-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Nb2B7Ip1FUzNUsO5QeKK99Q2TyhE5WUMoPz8VYBXuxJWmmyGRrR0uzWw8DH4VYLV 2uvf1Cl4BHLRMHlnVrl0aA== 0000950129-95-001362.txt : 19951030 0000950129-95-001362.hdr.sgml : 19951030 ACCESSION NUMBER: 0000950129-95-001362 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 12 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951027 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: 95585133 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. FORM 10-Q 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 SEPTEMBER 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 October 20, 1995, there were 87,611,428 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)
SEPTEMBER 30, DECEMBER 31, 1995 1994 ------------ ------------ ASSETS (UNAUDITED) Current assets: Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . $ 21,653 $ 8,389 Accounts and notes receivable, less allowance for doubtful accounts . . . . . 61,557 54,773 Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40,850 43,228 Prepaid expenses and other current assets . . . . . . . . . . . . . . . . . . 45,372 30,675 ---------- ---------- Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . 169,432 137,065 Equity investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112,533 114,505 Property, plant and equipment, at cost, less accumulated depreciation, depletion and amortization* . . . . . . . . . . . . . . . . . . 1,588,759 1,286,278 Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,919 6,786 ---------- ---------- Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,880,643 $1,544,634 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current portion of long-term debt . . . . . . . . . . . . . . . . . . . . . $ 2,292 $ 2,292 Short-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138,336 106,032 Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96,720 89,281 Taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40,883 48,069 Other current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . 37,063 41,862 ---------- ---------- Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . 315,294 287,536 Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 614,055 430,085 Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 415,227 365,777 Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115,261 111,737 ---------- ---------- Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,459,837 1,195,135 ---------- ---------- Stockholders' equity: Common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,391 4,391 Paid in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,418 19,889 Cumulative foreign exchange translation adjustment and other . . . . . . . . (61,194) (65,476) Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 460,152 394,806 Common stock held in treasury, at cost: 104,155 shares at September 30, 1995 and 221,565 shares at December 31, 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,961) (4,111) ---------- ---------- Total stockholders' equity . . . . . . . . . . . . . . . . . . . . . . . 420,806 349,499 ---------- ---------- Total liabilities and stockholders' equity . . . . . . . . . . . . . . . $1,880,643 $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. 1 3 FORM 10-Q UNION TEXAS PETROLEUM HOLDINGS, INC. CONSOLIDATED STATEMENT OF OPERATIONS (DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS) (UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED ------------------ ----------------- SEPTEMBER 30, SEPTEMBER 30, ------------- ------------- 1995 1994 1995 1994 ---- ---- ---- ---- Revenues: Sales and operating revenues . . . . . . . . . . . . . $197,255 $193,707 $637,237 $533,412 Interest income and other revenues . . . . . . . . . . 82 796 412 919 Net earnings of equity investee . . . . . . . . . . . 6,387 5,253 17,328 15,432 -------- -------- -------- -------- 203,724 199,756 654,977 549,763 Costs and other deductions: Product costs and operating expenses . . . . . . . . . 71,111 71,763 224,674 205,708 Exploration expenses . . . . . . . . . . . . . . . . . 22,256 15,375 59,905 39,702 Depreciation, depletion and amortization . . . . . . . 51,998 48,494 136,645 123,536 Selling, general and administrative expenses . . . . . 5,362 6,135 17,643 18,039 Interest expense . . . . . . . . . . . . . . . . . . . 9,106 3,415 19,616 7,953 -------- -------- -------- -------- Income before income taxes . . . . . . . . . . . . . . . . 43,891 54,574 196,494 154,825 Income taxes . . . . . . . . . . . . . . . . . . . . . . . 32,168 39,933 117,993 105,273 -------- -------- -------- -------- Net income . . . . . . . . . . . . . . . . . . . . . . . . $ 11,723 $ 14,641 $ 78,501 $ 49,552 ======== ======== ======== ======== Earnings per share of common stock . . . . . . . . . . . . $ .13 $ .17 $ .89 $ .57 ======== ======== ======== ======== Dividends per share of common stock . . . . . . . . . . . . $ .05 $ .05 $ .15 $ .15 ======== ======== ======== ======== Weighted average number of shares outstanding (000s) . . . 87,763 87,577 87,712 87,656 ======== ======== ======== ========
The accompanying notes are an integral part of this financial statement. 2 4 FORM 10-Q UNION TEXAS PETROLEUM HOLDINGS, INC. CONSOLIDATED STATEMENT OF CASH FLOWS (Dollars in thousands) (Unaudited)
NINE MONTHS ENDED SEPTEMBER 30, ------------------------------- 1995 1994 ---- ---- CASH FLOWS FROM OPERATING ACTIVITIES: Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 78,501 $ 49,552 Adjustment to reconcile net income to net cash provided by operating activities: Depreciation, depletion and amortization . . . . . . . . . . . . . . . . 136,645 123,536 Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . (7,234) (6,473) Net income of equity investee . . . . . . . . . . . . . . . . . . . . . . (17,328) (15,432) Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,431 2,873 -------- --------- Net cash provided by operating activities before changes in other assets and liabilities . . . . . . . . . . . . . . . . . . . . . . . 194,015 154,056 (Increase) decrease in accounts and notes receivable . . . . . . . . . . (7,106) 4,254 (Increase) decrease in inventories . . . . . . . . . . . . . . . . . . . 3,666 (110) (Increase) decrease in prepaid expenses and other assets . . . . . . . . (16,225) 1,372 Increase in accounts payable and other liabilities . . . . . . . . . . . 748 134 Decrease in income taxes payable . . . . . . . . . . . . . . . . . . . . (11,551) (13,503) -------- --------- Net cash provided by operating activities . . . . . . . . . . . . . . 163,547 146,203 -------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Additions to property, plant and equipment . . . . . . . . . . . . . . . . . (369,436) (101,089) Cash provided by equity investee . . . . . . . . . . . . . . . . . . . . . 19,300 50 Net cash required by sale of businesses . . . . . . . . . . . . . . . . . . (798) (1,144) -------- --------- Net cash required by investing activities . . . . . . . . . . . . . . . . (350,934) (102,183) -------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Net proceeds from long-term debt . . . . . . . . . . . . . . . . . . . . . . 218,406 Payments to settle long-term debt . . . . . . . . . . . . . . . . . . . . . (1,146) (36,146) Net payments under credit facilities . . . . . . . . . . . . . . . . . . . . (35,503) (15,000) Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (13,155) (13,151) Proceeds from issuance of common stock . . . . . . . . . . . . . . . . . . . 311 Proceeds from issuance of treasury stock . . . . . . . . . . . . . . . . . . 1,035 Purchase of treasury stock . . . . . . . . . . . . . . . . . . . . . . . . . (498) (4,877) Net proceeds from short-term borrowings . . . . . . . . . . . . . . . . . . 31,512 17,025 -------- --------- Net cash (required) provided by financing activities . . . . . . . . . . 200,651 (51,838) -------- --------- Net increase (decrease) in cash and cash equivalents . . . . . . . . . . . 13,264 (7,818) Cash and cash equivalents at beginning of period . . . . . . . . . . . . . . 8,389 18,143 -------- --------- Cash and cash equivalents at end of period . . . . . . . . . . . . . . . . . . . $ 21,653 $ 10,325 ======== ========= SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for: Interest (net of amount capitalized) . . . . . . . . . . . . . . . . . . $ 19,048 $ 6,632 Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 136,435 118,029
The accompanying notes are an integral part of this financial statement. 3 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. ("UTPH") and its consolidated subsidiaries (referred to herein individually and collectively as the "Company") at September 30, 1995, and the results of operations and cash flows for the three and nine months ended September 30, 1995 and 1994. The results of operations for the nine months ended September 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 $270 million for the interest, subject to certain closing adjustments. 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. The Company increased plant, property and equipment by $328 million, the sum of the purchase price of $270 million and a deferred tax payable of $58 million arising from the purchase. 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. KKR currently owns 21.8 million shares of the Company's common stock. 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 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 is 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 the pronouncement will have no material impact on the Company. 4 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. NOTE 8 - SUPPLEMENTAL GUARANTOR INFORMATION - In connection with the sale of the Company's 8-3/8% Senior Notes, 8-1/2% Senior Notes and $100 million principal amount of 8.25% Senior Notes due 1999 (collectively referred to herein as the "Senior Notes"), the following wholly owned direct or indirect subsidiaries of UTPH (collectively, the "Guarantors") unconditionally and fully guaranteed on a joint and several basis UTPH's obligations to pay principal, premium, if any, and interest with respect to the Senior Notes: Union Texas East Kalimantan Limited ("Kalimantan"), Union Texas Petroleum Energy Corporation ("Energy"), Union Texas International Corporation ("International"), Union Texas Products Corporation ("Products") and Unistar, Inc. ("Unistar"). The Guarantors are also guarantors under the Company's Credit Facilities. Each of the Guarantors is a Delaware corporation, except that Kalimantan is incorporated under the laws of the Bahamas, although, the applicable laws of the Bahamas are similar to the laws of Delaware with respect to the availability of assets to satisfy the obligations to the holders of the Senior Notes. Kalimantan and Unistar together own a 37.81% interest in a joint venture that represents the Company's operations in Indonesia. Products conducts the Company's domestic hydrocarbon products businesses. International, a subsidiary of Energy, is a holding company for subsidiaries that conduct the Company's principal international operations, which include operations in Indonesia by Kalimantan, a Guarantor, and in the United Kingdom and Pakistan by two non-Guarantor subsidiaries. Separate financial statements of the Guarantors of the Senior Notes are not considered to be material to the holders of the Senior Notes. See Notes 14 and 19 of Notes to Consolidated Financial Statements in the Company's 1994 annual report on Form 10-K for information describing the Company's operations through the two Guarantor subsidiaries in Indonesia relating to a production sharing contract as well as through the non-Guarantor subsidiaries in the United Kingdom, Pakistan and other international locations. Investments in subsidiaries are accounted for by the Company on the equity basis for purposes of the supplemental information. In 1995, the Company changed its basis of presentation for investments in subsidiaries from the cost to the equity method for purposes of the supplemental guarantor information. Accordingly, prior year information has been restated. Certain reclassifications were made to conform all of the financial information to the financial presentation on a consolidated basis. The principal eliminating entries eliminate investments in subsidiaries, intercompany balances and intercompany dividends. 5 7 SUPPLEMENTAL COMBINING BALANCE SHEET SEPTEMBER 30, 1995 (UNAUDITED) ASSETS
UNCONSOLIDATED ----------------------------------- NON- GUARANTOR GUARANTOR ELIMINATING CONSOLIDATED UTPH SUBSIDIARIES SUBSIDIARIES ENTRIES UTPH ---- ------------ ------------ ------- ---- Current assets: Cash and cash equivalents . . . . . . . $ 905 $ 3,116 $ 17,632 $ 21,653 Accounts and notes receivable, less allowance for doubtful accounts . . . 52 33,960 27,545 61,557 Inventories . . . . . . . . . . . . . . 19,011 21,839 40,850 Prepaid expenses and other current assets 1,557 6,575 37,240 45,372 Intercompany notes receivable . . . . . 665,646 $ (665,646) -------- ---------- ---------- ----------- ---------- Total current assets . . . . . . . . . 2,514 62,662 769,902 (665,646) 169,432 Intercompany investments . . . . . . . . 622,017 351,627 (973,644) Equity investment . . . . . . . . . . . . 112,533 112,533 Property, plant and equipment, at cost, less accumulated depreciation, depletion and amortization* . . . . . . 93,128 390,525 1,105,106 1,588,759 Other assets . . . . . . . . . . . . . . 5,569 4,350 9,919 -------- ---------- ---------- ----------- ---------- Total assets . . . . . . . . . . . . . $723,228 $ 917,347 $1,879,358 $(1,639,290) $1,880,643 ======== ========== ========== ============ ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current portion of long-term debt . . . $ 2,292 $ 2,292 Short-term debt . . . . . . . . . . . . $ 75,000 63,336 138,336 Accounts payable . . . . . . . . . . . . 1,380 $ 16,855 78,485 96,720 Taxes payable . . . . . . . . . . . . . 26,348 22,837 (8,302) 40,883 Other current liabilities . . . . . . . 10,703 2,991 23,369 37,063 Intercompany notes payable . . . . . . . 12,960 652,686 $ (665,646) -------- ---------- ---------- ----------- ---------- Total current liabilities . . . . . . . 113,431 55,643 811,866 (665,646) 315,294 Long-term debt . . . . . . . . . . . . . 590,000 24,055 614,055 Deferred income taxes . . . . . . . . . . 2,003 105,216 308,008 415,227 Other liabilities . . . . . . . . . . . . 1,445 4,837 108,979 115,261 Intercompany clearing account . . . . . . (443,694) (289,568) 154,273 578,989 -------- ---------- ---------- ----------- ---------- Total liabilities . . . . . . . . . . . 263,185 (123,872) 1,407,181 (86,657) 1,459,837 -------- ---------- ---------- ----------- ---------- Stockholders' equity: Common stock . . . . . . . . . . . . . . 4,391 19 121,082 (121,101) 4,391 Paid in capital . . . . . . . . . . . . 19,418 1,689,426 557,898 (2,247,324) 19,418 Cumulative foreign exchange translation adjustment and other . . . (21,957) (39,237) (61,194) Retained earnings (deficit) . . . . . . 460,152 (648,226) (167,566) 815,792 460,152 Common stock held in treasury, at cost . (1,961) (1,961) -------- ---------- ---------- ----------- ---------- Total stockholders' equity . . . . . . 460,043 1,041,219 472,177 (1,552,633) 420,806 -------- ---------- ---------- ----------- ---------- Total liabilities and stockholders' equity . . . . . . . . . . . . . . . $723,228 $ 917,347 $1,879,358 $(1,639,290) $1,880,643 - --------------- ======== ========== ========== ============ ==========
* The Company follows the successful efforts method of accounting for oil and gas activities. 6 8 SUPPLEMENTAL COMBINING BALANCE SHEET DECEMBER 31, 1994 ASSETS
UNCONSOLIDATED ----------------------------------- NON- GUARANTOR GUARANTOR ELIMINATING CONSOLIDATED UTPH SUBSIDIARIES SUBSIDIARIES ENTRIES UTPH ---- ------------ ------------ ------- ---- Current assets: Cash and cash equivalents . . . . . . . $ 528 $ 5,299 $ 2,562 $ 8,389 Accounts and notes receivable, less allowance for doubtful accounts . . . 273 31,302 23,198 54,773 Inventories . . . . . . . . . . . . . . 23,764 19,464 43,228 Prepaid expenses and other current assets . . . . . . . . . . . . . . . . 1,457 5,074 24,144 30,675 Intercompany notes receivable . . . . . 105,502 243,504 (349,006) -------- --------- ---------- ----------- ---------- Total current assets . . . . . . . . . 2,258 170,941 312,872 (349,006) 137,065 Intercompany investments . . . . . . . . 511,122 100,521 (611,643) Equity investment . . . . . . . . . . . . 114,505 114,505 Property, plant and equipment, at cost, less accumulated depreciation, depletion and amortization* . . . . . . 88,951 394,745 802,582 1,286,278 Other assets . . . . . . . . . . . . . . 3,920 2,866 6,786 -------- --------- ---------- ----------- ---------- Total assets . . . . . . . . . . . . . $606,251 $ 780,712 $1,118,320 $ (960,649) $1,544,634 ======== ========= ========== =========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current portion of long-term debt . . . $ 2,292 $ 2,292 Short-term debt . . . . . . . . . . . . $ 40,000 66,032 106,032 Accounts payable . . . . . . . . . . . . 295 $ 23,727 65,259 89,281 Taxes payable . . . . . . . . . . . . . 21,904 26,746 (581) 48,069 Other current liabilities . . . . . . . 5,360 10,922 25,580 41,862 Intercompany notes payable . . . . . . . 8,395 340,611 $ (349,006) -------- --------- ---------- ----------- ---------- Total current liabilities . . . . . . . 67,559 69,790 499,193 (349,006) 287,536 Long-term debt . . . . . . . . . . . . . 425,504 4,581 430,085 Deferred income taxes . . . . . . . . . . 2,003 107,707 256,067 365,777 Other liabilities . . . . . . . . . . . . 2,478 4,300 104,959 111,737 Intercompany clearing account . . . . . . (284,114) (363,270) 36,909 610,475 -------- --------- ---------- ----------- ---------- Total liabilities . . . . . . . . . . . 213,430 (181,473) 901,709 261,469 1,195,135 -------- --------- ---------- ----------- ---------- Stockholders' equity: Common stock . . . . . . . . . . . . . . 4,391 19 121,080 (121,099) 4,391 Paid in capital . . . . . . . . . . . . 19,888 1,721,287 272,441 (1,993,727) 19,889 Cumulative foreign exchange translation adjustment and other . . . (22,153) (43,323) (65,476) Retained earnings (deficit) . . . . . . 394,806 (759,121) (133,587) 892,708 394,806 Common stock held in treasury, at cost . (4,111) (4,111) -------- --------- ---------- ----------- ---------- Total stockholders' equity . . . . . . 392,821 962,185 216,611 (1,222,118) 349,499 -------- --------- ---------- ----------- ---------- Total liabilities and stockholders' equity . . . . . . . . . . . . . . . $606,251 $ 780,712 $1,118,320 $ (960,649) $1,544,634 - --------------- ======== ========= ========== =========== ==========
* The Company follows the successful efforts method of accounting for oil and gas activities. 7 9 SUPPLEMENTAL COMBINING STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1995 (UNAUDITED)
UNCONSOLIDATED ----------------------------------- NON- GUARANTOR GUARANTOR ELIMINATING CONSOLIDATED UTPH SUBSIDIARIES SUBSIDIARIES ENTRIES UTPH ---- ------------ ------------ ------- ---- Revenues: Sales and operating revenues . . . . . $108,657 $ 89,866 $ (1,268) $197,255 Interest income and other revenues . . $ 3,584 (1,609) 10,962 (12,855) 82 Net earnings (losses) of intercompany investees . . . . . . . 21,781 (14,748) (7,033) Net income of equity investee . . . . 6,387 6,387 -------- -------- --------- -------- -------- 25,365 98,687 100,828 (21,156) 203,724 Costs and other deductions: Product cost and operating expenses . (557) 41,854 31,082 (1,268) 71,111 Exploration expenses . . . . . . . . . 479 21,777 22,256 Depreciation, depletion and amortization . . . . . . . . . . . . 4,939 9,229 37,830 51,998 Selling, general and administrative expenses . . . . . . . . . . . . . . (349) 1,706 4,005 5,362 Interest expense . . . . . . . . . . . 6,564 1,048 14,349 (12,855) 9,106 -------- -------- --------- -------- -------- Income before income taxes . . . . . . 14,768 44,371 (8,215) (7,033) 43,891 Income taxes . . . . . . . . . . . . . 3,045 22,590 6,533 32,168 -------- -------- --------- -------- -------- Net income . . . . . . . . . . . . . . $ 11,723 $ 21,781 $ (14,748) $ (7,033) $ 11,723 ======== ======== ========= ========= ========
8 10 SUPPLEMENTAL COMBINING STATEMENT OF OPERATIONS FOR THREE MONTHS ENDED SEPTEMBER 30, 1994 (UNAUDITED)
UNCONSOLIDATED ----------------------------------- NON- GUARANTOR GUARANTOR ELIMINATING CONSOLIDATED UTPH SUBSIDIARIES SUBSIDIARIES ENTRIES UTPH ---- ------------ ------------ ------- ---- Revenues: Sales and operating revenues . . . . . $121,893 $ 73,214 $ (1,400) $193,707 Interest income and other revenues . . $ 843 2,832 1,658 (4,537) 796 Net earnings (losses) of intercompany investees . . . . . . . 22,507 (4,831) (17,676) Net income of equity investee . . . . 5,253 5,253 -------- -------- --------- -------- -------- 23,350 125,147 74,872 (23,613) 199,756 Costs and other deductions: Product cost and operating expenses . 1 50,914 22,248 (1,400) 71,763 Exploration expenses . . . . . . . . . 3,639 11,736 15,375 Depreciation, depletion and amortization . . . . . . . . . . . . 4,912 10,933 32,649 48,494 Selling, general and administrative expenses . . . . . . . . . . . . . . 532 2,069 3,534 6,135 Interest expense . . . . . . . . . . . 3,086 1,239 3,627 (4,537) 3,415 -------- -------- --------- -------- -------- Income before income taxes . . . . . . 14,819 56,353 1,078 (17,676) 54,574 Income taxes . . . . . . . . . . . . . 178 29,789 9,966 39,933 -------- -------- --------- -------- -------- Net income . . . . . . . . . . . . . . $ 14,641 $ 26,564 $ (8,888) $(17,676) $ 14,641 ======== ======== ========= ======== ========
9 11 SUPPLEMENTAL COMBINING STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 (UNAUDITED)
UNCONSOLIDATED ----------------------------------- NON- GUARANTOR GUARANTOR ELIMINATING CONSOLIDATED UTPH SUBSIDIARIES SUBSIDIARIES ENTRIES UTPH ---- ------------ ------------ ------- ---- Revenues: Sales and operating revenues . . . . . $366,936 $ 274,200 $ (3,899) $637,237 Interest income and other revenues . . $ 3,973 3,793 19,828 (27,182) 412 Net earnings (losses) of intercompany investees . . . . . . . . . . . . . 110,895 (20,917) (89,978) Net income of equity investee . . . . 17,328 17,328 -------- -------- --------- -------- -------- 114,868 367,140 294,028 (121,059) 654,977 Costs and other deductions: Product cost and operating expenses . 944 135,689 91,940 (3,899) 224,674 Exploration expenses . . . . . . . . . 2,368 57,537 59,905 Depreciation, depletion and amortization . . . . . . . . . . . . 13,396 29,091 94,158 136,645 Selling, general and administrative expenses . . . . . . . . . . . . . . 397 5,604 11,642 17,643 Interest expense . . . . . . . . . . . 13,846 3,107 29,845 (27,182) 19,616 -------- -------- --------- -------- -------- Income before income taxes . . . . . . 86,285 191,281 8,906 (89,978) 196,494 Income taxes . . . . . . . . . . . . . 7,784 80,386 29,823 117,993 -------- -------- --------- -------- -------- Net income . . . . . . . . . . . . . . $ 78,501 $110,895 $ (20,917) $(89,978) $ 78,501 ======== ======== ========== ========= ========
10 12 SUPPLEMENTAL COMBINING STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1994 (UNAUDITED)
UNCONSOLIDATED ----------------------------------- NON- GUARANTOR GUARANTOR ELIMINATING CONSOLIDATED UTPH SUBSIDIARIES SUBSIDIARIES ENTRIES UTPH ---- ------------ ------------ ------- ---- Revenues: Sales and operating revenues . . . . . $319,691 $ 216,715 $ (2,994) $533,412 Interest income and other revenues . . $ 3,004 8,933 2,137 (13,155) 919 Net earnings (losses) of intercompany investees . . . . . . . . . . . . . 71,232 (3,782) (67,450) Net earnings of equity investee . . . 15,432 15,432 -------- -------- --------- -------- -------- 74,236 340,274 218,852 (83,599) 549,763 Costs and other deductions: Product cost and operating expenses . (353) 139,995 69,060 (2,994) 205,708 Exploration expenses . . . . . . . . . 230 4,817 34,655 39,702 Depreciation, depletion and amortization . . . . . . . . . . . . 12,059 31,869 79,608 123,536 Selling, general and administrative expenses . . . . . . . . . . . . . . 423 5,907 11,709 18,039 Interest expense . . . . . . . . . . . 7,219 3,596 10,293 (13,155) 7,953 -------- -------- --------- -------- -------- Income before income taxes . . . . . . 54,658 154,090 13,527 (67,450) 154,825 Income taxes . . . . . . . . . . . . . 5,106 78,241 21,926 105,273 -------- -------- --------- -------- -------- Net income . . . . . . . . . . . . . . $ 49,552 $ 75,849 $ (8,399) $(67,450) $ 49,552 ======== ======== ========== ========= ========
11 13 SUPPLEMENTAL COMBINING STATEMENT OF CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 (UNAUDITED)
UNCONSOLIDATED ----------------------------------- NON- GUARANTOR GUARANTOR ELIMINATING CONSOLIDATED UTPH SUBSIDIARIES SUBSIDIARIES ENTRIES UTPH ---- ------------ ------------ ------- ---- Cash flows from operating activities: Net income . . . . . . . . . . . . . . . . . $ 78,501 $110,895 $ (20,917) $(89,978) $ 78,501 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, depletion and amortization . . 13,396 29,091 94,158 136,645 Deferred income taxes . . . . . . . . . . . (2,189) (5,045) (7,234) Income (losses) of equity investees . . . . (110,895) 3,589 89,978 (17,328) Intercompany dividends received . . . . . . 80,563 (80,563) Other . . . . . . . . . . . . . . . . . . . 1,894 1,537 3,431 (Increase) decrease in working capital and other assets and liabilities . . . . . 9,150 (14,451) (25,167) (30,468) -------- -------- --------- -------- -------- Net cash provided (required) by operating activities . . . . . . . . . . (7,954) 207,498 44,566 (80,563) 163,547 -------- -------- --------- -------- -------- Cash flows from investing activities: Additions to property, plant and equipment . (16,680) (28,304) (324,452) (369,436) Cash provided by equity investee . . . . . . 19,300 19,300 Net cash required by sales of businesses . . (798) (798) -------- -------- --------- -------- -------- Net cash required by investing activities . . . . . . . . . . . . . . (16,680) (9,004) (325,250) (350,934) -------- -------- --------- -------- -------- Cash flows from financing activities: Net proceeds from long-term debt . . . . . . 197,713 20,693 218,406 Payments to settle long-term debt . . . . . (1,146) (1,146) Net payments under credit facilities . . . . (35,503) (35,503) Purchase of treasury stock . . . . . . . . . (498) (498) Proceeds from issuance of treasury stock . . 1,035 1,035 Common stock dividends . . . . . . . . . . (13,155) (13,155) Intercompany dividends . . . . . . . . . . . (67,500) (13,063) 80,563 Net proceeds from short-term borrowings . . 35,000 (3,488) 31,512 (Decrease) increase in net payable to parent . . . . . . . . . . . . . . . . (159,581) (133,177) 292,758 -------- -------- --------- -------- -------- Net cash provided (required) by financing activities . . . . . . . . . . 25,011 (200,677) 295,754 80,563 200,651 -------- -------- --------- -------- -------- Net increase (decrease) in cash and cash equivalents . . . . . . . . . . . . . . . . 377 (2,183) 15,070 13,264 Cash and cash equivalents at beginning of year . . . . . . . . . . . . . . . . . . 528 5,299 2,562 8,389 -------- -------- --------- -------- -------- Cash and cash equivalents at end of year . . $ 905 $ 3,116 $ 17,632 $ 21,653 ======== ======== ========= ======== ========
12 14 SUPPLEMENTAL COMBINING STATEMENT OF CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1994 (UNAUDITED)
UNCONSOLIDATED ----------------------------------- NON- GUARANTOR GUARANTOR ELIMINATING CONSOLIDATED UTPH SUBSIDIARIES SUBSIDIARIES ENTRIES UTPH ---- ------------ ------------ ------- ---- Cash flows from operating activities: Net income . . . . . . . . . . . . . . . . . $49,552 $75,849 $(8,399) $(67,450) $49,552 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, depletion and amortization . . 12,059 31,869 79,608 123,536 Deferred income taxes . . . . . . . . . . . (2,974) (3,499) (6,473) Income of equity investees . . . . . . . . . (71,232) (11,650) 67,450 (15,432) Intercompany dividends received . . . . . . . 107,959 (107,959) Other . . . . . . . . . . . . . . . . . . . 2,484 31,891 (31,502) 2,873 (Increase) decrease in working capital and other assets and liabilities . . . . . . . 4,590 841 (13,284) (7,853) -------- -------- --------- -------- -------- Net cash provided (required) by operating activities . . . . . . . . . . (2,547) 233,785 22,924 (107,959) 146,203 -------- -------- --------- -------- -------- Cash flows from investing activities: Additions to property, plant and equipment . . . . . . . . . . . . . . . . . (13,266) (24,899) (62,924) (101,089) Cash provided by equity investee . . . . . . 50 50 Net required by sales of businesses . . . . (1,144) (1,144) -------- -------- --------- -------- -------- Net cash required by investing activities . (13,266) (24,849) (64,068) (102,183) -------- -------- --------- -------- -------- Cash flows from financing activities: Net payments under credit facilities . . . . (15,000) (15,000) Payments to settle long-term debt . . . . . (35,000) (1,146) (36,146) Net proceeds from short-term borrowings . . 17,025 17,025 Purchase of treasury stock . . . . . . . . . (4,877) (4,877) Proceeds from issuance of common stock . . . 311 311 Dividends paid . . . . . . . . . . . . . . . (13,151) (13,151) Intercompany dividends . . . . . . . . . . . (65,000) (42,959) 107,959 Increase (decrease) in net payable to parent . . . . . . . . . . . . . . . . 66,336 (147,624) 81,288 -------- -------- --------- -------- -------- Net cash provided (required) by financing activities . . . . . . . . . . 15,644 (212,624) 37,183 107,959 (51,838) -------- -------- --------- -------- -------- Net decrease in cash and cash equivalents . . . . . . . . . . . . . . . . (169) (3,688) (3,961) (7,818) Cash and cash equivalents at beginning of year . . . . . . . . . . . . . . . . . . 68 7,957 10,118 18,143 -------- -------- --------- -------- -------- Cash and cash equivalents at end of year . . $ (101) $ 4,269 $ 6,157 $ 10,325 ========= ======== ========= ======== ========
13 15 UNION TEXAS PETROLEUM HOLDINGS, INC. With respect to the unaudited consolidated financial information of Union Texas Petroleum Holdings, Inc. for the three and nine month periods ended September 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 October 24, 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 September 30, 1995 and the related consolidated statements of operations for the three and nine month periods ended September 30, 1995 and 1994 and of cash flows for the nine month periods ended September 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 October 24, 1995 14 16 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 SEPTEMBER 30, 1995 COMPARED WITH THREE MONTHS ENDED SEPTEMBER 30, 1994 Net income for the three months ended September 30, 1995, was $12 million, or $.13 per share as compared to net income of $15 million, or $.17 per share reported for the same period in 1994. Earnings per share for the current period were unfavorably impacted primarily by higher exploration expenses, higher interest expense, lower LNG sales volumes and prices, partially offset by higher U.S. ethylene margins and higher volumes in the U.K. North Sea. Sales and operating revenues for the three months ended September 30, 1995, were $197 million, $4 million higher than the third quarter of 1994. International revenues totaled $149 million as compared to $147 million for the third quarter of 1994. In the U.K., sales and operating revenues increased by $14 million due to increased sales volumes, primarily as a result of the July acquisition of the Alba field, and due to higher natural gas prices and volumes. In Indonesia, sales decreased $15 million due to lower LNG and oil volumes and lower sales prices for LNG and crude oil. 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 $3 million above 1994 primarily due to higher volumes and gas prices partially offset by lower crude prices. Average prices received and volumes sold by the Company's major operations during the third quarter of 1995 and 1994, respectively, were as follows:
PRICES VOLUMES (000S PER DAY) 1995 1994 1995 1994 ---- ---- ---- ---- Crude oil (barrels): U.K. $15.16 $15.69 47 36 Pakistan 13.77 14.40 6 5 Indonesia 16.39 17.41 5 6 Indonesian LNG (Mcf) 2.92 3.06 191 234 Pakistan natural gas (Mcf) 1.37 1.04 45 40 U.K. natural gas (Mcf) 2.74 1.12 18 13 U.S. ethylene (pounds) .25 .21 1,180 1,280
Petrochemical revenues totaled $48 million for the current period, essentially level with 1994, while operating profit was $17 million as compared to $7 million in the prior period. The increase was primarily due to higher ethylene sales prices, which offset lower sales volumes, and lower product cost, which resulted in an increase in ethylene margins to 14 cents per pound in 1995 vs. 7 cents per pound in 1994. Exploration expenses increased by $7 million primarily due to drilling expenditures in Tunisia, Eastern Indonesia and Vietnam. Interest expense increased by $6 million during the period due to higher levels of debt and higher interest rates. 15 17 NINE MONTHS ENDED SEPTEMBER 30, 1995 COMPARED WITH NINE MONTHS ENDED SEPTEMBER 30, 1994 Net income for the nine months ended September 30, 1995, was $79 million, or $.89 per share as compared to net income of $50 million, or $.57 per share reported for the same period in 1994. The current period was favorably impacted by higher U.S. ethylene margins and sales volumes, higher volumes in the U.K. and Pakistan and higher oil and gas prices, partially offset by higher exploration expenses and lower Indonesian LNG volumes. Sales and operating revenues for the nine months ended September 30, 1995, were $637 million, up from $533 million in the prior year. International revenues totaled $478 million as compared to $418 million for the first nine months of 1994. In the U.K., sales and operating revenues increased by $49 million due to higher prices and increased sales volumes. In Indonesia, sales increased $3 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 $8 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 nine months of 1995 and 1994, respectively, were as follows:
PRICES VOLUMES (000S PER DAY) 1995 1994 1995 1994 ---- ---- ---- ---- Crude oil (barrels): U.K. $16.22 $14.53 37 32 Pakistan 14.41 13.57 6 5 Indonesia 17.19 15.72 6 6 Indonesian LNG (Mcf) 3.06 2.82 212 228 Pakistan natural gas (Mcf) 1.32 1.08 45 44 U.K. natural gas (Mcf) 2.91 2.37 29 20 U.S. ethylene (pounds) .27 .18 1,271 1,145
Petrochemical revenues totaled $158 million as compared to $114 million in the first nine months of 1994, while operating profit was $55 million as compared to $10 million in the prior period. The increase was primarily due to higher ethylene sales prices and lower product cost, which resulted in an increase in ethylene margins to 16 cents per pound in 1995 vs. 4 cents per pound in 1994, and due to higher volumes. Exploration expenses increased by $20 million primarily due to drilling expenditures in Argentina, Ireland, Tunisia, Vietnam and Eastern Indonesia. Interest expense increased by $12 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. 16 18 FINANCIAL CONDITION Cash flow from operations: Net cash provided by operating activities was $164 million in the first nine months of 1995, an increase of $17 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 higher exploration costs and lower Indonesian volumes. Ethylene margins have averaged approximately 16 cents per pound in the first nine months of 1995, as compared to 4 cents per pound for the first nine months of 1994 and have averaged approximately 14 cents per pound during the third quarter of 1995 and 13 cents per pound for the month of September 1995. During the last six months of 1994, ethylene margins improved significantly from the first six months of 1994. The Company expects ethylene margins for the fourth quarter of 1995 to be less than the fourth quarter of 1994, which averaged 12 cents per pound. Ethylene volumes were down about 8% in 1995's third quarter compared to a year ago. The ethylene business is cyclical and the Company cannot predict the duration of any trends in the business. 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 nine months of 1995 were $144 million including capitalized interest of $17 million. Capital expenditures for the first nine months of 1994 were $95 million including capitalized interest of $14 million. The increase is principally due to development costs for the Britannia field and increased exploration spending. The Company expects that capital expenditures for 1995 will be approximately $175 million excluding capitalized interest. 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 $270 million for the interest, subject to certain closing adjustments. 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 recorded approximately 45 million barrels of oil as proved reserves, of which approximately 30 million barrels are classified as proved undeveloped. The Company expects to spend about $30 million net over the next five years for future development expenditures related to those reserves. The Alba field commenced production in January 1994 and 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 holding 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 (as defined below). 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. Based on current conditions, the Company expects to pay 17 19 dividends without restriction under the Credit Facilities. At September 30, 1995, $290 million was outstanding under the Credit Facilities bearing interest at a weighted average rate of 6.21% per annum. At September 30, 1995, $138 million was outstanding under the Company's uncommitted and unsecured lines of credit. These amounts outstanding bear interest at a weighted average rate of 6.68% 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 is 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 September 30, 1995, 13 million pounds sterling ($21 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. KKR currently owns 21.8 million shares of the Company's common stock. 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 329,536 shares as of December 31, 1994. The repurchased stock will be used for general corporate purposes, including fulfilling employee benefit program obligations. The Company has repurchased 54,900 shares during 1995 and at September 30, 1995, 104,155 shares of common stock were held, at cost, as treasury shares. Financial condition: In the first, second and third quarters of 1995, the Company declared and paid a dividend of approximately $4.4 million on its common stock. On October 20, 1995, the Company announced a dividend on its common stock of $.05 per share to stockholders of record as of October 31, 1995, payable on November 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 the pronouncement will have no material impact on the Company. 18 20 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 6 - EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits Exhibit No. Description ----------- ----------- 10.1 Bontang V Loan Agreement, dated as of July 1, 1995, among BankAmerica International, as Trustee under the Bontang V Trustee and Paying Agent Agreement, as Borrower, Bontang Train-G Project Finance Co., Ltd. ("Tranche A Lender"), the Banks named therein as Tranche B Lenders, The Long-Term Credit Bank of Japan, Limited, New York Branch ("Facility Agent"), The Fuji Bank, Limited ("Intercreditor Agent"), Credit Lyonnais ("Technical Agent"), and Credit Lyonnais, The Fuji Bank, Limited and The Long-Term Credit Bank of Japan, Limited (collectively, the "Arrangers"). 10.2 Bontang V Producers Agreement, dated as of July 1, 1995, by Perusahaan Pertambangan Minyuak Dan Gas Bumi Negara, Virginia Indonesia Company, OPICOIL Houston, Inc., Virginia International Company, LASMO Sanga Sanga Limited, Union Texas East Kalimantan Limited, Universe Gas & Oil Company, Inc., Total Indonesie, Unocal Indonesia Company and Indonesia Petroleum, Ltd. (collectively, the "Producers"), in favor of the Tranche A Lender, Facility Agent, Intercreditor Agent, Technical Agent and Arrangers. 10.3 Bontang V Trustee and Paying Agent Agreement, dated as of July 1, 1995, among the Producers and BankAmerica International, as Trustee and Paying Agent. 10.4 Amendment No. 1 to Amended and Restated Badak Trustee and Paying Agent Agreement, dated as of July 1, 1995, among Continental Bank International, as Trustee, and the Producers. 10.5 Amendment No. 1 to Amended and Restated Bontang Excess Sales Trustee and Paying Agent Agreement, dated as of July 1, 1995, among Continental Bank International, as Trustee, and the Producers. 19 21 10.6 Amendment No. 1 to Bontang III Loan Agreement, dated as of July 1, 1995, among Continental Bank International, as Trustee under the Bontang III Trustee and Paying Agent Agreement, Train-E Finance Co., Ltd., as Tranche A Lender, and The Industrial Bank of Japan Trust Company, as Agent on behalf of the Majority Tranche B Lenders. 10.7 Second Amended and Restated 1973 LNG Sales Contract, dated as of August 3, 1995, between Perusahaan Pertambangan Minyak Dan Gas Bumi Negara ("Pertamina"), as Seller, and Chubu Electric Power Co., Inc., The Kansai Electric Power Co., Inc., Kyushu Electric Power Co., Inc., Nippon Steel Corporation, Osaka Gas Co., Ltd. and Toho Gas Co., Ltd., as the Buyers, with related letter agreement, dated August 3, 1995, between Seller and Buyers. 10.8 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 and Oil Company, Inc. and Virginia International Company. 10.9 First Amendment to Union Texas Petroleum Savings Plan for Salaried Employees. 15 Independent Accountants' Awareness Letter. 27.1 Financial Data Schedule for the nine-month period ended September 30, 1995. (b) Reports on Form 8-K The Company filed a Form 8-K dated July 14, 1995 to disclose completion of financing on Train G in Indonesia and an update to 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. The Company filed a Form 8-K dated July 28, 1995 to report the completion of the acquisition of an interest in the Alba Field. The Company filed a Form 8-K dated August 18, 1995 to disclose an update of the Company's drilling results on the Kai-Tanimbar-Rebi blocks in Eastern Indonesia and to attach a press release announcing natural gas discoveries in Pakistan. The Company filed a Form 8-K dated September 25, 1995 to attach press releases announcing the participation in an exploration concession in Italy, the results of an offshore Tunisia exploration well and the results of an offshore Vietnamese exploration well. The Company filed a Form 8-K/A dated October 2, 1995 to include certain historical and pro forma information for the Alba acquisition. 20 22 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: October 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) 21 23 EXHIBIT INDEX Exhibit No. Description - ----------- ----------- 10.1 Bontang V Loan Agreement, dated as of July 1, 1995, among BankAmerica International, as Trustee under the Bontang V Trustee and Paying Agent Agreement, as Borrower, Bontang Train-G Project Finance Co., Ltd. ("Tranche A Lender"), the Banks named therein as Tranche B Lenders, The Long-Term Credit Bank of Japan, Limited, New York Branch ("Facility Agent"), The Fuji Bank, Limited ("Intercreditor Agent"), Credit Lyonnais ("Technical Agent"), and Credit Lyonnais, The Fuji Bank, Limited and The Long-Term Credit Bank of Japan, Limited (collectively, the "Arrangers"). 10.2 Bontang V Producers Agreement, dated as of July 1, 1995, by Perusahaan Pertambangan Minyuak Dan Gas Bumi Negara, Virginia Indonesia Company, OPICOIL Houston, Inc., Virginia International Company, LASMO Sanga Sanga Limited, Union Texas East Kalimantan Limited, Universe Gas & Oil Company, Inc., Total Indonesie, Unocal Indonesia Company and Indonesia Petroleum, Ltd. (collectively, the "Producers"), in favor of the Tranche A Lender, Facility Agent, Intercreditor Agent, Technical Agent and Arrangers. 10.3 Bontang V Trustee and Paying Agent Agreement, dated as of July 1, 1995, among the Producers and BankAmerica International, as Trustee and Paying Agent. 10.4 Amendment No. 1 to Amended and Restated Badak Trustee and Paying Agent Agreement, dated as of July 1, 1995, among Continental Bank International, as Trustee, and the Producers. 10.5 Amendment No. 1 to Amended and Restated Bontang Excess Sales Trustee and Paying Agent Agreement, dated as of July 1, 1995, among Continental Bank International, as Trustee, and the Producers. 10.6 Amendment No. 1 to Bontang III Loan Agreement, dated as of July 1, 1995, among Continental Bank International, as Trustee under the Bontang III Trustee and Paying Agent Agreement, Train-E Finance Co., Ltd., as Tranche A Lender, and The Industrial Bank of Japan Trust Company, as Agent on behalf of the Majority Tranche B Lenders. 24 10.7 Second Amended and Restated 1973 LNG Sales Contract, dated as of August 3, 1995, between Perusahaan Pertambangan Minyak Dan Gas Bumi Negara ("Pertamina"), as Seller, and Chubu Electric Power Co., Inc., The Kansai Electric Power Co., Inc., Kyushu Electric Power Co., Inc., Nippon Steel Corporation, Osaka Gas Co., Ltd. and Toho Gas Co., Ltd., as the Buyers, with related letter agreement, dated August 3, 1995, between Seller and Buyers. 10.8 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 and Oil Company, Inc. and Virginia International Company. 10.9 First Amendment to Union Texas Petroleum Savings Plan for Salaried Employees. 15 Independent Accountants' Awareness Letter. 27.1 Financial Data Schedule for the nine-month period ended September 30, 1995. EX-10.1 2 BONTANG V LOAN AGREEMENT DATED 07/01/95 1 BONTANG V LOAN AGREEMENT __________________________ US$969,500,000.00 BANKAMERICA INTERNATIONAL as Trustee under the Bontang V Trustee and Paying Agent Agreement as Borrower, BONTANG TRAIN-G PROJECT FINANCE CO., LTD. as Tranche A Lender, THE BANKS named herein as Tranche B Lenders and THE LONG-TERM CREDIT BANK OF JAPAN, LIMITED NEW YORK BRANCH as Facility Agent THE FUJI BANK, LIMITED as Intercreditor Agent CREDIT LYONNAIS as Technical Agent Tranche B Arranged By CREDIT LYONNAIS THE FUJI BANK, LIMITED THE LONG-TERM CREDIT BANK OF JAPAN, LIMITED __________________________ Dated as of July 1, 1995 2 TABLE OF CONTENTS*/
Page ---- 1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 2. THE ADVANCES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 2.1 The Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 2.2 Purpose and Manner of Borrowing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 2.3 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 2.4 Election of Interest Periods for Tranche B. . . . . . . . . . . . . . . . . . . . . . . . . . . 26 2.5 Determination of Interest Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 2.6 Alternative Interest Rates; Voluntary Prepayment . . . . . . . . . . . . . . . . . . . . . . . . 27 2.7 Interest Rate on Overdue Amounts; Other Indemnities . . . . . . . . . . . . . . . . . . . . . . 29 2.8 Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 2.9 The Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 2.10 Repayment on Maturity Dates; Deferral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 2.11 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 3. PAYMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 3.1 Allocation of Amounts; Substitute Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 3.2 Funds of Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 3.3 Set-Off, Counterclaim and Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 3.4 Change of Law; Certain Mandatory and Voluntary Prepayments; Additional Amounts . . . . . . . . . 38 3.5 Prepayments in Connection with Completion of Train G; Debt Coverage Reserve Mandatory Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 3.6 Notice of Certain Voluntary Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 3.7 Other Voluntary Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 3.8 Cancellation of Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 3.9 No Reborrowing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 3.10 Payments to be Made at End of Interest Period . . . . . . . . . . . . . . . . . . . . . . . . . 42 4. REPRESENTATIONS AND WARRANTIES OF THE BORROWER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 4.1 Power and Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 4.2 Legal Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 4.3 Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 4.4 Registration and Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 4.5 Agreement Binding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 4.6 Ranking of Advances; Encumbrances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 4.7 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
__________________________________ * The Table of Contents is not a substantive part of this Agreement. (i) 3
Page ---- 4.8 Compliance with Other Instruments, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 4.9 No Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 4.10 Trust Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 5. CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 5.1 Conditions Precedent to the Effective Date . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 5.2 Conditions Precedent to Certain Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 5.3 Conditions Precedent to the Initial and Subsequent Advances . . . . . . . . . . . . . . . . . . 50 5.4 Conditions Precedent to Advances to Fund Reserve Account . . . . . . . . . . . . . . . . . . . . 51 5.5 Representations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 6. COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 6.1 Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 6.2 Negative Pledge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 6.3 No Consent to Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 6.4 Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 6.5 Notice at End of Availability Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 6.6 Selection of Qualified Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 7. EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57 8. AGENT, ETC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 8.1 Appointment and Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 8.2 Agent May Rely on Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 8.3 No Amendment to Duties of Agent Without Consent . . . . . . . . . . . . . . . . . . . . . . . . 60 8.4 Responsibilities of Agent and Arrangers . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 8.5 Funding Costs of Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61 8.6 Agent in Individual Capacity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61 8.7 Credit Decision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61 8.8 Arrangers, Intercreditor Agent, Technical Agent, Tranche A Lender . . . . . . . . . . . . . . . 62 8.9 Change of Administrative Office of Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62 8.10 Successor Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62 9. SOURCE OF DEBT SERVICE; NO RECOURSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 9.1 Accumulation for Debt Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 9.2 Accumulation in Regular Reserve Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 9.3 Deposit in Debt Coverage Reserve Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 9.4 Payments Made from Debt Service Account and Reserve Account . . . . . . . . . . . . . . . . . . 64 9.5 No Recourse . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 9.6 Not to Limit Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
(ii) 4
Page ---- 10. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66 10.1 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66 10.2 No Waiver; Remedies Cumulative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68 10.3 Use of English Language . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68 10.4 Assignment; Successors and Assigns; Participations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68 10.5 Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71 10.6 Expenses; Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71 10.7 Sharing of Set-Off and Other Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73 10.8 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74 10.9 Table of Contents and Section Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74 10.10 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74 10.11 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74 10.12 Term of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
(iii) 5 EXHIBIT A FORM OF NOTICE OF BORROWING EXHIBIT B-1 FORM OF NOTICE OF DEFERRAL EXHIBIT B-2 FORM OF NOTICE OF INTEREST PERIOD EXHIBIT B-3 FORM OF NOTICE OF COMPLETION EXHIBIT C-1 FORM OF TRANCHE A NOTE EXHIBIT C-2 FORM OF TRANCHE B NOTE EXHIBIT C-3 FORM OF TRANSFER CERTIFICATE EXHIBIT D-1 FORM OF LEGAL OPINION OF KELLEY, DRYE & WARREN, COUNSEL FOR THE BORROWER EXHIBIT D-2 FORM OF LEGAL OPINION OF ROBERT RYWKIN, COUNSEL TO THE BORROWER EXHIBIT E-1 FORM OF LEGAL OPINION OF BUDHY RUKIAT, LEGAL COUNSEL TO PERTAMINA EXHIBIT E-2 FORM OF LEGAL OPINION OF ANDREWS & KURTH, L.L.P., SPECIAL COUNSEL TO THE PRODUCERS (OTHER THAN PERTAMINA) EXHIBIT E-3 FORM OF LEGAL OPINION OF COUNSEL TO EACH PRODUCER (OTHER THAN PERTAMINA) EXHIBIT E-4 FORM OF LEGAL OPINION OF WHITE & CASE, SPECIAL NEW YORK COUNSEL TO PERTAMINA EXHIBIT F-1 FORM OF LEGAL OPINION OF PAUL, WEISS, RIFKIND, WHARTON & GARRISON, SPECIAL COUNSEL TO THE TRANCHE A LENDER, THE AGENT AND THE TRANCHE B LENDERS EXHIBIT F-2 FORM OF LEGAL OPINION OF SPECIAL KOREAN AND TAIWANESE COUNSEL TO THE TRANCHE A LENDER, THE AGENT AND THE TRANCHE B LENDERS EXHIBIT G-1 FORM OF LEGAL OPINION OF LEGAL COUNSEL TO PERTAMINA EXHIBIT G-2 FORM OF LEGAL OPINION OF WHITE & CASE, SPECIAL NEW YORK COUNSEL TO PERTAMINA EXHIBIT G-3 FORM OF LEGAL OPINION OF SPECIAL JAPANESE COUNSEL TO THE TRANCHE A LENDER, THE AGENT AND THE TRANCHE B LENDERS EXHIBIT G-4 CERTIFICATE OF PERTAMINA (iv) 6 SCHEDULE 1 BASIC AGREEMENTS SCHEDULE 2 DRAWDOWN SCHEDULE SCHEDULE 3 ASSUMED INTEREST RATE AND OTHER ASSUMPTIONS SCHEDULE 4 QUALIFIED BANKS (v) 7 LOAN AGREEMENT AGREEMENT dated as of July 1, 1995 among (i) BANKAMERICA INTERNATIONAL, not in its individual capacity but solely as Trustee under the Bontang V Trustee and Paying Agent Agreement among it and PERUSAHAAN PERTAMBANGAN MINYAK DAN GAS BUMI NEGARA, VIRGINIA INDONESIA COMPANY, OPICOIL HOUSTON, INC., VIRGINIA INTERNATIONAL COMPANY, LASMO SANGA SANGA LIMITED, UNION TEXAS EAST KALIMANTAN LIMITED, UNIVERSE GAS & OIL COMPANY, INC., TOTAL INDONESIE, INDONESIA PETROLEUM, LTD. and UNOCAL INDONESIA COMPANY, dated as of the date hereof; (ii) BONTANG TRAIN-G PROJECT FINANCE CO., LTD., as Tranche A Lender; (iii) CREDIT LYONNAIS, THE FUJI BANK, LIMITED and THE LONG-TERM CREDIT BANK OF JAPAN, LIMITED, as Arrangers; (iv) The Long-Term Credit Bank of Japan, Limited, New York Branch, as "Facility Agent" (hereinafter defined as "Agent"), The Fuji Bank, Limited, as "Intercreditor Agent," and Credit Lyonnais, as "Technical Agent"; and (v) the banks and other financial institutions named under the caption "Tranche B Lenders" on the signature pages hereof. W I T N E S S E T H : WHEREAS, the Borrower has requested the Tranche A Lender and the Tranche B Lenders to make advances to the Borrower upon the terms and subject to the conditions of this Agreement in an aggregate principal amount of $678,650,000.00 for Tranche A, which amount shall be indirectly financed by The Export-Import Bank of Japan, and $290,850,000.00 for Tranche B, respectively, for the purpose of paying (i) the costs incurred or to be incurred in connection with or otherwise relating to the design, engineering, procurement and construction of or otherwise relating to Train G, (ii) interest, fees, expenses, taxes and other amounts payable by the Borrower pursuant to Sections 2.3, 2.7, 2.8, 3.3, 3.4(b), 6.6 and 10.6 hereof and (iii) certain amounts to be paid to the Reserve Account pursuant to Section 2.2(b)(ii) hereof and used as provided therein; 8 2 WHEREAS, the Tranche A and Tranche B Lenders are prepared, severally, and not jointly or jointly and severally, to make such advances to the Borrower on a pro rata basis upon the terms and subject to the conditions of this Agreement; and WHEREAS, no recourse shall be had for any amount due under this Agreement against BankAmerica International in its individual capacity, with certain proceeds from the sale of liquefied natural gas being the sole source of repayment hereunder of all such amounts, except as specifically provided herein. NOW, THEREFORE, in consideration of the mutual promises contained herein, the parties hereto agree as follows: SECTION 1. DEFINITIONS As used in this Agreement, the following capitalized expressions shall have the following respective meanings, such meanings to be applicable to both the singular and the plural forms of such expressions: "Additional Plant" means the additional gas liquefaction and processing facility and facilities (other than the Support Facilities and the Loading Facilities) related to or used in connection therewith, all to be located at the Bontang Plant, in each case as described in and consistent with the Development Plan. "Advance" means, with respect to Tranche A, each advance by the Tranche A Lender, and, with respect to Tranche B, each advance by a Tranche B Lender, in each case to the Borrower hereunder on a Borrowing Date or, where the context so requires, the amount of such advance from time to time outstanding. "Agent" means The Long-Term Credit Bank of Japan, Limited, New York Branch, acting in its capacity as facility agent for the Tranche B Lenders hereunder, or any successor thereto appointed pursuant to Section 8.10 hereof. "Applicable Margin" means for all Advances (including any Deferred Portion thereof) (i) on any date during the period beginning on the Effective Date and ending on December 31, 1999, 1.125%, and (ii) on any date following December 31, 1999 while this Agreement is in effect, 0.875%. "Arrangers" means the financial institutions named under the caption "Arrangers" on the signature pages hereof. 9 3 "Arun III Contract" has the meaning set forth in the KGC Sales Contract. "Assumed Interest Rate" means the interest rate per annum set forth on Schedule 3; provided, however, that at any time and from time to time following the date hereof upon the reasonable request of the Borrower, the Tranche A Lender or the Agent, the Borrower, the Tranche A Lender and the Agent shall negotiate in good faith to reach agreement on an interest rate per annum to serve as the Assumed Interest Rate which is acceptable to the Borrower, the Tranche A Lender and the Agent. If agreement cannot be reached on such interest rate within 10 Business Days following a request for such negotiations, then the Assumed Interest Rate shall be the interest rate per annum specified in writing by a Selected Qualified Bank as the most appropriate interest rate to assume for purposes of calculating the Debt Coverage Ratio. "Availability Period" means the period beginning on the Effective Date and ending on the earlier of (i) the date nine months following the Completion Date or (ii) September 10, 1998. "Basic Agreements" means the agreements listed on Schedule 1 hereto. "Bontang Plant" means the natural gas liquefaction plant at Bontang Bay on the east coast of Kalimantan, Indonesia, including all related facilities, such as natural gas processing plants for the production of LNG and liquefied petroleum gas consisting of propane and butane, utilities, storage tanks, loading lines and arms, harbor, docks, berths, tugboats, residential community, workshops, offices, fixed plant and equipment and communication systems, together with replacements, improvements, additions and expansions of all such facilities (including Train G), together also with natural gas transmission lines extending from "Delivery Points" as defined in the Processing Agreement, and from such other points in other fields from which natural gas is supplied, to the said natural gas liquefaction plant (including associated knock-out drums but excluding natural gas gathering pipelines within fields). "Bontang V Payment Account" has the meaning set forth in Article 1 of the Trust Agreement. "Borrowed Amounts" has the meaning set forth in Section 2.2(b) hereof. "Borrower" means BankAmerica International, solely as Trustee under the Trust Agreement and not in its individual capacity. The term "Borrower" does not include 10 4 BankAmerica International in any other capacity or any one or more of the Producers. "Borrowing" means a borrowing hereunder consisting of Advances of a Tranche made to the Borrower at the same time by all then participating Lenders severally. "Borrowing Date" means (i) with respect to the initial Borrowing, a Business Day occurring on or after the fifth Business Day following the Effective Date and specified in a Notice of Borrowing as a date on which the Borrower will make a Borrowing hereunder and (ii) thereafter a Business Day occurring, on the eighth, ninth, tenth, eleventh or twelfth day of any calendar month and specified in a Notice of Borrowing as a date on which the Borrower will make a Borrowing hereunder; provided that not more than one Borrowing Date may occur during any single calendar month and no Borrowing Date may occur following the last day of the Availability Period; and provided further that if a Borrowing Date would otherwise occur on a date which is not a Business Day, such Borrowing Date shall be the immediately succeeding Business Day, or, if any such extension would cause the Borrowing Date to be a date later than the twelfth calendar day of the relevant month, then the Borrowing Date shall be the immediately preceding Business Day. "Business Day" means any day on which (i) dealings in Dollar deposits are carried on in the London interbank market and (ii) commercial banks are not authorized or required to close in any of London, the City of New York or Tokyo. "Buyer" means each of (i) Korea Gas Corporation, a corporation organized under the laws of the Republic of Korea, as buyer under the KGC Sales Contract, (ii) Chinese Petroleum Corporation, a corporation organized under the laws of the Republic of China, as buyer under the CPC Sales Contract and (iii) each of the Japanese Buyers, as buyers under the New 1973 Sales Contract. "Commitment" means, with respect to each Lender, the principal amount set forth opposite such Lender's name under the caption "Commitment" on the signature pages hereof, as such amounts may be reduced from time to time pursuant to Section 3.8 hereof, or such Lender's commitment to lend such amounts, as the context may require. "Completion Date" means the date on which each of the Tranche A Lender and the Agent shall have received a written notice from the Borrower as required by Sec- 11 5 tion 6.1(e) hereof, to which is attached a notice from Pertamina to the effect that: (i) the construction of the Additional Plant and the Loading Facilities has been completed in accordance with the Development Plan and the Additional Plant and the Loading Facilities have been fully and finally accepted by Pertamina under the Construction Documents; and (ii) the Additional Plant has demonstrated processing capabilities consistent with those contained in the Development Plan and at least 170,000 metric tons of LNG meeting the quality specifications set forth in each of the LNG Sales Contracts have been produced over a period of 30 consecutive days and delivered to storage during such period. "Construction Documents" means (i) the EPC Contract and (ii) the Loading Facilities Construction Contract. "CPC Sales Contract" means the Memorandum of Agreement between Pertamina and Chinese Petroleum Corporation for Sale and Purchase of LNG during 1998 and 1999, dated as of December 6, 1994, as heretofore and hereafter modified or amended, until such time as no amounts that may then or thereafter be payable thereunder or with respect thereto would, if paid, constitute Source of Debt Service, at which time such Memorandum shall cease, for purposes hereof and for purposes of the Producers Agreement, to be the CPC Sales Contract and an LNG Sales Contract. "CPC SDS Period" has the meaning set forth in the definition of Source of Debt Service. "CPC Supply Agreements" means, for as long as the CPC Sales Contract is an LNG Sales Contract: (i) Package V Supply Agreement (1998-1999 LNG Sales to Chinese Petroleum Corporation), dated June 16, 1995, by and between Pertamina, on the one hand, and the members of the Vico Group, on the other hand, as heretofore and hereafter modified or amended; (ii) Package V Supply Agreement (1998-1999 LNG Sales to Chinese Petroleum Corporation), dated June 16, 1995, by and between Pertamina, on the one hand, and the members of the Total Group, on the other hand, as heretofore and hereafter modified or amended; (iii) Package V Supply Agreement (1998-1999 LNG Sales to Chinese Petroleum Corporation), dated June 16, 1995, by and between Pertamina, on the one hand, and Unocal, 12 6 on the other hand, as heretofore and hereafter modified or amended; and (iv) Package V Supply Agreement (1998-1999 LNG Sales to Chinese Petroleum Corporation), dated June 16, 1995, by and between Pertamina, on the one hand, and Unocal and Inpex, on the other hand, as heretofore and hereafter modified or amended. "Debt Coverage Ratio" means: (i) during the Availability Period, an amount determined as the product of (a) (i) the sum of (x) the present value as of September 10, 1998 (determined by discounting by the Assumed Interest Rate at the time of calculation) of the Source of Debt Service reasonably anticipated to be payable from such date to the Final Maturity Date plus (y) the amount held in the Reserve Account at the time of calculation, divided by (ii) the total Commitments, multiplied by (b) 100; and (ii) thereafter, an amount determined as the product of (a) (i) the sum of (x) the present value as of the time of calculation (determined by discounting by the Assumed Interest Rate at the time of calculation) of the Source of Debt Service reasonably anticipated to be payable from the time of calculation to the Final Maturity Date plus (y) the amount held in the Reserve Account at the time of calculation, divided by (ii) the outstanding principal amount of the Notes at the time of calculation, multiplied by (b) 100. The assumptions necessary for calculating the Debt Coverage Ratio are set forth in Schedule 3 hereto. These assumptions shall remain in effect for purposes of calculating the Debt Coverage Ratio, whenever required, until such time as new assumptions have been mutually agreed by the Borrower, the Tranche A Lender and the Agent or specified by a Selected Qualified Bank, in each case as provided herein. The Borrower, the Tranche A Lender or the Agent may at any time (but not more than once each calendar quarter) request a reconsideration of such assumptions, whereupon the Borrower, the Tranche A Lender and the Agent shall negotiate in good faith to reach agreement on the assumptions described below, used in calculating the Debt Coverage Ratio which are acceptable to the Borrower, the Tranche A Lender and the Agent. The assumptions to be negotiated in good faith are, in addition to the Assumed Interest Rate as provided in the definition thereof, those with respect to the realized export prices of all classifications of Indonesian crude oil and the U.S. Consumer Price Index, in each case as such realized export prices and Consumer Price Index are used for determining the LNG sales price in the relevant LNG Sales 13 7 Contract. If the Borrower, the Tranche A Lender and the Agent cannot reach agreement on such assumptions within 10 Business Days following a request by one to the others for such negotiations, then such assumptions shall be those specified in writing by a Selected Qualified Bank. "Debt Coverage Reserve Account" has the meaning set forth in Article 1 of the Trust Agreement. "Debt Service Account" has the meaning set forth in Article 1 of the Trust Agreement. "Deferred Portion" means any portion of the outstanding principal amount of a Tranche, the payment of which has been deferred pursuant to Section 2.10(b) hereof. "Development Plan" means the Badak LNG Train "G" Project Development Plan prepared by Project Gas and Petrochemical, dated February 1995, as heretofore and hereafter amended. "Dollars" and the sign "$" mean such coin or currency of the United States of America as is, at the relevant time, legal tender for the payment of public and private debts. "Drawdown Schedule" has the meaning set forth in Section 2.2(c) hereof. "Effective Date" has the meaning set forth in Section 5.1 hereof. "Encumbrance" means any lien, security interest, mortgage, deed of trust, pledge, charge or any other encumbrance of any kind, including, without limitation, the rights of a vendor, lessor or similar party under any conditional sale agreement or other title retention agreement or lease substantially equivalent thereto, any production payment, and, with respect to any property or assets, any other right of or arrangement with any creditor to have its claim satisfied out of any such property or assets, or the proceeds therefrom, prior to the general creditors of the owner thereof. "EPC Contract" means each of (i) the Bontang LNG Expansion Project Train G Contract No. B60-JMC-001 Agreement between Pertamina and IKPT, dated March 20, 1995, (ii) the Bontang LNG Expansion Project Train G Contract No. B60-JMC-001 Interim Contract between Pertamina and IKPT, dated March 20, 1995, (iii) Articles 1, 2, 6, 8, 9 and 18 of the Collaboration Agreement dated March 1, 1995 among IKPT, Chiyoda Corporation and Mitsubishi Corporation, and (iv) the letter agreement dated March 1, 1995 among Chiyoda 14 8 Corporation, Mitsubishi Corporation and Pertamina, each as heretofore and hereafter amended. "Events of Default" means any of the events specified in Section 7 hereof. "Excluded Taxes" means: (i) with respect to Tranche A, (x) any Taxes imposed by Japan or any department, agency or political subdivision or taxing authority thereof or therein and (y) the additional amount of any Taxes that may be imposed upon or with respect to a Payment arising solely by reason of the fact that the Tranche A Lender changes the source of the funds it uses to make or maintain Advances from that contemplated as of the date hereof for any reason other than a change in the source of funding made in connection with maintaining any overdue principal or other amounts owing pursuant to this Agreement with respect to Tranche A or the Tranche A Note or any Deferred Portion of Tranche A; and (ii) with respect to Tranche B, (x) any Taxes (including withholdings) based upon gross or net income payable by a Tranche B Lender or the Agent to the jurisdiction of such Lender's incorporation or the jurisdictions in which such Lender has its principal executive office or in which its Lending Office is located, or to any department, agency or other political subdivision or taxing authority in any of such jurisdictions and (y) the additional amount of any Taxes (other than Taxes described in the preceding clause (x) prior to a change in the Lending Office) that may be imposed upon or with respect to a Payment arising solely by reason of the facts that the Lender is a foreign corporation or other non-resident person within the meaning of the Internal Revenue Code of 1986, as amended, and the Lending Office receiving such Payment is not located in the United States of America. Solely for purposes of the preceding sentence, the term "Lending Office" shall mean, in addition to the definition set forth below in this Section 1, a branch or office of a Tranche B Lender which has physical custody of a Tranche B Note, this Agreement or the Letter Agreement or which conducts the activities that are the responsibilities of a Tranche B Lender described in this Agreement or, solely in the event that a taxing jurisdiction asserts a Tax by reason of the fact that a branch or office of a Tranche B Lender previously had (but no longer has) such custody or conducted (but no longer conducts) such activities, such other branch or office. "Extension Period" has the meaning set forth in the definition of Source of Debt Service. 15 9 "Final Maturity Date" means the fortieth Maturity Date occurring following the last day of the Availability Period. "Front End Fee Letter Agreement" has the meaning set forth in Section 2.8(a) hereof. "Gross Invoice Amount" means: (i) with respect to the KGC Sales Contract, the sum, without duplication, of (a) the amounts payable to the Borrower pursuant thereto in respect of LNG purchased, (b) amounts payable to the Borrower pursuant to Section 6.3 of each KGC Supply Agreement (with respect to amounts payable to Pertamina), (c) all amounts payable to the Borrower on account of interest due by reason of late payment of invoices for LNG under the KGC Sales Contract pursuant to the provisions thereof that result from the incorporation therein of Sections 10.3(d) of each of the Arun III Contract and the Korea II Contract (as defined in the KGC Sales Contract), (d) amounts payable to the Borrower relating to transportation charges, if any, other than demurrage and (e) all demurrage payable to the Borrower under the KGC Sales Contract pursuant to the provisions thereof that result from the incorporation therein of Section 4.5 of the Arun III Contract; (ii) with respect to the CPC Sales Contract, the sum, without duplication, of (a) the amounts payable to the Borrower pursuant thereto in respect of LNG purchased, (b) amounts payable to the Borrower pursuant to Section 6.3 of each CPC Supply Agreement (with respect to amounts payable to Pertamina), (c) all amounts payable to the Borrower on account of interest due by reason of late payment of invoices for LNG under the CPC Sales Contract pursuant to the provisions thereof that result from the incorporation therein by reference of Section 10.3(c) of the Badak III LNG Sales Contract (as defined in the CPC Sales Contract), (d) amounts payable to the Borrower relating to transportation charges, if any, other than demurrage and (e) all demurrage payable to the Borrower under the CPC Sales Contract pursuant to the provisions thereof that result from the incorporation therein by reference of Section 4.4 of the Badak III LNG Sales Contract; and (iii) with respect to the New 1973 Sales Contract, the sum, without duplication, of (a) the amounts payable to the Borrower pursuant thereto in respect of LNG purchased or, if not taken, required to be purchased but not taken thereunder, (b) amounts payable to the Borrower pursuant to Section 5.3 of each Japanese Supply Agreement (with respect to amounts payable to Pertamina), (c) all amounts payable to the Borrower on account of interest due 16 10 by reason of the late payment of invoices for LNG under the section of the Second A/R 1973 Sales Contract that corresponds to Section 10.3 of Attachment A to the 1973 Extension MOA, (d) amounts payable to the Borrower under the New 1973 Transportation Arrangements and (e) all demurrage and other amounts payable to the Borrower by the Buyer under the sections of the Second A/R 1973 Sales Contract that correspond to Sections 4.4(c), 4.5(b) and 4.6 of Attachment A to the 1973 Extension MOA; provided that the Gross Invoice Amount (other than amounts paid to Pertamina solely with respect to the transportation of cargoes of LNG, including without limitation demurrage payments and non-utilization costs) shall not be reduced by any rebate, set-off, reduction or discount given or agreed to by one or more parties to any LNG Sales Contract from such amount payable as so defined, adjusted and calculated; and provided further that if the Borrower is authorized and requested by the Producers (which authorization and request may be given pursuant to Section 1.16(b) of the Producers Agreement) to execute and deliver an agreement providing for the amendment of this definition of Gross Invoice Amount, and if the Tranche A Lender and the Agent on behalf of the Tranche B Lenders also execute and deliver such agreement this definition of Gross Invoice Amount shall be deemed amended for all purposes of this Agreement as set forth in such agreement. "Guarantee" by any Person means any obligation, contingent or otherwise, of such Person guaranteeing any Indebtedness or other obligation of any other Person and, without limiting the generality of the foregoing, any obligation, direct or indirect, contingent or otherwise, of such Person (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation (whether arising by virtue of partnership arrangements, by agreement to keep-well, to purchase assets, goods, securities or services, to take-or-pay or to maintain financial statement conditions or otherwise) or (ii) entered into for the purpose of assuring in any other manner the obligee of such Indebtedness or other obligation of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part); provided that the term Guarantee shall not include endorsements for collection or deposit in the ordinary course of business. "IKPT" means P.T. Inti Karya Persada Tehnik, an Indonesian corporation. "Indebtedness" means, with respect to any Person, (i) all indebtedness or obligations of such Person for borrowed money, (ii) all indebtedness or obligations of such Person evidenced by bonds, debentures, notes, swap agree- 17 11 ments or other similar instruments or agreements, and all securities issued by such Person providing for mandatory payments of money, whether or not contingent, (iii) all obligations of such Person to pay the deferred purchase price of property or services, except trade accounts payable arising in the ordinary course of business, (iv) all obligations of such Person as lessee under capital leases, (v) all obligations of such Person to purchase securities (or other property) which arise out of or in connection with the sale of the same or substantially similar securities or property, (vi) all non-contingent obligations of such Person to reimburse any Person in respect of amounts paid under a letter of credit or similar instrument to the extent that such reimbursement obligations remain outstanding five business days after they become non-contingent, (vii) Indebtedness of others secured by an Encumbrance on any asset of such Person, whether or not such Indebtedness is assumed by such Person or (viii) all Guarantees by such Person of or with respect to the Indebtedness of another Person. "Inpex" means Indonesia Petroleum, Ltd. "Insured Bontang Plant" means the Bontang Plant as defined herein but excluding: (i) property located outside the perimeter fence (other than the feed gas knock-out drums which are located in a separately fenced area to the west of the main plant and which are included in the meaning of Insured Bontang Plant); (ii) land acquisition, site preparation, grading and infilling; (iii) roads, gates and fences; (iv) foundations other than parts exposed at or above grade level; (v) pilings; (vi) underground pipes, sewers and drains; (vii) LNG and LPG (liquefied petroleum gas) loading docks other than the equipment and superstructures thereon; (viii) cooling water intakes other than the equipment thereon; (ix) cargo docks and navigational aids located offshore; (x) moveables other than spare parts; (xi) fresh water systems, outfall canals and diversion dikes; and (xii) temporary electrical and communications equipment. "Interest Payment Date" means the last day of each Interest Period. "Interest Period" means (except in the case of the initial Interest Period applicable to a Borrowing), with respect to Tranche A, a period of three months, and, with respect to Tranche B, a period of three or six months selected or deemed selected by the Borrower as provided in Section 2.4 hereof, and, in each case, determined as follows: (i) The initial Interest Period for each Borrowing will begin on the date of such Borrowing and will 18 12 end on the March 10, June 10, September 10 or December 10 next occurring within three months thereafter, and each subsequent Interest Period for such Borrowing will begin on the Interest Payment Date ending the previous Interest Period and end on the June 10, September 10, December 10 or March 10 next occurring three or six months thereafter, as the case may be, subject to Section 2.4 hereof and clauses (ii), (iii) and (iv) of this definition. (ii) Subject to clause (iv) of this definition, all Borrowings for which Interest Periods end on the same Interest Payment Date shall be consolidated so that all subsequent elections of Interest Periods for such Borrowings shall apply to all such Borrowings so consolidated. (iii) If any Interest Period would otherwise end on a day which is not a Business Day, such Interest Period shall end on the immediately succeeding Business Day. (iv) If the Borrower wishes to elect an Interest Period of six months for Borrowings of Tranche B and if the aggregate outstanding principal amount of the Borrowings of Tranche B for which a Notice of Interest Period is then to be given is greater than the amount of the repayment installment of such Tranche due to the Tranche B Lenders on a Maturity Date approximately three months following the date of the proposed election, then, for purposes of calculating interest, such Borrowings shall be divided and henceforth treated as two separate Borrowings of such Tranche (such division to be pro rata as to each Tranche B Lender's Advances), one of an amount equal to the amount of the repayment installment of such Tranche due to the Tranche B Lenders on such Maturity Date (the Interest Period for which will end on such Maturity Date) and the other of an amount equal to the remainder of such consolidated Borrowings of such Tranche. The Borrower's election of a six month Interest Period shall only apply to such remainder of the consolidated Borrowings of such Tranche. "Japanese Buyers" means Chubu Electric Power Co., Inc., The Kansai Electric Power Co., Inc., Kyushu Electric Co., Inc., Nippon Steel Corporation, Osaka Gas Co., Ltd. and Toho Gas Co., Ltd. "Japanese Supply Agreements" means, for as long as the New 1973 Sales Contract is an LNG Sales Contract: (a) during the portion of the Extension Period commencing on January 1, 2000 and ending on December 31, 2009: (i) Package V Supply Agreement for Natural Gas in Support of the 1973 LNG Sales Contract Extension, dated June 16, 1995, by and between Pertamina, on the one 19 13 hand, and the members of the Vico Group, on the other hand, as heretofore and hereafter modified or amended; (ii) Package V Supply Agreement for Natural Gas in Support of the 1973 LNG Sales Contract Extension, dated June 16, 1995, by and between Pertamina, on the one hand, and the members of the Total Group, on the other hand, as heretofore and hereafter modified or amended; (iii) Package V Supply Agreement for Natural Gas in Support of the 1973 LNG Sales Contract Extension, dated June 16, 1995, by and between Pertamina, on the one hand, and Unocal, on the other hand, as heretofore and hereafter modified or amended; and (iv) Package V Supply Agreement for Natural Gas in Support of the 1973 LNG Sales Contract Extension, dated June 16, 1995, by and between Pertamina, on the one hand, and Unocal and Inpex, on the other hand, as heretofore and hereafter modified or amended. (b) during the portion of the Extension Period, if any, commencing after December 31, 2009, such supply agreements as provide for the supply of natural gas to the Bontang Plant in support of sales under the New 1973 Sales Contract during all or part of such period. "KGC Sales Contract" means the Memorandum of Agreement for Purchase and Sale of LNG During 1995-1999, dated September 30th, 1994, by and between Pertamina and Korea Gas Corporation, as heretofore and hereafter modified or amended, until such time as no amounts that may then or thereafter be payable thereunder or with respect thereto would, if paid, constitute Source of Debt Service, at which time such Memorandum shall cease, for purposes hereof and for purposes of the Producers Agreement, to be the KGC Sales Contract and an LNG Sales Contract. "KGC SDS Period" has the meaning set forth in the definition of Source of Debt Service. "KGC Supply Agreements" means, for as long as the KGC Sales Contract is an LNG Sales Contract: (i) Package V Supply Agreement (1995-1999 LNG Sales to Korea Gas Corporation), dated June 16, 1995, by and between Pertamina, on the one hand, and the members of the Vico Group, on the other hand, as heretofore and hereafter modified or amended; (ii) Package V Supply Agreement (1995-1999 LNG Sales to Korea Gas Corporation), dated June 16, 1995, by and between Pertamina, on the one hand, and the members of 20 14 the Total Group, on the other hand, as heretofore and hereafter modified or amended; (iii) Package V Supply Agreement (1995-1999 LNG Sales to Korea Gas Corporation), dated June 16, 1995, by and between Pertamina, on the one hand, and Unocal, on the other hand, as heretofore and hereafter modified or amended; (iv) Package V Supply Agreement (1995-1999 LNG Sales to Korea Gas Corporation), dated June 16, 1995, by and between Pertamina, on the one hand, and Unocal and Inpex, on the other hand, as heretofore and hereafter modified or amended. "Legal Requirements" means all applicable (i) laws, rules, regulations, ordinances, orders, decrees, permits, licenses, authorizations, directions and requirements of all governments and governmental departments, commissions, boards, authorities and agencies, (ii) court and governmental administrative agency judgments and injunctions, (iii) arbitral awards and (iv) requirements of courts and arbitral tribunals. "Lender" means each of, and "Lenders" means all of, the Tranche A Lender and each of the Tranche B Lenders, any transferee pursuant to and subject to the conditions set forth in Section 10.4 hereof and their respective permitted successors and assigns. "Lending Office" means (i) initially for each Lender its office or branch located as of the date hereof at its address set forth on the signature pages hereof and (ii) subsequently for each Lender such other office or branch of such Lender as such Lender may designate by notice in writing to the Borrower and the Agent on behalf of the Tranche B Lenders as the office or branch from or at which such Lender's Advances with respect to a Tranche will thereafter be made or maintained and for the account of which all payments of principal of and interest on the relevant Notes and all other payments to such Lender under this Agreement will thereafter be made; provided that the designation of a new Lending Office shall be subject to the conditions stated in Section 10.4 hereof. "Letter Agreement" has the meaning set forth in Section 2.8(b) hereof. "LIBOR" has the meaning set forth in Section 2.5(a) hereof. "LNG" has the meaning set forth in Article 1 of the Processing Agreement. 