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 Contract for Leasing


Western Garmak Coal Occurrence at Dar-e-Souf


District of Samangan Province











Khou mpany





\ And the", j





Ministry of Mines


of the Islamic Republic of Afghanistan





Contract Number: co.002-91





14 July, 2012





S'


 Table of Contents





1. Definitions:.........................................................................................................................3


2. Details of this Contract:......................................................................................................5


3. Duration and Renewal of the contract:...............................................................................6


4. Financial Guarantee:...........................................................................................................6


5. Investment:.........................................................................................................................7


6. Exploration Phase:..............................................................................................................7


7. Exploitation Phase:.............................................................................................................8


8. Royalties:............................................................................................................................9


9. Funding...............................................................................................................................9


10. Production Rate:............................................................................................................10


11. Accounting of Materials:..............................................................................................10


12. Access:..........................................................................................................................10


13. Reporting Requirements:..............................................................................................10


14. Employment of workers:...............................................................................................10


15. Equipment and Machinery............................................................................................11


16. Health and Safety Plan and Training:...........................................................................11


17. Environmental Protection:............................................................................................11


18. Transfer or Assignment of this Contract.......................................................................12


19. Taxation & Fees Performance:.....................................................................................12


20. Surface Use fees:...........................................................................................................12


21. Inspection, Supervision and Capacity-Building:..........................................................13


22. Explosives:....................................................................................................................13


23. Energy:..........................................................................................................................13


24. Amendments:................................................................................................................13


25. Force Majeure:..............................................................................................................13


26. Observance of laws:......................................................................................................14


27. Historical and cultural artifacts:....................................................................................14


28. Obligations:...................................................................................................................14


29. Construction of the necessary facilities and infrastructures.........................................15


30. Social Services:.............................................................................................................15


31. Dispute Resolution:.......................................................................................................15


32. Cancellation of Contract:..............................................................................................15


33. Notification and Remedy..............................................................................................16


34. Default...........................................................................................................................17


3 5. Domicile; Service of Process........................................................................................17


36. Damage to Property:.....................................................................................................18


37. Binding Effect of Contract............................................................................................18


38. AEITI............................................................................................................................18


39. Governing Law.............................................................................................................18


40. Severability...................................................................................................................18


41. Complete Contract........................................................................................................18


THIS CONTRACT, dated is entered into between Khoshak Brothers Company


(KBC), a company duly licensed under the laws of Afghanistan, and the Ministry of Mines of


the Islamic Republic of Afghanistan ("MoM"), (together the "Parties").





IN WITNESS





WHEREAS the Ministry of Mines has the authority for the ownership, control and


monitoring of all mineral rights within Afghanistan, and specifically controls the mineral


rights to the Coal Project located in Western Garmak area in the Dara-e-Sof District ,


Samangan Province, Afghanistan;


WHEREAS the Aria Popal Company desires to be engaged in the business of mining of


Coal within Afghanistan;


WHEREAS the Aria Popal Company has been granted the right to operate a business in


Afghanistan by the Afghanistan Investment Support Agency (AISA) with license number (21


- - - 2343).


WHEREAS the Parties hereto desire that the MoM grants the mineral rights, including the


necessary Exploration and Exploitation Licenses, to the Western Garmak Coal Project to Aria


Popal Company;


NOW, THEREFORE, in consideration of the mutual covenants and understandings


contained herein, and in return for good and valuable consideration, the acceptance of which


is hereby acknowledged, and subject to and on the terms and conditions herein set forth, the


Parties agree as follows:


1. Definitions:


The terms used in this Contract shall have the meanings set forth below:


1. "Khoshak Brothers Company" ("KBC"): The entity that was selected as the


Preferred Bidder during the Western Garmak Coal Tender Process to negotiate and


conclude the Western Garmak Coal Project Contract with the Government and which


will be obligated by the terms of this Contract, jointly and severally, together with any


successor entities. KBC has been granted the right from Afghanistan Investment


Support Agency with AISA license # (........dated..........) to start the investment.


2. Associated Materials": means copies of all studies, reports, records, files, documents,


correspondence and other similar printed or written commercial materials to the


extent related to the exploration and mining activities conducted at the Malooma Coal


Project.


3. "Coal": refers to the mineral stipulated in this contract


4. "Commercial Production": The date at which the mining activities associated with


extraction of minerals begins and the mineral produced are made available for sale.


5. "Construction Plan": A plan that sets forth the sequence and schedule of the program


and/or extraction, exploitation and rehabilitation activities.


 6. "Contract Period": the term as set forth in this Contract and any extensions or other


modifications to the term agreed to in writing by the Parties.





