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 PRODUCTION SHARING CONTRACT








MIRA IN BLOCK


KURDISTAN REGION


























THE KURDISTAN REGIONAL GOVERNMENT OF IRAQ


AND








HERITAGE ENERGY MIDDLE EAST LIMITED


TABLE OF CONTENTS


PREAMBLE


Article I DEFINITIONS


Article : SCOPE OF THE CONTRACT


Article 3 CONTRACT AREA


Article 4 OPTION'S OF GOVERNMENT PARTICIPATION AND THIRD PARTY


PARTICIPATION


Article 5 OPERATOR


Article 6 TERM OF THE CONTRACT


Article 7 REUNQUISHNCNTS


Article 8 MANAGEMENT COMMI ITEfc


Article 9 GUARANTEES


Ancle ID MINIMUM EXPLORATION WORK OBUGATIONS


Article 11 EXPLORATION WORK PROGRAMS AND BUDGETS


Article 12 DISCOVERY AND CtVhlOPMfcN I


Ankle II DEVELOPMENT AND PRODUCTION WORK PROGRAMS AND


BUDGETS


Article 14 NATURAL GAS


Article 15 ACCOUNTING AND AUDTIS


Article I ft CONTRACTOR'S RIGHTS AND OBLIGATIONS


Article 17 USE OF I AND ANI) EXISTINGINFRASTRIJCTURE


Article 18 ASSISTANCE FROM THE GOVERNMENT


Article 19 EQiJIPMENT AND MATERIALS


Ankle 20 TITLE IT)THE ASSETS


Article 21 USE OF THE ASSETS


Article 22 SUBCONTRACTING


Ankle 23 PERSONNEL TRAINING AND TECHNOLOGICAL ASSISTANCE


Article 24 ROYALTY





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Ankle 25 RECOVERY OF PETROUiUM COSTS


Ankle 26 SHARING OF PROFIT PETROLEUM


Ankle 27 VALUATION AND METERING OF (RUDE OIL AND NATURAL GAS


Ankle 28 DOMESTIC MARKET - SALE Gf GOVERNMENT SHARE


Ankle 29 FINANCIAL PROVISIONS


Ankle 30 CUSTOMS PROVISIONS


Ankle 31 TAX PROVISIONS


Ankle 52 BONUSES


Ankle 33 PIPELINES


Ankle 34 UNmSATTON


Ankle 35 UAB1LTIY AND INSURANCE


Ankle 36 INFORMATION AND CONFIDENTIALITY


Arack 37 ENVIRONMENTAL PROVISION'S


Ankle 38 DECOMMISSIONING


Artkle 39 ASSIGNMENT AND CHANGE OF CONTROL


Ankle 40 FORCE MAJELRE


Article 41 WAIVER OF SOVEREIGN IMMUNITY


Ankle 42 ARHI IKA HON AND EXPERT DETERMINATION


Ankle 43 GOVERNING LAW. FISCAL STABILITY AMENDMENTS AND


VALIDITY


Anick 44 NOTICES


Article 45 TERMINATION


Ankle 46 APPi ICATIONOF CORRUPTION 1 AWS


Ankle 47 EFFECTIVE DATE


Amex A CONTRAIT ARI A MAP AND 11ST OF COORDINATES


Annex B ACCOUNTING PROCEDURE


Amex C REFINERY JOINT DEVELOPMENT AGREEMENT








J/164


 PRODUCTION SHARING CONTRACT





BETWEEN





Ihe KUKDIM AN REGIONAL GOVERNMENT OF IRAQ (licieaficr dfcmJ U» »» the


GOVKRNMKN'n. duly represented by the Minister or Natural Resources;


AM)





HERITAGE ENERGY MIDDLE EAST LIMITED, a company cdablished and existing


unkt the laws of Nevis. whose registered office b at P.O. Box 693. Hamilton Estate,


< fnrkstiwn. Nevis. duly represented by Anthery Buckingham;








(hereafter referred In ns Ik ••CONT RACTOR"!





WHEREAS





(A) Tire GOVERNMENT wistes to develop the petroleum wealth of the KunlisUr


KcgRxi (ax defined In ills Contract) in a -o> that achieves the highest benefit to the


people of the Kurdistan Region and all tf Irw* usitv the most idvareed tcchnitjjo of


nartet principles and encouraging invesanent. cunsbtent with he Censtmaion of Iraq


ncludng Article 112 thereof


(B) In accordance with Ihe Constitution of Iraq, the prevailing bw of the Kunlistar


Kegioa is Ik Kurdistan Region Law (as defined In tills Comma), except with regard


10 n m iller wholly within the exclusive jurisdiction cf the Government of Iraq;





(Q The National Assembly of the KurJistar Regun approved the Oil I Gas Law of the


Kurdmaa Kepoa • Iraq (Law No. 22 of 2007) wtikh la*








(D) Hie GOVERNMENT intends to preseal to toe National Assembly of the Kurdiuar


Repen a la* to axhorar the GOVERNMENT, by contract or other authwivaion. tc


n theKunisun Repot from Kurdtstaa Report taxation to ndcmmty wch ladders


leans liability tc pay such taxatkn. and/or to guarantee the stability of the applicable


legal, fiscal and ccononic catdRRm of such projects.





Hie CONTRACTOR inteads tc develop, construct, finance aid partly own ar


merest in a petroleum refinery b the Kodislan Region, in which the


GOVERNMENT ah* holds an « parsuaat to the terms of the agreement


contained ir Annex C: and





(F) -ach CONTRACTOR Entity is acontaav.


(1) with the financial capability. and Ihe technical knowledge and lechakal ability,





to cany out Petroleum Operations m the Contract Area (as defined n thn


Contract) under the terms of this Contract.











4/IM











\4l.





 (H) hiviftg a record of conpliarcc wkh ihc princ pics cf gocd corporate citurnship;


and





(;ii) willhg 10 cooperate with the GOVERNMENT by enuring into ihs Contract


thereby usisthv ihc GOVERNMENT to develop the Kurdistan Region


petroleum industry, thereby promoting ihc economic development of ibe


Kunfiaan Region and Iraq and d** social welfare of its people.








NOW. THEREFORE. THF PARTIES HAVE AGREED AS FOLLOWS


ARTICLE I - DEFINITIONS


l.l Capitalised wins and expressions in this Contract shall have be following meaning,


in less otherwise specified:


Abroad means oUside of the Kunfctan Region and other p«m of Iraj.


Accra* Authorisation is defined ia Ancle 17.9


Accounta ia defined in \rtkk I5.L


Accounting Fromlure mem** the Acceuntinj Procedure attached to this Contract as


Annex fi und constituting un integral part of this Contract.


Adjacent Contract Area Is defined in Article 34.1


Adjustment Date is defined tn Article 27.6


Amilfltcd Company

constituting the CONTRACTOR a company or other legal entity which


(» controls a CONTRACTOR Entry; or


(b) is controlled by a CONTRACTOR Ertity; tr


(c) controls or is controlled by a ccmpary or entity which controls a


CONTRACTOR Entity.


tut shall not inclulc the GOVERNMENT in respect of tac Public Company. For ihc


purport of this definition. “controT means direct cr indirect ownership or control of


tic majority of the voting rigits ol the applicable entity it its shareholders' meetings


cr thcr equivalent


Agreed Terms bdefired in Article 14.10(a).


Appraisal Area means the area denned n Article 12-2.


Appraisal Work Program and Badge! is defined n Article 1L2.


Appraisal Report h defined in Article 12.4.





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Appraisal Well means a wdl drilled for ihc purpose of cvaljaling the commercial


potential of a gcobgical feature ora geological structure n which Pctroleun has been


discovered


Arm'§ Impih mrtni ul« of PHmfcnim in freely convertible currencies


betweai sellers and buyers having no direst or indirect relationship or common


interest whatsoever with each other that could remcmably influence the sales price


Such Amt's- Length Snlos shall exclude:


(i) sales between or among any of ihc CONTRACTOR Entities and their


respective Affilinton;


(H) sales involving the GOVERNMENT •« the Government of Iraq: and


(e) Miles ins.Iving exchanges and any iramadions nrt reining to normal


commercial practices


Assets meant all land, platforms, pipelines plant, equipment machinery, wells,


facilitiaa and all other in.4alhai.MK «nd structure, and all Materials and Eqoipmeat


A Module. I Natural C«« means

reservoir conditions and (ii) any residue gns remaining after the cxtractiai of Crude


Oil lr«n a rcaervoir.


Audit IUt|u

Available Aaooriated Natural Cas is defined in Article 25 I


Available ( rude OR U defined m Article 25.1.


Available Non-A««< •elated Natural Cat is defined in Article 25.1


Available Petroleum is defined in Article 25.1.


Barrel meant u quantity nl forty-two (42) 11$ gallons as a unit to measure liquids, /it a


temperature of sixty degrees <(iO°'i Fahrenheit und proiwurc of fourteen point seven


(14.7) pd


Budget* menu, nny budgets prepared by. or on behalf of. the (’OVIKACTOR


piTMiant to this Contract and forming pal of an I vpbralion Wort I*rogrum and


Budget and/or an Appraisal Wort Program and Budget a*i/or a Ga* Marketing Wort


Program and Budget uxCor a Development Wort; Pmgram and Budget and/or a


Production Wort Pregram aid Budget.


CalcnJar Year means a period of twelve (12) consecutive Monthj. commenting I


January and ending on 31 December of the same year.


Chairman is defined in Article 8.1


Commercial Discovery mains u Discovery which is potentially commercial when


Uking into account all lechnwal. operational, commercial and financial data collected


when carrying out nppruiNil works or similar operations, including recoverable





WIM


it serves of Petroleum, sustainable regular production levels and other imtcrial


technical, operational, commercial und financial pirumclers, all in accordance with


prudent international petroleum industry practice


<’nmmerfl.il Production irenn*; the production of Petroleum from the Production


Area in accordance with annual Production Work Program und Budget.


Constitution of Iraq means die permanent constitution of Iraq approved by the people


of Iraq in the general referendum or 15 October 200'


Contract means this production sharing contract, including it« Annexes A. B ind C


that ate on integral pan hereof, as well as any extension, renewal, substitution or


amendment of this production shoring contract ihnt may he ugreed in writing by the


Parties in accordance with Article 43.7.


Contract Aren means the area described or»J defined in Annex A attached to this


Contract and constituting un Integral port cif this Contract, aotl any modifications


made to that Annex in accordance widt the provisions of this Contract, through


iinicndments, surrender, withdrawal, extension or otherwise


Contract Year meuns a period of twelve (12) consecutive Months starting from the


Effective l>atc or any anniversary of the said I ffcctivc Date.


CONTRACTOR includes and comprises each and all CONTRACTOR Entities.


Including any Public Company nomiauted by die CiOVKKNMENT pursuant to


Article 4. and/or any assignee of ill or port of the rights and obligations under this


Contract in accordance with Article 39.


CONTRACTOR Parity mem any Person which is lor the time beit^ a cemporttit ol


the CONTRACTOR. «*Coran> assignee of all or part of the rghts and obligations of


web Person under this Contract in axontancc with Arriclc 39.


Crude OU means all I squid fcydrouartoors in nctr mpnxessed state or obuuned from


Natura Gas by condensation re any other means of extraction.


Decommission lag Coot* means all the costs and expenditures incurred by the


CONTRACTOR whea carrying out Decommissioning Operations, including those


defined in the Accountiag Procedure.


Decommissioning Operation* means any works, together with all related and


aixiliary activities, for decemmisnonirg and/or removal and/or abandretmer* and


making safe all of the Assets and site restoration and remediation related thereto in


relation to any Production Area.


Decommissioning Plan is defiled in Article 38.7.


Decommissioning Reserve Fund is defined in Article 38.1 aid includes all


contribution1' paid into such fund und all interest accumulated such fund.


Deductible Amount is defined in Article 35.12.








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run for a Product* Area. at wh.di the trudcOU. Aanchaed Natunrf Gas and or Noo-


AixiCJKij Saiuitl (iu b »c«crvJ for I Sc jurpoe* of Aide* 77 7. vaurrf for ihr


pufj.ro> of Aitiek 27.: and ready to be taken and disposed oC comment »ich puden


ntenvoona.’ petittaan nfcisry praukc. and * a Party may aesube «**»«*


tac of Pttofcun wder this Contract or midi ccher port wttkn nay be agreed by thr


Mb


Oevi'kipmcnt Coats means ull (Ik unb amJ expenditures Incurred by the


CONTRACTOR when carrying out Development Operations. including those


defined in the Accounting Procedure





Drtctupmcal Operations racam all dcvckspncni operations or wurla umductcd ia


accordance with a Development Plan up to the Delivery Point with a view to


developing a Production Area, including: drilling of wells; primary and aubacqucnl


recovery projects und pressure rnninlcnnncc; survey, engineering, building und


erecting or laying of production plants and facilities (Including ceperutors.


.iHnprcssc*is; gmcraiccv; pumps and tankage: gatherng Incs; pipclnc* md all


facilities required to be instilled for pnductwn. pressure maitienanee. ard treumcn*,


storage and transportation of l*ctn>letiTi); obtaining of suefc matemk equipment,


machinery, items and supplies a\ may be required or expedient for the loregoing


mrtlvitlcs: and all auxiliary opcrilions and activities required or cxjwdicnt for lire


production of Petroleum from the IWuclion Area.


liesriopmcat Period is dcfiacd in Article 6.





DcvHopmrnt Pba means apian foe development defined in Article 12.8





Well means any well drilled after the date ol approval ol the


Plan fnr the purpose of producing Petndewn. mcreasng or acccfcralirg


of f^trulemn. lacludo* imectioa wets and dry boles Any well drilled


Wei





(WvvIofMiOTi Work Program and Radget means the development work program


and budget prepared puruiaat to Article 13.2


Dbeavrry meats a dneovery of PWnieun: wnhn the lanes of the Contract Area





rmnl-ii^ from himlium Opexabnm carried out under this Contract, provided such


Petredeum is recover** at the surface with a measurable flow Kiliurg techniques


used in prvdcfrt nlemaimnd prtndruir industry practice.





IK.pair u defied m Artie* 4? I





Dollar (INS) mam ihr trgal -um-mry (dollar) of De l‘ailed Stales of America


(USA).


KfTcctivr Date means the date on whkh the condtkms referred to in Article 47 hare


Seen fulfilled





► .. roarer.. ¥mmA k defined .t Artrlc 219.


tqaipauai and M.trrtak k defined n Article 111.








t/144


Ciploraliot Carta means all the costs and expenditure lacurml b> the


CONTRACTOR when earn ing cut Exploration Operates, hcludng thwc defined


is the Accounting Procedure.


Fiploratios Operation! means aiy a»d all operations conducted with a view to


ciscovrring Petrocum. inc tiding: any activii*s necessary to commence operations.


my topographical hydrographical geological geophysical. aerial anti other surveys


and activities (intludiiv interpretations, analyses and related studies) to investigate


IM subsurface for the locatkm of Petrcicum: doling of she* holes, core hole* anti


< rati graphic test holes drllmg. tesxiag. coring, logging and equipping of


Exploration We lb or Appraisal Well*; procurement of *t*:h aervices material


equipment, machnery. items and supples as may be required or expedent for the


foregoing activities; anJ all auxiliiry operatic** oral act vtlies rvMu red or expedient


for the conduct of the faregoing activities.


Exploration Period is defined in Article 6.


Exploration Rental isdefined in Ankle 6.3.


Exploration Well mcaas an* well drilled for the purpose of confirming e geological


srucnxc or rtratigraphk unit in which no Di**ov«e> has preview*!} keen made by the


CONTRACTOR


Exploration Work Pragran and Budget means foe exploration work program and


tudget prepared pursuant to Artiek II.I


Expo* Crude Oil b defined ia -Ankle 242.


Export Non Aauxiatrd Natural Gaa rs defined in Ankle 2*2


Export Petroleum is defined ri Article 242


PI rat Commercial Declaration Date isdefined In Article 4. f


Flraf Exploration Well is defined In Article KU (c).


First Production menus the moment wlum Comrxwcinl Production of Crude Oil ot


Non-Associated Nitural Gas (as the ease may be) first commence*, by flowing at the mte


forocart in the Development lion without interruption for a minimum of forty eight (48)


hours.


Forte Mujcxrc isdefined in Article 40.2.


Can Development is defined in Article 14.10.


(ins Vlarkcting Costs means nil costs and expenditure incurroi b) ihc


CONTRACTOR when carrying out Gas Marketing Operations, including those


defined in the Accounting Procedure.


Gas Marketing Operations means any and all of the activities and operations


contemplated by Article 14.6.





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(.'«* Marketing Work Program and Budget means lltc marketing work pn^ram anJ


budget prepared pursuant to Article 14.8.


(nneraMt lowrcst H defined n Ancle 4 1.























I rai| mean.' the entirety of the Republic oflra^ including the Kurdistan Region.


Joint Operating Agreement mams any agreement executed by the


CONTRACTOR Entities «t any time for tlte purpose of regulating between such


entities the terms unifcr which the Petroleum Operations will be conducted, which


agreement shall be:

practice; (b) ns between such entities, supplementary to this Contract; and (c)


consistent with the provisions of the Contract


Kurdiaian Itr,.mn means the Federal Region of Kurdtam recognised hy the


Constitution of Iraq and having the same meaning as in the Kurdistan Region Oil and


Has lav*.





Kurdl*Ian Region Law means all sUUutot, dotrae*. edict*. cod nilei.


ordinances and regulations of the GOV KKNMK.NT or of any other











Knrdastaa Regina Oi aad Gas law means the Oil aad Gaa l.aw of the Kurdntai


Regnn Iraq (Law Nn. 22 of 2007) as die Mine miy be amcnied


law neons all applicable law* ududiag the following: consrituinnal law, cisil law.


common law. latrmumnal law. cqirtv. treaties, statutes, decrorv edicts, codes,


“•slcn. jucgemaiU. rok*. ordinances aad rcgUalkn-.s of any local, munkipa'.


territorial, provireial federated. aatioad or any ocher duly constitutes! govcmmcnul


authority or agency.


I-CIA t» defined In Ankle 42.1(b».





MOOR mmm Ike London Inlet-dank Offered Rale 1 which Dollar skp~.li k* one


(I) rretnth an: ottered in the inter-hank market in London, as quoted in the financial


I ones of London Ibr tie day m qwsuoa. In the event tlui wick me a not published h


the Financial Times, it shall mean dr London Inter-dank Offered Kate at which


Dollar deposits lor one month arc ottered hr the neared day as *x*cd by National


Westminster Hark pie.


Management ( emmittcr is dcfircd in Article 8.


Masmam Efficient Kate (VIKKi is defined in Article 16.12.





10/161


Mininum Exploration Obligation* is defined in Article 10.1.


Minimum Financial Commitmrul means:


(a) in reject of the First Sub-Period. the total of the amounts set out in Articles


10.2(d) and 10.2(c); and


(b) in respect of the Second Sub-Period, (he amount set out in Article 10.3(b),


Month means n calendar month according to the Gregorian calendar.


Natural G» means all gaseous Petroleum and mens.


Nob-Associated Natural Gas means any Nnturnl lias which is not nny Associated


Natural Gas.


Notice of Dispute is defined in Article 42.1


Operator means the entity designated by the CONI'RACTOR punuunl 10 Article 5


which, in the name aid on bchull ol the CON IRACTOR, shall curey cut all


Petroleum Operations. If at any lime there exists more than one (I) Operator under


this Contract, any reference herein to the term Operator1 shall be to each Operator with


respect to die pans of the Contract Area in which Mich Operator conducts Petroleum


Operations.


Oplioa of Government Participation is defined in Article 4.1.


Option of Third Party Participation is defined in Article 4.8.


Party or Panics means the GOVERNMENT and'oc eatfi CONTRACTOR hntity


and/or the CONTRACTOR.


Permits means ail licences, permits, coastals, authsmatxms or other pcrmkMtn.v as


the context requires.