21 15 "LNG Sales Contract" means each of, and "LNG Sales Contracts" means all of, the CPC Sales Contract, the KGC Sales Contract and the New 1973 Sales Contract. "Loading Facilities" means the third LNG/LPG loading dock and new LPG storage tank to be located adjacent to the Bontang Plant, in each case as described in and consistent with the Development Plan. "Loading Facilities Construction Contract" means the construction contract with respect to the Loading Facilities contemplated by the Development Plan. "Majority Lenders" means the Tranche A Lender and the Majority Tranche B Lenders. "Majority Tranche B Lenders" means at any time Tranche B Lenders holding in excess of 66-2/3% of the aggregate unpaid principal amount of the Advances of Tranche B, or if no such Advances are at the time outstanding, Tranche B Lenders having in excess of 66-2/3% of the aggregate amount of the Commitments with respect to Tranche B. "Management and Agency Fee Letter Agreement" has the meaning set forth in Section 2.8(b) hereof. "Maturity Date" means the first March 10, June 10, September 10 or December 10 to occur at least three months following the last day of the Availability Period and, thereafter, each March 10, June 10, September 10 and December 10 occurring three months following the last of the same to occur, each of which shall be an Interest Payment Date; provided, however, that if any such date is not a Business Day, such Maturity Date shall be the immediately succeeding Business Day. "New 1973 Sales Contract" means (i) until the Second A/R 1973 Sales Contract has been duly authorized, executed and delivered by Pertamina and the other parties thereto, the 1973 Extension MOA and (ii) thereafter, the Second A/R 1973 Sales Contract. "New 1973 Transportation Arrangements" means the contractual arrangements providing for the transportation of all quantities of LNG contemplated to be delivered pursuant to the New 1973 Sales Contract, as modified or amended from time to time. "1973 Extension MOA" means the Memorandum of Agreement Re: 1973 LNG Sales Contract Extension, dated October 6, 1994, by and between Pertamina and the Japanese Buyers, as heretofore and hereafter modified or amended, until superseded by the Second A/R 1973 Sales Contract. 22 16 "1973 Sales Contract" means the LNG Sales Contract, dated as of December 3, 1973, between Pertamina and the Japanese Buyers, as heretofore and hereafter modified or amended, but excluding the New 1973 Sales Contract. "Note" means any one of the Tranche A Note or Tranche B Notes provided for in Section 2.9 hereof. "Notice of Borrowing" means a notice from the Borrower to each of the Tranche A Lender and the Agent substantially in the form of Exhibit A hereto. "Notice of Completion" means a notice from the Borrower to the Tranche A Lender and the Agent substantially in the form of Exhibit B-3 hereto. "Notice of Deferral" means a notice from the Borrower to each of the Tranche A Lender and the Agent substantially in the form of Exhibit B-1 hereto. "Notice of Interest Period" means a notice from the Borrower to the Agent substantially in the form of Exhibit B-2 hereto. "Notice Lenders" has the meaning set forth in Section 2.6. "Pari Passu Swap Indebtedness" has the meaning set forth in Section 6.4 hereof. "Payments" has the meaning set forth in Section 3.3 hereof. "Person" means and includes any individual, corporation, juridical entity, association, statutory body, partnership, joint venture, trust, estate, unincorporated organization or government, state or any political subdivision, instrumentality, agency or authority thereof. "Pertamina" means Perusahaan Pertambangan Minyak Dan Gas Bumi Negara, a State Enterprise of the Republic of Indonesia, which is wholly owned by the Republic of Indonesia, and its successors and assigns permitted under the Producers Agreement. "Plant Use Agreement" means the Second Amended and Restated Agreement for Use and Operation of Plant dated August 12, 1991, but effective as of February 9, 1988, between Pertamina and P.T. Badak, as heretofore and hereafter modified or amended. 23 17 "Processing Agreement" means the Amended and Restated Bontang Processing Agreement, dated as of February 9, 1988, among the Producers (or their predecessors in interest) on the one hand and P.T. Badak on the other, as heretofore and hereafter modified or amended. "Producers" means Pertamina, Virginia Indonesia Company, OPICOIL Houston, Inc., Virginia International Company, Lasmo Sanga Sanga Limited, Union Texas East Kalimantan Limited, Universe Gas & Oil Company, Inc., Total Indonesie, Indonesia Petroleum, Ltd. and Unocal Indonesia Company and Persons succeeding to their interests in the manner permitted by Section 6.3 of the Producers Agreement. "Producers Agreement" means the Bontang V Producers Agreement of even date herewith among the Producers, the Tranche A Lender, the Agent, the Intercreditor Agent, the Technical Agent, the Arrangers and the Tranche B Lenders, as hereafter modified or amended. "P.T. Badak" means P.T. Badak Natural Gas Liquefaction Company, a corporation organized under the laws of the Republic of Indonesia. "Qualified Bank" has the meaning set forth in Section 6.6(b) hereof. "Quarterly Debt Service" has the meaning set forth in Section 9.1 hereof. "Quarterly Period" shall mean the period from and including the making of the initial Borrowing to and including the next to occur of March 10, June 10, September 10 and December 10, and thereafter each subsequent period of approximately three calendar months ending on the next to occur of March 10, June 10, September 10 or December 10, as the case may be; provided that if the last day of a Quarterly Period would be a day which is not a Business Day such Quarterly Period will end on the immediately succeeding Business Day and that each subsequent Quarterly Period will begin on the calendar day (whether or not a Business Day) immediately following the last day of the preceding Quarterly Period. "Reference Banks" means the London Branches of each of The Long-Term Credit Bank of Japan, Limited, The Fuji Bank, Limited and Credit Lyonnais. "Reference Date" has the meaning set forth in Section 2.5(a) hereof. "Regular Reserve Account" has the meaning set forth in Article 1 of the Trust Agreement. 24 18 "Reserve Account" has the meaning set forth in Article 1 of the Trust Agreement. "Reserve Account Borrowed Amount" has the meaning set forth in Section 2.2(b) hereof. "Reserves" has the meaning set forth in Section 2.6 hereof. "Responsible Officer of the Borrower" means the chairman and vice chairman of the board of directors, the chairman of the executive committee of the board of directors, the president, any executive vice president, any senior vice president, any senior director or any vice president of BankAmerica International. "Second A/R 1973 Sales Contract" means the Second Amended and Restated 1973 LNG Sales Contract, substantially in the form attached to the 1973 Extension MOA as Attachment A, as hereafter modified or amended, until such time as no amounts that may then or thereafter be payable thereunder or with respect thereto would, if paid, constitute Source of Debt Service, at which time such Contract shall cease, for purposes hereof and for purposes of the Producers Agreement, to be the Second A/R 1973 Sales Contract and an LNG Sales Contract. "Section 10.4(a) Affiliate" has the meaning set forth in Section 10.4(a) hereof. "Selected Qualified Bank" has the meaning set forth in Section 6.6(a) hereof. "Source of Debt Service" means I.(i) in respect of each amount payable to the Borrower for cargoes of LNG delivered on or after January 1, 1998 and for cargoes ordered for delivery on or before December 31, 1999 (the "KGC SDS Period") under the KGC Sales Contract, or payable with respect to the KGC SDS Period to the Borrower pursuant to the Supply Agreements or otherwise pursuant to the KGC Sales Contract (without duplication), the portion, if any, of the amount so payable equal to 90% of the LNG Related Portion (as defined in the KGC Sales Contract) of the Gross Invoice Amount payable (a) under each invoice rendered with respect to each such cargo, and (b) otherwise in respect of each such cargo, plus 90% of all indemnities and additional amounts payable by the Buyer with respect to the KGC SDS Period under the KGC Sales Contract (excluding such amounts required to be paid to Pertamina with respect to the transportation of such cargoes of LNG, including, without limitation, demurrage payments), without any reduction or set-off from any such amounts (for 25 19 purposes hereof, a cargo shall be deemed delivered when title thereto passes to KGC pursuant to the terms of the KGC Sales Contract); (ii) in respect of each amount payable to the Borrower for cargoes of LNG delivered on or after January 1, 1998 and for cargoes ordered for delivery on or before December 31, 1999 (the "CPC SDS Period") under the CPC Sales Contract, or payable with respect to the CPC SDS Period to the Borrower pursuant to the Supply Agreements or otherwise pursuant to the CPC Sales Contract (without duplication), the portion, if any, of the amount so payable equal to 90% of the LNG Related Component (as defined in the CPC Sales Contract) of the Gross Invoice Amount payable (a) under each invoice rendered with respect to each such cargo, and (b) otherwise in respect of each such cargo, plus 90% of all indemnities and additional amounts payable by the Buyer with respect to the CPC SDS Period under the CPC Sales Contract (excluding such amounts required to be paid to Pertamina with respect to the transportation of such cargoes of LNG, including without limitation demurrage payments), without any reduction or set-off from any such amounts (for purposes hereof, a cargo shall be deemed delivered when title thereto passes to CPC pursuant to the terms of the CPC Sales Contract); (iii) in respect of each amount payable to the Borrower for LNG purchased during the period from and including January 1, 2000 to and including December 31, 2014 (the "Extension Period") or for LNG required to be purchased but not taken during the Extension Period, under the New 1973 Sales Contract, or payable with respect to the Extension Period to the Borrower pursuant to the Supply Agreements or otherwise pursuant to the New 1973 Sales Contract (without duplication), the portion, if any, of the amount so payable equal to 21% of the LNG Element (as defined in the New 1973 Sales Contract) of the Gross Invoice Amount payable (a) under each invoice rendered with respect to each cargo purchased during the Extension Period, or in the case of LNG required to be purchased during the Extension Period but not taken under each invoice rendered with respect to the same quantity not taken, and (b) otherwise in respect of each such cargo, plus 21% of all indemnities and additional amounts payable by any of the Buyers with respect to the Extension Period under the New 1973 Sales Contract (excluding such amounts required to be paid to Pertamina with respect to the transportation of such cargoes of LNG, including without limitation demurrage payments and non-utilization costs), without any reduction or set-off from any such amounts; and 26 20 II. in respect of any period, the aggregate amount of the Source of Debt Service payable during such period. Notwithstanding the foregoing, if the Borrower is authorized and requested by the Producers (which authorization and request may be given pursuant to Section 1.16(b) of the Producers Agreement) to execute and deliver an agreement providing for the amendment of this definition of Source of Debt Service, and if the Tranche A Lender and the Agent on behalf of the Tranche B Lenders also execute and deliver such agreement, this definition of Source of Debt Service shall be deemed amended for all purposes of this Agreement as set forth in such agreement. "Subordinated Indebtedness" has the meaning set forth in Section 6.4 hereof. "Supply Agreement" means each of, and "Supply Agreements" means all of, the CPC Supply Agreements, the KGC Supply Agreements and the Japanese Supply Agreements. "Support Facilities" means the three new tug-boats and the community support facilities to be located adjacent to the Bontang Plant, in each case as described in and consistent with the Development Plan. "Taxes" means any present or future taxes, levies, imposts, duties, fees, assessments, deductions, withholdings or other charges of whatsoever nature, that may now or hereafter be imposed or asserted by any jurisdiction or any political subdivision thereof or any taxing authority therein and all interest, penalties or similar liabilities with respect thereto. "Total Group" means Total Indonesie and Inpex and their successors in interest. "Train G" means, collectively, (i) the Additional Plant, (ii) the Support Facilities and (iii) the Loading Facilities. "Tranche" means Tranche A or Tranche B and "Tranches" means Tranche A and Tranche B. "Tranche A" means Advances of the Tranche A Lender in an aggregate maximum principal amount not exceeding $678,650,000.00. "Tranche A Lender" means Bontang Train-G Project Finance Co., Ltd. and its successors and assigns hereunder. 27 21 "Tranche A Note" has the meaning set forth in Section 2.9 hereof. "Tranche B" means Advances of the Tranche B Lenders in an aggregate maximum principal amount not exceeding $290,850,000.00. "Tranche B Lender" means each of the banks and other financial institutions named under the caption "Tranche B Lenders" on the signature pages hereof and their respective successors and assigns. "Tranche B Note" has the meaning set forth in Section 2.9 hereof. "Transfer Certificate" has the meaning set forth in Section 10.4(b) hereof. "Transferee" and "Transferees" have the meanings set forth in Section 10.4(b) hereof. "Trust Agreement" means the Bontang V Trustee and Paying Agent Agreement among BankAmerica International, as Trustee, and the Producers, dated as of the date hereof, as hereafter modified or amended. "Unocal" means Unocal Indonesia Company. "Vico Group" means Virginia Indonesia Company, Virginia International Company, OPICOIL Houston, Inc., Lasmo Sanga Sanga Limited, Union Texas East Kalimantan Limited, and Universe Gas & Oil Company, Inc. and their successors in interest. SECTION 2. THE ADVANCES 2.1 The Commitments. Upon the terms and subject to the conditions set forth in this Agreement, during the Availability Period the Tranche A Lender agrees to make Advances to the Borrower of Tranche A, and each Tranche B Lender severally, and not jointly or jointly and severally, agrees to make Advances to the Borrower of Tranche B, in each case in Dollars through its Lending Office. The Advances shall be made by each Lender on the Borrowing Dates and in the amounts provided for in Section 2.2 hereof, but in no event in an amount that exceeds the aggregate amount of its Commitment; provided that such Commitment has not theretofore been terminated or cancelled pursuant to Section 3.4(a) hereof or Section 3.8 hereof or otherwise. 28 22 2.2 Purpose and Manner of Borrowing. (a) Subject to the limitations provided in Section 2.1 hereof, the Borrower shall have the right to elect to borrow from the Lenders on each Borrowing Date amounts to be used to pay for costs incurred, or to be incurred, in connection with or otherwise relating to the design, engineering, procurement and construction of or otherwise relating to the Additional Plant, the Loading Facilities and, to the extent provided for in the Drawdown Schedule as the same may be revised from time to time, the Support Facilities. (b) Subject to the limitations provided in Section 2.1 hereof, the Borrower shall have the right to elect to borrow from the Lenders, in addition to the amounts permitted by Section 2.2(a) hereof, the following amounts ("Borrowed Amounts"): (i) on each Borrowing Date occurring during the Availability Period, an amount to be used to pay, and equal in amount to (or rounded upward to the next integral multiple of $1,000,000 as provided in Section 2.2(d)), the sum of the amount of interest, fees, expenses, taxes and other amounts payable by the Borrower pursuant to Sections 2.3, 2.7, 2.8, 3.3, 3.4(b), 6.6 and 10.6 hereof, which amounts shall be used only to pay the amounts referred to therein which are due on such Borrowing Date, and (ii) on each Borrowing Date to occur in 1998, an amount (the "Reserve Account Borrowed Amount") to be paid to the Reserve Account, which amount shall not exceed the lesser of (A)(1) the maximum amount permitted by the terms of Section 3.2(h)(i) of the Trust Agreement to be held in the Reserve Account on such Borrowing Date, as reasonably estimated and reflected in the relevant Notice of Borrowing, less (2) the amount that would be held in the Reserve Account on such Borrowing Date if no amount were borrowed hereunder to deposit in the Reserve Account on such Borrowing Date, as reasonably estimated and reflected in the relevant Notice of Borrowing, or (B) the amount of then undrawn Commitments less the sum of (1) 100 percent of costs estimated to be required for the completion and final acceptance of the Additional Plant and the Loading Facilities pursuant to the Development Plan and the Construction Documents, as set forth in the report referred to in Section 5.4(b) hereof plus (2) the amount of interest, fees, expenses, taxes and other amounts which are reasonably estimated to be incurred by the Borrower pursuant to Section 2.3, 2.7, 2.8, 3.3, 3.4(b), 6.6 and 10.6 hereof during the 29 23 Availability Period and which have not been paid as of such Borrowing Date. The amount of any Borrowings made pursuant to this Section 2.2(b) shall be added to the outstanding principal amount of the Advances and shall bear interest as specified in Section 2.3, 2.4, 2.5, 2.6 and 2.7 hereof. (c) The Borrower has delivered to the Tranche A Lender and the Agent on behalf of the Tranche B Lenders a drawdown schedule (as revised from time to time as provided herein, the "Drawdown Schedule"), a copy of which is attached hereto as Schedule 2, that sets forth the currently expected schedule of Borrowings, including Borrowing Dates and amounts of Borrowings (separately identifying Borrowings under Sections 2.2(a), 2.2(b)(i) and 2.2(b)(ii) hereof and, with respect to Borrowings under Section 2.2(a), separately identifying Borrowings relating to the different costs related to Train G as provided therein), anticipated to be requested during the Availability Period. The Borrower shall update the Drawdown Schedule from time to time, but in any event not less frequently than approximately every six months following the initial Borrowing Date and shall immediately provide such updated Drawdown Schedule to the Tranche A Lender and the Agent on behalf of the Tranche B Lenders. If at any time it is anticipated that a Borrowing to be made on a Borrowing Date will be in an amount greater than 110% of the amount indicated for such Borrowing on the then current Drawdown Schedule or pursuant to any previous notice given pursuant to this sentence, the Borrower shall use all reasonable efforts (but shall not be liable for failure) to deliver notice thereof, which shall include the then anticipated amount of such Borrowing, to the Tranche A Lender and the Agent as soon as practicable in order to facilitate the Lenders' funding arrangements with respect to such Borrowing. (d) (i) With respect to the initial Borrowing only, the Borrower shall give to each of the Tranche A Lender and the Agent on behalf of the Tranche B Lenders, in each case not later than noon, New York time, on or prior to the sixth Business Day preceding such initial Borrowing Date, a Notice of Borrowing, in writing, which shall specify the amount of such Borrowing and the account or accounts to which such Borrowing shall be made available, each of which shall be the proper account for the deposit of each portion of such Borrowing as provided in the Trust Agreement; provided that notice to the Tranche A Lender with respect to such initial Borrowing Date shall be deemed timely if received by the Tranche A Lender not later than noon Tokyo time on the date five Business Days preceding such Borrowing Date. Notwithstanding the foregoing, the 30 24 initial Borrowing Date may not occur prior to July 14, 1995. (ii) With respect to each subsequent Borrowing, the Borrower shall give to each of the Tranche A Lender and the Agent on behalf of the Tranche B Lenders, in each case not later than noon, New York time, on or prior to the eighth Business Day preceding such Borrowing Date, a Notice of Borrowing, in writing, which shall specify the amount of such Borrowing and the account or accounts to which such Borrowing shall be made available, each of which shall be the proper account for the deposit of each portion of such Borrowing as provided in the Trust Agreement; provided that notice to the Tranche A Lender with respect to such Borrowing Date shall be deemed timely if received by the Tranche A Lender not later than noon Tokyo time on the date seven Business Days preceding such Borrowing Date. (iii) The amount to be drawn down on any Borrowing Date shall be $5,000,000.00 or any larger integral multiple of $1,000,000.00, except in the case of the final Borrowing Date, in which case the amount to be drawn down shall be any amount of the undrawn Commitments specified by the Borrower; provided that the aggregate amount to be drawn down on any Borrowing Date shall in no event exceed the aggregate amount of then outstanding Commitments. The total amount to be drawn down on any Borrowing Date shall be apportioned 70% to the Tranche A Lender and 30% to the Tranche B Lenders, and the amount apportioned to the Tranche B Lenders shall be apportioned by the Agent on a pro rata basis among the outstanding Commitments of the Tranche B Lenders. A Notice of Borrowing, once received by the Tranche A Lender and the Agent, shall not be revocable by the Borrower. (e) With respect to each Notice of Borrowing received by the Tranche A Lender, upon and subject to the terms and conditions of this Agreement, before 1:00 p.m. New York time on the Borrowing Date identified therein the Tranche A Lender shall make available in Dollars to the Borrower to the account or accounts in New York City specified with respect to Tranche A in such Notice of Borrowing on such Borrowing Date the amount of funds requested of the Tranche A Lender by the Borrower in such Notice of Borrowing in same day settlement funds by credit of Federal or other immediately available funds. (f) Upon receipt of a Notice of Borrowing, the Agent shall forthwith notify each Tranche B Lender of the Borrowing Date identified therein. Before 11:00 a.m. New York time on such Borrowing Date each Tranche B Lender will make available in Dollars the amount of such Tranche B Lender's Advance to be made on such Borrowing Date in same day settlement funds by credit of Federal or other immedi- 31 25 ately available funds satisfactory to the Agent to the account of the Agent (account no. 544-7-75066) at Chemical Bank, N.A. located at 4 New York Plaza, New York, 10004, U.S.A. for the account of the Borrower or at such other office or bank in New York, New York or elsewhere as the Agent may from time to time designate by telex (to be confirmed by letter) to the Tranche B Lenders. Upon and subject to the terms and conditions of this Agreement, before 1:00 p.m. New York time on such Borrowing Date the Agent on behalf of the Tranche B Lenders shall make available to the Borrower to the account or accounts in New York City as shall have been specified with respect to Tranche B by the Borrower in such Notice of Borrowing on such Borrowing Date the funds made available to the Agent pursuant to the next preceding sentence in the same funds as received by the Agent. (g) The failure of a Lender to make an Advance to be made by it on the date specified therefor shall not relieve any other Lender of its obligation to make its Advance hereunder on such date, and no Lender shall be responsible for the failure of any other Lender to make an Advance to be made by such other Lender on the date specified therefor. Unless the Agent shall have been notified by a Tranche B Lender one Business Day prior to a Borrowing Date (which notice shall be effective only upon receipt) that such Tranche B Lender does not intend to make available to it such Tranche B Lender's Advance with respect to Tranche B to be made on such date, the Agent may (but shall have no obligation to) assume that such Tranche B Lender has made such Tranche B Lender's Advance available to it on such date, and the Agent may, in reliance upon such assumption, make available (but shall have no obligation to make available) to the Borrower a corresponding amount. If the Tranche B Lender's Advance is not in fact made available to the Agent by such Tranche B Lender, the Agent shall be entitled to recover such amount either on demand from such Tranche B Lender or on demand and in accordance with the provisions of Section 3.10 hereof from the Borrower together with interest thereon at a rate per annum representing the interest cost to the Agent (as determined by the Agent using reasonable efforts to minimize such cost) of funding the amount in question until reimbursement thereof to the Agent; provided that to the extent such amount is recovered from the Borrower, interest paid thereon by the Borrower shall not exceed the rate or rates per annum then applicable to the Advances made with respect to Tranche B. 2.3 Interest. The Borrower shall pay interest on the unpaid principal amount of all Advances outstanding from time to time at the applicable interest rates determined in accordance with Section 2.5 or 2.6 hereof, as the case may be, with respect to each Interest Period. Such interest 32 26 payable with respect to each Interest Period shall be paid on the Interest Payment Date at the end of such Interest Period. Interest on the Advances shall be calculated from and including the relevant Borrowing Date up to but not including the date of actual receipt and shall be computed on the basis of a year of 360 days, and shall be payable for the actual number of days elapsed. 2.4 Election of Interest Periods for Tranche B. The Borrower shall have the option to elect an Interest Period of three months or six months to apply to the entire amount of the Borrowings outstanding with respect to Tranche B for which an Interest Period is then to be determined, except (i) for the initial Interest Period referred to in clause (i) of the definition of Interest Period; (ii) for each other Interest Period during the Availability Period, each of which shall be a three-month Interest Period; (iii) with respect to any amounts of principal coming due in approximately three months, to which a three-month Interest Period shall apply as provided in clause (iv) of the definition of Interest Period; and (iv) with respect to any Deferred Portion of such Tranche, to which a three-month Interest Period shall apply. Such option shall be exercised by delivery to the Agent of a written Notice of Interest Period and the Agent shall promptly notify the Tranche B Lenders of the Interest Period so elected. If a Notice of Interest Period in respect of any Interest Period is not received by the Agent on behalf of the Tranche B Lenders at least five Business Days prior to the commencement of such Interest Period, the Borrower shall be deemed to have elected an Interest Period of three months' duration. 2.5 Determination of Interest Rates. (a) On the Business Day (the "Reference Date") that is two Business Days prior to the commencement of each Interest Period, the Tranche A Lender shall fix the interest rate for the Advances with respect to Tranche A and any Deferred Portion of Tranche A to be outstanding with respect to and during such Interest Period, and the Agent on behalf of the Tranche B Lenders shall fix the interest rate for the Advances with respect to Tranche B and any Deferred Portion of Tranche B to be outstanding with respect to and during such Interest Period, in each case at the rate per annum equal to the sum of the Applicable Margin plus the London Interbank Offered Rate (the London Interbank Offered Rate is referred to as "LIBOR"). LIBOR for each such Interest Period shall be the rate for deposits in Dollars which appears on page 3750 of the Telerate screen (or such other page as may replace that page on the Telerate screen for the purpose of displaying London interbank Dollar deposit rates of leading reference banks and as may be 33 27 selected by the Tranche A Lender and the Agent on behalf of the Tranche B Lenders) as of approximately 11:00 a.m., London time, on the Reference Date for a period equal to such Interest Period, as determined by each of the Tranche A Lender and the Agent on behalf of the Tranche B Lenders. If such an offered rate is not available on the relevant page of the Telerate screen or if the Telerate screen is unavailable, or if an offered rate is not quoted on the Telerate screen for Dollars or for the period required at or about 11:00 a.m. (London time) on the Reference Date, LIBOR for each such Interest Period shall be the arithmetic mean (rounded upward, if necessary, to the nearest 1/16 of 1%) of the rates which are quoted at or about 11:00 a.m., London time, on the Reference Date for a period equal to such Interest Period, on such Business Day on the "LIBO" page of the Reuters Monitor Money Rates Service (or such other page of the Reuters Monitor Money Rates Service as may replace such LIBO page for the purpose of displaying London interbank Dollar offered rates of leading reference banks and as may be selected by the Tranche A Lender and the Agent on behalf of the Tranche B Lenders). So long as at least two quotations are available on the "LIBO" page for a period equal to such Interest Period, LIBOR for such Interest Period shall be determined in accordance with the preceding sentence on the basis of the offered quotations as quoted. The determinations of the Tranche A Lender and the Agent on behalf of the Tranche B Lenders shall be conclusive in the absence of manifest error. (b) If pursuant to Section 2.5(a) hereof the use of the "LIBO" page is required, and the "LIBO" page does not at the appointed time with respect to any Interest Period display at least two offered quotations, LIBOR for such Interest Period shall be the average (rounded upward, if necessary, to the nearest 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 as of approximately 11:00 a.m., London time, on the Reference Date for a period comparable to such Interest Period and in an amount of $50,000,000.00. The determination of the Tranche A Lender and the Agent on behalf of the Tranche B Lenders shall be conclusive in the absence of manifest error and shall be made on the above basis as soon as practicable thereafter, New York time. If for any reason no quotation is furnished by one or more of the Reference Banks to the Tranche A Lender and the Agent on behalf of the Tranche B Lenders, the Tranche A Lender and the Agent on behalf of the Tranche B Lenders shall determine such interest rate on the basis of the quotations furnished by the remaining Reference Banks. 2.6 Alternative Interest Rates; Voluntary Prepayment. If, on any date on which an interest rate is to 34 28 be fixed pursuant to Section 2.5 hereof, (i) none of the Reference Banks is able to furnish a quotation to the Tranche A Lender and the Agent on behalf of the Tranche B Lenders for purposes of determining an interest rate pursuant to Section 2.5(b) hereof or (ii) for purposes of determining an interest rate pursuant to Section 2.5(b) hereof the Tranche A Lender and the Agent on behalf of the Tranche B Lenders are notified by all of the Reference Banks that deposits in Dollars in an amount of $50,000,000.00 are not being offered to the Reference Banks in the London interbank market or (iii) the Agent is notified by Notice Lenders (as defined in the last sentence of this Section 2.6) that the rate or rates for Dollar deposits displayed on the Telerate screen or the "LIBO" page (as applicable pursuant to Section 2.5(a) hereof) or, in the event that LIBOR for such Interest Period is being determined pursuant to Section 2.5(b) hereof, the rates at which Dollar deposits are being offered to the Reference Banks in the London interbank market plus all costs associated with reserves, special deposits, deposit insurance or similar requirements to be maintained or paid in accordance with the regulations or other requirements of the Federal Reserve System, the Federal Deposit Insurance Corporation or any other department, agency or instrumentality of the United States of America or any state thereof (collectively, "Reserves") in effect on the date of this Agreement do not adequately reflect the cost to the relevant Lenders of making or maintaining for the next succeeding Interest Period their respective Advances with respect to Tranche A or Tranche B, as the case may be, or any Deferred Portion thereof, then the Agent shall promptly give notice of such fact to the Borrower and the relevant Lenders. During the 30 days next succeeding the giving of such notice, the Borrower and the relevant Lenders shall negotiate in good faith in order to arrive at a mutually satisfactory interest rate which shall be applicable to such Advances and Deferred Portions to be outstanding during such Interest Period instead of LIBOR. If within such 30-day period the Borrower and the relevant Lenders agree in writing upon an alternative interest rate, such rate shall be substituted for LIBOR and shall be effective with respect to the relevant amounts from the commencement of such Interest Period. The Borrower shall pay to the relevant Lenders interest on such Advances and Deferred Portions calculated based upon such alternative interest rate plus the Applicable Margin during such Interest Period. If the Borrower and the relevant Lenders fail to agree upon such an alternative interest rate within such 30-day period, the interest rate during such Interest Period, applicable to each relevant Lender's Advance and each relevant Lender's Deferred Portion and effective from the commencement of such Interest Period shall be such rate as such Lender shall determine (in a certificate delivered by such Lender to the Agent setting 35 29 forth the basis of the computation of such rate, which certificate shall in the absence of manifest error be conclusive and binding on the Borrower) to be necessary to compensate each such Lender for its actual out-of-pocket cost, and costs associated with such Reserves (determined in good faith using reasonable efforts to minimize the interest cost to the Borrower, rounded upward, if necessary, to the nearest 1/16 of 1% and disregarding for such purposes all costs of Reserves in effect on the date of this Agreement), as of the commencement of such Interest Period, of funds for such Interest Period in an amount equal to the aggregate principal amount of each relevant Lender's Advances and each relevant Lender's Deferred Portion to which such Interest Period relates plus the Applicable Margin. The Agent shall notify the Borrower of such determination as promptly as practicable. After the Agent shall have notified the Borrower of such determination and during the period such interest rate continues to be applicable, the Borrower may elect to prepay any one or more of the relevant Notes or the Deferred Portion of the relevant Notes without premium or penalty (except as provided in Section 2.7(b) hereof) in accordance with the provisions of Section 3.6 hereof. For purposes of this Section 2.6, "Notice Lenders" means at any time either (i) the Tranche A Lender or (ii) Tranche B Lenders holding in excess of 15% of the aggregate unpaid principal amount of the Tranche B Advances, or if no such Advances are at the time outstanding, Tranche B Lenders having in excess of 15% of the aggregate amount of the Commitments with respect to Tranche B. 2.7 Interest Rate on Overdue Amounts; Other Indemnities. (a) The Borrower shall pay interest on overdue principal of the Tranche A Note or any Tranche B Note and, so far as may be lawful, on any other overdue amount owing pursuant to this Agreement, the Notes and the Letter Agreement, from and including the date the payment thereof was due to, but not including, the day of actual payment, at a rate per annum which shall be (i) with respect to the period ending on December 31, 1999, 2.1%, and (ii) thereafter, 1.85%, in each case over (A) the rate which appears on page 3750 (or any successor page) of the Telerate Screen at or about 11:00 a.m., London time, on the day such rate of interest is determined, for deposits in Dollars with maturities of at least six days and not exceeding six months, as the Tranche A Lender may elect with respect to the Tranche A Note and any other amounts payable to the Tranche A Lender and as the Agent on behalf of the Tranche B Lenders may elect with respect to the Tranche B Notes and any other amounts payable to it or to the Tranche B Lenders, in each case as determined, as appropriate, by the Tranche A Lender and the Agent on behalf of the Tranche B Lenders 36 30 upon consulting the relevant page of the Telerate screen, (B) if such rate is not available on the relevant page of the Telerate Screen or if the Telerate Screen is unavailable, the arithmetic mean (rounded upward, if necessary, to the nearest 1/16 of 1%) of the offered quotations in effect at or about 11:00 a.m., London time, on the day such rate of interest is determined for deposits in Dollars with maturities of at least six days and not exceeding six months, as the Tranche A Lender may elect with respect to the Tranche A Note and any other amounts payable to the Tranche A Lender and as the Agent on behalf of the Tranche B Lenders may elect with respect to the Tranche B Notes and any other amounts payable to it or to the Tranche B Lenders as displayed on the "LIBO" page, in each case as determined, as appropriate, by the Tranche A Lender and the Agent upon consulting such "LIBO" Page (or any successor page) of the Reuters Monitor Money Rates Service or (C) if the LIBO Page should be used pursuant to clause (B) but does not at the time of determination display at least two offered quotations, the average (rounded upward, if necessary, to the nearest 1/16 of 1%) of the respective rates at which deposits in Dollars with maturities of longer than six days and shorter than six months, as the Tranche A Lender or the Agent on behalf of the Tranche B Lenders may elect, are offered to each of the Reference Banks in the London interbank market as of approximately 11:00 a.m., London time, on the day such rate of interest is determined in an amount approximately equal to the aggregate amount of such overdue payment due to the relevant Lenders. If for any of the reasons specified in clauses (i), (ii) or (iii) of Section 2.6 hereof an alternative interest rate would be determined pursuant thereto, then such alternative interest rate shall be determined and the Borrower shall pay to the relevant Lenders interest on such overdue principal or other amounts at a rate per annum that shall be (i) with respect to the period ending on December 31, 1999, 2.1%, and (ii) thereafter, 1.85%, in each case over such alternative interest rate without the addition of the Applicable Margin. (b) To the extent permitted by applicable law, without prejudice to the other rights of the Lenders under Sections 2.7(a) and 10.6(b) hereof, the Borrower shall indemnify, without duplication, each such Lender against, hold each such Lender harmless from and promptly pay to the Tranche A Lender or the Agent on behalf of each Tranche B Lender, as the case may be, all out-of-pocket costs, losses (excluding loss of profit) or expenses which each such Lender may sustain or incur as a consequence of (i) any portion of a Borrowing not being made, after notice thereof has been given by the Borrower, other than due to a breach by one or more Lenders of its or their obligations hereunder, (ii) any prepayment of any Advance (including any Deferred Portion thereof) or (iii) the failure by the 37 31 Borrower to pay when due the principal of or interest on any Note or any other amount payable under this Agreement or the Letter Agreement, including but not limited to breakage and other funding costs and any amounts payable by such Lender in order to maintain its Advances, including any Deferred Portion thereof, until the end of the relevant Interest Period in the event of prepayment or until payment of all amounts then due by acceleration or otherwise in the event of a failure to pay, but excluding any such costs, losses or expenses resulting from prepayment on an Interest Payment Date of amounts for which an Interest Period ends on such Interest Payment Date as permitted in accordance with Section 3.7 hereof. In each case involving a prepayment (other than a prepayment under Section 3.7 hereof for which no costs, losses or expenses are payable), each Lender shall act in good faith and use reasonable efforts to minimize the costs, losses and expenses payable by the Borrower hereunder. (c) A certificate of any Lender setting forth in reasonable detail the basis for the determination of the amounts necessary to indemnify such Lender pursuant to Section 2.7(b) shall be conclusive as to the determination of such amounts in the absence of manifest error. 2.8 Fees. (a) The Borrower hereby agrees to pay a non-refundable front end fee in the amount specified in and otherwise in accordance with the letter agreement between the Borrower and the Tranche A Lender of even date herewith (the "Front End Fee Letter Agreement"). (b) The Borrower hereby agrees to pay a non-refundable management fee and a non-refundable agency fee in the amount specified in and otherwise in accordance with the management and agency fee letter agreement between the Borrower and the Agent of even date herewith (the "Management and Agency Fee Letter Agreement" and, collectively with the Front End Fee Letter Agreement, the "Letter Agreement"). (c) The Borrower agrees to pay to the Agent for the account of each Tranche B Lender a commitment fee at the rate of 1/4 of 1% per annum on the daily undrawn amount of such Tranche B Lender's Commitment during the period from and including the Effective Date to and including the last day of the Availability Period. Such fee will be calculated on an estimated basis on the first day of each Interest Period in accordance with the undrawn amount of such Tranche B Lender's Commitment on that day and amounts in respect thereof shall be accumulated for payment and paid in accordance with Sections 3.2 and 3.3 of the Trust Agreement, subject to adjustment when any Advance is made hereunder. 38 32 Such commitment fee shall be calculated on the basis of the actual number of days elapsed and a 360-day year and shall be paid in arrears, in accordance with Section 3.2 hereof, initially on the first Interest Payment Date, thereafter on each Interest Payment Date that occurs during the Availability Period and finally on the Interest Payment Date on or immediately following the last day of the Availability Period. 2.9 The Notes. The Tranche A Lender's Advances shall be evidenced by a single promissory note of the Borrower (the "Tranche A Note"), substantially in the form of Exhibit C-1 hereto, and each Tranche B Lender's Advances shall be evidenced by a single promissory note of the Borrower (a "Tranche B Note"), substantially in the form of Exhibit C-2 hereto, each payable to the order of such Lender for the account of its Lending Office in an amount equal to such Lender's Commitment or, if less, the aggregate unpaid principal amount of such Lender's Advances. Each Note shall be dated the date of its delivery pursuant to Section 5.1 hereof, shall have the blanks therein appropriately completed, and shall bear interest as specified in Sections 2.3, 2.4, 2.5, 2.6 and 2.7 hereof. Each Lender shall, and is hereby irrevocably authorized by the Borrower to, endorse on the schedule attached to its Note or on a continuation of such schedule attached to and made a part of such Note an appropriate notation evidencing the date and amount of each Advance made by such Lender and the date and amount of each payment, prepayment or deferral of principal made by the Borrower with respect thereto. The failure so to record any such amount or any error in so recording any such amount shall not, however, limit or otherwise affect the obligations of the Borrower hereunder or under any of the Notes to repay the principal amount of all Advances thereunder together with all interest accruing thereon. 2.10 Repayment on Maturity Dates; Deferral. (a) Subject to Section 2.10(b), on each Maturity Date the Borrower shall repay with respect to each Tranche, as provided in Section 3.1 hereof, an amount of principal equal to the percentage of the principal amount of such Tranche outstanding at the end of the Availability Period set forth immediately below; provided that on the Final Maturity Date the Borrower shall repay in full the amount of the aggregate Advances of both Tranches then outstanding. 39 33
Percentage of Maturity Date Advance Payable ------------- --------------- 1st to 5th 0.8% each 6th to 17th 2.5% each 18th to 29th 2.75% each 30th to 40th 3.0% each
(b) If after application of amounts to the payment of interest and other amounts payable with respect to both Tranches on any Maturity Date other than the Final Maturity Date, the aggregate of the amounts held in the Debt Service Account and the Reserve Account will be insufficient on such Maturity Date to pay all or a portion of the principal payable on such Maturity Date with respect to both Tranches, then the Borrower may elect (by giving not later than noon New York time on or prior to the eighth Business Day preceding such Maturity Date an irrevocable Notice of Deferral to the Tranche A Lender and the Agent, who shall promptly notify the Tranche B Lenders thereof; provided that notice to the Tranche A Lender with respect to such Maturity Date shall be deemed timely if received by the Tranche A Lender not later than noon Tokyo time on the date seven Business Days preceding such Maturity Date) to defer to the next succeeding Maturity Date payment of the amount of principal for which such funds will be insufficient (pro rata for the account of each Lender to the unpaid principal amount of the Notes) (such amount referred to as the "Deferred Portion"), subject to the following being true on the Maturity Date on which such insufficiency exists: (i) The Borrower shall not have previously deferred payments of any principal in accordance with this Section 2.10(b) either (x) on the four consecutive Maturity Dates immediately preceding such Maturity Date or (y) on a total of 15 previous Maturity Dates, whether or not consecutive; (ii) Each LNG Sales Contract pursuant to which Source of Debt Service may then or in the future be payable shall be in full force and effect; (iii) No material breach or default under any LNG Sales Contract pursuant to which Source of Debt Service may then or in the future be payable shall exist and no notice of incipient material breach or default shall have been given by any party thereto; (iv) No authorization or approval required for the continued validity and enforceability of any LNG Sales Contract pursuant to which Source of 40 34 Debt Service may then or in the future be payable shall have been revoked or suspended; and (v) No Event of Default shall have occurred and be continuing or would occur with the giving of notice or the lapse of time. 2.11 Notices. The Tranche A Lender or the Agent, as appropriate with respect to the Tranche A Note and the Tranche B Notes, respectively, shall promptly give the Borrower, and the Agent shall promptly give the Tranche A Lender or the Tranche B Lenders or each of them, as appropriate, with respect to their Notes (i) notice of each interest rate (or interest rates) determined pursuant to Sections 2.5, 2.6 or 2.7 hereof, the date of each of the next Interest Payment Dates with respect to which the interest payable is then calculable, the date of the next Maturity Date and the amount of principal or interest on the relevant Tranche, as the case may be, the amount of commitment fees estimated in accordance with Section 2.8(c) hereof to be paid to the Tranche B Lenders on each of such dates and the amount of the agency fee, the management fee and the front end fee provided for in the Letter Agreement, (ii) as otherwise provided in this Agreement, notice of other relevant amounts due and payable hereunder, (iii) upon satisfaction of the conditions precedent contained in Section 5.2 hereof, notice to the effect that such conditions precedent have been satisfied, (iv) upon the occurrence of the Effective Date, notice to the effect that the Effective Date has occurred, and (v) the notices to the Borrower by the Tranche A Lender or the Agent or both that Section 3.2(b) of the Trust Agreement requires this Agreement to provide for. The Tranche A Lender or the Agent on behalf of the Tranche B Lenders, as appropriate, shall provide the foregoing information to the Borrower at the time and in the manner specified in Section 3.2(b) of the Trust Agreement; provided that no failure or delay in the giving of such notice shall discharge or excuse the Borrower from or permit the Borrower to delay making any payment hereunder. SECTION 3. PAYMENTS 3.1 Allocation of Amounts; Substitute Payment. (a) Unless otherwise provided in this Agreement, all payments by the Borrower to the Tranche A Lender and the Agent for the account of the Tranche B Lenders shall be allocated as provided for in Section 3.3 of the Trust Agreement. All payments by the Borrower of commitment fees shall be made to the Agent for the account of the Tranche B Lenders, pro rata to their respective 41 35 Commitments. All payments referred to in this Section 3.1 which are received by the Agent in the manner provided in Section 3.2 hereof shall be deemed to have been made to the Tranche B Lenders, and the receipt by the Agent of such payments shall discharge the Borrower from any further liability to make such payments to such Tranche B Lenders. (b) Notwithstanding anything to the contrary contained in this Agreement or in any Note, but subject always to the provisions of Section 9 hereof, if the Agent shall have notified the Borrower that it shall have become unlawful or, in the opinion of the Agent, impracticable for any payment to be made as aforesaid, the Borrower shall pay to each Tranche B Lender for its own account in such funds as are required by Section 3.2 hereof or in such other manner as may be agreed between the Borrower and the relevant Tranche B Lender and to such account as may be specified by the relevant Tranche B Lender to the Borrower, the amount of the relevant Tranche B Lender's portion of the payment in question. Each such Tranche B Lender shall keep the Agent fully informed as to all amounts received by it and as to all agreements made between it and the Borrower as referred to above. 3.2 Funds of Payment. (a) Each payment made by the Borrower under this Agreement with respect to Tranche A, under the Tranche A Note and to the Tranche A Lender under the Letter Agreement shall be made in Dollars and in same day settlement funds by credit of Federal or other immediately available funds satisfactory to the Tranche A Lender (or such funds as may from time to time be customary for the settlement in New York City of international banking transactions in Dollars) not later than 10:00 a.m. Tokyo time on the Business Day on which such payment is due. To effectuate the foregoing sentence and to ensure that the Tranche A Lender and the Tranche B Lenders receive payment on the same calendar date in their respective time zones, the Borrower shall issue, not later than one Business Day prior to the Business Day on which any payment is due, an irrevocable payment order in favor of the Tranche A Lender for value on the Business Day on which such payment is due in the full amount of such payment, such irrevocable payment order to be addressed to the Tranche A Lender's bank in Tokyo, Japan (Account No. 02USD07160945-01) at The Long-Term Credit Bank of Japan, Limited, Tokyo headquarters, Japan, or to such other bank or account of the Tranche A Lender in Tokyo, Japan as the Tranche A Lender may at any time or from time to time designate by written notice to the Borrower. The receipt by the Tranche A Lender of such payment in accordance with such irrevocable payment order shall fully discharge the Borrower's obligations with respect to the 42 36 amount paid. If and to the extent the Borrower shall have delivered a Notice of Borrowing as provided herein that requests a Borrowing to pay for interest or fees pursuant to Section 2.3, 2.7 or 2.8 hereof, and if the Borrowing Date applicable to such Borrowing is also the date such payment is to be made to the Tranche A Lender, then the payment order referred to in the second preceding sentence shall expressly provide that payment pursuant thereto shall be subject to the receipt by the Borrower by 1:00 p.m., New York City time, on the relevant Borrowing Date of immediately available funds in the amount requested in such Notice of Borrowing. (b) Each payment made by the Borrower under this Agreement with respect to Tranche B, the Tranche B Notes and to the Agent under the Letter Agreement shall be made in Dollars and in same day settlement funds by credit of Federal or other immediately available funds satisfactory to the Agent (or such funds as may from time to time be customary for the settlement in New York City of transactions in Dollars) not later than 11:00 a.m. New York time on the Business Day on which such payment is due by credit to the account of the Agent (Account No. 544-7-75066) at Chemical Bank, N.A., 4 New York Plaza, New York, New York 10004 U.S.A. or to such other account of the Agent as the Agent may at any time or from time to time designate by written notice to the Borrower; provided that if and to the extent the Borrower shall have delivered a Notice of Borrowing as provided herein that requests a Borrowing to pay for interest or fees pursuant to Section 2.3, 2.7 or 2.8 hereof and if the Borrowing Date applicable to such Borrowing is also the date such payment is to be made to the Agent, then such portion of such payment as shall be payable by the Borrower from the proceeds of such Borrowing shall be made as soon as reasonably practical after the Borrower receives the proceeds of such Borrowing, but in any case not later than 1:00 p.m. New York time on such Business Day. The Agent will promptly cause each such payment received by it to be distributed to each Tranche B Lender (in each case for the account of such Tranche B Lender's Lending Office) in like funds with respect to each payment received by such Agent for the account of such Tranche B Lenders or the holders of the Tranche B Notes. (c) Whenever any payment hereunder or under any Note falls due on a day which is not a Business Day, the due date for such payment shall be advanced to the next succeeding Business Day, unless the next succeeding Business Day falls in another calendar month, in which case such payment shall be the immediately preceding Business Day. 3.3 Set-Off, Counterclaim and Taxes. The Borrower will (i) pay all amounts of principal of and 43 37 interest on the Notes and all other amounts payable under this Agreement, the Notes and the Letter Agreement ("Payments") without set-off or counterclaim, and, to the extent permitted by law, free and clear of, and without deduction or withholding for or on account of, any Taxes, and (ii) pay to, indemnify for and hold each of the Lenders harmless from and against any Taxes which are stamp or like taxes imposed directly or indirectly with respect to the preparation, execution, delivery, registration, filing or recording of this Agreement, the Notes, the Producers Agreement, the Trust Agreement, the Letter Agreement or any document connected herewith or therewith and any Taxes which are imposed directly or indirectly on any Lender or the Agent, with respect to this Agreement, the Notes, the Producers Agreement, the Trust Agreement, the Letter Agreement, any document connected herewith or therewith or the transactions contemplated by any of the foregoing documents or any Payments. Notwithstanding the foregoing, the provisions of the first sentence of this Section 3.3 shall not require the Borrower to indemnify for any Excluded Taxes. If any Taxes (other than Excluded Taxes) are required by law to be deducted or withheld from any Payment, the Borrower will increase the amount of such Payment to the Tranche A Lender or the Agent or both, and the Tranche B Lenders through the Agent, to the extent necessary in order that the net amount received by the Tranche A Lender and Agent, and the Tranche B Lenders through the Agent, after deduction of all Taxes required to be deducted or withheld with respect to such Payment as so increased and any other Taxes payable by the Lenders with respect to the amount of such increase, will equal the full amount of the Payment due and payable to the relevant Lender or Lenders. The Borrower will furnish to each Lender, in such number of copies as such Lender shall request, certified copies of tax receipts or other appropriate evidence of payment, satisfactory to such Lender, evidencing the payment of all Taxes levied or imposed upon any Payment within 45 days after the date any such payment is due pursuant to applicable law. If any Taxes (other than Excluded Taxes) are imposed on or with respect to any Payment or are required to be paid by the Tranche A Lender, the Agent or any Tranche B Lender on or with respect to any Payment or in connection with this Agreement or the Notes, the Borrower will pay or otherwise indemnify and hold the Tranche A Lender, the Agent and each Tranche B Lender harmless from any such Taxes or will reimburse to the Tranche A Lender, the Agent and each Tranche B Lender on demand, subject to the provisions of Section 3.10 hereof, such amounts as may be necessary in order that the net amount received by the Tranche A Lender, the Agent and each Tranche B Lender pursuant to such indemnity or reimbursement, after deduction of all Taxes required to be deducted, withheld or otherwise paid by the Tranche A Lender, the Agent and the Tranche B Lenders with respect to 44 38 such amount, shall equal the amount of such Taxes so imposed or otherwise subject to indemnity and reimbursement. If a Lender shall receive a refund of any Taxes paid by the Borrower pursuant to this Section 3.3 by reason of the fact that such Taxes were not correctly or legally asserted, the Lender shall within 45 days after receipt of such refund pay to the Borrower the amount of such refund, as determined solely by the Lender; provided, however, that in no event shall the amount paid by the Lender to the Borrower pursuant to this sentence exceed the amount of Taxes originally paid by the Borrower; and provided further that no Lender shall have any obligation under this Agreement to claim or otherwise seek to obtain any such refund. 3.4 Change of Law; Certain Mandatory and Voluntary Prepayments; Additional Amounts. (a) Notwithstanding any other provision in this Agreement to the contrary, if any change in any applicable law, rule or regulation or in the interpretation or administration thereof by any governmental authority charged with the interpretation or administration thereof, or compliance by any Lender (or its Lending Office) with any new request, interpretation or directive of any relevant central bank or other governmental authority, shall make it unlawful for any Lender (or its Lending Office) to (i) maintain its Commitment, then such Commitment of such Lender shall thereupon terminate, or (ii) maintain or fund its Advances, then such Commitment of such Lender shall thereupon terminate, and the principal amount of such Lender's Note then outstanding shall be repaid, together with interest accrued thereon and any other amounts payable to such Lender under this Agreement, such Lender's Note or the Letter Agreement, commencing immediately as an accelerated mandatory prepayment in accordance with Sections 3.2 and 3.3 of the Trust Agreement; provided, however, that all such amounts shall be paid on or prior to the Final Maturity Date. Upon the occurrence of any such change or request making it unlawful for the Tranche A Lender to maintain its Commitment as aforesaid, the Tranche A Lender shall promptly forward to the Borrower evidence certified by the Tranche A Lender as to such change or request. Upon the occurrence of any such change or request making it unlawful for a Tranche B Lender to maintain its Commitment as aforesaid, such Tranche B Lender shall promptly forward to the Agent in writing, and the Agent shall promptly forward to the Borrower, evidence certified by such Tranche B Lender as to such change or request. (b) If any change in any applicable law, rule or regulation or in the interpretation or administration thereof, or compliance by any Lender with any request 45 39 (whether or not having the force of law) of any relevant central bank or other governmental authority, shall change the basis of taxation of payments to any such Lender (or its Lending Office) of the principal of or interest on any of the Notes or any other amounts payable under this Agreement or the Letter Agreement (except for Excluded Taxes) or shall impose, modify or deem applicable any similar requirement not in effect on the date of this Agreement in respect of Reserves against assets of, deposits with or for the account of, or credit extended by, or the Commitment of, any such Lender (or its Lending Office) (except for Reserves in effect on the date of this Agreement), or shall impose on any such Lender (or its Lending Office) or the London interbank market any other condition not in effect on the date of this Agreement directly affecting this Agreement, any of the Notes, the Letter Agreement or the Advances and the result of any of the foregoing is to increase the cost to any Lender of maintaining its Commitment or making or maintaining its Advances, or to reduce the amount of any such payments received or receivable by any such Lender (or its Lending Office) hereunder, by an amount deemed by such Lender to be material, then the Borrower shall pay to such Lender such additional amount or amounts as will compensate such Lender for such additional cost or reduction. Such additional amount or amounts shall be paid on the Interest Payment Date for the Interest Period to which such costs relate. Each Lender agrees that it will promptly notify the Borrower of any event which will entitle such Lender to an additional amount pursuant to this Section 3.4(b). A certificate of such Lender setting forth the basis in reasonable detail for the determination of such additional amount necessary to compensate such Lender as aforesaid shall be conclusive as to the determination of such amount in the absence of manifest error. After the receipt of any notice from any Lender indicating that such Lender is entitled to an additional amount pursuant to this Section 3.4(b), the Borrower may elect to prepay the relevant Note or Notes of such Lender without premium or penalty (except as provided in Section 2.7(b) hereof) in accordance with the provisions of Section 3.6 hereof; provided that any such prepayment may be made only if the amounts set forth in the certificate described in the preceding sentence are paid by the Borrower prior to or simultaneously with such prepayment. (c) Each Tranche B Lender agrees that, upon the occurrence of any event giving rise to the operation of Section 3.4(a) or (b) hereof with respect to such Tranche B Lender, it will, if requested by the Borrower, and in consultation with the Agent, use its best efforts to designate another Lending Office for its Commitment or its Advances and/or for a period of thirty calendar days after the date of such request use reasonable efforts to transfer its Commitment and Advances to another Person in accordance 46 40 with the procedures set forth in Section 10.4, in either case with the object of avoiding the consequence of the event giving rise to the operation of Section 3.4(a) or (b) hereof; provided that in either case such designation or transfer can be made on such terms that such Tranche B Lender and its Lending Office suffer no economic, legal or regulatory disadvantage. Nothing in this Section 3.4(c) shall affect or postpone any of the obligations of the Borrower or the rights of the Tranche B Lenders provided in Section 3.4(a) or (b) hereof. 3.5 Prepayments in Connection with Completion of Train G; Debt Coverage Reserve Mandatory Prepayments. (a) Any amounts borrowed hereunder and not used as provided in Section 2.2(a) hereof in connection with the completion of Train G or otherwise used as provided in Section 2.2(b) hereof, shall be repaid to the Lenders, or applied on the Lenders' behalf, on the Interest Payment Date ending the Quarterly Period then in effect in accordance with the provisions of Section 3.5(c)(ii)(1) of the Trust Agreement. (b) If during any Quarterly Period the Borrower shall have paid into the Debt Coverage Reserve Account any Source of Debt Service pursuant to Section 3.2 of the Trust Agreement (as provided in Section 9.3 hereof), then on the Maturity Date occurring at the end of such Quarterly Period the Borrower shall apply the Source of Debt Service so accumulated in the Debt Coverage Reserve Account to prepay the Notes on a pro rata basis (based on outstanding principal amount), with such prepayment to be applied to the installments of principal due thereunder in the inverse order of maturity; provided that for purposes of further calculations of the Debt Coverage Ratio any such prepayment shall be deemed to have been applied to such installments of principal pro rata so that the Final Maturity Date is not thereby changed. 3.6 Notice of Certain Voluntary Prepayments. Whenever the Borrower has elected to prepay any relevant Note or Notes or any Deferred Portion thereof pursuant to Section 2.6 or 3.4(b) hereof, the Borrower shall give the Tranche A Lender and the Agent on behalf of the Tranche B Lenders notice of such prepayment at least eight Business Days in advance thereof (provided that such notice to the Tranche A Lender shall be deemed timely if received by the Tranche A Lender in Tokyo at least seven Business Days in advance thereof), and on the date specified in such notice (which shall be a Business Day and a single date) the principal then outstanding of the affected Note or Notes shall be repaid in full, together with interest accrued thereon and, to the extent then ascertainable, any other amount 47 41 payable under this Agreement to the Lender or Lenders holding such Note or Notes. Any notice of prepayment under this Section 3.6 hereof shall be irrevocable. Without limiting the right of the Borrower to prepay the Notes in the manner provided in Section 2.6 or 3.4(b) and upon the prior notice as provided above in this Section 3.6, the Borrower shall use its best efforts (without incurring any liability additional to that provided for in Section 9.5 hereof) to provide the Tranche A Lender and the Agent on behalf of the Tranche B Lenders with as much prior written notice of its intention to prepay any of the Notes pursuant to Section 2.6 or 2.4(b) as is reasonably possible in the circumstances. 3.7 Other Voluntary Prepayments. The Borrower may, upon not less than eight Business Days' irrevocable prior notice to the Tranche A Lender and the Agent on behalf of the Tranche B Lenders (provided that such notice to the Tranche A Lender shall be deemed timely if received by the Tranche A Lender in Tokyo at least seven Business Days prior to prepayment), prepay the Notes in whole or in part on a pro rata basis (based on outstanding principal amount) on any Interest Payment Date for the Notes being prepaid, and if in part in an amount which is equal to $1,000,000.00 or an integral multiple of $1,000,000.00. Each partial prepayment of any Notes made pursuant to this Section 3.7 shall be applied to the installments of principal due thereunder in the inverse order of maturity. Except as provided in Sections 2.7(b) hereof, such prepayments shall be without premium or penalty; provided that the right to prepay without premium or penalty shall not apply to any amounts declared forthwith due and payable in accordance with Section 7 hereof. All prepayments permitted pursuant to this Section 3.7 shall be made together with payment of accrued interest on the principal amount prepaid, and, to the extent then ascertainable, any other amount payable under this Agreement, the Notes or the Letter Agreement. Without limiting the right of the Borrower to prepay the Notes in the manner and upon the prior notice as provided above in this Section 3.7, the Borrower shall use its best efforts (without incurring any liability additional to that provided for in Section 9.5 hereof) to provide the Tranche A Lender and the Agent on behalf of the Tranche B Lenders with thirty days' prior written notice of its intention to prepay all or any portion of the Notes pursuant to this Section 3.7. 3.8 Cancellation of Commitments. The Borrower may without premium or penalty (i) upon not less than 30 days' irrevocable prior notice to the Tranche A Lender and the Agent on behalf of the Tranche B Lenders, cancel the Commitments of the Lenders in whole or in part, and if in part in an aggregate amount of $1,000,000.00 or an integral 48 42 multiple of $1,000,000.00, all such cancellations to be on a pro rata basis as among the Lenders based on their respective Commitments, or (ii) upon irrevocable notice given simultaneously with or as part of the notice given pursuant to Section 3.6 hereof to any Lender whose Note is prepaid in accordance with the provisions of Section 3.6 hereof, cancel the Commitment of such Lender. 3.9 No Reborrowing. The Commitments are not revolving in nature, and no amount repaid or prepaid under this Agreement may be reborrowed hereunder. 3.10 Payments to be Made at End of Interest Period. Except for amounts owing pursuant to Sections 3.4(a), 7 and 10.6 hereof which become payable as provided in such Sections, and notwithstanding any provision of any Section other than Sections 3.4(a), 7 and 10.6 hereof to the contrary, in view of the nature of the Borrower and the nature of the Source of Debt Service from which payments hereunder will be made, all amounts becoming payable hereunder, which would otherwise be due on a date which does not fall on an Interest Payment Date instead shall be due on the Interest Payment Date next to occur thereafter and prior to which the Borrower is notified that such amount is payable, subject in each such case to the relevant provisions of Sections 3.2 and 3.3 of the Trust Agreement; provided, however, that all amounts due and payable under this Agreement and the Notes shall be paid on or prior to the Final Maturity Date. SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE BORROWER The Borrower and, only to the extent expressly stated to be in its individual capacity, BankAmerica International represent and warrant to the Lenders that: 4.1 Power and Authority. The Borrower has full power, authority and legal right to incur the Indebtedness and other obligations provided for in this Agreement, the Notes and the Letter Agreement, to execute and deliver this Agreement, the Notes, the Trust Agreement and the Letter Agreement and the other documents contemplated hereby or referred to herein to which the Borrower is a party, to borrow, pay and repay hereunder and under the Notes and the Letter Agreement and to perform and observe the terms and provisions hereof and thereof. BankAmerica International, in its individual capacity, is a banking corporation duly organized and validly existing in good standing under the laws of the United States of America and has the full power, authority and legal right to execute, deliver and perform this Agreement, the Notes, the Trust Agreement and the Letter Agreement as Trustee. 49 43 4.2 Legal Action. All necessary legal action has been taken to authorize the Borrower (i) to execute and deliver this Agreement, the Notes, the Trust Agreement, the Letter Agreement and the other documents contemplated hereby or referred to herein to which the Borrower is a party, (ii) to borrow, pay and repay hereunder and under the Notes and the Letter Agreement and (iii) to perform and observe the terms and provisions of this Agreement, the Notes, the Trust Agreement and the Letter Agreement. 4.3 Restrictions. There is no Legal Requirement and no contractual or other obligation binding on the Borrower or BankAmerica International in its individual capacity, that is or will be contravened (or, in the case of a contractual obligation, in respect of which a breach has occurred or will occur) by reason of the execution and delivery of this Agreement, the Notes, the Trust Agreement, the Letter Agreement or any of the other documents contemplated hereby or referred to herein to which the Borrower is a party, the making of Borrowings by the Borrower hereunder or the performance or observance by the Borrower of any of the terms or provisions hereof or thereof in each case in the manner contemplated hereby and thereby. 4.4 Registration and Approvals. No registrations, declarations or filings with, or consents, licenses, approvals or authorizations of, any legislative body, governmental department or governmental authority necessary under any applicable laws are required of the Borrower or BankAmerica International in its individual capacity for the due execution and delivery by the Borrower, or for the performance by the Borrower, of this Agreement, the Notes, the Trust Agreement, the Letter Agreement or any of the other documents contemplated hereby or referred to herein to which the Borrower is a party, or to authorize the Borrowings hereunder or to assure the validity or enforceability hereof or thereof, except in each case for those as have been made or obtained and copies of which have been furnished to the Tranche A Lender and the Agent on behalf of the Tranche B Lenders and which are in full force and effect. 4.5 Agreement Binding. This Agreement, the Trust Agreement and the Letter Agreement constitute, and the Notes when executed and delivered pursuant hereto for value will constitute, the legal, valid and binding obligations of the Borrower enforceable against the Borrower to the extent specified in Section 9 hereof in accordance with its and their respective terms, subject in the case of enforcement to any applicable bankruptcy, insolvency, moratorium or other similar laws affecting the enforcement of creditors' rights generally and to equitable principles of general application. 50 44 4.6 Ranking of Advances; Encumbrances. The Borrower has no outstanding Indebtedness charging or to be paid out of the Source of Debt Service or Borrowed Amounts other than the obligations and liabilities of the Borrower hereunder and under the Notes and the Letter Agreement and any Indebtedness permitted by Section 6.4 hereof. The Borrower has not created, incurred or suffered to exist (i) any Encumbrance on the Source of Debt Service received or receivable by it prior to its deposit in the Bontang V Payment Account, or (ii) any Encumbrance on any Borrowed Amounts, in each case under clause (i) or (ii) resulting from any act of the Borrower or any failure by the Borrower to perform any of its obligations under this Agreement or the Trust Agreement or any of its duties thereunder, except any Encumbrance permitted pursuant to Section 6.2 hereof. 4.7 Litigation. There is no suit, action, proceeding or investigation pending against the Borrower or, to the knowledge of the Borrower, threatened against the Borrower, which (a) questions the validity of this Agreement, any Note, the Trust Agreement or the Letter Agreement, or any action taken or to be taken by the Borrower pursuant hereto or thereto, (b) affects or is likely to affect the amount of the Source of Debt Service received by it or to the best of the Borrower's knowledge, receivable by it, or (c) would or is likely to affect adversely the Borrower's ability to perform its obligations under this Agreement, the Notes, the Trust Agreement or the Letter Agreement or any other agreement to which it is a party or by which it or its properties or assets is bound. 4.8 Compliance with Other Instruments, etc. BankAmerica International in its individual capacity is not in violation of any term of its charter or by-laws. The Borrower is not in violation of any term of any agreement or any instrument to which it is a party or by which it or any of its properties or assets is bound or of any Legal Requirement, which violation would or is likely to have an adverse effect on the Borrower's ability to perform its obligations under this Agreement, the Notes, the Trust Agreement, the Letter Agreement or any other agreement to which it is a party or by which it or its property or assets are bound. 4.9 No Defaults. No Event of Default referred to in Sections 7(a) through 7(e) hereof has occurred and is continuing and no event has occurred or failed to occur, the occurrence or non-occurrence of which, with the giving of notice or lapse of time or both, would constitute such an Event of Default, and the Borrower is not in violation of any of its obligations under the Trust Agreement. 51 45 4.10 Trust Agreement. The copy of the Trust Agreement delivered to the Lenders on the date hereof is a true, complete and correct copy thereof as in effect on the date hereof. SECTION 5. CONDITIONS PRECEDENT 5.1 Conditions Precedent to the Effective Date. Except as the Majority Lenders may otherwise consent, the effectiveness of this Agreement (other than Sections 8, 9.5, 10.6 and 10.10 hereof which are effective upon due execution and delivery of this Agreement) is subject to satisfaction in full of each of the following conditions precedent, and the "Effective Date" shall be the first Business Day on which each of such conditions precedent is so satisfied: (a) the Tranche A Lender and the Agent on behalf of the Tranche B Lenders shall have received on the Effective Date (or, in the case of Section 5.1(a)(xiii), not fewer than 15 days prior to the Effective Date) the following, all in form and, as to Section 5.1(a)(i) to (a)(xv) inclusive and 5.1(a)(xvii) and (xviii), in substance satisfactory to the Lenders: (i) in the case of the Tranche A Lender only, the Tranche A Note payable to the order of the Tranche A Lender complying with the requirements of Section 2.9 hereof; (ii) in the case of the Agent only, a Tranche B Note payable to the order of each Tranche B Lender complying with the requirements of Section 2.9 hereof; (iii) a signed copy of an opinion of Kelley, Drye & Warren, special counsel to the Borrower, substantially in the form of Exhibit D-1 hereto, dated the Effective Date; (iv) a signed copy of an opinion of Robert Rywkin, counsel to the Borrower, substantially in the form of Exhibit D-2 hereto, dated the Effective Date; (v) a signed copy of an opinion of Budhy Rukiat, legal counsel to Pertamina, substantially in the form of Exhibit E-1 hereto, dated not more than five Business Days prior to the Effective Date; (vi) a signed copy of an opinion of Andrews & Kurth L.L.P., special New York counsel for each of the Producers other than Pertamina, substan- 52 46 tially in the form of Exhibit E-2 hereto, dated the Effective Date; and signed copies of opinions of counsel for each of the Producers other than Pertamina, substantially in the form of Exhibit E-3 hereto, dated the Effective Date; (vii) a signed copy of an opinion of White & Case, special New York counsel to Pertamina, substantially in the form of Exhibit E-4 hereto, dated the Effective Date; (viii) a signed copy of an opinion of Paul, Weiss, Rifkind, Wharton & Garrison, special counsel to the Tranche A Lender, the Agent and the Tranche B Lenders, substantially in the form of Exhibit F-1 hereto, dated the Effective Date; (ix) a signed copy of an opinion of Kim, Shin & Yu, special Korean counsel to the Tranche A Lender, the Agent and the Tranche B Lenders, substantially in the form of Exhibit F-2 hereto, dated the Effective Date; (x) a signed copy of an opinion of Tsar & Tsai, special Taiwanese counsel to the Tranche A Lender, the Agent and the Tranche B Lenders, substantially in the form of Exhibit F-2 hereto, dated the Effective Date; (xi) a copy of the Trust Agreement with all amendments to the Effective Date certified by the Borrower; (xii) a copy of a notice from the Producers to the Borrower that they have approved the form and terms of this Agreement and authorizing and requesting the execution and delivery of this Agreement by the Borrower as contemplated by Section 3.1 of the Trust Agreement; (xiii) a copy of the "Burmah Fleet Longevity Study Task Force Final Report" dated November 18, 1994 relating to the LNG tankers currently being used for the transport of LNG to the Buyers under the 1973 Sales Contract, and the Longevity Study of "Aquarius" Class LNG Carriers on Behalf of Burmah Gas Transport Limited (BGT) -- Final Overall Report dated November 4, 1994 referred to therein; (xiv) a copy of the executed and delivered EPC Contract with all amendments to the Effective Date certified by Pertamina, but not including Exhibits A and B of the Bontang LNG Expansion 53 47 Project Train G Contract No. B60-JMC-001 Agreement between Pertamina and IKPT; (xv) a certificate of Pertamina and, with respect to each such agreement to which each representative referred to in Section 13.3 of the Trust Agreement is a party, a certificate of such representative, to the effect that the copies of (i) the Development Plan and (ii) each Basic Agreement, other than the Second A/R 1973 Sales Contract and the New 1973 Transportation Arrangements, in each case as amended, that were provided to the Tranche A Lender and the Agent on the date hereof were true, correct and complete copies of such documents with all amendments and that no change has been made in such documents since the date of this Agreement, except for such changes as are permitted without the consent of the Majority Lenders pursuant to the Producers Agreement; (xvi) a copy of the most recent statements, entitled "Certificate of Gas Reserves as of May 31, 1994 of the Tunu Field in the Mahakam Contract Area, Offshore East Kalimantan, Republic of Indonesia," "Certificate of Gas Reserves as of May 31, 1994 of the Tambora Field in the Mahakam Contract Area, Offshore East Kalimantan, Republic of Indonesia," "Certificate of Gas Reserves as of May 31, 1994 of the Sisi Field, Offshore East Kalimantan, Republic of Indonesia," "Certificate of Gas Reserves as of May 31, 1994 of the Peciko Field in the Mahakam Contract Area, Offshore East Kalimantan, Republic of Indonesia," "Certificate of Gas Reserves as of May 31, 1994 of the Nubi Field, Offshore East Kalimantan, Republic of Indonesia," "Certificate of Gas Reserves as of May 31, 1994 of the Handil Field in the Mahakam Contract Area, East Kalimantan, Republic of Indonesia," "Certificate of Gas Reserves as of May 31, 1994 of the Bekapai Field in the Mahakam Contract Area, Offshore East Kalimantan, Republic of Indonesia," "Certificate of Gas Reserves as of May 31, 1994 of Certain Fields in the Unocal Indonesia, Ltd. Contract Area, East Kalimantan, Republic of Indonesia," "Certificate of Gas Reserves as of May 31, 1994 of the Attaka Field in the Unocal Indonesia, Ltd. Contract Area, Offshore East Kalimantan, Republic of Indonesia," "Certificate of Gas Reserves as of May 31, 1994 of Certain Fields in the Sanga Sanga Contract Area, East Kalimantan, Republic of Indonesia," "Certificate of Gas Reserves as of May 31, 1994 of the Semberah Field in the Sanga Sanga Contract Area, East Kalimantan, Republic of Indonesia," "Certificate of Gas Reserves as of May 31, 1994 of the Nilam Field in the Sanga Sanga Contract Area, East Kalimantan, Republic of Indonesia," "Certificate of Gas 54 48 Reserves as of May 31, 1994 of the Mutiara Field in the Sanga Sanga Contract Area, East Kalimantan, Republic of Indonesia" and "Certificate of Gas Reserves as of May 31, 1994 of the Badak Field in the Sanga Sanga Contract Area, East Kalimantan, Republic of Indonesia", each of which has been prepared by DeGolyer and MacNaughton, relating to the gas reserves in the Badak and certain other East Kalimantan fields, together with reconciliations, satisfactory to the Tranche A Lender and the Agent, indicating, as of a date not more than 15 days prior to the Effective Date, the sufficiency of such gas reserves to meet the Seller's Gas Supply Obligation (as defined in each of the LNG Sales Contracts); (xvii) a certificate of Pertamina to the effect that (i) Property Insurance Policy No. NE0056-DA dated June 1994, together with any amendments, issued by P.T. Tugu Pratama Indonesia in favor of Pertamina, among others, covering the Insured Bontang Plant (excluding Train G) and (ii) Contractors "All Risks" Insurance Policy No. EF 0045-ED, dated June 19, 1995, together with any amendments, issued by P.T. Tugu Pratama Indonesia in favor of Pertamina, among others, covering Train G have been delivered to the Tranche A Lender and the Agent prior to the date hereof and, except as permitted by Section 1.11 of the Producers Agreement, remain in full force and effect in compliance with Section 1.11 of the Producers Agreement; and (xviii) certified copies of all required authorizations and consents of all relevant governmental authorities of Indonesia (certified by Pertamina) and Japan (certified by the Tranche A Lender), if any, in connection with the transactions contemplated by this Agreement, the Notes, the Letter Agreement and the Producers Agreement; provided that no certified copy of any required authorization or consent of The Export-Import Bank of Japan shall be required if the Tranche A Lender shall certify that it has received oral confirmation that such authorization or consent has been granted. (b) all legal matters in connection with the transactions contemplated hereby and the satisfaction of the conditions precedent contained in this Section 5.1, and all documents and instruments evidencing such matters or incident thereto including, but not limited to, the documents delivered pursuant to this Section 5.1 shall be satisfactory in form and substance to special counsel to the Lenders, and special counsel to the Lenders shall have received all such other documents and instruments, or copies 55 49 thereof, certified if requested, as they may reasonably request in order to enable them to pass upon such matters; (c) no Event of Default shall have occurred and be continuing and no event shall have occurred or failed to occur the occurrence or non-occurrence of which, with the giving of notice or lapse of time or both would constitute, an Event of Default; (d) the representations and warranties of the Borrower contained in this Agreement and of the Producers contained in the Producers Agreement shall be true and correct on and as of the Effective Date with the same effect as though such representations and warranties had been made on and as of the Effective Date; (e) the Trust Agreement and the Producers Agreement shall have been executed and delivered by each of the parties thereto in form and substance satisfactory to the Lenders; and (f) the Tranche A Lender and the Agent on behalf of the Tranche B Lenders shall have received copies certified by the Borrower to be true and correct as of the Effective Date of (i) the designation of each entity and individual authorized to give borrowing instructions under Section 3.4(a) of the Trust Agreement, (ii) the borrowing instructions to the Borrower relating to the initial Advance from an entity and individual so designated, and (iii) specimen signatures of the persons who are authorized to act for the Borrower under and in accordance with the terms of this Agreement, the Notes, the Trust Agreement and the Letter Agreement. 5.2 Conditions Precedent to Certain Advances. Except as the Majority Lenders may otherwise consent, the obligation of each Lender to make any Advance that, when aggregated with the other Advances requested by the Borrower in the relevant Notice of Borrowing, would cause the aggregate outstanding principal amount of Indebtedness under this Agreement and the Notes to exceed $275,000,000.00, is subject to the condition precedent that the Tranche A Lender and the Agent shall have received, on or before the date of the relevant Notice of Borrowing, all in form and substance satisfactory to the Lenders: (a) a signed copy of an opinion of qualified in-house legal counsel of Pertamina, substantially in the form of Exhibit G-1 hereto; (b) a signed copy of an opinion of White & Case, special New York counsel to Pertamina, substantially in the form of Exhibit G-2 hereto; 56 50 (c) a signed copy of an opinion of special Japanese counsel to the Tranche A Lender, the Agent and the Tranche B Lenders, substantially in the form of Exhibit G-3 hereto; (d) copies of the Second A/R 1973 Sales Contract and all of the New 1973 Transportation Arrangements, duly executed and delivered by each of the parties thereto, certified by Pertamina as correct and complete copies of such agreements; and (e) a certificate of Pertamina in substantially the form of Exhibit G-4 hereto. 