7. "Effective Date": of this Contract is the date that the Contract after approval is signed


by both parties.


8. "Environment:" Physical factors of the surroundings of human beings, including land,


water, atmosphere, climate, sound, odors, tastes, artifacts, and biological factors of


animals and plants and the social factors of aesthetics.


9. "Environmental and Social Impact Assessment (ESIA)": the study performed by





KBC, and which must be accepted by MoM, which assesses the Environmental and


Social factors which will be caused by the implementation of the Western Garmak


Coal Project.


10. "Environmental and Social Management Plan (ESMP)": the plan proposed by KBC,





and which must be accepted by MoM, which details the measures to be taken to


minimize or alleviate the Environmental and Social factors applicable to the Western


Garmak Project which are identified and detailed in the ESIA,





11. "Exploration Work": means all the activity or work of prospecting or reconnaissance


in the search for ore and minerals on, in, or under the Said Lands, and the drilling,


examining, measuring, mining and sampling of a mineral deposit when found, in


order to determine the size, shape, position, characteristics, and economic value of the


deposit.





12. "Feasibility Study": A study performed to KBC, taking into consideration the results


of national and regional planning and all currently known and forecasted relevant


technical, environmental, economic, operational and logistical factors, including


considerations of the environmental and social impact assessment activities conducted


as required by Article 7 of this Contract.





13. "force majeure": shall include wars, acts of terrorism, insurrections, civil


disturbances, blockades, embargoes, strikes and other labor conflicts, riots, epidemics,


earthquakes, storms, floods, or other extreme adverse weather conditions, explosions,


fires, lightning, orders or directions of any government de jure or de facto or


instrumentality or subdivision thereof, and acts of God or the public enemy.





14. "Government": The Government of Afghanistan, or any successor entity, acting on


behalf of the Government of Afghanistan with respect to this Contract.


15. "Gross Coal Production": The total production of Coal produced by the mine prior to


deduction of the expenditures.





16. Imminent Hazard: Any event not intrinsic to normal operations that could lead to


rxr' serious injury, the loss of life or damage to physical property.


-. A.scP'w/


- "Mining Law": means the 2009 Mineral Laws of the Islamic Republic of


' .V" ^ Afghanistan.











H'BUfL


 18. "Ministry of Mines (MoM)": The Ministry of Mines of the Islamic Republic of


Afghanistan or any successor entity, acting on behalf of the Government of


Afghanistan with respect to this Malooma Coal Contract.


19. "Month": All references to months in this Contract shall be based on the solar


calendar specified in Article 18 of Afghanistan’s Constitution.


20. "Pollution": Any direct or indirect alteration of the physical, thermal, chemical,


biological, or radioactive properties of any part of the Environment by discharging,


emitting, or depositing wastes so as materially to affect any beneficial use adversely,


or to cause a condition which is hazardous or potentially hazardous to public health,


safety or welfare, or to animals, birds, wildlife, fish or aquatic life, or to plants. The


tenn “pollute” shall have a corresponding meaning.





21. "Regulation": includes any legislative document, procedure, official orders,


directives, requests or guideline that are binding as per the laws of Afghanistan


22. "Royalties": Monetary payments by KBC to the Government of Afghanistan from


gross Coal production in recognition of the right to extract minerals in accordance


with the laws and regulations of Afghanistan, this contract, and as specified in the


bidding proposal for the Western Garmak Coal Project tender.


23. "Said Lands": means all the lands subject to this Contract and contained under the


Licenses which the Parties or a party has an interest, whether granted by the MoM


through option, claim, lease, or otherwise.


24. "Security": means the measures taken to insure the safety of persons and facilities.





25. "US$": means the United States Dollar.


26. "Waste": Any matter, whether liquid, solid, gaseous, or radioactive, which is





discharged, emitted or deposited in the Environment in such volume, consistency, or


manner as to cause an alteration of the Environment.





2. Details of this Contract:


The MoM, in accordance with the agreed terms and conditions of the award of the bidding


tender for the Malooma Coal Concession and the Mineral Laws of Afghanistan hereby grants


Aria Popal Company (KBC) the right to explore for Coal mineralization within the said lands


through issuance of an Exploration License, and the right to mine the economic portions of


the deposit as defined through acceptance by both parties of the detailed Feasibility Study for


the Malooma Coal Project and issuance of an Exploitation License for that delineated


economic area; which will be properly according to accepted extractive plan of the MoM. For


purposes of clarification, this Western Garmak Coal Project Contract includes, but is not


limited to, articles concerning the exploration phase, exploitation phase, and general terms of


the contract.


