Dated October 11, 1996
(1) P.T. FREEPORT INDONESIA COMPANY
(2) P.T. RTZ-CRA INDONESIA
PARTICIPATION AGREEMENT
with respect to the Contract Area
TABLE OF CONTENTS
1. DEFINITIONS.............................................. 1
1.2 Interpretation............................. 11
1.3 Headings................................... 11
2. PURPOSES AND TERM........................................ 11
2.1 General.................................... 11
2.2 Purposes................................... 12
2.3 Assignment of COW.......................... 12
2.4 Term....................................... 13
2.5 Termination................................ 13
3. RELATIONSHIP OF THE PARTICIPANTS......................... 14
3.1 Contribution of Use of Assets.............. 14
3.2 Obligations Several and Not Joint.......... 14
3.3 Not a Partnership.......................... 14
3.4 No Authority to Act for other Participants. 15
3.5 No Joint Receipt of Income................. 15
3.6 Area of Mutual Interest.................... 15
3.7 Other Business Opportunities............... 17
3.8 Waiver of Right to Partition............... 17
3.9 Employees.................................. 17
3.10 Title...................................... 17
4. REPRESENTATIONS AND WARRANTIES........................... 18
4.1 Capacity................................... 18
4.2 PT-FI Representations and Warranties....... 18
4.3 Disclosures................................ 20
5. EXPLORATION CONTRIBUTIONS BY PARTICIPANTS................ 20
5.1 Exploration Contribution by PT-RTZ......... 20
5.2 Additional Cash Contributions.............. 20
6. INTERESTS OF PARTICIPANTS................................ 21
6.1 Participating Interests.................... 21
6.2 Changes in Participating Interests......... 21
6.3 Default in Making Contributions............ 22
6.4 Continuing Liabilities Upon Adjustment
of the Participating Interests........... 26
7. COVENANTS AND RIGHTS..................................... 27
7.1 Mutual Covenants........................... 27
7.2 PT-FI Covenants............................ 28
7.3 PT-RTZ Covenant............................ 30
7.4 Power of Attorney.......................... 30
7.5 Retained PT-FI Rights...................... 31
8. COMMITTEES............................................... 33
8.1 Exploration Committees..................... 33
8.2 Operating Committee........................ 33
8.3 Other Committees........................... 34
8.4 Quorum..................................... 34
8.5 Decisions.................................. 34
8.6 Meetings................................... 35
8.7 Action Without Meeting..................... 36
8.8 Close-down................................. 36
9. OPERATOR................................................. 37
9.1 Appointment................................ 37
9.2 Powers and Duties of Operator.............. 37
9.3 No Fee..................................... 41
9.4 Standard of Care........................... 41
9.5 Resignation; Deemed Offer to Resign........ 41
9.6 Transactions With Affiliates............... 43
10. FEASIBILITY STUDY INTO EXPANSION........................ 43
11. GREENFIELD PROJECTS AND LATER EXPANSION PROJECTS........ 45
12. SOLE RISK............................................... 46
13. PROGRAMMES AND BUDGETS.................................. 48
14. TAXATION IN INDONESIA................................... 48
15. TRANSFER OF PARTICIPATING INTERESTS .................... 49
15.1 General.................................... 49
15.2 Limitations on Free Transferability........ 49
15.3 First Offer Right.......................... 51
15.4 Exceptions to First Offer Right............ 51
16. GENERAL PROVISIONS...................................... 52
16.1 Notices.................................... 52
16.2 Waiver..................................... 53
16.3 Modification............................... 53
16.4 Force Majeure.............................. 54
16.5 Governing Law.............................. 55
16.6 Penalties.................................. 56
16.7 Rule Against Perpetuities.................. 57
16.8 Further Assurances......................... 57
16.9 Confidentiality and Public Statements...... 57
16.10 Entire Agreement; Successors and Assigns... 58
16.11 Severability............................... 59
16.12 Indonesian Law Waiver...................... 59
16.13 Tax Covenant............................... 59
SCHEDULE 1.................................................. 62
Privatisation Agreements.................................. 62
SCHEDULE 2.................................................. 65
Deed of Assignment of Interest in COW..................... 65
SCHEDULE 3.................................................. 69
Exceptions to Representations and Warranties............. 69
ANNEX A..................................................... 70
Product Schedule.......................................... 70
ANNEX B..................................................... 72
Financial and Accounting Procedures....................... 72
ATTACHMENT X................................................ 1
THIS AGREEMENT is made October 11, 1996
BETWEEN:
(1) P.T. FREEPORT INDONESIA COMPANY, a limited liability company
organised under the laws of the Republic of Indonesia and
domesticated in the State of Delaware, U.S.A. ("PT-FI") and
(2) P.T. RTZ-CRA INDONESIA, a company in formation under the laws of
the Republic of Indonesia ("PT-RTZ"),
WHEREAS
(A) By a Contract of Work dated 30 December 1991 made between The
Government of the Republic of Indonesia (the "Government") and
PT-FI, the Government appointed PT-FI as the sole contractor for
the Government with respect to the Contract Area, as defined in
the Contract of Work, with the sole rights to explore, mine,
process, store, transport, market, sell, and dispose of
Products, as defined below, in the Contract Area (defined as
aforesaid)
(B) PT-FI desires PT-RTZ and PT-RTZ desires to participate in
operations under the COW (as defined below) on the terms and
conditions hereinafter appearing
IT IS HEREBY AGREED as follows:
1. DEFINITIONS
1.1 In this Agreement (including the Schedules and
Annexes hereto), unless the context otherwise requires, the
following terms shall have the following meanings:
1.1.1 "Affiliate" or "Affiliates" of any
specified person means any such other person,
company, partnership, joint venture, or other form
of enterprise which directly or indirectly controls,
or is controlled by or is under common control with,
the specified person and, in the case of RTZ,
includes CRA Limited and the Affiliates of CRA
Limited. The term "control" as used herein means
possession, directly or indirectly, of the power to
direct or cause direction of management and policies
through ownership of voting securities, contract,
voting trust or otherwise;
1.1.2 "Agreement" means this Participation
Agreement, including all amendments and modifications
thereof, and all schedules and annexes hereto, which
are incorporated herein by this reference;
1.1.3 "Annual Budget Meeting" means the meeting
defined in Clause 8.6;
1.1.4 "Approved Expansion Project" means any
project of Expansion in Contract Area Block A which
has been approved by the boards of directors of PT-
FI, FCX and PT-RTZ or is otherwise an Approved
Expansion Project in accordance with Clause 10.3;
1.1.5 "Approved Programme and Budget" means a
Programme and Budget which has been approved by the
boards of directors of PT-FI and PT-RTZ upon the
recommendation of the relevant Exploration Committee
or the Operating Committee, as appropriate, as
provided in Clause 8.5 and paragraph 10.1 of the
Financial and Accounting Procedures;
1.1.6 "Area of Mutual Interest" has the meaning
assigned to that expression in Clause 3.6;
1.1.7 "Assignment" means the assignment
referred to in Clause 2.3;
1.1.8 "board of directors" of PT-FI or PT-RTZ
shall mean the respective board of directors and/or
board of commissioners (if any) of such entity and,
in the case of PT-RTZ during the period prior to
Completion of Formation, means the board of directors
and/or board of commissioners as constituted from
time to time pursuant to the Deed of Establishment of
PT-RTZ, whichever is the appropriate body (whether
pursuant to its constitutional documents or law) for
the decision or action in question;
1.1.9 "Budget" means a detailed estimate of all
costs to be incurred by the Participants with respect
to a Programme and an estimated schedule of cash
calls to be made therefor;
1.1.10 "Budgetary Period" means the budgetary
period established in a Programme and Budget;
1.1.11 "Chargeable Operations" has the meaning
assigned to that expression in the Financial and
Accounting Procedures;
1.1.12 "Close-down" means a decision by the
boards of directors of PT-FI, FCX and PT-RTZ, upon
the recommendation of the Operating Committee, to
cease all Mining and Processing in the Contract Area;
1.1.13 "Committee" means whichever committee
during the applicable time (be that the Exploration
Committee in respect of either ▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇
▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇ or the Operating Committee
or a committee established pursuant to Clause 8.3) is
responsible for the subject matter under this
Agreement as provided in Clause 8;
1.1.14 "Completion of Formation" has the meaning
assigned to that expression in the Early Closing
Agreement;
1.1.15 "Confidential Information" means the
confidential information referred to in Clause 16.9;
1.1.16 "Contract Area" means the area defined as
such under the COW;
1.1.17 "Contract Area Block" means, as
appropriate or as the context requires, either
▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇ ▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇;
1.1.18 "Contract Area Block A" has the meaning
assigned to that expression in the COW;
1.1.19 "Contract Area Block B" has the meaning
assigned to that expression in the COW;
1.1.20 "Cover Payment" means the payment
described in Clause 6.3.2.1;
1.1.21 "COW" means the Contract of Work referred
to in Recital (A) of this Agreement and includes any
other contract of work, whenever granted, for the
conduct of Exploration, Development or Mining in all
or any part of the Contract Area;
1.1.22 "Cut-off Date" means the last day of the
final Year covered in the Product Schedule, as the
same may be extended pursuant to Clause 16.4.2;
1.1.23 "Defaulting Participant" means the
Participant referred to in Clause 6.3;
1.1.24 "Development" has the meaning assigned to
that expression in the Financial and Accounting
Procedures;
1.1.25 "Dispose" means, in relation to any
relevant property, to sell, transfer, assign, declare
oneself a trustee of or part with the use or benefit
of or otherwise dispose of the relevant property (or
any interest therein);
1.1.26 "dollar" or "$" means a dollar being the
lawful currency of the United States of America;
1.1.27 "Early Closing Agreement" means the
agreement dated as of the date of this Agreement
between PT-FI, FCX, PT-RTZ, RTZ, RTZ Jersey
Investments One Limited, RTZ Jersey Nominees Limited,
First Trust Of New York, National Association, as
Trustee, The Chase Manhattan Bank (formerly Chemical
Bank), as Administrative Agent, JAA Security Agent
and Security Agent and The Chase Manhattan Bank (as
successor to The Chase Manhattan Bank (National
Association)), as Depositary and Documentary Agent;
1.1.28 "Effective Date" means the date of this
Agreement;
1.1.29 "Encumbrance" means any mortgage, pledge,
lien, charge, power of attorney, assignment for the
purpose of providing security, hypothecation,
security interest or trust arrangement for the
purpose of providing security and any other security
agreement or arrangement;
1.1.30 "Enterprise Operations" means all
operations within the Contract Area under the COW by
or on behalf of PT-FI or by or on behalf of PT-FI and
PT-RTZ, including the Mining of the 10-K Reserves and
Joint Operations, but excluding Sole Risk Ventures;
1.1.31 "Expansion" means a Development which is
designed to increase the productive capacity of
existing facilities (whether comprising PT-FI
Available Assets or Joint Account Assets and whether
Mining, milling and delivery facilities or related
infrastructure) for the obtaining of Products from
the aggregate resources in Contract Area Block A
(being both the 10-K Reserves and reserves other than
the 10-K Reserves) at an aggregate rate in excess of
the then existing production capacity of such
facility;
1.1.32 "Exploration" has the meaning assigned to
that expression in the Financial and Accounting
Procedures;
1.1.33 "Exploration Committee" means a committee
established under Clause 8.1;
1.1.34 "Exploration Costs" has the meaning
assigned to that expression in the Financial and
Accounting Procedures as the same may have been
amended or clarified with respect to specific costs
as set out in the Memorandum of Understanding
attached hereto and marked X and with such further
changes with respect to specific costs as shall from
time to time be approved in writing by the
Participants;
1.1.35 "Exploration Obligation" means the
obligation on the part of RTZ contained in Clause
6(1) of the Implementation Agreement as the same may
have been modified in the agreement of even date
herewith made between PT-FI, P.T. ▇▇▇▇ Eastern
Minerals Corporation, FCX, RTZ and PT-RTZ, a copy of
which is annexed hereto and marked X and with such
further changes as shall from time to time be
approved in writing by the Participants;
1.1.36 "FCX" means Freeport-McMoRan Copper &
Gold Inc., a Delaware corporation;
1.1.37 "Feasibility Study" means a report
showing the economic viability of a proposed
Development project, which may relate to Expansion,
and shall include (i) reasonable assessment of the
size and quality of the minable reserves of Minerals,
(ii) reasonable assessments of the amenability of the
Minerals to metallurgical treatment, (iii) reasonable
description of the work, equipment, supplies and
permitting, if any, required to bring the prospective
deposit of Minerals into commercial production and
the estimated costs thereof, (iv) conclusions
regarding the economic viability of bringing the
prospective deposit of Minerals into commercial
production, (v) an analysis of the impact which such
project will have on the existing Enterprise
Operations and Sole Risk Programmes and (vi) such
other information as may be appropriate to allow
banking and other financial institutions familiar
with the mining business to make a firm decision
whether or not to advance funds sufficient to finance
the Development in whole or in part;
1.1.38 "Financial and Accounting Procedures"
means the document so entitled, in the form attached
to this Agreement as Annex B;
1.1.39 "Government" means the Government of the
Republic of Indonesia;
1.1.40 "Greenfield Project" means a Development
project which does not rely to any significant extent
on PT-FI Available Assets, the 10-K Reserves or the
Joint Account Assets constituting part of any prior
approved project;
1.1.41 "Implementation Agreement" means the
agreement so designated between FCX and RTZ dated as
of 2 May 1995;
1.1.42 "Incremental Expansion Cashflow" has the
meaning assigned to that expression in the Financial
and Accounting Procedures;
1.1.43 "Incremental Expansion Revenues" has the
meaning assigned to that expression in the Financial
and Accounting Procedures;
1.1.44 "Incremental Production" has the meaning
assigned to that expression in the Financial and
Accounting Procedures;
1.1.45 "Joint Account Assets" means
(i) all Products (in whatever form)
derived from Joint Operations prior to their
being sold and
(ii) all other real and personal property,
tangible and intangible, which is acquired as a
joint asset of the Participants or as a result
or for the purpose of Joint Operations or the
funding thereof (other than any thereof which is
distributed to the Participants or either of
them pursuant to the provisions of this
Agreement);
1.1.46 "Joint Operations" means the conduct of
the following activities:
(i) Approved Expansion Projects;
(ii) Exploration in the Contract Area;
(iii) Development and Mining in Contract Area Block B
and, after the Cut-off Date, if there has,
before such Date, been a first Approved
Expansion Project, also in Contract Area Block A
and
(iv) any other activities in or in
relation to the Contract Area which the
Participants agree to conduct jointly under the
terms of this Agreement, including Joint
Operations Greenfield Projects,
but excluding Sole Risk Ventures;
1.1.47 "Liabilities" or "Liability" means any
and all claims, demands, investigations, judgements,
losses, liabilities, costs and expenses, including
reasonable attorneys' fees;
1.1.48 "LIBOR" means a rate of interest which is
equal to three month U.S dollar Libor as published in
the London Financial Times;
1.1.49 "Memorandum Equity Account" means an
account established for each Participant pursuant to
paragraph 2 of the Financial and Accounting
Procedures;
1.1.50 "Minerals" has the meaning assigned to
that expression in the COW;
1.1.51 "Mining" means the mining, extracting,
producing, handling, milling or other processing of
Minerals and the marketing and selling of Products
therefrom;
1.1.52 "Non-defaulting Participant" means a
Participant which is not the Defaulting Participant
as described in Clause 6.3;
1.1.53 "Operating Committee" means the committee
established under Clause 8.2;
1.1.54 "Operator" means the person or entity
appointed under Clause 9.1 or any successor Operator;
1.1.55 "Operator Replacement Agreement" means
the agreement dated as of the date of this Agreement
between PT-FI, PT-RTZ, First Trust of New York,
National Association, as trustee under the Trust
Agreement and the Operator Selection Representative;
1.1.56 "Participation" means the business
arrangement of the Participants under this Agreement;
1.1.57 "Participants" means PT-FI and PT-RTZ and
their respective successors and permitted assigns and
"Participant" means any one of them;
1.1.58 "Participating Interest" means, at any
time, with respect to ▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇ ▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇, the percentage interest then
applicable to each Participant with respect to such
Contract Area Block determined in accordance with
this Agreement (including the Financial and
Accounting Procedures), provided that, if such
expression is used with reference to assets, it shall
refer only to an interest in the Joint Account Assets
and Joint Operations, and if such expression is used
with reference to Products from Contract Area Block
A, to Sales Revenues from such Products or to
revenues from Contract Area Block A, it shall, until
the Cut-off Date, refer only to Incremental
Production, or, as the case may be, Incremental
Expansion Revenues;
1.1.59 "Privatisation Agreements" means the
agreements listed in Schedule 1 to this Agreement;
1.1.60 "Processing" has the meaning assigned to
that expression in the COW;
1.1.61 "Product Schedule" means the Product
Schedule annexed hereto as Annex A, setting out the
planned production of Products for each Year from
1995 to 2021 as the same may be amended pursuant to
Clause 16.4.2;
1.1.62 "Products" has the meaning assigned to
that expression in the COW;
1.1.63 "Programme" means a description in
reasonable detail of Joint Operations or Sole Risk
Ventures, as appropriate, to be conducted for a Year
or any longer period, which is prepared and approved
in accordance with paragraph 10.1 of the Financial
and Accounting Procedures;
1.1.64 "Proposing Participant" means the
Participant referred to in Clause 10.1;
1.1.65 "PT-FI Assets" means together
(i) the PT-FI Available Assets
(ii) the right, title and interest of PT-
FI in and under the COW and all authorisations
issued pursuant to the COW and
(iii) all other real and personal assets, tangible
and intangible, of PT-FI, including without
limitation, (A) cash, accounts receivable,
inventories and capital stock and indebtedness
of other corporations, including its interests
in the Gresik smelter and any assets in respect
of Sole Risk Ventures of PT-FI, but excluding
(B) all Joint Account Assets or interests
therein;
1.1.66 "PT-FI Available Assets" means together
(i) all real and personal property,
tangible and intangible, held by PT-FI from time
to time which are used or intended to be used
for Exploration, Development or Mining in the
Contract Area, including, without limitation,
▇▇▇▇▇ and infrastructure, but excluding
(A) property which is produced by or
acquired pursuant to (1) Approved Expansion
Projects or (2) Sole Risk Ventures of PT-RTZ
which is held in the name of PT-FI as
Operator
(B) items specified in (i) and
(iii)(A) of Clause 1.1.65 (the definition of
PT-FI Assets) and
(C) all Joint Account Assets or
interests therein
(ii) the right, title and interest of PT-
FI in and to the Privatisation Agreements and;
(iii) except for the purpose of the Financial and
Accounting Procedures, capital replacements
hereafter of physical property subject to
Privatisation Agreements or otherwise
constituting PT-FI Available Assets under (i) of
this Clause 1.1.66;
1.1.67 "PT-RTZ Assets" means together
(i) the interest of PT-RTZ in and under
the COW pursuant to the Assignment
(ii) any assets in respect of Sole Risk
Ventures of PT-RTZ and
(iii) all other real and personal assets, tangible
and intangible, of PT-RTZ, but excluding all
Joint Account Assets or interests therein;
1.1.68 "RTZ" means The RTZ Corporation PLC, an
English company;
1.1.69 "RTZ Loan" has the meaning assigned to
the expression "Loan" in the RTZ Loan Agreement;
1.1.70 "RTZ Loan Agreement" means the facility
agreement of even date herewith between PT-FI and RTZ
Indonesian Finance Limited ("RTZ Lender") whereby RTZ
Lender agrees to make available to PT-FI a facility
of up to $450,000,000 to fund one or more Approved
Expansion Projects;
1.1.71 "Sales Revenues" has the meaning assigned
to that expression in the Financial and Accounting
Procedures;
1.1.72 "Sharing Commencement Date" has the
meaning assigned to that expression in the Financial
and Accounting Procedures;
1.1.73 "Sole Risk Programme" has the meaning
assigned to it in Clause 10.3;
1.1.74 "Sole Risk Venture" means any activity
carried out by a Participant in the Contract Area on
its own account pursuant to Clauses 10 and 12;
1.1.75 "Specified Area" means the area referred
to as such in Clause 10.1;
1.1.76 "subsidiary" has the meaning assigned to
it in the Implementation Agreement;
1.1.77 "Taxes" means all present and future
income and other taxes, levies, imposts, duties,
charges, deductions and withholdings whatsoever
together with interest thereon and penalties with
respect thereto;
1.1.78 "10-K Reserves" means the proved and
probable ore reserves as at 31 December 1994 in
Contract Area Block A being 1,125.6 million tonnes at
an average grade of 1.30% copper, 1.42 grams of gold
per tonne and 4.06 grams of silver per tonne;
1.1.79 "Trust Agreement" means the amended and
restated trust agreement dated as of the date of this
Agreement between, among others, PT-FI, PT-RTZ, The
Chase Manhattan Bank (as successor to The Chase
Manhattan Bank (National Association)), as
Depositary, First Trust of New York, National
Association, as Trustee, and certain Secured
Creditors of PT-FI (as defined therein);
1.1.80 "Year" means a calendar year commencing
on 1 January.
