . . . . . . . . . . . 120 49. PARTIAL INVALIDITY . . . . . . . . . . . . . . . . . . . . 121 50. AMENDMENTS . . . . . . . . . . . . . . . . . . . . . . . . 121 51. NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . 122 52. COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . 123
PART 17 5 LAW 53. LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . 124 54. JURISDICTION . . . . . . . . . . . . . . . . . . . . . . . 124 THE FIRST SCHEDULE THE BANKS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125 THE SECOND SCHEDULE FORM OF TRANSFER CERTIFICATE . . . . . . . . . . . . . . . . . . . 126 THE THIRD SCHEDULE CONDITION PRECEDENT DOCUMENTS . . . . . . . . . . . . . . . . . . 129 THE FOURTH SCHEDULE NOTICE OF DRAWDOWN . . . . . . . . . . . . . . . . . . . . . . . . 134 THE FIFTH SCHEDULE REPAYMENT SCHEDULE . . . . . . . . . . . . . . . . . . . . . . . . 136 THE SIXTH SCHEDULE PROJECT AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . 137 THE SEVENTH SCHEDULE PROJECT COMPLETION TESTS . . . . . . . . . . . . . . . . . . . . . 140 THE EIGHTH SCHEDULE INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 142 THE NINTH SCHEDULE ASSOCIATED COSTS RATE . . . . . . . . . . . . . . . . . . . . . . 147 THE TENTH SCHEDULE THE ORIGINAL BANKING CASE . . . . . . . . . . . . . . . . . . . . 149 THE ELEVENTH SCHEDULE MINIMUM VOLUMES . . . . . . . . . . . . . . . . . . . . . . . . . 157
6 THIS AGREEMENT is made the 26 day of May, 1995 BETWEEN (1) UNION TEXAS BRITANNIA LIMITED a company registered in England and Wales with company registration number 2894635 (the "BORROWER"); (2) CHEMICAL BANK (the "ARRANGER"); (3) NATIONSBANK, N.A. (CAROLINAS) and NATIONAL WESTMINSTER BANK PLC as co-arrangers (the "CO-ARRANGERS"); (4) NATIONSBANK, N.A. (CAROLINAS) as facility agent (the "FACILITY AGENT"); (5) NATIONSBANK, N.A. (CAROLINAS) and CHEMICAL BANK as technical agents (the "TECHNICAL AGENTS" and each a "TECHNICAL AGENT"); (6) NATIONAL WESTMINSTER BANK PLC as funding agent (the "FUNDING AGENT"); (7) NATIONAL WESTMINSTER BANK PLC as account bank (the "ACCOUNT BANK"); and (8) THE FINANCIAL INSTITUTIONS named in the First Schedule (in their capacities as providers of the loan facility described herein, together the "BANKS" and each a "BANK" and, in their capacities as counterparties to the Borrower under any hedging agreement entered into pursuant to the Approved Hedging Programme (as hereinafter defined), together the "HEDGE COUNTERPARTIES" and each a "HEDGE COUNTERPARTY"). IT IS HEREBY AGREED as follows: PART 1 INTERPRETATION 1. INTERPRETATION 1.1 In this Agreement: "ABANDONMENT COSTS" means all costs and expenses incurred, or to be incurred, by the Borrower in connection with the abandonment and/or demolition and removal of the Britannia Field Facilities (together with any site reinstatement) required at the time of such abandonment by the Unit Operating Agreement, any applicable laws, rules and regulations, to the extent attributable to the Borrower's interest therein but so as to exclude any costs or expenses which have been classified hereunder as Capital Expenditure, GSA Refunds, Hedging Payments, Insurance Costs, Financing Expenses, Operating Costs, Overlifting Costs, - 1 - 7 Project Taxes, Royalties, Transportation Costs, Trust Fund Costs and any amounts payable by the Borrower in respect of its indebtedness for borrowed money; "ABANDONMENT COSTS AGREEMENT" means the agreement brief particulars of which are set out at paragraph 5 of the Sixth Schedule; "ABANDONMENT DATE" means the day on which the Britannia Field Facilities and the Britannia Field have been abandoned in accordance with the terms of the Unit Operating Agreement and all applicable laws, rules and regulations; "ADMINISTRATIVE SERVICES AGREEMENT" means the agreement of even date herewith and made between the Sponsor and the Borrower pursuant to which the Sponsor has agreed to provide certain management and administrative services to the Borrower; "ADVANCE" means, save as otherwise provided herein, an advance (as from time to time reduced by repayment) made or to be made by the Banks hereunder; "AGENTS" means the Facility Agent, the Technical Agents and the Funding Agent (and "AGENT" means any of them); "ANNEX B APPROVAL" in relation to the Britannia Field means the giving of consent to, the approval of or the serving of a programme for the development of such field by the Secretary of State pursuant to the relevant Model Clauses or the equivalent provision under any licence applicable to such development; "APPLICABLE MARGIN" means: (i) at any time prior to the Project Completion Date 0.875% (zero point eight seven five per cent.) per annum; and (ii) at any time on or after the Project Completion Date 0.75% (zero point seven five per cent.) per annum, Provided that if at any time an Event of Default has occurred and has not been remedied or waived the Applicable Margin at such time as determined pursuant to (i) or (ii) above shall be increased by 1% (one per cent.) per annum; "APPROVED HEDGING PROGRAMME" at any time means the programme (if any) from time to time entered into or adopted by the Borrower and approved by an Instructing Group (acting reasonably) on behalf of the Beneficiaries for the entering into and performance of Hedging Agreements by the Borrower which such programme shall provide for Hedging Agreements the object of which is to reduce (and, for the avoidance of doubt, not to speculate in respect of the following): (i) the Borrower's exposure to changes in floating rates of interest; (ii) the Borrower's exposure to changes in exchange rates; - 2 - 8 (iii) the Borrower's exposure to changes in the contract price of gas sold under the Gas Sales Agreements; and (iv) such other exposures or risks associated with the Project's cash flow as the Borrower and the Facility Agent may from time to time agree; "ARRANGEMENT/UNDERWRITING FEES LETTERS" means the letters dated 22nd February 1995 from Chemical Bank, 17th February 1995 from NationsBank, N.A. (Carolinas) and of even date herewith from National Westminster Bank Plc to the Borrower; "ASSIGNMENT OF INSURANCES" means the assignment brief particulars of which are set out at paragraph (ii) of Part 2 of the Third Schedule; "ASSOCIATED COSTS RATE" means, in relation to any Advance or unpaid sum, the rate determined in accordance with the Ninth Schedule; "ASSUMPTIONS" means Technical Assumptions and Economic Assumptions; "AUTHORISED INVESTMENT" means: (i) any security having a remaining maturity not exceeding 1 year that is issued by the Government of the United Kingdom or other security containing direct obligations of the United Kingdom or any agency thereof; (ii) a sterling denominated time deposit (of an original maturity not exceeding six months) with a bank which is an authorised institution under the Banking Act 1987 and whose short-term debt securities are for the time being rated at least P-1 by Moody's Investors Service, Inc and A-1 by Standard & Poor's Corporation; (iii) any medium term note, asset backed security, bond, note and letter of credit supported instruments in each case rated in any of the three highest categories by Standard & Poor's Corporation or Moody's Investors Service, Inc; and (iv) any other security of a type permitted under the Sponsor's then current investment policy and guidelines and notified to the Facility Agent in writing and which security shall, unless an Instructing Group shall have notified the Facility Agent in writing within 30 days after receipt of such notice that it objects in its sole discretion to securities of such type, be deemed to be an Authorised Investment; "AVAILABLE CASH FLOW" in respect of any period means Net Cash Flow for such period less Financing Expenses for such period; "AVAILABLE COMMITMENT" means, in relation to a Bank at any time and save as otherwise provided herein, the amount set opposite its name in the First Schedule LESS the aggregate amount which it has advanced hereunder at such time; - 3 - 9 "AVAILABLE FACILITY" means, at any time, the aggregate amount of the Available Commitments at such time; "BANKING CASE" means the Original Banking Case or any draft banking case delivered by the Borrower pursuant to Clause 19.1 as such draft banking case may be approved by an Instructing Group in accordance with Clause 19.6 or revised by the Borrower in accordance with Clause 19.10; "BARREL" means a volume of 42 U.S. gallons, corrected to 60 degrees Fahrenheit and 14.7 psia; "BASLE PAPER" means the paper entitled "International Convergence of Capital Measurement and Capital Standards" dated July 1988 prepared by the Basle Committee on Banking Regulations and Supervisory Practices; "BENEFICIARIES" at any time means each of the Agents, the Account Bank, the Arranger, the Co-Arrangers and the Finance Parties at such time and "BENEFICIARY" means any one of them; "BRITANNIA COVENTURERS" means the parties from time to time considered Coventurers under, and as defined in, the Unit Operating Agreement; "BRITANNIA FIELD" means the Unitised Formation as defined in the Unit Operating Agreement; "BRITANNIA FIELD FACILITIES" means: (i) all wells drilled or which may be drilled in the Britannia Field (including production and injection wells) and all equipment installed or which may be installed in and on such wells and sub-sea equipment (including flowlines and risers) connected to such wells; (ii) the stationary platform in Block 16/26 (the "BRITANNIA PLATFORM") and the subsea centre in Block 15/30 from which such wells are drilled or are to be drilled and the production and quarters platform installed or which may be installed in or on the Britannia Field including the structure and equipment erected or which may be erected thereon; (iii) the Britannia Gas Terminal; (iv) the Britannia Trunkline; (v) the Britannia - Forties Pipeline; and (vi) all other pipelines, structures, machinery and equipment, vessels, vehicles and other facilities constructed or which may be constructed insofar as the same relate directly to the Britannia Field or any Petroleum won and saved therefrom or which are or will be used in the development and operation of the Britannia Field, to the extent, in each case, that the Britannia Coventurers have an interest therein; - 4 - 10 "BRITANNIA-FORTIES PIPELINE" has the meaning specified in the agreement brief particulars of which are set out in paragraph 25 of the Sixth Schedule; "BRITANNIA GAS TERMINAL" has the meaning given thereto in the Unit Operating Agreement; "BRITANNIA PETROLEUM" means Unitised Substances (as defined in the Unit Operating Agreement) won and saved from the Britannia Field; "BRITANNIA TRUNKLINE" has the meaning given thereto in the Unit Operating Agreement; "BRITANNIA UNIT AREA" means the Unit Area (as defined in the Unit Operating Agreement); "CALCULATION DATE" means: (i) the Project Completion Date; and (ii) thereafter each and every 30 June and 31 December; "CAPITAL EXPENDITURE" in respect of any period means all costs and expenses of a capital (but not an operating) nature incurred, or to be incurred, by the Borrower pursuant to the Project Agreements during such period and in respect of the Britannia Field to the extent attributable to the Borrower's interest therein but so as to exclude any costs or expenses which have been classified hereunder as Abandonment Costs, Financing Expenses, GSA Refunds, Hedging Payments, Insurance Costs, Operating Costs, Overlifting Costs, Project Taxes, Royalties, Transportation Costs, Trust Fund Costs and any amounts payable by the Borrower in respect of its indebtedness for borrowed money (other than any indebtedness for borrowed money permitted by Clause 24 (x)(c) but without double counting such indebtedness for borrowed money with the expenditure which such indebtedness for borrowed money is financing); "CHARGE OVER ACCOUNTS" means the charge brief particulars of which are set out at paragraph (iii) of Part 2 of the Third Schedule; "COMPLETION CERTIFICATE" means a certificate delivered by the Borrower to the Facility Agent pursuant to Clause 21 (and signed by a duly authorised officer of the Borrower) certifying that, in the opinion of the Borrower, the Project Completion Tests have been satisfied; "CONDENSATE" has the meaning specified in the Unit Operating Agreement; "CURRENT BANKING CASE" at any time prior to the adoption of a Banking Case as the Current Banking Case pursuant to Clause 19 means the Original Banking Case and at any time thereafter means the Banking Case most recently adopted as the Current Banking Case pursuant to Clause 19; "DAILY CAPACITY" means, in relation to the Britannia Field Facilities, and for any day, their daily delivery capacity of 740 million cubic feet of Gas per day, as such daily capacity may reduce every year pro rata to the reduction in the Britannia Field Delivery Capacity (as defined in the Gas Sales Agreements) for each Contract Year (as also defined therein); - 5 - 11 "DEBENTURE" means the debenture brief particulars of which are set out at paragraph (i) of Part 2 of the Third Schedule; "DEVELOPMENT BUDGET" means the Development Budget, as defined in, and from time to time in effect under, the Unit Operating Agreement; "DEVELOPMENT PLAN" means the Development Programme, as defined in, and from time to time in effect under, the Unit Operating Agreement; "DISCHARGE DATE" means the date on which: (i) the Beneficiaries have ceased to be under any commitment to make any Advance hereunder; and (ii) the Loan has been repaid in full and no other amount is outstanding under or pursuant to the terms of any of the Financing Agreements (whether or not the same is due); "DISCOUNT RATE" means the rate specified in the Current Banking Case for use in determining the Net Present Value of the Forecast Net Cash Flow estimated therein; "DOUBLE TAXATION TREATY BANK" is defined in Clause 12.5; "ECONOMIC ASSUMPTIONS" means assumptions as to the following matters used in the preparation of a Banking Case: (i) the price of Gas sales under each of the Gas Sales Agreements, the price of NGL sales and the price of Condensate sales; (ii) the price of Gas sales under any agreements for the sale of Gas with a term of less than one year which the Borrower and an Instructing Group have agreed should constitute an Economic Assumption; (iii) the price and volumes of raw gas to be sold under the agreement brief particulars of which are set out in paragraph 26 of the sixth Schedule; (iv) the Brent Crude price; (v) general currency exchange rates; (vi) relevant rates of inflation; (vii) sterling rates of interest; (viii) Discount Rates; - 6 - 12 (ix) costs of items comprising Permitted Expenditure; (x) corporation taxes; and (xi) any other assumptions required to be used for the preparation of a Banking Case which the Facility Agent and the Borrower determine should be treated as an Economic Assumption; "ENGINEERING REPORT" means the Initial Engineering Report and any subsequent report prepared by the Independent Engineers and delivered to the Facility Agent pursuant to Clause 20.1 or 20.3; "ENVIRONMENTAL LAW" means all or any applicable statutes, rules, regulations, statutory instruments, treaties, directives, directions, by-laws, codes of practice, orders, notices, demands, injunctions, statute law or common law or duty of care legally binding on the Borrower and affecting the Project and concerning the environment and/or the protection of human health; "ENVIRONMENTAL LICENCE" means any permit, licence, authorisation, approval, consent or like matter required by any Environmental Law; "ESTIMATED ULTIMATE RECOVERABLE RESERVES" means at any time those quantities of Petroleum which are the aggregate of (i) those quantities of Petroleum actually recovered from the Britannia Field at such time and (ii) the Proved Reserves of Petroleum from the Britannia Field at such time; "EVENT OF DEFAULT" means any of those events specified in Clause 28; "FACILITY" means the sterling loan facility granted to the Borrower in this Agreement; "FACILITY AGENT FEE LETTER" means the letter dated 17 February 1995 from NationsBank, N.A. (Carolinas) to the Borrower; "FACILITY AMOUNT" means pound sterling 150,000,000 or such other lesser amount in accordance with Clause 2.4; "FACILITY OFFICE" means, in relation to the Facility Agent or any Bank, the office identified with its signature below (or, in the case of a Transferee, at the end of the Transfer Certificate to which it is a party as Transferee) or such other office as it may from time to time select or such other office as may be agreed pursuant to Clause 16; "FEE LETTERS" means the Facility Agent Fee Letter, the Technical Agents Fee Letters, the Funding Agent Fee Letter and the Arrangement/Underwriting Fees Letters; "FIELD LIFE COVER RATIO" or "FLCR" for any Calculation Date means the value determined by the Current Banking Case as being the ratio (expressed as the result of dividing (i) below by (ii) below) of: (i) the Net Present Value of Forecast Net Cash Flow for the period (1) commencing (a) prior to the Project Completion Date, on the date projected to be the Project Completion - 7 - 13 Date in the Current Banking Case and (b) on or after the Project Completion Date, on such Calculation Date and (2) ending on the Projected Abandonment Date; to (ii) the maximum amount which the Current Banking Case estimates the Loan will be at or any time after such Calculation Date ("PEAK DEBT") less the amount of the Loan then forecast in such Banking Case to be repaid on the Repayment Date immediately following such Calculation Date Provided that such subtraction shall only be made if such Calculation Date falls on or after 30 June, 1999 and if (a) the Current Banking Case projects that there will be received into the Proceeds Account sufficient cash so that on the Repayment Date falling immediately after such Calculation Date the Borrower will be able to satisfy its obligations under Clause 10.1 in respect of such Repayment Date or (b) the then current Net Cash Flow report prepared pursuant to Clause 18.4 demonstrates that the Available Cash Flow received by the Borrower during the Semi-Annual Cash Flow Period to which such report relates would enable the Borrower to satisfy its obligations under Clause 10.1 on such Calculation Date as if such Calculation Date were the immediately following Repayment Date; "FINAL MATURITY DATE" means 30 September, 2005; "FINANCE PARTIES" means the Banks and each Hedge Counterparty; "FINANCING AGREEMENTS" means: (i) this Agreement; (ii) the Fee Letters; (iii) the Security Documents; (iv) any Hedging Agreement entered into pursuant to the Approved Hedging Programme; and (v) the UTPL Agreements; "FINANCING EXPENSES" in respect of any period means all amounts of interest, fees, commitment commission, costs or expenses (including the fees and expenses (together with any VAT thereon) of the Independent Engineers, the Insurance Adviser, any Independent Expert and any legal counsel appointed by any of the Beneficiaries which the Borrower is obliged to pay under any of the Financing Agreements) or other payments (other than payments of principal) falling due and payable by the Borrower in respect of the Financing Agreements during such period but so as to exclude any payments which have been classified hereunder as Hedging Payments; "FORECAST DEBT SERVICE" in respect of any period means an amount equal to the aggregate of: (i) the amount of the Loan projected and estimated in the Current Banking Case to fall due and payable by the Borrower during such period; and - 8 - 14 (ii) the amount projected and estimated in the Current Banking Case to be the Financing Expenses falling due and payable by the Borrower during such period; "FORECAST NET CASH FLOW" in respect of any period means an amount (as the same may be revised pursuant to Clause 19.5) equal to: (i) the amount projected and estimated in the Current Banking Case to be the Forecast Project Receipts for such period; less (ii) the amount projected and estimated in the Current Banking Case to be the aggregate of the Borrower's Permitted Expenditure for such period, Provided that, for the purpose of determining the Forecast Net Cash Flow for such period no account shall be taken of any portion of: (a) any Forecast Project Receipts referred to in paragraphs (v), (vi) (vii) or (ix) in the definition of "Forecast Project Receipts" set out below unless, at the time such determination falls to be made, the Borrower is legally entitled to receive such amount and to the extent that such receipt is subject to any conditions, such conditions will with reasonable certainty be satisfied at the time the Borrower would receive such amount during such period; (b) any sale of Petroleum unless at the time the sale is actually made the Borrower is legally and unconditionally entitled to receive such amount; (c) any Forecast Project Receipts which are projected to be received by the Borrower on or after the Projected Abandonment Date; (d) any Permitted Expenditure which is projected to be paid by the Borrower on or after the Projected Abandonment Date; or (e) (1) the amount of any Insurance Proceeds which would be part of Forecast Project Receipts for such period pursuant to paragraph (v) of the definition thereof up to an amount equal to the total expenditure incurred (or estimated to be incurred) in replacing, rectifying or repairing the asset lost or damaged in respect of which such Insurance Proceeds are payable; or (2) the amount of such total expenditure where the Insurance Proceeds payable in respect thereof are not included within Forecast Net Cash Flow pursuant to (1) above; "FORECAST PROJECT RECEIPTS" in respect of any period means the aggregate (without double-counting) of: - 9 - 15 (i) the revenues receivable by the Borrower during such period in respect of the sale or other disposal of Britannia Petroleum under the Gas Sales Agreements; (ii) the revenues receivable by the Borrower during such period in respect of any tariff receipts or payments receivable by the Borrower in respect of the use of any of the Britannia Field Facilities; (iii) the revenues receivable by the Borrower during such period in respect of sales of NGLs or Condensates; (iv) the revenues receivable by the Borrower during such period in respect of sales of Gas under contracts with a term of less than one year and which an Instructing Group has agreed may be included in this definition of Forecast Project Receipts; (v) any and all Insurance Proceeds receivable by the Borrower and payable into the Insurance Account pursuant to Clause 34.6 (ii) during such period in respect of the whole or any part of the Project Interest; (vi) any amounts which are receivable by the Borrower during such period as a result of the sale or other disposal by the Borrower of all or any part of the assets or revenues comprising all or part of the Project Interest (other than Petroleum) in accordance with the Financing Agreements; (vii) any amounts which are receivable by the Borrower during such period from the Operator by way of refunds under the Unit Operating Agreement; (viii) any interest receivable on the balance of any Project Account and any income of any kind receivable by the Borrower in respect of an Authorised Investment; (ix) any amounts (excluding Insurance Proceeds) which are receivable by the Borrower during such period by way of any damages or compensation for the loss of any of the foregoing; (x) any amounts payable to the Borrower as consideration for the underlifting of Petroleum pursuant to Exhibit G of the Unit Operating Agreement or pursuant to Exhibit L of the Unit Operating Agreement; and (xi) any other sums of whatever nature not expressly excluded from paragraphs (i) to (x) above and receivable by the Borrower during such period which are (a) attributable to the Project Interest and which an Instructing Group and the Borrower have agreed may be taken into account in calculating the Forecast Project Receipts for such period or (b) receivable by the Borrower during such period pursuant to any Hedging Agreement; "FUNDING AGENT FEE LETTER" means the letter of even date herewith from National Westminster Bank Plc to the Borrower; - 10 - 16 "GAS" means all hydrocarbons which at standard atmospheric conditions of pressure and temperature are in a gaseous state, including, without limitation, NGLs and non-hydrocarbon gas which is produced in association with such gaseous hydrocarbons; "GAS SALES AGREEMENTS" means each of the agreements brief particulars of which are set out at paragraphs 8, 11, 13, 15 and 19 of the Sixth Schedule together with any other agreement entered into by the Borrower for the sale of Gas which is expressly permitted by Clause 24(xv); "GOVERNMENT CONSENT AGREEMENT" means the consent agreement with the Secretary of State brief particulars of which are set out in paragraph (v) of Part 2 of the Third Schedule; "GROUP INSURANCES" is defined in Clause 26.2(ii); "GSA REFUNDS" in respect of any period means any amount due and payable by the Borrower under a Gas Sales Agreement; "HEDGING AGREEMENT" means any hedging agreement between the Borrower and any Hedge Counterparty (or any other counterparty approved pursuant to Clause 23(viii)) pursuant to and in accordance with the Approved Hedging Programme and Clause 23(viii); "HEDGING PAYMENTS" means amounts falling due from time to time for payment by the Borrower under or pursuant to any Hedging Agreement; "INDEPENDENT ENGINEERS" at any time means DeGolyer and McNaughton or such other independent engineering firm appointed in accordance with Clause 20.4; "INDEPENDENT EXPERT" means such independent expert selected by the Borrower from a list of not fewer than five alternatives suggested by the Technical Agents each of which shall have appropriate experience in the context of limited recourse North Sea Petroleum financings to be able to determine any dispute referred to him in accordance with Clause 19.9 or, as the case may be, Clause 21.3 without having any interest in the outcome of such dispute; "INFORMATION MEMORANDUM" means the document dated March 1995 concerning the Project, the Borrower and the Sponsor which, at the Borrower's request and on its behalf, was prepared in relation to this transaction and distributed by the Arranger and the Co-Arrangers to selected banks during March 1995; "INITIAL DEVELOPMENT BUDGET" means the budget approved by the Britannia Coventurers pursuant to clause 11.1 of the Unit Operating Agreement; "INITIAL ENGINEERING REPORT" means the engineering report brief particulars of which are set out at paragraph 12 of Part 1 of the Third Schedule; - 11 - 17 "INSTRUCTING GROUP" means: (i) before any Advances have been made hereunder, a Bank or group of Banks whose Available Commitments amount in aggregate to sixty-six and two-thirds per cent. or more of the Available Facility; and (ii) thereafter, a Bank or group of Banks to which in aggregate sixty-six and two-thirds per cent. or more of the Loan is (or, immediately prior to its repayment, was then) owed; "INSURANCE ACCOUNT" means the account of the Borrower with the Account Bank (including sub-accounts into which such account may be divided) to be designated the "UNION TEXAS BRITANNIA LIMITED - INSURANCE ACCOUNT" as described in Clause 34.1 and any account (and sub-accounts) opened by any successor to the Account Bank in relation thereto pursuant to Clause 34.1(iii) as any such account may be renewed, redesignated or renumbered from time to time; "INSURANCE ADVISER" at any time means Glen Goodman or such other insurance advisers appointed by the Facility Agent acting in accordance with the instructions of an Instructing Group and after consultation with the Borrower; "INSURANCE COSTS" in respect of any period means all premia, contributions or other sums payable by (i) the Borrower (ii) the Operator on the Borrower's behalf or (iii) the Sponsor but reasonably allocated to the Borrower in the case of any insurance required pursuant to Clause 26 and which is a Group Insurance during such period in insuring all or any part of the Project Interest (including the fees, costs and expenses of insurance brokers appointed for such purpose); "INSURANCE PROCEEDS" means the proceeds of any insurances required to be maintained pursuant to Clause 26 together with any amount paid by the Sponsor pursuant to Clause 5.5 of the Sponsor Support Agreement; "INTEREST PERIOD" means, save as otherwise provided herein, any of those periods calculated in accordance with Clause 7; "ISDA MASTER AGREEMENT" means an Interest Rate and Currency Exchange Agreement as published by the International Swap Dealers Association in 1987 or 1992; "LIBOR" means, in relation to any Advance or unpaid sum and any specified period the rate per annum determined by the Funding Agent to be equal to the arithmetic mean (rounded, if not already such a multiple, to the nearest whole multiple of one-sixteenth of one per cent. save that if the arithmetic mean is exactly midway between two such whole multiples then it shall be rounded upwards) of the rates (as notified to the Funding Agent) at which each of the Reference Banks was offering to prime banks in the London Interbank Market deposits in sterling and for such specified period (or for a period comparable thereto) at or about 11.00 a.m. on the Quotation Date for such specified period and, for the purposes of this definition, "SPECIFIED PERIOD" means the Interest Period of such Advance or, as the case may be, the period in respect of which LIBOR falls to be determined in relation to such unpaid sum; - 12 - 18 "LICENCES" means the United Kingdom petroleum production licence P213 and the United Kingdom petroleum production licence P345; "LOAN" means the aggregate principal amount for the time being outstanding hereunder; "MATERIAL ADVERSE EFFECT" means a material adverse effect on any of: (i) the Borrower's ability to perform and comply with any of its obligations under the Financing Agreements or under any of (or any replacement of any of the following agreements) the Unit Operating Agreement, the Transportation Agreement, any Licence or any Gas Sales Agreement; (ii) the legality, binding nature, validity or enforceability of any of the Financing Agreements or any of (or any replacement of any of the following agreements) the Unit Operating Agreement, the Transportation Agreement, any Licence or any Gas Sales Agreement or on the legality, validity, enforceability or ranking of any encumbrance created or arising under or pursuant thereto; or (iii) the Project, any category of items listed at paragraphs (i) to (vi) of the definition of Britannia Field Facilities (such determination to be made with respect to such category as a whole) or any of the insurances required to be maintained pursuant to Clause 26 or on the production, processing, transportation or marketing of Petroleum won and saved from the Britannia Field; "MINIMUM BILL QUANTITY" means the sum of (i) the "MINIMUM BILL QUANTITIES" as defined and determined in accordance with the Gas Sales Agreements in effect on the date hereof, and (ii) with respect to any Gas Sales Agreement entered into after the date hereof, the annual minimum quantity of Gas which the buyer is required to pay for (regardless of whether such quantity is actually taken by such buyer); "MINIMUM VOLUME" means, at any time in any year, the volume of Gas set out for such year in the Eleventh Schedule; "MODEL CLAUSE" means a clause of the model clauses for production licences in seaward areas set out in Schedule 2 of the Petroleum and Submarine Pipelines Act 1975 and Schedule 5 of the Petroleum (Production) Regulations 1976; "NET CASH FLOW" in respect of any period means an amount equal to: (i) the Project Receipts for such period; less (ii) the aggregate of the amounts paid out by the Borrower during such period in respect of Permitted Expenditure, Provided that, for the purposes of determining Net Cash Flow for any period: - 13 - 19 (a) any amount paid out or received by the Borrower in a currency other than sterling shall be taken into account in accordance with accounting principles generally accepted in the United Kingdom and consistently applied; and (b) no account shall be taken of the amount of: (1) any Insurance Proceeds which would be a part of Project Receipts for such period pursuant to paragraph (iv) of the definition thereof up to an amount equal to the total expenditure incurred (or estimated to be incurred) in replacing, rectifying or repairing the asset lost or damaged in respect of which such Insurance Proceeds were paid; or (2) such total expenditure where the Insurance Proceeds payable in respect thereof are not included within Net Cash Flow pursuant to (1) above; "NET PRESENT VALUE" means in relation to the Forecast Net Cash Flow projected and estimated in any Banking Case for any period falling after any date (the "CALCULATION DATE") an amount equal to such Forecast Net Cash Flow for such period discounted back to such calculation date on a semi-annual basis assuming mid period cash flows at the Discount Rate; "NGL" means all hydrocarbon products (including, without limitation, ethane, propane, normal butane, isobutane and natural gasoline) which are produced with or as part of Gas other than Condensate; "NOTICE OF DRAWDOWN" means a notice substantially in the form set out in the Fourth Schedule; "OPERATING AND FINANCING COSTS RESERVE" means a reserve on the books of the Borrower of the same name and which will be "FULLY FUNDED" from time to time if there is credited to such reserve an amount equal to the aggregate of Operating Costs and Financing Expenses, in each case, projected and estimated in the then Current Banking Case to fall due for payment during the period beginning on the most recent Calculation Date to have occurred prior to the delivery of the draft banking case which, when approved pursuant to Clause 19.6 or revised pursuant to Clause 19.10, became such Current Banking Case and ending on the next Calculation Date to occur after that first mentioned Calculation Date; "OPERATING COSTS" in respect of any period means all direct and indirect costs and expenses of an operating but not a capital nature incurred by the Borrower pursuant to the Project Agreements during such period in connection with the operation of the Britannia Field and Britannia Field Facilities to the extent attributable to the Borrower's interest therein including general and administrative costs of the Operator under the Unit Operating Agreement and costs of maintenance and repair (including any amount payable to a buyer of Petroleum in settlement of any obligation of the Borrower under any agreement for the sale thereof) but so as to exclude any costs or expenses which have been classified hereunder as Abandonment Costs, Capital Expenditure, GSA Refunds, Financing Expenses, Hedging Payments, Insurance Costs, Overlifting Costs, Project Taxes, Royalties, Transportation Costs, Trust Fund Costs, any amounts payable by the Borrower in respect of its indebtedness for borrowed money (other than any indebtedness for borrowed money permitted by Clause 24 (x) (c) but without double counting such - 14 - 20 indebtedness for borrowed money with the expenditure which such indebtedness for borrowed money is financing) and any amounts payable to the Sponsor under the Administrative Services Agreement; "OPERATOR" means Britannia Operator Limited as the person so designated or appointed from time to time as the operator of the Britannia Field pursuant to the Unit Operating Agreement or any successor thereto in such capacity; "OPERATOR MAINTAINED INSURANCES" is defined in Clause 26.2(i); "OPERATOR'S CURRENT FORECAST" means each report and forecast (if any) prepared by the Operator for each calendar month and delivered to each of the Britannia Coventurers setting out the Operator's statement of all expenditure incurred in respect of the project and its forecast of all future expenditure required to complete the Project and otherwise required in relation to the Project; "ORIGINAL BANKING CASE" means the banking case of the Borrower set out as the Tenth Schedule; "ORIGINAL FINANCIAL STATEMENTS" means in relation to: (i) the Borrower, its unaudited financial statements for its financial year ended 31 December 1994; (ii) the Sponsor, its audited financial statements for the financial year ended 31 December 1994; and (iii) UTPH, its audited financial statements for the financial year ended 31 December 1994; "OVERLIFTING COSTS" means in respect of any period any amount due and payable by the Borrower (i) as consideration for the overlifting of Petroleum pursuant to Exhibit G of the Unit Operating Agreement or (ii) as consideration for the overlifting of Petroleum pursuant to Exhibit L of the Unit Operating Agreement but so as to exclude any amounts classified hereunder as Operating Costs, Project Taxes, Royalties and Transportation Costs; "PERMITTED EXPENDITURE" in respect of any period means expenditure by the Borrower during such period in respect of Abandonment Costs, Capital Expenditure, GSA Refunds, Hedging Payments, Insurance Costs, Operating Costs, Overlifting Costs, Project Taxes, Royalties, Transportation Costs and Trust Fund Costs; "PETROLEUM" has the meaning specified in the Unit Operating Agreement; "POTENTIAL EVENT OF DEFAULT" means any event which would become (with the passage of time, the giving of notice, the making of any determination hereunder or any combination thereof) an Event of Default; "PRE-COMPLETION AVAILABLE FUNDING" at any time means the aggregate of (without double counting): (i) the Available Facility; - 15 - 21 (ii) the balance then standing to the credit of the Projects Accounts and available for release to the Borrower pursuant to Clause 34.7; and (iii) the Sponsor's unfunded commitment under Clause 2.1 of the Sponsor Support Agreement (assuming no Event of Default mentioned in Clause 28.1(vi), (vii), (viii) or (ix) has occurred in relation to the Sponsor and is continuing); and (iv) any other amount which the Borrower has demonstrated to the satisfaction of an Instructing Group is then unconditionally available for disbursement to the Borrower on or prior to the Project Completion Date by way of contribution to the Borrower's share capital or drawings under a lending facility which will give rise to Subordinated Debt; "PRE-COMPLETION EXPENDITURE" means at any time the aggregate of (without double counting and only to the extent not previously paid): (i) Permitted Expenditure (but, for the purposes of this paragraph (i) the amount of Project Taxes included within such Permitted Expenditure shall be the higher of (i) and (ii) as set out in the definition of Project Taxes in this Clause 1.1) projected and estimated in the Current Banking Case as falling due for payment on or prior to the Project Completion Date; (ii) Forecast Debt Service projected and estimated in the Current Banking Case as falling due for payment on or prior to the Project Completion Date; (iii) fees and disbursements of professional advisers properly incurred by the Borrower in connection with the Financing Agreements; and (iv) any other financial obligations of the Borrower in respect of the Project Agreements or otherwise in respect of the Project Interest projected and estimated in the Current Banking Case as falling due for payment on or prior to the Project Completion Date; "PRIMARY ECONOMIC ASSUMPTIONS" means those assumptions referred to in paragraphs (i) to (viii) in the definition of "Economic Assumptions" in this Clause 1.1; "PROCEEDS ACCOUNT" means the account of the Borrower with the Account Bank (including sub-accounts into which such account may be divided) designated "UNION TEXAS BRITANNIA LIMITED - PROCEEDS ACCOUNT" and described in Clause 34.1 and any account (and subaccounts) opened by any successor to the Account Bank in relation thereto pursuant to Clause 34.1(iii) as any such account may be renewed, redesignated or renumbered from time to time; "PROJECT" means the development and operation of the Britannia Field (including, without limitation, the sale or other distribution of Britannia Petroleum) and the development, construction and operation of the Britannia Field Facilities in accordance with the Licences, the Project Agreements and the Development Plan relating thereto; - 16 - 22 "PROJECT ACCOUNTS" means the Proceeds Account, the Insurance Account and the VAT Account; "PROJECT AGREEMENTS" means: (i) the Licences and each of the deeds and other agreements, brief particulars of which are set out in the Sixth Schedule; (ii) each of the agreements (a) required for the development and operation of the Britannia Field and the Britannia Field Facilities or (b) relating to the joint venture arrangements concerning the Project, in each case to which the Borrower is, or hereafter becomes, a party or (where the Borrower is not a party) under which the Borrower has, or hereafter acquires and/or assumes rights and/or obligations but, in each case, only if such agreement is material to the Project or the interests of the Beneficiaries; (iii) each of the agreements required for the transportation or relating to the disposal of Petroleum or other products of the Project to which the Borrower is, or hereafter becomes, a party or (where the Borrower is not a party) under which the Borrower has, or hereafter acquires benefits but, in each case, only if such agreement is material to the Project or the interests of the Beneficiaries (in each case) where the amounts received or receivable, or paid or payable, by the Borrower thereunder or pursuant thereto (whether in respect of the transportation or disposal of Petroleum or otherwise) are or are proposed to be taken into account in any material respect for the purpose of calculating the Forecast Net Cash Flow or the Net Cash Flow for any period; and (iv) such other agreements as may be designated Project Agreements by the Borrower and the Facility Agent, as any such agreement may be amended, varied or replaced with the approval of an Instructing Group in accordance with Clause 24(i); "PROJECT COMPLETION DATE" means either of the dates referred to in Clause 21.2 or Clause 21.4, whichever actually occurs; "PROJECT COMPLETION TESTS" means those tests set out in the Seventh Schedule; "PROJECT INTEREST" means all the Borrower's rights, title and interest from time to time in and to each of the following: (i) the Project Agreements; (ii) the Britannia Field Facilities; (iii) all Britannia Petroleum; (iv) every contract for the sale or other disposal of Britannia Petroleum and the proceeds of all such sales or other disposals; - 17 - 23 (v) every contract (not falling within (i) above) for the use by any third party of any of the Britannia Field Facilities; and (vi) any and all other contracts or agreements entered into by the Borrower, insurance policies required to be maintained pursuant to Clause 26, permits, leases, licences, consents, easements, way leaves and other rights now or hereafter existing which relate to the development, construction, maintenance or use of any of the Britannia Field Facilities, the development and operation of the Britannia Field or the production, transportation, storage, processing or marketing of Britannia Petroleum or which otherwise relate to any of the Project Agreements; "PROJECT RECEIPTS" in respect of any period means the aggregate (without double counting) of: (i) the revenues received by the Borrower during such period in respect of the sale or other disposal of Britannia Petroleum whether under the Gas Sales Agreements or otherwise (excluding, for the avoidance of doubt, any VAT Receipts in respect of such sale or other disposal); (ii) the revenues received by the Borrower during such period in respect of any tariff receipts or payments received by the Borrower in respect of the use of any of the Britannia Field Facilities (excluding, for the avoidance of doubt, any VAT Receipts in respect of the grant of such use); (iii) all compensation or other consideration received by the Borrower during such period from any entity on account of partial or total nationalisation, expropriation or requisition of the Project Interest; (iv) any and all Insurance Proceeds which are received by the Borrower and payable into the Insurance Account pursuant to Clause 34.6 (ii) during such period in respect of the whole or any part of the Project Interest; (v) any amounts which are received by the Borrower during such period as a result of the sale or other disposal by the Borrower of all or any part of the assets or revenues comprising all or part of the Project Interest (other than Petroleum) in accordance with the Financing Agreements (excluding, for the avoidance of doubt, any VAT Receipts in respect of such sale or other disposal); (vi) any amounts which are received by the Borrower during such period from the Operator by way of refunds under the Unit Operating Agreement; (vii) any interest on any amount credited to any Project Account and any income of any kind received by the Borrower in respect of any Authorised Investment; (viii) any amount paid to the Borrower as a refund of tax or any payment on account of the same; - 18 - 24 (ix) any amounts (excluding Insurance Proceeds) which are received by the Borrower during such period by way of any damages or compensation for the loss of any of the foregoing; (x) any amounts paid to the Borrower as consideration for the underlifting of Petroleum pursuant to Exhibit G of the Unit Operating Agreement or pursuant to Exhibit L of the Unit Operating Agreement; and (xi) any other sums of whatever nature not expressly excluded from paragraphs (i) to (x) above and received by the Borrower during such period which are attributable to the Project Interest or arise pursuant to any Hedging Agreement (excluding, for the avoidance of doubt, any VAT Receipts in respect of such sums); "PROJECT TAXES" in respect of any period means the lesser of (i) the aggregate amount of any tax liabilities (excluding any Royalties) paid by the Borrower during such period taking into account all tax reliefs utilised, and all tax credits received, by the Borrower during such period and (ii) the aggregate amount of any tax liabilities (excluding any Royalties) which would have been paid by the Borrower during such period but for the surrender of Group Relief (as defined in the Sponsor Support Agreement) to the Sponsor pursuant to Clause 4 of the Sponsor Support Agreement; "PROJECTED ABANDONMENT DATE" means at any time the date projected in the Current Banking Case as at such time as being the date on which the Britannia Field Facilities and the Britannia Field will be abandoned in accordance with the terms of the Unit Operating Agreement and all applicable laws, rules and regulations and based on the Independent Engineers' then current analysis of the Estimated Ultimate Recoverable Reserves; "PROVED RESERVES" at any time means those quantities of Britannia Petroleum which, based on analysis of geological and engineering data provided by the Independent Engineers in the then most recent Engineering Report are demonstrated with a high degree of certainty to be recoverable in future years (under economic and operating conditions prevailing at such time) from known reservoirs in the Britannia Field, assuming the continuation of the then current regulatory practices using conventional production methods and equipment; "PROVED RESERVES AND PRODUCTION PROFILES FIGURES" is defined in Clause 19.4(ix); "QUOTATION DATE" means, in relation to any period for which an interest rate is to be determined hereunder, the first day of such period, Provided that, if such day is not the day on which quotations would ordinarily be given by prime banks in the London Interbank Market for deposits in sterling for delivery on the first day of such period, then it means the day on which such quotations would ordinarily be given; "REFERENCE BANKS" means the principal London offices of Chemical Bank, NationsBank, N.A. (Carolinas) and National Westminster Bank Plc or such other bank or banks as may from time to time be agreed between the Borrower and an Instructing Group; - 19 - 25 "RELEVANT INTEREST AMOUNT" in relation to any Beneficiary at any time means the aggregate of all interest, fees, commitment commission or other payments of a revenue nature then due and payable to such Beneficiary under or pursuant to any Financing Agreement; "RELEVANT PRINCIPAL AMOUNT" in relation to any Beneficiary at any time means the aggregate of all principal amounts (including, without limitation, amounts arising in respect of costs and expenses or pursuant to Clause 12 or Clause 14 or otherwise not falling within the definition of Relevant Interest Amount) due and payable to such Beneficiary under or pursuant to any Financing Agreement and, in the case of any such amount arising under any Hedging Agreement such amount shall be determined by reference to the marking to market of such Hedging Agreement in accordance with the relevant Hedging Agreement; "REPAYMENT DATE" means the last business day in each of the calendar months appearing in Column A of the Fifth Schedule; "RESERVE TAIL COVER RATIO" or "RTCR" for any Calculation Date means the value determined by the Current Banking Case as being the ratio (expressed as the result of dividing (i) below by (ii) below) of: (i) the Net Present Value of Forecast Net Cash Flow for the period (1) commencing (a) prior to the Project Completion Date, on the date projected to be the Project Completion Date in the Current Banking Case and (b) on or after the Project Completion Date, on such Calculation Date and (2) ending on the Reserve Tail Date; to (ii) the maximum amount which the Current Banking Case estimates the Loan will be at or any time after such Calculation Date ("PEAK DEBT") less the amount of the Loan then forecast in such Banking Case to be repaid on the Repayment Date immediately following such Calculation Date Provided that such subtraction shall only be made if such Calculation Date falls on or after 30 June, 1999 and if (a) the Current Banking Case projects that there will be received into the Proceeds Account sufficient cash so that on the Repayment Date falling immediately after such Calculation Date the Borrower will be able to satisfy its obligations under Clause 10.1 in respect of such Repayment Date or (b) the then current Net Cash Flow report prepared pursuant to Clause 18.4 demonstrates that the Available Cash Flow received by the Borrower during the Semi-Annual Cash Flow Period to which such report relates would enable the Borrower to satisfy its obligations under Clause 10.1 on such Calculation Date as if such Calculation Date were the immediately following Repayment Date; "RESERVE TAIL DATE" means, in respect of any Banking Case, the Calculation Date which falls nearest to the date (the "RELEVANT DATE") on which the volume of Petroleum recoverable from the Britannia Field under economic and operating conditions prevailing at the relevant date is projected, by the Independent Engineers in the most recent Engineering Report to be less than thirty per cent of Estimated Ultimate Recoverable Reserves; "ROYALTIES" in respect of any period means the actual amount in cash of royalties paid by the Borrower during such period under the Licences in respect of Britannia Petroleum Provided that if such royalty - 20 - 26 is payable as Britannia Petroleum then it shall not be taken into account for the purposes of calculating the Net Cash Flow or Forecast Net Cash Flow for such period; "SCOTTISH ASSIGNATION" means the Scottish assignation brief particulars of which are set out at paragraph (iv) of Part 2 of the Third Schedule; "SECRETARY OF STATE" means the United Kingdom Secretary of State for Trade and Industry from time to time or his successor for the time being holding office under the Crown and exercising the powers, duties and functions thereof under the Petroleum (Production) Act 1934, the Pipe-lines Act 1962, the Continental Shelf Act 1964, the Petroleum and Submarine Pipe-lines Act 1975, the Oil and Gas (Enterprise) Act 1982, the Petroleum Act 1987 and under any regulations made pursuant thereto; "SECTION 349 BANK" is defined in Clause 12.4; "SECURITY DOCUMENTS" means each of the documents listed in Part 2 of the Third Schedule and any other agreement, deed or document from time to time executed in favour of the Beneficiaries (or the Facility Agent as trustee for the Beneficiaries) for the purpose of securing all or any of the Borrower's obligations under the Financing Agreements or any of them together with all amendments and variations of, and supplements to, any of the foregoing and "SECURITY DOCUMENT" shall be construed accordingly; "SEMI-ANNUAL CASH FLOW PERIOD" means: (i) the period from the date on which Petroleum revenues are first received by the Borrower to 30 June 1999; and (ii) thereafter a period of six calendar months commencing on the first day after a Calculation Date; "SPONSOR" means Union Texas Petroleum Limited, a company registered in England and Wales with company registration number 708552; "SPONSOR DIRECT AGREEMENT" means the agreement of even date herewith between the Sponsor, the Borrower and the Facility Agent on behalf of the Beneficiaries; "SPONSOR SUPPORT AGREEMENT" means the agreement of even date herewith made between the Borrower and the Sponsor providing for certain support to be given by the Sponsor in relation to the Facility; "STANDBY LETTER OF CREDIT" means an irrevocable, fully revolving, standby letter of credit issued by a bank whose long term debt securities are for the time being rated at least A by Standard & Poor's Corporation and at least A2 by Moody's Investors' Service, Inc. in favour of the Facility Agent as trustee for the Beneficiaries; "SUBORDINATED DEBT" means any indebtedness for borrowed money of the Borrower owed to the Sponsor (whether arising under any UTPL Agreement or otherwise) and includes any interest and any other amounts payable by the Borrower to the Sponsor in respect thereof; - 21 - 27 "TAX DIFFERENTIAL AMOUNT" has the meaning given thereto in the Sponsor Support Agreement; "TECHNICAL AGENTS FEE LETTERS" means the letters dated 17 February 1995 from NationsBank, N.A. (Carolinas) and dated 22 February 1995 from Chemical Bank to the Borrower; "TECHNICAL ASSUMPTIONS" means all assumptions, other than Economic Assumptions, used in the preparation of a Banking Case and includes assumptions as to the occurrence of the Abandonment Date and (before the Project Completion Date has occurred) the Project Completion Date; "TERMINATION DATE" means the earlier of: (i) the date which is six months after the day on which the Project Completion Date occurs; (ii) 31st December 1999; and (iii) the first business day on which the Available Commitment of each of the Banks is zero; "THIRD PARTY INSURANCE" means each of the insurances specified in paragraphs 1 (but only seepage and pollution liability) 2, 3, (but only to the extent of third party liability) 4 and 5 of Part 1 of the Eighth Schedule; "TRANSFER CERTIFICATE" means a certificate substantially in the form set out in the Second Schedule signed by a Bank and a Transferee whereby: (i) such Bank seeks to procure the transfer to such Transferee of all or a part of such Bank's rights and obligations hereunder upon and subject to the terms and conditions set out in Clause 45; and (ii) such Transferee undertakes to perform the obligations it will assume as a result of delivery of such certificate to the Facility Agent as is contemplated in Clause 45.3; "TRANSFER DATE" means, in relation to any Transfer Certificate, the date for the making of the transfer as specified in the schedule to such Transfer Certificate; "TRANSFEREE" means a bank or other financial institution to which a Bank seeks to transfer all or part of such Bank's rights and obligations hereunder; "TRANSPORTATION AGREEMENT" means the agreements brief particulars of which are set out in paragraph 25 of the Sixth Schedule; "TRANSPORTATION COSTS" in respect of any period means the aggregate of all direct or indirect costs and expenses incurred, or to be incurred, by the Borrower during such period in connection with the transportation of any Britannia Petroleum to the extent attributable to the Borrower's interest therein but so as to exclude any Royalties and any amounts payable by the Borrower in respect of its indebtedness for borrowed money; - 22 - 28 "TRUST FUND" means the trust fund established or to be established by the Borrower in accordance with Clause 4.1 of the Abandonment Costs Agreement; "TRUST FUND COSTS" in respect of any period means all amounts payable by the Borrower during such period into the Trust Fund pursuant to Clauses 4.3 or 7.1 of the Abandonment Costs Agreement; "UNIT OPERATING AGREEMENT" means the agreement brief particulars of which are set out at paragraph 1 of the Sixth Schedule; "UTPH" means Union Texas Petroleum Holdings, Inc., a company organised under the laws of the State of Delaware; "UTPL AGREEMENTS" means the Administrative Services Agreement, the Sponsor Direct Agreement and the Sponsor Support Agreement; "UTPL CREDIT TEST" means the tests on the financial standing of the Sponsor specified in Clause 36.1; "VAT ACCOUNT" means the account of the Borrower with the Account Bank (including sub-accounts into which such accounts may be divided) designated the "UNION TEXAS BRITANNIA LIMITED - VAT ACCOUNT" and described in Clause 34.1 and any account (and sub-accounts) opened by any successor to the Account Bank in relation thereto pursuant to Clause 34.1(iii) as any such account may be renewed, redesignated or renumbered from time to time; and "VAT RECEIPTS" is defined in Clause 34.6. 1.2 Any reference in this Agreement to: the "ACCOUNT BANK", the "FACILITY AGENT", the "FUNDING AGENT", any "TECHNICAL AGENT" or any "BANK" or "BENEFICIARY" shall be construed so as to include its and any subsequent successors, permitted Transferees and assigns in accordance with their respective interests; the "AGREED FORM" in relation to any document means a form agreed between the Borrower and the Facility Agent and initialled by the Borrower and the Facility Agent for the purposes of identification; a "BUSINESS DAY" shall be construed as a reference to a day (other than a Saturday or Sunday) on which banks generally are open for business in London; a "CLAUSE" shall, subject to any contrary indication, be construed as a reference to a clause hereof; an "ENCUMBRANCE" shall be construed as a reference to a mortgage, charge, pledge, lien, assignation, or other encumbrance securing any obligation of any person or any other type of preferential arrangement (including, without limitation, title transfer and retention arrangements) having a similar effect; the "EQUIVALENT" at any time in one currency (the "FIRST CURRENCY") of an amount denominated in another currency (the "SECOND CURRENCY") is a reference to the amount of the first currency which could be - 23 - 29 purchased with the amount of the second currency at the spot rate of exchange quoted by the Facility Agent at such time for the purchase of the first currency with the second currency; a "HOLDING COMPANY" of a person shall be construed as a reference to any person of which the first-mentioned person is a subsidiary; "INDEBTEDNESS" shall be construed so as to include any obligation (whether incurred as principal or as surety) for the payment or repayment of money, whether present or future, actual or contingent; "INDEBTEDNESS FOR BORROWED MONEY" shall be construed so as to include, without limitation, any indebtedness of any person for or in respect of: (i) moneys borrowed (whether or not for cash consideration) by whatever means; (ii) amounts raised by acceptance under any acceptance credit facility; (iii) amounts raised under any note purchase facility; (iv) the amounts of any liability in respect of leases or hire purchase contracts which would, in accordance with generally accepted accounting standards in England (and, after the delivery of the first thereof, as used in the most recent audited financial statements of the Borrower delivered pursuant to Clause 17.1), be treated as finance or capital leases; (v) the amount of any liability in respect of any purchase price for assets or services (other than any trade accounts payable by the Borrower in the ordinary course of its business on customary trade terms) the payment of which is deferred for a period in excess of ninety days; (vi) redeemable preference shares; and (vii) amounts raised under any other transaction (including, without limitation, any forward sale or purchase agreement) having the commercial effect of a borrowing, and so as to exclude any liability of the Borrower arising in respect of a cash call made by the Operator under the Unit Operating Agreement and any retrospective adjustment thereto; a "MONTH" is a reference to a period starting on one day in a calendar month and ending on the numerically corresponding day in the next succeeding calendar month save that, where any such period would otherwise end on a day which is not a business day, it shall end on the next succeeding business day, unless that day falls in the calendar month succeeding that in which it would otherwise have ended, in which case it shall end on the immediately preceding business day Provided that, if a period starts on the last business day in a calendar month or if there is no numerically corresponding day in the month in which that period ends, that period shall end on the last business day in that later month (and references to "MONTHS" shall be construed accordingly); - 24 - 30 a "PART" shall, subject to any contrary indication, be construed as a reference to a part hereof; a "PERSON" shall be construed as a reference to any person, firm, company, corporation, government, state or agency of a state or any association or partnership (whether or not having separate legal personality) of two or more of the foregoing; "REPAY" (or any derivative form thereof) shall, subject to any contrary indication, be construed to include "PREPAY" (or, as the case may be, the corresponding derivative form thereof); a "SCHEDULE" shall, subject to any contrary indication, be construed as a reference to a schedule hereto; a "SUBSIDIARY" of a company or corporation shall be construed as a reference to any company or corporation: (i) which is controlled, directly or indirectly, by the first-mentioned company or corporation; (ii) more than half the issued share capital of which is beneficially owned, directly or indirectly, by the first-mentioned company or corporation; or (iii) which is a subsidiary of another subsidiary of the first-mentioned company or corporation, and, for these purposes, a company or corporation shall be treated as being controlled by another if that other company or corporation is able to direct its affairs and/or to control the composition of its board of directors or equivalent body; "TAX" shall be construed so as to include any tax, levy, impost, duty or other charge of a similar nature (including, without limitation, any penalty or interest payable in connection with any failure to pay or any delay in paying any of the same); "VAT" shall be construed as a reference to value added tax including any similar tax which may be imposed in place thereof from time to time; and the "WINDING-UP", "DISSOLUTION" or "ADMINISTRATION" of a company or corporation shall be construed so as to include any equivalent or analogous proceedings under the law of the jurisdiction in which such company or corporation is incorporated or any jurisdiction in which such company or corporation carries on business including the seeking of liquidation, winding-up, reorganisation, dissolution, administration, arrangement, adjustment, protection or relief of debtors. 