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Exploration and Production Agreement for Petroleum Activities



In



Block 4



Between



The Republic of Lebanon



and



Total E&P Liban SAL



And



Eni Lebanon B.V.,



and



NOVATEK Lebanon SAL





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Table Of Contents



Parties 4

Preamble 5

Art. 1 EPA Documents 6

Art.2 Definitions 7

Art. 3 Delineation of the Block pursuant to this EPA 19

Art. 4 EPA rights and their duration 20

Art. S State participation 21

Art. 6 Participating Interests, Obligations of Right Holders and Term of the EPA 21

Art. 7 Exploration Phase and Exploration Periods 24

Art. 8 Minimum Work Commitment 32

Art. 9 Work Commitment Guarantee 38

Art. 10 Results of Exploration and Appraisal 41

Art. 11 Declaration of Commerciality and Development and Production Plan 45

Art. 12 Production Phase and Production Periods 49

Art. 13 Revisions to Plans; Annual Work Programs and Budgets 52

Art. 14 Natural Gas 56

Art. 15 Appointment and functions of Operator 64

Art. 16 Management Committee 67

Art. 17 Health, Safety and Environmental Requirements 69

Art. 18 Decommissioning Requirements Art. 19 Petroleum Lifting and Delivery arrangements 72

Art. 20 Recruitment and training 75

Art 21. Coordinated Petroleum Activities and unitisation 77

Art 22.Royalties 79

Art. 23. Entitlements for Royalties; Disposable Petroleum; Cost Recovery 85

Art. 24.Profit Petroleum Entitlements 86

Art 25. Title to assets 89

Art 26. Fiscal terms and other charges 91

Art 27. Procurement and supply bases 92

Art 28. Changes in Laws and Regulations 96

Art 29.Force majeure 97

Art 30. Indemnification and liability 100

Art 31. Insurance 102

Art 32. Records, accounting and audit 103

Art 33. Amendments 104

Art. 34 Assignment and mortgage 104





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Art. 35 Confidentiality 106

Art. 36 Early Termination and Forced Assignment 110

Art. 37 General provisions on consultation, arbitration and sole expert 116

Art. 38 Arbitration 117

Art. 39 Sole expert 118

Art. 40 Language, governing law and interpretation 120

Art. 41 Right Holder conduct 121

Art. 42 Conflicts of interest 122

Art. 43 Waiver 122

Art. 44 Notices 123





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Annexes:



Annex A Description of the EPA Block

Annex B Map of the EPA Block

Annex C Heads of Joint Operating Agreement

Annex D Accounting and Financial Procedure

Annex E Form of Parent Company Guarantee

Annex F Form of Work Commitment Guarantee

Annex G Form of Statement of Calculation of Annual Adjustment to Work Commitment Guarantee Amount



Parties



This Exploration and Production Agreement is subject to applicable Lebanese Law, and has been approved by the Council of Ministers as stipulated by Article 19 of the Offshore Petroleum Resources Law No 132 of 2010 (the “OPR Law"), and is made on the Fourteenth of December 2017 between:



The Republic of Lebanon, herein represented by the Minister of Energy and Water (the “Minister"); and



Total E&P Liban SAL, a corporation established pursuant to the laws of Lebanon, and having its registered office at Beirut, 250, Badaro street, Manhattan building, 3’d floor, hereinafter referred to as "Total" and herein represented by its its duly appointed and authorised representative Mr. Stéphane Michel;





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Epa Block (4) - Final 29-01-2018





Eni Lebanon B.V., a corporation established pursuant to the laws of the Netherlands, and having its registered office at World Trade Center B-Tower, 17th floor, Strawinskylaan 1725, 1077 XX Amsterdam, The Netherlands, hereinafter referred to as "Eni" and herein represented by its duly appointed and authorised representative Mr. Andrea Cozzi;



NOVATEK Lebanon SAL, a corporation established pursuant to the laws of Lebanon, and having its registered office at Badaro, OMT Building, 3rd floor, Plot No. 5243, Section 14, Beirut, Lebanon, hereinafter referred to as "Novatek" and herein represented by its Chairman-General Manager Mr. Vyacheslav Mishin.



Each of Total, Eni and Novatek shall hereinafter individually be referred to as a "Right Holder," and they shall collectively be referred to as the "Right Holders". The Right Holders and the State shall hereinafter be referred to as the "Parties" and each shall be individually referred to as a "Party".



Preamble



WHEREAS, the Constitution of the Republic of Lebanon stipulates that no contract or concession for the exploitation of the natural resources of the country may be granted except by virtue of a law and for a limited period.



WHEREAS, the Law no 132/2010 (Offshore Petroleum Resources (OPR) Law) provides that the Republic of Lebanon has title to all Petroleum resources in the seabed of Lebanese waters and exclusive right to their management;



WHEREAS, pursuant to the Law no 132/2010 (OPR Law), the Council of Ministers has the authority to ensure the implementation of the Petroleum policy of the Lebanese State and has for the purpose of this Exploration and Production Agreement appointed the Minister



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and the Petroleum Administration to carry out certain functions for and on behalf of the Council of Ministers as hereafter specified;



WHEREAS, the Law no 132/2010 (OPR Law) provides that particular Petroleum Activities may only be carried out pursuant to an Exploration and Production Agreement;



WHEREAS, the Council of Ministers desires, on certain terms and conditions stipulated herein, to award to Total, Eni and Novatek the right to undertake specified Petroleum Activities in certain areas subject to the jurisdiction of the Republic of Lebanon;



WHEREAS, the Right Holders are willing to undertake these specified Petroleum Activities in the Block pursuant to this Exploration and Production Agreement; and



WHEREAS, the Council of Ministers, by its Resolution No. 32 dated 14/12/2017, has approved this EPA and has authorized the Minister to sign this EPA on behalf of the State.



NOW THEREFORE it has been concluded as

follows:



Art. 1 EPA Documents



1. This Exploration and Production Agreement, hereinafter referred to as the “EPA”, consists of the main body of this EPA and the following Annexes, which form an integral part hereof:



Annex A Description of the EPA Block

Annex B Map of the EPA Block

Annex C Heads of Joint Operating Agreement

Annex D Accounting and Financial Procedure



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Annex E Form of Parent Company Guarantee

Annex F Form of Work Commitment Guarantee

Annex G Form of Statement of Calculation of Annual Adjustment to Work Commitment Guarantee Amount



2. The purpose and function of the main body of this EPA is principally to regulate the legal and contractual relationship between the State and the Right Holders.



3. This EPA, and all operations or transactions related to Petroleum Activities pursuant to this EPA, shall be governed by applicable Lebanese law. In the event of conflict between the provisions of this EPA and applicable Lebanese law, applicable Lebanese law shall prevail.



4. In the event of conflict between the provisions of the main body of the EPA and its Annexes, the main body of the EPA shall prevail.



Art. 2 Definitions



1. Definitions set forth in the Law no 132/2010 (OPR Law) and the decree no

10289/2013 (Petroleum Activities Regulation (PAR)) shall apply in this EPA. For ease of reference, the following is a list of definitions

contained in the OPR Law and the PAR and used in this EPA:







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Law no 132/2010

(OPR Law)

Development

Discovery

Exploration

Facility

Operator

Petroleum

Petroleum Activities

Petroleum Administration

Petroleum Right

Production

Reconnaissance

Reservoir

Royalty

Transportation

Well



Decree no

10289/2013 (PAR)

Control

Crude Oil

Data

Decommissioning Fund

Disposable Petroleum

Exploration Costs

Processing

Quarter



2. Words and phrases used in this EPA including its Annexes shall have the following meanings:



“Accounting and Financial Procedure” means the accounting and financial procedure set forth in Annex D to this EPA.



“Adjacent Awarded Block” has the meaning set forth in Article 21.



“Affiliate” or “Affiliated Company” has the meaning given to the term “Affiliated Company” in the Decree no 10289/2013 (PAR)



“Appraisal Activities” means, with respect to a Potentially Commercial Discovery, Petroleum Activities conducted with a view to determining whether such Discovery constitutes a Commercial Discovery and allowing the Right Holders to prepare and submit a Development and Production Plan with respect thereto.



“Appraisal Area” means a portion of the Block, determined on the basis of geographical coordinates but without limitations expressed in terms of depth or stratigraphic horizon, in which a Potentially Commercial Discovery(s) has





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been made, and that is identified within an approved Appraisal Plan.



“Appraisal Plan” means a plan for the conduct of Appraisal Activities prepared by the Right Holders and approved by the Minister acting upon the recommendation of the Petroleum Administration in accordance with Article 10.6 of this EPA.



“Associated Gas” means Natural Gas, which may occur as gas-cap gas which overlies and is in contact with Crude Oil in a Reservoir, and/or as solution gas dissolved in Crude Oil in a Reservoir.



“Appraisal Well” means a Well drilled for the purpose of evaluating the commercial potential of a geological feature or a geological structure in which Petroleum has been discovered.



“Best International Petroleum Industry Standards” means all those uses and practices that are, at the time in question, generally accepted in the international petroleum industry as being good, safe, economical, environmentally sound and efficient in exploring for, developing, producing, processing and transporting Petroleum. They should reflect standards of service and technology that are appropriate to the operations in question (including state-of-the-art standards where appropriate and economically justified), and should be applied using standards in all matters that are no less rigorous than those in use by the Right Holders or their Affiliates in other global operations.



“Block” means the area awarded to the Right Holders for the conduct of Petroleum Activities pursuant to this EPA (and constituting the “Area” for purposes of the Law no 132/2010 "OPR Law)", as determined in accordance with Article 3 of this EPA, as such area may be reduced from time to time as a result of obligatory or voluntary relinquishment, withdrawal or surrender.





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"Capital Expenditures” means all Recoverable Costs that are classified as Capital Expenditures in accordance with the definition of such term set forth in Annex D .



“Certificate of Annual Adjustment” shall have the meaning specified in Article 9.1.3 of this EPA.



"Change of Control" means, with respect to a Right Holder, any direct or indirect change of the identity of the Ultimate Parent Entity that Controls such Right Holder, through a single transaction or a series of related transactions, unless such change of identity occurs solely as a result of the acquisition of shares of an Entity that is listed on a public stock exchange, or the merger or consolidation of any such listed Entity with any other Entity.



"Claim Notice” shall have the meaning specified in Article 30.5 of this EPA.



"Commercial Discovery” means a Discovery, or multiple Discoveries, if intended for development within a Development and Production Area under a single Development and Production Plan, for which the Right Holders have submitted a Declaration of Commerciality.



"Commercial Production" means Production of Petroleum and delivery at the Delivery Point or Delivery Points in commercial quantities, as stipulated by a Development and Production Plan.



"Contingent Well” shall have the meaning specified in Article 7.2 of this EPA.



"Contractor" means any individual or Entity retained by a Right Holder or Operator to carry out any part of Petroleum Activities arising out of or related to this EPA.





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“Cost Petroleum” means the portion of Disposable Petroleum that is available to the Right Holders to cover Recoverable Costs incurred in connection with Petroleum Activities, as specified in Article 23 of this EPA.



“Crude Oil Discovery” means an area consisting of a single Reservoir or multiple Reservoirs all grouped on, or related to, a common geological structure or stratigraphic feature, from which Crude Oil may be produced in commercial quantities, and which is designated as such by the Right Holders on a provisional basis at the time the relevant Discovery is reported, and on a definitive basis in a Declaration of Commerciality.



“Declaration of Commerciality” means a written notice delivered by the Right Holders to the Minister stating that, in the opinion of the Right Holders, a certain Discovery or multiple Discoveries is a Commercial Discovery, which merits preparation and submission of a Development and Production Plan relating thereto.



“Delivery Point” means, with respect to each Commercial Discovery, the point or points at which title to Petroleum and risk of loss is transferred to the State or to the Right Holders, as specified in the approved Development and Production Plan.



“Development and Production Area” means a portion of the Block, which may include limitations expressed in terms of depth or stratigraphic horizon, in which a Commercial Discovery(s) has been made, and that is identified within an approved Development and Production Plan.



“Development and Production Plan” means a plan meeting the requirements of Article 11 of this LF'A ana approved by the Louncii o* Ministers, for the conduct of Petroleum Activities with respect to Development and Production in respect of a Commercial







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Discovery.



"ECB" means the European Central Bank.



"Effective Date" means the date of approval of this EPA by the Council of Ministers.



“Encumbrance” means any mortgage, charge, pledge, lien, restriction, assignment, hypothecation, security interest, title retention or any other agreement or arrangement, the effect of which is the creation of security, or any other interest, equity or other right of any person (including any right to acquire, option, right of first refusal or right of pre-emption), or any agreement or arrangement to create any of the same.



“Entity” means any partnership, joint stock company, corporation, company or any other legal entity, and all references to an “Entity” shall include such Entity’s successors and permitted assigns.



“EPA” has the meaning set forth in Article 1 of this EPA.



“EPA Termination Notice” has the meaning specified in Article 36.1 of this EPA.



“Exclusive Petroleum Operations" means Petroleum Activities carried out pursuant to applicable Lebanese law and this EPA at the cost, expense and risk, and for the benefit, of fewer than all Right Holders, or in respect of which the economic interests of some or all Right Holders are different from their Participating Interests.



"Exploration Period" means each period specified in Article 7.2 of this EPA, forming a part of the Exploration Phase, as each such period may be extended in accordance with Articles 7.2 and 7.9 of this EPA.





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“Exploration Phase” means the periods determined pursuant to Article 7.1, as it may be extended in accordance with Article 7.10.



“Exploration Plan” means the plan to be submitted by the Right Holders pursuant to Article 7.4 or 7.5 of this EPA and approved by the Minister acting upon the recommendation of the Petroleum Administration.



“Exploration Well” means a Well drilled primarily for the purpose of identifying or confirming the existence of a geological structure or stratigraphic unit in which no Discovery has previously been made.



“Event of Force Majeure” has the meaning specified in Article 29.2 of this EPA.



“Forced Assignment Event” has the meaning specified in Article 36.2 of this EPA.



“Forced Assignment Notice” has the meaning specified in Article 36.2 of this EPA.



“Gas Infrastructure and Marketing Plan” means a plan meeting the requirements of Article 14 of this EPA for the use and/or construction of infrastructure for the Transportation, Processing and storage of Natural Gas, as well as marketing and offtake arrangements relating to such Natural Gas.



“Gross Negligence or Wilful Misconduct” means any unjustifiable act or omission, but not mere negligence, that constitutes an intentional, deliberate, reckless or conscious disregard of Best International Petroleum Industry Standards, the terms of this EPA or Lebanese law.



“ICC Rules of Arbitration” shall have the meaning specified in Article 38 of this EPA.







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“Initial WCG EUR Amount” shall have the meaning specified in Article 9.1 of this EPA.



“Initial WCG USD Amount” shall have the meaning specified in Article 9.1 of this EPA.



"Joint Operating Agreement” means an agreement entered into among the Right Holders and the Operator, providing for the conduct and financing of Petroleum Activities and related matters, as provided in Article 15.4 of this EPA.

"Lebanese law” means all legislation, statutes, regulations, decrees, orders or other similar documents adopted or approved by the competent Lebanese authorities and having binding effect, including without limitation the Law no 132/2010 (OPR Law) and the Decree no 10289/2013 (PAR).



"Management Committee” means a committee, composed of representatives of each Right Holder holding a Participating Interest, and constituted in accordance with applicable Lebanese law and this EPA, that will provide the Right Holders’ supervision and direction of the Petroleum Activities pursuant to this EPA.



"Minimum Work Commitment” means the activities or tasks which the Right Holders are required to perform during each of the first two Exploration Periods, as set forth in Article 8 of this EPA.



"Minister" has the meaning set forth in the recitals to this EPA.





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"Natural Gas" means a mixture of hydrocarbons and varying quantities of non-hydrocarbons that exist either in the gaseous phase or in solution with Crude Oil in natural subsea Reservoirs and when produced remain in gaseous phase at atmospheric conditions of temperature and pressure, and which is classified as either Associated Gas or Non- Associated Gas.



"Natural Gas Discovery" means an area consisting of a single Reservoir or multiple Reservoirs all grouped on, or related to, a common geological structure or stratigraphic feature, from which Non-Associated Gas may be produced and which is designated as such by the Right Holders on a provisional basis at the time the relevant Discovery is reported, and on a definitive basis in a Declaration of Commerciality.



"Natural Gas Liquids" means the propane and heavier components of Natural Gas that can be classified according to their vapor pressures; as low vapor pressure (Condensate), intermediate vapor pressure (Natural Gasoline) and high vapor pressure (LPG).



"Non-Associated Gas" means Natural Gas that is found in a Reservoir that does not contain significant quantities of Crude Oil relative to the volume of Natural Gas.



"OPR Law" has the meaning set forth in the recitals to this EPA.



"Operating Expenditures" has the meaning stated in Annex D of this EPA.



"PAR" means the Lebanese Petroleum Activities Regulation adopted by the Council of Ministers pursuant to Decree No. 10289/2013 dated 30 April 2013.









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Page 15 of 126"Participating Interest" means the undivided percentage portion of each Right Holder in the assets, rights, privileges, duties, obligations and liabilities derived from this EPA.



"Party" has the meaning set forth in the "Parties" section of this EPA.



"Petroleum Produced" means Petroleum extracted from a Reservoir, sufficiently processed for consumption or use for Production purposes, or for delivery to the relevant Delivery Point or Delivery Points.



"Potentially Commercial Discovery" means a Discovery that appears capable of becoming a Commercial Discovery and for which an Appraisal Plan is to be submitted pursuant to Article 10 of this EPA.



"Production Period" means, with respect to any Commercial Discovery, the period designated as such pursuant to Article 12.2 of this EPA, as such period may be extended pursuant to Article 12.4 of this EPA.



"Production Phase" means the period designated as such pursuant to Article 12.2 of this EPA.



"R-Factor" means, for any Quarter, the number calculated and designated as the R-Factor pursuant to Article 24 of this EPA.



"Recoverable Costs" means all costs incurred by the Right Holders in connection with Petroleum Activities, which are recoverable in accordance with the Accounting and Financial Procedure.



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Page 16 of 126"Right Holder" has the meaning set forth in the paragraph related to "parties" and the preamble to this EPA.



"State" means the Republic of Lebanon.



"State Participating Interest" means the Participating Interest of the State or any Entity owned by the State.



"Subcontractor" means any individual or Entity retained by a Contractor to carry out any part of Petroleum Activities arising out of or related to this EPA.



"Termination Event" has the meaning specified in Article 36.1 of this EPA.



"Ultimate Parent Entity" in relation to a group of Affiliated Entities, the Entity within such group that is not itself subject to Control by any other Entity.



"WCG EUR Amount Year N+l" shall have the meaning specified in Article 9.1.2 of this EPA.



"Wholly-Owned Affiliate" means, with respect to an Entity (referred to in this definition as the first Entity), an Affiliate of such first Entity that directly or indirectly: (i) is wholly owned by that first Entity, (ii) wholly owns that first Entity, or (iii) is wholly owned by a second Entity that also wholly owns such first Entity, in each case with the exception of any shares required to be held by directors of the owned Entity or by a minimum number of other shareholders, in both cases in accordance with the company law of the jurisdiction in which such owned Entity is organized, but only to the extent strictly required by such law and only to the extent such shares do not represent more than 1% of the capital of the owned Entity.



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Page 17 of 126"Work Commitment Guarantee" means an unconditional and irrevocable bank guarantee or letter of credit, issued by a bank acceptable to the Petroleum Administration, in substantially the form set forth in Annex F.



"Work Program" means a program prepared by the Right Holders pursuant to this EPA, detailing the work planned to be conducted by the Operator for a specified period of time.



3. In this EPA, except as otherwise specified or as the context otherwise requires:



a) headings of Articles are for convenience of reference only and shall not affect, in any way, the meaning or interpretation of this EPA;



b) references to Articles herein are to the articles in the main body of this EPA, unless the context requires otherwise;



c) all recitals and the preamble to this Agreement and all Annexes to this Agreement shall be construed as integral parts of this Agreement;



d) where the context requires, words denoting the singular only may also include the plural and vice-versa, and words importing one gender include the other;



e) periods of time refer to the Gregorian calendar;



f) the words "including", "include" or "includes" shall be construed to include the words "without limiting the generality of the foregoing" or "without limitation" or "among other things"; and



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Page 18 of 126g) any reference to a law, regulation, agreement or other document shall mean such law, regulation, agreement or document as the same may be supplemented, amended or modified from time to time in accordance with its terms, and references to a specific article or section of such law, regulation, agreement or other document shall be construed as references to the relevant successor article or section of such supplemented, amended or modified law, regulation, agreement or other document; and



h) any reference to a governmental authority or Entity shall be construed as being a reference to any successor thereof.



Art. 3 Delineation of the Block pursuant to this EPA



1. The Block over which the Right Holders are initially awarded exclusive Petroleum Rights pursuant to the Law no 132/2010 (OPR Law) and this EPA is stipulated by geographical coordinates set out in Annex A and outlined on the map included in Annex B of this EPA. Any changes in the shape or extent of the Block pursuant to this EPA shall, after any appropriate approval has been obtained, be included in an amendment to Annex A and Annex B of this EPA.



2. The Petroleum Administration shall provide such assistance to the Right Holders as they may reasonably request in order to obtain information with respect to current and existing infrastructure and activities in the Block that are unrelated to Petroleum Activities (including telecommunication cables and areas reserved for naval activities of the State). For the avoidance of doubt, the Petroleum Administration shall have no obligation to provide the Right Holders with



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Page 19 of 126the information described in the preceding sentence.



Art. 4 EPA rights and their duration



1. This EPA is a Petroleum Rights document awarded pursuant to the law no 132/2010 (OPR Law), authorising the conduct by the Right Holders of Petroleum Activities in the Block, on the terms and subject to the conditions set forth in this EPA.



2. Accordingly, this EPA, for the period from the Effective Date until the date of termination of this EPA:



a) confers on the Right Holders, subject to applicable Lebanese law and the terms and conditions set forth in this EPA, the exclusive right to conduct Reconnaissance, Exploration, Appraisal, Development, Production and other Petroleum Activities relating to Petroleum originating from one or more Reservoirs in the subsoil of the seabed within the limits of the Block; and



b) Confers a non-exclusive right, subject to applicable law, to construct and operate Facilities for the purpose of Processing, Transportation and storage of Petroleum up to each Delivery Point.



3. This EPA shall have no fewer than three (3) Right Holders at any time.



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Page 20 of 126Art. 5 State participation



1. Without prejudice to Article 36(2)(e) of this EPA, there is no State Participating Interest in the first licensing round.



2. The State or any Entity owned by the State may in the future become a Right Holder pursuant to Article 36 of this EPA, but the State or such entity shall not in such capacity have any rights or obligations under this EPA that are different from those of any other Right Holder (except to reflect the respective Participating Interests of each Right Holder).



3. The Right Holders shall not have, and to the extent necessary hereby waive, any right, arising as a matter of law or otherwise, to recover any contribution or other amounts from the State or any Entity owned by the State in its capacity as a Right Holder that result from the joint and several nature of the liability of the Right Holders pursuant to Article 6.3 hereof or the Law no 132/2010 (OPR Law), except that the Right Holders shall be permitted to exercise rights to recover a contribution from the State or any such Entity to such liability that is proportional to the State Participating Interest.



Art. 6 Participating Interests, Obligations of Right Holders and Term of the EPA



1. This EPA enters into force on the Effective Date. As of the Effective Date, pursuant to Article 19-2 of the Law no 132/2010 (OPR Law), the Right Holders shall be deemed to have formed an unincorporated joint venture, on the terms set forth herein. In accordance with Article 8 of the Decree no 10289/2013 (PAR), within thirty (30) days of the Effective Date, each Right Holder shall have in place, and shall maintain during the term of this EPA, a legal presence in Lebanon appropriately staffed



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Page 21 of 126and authorized to manage, in accordance with applicable Lebanese law, all aspects of rights and obligations related to or arising out of this EPA.



2. On the Effective Date of this EPA, the respective Participating Interests of Total, Eni and Novatek are:



Total:|Forty percent (40%)

Eni:|Forty percent (40%)

Novatek:|Twenty percent (20%)



3. The obligations of the Right Holders under this EPA and in respect of all Petroleum Activities shall be joint and several, except in respect of (i) any obligation of an individual Right Holder to pay taxes pursuant to Article 26 of this EPA, or (ii) the confidentiality obligations set forth in Article 35 of this EPA. The Right Holders may enter into agreements among themselves for the apportionment of liability or indemnification, but no such agreement shall affect the joint and several nature of the obligations of the Right Holders hereunder. Any such agreements shall be submitted to the Minister for approval in accordance with Article 65-1 of the Law no 132/2010 (OPR Law).



4. Without prejudice to the joint and several liability of the Right Holders, concurrently with the signature of this EPA, each of the following Right Holders has provided to the Minister a guarantee of its obligations hereunder from the guarantor set forth opposite its name, substantially in the form of Annex E to this EPA. Such Guarantee is required where the pre-qualified company has designated a Wholly-Owned Affiliate to be the Right Holder or where the pre-qualified



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Page 22 of 126company has relied on the characteristics of parent to become pre-qualified.



Right Holder|Guarantor

Total:|Total S.A.

Eni:|Eni International B.V.

Novatek:|JSC Novatek



5. The rights and obligations of each Right Holder, and the Right Holders collectively, pursuant to the EPA shall commence on the Effective Date and shall remain in force:



a) With respect to Reconnaissance, Exploration and Appraisal Activities, for the duration of the Exploration Phase (and for the duration of the Production Phase, to the extent such activities are conducted within a Development and Production Area);



b) With respect to Development and Production Activities, for the duration of the Production Phase (and for the duration of the relevant Production Period, with respect to any particular Development and Production Area); and



c) For such additional period of time as may be reasonably necessary to finalise the implementation of a plan for the transfer of Petroleum Activities to the State pursuant to Article 25.4 of this EPA and/or the cessation of Petroleum Activities and decommissioning of Facilities pursuant to Article 18 of this EPA and the Decree no 10289/2013 (PAR).



6. This EPA may be terminated prior to the relevant date or dates set forth in paragraph 5 above at the time and in the manner set forth in Article 36 of this EPA.



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Page 23 of 1267. Notwithstanding that this EPA has expired, has otherwise been terminated or revoked subject to applicable law or the terms and conditions of this EPA, the obligations of the Right Holders which have accrued hereunder before the date of termination shall continue to be binding on the Right Holders for the period provided by applicable Lebanese law and this EPA, and for the purpose of any claim in respect thereof (and of any obligations that expressly apply after termination), the provisions of this EPA relating to the joint and several nature of the liability of the Right Holders (Article 6.3), health, safety and environmental requirements (Article 17), decommissioning requirements (Article 18), indemnification and liability (Article 30), confidentiality (Article 35), arbitration (Article 38), language, governing law and interpretation (Article 40), Right Holder conduct (Article 41), waiver (Article 43) and notices (Article 44) shall survive such termination.



Art. 7 Exploration Phase and Exploration Periods



1. The Exploration Phase shall have an initial duration of five (5) years, subject to two possible extensions of one (1) year each, as contemplated in Article 7.2, and to possible additional extension with the approval of the Council of Ministers as contemplated in Article 7.10 of this EPA. The Exploration Phase shall commence on the date on which a decision is made (or deemed to be made) with respect to the approval of the Exploration Plan for the first Exploration Period, pursuant to Article 7.7 of this EPA.



2. The Exploration Phase shall be divided into two Exploration Periods of three (3) years and two (2) years, respectively. The first Exploration Period may be extended in connection with the drilling of a Contingent Well as set out in this Article 7.2. The second Exploration Period may be extended with the



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Page 24 of 126approval of the Minister as provided in this Article 7.2.



The first Exploration Period shall commence on the date of commencement of the Exploration Phase determined pursuant to Article 7.1 of this EPA. The second Exploration Period shall commence on the expiration date of the first Exploration Period, as it may be extended, except that there shall be no second Exploration Period if the Right Holders fail to complete the Minimum Work Commitment during the first Exploration Period other than by reason of an Event of Force Majeure. In such event the Exploration Phase shall terminate at the end of the first Exploration Period, as it may be extended.



If at any time during the first Exploration Period the Minister has approved an Appraisal Plan in relation to the Exploration Well drilled as part of the Minimum Work Commitment of the first Exploration Period, then the Right Holders will drill an Exploration Well with the depth of 4200m true vertical depth subsea (TVDss) ("Contingent Well") and, upon request by the Right Holders submitted at least sixty (60) days prior to the end of the first Exploration Period, such first Exploration Period shall be extended for a period as may be required to: (i) complete the drilling of the Contingent Well, and in the event of a Discovery, (ii) determine whether such Discovery is a Potentially Commercial Discovery, and if this is the case (iii) submit an Appraisal Plan with respect to such Discovery. In any event, such extension may not be longer than one (1) year.



If the first Exploration Period is extended as provided above, the deadline for the submission by the Right Holders of an Exploration Plan for the second Exploration Period pursuant to Article 7.5 shall be similarly extended, so such deadline will be sixty (60) days prior to the



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Page 25 of 126expiration of the extended first Exploration Period.



For the avoidance of doubt: (i) drilling of the Contingent Well shall not relieve the Right Holders of the Minimum Work Commitment for the second Exploration Period in case the Right Holders elect to enter into the second Exploration Period, and Article 8.7 of this EPA shall not apply to the Contingent Well; and (ii) the drilling of the Contingent Well shall not form part of the Minimum Work Commitments; and (iii) the non-completion of drilling of the Contingent Well shall not be in any event considered as or deemed to be a breach of the EPA and the Right Holders shall not bear any liability to the State for such non-completion of drilling of the Contingent Well.



If, having obtained an extension to the first Exploration Period pursuant to this Article 7.2, the Right Holders have not spudded the Contingent Well within four months following the expiration of the first Exploration Period (other than by reason of an Event of Force Majeure), the Minister shall have the right to revoke such extension.



If at the end of the two-year term of the second Exploration Period the Right Holders have completed the Minimum Work Commitment for such second Exploration Period (unless prevented from doing so by an Event of Force Majeure), and are pursuing Appraisal Activities pursuant to an approved Appraisal Plan, or have submitted an Appraisal Plan for approval in a timely manner but have not yet received a response, the Minister (based on the of recommendation the Petroleum Administration) may approve an extension of the second Exploration Period of one (1) year, upon request by the Right Holders submitted at least sixty (60) days prior to the end of the second Exploration Period. Exploration Periods may be extended by reason of an Event of Force



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Page 26 of 126Majeure pursuant to Article 7.9 of this EPA. The Exploration Phase shall terminate at the end of the second Exploration Period (as it may be extended), unless it is extended pursuant to Article 7.10 of this EPA.



3. During the Exploration Phase, the Right Holders may conduct Reconnaissance, Exploration and Appraisal Activities pursuant to approved Exploration Plans. Each Exploration Plan shall contain at a minimum the information required by Article 31 of the decree no 10289/2013 (PAR) (except that information regarding the technical qualifications of the Right Holders need not be submitted if it would be duplicative of the information already provided in connection with the award of this EPA). Exploration Plans may contain applications for drilling permits contemplated by the decree no 10289/2013 (PAR), in which case the approval by the Minister of the Exploration Plan shall also constitute the approval of the relevant drilling permit or permits.