5.3 Conditions Precedent to the Initial and Subsequent Advances. Except as the Majority Lenders may otherwise consent, the obligation of each Lender to make each Advance to be made by such Lender hereunder (including the initial such Advance) is subject to the satisfaction in full of each of the following conditions precedent: (a) the Tranche A Lender and the Agent on behalf of the Tranche B Lenders shall have received a Notice of Borrowing in accordance with the provisions of Section 2.2(d) hereof; (b) on the date of the making of such Advance and after giving effect thereto (i) no Event of Default shall have occurred and be continuing and no event shall have occurred or failed to occur the occurrence or non-occurrence of which, with the giving of notice or lapse of time or both would constitute, an Event of Default, and (ii) the representations and warranties of the Borrower contained in this Agreement and of the Producers contained in the Producers Agreement, shall be true and correct on and as of the date of the making of such Advance with the same effect as though such representations and warranties had been made on and as of such date; (c) the Tranche A Lender and the Agent on behalf of the Tranche B Lenders shall have received from the Borrower a statement from the Producers conforming to the requirements of Section 6.1(b) hereof indicating that the Debt Coverage Ratio (calculated using the assumptions provided for in such Section in effect as of the date of the relevant Notice of Borrowing) is not less than 150%; (d) there shall have been no material adverse change since the date of this Agreement (i) in the business, assets, financial condition or results of operation of the Borrower or any of the Producers which affects materially and adversely, or would be likely to affect materially and adversely, the performance by 57 51 Pertamina of or the ability of Pertamina to perform its obligations under any of the LNG Sales Contracts, or (ii) in the operation of the Bontang Plant; (e) the authorizations and consents described in Section 5.1(a)(xviii) hereof shall be in full force and effect; (f) no event shall have occurred or circumstance exist that renders impracticable any of the events set forth in clauses (i) or (ii) of the definition of Completion Date in Section 1 hereof; and (g) with respect to the making of the initial Advances only, if such Advances are to be made 30 or more days after the Effective Date, the Tranche A Lender and the Agent on behalf of the Tranche B Lenders shall have received at least three Business Days prior to the relevant Borrowing Date from each of the counsel referred to in Section 5.1 hereof signed copies of an opinion, dated not more than five days prior to date of such Advances, to the effect that no change has occurred with respect to the matters stated in the opinion delivered by such counsel pursuant to Section 5.1 hereof. 5.4 Conditions Precedent to Advances to Fund Reserve Account. Except as the Majority Lenders may otherwise consent, the obligation of each Lender to make any Advance requested pursuant to Section 2.2(b)(ii) is subject to the satisfaction in full of the following conditions precedent: (a) the notice of Mechanical Completion (as defined in the EPC Contract) with respect to the Additional Plant shall have been issued as contemplated by Section 11.1.2 of the EPC Contract, and the Tranche A Lender and the Agent on behalf of the Tranche B Lenders shall have received, at or prior to the delivery of the Notice of Borrowing with respect to such Advance, a copy of such notice certified by Pertamina; and (b) the Tranche A Lender and the Agent on behalf of the Tranche B Lenders shall have received, at or prior to the delivery of the Notice of Borrowing with respect to such Advance a copy of a report concerning the estimated cost of completing the Additional Plant and the Loading Facilities pursuant to the Development Plan and the Construction Documents prepared by the Producers as of a date after the date of the notice of Mechanical Completion referred to in clause (a) above, accompanied by a written opinion of the engineering firm then qualified under Section 1.14(c) of the Producers Agreement to prepare the semi-annual report contemplated thereby, which opinion shall 58 52 be to the effect that the engineering firm has reviewed the status of the construction of the Additional Plant and the Loading Facilities and has concluded that such estimated cost of so completing such facilities contained in such report of the Producers is reasonable in its judgment. 5.5 Representations. The making of each Borrowing hereunder shall be deemed to be a representation and warranty by the Borrower as of the date of such Borrowing that the facts specified in Section 5.3(b)(i) hereof as to Sections 7(a) through 7(e) hereof only, Section 5.3(b)(ii) hereof and Section 5.3(d) hereof in each case as to the Borrower only are true and correct on the date of such Borrowing. SECTION 6. COVENANTS Until payment in full of all of the Notes, and of all other amounts due and owing under this Agreement at the time the Notes are paid in full, unless compliance with the provisions of this Section shall have been waived by the Majority Lenders, the Borrower covenants and agrees with the Lenders as to Sections 6.1 through 6.5, and the Borrower, on the one hand, and the Lenders and the Agent, on the other hand, covenant and agree with each other as to Section 6.6. 6.1 Information. The Borrower shall provide or cause to be provided to the Tranche A Lender and the Agent: (a) as soon as possible and in any event within 45 days after the end of each of the first three Quarterly Periods ending in each year from and after 1998, for each such Quarterly Period, and within 45 days after the end of the fourth Quarterly Period ending in each such year, for the preceding four Quarterly Periods taken as a whole and for the final Quarterly Period, a statement setting forth for the relevant period or periods (i) the Gross Invoice Amounts invoiced under each of the LNG Sales Contracts and the amount of such Gross Invoice Amounts that does and does not constitute Source of Debt Service, including (u) with respect to the KGC Sales Contract, the LNG Portion (as defined in such contract), (v) with respect to the CPC Sales Contract, the LNG Related Component (as defined in such contract) and (w) with respect to the New 1973 Sales Contract, the LNG Element (as defined in such contract), (ii) the amount of such Gross Invoice Amount received by the Borrower, (iii) the amount of such Gross Invoice Amount received by the Borrower that does and does not constitute Source of Debt Service, including (x) with respect to the KGC Sales Contract, the LNG Portion (as defined in such contract), (y) with respect to the CPC Sales Contract, the LNG Related Component (as defined in such 59 53 contract) and (z) with respect to the New 1973 Sales Contract, the LNG Element (as defined in such contract) and (iv) the debits and credits from the Debt Service Account and Reserve Account and all subaccounts thereof (as provided in the Trust Agreement); (b) on or prior to the first day of each Quarterly Period, a statement in writing setting forth (i) the Source of Debt Service reasonably anticipated to be payable in each Quarterly Period to the Final Maturity Date, (ii) the aggregate principal, interest and other amounts reasonably anticipated to be payable during each Quarterly Period to the Final Maturity Date under this Agreement, the Notes and the Letter Agreement, (iii) the Debt Coverage Ratio (calculated as provided in the definition thereof) and (iv) the reasonably anticipated Gross Invoice Amount under each of the LNG Sales Contracts in each Quarterly Period to the Final Maturity Date and the reasonably anticipated amount of such Gross Invoice Amount that will and will not constitute Source of Debt Service, such statement to be prepared using the most recent assumptions in effect in accordance with the last paragraph of the definition of Debt Coverage Ratio in Section 1 hereof; provided, however, that additional statements containing the information set forth above shall be provided each time the Assumed Interest Rate and Debt Coverage Ratio shall change as contemplated in the definitions of such terms in Section 1 hereof; (c) information of the type referred to in clauses (a) and (b) of this Section 6.1 at such times other than those specified above as the Tranche A Lender or the Agent on behalf of the Tranche B Lenders may reasonably request; (d) as soon as a Responsible Officer of the Borrower obtains actual knowledge thereof, notice of each Event of Default and each event which has occurred or failed to occur, the occurrence or non-occurrence of which with the giving of notice or lapse of time would constitute an Event of Default; and (e) as soon as the Borrower receives notice from Pertamina that the events set forth in clauses (i) and (ii) of the definition of Completion Date have occurred, a written notice substantially in the form of Exhibit B-3 hereto, together with the original copy of the Notice of Completion to Trustee substantially in the form included as part of Exhibit B-3 hereto; and (f) as soon as the Borrower receives notice from the Producers pursuant to Section 3.5(c) of the Trust Agreement that Train G has been completed, a written notice 60 54 together with the copy of the notice from the Producers certifying that such event has occurred. The Agent shall forthwith cause a copy of all information provided under this Section 6.1 to be distributed to each Tranche B Lender. 6.2 Negative Pledge. The Borrower will not create, incur or suffer to exist any Encumbrance on the Source of Debt Service received or receivable by it prior to its deposit in the Bontang V Payment Account, or any Encumbrance on any Borrowed Amounts, in each case resulting from any act or any failure to perform any obligation of the Borrower under this Agreement or of the Bontang V Trustee under the Trust Agreement or any duty as Bontang V Trustee, except any Encumbrance, if any, (i) arising pursuant to the Trust Agreement or in favor of the holders of Indebtedness permitted in accordance with Section 6.4 hereof or (ii) arising pursuant to statute or otherwise by operation of law, and not pursuant to any agreement, which is discharged in the ordinary course of business and which is not enforced by attachment or levy. 6.3 No Consent to Changes. The Borrower will not (i) terminate or revoke the Trust Agreement, or (ii) amend, modify, revise, supplement or waive any of the provisions of (a) Article 1, 4 or 10 or Section 2.1, 2.2, 2.4, 3.1, 3.2, 3.3 (other than Section 3.3(i)), 3.5 or 3.7, or the third sentence of Section 8.2 of the Trust Agreement, in each case other than to permit the Borrower to enter into Subordinated Indebtedness or Pari Passu Swap Indebtedness, or (b) any other provision of the Trust Agreement if any such amendment, modification, revision, supplement or waiver would or would be likely to affect adversely the trust created under such Trust Agreement, the rights of the Lenders under or the ability of the Borrower to perform its obligations under this Agreement, the Notes or the Letter Agreement. Any consent of the Majority Lenders necessary to permit any action otherwise prohibited by this Section 6.3 shall not be unreasonably withheld. The Borrower shall promptly provide to the Tranche A Lender and the Agent on behalf of the Tranche B Lenders copies of any agreement or document evidencing any revocation, amendment, modification or revision of the Trust Agreement or any provision thereof not requiring the consent of the Majority Lenders under this Section 6.3. 6.4 Indebtedness. The Borrower shall not create, assume or become liable for, directly or indirectly, any Indebtedness charging or to be paid out of the Source of Debt Service, except for (i) all obligations and liabilities under this Agreement, the Notes or the Letter Agreement, (ii) any Indebtedness (a) that shall be payable out of 61 55 amounts of the Source of Debt Service only after the Trustee shall have accumulated amounts in the Debt Service Account and the Reserve Account during each Interest Period required to be accumulated therein pursuant to Sections 7 and 9 hereof, (b) the terms and conditions of which have been approved as to form and substance by the Majority Lenders, such approval not to be unreasonably withheld, and (c) the proceeds of which shall be applied solely in connection with the Bontang Plant (the Indebtedness referred to in this clause (ii), "Subordinated Indebtedness") and (iii) with respect to Source of Debt Service only, obligations (other than Subordinated Indebtedness) in respect of interest rate swap arrangements of the Borrower entered into solely for the purpose of exchanging floating interest rate obligations with respect to the aggregate Commitments or the Advances outstanding under this Agreement for fixed interest rate obligations, if such Indebtedness is pari passu in right of payment and does not benefit from any Encumbrance other than equally and ratably with, or subordinate to, the Indebtedness owed to the Lenders under this Agreement, the Notes and the Letter Agreement and if the terms and conditions of such arrangements are approved as to form and substance by the Majority Lenders ("Pari Passu Swap Indebtedness"), such approval not to be unreasonably withheld; provided that the withholding of any consent by the Majority Lenders under either Section 6.4(ii) or Section 6.4(iii) shall be deemed reasonable if the Borrower and the Majority Lenders are unable to agree with respect to (x) amendments to this Agreement, including without limitation amendments to the definition of "Debt Coverage Ratio," with respect to such Subordinated Indebtedness or Pari Passu Swap Indebtedness, as the case may be, (y) amendments to the Trust Agreement relating to such Subordinated Indebtedness or Pari Passu Swap Indebtedness, as the case may be, or (z) such other changes to the terms and conditions, including the Events of Default, of the Trust Agreement, the Producers Agreement and this Agreement as the Majority Lenders shall request in connection with such Subordinated Indebtedness or Pari Passu Swap Indebtedness, as the case may be. The Borrower shall not create, assume or become liable for, directly or indirectly, any Indebtedness charging or to be paid out of any Borrowed Amounts, except for Indebtedness for which such Borrowed Amounts were borrowed. 6.5 Notice at End of Availability Period. After the end of the Availability Period, the Tranche A Lender and the Agent on behalf of the Tranche B Lenders shall deliver to the Borrower a notice setting forth the outstanding amounts of principal and interest as of the final Borrowing Date and a repayment schedule. The Borrower shall either promptly confirm that it agrees with such amounts and such schedule by signing and returning to each of the Tranche A Lender and the Agent on behalf of the Tranche B Lenders a 62 56 copy of such notice or promptly deliver to the Tranche A Lender and the Agent on behalf of the Tranche B Lenders a notice indicating that it does not agree and specifying the reasons therefor. The delivery or lack of delivery of such notice to the Borrower shall in no way affect any of the obligations of the Borrower pursuant to this Agreement other than those set forth in this Section 6.5. 6.6 Selection of Qualified Bank. (a) If at any time the Assumed Interest Rate or the assumptions necessary for calculating the Debt Coverage Ratio are, pursuant to the definition of Assumed Interest Rate or Debt Coverage Ratio, to be specified by a Qualified Bank, either (i) the Borrower shall select, no later than 15 Business Days after the request for negotiations referred to in the relevant definition, one of the banks listed on Schedule 4 hereto (as such Schedule 4 may be amended by the Borrower, the Tranche A Lender and the Agent from time to time), other than any such bank with respect to which the Tranche A Lender or the Agent has, within 10 Business Days after the request for negotiations in question, given written notice of its reasonable objection or (ii) if the Borrower shall not have selected a bank as provided in the foregoing clause (i), if at any time all of the banks on Schedule 4 have been so objected to in one or more such notices or if such Qualified Bank shall not have specified the Assumed Interest Rate or such other assumptions, as the case may be, within 10 Business Days after being selected, the Tranche A Lender and the Agent shall select the Qualified Bank, with the consent of the Borrower, such consent not to be unreasonably withheld; provided, however, that for purposes of the foregoing, a failure to respond to a request for such consent within three Business Days shall be deemed to be the granting of such consent. A Qualified Bank so selected is referred to herein as a "Selected Qualified Bank." The Selected Qualified Bank shall render a written report addressed to the Borrower, the Producers, the Tranche A Lender and the Agent setting forth its determination and containing a statement to the effect that it is qualified and able to make a fair, informed and impartial decision concerning the matters submitted to it for its decision. Prior to the end of the Availability Period, the fees and charges of Selected Qualified Banks may be paid by the Borrower out of Borrowings drawn down for such purpose (and, if so borrowed, shall be paid out of such Borrowings), and following the end of the Availability Period, such fees and expenses may be paid as contemplated by Section 3.3(b)(iv) of the Trust Agreement. (b) A "Qualified Bank" shall mean, in addition to each of the financial institutions listed on 63 57 Schedule 4 hereto (as the same may be amended from time to time) and not objected to as provided in Section 6.6(a) hereof, each of the following: (i) any commercial bank that has (a) a net worth in excess of $100,000,000.00 or (b) outstanding debt securities that are rated A or better by Standard & Poor's Rating Group or its equivalent by Moody's Investors Service or another nationally recognized rating agency in the United States or (ii) an investment bank of outstanding international reputation, and in the case of either of (i) or (ii), that is a well-recognized and active participant in international capital markets and is experienced in oil or gas-related financings and does not control and is not controlled by or under common control with any of the Lenders or any of the Producers. SECTION 7. EVENTS OF DEFAULT If any one or more of the following events ("Events of Default") shall occur and be continuing: (a) (i) failure to make any payment of the principal of any of the Notes with respect to either or both of the Tranches within two days following, or interest on any of the Notes with respect to either or both of the Tranches within three days following, the date when due and payable in accordance with the terms hereof and thereof (provided that for the purposes of this clause (i) a deferral of payment of an amount of principal pursuant to Section 2.10(b) hereof shall not be deemed to be a failure to make such payment), or (ii) failure to pay any other amounts payable under this Agreement, any of the Notes or the Letter Agreement within seven days following the date when due in accordance with the terms of this Agreement, including Section 3.10 hereof; or (b) any representation or warranty made or deemed made by or on behalf of the Borrower in Section 4 or Section 5.3 of this Agreement or in any certificate delivered to the Tranche A Lender, the Agent or the Tranche B Lenders pursuant hereto shall prove to have been incorrect or misleading in any material respect as of the date when made; or (c) failure by the Borrower to perform or observe any term, covenant or agreement contained in Section 6.2, 6.3 or 6.4 hereof; or (d) failure by the Borrower to perform its obligations under Section 6.1(d) hereof for seven days after written notice of such failure shall have been given to the Borrower by the Tranche A Lender or by the Agent at the request of any Tranche B Lender; or 64 58 (e) any failure by the Borrower to perform or observe any term, covenant or agreement contained in this Agreement (other than those referred to in clauses (a), (b), (c), (d) or (f) of this Section 7), or any failure by the Borrower or any Producer to perform or observe any term, covenant or agreement contained in the Trust Agreement, for 30 days after written notice of such failure shall have been given to the Borrower by the Tranche A Lender or by the Agent at the request of any Tranche B Lender; or (f) a Default as defined in the Producers Agreement shall have occurred thereunder; then the Tranche A Lender and the Agent shall, upon the written request of the Majority Lenders, by notice of default given to the Borrower, (i) declare the Commitment of each Lender to be forthwith terminated and/or (ii) declare all the Notes outstanding hereunder to be forthwith due and payable, whereupon the then outstanding principal amount of such Notes, together with accrued interest thereon and any and all other amounts due under this Agreement and the Letter Agreement, shall forthwith become due and payable without diligence, presentment, demand, protest, notice of dishonor, or other notice of any kind, all of which are hereby expressly waived by the Borrower. Should the principal amount of the Notes be declared or become due and payable in the foregoing manner, the entire amount of the Source of Debt Service received by the Borrower thereafter shall to the extent provided by the Trust Agreement, as and when received by the Borrower, be accumulated and paid to the Tranche A Lender and the Agent on behalf of the Tranche B Lenders for application to the amounts owing by the Borrower under this Agreement, the Notes which were declared to be or which became due and payable and the Letter Agreement until all principal of and interest on such Notes and all other amounts then due and payable under this Agreement, the relevant Notes and the Letter Agreement shall have been paid in full. SECTION 8. AGENT, ETC. The Tranche B Lenders, the Agent, the Intercreditor Agent, the Technical Agent and the Arrangers agree among themselves and, (i) where the context of Section 8.9 or 8.10 so requires, with the Borrower and (ii) where the context of Section 8.8 so requires, with the Tranche A Lender, as follows: 65 59 8.1 Appointment and Authority. (a) Each Tranche B Lender, and each subsequent holder of any Tranche B Note by its acceptance thereof, irrevocably authorizes the Agent to receive all payments of principal, interest and other amounts due to such Tranche B Lender or such holder under this Agreement and the Tranche B Notes and to take all other actions on behalf of such Tranche B Lender or such holder and to exercise such powers hereunder as are specifically delegated to such Agent by the terms hereof, together with all other such powers as shall be reasonably incidental thereto. (b) The relationship between each of the Tranche B Lenders and the Agent is and shall be that of agent and principal only, and nothing herein shall be construed to constitute the Agent a trustee for any holder of a Tranche B Note or of a participation therein nor to impose on the Agent duties and obligations other than those expressly provided for herein nor to confer upon the Agent any relationship of agency or trust with the Borrower. Neither the Agent, nor any of its directors, officers, employees or agents shall be liable to any of the Tranche B Lenders for any action taken or omitted to be taken by it or them hereunder or in connection herewith, whether as a result of any conflicts affecting or involving the Agent resulting from its responsibilities relating to this Agreement, the Commitments of the Tranche B Lenders, Tranche B or otherwise, except for its own gross negligence or willful misconduct. Each of the Tranche B Lenders, and each subsequent holder of any Tranche B Note by its acceptance thereof, agrees (which agreement shall survive payment of the Tranche B Notes) to indemnify the Agent (to the extent not reimbursed by the Borrower) in amounts which are pro rata to the respective Commitments of such Tranche B Lenders and, in the case of a subsequent holder of any Tranche B Notes, of the Tranche B Lender from whom such holder acquired (directly or indirectly) such Tranche B Notes, from and against any and all losses, claims, damages, liabilities and expenses of any kind (including failure to receive any payment specified in the Management and Agency Fee Letter Agreement) which may be imposed on, incurred by or asserted against the Agent (in its capacity as such) in any way related to or arising out of this Agreement or any Advances with respect to Tranche B or any action taken or omitted by such Agent under this Agreement whether as a result of any conflicts affecting or involving the Agent resulting from its responsibilities relating to this Agreement, the Commitments of the Tranche B Lenders, Tranche B or otherwise, except (i) normal administrative expenses incidental to the performance of their duties as such Agent and Arrangers hereunder and (ii) any losses, 66 60 claims, damages, liabilities or expenses resulting from its or their gross negligence or willful misconduct. 8.2 Agent May Rely on Documents. The Agent shall be entitled to rely on any communication, instrument or document reasonably believed by it to be genuine and correct and to have been signed or sent by the proper Person or Persons, and with respect to all legal matters shall be entitled to rely on the advice of legal and other professional advisors selected by it from time to time concerning all matters relating to this Agreement, the Tranche B Notes and its duties hereunder and thereunder, and shall not be liable to any of the Tranche B Lenders for the consequences of such reliance. 8.3 No Amendment to Duties of Agent Without Consent. The Agent shall not be bound by any waiver, amendment, supplement or modification of this Agreement which affects its duties under this Agreement unless it shall have given its prior written consent, as Agent, thereto. 8.4 Responsibilities of Agent and Arrangers. The Agent may treat the payee of any Tranche B Note as the holder thereof until written notice of the transfer thereof shall have been received by it pursuant to Section 10.4 hereof. The Agent does not make any warranty or representation to any Tranche B Lender, and shall not be responsible for any recitals, statements, representations or warranties herein or in any document prepared by or given by the Borrower or any other Person to the Tranche B Lenders in connection herewith (or for the accuracy or completeness of any such document) or for the execution, effectiveness, genuineness, validity or enforceability of this Agreement or the Tranche B Notes or any other document, agreement or instrument delivered in connection herewith or related hereto, or be liable for failing to make any inquiry concerning the performance or observance of any of the terms, provisions or conditions of this Agreement or any Tranche B Note or any other document, agreement or instrument delivered in connection herewith or related hereto. The Agent shall be entitled to retain for its own use any amounts paid to it in its capacity as such. The Agent shall not be deemed to have known of the occurrence of an Event of Default or other event the occurrence or non-occurrence of which with the giving of notice or lapse of time or both would become an Event of Default or comparable event under any other agreement unless the Agent has received written notice from a Tranche B Lender or the Borrower specifying such Event of Default or other event and stating that such notice is a "Notice of Default" or from any other relevant Person so specifying. If (i) the Agent receives a notification pursuant to the preceding sentence, or (ii) the 67 61 Borrower fails to pay in accordance with the terms hereof to the Agent when due the principal of or interest on any Tranche B Note or any commitment fee payable to any Tranche B Lender hereunder, the Agent shall promptly give written notice thereof to the Tranche B Lenders. The Agent may decline to take any action except upon the written direction of the Majority Tranche B Lenders in accordance with the voting procedures agreement entered into by the Tranche B Lenders and the Agent on the date hereof and the Agent may obtain a ratification by such Majority Tranche B Lenders of any action taken by it under this Agreement or any other document, agreement or instrument delivered in connection herewith or related hereto as provided in such voting procedures agreement. The Agent shall have no liability to the Tranche B Lenders for any action taken by it upon the direction of the Majority Tranche B Lenders or if ratified by the Majority Tranche B Lenders, nor shall the Agent have any such liability for any failure to act unless the Agent has been instructed to act by the Majority Tranche B Lenders. The action of the Majority Tranche B Lenders shall in each case bind all of the Tranche B Lenders hereunder. The Agent shall not be required to take any action which exposes the Agent to personal liability (unless indemnified to its satisfaction for any and all consequences of such action) or which is contrary to this Agreement or any Legal Requirement. 8.5 Funding Costs of Agent. If at any time the Agent makes available to a Tranche B Lender amounts due from the Borrower hereunder which the Borrower has failed to make available to the Agent, then the Tranche B Lender shall on first demand forthwith refund such amounts to the Agent together with interest thereon at the rate offered by the Agent for overnight Dollar deposits in the New York Federal Funds market. 8.6 Agent in Individual Capacity. The Agent and its affiliates in their capacities as Tranche B Lenders shall have the same rights and powers hereunder as any Tranche B Lender and may exercise such rights and powers as though the Agent were not the Agent. The Agent and its affiliates may (without having to account therefor to any Tranche B Lender) accept deposits from, lend money to and generally engage in any kind of banking, trust or other business with the Borrower, any of the Borrower's affiliates, the Producers and any of the Producers' affiliates, as if such Agent were not acting in such capacity hereunder. 8.7 Credit Decision. Each Tranche B Lender represents, warrants and acknowledges that it has, independently and without reliance upon the Agent, the Arrangers or any other Lender, and based on such documents and information as it has deemed appropriate, made its own 68 62 credit analysis and decision to enter into this Agreement. Each Tranche B Lender also acknowledges that it will, independently and without reliance upon the Agent, the Arrangers or any other Lender, 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. 8.8 Arrangers, Intercreditor Agent, Technical Agent, Tranche A Lender. Nothing in this Agreement shall impose on the Arrangers, the Intercreditor Agent, the Technical Agent, or the Tranche A Lender in their capacity as such, any duties or obligations whatsoever among themselves or in favor of the Tranche B Lenders or any of them. 8.9 Change of Administrative Office of Agent. The Agent may at any time or from time to time by written notice to the Borrower and to each Tranche B Lender designate a different office from which its duties as Agent will thereafter be performed; provided that no such change to a location outside of the City of New York shall be made without the Borrower's consent, which consent shall not be unreasonably withheld. 8.10 Successor Agent. Subject to the appointment and acceptance of a successor Agent as provided below, the Agent may resign at any time by giving written notice thereof to the Tranche B Lenders and to the Borrower. The Agent may be removed at any time with or without cause by the Majority Tranche B Lenders. Upon any such resignation or removal, such Majority Tranche B Lenders shall have the right to appoint such successor Agent. If no successor Agent shall have been so appointed by such Majority Tranche B Lenders and shall have accepted such appointment within 30 days after any such retiring Agent's giving of notice of resignation, then such retiring Agent may appoint such successor Agent. No successor Agent shall be appointed without the consent of the Borrower, which consent shall not be unreasonably withheld or delayed. Upon the acceptance of any appointment as Agent hereunder by a successor Agent, such successor Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of such retiring Agent, and such retiring Agent shall be discharged from its duties and obligations hereunder. After any such retiring Agent's resignation hereunder as Agent, the provisions of this Section 8 shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as any such Agent hereunder. 69 63 SECTION 9. SOURCE OF DEBT SERVICE; NO RECOURSE 9.1 Accumulation for Debt Service. Pursuant to Sections 3.2 and 3.3 of the Trust Agreement and except as therein stated, the Borrower shall pay (i) into the Debt Service Account the entire amount of all Borrowed Amounts (other than Reserve Account Borrowed Amounts) immediately upon receipt thereof, (ii) into the Reserve Account the entire amount of all Reserve Account Borrowed Amounts immediately upon receipt thereof and (iii) starting with the first day after the end of the Availability Period, into the Debt Service Account the entire amount of each payment of the Source of Debt Service, as and when actually received by the Borrower, until the aggregate amount accumulated in the Debt Service Account shall be sufficient to pay the principal of and interest due on all of the Notes, as well as all other amounts due and payable under this Agreement, the Notes and the Letter Agreement, in each case during such Quarterly Period; provided, however, that for any six-month Interest Period, the amount of the Source of Debt Service paid over to and accumulated in the Debt Service Account for principal and interest due during such Interest Period shall be in accordance with Sections 3.2 and 3.3 of the Trust Agreement. All such principal, interest and other amounts due during any Interest Period are referred to herein as the "Quarterly Debt Service" for such Interest Period. 9.2 Accumulation in Regular Reserve Account. (a) Pursuant to Sections 3.2 and 3.3 of the Trust Agreement, during each Quarterly Period that ends on a Maturity Date, after all amounts of Source of Debt Service required to be paid into the Debt Service Account pursuant to Section 9.1 hereof with respect to such Quarterly Period have been so paid, the Borrower shall pay into the Regular Reserve Account the entire remaining amount of each payment of the Source of Debt Service, as and when actually received by the Borrower, until the aggregate amount accumulated in such Regular Reserve Account shall equal 100% of the amount of Quarterly Debt Service reasonably anticipated to be due during the two Quarterly Periods next succeeding such Quarterly Period. For purposes of determining such amounts of Quarterly Debt Service, the interest rate applicable to the Advances (including any Deferred Portion thereof) scheduled to be outstanding during each of such two succeeding Quarterly Periods shall be or be deemed to be the interest rate, if any, then in effect in respect of principal to be outstanding during the next succeeding Interest Period and, if no such rate shall then be in effect, shall be deemed to be the interest rate in effect for the then current Interest Period. 70 64 (b) Notwithstanding Sections 9.1 and 9.2(a) hereof, and subject to Section 9.2(c) hereof, if there is any Source of Debt Service during the period from and including January 1, 1998 to and including the last day of the Availability Period, the Borrower shall pay the full amount thereof into the Regular Reserve Account pursuant to Section 3.2 of the Trust Agreement so long as and to the extent that the amount therein is less than 100% of the amount of Quarterly Debt Service reasonably anticipated (in the manner prescribed in Section 9.2(a) hereof) to be due on the first two Maturity Dates. (c) If there is any Source of Debt Service at any time prior to the satisfaction of the conditions precedent set forth in Section 5.2 hereof, then after all amounts of Source of Debt Service required to be paid into the Debt Service Account and the Regular Reserve Account pursuant to Sections 9.1, 9.2(a) and 9.2(b) and, if any, the Debt Coverage Reserve Account pursuant to Section 9.3 hereof have been so paid, the Borrower shall pay the entire remaining amount thereof into the Regular Reserve Account pursuant to Section 3.2 of the Trust Agreement; provided, however, that upon the satisfaction of such conditions precedent all amounts held in the Regular Reserve Account in excess of the amounts required to be so held pursuant to Sections 9.2(a) and (b) hereof shall be applied in accordance with Sections 3.2 and 3.3 of the Trust Agreement. 9.3 Deposit in Debt Coverage Reserve Account. Pursuant to Section 3.2 of the Trust Agreement, if at any time at or after the end of the Availability Period the Certificate delivered to the Tranche A Lender and the Agent pursuant to 6.1(b) of this Agreement indicates that the Debt Coverage Ratio at the time of calculation is less than 130%, then for each Quarterly Period then in effect or thereafter occurring, after all amounts of Source of Debt Service required to paid into the Debt Service Account and the Regular Reserve Account pursuant to Sections 9.1 and 9.2 hereof with respect to such Quarterly Period have been so paid, the Borrower shall pay into the Debt Coverage Reserve Account the entire remaining amount of each payment of the Source of Debt Service, as and when actually received by the Borrower. Amounts deposited and held in the Debt Coverage Reserve Account shall be applied as provided in Section 3.5(b) hereof until the Debt Coverage Ratio shall equal or exceed 130%. The procedure set forth in this Section 9.3 shall continue in effect in each subsequent Quarterly Period until the Debt Coverage Ratio, calculated at the commencement of any such Quarterly Period, equals or exceeds 130%. 9.4 Payments Made from Debt Service Account and Reserve Account. Except for any personal liability of the 71 65 Borrower arising as specifically provided in this Agreement and except for any prepayments pursuant to Section 9.3 hereof, all payments to be made by the Borrower under this Agreement, the Notes and the Letter Agreement, including in each case, without limitation, payments due on the Final Maturity Date, shall be made only from the Debt Service Account as at any applicable time the same shall be funded under Sections 3.2 and 3.3 of the Trust Agreement; provided, however, that if amounts held in the Debt Service Account and the Debt Coverage Reserve Account are insufficient to pay all such amounts when due, any amounts then held in the Regular Reserve Account shall be applied to make such payments to the extent provided in Section 3.3 of the Trust Agreement. Except in accordance with the preceding sentence with respect to any personal liability of the Borrower, the Borrower shall only be obligated to make payments under this Agreement, the Notes and the Letter Agreement, including in each case, without limitation, payments due on the Final Maturity Date, out of amounts of the Source of Debt Service and Borrowed Amounts received by it. The Borrower agrees that, as long as moneys are held in such Debt Service Account and such sub-accounts of the Reserve Account, the Lenders, to the extent necessary to make payments in accordance with the terms of the Trust Agreement of principal, interest and other amounts due under this Agreement, the Notes and the Letter Agreement, are among those having a right as provided under Section 2.2 of the Trust Agreement to receive disbursements thereunder. 9.5 No Recourse. In furtherance of Sections 9.1 to 9.4 hereof, each of the Tranche A Lender, the Agent, the Intercreditor Agent, the Technical Agent, the Arrangers, the Tranche B Lenders and each holder of a Note, by its acceptance thereof, agrees that, except as provided in Sections 9.3 and 9.4, (i) it will look solely to the Source of Debt Service and Borrowed Amounts to the extent provided in Sections 9.3 and 9.4 hereof for all payments to be made by the Borrower under this Agreement, the Notes and the Letter Agreement, as provided therein or herein, including in each case, without limitation, payments due on the Final Maturity Date, and that no recourse shall be had for the payment of the principal of or interest on the Notes or the payment of any other amounts due under this Agreement or the Letter Agreement, or shall be had for any claim based on any provision hereof or thereof, against BankAmerica International (or any entity acting as successor trustee under the Trust Agreement) in its individual capacity, or against any past, present or future stockholder, officer, director, employee or agent of BankAmerica International (or any entity so acting), or against the grantors, settlors or beneficiaries of any trust under the Trust Agreement, either directly or through the Borrower or any successor of any thereof, under any constitution, statute or rule of law or 72 66 by the enforcement of any assessment, or otherwise, and (ii) neither BankAmerica International (or any such entity acting as such successor trustee) nor any such other Person shall have any personal obligation, liability or duty whatsoever to the Tranche A Lender, the Agent, the Intercreditor Agent, the Technical Agent, the Arrangers or the Tranche B Lenders or any holders of the Notes or anyone else for or with respect to any such payment or for the performance of or compliance with any covenant or agreement contained in any of said documents or for the truth, accuracy or completeness of any statement or representation made in any such document, except only in the case of BankAmerica International (or any such entity acting as successor trustee) for any material breach of a representation or warranty expressly made by it under Section 4 or Section 5.3 hereof in its individual capacity and such liability as may arise under this Agreement for gross negligence or willful misconduct in acting hereunder. In such connection the Borrower (a) shall be entitled to act upon any notice, certificate, request, direction, waiver, receipt or other document which it in good faith believes to be genuine and it shall be entitled to rely upon the due execution, validity and effectiveness of, and the truth and acceptability of any provisions contained in, any of the foregoing so received, (b) may consult with, and obtain advice from qualified accounting and legal advisers in connection with the performance of its obligations and it shall incur no liability and shall be fully protected in acting in good faith in accordance with the opinion and advice of such advisers, and (c) shall have no duties other than those specifically set forth or provided for herein nor any obligation to familiarize itself with nor any responsibility with respect to any other agreement relating to the transactions contemplated by this Agreement to which it is not a party. 9.6 Not to Limit Remedies. Nothing contained in this Section 9 shall be construed to limit the exercise and enforcement, in accordance with the terms of this Agreement, the Notes or the Letter Agreement, of the rights and remedies of the Tranche A Lender, the Agent, the Intercreditor Agent, the Technical Agent, the Arrangers or the Tranche B Lenders or any holders of the Notes against the Borrower hereunder to the extent of the Source of Debt Service and Borrowed Amounts as provided herein. SECTION 10. MISCELLANEOUS 10.1 Notices. Any notice required or permitted to be given hereunder shall be in writing and shall be (a) personally delivered, (b) transmitted by postage prepaid registered mail, return receipt requested, (c) transmitted 73 67 by telex (with postage prepaid mail confirmation) or (d) sent by telecopier to the parties as follows (as elected by the party giving such notice): To the Borrower: BankAmerica International, as Trustee under the Bontang V Trust Agreement dated as of July 1, 1995 1 World Trade Center, 9th Floor New York, New York 10017 Attention: Vice President-Manager Telex: 62944 Answerback: BOA UW Telecopier: (212) 390-2249 To the Tranche A Bontang Train-G Project Finance Co., Lender: Ltd. Ebisu Neonato, 14th Floor 1-18, Ebisu 4-chome Shibuya-ku Tokyo, Japan Attention: Treasurer Telex: (0)2422027 Answerback: BGPF J Telecopier: (03) 5423-5593 To the Agent: The Long-Term Credit Bank of Japan, Limited New York Branch 165 Broadway New York, New York 10006 Attention: Vice President, Business Promotion II Telex: 425722 Answerback: LTCB UI Telecopier: (212) 608-2371 To the Tranche B As provided on the signature Lenders: pages hereof Any notice relating to a Borrowing or a prepayment shall only be effective on receipt of a legible copy thereof. Except as otherwise specified in this Agreement, all notices and other communications shall be deemed to have been duly given on (i) the date of delivery if delivered personally at or before 5:00 p.m. on the date of delivery in the time zone of the recipient (otherwise on the day immediately following the date of delivery), (ii) five days following posting if transmitted by mail, (iii) the date of transmission if transmitted by telex with confirmed answerback received at or before 5:00 p.m. on the date of transmission in the time zone of the recipient (otherwise on the day immediately following the date of transmission) or (iv) the date of 74 68 receipt of a legible copy thereof if sent by telecopier received at or before 5:00 p.m. on the date of transmission in the time zone of the recipient (otherwise on the day immediately following the date of receipt), whichever shall first occur. Any party may change its address for purposes hereof by notice to the other parties. 10.2 No Waiver; Remedies Cumulative. No failure to exercise and no delay in exercising, on the part of the Tranche A Lender, the Agent, the Tranche B Lenders or the holders of any Note, any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, power or privilege. Subject always to the provisions of Section 9 hereof, the rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law. The provisions of this Agreement shall inure to the benefit of any subsequent holder of the Notes. 10.3 Use of English Language. All documents or notices to be delivered pursuant to or in connection with this Agreement shall be in the English language. English shall be the official language for construction and interpretation of this Agreement, the Notes, the Letter Agreement and all agreements, notices, documents and instruments related thereto. If the original of any such document or notice is not in the English language, an English translation thereof shall be delivered. 10.4 Assignment; Successors and Assigns; Participations. (a) This Agreement shall be binding upon and inure to the benefit of the Borrower, the Tranche A Lender, the Arrangers, the Tranche B Lenders, the Agent and their respective successors and permitted assigns. The Borrower may not assign any of its rights or delegate any of its obligations hereunder without the written consent of all of the Lenders. Any Lender may at any time sell, assign, transfer, negotiate, or otherwise dispose of, in whole or in part, with the prior written consent (such consent not to be unreasonably withheld) of the Borrower, its rights and obligations under this Agreement or the Notes; provided, that such consent by the Borrower shall not be required for any proposed sale, assignment, transfer, negotiation or other disposition by a Tranche B Lender to another financial institution (i) at least 75% of the voting shares of which are held directly or indirectly by such Tranche B Lender, or (ii) holding directly or indirectly at least 75% of the voting shares of such Tranche B Lender or (iii) at least 75% of the voting shares of which are held directly or 75 69 indirectly by a corporation which holds directly or indirectly at least 75% of the voting shares of such Tranche B Lender (any of the foregoing described transferees, a "Section 10.4(a) Affiliate"). The exercise of such right by any Lender is, however, subject to the conditions that the transferee shall (x) not have any right at the time of transfer, or shall have effectively waived any right existing in the transferee at the time of transfer, pursuant to Section 3.3 hereof to claim from the Borrower tax indemnification and pursuant to Section 3.4(b) hereof to claim from the Borrower any additional amounts, in either case above and beyond that or those which could have been claimed by the transferor at the time of transfer, (y) not have any right at the time of transfer pursuant to Section 3.4(a) hereof not possessed by the transferor at the time of transfer, and (z) in the case of any transfer to a Section 10.4(a) Affiliate, not have designated a Lending Office in any jurisdiction with respect to which the Borrower is at the time of transfer prohibited by applicable state or federal laws of the United States from doing business. (b) In furtherance of the foregoing clause (a), any Lender wishing to transfer any of its rights and obligations under this Agreement or the Notes to any Person shall effect such transfer in the following manner: (i) The Lender and the Person or Persons to which the Lender wishes to transfer any of such rights and obligations (the "Transferee" or "Transferees") shall duly complete and execute a transfer certificate in the form of Exhibit C-3 hereto (the "Transfer Certificate"). (ii) Unless the intended Transferee is stated in the relevant Transfer Certificate to be a Section 10.4(a) Affiliate, the Lender shall obtain the consent of the Borrower to the transfer by having the Borrower evidence its consent in the space provided therefor in the Transfer Certificate. (iii) The Lender then and only then shall deliver the Transfer Certificate to the Agent together with (x) a photocopy of the Transfer Certificate as executed by the Lender, the Transferee and the Borrower, (y) the Note or Notes in respect of which the transfer is being made, and (z) payment of the transfer fee of $1,000, upon receipt of which the Agent shall acknowledge receipt of such Transfer Certificate in the space provided therefor in the photocopy and deliver the same to the Transferee. (iv) Each transfer shall become effective on the later of (x) the date specified for such transfer in the related Transfer Certificate and (y) the 76 70 fifth Business Day after acknowledgment of receipt of the related Transfer Certificate by the Agent. (v) Upon a transfer becoming effective in the foregoing manner, the Transferee shall assume the obligations and acquire the rights which are the subject of such transfer with the same effect as if such Transferee had been an original party hereto as a Lender with the rights and obligations acquired and assumed by such Transferee as the result of such transfer. (c) The Agent shall as promptly as practicable deliver to the Borrower a copy of each Transfer Certificate the receipt of which is acknowledged pursuant to this Section 10.4 together with the Note or Notes received with respect thereto, whereupon the Borrower shall execute and deliver into the custody of the Agent one or more new Notes (of the same category as the Notes subject to transfer and dated the date to which interest has been paid on the Advances evidenced thereby) (i) in the principal amounts being retained, if any, and/or transferred by the transferor and the Transferee or Transferees, respectively, (ii) payable to the order of such transferor and/or Transferee or Transferees, respectively, and (iii) in an aggregate principal amount equal to that evidenced by the Note or Notes which are the subject of such transfer. (d) The Agent shall as promptly as practicable deliver to the relevant Transferees all new Notes delivered into its custody pursuant to Section 10.4(c) hereof. (e) The Agent and the Borrower may treat each Lender as the holder of the Note drawn to its order and delivered to such Lender, whether pursuant to Section 2.9 hereof or this Section 10.4, except in those circumstances where a transfer has become effective pursuant to this Section 10.4 but the new Note or Notes to be issued in connection with such transfer have yet to be issued, in which case the transferor and Transferee or Transferees parties to such transfer shall be treated as the holder or holders of the existing Note or Notes related to such transfer to the extent of their respective interests as set forth in the relevant Transfer Certificate. (f) All agreements, representations and warranties made herein shall survive the making of any such transfer hereunder by any Lender. (g) Notwithstanding anything otherwise contained in this Section 10.4, each Lender may grant participations which do not create or purport to create binding obligations of the Borrower, in whole or in part, in 77 71 its rights under this Agreement and the Notes without any restriction and without notice to the Borrower. (h) The parties named on the signature pages hereof under the captions "Arrangers", "Intercreditor Agent" and "Technical Agent" are intended to have such benefits, and in accepting any such benefits also to accept such obligations, as may be expressly provided for such parties herein to the same extent as if such parties had actually executed and delivered this Agreement. 10.5 Amendments. Any provision of this Agreement or the Notes may be amended or waived if, and only if, such amendment or waiver shall be in writing and signed by the Tranche A Lender (except with respect to Section 8 hereof (other than Section 8.8 hereof)), the Majority Tranche B Lenders and, if the Agent's rights or duties as agent are affected, the Agent; provided that any such amendment must also be signed by the Borrower; and provided, further that no such amendment or waiver shall, unless signed by the Tranche A Lender and each Tranche B Lender, do any of the following: (a) increase or decrease the Commitment of any Lender or subject any Lender to any additional obligation hereunder; (b) reduce the amount or postpone the date of any payment of principal, interest or other amount hereunder with respect to a Tranche; (c) with respect to Tranche B only, reduce the percentage of the amount of the Commitments with respect to Tranche B or the Advances with respect to Tranche B, specified in the definition of "Majority Tranche B Lenders" or otherwise required to take any action hereunder; or (d) amend or waive any provision of this Section 10.5. Any such amendment or waiver shall be signed by the Tranche A Lender and by the Agent on behalf of the relevant Tranche B Lenders if the Agent has been so authorized in writing or by telex, cable or facsimile transmission by the Majority Tranche B Lenders or all of the Tranche B Lenders, as the case may be. Any amendment or waiver signed by the Agent in accordance with the preceding sentence shall be binding upon the Tranche B Lenders and any holder of a Tranche B Note. Any action that the Agent may take on behalf of the Majority Tranche B Lenders under this Agreement and that the Agent in fact so takes shall be binding on all of the Tranche B Lenders. 10.6 Expenses; Indemnification. (a) Subject to such limitations as are separately agreed, whether or not the transactions contemplated by this Agreement shall be consummated, the Borrower agrees (i) to pay, or reimburse the Tranche A Lender and the Agent, on behalf of the Tranche B Lenders, for, all reasonable fees, disbursements, expenses (including without limitation travel expenses) and other charges of the 78 72 Lenders' special New York, Japanese, Taiwanese and Korean counsel and (ii) to pay or reimburse the Tranche A Lender and, with respect to the Arrangers, the Agent on behalf of the Arrangers, for, all other reasonable out-of-pocket expenses of the Tranche A Lender and the Arrangers, including, but not limited to, travel and photocopying expenses, in each case in connection with the preparation, negotiation and signing of, and the initial disbursement under, this Agreement; provided that, subject to Section 10.6(b) hereof, the Borrower shall not be obligated to pay or reimburse the Lenders for any such fees, disbursements, expenses or other charges that were incurred prior to April 5, 1995 or after the initial Borrowing Date; and provided, further, that the Borrower shall pay or reimburse any fees and disbursements of Merlin Associates, Inc. in connection with the preparation of the report referred to in Section 1.19 of the Producers Agreement up to an aggregate maximum of $50,000.00. The Borrower shall pay such amounts, to the extent then incurred, on or before the earliest to occur of (i) the initial Borrowing Date, (ii) the thirtieth day following the Effective Date or (iii) the sixtieth day following the date hereof. If such thirtieth or sixtieth day referred to in the preceding clauses (ii) and (iii) shall occur earlier than the initial Borrowing Date, then, in addition to the amount paid on such day, the Borrower shall also pay on the initial Borrowing Date any such amounts that are incurred after such thirtieth or sixtieth day and on or before the initial Borrowing Date. (b) The Borrower agrees (i) to pay, or reimburse the Tranche A Lender or the Agent or both, as the case may be, for all reasonable out-of-pocket expenses, including, but not limited to, travel expenses, legal fees, disbursements and other charges of Lenders' counsel incurred by the Tranche A Lender or the Agent or both in connection with any amendment or supplement to, or modification or waiver of, this Agreement, the Trust Agreement, the Producers Agreement or other related documents after this Agreement has been fully executed, and, subject to such limitations as are separately agreed, in connection with the satisfaction of the conditions precedent set forth in Section 5.2 hereof, and (ii) whether or not amounts due under this Agreement, any of the Notes or the Letter Agreement are accelerated, upon the occurrence of an Event of Default or an event the occurrence or nonoccurrence of which would, with notice or lapse of time or both constitute an Event of Default (but only if such event later becomes an Event of Default), (x) to pay, or reimburse the holder of the Tranche A Note for, all reasonable out-of-pocket expenses of such holder arising in connection with such Event of Default or the enforcement of this Agreement, such Tranche A Note, the Letter Agreement or the Producers Agreement, including but not limited to the fees, disbursements and expenses (including without limitation travel expenses) and other charges of counsel employed by such holder and (y) to pay, or reimburse the Agent for, all reasonable out-of-pocket expenses of the Agent and each holder of any Tranche B Notes arising in connection with such Event of Default or the enforcement of this Agreement, such Tranche B Notes, the Letter Agreement or the Producers Agreement, including but not limited to the fees, disburse- 79 73 ments and expenses (including without limitation travel expenses) and other charges of counsel employed by the Agent or such holder. The Borrower shall pay any such amounts for which an invoice is delivered to it on or prior to the end of the Availability Period, on or before the earlier of (A) the next Borrowing Date or (B) the next Interest Payment Date following delivery to the Borrower of the invoice therefor. The Borrower shall pay any such amounts for which an invoice is delivered to it after the Availability Period, as provided in the Trust Agreement. 10.7 Sharing of Set-Off and Other Payments. In the event that any Tranche B Lender shall have received an amount in excess of its ratable share of payments hereunder or under the Tranche B Notes through the exercise of any lien, set-off or similar right or any voluntary payment by the Borrower, such Tranche B Lender shall promptly (and in any event within 15 days) purchase for cash, without recourse that portion of each other Tranche B Lender's Advances as will result in each Tranche B Lender receiving its ratable share of the amount of such lien, set-off or similar right, or voluntary payment; provided that to the extent that such excess amount or any portion thereof is subsequently recovered from the purchasing Tranche B Lender, its purchases from the other Tranche B Lenders shall be rescinded and the price repaid without interest; and provided further that if, after acceleration of the maturity of the relevant Tranche B Notes pursuant to Section 7 hereof, any Tranche B Lender shall commence an action or proceeding in any court to enforce the relevant Tranche B Notes held by such Tranche B Lender and as a result thereof, or in connection therewith, shall receive an excess payment on such Tranche B Notes, such Tranche B Lender shall not be required to share any portion of such excess payment with a Tranche B Lender which has received sufficient notice to enable it to and which, has the legal right to, but does not, join such action or proceeding or commence and diligently prosecute a separate action or proceeding to enforce its Tranche B Notes in another court. Nothing herein contained shall in any way affect (a) expenses pursuant to Section 2.7(b) hereof, prepayments pursuant to Section 3.4 hereof and interest payments calculated in accordance with the provisions of the fifth sentence of Section 2.6 hereof and (b) the right of any Lender to obtain payment of indebtedness of the Borrower other than 80 74 Indebtedness under this Agreement, the Notes and the Letter Agreement. 10.8 Counterparts. This Agreement may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts together shall constitute one and the same instrument. Complete sets of counterparts shall be lodged with the Tranche A Lender, the Agent and the Borrower. 10.9 Table of Contents and Section Headings. The table of contents and the section headings in this Agreement are inserted for convenience of reference only and shall be ignored in construing this Agreement. 10.10 Governing Law. This Agreement and the Notes shall be governed by and construed in accordance with the laws of the State of New York, United States of America, applicable to agreements made and to be performed entirely within such State. 10.11 Severability. If any one or more of the provisions contained in this Agreement or any document executed in connection herewith shall be invalid, illegal or unenforceable in any respect under any applicable law, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired. 10.12 Term of Agreement. The term of this Agreement shall commence on the date hereof and shall end on the termination of all of the Lenders' Commitments or payment in full of all of the Notes and all other amounts payable under this Agreement and the Letter Agreement, whichever is later. The agreements of the Borrower to pay expenses and indemnities pursuant to Sections 3 and 10.6 of this Agreement shall survive the repayment of the Advances 81 75 and the cancellation of all of the Notes until all amounts payable thereunder are paid in full. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective duly authorized signatories as of the date hereof. The Borrower ------------ BANKAMERICA INTERNATIONAL, as Trustee aforesaid By /s/ VINCENT CHORNEY ----------------------------------- Name: Vincent Chorney Title: Attorney-in-Fact Commitment Tranche A Lender - ---------- ---------------- $678,650,000.00 BONTANG TRAIN-G PROJECT FINANCE CO., LTD. By /s/ RINTARO HARA ----------------------------------- Name: Rintaro Hara Title: President Lending Office: Ebisu Neonato 14th Floor 1-18, Ebisu 4-chome, Shibuya-ku Tokyo, Japan Attention: Treasurer Telex: (0)2422027 Answerback: BGPF J Telecopier No.: (03) 5423-5593
82 76 Arrangers --------- CREDIT LYONNAIS By /s/ PHILIPPE SOUSTRA ----------------------------------- Name: Philippe Soustra Title: Attorney-in-Fact THE FUJI BANK, LIMITED By /s/ HAJIME TANIMURA ----------------------------------- Name: Hajime Tanimura Title: Attorney-in-Fact THE LONG-TERM CREDIT BANK OF JAPAN, LIMITED By /s/ KENICHI AMANO ----------------------------------- Name: Kenichi Amano Title: Attorney-in-Fact Facility Agent ("Agent") ------------------------ THE LONG-TERM CREDIT BANK OF JAPAN, LIMITED NEW YORK BRANCH By /s/ KENICHI AMANO ----------------------------------- Name: Kenichi Amano Title: Attorney-in-Fact
83 77 Intercreditor Agent ------------------- THE FUJI BANK, LIMITED Technical Agent --------------- CREDIT LYONNAIS Tranche B Lenders ----------------- Commitment - ---------- $25,000,000.00 CREDIT LYONNAIS By /s/ PHILIPPE SOUSTRA ----------------------------------- Name: Philippe Soustra Title: Attorney-in-Fact Lending Office: Credit Lyonnais/IFAP/MTC 5 1 Rue des Italiens 75 009 Paris, France Attention: Ms. Annick Paccioni Assistant Manager Central Department of Asset & Project Financial Engineering Telex: 285 018 F Answerback: CREDC/A Telecopier No.: 33-1-4295-3814
84 78 Commitment - ---------- $15,700,000.00 THE DAIWA BANK, LIMITED NEW YORK BRANCH By /s/ SHINICHI THOUE ----------------------------------- Name: Shinichi Thoue Title: Attorney-in-Fact Lending Office: 666 Fifth Avenue, 3rd Floor New York, New York 10103-0300 Attention: Mr. Masafumi Asai Vice President & Manager Loan Section Telex: RCA 232246 Answerback: NEW DAIWA Telecopier No.: (212) 554-7210 Commitment - ---------- $7,600,000.00 THE DAI-ICHI KANGYO BANK, LIMITED NEW YORK BRANCH By /s/ TAKAYUKI NAKAYAMA ----------------------------------- Name: Takayuki Nakayama Title: Attorney-in-Fact Lending Office: One World Trade Center, Suite 4911 New York, New York 10048 Attention: Ms. Lisa Saito Investment Banking Department II Telex: 232988 Answerback: DKB UR Telecopier No.: (212) 542-0579
85 79 Commitment - ---------- $25,000,000.00 THE FUJI BANK, LIMITED NEW YORK BRANCH By /s/ HAJIME TAMURA ----------------------------------- Name: Hajime Tamura Title: Attorney-in-Fact Lending Office: Two World Trade Center, 79th Floor New York, New York 10048 Attention: Mr. Thomas Boylan (Vice President) Credit Contact Ms. Rosanna Caminiti (Assistant Manager) Administrative Contact Telex: 420626 Answerback: 420626 Telecopier No.: (212) 321-9407 (212) 321-9408 Commitment - ---------- $19,650,000.00 THE INDUSTRIAL BANK OF JAPAN TRUST COMPANY By /s/ KENICHIRO MURATA ----------------------------------- Name: Kenichiro Murata Title: Attorney-in-Fact Lending Office: 245 Park Avenue New York, New York 10167 Attention: Mr. Ryosuke Shigetomi Vice President Real Estate & Project Finance Department (copy to Mr. K. Murata) Telex: 420802 Answerback: KOGI UI Telecopier No.: (212) 949-0134
86 80 Commitment - ---------- $19,650,000.00 KOREA FIRST BANK NEW YORK AGENCY By /s/ HEUNG-JE KIM ----------------------------------- Name: Heung-Je Kim Title: Attorney-in-Fact Lending Office: 410 Park Avenue New York, New York 10022 Attention: Mr. Jin Hang Lee Senior Assistant General Manager Mr. Bong Young Kim Assistant General Manager Telex: 668115 or 425747 Answerback: KOFIRST NY or KORFBK A Telecopier No.: (212) 319-0255 Commitment - ---------- $25,000,000.00 THE LONG-TERM CREDIT BANK OF JAPAN, LIMITED NEW YORK BRANCH By /s/ KENICHI AMANO ----------------------------------- Name: Kenichi Amano Title: Attorney-in-Fact Lending Office: 165 Broadway New York, New York 10006 Attention: Mr. Hisashi Saito Vice President, Business Promotion II Telex: 425722 Answerback: LTCB UI Telecopier No.: (212) 608-2303
87 81 Commitment - ---------- $19,650,000.00 THE MITSUBISHI BANK, LIMITED NEW YORK BRANCH By /s/ YOSHISABURO MOGI ----------------------------------- Name: Yoshisaburo Mogi Title: Attorney-in-Fact Lending Office: Two World Financial Center 225 Liberty Street New York, New York 10281 Attention: Mr. Hiroaki Fuchida Vice President & Manager U.S. Corporate Banking Department Telex: 232328 Answerback: MITUR Telecopier No.: (212) 667-3562 Commitment - ---------- $19,650,000.00 THE MITSUBISHI TRUST AND BANKING CORPORATION NEW YORK BRANCH By /s/ TATSUHISA TESHIMA ----------------------------------- Name: Tatsuhisa Teshima Title: Attorney-in-Fact Lending Office: 520 Madison Avenue, 26th Floor New York, New York 10022 Attention: Mr. Ichiro Yanagiya Manager Finance IV Telex: 425078 Answerback: MTAB UI Telecopier No.: (212) 755-2349
88 82 Commitment - ---------- $19,650,000.00 THE NORINCHUKIN BANK NEW YORK BRANCH By /s/ SHOJIRO MATSUOKA ----------------------------------- Name: Shojiro Matsuoka Title: Attorney-in-Fact Lending Office: 245 Park Avenue, 29th Floor New York, New York 10167 Attention: Mr. Takehiko Ishihara Assistant Manager Telex: 6720068 Answerback: NOCHUBANK Telecopier No.: (212) 697-5754 Commitment - ---------- $19,650,000.00 THE SAKURA BANK, LIMITED NEW YORK BRANCH By /s/ MASAO UMEMURA ----------------------------------- Name: Masao Umemura Title: Attorney-in-Fact Lending Office: 277 Park Avenue, 45th Floor New York, New York 10172 Attention: Mr. Yasuhiro Terada Senior Vice President Structured Finance Department (copy to Mr. T. Fujinawa) Telex: 421242 Answerback: MITKBK NY Telecopier No.: (212) 888-7651
89 83 Commitment - ---------- $19,650,000.00 THE SANWA BANK, LIMITED NEW YORK BRANCH By /s/ AKIRA TEKEUCHI ----------------------------------- Name: Akira Tekeuchi Title: Attorney-in-Fact Lending Office: Park Avenue Plaza 55 East 52nd Street New York, New York 10055 Attention: Ms. Elizabeth Murphy Assistant Vice President Loan Administration Telex: RCA 232423 Answerback: SWBUR Telecopier No.: (212) 754-1851 Commitment - ---------- $15,700,000.00 SOCIETE GENERALE TOKYO BRANCH By /s/ PATRICK FROGER ----------------------------------- Name: Patrick Froger Title: General Manager for Japanese Branches Lending Office: 2-9, Nishi-Shinbashi 1-chome Minato-ku, Tokyo 105 Japan Attention: Mr. Toshio Hamasaki Senior Vice President Corporate Marketing Department IV Telex: 28611 Answerback: SOGE Telecopier No.: (813) 3503-4090
90 84 Commitment - ---------- $19,650,000.00 THE SUMITOMO BANK, LIMITED NEW YORK BRANCH By /s/ KIYOTAKA KUROKAWA ----------------------------------- Name: Kiyotaka Kurokawa Title: Attorney-in-Fact Lending Office: 277 Park Avenue New York, New York 10172 Attention: Mr. Keiji Hayashida Assistant Vice President International Finance Department U.S.A. Telex: 420515(ITT) Answerback: SMBK UI Telecopier No.: (212) 593-9522 Commitment - ---------- $19,650,000.00 THE TOKAI BANK, LIMITED NEW YORK BRANCH By /s/ TURO SATOH ----------------------------------- Name: Turo Satoh Title: Attorney-in-Fact Lending Office: Park Avenue Plaza 55 East 52nd Street New York, New York 10055 Attention: Mr. Masayuki Kawahara Vice President Utilities Finance Group Telex: 211250 Answerback: TOKAI UR Telecopier No.: (212) 754-2171
EX-10.2 3 BONTANG V PRODUCERS AGREEMENT DATED 07/01/95 1 BONTANG V PRODUCERS AGREEMENT by PERUSAHAAN PERTAMBANGAN MINYAK DAN GAS BUMI NEGARA VIRGINIA INDONESIA COMPANY OPICOIL HOUSTON, INC. VIRGINIA INTERNATIONAL COMPANY LASMO SANGA SANGA LIMITED UNION TEXAS EAST KALIMANTAN LIMITED UNIVERSE GAS & OIL COMPANY, INC. TOTAL INDONESIE UNOCAL INDONESIA COMPANY INDONESIA PETROLEUM, LTD. in favor of BONTANG TRAIN-G PROJECT FINANCE CO., LTD. as Tranche A Lender, THE BANKS named herein as Tranche B Lenders and THE LONG-TERM CREDIT BANK OF JAPAN, LIMITED NEW YORK BRANCH as Facility Agent THE FUJI BANK, LIMITED as Intercreditor Agent CREDIT LYONNAIS as Technical Agent Tranche B Arranged by CREDIT LYONNAIS THE FUJI BANK, LIMITED THE LONG-TERM CREDIT BANK OF JAPAN, LIMITED Dated as of July 1, 1995 2 TABLE OF CONTENTS
Page ---- PART 1 PRODUCERS' AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 1.1 Authorization of Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 1.2 Approval of Expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 1.3 Rights to Bontang Plant and Improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 1.4 No Amendments, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 1.5 Compliance with Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 1.6 Enforcement of Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 1.7 Operation of Bontang Plant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 1.8 Replacement of Trustees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 1.9 Indebtedness; Permitted Amounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 1.10 Negative Pledge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 1.11 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 1.12 Reserve Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 1.13 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 1.14 Construction of Train G . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 1.15 Notices Relating to Source of Debt Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 1.16 Effect of Certain Events with Respect to LNG Sales Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 1.17 Payment Instructions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 1.18 Monitoring Total Project Expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 1.19 Construction Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 1.20 Loading Facilities Construction Contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 1.21 Debt Service Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 1.22 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 1.23 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 PART 2 REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 2.1 Due Incorporation; Power and Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 2.2 Legal Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 2.3 Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 2.4 Registrations and Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 2.5 Agreement Binding; No Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 2.6 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 2.7 Compliance with Other Instruments, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 2.8 Other Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 2.9 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 2.10 No Encumbrance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 2.11 No Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 PART 3 DEFAULTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 3.1 Default Defined . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 3.2 Remedy for Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
(i) 3
Page ---- 3.3 Diversion and Remedy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 3.4 Liability Share Defined . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 3.5 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 PART 4 INSURED LOSS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 4.1 Effect of Total Loss of Additional Plant or Loading Facilities Prior to Operational Acceptance . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 4.2 Effect of Total Loss of Insured Bontang Plant . . . . . . . . . . . . . . . . . . . . . . . . . 32 4.3 Insurance Shortfall . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 4.4 Other Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 PART 5 SCOPE OF PRODUCERS' LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 PART 6 MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 6.1 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 6.2 No Waiver; Remedies Cumulative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 6.3 Assignment; Successors and Assigns; Participations . . . . . . . . . . . . . . . . . . . . . . . 37 6.4 Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 6.5 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 6.6 Section Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 6.7 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 6.8 Consent to Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 6.9 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 6.10 Reinstatement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 6.11 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 Schedule 1 Liability Share Percentages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