1.3 "POUND STERLING" and "STERLING" denote lawful currency of the United Kingdom and "$" and "DOLLARS" denote lawful currency of the United States of America. 1.4 Save where the contrary is indicated, any reference in this Agreement to: - 25 - 31 (i) this Agreement, a Project Agreement, a Financing Agreement, licence, permission, model clause or any other agreement or document shall be construed as a reference to this Agreement or, as the case may be, such Project Agreement, Financing Agreement, licence, permission, model clause or other agreement or document as the same may have been, or may from time to time be, amended, varied, novated or supplemented; (ii) a statute shall be construed as a reference to such statute as the same may have been, or may from time to time be, amended or re-enacted; and (iii) a time of day shall be construed as a reference to London time. 1.5 Clause, Part and Schedule headings are for ease of reference only. 1.6 The definitions of Abandonment Costs, Capital Expenditure, Field Life Cover Ratio, Forecast Net Cash Flow, Forecast Project Receipts, GSA Refunds, Insurance Costs, Financing Expenses, Net Cash Flow, Operating Costs, Overlifting Costs, Permitted Expenditure, Project Receipts, Project Taxes, Reserve Tail Cover Ratio, Royalties and Transportation Costs and Trust Fund Costs contained in Clause 1.1 and any reference to tax or taxes herein shall, save as otherwise provided herein, be construed in accordance with accounting principles generally accepted in the United Kingdom and consistently applied and all calculations to be made thereunder shall be made in sterling and, if for the purposes of any such calculation any amount denominated in a currency other than sterling has to be converted into sterling then, save as provided in Clause 19.4(vii) in respect of projections and forecasts, the amount of sterling to be taken into account in such calculation shall be calculated in accordance with accounting principles generally accepted in the United Kingdom and consistently applied. 1.7 Terms and expressions used in the Eighth Schedule shall, unless otherwise defined in this Agreement, be construed in accordance with the respective meanings given thereto by normal market practice in the London insurance market. - 26 - 32 PART 2 THE FACILITY 2. THE FACILITY 2.1 The Banks grant to the Borrower, upon the terms and subject to the conditions hereof, a sterling loan facility in an aggregate amount of the Facility Amount. 2.2 If the Borrower is required to deliver a draft banking case pursuant to Clause 19.1(viii) then such banking case shall contain the same information as was used in the then Current Banking Case but with such changes as shall reflect such revisions to Capital Expenditure, Insurance Costs, Operating Costs, Project Taxes, Royalties, taxes and any other costs and any new tariff charges for the transportation and processing of Gas which will not then be transported through the Britannia Trunkline or processed at the Britannia Gas Terminal all such revisions and new charges being amounts therefor projected by the Operator. 2.3 The Facility Agent shall thereupon calculate an amount being such amount as the banking case delivered pursuant to Clause 19.1(viii) discloses would be equal to (i) the Net Present Value of Forecast Net Cash Flow commencing on the date projected in such banking case to be the Project Completion Date and ending on the Reserve Tail Date divided by (ii) 1.45. 2.4 The Facility Agent shall promptly thereafter notify the Borrower and all the Banks and the other Agents of the amount determined in accordance with Clause 2.3. Upon the date of such notification: (i) the Facility Amount, for all purposes of the Financing Agreements, shall become the greater of the amount determined in accordance with Clause 2.3 (up to a maximum of pound sterling 150,000,000) and pound sterling 140,000,000; (ii) unless the Facility Amount remains at pound sterling 150,000,000, the First Schedule shall be deemed to be amended so that the amount set opposite each Bank's name therein shall be reduced pro rata to the reduction of the Facility Amount from pound sterling 150,000,000 pursuant to Clause 2.4(i); and (iii) unless the Facility Amount remains at pound sterling 150,000,000, the Fifth Schedule shall be deemed to be amended so that each of the amounts set out in Column B thereof shall be reduced pro rata to the reduction of the Facility Amount from pound sterling 150,000,000 pursuant to Clause 2.4(i). 3. PURPOSE 3.1 The Borrower shall apply all amounts advanced to it hereunder on or before the Project Completion Date in or towards: - 27 - 33 (i) Permitted Expenditure incurred by it or reimbursing the Sponsor for Permitted Expenditure paid on behalf of the Borrower and satisfaction of the Borrower's other obligations arising from time to time under the Project Agreements in respect of the development and operating costs of the Project including, without limitation, Permitted Expenditure paid by it (or the Sponsor on its behalf) on or after 1 January 1995; (ii) satisfaction of its obligations from time to time in respect of interest, commitment commission, fees, costs and expenses or other payments which shall have fallen due under the Financing Agreements; and (iii) fees and disbursements of professional advisers properly incurred by the Borrower in connection with the Financing Agreements (other than the Administrative Services Agreement). 3.2 The Borrower shall apply all amounts advanced to it hereunder after the Project Completion Date but on or before the Termination Date either: (i) for the purposes specified in Clause 3.1 (i), (ii) and (iii); or (ii) for general corporate and working capital purposes of the Borrower (including the payment to the Sponsor of any fees accrued prior to the Project Completion Date under the Administrative Services Agreement) and reimbursement of any amount paid on behalf of the Borrower by the Sponsor prior to the Project Completion Date which falls within (iii) in the definition of Insurance Costs in Clause 1.1. 3.3 Notwithstanding any provision to the contrary in Clauses 3.1 or 3.2, the Borrower shall not apply any amount advanced to it hereunder for any purpose which is prohibited by Chapter VI of Part V of the Companies Act 1985. 3.4 Without prejudice to the obligations of the Borrower under Clause 3.1, 3.2 or 3.3, none of the Beneficiaries shall be obliged to concern themselves with the application of amounts raised by the Borrower hereunder. 4. CONDITIONS PRECEDENT Save as the Banks may otherwise agree, the Borrower may not deliver any Notice of Drawdown hereunder unless the Facility Agent has confirmed to the Borrower that it has received all of the documents listed in the Third Schedule and that each is, in form and substance, satisfactory to the Facility Agent. The Facility Agent shall deliver to the Funding Agent, promptly after receipt thereof, a copy of the certificate delivered by the Borrower pursuant to paragraph 3 of Part 1 of the Third Schedule. - 28 - 34 5. NATURE OF BANKS' OBLIGATIONS 5.1 The obligations of each Bank hereunder are several. 5.2 The failure by a Bank to perform its obligations hereunder shall not affect the obligations of the Borrower towards any other party hereto nor shall any other party be liable for the failure by such Bank to perform its obligations hereunder. - 29 - 35 PART 3 AVAILABILITY OF THE FACILITY 6. AVAILABILITY OF THE FACILITY 6.1 Save as otherwise provided herein and subject to Clause 6.3, an Advance will be made by the Banks to the Borrower if: (i) no earlier than 11.00 a.m. on the tenth business day and no later than 11.00 a.m. on the fifth business day before the proposed date for the making of such Advance, both the Facility Agent and the Funding Agent have received from the Borrower a Notice of Drawdown therefor, receipt of which shall oblige the Borrower to borrow the amount therein requested on the date therein stated upon the terms and subject to the conditions contained herein; (ii) the proposed date for the making of such Advance is a business day which is or precedes the Termination Date; (iii) if the proposed Advance is to be made for the purposes specified in Clause 3.2, the Project Completion Date has occurred; (iv) the proposed date for the making of such Advance is not less than five business days after the date upon which the previous Advance (if any) was made hereunder; (v) the proposed amount of such Advance is: (a) a minimum amount of pound sterling 3,000,000 and an integral multiple of pound sterling 1,000,000 which is less than the amount of the Available Facility; or (b) equal to the amount of the Available Facility; (vi) the Borrower has certified in the Notice of Drawdown therefor that the proceeds of such Advance (rounded upwards solely to the extent required to comply with Clause 6.1(v)(a)) (a) when aggregated with the amount then standing to the credit of the Proceeds Account are required by the Borrower for application in or towards meeting costs referred to in Clause 3.1 or Clause 3.2 (i) which have fallen due for payment or which the Borrower anticipates will fall due for payment during the thirty day period commencing on the proposed date for the making of the Advance or (b) will be used for the purposes referred to in Clause 3.2 (ii); (vii) there would not, immediately after the making of such Advance, be more than ten Advances outstanding hereunder; - 30 - 36 (viii) the interest rate applicable to such Advance during its first Interest Period would not fall to be determined pursuant to Clause 9.1; (ix) in the case of an Advance made for the purposes specified in Clause 3.2, (a) on the proposed date for the making of such Advance the RTCR would be at least 1.4 after such Advance is made and (b) the Current Banking Case projects that, in respect of the first Repayment Date, the amount of the Loan which the Borrower will repay on such Repayment Date will not be less than either of the amounts referred to in Clauses 10.1(ii)(a) and (b) for such Repayment Date; (x) the Borrower has not received a notice from the Facility Agent pursuant to any of Clauses 19.1(iii), (iv) (but not where the Instructing Group's opinion that a Material Adverse Effect had occurred which lead to the notice being given pursuant to Clause 19.1 (iv) was based on the average spot price of Brent Crude falling below ten dollars per Barrel as specified in Clause 19.1(iv)), (v) or (vii) or from the Operator pursuant to Clause 19.1(vi) or, if it has received any such notice, if any Banking Case produced following any such notice shows for any Calculation Date an FLCR of not less than 1.3 or an RTCR of not less than 1.2; (xi) the Available Facility is not zero immediately before the making of the Advance; (xii) in the case only of any Advance the proceeds of which are to be applied, in whole or in part, to pay to the Sponsor any fees accrued under the Administrative Services Agreement or to fund any intra-group loan to the Sponsor, the Borrower has delivered to the Facility Agent and the Funding Agent a copy, certified a true copy by a duly authorised officer of the Borrower, of a board resolution of it approving, in the case of the payment of such fees, the specified amount of such fees and, in the case of such loan, such loan and in each case stating that the board considers that the payment of such fees or funding of such loan (as the case may be) will not cause the Borrower to be in breach of Clause 3.3; and (xiii) either: (a) no Event of Default or Potential Event of Default has occurred which has not been waived or remedied and is continuing; and (b) the representations set out in Clauses 22.1 and 22.2 (except Clauses 22.1(ii), 22.2(v), 22.2(vi) and 22.2(viii)) and (in the case of the first Advance only to be made hereunder) Clause 22.4 are true on and as of the proposed date for the making of such Advance, or each of the Banks agrees (notwithstanding any matter mentioned at (a) or (b) above) to participate in the making of such Advance. - 31 - 37 6.2 Notwithstanding any provision to the contrary contained in Clause 6.1, the Borrower may not deliver any Notice of Drawdown hereunder on or after the first Repayment Date (or before such date if the Advance requested therein is to be made on or after such date), and no Bank shall be required to contribute to any Advance, which would have the effect of making the amount of the Loan greater than pound sterling 140,000,000 (or, if column B in the Fifth Schedule has been deemed to have been amended pursuant to Clause 2.4(iii), the amount then deemed to be set out in column B opposite September 1999 in column A). 6.3 Each Bank will participate through its Facility Office in each Advance made pursuant to Clause 6.1 in the proportion borne by its Available Commitment to the Available Facility immediately prior to the making of that Advance. 6.4 If a Bank's Available Commitment is reduced in accordance with the terms hereof after the Facility Agent and the Funding Agent have received the Notice of Drawdown for an Advance, then the amount of that Advance shall be reduced accordingly. 6.5 The Banks acknowledge that the Borrower may, after the date hereof, seek to introduce funding from the European Investment Bank ("EIB") into the financing of the Project which will be severally guaranteed by the Banks under standby letters of credit to be issued by the Facility Agent on their behalf. The Banks confirm that, subject to the conditions specified below, they will, if the Borrower so requests, work in good faith with it and the EIB towards agreeing the basis and documentation upon which funding from the EIB may be introduced. The conditions of the Banks' confirmation are that:- (a) all the Banks are satisfied with the terms of the credit agreement to be entered into by the EIB and the Borrower and any related documentation; (b) such amendments are made to this Agreement and any other Financing Agreements as may be considered necessary or desirable by all the Banks; (c) the FLCR and the RTCR are no worse than those which at the relevant time exist under the financing provided by the Financing Agreements and would continue to be no worse than those ratios if the EIB funding were introduced; and (d) no Event of Default or Potential Event of Default has occurred or will occur as a result of the introduction of such EIB funding. - 32 - 38 PART 4 INTEREST 7. INTEREST PERIODS 7.1 The period for which an Advance is outstanding shall be divided into successive periods each of which (other than the first) shall start on the last day of the preceding such period. 7.2 The duration of each Interest Period shall, save as otherwise provided herein, be one, three or six months or, with the consent of all the Banks, having regard to the provisions of paragraph (i) (b) below, any longer period, as the Borrower may in each case select by notice to the Funding Agent no later than 11.00 a.m. on the fifth business day preceding the first day of such Interest Period (and the Funding Agent shall inform each Bank of the contents of such notice no later than 11.00 a.m. on the fourth business day preceding the first day of such Interest Period) Provided that: (i) if the Borrower selects a duration of more than six months in relation to an Interest Period, then: (a) the Borrower may, at the same time, notify the Funding Agent of its selection of a duration of one, three or six months to apply should the Borrower's selection become ineffective pursuant to paragraph (b) below; and (b) any Bank may, at any time before 11.00 a.m. on the third business day preceding the first day of such Interest Period, notify the Funding Agent of its objections to the Borrower's selection, whereupon such selection shall become ineffective; (ii) if the Borrower fails to give such notice of its selection in relation to an Interest Period, or if its selection becomes ineffective under (i)(b) above and the Borrower has failed to give the Funding Agent any permitted alternative selection pursuant to (i)(a) above, then the duration of that Interest Period shall, subject to (iii) and (iv) below, be one month; (iii) if requested by the Borrower, any Interest Period which begins during or at the same time as any other Interest Period shall end at the same time as that other Interest Period; (iv) any Interest Period which would otherwise end during the month preceding, or extend beyond, the Final Maturity Date shall be of such duration that it shall end on the Final Maturity Date; and (v) the Borrower shall make its selection of Interest Periods so that at all times it is able to comply with its obligations under Clause 10 without incurring any costs under Clause 29.4. - 33 - 39 7.3 If two or more Interest Periods end at the same time, then, on the last day of those Interest Periods, the Advances to which they relate shall, at the option of the Borrower, be consolidated into (and thereafter, save as otherwise provided herein, treated in all respects as) a single Advance. 8. INTEREST 8.1 On the last day of each Interest Period (and, in the case of any Interest Period of more than six months' duration, on the last day of each successive period of six months which occurs during such Interest Period) the Borrower shall pay accrued interest on the Advance to which such Interest Period relates. 8.2 The rate of interest applicable to an Advance from time to time during an Interest Period relating thereto shall be the rate per annum which is the sum of the Applicable Margin at such time, the Associated Costs Rate in respect thereof at such time and LIBOR on the Quotation Date therefor. 9. ALTERNATIVE INTEREST RATES 9.1 If: (i) the Funding Agent determines that at or about 11.00 a.m. on the Quotation Date for an Interest Period in respect of an Advance none of the Reference Banks was offering to prime banks in the London Interbank Market deposits in sterling, in each case, for the proposed duration of such Interest Period; or (ii) before the close of business in London on the Quotation Date for an Interest Period in respect of an Advance, the Funding Agent has been notified by a Bank or each of a group of Banks to which in aggregate thirty-five per cent. or more of the Loan is (or, if an Advance were then made, would be) owed that the rate at which such deposits were being so offered does not fairly reflect the cost to it of obtaining such deposits, then, notwithstanding the provisions of Clauses 7 and 8: (a) if paragraph (i) above applies, the duration of that Interest Period shall be one month or, if less, such that it shall end on the next succeeding Repayment Date; and (b) if paragraph (i) or (ii) above applies, the rate of interest applicable to each Bank's portion of such Advance from time to time during such Interest Period shall be the rate per annum which is the sum of the Applicable Margin at such time, the Associated Costs Rate in respect thereof at such time and the rate per annum notified to the Funding Agent by such Bank before the last day of such Interest Period to be that which expresses as a percentage rate per annum the cost to such Bank of funding from whatever sources it may reasonably select its portion of such Advance during such Interest Period. - 34 - 40 9.2 If (i) either of those events mentioned at paragraphs (i) and (ii) in Clause 9.1 occurs or (ii) by reason of circumstances affecting the London Interbank Market during any period of three consecutive business days none of the Reference Banks offers deposits in sterling to prime banks in the London Interbank Market, then: (a) the Funding Agent shall notify the Borrower and the Banks promptly of such event; and (b) if the Funding Agent or the Borrower requires within five days of such notification, the Funding Agent and the Borrower shall enter into good faith negotiations with a view to agreeing a substitute basis (1) for determining the rates of interest from time to time applicable to the Advances and/or (2) upon which the Advances may be maintained (whether in sterling or some other currency) thereafter, and any such substitute basis that is agreed shall take effect in accordance with its terms and be binding on each party hereto Provided that the Funding Agent may not agree any such substitute basis without the prior consent of each Bank. If no substitute basis is agreed the Borrower may, at its option, prepay (without premium or penalty but subject to Clause 29.4) all of the Advances on any business day thereafter. - 35 - 41 PART 5 REPAYMENT, CANCELLATION AND PREPAYMENT 10. REPAYMENT OF THE LOAN 10.1 The Borrower shall make such repayments of the Loan as are required so that the Loan is reduced on each Repayment Date by an amount equal to the lesser of: (i) an amount equal to one hundred per cent. of the Available Cash Flow, during the Semi-Annual Cash Flow Period immediately preceding such Repayment Date plus any amount payable under Clause 3.2 of the Sponsor Support Agreement; and (ii) an amount equal to the greatest of: (a) the amount required to ensure that the amount of the Loan outstanding after such repayment on such Repayment Date does not exceed the amount set out in column B of the Fifth Schedule for that Repayment Date; (b) the amount by which the Current Banking Case demonstrates that the Loan is required to be reduced on such Repayment Date so that the RTCR on each Calculation Date as determined in the Current Banking Case will be at least 1.35 after taking account of such repayment Provided that if the Borrower has delivered a draft banking case to the Facility Agent which has not yet become a Banking Case (as defined in Clause 1.1) then, if the Facility Agent so determines, references in this Clause 10.1(ii)(b) to the Current Banking Case shall be replaced by references to such draft banking case; and (c) sixty per cent. of Available Cash Flow: (1) in the case of the first Repayment Date, arising on or before the Calculation Date immediately preceding such Repayment Date and calculated by reference to the latest Net Cash Flow report delivered by the Borrower pursuant to Clause 18.4 in respect thereof; and (2) in the case of each subsequent Repayment Date, arising in the Semi-Annual Cash Flow Period immediately preceding such Repayment Date and calculated by reference to the latest Net Cash Flow report delivered by the Borrower pursuant to Clause 18.4 in respect thereof. 10.2 If at any time the Current Banking Case projects and estimates that the FLCR and RTCR in respect of any Calculation Date is or will be less than 1.3 (in the case of the FLCR) or less than 1.2 (in the case of the RTCR), then within forty days of that Current Banking Case being delivered to the Facility Agent the Borrower shall repay such amount of the Loan in accordance with the terms and conditions hereof (including, without limitation, Clause 29.4) as is necessary to ensure that after such - 36 - 42 prepayment and at all times thereafter the FLCR is equal to or greater than 1.3 and the RTCR is equal to or greater than 1.2. 10.3 If in respect of any draft banking case: (i) any dispute in respect thereof has been referred to an Independent Expert pursuant to Clause 19.9; (ii) the Independent Expert has not made a determination on the matter in dispute by any Repayment Date (the "AFFECTED REPAYMENT DATE"); and (iii) when the Independent Expert makes a determination the resultant effect of such determination upon the calculation of the RTCR in such Banking Case is that, if such Banking Case had been the Current Banking Case on the Affected Repayment Date, the Borrower would have been obliged to pay a larger amount (the "REVISED AMOUNT") on the Affected Repayment Date than that which it was then obliged to pay, then the Borrower shall make a further repayment of the Loan on the fifth business day after the day on which the Borrower is required to deliver a revised banking case to the Facility Agent pursuant to Clause 19.10 in an amount equal to the difference between the amount which the Borrower was due to repay on the Affected Repayment Date and the Revised Amount. 10.4 Notwithstanding anything to the contrary in any Financing Agreement, all amounts outstanding in respect of the Loan shall have been repaid in full on or before the Final Maturity Date. 10.5 To the extent that the Sponsor is obliged to pay any amount to the Borrower pursuant to Clause 3.2 of the Sponsor Support Agreement, the Borrower will apply such amount immediately upon receipt thereof (and the Account Bank is hereby authorised, under instructions from the Facility Agent, to make any application of such amount which is paid into the Proceeds Account) in order to satisfy its obligations under Clause 10.1 on such date. 11. CANCELLATION AND PREPAYMENT 11.1 Subject as provided in Clause 11.2, the Borrower may, by giving to both the Facility Agent and the Funding Agent not less than ten days' prior notice to that effect, cancel (without premium or penalty) the whole or any part (being a minimum amount of pound sterling 3,000,000 and an integral multiple of pound sterling 1,000,000) of the Available Facility. Any such cancellation shall reduce the Available Commitments of the Banks rateably. 11.2 The Borrower shall not be entitled to cancel any part of the Available Facility under Clause 11.1 (and no Bank's Available Commitment shall be reduced to zero pursuant to Clause 11.9) at any time prior to the Project Completion Date unless the Borrower has demonstrated to the reasonable satisfaction of an Instructing Group that it no longer requires the amount which is to be so cancelled in order to meet the cost to it of completing the Project by means of the Project Completion Tests being satisfied or it has raised, or has obtained unconditional legal commitments entitling it to raise (but only by the raising of - 37 - 43 any Subordinated Debt or equity) amounts not less than the amounts then required to finance such obligations, including a reasonable provision in respect of unforeseen costs, (after taking into account any amounts which have not been so cancelled and which remain available hereunder) and such amounts are available for, and are dedicated in a manner satisfactory to an Instructing Group to, the financing of such requirements and that the Borrower has agreed with the Facility Agent and all relevant Hedge Counterparties such modifications to the Approved Hedging Programme and any Hedging Agreement as the Facility Agent shall determine to be appropriate and the Borrower has demonstrated that it will be able to meet all additional obligations, if any, arising from such modification and the implementation thereof. 11.3 The Borrower may, if it has given to the Funding Agent not less than ten days' prior written notice to that effect, prepay (without premium or penalty but subject to Clause 29.4) the whole of any Advance or any part of any Advance (being a minimum amount of pound sterling 3,000,000 and an integral multiple of pound sterling 1,000,000) on any business day which ends after the Termination Date. 11.4 The Borrower may, if it has given to the Funding Agent not less than ten days' prior written notice to that effect, at any time (without penalty or premium but subject to Clause 29.4): (i) prepay the Loan in full together with accrued interest thereon and all other amounts outstanding hereunder; (ii) cancel in full the Available Facility; and (iii) satisfy all its other obligations and liabilities under each other Financing Agreement (including, without limitation, the making of such payments to Hedge Counterparties as are required by the relevant Hedging Agreements such that each shall be released from all obligations and liabilities arising under or pursuant to the relevant Hedging Agreement). 11.5 Any notice of cancellation or prepayment given by the Borrower pursuant to Clause 11.1, 11.3 or 11.4 shall be irrevocable, shall specify the date upon which such cancellation or prepayment is to be made and the amount of such cancellation or prepayment and, in the case of a notice of prepayment, shall oblige the Borrower to make such prepayment on such date. 11.6 If any Bank claims indemnification from the Borrower under Clause 12.2 or Clause 14.1 or an amount becomes payable to any Bank pursuant to Clause 12.1 and within thirty days thereafter the Funding Agent receives from the Borrower notice (which shall be irrevocable) of the Borrower's intention to repay such Bank's share of the Loan, the Borrower shall repay such Bank's share of the Loan together with accrued interest thereon but only in accordance with and subject to Clause 11.7, Clause 11.8 and Clause 29.4. 11.7 If, at any time, the Borrower gives any notice of its intention to pay any amount pursuant to Clause 11.6 or becomes obliged to pay any amount for the account of any Bank pursuant to Clause 11.6 or Clause 15(ii) (any such amount being a "RELEVANT SUM"), then such relevant sum shall be paid by the Borrower in the manner specified in Clause 11.8 Provided that, without prejudice to the obligations of - 38 - 44 the Borrower under Clauses 12.1, 12.2, 14.1 or 29, no payments shall be made pursuant to this Clause 11.7 or Clause 11.8 at any time whilst any Event of Default or Potential Event of Default has occurred and not been remedied or waived and unless and until the Borrower has agreed with the Facility Agent and all relevant Hedge Counterparties (acting reasonably) such modifications to the Approved Hedging Programme as the Facility Agent shall determine (acting reasonably) to be appropriate and the Borrower has demonstrated to the satisfaction of the Facility Agent (acting reasonably) that it will be able to meet all additional obligations, if any, arising from such modification and the implementation thereof. 11.8 If on or before the third business day prior to any Repayment Date the Borrower's intention to repay any relevant sum or sums has been notified pursuant to Clause 11.6, then on such Repayment Date the Borrower shall pay to the Funding Agent for the account of the Bank or Banks to which such relevant sum or sums are owed, amounts equal to the relevant sums (or any unpaid part thereof) respectively owing to them or, if less, an aggregate amount equal to the excess of Available Cash Flow for the then immediately preceding Semi-Annual Cash Flow Period over the aggregate amount to be applied by the Borrower pursuant to Clause 10 in respect of such Repayment Date. 11.9 Subject to Clause 11.2, in the case of any repayment obligation arising by reason of any notice given by the Borrower pursuant to Clause 11.6, a Bank for whose account a repayment is to be made under Clause 11.6, 11.7 and 11.8 or Clause 15(ii) shall not be obliged to make any advances hereunder on or after the date upon which the Funding Agent receives the Borrower's notice of its intention to repay such Bank's share of the Loan, on which date such Bank's Available Commitment shall be reduced to zero. 11.10 The Borrower shall not repay all or any part of the Loan except at the times and in the manner expressly provided for in this Agreement and shall not be entitled to reborrow any amount repaid. - 39 - 45 PART 6 CHANGES IN CIRCUMSTANCES 12. TAXES 12.1 All payments to be made by the Borrower to any person hereunder shall be made free and clear of and without deduction for or on account of tax unless the Borrower is required to make such a payment subject to the deduction or withholding of tax, in which case the sum payable by the Borrower in respect of which such deduction or withholding is required to be made shall, subject to Clause 12.4 and 12.5, be increased to the extent necessary to ensure that, after the making of the required deduction or withholding, such person receives and retains (free from any liability in respect of any such deduction or withholding) a net sum equal to the sum which it would have received and so retained had no such deduction or withholding been made or required to be made. 12.2 Without prejudice to the provisions of Clause 12.1, if any person or any Agent on its behalf is required to make any payment on account of tax (not being a tax imposed on its overall net income or on the net income of its Facility Office by the jurisdiction in which it is incorporated or in which its Facility Office is located) on or in relation to any sum received or receivable hereunder by such person or such Agent on its behalf (including, without limitation, any sum received or receivable under this Clause 12) or any liability in respect of any such payment is asserted, imposed, levied or assessed against such person or such Agent on its behalf, the Borrower shall, within fifteen days of a demand of such Agent but subject to Clauses 12.4 and 12.5, indemnify such person against such payment or liability, together with any interest, penalties and expenses payable or incurred in connection therewith. 12.3 A Bank intending to make a claim pursuant to Clause 12.2 shall notify the Facility Agent of the event by reason of which it is entitled to do so, whereupon the Facility Agent shall notify the Borrower thereof Provided that nothing herein shall require such Bank to disclose any confidential information relating to the organisation of its affairs. 12.4 If any Bank whose Facility Office is in the United Kingdom, otherwise than by reason of any change in law or in the interpretation or administration thereof or any change in any published extra-statutory or revenue concession: (i) is not or ceases to be recognised by the United Kingdom Inland Revenue as a bank carrying on a bona fide banking business in the United Kingdom for the purposes of Section 349 of the Income and Corporation Taxes Act 1988 (a "SECTION 349 BANK"); or (ii) does not take or ceases to take any interest received by it hereunder into account as a trading receipt of its banking business in the United Kingdom, - 40 - 46 then the Borrower shall not be liable to pay to such Bank under Clause 12.1 or 12.2 any amount in excess of the amount it would have been obliged to pay if such Bank was or had not ceased to be so recognised by the Inland Revenue or, as the case may be, had brought such payments into account as a trading receipt of its banking business in the United Kingdom. 12.5 If any Bank whose Facility Office is outside the United Kingdom, otherwise than by reason of any change in law, regulation or treaty or any change in its interpretation or administration or any change in any extra-statutory or revenue concession, is not or ceases to be entitled by virtue of an applicable double tax treaty to receive payments from the Borrower hereunder without deduction of United Kingdom withholding tax (a Bank whose Facility Office is outside the United Kingdom and is also so entitled under such double tax treaty, having made all appropriate claims under such treaty, being a "DOUBLE TAXATION TREATY BANK"), then the Borrower shall not be liable to pay to such Bank under Clause 12.1 or 12.2 any amount in excess of the amount it would have been obliged to pay if such Bank had been so entitled to receive payments hereunder from the Borrower, and had made all appropriate claims to obtain such payments, without deduction of United Kingdom withholding tax. 12.6 If: (i) any Bank whose Facility Office is in the United Kingdom is not, or ceases to be, a Section 349 Bank or is notified by the Inland Revenue that it will cease to be a Section 349 Bank and/or does not bring interest received by it hereunder as a trading receipt of its banking business in the United Kingdom; or (ii) any Bank whose Facility Office is outside the United Kingdom is not, or ceases to be, a Double Taxation Treaty Bank, it shall give notice thereof to the Borrower through the Facility Agent promptly upon its Facility Office becoming aware of the same. 12.7 Each Bank hereby represents to the Borrower that at the date hereof it is a Section 349 Bank or a Double Taxation Treaty Bank. 13. TAX RECEIPTS 13.1 If, at any time, the Borrower is required by law to make any deduction or withholding from any sum payable by it hereunder (or if thereafter there is any change in the rates at which or the manner in which such deductions or withholdings are calculated), the Borrower shall promptly notify both the Facility Agent and the Funding Agent. 13.2 If the Borrower makes any payment hereunder in respect of which it is required to make any deduction or withholding, it shall pay the full amount required to be deducted or withheld (net of any allowable deductions or other amounts) to the relevant taxation or other authority within the time allowed for such payment under applicable law and shall deliver to the Facility Agent for each Bank, within thirty days after it has made such payment to the applicable authority, an original receipt (or a certified copy thereof) issued by such authority evidencing the payment to such authority of all amounts so required to - 41 - 47 be deducted or withheld (and details of any allowed deductions therefrom) in respect of that Bank's share of such payment. 13.3 If an additional payment is made under Clause 12.1 or 12.2 by the Borrower for the benefit of any person and such person, in its sole discretion, determines that it has received a refund or repayment of any tax or been granted and derived use and benefit from a credit against, a relief or remission for any tax, then, if and to the extent that such person, in its sole opinion, determines that such credit, relief, remission, refund or repayment is in respect of the deduction or withholding giving rise to such additional payment or, in the case of an additional payment made pursuant to Clause 12.2, with reference to the liability, expense or loss to which the payment giving rise to the additional payment relates, such person shall, to the extent that it can do so without prejudice to the retention of the amount of such credit, relief, remission, refund or repayment, pay to the Borrower such amount as such person shall, in its sole opinion, have concluded to be attributable to such deduction or withholding or, as the case may be, such liability, expense or loss and such person shall provide to the Borrower a certificate of a duly authorised officer of it certifying the amount claimed. Any such payment shall be conclusive evidence (in the absence of manifest error) of the amount due to the Borrower hereunder and shall be accepted by the Borrower in full and final settlement of its rights of reimbursement hereunder in respect of such deduction or withholding. 13.4 Nothing herein contained shall interfere with the right of any person to arrange its tax affairs in whatever manner it thinks fit nor oblige any person to disclose any confidential information relating to its tax affairs or any computations in respect thereof and, in particular, none of the Beneficiaries shall be under any obligation to claim credit, relief, remission or repayment from or against its corporate profits or similar tax liability in respect of the amount of such deduction or withholding in priority to any other claims, reliefs, credits or deductions available to it. 13.5 If any person makes any payment to the Borrower pursuant to Clause 13.3 and such person subsequently determines, in its sole opinion, that the credit, relief, remission, refund or repayment in respect of which such payment was made was not available to it or has been withdrawn from it or that it was unable to use such credit, relief, remission, refund or repayment in full, such person shall provide to the Borrower a certificate of a duly authorised officer of it certifying the amount claimed and the Borrower shall reimburse such person to the extent such person determines, in its sole opinion acting in good faith, to be required to place it in the same after-tax position as it would have been in if such credit, relief, remission, refund or repayment had been obtained and fully used and retained by such person. 14. INCREASED COSTS 14.1 If, by reason of (i) any change in law or in its interpretation or administration and/or (ii) compliance with any request from or requirement of any central bank (other than, save in the case of (e) below, the requirements of the Bank of England reflected in the Associated Costs Rate) or other fiscal, monetary or other authority whether or not having the force of law (including, without limitation, a request or requirement which affects the manner in which a Bank or any holding company of a Bank allocates capital resources to its obligations hereunder but excluding the implementation by any authority or government of any of the matters set out in the Basle Paper in the jurisdiction in which such Bank or any holding company of such Bank is incorporated, in which such Bank or any holding company - 42 - 48 of such Bank carries on business or in which such Bank's Facility Office is located, unless the same arises from any renewal or modification of the Basle Paper to the extent that the same results in a change in the implementation or administration of the Basle Paper as implemented at the date hereof): (a) a Bank or any holding company of such Bank incurs a cost as a result of such Bank's having entered into and/or performing its obligations under this Agreement and/or assuming or maintaining a commitment under this Agreement and/or making one or more advances hereunder; (b) a Bank or any holding company of such Bank is unable to obtain the rate of return on its overall capital (save that, in the case of such holding company, the relevant rates of return shall be determined on a consolidated basis) which it would have been able to obtain but for its having entered into and/or performing its obligations and/or assuming or maintaining a commitment under this Agreement and/or making one or more Advances hereunder; (c) there is any increase in the cost to a Bank or any holding company of such Bank of funding or maintaining all or any of the advances comprised in a class of advances formed by or including the advances made or to be made by such Bank hereunder; (d) a Bank or any holding company of such Bank becomes liable to make any payment on account of tax or otherwise (not being a tax imposed on its overall net income or on the net income of such Bank's Facility Office by the jurisdiction in which it is incorporated or in which its Facility Office is located) on or calculated by reference to the amount of the advances made or to be made by such Bank hereunder and/or to any sum received or receivable by it hereunder; or (e) the Associated Costs Rate, as calculated hereunder, does not represent the cost to any Bank of complying with the requirements of the Bank of England in relation to its funding or maintaining advances hereunder, then the Borrower shall, from time to time on demand of the Facility Agent, within fifteen days of a demand pay to the Facility Agent for the account of that Bank amounts sufficient to indemnify that Bank or any such holding company (except in the case of a holding company, to the extent that such holding company has been indemnified in respect of the same cost, liability or reduction in rate of return) against, as the case may be, (1) such cost, (2) such reduction in such rate of return (or such proportion of such reduction as is, in the opinion of that Bank, attributable to its obligations hereunder), (3) such increased cost (or such proportion of such increased cost as is, in the reasonable opinion of that Bank, attributable to its funding or maintaining advances hereunder), (4) such liability or (5) such portion of such cost as is not represented by the Associated Costs Rate. 14.2 A Bank intending to make a claim pursuant to Clause 14.1 shall deliver to the Borrower, through the Facility Agent, a certificate to that effect specifying the event by reason of which it is entitled to make such claim and the amount of such claim Provided that: (i) nothing herein shall require such Bank to disclose any confidential information relating to the organisation of its affairs; and (ii) if the event by - 43 - 49 reason of which such Bank claims to be entitled to make a claim falls within any of paragraphs (a), (b), (c), (d) and (e) of Clause 14.1 and such Bank fails to deliver such certificate within thirty days of an officer of that Bank with responsibility for its participation in the Facility becoming aware of such event and the possible results thereof referred to in Clause 14.1, then such Bank shall not be entitled to make any claim under Clause 14.1 in respect of such event for the period falling more than thirty days before the date upon which it delivers such certificate. 15. ILLEGALITY If, at any time, it is unlawful for a Bank to make, fund or allow to remain outstanding all or any of the advances made or to be made by it hereunder, then that Bank shall, promptly after becoming aware of the same, deliver to the Borrower through the Facility Agent a certificate to that effect and, unless such illegality is avoided in accordance with Clause 16: (i) such Bank shall not thereafter be obliged to make advances hereunder and the amount of its Available Commitment shall be immediately reduced to zero; and (ii) if the Facility Agent on behalf of such Bank so requires, the Borrower shall repay (without premium or penalty but subject to Clause 29.4) such Bank's share of any outstanding Advances together with accrued interest thereon but only in accordance with and subject to Clauses 11.6, 11.7 and 11.8. 16. MITIGATION If, in respect of any Bank, circumstances arise which would or would upon the giving of notice result in: (i) the reduction of its Available Commitment to zero pursuant to Clause 15(i) and/or the repayment of its share of outstanding Advances pursuant to Clause 15(ii); (ii) an increase in the amount of any payment to be made to it or for its account pursuant to Clause 12.1; or (iii) a claim for indemnification pursuant to Clause 12.2 or Clause 14, then, without in any way limiting, reducing or otherwise qualifying the rights of such Bank or the obligations of the Borrower under any of the Clauses referred to in (i), (ii) or (iii) above such Bank shall promptly upon its Facility Office becoming aware of such circumstances and the possible results thereof notify the Facility Agent thereof and, in consultation with the Facility Agent and the Borrower and to the extent that it can do so without prejudice to its own position, take such steps as such Bank in its bona fide opinion considers appropriate to mitigate the effects of such circumstances including the transfer of its Facility Office or the transfer of its rights and obligations hereunder to another financial institution willing to participate in the Facility in respect of which the Facility Agent, in consultation with the Borrower shall provide reasonable assistance (at the cost and expense of the Borrower) in identifying whether any Bank or financial institution would be so willing Provided that such Bank shall be under no obligation - 44 - 50 to take any such action if, in the opinion of such Bank (exercised in good faith), to do so might have an adverse effect upon its business, operations or financial condition Provided further that, for the avoidance of doubt, the fact that after any such transfer that Bank will no longer be participating in the Facility will not of itself be deemed to have an adverse effect upon its business, operations or financial condition. - 45 - 51 PART 7 INFORMATION AND FORECASTS 17. FINANCIAL INFORMATION 17.1 The Borrower shall: (i) as soon as the same become available, but in any event within one hundred and twenty days after the end of each of its financial years, deliver to the Facility Agent in sufficient copies for the Banks its audited financial statements for such financial year; (ii) as soon as the same become available, but in any event within one hundred and twenty days after the end of each of the Sponsor's financial years, deliver to the Facility Agent in sufficient copies for the Banks the Sponsor's audited financial statements for such financial year; (iii) as soon as the same become available, but in any event within one hundred and twenty days after the end of each of UTPH's financial years, deliver to the Facility Agent in sufficient copies for the Banks UTPH's audited financial statements for such financial year; (iv) as soon as the same become available, but in any event within sixty days after the end of the first six months in each of the Sponsor's financial years, deliver to the Facility Agent in sufficient copies for the Banks the Sponsor's unaudited financial statements for such six month period; (v) as soon as the same become available, but in any event within sixty days after the end of each of the first three quarters in each of UTPH's financial years, deliver to the Facility Agent in sufficient copies for the Banks UTPH's unaudited financial statements for such quarter; and (vi) promptly provide the Facility Agent with access to and copies of such other information concerning its business, operations and condition (financial or otherwise) and that of the Sponsor and UTPH as the Facility Agent may from time to time reasonably require. 17.2 The Borrower shall ensure that: (i) each set of financial statements delivered by it pursuant to Clause 17.1 is prepared, in accordance with accounting principles generally accepted in the United Kingdom (or in accordance with accounting principles generally accepted in the United States of America in the case of UTPH) and consistently applied; (ii) each set of financial statements delivered by it pursuant to Clause 17.1 is certified by a duly authorised officer of the relevant company as giving a true and fair view of its - 46 - 52 financial condition as at the end of the period to which those financial statements relate and of the results of its operations during such period; and (iii) each set of financial statements delivered by it pursuant to paragraphs (i), (ii) or (iii) of Clause 17.1 has been audited by Price Waterhouse or an internationally recognised firm of independent auditors licensed to practise in the United Kingdom (or the United States of America in the case of UTPH). 18. PROJECT EXPENDITURE AND OTHER REPORTS 18.1 The Borrower shall, within 60 days after (i) each June 30 and December 31 occurring prior to the Termination Date and (ii) the Termination Date (each a "CALCULATION DATE"), deliver to the Facility Agent (in sufficient copies for the Banks): (a) a project expenditure report for the period commencing on the day after the immediately preceding calculation date (or in the case of the first such report, the date hereof) and ending on such calculation date (each, a "RELEVANT PERIOD"), being a statement of expenditure made by the Borrower during such relevant period and otherwise prepared in accordance with Clauses 18.2 and 18.3; and (b) a summary in reasonable detail of the Operator's Current Forecasts (if any) provided to the Borrower during each relevant period. 18.2 Each statement delivered by the Borrower pursuant to Clause 18.1 shall set out details of: (i) all expenditure during the relevant period to which such statement relates falling within the definition of Permitted Expenditure in Clause 1.1 and shall also include details of expenditure during such relevant period, if any, in respect of any other amounts paid out by it and referred to in Clause 3.1 or Clause 3.2 (the "RELEVANT EXPENDITURE"); and (ii) all relevant currency exchange rates and other information required to enable the Facility Agent to determine Permitted Expenditure for the relevant period to which such statement relates. 18.3 Each statement delivered by the Borrower pursuant to Clause 18.1 shall: (i) compare: (a)(1) the Permitted Expenditure incurred to date; plus (2) the amount projected and estimated in the Operator's Current Forecasts received by the Borrower to be the aggregate of the Borrower's remaining Permitted Expenditure up to and including the projected Project Completion Date; with (b) the Initial Development Budget and the latest Development Budget; (ii) specify the total of the Relevant Expenditure; and - 47 - 53 (iii) specify the total of the actual expenditure falling within the definition of Permitted Expenditure in Clause 1.1 that has been incurred to date. 18.4 The Borrower shall, at the same time at which it is required to deliver to the Facility Agent a draft banking case pursuant to Clauses 19.1 commencing with the first such draft banking case delivered after the end of the first Semi-Annual Cash Flow period, deliver to the Facility Agent (in sufficient copies for the Banks) a Net Cash Flow report, being a statement of payments and receipts of the Borrower during the immediately preceding Semi-Annual Cash Flow Period and setting out: (i) a calculation of Available Cash Flow for such period and otherwise prepared in accordance with this Agreement together with the latest schedule of proposed cash calls under the Unit Operating Agreement provided by the Operator to the Borrower (if any); and (ii) all relevant currency exchange rates and other information required to enable the Facility Agent to determine Net Cash Flow for the relevant period to which such statement relates. 19. BANKING CASES 19.1 Subject to the following provisions of this Clause 19 and with a view to the subsequent preparation of a draft banking case under Clause 19, the Borrower shall: (i) on the date on which it delivers to the Facility Agent a Completion Certificate pursuant to Clause 21.1, deliver to the Facility Agent a draft banking case; (ii) not later than the fifty-fourth day after each Calculation Date which falls after the Project Completion Date, deliver to the Facility Agent a draft banking case; (iii) not later than the thirtieth day after the Facility Agent shall have notified it that an Event of Default has occurred (unless, in either case, such Event of Default has been remedied or waived in accordance with the provisions hereof), deliver to the Facility Agent a draft banking case; (iv) not later than the thirtieth day (or, if the Borrower is then required to arrange for a detailed review to be produced by the Independent Engineers pursuant to Clause 20.3, the fifty-fourth day) after the Facility Agent shall have notified it that an Instructing Group together with either of the Technical Agents is of the opinion (formed on a reasonable basis) that any event has occurred or state of affairs subsist which has, or would have, a Material Adverse Effect or which gives an Instructing Group (together with either of the Technical Agents) reasonable grounds for belief, at any time after the Project Completion Date, that the RTCR is less than 1.35 deliver to the Facility Agent a draft banking case Provided that such opinion must be based on an event or state of affairs other than an adverse movement in oil prices Provided further that the previous - 48 - 54 proviso shall not apply if the average spot price of Brent Crude over any period of thirty days within the previous six months has fallen below ten dollars per Barrel; (v) not later than the thirtieth day (or, if the Borrower is then required to arrange for a detailed review to be produced by the Independent Engineers pursuant to Clause 20.3, the fifty-fourth day) after the Facility Agent shall have notified it that any event has occurred which would become (with the passage of time, the giving of notice, the making of any determination hereunder or any combination thereof) an Event of Default (unless such event has been remedied or waived in accordance with the provisions hereof), deliver to the Facility Agent a draft banking case; (vi) not later than the thirtieth day (or, if the Borrower is then required to arrange for a detailed review to be produced by the Independent Engineers pursuant to Clause 20.3, the fifty-fourth day) after it has received notice from the Operator that the Operator has projected that the date for the first entry of Gas into the Britannia Field Facilities will occur after 31 December 1998, deliver to the Facility Agent a draft banking case; (vii) no later than the thirtieth day (or, if the Borrower is then required to arrange for a detailed review to be produced by the Independent Engineers pursuant to Clause 20.3, the fifty-fourth day) after, and the Facility Agent has so notified it that, any indebtedness for borrowed money in excess of pound sterling 10,000,000 (or its equivalent) in the aggregate of the Sponsor has not been paid when due (or within any applicable grace period granted in the agreement, if any, evidencing the same), any indebtedness for borrowed money in excess of pound sterling 10,000,000 (or its equivalent) in the aggregate of the Sponsor has been declared to be or otherwise has become due and payable prior to its specified maturity by reason of the happening of a default or event of default (howsoever described and whether or not involving culpability on the part of any person) or any creditor of the Sponsor has become entitled to declare any indebtedness for borrowed money in excess of pound sterling 10,000,000 (or its equivalent) in the aggregate of the Sponsor due and payable prior to its specified maturity by reason of the happening of a default or event of default (howsoever described and whether or not involving culpability on the part of any person), deliver to the Facility Agent a draft banking case; and (viii) no later than the thirtieth day (or, if the Borrower is then required to arrange for a detailed review to be produced by the Independent Engineers pursuant to Clause 20.3, the fifty-fourth day) after the Facility Agent has notified it that the Operator has determined and has notified the Borrower, or the Unit Operating Committee (as defined in the Unit Operating Agreement) has determined, that neither the Britannia Gas Terminal nor the Britannia Trunkline will be constructed, deliver to the Facility Agent a draft banking case, Provided that the Borrower will not be required to deliver more than seven draft banking cases pursuant to Clauses 19.1(iii), (iv), (v), (vi) or (vii) during the term of this Agreement and will only be required to deliver one draft banking case pursuant to Clause 19.1 (viii) during the term of this Agreement. - 49 - 55 19.2 The Borrower shall deliver to the Facility Agent the draft Primary Economic Assumptions upon which any draft banking case is to be prepared no later than: (i) in the case of a draft banking case to be delivered pursuant to Clause 19.1(i), the date which is thirty days before the date on which it delivers to the Facility Agent a Completion Certificate; (ii) in the case of a draft banking case to be delivered pursuant to Clause 19.1(ii), the date which is the relevant Calculation Date; or (iii) in the case of a draft banking case to be delivered pursuant to any of Clauses 19.1(iii), (iv), (v), (vi), (vii) or (viii), the date which is twenty one days before the last time for delivery of such banking case. 19.3 The Facility Agent shall promptly deliver such draft Primary Economic Assumptions to each of the Technical Agents who shall discuss the same with the Borrower. The Borrower and each of the Technical Agents shall negotiate in good faith to try to agree such Primary Economic Assumptions between themselves, in the case of a draft banking case delivered pursuant to Clause 19.1(ii), no later than the fifteenth day after the relevant Calculation Date. The Borrower shall, in any case have due regard to the comments made on the draft Primary Economic Assumptions by the Technical Agents (including, without limitation, any opinion expressed by the Technical Agents as to the accuracy or otherwise of such Assumptions). In making their comments under this Clause 19.3 the Technical Agents shall act reasonably and shall apply such criteria as they usually apply in transactions of a similar nature to the Facility. In this Clause 19.3 the obligation of the Borrower to have "due regard" to the comments made by the Technical Agents shall mean that the Borrower shall reconsider in good faith the accuracy and/or appropriateness of the Assumptions put forward by it in the light of the comments made by the Technical Agents, any information put forward by the Technical Agents in support of such comments and the most recent and up-to-date data provided by the Operator. 