4. The initial Exploration Plan shall be submitted to the Minister with a copy to the Petroleum Administration within sixty (60) days of the Effective Date. Such Exploration Plan shall, at a minimum, provide for the completion of the Minimum Work Commitment for the first Exploration Period.



5. No later than sixty (60) days prior to the expiration of the first Exploration Period (as it may be extended), the Right Holders may submit an Exploration Plan for the second Exploration Period to the Minister with a copy to the Petroleum Administration. No such Exploration Plan may be submitted unless (i) the Right Holders confirm in writing that they will complete the Minimum Work Commitment prior to the end of the current Exploration Period (unless they have already done so or are prevented from doing so by reason of an Event



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Page 27 of 126of Force Majeure), (ii) such Exploration Plan, at a minimum, provides for the completion of the Minimum Work Commitment (if any) for the Exploration Period to which it applies, and (iii) such Exploration Plan provides for the relinquishment of a portion of the remaining area in the Block as provided in Article 7.6 and delineates the portion of the Block to be relinquished. Upon approval by the Minister of such Exploration Plan, the rights of the Right Holders to conduct Reconnaissance, Exploration and Appraisal Activities shall be maintained in the relevant Exploration Period, and the Block shall be reduced by the area that is relinquished as of the first day of such Exploration Period.



6. The Right Holders shall relinquish twenty-five per cent (25%) of the Block at the start of the second Exploration Period. For purposes of the foregoing, any Appraisal Area and any Development and Production Area shall not be subject to relinquishment. The percentage set forth above shall be applied to the portion of the Block that is outside any Appraisal Area and any Development and Production Area. The portion of the Block to be relinquished shall be contiguous and delimited by meridians and parallels expressed in minutes of a degree. The same shall apply to the portion of the Block that is retained by the Right Holders. The size and shape of the Block to be retained shall be subject to approval by the Minister, based on the opinion of the Petroleum Administration.



At the end of the second Exploration Period and upon the extension request of the Exploration Phase, the Right Holders shall relinquish an additional 25% of the initial Block size in order to fulfill the obligation stipulated in Article 24 of the Law No 132/2010 (OPR Law).



7. The Petroleum Administration shall review each Exploration Plan and make a recommendation to the Minister as to whether



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Page 28 of 126to approve such Exploration Plan. If no decision is made as to approval or rejection of an Exploration Plan within sixty (60) days of its submission to the Petroleum Administration, the Exploration Plan shall be deemed approved. The Exploration Plan shall be approved unless (i) the relevant conditions set forth in Articles 7.4 or 7.5 of this EPA relating to the Minimum Work Commitment are not met, (ii) any required Work Commitment Guarantee has not been provided, (iii) the Exploration Plan does not provide for the required relinquishment pursuant to Article 7.6 of this EPA, (iv) the activities contemplated in the Exploration Plan are not in accordance with Best International Petroleum Industry Standards, (v) such activities would, in the reasonable opinion of the Petroleum Administration, present an unacceptable risk to health, safety or the environment, or (vi) such activities would violate applicable Lebanese law. Any decision to reject an Exploration Plan shall be accompanied by a written explanation of the reasons for such rejection. In the event that any Exploration Plan is not approved, the Right Holders may submit an amended Exploration Plan addressing the issues giving rise to its rejection, and such Exploration Plan shall be evaluated on the basis of the same standards. Unless the Minister allows otherwise, the Right Holders may only submit one such amended Exploration Plan in respect of each Exploration Period. Prior to the rejection of any such amended Exploration Plan by the Minister, the Petroleum Administration shall notify the Right Holders of the contemplated rejection, and upon the request of the Right Holders shall engage in good faith discussions with the Right Holders for at least thirty (30) days with regard to possible further amendments to the Exploration Plan. Pending the outcome of such discussions, the Exploration Plan shall not be deemed approved or rejected. If such discussions result in agreed further amendments, the Right Holders shall have the right to submit an Exploration Plan with such amendments in replacement of the prior



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Page 29 of 126amended Exploration Plan (notwithstanding the restriction that would otherwise limit the Right Holders to one amended Exploration Plan).



8. In the event that, at the end of the first Exploration Period, as it may be extended, the Right Holders do not submit an Exploration Plan for the second Exploration Period, or any such Exploration Plan (and any amended plan) is finally rejected, then the Right Holders may not conduct any further Petroleum Activities, except for (i) Appraisal Activities conducted within an Appraisal Area in accordance with an Appraisal Plan, and (ii) Petroleum Activities conducted within a Development and Production Area in accordance with a Development and Production Plan. In such event, the Right Holders shall be deemed to have relinquished the entire Block, except for any Appraisal Area or Development and Production Area that has been approved, and any proposed Appraisal Area or proposed Development and Production Area that is the subject of an Appraisal Plan or Development and Production Plan that is under review for possible approval.



9. In the event that Reconnaissance, Exploration or Appraisal Activities contemplated in an Exploration Plan are substantially interrupted due to an Event of Force Majeure, the relevant Exploration Period (and the period for completion of the relevant Minimum Work Commitment) shall be extended by the number of days of the interruption. However, no Exploration Period may be extended beyond the end of the Exploration Phase, except with the prior approval of the Council of Ministers in accordance with Article 21-1 of the Law no 132/2010 (OPR Law). In such event, the Exploration Phase may not be extended beyond the latest date permitted by the Law no 132/2010 (OPR Law).



10. At the end of the Exploration Phase, the Right Holders may apply to the Minister, with a



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Page 30 of 126



copy to the Petroleum Administration,

for an extension of the Exploration

Phase pursuant to Article 21 of the Law

no 132/2010 (OPR Law).Such an

application must be submitted within

the time period contemplated in Article 33 of

the Decree no 10289/2013 (PAR). The

application shall provide the following

information:



a) the reasons the Right Holders are

seeking an extension (which must be

valid operational reasons or an Event of

Force

Majeure, as provided in Article 33 of the

Decree no 10289/2013 (PAR))









b) the proposed duration of the extension;



c) a description of the portion of the Block

to be relinquished pursuant to Article 24

of the Law no 132/2010 (OPR Law); and









d) a proposed Exploration Plan covering the

period of the extension (or a statement

to the effect that the purpose of the

extension is to pursue activities under

an approved Appraisal Plan, or to

Development and Production Plan for

approval).



The Right Holders may propose to provide a

guarantee relating to the work contemplated in

such Exploration Plan (including pursuant to

the Work Commitment Guarantee provided in

connection with the Second Exploration Period,

if appropriate), and the Minister shall

consider any such guarantee in deciding whether

to submit the extension request to the Council

of Ministers for approval pursuant to Article

21-1 of the Law no 132/2010 (OPR Law). Any such



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approval by the Council of Ministers.



11. For the avoidance of doubt, the duration

of the Exploration Period(s) and the

Exploration Phase shall not be affected by the

submission or approval of an Appraisal Plan or

a Development and Production Plan. The Right

Holders may continue conduct Exploration,

Reconnaissance and Appraisal Activities in all

parts of the Block for the remaining duration

of the Exploration Phase, and inside of a

Development and Production Area for the

remaining duration of the Exploration Phase

and the Production Phase. If an additional

Discovery is made, the Right Holders shall

follow the procedures contemplated by this EPA

in respect of such additional Discovery. to



Art. 8 Minimum Work Commitment



1. The Right Holders shall carry out the

Minimum Work Commitment stipulated by this

Article with respect to each Exploration

Period. The Minimum Work Commitments

stipulated by this Article may not be

performed as Exclusive Petroleum Operations.



2. During the first Exploration Period the

Right Holders shall conduct the following

Minimum Work Commitment:



a) Geophysical survey:



(i) Carry out and process at least Zero

(0) square kilometers of 3D seismic.

(ii) Evaluate, integrate and map all

seismic data with respect to the

Block.



b) Other geological and geophysical

surveys:



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(i) Airborne, gravity, aeromagnetics: Carry

out at least Zero (0) line kilometers of

surveys.

(ii) Advanced technologies, such as electro-

magnetics: Carry out at least Zero (0)

square kilometers of surveys.



c) Exploration Wells drilling:



(i) Drill at least one (1) Exploration

Well.

(ii) Such Exploration Well shall be drilled

to a minimum depth of 4,400m (four

thousand and four hundred meters), true

vertical depth subsea (TVDss).



In case any part of the Minimum Work Commitment

for the first Exploration Period described in

this Article has not been performed by the end

of the first Exploration Period, the Right

Holders shall pay to the State an amount in

euros equivalent to (i) 40,000,000 (forty

million United States dollars), less (ii) the

amount of Recoverable Costs incurred during the

first Exploration Period in fulfilment of the

Minimum Work Commitment. For this purpose, the

euro equivalent of the United States dollar

amount calculated pursuant to the preceding

sentence will be determined on the basis of the

average of the USD/EUR rates published by the

European Central Bank ("ECB") at 4:00 p.m.

Central European Time ("CET") on each day

during the calendar month preceding the payment

due date (determined pursuant to Article 8.4 of

this EPA), on the European Central Bank

website:

www.ecb.europa.eu/stats/policy and exchang e

rates/euro reference exchange rates (or any

successor website on which such rate is

published).



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3. During the second Exploration Period

(excluding any extension approved by the

Minister pursuant to Article 7.2), the Right

Holders shall conduct the following Minimum

Work Commitment:



a) Geophysical survey:



(i) Carry out and process at least Zero

(0)square kilometers of 3D seismic.

(ii) Evaluate, integrate and map all

seismic data with respect to the

Block.



b) Other geological and surveys: geophysical



(i) Airborne, gravity, aeromagnetics:

Carry out at least Zero (0) line

kilometers of surveys.

(ii) Advanced technologies, such as

electro-magnetics: Carry out at least

Zero (0) square kilometers of

surveys.



c) Exploration Wells drilling:



(i) Drill at least one (1) Exploration

Well.

(ii) Such Exploration Well shall be drilled

to a minimum depth of 4,200m four

thousand and two hundred meters), true

vertical depth subsea (TVDss).



d) In case any part of the Minimum Work

Commitment for the second Exploration Period

described in this Article has not been

performed by the end of the second Exploration

Period, the Right Holders shall pay to the

State an amount in euros equivalent to (i)

35,000,000 (thirty five million) United States

dollars, less (ii) the amount of Recoverable

Costs incurred during the second Exploration

Period (or carried





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forward from the first Exploration Period as

provided below) in fulfilment of the minimum

Work Commitment. The euro equivalent of the

United States dollar amount shall be calculated

in the same manner as set forth in Article 8.2

of this EPA.



4. At the end of each Exploration Period

(excluding any extension pursuant to Article

7.2 of this EPA), if the Minimum Work

Commitment has not been satisfied, the Right

Holders shall provide a statement of the

Recoverable Costs incurred in fulfilment of the

Minimum Work Commitment within sixty (60) days

of the end of such Exploration Period. The

Right Holders shall pay the requisite amount

described in paragraphs 2 or 3 above, as the

case may be, within thirty (30) days of the

delivery of such statement. Such payment shall

be without prejudice to the right of the

Petroleum Administration to dispute the amount

of such Recoverable Costs or their attribution

to the Minimum Work Commitment. In the event

that any such payment is not made in a timely

manner, the Minister may draw the relevant

amount under the applicable Work Commitment

Guarantee. In the event that the statement of

Recoverable Costs is not submitted in a timely

manner, the Minister may draw the entire amount

of the applicable Work Commitment Guarantee, as

if the Recoverable Costs were zero, unless the

failure to submit the statement is cured before

the drawing is made. The right of the State to

receive the amount set forth in Article 8.2 or

8.3 (as applicable) and, if any such amount is

not paid, the right of the Minister to draw

under the applicable Work Commitment Guarantee,

shall be the sole remedy in case the Minimum

Work Commitment for either Exploration Period

is not fulfilled.



5. The Right Holders must complete the work

contemplated by the Minimum Work Commitment

regardless of the amount of



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Recoverable Costs incurred in doing so. The

Minimum Work Commitment is a minimum work

obligation and not a spending obligation.



6. Should any Well forming part of the Minimum

Work Commitments be abandoned before reaching

the defined objectives of such Well for any

reason, the Right Holders shall drill a

substitute Well, unless the Right Holders

demonstrate to the reasonable satisfaction of

the Minister (based on the opinion of the

Petroleum Administration) that:



(i) a formation stratigraphically older

than the deepest target formation is

encountered;

(ii) basement is encountered;



(iii) further drilling would present an

obvious danger, such as but not limited

to the presence of abnormal pressure or

excessive losses of drilling mud;



(iv) impenetrable formations are

encountered;



(v) Petroleum-bearing formations are

encountered which require protecting,

thereby preventing planned depths from

being reached.



In such circumstances, the drilling of any such

Well may be terminated at a lesser depth and

shall be deemed to have satisfied the

obligations of the Right Holders in respect of

that Well. In the event that the Right Holders

are required to drill a substitute Well, the

Right Holders may apply to the Minister for an

extension of the relevant Exploration Period,

which the Minister may grant, to the extent such

extension is reasonably necessary to allow for

drilling and evaluation of the substitute





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Well. No such extension may last beyond the end

of the Exploration Phase (unless an extension of

the Exploration Phase is applied for pursuant to

Article 7.10 of this EPA and approved by the

Council of Ministers in accordance with Article

21-1 of the Law no 132/2010 (OPR Law). No such

extension shall be available if the relevant

Well is abandoned before reaching its defined

objectives as a result of the failure by the

Operator to conduct the relevant Petroleum

Activities in accordance with the standards

required by this EPA and the decree no

10289/2013 (PAR).



7. Except as otherwise provided under Article

7.2 of this EPA, in the event the number of

Wells drilled by the Right Holders (excluding

any appraisal Well and excluding any

Contingent Well) during the first Exploration

Period exceeds the number of Wells provided

for in the Minimum Work Commitment for that

Exploration Period as specified by this EPA,

the number of additional Wells drilled by the

Right Holders during such Exploration Period

may be carried forward and treated as work

undertaken in discharge of the Right Holders'

Minimum Work Commitment to drill Wells during

the second Exploration Period if such work would

comply with the requirements of the second

Exploration Period; provided, however, if by

reason of the provisions of this Article the

Minimum Work Commitment of the Right Holders for

the second Exploration Period as specified by

this EPA has been fully discharged by the Right

Holders before that Exploration Period

commences, the Right Holders shall, after

consultation with the Petroleum Administration,

adjust the Exploration Plan for the second

Exploration Period so as to ensure the

continuity of Petroleum Activities in the Block

pursuant to this EPA.



8. Appraisal Wells drilled with respect to a

Discovery shall not be considered Exploration

Wells for purposes of the Minimum Work

Commitment. In the event of a Discovery, only



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the Discovery Well shall be deemed to be an

Exploration Well for purposes of the Minimum

work Commitment.



Art. 9 Work Commitment Guarantee



9.1. On or prior to the date of this Agreement,

the Right Holders have jointly and severally

provided to the Minister one or more Work

Commitment Guarantees for the first Exploration

Period in the aggregate amount of EURO (the

"Initial WCG EUR Amount"), equivalent to

US$40,000,000 (forty million US dollars) (the

"Initial WCG USD Amount"). It is specified that

the Initial WCG EUR Amount corresponds to the

Initial WCG USD Amount converted into EURO

using the average EUR/USD exchange rate

published by the ECB at 4:00 p.m CET on each day

on which such rate is published during the month

of [December 2017.















9.1.1. Following the end of each calendar year,

the Right Holders may present to the Minister,

with a copy to the Petroleum Administration, a

Statement of the Adjustment as per the example

set out in Annex G to this EPA, setting out the

WCG EUR Amount for Year N+1, as defined in the

following paragraph and set out in Annex G. Such

WCG EUR Amount will be determined as set out in

Annex G to reflect:



(i) Recoverable Costs incurred by the Right

Holders in fulfilment of the Minimum

Commitment calendar year; and during Work

such



(ii) The adjustment of the Initial WCG EUR

amount following the end of the first

calendar year and



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then successively on an annual basis the

adjustment of the WCG EUR Amount Year N,

to reflect the updated exchange rate

EUR/USD, in the manner provided in the

following paragraph.



9.1.2. Once the WCG USD Amount Year N+1 is

calculated in accordance with Annex G for the

relevant alendar year, shall be converted to

euros(the "WCG EUR Amount Year N+1") using the

average exchange rate of the ECB for each day in

the month of December of the relevant year

(except days on which no such rate is

published), as published by the ECB at 4:00 p.m

CET on each such day.













9.1.3. Within thirty (30) days after the receipt

by the Minister of the completed statement set

out in Annex G, the Minister, based on the

recommendation of the Petroleum Administration,

shall provide to the Right Holders a certificate

(in the form attached to the Work Commitment

Guarantee (the "Certificate of Annual

Adjustment") providing the WCG EUR Amount Year

N+1 which shall result in the automatic

adjustment of the WCG EUR Amount.



9.1.4. In the event that the Minister, based on

the recommendation of the Petroleum

Administration, disputes the amount of any such

Recoverable Costs, or their allocation to the

Minimum Work Commitment, the Minister shall

provide a certificate with respect to the

undisputed portion thereof. The Petroleum

Administration and the Right Holders shall

discuss the resolution of such dispute, and if no

agreement is reached within thirty (30) days of

the date of delivery of such statement, the Right

Holders may submit the question to a sole expert

for determination pursuant to Article 39 of this

EPA. Such determination shall be final





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and binding on the Parties. Following the

resolution of the dispute, the Minister shall





provide the Right Holders with an additional

Certificate of Annual Adjustment to reduce the

Work Commitment Guarantee in an amount reflecting

such resolution.



9.1.5. The Right Holders shall provide a new Work

Commitment Guarantee, if the value of WCG EUR

Amount Year N+1 is equal to or exceeds 120% of

the value of the Initial WCG EUR Amount. Such new

Work Commitment Guarantee shall be in the initial

amount equal to the WCG EUR Amount Year N+1 and

in all other respects in the form set forth in

Annex F to this EPA. Upon the issuance of the new

Work Commitment Guarantee, the State shall return

the prior Work Commitment Guarantee within 10

business days to the Right Holders and shall not

have a right to make any claim thereunder and

provide a certificate of release in such form as

may be reasonably requested by the Right Holders.



9.1.6. The calculation of the WCG USD Amount N+1

and WCG EUR Amount N+1 for each following year

shall apply the principles set out above in

paragraphs 9.1.1 to 9.1.5 and in Annex G to this

EPA.



9.2. On or prior to the date of submission of an

Exploration Plan for the second Exploration

Period, the Right Holders shall be jointly and

severally required to provide to the Minister one

or more Work Commitment Guarantees in the

aggregate amount in EURO equivalent to

US$35,000,000 (thirty-five million US dollars)

calculated on the same basis as the Initial WCG

EUR Amount, except by reference to exchange rates

for the latest calendar month prior to delivery

of such Work Commitment Guarantee(s). The

principles set out in Article 9.1 applicable to

the revision of this amount and the requirement

to provide a new Work



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Commitment Guarantee shall apply to the Work

Commitment Guarantee for the second Exploration

Period.



9.3. When the Minimum Work Commitment for an

Exploration Period has been completed, the Work

Commitment Guarantee for the Exploration Period

in question shall be released within thirty

(30) days after the Right Holders deliver a

request for such release to the Petroleum

Administration.



9.4. In the event that the Right Holders

deliver more than one Work Commitment

Guarantee, then (i) there shall be no more than

one Work Commitment Guarantee for each Right

Holder, (ii) the Initial WCG EUR Amount shall

be allocated among such Minimum Work Commitment

Guarantees in such proportion as the Right

Holders may determine among themselves, (iii)

all calculations made pursuant to this Article

shall be made on a pro rata basis in accordance

with the respective Initial WCG EUR Amounts of

each such Minimum Work Commitment Guarantee,

and (iv) references to the "Right Holders" in

this Article 9 shall be adjusted to "Right

Holder" as the context may require. For the

avoidance of doubt, the obligation of the Right

Holders to deliver new Work Commitment

Guarantees pursuant to Article 9.1.5 shall be

joint and several.



Art. 10 Results of Exploration and Appraisal



1. During the drilling of any Wells pursuant to

an Exploration Plan, the Right Holders shall,

in accordance with the law no 132/2010 (OPR

Law) and the decree no 10289/2013 (PAR), keep

the Petroleum Administration informed of the

progress of each Well and shall:



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a) as soon as reasonably possible, consult

with the Petroleum Administration

regarding any proposed Well testing

program;



b) as stipulated by applicable Lebanese law,

promptly undertake a technical evaluation

of test results and of all other relevant

subsurface Data and submit such evaluation

to the Petroleum Administration as soon as

it has been completed.



2. In the event that a Discovery is made, the

Right Holders shall promptly inform the

Minister with a copy to the Petroleum

Administration. The notification by the Right

Holders shall indicate whether they believe

the Discovery is a Crude Oil Discovery or a

Natural Gas Discovery, and whether the

Discovery is a Potentially Commercial

Discovery. In accordance with Article 28 of

the law no 132/2010 (OPR Law), no later than

six (6) months after such notification, the

Right Holders shall submit a report to the

Minister describing the results of the testing

of the Discovery Well conducted pursuant to

Article 10.1 of this EPA.



3. In the event that the Right Holders believe

that the Discovery is a Potentially Commercial

Discovery, within sixty (60) days of the date

on which the Discovery is reported to the

Minister pursuant to Article 10.2, the Right

Holders shall submit to the Minister, with a

copy to the Petroleum Administration, either

(i) an Appraisal Plan, or (ii) a written

statement to the effect that for technical or

economic reasons (which shall be described in

such statement) a longer period is required in

order to prepare an Appraisal Plan in

accordance with Best International Petroleum

Industry Standards. In the latter case, the

deadline for submission of the Appraisal Plan

shall be postponed to the end







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of the period for which such technical or

economic justification applies. The Appraisal

Plan shall contain at a minimum the

information contemplated by Article 40 of the

decree no 10289/2013 (PAR), as well as a

description of the proposed Appraisal Area

(which shall be no more than two times the

geographical area that the Right Holders

reasonably believe may include a Development

and Production Area if the Discovery proves to

be a Commercial Discovery). In the case of a

Natural Gas Discovery, the work contemplated

by the Appraisal Plan shall include the

preparation of a Gas Infrastructure and

Marketing Plan. An Appraisal Plan may contain

an application for one or more drilling

permits, in which case the approval of the

Appraisal Plan shall also constitute the

approval of such drilling permits.



4. If the Right Holders fail to submit an

Appraisal Plan or written statement meeting

the foregoing requirements within the required

time period (including a failure to submit an

Appraisal Plan by the deadline established

pursuant to any such written statement), then

they shall be deemed to have conclusively

determined that the Discovery is not a

Potentially Commercial Discovery. In such

case, they shall not have the right to conduct

Appraisal Activities or to submit a

development and Production Plan with respect

thereto, unless either (i) the Right Holders

demonstrate to the reasonable satisfaction of

the Minister (based on the opinion of the

Petroleum Administration) that changed

economic or technical conditions since the

original deadline (which they shall describe)

justify the conduct of Appraisal Activities or

the submission of a Development and Production

Plan with respect thereto, or (ii) a

subsequent Discovery is made and the Right

Holders reasonably believe that the initial

Discovery is a Potentially Commercial

Discovery when evaluated on a joint basis with

the subsequent Discovery.



5. The Appraisal Plan shall provide for

Appraisal Activities to be conducted so as to





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lead to a decision regarding a Declaration of

Commerciality as quickly as reasonably

practicable in accordance with Best

International Petroleum Industry Standards.

The Appraisal Plan may not last for more than

two years, unless the Right Holders

demonstrate to the reasonable satisfaction of

the Minister (based on the opinion of the

Petroleum Administration) that a longer period

is technically or economically justified in

accordance with Best International Petroleum

Industry Standards. After the completion of an

Appraisal Plan, the Right Holders may continue

to conduct activities relating to concept

design, front-end engineering design (FEED),

analysis of geological and geophysical data,

and other activities that do not involve

drilling (all of which shall be described in a

Work Program or amendment thereto), until the

deadline for a Declaration of Commerciality

and, if a Declaration of Commerciality is

made, until the deadline for the submission of

a Development and Production Plan. The

Appraisal Plan and any such other activities

may not extend beyond the end of the

Exploration Phase unless an extension to the

Exploration Phase is applied for pursuant to

Article 7.10 of this EPA and approved by the

Council of Ministers pursuant to Article 21-1

of the law no 132/2010 (OPR Law). Pending the

decision of the Council of Ministers as to

whether to approve an application to extend

the Exploration Phase in connection with a

proposed Appraisal Plan, such Appraisal Plan

may be approved by the Minister with respect

to Appraisal Activities that are reasonably

designed to be completed prior to the end of

the Exploration Phase, and on a contingent

basis (subject to Council of Ministers

approval of the extension) with respect to

remaining Appraisal Activities.



6. The Petroleum Administration shall review

each Appraisal Plan and make a recommendation

to the Minister as to whether to approve such

Appraisal Plan. If no decision is made as to

approval or rejection of an Appraisal Plan

within sixty (60) days of its submission to





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the Petroleum Administration, the Appraisal

Plan shall be deemed approved. The Appraisal

Plan shall be approved unless (i) the

Appraisal Plan does not meet the requirements

of this Article 10, (ii) the activities

contemplated in the Appraisal Plan are not in

accordance with Best International Petroleum

Industry Standards, (iii) such activities

would, in the reasonable opinion of the

Petroleum Administration, present an

unacceptable risk to health, safety or the

environment, or (iv) such activities would

violate applicable Lebanese law. Any decision

to reject an Appraisal Plan shall be

accompanied by a written explanation of the

reasons for such rejection. In the event that

any Appraisal Plan is not approved, the Right

Holders may submit an amended Appraisal Plan

addressing the issues giving rise to its

rejection, and such Appraisal Plan shall be

evaluated on the basis of the same standards.

Unless the Minister allows otherwise, the

Right Holders may only submit one such

amended Appraisal Plan in respect of each

Potentially Commercial Discovery. Prior to

the rejection of any such amended Appraisal

Plan by the Minister, the Petroleum

Administration shall notify the Right Holders

of the contemplated rejection, and upon the

request of the Right Holders shall engage in

good faith discussions with the Right Holders

for at least thirty (30) days with regard to

possible further amendments to the Appraisal

Plan. Pending the outcome of such

discussions, the Appraisal Plan shall not be

deemed approved or rejected. If such

discussions result in agreed further

amendments, the Right Holders shall have the

right to submit an Appraisal Plan with such

amendments in replacement of the prior

amended Appraisal Plan (notwithstanding the

restriction that would otherwise limit the

Right Holders to one amended Appraisal Plan).



Art. 11 Declaration of Commerciality and

Development and Production Plan



1. At any time following the notification of

a Discovery to the Minister pursuant to

Article 10.2 of this EPA, the Right Holders

may deliver a Declaration of Commerciality to

the Minister OL





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with a copy to the Petroleum Administration. The

Declaration of Commerciality shall be accompanied

by an outline of the expected Development and

Production Plan. Such outline may contemplate the

joint development of the relevant Discovery with

another Discovery within the Block, or a unitized

development as contemplated in Article 21 of this

EPA. In the case of a Natural Gas Discovery, a

Declaration of Commerciality may be made subject

to the preparation and approval of a Gas

Infrastructure and Marketing Plan pursuant to

Article 14 of this EPA.



2. In accordance with Article 26 of the law no.

132/2010 (OPR Law), no later than two years after

the drilling of the last Exploration Well, the

Right Holders shall notify the Minister in

writing, with a copy to the Petroleum

Administration, as to whether they have decided to

make a Declaration of Commerciality, or whether

they require additional time to make such

decision. The Right Holders may deliver a

Declaration of Commerciality at any time until

sixty (60) days after the completion of the work

contemplated in an Appraisal Plan, unless the

Right Holders demonstrate to the reasonable

satisfaction of the Minister (based on the opinion

of the Petroleum Administration) that a later

deadline would be technically or economically

justified (such deadline may not be later than the

end of the Exploration Phase, including any

extension approved pursuant to Article 7.10 of t

this EPA). In the absence of a Declaration of

Commerciality by the applicable deadline, the

Right Holders shall be deemed not to have made a

Declaration of Commerciality in respect of the

relevant Discovery. In such case, they shall not

have the right to submit a Development and

Production Plan with respect thereto, unless

either (i) the Right Holders demonstrate to the

reasonable satisfaction of the Minister (based on

the opinion of the Petroleum Administration) that

changed economic or technical conditions since the

original deadline (which they shall describe







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justify the notification of a Declaration of

Commerciality and the submission of a Development

and Production Plan, or (ii) a subsequent

Discovery is made and the Right Holders reasonably

believe that the initial Discovery is a

Potentially Commercial Discovery when evaluated on

a joint basis with the subsequent Discovery.



3. As soon as reasonably practicable, and in any

event no later than one hundred and eighty (180)

days after the delivery of a Declaration of

Commerciality (but no later than ninety (90) days

prior to the end of the Exploration Phase pursuant

to Article 41 of the decree no. 10289/2013 (PAR),

including any extension approved pursuant to

Article 7.10 of this EPA), the Right Holders shall

submit to the Minister, with a copy to the

Petroleum Administration, a proposed Development

and Production Plan. The deadline of one hundred

and eighty (180) days may be extended if the Right

Holders demonstrate to the reasonable satisfaction

of the Minister (based on the opinion of the

Petroleum Administration) that a later deadline

would be technically or economically justified

(such deadline may not be later than the end of

the Exploration Phase, including any extension

approved pursuant to Article 7.10 of this EPA).

The Development and Production Plan shall contain,

at a minimum, the information contemplated in

Article 29 of the law no 132/2010 (OPR Law) and

Articles 41 and 42 of the decree no 10289/2013

(PAR), as well as: (i) a proposed target date and

initial production rate for first Commercial

Production; and (ii) a preliminary description of

the decommissioning activities that would be

required in respect of Facilities contemplated in

the proposed Development and Production Plan if it

were to be approved. A proposed Development and

Production Plan in respect of a Natural Gas

Discovery shall include a Gas Infrastructure and

Marketing Plan, except to the extent that an

extension is approved pursuant to Article 14 of

this EPA. The proposed target date for first







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Commercial Production may take into account any

such extension.



4. The Petroleum Administration shall study the

proposed Development and Production Plan and,

within ninety (90) days of receipt of the proposed

Development and Production Plan, make a

recommendation to the Minister pursuant to Article

41 of the decree no 10289/2013 (PAR) as such

Development and Production Plan shall be submitted

to the Council of Ministers for approval. I

the event that a decision is not made by the

Council of Ministers prior to the end of the

Exploration Phase, the Right Holders may apply for

an extension of the Exploration Phase with respect

to the relevant Discovery. If such extension is

granted, the rights of the Right Holders with

respect to the relevant Discovery shall continue,

and the Right Holders shall be entitled to pursue

Development and Production Activities if and when

such Development and Production Plan is approved.