(ii) 4 BONTANG V PRODUCERS AGREEMENT Dated as of July 1, 1995 Bontang Train-G Project Finance Co., Ltd., as Tranche A Lender, and Credit Lyonnais, The Fuji Bank, Limited and The Long-Term Credit Bank of Japan, Limited as Arrangers and The Long-Term Credit Bank of Japan, Limited, New York Branch, as Facility Agent, The Fuji Bank, Limited as Intercreditor Agent and Credit Lyonnais, as Technical Agent, under the Loan Agreement Dear Sirs: Each of the undersigned Producers confirms that it has authorized and requested the Trustee to enter into the Loan Agreement. In connection therewith, the undersigned Producers hereby confirm for your benefit and for the benefit of the other parties to such Loan Agreement executing this Agreement, any permitted successor or successors to your or their interests thereunder, and the holders of the Notes referred to in such Loan Agreement the matters set forth below. * * * * * As used above and below in this Agreement, the following capitalized expressions shall have the meanings set forth below, such meanings to be applicable to both the singular and plural forms of such expressions. "Affected Facilities" has the meaning set forth in Section 4.4 hereof. "Approved Institutions" means the United States headquarters or a United States branch of the following financial institutions: (i) any branch or affiliate of BankAmerica International with the power to act as Trustee or (ii) any other bank, trust company or financial institution (in each case with trust powers) which (1) has a net worth in excess of $100,000,000.00 or (2) has outstanding debt securities rated A or better by Standard and Poor's Rating Group or its equivalent by Moody's Investors Service 5 or another nationally recognized rating agency in the United States. "Bontang Excess Sales Trust Agreement" has the meaning set forth in Article 1 of the Trust Agreement. "Bontang Excess Sales Trustee" has the meaning set forth in Article 1 of the Trust Agreement. "Bontang I Trust Agreement" has the meaning set forth in Article 1 of the Trust Agreement. "Bontang I Trustee" has the meaning set forth in Article 1 of the Trust Agreement. "Bontang III Trust Agreement" means the Bontang III Trustee and Paying Agent Agreement, dated as of February 9, 1988, among the Producers or their predecessors in interest, and Continental Bank International, as heretofore or hereafter amended or modified. "Bontang III Trustee" means the trustee and paying agent under the Bontang III Trust Agreement. "Bontang V Payment Account" has the meaning set forth in Article 1 of the Trust Agreement. "Default" has the meaning set forth in Section 3.1 hereof. "Default Shortfall" has the meaning set forth in Section 3.2 hereof. "Diversion" has the meaning set forth in Section 3.3 hereof. "Diversion Shortfall" has the meaning set forth in Section 3.3 hereof. "Engineering Firm" means Merlin Associates, Inc. "EPC Contractor" means P.T. Inti Karya Persada Tehnik, as contractor under the EPC Contract. "Gas Supply Area" has the meaning set forth in Section 1.12(a) hereof. "Inpex" means Indonesia Petroleum, Ltd. "Insurance Shortfall" has the meaning set forth in Section 4.3 hereof. 2 6 "Japanese Taxes" means any Taxes imposed by Japan or any political subdivision or taxing authority thereof or therein with respect to any amount constituting Source of Debt Service. "Liability Share" has the meaning set forth in Section 3.4 hereof. "Loading Facilities Contractor" means the contractor under the Loading Facilities Construction Contract. "Loading Facilities Sub-Contractor" means any sub-contractor that may be appointed under the Loading Facilities Construction Contract. "Loan Agreement" means the Bontang V Loan Agreement, dated as of the date hereof, among the Trustee, as borrower thereunder, the Tranche A Lender, the Tranche B Lenders and the Agent, the Intercreditor Agent, the Technical Agent and the Arrangers parties thereto, as hereafter amended. "Lost Facilities" has the meaning set forth in Section 4.1 hereof. "Plant Insurance" has the meaning set forth in Section 1.11(b) hereof. "Plant Insurance Proceeds" has the meaning set forth in Section 1.11(b) hereof. "Production Sharing Contracts" means to the extent such contracts relate to the supply of natural gas to the Bontang Plant, each of: (a) as to Pertamina and the Vico Group, (i) until August 8, 1998, the Amended and Restated Production Sharing Contract dated April 23, 1990, as hereafter modified or amended, between Pertamina, on the one hand, and the members of the Vico Group on the other, and (ii) effective August 8, 1998, the Production Sharing Contract dated April 23, 1990, as hereafter modified or amended, between Pertamina, on the one hand, and the members of the Vico Group, on the other; (b) as to Pertamina and the Total Group, (i) until March 31, 1997, the Amended and Restated Production Sharing Contract dated January 11, 1991, as hereafter modified or amended, between Pertamina, on the one hand, and the members of the Total Group, on the other, and (ii) effective March 31, 1997, the Production Sharing 3 7 Contract dated January 11, 1991, as hereafter modified or amended, between Pertamina, on the one hand, and the members of the Total Group, on the other; (c) as to Pertamina and the Unocal Group, (i) until October 24, 1998, the Amended and Restated Production Sharing Contract dated January 11, 1991, as hereafter modified or amended, between Pertamina, on the other hand, and Unocal on the other, and (ii) effective October 25, 1998, the Production Sharing Contract dated January 11, 1991, as hereafter modified or amended, between Pertamina, on the one hand, and Unocal, on the other; and (d) as to Pertamina and Inpex, effective March 31, 1997, the Production Sharing Contract dated March 28, 1991, as hereafter modified or amended, between Pertamina, on the one hand, and Inpex, on the other. "Regular Reserve Account" has the meaning set forth in Article 1 of the Trust Agreement. "Sub-Contractor" means each of the Chiyoda Corporation and the Mitsubishi Corporation, as subcontractors under the EPC Contract. "Total Group" means Total Indonesie and Inpex, and their successors in interest. "Total" means Total Indonesie. "Trustee" means BankAmerica International, as Bontang V Trustee under the Trust Agreement, and its successors thereunder pursuant to Section 1.8 hereof. "Unocal Group" means Unocal and Inpex, and their successors in interest; provided, however, that Inpex shall cease to be a member of the Unocal Group on March 31, 1997. "Vico Group" means Virginia Indonesia Company, Virginia International Company, OPICOIL Houston, Inc., Lasmo Sanga Sanga Limited, Union Texas East Kalimantan Limited, and Universe Gas & Oil Company, Inc., and their successors in interest. In addition to the definitions set forth above, and except as otherwise provided in this Agreement, capitalized expressions which are defined in the Loan Agreement are used herein with the meanings defined in the Loan Agreement, unless the context shall otherwise specifically require. * * * * * 4 8 PART 1 PRODUCERS' AGREEMENTS Each of the Producers covenants to the Lenders solely as to itself until payment in full of the principal of and interest on the Notes and payment in full of all amounts owing under the Loan Agreement and the Letter Agreement at the time of such payment in full of such Notes, unless compliance with the provisions of this Part 1 shall have been waived by the Majority Lenders, to do and perform the following: 1.1 Authorization of Borrowings. Each of the Producers has reviewed the Loan Agreement (including the form of Notes attached thereto) and the Letter Agreement, and has authorized and requested the Borrower to enter into the Loan Agreement and the Letter Agreement and to execute and deliver the Notes, in each case, not in its individual capacity but solely as Trustee under the Trust Agreement, to make and repay Borrowings, to pay interest on the Borrowings, to pay other amounts and to perform the other obligations of the Borrower, all of the foregoing under and in accordance with the terms of the Loan Agreement, the Notes and the Letter Agreement. For purposes of effecting each Borrowing, each Producer other than Pertamina hereby irrevocably authorizes and designates Pertamina as its agent with full power and authority on behalf of such Producer to authorize and request the Borrower to effect such Borrowing or to designate an entity and individuals in accordance with the Trust Agreement to do the same, or both. Pertamina hereby accepts such authorization and agrees to perform on behalf of the Producers (including on its own behalf) the obligations authorized pursuant to, and accepts the designation contained in, this Section 1.1 and in the Trust Agreement. 1.2 Approval of Expenditures. The Producers confirm that in accordance with Article 10 of the Processing Agreement they have made arrangements among themselves whereby, and the Producers hereby covenant to the Lenders that, all invoices of all project creditors shall be approved or disapproved in good faith in accordance with objective standards customarily followed in the oil and gas industry in construction activities of the sort contemplated by the Development Plan. 5 9 1.3 Rights to Bontang Plant and Improvements. The Producers agree that Pertamina shall exclusively hold and shall continue to maintain title to the Bontang Plant, and all rights and interests in and to the Bontang Plant, subject with respect to Pertamina's rights and interests to rights and interests created under the Basic Agreements and any rights and interests created in other parties which do not adversely affect the processing of LNG thereat in the amounts and in the manner contemplated by the Processing Agreement for sale under the LNG Sales Contracts, and Pertamina agrees that it will not create, incur or suffer to exist any Encumbrances on the Bontang Plant, except for Encumbrances arising pursuant to statute or otherwise by operation of law, which shall be discharged in the ordinary course of business and shall not be enforced by attachment or levy. 1.4 No Amendments, etc. Each of the Producers agrees: (a) with respect to the Trust Agreement, such Producer shall not (i) terminate or revoke the Trust Agreement, or (ii) amend, modify, revise, supplement or waive any of the provisions of Article 1, 4 or 10 or Section 2.1, 2.2, 2.4, 3.1, 3.2, 3.3 (other than Section 3.3(i)), 3.5 or 3.7 or the third sentence of Section 8.2 of the Trust Agreement, in each case other than to permit the Borrower to enter into Subordinated Indebtedness or Pari Passu Swap Indebtedness as permitted by the Loan Agreement, or any other provision of the Trust Agreement, if any such amendment, modification, revision, supplement or waiver would or would be likely to affect adversely the trust created under the Trust Agreement, the rights of the Lenders under the Loan Agreement or Notes or the ability of the Borrower to perform its obligations under such Loan Agreement, Notes or the Letter Agreement, or (iii) change or agree to the change of the trustee thereunder, except as contemplated by Section 1.8 hereof; (b) with respect to each Basic Agreement (other than the Second A/R 1973 Sales Contract and the New 1973 Transportation Arrangements) and, if and when duly executed and delivered, the Second A/R 1973 Sales Contract and the New 1973 Transportation Arrangements, each Production Sharing Contract and each Construction Document to which it is a party, such Producer shall not (i) terminate or revoke such Basic Agreement (except for a termination or revocation of any portion of the New 1973 Transportation Arrangements that will not impair Pertamina's ability to deliver LNG under the New 1973 Sales Contract in any material respect), Production Sharing Contract or Construction Document or (ii) amend, modify, revise, 6 10 supplement or waive any of the provisions of such Basic Agreement, Production Sharing Contract or Construction Document (x) if any such amendment, modification, revision, supplement or waiver would or would be likely to, after giving effect thereto, (A) cause the Debt Coverage Ratio under the Loan Agreement at any time that amounts are outstanding thereunder to be less than 150% or (B) conflict with or affect adversely the rights of the Lenders under the Loan Agreement, Notes or the Letter Agreement or the obligations of the Borrower under the Loan Agreement, Notes, the Letter Agreement or Trust Agreement or conflict with or impair the obligations of the Producers pursuant to this Agreement (other than an assignment permitted pursuant to Section 6.3 hereof); or (y) if the Debt Coverage Ratio already is, at the relevant time, less than 150% and if any such amendment, modification, revision, supplement or waiver would or would be likely to, after giving effect thereto, cause the Debt Coverage Ratio to be reduced further; provided, however, that if a Basic Agreement incorporates by reference the provisions of a separate agreement or agreements, the provisions of this Section 1.4(b) shall apply to such provisions of such separate agreement or agreements if any termination, revocation, amendment, modification, supplement or waiver thereof would have the effect of the same on such Basic Agreement; (c) with respect to each LNG Sales Contract, Pertamina shall not consent to the assignment or delegation by any Buyer thereunder of any of such Buyer's rights or obligations thereunder; and (d) with respect to the Construction Documents, Pertamina shall not consent to the assignment or delegation of any of the rights or obligations of the EPC Contractor or the Sub-Contractor and, upon the execution of the Loading Facilities Construction Contract, shall not consent to the assignment or delegation of any of the rights or obligations thereunder of the Loading Facilities Contractor or the Loading Facilities Sub-Contractor, other than (i) a delegation by the EPC Contractor to the Sub-Contractor or by the Loading Facilities Contractor to the Loading Facilities Sub-Contractor in accordance with the Construction Documents or (ii) a delegation to subcontractors, and use of suppliers, in the ordinary course of construction implementation. Any consent of the Majority Lenders necessary to permit any action otherwise prohibited by this Section 1.4 shall not be unreasonably withheld. Each of the Producers shall promptly provide or cause to be provided to the Tranche A Lender and the Agent correct and complete copies of (i) if and when executed, the Second A/R 1973 Sales 7 11 Contract, the New 1973 Transportation Arrangements (the constituent documents of which will be delivered as a package concurrently with the delivery of the Second A/R 1973 Sales Contract) and any other transportation agreements relating to the New 1973 Sales Contract entered into as contemplated by Section 1.5(b) hereof and (ii) whether or not requiring consent of the Lenders pursuant to this Section 1.4, any agreement or document evidencing any amendment, modification, revision, supplement or waiver of any provision of the Trust Agreement, any of the Basic Agreements to which it is a party, any of the Construction Documents to which it is a party (excluding change orders and similar modifications or supplements arising in the ordinary course of construction implementation) or any Production Sharing Contract to which it is a party and, in the case of an amendment to the Trust Agreement providing for Subordinated Indebtedness or Pari Passu Swap Indebtedness with respect to amounts to be held and distributed under the Trust Agreement, copies of the proposed amendment not less than 10 Business Days prior to execution thereof. 1.5 Compliance with Agreements. (a) Each of the Producers agrees that it will duly perform in a timely manner each obligation contemplated to be performed by it under this Agreement and the Trust Agreement, including, without limitation, (i) giving notices, instructions, certificates (including, without limitation, certificates as to the accuracy of the representations and warranties set forth in this Agreement and the compliance by the Producers with the terms of this Agreement), approvals and communications necessary or appropriate in order (x) to effect Borrowings, repayments and payments by the Trustee as Borrower under and in accordance with the terms of the Loan Agreement, the Notes and the Letter Agreement and (y) to permit the Borrower to perform its other obligations under the Loan Agreement, (ii) providing financial and other information to the Trustee to be supplied to the Lenders under and in accordance with the Loan Agreement, and (iii) giving of other notices, instructions, approvals and communications contemplated by the Trust Agreement. (b) Each of the Producers that is a party thereto also agrees duly to perform its obligations under the Construction Documents (including the Loading Facilities Construction Contract after it has been duly executed and delivered by the parties thereto), the Production Sharing Contracts, the Supply Agreements, the LNG Sales Contracts and any transportation agreements and agreements to pay for shipping of cargoes under an LNG Sales Contract including, 8 12 without limitation, when and if executed, the New 1973 Transportation Arrangements, except in respects which are not material and not likely to give rise to the assertion of a claim for breach thereunder, and to perform in all material respects the terms of the other Basic Agreements to which it is a party, as the same may be amended from time to time as permitted by Section 1.4 hereof. The Producers shall maintain in effect at all relevant times, whether pursuant to the New 1973 Transportation Arrangements or other agreements, sufficient shipping capacity in order to deliver all cargoes of LNG required to be delivered to the Japanese Buyers under the New 1973 Sales Contract during the term thereof (as the same may be extended from time to time up to and including December 31, 2014) until such time as no amounts that may then or thereafter be payable thereunder or with respect thereto would, if paid, constitute Source of Debt Service. 1.6 Enforcement of Agreements. The Producers agree that, if the Borrower shall fail to perform any of its obligations under the Trust Agreement, then the Producers shall give written notice to the Borrower as promptly as practical under the circumstances demanding that all of the Borrower's obligations under the Trust Agreement be immediately performed and simultaneously deliver a copy of such notice to the Tranche A Lender and the Agent. Each Producer shall promptly enforce all legal rights it possesses against the Borrower to compel performance by the Borrower of its obligations under the Trust Agreement, and give notices from time to time to the Tranche A Lender and the Agent with respect to the actions being taken. Each of the Producers that is a party thereto shall, with due diligence and in a reasonable and prudent manner, enforce its rights (a) under the Construction Documents against the EPC Contractor, the Sub-Contractor, the Loading Facilities Contractor, the Loading Facilities Sub-Contractor and any other sub-contractors under the Construction Documents, and (b) under the LNG Sales Contracts, (c) under the Plant Use Agreement, (d) under the Processing Agreement and (e) when and if duly executed and delivered, under the New 1973 Transportation Arrangements and any other transportation agreements contemplated by Section 1.5(b) hereof. 1.7 Operation of Bontang Plant. Each Producer that is a shareholder of P.T. Badak shall use its best efforts, as a shareholder, to cause P.T. Badak or any successor to P.T. Badak under the Plant Use Agreement to operate the Bontang Plant in the manner required pursuant to the Plant Use Agreement and to cause P.T. Badak or any successor to P.T. Badak to perform its obligations under the Processing Agreement in the manner required under the Processing Agreement. 9 13 1.8 Replacement of Trustees. (a) The Producers may, solely with the prior written consent of the Majority Lenders, appoint any Approved Institution as successor trustee under the Trust Agreement. The Producers shall, if any of the circumstances set forth in Section 1.8(b) hereof shall have occurred and be continuing and if requested by the Majority Lenders, (1) appoint one of the institutions referred to in clause (ii) of the definition of Approved Institutions, if any of the circumstances set forth in Sections 1.8(b)(i), (ii) and (iii)(3) hereof shall have occurred and, (2) with respect to any other circumstance referred to in Section 1.8(b) hereof, appoint any institution other than a branch of the Borrower referred to in such definition as successor trustee under the Trust Agreement. Any such appointment made pursuant to this Section 1.8(a) shall, for purposes of this Agreement, become effective upon the written confirmation by such institution, solely in its capacity as successor trustee under the Trust Agreement, of its assumption of the obligations of successor trustee under such Trust Agreement and of the Borrower under the Loan Agreement, all of the Notes and the Letter Agreement. (b) The circumstances referred to in Section 1.8(a) hereof are as follows: (i) The Borrower, BankAmerica International or Bank of America National Trust and Savings Association or any successor trustee appointed pursuant to this Section 1.8 shall: (1) make an assignment for the benefit of creditors; or (2) file a petition in bankruptcy, petition or apply to any tribunal or applicable regulatory authority for the appointment of a custodian, receiver, trustee or official with similar powers for it or a substantial part of its property or assets, or commence any case or proceeding under any bankruptcy, reorganization, arrangement, readjustment of debt, dissolution or liquidation or similar law or statute of any jurisdiction, whether now or hereafter in effect; or (3) if there shall have been filed any such petition or application, or any such case or proceeding shall have been commenced against it, indicate its consent to, approval of or acquiescence in any such petition, application, case or proceeding or any order for relief or the appointment of a custodian, 10 14 receiver, trustee or official with similar powers or regulatory authority for it or any substantial part of any of its properties or assets, or suffer to exist any such case or proceeding in which an order for relief is entered, or suffer any such custodianship, receivership, trusteeship or jurisdiction of such similar official or regulatory authority to continue undischarged for a period of 30 days or more; or (4) generally be unable to or generally fail to pay its debts as such debts become due; or (5) have concealed, removed, or permitted to be concealed or removed, any part of its property, with intent to hinder, delay or defraud its creditors or any of them, or made or suffered a transfer of any of its property which may be fraudulent under any bankruptcy, fraudulent conveyance or similar law or shall have suffered or permitted, while insolvent, any creditor to obtain an Encumbrance upon any of its property through legal proceedings or distraint which is not vacated within 30 days from the date such Encumbrance is created; or (6) take appropriate corporate action required to authorize any of the foregoing; or (ii) The Borrower or any successor trustee appointed pursuant to this Section 1.8 shall fail to perform any of its obligations under the Trust Agreement; or (iii) BankAmerica International or, except in the case of clause (1) below, any person that becomes a successor trustee pursuant to this Section 1.8 hereof, as relevant, shall: (1) cease to be a wholly owned subsidiary of Bank of America National Trust and Savings Association; or (2) dispose of all or substantially all of its assets; or (3) fail to pay principal of, or premium or interest on, any of its Indebtedness in a material amount when due for payment, whether by acceleration or otherwise, but after giving effect to all applicable grace and waiver periods provided for in the agreement or instrument creating or evidencing such Indebtedness; or 11 15 (iv) Any suit, legal action or proceeding or governmental investigation shall be commenced, or any Legal Requirement shall be in effect, which questions the power, authority or capacity of the Borrower, BankAmerica International or any successor trustee under the Trust Agreement to enter into the Trust Agreement, or to serve thereunder in accordance with the terms thereof or to perform any material obligation thereunder, or in the case of the Borrower, to enter into the Loan Agreement or to perform any material obligation thereunder. 1.9 Indebtedness; Permitted Amounts. The Producers shall neither enter into, nor authorize or request the Borrower or any other Person to enter into, financing agreements or otherwise create, assume or become liable for, directly or indirectly, any Indebtedness pursuant to any agreement that will charge or be paid out of (x) the Source of Debt Service received by the Trustee prior to its deposit in the Bontang V Payment Account, except for (i) all obligations and liabilities under the Loan Agreement, the Notes and the Letter Agreement, (ii) any Subordinated Indebtedness incurred pursuant to Section 6.4 of the Loan Agreement and (iii) obligations in respect of Pari Passu Swap Indebtedness incurred pursuant to Section 6.4 of the Loan Agreement, or (y) any Borrowed Amounts, except for the purposes for which such Borrowed Amounts are borrowed. 1.10 Negative Pledge. The Producers shall not create or agree to, or authorize or request the Borrower or any other Person to create or agree to, any Encumbrance on the Source of Debt Service prior to its deposit in the Bontang V Payment Account or on any Borrowed Amounts, except any Encumbrance, if any, (i) arising from the assignments made in the Supply Agreements by Pertamina to the other Producers of the production sharing percentages of such Producers of amounts payable by the Buyers under the LNG Sales Contracts and certain other amounts as provided in the Supply Agreements,(ii) arising pursuant to the Trust Agreement or in favor of the holders of Indebtedness as permitted in accordance with Section 1.9 hereof, or (iii) arising pursuant to statute or otherwise by operation of law in connection with any transportation agreement related to any LNG Sales Contract and discharged in the ordinary course of business. 1.11 Insurance. (a) Prior to operational acceptance of the Additional Plant and the Loading Facilities by Pertamina pursuant to the Construction Documents, Pertamina shall maintain or cause to be maintained "All Risk" Builder's Risk 12 16 Insurance as required pursuant to the Construction Documents. (b) Prior to operational acceptance of the Additional Plant and the Loading Facilities by Pertamina pursuant to the Construction Documents, Pertamina shall maintain, or cause to be maintained, with respect to the Insured Bontang Plant (excluding Train G) and, upon and after such operational acceptance, Pertamina shall maintain, or cause to be maintained with respect to the Insured Bontang Plant (excluding the Support Facilities), property and casualty insurance (the "Plant Insurance") on terms at least as favorable to Pertamina as, and having coverage substantially similar to, the policy furnished to the Tranche A Lender and the Agent prior to the date hereof and in an amount which is the greater of (i) the sum of (w) the full replacement value of the Insured Bontang Plant (excluding the Support Facilities), together with spare parts located within the perimeter fences thereof, and (x) the maximum value of the inventory forming a part of the Insured Bontang Plant (excluding the Support Facilities), determined on the basis of an independent appraisal provided in the manner described below in this Section 1.11(a) (if such Plant Insurance in such amount is available on commercially reasonable terms), or (ii) 125% of the sum of (y) all amounts outstanding from time to time under the Loan Agreement, the Notes and the Letter Agreement, plus (z) all other Indebtedness of any Person outstanding, the holders of which, directly or indirectly, are entitled to share in the proceeds of the Plant Insurance (the "Plant Insurance Proceeds") prior to or on an equal and ratable basis with the Lenders (as the Lenders' rights are determined under Section 4.1 hereof). In determining the full replacement value of the Insured Bontang Plant pursuant to clause (i) above, the cost of the following shall be excluded: all basic engineering and that part of the detail engineering that may be based on existing drawings and available specifications, all dredging work, water wells, all major excavation work and the use of heavy earth-moving equipment, and surplus materials in excess of five percent (5%) of required quantities. As of the date hereof, the appraisal of the Insured Bontang Plant contemplated above shall be the appraisal dated February, 1994 prepared by RDI Consultants which has been delivered to the Tranche A Lender and the Agent prior to the date hereof. Thereafter, the appraisal of the Insured Bontang Plant contemplated above shall be the independent appraisal most recently prepared with respect thereto, including any of the following: (1) upon the written request of the Tranche A Lender and the Agent, Pertamina shall promptly cause to be prepared and delivered to the Tranche A Lender and the Agent an appraisal prepared by an independent appraiser, who shall be acceptable to the 13 17 Tranche A Lender and the Agent in their reasonable judgment; provided, however, that the Tranche A Lender and the Agent may not request Pertamina to cause any such appraisal to be prepared and delivered more than once every five years, and (2) the Tranche A Lender and the Agent may from time to time have prepared for their benefit and at the sole cost of the Lenders an appraisal of an independent appraiser, who shall be acceptable to the Producers in their reasonable judgment, and Pertamina shall, and shall cause P.T. Badak to, cooperate reasonably in the preparation of such appraisal. (c) All Plant Insurance shall be maintained with (i) P.T. Tugu Pratama Indonesia, or (ii) so long as Indonesian law requires that the relevant insurance be maintained with an Indonesian insurance company, any Indonesian insurance company other than P.T. Tugu Pratama Indonesia approved by the Majority Lenders, which approval shall not be unreasonably withheld, or (iii) if Indonesian law changes to permit the relevant insurance to be maintained with one or more non-Indonesian insurance companies, any insurance company other than P.T. Tugu Pratama Indonesia approved by the Majority Lenders. (d) Pertamina agrees that all Plant Insurance shall have Pertamina as a loss payee, and that no party other than Pertamina, the other Producers and P.T. Badak shall be a loss payee. Pertamina agrees that it will not create or agree to any assignment of or security interest in the Plant Insurance Proceeds, or create any right to receive the Plant Insurance Proceeds other than equally and ratably with, or subordinated in right of payment to, the rights of the Lenders pursuant to this Agreement in favor of any Person other than the loss payees under the Plant Insurance. (e) Pertamina shall, on or before the Effective Date, provide to the Tranche A Lender and the Agent a correct and complete copy of the policy or policies of insurance required by Sections 1.11(a) and (b) hereof and, as promptly as practicable in the circumstances (but in no event later than 30 days) following the issuance thereof, correct and complete copies of each subsequent policy or policies of insurance required by Sections 1.11(a) and (b) hereof. Pertamina shall also provide to the Tranche A Lender and the Agent as promptly as practicable under the circumstances, correct and complete copies of each amendment, modification or waiver and each notice of cancellation or termination with respect to each policy of insurance required by Sections 1.11(a) and (b) hereof (but in no event later than 30 days following any such amendment, modification or waiver or receipt of any such notice). 14 18 1.12 Reserve Reports. (a) The Producers agree that, if requested by either the Tranche A Lender or the Agent, they will cause to be delivered to the Tranche A Lender and the Agent correct and complete copies of the latest reserve report or reports and any updates, modifications or supplements thereto covering the areas which supply gas to the Bontang Plant (the "Gas Supply Area"), prepared by DeGolyer and MacNaughton or another independent petroleum engineering consulting firm of recognized standing in the petroleum industry qualified by reputation and experience in the estimating of reserves of oil and gas in subsurface reservoirs. (b) Pertamina shall, before committing additional natural gas from the Gas Supply Area to sale or other utilization, submit or cause to be submitted to the Tranche A Lender and the Agent a copy of each certificate and all supporting documentation furnished to one or more of the Buyers pursuant to the provisions of the KGC Sales Contract that result from the incorporation therein of Section 3.2(a) of each of the Arun III Contract and the Korea II Contract (each as defined in the KGC Sales Contract), pursuant to the provisions of the CPC Sales Contract that result from the incorporation therein of Section 3.2(a) of the Badak III LNG Sales Contract (as defined in the CPC Sales Contract) or pursuant to Section 3.2(a) of the Second A/R 1973 Sales Contract, together with a statement setting forth the calculation of the Seller's Gas Supply Obligation (as defined in each LNG Sales Contract) and the breakdown of such calculation by non-spot sale LNG sales contract, which statement shall be in the form of that delivered to the Tranche A Lender and the Agent pursuant to Section 5.1(a)(xvi) of the Loan Agreement. 1.13 Use of Proceeds. (a) The proceeds of the Borrowings shall be used solely for the payment of (i) the costs incurred or to be incurred in connection with the design, engineering, procurement and construction of or otherwise relating to the Additional Plant, the Loading Facilities and, in the case of Borrowings that the Drawdown Schedule contemplates for such purpose (but solely to the extent so contemplated), the Support Facilities, (ii) interest, fees, expenses, taxes and other amounts payable by the Borrower pursuant to Sections 2.3, 2.7, 2.8, 3.3, 3.4(b), 6.6 and 10.6 of the Loan Agreement and (iii) funding the Reserve Account as provided in and solely to the extent permitted by Section 2.2(b) of the Loan Agreement. 15 19 (b) If, during the Availability Period, no further amounts of the Commitments of the Lenders are available to be drawn by the Borrower under the Loan Agreement, and if the proceeds of the Borrowings are insufficient to pay the costs required for the completion of the Additional Plant and the Loading Facilities as indicated in the most recent quarterly status report delivered to the Tranche A Lender and the Agent pursuant to Section 1.14(b) hereof, then, from time to time prior to the last day of the Availability Period, the Producers may, to pay for such required costs, instruct the Trustee to transfer to the Bontang V Payment Account from the amounts then held in the Regular Reserve Account, subject to Section 3.3(b)(iii) of the Trust Agreement, amounts which shall not exceed in the aggregate the lesser of (x) the aggregate amount of all Reserve Account Borrowed Amounts borrowed pursuant to Section 2.2(b)(ii) of the Loan Agreement or (y) the amounts needed to pay for such required costs. Any such instruction shall be provided by written notice to the Trustee, the Tranche A Lender and the Agent. The Producers shall use such amounts so transferred to the Bontang V Payment Account solely for the purpose of paying for such required costs. (c) If, following the last day of the Availability Period, the Producers shall at any time have paid the cost of a Selected Qualified Bank retained and performing services pursuant to Section 6.6 of the Loan Agreement, then Pertamina may instruct the Bontang V Trustee to transfer to the Bontang V Payment Account from the amounts then held in the Regular Reserve Account, subject to the conditions contained in Section 3.3(b)(iv) of the Trust Agreement, an amount which shall not exceed the amount so paid to such Selected Qualified Bank. Pertamina shall give any such instruction by giving notice to the Trustee, the Tranche A Lender and the Agent setting forth the amount paid to the Selected Qualified Bank and attaching a copy of the Selected Qualified Bank's invoice relating to the services so performed. 1.14 Construction of Train G. (a) Pertamina shall insure that Train G is constructed and completed with due diligence and efficiency and in conformity with sound administrative, engineering and financial practices. (b) Pertamina shall deliver to each of the Tranche A Lender and the Agent (i) a quarterly status report in reasonable detail concerning construction of Train G, such report to include, but not be limited to, the cost incurred to the end of such quarter and an estimate of costs required for the completion and acceptance of Train G pursuant 16 20 to the Development Plan and the Construction Documents, and (ii) such other information in respect of Train G as the Tranche A Lender and the Agent may reasonably request. (c) Pertamina shall submit or cause to be submitted to the Tranche A Lender and the Agent a semi-annual report, prepared by the Engineering Firm or if the Engineering Firm becomes unacceptable to Pertamina or to the Tranche A Lender and the Agent for any reason following the date hereof, any other independent engineering firm of recognized standing in the construction industry and acceptable to the Tranche A Lender and the Agent, concerning the status of the construction of Train G. Such report shall be based upon the reports delivered pursuant to Section 1.14(b) hereof and such discussions and analysis thereof with representatives of Pertamina, the EPC Contractor and the Sub-Contractor as the independent engineering firm deems appropriate in order for the semi-annual report to provide, through the end of such semi-annual period, a comparison of (i) the physical progress of the construction of Train G with the progress scheduled for such period and (ii) the expenditures made to achieve such physical progress with the amounts forecast therefor. (d) Pertamina shall not amend the Development Plan in a manner that would result in a material increase in Pertamina's expenditures or materially deviate from the Development Plan with regard to the construction, completion or operation of Train G; provided, however, that Pertamina may, to the extent necessary to comply with the provisions of Section 1.18 hereof, deviate from the Development Plan by declining to construct specific portions of the Support Facilities. (e) Pertamina shall, if requested by either the Tranche A Lender or the Agent, permit representatives of the Tranche A Lender or the Agent, and designees appointed by them with the consent of Pertamina, which consent shall not be unreasonably withheld, to visit the site of the construction of Train G to review and examine the current status of the construction and implementation thereof. (f) Pertamina shall promptly after it becomes aware of such event, give notice to the Tranche A Lender and the Agent of any event or occurrence that will, or would be reasonably likely to, (i) prevent shipments of LNG under the KGC Sales Contract or the CPC Sales Contract on a regular basis during 1998 and 1999 or (ii) prevent shipments of LNG under the Second A/R 1973 Sales Contract on a regular basis during the term thereof (as the same may be extended from time to time up to and includig December 31, 2014). 17 21 1.15 Notices Relating to Source of Debt Service. (a) Pertamina shall inform each of the Tranche A Lender and the Agent by notice (with a copy to the Borrower) in advance of the annual and quarterly shipment schedules, and of actual shipment information promptly after shipment, with respect to each shipment for sale and delivery of LNG related to the Source of Debt Service. (b) Pertamina shall give notice to each of the Tranche A Lender and the Agent promptly after it learns (i) of any event or occurrence, in the nature of force majeure, and any material dispute which could reasonably be expected to affect adversely the amount or time of receipt of the Source of Debt Service and (ii) that any default under any LNG Sales Contract has occurred or will occur with the giving of notice or lapse of time or both. Pertamina shall thereafter also inform the Tranche A Lender and the Agent of the status of such event at reasonable intervals during the continuance thereof. 1.16 Effect of Certain Events with Respect to LNG Sales Contracts. (a) If (i) any LNG Sales Contract is terminated or (ii) any sales under any LNG Sales Contract, which if made would give rise to Source of Debt Service, are suspended in respect of any Buyer or Buyers or an event of force majeure as to any LNG tanker or any Buyer's facilities relevant to any LNG Sales Contract shall occur and such suspension of sales or event of force majeure shall continue for a period of nine months, Pertamina shall make all reasonable efforts to sell any LNG originally scheduled to be sold to any affected Buyer or Buyers pursuant to any such LNG Sales Contract after the date of termination or the end of such nine-month period, as the case may be, which Pertamina reasonably anticipates will not be sold because of such termination, suspension of sales or event of force majeure; provided, however, that with respect to an event of the type specified in the foregoing clause (ii), Pertamina shall not be obligated to enter into any replacement LNG sales contract which Pertamina reasonably anticipates would cause it to be unable to perform fully its obligations under the affected LNG Sales Contract upon the cessation of such event of force majeure or suspension of sales; and provided further that Pertamina may, in its sole discretion, make replacement sales during any initial period of nine months during which sales are so suspended or during which such an event of force majeure has occurred. (b) Pertamina shall cause the proceeds of any replacement sales made pursuant to Section 1.16(a) 18 22 hereof to be paid to the Trustee as if such sales had been made pursuant to the affected LNG Sales Contract and shall authorize and request the Borrower to execute and deliver prior to the payment of any such proceeds an agreement providing for any amendment of the definitions of Source of Debt Service and Gross Invoice Amount contained in the Loan Agreement and the Trust Agreement required to cause such proceeds to be included therein. 1.17 Payment Instructions. (a) Subject to Section 1.8 hereof, Pertamina hereby agrees to instruct each Buyer to pay to the Trustee all amounts payable by such Buyer to Pertamina pursuant to the LNG Sales Contracts which constitute Source of Debt Service, and not to change such instructions or the designation of the Trustee as the recipient of amounts which constitute the Source of Debt Service. (b) Subject to Section 1.8 hereof, Pertamina agrees to deliver or to cause to be delivered to the Trustee on the date payment is made to the Trustee pursuant to Section 1.17(a), a written statement correctly identifying the separate portions of such payment that relate to each component of the Gross Invoice Amount and the Source of Debt Service and specifying by category the portion of such payment that does not constitute Source of Debt Service. Such statement shall identify, among other things, the portion of such payment related to (x) with respect to the KGC Sales Contract, the LNG Portion (as defined in such contract), (y) with respect to the CPC Sales Contract, the LNG Related Component (as defined in such contract), and (z) with respect to the New 1973 Sales Contract, the LNG Element (as defined in such contract). (c) With respect to all other relevant Basic Agreements, Pertamina has designated or shall designate, and agrees not to change the designation of, the Trustee as the recipient of amounts which constitute the Source of Debt Service payable thereunder. (d) On or promptly following the date hereof, the Producers shall instruct the Bontang III Trustee, the Bontang I Trustee, the Bontang Excess Sales Trustee and any other relevant trustee in writing to make immediate payment to the Bontang V Trustee of any amounts received by any of such trustee and deposited under the Bontang III Trust Agreement, the Bontang I Trust Agreement, the Bontang Excess Sales Trust Agreement or any other relevant trust agreement or trustee and paying agent agreement which constitute Source of Debt Service as defined in the Loan Agreement. The Producers shall provide copies 19 23 of such written instruction (which may be reflected in an amendment to the relevant trust agreements or trustee and paying agent agreements) to the Tranche A Lender and the Agent simultaneously with sending such instructions to the Bontang III Trustee, the Bontang I Trustee, the Bontang Excess Sales Trustee and any other relevant trustee. The Producers agree that, so long as any amounts remain owing to the Lenders under the Loan Agreement, the Notes or the Letter Agreement, such written instruction shall not be revoked, amended or modified, except with the prior written consent of the Majority Lenders. 1.18 Monitoring Total Project Expenditures. (a) Pertamina hereby agrees that, during the Availability Period, it will monitor Borrowings, interest rate(s) applicable to the Notes and all other costs and expenditures relating to Train G on a quarterly basis and in accordance with its customary procurement procedures, in order to determine the extent to which the costs of specific portions of the Support Facilities can be financed through Borrowings under the Loan Agreement without causing the sum of (i) all reasonably anticipated costs of completing the Additional Plant and the Loading Facilities that have not already been paid for from the proceeds of previous Advances, (ii) all reasonably anticipated costs of such specific portions of the Support Facilities that Pertamina proposes to finance through Borrowings under the Loan Agreement, (iii) all reasonably anticipated future Borrowed Amounts and (iv) all capitalized interest with respect to the Notes that is reasonably anticipated to accrue thereafter during the Availability Period to exceed the then remaining Commitments. If and to the extent that at any time the Drawdown Schedule does not provide for the financing of the costs of any specific portions of the Support Facilities and such costs can be so financed without causing such sum to exceed the then remaining Commitments, and if, after financing such costs the remaining Commitments will be sufficient to fund fully the amounts referred to in clauses (i), (ii) and (iv) above, then Pertamina may instruct the Borrower to revise the current Drawdown Schedule to provide for the financing of the costs of such specific portions of the Support Facilities through Borrowings under the Loan Agreement. If and to the extent that at any time the costs of any specific portions of the Support Facilities cannot be so financed as provided in the first sentence hereof, then Pertamina shall instruct the Borrower to revise the then current Drawdown Schedule to exclude such financing. (b) Pertamina shall submit, or cause to be submitted to the Tranche A Lender and the Agent, with 20 24 reasonable promptness after the end of each calendar quarter during the Availability Period, a summary statement of its then current estimate of the excess capacity of the Bontang Plant to be contractually uncommitted on March 31, 1998, excluding the LNG Sales Contracts and the capacity of the Additional Plant. 1.19 Construction Report. Pertamina shall use its best efforts to cooperate with the Agent and the Engineering Firm and to provide such assistance as the Agent or the Engineering Firm may reasonably request from time to time, in connection with the preparation by the Engineering Firm of a single report to be completed as soon as practicable after the Effective Date concerning the status of the Additional Plant. Such report shall be in form and substance satisfactory to the Agent and shall (unless otherwise agreed) be substantially similar in scope to the Technical Consultant's Report of Merlin Associates, Inc., dated May 31, 1991, with respect to Pertamina Bontang LNG Plant Train F Expansion Project. The fees and disbursements of the Engineering Firm in connection with the preparation of such report shall be reimbursed by the Borrower pursuant to Section 10.6 of the Loan Agreement up to a maximum amount of $50,000.00. 1.20 Loading Facilities Construction Contract. Pertamina shall enter into the Loading Facilities Construction Contract with a reliable and reputable contractor, on terms which are based on sound administrative, engineering and financial practices. Pertamina shall provide to the Tranche A Lender and the Agent correct and complete copies of the final draft of such Contract prior to execution thereof and, with reasonable promptness following execution and delivery, correct and complete copies of the executed version of the Loading Facilities Construction Contract. 1.21 Debt Service Accounts. Each of the Producers agrees with respect to the Trust Agreement that, as long as moneys are held by the Trustee in the Debt Service Account and Reserve Account, the Lenders are, to the extent necessary for payments to be made in accordance with the terms of the Trust Agreement of principal, interest and other amounts due under the Loan Agreement, the Notes and the Letter Agreement, among those having a right, as provided under Section 2.2 of the Trust Agreement, to receive disbursements thereunder. 1.22 Expenses. To the extent that any amounts required to be paid by the Borrower pursuant to Section 10.6(a) and, prior to the Completion Date, Section 10.6(b), of the Loan Agreement are not paid when due, the Producers shall, following notice from the 21 25 Tranche A Lender or the Agent or both, as appropriate, immediately pay such amounts or otherwise cause such amounts to be paid. 1.23 Financial Statements. Upon the request of the Tranche A Lender or any Tranche B Lender made through the Agent, as appropriate, from time to time, each Producer agrees to deliver to such Lender in respect of one or more fiscal years (but no more than the three immediately prior fiscal years) of such Producer or, where applicable, of any Person controlling such Producer which reports its financial condition and results to the public, any publicly available annual financial statements of such Producer or Person. PART 2 REPRESENTATIONS AND WARRANTIES Each Producer makes the following representations and warranties to the Lenders solely with respect to itself; provided, however, that (i) each representation and warranty with respect to any agreement that is dated on, as of or prior to the date hereof is made as of the date hereof, (ii) each representation and warranty with respect to any other agreement will be made as of the date such agreement is entered into and solely with respect to the agreement being entered into as of such date, (iii) each representation and warranty with respect to any agreement is made only by those Producers that are parties thereto and (iv) Pertamina is the only Producer making the representation and warranty in Section 2.9 hereof: 2.1 Due Incorporation; Power and Authority. Such Producer is, and upon the due execution and delivery of any Construction Document or Basic Agreement not heretofore executed and delivered will be, a corporation or partnership duly organized and validly existing under the laws of the jurisdiction of its incorporation or formation. Such Producer has, and upon the due execution and delivery of any such agreement not heretofore executed and delivered will have, full power, authority and legal right to execute, deliver, perform and observe the terms and provisions of this Agreement, the Trust Agreement, each Production Sharing Contract, each Construction Document and each Basic Agreement. 22 26 2.2 Legal Action. All necessary legal action has been taken, and upon the due execution and delivery of any such agreement not heretofore executed and delivered will have been taken, to authorize such Producer to execute and deliver and to perform and observe the terms and provisions of this Agreement, the Trust Agreement, each Production Sharing Contract, each Construction Document and each Basic Agreement. 2.3 Restrictions. There is no Legal Requirement and no contractual or other obligation binding on such Producer, and upon the due execution and delivery of any Construction Document or Basic Agreement not heretofore executed and delivered there will be no Legal Requirement and no contractual or other obligation binding on such Producer, including, without limitation, under any of the Basic Agreements or the Production Sharing Contracts or any of the Construction Documents, that is or will be contravened (or, in the case of a contractual obligation, in respect of which a breach has occurred or will occur) by reason of the execution and delivery of or the performance or observance by such Producer of any of the terms or provisions of this Agreement or the Trust Agreement. 2.4 Registrations and Approvals. No registrations, declarations or filings with, or consents, licenses, approvals or authorizations of, any legislative body, governmental department or government authority are necessary or required under any applicable law for the due execution and delivery by such Producer, or for the performance by such Producer, of this Agreement or the Trust Agreement, or to assure the validity or enforcement hereof or thereof with respect to such Producer, except such as have been obtained, copies of which have been provided to the Tranche A Lender and the Agent in connection with the execution and delivery of this Agreement and which remain in full force and effect. 2.5 Agreement Binding; No Defaults. This Agreement, the Trust Agreement, each Production Sharing Contract, the EPC Contract and each Basic Agreement other than the Second A/R 1973 Sales Contract and the New 1973 Transportation Arrangements constitute, and when duly executed and delivered each of the Loading Facilities Construction Contract, the Second A/R 1973 Sales Contract and the New 1973 Transportation Arrangements will constitute, the legal, valid and binding obligations of such Producer enforceable against it in accordance with each of their respective terms, subject in the case of enforcement to any applicable bankruptcy, insolvency, moratorium or other similar laws affecting the enforcement of creditors' rights generally and to equitable principles of general 23 27 application. No Default by such Producer has occurred and is continuing and no event has occurred or failed to occur in each case pertaining to such Producer, the occurrence or non-occurrence of which with the giving of notice or lapse of time or both would constitute a Default. Such Producer is not, and upon the due execution and delivery of each of the Loading Facilities Construction Contract, the Second A/R 1973 Sales Contract and the New 1973 Transportation Arrangements will not be, in violation of any of such Producer's obligations under (i) the Trust Agreement, (ii) any of the Production Sharing Contracts, the Supply Agreements or the LNG Sales Contracts, except for violations which are not material and are not likely to give rise to the assertion of a claim for breach, (iii) any of the Basic Agreements (other than those referred to in the immediately preceding clause (ii)) or (iv) any of the Construction Documents, in any material respect. Each of the Production Sharing Contracts, the Plant Use Agreement and the Processing Agreement either does not by its terms terminate, or is not by its terms scheduled to expire, prior to the time of shipment of the last cargo giving rise to Source of Debt Service under the New 1973 Sales Contract (except in the case of those Production Sharing Contracts that are scheduled so to expire as provided in the relevant portion of the definition of Production Sharing Contracts in the definition section hereof), and each Supply Agreement either does not by its terms terminate, or is not by its terms scheduled to expire, prior to the time of shipment of the last cargo giving rise to Source of Debt Service under the LNG Sales Contract to which such Supply Agreement relates; provided that the existing Japanese Supply Agreements cover the period from January 1, 2000 to December 31, 2009. 2.6 Litigation. There is no suit, action, proceeding or investigation pending against such Producer or, to the best of such Producer's knowledge, threatened against such Producer, which (a) questions the validity of this Agreement, the Trust Agreement, any Construction Document, any Production Sharing Contract or any Basic Agreement, or any material action taken or to be taken by such Producer pursuant hereto or pursuant to any thereof, or (b) affects materially and adversely or is likely materially and adversely to affect (i) the amounts of the Source of Debt Service payable to the Trustee under any of the LNG Sales Contracts, or the right of the Borrower to receive any such amounts under the Loan Agreement, (ii) the Bontang Plant or Pertamina's interests therein or (iii) such Producer's ability to perform its obligations under this Agreement, the Trust Agreement, any Construction Document, any Production Sharing Contract or any Basic Agreement. 24 28 2.7 Compliance with Other Instruments, etc. Such Producer is not, and upon the due execution and delivery of any Construction Document or Basic Agreement not heretofore executed and delivered will not be, in violation of any term of its charter or by-laws or, as relevant, the partnership agreement under which such Producer is formed, or any term of any agreement or any instrument to which it is a party or by which it or any of its properties is bound or any Legal Requirement, which violation would have a material adverse effect on such Producer's ability to perform its obligations under this Agreement, the Trust Agreement, any Production Sharing Contract, any Construction Document or any Basic Agreement. 2.8 Other Agreements. Each of the Tranche A Lender and the Agent has been provided with correct and complete copies of the Development Plan, the EPC Contract (excluding Exhibits A and B of the agreement referred to in clause (i) of the definition thereof) and the Basic Agreements, in each case as amended and in effect on the date hereof. Each Producer represents and warrants that, to the best of its knowledge, no party to any of such Production Sharing Contracts, the Basic Agreements executed and delivered on or prior to the date hereof or the EPC Contract, other than any other Producer, is, and upon the due execution and delivery of each Construction Document or Basic Agreement not heretofore executed and delivered no party to each such agreement will be, in breach of any material obligation thereunder. 2.9 Insurance. Insurance policies of the type required by Section 1.11 hereof are in full force and effect, no default or breach exists thereunder which would give rise to a right to cancel the same, and no notice of default or breach or notice of termination has been given to Pertamina with respect thereto. On or prior to the Effective Date, correct and complete copies of such insurance policies will be delivered to the Tranche A Lender and the Agent. 2.10 No Encumbrance. There is no Encumbrance on the Source of Debt Service prior to its deposit in the Bontang V Payment Account caused by such Producer, for which such Producer is responsible or which relates to such Producer, except Encumbrances, if any, (i) arising pursuant to statute or otherwise by operation of law, and not pursuant to any agreement, which are not being enforced by attachment or levy and which will be discharged in the ordinary course of business or (ii) permitted by Section 1.10 hereof. 25 29 2.11 No Material Adverse Change. There has been no material adverse change since December 31, 1994 in (i) the business, assets, financial position or results of operation of such Producer which affects materially and adversely, or would be likely to affect materially and adversely, the performance by Pertamina of or the ability of Pertamina to perform its obligations under the LNG Sales Contracts or (ii) the operation of the Bontang Plant. PART 3 DEFAULTS 3.1 Default Defined. Each of the Producers agrees with the Lenders that if any one or more of the following events shall occur it shall be, so long as the same shall continue, a default hereunder (a "Default"): (a) a failure to comply with any of the provisions of Section 1.1, 1.3, 1.4, 1.9, 1.10, 1.11, 1.17 (other than 1.17(b)), 1.21 or 6.3 hereof; or (b) a failure to comply with any of the provisions of Section 1.5, 1.6, 1.7, 1.14(f), 1.15(b), 1.16, 1.17(b), 1.18(a) or 3.5 hereof for seven days after written notice of such failure shall have been given to the Producers by the Tranche A Lender and the Agent; or (c) a failure to comply with any of the provisions of Part 1 hereof other than those referred to in Sections 3.1(a) and (b) hereof for 30 days after written notice of such failure shall have been given to the Producers by the Tranche A Lender and the Agent; or (d) any representation or warranty made by any Producer in this Agreement (including the representations contained in the first paragraph following "Dear Sirs:" at the beginning of this Agreement) shall prove to have been incorrect or misleading in any material respect as of the date when made or deemed made; or (e) (i) failure by any of the Producers to pay principal of, or premium or interest on, any of its Indebtedness in an amount which is material in the context of this Agreement when due for payment, whether by acceleration or otherwise, but after giving effect to all applicable grace and waiver periods provided for in the agreement or instrument creating or evidencing such Indebtedness; or 26 30 (ii) any of the Producers shall: (1) make an assignment for the benefit of creditors; or (2) file a petition in bankruptcy, petition or apply to any tribunal or applicable regulatory or governmental authority for the appointment of a custodian, receiver, trustee or official with similar powers for it or a substantial part of its property or assets, or commence any case or proceeding under any bankruptcy, reorganization, arrangement, readjustment of debt, dissolution or liquidation or similar law or statute of any jurisdiction, whether now or hereafter in effect; or (3) if any such petition or application shall have been filed, or any such case or proceeding shall have been commenced against it, indicate its consent to, approval of or acquiescence in any such petition, application, case or proceeding or the appointment of a custodian, receiver, trustee or official with similar powers or regulatory or other governmental authority for it or any substantial part of its properties or assets, or suffer to exist any such case or proceeding in which an order for relief is entered, or suffer any such custodianship, receivership, trusteeship or jurisdiction of such official or regulatory or governmental authority to continue undischarged for a period of 60 days or more; or (4) generally be unable to or generally fail to pay its debts as such debts become due; or (iii) a failure by P.T. Badak to comply with a material term or provision of the Plant Use Agreement or the Processing Agreement; provided, however, that the effect of the occurrence of any of the events or circumstances referred to in this clause (e) is to affect, materially and adversely, the performance by Pertamina of its obligations under any of the LNG Sales Contracts or the ability of Pertamina to perform such obligations; or (f) any statement furnished to the Tranche A Lender or the Agent under any of Section 5.3(c) or 6.1 of the Loan Agreement with respect to the Debt Coverage Ratio, the Gross Invoice Amount, the Source of Debt Service, as of the date of such statement, (i) was not prepared based on information concerning amounts outstanding under the Loan 27 31 Agreement or the Notes which was complete and accurate in all material respects or information concerning amounts of the Gross Invoice Amount or the Source of Debt Service actually invoiced or received which was complete and accurate in all material respects, or (ii) was not prepared based on assumptions concerning future periods which were established as provided in the Loan Agreement, or (iii) was delivered by the Producers in bad faith or by the Borrower pursuant to a request or authorization of the Producers given in bad faith. 3.2 Remedy for Default. If at any time during one or more Interest Periods the effect of any one or more Defaults is to cause the Source of Debt Service received by the Borrower and payable to the Lenders to be insufficient to satisfy any payment obligation when due under the Loan Agreement, any of the Notes or the Letter Agreement (the difference between the amount of the Source of Debt Service received with respect to any Interest Period by the Borrower and payable to the Lenders under the Loan Agreement, any of the Notes or the Letter Agreement and the amount which would have been so received and payable but for such Default or Defaults, the "Default Shortfall"), then each of the Producers which caused or is responsible for such Default or to which such Default relates shall be obligated to pay an aggregate amount to the Tranche A Lender and the Agent for the account of the Tranche B Lenders, on the dates when due during or at the end of such Interest Period, in the manner and with the effect of payments made by the Borrower as provided in the Loan Agreement, the relevant Notes or the Letter Agreement, on account of its Liability Share of the Default Shortfall, such that the net aggregate amount received from each such Producer by the Tranche A Lender and the Agent for the account of the Tranche B Lenders pursuant to this Section 3.2, after deduction of all Taxes required to be deducted or withheld from, or otherwise paid by the Lenders with respect to, such payment (but excluding Excluded Taxes required to be so deducted, withheld or paid solely to the extent that the amount of such Excluded Taxes does not exceed the amount of Excluded Taxes that would have been deducted, withheld or otherwise paid by the Lenders, if there had been no Default Shortfall, and the net amount were paid to, and received by, the Lenders out of the Source of Debt Service), shall equal such Producer's Liability Share of the Default Shortfall. The provisions of this Section 3.2 shall apply to breaches of Section 1.17(b) as if such breaches were a Default, whether or not notice of such breach is given to the Producers by the Tranche A Lender or the Agent. 28 32 3.3 Diversion and Remedy. In addition to the Defaults provided for in Section 3.1 hereof, if the effect during one or more Interest Periods of (i) any claim asserted by, on behalf of, or against any one or more of the Producers or any of its or their property or any interest in any of its or their property, or against the Source of Debt Service, including, without limitation, claims asserted by any governmental or taxing authority, or by, or on behalf of, any creditor, trustee in bankruptcy, custodian, receiver or similar official or authority, or (ii) the imposition of any Taxes on amounts payable under any of the Supply Agreements or any of the LNG Sales Contracts, in any such case constituting Source of Debt Service, or on any other payment or receipt of the Source of Debt Service but excluding the effect, if any, of any Japanese Taxes (such a claim referred to in clause (i) or imposition of such Tax referred to in clause (ii), a "Diversion"), is to cause the Source of Debt Service received by the Borrower and payable during or at the end of any Interest Period to the Lenders to be insufficient to satisfy any payment obligation when due under the Loan Agreement, any of the Notes or the Letter Agreement (the difference between the amount of the Source of Debt Service received by the Borrower and payable to the Lenders under the Loan Agreement, the relevant Notes or the Letter Agreement and the amount which would have been so received and payable but for such Diversion, the "Diversion Shortfall"), each of the Producers which has caused or is responsible for such Diversion or to which such Diversion relates, shall be obligated to pay an aggregate amount to the Tranche A Lender and the Agent for the account of the Tranche B Lenders, on the dates, in the manner and with the effect of payments made by the Borrower as provided in the Loan Agreement, the relevant Notes or the Letter Agreement, on account of its Liability Share of the Diversion Shortfall, such that the net aggregate amount received from each such Producer by the Tranche A Lender and the Agent for the account of the Tranche B Lenders pursuant to this Section 3.3, after deduction of all Taxes required to be deducted or withheld from, or otherwise paid by the Lenders with respect to, such payment (but excluding Excluded Taxes required to be so deducted, withheld or paid solely to the extent that the amount of such Excluded Taxes does not exceed the amount of Excluded Taxes that would have been deducted, withheld or otherwise paid by the Lenders if there had been no Diversion Shortfall, and the net amount were paid to, and received by, the Lenders), shall equal such Producer's Liability Share of the Diversion Shortfall. 29 33 3.4 Liability Share Defined. The "Liability Share" of a Producer which caused or is responsible for a Default or a Diversion or to which such Default or Diversion relates which has given rise to a Default Shortfall or a Diversion Shortfall, as the case may be, shall be with respect to such Default Shortfall or Diversion Shortfall a percentage determined by dividing the percentage interest of such Producer (as set forth in Schedule 1 hereto and as adjusted for changes in the Producers' Percentages as defined in and pursuant to the Supply Agreements or the Production Sharing Percentages as defined in the recitals thereof) by the aggregate percentage interest of all Producers (as set forth in such Schedule 1 as so adjusted) which have caused or which are responsible for such Default or Diversion or to which such Default or Diversion relates. With respect to the imposition of Taxes referred to in Section 3.3 hereof, each Producer shall be deemed to have caused the corresponding Diversion to the extent of its percentage interest as shown in Schedule 1 hereto, adjusted as aforesaid. No adjustment to the Producers' Percentages or the Production Sharing Percentages referred to in this Section 3.4 shall be effective for purposes of this Agreement until the Producers have provided to the Tranche A Lender and the Agent a copy of an amended Schedule 1 which properly reflects such adjustment. Any adjustment to the Producers' Percentages or the Production Sharing Percentages or revision to Schedule 1 shall require the mutual agreement of the Producers, but shall not require any consent, approval or other action by the Tranche A Lender, the Agent, any Lender or the Trustee. 3.5 Notices. Each Producer shall promptly, and in any event not later than three Business Days after obtaining actual knowledge thereof, give notice to the Tranche A Lender and the Agent of the occurrence of any Default or Diversion caused by such Producer or for which it is responsible or to which it is related or any event that, with the giving of notice or the passing of time, or both, would constitute such a Default or Diversion. PART 4 INSURED LOSS 4.1 Effect of Total Loss of Additional Plant or Loading Facilities Prior to Operational Acceptance. If any event occurs for which insurance proceeds are payable by an insurance company under any insurance policy referred to in Section 1.11(a) hereof relating to an actual total loss or a constructive, compromised or arranged total loss (within the 30 34 meaning of such policy) of the Additional Plant or the Loading Facilities or both (the "Lost Facilities"), Pertamina agrees as follows: (a) Pertamina shall, as promptly as possible in the circumstances following such event, notify the Tranche A Lender and the Agent of the occurrence of such event and shall, within six months following such event, notify the Tranche A Lender and the Agent in writing whether or not it intends to rebuild or reconstruct the Lost Facilities. (b) If Pertamina notifies the Tranche A Lender and the Agent that it does not intend to rebuild or reconstruct the Lost Facilities, it shall promptly pay to the Tranche A Lender and the Agent such amounts as are instructed by the Tranche A Lender and the Agent equal in the aggregate to the lesser of the aggregate amounts outstanding under the Loan Agreement, Notes and Letter Agreement and the aggregate amount of such insurance proceeds paid to Pertamina in respect of such event. (c) If Pertamina notifies the Tranche A Lender and the Agent that it intends to rebuild or reconstruct the Lost Facilities, then it shall proceed to do so with the services of a reliable and reputable contractor, diligently and in good faith, and shall provide the Tranche A Lender and the Agent with periodic written reports not less frequently than quarterly in reasonable detail concerning the rebuilding or reconstruction and including (i) the amount of insurance proceeds received under such policy, (ii) the amount of funds expended to date on the rebuilding or reconstruction, (iii) the proposed schedule for completion of the construction work, and (iv) the progress of the construction work to date. (d) If, at any time prior to completion, Pertamina shall terminate the rebuilding or reconstruction of the Lost Facilities or shall not be proceeding with such rebuilding or reconstruction diligently and in good faith, then Pertamina shall be obligated promptly to pay to each of the Tranche A Lender and the Agent for the account of the Tranche B Lenders, such amounts as are instructed by the Tranche A Lender and the Agent equal in the aggregate to the lesser of the amounts outstanding under the Loan Agreement, the Note and the Letter Agreement and the aggregate insurance proceeds which are paid to Pertamina under such policy in respect of such event and not in good faith expended or committed to be expended (pursuant to a commitment which cannot by its terms be avoided) on such rebuilding or reconstruction. 31 35 4.2 Effect of Total Loss of Insured Bontang Plant. If any event occurs for which insurance proceeds are payable by an insurance company under any insurance policy referred to in Section 1.11(b) hereof relating to an actual total loss or a constructive, compromised or arranged total loss (within the meaning of such policy) of the Insured Bontang Plant (which term, for purposes of this Section 4.2 and Section 4.4, shall exclude Train G if such loss occurs prior to operational acceptance of the Additional Plant and the Loading Facilities by Pertamina pursuant to the Construction Documents and, thereafter, shall include all of Train G other than the Support Facilities), Pertamina agrees as follows: (a) Pertamina shall, as promptly as possible in the circumstances following such event, notify the Tranche A Lender and the Agent of the occurrence of such event and shall, within six months following such event, notify the Tranche A Lender and the Agent in writing whether or not it intends to rebuild or reconstruct the Insured Bontang Plant. (b) If Pertamina so notifies the Tranche A Lender and the Agent that it does not intend to rebuild or reconstruct the Insured Bontang Plant, it shall promptly pay to each of the Tranche A Lender and the Agent for the account of the Tranche B Lenders such amounts as are instructed by the Tranche A Lender and the Agent in an aggregate amount equal to the lesser of the share referred to below of the total insurance proceeds that are paid to Pertamina under such policy in respect of such event and the aggregate amount outstanding under the Loan Agreement, Notes and Letter Agreement after giving effect to any payment made pursuant to Section 4.1(b) hereof. (c) If Pertamina notifies the Tranche A Lender and the Agent that it intends to rebuild or reconstruct the Insured Bontang Plant, then it shall, subject to the proviso of Section 4.4 hereof, proceed to do so with the services of a reliable and reputable contractor, diligently and in good faith, applying amounts equal to the proceeds of the insurance to the extent required, and shall provide the Tranche A Lender and the Agent with periodic written reports not less frequently than quarterly in reasonable detail concerning the rebuilding or reconstruction and including (i) the amount of insurance proceeds received under such policy, (ii) the amount of funds expended to date on the rebuilding or reconstruction, (iii) the proposed schedule for completion of the construction work, and (iv) the progress of the construction work to date. 32 36 (d) If, at any time prior to completion, Pertamina shall terminate the rebuilding or reconstruction or shall not be proceeding with such rebuilding or reconstruction diligently and in good faith, then Pertamina shall be obligated promptly to pay to each of the Tranche A Lender and the Agent for the account of the Tranche B Lenders such amounts as are instructed by the Tranche A Lender and the Agent in an aggregate amount equal to the lesser of the share referred to below or the total insurance proceeds that are paid to Pertamina under such policy in respect of such event and not in good faith expended or committed to be expended (pursuant to a commitment which cannot by its terms be avoided) on such rebuilding or reconstruction and the aggregate amounts outstanding under the Loan Agreement, the Notes and the Letter Agreement after giving effect to any payments made pursuant to Sections 4.1(b) and 4.2(b) hereof. The share referred to in clauses (b) and (d) above of such total insurance payments shall be (i) the total amount of such payments multiplied by (ii) a fraction the numerator of which is the aggregate principal amount of Indebtedness outstanding under the Loan Agreement, Notes and the Letter Agreement at the time amounts are payable to the Lenders under this Section 4.2 and the denominator of which is equal to the sum of the aggregate principal amount of the Indebtedness outstanding under the Loan Agreement and the aggregate principal amount of all Indebtedness of any Person outstanding at such time, the holders of which, directly or indirectly, are entitled to share in the Plant Insurance Proceeds prior to or on an equal and ratable basis with the Lenders (as the Lenders' rights are determined under this Section 4.2). 4.3 Insurance Shortfall. If by reason of a failure of Pertamina to comply with Section 1.11 hereof, the share of insurance payments of the type referred to in Sections 4.1(b) and (d) and 4.2(b) and (d) hereof is insufficient to pay in full all principal, interest and other amounts payable under the Loan Agreement and the Notes and all amounts payable under the Letter Agreement (the amount of such insufficiency, an "Insurance Shortfall"), Pertamina shall be obligated to pay the amount of the Insurance Shortfall to each of the Tranche A Lender and the Agent for the account of the Tranche B Lenders in such amounts as are instructed by the Tranche A Lender and the Agent on the dates, in the manner of and with the effect of payments made by the Borrower as provided in the Loan Agreement, the Notes and the Letter Agreement, such that the net amount received by the Lenders, pursuant to this Section 4.3, after deduction of all Taxes required to be deducted or withheld from, or otherwise paid by the Lenders, 33 37 with respect to, such payment (but excluding Excluded Taxes required to be so deducted, withheld or otherwise paid solely to the extent that the amount of such Excluded Taxes does not exceed the amount of Excluded Taxes that would have been deducted, withheld or otherwise paid by the Lenders if there had been no Insurance Shortfall, and the net amount were paid to, and received by the Lenders out of an amount equal to such share of insurance), shall equal the Insurance Shortfall. 4.4 Other Losses. Upon a partial loss of the Additional Plant, the Loading Facilities or the Insured Bontang Plant (the "Affected Facilities"), as the case may be, or a total loss thereof with respect to which Pertamina has not given notice pursuant to Section 4.1 or 4.2 hereof that it intends not to rebuild and if Pertamina has not applied amounts equal to the insurance proceeds paid to Pertamina to repayment of the Indebtedness outstanding under the Loan Agreement, the Notes and the Letter Agreement in the manner contemplated by Sections 4.1 and 4.2 hereof, Pertamina shall proceed to rebuild or reconstruct the Affected Facilities with the services of a reliable and reputable contractor, diligently and in good faith, applying amounts equal to the proceeds of the insurance referred to in Section 1.11(a) or (b), as the case may be, to the extent required and shall provide the Tranche A Lender and the Agent with the periodic reports described in clause 4.l(c) or 4.2(c) hereof, as the case may be, as provided in such clause; provided, however, that if (i) it is reasonably anticipated by the Majority Lenders that amounts held in the Debt Service Account (after application of amounts held in the Regular Reserve) and amounts to be paid during the remaining respective terms of the LNG Sales Contracts will be insufficient to pay the amounts then outstanding under the Loan Agreement, the Notes and Letter Agreement and (ii) either (A) the Second A/R 1973 Sales Contract has not been duly executed and delivered or (B) if it has been duly executed and delivered, it has not been extended to provide for a termination date of December 31, 2014 or later or the Japanese Supply Agreements then in effect do not provide for the supply of natural gas required in connection with the Second A/R 1973 Sales Contract for the period through and including December 31, 2014, then the Plant Insurance Proceeds may be applied towards such reconstruction or repair of the Affected Facilities only if arrangements acceptable to the Majority Lenders shall have been made for (x) the sale of a volume of LNG at least equal to the volume of LNG that, but for such total or partial loss, would have been sold during the remaining term of the Second A/R 1973 Sales Contract, if the same has been duly executed and delivered, and (y) the application of a portion of the proceeds of such sales as the Source of Debt Service on the 34 38 same basis as would have been the case if such sales had been made under the Second A/R 1973 Sales Contract. PART 5 SCOPE OF PRODUCERS' LIABILITIES Except as stated in Sections 3.2, 3.3, 3.4 and Part 4 hereof and then only to the limited extent specifically stated therein, no recourse shall be had for the payment of the principal of or interest on the Notes or the payment of any other amounts due under the Loan Agreement or the Letter Agreement, or shall be had for any claim based on any provision of the Notes, the Loan Agreement or the Letter Agreement, against any of the Producers, or against any past, present or future stockholder, partner, officer, director, employee, or agent of any of the Producers, either directly or through the Borrower or any successor of the Borrower, or under the Trust Agreement or under any constitution, statute or rule of law or by the enforcement of any assessment, or otherwise, and, except as above provided, no such Person shall have any personal obligation, liability or duty whatsoever to the Tranche A Lender, the Agent, the Intercreditor Agent, the Technical Agent, the Arrangers or any of the Tranche B Lenders or any holders of the Notes or anyone else for or with respect to any such payment, the performance of or compliance with any covenant or agreement contained in the Loan Agreement, the Letter Agreement, the Trust Agreement or this Agreement or the truth, accuracy or completeness of any statement or representation made in or pursuant to any such document. Furthermore, the obligations of the Producers hereunder are several, and not joint or joint and several, and there shall be no recourse to any Producer by any Person party to the Loan Agreement or the Letter Agreement or by any holder of a Note or otherwise for any liability of another of the Producers which may have arisen hereunder, it being expressly agreed and understood, however, that the failure of a Producer to perform its obligations under this Agreement shall not relieve any other Producer of its obligations hereunder. The Tranche A Lender, the Agent, the Intercreditor Agent, the Technical Agent, each Arranger, each Tranche B Lender, each holder of any of the Notes and each other Person relying on or purporting to rely on the terms of this Agreement in adopting any course of action shall be bound by the terms of this Part 5 of this Agreement to the same extent as if its written acceptance of the terms hereof were subscribed hereto. 35 39 PART 6 MISCELLANEOUS 6.1 Notices. All notices, requests, demands or other communications to or from the parties hereto shall be given or made by telex, telecopier or by personal delivery in the manner provided in Section 10.1 of the Loan Agreement. Any such notice, request, demand or communication shall be sent in the case of each Producer to its address, telex number and answerback or telecopier number set forth on the signature pages hereof or, where applicable, to the designated representative of such Producer as set forth below; or in each case with respect to any party to such other address, telex or telecopier number as such party may designate for the purpose by written notice to the party sending such notice, request, demand or communication. Except as otherwise specified in this Agreement, all notices and other communications shall be deemed to have been duly given on (i) the date of delivery if delivered personally at or before 5:00 p.m. on the date of delivery in the time zone of the recipient (otherwise on the day immediately following the date of delivery), (ii) following receipt if transmitted by mail, (iii) the date of transmission if transmitted by telex with confirmed answerback received at or before 5:00 p.m. on the date of transmission in the time zone of the recipient (otherwise on the day immediately following the date of transmission) or (iv) the date of receipt of a legible copy thereof if sent by telecopier received at or before 5:00 p.m. on the date of transmission in the time zone of the recipient (otherwise on the day immediately following the date of receipt), whichever shall first occur. Any party may change its address for purposes hereof by notice to the other parties. In the case of notices and other communications for Virginia Indonesia Company, OPICOIL Houston, Inc., Virginia International Company, Lasmo Sanga Sanga Limited, Union Texas East Kalimantan Limited and Universe Gas & Oil Company, Inc., such notices and communications shall be sent to Virginia Indonesia Company, which is hereby designated the representative of such Producers for such purpose. Total shall receive notices and other communications for itself and Inpex, and Unocal shall receive notices and other communications for itself and Inpex so long as Inpex is a member of the Unocal Group and, thereafter, notices shall be sent to Inpex directly. A new or successor representative may be designated by notice to such effect signed by all such appropriate Persons given to the Tranche A Lender and the Agent 10 days in advance of any such change. Until 36 40 receipt of any such notice, the Tranche A Lender and the Agent may rely on any notice or other communication to the representative as being notice to each such Person. 6.2 No Waiver; Remedies Cumulative. No failure to exercise and no delay in exercising, on the part of any Person having rights hereunder, any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, power or privilege. Subject always to the provisions of Part 5 hereof, the rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law. 6.3 Assignment; Successors and Assigns; Participations. This Agreement shall be binding upon and inure to the benefit of the Tranche A Lender, the Arrangers, the Tranche B Lenders, the Agent and the holders from time to time of the Notes and their respective successors and permitted assigns, in each case to the extent that the provisions of the Loan Agreement and Letter Agreement inure to the benefit of such Persons and their respective successors and permitted assigns thereunder, and except as specifically set forth in this Section 6.3, no Person shall have or acquire any right or benefit hereunder or in respect of any obligation of any Producer herein contained. Except for the assignments prior to the date hereof pursuant to the Supply Agreements (or after the date hereof in connection with and pursuant to any Japanese Supply Agreement entered into pursuant to an extension of the New 1973 Sales Contract on substantially the same terms as the existing Japanese Supply Agreements) by Pertamina to the other Producers of the production sharing percentages of such Producers in amounts payable by the Buyer under the LNG Sales Contracts and certain other amounts as specified in the Supply Agreements, no Producer may assign any rights or delegate any obligations hereunder or assign any rights in or to the Source of Debt Service prior to deposit in the Bontang V Payment Account, without the written consent of the Majority Lenders, such consent not to be unreasonably withheld; provided that if another corporation, or other entity, wholly owned by or an agency of the Republic of Indonesia should succeed to all rights and obligations of Pertamina under the Trust Agreement and all of the Basic Agreements to which it is a party, Pertamina may assign all of its rights and delegate all of its obligations hereunder to such other corporation, entity or agency, such assignment and delegation to become effective upon such Person's written assumption (a copy of which shall be provided to the Tranche A Lender and the Agent and which shall confirm the 37 41 assignment of rights and the assumption of obligations by such Person under the Trust Agreement, the LNG Sales Contracts and all other Basic Agreements to which the assignor is a party) of all of Pertamina's obligations hereunder including, without limitation, the restrictions on assignments and delegations contained in this Section 6.3 which shall apply to all assignees of the rights and delegees of the obligations of Pertamina and its assignees and delegees; and provided further that any Producer other than Pertamina may assign its rights and delegate its obligations hereunder and assign its rights with respect to the Source of Debt Service prior to deposit in the Bontang V Payment Account, to the extent of and in conjunction with the assignment of its rights and the delegation of obligations under the Trust Agreement and the Basic Agreements, in each case to which it is a party, such assignment and delegation to become effective upon such Person's written assumption (a copy of which assumption shall be provided to the Tranche A Lender and the Agent and which shall confirm to the extent provided in such assignment and delegation the assignment of rights and the assumption of obligations under the Trust Agreement and the Basic Agreements, in each case to which the assignor is a party) of such Producer's obligations hereunder including, without limitation, the restrictions on assignments and delegations contained in this Section 6.3 which shall apply to all assignees of the rights and delegees of the obligations of such Producer and its assignees and delegees. The Producers may treat each Lender as the holder of the Note or Notes drawn to its order and delivered to such Lender until written notice of transfer shall have been received by them. All agreements, representations and warranties made herein shall survive the making of any such transfer hereunder by any Lender. Notwithstanding the foregoing, each Lender may grant participations, in whole or in part, in its rights under this Agreement to the extent that it may grant participations in its rights under the Loan Agreement, Notes and Letter Agreement. 6.4 Amendments. Any provision of this Agreement may be amended or waived if, and only if, such amendment or waiver shall be in writing and signed (including the form of signatures on any telex with appropriate confirmed answerback, or telecopied version duly sent by the Person so amending or waiving) by the Producers, the Tranche A Lender, the Agent and the Majority Tranche B Lenders; provided that any waiver need only be signed by the party granting the waiver. Any such amendment or waiver shall be signed by the Agent on behalf of the Tranche B Lenders if the Agent has been so authorized in writing or by telex by the Majority Tranche B Lenders. Any amendment or waiver or telecopied version signed by the Agent in accordance with the preceding 38 42 sentence shall be binding upon the Tranche B Lenders and any holder of a Tranche B Note. 6.5 Counterparts. This Agreement may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts together shall constitute one and the same instrument. Complete sets of counterparts shall be lodged with the Tranche A Lender, the Agent and Pertamina. 6.6 Section Headings. The Section headings in this Agreement are inserted for convenience of reference only and shall be ignored in construing this Agreement. 6.7 Governing Law. This agreement shall be governed by and construed in accordance with the laws of the State of New York, United States of America, applicable to agreements made and to be performed entirely within such state. 6.8 Consent to Jurisdiction. (a) Solely for purposes of this Agreement, each Producer hereby irrevocably consents that any suit, legal action or proceeding against it or any of its property with respect to any of the obligations arising under this Agreement may be brought in any New York State court located in the Borough of Manhattan, City and State of New York or any Federal Court of the United States of America located in the Southern District of New York, as the Tranche A Lender, any Tranche B Lender or the Agent may elect, and by execution and delivery of this Agreement, each Producer hereby irrevocably submits to and accepts, solely as aforesaid, with regard to any such suit, legal action or proceeding, for itself and in respect of its property, generally and unconditionally, the non-exclusive personal jurisdiction of the aforesaid courts. Each Producer hereby irrevocably designates, appoints and empowers CT Corporation System, 1633 Broadway, New York, New York 10019 as its agent to receive for and on its behalf service of process in New York in any suit, legal action or proceeding with respect to this Agreement. It is understood that a copy of any such process served on such agent shall be promptly forwarded by airmail by the person commencing such suit, legal action or proceeding to the relevant Producer at its address set forth on the signature pages hereof, but the failure of the relevant Producer to receive such copy shall not affect in any way the service of such process as aforesaid. If service of process cannot be effected in the foregoing manner, each Producer further, solely as aforesaid, irrevocably consents to the service of process in 39 43 any such suit, legal action or proceeding by the mailing of copies thereof by registered or certified airmail, postage prepaid, return receipt requested, to the respective Producer at its address set forth on the signature pages hereof. The foregoing, however, shall not limit the right of the Lenders to serve process in any other manner permitted by law or to bring any suit, legal action or proceeding or to obtain execution of judgment in any other jurisdiction. (b) Solely as aforesaid, each Producer hereby irrevocably waives any objection which it may now or hereafter have to the laying of venue of any suit, legal action or proceeding arising out of or relating to this Agreement in any court located in the Borough of Manhattan, City and State of New York and hereby further irrevocably waives any claim it may now or hereafter have that a court located in the Borough of Manhattan, City and State of New York is not a convenient forum for any such suit, legal action or proceeding. Pertamina represents and warrants that this Agreement and its obligations made hereunder and the transactions contemplated hereby constitute commercial rather than public or governmental acts. Each Producer (other than Pertamina, which waives its immunity as provided below) represents and warrants that it is not entitled to claim immunity from legal proceedings with respect to itself or any of its property on the grounds of sovereignty or otherwise under any law or in any jurisdiction where an action may be brought for the enforcement of any of the obligations arising under this Agreement or the Trust Agreement. To the extent that any Producer or any of its property or the Source of Debt Service, prior to deposit in the Bontang V Payment Account has or hereafter may acquire any claim of right to immunity from set-off, legal proceedings, attachment prior to judgment, other attachment, levy or execution of judgments on the grounds of sovereignty or otherwise, each Producer on behalf of itself and any successors, solely as aforesaid, hereby irrevocably waives such claim of right to immunity for itself and its property in respect of its obligations arising under this Agreement and the Trust Agreement and each Producer agrees that it will not assert any such right to immunity in any way which would impair the performance or ability of the Borrower to perform its obligations under the Loan Agreement. 6.9 Severability. If any one or more of the provisions contained in this Agreement or any document executed in connection herewith shall be invalid, illegal or unenforceable in any respect under any applicable law, the validity, legality and enforceability of the remaining provisions contained herein shall not be in any way affected or impaired. 40 44 6.10 Reinstatement. The obligations of the Producers to make payments under this Agreement shall continue to be effective or shall be reinstated, as the case may be, if, at any time, a payment or any part thereof, of any amount paid to a Lender in respect of which a Producer is obligated to make payment hereunder is rescinded or must otherwise be restored or returned by the Lender upon the insolvency, bankruptcy or reorganization of the Borrower or for any other reason, all as though such payment had not been made. 6.11 Confidentiality. No copy of (a) this Agreement, the Loan Agreement or the Trust Agreement or (b) any other agreement to which any Producer or the Trustee is a party or any document signed or issued by or on behalf of any such Producer, which agreement or document is identified by any Producer to the Tranche A Lender and the Agent as confidential, shall, without Pertamina's consent for the agreements referred to in clause (a), or the consent of the relevant Producer for agreements or documents referred to in clause (b), be released or otherwise delivered by or on behalf of the Tranche A Lender, the Agent, the Arrangers, the Intercreditor Agent, the Technical Agent or any Tranche B Lender to any third party, except, prior to the Effective Date, to any prospective lender in connection with the transactions contemplated hereby pursuant to a confidentiality undertaking in a form approved by the Producers on or prior to the date hereof. Notwithstanding the foregoing, the agreements and documents referred to in the preceding sentence may be released to any bank regulatory authority having jurisdiction over any Lender, as may otherwise be required by law and to any prospective assignee of or participant in the rights of the Lenders under the Loan Agreement, the Notes and this Agreement upon execution by such Person of a confidentiality undertaking in a form substantially similar to that approved by the Producers on or prior to the date hereof. No public announcement or statement or publication relating to any of the foregoing shall be made or released by or on behalf of the Tranche A Lender, the Agent, the Arrangers or any Tranche B Lender, without the prior written approval of the Producers. * * * * * 41 45 The undersigned Producers have caused this Agreement to be duly executed by their respective duly authorized signatories as of the date hereof. PERUSAHAAN PERTAMBANGAN MINYAK DAN GAS BUMI NEGARA (PERTAMINA) Jalan Medan Merdeka Timur 1A Jakarta - Indonesia Telex No.: 44134 Answerback: PTMJKT 1A Telecopier No.: 62-21-365-685 By: /s/ FAISAL ABDAOE Attention: Director of ---------------------------------------------------- Processing Name: Faisal Abdaoe Title: President-Director and C.E.O. VIRGINIA INDONESIA COMPANY One Houston Center 1221 McKinney - Suite 700 Houston, Texas 77010 U.S.A. Telex No.: 713-166-100 Answerback: VICO HOU By: /s/ TERRY QUINN Telecopier No.: 713-754-6697 ---------------------------------------------------- Attention: Treasurer Name: Terry Quinn Title: Vice President and Chief Financial Officer VIRGINIA INTERNATIONAL COMPANY One Houston Center 1221 McKinney - Suite 600 Houston, Texas 77010 U.S.A. Telex No.: N/A Answerback: N/A By: /s/ RICHARD L. SMERNOFF Telecopier No.: 713-654-8569 ---------------------------------------------------- Attention: Chief Financial Name: Richard L. Smernoff Officer Title: Finance Director LASMO SANGA SANGA LIMITED 100 Liverpool Street London EC2M 2BB United Kingdom Telex No.: 8812970 By: /s/ RICHARD L. SMERNOFF Answerback: LASMO G ---------------------------------------------------- Telecopier No.: 44-171-606-2893 Name: Richard L. Smernoff Attention: Finance Director Title: Finance Director