19.4 Each draft banking case prepared by the Borrower and delivered pursuant to Clause 19.1 shall: (i) save as may otherwise have been agreed between the Borrower and the Technical Agents, be in substantially the same form as the Original Banking Case and contain such additional information as is required to be included in a banking case delivered pursuant to this Agreement; (ii) be based on the application of the Economic Assumptions and Technical Assumptions (the Primary Economic Assumptions being as determined in accordance with Clause 19.3); (iii) assume that: (a) (save to the extent of other finance accepted by an Instructing Group to be available to the Borrower as contemplated by Clause 11.2) the Facility constitutes the sole source of finance available to the Borrower (other than any amount - 50 - 56 falling within the definition of Forecast Net Cash Flow) and that, to the extent available, the Borrower will draw down amounts under the Facility to meet its obligations as they fall due; and (b) (save as specified in the definitions of RTCR and FLCR in Clause 1.1), no obligation to prepay, repay or cancel any part of the Facility or obligation to increase the amount of any payment pursuant to Clause 12.1 or to indemnify any Bank arising pursuant to Clause 12.2 or Clause 14.1 will arise during the period the subject of the banking case unless known to be the case; (iv) include amounts for Capital Expenditure and Operating Costs which are provided to the Borrower by the Operator in the most recent Operator's Current Forecast, if any, received by the Borrower as revised and adjusted to reflect the difference, if any, between the Operator's forecasted production and the production forecasted by the Independent Engineer in the most recent Engineering Report; (v) subject to Clause 19.5, set out, in respect of the period commencing on the most recent Calculation Date to have occurred prior to delivery of such draft banking case pursuant to Clause 19.1 and ending on the Abandonment Date projected therein, the Borrower's projection and estimate of: (a) the Forecast Project Receipts during such period giving reasonable details of all production and other revenues and the sources from which they are derived; (b) the Borrower's liability in respect of: (1) Permitted Expenditure during such period broken down to show projected expenditure in respect of each of the items referred to in the definition thereof in Clause 1.1. (to the extent that the same is, with the exception of Abandonment Costs, projected and estimated to be incurred prior to the Abandonment Date) and, in the case of its liability in respect of Capital Expenditure, making provision for cost overruns then known or considered to be probable; (2) Financing Expenses during such period; and (3) taxes during such period; (c) the Borrower's liability in respect of any other expenditure which the Borrower is then required to take into account for the purposes of calculating the Forecast Net Cash Flow in respect of such period; (d) the Forecast Net Cash Flow of the Borrower in respect of such period and all other information required for the calculation of the FLCR and the RTCR; - 51 - 57 (e) the projected amount of the Operating and Financing Costs Reserve and the amount by which the Loan is to be repaid, each as on each Repayment Date falling in such period; (f) the FLCR and the RTCR each as at the beginning of each Semi-Annual Cash Flow Period up to the Semi-Annual Cash Flow Period in which the Discharge Date occurs; and (g) the amount by which the Loan must be repaid on each future Repayment Date, and each such projection and estimate being made in relation to each Semi-Annual Cash Flow Period, or part thereof, which occurs during the period to which such forecast relates; (vi) set out the Borrower's projection and estimate of (a) the Reserve Tail Date, (b) the Abandonment Date and (c) the Project Completion Date (if delivered prior thereto) together with any further information used in the calculation or, as the case may be, the determination of any of such dates; (vii) be calculated in sterling and, to the extent that any sum denominated in a currency other than sterling falls to be taken into account, using such rates of exchange between such currency and sterling as may be determined on the assumptions therein disclosed in reasonable detail; (viii) take into account the anticipated effect of each of the Hedging Agreements, if any, in respect of each period to which such banking case relates; and (ix) include such figures in relation to Proved Reserves and production profiles relating to the Britannia Field as are set out in the most recent Engineering Report prepared in accordance with Clause 20.3 ("PROVED RESERVES AND PRODUCTION PROFILES FIGURES"). 19.5 If at any time a UTPL Credit Test is carried out pursuant to Clause 36.3 and such test is not satisfied then any Banking Case thereafter (until such time as the UTPL Credit Test shall be satisfied thereafter) shall set out a revised amount for Forecast Net Cash Flow which assumes that, for the period from the most recent Calculation Date to have occurred prior to such banking case being delivered pursuant to Clause 19.1 to the Abandonment Date projected therein, the Borrower's liability for Project Taxes is the higher of (i) and (ii) as set out in the definition of Project Taxes in Clause 1.1 and the amount of such revised Forecast Net Cash Flow shall be the amount used in calculating the RTCRs and FLCRs pursuant to Clause 19.4(v)(f). Such revised RTCRs and FLCRs shall be the ratios set out in such banking case accordingly unless a Standby Letter of Credit has been issued in an amount at least equal to the difference between (i) the Net Present Value of Forecast Net Cash Flow revised as above and (ii) the Net Present Value of Forecast Net Cash Flow calculated without such revisions. Upon the issuance of such a Standby Letter of Credit and for so long as such Standby Letter of Credit remains available for drawing (or until the UTPL Credit Test is not satisfied when next tested, whichever is the sooner) such - 52 - 58 banking case shall not include the revisions as to Forecast Net Cash Flow and the RTCRs and FLCRs specified above. 19.6 The Facility Agent shall, within five days after receipt by it of any draft banking case delivered by the Borrower pursuant to Clause 19.1 distribute to the Technical Agents and the Banks a copy of such draft banking case together with a statement specifying whether or not the Technical Agents disagree with any of the Assumptions on which the draft banking case is based or the data applied in relation to such Assumptions (other than, in either case, the Technical Assumptions which consist of the Proved Reserves and Production Profiles Figures), and, if they do not so agree, the reasons therefor and details of the Assumptions and/or data (as the case may be) upon which the Technical Agents believe that such draft banking case should be based. 19.7 Each Bank shall, within fourteen days after the delivery to it by the Facility Agent of any draft banking case pursuant to Clause 19.6, notify the Facility Agent whether or not it agrees with each of the Assumptions or data on which such draft banking case is based (other than, in either case, the Technical Assumptions which consist of the Proved Reserves and Production Profiles Figures), stating in reasonable detail its grounds for its objections (if any) to any such Assumption or data. The Facility Agent shall thereupon notify the Borrower as soon as possible. 19.8 If any Bank fails to notify the Facility Agent that it does object to any of the Assumptions or data on which a draft banking case is based (other than, in either case, the Technical Assumptions which consist of the Proved Reserves and Production Profiles Figures) within the fourteen day period referred to in Clause 19.7, then such Bank shall be deemed to have approved the draft banking case submitted to it. If an Instructing Group approves any draft banking case so submitted, such draft banking case shall become the Current Banking Case. 19.9 If an Instructing Group (acting reasonably) shall not have approved any Assumption (or data to be applied in relation thereto) on which any draft banking case is based (other than, in either case, the Technical Assumptions which consist of the Proved Reserves and Production Profiles Figures) then: (i) the Assumption or Assumptions (or data) in dispute shall be referred by the Facility Agent to, and determined by, an Independent Expert; (ii) the Independent Expert shall be appointed on terms that: (a) he shall act as an expert and not an arbitrator; (b) he shall be required to make a determination on the Assumption or Assumptions (or data) in dispute within thirty days of the same being referred to him or such longer period as the Technical Agents and the Borrower may agree is necessary and, without prejudice to the provisions of paragraph (a) above, to state, in reasonable detail, his grounds for his determination; and - 53 - 59 (c) such determination shall be made on the basis of assumptions which the Independent Expert regards as reasonable in all the circumstances prevailing at the time taking into account: (1) that such Assumption(s) is to be used in the context of a projection of financial ratios prepared by lending banks to a limited recourse financing of a North Sea Petroleum project; and (2) (to the extent that the Independent Expert considers them to be relevant) the submissions of the Borrower, the Technical Agents and the Banks and such other information as he may consider appropriate; and (iii) the draft banking case shall thereafter be revised by the Borrower at the time, in the manner and to the extent required by Clause 19.10. 19.10 If any dispute relating to the Borrower's draft banking case is referred to an Independent Expert, then promptly after the determination of all such disputes by the Independent Expert and the notification thereof to the Borrower, the Borrower shall prepare and deliver to the Facility Agent in sufficient copies for the Banks the draft banking case in relation to which the dispute or disputes arose revised to take into account all changes in the assumptions relating thereto determined by such Independent Expert and such draft banking case shall become the Current Banking Case. Any determination made by an Independent Expert shall, in each case, be conclusive and binding on the parties hereto, in the absence of manifest error. 19.11 For the avoidance of doubt, if as a result of any revision of any draft banking case in accordance with Clause 19.9 there is any change in the FLCR, RTCR or the Forecast Net Cash Flow for any period then such changes shall be treated as having occurred on the first day of the period to which such draft banking case relates. 19.12 The Borrower shall ensure that: (i) each of the reports and other information to be prepared and/or delivered by it pursuant to this Agreement is compiled with due care and responsibility and does not contain any false statement of any material fact or omit to state any material facts or circumstances actually known to the Borrower (having made all reasonable enquiries); (ii) all opinions of the Borrower expressed therein are honestly held and reasonably arrived at; and (iii) the arithmetic of all computations in the projections, forecasts, estimates and opinions prepared by it pursuant to this Agreement is accurate in all respects and the assumptions upon which any such computations are based are disclosed therein and are reasonable. - 54 - 60 19.13 The Borrower shall from time to time, on request of the Technical Agents, supply each of them with a copy of any computer disk which contains the computer model used to produce projected cash flows and financial ratios in respect of the Project. 20. ENGINEERING REPORTS 20.1 The Borrower, in consultation with the Technical Agents, shall arrange for the Independent Engineers to produce a report updating the Initial Engineering Report by no later than 21 February in each year commencing on the first 21 February to occur after the Project Completion Date. Each such report shall set out in reasonable detail up to date estimates and analyses of the Proved Reserves and production profiles relating to the Britannia Field, the progress made on the development of, and the results of the operation of, the Project (including, without limitation, detail as to the quantities of Petroleum recovered from the Britannia Field) and estimating, on the basis therein disclosed in reasonable detail, the likely rate of progress in the future development of, and the likely results of the future operation of, the Project (estimating suitable provisions in each case, for cost overruns then known or considered to be probable). The Borrower shall promptly deliver a copy of such reports (in sufficient numbers for the Banks) to the Technical Agents who shall promptly deliver such copies to the Banks. 20.2 The Borrower shall from time to time deliver to the Independent Engineers (promptly upon their request) such information in its possession or within its ability to obtain about the Project or the production, processing, transportation or sale of Britannia Petroleum as the Independent Engineers may reasonably require in order to produce an Engineering Report pursuant to Clause 20.1. 20.3 If the Borrower is required to deliver a draft banking case pursuant to any of Clauses 19.1(iii), (iv), (v), (vi), (vii) or (viii) the Borrower shall if requested by the Facility Agent (acting on the instructions of an Instructing Group), arrange for the Independent Engineers to conduct a detailed review of the Britannia Field and to deliver to the Technical Agents through the Facility Agent a report on the same by no later than the second business day before the latest permitted date for delivery of any such draft banking case. The Borrower shall use all reasonable endeavours to ensure that the information required by the Independent Engineers to prepare such a report is made available to them promptly upon request. The Technical Agents may review any Independent Engineers' report delivered to them pursuant hereto. Promptly after receipt of the Independent Engineers' report (or, if the Technical Agents are reviewing the same, as soon as practicable thereafter but no longer than thirty days after such receipt), the Facility Agent shall request the Independent Engineers to deliver such copies of such report (as supplemented or amended as agreed as a result of such review) as are sufficient for the Borrower and the Banks, whereupon the Facility Agent shall deliver copies of the same to the Borrower and the Banks. 20.4 It is agreed that the initial Independent Engineers shall be DeGolyer and McNaughton. If at any time the Borrower wishes to replace such Independent Engineers then the Borrower shall select another firm of independent engineers which are acceptable to an Instructing Group. If after 30 days of such alternative selection, the Borrower and an Instructing Group have not reached agreement then the Independent Engineers will be such firm as an Instructing Group may select, acting reasonably. - 55 - 61 21. COMPLETION CERTIFICATES 21.1 The Borrower may deliver to the Facility Agent for review by the Technical Agents a Completion Certificate and the Borrower agrees that it will, promptly upon a request to that effect, furnish either of the Technical Agents with such information as either of them may reasonably require to be delivered to it together with any such certificate. Each of the Technical Agents shall, within fifteen days after receipt by it of any such certificate notify the Borrower whether or not such Completion Certificate is in form and substance reasonably satisfactory to it (including, whether any supporting documentary evidence of the matters the subject of such certificate is reasonably satisfactory to it) and, if not, the reasons therefor. The Borrower and the Technical Agents shall consult together during a period not exceeding fourteen days with a view to agreeing amendment of, or replacement of, the certificate (and/or any such supporting documentary evidence). 21.2 If the Technical Agents have approved the Completion Certificate delivered by the Borrower (or any Completion Certificate delivered in substitution therefor) then the Technical Agents shall notify the Facility Agent and the Facility Agent shall promptly notify the Borrower and the Banks of such fact (the date on which the Facility Agent gives such notice being the "PROJECT COMPLETION DATE"). 21.3 If either of the Technical Agents have not then approved the Completion Certificate delivered by the Borrower (or any Completion Certificate delivered in substitution therefor) then: (i) the matter in dispute may be referred by either of the Technical Agents or the Borrower to, and determined by, an Independent Expert; (ii) the Independent Expert shall be appointed on terms that: (a) he shall act as an expert and not an arbitrator; (b) he shall be required to make a determination on the matter in dispute within thirty days of the same being referred to him or such longer period as the Technical Agents and the Borrower may agree is necessary and, without prejudice to the provisions of paragraph (a) above, to state, in reasonable detail, his grounds for his determination; and (c) such determination shall be made on the basis of matters and assumptions which the Independent Expert regards as reasonable in all the circumstances prevailing at the time taking into account: (1) that such matters are to be used in the context of the determination of the completion, in accordance with the Project Completion Tests, of a limited recourse financing of a North Sea Petroleum project; and (2) (to the extent that the Independent Expert considers them to be relevant) the submissions of the Borrower, the Technical Agents, the Banks and such other information as he may consider appropriate. - 56 - 62 21.4 If any dispute as to whether the Project Completion Tests have been satisfied is referred to an Independent Expert, then, promptly after the determination of all such disputes by the Independent Expert and the notification thereof to the Technical Agents, the Technical Agents shall notify the Facility Agent and the Facility Agent shall promptly notify the Borrower and the Banks of such determination. If the Independent Expert has determined that the Project Completion Tests have been satisfied then the date on which the Facility Agent gives such notice shall be the "PROJECT COMPLETION DATE". 21.5 If an Independent Expert determines that the Project Completion Tests have not then been satisfied, the Borrower may continue to repeat the procedures set out above until the Technical Agents or an Independent Expert are satisfied (on the bases set out above) that the Project Completion Tests have been satisfied. - 57 - 63 PART 8 REPRESENTATIONS, COVENANTS AND SECURITY 22. REPRESENTATIONS 22.1 The Borrower represents that, save as expressly stated in the reservations to the legal opinions referred to in paragraphs 15 and 16 of Part 1 to the Third Schedule: (i) it is a company duly incorporated under the laws of England with power to enter into (or otherwise accept an assignment, transfer or novation of) each of the Financing Agreements and the Project Agreements to which it is expressed to be a party, and to exercise its rights and perform its obligations thereunder and under the Development Plan relating to the Britannia Field and all corporate and other action required to authorise its execution of each of the Financing Agreements and the Project Agreements to which it is expressed to be a party (including such other documents, deeds and agreements required to be executed in order to effect in its favour an assignment, transfer or novation thereof) and its performance of its obligations thereunder and under the Development Plan relating to the Britannia Field has been duly taken; (ii) under the laws of England in force at the date hereof, it will not be required to make any deduction or withholding from any payment it may make under any of the Financing Agreements; (iii) under the laws of England and Scotland in force at the date hereof to the extent not secured by assets of the Borrower, the claims of each of the Beneficiaries against the Borrower under the Financing Agreements will rank at least pari passu with the claims of all its other unsecured creditors save those whose claims are preferred solely by any bankruptcy, insolvency, liquidation or other similar laws of general application; (iv) (a) save for the registration of the documents mentioned at paragraph (i) to (iv) of Part 2 of the Third Schedule pursuant to Part XII of the Companies Act 1985, no further acts, conditions and things are required to be done, fulfilled and performed in order (1) to enable it lawfully to enter into (or otherwise accept an assignment, transfer or novation of), exercise its rights under and perform and comply with the obligations expressed to be assumed by it in each of the Financing Agreements and the Project Agreements to which it is expressed to be a party, (2) to ensure that the obligations expressed to be assumed by it in the Financing Agreements and such Project Agreements are legal, valid and binding or (3) to make the Financing Agreements and such Project Agreements admissible in evidence in England and (b) the obligations expressed to be assumed by it in the Financing Agreements and the Project Agreements to which it is expressed to be a party are legal and valid obligations binding on it in accordance with the terms thereof; and - 58 - 64 (v) to the extent that it is necessary under the laws of England and Scotland in force at the date hereof that any of the Financing Agreements or the Project Agreements to which it is expressed to be a party (or any other document, deed or agreement required to be executed in order to effect an assignment, transfer or novation thereof in favour of the Borrower) be filed, recorded or enrolled with any court or other authority in England and/or Scotland (as applicable) or that any stamp, registration or similar tax be paid on or in relation to any of the Financing Agreements or such Project Agreements (or any such other document, deed or agreement), all such filings, recordings and enrolments have been, or will be, made within any applicable time period prescribed by law and any such stamp, registration or similar tax has been, or will be, paid within any applicable time period prescribed by law. 22.2 The Borrower further represents that: (i) other than pursuant to the Financing Agreements, the Project Agreements to which it is expressed to be a party, the Development Plan relating to the Britannia Field or any Subordinated Debt or otherwise in respect of the Project Interest, it has no assets (other than Authorised Investments or cash with accrued interest in respect of its fully paid up share capital) or liabilities (whether actual, contingent or otherwise); (ii) it has not taken any corporate action nor have any other steps been taken or legal proceedings been started or (to the best of the Borrower's knowledge and belief) threatened against it for its winding-up, dissolution, administration or re-organisation or for the appointment of a receiver, administrator, administrative receiver, trustee or similar officer of it or of any or all of its assets or revenues; (iii) it is not in breach of or in default under any agreement (including the Project Agreements) to which it is a party or which is binding on it or any of its assets to an extent or in a manner which has or might reasonably be expected to have a Material Adverse Effect and save, as previously notified to the Facility Agent in writing, there exists no Event of Default and it has no actual knowledge or notice of the existence of a Potential Event of Default; (iv) no action or administrative proceeding of or before any court or agency against the Borrower or the Sponsor which has or might reasonably be expected to have a Material Adverse Effect has been started or (to the best of the Borrower's knowledge and belief) threatened; (v) (save as otherwise disclosed therein) the Original Financial Statements were prepared in accordance with accounting principles generally accepted in England (or in accordance with accounting principles generally accepted in the United States of America in the case of UTPH) and consistently applied and give (in conjunction with the notes thereto) a true and fair view of the financial condition of the Borrower, the Sponsor or, as the case may be, UTPH at the date as of which they were prepared and the results of the Borrower's, - 59 - 65 the Sponsor's or, as the case may be, UTPH's operations during the financial year then ended; (vi) since publication of the Original Financial Statements of such person, there has been no change in (a) the business, prospects or financial condition of the Borrower, the Sponsor or, as the case may be, UTPH or (b) the Project which has or might reasonably be expected to have a Material Adverse Effect; (vii) as at the date as of which the most recent audited financial statements delivered pursuant to Clause 17.1 of such person or, if none, the Original Financial Statements of such person were prepared neither the Borrower, the Sponsor nor UTPH had any material liabilities (contingent or otherwise) which were not disclosed thereby (or by the notes thereto) or reserved against therein and which should have been so disclosed or reserved against at such date in accordance with accounting principles generally accepted in England (or the United States of America in the case of UTPH) and consistently applied nor any material unrealised or anticipated losses arising from commitments entered into by it which were not so disclosed or reserved against at such date and which should have been so disclosed or reserved against in accordance with accounting principles generally accepted in England (or the United States of America in the case of UTPH) and consistently applied; (viii) (a) the information contained in the Information Memorandum which is not stated in the Information Memorandum to be derived from a source other than the Borrower, UTPH or any of its subsidiaries and any information supplied by the Borrower to any of the Beneficiaries in connection with this Agreement is, as at the date of the Information Memorandum, true, complete and accurate in all material respects and no such information contains any misstatement of material fact or omits any material fact which makes any of such information materially inaccurate or misleading in light of the circumstances under which such statements were made; (b) the statements of opinion and estimates contained in the Information Memorandum and any information supplied by it to any of the Beneficiaries in connection with this Agreement are honestly held and reasonably arrived at (but, for the avoidance of doubt, it is agreed that nothing in this Clause 22.2 (viii) (b) shall be taken as a representation that such statements will ultimately prove to be correct); and (c) the Borrower is not aware of any material facts or circumstances that have not been disclosed to the Beneficiaries and which might, if disclosed, reasonably be expected to adversely affect the decision of a person considering whether or not to provide finance to the Borrower for any of the purposes specified in Clauses 3.1 or 3.2 on terms substantially similar to the terms of this Facility; - 60 - 66 (ix) (a) all written information supplied by the Borrower, UTPH or any subsidiary of UTPH to the insurers of such company or the Operator's insurers (or otherwise made available to such insurers) in connection with the Project is or was true and accurate in all material respects as at the date thereof and it is not aware of any facts or circumstances that have not been disclosed to such insurers and which might reasonably be expected, if so disclosed, to materially adversely affect the nature or extent of the cover to be provided under any insurances required to be maintained pursuant to Clause 26; and (b) it is not aware of any facts or circumstances that have not been disclosed to its or the Operator's insurers and which might reasonably be expected, if so disclosed, to materially adversely affect the nature or extent of the cover to be provided under the insurances required to be taken out pursuant to Clause 26; (x) the insurances required to be maintained pursuant to Clause 26 have been taken out and are in full force and effect and (to the best of the Borrower's knowledge and belief) nothing has been done, suffered or omitted to be done which might reasonably be expected to render any of the insurances unenforceable, suspended or void, in whole or in part and there are no insurances not disclosed to the Facility Agent which will reduce the rights of the Borrower under the insurances required to be maintained pursuant to Clause 26; (xi) it has good and marketable title to the assets (other than assets the aggregate book value of which is no more than pound sterling 200,000) over which an encumbrance is, or is expressed to be, created pursuant to any Security Document, no encumbrance exists over the Project Interest or any other of its present or future revenues or assets save as is permitted by Clause 24(v) and the security expressed to be given under each of the Security Documents is (or, on the date of execution of such Security Document, will be) legal, valid security ranking ahead of all (if any) other encumbrances and rights of third parties; (xii) the execution of each of the Financing Agreements and the Project Agreements to which the Borrower is expressed to be a party (including such other documents, deeds and agreements required to be executed in order to effect an assignment, transfer or novation thereof in favour of the Borrower) and its exercise of its rights and performance of its obligations thereunder or under the Development Plan then relating to the Britannia Field, will not result in the existence of nor oblige it to create any encumbrance over the Project Interest or all or any of its other present or future revenues or assets save as is then permitted by Clause 24(v); (xiii) the execution of each of the Financing Agreements and the Project Agreements to which it is expressed to be a party (including such other documents, deeds and agreements required to be executed in order to effect an assignment, transfer or novation thereof in favour of the Borrower) and its exercise of its rights and performance of its obligations thereunder or under the Development Plan then relating to the Britannia Field do not and will not: - 61 - 67 (a) conflict with any agreement, mortgage, bond or other instrument to which it is expressed to be a party or which is binding upon it or any of its revenues or assets; (b) conflict with its Memorandum and Articles of Association; or (c) conflict with any applicable treaty, law, regulation or official or judicial order; (xiv) it is a party to the Licences and the Unit Operating Agreement with a resultant interest in the Britannia Field of nine point four two per cent (9.42%) (or such higher or lower percentage interest as may have resulted from (a) any permitted redetermination thereof pursuant to the Unit Operating Agreement or (b) any disposal permitted by an Instructing Group) and it is entitled to receive its Unit Interest (as defined in the Unit Operating Agreement) of all Petroleum won and saved from the Britannia Field in accordance with such interest; (xv) (a) except as permitted by Clause 24(i)(a), each of the Project Agreements and the Annex B Approval is in full force and effect, and save as disclosed in the Sixth Schedule or as permitted pursuant to Clause 24(i)(a) (1) there have been no material amendments or variations thereto and (b) to the best of its knowledge, there exists no reason why any of the Licences or the Annex B Approval might be withdrawn, suspended, cancelled, varied, surrendered or revoked and it has complied with all of its obligations under each of the Licences and the Annex B Approval; (xvi) (a) all material consents, licences, authorisations, approvals, registrations and permits required for the Project have been obtained; and (b) (to the best of the Borrower's knowledge and belief) there exists no reason why any of such consents, licences, authorisations, approvals, registrations or permits (including the Annex B Approval) might be withdrawn, suspended, cancelled, amended, varied, surrendered or revoked or not renewed as and when required; (xvii) the Sponsor beneficially owns, either directly or indirectly, one hundred per cent. of the issued share capital of the Borrower; and (xviii) (a) the Borrower is not in breach of or default under the provisions of any of the UTPL Agreements; and (b) the Sponsor is not in breach of or default under the provisions of any of the UTPL Agreements. 22.3 The representations contained in Clauses 22.1 and 22.2 (except Clauses 22.1(ii), 22.2(v), 22.2(vi) and 22.2(viii)) shall be deemed to be repeated by the Borrower on the making of each Advance and on each Calculation Date by reference to the facts and circumstances then existing. - 62 - 68 22.4 On the date hereof, on the date of execution of each of the Security Documents, on the date on which the Borrower delivers the Notice of Drawdown for the first Advance hereunder and on the date of making such Advance the Borrower represents and shall be deemed to represent that: (i) it was not insolvent immediately prior to the execution and delivery of each of the Financing Agreements; (ii) it is not then insolvent; (iii) it will not become insolvent in consequence of any transaction, preference or charge entered into or given, or to be entered into or given, by it pursuant to any of the Financing Agreements; and (iv) there are no other transactions, preferences or charges which have been, or will be, entered into or given by it in connection with the Financing Agreements in consequence of which it will become insolvent. 23. POSITIVE COVENANTS Save as otherwise agreed in writing by an Instructing Group, the Borrower shall, at all times up to and including the Discharge Date: (i) promptly take all such actions as are reasonably required to protect and maintain its rights, title and interest in and to the Licences, the other Project Agreements, the Britannia Field, the Britannia Field Facilities and all revenues, assets and contributions arising therefrom or pursuant thereto or otherwise in connection with or pursuant to the Project Interest and pursue with diligence all material claims and/or rights of action arising or accruing to it against third parties in connection therewith; (ii) (a) duly observe and perform all of its obligations under each of the Project Agreements to which it is expressed to be a party to the extent that the same are material obligations or, without prejudice to the foregoing, are obligations the non-observance or non-performance of which has or might reasonably be expected to have a Material Adverse Effect or (except as permitted by Clause 24(i)(a)(2)) result in the withdrawal, suspension, revocation, cancellation or termination thereof; (b) exercise such voting rights and other rights as it may from time to time have under or pursuant to any of the Project Agreements to procure the due observance and performance by each other party thereto of such party's respective obligations under each of the Project Agreements to the extent that such obligations are material obligations or are obligations, the non-observance or non-performance of which has, or might be reasonably expected to have, a Material Adverse Effect; - 63 - 69 (c) take all reasonable steps to pursue and enforce its rights under each of the Project Agreements where failure to do so has or might reasonably be expected to have a Material Adverse Effect; and (d) duly observe and perform all the obligations expressed to be assumed by it under or pursuant to the UTPL Agreements; (iii) take all steps as it reasonably considers appropriate (including, without limitation, the exercise of such voting and other rights as it may have under, or by reason of, any of the Project Agreements but without, for the avoidance of doubt, being required to undertake any sole risk drilling) to ensure that: (a) the Project is at all times developed, completed, equipped, operated, maintained and (if appropriate and without limiting any other obligations of the Borrower hereunder) abandoned in a good and workmanlike manner and in accordance with (1) good and prudent oil and gas field practices, (2) the terms of the Project Agreements and the Development Plan relating to the Britannia Field and (3) all applicable laws, rules, regulations, licences and consents; (b) all machinery, equipment and facilities of any kind forming part of the Britannia Field Facilities are provided as and when required and that all such machinery, equipment and facilities are maintained in accordance with good and prudent oil and gas field practices; (c) all reasonable safeguards are used and thereafter maintained, in accordance with good and prudent oil and gas field practices, to prevent damage to or pollution of the environment originating from the development or operation of the Project or any of the Britannia Field Facilities and to observe and comply with all applicable Environmental Licences and Environmental Laws; and (d) subject to compliance with good and prudent oil and gas field practices, (1) the maximum quantities of Britannia Petroleum available to it in accordance with the Development Plan relating to the Britannia Field are obtained and (2) all Petroleum which is required to satisfy the Borrower's obligations under the Gas Sales Agreements is, as soon as practicable, made available for sale and transported to the point of delivery to purchasers of the same in accordance with the terms of the Gas Sales Agreements; (iv) promptly upon becoming aware of the same inform the Facility Agent of the occurrence of any of the following: (a) an Event of Default or Potential Event of Default together with (if any) the Borrower's proposals to remedy the same; - 64 - 70 (b) an event which to the best of the Borrower's knowledge and belief is likely to result in, or has resulted in, the revocation, withdrawal, cancellation, suspension, amendment, modification or variation in any material respect of the Development Plan relating to the Britannia Field, any of the Project Agreements or any licences, consents, approvals or registrations relating thereto; (c) the resignation or removal of the Operator or of any other change in the parties to the Unit Operating Agreement; (d) any material default by any party under the Project Agreements or any material dispute arising under any provisions thereof which may entitle any party thereto to terminate any such agreement or document prior to the stated maturity or term thereof; (e) any enlargement of, or reduction in, its percentage interest in the Licences or the Unit Operating Agreement or its resultant interest in the Britannia Field (giving details, in each case and as soon as practicable thereafter, of the percentage interest resulting therefrom); (f) the occurrence of any event of force majeure (howsoever defined or described) under any of the Gas Sales Agreements, any event which would entitle any purchaser under any of the Gas Sales Agreements to purchase Tolerance Gas, Shortfall Gas or Default Gas (each as defined therein) where the occurrence of such event of force majeure or such other event would have, or might reasonably be expected to have, a Material Adverse Effect; or (g) the threat or commencement of any action, arbitration or administrative proceeding before any court or agency where the amount claimed against the Borrower is at least pound sterling 5,000,000 and where such action, arbitration or proceeding is not wholly and manifestly frivolous or vexatious, and provide to the Facility Agent details thereof from time to time upon request, and, in each case, promptly, upon request to that effect from the Facility Agent, confirm to the Facility Agent that, save as previously notified to the Facility Agent or as notified in such confirmation, none of the circumstances described in paragraphs (a) to (g) above has occurred; (v) obtain, comply with the terms of and do all that is necessary to maintain in full force and effect all authorisations, approvals, licences, registrations and consents (including the Annex B Approval) required in or by the laws and regulations of England or Scotland (a) for the development and operation of the Britannia Field, the construction, operation and use of the Britannia Field Facilities and for the production, processing, transportation and sale of all Petroleum won and saved from the Britannia Field where any failure so to obtain or comply has or might reasonably be expected to have a Material Adverse Effect, (b) to permit it lawfully to enter into (or otherwise accept an assignment, transfer - 65 - 71 or novation in its favour of), exercise its rights under and perform and comply with its obligations under each of the Financing Agreements and the Project Agreements and (c) to ensure the legality, validity, enforceability or admissibility in evidence in England and Scotland of each such document or agreement and, from time to time upon request of the Facility Agent, supply the Facility Agent with evidence reasonably satisfactory to the Facility Agent that all such authorisations, approvals, licences, registrations and consents have been so obtained and maintained; (vi) pay its share (as determined under the Unit Operating Agreement) of all fees required for the development and operation of the Project and all Royalties when due (or within any applicable grace period prescribed by law or expressly granted in the agreement, if any, requiring payment of the same) Provided that, if the Borrower is in bona fide dispute with any person (other than the Secretary of State) in respect of the amount of its share of, as so determined, any such fees or Royalties, then the Borrower shall be entitled to withhold payment of its share of, as so determined, such fees or Royalties pending resolution of any such dispute if and only if (a) no other person would thereby obtain a right to (1) suspend, cancel, revoke or otherwise vary the Licences (or the Britannia Unit Area), (2) interrupt the production, processing or transportation of Petroleum won and saved from the Britannia Field or (3) otherwise materially disrupt the work of the Project and (b) it has made adequate reserves against such liability; (vii) claim all material tax credits to which it is entitled promptly upon becoming so entitled, promptly pay all taxes to which it is assessed liable as they fall due (or within any applicable grace period prescribed by law or expressly granted in the agreement, if any, requiring payment of the same and in any case before the time after which any penalty or interest would be incurred) except for those contested in good faith by proper proceedings and which it may lawfully withhold payment of pending resolution of such dispute provided that it has made proper reserves against such liability; (viii) prior to entering into any Hedging Agreement if the Borrower elects to enter into a Hedging Agreement, it shall seek competitive bids from the potential hedge counterparties to such Hedging Agreement and shall not enter into any Hedging Agreement unless such Hedging Agreement (a) is entered into pursuant to the Approved Hedging Programme, (b) is governed by an ISDA Master Agreement, amended as approved by an Instructing Group, such approval not to be unreasonably withheld or delayed, (c) is entered into with a Hedging Counterparty and (d) is otherwise entered into on terms and conditions approved by any Instructing Group, such approval not to be unreasonably withheld or delayed; (ix) promptly on receipt of the same by it, deliver to the Facility Agent a copy of any actual or proposed material amendment, modification or variation of the Licences, the Development Plan relating to the Britannia Field, any of the other Project Agreements, the Development Budget, any proposal to abandon the whole or any material part of the Project or any licences, consents, approvals or registrations (including the Annex B Approval) relating thereto (including, any amendment, modification or variation thereof - 66 - 72 from the form (if any) which the parties thereto previously have deemed to be effective as between themselves); (x) ensure that at all times to the extent not secured by or pursuant to the Security Documents, the claims of the Beneficiaries against it under each of the Financing Agreements rank at least pari passu with the claims of all its other unsecured creditors save those whose claims are preferred solely by any bankruptcy, insolvency, liquidation or other similar laws of general application; (xi) in the event of (a) any material damage to, or the destruction of, any of the Britannia Field Facilities, (b) a cessation of production from the Britannia Field for a period of ten consecutive days (otherwise than by reason solely of any planned maintenance) or (c) a reduction in the Daily Capacity in the Britannia Field Facilities (other than the Britannia Forties Pipeline) in excess of twenty-five per cent. (otherwise than by reason solely of any planned maintenance), promptly deliver to the Technical Agents, in sufficient copies for the Banks, written details of such damage, destruction, cessation or reduction in capacity which shall be in a form reasonably acceptable to the Technical Agents and promptly, upon receipt of a written request to that effect from either of the Technical Agents, deliver an outline of the procedures taken and/or its proposals in respect of the procedures to be taken to restore production and/or transportation; (xii) subject to the approval of the Operator granted or withheld in accordance with the Unit Operating Agreement ensure that any one or more representatives of the Technical Agents (including, without limitation, the Independent Engineers and any of either of the Technical Agents' officers, employees, surveyors or agents) be allowed, upon reasonable notice, to have access to the Project and, so far as is possible without disrupting the work thereof, to inspect or observe any of the Britannia Field Facilities; (xiii) do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence and all rights arising as a consequence thereof; (xiv) use all reasonable efforts to sell all Petroleum to which the Borrower is entitled, and which has been won and saved from the Britannia Field, on arms length commercial terms and on the best terms reasonably obtainable for such products at the time, and from time to time on request of the Facility Agent, notify the Facility Agent of the terms of any contracts having a term of more than one year entered into for the sale of such products; and (xv) deliver to the Facility Agent (a) notification of any Scheduled Maintenance Period (as defined in the Gas Sales Agreements) notified by the Operator as representative of the Borrower to any buyer under a Gas Sales Agreement and (b) each agenda for, and minutes of, each meeting of the Unit Operating Committee (as defined in the Unit Operating Agreement) promptly upon receipt of each of them. - 67 - 73 24. NEGATIVE COVENANTS The Borrower shall not at any time on or before the Discharge Date without the prior written consent of an Instructing Group (save as may be expressly provided below): (i) (a) agree to or (save to the extent that if the Borrower is given the reasonable opportunity to do so it shall have opposed the same by exercising accordingly such voting rights and other rights as it may have under, or by reason of, any of the Project Agreements on each occasion on which the same fell for consideration between the parties to the relevant Project Agreement) permit (1) any amendment, variation or waiver to or of any of the terms and conditions of the Project Agreements or the Development Plan relating to the Britannia Field if such amendment, variation or waiver has, or might reasonably be expected to have, a Material Adverse Effect unless, in the case of an amendment to the price of Gas to be sold under any Gas Sales Agreement, the Current Banking Case, revised by the Technical Agents to take into account such amendment and any prepayment of the Loan made by the Borrower within 30 days of such amendment, projects that the RTCR for each Calculation Date is at least 1.35, (2) the cancellation, suspension (other than by reason of force majeure, howsoever defined in such Project Agreement), termination or revocation of any Project Agreement (other than the Unit Operating Agreement or any of the Licences) prior to the stated maturity or term thereof unless it is simultaneously replaced by another Project Agreement containing substantially the same terms, which has been approved by an Instructing Group (such approval not to be unreasonably withheld or delayed) and which is governed by English law or Scottish law or is a Gas Sales Agreement which may be cancelled, suspended, terminated or revoked pursuant to (3) below, (3) the cancellation, suspension (other than by reason of force majeure, howsoever defined therein), termination or revocation of any Gas Sales Agreement prior to the stated term thereof, unless the aggregate Minimum Bill Quantity under each of the remaining Gas Sales Agreements is at least equal to the Minimum Volume or, if it is less than the Minimum Volume, the Current Banking Case, revised by the Technical Agents to take account of such cancellation, suspension, termination or revocation and any prepayment of the Loan made by the Borrower within 30 days of such cancellation, suspension, termination or revocation, projects that the RTCR for each Calculation Date will be at least 1.35, (4) the cancellation, suspension, termination or revocation of the Development Plan relating to the Britannia Field, (5) any amendment, variation, waiver, cancellation, suspension, termination or revocation of any of the authorisations, approvals, licences, permits and consents (including the Annex B Approval) required for the development and/or operation of the Britannia Field or the production, processing and transportation of Britannia Petroleum which has or might reasonably be expected to have a Material Adverse Effect or (6) the cancellation, suspension, termination or revocation of the Unit Operating Agreement or any of the Licences; or - 68 - 74 (b) exercise such voting rights and other rights as it may have under, or by reason of, any of the Project Agreements in favour of any amendment or variation to any authorisation for expenditure issued by the Operator pursuant to the Unit Operating Agreement which might reasonably be expected (having regard to all authorisations for expenditure then issued or anticipated to be issued) to have the effect at any time prior to the Project Completion Date of causing Pre-Completion Expenditure to exceed Pre-Completion Available Funding; or (c) amend, vary, waive, supplement, novate, cancel, suspend or terminate any of the UTPL Agreements to which it is expressed to be a party nor permit the same; or (ii) propose or vote in favour of abandonment of the Project, the Britannia Field or any material part of either of them (unless the Borrower has (a) given to the Facility Agent not less than thirty days prior notice of its intention to do so, in each case, with effect from a specified date (b) within the thirty days demonstrated to the satisfaction of an Instructing Group (acting in good faith) that the Forecast Net Cash Flow (including, for the purposes of this Clause 24 (ii) only, any amounts projected by the Facility Agent, acting reasonably to be payable under the Sponsor Support Agreement), which is projected to be generated during the period from the specified date up to the Projected Abandonment Date, is, on the basis of Proved Reserves, negative and would remain negative during such period notwithstanding any further expenditure on the Project and (c) received the approval of an Instructing Group to the Abandonment Costs therefor) or withdraw from the Unit Operating Agreement; or (iii) propose or vote in favour of the replacement of the Operator unless a successor operator which is reasonably acceptable to the Technical Agents is appointed; or (iv) voluntarily enter into liquidation or dissolution or voluntarily enter into a merger or consolidation with any other person; or (v) create or permit to subsist any encumbrance over all or any part of the Project Interest, the Project Accounts, the Project Receipts or its interest in any of the Financing Agreements other than: (a) any encumbrance created by or pursuant to or in accordance with any of the Financing Agreements; (b) liens and encumbrances (not securing any indebtedness for borrowed money of any person) arising solely by reason of the performance by any party to any agreement relating to the Project Interest (including the Project Agreements) of its obligations thereunder and pursuant to the operation of law; (c) liens and rights of set-off arising solely by operation of law (or under an agreement to substantially similar effect) in the ordinary course of the Borrower's - 69 - 75 business and securing indebtedness not more than thirty days overdue for payment; (d) any encumbrance securing indebtedness which in the aggregate does not at any time exceed pound sterling 100,000 and where the asset or assets so encumbered shall not, at any time have an aggregate book value (as the same appears in the financial statements of the Borrower) of more than pound sterling 200,000 and which if secured on any assets comprising the Project Interest is fully subordinated to the security thereover created by the Security Documents on terms satisfactory to an Instructing Group; or (e) any encumbrance over the Trust Fund which the Borrower is required to create pursuant to the Abandonment Costs Agreement; or (vi) sell, lease, rent, transfer, assign or otherwise dispose of the whole or any part of the Project Interest, the Project Accounts or the Project Receipts other than: (a) the sale or other disposal of any Petroleum forming part of the Project Interest and made pursuant to any Gas Sales Agreement or otherwise on normal arm's length commercial terms and on terms then customary for sales by Petroleum exploration and production companies having interests in the North Sea; (b) disposals of equipment which the Operator or the Unit Operating Committee (as defined in the Unit Operating Agreement) has determined is either obsolete or worn out and which are either (1) replaced by other assets at least equal in quality and in dependability prior to its obsolescence or (2) no longer required for the proper operation and maintenance of the Britannia Field Facilities; (c) any other disposals of assets within the Britannia Field Facilities approved pursuant to the Unit Operating Agreement provided that the Borrower shall not approve any disposal (not falling within paragraphs (a) or (b) above) where the book value of the Borrower's interest in the assets so disposed of exceeds (or would, when aggregated with the book value of the Borrower's interest in any other assets disposed of by the Borrower with the consent of an Instructing Group pursuant to this paragraph (c), exceed) pound sterling 5,000,000 in any calendar year without the prior written consent of an Instructing Group or in any circumstances where such disposal has or might reasonably be expected to have a Material Adverse Effect; or (d) payments from the Project Accounts which are permitted pursuant to Clause 34, Provided that the Borrower shall not be in breach of this paragraph (vi) by reason only of any disposal made which the Borrower is unable to prevent through its exercise of such voting rights and other rights as it may have under, or by reason of, any of the Project Agreements, and to the extent that the Borrower is given the reasonable - 70 - 76 opportunity to do so, the Borrower shall have opposed the same by exercising such rights on each occasion on which such disposal fell for consideration between the parties to the relevant Project Agreement; or (vii) in respect of taxes, agree to surrender or dispose of, nor surrender nor dispose of, any credit, losses, allowances, concessions, discharges, or other reliefs available to it other than in connection with any settlement with the Inland Revenue or pursuant to the terms of Clause 4 of the Sponsor Support Agreement; or (viii) own any assets or conduct or enter into any business or operation other than such as is connected with the development and operation of the Project, is provided for under or pursuant to any Project Agreement, this Agreement or any other Security Documents or as is required pursuant to the Annex B Approval or the Unit Operating Agreement; or (ix) permit or agree to any increase in its percentage interest in the Licences or the Unit Operating Agreement other than pursuant to the Unit Operating Agreement; or (x) incur, or have outstanding, any indebtedness for borrowed money other than (a) under any of the Financing Agreements, (b) Subordinated Debt or (c) capitalised lease obligations or other obligations incurred by the Operator on behalf of the Borrower arising in connection with the Unit Operating Agreement up to a maximum aggregate outstanding indebtedness of pound sterling 5,000,000 (in respect of the Borrower's percentage interest in the Britannia Field); or (xi) save as may be specified in this Agreement, Clause 4 of the Sponsor Support Agreement or the other UTPL Agreements, pay, make or declare any dividend or other distribution or otherwise make any payment or distribution (whether in cash or in kind) to the Sponsor, UTPH or any subsidiary of UTPH unless wholly funded from a drawing from the Proceeds Account and not prohibited by Clause 34; or (xii) have any subsidiary or interest in any other person; or (xiii) enter into any transaction with UTPH or any of its subsidiaries save: (a) with the Sponsor in respect of the UTPL Agreements; (b) for transactions entered into on arm's length commercial terms no less favourable to the Borrower than those which the Borrower could reasonably have obtained from other sources; (c) for Subordinated Debt; and (d) for any other transactions required or permitted pursuant to this Agreement or any of the Security Documents; or - 71 - 77 (xiv) make any loans (other than loans to the Sponsor made in accordance herewith), grant any credit, save for trade credit granted on customary trade terms in respect of the sale of Petroleum, or give any guarantees or indemnity to or for the benefit of any person save for indemnities provided by the Borrower in the ordinary course of its business on customary trade terms under agreements required for the development and construction of the Britannia Field and the Britannia Field Facilities where the aggregate amount of liabilities (contingent or otherwise) to which the Borrower could thereby be exposed does not at any time exceed pound sterling 10,000,000 (or its equivalent) in aggregate or otherwise voluntarily assume any liability, whether actual or contingent, in respect of any obligation of any other person other than as specified in any of the Financing Agreements or Project Agreements (as in existence at the date hereof); or (xv) enter into any gas sales agreement with any person which has a term of more than one year without the prior written consent of an Instructing Group such consent not to be unreasonably withheld or delayed, Provided that it shall not be necessary to obtain the consent of an Instructing Group unless the entering into by the Borrower of such agreement or its performance or observance of its obligations thereunder has or might reasonably be expected to have a Material Adverse Effect or where the Borrower would be exposed to an aggregate amount of liabilities, to which it would not be exposed if it had not entered into such agreement, which equals or exceeds pound sterling 10,000,000 (or its equivalent). 