1.2 Interpretation
In this Agreement
1.2.1 References to any document or agreement,
including the COW, includes such document or
agreement as amended, novated, substituted, varied,
supplemented or replaced from time to time.
1.2.2 References to any Act of Parliament,
code, decree, regulation or ordinance or to any
provision thereof include any modification or re-
enactment thereof or any provision substituted
therefor and all statutory or other instruments
issued thereunder.
1.2.3 References to a party to this Agreement
or any other document or agreement include such
party's successors or permitted assigns.
1.3 Headings
Headings to Clauses, sub-clauses, Schedules or
Annexes are for convenience only and shall not affect the
interpretation of this Agreement.
2. PURPOSES AND TERM
2.1 General
PT-FI and PT-RTZ hereby agree that all of their
rights and obligations as between themselves relating to
Joint Operations, Sole Risk Ventures and other operations
within the Contract Area shall be subject to and governed by
this Agreement.
2.2 Purposes
This Agreement is entered into for the following
purposes and for no others, and shall serve as the exclusive
means by which the Participants, or either of them,
accomplish such purposes:
2.2.1 to conduct Exploration within the
Contract Area, including the evaluation of
Development or Mining opportunities within the
Contract Area;
2.2.2 to engage in Development and Mining
within the Contract Area if so decided in the manner
provided in this Agreement;
2.2.3 to engage in the Disposal of Products
derived from Joint Operations;
2.2.4 to allocate costs of and revenues derived
from Joint Operations;
2.2.5 to regulate as between the parties the
conduct of Joint Operations and Sole Risk Ventures in
the Contract Area;
2.2.6 to regulate as between the parties to the
extent provided herein the conduct by PT-FI of its
activities in the Contract Area, other than in
respect of Joint Operations, using the PT-FI
Available Assets, the Joint Account Assets, and the
Participants' right, title and interest in and under
the COW and all authorisations issued pursuant to the
COW;
2.2.7 to regulate the procedures for making a
Close-down decision and for implementing that
decision; and
2.2.8 to perform any other operation or
activity necessary, appropriate or incidental to any
of the foregoing.
2.3 Assignment of COW
Simultaneously with signature of this Agreement, PT-
FI and PT-RTZ shall execute an assignment of interests in
the COW in the form set out in Schedule 2 to this Agreement
or in such other form as PT-RTZ may reasonably require
provided that such interests shall be reassigned by PT-RTZ
to PT-FI in the circumstances provided for in Clause 6(2) of
the Implementation Agreement.
2.4 Term
The term of this Agreement shall commence on the
Effective Date and shall continue until the occurrence of
any of the following events:
2.4.1 the termination of the COW and the
termination of all rights of the Participants to
conduct Exploration, Development and Mining in the
Contract Area and completion of a final accounting
between the Participants as provided in Clause 2.5.2;
or
2.4.2 the agreement by the Participants
permanently to cease Joint Operations and terminate
this Agreement and completion of a final accounting
between the Participants as provided in Clause 2.5.2;
or
2.4.3 the reduction of the Participating
Interest of one of the Participants in both ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇ ▇ ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇ to zero
(including a reduction pursuant to the operation of
the proviso to Clause 2.3); or
2.4.4 the Disposal of all Joint Account Assets
and the completion of a final accounting between the
Participants as provided in Clause 2.5.2; or
2.4.5 the bankruptcy, dissolution or withdrawal
of any Participant, unless all of the remaining
Participants agree to continue this Agreement, and
completion of a final accounting between the
Participants as provided in Clause 2.5.2.
2.5 Termination
Upon expiry of the term of this Agreement:
2.5.1 all unpaid Liabilities properly incurred
arising out of Joint Operations during the term of
this Agreement shall be paid by the Participants as
provided in this Agreement
2.5.2 the Operator shall take all action
necessary to wind up the activities of the
Participation, and all costs and expenses incurred in
connection with the termination of the Participation
shall be expenses chargeable to the Participants.
Where the term of this Agreement expires pursuant to
Clauses 2.4.1, 2.4.2, 2.4.4 or 2.4.5, the Joint
Account Assets shall be paid, applied, or distributed
in satisfaction of all Liabilities of the
Participation arising out of Joint Operations to
third parties. Thereafter, all other Joint Account
Assets shall be sold and the proceeds, together with
any remaining cash, shall be distributed to the
Participants in proportion to their Participating
Interests in Contract Area Block A or, as
appropriate, Contract Area Block B at the time of
such distribution, subject as provided in Clause 6.1
or the Financial and Accounting Procedures, after
first satisfying out of a Participant's share any
Liabilities owed by that Participant to the other
2.5.3 the Participants shall enter into such
other agreements and arrangements as may be necessary
or appropriate in the circumstances to regulate the
conduct of any Sole Risk Ventures in the Contract
Area which are to continue after expiry of the term
of this Agreement.
3. RELATIONSHIP OF THE PARTICIPANTS
3.1 Contribution of Use of Assets
3.1.1 PT-FI agrees to make available in
accordance with the terms of this Agreement the PT-FI
Available Assets, and each of PT-FI and PT-RTZ agrees
to make available in accordance with the terms of
this Agreement the Joint Account Assets, in each case
for the purposes of Enterprise Operations without
charge to the Participants except as otherwise
provided in this Agreement.
3.1.2 PT-FI and PT-RTZ agree that their
respective rights under the COW will be made
available to the Participants without charge for the
purposes of Joint Operations.
3.2 Obligations Several and Not Joint
The liability of the Participants shall be several
and not joint nor joint and several. Each Participant shall
be liable to the other only for its obligations as set out
in this Agreement.
3.3 Not a Partnership
Nothing contained in this Agreement shall be deemed
to constitute either Participant the partner of the other,
nor, except as otherwise herein expressly provided, to
constitute either Participant the agent or legal
representative of the other or to create any fiduciary
relationship between them.
3.4 No Authority to Act for other Participants
No Participant shall have any authority to act for or
to assume any obligation or responsibility on behalf of the
other Participant, except as otherwise expressly provided
herein. Each Participant shall indemnify, defend and hold
harmless the other Participant and its Affiliates
(including, without limitation, direct and indirect parent
companies), and its or their respective directors,
commissioners, officers, shareholders, employees, agents and
attorneys, from and against any Liabilities which may be
imposed upon, asserted against or incurred by any of them
and which arise out of or result from any act of or any
assumption of Liability by the indemnifying Participant, or
any of its directors, commissioners, officers, shareholders,
employees, agents, attorneys and Affiliates, done or
undertaken, or apparently done or undertaken, on behalf of
the other Participant, except pursuant to the authority
expressly granted herein or as otherwise agreed in writing
between the Participants.
3.5 No Joint Receipt of Income
The Participants acknowledge that it is not their
intention to receive income jointly as a result of the
Participation.
3.6 Area of Mutual Interest
3.6.1 General Any exploration permit, contract
of work, mineral lease, right or interest, including
an equity interest or option to acquire an equity
interest in an entity owning any of the foregoing,
including rights and interests which do not directly
involve Mining but which may be useful in connection
with the Joint Operations (collectively, "Mining
Rights") acquired during the term of this Agreement
by or on behalf of a Participant or an Affiliate of a
Participant (the "Acquirer") which is situated in the
province of Irian Jaya, Indonesia (the "Area of
Mutual Interest") shall be subject to the terms and
provisions of this Clause 3.6, except Mining Rights
acquired pursuant to an Approved Programme and Budget
or Sole Risk Ventures.
3.6.2 Notice Within 30 days after acquisition
of Mining Rights or the right to acquire any Mining
Rights wholly or partially within the Area of Mutual
Interest, the Participant being the Acquirer or an
Affiliate of the Acquirer ("Acquirer's Participant")
shall notify the other Participant of such
acquisition. The Acquirer's Participant's notice
shall describe in detail the acquisition, the Mining
Rights covered thereby and the cost thereof and the
Acquirer's Participant shall procure that there is
made available for inspection by the other
Participant any and all information available to the
Acquirer (subject to any confidentiality
restrictions) concerning the Mining Rights.
3.6.3 Option Exercised Within 30 days after
receiving the Acquirer's Participant's notice, the
other Participant shall elect, by notice to the
Acquirer's Participant, that an Affiliate of such
other Participant shall:
(a) accept an interest in the Mining
Rights equal to the other Participant's
Participating Interest at the date of this
Agreement; or
(b) not acquire an interest in the Mining
Rights.
If a Participant entitled to make an election under this
Clause 3.6.3 fails to give notice within the time
allotted, such failure shall be deemed an election by
such Participant not to accept an interest in the
Mining Rights and the Mining Rights shall not be
subject to the same terms, mutatis mutandis, as this
Agreement. If a Participant entitled to make an
election under this Clause 3.6.3 makes a timely
election to accept an interest in the Mining Rights,
the Acquirer's Participant shall procure that the
Acquirer shall, subject to all necessary Governmental
consents, convey to an Affiliate of the other
Participant nominated by the other Participant, by
appropriate instrument, an undivided interest in the
Mining Rights equal to such Participant's
Participating Interest at the date of this Agreement.
If such Participant has elected that an Affiliate
shall accept an interest in Mining Rights pursuant to
this Clause 3.6.3, the Mining Rights shall be held on
the same terms as this Agreement, mutatis mutandis to
those with respect to Contract Area Block B, unless
the Participants agree otherwise. The Participant
which is not the Acquirer's Participant shall procure
that its Affiliate acquiring the interest in the
Mining Rights shall promptly pay to the Acquirer its
proportionate share of the latter's actual out-of-
pocket acquisition costs.
3.7 Other Business Opportunities
Except as expressly provided in Clause 3.6, each
Participant shall have the right independently to engage in
and receive full benefits from business activities outside
the Contract Area, whether or not in competition with the
Enterprise Operations, without consulting the other.
Except as expressly provided in Clause 3.6, no Participant
shall have any obligation to the other under this Agreement
with respect to any opportunity to acquire any property
outside the Contract Area at any time, or within the
Contract Area after the termination of this Agreement.
Except as otherwise agreed by the Participants, whether in
this Agreement or subsequently, neither Participant shall
conduct any activity inside the Contract Area other than
Enterprise Operations, Sole Risk Ventures and activities
which do not adversely affect the carrying out of the
Enterprise Operations and any Sole Risk Ventures, without
the prior written approval of the other.
3.8 Waiver of Right to Partition
The Participants hereby waive and release all rights
of partition, or of sale in lieu thereof, or other division
of Joint Account Assets, including any rights provided by
law.
3.9 Employees
Employees of one Participant are not and shall not be
employees of the other Participant or of the Participation.
3.10 Title
All Joint Account Assets acquired by the Operator for
Joint Operations may be held in the name of PT-FI but,
subject to any mandatory provisions of applicable law, the
beneficial interest therein shall be for the benefit of PT-
FI and PT-RTZ severally in proportion to their respective
Participating Interests. Subject to any mandatory
provisions of applicable law, each of the Participants
agrees to execute appropriate documents to reflect any
changes in Participating Interests which may occur hereunder
from time to time and to execute, and register with the
appropriate Governmental authorities, the necessary
document(s) to effect the transfer of any property as
contemplated by this Agreement.
4. REPRESENTATIONS AND WARRANTIES
4.1 Capacity
Subject, in the case of PT-RTZ, to the matters stated
in Schedule 3, each of the parties represents, warrants and
undertakes to the other(s) as follows:
4.1.1 it is a company duly incorporated and in
good standing in its place of incorporation and that
it is qualified to do business and is in good
standing in those jurisdictions where necessary in
order to carry out the purposes of this Agreement;
4.1.2 it has the capacity to enter into and
perform its obligations under this Agreement and, in
the case of PT-FI, the Assignment and all
transactions contemplated herein or (as appropriate)
therein and that all corporate and, except as
mentioned in Schedule 3 to this Agreement, other
actions required to authorise it to enter into and
perform its obligations under this Agreement and, in
the case of PT-FI, the Assignment have been properly
and duly taken;
4.1.3 this Agreement constitutes, and, in the
case of PT-FI, the Assignment will constitute its
legal, valid and binding obligation, save as
enforcement may be limited by bankruptcy,
reorganisation, insolvency, moratorium or other laws
affecting the enforcement of creditors' rights
generally and subject to any limitations acts and to
general equitable principles;
4.1.4 the execution, delivery and performance
by it of this Agreement and, in the case of PT-FI,
the Assignment and the transactions implemented
hereunder or (as appropriate) thereunder do not and
will not contravene, conflict with or constitute a
default under (a) any law or regulation or any
official or judicial order, judgment, injunction or
decree applicable to it or (b) its constitutional
documents or (c) any agreement or document to which
it is a party or which is binding upon it or any of
its assets.
4.2 PT-FI Representations and Warranties
Subject to the matters stated in Schedule 3 and in
addition to the representations, warranties and undertakings
contained in Clause 4.1, PT-FI represents, warrants and
undertakes to PT-RTZ as follows:
4.2.1 the shareholders in PT-FI are FCX, as to
81.28%, the Government as to 9.36% and PT Indocopper
Investama Corporation as to 9.36%;
4.2.2 it has all authorisations, consents and
licences necessary to conduct its activities in the
Contract Area as presently conducted;
4.2.3 it is up to date on all payments,
filings, or other requirements in respect of the COW
and there are no existing or threatened actions,
suits, claims or proceedings in relation thereto, and
PT-FI has not received any notice of violation or
claim alleging any violation of any law, rule,
regulation, or permit, including without limitation
any environmental law, rule, regulation or permit, in
connection with the COW except any thereof where such
violation or claim would not, individually or in the
aggregate, have a material adverse effect on the
rights of PT-FI and PT-RTZ under the COW;
4.2.4 it has delivered to or made available to
PT-RTZ or its Affiliates all geological data and
other similar information in PT-FI's possession or
control derived from its activities in the Contract
Area which any person interested in acquiring a
Participating Interest in the Contract Area would
reasonably be expected to wish to see and all other
information or copies thereof reasonably requested by
them concerning the COW, its operations in the
Contract Area and the disposal of Products,
including, but not limited to, true and correct
copies of all contracts relating to the COW and the
Contract Area of which PT-FI has knowledge;
4.2.5 all activities by PT-FI under the COW up
to the date of this Agreement have in all material
respects been in accordance with the requirements of
the Government and Indonesian law and there has been
no breach by PT-FI of any of the provisions of the
COW or of any other agreement binding upon it the
breach of which might have a material adverse effect
on the ability of PT-FI to carry out the Enterprise
Operations;
4.2.6 there has been no material breach by the
Government of any of the provisions of the COW and
PT-FI has not received any indication from the
Government that the Government is seeking to re-
negotiate any of the terms of the COW;
4.2.7 to the best of PT-FI's knowledge, there
has been no material breach by any third party of any
material contract with PT-FI in relation to PT-FI's
activities under the COW or the sale of Products;
4.2.8 there are no material litigation,
arbitration or administrative proceedings or claims
currently in progress or, so far as PT-FI is aware,
pending or threatened against PT-FI or any of its
assets under the COW or any material contract to
which PT-FI is a party in relation to PT-FI's
activities under the COW or the sale of Products;
4.2.9 PT-FI is not a party to any agreement or
under any other obligation under or pursuant to which
it has created or given or permitted to subsist or is
obliged or bound to create or give or permit to
subsist in favour of any third party any Encumbrance
over PT-RTZ's share of the Joint Account Assets or
over any revenues allocated to PT-RTZ (or to which
PT-RTZ is entitled) under this Agreement;
4.2.10 PT-RTZ's interest in the COW pursuant to
the Assignment is not subject to any Encumbrance
created or given by PT-FI in favour of any third
party.
4.3 Disclosures
Each of the parties represents and warrants to the
other(s) that it is unaware of any facts or circumstances
which have not been disclosed in this Agreement and which
should have been disclosed to the other party in order to
prevent the representations and warranties given by it in
this Clause 4 from being materially misleading.
5. EXPLORATION CONTRIBUTIONS BY PARTICIPANTS
5.1 Exploration Contribution by PT-RTZ
PT-RTZ shall pay, in accordance with paragraph 10.3
of the Financial and Accounting Procedures, all Exploration
Costs approved by an Exploration Committee after the
Effective Date until the Exploration Obligation has been
satisfied, including the expenditure of not less than
$40,000,000 in respect of Contract Area Block A.
5.2 Additional Cash Contributions
After the Exploration Obligation has been satisfied,
the Participants shall contribute funds for Approved
Exploration Programmes and Budgets in proportion to their
respective Participating Interests, subject to their rights
to conduct Sole Risk Ventures.
6. INTERESTS OF PARTICIPANTS
6.1 Participating Interests
6.1.1 At the date of this Agreement, except as
otherwise provided in this Agreement (including the
Financial and Accounting Procedures), the
Participating Interests of the Participants in
Contract Area Block A and in Contract Area Block B
are:
PT-FI sixty per cent (60%)
PT-RTZ forty per cent (40%).
The Participating Interests of the
Participants shall not be changed except as provided
in this Agreement (including the Financial and
Accounting Procedures) and each Participant's
Participating Interest in Contract Area Block A may,
as provided in this Agreement and the Financial and
Accounting Procedures, be different from its
Participating Interest in Contract Area Block B.
6.1.2 There shall be allocated to the
Participants the revenues and shares thereof
calculated in accordance with the Financial and
Accounting Procedures.
6.1.3 All costs and liabilities incurred in or
attributable to Chargeable Operations in the Contract
Area shall be allocated to and borne by the
Participants in accordance with the Financial and
Accounting Procedures.
6.1.4 Participating Interests shall be
calculated to three decimal places and rounded to two
(e.g. 1.519% rounded to 1.52%). Decimals of .005 and
less shall be rounded down.
6.2 Changes in Participating Interests
A Participant's Participating Interest may be changed
as follows:-
6.2.1 in the event of default by a Participant
in making its agreed upon contribution to an Approved
Programme and Budget, followed by an election by the
other Participant to invoke Clause 6.3.2.3; or
6.2.2 transfer by a Participant of less than
all its Participating Interest in accordance with
Clause 15; or
6.2.3 acquisition of less than all of the
Participating Interest of the other Participant,
however arising.
In the event of a change in a Participant's
Participating Interest with respect to either Contract Area
Block A or Contract Area Block B, there will, subject to
obtaining any necessary Governmental approval, be a
corresponding and proportionate change in the Participant's
interest in the COW with respect to Contract Area Block A
(subject to PT-FI's rights with respect to the 10-K Reserves
and PT-FI Assets) or the COW with respect to Contract Area
Block B, as the case may be.
6.3 Default in Making Contributions
If a Participant defaults in its obligation to pay a
contribution or cash call properly payable or made under
this Agreement (including the Financial and Accounting
Procedures), (such Participant being a "Defaulting
Participant"),
6.3.1 All rights of the Defaulting Participant
to receive its proportionate share of the Incremental
Expansion Cashflow of Approved Expansion Projects, or
the revenues from Contract Area Block B, Joint
Operations Greenfield Projects in Contract Area Block
A or, as the case may be, in any Year after the Cut-
off Date, the revenues from Joint Operations, shall
be suspended until such time as the default has been
remedied and until such time, such proportionate
share shall go to the Non-Defaulting Participant(s),
who shall apply such share of the relevant revenues
or (as the case may be) Incremental Expansion
Cashflow first, to make any contribution or meet any
cash calls not made or met by the Defaulting
Participant or made or met on its behalf, and second,
to pay the indebtedness and unpaid and accrued
interest thereon then owing by the Defaulting
Participant to such Non-Defaulting Participant
pursuant to Clause 6.3.2. The right of a Defaulting
Participant to receive its proportionate share of the
relevant revenues or (as the case may be) the
Incremental Expansion Cashflow shall be reinstated at
the first time when such Participant is not in
default in its obligation to make a contribution or
meet a cash call and all indebtedness and interest
thereon arising out of the making by the Non-
Defaulting Participant of Cover Payments has been
paid in full.