42 46 UNION TEXAS EAST KALIMANTAN LIMITED c/o Union Texas International Corporation P.O. Box 2120 Houston, Texas 77252-2120 U.S.A. By: /s/ ALAN CUNNINGHAM Telex No.: 775255 ---------------------------------------------------- Answerback: UNOTEX PET HOU Name: Alan Cunningham Telecopier No.: 1-713-968-2771 Title: Assistant Secretary Attention: President OPICOIL HOUSTON, INC. 2801 Post Oak Blvd. - Suite 300 Houston, Texas 77056 U.S.A. Telex No.: N/A By: /s/ Roy C. H. Chiu Answerback: N/A ---------------------------------------------------- Telecopier No.: 1-713-297-8108 Name: Roy C. H. Chiu Ext. 322 Title: President Attention: Vice President of Finance UNIVERSE GAS & OIL COMPANY, INC. NYK Tennoz Building 2-20, Higashi-Shinagawa 2-chome Shinagawa-ku, Tokyo 140 Japan Telex No.: J26268 Answerback: UGO TOK Telecopier No.: 81-3-5462-0679 By: /s/ TOSHIO NORIMATSU Attention: General Manager to ---------------------------------------------------- Business Department Name: Toshio Norimatsu Title: General Manager Business Development TOTAL INDONESIE P.O. Box 1010 Jakarta 10010 Indonesia Telex No.: 60980 Answerback: TOTALJ IA Telecopier No.: 62-21-252-0814 Attention: President and By: /s/ BERNARD VITRY General Manager ---------------------------------------------------- Name: Bernard Vitry Title: President and General Manager
43 47 INDONESIA PETROLEUM, LTD. 17th Floor, Ebisu Neonato, No. 1-18, Ebisu 4-chome Shibuya-ku, Tokyo 150, Japan Telex No.: 2424210 Answerback: JAIPEX J By: /s/ KAZUO YOSHIKAWA Telecopier No.: 81-3-5448-1244 ---------------------------------------------------- Attention: General Manager Name: Kazuo Yoshikawa of Gas Business Title: Executive Senior Department Managing Director UNOCAL INDONESIA COMPANY Ratu Plaza Office Tower Jalan Jenderal Sudirman Jakarta, Indonesia Telex No. 47335 By: /s/ DONALD A. MACKAY Answerback: UNOCAL IA ---------------------------------------------------- Telecopier No. 62-21-720-4499 Name: Donald A. MacKay Attention: President Title: Assistant Treasurer Accepted: BONTANG TRAIN-G PROJECT FINANCE CO., LTD. By: /s/ RINTARO HARA -------------------------------------------------------- Name: Rintaro Hara Title: President
44 48 Arranger -------- CREDIT LYONNAIS By /s/ PHILIPPE SOUSTRA -------------------------------- Name: Philippe Soustra Title: Attorney-in-Fact THE FUJI BANK, LIMITED By /s/ HAJIME TANIMURA -------------------------------- Name: Hajime Tanimura Title: Attorney-in-Fact THE LONG-TERM CREDIT BANK OF JAPAN, LIMITED By /s/ KENICHI AMANO -------------------------------- Name: Kenichi Amano Title: Attorney-in-Fact Facility Agent ("Agent") ------------------------ THE LONG-TERM CREDIT BANK OF JAPAN, LIMITED NEW YORK BRANCH By /s/ KENICHI AMANO -------------------------------- Name: Kenichi Amano Title: Attorney-in-Fact
45 49 Intercreditor Agent ------------------- THE FUJI BANK, LIMITED Technical Agent --------------- CREDIT LYONNAIS Tranche B Lenders ----------------- CREDIT LYONNAIS By /s/ PHILIPPE SOUSTRA -------------------------------- Name: Philippe Soustra Title: Attorney-in-Fact THE DAIWA BANK, LIMITED NEW YORK BRANCH By /s/ SHINICHI INOUE -------------------------------- Name: Shinichi Inoue Title: Attorney-in-Fact THE DAI-ICHI KANGYO BANK, LIMITED NEW YORK BRANCH By /s/ TAKAYUKI NAKAYAMA -------------------------------- Name: Takayuki Nakayama Title: Attorney-in-Fact THE FUJI BANK, LIMITED NEW YORK BRANCH By /s/ HAJIME TANIMURA -------------------------------- Name: Hajime Tanimura Title: Attorney-in-Fact
46 50 THE INDUSTRIAL BANK OF JAPAN TRUST COMPANY By /s/ KENICHIRO MURATA -------------------------------- Name: Kenichiro Murata Title: Attorney-in-Fact KOREA FIRST BANK NEW YORK AGENCY By /s/ HEUNG-JE KIM -------------------------------- Name: Heung-Je Kim Title: Attorney-in-Fact THE LONG-TERM CREDIT BANK OF JAPAN, LIMITED NEW YORK BRANCH By /s/ KENICHI AMANO -------------------------------- Name: Kenichi Amano Title: Attorney-in-Fact THE MITSUBISHI BANK, LIMITED NEW YORK BRANCH By /s/ YOSHISABURO MOGI -------------------------------- Name: Yoshisaburo Mogi Title: Attorney-in-Fact THE MITSUBISHI TRUST AND BANKING CORPORATION NEW YORK BRANCH By /s/ TATSUHISA TESHIMA -------------------------------- Name: Tatsuhisa Teshima Title: Attorney-in-Fact
47 51 THE NORINCHUKIN BANK NEW YORK BRANCH By /s/ SHOJIRO MATSUOKA -------------------------------- Name: Shojiro Matsuoka Title: Attorney-in-Fact THE SAKURA BANK, LIMITED NEW YORK BRANCH By /s/ MASAO UMEMURA -------------------------------- Name: Masao Umemura Title: Attorney-in-Fact THE SANWA BANK, LIMITED NEW YORK BRANCH By /s/ AKIRA TAKEUCHI -------------------------------- Name: Akira Takeuchi Title: Attorney-in-Fact SOCIETE GENERALE TOKYO BRANCH By /s/ PATRICK FROGER -------------------------------- Name: Patrick Froger Title: General Manager for Japanese Branches THE SUMITOMO BANK, LIMITED NEW YORK BRANCH By /s/ KIYOTAKA KUROKAWA -------------------------------- Name: Kiyotaka Kurokawa Title: Attorney-in-Fact THE TOKAI BANK, LIMITED NEW YORK BRANCH By /s/ TORU SATOH -------------------------------- Name: Toru Satoh Title: Attorney-in-Fact
48 52 Schedule 1 Liability Share Percentages
Pre Tax Percentage Interest (%) ------------ Pertamina 44.2276% OPICOIL Houston, Inc. 2.2183% Virginia International Company 1.7330% Virginia Indonesia Company 0.8318% Lasmo Sanga Sanga Limited 2.9115% Union Texas East Kalimantan Limited 2.9115% Universe Gas & Oil Company, Inc. 0.4852% Total Indonesie 20.7131% Unocal Indonesia Company 2.4971% Indonesia Petroleum, Ltd. 21.4709% -------- 100%
EX-10.3 4 BONTANG V TRUSTEE & PAYING AGENT AGREEMENT 1 BONTANG V TRUSTEE AND PAYING AGENT AGREEMENT among PERUSAHAAN PERTAMBANGAN MINYAK DAN GAS BUMI NEGARA (PERTAMINA) VIRGINIA INDONESIA COMPANY OPICOIL HOUSTON, INC. VIRGINIA INTERNATIONAL COMPANY LASMO SANGA SANGA LIMITED UNION TEXAS EAST KALIMANTAN LIMITED UNIVERSE GAS & OIL COMPANY, INC. TOTAL INDONESIE UNOCAL INDONESIA COMPANY INDONESIA PETROLEUM, LTD. and BANKAMERICA INTERNATIONAL Dated as of July 1, 1995 2 TABLE OF CONTENTS Page ARTICLE 1 DEFINED TERMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 ARTICLE 2 RECEIPT OF PAYMENTS WITH RESPECT TO LNG . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 2.1 Designation of Bontang V Trustee and Bontang V General Account . . . . . . . . . . . . . . . . . 19 2.2 Bontang V Trust Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 2.3 Allocation of Amounts Received . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 2.4 Proceeds of Cargo Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 2.5 Payments Under New 1973 Transportation Arrangements . . . . . . . . . . . . . . . . . . . . . . 21 ARTICLE 3 POWER TO BORROW AND ENTER INTO INTEREST RATE SWAPS . . . . . . . . . . . . . . . . . . . . . . . 22 3.1 Enumeration of Powers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 3.2 Accumulation of Debt Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 3.3 Payment of Debt Service; Choices; Delivery of Information and Certificates . . . . . . . . . . . 30 3.4 Borrowing Instructions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 3.5 Disbursement Trust; Payment Instructions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 3.6 Duties of Bontang V Trustee with Respect to Instructions . . . . . . . . . . . . . . . . . . . . 42 3.7 Bontang V Depositaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 ARTICLE 4 ESTABLISHMENT OF BONTANG V PAYMENT ACCOUNT . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 4.1 Bontang V Payment Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 4.2 Funds to be Deposited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 4.3 Other Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 ARTICLE 5 DISBURSEMENTS WITH RESPECT TO PROCESSING CHARGES . . . . . . . . . . . . . . . . . . . . . . . . 44 5.1 Submission and Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 5.2 Payment Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 ARTICLE 6 TRANSPORTATION EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 6.1 Submission and Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 6.2 Payment Procedure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 ARTICLE 7 DISBURSEMENTS WITH RESPECT TO OTHER CHARGES . . . . . . . . . . . . . . . . . . . . . . . . . . 45 7.1 Submission and Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 7.2 Payment Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
i 3
Page ---- ARTICLE 8 DISBURSEMENTS WITH RESPECT TO SHARING PERCENTAGES . . . . . . . . . . . . . . . . . . . . . . . 46 8.1 Approved Level of Working Capital; Sharing Percentages . . . . . . . . . . . . . . . . . . . . . 46 8.2 Charging of Amounts Payable; Payment of Excess . . . . . . . . . . . . . . . . . . . . . . . . . 46 8.3 Accountants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 8.4 Arrangements for Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 8.5 Special Disbursement Instructions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 8.6 Payment Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 8.7 Receipt of Special Disbursements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 ARTICLE 9 PROCEDURES RESPECTING ACCOUNTS UNDER THIS AGREEMENT . . . . . . . . . . . . . . . . . . . . . . 49 9.1 Accounting for Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 9.2 Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 9.3 Producer Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 ARTICLE 10 INVESTMENT OF FUNDS HELD IN ACCOUNTS UNDER THIS AGREEMENT . . . . . . . . . . . . . . . . . . . 51 10.1 Permitted Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 10.2 Prudence and Yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 10.3 Interest Allocation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 ARTICLE 11 CONCERNING THE BONTANG V TRUSTEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 11.1 Duties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 11.2 Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 11.3 Resignation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 11.4 Appointment of Successor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 11.5 Application to Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 11.6 Successor Vested with Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 11.7 Payments After Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 11.8 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 11.9 Trustee in Individual Capacity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 ARTICLE 12 DEBT SERVICE ALLOCATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 12.1 Debt Service Allocation Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 12.2 Estimated Debt Service Percentages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 12.3 Aggregate Dollar Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 12.4 Pro Rata Treatment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 12.5 Income From the Disbursement Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 ARTICLE 13 MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 13.1 Counterparts; Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
ii 4
Page ---- 13.2 DISPUTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 13.3 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61 13.4 Incumbency Certificates; Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 13.5 No Amendment Except in Writing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 13.6 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
iii 5 BONTANG V TRUSTEE AND PAYING AGENT AGREEMENT __________________________ THIS AGREEMENT, made as of the 1st day of July, 1995 among PERUSAHAAN PERTAMBANGAN MINYAK DAN GAS BUMI NEGARA ("Pertamina"); and VIRGINIA INDONESIA COMPANY ("Vico"), OPICOIL HOUSTON, INC. ("Opicoil"), VIRGINIA INTERNATIONAL COMPANY, LASMO SANGA SANGA LIMITED, UNION TEXAS EAST KALIMANTAN LIMITED, UNIVERSE GAS & OIL COMPANY, INC., TOTAL INDONESIE ("Total"), UNOCAL INDONESIA COMPANY ("Unocal"), and INDONESIA PETROLEUM, LTD. ("Inpex"); and BANKAMERICA INTERNATIONAL (the "Bontang V Trustee"), as Trustee and Paying Agent; W I T N E S S E T H : WHEREAS, Pertamina, in collaboration with the Contractors (such expression and certain other capitalized expressions used in these Recitals have the meanings set forth in Article 1 hereof) has executed the LNG Sales Contracts; WHEREAS, the LNG Sales Contracts provide that the Buyers shall pay amounts due thereunder to a bank in the United States designated by Pertamina; WHEREAS, under the Supply Agreements: (i) each of the Contractors has agreed to make available, for sale and delivery by Pertamina under the LNG Sales Contracts, a portion of the LNG sold thereunder; (ii) Pertamina has assigned to each Contractor a percentage of certain amounts paid or payable by the Buyers thereunder; (iii) Pertamina and the Contractors have agreed that certain payments made by the Buyers shall be remitted directly to a bank in the United States selected by Pertamina and the Contractors which will serve as Trustee and Paying Agent for the purposes of causing the due payment in an orderly administrative manner of certain costs and expenses of Pertamina and of each Contractor incurred in the processing and sale of the LNG of each such party; WHEREAS, Pertamina and the Contractors wish to authorize the Bontang V Trustee to borrow funds from time to 6 2 time to pay for certain costs incurred and to be incurred in connection with Financed Capital Projects; WHEREAS, Pertamina, the Contractors and Continental Bank International are parties to certain existing trustee and paying agent agreements and BankAmerica International (both as successor in interest to Continental Bank International and in its own right) may in the future enter into other such agreements; and WHEREAS, Pertamina and the Contractors wish to set forth arrangements whereby certain amounts paid with respect to the LNG Sales Contracts and certain other agreements will be received, held, managed and disbursed by the Bontang V Trustee upon the terms and conditions set forth in this Agreement; NOW, THEREFORE, in consideration of the mutual agreements contained herein, the parties hereto agree as follows: ARTICLE 1 DEFINED TERMS The following defined terms shall have the meanings set forth below, such meanings to be applicable to both the singular and the plural forms of such expressions: "Accountants" shall have the meaning set forth in Section 8.3. "Additional Plant" shall have the meaning set forth in Section 1 of the Loan Agreement. "Affected Lender" shall mean any Lender with respect to which the Bontang V Trustee has received a Notice of Mandatory Prepayment. An Affected Lender shall continue to be such for purposes of this Agreement until the entire amount of the Mandatory Prepayment payable to it has been paid in full. "Agent" shall mean The Long-Term Credit Bank of Japan, Limited, New York Branch, acting in its capacity as facility agent for the Tranche B Lenders under the Loan Agreement, or any successor thereto appointed pursuant to Section 8.10 thereof. "Anticipated Loan Amounts" shall have the meaning set forth in Section 3.2(b)(iii). 7 3 "Approved Level of Working Capital" shall have the meaning set forth in Section 8.1. "Arun III Contract" shall have the meaning set forth in the KGC Sales Contract. "Assumed Interest Rate" shall have the meaning set forth in Section 1 of the Loan Agreement. "Availability Period" shall have the meaning set forth in Section 1 of the Loan Agreement. "Badak III LNG Sales Contract" shall have the meaning set forth in the CPC Sales Contract. "Bontang Excess Sales Trust Agreement" shall mean the Bontang Excess Sales Trustee and Paying Agent Agreement, originally dated as of November 1, 1986, as amended and restated as of February 9, 1988, and as amended by Amendment No. 1 thereto, dated as of July 1, 1995, each among the Producers or their predecessors in interest, and Continental Bank International, as hereafter modified or amended. "Bontang Excess Sales Trustee" shall mean the trustee and paying agent under the Bontang Excess Sales Trust Agreement. "Bontang I Trust Agreement" shall mean the Badak Trustee and Paying Agent Agreement, originally dated as of July 15, 1974, as amended and restated as of February 9, 1988, and as amended by Amendment No. 1 thereto, dated as of July 1, 1995, each among the Producers or their predecessors in interest, and Continental Bank International, as hereafter modified or amended. "Bontang I Trustee" shall mean the trustee and paying agent under the Bontang I Trust Agreement. "Bontang Plant" shall mean the natural gas liquefaction plant at Bontang Bay on the east coast of Kalimantan, Indonesia, including all related facilities, such as natural gas processing plants for the production of LNG and liquefied petroleum gas consisting of propane and butane, utilities, storage tanks, loading lines and arms, harbor, docks, berths, tug boats, residential community, workshops, offices, fixed plant and equipment and communication systems, together with replacements, improvements, additions and expansions of all such facilities (including Train G), together also with natural gas transmission lines extending from "Delivery Points" as defined in the Processing Agreement, and from other such points in other fields from which natural gas is supplied to the said natural gas liquefaction plant (including associated knock- 8 4 out drums but excluding natural gas gathering pipelines within fields). "Bontang II Trust Agreement" shall mean the Badak Expansion Trustee and Paying Agent Agreement, originally dated as of July 15, 1981, as amended and restated as of July 15, 1991, among the Producers or their predecessors in interest, and Continental Bank International, as hereafter modified or amended. "Bontang II Trustee" shall mean the trustee and paying agent under the Bontang II Trust Agreement. "Bontang III Trust Agreement" shall mean the Bontang III Trustee and Paying Agent Agreement, dated as of February 9, 1988, among the Producers or their predecessors in interest, and Continental Bank International, as heretofore and hereafter modified or amended. "Bontang III Trustee" shall mean the trustee and paying agent under the Bontang III Trust Agreement. "Bontang IV Trust Agreement" shall mean the Bontang IV Trustee and Paying Agent Agreement, dated as of August 26, 1991, among the Producers or their predecessors in interest, and Continental Bank International, as heretofore and hereafter modified or amended. "Bontang IV Trustee" shall mean the trustee and paying agent under the Bontang IV Trust Agreement. "Bontang V Depositary" shall mean the United States headquarters or a United States branch of the following financial institutions appointed pursuant to Section 3.7 as a depositary of funds, properties and rights in the Debt Service Account and the Reserve Account for the purposes of safekeeping, investment or disbursement thereof: (a) any branch or affiliate of BankAmerica International with the power to act as a Bontang V Depositary, or (b) any other bank, trust company or financial institution (in each case with trust powers) which (i) has a net worth in excess of $100,000,000.00 or (ii) has outstanding debt securities rated A or better by Standard and Poor's Rating Group or its equivalent by Moody's Investors Service or another nationally recognized rating agency in the United States and, in either case, has been approved in writing by the Producers, the Tranche A Lender and the Agent on behalf of the Tranche B Lenders. "Bontang V General Account" shall have the meaning set forth in Section 2.1. 9 5 "Bontang V Payment Account" shall mean a trust account of the Bontang V Trustee established as a sub-account of the Bontang V General Account pursuant to Section 4.1. "Bontang V Trustee" shall mean BankAmerica International as trustee and paying agent under this Agreement, or a successor thereto. "Bontang V Trust Funds" shall have the meaning set forth in Section 2.2. "Bontang V Trust Funds Accounts" shall mean the accounts referred to in Section 9.3. "Borrowed Amounts" shall have the meaning set forth in Section 1 of the Loan Agreement. "Borrowing" shall have the meaning set forth in Section 1 of the Loan Agreement. "Business Day" shall have the meaning set forth in Section 1 of the Loan Agreement. "Buyer" shall mean each of (i) Korea Gas Corporation, a corporation organized under the laws of the Republic of Korea, as buyer under the KGC Sales Contract, (ii) Chinese Petroleum Corporation, a corporation organized under the laws of the Republic of China, as buyer under the CPC Sales Contract and (iii) each of the Japanese Buyers, as buyers under the New 1973 Sales Contract. "Capital Payment Dates" shall mean the dates determined pursuant to Section 3.2(a). "Commitment" shall have the meaning set forth in Section 1 of the Loan Agreement. "Contractor" shall mean each of Virgina Indonesia Company, Lasmo Sanga Sanga Limited, Union Texas East Kalimantan Limited, OPICOIL Houston, Inc., Virginia International Company, Universe Gas & Oil Company, Inc. Total Indonesie, Unocal Indonesia Company and Indonesia Petroleum, Ltd., and in each case its predecessors and successors in interest (collectively, the "Contractors"). "Contractor Group" shall mean any of the Vico Group, the Total Group and the Unocal Group, and, after it ceases to be a member of the Unocal Group, Inpex. "CPC Sales Contract" shall mean the Memorandum of Agreement between Pertamina and Chinese Petroleum Corporation for Sale and Purchase of LNG during 1998 and 1999, dated as of December 6, 1994, as heretofore and 10 6 hereafter modified or amended, until such time as no amounts that may then or thereafter be payable thereunder or with respect thereto would, if paid, constitute Source of Debt Service, at which time such Memorandum shall cease, for purposes hereof and for purposes of the Producers Agreement, to be the CPC Sales Contract and an LNG Sales Contract. "CPC Supply Agreements" shall mean, for as long as the CPC Sales Contract is an LNG Sales Contract: (i) Package V Supply Agreement (1998-1999 LNG Sales to Chinese Petroleum Corporation), dated June 16, 1995, by and between Pertamina, on the one hand, and the members of the Vico Group, on the other hand, as heretofore and hereafter modified or amended; (ii) Package V Supply Agreement (1998-1999 LNG Sales to Chinese Petroleum Corporation), dated June 16, 1995, by and between Pertamina, on the one hand, and the members of the Total Group, on the other hand, as heretofore and hereafter modified or amended; (iii) Package V Supply Agreement (1998-1999 LNG Sales to Chinese Petroleum Corporation), dated June 16, 1995, by and between Pertamina, on the one hand, and Unocal, on the other hand, as heretofore and hereafter modified or amended; and (iv) Package V Supply Agreement (1998-1999 LNG Sales to Chinese Petroleum Corporation), dated June 16, 1995, by and between Pertamina, on the one hand, and Unocal and Inpex, on the other hand, as heretofore and hereafter modified or amended. "Debt Coverage Ratio" shall have the meaning set forth in Section 1 of the Loan Agreement. "Debt Coverage Reserve Account" shall mean a trust account of the Bontang V Trustee established as a sub-account of the Reserve Account pursuant to Section 3.2(c), and such term shall include all sub-accounts thereof. "Debt Service" shall mean payments into the Debt Service Account and the Reserve Account, together with payments made by one or more Producers and identified to the Bontang V Trustee as "Debt Service" under the Debt Service Allocation Agreement. "Debt Service Account" shall mean a trust account of the Bontang V Trustee established as a sub-account of the Bontang V General Account pursuant to Section 3.2(c), which may be established and maintained at the offices of the Bontang V Trustee, or any Bontang V Depositary as permitted 11 7 in accordance with the terms hereof and such term shall include all sub-accounts thereof. "Debt Service Allocation Agreement" shall mean the Amended and Restated Debt Service Allocation Agreement, dated as of February 9, 1988, among the Producers, as heretofore and hereafter modified or amended. "Deferred Principal" shall mean any amount of principal due to the Lenders (other than any Affected Lenders) under the Loan Agreement and the Notes, the payment of which is deferred pursuant to Section 2.10(b) of the Loan Agreement. "Disbursement Trust Agreement" shall mean a disbursement trustee and paying agent agreement entered into in the manner specified in Section 3.5 under which the Loan Proceeds (other than amounts referred to in Sections 3.2(d), (e), (f) and (g) and 3.4(b)(iii)(y)) shall be maintained until use thereof is required, as thereafter modified or amended. "Disbursement Trustee" shall mean BankAmerica International acting as disbursement trustee and paying agent under the Disbursement Trust Agreement, or a successor thereto. "Effective Date" shall mean the date specified as such in the Loan Agreement, as advised to the Bontang V Trustee in writing by the Tranche A Lender and the Agent on behalf of the Tranche B Lenders. "Encumbrance" shall mean any lien, security interest, mortgage, deed of trust, pledge, charge or any other encumbrance of any kind, including, without limitation, the rights of a vendor, lessor or similar party under any conditional sale agreement or other title retention agreement or lease substantially equivalent thereto, any production payment, and, with respect to any property or assets, any other right of or arrangement with any creditor to have its claim satisfied out of any such property or assets, or the proceeds therefrom, prior to the general creditors of the owner thereof. "Excluded Amounts" shall have the meaning set forth in Section 2.1. "Extension Period" shall have the meaning set forth in the definition of "Source of Debt Service" in this Article 1. "Financed Capital Project" shall have the meaning specified in the Processing Agreement. 12 8 "Gross Invoice Amount" shall mean: (i) with respect to the KGC Sales Contract, the sum, without duplication, of (a) the amounts payable to the Bontang V Trustee pursuant thereto in respect of LNG purchased, (b) amounts payable to the Bontang V Trustee pursuant to Section 6.3 of each KGC Supply Agreement (with respect to amounts payable to Pertamina), (c) all amounts payable to the Bontang V Trustee on account of interest due by reason of late payment of invoices for LNG under the KGC Sales Contract pursuant to the provisions thereof that result from the incorporation therein of Sections 10.3(d) of each of the Arun III Contract and the Korea II Contract (as defined in the KGC Sales Contract), (d) amounts payable to the Bontang V Trustee relating to transportation charges, if any, other than demurrage and (e) all demurrage payable to the Bontang V Trustee under the KGC Sales Contract pursuant to the provisions thereof that result from the incorporation therein of Section 4.5 of the Arun III Contract; (ii) with respect to the CPC Sales Contract, the sum, without duplication, of (a) the amounts payable to the Bontang V Trustee pursuant thereto in respect of LNG purchased, (b) amounts payable to the Bontang V Trustee pursuant to Section 6.3 of each CPC Supply Agreement (with respect to amounts payable to Pertamina), (c) all amounts payable to the Bontang V Trustee on account of interest due by reason of late payment of invoices for LNG under the CPC Sales Contract pursuant to the provisions thereof that result from the incorporation therein by reference of Section 10.3(c) of the Badak III LNG Sales Contract (as defined in the CPC Sales Contract), (d) amounts payable to the Bontang V Trustee relating to transportation charges, if any, other than demurrage and (e) all demurrage payable to the Bontang V Trustee under the CPC Sales Contract pursuant to the provisions thereof that result from the incorporation therein by reference of Section 4.4 of the Badak III LNG Sales Contract; (iii) with respect to the New 1973 Sales Contract, the sum, without duplication, of (a) the amounts payable to the Bontang V Trustee pursuant thereto in respect of LNG purchased or, if not taken, required to be purchased but not taken thereunder, (b) amounts payable to the Bontang V Trustee pursuant to Section 5.3 of each Japanese Supply Agreement (with respect to amounts payable to Pertamina), (c) all amounts payable to the Bontang V Trustee on account of interest due by reason of the late payment of invoices for LNG under the section of the Second A/R 1973 Sales Contract that corresponds to Section 10.3 of Attachment A to the 1973 Extension MOA, (d) amounts payable to the Bontang V Trustee under the New 1973 Transportation Arrangements and (e) all demurrage and other amounts payable to the Bontang V Trustee by the Buyer under the sections of the Second A/R 13 9 1973 Sales Contract that correspond to Sections 4.4(c), 4.5(b) and 4.6 of Attachment A to the 1973 Extension MOA; provided that the Gross Invoice Amount (other than amounts paid to Pertamina solely with respect to the transportation of cargoes of LNG, including without limitation demurrage payments and non-utilization costs) shall not be reduced by any rebate, set-off, reduction or discount given or agreed to by one or more parties to any LNG Sales Contract from such amount payable as so defined, adjusted and calculated; and provided further that if the Bontang V Trustee is authorized and requested by the Producers (which authorization and request may be given pursuant to Section 1.16(b) of the Producers Agreement) to execute and deliver an agreement providing for the amendment of this definition of Gross Invoice Amount, and if the Tranche A Lender and the Agent on behalf of the Tranche B Lenders also execute and deliver such agreement this definition of Gross Invoice Amount shall be deemed amended for all purposes of this Agreement as set forth in such agreement. "Guarantee" by any Person shall mean any obligation, contingent or otherwise, of such Person guaranteeing any Indebtedness or other obligation of any other Person and, without limiting the generality of the foregoing, any obligation, direct or indirect, contingent or otherwise, of such Person (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation (whether arising by virtue of partnership arrangements, by agreement to keep-well, to purchase assets, goods, securities or services, to take-or-pay or to maintain financial statement conditions or otherwise) or (ii) entered into for the purpose of assuring in any other manner the obligee of such Indebtedness or other obligation of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part); provided that the term Guarantee shall not include endorsements for collection or deposit in the ordinary course of business. "Indebtedness" shall mean, with respect to any Person, (i) all indebtedness or obligations of such Person for borrowed money, (ii) all indebtedness or obligations of such Person evidenced by bonds, debentures, notes, swap agreements or other similar instruments or agreements, and all securities issued by such person providing for mandatory payments of money, whether or not contingent, (iii) all obligations of such Person to pay the deferred purchase price of property or services, except trade accounts payable arising in the ordinary course of business, (iv) all obligations of such Person as lessee under capital leases, (v) all obligations of such Person to purchase securities (or other property) which arise out of or in connection with the sale of the same or substantially similar securities or property, (vi) all non-contingent obligations of such Person to reim- 14 10 burse any Person in respect of amounts paid under a letter of credit or similar instrument to the extent that such reimbursement obligations remain outstanding five business days after they become non-contingent, (vii) Indebtedness of others secured by an Encumbrance on any asset of such Person, whether or not such Indebtedness is assumed by such Person, or (viii) all Guarantees by such Person of or with respect to the Indebtedness of another Person. "Inpex" is defined in the title paragraph hereof. "Interest" shall mean all amounts of interest, including interest on Scheduled Principal, Deferred Principal and overdue amounts, payable to the Lenders (other than any Affected Lenders) under Sections 2.3 and 2.7(a) of the Loan Agreement and under the Notes. "Interest Payment Date" shall have the meaning set forth in Section 1 of the Loan Agreement. "Interest Period" shall have the meaning set forth in Section 1 of the Loan Agreement. "Japanese Buyers" shall mean Chubu Electric Power Co., Inc., The Kansai Electric Power Co., Inc., Kyushu Electric Co., Inc., Nippon Steel Corporation, Osaka Gas Co., Ltd. and Toho Gas Co., Ltd. "Japanese Supply Agreements" shall mean, for as long as the New 1973 Sales Contract is an LNG Sales Contract: (a) during the portion of the Extension Period commencing on January 1, 2000 and ending on December 31, 2009: (i) Package V Supply Agreement for Natural Gas in Support of the 1973 LNG Sales Contract Extension, dated June 16, 1995, by and between Pertamina, on the one hand, and the members of the Vico Group, on the other hand, as heretofore and hereafter modified or amended; (ii) Package V Supply Agreement for Natural Gas in Support of the 1973 LNG Sales Contract Extension, dated June 16, 1995, by and between Pertamina, on the one hand, and the members of the Total Group, on the other hand, as heretofore and hereafter modified or amended; (iii) Package V Supply Agreement for Natural Gas in Support of the 1973 LNG Sales Contract Extension, dated June 16, 1995, by and between Pertamina, on the one hand, and Unocal, on the other hand, as heretofore and hereafter modified or amended; and 15 11 (iv) Package V Supply Agreement for Natural Gas in Support of the 1973 LNG Sales Contract Extension, dated June 16, 1995, by and between Pertamina, on the one hand, and Unocal and Inpex, on the other hand, as heretofore and hereafter modified or amended. (b) during the portion of the Extension Period, if any, commencing after December 31, 2009, such supply agreements as provide for the supply of natural gas to the Bontang Plant in support of sales under the New 1973 Sales Contract during all or part of such period: "KGC Sales Contract" shall mean the Memorandum of Agreement for Purchase and Sale of LNG during 1995-1999, dated as of September 30th, 1994, between Pertamina and the Korea Gas Corporation, as heretofore and hereafter modified or amended, until such time as no amounts that may then or thereafter be payable thereunder or with respect thereto would, if paid, constitute Source of Debt Service, at which time such Memorandum shall cease, for purposes hereof and for purposes of the Producers Agreement, to be the KGC Sales Contract and an LNG Sales Contract. "KGC Supply Agreements" shall mean, for as long as the KGC Sales Contract is an LNG Sales Contract: (i) Package V Supply Agreement (1995-1999 LNG Sales to Korea Gas Corporation), dated June 16, 1995, by and between Pertamina, on the one hand, and the members of the Vico Group, on the other hand, as heretofore and hereafter modified or amended; (ii) Package V Supply Agreement (1995-1999 LNG Sales to Korea Gas Corporation), dated June 16, 1995, by and between Pertamina, on the one hand, and the members of the Total Group, on the other hand, as heretofore and hereafter modified or amended; (iii) Package V Supply Agreement (1995-1999 LNG Sales to Korea Gas Corporation), dated June 16, 1995, by and between Pertamina, on the one hand, and Unocal, on the other hand, as heretofore and hereafter modified or amended; (iv) Package V Supply Agreement (1995-1999 LNG Sales to Korea Gas Corporation), dated June 16, 1995, by and between Pertamina, on the one hand, and Unocal and Inpex, on the other hand, as heretofore and hereafter modified or amended. "Lender" shall mean each of, and "Lenders" shall mean all of, the Tranche A Lender and each of the Tranche B Lenders, any transferee pursuant to and subject to the conditions set forth in Section 10.4 of the Loan Agreement and their respective permitted successors and assigns. 16 12 "Lenders Fees and Expenses" shall mean any amounts payable to the Agent or any of the Lenders (other than any Affected Lenders) under Sections 2.8 and 10.6 of the Loan Agreement and under the Letter Agreement. "Letter Agreement" shall have the meaning set forth in Section 1 of the Loan Agreement. "LNG" shall have the meaning set forth in Article 1 of the Processing Agreement. "LNG Sales Contract" shall mean each of, and "LNG Sales Contracts" shall mean all of, the CPC Sales Contract, the KGC Sales Contract and the New 1973 Sales Contract. "Loading Facilities" shall have the meaning set forth in Section 1 of the Loan Agreement. "Loan Account" shall mean a trust account of the Bontang V Trustee established as a sub-account of the Debt Service Account pursuant to Section 3.2(c). "Loan Agreement" shall mean the Loan Agreement among the Bontang V Trustee, as borrower thereunder, the Tranche A Lender, the Tranche B Lenders, the Agent, the Intercreditor Agent, the Technical Agent and the Arrangers parties thereto, to be entered into pursuant to Section 3.1(a), as hereafter modified or amended. "Loan Percentage" shall mean, for any Affected Lenders at any time, the percentage determined by dividing the principal amount of such Affected Lenders' Notes outstanding at such time by the aggregate principal amount outstanding at such time under all Lenders' Notes. "Loan Proceeds" shall mean any funds disbursed by the Lenders pursuant to the Loan Agreement. "Majority Lenders" shall mean the Tranche A Lender and the Majority Tranche B Lenders. "Majority Tranche B Lenders" shall mean at any time Tranche B Lenders holding in excess of 66-2/3% of the aggregate unpaid principal amount of the advances by the Tranche B Lenders, or if no such advances are at the time outstanding, Tranche B Lenders having in excess of 66-2/3% of the aggregate amount of the commitments of the Tranche B Lenders to lend to the Bontang V Trustee under the Loan Agreement. "Mandatory Prepayment Account" shall mean a trust account of the Bontang V Trustee established as a subaccount of the Debt Service Account pursuant to Section 3.2(c). 17 13 "Mandatory Prepayment" shall mean any required prepayment of the entire outstanding principal of a Lender's Note, together with all other amounts due to such Lender thereunder and under the Loan Agreement and the Letter Agreement, the payment of which is mandatorily accelerated under Section 3.4(a) of the Loan Agreement. "Maturity Date" shall have the meaning set forth in the Loan Agreement. "New 1973 Sales Contract" shall mean (i) until the Second A/R 1973 Sales Contract has been duly authorized, executed and delivered by Pertamina and the other parties thereto, the 1973 Extension MOA and (ii) thereafter, the Second A/R 1973 Sales Contract. "New 1973 Transportation Arrangements" shall mean the contractual arrangements providing for the transportation of all quantities of LNG contemplated to be delivered pursuant to the New 1973 Sales Contract, as modified or amended from time to time. "1973 Extension MOA" shall mean the Memorandum of Agreement Re: 1973 LNG Sales Contract Extension, dated October 6, 1994, between Pertamina and the Japanese Buyers, as heretofore and hereafter modified or amended, until superseded by the Second A/R 1973 Sales Contract. "1973 Sales Contract" shall mean the LNG Sales Contract, dated as of December 3, 1973, between Pertamina and the Japanese Buyers, as heretofore and hereafter modified or amended, but excluding the New 1973 Sales Contract. "Note" shall mean a promissory note issued by the Bontang V Trustee as borrower under the Loan Agreement to a Lender to evidence such Lender's advances to the Bontang V Trustee as borrower under the Loan Agreement. "Notice of Acceleration" shall have the meaning set forth in Section 3.3(d). "Notice of Borrowing" shall have the meaning set forth in Section 1 of the Loan Agreement. "Notice of Mandatory Prepayment" shall have the meaning set forth in Section 3.3(c). "Other Trust Agreements" shall mean the Bontang I Trust Agreement, the Bontang II Trust Agreement, the Bontang Excess Sales Trust Agreement, the Bontang III Trust Agreement, the Bontang IV Trust Agreement, and any other relevant agreements of this type entered into from time to 18 14 time by Pertamina and the trustees parties thereto, among others, as hereafter modified or amended. "Pari Passu Swap Indebtedness" shall mean Indebtedness of the Bontang V Trustee contemplated by Section 3.1(c). "Person" shall mean and include any individual, corporation, juridical entity, association, statutory body, partnership, joint venture, trust, estate, unincorporated organization or government, state or any political subdivision, instrumentality, agency or authority thereof. "Pertamina" is defined in the title paragraph hereof. "Processing Agreement" shall mean the Amended and Restated Bontang Processing Agreement, dated as of February 9, 1988, among the Producers (or their predecessors in interest) on the one hand and P.T. Badak on the other, as heretofore and hereafter modified or amended. "Producers" shall mean Pertamina (and its successors) and the Contractors. "Producers Agreement" shall mean the Bontang V Producers Agreement of even date herewith among the Producers, the Tranche A Lender, the Agent, the Intercreditor Agent, the Technical Agent, the Arrangers and the Tranche B Lenders, as hereafter modified or amended. "Production Sharing Contract" shall mean, to the extent such contracts relate to the supply of natural gas to the Bontang Plant, each of: (i) as to Pertamina and the Vico Group, (i) until August 8, 1998, the Amended and Restated Production Sharing Contract dated April 23, 1990, as hereafter modified or amended, between Pertamina, on the one hand, and the members of the Vico Group on the other, and (ii) effective August 8, 1998, the Production Sharing Contract dated April 23, 1990, as hereafter modified or amended, between Pertamina, on the one hand, and the members of the Vico Group, on the other; (ii) as to Pertamina and the Total Group, (i) until March 31, 1997, the Amended and Restated Production Sharing Contract dated January 11, 1991, as hereafter modified or amended, between Pertamina, on the one hand, and the members of the Total Group, on the other, and (ii) effective March 31, 1997, the Production Sharing Contract dated January 11, 1991, as hereafter modified or amended, between Pertamina, on the one hand, and the members of the Total Group, on the other; 19 15 (iii) as to Pertamina and the Unocal Group, (i) until October 24, 1998, the Amended and Restated Production Sharing Contract dated January 11, 1991, as hereafter modified or amended, between Pertamina, on the other hand, and Unocal on the other, and (ii) effective October 25, 1998, the Production Sharing Contract dated January 11, 1991, as hereafter modified or amended, between Pertamina, on the one hand, and Unocal, on the other; and (iv) as to Pertamina and Inpex, effective March 31, 1997, the Production Sharing Contract dated March 28, 1991, as hereafter modified or amended, between Pertamina, on the one hand, and Inpex, on the other. "P.T. Badak" shall mean P.T. Badak Natural Gas Liquefaction Company, a corporation organized under laws of the Republic of Indonesia. "Quarterly Period" shall mean the period from and including the making of the initial borrowing under the Loan Agreement to and including the next to occur of March 10, June 10, September 10 and December 10, and thereafter each subsequent period of approximately three calendar months ending on the next to occur of March 10, June 10, September 10 or December 10, as the case may be; provided that if the last day of the Quarterly Period would be a day which is not a Business Day under the Loan Agreement such Quarterly Period will end on the immediately succeeding Business Day and that each subsequent Quarterly Period will begin on the calendar day (whether or not a Business Day) immediately following the last day of the preceding Quarterly Period. "Regular Reserve Account" shall mean a trust account of the Bontang V Trustee established as a sub-account of the Reserve Account pursuant to Section 3.2(c), and such term shall include all sub-accounts thereof. "Reserve Account" shall mean a trust account of the Bontang V Trustee established as a sub-account of the Bontang V General Account pursuant to Section 3.2(c), which may be established at the offices of the Bontang V Trustee, or any Bontang V Depositary, as permitted in accordance with the terms hereof, and such term shall include all sub-accounts thereof. "Scheduled Principal" shall mean the amount of principal regularly scheduled to be payable to the Lenders (other than any Affected Lenders) under Section 2.10(a) of the Loan Agreement and under the Notes. "Second A/R 1973 Sales Contract" shall mean the Second Amended and Restated 1973 LNG Sales Contract, substantially in the form attached to the 1973 Extension MOA as 20 16 Attachment A, as hereafter modified or amended, until such time as no amounts that may then or thereafter be payable thereunder or with respect thereto would, if paid, constitute Source of Debt Service, at which time such Contract shall cease, for purposes hereof and for purposes of the Producers Agreement, to be the Second A/R 1973 Sales Contract and an LNG Sales Contract. "Selected Qualified Bank" shall have the meaning set forth in Section 1 of the Loan Agreement. "Sharing Percentages" shall have the meaning set forth in Section 8.1. "Source of Debt Service" shall mean I.(i) in respect of each amount payable to the Bontang V Trustee for cargoes of LNG delivered on or after January 1, 1998 and for cargoes ordered for delivery on or before December 31, 1999 (the "KGC SDS Period") under the KGC Sales Contract, or payable with respect to the KGC SDS Period to the Bontang V Trustee pursuant to the Supply Agreements or otherwise pursuant to the KGC Sales Contract (without duplication), the portion, if any, of the amount so payable equal to 90% of the LNG Related Portion (as defined in the KGC Sales Contract) of the Gross Invoice Amount payable (a) under each invoice rendered with respect to each such cargo, and (b) otherwise in respect of each such cargo, plus 90% of all indemnities and additional amounts payable by the Buyer with respect to the KGC SDS Period under the KGC Sales Contract (excluding such amounts required to be paid to Pertamina with respect to the transportation of such cargoes of LNG, including, without limitation, demurrage payments), without any reduction or set-off from any such amounts (for purposes hereof, a cargo shall be deemed delivered when title thereto passes to KGC pursuant to the terms of the KGC Sales Contract); (ii) in respect of each amount payable to the Bontang V Trustee for cargoes of LNG delivered on or after January 1, 1998 and for cargoes ordered for delivery on or before December 31, 1999 (the "CPC SDS Period") under the CPC Sales Contract, or payable with respect to the CPC SDS Period to the Bontang V Trustee pursuant to the Supply Agreements or otherwise pursuant to the CPC Sales Contract (without duplication), the portion, if any, of the amount so payable equal to 90% of the LNG Related Component (as defined in the CPC Sales Contract) of the Gross Invoice Amount payable (a) under each invoice rendered with respect to each such cargo, and (b) otherwise in respect of each such cargo, plus 90% of all indemnities and additional amounts payable by the Buyer with respect to the CPC SDS Period under the CPC Sales Contract (excluding such amounts required to be paid to Pertamina with respect to the trans- 21 17 portation of such cargoes of LNG including, without limitation, demurrage payments) without any reduction or set-off from any such amounts (for purposes hereof, a cargo shall be deemed delivered when title thereto passes to CPC pursuant to the terms of the CPC Sales Contract); (iii) in respect of each amount payable to the Bontang V Trustee for LNG purchased during the period from and including January 1, 2000 to and including December 31, 2014 (the "Extension Period") or for LNG required to be purchased but not taken during the Extension Period, under the New 1973 Sales Contract, or payable with respect to the Extension Period to the Bontang V Trustee pursuant to the Supply Agreements or otherwise pursuant to the New 1973 Sales Contract (without duplication), the portion, if any, of the amount so payable equal to 21% of the LNG Element (as defined in the New 1973 Sales Contract) of the Gross Invoice Amount payable (a) under each invoice rendered with respect to each cargo purchased during the Extension Period, or in the case of LNG required to be purchased during the Extension Period but not taken under each invoice rendered with respect to the same quantity not taken, and (b) otherwise in respect of each such cargo, plus 21% of all indemnities and additional amounts payable by any of the Buyers with respect to the Extension Period under the New 1973 Sales Contract (excluding such amounts required to be paid to Pertamina with respect to the transportation of such cargoes of LNG including, without limitation, demurrage payments and non-utilization costs), without any reduction or set-off from any such amounts; and II. in respect of any period, the aggregate amount of the Source of Debt Service payable during such period. Notwithstanding the foregoing, if the Bontang V Trustee is authorized and requested by the Producers (which authorization and request may be given pursuant to Section 1.16(b) of the Producers Agreement) to execute and deliver an agreement providing for the amendment of this definition of Source of Debt Service, and if the Tranche A Lender and the Agent on behalf of the Tranche B Lenders also execute and deliver such agreement, this definition of Source of Debt Service shall be deemed amended for all purposes of this Agreement as set forth in such agreement. "Special Disbursement Amount" shall mean an amount paid by the Bontang V Trustee pursuant to a Special Disbursement Instruction or an amount received by the Bontang V Trustee from the trustee and paying agent under any of the Other Trust Agreements which such trustee and paying agent has notified the Bontang V Trustee is a Special Disbursement Amount, as the case may be. 22 18 "Special Disbursement Instruction" shall have the meaning set forth in Section 8.5. "Special Payment Account" shall mean a trust account of the Bontang V Trustee established as a sub-account of the Debt Service Account pursuant to Section 3.2(c). "Special Payments" shall mean (i) any amounts of or with respect to taxes, increased costs arising from regulatory changes, breakage and other funding costs and losses, indemnities and any other amounts payable to any of the Lenders (other than any Affected Lenders) under Sections 2.7(b), 3.3 and 3.4(b) of the Loan Agreement and (ii) any other amounts (other than Lenders Fees and Expenses, Interest, Deferred Principal, Scheduled Principal and Mandatory Prepayments) payable to any of the Lenders (other than any Affected Lenders) under the Loan Agreement and the Notes. For avoidance of doubt, it is expressly agreed that the term "Special Payments" does not include or refer to prepayments of principal of the Advances pursuant to the Loan Agreement. "Subordinated Indebtedness" shall mean Indebtedness of the Bontang V Trustee contemplated by Section 3.1(b). "Successor" shall have the meaning set forth in Section 11.4. "Supply Agreement" shall mean each of, and "Supply Agreements" shall mean all of, the CPC Supply Agreements, the KGC Supply Agreements and the Japanese Supply Agreements. "Total" is defined in the title paragraph hereof. "Total Group" shall mean Total and Inpex, and their successors in interest. "Train G" shall have the meaning set forth in Section 1 of the Loan Agreement. "Tranche" shall mean Tranche A or Tranche B, and "Tranches" shall mean Tranche A and Tranche B. "Tranche A" shall mean all advances by the Tranche A Lender under the Loan Agreement. "Tranche A Lender" shall mean Bontang Train-G Project Finance Co., Ltd. and its successors and assigns under the Loan Agreement. 23 19 "Tranche B" shall mean all advances by the Tranche B Lenders under the Loan Agreement. "Tranche B Lenders" shall mean the banks and other financial institutions named as such in the Loan Agreement and their respective successors and assigns under the Loan Agreement. "Transporter" shall mean a Person that contracts with Pertamina to provide transportation of LNG under an LNG Sales Contract. "Trustee's Office" shall mean the office of the Bontang V Trustee, the address of which is set out in Section 13.3 or any other office of the Bontang V Trustee in the United States the address of which is notified to the Producers by the Bontang V Trustee pursuant to Section 13.3 or the office specified in an instrument delivered by the Successor pursuant to Section 11.4. "Unocal" is defined in the title paragraph hereof. "Unocal Group" shall mean Unocal and Inpex, and their successors in interest; provided, however, that Inpex shall cease to be a member of the Unocal Group on March 31, 1997. "Vico" is defined in the title paragraph hereof. "Vico Group" shall mean Vico, Virginia International Company, OPICOIL Houston, Inc., Lasmo Sanga Sanga Limited, Union Texas East Kalimantan Limited, and Universe Gas & Oil Company, Inc. and their successors in interest. ARTICLE 2 RECEIPT OF PAYMENTS WITH RESPECT TO LNG 2.1 Designation of Bontang V Trustee and Bontang V General Account. Pursuant to the relevant provisions of the Supply Agreements and the LNG Sales Contracts, Pertamina hereby designates, and each of the Contractors hereby agrees to the designation of, the Bontang V Trustee named herein, and directs the Bontang V Trustee to establish on the next Business Day following the date hereof and maintain at the Trustee's Office an account, to be designated as the "Bontang V General Account." Pertamina hereby designates the Bontang V General Account, and each of the Contractors hereby agrees to such designation of the Bontang V General Account, as the account to which the following amounts shall be paid: 24 20 (a) all amounts which become due and payable under the KGC Sales Contract for, or otherwise relating to, cargoes delivered thereunder on or after January 1, 1998; (b) all amounts which become due and payable under the CPC Sales Contract; and (c) all amounts which become due and payable under the New 1973 Sales Contract for, or otherwise relating to, cargoes delivered thereunder during the Extension Period. For purpose of the preceding sentence a cargo shall be deemed delivered when title thereto passes to the relevant Buyer under the terms of the relevant LNG Sales Contract. Without limiting the foregoing, and notwithstanding any other provision herein to the contrary, the parties hereto acknowledge and agree that (x) all amounts which become due and payable by the Japanese Buyers under the 1973 Sales Contract with respect to cargoes required to be delivered under such contract through and including December 31, 1999 shall not constitute Bontang V Trust Funds, and if received by the Bontang V Trustee shall be paid over to the Bontang I Trustee, and (y) all amounts payable by the Buyer under the KGC Sales Contract with respect to cargoes delivered thereunder through and including December 31, 1997 shall not constitute Bontang V Trust Funds, and if received by the Bontang V Trustee shall be paid over to the Bontang Excess Sales Trustee (all such amounts described in clauses (x) and (y) are herein called "Excluded Amounts"). 2.2 Bontang V Trust Funds. All such amounts that shall have been received in the Bontang V General Account pursuant to Section 2.1 (other than Excluded Amounts) and any other amounts the Bontang V Trustee may receive under the terms of this Agreement (together with any securities acquired by the Bontang V Trustee pursuant to Article 10 and all interest thereon) are herein referred to as the "Bontang V Trust Funds." The respective Sharing Percentages of each Producer of all Bontang V Trust Funds shall be credited to the respective Bontang V Trust Funds Accounts of each Producer, to be held in trust, however, for the benefit of those having a right, to the extent provided in this Agreement, to receive disbursements and distributions hereunder. Immediately upon the Bontang V Trustee's receipt of any funds unambiguously representing amounts payable to the Bontang V Trustee with respect to the LNG Sales Contracts (other than Excluded Amounts), such funds shall be impressed with the trust created hereby and become a part of the Bontang V Trust Funds and shall be deposited in the Bontang V General Account. 25 21 2.3 Allocation of Amounts Received. All amounts received by the Bontang V Trustee pursuant to Section 2.1 and designated as representing amounts payable for LNG delivered, or for LNG required to be purchased, but not taken, under the LNG Sales Contracts, all amounts paid on account of interest due by reason of the late payment of invoices, and all demurrage payments by the Buyers, shall be deemed to be attributable to sales under the LNG Sales Contracts. In the event the Bontang V Trustee receives any amount from any Buyer which amount is not designated for the Bontang V General Account or for any accounts established or to be established under the Other Trust Agreements, it shall first contact the remitting party in order to determine the proper designation for the amounts received, and shall solicit and, if possible, obtain from the remitting party such documentation as the Bontang V Trustee deems appropriate as evidence of such designation. In the event the remitting party is unable to provide appropriate evidence of such designation, the Bontang V Trustee shall notify the Producers of the amount received, the date of receipt and any other information relevant to such amount known to the Bontang V Trustee. The Bontang V Trustee shall thereupon request instructions as to the proper allocation of the amount received and shall allocate such amounts between the Bontang V General Account and any accounts established under the Other Trust Agreements in accordance with instructions given jointly by the Producers. Pertamina shall provide written notice to the Bontang V Trustee identifying and itemizing in reasonable detail the portions of the amounts received in the Bontang V General Account that do and do not constitute Source of Debt Service. Until such notice has been delivered, all amounts received in the Bontang V General Account shall be retained therein. 2.4 Proceeds of Cargo Insurance. The Producers hereby agree that all proceeds from cargo insurance policies covering LNG transported for sale under the LNG Sales Contracts (other than Excluded Amounts) shall be paid directly to the Bontang V Trustee. All such amounts received by the Bontang V Trustee and designated by the insurer as representing proceeds from cargo insurance policies covering LNG transported for sale under the LNG Sales Contracts on an ex-ship basis shall become a part of the Bontang V Trust Funds and shall be deposited in the Bontang V General Account. In the event the Bontang V Trustee receives any amounts from insurers that are not designated as to origin, the procedures specified in Section 2.3 shall apply. 2.5 Payments Under New 1973 Transportation Arrangements. Pertamina shall provide instructions that all amounts coming due to Pertamina under the New 1973 Transportation Arrangements shall be paid directly to the Bontang V Trustee. All such amounts received by the 26 22 Bontang V Trustee shall become a part of the Bontang V Trust Funds and shall be deposited in the Bontang V General Account. Upon receipt of any such amount that has not been designated as to origin, the procedures specified in Section 2.3 shall apply. ARTICLE 3 POWER TO BORROW AND ENTER INTO INTEREST RATE SWAPS 3.1 Enumeration of Powers. (a) In addition to its other powers hereunder, the Bontang V Trustee shall have the power to borrow money from time to time from the Lenders upon the terms and conditions set forth below: (i) Upon its receipt of notice from the Producers that they have determined that a credit facility for borrowing by the Bontang V Trustee to pay for a portion of the capital costs incurred, or to be incurred, in connection with the construction or financing of Train G is desirable, the Bontang V Trustee, at the direction of the Producers, shall undertake to obtain such credit facility, which shall be evidenced by the Loan Agreement, the Notes and the Letter Agreement. (ii) The Bontang V Trustee shall have the power to enter into or modify the Loan Agreement, the Notes and the Letter Agreement upon its receipt of notice from Pertamina and each of the Contractors that they have approved the form and terms of such agreements or modifications and that they authorize and request the Bontang V Trustee to enter into such agreements or modifications. The Bontang V Trustee shall have the power to obtain and repay Indebtedness and to pay other amounts and to perform other obligations under the Loan Agreement, the Notes and the Letter Agreement. Notwithstanding the provisions of Section 13.3, no representatives of the Contractor Groups, any Contractor or any other individual or entity shall have authority to give any approval under this Section 3.1(a) for any Contractor other than itself, unless such Contractor shall give notice to the Bontang V Trustee that it has appointed such representative or other individual or entity to give such approval. (iii) The Loan Agreement, the Notes and the Letter Agreement shall contain provisions acceptable to the Bontang V Trustee to the effect that no recourse may be had nor any claim thereunder made against BankAmerica International in its individual capacity other than for 27 23 breach of a representation or warranty made in its individual capacity or for gross negligence or willful misconduct. (b) In addition to its other powers hereunder, the Bontang V Trustee shall have the power at any time to incur Indebtedness that is payable out of amounts of the Source of Debt Service only after (i) the Bontang V Trustee shall have accumulated amounts in the Debt Service Account and the Reserve Account during each Interest Period required to be accumulated therein pursuant to Section 3.2 or 3.3(d), as applicable, and (ii) any amounts required to be deposited in the Debt Coverage Reserve Account and paid to the Lenders therefrom under Sections 3.2 and 3.3, as applicable, have been so deposited and paid (such Indebtedness, "Subordinated Indebtedness"), as follows. Upon its receipt of notice from the Producers that they have determined that Subordinated Indebtedness in the form of a credit facility for borrowing by the Bontang V Trustee to pay for a portion of the capital costs incurred, or to be incurred, in connection with a Financed Capital Project is desirable, the Bontang V Trustee, at the direction of the Producers, shall undertake to obtain and enter into one or more appropriate agreements relating to such Subordinated Indebtedness; provided, however, that the Bontang V Trustee shall not enter into any such agreement or amendment prior to (i) receiving written notice from the Tranche A Lender and the Agent that the Majority Lenders have approved such agreement in form and substance in accordance with Section 6.4 of the Loan Agreement, and (ii) entering into an appropriate amendment to this Agreement to make provision for making payments under the agreements relating to such Subordinated Indebtedness to the extent provided in the first sentence of this Section 3.1(b), which amendment shall have been approved in writing as to form and substance by the Majority Lenders. (c) In addition to its other powers hereunder, the Bontang V Trustee shall have the power to incur Indebtedness (other than Subordinated Indebtedness) in respect of interest rate swap arrangements of the Bontang V Trustee entered into solely for the purpose of exchanging floating interest rate obligations of the Bontang V Trustee under the Loan Agreement into fixed interest rate obligations if such Indebtedness is only payable out of Source of Debt Service and is pari passu in right of payment and does not benefit from any Encumbrance other than equally and ratably with, or subordinate to, the Indebtedness owed to the Lenders under the Loan Agreement, the Notes and the Letter Agreement ("Pari Passu Swap Indebtedness"). Upon its receipt of notice from the Producers that they have determined that such Pari Passu Swap Indebtedness is desirable, the Bontang V Trustee, at the direction of the Producers, shall undertake to obtain and enter into one or more appropriate agreements relating to such Pari Passu Swap Indebted- 28 24 ness; provided, however, that the Bontang V Trustee shall not enter into any such agreement prior to (i) receiving written notice from the Tranche A Lender and the Agent that the Majority Lenders have approved such agreement in form and substance in accordance with Section 6.4 of the Loan Agreement, and (ii) entering into an amendment to this Agreement making provision for making payments under such agreement on a pari passu basis out of the Source of Debt Service with the payments to be made to the Lenders under the Loan Agreement, which amendment shall have been approved in writing as to form and substance by the Majority Lenders. (d) The provisions contained in the last sentence of Section 3.1(a)(ii) and in Section 3.1(a)(iii) relating to the Loan Agreement shall apply equally to any agreements relating to Subordinated Indebtedness or Pari Passu Swap Indebtedness to be entered into by the Bontang V Trustee pursuant to Section 3.1(b) or 3.1(c). 3.2 Accumulation of Debt Service. (a) The Loan Agreement shall provide that all payment dates for payment of principal and interest thereunder shall be uniform dates within each calendar quarter, subject to any option provided for in the Loan Agreement permitting the borrower thereunder to elect Interest Periods for the calculation of interest which are six months in length and which end on the same calendar quarter date (each such date ending a three-month or six-month Interest Period for payment of principal or interest, a "Capital Payment Date"). (b) (i) The Loan Agreement shall provide for the Bontang V Trustee to receive, at the time of the initial borrowing and each subsequent borrowing thereunder in each case in respect of the Quarterly Period in which such borrowing occurs and on or about the first day of each Quarterly Period thereafter, a notice from each of the Tranche A Lender, with respect to Tranche A, and the Agent, with respect to Tranche B, of the amounts of Scheduled Principal, Deferred Principal, regularly scheduled Interest and regularly scheduled Lenders Fees and Expenses payable with respect to the relevant Tranche on the Capital Payment Date occurring at the end of such Quarterly Period, designating the Tranche to which such amounts relate. (ii) The Loan Agreement shall provide for the Bontang V Trustee to receive notice from the Tranche A Lender, with respect to Tranche A, and the Agent, with respect to Tranche B, as the case may be, of other amounts payable under the Loan Agreement, the Notes and the Letter Agreement as the same shall become due and payable, designating the Tranche to which such amounts relate and whether such amounts constitute principal, Lenders Fees and 29 25 Expenses, Interest, Special Payments or Mandatory Prepayments. (iii) The Loan Agreement shall provide for the Bontang V Trustee to receive on or about December 31, 1997 and on or about the first day of each Quarterly Period thereafter and on or following the date of delivery of each Notice of Borrowing delivered thereafter, a notice from each of the Tranche A Lender, with respect to Tranche A, and the Agent, with respect to Tranche B, of the sum (such sum, the "Anticipated Loan Amounts") of Scheduled Principal and Deferred Principal to be payable to the Lenders (other than Affected Lenders) on each of the two Capital Payment Dates next succeeding the Capital Payment Date occurring at the end of such Quarterly Period plus Interest to accrue during the two Quarterly Periods next succeeding such Quarterly Period plus Lenders Fees and Expenses reasonably anticipated to be payable during such next two Quarterly Periods; provided, however, that during the Availability Period, such sum shall be equal to (and the phrase Anticipated Loan Amounts shall refer to) the Scheduled Principal and Deferred Principal to become due to the Lenders (other than Affected Lenders) with respect to the first two Maturity Dates plus Interest to be due on such Maturity Dates plus Lenders Fees and Expenses reasonably anticipated to be due on such Maturity Dates. (iv) The Bontang V Trustee, without any action or approval being required of the Producers, shall be entitled to rely conclusively on each such statement in the absence of manifest error. (c) On or before the Effective Date, the Bontang V Trustee shall open in its own name, as Bontang V Trustee, at the Trustee's Office, two sub-accounts of the Bontang V General Account, one designated as the "Debt Service Account" (which term shall include all sub-accounts thereof), and the other designated as the "Reserve Account" (which term shall include all sub-accounts thereof). On or before the Effective Date, the Bontang V Trustee shall also open in its own name at the Trustee's Office (i) two separate sub-accounts of the Debt Service Account, one for each Tranche under the Loan Agreement (each such sub-account, a "Loan Account"), (ii) two other separate sub- accounts of the Debt Service Account, one for each Tranche under the Loan Agreement (each such sub-account, a "Special Payment Account"), (iii) a separate sub-account of the Debt Service Account (such sub-account to be designated as the "Mandatory Prepayment Account"), and (iv) two separate sub-accounts of the Reserve Account (such sub-accounts to be designated as the "Regular Reserve Account" and the "Debt Coverage Reserve Account," respectively), all such sub-accounts to be used for the receipt, administration and 30 26 payment of principal, interest and other amounts due or to become due under the Loan Agreement. (d) If the Bontang V Trustee, as borrower under the Loan Agreement, elects to borrow amounts thereunder, as permitted thereby, for the purpose of paying any Lenders Fees and Expenses due thereunder as specified in all notices received by the Bontang V Trustee of the type referred to in Sections 3.2(b)(i) and (ii), without duplication, the amounts borrowed for such purpose shall be immediately deposited into the Loan Accounts pro rata in accordance with the amounts of such Lenders Fees and Expenses so borrowed payable with respect to Tranche A and Tranche B, respectively. (e) If the Bontang V Trustee, as borrower under the Loan Agreement, elects to borrow amounts thereunder, as permitted thereby, for the purpose of paying any Interest due thereunder as specified in all notices received by the Bontang V Trustee of the type referred to in Sections 3.2(b)(i) and (ii), without duplication, the amounts borrowed for such purpose shall be immediately deposited into the Loan Accounts pro rata in accordance with the amounts of such Interest so borrowed payable with respect to Tranche A and Tranche B, respectively. (f) If the Bontang V Trustee, as borrower under the Loan Agreement, elects to borrow amounts thereunder, as permitted thereby, for the purpose of paying any Special Payments due thereunder as specified in all notices received by the Bontang V Trustee of the type referred to in Section 3.2(b)(ii), without duplication, the amounts borrowed for such purpose shall be immediately deposited into the Special Payment Accounts pro rata in accordance with the amounts of such Special Payments so borrowed payable with respect to Tranche A and Tranche B, respectively. (g) (i) If the Bontang V Trustee, as borrower under the Loan Agreement, elects to borrow amounts thereunder, solely as permitted thereby, for the purpose of funding the Regular Reserve Account, the amounts borrowed for such purpose shall be immediately deposited into the Regular Reserve Account. (ii) If the Bontang V Trustee, as borrower under the Loan Agreement, elects to borrow amounts thereunder, as permitted thereby, for the purpose of reimbursing the Producers for amounts paid by them to a Selected Qualified Bank retained pursuant to Section 6.6 of the Loan Agreement to specify the Assumed Interest Rate or the assumptions necessary for calculating the Debt Coverage Ratio, the amounts borrowed for such purpose shall be immediately deposited into the Bontang V Payment Account. 