'O’


' The said- lands of the Exploration Lease area shall be........., which is equal to.......ha and


are bounded by the following coordinates:


 East: 62° 46'43.6" North: 34° 25'46.0"


East: 62° 47’ 53.4" North: 34° 25' 17.7"


East: 62° 48'19.4" North: 34° 25'43.5"


East: 62° 47’51.5" North: 34° 26’07.2"


KBC shall be entitled to market and sell its Coal production in accordance with the


provisions of this contract and the laws of Afghanistan.


3. Duration and Renewal of the contract:





This contract shall be valid for a period of ten (.) years from the Effective Date. (..) years of


which has been allocated for prospecting and exploration phases. Having executed the


contract, the company may start its operation following .... months of mobilization. This


Contract may also be extended or terminated in accordance with the terms and provisions or


as otherwise mutually determined and agreed to in writing by the parties. The mobilization


period is out the validity of contract.


KBC has the right to renewal of this contract, provided that full compliance of the conditions


of this contract are being upheld, and that the KBC informs the MoM in writing at least one


(1) year before the termination date of the contract.


In compliance with the Mineral Law, this contract may be renewed in five (5) year


incremental periods as detailed in Article Three, Section 2 above, until the deposit is


depleted, or the Contract is extended.





Should KBC cease exploration activities related to the approved Exploration Plan for a period


of longer than one year without the approval and agreement of MoM, then the MoM may


consider the Exploration License null and void and the exploration right will revert back to


the Government of Afghanistan.


KBC has the right to renewal of the associated Exploration and Exploitation Licenses through


continuation of this contract as described in Article Three, Section 2 above.


Should KBC cease exploitation activities relating to the approved Feasibility Study for longer


than twelve (12) consecutive months without the approval and agreement of MoM once the


Exploitation License has been issued, then MoM may consider this contract and the


Exploitation License null and void and the right to conduct Coal exploitation activates will


revert back to the Government of Afghanistan. In this case, the guarantee bond of the


company is non-refundable.





In case the company intends to expand its exploration and exploitation zone for performance


of the exploration and exploitation operation in Western Garmak area, the area after approval


by the MoM shall be made available for the company under the same terms and conditions.





4. Financial Guarantee:





tee Bond in the amount of one hundred thousand US Dollars ($100,000 US$) or its


Afghani will be provided by KBC to the Government of Afghanistan at no


leld in a dedicated bank account by the MoM. This is a bond for compensation


of, and reparation for, damage to the environment, property rights, and any other violations


resulting from the activities of KBC, their employees, or contractors during the period of the


contract. The bond, or residual amount, will be returned to KBC, at the termination of this


contract provided that all outstanding claims for compensation and reparation have been


satisfied. The bond shall be kept in a dedicated bank account of the ministry as guarantee for


implementing the conditions of the contract.


5. Investment:


KBC, as part of a detailed Exploration Plan, is obliged to provide the MoM a detailed


investment plan for the exploration phase of the mine, which meets the terms of its bid


proposal which was submitted to the MoM. The Exploration Plan is be submitted to the


MoM within 4 months of the effective date of this contact.


KBC as part of the detailed Feasibility Study, is obligated to provide the MoM a detailed


investment plan for the mining phase of this contract, which meets the terms of its bid


proposal which was submitted to the MoM. The investment plan shall be submitted to the


MoM within ..... months after the economics of the coal occurrence is ascertained and


verified.


6. Exploration Phase:


KBC is obligated to provide the MoM a detailed Exploration Plan within four (.) months of


the Effective Date of this contract. KBC is obligated to begin actual exploration activities as


defined in the Exploration Plan one month after approval by the MoM








KBC agrees to provide an Exploration Plan detailing the following:


Technical Exploration Plan. A plan of anticipated physical activities related to the defining


and delineating of the mineral deposit, including but not limited to access road construction,


drilling program, sampling proposal, metallurgical studies, and time schedule of activities.


Financial Plan. This plan will budget anticipated costs and expenditures for the exploration


program and demonstrate KBC's capacity to finance it.


Environmental Action Plan: This plan will detail the anticipated effects of the exploration


work on the environment, and will include detailed plans to minimize environmental


disturbance and address reparation of damage caused to the environment through the


exploration activities of KBC





KBC agrees that exploration activities will not commence until the Exploration Plan has been


accepted by the MoM. The MoM agrees to respond to KBC on the acceptance or rejection of


the Exploration Plan within a month of receiving the Exploration Plan. Should the


Exploration Plan be rejected, the MoM shall give specific reasons for rejection of part or the


entire plan and cooperate with KBC to remedy the concerns resulting in the rejection. MoM


shall respond to the revised exploration plan submitted by the KBC within 15 days.





and KBC agree that the accepted Exploration Plan will form the basis of the


work and that the KBC is bound to carry out the work as detailed therein and as


 per a time schedule agreed on by both parties. Upon acceptance of its exploration plan and


time schedule, MoM will issue KBC an exploration license for the said lands.