6.3.2.1 The other Participant, by notice to the
Defaulting Participant, may at any time, but
shall not be obliged to, elect to make such
contribution or meet such cash call on behalf
of the Defaulting Participant (a "Cover
Payment"). If more than one Cover Payment is
made by the other Participant in relation to
the same Contract Area Block, such Cover
Payments shall be aggregated and the rights and
remedies described herein pertaining to an
individual Cover Payment shall be read to apply
to the aggregated Cover Payments.
6.3.2.2 Each Cover Payment shall constitute
indebtedness due from the Defaulting
Participant to the Non-Defaulting Participant,
which indebtedness, together with interest
(calculated from the date of the Cover Payment
at the rate specified in paragraph 10.3.3 of
the Financial and Accounting Procedures) shall
be payable upon demand.
6.3.2.3 If a Cover Payment shall have been made, upon
the giving of not less than 5 days' prior
notice to the Defaulting Participant, whether
or not payment thereof has been demanded under
Clause 6.3.2.2, the Non-Defaulting Participant
may, but shall not be obliged to, elect to
effect an adjustment of the Defaulting
Participant's Participating Interest in the
relevant Contract Area Block pursuant to this
Clause 6.3.2.3; provided, however, that if
within such 5 day period the Defaulting
Participant shall evidence to the reasonable
satisfaction of the Non-Defaulting Participant
that it will have the funds to, and will,
within 10 days of the expiry of such 5 day
period, pay the indebtedness constituted by the
Cover Payment together with interest accrued
thereon pursuant to Clause 6.3.2.2 owing by the
Defaulting Participant to the Non-Defaulting
Participant, then such adjustment of
Participating Interest may not be effected
until the end of such additional 10 day period.
If such election is made and such indebtedness
has not been paid, at the expiration of such 5
day period, or, if applicable, at the end of
such additional 10 day period, an amount equal
to 125% times the Cover Payment shall be
deducted from the Defaulting Participant's
relevant Memorandum Equity Account for the
relevant Contract Area Block and added to the
relevant Memorandum Equity Account for that
Contract Area Block of the Non-Defaulting
Participant and the Participating Interests of
the Participants shall be recalculated based on
the relevant adjusted Memorandum Equity
Accounts.
6.3.2.4 Notwithstanding anything to the contrary
contained in this Agreement, failure by PT-FI
to make a contribution or respond to a cash
call shall not constitute a default hereunder
or give rise to any adjustment of PT-FI's or
PT-RTZ's Memorandum Equity Account if such
failure occurs prior to the time an aggregate
sum of $750,000,000 has been spent on one or
more Approved Expansion Projects and is
attributable to the failure by PT-FI to receive
advances under the RTZ Loan Agreement.
6.3.3 If as a consequence of the adjustment of
a Defaulting Participant's relevant Memorandum Equity
Account under Clause 6.3.2.3 its recalculated
Participating Interest in Contract Area Block A or,
as the case may be, Contract Area Block B is less
than 10% (such adjustment being a "Forced Sale
Adjustment"), then
6.3.3.1 the Defaulting Participant shall be deemed to
have elected to withdraw from participation in
Joint Operations in Contract Area Block A or,
as the case may be, Contract Area Block B
6.3.3.2 the Defaulting Participant shall sell to the
Non-Defaulting Participant and the Non-
Defaulting Participant shall buy all of the
Defaulting Participant's Participating Interest
in Contract Area Block A or, as the case may
be, Contract Area Block B for a price equal to
the Fair Market Value of the Defaulting
Participant's Participating Interest in
Contract Area Block A or, as the case may be,
Contract Area Block B as at the date on which
its Participating Interest first reduces below
10%
6.3.3.3 completion of the sale and purchase under
Clause 6.3.3.2 shall take place within 90 days
after establishment of the Fair Market Value.
The Defaulting Participant shall be liable for
all costs and expenses of the sale and purchase
(other than the purchase price) and shall
indemnify the Non-Defaulting Participant
against all adverse tax consequences of the
sale and purchase
6.3.3.4 for the purposes of Clause 6.3.3.2, the Fair
Market Value of the Defaulting Participant's
Participating Interest in Contract Area Block A
or, as the case may be, Contract Area Block B
means the amount determined by the
Participants. Should the Participants be
unable within 30 days after a Forced Sale
Adjustment to agree as to the Fair Market Value
of the Defaulting Participant's Participating
Interest to be sold pursuant to Clause 6.3.3.2,
the Participants shall, within 10 days after
the expiration of such 30 day period, attempt
to select one reasonably acceptable,
internationally recognised independent
investment bank to determine the Fair Market
Value of the Defaulting Participant's
Participating Interest, which determination
shall be binding on all Participants. Should
the Participants be unable to agree upon a
mutually acceptable investment bank within such
10 day period, each of the Participants shall
have 10 additional days to select one
internationally recognised investment bank to
determine the Fair Market Value of the
Defaulting Participant's Participating
Interest. Each such investment bank or, in
default of selection by either Participant, the
sole investment bank so selected shall, within
30 days of being requested to do so, determine
the Fair Market Value of the Defaulting
Participant's Participating Interest provided
however that, where two such investment banks
are so selected, the Fair Market Value of such
interest shall be the average of their
respective determinations if and only if the
lower of the two determinations is at least 90%
of the higher of the two determinations. If it
is not, then such two investment banks shall
select a third internationally recognised
investment bank to determine the Fair Market
Value of the Defaulting Participant's
Participating Interest, and the Fair Market
Value of such interest (i) shall be such third
determination if such third determination is a
figure between the two previous determinations;
(ii) shall be the lower of the two previous
determinations if the third determination is
lower than both the two previous
determinations; and (iii) shall be the higher
of the two previous determinations if the third
determination is higher than both the two
previous determinations. The Participants
shall each pay 50% of the costs of the services
and expenses of the investment bank(s)
6.3.3.5 upon completion of the sale and purchase
under Clause 6.3.3.2 the Defaulting Participant
shall cease to conduct any activities in
Contract Area Block A or, as the case may be,
Contract Area Block B (other than then existing
Sole Risk Ventures and other than, in the case
of PT-FI, PT-FI's rights with respect to the
10-K Reserves and any retained rights referred
to in Clause 7.5) and shall surrender to the
Non-Defaulting Participant the right to conduct
all such activities
6.3.3.6 each of the Participants appoints the other
its attorney, such appointment becoming
effective upon its becoming a Defaulting
Participant, with power in its name or
otherwise to do all such things and sign or
execute all such deeds or documents as may be
necessary or desirable to complete any of the
transactions referred to in this Clause 6.3.3,
and (without limitation) for that purpose to
appear in the name of the Defaulting
Participant before any notary or other
Government official in Indonesia; provided that
such power of attorney shall not be deemed to
apply to each Participant's rights under Clause
6.3.3.4.
6.4 Continuing Liabilities Upon Adjustment of the
Participating Interests
Any reduction of a Participant's Participating
Interest under this Clause 6 shall not relieve such
Participant of its share of any Liability, whether it
accrues before or after such reduction, arising out of Joint
Operations in Contract Area Block A or, as the case may be,
Contract Area Block B conducted after the Effective Date and
prior to such reduction. For purposes of this Clause 6,
such Participant's share of such Liability shall, subject to
Clause 6.1 and the Financial and Accounting Procedures, be
equal to its Participating Interest in the relevant Contract
Area Block at the time such Liability was incurred. The
increased Participating Interest accruing to a Participant
as a result of the reduction of the other Participant's
Participating Interest shall be free from Encumbrances
arising by, through or under such other Participant, except
those to which both Participants have given their written
consent or are otherwise subject (including, without
limitation, royalties payable under the COW). Each
Participant's Participating Interest shall be shown in the
books of the Operator.
7. COVENANTS AND RIGHTS
7.1 Mutual Covenants
Each of the Participants covenants and agrees with
the other that:
7.1.1 it will give prompt notice to the other
Participant of any notice of default, lawsuit,
proceeding, action or damage of which it becomes
aware and which might affect the Joint Account
Assets, the Contract Area or the COW
7.1.2 it will only conduct operations within or
relating to the Contract Area in accordance with the
provisions of the COW and this Agreement and, without
prejudice to the foregoing, not at any time do or
cause or permit to be done any act or omission which
results or might result in a breach of the provisions
of the COW, this Agreement or any other agreement
binding upon it a breach of which might have a
material adverse effect on Joint Operations.
7.1.3 to the extent required by any law, rule,
regulation, decree, consent, contractual arrangement
or otherwise by any Indonesian Governmental Agency,
there shall be no sale or other transfer of any
interest in the Contract of Work by PT-FI or PT-RTZ
without the prior consent of the Ministry of Mines
and Energy of the Republic of Indonesia.
7.2 PT-FI Covenants
PT-FI covenants and agrees with PT-RTZ that it will:
7.2.1 At all times comply with and perform all
its obligations under the Privatisation Agreements
and exercise its rights under the Privatisation
Agreements in consultation with PT-RTZ and in a
manner which does not adversely affect the carrying
out of the Joint Operations and will not enter into
any other agreements in the nature of Privatisation
Agreements (other than as listed in Schedule 1)
except in consultation with PT-RTZ;
7.2.2 Prepare its annual financial statements
in accordance with accounting principles generally
accepted in the U.S.A. except as otherwise stated
therein and based on accounting policies consistently
applied in all respects except as otherwise stated
therein and at the time of the issue thereof send to
PT-RTZ copies of the same;
7.2.3 As and when required by PT-RTZ furnish to
PT-RTZ promptly such financial or other information,
data or maps relating to the Contract Area and the
Enterprise Operations therein and thereon as PT-RTZ
may from time to time require;
7.2.4 Furnish to PT-RTZ a copy of each material
return and report (and each other return and report
requested specifically by PT-RTZ) submitted to the
Government under the COW and, with respect to major
returns and reports (as determined from time to time
by the Participants), do so within a reasonable time
before the latest day for such submission to permit
time for review by PT-RTZ provided that tax returns
shall not be included in this sub-Clause 7.2.4;
7.2.5 Not, without the prior written consent of
PT-RTZ, create or permit to exist any Encumbrance on
or Dispose, except in the ordinary course of
business, of the whole or any part of the PT-FI
Available Assets or its right, title and interest in
and under the COW or any authorisations issued
pursuant to the COW or the Joint Account Assets,
other than, with respect to Dispositions, sales
otherwise permitted by this Agreement and, with
respect to Encumbrances, (i) the security in favour
of RTZ Lender referred to in the RTZ Loan Agreement,
(ii) Encumbrances in favour of the existing bank
lenders to PT-FI or the lenders under any replacement
or refinancing thereof, (iii) Encumbrances in favour
of lenders on PT-FI Available Assets or on PT-FI's
share of the Joint Account Assets or, with PT-RTZ's
consent, on all of the Joint Account Assets, (iv)
Encumbrances on replacements of assets under
Privatisation Agreements and (v) Encumbrances on
replacements of PT-FI Available Assets provided that
the lenders holding Encumbrances referred to in (ii)
and (iii) above shall have executed documents
recognising PT-RTZ's rights to the same extent as
have PT-FI's existing bank lenders in connection with
this Agreement;
7.2.6 Do and cause to be done all things
necessary to preserve and keep in full force and
effect its rights and authorisations with respect to
the COW and the Contract Area, at all times comply
with and cause to be complied with all applicable
laws, the violation of which would be materially
adverse to the Enterprise Operations and obtain and
maintain in full force and effect all authorisations,
approvals, consents, licences and exemptions with
respect to the COW and the Contract Area, in each
case where the failure to obtain or maintain which
would be materially adverse to Enterprise Operations,
promptly effect all filings, registrations and
notarisations and promptly comply with all other
requirements in any such case which may at any time
be required with respect to or under this Agreement,
the COW and Enterprise Operations, and the continued
due performance of its obligations hereunder or
thereunder or the validity or enforceability of this
Agreement and the COW, and PT-RTZ shall provide to
PT-FI all such information in relation to PT-RTZ's
participation in Joint Operations as PT-FI may
reasonably require and which is not otherwise
available to PT-FI in order to enable PT-FI to
fulfill its obligations under this Clause 7.2.6;
7.2.7 Notify PT-RTZ immediately upon becoming
aware of the actual or threatened revocation or
variation of any such authorisation as is referred to
in Clause 7.2.6;
7.2.8 Without the prior written consent of PT-
RTZ, not agree to any waiver or amendment of the
terms of the COW which would have a material adverse
effect on PT-RTZ's Participating Interest;
7.2.9 Not take any action, including actions
using the PT-FI Available Assets, which would
prejudice either the institution, completion or
operation of any first Approved Expansion Project as
described in Clause 10.5 and any projects of
Expansion thereafter or any activity of PT-FI
authorised hereunder;
7.2.10 Make available the PT-FI Available Assets
and its right, title and interest in and under the
COW and all authorisations issued pursuant to the COW
for their use in Joint Operations on a first priority
basis with respect to any PT-FI Available Assets
which are not, at the time, being employed with
respect to activities permitted by Clause 7.5, and on
a shared basis that reflects equitably the needs of
the parties with respect to other PT-FI Available
Assets;
7.2.11 Without prejudice to any other provisions
of this Agreement, not take any action or permit any
action to be taken which will affect materially and
adversely PT-RTZ's Participating Interest but PT-FI
shall not be deemed to be in breach of this Clause
merely because it exercises any right contained in
Clauses 6.3 and 15 of this Agreement.
7.3 PT-RTZ Covenant
PT-RTZ covenants and agrees with PT-FI that, without
the prior written consent of PT-FI, it will not create or
permit to exist any Encumbrance on or Dispose, except in the
ordinary course of business, of the whole or any part of the
interests assigned in the Assignment or the Joint Account
Assets, or violate any applicable law if the effect thereof
would be materially adverse to the Enterprise Operations
provided that PT-RTZ may create Encumbrances in favour of
project lenders on PT-RTZ's share of the Joint Account
Assets or, with PT-FI's consent, on all of the Joint Account
Assets.
7.4 Power of Attorney
Each of the Participants hereby appoints the other
Participant its attorney in its name or otherwise to do all
such things and sign or execute all such deeds or documents
as may be necessary or desirable to cure any and each
default by that Participant under the COW or, in the case of
PT-RTZ, its assigned interest in the COW and (without
limitation) to appear in the name of the appointor before
any notary or other Government official in Indonesia.
7.5 Retained PT-FI Rights
7.5.1 Existing Operations
7.5.1.1 Subject to Clause 7.5.1.2, PT-FI shall have
the right, without the need to obtain the
consent of PT-RTZ, to continue to carry on
Mining activities with the use of the PT-FI
Available Assets, including activities which,
through optimisation or fine tuning of its
operations and facilities, may result in
treatment of ore at a rate in excess of 118,000
tonnes per day and shall have the right to use
and make changes to the PT-FI Available Assets
so long as such activities do not prejudice the
undertaking of the first Approved Expansion
Project at the current millsite, as described
in Clause 10.5.
7.5.1.2 PT-FI will not undertake any Expansion
project (as opposed to optimisation or fine
tuning) in Contract Area Block A other than as
part of Joint Operations or take any other
action which will prejudice the undertaking of
the first Approved Expansion Project at the
current millsite, provided that, if no project
for Expansion which meets the criteria
specified in, or agreed pursuant to,
Clause 10.5 has been proposed by PT-RTZ to the
Operating Committee before the tenth
anniversary of the Effective Date, the
following provisions shall apply:
(i) the foregoing limitation on PT-
FI's ability to enter into an Expansion
project other than as part of Joint
Operations shall no longer be applicable,
(ii) PT-FI shall be entitled to
enter into such a project either as a Sole
Risk Venture or, if it elects at its
option to offer PT-RTZ a right of
participation and PT-RTZ accepts such
offer, as part of Joint Operations, in
which latter event, RTZ Lender shall
remain obliged to make available the loan
funds contemplated by the RTZ Loan
Agreement, and
(iii) except as set out in the immediately
preceding item (ii), PT-RTZ will not have
a right to participate in any revenues
from nor will it be obliged to contribute
to any costs in respect of Contract Area
Block A, even after the Cut-off Date,
except with respect to Joint Operations
Greenfield Projects and Sole Risk Ventures
in Contract Area Block A in which PT-RTZ
has participated.
7.5.1.3 PT-FI shall be entitled to receive and retain
100% of all revenues, including Sales Revenues,
from Contract Area Block A:
(i) prior to the Sharing
Commencement Date, except for any revenues
from Joint Operations Greenfield Projects
and Sole Risk Ventures in which PT-RTZ shall
have participated, and
(ii) from the Sharing Commencement Date until
the Cut-Off Date, except for Incremental
Expansion Revenues and any revenues from
Joint Operations Greenfield Projects and
Sole Risk Ventures in which PT-RTZ shall
have participated.
7.5.2 Privatisation Agreements Without
prejudice and subject to the covenants on the part of
PT-FI contained in Clause 7.2, PT-FI shall have the
right, without the need to obtain the consent of PT-
RTZ, to conduct activities in accordance with the
Privatisation Agreements existing on the Effective
Date or described in Schedule 1 provided that the
consent of PT-RTZ shall be obtained prior to any
material change in the terms thereof which results in
an increase in the burdens of PT-FI thereunder, other
than as described in Schedule 1. The Participants
will discuss the possibility of future agreements in
the nature of Privatisation Agreements on the basis
of the financial requirements of the Participants.
If PT-FI wishes to sell and lease back further of the
PT-FI Available Assets (as part of such future
agreements or otherwise) or to sell any part thereof
reasonably deemed by it to be surplus to its
requirements in relation to Enterprise Operations, it
shall be permitted to do so provided such action does
not affect materially and adversely the institution,
completion or operation of any Approved Expansion
Projects or the availability of the use of such
assets, if required, for Joint Operations.
8. COMMITTEES
8.1 Exploration Committees
The Participants will, not later than thirty days
after the Effective Date, establish both an Exploration
Committee for Contract Area Block A and an Exploration
Committee for Contract Area Block B, in each case to
determine overall policies, objectives, procedures, methods
and actions for incurring the Exploration Costs. Until the
Exploration Obligation has been satisfied, each Participant
may appoint two members to each of the Exploration
Committees. Once the Exploration Obligation has been
satisfied, PT-FI may appoint an additional member to each of
the Exploration Committees. Each Participant may appoint
one or more alternates to act in the absence of a regular
member. Any alternate so acting shall be deemed a member.
Appointments shall be made or changed by written notice to
the other Participant.
8.2 Operating Committee
PT-FI shall establish an Operating Committee to,
among other things:
(i) receive reports on all operations within the
Contract Area, including Joint Operations,
(ii) design for presentation to the boards of
directors of PT-FI and PT-RTZ appropriate actions
respecting the Joint Operations,
(iii) develop plans and make recommendations to the board of
directors of PT-FI,
(iv) monitor execution of plans approved by the
board of directors of PT-FI, and
(v) subject to the control of the board of
directors of PT-FI, be involved generally in directing
day-to-day operations of the business of PT-FI, but will
not determine policies, objectives, procedures, methods
and actions for incurring Exploration Costs, which will
continue to be determined by the relevant Exploration
Committee. The Operating Committee will have three members,
comprising the Chief Operating Officer of PT-FI as Chairman,
the General Manager (Mining Operations) of PT-FI and one
member appointed by PT-RTZ. Each of PT-FI and PT-RTZ may
appoint one or more alternates to act in the absence of the
regular member appointed by it. Any alternate so acting
shall be deemed a member. Appointments shall be made or
changed by written notice to the other Committee members.