25. SECURITY 25.1 The Borrower shall, at all times on or before the Discharge Date take all such action as may be open to it (or, at their request, to assist the Beneficiaries) in: (i) perfecting and protecting the security intended to be conferred on the Beneficiaries (or the Facility Agent as trustee on behalf of the Beneficiaries) by the Security Documents; (ii) (save as otherwise provided herein or therein) maintaining the security thereby intended to be created; (iii) creating any further security in favour of the Beneficiaries (or the Facility Agent as trustee on behalf of the Beneficiaries) over the whole or any part of the Project Interest, the Project Accounts, the Project Receipts and any of the UTPL Agreements which may from time to time be reasonably requested by an Instructing Group (or the Facility Agent on its behalf); and (iv) making all such filings and registrations and taking all such other action as is from time to time necessary (including, without limitation, the giving of all requisite notices of assignment, transfer, assignation or charge to, inter alia, the Operator and each insurer) in connection with the creation, perfection or protection of any security which the Borrower may, or may be required to, create pursuant to the Financing Agreements, - 72 - 78 Provided that the Borrower shall not be required to give any notice of assignment of its rights in respect of any contract for the sale of Petroleum if the term of such contract is less than one year unless an Event of Default or Potential Event of Default has occurred which has not been remedied or waived. 25.2 The Borrower shall ensure that prior to delivery of the first Notice of Drawdown hereunder all consents that are or may be necessary under the Project Agreements in respect of the execution, delivery and performance of the Security Documents have been properly granted by each party to a Project Agreement which is required to grant such consent and each such consent remains in full force and effect. 25.3 The Borrower shall not: (i) enter into any Project Agreement (other than the agreements listed in the Sixth Schedule) which requires the parties thereto (other than the Borrower) to consent to the creation or subsistence of any encumbrance which is, or is expressed to be, created by or pursuant to any Security Document unless the Borrower ensures that such consent is duly obtained prior to, or simultaneously with, the execution by the Borrower of such Project Agreement; or (ii) without the prior written consent of an Instructing Group, agree to or (save to the extent that if it has the reasonable opportunity to do so it shall have opposed the same by exercising accordingly such voting rights and other rights as it may have under, or by reason of, any of the Project Agreements on each occasion on which the same fell for consideration between the parties to the relevant Project Agreement) permit the registration of any of the Britannia Field Facilities in the British Registry of Shipping. - 73 - 79 PART 9 INSURANCES 26. INSURANCES 26.1 The Borrower shall, save as provided for herein: (i) maintain or cause to be maintained (for, inter alia, its benefit and for the benefit of the Beneficiaries) the insurances specified in the Eighth Schedule: (a) the insurances specified in Part 1 of the Eighth Schedule being required to be maintained from the date of this Agreement until the Discharge Date; (b) the insurances specified in Part 2 of the Eighth Schedule being required to be maintained no later than 6 months from the date of this Agreement until the date when production from the Britannia Field first commences; and (c) the insurances specified in Part 3 of the Eighth Schedule being required to be maintained from the date when production from the Britannia Field first commences until the Discharge Date; and (ii) ensure that the insurances referred to in paragraph (i) above: (a) are effected against the risks and liabilities, provide the covers and are maintained in the amounts specified in the relevant Part of the Eighth Schedule (as varied from time to time as required by sub- paragraph (c) below); (b) include only such provisions for self-insurance, whether by deductible or otherwise, as are specified in the relevant Part of the Eighth Schedule; and (c) are otherwise modified from time to time as provided below: (1) in the event of a material change in the risks contemplated to be insured as at the date of this Agreement, including, but not limited to, a material change in the nature or scope of the Project, then such insurance shall be modified, after due consultation with the Insurance Adviser and Facility Agent, so as to ensure as far as reasonably practicable, that the nature and amounts of uninsured risks will not materially exceed the nature and amounts of uninsured risks as at the date of this Agreement, provided that (x) such modified insurances shall be in such amounts and with such deductibles as would be obtained by a prudent participant in a North Sea oil and gas project of a size, and with characteristics, comparable to the Project which does not self-insure (except by means of deductibles) (y) in obtaining such modified insurances, the Borrower shall have regard - 74 - 80 to all circumstances including the interests of the Beneficiaries under the Financing Agreements; or (2) in the event the insurances specified in the Eighth Schedule cannot be obtained or maintained on commercial and economic terms in the worldwide insurance markets for energy risks and which would be obtained by a prudent participant in a North Sea oil and gas project of a size and with characteristics similar to the Project which does not self insure (except by means of deductibles) then such insurance shall be modified, after due consultation with the Insurance Adviser and Facility Agent, so as to ensure, as far as reasonably practicable, that the amount of insurance (and with such deductibles) will be obtained on commercial and economic terms (as set out above), and in obtaining such modified insurance the Borrower shall have regard to all circumstances including the interests of the Beneficiaries under the Financing Agreements. 26.2 It is acknowledged and agreed that the Borrower may and shall, in or towards satisfaction of its obligations under Clause 26.1 maintain insurance: (i) in respect of the risks specified in Part 2 of the Eighth Schedule, through insurances effected and maintained by the Operator for and on behalf of the Britannia Coventurers (the "OPERATOR MAINTAINED INSURANCES"); and (ii) in respect of the risks specified in Parts 1, 2 (to the extent not covered by Clause 26.2(i)) and 3 of the Eighth Schedule, through insurances effected and maintained by UTPH for and on behalf of the Borrower and other subsidiaries of UTPH and where the Borrower is a named insured in respect thereof (the "GROUP INSURANCES"). To the extent that such Operator Maintained Insurances (or any part thereof) or, as the case may be, the Group Insurances (or any part thereof) are insufficient to meet the obligations of the Borrower under Clause 26.1 to maintain insurance in respect of the risks referred to in the preceding sentence, then the Borrower shall maintain or cause to be maintained additional insurance such that the cumulative insurance maintained by or on behalf of the Borrower in respect of such risks satisfies in full the obligations of the Borrower under Clause 26.1. 26.3 Without prejudice to the other provisions of this Clause 26, the Borrower shall, during the period from the date of this Agreement until the Discharge Date: (i) from time to time effect and maintain in full force the insurances which it is required to effect by any applicable law or by the terms of any Project Agreement to which it is at any time expressed to be a party; and (ii) effect and maintain in full force the insurances which it is required to effect by the terms of any other contract to which it is at any time expressed to be a party. - 75 - 81 26.4 It is acknowledged and agreed that nothing in this Part 9 or in the Assignment of Insurances shall require the Borrower to take out, maintain or have any interest in any business interruption or delay in start up insurances. If the Borrower shall take out, maintain or have any interest in any such insurance, such insurance shall be for its benefit alone, and shall not be for the benefit of, in whole or in part, the Beneficiaries but subject to the rights of the Beneficiaries under the Debenture. 27. INSURANCE COVENANTS 27.1 The Borrower shall ensure that each policy of insurance taken out pursuant to Clause 26: (i) is, except to the extent otherwise required pursuant to Clause 26, placed and maintained through such brokers and underwriters or insurance companies of the same claims paying quality (in the case of underwriters or insurance companies only) and repute as such brokers and reputable underwriters or insurance companies as of the date of this Agreement but only if it is reasonably practicable to do so on economic and commercial terms but in no event of lesser claims paying quality (in the case of underwriters or insurance companies only) and repute as would be acceptable to a prudent participant in a North Sea oil and gas project of a size with characteristics comparable to the Project which does not self insure (except by means of deductibles); (ii) is in form and substance consistent with the obligations of the Borrower under this Part 9; (iii) is, other than in the case of any Third Party Insurances, the subject of a notice of assignment duly given to the brokers, underwriters and/or insurance companies as contemplated by the Assignment of Insurances; and (iv) names the Borrower as a principal insured in respect of the insurances specified in Part 2 of the Eighth Schedule and provides that the Borrower is a named insured in respect of the insurances specified in Parts 1 and 3 of the Eighth Schedule. 27.2 The Borrower shall: (i) in respect of each policy of insurance taken out pursuant to Clause 26, other than in the case of any Third Party Insurances and the Operator Maintained Insurances procure that: (a) the Facility Agent (as trustee for the Beneficiaries) is joined as an additional insured thereunder at the time of issue thereof (or, if already issued, as soon as practicable hereafter) and the interest of the Facility Agent (as trustee for the Beneficiaries) is duly noted and endorsed upon such policy; (b) a loss payee clause in the form agreed by the Borrower and the Insurance Adviser is inserted in each such policy at the time of issue thereof (or, if already issued, as soon as practicable hereafter) and that such loss payee clause is not cancelled, varied or amended in any respect; and - 76 - 82 (c) provisions are inserted in each such policy meeting in all respects all relevant provisions of the relevant forms of undertaking set out in the Second Schedule to the Assignment of Insurances; and (ii) in respect of each policy of insurance taken out pursuant to Clause 26 in the case of Operator Maintained Insurances the Borrower shall use reasonable efforts to procure that: (a) the Facility Agent (as trustee for the Beneficiaries) is joined as an additional insured thereunder at the time of issue thereof (or, if already issued, as soon as practicable hereafter) and the interest of the Facility Agent (as trustee for the Beneficiaries) is duly noted and endorsed upon such policy; (b) a loss payee clause in the form agreed by the Borrower and the Insurance Adviser is inserted in each such policy at the time of issue thereof (or, if already issued, as soon as practicable hereafter) and that such loss payee clause is not cancelled, varied or amended in any respect; and (c) provisions are inserted in each such policy meeting in all respects all relevant provisions of the relevant forms of undertaking set out in the Second Schedule to the Assignment of Insurances. 27.3 The Borrower shall: (i) pay all premiums and other sums payable under each policy and any renewals thereof maintained pursuant to Clause 26 as required by the terms of each such policy or as is reasonably allocated to the Borrower in the case of the Group Insurances and shall, upon receipt of a written request from the Facility Agent (acting reasonably) to that effect, deliver to the Facility Agent evidence of such payment; (ii) deliver to the Facility Agent, as soon as reasonably practicable after such insurance is effected or renewed Certificates of Insurance or other evidence reasonably satisfactory to the Facility Agent that all the insurances required to be effected pursuant to Clause 26 are in force; (iii) ensure that any broker or agent through whom any insurance policy required to be effected or renewed under Clause 26 is effected or renewed (other than any Third Party Insurances and Operator Maintained Insurances) delivers to the Facility Agent an undertaking substantially in the form of Part I of the Second Schedule to the Assignment of Insurances as soon as reasonably practicable after each such insurance policy is effected or renewed; (iv) use reasonable efforts to procure that any broker or agent through whom Operator Maintained Insurances are effected or renewed delivers to the Facility Agent an undertaking substantially in the form of Part 2 of the Second Schedule of the Assignment - 77 - 83 of Insurances as soon as reasonably practicable after each such insurance policy is effected or renewed; (v) upon receipt of a written request from the Facility Agent to such effect, deliver to the Facility Agent and the Insurance Adviser such information as to the policies of insurance (or as to any matter which may be relevant to such insurances) maintained pursuant to Clause 26 as the Facility Agent may reasonably request; (vi) promptly upon becoming aware of the same, notify the Facility Agent and the Insurance Adviser of any insurance claim notified to the insurers thereof where the amount of such claim exceeds pound sterling 250,000 (in respect of the Borrower's percentage interest in the Britannia Field) (or its equivalent, on the date on which the claim is made, in the currency in which such claim is made) or such other amount as may, from time to time, be agreed between the Borrower and the Facility Agent (following consultation with the Insurance Adviser); (vii) ensure except in accordance with Clause 26.1(ii)(c) that no reductions in limits or coverage (including those resulting from extensions) or increases in deductibles, exclusions or exceptions shall be made to any insurance maintained pursuant to Clause 26, without the prior consent of the Facility Agent (following consultation with the Insurance Adviser) such consent not to be unreasonably withheld or delayed; (viii) not, at any time, do (or omit to do) or suffer or permit UTPH or any subsidiary of UTPH which maintains or has any interest in any Group Insurance (but not, save as provided below, any other person) to do (or omit to do) anything whereby any of the insurances maintained pursuant to Clause 26 may be rendered void, voidable, unenforceable, suspended or impaired in whole or in part or which may otherwise render any sum paid out under any such policy repayable in whole or in part; and (ix) take all actions which may be open to it under the Unit Operating Agreement, and of which it is aware or ought reasonably to be aware, to ensure that no insurance maintained pursuant to Clause 26 is rendered void, voidable, unenforceable, suspended or impaired in whole or in part or which may otherwise render any sums paid out under any such policy repayable in whole or in part by reason of any action or omission of the Operator or any other Britannia Coventurer. 27.4 If, at any time, and for any reason, any insurance required to be maintained under this Part 9 shall not be in full force and effect the Facility Agent shall be entitled (but not bound) on behalf of itself and on behalf of the Beneficiaries, to take out any such insurance in which case the Borrower shall, on demand by the Facility Agent, reimburse the Facility Agent in respect of any premiums or other costs and expenses incurred by the Facility Agent in relation to any such insurance, Provided that any such premium is on terms which are commercial and economic in the world wide insurance markets for energy risks and that such costs and expenses are reasonably incurred. - 78 - 84 27.5 If by virtue of the Assignment of Insurances or the Facility Agent being named as an insured and loss payee, an underwriter or insurance company shall require the Facility Agent to execute payment on account forms or other similar documents in order for such underwriters or insurers to pay or settle any claim or loss insured under the Third Party Insurance or any claim or loss not insured by the insurance specified in the Eighth Schedule, the Facility Agent (as trustee for the Beneficiaries) shall promptly upon request by the Borrower or the Sponsor execute such document. - 79 - 85 PART 10 DEFAULT 28. EVENTS OF DEFAULT 28.1 If at any time: (i) the Borrower fails to pay any sum due from it under any Financing Agreement, the Unit Operating Agreement, the Transportation Agreement or any Gas Sales Agreement at the time, in the currency and in the manner specified therein and such failure is not remedied within five business days of the due date therefor; or (ii) any representation or warranty made or deemed to be made by the Borrower in any of the Financing Agreements or by the Sponsor in any of the UTPL Agreements is or proves to have been incorrect or misleading in any material respect when made or deemed to be made or repeated; or (iii) (a) the Borrower fails duly to perform or comply with its obligations in Clauses 24(i)(a)(1), (3) or (6) or 24(iv); (b) the Borrower fails duly to perform or comply with any of its obligations in Clauses 23(iv), 23(vi), 23(vii), 34 or 35 and, if capable of remedy, such failure is not remedied within five business days of the earlier of the date on which the Facility Agent gives notice thereof to the Borrower and the date on which the Borrower knew or received notice of such failure; or (c) the Borrower fails duly to perform or comply with any of its obligations in Clauses 3, 23(xiii) or 24(i)(c) and, if capable of remedy, such failure is not remedied within ten days of the earlier of the date on which the Facility Agent gives notice thereof to the Borrower and the date on which the Borrower knew or received notice of such failure; or (d) the Borrower fails duly to perform or comply with any of its obligations in Clauses 24(i)(b), 24(ii), 24(iii), 24(v), 24(vi), 25.2, 25.3 or 26.1 of this Agreement, Clauses 4 or 6 of the Charge over Accounts, Clauses 5, 8 or 11 of the Debenture or Clauses 4.1 or 5 of the Assignment of Insurances and, if capable of remedy, such failure is not remedied within fifteen days of the earlier of the date on which the Facility Agent gives notice thereof to the Borrower and the date on which the Borrower knew or received notice of such failure; or - 80 - 86 (e) the Borrower fails duly to perform or comply with any of its obligations in Clauses 19, 20, 23(i), 23(ii), 23(iii), 23(v), 23(viii), 23(ix), 23(x), 23(xi), 23(xii), 23(xiv), 23(xv), 24(i)(a)(2), (4) or (5), 24(vii), 24(viii), 24(ix), 24(x), 24(xi), 24(xii), 24(xiii), 24(xiv), 24(xv) or 25.1 or any of its other obligations under Part 9 or any of its other obligations under any of the Security Documents and, if capable of remedy, such failure is not remedied within thirty days of the earlier of the date on which the Facility Agent gives notice thereof to the Borrower and the date on which the Borrower knew or received notice of such failure; or (f) the Borrower fails duly to perform or comply with any other obligation expressed to be assumed by it in any of the Financing Agreements and, if capable of remedy, such failure is not remedied within sixty days of the earlier of the date on which the Facility Agent gives notice thereof to the Borrower and the date on which the Borrower knew or received notice of such failure; or (iv) (a) the Sponsor fails to pay any sum due from it under any of the UTPL Agreements at the time, in the currency and in the manner specified therein and such failure is not remedied within thirty business days of the due date therefor; or (b) the Sponsor fails duly to perform or comply with any other material obligation expressed to be assumed by it in any of the UTPL Agreements and, if capable of remedy, such failure is not remedied within fifteen days of the earlier of the date on which the Facility Agent gives notice thereof to the Sponsor and the date on which the Sponsor knew or received notice of such failure; or (c) the Sponsor fails duly to perform or comply with any other obligation expressed to be assumed by it in any of the UTPL Agreements and, if capable of remedy, such failure is not remedied within sixty days of the earlier of the date on which the Facility Agent gives notice thereof to the Sponsor and the date on which the Sponsor knew or received notice of such failure, unless, in the case of (b) or (c) above, (1) the Project Completion Date has occurred and (2) the Current Banking Case projects and estimates that the RTCR for each Calculation Date thereafter will be at least 1.35, as such Current Banking Case may be revised by the Technical Agents to take into account, for the purpose of calculating Forecast Net Cash Flow and the RTCRs thereunder, that the Borrower's liability for Project Taxes is the higher of (i) and (ii) as set out in the definition of Project Taxes in Clause 1.1; or (v) any indebtedness for borrowed money of the Borrower is not paid when due (or within any applicable grace period granted in the agreement, if any, evidencing the same), any indebtedness for borrowed money of the Borrower is declared to be or otherwise becomes due and payable prior to its specified maturity by reason of the happening of a default or event of default (howsoever described and whether or not involving - 81 - 87 culpability on the part of any person) or any creditor of the Borrower becomes entitled to declare any indebtedness for borrowed money of the Borrower due and payable prior to its specified maturity by reason of the happening of a default or event of default (howsoever described and whether or not involving culpability on the part of any person); or (vi) any indebtedness for borrowed money of the Sponsor in excess of pound sterling 10,000,000 (or its equivalent) in the aggregate which is due, or the applicable grace period for which expires, on any date before the Project Completion Date is not paid when due (or within any applicable grace period granted in the agreement, if any, evidencing the same), any indebtedness for borrowed money of the Sponsor in excess of pound sterling 10,000,000 (or its equivalent) in the aggregate is declared to be or otherwise becomes due and payable prior to its specified maturity on any date before the Project Completion Date by reason of the happening of a default or event of default (howsoever described and whether or not involving culpability on the part of any person) or any creditor of the Sponsor becomes entitled on any date before the Project Completion Date to declare any indebtedness for borrowed money of the Sponsor in excess of pound sterling 10,000,000 (or its equivalent) in the aggregate due and payable prior to its specified maturity by reason of the happening of a default or event of default (howsoever described and whether or not involving culpability on the part of any person); or (vii) the Borrower or the Sponsor is unable to pay its debts in general as they fall due, commences negotiations with any one or more of its creditors with a view to the general readjustment or rescheduling of all of its indebtedness for borrowed money or makes a general assignment for the benefit of or a composition with its creditors; or (viii) any corporate action or other steps are taken or legal proceedings are started (or renewed after a stay) for the winding-up, and in the case of a petition for winding up is not discharged within 30 days, dissolution, administration or re-organisation (other than a solvent amalgamation or reorganisation which is, in the case of the Borrower only, on terms previously approved in writing by an Instructing Group) of the Sponsor or the Borrower or for the appointment of a receiver, administrator, administrative receiver, trustee or similar officer of the Sponsor or the Borrower or of any or all of the revenues and assets of the Borrower or all or a substantial part of the revenues and assets of the Sponsor; or (ix) any execution, distress, attachment or legal process is levied, made or taken against, or an encumbrancer takes possession of, the whole or any part of, the property, undertaking or assets of the Borrower or the whole or any substantial part of the assets of the Sponsor and in either case is not discharged or stayed within 30 days; or (x) the Sponsor ceases to be the beneficial owner (whether directly or indirectly) of 100% of the issued share capital of the Borrower; or - 82 - 88 (xi) any event shall occur which gives reasonable grounds for belief that any of the Licences or the Unit Operating Agreement will be suspended, cancelled, revoked, surrendered or terminated (whether in whole or in part) or any part of the Britannia Unit Area will be surrendered pursuant to the terms of any of the Licences; or (xii) (a) any of the Licences or the Unit Operating Agreement is suspended, cancelled, revoked, surrendered or terminated (whether in whole or in part) or any part of the Britannia Unit Area is surrendered pursuant to the terms of any of the Licences, (b) any of the Licences, the Annex B Approval or the Unit Operating Agreement ceases to be in full force and effect, (c) any other consent, licence, approval, authorisation, registration or permit required for the development or operation in accordance with good and prudent oil and gas field practices of the Project is suspended, cancelled, revoked, surrendered or terminated or otherwise ceases to be in full force or effect or is amended or varied in such a way as to render further construction, development or operation of the Project in accordance with good and prudent oil and gas field practices impracticable or which otherwise has, or might reasonably be expected to have, a Material Adverse Effect and such state of affairs has continued unremedied for at least thirty days thereafter, (d) any of the Project Agreements is varied, amended or waived to an extent or in a manner which has, or might reasonably be expected to have, a Material Adverse Effect unless, in the case of an amendment to the price of Gas to be sold under any Gas Sales Agreement, the Current Banking Case, revised by the Technical Agents to take into account such amendment and any prepayment of the Loan made by the Borrower within thirty days of such amendment, variation or waiver, demonstrates that the RTCR for each Calculation Date thereafter will be at least 1.35 or (e) any of the Project Agreements (other than the Unit Operating Agreement or any Licence) is cancelled, suspended (other than by reason of force majeure, howsoever defined in such agreement), terminated or revoked (1) unless it is replaced within thirty days thereof by another Project Agreement containing substantially the same terms, which has been approved by an Instructing Group (such approval not to have been unreasonably withheld or delayed) and which is governed by English or Scottish law or (2) in the case of any Gas Sales Agreement, unless the aggregate Minimum Bill Quantity under each of the remaining Gas Sales Agreements is at least equal to the Minimum Volume or, if the same is less than the Minimum Volume, the Current Banking Case, revised by the Technical Agents, to take into account such cancellation, suspension, termination or revocation and any prepayment of the Loan made by the Borrower within 30 days of such breach or default, projects that the RTCR for each Calculation Date thereafter will be at least 1.35; or (xiii) any of the Security Documents is not, or ceases to be, in full force and effect or is, or becomes, invalid or the validity or applicability thereof to any sums expressed to be secured thereby is denied by or on behalf of the Borrower; or (xiv) the security constituted by any of the Security Documents becomes enforceable; or - 83 - 89 (xv) the Project Completion Date does not occur on or before 30th June, 1999 (unless the Project Completion Date has not then occurred by reason only of the Project Completion Test referred to in Part 6 of the Seventh Schedule having not been satisfied); or (xvi) the Loan is not repaid in full on or before the Final Maturity Date; or (xvii) the Current Banking Case demonstrates that the Borrower will not be able to pay all Pre-Completion Expenditure as the same falls due out of Pre-Completion Available Funding and, within thirty days of that Banking Case being adopted as the Current Banking Case pursuant to Clause 19, the Borrower has not arranged for such additional funding in accordance with paragraph (iv) of the definition of Pre-Completion Available Funding in Clause 1.1 to be available to it so that it will be able to pay all such Pre-Completion Expenditure as the same falls due; or (xviii) the Sponsor or the Borrower repudiates any of the Financing Agreements, the Project Agreements or the UTPL Agreements, or does or causes to be done any act or thing evidencing an intention to repudiate any of such documents unless (a), in the case of the repudiation or intended repudiation of any Gas Sales Agreement, the aggregate Minimum Bill Quantity under each of the remaining Gas Sales Agreements is at least equal to the Minimum Volume or, if the same is less than the Minimum Volume, the Current Banking Case, revised by the Facility Agent to take into account such repudiation or intended repudiation and any prepayment of the Loan made by the Borrower within 30 days of such repudiation or action evidencing an intended repudiation, projects that the RTCR for each Calculation Date thereafter will be at least 1.35 or (b) in the case of any repudiation or intended repudiation by the Borrower of any Project Agreement (other than the Unit Operating Agreement or any Licence) which is required for the construction, repair, or addition to any of the Britannia Field Facilities, such repudiation or intended repudiation is solely resultant upon the dissatisfaction of the Borrower (acting reasonably) with the performance by the counterparty to such agreement of its obligations thereunder; or (xix) any breach or default occurs of any of the Project Agreements or of any consent, licence, approval, authorisation, registration or permit (including the Annex B Approval) required for the development or operation in accordance with good and prudent oil and gas field practice of the Project which such breach or default has a Material Adverse Effect or might reasonably be expected to have a Material Adverse Effect unless (1) in the case of any breach or default under any Project Agreement (other than the Unit Operating Agreement or any of the Licences) which has or might reasonably be expected to have the result of the cancellation, termination, suspension, or revocation thereof, such agreement has been replaced within thirty days of such breach or default by another Project Agreement containing substantially the same terms, which has been approved by an Instructing Group (such approval not to be unreasonably withheld or delayed) and which is governed by English or Scottish law or (2), in the case of any breach or default by any buyer under any of the Gas Sales - 84 - 90 Agreements, the Current Banking Case, revised by the Facility Agent to take into account such breach or default and any prepayment of the Loan made by the Borrower within 30 days of such breach or default, projects that the RTCR for each Calculation Date thereafter will be at least 1.35; or (xx) at any time it is or becomes unlawful for the Sponsor or the Borrower to perform or comply in any material respects with any or all of its obligations under any of the Financing Agreements, the Project Agreements or any of the obligations of the Sponsor or the Borrower thereunder are not or cease to be legal, valid and binding except in accordance with its terms or as otherwise contemplated by this Agreement; or (xxi) the Project, the Britannia Field Facilities or any substantial part thereof is abandoned without the prior written consent of an Instructing Group, the abandonment of which has or might reasonably be expected to have a Material Adverse Effect; or (xxii) any action, arbitration or administrative proceeding of or before any court or agency is started or threatened against the Borrower or the Sponsor and the same has, or, in the case of the Borrower, might reasonably be expected to have, or, in the case of the Sponsor, would have a Material Adverse Effect; or (xxiii) by or under the authority of any government, (a) the management of the Borrower is wholly or partially displaced or the authority of the Borrower in the conduct of its business is wholly or partially curtailed, (b) all or a majority of the issued share capital of the Borrower is seized, nationalised, expropriated or compulsorily acquired or (c) the whole or any part of the Project Interest is seized, nationalised, expropriated or compulsorily acquired or any other event occurs which has an effect substantially similar thereto; or (xxiv) the Borrower's interest in the Project, the Licences or the Unit Operating Agreement is reduced and such reduction has, or might reasonably be expected to have, a Material Adverse Effect; or (xxv) the Borrower ceases to carry on the business it carries on at the date hereof; or (xxvi) any act, condition or thing required to be done, fulfilled or performed at any time in order (a) to permit the Borrower or the Sponsor lawfully to enter into, exercise its rights under and perform and comply with the obligations expressed to be assumed by either of them in any of the Financing Agreements or the Project Agreements to which either is expressed to be a party, (b) to ensure that the obligations expressed to be assumed by the Borrower or the Sponsor in any of the Financing Agreements or the Project Agreements to which either of them is expressed to be a party are legal, valid and binding or (c) to make any of the Financing Agreements or the Project Agreements admissible in evidence in the United Kingdom is not done, fulfilled or performed; or - 85 - 91 (xxvii) all or a substantial part of (a) the Project or (b) all or a substantial part of each of the items listed at paragraphs (i) to (vi) in the definition of Britannia Field Facilities in Clause 1.1 is destroyed or damaged in any material respect unless the Borrower as soon as is reasonably practicable demonstrates to the satisfaction of an Instructing Group (acting reasonably) that the relevant part or parts of the Project or the Britannia Field Facilities will be fully and promptly reinstated and that the necessary resources (including any Insurance Proceeds) will be available to achieve such reinstatement and unless all such works as may be required for such reinstatement are diligently proceeded with (but not in such a way which would be contrary to good oil and gas field practices); or (xxviii) any further shares of the Borrower are issued (other than to the Sponsor) or any rights attaching to the Borrower's issued shares in existence at the date hereof are altered and such issue or alteration has not been irrevocably cancelled within thirty days of the earlier of the date on which the Facility Agent gives notice thereof to the Borrower and the date on which the Borrower knew or received notice of such issue or alteration, then, and in any such case and at any time thereafter the Facility Agent may (and, if so instructed by an Instructing Group, shall) by written notice to the Borrower: (a) declare the Advances to be immediately due and payable (whereupon the same shall become so payable together with accrued interest thereon and any other sums then owed by the Borrower hereunder) or declare the Advances to be due and payable on demand of the Facility Agent; and/or (b) declare that any undrawn portion of the Facility shall be cancelled, whereupon the same shall be cancelled and the Available Commitment of each Bank shall be reduced to zero, and the Facility Agent shall be entitled to exercise any and all such rights as may be available to it under any of the Security Documents. 28.2 If, pursuant to Clause 28.1, the Facility Agent declares the Advances to be due and payable on demand of the Facility Agent, then, and at any time thereafter, the Facility Agent may (and, if so instructed by an Instructing Group, shall) by written notice to the Borrower: (i) call for repayment of the Advances on such date as it may specify in such notice (whereupon the same shall become due and payable on such date together with accrued interest thereon and any other sums then owed by the Borrower hereunder) or withdraw its declaration with effect from such date as it may specify in such notice; and/or (ii) select as the duration of any Interest Period which begins whilst such declaration remains in effect a period of six months or less. - 86 - 92 28.3 Any sum which is received by the Facility Agent after the enforcement of any of the security created by or pursuant to any of the Security Documents or by any Receiver (as such term is defined in the Debenture) and is to be applied in or towards satisfaction of sums due and payable by the Borrower to any of the Beneficiaries under any of the Financing Agreements shall be applied by the Facility Agent: (i) first, in payment of all costs, charges, expenses and liabilities incurred by the Facility Agent and every Receiver, attorney, agent, delegate, sub-delegate or other person appointed by the Facility Agent under any of the Financing Agreements in the execution of any powers, authorities or discretions vested in it or him pursuant to the Financing Agreements; (ii) secondly, to the Beneficiaries in respect of any amount of interest (including default interest), fees and commissions arising under the Financing Agreements, pro rata in accordance with each Beneficiary's Relevant Interest Amount; (iii) thirdly, to the Beneficiaries in respect of any amount of principal or other amount arising under the Financing Agreements not falling within paragraph (ii) above, pro rata in accordance with each Beneficiary's Relevant Principal Amount; and (iv) fourthly, to the Borrower. 28.4 For the avoidance of doubt, nothing in Clause 10.1 shall be construed so as to limit the recourse of any of the Beneficiaries to any of the assets or revenues of the Borrower (including, without limitation, all Project Receipts, any part of the Project Interest and any amount credited to any Project Account) by exercising their rights under the Financing Agreements on the terms and conditions contained therein. 29. DEFAULT INTEREST AND INDEMNITY 29.1 If any sum due and payable by the Borrower hereunder is not paid on the due date therefor in accordance with the provisions of Clause 31 or if any sum due and payable by the Borrower under any judgment of any court in connection herewith is not paid on the date of such judgment, the period beginning on such due date or, as the case may be, the date of such judgment and ending on the date upon which the obligation of the Borrower to pay such sum (the balance thereof for the time being unpaid being herein referred to as an "UNPAID SUM") is discharged shall be divided into successive periods, each of which (other than the first) shall start on the last day of the preceding such period and the duration of each of which shall (except as otherwise provided in this Clause 29) be selected by the Funding Agent. 29.2 During each such period relating thereto as is mentioned in Clause 29.1 an unpaid sum shall bear interest at the rate per annum which is the sum from time to time of the Applicable Margin at such time, the Associated Costs Rate at such time in respect thereof and LIBOR on the Quotation Date therefor Provided that: (i) if, for any such period, LIBOR cannot be determined, the rate of interest applicable to such unpaid sum shall be the sum from time to time of the Applicable Margin at such time, the Associated Costs Rate at such time in respect thereof and the rate per - 87 - 93 annum determined by the Funding Agent to be the arithmetic mean (rounded upwards, if not already such a multiple, to the nearest whole multiple of one-sixteenth of one per cent.) of the rates notified by each Bank to the Funding Agent before the last day of such period to be those which express as a percentage rate per annum the cost to it of funding from whatever sources it may reasonably select its portion of such unpaid sum for such period; and (ii) if such unpaid sum is all or part of an Advance which became due and payable on a day other than the last day of an Interest Period relating thereto, the first such period applicable thereto shall be of a duration equal to the unexpired portion of that Interest Period. 29.3 Any interest which shall have accrued under Clause 29.2 in respect of an unpaid sum shall be due and payable and shall be paid by the Borrower at the end of the period by reference to which it is calculated or on such other date or dates as the Funding Agent may reasonably specify by written notice to the Borrower. 29.4 If any Bank or the Funding Agent on its behalf receives or recovers all or any part of such Bank's share of an Advance otherwise than on the last day of an Interest Period relating to that Advance, the Borrower shall pay to the Funding Agent on demand for the account of such Bank an amount equal to the amount (if any) by which (i) the additional interest (but excluding the Applicable Margin thereon) which would have been payable on the amount so received or recovered had it been received or recovered on the last day of that Interest Period exceeds (ii) the amount of interest which in the opinion of the Funding Agent would have been payable to the Funding Agent on the last day of that Interest Period in respect of a sterling deposit equal to the amount so received or recovered placed by it with a prime bank in London for a period starting on the date of such receipt or recovery (or, if such receipt or recovery was made after 3.00 p.m. on any day, on the business day following such the date of such receipt or recovery) and ending on the last day of that Interest Period. 29.5 The Borrower undertakes to indemnify: (i) each of the Beneficiaries against any cost, claim, loss, expense (including, without limitation, (a) at any time, any legal fees incurred by the Facility Agent and (b) at any time after any Event of Default has occurred which has not been remedied or waived (and only after such an Event of Default has occurred) any legal fees incurred by any other Beneficiary) or liability together with any VAT thereon, which any of them may sustain or incur as a consequence of the occurrence of any Potential Event of Default or Event of Default or any default by the Borrower in the performance of any of the obligations expressed to be assumed by it in any of the Financing Agreements; and (ii) each Bank against any loss it may suffer as a result of its funding its portion of an Advance requested by the Borrower hereunder but not made by reason of the operation of any one or more of the provisions hereof. - 88 - 94 29.6 Any unpaid sum shall (for the purposes of this Clause 29 and Clause 14.1) be treated as an advance and accordingly in this Clause 29 the term "Advance" includes any unpaid sum and the term "Interest Period", in relation to an unpaid sum, includes each such period relating thereto as is mentioned in Clause 29.1. - 89 - 95 PART 11 PAYMENTS 30. CURRENCY OF ACCOUNT AND PAYMENT 30.1 Sterling is the currency of account and payment for each and every sum at any time due from the Borrower hereunder Provided that: (i) each payment in respect of costs and expenses shall be made in the currency in which the same were incurred; and (ii) each payment pursuant to Clause 12.2 or Clause 14.1 shall be made in the currency specified by the party claiming thereunder. 30.2 If any sum due from the Borrower under this Agreement or any order or judgment given or made in relation hereto has to be converted from the currency (the "FIRST CURRENCY") in which the same is payable hereunder or under such order or judgment into another currency (the "SECOND CURRENCY") for the purpose of (i) making or filing a claim or proof against the Borrower, (ii) obtaining an order or judgment in any court or other tribunal or (iii) enforcing any order or judgment given or made in relation hereto, the Borrower shall indemnify and hold harmless each of the persons to whom such sum is due from and against any loss suffered as a result of any discrepancy between (a) the rate of exchange used for such purpose to convert the sum in question from the first currency into the second currency and (b) the rate or rates of exchange at which such person may in the ordinary course of business purchase the first currency with the second currency upon receipt of a sum paid to it in satisfaction, in whole or in part, of any such order, judgment, claim or proof. 31. PAYMENTS 31.1 On each date on which this Agreement requires an amount denominated in sterling to be paid by the Borrower or any of the Banks hereunder, the Borrower or, as the case may be, such Bank shall make the same available to the Funding Agent by payment in sterling and in immediately available, freely transferable cleared funds to such account of the Funding Agent with such bank in the United Kingdom as the Funding Agent shall from time to time have specified for this purpose. 31.2 If, at any time, it shall become impracticable (by reason of any action of any governmental authority or any change in law, exchange control regulations or any similar event) for the Borrower to make any payments hereunder in the manner specified in Clause 31.1, then the Borrower may agree with each or any of the Banks alternative arrangements for the payment direct to such Bank of amounts due to such Bank hereunder Provided that, in the absence of any such agreement with any Bank, the Borrower shall be obliged to make all payments due to such Bank in the manner specified herein. Upon reaching such agreement the Borrower and such Bank shall immediately notify the Funding Agent thereof and shall thereafter promptly notify the Funding Agent of all payments made direct to such Bank. - 90 - 96 31.3 Save as otherwise provided herein, each payment received by the Funding Agent for the account of another person pursuant to Clause 31.1 shall: (i) in the case of a payment received for the account of the Borrower, be made available by the Funding Agent to the Borrower: (a) first, in or towards payment (for value the same day) of any amount due from the Borrower hereunder to the person from whom the amount was so received; and (b) secondly, by transfer in the currency of receipt and for value the same day to the Account Bank for credit to the Proceeds Account; or (ii) in the case of any other payment, be made available by the Funding Agent, to the person for whose account such payment was received (in the case of a Bank, for the account of its Facility Office) for value the same day by transfer to such account of such person with such bank in London as such person shall have previously notified to the Funding Agent. 31.4 All payments required to be made by the Borrower hereunder shall be calculated without reference to any set-off or counterclaim and shall be made free and clear of and without any deduction for or on account of any set-off or counterclaim. 31.5 Where a sum is to be paid hereunder to the Funding Agent for account of another person, the Funding Agent shall not be obliged to make the same available to that other person until it has been able to establish to its satisfaction that it has actually received such sum, but if it does so and it proves to be the case that it had not actually received such sum, then the person to whom such sum was so made available shall on request refund the same to the Funding Agent together with an amount sufficient to indemnify the Funding Agent against any cost or loss it may have suffered or incurred by reason of its having paid out such sum prior to its having received such sum. Where the Funding Agent has made any sum available to the Borrower by transfer to the Proceeds Account in accordance with Clause 31.3(i)(b) and it proves to be the case that it had not actually received such sum, then, notwithstanding any other provision hereof, the Funding Agent shall be entitled to require the Account Bank to pay out of the amount standing to the credit of the Proceeds Account an amount equal to the sum so transferred together with accrued interest thereon and require the person to whom the money was paid to indemnify it as above. 31.6 The obligations of the Borrower under Clauses 30 and 31 are separate and continuing obligations and shall continue in full force and effect notwithstanding the termination of this Agreement for any reason whatsoever. - 91 - 97 32. SET-OFF The Borrower authorises each Bank to apply any credit balance to which the Borrower is entitled on any account of the Borrower with that Bank in satisfaction of any sum due and payable from the Borrower to such Bank under any of the Financing Agreements but unpaid; for this purpose, each Bank is authorised to purchase with the moneys standing to the credit of any such account such other currencies as may be necessary to effect such application. No Bank shall be obliged to exercise any right given to it by this Clause 32. 33. REDISTRIBUTION OF PAYMENTS 33.1 If, at any time, the proportion which any Bank (a "RECOVERING BANK") has received or recovered (whether by payment, the exercise of a right of set-off or combination of accounts or otherwise) in respect of its portion of any payment (a "RELEVANT PAYMENT") to be made under this Agreement by the Borrower for the account of such Recovering Bank and one or more other Banks is greater (the portion of such receipt or recovery giving rise to such excess proportion being herein called an "EXCESS AMOUNT") than the proportion thereof so received or recovered by the Bank or Banks so receiving or recovering the smallest proportion thereof, then: (i) such Recovering Bank shall pay to the Funding Agent an amount equal to such excess amount; (ii) there shall thereupon fall due from the Borrower to such Recovering Bank an amount equal to the amount paid out by such Recovering Bank pursuant to paragraph (i) above, the amount so due being, for the purposes hereof, treated as if it were an unpaid part of such Recovering Bank's portion of such relevant payment; and (iii) the Funding Agent shall treat the amount received by it from such Recovering Bank pursuant to paragraph (i) above as if such amount had been received by it from the Borrower in respect of such relevant payment and shall pay the same to the persons entitled thereto (including such Recovering Bank) pro rata to their respective entitlements thereto. 33.2 If any sum (a "RELEVANT SUM") received or recovered by a Recovering Bank in respect of any amount owing to it by the Borrower becomes repayable and is repaid by such Recovering Bank, then: (i) each Bank which has received a share of such relevant sum by reason of the implementation of Clause 33.1 shall, upon request of the Funding Agent, pay to the Funding Agent for the account of such Recovering Bank an amount equal to its share of such relevant sum; and (ii) there shall thereupon fall due from the Borrower to each such Bank an amount equal to the amount paid out by it pursuant to paragraph (i) above, the amount so due being, for the purposes hereof, treated as if it were the sum payable to such Bank against which such Bank's share of such relevant sum was applied. - 92 - 98 PART 12 PROJECT ACCOUNTS 34 THE PROJECT ACCOUNTS 34.1 An account, in the name of the Borrower and designated "Union Texas Britannia Limited - Proceeds Account" and numbered 25661361 has been opened on the books of the Account Bank at its office in London at 64 Knightsbridge, London SW1X 7LG. The Facility Agent, the Account Bank and the Borrower agree that, at such time as the Facility Agent and the Borrower reasonably consider it to be appropriate, further accounts respectively designated "Union Texas Britannia Limited - Insurance Account" and "Union Texas Britannia Limited - VAT Account" shall be opened on the books of the Account Bank at such office in London. In respect of each of the Project Accounts: (i) the Account Bank shall (on instructions from the Borrower) from time to time sub-divide the Project Accounts into such sub-accounts as may be appropriate for the purposes hereof; (ii) the Project Accounts shall be maintained at the Account Bank in accordance with the terms of this Agreement and its usual practices; (iii) if at any time the Account Bank retires pursuant hereto, then there shall be opened on the books of its successor's principal office in London such accounts and the retiring Account Bank shall transfer to the credit thereof any amount standing to the credit of the relevant accounts opened by it as provided above together with any accrued interest thereon; and (iv) save as may be agreed by the Borrower, the Facility Agent and the Account Bank each account shall be maintained in sterling Provided that the Proceeds Account shall be sub-divided so that it has a dollar sub-account. 34.2 It is hereby agreed that, save as otherwise provided in any of the Security Documents: (i) the Borrower shall credit, and shall procure that there is credited, to the Project Accounts all such amounts as are required pursuant to this Agreement to be so credited and ensure that such other credits are made thereto as are required to be made pursuant to any provision of any other Financing Agreement; and (ii) the Account Bank shall credit the Project Accounts with such amounts as are required pursuant to this Agreement to be so credited and make such other credits thereto as the Account Bank is required to make pursuant to any provision of any other Financing Agreement. - 93 - 99 34.3 Each amount from time to time standing to the credit of the Project Accounts shall bear interest at such rate as may from time to time be agreed between the Borrower and the Account Bank or, if no such rate is agreed for any period, at the Account Bank's overnight rate for call deposits from time to time, such interest to be credited to the relevant Project Account at such time or times as may be agreed from time to time between the Borrower and the Account Bank or, failing agreement, in arrears on the last business day of each successive period of one month and on the date on which the relevant Project Account is closed. 34.4 The Account Bank hereby agrees that any deposit made with it in any Project Account shall be subject to the provisions of this Clause 34 and in addition waives any lien or right of set-off or counterclaim which it may have from time to time over any Project Account, the amount of such deposit or any interest accrued thereon from time to time. The Account Bank shall, in relation to the Project Accounts, act in accordance with the instructions of the Borrower (subject to Clauses 34.17 and 34.18) Provided that such instructions were given expressly in accordance herewith or to the extent specified in any of the Financing Agreements. 34.5 The Borrower agrees that it shall make such payments out of the Project Accounts as required by and in accordance with this Agreement but subject always to Clause 34.17. Save as otherwise provided herein, the Borrower shall not make any payment out of the amount standing to the credit of any of the Project Accounts. 34.6 The Borrower shall: (i) use all reasonable endeavours to ensure that all Project Receipts (other than any Insurance Proceeds) are paid directly into the Proceeds Account, and shall ensure that all such amounts which are not paid directly into the Proceeds Account are paid into the Proceeds Account immediately upon their receipt by or on behalf of the Borrower; (ii) use all reasonable endeavours to ensure that all Insurance Proceeds (excluding the proceeds due to be paid out to a third party or to the Borrower or the Sponsor as reimbursement for the amounts which it has paid out against delivery to the Facility Agent of a copy of the third party claim settled by it in each case in settlement of claims or expenses related thereto in respect of any third party liability and excluding any proceeds properly payable by the insurers directly to the Operator under the terms of the relevant policy) are paid directly into the Insurance Account and shall ensure that all such proceeds not so paid directly are paid into the Insurance Account immediately upon their receipt by or on behalf of the Borrower; (iii) use all reasonable endeavours to ensure that: (a) any amount payable by any person to the Borrower which represents VAT chargeable in respect of any supply made or to be made by the Borrower in consideration (in whole or in part) for any Project Receipt; and - 94 - 100 (b) any amount payable (or repayable) by H.M. Customs & Excise to the Borrower in respect of VAT input tax incurred by the Borrower, ("VAT RECEIPTS") are paid directly into the Proceeds Account and shall ensure that all VAT Receipts which are not paid directly into the Proceeds Account are paid into the Proceeds Account immediately upon their receipt by or on behalf of the Borrower and on the last business day of each calendar month the Borrower shall request the Account Bank to transfer an amount equal to all VAT Receipts received into the Proceeds Account during that calendar month into the VAT Account and the Account Bank shall make such transfer promptly upon such request; (iv) ensure that, save where specifically provided to the contrary in any Financing Agreement, all amounts payable to it under any UTPL Agreement or in respect of Subordinated Debt are paid directly into the Proceeds Account; (v) ensure that all Insurance Proceeds due to be paid out to a third party in settlement of claims in respect of any third party liability are, to the extent received by the Borrower, paid promptly to the third party upon settlement or final determination of any such claim; (vi) to the extent that any amount is paid into the Proceeds Account in dollars it shall be credited to the dollar sub-account thereof and the Borrower shall, to the extent that any such amount is (or when aggregated with any other amounts then standing to the credit of such account is) in excess of US$500,000 promptly thereafter convert such excess amount into sterling pursuant to a spot currency exchange transaction, shall apply any such dollar amount in satisfaction of its liability under such transaction immediately upon the same becoming due and payable and shall ensure that the sterling proceeds of such transaction shall be credited to the Proceeds Account upon their being paid; and (vii) to the extent that it is required to satisfy any Permitted Expenditure then due and payable in dollars, be entitled to withdraw amounts from the Proceeds Account and convert the same into dollars pursuant to a spot currency exchange transaction and shall ensure that the dollar proceeds of such transaction are paid to the relevant third party immediately upon their being paid. 34.7 If: (i) any amounts mentioned in paragraphs (i), (ii), (vi), (vii) or (x) of the definition of Project Receipts in Clause 1.1 have been paid into the Proceeds Account prior to the Project Completion Date then such amounts may, at the Borrower's option, be released therefrom to meet any Permitted Expenditure upon the same becoming due and payable by the Borrower prior to the Project Completion Date; or - 95 - 101 (ii) any amounts are credited to the Proceeds Account which represent the proceeds of any Advance made hereunder, then such amounts may be released to meet items and expenditure specified in Clause 3 and, to the extent that such proceeds have been drawn for general corporate purposes pursuant to Clause 3.2(ii), notwithstanding Clause 34.13(i), such proceeds may be applied on such date to fund intra-group loans to the Sponsor or to pay to the Sponsor fees accrued under the Administrative Services Agreement prior to the Project Completion Date, Provided that no amount may be released from the Proceeds Account (notwithstanding (i) or (ii) above) if any Event of Default has occurred or would occur in consequence of making such release. 