Person shall include natural ard juristic pcrvns (including iorporalion- and


governmental agencies*


Petroleum means:


(a) any naturally occurring hydrocartwn in a garsc *u\ or liquid state


(b) any mixture of naturally occurring hydrocartxm in a gaseous or liqud stale or




returned to a Reservoir.


Petroleum costs means all costs and expenditure incurred by the CON iKAt lOK


for the Petroleum Operations and which the CONTRACTOR is entitled to recover


under this Contract and its Accounting Procedure, including Decommissioning Costs,


Development Costs, Exploration Costs, Gas Marketing Costs and Production Costs.








11/164


Petrokam Grid ncansa Resrvoir or group of Reservoir* withn a conmoa geobgkal


anxiuc or drati graphic unit, which may become part of a Prodactkm Area pursmnt to


a I Vvriopment Plan.


Patrol ram Operation* means all Exploration Operation* Gas Marketing Operations.


Development Operations, Production Operations and Decommissioning Operations.


.V* well ns nny other activities or operations directly or indirectly related or connected


with the said operations (including health, safely awl environmental operation* and


activities) And authoriwd or contemplated hy. or performed in Accordance with, thin


Contract.


Pipcllac Costs is defined in Article 33,5.


Prod act to a Area means such arcus within the Contract Area designated as a


production arvu in an appro* od Development Plan prepared pursuant to Article 12.


For the avoidance of doubt, all supcijucent or subjacent strata of the Reservoir in


which A Commercial Discovery in located arc automatically included in the rc'cvnnt


Production Area.


production Bonus means any bonus due pursuant to Article 32.3 nr 32.4.


Production Costs means all Ihc costs and expenditure incurred by the


CONTRACTOR in carrying out the Production Operations including Hum defined


in the Accounting Procedure.


Production Operations means nny works, together with all related and auxiliary


activities, for die production of Petroleum from the start of Commercial Production,


including: extraction, injection. stimulation, pumping, treatment, storage, engineering,


(.pending, set vicing, repairing, and maintaining any wells, plants. cquijvncnt.


pipelines, terminals and ary other (retaliations and factleies. and any related


(fiendtuns *xl aunluiry operatiom. and saorage and mmspucuduo of Pctndcuiii fturn


the Productwn Area to tic Delivery Point.


rrodactioa Rental is defined in Article 13.10


Prod action Work Program and Bad get shall mean th: preduetko wtvl program


and budget fteparrd pursuant to Article 13.6.


Profit Crude Ot Is denoed In Ankle 26.1.


Profit Natural Go b defined in Ankk 26.1.


profit Patfnb--- is defined m An tie 2*. I.


Proposed Contract b defined in Artkk 14.10(a).


Pnblk Company means a fublk compui) doty registered and incorporated in the


Kurdistan Region and regulafcd by the GOVERNMENT under the Kurdistan Region


Oil and Gas Law.


Public Officer means a cn/l servant, including • men her or cmpmycc of a pjblw entity,


n member of ihc Kurdbun National Assembly or a member of ihe GOVERNMENT





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Ouurlcr means a period of three (3) consecutive Month* starling on the llrst day of


January. April, July or Ocl«»bcr respectively.


Reservoir means a suhsurftkc rock formation containing an individual and separate


rotund occumulaiinn of producible Petroleum characterised by a simile natural pressure


system.


•‘IT Factor is defined in Article 26.4.


Royalty is defined in Article 24


Second Fiploration Wells is defined in Article 10.3(b).


Semester means • period of fix (6) comceutlvc Months darting front the first day ol


January or July respectively.


Senior Representatives is defined in Article 42.1(a).


Subcontractor means any entity of uny contracting tier providing services ond/or


undertaking works relating :o die Petroleum Operations directly or indirectly on


behalf of. the CONTRACTOR or any CONTRACTOR Entity.


Sub-Period and Sub-Periods arc defined in Article 6.2.


Tales means all curreni or future levies, duties, payments, charges, impositions,


imposts, withholdings, fees, taxes (including value added lax or other sales or


transaction based tax. corporation tax. income tax. capital gain* tax. stamp duty, land


tax. registration tax. capital end wealth tax. profit tax. dividend tax or withholdings,


transfer tax. customs duties, branch or permanent establishment taxor withholdings.


(IX on income from movable capital znd fixed ux or transfers) ur coni ri hit ions


payable to nr imposed by the GOVF.KNWENT.


Third Party latemf isdefired in Article 4.8.


Third Party Parbripaat » defined in Article 4.9.


Work Protram meats any work pregnur prepared by. or on bdulf oC the


CONTRACTOR purnant to this Contract and forming part of an Lxplonlion Wort.


Program and Budget aad/nr an Apprai«al Wort Pmgran and Budget and/or • Gas


Marketing Wort Program and Badge! and/cc a Deveiopmer.t Wert Piograia and


Budget and/or a Production Wort Program and Budget.


Virr-Oiairaiaa it drfiaed in Anide 8 I


In this Contract, unless the context otherwise retires or is specifically otherwise


sated.





(•) headflgs arc to be ignited.







(c) singe Ur ircludc* plural and vice *cr so; and





13/164


 id) reference to an “Article" i\ to an article of this Contract and to u ‘TuraumpIT


is to a paragraph in the Accounting I’roccdure.





ARTICLE 2-SCOPE OF THE CONTRACT


2.1 This Contract is a production-shurinu arrungement with respect to titc Contract Area,


whereby th: GOVERNMENT has the right, pursuant in the Constitution of Iraq, to


regulate and overer Petroleum Operations within the Contract Aren


The purpose of this Contract is to define the respective rights and obligations of the


Parties and the terms and conditions under which the CONTRACTOR shall carry out


■II die Petroleum Operations.


By entering into this Contract, the GOVERNMENT grunt-, the CONTRACTOR the


exclusive right and authority to conduct ull I’etroleum Operations in the Contract Are*


u detailed in Article


2.2 Upon the CONTRACTOR1# request, the GOVERNMENT shall provide and/or


procure all Permits relating to the Petroleum Operations required by the


CONTRACTOR to fulfil lt» obligation* under thij Contract, including those relating


io any extension and renewal periods and including those required hy the Government


of Iraq. IlK GOVERNMENT (i) represent.' and warrants to die CONTRACTOR


that it has not done und has nut omitted to do anything that would cauic the


cancellation or suspension of this Contract or any Permit granted under this Article


2.2 or pursuant to this Contract; and (ii) covenants that it will not do, or omit to do,


anything that would cause the cancellation or suspension of this Contract or any


Permit grunted under this Article 2.2 or pursuant to this CuntiacL For the avoidance


of doubt nothing in das Ankle shall affect the rights and obligations of the Parties


pursuant to Artkie 43.


2J The CONTRACTOR shall conduct ail Petroleum Operations wkhtn the Contract


Area a its -ok cost, rii and peril on behalf of the GOVERNMENT, pursuant to this


Contract, including the following eperatons:


»a) Technical Services


Impcmertatkm of all technica, hunan and material resources reasonably


required for csccutbn of the Petrekum Operations, in accordance with


prudent irtemationai petroieum industry practice.


(b) Finaacial Services


I hc responsibility for funding the Exploration Operations and. in the event of


a Commercial Discovery, Development. Production und Decommissioning


Operations pursuant to this Contract.


For the luruling of Petroleum Operations, each CONTRACTOR Entity shall


he entitled to have recourse to external financing from either its Affiliated


Companies or from any third panics.








14/lW


 (c) Administrative Services





Implementation of all appropriate management and administration techniques


for execution of the Petroleum Operations under this Contract, in accordance


with prudent Intrmulinnnl petroleum industry practice.


2.4 During the term of this Contract, the CONTRACTOR shall be responsible to the


GOVERNMENT for the conduct of Petroleum Operations within the Ccmract Area


2.5 pursuant lo the terms of this Contract


Natural resource' other than IVtrolcuro shall he excluded from the scope of this


Contract. even if die CONTRACTOR discovers any such resource! when executing


2.6 its obligations puminnt to this Contract


Hie CONTRACTOR shall only he entitled to recover Petroleum Costs incurred


under this Contract in the event of a Commercial Discovery. Recovery of Petroleum


2.7 Costs shall occur within the limits provided under Article 25.


During the u-rm of this Contract, Profit Cmdc Oil nnd/or Profit Natural Ci»s produced


from Petroleum 0|>crat<>ns shall lie shared between the Parties in accordance with the


2.1 provisions of Article 26.


For the execution of Petroleum Oprrntiiw* ut»ler this Contract, the CONTRACTOR


shall have the right to:


(a) freely access and operate within the Contract Area, as well as any facilities





associated with the Petroleum Operations, wherever they may be located:


(b) freely use access roads located within the Cortract Area and outside the


Contract Area lor the constructed. installation. maintenance, operation and


removal of pipelines anJ other facilities required for the Petroleum





(c) freely use sand water, electricity and anv otheT natural resources iccatcd


irnutk or outside the Contm:( Area for the Petiole»m Operations.


(d) use *ny qualified foreign w»d local personnel and/or Subcortractcrs required


for tire conduct of Paroleun Operations in accordance with Articles 22 and


23. Any foreign personnel working in the KjedtUan Region shall require prior


authorisation of the GOVERNMENT (such authorisation not to be


unreasonably delayed or wiihhcW) and the GOVERNMENT shall obtain any


autbcrisaiun required by th: Government of Iraq:


(e) impert any goeds. naterals, equipment and/or services required for the


Petroleum L/pennons in accordaacc w*n Articles 19.22 and 30; anJ


(f) freel* use land or propenv belonging to the Kurdistan Kvgkn. anJ tbe


GOVERNMENT will assifl the CONTRACTOR with faciltiating the use by


the CONTRACTOR of any private property in the Kurdistan Region.


2.9 Ir addition to production-sharing amingcnjcnu will: respect to Pctrvlcum Operations


the Coat fact Area, this Contract defines in Aancx C the term* and conditions under





15/164














 vhich the CONTRACTOR shall deidop, comma, finance and own a petiolcum


rr liner. in *>c KardisUn Region. For the avoidaacc of doubt the costs associated


with ttc refinery dull KM be recoverable under this Contract





ARTICLE 3 - CONTRACT ARF.A





The initial Contract Area cover, the Minin Block ural extends over an urea of one thousand


and fifteen squuro kilometres (1015 km*), as detailed and indicated on the map attached in


Annex A and is delimited by the following coordinates:





Point Latitude (d*fl min Longitude (deg X(mE) Y(mN,


*ocj_ min aec)


A 35 54 09 44 59 05 498 628 3973 147


B 35 50 il 45 04 44 507 123 3966 422


c 35 33 18 45 20 31 531 002 3934 £63


D 35 27 32 45 25 00 537 709 3924 011


E 35 21 02 45 16 58 528 718 3911 «65


F 35 20 22 45 12 49 519 366 3925 488


d 3647 18 44 51 55 487 823 3960 471








The GOVERNMENT, by execution of this Contract hereby validates and aj>provcs the


foregoing co-ordlnnlCN of the Contract Area.


The total urea of the C ontract Arva may be reduced only in accordance with the provisions of





this Contract











ARTICIX 4 -OPTIONS OF GOVERNMENT PARTICIPATION AND THIRD


PARTY PARTICIPATION





Government Interrat


4.1 The COVFRNMF.NT shal have the opt on of participating through a Public





Company at tha Contract in respect of the entire Contract Area, as a


CONTRACTOR Entity, with an andivded iitcres in the Peroleun Operation* and


all the other rights, dutira. obligation* and li.Nlitiesof thr CONTRACTOR (save as


provided in and subject to this Article 4) under this Contract in respect of the C.ntratf


Area, of up to twenty five p*r cert (2SS). aad not less than five per cert (5S) (the


Government IntrrcaO. sceh option being referred to herein as the Tlpttoa of


Government Participation”. The GOVERNMENT shall be entitled to exerebc the


Option of Government Participation by notifying the CONTRACTOR in writ.ng of


aidt elect km und die atic of die Gtivciiinicni Interest.





4J Hie GOVERNMENT may exercise tlie Opium of Government Participation si any


lime in the period commencing oo the Inflective Date and ending one hundred und


eighty (IR0» days ultci the dole on which CONTRACTOR dcclan* the Hrvt


Commercial Discovery (which date of declaration is referred to herein as the ‘First


Commercial IH-claratlua Date"), by nominating to the CONTRACTOR, in writing,


a Public Company. If the GOVERNMENT does r»t notify th; CONTRACTOR of





16/164


 vuch dcctkn within wh period, the Optior of Covenment Participation shall be


deemed lo hive been waived.





4J If the GOVERNMENT exercbes the Ojtkm of Government Participation m


accordance with Article. 4.1 and 42:


(a) the effective dale of such particiration shall be the date of the notice by which


the COVF.RNMK.VI exercises is Option of Government Participation or the


First Commercial Declaration Dae. whichever iv the earlier.


(b) the Public Company shall participate as a CONTRACTOR Entity under this


Contract Pom such effective dase. with all its rights. Julies obligations and


liahi ities • ruler this ( ontrnet. save as rmvidrd m and sabicct to the provisions


of thu Artclc 4;


(c) the Public Company dull rot have am liability lo the .Over CONTRACTOR


Entities lo contribute its Government In tries! share of all PetnWeum Costs


incurred before the First Comnctcial Declaration Dale and its Govcramenl


Intcrrst «hire of such l*etrclcum Cost* shall be the responsibility of the oshev


CONTRACTOR Entities, provided always that such ether CONTRACTOR


Entities ahall be entitled (through the CONTRACTOR) to teener all such


Petroleum Costs in accordaxe with Amclc 25;


(J) iC pursuant to the terms of tac Joint Operafng Agreement. the Public


Company j«oilici|H.lcs in the doclupmcnt of the Co*ame»vw»l D.vcovxry, it


shall be liable to the other CONTRACTOR Entiles to antnboc its


Government Interval sluue of all Petroleum Costs incurred on or after the l int


Comraetcial Declaration Date, with the exception of the Production Bourses


referred to in Article J2. nnd shall be entitled (through the CONTRACTOR)


lo recover nil such Petroleum Costs ic acccrdarxx with Ankle 25. including


the Petroleum Costs which it has reimbursed puraant ic Article 4.3 (e);


(c) II such Ojxlon of Government Participation is exercised on or after the Firs


Commercial Derloraton One. the Public Company shall, within thins (30)


days of the date on whch he GOVERNMENT ratified the


CONTRACTOR of its election, reimburse the other CONTRACTOR


Entities for all Petroleum Costs for which h is liable pursuant to Article 4.3(d)


and which have been incurred by such other CONTRACTOR Ertities on or


after the lirvt ComnxrciaJ Declaration Date but prior lo and traludirg the


date of the notice pursuant to whth the GOVERNMENT exercises its Optioa


of Govcmncni Partcipatwn. From the date of $o:h notice, the Public


Company shall pay be Govcnuncnl Interest share of such Petnxeum Costs


directly; aad


(0 for the purposes of Article 37 of the Kurdistan Region Oil and Gas Law. the


Government I merest so assigned shall be deemed lo he held by rhe


GOVERNMENT and in axordincc with tf»c pmciple in Article 16.13. the


Pubic Company will he individually and separate > liable (and not jointly and


severally liable wkh the other CONTRACTOR Politics) to the


GOVERNMENT foe its obligations, duties and lability under ifcis Contract


as a CONTRACTOR Entity and the provisions of Article 4.5 shall apply.





17/164


Article '7 of the KunSstan Region Oi and Gas Law, the Goverrment Inters sc


principle in Article 16.13. the Pubs Canpaoy 10 which such Govonmen Interest b


transferred will hr md cduolly aad «p«^ liaMe <«*d not jointly ard tcrerally


table with the ether CONTRACTOR Emiies) to the GOVERNMENT far its


cMigabons. Julia' and Kahiliae* under tkb Centred as m CONTRACTOR FoUJv and


lire previsions of Article 4.5 shall apply.


4.5 Any failure by the Public Company to perform any of its obligations or to satisfy any


id ha cmics or liabilitic* undo this Contact a> a CONTRACTOR Entity dv.ll mfi hi


considered as a default of the other CONTRACTOR Indies and shall in no case be


Invoked by the GOVERNMENT to utmiiuic this Contract or cervix any other


rghts or rcrredies in respect of such default that may be available to c


The capacity of a Public Company as a CONTRACTOR Entity, as h may arise


pursuant to ihe provewns of this Contract, shall m ao event caacel or aflcet the right'


cf the other CONTRACTOR Bxfhies to seek to settle a dispute or to refer such


Article 42.


4.6 A l*ublic Company may assign pan or al, of its Government Interest to a thrd pmty or


parties (not being a PuNic Company) and for the avoidance of doubt the prov iskos of


Articles 39.1, 39.2 and 39.3 shall not apply. Any such assignee shall be jointly and


Kvcrally liable w4h the other CONTRACTOR Entities.


For the avoidance of doubt, following any assignment by a Public Company of nil or


part or all of a Government Interest ton third party which is not a Public Company, in


occordince with Ihe provisions of this Article 4, the provisions of Articles 39.1. .19.2


nnd 19 l ..hall apply to any subsequent assignment of such interrsi


4.7 Where a Joint Operating Agreement has been executed by the CONTRACTOR


I jttitles prior lo any exercise of the Option of Government Participation pursuant to


this Article 4. the Public Company nominated by the GOVERNMENT shall become


u party to such agreement, with any amendments necessary to lie consistent with the


principles of this Artie Ip 4 Where a Join! Operating Agreement ii not In place prior


to the exercise of the Option of (fovemment Participation pursuant to this Ankle 4,


Ike Public Company and the other CONTRACTOR I ntitio. ■ball, within a


reasonable period of time, negotiate in good faith ond enter into a Joint Operating


Agreement imJ .shall during the period between the exercising cf the Opt inn of


Government Participation aad the execution of the Join! Operating Agreement,


comply with Ankle 4.14(a) and (b) as if they were provbjunx of thisCunUact.











18/164


 4.1 The GOVERN MF.NT shall have the o^ion of norainarrag a third party. n respect o:


foe citire Contrail Area, as a CONTRACTOR Entity. with *n undivided inlcrcv* ir


foe Prtrolcun Ormliem ani all (he other rights. duties. obligaikwi' and liabilities of


tic CONTRACTOR (save as provided in and subject (o this Ancle under this


Contract in rrvprtl of tie Centrart Area, of op to twenty-five per cent (25%) aid not


levs than five percent (5%) «thc Third Part. Interest"), such option being referred


to herein a* the 'Optio* of Third Parts Participation".


4 • The GOVERNMENT may excrciar the Option of Third Party Participation it any


time prior to the date eight (I) months following the Effective Date by nctninaiing tc


tie CONTRACTOR, in writing, the sue of the Third Pam huerefl and a company


which has adequate revnnccs and capacity to discharge the obligations of a


CONTRACTOR I ntity under this Contract and a Joint Operating Agreement


respect thereof (u»ch a cotrpany to be the "Third Party Participant'). For the




Patty Partkipolkn once, in respect of ooc Third Party Part cipatl. and after suck


c.\crvi< the resulting Third Party Liferca may not be increased under this Article 4.


4.10 If the GOVERNMENT auninoas a Thin) Party Participant pmuan: to and ir





accordance with Articles 4.8 and 4.9. that Third Patty Pvtkiputi shall have the Third


Party Interest.


4.|| |f the GOVERNMENT does not Tomhuue a Thtrd Party Pan clpnrt punuam to anc


h accordance wi* Articles 4.8 ard 4.9 then the Option of Third Party Participation


•hall be deemed to have been waived.