8.3 Other Committees
A special Tax Committee will be established to
administer the provisions of Clause 16.13 of this Agreement.
Other committees may be established as required on which PT-
FI shall be entitled to have majority representation
provided that, on any committee established in respect of a
Sole Risk Programme undertaken by PT-RTZ, PT-RTZ shall be
entitled to have majority representation and that PT-FI and
PT-RTZ shall be entitled to have equal representation on the
special Tax Committee.
8.4 Quorum
At any Committee meetings, a quorum will exist if a
representative of each Participant is present at the
meeting. If at the time a meeting is convened, a quorum is
not present, the meeting may, upon notice to the parties
entitled to be represented at the meeting, be adjourned to a
date no sooner than twenty nor later than thirty days
following such originally scheduled meeting. Those members
who attend the rescheduled meeting shall be deemed to
constitute a quorum and may adopt any resolutions or take
any other action not inconsistent with the provisions of
this Agreement.
8.5 Decisions
Each party entitled to be represented, acting through
its appointed members, shall have a vote on a Committee.
Each member of a Committee shall have one vote. With
respect to the approval of an Approved Expansion Project or
of Programmes and Budgets, the function of the Operating
Committee will be to recommend the same for the approval of
the boards of directors of, in the case of an Approved
Expansion Project, PT-FI, FCX and PT-RTZ and, in the case of
Programmes and Budgets, PT-FI and PT-RTZ. No project for
Expansion shall be an Approved Expansion Project unless and
until it has been approved by the boards of directors of PT-
FI, FCX and PT-RTZ (and each project of Expansion shall be
an Approved Expansion Project if and when it has been so
approved) or is otherwise an Approved Expansion Project in
accordance with Clause 10.3 and no Programme and Budget
shall be an Approved Programme and Budget unless and until
it has been approved by the boards of directors of PT-FI and
PT-RTZ. Subject to the foregoing, all decisions of each
Committee shall be taken by simple majority vote of members
present in person or by proxy except that all decisions
relating to Approved Expansion Projects, including a
decision regarding a material departure from the scope or
cost of any Approved Expansion Project, shall, subject to
Clause 10.3, require the approval of representatives of both
Participants.
8.6 Meetings
The Operator shall call the first meetings of the
Exploration Committees within thirty days of the formation
thereof. The purpose of such first meetings shall be to
propose and agree the first Programme and Budget for the
remainder of that Year provided that until such a first
Programme and Budget has been agreed, Exploration activities
will be conducted in accordance with the Exploration
programme for 1995 in existence at the date of the
Implementation Agreement or, if this Agreement is executed
after 31 December 1995, the then existing Exploration
programme of PT-FI which does not cover a period in excess
of 12 months. Thereafter the Exploration Committees and the
Operating Committee shall hold at least four meetings per
Year, one of which shall be in December to propose the
relevant Programme and Budget for the subsequent calendar
year (the "Annual Budget Meeting"). The Operator shall give
thirty days' notice to the Participants of each meeting.
Additionally, any Participant or the Operator may call a
special meeting upon fifteen days' notice to the other
Participant(s) and to the Operator if the Operator is not
calling the meeting. In case of emergency, reasonable
notice of a special meeting shall suffice. All meetings
shall be held in a mutually agreed place, failing which in
New Orleans. Each notice of a meeting shall include an
itemised agenda prepared by the Operator in the case of a
regular meeting, or by the Participant calling the meeting
in the case of a special meeting, but any matters may be
considered with the consent of the Participants. The
Operator shall prepare minutes of all meetings and shall
distribute copies of such minutes to the Participants within
thirty days after the meeting. The minutes, when signed by
all Participants (and no signature shall be unreasonably
withheld or delayed), shall be the official record of the
decisions made by a Committee and shall be binding on the
Participants and on the Operator. Each of the Participants
shall bear its own costs of attendance at meetings of
Committees. The Operator shall be entitled to be present at
all meetings of a Committee unless such Committee otherwise
resolves but the Operator shall not be counted in the quorum
or be entitled to vote in its capacity as Operator.
8.7 Action Without Meeting
In lieu of meetings, a Committee may hold telephone
conferences, so long as all decisions are immediately
confirmed in writing and signed by all the parties entitled
to be represented at meetings of that Committee, and a
member appointed by each party entitled to be represented at
meetings of that Committee has a reasonable opportunity to
be included in any such conference.
8.8 Close-down
8.8.1 If either Participant shall determine
that, in its best judgment, Close-down shall occur
within 11 years thereafter, it shall notify the other
Participant and the Operator. Within 30 days after
receipt of notice of such determination, the other
Participant shall notify the first Participant
whether or not it agrees with such determination. If
there is a disagreement as to such determination, the
Participants shall seek to achieve a mutually agreed
expected date of Close-down (an "Anticipated Close-
down Date"). In the absence of such an agreement,
the dispute shall be referred to the firm of
independent mining consultants which has most
recently reviewed and confirmed the reserves in the
Contract Area for Form 10-K reporting purposes, whose
determination as to the Anticipated Close-down Date
shall be binding on both Participants.
8.8.2 Within 90 days after a final
determination of the Anticipated Close-down Date, the
Operator shall deliver to the Participants its best
estimate of the anticipated Close-down Costs. In
December of the Year in which such determination of
the Anticipated Close-down Date shall have been
finally determined, and in December of each of the
nine subsequent Years, each Participant shall secure
the payment of 10% of the Close-down Costs payable by
such Participant (in accordance with the Financial
and Accounting Procedures), by such methods as shall
be determined by agreement of the Participants or, in
the absence of agreement, by (i) the purchase of
bonds with an investment rating of A (or the then
equivalent rating) or better and (ii) the delivery of
such bonds to the Trustee under the Trust Agreement
or such other trustee as shall be agreed by the
Participants. The proceeds of such bonds or other
form of security shall be made available, as
required, to pay such Close-down Costs.
8.8.3 In the case of a Sole Risk Venture, the
Participant undertaking the Sole Risk Venture shall
provide for the anticipated Close-down Costs as
provided in Clauses 8.8.1 and 8.8.2, unless an
alternate method of funding Close-down Costs has been
approved by the non-Participating Participant(s).
9. OPERATOR
9.1 Appointment
Except as provided in Clauses 9.5 and 12.2, PT-FI
shall be the Operator for all operations under the COW or
this Agreement. The Operator shall report to the
Committees.
9.2 Powers and Duties of Operator
Subject to the provisions of this Agreement and other
agreements which the Participants have agreed to be binding
with respect to all or part of Enterprise Operations, the
Operator shall, in addition to those powers and duties
contained elsewhere in this Agreement, have the following
powers and duties which shall be discharged in accordance
with each Programme and Budget:
9.2.1 The Operator shall manage, direct and
conduct Enterprise Operations.
9.2.2 The Operator shall prepare and present to
each member of the appropriate Committee proposed
Programmes and Budgets in accordance with paragraph
10.1 of the Financial and Accounting Procedures.
9.2.3 The Operator shall make cash calls as
provided in paragraph 10.3 of the Financial and
Accounting Procedures and on receipt of amounts from
the Participants pursuant to paragraph 10.3 of the
Financial and Accounting Procedures shall make all
expenditures necessary to carry out Approved
Programmes and Budgets and shall promptly advise the
relevant Committee if it lacks sufficient funds to
carry out its responsibilities under this Agreement.
Any payments made by the Operator pursuant to this
Agreement shall be for the account of the
Participants and the Operator shall not be required
as Operator to advance its own funds for the purposes
of conducting Joint Operations.
9.2.4 The Operator shall make distributions of
cashflow as provided in this Agreement (including the
Financial and Accounting Procedures) and should the
Operator default in making any such distributions and
the default continues for 30 days after (i) (in the
absence of any dispute or, in the event of a dispute,
as regards the undisputed amount) notice from any
Participant of non-payment or (ii) (in the event of a
dispute, as to the disputed amount) final
determination of such amount as provided in the
Financial and Accounting Procedures, any Participant
shall have the right to declare an Allocation Event
(as defined in the Trust Agreement).
9.2.5 The Operator shall implement Approved
Expansion Projects and other Expansions.
9.2.6 The Operator shall sell on behalf of the
Participants with an interest in such Products, the
Products derived from Enterprise Operations on terms
which shall be discussed with such Participants. In
carrying out its obligations pursuant to Clause
9.2.6, the Operator shall conduct such hedging and
other price protection activities as are authorised
by the relevant Participant with an interest in such
Products. However, the costs and benefits of such
price protection activities shall be specifically
allocated to and borne solely by the authorising
Participant.
9.2.7 The Operator shall:
(a) purchase or otherwise acquire all
material, supplies, equipment, water, utility
and transportation services required for
operations, such purchases and acquisitions to
be made on such terms as the Operator shall
prudently approve, taking into account all of
the circumstances, including the existence of
prior agreements and arrangements;
(b) obtain such customary warranties and
guarantees as are available in connection with
such purchases and acquisitions, taking into
account all of the circumstances; and
(c) keep the Joint Account Assets free
and clear of all Encumbrances, except for those
existing at the time of, or created concurrent
with, the acquisition of such Joint Account
Assets and those which are otherwise permitted
by this Agreement, including Clause 7.2.5, or
with the consent of the Participants.
9.2.8 The Operator shall: (a) make or arrange
for all payments required by the COW, leases, claims,
grants, permits, licences, concessions, contracts and
other agreements related to the Joint Account Assets;
(b) pay all Taxes, assessments and like charges on
Enterprise Operations and Joint Account Assets except
Taxes determined or measured by a Participant's net
income subject to the provisions of Clause 14 and (c)
do all other acts reasonably necessary to maintain
the Joint Account Assets and the COW.
9.2.9 The Operator shall: (a) apply for all
necessary permits, licences and approvals; (b) comply
with applicable laws and regulations; (c) notify
promptly the relevant Committee of any allegations of
substantial violation thereof; and (d) prepare and
file all reports or notices required for Joint
Operations. The Operator shall not be in breach of
this provision if a violation has occurred in spite
of the Operator's good faith efforts to comply, and
the Operator has in a timely manner cured or disposed
of such violation.
9.2.10 The Operator shall prosecute and defend,
but shall not initiate without consulting the
Participants any litigation or administrative
proceedings arising out of Joint Operations. The
Participants shall have the right to participate, at
their own expense, in such litigation or
administrative proceedings.
9.2.11 The Operator shall maintain for the
account of the Participants with respect to the Joint
Operations such basic insurance as it shall
reasonably deem to be necessary for prudent operation
(details of which it shall supply to each
Participant) and, to the extent practicable, shall
also make available, at the individual Participant's
cost and for the individual Participant's benefit,
such additional insurance, including business
interruption insurance, as the individual
Participants shall desire. The premium for such
basic insurance will be a charge to the Participation
and for such additional insurance to the
Participant(s) requesting the same. No other
insurance shall be provided for the benefit of the
Participants. However, after consultation with the
other Participant, any Participant may procure and
maintain at its cost and expense such other insurance
as it shall determine and such other insurance shall
be solely for the benefit of the Participant
procuring the same and the premium therefor shall not
be a charge to the Participation. Further, such
insured Participant shall indemnify the other
Participants not named as insured in such additional
insurance policy against any claim of the insurer by
subrogation or otherwise.
9.2.12 Except where the Operator is expressly
permitted to Dispose of Joint Account Assets by the
terms of this Agreement, the Operator may not Dispose
of Joint Account Assets, whether by sale, assignment,
abandonment or other transfer, except in the ordinary
course of business or with the agreement of the
Participants.
9.2.13 The Operator shall have the right
(subject to Clause 9.6) to carry out its
responsibilities hereunder through agents, Affiliates
or independent contractors.
9.2.14 The Operator shall keep and maintain all
accounting and financial records in accordance with
the Financial and Accounting Procedures.
9.2.15 The persons employed in the Joint
Operations will not be employees of the
Participation.
9.2.16 At all reasonable times, the Operator
shall provide the relevant Committee or the
representative of any Participant, upon request,
access to, and the right to inspect and copy all
information acquired in Joint Operations, including,
but not limited to, maps, drill logs, core tests,
reports, surveys, assays, analyses, production
reports, operations, technical, accounting and
financial records. In addition, the Operator shall
allow each Participant, at its sole risk and expense,
and subject to reasonable safety regulations, to
inspect the Joint Account Assets and observe
Enterprise Operations at all reasonable times, so
long as the inspecting Participant does not
unreasonably interfere with Enterprise Operations.
9.2.17 The Operator shall undertake all other
activities reasonably necessary to fulfill the
foregoing.
The Operator shall not be in default of its duties
under this Clause 9.2 if its inability to perform results
from the failure of either Participant to perform acts or to
contribute amounts required of it by this Agreement, but
this shall not relieve any Participant which is the Operator
of any liability in its capacity as a Participant.
9.3 No Fee
Except as otherwise agreed or provided for in the
Financial and Accounting Procedures, the Operator shall not
be entitled to any fee or other compensation for acting as
Operator.
9.4 Standard of Care
The Operator shall conduct all Enterprise Operations
(including the marketing of Products) in a good, workmanlike
and efficient manner, in accordance with sound mining and
other applicable industry standards and practices, and in
accordance with applicable laws, the terms and provisions of
the COW and any leases, licences, permits, contracts and
other agreements pertaining to the Joint Account Assets.
Without prejudice to the generality of the foregoing, the
Operator shall maintain in good working order all material
assets taken as a whole from time to time used in Enterprise
Operations or Sole Risk Ventures. The Operator shall not be
liable to any Participant for any act or omission in its
capacity as Participant (insofar as such act or omission
relates to conduct of operations in the Contract Area) or as
Operator resulting in damage or loss except to the extent
caused by or attributable to its wilful misconduct or gross
negligence.
9.5 Resignation; Deemed Offer to Resign
The Operator may resign upon 90 days' prior notice.
In addition, the Operator shall be deemed to have resigned
forthwith upon an Event of Resignation, as defined below
and, as provided in the Operator Replacement Agreement, PT-
RTZ shall, if at the time of such Event of Resignation, PT-
RTZ is not the Operator and is an indirect or direct
subsidiary of RTZ, have the right to become substitute
Operator in succession to PT-FI with respect to the COW.
Similarly, if the Operator shall resign upon 90 days' prior
notice, PT-RTZ will have the right to become Operator in
succession to PT-FI with respect to the COW if PT-RTZ is not
then the Operator and shall at the time be a direct or
indirect subsidiary of RTZ. For the purposes of this
Agreement, an Event of Resignation shall mean one of the
following occurrences:
9.5.1 an Event of Default shall have occurred
under an FI Credit Document (as defined in the Trust
Agreement) which gives the Operator Selection
Representative a right under the Operator Replacement
Agreement to cause PT-FI to resign as Operator and
such Operator Selection Representative has elected to
exercise such right; or
9.5.2 the Government has given PT-FI a notice
of default under Article 20 of the COW and PT-FI has
not within 30 days (unless the default relates to
failure to make payments pursuant to Article 12 or 13
of the COW, in which event 20 days) after receipt
thereof either corrected such default or obtained the
withdrawal or stay of such notice, unless the
question has been submitted to arbitration, in which
event it shall be an Event of Resignation if PT-FI
has not corrected such default within 10 days after
affirmation of such default by arbitration; or
9.5.3 FCX and its Affiliates shall cease to own
at least such number of shares of the capital stock
of PT-FI as shall permit FCX and its Affiliates to
elect a majority of the board of directors and of the
board of commissioners of PT-FI; or
9.5.4 any person shall, except with the consent
of RTZ, acquire such number of shares of the capital
stock of FCX as shall permit such person to elect a
majority of the board of directors of FCX; or
9.5.5 a general meeting of shareholders of the
Operator resolves that the Operator be liquidated or
the Operator suffers the appointment of a receiver,
liquidator, administrator, assignee, custodian,
trustee, sequestrator or similar official for a
substantial part of its assets in a proceeding
brought against or initiated by it, and such
appointment is neither made ineffective nor
discharged within ninety days after the making
thereof or such appointment is consented to,
requested by or acquiesced in by it; or
9.5.6 the Operator commences a voluntary case
under any applicable bankruptcy, insolvency or
similar law now or hereafter in effect; or consents
to the entry of an order of relief in an involuntary
case under any such law or to the appointment of or
taking possession by a receiver, liquidator,
administrator, assignee, custodian, trustee,
sequestrator or other similar official of any
substantial part of its assets; or makes a general
assignment for the benefit of creditors; or
9.5.7 entry is made against the Operator of a
judgment, decree or order for relief by a court of
competent jurisdiction in an involuntary case
commenced against the Operator under any applicable
bankruptcy, insolvency or other similar law of any
jurisdiction now or hereafter in effect.
9.6 Transactions With Affiliates
If the Operator engages an Affiliate of either
Participant to provide services hereunder or to perform any
of the obligations of the Operator, it shall do so on terms
no more favourable to the Affiliate than would be the case
with an unrelated person in an arm's length transaction
provided that arrangements with Affiliates consistent with
the Management Services Agreement presently in existence
between Freeport-McMoRan Inc. and PT-FI or between FCX and
PT-FI, and substitute arrangements no more onerous to PT-FI,
shall not constitute a violation of the foregoing.
10. FEASIBILITY STUDY INTO EXPANSION
10.1 At such time (whether before or after the Effective Date)
as a Participant is of the good faith and reasonable opinion
that an economically viable project of Expansion or
Development may be possible in any area of the Contract Area
(the "Specified Area") (the "Expansion Project"), such
Participant (the "Proposing Participant") may propose that a
Feasibility Study be prepared to assess the economic
viability of such Expansion Project. Such proposal (the
"Proposal") shall be made to the Operating Committee and
shall detail the information upon which the Proposing
Participant has based its opinion. The Specified Area shall
be defined in terms of a three-dimensional physical
description.
Within 30 days following the Operating Committee's
receipt of the Proposal, the Operating Committee shall vote
whether to authorise the Operator to conduct a Feasibility
Study relating to such Proposal, except that, if the
Proposal relates to an Expansion Project which satisfies the
criteria specified in, or agreed pursuant to, Clause 10.5
and would be the first Approved Expansion Project, such
approval shall be deemed to have been given. If the
Operating Committee approves the Proposal, the Operator
shall conduct a Feasibility Study relating thereto. If the
Operating Committee does not approve the Proposal, the
Proposing Participant may, at its sole risk and expense,
proceed with the project as described in the Proposal as a
Sole Risk Programme, to which the provisions of this
Agreement relating to Sole Risk Programmes and Sole Risk
Ventures shall apply.
10.2 Upon completion of any such Feasibility Study as is
referred to in Clause 10.1 (including any initiated before
the Effective Date and completed after the Effective Date),
the Operator will deliver a copy of the results thereof to
the Operating Committee and to the boards of directors of
FCX, PT-FI and PT-RTZ respectively. Within 90 days
following receipt of such results or, if the Expansion
Project does not involve project financing on a joint basis
and is not to be financed through the proceeds of the RTZ
Loan Agreement, then within such additional reasonable
period of time, not exceeding six months, as shall be
necessary for either Participant to receive assurance of
necessary financing, the boards of directors of FCX and PT-
FI, on one hand, and of PT-RTZ, on the other, shall either
10.2.1 approve, and authorise the commencement
of construction of, the Expansion Project in
accordance with its terms;
10.2.2 agree in principle that the Expansion
Project be carried out as Joint Operations but
disagree as to scope or related Budget; or
10.2.3 decline to approve the Expansion Project.
10.3 Notwithstanding any other provision of this Agreement to
the contrary, for a period of ten years from the date
hereof, PT-RTZ shall have the sole right (i) to propose as
the subject of a Feasibility Study an Expansion Project
which satisfies the criteria specified in, or agreed
pursuant to, Clause 10.5 and which would be the first
Approved Expansion Project and (ii) to determine that the
Expansion Project which is the subject of such Feasibility
Study shall be the first Approved Expansion Project, for
which purpose the approval of the board of directors of PT-
FI shall be deemed to have been given. Accordingly, whether
or not the board of directors of PT-FI or the board of
directors of FCX approve such Expansion Project, such
Expansion Project shall, provided it is approved by the
board of directors of PT-RTZ, be an Approved Expansion
Project for all purposes of this Agreement.