34.8 The Borrower may, from time to time, instruct the Account Bank to release to the Sponsor any amount then standing to the credit of the Proceeds Account (all amounts released pursuant to this Clause 34.8 being "SPECIAL SPONSOR PAYMENTS"). Subject to Clauses 34.17 and 34.18, the Account Bank will make such payment from the Proceeds Account if and only if on the date for payment thereof the following conditions are satisfied and the Facility Agent has not notified it to the contrary (which it will do only if any such condition is not satisfied): (i) the Banking Case delivered pursuant to Clause 19.1(i) and each Current Banking Case thereafter projects and estimates that the RTCR in respect of any Calculation Date is or will be equal to or greater than 1.35; (ii) no Event of Default or Potential Event of Default has occurred or would occur as a result of such payment from the Proceeds Account; (iii) the Project Completion Date has occurred; (iv) all indebtedness for borrowed money of the Sponsor in excess of pound sterling 10,000,000 (or its equivalent) in the aggregate has been paid when due (or within any applicable grace period granted in the agreement, if any, evidencing the same), no indebtedness for borrowed money of the Sponsor in excess of pound sterling 10,000,000 (or its equivalent) in the aggregate has been declared to be or otherwise has become due and payable prior to its specified maturity by reason of the happening of a default or event of default (howsoever described and whether or not involving culpability on the part of any person) and no creditor of the Sponsor has become entitled to declare any indebtedness for borrowed money of the Sponsor in excess of pound sterling 10,000,000 (or its equivalent) in the aggregate due and payable prior to its specified maturity by reason of the happening of a default or event of default (howsoever described and whether or not involving culpability on the part of any person); and (v) the most recent UTPL Credit Test to have been carried out pursuant to Clause 36.3 has been satisfied. 34.9 If, at any time, any of the conditions specified in Clause 34.8(i), (ii), (iii), (iv) or (v) are not or cease to be satisfied, then the Borrower shall immediately pay, or ensure that there is immediately paid, - 96 - 102 to the Account Bank for credit to the Proceeds Account an amount equal to the aggregate of all Special Sponsor Payments at any time paid out by the Account Bank from the Proceeds Account which Special Sponsor Payments have not been applied or distributed by the Borrower to pay the types of items specified in Clause 34.10. 34.10 Subject to Clauses 34.11, 34.17 and 34.18, the Borrower may from time to time instruct the Account Bank to pay amounts out of the Proceeds Account to the extent that the same are to be applied or distributed to pay (and in the case of the payment of obligations, such obligations shall be paid in a timely manner): (i) Permitted Expenditure, taxes and any other item of expenditure specified in Clause 3.1 in each case then due and payable and not being an amount which might otherwise be satisfied by a payment out of the Insurance Account as contemplated by Clause 34.15; (ii) any amounts of principal, interest, fees, commissions, costs or expenses due and payable under any of the Financing Agreements; or (iii) subject to Clause 34.13, any dividend or distribution to its shareholders or any principal, interest or other amount then due and payable in respect of Subordinated Debt, payments to the Sponsor under the Administrative Services Agreement or any intra group loan to the Sponsor (but excluding, for the avoidance of doubt, any Special Sponsor Payments) Provided that after such payment an amount remains credited to the Proceeds Account which is equal to the amount at which the Operating and Financing Costs Reserve will then be Fully Funded, Provided that the Borrower may not give any instruction to the Account Bank to release any amount specified in Clause 34.10 (i) if the amount of all such expenditure already incurred by the Borrower during the then current Semi-Annual Cash Flow Period exceeds 120% of the amount of such expenditure projected and estimated in the Current Banking Case to be expended by the Borrower during such Semi-Annual Cash Flow Period unless the Borrower has delivered to the Facility Agent a certificate of a duly authorised officer of the Borrower confirming that the expenditure which the Borrower wishes to pay is properly due and payable and the Facility Agent has confirmed to the Account Bank that it has approved the expenditure so certified (such approval not to be unreasonably withheld or delayed). 34.11 No payment may be made from the Proceeds Account in respect of Clause 34.7 or 34.10 (unless otherwise agreed by an Instructing Group) if: (i) any Event of Default has occurred or would occur in consequence of the making of such payment out; or (ii) the Project Completion Date has not occurred and the Pre-Completion Available Funding is zero. - 97 - 103 34.12 Notwithstanding any provision to the contrary in any Financing Agreement, no amount may be released from any Project Account if such release would result in a debit balance appearing on such Project Account. 34.13 (i) The Borrower shall only pay dividends or other distributions to its members, pay or repay any interest or other amount in respect of, or any amount of, Subordinated Debt, pay any amount to the Sponsor under the Administrative Services Agreement (but subject to Clause 34.7(ii)) or pay any intra-group loans to the Sponsor (but subject to Clause 34.7(ii)) on a Repayment Date and only to the extent that after such payment the Operating and Financing Costs Reserve will be Fully Funded. (ii) The Borrower may only declare and pay dividends or distributions to its members in cash. 34.14 Where two or more payments fall to be made by the Borrower on the same business day either (i) out of amounts credited to the Proceeds Account or (ii) out of any other funds then available to the Borrower (other than funds contained in any other Project Account) and the amount so credited to the Proceeds Account or, as the case may be, then available to the Borrower is insufficient to discharge all such payments such amount shall be applied in satisfying the following payment obligations of the Borrower in the following order of priority (subject to Clause 34.18): (i) first, amounts payable in respect of Abandonment Costs, Capital Expenditure, GSA Refunds, Insurance Costs, Operating Costs, Overlifting Costs, Royalties, Transportation Costs, Trust Fund Costs or any tax liability of the Borrower to the extent that the same has fallen due for payment and (except in the case of amounts payable to the Sponsor in respect of Insurance Costs after the Project Completion Date) is payable to or for the account of a person other than the Sponsor, UTPH or any subsidiary of the Sponsor or UTPH pari passu with any transfer to the VAT Account required to be made pursuant to Clause 34.6(iii); (ii) secondly, amounts due and payable in respect of costs and expenses, fees, commissions and interest arising under this Agreement or any of the Security Documents; (iii) thirdly, amounts not falling within paragraph (ii) above and due and payable under any Hedging Agreement Provided that if an Event of Default has occurred then any amount due and payable under a Hedging Agreement (other than an amount payable thereunder which is referred to in paragraph (iv) below) shall be made pari passu with amounts payable under paragraph (ii) above; (iv) fourthly, amounts not falling within paragraphs (ii) or (iii) above and due and payable to any of the Beneficiaries under any of the Financing Agreements (which, for the avoidance of doubt, shall include principal amounts of the Loan falling due for repayment) pari passu with, but only if an Event of Default shall have occurred, any amount payable under a Hedging Agreement pursuant to any close out or termination - 98 - 104 provision thereof and which is based on the marked to market value of such Hedging Agreement; (v) fifthly, if on any date the Operating and Financing Costs Reserve is not Fully Funded, amounts required to be paid so that such reserve shall be Fully Funded thereafter; and (vi) sixthly, amounts due and payable to the Sponsor by way of dividend or distribution, or by way of the repayment or payment of interest, principal or other amounts in respect of Subordinated Debt, payments to the Sponsor under the Administrative Services Agreement or by way of intra-group loans to the Sponsor or payments to UTPH or any of its subsidiaries in respect of a transaction permitted by Clause 24(xiii)(b)), in each case as permitted by the terms of the Financing Agreements. 34.15 Subject to Clause 34.17 and 34.18 and provided that no Event of Default has occurred or will occur in consequence of making such payment out, the Borrower may instruct the Account Bank to pay out of the amount standing to the credit of the Insurance Account amounts to be applied against the following items in the following circumstances: (i) in the case of moneys representing the Insurance Proceeds in respect of loss or damage to any part of the Project Interest (and to which neither of (ii) or (iii) below apply), in repair, replacement or rectification of the asset lost or damaged save where the Current Banking Case, revised by the Facility Agent to take into account, for the purpose of calculating Forecast Net Cash Flow, Permitted Expenditure and the RTCRs thereunder, the expenditure payable in respect of such loss and any Insurance Proceeds paid in respect of it, projects and estimates that the RTCR for any Calculation Date thereafter will be less than 1.35, in which case the Account Bank shall retain such moneys in the Insurance Account pending the instructions of the Facility Agent as to their application; (ii) in the case of moneys representing Insurance Proceeds where the Sponsor had, prior to such proceeds being paid by the insurers, paid (or provided the Borrower with funds to pay) for the repair, replacement or rectification of that part of the Project Interest which was lost or damaged, in reimbursing the Sponsor for any such payment; and (iii) in the case of moneys representing Insurance Proceeds where the Banks had advanced amounts hereunder to the Borrower, prior to such proceeds being paid, and which advances were applied in repairing, replacing or rectifying any part of the Project Interest which was lost or damaged, such moneys shall be retained by the Account Bank in the Insurance Account pending the instructions of the Facility Agent as to their application, Provided that prior to any such payment being made from the Insurance Account the Account Bank may seek confirmation from the Facility Agent that the relevant payment falls under paragraphs (i), (ii) or (iii) above and the Facility Agent shall give such confirmation as soon as is practicable after such request if such shall be the case. - 99 - 105 34.16 The Borrower may request the Account Bank to release any amount standing to the credit of the VAT Account at any time Provided that at the time of such release each of the conditions specified in Clause 34.8 (i), (ii), (iii), (iv) and (v) are satisfied and the Facility Agent has not notified it to the contrary (which it will only do if any such condition is not satisfied). If any such condition ceases to be satisfied the Borrower shall immediately pay, or ensure that there is immediately paid to the Account Bank for the credit of the VAT Account an amount equal to all amounts at any time paid out from the VAT Account which amounts have not been applied by the Borrower in satisfaction of its VAT Obligations (as defined below) and thereafter the Borrower may only request the Account Bank to release any amount standing to the credit of the VAT Account in order to meet obligations of the Borrower to pay VAT (a "VAT OBLIGATION") (whether to a third party in respect of any supply of goods or services made to the Borrower in respect of which supply VAT is chargeable at a positive rate and in respect of which VAT the Borrower has agreed to pay such third party a sum equal to such VAT in addition to the consideration for the said supply or to H.M. Customs & Excise) and the Account Bank will release any amount so requested Provided that the Account Bank has not been notified by the Facility Agent that an Event of Default has occurred or will occur in consequence of making such payment out. 34.17 In order for a withdrawal to be made by the Borrower, the Borrower shall, not later than 10 a.m. on the business day prior to the proposed date of the withdrawal, give the Account Bank a notice of withdrawal, in such form as the Account Bank and the Borrower may from time to time agree. The proposed date for withdrawal stipulated in such notice shall be a business day. 34.18 The Account Bank shall, at any time after the notification to it by the Facility Agent of the occurrence of an Event of Default and until such time as it is notified by the Facility Agent that such Event of Default has ceased or been waived by the Banks: (i) not be obliged to act on the instructions of the Borrower pursuant to this Clause 34 in relation to any sums at such time standing to the credit of the Accounts; and (ii) (subject to Clause 28.3) be entitled to pay to the Facility Agent any sums standing to the credit of the Project Accounts for application by the Facility Agent in or towards the payment and discharge of any amounts owing to the Beneficiaries under the Financing Agreements as the Facility Agent thinks fit. 34.19 Subject as provided in the Charge over Accounts, the Account Bank shall, at the request of, and against payment of its reasonable costs by, the Borrower (or any other person or persons entitled thereto) made on or after the Discharge Date, close the Project Accounts and pay any amount standing to the credit thereof to the Borrower (or such other person or persons entitled thereto). 35. AUTHORISED INVESTMENTS 35.1 The Borrower may invest in Authorised Investments from time to time, subject as provided in this Agreement, by utilising any amounts (and only such amounts) standing to the credit of the Proceeds Account, in each case as may be prudent in accordance with the following provisions of this Clause 35. 35.2 All Authorised Investments will be: - 100 - 106 (i) made in the name of the Account Bank; or (ii) in the name of the Borrower, but only if such Authorised Investment is with a Finance Party or with any other bank who has agreed, in a form acceptable to the Facility Agent, that: (a) such Authorised Investment is held to the order of the Account Bank (but subject to the terms of the Debenture) and that, unless the Facility Agent has notified the relevant bank that an Event of Default has occurred and has demanded delivery, any payment in respect of the Authorised Investment shall be remitted (in full and without any deduction, withholding or retention of any kind) to the Account Bank (who shall credit such payment to the relevant Project Account); (b) such Authorised Investment is subject to the encumbrances created by the Security Documents; and (c) it will not exercise, and will hold the Authorised Investment free of, any encumbrance, right of set-off, counterclaim or other interest which it may have. Each Finance Party acknowledges that any Authorised Investment made with it is made on the above terms. Subject to this Clause 35 and the Security Documents, the Account Bank agrees to act on the instructions of the Borrower in relation to all its dealings relating to Authorised Investments but without the Account Bank in any way being, or being deemed to be, the agent of the Borrower. 35.3 The Borrower will procure that a prudent spread of Authorised Investments is maintained at all times with tenors which coincide with Repayment Dates in respect of amounts due to be paid on such dates in repayment of the Loan. The Borrower will match the maturities of the Authorised Investments made out of moneys standing to the credit of the Proceeds Account, having regard to the availability of Authorised Investments which are readily marketable, and shall liquidate (or procure that there are liquidated) Authorised Investments to the extent necessary, for the purposes of payment of any amount due under the Financing Agreements and the Project Agreements. 35.4 All documents of title or other documentary evidence of ownership with respect to Authorised Investments made out of the Proceeds Account will be held in the custody of the Account Bank and, if any such document or other evidence comes into the possession or control of the Borrower, it shall procure that the same is delivered to the Account Bank immediately. The Account Bank shall hold all of the above subject to the security created or evidenced by the Security Documents. 35.5 The Borrower shall at all times indemnify and keep indemnified the Account Bank fully and effectively from and against all liabilities, costs and expenses which the Account Bank may incur by reason of the proper acquisition, holding, disposal or realisation of any Authorised Investment including any liability incurred as a result of any action described in Clause 35.9 except for any wilful default or gross negligence in its dealings with any Authorised Investments. - 101 - 107 35.6 Upon the realisation of any investment made under this Clause 35, the proceeds of realisation shall immediately be credited directly to the Proceeds Account or immediately invested in another Authorised Investment. 35.7 If any Authorised Investment ceases to be an Authorised Investment, the Borrower will as soon as reasonably practicable after becoming aware of that fact (and in no event more than five business days after that time) notify the Facility Agent of that fact and promptly, if so required by the Facility Agent after consultation with the Borrower, instruct the Account Bank to immediately replace the relevant investment by an Authorised Investment or by cash. 35.8 Subject to Clause 35.9, any reference in this Agreement to the balance standing to the credit of the Proceeds Account will be deemed to include a reference to the Authorised Investments in which all or part of such balance is for the time being invested. In the event of any dispute as to the value of any Authorised Investment for the purpose of determining the amount deemed to be standing to the credit of the Proceeds Account pursuant to this Clause 35.8, that value shall be determined by the Facility Agent (acting reasonably). Any interest or other income paid in respect of any Authorised Investment will be paid to the Proceeds Account in accordance with Clause 34. 35.9 If the amount standing to the credit of the Proceeds Account (excluding for this purpose any amount deemed to be included pursuant to Clause 35.8) is insufficient to make a payment under the Financing Agreements or in respect of Permitted Expenditure or taxes when due out of the Proceeds Account, the Facility Agent is hereby authorised, in its discretion and without any liability for loss or damage incurred by the Borrower as a result of its so doing, to require the Account Bank or, as the case may be, the Borrower to sell or otherwise realise or to enter into any exchange transaction with respect to, any Authorised Investment made out of moneys standing to the credit of the Proceeds Account to the extent that it appears to the Facility Agent to be necessary for the payment of any amount due under the Financing Agreements or in respect of Permitted Expenditure or taxes which could not otherwise be paid out of the cash balance standing to the credit of the Proceeds Account, all costs and expenses incurred thereby being for the account of the Borrower. 35.10 Not later than ten business days after the end of each calendar month beginning with the month in which an Authorised Investment is first made on behalf of the Borrower, the Borrower will deliver to the Facility Agent a schedule of the investments made, realised or liquidated during that month in respect of the Proceeds Account, in such detail as the Facility Agent may reasonably require. The Facility Agent shall be entitled to require the liquidation of any investment which is not an Authorised Investment immediately upon notice to that effect being given by the Facility Agent to the Borrower. 35.11 Not later than ten business days after the end of each financial quarter, beginning with the first financial quarter ending after the making of the first Authorised Investment made on behalf of the Borrower, the Facility Agent will deliver to the Banks a schedule of the Authorised Investments as at the end of such quarter, in such detail as an Instructing Group may reasonably request. - 102 - 108 36. UTPL CREDIT TEST 36.1 For any purposes of the Financing Agreements the UTPL Credit Test will have been satisfied if both the following tests are satisfied as at the date on which any provision of any Financing Agreement required it to be satisfied but by reference to the most recent audited annual financial statements of the Sponsor or, in the case of (i) below only, the most recent unaudited semi-annual financial statements of the Sponsor, whichever is the most recent: (i) Consolidated Debt of the Sponsor on the relevant 30 June or 31 December must not exceed 3.75 times the Discretionary Cash Flow of the Sponsor for the twelve month period ending on the relevant 30 June or 31 December; and (ii) the SEC Value of the Sponsor must be at least pound sterling 250,000,000. 36.2 The expressions used in this Clause 36 shall be construed in accordance with generally accepted accounting principles in the United Kingdom (as used in the Sponsor's most recent audited annual, or unaudited semi-annual, financial statements) but so that: "DISCRETIONARY CASH FLOW" means, in respect of any period, an amount equal to (i) the "Profit For The Financial Year" of the Sponsor and its subsidiaries for such period, as defined in the Consolidated Profit and Loss Account of the Sponsor and its subsidiaries for such period in the most recent annual or semi-annual consolidated financial statements of the Sponsor and its subsidiaries, prepared in accordance with generally accepted accounting principles in the United Kingdom and on substantially the same basis as the same appears in the Consolidated Profit and Loss Account of the Sponsor and its subsidiaries for the year ended 31 December 1994 plus (ii) any depreciation incurred by the Sponsor or any of its subsidiaries during such period, (iii) any dismantlement provision made by the Sponsor or any of its subsidiaries during such period, (iv) any exploration expenses incurred by the Sponsor or any of its subsidiaries during such period, (v) any deferred taxes incurred by the Sponsor or any of its subsidiaries during such period, plus or minus (vi) any loss incurred or gain made (respectively) on disposals of any tangible assets (as permitted pursuant to the Financing Agreements), plus or minus (vii) any gain made or loss incurred from extraordinary items, changes in accounting policies, or non-cash non-recurring items, but minus (viii) dividends on preferred stock paid during such period by the Sponsor, or any of its subsidiaries (each of (ii), (iii), (iv), (v), (vi), (vii) and (viii) as set out in the Notes in the most recent annual or semi-annual consolidated financial statements of the Sponsor and its subsidiaries, prepared in accordance with generally accepted accounting principles in the United Kingdom and on substantially the same basis as the same appears in the Consolidated Profit and Loss Account of the Sponsor and its subsidiaries for the year ended 31 December 1994) and minus (ix) any amount receivable by the Sponsor in accordance with any of the Financing Agreements (including any payments to the Sponsor out of the Proceeds Account); "CONSOLIDATED DEBT" means the aggregate of all indebtedness for borrowed money of the Sponsor and all of its subsidiaries (excluding the Borrower) owed to any person other than indebtedness for borrowed money owed by the Sponsor to any of its subsidiaries or owed by any of the Sponsor's subsidiaries to the Sponsor or to any other subsidiary of the Sponsor; and - 103 - 109 "SEC VALUE" means an amount equal to the "standardized measure of discounted future net cash flows" for the Sponsor as set forth in the Form 10-K of UTPH as of 31 December of each year. 36.3 Unless specified otherwise in any Financing Agreement the Sponsor must have satisfied the UTPL Credit Test on each Calculation Date, it being understood and agreed that a failure to satisfy such credit test does not by itself constitute an Event of Default or a breach of this Agreement. - 104 - 110 PART 13 FEES, COSTS AND EXPENSES 37. FEES 37.1 The Borrower shall pay to the Funding Agent for account of each Bank a commitment commission on the amount of such Bank's Available Commitment from day to day during the period beginning on the date hereof and ending on the day on which such Bank's Available Commitment is reduced to zero, such commitment commission to be calculated at the rate of zero point three five per cent. (0.35%) per annum and payable in arrear on the last day of each successive period of three months which ends during such period and on the day on which such Bank's Available Commitment is reduced to zero. 37.2 The Borrower shall pay to the account of each of Chemical Bank, NationsBank, N.A. (Carolinas) and National Westminster Bank Plc the arrangement and underwriting fees specified in the Arrangement/Underwriting Fees Letters at the times, and in the amounts, specified in such letters. 37.3 The Borrower shall pay to each of the Technical Agents for their own account the technical agent fees specified in the Technical Agents Fee Letters at the times, and in the amounts, specified in such letter. 37.4 The Borrower shall pay to the Facility Agent for its own account the facility agent fees specified in the Facility Agent Fee Letter at the times, and in the amounts, specified in such letter. 37.5 The Borrower shall pay to the Funding Agent for its own account the funding agent fees specified in the Funding Agent Fee Letter. 38. COSTS AND EXPENSES 38.1 The Borrower shall, from time to time on demand of the Facility Agent, reimburse the Facility Agent for all reasonable legal fees together with any VAT thereon incurred by it before the first Advance is made hereunder in connection with the review of the Project Agreements, the negotiation, preparation and execution of the Financing Agreements and the completion of the transactions therein contemplated, the preparation of the Information Memorandum and the taking of any new security, or the preservation of existing security, in accordance with Clause 25. 38.2 The Borrower shall, from time to time on demand of the Facility Agent, reimburse each of the Account Bank, the Agents, the Arranger and the Co-Arrangers for all reasonable costs and expenses (excluding legal fees) together with any VAT thereon incurred by them in connection with the review of the Project Agreements, the negotiation, preparation and execution of the Financing Agreements and the completion of the transactions therein contemplated, the preparation of the Information Memorandum and the taking of any new security, or the preservation of existing security, in accordance with Clause 25. - 105 - 111 38.3 The Borrower shall, from time to time on demand of the Facility Agent, reimburse the Facility Agent for all costs and expenses (including, without limitation, legal fees) together with any VAT thereon incurred by it in or in connection with the preservation and/or enforcement of any of the rights, and/or exercise of any discretions on the part of, any of the Beneficiaries under the Financing Agreements or any of them. 38.4 The Borrower shall, from time to time on demand of the Facility Agent, reimburse the Beneficiaries and each of them for all costs and expenses (including, without limitation, legal fees) together with any VAT thereon incurred at any time after an Event of Default has occurred, which has not been remedied or waived, in or in connection with the preservation and/or enforcement of any of the rights, and/or the exercise of any discretions on the part of, any of the Beneficiaries under the Financing Agreements or any of them. 38.5 The Borrower shall pay all stamp, registration and other taxes to which any Financing Agreement or any judgment given in connection therewith is or at any time may be subject and shall, from time to time on demand of the Facility Agent, indemnify the Beneficiaries against any liabilities, costs, claims and expenses resulting from any failure to pay or any delay in paying any such tax. 38.6 The Borrower shall, from time to time on demand of the Facility Agent, reimburse each Agent for all properly incurred fees, costs and expenses (together with any VAT thereon) of: (i) any Independent Engineers appointed hereunder paid out by it in connection with the obtaining of any of the reports (or any verification or updates thereof) delivered pursuant to Part 7; (ii) any Independent Expert appointed hereunder paid out by it; or (iii) any Insurance Adviser appointed hereunder paid out by it in connection with Part 9. 38.7 If the Borrower fails to perform any of its obligations under this Clause 38, each Bank shall, in the proportion borne by its share of the Loan (or, if no Advances have been made, its Available Commitment) to the amount of the Loan (or, if no Advances have been made, the Available Facility) for the time being (or, if the Loan has been repaid in full, immediately prior to the final repayment thereof), indemnify the relevant Agent and/or the Account Bank, against any loss incurred by it as a direct result of such failure and the Borrower shall forthwith reimburse each Bank for any payment made by it pursuant to this Clause 38.7. - 106 - 112 PART 14 AGENCY PROVISIONS 39. THE AGENTS, THE ARRANGER, THE CO-ARRANGERS AND THE FINANCE PARTIES 39.1 (i) The Arranger, the Co-Arrangers, the Funding Agent, the Technical Agents, the Account Bank and each Finance Party hereby appoints the Facility Agent to act as its agent in connection with the Financing Agreements and authorises the Facility Agent: (a) to exercise such rights, powers, authorities and discretions as are specifically delegated to such Agent by the terms thereof together with all such rights, powers, authorities and discretions as are reasonably incidental thereto; and (b) to execute on its behalf each of the Security Documents, the Sponsor Direct Agreement and any other document required to be entered into by the Facility Agent on its behalf in connection herewith provided that such document has been approved in writing by the relevant Beneficiary. (ii) The Arranger, the Co-Arrangers, the Facility Agent, the Technical Agents, the Account Bank and each Finance Party hereby appoints the Funding Agent to act as its agent in connection with the Financing Agreements and authorises the Funding Agent to exercise such rights, powers, authorities and discretions as are specifically delegated to such Agent by the terms thereof together with all such rights, powers, authorities and discretions as are reasonably incidental thereto. 39.2 Each Agent may: (i) assume that: (a) any representation made by the Borrower in connection with the Financing Agreements is true; (b) no Event of Default or Potential Event of Default has occurred; (c) neither the Sponsor nor Borrower is in breach of or default under its obligations under any of the Financing Agreements; and (d) any right, power, authority or discretion vested herein upon an Instructing Group, the Finance Parties or any other person or group of persons has not been exercised, unless and until it has, in its capacity as agent under the Financing Agreements, acquired actual knowledge or received express notice to the contrary; - 107 - 113 (ii) assume that the Facility Office of each Bank is that identified with its signature below (or, in the case of a Transferee, at the end of the Transfer Certificate to which it is a party as Transferee) until, in the case of the Facility Agent it has received from such Bank (a copy of which the Facility Agent shall send to the Borrower and each of the other Agents) a notice designating some other office of such Bank to replace its Facility Office and act upon any such notice until the same is superseded by a further such notice; (iii) assume that all the conditions for the making of any payment out of the amount standing to the credit of any Project Account which are specified in any of the Financing Agreements have been satisfied, unless it has actual knowledge or actual notice to the contrary; (iv) engage and pay for the advice or services of any lawyers, accountants, engineering consultants or other experts whose advice or services may to it seem necessary, expedient or desirable and rely upon any advice so obtained; (v) rely as to any matters of fact which are or might reasonably be expected to be within the knowledge of the Borrower upon a certificate signed by or on behalf of the Borrower; (vi) rely upon any communication or document believed by it to be genuine; (vii) refrain from exercising any right, power or discretion vested in it as agent hereunder unless and until instructed by an Instructing Group as to whether or not such right, power or discretion is to be exercised and, if it is to be exercised, as to the manner in which it should be exercised; and (viii) refrain from acting in accordance with any instructions of an Instructing Group to begin any legal action or proceeding arising out of or in connection with this Agreement until it shall have received such security as it may require (whether by way of payment in advance or otherwise) for all costs, claims, losses, expenses (including, without limitation, legal fees) and liabilities together with any VAT thereon which it will or may expend or incur in complying with such instructions. 39.3 The Facility Agent shall: (i) promptly inform each Finance Party of the contents of any notice or document received by it from the Borrower under any Financing Agreement in its capacity as agent thereunder; (ii) promptly notify each Finance Party and the Funding Agent of the occurrence of any Event of Default or any default by the Borrower in the due performance of or compliance with its obligations under any of the Financing Agreements of which such Agent has actual notice from any other party hereto; - 108 - 114 (iii) save as otherwise provided herein, act as agent under the Financing Agreements in accordance with any instructions given to it by an Instructing Group, which instructions shall be binding on the Arranger, the Co-Arrangers and all of the Finance Parties; and (iv) if so instructed by an Instructing Group, refrain from exercising any right, power or discretion vested in it as agent under any of the Financing Agreements. 39.4 Notwithstanding anything to the contrary expressed or implied herein, none of the Agents, the Arranger or the Co-Arrangers shall: (i) be bound to enquire as to: (a) whether or not any representation made or deemed repeated by the Borrower in connection with any of the Financing Agreements is true; (b) the occurrence or otherwise of any Event of Default or Potential Event of Default; (c) the performance by the Borrower or the Sponsor of its obligations under any of the Financing Agreements; (d) any breach of or default by the Borrower or the Sponsor of or under its respective obligations under any of the Financing Agreements; (e) the title of the Borrower to any part of the Project Interest; or (f) any information contained in any communication from the Insurance Adviser or contained in any Engineering Report is true, complete or accurate; (ii) be bound to account to any Bank for any sum or the profit element of any sum received by it for its own account; (iii) be bound to disclose to any other person any information relating to the Borrower if such disclosure would or might in its opinion constitute a breach of any law or regulation or be otherwise actionable at the suit of any person; or (iv) be under any obligations other than those for which express provision is made herein. 39.5 Each Bank shall, from time to time on demand by any Agent, indemnify such Agent, in the proportion its share of the Loan (or, if no Advances have been made, its Available Commitment) bears to the amount of the Loan (or, if no Advances have been made, the Available Facility) at the time of such demand (or, if the Loan has then been repaid in full, immediately prior to the final repayment thereof), against any and all costs, claims, losses, expenses (including, without limitation, legal fees) and liabilities together with any VAT thereon which such Agent may incur, otherwise than by reason of its own gross - 109 - 115 negligence or wilful misconduct, in acting in its capacity as agent under the Financing Agreements or otherwise in performance of its obligations thereunder. 39.6 None of the Agents, the Arranger or the Co-Arrangers accepts any responsibility for the accuracy and/or completeness of the Information Memorandum or any other information supplied by the Borrower, UTPH or any of its subsidiaries in connection with the Financing Agreements or for the legality, validity, effectiveness, adequacy or enforceability of any Financing Agreements or the Project Agreements and none of the Agents, the Arranger or the Co-Arrangers shall be under any liability as a result of taking or omitting to take any action in relation to any such agreement or document, save in the case of gross negligence or wilful misconduct. 39.7 Each of the Finance Parties agrees that it will not assert or seek to assert against any director, officer or employee of any of the Agents, the Arranger or the Co-Arrangers any claim it might have against any of them in respect of the matters referred to in Clause 39.6. 39.8 Each of the Agents, the Arranger and the Co-Arrangers may accept deposits from, lend money to and generally engage in any kind of banking or other business with the Borrower or the Sponsor. 39.9 Any Agent may resign its appointment hereunder at any time without assigning any reason therefor by giving not less than thirty days' prior written notice to that effect to each of the other parties hereto Provided that no such resignation shall be effective until a successor for such Agent is appointed in accordance with the succeeding provisions of this Clause 39. 39.10 If any Agent gives notice of its resignation pursuant to Clause 39.9, then any reputable and experienced bank or other financial institution may be appointed as a successor to such Agent by an Instructing Group during the period of such notice but, if no such successor is so appointed, such Agent may appoint such a successor itself Provided that prior to the appointment of any successor Agent the Borrower shall have given its prior written consent (such consent not to be unreasonably withheld or delayed) and the Borrower shall be deemed to have given such consent if the Borrower shall not have responded in the affirmative or in the negative to any request for such consent made in writing within 10 days of such request being made to it and Provided Further that no such consent of the Borrower shall be required if an Event of Default shall have occurred. 39.11 If a successor to an Agent is appointed under the provisions of Clause 39.10, then: (i) if such Agent is also the Account Bank any amounts standing to the credit of the Project Accounts shall be transferred to the accounts in the name of the Borrower opened on the books of the successor Agent at its principal office in London pursuant to Clause 34.1(iii) of this Agreement; (ii) such Agent shall cease to be a party hereto as Facility Agent and shall cease to have any obligation hereunder in such capacity (but without prejudice to any accrued liabilities under this Agreement and its obligations under Clause 45) (but shall remain entitled to the benefit of the provisions of this Clause 39); and - 110 - 116 (iii) the successor Agent and each of the other parties hereto shall have the same rights and obligations amongst themselves as they would have had if such successor Agent had been a party hereto as such Agent. 39.12 It is understood and agreed by each Finance Party that it has itself been, and will continue to be, solely responsible for making its own independent appraisal of and investigations into the financial condition, creditworthiness, condition, affairs, status and nature of the Borrower and the Sponsor and, accordingly, each Finance Party warrants to each of the Agents, the Arranger and the Co-Arrangers that it has not relied on and will not hereafter rely on any of the Agents, the Arranger or the Co-Arrangers: (i) to check or enquire on its behalf into the adequacy, accuracy or completeness of any information provided by the Borrower, UTPH or any of its subsidiaries in connection with any of the Financing Agreements or the Project Agreements or the transactions therein contemplated (whether or not such information has been or is hereafter circulated to such Finance Party by any Agent, the Arranger or the Co-Arrangers); or (ii) to assess or keep under review on its behalf the financial condition, creditworthiness, condition, affairs, status or nature of the Borrower, the Sponsor or the Project. 39.13 In acting as agent under the Financing Agreements, the agency division of each Agent shall be treated as a separate entity from any other divisions of such Agent and from its subsidiaries, its holding company and its holding company's other subsidiaries (together, the "AGENT'S AFFILIATES") and, without detracting from the generality of the foregoing, in the event that any of such Agent's divisions or any of such Agent's affiliates should act for the Borrower in any capacity whether as bankers or otherwise in relation to any other matter, such Agent shall as between itself, the other Agents, the Arranger, the Co-Arrangers and the Finance Parties not be obliged to disclose any information given by the Borrower to any of such divisions or to any of such Agent's affiliates. 40. THE FACILITY AGENT AS TRUSTEE 40.1 The Facility Agent hereby declares that it holds and shall hold (i) all rights, titles and interests that may now or hereafter be mortgaged, charged, assigned or otherwise secured in favour of the Facility Agent by or pursuant to the Financing Agreements, (ii) the benefit of all representations, covenants, guarantees, indemnities and other contractual provisions given in favour of the Facility Agent (other than any such benefits given to the Facility Agent solely for its own benefit) by or pursuant to the Financing Agreements (other than this Agreement) and (iii) all proceeds of the security referred to in (i) above and of the enforcement of the benefits referred to in (ii) above on trust for itself and the other Beneficiaries from time to time. Such declaration shall remain valid notwithstanding that the Facility Agent may on the date hereof or at any other time be the sole Beneficiary; for the avoidance of doubt, however, such declaration shall, in such case, be deemed repeated on each date on which the Facility Agent ceases to be the sole Beneficiary. Each of the parties hereto agrees that the obligations, rights and benefits vested or to be vested in the Facility Agent as trustee as aforesaid by the Financing Agreements or any document entered into pursuant thereto shall (as well before as after enforcement) be performed and (as the case may be) exercised by the Facility Agent in accordance with the provisions of this Part 14. - 111 - 117 40.2 The Facility Agent shall have all the powers and discretions conferred upon trustees by the Trustee Act 1925 (to the extent not inconsistent herewith) and by way of supplement it is expressly declared as follows: (i) the Facility Agent shall be at liberty to place any of the Financing Agreements and any other instruments, documents or deeds delivered to it pursuant thereto or in connection therewith for the time being in its possession in any safe deposit, safe or receptacle selected by the Facility Agent or with any bank, any company whose business includes undertaking the safe custody of documents or any firm of lawyers of good repute; (ii) the Facility Agent may, whenever it thinks fit, delegate by power of attorney or otherwise to any person or persons or fluctuating body of persons (being, in the opinion of the Facility Agent, competent and experienced in such matters and, except in the case of employees of the Facility Agent or any affiliate of the Facility Agent, approved by an Instructing Group) all or any of the rights, trusts, powers, authorities and discretions vested in it by any of the Financing Agreements and such delegation may be made upon such terms and subject to such conditions (including the power to sub-delegate) and subject to such regulations as the Facility Agent may think fit and the Facility Agent shall not be bound to supervise, or be in any way responsible for any loss incurred by reason of any misconduct or default on the part of, any such delegate (or sub-delegate) Provided that such delegate shall only be liable for such loss in the case of gross negligence or wilful misconduct; (iii) notwithstanding anything else herein contained, the Facility Agent may refrain from doing anything which would or might in its opinion be contrary to any law of any jurisdiction or any directive or regulation of any agency of any state or which would or might otherwise render it liable to any person and may do anything which is, in its opinion, necessary to comply with any such law, directive or regulation; (iv) save in the case of gross negligence or wilful misconduct, the Facility Agent and every attorney, agent, delegate, sub-delegate and any other person appointed by any of them under any of the Financing Agreements may indemnify itself or himself out of the security held by the Facility Agent against all liabilities, costs, fees, charges, losses and expenses incurred by any of them as permitted by this Agreement in relation to or arising out of the taking or holding of any of the security constituted by, or any of the benefits provided by, any of the Financing Agreements in the exercise or purported exercise of the rights, trusts, powers and discretions vested in any of them or in respect of any other matter or thing done or omitted to be done in any way relating to any of the Financing Agreements or pursuant to any law or regulation; and (v) without prejudice to the provisions of any of the Financing Agreements, the Facility Agent shall not be under any obligation to insure any property or to require any other person to maintain any such insurance and shall not be responsible for any loss which may be suffered by any person as a result of the lack of or inadequacy or insufficiency of any such insurance. - 112 - 118 40.3 The Facility Agent shall not be liable for any failure (save in the case of gross negligence or wilful default): (i) to require the deposit with it of any deed or document certifying, representing or constituting the title of the Borrower to any of the property mortgaged, charged, assigned or otherwise encumbered by or pursuant to any of the Financing Agreements; (ii) to obtain any licence, consent or other authority for the execution, delivery, validity, legality, adequacy, performance, enforceability or admissibility in evidence of any of the Financing Agreements; (iii) to register or notify any deed or document mentioned at (i) or (ii) above in accordance with the provisions of any of the documents of title of the Borrower; (iv) to effect or procure registration of or otherwise protect any of the security created by any of the Financing Agreements by registering the same under the Land Registration Act 1925 or any other applicable registration laws in any territory or otherwise by registering any notice, caution or other entry prescribed by or pursuant to the provisions of the said Act or laws; (v) to take or to require the Borrower to take any steps to render the security (including, without limitation, any floating charge) created or purported to be created by or pursuant to any of the Financing Agreements effective or to secure the creation of any ancillary charge under the laws of any jurisdiction; or (vi) to require any further assurances in relation to any of the Financing Agreements. 40.4 The Facility Agent may accept without enquiry, requisition or objection such right and title as the Borrower may have to the property belonging (or purportedly belonging) to it (or any part thereof) which is the subject matter of any of the Financing Agreements and shall not be bound or concerned to investigate or make any enquiry into the right or title of the Borrower to such property (or any part thereof) or, without prejudice to the foregoing, to require the Borrower to remedy any defect in the Borrower's right or title as aforesaid. 40.5 The perpetuity period under the rule against perpetuities if applicable to the trusts constituted in this Part 14 and the other Financing Agreements shall be the period of eighty years from the date of this Agreement and, subject thereto, if the Facility Agent determines that all of the obligations of the Borrower under any of the Financing Agreements have been fully and unconditionally discharged, such trusts shall be wound up. 40.6 Notwithstanding any other provisions of this Agreement or any duty or obligation owed by the Facility Agent (whether as trustee, agent or otherwise) to any person, the Facility Agent shall act on the directions of an Instructing Group (and in accordance with such directions) in determining the manner and the extent of enforcement to be adopted (if any) of the security created by or pursuant to the Security Documents (or any of them) over any person's right, title and/or interest therein or arising therefrom and - 113 - 119 shall, if directed so to do by an Instructing Group, discharge all or such part of such security. The other Finance Parties expressly acknowledge and consent to the provisions of the immediately preceding sentence. 41. THE ACCOUNT BANK 41.1 It is hereby agreed that the Account Bank is party hereto for the purpose of performing the functions expressly mentioned in Part 12 and that the Account Bank is not, and shall not be construed to be, the agent or trustee of any other party hereto. 41.2 The Account Bank may: (i) engage and pay for the advice or services of any lawyers, accountants or other experts whose advice or services may to it seem necessary, expedient or desirable and rely upon any advice so obtained; (ii) rely upon any communication or document believed by it to be genuine; and (iii) assume that no Event of Default or Potential Event of Default has occurred, unless it has actual notice to the contrary. 41.3 Notwithstanding anything to the contrary expressed or implied herein, the Account Bank shall not: (i) be bound to enquire as to the occurrence or otherwise of any Event of Default or Potential Event of Default; (ii) be bound to exercise any right, power or discretion vested in the Account Bank under any of the Financing Agreements; (iii) be bound to account to any other party hereto for any sum or the profit element of any sum received by it for its own account; (iv) be bound to disclose to any other person any information relating to any person if such disclosure would or might in its opinion constitute a breach of any law or regulation or be otherwise actionable at the suit of any person; or (v) be under any fiduciary duty towards any other party hereto or under any obligation other than those for which express provision is made herein. 41.4 Each Bank shall, from time to time on demand by the Facility Agent, indemnify the Account Bank, in the proportion its share of the Loan (or, if no Advances have been made, its Available Commitment) bears to the amount of the Loan (or, if no Advances have been made, the Available Facility) at the time of such demand (or, if the Loan has then been repaid in full, immediately prior to the final repayment thereof), against any and all costs, claims, losses, expenses (including, without - 114 - 120 limitation, legal fees) and liabilities together with any VAT thereon which the Account Bank may incur, otherwise than by reason of its own gross negligence or wilful misconduct, in acting in its capacity as Account Bank hereunder or otherwise in the performance of its obligations hereunder. 41.5 The Account Bank does not accept any responsibility for the accuracy and/or other completeness of the Information Memorandum or any other information supplied by the Borrower in connection herewith or the legality, validity, effectiveness, adequacy or enforceability of any Financing Agreements and the Account Bank shall not be under any liability as a result of taking or omitting to take any action in relation to any such agreement or document, save in the case of gross negligence or wilful misconduct. 41.6 Each of the Finance Parties agrees that it will not assert or seek to assert against any director, officer or employee of the Account Bank any claim it might have against the Account Bank in respect of the matters referred to in Clause 41.5. 41.7 The Account Bank may accept deposits from, lend money to and generally engage in any kind of banking or other business with the Borrower or the Sponsor. 41.8 The Account Bank may, after such consultation with the Borrower as is practicable in the circumstances, notify the Facility Agent and the Borrower in writing that it wishes to cease to be a party hereto as Account Bank (a "CESSATION NOTICE"). Upon receipt of a cessation notice the Facility Agent shall in consultation with an Instructing Group nominate with the consent of the Borrower (such consent not to be unreasonably withheld or delayed) a Bank as a successor to the Account Bank (a "SUCCESSOR ACCOUNT BANK"). If no such nomination is made by an Instructing Group before the date specified in the cessation notice as being the date on which the Account Bank wishes to cease to be a party hereto (the "CESSATION DATE") (which such date shall be a business day falling not less than thirty days after the date of delivery of the cessation notice to the Facility Agent) then the Account Bank may nominate such a successor Account Bank itself Provided that prior to the appointment of any successor Account Bank the Borrower shall have given its prior written consent (such consent not to be unreasonably withheld or delayed) and such consent shall be deemed to have been given if the Borrower shall not have responded in the affirmative or in the negative to any request for such consent made in writing within 10 days of such request being made to it and Provided Further that no such consent of the Borrower shall be required if an Event of Default shall have occurred. 41.9 If a successor Account Bank is nominated under the provisions of Clause 41.8, then on the cessation date: (i) the amount standing to the credit of the Proceeds Account and the Insurance Account and the VAT Account together with any interest attributable thereto shall be transferred to accounts denominated in sterling (and, in the case of the Proceeds Account, with a sub-account denominated in dollars) in the name of the Borrower opened on the books of the successor Account Bank at its principal office in London designated (respectively) the Proceeds Account, Insurance Account and VAT Account; - 115 - 121 (ii) the Account Bank shall cease to be party hereto as Account Bank and shall cease to have any obligation hereunder in such capacity (but shall remain entitled to the benefit of the provisions of this Clause 41); and (iii) the successor Account Bank and each of the other parties hereto shall have the same rights and obligations amongst themselves as they would have had if such successor Account Bank had been a party hereto as Account Bank. 41.10 It is understood and agreed by each Finance Party that it has itself been, and will continue to be, solely responsible for making its own independent appraisal of and investigations into the financial condition, creditworthiness, condition, affairs, status and nature of the Borrower and the Sponsor and, accordingly, each Finance Party warrants to the Account Bank that it has not relied on and will not hereafter rely on the Account Bank: (i) to check or enquire on its behalf into the adequacy, accuracy or completeness of any information provided by the Borrower, UTPH or any of its subsidiaries in connection with any of the Financing Agreements or the transactions therein contemplated (whether or not such information has been, or is hereafter, circulated to such Finance Party by the Account Bank); or (ii) to assess or keep under review on its behalf the financial condition, creditworthiness, condition, affairs, status or nature of the Borrower, the Sponsor or the Project. 42. THE TECHNICAL AGENTS It is hereby agreed that the Technical Agents are parties hereto for the purposes of performing the functions expressly mentioned herein and that neither of the Technical Agents shall, nor shall they be construed to be, the agent or trustee of any other party hereto. - 116 - 122 PART 15 ASSIGNMENTS AND TRANSFERS 43. BENEFIT OF AGREEMENT This Agreement shall be binding upon and enure to the benefit of each party hereto and its or any subsequent successors, Transferees and assigns. 44. ASSIGNMENTS AND TRANSFERS BY THE BORROWER The Borrower shall not be entitled to assign or transfer all or any of its rights, benefits and obligations hereunder. 45. ASSIGNMENTS AND TRANSFERS BY BANKS 45.1 Any Bank may, at any time, assign all or any of its rights and benefits hereunder as a Bank or transfer in accordance with Clause 45.3 all or any of its rights, benefits and obligations hereunder as a Bank Provided that: (i) (save in the case of an assignment or transfer of rights and benefits to (a) any subsidiary or holding company, or to any subsidiary of any holding company, of such Bank or (b) any other Bank) no such assignment or transfer may be made without the prior written consent of the Borrower, such consent not to be unreasonably withheld or delayed and Provided further that the requirements of this paragraph (i) shall not be required to be satisfied in respect of a transfer made at any time after the Facility Agent has made a declaration pursuant to Clause 28.1 (a) and/or (b) and the security (or any part thereof) created by or pursuant to the Security Documents (or any of them) is being enforced; (ii) the assignee or transferee is a Section 349 Bank or a Double Taxation Treaty Bank; (iii) the aggregate of the Bank's Available Commitment and portion of the Loan so transferred or assigned must be at least pound sterling 10,000,000 or, in respect of any assignment or transfer which is to take effect after the Project Completion Date, at least pound sterling 5,000,000; and (iv) the consent of the Secretary of State has been received in respect of such assignment or transfer pursuant to Clause 3 of the Government Consent Agreement. 45.2 If any Bank assigns all or any of its rights and benefits hereunder in accordance with Clause 45.1, then, unless and until the assignee has agreed with each of the Beneficiaries that it shall be under the same obligations towards each of them as it would have been under if it had been an original party hereto as a Bank, each of the Beneficiaries shall not be obliged to recognise such assignee as having the rights against each of them which it would have had if it had been such a party hereto. - 117 - 123 45.3 If any Bank wishes to transfer all or any of its rights, benefits and/or obligations hereunder as permitted by Clause 45.1, then such transfer may be effected by the delivery to the Facility Agent of a duly completed and duly executed Transfer Certificate in which event, on the later of the Transfer Date specified in such Transfer Certificate and the fifth business day after (or such earlier business day endorsed by the Facility Agent on such Transfer Certificate falling on or after) the date of delivery of such Transfer Certificate to the Facility Agent: (i) to the extent that in such Transfer Certificate the Bank party thereto seeks to transfer its rights, benefits and obligations hereunder, the Borrower and such Bank shall be released from further obligations towards one another hereunder and their respective rights against one another shall be cancelled (such rights, benefits and obligations being referred to in this Clause 45.3 as "DISCHARGED RIGHTS AND OBLIGATIONS"); (ii) the Borrower and the Transferee party thereto shall assume obligations towards one another and/or acquire rights against one another which differ from such discharged rights and obligations only insofar as the Borrower and such Transferee have assumed and/or acquired the same in place of the Borrower and such Bank; and (iii) the Transferee and the other Beneficiaries shall acquire the same rights and benefits and assume the same obligations between themselves as they would have acquired and assumed had such Transferee been an original party hereto as a Bank with the rights, benefits and/or obligations acquired or assumed by it as a result of such transfer. 45.4 On the date upon which a transfer takes effect pursuant to Clause 45.3, the Transferee in respect of such transfer shall pay to the Facility Agent, jointly for its own account and the account of the Funding Agent, a transfer fee of pound sterling 1000. If any Transferee fails to pay any transfer fee payable by it hereunder on the due date therefor, the Facility Agent may at any time deduct an amount equal to such fee from any moneys from time to time held by the Facility Agent for account of such Transferee. 