If no decision is made by the Council of

Ministers, with respect to such extension or with

respect to the substance of the Development and

Production Plan, prior to the end of the

Exploration Phase, then this EPA (including the

term of the Exploration Phase) shall be

automatically suspended for the period from the

last day of the Exploration Phase (determined

without regard to such suspension) until the date

on which a decision is made by the Council of

Ministers. During the period of suspension, the

Right Holders shall promptly cease the conduct of

all Petroleum Activities, except (i) such

activities that are reasonably necessary to ensure

the protection of health, safety, the environment

or the preservation and maintenance of Facilities,

(ii) preparatory activities described in Article

11.5 of this EPA, and (iii) administrative and

similar activities relating to the foregoing.



5. Pending the approval of a Development and

Production Plan, the Right Holders may conduct

preparatory activities in relation to







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such Development and Production Plan, but they may

not engage substantial contractual obligations

relating to such Development and Production Plan,

within the meaning f Article 30-3 of the law no

132/2010 (OPR Law), until such Development and

Production Plan is approved by the Council of

Ministers.



6. The Development and Production Plan may include

an application for a license and plan for

placement and operation of Processing,

Transportation or storage Facilities, for

consideration by the Council of Ministers pursuant

to Article 31 of the law no 132/2010 (OPR Law).



7. The Development and Production Plan may include

or be accompanied by an application for drilling

permits relating to the drilling activities

contemplated thereby. It may also include or be

accompanied by an application for a Production

permit meeting the requirements of Article 46 of

the decree no 10289/2013 (PAR), covering all or

any portion of the relevant Production Period. In

such event, a decision by the Minister to submit

the Development and Production Plan for approval

of the Council of Ministers shall be deemed to be

the approval of such drilling permits and

production permits, conditional upon the approval

by the Council of Ministers of the Development and

Production Plan.



Art. 12 Production Phase and Production Periods



1. If the first Commercial Discovery is a Crude

Oil Discovery, the Production Phase shall commence

on the date on which the Right Holders receive

notice of the approval of the Development and

Production Plan by the Council of Ministers. If

the first Commercial Discovery is a Natural Gas

Discovery, the Production Phase shall commence on

the later of the date on which the Right Holders

receive notice of the approval of the Development

and Production Plan by the Council of Ministers,

and the date of approval of a Gas Infrastructure

and





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Marketing Plan pursuant to Article 14 of this EPA.

The Petroleum Administration shall provide notice

of the approval of a Development and Production

Plan by the Council of Ministers to the Right

Holders as soon as reasonably practicable

following such approval. There shall be one

Production Phase under this EPA, regardless of the

number of Commercial Discoveries that are made.



2. The Production Phase shall, unless it is

terminated earlier in accordance with this EPA,

last for thirty (30) years. The Production Phase

will include a Production Period for each

Commercial Discovery, which shall initially be

equal to the lesser of (i) twenty-five (25) years,

or (ii) the remainder of the Production Phase as

of the date of approval of the Development and

Production Plan (and, if applicable, the Gas

Infrastructure and Marketing Plan) for such

Commercial Discovery. If the Production Period for

any Commercial Discovery ends prior to the

expiration of the Production Phase, it may be

extended pursuant to Article 12.4 of this EPA.

Following the termination of the Production Period

for any Commercial Discovery, the Right Holders

shall be required to conduct the activities

contemplated by Articles 18.4 and 25.4 of this EPA

in respect of the transfer of Petroleum Activities

to the State or decommissioning, as the case may

be. If the Production Phase terminates before the

completion of such activities, this EPA shall

remain in force with respect to the Development

and Production Area for such purposes. 2.



3. In the event that the Right Holders determine

that it will not be practicable, for technical or

economic reasons based on Best International

Petroleum Industry Standards, or by reason of an

Event of Force Majeure, to achieve first

Commercial Production at the rate and by the

target date contemplated in the Development and

Production Plan, then the Right Holders may apply

to the Minister (with a copy to the Petroleum

Administration) for a





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reduction in the Commercial Production rate and/or

an extension of the target date. The Minister,

pursuant to Article 30 of the Law no. 132/2010

(OPR Law), and after consulting the Petroleum

Administration, shall grant such an extension if

it is technically or economically justified as

described above, or if it is due to an Event of

Force Majeure. In the event that the Minister

rejects an application for an extension, pursuant

to Article 30 of the Law no. 132/2010 (OPR Law),

the Petroleum Administration and the Right Holders

(represented by the Operator) shall discuss the

reasons for such rejection and seek to agree on a

revised Commercial Production rate or target date.

In the absence of such agreement within sixty (60)

days, or in the event that Commercial Production

does not commence at the rate and by the target

date contemplated in the Development and

Production Plan, then the rights of the Right

Holders in respect of the relevant Development and

Production Area shall terminate pursuant to

Article 41 of the decree no 10289/2013 (PAR), as

though such rights had been surrendered in

accordance with the Law no 132/2010 (OPR Law) and

the decree no 10289/2013 (PAR).



4. No more than five years and no less than one

year prior to the end of the Production Period for

a Commercial Discovery, the Right Holders may

submit an application for extension of the

relevant Production Period up to the end of the

Production Phase (unless such Production Period

already expires at the end of the Production

phase). Such application shall be submitted to

the Minister with a copy to the Petroleum

Administration, and shall explain the reasons for

seeking an extension, which must be justified

operational reasons. Without limiting the

foregoing, the application shall propose an

additional investment program (such as an enhanced

recovery project) to be implemented by the Right

Holders during or prior to the period of the

extension. The Minister, pursuant to Article 30 of

the Law no. 132/2010 (OPR Law),





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and after Administration, consulting the Petroleum

shall grant such extension if (i) the investment

program is consistent with Best International

Petroleum Industry Standards and Lebanese law, and

(ii) the benefits to the State from such

investment program (including additional

Royalties, Profit Petroleum Share and taxes, as

well as indirect benefits such as increased

employment and opportunities for Lebanese service

providers) are expected to be greater than the

cost to the State of granting the extension. The

Right Holders shall provide the Minister (with a

copy to the Petroleum Administration) with such

information and analyses as may be reasonably

necessary to allow the determination to be made

pursuant to Article 30 of the Law no. 132/2010

(OPR Law). In addition, if Petroleum Activities

relating to a Commercial Discovery are

substantially disrupted due to an Event of Force

Majeure, the relevant Production Period shall

automatically be extended on a day-for-day basis,

but no such extension may last beyond the end of

the Production Phase.



Art. 13 Revisions to Plans; Annual Work Programs

and Budgets



1. The Right Holders may at any time submit a

revision to an approved Exploration Plan,

Appraisal Plan or Development and Production Plan

for approval. Approval shall be granted or denied

based on the same criteria as the initial plan,

and by the same body (Council of Ministers or the

Minister) that granted the approval of the initial

plan. The Right Holders must submit a revision to

an Exploration Plan, Appraisal Plan or Development

and Production Plan if their activities are

expected to deviate materially from those

contemplated in the initial plan, determined in

accordance with Best International Petroleum

Industry Standards. For the avoidance of doubt,

changes to operations or economic returns that

occur in the ordinary course of Petroleum

Activities shall not constitute, by themselves,

material deviations from approved plans. In

addition,





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changes to the profile of anticipated Production

(without a material change to the development

concept) shall be considered amendments to the

Production Permit approved together with the

Development and Production Plan, and thus may be

approved by the Minister (based on the opinion of

the Petroleum Administration) pursuant to Article

46 of the decree no 10289/2013 (PAR).



2. If the Minister, based on the opinion of the

Petroleum Administration, believes that Production

is not occurring at an optimal rate in accordance

with Best International Petroleum Industry

Standards, the Minister may request that the Right

Holders amend the contemplated Production profile

accordingly. No later than sixty (60) days after

such request, the Right Holders shall submit a

request for an amended Production Permit with a

revised Production profile for approval, or shall

submit a written explanation of the reasons why

they believe that such an amendment is not

appropriate. In the latter case, the Right Holders

and the Petroleum Administration shall discuss the

matter and attempt to reach an agreement, within

sixty (60) days. Any adjustment to the Production

Permit agreed by the Right Holders and the

Petroleum Administration, shall be submitted for

approval by the Minister pursuant to Article 46 of

the decree no 10289/2013 (PAR).



3. Within sixty (60) days of the Effective Date,

and at least ninety (90) days prior to the end of

each calendar year, or at such other times as may

be approved in advance by Petroleum

Administration, the Right Holders shall prepare in

reasonable detail and submit to the Petroleum

Administration a Work Program and budget for

Exploration, Appraisal Activities, and/or

Development and Production (as applicable) for the

remaining portion of the calendar year or for the

subsequent calendar year, as the case may be. Such

Work Program and budget shall be consistent with

the requirements of the relevant Exploration Plan,





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Appraisal Plan and/or Development and Production

Plan, and shall reflect all previously approved

contracts as contemplated by Article 27.2 of this

EPA and the Accounting and Financial Procedure

that constitutes Annex D of this EPA. The Work

Program and budget shall be consistent with

obligations pursuant to this EPA and shall set

forth the Petroleum Activities which the Right

Holders propose to carry out during the remaining

portion of the calendar year or for the subsequent

calendar year, as the case may be.



4. The Petroleum Administration shall inform the

Right Holders within thirty (30) days as of the

date of submission of the relevant Work Program

and budget as to whether the proposed Work Program

and budget are approved. Such approval shall be

granted so long as the Work Program and budget are

consistent with the requirements of Article 13.3

of this EPA. In the event that the Petroleum

Administration does not respond within such thirty

(30) day period, then the Work Program and budget

shall be deemed approved. If a Work Program and

budget is rejected, the Petroleum Administration

shall explain the reasons for such rejection in

writing, in which case the Right Holders may

submit a revised Work Program and budget for

approval on the basis of the same procedures. In

the event that a decision on approval is not made

by the beginning of the period to which the Work

Program and budget applies, the Right Holders may

continue to carry out Petroleum Activities during

such period on the basis of (i) the approved

Exploration Plan, Appraisal Plan and/or

Development and Production Plan, (ii) all

previously approved contracts (to the extent such

approval was required pursuant to Article 27.2 of

this EPA), and (iii) a budget for all other items

that is no more than ten per cent (10%) greater

than that contemplated in the approved budget for

the most recent period (determined separately for

each Exploration Plan, Appraisal Plan and

Development and Production Plan).





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5. The Right Holders may at any time amend the

Work Program and budget submitted in accordance

with this Article, provided that the amended Work

Program and budget are:



a) prepared in reasonable submitted

Administration, detail and to the Petroleum

whose recommendations in respect thereof shall

be considered by the Right Holders;



b) consistent with the relevant Exploration

Plan, Appraisal Plan and/or Development and

Production Plan, any previously approved

contracts, and the Right Holders' obligations

pursuant to this EPA; and



c) Submitted to the Petroleum Administration

for information once the Right Holders have

made such revisions as deemed appropriate

after consideration of any recommendations

made by the Petroleum Administration.



Any such amendment shall be effective without

approval by the Petroleum Administration so long

as (i) the overall budget for each Exploration

Plan, Appraisal Plan and Development and

Production Plan for the relevant period will not

increase by more than ten per cent (10%), or (ii)

the amendment is made solely to reflect

expenditures incurred in connection with any

emergency posing a threat to health, safety or the

environment. Any other amendment shall require

approval by the Petroleum Administration.



6. Petroleum Activities shall be conducted in

accordance with approved Exploration Plans,

Appraisal Plans, Development and Production Plans,

Work Programs and budgets. The Right Holders may,

however, conduct such activities as may be

required in order to address any emergency

situation posing a threat to health, safety or the

environment without the





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submission or approval of a revision to a plan or

an amendment to a Work Program and budget. In such

event, the relevant activities and expenditures

shall be reported to the Petroleum Administration

as soon as reasonably practicable and shall be

reflected for information purposes in a revised

budget.



Art. 14 Natural Gas



1. The Right Holders may freely use any

Petroleum Produced from a Reservoir in the form of

Natural Gas in an Appraisal Area or a Development

and Production Area in connection with the conduct

of Petroleum Activities. If technically and

economically justified, the Right Holders shall in

priority use any Associated Natural Gas for the

purpose of enhancing recovery of Crude Oil

(including by means of re-injection) in accordance

with Best International Petroleum Industry

Standards.



2. Flaring and venting of Natural Gas shall be

permitted only when necessary for safety or in

connection with commissioning of Facilities.

Before any flaring and venting will be permitted,

the Right Holders must obtain a permit from the

Minister in accordance with Article 36 of the law

no 132/2010 (OPR Law) (except as contemplated in

Article 48 of the decree no 10289/2013 (PAR) in

case of emergency situations).



3. A Development and Production Plan for a Crude

Oil Discovery shall include a plan for the use or

disposition of Associated Natural Gas. Such plan

may include a Gas Infrastructure and Marketing

Plan prepared on a basis similar to that for a

Natural Gas Discovery. In the absence of a Gas

Infrastructure and Marketing Plan, the Right

Holders shall deliver the Associated Natural Gas

free of charge to the State at one or more

Delivery Points specified in the Development and

Production Plan (in which case the State shall

enter into a gas sales agreement providing for an

obligation to take





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such Associated Natural Gas, subject to customary

exceptions). In such case, the Right Holders may

propose that such Associated Natural Gas be

processed to extract Natural Gas Liquids at gas

processing Facilities owned and operated by a

third party or constructed by the Right Holders,

in which case the dry Natural Gas resulting from

such processing shall be delivered to the State

free of charge, and such Natural Gas Liquids shall

be included in the Petroleum Produced for purposes

of this EPA. All costs relating to the delivery of

Associated Natural Gas to the State shall, to the

extent allowable pursuant to the Accounting and

Financial Procedure that constitutes the Annex D

of this EPA, be considered Recoverable Costs.



4. If the Right Holders reasonably believe that

Associated Natural Gas cannot be commercially

exploited under the economic terms set forth in

this EPA, but could be commercially exploited if

the economic terms of this EPA were adjusted, the

Right Holders may propose an adjustment to such

economic terms to the Minister at or prior to the

time of submission of the Development and

Production Plan for a Crude Oil Discovery. Such

proposal shall describe the adjustments in detail

(which shall apply only to such Associated Natural

Gas) and shall include an explanation of the

reasons why the Right Holders are seeking the

adjustments. If the Minister agrees with the

proposal, it shall be submitted for approval by

the Council of Ministers together with the

Development and Production Plan, and shall be

effective upon the grant of such approval.



5. In connection with a Natural Gas Discovery,

the Right Holders shall prepare and submit to the

Minister for approval, with a copy to the

Petroleum Administration, a Gas Infrastructure and

Marketing Plan. Such submission shall be made

together with the submission of the Development

and Production Plan, unless the Right Holders

apply for and receive an extension of such

deadline. At the time of submission of the

Development and





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Production Plan, the Right Holders may apply for

an extension of up to three years for the

submission of a Gas Infrastructure and Marketing

Plan, specifying the reasons why such extension is

necessary and the proposed duration of such

extension. Such extension shall require the

approval of the Minister. Pending the decision of

the Minister, such extension shall be deemed

granted on a temporary basis, subject to the Right

Holders diligently pursuing activities in

contemplation of such Gas Infrastructure and

Marketing Plan. In addition, a temporary extension

shall be granted pending the decision of the

Minister whether to exercise the right to take

Natural Gas pursuant to Article 14.8 of this EPA,

so long as the Right Holders submit the

information contemplated in Article 14.9 of this

EPA as soon as reasonably practicable following

the completion of Appraisal Activities relating to

the Natural Gas Discovery. If approval of the

extension is refused by the Minister, the Right

Holders shall have sixty (60) days following

notification of such refusal to submit a Gas

Infrastructure and Marketing Plan to the Minister,

with a copy to the Petroleum Administration. In

the absence of a timely submission of a Gas

Infrastructure and Marketing Plan, the Right

Holders shall be conclusively deemed to have

determined that such Natural Gas Discovery is not

a Commercial Discovery, and the relevant

Development and Production Plan shall be deemed to

be rescinded. In such case, the Right Holders

shall not have the right to develop such Natural

Gas Discovery, unless either (i) the Right Holders

demonstrate to the reasonable satisfaction of the

Minister (based on the opinion of the Petroleum

Administration) that changed economic or technical

conditions since the original deadline (which they

shall describe) justify the submission of a Gas

Infrastructure and Marketing Plan, or (ii) a

subsequentDiscovery is made and the Right Holders

reasonably believe that such initial Natural Gas

Discovery is a Potentially Commercial Discovery





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when evaluated on a joint basis with the

subsequent Discovery.



6. A Gas Infrastructure and Marketing Plan shall

provide for the use and/or construction of

Facilities for the processing and Transportation

of Natural Gas to one or more Delivery Points, and

for the marketing and offtake of Natural Gas, in

accordance with Lebanese law and Best

International Petroleum Industry Standards. The

Gas Infrastructure and Marketing Plan shall

include, to the extent applicable, the following:



a) Information with respect to anticipated

offtake arrangements for Natural Gas. Such

information shall include, at a minimum, a

description of each offtake agreement,

including the identity of the purchaser or

purchasers, the pricing arrangements, and

extent to which the offtake commitments

are firm or interruptible from the

perspective of both the buyer and the

seller. Copies of such offtake agreements

(or, if not then available, detailed term

sheets) shall be included with the Gas

Infrastructure and Marketing Plan.



b) A description of any excess volumes of

Natural Gas expected to be available after

fulfilment of commitments under the

offtake agreements referred to above.



c) A description of the anticipated financing

arrangements with respect to the

construction of Facilities contemplated in

such Gas Infrastructure and Marketing

Plan.



d) A description of the Facilities that the

Right Holders propose to be used for

Transportation, processing, storage and

delivery of Natural Gas to the party or

parties that will act as offtakers at the

relevant Delivery Point or Delivery

Points. In this regard, the Right Holders

Ishall, to the maximum extent feasible





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,





use existing Facilities or Facilities that are

then under construction, to the extent the Right

Holders are able to do so on reasonable

commercial terms. In addition, any Facilities

that the Right Holders propose to construct

shall, to the extent technically and

economically feasible, be designed to receive

(or to be expandable so as to receive) Natural

Gas from other Reservoirs that may be developed

by the Right Holders in the Block or by third

parties outside the Block. In this regard, the

Petroleum Administration shall provide to the

Right Holders such information as they may

request with respect to current and existing

Facilities and anticipated Natural Gas

developments outside the Block.



e) The expected schedule for the planning and

construction of infrastructure, including

planning, front-end engineering design (FEED),

and engineering-procurement-construction phases.

The schedule may provide for phased construction

and development, as well as activities that are

contingent upon the success of one or more prior

activities, whether conducted under this EPA or

otherwise.



f) Projected volumes of Natural Gas and Natural Gas

Liquids to be produced during the Production

Phase on an annual basis, including

sensitivities based on reasonable economic and

technical assumptions. Such projections shall

also indicate the volumes expected to be

available for delivery to the State in respect

of Royalties in kind and the entitlement of the

State to its share of Profit Petroleum resulting

from such Natural Gas Production.











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g) Information relating to the expected investments and operating costs to be incurred in connection with the use and/or construction of Facilities contemplated in the Gas Infrastructure and Marketing Plan. If any such information is already included in the Development and Production Plan, the Gas Infrastructure and Marketing Plan may refer to the Development and Production Plan rather than repeating information.



7. The Gas Infrastructure and Marketing Plan may (if it is submitted later than the submission of the Development and Production Plan) provide for amendments to the Development and Production Plan to ensure proper coordination with the availability of third party Facilities or the construction of new Facilities. In such case, the amendments shall be submitted for approval by the Council of Ministers, and the Gas Infrastructure and Marketing Plan shall not be effective until such approval is received.



8. The Minister may require that the Gas Infrastructure and Marketing Plan contemplate that the State's entitlement to Royalties and Profit Petroleum will take the form of Natural Gas for use in the Lebanese domestic market. In such event, the entitlement of the Right Holders to Cost Petroleum and a share of Profit Petroleum shall be satisfied first from Crude Oil and Natural Gas Liquids, and then from Natural Gas. In addition, the Minister may require that the Right Holders sell all or a portion of the Natural Gas produced from a Reservoir to the State or to an Entity that is owned by the State for use in the Lebanese domestic market. In such event, the State or such Entity (with a guarantee from the State) shall have the obligation to take the amount of Natural Gas in respect of which the election is made. The price for such Natural Gas shall be equal to the price in U.S. dollars determined pursuant to Article 81 of the decree no 10289/2013 (PAR), with



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appropriate adjustments for Transportation and other costs to ensure that such price is determined on the basis of FOB deliveries at the relevant Delivery Points. If the purchase right of the State is exercised, payment shall be made in U.S. dollars, and appropriate financial security shall be provided to the Right Holders so as to ensure reasonable security of payment.



9. The Right Holders shall provide the Minister (with a copy to the Petroleum Administration) with information relating to a Natural Gas Discovery in order to enable the Minister to be able to make a determination as to whether to exercise the rights set forth in Article 14.8 of this EPA. The Minister shall have six (6) months following the receipt of such information to notify the Right Holders of such determination. The purchase right may be exercised once only, and the obligation of the State (or an Entity owned by the State) to take Natural Gas pursuant to such exercise may not be amended except with the written agreement of the Operator, on behalf of the Right Holders. The Gas Infrastructure and Marketing Plan shall reflect (or be amended to reflect) such determination. In the event that the Right Holders believe that the Natural Gas Discovery would not be a Commercial Discovery if they were required to deliver or sell all or part of the Natural Gas produced from the relevant Reservoir to the State, they shall indicate this when the relevant information is provided, and the Minister shall take into account the views of the Right Holders in making the determination whether to exercise the State's rights.



10. If the Minister in agreement with the Minister of Finance determine that the State will not take all or a portion of any Natural Gas that forms part of the State's Royalty or Profit Petroleum entitlement, the Right Holders shall include such Natural Gas in any marketing and offtake arrangements contemplated in the Gas Marketing and Infrastructure Plan. In such case, the Minister will be deemed to have elected to sell the State's entitlement to Royalties and



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Profit Petroleum on a joint basis with the Right Holders pursuant to Article 82 of the decree no 10289/2013 (PAR), to the extent necessary to permit the delivery of firmly committed volumes under such marketing and offtake arrangements. To the extent such offtake arrangements provide for variable or interruptible deliveries of Natural Gas, the Minister shall be entitled to exercise such election in the manner and at the times contemplated by Article 82 of the decree no 10289/2013 (PAR) (except that any decision not to exercise such election may only be made if the State has infrastructure available to allow it to take its share of the relevant Natural Gas). The proceeds of any Natural Gas marketed by the Right Holders on behalf of the State shall be remitted to the State by the Right Holders promptly upon receipt, in the currency in which it is received.



11. In the event that the Minister exercises the right to have the State take Natural Gas pursuant to Article 14.8 of this EPA, and subsequently a declaration of commerciality is made with respect to a natural gas discovery from another block that is subject to an exploration and production agreement similar to this EPA, the Right Holders may propose that their obligation to deliver Natural Gas to the State be reduced and shared on an equitable basis with the right holders from such other block. The Petroleum Administration shall discuss in good faith the conditions under which such an equitable allocation may be implemented. Based on the recommendation of the Petroleum Administration, the Minister shall exercise the State's rights to receive Natural Gas from such other block in order to implement such equitable allocation (and reduce the obligation of the Right Holders accordingly), to the extent that doing so would be practicable and cost-effective for the State, and would not make the development of the Natural Gas discovery in the other block uneconomical.



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Art. 15 Appointment and functions of Operator



1. Total has been appointed by the Right Holders and approved by the Council of Ministers as Operator, and assumes such role and accepts all rights and obligations as Operator pursuant to applicable Lebanese law and this EPA.



2. Subject to the terms and conditions of this EPA and unless otherwise specified, the Operator shall act on behalf of the Right Holders in relation to this EPA, have all of the rights, functions and duties of Operator pursuant to applicable Lebanese law, this EPA and decisions of the Management Committee, and shall conduct and manage all Petroleum Activities authorised pursuant to this EPA. Subject to applicable law, this EPA and any decisions of the Management Committee, the Operator may employ any individual or Entity, including Affiliates of Right Holders, in connection with such Petroleum Activities.



3. Notwithstanding that each Right Holder shall remain jointly and severally liable for all its obligations as Right Holder to the extent provided in Article 6 of this EPA, the Operator shall on behalf of the Right Holders perform the Petroleum Activities pursuant to this EPA in accordance with the provisions of applicable Lebanese law and this EPA. The Operator shall abide by the decisions and directions of the Management Committee.



4. All Petroleum Activities shall be conducted by the Operator in accordance with the terms of a Joint Operating Agreement among the Right Holders, which must contain provisions reflecting the substance of the Heads of Joint Operating Agreement attached as Annex C to this EPA, as well as such other terms (which may not be inconsistent with the Heads



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of Joint Operating Agreement) as the Right Holders may agree. The definitive Joint Operating Agreement and any amendment or supplement thereto shall be subject to the approval of the Minister pursuant to Article 65- 1 of the law no 132/2010 (OPR Law).



5. Without limiting the foregoing, the Right Holders shall cause the Operator to conduct all Petroleum Activities in a reasonable and prudent manner, in accordance with the standards set forth in Article 10 of the decree no 10289/2013 (PAR) and Best International Petroleum Industry Standards. The Operator shall maintain a management system meeting the requirements of Article 9 of the decree no 10289/2013 (PAR). The Right Holders shall make available on reasonable terms their most appropriate technical expertise and technology (and that of their Affiliates) for use in the conduct of Petroleum Activities, and shall cause their Contractors and Subcontractors to do the same.



6. The Operator shall, except in respect to individual chargeable tax liability and in accordance with any decisions of the Management Committee, have the obligation to represent the Right Holders in all dealings with the State with respect to matters concerning Petroleum Activities, pursuant to this EPA. The obligation of the Operator to represent Right Holders does not limit the right of each Right Holder to communicate with the State, but such communication shall only be for the purpose of communicating issues related and relevant to that Right Holder.



7. The Right Holders may engage in Exclusive Petroleum Operations in accordance with such terms and conditions as they may agree among themselves, so long there are at least three (3) Right Holders with a participation in such Exclusive Petroleum Operations. The Right Holders shall, notwithstanding the terms



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Page 65 of 126that they may agree among themselves, be jointly and severally liable for all obligations under this EPA, the decree no 10289/2013 (PAR) and the Law no 132/2010 (OPR Law) in respect of such Exclusive Petroleum Operations, to the extent provided in Article 6 of this EPA. In connection with any Exclusive Petroleum Operations, the Operator shall act on behalf of the participating Right Holders, except as otherwise approved by the Minister based on the opinion of the Petroleum Administration. If the Operator does not do so, then the party charged with such Exclusive Petroleum Operations must be approved as an operator by the Council of Ministers, and shall have all the rights and obligations of the "Operator" in this EPA with respect to such Exclusive Petroleum Operations.



8. The Petroleum Administration may require the Right Holders to remove and replace the Operator if (i) the Operator materially breaches (or causes the Right Holders to materially breach) the obligations set forth in this EPA, (ii) the Operator is conducting activities in a manner that poses a material risk to health, safety or the environment, (iii) the Operator is conducting activities in a manner that is in material violation of applicable Lebanese law, or (iv) the Operator is required to make a Forced Assignment pursuant to Article 36 of this EPA. In the case of (i), (ii) and (iii), the Petroleum Administration may only require the removal of the Operator if the relevant circumstance is not remedied within ninety (90) days after notice is delivered to the Operator (provided that if such circumstance cannot reasonably be remedied within ninety days, the Operator shall have such additional time as may be necessary to effect such remedy, as long as it is diligently pursuing a remedy). The replacement Operator must be approved as an operator by the Council of Ministers.



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Page 66 of 1269. The Petroleum Administration shall provide reasonable assistance to the Operator and the Right Holders, upon request by the Operator, in order to facilitate the procurement of any approvals, consents, orders, instructions or other governmental authorizations that may be required under applicable Lebanese law, and in respect of which the Operator and/or the Right Holders have complied with the necessary procedures and made the necessary applications under Lebanese law. Without limiting the foregoing, the Petroleum Administration shall provide reasonable assistance, and shall seek the assistance of and/or cooperation by any Lebanese national, regional and/or local government, governmental agency or governmental authority, as may reasonably be required to secure and renew all entry visas or work permits for employees of the Operator, the Right Holders and any Contractors or Sub-Contractors and their dependents, and all customs and other clearances required for imports and exports of equipment and supplies required for Petroleum Activities, and shall assist the Operator in obtaining easements, rights of way, licenses and renewals thereof, pursuant to applicable Lebanese law, all for the purpose of conducting Petroleum Activities.



Art. 16 Management Committee



1. The Right Holders shall, no later than thirty (30) days after the Effective Date of this EPA, establish a Management Committee.



2. Unless otherwise stipulated, the Management Committee shall have the power and duty to authorize and supervise, on behalf of the Right Holders, Petroleum Activities carried out pursuant to this EPA, in accordance with Lebanese law and this EPA, and in a manner appropriate in the circumstances.



3. Each Right Holder shall have the right to appoint at least one (1) representative on the Management Committee. Otherwise, the



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composition and membership of the Management Committee shall be determined by the Right Holders. No person may be a member of the Management Committee if it would be contrary to Lebanese law for such person to hold such position.



4. Each Right Holder shall as soon as possible after the approval of this EPA give notice in writing to the other Right Holders, the Minister and the Petroleum Administration of the name, position and contact details of its representative(s) and alternate representative(s) to serve on the Management Committee. Each Right Holder shall have the right to change any representative and alternate at any time by giving notice of such change to the other Right Holders, the Minister and the Petroleum Administration.



5. Each representative of a Right Holder, or in his absence his alternate representative, shall be authorised to represent and bind such Right Holder with respect to any matter which is within the powers of the Management Committee and is properly brought before the Management Committee. The representative(s) of each Right Holder shall (collectively if more than one) have a vote equal to the Participating Interest of the Right Holder such person represents. Each alternate representative shall be entitled to attend all Management Committee meetings, but shall have no vote at such meetings except in the absence of the representative for whom he is the alternate. In addition to the representative and alternate representative, each Right Holder may also bring to any Management Committee meetings such technical and other advisors as the Right Holder may deem appropriate.



6. The Minister and the Petroleum Administration may appoint representatives who shall have the right to attend as observers in any meeting of the Management Committee and any sub-committee established for the purpose of Petroleum Activities pursuant to this



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EPA or, as applicable, the equivalent committees or working groups pursuant to a unitisation agreement. The Operator shall copy the Petroleum Administration on all notices, documents, information and minutes regarding such meetings. The appointed observers shall act solely as observers.



7. Nothing shall prevent the Right Holders from organizing committees or working groups among themselves for purposes of planning activities and for other purposes in respect of this EPA, subject in each case to any decisions made by the Management Committee. The Minister and the Petroleum Administration shall not have the right to attend meetings of such committees or working groups, but shall have the right to review reports made by such committees and working groups to the Management Committee.