31 27 (h) Subject to all payments (if any) required by Section 3.3(d) having first been made, during the period beginning on January 1, 1998 and ending on the last day of the Availability Period, the Bontang V Trustee shall, upon receipt, promptly pay over to the Reserve Account or the Mandatory Prepayment Account, as applicable, for deposit in the appropriate sub-account (or, in the case of clause (iv) below, to the Bontang V Payment Account) or payment of all amounts of the Source of Debt Service received in the Bontang V General Account in the following amounts and in the following order of priority: (i) First, to the Regular Reserve Account until the aggregate amount accumulated therein shall be sufficient to pay the Anticipated Loan Amounts at such time as specified in notices received by the Bontang V Trustee of the type referred to in Section 3.2(b)(iii), without duplication; (ii) Second, prior to the receipt by the Bontang V Trustee of notice from the Tranche A Lender and the Agent that the conditions precedent contained in Section 5.2 of the Loan Agreement have been satisfied, to the Regular Reserve Account; (iii) Third, to the Mandatory Prepayment Account, until the aggregate of all amounts of Mandatory Prepayments due and payable, as specified in any applicable Notices of Mandatory Prepayment and to the extent not previously paid pursuant to Section 3.3(c), have been paid in full; and (iv) Fourth, following receipt by the Bontang V Trustee of notice from the Tranche A Lender and the Agent that the conditions precedent contained in Section 5.2 of the Loan Agreement have been satisfied, to the Bontang V Payment Account as provided in Section 4.2. (i) Subject to all payments (if any) required by Section 3.3(d) having first been made, commencing on the first day after the end of the Availability Period under the Loan Agreement, and for each Quarterly Period thereafter under the Loan Agreement, and continuing until the date of payment of all amounts due thereunder, the Bontang V Trustee shall, upon receipt, promptly pay over to the Debt Service Account with respect to each such Quarterly Period for deposit in the appropriate sub-account all amounts of the Source of Debt Service received in the Bontang V General Account in the following amounts and in the following order of priority: (i) First, to the Loan Accounts, pro rata according to the amounts, if any, of Lenders Fees and Expenses due and payable by the Bontang V Trustee on the 32 28 Capital Payment Date occurring at the end of such Quarterly Period (and on any prior Capital Payment Date to the extent not previously paid), as specified in all notices received by the Bontang V Trustee of the type referred to in Sections 3.2(b)(i) and (ii), without duplication, until the aggregate amount accumulated in the Loan Accounts shall be sufficient to pay the aggregate of all such amounts of Lenders Fees and Expenses; (ii) Second, to the Loan Accounts, pro rata according to the amounts of Interest due and payable by the Bontang V Trustee on the Capital Payment Date occurring at the end of such Quarterly Period (and on any prior Capital Payment Date to the extent not previously paid), as specified in all notices received by the Bontang V Trustee of the type referred to in Sections 3.2(b)(i) and (ii), without duplication, until the aggregate amount accumulated in the Loan Accounts (in excess of the amounts referred to in clause (i) above) shall be sufficient to pay the aggregate of all such amounts of Interest; provided, however, that with respect to any six-month Interest Period, the amount of the Source of Debt Service to be paid over to the Loan Account for Tranche B in respect of all Interest due on the Capital Payment Date occurring at the end of such Interest Period shall, in the first three months of such Interest Period, be an amount equal to one half of all such Interest due, and in the second three months of such Interest Period, be an amount equal to the other half of all such Interest due; (iii) Third, to the Special Payment Accounts, pro rata according to the amounts of Special Payments, if any, due and payable by the Bontang V Trustee on the Capital Payment Date occurring at the end of such Quarterly Period (and on any prior Capital Payment Date to the extent not previously paid), as specified in all notices received by the Bontang V Trustee of the type referred to in Section 3.2(b)(ii), without duplication, until the aggregate amount accumulated in the Special Payment Accounts shall be sufficient to pay the aggregate of all such amounts of Special Payments; (iv) Fourth, to the Loan Accounts, pro rata according to the amounts, if any, of Deferred Principal due and payable by the Bontang V Trustee on the Capital Payment Date occurring at the end of such Quarterly Period (and on any prior Capital Payment Date to the extent not previously paid), as specified in all notices received by the Bontang V Trustee of the type referred to in Section 3.2(b)(i), without duplication, until the aggregate amount accumulated in the Loan Accounts (in excess of the amounts referred to in clauses (i) and (ii) above) shall be sufficient to pay the aggregate of all such amounts of Deferred Principal; and 33 29 (v) Fifth, to the Loan Accounts, pro rata according to the amounts of Scheduled Principal due and payable by the Bontang V Trustee on the Capital Payment Date occurring at the end of such Quarterly Period (and on any prior Capital Payment Date to the extent not previously paid), as specified in all notices received by the Bontang V Trustee of the type referred to in Sections 3.2(b)(i) and (ii), without duplication, until the aggregate amount accumulated in the Loan Accounts (in excess of the amounts referred to in clauses (i), (ii) and (iv) above) shall be sufficient to pay the aggregate of all such amounts of Scheduled Principal. (j) Subject to all payments (if any) required by Section 3.3(d) having first been made, for each Quarterly Period referred to in Section 3.2(i), after all amounts of Source of Debt Service required to be paid into the Debt Service Account pursuant to Section 3.2(i) with respect to such Quarterly Period have been so paid, the Bontang V Trustee shall, upon receipt, promptly pay over to the Reserve Account or the Mandatory Prepayment Account, as applicable, with respect to each such Quarterly Period for deposit in the appropriate sub-account (or, in the case of clause (v) below, to the Bontang V Payment Account) or payment of all additional amounts of the Source of Debt Service received in the Bontang V General Account in the following amounts and in the following order of priority: (i) First, to the Regular Reserve Account until the aggregate amount accumulated therein shall be sufficient to pay the Anticipated Loan Amounts specified for such Quarterly Period in all notices received by the Bontang V Trustee of the type referred to in Section 3.2(b)(iii), without duplication; (ii) Second, prior to receipt by the Bontang V Trustee of notice from the Tranche A Lender and the Agent that the conditions precedent contained in Section 5.2 of the Loan Agreement have been satisfied, subject to Sections 3.2(j)(iii) and (iv), to the Regular Reserve Account; (iii) Third, if the certificate delivered to the Tranche A Lender and the Agent pursuant to Section 6.1(b) of the Loan Agreement on or prior to the first day of such Quarterly Period indicates that the Debt Coverage Ratio is less than 130%, to the Debt Coverage Reserve Account; (iv) Fourth, to the Mandatory Prepayment Account, until the aggregate of all amounts of Mandatory Prepayments due and payable, as specified in any applicable Notices of Mandatory Prepayment and to the extent not pre- 34 30 viously paid pursuant to Section 3.3(c), have been paid in full; and (v) Fifth, following receipt by the Bontang V Trustee of notice from the Tranche A Lender and the Agent that the conditions precedent contained in Section 5.2 of the Loan Agreement have been satisfied, to the Bontang V Payment Account as provided in Section 4.2. (k) Subject to the requirement that all payments (if any) required by Sections 3.3(c) and (d) shall in all events have first been made, if the Producers have, prior to the Bontang V Trustee having paid all or part of any Special Payments, advised the Bontang V Trustee, in writing, to contest payment of any amounts of Special Payments, such contested amounts of the Source of Debt Service accumulated in the Special Payment Accounts shall remain on deposit therein until such time as Pertamina and the Contractors have approved the use thereof for payment of such amounts or, if earlier, such time as the Bontang V Trustee may be legally compelled to pay such amounts to the Lenders through the exercise by such Lenders of the legal or equitable remedies available to them. 3.3 Payment of Debt Service; Choices; Delivery of Information and Certificates. (a) Subject to all payments (if any) required by Sections 3.3(b)(ii), 3.3(c) and (d) having first been made, on each Capital Payment Date, the Bontang V Trustee shall pay the following amounts in the following order of priority: (i) First, all amounts of Lenders Fees and Expenses then due and payable, as specified in all notices received by the Bontang V Trustee of the type referred to in Sections 3.2(b)(i) and (ii), without duplication, shall be paid to the Tranche A Lender and to the Agent for the account of the Tranche B Lenders, pro rata in accordance with the portions of such amounts payable with respect to Tranche A and Tranche B, respectively, to the extent of and out of amounts then held in the Loan Accounts; provided, however, that all amounts of Lenders Fees and Expenses due and payable under Section 10.6(a) of the Loan Agreement, as specified in all notices received by the Bontang V Trustee of the type referred to in Sections 3.2(b)(i) and (ii), without duplication, shall be paid to the Tranche A Lender and to the Agent for the account of the Tranche B Lenders, pro rata in accordance with the portions of such amounts payable with respect to Tranche A and Tranche B, respectively, on the earlier of (x) the date of the first borrowing by the Bontang V Trustee under the Loan Agreement, (y) the thirtieth day following the Effective Date under the Loan Agreement and (z) the sixtieth (60th) day following the 35 31 date of execution and delivery of the Loan Agreement, in each case to the extent of and out of amounts then held in the Loan Accounts; (ii) Second, all amounts of Interest then due and payable, as specified in all notices received by the Bontang V Trustee of the type referred to in Sections 3.2(b)(i) and (ii), without duplication, shall be paid to the Tranche A Lender and to the Agent for the account of the Tranche B Lenders pro rata in accordance with the portions of such amounts payable with respect to Tranche A and Tranche B, respectively, to the extent of and out of amounts then held in the Loan Accounts; provided, however, that any amounts held in the Loan Account for Tranche B and (1) accrued in respect of any six-month Interest Period in accordance with the proviso to Section 3.2(i)(ii), or (2) deposited as provided in Section 3.5(c)(ii)(1), shall be held and paid as follows: (x) during the three-month period commencing on and including the first day of such Interest Period and ending on but not including the Capital Payment Date approximately three months following such first day, any amounts deposited and held in such Loan Account in respect of Interest for such three-month period shall be held for the pro rata account of the Tranche A Lender and the Tranche B Lenders; (y) following the three-month period referred to in the preceding clause (x), the amounts referred to in such clause (x), if they continue to be so held in the Loan Account for the Tranche B Lenders, shall be held for the sole benefit of the Tranche B Lenders in respect of Interest due to them at the end of such Interest Period; and (z) during the three-month period commencing on and including the Capital Payment Date occurring approximately three months following the beginning of such Interest Period and ending on but not including the Capital Payment Date ending such Interest Period, any amounts deposited and held in such Loan Account in respect of Interest for such three-month period shall be held for the pro rata account of the Tranche A Lender and the Tranche B Lenders; (iii) Third, subject to Section 3.2(k), all amounts of Special Payments then due and payable, as specified in all notices received by the Bontang V Trustee of the type referred to in Section 3.2(b)(ii), without duplication, shall be paid to the Tranche A Lender and to the Agent for the account of the Tranche B Lenders, pro rata in accordance with the portions of such amounts payable with respect to Tranche A and Tranche B, respectively, to the extent of and out of amounts then held in the Special Payment Accounts; (iv) Fourth, all amounts of Deferred Principal then due and payable, as specified in all notices received by the Bontang V Trustee referred to in Sec- 36 32 tion 3.2(b)(i), without duplication, shall be paid to the Tranche A Lender and to the Agent for the account of the Tranche B Lenders, pro rata in accordance with the portions of such amounts payable with respect to Tranche A and Tranche B, respectively, to the extent of and out of amounts then held in the Loan Accounts; (v) Fifth, all amounts of Scheduled Principal then due and payable, as specified in all notices received by the Bontang V Trustee of the type referred to in Section 3.2(b)(i), without duplication, shall be paid to the Tranche A Lender and to the Agent for the account of the Tranche B Lenders, pro rata in accordance with the portions of such amounts payable with respect to Tranche A and Tranche B, respectively, to the extent of and out of amounts then held in the Loan Accounts; (vi) Sixth, all amounts necessary to ensure that the aggregate amount accumulated in the Regular Reserve shall be sufficient to pay the Anticipated Loan Amounts specified for the Quarterly Period commencing on such Capital Payment Date in notices received by the Bontang V Trustee of the type referred to in Section 3.2(b)(iii), shall be paid from the Debt Service Account to the Regular Reserve Account; (vii) Seventh, if the certificate delivered to the Tranche A Lender and the Agent pursuant to Section 6.1(b) of the Loan Agreement on or prior to the first day of such Quarterly Period indicates that the Debt Coverage Ratio for the Quarterly Period is less than 130%, all amounts required for application as provided in Section 3.3(b)(ii) shall be paid from the Debt Service Account to the Debt Coverage Reserve Account; and (viii) Eighth, any amount held in the Debt Service Account after all payments required by Sections 3.3(a)(i) through (vii), inclusive, have been made, shall be paid to the Bontang V Payment Account as provided in Section 4.2. (b) (i) Subject to all payments (if any) required by Sections 3.3(c) and (d) having first been made, to the extent that on any Capital Payment Date (or, in the case of clause (v) below, on the date of receipt by the Bontang V Trustee of the notice required therein) the amounts held in any sub-account of the Debt Service Account are not sufficient to pay in full all amounts payable under the Loan Agreement, the Notes and the Letter Agreement on such Capital Payment Date that are to be paid out of amounts then held in such sub-account, any amounts then held in the Regular Reserve Account shall be applied to make such payments in the order of priority set forth in Section 3.3(a)(i) through (v), inclusive; provided, however, 37 33 that if, on any Capital Payment Date occurring during the Availability Period, there are any undrawn amounts of the Commitments and such amounts are available to be borrowed under the Loan Agreement, then the Bontang V Trustee may apply amounts held in the Regular Reserve Account to make payment to the Lenders of the Interest and Lenders Fees and Expenses due and payable on such Capital Payment Date solely (1) upon receipt of notice from the Producers addressed to the Tranche A Lender, the Agent and the Bontang V Trustee and (2) in an amount by which the aggregate of such Interest and Lenders Fees and Expenses exceeds the aggregate amount of the Commitments available to be borrowed on such date. (ii) Subject to all payments (if any) required by Section 3.3(d) having first been made, if on any Capital Payment Date there shall be amounts held in the Debt Coverage Reserve Account, all such amounts shall be paid to the Tranche A Lender and the Agent for the account of the Tranche B Lenders as a prepayment of principal of the Notes in the manner prescribed in the Loan Agreement for the making of prepayments from the Debt Coverage Reserve Account. (iii) Subject to all payments (if any) required by Sections 3.3(b)(i), 3.3(c) and 3.3(d) having first been made, if at any time during the Availability Period the Bontang V Trustee shall receive a notice from the Producers given pursuant to Section 1.13(b) of the Producers Agreement, the Bontang V Trustee shall transfer to the Bontang V Payment Account, from amounts then held in the Regular Reserve Account, the amount specified in such notice, provided that the aggregate of the amounts permitted to be so transferred shall not exceed the aggregate amount borrowed pursuant to Section 2.2(b)(ii) of the Loan Agreement. (iv) Subject to all payments (if any) required by Sections 3.3(b)(i), 3.3(b)(iii), 3.3(c) and 3.3(d) having first been made, if, following the end of the Availability Period, the Bontang V Trustee shall receive a notice from Pertamina given pursuant to Section 1.13(c) of the Producers Agreement, then the Bontang V Trustee shall transfer to the Bontang V Payment Account, from amounts then held in the Regular Reserve Account, the amount specified in such notice. (v) Subject to all payments (if any) required by Sections 3.3(b)(i) through (iv), 3.3(b)(vi), 3.3(c) and 3.3(d) having first been made, following receipt by the Bontang V Trustee of notice that the conditions precedent contained in Section 5.2 of the Loan Agreement have been satisfied, the amount, if any, by which the amounts then held in the Regular Reserve Account exceed the Anticipated Loan Amounts required to be held in the Regular 38 34 Reserve Account pursuant to Section 3.2, shall be paid over to the Bontang V Payment Account as provided in Section 4.2. (vi) Subject to all payments (if any) required by Sections 3.3(b)(i), 3.3(c) and 3.3(d) having first been made, if, on any Capital Payment Date, following payment in full of all amounts then due and payable on such Capital Payment Date to the Lenders under the Loan Agreement, the Notes and the Letter Agreement, there remains in the Regular Reserve Account any amount in excess of the Anticipated Loan Amounts then required to be held in the Regular Reserve Account pursuant to Section 3.2, such excess amount shall (x) at any time the certificate delivered to the Tranche A Lender and the Agent pursuant to Section 6.1(b) of the Loan Agreement indicates that the Debt Coverage Ratio for the Quarterly Period is less than 130%, be paid to the Debt Coverage Reserve Account for application as provided in Section 3.3(b)(ii) or (y) if the circumstances set forth in clause (x) do not apply, be paid over to the Bontang V Payment Account as provided in Section 4.2. (c) (i) The Loan Agreement provides for Mandatory Prepayments to be made with respect to the Notes of one or more of the Lenders in circumstances involving illegality with respect thereto. Notwithstanding Sections 3.3(a) and (b)(i), but subject to all payments (if any) required by Sections 3.3(b)(ii) and 3.3(d) having first been made, upon receipt by the Bontang V Trustee of any notice pursuant to Section 3.2(b)(ii) that any Mandatory Prepayments have become due and payable to one or more Affected Lenders (a "Notice of Mandatory Prepayment"), the Bontang V Trustee, without any action or approval being required of Pertamina or the Contractors, shall: (1) Immediately pay to the Tranche A Lender and the Agent for the account of such Affected Lenders, to the extent necessary to pay the entire amount of the Mandatory Prepayments payable to such Affected Lenders in full as shown on such Notice of Mandatory Prepayment, the Loan Percentage for such Affected Lenders of all amounts then held in the Debt Service Account and the Regular Reserve Account; and (2) Immediately upon deposit of any amounts in the Mandatory Prepayment Account pursuant to Section 3.2(j) or otherwise, pay all such amounts to the Tranche A Lender and the Agent for the account of such Affected Lenders, to the extent the amount of such Mandatory Prepayments shall not have been previously paid. (ii) All amounts paid to the Tranche A Lender and the Agent for the account of the Affected Lenders pursuant to Section 3.3(c)(i) shall be reflected in the 39 35 records of the Bontang V Trustee as having been applied in the following order of priority: (1) First, to the payment of all Lenders Fees and Expenses due and payable at the time of payment to the Affected Lenders as specified in the applicable Notices of Mandatory Prepayment; (2) Second, to the payment of all Interest due and payable at the time of payment to the Affected Lenders as specified in the applicable Notices of Mandatory Prepayment; (3) Third, to the payment of all principal then due and payable to the Affected Lenders as specified in the applicable Notices of Mandatory Prepayment; and (4) Fourth, to the payment of all Special Payments due and payable at the time of payment to the Affected Lenders as specified in the applicable Notices of Mandatory Prepayment. (d) The Loan Agreement may provide for the acceleration of the Tranches outstanding and payable thereunder. Notwithstanding Sections 3.3(a), (b) and (c), upon receipt by the Bontang V Trustee of any notice of acceleration (a "Notice of Acceleration") from the Tranche A Lender and the Agent, the Bontang V Trustee, without any action or approval being required of the Producers, shall: (i) Immediately apply all amounts then held in all sub-accounts of the Debt Service Account and the Reserve Account to the payment of the following amounts in the following order of priority, to the extent not previously paid: (1) First, all amounts referred to in clause (y) of the proviso to Section 3.3(a)(ii) shall be paid to the Tranche B Lenders in respect of Interest for the period referred to in such clause (y); (2) Second, all amounts of Lenders Fees and Expenses due and payable at the time of payment, as specified in the Notice of Acceleration or in any notices received by the Bontang V Trustee of the type referred to in Section 3.2(b)(ii), without duplication, shall be paid to the Tranche A Lender and to the Agent for the account of the Tranche B Lenders, pro rata in accordance with the portions of such amounts payable with respect to Tranche A and Tranche B, respectively; 40 36 (3) Third, all amounts of Interest due and payable at the time of payment, as specified in the Notice of Acceleration or in any notices received by the Bontang V Trustee of the type referred to in Section 3.2(b)(ii), without duplication, shall be paid to the Tranche A Lender and to the Agent for the account of the Tranche B Lenders, pro rata in accordance with the portions of such amounts payable with respect to Tranche A and Tranche B, respectively; (4) Fourth, all amounts of principal then due and payable under the Loan Agreement and the Notes, as specified in the Notice of Acceleration or in any notices received by the Bontang V Trustee of the type referred to in Sections 3.2(b)(i) and (ii), without duplication, shall be paid to the Tranche A Lender and to the Agent for the account of the Tranche B Lenders, pro rata in accordance with the portions of such amounts payable with respect to Tranche A and Tranche B, respectively; and (5) Fifth, all amounts of Special Payments due and payable at the time of payment, as specified in the Notice of Acceleration or in any notices received by the Bontang V Trustee of the type referred to in Section 3.2(b)(ii), without duplication, shall be paid to the Tranche A Lender and to the Agent for the account of the Tranche B Lenders, pro rata in accordance with the portions of such amounts payable with respect to Tranche A and Tranche B, respectively; (ii) Promptly upon receipt pay over to the Debt Service Account all amounts of Source of Debt Service received in the Bontang V General Account following receipt of the Notice of Acceleration; and (iii) Immediately upon deposit of any amounts in the Debt Service Account pursuant to Section 3.3(d)(ii), make the payments referred to in Section 3.3(d)(i), to the extent not previously paid. (e) The Loan Agreement may provide for the exercise of choices or taking or refraining from taking any action by the Bontang V Trustee as to certain matters, including, but not limited to, length of Interest Period, acceptance of alternate interest rates, and optional prepayment of loans. If the exercise of such a choice or the taking of any other action with respect thereto is required of or permitted by the Bontang V Trustee pursuant to the terms of such Loan Agreement which is not otherwise specifically provided for in this Article 3, the Bontang V Trustee shall take no action with respect thereto except such action as it has been specifically authorized and directed to take, in writing, by the Producers. 41 37 (f) The Loan Agreement may provide for the delivery of information and certificates to the Lenders. To the extent the information to be furnished is produced by the Bontang V Trustee in the performance of its duties under this Agreement, the Bontang V Trustee shall supply such information and certificates to the Lenders as and when required, without any action being required on the part of the Producers. Otherwise, the Bontang V Trustee, as between itself and the Producers, shall have no obligation to provide such information and certificates unless and until such time as such information and certificates have been provided to the Bontang V Trustee by the Producers, which, together with information produced by the Bontang V Trustee in the performance of its duties hereunder, will enable the Bontang V Trustee to provide to such Lenders the information and certificates required under the Loan Agreement. (g) In furtherance of the foregoing provisions of this Section 3.3, the Bontang V Trustee shall provide to the Producers a copy of each notice and declaration received by it from the Lenders under the Loan Agreement promptly after receipt thereof by the Bontang V Trustee. (h) All notices, approvals, instructions, and other communications to be provided by the Producers to the Bontang V Trustee pursuant to this Section 3.3 shall be given or made as provided in Section 13.3. (i) The Bontang V Trustee shall promptly give notice to the Allocation Trustees (as defined in Section 12.1) of (1) each payment into the Debt Service Account or Reserve Account made by the Bontang V Trustee; (2) each payment of Debt Service of which the Bontang V Trustee has been notified made by a Producer pursuant to the Producers Agreement; (3) each transfer to the Bontang V Payment Account of funds in the Regular Reserve Account pursuant to Section 4.2; (4) each distribution of funds in the Debt Service Account and Reserve Account pursuant to Section 3.3(k); (5) each receipt of amounts from the Disbursement Trustee to which the Producers are entitled pursuant to Section 3.5(c); and 42 38 (6) the portion of each such payment of Debt Service, whether made by the Bontang V Trustee or a Producer, borne by each Producer. Solely for the purposes of this Section 3.3(i), the portion of each such payment of Debt Service "borne by such Producer" shall be the portion of each such payment under (1) above (other than payments made from Borrowed Amounts) which is charged to such Producer's account pursuant to Section 8.2, plus the sum of any payments under (2) above of which the Bontang V Trustee has received notice from such Producer less the portion of each transfer and distribution of funds referred to in clauses (3) and (4) above, and each amount received referred to in clause (5) above, which is credited to such Producer's account pursuant to Section 8.2. (j) The Bontang V Trustee shall furnish the Accountants with such information as they may from time to time request (with a copy to the Producers), to the extent such information is in the possession of the Bontang V Trustee, as to Debt Service and other matters stated by the Accountants to be necessary to enable them to perform their functions under the Debt Service Allocation Agreement in a timely manner. (k) After the date of payment of the final installment of principal of and accrued interest on the loans made pursuant to the Loan Agreement and the payment of all other amounts due thereunder and under the Notes and the Letter Agreement, the Bontang V Trustee shall forthwith convert to cash any investments then held in the Debt Service Account and Reserve Account and promptly give notice to the Accountants of the amount held in such account after the receipt of such cash proceeds. Upon receipt of instructions from the Accountants, which shall state that they are issued pursuant to provisions of the Debt Service Allocation Agreement relating to final distribution of the Debt Service Account and Reserve Account, the Bontang V Trustee shall distribute the funds then held in the Debt Service Account and Reserve Account, as specified in such instructions, and thereafter close the relevant accounts. 3.4 Borrowing Instructions. (a) Prior to any borrowing under the Loan Agreement, Pertamina shall give the Bontang V Trustee written notice of each entity and individual authorized to give borrowing instructions to the Bontang V Trustee with respect to the Loan Agreement. No other entity or individual shall be authorized to give such borrowing instructions. Any such entity or individual may be changed by subsequent written notice from Pertamina to the Bontang V Trustee. 43 39 (b) Each borrowing instruction shall specify (i) that the borrowing is to be made under the Loan Agreement, (ii) the date and amount thereof and (iii) the persons to whom the Loan Proceeds should be paid, which (x) in the case of amounts still to be applied to the design, engineering, procurement and construction of or otherwise relating to Train G shall be a disbursement trust fund of the type referred to in Section 3.5, (y) in the case of reimbursement of costs previously incurred for the design, engineering, procurement and construction of or otherwise relating to Train G shall be to such persons as the borrowing instruction shall specify, and (z) in the case of Borrowed Amounts, shall be as provided in Sections 3.2(d), (e), (f) and (g). (c) In the event any borrowing instruction does not include all of the information required by subsection (b) above, the Bontang V Trustee shall promptly so notify the instructing entity by telex or telecopier (with a copy to the Producers) and shall not comply with such incomplete instructions. (d) The Bontang V Trustee shall take such action as is required to effect the specified borrowing under the Loan Agreement. 3.5 Disbursement Trust; Payment Instructions. (a) Subject to Sections 3.2(d), (e), (f) and (g) and 3.4(b)(iii)(y), all Loan Proceeds and all amounts transferred from the Regular Reserve Account to the Payment Account pursuant to Section 3.3(b)(iii) ("Transferred Amounts") shall be disbursed directly into a disbursement trust fund pursuant to a Disbursement Trust Agreement for Train G having the following features: (i) The disbursement trust fund will be maintained by BankAmerica International, as Disbursement Trustee. (ii) The parties to the Disbursement Trust Agreement shall be the Disbursement Trustee and the Bontang V Trustee. (iii) The Bontang V Trustee shall have the power to enter into or modify the Disbursement Trust Agreement upon its receipt of notice from the Producers that they have approved the form and terms of such agreement or modification and that they authorize and request the Bontang V Trustee to enter into such agreement or modification. Notwithstanding the provisions of Section 13.3, the representative of a Contractor shall not have authority to give such approval for any Contractor other than itself. 44 40 (b) (i) Pertamina shall, at the time the Disbursement Trust Agreement is executed and delivered, give the Bontang V Trustee written notice of each entity and individual authorized to give payment instructions to the Bontang V Trustee with respect to the Disbursement Trust Agreement. No other entity or individual shall be authorized to give such payment instructions. Any such entity or individual may be changed by subsequent written notice from Pertamina to the Bontang V Trustee. (ii) Each payment instruction shall be transmitted by telex or telecopier to the Bontang V Trustee, with a copy by hand delivery or by telex or telecopier to the Producers, and shall include the following information: (1) the Disbursement Trust Agreement under which the payment is to be made; (2) the name of the payee and the place and manner of payment; (3) the amount of such payment and the currency to be used; and (4) a brief description of the purpose of such payment, together with the relevant invoice number or designation of other relevant payment documentation. (iii) In the event any payment instruction does not include all of the information required by subsection (ii) above, the Bontang V Trustee shall promptly so notify the instructing entity by telex or telecopier (with a copy to the Producers) and shall not comply with such incomplete instructions. (iv) Except in the case of payments to be made as provided in Section 3.4(b) for costs previously incurred or as provided in Sections 3.2(d), (e), (f) and (g), the Bontang V Trustee shall forward each payment instruction to the Disbursement Trustee. (c) (i) With respect to the Disbursement Trust Agreement and the investment income earned from amounts held thereunder in each calendar year, the Producers shall, subject to Section 3.5(c)(ii)(1), on or after February 15 in each year, cause the Accountants to notify the Bontang V Trustee (with a copy to the Producers) of the amount of such investment income earned during the previous calendar year (and not disbursed pursuant to payment instructions) and the portions due each of the Producers. Upon receipt of each such notice, the Bontang V Trustee shall promptly send the same to the Disbursement Trustee, which notices shall include a payment instruction for the 45 41 Disbursement Trustee to pay such amount to the Bontang V Trustee. (ii) The Producers shall notify the Bontang V Trustee when any Financed Capital Project to be paid for under the Disbursement Trust Agreement has been completed. Any such notice shall contain the following information: (1) Until such time as the Bontang V Trustee shall have received notice from the Tranche A Lender and the Agent on behalf of the Tranche B Lenders that the Lenders have been paid in full all amounts owed to them under the Loan Agreement, the Notes and the Letter Agreement, instructions to hold for the account of the Lenders and pay on the next following Capital Payment Date to the Tranche A Lender and the Agent for the account of the Tranche B Lenders to their accounts provided in the Loan Agreement any Loan Proceeds and Transferred Amounts still held under the Disbursement Trust Agreement to the extent necessary to make payment to the Lenders of all such amounts owing to them. The Bontang V Trustee shall apply all such Loan Proceeds and Transferred Amounts and the income accrued thereon on the next following Capital Payment Date under Section 3.5(a) of the Loan Agreement in the following order of priority, pro rata as to Tranche A and Tranche B: (A) First, to the extent that such amounts are not otherwise paid as provided in Section 3.3, to the payment of all Lenders Fees and Expenses due and payable on such Capital Payment Date; (B) Second, to the extent that such amount is not otherwise paid as provided in Section 3.3, to the payment of all Interest due and payable on such Capital Payment Date, provided, however, that if such Capital Payment Date occurs during, but not at the end of, a six-month Interest Period then in effect with respect to Tranche B, the pro rata amount allocable to such six- month Interest Period shall be one-half of the amount due at the end of such Interest Period, and such amount shall be deposited in the Loan Account for Tranche B and held in such account for the Tranche B Lenders, and treated as provided in the proviso to Section 3.3(a)(ii); (C) Third, to the extent that such amount is not otherwise paid as provided in Section 3.3, to the payment of all principal then due and payable on such Capital Payment Date; 46 42 (D) Fourth, to the extent that such amounts are not otherwise paid as provided in Section 3.3, to the payment of all Special Payments due and payable on such Capital Payment Date; and (E) Fifth, applied to prepay the Notes, which prepayment, if partial, shall be applied pro rata to the principal amounts due thereunder in the order of maturity. (2) Upon satisfaction of the requirements of clause (1) above, instructions with respect to Loan Proceeds and Transferred Amounts still held under the Disbursement Trust Agreement, identifying the portion thereof to be paid to the Bontang V Trustee for the account of the Producers and the portion thereof to which each of the Producers is entitled. (3) With respect to investment income earned under the Disbursement Trust Agreement and not previously distributed, the portion thereof to be paid to the Bontang V Trustee for the account of the Producers and the portion thereof to which each of the Producers is entitled. Upon receipt of such notice, the Bontang V Trustee shall send the same to the Disbursement Trustee together with an instruction to terminate the disbursement trust under, and to make payment of all amounts then held under, the Disbursement Trust Agreement in conformity with the notice referred to above in this clause (ii) and the terms of the Disbursement Trust Agreement. 3.6 Duties of Bontang V Trustee with Respect to Instructions. In acting on any borrowing instruction or forwarding any payment instruction hereunder or any Notice of Borrowing under the Loan Agreement, the Bontang V Trustee shall not have any responsibility for determining whether or not the borrowing being incurred or the payment being made is being properly incurred or made in accordance with the provisions of any agreement or any understandings among the Producers or any other parties, it being understood that the Bontang V Trustee's sole responsibility in such circumstances shall be to take such action with respect to such instruction as specified in Section 3.4 or Section 3.5(b), as the case may be. 3.7 Bontang V Depositaries. The Bontang V Trustee shall, upon the authorization and request of the Producers, and in accordance with the Loan Agreement, appoint or remove any Bontang V Depositary as set forth below. 47 43 (a) The Bontang V Trustee may entrust any Bontang V Depositary with the exclusive custody and possession of any funds, properties and rights in the Debt Service Account or the Reserve Account or both. The Bontang V Trustee's responsibility with respect to the funds, properties and rights held by a Bontang V Depositary shall be only to maintain and administer the accounting of the Debt Service Account or the Reserve Account or both. Each Bontang V Depositary shall have the exclusive custody and possession of the funds, properties and rights held by it. (b) It shall be a condition to the appointment of any Bontang V Depositary hereunder that the bank, trust company or financial institution so appointed shall conform to the definition of "Bontang V Depositary" set forth herein and shall agree to hold the funds, properties and rights held by it in trust on the same basis, and subject to the same rights and obligations, as are set forth in this Agreement with respect to the Bontang V Trustee, and upon such agreement such rights and obligations shall be enjoyed by and binding upon such Bontang V Depositary. The terms of appointment of any Bontang V Depositary shall not be inconsistent with the provisions of this Agreement. (c) Without the written consent of the Producers and the Majority Lenders pursuant to the Loan Agreement, no funds, properties or rights shall be transferred from the custody and possession of the Bontang V Trustee to the custody and possession of a Bontang V Depositary nor, except in the case such transfer shall be required for effecting payments necessary hereunder, shall any such funds, properties or rights be transferred from a Bontang V Depositary to the Bontang V Trustee without such consent. ARTICLE 4 ESTABLISHMENT OF BONTANG V PAYMENT ACCOUNT 4.1 Bontang V Payment Account. On or before the Effective Date, a sub-account of the Bontang V General Account designated as the "Bontang V Payment Account" shall be opened by the Bontang V Trustee in its own name, as Bontang V Trustee, at the Trustee's Office. If requested by the Producers, the Bontang V Trustee shall open in its own name, as Bontang V Trustee, at the Trustee's Office, one or more sub-accounts of the Bontang V Payment Account (each a "Payment Subaccount"). 4.2 Funds to be Deposited. Commencing on the date of the first receipts by the Bontang V Trustee under Article 2 and continuing throughout the term of this Agree- 48 44 ment the Bontang V Trustee shall deposit in the Bontang V Payment Account (i) promptly after receipt by it of any amount hereunder (other than Loan Proceeds), all amounts in the Bontang V General Account other than Source of Debt Service, (ii) as and when specified herein, all amounts required to be transferred from the Debt Service Account or the Reserve Account to the Bontang V Payment Account, (iii) any Loan Proceeds to be deposited in the Bontang V Payment Account pursuant to Section 3.2(g)(ii), and (iv) promptly after receipt, all amounts of Source of Debt Service in the Bontang V General Account not required to be paid over into the Debt Service Account or the Reserve Account pursuant to the provisions of Sections 3.2 and 3.3. If any Payment Subaccounts have been opened by the Bontang V Trustee pursuant to Section 4.1, amounts deposited into the Bontang V Payment Account shall be further credited to the appropriate Payment Subaccount pursuant to the written instructions of the Producers provided at the time such Payment Subaccount is opened or at any subsequent date. 4.3 Other Prepayments. Any prepayments of the Notes pursuant to Sections 2.6, 3.4(b) or 3.7 of the Loan Agreement (other than a prepayment in full of all amounts due and payable under the Loan Agreement, the Notes and the Letter Agreement) shall be made solely from the amounts held from time to time in the Bontang V Payment Account and otherwise in accordance with the provisions of such Sections 2.6, 3.4(b) or 3.7. ARTICLE 5 DISBURSEMENTS WITH RESPECT TO PROCESSING CHARGES 5.1 Submission and Payment. The Producers shall submit to the Bontang V Trustee debit notes received from P.T. Badak on account of LNG processing charges. To the extent that funds are then held in the Bontang V Payment Account the Bontang V Trustee shall, promptly upon receipt of notice from the Producers that any such debit note has been approved for payment, pay to P.T. Badak from the Bontang V Payment Account the amount of such debit note, pursuant to procedures to be agreed upon pursuant to Section 5.2. 5.2 Payment Procedures. The Producers shall agree with P.T. Badak on appropriate procedures for the payment of funds payable to P.T. Badak pursuant to Section 5.1, and shall advise the Bontang V Trustee of such procedures, which shall include a requirement that P.T. Badak furnish the Bontang V Trustee with an acknowledgment that each payment by the Bontang V Trustee hereunder fully satisfies 49 45 the liabilities of the Producers with respect to the debit note to which the payment relates. ARTICLE 6 TRANSPORTATION EXPENSES 6.1 Submission and Payment. Pertamina shall submit to the Bontang V Trustee (with a copy to the Contractors) each invoice relating to shipment of LNG that it may receive from a Transporter pursuant to the New 1973 Transportation Arrangements or such other transportation contract as may be applicable to the sale of LNG under the LNG Sales Contracts. To the extent that funds are then held in the Bontang V Payment Account, the Bontang V Trustee shall, promptly upon receipt of notice from the Producers that any such invoice has been approved for payment, pay to the Transporter shown on such invoice from the Bontang V Payment Account the amount of such invoice, pursuant to such procedures, which shall specify the place and manner of payment, as shall be established with the Bontang V Trustee by the Producers. 6.2 Payment Procedure. Pertamina, in consultation with the Contractors, shall agree with each Transporter as to appropriate procedures for the payment of funds payable to such Transporter out of the Bontang V Payment Account under Section 6.1, and shall advise the Bontang V Trustee of such procedures, which shall include a requirement that such Transporter furnish the Bontang V Trustee with an acknowledgment that each payment by the Bontang V Trustee hereunder satisfies the liabilities of Pertamina to which the payment relates. ARTICLE 7 DISBURSEMENTS WITH RESPECT TO OTHER CHARGES 7.1 Submission and Payment. It is contemplated that other charges with respect to the production, sale or delivery of LNG sold under the LNG Sales Contracts will from time to time be payable from the Bontang V Payment Account. Any Producer may submit to the Bontang V Trustee payment orders or instructions, or invoices or other statements, received by it with respect to such charges. To the extent that funds are then held in the Bontang V Payment Account, the Bontang V Trustee shall, promptly upon receipt of notice from the Producers that any such payment order, instruction, invoice or statement has been approved for payment, pay to the person entitled thereto from the Bontang V Payment 50 46 Account the amount thereof, pursuant to procedures to be agreed upon pursuant to Section 7.2. 7.2 Payment Procedures. The Producers shall agree with the person submitting any invoice or statement payable pursuant to Section 7.1 on appropriate procedures for the payment thereof, and shall advise the Bontang V Trustee of such procedures, which shall include a requirement that the person receiving payment furnish the Bontang V Trustee with an acknowledgment that each payment by the Bontang V Trustee hereunder fully satisfies the liabilities of the Producers with respect to the invoice or statement to which the payment relates. ARTICLE 8 DISBURSEMENTS WITH RESPECT TO SHARING PERCENTAGES 8.1 Approved Level of Working Capital; Sharing Percentages. For the purposes of this Agreement the "Approved Level of Working Capital" shall be that amount, if any, specified to the Bontang V Trustee in a notice from the Producers, and the respective "Sharing Percentages" of each Producer with respect to an LNG Sales Contract shall be the percentages set forth in the most recent certificates furnished to the Bontang V Trustee pursuant to Section 8.3. 8.2 Charging of Amounts Payable; Payment of Excess. The respective Sharing Percentages of each Producer of all amounts required to be paid into the Debt Service Account and the Reserve Account under Sections 3.2 and 3.3, and of all amounts required to be paid under Articles 5, 6 and 7 and Sections 8.5 and 11.2, shall be charged to each such Producer's Bontang V Trust Fund Account. The (i) respective Sharing Percentages of each Producer of any funds deposited in the Bontang V Payment Account pursuant to Section 4.2, (ii) amount of any excess funds distributed to each Producer from the Debt Service Account and Reserve Account pursuant to Section 3.3(k), and (iii) portion due each Producer from any amounts received by the Bontang V Trustee from the Disbursement Trustee pursuant to Section 3.5(c), shall be credited to each such Producer's Bontang V Trust Fund Account. Whenever and to the extent that the amount held in the Bontang V Payment Account at the end of any business day of the Bontang V Trustee in the City of New York is in excess of the Approved Level of Working Capital, after having deducted all amounts of Source of Debt Service then required to be paid into the Debt Service Account and the Reserve Account under Sections 3.2 and 3.3, and all amounts then payable by the Bontang V Trustee under Articles 5 and 6 and Sections 8.5 and 11.2, then, except as otherwise provided in Section 8.3 or Article 12, such excess 51 47 shall be immediately paid out to the Producers in accordance with their respective Sharing Percentages applicable to such amount, as specified in the most recent certificate for the current year furnished pursuant to Section 8.3. 8.3 Accountants. The Producers shall mutually appoint a firm of independent public accountants to act as the accountants hereunder (the "Accountants") and shall promptly advise the Bontang V Trustee of such appointment. The Accountants shall be directed to furnish to the Bontang V Trustee (with a copy to the Producers) a certificate on or before the 15th day of December in each calendar year (initially for 1995 on or before December 15, 1995) setting forth the respective Sharing Percentages of each Producer for the following calendar year (for 1995 in the case of the first such certificate) with respect to each LNG Sales Contract in effect during such calendar year. The Sharing Percentages with respect to an LNG Sales Contract shall be calculated as provided in the respective Supply Agreements applicable to such LNG Sales Contract and the respective Production Sharing Contracts, based upon actual or estimated production and costs as required thereby. The Accountants shall also be directed to furnish to the Bontang V Trustee (with a copy to the Producers) on or before the 15th day of March, June and September in each calendar year, commencing March 15, 1996 a revision of the certificate furnished for such year setting forth the respective Sharing Percentages of each Producer based upon revised estimates of production and costs for such year. In addition, the Accountants shall be directed to furnish to the Bontang V Trustee (with a copy to the Producers) on or before the 15th day of February in each calendar year, commencing February 15, 1996, a final version of the certificate for the previous year setting forth the respective Sharing Percentages of each Producer based upon actual production and costs for the previous year. Every revised and final certificate shall specify the amount, if any, by which the aggregate amount paid by the Bontang V Trustee to each Producer pursuant to the initial certificate and any earlier revisions thereof under this Article 8 was greater or less than the amount that would have been paid to each on the basis of the Sharing Percentages which are certified therein and shall specify the amount that will be required to be paid to any underpaid Producer, in order to bring the total amount paid to it into equitable relation to the amount paid to any overpaid Producers so that the payments, as adjusted, would be in accordance with such Sharing Percentages. In the event that any 52 48 such certificate indicates that any of the Producers has been underpaid, the Bontang V Trustee, after receipt of the certificate, shall pay to any such Producers pro rata in proportion to the amount by which each such Producer was underpaid, all amounts otherwise payable under this Article 8 to the Producers which have been overpaid until each such underpaid Producer shall have received the entire amount stated in the certificate as required to be paid to such underpaid Producer. After each such Producer has received the entire amount it is entitled to receive as aforesaid, the Bontang V Trustee shall make all future payments to the Producers out of the funds remitted in respect of the LNG Sales Contracts in accordance with the Sharing Percentages specified in the most recent certificate relating thereto furnished to Bontang V Trustee pursuant to this Section 8.3. 8.4 Arrangements for Payment. Each Producer shall make such reasonable arrangements with the Bontang V Trustee as it shall deem appropriate for the payment to it of amounts payable to it under the terms of this Article 8. Except as otherwise provided in Section 8.5, each Contractor shall make its own arrangements with respect to such payments directly with the Bontang V Trustee and, notwithstanding the provisions of Section 13.3, the representative of any Contractor Group shall have no authority to act for any Contractor other than itself in making such arrangements. 8.5 Special Disbursement Instructions. The Producers acknowledge that from time to time it may be necessary for amounts which would otherwise be paid to Producers pursuant to Section 8.2 to be paid instead to (a) persons who have submitted invoices or other statements for charges with respect to the production, sale or delivery of LNG or LPG from the Bontang Plant under sales contracts other than the LNG Sales Contracts, (b) the trustee under any trust established to pay charges of the type described in (a) above, or (c) the trustee under any of the Other Trust Agreements, in order to satisfy certain obligations of the Producers having interests in the Bontang V Payment Account. Accordingly, notwithstanding the payment arrangements made with the Bontang V Trustee pursuant to Section 8.4, each Contractor hereby authorizes the representative of any of the Contractor Groups of which it is a member, as designated in or pursuant to Section 13.3, to give to the Bontang V Trustee from time to time on its behalf such Special Disbursement Instructions as such representative may deem necessary or appropriate to authorize such payments. Each representative shall give copies of any such Special Disbursement Instruction to the members of its Contractor Group contemporaneously with the transmission thereof to the Bontang V Trustee, by the same means of transmission. As used herein, a "Special 53 49 Disbursement Instruction" means an instruction so entitled which (i) is given by the Producers as provided in Section 13.3, (ii) instructs the Bontang V Trustee to pay to persons described in clauses (a), (b), (c) or (d) above any amount which would otherwise be paid to Producers pursuant to Section 8.2, and (iii) specifies the funds from which such payment is to be made. Any Special Disbursement Instruction requiring payment to another trustee shall also specify the account or accounts to which such funds are to be credited and direct the Bontang V Trustee to notify such trustee that such payment is a Special Disbursement Amount for the account or accounts so specified. The inclusion of this Section 8.5 shall have no effect on the authority of the Bontang V Trustee to act and rely upon any other special disbursement or transfer instruction which does not comply with this Section 8.5 so long as such instruction is given in an instrument executed by all of the Producers. 8.6 Payment Procedures. The Producers shall agree with the persons specified in Section 8.5(a) on appropriate procedures for the payment of the relevant invoices of statements, and shall advise the Bontang V Trustee of such procedures which shall include a requirement that the person receiving payment furnish the Bontang V Trustee with an acknowledgment that each payment by the Bontang V Trustee hereunder fully satisfies the liabilities of the person to which such invoice or statement is addressed with respect thereto. 8.7 Receipt of Special Disbursements. The Bontang V Trustee may from time to time receive Special Disbursement Amounts from the trustee under any of the Other Trust Agreements. Immediately upon the Bontang V Trustee's receipt of any funds identified as a Special Disbursement Amount, such funds shall be impressed with the trust created hereby and become a part of the Bontang V Trust Funds. Any such amounts received by the Bontang V Trustee shall be deposited in the account hereunder specified by the remitting trustee. ARTICLE 9 PROCEDURES RESPECTING ACCOUNTS UNDER THIS AGREEMENT 9.1 Accounting for Assets. All assets under the jurisdiction and control of the Bontang V Trustee and held from time to time in the Bontang V Trust Funds shall be accounted for within the Bontang V General Account specifying the sub-account and LNG Sales Contract to which such assets may be allocated, the bank or banks at which cash deposits may be maintained and the place or places at which investment securities may be held in custody for the account 54 50 of the Bontang V Trustee. The Bontang V Trustee shall maintain such books of account and other records as may be necessary to ensure full and proper segregation of the funds credited to such accounts as may be established by the Bontang V Trustee hereunder. It shall also segregate, and keep such accounts separate, from any accounts which may be established by it as trustee and paying agent under the Other Trust Agreements. Such books of account shall be open to inspection by the duly authorized representatives of the Producers at all reasonable times. 9.2 Reports. The Bontang V Trustee shall furnish to each of the Producers the following reports: (a) As soon as practicable (and not later than 45 days) after the close of each calendar year, a statement prepared by the Bontang V Trustee, setting forth the amount and source (by category and the relevant LNG Sales Contract) of funds received pursuant to this Agreement and the disbursement of such funds as disclosed by the records and accounts kept by the Bontang V Trustee pursuant to Section 9.1 during such preceding calendar year, and a statement of the cash and investments held in the accounts under this Agreement as of the end of such period. (b) Within 20 days after the close of each calendar quarter a statement prepared by the Bontang V Trustee setting forth the amount and source (by category and the relevant LNG Sales Contract) of funds received pursuant to this Agreement and the disbursements of such funds as disclosed by the records and accounts kept by the Bontang V Trustee pursuant to Section 9.1 during such preceding calendar quarter and a statement of the cash and investments held in the accounts under this Agreement as of the end of such period. (c) Promptly after its receipt or disbursement of any funds pursuant to this Agreement, the Bontang V Trustee shall notify the Producers by telex or telecopier of such transactions specifying the amount and the source (by category and the relevant LNG Sales Contract) of the funds received and disbursed and the amounts credited or charged to the Bontang V General Account or any sub-account thereof. Notwithstanding the provisions of Section 13.3 respecting the representatives of the Contractors' Groups, each of the reports required by clauses (a) and (b) of this Section 9.2 shall be furnished by the Bontang V Trustee directly to each Contractor at its address specified pursuant to Section 13.3. 9.3 Producer Accounts. The Bontang V Trustee shall maintain separate accounts for each Producer which are sufficient to reflect each such Producer's interest in the 55 51 assets, liabilities, receipts and disbursements of the Bontang V Trust Funds, and its right to distributions therefrom (the "Bontang V Trust Funds Accounts"). It is the intention of each Producer that the trust created hereby be a security trust of the type described in Treas. Reg. 1.61-13(b) and I.T. 1942, III-1 C.B. 11 (1924). Accordingly, each Producer agrees for U.S. income tax purposes to account for its share of the receipts and disbursements made pursuant to this Agreement as if it had received such amounts directly and made such disbursements directly, and the Bontang V Trustee agrees for United States income tax purposes, unless advised by the U.S. Internal Revenue Service to the contrary, to treat such receipts and disbursements in a manner consistent with its status as the agent for each such party, or if so advised by Bontang V Trustee's counsel, as the trustee of a separate grantor trust for each such party within the meaning of Section 671 of the U.S. Internal Revenue Code of 1986, as amended, and the regulations thereunder. ARTICLE 10 INVESTMENT OF FUNDS HELD IN ACCOUNTS UNDER THIS AGREEMENT 10.1 Permitted Investments. The Bontang V Trustee shall invest amounts held by it from time to time in the Bontang V Payment Account, the Debt Service Account and the Reserve Account solely in: (i) Eurodollar bank time deposits or Eurodollar certificates of deposit with banks or both whose deposits are rated "P-1" by Moody's Bank Credit Report Service and "A-1+" by Standard and Poor's Rating Group CD Ranking Service, which may include any affiliate of the Bontang V Trustee satisfying the foregoing criteria; or (ii) such other types of short-term interest-bearing bank time deposits and certificates of deposit (x) as to which there is applicable a sovereign guarantee of repayment of principal, or other evidence of sovereign support in respect of such repayment as approved by the Producers and, with respect to amounts, if any, held in the Debt Service Account or the Reserve Account or any sub-account thereof for the Lenders under the Loan Agreement, approved by the Majority Lenders; and (y) issued by banks having at least $100,000,000.00 (or its equivalent) of capital and earned surplus (or equivalent accounts) as reflected in the then current financial statements of the issuing banks, which may include any affiliate of the Bontang V Trustee satisfying the foregoing criteria; or 56 52 (iii) if, due to the relatively small amount of funds to be invested, the unconventional period during which such funds are to be invested or similar factors, investments of the type authorized by clauses (i) and (ii) above are not generally available for such funds, the Bontang V Trustee may invest such funds in short-term Eurodollar time deposits, Eurodollar certificates of deposit or Eurodollar repurchase agreements, or any combination of the foregoing, in each case with any bank or banks each having at least $100,000,000.00 (or its equivalent in any other currency) of capital and earned surplus (or equivalent accounts) as reflected in the then current financial statements of such bank or banks, which may include any affiliate of the Bontang V Trustee satisfying the foregoing criteria; provided, however, that the aggregate principal amount of such funds so invested shall not exceed $1,000,000.00 at any one time. In no event shall the aggregate amount invested by the Bontang V Trustee pursuant to the foregoing provisions in time deposits or certificates of deposit with, or issued by, respectively, any one bank exceed 10% of such bank's capital and earned surplus (or equivalent accounts) as reflected in the bank's then current financial statements. For purposes of investments pursuant to clause (ii) above, the Bontang V Trustee shall request the approval of the Producers in accordance with Section 13.3 and, as applicable, the Majority Lenders by giving notice, which request shall specify the type of investment proposed and the nature of any sovereign guarantee or support applicable thereto. The Bontang V Trustee shall use its best efforts to assure that the final maturity of any such investment does not extend beyond the time when the amounts used to acquire such investments would be required for any other application hereunder. For the purposes of investments made pursuant to the foregoing clauses (i) and (iii), the Bontang V Trustee may submit to the Producers and to the Tranche A Lender and the Agent a list of bank issuers of securities satisfying the criteria of such clauses and may request that the Producers, the Tranche A Lender and the Agent designate one or more such issuers, on the list or otherwise, as acceptable to them for investment purposes. Upon receipt of such list and request, the Producers, the Tranche A Lender and the Agent shall designate from such list or propose one or more issuers satisfactory to them for such investment purposes; if more than one such issuer is designated, the designation shall indicate a priority among them; and no such designation with respect to investments of amounts in the Bontang V Payment Account shall require any approval or other action on the part of the Lenders or the Agent. The Bontang V Trustee shall make no investments under such clauses (i) and (iii) until it has received such a 57 53 designation. The Bontang V Trustee shall not be liable for the results of any investments made in the securities contemplated by clauses (i) and (iii) of issuers so approved. 10.2 Prudence and Yield. In making any investments pursuant to Section 10.1 the Bontang V Trustee shall be guided by the standards of a prudent investor seeking the maximum yield available consistent with security of principal at all times; provided that the Bontang V Trustee shall have no liability whatsoever for the results of any investment approved by the Producers and the Majority Lenders. 10.3 Interest Allocation. Interest or any other income arising out of investment of the Bontang V Trust Funds shall be and become a part of the Bontang V Trust Funds, allocated to the account for which such investment was made. Interest or any other income arising out of investment of funds in a sub-account of the Debt Service Account or the Reserve Account shall be allocated to the sub-account for which such investment was made. ARTICLE 11 CONCERNING THE BONTANG V TRUSTEE 11.1 Duties. In connection with its duties, rights and powers under this Agreement (including in relation to transactions it may enter into pursuant hereto), the Bontang V Trustee shall be subject to the following: (a) The Bontang V Trustee shall be entitled to act upon any notice, certificate, request, direction, waiver, receipt or other document which it in good faith believes to be genuine; and it shall be entitled to rely upon the due execution, validity and effectiveness, and the truth and acceptability of any provisions contained therein. (b) The Bontang V Trustee shall not be liable for any error of judgment or for any act done or omitted by it in good faith or for any mistake of fact or law, or for anything which it may do or refrain from doing, including with respect to any provision herein requiring the Bontang V Trustee to use its best efforts, except for its own gross negligence or willful misconduct, nor shall the Bontang V Trustee be liable for special, indirect or consequential loss or damage of any kind including, without limitation, lost profits, except such losses or damages resulting from its willful misconduct. 58 54 (c) The Bontang V Trustee may consult with, and obtain advice from, accounting and legal advisers and it shall incur no liability or loss and shall be fully protected in acting in good faith in accordance with the opinion and advice of such advisers. (d) The Bontang V Trustee shall have no duties other than those specifically set forth or provided for in this Agreement. The Bontang V Trustee shall have no obligation to familiarize itself with and shall have no responsibility with respect to any agreement to which it is not a party relating to the transactions contemplated by this Agreement nor any obligation to inquire whether any notice, instruction, statement or calculation is in conformity with the terms of any such agreement, except for those irregularities, errors or mistakes apparent on the face of such document or to the knowledge of the Bontang V Trustee. If, however, any remittance or communication received by the Bontang V Trustee appears erroneous or irregular on its face, the Bontang V Trustee shall be under a duty to make prompt inquiry to the person or party originating such remittance or communication in order to determine whether a clerical error or inadvertent mistake has occurred. 11.2 Compensation. The Bontang V Trustee shall be entitled to reasonable compensation to be agreed upon from time to time among the parties for the services to be performed by it hereunder or under any other document entered into by the Bontang V Trustee at the request of, or with the approval of, the Producers, or contemplated hereby or thereby, and to be reimbursed for all reasonable out-of-pocket expenses incurred by the Bontang V Trustee in connection therewith. The Bontang V Trustee may charge such agreed compensation and expenses to the Bontang V Payment Account, providing the Producers with such evidence as to the nature and amount of such expenses as any of the Producers may reasonably require. If the balance in the Bontang V Payment Account is insufficient therefor, each Producer shall pay such compensation and expenses to the Bontang V Trustee, provided, however, that the obligation of each respective Contractor with respect to this Section 11.2 shall be pro rata in accordance with its respective Sharing Percentage. 11.3 Resignation. The Bontang V Trustee may, at any time, by notice to the Producers, the Tranche A Lender and the Agent, tender its resignation as Trustee and Paying Agent under this Agreement. The Producers may, at any time by notice jointly given by them, terminate the Bontang V Trustee's appointment hereunder. Such resignation or termination shall be effective as from the appointment of a successor as hereinafter provided. 59 55 11.4 Appointment of Successor. Within 60 days of receipt of a notice of resignation or issuance of a notice of termination, the Producers shall jointly appoint a successor, being a bank in the United States acceptable to the Producers. The proposed successor bank (the "Successor") shall promptly give notice of its appointment to the Bontang V Trustee and shall execute and deliver to each of the parties hereto an instrument in writing accepting its appointment hereunder which shall specify the office of the Successor in the United States which is to be the Trustee's Office for the purpose of this Agreement. 11.5 Application to Court. If in any case a Successor shall not be appointed pursuant to the foregoing provisions of this Article 11 within the 60 days aforesaid, the Bontang V Trustee may apply to any court of competent jurisdiction to appoint a Successor, notwithstanding the provisions of Section 13.2. Such court may thereupon, in any case, after such notice, if any, as such court may deem proper and prescribe, appoint a Successor. 11.6 Successor Vested with Rights. Upon and from the execution and delivery of its acceptance in writing as aforesaid, the Successor without any further act or deed shall become fully vested with all the rights, powers and duties and subject to all the obligations of the Bontang V Trustee hereunder, but the Bontang V Trustee, upon payment of all sums due it and on the written request of the Producers shall execute and deliver an instrument transferring to the Successor the Bontang V Trust Funds, including all funds held in the Bontang V Payment Account, the Debt Service Account and the Reserve Account and assigning to the Successor all its rights hereunder and under any Bontang V Disbursement Trust Agreements and all of its rights with respect to any Bontang V Depositary. 11.7 Payments After Notice. Upon and from the date of notification from any Successor, any person required to pay amounts to the Bontang V Trustee under this Agreement shall pay the Successor at its office specified as aforesaid all amounts described herein as payable to the Bontang V Trustee. 11.8 Indemnification. The Producers hereby agree to indemnify the Bontang V Trustee for, and to hold it harmless against any loss, liability, claim, judgment, settlement, compromise or reasonable expense incurred or suffered without gross negligence or willful misconduct on the part of the Bontang V Trustee, arising out of or in connection with its entering into this Agreement, the Loan Agreement or any other document entered into by the Bontang V Trustee at the request of, or with the approval of, the Producers, or contemplated hereby or thereby, and carrying out its duties or exercising its rights hereunder or thereunder, including 60 56 the cost and expenses of defending itself against any claim of liability in the premises. 11.9 Trustee in Individual Capacity. Each of the parties hereto acknowledges and consents that the Bontang V Trustee, in its individual capacity, or any affiliate thereof, shall have the same rights, powers and authority to enter into any deposit agreement, loan agreement or any other banking or business relationship permitted by law with any of the Producers, the Lenders or the Agent (without having to account therefor to any of the Producers) as though it were not the Trustee and Paying Agent under this Agreement. ARTICLE 12 DEBT SERVICE ALLOCATION 12.1 Debt Service Allocation Definitions. In addition to and in amendment of the terms defined elsewhere in this Agreement, the following terms shall, solely for purposes of this Article 12, have the meanings set forth below: "Aggregate Dollar Share" shall have the meaning set forth in Section 12.3. "Allocation Trust Agreements" shall mean this Agreement, the Bontang II Trust Agreement, the Bontang III Trust Agreement, the Bontang IV Trust Agreement, the Bontang Excess Sales Trust Agreement and the Bontang LPG Trust Agreement. "Allocation Trustees" shall mean all of the trustees under the Allocation Trust Agreements, collectively, and "Allocation Trustee" shall mean one of such Allocation Trustees as the context may require. "Bontang LPG Trust Agreement" shall mean the Bontang LPG Trustee and Paying Agent Agreement, dated as of August 1, 1988, among the Producers and Continental Bank International, as heretofore and hereafter amended. "Bontang LPG Trustee" shall mean the trustee under the Bontang LPG Trust Agreement. "Borrowing Trustees" shall mean those Trustees which are a party to any of the Financing Agreements and "Borrowing Trustee" shall mean one of such Borrowing Trustees as the context may require. 61 57 "Contingent Support Trustees" shall mean all of the trustees under the Bontang Excess Sales Trust Agreement and any Special Long Term Sales Trust Agreements of which the Bontang V Trustee has been notified by Pertamina, collectively, and "Contingent Support Trustee" shall mean one of such Contingent Support Trustees as the context may require. "Debt Service" shall mean (i) amounts paid into any Debt Service Account by a Borrowing Trustee (other than amounts so paid from the proceeds of any borrowing under a Financing Agreement or by the Bontang III Trustee from Contingent Support), (ii) amounts which any Borrowing Trustee has been notified as having been paid by one or more Producers and identified to such Borrowing Trustee as "Debt Service" under the Debt Service Allocation Agreement with respect to indebtedness of such Borrowing Trustee, and (iii) Contingent Support paid by any Contingent Support Trustee to the Bontang III Trustee. "Debt Service Accounts" shall mean all accounts, including any sub-accounts thereof, which a Borrowing Trustee opens and into which it transfers LNG revenues or other funds in anticipation of payments of, or as a reserve for possible payment of, principal, interest and other fees and expenses pursuant to any of the Financing Agreements, and "Debt Service Account" shall mean one of such Debt Service Accounts as the context may require. "Estimated Debt Service Percentages" shall have the meaning set forth in Section 12.2. "Financing Agreement No. 3" shall mean Bontang III Loan Agreement, dated as of February 9, 1988, as heretofore and hereafter amended, entered into by the Bontang III Trustee. "Financing Agreement No. 4" shall mean Bontang IV Loan Agreement, dated as of August 26, 1991, as heretofore and hereafter amended, entered into by the Bontang IV Trustee. "Financing Agreement No. 5" shall mean Bontang V Loan Agreement, dated as of the date hereof, as hereafter amended, entered into by the Bontang V Trustee. "Financing Agreements" shall mean Financing Agreement No. 3, Financing Agreement No. 4, Financing Agreement No. 5 and any other agreement designated as a "Financing Agreement" in a notice to the Bontang V Trustee from the Producers. "Producers Agreement" shall mean any agreement so entitled among the Producers, or any of them, and lenders 62 58 under a Financing Agreement, as amended as of the date hereof and hereafter amended. "Provisional Debt Service" shall mean, with respect to any Debt Service, payments by any Allocation Trustee to reimburse Producers which have borne more than their respective Estimated Debt Service Percentages of such Debt Service, together with interest on the Reimbursement Amount from and including the date of such Debt Service payment to, but not including, the date of such reimbursement, at the rate equal to the weighted average of the interest rates in effect under Financing Agreement No. 3 on the date of such reimbursement. "Reimbursement Amount" shall mean the amount of any Provisional Debt Service payment other than the portion thereof attributable to interest on said reimbursement amount. "Special Long Term Sales Trust Agreements" shall have the meaning set forth in Article I of the Bontang III Trust Agreement. "Trust Agreements" shall mean, collectively, this Agreement and all Other Trust Agreements, and "Trust Agreement" shall mean one of such Trust Agreements as the context may require. "Trustees" shall mean the trustees under the Trust Agreements, and "Trustee" shall mean one of such Trustees as the context may require. 12.2 Estimated Debt Service Percentages. The Debt Service Allocation Agreement requires that the Accountants calculate, and deliver to the Allocation Trustees from time to time certificates setting forth, the Estimated Debt Service Percentages for each Producer of the estimated amounts of each type of Debt Service to be paid by the Borrowing Trustees, and the Contingent Support Trustees (the percentages last so certified as to each period for each Producer being its "Estimated Debt Service Percentages"). Each Trust Agreement to which a Borrowing Trustee is a party provides that such Borrowing Trustee shall promptly give notice to the Allocation Trustees of (i) each payment into a Debt Service Account made by such Borrowing Trustee, specifying any amounts so paid from the proceeds of any borrowing under a Financing Agreement and, in the case of the Bontang III Trustee, from Contingent Support, (ii) each transfer, payment or distribution from a Debt Service Account, or any disbursement trust pursuant to a Financing Agreement, of funds in excess of the amount required to be held therein from time to time, (iii) each payment of Debt Service of which such Borrowing Trustee has been notified made by a Producer pursuant to a Producers Agreement, and 63 59 (iv) the portion of each such payment of Debt Service, whether made by such Borrowing Trustee or a Producer, borne by each Producer, after taking into account such Producer's interest in any excess funds transferred, paid or distributed from any Debt Service Account, or any disbursement trust pursuant to a Financing Agreement, to or for the account of any Producers. Each Trust Agreement to which a Contingent Support Trustee is a party provides for similar notices. In the event that such notices received by the Bontang V Trustee, together with the notices referred to in the last sentence of this paragraph and all similar notices received from the other Allocation Trustees, considered in the aggregate, show at any time that any Producers have borne more than their Estimated Debt Service Percentages of Debt Service ("underpaid Producers"), the Bontang V Trustee shall thereafter make Provisional Debt Service payments to the underpaid Producers, pro rata in proportion to the excess amount borne by each such Producer, out of all amounts otherwise payable under Article 8 to the Producers which have borne less than their Estimated Debt Service Percentages of such Debt Service until the Reimbursement Amount of the aggregate Provisional Debt Service payments received by each of the underpaid Producers from the Allocation Trustees equals the excess amount of Debt Service borne by such Producer. The Bontang V Trustee shall promptly advise each other Allocation Trustee of each such Provisional Debt Service payment made by it. 12.3 Aggregate Dollar Share. The Debt Service Allocation Agreement also requires that the Accountants calculate, and deliver to the Allocation Trustees from time to time certificates setting forth, the portion of Debt Service each Producer should have borne of the Debt Service paid by the Borrowing Trustees and the Contingent Support Trustees (the amount last so certified as to each period for each Producer being its "Aggregate Dollar Share") and the portion thereof which has actually been borne by each Producer. In the event that any such calculations indicate that any Producers have borne more than their Aggregate Dollar Shares of Debt Service during the period in question ("underpaid Producers"), the Accountants are required to instruct the Bontang V Trustee to pay to the underpaid Producers, pro rata in proportion to the excess amount borne by each such Producer, all amounts otherwise payable under Article 8 to the Producers which have borne less than their Aggregate Dollar Shares for the period in question until the aggregate amount received by each of the underpaid Producers from the Allocation Trustees (as shown by the notices referred to in the last sentence of this paragraph and all similar notices received from the other Allocation Trustees) equals the amount stated in such instructions to be the excess amount borne by such Producer. The Bontang V Trustee 64 60 shall promptly advise each other Allocation Trustee of each such payment pursuant to this Section 12.3. Upon receipt of any such instructions the Bontang V Trustee shall give effect thereto commencing with the next payments to Producers pursuant to Article 8. 12.4 Pro Rata Treatment. In the event that the funds available for making the payments required by Sections 12.2 and 12.3 shall not be sufficient to make the payments therein required in full, such funds shall be paid to the Producers entitled to payments pursuant to such Sections pro rata in proportion to the amounts payable to each such Producer thereunder. 12.5 Income From the Disbursement Trust. In order to implement the provisions of Section 2.4 of the Debt Service Allocation Agreement, upon receipt of instructions from the Accountants, which shall state that they are issued pursuant to said Section, and receipt from the Disbursement Trustee of the funds specified in such instructions, the Bontang V Trustee shall distribute the funds so received as specified in such instructions. ARTICLE 13 MISCELLANEOUS 13.1 Counterparts; Term. This Agreement may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts together shall constitute one and the same instrument. Complete sets of counterparts shall be lodged with the Bontang V Trustee. This Agreement shall be effective as of the date hereof, and shall remain in effect until the Producers shall have notified the Bontang V Trustee that this Agreement shall terminate. 13.2 DISPUTES. ALL DISPUTES ARISING AMONG THE PARTIES RELATING TO THIS AGREEMENT OR THE INTERPRETATION OR PERFORMANCE HEREOF, SHALL BE FINALLY SETTLED BY ARBITRATION CONDUCTED IN THE ENGLISH LANGUAGE IN PARIS, FRANCE, BY THREE ARBITRATORS UNDER THE RULES OF ARBITRATION OF THE INTERNATIONAL CHAMBER OF COMMERCE. JUDGMENT UPON THE AWARD RENDERED MAY BE ENTERED IN ANY COURT HAVING JURISDICTION, OR APPLICATION BE MADE TO SUCH COURT FOR A JUDICIAL ACCEPTANCE OF THE AWARD AND AN ORDER OF ENFORCEMENT AS THE CASE MAY BE. ANY AWARD MADE UNDER THIS SECTION 13.2 SHALL BE BINDING UPON ALL PARTIES CONCERNED. 65 61 13.3 Notices. All notices, approvals, instructions, and other communications for purposes of this Agreement shall be in writing, which shall include transmission by telex or telecopier. All communications given by telex or telecopier shall be directed as set forth below, provided that in the event any communication is received by the Bontang V Trustee from a telex or telecopy number other than those set forth below, its responses thereto may be directed to the number from which such communication was received. (a) To Pertamina at the following mail, telex and telecopier addresses: Perusahaan Pertambangan Minyak dan Gas Bumi Negara (Pertamina) Jalan Medan Merdeka Timur 1A Jakarta - Indonesia Telex No.: 45018 Answerback: PTMJKT 1A Telecopier No.: 62-21-345-2958 Attention: Director of Finance (b) To the Contractors comprising the Vico Group at the following mail, telex and telecopier addresses: Virginia Indonesia Company One Houston Center 1221 McKinney - Suite 700 Houston, Texas 77010 U.S.A. Telex No.: 713-166-100 Answerback: VICO HOU Telecopier No.: 713-754-6697 Attention: Treasurer (c) To the Contractors comprising the Total Group at the following mail, cable, telex and telecopier addresses: Total Indonesie P.O. Box 1010 Jakarta 10010 Indonesia Telex No.: 60980 Answerback: TOTALJ IA Telecopier No.: 62-21-252-0814 Attention: President and General Manager (d) To the Contractors comprising the Unocal Group at the following mail, telex and telecopier addresses: 66 62 Unocal Indonesia Company Ratu Plaza Office Tower Jalan Jenderal Sudirman Jakarta, Indonesia Telex No. 47335 Answerback: UNOCAL IA Telecopier No.: 62-21-720-4499 Attention: President (e) To Inpex on or following March 31, 1997 at the following mail, telex and telecopier address: Indonesia Petroleum, Ltd. 17th Floor, Ebisu Neonato, No. 1-18, Ebisu 4-Chome Shibuya-ku, Tokyo 150, Japan Telex No.: 2424210 Answerback: JAIPEX J Telecopier No.: 81-3-5448-1244 Attention: General Manager of Gas Business Department (f) To the Bontang V Trustee or the trustee under any Other Trust Agreement at the following mail, telex, and telecopier addresses: BankAmerica International 1 World Trade Center 9th Floor New York, New York 10017 Telex No.: 62 944 Answerback: BOA UW Telecopier No.: 212-390-2249 Attention: Vice President-Manager Each of Vico, Total and Unocal is hereby designated the sole representative of the Contractors comprising its respective Contractor Group for the giving and receipt of notices, approvals, instructions and other communications to or from the Contractors under this Agreement and, to the extent Contractors are entitled to give or receive notices, approvals or instructions thereunder, the Other Trust Agreements. For purposes of the foregoing, unless specifically provided otherwise and, with respect to Inpex, solely until March 31, 1997, each reference in this Agreement to the Producers or the Contractors, shall insofar as the Contractors are concerned, require notices, approvals and other communications to and from such representatives. On and following March 31, 1997, each reference to the Producers or the Contractors shall, insofar as Inpex is concerned, require notices, approvals and other communications to and from Inpex. A new or successor representative may be designated by notice to such effect signed by all the Contractors 67 63 comprising a Contractor Group given to the parties to this Agreement ten days in advance of any such change. Until receipt of any such notice, the parties to this Agreement and the Other Trust Agreements may rely on any notice, approval, instruction or other communication from or to the representative of a Contractor Group as binding upon each of the Contractors in such Contractor Group; provided, however, that except as provided in Section 8.5, nothing in this Agreement is intended to grant the representative of a Contractor Group (or any successor representative designated pursuant to this Section 13.3) any power or authority as among the Contractors in such Contractor Group themselves. The parties may designate additional addresses for particular communications as required from time to time, and may change any address, by notice given ten days in advance of such additions or changes. Immediately upon receiving communications by telex or telecopier a party may request a repeat transmittal of the entire communication or confirmation of particular matters. Any notice to or from the Tranche A Lender or the Agent under the Loan Agreement shall be given in accordance with this Section 13.3, addressed, if to the Tranche A Lender or the Agent at the address set forth in the Loan Agreement. 13.4 Incumbency Certificates; Notices. (a) Pertamina and each representative of a Contractor Group (or any successor representative of a Contractor designated pursuant to Section 13.3) shall each furnish the Bontang V Trustee, from time to time, with duly executed incumbency certificates showing the names, titles, and specimen signatures of the persons authorized on behalf of such party to give the notifications and approvals required by this Agreement. (b) The Producers shall arrange for the Accountants to provide the Bontang V Trustee from time to time with a notification signed by two of its partners, advising the Bontang V Trustee of the name and title, and furnishing a specimen signature, of the person or persons authorized to execute the certificates and other documents required by this Agreement. (c) Each Producer shall, and the Producers shall cause the Accountants to, agree with the Bontang V Trustee upon "test-key" arrangements for the purpose of authenticating communications between them respectively which authorize, accomplish, direct or otherwise deal with the transfer of money under this Agreement. If the Bontang V Trustee or any Producer receives such a communication which does not comply with such arrangements, such 68 64 recipient shall notify the sender of such failure to comply, requesting correction thereof, and shall take no action in accordance with such communication until such correction is effected. (d) Each of the Contractors shall furnish the Bontang V Trustee, from time to time, with such certificates or other evidence as the Bontang V Trustee may reasonably require showing the names, titles, and specimen signatures of the persons authorized on behalf of such party to make the payment arrangements contemplated by Section 8.4. Each Contractor shall also furnish the Bontang V Trustee, from time to time, with its address to which the reports required by Section 9.2 shall be sent. (e) The Bontang V Trustee shall furnish the Producers with notice of the officers of the Bontang V Trustee who are authorized to act on its behalf in the performance by the Bontang V Trustee of its duties under this Agreement. 13.5 No Amendment Except in Writing. This Agreement may not be revoked, amended, modified, varied or supplemented except by an instrument in writing signed by all of the parties hereto. 13.6 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, UNITED STATES OF AMERICA, APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective duly authorized signatories as of the date first above written. PERUSAHAAN PERTAMBANGAN MINYAK DAN GAS BUMI NEGARA (PERTAMINA) By /s/ FAISAL ABDAOE ---------------------------- Name: Faisal Abdaoe Title: President-Director 69 65 VIRGINIA INDONESIA COMPANY UNION TEXAS EAST KALIMANTAN LIMITED By /s/ TERRY QUINN By /s/ ALAN CUNNINGHAM ------------------------- ----------------------- Name: Terry Quinn Name: Alan Cunningham Title: Vice President & CFO Title: Assistant Secretary UNIVERSE GAS & OIL VIRGINIA INTERNATIONAL COMPANY, INC. COMPANY By /s/ TOSHIO NORIMATSU By /s/ RICHARD L. SMERNOFF ------------------------- ----------------------- Name: Toshio Norimatsu Name: Richard L. Smernoff Title: General Manager Title: Finance Director Business Development TOTAL INDONESIE OPICOIL HOUSTON, INC. By /s/ BERNARD VITRY By /s/ ROY C.H. CHIU ------------------------- ----------------------- Name: Bernard Vitry Name: Roy C.H. Chiu Title: President & General Title: President Manager UNOCAL INDONESIA COMPANY LASMO SANGA SANGA LIMITED By /s/ DONALD A. MACKAY By /s/ RICHARD L. SMERNOFF ------------------------- ----------------------- Name: Donald A. Mackay Name: Richard L. Smernoff Title: Assistant Treasurer Title: Finance Director INDONESIA PETROLEUM, LTD. BANKAMERICA INTERNATIONAL By /s/ KAZUO YOSHIKAWA By /s/ GUY J. REY-HERME ------------------------- ----------------------- Name: Kazuo Yoshikawa Name: Guy J. Rey-Herme Title: Executive Senior Title: Attorney-in-Fact Managing Director 70 APPOINTMENT OF ACCOUNTANTS UNDER BONTANG V TRUSTEE AND PAYING AGENT AGREEMENT ___________________________________ Reference is made to the Bontang V Trustee and Paying Agent Agreement dated as of July 1, 1995 (the "Bontang V Trustee and Paying Agent Agreement"), among the undersigned parties and BankAmerica International. Terms defined in the Bontang V Trustee and Paying Agent Agreement shall have the same meanings herein as so defined. Pursuant to Section 8.3 of the Bontang V Trustee and Paying Agent Agreement the independent public accounting firm of Hanadi Sujendro & Co., Member firm of Klynveld Peat Marwick Goerdeler, and its successors from time to time, is hereby appointed to act as the Accountants thereunder. In preparation of the certificates required pursuant to Section 8.3 of the Bontang V Trustee and Paying Agent Agreement such Accountants are authorized to rely upon confirmations from the auditors of the Total Group and the Unocal Group with respect to the percentages in which natural gas produced under their respective Production Sharing Contracts is shared among such groups and Pertamina. Dated July 1, 1995. PERUSAHAAN PERTAMBANGAN MINYAK DAN GAS BUMI NEGARA (PERTAMINA) By _____________________________ Name: Title: VIRGINIA INDONESIA COMPANY UNION TEXAS EAST KALIMANTAN LIMITED By _________________________ By ________________________ Name: Name: Title: Title: 71 VIRGINIA INTERNATIONAL COMPANY UNIVERSE GAS & OIL COMPANY, INC. COMPANY, INC. By _________________________ By ________________________ Name: Name: Title: Title: OPICOIL HOUSTON, INC. TOTAL INDONESIE By _________________________ By ________________________ Name: Name: Title: Title: LASMO SANGA SANGA LIMITED UNOCAL INDONESIA COMPANY By _________________________ By ________________________ Name: Name: Title: Title: INDONESIA PETROLEUM, LTD. By ________________________ Name: Title: EX-10.4 5 AMEND #1 - BADAK TRUSTEE & PAYING AGENT AGREEMENT 1 AMENDMENT NO. 1 TO AMENDED AND RESTATED BADAK TRUSTEE AND PAYING AGENT AGREEMENT AMENDMENT No. 1 dated as of July 1, 1995 among (i) Continental Bank International, not in its individual capacity but solely as Trustee under the Bontang I Trust Agreement (as defined below); and (ii) PERUSAHAAN PERTAMBANGAN MINYAK DAN GAS BUMI NEGARA, VIRGINIA INTERNATIONAL COMPANY, VIRGINIA INDONESIA COMPANY, LASMO SANGA SANGA LIMITED, UNION TEXAS EAST KALIMANTAN LIMITED, OPICOIL HOUSTON, INC., UNIVERSE GAS & OIL COMPANY, INC., TOTAL INDONESIE, UNOCAL INDONESIA COMPANY and INDONESIA PETROLEUM, LTD. W I T N E S S E T H : WHEREAS, the parties hereto (or their predecessors in interest) are parties to the Badak Trustee and Paying Agent Agreement originally dated as of July 15, 1974, as amended and restated as of February 9, 1988 (the "Bontang I Trust Agreement"); and WHEREAS, the parties hereto have determined that the Trust Agreement should be further amended as provided herein. NOW, THEREFORE, the parties hereto agree as follows: 1. The definition of "LNG Sales Contract" in the Bontang I Trust Agreement is hereby amended so as to read in its entirety as follows: " "LNG Sales Contract" means the LNG Sales Contract dated as of December 3, 1973, as heretofore and hereafter amended or extended up to the period ending on December 31, 1999 (but excluding any and all extensions, supplements, modifications, renewals or amendments applicable to periods subsequent to December 31, 1999) between Pertamina and The Chubu Electric Power Co., Inc., The Kansai Electric Power Co., Inc., Kyushu Electric Power 1 2 Co., Inc., Nippon Steel Corporation, and Osaka Gas Company, Ltd. ("Buyers")." 2. Section 1.1 of the Bontang I Trust Agreement is hereby amended so as to read in its entirety as follows: "1.1 Pursuant to Section 10.5 of the LNG Sales Contract, Article 7 of the Base Load Supply Agreements, and Article 6 of the KCO Supply Agreements, Pertamina hereby designates, and the Contractors hereby agree to the designation of, the Trustee named herein as the Trustee and Paying Agent to which all amounts which become due and payable by each Buyer under the LNG Sales Contract and applicable to LNG from the Bontang Plant shall be paid. Notwithstanding the foregoing or any other provision hereof to the contrary, the parties hereto acknowledge and agree that all amounts which become due and payable by the Buyers under the LNG Sales Contract (which term shall, solely for this sentence, include any extensions, renewals and amendments applicable to periods subsequent to December 31, 1999) with respect to cargoes required to be delivered at any time on or after January 1, 2000 shall not constitute Badak Trust Funds, and if received by the Trustee shall be paid over to the trustee under the Bontang V Trustee and Paying Agent Agreement dated as of July 1, 1995." 3. Section 1.2 of the Bontang I Trust Agreement is hereby amended by (i) deleting the word "All" at the beginning of Section 1.2 and inserting in lieu thereof the phrase "Subject to the second sentence of Section 1.1, all" and (ii) deleting the word "Immediately" at the beginning of the last sentence of Section 1.2 and inserting in lieu thereof the phrase "Subject to the second sentence of Section 1.1, immediately." 4. Section 1.3 of the Bontang I Trust Agreement is hereby amended by deleting the word "All" at the beginning of Section 1.3 and inserting in lieu thereof the phrase "Subject to the second sentence of Section 1.1, all." 5. Except as amended hereby, the Trust Agreement remains unchanged and in full force and effect. 6. THIS AMENDMENT SHALL BE GOVERNED BY AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, UNITED STATES OF AMERICA. 7. This Amendment may be executed in any number of counterparts by the different parties hereto on separate counterparts, each of which when so executed and 2 3 delivered shall be an original, but all such counterparts together shall constitute one and the same instrument. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed by their respective duly authorized signatories as of the date hereof. The Trustee CONTINENTAL BANK INTERNATIONAL, as Trustee aforesaid By: /s/ VINCENT CHORNEY ------------------------------------------- Name: Vincent Chorney Title: Attorney-in-Fact Producers PERUSAHAAN PERTAMBANGAN MINYAK DAN GAS BUMI NEGARA (PERTAMINA) By: /s/ F. ABADA'OE ------------------------------------------- Name: F. Abada'oe Title: President Director VIRGINIA INDONESIA COMPANY By: /s/ TERRY N. QUINN ------------------------------------------- Name: Terry N. Quinn Title: Vice President and C.F.O. VIRGINIA INTERNATIONAL COMPANY By: /s/ RICHARD L. SMERNOFF ------------------------------------------- Name: Richard L. Smernoff Title: Attornery-in-fact Virginia International Company 3 4 LASMO SANGA SANGA LIMITED By: /s/ RICHARD L. SMERNOFF ------------------------------------------- Name: Richard L. Smernoff Title: Finance Director, LASMO plc UNION TEXAS EAST KALIMANTAN LIMITED By: /s/ R. A. CUNNINGHAM ------------------------------------------- Name: R. A. Cunningham Title: Assistant Secretary OPICOIL HOUSTON, INC. By: /s/ ROY, C.H. CHIU ------------------------------------------- Name: Roy, C. H. Chiu Title: President, Opicoil Houston, Inc. UNIVERSE GAS & OIL COMPANY, INC. By: /s/ TOSHIO NORIMATSU ------------------------------------------- Name: Toshio Norimatsu Title: General Manager TOTAL INDONESIE By: /s/ B. VITRY ------------------------------------------- Name: B. Vitry Title: President & General Manager 4 5 UNOCAL INDONESIA COMPANY By: /s/ DONALD A. MACKAY ------------------------------------------- Name: Donald A. MacKay Title: Assistant Treasurer INDONESIA PETROLEUM, LTD. By: /s/ KAZUO YOSHIKAWA ------------------------------------------- Name: Kazuo Yoshikawa Title: Executive Senior Managing Director 5 EX-10.5 6 AMEND #1 - BONTANG EXCESS SALES TRUSTEE 1 AMENDMENT NO. 1 TO AMENDED AND RESTATED BONTANG EXCESS SALES TRUSTEE AND PAYING AGENT AGREEMENT AMENDMENT No. 1 dated as of July 1, 1995 among (i) Continental Bank International, not in its individual capacity but solely as Trustee under the Bontang Excess Sales Trustee and Paying Agent Agreement; and (ii) PERUSAHAAN PERTAMBANGAN MINYAK DAN GAS BUMI NEGARA, VIRGINIA INTERNATIONAL COMPANY, VIRGINIA INDONESIA COMPANY, LASMO SANGA SANGA LIMITED, UNION TEXAS EAST KALIMANTAN LIMITED, OPICOIL HOUSTON, INC., UNIVERSE GAS & OIL COMPANY, INC., TOTAL INDONESIE, UNOCAL INDONESIA COMPANY and INDONESIA PETROLEUM, LTD. W I T N E S S E T H : WHEREAS, the parties hereto are parties to the Bontang Excess Sales Trustee and Paying Agent Agreement originally dated as of November 1, 1986, as amended and restated as of February 9, 1988 (the "Trust Agreement"); and WHEREAS, the parties hereto have determined that the Trust Agreement should be further amended as provided herein. NOW, THEREFORE, the parties hereto agree as follows: 1. Article 1 of the Trust Agreement is hereby amended by adding a new definition of "CPC 1994 Sales Contract" to be inserted immediately following the definition of "CPC" and reading in its entirety as follows: 1 2 " "CPC 1994 Sales Contract" means the Memorandum of Agreement between PERTAMINA and Chinese Petroleum Corporation for Sale and Purchase of LNG during 1998 and 1999, dated as of December 6, 1994, as amended or modified from time to time." " 2. Article 1 of the Trust Agreement is hereby amended by adding a new definition of "KGC 1994 Sales Contract" to be inserted immediately following the definition of "Inpex" and reading in its entirety as follows: " "KGC 1994 Sales Contract" means the Memorandum of Agreement for Purchase and Sale of LNG during 1995-1999, dated September 30, 1994, by and between PERTAMINA and Korea Gas Corporation, as amended or modified from time to time." " 3. The definition of "Excess Sales Contracts" in Article 1 of the Trust Agreement is hereby amended so as to read in its entirety as follows: "Excess Sales Contracts" shall mean: (i) "Agreement for Sale and Purchase of Liquefied Natural Gas" dated August 29, 1986, between PERTAMINA and Total International Limited, as hereafter amended; (ii) "Invoice Settlement Agreement for 1973 LNG Sales Contract" and "Invoice Settlement Agreement for 1981 LNG Sales Contract" both dated as of March 31, 1987, between PERTAMINA and divers Japanese buyers of LNG, as hereafter amended, including any extension or renewal thereof; (iii) "LNG Sales and Purchase Contract (Yokkaichi LNG Trade)" dated August 28, 1987, between PERTAMINA and Nusantara Gas Services Company, Inc., as hereafter amended, including any extension or renewal thereof; (iv) the Korean Quantities Agreement, it being understood that after December 31, 1999, the Korean Carry-Over Quantities will not be supplied under the 1973 LNG Sales Contract (as defined in the Korean Quantities Agreement) and the 1973 LNG Sales Contract will not be the Designated LNG Sales Contract (as defined in the Korean Quantities Agreement); and any other contract (other than any Excluded Excess Sales Contracts, the CPC 1994 Sales Contract and the KGC 1994 Sales Contract), for the sale of LNG to be manufactured using existing or future excess capacity at the Bontang 2 3 Plant; provided, that the KGC 1994 Sales Contract will constitute an Excess Sales Contract solely with respect to cargoes delivered thereunder through and including December 31, 1997." 4. Section 2.1 of the Trust Agreement is hereby amended by deleting the word "Pursuant" at the beginning of Section 2.1 and inserting in lieu thereof the phrase "Subject to the last sentence of Section 2.3, pursuant." 5. Section 2.2 of the Trust Agreement is hereby amended by (i) deleting the word "All" at the beginning of Section 2.2 and inserting in lieu thereof the phrase "Subject to the last sentence of Section 2.3, all" and (ii) deleting the word "Immediately" at the beginning of the last sentence of Section 2.2 and inserting in lieu thereof the phrase "Subject to the last sentence of Section 2.3, immediately." 6. Section 2.3 of the Trust Agreement is hereby amended by adding a new sentence at the end thereof providing as follows: "Notwithstanding the foregoing or any other provision hereof to the contrary, the parties hereto acknowledge and agree that (a) all amounts which become due and payable by the buyer under the KGC 1994 Sales Contract for, or otherwise relating to, cargoes delivered under the KGC 1994 Sales Contract at any time on or after January 1, 1998, (b) all amounts which become due and payable by the buyer under the CPC 1994 Sales Contract and (c) all amounts which become due and payable on or after January 1, 2000 by the buyers under the 1973 LNG Sales Contract (as defined in the Korean Quantities Agreement, (the amounts described in (a), (b) and (c) referred to collectively as the "Bontang V Trust Funds") shall not constitute Bontang Excess Sales Trust Funds. Any Bontang V Trust Funds received by the Bontang Excess Sales Trustee shall be paid over to the trustee under the Bontang V Trustee and Paying Agent Agreement dated as of July 1, 1995." 7. Except as amended hereby, the Trust Agreement remains unchanged and in full force and effect. 8. THIS AMENDMENT SHALL BE GOVERNED BY AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, UNITED STATES OF AMERICA. 9. This Amendment may be executed in any number of counterparts by the different parties hereto on separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts together shall constitute one and the same instrument. 3 4 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed by their respective duly authorized signatories as of the date hereof. The Trustee CONTINENTAL BANK INTERNATIONAL, as Trustee aforesaid By: /s/ VINCENT CHORNEY ---------------------------------------- Name: Vincent Chorney Title: Attorney-in-Fact Producers PERUSAHAAN PERTAMBANGAN MINYAK DAN GAS BUMI NEGARA (PERTAMINA) By: /s/ F. ABDA'OE ---------------------------------------- Name: F. Abda'oe Title: President Director VIRGINIA INDONESIA COMPANY By: /s/ TERRY N. QUINN ---------------------------------------- Name: Terry N. Quinn Title: Vice President and C.F.O. 4 5 VIRGINIA INTERNATIONAL COMPANY By: /s/ RICHARD L. SMERNOFF -------------------------------------------- Name: Richard L. Smernoff Title: Attornery-in-fact Virginia International Company LASMO SANGA SANGA LIMITED By: /s/ RICHARD L. SMERNOFF -------------------------------------------- Name: Richard L. Smernoff Title: Finance Director, LASMO plc UNION TEXAS EAST KALIMANTAN LIMITED By: /s/ R. A. CUNNINGHAM -------------------------------------------- Name: R. A. Cunningham Title: Assistant Secretary OPICOIL HOUSTON, INC. By: /s/ ROY, C. H. CHIU -------------------------------------------- Name: Roy, C. H. Chiu Title: President, Opicoil Houston, Inc. UNIVERSE GAS & OIL COMPANY, INC. By: /s/ TOSHIO NORIMATSU -------------------------------------------- Name: Toshio Norimatsu Title: General Manager 5 6 TOTAL INDONESIE By: /s/ B. VITRY -------------------------------------------- Name: B. Vitry Title: President & General Manager UNOCAL INDONESIA COMPANY By: /s/ DONALD A. MACKAY -------------------------------------------- Name: Donald A. MacKay Title: Assistant Treasurer INDONESIA PETROLEUM, LTD. By: /s/ KAZUO YOSHIKAWA -------------------------------------------- Name: Kazuo Yoshikawa Title: Executive Senior Managing Director 6 EX-10.6 7 AMEND #1 - BONTANG III LOAN AGREEMENT 1 AMENDMENT NO. 1 TO BONTANG III LOAN AGREEMENT AMENDMENT No. 1 dated as of July 1, 1995 among (i) Continental Bank International, not in its individual capacity but solely as Trustee under the Bontang III Trustee and Paying Agent Agreement among it and Perusahaan Pertambangan Minyak dan Gas Bumi Negara, Virginia International Company, Virginia Indonesia Company, Lasmo Sanga Sanga Limited, Union Texas East Kalimantan Limited, Opicoil Houston, Inc., Universe Gas & Oil Company, Inc., Total Indonesie, Unocal Indonesia Company and Indonesia Petroleum, Ltd. (or their predecessors in interest), dated as of February 9, 1988; and (ii) TRAIN-E FINANCE CO., LTD., as Tranche A Lender; and (iii) THE INDUSTRIAL BANK OF JAPAN TRUST COMPANY, as Agent on behalf of the Majority Tranche B Lenders. W I T N E S S E T H : WHEREAS, the parties hereto are parties to the Bontang III Loan Agreement dated as of February 9, 1988 (the "Bontang III Loan Agreement"); and WHEREAS, the parties hereto have determined that the Bontang III Loan Agreement should be amended as provided herein. NOW, THEREFORE, the parties hereto agree as follows: 1. The definition of "Future Long Term Sales Contracts" in Section 1 of the Bontang III Loan Agreement is hereby amended so as to read in its entirety as follows: " "Future Long Term Sales Contracts" means, with respect to any First Contingent Support Period referred to in clauses (ii), (iii) and (iv) of the definition thereof, all Long Term Sales Contracts in -1- 2 effect and with respect to which payment or performance or both are not yet completed (and any proceeds of which have not been deposited in the relevant Contingent Support Account under the Bontang Excess Sales Trust Agreement) at the time of commencement of such First Contingent Support Period, other than (i) Special Long Term Sales Contracts, (ii) the Memorandum of Agreement between Pertamina and Chinese Petroleum Corporation for the Sale and Purchase of LNG during 1998 and 1999, dated and effective as of December 6, 1994, as amended or modified from time to time, and (iii) the Memorandum of Agreement by and between Pertamina and Korea Gas Corporation for Purchase and Sale of LNG during 1995-1999, dated September 30th, 1994, as amended or modified from time to time, provided, that such Memorandum of Agreement shall constitute a Future Long Term Sales Contract and a Contingent Support Agreement solely with respect to cargoes delivered thereunder through and including December 31, 1997"; 2. The definition of "1973 LNG Sales Contract" in Section 1 of the Bontang III Loan Agreement is hereby amended so as to read in its entirety as follows: " "1973 LNG Sales Contract" means the LNG Sales Contract, dated as of December 3, 1973, between Pertamina and The Chubu Electric Power Co., Inc., The Kansai Electric Power Co., Inc., Kyushu Electric Power Co., Inc., Nippon Steel Corporation and Osaka Gas Company, Ltd. as heretofore and hereafter amended, including any extension of renewal thereof, as supplemented by the Memorandum of Agreement between Pertamina and The Chubu Electric Power Co., Inc., The Kansai Electric Power Co., Inc. and Kyushu Electric Power Co., Inc., dated as of January 1, 1983, as heretofore and hereafter amended, including any extension or renewal thereof; provided that the term "1973 LNG Sales Contract" shall exclude any amendments, extensions or renewals thereof with respect to the period on or after January 1, 2000 and on and after such date the 1973 LNG Sales Contract will no longer constitute a Contingent Support Agreement." 3. Except as amended hereby, the Bontang III Loan Agreement remains unchanged and in full force and effect. 4. THIS AMENDMENT SHALL BE GOVERNED BY AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, UNITED STATES OF AMERICA. 5. This Amendment may be executed in any number of counterparts by the different parties hereto on separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts -2- 3 together shall constitute one and the same instrument. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed by their respective duly authorized signatories as of the date hereof. The Trustee CONTINENTAL BANK INTERNATIONAL, as Trustee aforesaid By: /s/ VINCENT CHORNEY ------------------------------------ Name: Vincent Chorney Title: Attorney-in-Fact The Lenders TRAIN-E FINANCE CO., LTD. By: /s/ KANJI SEKIMOTO ------------------------------------ Name: Kanji Sekimoto Title: Senior Managing Director THE INDUSTRIAL BANK OF JAPAN TRUST COMPANY, as Agent on Behalf of the Majority Tranche B Lenders By: /s/ KENICHIRO MURATA ------------------------------------ Name: Kenichiro Murata Title: Attornery-in-fact -3- EX-10.7 8 2ND AMENDED 1973 LNG SALES CONTRACT 1 SECOND AMENDED AND RESTATED 1973 LNG SALES CONTRACT BETWEEN PERUSAHAAN PERTAMBANGAN MINYAK DAN GAS BUMI NEGARA (PERTAMINA), AS SELLER AND CHUBU ELECTRIC POWER CO., INC. THE KANSAI ELECTRIC POWER CO., INC. KYUSHU ELECTRIC POWER CO., INC. NIPPON STEEL CORPORATION OSAKA GAS CO., LTD. TOHO GAS CO., LTD., AS BUYERS 2 SECOND AMENDED AND RESTATED 1973 LNG SALES CONTRACT CONTENTS