46. DISCLOSURE OF INFORMATION 46.1 Any information ("CONFIDENTIAL INFORMATION") disclosed by the Borrower to any of the Beneficiaries in connection with any of the Financing Agreements shall be kept confidential by each person to whom such information is disclosed (each a "RECIPIENT") Provided that: (i) each recipient shall be entitled to disclose such Confidential Information: (a) pursuant to any law or regulation having the force of law; (b) to any banking or other regulatory or examining authorities (whether governmental or otherwise) with whose instructions the recipient and other banks are accustomed to comply, upon furnishing a copy of this Clause 46 to any such authority; - 118 - 124 (c) to any subsidiary, holding company or subsidiary of a holding company of such recipient or to such recipient's professional advisors in each case, upon giving the Borrower advance notice of the proposed disclosures; or (d) to the extent that the same has become generally available to the public, through no act or omission of the recipient. 46.2 Each recipient acknowledges and agrees that the Confidential Information shall be held strictly confidential for the period from the date hereof until 5 years following the date of termination of the Unit Operating Agreement. 46.3 The provisions of Clause 46.1 and 46.2 shall inure to the benefit of the Borrower and each other party to any contracts constituting Confidential Information (including, without limitation, the other Britannia Coventurers, BP Exploration Operating Company Limited and the buyers under the Gas Sales Agreements). 46.4 Notwithstanding Clauses 46.1 or 46.2, any Bank may, at any time, disclose to any actual or potential assignee or transferee or any other person who may otherwise enter into contractual relations with such Bank in relation to this Agreement, the Information Memorandum, the Financing Agreements, the Project Agreements, the Development Plan relating to the Britannia Field, any notices delivered pursuant hereto or thereto and details of the amounts outstanding hereunder or any other Confidential Information Provided that such actual or potential assignee, transferee or such other person has given a written undertaking to the Borrower in the form, mutatis mutandis of Clauses 46.1, 46.2 and 46.3. - 119 - 125 PART 16 MISCELLANEOUS 47. CALCULATIONS AND EVIDENCE OF DEBT 47.1 Interest and commitment commission shall accrue from day to day and shall be calculated on the basis of a year of 365 days (or, if market practice differs, in accordance with market practice) and the actual number of days elapsed. 47.2 If on any occasion a Reference Bank or Bank fails to supply the Funding Agent with a quotation required of it under the provisions of this Agreement, the rate for which such quotation was required shall be determined from those quotations which are supplied to the Funding Agent. 47.3 Each Bank shall maintain in accordance with its usual practice accounts evidencing the amounts from time to time lent by and owing to it hereunder. 47.4 The Funding Agent shall maintain on its books a control account or accounts in which shall be recorded (i) the amount of any Advance made or arising hereunder and each Bank's share therein, (ii) the amount of all principal, interest and other sums due or to become due from the Borrower to any of the Banks hereunder and each Bank's share therein and (iii) the amount of any sum received or recovered by the Funding Agent hereunder and each Bank's share therein. The Funding Agent shall from time to time promptly upon request of the Facility Agent provide it with details of such account or accounts. 47.5 In any legal action or proceeding arising out of or in connection with this Agreement, the entries made in the accounts maintained pursuant to Clauses 47.3 and 47.4 (in the absence of manifest error) shall be prima facie evidence of the existence and amounts of the obligations of the Borrower therein recorded. 47.6 A certificate of a Bank as to (i) the amount by which a sum payable to it hereunder is to be increased under Clause 12.1 or (ii) the amount for the time being required to indemnify it against any such cost, payment or liability as is mentioned in Clause 12.2 or 14.1 shall, in the absence of manifest error, be prima facie evidence for the purposes of this Agreement and in any legal action or proceeding arising out of or in connection with this Agreement. 48. REMEDIES AND WAIVERS No failure to exercise, nor any delay in exercising, on the part of the Beneficiaries or any of them, any right or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any right or remedy prevent any further or other exercise thereof or the exercise of any other right or remedy. The rights and remedies herein provided are cumulative and not exclusive of any rights or remedies provided by law. - 120 - 126 49. PARTIAL INVALIDITY If, at any time, any provision hereof is or becomes illegal, invalid or unenforceable in any respect under the law of any jurisdiction, neither the legality, validity or enforceability of the remaining provisions hereof nor the legality, validity or enforceability of such provision under the law of any other jurisdiction shall in any way be affected or impaired thereby. 50. AMENDMENTS 50.1 With the prior written consent of an Instructing Group, the Facility Agent (on behalf of the Beneficiaries and for itself) and the Borrower may from time to time enter into written amendments, supplements or modifications to the Financing Agreements (other than any Hedging Agreement) and the Facility Agent (on behalf of the Beneficiaries and for itself) may execute and deliver to the Borrower a written instrument waiving prospectively or retrospectively, on such terms and conditions as may be specified in such instrument, any Potential Event of Default, Event of Default, breach of any provision or other requirements of the Financing Agreements (other than any Hedging Agreement) Provided, however, that: (i) no such waiver and no such amendment, supplement or modification shall without the prior consent of all the Banks: (a) amend or modify the definitions of Event of Default, Final Maturity Date, Instructing Group, Potential Event of Default, Repayment Date, encumbrance or indebtedness or amend the schedule of Repayment Dates; (b) amend, modify or waive any provision which requires the consent or approval of all the Banks or any of the provisions of this Clause 50; (c) have the effect of changing the amount of the Facility or any Bank's Available Commitment or the principal amount or currency of any Advance or any Bank's share thereof; (d) have the effect of decreasing the amount of, or changing the currency of or extending the date for any payment of interest, fees or any other amount payable to all or any of the Beneficiaries hereunder; or (e) (save as otherwise provided herein or therein) release the benefit of any security constituted by or pursuant to any of the Security Documents; and (ii) notwithstanding any other provision hereof, none of the Agents, the Arrangers, the Co-Arrangers or the Account Bank shall be obliged to agree to any such waiver, amendment, supplement or modification if the same would: (a) amend, modify or waive any provision of this Clause 50; or - 121 - 127 (b) otherwise amend, modify or waive any of such person's rights hereunder or subject any such person to any additional obligations hereunder. 50.2 If the Borrower requests any amendment, supplement, modification or waiver in accordance with Clause 50.1, then the Borrower shall, from time to time on demand of the Facility Agent, reimburse the Facility Agent for all reasonable costs and expenses (including, without limitation, legal fees) together with any VAT thereon incurred by the Facility Agent in the negotiation, preparation and execution of any written instrument contemplated by Clause 50.1. 51. NOTICES 51.1 Each communication to be made hereunder shall be made in writing but unless otherwise stated, may be made in writing by facsimile, telex, Society for Worldwide Interbank Financial Communications ("SWIFT") (if available) or letter save in the case of any Notice of Drawdown or any communication by any Bank regarding the manner in which payments are to be made hereunder which must be made by telex or facsimile. 51.2 Any communication or document to be made or delivered by one person to another pursuant to this Agreement shall (unless that other person has specified another address by written notice to the Facility Agent fifteen days prior to the date of the communication) be made or delivered to that other person at the address, telex or facsimile number identified with its signature below (or, in the case of a Transferee, at the end of the Transfer Certificate to which it is a party as Transferee) and shall be deemed to have been made or delivered (a) if sent by telex or facsimile at the time of despatch (if despatched between 9.00 a.m. and 5.00 p.m (local time in the place to which it is sent) on a working day in that place, when sent, or if sent by telex or facsimile at any other time, at 9.00 a.m. (local time in the place to which it is sent) on the next working day in that place) provided that, in the case of facsimile, the person sending the facsimile shall have received a transmission receipt and a hard copy of such facsimile shall be sent on the same day to the party to whom such notice was sent (but failure to send or receive any such hard copy shall not prejudice any such deemed making or delivery) and, in the case of telex, the person sending the telex shall have received the correct answerback at the beginning and end of the transmission, (b) in the case of communications by SWIFT, when despatched and an acknowledgement of receipt by SWIFT received, (c) if sent by recorded delivery, at the recorded time of delivery or (d) in the case of any other communication made by letter, when left at that address or (as the case may be) five days after being deposited in the post postage prepaid in an envelope addressed to it at that address Provided that any communication or document to be made or delivered to the Facility Agent shall be effective only when received by the Facility Agent and then only if the same is expressly marked for the attention of the department or officer identified with the Facility Agent's signature below (or such other department or officer as the Facility Agent shall from time to time specify for this purpose). 51.3 Each communication and document made or delivered by one party to another pursuant to this Agreement shall be in the English language or accompanied by a translation thereof into English certified (by an officer of the person making or delivering the same) as being a true and accurate translation thereof. In the event of dispute, the English language version shall prevail. - 122 - 128 52. COUNTERPARTS This Agreement may be executed in any number of counterparts and by different parties hereto on separate counterparts each of which, when executed and delivered, shall constitute an original, but all the counterparts shall together constitute but one and the same instrument. - 123 - 129 PART 17 LAW 53. LAW This Agreement shall be governed by, and shall be construed in accordance with, English law. 54. JURISDICTION 54.1 Each of the parties agrees for the benefit of each of the Beneficiaries that the courts of England shall have jurisdiction to hear and determine any suit, action or proceeding, and to settle any disputes, which may arise out of or in connection with this Agreement and, for such purposes, irrevocably submits to the jurisdiction of such courts. 54.2 Each of the parties irrevocably waives any objection which it might now or hereafter have to the courts referred to in Clause 54.1 being nominated as the forum to hear and determine any suit, action or proceeding, and to settle any disputes, which may arise out of or in connection with this Agreement and agrees not to claim that any such court is not a convenient or appropriate forum. 54.3 The submission to the jurisdiction of the courts referred to in Clause 54.1 shall not (and shall not be construed so as to) limit the right of any of the parties hereto to take proceedings against any other party in any other court of competent jurisdiction nor shall the taking of proceedings in any one or more jurisdictions preclude the taking of proceedings in any other jurisdiction, whether concurrently or not. AS WITNESS the hands of the duly authorised representatives of the parties hereto the day and year first before written. - 124 - 130 SCHEDULES The following schedules to the Facility Agreement, included in pages 125 to 157, have been omitted, but will be furnished upon request: The First Schedule: List of Banks and Commitments - ------------------ The Second Schedule: Form of Transfer Certificate - ------------------- The Third Schedule: List of Condition Precedent Documents - ------------------ The Fourth Schedule: Form of Notice of Drawdown - ------------------- The Fifth Schedule: Repayment Schedule - ------------------ The Sixth Schedule: List of Project Agreements - ------------------ The Seventh Schedule: List of Project Completion Tests - -------------------- The Eighth Schedule: Insurance - ------------------- The Ninth Schedule: Formula for Associated Costs Rate - ------------------ The Tenth Schedule: The Original Banking Case - ------------------ The Eleventh Schedule: Schedule of Minimum Volumes - --------------------- 131 THE BORROWER UNION TEXAS BRITANNIA LIMITED By: R.A. HALSON Address: 5th Floor Bowater House 68/114 Knightsbridge London SW1X 7LR Attention: The Managing Director Telex: 22160 Fax: 0171 584 7785 THE ARRANGER CHEMICAL BANK By: KAREN SIMON Address: 125 London Wall London EC2Y 5AJ Attention: Karen Simon/Matthew Rigas Telex: 94060000 CBC G Fax: 0171-777 4749 THE CO-ARRANGERS NATIONSBANK, N.A. (CAROLINAS) By: ASAD ZAFAR Address: New Broad Street House 35 New Broad Street London EC2M 1NH Attention: Patrick Delaney/Asad Zafar Telex: 883181 NCNB G Fax: 0171 628 8692 - 158 - 132 NATIONAL WESTMINSTER BANK PLC By: D.R. PARKER Address: 135 Bishopsgate London EC2M 3UR Attention: David Walton Telex: 882121 Fax: 0171 375 5820 THE FACILITY AGENT NATIONSBANK, N.A. (CAROLINAS) By: ASAD ZAFAR Address: New Broad Street House 35 New Broad Street London EC2M 1NH Attention: Patrick Delaney/Asad Zafar Telex: 883181 NCNB G Fax: 0171 628 8692 THE TECHNICAL AGENTS NATIONSBANK, N.A. (CAROLINAS) By: ASAD ZAFAR Address: New Broad Street House 35 New Broad Street London EC2M 1NH Attention: Patrick Delaney/Asad Zafar Telex: 883181 NCNB G Fax: 0171 628 8692 - 159 - 133 CHEMICAL BANK By: KAREN SIMON Address: 125 London Wall London EC2Y 5AJ Attention: Karen Simon/Matthew Rigas Telex: 94060000 CBC G Fax: 0171-777 4749 THE FUNDING AGENT NATIONAL WESTMINSTER BANK PLC By: D.R. PARKER Address: 3rd floor, Juno Court 24 Prescott Street London E1 8BB Attention: Neil Burrough Telex: 922457 Answerback NWMAG G Fax: 0171 714 6167 THE ACCOUNT BANK NATIONAL WESTMINSTER BANK PLC By: D.R. PARKER Address: 1st floor 180 Brompton Road London SW3 1HL Attention: Andrew Norman Telex: 882121 Fax: 0171 591 4081 - 160 - 134 THE BANKS CHEMICAL BANK By: KAREN SIMON Address: 125 London Wall London EC2Y 5AJ Attention: Karen Simon/Matthew Rigas Telex: 94060000 CBC G Fax: 0171-777 4749 NATIONAL WESTMINSTER BANK PLC By: D.R. PARKER Address: 135 Bishopsgate London EC2M 3UR Attention: David Walton Telex: 882121 Fax: 0171 375 5820 NATIONSBANK, N.A. (CAROLINAS) By: ASAD ZAFAR Address: New Broad Street House 35 New Broad Street London EC2M 1NH Attention: Patrick Delaney/Asad Zafar Telex: 883181 NCNB G Fax: 0171 628 8692 - 161 - 135 BANK OF AMERICA NT & SA By: N.C. STORTON Address: 1 Alie Street London E1 8DE Attention: Pradeep Sharma/Nick Storton Telex: 888412 Fax: 0171 634 4725 THE BANK OF NOVA SCOTIA By: RUSSEL C. HAMER Address: Scotia House 33 Finsbury Square London EC2A 1BB Attention: Bill Currie/Russ Hamer Telex: 885188 Fax: 0171 454 9019 CHRISTIANIA BANK OG, KREDITKASSE, LONDON BRANCH By: CAROLLA BENEDICTE MOISE Address: Lloyds Chambers 1 Portsoken Street London E1 8RU Attention: Niels Magnussen Telex: 8812511 Fax: 0171 481 1860 - 162 - 136 THE LONG-TERM CREDIT BANK OF JAPAN, LTD By: N.R. SLOAN Address: 55 Bishopsgate London EC2N 3AX Attention: Nick Sloan Telex: 885305 Fax: 0171 814 9855 SOCIETE GENERALE By: A.D. JESSOP Address: Exchange House Primrose Street London EC2A 2HT Attention: Alan Jessop Telex: 886611 Fax: 0171 638 6504 CITIBANK, N.A. By: V.M. WILMOT Address: P.O. Box 199 Cottons Centre Hays Lane London SE1 2QT - 163 - 137 Attention: Jane Miles Telex: 896581 Fax: 0171 234 2990 CREDIT LYONNAIS By: CHRISTINE GALEON Address: P.O. Box 81 84-94 Queen Victoria Street London EC4P 4LX Attention: Christine Galeon Telex: 885479 Fax: 0171 489 1559 - 164 - EX-10.10 11 SPONSOR DIRECT AGREEMENT DATED 05/26/95 1 EXHIBIT 10.10 CONFORMED COPY SPONSOR DIRECT AGREEMENT between UNION TEXAS PETROLEUM LIMITED as sponsor UNION TEXAS BRITANNIA LIMITED as borrower and NATIONSBANK, N.A. (CAROLINAS) as facility agent Clifford Chance London 2 CONTENTS PART 1 INTERPRETATION 1. INTERPRETATION .......................................... 2 PART 2 REPRESENTATIONS 2. REPRESENTATIONS ......................................... 3 PART 3 DIRECT OBLIGATIONS 3. BENEFICIAL OWNERSHIP OF THE BORROWER .................... 5 4. UTPL AGREEMENTS ......................................... 5 5. DIVIDENDS, DISTRIBUTIONS AND SUBORDINATED INDEBTEDNESS... 5 6. INSURANCE DISPUTES ...................................... 6 PART 4 SUBORDINATED INDEBTEDNESS 7. SUBORDINATION ........................................... 7 PART 5 MISCELLANEOUS 8. LIMITATION OF LIABILITY ................................. 9 9. TAX .................................................... 9 10. ENFORCEABILITY ......................................... 10 11. PAYMENTS ............................................... 10 12. BENEFIT OF AGREEMENT ................................... 10 13. ASSIGNMENTS AND TRANSFERS BY THE SPONSOR AND THE BORROWER ................................ 10 14. ASSIGNMENTS AND TRANSFERS BY THE FACILITY AGENT ........ 10 15. REMEDIES AND WAIVERS .................................... 11 16. PARTIAL INVALIDITY ...................................... 11 17. NOTICES ................................................ 11 18. COUNTERPARTS ........................................... 12
3 PART 6 LAW 19. LAW ................................................... 13 20. JURISDICTION .......................................... 13
4 THIS AGREEMENT is made the 26 day of May, 1995 BETWEEN (1) UNION TEXAS PETROLEUM LIMITED a company incorporated in England and Wales with company registration number 708552, (the "SPONSOR"); (2) UNION TEXAS BRITANNIA LIMITED a company incorporated in England and Wales with company registration number 2894635, (the "BORROWER"); and (3) NATIONSBANK, N.A. (CAROLINAS) (the "FACILITY AGENT"). WHEREAS: (A) By a facility agreement (the "FACILITY AGREEMENT") of even date herewith between (1) the Borrower, (2) Chemical Bank as arranger, (3) NationsBank, N.A. (Carolinas) and National Westminster Bank Plc as co-arrangers, (4) NationsBank, N.A. (Carolinas) as facility agent, (5) NationsBank, N.A. (Carolinas) and Chemical Bank as technical agents, (6) National Westminster Bank Plc as funding agent, (7) National Westminster Bank Plc as account bank and (8) the financial institutions named therein as banks (the "BANKS") and as hedge counterparties, the Banks have agreed, upon the terms and subject to the conditions thereof, to make available to the Borrower a credit facility up to the maximum principal amount of pound sterling 150,000,000. (B) By the Facility Agreement, the Facility Agent has agreed, upon the terms and subject to the conditions thereof, to act as trustee and to hold, inter alia, the benefit of the obligations undertakings and provisions assumed or expressed to be assumed and granted by the Sponsor and/or the Borrower by or pursuant to the terms and conditions of this Agreement on trust for the Beneficiaries (as defined in the Facility Agreement). (C) The Sponsor and the Borrower have each agreed to assume the obligations and undertakings and grant the provisions in favour of the Facility Agent for the benefit of such Beneficiaries set out herein. (D) It is a condition to the making of any advance under the Facility Agreement that the Sponsor and the Borrower enter into this Agreement. NOW IT IS HEREBY AGREED as follows: - 1 - 5 PART I INTERPRETATION 1. INTERPRETATION 1.1 Terms defined or construed in the Facility Agreement shall, unless otherwise defined or construed herein, bear the same meaning or construction herein. 1.2 In this Agreement: "INDEPENDENT LOSS ADJUSTER" means such independent loss adjuster selected by the Sponsor from a list of not fewer than three alternatives suggested by the Facility Agent each of which shall have appropriate experience in the context of the settlement of claims in respect of physical loss or damage in North Sea Petroleum developments and shall be able to determine any dispute referred to him in accordance with Clause 6 without having any interest in the outcome of such dispute; and "SUBORDINATED INDEBTEDNESS" means Subordinated Debt and any amount payable to the Sponsor under the Administrative Services Agreement. 1.3 A reference in this Agreement to a "CLAUSE" or "PART" shall, subject to any contrary indication, be construed as a reference to a clause, or part, as the case may be, hereof. 1.4 "POUND" and "STERLING" denote lawful currency of the United Kingdom. 1.5 Save where the contrary is indicated, any reference in this Agreement to: (i) this Agreement, a Project Agreement, a Financing Agreement, licence, permission, or any other agreement or document shall be construed as a reference to this Agreement or, as the case may be, such Project Agreement, Financing Agreement, licence, permission or other agreement or document as the same may have been, or may from time to time be, amended, varied, novated or supplemented; (ii) a statute shall be construed as a reference to such statute as the same may have been, or may from time to time be, amended or re-enacted; and (iii) a time of day shall be construed as a reference to London time. 1.6 Clause and Part headings are for ease of reference only. - 2 - 6 PART 2 REPRESENTATIONS 2. REPRESENTATIONS 2.1 The Sponsor represents that, save as expressly stated in the reservations to the legal opinion referred to in paragraph 15 of Part 1 of the Third Schedule to the Facility Agreement: (i) it is a company duly incorporated under the laws of England with power to enter into each of the UTPL Agreements and to perform its obligations thereunder and all corporate and other action required to authorise its execution of each such UTPL Agreement and its performance of its obligations thereunder has been duly taken; (ii) all acts, conditions and things required to be done, fulfilled and performed in order (a) to enable it lawfully to enter into and perform and comply with the obligations expressed to be assumed by it in each of the UTPL Agreements, (b) to ensure that the obligations expressed to be assumed by it in each such UTPL Agreement to which it is expressed to be a party are legal, valid and binding and (c) to make each such UTPL Agreement admissible in evidence in England have been done, fulfilled and performed; (iii) under the laws of England in force at the date hereof, the claims of each of the Beneficiaries against the Sponsor under each of the UTPL Agreements will rank at least pari passu with the claims of all its other unsecured creditors save those whose claims are preferred solely by any bankruptcy, insolvency, liquidation or other similar laws of general application; (iv) it is not necessary that any of the UTPL Agreements be filed, recorded or enrolled with any court or other authority in England or that any stamp, registration or similar tax be paid on or in relation to any such agreement; and (v) the obligations expressed to be assumed by it in each of the UTPL Agreements are legal and valid obligations binding on it in accordance with the terms thereof. 2.2 The Sponsor further represents that: (i) it has not taken any corporate action nor have any other steps been taken or legal proceedings been started or (to the best of its knowledge and belief) threatened against the Sponsor for its winding-up, dissolution, administration or re-organisation (other than a solvent amalgamation or reorganisation) or for the appointment of a receiver, administrator, administrative receiver, trustee or similar officer of it or of any or all of its assets or revenues; - 3 - 7 (ii) it is not in breach of or in default under any agreement to which it is a party or which is binding on it or any of its assets to an extent or in a manner which has had, or might reasonably be expected to have, a material adverse effect on the Sponsor's ability to meet or perform the obligations expressed to be assumed by it pursuant to any UTPL Agreement; (iii) no action or administrative proceeding of or before any court or agency which has had, or might reasonably be expected to have, a material adverse effect on the Sponsor's ability to meet or perform the obligations expressed to be assumed by it pursuant to any UTPL Agreement to which it is expressed to be a party has been started or (to the best of the Sponsor's knowledge and belief) threatened against the Sponsor; (iv) the execution of any of the UTPL Agreements to which it is expressed to be a party and the performance of its obligations thereunder do not and will not: (1) conflict with any agreement, mortgage, bond or other instrument or treaty to which the Sponsor is a party or which is binding upon the Sponsor or any of the assets of the Sponsor; (2) conflict with the Memorandum and Articles of Association of the Sponsor; or (3) conflict with any applicable law, regulation or official or judicial order which judicial order is binding upon the Sponsor; and (v) the Sponsor directly or indirectly beneficially owns one hundred per cent. of the issued share capital of the Borrower. 2.3 The representations contained in this Clause 2 shall be deemed to be repeated by the Sponsor on the making of each Advance by reference to the facts and circumstances then existing. - 4 - 8 PART 3 DIRECT OBLIGATIONS 3. BENEFICIAL OWNERSHIP OF THE BORROWER The Sponsor undertakes and covenants to the Facility Agent for the benefit of the Beneficiaries that, unless an Instructing Group has otherwise consented in writing: (i) the Sponsor will at all times directly or indirectly maintain beneficial ownership of one hundred per cent. of the equity share capital of the Borrower; and (ii) the Sponsor will not create or permit to subsist any encumbrance over all or any part of its beneficial interest in the equity share capital of the Borrower and any rights attaching thereto. 4. UTPL AGREEMENTS 4.1 The Sponsor undertakes and covenants to the Facility Agent for the benefit of the Beneficiaries that unless an Instructing Group has otherwise consented in writing: (i) it will duly observe and perform all of the obligations expressed to be assumed by it in favour of the Borrower under or pursuant to the UTPL Agreements and if the Sponsor at any time fails to observe or perform any of its obligations under any of the UTPL Agreements the Sponsor shall, forthwith upon demand by the Facility Agent, pay to the Borrower, by crediting the same to the Proceeds Account, by way of liquidated damages a sum equal to the amount (if any) which the Borrower would have received from the Sponsor if the Sponsor had not so failed to comply with any of such obligations; and (ii) it will not amend, vary, waive, supplement, novate, cancel or terminate any of the UTPL Agreements nor permit the same. 4.2 The parties hereto agree that the Facility Agent (acting on the instructions of an Instructing Group) may terminate the appointment of the Sponsor under the Administrative Services Agreement upon, or at any time after, the occurrence of any Event of Default (unless such Event of Default has been waived or remedied and no Events of Default are continuing or outstanding). 4.3 It is hereby agreed that any sum payable pursuant to Clause 4.1(i) is payable by way of liquidated damages and represents a genuine pre-estimate of losses and not a penalty. 5. DIVIDENDS, DISTRIBUTIONS AND SUBORDINATED INDEBTEDNESS The Sponsor agrees with the Facility Agent that unless an Instructing Group has otherwise consented in writing it will ensure that the Borrower does not pay, make or declare any dividend or other distribution - 5 - 9 to it (or to UTPH or any subsidiary of UTPH), make any intra-group Loan to the Sponsor, make any payment under the Administrative Services Agreement or make any repayment or payment of principal, interest or any other amounts in respect of Subordinated Debt other than in accordance with, and subject to the terms of, Clause 34 of the Facility Agreement. 6. INSURANCE DISPUTES 6.1 Promptly after any event occurs in respect of which the Sponsor is obliged to pay an amount pursuant to Clause 5.5 of the Sponsor Support Agreement, the Sponsor and the Facility Agent shall negotiate in good faith to try to agree the amount then payable by the Sponsor under such Clause 5.5. If after 21 days after the occurrence of such event no agreement has been reached then the matter or matters in dispute in respect thereof shall be referred by the Facility Agent to, and determined by, an Independent Loss Adjuster. 6.2 The Independent Loss Adjuster shall be appointed on terms that: (i) he shall act as an expert and not an arbitrator; (ii) he shall be required to make a determination on the matter or matters in dispute within thirty days of the same being referred to him or such longer period as the Facility Agent and the Sponsor may agree is necessary and, without prejudice to the provisions of paragraph (i) above, to state, in reasonable detail, his grounds for his determination; and (iii) such determination shall be made taking into account: (a) that the amount to be determined represents an amount which would have been payable by underwriters in the worldwide insurance markets for energy risks in respect of a claim under a Construction All Risks insurance policy which conforms with the requirements of Part 9 of the Facility Agreement, Part 2 of the Eighth Schedule of the Facility Agreement and the Assignment of Insurances; (b) that any other terms applicable to such insurance would be commercial terms customary within the worldwide insurance markets for energy risks for similar policies to that specified in Part 2 of the Eighth Schedule to the Facility Agreement; and (c) (to the extent that the Independent Loss Adjuster considers them to be relevant) the submissions of the Sponsor, the Borrower, the Facility Agent and the Banks and such other information as he may reasonably consider appropriate. - 6 - 10 PART 4 SUBORDINATED INDEBTEDNESS 7. SUBORDINATION 7.1 Subject to Clause 7.5 the Sponsor hereby covenants with the Facility Agent that, save as an Instructing Group may otherwise agree, the Sponsor shall not and shall not be entitled to, at any time prior to the Discharge Date: (i) except as permitted under Clause 34 of the Facility Agreement, demand or receive any payment in respect of any Subordinated Indebtedness (whether of principal, interest thereon or otherwise); (ii) assign, agree to assign or purport to assign any rights which it may have against the Borrower in respect of any Subordinated Indebtedness unless the assignee has entered into covenants with the Facility Agent on the same terms, mutatis mutandis, as are set out in this Part 4; (iii) create or permit to subsist any encumbrance in respect of any Subordinated Indebtedness unless the encumbrancer has entered into covenants with the Facility Agent on the same terms, mutatis mutandis, as are set out in this Part 4; (iv) demand the creation of, or receive the benefit of any encumbrance over or any guarantee or indemnity in respect of any Subordinated Indebtedness; (v) commence any proceedings against the Borrower; (vi) except as permitted under Clause 34 of the Facility Agreement, take any action to collect any of the Subordinated Indebtedness (including, without limitation, the exercise of any right of set-off, counterclaim or lien); (vii) take any action or steps with a view to or otherwise in connection with the winding-up, dissolution, receivership or administration of the Borrower; or (viii) otherwise take or omit to take any action whereby the subordination intended by this Agreement may be impaired. 7.2 Subject to Clause 7.5 the Borrower hereby covenants with the Facility Agent that, save as an Instructing Group may otherwise agree, it shall not be entitled to, and shall not, at any time prior to the Discharge Date: (i) make any payment or repayment of or in respect of any Subordinated Indebtedness; or - 7 - 11 (ii) otherwise take or omit to take any action whereby the subordination intended by this Agreement may be impaired. 7.3 The Sponsor hereby covenants with the Facility Agent and the Borrower that, subject to Clause 7.4: (i) in the event of it receiving any payment or any other benefit on account of Subordinated Indebtedness in breach of Clause 7.1 it shall forthwith notify the Facility Agent of the receipt and forthwith repay or return any sums or other benefits which shall have been received by it in consequence of such breach to the Borrower; and (ii) in the event of any Subordinated Indebtedness being discharged by set-off in breach of Clause 7.1, it shall forthwith notify the Facility Agent of the discharge and repay forthwith an amount equal to the amount of the discharge to the Borrower. 7.4 If, (i) but for this Clause 7.4, any amount, benefit or distribution would fall to be repaid or returned to the Borrower pursuant to Clause 7.3 at any time after an Event of Default has occurred; or (ii) on a winding-up, dissolution, receivership or administration of the Borrower, a distribution of the Borrower's assets by any liquidator, receiver or similar officer of the Borrower or any other person (whether in cash, property or securities) being made to the Sponsor in respect of its claims in respect of any Subordinated Indebtedness prior to all amounts owing to the Beneficiaries being paid in full in accordance with the terms of the Financing Agreements (and for this purpose any dividends or payments received by any Beneficiary shall only be taken to discharge the same to the extent of the actual amount received), the Sponsor will forthwith notify the Facility Agent of the receipt and forthwith pay to the Facility Agent any sum so received by it from the Borrower or, as the case may be, the liquidator, receiver or similar officer of the Borrower or other person and until such payment the Sponsor will hold such sum on trust for the Facility Agent, and any such sums so paid to, or held on trust for, the Facility Agent shall be applied, or pending application held, by the Facility Agent in accordance with the provisions of the Facility Agreement. 7.5 Notwithstanding the foregoing provisions of this Clause 7, the Borrower shall be entitled to make, and the Sponsor shall be entitled to receive and retain payments in reimbursement of or in satisfaction of any indebtedness incurred by way of Subordinated Indebtedness Provided that such payment is made in accordance with Clause 34 of the Facility Agreement and Clause 5 of this Agreement. 7.6 Nothing in this Clause 7 is intended to, nor shall it, constitute or create an encumbrance over any revenues or assets of the Sponsor or the Borrower. - 8 - 12 PART 5 MISCELLANEOUS 8. LIMITATION OF LIABILITY 8.1 Notwithstanding any provision to the contrary which is contained in any of the Financing Agreements, neither UTPH nor any of its shareholders, subsidiaries, officers or directors (other than the Borrower in respect of its obligations under the Financing Agreements to which it is party, and the Sponsor in connection with its obligations under the UTPL Agreements) shall be personally liable to any Beneficiary: (i) for the payment or repayment of any moneys outstanding under the Financing Agreements; or (ii) in any claim for damages or compensation by the Beneficiaries or any of them on the grounds of an Event of Default, or any other breach or default of any Financing Agreement, or any representation or warranty contained in any Financing Agreement not being true and correct. 8.2 The liability of the Sponsor under the UTPL Agreements is limited as follows: (i) if the Sponsor breaches any of its obligations or undertakings set forth in any of the UTPL Agreements, the Sponsor's liability in respect thereof shall be limited to specific enforcement of such obligation, recovery of amounts due in respect of any payment liability or, subject to Clause 4.1(i), recovery of actual, direct damages resulting therefrom (and expressly excluding any consequential damages resulting therefrom) by (a) the Borrower in the case of the Sponsor Support Agreement and the Administrative Services Agreement (or by the Beneficiaries but only after enforcement of the security constituted in respect thereof under the Debenture) and (b) the Beneficiaries in the case of this Agreement; and (ii) nothing in any of the UTPL Agreements shall be construed as a guarantee of, or to otherwise oblige the Sponsor to make, any payment of any principal, interest, fee or other amount owing by the Borrower under any of the Financing Agreements. 8.3 The obligations and liabilities of the Sponsor, the Borrower and the Beneficiaries under this Agreement shall cease on the Discharge Date. 9. TAX 9.1 The Borrower and the Sponsor each undertake and covenant to the Facility Agent for the benefit of the Beneficiaries that the Borrower will not, and the Sponsor shall ensure that the Borrower will not, without the prior written consent of the Facility Agent (acting on the instructions of an Instructing Group) and whether to the Sponsor or to any other person, agree to surrender or dispose of, nor surrender or - 9 - 13 dispose of, any credit, losses, allowances, concessions, discharges or other relief available to it in respect of tax (being, in this Clause 9.1, a "SURRENDER OF RELIEF") otherwise than in connection with any settlement with the Inland Revenue or pursuant to the terms of Clause 4 of the Sponsor Support Agreement. 9.2 All payments to be made by the Sponsor to the Borrower or the Facility Agent under or pursuant to this Agreement shall be made free and clear of and without deduction for or on account of tax unless the Sponsor is required to make such payment subject to the deduction or withholding of tax, in which case the sum payable by the Sponsor in respect of which such deduction or withholding is required to be made shall, subject to Clause 12.4 and 12.5 of the Facility Agreement, be increased to the extent necessary to ensure that, after the making of the required deduction or withholding, the Borrower or the Facility Agent, as the case may be, receives and retains (free from any liability in respect of any such deduction or withholding) a net sum equal to the sum which it would have received and so retained had no such deduction or withholding have been made or required to be made and the Sponsor undertakes and covenants to the Facility Agent for the benefit of the Beneficiaries to make all such payments. 10. ENFORCEABILITY Save where expressly stated to the contrary, any representation, undertaking, covenant or other provision given by the Sponsor or the Borrower hereunder in favour of the Facility Agent (whether expressed to be in favour of the Agent on behalf of the Beneficiaries or otherwise) shall be deemed to be given in favour of the Facility Agent as agent and trustee for the Beneficiaries (as trustee pursuant to the trusts constituted in Part 14 of the Facility Agreement) and, subject to the provisions of the Facility Agreement, shall be enforceable by the Facility Agent or by the Beneficiaries or any of them. 11. PAYMENTS Save as may be expressly permitted in any UTPL Agreement, all payments required to be made by either of the Sponsor or the Borrower to any other person under any of the UTPL Agreements shall be calculated without reference to any set-off or counterclaim and shall be made free and clear of and without any deduction for or on account of any set-off or counterclaim. 12. BENEFIT OF AGREEMENT This Agreement shall be binding upon and enure to the benefit of each party hereto and its or any subsequent successors, Transferees and assigns. 13. ASSIGNMENTS AND TRANSFERS BY THE SPONSOR AND THE BORROWER Save for any assignment made by the Borrower by or pursuant to any of the Security Documents, neither the Sponsor nor the Borrower shall be entitled to assign or transfer all or any of its rights, benefits and obligations under any of the UTPL Agreements. - 10 - 14 14. ASSIGNMENTS AND TRANSFERS BY THE FACILITY AGENT The Facility Agent shall be entitled to assign or transfer all or any of its rights, benefits and obligations hereunder in accordance with Part 14 of the Facility Agreement. 15. REMEDIES AND WAIVERS No failure on the part of the Facility Agent or any of the Beneficiaries to exercise, nor any delay in exercising, any right or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any right or remedy prevent any further or other exercise thereof or the exercise of any other right or remedy. The rights and remedies herein provided are cumulative and not exclusive of any rights or remedies provided by law. 16. PARTIAL INVALIDITY If, at any time, any provision hereof is or becomes illegal, invalid or unenforceable in any respect under the law of any jurisdiction, neither the legality, validity or enforceability of the remaining provisions hereof nor the legality, validity or enforceability of such provision under the law of any other jurisdiction shall in any way be affected or impaired thereby. 17. NOTICES 17.1 Each communication to be made hereunder shall be made in writing but unless otherwise stated, may be made in writing by facsimile, telex, Society for Worldwide Interbank Financial Communications ("SWIFT") (if available) or letter. 17.2 Any communication or document to be made or delivered by one person to another pursuant to this Agreement shall (unless that other person has specified another address by written notice to the Facility Agent fifteen days prior to the date of the communication) be made or delivered to that other person at the address, telex or facsimile number identified with its signature set out below (in the case of the Sponsor) or set out in the signature pages of the Facility Agreement (in the case of the Facility Agent or the Borrower) and shall be deemed to have been made or delivered (a) if sent by telex or facsimile at the time of despatch (if despatched between 9.00 a.m. and 5.00 p.m. (local time in the place to which it is sent) on a working day in that place, when sent, or if sent by telex or facsimile at any other time, at 9.00 a.m. (local time in the place to which it is sent) on the next working day in that place), provided that in the case of facsimile the person sending the facsimile shall have received a transmission receipt and a hard copy of such facsimile shall be sent on the same day to the party to whom such notice was sent (but failure to send or receive any such hard copy shall not prejudice any such deemed making or delivery), (b) in the case of communications by SWIFT, when despatched and an acknowledgement of receipt by SWIFT received, (c) if sent by recorded delivery, at the recorded time of delivery or (d) in the case of any other communication made by letter, when left at that address or (as the case may be) five days after being deposited in the post postage prepaid in an envelope addressed to it at that address Provided that any communication or document to be made or delivered to the Facility Agent shall be effective only when received by the Facility Agent and then only if the same is expressly marked for the attention of the department or officer identified with the Facility Agent's signature to the Facility Agreement (or such other department or officer as the Facility Agent shall from time to time specify for this purpose). - 11 - 15 17.3 Each communication and document made or delivered by one party to another pursuant to this Agreement shall be in the English language or accompanied by a translation thereof into English certified (by an officer of the person making or delivering the same) as being a true and accurate translation thereof. In the event of dispute, the English language version shall prevail. 18. COUNTERPARTS This Agreement may be executed in any number of counterparts and by different parties hereto on separate counterparts each of which, when executed and delivered, shall constitute an original, but all the counterparts shall together constitute but one and the same instrument. - 12 - 16 PART 6 LAW 19. LAW This Agreement shall be governed by, and shall be construed in accordance with, English law. 20. JURISDICTION 20.1 Each of the parties agrees for the benefit of each of the Beneficiaries that the courts of England shall have jurisdiction to hear and determine any suit, action or proceeding, and to settle any disputes, which may arise out of or in connection with this Agreement and, for such purposes, irrevocably submits to the jurisdiction of such courts. 20.2 Each of the parties irrevocably waives any objection which it might now or hereafter have to the courts referred to in Clause 20.1 being nominated as the forum to hear and determine any suit, action or proceeding, and to settle any disputes, which may arise out of or in connection with this Agreement and agrees not to claim that any such court is not a convenient or appropriate forum. 20.3 The submission to the jurisdiction of the courts referred to in Clause 20.1 shall not (and shall not be construed so as to) limit the right of any of the parties hereto to take proceedings against the other parties in any other court of competent jurisdiction nor shall the taking of proceedings in any one or more jurisdictions preclude the taking of proceedings in any other jurisdiction (whether concurrently or not) if and to the extent permitted by applicable law. AS WITNESS the hands of the duly authorised representatives of the parties hereto the day and year first before written. - 13 - 17 THE SPONSOR UNION TEXAS PETROLEUM LIMITED By: R.A. HALSON Address: 5th Floor Bowater House 68/114 Knightsbridge London SW1X 7LR Telex: 22160 Facsimile: 0171 584 7785 THE BORROWER UNION TEXAS BRITANNIA LIMITED By: R.A. HALSON THE FACILITY AGENT NATIONSBANK, N.A. (CAROLINAS) By: ASAD ZAFAR - 14 - EX-10.11 12 SPONSOR SUPPORT AGMT. DATED 05/26/95 1 EXHIBIT 10.11 CONFORMED COPY SPONSOR SUPPORT AGREEMENT between UNION TEXAS PETROLEUM LIMITED as sponsor and UNION TEXAS BRITANNIA LIMITED as borrower Clifford Chance London 2 CONTENTS PART 1 INTERPRETATION 1. INTERPRETATION . . . . . . . . . . . . . . . . . . . . . . . . . . 1 PART 2 SUPPORT OBLIGATIONS 2. COST OVERRUNS . . . . . . . . . . . . . . . . . . . . . . . . . . 4 3. DIVIDEND CLAWBACK . . . . . . . . . . . . . . . . . . . . . . . . 4 4. TAX SHARING . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 5. INSURANCE SUPPORT . . . . . . . . . . . . . . . . . . . . . . . . 7 6. REFUNDS OF PAYMENTS OUT OF PROJECT ACCOUNTS . . . . . . . . . . . 8 PART 3 MISCELLANEOUS 7. TAX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 8. PAYMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 9. BENEFIT OF AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . 9 10. ASSIGNMENTS AND TRANSFERS . . . . . . . . . . . . . . . . . . . . 10 11. REMEDIES AND WAIVERS . . . . . . . . . . . . . . . . . . . . . . . 10 12. PARTIAL INVALIDITY . . . . . . . . . . . . . . . . . . . . . . . . 10 13. NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 14. COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 PART 4 LAW 15. LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 16. JURISDICTION . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3 THIS AGREEMENT is made the 26 day of May, 1995 BETWEEN (1) UNION TEXAS PETROLEUM LIMITED a company incorporated in England and Wales with company registration number 708552, (the "SPONSOR"); and (2) UNION TEXAS BRITANNIA LIMITED a company incorporated in England and Wales with company registration number 2894635, (the "BORROWER"). WHEREAS: (A) By a facility agreement (the "FACILITY AGREEMENT") of even date herewith between (1) the Borrower, (2) Chemical Bank as arranger, (3) NationsBank, N.A. (Carolinas) and National Westminster Bank Plc as co-arrangers, (4) NationsBank, N.A. (Carolinas) as facility agent, (5) NationsBank, N.A. (Carolinas) and Chemical Bank as technical agents, (6) National Westminster Bank Plc as funding agent, (7) National Westminster Bank Plc as account bank and (8) the financial institutions named therein as banks (the "BANKS") and as hedge counterparties, the Banks have agreed, upon the terms and subject to the conditions thereof, to make available to the Borrower a credit facility up to the maximum principal amount of pound sterling 150,000,000. (B) It is a condition to the making of any advance under the Facility Agreement that the Sponsor provide the support to the Borrower on the terms hereof. NOW IT IS HEREBY AGREED as follows: PART 1 INTERPRETATION 1. INTERPRETATION 1.1 Terms defined or construed in the Facility Agreement shall, unless otherwise defined or construed herein, bear the same meaning or construction herein. 1.2 In this Agreement: "ACCOUNTING DATE" shall have the meaning given to it in section 834 of the Taxes Act; "ACCOUNTING PERIOD" shall have the meaning given to it in section 834 of the Taxes Act; - 1 - 4 "CAPITAL CONTRIBUTION" means (a) a payment in cash by the Sponsor as consideration for the issue and allotment to it of ordinary shares at par in the Borrower or (b) the lending by the Sponsor of an amount to the Borrower by way of Subordinated Debt; "COST OVERRUN" means every amount (if any) by which the total amount which the Borrower is liable to pay in relation to the Project, any part of the Project Interest or under any Project Agreement and for which the Borrower is entitled to draw down Advances pursuant to Clause 3.1 of the Facility Agreement (including, for the avoidance of doubt, Financing Expenses) exceeds the Facility Amount from time to time; "DISTRIBUTED AMOUNT" means any amount paid by the Borrower (i) to the Sponsor or any shareholder of the Borrower in respect of any dividend, distribution or other amount paid to the Sponsor or any shareholder of the Borrower by the Borrower in its capacity as shareholder of the Borrower, (ii) in respect of principal, interest or otherwise in respect of Subordinated Debt or any other indebtedness of the Borrower to the Sponsor (other than any trade accounts payable by the Borrower to the Sponsor in the ordinary course of its business provided that such transactions are entered into on arm's length commercial terms no less favourable to the Borrower than those which the Borrower could reasonably have obtained from sources other than the Sponsor), (iii) to the Sponsor as an intra group loan (excluding any intra group loan funded with the proceeds of an Advance for general corporate purposes pursuant to Clause 3.2(ii) of the Facility Agreement) or (iv) as fees due to the Sponsor under the Administrative Services Agreement (other than any fees accrued to the Sponsor thereunder before the Project Completion Date and paid with the proceeds of an Advance) Provided that no Sponsor Special Payment shall constitute a Distributed Amount; "GROUP RELIEF" means any losses or other amounts eligible for relief from Tax which may be surrendered by way of group relief in accordance with the provisions of Chapter IV of Part X of the Taxes Act; "RELEVANT ACCOUNTING PERIOD" means any Accounting Period of the Borrower during the period from 1st January 1995 until the Final Discharge Date; "RELEVANT RELIEF" means every amount of Group Relief which is surrendered by the Borrower to the Sponsor in any Relevant Accounting Period, which, had it not been surrendered, would have been available to the Borrower in any Subsequent Relevant Accounting Period to reduce or eliminate the profits or income on which it is liable to pay Tax; "RELEVANT REPAYMENT DATE" is defined in Clause 3.2; "REPAYMENT EVENT" is defined in Clause 3.2; "SPONSOR REPAYMENT EVENT MAXIMUM AMOUNT" is defined in Clause 3.2; "SPONSOR'S PAYMENT" is defined in Clause 3.3; "SUBSEQUENT RELEVANT ACCOUNTING PERIOD" is defined in Clause 4.3.1; - 2 - 5 "TAX" means corporation tax on income and chargeable gains; "TAX DIFFERENTIAL AMOUNT" for any Relevant Accounting Period means the amount of Tax paid or payable by the Borrower during that Relevant Accounting Period taking into account all tax reliefs utilised and all tax credits received, which Tax would not have been paid or payable during that Relevant Accounting Period if Relevant Relief, not previously taken into account in the calculation of any earlier Tax Differential Amount, had not been surrendered to the Sponsor; and "TAXES ACT" means the Income and Corporation Taxes Act 1988. 1.3 A reference in this Agreement to a "CLAUSE" or "PART" shall, subject to any contrary indication, be construed as a reference to a clause, or part, as the case may be, hereof. 1.4 "POUND STERLING" and "STERLING" denote lawful currency of the United Kingdom. 1.5 Save where the contrary is indicated, any reference in this Agreement to: (i) this Agreement, a Project Agreement, a Financing Agreement, licence, permission, or any other agreement or document shall be construed as a reference to this Agreement or, as the case may be, such Project Agreement, Financing Agreement, licence, permission or other agreement or document as the same may have been, or may from time to time be, amended, varied, novated or supplemented; (ii) a statute shall be construed as a reference to such statute as the same may have been, or may from time to time be, amended or re-enacted; and (iii) a time of day shall be construed as a reference to London time. 1.6 Clause and Part headings are for ease of reference only. - 3 - 6 PART 2 SUPPORT OBLIGATIONS 2. COST OVERRUNS 2.1 The Sponsor agrees with the Borrower that it will make Capital Contributions to the Borrower from time to time within five business days of its request to enable it to meet any amount which is a Cost Overrun and which is due and payable by the Borrower at any time before the Project Completion Date Provided that: (i) the Sponsor's maximum aggregate liability under this Clause 2 shall be pound sterling 30,000,000 or, if the Facility Amount has been reduced pursuant to Clause 2.4 of the Facility Agreement, such lower amount which is produced by reducing pound sterling 30,000,000 pro rata to the reduction in the Facility Amount; (ii) the Sponsor shall not be obliged to make any payment under this Clause 2 until such time as the Banks have advanced the Facility Amount to the Borrower under the Facility Agreement; (iii) the Borrower shall apply the amount so paid to it against any Permitted Expenditure which is a Cost Overrun and is then due and payable provided that if the tests specified in Parts 1 through 5 of the Seventh Schedule of the Facility Agreement (the "TECHNICAL COMPLETION TESTS") have been satisfied, the Sponsor's obligation to fund Cost Overruns pursuant to this Clause 2 shall be limited further to any such Permitted Expenditure described in Part 6 of the Seventh Schedule to the Facility Agreement that arose, or relate to events occurring, on or prior to satisfaction of the Technical Completion Tests; and (iv) the Sponsor shall not be obliged to make any payment under this Clause 2 if the Unit Operating Committee has determined that the Project should be abandoned pursuant to Clause 20.1 of the Unit Operating Agreement. 2.2 Any amount payable by the Sponsor under Clause 2.1 shall be paid directly to the credit of the Proceeds Account. 3. DIVIDEND CLAWBACK 3.1 If an Event of Default of the type specified in Clause 28.1(i) of the Facility Agreement has occurred (a "PAYMENT EVENT OF DEFAULT"), the Sponsor shall immediately pay to the Borrower by crediting the same directly to the Proceeds Account, an amount equal to all amounts paid by or on behalf of the Borrower by way of any Distributed Amount (subject to Clause 3.3) on or in respect of the previous two Repayment Dates to have occurred before the payment default occurred which became such Payment Event of Default Provided that the maximum amount payable in respect of such Payment Event - 4 - 7 of Default shall be that which would then satisfy the Borrower's then outstanding obligations to the Beneficiaries. 3.2 If the amount of the Loan to be repaid by the Borrower on any Repayment Date (the "RELEVANT REPAYMENT DATE") would (but for any payment under this Clause 3.2) be less than the greatest of the amounts referred to in Clause 10.1(ii)(a), (b) and (c) of the Facility Agreement for the Relevant Repayment Date (a "REPAYMENT EVENT"), the Sponsor shall immediately pay to the Borrower, by crediting the same directly to the Proceeds Account, an amount equal to all amounts paid by or on behalf of the Borrower by way of any Distributed Amount (subject to Clause 3.3) on or in respect of the previous two Repayment Dates to have occurred before the Relevant Repayment Date Provided that the maximum amount payable in respect of such Repayment Event (such maximum amount being the "SPONSOR REPAYMENT EVENT MAXIMUM AMOUNT") shall be that which would enable the Borrower to reduce the Loan on the Relevant Repayment Date by an amount equal to the greatest of the amounts referred to in Clauses 10.1(ii)(a), (b) and (c) of the Facility Agreement for the Relevant Repayment Date (and, for the purposes of calculating the amount to be paid pursuant to this Clause 3.2, any amount referred to in Clause 10.1(i) of the Facility Agreement for the Relevant Repayment Date shall be deemed to be equal to the greatest of the amounts referred to in Clause 10.1(ii) thereof). 3.3 If the Sponsor makes any payment under Clause 3.1 or 3.2 (a "SPONSOR'S PAYMENT"), then the amount of any Distributed Amount paid by the Borrower and in respect of which such Sponsor's Payment was made shall, for the purposes of this Clause 3, be deemed to be reduced by the amount of such Sponsor's Payment Provided that no Distributed Amount paid by the Borrower on the second of the two previous Repayment Dates before the relevant payment default or relevant Repayment Event shall be deemed to be reduced hereunder before the Distributed Amounts paid by the Borrower on the first such previous Repayment Date have been deemed to have been reduced to zero pursuant hereto. 3.4 Any Sponsor's Payment may be paid as an advance to the Borrower by way of Subordinated Debt which shall be repayable in accordance with such terms as may be mutually agreed between the Sponsor and the Borrower subject to Clause 7 of the Sponsor Direct Agreement. 4. TAX SHARING 4.1 SURRENDER The Borrower agrees to surrender to the Sponsor by way of Group Relief, such amount of losses and other amounts eligible for relief from Tax during a Relevant Accounting Period as the Sponsor may request, up to the maximum amount so eligible for surrender during such Relevant Accounting Period. Unless otherwise agreed with the Sponsor, the Borrower will maintain its Accounting Date as 31 December in each year. 4.2 CONSENT TO SURRENDER The Borrower will give to the Sponsor the appropriate consents (as referred to in paragraph 10 to Schedule 17A of the Taxes Act) and otherwise take such action as the Sponsor shall reasonably request to ensure that Group Relief can be and is duly surrendered in accordance with relevant statutory - 5 - 8 provisions and Inland Revenue practice, in each case promptly and shall notify such consents to the Inland Revenue as soon as reasonably practicable and, in any event, in reasonably sufficient time to allow claims or amended claims to be made by the Sponsor within the applicable time periods. 4.3 PAYMENT 4.3.1 If: (i) any amount has been surrendered by the Borrower to the Sponsor by way of Group Relief in any Relevant Accounting Period; and (ii) in any subsequent Relevant Accounting Period (the "SUBSEQUENT RELEVANT ACCOUNTING PERIOD"), the Borrower becomes liable to pay Tax which it would not have been liable to pay had such surrender not been made in any previous Relevant Accounting Period, then the Sponsor shall, on the Repayment Date which immediately precedes the last day on which the Borrower can pay such Tax without incurring any interest or penalties and occurring in such Subsequent Relevant Accounting Period , make a group relief payment to the Borrower, as referred to in section 402(6) of the Taxes Act, of an amount equal to the Tax Differential Amount for such Subsequent Relevant Accounting Period. 4.3.2 The Sponsor and the Borrower agree that if on any Repayment Date the Sponsor is obliged to make any payment under Clause 4.3.1 and the Borrower is obliged to make any payment to the Sponsor permitted pursuant to Clause 34.14(vi) of the Facility Agreement then such payments shall be netted off against each other and the Borrower or the Sponsor, as the case may be, shall pay the resultant balance, as appropriate, but for all purposes of the Financing Agreements each party hereto shall be deemed to have received the full amount on such Repayment Date which it would otherwise have received but for this Clause 4.3.2. 4.3.3 To the extent that the Sponsor makes any payment to the Borrower on any Relevant Repayment Date, such payment shall satisfy the Sponsor's obligations under Clause 4.3.1 to the fullest extent possible before satisfying any of its obligations under Clause 3 which may also have arisen on such Relevant Repayment Date. 4.4 ADJUSTMENTS 4.4.1 If the amount of the Tax liability of the Borrower in any Relevant Accounting Period is finally determined (in accordance with Clause 4.4.3) (the "FINAL DETERMINATION") and if such Final Determination is an amount greater than the amount of the Tax liability of the Borrower by reference to which the Tax Differential Amount for that Relevant Accounting Period under Clause 4.3 was calculated, the Sponsor shall pay to the Borrower such amount as ensures that the total amount paid by the Sponsor under Clause 4.3 and this Clause 4.4 shall be the amount which is payable in respect of the Tax Differential Amount for that Relevant Accounting Period as calculated by reference to the Final Determination. - 6 - 9 4.4.2 Any sum payable under this Clause 4.4 shall be paid within 5 business days after the date on which the Final Determination is made. 4.4.3 For the purposes of this Clause 4.4, the liability to Tax is finally determined on the date on which the Tax becomes due and recoverable by the tax authority demanding the same, provided that, if the date on which the Tax can be recovered is deferred following application to the relevant tax authority, the date on which the liability to Tax is finally determined shall be such later date when the amount of Tax is finally and conclusively determined. For this purpose, an amount of Tax shall be deemed to be finally and conclusively determined when, in respect of such amount, an agreement under section 54 of the Taxes Management Act 1970 or any legislative provision corresponding to that section is made or a decision of a court or tribunal is given from which either no appeal lies or in respect of which no appeal is made within the prescribed time limit. 5. INSURANCE SUPPORT 5.1 The Sponsor agrees that if the Borrower (or any other person on its behalf) has made any claim upon any insurance specified in the sections of the Eighth Schedule to the Facility Agreement specified in Column A below, the Sponsor shall, upon such claim being paid by the underwriters, pay the amount to the Borrower, by crediting the same directly to the Insurance Account, which is equal to the difference between (i) the amount paid by the underwriters in respect of such claim and (ii) the amount which would have been paid by the underwriters in respect of such claim had such insurance been subject to the deductibles specified opposite such insurances in Column B below (and not those specified in the relevant section of the Eighth Schedule to the Facility Agreement), such deductibles being per occurrence and in respect of the Borrower's percentage interest in the Britannia Field:
COLUMN A COLUMN B Control of Well (section 1 of Part 1 of the Eighth Schedule) US$250,000 Drilling Tools and Equipment (section 3 of Part 1 of the Eighth Schedule) US$250,000 Liabilities (section 5 of Part 1 of the Eighth Schedule) US$1,000,000
5.2 The Sponsor agrees that if (i) the Borrower (or any other person on its behalf) makes any claim on any insurance required to be effected pursuant to Clause 26 of the Facility Agreement and, (ii) the Borrower is required pursuant to Clause 34.6(ii) of the Facility Agreement to pay the proceeds of such claim to the Insurance Account, and (iii) any amount paid by the underwriters in respect of such claim is paid to the Sponsor, UTPH or any other subsidiary of UTPH (other than the Borrower) then the Sponsor shall ensure that such amount is promptly paid to the Borrower by crediting the same directly to the Insurance Account. - 7 - 10 5.3 The Sponsor hereby undertakes until the Project Completion Date to the Borrower to pay or ensure that there is paid all premiums required to be paid to any insurers in respect of any Group Insurances required to be maintained pursuant to Clause 26 of the Facility Agreement, such premiums to be paid promptly and in any event before the renewal date for each such insurance. 5.4 The Borrower undertakes to reimburse the Sponsor for any amounts of insurance premiums which the Sponsor has paid in respect of Group Insurances (including those paid pursuant to Clause 5.3) and which are reasonably allocated to the Borrower in respect of its interest in the Britannia Field. Such reimbursement shall be made: (i) with respect to any insurance premiums paid by the Sponsor on or before the Project Completion Date from the proceeds of an Advance on or after the Project Completion Date; and (ii) with respect to any insurance premiums paid by the Sponsor after the Project Completion Date promptly after any payment made by the Sponsor. 5.5 If at any time on or after the date on which the first Advance is made under the Facility Agreement the Construction All Risk insurance specified in Part 2 of the Eighth Schedule to the Facility Agreement has not been taken out by or on behalf of the Borrower, and if at any such time an event occurs which, had such insurance been in effect, would have entitled a claim to have been made under such insurance, then the Sponsor shall pay such amount to the Borrower as would be the amount which underwriters would have paid under such insurance had such insurance been in full force and effect. Any amount so paid by the Sponsor shall be paid by crediting the same directly to the Insurance Account for application in accordance with Clause 34.15 of the Facility Agreement. The Sponsor shall pay any such amount as soon as reasonably practicable after such event occurs, or if there is any dispute as to the amount so payable, promptly after the determination of such dispute by the Independent Loss Adjuster pursuant to Clause 6.2 of the Sponsor Direct Agreement. 5.6 To the extent that the Borrower may receive any Insurance Proceeds where the Sponsor had, prior to such proceeds being paid by the insurers, paid for (or provided the Borrower with funds to make such payments) the repair, replacement or rectification of that part of the Project Interest which was lost or damaged, the Borrower shall reimburse the Sponsor out of and up to the amount of such Insurance Proceeds so received, as permitted in accordance with Clause 34.15(ii) of the Facility Agreement. 6. REFUNDS OF PAYMENTS OUT OF PROJECT ACCOUNTS If at any time the Borrower is required to pay or ensure that there is paid (a) to the credit of the Proceeds Account any amount pursuant to Clause 34.9 of the Facility Agreement or (b) to the credit of the VAT Account pursuant to Clause 34.16 of the Facility Agreement by reason of any of the conditions specified in Clause 34.8(i), (ii), (iii), (iv) or (v) of the Facility Agreement not being or ceasing to be satisfied, the Sponsor shall immediately pay or ensure that there is immediately paid, such amount to the credit of the Proceeds Account but only to the extent that such funds have been released therefrom pursuant to Clause 34.8 of the Facility Agreement and an amount equal to such funds has not been paid by the Sponsor pursuant to Clause 3.1 or 3.2. - 8 - 11 PART 3 MISCELLANEOUS 7. TAX 7.1 All payments to be made by the Sponsor to the Borrower under or pursuant to this Agreement shall be made free and clear of and without deduction for or on account of tax unless the Sponsor is required to make such payment subject to the deduction or withholding of tax, in which case the sum payable by the Sponsor in respect of which such deduction or withholding is required to be made shall be increased to the extent necessary to ensure that, after the making of the required deduction or withholding, the Borrower receives and retains (free from any liability in respect of any such deduction or withholding) a net sum equal to the sum which it would have received and so retained had no such deduction or withholding have been made or required to be made. 7.2 If any payment by the Sponsor to the Borrower hereunder will be or has been subject to tax, the Sponsor shall, on demand from the Borrower, pay the Borrower a sum which (after taking into account tax payable by the Borrower in respect of that sum) will ensure that the Borrower receives and retains a net amount equal to the amount which it would have received and retained had the payment not been subject to tax. 8. PAYMENTS 8.1 Save as may be expressly permitted hereunder, all payments required to be made by the Sponsor to the Borrower hereunder shall be calculated without reference to any set-off or counterclaim and shall be made free and clear of and without any deduction for or on account of any set-off or counterclaim. 8.2 Any amount payable by the Sponsor hereunder: (i) shall, save as expressly stated to the contrary, be paid directly to the Account Bank for crediting to the Proceeds Account; and (ii) shall be paid in immediately available, freely transferable cleared funds and, in the case of any payment made under Clauses 3.2 and 4.3.1 shall be made so that on the Repayment Date on which the Borrower is to receive such payment the Borrower is able to pay such amount to the Funding Agent for the account of the Banks in repayment of the Loan in accordance with the Facility Agreement. 9. BENEFIT OF AGREEMENT This Agreement shall be binding upon and enure to the benefit of each party hereto and its or any subsequent successors and assigns. - 9 - 12 10. ASSIGNMENTS AND TRANSFERS Save for any assignment made by the Borrower by or pursuant to any of the Security Documents, neither the Sponsor nor the Borrower shall be entitled to assign or transfer all or any of its rights, benefits and obligations hereunder. 11. REMEDIES AND WAIVERS No failure on the part of the Borrower to exercise, nor any delay in exercising, any right or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any right or remedy prevent any further or other exercise thereof or the exercise of any other right or remedy. The rights and remedies herein provided are cumulative and not exclusive of any rights or remedies provided by law. 12. PARTIAL INVALIDITY If, at any time, any provision hereof is or becomes illegal, invalid or unenforceable in any respect under the law of any jurisdiction, neither the legality, validity or enforceability of the remaining provisions hereof nor the legality, validity or enforceability of such provision under the law of any other jurisdiction shall in any way be affected or impaired thereby. 13. NOTICES 13.1 Each communication to be made hereunder shall be made in writing but unless otherwise stated, may be made in writing by facsimile, telex or letter. 13.2 Any communication or document to be made or delivered by one person to another pursuant to this Agreement shall be made or delivered to that other person at the address, telex or facsimile number identified with its signature, in the case of the Borrower, in the signature pages of the Facility Agreement and, in the case of the Sponsor, in the signature pages of the Sponsor Direct Agreement and shall be deemed to have been made or delivered (i) if sent by telex or facsimile at the time of despatch (if despatched between 9.00 a.m. and 5.00 p.m. (local time in the place to which it is sent) on a working day in that place, when sent, or if sent by telex or facsimile at any other time, at 9.00 a.m. (local time in the place to which it is sent) on the next working day in that place), provided that in the case of facsimile, the person sending the facsimile shall have received a transmission receipt and a hard copy of such facsimile or telex shall be sent on the same day to the party to whom such notice was sent (but failure to send or receive any such hard copy shall not prejudice any such deemed making or delivery) and, in the case of a telex, the person sending the telex shall have received the correct answerback at the beginning and end of the transmission, (ii) if sent by recorded delivery, at the recorded time of delivery or (iii) in the case of any other communication made by letter, when left at that address or (as the case may be) five days after being deposited in the post postage prepaid in an envelope addressed to it at that address. 13.3 Each communication and document made or delivered by one party to another pursuant to this Agreement shall be in the English language or accompanied by a translation thereof into English certified - 10 - 13 (by an officer of the person making or delivering the same) as being a true and accurate translation thereof. In the event of dispute, the English language version shall prevail. 14. COUNTERPARTS This Agreement may be executed in any number of counterparts and by different parties hereto on separate counterparts each of which, when executed and delivered, shall constitute an original, but all the counterparts shall together constitute but one and the same instrument. - 11 - 14 PART 4 LAW 15. LAW This Agreement shall be governed by, and shall be construed in accordance with, English law. 16. JURISDICTION 16.1 Each of the parties agrees for the benefit of the other that the courts of England shall have jurisdiction to hear and determine any suit, action or proceeding, and to settle any disputes, which may arise out of or in connection with this Agreement and, for such purposes, irrevocably submits to the jurisdiction of such courts. 16.2 Each of the parties irrevocably waives any objection which it might now or hereafter have to the courts referred to in Clause 16.1 being nominated as the forum to hear and determine any suit, action or proceeding, and to settle any disputes, which may arise out of or in connection with this Agreement and agrees not to claim that any such court is not a convenient or appropriate forum. AS WITNESS the hands of the duly authorised representatives of the parties hereto the day and year first before written. - 12 - 15 THE SPONSOR UNION TEXAS PETROLEUM LIMITED By: R.A. HALSON THE BORROWER UNION TEXAS BRITANNIA LIMITED By: R.A. HALSON - 13 - EX-10.12 13 UNION TEXAS HOLDINGS, INC. 1994 INCENTIVE PLAN 1 EXHIBIT 10.12 UNION TEXAS PETROLEUM HOLDINGS, INC. 1994 INCENTIVE PLAN SECTION 1. PURPOSE OF THE PLAN The Union Texas Petroleum Holdings, Inc. 1994 Incentive Plan (the "Plan") is intended to promote the interests of Union Texas Petroleum Holdings, Inc., a Delaware corporation (the "Company"), by encouraging employees of the Company, its subsidiaries and affiliated entities, and non-employee directors of the Company to acquire or increase their equity interest in the Company and to provide a means whereby employees may develop a sense of proprietorship and personal involvement in the development and financial success of the Company, and to encourage them to remain with and devote their best efforts to the business of the Company thereby advancing the interests of the Company and its shareholders. The Plan is also contemplated to enhance the ability of the Company, its subsidiaries and affiliated entities to attract and retain the services of individuals who are essential for the program, growth and profitability of the Company. SECTION 2. DEFINITIONS As used in the Plan, the following terms shall have the meanings set forth below: "Affiliate" shall mean (i) any entity that, directly or through one or more intermediaries, is controlled by the Company and (ii) any entity in which the Company has a significant equity interest, as determined by the Committee. "Award" shall mean any Option, Stock Appreciation Right, Restricted Stock, Performance Award, Stock Compensation Award, Deferred Shares, Bonus Shares, Other Stock-Based or Cash Award. "Award Agreement" shall mean any written agreement, contract, or other instrument or document evidencing any Award, which may, but need not, be executed or acknowledged by a participant. "Board" shall mean the Board of Directors of the Company. "Bonus Shares" shall mean an award of Shares granted pursuant to Section 6(e) of the Plan. "Cash Award" shall mean an award payable in cash granted pursuant to Section 6(g) of the Plan. "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time, and the rules and regulations thereunder. "Committee" shall mean the Organization and Compensation Committee of the Board. "Covered Employees" shall have the meaning specified in Section 162(m)(3) of the Code. "Deferred Shares" shall mean an Award of the right to receive Shares issued at the end of a Restricted Period which is granted pursuant to Section 6(f) of the Plan. "Disability" shall mean (i) with respect to an Employee of the Company or of any Affiliate, becoming permanently disabled under the standards of the Company's disability program as determined by the Committee or (ii) with respect to a non-employee Director, inability to perform duties and services as a director of the Company by reason of a medically determinable physical or mental impairment supported by medical evidence which in the opinion of the Committee can be expected to result in death or which can be expected to last for a continuous period of not less than twelve (12) months. "Employee" shall mean any employee of the Company or of any Affiliate. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. "Fair Market Value" shall mean the fair market value of the property or other item being valued, as determined by the Committee. With respect to Shares, if the Shares are traded on a national stock 1 2 exchange, the fair market value of a Share on a particular date shall be equal to the average of the reported high and low sales prices of the Share on such exchange on that date, or if no prices are reported on that date, on the last preceding date on which such prices of the Share are so reported. If the Shares are publicly traded but are not traded on a national stock exchange at the time a determination of its fair market value is required to be made hereunder, its fair market value shall be deemed to be equal to the average between the closing bid and asked price of the Share on the most recent date the Shares were publicly traded. In the event the Shares are not publicly traded at the time a determination of its fair market value is required to be made hereunder, the determination of fair market value shall be made in good faith by the Committee. "Incentive Stock Option" or "ISO" shall mean an option granted under Section 6(a) of the Plan that is intended to qualify as an "incentive stock option" under Section 422 of the Code or any successor provision thereto. "non-employee Director" shall mean a director of the Company who is not (i) otherwise an employee of the Company or any Affiliate or (ii) a general partner, limited partner or employee of Kohlberg Kravis Roberts & Co. "Non-Qualified Stock Option" or "NQO" shall mean an option granted under Sections 6(a) or 6(h) of the Plan that is not intended to be an Incentive Stock Option. "Option" shall mean an Incentive Stock Option or a Non-Qualified Stock Option. "Other Stock-Based Award" shall mean any right granted under Section 6(g) of the Plan. "Participant" shall mean any individual granted an Award under the Plan. Any other provisions hereof to the contrary notwithstanding, no non-employee Director may receive benefits under this Plan except for Non-Qualified Stock Options as provided in Section 6(h). "Performance Award" shall mean any right granted under Section 6(d) of the Plan. "Person" shall mean individual, corporation, partnership, association, joint-stock company, trust, unincorporated organization, government or political subdivision thereof or other entity. "Restricted Period" shall mean the period established by the Committee with respect to an Award during which the Award either remains subject to forfeiture or is not exercisable by the Participant. "Restricted Stock" shall mean any Share, prior to the lapse of restrictions thereon, granted under Section 6(c) of the Plan. "Retirement" shall mean (i) with respect to an employee of the Company or one of its Affiliates, retirement as determined by the Committee, and (ii) with respect to a non-employee Director of the Company, termination of service as a director or honorary director, after at least five (5) years of continuous service. "Rule 16b-3" shall mean Rule 16b-3 promulgated by the SEC under the Exchange Act, or any successor rule or regulation thereto as in effect from time to time. "SEC" shall mean the Securities and Exchange Commission, or any successor thereto. "Shares" or "Common Shares" or "Common Stock" shall mean the common stock of the Company, $0.05 par value, and such other securities or property as may become the subject of Awards or become subject to Awards pursuant to an adjustment made under Section 4(c) of the Plan. "Stock Appreciation Right" or "Right" shall mean any right to receive the appreciation of Shares granted under Section 6(b) of the Plan. "Stock Compensation" shall mean any right granted under Section 6(e) of the Plan. 2 3 "Substitute Award" shall mean Awards granted in assumption of, or in substitution for, outstanding awards previously granted by (i) a company acquired by the Company or one or more of its Affiliates, or (ii) a company with which the Company or one or more of its Affiliates combines. SECTION 3. ADMINISTRATION The Plan shall be administered by the Committee, which Committee shall consist of at least two members. Members of the Committee shall be "disinterested persons" within the meaning of Rule 16b-3 which has been adopted by the SEC under the Exchange Act as such Rule or its equivalent is then in effect. A majority of the Committee shall constitute a quorum, and the acts of the members of the Committee who are present at any meeting thereof at which a quorum is present, or acts unanimously approved by the members of the Committee in writing, shall be the acts of the Committee. Subject to the terms of the Plan and applicable law, and in addition to other express powers and authorizations conferred on the Committee by the Plan, the Committee shall have full power and authority to: (i) designate Participants; (ii) determine the type or types of Awards to be granted to an eligible Employee; (iii) determine the number of Shares to be covered by, or with respect to which payments, rights, or other matters are to be calculated in connection with, Awards; (iv) determine the terms and conditions of any Award; (v) determine whether, to what extent, and under what circumstances Awards may be settled or exercised in cash, Shares, other securities, other Awards or other property, or cancelled, forfeited, or suspended and the method or methods by which Awards may be settled, exercised, cancelled, forfeited, or suspended; (vi) determine whether, to what extent, and under what circumstances cash, Shares, other securities, other Awards, other property, and other amounts payable with respect to an Award shall be deferred either automatically or at the election of the holder thereof or of the Committee; (vii) interpret and administer the Plan and any instrument or agreement relating to, or Award made under, the Plan; (viii) establish, amend, suspend, or waive such rules and regulations and appoint such agents as it shall deem appropriate for the proper administration of the Plan; and (ix) make any other determination and take any other action that the Committee deems necessary or desirable for the administration of the Plan. Unless otherwise expressly provided in the Plan, all designations, determinations, interpretations, and other decisions under or with respect to the Plan or any Award shall be within the sole discretion of the Committee, may be made at any time and shall be final, conclusive, and binding upon all Persons, including the Company, any Affiliate, any Participant, any holder or beneficiary of any Award, any stockholder and any Employee. The provisions of this Section 3 with respect to decisions made by, and authority of, the Committee shall be subject to the controlling provisions of Section 6(h). SECTION 4. SHARES AVAILABLE FOR AWARDS (a) Shares Available Subject to Section 4(d) and to adjustment as provided in Section 4(c), the number of Shares with respect to which Awards may be granted under the Plan shall be 4,000,000. If, after the effective date of the Plan, any Shares covered by an Award granted under the Plan, or to which such an Award relates, are forfeited, or if an Award otherwise terminates or is cancelled without the delivery of Shares or of other consideration, then the Shares covered by such Award, or to which such Award relates, or the number of Shares otherwise counted against the aggregate number of Shares with respect to which Awards may be granted, to the extent of any such forfeiture, termination or cancellation, shall again be, or shall become, to the extent permissible under Rule 16b-3, Shares with respect to which Awards may be granted. In the event that any Option or other Award granted hereunder is exercised through the delivery of Shares, the number of Shares available for Awards (other than an Incentive Stock Option) under the Plan shall be increased by the number of Shares surrendered, to the extent permissible under Rule 16b-3. Notwithstanding the foregoing, no more than 1,200,000 Shares available for Awards shall be issued as Restricted Stock. (b) Sources of Shares Deliverable Under Awards Any Shares delivered pursuant to an Award may consist, in whole or in part, of authorized and unissued Shares or of treasury Shares. 3 4 (c) Adjustments In the event that the Committee determines that any dividend or other distribution (whether in the form of cash, Shares, other securities, or other property), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase, or exchange of Shares or other securities of the Company, issuance of warrants or other rights to purchase Shares or other securities of the Company, or other similar corporate transaction or event affects the Shares such that an adjustment is determined by the Committee to be appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan, then the Committee shall, in such manner as it may deem equitable, adjust any or all of (i) the number and type of Shares (or other securities or property) with respect to which Awards may be granted, (ii) the number and type of Shares (or other securities or property) subject to outstanding Awards, and (iii) the grant or exercise price with respect to any Award or, if deemed appropriate, make provision for a cash payment to the holder of an outstanding Award; provided, in each case, that with respect to Awards of Incentive Stock Options and Awards intended to qualify as performance based compensation under Section 162(m)(4)(C) of the Code, no such adjustment shall be authorized to the extent that such authority would cause the Plan to violate Section 422(b)(1) of the Code or would cause such Award to fail to so qualify under Section 162(m) of the Code, as the case may be, or any successor provisions thereto; and provided, further, that the number of Shares subject to any Award denominated in Shares shall always be a whole number. (d) Substitute Awards Any Shares underlying Substitute Awards shall not, except in the case of Shares with respect to which Substitute Awards are granted with respect to Incentive Stock Options or, if not permissible under Rule 16b-3, to Employees who are officers or directors of the Company for purposes of Section 16 of the Exchange Act or any successor section thereto, be counted against the Shares available for Awards other than Incentive Stock Options under the Plan. SECTION 5. ELIGIBILITY Other than Awards granted to non-employee Directors pursuant to Section 6(h) of the Plan, any Employee who is not a member of the Committee, including any officer or employee-director of the Company or any Affiliate, shall be eligible to be designated a Participant. All Employees shall be eligible for Awards under the Plan. However, no Employee under this Plan may receive in any calendar year Stock Options and/or Rights that, in the aggregate, are with respect to more than 500,000 Shares (tandem Awards shall be deemed to be one Award for this purpose). SECTION 6. AWARDS (a) Options Subject to the provisions of the Plan, the Committee shall have authority to determine the Employees to whom Options shall be granted, the number of Shares to be covered by each Option, the purchase price therefor and the conditions and limitations applicable to the exercise of the option including the following terms and conditions and such additional terms and conditions, as the Committee shall determine are not inconsistent with the provisions of the Plan. (i) Exercise Price. The purchase price per Share purchasable under an Option shall be determined by the Committee at the time each Option is granted; provided, however, that the purchase price per Share shall not be less than 100% of the Fair Market Value on the date of grant, except in the case of Options that are Substitute Awards. (ii) Time and Method of Exercise. The Committee shall determine the time or times at which an Option may be exercised in whole or in part, and the method or methods by which, and the form or forms (which may include, without limitation, cash, Shares, outstanding Awards, Shares that would otherwise be acquired upon exercise of the Option, other securities or other property, or any combination thereof, 4 5 having a Fair Market Value on the exercise date equal to the relevant exercise price) in which payment of the exercise price with respect thereto may be made or deemed to have been made. Pursuant to Section 7(b) of the Plan, the Committee may, at its discretion, accelerate the time at which Options may be exercised and otherwise modify the time or methods of exercise of the Options. (iii) Incentive Stock Options. The terms of any Incentive Stock Option granted under the Plan shall comply in all respects with the provisions of Section 422 of the Code, or any successor provision, and any regulations promulgated thereunder. Incentive Stock Options may be granted only to Employees of the Company and its "subsidiaries" within the meaning of Section 424(f) of the Code. (b) Stock Appreciation Rights Subject to the provisions of the Plan, the Committee shall have authority to determine the Employees to whom Stock Appreciation Rights shall be granted, the number of Shares to be covered by each Stock Appreciation Right Award, the grant price thereof and the conditions and limitations applicable to the exercise thereof. A Stock Appreciation Right may be granted in tandem with another Award, in addition to another Award, or freestanding and unrelated to another Award. A Stock Appreciation Right granted in tandem with or in addition to another Award may be granted either at the same time as such other Award or at a later time. (i) Grant Price. The grant price of a Stock Appreciation Right shall be determined by the Committee; provided, however, that the grant price shall not be less than 100% of the Fair Market Value on the date of grant or on the date of original grant of any related Award. (ii) Other Terms and Conditions. Subject to the terms of the Plan and any applicable Award Agreement, the Committee shall determine, at or after the grant of a Stock Appreciation Right, the term, methods of exercise, methods of settlement, and any other terms and conditions of any Stock Appreciation Right. Any such determination by the Committee may be changed by the Committee from time to time and may govern the exercise of Stock Appreciation Rights granted or exercised prior to such determination as well as Stock Appreciation Rights granted or exercised thereafter. The Committee may impose such conditions or restrictions on the exercise of any Stock Appreciation Right as it shall deem appropriate. (c) Restricted Stock Subject to the provisions of the Plan, the Committee shall have authority to determine the Employees to whom Restricted Stock shall be granted, the number of Shares of Restricted Stock to be granted to each such Participant, the duration of the Restricted Period during which, and the conditions under which, the Restricted Stock may be forfeited to the Company, and the other terms and conditions of such Awards. (i) Dividends. Unless otherwise determined by the Committee, Restricted Stock Awards shall provide for the payment of dividends during the Restricted Period. Any Restricted Stock Award may require that any or all dividends or other distributions paid on the Restricted Stock during the Restricted Period be automatically sequestered and held in a bookkeeping cash account (with or without interest) or reinvested on an immediate or deferred basis in additional shares of Common Stock, which credit or shares may be subject to the same restrictions as the underlying Award or such other restrictions as the Committee may determine. Dividends paid on Restricted Stock may be paid directly to the Participant, may be subject to risk of forfeiture and/or transfer restrictions during any period established by the Committee, all as determined by the Committee in its discretion. (ii) Registration. Any Restricted Stock may be evidenced in such manner as the Committee shall deem appropriate, including, without limitation, book-entry registration or issuance of a stock certificate or certificates. In the event any stock certificate is issued in respect of Restricted Stock granted under the Plan, such certificate shall be registered in the name of the Participant and shall bear an appropriate legend referring to the terms, conditions, and restrictions applicable to such Restricted Stock. 5 6 (iii) Forfeiture and Restrictions Lapse. Except as otherwise determined by the Committee or the terms of the Award that granted the Restricted Stock, upon termination of a Participant's employment (as determined under criteria established by the Committee, including, without limitation, in the Committee's discretion, goals described under Section 6(d)(i)) for any reason during the applicable Restricted Period, all Restricted Stock shall be forfeited by the Participant and re-acquired by the Company. The Committee may, when it finds that a waiver would be in the best interests of the Company and not cause such Award, if it is intended to qualify as performance based compensation under Section 162(m) of the Code, to fail to so qualify under Section 162(m) of the Code, waive in whole or in part any or all remaining restrictions with respect to such Participant's Restricted Stock. Unrestricted Shares, evidenced in such manner as the Committee shall deem appropriate, shall be issued to the holder of Restricted Stock promptly after the applicable restrictions have lapsed or otherwise been satisfied. (iv) Transfer Restrictions. During the Restricted Period, Restricted Stock will be subject to the limitations on transfer as provided in Section 6(i)(iii). (d) Performance Awards The Committee shall have authority to determine the Employees who shall receive a Performance Award, which shall (A) consist of a right, denominated or payable in cash, Shares, Deferred Shares, other securities or other property (including, without limitation, Restricted Stock, or any combination thereof), and (B) confer on the holder thereof rights valued as determined by the Committee and payable to, or exercisable by, such holder, in whole or in part, upon the achievement of such performance goals during such performance periods as the Committee shall establish. (i) Terms and Conditions. Subject to the terms of the Plan and any applicable Award Agreement, the Committee shall determine the performance goals to be achieved during any performance period, the length of any performance period, the amount of any Performance Award and the amount of any payment or transfer to be made pursuant to any Performance Award. Without limiting the generality of the foregoing, it is intended that the Committee may establish performance goals applicable to Performance Awards granted to Participants who, in the judgment of the Committee, may be Covered Employees in such a manner as shall permit payments with respect thereto to qualify as "performance-based compensation" as described in Section 162(m)(4)(C) of the Code. It is specifically provided that the material terms of such performance goals for Participants who, in the judgment of the Committee, may be Covered Employees, shall, until changed by the Committee with the approval of the stockholders, if such stockholder approval is required by the Code, be as follows: (x) the business criteria on which the performance goals shall be based shall be the attainment of such target levels of either net income, cash flows, reserve additions or revisions, total capitalization, total shareholder return, assets, exploration successes, production volumes, finding and development costs, costs reductions and savings, reportable incidents in safety or environmental matters, return on sales, profit margin, earnings per share or personal objectives tied to operational studies, implementing policies and plans, negotiating transactions and sales, developing long-term business goals, managerial responsibilities and assessments as may be specified by the Committee; and (y) the maximum amount of compensation that may be paid to any one Participant with respect to any one year shall be $1.5 million under an annual performance bonus Award and $1.5 million under a long-term Award with a performance period longer than one fiscal year. (ii) Payment of Performance Awards. Performance Awards may be paid in a lump sum or in installments following the close of the performance period or, in accordance with procedures established by the Committee, on a deferred basis. (e) Stock Compensation and Bonus Shares (i) Stock Compensation. The Committee shall have the authority, in its discretion, to pay in Shares all, or such portion as it shall determine, of amounts payable (x) under any Award of the Plan, other than Performance Awards payable in cash as a short term annual incentive or Cash Awards granted in tandem with Restricted Stock or (y) if requested by an Employee, under any compensation program of the Company. The 6 7 number and type of Shares to be distributed in lieu of the cash compensation to which an Employee would otherwise be entitled, as well as the terms and conditions of any such bonus awards, shall be determined by the Committee. (ii) Bonus Shares. The Committee may also grant Bonus Shares to eligible Employees. Each Bonus Share shall constitute a transfer of Common Shares to the Participant, without other payment therefor, as additional compensation for the Participant's services to the Company. (f) Deferred Shares The Committee may also grant Awards of Deferred Shares to eligible Employees upon such terms and conditions as the Committee may determine. (i) Terms and Conditions. Each Deferred Share award shall constitute an agreement by the Company to issue or transfer a specified number of Shares to the Participant in the future, subject to the fulfillment during the Restricted Period of such conditions, including performance objectives or, as described in Section 6(d)(i), performance goals, if any, as the Committee may specify at the date of grant. During the Restricted Period, the Participant shall not have any right to transfer any rights under the subject Award, shall not have any rights of ownership in the Deferred Shares and shall not have any right to vote such shares. (ii) Dividends. Any Deferred Share award may provide that any or all dividends or other distributions paid on Shares during the Restricted Period be credited in a cash bookkeeping account (without interest) or that equivalent additional Deferred Shares be awarded, which account or shares may be subject to the same restrictions as the underlying Award or such other restrictions as the Committee may determine. (g) Other Stock-Based and Cash Awards (i) Other Stock Based Awards. The Committee is hereby authorized to grant to eligible Employees an "Other Stock-Based Award," which shall consist of a right (i) which is not an Award or right described in Section 6(a), (b), (c), (d), (e) or (f) above and (ii) which is denominated or payable in, valued in whole or in part by reference to, or otherwise based on or related to, Shares (including, without limitation, securities convertible into Shares) as are deemed by the Committee to be consistent with the purposes of the Plan; provided, that any such rights must comply, to the extent deemed desirable by the Committee, with Rule 16b-3 and applicable law. Subject to the terms of the Plan and any applicable Award Agreement, the Committee shall determine the terms and conditions of any such Other Stock-Based Award. (ii) Cash Awards. Subject to the provisions of the Plan, the Committee shall have authority to determine the Employees to whom Cash Awards shall be granted, the amount, and the terms or conditions, if any, as additional compensation for the Employee's services to the Company or its Affiliates. A Cash Award may be granted (simultaneously or subsequently) in tandem with another Award and may entitle a Participant to receive a specified amount of cash from the Company upon such other Award becoming taxable to the Participant, which cash amount may be based on a formula relating to the anticipated taxable income associated with such other Award and the payment of the Cash Award or other terms determined by the Committee. (h) Awards to Non-employee Directors (i) Initial Granting of Options. Subject to stockholder approval of the Plan pursuant to Section 10, and to the limitation of the number of shares of Stock set forth in Section 4(a), each non-employee Director who serves in such capacity on the date of the approval of the Plan by the Board (the "Current non-employee Directors") shall receive, as of such date and without the exercise of the discretion of any person or persons, a Non-Qualified Stock Option exercisable for 5,000 shares of Stock. Subject to stockholder approval of the Plan pursuant to Section 10, and to the limitation of the number of shares of Stock set forth in Section 4(a), each non-employee Director who is elected or appointed to the Board for the first time after the effective date of the 7 8 Plan (excluding the Current non-employee Directors) shall receive, as of the date of his or her election or appointment and without the exercise of the discretion of any person or persons, a Non-Qualified Stock Option exercisable for 5,000 shares of Stock (subject to adjustment in the same manner as provided in Section 7 hereof with respect to shares of Stock subject to Options then outstanding). Any nominee non-employee Director may make an irrevocable election in advance of election not to receive an option pursuant to this Section 6(h)(i). (ii) Annual Granting of Options. Subject to stockholder approval of the Plan pursuant to Section 10, and to the limitation of the number of shares of Stock set forth in Section 4(a), as of the date of the annual meeting of the stockholders of the Company in each year that the Plan is in effect as provided in Section 11 hereof (commencing with the 1995 annual meeting of stockholders), each non-employee Director who is in office immediately after such meeting and who is not then entitled to receive an Option pursuant to the preceding provisions of this Section 6(h) shall receive, without the exercise of the discretion of any person or persons, a Non-Qualified Stock Option exercisable for 3,000 shares of Stock (subject to adjustment in the same manner as provided in Section 7 hereof with respect to shares of Stock subject to Options then outstanding). Any non-employee Director may make an irrevocable election in advance not to receive an option pursuant to this Section 6(h)(ii). (iii) Other Terms and Conditions. The following provisions are applicable to Options granted pursuant to Sections 6(h)(i) and (ii): A. Options shall be exercisable on the day following the date of grant. B. The purchase price of a Share covered under an Option granted under this Section 6(h) shall be the Fair Market Value of a Share on the date of grant. C. The Option may be exercised in full at one time or in part from time to time by giving written notice, signed by the optionee exercising the Option, to the Company, stating the number of Shares with respect to which the Option is being exercised, accompanied by payment in full for such Shares, which payment may be in whole or in part in Shares of the Company already owned by said optionee, valued at Fair Market Value; provided, however, that (i) no Option shall be exercisable after ten (10) years from the date on which it was granted, and (ii) there shall be no such exercise at any one time for fewer than one hundred (100) Shares or for all of the remaining Shares then purchasable by the optionee exercising the Option, if fewer than one hundred (100) Shares. D. Each Option shall expire ten (10) years from the date of grant thereof, but shall be subject to earlier termination as follows. Options, to the extent exercisable as of the date a non-employee Director optionee ceases to serve as a director of the Company, must be exercised within six months of such date unless such event results from death, Disability or Retirement, in which case Options may be exercised by the optionee, the optionee's legal representative, heir or devisee, as the case may be, within two (2) years from the date of death or Disability and within three (3) years from the date of Retirement; provided, however, that no such event shall extend the normal expiration date of such Options. E. Upon exercise of the Option, subject to paragraph F below, delivery of a certificate for fully paid and nonassessable Shares shall be made either at the corporate office of the Company in Houston, Texas to the optionee exercising the Option at such time during ordinary business hours after fifteen (15) days but not more than thirty (30) days from the date of receipt of the notice by the Company as shall be designated in such notice, or at such time, place and manner as may be agreed upon by the Company and the optionee exercising the Option. F. Until the earlier to occur of the following events (i) the non-employee Director no longer serves as a Director of the Company for any reason, (ii) a Change in Control, (iii) the approval by the Company's stockholders of a merger or consolidation or (iv) a tender offer for the Common Stock of the Company ("Termination of Restriction"), the Shares received by the non-employee Director upon the exercise of an Option granted pursuant to Section 6(h)(i) and (ii) shall not be subject to disposition by the non-employee Director, by sale, transfer, alienation, anticipation, pledge, encumbrance, assignment or any other means whether such disposition be voluntary or involuntary or by operation of law by judgment, 8 9 levy, attachment, garnishment or any other legal or equitable proceeds (including bankruptcy), and any attempted disposition thereof, shall be null and void and of no effect; provided, however, that nothing in this Section 6(h)(iii)F shall prevent transfer by will, the applicable laws of descent and distribution or pursuant to a qualified domestic relations order. The certificates evidencing the Shares may bear a legend restricting or incorporating the restrictions, and the Company may cause the certificates to be delivered upon issuance to the Secretary of the Company or such other depositary as may be designated by the Company as a depositary for safe-keeping until Termination of Restriction. Upon Termination of Restriction, the Company will cause a new certificate or certificates to be issued without legend in the name of such former director. (iv) Notwithstanding anything in the Plan to the contrary, a non-employee Director shall be ineligible to receive a grant provided for in Section 6(h) if as of the date of such grant the Director (i) is an employee of the Company or any Affiliate or (ii) has been an employee of the Company or any Affiliate for any part of the calendar year preceding the calendar year in which such a grant is to be made. (v) In the event that the number of Shares available for grants under the Plan is insufficient to make all grants provided for in this Section 6(h) hereby made on the applicable date, then all non-employee Directors who are entitled to a grant on such date shall share ratably in the number of Shares then available for grant under the Plan, and shall have no right to receive a grant with respect to the deficiencies in the number of available Shares and the grants under this Section 6(h) shall terminate. (vi) Except as expressly provided in this Section 6(h) grants made pursuant to this Section 6(h) shall be subject to the terms and conditions of the Plan; however, if there is a conflict between the terms and conditions of the Plan and this Section 6(h) then the terms and conditions of this Section 6(h) shall control. The Committee may not exercise any discretion with respect to this Section 6(h) which would be inconsistent with the intent expressed in Section 6(h)(vii). (vii) It is intended that the Plan meet the requirements of Rule 16b-3 and that any non-employee Director who is eligible to receive a grant or to whom a grant is made pursuant to this Section 6 will not for such reason cease to be a "disinterested person" within the meaning of Rule 16b-3 with respect to the Plan and other stock related plans of the Company. (viii) All Options under this Section 6(h) shall be evidenced by Award Agreements. (i) General (i) Awards May Be Granted Separately or Together. Awards may, in the discretion of the Committee, be granted either alone or in addition to, in tandem with, or in substitution for any other Award granted under the Plan or any award granted under any other plan of the Company or any Affiliate. Awards granted in addition to or in tandem with other Awards or awards granted under any other plan of the Company or any Affiliate may be granted either at the same time as or at a different time from the grant of such other Awards or awards. (ii) Forms of Payment by Company Under Awards. Subject to the terms of the Plan and of any applicable Award Agreement, payments or transfers to be made by the Company or an Affiliate upon the grant, exercise or payment of an Award may be made in such form or forms as the Committee shall determine, including, without limitation, cash, Shares, other securities, other Awards or other property, or any combination thereof, and may be made in a single payment or transfer, in installments, or on a deferred basis, in each case in accordance with rules and procedures established by the Committee. Such rules and procedures may include, without limitation, provisions for the payment or crediting of reasonable interest on installment or deferred payments. (iii) Limits on Transfer of Awards (A) Each Award, and each right under any Award, shall be exercisable only by the Participant during the Participant's lifetime, or, if permissible under applicable law, by the Participant's guardian or 9 10 legal representative or by a transferee receiving such Award pursuant to a qualified domestic relations order (a "QDRO") as determined by the Committee. (B) No Award and no right under any such Award may be assigned, alienated, pledged, attached, sold or otherwise transferred or encumbered by a Participant otherwise than by will or by the laws of descent and distribution (or, in the case of Restricted Stock, to the Company) or pursuant to a QDRO and any such purported assignment, alienation, pledge, attachment, sale, transfer or encumbrance shall be void and unenforceable against the Company or any Affiliate. (C) To the extent approved by the Committee and in compliance with Rule 16b-3 and the Securities Act of 1933, as amended, a Non-Qualified Stock Option may be transferred to immediate family members. (iv) Term of Awards. The term of each Award (other than pursuant to Section 6(h)) shall be for such period as may be determined by the Committee; provided, that in no event shall the term of any Incentive Stock Option Award exceed a period of ten years from the date of its grant. (v) Share Certificates. All certificates for Shares or other securities of the Company or any Affiliate delivered under the Plan pursuant to any Award or the exercise thereof shall be subject to such stop transfer orders and other restrictions as the Committee may deem advisable under the Plan or the rules, regulations, and other requirements of the SEC, any stock exchange upon which such Shares or other securities are then listed, and any applicable Federal or state laws, and the Committee may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions. (vi) Consideration for Grants. Awards may be granted for no cash consideration or for such consideration as the Committee determines including, without limitation, such minimal cash consideration as may be required by applicable law. (vii) Delivery of Shares or other Securities and Payment by Participant of Consideration. No Shares or other securities shall be delivered pursuant to any Award until payment in full of any amount required to be paid pursuant to the Plan or the applicable Award Agreement is received by the Company. Such payment may be made by such method or methods and in such form or forms as the Committee shall determine, including, without limitation, cash, Shares, other securities, other Awards or other property, withholding of Shares, cashless exercise with simultaneous sale, or any combination thereof; provided, that the combined value, as determined by the Committee, of all cash and cash equivalents and the Fair Market Value of any such Shares or other property so tendered to the Company, as of the date of such tender, is at least equal to the full amount required to be paid pursuant to the Plan or the applicable Award Agreement to the Company. SECTION 7. AMENDMENT AND TERMINATION Except to the extent prohibited by applicable law and unless otherwise expressly provided in an Award Agreement or in the Plan: (a) Amendments to the Plan The Board may amend, alter, suspend, discontinue, or terminate the Plan without the consent of any shareholder, Participant, other holder or beneficiary of an Award, or other Person; provided, however, that the provisions of Section 6(h) may not be amended more than once every six months other than to comport with changes in the Code, the Employee Retirement Income Security Act of 1974, as amended, or the rules thereunder and; provided, further, that notwithstanding any other provision of the Plan or any Award Agreement, without the approval of the stockholders of the Company no such amendment, alteration, suspension, discontinuation, or termination shall be made that would: (i) increase the total number of Shares available for Awards under the Plan, except as provided in Section 4(c) of the Plan; 10 11 (ii) permit Incentive Stock Options to be granted with per Share grant, exercise or purchase prices of less than the Fair Market Value of a Share on the date of grant thereof; or (iii) result in this Plan no longer satisfying the requirements of Rule 16b-3. (b) Amendments to Awards The Committee may waive any conditions or rights under, amend any terms of, or alter any Award theretofore granted (other than Awards granted pursuant to Section 6(h)), provided no change in any Award, other than pursuant to Section 7(c), shall reduce the benefit to Participant without the consent of such Participant. Notwithstanding the foregoing, with respect to any Award intended to qualify as performance-based compensation under Section 162(m) of the Code, no adjustment shall be authorized to the extent such adjustment would cause the Award to fail to so qualify. (c) Adjustment of Awards Upon the Occurrence of Certain Unusual or Nonrecurring Events The Committee is hereby authorized to make adjustments in the terms and conditions of, and the criteria included in, Awards in recognition of unusual or nonrecurring events (including, without limitation, the events described in Section 4(c) of the Plan) affecting the Company, any Affiliate, or the financial statements of the Company or any Affiliate, or of changes in applicable laws, regulations, or accounting principles, whenever the Committee determines that such adjustments are appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan. Notwithstanding the foregoing, with respect to any Award intended to qualify as performance-based compensation under Section 162(m) of the Code, no adjustment shall be authorized to the extent such adjustment would cause the Award to fail to so qualify. SECTION 8. CHANGE IN CONTROL (a) In addition to the Committee's authority set forth in Section 7(c) of the Plan, in order to maintain the Participants' rights in the event of any Change in Control, as hereinafter defined, the Committee, as constituted before such Change in Control, is hereby authorized and directed to provide for the acceleration of any time periods relating to the exercise or realization of all Awards so that such Award may be exercised or realized in full, and has sole discretion, as to any Award, either at the time such Award is made hereunder or any time thereafter, to take any one or more of the following actions: (i) provide for the purchase of any such Award, either automatically or upon the Participant's request, for an amount of cash equal to the amount that could have been attained upon the exercise of such Award or realization of the Participant's rights had such Award been currently exercisable or payable; (ii) make such adjustment to any such Award then outstanding as the Committee deems appropriate to reflect such Change in Control; or (iii) if equitable and in the best interests of the Company and its stockholders, cause (x) any such Award then outstanding to be assumed, or new rights substituted therefor, by the acquiring or surviving corporation after such Change in Control or (y) the exercise period for any such Award then outstanding to terminate on a fixed date following such Change in Control provided the Participant receives written notice of such event and the fixed date at least twenty days prior to the effective date of such Change in Control. The Committee may, in its discretion, include such further provisions and limitations in any Award Agreement as it may deem equitable and in the best interests of the Company and its stockholders. (b) A "Change in Control" shall be deemed to occur (i) if any person or persons or entity or entities (other than Petroleum Associates, L.P., KKR Partners II, L.P. and any entity controlling, controlled by or under common control with any such entities, separately or in the aggregate ("KKR")) acquires 75% or more of the assets of the Company or a successor of the Company or such successor's parent corporation (based upon the then current fair market value thereof) or 50% or more of the Company's then outstanding voting stock or a successor's or such successor's parent corporation's then outstanding voting securities, and, if there shall be more than one class of voting securities thereof, then of the combined voting power held by all classes of voting securities of the Company, a successor corporation or its parent corporation (whether such acquisition of stock or assets occurs pursuant to a single transaction or several related transactions or series of 11 12 transactions), (ii) upon the approval by the Company's stockholders of a plan of liquidation or dissolution of the Company or a successor of the Company or such successor's parent corporation, or (iii) upon the approval by the Company's stockholders of a merger or consolidation and such transaction was determined to be a Change in Control, which transaction and determination was approved by a majority of the Company's Board of Directors in actions taken prior to, and with respect to such transaction. SECTION 9. GENERAL PROVISIONS (a) No Rights to Awards No Employee, Participant or other Person shall have any claim to be granted any Award, and there is no obligation for uniformity of treatment of Employees, Participants, or holders or beneficiaries of Awards. The terms and conditions of Awards need not be the same with respect to each recipient. (b) Delegation Subject to the terms of the Plan and applicable law, the Committee may delegate to one or more officers or managers of the Company or any Affiliate, or to a committee of such officers or managers, the authority, subject to such terms and limitations as the Committee shall determine, to grant Awards to, or to cancel, modify or waive rights with respect to, or to alter, discontinue, suspend, or terminate Awards held by, Employees who are not officers or directors of the Company for purposes of Section 16 of the Exchange Act, or any successor Section thereto, or who are otherwise not subject to such Section. (c) Withholding The Company or any Affiliate is hereby authorized to withhold from any Award, from any payment due or transfer made under any Award or under the Plan or from any compensation or other amount owing to a Participant the amount (in cash, Shares, other securities, Shares that would otherwise be issued pursuant to such Award (including automatic withholding), other Awards or other property) of any applicable taxes payable in respect of an Award, its exercise, the lapse of restrictions thereon, or any payment or transfer under an Award or under the Plan and to take such other action as may be necessary in the opinion of the Company to satisfy all obligations for the payment of such taxes. (d) No Limit on Other Compensation Arrangements