Art. 17 Health, Safety and Environmental Requirements



1. General Requirements

a. In conducting Petroleum Activities under this EPA, the Right Holders and the Operator shall at all times comply with: (i) Best International Petroleum Industry Standards relating to the protection of health, safety and the environment; (ii) applicable Lebanese laws relating to health, safety and the environment; and (iii) the reasonable requirements of the Petroleum Administration or any other competent authority relating to the protection of health, safety and the environment. The Right Holders shall also cause anyone carrying out work on their behalf including any Contractors and their Subcontractors to comply with the foregoing.



b. In particular, the Right Holders shall:

i. make all efforts to prevent accidents, damage to assets, injuries, loss of life and environmental damage and, should any, adverse impact on the



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environment or risks to the workforce or the public occur, to minimize such damage and the consequential effects thereof;



ii. prevent harm to the degradation of livelihood or quality of life of surrounding communities and, should some adverse impact occur, minimize such impact and ensure proper compensation for injury to persons or damage to property or the ecosystem caused by the effect of Petroleum Activities;



iii. instil a culture of proactive commitment to health, safety and environmental values among all personnel involved in the Petroleum Activities;



iv. Develop detailed guidelines that meet Best International Petroleum Industry Standards for health, safety, environmental protection, monitoring and community interaction.



v. conduct internal Health, Safety and Environmental audits and inspections and implement self- monitoring processes.



vi. report on a regular basis on the HSE performance to relevant competent authorities.



vii. facilitate the work and access of the HSE inspectors and auditors from relevant competent authorities.



c. Without limiting the generality of the foregoing and without prejudice to any other applicable Lebanese law (including



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Environmental Protection Law No. 444 dated 29 July 2002 and Decree 8633/2012), the Right Holders shall at all times comply with, and where appropriate ensure the Operator complies with:



i. the general obligation to conduct Petroleum Activities in a responsible and prudent manner in accordance with Article 61 of the Law no 132/2010 (OPR Law);



ii. the provisions concerning health, safety and the environment contained in chapter 9 of the law no 132/2010 (OPR Law) and chapter 9 of the decree no 10289/2013 (PAR);



iii. the obligations to prepare an environmental impact assessment study in connection with: (α) a Development and Production Plan in accordance with Article 43 of the decree no 10289/2013 (PAR); (β) the construction, placement and operation of a Transportation or storage Facility in accordance with Article 55 of the decree no 10289/2013 (PAR); and (γ) a plan for cessation of Petroleum Activities and decommissioning of Facilities in accordance with Article 61 of the decree no 10289/2013 (PAR); and



iv. the obligations to prepare and regularly update and develop a health and safety plan which shall contain, at a minimum, the information contemplated by Article 129 of the decree no 10289/2013 (PAR).



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d. Where an HSE study (such as an environmental impact assessment) is required under the decree no 10289/2013 (PAR) or any other related regulation, the Right Holders shall engage third party specialized HSE professionals to conduct such HSE study.



e. In the event of any accident, damage, injury or other significant occurrence arising from Petroleum Activities and affecting the environment, the Operator shall immediately notify the Petroleum Administration in accordance with Article 133 of the decree no 10289/2013(PAR) and shall promptly implement an emergency response plan prepared in accordance with Article 138 of the decree no 10289/2013 (PAR) and take such action as is prudent and perform such site restoration as may be necessary in accordance with Best International Petroleum Industry Standards.



2. Environmental Costs

Except in case of Gross Negligence or Wilful Misconduct on the part of the Right Holders or the Operator, all costs incurred by the Right Holders in connection with the obligations in paragraph 1 and 2 of this Article 17 shall be treated as a Recoverable Cost to the extent allowable pursuant to the Accounting and Financial Procedure that constitutes Annex D of this EPA.



Art. 18 Decommissioning Requirements



1. The Right Holders shall ensure that the cessation of Petroleum Activities and decommissioning of Facilities during the term of this EPA will be conducted prudently in accordance with Best International Petroleum Industry Standards and, to the extent consistent



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Page 72 of 126with the foregoing, the Operator's standards for cessation and decommissioning based on its past practice.



2. The Right Holders shall include a preliminary analysis of the expected plan for the decommissioning of the Facilities in each Development and Production Plan.



3. The Right Holders shall submit a preliminary plan for cessation of Petroleum Activities and decommissioning of Facilities to the Petroleum Administration no later than one year before the date the Right Holders are required to make the first contribution to the Decommissioning Fund in accordance with Articles 63 and 64 of the decree no 10289/2013 (PAR) and Article 2.6 of the Accounting and Financial Procedure (Annex D of this EPA). Such plan shall, to the extent available at the time, contain the information required by Article 60 of the decree no 10289/2013 (PAR), as well as a proposed budget to be used for determining the amount of contributions to be made to the Decommissioning Fund, as provided in Article 64 of the decree no 10289/2013 (PAR). The Right Holders shall revise such plan to take into account any comments of the Petroleum Administration in accordance with Article 59 of the decree no 10289/2013 (PAR). Upon the election by the Minister of a decommissioning solution pursuant to Article 64 of the decree no 10289/2013 PAR, annual contributions to the Decommissioning Fund shall be made on the basis of the relevant budget. The Right Holders shall update this preliminary plan annually in accordance with Article 64 of the decree no 10289/2013 (PAR) until a definitive plan is approved and adopted in accordance with Article 18.4 of this EPA.



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Page 73 of 1264. The Right Holders shall submit a definitive plan for cessation of Petroleum Activities and decommissioning of Facilities to the Minister three (3) years prior to the expiry of the Production Phase. Such plan shall at a minimum contain the information required by Article 60 of the decree no 10289/2013 (PAR) and, if approved, shall be adopted in accordance with Article 59 of the decree no 10289/2013 (PAR). Such plan shall indicate the decommissioning activities to be undertaken by the Right Holders prior to the expiry of the Production Phase, and those that will remain to be completed following the transfer of the assets relating to Petroleum Activities to the State pursuant to Article 25.4 of this EPA.



5. The Right Holders may use amounts in the Decommissioning Fund for purposes of implementing the activities contemplated in the preliminary or definitive Decommissioning Plan. The Right Holders shall provide reports at least once each Quarter to the Petroleum Administration on the progress of such plan and the utilisation of amounts in the Decommissioning Fund.



6. The Right Holders undertake to:



a. Contribute to the Decommissioning Fund in accordance with Articles 63 and 64 of the Decree no 10289/2013 (PAR) and Article 2.6 of the Accounting and Financial Procedure (Annex D of this EPA);



b. Use the Decommissioning Fund solely for the purpose of implementing the preliminary plan or the approved definitive plan for cessation of Petroleum Activities and decommissioning of Facilities; and



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Page 74 of 126c. Pay any shortfall in the event the Decommissioning Fund is depleted prior to completing the implementation of the approved definitive plan for cessation of Petroleum Activities and decommissioning of Facilities as provided for by Article 66 of the decree no 10289/2013 (PAR).



7. In the event that the Right Holders do not complete the decommissioning activities contemplated by the plan that are scheduled to be completed before the end of the Production Phase, they shall be required to complete such activities as soon as practicable thereafter, notwithstanding the expiration of this EPA. In such event, the Right Holders may propose to the Minister to make an additional cash contribution to the Decommissioning Fund to cover the costs of having a third party complete such work, and if such proposal is accepted by the Minister, the Right Holders shall be discharged from any further obligation in respect thereof.



Art. 19 Petroleum Lifting and Delivery arrangements



1. The Right Holders shall, subject to applicable Lebanese law and provisions of this EPA regulating the Production and sale of Petroleum (including Article 14 of this EPA), be entitled to lift, receive, dispose of and export freely their respective entitlements to Petroleum Produced pursuant to this EPA. Each Party shall take its entitlement to Petroleum consistent with the Best International Petroleum Industry Standards at a regular rate throughout each calendar year.



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2. The Development and Production Plan and/or the Gas Infrastructure and Marketing Plan shall include a summary of anticipated lifting and delivery arrangements for Petroleum Produced from each relevant Reservoir, indicating any options and alternative structures, and any additional work needed to determine definitive lifting and delivery procedures (including any need to obtain rights to Facilities operated by third parties, and the construction of any necessary Facilities).



3. As soon as practicable following the approval of the Development and Production Plan or the approval of the Gas Infrastructure and Marketing Plan (in the case of a Natural Gas Discovery), and in any event no later than ninety (90) days prior to the date scheduled for the commencement of Commercial Production, the Parties shall establish off-take procedures covering the scheduling, storage, lifting and delivery of Petroleum and such other related matters as the Parties shall agree. Such procedures shall be consistent with Best International Petroleum Industry Standards and shall be submitted to the Petroleum Administration for approval. In the absence of a decision denying such approval within thirty (30) days after such procedures are submitted, they shall be deemed approved. Commercial Production may not commence until such lifting arrangements have been established and approved.



4. All ancillary products resulting from the Production or processing of Petroleum Produced (such as helium, hydrogen and other non-Petroleum products) shall be the property of the State. Such ancillary products shall be delivered to the State or its designee(s) at delivery points located as close as reasonably practical to the point of extraction or processing (to the extent that: (i) such ancillary products are recoverable in a form separate to Crude Oil, Natural Gas or Natural Gas Liquids, and (ii) the State makes available appropriate transportation and/or receiving facilities), and



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Page 76 of 126all related costs borne by the Right Holders shall be Recoverable Costs to the extent allowable pursuant to the Accounting and Financial Procedure that constitutes Annex D of this EPA.



Art. 20 Recruitment and training



1. The Right Holders shall develop and carry out an effective recruitment and training program for Lebanese personnel in accordance with the law no 132/2010 (OPR Law) and this EPA. A proposal for a detailed recruitment and training program shall be submitted to the Petroleum Administration for approval no later than six (6) months after the Effective Date of this EPA. An updated program for recruitment and training shall be submitted annually to the Petroleum Administration by 31 December each year. As of the beginning of the Exploration Phase, not less than eighty per cent (80%) of the aggregate number of employees of the Right Holders (including the Operator) shall be Lebanese nationals. Prior to the beginning of the Exploration Phase, the Right Holders and their Contractors and Subcontractors according to article 67 of the Law no 132/2010 (OPR Law) shall achieve this eighty per cent (80%) threshold as soon as possible, to the extent that they are able to recruit a sufficient number of Lebanese nationals with the requisite qualifications, and the Right Holders and their Contractors and Subcontractors shall in any event maximize the proportion of Lebanese nationals employed by them, subject to their obligation to conduct Petroleum Activities in accordance with Best International Petroleum Industry Standards. In the event that as of the beginning of the Exploration Phase or at any time thereafter the aggregate number of employees of the Right Holders (including the Operator) and their Contractors and Subcontractors who are Lebanese nationals is less than eighty per cent (80%), the Right Holders shall submit to the Minister on their behalf and on behalf of their Contractors and Subcontractors in writing an explanation of the reasons why this requirement has not been met and a request for an exemption from this



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Page 77 of 126requirement. The Minister may, based on the opinion of the Petroleum Administration and after consulting with the concerned ministries, grant such an exemption to the Right Holders and their Contractors and Subcontractors. Pending a decision on the exemption request, the Right Holders and their Contractors and Subcontractors shall not be considered to be in breach of this requirement.



2. Without limiting the foregoing, the Operator shall employ, and cause all Contractors and Subcontractors to employ, qualified personnel of Lebanese nationality whenever available. The Right Holders shall fund the training of Lebanese personnel associated with Petroleum Activities. Each Exploration Plan and Development and Production Plan shall include a plan for the hiring and training of persons of Lebanese nationality, including hiring and training of management, engineering and other professional staff, consistent with the recruitment and training program prepared pursuant to Article 20.1 of this EPA.



3. The Right Holders shall pay costs related to the training of public sector personnel with functions relating to the oil and gas sector identified by the Petroleum Administration in addition to those nominated by the concerned ministries and notified to the Petroleum Administration (including awarding public sector personnel research grants), in an amount up to $/300,000/ per year (increased by 5% each year) until the beginning of the Production Phase, and thereafter $/500,000/ per year (increased by 5% each year). The Right Holders shall, upon request by the Petroleum Administration, assist the Petroleum Administration in arranging third party training opportunities for such public sector personnel, to be paid for by the Right Holders pursuant to the preceding sentence. The Right Holders shall pay all such costs directly to the provider of the training (or to the recipient of the research



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Page 78 of 126grant) when due and shall, promptly upon request from the Petroleum Administration, provide satisfactory evidence of payment of such costs in order to enable the Petroleum Administration to monitor and verify the Right Holders' expenditure under this Article.



4. The Right Holders and their Affiliates may provide training or participate in the preparation of training programs contemplated by Article 20.3 of this EPA, unless doing so would represent an actual or potential conflict of interest (such as training auditing personnel who would be expected to audit the books and records of the Right Holders). As soon as practicable after the Effective Date, the Right Holders and the Petroleum Administration shall jointly prepare, and shall subsequently update at least annually, a plan for training programs to be implemented pursuant to Article 20.3 of this EPA, including the types of training and the categories of personnel to receive training, lists of and methods for selecting eligible training service providers (which may include the Right Holders and their Affiliates except as provided above in this Article 20.4), and such other information as they may consider appropriate.



5. The cost incurred by the Right Holder for recruitment and training of Lebanese personnel and the annual contribution for the training and participation of public sector personnel as provided in this Article shall be Recoverable Costs for the purpose of the Accounting and Financial Procedure that constitutes Annex D of this EPA.



Art 21. Coordinated Petroleum Activities and unitisation



1. In the event that a Reservoir that is the subject of a Potentially Commercial Discovery extends beyond the Block into an adjacent block which is the subject of another Petroleum Right that grants a third party the right to conduct Development and Production activities (an



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Page 79 of 126"Adjacent Awarded Block"), the relevant provisions of Article 38 of the law no 132/2010 (OPR Law) shall apply, and the Right Holders shall in good faith negotiate and agree with the right holder(s) of the Adjacent Awarded Block on the terms of a unitisation agreement, which terms shall be based on reliable technical, operational and economic parameters in a manner designed to ensure optimal recovery of Petroleum in the Reservoir, all in accordance with Best International Petroleum Industry Standards. The apportionment of the entitlements of the Right Holders, on the one hand, and the holder(s) of the Petroleum Right for the Adjacent Awarded Block, on the other hand, shall be agreed upon on a fair and equitable basis and, to the extent practicable, be determined on the basis of the expected total reserves in the Block and in the Adjacent Awarded Block. The Appraisal Plan for such Potentially Commercial Discovery shall have, as an objective, the preparation of a unitised Development and Production Plan, the determination of the respective entitlements to Production, and the preparation and negotiation of a unitisation agreement in accordance with Best International Petroleum Industry Standards. The unitised Development and Production Plan shall include a plan for unitisation which identifies the limits of the unitised area, the volumes of estimated Petroleum in place, and the principal terms to be included in the unitisation agreement and an undertaking by the respective parties to coordinate efficiently among themselves for the optimal development of the unitised Reservoir.



2. In the event that a Reservoir of an Adjacent Awarded Block extends into the Block, the Right Holders agree to negotiate in good faith with the right holder(s) of the Adjacent Awarded Block the terms of a unitisation agreement and to coordinate efficiently for the optimal development of the unitised Reservoir, under the same terms provided in paragraph 1 above.



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Page 80 of 1263. If the condition of a Reservoir extending beyond its initial delimitation line is discovered only after a Development and Production Plan has been put into effect, the Right Holders, on the one hand, and the right holder(s) of the Adjacent Awarded Block, on the other hand, shall prepare a unitised plan for Development and Production and may continue approved activities pending finalisation of the unitised plan.



4. In the event that a Reservoir extends beyond the Block into an adjacent area which is not an Adjacent Awarded Block, the provisions of Article 38-2 of the law no 132/2010 (OPR Law) shall apply. To this end, the application presented by the Right Holder(s) to the Minister for the extension of the perimeter of the existing Block shall offer a competitive minimum work program for such adjacent area. For the avoidance of doubt, the Right Holders expressly understand and agree that the Council of Ministers reserves a discretionary power to approve or reject such extension.



5. The provisions of paragraph 1 or 3 (as applicable) of this Article shall apply to the situation where a Reservoir straddles the delimitation line of the continental shelf or territorial waters subject to the jurisdiction of another country, except that the State shall be responsible for any government-to-government negotiations, and the Right Holders shall negotiate with any private sector operator or right holder in the other country. Any agreement for the development of such Reservoir or the construction or use of trans- boundary Facilities, or any other arrangement between the Right Holders and any other Entities in relation to the coordination of trans- boundary Petroleum Activities, or any decision to develop such Reservoir without any such agreement or arrangement, shall be subject to the prior approval of the Council of Ministers. In this respect, any discussions undertaken or



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Page 81 of 126agreements or other arrangements made with any third party, shall at all times be compliant with the Lebanese laws and regulations in force.



Art 22. Royalties



1. Royalties shall be due in respect of Petroleum Produced at rates determined in accordance with the following:



a) For Crude Oil: a variable rate depending on the average daily volume of Petroleum Produced and on which Royalty is due, during the calendar month for which the Royalty is calculated, as set forth in the following table:



Production Rate (Barrels / Day) | Royalty Rate

0 to 15,000 | 5%

15,001 to 25,000 | 6%

25,001 to 50,000 | 7%

50,001 to 75,000 | 8%

75,001 to 100,000 | 10%

Above 100,000 | 12%



The Royalty rates set forth above are due only with respect to the Production band set forth opposite the relevant percentage rate. For example, if average daily volume of Petroleum Produced during a given calendar month is 20,000 Barrels per day, then Royalty is due at a rate of 5% on a number of Barrels of Production equal to 15,000 times the number of days in such month, and at a rate of 6% on Production in excess of such number. For purposes of the foregoing, any days on which there is no Production shall not be counted in determining the average daily volume of Petroleum Produced, except that such days shall be counted where the absence of Production is due to (i) an



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Page 82 of 126Event of Force Majeure, (ii) temporary shutdown of Facilities in connection with any development or construction activities contemplated in an approved Development and Production Plan or Gas Infrastructure and Marketing Plan, or (iii) scheduled maintenance contemplated in an approved Work Program or otherwise notified to the Petroleum Administration. In addition, in the first month in which there is Production, the average daily volume shall be calculated starting on the first day on which Production takes place.



b) For Natural Gas: 4%



For purposes of the foregoing, Natural Gas Liquids in the form of condensate produced during the course of Production as a result of condensation or extraction shall be considered to be Crude Oil, except as otherwise approved by the Minister based on the opinion of the Petroleum Administration. Royalties shall be due in respect of Petroleum that is discharged, flared or vented, as provided in Article 72 of the decree no 10289/2013 (PAR). No Royalties shall be due in respect of Petroleum used or consumed by the Right Holders in connection with Petroleum Activities, or in respect of Associated Natural Gas that is not the subject of a Gas Infrastructure and Marketing Plan, and that is therefore delivered to the State pursuant to Article 14.3 of this EPA.



2. As provided in the law no 132/2010 ( OPR Law) and the decree no 10289/2013 (PAR), Royalties may be taken by the State in cash payable in U.S. dollars, or in the form of Petroleum. The Minister in agreement with the Minister of Finance may elect whether the State will take Royalties in cash or in kind on an annual basis. The election for any calendar year shall be notified to the Right Holders by the Petroleum Administration by October 1 of the preceding calendar year. In the absence of an election by



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Page 83 of 126such date, the Minister shall be deemed to have elected that the State will take Royalties in cash. The election in respect of Natural Gas shall be consistent with any commitments set forth in an approved Gas Infrastructure and Marketing Plan and any gas sales agreement entered into pursuant thereto. The election shall provide that the State will take all Royalties in a calendar year in cash or in kind, except that a partial election may be made if necessary to allow commitments set forth in an approved Gas Infrastructure and Marketing Plan and related gas sales agreement to be respected.



3. Subject to Article 14 of this EPA, in the event that more than one type of Petroleum (Crude Oil, Natural Gas or Natural Gas Liquids) is produced from a Discovery, any Royalties received by the State in kind shall be taken in the form of each such type of Petroleum (based on the application of the applicable Royalty rate to the volume of Petroleum Produced of such type).



4. The Development and Production Plan and the Gas Infrastructure and Marketing Plan shall provide for the use or construction of Transportation Facilities sufficient to allow the delivery of Royalties taken in kind at one or more Delivery Points specified therein. The costs and expenses of the use or construction of such Facilities shall, to the extent allowable in accordance with the Accounting and Financial Procedure that constitutes Annex D of this EPA, be deemed Recoverable Costs.



5. Royalties shall be calculated on an aggregate basis for all Development and Production Areas that are subject to this EPA. Where Royalties are taken in kind, the Right Holders shall satisfy their aggregate Royalty obligation by delivering Petroleum extracted from one or more Development and Production Areas in a manner that, in the reasonable



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Page 84 of 126opinion of the Right Holders, will minimize aggregate costs of Facilities and permit compliance with commitments under offtake agreements specified in any Gas Infrastructure and Marketing Plan. In the event that there are differences in the quality of Petroleum produced from separate Discoveries, an appropriate adjustment factor shall be applied (to be specified in the Development and Production Plan).



6. The Minister in agreement with the Minister of Finance may require the Right Holders to sell the Petroleum received by the State as Royalty in kind on a joint basis with the entitlements of the Right Holders, as provided in Article 82 of the decree no 10289/2013 (PAR).



Art. 23. Entitlements for Royalties; Disposable Petroleum; Cost Recovery



1. The Right Holders shall be entitled to receive a volume of Petroleum sufficient to allow them to deliver pursuant to Article 43.5 of the law no 132/2010 (OPR Law) and Article 71 of the Decree no 10289/2013 (PAR) or pay Royalties in accordance with Article 22 of this EPA.



2. All Disposable Petroleum shall be allocated between the Right Holders and the State in accordance with this Article 23 and Article 24 of this EPA.



3. Recoverable Costs incurred by the Right Holders shall be recovered exclusively from and to the extent of Cost Petroleum. The Right Holders shall be entitled to receive and lift, in each Quarter, a volume of Petroleum ("Cost Petroleum") equal to the lesser of (i) sixty percent (60%) of the Disposable Petroleum for such Quarter, and (ii) a volume of Petroleum with a value (determined in accordance with Articles 80 and 81 of the decree no 10289/2013 (PAR) amended by the decree no 1177/2017,



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Page 85 of 126equal to the sum of the Recoverable Costs for such Quarter, plus the Recoverable Costs for previous Quarters that were not fully recovered from allocations of Cost Petroleum during or prior to the immediately preceding Quarter. For these purposes, lifting rights to Cost Petroleum shall be determined on the basis of estimated Recoverable Costs for the current Quarter, with appropriate adjustments applied in the following Quarter, as specified in Article 77 of the decree no 10289/2013 (PAR). Detailed procedures for making such estimates and adjustments shall be specified in the Development and Production Plan.



4. Subject to Article 14, Cost Petroleum shall be taken in the form of Crude Oil, Natural Gas or Natural Gas Liquids in accordance with the provisions of Article 76 of the decree no 10289/2013 (PAR).



5. Recoverable Costs and Cost Petroleum shall be determined on an aggregate basis for all Development and Production Areas that are subject to this EPA. The Right Holders shall take their aggregate Cost Petroleum entitlement from Petroleum extracted from one or more Development and Production Areas in a manner that, in the reasonable opinion of the Right Holders, will minimize aggregate costs of Facilities and permit compliance with commitments under offtake agreements specified in any Gas Infrastructure and Marketing Plan. In the event that there are differences in the quality of Petroleum produced from separate Discoveries, an appropriate adjustment factor shall be applied (to be specified in the Development and Production Plan).



Art 24.Profit Petroleum Entitlements



1. In any Quarter, all Disposable Petroleum in excess of the volume allocated to Cost Petroleum shall be "Profit Petroleum", which



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Page 86 of 126shall be apportioned between the Right Holders and the State in accordance with this Article.



2. Profit Petroleum produced in any Quarter shall be apportioned between the Parties in percentages that will be determined by reference to the R-Factor for the immediately preceding Quarter, according to the following:



[TABLE]

R-Factor | State's Portion | Right Holders' Aggregate Portion

R 1 ≤ 1 Less than or equal to 1 | A% ≥ (30%) | 100%-A%

1
R ≥ RB Greater than or equal to RB | B% | 100%-B%



When the R-Factor is greater than 1 and less than RB, the State's portion of Profit Petroleum shall be determined in accordance with the following formula:



[FORMULA]

SP = A + [(BA) x (R-1)/(RB - 1)]



Where "SP" is the State's portion and "R" is the R-Factor used to determine the State's portion (i.e., the R-Factor for the immediately preceding Quarter). In addition, "A" shall be thirty percent (30%), "B" shall be fifty five percent (55%), and RB shall be equal to 2.5.



3. The Profit Petroleum entitlement of each Right Holder for any Quarter shall be equal to the product of (i) such Right Holder's Participating Interest, and (ii) the Profit Petroleum entitlement of all of the Right Holders for such Quarter.



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Page 87 of 1264. For purposes of the foregoing, the R- Factor for any Quarter shall be calculated in accordance with the following formula:



R = Cumulative Cash Inflow/ Cumulative CAPEX



Where



"R" is the R-Factor being determined



Cumulative Cash Inflow for any Quarter is equal to (i) all Profit Petroleum to which the Right Holders are or have been entitled from the beginning of the Production Phase through the end of such Quarter, plus (ii) all Cost Petroleum to which the Right Holders are or have been entitled from the beginning of the Production Phase through the end of such Quarter, less (iii) all Operating Expenses recorded pursuant to the Accounting and Financial Procedure that constitutes Annex D of this EPA from the beginning of the Production Phase through the end of such Quarter.



Cumulative CAPEX for any Quarter is equal to all Capital Expenditures recorded pursuant to the Accounting and Financial Procedure that constitutes Annex D of this EPA from the Effective Date through the end of such Quarter.



5. Lifting and delivery rights to Profit Petroleum shall be determined on the basis of estimated amounts for the current Quarter, with appropriate adjustments applied in the following Quarter, as specified in Article 77 of the decree no 10289/2013 (PAR). Detailed procedures for making such estimates and adjustments shall be specified in the Development and Production Plan.



6. Subject to Article 14, Profit Petroleum shall be taken in the form of Crude Oil, Natural Gas or Natural Gas Liquids in accordance with



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Page 88 of 126the provisions of Article 77 of the decree no 10289/2013 (PAR).



7. The allocation of Profit Petroleum and the R-Factor shall be determined on an aggregate basis for the entire Block, regardless of whether there are one or several Development and Production Areas, and regardless of whether multiple Reservoirs are developed on a separate basis or on a joint basis. The Right Holders shall take their share of Profit Petroleum and deliver to the State its share of Profit Petroleum from one or more Development and Production Areas in a manner that, in the reasonable opinion of the Right Holders, will minimize aggregate costs of Facilities and permit compliance with commitments under offtake agreements specified in any Gas Infrastructure and Marketing Plan. In the event that there are differences in the quality of Petroleum produced from separate Discoveries, an appropriate adjustment factor shall be applied (to be specified in the Development and Production Plan).



8. The Minister may require the Right Holders to sell the State's entitlement to Profit Petroleum on a joint basis with the entitlements of the Right Holders, as provided in Article 82 of the decree no 10289/2013 (PAR).



Art 25. Title to assets



1. Title to Facilities acquired or provided by the Right Holders for the purpose of Petroleum Activities pursuant to this EPA, the costs of which are subject to cost recovery in accordance with this EPA and the Accounting and Financial Procedure that constitutes Annex D of this EPA, shall be vested in the Operator, on behalf of the Right Holders, and shall be transferred to and become the property of the



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Page 89 of 126State without the payment of any consideration upon the termination of this EPA.



2. The Right Holders shall be entitled to the full and free use of such Facilities for the purpose and duration of this EPA, for purposes of conducting Petroleum Activities. To the extent that such Facilities have extra capacity, the Minister (based on the recommendation of the Petroleum Administration) may require the Right Holders to make such capacity available to third parties on the terms and subject to the conditions set forth in Article 39 of the law no. 132/2010 (OPR Law) and Article 56 of the decree no 10289/2013 (PAR). Prior to the termination of this EPA, the Right Holders shall not assign, sell or otherwise dispose of such Facilities except by mutual agreement.



3. The provisions of Article 25.1 shall not apply to assets that have been leased and movable assets used on a temporary basis by Contractors or Subcontractors, which shall instead be removed from the Block upon termination of this EPA.



4. No later than six (6) months prior to the anticipated termination date of the EPA, the Right Holders shall prepare and deliver to the Petroleum Administration a plan for implementing the transfer of title to, and operations of the Facilities. To the extent that any license to technology or intellectual property would not remain force following such termination, the transfer plan shall also include a plan for the provision of services or arrangements so as to ensure the effective continuation of Petroleum Activities following such termination.



5. All Data collected or obtained in relation to or resulting from Petroleum Activities pursuant to this EPA shall, according to



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applicable Lebanese law, be the property of the State.



6. Data, analysis or reports collected, developed or obtained by the Right Holders shall be submitted to the State free of charge and may be used for Petroleum Activities free of charge by the Right Holders for the duration of this EPA.





7. Copies of Data, analyses and reports related to this EPA shall be stored in Lebanon. Additional copies of Data, analysis and reports may, subject to applicable Lebanese law, be exported. In addition, core samples may be exported temporarily for such period of time as may be reasonably necessary to allow Right Holders or their Contractors and Subcontractors to perform analyses in connection with Petroleum Activities, but shall be returned to Lebanon as quickly as reasonably practicable after the completion of such analyses. In cases where an unavoidable consequence of the analyses carried out by Right Holders or their Contractors and Subcontractors is the destruction of core samples, the remnants of such core samples shall be returned to Lebanon in accordance with this Article.



8. All proprietary technology of the Right Holders and their Affiliates, Contractors and Subcontractors used in connection with Petroleum Activities shall remain the property of the Right Holders and their Affiliates, Contractors and Subcontractors.

Art 26. Fiscal terms and other charges



The Right Holders, their Contractors and Subcontractors, and their respective employees shall be subject to applicable Lebanese law which imposes taxes, duties, levies, charges, fees or contributions, except to the extent exempt therefrom according to applicabie Leoanese law.









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2. The Right Holders shall be subject to and comply with the requirements of the Lebanese Income Tax Law with respect to the computation of tax, filing of returns, assessment of tax and the keeping of records for review by authorized persons.



3. The Right Holders shall file a tax declaration at the time required by the Lebanese Income Tax Law and shall contemporaneously with such filing, forward a copy of such declaration to the Petroleum Administration.



4. The Right Holders shall comply with the applicable procedures and formalities duly imposed by applicable Lebanese law when claiming exemptions from customs duties on import or export. The Right Holders shall also ensure that Contractors and Subcontractors comply with the applicable procedures and formalities duly imposed by applicable Lebanese law.