4.12 If the Option of Third Puny Participation is exercised in accordance w nh Aiticfcs 4.8


ami 4.4:


(a) the effective date of such pirticipation shall be the Effective I Kile,





notwithstanding that the exercise ot ihe option ot third Party Participation


under Article 4.8 ocean after such date;


(b) ihe Third Party Participant shall, upon signature of a tending and enforceable


instrument ol assignment and novation in respect of this Contract rclerrcd to in


Article 39.3, pay to the CON TRACTOR, by way of cleared funds to a bonk


account nominated by the CONTRACTOR, on amount equivalent to Ihe


proportion of Petroleum Costs incurred by ihe CONTRACTOR up until the


date of such payment utiriteitnhlc to th: Third Party Interest (which Petroleum


Costs, for the avoidance of doubt, do not include bonuses payable under this


Contnict or cost* paid purwiunt to Annex C);


(c) upon payment pursuant to and in accordance with Article 4.12(b) and (he





execution of ihe instrument referred to in Article 4.12(b). Ihe Third Puny


Participant shall participate an a CONTRACTOR Entity under this Contract


as if it had be»'n a CONTRACTOR Fntity from Ihe PfTectivr Onto, with nil


its rights duties obligations and liabilities under this Contraci; and











19/164














V -


(d) where a Joint Operating Agreement has been executed by the


CONTRACTOR Entities prior to am exercise of the Option ot'Third P«rt>


Piilfcipotion pursuant to Article 4.8 and 4.9. the Third Party Participant shall,


upon signature of the instrument referred to in Article A. 12(b). become u party


to such Joint Operating Agreem.'nt on the terms thereof


(e) If a Joint Operating Agreement is not in place prior to the GOVERNMENT


exercising the Option of Third Party Participation, then the Third Party


PnrticipAnl and ihe other CONTRACTOR Entities shall, within a reasonable


period of time, negotiate in good frith and enter into a Joint Operating


Agix-vmoiK mid shall during the period between the exercising of the Option of


Third Party Participation and the execution of the Joint Operating Agreement,


comply with Article 4.14(a) and (b) as if they were provisions of this Contract.


Order of Kscrcialaic Option*


4.13 Notwithstanding Articles 4.8 to 4.12. if the GOVERNMENT exercises the Option of


Government Participation:


(a) alter the GOVERNMENT has exercised the Option of Third Party


Participation, Ihe Government Interest nhall be uiutgned under this Article 4 to


the Public Company by the CONTRACTOR Entities pro rata to their


respective participating interests under thin ContriKt; and


(b) prior to tin GOVERNMENT exercising the Option of Third Party


Participation, then the Third Party Interest shull be reduced by a percentage so


as lu put tlic other CONTRACTOR BniitlM (oilier than the Person holding


the Government Interest) and the TTtinl Potty Participant in the pasitioa they


would have bee* in had the Option of Third Party Partkipjlko been exercised


before the Option of Goverament Participation.


Joint Operating Agreement Pro»t»oa»


4.14 Any Joint Operating Agreement entered into in relation to this Contract shall be


consisrem with the principles of thh Ankle 4 and shall provide as follows:


(a) all decisions c€ anj operating cmmmilicc esubllslcd umJct such Joint


Operating Agrtemert shall require the afTirraativc vote of an agreed


percentage of pamcipitlng Interests hdd thcrcuncer. witch b any event shall


be not more that seventy fi*e per cent 75%); and


(b) in the evert of a proposed transfix by any CONTRACTOR Fntity of part of a


participating merest under suet Joint Operating Agreement. including any


Government Interest ce Third Party interest:


(i) no transfer may be mace which would result in tie transferor or


traaslerce holding less den a five percent (5%) panic paling interest.


(ii) the proposed turd party assignee mast demonstrate to the reasonable


safisfeetbn of each of the extaat CONTRACTOR Entities that it has


the financial capability to pcrlvni Is payment obligations under the


Coacmcl and uadcr Ac Joint Operating Agreement and





20/164


 (id) the propped third party MftigfCC dial I enter into an instrument


satisfactory to each of the extant CONTRACTOR Entities so at to


resume and to perform the obligations cf the wnt&rot.





ARTICLE 5- OPERATOR


5.1 The CONTRACTOR hereby designates I leritnge Energy Middle East Limited to act


as the Operator on Eehalfof the CONTRACTOR Tot the execution of the Petroleum


Operations. The CONTRACTOR shall at any time have the right to appoint another


entity as the Operator, upon giving the COVERNMENT not less than thirty (10)


days prior written net ice of such appointment.


52 The CONTRACTOR shall submit to tlic f .‘OVERNMENT for comment any agreement


regarding or regulating the Operutofs appointment and its conduct of Petroleum


Operations on behalf of the CONTRACTOR pursuant to thk Contract prior to


execution of such agreement.


5.3 In the event of the occurrence of either of the following, the GOVERNMENT may


require the CONTRACTOR to appoint toother entity as Operator as soon as is


reasonably practicable:


(a) if nn ©filer hi* been pasted in court doclaring the bankruptcy, liquidation, or


dissolution oflhc Operator, or


(b) if the Operahr terminate the activities under this Contract delegated to it by the


CONTRACTOR or u material proportion thereof, and. as a result die


CONTRACTOR fails to fulfil its obligations urder the Contract.





ARTICLE 6 - TERM OF THE CONTRACT


& I Thi> Contact comprises ar Exploration Period and a IVvcUpmcni Period, as defined


bekxv:


itPc™*


62 The Exp brat ion Period shall be for an Jtilial term of five (S) Ccrttracl Yean,


extendable on a yearly basis (as pmv-ded in Articles 4.5 and 6.61 up to a miximun


period of seven (7) Contract Years starting from the EfTccthc Date. Tic initial term


of five (5) yean shall be subdivided in two (2) su^perieds as follow*.


(a) an initial udwperiod of three (3) Contract Years <“ First Sab Peered"); and


(b) a second suKperiod of two (2) Contract Years fSecaad Sab Period")


each a "Sab-Period" and collectively ‘Sab-Period*-.


It is jnderdnnd that the right of tfv CONTR ACTOR to accede to the next Sub-Period


or osy extension thereof shall be subeef to fulQment of the Miiimurv Exploration


Obligations or minimum wort ohligsriom applicable to th* previous Sub-Period or


Daewoo ihcrerf (as the case ma> be).





21/164


6.3 During (he Exploration Perkxl, ihc CONTRACTOR shall pay to the


GOVERNMENT, in arrears nn annual surface rental for the Contract Area, os may


be reduced by rclinquishmcrt fn>cn time to linu: pursuant to Article 7. often Dollars


(IJSSIO) per square kilometre per Contract Year ("Exploration Rentar). Such


I v p|< Kit ion Rental shnl I hr com idem! ns n Petroleum Cost nnd shnll hr recovered hy the


CONTRACTOR in accordance with the provisions of Articles 1 and 25.


6.4 If the CONTRACTOR decides net to enter into die Second Sub-Period, it shall notify


tho GOVERNMENT «t least thirty (3lt) days prior lo the expiry of the First Sub¬


total and, provided that iIk data from the first Exploration Well demonstrates that


there k no rvaeotmhlc tochnfeal cure fiv drilling the Second Fxplorition Well in the


Contract Area, die Exploration Period shnll expire at the end of the First Sub-Period,


unlwwlho I'int Sub ParnxJ liut Ixcn extendod pursuant to Article6.5 and/or Article 6.6.


6.5 If the CONTRACTOR Hub fulfilled Its Minimum Exploration Obligations for a Sub


Perkxl of the Exploration Period but considers ihnt additional work is required prior


(a) to deciding to submit an Appraisal Work Program and Budget as provided


under Article 12.2 in runpeot of a Discovery, or


(b) to deciding to declare n Dtaovery uu a Commercial Discovery in accordance


with Article I2.6

preparation and'or execution of an Appraisal Work Program and Budget os


provided under Article 12.2 nnd/or Oas Mattering Operations,


the CONTRACTOR will automatically be entitled to extensions, each of one (I)


Cunua;t Year, of the Uten CUTTOil Sub-Period, up to the end of tire maximum


Exploration Period of seven (7) Contract Years, (as provided in Article 6_2> The


CONTRACTOR’S notification of its Intention to exercise such cxicndon aid its


duration shall be submitted tn writing to the GOVERNMENT at least thirty (30)


days prior to the eod of the then current Sub-Penod or the rod of the ben current


extern on (as die case nay be\


6.6 W ithoot prejudice to Article 6.5. upon expiry of the initial term of the Exploration


Period it it considers r. has lot completed its exploration cvxuatico ol the Centract


Area, the CONTRACTOR shall be entitled to at extension of the Second Sub-


Penod provided :t notifies the GOVERNMENT in writing at leas thirty (30) days


prior to the end of such Sub-Period togethe- with a proposal for a min mum work


obligation for such exiensior. Any such extension shall not exceed one (I) Contract


Year. Upon the expiry of such exfcnsioa. if it considers it has dill not completed il>


evaluation of the Contract Area, the CONTRACTOR dull be entitled to a further


extenvon of one (I) Contract Year provided hat it notifes the GOVERNMENT in


writing at least thirty (30) days prior to be end of tie original extension. The right of


the CONTR ACTOR to accede to the farther extcrvjon dull he vuhjecl to fulfilment


of the minimum work obligations applicable to the original extension


6.7 Subject to Article 6.4. at any lime curing the Exploration Period, upon thirty (30) days


prior notice to the GOVERNMENT, the CONTRACTOR dull have (he right tn


withdraw from this Contract provided that the outstanding Minimum Exploration


Obligation* nrlatnu to the the* current Sub-Period have been completed in


accordance with he Contract or it has paid to thr GOVERNMENT the amounts





22/164


specified in Article 10J or AUklc 10.3. whkhever is appl cable »ihc then cunrn: Sub-


Itriod.


6.8 II' no Commercial Discover) has been made at the one of the I splon inn Period


(including any extensions thereof) this Contract shall tcmtinate.


6.V If n Discovery is mode within the maximum Exploration Period of seven (7) Contract


Years (as provided in Article 6.2). and if the CONTRACTOR considcn it his not


had time to complete sufficient Cim Marketing Operations to declare the Discovery a


Commercial Discovery pursuant to Article 12.6(a) or 14.5(a). the CONTRACTOR


shrill hr entitled to request nn extension of Ihc Exploration Period (notwithstanding


the maximum period provided in Article 6.2), provided it to requests the


COVI.RNMFNT |n writing «t lend thirty (30) days prior to the end of the maximum


Exploration Period, together with a proposal for Gas Marketing Operations to he


undertaken during .such extension. If granted by the GOVERNMENT, any such


extension shall mx exceed two (2) Contract Years. Upon the expiry of such extension,


if it cvaukicis it baa Mill not completed its Gas Marketing Operations relating to such


Discovery, the CONTRACTOR shall be entitled to request a further extension of two


(2) Contract Yean, provided that it so requests the GOVERNMENT in writing at


least thirty (30) days prior to the end of the original extension, together with a


proposil fix Gas Marketing Operations n> tie undertaken during such extension.











6.10 ir the CONTRACTOR COliskleis that u Discovery of Crude Oil and any Associated


Natural Gu is a Commercial Discovery, the CONTRACTOR shot have the


exclusive right to develop and pnxlucc such CumnrerciaJ Discovery, pursuant x» the


terms of this Contract live Devetopmert Period foe ■ Commercial Dscovoy of Crude


Oil and any AsociatcC Naural Gas shall be twerty (20) yars commercing co the


drclanxkxi of such Commercial Discovery by CONTRACTOR, in accordance wrth


Article 12.6(a). wi± an automatic right toa fivc(5) year externum


6.11 If the CONTRACTOR consdcre drat a Discovery of Nov Associated Naairal Gas is


a Commcrcal Discovery. the CONTRACTOR dull have the exclusive right to


develop and produce such Comncrcial Discovery, pursuant to the trims of this


Control. The Dcvrlofmcnt Period far a Commercial Discovery of Non-Associaacd


Naim Gas shall be twenty (20) years, commercing on th: declaration of such


Commercial Discovery by CONTRACTOR, in accordance with Ankle 12.6(a) or


Article 14.5(a), wifc an automatic ri^a to a five (5) ye* extension


6.12 If Cocimcrcial Production from a Production Area is still possible at the end of its


Devekpmen Period as defiued in Ankles 6.10 or 6.11 then upoa its request, the


CONTRACTOR shall be entitled to an extension of such Development Period jndcr


the came terms » those provided in litis frrtraci Such rrsjirM dull hr made in


writing by the CONTRACTOR at lean six (6) Months beferr the end of the said


Devekpmert Period.




















23/164

















I


n*c lam of my mch extension of the Ifcselofrocm Period shall bo:


(a) five (5) Yean, for CruJo Oil and any ArtOefattd Natural Cm, and/or


(b) 11 vo (5) Yean for Non-Autaclalud Natural Guo.


6.13 The CONTRACTOR shall have the ri*)hi lo tomtiitaic Production (ipr rations (nr any


Production Area al an>' lime during the term of this ( ontract. subject (o giving


xHKe to I ho GOVERNMENT of al least ninety (0©) day*. I*i» Contract shall


crmiaalc on the expiry due of the last Protection Area or a hen Product ioa


Operations A* all Prudjctk* Are** have tern inoted





ARTICLE 7 - RELINQUISHMENTS


7,1 Subject to Ihc provisions of Articles 7.2 and 7.3. the CONTRACTOR shill surrender


portkma of the Contract Area as fellows


(a) at the end of the initial term of the Exploration Period referred tn in An*cl<*


6.2, twenty five per cent (25%) of the net area Octcmined by subtracting the


PiuIikImi Areas from the initial Contract Area;


(b) at the end of the first extension period entered into under lhi» <'niifnct nller th-


etui of ihc initial term of ihc Exploration Period referred to in Article 6.2. an


iiddlllomil twenty five per tent (25%) of the net area determined by subtracting


the Production Areas from the remaining part of ihc Contract Area; and


(c) at the end of the Exploration Period ('including ill cecnvkm thereof) all vf


the remakilug area dm H aul in ■ Pruduetkn Area.





72 For the apftkouea of Ankle 7.1:


(a) any areas already relinquished pursuant to Article 7.4 shall he deducted fine*


areas u> hr surrendered; and


(b) the CONTRACTOR sha.1 have the right to drtermne th: area, shape and


of the Contract Area shall be in contiguous bockv


73 If the rebnqutshracrt referred to is Ankle 7.1 can only be achieved by racludng pari


Of aa Appraisal Area, that these parentages thall be reduced lo t»cludi such


Appraisal Area.


74 Dimag (he Exploration Perud. thr CONTRACTOR may at he cni of each Corarnct


Year surrender all or any pan of the Contract Area by written notke sent to tie


GOVERNMENT « Ieast thm* (30t days in advance of the propped date of


during the Exploration Period shall be deemed csgal to the oHifteory rchnqui*mcm


referred to ondcr Amce 7.1. Tho Contract shall icmirute m tte event of she srrenda


of the entire Coctract Area.











24/164


 7.5 No iurrender provided mdrr Article 7.4 shall exerrpl the COVTHAfTOR from its


•ulstudmg obligations under this Contract In ’he oent dr CONTRACTOR elects to





Obligations relating to the hen currea Sub-Peried as provided it. Ancle 10.2 or


Article tOJ. the CONTRACTOR shal pay to the GOVERNMENT he relevant


ctnsaniing anoint as detailed in Article 02 or Ankle 103.» #w caw may be.


7.6 The boundaries of the portion if the Contact Area to be relinquished by the


CONTRACTOR shall be cunmuukated to the GOVERNMENT by writfcn notice at


least thirty (JO) days in advance if the relevant die for relinquishncnt pursuant to


Ankle 7.1.








ARTICLE * - MANAGEMENT COMMITTEE


A Maragenent Comm (tee rtoll be established within thirty (JO) day* Wkrwirg the


8.1


Effective D«*c forth© purpose of frovidrig orderly direction of all marten pertaining


to the Petroleum Operations and the Work Pregrams. Within sach period, each of the


GOVERNMENT and the CONTRACTOR abal by written notice Dominate its


respective members of tie Management Committee md their deputies.


The Management Corrmittce shall con prise two (2) members designated by the


GOVERNMENT and two (2) members desigaated by the CONTRACTOR.


Upon ten (10) days make, each of the GOVERNMENT and the CONTRACTOR


may sibstitue an, of its members of the Management Committee. The chairman of


Oc Management Conmiuce shall be one of die members designated by the


GOVERNMENT (the “Ckainnas") The vice-chakman of the Management


Committee shall be one of (he members designated b) the CONT RACTOR (the


“VIca-CTiulntian”). In the absence of the Chairman, the Vice-Chnimutn sltall chair


the meeting


I ach l*arty shall have the right to invite a reasonable number ot observers as deemed


necessary to attend the meetings of the Management Committee in n non-toting


capacity.





8.2 Die Management Committee shill review, deliberate, decalc und give advice,


suggestions and recommendation.' to the Parties regarding the following subject


mailers:





(a) Wort Programs and Budgets;


(ti) the C ONTRACTOR * activity reports:





(c) production levels submitted by the CONTRACTOR, bused on prudent


international petroleum industry practice;


(d) Accomts of Petroleum Costs;


(e) procurement procedures for potential Subcontractors, submitted by the





CON I KAL I OR in accordance with Arttek 19.3:








25/164








\<7U.





(0 Development Plan and Budget fer each Production Arcu;






consider.


8.) h*ch of the GOVERNMENT and ihe CONTRACTOR shall have one (I) vote ir.


the Management Committee The Management Con mi lure cannot valid!, deliberate


unkrN. each of the GOVERNMENT and the CONTRACTOR is represented by •>


fca-4 one (I) of its members or its deputy.


The Management Committee shall attempt so reach unanimous agreement an an>


subject mailer being submitted. In the event the MnnagenKnl Committee cannot


reach unanimous agreement, n second meeting sluill he held within fourteen 1141 days


to discuss the same subject matter and attempt to reach n unanimous decision.


Except as provided for in Article 8.4 untl Article 8.5, in the event tliut no agreement Is


reached at the wound meeting, (hcf'linirmnn 'hull luivo tlio lic-brcnking vote


8.H In the event that, during the Exploration Period, no agreement is reached at the sxond


meeting of the Management Committee, as provided for in Article 8.3. or unanimous


approval is not obtained. n«J required pnminm to Article 8 5; then the prrpovil made


by the CONTRACTOR shall be deemed adopted by the Management Committee.


8.5 Notwithstanding the provisions of Article 8.3, and subject to Article 8.4. unanimous


uppro.al of the Management Committee shall he required fttr


(>) approval of. and any mat era I revision to. aay Exploration 'bock Program anc


Budget prepared after the 5m Commercial Discovery n the Prudxtiut Area


approval oC rod ooy mlm, revwion to. Ur rVvelnpment PU. the


predictior schedule, lifting schedule and Development and Production Wart


(0) establishment of rules of procedure for the Management Committee;


(r) approval of. and any material revision to. pronermnt procedure* for giant*


mdor aenicev submJted by the CONTRACTOR in Kconfcncc with Article


10.3 (imUc uMch procedures love hero deemed ^proved by the Mana^meni


Committee in aourdoacc wth Article I9JK























2^164


(f>) approval of. and any material revision to. any proposed Oxommbnioning Plan


submitted pursuant to Article 38.7 on nny Dtxommlssioning Work Program and


Budget or Gas Marketing Work Program and Budget;


(i) any Terms of Reference which are required to be i*epefed and agreed for the


purposes of expert determination, pursuant to Article 42.2;


(j) approval of any costs in excess of ten per cent (10%) flbovc any Hudpt: and


(k) any matter having a material adverse effect on Petroleum Operations.


8.6 Ordinary meetings of the Management Committee shall tuke place in the Kurdistan


Region, alternately ut the offices of the GOVERNMENT and those of the


CONTRACTOR or 8 any other location agreed between Parties at least twice a


Contract Year prior to the dote of the first Commercial Discovery and three times a


Contract Year thereafter.