Page ARTICLE 1 - DEFINITIONS 2 ARTICLE 2 - SALE AND PURCHASE 10 ARTICLE 3 - SOURCES OF SUPPLY 11 ARTICLE 4 - TRANSPORTATION AND UNLOADING 13 ARTICLE 5 - ONSHORE FACILITIES 23 ARTICLE 6 - DURATION OF CONTRACT 26 ARTICLE 7 - QUANTITIES 27 ARTICLE 8 - CONTRACT SALES PRICE 36 ARTICLE 9 - TRANSFER OF TITLE 50 ARTICLE 10 - INVOICES AND PAYMENT 51 ARTICLE 11 - QUALITY 55 ARTICLE 12 - PROGRAMMING AND SHIPPING MOVEMENTS 56 ARTICLE 13 - MEASUREMENTS AND TESTS 58 ARTICLE 14 - DUTIES, TAXES AND CHARGES 66 ARTICLE 15 - FORCE MAJEURE 67 ARTICLE 16 - ARBITRATION 69 ARTICLE 17 - APPLICABLE LAW 70 ARTICLE 18 - BUYERS' COORDINATOR 71 ARTICLE 19 - CONFIDENTIALITY 72 ARTICLE 20 - NOTICES 73 ARTICLE 21 - ASSIGNMENT 75 ARTICLE 22 - AMENDMENTS 76 ARTICLE 23 - SEVERALTY 77 ARTICLE 24 - DETAILS OF PERFORMANCE 78 ARTICLE 25 - SCOPE 79 ARTICLE 26 - COUNTERPARTS 80 ARTICLE 27 - EFFECTIVE DATE AND APPLICABILITY 81 SCHEDULE A - TESTING AND METHODS
3 SECOND AMENDED AND RESTATED 1973 LNG SALES CONTRACT This LNG Sales Contract ("Contract"), dated as of the 3rd day of December, 1973, amended by Amendment No.1 dated as of the 31st day of August, 1976, amended and restated as of the 1st day of January, 1990 and further amended as of the 1st day of June, 1992 ("First A/R"), is hereby further amended and restated as of the 3rd day of August, 1995 ("Second A/R") by and between PERUSAHAAN PERTAMBANGAN MINYAK DAN GAS BUMI NEGARA ("PERTAMINA"), a state enterprise of the Republic of Indonesia ("Seller"), on the one hand, and CHUBU ELECTRIC POWER CO., INC. ("Chubu Electric"), THE KANSAI ELECTRIC POWER CO., INC. ("Kansai Electric"), KYUSHU ELECTRIC POWER CO., INC. ("Kyushu Electric"), NIPPON STEEL CORPORATION ("Nippon Steel"), OSAKA GAS CO., LTD. ("Osaka Gas") and TOHO GAS CO., LTD. ("Toho Gas"), all corporations organized and existing under the laws of Japan (referred to individually as "Buyer" and collectively as "Buyers"), on the other hand. WITNESSETH: WHEREAS: 1. Seller and Buyers have, from time to time, amended the Contract to incorporate new or revised terms relating to the sale and purchase of LNG; 2. By Memorandum of Agreement Re : 1973 LNG Sales Contract Extension ("1973 Extension MOA") dated as of October 6, 1994, and subsequent agreements Seller and Buyers agreed to extend the Contract to December 31, 2010 on agreed terms and conditions and to reflect such extension in this Second A/R after the finalization of transportation arrangements; and 3. Seller and Buyers have agreed on the appropriate revisions to reflect the transportation arrangements in accordance with the provisions of the 1973 Extension MOA, and Seller and Buyers desire to amend and restate the Contract accordingly. NOW, THEREFORE, Seller and each Buyer hereby agree to the following terms: -1- 4 ARTICLE 1 - DEFINITIONS The terms or expressions below will have the following meanings in this Contract: 1.1 Actual Cubic Foot A volume equal to the volume of a cube whose edge is one foot. 1.2 Adverse Weather Conditions As defined in Section 4.4(b)(iii). 1.3 Affiliate As defined in Article 19. 1.4 Allowance The quantity of LNG by which a Buyer reduces a Quantity Deficiency in respect of a given calendar year pursuant to the provisions of Section 7.3(d). 1.5 Allowance Restoration Period As defined in Section 7.3(d)(iv). 1.6 Annual Program As defined in Section 12.1(a). 1.7 Badak Facility The liquefaction plant facilities, including processing, storage, loading and related facilities and the Natural Gas transmission pipelines from the field to the liquefaction plant, located in East Kalimantan, Indonesia. 1.8 Base Rate The rate of interest announced from time to time by Citibank, N.A., New York ("Citibank") as Citibank's base rate. The base rate may not be the lowest rate charged by Citibank to its borrowers. If there is any doubt as to the Base Rate for any period, a written confirmation signed by an officer of Citibank shall conclusively establish the Base Rate in effect for such period. In the event that Citibank shall for any reason cease quoting a base rate as described above, then a comparable rate shall be determined using rates then in effect and shall be used in place of the said base rate. -2- 5 1.9 British Thermal Unit (BTU) The amount of heat required to raise the temperature of one avoirdupois pound of pure water from 59.oF to 60.oF at an absolute pressure of 14.696 pounds per square inch. 1.10 Burmah Burmah Gas Transport Limited, a Liberian corporation, and its successors and assigns. 1.11 Burmah Vessels The following LNG tankers: LNG Capricorn, LNG Gemini, LNG Leo, LNG Libra, LNG Taurus, and LNG Virgo. 1.12 Business Day in Japan Every day other than Saturdays, Sundays, National Holidays (including compensatory days), and January 2 and 3. 1.13 Buyer Force Majeure As defined in Section 4.6(a). 1.14 Buyers' Coordinator Japan Indonesia LNG Co., Ltd. or such other entity as may be designated by Buyers pursuant to Article 18. 1.15 Buyer's Facilities For the purposes of Section 15.1 E in respect of any Buyer, the Receiving Facilities of such Buyer and such other facilities directly related to the use of LNG which, if not operational, would reduce the amount of LNG which such Buyer is able to receive hereunder. 1.16 Certificate As defined in Section 3.2(a). 1.17 Contract Sales Price As defined in Section 8.1. 1.18 Coordinated Maintenance Schedule As defined in Section 12.3. -3- 6 1.19 Cubic Meter A volume equal to the volume of a cube whose edge is one meter. 1.20 Delivery Point The point at which the flange coupling of Buyer's unloading line joins the flange coupling of the LNG discharging manifold on board the LNG Tanker. 1.21 Demurrage Event As defined in Section 4.4(a). 1.22 Dwiputra The LNG tanker Dwiputra. 1.23 Exercising Buyer As defined in Section 7.3(d)(i). 1.24 Extension Fleet The Burmah Vessels and the Dwiputra. 1.25 Final Settlement As defined in Section 8.5(a). 1.26 Fixed Quantity As defined in Section 7.1. 1.27 Fixed Quantity Period As defined in Section 7.1. 1.28 Force Majeure Deficiency As defined in Section 7.6(a). 1.29 G.P.A. Gas Processors Association. 1.30 Gas Supply Area The areas in East Kalimantan, Indonesia, covered by production sharing contracts between Seller and Seller's Suppliers, and such other nearby contract areas as Seller may designate from time to time. -4- 7 1.31 Gross Heating Value The quantity of heat expressed in British Thermal Units produced by the complete combustion in air of one cubic foot of anhydrous gas, at a temperature of 60.0oF and at an absolute pressure of 14.696 pounds per square inch, with the air at the same temperature and pressure as the gas, after cooling the products of the combustion to the initial temperature of the gas and air, and after condensation of the water formed by combustion. 1.32 Inward Steaming Time As defined in Section 4.4(b). 1.33 Liquefied Natural Gas (LNG) Natural Gas in a liquid state at or below its boiling point at a pressure of approximately one atmosphere. 1.34 LNG Element or LE As defined in Section 8.1. 1.35 LNG Tanker One of the vessels in the Extension Fleet or a Substitute LNG Tanker. 1.36 Loading Port The port located at the Badak Facility. 1.37 M.S.A. The Maritime Safety Agency of Japan. 1.38 Make-Good LNG As defined in Section 7.3(d)(iv). 1.39 Make-Good Obligation The obligation of a Buyer as set forth in Section 7.3(d)(iv) to take and pay for LNG in an amount (measured in BTU's) equal to each Allowance exercised. 1.40 Make-Up LNG As defined in Section 7.5. 1.41 Natural Gas Any hydrocarbon or mixture of hydrocarbons consisting essentially of methane, other hydrocarbons, and non-combustible gases in a gaseous state and -5- 8 which is extracted from the subsurface of the earth in its natural state, separately or together with liquid hydrocarbons. 1.42 Net Payments The amount paid after deducting any amounts pursuant to section 8.3 of a Charter and any other credits or sums which Seller receives with respect to the applicable Seller's Transportation Arrangements (but excluding any credits or sums which Seller receives with respect to the cargo or with respect to the Omnibus and Waiver Agreements); provided, however, that any sums received by Seller from Seller's Transporter in the nature of damages or other compensation for breach of contract or received by Seller from Guarantors under the Guarantee shall be net of any attorney's fees, arbitrators' fees and costs, and any other third party costs and expenses incurred by Seller in recovering such damages or compensation. 1.43 Ninety-Day Schedule As defined in Section 12.2. 1.44 Non-Utilization Cost As defined in Section 4.6(a). 1.45 Notice of Readiness The notice given at the time prescribed in Section 4.4(b) by the Master of each LNG Tanker or its agent to Buyer by letter, telegraph, telex, facsimile, radio or telephone that such LNG Tanker is ready to discharge LNG. 1.46 Outward Steaming Time As defined in Section 4.4(b). 1.47 Pacific Pacific LNG Transport Limited, a Bahamas corporation, and its successors and assigns. 1.48 Proved Remaining Recoverable Reserves Reserves which have been proved to a high degree of certainty by reason of actual completion, successful testing or in certain cases by adequate core analyses, and which are defined areally by reasonable geological interpretation of structure and known continuity of oil-or gas-saturated material. -6- 9 1.49 Quantity Deficiency As defined in Section 7.3(a). 1.50 Receiving Facilities The LNG receiving terminal facilities which Buyers have constructed or will construct at the Unloading Ports including, without limitation, berthing and unloading facilities, LNG storage tanks, vessel services facilities and regasification plants. 1.51 Restoration Quantities As defined in Section 7.6(a). 1.52 Safety Pledge Letter As defined in Section 4.1(f). 1.53 Seller's Facilities For the purpose of Section 15.1 D, Natural Gas reservoirs or (whether heretofore constructed or to be constructed) production facilities in the field, the facilities for transportation of Natural Gas from the field, and the Badak Facility. 1.54 Seller Force Majeure As defined in Section 8.3(a)(ii). 1.55 Seller's Gas Supply Obligation From time to time on any given date, the amount of Natural Gas required to satisfy the remaining obligations of Seller on such date to supply LNG or Natural Gas from the Gas Supply Area plus the amount of Natural Gas from the Gas Supply Area required to supply any additional commitment or commitments which Seller anticipates making. 1.56 Seller's Suppliers In respect of portions of the LNG to be sold hereunder : (a) Total Indonesie and Indonesia Petroleum, Ltd.; (b) Virginia Indonesia Company, Lasmo Sanga Sanga Limited, OPICOIL Houston, Inc., Union Texas East Kalimantan Limited, Universe Gas & Oil Company, Inc. and Virginia International Company; (c) Unocal Indonesia Company; (d) Indonesia Petroleum, Ltd.; and -7- 10 such other entities that may, from time to time, execute a Supply Agreement with Seller; and any successors and assigns of any of the aforesaid suppliers who shall have agreed in writing to be bound by all of the obligations of their respective assignors under the applicable Supply Agreement with Seller. 1.57 Seller's Transportation Arrangements The Fleetwide Agreement, Charters, and Paying Agent Agreement, each dated as of July 25, 1995, between Burmah and Seller, and Deed of Guarantee and all other agreements and instruments referred to therein to which Seller is a party; the Time Charter Party dated June 2, 1994 between Pacific and Seller and all other agreements and instruments referred to therein to which Seller is a party; and all agreements and instruments to which Seller is a party relating to a Substitute LNG Tanker; including, in each case, any amendments and supplements thereto; but, in each case, only to the extent related to the transportation of LNG hereunder. 1.58 Seller's Transporter Burmah, Pacific or any entity providing a Substitute LNG Tanker. 1.59 Standard Cubic Foot (scf) The quantity of Natural Gas, free of water vapor, occupying a volume of one Actual Cubic Foot at a temperature of 60.0oF and at an absolute pressure of 14.696 pounds per square inch. 1.60 Substitute LNG Tanker An ocean-going vessel suitable for transporting LNG (other than a vessel in the Extension Fleet) which Buyers have consented pursuant to Section 4.1(c) that Seller may use for transportation of LNG hereunder. 1.61 Supply Agreement As defined in Section 3.1. 1.62 Take-or-Pay Quantity As defined in Section 7.5. 1.63 TE Formula As defined in Section 8.3(a). 1.64 TE Period As defined in Section 8.3(a). -8- 11 1.65 Transportation Element or TE As defined in Section 8.1. 1.66 Unloading Ports The ports at locations in or near Nagoya, Osaka, Himeji, Kita-Kyushu and Oita, and at such other locations in Japan as may be agreed between Seller and Buyers, where the Receiving Facilities are or will be constructed. 1.67 U.S.CPI The United States Consumer Price Index (determined by reference to : All Urban Consumers (CPI-U); Unadjusted U.S. City Average; All items; with a base period of 1982-84 = 100) as published by the U.S. Department of Labor, Bureau of Labor Statistics. 1.68 Capitalized terms defined in Seller's Transportation Arrangements for the Burmah Vessels and not otherwise defined herein shall have the same meanings when used in this Contract. -9- 12 ARTICLE 2 - SALE AND PURCHASE Seller agrees to sell and deliver, and each Buyer agrees to purchase, receive and pay for, or to pay for if not taken, LNG, in the quantities and at the price and in accordance with the other terms and conditions set forth in this Contract. -10- 13 ARTICLE 3 - SOURCES OF SUPPLY 3.1 Sources of Supply The Natural Gas to be processed into LNG and sold hereunder is to be produced from the Gas Supply Area. Seller represents that Seller will maintain throughout the term hereof the right to sell all quantities of LNG to be sold hereunder. In this connection, Seller represents that it has executed or will execute from time to time, as required in order to maintain the right to sell the quantities of LNG to be sold hereunder, agreements with production sharing contractors of Seller under which agreements such production sharing contractors make available for sale hereunder their respective interests in the quantities of LNG to be sold hereunder ("Supply Agreement"). Notwithstanding any reference to Seller's Suppliers in this Contract, Seller is fully responsible for performance of all the obligations of Seller hereunder. 3.2 Reserves of Natural Gas (a) Seller has furnished Buyers with statements, each entitled "Certificate" and each dated on or prior to May 31, 1994, of DeGolyer and MacNaughton expressing its estimate of Proved Remaining Recoverable Reserves of Natural Gas in the Gas Supply Area. Seller represents that such estimated quantity is in excess of Seller's Gas Supply Obligation as of the date hereof. Hereafter and throughout the term hereof, before committing additional Natural Gas from the Gas Supply Area to sale or other utilization, Seller shall secure from an independent petroleum engineering consultant firm of recognized standing in the petroleum industry, qualified by reputation and experience in estimating reserves of oil and Natural Gas in subsurface reservoirs, the written statement (the "Certificate") of such firm expressing its estimate of Proved Remaining Recoverable Reserves of Natural Gas in the Gas Supply Area in an amount at least equal to Seller's Gas Supply Obligation. Seller shall provide Buyers with copies of each Certificate of such independent petroleum engineering consultant firm on which Seller relies in making any such commitment for supply of Natural Gas from the Gas Supply Area. Seller shall also furnish all supporting documentation provided by such independent petroleum engineering consultant firm in connection with the issuance of such Certificate. (b) If, during the term hereof, Seller obtains information from its activities (including the activities of Seller's production sharing contractors) in -11- 14 operating fields in the Gas Supply Area which indicates unforeseen adverse changes in the Proved Remaining Recoverable Reserves of Natural Gas in the Gas Supply Area, Seller will promptly inform Buyers of such situation and will further inform Buyers of any measures which Seller may be required to take in order to fulfill its obligations under this Contract. -12- 15 ARTICLE 4 - TRANSPORTATION AND UNLOADING 4.1 General (a) Seller shall be responsible for the continuous transportation from the Badak Facility to the Receiving Facilities of the LNG to be sold and delivered under this Contract and shall use LNG Tankers for transportation of such LNG. (b) Buyers shall be entitled to participate in transportation as follows, at all times ensuring that such participation is performed in an expedient manner: (i) For the Burmah Vessels and Substitute LNG Tankers: (A) Buyers shall have the right to participate (consistent with Seller's Transportation Arrangements) in all meetings between Seller and Seller's Transporter related to payments to be made by Buyers under this Contract, to attend any arbitration proceeding pursuant to Seller's Transportation Arrangements, and to receive copies of reports, including audited statements, that Seller receives from Seller's Transporter and any correspondence relating to amounts to be paid by Buyers therefor; (B) Seller shall consult and agree with Buyers prior to exercising or expressly waiving its rights (other than rights related to day-to-day operations) under Seller's Transportation Arrangements that will significantly affect amounts payable by Buyers and shall make reasonable efforts to implement any reasonable requests of Buyers in connection therewith; (C) Seller shall consult and agree with Buyers prior to amending or terminating in whole or in part Seller's Transportation Arrangements or concluding any new Seller's Transportation Arrangements; and (D) Seller shall permit Buyers to participate in negotiations relating to any such amendment or termination or -13- 16 conclusion of such new Seller's Transportation Arrangements. (ii) For the Dwiputra, except as provided below, Buyers shall not be entitled to review or participate in any audit of costs or to otherwise participate in Dwiputra-related matters. Buyers shall have the following rights: (A) to receive general information regarding the maintenance and repair of the Dwiputra, including information regarding proposed dry-docking plans and time schedules of significant maintenance and repair and results thereof, and to receive copies of shipyard reports which identify any significant maintenance problems with the Dwiputra; (B) to make general observations to Seller regarding maintenance and repair of the Dwiputra; (C) to attend Dwiputra ship/shore meetings to the extent such meetings relate to the Receiving Facilities; and (D) to receive such information in respect of the Dwiputra as is reasonably necessary to verify the calculations required in Section 4.6 and Article 8. It is acknowledged that, prior to the date hereof, Buyers together with Seller and Burmah have commissioned and participated in a technical evaluation of the longevity of the Burmah Vessels, conducted by Lloyd's Register of Shipping, which confirmed that the condition, structural integrity, reliability, and availability of the Burmah Vessels are satisfactory to provide transportation under this Contract. (c) If it is necessary to employ a vessel to substitute for a vessel in the Extension Fleet to deliver the quantities under this Contract, Seller shall arrange a Substitute LNG Tanker, utilizing any rights it might have under Seller's Transportation Arrangements for the Burmah Vessels or utilizing other vessels that are then available. Buyers shall have the right to offer a proposed Substitute LNG Tanker to Seller. Seller shall finalize its arrangements for a Substitute LNG Tanker only after obtaining Buyers' consent, such consent not to be unreasonably withheld. If Buyers do not consent to the arrangements which Seller -14- 17 proposes for a Substitute LNG Tanker, then Seller and Buyers shall discuss the availability of alternatives. If agreement on an alternative is not reached within a reasonable period of time, such unavailability of transportation shall be deemed to constitute an event of force majeure pursuant to Section 15.1 I and the provisions of Article 15 shall apply. (d) Seller will endeavor as far as reasonably practicable to coordinate the day-to-day operations of the LNG Tankers and to coordinate the operations of the LNG Tankers with common standards, documentation and procedures with respect to: (i) vessel/terminal interface, including joint ship/shore meetings; (ii) vessel compliance with applicable national and international regulations; (iii) cargo documentation; (iv) vessel performance; (v) cargo transfer procedures; and (vi) Loading Port Conditions of Use and Omnibus and Waiver Agreements. Seller shall coordinate the LNG Tankers regarding implementation of the Annual Program and Ninety-Day Schedule, including (i) scheduling of dry-dock and lay-up periods; and (ii) scheduling of Substitute LNG Tankers. (e) Before using an LNG Tanker to undertake a voyage to a buyer other than Buyers during or after the Fixed Quantity Period 2000, Seller shall obtain Buyers' consent, such consent not to be unreasonably withheld. (f) Seller shall use its best efforts to cause Seller's Transporters to take such actions as are reasonably required by Japanese authorities to evidence responsibility for safe operation of LNG Tankers in accordance with the letter of the vessel operator addressed to Japanese port authorities in connection with permission for LNG Tankers to enter into Unloading Ports ("Safety Pledge Letter"). Seller shall arrange or shall cause Seller's Transporters to arrange for such number and types of fireboats and -15- 18 escort vessels as are required by the Japanese authorities to attend the LNG Tankers so as to permit safe and efficient movement of the LNG Tanker within the maritime safety areas located in the approaches to and from the Unloading Ports. 4.2 Notices of LNG Tanker Movements and Characteristics of LNG Cargoes (a) With respect to each cargo of LNG to be delivered hereunder, Seller shall give, or cause the Master of the LNG Tanker to give, to the Buyer at the Receiving Facility at which such cargo is to be delivered, the following notices: (i) A first notice, which shall be sent upon the departure of the LNG Tanker from the Loading Port and which shall set forth the time and date that loading was completed, the volume, expressed in Cubic Meters, of LNG loaded on board the LNG Tanker, and the estimated time of arrival of the LNG Tanker at Buyer's Unloading Port; (ii) A second notice, which shall be sent ninety-six (96) hours prior to the estimated time of arrival of the LNG Tanker at the Unloading Port; (iii) A third notice, which shall be sent forty-eight (48) hours prior to the estimated time of arrival of the LNG Tanker at the Unloading Port; (iv) A fourth notice, which shall be sent twenty-four (24) hours prior to the estimated time of arrival of the LNG Tanker at the Unloading Port; (v) A final notice, which shall be sent five (5) hours prior to the estimated time of arrival of the LNG Tanker at the Unloading Port; and (vi) A Notice of Readiness, which shall be given at the time prescribed in Section 4.4(b) below. (b) Within thirty-six (36) hours after departure of each LNG Tanker from the Loading Port, Seller shall notify Buyer, for Buyer's information -16- 19 only, of the following characteristics of the LNG comprising its cargo as determined at the time of loading: (i) the Gross Heating Value per unit, and (ii) the molecular percentage of hydrocarbon components and nitrogen. 4.3 Obligations of Buyers at Unloading Ports Each Buyer shall cooperate with Seller's Transporters or their agents and the Master of each LNG Tanker directed to an Unloading Port to ensure the continuous and efficient delivery of LNG hereunder. Each Buyer shall provide a safe berth for prompt berthing of LNG Tankers at its Receiving Facility and shall operate the Receiving Facility, or ensure that it is operated, so as to permit discharge of the cargo of each LNG Tanker as quickly as possible. During discharge of each cargo of LNG, Buyer shall return to the LNG Tanker natural gas in such quantities as are necessary for the safe unloading of the LNG at such rates, pressures and temperatures as may be required by the LNG Tanker design. 4.4 Demurrage at Unloading Ports (a) Subject to paragraph (c) below, in the event used laytime exceeds allowed laytime in unloading an LNG Tanker, as provided in paragraph (b) below ("Demurrage Event"), Buyer shall pay to Seller, or for Seller's account if so directed by Seller, demurrage at the daily rate in U.S. Dollars (which shall be prorated for a portion of a day) determined in accordance with the following formula: TE (reduced to exclude 436,821,000 voyage costs) in effect Demurrage rate = 0.14 x MMBTU's x on the day the Demurrage Event occurs -------------------------------------- 365 (b) Laytime to be allowed at each Unloading Port at which the LNG Tanker discharges LNG being delivered hereunder shall be thirty-six (36) consecutive hours extended by any period of delay which is caused by: (i) reasons attributable to Seller, the LNG Tanker or its Master, crew, owner or operator; -17- 20 (ii) force majeure as defined in Article 15; provided, however, that delays resulting from the application of safety regulations or similar governmental action shall not be considered as an event of force majeure for the purposes hereof; or (iii) "Adverse Weather Conditions", which for purposes hereof means weather and/or sea conditions actually experienced at the Unloading Port which are sufficiently severe either: (A) to prevent all LNG Tankers from proceeding to berth, discharging or departing from berth in accordance with the weather standards prescribed in the M.S.A. standard published regulations, including the Safety Pledge Letters, or (B) to cause an actual determination by the Master that it is unsafe for the LNG Tanker to berth, discharge or depart from berth. The period of delay to an LNG Tanker caused by Adverse Weather Conditions shall not be considered to extend past the time during which such Adverse Weather Conditions actually prevailed except where additional delay is caused by the occupation of the berth by another LNG Tanker. Upon arrival of each LNG Tanker at the agreed location off each Unloading Port, and subject to any mutually agreed time restrictions, the Master of the LNG Tanker or its agent shall give Notice of Readiness to Buyer or its agent that such LNG Tanker is ready to discharge LNG, berth or no berth. Laytime shall commence upon receipt of Notice of Readiness and shall continue to run until the LNG Tanker clears the Unloading Port (i.e., when leaving the Unloading Port passes the agreed position for tendering Notice of Readiness). From used laytime calculated as above shall be deducted all Inward Steaming Time and all Outward Steaming Time. For the purpose of this paragraph (b): (A) "Inward Steaming Time" shall mean the total time elapsed between Notice of Readiness and "all fast" in berth, minus the period of any delay or stoppage that prevents the forward movement of the LNG Tanker to the berth if and to the extent the total of all such delays or stoppages exceeds six (6) hours, and (B) "Outward Steaming Time" shall mean the total of all hours between the disconnection of the discharge and return lines and -18- 21 the LNG Tanker clearing the Unloading Port, minus the period(s) of any delay or stoppage that prevents the outward movement of the LNG Tanker. Any delay caused to an LNG Tanker by quarantine at an Unloading Port (except that related to the presence aboard or processing of refugees picked up by the LNG Tanker) shall count as used laytime. (c) If a Demurrage Event occurs, Seller shall take such actions which are prudent and reasonable to prevent any modification of the Ninety-Day Schedule and any other ninety-day schedule of loadings at the Loading Port, including appropriate direction of the LNG Tanker. In the event that the Demurrage Event causes the LNG Tanker involved to be delayed in arriving at the Loading Port so that it is unable to commence loading on the scheduled loading date (in effect at the time of the Demurrage Event) or such delay requires the modification of the date of commencement of loading of any other LNG vessel, any Seller's invoice to Buyer in accordance with the provisions of Section 10.2 with respect to such Demurrage Event shall remain in effect; otherwise, no payment for the Demurrage Event shall be due and Seller shall notify Buyer either that it is not invoicing Buyer or that it is canceling any invoice already submitted to Buyer. 4.5 Effect of Unloading Port Delays; Excess Boil-Off (a) Notwithstanding the provisions of Section 11.1, if the Gross Heating Value of LNG to be delivered hereunder is higher than the limits set forth in Section 11.1 by reason of boil-off occurring during a delay in unloading an LNG Tanker of more than forty-eight (48) hours after Notice of Readiness has been given, such LNG shall be deemed to have met the quality specifications of this Contract regarding Gross Heating Value. (b) If an LNG Tanker is delayed in berthing and/or commencement of unloading for a reason that would not result in an extension of allowed laytime under Section 4.4(b), and if, as a result thereof, the commencement of unloading is delayed beyond thirty (30) hours after Notice of Readiness has been given, then, for each full hour by which commencement of unloading is delayed beyond such thirty-hour period, Buyer shall pay Seller an amount, on account of excess boil-off, equal to the Contract Sales Price multiplied by the number of MMBTU's per -19- 22 hour by which such boil-off reduces the aggregate number of BTU's of a full cargo at berth. The hourly BTU reduction rate to be applied for such purpose shall be determined by actual boil-off experience as determined at appropriate intervals. 4.6 Non-Utilization Cost (a) If there is an event of force majeure pursuant to Section 15.1 affecting a Buyer ("Buyer Force Majeure") which results in an LNG Tanker being less than fully utilized under this Contract, then the Buyer so affected shall pay to Seller, with respect to such period of Buyer Force Majeure, an amount in U.S. Dollars calculated in accordance with the following formula ("Non-Utilization Cost"): NUC = [(TN - VA) x BFM] - BFMS where: NUC = The Non-Utilization Cost to be paid to Seller with respect to quantities not taken and expected not to be taken during a Fixed Quantity Period as a result of a Buyer Force Majeure; TN = TE Non-Utilization which is the TE in U.S.$/MMBTU in effect at the time BFM is not taken and expected not to be taken; VA = Voyage Expenses Amount which is the component of TN in U.S.$/MMBTU that is attributable to voyage costs; BFM = Buyer Force Majeure Quantities which is the quantities not taken and expected not to be taken during a Fixed Quantity Period as a result of a Buyer Force Majeure, such quantities to be reduced to the extent that an LNG Tanker undertakes voyages to other Buyers or to other LNG customers in order to deliver cargoes that would have been delivered to the affected Buyer but for the Buyer Force Majeure; and -20- 23 BFMS = Buyer Force Majeure Savings which is the savings in U.S. Dollars, if any, in transportation costs during the period of Buyer Force Majeure, calculated as the sum of: BS + DS where: BS = Burmah Savings which is the reduction in payments by Seller resulting from the lay-up of a Burmah Vessel or a Substitute LNG Tanker during the period of Buyer Force Majeure or pursuant to any provision of Seller's Transportation Arrangements for such vessels applicable to such period of Buyer Force Majeure; and DS = Dwiputra Savings which is, if the Dwiputra is in lay-up due to the Buyer Force Majeure, an amount equal to the reduction in the Burmah Vessel daily Hire Rate applicable if a Burmah Vessel were laid up for the same number of days (as established pursuant to paragraph 2.5.3(b) of Schedule III of the Charters), multiplied by the number of days the Dwiputra is in lay-up. (b) During a period of Buyer Force Majeure, Seller and Buyers will consult on whether an LNG Tanker should be laid up and/or placed in non-utilization status, and Seller agrees to give preference to first removing a Burmah Vessel from providing transportation under this Contract before removing any other LNG Tanker. (c) Seller shall invoice the affected Buyer for amounts due under this Section 4.6 periodically so as to ensure Seller receives Non-Utilization Cost payments at generally the same time it would have received the Transportation Element for quantities not taken and expected not to be taken as a result of the Buyer Force Majeure. Buyer shall pay such invoice in accordance with the terms of Section 10.2. In connection with the determination of Non-Utilization Cost, Seller shall furnish to the -21- 24 affected Buyer such available estimates, accounting and other data as may reasonably be required by such Buyer to establish the basis upon which and the manner in which such Non-Utilization Cost is calculated. If in fact a BFM cargo is actually taken by the end of the applicable Fixed Quantity Period, that part of the invoice for such cargo relating to the Transportation Element shall be reduced by the amount of Non-Utilization Cost previously paid with respect thereto. (d) In the event Seller terminates a Charter for a Burmah Vessel as a result of a Buyer Force Majeure, Seller shall invoice the affected Buyer promptly and such Buyer shall pay the amount of the Required Termination Payment under the Charter (excluding any amount under item (D) of BE of Section 8.3(a)(i)) to Seller in lump sum amount in accordance with the terms of Section 10.2. Upon such termination, the affected Buyer shall have no further obligation to pay Non-Utilization Cost other than payments due with respect to periods prior to the effective date of such termination. If Seller decides for its own reasons not to terminate the non-utilized LNG Tanker, Seller and the affected Buyer will determine whether the affected Buyer has any further obligation to make payments under this Section 4.6 based on the benefits to be received by such Buyer if the Charter for the non-utilized LNG Tanker is continued. -22- 25 ARTICLE 5 - ONSHORE FACILITIES 5.1 Receiving Facilities Each Buyer shall ensure, at no cost to Seller, that its Receiving Facilities shall be compatible with the general specifications of the Extension Fleet and shall include the following: A. Berthing facilities capable of receiving LNG Tankers having an overall length of up to 950 feet, a beam of up to 150 feet and a draft of up to 36 feet 6 inches, which the LNG Tankers can always safely reach, fully laden, and safely depart, and at which the LNG Tankers can lie safely berthed and discharge safely afloat at all times; B. Unloading facilities capable of receiving LNG at a rate which will permit the discharging of cargo from a fully loaded LNG Tanker within twelve (12) hours of pumping time at the full pumping rate specified by the LNG Tanker design; C. A vapor return line system of sufficient capacity to transfer to the LNG Tankers quantities of natural gas necessary for the safe unloading of LNG at such rates, pressures and temperatures as may be required by the LNG Tanker design; D. Systems for timely provision of the LNG Tankers with adequate fresh water and bunker oil, if necessary; E. Facilities allowing access to the LNG Tankers from onshore adequate for the handling and delivery of ship's stores, provisions and spare parts to the LNG Tankers; F. Shore-based tanks and loading lines for liquid nitrogen adequate to service the LNG Tankers; G. LNG storage tanks of adequate capacity to receive and store a full cargo of LNG upon each scheduled arrival of an LNG Tanker; H. Appropriate systems for necessary radio communications with LNG Tankers; and I. Regasification plant. -23- 26 5.2 Badak Facility Seller shall ensure, at no cost to Buyers, that the Badak Facility shall include the following: A. Natural Gas transmission pipelines for the delivery to the liquefaction plants of Natural Gas for processing into LNG; B. LNG processing facilities of sufficient capacity to process Natural Gas into the LNG to be sold and delivered hereunder; C. LNG storage tanks of adequate capacity for the storage of quantities of LNG for subsequent loading on to LNG Tankers; D. Berthing facilities capable of receiving LNG Tankers having an overall length of up to 950 feet, a beam of up to 150 feet and a draft of up to 36 feet 6 inches, which the LNG Tankers can always safely reach, fully laden, and safely depart, and at which the LNG Tankers can lie safely berthed and load safely afloat at all times; E. Loading facilities capable of loading LNG at a rate which will permit the full loading of an LNG Tanker within twelve (12) hours of pumping time; F. Facilities allowing access to the LNG Tankers from onshore adequate for the handling and delivery of ship's stores, provisions, liquid nitrogen and spare parts to the LNG Tankers; and G. Appropriate systems for necessary radio communications with LNG Tankers. 5.3 Compatibility of Receiving Facilities and LNG Tankers (a) Seller shall ensure, at no cost to Buyers, that the Dwiputra is compatible with the Receiving Facilities existing as of the date hereof. (b) Seller shall ensure that each Substitute LNG Tanker is compatible with the Receiving Facilities, and any costs necessary to ensure such compatibility shall be included in S under Section 8.3(a)(i). (c) Buyers shall ensure, at no cost to Seller, that the construction or modification of any Receiving Facility (other than the Receiving -24- 27 Facilities existing as of the date hereof) is compatible with the Extension Fleet. (d) With respect to paragraphs (a) through (c) above, Seller and Buyers shall consult to determine the most effective manner to achieve the required compatibility. -25- 28 ARTICLE 6 - DURATION OF CONTRACT The terms of this Contract shall continue in effect until the expiration of the parties' respective obligations hereunder with respect to the sale and purchase of LNG or the earlier termination of this Contract pursuant to Section 10.5. If Seller and any Buyer or Buyers so agree at least seven (7) years before the time this Contract would otherwise expire, the term of this Contract may, as to such Buyer or Buyers, be extended on such terms and conditions as may be mutually agreed. -26- 29 ARTICLE 7 - QUANTITIES 7.1 Required Deliveries During each calendar year or portion thereof specified below (each such period being called a "Fixed Quantity Period"), Seller shall sell and deliver to each Buyer, and each Buyer shall purchase, receive and pay for, or pay for if not taken, at the Contract Sales Price, a quantity of LNG having a heating value as specified for such Buyer for such Fixed Quantity Period (each such quantity being called a "Fixed Quantity") as follows:
CALENDAR FIXED QUANTITY FIXED QUANTITIES FOR EACH BUYER YEAR PERIOD (BILLIONS OF BTU'S) -------- ------------ ----------------------------------------------------------------- CHUBU KANSAI KYUSHU NIPPON OSAKA TOHO TOTAL ELECTRIC ELECTRIC ELECTRIC STEEL GAS GAS -------- -------- -------- ------ ----- ---- -------- 1977 OCT 18-DEC 31 6,079.70 1,957.78 1,641.03 1,547.77 7,081.48 - 18,307.76 1978 FULL YEAR 54,792 29,389 37,149 29,387 39,741 - 190,458 1979 FULL YEAR 71,650 67,459 69,063 30,293 45,801 - 284,266 1980 FULL YEAR 87,848 108,520 77,516 31,004 54,260 - 359,148 1981 FULL YEAR 87,850 124,023 77,515 31,006 59,427 - 379,821 1982 FULL YEAR 87,850 124,023 77,515 31,006 67,179 - 387,573 1983 FULL YEAR 117,050 141,543 83,355 31,006 67,179 - 440,133 1984-1986 EACH FULL YEAR 117,050 132,783 86,275 31,006 67,179 - 434,293 1987-1999 EACH FULL YEAR 111,210 132,783 80,435 28,066 67,179 2,940 422,613 2000-2010 EACH FULL YEAR 111,210 132,783 80,435 32,251 67,179 12,963 436,821
The above Fixed Quantities are subject to adjustment as provided in Section 7.3(a). After giving effect to any such adjustment, the term "Fixed Quantity" shall mean the applicable Fixed Quantity as so adjusted, and the respective obligations of Seller to sell and deliver, and of each Buyer to purchase, receive and pay for, or pay for if not taken, Fixed Quantities of LNG in any Fixed Quantity Period shall apply to the applicable Fixed Quantities as so adjusted. 7.2 Single-Port Cargoes; Reallocation of Cargoes; Rate of Deliveries (a) All deliveries of LNG by Seller and receipt thereof by a Buyer shall be made in fully loaded LNG Tanker lots and, except as provided in paragraph (c) below, each LNG Tanker shall be unloaded at a single Receiving Facility in Japan. -27- 30 (b) Each Buyer, upon appropriate notice to Seller, may reallocate all of an LNG Tanker cargo from one Buyer to another Buyer and/or from one Receiving Facility to another, and also may reallocate any part of an LNG Tanker cargo from one Buyer to another within one Receiving Facility. In case of such reallocation, the ownership of such cargo or part thereof shall be transferred directly from Seller to the new Buyer in place of the original Buyer, but the respective Fixed Quantities of the Buyers concerned shall not be changed and the cargo in question shall be deemed to be received by the original Buyer in connection with its take or pay obligations under Section 7.3(a). Each such reallocation shall be documented in a form to be established by Seller and Buyers, executed by the original Buyer and the Buyer which will actually receive the cargo, which document will provide that the receiving Buyer will assume and be responsible to Seller for performance of the obligations of the original Buyer in respect of such cargo, and that such cargo is deemed to be taken by the original Buyer in connection with its take or pay obligations under Section 7.3(a). Buyers will exercise the right to reallocate cargoes in a manner that will not materially disrupt the shipping schedules. (c) In addition to paragraph (b) above, upon reasonable advance notice to Seller from the Buyer concerned, in case of emergency, Seller and Buyers may reallocate all or any part of an LNG Tanker cargo from one Receiving Facility to another, if such change would not materially disrupt the shipping schedules. (d) Within each Fixed Quantity Period, the quantities to be delivered by Seller and received by each Buyer shall be delivered at rates and intervals and in quantities which are reasonably constant over the course of such Fixed Quantity Period and give effect to the maintenance, downtime and shipping schedules provided for in Article 12, so as to assure, as nearly as possible, continuous full utilization of the LNG Tankers, an even production rate at the Badak Facility, and even rates of deliveries at each Buyer's Receiving Facility. -28- 31 7.3 Buyer's Obligation to Take or Pay (a) If, during any Fixed Quantity Period, any Buyer should fail to take the full Fixed Quantity applicable thereto, such Buyer shall pay Seller, at the Contract Sales Price (reduced to exclude that portion of the Transportation Element related to voyage costs) in effect as of the last day of such Fixed Quantity Period, for the quantities of LNG required to be purchased but which were not taken by such Buyer during such Fixed Quantity Period (any such quantity deficiency being called a "Quantity Deficiency"), subject, however, to paragraphs (b), (c) and (d) below and the following: (i) If, after taking into account all adjustments provided for in this Section 7.3 including any Allowance that has been exercised, there remains a Quantity Deficiency for a Buyer at the end of any Fixed Quantity Period, such Buyer may carry forward and add to the Fixed Quantity for the next succeeding Fixed Quantity Period: (A) the full amount when such Quantity Deficiency amounts to less than a full LNG Tanker cargo lot; or (B) any fractional portion of a cargo when the Quantity Deficiency exceeds one full LNG Tanker cargo lot. Amounts so carried forward shall not be included in such Quantity Deficiency. (ii) If, at the end of any Fixed Quantity Period, a Buyer has purchased and received quantities of LNG hereunder in excess of the Fixed Quantity of such Buyer for such Fixed Quantity Period other than Make-Up LNG, Make-Good LNG, or Restoration Quantities, the excess shall be applicable to reduce the Fixed Quantity of such Buyer for the next succeeding Fixed Quantity Period. (b) The obligation (set forth in paragraph (a) above) of each Buyer with regard to any Fixed Quantity Period to pay for Fixed Quantities not taken shall be reduced by the quantity of LNG which such Buyer was unable to purchase because of an event of force majeure as defined in Article 15 affecting either Seller or such Buyer or because of Seller's -29- 32 failure for any other reason to make such quantity available for sale in accordance with this Contract. (c) In calculating the quantity of LNG delivered by Seller and purchased by a Buyer for each Fixed Quantity Period, quantities delivered and purchased within the first seven (7) days of the next following Fixed Quantity Period shall be included, provided such quantities were scheduled in the Annual Program for the Fixed Quantity Period with respect to which the calculation is being made. (d) The obligation of a Buyer pursuant to paragraph (a) above to pay for quantities not taken may be reduced by the exercise of an Allowance as follows: (i) Each Allowance must be exercised by notice in writing given to Seller by Buyers' Coordinator, which will act as agent for Buyers in connection with the exercise of all Allowances. A notice of the exercise of an Allowance given by Buyers' Coordinator shall be deemed to have both the authority of the Buyer on whose behalf it is expressed to be given (the "Exercising Buyer") and the consent of all other Buyers. No purported direct exercise of an Allowance by a Buyer shall be valid. A notice of exercise of an Allowance must be received by Seller on or before January 12 of the year following the Fixed Quantity Period in respect of which such Allowance is exercised. (ii) Each notice of exercise of an Allowance shall specify the Exercising Buyer and the quantity of LNG by which such Buyer's obligation to take and/or pay during the relevant Fixed Quantity Period is to be reduced. (iii) No Allowance can be exercised which would result in the aggregate Allowances then outstanding for all Buyers during any Fixed Quantity Period being in excess of 21,841 billion BTU's. Subject to the provisions of subparagraph (viii) below, an Allowance (or portion thereof) is outstanding until either the Make-Good Obligation pursuant to subparagraph (iv) below is satisfied, or payment in respect thereof is made pursuant to subparagraph (vi) below. -30- 33 (iv) Each Allowance shall be made good in full (even if it amounts to a fractional portion of a full cargo lot) by the purchase of an equal quantity of LNG in excess of Fixed Quantities ("Make-Good LNG") within a period commencing January 1 of the year following the Fixed Quantity Period in relation to which such Allowance was exercised and ending with the earlier of the expiration of five (5) calendar years or March 31, 2011 ("Allowance Restoration Period"). Any Make-Good LNG purchased after the expiration of the last Fixed Quantity Period but prior to March 31, 2011 shall be paid for at the LNG Element in effect as of the date of delivery plus the actual transportation costs incurred in delivering the Make-Good LNG. No Buyer may satisfy a Make-Good Obligation or any part thereof during a Fixed Quantity Period until it shall first have taken its Fixed Quantity for such Fixed Quantity Period. If a Buyer has more than one Allowance outstanding, the Make-Good Obligations in respect thereof shall be satisfied in the same chronological order in which such Allowances were exercised. One or more Buyers may satisfy the Make-Good Obligation with respect to an Allowance exercised by another Buyer. (v) Every request for Make-Good LNG shall be made by Buyers' Coordinator on behalf of a named Buyer in accordance with Section 12.1 and shall specify the Allowance to which it relates. Each such request shall be deemed to have the authority of the named Buyer and, if the named Buyer is not the Exercising Buyer, of the Exercising Buyer. (vi) If, at the expiration of the Allowance Restoration Period, a Make-Good Obligation has not been satisfied in full, the Exercising Buyer (whether or not a Buyer other than the Exercising Buyer was named in any relevant request for Make-Good LNG) shall pay for any unsatisfied portion of the Make-Good Obligation at the Contract Sales Price (reduced to exclude that portion of the Transportation Element related to voyage costs) in effect as of the last day of such Allowance Restoration Period. The Buyer shall have the right to request Make-Up LNG pursuant to Section 7.5 with respect to any such payment. -31- 34 (vii) Seller shall not be obligated to reserve any LNG production or shipping capacity for the purposes of permitting Buyers to satisfy Make-Good Obligations. (viii) In the event that Buyers' Coordinator requests quantities of LNG to satisfy a Make-Good Obligation on behalf of a Buyer or Buyers which Seller is unable to make available for any reason, including force majeure, the following provisions shall apply: (A) The Exercising Buyer shall be relieved from the obligation pursuant to subparagraph (vi) above to pay for such requested quantities as of the expiration of the Allowance Restoration Period relating thereto, except in the case where subparagraph (viii)(C) below requires such payment; (B) Such requested quantities shall be deemed not outstanding for the purposes of subparagraph (iii) above until Seller shall (whether during or after the Allowance Restoration Period) have offered the same to such Buyer but shall then be outstanding if such Buyer does not accept such offer; any change in the quantity outstanding due to a failure to accept such an offer shall not result in an acceleration of any then outstanding Make-Good Obligations; and (C) Such requested quantities shall be scheduled for delivery at any time prior to March 31, 2011 as mutually agreed by Seller and the Buyer having the Make-Good Obligation. If such requested quantities have not been scheduled as of the end of the last Fixed Quantity Period and should Seller be unable to deliver such requested quantities during the three (3) months following the last Fixed Quantity Period, Buyer shall have no further obligation in respect thereof. If Seller gives Buyer reasonable notice that such requested quantities are available during such three-month period but Buyer does not take such quantities, Buyer shall then make the payment required under subparagraph (vi) above. -32- 35 7.4 Allocation of Deliveries between Buyers and Other Purchasers (a) Whenever deliveries of LNG by Seller under this Contract must be reduced by reason of an event or circumstance of force majeure as defined in Article 15 affecting Seller's ability to produce or load LNG from the Badak Facility, an allocation of quantities then available for sale at the Badak Facility will be made between Buyers and other purchasers of LNG from the Badak Facility. At such times the total quantities available for sale from the Badak Facility shall be allocated among the purchasers therefrom (including Buyers) pro rata in the ratio of their respective quantities which are eligible for allocation as provided below. The quantities eligible for such allocation shall, as to Buyers, be the portion of the Fixed Quantities to be purchased hereunder during the period of such force majeure and, as to other purchasers, be those fixed or contract quantities of LNG which are committed for sale from the Badak Facility during the period of such force majeure in satisfaction of Seller's contracts with other purchasers which provide for sales of LNG over a term of at least fifteen (15) years. (b) If such an event of force majeure does not preclude full production and loading of all Fixed Quantities under the allocation formula described in paragraph (a) above, but is of such an extent as to prevent Seller from producing and loading all Make-Up LNG, Make-Good LNG and Restoration Quantities scheduled for delivery from the Badak Facility to Buyers and equivalent quantities scheduled for delivery from the Badak Facility to other purchasers under LNG sales contracts providing for deliveries over a term of at least fifteen (15) years, quantities of such LNG as are available shall be allocated between Buyers and such other purchasers in proportion to the respective quantities so scheduled. 7.5 Take-or-Pay Make-Up If, pursuant to Section 7.3(a) or Section 7.3(d)(vi), a Buyer shall have paid for any quantity of LNG which was not taken by such Buyer ("Take-or-Pay Quantity"), then, in any subsequent year, the said Buyer may purchase up to an equal quantity of LNG from Seller as make-up LNG ("Make-Up LNG") (to the extent not previously made up). A Buyer may request Make-Up LNG by giving written notice to Seller as provided in Section 12.1. If, during any year for which Make-Up LNG has been requested, (i) Seller has uncommitted quantities of LNG available for such purpose, (ii) Seller has available LNG Tanker capacity which may be used to transport such Make-Up LNG, and (iii) such Buyer shall have first taken and paid for its Fixed Quantity for such year, then -33- 36 Seller shall sell and deliver to such Buyer the quantity of Make-Up LNG requested; provided, however, that after the expiration of three (3) months following the end of the last Fixed Quantity Period such Make-Up LNG shall only be made available if either Seller has at the time uncommitted shipping capacity available for the purpose or the Buyer provides transportation. A Buyer's right to purchase Make-Up LNG under this Section 7.5 shall expire on December 31, 2011 unless such Buyer shall have requested Make-Up LNG during the year 2011 and Seller shall have had insufficient uncommitted LNG to meet such request. In such circumstances, the parties shall consult to agree upon a deferred schedule for Buyer to take delivery of any outstanding balance of Take-or-Pay Quantity not made up by December 31, 2011. Each Buyer shall pay for Make-Up LNG at the Contract Sales Price in effect as of the date of delivery, reduced by the amount previously paid on account of all or that part of the Take-or-Pay Quantity being made up by such sale; provided, however, that any Make-Up LNG delivered after the end of the last Fixed Quantity Period shall be paid for at the LNG Element in effect as of the date of delivery (reduced by the amount previously paid as the LNG Element on account of all or that part of the Take-or-Pay Quantity being made up by such sale) plus the actual transportation costs incurred in delivering the Make-Up LNG. Take-or-Pay Quantities shall be made up, and prior payments applicable thereto applied, in the same chronological order in which such quantities accrued. 7.6 Force Majeure Deficiency (a) If, during any Fixed Quantity Period or Fixed Quantity Periods, all or any portion of the Fixed Quantity of LNG required to be taken by any Buyer therein is not delivered by Seller or taken by such Buyer by reason of force majeure as defined in Article 15 (any such quantity not taken for such reason being called a "Force Majeure Deficiency"), Seller and the Buyer or Buyers concerned shall each make best efforts to restore the Force Majeure Deficiency in full by Seller selling and the Buyer or Buyers purchasing such quantities of LNG prior to the expiration of the last Fixed Quantity Period. The restoration quantities so agreed ("Restoration Quantities") will be scheduled for delivery pursuant to Article 12 at the mutual convenience of the parties. As between a Force Majeure Deficiency resulting from force majeure affecting Seller and a Force Majeure Deficiency resulting from force majeure affecting a Buyer or Buyers, the Restoration Quantities applicable thereto shall be scheduled in the chronological order in which the force majeure events arose, but shall be subordinate to Make-Good LNG requested pursuant to Section 7.3(d) and Make-Up LNG requested -34- 37 pursuant to Section 7.5. Each Buyer shall pay for Restoration Quantities at the Contract Sales Price in effect as of the date of delivery. In the case of Restoration Quantities arising from an event of force majeure affecting a Buyer, that part of the invoice relating to the Transportation Element will be reduced by the amount of any Non-Utilization Cost previously paid by such Buyer under Section 4.6 on account of all or that part of the quantities being restored. (b) If an event of force majeure prevents or delays the performance by any Buyer of its obligations under this Contract and causes a reduction in deliveries of LNG and Seller sells to third parties quantities of LNG which Buyers are unable to purchase, then the Force Majeure Deficiency shall be reduced by the amount, if any, that the Seller's Gas Supply Obligation (including amounts so sold to third parties) exceeds the estimate of Proved Remaining Recoverable Reserves stated in the most recent Certificate as a result of such sales. 7.7 Allocation for Make-Good LNG, Make-Up LNG and Restoration Quantities Whenever Make-Good LNG is requested under Section 7.3(d), Make-Up LNG is requested under Section 7.5 and/or Restoration Quantities are requested under Section 7.6(a) by a Buyer or Buyers, and quantities are requested for similar purposes by other purchasers from the Badak Facility under contracts which provide for sales of LNG over a term of at least fifteen (15) years, and uncommitted quantities of LNG are not available from the Badak Facility to meet all such requests, then the quantities of LNG which are available from the Badak Facility for such purposes shall be allocated, as between such Buyer or Buyers on the one hand and such other purchasers on the other hand, based on the proportion of the contract quantities of each requesting purchaser to the total of the contract quantities of all of the requesting purchasers. 7.8 Order of Priority of Make-Good LNG and Make-Up LNG Make-Good LNG requested under Section 7.3(d) and Make-Up LNG requested under Section 7.5 shall be delivered in the priority specified by Buyers' Coordinator. -35- 38 ARTICLE 8 - CONTRACT SALES PRICE 8.1 Contract Sales Price The contract sales price applicable to the quantities of LNG to be sold and delivered at the Delivery Point and to any quantities of LNG required to be taken but which are not taken and are required to be paid for by a Buyer hereunder, expressed in United States Dollars per million British Thermal Units (U.S.$/MMBTU), ("Contract Sales Price") shall comprise an LNG element ("LNG Element" or "LE") and a transportation element ("Transportation Element" or "TE") and shall be determined in accordance with the following provisions of this Article 8. The LNG Element and the Transportation Element are subject to adjustment from time to time according to the following provisions of this Article 8 and the sum thereof as adjusted and in effect at any time shall be the Contract Sales Price. The Contract Sales Price to be applied to the BTU's comprising each cargo shall be that Contract Sales Price in effect as of the date of completion of unloading of such cargo. 8.2 LNG Element (a) The LNG Element included in the Contract Sales Price, as adjusted from time to time, shall be calculated according to the following formula: 9 A 1 U.S.CPIn LE = ---(Po x ----------)+ ---(Po' x --------) + C 10 U.S.$18.00 10 U.S.CPIo where: LE = the LNG Element (expressed in U.S.$/MMBTU); Po = U.S.$ 3.06/MMBTU; A = the arithmetic average of the realized export prices per barrel in U.S. Dollars, f.o.b. Indonesia, of all field classifications of Indonesian crude oils then being sold and exported by PERTAMINA, except premiums and except such prices for spot sales; Po' = U.S.$ 3.24/MMBTU; U.S.CPIn = in respect of the applicable calendar year, the average of the monthly values of U.S.CPI for the twelve-month -36- 39 period commencing with the month of November, fourteen (14) months prior to the beginning of the applicable calendar year, and ending with the month of October, three (3) months prior to the commencement of the applicable calendar year; U.S.CPIo = 143.8, being the arithmetic average of the monthly values of U.S.CPI for the twelve- month period, November 1992 through October 1993; and C = U.S.$ 0.012/MMBTU. (b) An adjustment of the LNG Element to reflect any change in U.S.CPI shall be made on and shall be effective as of January 1 of each calendar year, and further adjustments of the LNG Element shall be made as of each effective date on which: (i) the realized export prices of more than one of the field classifications of Indonesian crude oils sold by PERTAMINA shall have changed from the respective prices therefor included in the last preceding determination of "A" made pursuant to Section 8.2 (a); or (ii) two or more field classifications of such crude oils shall have been added to or deleted from the crude oils being sold by PERTAMINA since the date of the last preceding determination of "A" made pursuant to Section 8.2(a). Procedures for verifying changes in the realized export prices of all Indonesian crude oils and for determining the effective date of any adjustment of the LNG Element shall be separately agreed upon by Seller and Buyers. (c) Seller and Buyers shall agree separate procedures for handling corrections, revisions or changes in the calculation of U.S.CPI. It is agreed that if at any time the U.S. Department of Labor, Bureau of Labor Statistics discontinues publishing a report on U.S.CPI values, then Seller and Buyers shall agree upon an index method that reflects inflation in the United States of America's consumer prices to replace the discontinued U.S.CPI report. -37- 40 8.3 Transportation Element (a) Subject to Sections 8.4 and 8.5 below, the Transportation Element included in the Contract Sales Price shall be calculated for each twelve (12) month period effective as of April 1 of each year (each such period being called a "TE Period") in accordance with the following formula ("TE Formula"): TEn = The Transportation Element in U.S.$/MMBTU for the TE Period n (commencing on April 1 of year n) calculated as follows: TC + A + RA = ----------- AQ TC (Transportation Costs), A (Adjustments) and AQ (Annual Quantities) are estimates for the current calendar year based on information available at the time of the calculation of TEn; RA (Reconciliation Amount) is based on actual amounts for the previous calendar year. where: (i) Transportation Costs TC = B + D + V + S where: B = BHA - BE + BSA where: BHA = Burmah Hire Amount which is the Net Payments in U.S. Dollars to be made under Seller's Transportation Arrangements for the Burmah Vessels during year n with respect to: (A) the Burmah's Cost Component; (B) the Operating Cost Component (including any prior year Over/ Under Adjustment Amounts); -38- 41 (C) the Additional Cost Component; (D) to the extent not included in (B) above any amount paid to Seller's Transporter for savings in respect of change of registry and recrewing; and (E) any other amounts to be paid to Seller's Transporter under a Charter for the transportation of LNG hereunder; BE = Burmah Exclusions which is the amount in U.S. Dollars to be paid under Seller's Transportation Arrangements for the Burmah Vessels during year n with respect to: (A) Supplemental Costs under paragraph 2.4 of Schedule III of a Charter; (B) insurance for the benefit of Seller only, including costs of Seller's entry as time charterer under paragraph 2(e) of Schedule IV of a Charter; (C) costs in respect of Seller's unexcused failure to satisfy its obligations under Seller's Transportation Arrangements, including late payment fees under section 8.7 of a Charter; (D) amounts payable as Additional Cost Component that relate to changes to the vessel requested by Seller for Seller's sole benefit; (E) Seller's share of costs of a change of registry (excluding costs of a change of registry requested by Buyers) based on the proportion of benefits received by Seller; and -39- 42 (F) amounts payable for a Burmah Vessel when on-hire but unavailable due to the gross negligence of Seller; (G) requisition compensation payable by Charterer under Article 38 of a Charter; and (H) fifty percent (50%) of costs included in BHA relating to testing and calibration of measuring devices provided by Seller under Article 13; BSA = SA x NBC where: SA = Sharing Amount which is U.S.$315,000; and NBC = Number of Burmah Charters which is the number of Charters for the Burmah Vessels in effect during year n (adjusted for a partial year if a Charter for a Burmah Vessel is terminated during year n). D = DCA + DNVOC - DOH where: DCA = Dwiputra Capital Amount which is U.S.$19,108,000 ); and BHAM - BE + BR DNVOC = (--------------) - DLS NBC -40- 43 where: BHAM = Burmah Hire Amount Modified which is BHA modified to exclude all amounts with respect to the Burmah's Cost Component (but not any amounts included in BE); BR = Burmah Reductions which is the amount, in U.S. Dollars, by which BHAM would be increased if the following deductions for year n had not been taken into account: (A) adjustments for lay-up; (B) adjustments for Off-Hire or other unavailability; (C) adjustments due to a vessel being a Non-Utilized Vessel under the Fleetwide Agreement; and (D) adjustments for performance compensation; and DLS = Dwiputra Lay-up Savings which is an amount equal to the reduction in the Burmah Vessel daily Hire Rate applicable if a Burmah Vessel were laid up for the same number of days (as established pursuant to paragraph 2.5.3(b) of Schedule III of the Charters), multiplied by the number of days the Dwiputra is laid up. -41- 44 DOHD DOH = (DCA + DNVOC + DLS) x ---- 365 where: DOHD = Dwiputra Off-hire Days which is the number of days the Dwiputra is off-hire in year n. DCA, DNVOC and DOH shall be adjusted for a partial year if Seller's Transportation Arrangements for the Dwiputra are terminated during year n. PAA V = --- x EV BV where: PAA = Paying Agent Agreement Amount which is the Net Payments in U.S. Dollars to be made under the Paying Agent Agreement during year n as Voyage Expenses for voyages under this Contract, taking into account the prior year Voyage Over/Under Amount for voyages under this Contract; BV = Burmah Vessel Voyages which is the total number of voyages under this Contract of the Burmah Vessels and any Alternate Vessels for year n; and EV = Extension Fleet Voyages which is the total number of voyages under this Contract of the Extension Fleet and any Alternate Vessels for year n; S = Substitute Tanker Costs which is any amount in U.S. Dollars paid by Seller with respect to use of a Substitute LNG Tanker (taking into -42- 45 account adjustments comparable to those included in BE, and excluding any amount already included in PAA); provided, however, that with respect to a Substitute LNG Tanker required as a result of a vessel in the Extension Fleet being unavailable because of an incident which would not have occurred but for a voyage to a buyer other than Buyers, amounts that are (on a daily basis) in excess of the average Hire Rate of the Burmah Vessels shall also be excluded. (ii) Adjustments A = BP - DP - AV - FM where: BP = BLP + BSP + BBP where: BLP = Burmah Loading Performance Compensation which is any amount in U.S. Dollars in respect of a failure in year n to meet the loading undertaking pursuant to section 16.4 of a Charter; BSP = Burmah Speed Performance Compensation which is fifty percent (50%) of any amount in U.S. Dollars in respect of a failure in year n to meet the speed undertaking pursuant to section 16.2 of a Charter; and BBP = Burmah Boil-off Performance Compensation which is the LE portion only in U.S. Dollars of any amount in respect of a failure in year -43- 46 n to meet the boil-off undertaking pursuant to Article 27 of a Charter. DP = DDP + DSP where: DDP = Dwiputra Discharge Performance Compensation which is in relation to a failure in year n to meet the discharge undertaking pursuant to Seller's Transportation Arrangements for the Dwiputra, an amount in U.S. Dollars calculated by taking the excess discharge time in hours multiplied by the average Hire Rate for the Burmah Vessels for year n divided by twenty-four (24); and DSP = Dwiputra Speed Performance Compensation which is in relation to a failure in year n to meet the speed undertaking pursuant to Seller's Transportation Arrangements for the Dwiputra, fifty percent (50%) of an amount in U.S. Dollars calculated by applying paragraph 4.1 of Schedule II of a Burmah Vessel Charter to the speed deficiency for the applicable Dwiputra voyage. AVD AV = (TC-V) x --- TVD where: AVD = Additional Voyage Days which is the number of days used by a vessel in the Extension Fleet to complete a voyage not pursuant to this Contract, determined from the time such vessel departs the sea buoy at the Loading Port prior to loading until it again arrives at such sea buoy upon completion of such voyage or arrives at a dry-dock port or place of lay-up, minus the -44- 47 number of days an LNG Tanker is unavailable (including, without limitation, off-hire) during any such voyage ; and TVD = Total Voyage Days which is the total number of voyage days calculated as the number of LNG Tankers performing transportation under this Contract multiplied by the number of days in year n, minus the number of days an LNG Tanker is in dry-dock or unavailable (including, without limitation, off-hire). FMQ FM = (TC +SFMS - V - AV) x ------------- - SFMS AQ + FMQ + DQ where: SFMS = Seller Force Majeure Savings which is the savings in U.S. Dollars, if any, in transportation costs during the period of an event of force majeure pursuant to Section 15.1 hereunder affecting Seller ("Seller Force Majeure"), calculated as the sum of: SBS + SDS where: SBS = Seller Burmah Savings which is the reduction in payments by Seller resulting from the lay-up of a Burmah Vessel or a Substitute LNG Tanker during the period of Seller Force Majeure or pursuant to any provision of Seller's Transportation Arrangements for such vessels applicable to such period of Seller Force Majeure; and SDS = Seller Dwiputra Savings which is, if the Dwiputra is in lay-up due to a Seller Force Majeure, an amount equal to the reduction in the Burmah -45- 48 Vessel daily Hire Rate applicable if a Burmah Vessel were laid up for the same number of days (as established pursuant to paragraph 2.5.3(b) of Schedule III of the Charters), multiplied by the number of days the Dwiputra is laid up. FMQ = Force Majeure Quantities which is the Fixed Quantities not delivered during year n as a result of a Seller Force Majeure but excluding DQ and quantities not delivered as a result of an LNG Tanker being off-hire; DQ = Declined Quantities which is Fixed Quantities not delivered because Buyers did not accept a proposed Substitute LNG Tanker offered by Seller during a period subject to Section 15.1 I as a result of an LNG Tanker being on-hire and unavailable; and AQ = as defined in Section 8.3(a)(iv) below. (iii) Reconciliation Amount RA = (RTA - TEP + R) x I where: RTA = Recalculated Transportation Amounts which is the sum in U.S. Dollars of TC and A for year n-1, recalculated using actual amounts under this Section 8.3, plus RA included in the calculation for TE for the year n-1; TEP = TE Payments which is the sum in U.S. Dollars of: -46- 49 (A) TE payments for quantities delivered in respect of year n-1 Fixed Quantity Period; (B) TE payments for Take-or-Pay Quantities in respect of year n-1 Fixed Quantities; (C) TE payments for excess boil-off made pursuant to Section 4.5(b) in respect of year n-1 quantities; and (D) the amount of Non-Utilization Cost under Section 4.6 hereof paid in respect of year n-1 quantities; R = Restoration Quantities Amount which is, if Restoration Quantities have been delivered in respect of year n-1, which restored a Force Majeure Deficiency resulting from a Seller's Force Majeure, amounts in U.S. Dollars of FM previously excluded from the TE calculation with respect to the Force Majeure Deficiency that was restored; and I = Interest which is one hundred and one percent (101%) plus the arithmetic average of LIBOR for year n-1. (iv) Annual Quantities AQ = The sum (expressed in MMBTU) of the following: (A) quantities to be delivered in respect of year n to Buyers hereunder; (B) any anticipated Take-or-Pay Quantities for year n; and (C) any quantities which would be delivered hereunder in respect of year n but for a Buyer Force Majeure. -47- 50 (b) Following the end of the calendar year 2000, and the end of each Fixed Quantity Period thereafter, the actual transportation costs for such year shall be determined. In this regard, Seller and Buyers jointly shall employ independent auditors to perform the audit pursuant to Seller's Transportation Arrangements for the Burmah Vessels and Substitute LNG Tankers and consultants to assist in the review of costs for such vessels, and the cost of such audit and such related consultancy fees shall be shared equally by Seller and Buyers and be paid directly by each party. (c) In connection with each annual adjustment of the Transportation Element, Seller shall furnish to Buyers such available estimates, accounting and other data as may reasonably be required by Buyers to establish the basis upon which and the manner in which such adjustment is calculated. Subject to Section 4.1(b)(ii), Seller shall permit Buyers to review the reasonableness of the current year estimated transportation costs and prior year results in conjunction with Seller's review as provided for in Seller's Transportation Arrangements. (d) Seller and Buyers intend that, except as noted in this Article 8 with respect to the Dwiputra and BSA, all costs for transportation of LNG hereunder shall be passed through to Buyers. Subject to the provisions of this Article 8, the TE Formula shall be adjusted to ensure that Seller neither profits nor loses under Seller's Transportation Arrangements in providing transportation of LNG hereunder. 8.4 Transportation Element for First Calendar Quarter of 2000 The Transportation Element included in the Contract Sales Price for the period January 1 to March 31, 2000 shall be calculated in accordance with Section 8.3, taking into account adjustments to such calculation as a result of the three (3) month period. 