Art 27. Procurement and supply bases





1. Subject to applicable Lebanese law and the provisions of the Joint Operating Agreement for the procurement of goods and services for the purpose of Petroleum Activities pursuant to this EPA, Right Holders shall conduct procurement on the basis of competitive tenders (except that competitive tenders shall not be required for any contract, or group of related contracts, with a total value of US50,000 or less, or such other lower threshold as the Right Holders may agree in the Joint Operating Agreement). The Right Holders shall ensure that preferential treatment is given to Lebanese goods and services that are bility, price and performance, in accordance with Article 67 of the law no 132/2010 (OPR Law) and Article 157 of the decree no 10289/2013 (PAR). Without limiting the foregoing, the Right Holders shall procure that:





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a) in selecting Contractors for the provision of services in relation to Petroleum Activities, the Operator shall select, when possible, individuals who are Lebanese or Entities which are majority- owned or controlled by Lebanese nationals and that provide such services through permanent establishments in Lebanon, provided that:



(i) the Operator, in its judgment acting reasonably, is satisfied (on the basis of demonstrated ability, experience, quality, timely performance, workmanship and other relevant criteria) with their ability to properly perform the work entrusted to them;



(ii) the cost of such services does not exceed one hundred and ten per cent (110%) of the lowest acceptable cost of equivalent or similar services offered by or otherwise available from foreign individuals or Entities that are not majority- owned or controlled by Lebanese nationals; and



(iii) the other terms and conditions applicable to such services are otherwise competitive with those available from foreign individuals or Entities that are not majority- owned or controlled by Lebanese nationals; and



b) in purchasing goods, the Operator shall give preference to goods which originate from Lebanon, or are





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manufactured or constructed in Lebanon, in each case by Entities that are majority-owned or controlled by Lebanese nationals, provided that:



(i) the Operator is reasonably satisfied (on the basis of demonstrated quality, workmanship, availability in the quantity and at the times when needed, and, as may be appropriate, availability of service and support, and other relevant criteria) with the fitness of the goods;



(ii) the goods price does not exceed one hundred and five per cent (105%) of the lowest acceptable all inclusive cost offered by or otherwise available for equivalent or similar goods that do not originate from Lebanon, are not manufactured or constructed in Lebanon or are not supplied by Entities that are not majority-owned or controlled by Lebanese nationals; and



(iii) the other terms and conditions on which such goods are offered or otherwise available are competitive with available goods that do not originate from Lebanon, are not manufactured or constructed in Lebanon or are not supplied by Entities that are not majority- owned or controlled by Lebanese nationals.



Right Holders and the Operator shall procure that Contractors and their Sub-Contractors shall comply with this Article. The Exploration Plan



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and each Development and Production Plan shall include a plan for retaining Lebanese companies as Contractors and Subcontractors, including priority rules meeting the requirements set forth in this Article.



2. The Operator may enter into agreements with Contractors (and permit Contractors to enter into agreements with Subcontractors) for the conduct of Petroleum Activities, and with suppliers of goods, equipment and materials to be used in Petroleum Activities, so long as such agreements are consistent with the terms of this EPA, the Joint Operating Agreement and Lebanese law. Any such agreement must be approved in advance by the Minister upon the recommendation of the Petroleum Administration if(i) a Right Holder or an Affiliate of the Right Holder is a party to such agreement (other than the Operator in its capacity as such), or (ii) the total amount of Recoverable Costs to be incurred under such agreement (or any group of related agreements) exceeds US$10 million in any calendar year, or US$20 million overall.



Any request for approvals shall include the amount of the relevant agreement or group of related agreements, the name of the relevant Contractor and either a copy of the agreement(s) or a description of the material terms thereof in reasonable detail. In the event that the Minister does not respond to a properly submitted request for approval of any agreement within thirty (30) days of submission, the request shall be deemed to be approved.



3. Supply bases for the provisions of goods and services, understood to include transhipment points, including air transport related to Petroleum Activities pursuant to this EPA, shall be used as stipulated by applicable Lebanese law and Article 8 of the decree no 10289/2013 (PAR), and approved plans for Development nd Production.





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Art 28. Changes in Laws and Regulations



1. Petroleum Activities shall be conducted in accordance with all applicable Lebanese laws, as they may be amended or modified from time to time during the term of this EPA. Nothing in this EPA shall be interpreted so as to exempt the Right Holders or the Operator from the obligation to comply fully with all applicable Lebanese laws, or as modifying any applicable Lebanese laws.



2. In the event that the law no 132/2010 (OPR Law), any regulations adopted thereunder (including the decree no 10289/2013 (PAR), or any other Lebanese laws are modified after the date of this EPA in any other manner (except as set forth in the next sentence) that substantially affects the economic or financial position of the Right Holders in respect of this EPA, then the Right Holders may notify the Minister and the Petroleum Administration that they wish to meet in order to discuss appropriate adjustments to the terms of this EPA to preserve such economic or financial position. The Right Holders may not provide any such notification if the relevant change in Lebanese law relates to the improvement of health, safety, environmental standards consistent with the evolution of international standards and practices. If any such notification is provided, the Right Holders shall, together with such notice, provide an explanation in reasonable detail of the manner in which the relevant modifications substantially affect the economic or financial position of the Right Holders in respect of this EPA. The Parties shall thereafter engage in good faith discussions with a view to agreeing on such adjustments. Neither Party shall have an obligation to agree to any adjustments. If such discussions do not produce an agreement within ninety (90) days of the commencement of such discussions, then the





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Right Holders may submit the issue to a sole expert, who shall determine the adjustment that is necessary to preserve the economic or financial position of the parties. Any adjustment agreed by the Parties or determined by a sole expert shall be submitted for approval by the Council of Ministers, and shall be effective only if such approval is granted.



3. In the event of an increase in the corporate income tax rate applicable in Lebanon, any Excess Corporate Income Tax (as defined in the Accounting and Financial Procedure that constitutes Annex D of this EPA) shall be a Recoverable Cost as provided in the Accounting and Financial Procedure that constitutes Annex D of this EPA. Accordingly, the Right Holders may not propose any adjustment in respect of such increase pursuant to Article 28.2 of this EPA.



In the event of any decrease in the Corporate Income Tax rate applicable in Lebanon, this decrease shall be deducted from the Recoverable Cost.



Art 29. Force majeure



1. The non-performance or delay in performance, wholly or in part, by the State or the Right Holder of any obligation pursuant to this EPA excepting an obligation to make payments hereunder, shall be excused if, and to the extent that, such non-performance or delay is caused by an Event of Force Majeure.



2. For the purpose of this EPA, the term “Event of Force Majeure” means any cause or event beyond the reasonable control of, and not brought about at the instance of, the Party claiming to be affected by such event, and which has caused the non-performance or delay in performance of obligations pursuant to this EPA. Without limitation to the generality of the foregoing, Events of Force Majeure shall include natural phenomena or calamities including but





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not limited to, epidemics, earthquakes, storms, lightning, floods, fires, blowouts, wars declared or undeclared, transboundary hostilities, blockades, civil unrest or disturbances, labour disturbances, strikes, quarantine restrictions and acts of state (except that: (i) no act of the State expressly contemplated by the Law no 132/2010 (OPR Law) or this EPA (including, without limitation, the approval or rejection of an Exploration Plan, Appraisal Plan or Development and Production Plan or revision thereto or any extension of the Exploration Phase) shall constitute an Event of Force Majeure, (ii) any act of the State shall not constitute an Event of Force Majeure with respect to the obligations of the State and (iii) any act of a state that controls a Right Holder shall not be deemed to constitute an Event of Force Majeure with respect to the obligations of such Right Holder).





3. The Party claiming suspension of its obligations pursuant to this EPA on account of

an Event of Force Majeure shall:



a) promptly notify the other Parties of the occurrence thereof;



b) take all actions that are reasonable and, if necessary, legal action to remove the cause of the Event of Force Majeure, but nothing herein shall require the Right Holders, subject to applicable law, to resolve any labour dispute except on terms satisfactory to the Right Holders; and



c) Upon removal or termination thereof, promptly notify the other Parties and take all reasonable action for the resumption of the performance of its obligations pursuant to this EPA as soon as possible after the removal or termination of the Event of Force Majeure.





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4. Where pursuant to this EPA the Right Holders are required or have the right to do any act or to carry out any activity within a specified period, or the rights of the Right Holders hereunder are to subsist for a specified period, the specified period shall be extended (to the extent permitted by applicable Lebanese law) so as to take reasonable account of any period during which by reason of an Event of Force Majeure the Right Holders have been unable to carry out the activity necessary to exercise a right, carry out its obligations or enjoy its rights pursuant to this EPA.



5. Where an Event of Force Majeure situation continues for more than fifteen (15) consecutive days, the Parties shall meet forthwith in order to review the situation and to agree on the measures to be taken for the removal of the cause of Event of Force Majeure and for the resumption in accordance with the provisions of this EPA of the performance of the obligations pursuant to this EPA.



6. Where an Event of Force Majeure substantially interrupts the conduct of Petroleum Activities for a period of more than thirty-six (36) consecutive months, either the Right Holders or the State shall have the right to terminate this EPA pursuant to Article 36 of this EPA.



7. In the event that the Minister orders the suspension of Petroleum Activities as a result of an incident, accident or emergency, in accordance with Article 58 of the law no 132/2010 (OPR Law), the term of this EPA (including the duration of the Exploration Phase, any Exploration Period, the Production Phase or any Production Period) shall be extended accordingly in order to provide reasonable compensation for the losses of the Right Holders, as contemplated in Articles 58-3 and 58-4 of the law no 132/2010 (OPR Law).





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Art 30. Indemnification and liability



1. The Right Holders shall indemnify and hold the State harmless from and against any and all claims, actions, demands and proceedings made against the State by third parties in respect of injury, loss or damage resulting from an act or omission by a Right Holder or the Operator and/or their Affiliates and/or Contractors or Subcontractors in their conduct of the Petroleum Activities that is in material breach of the EPA or Lebanese law or amounts to Gross Negligence or Wilful Misconduct.



2. The State shall indemnify and hold the Right Holders, their Affiliates, Contractors and Subcontractors harmless from any loss or damage incurred by a Right Holder caused by any operations unrelated to Petroleum Activities that are conducted within the Block by the State or, with the approval of the State, by third parties.



3. Notwithstanding anything to the contrary in this EPA, no Right Holder or any of their Affiliates, Contractors or Subcontractors carrying out Petroleum Activities on behalf of a Right Holder shall be liable to the State and the State shall not be liable to any Right Holder or any of their Affiliates, Contractors or Subcontractors, for consequential or indirect losses, damages, expenses or liabilities including but not limited to inability to produce Petroleum, loss of Production or loss of profit.



4. In carrying out Petroleum Activities pursuant to this EPA, the Right Holders shall not be liable for any loss or damage suffered by the State that is caused by a Right Holder, the Operator or any of their Affiliates, Contractors or Subcontractors carrying out Petroleum Activities on behalf of a Right Holder unless such

injury, loss or damage is the result of a breach





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of the EPA or Lebanese law or Gross Negligence or Wilful Misconduct on the part of a Right Holder, the Operator and/or their Affiliates, and/or Contractors or Subcontractors.



5. Any claim pursued by any third parties which would entitle any of the Parties, the Contractors or Subcontractors together referred to herein as the "Indemnified Party" to be indemnified by any of the other Parties, the Contractors or Subcontractors, together referred to herein as the "Indemnifying Party", shall be promptly communicated by the Indemnified Party by notice to the Indemnifying Party so that the Indemnifying Party may promptly intervene in such third party claim and pursue its defence. Such notice shall include a description of the third party claim and shall be accompanied by copies of all relevant papers received by the Indemnified Party and its counsel with respect to such third party claim (a “Claim Notice”). The Indemnified Party shall cooperate with the Indemnifying Party and its counsel in contesting such third party claim. If the Indemnified Party fails promptly to communicate by notice as provided above, it shall not lose its rights to the indemnification pursuant to this Article, except to the extent that such failure results in prejudice to the Indemnifying Party.



6. If within thirty (30) days of receipt of a Claim Notice, the Indemnifying Party notifies the Indemnified Party that it elects to assume the defence of such claim, then the Indemnifying Party shall have the rights to defend, at its cost and expense, such claim by all appropriate proceedings including compromise or settlement thereof, so long as any settlement agreement does not provide for or result in any continuing liability or obligation on, or an admission of fault by, the Indemnified Party in respect of such third party claim. If the Indemnifying Party fails to elect to assume the defence of such claim within thirty (30) days of







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receipt of a Claim Notice, then the Indemnified Party shall have the right to defend at the sole cost and expense of the Indemnifying Party the third party claim by all appropriate proceedings including any compromise or settlement thereof.



7. Except as provided for in paragraph 6 of this Article, the Indemnified Party shall not settle or compromise any third party claim without the prior written consent of the Indemnifying Party, and in the event that it does so, the Indemnified Party shall not be entitled to any indemnification or to be held harmless in relation to such third party claim so settled or compromised.





8. The Right Holders shall cause the Contractors and Subcontractors to comply with the provisions of this Article as if they were parties thereto.



Art 31. Insurance



1. The Right Holders shall effect and maintain, in respect of Petroleum Activities, all insurance required by Best International Petroleum Industry Standards and applicable Lebanese law and, in the event that the insurance is procured from a jurisdiction other than Lebanon, the applicable law of such other jurisdiction. Such insurance shall be reported annually to the Petroleum Administration and shall include coverage (subject to reasonably and customary deductibles and coverage limits, consistent with Best International Petroleum Industry Standards) at least in relation to the following:



a) loss and/or damage to all Facilities and equipment which are owned or used by the Right Holders in Petroleum Activities;







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b) environmental damage and/or pollution caused in the course of Petroleum Activities pursuant to this EPA for which the Right Holders may be held responsible;



c) property loss, damage or bodily injury suffered by any third party in the course of Petroleum Activities pursuant to this EPA;



d) the cost of removing wreckage and cleaning up operations following an accident in the course of Petroleum Activities pursuant to this EPA; and



e) The Right Holders’ and the Operator's liability for their employees engaged in the Petroleum Activities pursuant to this EPA.



2. The Right Holders shall require the Contractors and Subcontractors to carry equivalent insurance of the type and in such amount as is required by applicable Lebanese law and is customary in the international Petroleum industry in accordance with Best International Petroleum Industry Standards.



Art 32. Records, accounting and audit



1. The Right Holders shall maintain records of all income, receivables, costs, expenses and credits connected or related to the Petroleum Activities performed, in accordance with the requirements of applicable Lebanese law and this EPA. The records shall be kept in Lebanon.



2. Each Right Holder agrees to (i) maintain adequate internal controls; (ii) properly record and report all transactions; an comply with applicable Lebanese law. No Right Holder is in any way authorized to take any action on behalf of another Right Holder that would result in an inadequate or inaccurate recording and





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reporting of assets, liabilities or any other transaction, or which would put such Right Holder in violation of its obligations pursuant to the laws applicable to the Petroleum Activities pursuant to this EPA.



3. The Minister, the Petroleum Administration and other competent State authorities shall have the right to audit and inspect the Operator’s and each Right Holder’s records, upon reasonable notice and without material interference with Petroleum Activities, in accordance with the requirements of applicable Lebanese law and this EPA.



Art 33. Amendments



1. No amendment to this EPA may be concluded or shall be deemed concluded unless it is set

forth in a written instrument signed by or on behalf of the Right Holders on the one hand and the State on the other.



2. Any amendment, modification and supplement to this EPA shall be subject to, and effective only upon, the Council of Ministers’ approval and the signature of the Minister.



Art. 34 Assignment and mortgage



1. No Right Holder shall be permitted to sell, assign, transfer or otherwise dispose of all or part of its Participating Interest (an “Assignment”) otherwise than in accordance with this Article or as required by Article 36 of this EPA. A Change of Control of a Right Holder shall be deemed to be an Assignment under this EPA and shall be subject to this Article.



2. Each Right Holder shall have the right to make an Assignment to a Wholly-Owned Affiliate. Prior to such Assignment becoming effective the Right Holder shall agree to remain liable for or guarantee the obligations





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transferred pursuant to the Assignment on terms reasonably acceptable to the Minister.

Notwithstanding the foregoing, in the event that the Right Holder’s obligations under this EPA are guaranteed pursuant to Article 6.4, such Right Holder shall submit to the Minister in connection with such Assignment a confirmation that the obligations of the guarantor will apply to the obligations of the Wholly-Owned Affiliate taking such Assignment. In such case, the Right Holder making such assignment need not remain liable for or guarantee the obligations transferred pursuant

to the Assignment.



3. Each Right Holder shall also have the right to make an Assignment to any party (other than pursuant to Article 34.2 above), provided that:



a) the third party is qualified in accordance with the law no 132/2010 (OPR Law); and



b) The Minimum Work Commitment for the First Exploration Period has been fulfilled.



Such Assignment shall not result in any Right Holder: (i) holding a Participating Interest of less than ten per cent (10%), or (ii) if the Right Holder or its Affiliate is the Operator, holding a Participating Interest of less than thirty-five per cent (35%). No Right Holder may make an Assignment to another Right Holder if, following such Assignment, there would be fewer than three (3) Right Holders.



4. Any Assignment must be approved by the Council of Ministers pursuant to Article 70 of the law no 132/2010 (OPR Law) before becoming effective.



5. In order for any Assignment under paragraphs 2 and 3 of this Article to be effective





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[signatures]

[stampe]the Parties and the assignee shall enter into a binding and enforceable instrument of assignment and assumption, which shall include an undertaking by such assignee to fulfil any obligations under the EPA. Following the entry into such an instrument and the approval of the Council of Ministers as contemplated by paragraph 4 of this Article, the assignee shall be deemed to be a Right Holder for the purposes of this EPA.



6. Notwithstanding anything to the contrary in this Article, for the purpose of financing Petroleum Activities, any Right Holder may mortgage or otherwise encumber, totally or partially, its rights under this EPA to a reputable international bank and/or financial institution, subject to Articles 50 to 53 of the law no 132/2010 (OPR Law) and to any Decree adopted thereunder.



Art. 35 Confidentiality



1. Without prejudice to the provisions of Article 154 of the decree no 10289/2013 (PAR), this EPA, and all information, Data, analysis, interpretation and results collected or obtained in connection with or resulting from Petroleum Activities pursuant to this EPA shall be kept confidential and not be disclosed or communicated by the Right Holders to any third party without the prior written consent of the Minister upon the recommendation of the Petroleum Administration, except:



(i) Where such disclosure is made to an Affiliate or advisor of a Right Holder;



(ii) Where such disclosure is made to a Contractor, Subcontractor, or professional consultant retained by a Right Holder;



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Page 106 of 126(iii) Where such disclosure is made to the operator or a right holder of another block subject to an exploration and production agreement, in connection with possible joint development, infrastructure or marketing arrangements (including under unitization agreements), or possible swap arrangements in respect of Petroleum products;



(iv) Where necessary for the approval, implementation and/or financing of Petroleum Activities (including without limitation the sale or other disposal of the Right Holders' share of Petroleum Produced or the negotiation of any unitization or common infrastructure arrangement); or



(v) To a bona fide prospective assignee of all or part of a Right Holder's Participating Interest.



provided that in all cases, the Right Holders inform the party to whom the information or Data is disclosed (each, a "Right Holder Permitted Recipient") of the confidential nature of such information or Data, and ensure that each Right Holder Permitted Recipient maintains the confidentiality thereof on terms that are at least as extensive as those contained herein.



2. The State shall keep confidential and not disclose to any third party without the consent of the relevant Right Holder or Right Holders, all information in the nature of a commercial secret (such as the terms of any gas sales agreement, including pricing formulas), and all information relating to proprietary technology or intellectual property of a Right Holder or its Affiliates. in each case provided to the State in



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Page 107 of 126connection with Petroleum Activities pursuant to this EPA, except:



(i) Where such disclosure is made to a Ministry, agency or authority of the State for purposes of carrying out an official function (including without limitation any audit conducted pursuant to this EPA or Lebanese law);



(ii) Where such disclosure is made to a professional consultant retained by the State or any Ministry, agency or authority thereof;



(iii) Where necessary for the approval, implementation and/or financing of Petroleum Activities (including without limitation the sale or other disposal of the State's share of Petroleum Produced or the negotiation of any unitization or common infrastructure arrangement); or



(iv) In the case where the State acquires a Participating Interest, to a bona fide prospective assignee of all or part of such Participating Interest.



provided that in all cases (other than as required by Lebanese law, in the case of clause (i)), the party to whom the information is disclosed (each, a "State Permitted Recipient" and together with any Right Holder Permitted Recipients, the "Permitted Recipients") is informed of the confidential nature of such information, and the State or its representatives ensure that each State Permitted Recipient maintains the confidentiality thereof on terms that are at least as extensive as those contained herein.



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Page 108 of 1263. The confidentiality undertaking shall not apply:



(i) upon the confidential information becoming public knowledge other than by breach of this Article by any of the Right Holders, the State or a Permitted Recipient;



(ii) upon the confidential information becoming available to a Right Holder or the State from a third party (unless the third party acts in violation of a confidentiality obligation of which the Right Holder or the State is aware);



(iii) if the confidential information is independently developed by the State, the Right Holders or any of their Affiliates, and does not result from the conduct of Petroleum Activities under this EPA;



(iv) to the extent that the confidential information is required to be disclosed by law, judicial proceedings or applicable stock exchange regulations applicable to the Right Holders or their Affiliates; or



(v) to the extent that confidential information is disclosed in order to comply with the Extractive Industries Transparency Initiative or any similar international initiative.



4. Each Party shall (to the extent applicable) ensure that its officers, directors, employees, secondees, agents, representatives, or individuals with a similar role or function, and that the Contractors and Subcontractors shall comply with this Article.



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Page 109 of 1265. The foregoing provisions of this Article shall continue in force for a period of five (5) years following termination or expiry of this EPA.



Art. 36 Early Termination and Forced Assignment



1. Early Termination

a) The Minister may terminate this EPA by giving all of the Right Holders 90 days' written notice (an "EPA Termination Notice") specifying in reasonable detail the relevant circumstances if any of the following events or circumstances (each, a "Termination Event") occurs and is continuing:



(i) a material or repeated breach by the Right Holders or the Operator of the law no 132/2010 (OPR Law), the decree no 10289/2013 (PAR) or this EPA;



(ii) the Right Holders have failed to comply within a reasonable period of time with any final decision reached: (A) as the result of arbitration proceedings in accordance with Article 38 of this EPA, or (B) by a sole expert in accordance with Article 39 of this EPA that is final and binding in accordance with the provisions of this EPA;



(iii) the occurrence of an Event of Force Majeure that substantially disrupts the conduct of Petroleum Activities for a period of at least thirty-six (36) consecutive months provided that the Minister reasonably believes, based on the recommendation of the Petroleum Administration, that a party qualified in accordance



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Page 110 of 126with the Lebanese Law would be capable of conducting the Petroleum Activities in the Block pursuant to this EPA notwithstanding the events giving rise to such Event of Force Majeure; or



(iv) The revocation of the Petroleum Right granted hereunder pursuant to Article 161 of the decree no 10289/2013 (PAR).



b) If the Right Holders have remedied the Termination Event within the 90 days' notice period, the EPA Termination Notice shall be deemed to be no longer in effect. If the Right Holders notify the Minister that the Termination Event is not capable of remedy within such 90 day period, but is capable of remedy in a longer period of time, the Minister may grant an extension and suspend the effect of the EPA Termination Notice, so long as the Right Holders are diligently pursuing a remedy.



c) Any termination of this EPA pursuant to this Article shall be effective notwithstanding any dispute by the Right Holders of the grounds for such termination. In the event that an arbitral tribunal appointed pursuant to Article 38 of this EPA determines that such termination was not justified, the remedy of the Right Holders shall be limited to monetary damages based on the fair market value (determined in the manner set forth in paragraph (d), except for the additional limitation relevant to an Event of Force Majeure) of their rights under this EPA as of the date of termination.



d) No compensation shall be paid to the Right Holders in connection with any termination pursuant to this Article, except that upon any termination resulting from a Termination Event set forth in paragraph 1(a)(iii) of this Article, the State shall pay to the Right Holders an amount equal to the greater of



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Page 111 of 126(i) all Recoverable Costs that have not been recovered as of the time of such termination, and (ii) 80% of the fair market value of the Participating Interests of the Right Holders as of the date of termination (such fair market value being equal to the amount that a willing buyer would pay to a willing seller of such Participating Interests, free of all Encumbrances, for cash consideration in U.S. dollars and on arm's length terms, determined on a going concern basis and assuming that the Event of Force Majeure ends as of the date of termination).



The fair market value shall be determined by the Parties through negotiations, but if such negotiations do not result in an agreement within ninety (90) days, then either the State or the Right Holders may submit the issue to final resolution through arbitration pursuant to Article 38 of this EPA.



e) The Right Holders may terminate this EPA by giving the State 90 days' written notice upon an Event of Force Majeure occurring and continuing that substantially disrupts the conduct of Petroleum Activities for a period of at least thirty-six (36) consecutive months. The Right Holders may also withdraw from this EPA and surrender their rights hereunder in the circumstances contemplated in Article 39 of the decree no 10289/2013 (PAR). Any such withdrawal or surrender must be made by all of the Right Holders (or by the Operator acting on their behalf, if duly appointed to do so by the Right Holders). The withdrawal or surrender of a Participating Interest by one or more (but less than all) Right Holders shall be treated as an Assignment and may only be made in compliance with the requirements of Article 34 of this EPA. No compensation shall be paid to the Right Holders in connection with a termination or surrender contemplated in this paragraph.



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Page 112 of 1262. Forced Assignment

a) A "Forced Assignment Event" shall be considered to have occurred if any of the following events or circumstances occurs and is continuing:



(i) the occurrence of a Termination Event resulting primarily from the actions or omissions of, or an Event of Force Majeure affecting, a particular Right Holder;



(ii) a material breach of Article 26, 35 or 41 of this EPA or Article 147 of the decree no 10289/2013 (PAR) by a Right Holder;



(iii) a Right Holder has provided any materially false or misleading statement(s) to, or withheld any significant information from, the Council of Ministers or the Minister or the Petroleum Administration relating to this EPA or any Petroleum Activities; or



(iv) the making of any order or the passing of any resolution or the taking of any other step by any person for the receivership, administration, liquidation, bankruptcy, insolvency, dissolution, or reorganization for the benefit of the creditors, or any similar or analogous process in any part of the world, of any Right Holder or any Entity that guarantees the obligations of a Right Holder pursuant to paragraph 4 of Article 6 of this EPA, save where the foregoing is for the purpose of amalgamation or reorganization of a Right



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Page 113 of 126Holder or such guarantor and its Affiliates.



b) In the event of a Forced Assignment Event, the Minister may elect to require the Right Holder responsible for the Forced Assignment Event (the "Defaulting Party") to assign its Participating Interest unconditionally, without consideration and free from all Encumbrances to the other Right Holders (the "Non-Defaulting Parties") in proportion to the Non- Defaulting Parties' Participating Interests (a "Forced Assignment") by giving the Defaulting Party 90 days' written notice and specifying in reasonable detail the Forced Assignment Event (a "Forced Assignment Notice").



Notwithstanding the foregoing, if the Forced Assignment Event is a result of a breach of Article 41 of this EPA, the Minister may require the Forced Assignment to take place with immediate effect.



c) If the Defaulting Party has remedied the Forced Assignment Event within the 90 days' notice period, the Forced Assignment Notice shall be deemed to be no longer in effect. If the Defaulting Party notifies the Minister that the Forced Assignment Event is not capable of remedy within such 90 day period, but is capable of remedy in a longer period of time, the Minister may grant an extension and suspend the effect of the Forced Assignment Notice, so long as the Defaulting Party is diligently pursuing a remedy. The delivery of a Forced Assignment Notice shall be deemed to suspend, and the conclusion of a Forced Assignment shall be deemed to remedy, any Termination Notice del ed in respect of the same events or circumstances.



d) Each Non-Defaulting Party shall be required to accept the assignment of its share of the Defaulting Party's Participating Interest, provided that the Non-Defaulting



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Page 114 of 126Parties shall not be liable for any obligations of the Defaulting Party accrued prior to the Forced Assignment. From the date of the Forced Assignment, the Non-Defaulting Parties shall be jointly and severally liable for all obligations arising from the Defaulting Party's Participating Interest including but not limited to, any Minimum Work Commitment. The Right Holders may agree to arrangements among themselves for the compensation (or absence of compensation) of the Defaulting Party, but no such agreement shall have any impact on the effectiveness of, or result in a delay in, any Forced Assignment.



e) In the event that any Forced Assignment would result in there being fewer than three (3) Right Holders, the Minister may elect to have the State or an Entity wholly- owned by the State (provided that such Entity will be financially capable of meeting its obligations under the EPA) (i) take a Forced Assignment of the Defaulting Party's entire Participating Interest in lieu of the Non- Defaulting Parties, or (ii) take an assignment of a Participating Interest of 0.01% from the Defaulting Party, in which case the assignment to each Non-Defaulting Party shall be reduced accordingly. No compensation shall be paid to the Defaulting Party in connection with any such Forced Assignment.



f) Any Forced Assignment shall be effective notwithstanding any dispute by the Defaulting Party of the grounds thereof. In the event that an arbitral tribunal appointed pursuant to Article 38 of this EPA determines that such Forced Assignment was not justified, the remedy of the Defaulting Party shall be limited to monetary damages based on the fair value of its rights under this EPA as of the date of Forced Assignment, less any compensation received.



g) Nothing in this Article shall preclude the State from pursuing any and all remedies in respect of a default by a Defaulting



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Page 115 of 126Party available under this EPA, Lebanese law or otherwise.



3. Consequences of Termination. If the EPA is terminated in accordance with an EPA Termination Notice, the Right Holders shall:



a) forfeit all their future rights and interests under the EPA as from the date of termination;



b) release the State from any and all actions, claims, demands and proceedings that may arise out of such termination other than in respect of a dispute in relation to such termination; and



c) if termination occurs during an Exploration Period, forfeit the Work Commitment Guarantee, which the Minister may draw in an amount equal to its face amount less the Recoverable Costs incurred during such Exploration Period and attributable to the relevant Minimum Work Commitment.



Art. 37 General provisions on consultation, arbitration and sole expert



A dispute shall be resolved, if possible, by negotiation between the Parties. A notice of the existence of a dispute shall be given by a Party to another in accordance with the provisions of this EPA on serving notices. In the event that no agreement is reached within thirty (30) days after the date one Party notifies the other that a dispute exists, or such longer period that is specifically provided for elsewhere in this EPA or agreed between the Parties, either Party shall have the right to have such dispute determined by arbitration or a sole expert as provided for in this EPA. Arbitration and sole expert determination as aforesaid shall



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Page 116 of 126be the exclusive method of determining a dispute pursuant to this EPA.