KBC agrees to compile maps, geological data and other related information pertaining to the


deposit, and all of these records shall be available to the MoM upon request. Upon


termination, cancellation, or expiration of the contract these records will become the


exclusive property of the MoM.


If at the end of the Exploration work, or at any time during the exploration phase, and at its


sole discretion, KBC determines that the mineral resource is not sufficient to warrant further


exploration or does not constitute an economically mineable deposit, then KBC upon notice


to and acceptance by the MoM, has a right to terminate exploration activities and complete


reclamation work as per the Environmental Action Plan noted in Article 6 Section 1 Number


C above.


Any and all costs incurred by KBC relating to the Exploration work and reclamation from


exploration activities are not refundable.


7. Exploitation Phase:





1. KBC agrees to submit for approval to the MoM a Feasibility Report including the


following technical information. The investment plan is due to the MoM within 4


months if delineating an economic deposit.


Results of the Exploration Plan including all documentation to support studies, maps,


results, and conclusions as outlined in Article 6 above.


Proposed Technical Plan for the construction and operation of the Western Garmak


Coal Project.


This plan will include but is not limited to proposals for Construction Plan; Mining


Plan outlining mine development plans, equipment needs, development stage, etc.


Operations Plan outlining expected numbers of employees, expected outputs, revenue


generations predictions and other pertinent information.











C. An Environmental and Social Management Plan (ESMP) addressing:


The environmental impact as noted in the ESI A and mitigating the effects to the environment


and include measures to safeguard the environment from unnecessary damage.


The social impacts as found in the ESI A and what measures will be taken to mitigate


the negative impact of the proposed mining to the local populations. The plan if necessary


will outline the ‘Resettlement Action Plan’, which is part of the Social Development Plan as


well as development projects to assist the local peoples in social development.


iii.l^The,health and safety of the employees as detailed in a Health and Safety Plan.


2. KBC agrees that activity associated with the mining phase will commence only after the


Feasibility Study has been accepted and approved by the MoM. The MoM agrees to respond


to KBC within one and a half month of receiving the Feasibility Study of the acceptance or


rejection of the Feasibility Study. Should the Feasibility Study be rejected, the MoM shall


give specific reasons for rejection of part or the entire plan and cooperate with KBC to


remediate the concerns resulting in the rejection.


3. Both parties agree that the Feasibility Study is a legal and binding part of this contract,


and will become the basis for extraction activity; the KBC is bound to carry out works


detailed within and the Feasibility Study. Upon acceptance of its exploration plan, MoM will


issue KBC an exploitation license for the said lands.


4. Subject to the provisions of the Exploitation Plan KBC is obligated to selectively


stockpile low-grade material separate from waste materials. These stockpiles will be clearly


marked and separated from other non-economic repositories.


5. KBC agrees to maintain mining standards as agreed in the exploitation plan. KBC may


incorporate new technologies within its operations, which modify the approved Feasibility


Study if such changes will clearly improve the optimization of the operation.


6. Should KBC discover mineralization other than Coal that is of potential economic value,


it will inform MoM immediately


7. KBC may request from the MoM the right to extract the newly discovered


Minerals, however, until such a right has been granted the mineral remains


the property of the Government of Afghanistan.


8. Should the KBC request the extraction of the new mineral, it shall attach the


Feasibility Study Report of the new mineral to its application submitted to the MoM.


The MoM shall decide about the grant of the new mineral right discovered within the


relevant license area as per the Mineral Law and Mining Regulations.


8. Royalties:


Royalty Rate: KBC agrees to pay MoM at a certain time 1211 Afs (one thousand two


hundred and eleven Afs) royalty for per ton of coal produced during exploration, exploitation


and any other time.


After the completion of each business quarter, KBC shall deposit the royalty of the coal


produced to the bank account of the Ministry


9. Funding


KBC shall have responsibility for funding all exploration, construction, and operations


authorized pursuant to this Contract and determining the terms on which said funding shall be


obtained. KBC may, as authorized by the applicable laws of Afghanistan, pledge such rights,


licenses and authorizations obtained in accordance with operations authorized by this


10. Production Rate:


The projected production rates will be determined by the KBC in the feasibility study


resulting from the exploitation program, and in line with the plan approved by the MoM and


will be set to optimize the extraction of the deposit. The MoM will be informed of the actual


production rates on a monthly, quarterly and annual basis.