8.7 Either tltc GOVERNMENT or the CONTRACTOR may call an extraordinary


meeting of the Management Committee to diseuss important issues or developments


related to Petroleum Operations, subject to giving reasonable prior notice, specifying


the miners to Ke discussed nl the meeting, to the other Party. The Management


Committee muy from time to time make decisions by correspondence provided ill the


members have indicated their approval of such dreidonv in such correspondence


8.8 Unleu at ieust one (1) member or it* deputy of each of the GOVERNMENT and the


CONTRACTOR is present, the Management Committee shall be adjourned for a


period not to exceed eight (8) days. The Party being present rdioll then notify the other


Party of the new date, time and location for the meeting,


8.9 Ore agenda for meetings of the Manajemert Committee shall he prepared by the


CONTRACTOR in rcconlaicc with inoructbna of the Cha.ruan ard conmun coicd


to the Parlies at least fifteen (15) days prior ® the date of the meeting. The agenda


.Viall include any subject mffla proposed by either the GOVERNMENT or the


CONTRACTOR Decisions of the Management Committee will be made at the


meetings- The CONTRACTOR dal: be responsible for rrci*wuig aid keeping


minutes of ±c decisions made at the meetings- Copits of wch minutes shall be


forwarded to each Part) for review aad approval, bach Party dull review and


approve such mimics within ten (10) days of reccpt of the draft ninutes. A Pam


who (ails to notify in writing its approval or disapproval of such minutes within such


ten (1C) days shall be deemed to have approved the minutes.


8.10 If required, die Management Committee may request the creation of a Icdinicai sub¬


committee er any other sub-committee to assst it. Any such julxcmmitre shall be


composed of a reasonable number of expats from tbc GOVERNMENT and the


CONTRACTOR After cact meeting, the technical subcommittee ar an) other sub¬


committee vtall deliver a wriaen report to the Vlanajcmcat Committee,


8.11 Any costs and expend:lure incurred b> the CONTRACTOR for mcet.ngs of the


Manapanea Conmittee or my technical subcommittee or any other subcommittee


shall be consxfcred as Petroleum Costs and shall be recovered b> the


CONTRACTOR in accordaacc with the provsions of Articles I and 2$.





27/164


 ARTICLE 9 - GUARANTEES





9.1 l-Ach CONTRACTOR Emily shall provide lie GOVERNMENT, if so rcvjuirrd by


ike latter pursuant to written notice received by ihe CONTRACTOR E-.eiiiy within


ikirty (30) days of the Effective Dele, wth a corporate guarantor in a form as shall be


agreed in good fmih bet*wn the GOVERNMENT and each CONTRACTOR


nil later than ninety (90) days after the Effective Dmc. provided


guarantor shall he given only in respect of Ihe Minurum FnancnJ Coovnitncm fjr the


lira Sub-Period aad shall expire aacmaacally upon compkljon of dr pcrtonuaacc of


i Ankle 10.3d) aad (e) or cxpcndiure of


ICc





9 2 Not later that sixty (60) days after he ccmmeacemera of he Second Sub-teriod. each


CONTRACTOR FniHy shall provide he GOVERNMENT, if so rrqurrd by the


tiller pursued to wTrttci notice received by Ihr CONTRACTOR Entity within ihirty


(JO) days ofwch commencwtaenl dale, whh a corporate guarantee in


(a) the form wbrtrotial y apeed between the GOVERNMENT and each





CONTRACTOR Entity for tire First Sub-Period, if any. subject to makitg the


change* ncce«ar> in order for die corpora* guaranter to >«•> » «hr


Second Sth-Penod. or


(b) if there is ao agreed farm, n a form as shaE be a*nxd m gcod fath between





the GOVERNMENT and each CONTRACTOR Entity not later dm amety


(90) Jays after the GOVERNMENT s notice.





and provided in each ca«c thtf tuck corporate guaraxcc nail he given unb hi respect


uf the Minimum Financial Cp«t--- 1 for die Swat W. IWd and that auch


corporate guarantee shall expire automatically upon compkthv of the pcrirmaacc of


the Msiiinu.il Exploration Obligations xi out in Article 10.3 (b) cc cftpcndrfar* of


ajch Minimum Financial Commitment. whichever it the earlier





9.3 In the even; of an assignntoit by a CONTRACTOR Entity in accordance with


Article 39. the relevant third party anlgnoo -Jm 11 provide tlic GOVERNMENT. If so


rc«|uiml by the latter jxirsunnt to written notice given to such assignee within Ihirty


(30) ttays of the Effective Gate, with a corporate guarantee In die form agreed


pursuant to Article 9.1 or 9.2. as applicable lo the then current Sub-l*criod or. in the


absence of any such ugreed lorm o( corporate guarantee, in a linn us shall be ugived In


good faith between the GOVERNMENT and such assignee nrt Inlet Hum ninety (90)


tbys alter the effective dale of die assignment, provdod that such oapanM guarantee


■hall be given only in rejpect pf the Minimum Financial Commitment for the then oirrcnl


Sub-Period, and shall expire automatically uptn completion of the pcrlnmvamc of the


Minimum I-aplontion (Wigabons set out in Articles !02(dl and (c) or Article 10.3(b). as


the case may he. cr expenditire of such MM---u Financial Commitment. whichever b


•haenrikr

















at/i64


 ARTICLE 10 MINIMUM EXPLORATION WORK Oltl.lOATIONN





10.1 The CONTRACTOR shall start l Apkmlkm Operation* within Hilly (VJ> days of


Management ComailUce approval of the ExpbnUkm Work Program ami Budget in


aivordanoe with Article H The CONTRACTOR shall perform geological,


geophysical and/or drilling work* as provided under Articles 10.2 to 10.3 (the


Minimum Fiplorutloi ObUgntimr*)- If applicable. tlir said Minimum I xpknition


Obligations dull he performed during each Sub-Period in aocordnacc with prudent








102 During the First AnK-Perind. the C ONTRACTOR shall-


(■) carry out geological nnd gccfihysical studies.»«fiijn-uiv tie toil aving


(i) the compilation of a technical database:





(ii) the performance of h remote sensing study:


(ill) o field visit to verify initial gcolonicul anti geophysical work and


remote sensing results and plan for two dimensional seismic


itoiiihiitlon: nnd





(h> carry out n data search for existing data specific to this Contract Area,


comprising the following:


(i) well data, if available, for example, electric logs;





(ii) seismic data and gravity tfata. il available: and







«> field








(4) acqure. process and interim two hurdred and fifty (250) Inc kiometres of


firwrcial amount of ore mil ion DrHUn (IJSS1.000.000k and


(e) drill one (1) Lxrloratbn Well (tte “First F.sploralioa Well'), coramining for


this purpose a mrumum finaxtal amourl of seven million live hundred tfvussnd


noiiaranw.saaono).





103 During the Second SufvPcrioi the CONTRACTOR dial:


dwriotS^Tfiree CONTRACTOR omkkn that the





resuK horn thr First Fx^tocatro Well jnrify the acquisition of fwther


sciatic dsa. and


(t* drill me (I) Exfioraum Well (ftc “Second FiptoraiMn WriT) cummfUng





for rtM ptrposr a mnimun fimncial mu« of xrvtu milion fWe Kndrrd


iuusand Dollars (USS7_50Q0O0k unless the dan from the First Fxpfararion








29/164


Well demosstrates lhai there is not a reasonable technical ease for drilling the


Second Exploration Wells in the C ontract Area


10.4 Notwithstanding the provisions in Articles 10.2 to 10J. for the execution t*f the


Minimum Exploration Obligations under Articles 10.2 10 10.3. it is agreed is follows:


(i) Minimum Exploration Obligations in the Scccod StfvPcnod shall only apply in


the event the CONTRACTOR has not elected to notify the GOVERNMENT


that it will not enter into the Second Sub-Period, in accmbmee with and


subject to Article 6.4.


(I>) Subject to Article 10.4(a). ihc CON TRACTOR shall be retired to meet its


Minimum Exploration Obligations for the applicable Sob-l'criod. even If this


entails exceeding the Minimum financial Commitment for such Sub-Period. If the


CONTRACTOR ha* satisfied its Minimum Exploration Obligations without


having spent the total Minimum financial Commitment for such Sub-Period, it


shall be deemed to have iutisfi«d its Minimum Explcralio* r tbligatioa* for


such Sub-Period.


(c) Each Exploration Well shall be drilled to the depth agreed by the Mumignncnt


Committor unless:


(i) the formation it dncocmtcrcd at a lesser depth than originally


anticipated;


(ii) h.i'cmcnt is encountered ni a lesser dcpih than originally anticipated;


(iii) in the CONTRACTOR'S sdc orinion continued drilling of the


relevant Exploration We i presents a hazard due to the presove of


abrormal or uaforeiecn conditions:











W




















(d) Any geological or gcophyscal woci earned out cr any scivric diea aufrired.


processed or interpreted of any I spkxdtKia Well drilled or any other «.«tk


perfermed in excess of Ik- Mnimum Exploration Obligations and/or any


amoants stem a cxcew of the Mai Minlmim I iuukuI Commitment in any


giver Sub-Period, shill be earned firwaid to he next Sab-Period cr any


extension oenoC and shall be taken Into accoutt to satisfy the Minimum


Exphraticn ObSgatuns axvlor the total Mmmun Finmeial Commitment fc*


such subsequent $ub-ftnod r extensam pend





3WI64


 (c) For ihc avoidance of doubt. If: (•) in the First Sub-l’criod, the


CONTRACTOR perform. unv of the Minimum Exploration Obligations


prescribed for Ihc Second Sub-Period in Article 10.3; und (ii) the


CONTRACTOR has nol elected to notify the GOVERNMENT that ii will


not enter into the Second Sub-Period (in mx^vrrlume with and subject to Arti«'U*


6.4), ihc performance of such Minimum Exploration Obligations shill be


deemed to catiidy the tome Minimum Exploration Obligation* for the Second


Sub-Period.





ARTICI.F. 11 --- k'.XI*! ORATION WORK PROGRAMS AND BIWGFTS


Within forty-five (4S> days following (he Effective Dale, the CONTRACTOR shall





prepare and submit to Ihc Mnnogetiiere Committee a proposed work program and


budget relating to Exploration Operations (the "Exploration Work Program and


Budget ") fer the remainder of the Calendar Year. Thereafter, no later than I October


in each Calendar Year, the CONTRACTOR shall suhmit n proposed Exploration


Work Program unj Budget to Ihc Management Committee for ihc following Cafcndar


Year.


Each Exploration Work Program and Budget shall include detaik of, but ml he


11.2


limited to. the following:





(a) work to he undertaken;


(b) materials, goods and equipment to be acquired;





(c) cost estimate of services to be provided. iach»dhg services by ttird pirtic-


antVer Affiliated Companies of sty CONT MAC 'I OR fauity, and





(d) estimated experdhures. broken down by cost centre h accordant wch the








113 The Management Committee shall meet within sixty (60) days following is receipt of


CONTRACTOR s proposal to examine and approve the Expbretkn Werk Program


*d Bridget





If the GOVERNMENT requests my mxKfieotion to the Fxpkxratk* Wrek Program


11.4


«J Bod get. the Managemen: Cotrminee shal meet to discuss the Exploration Work


Program and Budget and proposed modifications thereto within the sixty (60) day


period referral to in Article 113. The CONTRACTOR shall communicate its


comments on any such requested modifications to the GOVERNMENT at the


meeting of the Management Camiritlee or in writing prior to such meeting





The CONTRACTOR shall be authorise! to make expenditures net budgeted in an


improved LxpkmKioa Work Program an! Budget provided ths the aggregate annum


of suck expend Hires stall net exceed tea per cent (10%) of the approved Exploration


Work Program aad Badget in ary C&cndar Year and provded further that such


excess expenditures stall be reported as sewn as is reasonably practicable id the


Managemerx Committee. Fer the avoidance of dnuM all excess expenditures stall be








31/164














}

recovered by the CONTRACTOR in accordance with the provisions of Articles I


and 25, provided that any excess expenditures above the ten percent (10%) limit shall


only he recovered with the unanimous approval of the Management Committee.


11.6 In « hm-; of emeryrncy, the CONTRACTOR may incur Hitch additional expenditures


at it ilecms necessary to protect life, environment or properly. Such additional


expenditures uhnll bo reported promptly to the Management Committee. For the


avoidance of doubt, such additional expenditure shall He considered Petroleum Costs


and shall be recovered by the CONTRACTOR in accordance with the provisions of


Articles I ami 25.








ARTICLE 12 DISCOVERY" AND DEVELOPMENT


12.1 If the drilling of an Exploration Well mult* in a Discovery. the CONTRACTOR


shall notify the GOVERNMENT within forty-eight (48) hours of completing tests


confirming the preoumod cxiutcncoof ouch Di-covory or within such longer period as


the CONTRACTOR reasonably requires to determine whether cr not there is a


Discovery- Within thirty (30) days following notification of the -xii Dis:ov«y. ibe


CONTRACT OR shall present to the Management Comnittccall technical dan then


available together with to opnxw on dx commcfvVI poaeniu.1 of Ok said Discovery


(die "Discovery Report”). TV: CONTRACTOR shall provide n a finely nanracr such


uher lifomutiun rciatlrg to the Discovery as the GOVERNMENT may reastnabh


rtquc*











12.2 If. pursuant to Ankle 12.1. the CONTRACTOR considers that the Dbcovery has


commercial poicreial it shall w ithin ninety (90) days follow jig notidcakxi » the


GOVERNMENT of the Discovery, submit an appraisal program n reject of the


Discovery (the •Appraisal Work Prog ran and Badger to ftc Management


Committee. The Management Committee shall examine (he Afprai«*l WcA Pn gram


and Hwlget within thirty (30) days of its receipt If the GOVERNMENT request any


modification to the Appraisal Work Program and Budget. the Management


Committee shall meet to discuss the Appraisal Work Program and Budget and the


requested modifications ihcreto within sixty (60) days from its fcceij* of tlx: proposed


Appraisal Work Program unci Budget The CONTRACTOR shall communicate its


comments on any such requested modifications to the GOVERNMENT ut the


meeting of the Management Committee or in writing prior to such meeting


The Appraisal Work IVogramand budget shall include the following


(a) an appraisal works program ind budget, in nccmlancc with prudent


imcmatinml petroleum industry practice:


(b) an esinuited tinv-framc for completion of appraisal works; and


(c) the delimitation of the area to be evaluated, the surface of which shuJI not


exceed twice (2 x) the surface of the geological structure or prospect to be


appraised (the "Appraisal Area**).








32/164


12.3 It following iDKanwy. a rig acceptabk to the CONTRACTOR »«vailabk to drill


• well the CONTRACTOR may dril any additional F.xpliralKn Well or any


A9nni«l Well deemed necessary by the CONTRACTOR hcforr or durinf the


Management C'omnittec's review of the Discovery Report provided in axordincc


w th Ariel* 12.1 or its review of the Appraisal Wort; Program aad Budget.


TV f'OVTTtAfTDR shall he authorised to incur rvperxJitum not budgeted n mi


afproved Appraisal Wert Program and Budget provided that the aggregate amotnf of


«rb *sp*nd«urr« shall not eveert ten per cent (10%) of the approved Appraisal


Wort Prognm aid Budget n am Caknfar Year and provided father that such


Management Committee For the a»o*dtacc of doubt, all excess expcvditurrs shall be


recovered by lha CONTRACTOR in accordance with tH* pn.vitunt of Articles I


ard 25. pros tied that any exons expenditures above the ten per cent (10%) limit shall


oaly be recovered with the unanimous approval of th: Maragcmrnl Committee








12.4 The CXWT11ACTOR 'hall lubmri a drta.kc report relating x> the IWwerv (th*


-Appraisal Report") to the Managenem Comninee wrtan nnrty (90) days


fUkmtlg voarpktoo of the Apprsi---I Wart Piograra and Budget.


12.5 The Afpraisal Rc»wrt shill include he follow.rg:


(a) geotoghal conditions;


(b) physical properties of any Irpuida;


(«) sulphir. sediment and water content;


(d) type *f suhitancre obtainad;


(a) Natural (ia« compositnn;


(() production I'orecaal per well, and


<8> ■ preliminary cetimatc of recoverable reserves.


 ihe < ONTRACTOR has determined that ihc Discovery s a signifcant


Discovery of Noa-AssociataJ Natural Gas. which nay become a Commercial


Discovery subject to Gas Madeline Operations. in accordance with


Article 14.5.


12.7 In case ihc rtatement of ihc CONTRACTOR corresponds to Article 12.6(c). Ihc


CONTRACTOR shall submit n Work Program and I Induct 10 the Management


Committee within thirty (30) days following such statement. Any well drilled to


evaluate iha und significant Discovery shill he considered an I vploraiion Well.








17 * II the Disco very hns been declared a Commercial Discovery by the CONTRACTOR


pursuant to Article I2.«

proposed Development Plan to the Management Committee within one hundred


eighty (180) days following such declaration. The Development Plon shall he in


accordance with prndoni intemuti.«u.l prtrolcim industry pne lire I vrept with the


consent of the GOVERNMENT, such Development Plan shall include details of the


(Ulowing *» applicable:


(e) the da limitation of the Production Are#, taking rn»> account the remits of the


Appraisal Report regarding the importance of the Petroleum I icld within the


Appraisal Arc*.


(1) drilling mid completion of Development Wclb;


(O drilling and completion of water cr Natural Gas injection went;


«> laying of g* the rug pifel'met.


(«) installation of separate unkv pumpi and any other Mwatrd production


and injection fire lilies for th: production;


(ft treatment and tansportaikn of Petroleum to the pmccssng aid storage


facilities onshore or offshora;


(g» laying of export pipeline-, inside or outside the Ccmtrmci Area to 4* sfrage


facility « Delivery Point;


(h) construction of sorage facilities for Petroleum;


(i) plan lor the utilisation of Associated Natural Gas;


(j) training commitment in accordance with Article 23;


(V) a preliminary decommissioning and site restoration pian;


(l) all contracts and arraagements trade cr lo be made by the CONTRACTOR


for tk> talc of Nitural Gas.


(m) to the CTtMt avmlahlc. all contracts and arrangements readc cr to be made by


Pcrvms in respect of that Nitural Gas downstream of the point at which it is to





34/164


 be sold bv the CONTRACTOK ind which are relevant to the price al which


land other terms on which) h is to he sold by the CONTRACTOR or arc


otherwise relcvaat to tf*e determiaation of the valae of it for the pirpovs of


this Contract, but not beyoed the point at which I is first disposed of *1 an


Arm'* I enjth *Ule:


(n) inch CONTRACTOR Entity's plans for financing its Interest, if any; and


(o) any other operations not expressly provided for in this Contract but reasonably





necessary for Development Operations. Production Operations and delivery of


IVtmkum produced, in accordance with prudent international petroleum


industry practice





The Management Committee shall use its best efforts to approve the Development


119


Pan within «fy (90) <>»>«. aflrr its rcecif* of such plan Iht Development Period for


each C ommercial Discovery within a Development Plar shall be extended for the


namber of days in excels of su:h sixty (60) day period that it takes for the


Management Committee to approve the Development Plan. The Development Plan


d-ull I* considered approved by the GOVERNMENT if the GOVERNMENT,


through its representatives on the Management Committee, indicate* it.' **pn>\al in


writing





12.10 If the GOVERNMENT requests any modifications to the Development Plan, then the


Management Committee shell mart within sixty (601 days of receipt by the


CONTRACTOR of the GOVERNMENT' written notification of requeued


modification* accompanied by all the dxummis justifying sach request and shall


discuss such request. ITtc CONTRACTOR VudI lomuunkali Us comments ua any


sach requested modi fictions to the GOVERNMENT al ^iM| or m writing


S meeting or withm a further period of Dirty (30) days bom tie drtc of such





fleeting shat be incorporated into tie Uevetoftnem Plan Much shall then be deemed


approved and adogaed


1111 If the CONTRACTOR make* several Commercial Discoveries within the Contract


Area each sach Commercial Discovery will have a separate Production Area. I he


CONTRACTOR shall be entitled to develop and to produce each Commercial


Discovery aad the GOVERNMENT shall provide the appropriate homes covering


each Production Area, la case the area covered by tfe Commercial Discovery extends


beyond the boundaries of the Contact Area, and to the extent such area outside the


Cnntrart Area k rest the subject of a Petroleum Cortract as defined in the Kurdistan


Region Oil and Get Ea») with a thrd party, the provision of Article K2 ihall apply
































3VI64








Ku





ARTICLE 1J - DEVELOPMENT AND PRODUC TION WORK PROGRAMS AND


BUDGET


13.1 Upon the approval of the Development Plan by the Management Committee the


CONTRACTOR shall start the Development Operations for the Commercial


Discovery in accordance with the Development Plan and prudent International


petroleum industry practice.