Art. 38 Arbitration



1. Subject to the provisions of Article 37 of this EPA, and save for any matter to be referred to a sole expert pursuant to the provisions of this EPA, the Parties shall submit any dispute, controversy or claim arising out of or relating to this EPA (including any dispute, controversy or claim between the Parties arising out of the application of the decree no 10289/2013 (PAR) to the activities contemplated in this EPA), which shall for the purpose of dispute resolution include the interpretation, breach, termination or invalidity thereof, and which cannot be resolved by negotiation during the time period specified in Article 37 of this EPA, to binding arbitration as hereinafter provided:



a) The dispute shall be settled by arbitration in accordance with the Rules of Arbitration of the International Chamber of Commerce, hereinafter referred to as the "ICC Rules of Arbitration";



b) The place of any arbitration pursuant to these provisions shall be Paris, France;



c) The law applicable to the merits of the dispute shall be Lebanese law;



d) The language of the arbitration shall be English, and the English version of this EPA and the decree no 10289/2013 (PAR) may be used in such arbitration to the extent there is no conflict with the Arabic version;



e) The arbitral proceedings shall be confidential.



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Page 117 of 126f) The arbitral panel shall be composed of three (3) arbitrators to be appointed in accordance with the ICC Rules of Arbitration, provided that, upon mutual agreement of both Parties, the arbitration may be conducted by a sole arbitrator appointed pursuant to the ICC Rules of Arbitration.



2. An award or a decision, including an interim award or decision, in arbitral proceedings pursuant to this Article shall be binding on the Parties, and judgment thereon may be entered in any court having jurisdiction for that purpose. Each of the Parties hereby waives any defences based upon sovereign immunity and waives any claim to immunity:



a) in respect of proceedings to enforce any such award or decision including, without limitation, immunity from service of process and from the jurisdiction of any court; and



b) in respect of immunity from the execution of any such award or decision against any property held for a commercial purpose.



Art. 39 Sole expert



1. Any dispute which is required to be referred to a sole expert pursuant to the provisions of this EPA and any other matter which the Parties may otherwise agree to so refer, shall be referred to a sole expert for determination by a Party giving notice to such effect pursuant to the provisions of this EPA on serving notices. Such notice shall contain a statement describing the dispute and all relevant information associated therewith.



2. A sole expert shall be an independent and impartial physical or legal person of international standing with relevant qualifications and experience and not of the



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Page 118 of 126same nationality as any of the Parties, appointed pursuant to the mutual agreement of the Parties. Any sole expert appointed shall act as an expert and not as an arbitrator or mediator and shall be instructed to endeavour to express an opinion on the resolution of the disagreement or to resolve the dispute, as the case may be, referred to him within thirty (30) days of his appointment, but in any event within sixty (60) days of the appointment. Upon the selection of the sole expert, the Party receiving the notice of referral as described in the previous paragraph of this Article shall submit its own statement containing all information it considers relevant with respect to the dispute. If the Parties are unable to agree on the appointment of a sole expert within twenty (20) days after a Party has received a notice of referral pursuant to this Article, the sole expert shall be appointed by the International Chamber of Commerce Centre for Expertise.



3. The sole expert shall decide the manner in which any determination is made, including whether the Parties shall make oral or written submissions and arguments, and the Parties shall co-operate with the sole expert and provide such documentation and information as the sole expert may request. All correspondence, documentation and information provided by a Party to the sole expert shall be copied to the other Party, and any oral submissions to the sole expert shall be made in the presence of all Parties. The sole expert may obtain any independent professional or technical advice as the sole expert considers necessary. The English version of this EPA signed by the Parties shall be used in any determination by the sole expert to the extent that there is no conflict with the Arabic version. The fees and expenses of a sole expert appointed pursuant to the provisions of this Article shall be borne equally by the Parties.



4. Where pursuant to the provisions of this EPA, the decision of the sole expert is final and binding, such decision shall not be subject to



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Page 119 of 126any appeal, save in cases of fraud, corruption or manifest disregard of applicable procedure of this EPA. In the event that any Party fails to comply with a final and binding decision of the sole expert in any material respect, and the issue is not resolved amicably by negotiations within the time period contemplated in Article 37, the other Party or Parties may commence arbitration proceedings for the purposes of compelling compliance with such decision or seeking damages from any lack of compliance. In the event that the sole expert fails to resolve the dispute by the deadline specified in paragraph 2 of this Article 39 where such resolution is, pursuant to the provisions of this EPA, deemed to be final and binding, any party may refer the dispute to arbitration in accordance with Article 38 of this EPA.



Art. 40 Language, governing law and interpretation



1. This EPA shall be governed by and construed in accordance with Lebanese law.



2. This EPA has been made in the Arabic language and an English language version. However, in case of conflict the Arabic original shall prevail.



3. All documents submitted for approval by the Council of Ministers pursuant to this EPA shall be in the Arabic language, although the Right Holders may also submit an English version for information purposes, or for purposes of any prior review or approval by the Petroleum Administration or the Minister. All other documents, accounts, books and records prepared, maintained or submitted pursuant to this EPA shall be in the Arabic language or the English language.



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Art. 41 Right Holder conduct



The Right Holders, their Affiliates and their

respective personnel shall act, at all times, in a

manner which is consistent with the highest ethical

standards.



Each Right Holder warrants that the Right Holder

and its Affiliates have not made, offered, or

authorized and will not make, offer, or authorize

with respect to the matters which are the subject

of this EPA, any compensation, commission, payment,

gift, promise or other advantage that would:



1. be based on knowing or being aware of a high

probability that any such money or thing of value

will be offered, paid or promised directly to any

public official or through any other person or

Entity, to or for the use or benefit of any public

official, including any person holding a

legislative, administrative or judicial office, or

any person employed by or acting on behalf of a

public agency, a public enterprise or a public

international organization, or any political party

or political party official or candidate for

office, for the purpose of influencing any act or

decision of such officials in their official

capacity.



2. be based or calculated on the successful award

of this EPA or any capital employed, cost incurred,

or profit earned or generated or estimated to be

earned or generated by the Right Holder and its

Affiliates.



3. violate (i) applicable Lebanese laws; (ii) the

laws of the country of incorporation of such Right

Holder or such Right Holder's Ultimate Parent

Entity and of the principal place of business of

such Ultimate Parent Entity; or (iii) the

principles described in the Convention on Combating

Bribery of Foreign Public Officials in





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International Business Transactions, signed in

Paris on December 17, 1997, which entered into

force on February 15, 1999, and the Convention's

Commentaries.



Each Right Holder and its Affiliates shall

acknowledge that the above stated representations

and warranties are fundamental to the basis of good

faith under this EPA and any breach of the above

shall entitle the State to require the Right Holder

in breach to make a Forced Assignment pursuant to

Article 36 of this EPA with immediate effect, and

in the event of such Forced Assignment, the Right

Holder and its Affiliates shall not be entitled to

any compensation and shall have no claims.



Each Right Holder and its Affiliates shall use all

reasonable endeavours to obtain representations and

warranties similar to those set out in this Article

from its Contractors.



Art. 42 Conflicts of interest



A Right Holder shall notify the Petroleum

Administration and the other Right Holders of any

arrangement or agreement to be entered into in

connection with the Petroleum Activities

contemplated or conducted pursuant to applicable

Lebanese law and this EPA in which such Right

Holder or its Affiliate has a direct or indirect

interest which could reasonably be expected to

conflict with the interests of the State.



Art. 43 Waiver



No waiver by the State of any default by a Right

Holder in the performance of any provision of this

EPA shall operate or be construed as a waiver of

any future default or defaults by the same Right

Holder or any other Right Holder, whether of a like

or of a different character. Except as expressly

provided in this EPA, no Party shall be deemed to

have waived, released



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or modified any of its rights pursuant to this EPA

unless such Party has expressly stated, in writing,

that it does waive, release or modify such right.



Art. 44 Notices



1. All notices, invoices and other communications

hereunder shall be deemed to have been properly

given or presented, if delivered in writing in

person or by courier or sent by facsimile or email

at the addresses indicated in this Article with the

charges associated with the delivery of the notice,

invoice or other communication being paid by the

sender. Any notice shall be effective upon receipt

by the Party to which it is addressed. All such

notices shall be addressed to the State or the

Right Holder, as the case may be, as follows: 1.



a) The State:



The Republic of Lebanon The Ministry of Energy and

Water - -



Address: 2nd Floor - Minister office -Ministry of

Energy and Water Bldg. - Corniche Al Nahr Beirut -

Lebanon Attention: Minister of Energy and Water

email:minster@energyandwater.gov.lb

Fax:+9611449639



With a copy to:



The Petroleum Administration



Address: 1st Floor, Marfaa 200, Georges Akouri

Street, Downtown - Beirut - Lebanon

Attention: Chairman of the Ptroleum

Administartion

email:epa2018@lpa.gov.lb

fax: +961 1 998781



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b) The Right Holders:



Total



Address: Achrafieh Street, Tilal Beirut Building,

Bloc B, 2nd floor

B.P. 11-3636

Beirut

Attention: The Managing Director- Philippe

Amblard

Email:philippe.amblard@total-liban.com

Fax: +961 1 364 370



With a copy to:



Total SA



Address: 2 Place Jean Millier

La Défense 6

92078 Paris, France

Attention: Vice President, North and East

Mediterranean - Elias Kassis

Email: elias.kassis@total.com

Fax: +33 1 47 44 49 22







Eni



Address: World Trade Center B-Tower

17th floor, Strawinskylaan 1725

1077 XX Amsterdam

The Netherlands

Attention: The Managing Director - Andrea

Cozzi

Email: andrea.cozzi@eni.com

Fax: +31(0) 20-570 7190





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Novatek



Address: Badaro, OMT Building, 3rd floor, Plot

No. 5243, Section 14, Beirut, Lebanon

Attention: Mr. Vyacheslav Mishin

Email: v.mishin@novatek.ru

Fax: +961 1 384064









With a copy to:



JSC NOVATEK



Address: 2, Udaltsova str., Moscow, Russia,

119415

Attention: Deputy Chairman of the

Management Board - Director for Geology

Email: novatek@novatek.ru

Fax: +7 (495) 721-22-53



2. Subject to the third paragraph of this Article

each Party to this EPA may substitute or change the

aforesaid address by giving written notice thereof

to the others.



3. Each Right Holder shall at all times maintain

an address in Lebanon for the purpose of service of

notice.





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IN WITNESS WHEREOF, the Minister of Energy and

Water herein representing the Republic of Lebanon

and each Right Holder have signed this EPA in four

(4) originals in each of the Arabic and English

languages, as of the date first herein below

stated.



The Republic of Lebanon

By: Cesar Abi Khalil

Minister of Energy and Water

Date: 29/1/2018





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Total E&P Liban SAL

By: Stéphane Michel

Position: Duly appointed and authorized

representative

Date: 29/1/2018





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Eni Lebanon B.V.

By: Andrea Cozzi

Position: Duly appointed and authorized

representative

Date: 29/1/2018





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NOVATEK Lebanon SAL

By: Vyacheslav Mishin

Position: Chairman-General Manager

Date: 29/1/2018





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EPA Block (4) Annexes - Final - 29-01-2018



Annex A



Description of the EPA Block



Block (4) is the area specified by Decree No.

42/2017 (The division of maritime waters subject to

the jurisdiction of the Lebanese State into areas

in the form of blocks).



Block area: the Block (4) area is /1,911/ Km².



Block Coordinates Points: A4, B4, C4, D4, E4, F4,

G4, H4









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Annex B



Map of the EPA Block 4-1,911 km²













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BLOCK 4- COORDINATES -













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Annex C



Heads of Joint Operating Agreement



This Annex C is attached to and made part of the

Exploration and Production Agreement entered into

between the State and Total E&P Liban SAL, Eni

Lebanon B.V. and NOVATEK Lebanon SAL for Petroleum

Activities in Block 4 (the "EPA"). Terms defined

in the EPA shall have the same meanings for the

purpose of this Heads of Agreement.



Art. 1 Scope



This Heads of Agreement provides the basic

principles that are of interest to the State and

are to be included in a Joint Operating Agreement

("JOA") to be executed among the Right Holders.



Until a definitive JOA is signed by the Right

Holders, the terms set forth in this Heads of

Joint Operating Agreement shall be binding and

shall form the basis for the conduct of Petroleum

Activities pursuant to the EPA.



Art. 2 Participating Interest



Subject to Article 15.7 of the EPA (relating to

Exclusive Petroleum Operations), each Right Holder

will have an undivided participating interest in

all operations specified under the JOA which shall

at all times be equal to such Right Holder's

Participating Interest under Article 6 of the EPA,

and the Right Holders shall as a result

participate in proportion to their respective

Participating Interests in all costs, expenses and

liabilities incurred pursuant to the EPA or JOA.



In accordance with Article 34 of the EPA, a Right

Holder's Participating Interest shall not be less

than ten percent (10%), or if the Right Holder is

the Operator, its Participating





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Interest shall not be less than thirty five

percent (35%).



Art. 3 Operator



3.1 [Signing Affiliate of Total] has been

appointed by the parties to act as Operator and

fulfill all obligations of the Operator as set

forth in the EPA and the JOA.



3.2 Any appointment of a new Operator, including

following the removal or replacement of the

Operator in the circumstances contemplated in

Article 15.8 of the EPA or pursuant to a Forced

Assignment, shall require the approval of the

Council of Ministers. Any removal of the Operator

by the Right Holders, and any resignation by the

Operator, may not be effective until a replacement

Operator satisfying all the conditions for

appointment has been identified by the Right

Holders and approved by the Council of Ministers.



Art. 4 Management Committee



4.1 A Management Committee composed of

representatives of the Right Holders shall be

established in accordance with Article 16 of the

EPA and shall act for the entire duration of the

JOA to establish policies and make any other

decisions necessary or expedient for the orderly

supervision and direction of Petroleum Activities.



4.2 The decision-making rules of the Management

Committee shall at all times be reasonably

designed in order to ensure the continuity of

Petroleum Activities and the continuing

fulfillment of the Right Holders' obligations

under the EPA and Lebanese law in the event of

deadlock.





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4.3 Except as otherwise approved by the Petroleum

Administration, all meetings of the Management

Committee shall take place in Lebanon.



Art. 5 Costs and Expenses



5.1 All costs and expenses of the Operator for

Petroleum Activities shall be borne by the Right

Holders participating in such Petroleum Activities

in proportion to their respective Participating

Interests, except in the case of Exclusive

Petroleum Operations. The Operator shall neither

realize profits nor suffer a loss as a result of

being the Operator in its conduct of Petroleum

Activities under the EPA and the JOA.



5.2 The Right Holders shall establish procedures

for cash calls that are sufficient to allow the

Operator to conduct Petroleum Activities in

accordance with the requirements of the EPA,

including without limitation the programs and

budgets contemplated in approved Exploration

Plans, Appraisal Plans, Development and Production

Plans and Work Programs, and the requirements of

the law no 132/2010 (OPR Law), the decree no

10289/2013 (PAR) and the EPA regarding

environmental remediation and decommissioning.



5.3 The Operator shall keep records of income,

costs and expenses in Lebanon in accordance with

the requirements of Article 32 of the EPA and the

Accounting and Financial Procedure. Such records

shall be sufficient to allow accounts to be

prepared in accordance with International

Financial Reporting Standards and Generally

Accepted Accounting Practices used in the

international petroleum industry, and shall be

subject to periodic inspection and audit in

accordance with the Accounting and Financial

Procedure (Annex D of the EPA.).





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Art. 6 Exclusive Petroleum Operations



6.1 In the event that Right Holders decide to carry

on Exclusive Petroleum Operations, such Operations

shall be undertaken in strict compliance with

Article 15.7 of the EPA. Any positive participation

interest shall be sufficient in order for a Right

Holder to be deemed to have an interest in

Exclusive Petroleum Operations for purposes of the

requirement that three Right Holders have such a

participation interest. Without prejudice to the

foregoing, and for the avoidance of doubt, nothing

in this Heads of Agreement, the JOA or the EPA

shall preclude one or more Right Holders from

funding the economic participation of another Right

Holder in relation to the conduct of Exclusive

Petroleum Operations.



6.2 In light of the joint and several liability of

the Right Holders for all Petroleum Activities

(including Exclusive Petroleum Operations), the JOA

may contain provisions for indemnification of

Right Holders by other Right Holders to reflect

their economic interests in any Exclusive Petroleum

Operations. The JOA may also contain provisions

allowing Right Holders with no participation

interest or a low participation interest to acquire

interests in Exclusive Petroleum Operations on such

terms as the Right Holders may agree among

themselves.



Any change in the participation interests of the

Right Holders in respect of Exclusive Petroleum

Operations shall not affect the joint and several

liability of the Right Holders provided in the EPA.



Art. 7 Default



7.1 The JOA shall contain provisions to ensure the

continued funding of Petroleum Activities in the

event of the default by a Right Holder to meet its

cash call or other





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funding obligations. Such provisions shall

include, but need not be limited to, a requirement

that the non-defaulting Right Holders advance the

amounts that a defaulting Right Holder fails to

fund, subject to a reasonable notice period.



7.2 The JOA may contain provisions designed to

minimize the likelihood of default, including

limitations on voting rights of a defaulting Right

Holder's representatives in the Management

Committee, limitations on distributions to a

defaulting Right Holder, requirements that a

defaulting Right Holder pay interest on advances

by non-defaulting Right Holders, and provisions

allowing non-defaulting Right Holders to force the

assignment of the Participating Interest of the

defaulting Right Holder (subject to Article 34 of

the EPA).



Art. 8 Withdrawal



The JOA may contain provisions permitting the

withdrawal of a Right Holder from its rights and

obligations under the EPA and the JOA.



Except as otherwise approved by the Petroleum

Administration, no such withdrawal shall be

permitted prior to the completion of the Minimum

Work Commitment for the first Exploration Period.

In addition, no withdrawal shall be permitted if

it would result in there being fewer than three

Right Holders.



Art. 9 State Participation



In the event that the State or any Entity owned by

the State acquires a Participating Interest in

accordance with Article 36 of the EPA, the State

or such Entity shall become a party to the JOA,

and its rights and obligations shall be identical

to those of the other Right Holders (except to

reflect the





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difference in their respective Participating

Interests). The Right Holders shall to the full

extent permitted by law not have, and to the

extent necessary shall agree to waive, any right,

arising as a matter of law or otherwise, to

recover any contribution or other amounts from the

State or any Entity owned by the State in its

capacity as a Right Holder that result from the

joint and several nature of the liability of the

Right Holders pursuant to the EPA, except that the

Right Holders shall be permitted to exercise

rights to recover a contribution from the State or

any such Entity to such liability that is

proportional to the State's or such Entity's

Participating Interest.



Art. 10 Assignment



10.1 Any Assignment made by a Right Holder

pursuant to Article 34 of the EPA, or in

connection with a Forced Assignment pursuant to

Article 36 of the EPA, will automatically give

rise to an Assignment of the Right Holder's

interest under the JOA. A new Right Holder taking

the Assignment shall, for the sake of good order,

sign an accession agreement relating to the JOA,

but pending the signature of such accession

agreement, the new Right Holder shall be deemed to

be bound by, and shall have the benefits of, the

JOA. In case of an Assignment to an existing Right

Holder, the rights and obligations of such Right

Holder shall automatically be deemed modified to

reflect its new Participating Interest, without

the need for the signature of any agreement.



10.2 The Right Holders may agree among themselves

on additional terms relating to Assignments

(including limitations on Assignments, pre-emptive

rights and similar provisions), so long as such

terms are consistent with the requirements of the

EPA, including in particular Article 34 of the

EPA.





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Art. 11 Relation of the Right Holders

The JOA may provide that it is not the intention of the Right Holders to create, nor shall the JOA be deemed or construed to create, a partnership, association or trust among the Right Holders, or as authorizing any Right Holder to act as an agent, servant or employee for any other Right Holder for any purpose whatsoever except as explicitly set forth in the JOA. Such provisions shall not affect the joint and several liability of the Right Holders provided for in the law no 132/2010 (OPR Law), the decree no 10289/2013 (PAR) and the EPA.





Art. 12 Dispute Resolution



Any dispute, controversy or claim arising out of or in relation to or in connection with the JOA or the operations carried out thereunder, including without limitation any dispute as to the validity, interpretation, enforceability or breach of the JOA, shall be settled by arbitration or other proceedings as agreed by the Right Holders. Costs relating to the settlement of any disputes among the Right Holders shall not be Recoverable Costs under the EPA.



Art. 13 Effective Date and Term

This Heads of Agreement shall come into force on the Effective Date and shall continue in effect until the definitive JOA is signed and approved by the Minister, at which time this Heads of Agreement shall be replaced and superseded by the definitive JO







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Art. 14 Joint Operating Agreement (JOA)

14.1 Within ninety (90) days from the Effective Date, the Right Holders shall submit to the Minister for approval a definitive JOA, which shall embody the principles stipulated in this Heads of Agreement, and which may include such other provisions as customarily used in accordance with Best International Petroleum Industry Standards. Upon approval by the Minister, the JOA shall come into effect. The JOA shall continue in effect as long as the EPA is in effect. Pending the signature of a definitive JOA, the terms of this Heads of JOA shall be binding upon the Right Holders.



14.2 The terms of the JOA shall not conflict with the provisions of the EPA and the provisions of applicable Lebanese law.



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Annex D



Accountine and Financial Procedure



This Annex is attached to and made part of the Exploration and Production Agreement dated 14 December 2017 concluded between the Republic of Lebanon and Total E&P Liban SAL, Eni Lebanon B.V. and NOVATEK Lebanon SAL.





1. General provisions



1.1. Purpose



The purpose of this Accounting and Financial Procedure is to determine the manner in which the Right Holder’s books and accounts shall be prepared and maintained, to establish the methods for determining charges and credits applicable to Petroleum Activities pursuant to the EPA, and to settle the Petroleum costs applicable to the entire EPA Block.





1.2. Definitions



(a) In addition to definitions stipulated in this Accounting and Financial Procedure, definitions stipulated in the law no 132/2010) (OPR Law) , the decree no 10289/2013(PAR) and the main body of the EPA apply to this Accounting and Financial Procedure.







(b) The following words and terms in the Accounting and Financial Procedure shall have the following meaning:



"Accrual Basis" means that basis of accounting under which costs and benefits regarded as applicable to





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the period in which the right to the benefit arises or revenues are earned, and the liability for the cost is incurred, regardless of when invoiced, paid, or received. Cost and expenses shall be deemed to have been incurred:



(i) with regard to physical items, in the accounting period where the Right Holder acquires title thereto, and





(ii) with regard to services, in the accounting period when the services are performed.





“Calendar year" means a period of twelve (12) consecutive Months according to the Gregorian calendar, commencing with the first (1st) day of January and ending with the thirty-first (31s‘) day of December.



“Calendar month" means any of the twelve (12) months of the Calendar year.





"Calendar day" means any of the seven

(7) days of the week.



“Excess Corporate Income Tax” means, for any Calendar year, the excess (if any) of the amount of Lebanese corporate income tax actually accrued in respect of such Calendar year with respect to net income earned by the Right Holders from Petroleum Activities, above the amount of Lebanese corporate income tax that would have accrued in respect of such Calendar year on net income earned by the Right Holders from Petroleum Activities according to the corporate income tax rate pursuant to Article 28.3 of the EPA. If any Right Holder conducts any trade or business unrelated to Petroleum Activities that is subject to corporate income tax in Lebanon, such other trade or business shall be disregarded for purposes of determining the Excess Corporate Inco







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"Joint Account" means the account or set of accounts maintained by the Operator to record Recoverable Costs and other amounts to be debited and credited thereto in accordance with this Accounting and Financial Procedure.



"Material" means machinery, equipment and supplies acquired and held for use in Petroleum Activities.





"Section" means a section of this Accounting and Financial Procedure.





1.3. Accounting records and statements

submitted by the Right Holders



(a) Within sixty(60) days of the Effective Date, the Operator shall submit to the Petroleum Administration a proposed outline of charts of accounts, operating records and reports, applicable to Petroleum Activities pursuant to the EPA, which shall be in accordance with applicable Lebanese law and generally accepted and recognised accounting principles used in the international Petroleum industry. Within sixty (60) days of receiving the above submission, the Petroleum Administration shall either approve or require revisions to the proposal. Following the approval, and within one hundred and twenty days (120) of the Effective Date, the Operator shall expeditiously prepare and provide all Right Holders and the Petroleum Administration with formal copies of the comprehensive charts of accounts related to the accounting, recording and reporting functions for the Right Holders to implement the charts of accounts, and in order allow the Petroleum







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Administration to examine the Right Holder’s manuals and to review procedures which are, and shall be, observed under the EPA.





The Right Holders shall also maintain a chart of accounts that complies with Lebanese tax regulations with respect to tax payments and tax returns preparation.



(b) Notwithstanding the generality of the foregoing, the Operator, on behalf of the Right Holders, is required to make regular statements to the Petroleum Administration relating to the Petroleum Activities performed pursuant to the EPA. These statements shall, as a minimum, include:



(i) Production Report (see Section

6.1 of this Annex);



(ii) Value of Production and Royalty Statement (see Section 6.2 of this Annex);



(iii) Cost Recovery Statement (see Section 6.3 of this Annex);



(iv) Statement of Expenditures and Receipts (see Section 6.4 of this Annex);



(v) Profit Petroleum Sharing Statement (see section 6.5 of this Annex);



(vi) Final End-of-Year Statement (see Section 6.6 of this Annex);



(vii) Budget Statement (see Section

6.7 of this Annex); and



(viii) Local Procurement Statement (see Section 6.8 of this Annex).







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(c) All reports and statements shall be prepared in accordance with the EPA, applicable Lebanese law and, where there are no relevant provisions in either of these, in accordance with generally accepted and recognised accounting principles used in the international Petroleum industry.





(d) Each Right Holder shall be responsible for preparing its own accounting and tax reports to meet the applicable requirements of the Republic of Lebanon and of all other countries to which the Right Holder may be subject. The operator, to the extent that the information is reasonably available from the Joint Account records, shall provide the Right Holders in a timely manner with the necessary information to facilitate the discharge of such responsibility.



(e) The operator shall at all times maintain and keep true and correct records of the Production and disposition of all liquid and gaseous Petroleum, and of all Recoverable Costs, as well as other Data necessary or proper for the settlement of accounts between the State and the Right Holders, between the Operator and Right Holders, and between Right Holders hereto in connection with their rights and obligations under the EPA. Such accounts and records shall also be maintained so as to enable the Right Holders to comply with their respective obligations under applicable Lebanese income tax and other laws.



(f) Accounting records pertaining to Petroleum Activities Operations shall be maintained in accordance with applicable Lebanese law and the EPA and, when required, generall accepted accounting







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practices used in the international Petroleum industry.





(g) The Accrual Basis for accounting shall be used in maintaining the Joint Account related to Petroleum Activities, except for the calculation of the Cumulative Cash Inflow for purposes of the computation of the R-Factor in Article 24 of the EPA.





1.4. Language and units of account



(a) Accounts shall be maintained in United States dollars, but may in addition be kept in such other currency as may be required under applicable Lebanese law.



(b) Metric units and Barrels shall be employed for measurements required under this Annex.



(c) The language employed shall be English and such other language as may be required under applicable Lebanese law. Where necessary for clarification, the Right Holder may also maintain accounts and records in other languages, units of measurement and currencies.





1.5. Currency exchange



Conversions of currencies into and from United States dollars shall be recorded at the rate actually experienced in the conversion. Unless otherwise agreed, currency translations to United States dollars equivalents for non-United States dollar expenditures accrued but not paid and receipts shall be recorded at the arithmetic average of the buying and selling exchange rates for conversions between United States dollars and the currency of expenditure/receipt at the close of the I ness day as published by





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the Lebanese Central Bank, or if not published, then by the Wall Street Journal or some other mutually agreed publication.



(b) Any realized or unrealized gains or losses from currency exchange related to Petroleum Activities shall be credited or charged to the Joint Account, except as otherwise specified in this Accounting and Financial Procedure. Any such exchange gains or losses shall be separately identified as such.



(c) A record of the exchange rates used in converting Lebanese Pounds or any other currencies into United States dollars shall be maintained.







1.6. Payments between Parties; Default interest rate



(a) Except as provided in this Section 1.6

(b) and (c), all payments between the Parties, unless otherwise agreed, shall be in United States dollars and through a bank designated by each receiving Party.







(b) Payment of any individually chargeable tax by the Right Holder shall be made in accordance with the provisions of the EPA and applicable Lebanese law.



(c) Discharge of the Right Holder’s obligation with respect to Royalty and the State’s share of Profit Petroleum shall be made in accordance with the EPA and applicable Lebanese law.



(d) All sums due by a Right Holder to the State or from the State to the Right Holder pursuant to the EPA or applicable Lebanese law during any Calendar onth shall, for each day







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such sums are overdue during such month, bear interest compounded on a monthly basis at a rate equivalent to the delay penalty paid on withholding tax, according to the Lebanese Tax Procedures Law.







1.7. State right to audits

(a Pursuant to applicable Lebanese law and upon giving the Right Holder thirty (30) Calendar days’ notice, the Petroleum Administration, either

or through its

representatives (including professional accounting firms appointed by the Petroleum Administration, provided that those firms are not directly or indirectly associated with the Right Holder under audit, in order to avoid any conflict of interest), shall have the right to audit the Right Holder's accounts and records maintained in connection with Petroleum Activities or otherwise pursuant to the EPA with respect to any Calendar year within four (4) years from the end of each such Calendar year. Notice of any objection to the Right Holder's accounts of any Calendar year must be submitted to the Right Holder within four (4) years from the end of such Calendar year, unless an audit is ongoing at that time, in which case the exception shall be submitted as soon as reasonably practical following such audit. For purposes of auditing, the Petroleum Administration may examine and verify at reasonable times all charges and credits relating to the Petroleum Activities such as books of account, accounting entries, Material, records, inventories, payroll, tenders, invoices and any other documents, correspondence and records necessary to audit and verify the charges and credits. Furthermore, the auditors shall have the right connection with such







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audit to visit and inspect, subject to reasonable notification, all sites, Facilities, warehouses and offices of the Right Holders related to the Petroleum Activities pursuant to the EPA, including visiting personnel associated with such Petroleum Activities.



(b) Without prejudice to the finality of matters as described in Section 1.7(a) above, all documents referred to in that Section shall be maintained and made available for inspection by the State for such a time as is prescribed by the EPA or applicable Lebanese law (whichever is longer).



(c) No later than one hundred and twenty (120) days after the end of each Calendar year, each Right Holder shall cause each of its Affiliates that provides goods or services in connection with Petroleum Activities to provide an audit certificate from an internationally recognized firm of auditors acceptable to the Petroleum Administration certifying that all amounts paid or payable to the Affiliate for such goods and services that are charged to the Joint Account in respect of such Calendar year are done so fully in compliance with this Accounting and Financial Procedure, or noting any exceptions (which shall be applied as an adjustment as soon as practicable after delivery of the audit certificate). Such audit certificate shall be conclusive in the absence of fraud, gross negligence or manifest error. The Right Holder shall also require its Affiliates to maintain documents relating to Petroleum Activities conducted pursuant to the EPA as if they were a Right Holder. In addition, each Right Holder shall be required to include in its contracts with Contractors audit certification and document maintenance







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provisions (with respect to which the State shall be a third party beneficiary) which allow the Petroleum Administration or its representatives to request an audit certificate from the Contractors and its Subcontractors as to compliance of charges with the terms of the relevant contract or subcontract, as applicable.