11. Accounting of Materials:


KBC is to install an accurate scale for the weighing of the Coal.


12. Access:


KBC agrees that the MoM, or its designated authorized representative, will have unrestricted


access to the license area upon due written notice by the MoM to KBC with the exception of


the Health and Safety Inspectorate as per Article 22 Section 1 below.


13. Reporting Requirements:


In all phases of the Malooma Coal Occurrence Project, including but not limited to KBC's


exploration and exploitation activities, KBC agrees that it will:


KBC agrees to maintain and retain financial records in accordance with International


Financial Reporting Standards (IFRS) or equivalent accounting methods. KBC agrees to


maintain records and documentation of work activities and any other documentation as may


be required by the MoM or other authorities. These books and records will be made available


to authorized representatives of the MoM or other authorized persons upon request.


KBC agrees to provide Quarterly Reports to the MoM documenting all work progress made


over the quarter, the current status in regard to the planned schedule, and all expenditures for


the quarter, and project to date. The Quarterly Report is due no later than 30 days after the


end of the quarter.


KBC shall report to the MoM and the relevant authorities about any risks and accidents that


occur in connection with its activities and results in injuries, fatality and financial losses and


as well as any imminent hazard that arises.


14. Employment of workers:


Employment of Afghan Nationals: KBC shall employ Afghan personnel, to the extent


practicable in all classifications of employment, for its Coal Production Facilities


construction and operations in Afghanistan.


Training: KBC shall develop a training program and facility of suitable capacity for the


training of persons of Afghanistan citizenship in all classifications of employment for its Coal


Production Facilities.


KBC shall pay the expenses associated with work permit and visa of its international staff.


Equality: There shall at all times be equal treatment, facilities, and opportunities for all


employees, both Afghan and non-Afghan, in the same job classification regardless of


/natibr&lity.


Employee Accident Compensation: KBC shall maintain adequate insurance for the medical


and rehabilitation costs for any Coal Production employee injured performing his or her


duties while employed by KBC.


15. Equipment and Machinery


The supply of equipment and machinery, for all phases of prospecting, exploration, mining


and processing of material are the responsibility of KBC.


KBC is to supply in its technical proposal, a planned list of equipment and machinery to the


MoM together with an estimate of the cost. After purchase a copy of the proof of purchase


and cost shall be supplied in the quarterly reports.


KBC may procure its equipment and machines within Afghanistan or outside the country


according to the applicable laws. In the case where existing law prevents the import of any


equipment required by the mining operation, the MoM will assist with the importation of


such essential equipment.


16. Health and Safety Plan and Training:


KBC shall prepare its health and safety plan and submit it for approval to MoM


In accordance with the Minerals Law, KBC shall produce and implement a health and safety


plan. The details of this health and safety plan will be displayed in a prominent place and be


made known to illiterate workers.


KBC is bound to observe all regulations with regard to the supply of personal protective


equipment.


KBC shall implement a specific training program for the workers detailed in the Health and


Safety Plan.


17. Environmental Protection:


KBC shall observe all environmental laws and adhere to the Environmental and Social


Mitigation Action Plan as agreed to by both parties at the commencement of the mining


phase.


KBC as Holder of a Exploitation License is obliged to include in its plans details for its usage


of water and for the protection of local community water supplies, which must be presented


to the Environmental Directorate.


In order to protect and prevent environmental contamination, the KBC is obligated to do all


activities according to specified standards of hygiene and workplace environment according


to the laws of Afghanistan.


The KBC shall spend a minimum of fifty thousand dollars (US$ 50,000) during the contract


 The company shall be prepared for expending the minimum fund required to mitigate the


adverse environmental impacts and remedy the adverse environmental impacts caused by the


company activities after the expiry of the contract.





18. Transfer or Assignment of this Contract


KBC may not assign, transfer, lease, or pledge any of the rights, privileges, liabilities, or


obligations established under this Western Garmak Coal Project Contract without the prior


written consent of the MoM in accordance with the Mineral Laws.


The assignee shall have all the rights and privileges and shall assume all the liabilities and


obligations of the assignor with respect to what is assigned as per the MoM and the Mineral


Laws. The assignee is severally and jointly responsible to the government for the actions of


the lessor and lease holder.