112 Within ninety (90) davs followiag approval of the Ifcvdopmart PUn by the


Management Conrnitlce. the CONTRACTOR shall prepare and submit to the


Management Committee a proposed work program and budget for Development


Operations (the ‘Drvclopatent Work Progran and Rader'”) to he carried out in the


Production Area fur the duration of the Development Operation. Thereafter, no later


than I October in each Calendar Year, the CONTRACTOR shal submit to the


Management Committee updates ia respect of its IVvelepmeri Weak Pmgrarr and


Bjdgct To enable the Management Ccmnmcc to forecail expenditures. each


Development Wort Program and Badget dull ncludc details of the f.dlo* ng


(a) *orfcs to be carried out


(c) type »f services to he presided dimnguidung between third forties and


Affiliated Companies of any CONTRACTOR Entity- aad


13.3 If nny modification to tfic Development Wort Program and Budget is requested hy


the GOVERNMENT. the Management Committee dmll meet to discuss the


Devekipmeni Wort Program and Budget and proposed modifcatiofls thereto within


sixty (40) days from it. receipt of the proprsed IVvelopmert Wtrk Program and


Budget The CONTRACTOR 'hall communicate it* conmcnti on any such


KHucsfcd nwdifkatkms to the GOVERNMENT *« the ncctirg of ihe Managrnwit


Commute or in writing prior to such meeting.


13.4 The CONTRACTOR dial I be auihoriscd to incur expenditures not budgeted in an


aptHwvcd Development Work Program and Budget provided that the aggregate


amount of such expenditures shall not exceed ten per cent (10%) of the opprovod


Development Wink 1‘iogiuin and Budget in nay Calcndai Year and provided further


that such excess expenditures shall be reported as loon as is reasonably practicable to


the Management t oniinlltcc. For the avoidance of doul*. all excess cxpcinliuics


shall he recovered hy the CONTRACTOR in accordance with the provisions of


Articles I and 25. provided that any excess expenditures ihovc the ten per cem (lu%)


limit shall only be recovered with the unanimous approval of the Management


Committee.


13i la cases of emergency, the CONTRACTOR nay incur such laJdJliuial expenditures


as il deems necessary to protect life, environment or property Such additional


expenditures shall be reported promptly to #vc Management CommiOec. Fro the








WI64


 ard sh*l be recovered by the CONTRACTOR in axordaoce %rth Qc prcvjsaoas of





Articles 1 mi 25.








13 6 No later than I October of the CaletdaM car precedng the cstinalcdcommencejicnt


of prcdictior pursuant to an tpproved Development Plan and thereafter no later than


I October in each ( alcnlar Year, tic CONTRACTOR shall prepare and submit to


Or Maueenent Comrrmce a proposed wort program and budget for Production


Operatic (*c -Pmdacftna Wort Program aad BadfeC* for the foUonin*





P^Juctioo Uort Prognm and Budf« shall inriudr «*taik of the Wlrwm*


(a) »«ii to be carried out;


(k) -nultr a I ami rquipmrm to he acquired by man categories.





(c) type of cervices to he provided, distinguishing between third panics and


Affiliated Companies of am CONTRACTOR Emits; aad





137 If any nodifcalxw to the Product** Wort Pwgran and Budjct is requested by the


COVERNMEVT the Manxfrmrrt Conmitter shall meet to tftscusa the Produ.tMMl


Wort Program and lludgct and proposed modsficalwas thereto withia sixty (60) days


from its reevipt of th? pnpoaed Pmductiro Wort Program and Huigel The


CONTRACTOR vhal commuracatc its conuicnts on any such requested


modification, to the GOVERNMENT ai the nretirg of tie Management Committer


or in writing prior to such meeting.


13 J Pic CONTRACTOR shall he atAorised to incur expeadHurts not budgeted m an


or such expenditures shall act exceed tea per cent (10%) of the approved Production





th^SLcc rfXuK shall be





recovered b> the CONTRACTOR in axoedmee *ith lie provision of Arlklcs I


aad 25. provded nat arty excess cipcndJurc above the itn per «.c««i (10%) limn dull


only be recovered with Ik unanimeus approval of the Maaagcrrcnt Commttce


13.9 l> cases of emergency. the C ONTRACTOR may ncur such additional expenditure


as it deems necessary to protea life envbonmcm ur property. Such additional


expenditures dial be icported pnmpth to the SUnmpynerr Conmitice Fcr the


s.oidaace of dourt. such adAiood expeodmre shall be consadcrcd Petrocum UM>


md shall be recovered h> the CONTRACTOR * uxortnc w«b Ik provision of


Artkies I and 25.


13.10 After Ik canmcrecmcnt of Comoercol Production the C ONIKACIOR dial pay


to the GOVERNMENT, in ran. an annual surtax rcrul for the Produ.*tR>n Area,


of one huadred Dolbr* (1)SSI00) per square hiWmctre per Conrad Year





37/164








Ki.





 ("Prodoctioa RcntaT). Such ProdocUon Rental shill be consdcred as a Petroleum


Cmi ami shall be recovered by (he CONTRACTOR in accordance with the


pmvixions of Articles 1 and 25.





ARTICLE 14 - NATURAL CAS











14.1 To lake account of specific conditions relating to Natural Gas anti to promote ns


development in the Kurdistan Region, the GOVERNMENT will grant specific


benefit! to th: CONTRACTOR on principles materially similar to thorn contained in


this Contract, including, consistent with the Kudisuin Region Oil and Gas Law. more


generous provisions in respect of the recovery of Petroleum Costs and the slmriag of


IVMrolcum thnn in respect ofCnidcOil.





14 ? Ihr t'ONTR ACTOR may freely use any Natural Gas required fir the l*ctrolcum


Operations. If technically and economically justified, the CONTRACTOR shill in


priority use any Natural Gas for the purpose of enhancing recovery of Crude Oil in


accordance with prudent international petroleum industry practice as follows.








14.) Any excess Associated Natural Gas produced that b nether ased in the Petrefcum


Operations nor developed and msU by the CONTRACTOR dull. up«U the


CiOVERNMENT) written request be transferred at th: firs praetkabe del very


poinl an agreed betweer the Parties, free of ctwrge to the COVFRNMFNT In v>. h


CISC, the GOVERNMENT dull be tolcly responsible for collecting, treating,


compressing and transporting such Natural Gaa from such agreed delivery point and


shall be solcy liable for any additi

11k: cuvtaKtiun and operation of required facilities as wall aa the of»We of such


excess Associated Nattral Cias by the GOVf.RNMEVT >hal occar in accordance


with prudetu intcraatiunal pcaukuai mhI-vU, practise and shall not btorfoc the


production, lifting and ranyvetaism of the Crude Oil by the CONTRACTOR For


the avridancc of doubt all oprndturc ttcurred by the CONTRACTOR up to such


agreed delivery point shall be considered Petroleum Cosh and shall be moverrd by


the CONI KACTOK in accordance with the pmvuwmof ATOdrs I and 23





la the event the GOVERN MEN I finds a market fre AwiclatoJ N-uiral Cu>. it shall


promptly give written notice to the CONTRACTOR, and the CONTRACTOR may


elect tc parteipotc in v^plylag such Awociatcd Nutural Ott within ninety (VO)days


following notification thereof by the GOVERNMENT ir the CONTRACTOR


elect* to participate in supplyinn Associated Natunil lias to such market, all


expenditures associated with an> necessary facilities shall be paid for by the


CONTRACTOR. For the uvoidnacc of doubt, such expenditure incurred dull he


considered Petroleum Costs ami shull he recovered by the CONTRACTOR in


accordance with the provisions of Articles I and 25.




















31/164

















*n5ST





 14.4 (Mil on upprovcd Natural Gas sale' contract is executed in respect of all volumes of


Natural Gus expected to be pnxJuced. the CONTRACTOR dull be entiled dtxtng


the Exploration Period and the Development Period to curry out

Operations.





14.5 It pursuant In Artiefc 116(d). the CONTRACTOR has deteimitrd than the Discovery


is a significant Discovery of Non-Associalcd Natural Caw. which may becorae a


Commercial Discovery subject to Gas Marketmg Operatbos. it shal cam out Gas


Marketing Opera!ions, at the end of which it shaD submit a wntten vtatcircnt to the


Management Committee specifying that





(a) the CONTRACTOR has determined that the Discovery is a Commercial


Diiseovary; or





(b> the CONTRACTOR has determined that the Discover is not a Commercial


Discovery.


14.6 For the purpose of this Contract. “Gas Marketing Operation, means aay activity





urder toi« Contract relating to the mtrketng of Noe-Avsociated Natural Gas.


irv'luditg any evaluation to find a commercial market for inch Non-Assoc tiled


Natural (lax and/or to find a commercially viable vchni.nl means of extraction of


sw:h Non• Av,i minted NrfumI Gas uikI may include activities rch.texl to evaluating the


quaittilka uf Nun-Associated Natural Gas to be sold, its quality, the geographic


location of potential maikcts to be supplied as well as evaluating the costs of


production. OTMiaportaliai am! disUthulkn of the Non-Associated Natural Ga» from


the Delivery Point to the relevant market.


14.’ All costs and expenditure incurred by the CONTRACTOR m the performance of the


activities m rctaikn to be Gas M-kc.u* Opera-, dull be compered Petroleum


Costs.


14.1 f*> later thar I October of the Calendar Year preceding #>c Calendar Yem in which





aay Gas Marketing Uperattom arc due la uecu. the CONTRACTOR xhall prepare


aad submit to the Maragemenl C mm nee ha Gas Market mg Work Program and


frjS'exp^dml^dr Gas Market mg Work Program ^dfedgef shall ndude the





fc-Uowng:


(a) works to be earned out;








(b) type of services to be provided, dlstinguidiing between third panics oral


Affiliated compares of any CONTRACTOR Fntiy. aid











If any modification to tke Gas Marketmq Work b>


the GOVERNMENT. M Om


Marketing W.*k fTogran


(60) days frctn its receipt of toe proposed Oasj Work


The CONTRACTOR shall communicate i on any such requested





34/164











WV\.





 modifications to the GOVERNMENT at the meeting of the Management Committee


or in writing prior In .inch meeting.





14.9 lie CONTRACTOR shall he authorised to incur expenditure, not budgeted in an


approved Gai Marketing Wtri IVi.gram and Budget provided tha: the aggregate


amount of such expend lure dull sot exceed ten per cent (19%) of the approved


Hedge! n any Cairo. Ur Year and provided further thit such excess expend I lures dull


be repotted as won as reasonably practicable to the Management Committee For the


avoidanco of doubt, all now expenditures shall he recovered by the


CONTRACTOR at accordance with the provisions of Articles I and 25. provided


th.it any uaveu expenditure above the ion per cent (10%) limit shall only hr recovered


with the Uiummoui approval of the Management Committee.


14.10 If any Non-Associated Natural Cm is discovered wtfhin the Contract Are*. anC the


CONTRACTOR rcawnably considers that the Non Associated Nrural Tmk


Dacovcry will only be a Commcn.nl Discovery if certain terms of this Contract arc


amended. It dull be entitled tv request ninciulincnls to this Contract. with its rromi


The CJOVKRNMF.NT shall in good taith give reasonable conskJcratMn to the


CON I R At ’I OK I proponed amendment and reasons and the Parties droll in good


frntli attempt to agree on the necessary amendments to the Contract. If the Puttie arc


unable to agree on such amendments, and the Exploration Period expires without tin


CONTRACTOR having declared such Discovery to be * Commercial Diicovery in


accordance with Article 12.6(a) or Article 14.5(a). and subsequently wlthhi a period


of eight (8) ,ear. from the end of such Expbnticn Period, the GOVERNMENT


reaches agreement with any third party to develop such Discovery (the Km


Development”), then the following provisions shall *pply:


(a) either before or upon agreement in relation to the Gas Development having


been reached (and whether «* not w*ch agrcenent is recorded n a tUly termed


production sharag and/or operathg or other like agreement). but before such


agrcenent * signed (the "Propoard Cna tract") (lubjctf onh to the ngtts of


each CONTRACTOR Entry to pe-copt «xh Proposed Comet purport to


Artiefc 14.10(h) Bii suJi condNons as nay be appTicaMe). the


GOVERNMENT

of such cixumaancev serve on each of the CONTRACTOR Emiles, a


notice to dat effect and shall w«#i such noire provide such inforruhne and


main terms of such agreement as the CONTRACTOR Emilies may


reasonably request to determine if they will excreicr thro rigfcu (dr - Agreed


(•) ** identky of web third puty:


(8) the efface dele of 4k Proposed Contract;


(iii) the applcablc commercial leraw. iecludhg hcnuscs. royalties. cod


recovery, profk sharog. Uxatioa and any odrr sroilnr terms; and


frv) all and «ny reaierUI condifinra to whic* the Proposed Contract is














4H64


Ibi Upon a from my CONTRACTOR Entity. the GOVERNMENT will


provide all ihe CONTRACTOR Entities w«h such further information and


fcrms n nit h rraennaNy requested by any CONTRACTOR Entity.


Within one hundred and eighty days (IKO) thy* alcr receipt of a notice and


»ny Italhrr Information umler Article 14.10(a) in relation to a Proposed


Contract each o( the ( 'ONTRACTOR Entities shall elect either:


0) to enter Into the I’ropitscd Contract on the or substantially similar


'em* in the A|rrrtsl Terms with the riithl to cost recover all Petroleum


Conn incurred under this Conrad again* all Petroleum revenues


r»c*v«d under ihr Propel ( Vntrad. op lo any cat* recovery limits


id rot therein; or


• ii) lo waive tre aforesaid ri^e of pre-emptum in rcbtion lo the Propped


Contract;


•nd .Hall wrva accordingly ii|tm thr GOVERNMENT and a I the


CONTRACTOR I Jtfktes and in default of recct|« by Bre GOVERNMENT


of any Midi noli.c within rwch period of «*n* hundred and eighty (I BO) days


tuch CONTRACTOR Entity sludl be Jeemed conclusively to have served a


iKKlte ckumg U> wane its aforesaid right ol prv amption in relation to the


Proposed C ontract


(c) In the event that more than one of the CONTRACTOR Entities exercises its


rights under Article M.KMbKD in iclalon to the TropoMd Contract. then the


GOVERNMENT shall transfer or grant each such C ONTRACTOR Entity


an interem in the Proponed Contract upon the Agreed Perms (in accordance


with Article 14,10(b|(i)) in the proportions In which their response


percentage interests tear to the aggregate of «cir rcspculvc pcivcaUgc


merest* unJer Ur relevant Joint Operating Agreement (as it applied at the end


of tie Exploration Pened) a in suet otter popomom os mkJi


CONTRACTOR I runes shall acre between then


(«ft In thr event thacreoftte CONTRACTOR Frames cxcrcno ft* right*


trader Artick M.IOORi) ■ rehtion lo Re Ptopoaed lomo (her the


GOVERN VI ENT shall transfer or grant tte whole ef the ram h the


Proptned (•«*/** open the Agreed Terms (in accordance wift 14 Uth»i»u>


such CONTRACTOR Entity.


(e) In thr event th* none of Bre CONTRACTOR ntities exerciser its rights


under Arti:k I4.l0(b)(i) ire GOVERNMENT may enter into the


Prop, ved Contract on terms no nor? ivourablc to its counterpart} than the


Agreed Ictus axl. >a such case, the aforesaid ights of pre-cm*HO shall


theraap.*. .rara m ap^Cy in relraim to Vir pRfnvc* CoamcL


14 11 irihr rrr-rtrp.au. right* m Artick 14.10are rot exercise* raid the GOVERNMENT


eaters into the Proposed Coetrad with the thud pern concerned, the


COVERS ME VI will ■« it. hm endeavours tn av «id ary effect which tray hamper


the Petroleum Oparaawn of Ur CONTRACTOR whlc prcdixing Petroleum











41/164


14.12 FVmg af Nmural <*s ir the count of activities provided fee


prohibited except (i) shortterm flaring up to twelve (12) Months necessary tor testing or


other operational reasons in atxoniance with prudent international petroleum industry


practice (which shall include the flaring of Associated Natural Gtn to the extent the





CONTRACTOR ennsidm that re-inject inu Associated Natural Gas is nrt justified


technically and economically and provided the GOVERNMENT deodes not to take





such Aaaociatad Natural Crash nr (ii) with he prior auhorisatkn of the


GOVERNMENT.

CONTRACTOR shall «4wnir asch mji^l to thr

an evahatwn of n»raUe alternatives to Hannj that have been considered along with


a the ranoual ravd qualry of Naliail Gas involved and the duraion of the











ARTICLE 15 ACCOUNTING AND At WIN





15-1 TV CONTRACTOR shall keep in its offlcca in Ihe Kuniistan Region copies of all


bu>k<« and aoeounla of all revenues relating lo Ihe Petroleum Operations and all


Petroleum Costs (the "Aivouatt"). except during the I'xplonHion IVriod. when tile


(CONTRACTOR -hull be cntillcd to keep the Accounts at its headquarters Abroad. The


Aivuuitf* 'hall reflect in detail expenditure incurred as a functina of the quantities and


value of Petroleum produced, and shall be kept Tea a period of five (5) years All


Account* Whch art maoc available tu th; GOVERNMENT la acecnfcnc* witk the


provisum of ihis Contract shall he prepared in th: EngMi languay The Accounts shall


be kept In accordance with prudent international petroleum indurtry practice and in


accordance with th: provisions of the Accounting Procedure. The Accounts shall be


kept in DoUvs. which shall be the refererae currency for the fuiposcs of this








15.2 Vkahm ninety (*0) days following the end of each Calendar Year, the


CONTRACTOR shall Whml to Ue GOVERNMENT . summary Matcarcftf U all


Petroieam Casts ireuned during the saidCalcadv Year. The sunmars Oatonent hall


ato inoude a profa aloaatkw ptriutoi to 4»c pnw ««* of Article 2h.


15.3 TV GOVERNMENT hall have the right:








(a) lo rcaicsl hi auCti at tic Account wnJ respect to each Calcadai Year within











(h) to retain an auditor of ictemarional standing familiar wth Mcrnabunal


petroeum industry accounting prxiicc to undertake or assist the


GOVERNMENT to undertake the aud.t.


15.4 llv rcawmbfe cost of retiming an ludncr puruant K> Artck I5J shall be borne by


the COrrnuCTOR and treated as a Petroleum Cost for de purpose of cos recovery


ureter Articles I and 25.


15 5 Daring the Audit Request Period for toy Calendar Year btf not thereafter, the


GOVERNMENT. acting reasonably and in accurdmc* with prudent mtrmaUmal


pmnlrun mtusfn prank*. may reqaest n writing all rcawrably avaibblc


15.6 Shi hi kl ttc GOVERNMENT consider, oe the twis cf dau and information available


that the fOffTRAfTflR made a material mistake or there a any incpilarity in


respect of tlic Accourts aad etnsiders that ary ccmctioro, adjustment* or


•recmlnwnt. should hr made, fhr GOVERNMENT shall make any audit exceptions


in writiag and notified to the CONTRACTOR within si* (6) Months of C* da* of


(0|ucsr referred to in ArticU 15.3. and failure In give «h wrinen exccpt.<» wthm


su:h time shall be deemed to he an acknowledgement of the correctness of the


CONTRACTOR'* Accounts.