(d) The Right Holder shall reply in writing on exceptions raised in the audit report within ninety (90) days after receipt of the report. Where the Right Holder has, after the ninety

(90) days, failed to reply in writing on the audit report exceptions, the Right Holder shall be deemed to have agreed on the exceptions and the accounts shall be adjusted accordingly.



(e) All agreed adjustments resulting from an audit agreed between the State and the Right Holder shall be promptly made in the Right Holder’s accounts and any consequential adjustments to the State’s entitlement to Petroleum shall be made within thirty (30) days along with interest due for late payment under Section 1.6(d).





(f) If any dispute shall arise from the audit adjustments, either party may refer any dispute thereon to a sole expert as provided for in the EPA.







(g) Any information obtained under the provision of this Section 1.7 which does not relate directly to the Petroleum Activities shall be kept confidential by the State in accordance with Article 35 of the EPA or as is required by Lebanese law.









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(h) Audit costs shall be borne by the State.



(i) The Accounting and Financial Procedure is without prejudice to the rights of the State or any competent authority to audit Petroleum Activities as and when, including applicable time periods, provided by applicable Lebanese law.





2. Classification, definition and allocation of cost and expenditures



Costs and expenditures shall be segregated in accordance with the purpose for which such expenditures are made. For purposes of the EPA, all Exploration Costs and Development Costs are considered Capital Expenditures and all Operating Costs are considered Operating Expenditures. All expenditures relating to the Petroleum Activities shall, subject to applicable Lebanese law and the EPA, be classified, defined and allocated as follows:







2.1. Exploration Costs



“Exploration Costs” means all such direct and allocated indirect costs agreed, contracted or incurred after the Effective Date in the search for Petroleum in the EPA Block and Appraisal Activities conducted during the Exploration Phase, including:







(a) Aerial, geophysical, geochemical, paleontological, geological, topographical and seismic surveys and studies and their interpretation.







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(b) Core hole drilling and water well drilling as part of exploration operations.



(c) Labour, Materials and services used in drilling Wells with the object of finding new Reservoirs or for the purpose of appraising the extent of Reservoirs already discovered provided such Wells are not completed as Production Wells.



(d) Facilities used solely in support of Exploration together with purchased geological and geophysical information.



(e) Service Costs (as defined below) allocated to Exploration on a basis determined by the applicable Lebanese law or, in the absence of such basis, as agreed to between the Minister based on the opinion of the Petroleum Administration and the Operator on a systematic basis and, failing agreement, to be determined by a sole expert in accordance with the EPA.



(f) General and Administrative Expenses (as defined below) allocated to Exploration on a basis determined by applicable Lebanese law or, in absence of such basis, as agreed to between the Minister and the Operator, based on the opinion of the Petroleum Administration, on a systematic basis and, failing agreement, to be determined by a sole expert in accordance with the EPA.





2.2. Development Costs





“Development Costs” means all expenditures incurred in Development activities (recorded separately for each Development and Production Area), including:







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(a) Costs related to Appraisal Activities conducted during the Development Phase.



(b) Drilling Wells which are completed as Production Wells and Wells for purposes of Production from a Reservoir already discovered (regardless of whether these Wells are dry or producing).



(c) Completing Wells by way of installation of casing or equipment or otherwise (after a Well has been drilled for the purpose of bringing the Well into use as a Production Well).



(d) Intangible drilling costs such as labour, consumable Material and services having no salvage value which are incurred in drilling and deepening of Wells for Production purposes.



(e) Geological and geophysical information acquired in connection with Development operations.



(f) The costs of sites, Facilities, and appurtenant equipment used in Production pursuant to the EPA, including, but not limited to, flow lines, Production and treatment units, wellhead equipment, subsurface equipment, enhanced recovery systems, offshore platforms, Facilities for landing of Petroleum onshore (including the ultimate landing terminal), Facilities for final processing or treatment of Natural Gas (for the purpose of forwarding shipment as liquefied natural gas or compressed Natural Gas), Petroleum storage Facilities, export terminals and piers, harbours and related Facilities for Production activities







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(g) Engineering and design studies for Facilities.





(h) Service Costs allocated to Development activities on a basis determined by applicable Lebanese law or, in absence of such basis, as agreed to between the Minister based on the opinion of the Petroleum Administration and the Operator on a systematic basis and, failing agreement, to be determined by a sole expert in accordance with the EPA.



(i) General and Administrative Expenses allocated to Development activities on a basis determined by applicable Lebanese law or, in absence of such basis, as agreed to between the Minister, based on the opinion of the Petroleum Administration, and the Operator on a systematic basis and, failing agreement, to be determined by a so\e expert in accordance with the EPA.



2.3. Operating Costs



“Operating Costs” means all expenditures incurred in connection with Petroleum Activities after the start of the Commercial Production other than Development Costs, including:



(a) Operating, servicing, maintaining and repairing Wells for Production and all Facilities completed during Development and Production.



(b) Planning, producing, controlling, measuring and testing the flow of Petroleum and collecting, gathering, treating, storing and transporting the Petroleum from the Reservoir to the point of delivery as stipulated by the approved Development and Production Plan.





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(c) The decommissioning fund cost as described in section 2.6.



(d) The balance of General and Administrative Expenses and Service Costs not allocated to the Exploration Costs or Development Costs.





2.4. Service Costs



(a) “Service Costs” are direct and indirect expenditures in support of the Petroleum Activities, including for warehouses, offices, camps, piers, marine vessels, vehicles, motorised rolling equipment, aircraft, fire and security stations, workshops, water and sewage plants, power plants, housing, community and recreational facilities and furniture, tools and equipment used in these activities. Service costs in any Calendar year shall include the total costs incurred in such year to purchase and/or construct said facilities as well as the annual costs to maintain and operate the same. All Service Costs shall be regularly allocated as specified in Sections 2.1(e), 2.2(h) and 2.3 to Exploration Costs, Development Costs and Operating Costs.



(b) Service Costs incurred during the period commencing with the Effective Date and ending with the date of approval of the first Development and Production Plan and the approval of the Gas Infrastructure and Marketing Plan (in the case of a Natural Gas Discovery) by the Council of Ministers for a proposed Development and Production Area, shall be fully allocated to Exploration Cost.





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(c) Commencing with the date of approval of the first plan for Development and Production and the approval of the Gas Infrastructure and Marketing Plan (in the case of a Natural Gas Discovery) by the Council of Ministers for a proposed Development and Production Area, and if it becomes necessary to allocate Service Costs to or between Petroleum Activities pursuant to different exploration and production agreements, such allocation shall be made on an equitable basis in accordance with applicable Lebanese law or, in absence of such basis, as agreed to between the Minister, based on the opinion of the Petroleum Administration, and the Operator on a systematic basis and, failing agreement, the allocation to be determined by a sole expert in accordance with the EPA.



(d) The Right Holder shall furnish a description of its allocation procedures determined as set forth above pertaining to Service Costs, along with each proposed Development and Production Plan.





2.5. General and Administrative Expenses



“General and Administrative Expenses” means:



(a) All main office, field office and general administrative costs in the Republic of Lebanon incurred by Operator on behalf of the Right Holders, including but not limited to supervisory, accounting and employee relations services. If such main office, field office or other administrative functions are used for Petroleum Activities and for activities conducted under other exploration and production agreements or other activities





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outside the scope of the EPA, such costs shall be allocated on an equitable basis in accordance with applicable Lebanese law or, in absence of such basis, as agreed to between the Minister, based on the opinion of the Petroleum Administration, and the Operator and, failing agreement, the allocation shall be determined by a sole expert in accordance with the

EPA.



(b) An overhead charge for services rendered inside and outside the Republic of Lebanon by the Right Holders’ Affiliates for managing the Petroleum Activities and for staff advice and assistance including financial, legal, accounting and employee relations services. This charge shall be limited to one percent (1%) of all Exploration Costs, Development Costs, Operating Costs and Service Costs for each year (and not, for the avoidance of doubt, General and Administrative Expenses).



(c) All General and Administrative Expenses shall be regularly allocated as specified in Sections 2.1(f), 2.2(i) and 2.3 to Exploration Costs, Development Costs and Operating

Costs.



(d) General and Administrative Expenses incurred during the period commencing with the Effective Date and ending with the date of approval of the first plan for Development and Production and the approval of the Gas Infrastructure and Marketing Plan (in the case of a Natural Gas Oiscovery) by the Council of Ministers for a proposed Development and Production Area, shall be fully allocated to Exploration Cost.





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(e) Commencing with the date of approval of the first plan for Development and Production and the approval of the Gas Infrastructure and Marketing Plan (in the case of a Natural Gas Discovery) by the Council of Ministers for a proposed Development and Production Area, if it becomes necessary to allocate General and Administrative Expenses to or between Petroleum Activities pursuant to different exploration and production agreements, such allocation shall be made on an equitable basis in accordance with applicable Lebanese law, or, in absence of such basis, as agreed to between the Minister, based on the opinion of the Petroleum Administration, and the Operator and, failing agreement, the allocation shall be determined by a sole expert in accordance with the EPA.



(f) The Right Holder shall furnish a description of its allocation procedures pertaining to General and Administrative Expenses determined as set forth above, along with each proposed plan for Development and Production.



2.6. Decommissioning Fund



(a) For the purpose of costs related to the implementation of a plan for cessation of Petroleum Activities and decommissioning of Facilities, a Decommissioning Fund shall be established for each Development and Production Area as stipulated in the Law No 132/2010 (OPR Law), the Decree No 10289/2013 (PAR) and the EPA.







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(b) For every Quarter, commencing from the Quarter in which the first cost recoverable payment is made into the Decommissioning Fund, and for the remaining period in which Petroleum is produced from the Development and Production Area(s), Right Holders shall charge as Operating Costs the Quarterly amount to be paid to the Decommissioning Fund in accordance with the Law No 132/2010 (OPR Law), the Decree No 10289/2013 (PAR) and the EPA.



(c) The first payment into the Decommissioning Fund shall commence at the end of the Quarter during which fifty percent (50%) of the estimated recoverable reserve stated in the approved Development and Production Plan has been produced.



(d) Payment into the Decommissioning Fund with cost recovery effect may not commence before fifty percent (50%) of the estimated recoverable reserves stated in the approved Development and Production Plan is produced.



(e) The amount to be paid to the Decommissioning Fund for a Quarter shall be charged to the Joint Account as Operating Costs.





(f) The amount to be paid to the Decommissioning Fund for a Quarter shall be calculated on the basis of the estimated cost for the implementation of an approved plan (or, if there is not yet an approved definitive plan, the preliminary plan prepared pursuant to Article 18.3 of the EPA) for cessation of Petroleum Activities and decommissioning of Facilities, the Production for such Quarter and the remaining





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Petroleum reserves to be recovered

at the time of the first payment into the Decommissioning Fund subject to adjustments as described below. This shall be calculated in the following manner:



QD = (ECD X (QCPE/EPR)) - DSA



where:



QD is the amount of funds to be paid to the Decommissioning Fund in respect of the relevant Quarter;



ECO is the estimated total cost of

implementation of the approved plan (or preliminary plan) for cessation of Petroleum Activities and decommissioning of Facilities, as adjusted pursuant to the Law No 132/2010 (OPR Law), the Decree No 10289/2013 (PAR) and the EPA;



QCPE is the total cumulative Petroleum extracted from the time of the first payment into the Decommissioning Fund until the end of the relevant Quarter;



EPR is the estimated remaining Petroleum reserves to be recovered during the remaining life of the Reservoirs the relevant Development and Production Area(s) at the time of the first payment into the Decommissioning Fund as adjusted from time to time for any reserves arising from secondary recovery programmes or other changes; and



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DSA is the cumulative amount of moneys in the Decommissioning Fund following the payment in respect of the immediately preceding Quarter.



(g) The payment in respect of each Quarter shall be made within thirty (30) days of the end of such Quarter, and shall be subject to adjustment following the delivery of the relevant year-end statement pursuant to Section 6.6 of this Accounting and Financial Procedure.



3. Charges to the Joint Account



The Operator shall charge the Joint Account for all costs and expenditures incurred by the Operator for the conduct of Petroleum Activities within the limits of approved Work Programs and budgets or as otherwise specified by the EPA.



Charges for services normally provided by the Operator such as those contemplated which are provided by a Right Holder’s Affiliate shall reflect the cost to the Affiliate, excluding profit, for performing such services, except as otherwise provided in this Accounting and Financial Procedure.



The costs and expenditures shall be recorded as required for the settlement of accounts between the Right Holders hereto in connection with the rights and obligations pursuant to the EPA, and for purposes of complying with the tax laws of the Republic of Lebanon and of such other countries to which any of the Right Holders may be subject.



Costs and expenditures agreed, contracted or accrued subsequent to the Effective Date chargeable to the Joint Account include, but are not limited to, the following:





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3.1. Direct charges



Cost related to:





(a) Acquisition and maintenance of surface rights as described in Section 4.1(a).



(b) Labour as described in Section 4.1(b).



(c) Offices, warehouses, and miscellaneous infrastructure as described in Section 4.1(c).



(d) Transportation costs as described Section 4.1(d).



(e) Services as described in Section 4.1(e).



(f) Material as described in Section 4.1(f).



(g) Taxes and duties as described in Section

4.1(g).



(h) Environmental costs as described in Section 4.1(h).



(i) Insurance as described in Section 4.1(i).



(j) Damages and losses as described Section 4.1(i).



(k) Legal expenses as described in Section 4.1(j).



(l) Training expenses as described in Section 4.1(k).



(m) Communications expenses as described in Section 4.1(m).







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(n) Cessation and decommissioning as described under Section 4.1(n).



(o) Costs related to recovery of ancillary products as described in section 4.1(o).



(p) Other expenditures as described under section 4.1(p).



3.2. Indirect charges



(a) The Operator shall charge the Joint Account monthly for the cost of General and Administrative Expenses of the Operator and its Affiliates not otherwise provided in this Accounting and Financial Procedure. General and Administrative Expenses chargeable under this Section

3.2 represent the cost of general assistance and support services provided by the Operator or its Affiliates as described in Section 2.5 (a) and the charges described in Section 2.5 (b). These costs are such that it is not practical to identify or associate them with specific projects, but are for services which provide the Petroleum Activities with needed and necessary resources which Right Holders require and that provide a real benefit to Petroleum Activities. No cost or expenditure included under Section 3.1 shall be included or duplicated under this Section 3.2.





4. Costs, expenses, expenditures and credits of the Right Holder



4.1. Costs recoverable under the EPA



Subject to the provisions of applicable Lebanese law and the EPA, the Operator shall, subsequent to the Effective Date, charge to the Joint Account the following costs and expenses in respect of the





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Petroleum Activities pursuant to the EPA. Costs and expenses incurred in connection with Petroleum Activities shall be Recoverable Costs, and may be charged to the Joint Account, to the extent they are incurred in accordance with approved Exploration Plans, Appraisal Plans, Development and Production Plans, Work Programs and budgets, or otherwise pursuant to Article 13 of the EPA (in respect of allowances, continuation of operations and emergencies). These costs and expenses shall be classified under the headings referred to in Section 2, and shall constitute Recoverable Costs for purposes of the EPA without further approval of the State (subject to the audit and exception rights described above and the contracts approval conditions set in Article 27.2 of the EPA), and include the following:



(a) Surface Rights



All direct costs attributable to the acquisition, renewal or relinquishment of surface rights necessary in connection with the construction of onshore Facilities used in Petroleum Activities.



(b) Labour and associated labour costs, including:



(i) The salaries, wages and related costs of employees of Operator (including secondees from Affiliates of the Operator and other Right Holders) temporarily or permanently assigned in the Republic of Lebanon and directly engaged in Petroleum Activities;



(ii) The salaries, wages and related costs of employees of the Operator (including secondees from Affiliates of the Operator and other Right Holders) temporarily or permanently assigned outside the Republic of Lebanon directly engaged in





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Petroleum Activities, and not otherwise covered by Section 4.1(e);



(iii) Costs for salaries, wages and related costs for employees working full time on Petroleum Activities shall be fully chargeable to the Joint Account. Costs for salaries, wages and related costs for employees working part-time on Petroleum Activities shall be chargeable to the Joint Account on a pro rata basis, taking into account time spent by the relevant employees or such other method as may be approved by the Minister based on the opinion of the Petroleum Administration;



(iv) “Related costs” for purposes of the foregoing include:



a) holiday, vacation, sickness, severance (unless for dismissal of an employee without cause as determined by a court or arbitral body of competent jurisdiction), and disability, retirement ,work accidents compensation and survival payments applicable to the salaries and wages recoverable pursuant to the foregoing paragraphs. In respect of the severance, retirement, and survival payments mentioned above, the amount that shall be cost recoverable shall be in proportion of the total time the employee was directly engaged in the Petroleum Activities pursuant to the EPA on a full time equivalent basis to the employee's total tenure with the Right Holder and its Affiliates.







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b) social charges, or similar contributions made pursuant to assessments or obligations imposed under applicable law which are applicable to the Operator’s or Right Holder’s (as the case may be) cost of salaries and wages chargeable under the foregoing paragraphs;



c) Operator’s or Right Holder's (as the case may be) cost of established plans for employees' life insurance, hospitalisation, pensions, and other benefits of similar nature customarily granted to the Right Holder's employees and those of its Affiliates shall also be chargeable to the Joint Account; and



d) reasonable travel and personal expenses of employees of the Operator and the Right Holders including those made for travel and relocation of the expatriate employees and their immediate families assigned to Petroleum Activities in the Republic of Lebanon, all of which shall be in accordance with the Operator’s or Right Holder's (as the case may be) policies applied in similar projects.



(v) The Operator (on behalf of the Right Holders) shall also pay and may charge to the Joint Account reasonable expenses incurred by members and the State observers of the Management Committee in attending meetings of the Management Committee.





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(c) Offices

Cost of maintaining in Lebanon any offices and sub-offices, warehouses, operating bases and other infrastructure such as furniture, fixtures and supplies necessary for the operation of offices of the Operator located in Lebanon directly serving the Petroleum Activities. If such offices, sub-offices, warehouses, operating bases and other infrastructure serve activities in addition to the Petroleum Activities pursuant to the EPA, then costs shall be allocated on an equitable basis in accordance with applicable Lebanese law, or, in absence of such basis, as agreed to between the Minister, based on the opinion of the Petroleum Administration, and the Operator and, failing agreement, the allocation shall be determined by a sole expert in accordance with the EPA.



(d) Transportation costs

Transportation cost includes all cost of transportation of employees, equipment, Materials and supplies necessary for conducting the Petroleum Activities pursuant to the EPA.





(e) Charges for Services and use of Affiliate equipment and facilities.



(i) Third Party Contracts

The actual costs of contracts services, services of professional consultant, utilities and other necessary services to conduct Petroleum Activities entered into by the Operator and made with third parties are recoverable, provided that the charges paid under such contract by the Operator are not higher than those generally charged by other international or domestic third party suppliers for comparable





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work and services. In the case of contracts entered into with Affiliates of Right Holders, costs may only be chargeable to the Joint Account, and shall only be recoverable, to the extent the relevant contracts are approved pursuant to Article 27.2 of the EPA, and only to the extent set forth in (ii) below.



(ii) Affiliates of Right Holders



A. Professional and Administrative Services and Expenses



Cost of professional and administrative services provided by an Affiliate of a Right Holder for the direct benefit of Petroleum Activities pursuant to a service contract, including, but not limited to, services related to production, exploration, legal, financial, insurance, and accounting. Without prejudice to the charges to be made in accordance with Section 2.5, in the case of services rendered in the Petroleum Activities by an Affiliate of the Right Holder, the charges shall be based on actual costs. The charges shall be no higher than the most favourable prices charged by the Affiliate to third parties for comparable services under similar terms and conditions and no higher than the prices charged for comparable services currently by non-Affiliates. When required, certified evidence regarding the basis of prices charged by the Affiliate to third parties shall be obtained from the auditors of the Affiliate.



B. Scientific or Technical Personnel



Cost of scientific or technical personnel services provided by any Affiliate pursuant to a service for the direct



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benefit of the Petroleum Activities which shall be charged on a cost of service basis. Charges shall not exceed charges of comparable services currently

provided by outside technical service organization of comparable qualification.



C. Equipment and facilities



Use of equipment and facilities owned and furnished by the Affiliate, at rates commensurate with the cost of ownership and operation, provided that such rates shall not exceed those currently prevailing for the supply of similar equipment and facilities on comparable terms. The equipment and facilities referred to herein shall exclude major investment items such as, but not limited to, drilling rigs, producing platform, oil and gas loading and transportation, storage and terminal facilities and other major facilities. Upon the State request, the Operator shall furnish a list of rates and the basis of application.



(f) Materials



(i) General



So far as is practicable and consistent with applicable Lebanese law and Best International Petroleum Industry Standards, only such Material shall be purchased or furnished by the Operator on behalf of the Right Holders for use in the Petroleum Activities as may be required for use in the reasonably foreseeable future and to the extent that such purchase or supply are in accordance with the EPA (including without limitation Article 27 of the EPA).





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In case of defective Material or equipment, any adjustment received by the Operator from the suppliers or manufacturers or their agents shall be credited to the Joint Account under the EPA.



(ii) Value of Material charged to the accounts under the EPA



a) Except as otherwise provided in item b) below, Material purchased by the Operator for use in the Petroleum Activities shall be valued to include: invoice price less trade and cash discounts (if any), purchase and procurement fees plus freight and forwarding charges between point of supply and point of shipment, freight to port of destination, insurance, taxes, customs duties, consular fees, other items chargeable against imported Material and where applicable handling and transportation expenses from point of importation to warehouse or operating site or location, and its costs should not exceed those then currently prevailing in normal arms- length transactions on the open market.





b) Materials purchased from Affiliates of the Right Holders shall be charged at the prices specified in (1) and (2) hereof.



(1) New Material (condition "A") shall be valued at the current international price which should not exceed the price





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prevailing in normal arms-length transactions on the open market.



(2) Used Material (conditions "B" and "C") shall be valued as follows:



(i) Material which is in sound and serviceable condition and is suitable for reuse without reconditioning shall be classified as condition "B" and priced at seventy- five percent (75 %) of the current price of new Materials defined in (1) above (Condition A).



(ii) Material which cannot be classified as condition "B" but which after reconditioning will be further serviceable for original function as good second-hand Material condition "B", or which is serviceable for original function but substantially not suitable for reconditioning, shall be classified as condition "C" and priced at fifty percent (50%) of the current price of new Material as defined in (1) above (Condition A). The cost of reconditioning shall







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be charged to the reconditioned Material provided that the condition "C" Material value plus the cost of reconditioning does not exceed the value of condition "B" Material.



(iii) Material which cannot be classified as condition "B" or condition "C" shall be priced at a value commensurate with its use.



(iv) Material involving erection costs shall be charged at the applicable percentage, in accordance to its condition, of the current dismantled price of new Material as defined in (1) above (Condition A).



(v) When the use of Material is temporary and its service to the Petroleum Activities does not justify the reduction in price as provided for in (2)(ii) hereof, such Material shall be priced on a basis that will result in a net charge to the accounts under the EPA consistent with the value of the service rendered.







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(g) Taxes, duties and other assessments



All taxes, and all those levies, charges, fees, contributions and any other assessments and charges levied by the State, in connection with the Petroleum Activities, and paid directly or indirectly by the Right Holders including, for the avoidance of doubt, any Excess Corporate Income Tax, with the exception of the following:



(i) Taxes that are measured by or based upon the revenues, income and net worth of a Right Holder or physical person including but not limited to:



A. Corporate Income Tax (save for any Excess Corporate Income Tax);



B. Tax on capital gains;



Withholding tax on non-resident income;



D. Tax on dividends;



E. Tax on bank deposits returns;



F. Tax on movable capital; and



G. All taxes incurred by Right Holders on behalf of the tax payer including payroll tax wharre incurred by the Right Holders on behalf of the employee.



(ii) Fines and penalties imposed by any public authority in the Republic of Lebanon.



(h) Environmental costs by the Operator incurred with respect to the Petroleum Activities order to comply with











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applicable Lebanese law and Article 17 of the EPA.



(i) Insurance and losses



(i) Insurance premiums and costs incurred for insurance arranged in accordance with the EPA provided that if such insurance is wholly or partly placed with an Affiliate of the Operator or other Right Holder, such premiums and costs shall be recoverable only to the extent generally charged by competitive insurance companies other than an Affiliate of the Operator or other Right Holder. Costs and losses incurred as a consequence of events which are insurable, and in so far as not rectified by insurance obtained under the EPA through no fault of the Operator, are recoverable under the EPA.



(ii) All costs or expenditures necessary to replace or repair damages or losses incurred shall be recoverable. The Operator shall provide the Petroleum Administration written notice of damages or losses incurred in excess of one hundred thousand United States dollars (US$ 100,000) as soon as practical after report of the same has been received by the Operator. All losses in excess of fifty thousand United States dollars (US$50,000) shall be listed separately in the quarterly statement of costs and expenditures.



(iii) Expenditures incurred in the settlement of all losses, claims, damages, judgments, and other expenses for the account of Petroleum Activities shall be recoverable.





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(j) Legal expenses



All costs and expenses of litigation and legal or related services necessary or expedient for the procuring, perfecting, retention and protection of rights pursuant to the EPA , and in defending or prosecuting lawsuits involving the EPA Block or any third party claim arising out of Petroleum Activities pursuant to the EPA, or sums paid in respect of legal services necessary or expedient for the protection of Petroleum Rights pursuant to the EPA or joint interest of the State and the Right Holders, are recoverable. Such expenditures shall include attorney’s fees, court costs, cost of litigation, costs of investigation, and claims provided that such costs are not covered elsewhere in the Accounting and Financial Procedure. Where legal services are rendered in such matters by salaried or regularly retained lawyers of the Operator, an Affiliate of the Operator or other Right Holder, such compensation shall be included instead under Section 4.1(b) or 4.1(e) above, as applicable. Cost and expenses related to legal assistance for the purpose of challenging (or responding to a challenge of) cost recovery, Profit Petroleum split or Royalty shall not be cost recoverable.



(k) Training costs



All costs and expenses incurred by the Operator in training of its employees located in Lebanon and engaged in the Petroleum Activities pursuant to the EPA and such other training or institutional support as required under the EPA (including the contribution provided for in Article 20.3 of the EPA) or applicable





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Lebanese law including the recruitment costs of Lebanese citizens.



(l) General and Administrative Expenses



General and Administrative Expenses are the costs described in Section 2.5(a) and the charge described in Section 2.5(b).



(m) Communications



Cost of acquiring, leasing, installing, operating, repairing and mainlining communication systems including radio and microware facilities between the Block and the Operator’s nearest base facility.



(n) Decommissioning fund



Payments into the Decommissioning Fund and costs incurred for the preparation and implementation of a preliminary or definitive plan for cessation of Petroleum Activities and decommissioning of Facilities according to applicable Lebanese law, the Decree no 10289/2013 (PAR) and the EPA (and subject to the limitations contained therein) that are not covered by withdrawals from the Oecommissioning Fund.



(o) Costs related to recovery of ancillary

products



All costs borne by the Right Holders in respect of the recovery of ancillary products shall be recoverable costs pursuant to Article 19.4 of the EPA.



(p) Other expenditures



Any other legitimate expenditure, other than expendi es which are covered by





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the foregoing provisions of this section incurred for the performance of Petroleum Activities in accordance with approved Work Programs and budgets under the Agreement.



4.2. Priority of Recoverable Costs



Costs recoverable pursuant to applicable Lebanese law, the Decree no 10289/2013 (PAR) and the EPA shall be recovered in the following order of priority:



(a) Operating Costs pursuant to Section 2.3;



(b) Exploration Costs pursuant to Section 2.1; and



(c) Development Cost pursuant to Section 2.2;



4.3. Costs not recoverable under the

EPA



The following costs shall not be cost recoverable pursuant to the EPA:



(a) Petroleum marketing costs (except as otherwise contemplated in a Gas Infrastructure and Marketing Plan) and Transportation costs of Petroleum beyond the Delivery Point(s) as set forth in an approved Development and Production Plan;



(b) Costs of arbitration and the sole expert pursuant to the EPA;



(c) Royalty;



(d) Costs and expenditures incurred as a result of Gross Negligence or Willful Misconduct on the part of the Right Holders or the Operator, or their Affiliates;









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(e) Costs that are not adequately supported and documented;



(f) Costs and charges incurred before the Effective Date;



(g) Interest, or any charge or payment in the nature of, in lieu of, or having the commercial effect of interest related to the financing of Petroleum Activities;



(h) Any taxes measured by or based upon the revenues, income, gains, dividends and net worth of a Right Holder or physical person, wherever imposed (save for any Excess Corporate Income Tax);



(i) The Value Added Tax paid by the Right Holder except the non-deductible Value Added Tax and the tax which deduction is not approved by the tax authorities;



(j) Fines and penalties imposed by any public authority in the Republic of Lebanon or elsewhere;



(k) Commissions and arrangement fees and other costs relating to guarantees including the Work Commitment Guarantee and the Parent Company Guarantee;



(l) Donations and contributions made by the Right Holders; and



(m) Area fee.





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4.4. Recoverability and deductibility



The determination of whether the costs and expenses set forth herein are Recoverable Costs or not shall apply only to this EPA, and shall not be interpreted to preclude the Right Holder from deducting, or as providing the Right Holder with the right to deduct, said amounts in computing its net income from the Petroleum Activities for Corporate Income Tax purposes under applicable Lebanese law.





4.5. Credits under the EPA



The net proceeds of the following transactions pursuant to the EPA shall, subject to the applicable law, be credited to the Joint Account under the EPA:



(a) The net proceeds of any insurance or claim in connection with the Petroleum Activities or any assets charged as a Recoverable Cost under the EPA when such Petroleum Activities or assets were insured and the premiums charged as a Recoverable Cost under the EPA;



(b) Revenue received from third parties including Affiliated Companies for the use of, or Right Holders’ disposal of, Material, property or assets charged as a Recoverable Cost under the EPA;



(c) Any adjustment received by the Operator or any Right Holder from the suppliers or manufacturers, or their agents, in connection with defective Material the cost of which was previously charged by the Right Holders as a Recoverable Cost under the EPA;





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(d) Rentals, refunds or other credits received by the Operator or any Right Holder which apply to any charge which has been made as a Recoverable Cost under the EPA;



(e) Proceeds of interest received from bank accounts opened in connection with the Petroleum Activities under the EPA;



(f) The amounts received for inventory Materials charged to the Joint Account and subsequently exported from the Republic of Lebanon without having been used in the Petroleum Activities; and



(g) Legal expenses charged to the Joint Account under Section 4.1(j) and subsequently recovered by the Operator or any other Right Holder and payments obtained in resolution or settlement of losses, claims, damages, judgements and other expenses related to Petroleum Activities conducted pursuant to the EPA.