If KBC is rendered incapable of performing any of the conditions under the terms of this





contract for any reason, application to transfer of the rights granted under this contract should


be requested by a demonstrated authorized representative within three (3) months of


incapability to perform. If the application is received after the three (3) month period, these


rights and privileges will expire.





19. Taxation & Fees Performance:


KBC shall pay all applicable taxes, fees, custom duties, rents, penalties and other charges to


the Government as set forth in this Contract, and the applicable laws of Afghanistan. KBC


must deliver a copy of its tax settlement documentation to the MoM at end of each tax period


as specified in the Tax Laws of Afghanistan upon receipt from the Ministry of Finance. All


payments to the Government of Afghanistan shall be calculated in Afghanis in accordance


with the official exchange rate of the Da Afghanistan Bank and paid in Afghanis or in such


other currencies as may be acceptable to the Government.





KBC shall within a period as provided by the prevailing law and regulations furnish annually


to the Government of Afghanistan audited financial statements prepared in accordance with


International Financial Reporting Standards together with production statistics in reasonable


detail. The accounts shall be audited by an internationally recognized accounting firm


acceptable to the Government of Afghanistan.


According to the articles of this contract, if KBC delays specified payments owed, due and


payable to the MoM by more than one month, then KBC in addition to other obligations of


the contract shall be liable as per the bidding proposal defined as starting at 0.6% the first


month and doubling each month thereafter.


20. Surface Use fees:








KBC shall, during the exploration and exploitation phase, pay annually at the end of the


business year surface use fees to the MoM for the area of the operations and any neighboring


areas that they are using for the direct support of the mining operation according to the laws


of Afghanistan. The annual rate of payment for surface rights shall be five dollars (US$ 5)


°’v /•per hectare during the exploration period and twenty five dollars (US$ 25) during


" v. exploitation period or its equivalent in Afs.


21. Inspection, Supervision and Capacity-Building:


For the purpose of Health and Safety inspection the MoM Inspectorate reserves the right to


access any and all areas covered by this Contract for the purpose of any authorized legal


activity, at any time.


Since it is the part of the MoM Inspectorate Department ToR to oversee the implementation


of contract provisions, the KBC shall provide all the information relating to its mining


activities for the supervisory team of the MoM Inspectorate Department, who from time to


time pay a visit to the mining area.


KBC agrees that the MoM may assign some trainees to work with KBC for limited periods in


order to facilitate the development of professional expertise provided that the MoM has given


KBC reasonable notice in writing, and MoM covers all of the costs associated to these


trainees. KBC may not charge the MoM for this training.


22. Explosives:


Should the use of explosives be necessary, KBC shall apply for and obtain all the necessary


permits and permissions for the purchase, transport, and storage of explosives. The MoM


agrees that all necessary assistance will be given to the KBC to obtain these permits.


KBC shall be responsible for the safe transport, storage, and use of explosives.


In compliance with the relevant provisions and procedures, the company shall maintain


records of all explosives purchased, stored and used and submit a copy of them to MoM and


the relevant entities.


KBC is responsible for ensuring compliance with all laws, regulations, and procedures


relating to the use of explosives.


23. Energy:


The supply and procurement of the energy necessary for the Western Garmak Coal Project is


the responsibility of KBC.


24. Amendments:


The Parties mutually agree that this Coal Project Contract may be amended by the written


consent of the Parties and will be revised as necessary. For the purpose of this Coal Project


Contract, the Ministry of Mines is authorized to approve decisions concerning amendments


for the Government and KBC, or its successor, is authorized to approve decisions concerning


amendments for KBC


25. Force Majeure:


Any failure by the Government or any of its Ministries or subdivisions, or by KBC, to carry


 If, through force majeure, the fulfillment by either Party of any terms and conditions of this


Contract is delayed, curtailed, or prevented, then anything in this Contract to the contrary


notwithstanding, the time period for fulfilling the obligation thereby affected shall each be


extended for a period equal to the total of the periods during which such force majeure causes


or their effects were operative. Provided, however, that only such loss, damage or injury as


could not have been avoided by the taking due care or such reasonable alternative measures


as aforesaid shall be regarded as the consequences of any failure caused by force majeure


If KBC’s ability to perform its obligations as affected by force majeure KBC shall notify the


MoM within 24 hrs by phone and 3 days in writing, and estimating the additional time period


necessary to address the force majeure.


The Parties shall agree as to the amount of time necessary to address the force majeure and


the parties shall endeavor to do everything reasonable within their power to remove such


cause and resume activities within the agreed upon time period; provided, however, that


neither party shall be obligated to resolve or terminate any dispute with third parties,


including labor disputes, except under conditions acceptable to it or pursuant to the final


decision of any arbitral, judicial, or statutory agencies having jurisdiction to finally resolve


the dispute.