15.7 In ics|nvl of any audit exception made by ihr GOVERNMENT in accordance with


Article 15.6. the CONTRACTOR shall then have sixty (60) days to make necessary


CUicctlons. adjostaicnla or amendment* or to present ns cortmenw in writing or


request a meeting with the GOVERNMEVT. The GOVERNMENT shall within


thirty <)0) days of die CONTRACTOR * response, notity the CONTRACTOR .n


writing of its position on the corrections, adjustments. amendments .* commeas If


thereafter tltcrc Mill exists o disagreement between die government and the


CONTRACTOR, the dispute will I* settled in accordance with Artie* 15.9


15.1 In addition to the annual statements of Petroleum Costs as provided in Anicle 15.2.


the COVIRACTOK than provide the GOVERNMENT .kh mJ» pnxkrtkm


sutements and repairs, at required pursuant to Article I6J.


15.9 Any dilute between Ihc Parties unier this Article 15 that canre* be settled amicably


Witliin Sixty (60) days ol the GOVERNMENTS Dual make *™k. Aitxk 15.7. may be


submitted to an expert on the request of cither the GOVERNMENT or the


CONTRACTOR in accordance w* the provisions of Article 4i2. Nmw ehviaading


tt* provision* of Aitklr 42. n this specific irstance the dccison of the expert shall


not necessarily be foal and erJrer Party may decide to submit the maner toartonrsoon


in accordance with the provmmt of Ankle 421.








ARTICLE 16 - COVTRAC'I OR*S RIGM IN AND OMLK.A I IONS








16.1 If not done alrenly. within ninety (90) days Mowing the LfTculve M. each


CONTRAfTOR Emily shall opea an office and appoint a permanent rcfrcserrahve


ta the Kurdistan Region. who may be coatacted by t>c GOVE.KN M f.NT with regard


to any maacr relating to this Coronet and will be entitled to receive any


correspondence addressed to such CONTRACTOR hrtrty.














4VI64


16.2 Ihe CONTRACTOR shall carry out all Petroleum Operatbns ir accordance with the


provisions of this Contract, prudert international petroleum ladusoy prmniw and


applicable Ktrdisxa Regain Law.





TV CONTRACTOR shall be respensibk for tic conduct management, control and


adninisvslior of Fktrolcum Opcrabocs and shall be entitled lo conJuct Petroleum


Operations in accmtancr witi the provision* of tin Contract In competing it*


Petrolcun Opcralkm. th: CONTRACTOR shill have the righ U> u* an? Affiliate


of each CONTRACTOR Fntky. is an! their Suhcontractorv and the empkneev


consultants. md apmis of each of the foregoing. IV CONTRACTOR anJ ail such


Persons shall M all tiroes have free ac«« lo tie Centrar Area and an> Production


Ant fcr the :wrpo* of ramng ov. Petroleum Operations











I6J The CONTRACTOR *all provkfc the GOVERNMENT with periodic data and


activity reports rehting t> Pctn.lcun Opoatima. Sad inwb shall iraludc detail', of








at formation and data regaiding ail Faphmtion Operandm. Development


Operations and Production Opentkms (as applicable) perfumed Junnj the


Calendar Year, includiag an; qualities of Pemdeum produced and sM.





(b* data and information regarding any transportation tacilit c\ bull ai>3 operated


by the CONTRACIOR.








(el ■ statement specifying the


acII as a report on any medical services and





personnel; and





(dl :i descriptive statement ol all capital assets acquired lb« ilw Petroleum


Operations, indicating the dote and price or cost of their acquisition











16.4 The CONTRACTOR nay freely use any Petroleum produced within the Cor tract


Area for live Petroleum Operations.











Ifo5 Ihc CONIRAC.TOK shill at all times provide rcaronebk -ssisUikc as may


reasonably he requested by the GOVERNMENT during its review and verification


of records and of any other information relating to Petrolearn (peratkim m the


offices. worksites or any other facil tics of the CONTRACTOR.





I pon giving reasonable prior notice to the CONTRACTOR, the GOVERNMENT


may send a reasonable number of representatives to the work-sites or nny other


facilities of the CONIKAfTOR in the Kurdistan Region to perform such reviews


aid verifications. The represcnlanves of the GOVERNMENT shall at all times








44/164


 comply with any safety regulation* imposed by the CONTRACTOR and such


reviews and verification* shall not hinder the smooth progress of the Petroleum


Operations











16.6 Far the performance of the Petroleum (ipcraliors. the CONTRACTOR, any Affiliate


of each CONTRACTOR Kitity. it and thee Sulcm tractors and the employees,


consultantn and a*ml* of rath of the foregoing shall at all tones be granted free


access to the Contract Aiea onJ to any facilities for the Pcroleun Operations located


within or outside of the Coni rad Arm or within or outside the Production Area for


the purpose of coming out the Petroleum Operations


Use of Facilities





16.7 Upon notice from the GOVERNMENT, the CONTRAfTOR shall make available


to a reutmaklr number of rrpreurnlatlves nf the GOVERNMENT these of the


CONTRACTOR'S facilities which are accessory «o enable such representatives to


perform their tasks related to this Central and ihe Kardwun Region Oil and On I aw


including, in case of works to be performed on work sites, transportation,


aixutnnodalmii and board. under ihe «mr condition* as the** provklrd h> Ihe


CON I RACTOR for its own personnel


Notwithstanding Article 16.8. the GOVERNMENT shall indemnify and hold


harm lew each CONTRACTOR l.nlity ngaiurt all losses, damages and liability


arising under any claim, demand, action tv proceeding brought cr initialed against any


CON I KALI OK Entity by any rcp

with thr access to cr use of the facil tics by suck represenUlises.





16.8 llie CONTRACTOR shall be responsible for any loss or damage caused to third





parties oy Its or Its Subcontractors |icim.iiicI solely and directly rcnulimg from their


negligence, errors or omissiom in accordance with applicable Kurdistan Region law.








16.* In its Petroleum Operations, the CONTRACTOR shall respect any patents belonging


to third panics





l.itigatloq





16.10 The CONTRACTOR slu.ll us wop bn reasonably practicable inform ihe


GOVERNMENT of any material litigation relating to this Contract.





Sakll





16.11 Ihe CONTRACTOR 4ull implement a health, safety and environment program and


take necessary mcasuio to craurc hygiene. health and safety of its personnel carrying


out Petroleum Operation in acconimcc with (ruder! international pcfmlctxn industry


practice.








45/164











wl





 Sad measures shall include ihc following:





(a) sapplying first aid and «*frty equipment for each work area and maiatalnlag a


tealthy cnvironmeni for personnel;


(b) reporting to the GOVERNMENT within sc vent)-two (72) hours of such


iwrident. any Occident where personnel has been injured while engaged in


IHrtrulcum Operations and resulting In sich personnel being unable to return to


work:


«•) implementing • perm it do-work procedure around hazardous cquljvncnt and





iastalUtionv


(d| poviding safe storage areas fre explosives, detonators and nny other


dangemiM products lived in llic operations:


(e) supplying fifr-exlrnguidiing equipment in each wort area:





(0 for the purpwc of takirg control rf any blow out i* fire which could damage


the environment or Petroleum field, in accordance with prudent international


petroleum industry practice: and


vc of preventing any involuntary injoction <»r fluids in pctrofcum


formations and produciion of Cniie Oil and Natural Gas at rates that do not


conform to prudent intrmniiionl prtmlran industry practice.











16.12 Subject to Article 4» 7. in the evert the production rate of Ihc individual wells and


Reservoir of a Petroleum Field is to be set bekm the Maximum I Ilk lent Rate


<”VI*.R*) to the Reservoir, as provided for in the Development flan, as a


: of a dcci»» by the GOVERNMENT or my federal or


body. to COVUNMDrr undertakes to alocak any


forty md afjitabt. among the various operators (ntluditg the GOVERNMENT)


then pcoduciig in to Kvdirtan Repen. pro rata too respective productm«i rules In


such event, the GOVERNMENT shall grant an extension of the Development Period


of any rmdurtkm Area w affected to • naaooaMa period of time in onto to pndure


which wcxild otherw^c have already Seen produced, hml the MFR for














10.13 Tbe rerpccthc rights, italics, obligations kabilWaa of to CONTRACTOR and


to GOVERNMENT to be jndcniood as be ng


The Parties ag»v« tot Cm Co


or utor form of











16.14 Ihc GOVERNMENT and cadi CONTRACTOR Emily to right and


to take in kird aoC seprtoely sell orotorw.se





4WIM











)<7L


'W





 shares of Petroleum. Upon approval of the Development Plan, the Parties thnll meet


as soon as prarticabk to reach a detailed agreement governing the lilting o( I’drokum


hy each such CONTRACTOR Entity. Such lining agreement shall include the


fb'lowirg:


(a) the obligation of the GOVERNMENT and each CONTRACTOR hntity to


lilt, regularly throughout each Calendar Year, their shun; of Petroleum


produced from the Production Area;


(bl notification procedure by fcc Operate* to toe GOVERNMENT and each


CONTRACTOR F.ntity re«rdinz cnlitkmcnts an! avariability of Pcuocum


for lilting by each Party during each lining period and nominations by each


Party , ami


(c) the right of the Parties to lift any Available Petroleum n« scheduled for lifting


and/or not lifted by the other Party during each such lifting period








If. 15 rhe CONTRACTOR Entities shall sell and transfer to the GOVERNMENT, upon


written mjupat of the GOVERNMENT', any amounts or Crude Oil that the


GOVERNMENT shall deem necessary to meet hurditfan Region internal


consumption requirement. The ales prior of such Crude Oil shall be the


International Market Price. The GOVERNMENT shall provide the


CONTRACTOR Entities with not less than tlx (6) Months1 advance written notice


of its intcntiui to buy such Crude Oil.


Paymeats shall be made in Dollars and otherwise on terms consistent w*h prudent


IrlcmaiMNial pctnfcum induary practice. I he CONTRACTOR t n-ities' itoligafim


to sell Crude Oil to the GOVERNMENT shal be. with tie caber operators (melading


the GOVERNMENT) then prodding in the Kurdisxar Reg.cn. pro rata to their


respectve pr»ducLon rare*.


The previsions of iris Artiek 16.15 shall nca apply to Nor-Associated NaUraJ Cias





ARTK1.F. 17 - LSE OF LAND AND EXISTING INFRASTRI CTl RF


17.1 The GOVERNMENT shall make available to th? CONTRACTOR any laid or


property in Ik Kurdisan Region required ft* the Petroleum Operations. provided


real nerd fer d The CONTRACTOR shall have the right to burid and manum.


above and below ground any facilities required for toe Porulewn Operate


172 If II becomes necessary for icndiKt of toe Petrokara Operation), to occ w and use


ms land or property in ike Kardisun Region belonging to third parties, the


LON TKAt lOK shall endeavour to reach ankatfc agreement wkh th* owwrre of


arch land. If such arakabk agreement cannot be reached the CONTRACTOR shall


notify the GOV EKNMENI on receipt of such nouffcabon.











*7/164


 <•> th* COVRRNMFNT Owl I drtermnc the aireunf of campemMwn to hr paid


by lhe CONTRACTOR to the owner If occupation will be lot a shun








('•) the GOVERNMENT .hall r»pmori*ic the bnd or pnperty in aixurdmcc


with applicable Kurdistan Region Law, if Mich oocupatkM will be long lasing


or male* rt henceforth impartible to resume original usage of Mich land or


property. Any proper!} rights shal be acquired by and recorded in the rume


of the GOVERNMENT, bw the CONTRACTOR shal he entitled free use


cf the land or property for the Petroleum Operations for ihe ertire diration of








I he amount of the compensation in Article 17.7(a) shall he lair and reuxonable. in


accordance with Article 29 of the kurdiSMi Region OU and Ga> law. and shall take


into account tnc ngfits «>f the owner oxl any effective m of the Urn I or property by its


owner al the time i»r occupation by the CONTRACTOR All rrusonuble costs,


expenditures and lair and reawnnbk compensation (m required p.irv.«nl to Article 29


of the Kurdistan Region Oil and Gas law) which rrvils from such expropriation shall


he home hy Ihe CONTRACTOR. For We avoldmuc of doubt, «u*)h oorA*. expenses


and compensation Incurred bv the CONTRACTOR shall Ire considered Petroleum


Costs rod shall be recovered by the CONTRACTOR in ats.*danc* with the


provisium of Articles I and 25.





17 1 lar ilt Petroleum Operations, the CONTRACTOR shall have the right in the


Kurdistan Region to use. subject to applicable l aw. ary ral'way. tramway, road,


airport, laming feU. canal, river, bridge or waterway, any tclccomrrunkatiom


Mtwori and any raiding pipelines or tram** nation ml restructure, on icons no less











17.4








recovered by the CONTRACTOR in accordance with the provision* of Ankles I








rod 25





I7J for k» fVtiotcsws € the CONTRACTOR dull have rgM in the


Region to clear land. procure.





excavations,


Murage and disposal facilities. pnmaiy distillation unin. extrartUm ami processing


■nits reparation units, sulphur plants and other fault lie* or intfallaums far the








well as unices, schools


railways,


tun facilities, garage-


other auxiliary (acilMes for the Petroleum Operations and generally, everythin!





41/164


CONTRACTOR sAall have thc^ngL to select the location «or the*


17.6 For it' Petroleum Operations. the tt»MKAl lt>K shall have the rigta In U»c


kirdratan Repoo. subtext to uxnplnncc with applicable Kurdiftan Regioa Law. to














I)M CONTRACTOR shall have Ihc right in the Kurdistan Region to lake or use uny


water r**cc*»»ry fra the Petroleum Operations provided it does not damage any


existing irrigation or navigation syttrms and that land, bouse* or watering points


belonging to third panic* tor not deprived of their use


17.7 lie GOVERNMENT shall have the right in the Ktrdirtnn Region in huihl. Operate


and maintain roods, railways, airports, landing strips, canals, bridges, protection duns,


police station*, military uistnllaliom. pipeline' and telecommunications networks in


the Contract Area, provided this does not increase the emu, or compromise or have a


material adverse effect on the pctfuemaaic of die IVtrokum Operation*. If the


cimtnation, operation and nuintenancc of such facilities by the GOVERNMENT


remits n increased cost or expense for tie CONTRACTOR then, fee the avoidance


ol doubt, such COB and expense shall he comidsrad Petroleum Costa uixl shall be


recovered by the CONTRACTOR in accordance with the provision* of Articles I


and 25.


17.1 Upon request of the CONTRACTOR, the GOVERNMENT shall prohibit the


ccnstruction of residential or commercial tHiildrgs tn the vicinity of facilities used for


Ihc Petroleum Operations that may be declared dinger>us due to the Petroleum


Operations aad to prohibit an; interference witi the use ol any facilities required for


175 Ace*»» the Contract Am ray be granted punaart la an Aoccn Authoraatioa. as shall


be defired in. and corotmnt wah. de kurJman Regan Oil and liaa Law. a- aufeensed


thfd puiie* on rrmmabk terms rod ccnditwro (iacludng ixordumionf. inchding


Persons authcriscd to construct install and operate stiacturov faciirics and iretallabonv


and h> carry cur othrr worluL provided that renting in he Access Authensatkn or ia dm


A-tick 17.9 aBhorhes the holds to drill a Well or to perfcwn any PHrdcum Operations


 (b) securing regulatory Permits « matters of cusutns o» hnp»rt/exfvu.


(c) securagentyandexitviMS. wort and residence permits as well a* any «her


administrative Permits for each CONTRACTOR Entity v its Aflilaic * and


n Scbconvacior*' ftfeign penonnd (inciidmg thee ttnily nemters)


wwkiBS in the Kurdntan Kefioa ml any other part of Iraq daring the


rnpleoenuiion of this Contract;


(d) -ccuriag any necessary Perm ts k> tend Abntnl document*. dau or samptet for


atalyss or processing for the Petroleum Operations


lei relalkns with ,ncudm‘ **





(g> obtaining aay other Permits requeued la any CON IK At'I OK tatty for the











fl» access » aay exiting data and iafonrniioo, mcliding Jau and irfiemation


relating to rtc Contract Area held by previous operators c» contractor*; ana


(i) providing aJl necessary security for Petroleum Operation*.


112 U hhin*e scope of serv ees to be provided under dm Article II. remauble and duly


juaifKC expenses ncurrrd by the GOVERNMENT or paid to third parties shall be


charged to the CONTRACTOR and *hal be carsilcrtd Petroleum Co«s aad diall be


recovered b> the CONTRACTOR as Petroleum Cosh m accordance with, the


provisions of Articles I and 25.








ARTICLE If - EQUIPMENT AND MATERIALS


19.1 The C ONTRACTOR shall supply, or procure the spply of. all materials, equipment,


machinery, tods, -pan: parts and any other items or good* required lor the Petroleum


Carnations rKqoipinrnt aad Materials ).


19.2 Said Fquipraeni and Materials shall he provided by the CONTRACTOR in


accordance with the relevant Work Programs aad Bulgets


19.) As soon as possiNc after the Effective Date, foe CONTRACTOR -hall provide the


Management Committee with a copy of ds procedures for procurement of I quirroent


usd Materials and/or services for the Petroleum Operations as required by the


provisions or Article K.2 (e). including the criteria for tender evaluation, which


procedures and chicriu shall be in accordance with prudent internal ional petroleum


Irduntiy practice If ihr Maragement Committee does not request My modifications


to the procuremcni procedures within thirty (3«) days after receiving such procedures.


IW procedures dull h* deemed approved hy Ihr Management Committee








50/164


10 4 The CONTRACTOR shall give priority to equipment and Materials that arc reality


avillnhlc in the Kurdistan Regitn and other parts of Iraq to the extent their price, grade,


quality, quantity, upecificaticm. pure have, delivery and other commercial and


technical terms arc comparable in all material respects with those generally available in


the international prtiolcufr indn*iy


ARTICLE 20 riTLF. TO ASSETS





20.1 During the Exploration Period any Assets acquired by the CONTRACTOR lor the





Pemtlntn Operations dull remain the property of the CONTRACTOR, the


CONTRACTOR I ntitics. their Affiliates or their Subcontractor, as tkc ease may be.





20.2 During the Development Period subject to Article 21. all Assets acquired by the


CONTRACTOR for xhr Petroleum Operations shill become the property of the


GOVERNMENT upon the completion of the recovery of the costs of all such assets


by the CONTRA* TOR or thr end of (hr Contract whichever is the earlier


20.3 n» pcovi«ion« of Article 202 dull not apply to aay Assets leased by the


CONTRACTOR or bdongieg to an Affiliatod Company of a CONT RACTOR


Entity or belonging to it* or their Subcontractors nr its nr (heir employees.








ARTICLE 21 - USE OK THE ASSETS


21.1 Each CONTRACTOR Entity shall have the exclusive right to use. free of any


charge, all Aivrtv described in Article 20. both before and after recovery of the cost of


the same, for the Petroleum Operations, as well as for any petroleum opcrat.ms infer


other agreement* in the Kunliuan Regirai to wt*ch h nr any of in Affiliates it a forty,


provided that the Petroleum Operations take friority. Ihe GOVERNMENT agrees


net to trailer or ohrrww tfaqaw# of any of arch Asses without the


CONTRACTOR’S prior written approval





212 The CONTRACTOR nay fiecly mom to the Coatract Area any Assets frorr any


relinquished portkn of the Gwtiwi Area. or from any other area in the K unman


Region.





ARTICLE 22 MBCTWTR ACTING





22.1 TV CONTRACTOR thall it hive al the


experience





222 The CONTRACTOR shall gve polity to Subcontractors from the Kurdistan Region


of Iraq to the extort their cooprtence. rrtev experience, reputation.


ledrt rrtmg md term of avm labilky. delivery and other


the CONTRXfTOR * cole ipiman. ermpanMr in all


with those prrvided by foreign compares opening it the


ictcmatkma! pcUvfcum industry. S*»h Subcontraaore muat be bora fidr Kurdistan


Region companies nrt reialcd » any PuNi: Offer, drectly or indirectly, and must have











51/164


22.3 Selection of Subcontractor 'hall akc place m accorthncc with the procurement


procedures submitted by the CONTRACTOR to the Management Committee in


accordance with Article 19.3 and upproved by the Management Committee.