10.4 Except in relation to the Expansion Project falling within
Clause 10.3 as to which the provisions of Clause 10.3 shall
apply, if the boards of directors of FCX, PT-FI and PT-RTZ
do not agree on the scope and Budget of an Expansion Project
as mentioned in Clause 10.2.2, the matter shall be left open
for an additional period of 30 days to allow for further
discussion. If the boards of directors shall decline to
approve the Expansion Project within such 30 day period, the
board of directors of the Proposing Participant may, within
a further period of 30 days thereafter by notice to the
other Participant and the Operator elect, subject, in the
case of PT-FI, to the limitation specified in Clause
7.5.1.2, to carry out such Expansion Project as a sole risk
venture (a "Sole Risk Programme") and, unless the other
Participant, within a further period of 30 days after
receipt of the Proposing Participant's notice of election,
elects by written notice to the Proposing Participant and
the Operator to join in such Sole Risk Programme (in which
case the Expansion Project shall become part of Joint
Operations), the Proposing Participant shall have the right
to carry out the Expansion Project as a Sole Risk Venture
provided that it commences work within one year after the
date of its written election to carry out such Expansion
Project as a Sole Risk Venture, and provided further that,
in the case of any Sole Risk Programme carried out by PT-
RTZ, unless PT-RTZ has obtained the prior written consent of
PT-FI, the Sole Risk Programme is not based to any
significant degree on the accelerated mining of the 10-K
Reserves.
10.5 No project shall be capable of being the first Approved
Expansion Project unless it is a project for Expansion
which is (a) based on the aggregate of (i) the 10-K Reserves
and (ii) New Reserves of not less than 400,000,000 tonnes
containing an average of 0.5% copper and 0.5 grammes/tonne
of gold (or the economic equivalent thereof), unless FCX and
PT-RTZ shall agree that a smaller reserve would suffice and
(b) designed to result in the treatment of ore mined from
the aggregate resources in Contract Area Block A (being both
the 10-K Reserves and the above-mentioned New Reserves) at
an aggregate rate in excess of 118,000 tonnes per day. In
this Clause 10.5, "New Reserves" means proved and probable
ore reserves situated in Contract Area Block A which are
additional to the 10-K Reserves.
11. GREENFIELD PROJECTS AND LATER EXPANSION PROJECTS
11.1 The Participants will plan together, in accordance with the
procedures set out in Clause 10, the Development of any new
Greenfield Project in ▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇ ▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇, and any project of Expansion which is to be funded
wholly without the use of the proceeds of the RTZ Loan and
the related direct investment by PT-RTZ. The procedures
outlined in Clause 10 and the Financial and Accounting
Procedures will be applicable.
11.2 If any project referred to in Clause 11.1 is to be
developed as part of Joint Operations, the financing of such
project, insofar as it is not to be funded by way of the RTZ
Loan and the related direct investment by PT-RTZ, will be
either on a joint basis, in which event the financing costs
will be part of the Operating Costs for purposes of the
Financial and Accounting Procedures, or on an individual
basis, in which event each Participant will be solely liable
for its financing costs but will be entitled to determine
the form which such financing will take, including, if such
Participant so desires, sale and leaseback transactions so
long as such transactions relate solely to such
Participant's interest in the Joint Account Assets and do
not prejudice or unduly interfere with the carrying on of
Enterprise Operations or previously established Sole Risk
Ventures. The costs and benefits of any such project
carried on as part of Joint Operations will, subject to the
above provisions of this Clause 11.2 and Clause 6.1 and the
Financial and Accounting Procedures, be borne by the
Participants in proportion to their respective Participating
Interests in Contract Area Block A or Contract Area Block B,
as the case may be.
11.3 If, pursuant to the procedures set out in Clause 10, any
project referred to in Clause 11.1 is not to be developed as
part of Joint Operations, either Participant may treat the
project as a Sole Risk Venture under the provisions of
Clauses 10 and 12.
12. SOLE RISK
12.1 If a Proposing Participant shall proceed with a Sole Risk
Programme and unless otherwise agreed by the Participants,
for so long as the Sole Risk Programme continues or the
Proposing Participant continues to conduct operations on its
own account in the Specified Area:
12.1.1 the Specified Area shall not be eligible
for Joint Operations and the Proposing Participant
shall have the exclusive right to carry out the Sole
Risk Programme and any subsequent work programmes as
it may think fit in the Specified Area at its sole
risk and cost and the other Participant shall, to the
extent necessary and so far as it is able and without
prejudice to the existing Enterprise Operations,
provide full rights of ingress, egress and regress
to, from and over the Specified Area and the
remainder of the Contract Area so that the Proposing
Participant may exercise such right. Without
prejudice to the generality of the foregoing, to the
extent that the Sole Risk Venture requires the use of
PT-FI Available Assets PT-FI support services or
Joint Account Assets, and the use of these assets and
support services does not prejudice then or later the
conduct of Enterprise Operations, each of PT-FI and
PT-RTZ (as appropriate) will make available and
charge to the Sole Risk Venture the direct and
allocable costs of providing such assets and
services;
12.1.2 the Participant which is not the
Proposing Participant shall cease to have any rights
to the production of Minerals or proceeds therefrom
from operations in the Specified Area provided that
the rights of the Proposing Participant will relate
solely to the obtaining of exclusive rights to the
proved and probable reserves in the three-dimensional
physical area of the Specified Area, as described in
the Feasibility Study with respect to the project in
question, to the extent such reserves constitute the
basis for the project, as presented to the
Participants pursuant to Clause 10, but will not
thereby obtain rights with respect to any other
reserves. Any further Expansion within the Specified
Area, but not constituting part of the Sole Risk
Programme, will be subject to the procedure provided
in Clause 11 for approval of Programmes, but with
protections afforded to the holder of the Sole Risk
Programme which are comparable to those afforded PT-
FI with respect to the 10-K Reserves and the related
PT-FI Available Assets.
12.2 All Sole Risk Programmes shall be conducted by the Operator
appointed under this Agreement, unless it declines to act as
operator with respect thereto, in which event the operator
with respect thereto shall be the person designated as
operator by the Participant for whose account the Sole Risk
Venture is being conducted, subject to the reasonable
approval of PT-FI. The Operator or other operator shall
have, with respect to the Sole Risk Venture, the same
powers, rights and obligations as are applicable to the
Operator's activities with respect to Enterprise Operations.
In the event of any conflict between the conduct of
Enterprise Operations and a Sole Risk Programme, the
Operator shall give priority to Enterprise Operations.
12.3 Should the Operator conduct a Sole Risk Programme on behalf
of a Participant which is not also the Operator, the charges
provided for in the Financial and Accounting Procedures with
respect to such Sole Risk Programme shall be payable or
repayable to the Operator upon demand. The Operator shall
be authorised to establish such procedures as are reasonably
necessary to obtain such payments from revenues otherwise
payable to such Participant or to issue cash calls with
respect thereto to such Participant.
12.4 Should the board of directors of any Participant determine,
in any Year, not to participate in the proposed Exploration
Programme for such Year as recommended by the Exploration
Committee, or if no Programme is recommended by the
Committee, the board of directors of either Participant may
elect, upon 30 days' notice after having submitted a
proposed Exploration Programme to the other Participant, to
carry out such Programme as a Sole Risk Venture, unless
within such period the other Participant elects to join in
such Programme. If no such election by the other
Participant is made,
(a) if the proposed Programme is in Contract Area
Block B, the declining Participant shall not be
entitled to participate in that or any subsequent
Exploration Programmes or in any subsequent Development
Projects in Contract Area Block B other than any
Development Projects already begun or pursuant to
Exploration Programmes and subsequent Development
Projects based on Feasibility Studies which have
theretofore been approved, and
(b) if the proposed Programme is in Contract Area
Block A, the absence of any such election by the other
Participant shall not affect that other Participant's
rights to participate in any subsequent Exploration
Programmes or in any subsequent Development Projects
except that if the Participant which carries out the
Programme as a Sole Risk Programme subsequently puts
forward a proposal for Development based on such Sole
Risk Programme, the other Participant shall not, in
reaching a decision whether or not to participate in
such Development Project, be entitled to see or use any
data relating to such Exploration Sole Risk Programme.
13. PROGRAMMES AND BUDGETS
Joint Operations shall be conducted, expenses shall be incurred and
Joint Account Assets shall be acquired pursuant only to Approved
Programmes and Budgets. The Financial and Accounting Procedures
contains, among other things, provisions concerning the
preparation, review and approval of Programmes and Budgets.
14. TAXATION IN INDONESIA
It is the intention of the Participants that each of the Participants
should be liable for Indonesian Taxes on income separately
according to its participation in Joint Operations and any of
its Sole Risk Ventures (and with respect to PT-FI, its interest
in the 10-K Reserves and the other Enterprise Operations). Each
Participant shall be directly responsible for and shall directly
pay all such Taxes applicable to such Participant in Indonesia.
Each Participant shall individually and timely file its own
Indonesian Tax returns with the relevant authorities and
independently file pertinent claims and recover Tax credits to
the extent permitted by applicable law. Each Participant shall
provide to the other promptly all such information reasonably
requested by the other to enable such other to comply with its
obligations under this Clause 14.
Failure by a Participant to make any payment of Indonesian Income Tax
which is due and payable by the Participant and which would
result in a default under the COW shall entitle the Operator
after 3 business days' notice to the Participant to make the
required payment on behalf of the Participant and withhold such
amount from sums otherwise due to such Participant under this
Agreement.
15. TRANSFER OF PARTICIPATING INTERESTS
15.1 General
Subject to the provisions of this Clause 15, a
Participant shall have the right to transfer, grant, assign,
and otherwise commit or dispose (all such rights to be
referred to as "transfer" in this Clause 15) to any third
party all or any part of its Participating Interest.
15.2 Limitations on Free Transferability
The transfer right of a Participant in Clause 15.1
shall be subject to the following terms and conditions:
15.2.1 no transferee (other than a transferee
taking the Participating Interest or part thereof for
the purpose of securing the payment or repayment of
any indebtedness, or enforcement thereof, or the
taking of title by a party secured thereby or an
Affiliate (including any representative thereof and
the Trustee acting on its behalf under the Restated
Trust Agreement), and prior to the assumption of the
position of a Participant in substitution for a
Participant under the Participation Agreement) of all
or part of its Participating Interest shall have the
rights of a Participant unless and until the
transferring Participant has provided to the other
Participants notice of the transfer, and the
transferee (other than a transferee as aforesaid), as
of the effective date of the transfer, has committed
in writing to be bound by this Agreement to the same
extent and nature as the transferring Participant;
15.2.2 no transfer permitted by this Clause 15
shall relieve the transferring Participant of its
share of any Liability, whether accruing before or
after such transfer, which arises out of Joint
Operations conducted after the Effective Date and
prior to such transfer;
15.2.3 the transferring Participant and (unless
the transferee is taking the Participating Interest
or part thereof by way of security) the transferee
shall indemnify the other Participant against all
adverse tax consequences of the transfer;
15.2.4 no transfer shall be made of less than a
10% Participating Interest (unless it is the balance
of the transferor's Participating Interest) and no
such transfer shall result in the transferring
Participant retaining less than a 10% Participating
Interest provided that a Participant will be
entitled, in connection with the financing of a Sole
Risk Programme or an Approved Programme and Budget,
subject to the other sub-clauses of this Clause 15.2,
to transfer a partial interest of less than a 10%
Participating Interest, or a partial interest that
relates only to a specific geographic area, so long
as such transfer and such financing do not materially
and adversely affect any Joint Operations;
15.2.5 no transfer shall be made to a person
which is bankrupt, insolvent, liable to be wound up,
which is not of good financial standing or which is
otherwise objectionable on reasonable grounds from
the viewpoint of the interests of the Participation;
15.2.6 subject to Clause 15.4.4, such transfer
shall be subject to a first offer right in favour of
the other Participant as provided in Clause 15.3;
15.2.7 such transfer shall in no case affect the
rights of the non-transferring Participant under the
COW;
15.2.8 such transfer shall include the right to
receive revenues from Enterprise Operations to the
extent enjoyed by the transferor, but shall not
include the right to participate in any Committees
described in Clause 8 of this Agreement or in
Clause 2 of the Implementation Agreement or to be an
Operator as described in Clause 9 of this Agreement,
unless the non-transferring Participants consent to
the transfer of the right in question, which consent
may be withheld for any reason; and
15.2.9 such transfer shall be subject to prior
Government approval.
In addition, until the RTZ Loan has been repaid in full, no
transferee of the whole or any part of PT-FI's Participating
Interest in Incremental Expansion Cashflow (together with
PT-FI's related rights under the COW and agreements for the
sale of Products derived from Joint Operations) shall have
the rights of a Participant unless and until it has
committed in writing to be bound by the repayment provisions
of the RTZ Loan Agreement and acknowledged and consented to
the Intercreditor Agreement (as defined in the RTZ Loan
Agreement).
15.3 First Offer Right
Except as otherwise provided in Clause 15.4, if a
Participant desires to transfer all or any part of its
Participating Interest, including an interest therein that
relates only to a specific geographic area, it shall first
offer to sell such part to the other Participant on terms to
be agreed. The Participants shall thereupon use all
reasonable endeavours to agree the terms of the sale. If
despite using all such reasonable endeavours, the
Participants fail to agree on the terms of the sale within a
period of 60 days after the date of the offer referred to in
this Clause 15.3, the Participant desiring to sell shall
have the right for the period of 180 days following the
expiry of such 60 day period to sell such part of its
Participating Interest to a third party. If the Participant
desiring to sell shall fail to consummate such a sale to any
third party within 180 days after such Participant shall
become entitled hereunder to sell to such third party, no
sale or transfer may thereafter be made by such Participant
without again complying with the provisions of this Clause
15.3.
15.4 Exceptions to First Offer Right
Clause 15.3 shall not apply to the following
transfers:
15.4.1 transfer by a Participant of all or any
part of its interest in this Agreement or any
Participating Interest to an Affiliate;
15.4.2 corporate merger, consolidation,
amalgamation or reorganisation of a Participant for
the purposes of a financial reconstruction;
15.4.3 transfers among Participants which are
expressly required or permitted by the provisions of
this Agreement;
15.4.4 transfers by way of security or an
enforcement or foreclosure thereof or the taking of
title by a secured party or an Affiliate (including
any representative thereof and the Trustee acting on
its behalf under the Restated Trust Agreement) but
not a subsequent transferee.
16. GENERAL PROVISIONS
16.1 Notices
All notices, payments and other required
communications hereunder ("Notice") between the parties
shall be in writing and shall be addressed, respectively, as
follows: All Notices shall be given (a) by personal
delivery to each of the other parties, or (b) by electronic
communication, with a confirmation sent by registered or
certified mail, return receipt requested. All Notices shall
be effective and shall be deemed delivered (i) if by
personal delivery on the date of delivery and (ii) if by
electronic communication on the date of receipt of the
electronic communication. A party may change its address
from time to time by Notice to the other parties.
If to PT-FI: P. T. Freeport Indonesia Company
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Treasurer
Tel.: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
If to PT-RTZ: P.T. RTZ-CRA Indonesia
14th floor, World Trade Centre
▇▇▇▇▇ ▇▇▇▇. ▇▇▇▇▇▇▇▇ ▇▇▇. ▇▇-▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇
Tel: (▇▇▇▇) ▇▇▇ ▇▇▇▇
Fax: (▇▇▇▇) ▇▇▇ ▇▇▇▇
Attention: President Director
with a copy to: The RTZ Corporation PLC
▇ ▇▇. ▇▇▇▇▇'▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇
Tel: ▇▇▇▇ ▇▇▇ ▇▇▇▇
Fax: ▇▇▇▇ ▇▇▇ ▇▇▇▇
Attention: The Secretary
16.2 Waiver
The failure of a party to insist on the strict
performance of any provision of this Agreement or to
exercise any right, power or remedy upon a breach hereof
shall not constitute a waiver of any provision of this
Agreement or limit the party's right thereafter to enforce
any provision or exercise any right.
16.3 Modification
No modification or amendment of this Agreement shall
be valid unless made in writing and duly signed by all the
parties. If, in the event of experience gained through the
operation of this Agreement, the parties agree that
application of any of its provisions results in a material
inequity to (a) party(ies), then the parties agree that they
will meet to discuss possible changes in such provision(s)
proposed by one or more parties as a means of obviating such
inequity.
16.4 Force Majeure
16.4.1 The obligations of the Operator and of a
Participant, other than the payment of money provided
hereunder, shall be suspended and any period of time
mentioned in this Agreement shall be extended to the
extent and for the period that performance or the
ability of the Operator or (as the case may be) one
or both of the Participants to exercise rights or
carry out obligations or otherwise act as permitted
by or in accordance with this Agreement is prevented
by any cause, whether foreseeable or unforeseeable,
beyond its reasonable control, including, without
limitation, labour disputes (however arising and
whether or not employee demands are reasonable or
within the power of the Participant to grant); acts
of God; laws, regulations, orders, proclamations,
instructions or requests of any government or
governmental entity; judgments or orders of any
court; inability to obtain on reasonably acceptable
terms any public or private exploration or
exploitation, right, licence, permit or concession;
curtailment or suspension of activities to remedy or
avoid an actual or alleged, present or prospective
violation of federal, state or local environmental
standards; acts of war or conditions arising out of
or attributable to war, whether declared or
undeclared; riot, civil strife, insurrection or
rebellion; fire, explosion, earthquake, storm, flood,
sink holes, drought or other adverse weather
condition; delay or failure by suppliers or
transporters of materials, parts supplies, services
or equipment or by contractors or sub-contractors'
shortage of, or inability to obtain, labour,
transportation, materials, machinery, equipment,
supplies, utilities, or services; accidents;
breakdown of equipment, machinery or facilities; or
any other cause, whether similar or dissimilar to the
foregoing. The affected Participant shall promptly
give notice to the other Participant of the
suspension of performance, stating therein the nature
of the suspension, the reasons therefor and the
expected duration thereof. The affected Participant
shall resume performance as soon as reasonably
possible. During the period of suspension, the
obligations of the Participants to advance funds
pursuant to paragraph 10.3 of the Financial and
Accounting Procedures shall be reduced to levels
consistent with the Joint Operations which are
capable of being carried on in the circumstances.
16.4.2 Should any of the causes referred to in
Clause 16.4.1 result in the actual production of
Products from Enterprise Operations (other than
Greenfield Projects) in Contract Area Block A in any
Year (the "Actual Production") falling short of the
planned production of such Products for the Year as
shown in the then current programme and budget
(which, in the case of Joint Operations, shall be the
Approved Programme and Budget) for that Year (the
"Planned Production"), the Product Schedule shall be
amended as follows:
(i) The scheduled production of Products
for the Year in question as shown in the Product
Schedule shall be reduced in accordance with the
following formula:
D = A x C,
B
where D is the revised scheduled
production for the Year in question, A is the
Actual Production, B is the Planned Production
and C is the scheduled production of Products
for that Year as shown in the Product Schedule
prior to the occurrence of the cause and the
production which is D shall be substituted in
the Product Schedule as the scheduled production
of Products for the Year in question.
(ii) The shortfall in production being C -
D (as defined in (i) above) shall be added to
the final Year of production as shown by the
Product Schedule prior to the occurrence of the
cause or causes. If, in the final Year, the
scheduled production as so revised would exceed
the production which would result from a daily
rate of 118,000 tonnes per day, the excess shall
be carried forward to the subsequent Year (and
the Cut-off Date shall be extended accordingly)
and appropriate adjustments made to the
production of recovered metal for that Year.
16.5 Governing Law
16.5.1 This Agreement shall be governed by and
construed in accordance with the laws of the State of
New York.
16.5.2 Each of the parties irrevocably agrees
that any suit, action or proceedings (together in
this Clause 16.5 referred to as "Proceedings")
arising out of or in connection with this Agreement
shall be brought in any United States Federal or New
York State court sitting in the borough of Manhattan,
City of New York and, except for the purposes of or
Proceedings regarding enforcement, which may take
place in any relevant jurisdiction, submits to the
exclusive jurisdiction of the courts in such borough.