26. Observance of laws:


KBC, in carrying out this contract, hereby accepts the obligations to conduct all the


prospecting, exploration and exploitation activities in compliance with all of the applicable


terms of this Contract, and the applicable laws and regulations of Afghanistan.


27. Historical and cultural artifacts:





If, during prospecting, exploration, and mining, any historical or cultural artifacts,





monuments, buried treasures and (noble metals and non-noble metals) are found; these


historic items and works (according to the applicable laws of Afghanistan) will belong to the


government. If KBC, during its operations becomes aware of the existence of this kind of


treasure or monuments, ICBC is bound to inform the Ministry of Mines and Ministry of


Culture within 24 hours.


28. Obligations:








KBC shall:





KBC is not allowed to conduct exploration or mining activates outside of the areas specified


in this contract; except when additional mining contracts have been awarded to KBC by the


Ministry of Mines.


The MoM shall:


Provide the licenses, land, and rights of way necessary for Coal Production facilities


construction and operation in accordance with this Contract and the associated Security


The MoM will grant rights to subsurface water, and facilitate the use of surface water, as may


be necessary for this Contract.





The MoM will facilitate to the extent possible all governmental licensing within Afghanistan


pertaining to this contract.


29. Construction of the necessary facilities and infrastructures


KBC shall perform all necessary construction during the period of the contract e.g. offices;


stores; buildings; roads, and etc. at its sole expense, and submit a copy of all expenses as part


of the quarterly report to MoM.


When the contract ends, or is cancelled before its scheduled period, the immovable properties


and infrastructure such as roads, clinics, parks, buildings and water resources, will become


the property of the government without compensation. KBC is only entitled to retain


ownership of movable properties.


When the contract expires, terminates, or is cancelled, KBC shall remove its movable


property and exploited material from the mining site within six months. Failure to do so will


result in removal by the MoM, who will not be liable for any damage, and any expenses


incurred for removal or storage must be repaid by KBC.


30. Social Services:


KBC shall execute the social programs submitted in accordance with the proposal and the


social development plan.


31. Dispute Resolution:


Either party to the contract should try to manage and resolve conflicts arising from


disagreement in the interpretation of the contract, via negotiations, mutual agreement, and


other non-confrontational means. Both sides should resolve their conflict within sixty days


(60) after receiving written notice of an issue related to the contract. If unable to reach a


solution, as per the Mineral Laws then both sides hereby agree to refer their disagreement to


arbitration which shall be the International Court of Arbitration as the independent arbitrator.


32. Cancellation of Contract:


After the signing of the contract, any inability or failure of KBC to carry out the contract will


result in the contract being canceled and the Guarantee Bond of KBC will not be refunded.


In the event that there are outstanding fees, tax repayments, or expenses for reparation of


environmental damage, these expenses will be recovered by MoM from KBC.


a) Termination by the Government. In the event that:


1. KBC assigns to a third party all or a portion of the rights held by KBC under this Coal


 2. KBC has knowingly submitted to the Government false statements which were a


material consideration for the bidding, granting, or execution of this Coal Project


Contract, or


3. There exists another material breach or nonobservance by KBC of any of the terms,


obligations, or conditions of this Coal Project Contract, or of any law of Afghanistan,


or


The Ministry may, subject to relevant provisions of Mineral Law, Mineral regulations and





terms of this contract, revoke this Coal Project Contract and be entitled to recover any


damages it may have suffered due to KBC committing one or more of the above actions. The


extent of the damages shall be determined by a reputable third party who has been agreed to


by both parties.


b) Termination by KBC. In the event that:





1. The Government revokes or otherwise terminates this Coal Project Contract without





cause or legal justification, or


2. The Government violates KBC’s rights under this Coal Project Contract, or


3. KBC’s operations are interfered so seriously by the Government that KBC is unable


to maintain the normal operation of the Coal Production Facilities, or


4. There exists another material breach or nonobservance by the Government of any of


the terms, obligations, or conditions of this Coal Production project, or of the laws of


Afghanistan;


Then KBC may, subject to relevant provisions of this contract, revoke this Coal Project





Contract and be entitled to recover any damages it may have suffered due to the Government


committing one or more of the above actions. The extent of the damages shall be determined


by a reputable third party who has been mutually agreed to by both parties.








33. Notification and Remedy


In the event that the Government seeks to terminate this Coal Project Contract for a material





breach:





1. The MoM shall give notice in writing specifying the particular cause for termination


and a time period to address the concern based upon the circumstances but shall not


be less than three (3) months. KBC is required to remedy the particular cause for


termination within the specified time period.