Nothing contained in the Plan shall prevent the Company or any Affiliate from adopting or continuing in effect other compensation arrangements (subject to shareholder approval of such other arrangement, if such approval is required), and such arrangements may be either generally applicable or applicable only in specific cases. (e) No Right to Employment The grant of an Award shall not be construed as giving a Participant the right to be retained in the employ of the Company or any Affiliate. Further, the Company or an Affiliate may at any time dismiss a Participant from employment, free from any liability or any claim under the Plan, unless otherwise expressly provided in the Plan or in any Award Agreement. (f) Governing Law The validity, construction, and effect of the Plan and any rules and regulations relating to the Plan shall be determined in accordance with the laws of the State of Delaware and applicable Federal law. (g) Severability If any provision of the Plan or any Award is or becomes or is deemed to be invalid, illegal, or unenforceable in any jurisdiction or as to any Person or Award, or would disqualify the Plan or any Award under any law deemed applicable by the Committee, such provision shall be construed or deemed amended to 12 13 conform to the applicable laws, or if it cannot be construed or deemed amended without, in the determination of the Committee, materially altering the intent of the Plan or the Award, such provision shall be stricken as to such jurisdiction, Person or Award and the remainder of the Plan and any such Award shall remain in full force and effect. (h) Other Laws The Committee may refuse to issue or transfer any Shares or other consideration under an Award if, acting in its sole discretion, it determines that the issuance of transfer or such Shares or such other consideration might violate any applicable law or regulation or entitle the Company to recover the same under Section 16(b) of the Exchange Act, and any payment tendered to the Company by a Participant, other holder or beneficiary in connection with the exercise of such Award shall be promptly refunded to the relevant Participant, holder or beneficiary. It is intended that the Plan and any grant of an Award made to a person subject to Section 16 of the Exchange Act meet all of the requirements of Rule 16b-3. If any provision of the Plan or any such Award would disqualify the Plan or such Award under, or would otherwise not comply with, Rule 16b-3, such provision or Award shall be construed or deemed amended to conform to Rule 16b-3. (i) No Trust or Fund Created Neither the Plan nor any Award shall create or be construed to create a trust or separate fund of any kind or a fiduciary relationship between the Company or any Affiliate and a Participant or any other Person. To the extent that any Person acquires a right to receive payments from the Company or any Affiliate pursuant to an Award, such right shall be no greater than the right of any unsecured general creditor of the Company or any Affiliate. (j) No Fractional Shares No fractional Shares shall be issued or delivered pursuant to the Plan or any Award, and the Committee shall determine whether cash, other securities, or other property shall be paid or transferred in lieu of any fractional Shares or whether such fractional Shares or any rights thereto shall be cancelled, terminated, or otherwise eliminated. (k) Headings Headings are given to the Sections and subsections of the Plan solely as a convenience to facilitate reference. Such headings shall not be deemed in any way material or relevant to the construction or interpretation of the Plan or any provision thereof. SECTION 10. EFFECTIVE DATE OF THE PLAN The Plan shall be effective as of November 28, 1994, provided the Plan is subsequently approved by the stockholders of the Company within 12 months thereafter. SECTION 11. TERM OF THE PLAN No Award shall be granted under the Plan after November 27, 2004. However, unless otherwise expressly provided in the Plan or in an applicable Award Agreement, any Award theretofore granted may, and the authority of the Board or the Committee to amend, alter, adjust, suspend, discontinue, or terminate any such Award or to waive any conditions or rights under any such Award shall, extend beyond such date. 13 EX-10.13 14 FIRST AMEND. TO 1992 STOCK OPTION PLAN 1 EXHIBIT 10.13 FIRST AMENDMENT TO UNION TEXAS PETROLEUM HOLDINGS, INC. 1992 STOCK OPTION PLAN WHEREAS, UNION TEXAS PETROLEUM HOLDINGS, INC. (the "Company") has heretofore adopted the UNION TEXAS PETROLEUM HOLDINGS, INC. 1992 STOCK OPTION PLAN (the "Plan"); and WHEREAS, the Company desires to amend the Plan in certain respects; NOW, THEREFORE, the Plan shall be amended, subject to stockholder approval, as follows, effective as of January 26, 1995: 1. Subparagraph (c) of Paragraph X of the Plan shall be deleted and the following shall be substituted therefor: "In the event that the Committee determines that any dividend or other distribution (whether in the form of cash, Stock, other securities, or other property), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase, or exchange of Stock or other securities of the Company, issuance of warrants or other rights to purchase Stock or other securities of the Company, or other similar corporate transaction or event affects the Stock such that an adjustment is determined by the Committee to be appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan, then the Committee shall, in such manner as it may deem equitable, adjust any or all of (i) the number and type of shares of Stock (or other securities or property) with respect to which Options may be granted, (ii) the number and type of shares of Stock subject to outstanding Options, and (iii) the grant or exercise price with respect to any Option or, if deemed appropriate, make provision for a cash payment to the holder of an outstanding Option; provided, in each case, that with respect to Incentive Stock Options and Options intended to qualify as performance based compensation under Section 162(m)(4)(C) of the Code, no such adjustment shall be authorized to the extent that such authority would cause the Plan to violate Section 422(b)(1) of the Code or would cause such Option to fail to so qualify under Section 162(m) of the Code, as the case may be, or any successor provisions thereto; and provided, further, that the number of shares of Stock subject to any Option shall always be a whole number. In addition to the Committee's authority set forth in Paragraph X(b) and (c) of the Plan, in order to maintain the Optionees' rights in the event of any Change in Control, as hereinafter defined, the Committee, as constituted before such Change in Control, is hereby authorized and directed to provide for the acceleration of any time periods relating to the exercise or realization of all Options so that such Option may be exercised or realized in full, and has sole discretion, as to any Option, either at the time such Option is made hereunder or any time thereafter, to take any one or more of the following actions: (i) provide for the purchase of any such Option, either automatically or upon the Optionee's request, for an amount of cash equal to the amount that could have been attained upon the exercise of such Option or realization of the Optionee's rights had such Option been currently exercisable or payable; (ii) make such adjustment to any such Option then outstanding as the Committee deems appropriate to reflect such Change in Control; or (iii) if equitable and in the best interests of the Company and its shareholders, cause any such Option then outstanding to be assumed, or new rights substituted therefor, by the acquiring or surviving corporation after such Change in Control. The Committee may, in its discretion, include such further provisions and limitations in any Option Agreement as it may deem equitable and in the best interests of the Company. A "Change in Control" shall be deemed to occur (1) if any person or persons or entity or entities (other than Petroleum Associates, L.P., KKR Partners II, L.P. and any entity controlling, controlled by or under common control with any such entities, separately or in the aggregate ("KKR")) acquires 75% or more of the assets of the Company or a successor of the Company or such successor's parent corporation (based upon the then current fair market value thereof) or 50% or more of the Company's then outstanding voting stock or a successor's or such successor's parent corporation's then outstanding voting 1 2 securities, and, if there shall be more than one class of voting securities thereof, then of the combined voting power held by all classes of voting securities of the Company, a successor corporation or its parent corporation (whether such acquisition of stock or assets occurs pursuant to a single transaction or several related transactions or series of transactions), (2) upon the approval by the Company's stockholders of a plan of liquidation or dissolution of the Company or a successor of the Company or such successor's parent corporation, or (3) upon the approval by the Company's stockholders of a merger or consolidation and such transaction was determined to be a Change in Control, which transaction and determination was approved by a majority of the Company's Board of Directors in actions taken prior to, and with respect to such transaction." 2. As amended hereby, the Plan is specifically ratified and reaffirmed. 2 EX-10.14 15 SALE AND PURCHASE AGMT. DATED 05/31/95 1 EXHIBIT 10.14 SALE AND PURCHASE AGREEMENT THIS AGREEMENT is made the 31st day of May, 1995. BETWEEN: 1. UNION TEXAS PETROLEUM LIMITED, a company incorporated in England whose registered number is 708552 and whose registered office is 5th Floor, Bowater House, 68-114 Knightsbridge, London SW1X 7LR ("Buyer"); 2. ORYX U.K. ENERGY COMPANY, a corporation organized and existing under the laws of the State of Delaware whose principal place of business is Charter Place, Vine Street, Uxbridge, Middlesex, England UB8 1EZ, ("Seller"). WHEREAS: The Seller wishes to sell and Buyer wishes to purchase Seller's undivided interest under U.K. Continental Shelf Licence P213 encompassing Area A of Block 16/26 (containing Alba Field) and Area C of Block 16/26, all under the terms of this Agreement. NOW THEREFORE IT IS HEREBY AGREED as follows: 1. DEFINITIONS 1.1 In this Agreement, including its recitals and schedules, the following expressions shall, except where expressly stated otherwise, have the following respective meanings: "ACCRUALS BASIS" means that basis of accounting under which costs and benefits are regarded as applicable to the period in which the liability for the cost is incurred or the rights to the benefits arise regardless of when invoiced, paid or received; "AFFILIATE" means in relation to any Party, any company or other entity which controls or is controlled by that Party or is controlled by a company or other entity which controls that Party. "Control" means the right to exercise, directly or indirectly, more than 50% of the voting rights of a company or other entity; "ASSET" means Seller's undivided interest in and under the Licence and the Seller's 15.5% interest in and under the Joint Operating Agreement and, in particular, the Seller's 15.5% interest in Block 16/26 Area A and Block -1- 2 16/26 Area C, (including, without limitation, all equipment, materials, Production Facilities and associated records and data and the burden of all corresponding obligations and liabilities), attaching to such interests, including the corresponding rights and interests in and under the Asset Documents; "ASSET DOCUMENTS" means all the agreements relating to the Asset as listed in Schedule 1; "BLOCK 16/26 AREA A" means that area defined in the Joint Operating Agreement as Area A of Block 16/26 (including, without limitation, the Alba Field, as defined in the Joint Operating Agreement and as may be defined by the Secretary of State from time to time); "BLOCK 16/26 AREA C" means that area defined in the Joint Operating Agreement as Area C of Block 16/26; "BUSINESS DAY" means a day other than Saturday or Sunday on which banks are or, as the context may require, were generally open for business in the City of London and New York City; "COMPLETION" means the completion of the sale and purchase of the Asset as provided for in Clause 6; "COMPLETION DATE" means the date on which Completion actually occurs; "CO-VENTURERS" means the persons (and their respective successors and assigns) other than Seller having undivided interests in the Licence and in all agreements, instruments and documents related to the Licence, including for the avoidance of doubt the Joint Operating Agreement; "DATA" means all accounts, books and data relating to the Asset including, without prejudice to the generality of the foregoing, contracts, correspondence, information, data and reports (including petroleum engineering, reservoir engineering, drilling, geological, geophysical and all other kinds of technical data and reports, samples, well-logs and analyses in whatever form the same are maintained) together with (i) traded data other than the Traded Data; and (ii) so far as practical, meaningful extracts relating to the Asset of the accounts, books and data in the possession of the Seller, which relate partly to the Asset, but excluding information and data consisting of analysis prepared by -2- 3 Seller for its own internal corporate decision making and/or review process; "DATA ROOM DOCUMENTS" means the documents relating to the Asset and made available for the Buyer's inspection in the data rooms located at Seller's offices together with such other documents as Seller may have provided to the Buyer prior to the date hereof, all as set out in Schedule 6 hereto; "EFFECTIVE DATE" means 00:01 hours GMT on 1st July, 1995; "ENCUMBRANCE" means any mortgage, charge (whether fixed or floating), pledge, lien, equity or encumbrance; "FURTHER DOCUMENTS" means the Working Interest Assignment and the other documents listed on Schedule 7 in a form reasonably satisfactory to Buyer and in accordance with this Agreement, to be executed in accordance with Clause 6.1.3 and 6.1.4, subject to such amendments required by the Secretary of State and in respect of documents set out in part 2 of Schedule 7 any reasonable amendments required by the Co-Venturers, together with such other documents as are required to effect Completion; "DTI" means the Department of Trade and Industry; "INTERIM PERIOD" means the period of time commencing on the Effective Date and extending up to and including the Completion Date; "JOINT OPERATING AGREEMENT" means the Joint Operating Agreement dated 10 October 1990 as amended and restated; "LIBOR" for any period means the rate per annum quoted by National Westminster Bank plc, 53 Threadneedle Street, London EL2P 2JN for one (1) month deposits and in amounts of at least U.S. one (1) million dollars ($1,000,000) to leading banks in the London Interbank market at or about 11:00 a.m. (GMT) on Monday of each succeeding one (1) week term for the relevant period; "LICENCE" means the United Kingdom Petroleum Production Licence P. 213 granted under the provisions of the Petroleum (Production) Act 1934, as applied by the Continental Shelf Act 1964 and any extensions, amendments, variations or renewals of, or substitutions in respect of the whole or any part of, such licence in effect at the date hereof or hereafter; -3- 4 "OPERATOR" shall mean the Operator, as such term is defined in the Joint Operating Agreement; "PARTY" means any party to this Agreement; "PETROLEUM" has the meaning assigned to it under the Licence; "PRODUCTION FACILITIES" means the Alba Field platform and floating storage unit as described on schedule 5, and any other associated facilities, assets and systems related thereto; "REFERENCE INTEREST RATE" means LIBOR for the period in question for the sum due but unpaid on such date for the period in question plus one (1) percentage point; "SECRETARY OF STATE" means Her Majesty's Secretary of State for Trade and Industry; "SUBSIDIARY" has the meaning assigned to it by Section 736 of the Companies Act 1985; "TRADED DATA" means, with respect to the Asset, data which relates to an area unrelated thereto and which has been acquired by trade, purchase or otherwise by or on behalf of the Seller as a party to the Joint Operating Agreement from a third party or parties where such data cannot be provided to the Buyer because such transfer is prohibited by the Agreement under which it was acquired; "WORKING INTEREST ASSIGNMENT" means the assignment of the Asset in a form reasonably satisfactory to Buyer and in accordance with this Agreement. 1.2 All references to clauses, recitals and schedules are, unless otherwise expressly stated, references to clauses of, and recitals and schedules to, this Agreement. 1.3 The headings in this Agreement are inserted for convenience only and shall be ignored in construing this Agreement. 1.4 Any reference to any statute or statutory instrument in this Agreement shall be a reference to the same as amended, supplemented or re-enacted from time to time. -4- 5 1.5 Unless the context otherwise requires, reference to the singular shall include a reference to the plural and vice- versa; and reference to any gender shall include a reference to all other genders. 1.6 The schedules attached hereto form part of this Agreement. In the event of any conflict between the provisions of this Agreement and the schedules hereto, the provisions of this Agreement shall prevail. 1.7 Documents "in the Agreed Terms" shall mean documents in the form agreed between the Parties and initialled by the Parties for identification. 2. TRANSFER OF THE ASSET 2.1 Subject as provided in Clause 3, the Seller as legal and beneficial owner of the Asset hereby agrees for the consideration provided for herein to transfer to the Buyer at Completion and the Buyer hereby agrees to accept at Completion the Asset free from all Encumbrances, rights of pre-emption, royalty interests, production payments, carried interests, deferred obligations or any other third party rights or security interests whatsoever (except as specified in the Licence or in the Joint Operating Agreement). 2.2 On Completion, the transfer referred to in Clause 2.1 above shall, as between the Parties, be deemed for all purposes to be made with effect from the Effective Date. 3. CONDITIONS OF COMPLETION 3.1 Completion is conditioned on: 3.1.1 the receipt of all necessary written consents and approvals of the Secretary of State; 3.1.2 the receipt of any necessary written consents and approvals of each of the Co-Venturers; 3.1.3 the receipt of the confirmation by Buyer from each of the Co-Venturers that the Further Documents are in a form and content satisfactory to each of them and will be executed by each of them without further material amendment; 3.1.4 the Buyer having made the visit to the Production Facilities referred to in Clause 5.4 and having given no notice to Seller, within 48 hours from the return of its representatives to the U.K. -5- 6 mainland that, in its reasonable opinion, the Production Facilities have not been designed, fabricated, installed or managed in a good, workmanlike fashion, or are not in conformance with industry standards in the U.K. North Sea; 3.2 Completion is also conditioned on: 3.2.1 there not occurring before Completion (a) any casualty, losses or damages (including in either case, without limitation, curtailment or loss of production), (b) any mechanical failure or breakdown of equipment or (c) any event in relation to the Asset which gives or may give rise to environmental or pollution liability, and any of (a), (b) or (c), individually or in the aggregate, having or being reasonably expected to have an after-tax impact on Buyer of a monetary value exceeding U.S. $20,000,000; provided that if any of the same shall occur the Buyer shall have the option to terminate this Agreement and, subject to Clause 18.2 and 18.3, upon said termination no Party shall have any liability except for a breach of this Agreement committed before such termination. 3.3 Seller shall use all reasonable endeavours to procure, with prompt dispatch, the satisfaction of the conditions set out in Clause 3.1 and give the appropriate notices of transfer in the Agreed Terms to the Co-Venturers within five (5) Business Days of the execution of this Agreement and shall keep the Buyer informed of progress. 4. CONSIDERATION AND OTHER PAYMENTS 4.1 Consideration The consideration for the transfer of the Asset to the Buyer shall be Two Hundred Seventy Million ($270,000,000.00) U.S. dollars, exclusive of Value Added Tax ("VAT"). 4.2 Other Payments The Buyer shall pay to Seller, or Seller shall pay to the Buyer (as the case may be) such further sums as may be payable pursuant to Clauses 4.3, 4.4, 4.5, 8.3, 9.1, 10.8, 10.9, 11.1 and 11.2. Subject to Clause 4.4.4, any -6- 7 sums that may become payable pursuant to Clause 4.4 shall be an adjustment to the consideration and shall be added to or subtracted from the relevant balance of the asset allocation pursuant to Clause 8.1. 4.3 Working Capital 4.3.1 The Buyer shall pay to Seller or Seller shall pay to the Buyer (as the case may be) a sum to reflect the monetary value of the working capital attributable to the Asset as set forth in Schedule 4. The said sum shall be set out in a statement to be prepared and given by Seller to the Buyer within sixty (60) days after the Completion Date. Such statement shall be a statement of working capital and a statement of adjustments made pursuant to Schedule 4. 4.3.2 Working capital balances used for the purposes of the statement referred to in Clause 4.3.1 shall be taken from the individual accounts, statements and records as of June 30, 1995. A copy of the individual accounts, statements and records shall be provided by Seller to the Buyer with such statement. Verification (including the right of audit) of the aforesaid statement shall be carried out within sixty (60) days of receipt of such statement, and subject to the provisions of Clause 4.3.3, settlement of the sum detailed in the statement, as varied by any adjustment agreed between Seller and Buyer, shall be made within the said sixty (60) day period. 4.3.3 In the event that Seller and Buyer cannot agree upon any matter to which the statement referred to in Clause 4.3 relates, the undisputed amount shall be paid and the disputed amounts shall be referred for resolution to an independent chartered accountant appointed by Seller and Buyer or in the event of Seller and Buyer differing as to such appointment by the President for the time being of the Institute of Chartered Accountants of England and Wales. The accountant shall be afforded such access to books, records, accounts and documents in the possession of each of the Parties as he may reasonably request. For the purposes of this Agreement, the accountant so appointed shall be deemed to be acting as an expert and not as an arbitrator, and the decision of the accountant so appointed shall, in the absence of manifest error, be final and binding on Seller and Buyer and -7- 8 settlement of any outstanding amount shall be made within (5) Business Days of such decision. The costs of the accountant shall be borne equally by Seller and Buyer. 4.3.4 The Buyer shall pay to Seller or Seller shall pay to the Buyer (as the case may be) interest on such further sums as may be payable from the date such sums are due to be paid to the date the sums are actually paid (both dates inclusive) at a rate per annum equal to one (1) percentage point above the Reference Interest Rate calculated on a daily basis using simple interest. 4.4 Interim Period Adjustment 4.4.1 Buyer shall pay Seller the amount of all obligations and liabilities pertaining to the Asset and Licence paid by Seller in respect of the Interim Period. 4.4.2 Seller shall pay to the Buyer the amount of all receipts pertaining to the Asset and Licence received by Seller in respect of the Interim Period. 4.4.3 For the purposes of this Clause, obligations and liabilities will include, inter alia, cash calls for operating costs and receipts will include, inter alia, actual proceeds from the sale of Petroleum produced after the Effective Date. The Buyer will refund an amount equal to the Petroleum Revenue Tax ("PRT") and Corporation Tax ("CT") at the assumed rate of twenty-eight percent (28%) incurred by the Seller relating to the Asset for the period between the Effective Date and the Completion Date. For purposes of clarity, the PRT incurred by the Seller will be that amount of PRT actually paid or accrued by the Seller and CT incurred by the Seller will be a notional calculation based on the assumed rate of twenty-eight percent (28%) times receipts less revenue expenditures and PRT paid or accrued but with no capital allowances on any capital expenditure during the Interim Period. 4.4.4 If the Seller does not incur liability to PRT and CT relating to the Asset for the period between the Effective Date and the Completion Date, which situation shall arise if the Inland Revenue accepts the Effective Date as the date of transfer -8- 9 for tax purposes, then the sums repaid by the Buyer to the Seller and by the Seller to the Buyer pursuant to the foregoing provisions of this Clause 4.4 shall be deemed to have been incurred or received (as the case may be) directly by the Buyer as if the transfer of the Asset had taken place on the Effective Date for tax purposes. The Buyer may, at its own costs and expense with such assistance from the Seller as Buyer may reasonably request, seek to obtain the consent of the Inland Revenue to accept the Effective Date as the date of transfer for tax purposes and if such consent is obtained, the Seller agrees to file its PRT and CT returns accordingly and notwithstanding Clause 4.2 any sums that become payable pursuant to this Clause 4.4 shall not be an adjustment to the consideration. 4.4.5 The amounts set out above shall be set out in a statement to be prepared and given by Seller to the Buyer within sixty (60) days after Completion. Verification, including the right of audit of said statement, shall be carried out within sixty (60) days of receipt of such statement and subject to the provisions of Clause 4.4.6, settlement of the amounts detailed in the statement as varied by any adjustment agreed between Seller and Buyer shall be made within the said sixty (60) day period. 4.4.6 In the event that Seller and the Buyer cannot agree upon any matter to which the statement referred to in Clause 4.4.5 relates, the undisputed amounts shall be paid and the disputed amounts shall be referred for resolution to an independent chartered accountant appointed by Seller and Buyer or, in the event of Seller or Buyer differing as to such appointment, by the President for the time being of the Institute of Chartered Accountants of England and Wales. The accountant shall be afforded such access to books, records, accounts and documents in the possession of each of the Parties as he may reasonably request. For the purposes of this Agreement, the accountant so appointed shall be deemed to be acting as an expert and not as an arbitrator, and the decision of the accountant so appointed shall, in the absence of manifest error, be final and binding on Seller and the Buyer and settlement of -9- 10 any outstanding amount shall be made within five (5) business days of such decision. The costs of the accountant shall be borne equally by Seller and the Buyer. 4.5 INTEREST 4.5.1 In the event that Completion occurs after the Effective Date, the consideration shall be treated as having become due on the Effective Date and the Buyer shall pay to the Seller on the Completion Date, in addition to the consideration, interest on the consideration at a rate per annum equal to the Reference Interest Rate calculated on a daily basis using simple interest for the number of days elapsed between the Effective Date and the day immediately preceding the Completion Date (both dates inclusive). 4.5.2 Interest shall be paid on any payments due under Clause 4.4.1 and Clause 4.4.2 at a rate per annum equal to the Reference Interest Rate calculated on a daily basis using simple interest for the number of days elapsed between the time receipts are received and payments are made in accordance with Clause 4.4.1 and Clause 4.4.2. 4.6 Any and all amounts to be paid pursuant to this Agreement shall be paid in same day funds to the Seller's account as the Seller shall nominate in writing if owed to the Seller, or if owed to the Buyer in same day funds to such bank account as the Buyer shall nominate in writing. 5. CONDUCT OF OPERATIONS PRIOR TO THE COMPLETION DATE 5.1 Subject to any obligations of confidentiality by which Seller is bound, Seller shall in respect of the Asset from the date of this Agreement to Completion Date: 5.1.1 provide Buyer with copies of all notices and other information provided by or to Seller under the Joint Operating Agreement as the same become available; 5.1.2 provide to Buyer (and its authorized employees, agents and professional advisers) access to all such technical, legal and financial information in the possession of Seller which is or has been made available to Co-Venturers relating to the Asset as Buyer may from time to time reasonably require; -10- 11 5.1.3 not without prior written consent of Buyer (not to be unreasonably withheld) agree to amend the Licence, (or to execute a new joint operating Agreement in respect of the Licence) any of the Asset Documents or any other project documents; 5.1.4 keep the Buyer informed of and consult with the Buyer with regard to the marketing of Petroleum and on all material proposals affecting the Asset and, prior to any operating committee meeting or any material decision relating to the Asset, consult with the Buyer and (in each case) act or vote in accordance with the instructions of the Buyer provided that in the opinion of the Seller, exercised in good faith, the interests of the Seller are not thereby materially prejudiced; 5.1.5 continue to meet all expenditures, receive all income, perform all obligations relating to the Asset and generally conduct all business in relation to the Asset in a proper and workmanlike manner and exercise its voting power to ensure that the Asset is well maintained and fully safeguarded; 5.1.6 wherever practicable consult with Buyer and give due consideration to the view of Buyer before exercising its voting rights in connection with any matter or proposal to be voted upon by the operating committee established under the Joint Operating Agreement; and 5.1.7 not sell, charge, transfer, assign, encumber in any manner whatsoever the Asset or purport to seek to do any of the same. 5.2 Without prejudice to the foregoing, Seller shall (subject to any confidentiality obligations by which it is bound) ensure that pending Completion Buyer is kept fully informed of developments relating to the Asset including but not limited to: (a) the making of any cash calls; (b) the adoption or proposal of any budget; and (c) the receipt of any significant geological or other data. -11- 12 5.3. Nothing hereunder shall require Seller to consult or obtain the consent of Buyer in respect of actions taken by the Operator in cases of emergency under the Joint Operating Agreement. 5.4 Between the date of this Agreement and Completion Date, the Buyer shall have the right to visit the Production Facilities, either by itself or, if the Operator refuses consent for such visit, through Buyer's selected representatives with Seller. 6. COMPLETION 6.1 Completion shall, subject to the provisions of Clauses 3.2 and 18, take place as soon as possible (but in no event prior to July 1, 1995) within five (5) business days after the conditions in 3.1 have been satisfied at such location outside the territory of the U.K. and at such time as is mutually agreed by the Parties, when all of the following shall occur: 6.1.1 the Buyer shall pay to Seller by wire transfer in United States dollars the consideration set out in Clause 4.1 of this Agreement together with any sums payable in accordance with Clause 4.5.1; 6.1.2 Buyer shall deliver to Seller: a copy, certified as a true copy and in full force and effect by a director and the secretary or an assistant secretary of the Buyer of a resolution of the Board of Directors of the Buyer approving the acquisition of the Asset, on the terms of this Agreement, by the Buyer, and authorizing the execution on behalf of the Buyer of all the Further Documents and all other documents contemplated hereby; 6.1.3 Seller shall deliver to Buyer: (a) a copy, certified as a true copy and in full force and effect by a director and the secretary or an assistant secretary of the Seller, of a resolution of the Board of Directors of the Seller approving the disposal of the Asset, on the terms of this Agreement, by the Seller, and authorizing the execution by the Seller of the Further Documents and all other documents contemplated hereby; and -12- 13 (b) the Further Documents (other than the Working Interest Assignment) duly executed by the Seller and, as appropriate, by all of the Co-Venturers; and (c) signed originals of the Asset Documents or copies thereof. 6.1.4 The Parties shall execute the Working Interest Assignment and comply with its terms. 6.1.5 The Parties shall execute all such other documents and do all acts and things as may be reasonably required in order to effect the transfer of the Asset to the Buyer and otherwise carry out the true intent of this Agreement. 6.2 Seller will deliver to Buyer the Data and copies of the Data Room Documents and such other documentation relevant to the Asset as Buyer may reasonably request as soon as practicable after the Completion Date. 6.3 Without prejudice to the provisions of Clause 6.1.5 the Parties agree, notwithstanding Completion, to execute and deliver to each other all such additional instruments and to do all such further acts and things as may reasonably be required, or as may be reasonably requested by any Party, to fully vest in, and assure each Party of, all rights, powers and privileges intended to be granted to or conferred upon the Parties under or pursuant to this Agreement and to otherwise give effect to the transactions contemplated under this Agreement. 7. REPRESENTATIONS, WARRANTIES AND UNDERTAKINGS 7.1 Subject to the provisions of Clause 7.3, Seller hereby represents and warrants to Buyer in the terms set out in Schedule 2 and such representations and warranties shall be deemed to be repeated immediately prior to Completion on the basis that all references to "the date hereof" shall be deemed to refer to the Completion Date. 7.2 Buyer hereby represents and warrants to the Seller in the terms set out in Schedule 3 and such representations and warranties shall be deemed to be repeated immediately prior to Completion on the basis that all references to "the date hereof" shall be deemed to refer to the Completion Date. -13- 14 7.3 Except with regard to the warranties 1, 2, 3 and 21 in Schedule 2, the Buyer shall not be entitled to claim that any fact or matter constitutes a breach of the representations and warranties set out in Schedule 2 hereto to the extent that such fact or matter is fairly disclosed in the Data Room Documents relating to the Asset. 7.4 Seller shall ensure that the representations and warranties referred to in Clause 7.1 are true and accurate on the Completion Date but if notwithstanding such efforts any matter or thing occurs of which Seller is aware and which would be inconsistent with any of such representations and warranties on the Completion Date Seller shall promptly notify Buyer thereof. 7.5 In the event of any matter or thing materially inconsistent with any of the representations or warranties given by Seller in or pursuant to this Agreement being notified by Seller to Buyer prior to Completion (or Buyer otherwise becoming aware of such matter or thing) and such matter or thing continuing to be materially inconsistent at the date agreed for Completion, Buyer shall not be bound to complete the acquisition of the Asset and Buyer may by notice in writing to Seller prior to Completion rescind this Agreement. Such right of rescission shall be Buyer's only remedy, and there shall be no liability on the part of Buyer or Seller with respect to such matters or things whether or not this Agreement is rescinded. 7.6 The maximum aggregate liability of Buyer or Seller as the case may be, for all claims for breach of any representation or warranty under Clauses 7.1 or 7.2 arising after Completion shall in no event exceed the aggregate of the amount of consideration, interest (if any) paid thereon, and any amounts paid by Buyer pursuant to Clause 4.2. 7.7 If Buyer receives any claim or becomes aware of any fact which may result in Buyer having a claim against Seller under this Clause, Buyer shall promptly notify Seller thereof in writing and Seller shall be entitled to require Buyer to take any reasonable action it may request to resist such claim and Buyer will give Seller all co-operation, access and assistance for the purposes of considering such claim as they may reasonably require; provided always that Buyer is indemnified to its reasonable satisfaction by Seller against all claims, costs, expenses, damages or losses which may thereby be incurred. -14- 15 7.8 Where any statement in Schedule 2 is qualified by the expression "so far as Seller is aware" or any similar expression, that statement shall be deemed to include an additional statement that it has been made after due and careful enquiry. 7.9 The Seller acknowledges that the Buyer has entered into this Agreement in reliance upon the warranties and has been induced by the warranties to enter into this Agreement. 7.10 The benefit of the warranties may be assigned in whole or in part to any assignee of the Purchaser permitted in accordance with Clause 17. 7.11 No claim may be made by either Party for a breach of any representation or warranty made by Seller or Buyer, in the case of a claim relating to taxes following the seventh anniversary of the Completion Date and in the case of any other claim following the second anniversary of the Completion Date, and no liability shall attach to Seller or Buyer, as the case may be, in respect of any such claim until the aggregate amount of all such claims against Seller or Buyer, as the case may be, exceeds one million (1,000,000 pounds sterling) U.K. pounds sterling in which event Buyer or Seller, as the case may be, shall be liable for the whole of such amount and not merely the excess. 7.12 Any claim for breach of warranty under Schedule 2, including but not limited to lost production or loss of profits shall be limited in any recovery to the economic impact on Buyer based on Buyer's economic assumptions used to develop the consideration paid for the Asset. 8. TAXATION 8.1 Seller and Buyer acknowledge that: (a) the consideration represents expenditure incurred by Buyer in acquiring plant and machinery relating to the Asset to the extent of the amount of the Seller's gross expenditure incurred with respect to the Asset in acquiring plant and machinery less any relevant disposal proceeds up to but not including the Completion Date, and the remainder of the consideration relates to the balance of the Asset including the Licence. Seller covenants that it will treat the said allocated expenditures on plant and machinery as disposal proceeds for the purposes of Section 24(6) Capital Allowance Act 1990, and Buyer covenants that it will treat -15- 16 such amount as capital expenditure incurred for the purposes of the Capital Allowance Act 1990, and the Seller will provide details of such amount to the Buyer as soon as reasonably practicable after Completion. (b) subject to Clause 4.4.4 any sums that may become payable pursuant to Clause 4.4 and shall be added to or subtracted from the balance of the Asset; (c) no part of the consideration or other payments pursuant to Clause 4.2 whether or not attributed to the balance of the Asset, shall be treated as a reimbursement of expenditure which the Seller has incurred whether comprising intangible drilling expenditure or otherwise; and (d) they will each present their returns for tax purposes on the basis stated above and that they will use all reasonable endeavors to agree with the Oil Taxation Office the figures so presented. 8.2 The Seller shall prepare and the Seller and the Buyer shall deliver to the Board of Inland Revenue in a timely fashion a notice in accordance with paragraph 3 of Schedule 17 to the Finance Act 1980 and shall not make an application under paragraph 4 of the said Schedule for the provisions of Parts II and III of the said Schedule not to apply to the transfer of the Asset. 8.3 Buyer confirms that it is registered for VAT in the UK and that it intends to use the assets acquired for its own trade of exploration/exploitation. Seller and Buyer confirm that neither of them has elected to waive exemption under section 51 and paragraphs 2-4 Schedule 10 Value Added Tax Act 1994 in relation to the Asset and they each intend that the sale shall be treated as a transfer of part of the business of the Seller as a going concern within the terms of Section 49 of the Value Added Tax Act 1994 and of Article 5 Value Added Tax (Special Provisions) Order 1992, hereinafter referred to as "Article 5". In the event that Seller is advised in writing by H.M. Customs and Excise that the transaction is subject to VAT and if called upon to do so by Seller, Buyer agrees to pay to Seller, on presentation of a valid VAT invoice, any amounts due in respect of VAT relating to this transaction set out in such invoice and within thirty (30) days of demand. -16- 17 8.4 It is agreed that: (a) the Seller shall cooperate with any reasonable request by the Buyer who may, at its own cost and expense, send to HM Customs & Excise a letter seeking a ruling as to whether the sale of the Asset is to be treated as a transfer of part of the business of the Seller as a going concern and the Seller will assist the Buyer with all reasonable endeavours to obtain such a ruling as soon as reasonably practicable; (b) if the sale is to be so treated the Seller shall send to HM Customs & Excise a letter seeking confirmation that Seller be permitted to keep and preserve the records for the period prior to the date of Completion referred to in Section 49 of the Value Added Tax Act 1994 relating to the Asset and if such confirmation is not given, the Seller shall transfer to the Buyer all such records as relate to the Asset; (c) if HM Customs & Excise state in writing that the sale of the Asset does not fall within the provisions of Article 5 the Seller shall cooperate with any reasonable request by the Buyer who may, at its own cost and expense, seek a ruling from HM Customs & Excise that the sale is outside the scope of VAT being a supply of services in relation to land situated outside the UK and that no VAT will become due on this transaction; (d) if HM Customs & Excise state in writing that the sale of the Asset is taxable, the Seller shall cooperate with any reasonable request by the Buyer who may, at its own cost and expense, promptly take all steps to dispute such statement. In the event that it is subsequently held or decided that no VAT is payable in respect of the sale of the Asset and the Seller receives any repayment or credit in respect of an amount which had been paid by the Buyer as VAT to the Seller, the Seller shall promptly reimburse such amount to the Buyer; and (e) the Seller and Buyer shall copy each to the other all relevant correspondence between either of them and HM Customs and Excise. -17- 18 9. AUDIT CLAIMS 9.1 Notwithstanding any other provision of this Agreement, in the event that any audit in respect of any period prior to the Effective Date is made under the Joint Operating Agreement prior to the third anniversary of Completion or any request is made for an adjustment to any joint account relating to the Asset under the Joint Operating Agreement the Buyer shall, subject to it being reimbursed for all its reasonable expenses in so doing, give the Seller access to the results of such audit or request to the extent that they relate to periods prior to the Effective Date; and (a) to the extent that any payment in respect thereof is made by the Operator such payment shall be made to Seller and (b) to the extent that any payment is required to be made in respect thereof to the Operator, such payment shall be made by Seller to Buyer. 9.2 To the extent that the Seller shall have any information, records or data in respect of the Asset or the Asset Documents for periods prior to the Effective Date that it has not made available to the Buyer on or after Completion and/or to the extent that the Buyer shall request the assistance of the Seller in the interpretation and construction of the same and for any information, records or data that have been delivered to it by the Seller hereunder, the Seller shall, subject to it being reimbursed for all its reasonable expenses in so doing, make the same available to the Buyer promptly after receipt of said request. 10. INSURANCE 10.1 Neither Buyer nor Seller shall be obligated to arrange for insurance coverage on the Asset protecting the other party for any loss, damage, liability or expense for which such party may have responsibility under this Agreement, except as may be provided in Clauses 10.4, 10.5, 10.6 and 10.7 herein. Both Buyer and Seller shall be free to arrange such insurance coverage on the Asset protecting their respective interests as each may deem advisable for their own account and at their own expense and shall cooperate with each other to ensure, as far as practicable, that the insurance coverage held by either party is appropriately coordinated and does not conflict. 10.2 Upon execution of this Agreement, Seller shall furnish all such information as Buyer may reasonably request in order to enable Buyer to arrange for its own insurance coverage during and after the Interim Period, including -18- 19 information in respect of Seller's insurance coverage on the Asset. 10.3 Seller shall use reasonable efforts to ensure its policies providing insurance coverage on the Asset are endorsed such that the underwriters and/or insurers thereof shall have no right of contribution from the Buyer's insurance, and Buyer shall use reasonable efforts to ensure its policies providing insurance coverage on the Asset are endorsed such that the underwriters and/or insurers thereof shall have no right of contribution from the Seller's insurance. 10.4 During the Interim Period, Seller shall maintain or obtain or cause to be obtained in respect of the Asset all such insurance coverage as may be necessary to comply with applicable laws, rules and regulations and as may be required by any Asset Document. Buyer shall be named as an additional insured and loss payee on all such insurance wherever possible. 10.5 At the request of the Buyer, Seller shall, as soon as reasonably practicable following such request, have Buyer joined wherever possible on any insurance policy effected by the Seller in respect of the Asset, other than any business interruption insurance effected by the Seller, as an additional assured and loss payee during the Interim Period, in respect of Buyer's rights and interest under this Agreement. Seller shall provide certification or other documentation evidencing that the Buyer has been included as an additional insured and loss payee as soon as reasonably practicable. 10.6 In respect of the Gard Protection and Indemnity Entry on the Floating Storage Unit and the CRISTAL Entry on the shuttle tanker(s), Seller and Buyer shall endeavour as soon as reasonably practicable, at the request of Buyer, to have the Buyer protected thereunder. 10.7 In respect of any Operator arranged insurance in respect of the Asset, Seller and Buyer shall endeavor to have the Buyer protected thereunder. 10.8 In respect of the insurance coverage which may be afforded to the Buyer pursuant to the terms of Clauses 10.4, 10.5, 10.6, and 10.7, at the Completion Date or on the 10th Business Day after their receipt by Seller (whichever occurs later), Seller shall pay to Buyer the sum of any proceeds of such insurance coverage received against loss or damage suffered or liability or expense incurred in relation to the Asset during the Interim -19- 20 Period, less any amount which has been applied (or represents sums which have been applied) 10.8.1 in rectifying or remedying such loss or damage or meeting such liability or expense; and 10.8.2 in reimbursing Seller for expenditure incurred prior to the Effective Date for rectifying or remedying such loss or damage or meeting such liability of expense. Seller shall use reasonable endeavours to pursue (or assist and cooperate with Buyer to pursue, if Buyer is able to do so in its own name) any claim against insurers for loss or damage, liability or expense relating to the Asset suffered during the Interim Period. If the insurers dispute or resist any claim Seller shall promptly notify Buyer who shall be entitled to require Seller to pursue (or assist and cooperate with Buyer to pursue, if Buyer is able to do so in its own name) the claim provided that it shall indemnify Seller against any reasonable and verifiable costs and expenses Seller may thereby incur in pursuing such claim. 10.9 In respect of the insurance coverage which may be afforded to the Buyer pursuant to the terms of Clauses 10.4, 10.5, 10.6, and 10.7, Buyer shall pay to Seller the insurance premiums relative to such insurance during the Interim Period, at the time of the interim period adjustment as provided in Clause 4.4. Any premiums due to Seller hereunder shall not exceed reasonable commercial market rates. 11. INDEMNITY 11.1 Seller shall be liable for all costs, charges, expenses, liabilities and obligations in respect of the Asset which accrue or relate to any period before the Effective Date. Seller shall reimburse and indemnify Buyer against any such costs, charges, expenses, liabilities and obligations which are paid by Buyer and have not been reimbursed to Buyer pursuant to the other provisions of this Agreement, including Clauses 4.3 and 4.4. 11.2 Buyer shall be liable for all costs, charges, expenses, liabilities and obligations in respect of the Asset which accrue or relate to any period on and after the Effective Date. Buyer shall reimburse and indemnify Seller against any such costs, charges, expenses, liabilities and obligations which are paid by Seller and have not been reimbursed to Seller pursuant to the other provisions of -20- 21 this Agreement, including Clauses 4.3 and 4.4. Without prejudice to the generality of the foregoing Buyer shall indemnify and hold Seller harmless against any costs, charges, expenses, liabilities and obligations incurred in abandoning any field property (including but not limited to wells) or facilities acquired pursuant to this Agreement or held or brought into being with respect to the Asset to the extent that such costs, charges, expenses, liabilities and obligations are attributable to the Asset and accrue and relate to any period on or after the Effective Date. 11.3 Notwithstanding any other provision of this Agreement Seller shall not under any circumstances be liable to Buyer and Buyer shall not under any circumstances be liable to Seller under, arising out of or in any way connected with this Agreement or the Further Documents for any punitive loss or damages however imposed. 11.4 No claim may be made by either Party under Clause 11.1 or 11.2 by the Buyer or Seller as the case may be, until the aggregate amount of all such claims against Seller or Buyer, as the case may be, exceeds Fifty Thousand (pound sterling 50,000) U.K. pounds sterling, in which event Buyer or Seller, as the case may be, shall be liable for the whole of such amount and not merely the excess. 12. ANNOUNCEMENTS 12.1 Any Party shall be entitled to make a public announcement or statement regarding the Asset except that the prior approval of all other Parties shall be required where such announcement or statement relates to: a. the negotiation and/or execution of this Agreement or the Further Documents or Completion; b. subject to Clause 15 hereof, the terms of this Agreement. 12.2 Each party shall submit any proposed releases referred to in Clause 12(a) and 12(b) above to the other for comment and will give due consideration to any comments received. 12.3 Nothwithstanding the foregoing, neither Party shall be precluded from making any public announcement or release regarding the Asset or the transaction hereunder if the same is required by applicable law, the U.S. Securities and Exchange Commission or any recognized stock exchange on which the shares of the Parties or their respective Affiliates are traded. -21- 22 13. NOTICES 13.1 Any notice pursuant to this Agreement may be given by telex, facsimile transmission or letter to the Party to be served at the address stated in Clause 13.3 or such other address as may be given for the purposes of this Agreement by written notice to the other Parties. 13.2 A notice given by telex or facsimile transmission shall be deemed to be served on the first Business Day following the date of dispatch, but a notice sent by post or delivered personally shall not be deemed to be delivered until received. 13.3 The respective addresses for service are: Seller: Oryx U.K. Energy Company Charter Place, Vine Street, Uxbridge, Middlesex, England UB8 1EZ Facsimile No.: 01 895-270-208 With copy to: Oryx Energy Company 13155 Noel Road Dallas, Texas 75240-5067 Attention: Director Commercial Transactions Buyer: Union Texas Petroleum Limited Bowater House, 5th Floor 68/114 Knightsbridge London, SW1X 7LR Facsimile: 01-44-171-584-7785 Attention: Ms. Carol Boyd With copy to: Union Texas Petroleum Holdings, Inc. 1330 Post Oak Blvd. Houston, Texas 77056 Facsimile: (713) 968-2725 Attention: General Counsel 14. COSTS AND EXPENSES 14.1 The Parties shall each pay their own costs and expenses in relation to the preparation and execution of this Agreement and the documents contemplated hereby or executed pursuant hereto. -22- 23 14.2 Buyer shall be responsible for payment in a timely fashion of any and all United Kingdom stamp duties and any other charges payable on or in respect of this Agreement, the Further Documents and all transfers and/or documents contemplated hereby or executed pursuant hereto. 15. CONFIDENTIALITY The terms of this Agreement shall be held confidential by the Parties and shall not be divulged in any way to any third party by either Party provided that either Party may, without such approval, disclose such terms to: 15.1 any outside professional consultants, upon obtaining a similar undertaking of confidentiality (but excluding this proviso) from such consultants; or 15.2 any bank or financial institution from whom such Party is seeking or obtaining finance, upon obtaining a similar undertaking of confidentiality (but excluding this proviso) from such bank or institution; or 15.3 the extent required by any applicable laws, the Licence, or the requirements of any recognized stock exchange in compliance with its rules and regulations; or 15.4 any government agency lawfully requesting such information; or 15.5 any court of competent jurisdiction acting in pursuance of its powers; or 15.6 any Affiliate upon obtaining a similar undertaking of confidentiality. 16. VARIANCE The terms and conditions of this Agreement shall only be varied by an agreement in writing signed by each of the Parties and specifically referring to this Agreement. 17. ASSIGNMENT None of the rights, liabilities or obligations of either of the Parties under this Agreement are assignable except with the prior written consent of the other Party, such consent not to be unreasonably withheld; provided, however, that Buyer shall be free to assign its rights under this Agreement to any Affiliate but only on terms that all such rights should ipso facto lapse if for any reason whatsoever any such assignee -23- 24 ceases to be an Affiliate unless said Assignee shall, before ceasing to be an Affiliate, reassign said rights to Buyer. 18. TERMINATION 18.1 Subject to Clause 18.2, this Agreement shall terminate if Completion does not occur due to failure to fulfill the conditions set out in Clause 3.1 on or before 30 November 1995. Upon such termination, no Party shall have any liability hereunder except for a breach of this Agreement committed before such termination. 18.2 Notwithstanding termination of this Agreement pursuant to Clause 18.1, the provisions of Clause 15 shall continue to apply for a period of two years from the date hereof. 18.3 Termination of this Agreement pursuant to Clause 18.1 shall be without cost to any Party except where a Party has failed to use all reasonable endeavours to effect Completion in accordance with its obligations hereunder in which event the other Party shall be entitled to all costs and expenses reasonably incurred in seeking to effect such Completion in accordance with the provisions hereof. 19. GENERAL 19.1 This Agreement constitutes the entire agreement between the Parties and supersedes all warranties and representations previously made and all previous agreements, arrangements or understandings between the Parties relating to the matters contained herein whether oral or in writing made or dated prior to the date hereof. Buyer hereby confirms to Seller that they have not relied on any representation save those referred to in this Agreement. 19.2 No waiver by any Party of any breach of a provision of this Agreement shall be binding unless made expressly in writing. Further, any such waiver shall relate only to the breach to which it expressly relates and shall not apply to any subsequent or other breach. 19.3 Time shall be of the essence of this Agreement. 19.4 This Agreement shall enure to the benefit of and be binding upon the respective successors and permitted assigns of the Parties. -24- 25 20. GOVERNING LAW JURISDICTION The construction, validity and performance of this Agreement shall be governed by English Law and the Parties hereby submit to the jurisdiction of the High Court in London. 21. COUNTERPARTS This Agreement may be executed in counterparts by the parties hereto on separate counterparts, each of which when so executed and delivered shall be an original, but all of which shall together constitute one and the same instrument. IN WITNESS WHEREOF, the Parties have caused their duly authorized signatories to execute and deliver this Agreement on the day and year first above written. UNION TEXAS PETROLEUM LIMITED ) ) By:/s/ W.M. Krips ) --------------------------- ) ) Name: W.M. Krips ) ------------------------- ) ) Title: Director ) ----------------------- ) ) in the presence of: ) /s/ Luis H. Derrota ) --------------------------- ) ) Name: Luis H. Derrota ) ------------------------- ) ORYX U.K. ENERGY COMPANY ) ) By:/s/ Andrew B. Derman ) --------------------------- ) ) Name: Andrew B. Derman ) ------------------------- ) ) Title: Authorized Signatory ) ------------------------ ) ) in the presence of: ) /s/ William C. Lemmer ) ---------------------------- ) ) Name: William C. Lemmer ) ------------------------ ) -25- 26 SCHEDULES The following schedules to the Sale and Purchase Agreement have been omitted, but will be furnished upon request: Schedule 1: List of Asset Documents - ---------- Schedule 2: Representations and Warranties of the Seller - ---------- Schedule 3: Representations and Warranties of the Buyer - ---------- Schedule 4: Working Capital - ---------- Schedule 5: Description of Alba Field Platform and Floating Storage Unit - ---------- Schedule 6: List of Data Room Documents - ---------- Schedule 7: List of Further Documents - ---------- EX-15 16 INDEPENDENT ACCOUNTANTS' AWARENESS LETTER 1 Exhibit 15 INDEPENDENT ACCOUNTANTS' AWARENESS LETTER Securities and Exchange Commission 450 Fifth Street, N.W. Washington, D.C. 20549 Dear Sirs: We are aware that Union Texas Petroleum Holdings, Inc. has included our report dated July 25, 1995 (issued pursuant to the provisions of Statement on Auditing Standards No. 71) in the following registration statements: Registration Statement on Form S-8 (No. 33-26105) filed on December 21, 1988 Registration Statement on Form S-8 (No. 33-13575) filed on April 29, 1991 Registration Statement on Form S-8 (No. 33-21684) filed on April 29, 1991 Registration Statement on Form S-8 (No. 33-44045) filed on November 19, 1991 Registration Statement on Form S-8 (No. 33-64928) filed on June 24, 1993 Registration Statement on Form S-8 (No. 33-59213) filed on May 10, 1995 We are also aware of our responsibilities under the Securities Act of 1933. Yours very truly, Price Waterhouse LLP Houston, Texas July 25, 1995 EX-27.1 17 FINANCIAL DATA SCHEDULE FOR SIX-MONTHS
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMPANY'S SEC FORM 10-Q FOR THE PERIOD ENDING JUNE 30, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 6-MOS DEC-31-1995 JUN-30-1995 14,687 0 73,263 1 40,252 173,638 2,497,852 1,215,676 1,577,553 252,268 430,362 4,391 0 0 412,049 1,577,553 439,982 451,253 153,563 250,491 37,649 0 10,510 152,603 85,825 66,778 0 0 0 66,778 .76 0
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