16.5.3 Each of the parties irrevocably waives
any objection which it may have now or hereafter to
the laying of venue of any Proceedings in any such
court as is referred to in this Clause 16.5 and any
claim that any such Proceedings have been brought in
an inconvenient forum. Each of the parties hereby to
the fullest extent permitted by law waives any right
it may have to have any Proceedings take the form of
a trial by jury.
16.5.4 Each of the parties hereby irrevocably
designates, appoints and empowers, in the case of the
United States Federal Courts in New York and the New
York State courts, CT Corporation System, having
offices at the date hereof at ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇
▇▇▇▇, ▇.▇. ▇▇▇▇▇, ▇.▇.▇. to receive, for and on
behalf of itself, service of process in such
jurisdictions in any legal action or proceedings with
respect to this Agreement or any judgment in
connection herewith and agrees that failure by such
process agent to give notice of such service of
process to it shall not impair or affect the validity
of such service or of any judgment based thereon.
16.6 Penalties
It is agreed between the parties that, while the
percentage and rate set out in Clause 6.3.2.3 and paragraph
10.3.3 of the Financial and Accounting Procedures are
considered fair and reasonable and a genuine pre-estimate of
the loss to the non-Defaulting Participants, if it should be
found that either of such percentage and rate be
unenforceable as going beyond what is fair and reasonable or
a genuine pre-estimate in the circumstances and if by
substituting a different percentage or rate for the
percentage or rate set out in Clause 6.3.2.3 or paragraph
10.3.3 of the Financial and Accounting Procedures it would
be enforceable, then there shall be substituted such next
high percentage or rate as shall render Clause 6.3.2.3 or
paragraph 10.3.3 of the Financial and Accounting Procedures
valid and enforceable.
16.7 Rule Against Perpetuities
Any right or option to acquire any interest in real
or personal property under this Agreement must be exercised,
if at all, so as to vest such interest in the acquirer
within twenty-one years less one day after the death of the
last known descendent of Queen Victoria alive on the
Effective Date.
16.8 Further Assurances
Each of the Participants agrees that it shall take
from time to time such actions and sign or execute such
additional instruments as may be reasonably necessary or
convenient to implement and carry out the intent and purpose
of this Agreement.
16.9 Confidentiality and Public Statements
Except as otherwise provided in this Clause 16.9, the
terms and conditions of this Agreement, and all data,
reports, records and other information of any kind
whatsoever developed or acquired by any Participant in
connection with this Participation, shall be treated by the
Participants as confidential (hereinafter called
"Confidential Information"), and no Participant shall reveal
or otherwise disclose such Confidential Information to third
parties without the prior written consent of the other
Participant(s). The foregoing restrictions shall not apply
to the disclosure of Confidential Information (i) pursuant
to the terms of the COW or the request of the Government,
the laws, rules and regulations administered by the
Securities & Exchange Commission or the rules of any stock
or securities exchange on which the shares or stock of
either of the Participants or any of its Affiliates may from
time to time be listed or (ii) to any Affiliate, to any
public or private financing agency or institution, to any
contractors or subcontractors which the Participants may
engage and to employees and consultants of the Participants
or to any third party to which a Participant contemplates
the transfer, sale, assignment, encumbrance or other
disposition of all or part of its Participating Interest
pursuant to Clause 15; provided that, in any such case under
this (ii), only such Confidential Information as such third
party shall have a legitimate business need to know shall be
disclosed, and the person or company to whom disclosure is
made shall first undertake in writing to protect the
confidential nature of such information at least to the same
extent as the parties are obligated under this Clause 16.9.
In addition, (a) the foregoing restrictions shall not apply
to Confidential Information which otherwise comes into the
public domain and (b) notwithstanding anything to the
contrary in this Clause 16.9, each Participant is permitted
to use and disclose data arising from the Participation in
its annual audited financial statements and notes thereto.
In the event that a Participant is required to
disclose Confidential Information to any government and
appropriate agencies and departments thereof, to the extent
required by law or in response to a legitimate request for
such Confidential Information, the Participant so required
shall immediately and prior to any disclosure notify the
other Participants hereto of such requirement and the terms
thereof prior to such submission.
The provisions of this Clause 16.9 shall apply during
the term of this Agreement and shall continue to apply to
any Participant which forfeits, surrenders, assigns,
transfers or otherwise disposes of its Participating
Interest for one year following the date of such occurrence.
Except as may be required by applicable law or any
listing agreement with any national securities exchange or
the rules of any stock exchange on which the shares or stock
of either of the Participants or any of its Affiliates may
from time to time be listed, no party to this Agreement
shall issue any press release or make any public
announcement or public disclosure with regard to the
Participation or its financial performance or condition,
including Confidential and non-Confidential Information,
unless either (i) a draft of the proposed press release has
been provided to the other party hereto at least twenty-four
hours prior to its proposed release in order to permit such
party to comment thereon or (ii) such press release or other
public statement contains factual information (or discussion
or analysis of or comment based upon such factual
information) previously provided to such party by the other
party provided that neither will present projections or
forward-looking information that is attributed to the other
party or any of its Affiliates without the prior written
consent of the other party.
16.10 Entire Agreement; Successors and Assigns
This Agreement, together with the Implementation
Agreement and the other documents referred to therein and
the Early Closing Agreement and the other documents referred
to therein, contains the entire understanding of the parties
and supersedes all prior agreements and understandings
between the parties relating to the subject matter hereof.
This Agreement shall be binding upon and inure to the
benefit of the respective successors and permitted assigns
of the parties.
16.11 Severability
If part of this Agreement is rendered illegal,
invalid or unenforceable under applicable law, the remaining
clauses of this Agreement shall continue in force.
16.12 Indonesian Law Waiver
Each of the Participants waives those provisions of
Article 1266 of the Civil Code of the Republic of Indonesia
(if and to the extent that, notwithstanding Clause 16.5,
that Article is applicable to this Agreement) which would
otherwise require the order of a court as a precondition to
termination of this Agreement.
16.13 Tax Covenant
In recognition of the fact that the Participants and
the transactions contemplated by this Agreement may be
affected adversely over the life of the Chargeable
Operations, by the interaction of the laws relating to Taxes
under multiple taxing jurisdictions, the Participants agree
that they will cooperate with a view to minimizing the
adverse tax impact of the various jurisdictions on the
Participants to the extent such can be accomplished without
material adverse affect on the conduct of the Chargeable
Operations and the other Participant. The Participants will
consult and work together to ensure that neither party takes
any action which prejudices the Tax position of the other.
The Participants hereby agree that each will endeavour to
make such adjustments in the way in which Chargeable
Operations are conducted, or in the terms of this Agreement,
or in their other relationships, as may be reasonably
requested by the other Participant to avoid or minimize any
adverse tax impact on such Participant while taking into
account any adverse tax or operational impact on Chargeable
Operations and on the other Participant.
(Signature pages follow)
IN WITNESS WHEREOF the authorised representatives of the parties
hereto have signed this Agreement as of the date first above written.
P.T. FREEPORT INDONESIA COMPANY
By: /s/ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇
_____________________________
Name: ▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Treasurer
P.T. RTZ-CRA INDONESIA
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
_____________________________
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Attorney-In-Fact
In anticipation of the completion of formation of P.T. RTZ-CRA
Indonesia under the laws of the Republic of Indonesia, this
Agreement is also executed by RTZ Jersey Investments One Limited and
RTZ Jersey Nominees Limited, jointly and severally, the founding
shareholders.
RTZ JERSEY INVESTMENTS ONE LIMITED
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
________________________________
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Attorney-In-Fact
RTZ JERSEY NOMINEES LIMITED
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
________________________________
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Attorney-In-Fact
SCHEDULE 1
Privatisation Agreements
1. Joint Venture Agreement dated as of March 11, 1993 between
P.T. ALatieF Nusakarya Corporation ("ANC") and PT-FI (the
"ALatief J.V. Agreement").
The ALatief J.V. Agreement provides for the sale and purchase of
US$270 million of infrastructure assets consisting primarily of
warehouses, a hotel, housing (single and multi-family and
dormitories), and food service, medical, retail and recreational
facilities.
Master Services Agreement, dated December 15, 1993 between Alatief
Freeport Infrastructure Corporation ("AFIC") and PT-FI regarding
the operation and management of certain non-mining
infrastructure assets for the benefit of PT-FI, as amended April
15, 1994 and April 19, 1994.
Master Services Agreement, dated August 11, 1994, between AFIC and
PT-FI regarding the operation and management of certain non-
mining infrastructure assets for the benefit of PT-FI.
Master Services Agreement, dated August 11, 1994 between Alatief
Freeport Hotel Corporation ("AFHC") and PT-FI regarding the
provision of hotel management services for the Sheraton Inn at
Timika.
Management Contract, dated October 28, 1993 between PT-FI and Indo-
Pacific Sheraton Limited regarding the management of the
Sheraton Inn at Timika which was assigned by Indo-Pacific
Sheraton Limited to Sheraton Overseas Management Corporation on
October 28, 1993. By Assignment, dated August 11, 1994 PT-FI
assigned its rights and obligations under such Contract and
other hotel privatisation agreements to AFHC.
As of February 1996, transactions involving the sale of approximately
US$198 million of infrastructure assets have been closed with
P.T. ALatief Freeport Infrastructure Company ("AFIC") purchasing
approximately US$156 million and P.T. ALatief Freeport Hotel
Company ("AFHC") purchasing US$42 million. AFIC and AFHC are
each owned 2/3rds by ANC and 1/3rd by PT-FI.
ANC and PT-FI are currently discussing amending the ALatief J.V.
Agreement to add additional infrastructure assets, thereby
increasing the total amount of the infrastructure sales provided
for in the ALatief J.V. Agreement to approximately US$350-450
million, and to restructure financing for the transaction on
more favourable terms.
2. Asset Purchase Agreement dated as of December 26, 1994 between
P.T. Puncakjaya Power ("PTPJP") and PT-FI (the "Asset Purchase
Agreement").
The Asset Purchase Agreement provides for the sale and purchase of
US$215 million of infrastructure assets consisting primarily of
electric power generation and transmission facilities. The
final closing under the Asset Purchase Agreement occurred in
December 1995.
Power Sales Agreement, dated as of December 27, 1994 between P.T.
Puncakjaya Power ("Seller") and P.T. Freeport Indonesia Company
("Buyer") providing for Seller to make available, sell and
deliver to Buyer and to certain designees of Buyer, and for
Buyer to purchase from Seller, certain electric capacity and
electricity.
Operation, Maintenance and Management Agreement, dated and effective
as of January 30, 1995, between P.T. Puncakjaya Power ("Owner")
and P.T. Nusantara Power Services ("Operator") providing for
Operator to furnish certain services to Owner on a cost
reimburable basis for the operation, maintenance and management
of the Mill Site Facility, the Timika Facility, the New Town
Facility, the Milepost 38/39 Facility and the Port Site
Facility.
3. Purchase and Sale Agreement dated as of March 22, 1995 between
ANC, P&O Singapore Pte. Ltd., P.T. ALatief P&O Port Development
Company and PT-FI (the "Purchase and Sale Agreement").
Master Services Agreement, dated March 22, 1995 between P.T. Alatief
P & O Port Development Company ("PTAPPDC") and PT-FI regarding
the operation and management of the port, marine and logistics
assets by PTAPPDC for the benefit of PT-FI.
The Purchase and Sale Agreement provides for the purchase and sale of
US$100 million of infrastructure assets consisting primarily of
tugboats, motorised barges, wharfs and warehouses, cranes and
other cargo handling equipment, concentrate drying equipment,
heavy trucks and maintenance facilities. This transaction was
closed on March 22, 1995.
4. Joint Venture Agreement dated as of March 18, 1994 among P.T.
Airfast Indonesia, P.T. Giga Haksa and PT-FI (the "Aviation J.V.
Agreement").
The Aviation J.V. Agreement provides for the sale and purchase of
approximately US$48 million of infrastructure assets consisting
primarily of aircraft and helicopters, spare parts and aviation
support facilities. This transaction was closed in 1995.
5. PT-FI is currently negotiating with an Indonesian company
concerning the sale and purchase of infrastructure assets
constituting essentially all of PT-FI's potable water treatment
and distribution facilities and sewerage treatment and
collection facilities. PT-FI expects to enter into agreements
resulting in the closing of a sale of such assets in 1996 or
1997.
6. PT-FI is currently negotiating with an Indonesian company
concerning the sale and purchase of infrastructure assets
constituting essentially all of PT-FI's solid waste treatment,
storage and disposal facilities. PT-FI expects to enter into
agreements resulting in the closing of a sale of such assets in
1996 or 1997.
7. PT-FI is currently negotiating with certain Indonesian
companies concerning the sale and purchase of infrastructure
assets constituting a steel fabrication shop and industrial
gases plant. PT-FI expects to enter into agreements resulting
in the closing of a sale of such assets in 1996 or 1997.
8. PT-FI has formed a service company named P.T. Mining Services
International Company ("MSIC"). It is expected that in 1996
MSIC will enter into agreements for the provision of certain
mining related services to PT-FI, PT-▇▇▇▇, other related
companies, and potentially third parties. It is not anticipated
that any significant amount of assets will be transferred to the
MSIC, although PT-FI personnel may be transferred to MSIC.
9. PT-FI is currently negotiating with an Indonesian company
concerning the sale and purchase of its existing and proposed
new beef production and processing facilities and its proposed
new poultry and egg production and processing facilities. PT-FI
expects to enter into agreements resulting in the closing of a
sale of such assets in 1996 or 1997.
10. PT-FI is currently negotiating with various persons concerning
the sale and purchase of its existing and proposed single and
multi-family housing facilities and certain existing and
proposed retail and commercial facilities located at Kuala
Kencana. PT-FI expects to enter into a series of agreements
resulting in the closing of sales of such assets in 1996 through
2000.
SCHEDULE 2
Deed of Assignment of Interest in COW
ASSIGNMENT OF INTEREST
THIS AGREEMENT is made the 11th day of October, 1996 between P.T.
Freeport Indonesia Company, a corporation organised and existing
under the laws of Indonesia (hereinafter referred to as the
"Assignor") and P.T. RTZ-CRA INDONESIA, a company in formation under
the laws of the Republic of Indonesia (hereinafter referred to as the
"Assignee").
WHEREAS, the Assignor has a 100% undivided ownership interest in and
to the Contract of Work made 30 December 1991 between the Minister of
Mines and Energy of the Republic of Indonesia, acting for and on
behalf of the Government of the Republic of Indonesia, and the
Assignor (hereinafter referred to as the "Contract of Work");
AND WHEREAS, under the terms of the Contract of Work the Assignor is
now conducting certain development, mining and processing activities
in the Contract Area Block A (as defined in the Contract of Work) and
is implementing a plan for expansion of the capacity of its
facilities for treatment of ore mined from Contract Area Block A to a
design rate of 118,000 metric tonnes per day (hereinafter, together
with all assets and rights reserved to PT-FI pursuant to the terms of
the Participation Agreement (including Clause 7.5.1.3 thereof),
referred to as the "Existing Project");
AND WHEREAS under the terms of a Participation Agreement made
October 11, 1996, between the Assignor and the Assignee (hereinafter
called the "Participation Agreement") the Assignee is entitled at
this time to an assignment of a 40% undivided ownership interest in
and to the Contract of Work excluding the Existing Project, subject
to adjustment from time to time as set out in the Participation
Agreement.
NOW, THEREFORE THIS AGREEMENT WITNESSES that, in consideration of the
mutual covenants and agreements herein contained and subject to the
terms and conditions hereinafter set out, the Parties hereto agree as
follows:
1. The Assignor does hereby assign, set over, transfer and convey
unto the Assignee a 40% undivided ownership interest in and to
the Contract of Work and all benefit and advantage derived or to
be derived therefrom (excluding the Existing Project), subject
to adjustment from time to time, as set out in the Participation
Agreement (hereinafter called the "Assigned Interest"), to have
and to hold the same unto the Assignee on the terms, conditions
and obligations contained in the Contract of Work insofar as
they relate to the Assigned Interest. This Assignment is
subject to all terms and conditions of the Participation
Agreement.
2. The Assignee hereby accepts the assignment of the Assigned
Interest and covenants and agrees that it shall, at all times
hereafter be bound by, observe and perform all of the provisions
of the Contract of Work to be observed and performed by the
Assignor, insofar as they relate to the Assigned Interest, to
the same extent as if the Assignee had been a party thereto in
the place and stead of the Assignor in respect of the Assigned
Interest.
3. The Assignor shall remain responsible to the Government of the
Republic of Indonesia for the conduct of all operations under
the Contract of Work and for all communications with the
Government of the Republic of Indonesia under the Contract of
Work on behalf of itself and the Assignee.
4. The undivided ownership interest in and to the Contract of
Work as at the Effective Date after giving effect to the
assignment of the Assigned Interest and subject to the rights
and obligations of the parties in relation to the Existing
Project as set out in the Participation Agreement shall be as
follows:
(i) P.T. Freeport Indonesia Company 60%
(ii) P.T. RTZ-CRA Indonesia 40%
5. Each of the Assignor and the Assignee covenants and agrees
with the other of them that at the request of the other it will
execute such further assurances and do all such further acts as
may reasonably required for the purpose of vesting the Assigned
Interest in the Assignee.
6. The address of the Assignee for notices shall be:
14th floor, World Trade Centre
Jalan Jend. Sudirman ▇▇▇. ▇▇-▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇
7. This Assignment shall enure to the benefit of and be binding
on the Parties hereto and their respective successors and
assigns.
(Signature page follows)
IN WITNESS WHEREOF the authorised representatives of the parties
hereto have signed this Agreement as of the date first above written.
P.T. FREEPORT INDONESIA COMPANY
By:
_____________________________
Name:
Title:
P.T. RTZ-CRA INDONESIA
By: _____________________________
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President Director
In anticipation of the completion of formation of P.T. RTZ-CRA
Indonesia under the laws of the Republic of Indonesia, this
assignment is also executed by RTZ Jersey Investments One Limited
and RTZ Jersey Nominees Limited, jointly and severally, the founding
shareholders.
RTZ JERSEY INVESTMENTS ONE LIMITED
By: ________________________________
Name:
Title:
RTZ JERSEY NOMINEES LIMITED
By: ________________________________
Name:
Title:
SCHEDULE 3
Exceptions to Representations and Warranties
A. PT-FI
4.2.3
1. ▇▇▇ Beanal v. Freeport-McMoRan Inc. and Freeport-McMoRan
Copper & Gold Inc., Civ. No. 96-1474 (E.D. La. filed Apr. 29,
1996) and Yosefa Alomang v. Freeport-McMoRan Inc. and Freeport-
McMoRan Copper & Gold Inc., Civ. ▇▇. ▇▇-▇▇▇▇ (▇▇▇▇▇▇▇ ▇▇▇. ▇▇▇▇.
▇▇. ▇▇. filed June 19, 1996) and Civ. No. 96-2139 (E.D. La.
removed June 24, 1996).
In both actions, the plaintiffs allege substantially
identical environmental, human rights and social/cultural
violations in Indonesia. ▇▇▇ Beanal seeks $6 billion in
monetary damages and other equitable relief and Yosefa Alomang
seeks unspecified monetary damages and other equitable relief.
FCX denies the allegations, which have been refuted by a series
of independent examinations of the Indonesian mining operations
of PT-FI. FCX believes that the actions are baseless and will
vigorously defend such actions.
4.2.9 and 4.2.10
1. Assignment of the Contract of Work pursuant to the
Trust Agreement dated as of May 15, 1970, as amended and
restated, between PT-FI and First Trust, National
Association (successor to ▇▇▇▇▇▇ Guaranty Trust Company of
New York).
2. Assignment to Privatisation counterparties specified
in Schedule 1 of rights to use, occupy and construct
facilities on certain parcels of land on which
infrastructure assets are situated which have been sold by
PT-FI to such entities, and rights to pass over other land
as reasonably necessary to gain ingress and egress to such
parcels.
B. PT-RTZ
4.1.1, 4.1.2 and 4.1.3
1. Qualified, in the case of PT-RTZ, as to its status as
being in formation.