4.6. Duplication of charges and credits



Notwithstanding any provision to the contrary in this Accounting and Financial Procedure, there shall be no duplication of charges or credits in the accounts under the EPA.



5. Records and valuation of assets



The Operator shall, on behalf of the Right Holder, maintain detailed records of Facilities and other assets acquired and charged as Recoverable Costs pursuant to the EPA in use for the Petroleum Activities in accordance with the applicable Lebanese law and Best International Petroleum Industry Standards. The detailed recor s.shall include information





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on quantities, location and whether such assets are leased or owned.



At reasonable intervals, but at least once a year with respect to movable assets and once every five (5) years with respect to immovable assets, inventories of the property under the EPA shall be taken by the Operator. The Operator shall give the Petroleum Administration at least thirty (30) days written notice of its intention to take such inventory and the Petroleum Administration shall have the right to be represented when such inventory is taken. The Operator shall clearly state the principles upon which valuation of the inventory has been based.

When an Assignment of rights under the EPA takes place, a special inventory may be taken

by the Right Holder at the request of the assignee, provided that the costs of such inventory are borne by the Right Holder (for its own account, as a non-Recoverable Cost) or the assignee.



6. Statements and reports

6.1. Production Report



(a) Subsequent to the commencement of Commercial Production from the Block, the Operator, on behalf of the Right Holders, shall submit daily, monthly and annual reports on production (hereinafter referred to as the “Production Report”) to the Petroleum Administration for each Development and Production Area, pursuant to Article 50 of the Dcree No 10289/2013 (PAR) and the EPA.



(b) The Production Report of each Calendar month shall be submitted to the Petroleum Administration no later than fifteen (15) Calendar days after the end of such Calendar month.





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6.2. Value of Production and Royalty Statement



(a) The Operator, on behalf of the Right Holders, shall prepare with respect to each Calendar month a value of production and royalty statement (hereinafter referred to as the “Value of Production and Royalty Statement“) covering the determination of the value of Crude Oil and other Petroleum (determined in accordance with the Law No 132/2010 (OPR Law), the Decree No 10289/2013 (PAR) and the EPA) respectively, produced during each Calendar month and the value of Royalty payable (if taken in cash). This statement shall contain the following information:



(i) The quantities and prices realised by the Right Holder in each sale of Crude Oil and other Petroleum, respectively, other than to Affiliates, made during the Calendar month in question;



(ii) The quantities and the prices realised by the Right Holder in each sale of Crude Oil and other Petroleum, respectively, to Affiliates made during the Calendar month in question;



(iii) The quantity and location of stocks of Crude Oil, and if applicable other Petroleum, at the end of the preceding Calendar month;



(iv) The quantity and location of stocks of Crude Oil, and if applicable other Petroleum, at the end of the Calendar month in question;



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month and the detailed supporting calculation;



(vi) Published information available to the Right Holder, when requested by the Petroleum Administration, concerning the prices of relevant qualities of Crude Oil or other Petroleum produced by the main Petroleum producing and exporting countries, including contract prices, discounts and premia, and prices obtained in the spot markets for such qualities of Crude Oil and other Petroleum and for other relevant Petroleum products.



(b) The Value of Production and Royalty Statement of each Calendar month shall be submitted to the Petroleum Administration not later than thirty (30) Calendar days after the end of such Calendar month.



6.3. Cost Recovery Statement



(a) The Operator, on behalf of the Right Holders, shall prepare with respect to each Quarter a cost recovery statement (hereinafter referred to as the “Cost Recovery Statement“) containing the following information:



(i) Recoverable Costs carried forward from the previous Quarter, if any;



(ii) Recoverable Costs charged to the Joint Account for the Quarter in question;



(iii) Total Recoverable Costs for the Quarter in question (the sum of (i) and (ii));









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(iv) Quantity and value of Cost Petroleum taken proportionally in Crude Oil and other Petroleum for the Quarter in question;



(v) Credits for costs recovered for the Quarter in question;



(vi) Total cumulative Recoverable Costs recovered up to the end of the Quarter in question; and



(vii) Recoverable Costs to be carried forward into the next Quarter.



(b) The Cost Recovery Statement of each Quarter shall be submitted to the Petroleum Administration no later than thirty (30) Calendar days after the end of such Quarter.





6.4. Statement of Expenditure and Receipts



(a) The Operator, on behalf of the Right Holders, shall prepare with respect to each Quarter a statement of expenditures and receipts under the EPA (hereinafter referred to as the “Statement of Expenditure and Receipts“).



The Statement of Expenditure and Receipts shall distinguish between Exploration Costs, Development Costs and Operating Costs and cost related to cessation of Petroleum Activities and decommissioning of Facilities, including amounts drawn from the Decommissioning Fund, and shall identify major items of expenditures within these categories. The statement shall show the following:





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(i) Actual expenditures and receipts for the Quarter in

question;



(ii) Cumulative expenditure and receipts for the budget year in question;



(iii) Latest forecast cumulative expenditures at the year end; and



(iv) Variations between budget forecast and latest forecast and explanations thereof.



(b) The Statement of Expenditure and Receipts of each Quarter shall be submitted to the Petroleum Administration no later than thirty

(30) Calendar days after the end of such Quarter.





6.5. Profit Petroleum Sharing Statement





(a) The Operator, on behalf of the Right

Holders, shall prepare with respect !

to each Quarter a statement of profit

sharing (hereinafter referred to as the “Profit Petroleum Sharing Statement”). This statement shall contain the following information:



(i) The total amount of Profit Petroleum to be shared between the State and the Right Holder for the Quarter in question;



(ii) The amount of Profit Petroleum due to the State and to the Right Holders (collectively) for the Quarter in question; and



(iii) The details of R-Factor calculation for the Quarter in question and the R-Factor to be applicable to the following Quarter.







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(b) The Profit Petroleum Sharing Statement of each Quarter shall be submitted to the Petroleum Administration no later than thirty

(30) Calendar days after the end of such Quarter.





6.6. Final, End of Year Statement



The Operator, on behalf of the Right Holders, shall prepare a final end-of-year statement. The statement shall contain information as provided in the Production Report, Value of Production and Royalty Statement, Cost Recovery Statement and Statement of Expenditures and Receipts, Profit Petroleum Sharing Statement, but shall be based on actual quantities of Petroleum produced, and cost and expenses incurred. Based upon this statement, any adjustments that are necessary shall be made to the payments made by the Right Holder pursuant to the EPA. The final end-of-year statement of each Calendar year shall be submitted to the Petroleum Administration within ninety

(90) Calendar days of the end of such Calendar year.



Together with the end-of-year statement, the Operator shall submit to the Petroleum Administration an attestation of an auditor of international standing that is authorized to practice in Lebanon. This attestation shall state that the information in such end-of- year statement is in accordance with the requirements of the EPA, including this Accounting and Financial Procedure.





6.7. Budget Statement



The Operator shall, on behalf of the Right Holders and in accordance with Article 13.3 of the EPA, prepare an annual budget statement (hereinafter referred to as the “Budget Statement"). This shall distinguish between Exploration Costs, Development Costs and





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Operating Costs and shall show the following:



(i) Forecast expenditures and receipts for the budget year under the EPA;



(ii) Forecast cumulative expenditures and receipts to the end of the said budget year;



(iii) A schedule showing the most important individual items of forecast Exploration Costs and Development Costs for the said budget year; and



(iv) Decommissioning Fund statement, showing cumulative payments made into the Decommissioning Fund and the estimation of payments to be made the following year, and cumulative withdrawals from the Decommissioning Fund and withdrawals expected to be made during the following year.



(b) The Budget Statement shall be submitted to the Petroleum Administration with respect to each budget year on or before the date set forth in Article 13(3) of the EPA.





6.8. Local Procurement Statement



(a) The Operator, on behalf of the Right Holders, shall prepare a Local Procurement Statement that should include the following minimum information:



(i) The amount of expenditure incurred by the Right Holder directly or indirectly on goods/services originating in Lebanon;







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(ii) The percentage of the recorded local purchases (goods and services) represented in the total expenditures;



(iii) A comprehensive description of the procedures adopted to source and purchase local goods and services; and



(iv) A comprehensive variation analysis between the actual and budgeted local purchases.



(b) The Local Procurement Statement shall be submitted to the Petroleum Administration not later than ninety

(90) Calendar days after the end of each year.



7. Language and revision of the Accounting and Financial Procedure



This Accounting and Financial Procedure has been drafted in Arabic and English. However, in case of conflict, the Arabic original shall prevail.



The provisions of this Accounting and Financial Procedure may be amended only in accordance with the EPA.



8. Conflict with the EPA



In the event of any conflict between the provisions of this Accounting and Financial Procedure and the EPA main document, the provisions of the EPA main document shall prevail.





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Annex E





Form of Parent Company Guarantee



(Parent Company Guarantees issued by Right Holders are attached to this Agreement)





[To be presented on the guarantor’s corporate

stationery]

The Ministry of Energy and Water of the Republic of Lebanon

[Address]

[Date]



PARENT COMPANY GUARANTEE





1. In consideration of the Exploration and Production Agreement [dated [insert date]] or [to be entered into] for Block (the “EPA”), to which [insert name and company registration number of the Signing Affiliate] (the “Signing Affiliate”) is a Right Holder, we, a [corporate form] organized under the laws of [jurisdiction] with registered address at [address], being a Controlling Affiliate of the Signing Affiliate, hereby irrevocably and unconditionally undertake to make available or cause to be made available to the Signing Affiliate such financial resources as may be required to enable the Signing Affiliate to perform and fulfil its obligations in accordance with applicable Lebanese law and the terms of the EPA.



2. Definitions set forth in the EPA, to which this Parent Company Guarantee is an annex and an integral part, shall apply to this Parent Company Guarantee, unless otherwise defined herein or unless the context otherwise requires.



3. This Parent Company Guarantee shall be effective fr m the date hereof.



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4. We hereby irrevocably and unconditionally guarantee and undertake that, if any sums become due and payable by the Signing Affiliate in respect of any obligations owed to the State pursuant to applicable Lebanese law and the EPA (the “Guaranteed Obligations”) and the Signing Affiliate does not pay those sums payable by the Signing Affiliate, we shall ourselves pay to the State within five (5) days from the date of receipt of a request for payment under this Parent Company Guarantee an amount equal to all such sums. We will make any payments under this Parent Company Guarantee in full, without any deductions or withholdings whatsoever unless applicable law requires a deduction or withholding to be made. If a deduction is so required, we shall pay such additional amount as will ensure that the net amount the State or third party receives equals the full amount which it would have received had the deduction or withholding not been required. Notwithstanding the foregoing or anything else herein, this Parent Company Guarantee does not cover (and the Guaranteed Obligations do not include) amounts due pursuant to Article 8.2 or 8.3 of the EPA in the event of any failure by our Signing Affiliate to satisfy the Minimum Work Commitment under the EPA.



5. We agree that if any payments due from the Signing Affiliate and guaranteed hereunder are not recoverable from us as guarantor or surety for the Signing Affiliate for any reason whatsoever those payments shall nevertheless be recoverable from us as principal debtor and shall be payable by us within five (5) days from the date of receipt of a request for payment under this Parent Company Guarantee in accordance with the terms and conditions of this Parent Company Guarantee.



6. Any amounts due and payable under this Parent Company Guarantee shall carry interest compounded on a monthly basis





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equivalent to the delay penalty paid on withholding tax according to the Lebanese Tax Procedures Law, calculated from the date payment is due by the Signing Affiliate, up to and including the date of payment.



7. The State may claim under this Parent Company Guarantee after the Signing Affiliate has defaulted in respect of the Guaranteed Obligations. For the avoidance of doubt, the State may claim under this Parent Company Guarantee prior to taking any action to claim under or enforce any other right, security or guarantee which it may hold from time to time against the Signing Affiliate, subject to Article 8.4 of the EPA.



8. We have not received any security from the Signing Affiliate for giving this Parent Company Guarantee and we shall not take any security for our liability under this Parent Company Guarantee for so long as any sums may become payable with respect to the Guaranteed Obligations. If, in contravention of that undertaking, we take any security we shall hold the security and all or any amounts realized by us from it on trust for the State.



9. We also undertake not to dissolve or wind up the Signing Affiliate, or take any other course of action that would materially prejudice the ability of the Signing Affiliate to fulfil the Guaranteed Obligations.

10. We shall not take any steps to enforce any subrogation rights we may have against the Signing Affiliate or any co-guarantor in respect of any monies paid by us pursuant to this Parent Company Guarantee unless and until all of the Guaranteed Obligations have been performed and discharged in full.



11. This Parent Company Guarantee is a continuing guarantee and will remain in force until the Guaranteed Obligations have been discharged in full and shall terminate o e the statute of limitations







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under Lebanese law has expired with respect to the Guaranteed Obligations. Our liability under this Parent Company Guarantee will not be affected by:



a. any concession, time, indulgence or release granted by the State to the Signing Affiliate or any co-guarantor; or



b. the State’s failure to take, perfect or hold unimpaired any security taken for the liabilities of the Signing Affiliate,



which would, but for this paragraph, operate to discharge or reduce that liability.



After termination of this Parent Company Guarantee, the Minister shall, if requested by us and on behalf of the State, acknowledge in writing the termination of this Parent Company Guarantee.



12. We shall not assign rights and obligations under this Parent Company Guarantee without the prior written consent of the State.



13. This Parent Company Guarantee shall be in addition to any other guarantee for payment of any sums payable under the EPA by the Signing Affiliate signed by us that the State may hold.



14. This Parent Company Guarantee shall remain in full force and effect even if we or the Signing Affiliate have merged or amalgamated with another company or if we or the Signing Affiliate have changed our constitutional documents. If, pursuant to Article 34.2 of the EPA, the Signing Affiliate assigns its interest in the EPA to a Wholly-Owned Affiliate, this Parent Company Guarantee shall remain in full force and effect with all references to Signing Affiliate being deemed to refer to such Wholly-Owned Affiliate. The Parent Company Guarantee shall remain in full force and effect notwithstanding any amendment or extension to the EPA or any amendment to Lebanese law or regulation.







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15. Any demand or other communication to us concerning this Parent Company Guarantee may be sent to our registered address as indicated above.



16. For the avoidance of doubt, this Parent Company Guarantee shall be deemed a "caution solidaire” and not a “garantie à première demande” or a "caution simple”



17. This Parent Company Guarantee shall be governed by and construed in accordance with Lebanese law. We agree that the arbitration provisions ofthe EPA shall apply mutatis mutandis to any dispute that arises in connection with this Parent Company Guarantee. We irrevocably agree only to bring proceedings according to the arbitration provisions of the EPA. We agree in connection with arbitration proceedings that any writ, judgment or other notice of process shall be sufficiently and effectively served on us if delivered to: [insert address for service within Lebanon].



IN WITNESS WHEREOF, the Minister of Energy and Water herein representing the Republic of Lebanon and [insert name of parent company] have signed this Parent Company Guarantee in two (2) originals in each of the Arabic and English languages, as of the date first herein above stated.



Signed

....

PRINTNAME

.....

Company Director

for and on behalf of [insert name and registration number of the parent company]

Signed

.......

The Republic of Lebanon

By............

Minister of Energy and Water Date....................









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Annex F



Form of Work Commitment

Guarantee



(Bank-issued Work Commitment Guarantees are attached to this Agreement)





[Date]



The Republic of Lebanon,

Represented by its Minister of Energy and Water

[Address]



Work Commitment Guarantee



1. We understand that, on [insert date], the Republic of Lebanon (hereinafter referred to as the “State” or the “Beneficiary”), represented by the Minister of Energy and Water (the “Minister”), and [insert company name] (hereinafter referred to as the “Company”), entered into an Exploration and Production Agreement for Block in Lebanon, (the “EPA”).



2. We, the undersigned, SOCIETE GENERALE, a corporation with a capital of 1,009,641,917.50 Euros, registered under number 552 120 222 RCS Paris, with registered office located at 29, boulevard Hausmann 75009 Paris duly represented by , acting in its capacity as , with its International Guarantee Department located at Immeuble Cristallia 189, rue d’AuberviIliers, 75886 Paris Cedex 18 France, Attention of International Guarantee Department GTPS/GPS/OP, TRA/GAR, being the





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address where any claims must be received (hereinafter referred to as the “Bank”), hereby establish our Letter of guarantee (hereinafter referred to as the “Work Commitment Guarantee”) and unconditionally and irrevocably upon receipt of first demand, guarantee, in favor of the State punctual payment by the Company of the Initial Guaranteed Amount, as adjusted if applicable to the Adjusted Guaranteed Amount in the manner described herein. Any demand from the Beneficiary should specify all sums owed to the State by the Company in relation to the Company’s failure to fulfil the Minimum Work Commitment in relation to the First Exploration Period, up to a maximum aggregate amount of [............] Euros (EUR...)

(the “Initial Guaranteed Amount”).



3. “Minimum Work Commitment” means the activities or tasks which the Company is required to perform during the First Exploration Period pursuant to the EPA. “First Exploration Period” means a period of three years from approval by the State of the exploration plan for such period.



4. Following the end of each calendar year (Y) the Minister shall provide to the Company certificate (a “Certificate of Annual Adjustment”) as set out in Schedule 1. Upon receipt from the Company of a copy of the Certificate of Annual Adjustment, the Bank shall automatically update the guaranteed amount (the “Adjusted Guaranteed Amount”) for the current calendar year, provided that in no case shall the Adjusted Guaranteed Amount







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exceed 120% of the Initial Guaranteed Amount (the “Maximum Adjusted Guaranteed Amount”) i.e. [............] Euros (EUR ......). In the

event that the Certificate of Annual Adjustment shows an amount greater than the Maximum Adjusted Guaranteed Amount, the Adjusted Guaranteed Amount will be equal to the Maximum Adjusted Guaranteed Amount.



5. Any claim by the Beneficiary under this Work Commitment Guarantee will be honored within five (5) Banking Days, from the Bank’s receipt of a drawing certificate in the form attached as Schedule 2 to this Work Commitment Guarantee and delivered by the Minister (on behalf of the State) to the Bank by registered letter or any other express service or by hand delivery. In the event a drawing certificate is delivered by hand, the deliveryman shall sign the register held by the Bank acknowledging the delivery date, if so requested by the Bank.



For avoidance of doubt, Banking Day means a day (other than Saturday or Sunday) on which banks are open for general business in London, Moscow, Paris and Brussels and on which the Trans-European Automated Real Time Gross Settlement Express Transfer (known as TARGET2) System which was launched on 19 November 2007 (or any successor thereto) is operating.



6. This Work Commitment Guarantee shall become effective upon its signature and shall automatically terminate on the earlier to occur of:









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(a) the receipt by the Bank of the release from the Minister, on behalf of the State, of the Bank from its obligations hereunder;



(b) the close of Banking Day on the Final Termination Date.



The “Final Termination Date” shall be the first Banking Day that is three

(3) years and one hundred and eighty

(180) calendar days after the issuance of this Work Commitment Guarantee.



When terminated as specified above, this Work Commitment Guarantee shall become automatically null and void whether returned to the Bank or not, except that any drawing validly made hereunder prior to such expiration shall remain valid and shall be honoured in accordance with the terms hereof.



7. This Work Commitment Guarantee is subject to ICC Uniform Rules for Demand Guarantees in force, Publication 758 and shall be governed by and construed in accordance with applicable English law without regard to the conflict of law provisions thereof. We, the undersigned, agree that the courts of England and Wales shall have exclusive jurisdiction to settle any dispute or claim arising out of or in connection with this Work Commitment Guarantee or its subject matter or formation (including non- contractual disputes or claims).



8. Since English is the language used by



Arabic version of this Work Commitment Guarantee is provided for indicative purposes onl In case of a conflict



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between the two versions, the English version shall prevail.





The duly authorised representative of the Bank has executed this Work Commitment Guarantee on this the ......

Very truly yours, for and on behalf of SOCIETE GENERALE





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SCHEDULE 1—CERTIFICATE OF ANNUAL ADJUSTMENT



[To be presented on the letterhead of the Ministry of Energy and Water of the Republic of Lebanon]

[Date]



[The Company, name and address] (the

“Company”)



1. On [insert date], |insert the legal name of the bank] provided a guarantee in favour of the Republic of Lebanon, represented by its Minister of Energy and Water, in respect of certain obligations of the Company (the “Work Commitment Guarantee”).



2. The Minister, on behalf of the State, acknowledges and agrees that the [Initial] [current Adjusted] [second version to be used for the second year adjustment) Guaranteed Amount set forth in the Work Commitment Guarantee shall be replaced by the following adjusted amount: [. ] Euros (EUR ......) (the “Adjusted Guaranteed Amount”)



IN WITNESS WHEREOF, the undersigned being duly authorised to execute this certificate on behalf of the Republic of Lebanon has signed this certificate as of the date first herein above stated.



Signed



The Minister of Energy and Water,

on behalf of the Republic of Lebanon

By:





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SCHEDULE 2-FORM OF DRAWlNG

CERTIFICATE





[To be presented on the letterhead of the Ministry of Energy and Water of the Republic of Lebanon]

[Date]



SOCIETE GENERALE, International Guarantee Department located at Immeuble Cristallia 189, rue d’AuberviIliers, 75886 Paris Cedex 18 France, Attention of International Guarantee Department GTPS/GPS/OPE/TRA/GAR (the “Bank”)



1. On [insert date], SOCIETE GENERALE provided a guarantee in favour of the Republic of Lebanon, represented by its Minister of Energy and Water, in respect of the fulfilment of certain obligations of the Company (the “Work Commitment Guarantee”).



2. The Minister of Energy and Water, on behalf of the State, hereby certifies that:



a. the Minimum Work Commitment for the First Exploration Period has not been fulfilled at the end of the First Exploration Period;



b. the sums owed by the Company to the State in relation to the Company’s failure to fulfill the Minimum Work Commitment in relation to the First Exploration Period is [............J Euros (EUR ); and



c. the Company has been notified in writing by the State (a copy of such notice is attached) of the Company’s





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non-compliance with the Minimum Work Commitment and the details thereof, and has been advised that the State will make a drawing against the Work Commitment Guarantee.



3. Payment of the amount specified in sub-paragraph 2(b) of this certificate is to be made by the Bank to the

following account: [to be communicated by the Ministry in due course]



IN WITNESS WHEREOF, the undersigned being duly authorised to execute this certificate on behalf of the Republic of Lebanon has signed this certificate as of the date first herein above stated.



Signed



The Minister of Energy and Water, on behalf of the Republic of Lebanon

By:





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Annex F



Form of Work Commitment

Guarantee



[Date]



The Republic of Lebanon,

Represented by its Minister of Energy and

Water

[Address]



Work Commitment Guarantee



1. We understand that, on [insert date], the Republic of Lebanon (hereinafter referred to as the “State” or the “Beneficiary”), represented by the Minister of Energy and Water (the “Minister”), and [insert company name] (hereinafter referred to as the “Company”), entered into an Exploration and Production Agreement for Block in Lebanon, (the “EPA”).



2. We, the undersigned, AO Raiffeisenbank (hereinafter referred to as the “Bank”), a corporation with a capital of 1,907,676,632 Euros, registered under number 1027739326449, with registered office located at 17/1, Troitskaya street 129090 Moscow, Russia, duly represented by, acting in its capacity as, with Raiffeisen Banking Group Headquarters located at Am Stadtpark 9, A 1030 Wien, Austria, Attention of International Guarantee Department, being the address where any claims must be received , hereby establish our Letter of guarantee (hereinafter referred to as the “Work Commitment Guarantee”) and unconditionally and irrevocably upon





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receipt of first demand, guarantee, in favor of the State punctual payment by the Company of the Initial Guaranteed Amount, as adjusted if applicable to the Adjusted Guaranteed Amount in the manner described herein. Any demand from the Beneficiary should specify all sums owed to the State by the Company in relation to the Company’s failure to fulfil the Minimum Work Commitment in relation to the First Exploration Period, up to a maximum aggregate amount of [............] Euros (EUR ) (the “Initial Guaranteed Amount”).



3. “Minimum Work Commitment” means the activities or tasks which the Company is required to perform during the First Exploration Period pursuant to the EPA. “First Exploration Period” means a period of three years from approval by the State of the exploration plan for such period.



4. Following the end of each calendar year (Y) the Minister shall provide to the Company a certificate (a “Certificate of Annual Adjustment”) as set out in Schedule 1. Upon receipt from the Company of a copy of the Certificate of Annual Adjustment, the Bank shall automatically update the guaranteed amount (the “Adjusted Guaranteed Amount”) for the current calendar year, provided that in no case shall the Adjusted Guaranteed Amount exceed 120% of the Initial Guaranteed Amount (the “Maximum Adjusted Guaranteed Amount”) i.e. [............] Euros (EUR ......). In the event that the Certificate of Annual Adjustment shows an amount greater

than the Maximum Adjusted





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Guaranteed Amount, the Adjusted Guaranteed Amount will be equal to the Maximum Adjusted Guaranteed Amount.



5. Any claim by the Beneficiary under this Work Commitment Guarantee will be honored within five (S) Banking Days, from the receipt by the Bank’s parent entity in Vienna (i.e Raiffeisen Bank International AG) at the address set out under paragraph 2 above of a drawing certificate in the form attached as Schedule 2 to this Work Commitment Guarantee and delivered by the Minister (on behalf of the State) by registered letter or any other express service or by hand delivery. In the event a drawing certificate is delivered by hand, the deliveryman shall sign the register held by Raiffeisen Bank International AG acknowledging the delivery date, if so requested by Raiffeisen Bank International AG.



For avoidance of doubt, Banking Day means a day (other than Saturday or Sunday) on which banks are open for general business in London, Moscow, Paris and Brussels and on which the Trans-European Automated Real Time Gross Settlement Express Transfer (known as TARGET2) System which was launched on 19 November 2007 (or any successor thereto) is operating.



6. This Work Commitment Guarantee shall become effective upon its signature and shall automatically terminate on the earlier to occur of:



(a) the receipt by the Bank of the release from the Minister, on behalf of the State, of the Bank from its obligations hereunder;







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(b) the close of Banking Day on the Final Termination Date.



The “Final Termination Date” shall be the first Banking Day that is three

(3) years and one hundred and eighty

(180) calendar days after the issuance of this Work Commitment Guarantee.



When terminated as specified above, this Work Commitment Guarantee shall become automatically null and void whether returned to the Bank or not, except that any drawing validly made hereunder prior to such expiration shall remain valid and shall be honoured in accordance with the terms hereof.



7. This Work Commitment Guarantee is subject to ICC Uniform Rules for Demand Guarantees in force, Publication 758 and shall be governed by and construed in accordance with applicable English law without regard to the conflict of law provisions thereof. We, the undersigned, agree that the courts of England and Wales shall have exclusive jurisdiction to settle any dispute or claim arising out of or in connection with this Work Commitment Guarantee or its subject matter or formation (including non-contractual disputes or claims).



8. Since English is the language used by the Bank to issue this guarantee, the Arabic version of this Work Commitment Guarantee is provided for indicative purposes only. In case of a conflict between the two versions, the English version shall prevail.





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The duly authorised representative of the Bank has executed this Work Commitment Guarantee on this the...day of...

Very truly yours, for and on behalf of

AO Raiffeisenbank



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SCHEDULE 1 - CERTIFICATE OF ANNUAL ADJUSTMENT



[To be presented on the letterhead of the Ministry of Energy and Water of the Republic of Lebanon]

[Date]



[The Company, name and address] (the

“Company”)



1. On [insert date], [insert the legal name of the bank] provided a guarantee in favour of the Republic of Lebanon, represented by its Minister of Energy and Water, in respect of certain obligations of the Company (the ”Work Commitment Guarantee“).



2. The Minister, on behalf of the State, acknowledges and agrees that the [Initial] [current Adjusted] (second version to be used for the second year adjustment) Guaranteed Amount set forth in the Work Commitment Guarantee shall be replaced by the following adjusted amount: [....] Euros (EUR ......)(the “Adjusted Guaranteed Amount”)



IN WITNESS WHEREOF, the undersigned being duly authorised to execute this certificate on behalf of the Republic of Lebanon has signed this certificate as of the date first herein above stated.



Signed

The Minister of Energy and Water, on behalf of the Republic of Lebanon

By:....







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SCHEDULE 2 — FORM OF DRAWING CERTIFICATE



[To be presented on the letterhead of the Ministry of Energy and Water of the Republic of Lebanon]

[Date]



Raiffeisen Bank International AG, International Guarantee Department located at Am Stadtpark 9, A 1030 Wien, Austria, Attention of International Guarantee Department On [insert date], AO Raiffeisenbank, Moscow, Russia (the “Bank”) provided a guarantee in favour of the Republic of Lebanon, represented by its Minister of Energy and Water, in respect of the fulfilment of certain obligations of the Company (the “Work Commitment Guarantee”).



1. The Minister of Energy and Water, on behalf of the State, hereby certifies that:



a. the Minimum Work Commitment for the First Exploration Period has not been fulfilled at the end of the First Exploration Period;



b. the sums owed by the Company to the State in relation to the Company’s failure to fulfill the Minimum Work Commitment in relation to the First Exploration Period is [............] Euros (EUR . .. ); and



c. the Company has been notified in writing by the State (a copy of such notice is





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attached) of the Company’s non-compliance with the Minimum Work Commitment and the details thereof, and has been advised that the State will make a drawing against the Work Commitment Guarantee.



2. Payment of the amount specified in sub-paragraph 2(b) of this certificate is to be made by the Bank to the following account: [to be communicated by the Ministry in due course]



IN WITNESS WHEREOF, the

undersigned being duly authorised to execute this certificate on behalf of the Republic of Lebanon has signed this certificate as of the date first herein above stated.



Signed



The Minister of Energy and Water,

on behalf of the Republic of Lebanon By:





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[translation in arabic]



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ANNEX G



FORM OF STATEMENT OF CALCULATION OF ANNUAL ADJUSTMENT TO WORK

COMMITMENT GUARANTEE AMOUNT



1) First adjustment



List of Recoverable Costs paid during the relevant year N:



Recoverable Costs details | Amount (in USD)

X |

Y |

... | ...

Z |

Total Recoverable Cost Year N |



Days on which ECB USD/EUR rate is published | Daily rate of the European Central Bank as published at 4:00om CET on its website: www.ecb.europa.eu/stats/policy_and_exchange_rats/euro_reference_exchange_rates

1st December N | [.]

2nd December N | [.]

... | ...

31st December N | [.]

Applicable Exchange Rate USD/EUR N | Avarage



Note — if the ECB changes the website on which such rote is published, the successor website of the ECB shall be substituted for the above website.



WCG USD amount applicable for year N+1 and calculated at the end of year N (“WCG USD Amount Year N+1”) is defined as follows:



WCG USD Amount Year N+1 = WCG USD Amount Year N - Total Recoverable Costs Year N At the end of the first year, WCG USD Year N is equal to the Initial WCG USD Amount.



WCG EUR Amount applicable for year N+1 and calculated at the end of year N (“WCG EUR Amount Year N+1”) is then defined as follows:



WCG EUR Amount Year N+1 = WCG USD Amount Year N+1 x Applicable Exchange Rate USD/EUR N.





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