2? 4 IV CONTRACTOR shall provide the GOVERNMENT with copies of agreements


entered into with Subcontractor, where their amount exceed' the limit wet b> the


Management Committee from time to time.








ARTICLE 23- PERSONNEL, TRAINING. AND TECHNOLOGICAL ASSISTANCE


Pcnonnrl


23.1 l or the Petroleum Operations the CONTRACTOR shall give, and shall require its


Subcontractors to five, preference to personnel from the Kurdistan Region and other


part' of Iraq to the extent such personnel have the technical capability, qua fixations,


crenprtmce and experience required to perform the work.


23.2 llte C ONTRACTOR Entities shall give due consideration to the tecondment of


GOVERNMENT personnel to the CONTRACTOR Entities and of the


CONTRACTOR Entities’ personnel to the GOVERNMENT during the various


phaset of the Petroleum Operations. Terns and conditions for such tecondment shall


V mutually agreed hy the Parlies and nn> costs associated therewith shall he


considered Petroleum Costs and shall be recovered by the CONTRACTOR in


Mcordaneo with the provision* of Article I aivl 25.


23.) Each CONTRACTOR Entity and it' Affiliates ard Subcontractors shall have the


right to hire foreign personnel wherever the personnel from the Kurdistan Regina and


odtor parts of Iraq do not have the mpimte nvhriral capability. qualification or


experience for positions to be filled as required pursuant to Article 23.1. la the event


my M«h fswdgn pcnoancl arid'o* a moabu of ihrir (amity engage « divines or


commit acts winch breach Kudistai Region law. tie CONTRACTOR dull at the


M“SCT* ^ ",-n-r


23.4 For the first five (5) Contract Years, the CONTRACTOR shall provide up to two


hundred and fifty ihou«ndlX.IUr. (USE50,(00) j. ad.incc each Conrmrt Year to


the GOVERNMENT for the recreitmcrt or wcondmcnt of personnel whether from


the KudtSan Region Xher pins of Iraq or Atmmd. u Uw of Natural


Resource* The selection of web pcnortiel shall be at dc dhemioa of the Mhhicr


of Nararai Resources, bach mats *u!l he conuderet as rvuutaan Cows «al dwU be


recovered in acconancc with Ac promwm of Alkies I and 25.








23J la a planed way. h acccrdarex with the provisions of this Article 23.5 and Article* 23.6


■sd 23 7. the CONTRACT OK shall tram all as personnel ftorr the Kurdbtan Keg km


aid other parts of Iraq directly or ndirectly involved in the Petroleum Opera!mas for








trld b. the CONTRACTOR Entities- foreign weaken wrth an oyuvakni





52/164


Such traning shall also include the transfer of knowledge of petrefeum technology and


the necessary monapmcnl experience so «' to enable the personnel from the Surdimui


Key km and other part* of Iraq to apply advanced and appropriate tcchnohyy in the


Petroleum Operations, to the extent permitted by applicable Law and agreements w ith


third parties, and subject m appmprialc confidentmlitv agreements.


2 J.6 In addtion to the requirements of Article 23 I. the recruitment. mtepaiioc and «aWn| of


the CONTRACTOR Lntitics’ personnel from the Kurdistan Region and other parts


..l Iraq .hull be planned, which plans shall he submitted to the Management Committee


for its approval. Ihe training plan shall lake into consideration the requirements of Article


2J3 and may include training thr ihr (JOVERNMENT"* personnel. dependng on the


exient to which the «nourt allocated to the training plan, as pracribcd by Article 23 7. is


otiilahk otter taking Into comdeMra ihr rrainng of ihr CONTRACTOR Entities*


Kurdistan Region and other Iraqi personnel.


Within ninety (90) day* or the Effective Date, the CONIRACTOR shall submit to


the Management Committee a proposad training plan for the remainder of the


Calendar Year. Hereafter. t» later than I October in each Calendar Year, the


CONTRACTOR shall subrail a proposed trainmg plan » the Management


Committee for the fallowing Calendar Year.


23.7 I lie training plan referred to In Article 23.<> shall provide for the allocation of the


uitnium of one hundred ami fifty thousand Dollars (UK* 150.000) for each Contract


Year during the Exploration l*eriod and three hundred thousand Dollars (US$300,000)


lor each l on tract year daring ihe Development Peikd


23.H l ath t ONI RAI IOK Dully slmll be respunsMe fir the tramiag coas which it may


incur in respect of the personnel it employs front the Kurdtsun Region and other ports of


Iraq. All such reasonable costs shall be considered tu. »W4c«n C«.as -id dial I be


recovered in accordance with the provisions of Ankles I and 25. C*st' tacurred by


dr CONTRACTOR for trailing programs far the GOVERNMENT’* pcrwmnd


shall be borne by the CONTRACTOR only to the extent fiat dry are me laded n the


CONTRACTOR'S trairma pan. panuaal to Article 23.6 and stall oho be wiudcral


as Petroleum Cos* and shall be recovered in accordant w-.th dr provnioo of


Articles I and 25. The cost of all other training programs for the GOVERN MENT S


pmnnirl shall be the GOVERNMENT’S respansiblity.








23J Fiom the das: of Fir* Produenon km the Ccrtract Area, the CONTRACTOR shall


contribae the ameum of one hundred and fifty thousand Dollar* (USJ1M1.UUU) each


C ontract Year during the Exploration Period and three hundred thousand Dalian


(USS3CO.OOO for each C ortraci Year duriag the Dcvelopncnt Penod inn. the


ravimranent fund e«ah ishwd by dr GOVERNMENT for the benefit of the natural


cavirorment of dr Kurdistan Regun. penuaa to the Ksrdisxan Region Oil and Gas


Law One -E-vir---^.1 ¥mmT) Such arewts shall be deemed to be PWrofcsan


Cots and shall be recovered in accordance »kh Articles I anJ 25.


23.10 Any expendture ncurrrd by the CONTRACTOR urxfcr this Artcle 23 shall be


considered Pvtrolcsm Coav and shall hr iwosereri in axowhncc with Arta ks I and 25.








5VI64


23.11 Before the end of the flitt Contract Year, the CONTRACTOR shall provide to the


GOVERNMENT in kind technological and logistical assistance to tin- Kurdistan


Region petroleum sector, including geological computing hardware and software and


such other equipment as the Mmiser of Natural Resources may require, up to the


value of one million Ddlora (US$1,000,000). The form of such assistance shall be


m dually agreed by the Parties and my costs auociaxd therewith shall be considered


Prtroleum Cc-sts and shall he recovered by the CONTRACTOR in accordance with


the provisions of Articles I and 25.


ARTICLE 24 -ROYALTY


24 I Hr CONTRACTOR shall pay to the GOVERNMENT a pattern of Pctolcuni produced


and saved fran the Contract Area, os provided n this Article 24 (the “Royalty").


24.2 I he Royalty shall he applied on all Petroleum produced and saved from the Contract


Area which is Crude Oil or Non-Associated Natural Gas. except for Petroleum used in


Petroleum Operations, rc-injixted in a Petroleum Field, los. flared or for Pecedan that


I'utKHii K> used or sold and such ('rude Oil end Non-Associated Naural Gas (cxJudirg the


excepted F\-tioleura) shall he referred to colixtiveiy as “Export PetrotranT and


wpondrly and rc^MCthely at “Export Cmrir Of" and “Export Noo-tmaated


Natural Gas".


24.) If payable in cash, the amount of tfr Royalty rakmharrl by applying he Royalty raes


provided under Anick 24.4 shall be pa* by iW CONTRACTOR at directed by the


GOVERNMENT, in accordance with Artirk 24 7.


If payable in kind, the quantity or Export Petroleum comMpondtag to the Royalty and


cakulaicd by applying the Royalty role* provided under Artick 74 4 thall be drlncred


in kind by the CONTRACTOR to the GOVERNMENT at he Delivery |S..nt Title and


it* of loss of the Royalty paid in knd shall be transferred at the Iklirery INtint


In levs the GOVERNMENT roqu res the Royalty to be paid in hind. by giving the


CONTRACTOR not less than ninety (90) days prior written notice prior to the


commencement of the relcvuul Quarter, the GOVERNMENT uhnll he deemed to


hive elected to receive lltc Royally in full and in cash for the relevant Quarter.


24.4 Ihc Royalty due on any Export l*etrolcum produced and saved in the Contract Area


shall he determined daily by applying the following relevant Royalty -at*. to the


Export Crude Oil or to the Export Noo- XwxuUaJ Natural Cm (as tic ease may he)


produced and saved on tlui day.


(i) For Export Crude oil:


the Royally rate for Export Crude Oil shall Ik ten per cent (10%). which, for


the avoidance of doubt shallapply regardless of the gravity of the oil; and














51/164


 (b) For F.iport Natural Ca»:





the Royalty rate far Export Non-Associated Natural Gas shall he tea per cent


(10%).


24.5 Associated Natural Gas and any other Petroleum shall be exempt Irom any Royalty.


24.6 If. punant to Ankle 24J. th: GOVERNMENT receive the Koyaly In klml. and


pusuanl to Ankle 28. the GOVERNMENT requests assisancc for the sale of all or


pan of the Royalty recoved in kirri. each CONTRACTOR trrtity shall assist the


GOVERNMENT in sclkng all or put of such Royalty received in kind (belonging to


the GOVERNMENT) in consideration of a commission per Barrel payable to such


CON TRACTOR Entity, in accordance with Ankle 28.





24.7 If purs.Ml to Artick 24a the GOVERNMENT receives th: Royalty in cash:


(a) any Export Crude Oil sha I be valued at the International Market Price


obtained at toe Delivery Poii*. as defined in Ankle 27.2:


(b) any Export Non-Associated Natural Gas shall be valued at the actual price


obtained at the Delivery Point under on termed contract, as provided in Article


27.3;


(cl the CONTRACTOR shall pay «ch Royalty each Quarter, in aiTcaiv within


•forty (VI) days of the end of each Quarter, and dull calculate the payment


due for the relevant Quarter by reference U* tbc price for the Export Petroleum


ii ihe Delivery Point, determined in accordance with raragraphs (a) and (b)


•hove, and the Royalty due on the Export Petroleum, determined in


icconlunoc with Article 24 4. for the uni (>«rter and


(J) i»e CONTRACTOR -nrities shall he entitled to export freely the volume of


Export Petr^kuw corresponding to the Royaky decnmird in accordance with


Artiefc 24.4 for Ac pt«po«r of paying rfcc Royalty m cask





ARTICLE 25 - RECOVERY OF PETROLEUM COSTS


25.1 All Export Crude Oil prudaced and raved from the Contract Area -ball, after




All Associated Natural Gas produced and saved frren the Cortract Area, except fur


Aaaocirtad Natural Gat whch is used in Nrtndnan Operations, re-infected in a


Pttiukam Field, loo. ftaaxl or canna be used or void, shall be considered as ‘Avaiabtc








All Export Non-Associaied Natural Gaspmdcerd and saved from the Cnatract Area


shall, after deductxm of any Quantities of Expert Non-Associated Natural Gas dee for


Royally pumanf *> Artick 24. be considered aa “A-mil-Mr W-Aumrktad Natural


Cm".











55/164


"Avail*Mr Prtndeaw means Available Crude Oil Available Aeccwed Natural Gat


anJ AvalaMc Non-Associdcd Natural Gas.


252 Ftr the purpose of #iis Article 25:


(a) uny Availahle Crude Oil dull be valued at the International Market Price


obtained at the l>livery Point, as (feline*) in Article 27.2: and


(b) my Available Associated Nnlural Gas and uny Available Non-Assoc .tied


Natural Gas dull be valued at the actual price obtained at the Delivery Point


•mdrr an approved contract, as provided in Artclc 27.3.


25 1 Object to the provisions of this Ccntraa. from the First Production in the Contract


Area, the CONTHACTOH dull at all times be entitled to recover all Petroleum


Costs incurred undrr rhit Contact, of up to forty per cent (140%) of Available Crude


Oil (which, for the avoidance of doubt, shall apply regardless of the gravity of the oil)


and Avnilublo Awooiated Nnlural Gw. produced and uived within nny Calendar Year.


Available Crude Oil above this pcnenuijp or otherwise t*x used for the recovery or


IMndcum Cotta shrill be Profit CrudeOil.


25.4 Subject to the provinioni of this Contract, from l ira Production in the Cnrtract Arm.


the CONTRACTOR dull at all times he entitled to recover all Petroleum Costs


iu.urrcd u/xkr dm Contract of up to fifty per cent (50%) of Available Non-


Associated Natural Gas prodaccd and saved within any Calendar Year. Available


Non-Awciated Natural Gaa above this percentage or otherwise not used ft* the


recovery of Petroleum Costs shall be Profit Natural (ias.


25.3 l or the application of Article 25J ami 25.< Use CONTRACTOR dull keep a


detailed account ol Petroleum Costs In dLcocdoax with the provisions detailed is the


A .court mg Procedure. Recovery of Pcrokuai Corts shall occur in the following





(a) PTOdacdoa Cotas:





Contract Area);





(c) Gas Marketing Costs:


(tft Development Cotta; and











25.4 fatal recovery of Petroleum Costs during any Calendar Year, expressed in quart* ics


Petntom shall nut


25.4. If in my Calenttr Year, the ArailaNc Crude Oil ardor Avaikbk Xoa-


Assuciaied Natural Gw do not allow the CONTRACTOR to raw mi its


Petroleum Costs pursuant to this Article 25. be amount of un-recorcred Petroleum


Costs ci sues Calendar Year shall be carted forwad indefinitely u the subsequent


' alcndar Years urtil all Petroleum Costs are fully recovered, but. save as provided m


Articles 14.10 and iS.4. n no (thcr case alter the trmtnaliun of the Canaan.








54^164


25.7 11* provision of Artie to 27.7 and 27 J shall b» appled to determine die qumtities of


Available Crude Oil ard/or Available Non-Associated Natural Gas die to the


CONTRACTOR Inr the recovery rfits firtn>kum Costs.





7S H TW quantifies of IVnolcum ccnespondinf to the share of Available Petroleum dac to


the CONTRACTOR for the recovery of 111 Petroleum Costs shall be delivered to the


CONTRACTOR at thr Delivery Point I ille and risk of loss of such Available


Petroleum shall be transferred at the I Jcliwry Point.


25.9 Each CONTRACTOR Entity shall he entitled to receive, take in kind and to caport


freely >11 Available Petroleum to which it i« entitled for recovery of its Petroleum


Crisis ia accordance witfi the provisions of this Contract and to retain Abroad any


proceed* fn»i tire sale of all such Available Petrvfcum Petroleum Co* in each


Production Area shall be recovered from Available Petroleum from that Production


Area.


25.10 Subject to Article 38.4. tor the avoidance of doubt, Petroleum Costs unde this


Contract ure net recoverable ngnmst other contract areas held by the


CONTRACTOR.








ARTICLE 26-SHAKING OF PROFIT PETROLEUM


26.1 Under tills Contract


(a) “Protil Pelroleam'’ means Profit Crude Oil and Profit Natural Gas;


(b) "Proll t rade Ofl” means lie quantities of Available Crude Oil und Available


Associated Nutural Gas produced from he Production Area, after lie recovery


of Petroleum Costs, in accordance with Articles I aad 25. aid


It) Trofc Natural Gas' nans the quantities of Avails** Non-AwcHed huuaal


Gat produced fhm the Production Area, alter the recovery of Pctrocum Costs


in accordance « eh Articles and 25.


762 From First Pmdjctiue and as and when Peookurr is being produced the


CONTRACTOR shall be entitled to tike a percentage share of Profit Crude Oil


and/or Profs Natural Gas. n consideration for its investment ia the Petrrlcum


Opcralonv which percentage share shall be Jetemined in accordance with Article


26.S.


26 J To dctrrmim the peremUg* than of P-oCrt Crude Oil sruVor Profit Nat and Gat to


which the CONTRACTOR n^nwled. thc^Factor shall m




















57/164


2M Oe -R- Factor shall be calculated as follows:





K-X/Y


where:


X: h equal to Cumulative Revenues actually received by the CONTRACTOR:


Y: is equal to Cumu alive Costs actually ircurred by the CONTRACTOR, “ran


the date of tftc ttfMtUR of tfrs Coctract.


For the purpore of this Article 26.4:


“Cumulative Revenue* means local Revenues, as defined below, received b» die


CONTRACTOR until the end of the relevant Semester, determined in accordance


w«h Ankle 26.7.


"Revenues" means the total amouat actually received bj the CONTRACTOR for


rreovety or its Petroleum Costs and Ha share of Profit Petroleum In the Production


Areo.


“Cunulailvc Coals” moans all Petroleum Costs In lh« Production Area, actually


irvurred by tbe CONTRACTOR until the end of the relevant Semester. determined


in accordance with Article 26.7.


Notwithstanding the foregoing provisions of this Artkle 26.4 for the period from


Finvt Producta'ii until live end of the Calendar Year m which I irvt Production occurs,


the “R” Factor shall be deemed to be less than one (I).


26.J TV share of Profit Petroleum to which the CONTRACTOR shall be entitled from


Pnt Pr jducaioo i»


(•) far Profit Crude Oil. equal to the quoaritiev of FMrolcam rewh-s &o« the


application of the relevant pcrecruge as tnrfcattd below to tie daily vetume


ol production of Profit Crude Od withri the Productiui Area * the


corresponding Delivery PotaL


-R- Factor CONTRA! TOR’* % Share af Prefit Crude Oil


R

I

R>2 15%


and


(b) far Profit Natural Gas. equal to Use quantities of Non-Associated Natural Gas


the daily volume of production af Profit Natural Gas with tv the Prediction


Area at the corresponding Delivery Port:





5&/I64


-K" Hdor C'ONTRACTDK’a % Share of Profit Natural Gai


R < or - I 35%


I < R< or - 2.75 35 - (35 -18) *

R > 175 18%


26.6 IV CONTRACTOR'S accounting shall account separately for all components for the


calculation of“X" and “Y" values in the formula provided m Ankle 26.4


26.7 For caci Semester, startng trim the I"* of January of the Cakodar You following ihe


Calendar Year in which First Production occurs, the CONTRACTOR shall calculate


tit “RM Factor applicable to the relevant Semester within tinny (JO) days of lire


beginning of such Semester. The "H" Factor to be applied during a Semester shiill be


th.it determined by applying the Cumulative Revenues actually received unit the


Cumulative Costs actually incurred up to and including die Last day of the preceding


Semester.


If the CONTRACTOR is unable to cakutate the ~R" Factor lor the relevant


Semester before aa allocation of Profit Petroleum for such ScanJet mus: be made,


then the allocation of Profit Petroleum for the previews Semester shall be used for the


rdevnni Semester I fpnn the calculation of the “R” Factor for the relevant Semester:


(a) If the allocation of Profit Petroleum in the previous Semester and the relevant


Semester is the same, then rc> adjustment shall be made; and


(fc) if the allocation of the Profu Petroleum in lb* two Semewm a different, then


rhe CONTRACTOR shall make any adjustment! to tw Panes’ respective


share, of IVofit Petroleum to restore them to the positiaa that they vould have


bMii in had the *R“ Factor fix the relevant Semester been a.aiiabc from the


start of mch Semester.


26.8 If at any time an error occurs in the calculation of the TT Facte*, resulting in a


change in the CONTRACTOR’* perceatage dare of Profit Create Oil ard/or Profit


Natural Gas. the necessary creredkm shall be made and any aJjuvtraents shall apply


foot ike Semewarr in which the error occurred. TV Pre«> haring benefited from a


sarp!us of Profit FYtrokum shall ^render such wr>lus to the *her Part v beg.rn.ng


fwn the fim day »f ike Screeaier following the Semester ie which tV ereor was


rtcogn sed. However, each I fling of Petrokon resting to such eror by the Party


receiving the surplus xh.ll nul cacccd l»«m>-fw per ccnl (25*) of the dure of Profit


Petroleum to which such surrendemg Party is cntitfcd. For the avoidance of doabt if


a any rune an error occurs In die eahuUaion of the ~R“ factor. whkh docs noi result


ia a change in the CONTRACTOR’! ncrccatagc share of Piofit Crude Oil and/or


Profit Natural Gas. no correction dull be made.