ANNEX A
Product Schedule
Recovered Metal in Concentrate
Year Cu (mil. Au (000 oz.) Ag (000 oz.)
lbs)
1995 1,029 1,318 2,872
1996 1,085 1,379 2,828
1997 1,140 1,791 2,969
1998 1,033 1,365 3,275
1999 1,165 1,503 3,822
2000 1,069 1,262 4,103
2001 1,132 1,397 3,943
2002 1,090 1,375 3,795
2003 1,082 1,610 4,045
2004 1,052 1,657 3,703
2005 1,082 1,695 3,730
2006 1,099 1,653 3,934
2007 1,099 1,631 4,045
2008 1,110 1,614 4,158
2009 1,107 1,589 4,203
2010 1,099 1,567 4,296
2011 1,049 1,269 4,138
2012 1,035 1,283 4,010
2013 1,066 1,471 4,268
2014 1,066 1,461 4,277
2015 1,057 1,493 4,156
2016 1,044 1,529 3,768
2017 1,008 1,589 3,359
2018 1,008 1,589 3,359
2019 1,024 1,589 3,396
2020 1,027 1,593 3,405
2021 219 344 716
TOTAL 28,076 39,616 98,573
ANNEX B
Financial and Accounting Procedures
1. Accounting Definitions
Terms which are not defined in this Annex shall have the meaning
ascribed to them in the Agreement of which this Annex B is a
part.
1.1 Definitions Applicable to ▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇ ▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇
A. "AFE" means an authorisation for
expenditures in relation to a capital expenditure
project.
B. "Capital Costs" means all expenditures
incurred in connection with or allocable to a capital
project including fully loaded labour, materials,
equipment and contractors' costs, engineering,
procurement, including freight costs and handling,
construction and management costs, allocated owners'
cost, infrastructure and logistic support, support
costs, Taxes other than those imposed on net income
of the Participants, general and administrative
costs, land acquisition and preparation costs (if
any), legal and regulatory costs, pre-stripping and
pre-production costs, initial fill, spares and
consumables, capitalised finance costs, and any
associated working capital, but excluding
depreciation, non-cash charges, interest (other than
capitalised finance costs), payments in the nature of
principal and interest under Privatisation
Agreements, and accounting provisions and reserves.
Capital Costs shall not include any Exploration
Costs.
C. "Chargeable Operations" means operations,
including support activities, related to Mining and
Processing of Minerals and marketing and delivery of
Products produced from the Contract Area and
excluding (i) any operations or activities of PT-FI
not related to or associated with the Contract Area
and (ii) any operations or activities of parties
subject to the Privatisation Agreements to the extent
that they are operations or activities of third
parties unconnected with Enterprise Operations.
D. "Close-down Costs" means all costs
incurred in or allocable to Close-down, including
without limitation, rehabilitation of the
environment, the removal of buildings, equipment,
infrastructure and other tangible property, costs
incurred in terminating equipment, supply, service
and employment contracts, and costs incurred in
terminating and surrendering the COW. Close-down
Costs shall include all such costs incurred within
the period ten Years prior to the Anticipated Close-
down Date and prior to such date all such costs shall
be treated as Operating Costs.
E. "Development" means all preparation for
the removal and recovery of Products, including the
construction or installation of a mine or heap ▇▇▇▇▇
facilities, ore and waste handling facilities, mining
equipment, or any other improvement to be used for
Mining, handling, transportation or milling of
Minerals or other processing or marketing of
Products, including infrastructure and logistic
support facilities associated therewith. It is
acknowledged that certain expenditures may involve
activities that relate to both Exploration and
Development. In such cases, the primary purpose of
the activity related to such expenditure shall govern
its classification as Exploration or Development.
F. "Eastern Minerals COW" means the contract
of work dated 15 August 1994 made between the
Government and P.T. ▇▇▇▇ Eastern Minerals Corporation
with respect to the Contract Area as therein defined.
G. "Exploration" means all activities,
excluding Development and Mining, directed towards
ascertaining or appraising the existence, location,
quantity, quality or commercial value of deposits of
Minerals (other than the 10-K Reserves) and the
feasibility of Development or Mining in relation to
those deposits. It is acknowledged that certain
expenditures may involve activities that relate to
both Exploration and Development. In such cases, the
primary purpose of the activity related to such
expenditure shall govern its classification as
Exploration or Development.
H. "Exploration Costs" means all labour,
supplies, equipment, contract costs and other costs
directly attributable or allocable to Exploration
including fully loaded labour, logistical support
costs, facility and other miscellaneous costs
required to support these activities.
I. "Operating Costs" means the aggregate of:
(a) expenditure, adjusted for changes in
inventory, that is either directly incurred or
allocable to Chargeable Operations, including
but not limited to production, maintenance and
repair costs, logistical support and freight and
handling costs, infrastructure and support
facility costs (including similar expenditures
under Privatisation Agreements), Taxes (other
than those imposed on net income of the
Participants), and general and administrative
costs of the kind identified in PT-FI's annual
financial statements for the period ended 31
December 1994 under the heading "General and
Administrative Costs", but excluding
depreciation, non-cash charges, interest,
payments in the nature of principal and interest
under Privatisation Agreements, and accounting
provisions and reserves;
(b) Replacement Capital Costs in carrying
out Chargeable Operations (including such
expenditures under Privatisation Agreements);
and
(c) the cash element of specific
accounting provisions incurred in the normal
course of business in conducting Chargeable
Operations.
Exploration Costs, Taxes on net income of
the Participants, and financing costs in connection
with any financing arrangement entered into
separately by a Participant (including without
limitation, payments in the nature of principal and
interest under Privatisation Agreements undertaken
separately) shall not be treated as Operating Costs
incurred in carrying out Chargeable Operations.
Financing costs (including without limitation,
payments in the nature of principal and interest
under Privatisation Agreements) in connection with
any financing arrangement entered into jointly by the
Participants shall be included in Operating Costs.
J. "Replacement Capital Costs" means Capital
Costs incurred other than for Expansion, a Greenfield
Project or a Sole Risk Venture.
K. "Sales Revenues" means the value of
Products sold based on actual prices realised (or
which would have been realised but for any hedging
and other price protection activities), net of
smelting and refining charges, royalties and other
selling expenses.
1.2 Definitions Applicable to Approved Expansion Projects
Only
A. "Expansion Share of Costs" in any Year
means that proportion of the Operating Costs in
respect of Contract Area Block A in that Year which
is represented by a fraction the numerator of which
is the Incremental Expansion Revenues for that Year
and the denominator of which is Total Sales Revenues
from Contract Area Block A in that Year, and in any
Year where Incremental Expansion Revenues is nil or
deemed to be nil, "Expansion Share of Costs" shall be
nil or be deemed to be nil.
Operating Costs and Sales Revenues from
Greenfield Projects and Sole Risk Ventures shall be
excluded from this calculation.
B. "Incremental Expansion Cashflow" in any
Year means Incremental Expansion Revenues in that
Year less Expansion Share of Costs in that Year.
C. "Incremental Expansion Revenues" in any
Year means the Sales Revenues in respect of
Incremental Production sold in that Year or part
thereof in which sales of Incremental Production
occurred, with sales from inventory deemed to be sold
on a first-in, first-out basis, and any negative
value of "Incremental Expansion Revenues" in any Year
shall be deemed to be nil with respect to such period
but shall be carried forward to the next Year in
which there are Incremental Expansion Revenues.
D. "Incremental Production" in any Year
means the excess of:
(i) the actual production in that Year of
Products from Contract Area Block A, including
actual production resulting from Approved
Expansion Projects, but excluding actual
production resulting from Greenfield Projects
and Sole Risk Ventures; over
(ii) the scheduled production of Products
for such Year as shown in the Product Schedule
(as such schedule may be adjusted pursuant to
Clause 16.4.2 of the Agreement).
Production of Products from Contract Area
Block A at any time prior to the Sharing Commencement
Date shall not be treated as Incremental Production.
E. "Sharing Commencement Date" means the
date following the commissioning of the first
Approved Expansion Project on which the first Sales
Revenues from such project are accrued.
F. "Total Sales Revenues" in any Year means
the Sales Revenues of all Products produced from
Contract Area Block A (excluding Greenfield Projects
and Sole Risk Ventures) sold in that Year.
2. Memorandum Equity Accounts
A separate Memorandum Equity Account will be established by the
Operator for each Participant for each of ▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ B. Each such Memorandum Equity Account
shall be credited with such Participant's contribution to
Capital Costs (other than Replacement Capital Costs and Capital
Costs for Sole Risk Ventures) attributable to such Contract Area
Block. The Memorandum Equity Account of each Participant shall
be credited with such Participant's contributions to Capital
Costs, regardless of how such contributions were financed by a
Participant (it being understood that PT-FI will be credited
with contributions funded under the RTZ Loan), but such
Memorandum Equity Accounts shall not be credited for
contributions to Capital Costs financed jointly by the
Participants through project financing which encumbers the
interests of both Participants. Specifically:
(A) Approved Expansion Projects up to $750,000,000. The
first $750,000,000 of Capital Costs incurred pursuant to
AFE's for Approved Expansion Projects shall be credited 60%
to PT-FI's Memorandum Equity Account and 40% to PT-RTZ'S
Memorandum Equity Account, with funding for PT-FI's
proportionate share of such Capital Costs being provided
pursuant to the RTZ Loan.
(B) Approved Expansion Projects in Excess of
$750,000,000. All Capital Costs incurred pursuant to AFE's
for Approved Expansion Projects in excess of $750,000,000
shall be credited to the Memorandum Equity Account of each
Participant in proportion to its contribution to such
Capital Costs.
3. Exploration Activities
3.1 General Separate accounts will be maintained for
Exploration Costs incurred in respect of ▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇ ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇ and in respect of the Contract
Area as defined in the Eastern Minerals COW ("Eastern
Area").
3.2 Joint Operations Exploration Costs PT-RTZ will pay
all Exploration Costs approved by the relevant Exploration
Committee for Exploration in ▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇ ▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇ until the Exploration Obligation has
been satisfied, including the expenditure of not less than
$40,000,000 in respect of Contract Area Block A.
Thereafter, the Participants will pay all Exploration Costs
in proportion to their respective Participating Interests in
Contract Area Block A and Contract Area Block B.
3.3 Exploration Costs for Sole Risk Ventures All
Exploration Costs for a Sole Risk Venture in Exploration
shall be paid by the Participant undertaking such Sole Risk
Venture.
3.4 Statements of Exploration Costs Monthly statements
of Joint Operations Exploration Costs and Sole Risk Venture
Exploration Costs will be prepared by the Operator and
submitted to the Exploration Committee or the Participant
undertaking the Sole Risk Venture, as appropriate, so that
actual Exploration Costs may be monitored.
3.5 Payment for Exploration Costs Exploration Costs will
be included in the monthly cash calls made pursuant to
paragraph 10.3 of this Annex.
4. Feasibility Studies
4.1 General Separate accounts will be maintained for
each Feasibility Study and will be reported by the Operator
to the relevant Exploration Committee or Operating
Committee, or to the Participant undertaking a Sole Risk
Venture, as appropriate.
4.2 Joint Operations Feasibility Studies Prior to the
date any AFE is approved as a result of a Feasibility Study,
the costs of the Feasibility Study shall be Exploration
Costs. In the event that an AFE is approved as a result of
the Feasibility Study, then from and after the date that
such AFE is approved, any additional Feasibility Study costs
shall be Capital Costs of the project rather than
Exploration Costs.
4.3 Sole Risk Feasibility Studies All costs of a
Feasibility Study of a Sole Risk Venture shall be paid by
the Participant undertaking the Feasibility Study as a Sole
Risk Venture. There shall however be no reimbursement to
the non-participating Participant of previously incurred
costs.
4.4 Statements of Feasibility Study Costs Monthly
statements of the costs of each Joint Operations Feasibility
Study and Sole Risk Venture Feasibility Study will be
prepared by the Operator and submitted to the relevant
Exploration Committee or Operating Committee or the
Participant undertaking the Sole Risk Venture, as
appropriate, so that actual costs of the Feasibility Study
may be monitored.
4.5 Payment of Feasibility Study Costs The costs of each
Feasibility Study will be included as Exploration Costs or,
as appropriate, Capital Costs, in the monthly cash calls
made pursuant to paragraph 10.3 of this Annex.
5. Joint Operations in Contract Area Block A
5.1 Pre-Expansion Period "Pre-Expansion Period" means
the period commencing on the Effective Date and continuing
until the date that the first Approved Expansion Project in
Contract Area Block A has been approved by the boards of
directors of FCX, PT-FI, and PT-RTZ or, pursuant to
Clause 10.3, approved by the board of directors of PT-RTZ.
During the Pre-Expansion Period, all revenues from
and all Capital Costs and Operating Costs in respect of
Contract Area Block A are attributable 100% to PT-FI except
for revenues, Capital Costs and Operating Costs in respect
of Joint Operations Greenfield Projects (as to which
paragraphs 5.4 and 6 of this Annex shall apply) and Sole
Risk Ventures undertaken by PT-RTZ, if any (as to which,
subject to any express provision to the contrary in this
Annex or the Agreement, PT-RTZ shall be entitled to all
revenues attributable).
5.2 Development Period
5.2.1 "Development Period" means the period
commencing with the date that the first Approved
Expansion Project in Contract Area Block A has been
approved by the boards of directors of FCX, PT-FI and
PT-RTZ or, pursuant to Clause 10.3, approved by the
board of directors of PT-RTZ and continuing until the
Sharing Commencement Date.
During the Development Period, all
revenues from Contract Area Block A are attributable
100% to PT-FI except for revenues in respect of Joint
Operations Greenfield Projects (as to which
paragraphs 5.4 and 6 of this Annex shall apply) and
Sole Risk Ventures undertaken by PT-RTZ, if any (as
to which, subject to any express provision to the
contrary in this Annex or the Agreement, PT-RTZ shall
be entitled to all revenues attributable).
During the Development Period, all
Capital Costs and all Operating Costs in respect of
Contract Area Block A are attributable 100% to PT-FI
except for:
(i) all Capital Costs attributable to
Approved Expansion Projects, as to which the
provisions of 5.2.2 of this Annex shall apply
(ii) all Capital Costs and Operating Costs
attributable to or in respect of Joint
Operations Greenfield Projects as to which the
provisions of paragraphs 5.4 and 6 of this Annex
shall apply
(iii) all costs of Sole Risk Ventures
undertaken by PT-RTZ, all of which shall,
subject to any express provision to the contrary
in this Annex or the Agreement, belong to and be
borne by PT-RTZ.
5.2.2 Approved Expansion Projects
5.2.2.1 General For each Approved Expansion
Project, an AFE will be prepared detailing
budgeted expenditures of Capital Costs
anticipated to be incurred. Separate accounts
will be maintained for each AFE.
5.2.2.2 Allocation of Approved Expansion
Project Development Costs
(a) Approved Expansion Projects up
to $750,000,000 Until such time as
aggregate Capital Costs for Approved
Expansion Projects reach $750,000,000,
these Capital Costs will be allocated to
and be borne by the Participants in
proportion to their respective
Participating Interests in Contract Area
Block A and PT-FI's share will be funded
through the RTZ Loan.
(b) Approved Expansion Projects in
Excess of $750,000,000 Capital Costs for
Approved Expansion Projects after
aggregate Capital Costs for Approved
Expansion Projects exceed $750,000,000
will be allocated to and be borne by the
Participants in proportion to their
respective Participating Interests in
Contract Area Block A.
5.2.3 Statements of Approved Expansion Project
Development Costs Monthly statements of Approved
Expansion Project Development costs will be prepared
by the Operator and submitted to the Operating
Committee so that actual Development costs may be
monitored.
5.2.4 Payment for Development Costs Payment
for Development costs will be included in the monthly
cash calls made pursuant to paragraph 10.3 of this
Annex.
5.3 Production Period
5.3.1 "Production Period" means the period
commencing on the Sharing Commencement Date for the
first Approved Expansion Project and continuing
thereafter for so long as Joint Operations are
producing Products from Contract Area Block A.
During the Production Period, the
revenues from Contract Area Block A shall be
allocated between the Participants as follows:
(a) until and including the Cut-off Date
PT-RTZ shall be entitled to such share as is
proportionate to its Participating Interest in
Contract Area Block A of all Incremental
Expansion Revenues and of revenues related to
Joint Operations Greenfield Projects as provided
in paragraphs 5.4 and 6 of this Annex
(b) after the Cut-off Date, PT-RTZ shall
be entitled to such share as is proportionate to
its Participating Interest in Contract Area
Block A of all revenues derived from Joint
Operations in Contract Area Block A
(c) PT-RTZ shall be entitled to all
revenues attributable to Sole Risk Ventures
undertaken by PT-RTZ
(d) PT-FI shall be entitled, as between
the Participants, to all revenues from Contract
Area Block A other than those allocated to PT-
RTZ pursuant to sub-paragraphs (a), (b) and (c)
above.
During the Production Period, the costs
of or attributable to Contract Area Block A (other
than Exploration Costs as to which paragraph 3 shall
apply) shall be allocated to and borne by the
Participants as between themselves as follows:
(i) until and including the Cut-off Date,
PT-RTZ shall be obliged to contribute such share
of the following costs as is proportionate to
its Participating Interest in Contract Area
Block A:
(A) Expansion Share of Costs
(B) Capital Costs of Approved
Expansion Projects only
(C) Joint Operations Greenfield
Projects
(ii) after the Cut-off Date, PT-RTZ shall
be obliged to contribute such share of Operating
Costs and of Capital Costs of Joint Operations
in Contract Area Block A other than Sole Risk
Ventures as is proportionate to its
Participating Interest in Contract Area Block A
(iii) the costs of or attributable to each
Sole Risk Venture in Contract Area Block A
undertaken by PT-RTZ shall be allocated to and
borne by PT-RTZ
(iv) all costs of or attributable to
operations in Contract Area Block A other than
those allocated to and borne by PT-RTZ pursuant
to sub-paragraphs (i), (ii) or (iii) above
shall, as between the Participants, be allocated
to and borne by PT-FI.
5.3.2 General Each month during the Production
Period prior to the Cut-off Date, Incremental
Expansion Cashflow shall be computed by the Operator
and distributed to the Participants in proportion to
their Participating Interests in Contract Area Block
A; provided however, PT-FI shall assign to RTZ Lender
all of its interest in such distributions of
Incremental Expansion Cashflow pursuant to the RTZ
Loan Agreement until such RTZ Loan has been repaid
(including, for the avoidance of doubt, all interest
under the RTZ Loan Agreement). Each month during the
Production Period from and after the Cut-off Date,
all revenues and costs in respect of Joint Operations
in Contract Area Block A shall be considered in
determining the amount to be distributed to the
Participants in proportion to their Participating
Interests in Contract Area Block A.
(a) Incremental Expansion Revenue Each
month during the Production Period, Incremental
Expansion Revenue will be computed by the
Operator and included in the computation of
Incremental Expansion Cashflow for such month.
(b) Expansion Share of Costs Each month
during the Production Period, Expansion Share of
Costs will be computed by the Operator and
included in the computation of Incremental
Expansion Cashflow for such month.
(c) Incremental Expansion Cashflow Each
month during the Production Period, Incremental
Expansion Cashflow will be computed by the
Operator and distributed to the Participants or,
in the case of PT-FI, its assignee for the time
being, in the proportions attributable to each
not later than the 20th business day after the
end of the month. The amount distributed will
be based on the best estimate of Incremental
Expansion Revenue less Expansion Share of Costs
for such month.
(d) Statements of Incremental Expansion
Cashflow Monthly statements will be prepared by
the Operator showing details of the Incremental
Expansion Cashflow computation. A copy of the
statements will be distributed to the
Participants not later than the 20th business
day after the end of the month.
(e) Adjustment Any adjustment that is
determined to be required at any time shall be
included in the next monthly statement.
(f) Annual Adjustment Not later than 45
business days after the end of each Year during
the Production Period, a statement of the
previous Year's Incremental Expansion Cashflow
shall be prepared by the Operator and
distributed. If the annual settlement statement
indicates an overpayment of Incremental
Expansion Cashflow, each Participant shall pay
the Operator its share of such overpayment
within 30 business days. If the annual
settlement statement indicates an underpayment
of Incremental Expansion Cashflow, the Operator
shall pay to each Participant its share of such
underpayment within 30 business days.