2. KBC shall notify MoM about rectification of the situation at the end of the period


stipulated in first paragraph of this article.


3. In case the company is obligated to pay compensation for the damage, the method and


amount of compensation will be determined by a reputable third party who has


expertise and experience on the subject and has been mutually agreed by both parties.


The company shall pay the compensation to the Ministry within a month.


case the notification presented by the company about the rectification of the


5 '•2-* 0.^v,-§ituati ation is not acceptable to the Ministry. The Ministry may after the expiration of


time for remedying the cause for termination, terminate this Coal project contract,


'ded, however, that where there is any dispute between the Parties as to:





^2





a) the cause for termination has not been identified by the terminating Party, or


b) Whether there has been any breach or nonobservance by KBC or by the


Government of any term, obligation, or condition of this Coal Project Contract,


or


c) Whether any cause, breach or nonobservance can be remedied or as to the


manner in which it should be remedied,


The Ministry or KBC may, within three (3) months of notice refer the dispute to arbitration as


per Article 31 of this contract.


34. Default


1. If notice of termination is not remedied within the allowed period this Coal contract


shall not automatically terminate but shall constitute default.


2. In the event of a default, the aggrieved Party may notify the other Party in writing of


the default, and the notified Party shall have an additional period of thirty (30) days


after receipt of such notice to cure, or commence and diligently pursue activities if the


breach cannot reasonably be cured within thirty (30) days; provided that the period of


time for remedying the breach shall be extended by any time that a Party is prevented


from acting because of an event of circumstances beyond its control, including


Government action or inaction.


35. Domicile; Service of Process


1. KBC shall be licensed to do business in Afghanistan, be subject to the jurisdiction of


the courts for commercial dispute resolution that are subject to the dispute resolution


provisions specified in this Contract


2. KBC is responsible to establish an office in Kabul and appoint an official


representative and notify the MoM of these details.


Any and all notices or other instruments or papers to be sent to any party hereto by any other


party hereto pursuant to this Contract shall be official in writing from authorized persons and


delivered personally or by fax, or such other method as agreed between the Parties to the


following person or authorized representative:





To KBC:


Name Khoshak Brothers Company


Address Kabul, Chendawol, Jafaria Mosque Street, Sarai Haji Dedar


City Kabul


Country Afghanistan


0791888888,0799334334


!t-Mail • M. Reza-khoushak® yahoo, com


 To MoM:


Name Department of Mining Cadastre


Address Pashtoonistan Watt, across from Ministry of Finance


City Kabul


Country Afghanistan


Phone 0799431477


Fax


E-Mail rsamim(a>mom. gov.af





All notices, requests or other communications required by, provided for in, or relative to this


Coal Project Contract shall be in writing. E-mails, when acknowledged in writing, and


facsimiles shall be considered as written communications.


36. Damage to Property:





KBC shall take all appropriate risk management measures as outlined in the approved plan to


prevent damage to the rights and property of the Government of Afghanistan or third parties.


In the event of negligence or carelessness on the part of KBC under this Contract, KBC will


be liable for such injuries or damage in accordance with the applicable laws of Afghanistan.


37. Binding Effect of Contract


This Contract and the covenants and agreements of it shall legally binding and inure to the


benefit and responsibilities of the Parties, and their respective heirs, personal representatives,


successors, and assigns. Unless the Contract otherwise requires, the covenants of this


Contract shall survive the transfer of title.


38. AEITI





Since Afghanistan has recently acquired the membership of Extractive Industry Transparency


Initiative (EITI), the parties are obligated to comply with all the principles and regulations of


Afghanistan Extractive Industry Transparency Initiative (AEITI).








39. Governing Law


This Contract is subject to and governed by all applicable Laws and Regulations of the





Government of Afghanistan.


40. Severability





Should any part of this contact be found to be unenforceable all other elements shall remain


valid and in full effect.





41. Complete Contract





Contract, consisting of the above Sections 1-41, together with the herein referenced


^ofcqj^ments, constitutes the complete legal Contract between the Parties and supersedes all


«.**■«& \


prior Contracts and understandings between the parties. It shall not be terminated, revoked,


rescinded, altered, or modified in any respect unless as per the terms of this contract and the


prior written consent of the parties. This Contract shall be executed in Dari or Pashto in two


(2) originals, with each Party holding one (1) original.


IN WITNESS WHEREOF, the Parties have executed or caused this Contract to be executed.


Agreed to and Accepted this llj of Cf'f01 2.