8.5 Final Settlement (a) Within ninety (90) days after the delivery of the last cargo of LNG to be sold and purchased hereunder, Seller and Buyers shall determine the amount of the final reconciliation payment ("Final Settlement"). The Final Settlement shall be determined utilizing the principles by which RA is calculated annually pursuant to Section 8.3(a)(iii) (taking into -48- 51 consideration Section 8.3(d)) and shall be determined in respect of the period from January 1, 2010 until delivery of the last cargo of LNG to be sold and purchased hereunder. (b) If any Fixed Quantities previously included in FMQ under Section 8.3(a)(ii) as a result of the unavailability of an LNG Tanker which remained on-hire while unavailable have not been restored as Restoration Quantities at the end of the last Fixed Quantity Period, Buyers shall pay to Seller as part of the Final Settlement fifty percent (50%) of the amount of FM determined under Section 8.3(a)(ii) that was previously excluded from the TE calculation with respect to such quantities. (c) The Final Settlement will be payable by or paid to Buyers in proportion to each Buyer's Fixed Quantities during the Fixed Quantity Period 2010. After the amount of the Final Settlement has been determined, Seller shall invoice Buyers, or Buyers shall invoice Seller, in U.S. Dollars for amounts due under this Section 8.5, and Buyers or Seller, as the case may be, shall pay such invoice no later than twenty (20) calendar days after the date of receipt thereof. -49- 52 ARTICLE 9 - TRANSFER OF TITLE The LNG to be sold by Seller and purchased by each Buyer hereunder shall be delivered to such Buyer into its Receiving Facility at an Unloading Port. Delivery shall be deemed completed and title and risk of loss shall pass from Seller to such Buyer as the LNG reaches the Delivery Point. -50- 53 ARTICLE 10 - INVOICES AND PAYMENT 10.1 Invoice and Cargo Documents Promptly after completion of unloading of an LNG Tanker, Seller, or its representative, shall furnish to the receiving Buyer, or its representative, a certificate of volume unloaded together with such other documents concerning the cargo as may be reasonably requested by Buyers for the purpose of Japanese customs clearance. The receiving Buyer shall complete a laboratory analysis to determine quality and BTU content of the LNG as soon as possible but not later than forty-eight (48) hours after the completion of unloading. Promptly upon completion of such analysis, Seller or its representative shall furnish by telex or telegram to the receiving Buyer an invoice, stated in U.S. Dollars, in the amount of the Contract Sales Price for the number of BTU's delivered. At the same time Seller shall send to the receiving Buyer a signed copy of the invoice together with relevant documents setting forth the basis for the calculation thereof. If the receiving Buyer has not completed the above mentioned quality and BTU analysis within the forty-eight-hour period mentioned above, Seller may furnish a provisional commercial invoice based upon the typical BTU content and typical mole composition analysis of LNG then being delivered to Buyer, and such provisional invoice shall be payable on the due date specified in Section 10.3 subject only to any later adjusting payment which may be called for when the aforesaid analysis has been completed. 10.2 Other Invoices In the event any amount is due from any Buyer to Seller, including, without limitation, amounts payable pursuant to Section 7.3(a) on account of Fixed Quantities of LNG required to be purchased but which were not taken by such Buyer, Seller shall furnish or cause to be furnished to such Buyer an invoice therefor and relevant documents showing the basis for the calculation thereof. The procedure set forth in Section 10.1 for sending a copy of such invoice by telex or telegram may be followed. 10.3 Invoice Due Dates, etc. Each invoice for LNG delivered to a Buyer referred to in Section 10.1 shall become due and payable by such Buyer on the fifth (5th) Business Day in Japan after the date on which the telex/telegraphic copy of such invoice has been received by such Buyer in Japan. For this purpose a telex/telegraphic copy of an invoice shall be deemed received by Buyer in Japan on the next -51- 54 Business Day in Japan following the day on which it was sent. Each other invoice to Buyer referred to in Section 10.2 shall become due and payable by such Buyer within twenty (20) calendar days after the date of such Buyer's receipt of such invoice in Japan. If any invoice due date is not a Business Day in Japan, such invoice shall become due and payable on the next day which is a Business Day in Japan. In the event the full amount of any invoice is not paid when due, any unpaid amount thereof shall bear interest from the due date until paid, at an interest rate, compounded annually, two percent (2%) greater than the Base Rate in effect from time to time during the period of delinquency. Such interest rate shall be adjusted up or down, as the case may be, to reflect any changes in the Base Rate as of the dates of such changes in the Base Rate. 10.4 Payment Each Buyer shall pay, or cause to be paid, in U.S. Dollars all amounts which become due and payable by such Buyer pursuant to any invoice issued hereunder to a bank account or accounts in the United States to be designated by Seller. Buyer shall not be responsible for such bank's disbursement of amounts remitted by Buyer to such bank, and Buyer's deposit in immediately available funds of the full amount of each invoice with such bank shall constitute full discharge and satisfaction of the obligations hereunder for which such amounts were remitted. Each payment by a Buyer of any amount owing hereunder shall be in the full amount due without reduction or offset for any reason, including, without limitation, Japanese taxes, exchange charges or bank transfer charges. Transfer of funds to the bank in the United States, effected from Japan before the close of business in Japan on or before the due date of any invoice, shall be deemed timely payment notwithstanding that such U.S. bank cannot credit such transfer as ready funds for a period of up to fourteen (14) hours by reason of the time difference between Japan and the United States or for one or more days which are not banking days in the United States. 10.5 Seller's Rights Upon Buyers' Failure to Make Payment If payment of any invoice for quantities of LNG delivered hereunder or for Fixed Quantities of LNG not taken and for which a Buyer is obligated to pay hereunder is not made within sixty (60) days after the due date thereof, Seller shall be entitled, upon giving thirty (30) days' written notice to such Buyer, to suspend subsequent deliveries to such Buyer until the amount of such invoice -52- 55 and interest thereon has been paid, and such Buyer shall not be entitled to any make-up rights in respect of such suspended deliveries. If any such invoice is not paid within one hundred and twenty (120) days after the due date thereof, then, subject to the further provisions of this Section 10.5, Seller shall have the right, at Seller's election, upon not less than eighty (80) days' notice to Buyer or Buyers, as the case may be, to exercise either of the following options : (i) Seller may terminate this Contract in respect of the defaulting Buyer only, in which event this Contract shall continue in effect between Seller and the other Buyers just as though the defaulting Buyer had never been a party and the quantities of LNG to be purchased and received by such defaulting Buyer had never been included in this Contract; or (ii) Seller may terminate this Contract in its entirety as to Buyers unless, prior to such termination, arrangements shall have been made which are satisfactory to Seller for the payment of all amounts owed Seller by the defaulting Buyer and for the assumption of the LNG quantity and other obligations of the defaulting Buyer under this Contract by one or more Buyer(s) not defaulting. Termination by Seller under clause (i) or (ii) above shall become effective upon receipt by each Buyer of notice from Seller to such effect. Any such termination shall be without prejudice to any other rights and remedies of Seller arising hereunder or by law or otherwise, including the right of Seller to receive payment of all obligations and claims which arose or accrued prior to such termination or by reason of such default by a Buyer or Buyers. 10.6 Disputed Invoices In the event of disagreement concerning any invoice, the Buyer shall make provisional payment of the total amount thereof and shall immediately notify Seller of the reasons for such disagreement, except that : (i) in the case of obvious error in computation, Buyer shall pay the correct amount disregarding such error; and (ii) in the case of any disputed invoice for demurrage incurred at an Unloading Port, Buyer's provisional payment shall be ninety percent (90%) thereof or such greater amount as is not disputed by Buyer. Invoices may be contested by Buyer or modified by Seller only if, within a period of ninety (90) days after Buyer's receipt thereof, Buyer serves on Seller -53- 56 notice questioning their correctness. If no such notice is served, invoices shall be deemed correct and accepted by both parties. Promptly after resolution of any dispute as to an invoice, the amount of any overpayment or underpayment shall be paid by Seller or Buyer to the other, as the case may be. -54- 57 ARTICLE 11 - QUALITY 11.1 Gross Heating Value The LNG when delivered by Seller to Buyers shall have, in a gaseous state, a Gross Heating Value of not less than 1070 BTU per Standard Cubic Foot and not more than 1170 BTU per Standard Cubic Foot. The expected range will be between 1110 and 1165 BTU per Standard Cubic Foot. 11.2 Components The LNG delivered by Seller to Buyers shall, in a gaseous state, contain not less than eighty-five molecular percentage (85 MOL%) of methane (CH4) and, for the components and substances listed below, such LNG shall not contain more than the following : A. Nitrogen (N2), 1.0 MOL %. B. Butanes (C4) and heavier, 2.00 MOL %. C. Pentanes (C5) and heavier, 0.10 MOL %. D. Hydrogen sulfide (H2S), 0.25 grains per 100 Standard Cubic Feet (0.25 grains/100 scf). E. Total sulfur content, 1.3 grains per 100 Standard Cubic Feet (1.3 grains/100 scf). Although the LNG which Seller delivers to Buyers is permitted to contain the sulfur concentrations shown in clauses D and E above, under normal operating conditions at the Badak Facility, Seller would expect such concentrations to be materially less. -55- 58 ARTICLE 12 - PROGRAMMING AND SHIPPING MOVEMENTS 12.1 Annual Program (a) Not later than ninety (90) days prior to the beginning of each calendar year, Seller shall give written notice to Buyers of the anticipated quantities of LNG to be available for delivery hereunder from the Badak Facility in each calendar quarter of the next calendar year, taking into consideration the projected capacity of the Badak Facility. On or before October 15 of each year in which such notice is given, each Buyer shall advise Seller in writing of the quantities such Buyer wishes to take during each calendar quarter of the following year, specifying the amount of any Make-Up LNG requested pursuant to Section 7.5 and any Restoration Quantities in excess of Fixed Quantities requested pursuant to Section 7.6(a). In addition, by October 15 of each year, Buyers' Coordinator shall request any Make-Good LNG pursuant to Section 7.3(d). Seller and Buyers shall thereupon consult together and agree by December 1 of the same year upon a programming schedule of quantities to be delivered to each Receiving Facility during each calendar month during the following year (the "Annual Program"), which shall take into consideration the anticipated capacity of the parties' respective facilities, the Coordinated Maintenance Schedule and the shipping schedules. Such Annual Program and the Ninety-Day Schedules referred to below (and any revisions thereof) are intended to assist the parties in planning their respective operations during the periods involved. The content of the Annual Program and Ninety-Day Schedules shall not reduce the entitlement of any party during any Fixed Quantity Period to sell, deliver and be paid for, or to purchase and receive, as the case may be, the quantities of LNG required under Article 7 to be sold, delivered and paid for during such Fixed Quantity Period. Seller and Buyers will each take all appropriate steps to carry out each Annual Program and Ninety-Day Schedule. (b) An Annual Program shall be amended to reflect a request for : (i) Make-Good LNG relating to an Allowance exercised in respect of the immediately preceding year; -56- 59 (ii) Make-Up LNG relating to a Take-or-Pay Quantity paid for in respect of the immediately preceding year; or (iii) Restoration Quantities relating to a Force Majeure Deficiency arising in respect of the immediately preceding year; provided that the requested LNG and the necessary transportation are available and such request is received by Seller not later than January 15 of the year to which such Annual Program relates. 12.2 Ninety-Day Schedules Not later than the fifteenth (15th) day of each calendar month, Seller shall, after discussion with each Buyer, deliver to each Buyer a three-month forward plan of delivery (the "Ninety-Day Schedule"), which follows the applicable Annual Program as nearly as practicable and sets forth by voyages and the projected dates thereof the pattern of shipments forecast for each of the next three (3) calendar months. Each Ninety-Day Schedule shall reflect all adjustments, if any, necessitated by deviation from prior Ninety-Day Schedules so as to maintain as far as practicable the scheduled shipments forecast in the Annual Program. 12.3 Maintenance and Inspection Coordination Not later than ninety (90) days prior to the beginning of each calendar year, Seller and Buyers shall consult and agree on a program designed to coordinate the anticipated scheduled maintenance and inspection downtime during that calendar year of the Receiving Facilities of each Buyer, the anticipated scheduled downtime of the Badak Facility and the maintenance schedules of the LNG Tankers. Such program (the "Coordinated Maintenance Schedule") will be devised so as to minimize the collective impact of such downtime and maintenance periods on the continuous delivery of LNG hereunder. -57- 60 ARTICLE 13 - MEASUREMENTS AND TESTS 13.1 Parties to Supply Devices Seller shall supply, operate and maintain, or cause to be supplied, operated and maintained, suitable gauging devices, density, pressure and temperature measuring devices, and any other measurement or testing devices for the LNG tanks of the LNG Tankers, which are incorporated in the structure of LNG Tankers or customarily maintained on shipboard. Each Buyer shall supply, operate and maintain, or cause to be supplied, operated and maintained, devices required for collecting samples and for determining quality and composition of the LNG and any other measurement or testing devices which are incorporated in land structures or customarily maintained at Receiving Facilities. 13.2 Selection of Devices All devices provided for in this Article 13 shall be compatible with the specifications of the LNG Tankers. Such devices shall be chosen by mutual agreement of the parties and shall be such that at the time of selection are the most accurate and reliable devices in their practical application. The required degree of accuracy of such devices selected shall be mutually agreed upon and verified by Buyers and Seller, in advance of their use, and at the request of either Buyer or Seller such degree of accuracy shall be verified by an independent surveyor mutually agreed upon by such Buyer and Seller. 13.3 Units of Measurement and Calibration The parties will cooperate closely in the design, selection, and acquisition of devices to be used for measurements and tests under this Article 13 in order that, to the maximum extent possible, all measurements and tests may be conducted either in American units of measurement or in metric units of measurement. In the event that it becomes necessary to make measurements and tests using a new system of units of measurement, the parties shall establish mutually agreeable conversion tables, or, if they are unable to agree, such tables may be established by the procedures provided for resolution of disputes on measurement and testing in Section 13.11. Measurement devices shall be calibrated as follows : -58- 61
Measurement American Units Metric Units ----------- -------------- ------------ Volume Cubic feet Cubic Meters Temperature Degrees Fahrenheit Degrees Centigrade Pressure Pounds per square Kilograms per square inch or inches of centimeter or mercury millimeters of mercury Length Feet Meters Weight Pounds Kilograms Density Pounds per cubic Kilograms per Cubic foot Meter
13.4 Tank Gauge Tables of LNG Tankers Seller shall provide each Buyer, or cause each Buyer to be provided, with a certified copy of tank gauge tables for each tank of each LNG Tanker verified by the U.S. Bureau of Standards at Washington, D.C., the Nippon Kaiji Kentei Kyokai (Japan Marine Surveyors and Sworn Measurers' Association) or other competent impartial authority mutually agreed upon by the parties. Such tables shall include correction tables for list, trim, tank construction and any other items requiring such tables for accuracy of gauging. Seller and Buyers shall each have the right to have representatives present at the time each LNG tank on each LNG Tanker is volumetrically calibrated. If the LNG tanks of any LNG Tanker suffer distortion of such nature as to cause a prudent expert reasonably to question the validity of the tank gauge tables described herein (or any subsequent calibration provided for herein), any Buyer or Seller may require recalibration of such LNG tanks during any period when the LNG Tanker is out of service for scheduled inspection or repairs. Upon recalibration of the LNG tanks of the LNG Tankers, the same procedures used to provide the original tank gauge tables will be used to provide revised tank gauge tables based upon the recalibration data. The calibration of tanks provided for in this Section 13.4 shall constitute the only calibration required for purposes of this Contract. 13.5 Gauging and Measuring LNG Volumes Delivered Volumes of LNG delivered pursuant to this Contract shall be determined by gauging the LNG in the tanks of the LNG Tankers before and after unloading. Gauging the liquid in the tanks of the LNG Tankers and measuring of liquid temperature, vapor temperature, vapor pressure and liquid density in each LNG tank, trim and list of the LNG Tankers, and atmospheric pressure shall be performed, or be caused to be performed, by Seller before and after unloading. -59- 62 The first gauging and measurements shall be made immediately before the commencement of unloading. The second gauging and measurements shall take place immediately after completion of unloading. Copies of gauging and measurement records shall be furnished to Buyer. A. Gauging the Liquid Level of LNG The level of the LNG in each LNG tank of the LNG Tanker shall be gauged by means of the gauging device installed in the LNG Tanker for that purpose. The level of the LNG in each tank shall be logged or printed. B. Determination of Temperature The temperature of the LNG and of the vapor space in each cargo tank shall be measured by Seller by means of a sufficient number of properly located temperature measuring devices, to permit the determination of average temperatures. Temperatures shall be logged or printed. C. Determination of Pressure The pressure of the vapor in each LNG tank shall be determined by means of pressure measuring devices installed in each LNG tank of the LNG Tankers. The atmospheric pressure shall be determined by readings from the standard barometer installed in the LNG Tankers. D. Determination of Density Density of the LNG shall be determined by Seller either by computation or by measurement, as mutually agreed to by the parties. Initially, the density of the LNG will be computed by the method described in Schedule A. Should any improved data, method of calculation or direct measurement device become available which is acceptable to both Buyers and Seller, such improved data, method or device shall then be used. If density is determined by measurements, the results shall be logged or printed. 13.6 Samples for Quality Analysis Representative samples of the LNG delivered shall be obtained, or be caused to be obtained, in triplicate by each Buyer during the time of unloading and delivery to such Buyer. The three (3) samples shall be taken from an appropriate point on Buyer's receiving line as close as possible to the unloading flanges and collected in the gaseous state using the continuous gasification/collection method agreed by Buyers and Seller. The method and -60- 63 devices for sampling and the quantity of the samples to be withdrawn, shall be determined by agreement between Buyers and Seller to provide for taking representative and adequate samples of the LNG delivered. The samples obtained shall be distributed as follows : First sample - for use of Buyer receiving the LNG shipment. Second sample - for retention by such Buyer for an agreed period, not to exceed twenty (20) days, during which any dispute as to the accuracy of any analysis shall be raised, in which case the sample shall be further retained until such Buyer and Seller agree to retain it no longer. Third sample - for use of Seller, if Seller so requests. If representative samples cannot be obtained by Buyer, the data to be determined by sample analysis in Section 13.7 shall be based upon the analysis of the LNG loaded at the Loading Port and shall, after the boil-off adjustment provided for below, be substituted for use in determining composition of the cargo delivered. Such data obtained at the Loading Port shall be adjusted for boil-off on the basis of the arithmetic average of the boil-off experience during the one-way voyage with regard to the last five (5) cargoes from the Loading Port to the same Receiving Facility. For this purpose Seller shall utilize devices comparable to those utilized at the Receiving Facility and shall employ methods of taking and analyzing the samples at the Loading Port comparable in accuracy to those employed at the Receiving Facility. 13.7 Quality Analysis The samples provided for in Section 13.6 shall be analyzed, or be caused to be analyzed, by the Buyer receiving the LNG shipment to determine the molar fraction of the hydrocarbon and other components in the sample by gas chromatography in accordance with "G.P.A. Standard 2261, Analysis for Natural Gas and Similar Gaseous Mixtures by Gas Chromatography", published by G.P.A., current as of 1990. If better standards for analysis are subsequently adopted by G.P.A. or other recognized competent impartial authority, upon mutual agreement of Buyers and Seller, they shall be -61- 64 substituted for the standards then in use, but such substitution shall not take place retroactively. Should it be necessary to obtain periodic samples, the composition of the LNG unloaded from each LNG Tanker shall be the arithmetic average of the results obtained by analysis of the samples obtained under Section 13.6. A calibration of the chromatograph or other analytical instrument used shall be performed by each Buyer immediately prior to the analysis of the sample of LNG delivered. The Buyer intending to conduct a calibration shall give advance notice thereof to Seller, and Seller shall have the right to have a representative present at each such calibration; provided, however, that the party performing the calibration will not be obligated to defer or reschedule any calibration in order to permit the representative of the other party to be present. The sample shall be analyzed, or be caused to be analyzed, by the Buyer to determine the concentrations of hydrogen sulfide (2S) and total sulfur referred to in Section 11.2 using the methods described in Schedule A. 13.8 Operating Procedures Prior to conducting operations for measurement, gauging and analysis provided in Sections 13.5, 13.6 and 13.7 the party responsible for such operations shall notify the appropriate representatives of the other party, allowing such representative reasonable opportunity to be present for all operations and computations; however, the absence of the other party's representative after notification and opportunity to attend shall not prevent any operations and computations from being performed. At the request of either party, any measurement, gauging and analysis provided for in Sections 13.5, 13.6 and 13.7 shall be witnessed and verified by an independent surveyor mutually agreed upon by the Buyer and Seller. The results of such surveyor's verifications shall be made available promptly to each party. All records of measurements and the computation results shall be preserved and available to both parties for a period of not less than three (3) years after such measurements and computation. 13.9 BTU Quantities Delivered The quantity of BTU's of LNG delivered from LNG Tankers shall be calculated by Seller following the procedures described in this Section 13.9 and shall be verified by an independent surveyor mutually agreed upon by Seller and Buyer. -62- 65 A. Determination of Gross Heating Value The Gross Heating Value of the samples of the LNG shall be determined by computation, in accordance with the method described in Schedule A, on the basis of the molecular composition determined pursuant to Section 13.7 and of the molecular weights and heating values described in "G.P.A. Publication 2145" published by G.P.A., current at the time of computation. If better constants or improved methods for determination of heating value are subsequently adopted by G.P.A. or other recognized competent impartial authority, they shall, upon mutual agreement of Seller and Buyers, be substituted therefor, but not retroactively. The Gross Heating Value of the representative sample shall be the conclusive Gross Heating Value for the purpose of determining quantities of BTU's delivered. B. Determination of Volume of LNG Unloaded The LNG volume in the tanks of the LNG Tanker before and after unloading shall be determined by gauging as provided in Section 13.5 on the basis of the tank gauge tables provided for in Section 13.4. The volume of LNG remaining in the tanks of the LNG Tanker after unloading shall then be subtracted from the volume before unloading and the resulting volume shall be taken as the volume of the LNG delivered from the LNG Tanker. If failure of gauging and measuring devices of an LNG Tanker should cause impossibility of determining the LNG volume, the volume of LNG delivered shall be determined by gauging the liquid level in Buyer's onshore LNG storage tanks immediately before and after unloading the LNG Tanker and such volume shall be increased by adding an estimated LNG volume, agreed upon by the parties, for boil-off from such onshore LNG storage tanks and related pipelines during the unloading of LNG. Each Buyer shall provide Seller, or cause Seller to be provided with, a certified copy of tank gauge tables for each onshore LNG tank which is to be used for this purpose verified by a competent impartial authority. C. Determination of BTU Quantities Delivered The quantities of BTU's delivered from LNG Tankers shall be computed by Seller by means of the following formula : -63- 66 Q = V x D x P - Qr where: Q represents the quantity of the LNG delivered in BTU's. V represents the volume of the LNG unloaded, stated in Cubic Meters, determined as provided in Section 13.9 B. D represents the density of the LNG unloaded, stated in kilograms per Cubic Meter, determined as provided in Section 13.5 D. P represents the Gross Heating Value of the LNG unloaded, stated in BTU's per kilogram. Qr represents the quantity in BTU's of the vapor which displaced the volume of LNG unloaded from the LNG tanks of the LNG Tanker. Physical constants, calculation procedures and examples of BTU determination are provided in Schedule A. 13.10 Verification of Accuracy and Correction for Error Accuracy of devices used shall be tested and verified at the request of either party, including the request by a party to verify accuracy of its own devices. Each party shall have the right to inspect at any time the measurement devices installed by the other party, provided that the other party be notified in advance. Testing shall be performed only when both parties are represented, or have received adequate advance notice thereof, using methods recommended by the manufacturer or any other method agreed to by Seller and Buyers. At the request of any party, any test shall be witnessed and verified by an independent surveyor mutually agreed upon by Buyers and Seller. Permissible tolerances shall be as defined in Schedule A. Inaccuracy of a device exceeding the permissible tolerances shall require correction of previous recordings, and computations made on the basis of those recordings, to zero error with respect to any period which is definitely known or agreed upon by the parties, as well as adjustment of the device. In the event that the period of error is neither known nor agreed upon, corrections shall be made for each delivery made -64- 67 during the last half of the period since the date of the most recent calibration of the inaccurate device. However, the provisions of this Section 13.10 shall not be applied to require the modification of any invoice which has become final pursuant to Section 10.6. 13.11 Disputes In the event of any dispute concerning the subject matter of this Article 13, including, but not limited to, disputes over selection of the type or the accuracy of measuring devices, their calibration, the result of a measurement, sampling, analysis, computation or method of calculation, such dispute shall be submitted to a competent impartial authority mutually agreed upon by the parties or, if such authority cannot be agreed upon within thirty (30) days of request by either party, such dispute shall be decided by arbitration pursuant to Article 16. All decisions of an authority acting under this Section 13.11 shall be binding on the parties. Expenses incurred in connection with the services of such authority shall be shared equally by the parties. 13.12 Costs and Expenses of Test and Verification All costs and expenses for testing and verifying Seller's measurement devices as provided for in this Article 13 shall be borne by Seller, and all costs and expenses for testing and verifying a Buyer's measurement devices shall be borne by such Buyer. The fees and charges of independent surveyors for measurements and calculations as provided for in Section 13.8 and 13.9 shall be borne equally by Seller and Buyer. When the services of independent surveyors are required and selected by mutual agreement pursuant to Section 13.10, then the fees and charges of such surveyors shall be borne equally by Seller and Buyers. -65- 68 ARTICLE 14 - DUTIES, TAXES AND CHARGES Each Buyer shall pay (or reimburse Seller for payments made by it), and shall indemnify and hold Seller harmless from, all taxes, royalties, duties or other imposts levied or imposed by the Japanese Government, any subdivision thereof or any other governmental authority in Japan on the transportation, sale and import of LNG hereunder or on any income resulting therefrom, including income resulting from payments made under this Article 14, and all port charges, taxes and duties levied or imposed on the LNG Tankers in Japan with respect to the transportation of LNG hereunder. To the extent that the foregoing taxes, royalties, duties, other imposts or port charges are included in the calculation of the Transportation Element paid or payable by Buyer, the parties understand and confirm that Buyer shall not be required to also pay such amounts under this Article 14. All payments or reimbursements required under this Article 14 shall be made by Buyer within twenty (20) calendar days after the date of Buyer's receipt of such invoice in Japan. -66- 69 ARTICLE 15 - FORCE MAJEURE 15.1 Events of Force Majeure Neither Seller nor any Buyer shall be liable for any delay or failure in performance hereunder if and to the extent such delay or failure in performance results from any of the following : A. Fire, flood, atmospheric disturbance, lightning, storm, typhoon, tornado, earthquake, landslide, soil erosion, subsidence, washout or epidemic; B. War, riot, civil war, blockade, insurrection, act of public enemies or civil disturbance; C. Strike, lockout or other industrial disturbance; D. Serious accidental damage to or other serious failure of Seller's Facilities, unless such damage or failure is the result of gross negligence on the part of Seller's management; E. Serious accidental damage to or other failure of a Buyer's Facilities, unless such damage or failure is the result of gross negligence on the part of such Buyer's management; F. The Proved Remaining Recoverable Reserves of Natural Gas in the Gas Supply Area expressed in the then most recent Certificate referred to in Section 3.2(a) which can be economically produced have been fully depleted; G. Act of government which directly affects the ability of a party to perform any obligation hereunder other than the obligation to remit payments as provided in Section 10.4 on account of LNG delivered and taken or not taken but required to be paid for under this Contract; H. Delay in completion and testing of any stage of the expansion of the Badak Facility contemplated by Seller in connection with the performance of this Contract so as to prevent the same from becoming operational on a continuing basis, which delay is caused by delay in receiving major items of equipment or materials from the manufacturer or vendor thereof, provided that Seller shall have taken all steps reasonably available to obtain timely delivery of such items including -67- 70 the placing of purchase orders within such time as was prudent under then existing circumstances; or I. The removal of an LNG Tanker from service due to loss, serious accidental damage or other serious failure, or other unavailability of an LNG Tanker, unless such loss, damage, failure or unavailability is the result of gross negligence on the part of Seller. Nothing herein shall relieve Buyers of their obligation to pay for LNG delivered or to make any other payment which has become due and payable under this Contract prior to the occurrence of any of the events described above. 15.2 Notice, Resumption of Normal Performance, etc. Immediately upon the occurrence of an event of force majeure, the party affected shall give notice thereof to the other party describing such event and the estimated period during which operations will be suspended or reduced. The parties shall exercise reasonable diligence to ensure resumption of normal performance under this Contract after the occurrence of any event of force majeure, and, prior to resumption of normal performance, the parties shall continue to perform their obligations under this Contract to the extent not affected by such event of force majeure. 15.3 Settlement of Industrial Disturbances Settlement of strikes, lockouts or other industrial disturbances shall be entirely within the discretion of the party experiencing such situations and nothing herein shall require such party to settle industrial disputes by yielding to demands made on it when it considers such action inadvisable. -68- 71 ARTICLE 16 - ARBITRATION All disputes arising between any Buyer or Buyers, on the one hand, and Seller, on the other hand, relating to this Contract or the interpretation or performance hereof shall be finally settled by arbitration conducted in accordance with the Rules of Arbitration of the International Chamber of Commerce, effective at the time, by three (3) arbitrators appointed in accordance with such Rules. Arbitration shall be conducted in the English language and shall be held at Paris, France, unless another location is selected by mutual agreement of the parties concerned. The award rendered by the arbitrators shall be final and binding upon the parties concerned. -69- 72 ARTICLE 17 - APPLICABLE LAW This Contract shall be governed by and interpreted in accordance with the laws of the State of New York, United States of America. The parties agree that the United Nations Convention on Contracts for the International Sale of Goods and the Convention on the Limitation Period in the International Sale of Goods shall not apply to this Contract and the respective rights and obligations of the parties hereunder. -70- 73 ARTICLE 18 - BUYERS' COORDINATOR Buyers will from time to time designate a Buyers' Coordinator to act on behalf of each Buyer in performing the following: A. Coordinating among each of Buyers, and between Seller and Buyer or Buyers, and the handling of communications between Seller and Buyer or Buyers in connection with performance of this Contract, in particular the exercise of Allowances pursuant to Section 7.3(d); and B. Implementation of various operations of each Buyer or of Buyers which are necessary in connection with the purchasing of LNG hereunder. Buyers shall notify Seller the name and address of the entity to act as Buyers' Coordinator. Buyers have notified Seller that Japan Indonesia LNG Co., Ltd. is presently acting as Buyers' Coordinator. Seller shall be entitled to accept and rely upon any communication received from Buyers' Coordinator as if received directly from one or more of Buyers, and to give any communication to Buyers' Coordinator with the same effect as if given directly to a Buyer or Buyers, if such notice or communication relates to matters as to which Buyers' Coordinator is acting as described above pursuant to this Article 18. No act of, or authorization to, Buyers' Coordinator shall relieve any Buyer from performance of any obligation or payment of any liability of such Buyer hereunder, each Buyer remaining primarily liable therefor at all times. -71- 74 ARTICLE 19 - CONFIDENTIALITY No party to this Contract shall use or communicate to third parties the contents of this Contract or other confidential information or documents which may come into the possession of such party in connection with the performance of this Contract without the prior agreement of the party or parties to which such information or documents are confidential. This restriction shall not apply to the contents of this Contract, or information or documents, which: (i) have fallen into the public domain otherwise than through the act or failure to act of the party that has obtained them; or (ii) are communicated to: (A) any of Seller's Suppliers, or any Affiliate (as defined below), with the obligation of the receiving person to maintain confidentiality; (B) persons participating in the implementation of this project, such as Seller's Transporters, Buyers' Coordinator, legal counsel, accountants, other professional, business or technical consultants and advisers, underwriters or lenders, with the obligation of the receiving persons to maintain confidentiality; or (C) any governmental agency of the Republic of Indonesia or Japan, or having jurisdiction over any of Seller's Suppliers or any Affiliate or Seller's Transporters, provided that such agency has authority to require such disclosure, and that such disclosure is made in accordance with that authority. As used before, the term "Affiliate" means a company that controls, is controlled by, or is under common control with, a party to this Contract or any of Seller's Suppliers. -72- 75 ARTICLE 20 - NOTICES All notices and other communications for purposes of this Contract shall be in writing, which shall include transmission by telex, facsimile or telegraph, except that notices given from LNG Tankers at sea may be by radio. Notices and communications shall be directed as follows : A. To Seller at the following mail address : PERUSAHAAN PERTAMBANGAN MINYAK DAN GAS BUMI NEGARA (PERTAMINA) Attention : General Manager, Gas Marketing Department P.O. Box 12 / JKT Jalan Merdeka Timur No. 1A Jakarta Pusat, Indonesia And at the following telegraph, telex and facsimile addresses : Telegraph : Telex : PERTAMINA PERTAMINA JAKARTA, INDONESIA 44302 or 44152 Attention : General Manager, Gas Marketing JAKARTA, Department INDONESIA Facsimile: 62-21-345-8312 B. To Buyers at the following mail, telegraph, telex and facsimile addresses : CHUBU ELECTRIC POWER CO., INC. (Mail and telegraph address ) Attention : Fuels Department 1, Toshin-cho, Higashi-ku, Nagoya, 461-91 Japan (Telex address) 4444405 CHUDEN J (Facsimile address) 81-52-951-6025 THE KANSAI ELECTRIC POWER CO., INC. (Mail and telegraph address) Attention : LNG Group Office of Purchasing 3-22, Nakanoshima 3-chome, Kita-ku, Osaka, 530-70 Japan (Telex address) 5248320 KEPCO J (Facsimile address) 81-6-441-0283 -73- 76 KYUSHU ELECTRIC POWER CO., INC. (Mail and telegraph address) Attention : Fuels Department 1-82,Watanabe-dori 2-chome, Chuo-ku, Fukuoka, 810 Japan (Telex address) 725497KYUDEN J (Facsimile address) 81-92-731-8719 NIPPON STEEL CORPORATION (Mail and telegraph address) Attention : Coal & Fuel Dept.-1 Raw Materials Div.-1 6-3, Otemachi 2-chome, Chiyoda-ku, Tokyo, 100-71 Japan (Telex address) 22291 NSC J (Facsimile address) 81-3-3275-5990 OSAKA GAS CO., LTD. (Mail and telegraph address) Attention : Gas Resources Department 1-2, Hiranomachi 4-chome, Chuo-ku, Osaka, 541 Japan (Telex address) 5225275DAIGAS J (Facsimile address) 81-6-222-2044 TOHO GAS CO., LTD. (Mail and telegraph address) Attention : Raw Materials Department 19-18, Sakurada-cho, Atsuta-ku, Nagoya, 456 Japan (Telex address) 4477651 TOHOGS J (Facsimile address) 81-52-871-6967 The parties may designate additional addresses for particular communications as required from time to time, and may change any addresses, by notice given thirty (30) days in advance of such additions or changes. Immediately upon receiving communications by telex, facsimile, telegraph or radio, a party shall acknowledge receipt by the same means, and may request a repeat transmittal of the entire communication or confirmation of particular matters. If the sender receives no acknowledgment of receipt within twenty-four (24) hours, or receives a request for repeat transmittal or confirmation, said party shall repeat the transmittal or answer the particular request. -74- 77 ARTICLE 21 - ASSIGNMENT Neither this Contract nor any rights or obligations hereunder may be assigned by any Buyer without the prior written consent of Seller, or by Seller without the prior written consent of each Buyer. Any request by a Buyer for Seller's consent to an assignment shall be accompanied by the written consent of each other Buyer to the proposed assignment. Any purported assignment without the aforesaid consent or consents in each case shall be null and void. -75- 78 ARTICLE 22 - AMENDMENTS This Contract may not be amended, modified, varied or supplemented except by an instrument in writing signed by Seller and Buyers. Performance of any condition or obligation to be performed hereunder shall not be deemed to have been waived or postponed except by an instrument in writing signed by the party who is claimed to have granted such waiver or postponement. -76- 79 ARTICLE 23 - SEVERALTY This Contract shall be binding upon each Buyer in accordance with its terms. The liabilities of Buyers under this Contract are several and not joint, and each Buyer shall be liable only for performance of the obligations of such Buyer as provided in this Contract. -77- 80 ARTICLE 24 - DETAILS OF PERFORMANCE Details necessary for performance of this Contract shall be mutually agreed upon by Seller and each Buyer separately or, when necessary and desirable, by Seller and Buyers on a coordinated and mutually agreeable basis. -78- 81 ARTICLE 25 - SCOPE This Contract constitutes the entire agreement between the parties relating to the subject matter hereof and supersedes and replaces any provisions on the same subject contained in any other agreement between the parties, whether written or oral, prior to the date of the original execution hereof. Subsequent to the date of original execution of this Contract, various agreements, manuals, procedures and details of performance relating to the interpretation or implementation of the First A/R, or covering matters related thereto, have been agreed between Seller and Buyers ("Ancillary Agreements"). It is agreed that no Ancillary Agreement or portion thereof, to the extent it is in effect and capable of performance, shall be annulled, terminated or revoked by reason of the execution of this Second A/R, except that : (i) to the extent that there is any conflict between such Ancillary Agreements and any specific amendment to the Contract incorporated in this Second A/R, such specific amendment shall prevail; (ii) the Ancillary Agreements (or identified portions thereof) that were superseded by the First A/R (Section 25 (ii)) shall continue to be without effect; and (iii) the 1973 Extension MOA shall be terminated. -79- 82 ARTICLE 26 - COUNTERPARTS This Second A/R is executed in seven (7) identical counterparts, each of which shall have the force and dignity of an original, and all of which shall constitute but one and the same Second A/R. -80- 83 ARTICLE 27 - EFFECTIVE DATE AND APPLICABILITY This Second A/R shall be effective as of the date of execution stated below. Notwithstanding the foregoing sentence, the provisions of the First A/R shall continue to apply and shall take precedence over this Second A/R until January 1, 2000. IN WITNESS WHEREOF, each of the parties has caused this Second A/R to be duly executed and signed by its duly authorized officer as of August 3, 1995. SELLER: BUYERS: - ------ ----- PERUSAHAAN PERTAMBANGAN CHUBU ELECTRIC POWER CO., INC. MINYAK DAN GAS BUMI NEGARA (PERTAMINA) By: /s/ HIROJI OTA -------------------------------------------------- By: /s/ F. ABDA'OE Name: Hiroji Ota --------------------------------------------- ------------------------------------------- Name: F. Abda'oe Title: President and C.E.O. -------------------------------------- ------------------------------------------- Title: President Director -------------------------------------- THE KANSAI ELECTRIC POWER CO., INC. By: /s/ YOSHIHISA AKIYAMA -------------------------------------------------- Name: Yoshihisa Akiyama ------------------------------------------- Title: President and Director ------------------------------------------- WITNESSES: - ---------- JAPAN INDONESIA LNG CO., LTD. KYUSHU ELECTRIC POWER CO., INC. By: /s/ MASUO SHIBATA By: /s/ SHIGERU OHNO --------------------------------------------- -------------------------------------------------- Name: Masuo Shibata Name: Shigeru Ohno -------------------------------------- ------------------------------------------- Title: President and Director Title: President -------------------------------------- ------------------------------------------- NISSHO IWAI CORPORATION NIPPON STEEL CORPORATION By: /s/ AKIRA NISHIO By: /s/ ROKURO SUEHIRO --------------------------------------------- -------------------------------------------------- Name: Akira Nishio Name: Rokuro Suehiro -------------------------------------- ------------------------------------------- Title: President Title: Executive Vice President -------------------------------------- ------------------------------------------- OSAKA GAS CO., LTD. By: /s/ SHIN-ICHIRO RYOKI -------------------------------------------------- Name: Shin-ichiro Ryoki ------------------------------------------- Title: President ------------------------------------------- TOHO GAS CO., LTD. By: /s/ SADAHIKO SHIMIZU -------------------------------------------------- Name: Sadahiko Shimizu ------------------------------------------- Title: President -------------------------------------------
-81- 84 SECOND AMENDED AND RESTATED 1973 LNG SALES CONTRACT The following describes Schedule A to the Second Amended and Restated 1973 LNG Sales Contract, which is omitted herein, but will be furnished upon request: Schedule A - Testing and Methods Part I - BTU Quantity Determination (setting forth a table of physical constants and the formulae for LNG density determination, gross heating value calculation and total BTUs delivered calculation) Table I - Example of LNG Density Calculation Table II - Molar Volumes of Individual Components Table III - Correction C for Volume Reduction of Mixture Table IV - Example of Gross Heating Value Calculation Part II - Quality Determinations Part III - Maximum Permissible Tolerances 85 SIDE LETTER TO SECOND AMENDED AND RESTATED 1973 LNG SALES CONTRACT August 3, 1995 CHUBU ELECTRIC POWER CO., INC. THE KANSAI ELECTRIC POWER CO., INC. KYUSHU ELECTRIC POWER CO., INC. NIPPON STEEL CORPORATION OSAKA GAS CO., LTD. TOHO GAS CO., LTD. Gentlemen, This letter relates to the Second Amended and Restated 1973 LNG Sales Contract entered into of even date herewith ("Second A/R") (terms defined therein having the same meanings when used herein). A. HNS CONVENTION The International Maritime Organization is developing an International Convention on Liability and Compensation for Damage in Connection with the Carriage of Hazardous and Noxious Substances by Sea ("HNS Convention"). If it becomes likely that the HNS Convention will apply to shipments of LNG under the Second A/R, then Seller and Buyers shall engage in a process of mutual review and consultation in order to determine how to allocate any payments Seller is required to make under the HNS Convention relating to the Fixed Quantities. B. OMNIBUS AGREEMENT Seller believes that changing circumstances and increasing values at the Badak Facility necessitate making changes to the Omnibus Agreement regarding the required protection and indemnity insurance coverage in respect of the LNG Tankers ("P&I Cover"). Seller and Buyers shall therefore engage as soon as possible in a process of mutual review and consultation in order to determine whether the P&I Cover should be increased to U.S.$300,000,000, as proposed by Seller. C. SOCIAL RESPONSIBILITY INSURANCE Buyers and Seller shall meet during 1999 to determine whether Seller should obtain Japanese Social Responsibility Insurance ("SRI") for the Dwiputra. However, if the meetings on the HNS Convention contemplated under A above occur prior to 1999, then SRI discussions shall be included within such HNS Convention discussions. Any discussions on how to deal with the HNS Convention shall also consider whether SRI should be continued for the Burmah Vessels (and for the Dwiputra, if SRI has been obtained already for such vessel). D. DEFINITION OF BUSINESS DAY IN JAPAN Seller and Buyers have not reached a conclusion regarding whether December 31 should be considered a Business Day in Japan. Buyers are not able to make payment to Seller on December 31 through a bank in Japan since December 31 is, by Japanese Government order, a non-banking day in Japan. However, Seller believes the treatment of December 31 as a non-business day would cause Seller to incur substantial financial losses and is not justified by the difficulties faced by Buyers. -1- 86 Seller and Buyers are willing to engage in a process of mutual review and consultation on the exclusion of December 31 as a Business Day in Japan in the context of considering such a change for all of Seller's sales contracts with Japanese buyers. E. PRICING Article 8 of the Second A/R refers to realized export prices (except premiums and except prices for spot sales) of field classifications of Indonesian crude oils being sold and exported. The parties acknowledge that as of the effective date of the Second A/R, the Indonesian Crude Price (ICP) system establishes such realized export prices. If at any time in the opinion of Seller or Buyers, based on their independent studies, the prices of the field classifications used by Seller to determine "A" in the formula in Section 8.2(a) are materially different from the realized export prices, such party shall so notify the other stating the basis for such opinion, and the parties shall consult promptly and jointly review the matter with a view to determining whether such difference exists and, if so, to establishing an alternative basis, to be adopted by Seller, for determining (for the purposes of the Second A/R) such realized export prices (except premiums and except prices for spot sales). In such event the parties shall continue to administer and perform the provisions of the Second A/R, and to determine the Contract Sales Price and submit and pay invoices, on the basis provided for in the Second A/R, until the parties shall have completed such joint review. If, upon completion of such joint review, it is determined that such difference exists, then Seller shall promptly take all measures to ensure proper administration of the Second A/R at all times, including any necessary recalculation of the Contract Sales Price. F. EXCESS CAPACITY Seller confirms that it places great importance on the mutual trust and cooperation that exists with Buyers, and that no changes effected by the Second A/R are intended to adversely effect the relationship between the parties. Seller also fully appreciates the marketing opportunities for the excess capacity of its LNG facilities provided by Buyers and will continue to pursue such opportunities in the future. It is Seller's policy to retain the right to dispose of the excess capacity of its LNG facilities to such purchasers and upon such terms as it may elect. Seller is therefore unable to grant any general reservations of its excess capacity. However, in view of the long term business relationship between Seller and Buyers, Seller agrees that once a Buyer offers in writing to purchase a specified quantity of LNG on terms to be agreed, then and to the extent Seller determines that it has excess LNG production capacity and (if applicable) shipping capacity available, then Seller will give preferential consideration to such offer over future offers from other potential purchasers for a reasonable period while good faith negotiations are being conducted with such Buyer. -2- 87 This Side Letter shall be effective as of the date of execution, except the provisions of paragraph E and F above shall be effective as of and from January 1, 2000. This Side Letter supersedes as of January 1, 2000 any prior written instrument between the parties with respect to the subjects herein mentioned. Very truly yours, PERUSAHAAN PERTAMBANGAN MINYAK DAN GAS BUMI NEGARA (PERTAMINA) By: /s/ F. ABDA'OE ----------------------------- Name: F. Abda'oe Title: President Director AGREED AND ACCEPTED CHUBU ELECTRIC POWER CO., INC. THE KANSAI ELECTRIC POWER CO., INC. By: /s/ HIROJI OTA By: /s/ YOSHIHISA AKIYAMA ---------------------------------- --------------------------------- Name: Hiroji Ota Name: Yoshihisa Akiyama --------------------------- -------------------------- Title: President and C.E.O. Title: President and Director --------------------------- -------------------------- KYUSHU ELECTRIC POWER CO., INC. NIPPON STEEL CORPORATION By: /s/ SHIGERU OHNO By: /s/ ROKURO SUEHIRO ---------------------------------- --------------------------------- Name: Shigeru Ohno Name: Rokuro Suehiro --------------------------- -------------------------- Title: President Title: Executive Vice President --------------------------- -------------------------- OSAKA GAS CO., LTD. TOHO GAS CO., LTD. By: /s/ SHIN-ICHIRO RYOKI By: /s/ SADAHIKO SHIMIZU ---------------------------------- --------------------------------- Name: Shin-ichiro Ryoki Name: Sadahiko Shimizu --------------------------- -------------------------- Title: President Title: President --------------------------- -------------------------- -3- EX-10.8 9 PACKAGE V SUPPLY AGREEMENT 1 PACKAGE V SUPPLY AGREEMENT FOR NATURAL GAS IN SUPPORT OF THE 1973 LNG SALES CONTRACT EXTENSION 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 DATED: JUNE 16, 1995 EFFECTIVE: OCTOBER 6, 1994 2 PACKAGE V SUPPLY AGREEMENT FOR NATURAL GAS IN SUPPORT OF THE 1973 LNG SALES CONTRACT EXTENSION THIS SUPPLY AGREEMENT, made and entered into in Jakarta the 16th day of June, 1995, by and between PERUSAHAAN PERTAMBANGAN MINYAK DAN GAS BUMI NEGARA ("PERTAMINA"), on the one hand, and VIRGINIA INDONESIA COMPANY ("VICO"), LASMO SANGA SANGA LIMITED, OPICOIL HOUSTON, INC., UNION TEXAS EAST KALIMANTAN LIMITED, UNIVERSE GAS & OIL COMPANY, INC., and VIRGINIA INTERNATIONAL COMPANY (herein referred to collectively as "Contractors" and individually as "Contractor"), on the other hand, WITNESSETH: A. WHEREAS, Contractors individually own or control all of the interest of "Contractors" in that certain Amended and Restated Production Sharing Contract, dated April 23, 1990, but effective as of August 8, 1968 (such contract as hereafter amended is herein referred to as the "Amended and Restated Production Sharing Contract") and that certain Production Sharing Contract dated April 23, 1990, but effective as of August 8, 1998 (such contract as hereafter amended is herein referred to as the "Renewed Production Sharing Contract"). The Amended and Restated Production Sharing Contract and the Renewed Production Sharing Contract are herein referred to collectively as the "Production Sharing Contracts" and the area covered thereby is herein referred to as the "VICO Contract Area"; and 3 B. WHEREAS, pursuant to the Production Sharing Contracts, each of PERTAMINA and Contractors is entitled to take and receive, sell and freely export its respective share of the Natural Gas produced and saved from the VICO Contract Area (the percentage share of such Natural Gas to which each of PERTAMINA and Contractors is entitled, as determined under the Production Sharing Contracts, is herein referred to as the "Production Sharing Percentage" of such party); and C. WHEREAS, the reserves of Natural Gas in the VICO Contract Area exceed the reserves of Natural Gas committed to be produced, supplied and delivered by PERTAMINA and Contractors to meet a portion of PERTAMINA's existing obligations under LNG sales contracts, LPG sales contracts, and domestic gas sales contracts; and D. WHEREAS, PERTAMINA, with assistance from Contractors, has constructed and expanded and is further expanding the Natural Gas liquefaction and related facilities located at Bontang Bay, on the east coast of Kalimantan, Indonesia (herein referred to as the "Bontang Plant"); and E. WHEREAS, funds for the expansion of the liquefaction plant will be provided to PERTAMINA through financing of the cost of such expansion on terms, mutually agreeable to PERTAMINA and Contractors, which provide for the repayment of funds provided pursuant to such financing and the cost of such funds (repayment of funds and the cost of such funds are hereinafter referred to as "Financing Costs"); and - 2 - 4 F. WHEREAS, PERTAMINA and Contractors are parties to the Amended and Restated Bontang Processing Agreement dated as of February 9, 1988 (as from time to time amended, the "Processing Agreement"), which provides for the operation of the Bontang Plant and the payment of the costs of such operation (such costs as determined in accordance with the Processing Agreement are herein referred to as "Plant Operating Costs"); and G. WHEREAS, PERTAMINA and Contractors have agreed to use the Bontang Plant in part for the liquefaction of the VICO Contract Gas (as defined in Section 2.2 hereof) and the Other Contract Gas (as defined in Section 2.3 hereof); and H. WHEREAS, PERTAMINA, in collaboration with Contractors and its production sharing contractors in other contract areas in East Kalimantan (herein referred to as the "Other Contract Areas") has entered into that certain Amended and Restated 1973 LNG Sales Contract dated as of January 1, 1990 (such contract as amended as of June 1, 1992 and as amended hereafter being herein referred to as the "1973 Sales Contract") with Chubu Electric Power Co., Inc., The Kansai Electric Power Co., Inc., Kyushu Electric Power Co., Inc., Nippon Steel Corporation, Osaka Gas Co., Ltd., and Toho Gas Co., Ltd. (herein referred to collectively as "Buyers" and individually as "Buyer"); and I. WHEREAS, by a Memorandum of Agreement effective as of October 6, 1994 (the "1973 Extension MOA", and unless otherwise so stated, any terms defined in the 1973 Extension MOA shall have the same meanings when used herein), PERTAMINA and Buyers agreed, subject to fulfillment of certain conditions, to execute a Second Amended and Restated - 3 - 5 1973 Sales Contract extending the 1973 Sales Contract for the period (the "Extension Period") beginning on January 1, 2000 and ending on December 31, 2009 (quantities of LNG for the Extension Period sold pursuant to the 1973 Extension MOA herein referred to as the "Extension Quantities"); and J. WHEREAS, arrangements for the transportation of the Extension Quantities and for the payment of costs respecting such transportation will be made on terms mutually agreeable to PERTAMINA and Contractors (herein referred to as "Transportation Costs"); and K. WHEREAS, the 1973 Extension MOA provides that the Natural Gas to be processed into LNG and sold and delivered by PERTAMINA as Extension Quantities is to be produced from the Bontang Gas Supply Area, which consists of the VICO Contract Area and the Other Contract Areas; and L. WHEREAS, PERTAMINA and each Contractor desire to supply and deliver Natural Gas from the VICO Contract Area in support of the performance by PERTAMINA of an agreed portion of its obligations to deliver Extension Quantities under the 1973 Sales Contract; and M. WHEREAS, each Contractor desires to dispose of its Production Sharing Percentage of the VICO Contract Gas (as herein defined) in accordance with the terms of this Supply Agreement, - 4 - 6 NOW, THEREFORE, the parties agree as follows: ARTICLE 1 EFFECTIVE DATE AND DURATION This Supply Agreement shall be effective as of October 6, 1994, and shall terminate on the date the 1973 Sales Contract terminates; provided, however, that if the 1973 Extension MOA terminates as a result of acceptable transportation arrangements not having been agreed upon on a timely basis, then this Supply Agreement shall terminate on the date the 1973 Extension MOA terminates. ARTICLE 2 SUPPLY COMMITMENT AND QUANTITY 2.1 Net Gas Requirement. The total quantity of net Natural Gas required to be supplied and delivered out of proved recoverable reserves of Natural Gas in East Kalimantan for liquefaction and sale as Extension Quantities is estimated to be 4.5403 trillion standard cubic feet ("t.s.c.f."). Such quantity is herein referred to as the "1973 Extension Net Gas Requirement". The 1973 Extension Net Gas Requirement is based on the Fixed Quantities which Buyers have agreed to purchase under the 1973 Extension MOA. - 5 - 7 2.2 VICO Contract Gas. PERTAMINA and Contractors hereby commit and agree to supply and deliver from proved economically recoverable reserves of Natural Gas in specific fields within the VICO Contract Area sufficient Natural Gas (and LNG resulting from the liquefaction thereof) to meet a portion of the 1973 Extension Net Gas Requirement over the term of this Supply Agreement consisting of 0.9805 t.s.c.f., or 21.5956% thereof. Such quantities of net Natural Gas committed to be supplied pursuant to this Supply Agreement are herein referred to as the "VICO Contract Gas", and the above-stated percentage is herein referred to as the "Producers' Percentage". The specific fields from which the VICO Contract Gas will be committed are identified in the supplemental memorandum entered into among PERTAMINA, Contractors and the production sharing contractors in the Other Contract Areas pursuant to the Memorandum of Understanding Re: Supply Agreements and Package V Sales dated October 5, 1994 (the "Package V Supplemental Memorandum"). The VICO participating fields and the quantities in each field comprising the VICO Contract Gas are as follows:
Participating Fields Quantity of Gas (t.s.c.f.) -------------------- -------------------------- Badak 0.3241 Lampake 0.0277 Mutiara 0.1307 Nilam 0.3434 Pamaguan 0.0045 Semberah 0.1501
- 6 - 8 The quantities committed from each field are subject to revision from time to time, as the reserves from the fields may be updated and as additional data, from deliverability studies and otherwise, become available. 2.3 Other Contract Gas. To meet the balance of the 1973 Extension Net Gas Requirement, constituting 3.5598 t.s.c.f., or 78.4044% thereof, sufficient Natural Gas (and LNG resulting from the liquefaction thereof) will be committed for supply and delivery by PERTAMINA and its production sharing contractors from proved recoverable reserves of Natural Gas in the Other Contract Areas by separate supply agreements, similar hereto and compatible herewith, executed and delivered concurrently herewith (such amounts are herein collectively referred to as the "Other Contract Gas"). The specific fields from which the Other Contract Gas will be committed are also identified in the Package V Supplemental Memorandum. 2.4 DeGolyer and MacNaughton Certification. The amounts of net Natural Gas constituting the VICO Contract Gas and the Other Contract Gas are part of the estimates of proved recoverable reserves of Natural Gas as certified by the independent consultant firm of DeGolyer and MacNaughton in written statements based on data available on May 31, 1994. The quantities for the VICO Contract Gas and the Other Contract Gas set forth in Sections 2.2 and 2.3 hereof and the Producers' Percentage were established by PERTAMINA at a meeting on May 29, 1995 of the East Kalimantan Gas Reserves Management Committee. - 7 - 9 2.5 Reduction to Net Gas Requirement. Notwithstanding the above, if, pursuant to paragraph 4 of the 1973 Extension MOA, the Extension Quantities are reduced as a result of Financing not being arranged, PERTAMINA and Contractors agree to amend this Supply Agreement to decrease the VICO Contract Gas, such decrease to be based on the proportion of the VICO Contract Gas to the 1973 Extension Net Gas Requirement. By separate amendments, similar to and compatible with that entered into by PERTAMINA and Contractors, executed and delivered concurrently therewith, the balance of any such decrease in the 1973 Extension Net Gas Requirement will be allocated to the Other Contract Gas based on the proportion of the Other Contract Gas to the 1973 Extension Net Gas Requirement. ARTICLE 3 COORDINATION OF GAS SUPPLY The VICO Contract Gas and the Other Contract Gas may be produced from participating fields at times and production rates which may change from time to time during the term hereof so as to secure the optimal ultimate recovery of Natural Gas. The supply of Natural Gas from the VICO Contract Area and the Other Contract Areas will be coordinated by PERTAMINA so as to conserve and permit full utilization of such Natural Gas. The sources of supply, producing rates, quality of gas, metering and related matters shall be matters for study by the East Kalimantan Gas Reserves Management Committee, consisting of representatives from PERTAMINA, VICO, TOTAL Indonesie and UNOCAL Indonesia Company. - 8 - 10 ARTICLE 4 ADMINISTRATION, TITLE AND INSURANCE 4.1 LNG Sales Contract. PERTAMINA shall be responsible for the due and prompt administration of the 1973 Sales Contract for the benefit of PERTAMINA and Contractors. All matters which affect the 1973 Sales Contract or the sale, transportation and delivery of LNG thereunder will be administered by a representative to be appointed by PERTAMINA and the representative appointed by Contractors under Article 7 hereof. It is understood, however, that it will be necessary from time to time for PERTAMINA, as seller under the 1973 Sales Contract, to take certain administrative and operational actions without prior consultation where immediate action is required. Contractors will be promptly advised of any such action. 4.2 Consultation. PERTAMINA and Contractors agree to consult with each other freely on all matters relating to the 1973 Extension MOA and the 1973 Sales Contract. PERTAMINA and Contractors shall confer and agree as to any amendment to the 1973 Extension MOA or the 1973 Sales Contract or to any permitted action or election thereunder which constitutes a material adjustment in the quantities of LNG to be sold and delivered thereunder or a change in the terms thereof. At the request of any party hereto, a memorandum evidencing any such agreement shall be prepared as soon as feasible and signed by each party hereto. - 9 - 11 4.3 Title. PERTAMINA will cause the LNG resulting from the liquefaction of the VICO Contract Gas and the Other Contract Gas to be delivered to Buyer at the Delivery Point. Title to each Contractor's share of the LNG resulting from the liquefaction of the VICO Contract Gas shall pass to PERTAMINA at the same time as the passage of title from PERTAMINA to Buyer. 4.4 Insurance. The interests of PERTAMINA and each Contractor in each cargo of LNG transported by PERTAMINA from the Bontang Plant shall be adequately insured pursuant to arrangements mutually agreed to by PERTAMINA and each Contractor. PERTAMINA and each Contractor shall be entitled to receive its Production Sharing Percentage of the Producers' Percentage of any proceeds paid under a marine insurance policy covering a cargo of LNG being transported from the Bontang Plant. Such proceeds shall be remitted by the insurer directly to the bank designated as Trustee pursuant to Article 5 hereof. 4.5 Delivery and Invoicing. At the time of delivery of each cargo of LNG to Buyer at the Delivery Point, PERTAMINA will furnish Contractors with appropriate documentation to evidence the quantity and quality of LNG delivered, together with copies of the invoices to Buyer covering such shipment. PERTAMINA will also furnish Contractors with a copy of each invoice or billing delivered to Buyer on account of interest or other payment obligation of Buyer under the 1973 Sales Contract concurrently with its being furnished to Buyer. Calculation of the Contract Sales Price, the amount of sales invoices and other billings to Buyer, and any adjustments, shall be reviewed and approved by PERTAMINA and Contractors prior to presentation to Buyer. - 10 - 12 ARTICLE 5 PAYMENT 5.1 Contractor Entitlement. The amounts to be paid to each Contractor for its share of the LNG resulting from the liquefaction of Natural Gas to be supplied under this Supply Agreement shall be its Production Sharing Percentage of the Producers' Percentage of the sum of: (a) all amounts to be paid by Buyers to PERTAMINA for Extension Quantities sold and delivered under the 1973 Sales Contract; (b) all other amounts which a Buyer shall become obligated to pay pursuant to the 1973 Sales Contract with regard to deliveries of Extension Quantities, including, but not limited to: (i) amounts payable by such Buyer for its failure to take quantities it is obligated to purchase under the 1973 Sales Contract; (ii) any incremental payments applicable to make-up deliveries; and (iii) any interest accruing on overdue invoice payments; - 11 - 13 (c) amounts payable by insurers in respect of LNG resulting from the liquefaction of the VICO Contract Gas and the Other Contract Gas; and (d) interest earned on any of the amounts referred to in this Section 5.1. 5.2 PERTAMINA Assignment of Contractor Percentage Share. In order to arrange for the receipt by each Contractor of the payments to which such Contractor is entitled under Section 5.1 hereof, PERTAMINA hereby assigns to each Contractor that Contractor's Production Sharing Percentage of the Producers' Percentage of all amounts referred to in Section 5.1 hereof. 5.3 Method of Payment. Throughout the term of this Supply Agreement, all those payments referred to in Section 5.1 hereof shall be paid in U.S. Dollars, directly to BankAmerica International in New York City (or such other leading bank in the United States as shall be selected by PERTAMINA and approved by Contractors) pursuant to a Trustee and Paying Agent Agreement, the parties to which shall be PERTAMINA, Contractors, the production sharing contractors in the Other Contract Areas and the Trustee thereunder. Amounts so received by the Trustee shall be used for payment of (i) Financing Costs; (ii) an agreed portion of Plant Operating Costs, (iii) Transportation Costs in respect of LNG sold and delivered from the Bontang Plant, and (iv) other costs approved by PERTAMINA and Contractors. Amounts received by the Trustee, to the extent that they are not used for payment of the costs referred to in the preceding sentence, shall, insofar as they are applicable to the - 12 - 14 VICO Contract Gas, be disbursed to PERTAMINA and each Contractor in accordance with its Production Sharing Percentage at a bank or banks of its choice. 5.4 Contractors' Right to Payment. (a) The right of Contractors to the payments provided for in this Article 5 shall extend throughout the term of this Supply Agreement and shall not, except in the event of an occurrence contemplated in Section 5.4(d), be affected by the production rates or sources of Natural Gas supplied from the VICO Contract Gas or the Other Contract Gas from time to time during the term hereof. (b) If the quantities of net Natural Gas produced from the participating fields within the VICO Contract Area and delivered pursuant to this Supply Agreement exceed in the aggregate the quantity of the VICO Contract Gas, the Producers' Percentage (and the percentage of the revenues to be paid to PERTAMINA and Contractors hereunder) will not be increased, except in the event of an occurrence contemplated in Section 5.4(d), and Contractors, together with PERTAMINA, will be credited with and have the right to receive revenue from future marketing opportunities in respect of a quantity of net Natural Gas from reserves in the Other Contract Areas equal to such excess quantities. (c) If the quantities of net Natural Gas produced from the participating fields within the VICO Contract Area and delivered pursuant to this Supply Agreement are in the aggregate less than the quantity of the VICO Contract Gas, the Producers' Percentage (and the percentage - 13 - 15 of the revenues to be paid to PERTAMINA and Contractors hereunder) will not be reduced, except in the event of an occurrence contemplated in Section 5.4(d), and the production sharing contractors in the Other Contract Areas and any new contract area, together with PERTAMINA, will be credited with and have the right to receive revenue from future marketing opportunities in respect of a quantity of net Natural Gas from reserves in the VICO Contract Area equal to excess quantities delivered from sources within the Gas Supply Area. (d) If an insufficiency of deliverable reserves of Natural Gas shall occur which precludes the delivery from participating field(s) within the VICO Contract Area or from participating field(s) within any of the Other Contract Areas of the aggregate amount of Natural Gas committed therefrom pursuant to this Supply Agreement or to any of the supply agreements referred to in Section 2.3 hereof over the term thereof, then such insufficiency shall be delivered from field(s), including but not limited to the participating field(s) within the area(s) not then experiencing an insufficiency of deliverable reserves, and the Producers' Percentage shall thereupon be adjusted (together with a corresponding adjustment to the VICO Contract Gas) to reflect the revised share of the net Natural Gas in support of PERTAMINA's obligations under the 1973 Sales Contract which will be supplied and delivered from the VICO Contract Area over the term hereof, such adjustment in the Producers' Percentage to apply only to payments provided for in this Article 5 received after the date thereof. The procedure for determining (i) an insufficiency in deliverable reserves, (ii) the allocation of the right to supply such insufficiency among the VICO Contract Area, the Other Contract Areas and any new contract area and (iii) the calculation of the future Producers' Percentage, shall be made in accordance with principles to be decided upon by PERTAMINA. - 14 - 16 ARTICLE 6 ARBITRATION AND GOVERNING LAW 6.1 Arbitration. All disputes arising in connection with this Supply Agreement shall be finally settled by arbitration conducted in the English language in Paris, France, by three arbitrators under the Rules of Arbitration of the International Chamber of Commerce. Judgment upon the award rendered may be entered in any court having jurisdiction, or application may be made to such court for a juridical acceptance of the award and an order of enforcement, as the case may be. 6.2 Governing Law. This Supply Agreement shall be governed by and interpreted in accordance with the laws of the State of New York, United States of America. ARTICLE 7 CONTRACTORS' REPRESENTATIVE VICO is designated representative by Contractors for performance on behalf of Contractors of their obligation under Section 4.1 hereof and for the giving of notices, responses or other communications to and from Contractors under this Supply Agreement. Such representative may be changed by written notice to such effect from Contractors to PERTAMINA. - 15 - 17 ARTICLE 8 NOTICES Any notices to the parties shall be in writing and sent by mail, cable, telex or facsimile to the following addresses: To PERTAMIN: PERUSAHAAN PERTAMBANGAN MINYAK DAN GAS BUMI NEGARA (PERTAMINA) Jalan Medan Merdeka Timur 1 A Jakarta, Indonesia Attention: Head of BPPKA Cable: PERTAMINA, Jakarta, Indonesia Telex: PERTAMINA, 44134 Jakarta Facsimil: 3846932 To Contractors: VIRGINIA INDONESIA COMPANY (VICO) 6th Floor, Kuningan Plaza South Tower Jl. H.R. Rasuna Said Kav. C11-14 P.O. Box 2828 Jakarta Selatan, Indonesia Attention: President - VICO Indonesia Cable: VICO Telex: 62458 or 62468 Facsimil: 523-6100 - 16 - 18 cc: VIRGINIA INDONESIA COMPANY One Houston Center 1221 McKinney Suite 700 P.O. Box 1551 Houston, Texas 77251-1551 U.S.A. Attention: Chairman Telex: 166-100 Facsimile: (713) 754-6698 A party may change its address by written notice to the other parties. ARTICLE 9 MISCELLANEOUS 9.1 Amendment. This Supply Agreement shall not be amended or modified except by written agreement signed by the parties hereto. 9.2 Successors and Assigns. This Supply Agreement shall inure to the benefit of, and be binding upon, PERTAMINA and each Contractor, their respective successors and assigns, provided that this Supply Agreement shall be assignable by a Contractor only if such Contractor concurrently assigns to the same assignee an equal interest in the Production Sharing Contracts. 9.3 Exclusivity. The parties to this Supply Agreement shall be the only persons or entities entitled to enforce the obligations hereunder of the other parties hereto, and no persons - 17 - 19 or entities not parties to this Supply Agreement shall have the right to enforce any of the obligations hereunder of any of the parties hereto. 9.4 Headings and Subheadings. The Article headings and subheadings used herein are for convenience of reference only. IN WITNESS WHEREOF, PERTAMINA and Contractors have caused their duly authorized representatives to execute this Supply Agreement as of the day and year first written above. PERUSAHAAN PERTAMBANGAN MINYAK CONTRACTORS: DAN GAS BUMI NEGARA (PERTAMINA) ----------- VIRGINIA INDONESIA COMPANY BY /s/ F. ABDA'OE BY /s/ THOMAS W. ARMISTEAD --------------------------------- ------------------------------------- LASMO SANGA SANGA LIMITED BY /s/ IAN D. BROWN ------------------------------------- OPICOIL HOUSTON, INC. BY /s/ CHING-YUNG CHUNG -------------------------------------- - 18 - 20 UNION TEXAS EAST KALIMANTAN LIMITED BY /s/ J. E. KNIGHT ------------------------------------------- J. E. Knight Vice President UNIVERSE GAS & OIL COMPANY, INC. BY /s/ TOSHIO NORIMATSU ------------------------------------------- VIRGINIA INTERNATIONAL COMPANY BY /s/ IAN D. BROWN ------------------------------------------- - 19 - EX-10.9 10 1ST AMEND. U.T. SAVINGS PLAN SALARIED EMP. AGRMNT. 1 FIRST AMENDMENT TO UNION TEXAS PETROLEUM SAVINGS PLAN FOR SALARIED EMPLOYEES WHEREAS, UNION TEXAS PETROLEUM HOLDINGS, INC. (the "Company") and other Employing Companies have heretofore adopted and maintained the UNION TEXAS PETROLEUM SAVINGS PLAN FOR SALARIED EMPLOYEES (the "Plan") for the benefit of their eligible employees; and WHEREAS, the Company desires to amend the Plan on behalf of itself and the Employing Companies; NOW, THEREFORE, the Plan shall be amended as follows, effective as of January 1, 1989: 1. Section 3.1(e) of the Plan shall deleted and the following shall be substituted therefor: "(e) In further restriction of the Members' elections provided in Paragraphs (a), (b) and (c) above, it is specifically provided that one of the 'actual deferral percentage' tests set forth in section 401(k)(3) of the Code and the Treasury Regulations thereunder must be met in each Plan Year. For purposes of the actual deferral percentage tests, 'compensation' is defined as the total of all amounts paid by the Company to or for the benefit of a Member for services rendered or labor performed for the Company while a Member, which are required to be reported on the Member's federal income tax withholding statement or statements (Form W-2 or its subsequent equivalent). If multiple use of the alternative limitation (within the meaning of section 401(m)(9) of the Code and Treasury Regulations Section 1.401(m)-2(b)) occurs during a Plan Year such multiple use shall be corrected in accordance with the provisions of Treasury Regulation Section 1.401(m)-2(c); provided, however, that if such multiple use is not eliminated by making Employer Safe Harbor Contributions, then the 'actual contribution percentages' of all Highly Compensated Employees participating in the Plan shall be reduced, and the excess contributions distributed, in accordance with the provisions of Section 3.8(c) and Section 3.8(d), and applicable Treasury Regulations so that there is no such multiple use." 2. Section 3.5 of the Plan shall deleted and the following shall be substituted therefor: "3.5 RESTRICTIONS ON COMPANY CONTRIBUTIONS. In restriction of the Company Contributions hereunder, it is specifically provided that one of the 'actual contribution percentage' tests set forth in section 401(m) of the Code and the Treasury Regulations thereunder must be met in each Plan Year. For purposes of the actual contribution percentage tests, 'compensation' is defined as the total of all amounts paid by the Company to or for the benefit 2 of a Member for services rendered or labor performed for the Company while a Member, which are required to be reported on the Member's federal income tax withholding statement or statements (Form W-2 or its subsequent equivalent). The Committee may elect, in accordance with applicable Treasury Regulations, to treat Cash or Deferred Contributions to the Plan as Company Matching Contributions for the purposes of meeting this requirement. 3. Section 3.8(b) of the Plan shall be deleted and the following shall be substituted therefor: "(b) Anything to the contrary herein notwithstanding, if, for any Plan Year, the aggregate Cash or Deferred Contributions made by the Company on behalf of Highly Compensated Employees exceeds the maximum amount of Cash or Deferred Contributions permitted on behalf of such Highly Compensated Employees pursuant to Section 3.1(e) (determined by first reducing the Cash or Deferred Contributions made on behalf of the Highly Compensated Employees with the highest 'actual deferral percentage' (as that term is defined in section 401(k)(3)(B) of the Code and the Treasury Regulations thereunder) to the extent necessary to satisfy the restrictions of Section 3.1(e) or to cause such Highly Compensated Employees' actual deferral percentage to equal the actual deferral percentage of the Highly Compensated Employees with the next highest actual deferral percentage and then continuing in such manner until the restrictions set forth in Section 3.1(e) are satisfied), such excess shall be distributed to the Highly Compensated Employees on whose behalf such excess was contributed before the end of the next following Plan Year. For purposes of this Paragraph, the determination and correction of excess Cash or Deferred Contributions of a Member whose actual deferral percentage is determined under the family aggregation rules of sections 401(k) and 414(q) of the Code shall be made in accordance with the provisions of such sections and the Treasury Regulations thereunder based upon such Member's Cash or Deferred Contributions in proportion to the total Cash or Deferred Contributions of all family members used to determine the actual deferral percentage." 4. Section 3.8(g) of the Plan shall be deleted and the following shall be substituted therefor: "(c) Anything to the contrary herein notwithstanding, if, for any Plan Year, the aggregate Company Contributions allocated to the Accounts of Highly Compensated Employees exceeds the maximum amount of such Company Contributions permitted on behalf of such Highly Compensated Employees pursuant to Section 3.5 (determined by first reducing the Company Contributions made on behalf of the Highly Compensated Employees with the highest 'actual contribution percentage' (as that term is defined in section 401(m)(3) of the Code and Treasury Regulations thereunder) to the extent necessary to satisfy the restrictions of Section 3.5 or to cause such Highly Compensated Employees' contribution percentage to equal the contribution percentage of the Highly Compensated Employees with the next highest contribution percentage and then continuing -2- 3 in such manner until the restrictions set forth in Section 3.5 are satisfied), such excess shall be distributed to the Highly Compensated Employees on whose behalf such excess contributions were made (or, if such excess contributions are forfeitable, they shall be forfeited) before the end of the next following Plan Year. For purposes of this Paragraph, the determination and correction of excess Company Contributions allocated to the Accounts of a Member whose contribution percentage is determined under the family aggregation rules of sections 401(m) and 414(q) of the Code shall be made in accordance with the provisions of such sections and the Treasury Regulations thereunder based upon such Member's Company Contributions in proportion to the total Company Contributions allocated to the Accounts of all family members used to determine the actual contribution percentage. Company Contributions shall be forfeited pursuant to this Paragraph only if distribution of all vested Company Contributions is insufficient to meet the requirements of this Paragraph. If vested Company Contributions are distributed to a Member and nonvested Company Contributions remain credited to such Member's Accounts, such nonvested Company Contributions shall vest at the same rate as if such distribution had not been made." 5. Section 17.2(d) of the Plan shall be deleted and the following shall be substituted therefor: "(d) In the case of a total or partial termination of the Plan, and in the absence of a Plan amendment to the contrary, the Trustee shall pay the balance of the Accounts of a Member for whom the Plan is terminated to such Member, subject to the time of payment, manner of payment and consent provisions of Article X; provided, however, that any distribution under sections 401(k)(2)(B) and 401(k)(10) of the Code and the Treasury Regulations thereunder shall be paid in a lump sum distribution." 6. The last sentence in Section 20.4 of the Plan shall be deleted. 7. As amended hereby, the Plan is specifically ratified and reaffirmed. IN WITNESS WHEREOF, the undersigned has caused these presents to be executed on this 28th day of April, 1995. UNION TEXAS PETROLEUM HOLDINGS, INC. /s/ A.C. Johnson BY: ___________________________________ A.C. Johnson Chairman and Chief Executive Officer -3- EX-15 11 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 October 24, 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 October 24, 1995 EX-27.1 12 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMPANY'S SEC FORM 10-Q FOR THE PERIOD ENDING SEPTEMBER 30, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 9-MOS DEC-31-1995 SEP-30-1995 21,653 0 61,558 1 40,850 169,432 2,851,286 1,262,527 1,880,643 315,294 614,055 4,391 0 0 416,415 1,880,643 637,237 654,977 224,674 378,962 59,905 0 19,616 196,494 117,993 78,501 0 0 0 78,501 .89 0
-----END PRIVACY-ENHANCED MESSAGE-----