5.4 Joint Operations Greenfield Projects in Contract Area
Block A Joint Operations Greenfield Projects in Contract
Area Block A will be accounted for in a manner comparable to
that provided in paragraph 6 of this Annex in respect of
Joint Operations in Contract Area Block B. All costs,
including allocable costs, of and revenue related to
Greenfield Projects in Contract Area Block A will be
excluded from costs of and revenues derived from other
operations in Contract Area Block A.
6. Joint Operations in Contract Area Block B
6.1 Development Phase "Development Phase" means the
period commencing with the date on which the first Joint
Operations Greenfield Project in Contract Area Block B has
been approved by the boards of directors of PT-FI and PT-RTZ
and continuing until the date following commissioning of
such project on which the first Sales Revenues from such
project are accrued.
6.1.1 General For each Joint Operations
Development project, an AFE will be prepared by the
Operator detailing budgeted expenditures of Capital
Costs anticipated to be incurred. Separate accounts
will be maintained for each AFE.
6.1.2 Allocation of Joint Operations
Development Costs All Capital Costs incurred in
Joint Operations in Contract Area Block B will be
allocated to and borne by the Participants in
proportion to their respective Participating
Interests in Contract Area Block B and included in
monthly cash calls made pursuant to paragraph 10.3 of
this Annex.
6.1.3 Statements of Development Costs Monthly
statements will be prepared by the Operator showing
details of Joint Operations Development costs. These
statements will be submitted to the Operating
Committee not later than the 20th business day after
the end of the month so that actual Joint Operations
Development costs may be monitored.
6.1.4 Payment for Development Costs Payment
for Development costs will be included in the monthly
cash calls made pursuant to paragraph 10.3 of this
Annex.
6.2 Production Phase "Production Phase" means the period
commencing on the date following commissioning of the first
Joint Operations Greenfield Project on which the first Sales
Revenues from such project are accrued and continuing for so
long as Joint Operations are producing Products from
Contract Area Block B.
6.2.1 General During the Production Phase, all
revenues and costs in respect of Joint Operations in
Contract Area Block B shall be allocated to and be
borne by the Participants in proportion to their
Participating Interests in Contract Area Block B.
All revenues and costs in respect of Joint Operations
in Contract Area Block B shall be considered in
determining the amount to be distributed to the
Participants in proportion to their respective
Participating Interests in Contract Area Block B.
(a) Revenue Each month during the
Production Phase, the revenues that result from
Joint Operations in Contract Area Block B will
be computed by the Operator and included in the
computation of cashflow from Joint Operations in
Contract Area Block B for such month.
(b) Operating Costs Each month during
the Production Phase, the Operating Costs that
result from Joint Operations in Contract Area
Block B will be computed by the Operator and
included in the computation of cashflow from
Joint Operations in Contract Area Block B for
such month.
(c) Cashflow Each month during the
Production Phase, the cashflow will be computed
by the Operator by subtracting Operating Costs
that result from Joint Operations in Contract
Area Block B from revenues that result from
Joint Operations in Contract Area Block B and
the net amount of this calculation will be
distributed to the Participants in the
proportions to which they are entitled not later
than the 20th business day after the end of the
month. The amount distributed will be based on
the best estimate of revenues and Operating
Costs from Contract Area Block B for such month.
(d) Statements of Cashflow Monthly
statements will be prepared by the Operator
showing details of the cashflow computation and
delivered to the Participants not later than the
20th business day after the end of the month.
(e) Adjustment Any adjustment that is
determined to be required at any time shall be
included in the next monthly statement.
(f) Annual Adjustment Not later than 45
business days after the end of each Year during
the Production Phase, a statement of the
previous Year's cashflow shall be prepared by
the Operator and distributed. If the annual
settlement statement indicates an overpayment of
cashflow, each Participant shall pay the
Operator its share of such overpayment within 30
business days. If the annual settlement
statement indicates an underpayment of cashflow,
the Operator shall pay to each Participant its
share of such underpayment within 30 business
days.
7. Accounting for Sole Risk Ventures
7.1 Conduct of Operations Upon the establishment of a
Sole Risk Venture, the Operator, as determined pursuant to
the Agreement, or some other entity selected as operator of
the Sole Risk Venture in accordance with the Agreement (also
in this Annex referred to as the Operator), will be
responsible for the conduct of the operations of such
venture, including its accounting requirements, and will be
paid a reasonable fee for such services by the applicable
Participant.
7.2 Determination of Costs and Revenues Separate
accounts will be maintained for each Sole Risk Venture. All
costs, including allocable costs, of and revenue related to
Sole Risk Ventures will be excluded from the costs of and
revenues derived from Enterprise Operations.
7.3 Use of PT-FI Available Assets To the extent that the
Sole Risk Venture requires the use of PT-FI Available
Assets, PT-FI support services or Joint Account Assets, and
the use of these assets and support services does not
prejudice then or later the conduct of Enterprise
Operations, each of PT-FI and PT-RTZ (as appropriate) will
make available and charge to the Sole Risk Venture the full
direct and allocable costs, including financing and capital
costs, under Privatisation Agreements, of providing such
assets and services.
7.4 Sole Risk Venture Revenues and Costs All revenues
and costs derived from any Sole Risk Venture will be
directly attributed by the Operator to the Participant
undertaking the Sole Risk Venture. The net amount of
revenues less costs will be included in the monthly cash
call made pursuant to paragraph 10.3 of this Annex for
settlement (in the case of a negative amount) or
distribution (in the case of a positive amount) to the
Participant undertaking the Sole Risk Venture as
appropriate.
7.5 Sole Risk Venture Reports The Operator will
summarise each month all costs, including charges associated
with the use of PT-FI Available Assets and support services,
and revenues derived from the Sole Risk Venture during that
month and deliver this report to the Participant undertaking
the Sole Risk Venture not later than the 20th business day
after the end of the month.
7.6 Programmes and Budgets Programme and Budgets for
Sole Risk Ventures shall be approved and administered in a
manner comparable to that provided in paragraph 10.1 of this
Annex.
7.7 Co-operation Each Participant shall provide in a
timely manner to the Operator all information that is within
such Participant's knowledge, possession or control which
the Operator may require in order to perform its accounting
responsibilities for Sole Risk Ventures.
If the Operator is not PT-FI, the Operator shall
provide in a timely manner to PT-FI all information that is
within such Operator's knowledge, possession or control
which PT-FI may require in connection with fulfilling its
obligations under the COW.
8. Accounting for Hedging Activities
The revenues allocated to the Participants shall be adjusted to
allocate to the authorising Participant the costs and benefits
of any hedging and other price protection activities authorised
by either Participant pursuant to Clause 9.2.6 of the Agreement.
Prior to entering into any hedging or other price protection
activities authorised in writing by any Participant, the
Participant authorising such activities shall make appropriate
arrangements, satisfactory to the Operator, whereby the Operator
is protected from and assured that it will never be required to
use its own funds in connection with the placing or maintaining
of any such hedging or other price protection activities.
9. Accounting Records, Inspection of Books
9.1 Required Records & Accounts
(A) The Operator shall keep comprehensive and
accurate records and accounts of all Exploration
Costs, Operating Costs, costs in respect of
Feasibility Studies, and costs in respect of
Development which are capable of separate
identification, with respect to:
(i) Approved Expansion Projects,
(ii) Joint Operations with respect to
Contract Area Block A,
(iii) Joint Operations Greenfield Projects
with respect to Contract Area Block A,
(iv) Joint Operations with respect to
Contract Area Block B,
(v) Sole Risk Ventures,
(vi) Chargeable Operations and any other
operations within the Contract Area any part of
the costs of which are borne by either
Participant.
The costs of support and infrastructure
facilities and activities shall be allocated to the
activities for which they are utilised. The costs of
support and infrastructure facilities and activities
which are located in one Contract Area Block, but
utilised in support of activities in one or more
Contract Area Block, shall be allocated to the
activities in the Contract Area Blocks in accordance
with actual utilisation.
(B) The records and accounts in respect of
activities in Contract Area Block A shall be capable
of identifying Incremental Expansion Revenue and
other revenues, those attributable to Joint
Operations other than Approved Expansion Projects and
those attributable to all other activities in
Contract Area Block A, and costs attributable to the
activities, sub-divided as above.
The records and accounts in respect of
activities in Contract Area Block B shall show
separately the costs and revenues of each project.
Activity attributable to Sole Risk
Ventures by either Participant within the Contract
Area shall likewise be separately identifiable within
the records and accounts.
The records and accounts in respect of
Greenfield Projects in Contract Area Block A,
activities in Contract Area Block B and Sole Risk
Ventures will separately identify direct costs of
these projects from costs otherwise allocated
thereto.
(C) All records and accounts referred to
above shall be prepared and maintained in accordance
with generally accepted accounting principles in the
United States.
Accordingly, revenues recognised and
costs incurred shall include, in the normal course of
business, accruals to appropriately reflect the
operations of the business conducted during a given
month or year.
All accounting terms used in this Annex
will, except to the extent otherwise expressly
provided for, be determined in accordance with
generally accepted accounting principles in the
United States.
(D) Subject to compliance with the express
provisions of this Annex, the Operator's basic
accounting systems and accounting practices, policies
and procedures will apply.
(E) All such records and accounts shall be
retained for a period of 10 years or as required for
compliance with tax or other regulatory requirements
or as otherwise agreed to by the Participants.
9.2 Audits
(A) The Operator shall order an annual
examination of the accounting and financial records
kept by it in respect of activities in the Contract
Area for each Year.
(B) The audits shall be conducted by a firm
of accountants of international standing selected by
the Operator and approved by the Operating Committee
and such accountants shall provide certification that
the records and accounts have been properly
maintained in accordance with the provisions of this
Agreement and that the revenues and costs have been
properly calculated and allocated to the Participants
in accordance with the provisions of this Annex and
the Agreement.
9.3 Right of Participants to Inspect Records
Without prejudice to any other provision of this
Annex or the Agreement, and subject in any case to Clause
16.9 of the Agreement, representatives of each Participant
(including for this purpose its accountants or another
appointed firm of accountants and the Secured Creditors (as
defined in the Trust Agreement)) shall be entitled upon
reasonable prior notice at all reasonable times during
normal working hours to inspect and obtain copies of all
documents, records and accounts under the control of the
Operator relating to Enterprise Operations or the
Participation provided always that the frequency and
duration of inspections shall be without undue hindrance to
the proper conduct of Enterprise Operations or the
activities of the Operator. Without prejudice to the above,
but subject to the proviso, the Operator shall also give to
the Participants and their accountants during normal working
hours such access to the Operator's books and records and
such explanation of the same as the Participants or their
accountants may reasonably require in order to verify the
revenues from Sole Risk Ventures undertaken by such
Participants, Contract Area Block B, Incremental Expansion
Cashflow, Joint Operations Greenfield Projects in Contract
Area Block A and, after the Cut-off Date, revenues from
Joint Operations in the Contract Area and costs attributable
to the same.
9.4 Right of Participants to Conduct Audit
(A) Without prejudice to any other provision
of this Annex or the Agreement, and subject in any
case to Clause 16.9 of the Agreement, representatives
of each Participant (including for this purpose its
accountants or another appointed firm of accountants
and the Secured Creditors (as defined in the Trust
Agreement)) will be entitled, upon reasonable notice
and at its own cost, to conduct an audit of the
accounting and financial records of operations to
which these Financial and Accounting Procedures apply
for any Year, provided, however, that any such audit
shall be conducted within eighteen months after the
end of the Year to which the audit pertains and any
claim for an adjustment must be made within thirty-
six months after the end of the Year to which such
adjustment pertains.
(B) Should such audit reveal an alleged error
in the statement of revenues and costs or in the
calculation of the revenues and costs allocated to
each Participant, notice of the alleged error shall
be given promptly to each Participant and the
Participants shall thereupon use all reasonable
endeavours to reconcile any differences.
(C) Should the Participants be unable to
reconcile the differences to their mutual
satisfaction within a period of 60 days following the
notice referred to above, the dispute shall be
referred to an independent firm of accountants of
international standing appointed by agreement between
the Participants or in default of such agreement
within a period of 30 days following the expiry of
the period of 60 days referred to above, by the
President for the time being of the American
Institute of Certified Public Accountants on the
application of either of the Participants.
(D) Such independent firm of accountants
shall act as an expert and not as an arbitrator and
it shall be directed to find for one Participant or
the other. Its costs shall be borne by the
Participant losing the issue in question and its
determination shall be final and binding upon the
Participants and the Operator.
(E) If it is agreed between the Participants
or determined by the expert that an error has been
made to the calculation of the revenues and costs
from operations to which these Financial and
Accounting Procedures apply, such payments or
reimbursements as shall be appropriate to correct
such error shall be made by the Participants and the
Operator shall make any and all necessary entries and
corrections to the relevant Memorandum Equity
Accounts of each Participant.
9.5 Fair clause
The Participants agree that if any of the methods for
determining charges and credits applicable to operations
under the Agreement set out above prove to be unfair or
inequitable to either party, the Participants will in good
faith endeavour to agree on changes deemed necessary.
10. Other Financial and Accounting Matters
10.1 Programmes and Budgets
10.1.1 Joint Operations Pursuant to Programmes
and Budgets Joint Operations shall be conducted,
expenses shall be incurred and Joint Account Assets
shall be acquired only pursuant to Approved
Programmes and Budgets.
10.1.2 Preparation of Programmes and Budgets
The Operator shall, not less than one month prior to
the Annual Budget Meeting (which shall be held
annually in December as provided in Clause 8.6 of the
Agreement), prepare and submit to the relevant
Committee for recommendation to the boards of
directors of the Participants for the next ensuing
Budgetary Period separate proposed Programmes and
Budgets for Exploration and for Development and
Mining. Any Programme which includes the undertaking
of an Approved Expansion Project (or the relevant
part of it) shall be based upon the programme for
implementation thereof contained in the Feasibility
Study relating thereto.
Each Programme and/or Budget, as proposed
and approved, shall contain, as appropriate, a
breakdown on a quarterly basis of the following:
(a) a reasonably detailed description of
the Joint Operations to be undertaken with
respect to each of ▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇ ▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇;
(b) an itemised estimate of the Capital
Costs and Operating Costs to be incurred,
distinguishing between Replacement Capital Costs
and new Capital Costs and between Exploration
and Development and Mining and between ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇ ▇ ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇;
(c) itemised schedules of estimated
production of Products;
(d) itemised estimates of revenues;
(e) estimates of the amounts and timing
of expected cash requirements from the
Participants; and
(f) such other items as the Operator may
deem necessary or desirable or as either
Participant may reasonably require.
10.1.3 Review and Approval of Proposed
Programmes and Budgets
(a) At the Annual Budget Meeting, the
relevant Exploration Committee or Operating
Committee shall review the Operator's proposed
Programme and Budget and either submit it
unchanged to the boards of directors of PT-FI
and PT-RTZ for their approval or instruct the
Operator to make specified revisions and submit
the revised proposal to such boards for their
approval.
(b) Revisions, modifications and
amendments to Programmes and Budgets may be
initiated by the Operator, the relevant
Exploration or Operating Committee or the board
of directors of PT-FI or PT-RTZ, provided that
no material revision, modification or amendment
shall be made without the approval of both such
boards of directors.
(c) Any Programme and Budget, or any
revision modification and amendment thereto,
shall be deemed to be approved by any board of
directors which does not, within thirty days
after receipt, disapprove the same and notify
the other board of directors and relevant
Exploration or Operating Committee of its
disapproval (including explanation thereof in
reasonable detail).
(d) Except as otherwise specified in the
Agreement or this Annex, unbudgeted AFEs, and
budgeted AFEs in excess of amounts fixed from
time to time by the relevant Exploration or
Operating Committee, shall be submitted by the
Operator and subject to the approval by such
Committee, provided that any AFE which is in
excess of amounts fixed from time to time by the
boards of directors of PT-FI and PT-RTZ or which
requires unbudgeted expenditure in excess of 5%
of any Programme and Budget (whether
individually or as part of a group of related
expenditures) shall also be subject to the
approval of such boards of directors in the
manner set out in paragraph 10.1.3(c).
(e) Except as provided in Clause 10.3 of
the Agreement, should the board of directors of
PT-FI or PT-RTZ disapprove any Programme and
Budget or any revision, modification or
amendment thereto, both boards of directors and
the relevant Exploration Committee or Operating
Committee shall endeavour in good faith to
resolve the difference(s) and reach mutual
agreement on the applicable Programme and Budget
as soon as possible.
10.1.4 Budget Overruns; Programme Changes The
Operator shall immediately notify the relevant
Committee of any material departure from an Approved
Programme and Budget. As soon as practicable
following the Operator becoming aware that the costs
to be incurred under an Approved Budget are likely to
be exceeded by more than 10%, then unless such excess
is directly caused by an emergency or unexpected
expenditure made pursuant to paragraph 10.2 of this
Annex or otherwise authorised by the Participants,
the Operator shall prepare a revised Programme and
Budget for that Year and submit it as soon as
practicable to the relevant Committee for review, and
if needed, for recommendation for approval by the
boards of directors of the Participants.
10.2 Emergency or Unexpected Expenditures In case of
emergency, the Operator may take such action it deems
necessary to protect life, limb or property, to protect the
Enterprise Operations or Sole Risk Ventures or to comply
with law or government regulation. Likewise, the Operator
may make expenditures for unexpected events which are beyond
its reasonable control and which do not result from a breach
by it of its standard of care. In the case of either an
emergency or unexpected expenditures, the Operator shall
promptly notify the Participants of the emergency or
unexpected expenditure, and the Operator shall be reimbursed
therefor by the Participants as provided in Clause 6.1 of
the Agreement and this Annex.
10.3 Cash Calls
10.3.1 On the basis of the Approved Programme
and Budget or revision thereof, the Operator shall
submit to each Participant prior to the fifth
business day of each calendar month, a billing for
estimated cash requirements for the next following
calendar month, taking into consideration any cash
the Operator has on hand from Joint Operations and
any timing differences of actual expenditures from
the Approved Programme and Budget, and identifying
the separate contribution obligations of each
Participant in accordance with the provisions of this
Annex and the Agreement and any reimbursement
obligations under Clause 12 of the Agreement relating
to Sole Risk Ventures.
10.3.2 Prior to the first business day of the
month for which the funds are requested, each
Participant shall pay to the Operator by wire
transfer to the bank account designated by the
Operator, its share of the estimated amount as is
shown in the billing unless the share of the amount
shown therein is manifestly incorrect.
10.3.3 Time is of the essence of payment of each
billing. A Participant that fails to meet cash calls
in the amount and at the times specified in this
paragraph 10.3 shall be in default, and the amount of
the defaulted cash call shall bear interest from the
date due at an annual rate equal to 5% above LIBOR as
published in the London Financial Times on the
business day immediately prior to the date of
default.
10.3.4 All funds in excess of immediate cash
requirements shall be invested in interest-bearing
accounts, for the benefit of the Participants
provided that (i) all funds representing the
Exploration Obligation shall be so invested solely
for the benefit of PT-RTZ and (ii) funds for any Sole
Risk Venture shall be so invested solely for the
benefit of the applicable Participant.
10.3.5 Should the Operator be required to pay
large sums of money on behalf of the Participants
which were unforeseen at the time of providing the
monthly cash call, the Operator may make written
request for special advances which shall be payable
not later than the fifth business day after receipt
of such notice.
10.4 Close-down Costs
10.4.1 Close-down Costs directly attributable to
a Sole Risk Venture shall be allocated to and borne
by the Participant undertaking the Sole Risk Venture.
10.4.2 Notwithstanding any other provision to
the contrary in this Annex or the Agreement but
subject to paragraph 10.4.1 above, each Participant
agrees to pay and shall be liable to pay in respect
of Close-down, that proportion of Close-down Costs
which the value of Products sold by or for such
Participant over the life of the COW bears to the
value of all Products sold by or for the Participants
over the life of the COW.
Final salvage shall be credited to the
Participants in the same proportion as Close-down
Costs are allocated to them.
10.4.3 For purposes of paragraph 10.4.2, "value"
is determined by reference to the actual realised
price of Products sold (or which would have been
realised but for any price protection activities),
adjusted for inflation, net of smelting and refining
charges, royalties, and other selling expenses.
ATTACHMENT X
1