269 The quantities of lYofit FNaretoan due to the CONTRACTOR shal be ddixeKd u>


the COIVTRACTOR Entitiei at Ok Delivery Poirt. Tale and risk of loss of such


Profit Petroleum thall tc transferred to tie CONTRACTOR I milks at ike Dclvcry


Point











59/164

















f


 Each CONTRACTOR Entity shall be to receive. lake in kiad and to export


freely in *h«x of Profit Petrocum i with Ihc pros wm of t


Abroad any prwteih fora of al such Profi





26 0 TV share of ihe Profit Petroleum to wtveh the GOVERNMENT b atoVd it any


Calendar Year in aceixeance with Article 26.5 shaL be dxmed to include a potion


rtprcsroimg the corporate inccmc tax mpo*d ipon and due by each


CONTRACTOR Emily, and whfcfc will be pa«l directly by the GOVERNMENT on


behalf of each such entity representing the CONTRACTOR lo the appropriate tax


authorities in accordance with Article 112. IV GOVERNMENT shall provide the


CONTRACTOR Entities with all written dreumentalien and evidence reasonably


required by IV CONTRACTOR I ni it in to confinn that such corporate neons: tax


has bora paid by the GOVERN M EN1


26.! I Ihc quantities of Profit Petroleum due lo the GOVERNMENT shall V delivered to


tlr GOVERNMENT at the Delivery Point Title and risk of loss of such Profit


Petroleum dull be transferred al lh»> Dolivory Point


26.12 At (com twenty-one (21) dnya prior to CONTRACTOR’# estimated dale of First


Production and. subsequently. thirty (.10) days prior to the beginning of each


Semester, the CONTRACTOR shall prepare and deliver lo the GOVERNMENT a


production program coreprisiag the production forecast fa the next Semeser and the


furocatf of Ike quantities of Crude Oil aad Natural Gas to whith cadi Party dull be


cat it led during the said Semester.


26.13 Within ninety (W) days following the end of each Calendar Year. Ihc


C ON IKALTOK shall prepare iuhI thllvcr on annual production re fort to the


GOVERNMENT. Muting the quantities of ( rode Oil ond Natural Gas to which each


Party o enlitlcd. the quantities ot Cnxfc Oil ard Natural Gas lilted by each Part, and


the mulling over-lift or under-lilt position of e*:h Pwty. funuanl lo the lifting


l to Aftick 16. M.





26.14 Any cast* or expenditure trvurreC by tie CONTRACTOR Ms


sapplkrs relating to the lifting of he GOVERNMENT'* dm e of b 1


CONTRACTOR shall art be conadercd Petroleum CoR* and »i


GOVERNMENT according to terms to be mutually


CONTRACTOR and tV GOVERNMENT








ARTICLE 27 - VALUATION AND METERING OF CRUDE Oil. AND NATURAL


GAS








271 for the purpose of this Central, any l rule Oil prodaced n the l unmet Area shall be


valued al the end of each Quanet at the Dr ivers Point based on the Irtcrnatunal


Market Prta. as drfince in Article 172.


272 The later national Market Price relrned to m Article 27.1 shall be the weighted





average price per Band, expressed in Dollars, obtained by th: CONTRACTOR at











6

the Delivery Poinl. by netback if necessary, during the Quarter endirg on the date of


valuation for Arm's Length Sales of Crude OIL





IV CONTRACTOR shall provide evidence to the GOVERNMENT that tV sales


of Crude Oil referred to in Article 27.2 urc Ann's Length Sales. If the


GOVERNMENT considers that any such sale of Crude Oil Is not on the basis of an


Ann’s length Sale then the COVLKNMENT has the right to refer the matter to an


open pursuant to Articb 42.2.


In the event that there is no lilting of Crude Oil in the relevant Quarter or no Arm's





I mgth Sales the applicable ‘iatrnulioaal Market Price” for such Quarter shall be


the weighted average price per Barrel obtained during that Quarter fn*m Arm’s


I mgth Salei of Crude Oil of the same or similar gravity ard quality from other


production areas told Jt markets competing with Cnale Oil produced from the


Contract Area, taking it*o account gravity amt quality difference. aa

aad other post Delivery Point costs.





To determine such price, the Parties shall, price to the commencement of Production,


agree on a banket of Cnale Oil comparable to those produced in the Contract Are* imd


sold in the international market. Prices ebtained shall be adjusied to account for any


v«i (allotis such ru quality, specific gravity, sulphur content, iramportaiioii coat*.


IKoduct yield, seasonal variations In price and detmuid. general market trends and


tnlicr terms of sale.


27.3 IV price of Natural Cias dull V tV actual price obtained M the Delivery Point,


(which may take into axourt quantities to be sold, quality, geographic ocauon of


markets to he supplied as well as u*st> of pruduukn. transpuratkm and 4i*a»dwtiun


of Nataral tins from the Delivery Point lo the relevant market, in accordance with


dandari mtcmaticnal petroMaa industry practice k IV GOVERNMENT shall have


the right to review and ***oveNat»*IGM Mies coaracb.











27.4 la accordance with this Artkfc 27A the GOVERNMENT and tV CONTRACTOR


shall establish a satcmcnl showing calculations of the value of Pctiofcura produced


aad soU fron the Contract Area. Such statement shall include followmg information:





(a) quantities of Caidc Oil sold by tV CT3VTRACTOR Entities during the


preceding Moot* constituting Am v length sales together wih corespooding








(h) quantities of Caidc Oil sold by the CONTRACTOR Fannies during Uk


preceding Month that do not tall m the category referred to us pangraf* (a)














(4) quairit.es ot Natural t ran sold by the CONTRACTOR hntlOrs and the


GOVERNMENT toother with sale paces realised-











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s-


Metering





27.? All Export Petmloim shall he metered at the Del;very Point in axordance with


prudent intervalhnuI petroleum industry practce ani such meters skill be to fiscal


mrter aanriank All metering equipment shall be installed wd (pcrated by the


CONTRACTOR Ihe GOVERNMENT shall. on receipt by the CONTRACTOR


of reasonable pri.e wriltm noliee. have the right to inspect any such metering


equipment installed by the CONTRACTOR, k well as ill relevant documents and


supporting information remu'nitbly necessary to validate the accuracy of such


metering. All metering equipment shall be subject to periodic technical inspections in


accordance with prudent Intarralioral petroleum industry practice


27.6 If any raderiag oquipm.-nt la defective, ihe CONTRACTOR shall use all reasonable


endeavours to rcpiir it withn fifteen (15) days or. if deemed necessary by the


CONTRACTOR. .cpUre it as aeon as roasmabl, practicaNe from the dale tbe


defect became known Ihe "Adjustment Date" shall be the last date that the


metering equ pmcia was known m agreed to have been measuring correctly, or if not


known or agreed, the date that is mdwat between the date the defect was discovered


and the last date Ike equipment »m known to have measured correctly. The results


from the defective equipment shall be disregarded for the period from the Adjustment


Dale until the date the detective equipment is repaired or replaced and tltc


neasurement for such period thull be estimated:


(a) if chock measuring equipment is installed and registering accurately, then by


using the measurements recorded by such check measuring equipment.


(b) if check mcasumg equipment is n« nsalfcd or nrt registering accurately,


then by correct iag the emf if he percentage of emr is Bceminabk by


verification. calibratioa or rro thematic* cakslatiua. or


(c) if neither method is feasible, then by estimating he relume andrur quantity


delivered hived on deliveries during the preceding comparable perfod of time


when the metering equipment was registered accurately.


27.7 Any disputes arising under this Article 27 shall lie willed by otpen Jctemmatmn in


accordance with lie provision* of Article 42.2.





ARTICLE 28 SALK UF GOVERNMENT! SHAKE


Upon the tiOVERNMlNI** prior wriBen oxicc of m k*u ninety (90) days. each


CONTRACTOR Entity dial I provide all reascnabl) necessary assistance to the


GOVERNMENT for the sale of all or pan of the quantile* of t mdc Oil to whka the


GOVERNMENT is entitled, in consideration of i sales commission per Barrel to he


established with reference to prudent international petroleum practice and to be mutually


nitrccd upon betweea ihe Purl let.


ARTICLE 29-FINANCIAL PROVISIONS


29.1 Any payment to be made by a CONTRACTOR Faulty iu ihe GOVERNMENT


pursuaat to this Contract dull be in Dollars and shall be offset against any cutstaading





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paymerts due by he GOVERNMENT ID the COM KACTOR Entity. or paid into


lie bmk account Ally Ocsigrated n Ux GOVERNMENT in writing ird shtol be


paid within thirty 00) (toys of the dac date. after whch inrrcsi conquunifcd monthly


atthe rate of 11 IKK pirn two (2) percentage points dull he appjed.


29.1 The GOVERNMENT may. at its we diKirticn. direct tie CONTRACTOR


Ratifies to pay-


(a) any Royalty in cash due to the GOVERNMENT mmuant to he provisions of


Article 24; and/or


(h) any pocrafe fraen dr sak undertaken by the CONTRACTOR Entity on


behalf of tW CJOVF R NME-YT pursuant to Art ale 21 of «a> Ciudc Oil lo


which the GOVERNMENT is emitted punumt to Anide 25; andc*


(c) any Production Bonus.


to a fued for rrverue sharing, which may m die course be established by legislation


coexistent w «h the Cnmtitultxi of Iraq, between the fkwemreem of Iraq and other


regions (inclading the Kurdistan Region) and govemoraics of Iraq. Nothing la this


Article 20_2 shall be uadmtmd as anfiymg any contractual rrlatomhip nr other


rclatiorship between the CONTRACTOR mVor ai^fONTRACTOR Entity and








29J Any pavmcrl due by the GOVERNMENT to a CONTRACTOR Entity shall be


ofTsct again* fuurc payments Sue by mch CONTRACTOR Entry to the


GOVERNMENT or paid in Dolton to tie Kink account designate! by the


CONTRACTOR Entity in writing and shall be ped wahin thirty (30) 4my% ef (he


dale of invoice, after which interest corrpoundcd monthly at the rate of l IIIOR plus


two (2) percentage |H>lni* Rial lie applied.


29.4 Any cineocy cometskw u> be made under this Cxntimei 'hall be at the c whang* rale


of the Central Bank of Iraq, provided such exchange rate applied lo the


CON IKACTOK > mines shall not be levs favourable dun the rate offered by other


private, commercial or industrial hanks in the international market In the abscrce of


Ihc Central Bonk ol Iraq or in Ihc event that the Central Bank of Iraq U uuahlc lo


provide ihc relevant exchange rale, any currency convert ion lo be made under this


Contract shall he at Ihc exclnngc rale of u reputable ctimmetclal hank carrying on


business in the international market and approved by the Parties


29.5 Ihc CONTRACTOR shall not realL« any gain or Ims due to exchange rale


fuel rations and. consequently. any gain or km resulting tn«n the exchange of


currency shall be cither considered os revenue and credited lo the Accounts or shill be


considered as a Petroleum C ost aad shall be recovered by the CONTRACTOR in


Kcnrdancc with Articles I and 25. as the case mav be


.’9 6 lach CONTRACTOR Entity shall at all limes he emitted to freely convert into


Dollars or any Other foreign currency any Iraqi dinars received in Ihc framework of


ihr Pdroteum Opcruiiims nm) to freely transfer die wno Abroad. The conversion rale


shall he as provided under Article 29.4.





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 29.7 Each CONTRACTOR Entity shall have Ihc right lo be paid, receive, keep, irar.'fcr


anJ use Abroad, without any restrictions, all proceeds of its share ol IVtnvIcun.


29.8 Each CONTRACTOR Entity and its Subcontractors shall have the right to Irccly





open and maintain hank accounts for Petroleum Operations within or outside the


Kirdisun Region and other parts of Iraq.





29.9 Each CONTRACTOR Entity shall have the right to pay in any freely convembk


etmmcy all as financial requirements frr the Petroleum Operations and to coeven


these currencies to Iraqi dinars in *iy hank in the kurdbtan Region or otto pans of


Iraq, at thr same exchange rate as provided under Article 29.4.


79 10 Pach CONTRACTOR Entity shall have the right, without any restrirtions, to freely


repatriate Abroad and to freely dispose of


(at any proceeds received in the Kurdirtan Region or other pans of Iraq from the





ule of IVwleum:


|H) tny proceeds received from other operations and activities carried out indcr


this Gmtract in the Kurdistan Region or other pans tflraq


29.11 Each CONTRACTOR Entity shall have the nght lo pay in any foreign carrency its





Suhconiruciora and its expatriilc personnel, either in the Kurditfun Region, other parts


of Imq, or Abroad Said Subcontractor* and expatriate pmontxl shall be obliged U>


Iran-iter to the Kurdistan Region the amount nr foreign currency required for their kwal


needs and they shall have the right to repatriate tie proceeds of foe sae of their


be kinging* in accordance wiihlha regulator** b fore* in dc kiotolar Rrgun.





29.12 Lach CONTRACTOR Eatn*** Atfiliairs.


equally benefit from tie same rghts as saefa CONTRACTOR Entry anJ its


personnel as regards this Article 29.





29.13 For ihc financing of Petroleum Opmiiau. crc-h fONTR Af TOM Inlity shall have


the right to have recourse to external financing from third partici «x frxn its Affihated


Companies on an ami's length bask





ARTICLE 30 - CUSTOMS PROVISIONS





30.1 All sen ices, material equipment, pods, consumables and products imported into the


Kurdbtan Region and other parts of Iraq by I hr CONTRACTOR, any


CONTRACTOR Entity, its Affiliates, any Subcontracts «x any agent of any of the


foregoing, fee use or consumption in the Petroleum Oporolions shall he ndmitled tree


and exempt from any and all Taxes on Import Ihc CONTRACTOR, uny


CONTRACTOR Emily, its AffilUtca. uny Subcontractor or any agent of any ol the


foregoing shill have the right to re-expod from the Kurdistan Region and other pails


of Iraq tree trixn ill Texes cn export aay nirtcrUL equipment guuK ceeuumabk*


and products that ire no longer required for the Petroleum Operations, except where


tele hat passed to the GOVKRNMf.NT In acawdatce wall Ankle 20. in which case


re-expert shall he approved by the Management Committee.











64/164











)<7U.


10.2 Ike CONTRACTOR, any CONTRACTOR Entity, its Affiliate*, any Subcontractor


or any agent of any of the foregetng. and their personnel (tacludng their family


mernhet*) shill have the right to freely import intc the Kurdistan Region and Other


pots of I rat] and re-export horn the Kunlistai Region and other parts of Iraq any


personal he longings and furniture free mil exempt from any Taxes on import or


export. Hie sale in the Kurdistan Region and other ports of Iraq of personal belongings


and furniture of expatriate personnel ahall comply with K unlist nr Rogim law.


»0.J Each CONTRACTOR Entity and Us Affiliates dial! be eatitlod to freely export from


th: KurJistan Rcgwi and other parts of Iraq, free of aiy Taxes, aay Pttrulcum to which


it is ent tied pursuant to rf*e pro vis*, ns of this Contract


30.4 The GOVERNMENT tonll indemnify the CONTRACTOR, my CONTRACTOR


Entity, its Affiliates, any Subcontractor or any agent of any of the foregoing, and their


personnel (including their family members) for any import or export Taxes rvfemxl to in


Articles 30.1,30.2 or 30.3.








ARTICLE 31 - TAX PROVISIONS


31.1 Except ax expressly provided in this Article 31. and without prejuttcc to the


exemptions expressly provided for in Article 30 and in this Article 31. each


CONTRACTOR Entity, its Affiliates and my Subcontractor shall, for the entire


duration of thio Contract, be exempt from nil Taxes is a result of its income assets and


activities under this Contract The GOVERNMENT -hall indemnify each


CONTRACTOR Entity upon demamJ mguna any Ikoihry to pay any Taxes wrvnl «w


imposed uptn with creity which rebar to any of the exonpkns grafted by toe


GOVERNMENT under toil Artkk 11.1, nsd under Amcka 31.4 toroufto 31.11.


312 Each CONTRACTOR Entity toall he wibect to csvpcraa* iacranr «■«

Petroleum Operatiem as provided in Article 31J. which shill he deemed to be incisive


und in liill aid total discharge of any l ax on income, raooiptn. iw.miw, gains or profile


of each such entity. Payment of tie said corporate income tax shrill be nude lor the


entire duration of this Contrast directly to tile official Kurdistan Region tax authorities


by the GOVERNMENT, for the account of each CONTRACTOR I ntity. from the


GOVERNMENTS share of toe Profit Petroleum received pursuant to Artick 2C


bach CONTRACTOR Entity ahall. within sixty <«>> days after lbs end of caib lax


year, provide a satemcnl to the appropriate Kurdistan Regioa tax authorities of K*


profits which arc subject to corporate Income tax. together wklt a xakulalkm ol the


nmouiu of corporate inromc tax tine on those profits


The GOVERNMENT shall, within ninety (W) days nllcr Ihc end of each tax year,


provide to each CONTRACTOR l.ntity (i) the appropriate official tax receipts from


the appropriate Kardisun Region Ux autoorities or other relevant auhority certifying


the payment of its corporate income tax. as drtermned r the vud Wikmenu aid that


such entity has met all its Tax obligations in the preceding tax year, and (ii) a copy of


any return or other filing made by the GOVERNMENT in respect ol its payment of


corporate income tax on behalf of mh CONTRACTOR Entity.








65/164


31.3 For ihc purpose* of Article 31.2:


(a) The nlc of corporate incline lax to be applied to cjkH CONTRACTOR


Em My dial I he the generally applicable rate prescribed in the Law of Taxation


(law No 4 or l**W) passed hs the National Assembly of the Kurdistan


Region, as may he amended from time to time cr substituted in respect of


Pclmlnim Opmuinna (as defined under the Kurdistan Region Oil and Gas


Law) by a petroleum operations taxation law for the Kurdistan Region, but in


no •vent in ihcom of forty per cent (4(W»). The Parties acknowledge ami ngree


that ai ihc Effective llntc of this Contract, die corporate income lax rate is


fitrty per cent (40*4) for nil net lusable profits In rxeest of nine million Iraqi


dinar.


(bl Ihc GOVERNMENT and the CONTRACTOR agree that corporate income


ms shall be calculated fur each CONTRACTOR Entity on iu net taxable


profits under the Contract, as calculated in accordance with the provisions


iclaiug lltcrcUi In the Accounting Procedure.


31.4 laxb CONTRACTOR Entity, its Affiliates as well *j any Subcontractor*

exempt from any withholding tax applicable on any payments made to them ct by


them to or than AfllUars or thud parties, whether inside or outside the Kun*«an


Region and/or Iraq, for the entire duration of ths Cortract


31J Each CONTRACTOR Entity and its Affiliates shall be exempt from Additional


Pmllla I ax. is referred m In Article 40 uf die Kurdistan Region Oil and Gas Law or


any successor Tax


31.6 Each CONTRACTOR Entity und its Affiliates shall he exempt from Surface l ax. os


referred to Iti Article 40 ol the Kwdtaar Region Oil and <»» law i« any successor


Tax


31.7 Each CONTRACTOR Fntity and ks Affiliates shall he exempt from Windfall Profits


I axes, as referred to to Article 40 of the kurtiuan Region OR and Una Law or any


























31.« It is acknowledged that double tax Leatiei will have effect to give relief from taxes to.


hat not limited to. the CONTRACTOR. CONTRACTOR Fatltica. Subcontrstor*


are! employees and otha Persons in accordance with the ptoviskm of such double tax


treaties, hut dial I nil impose an add tionx burden of taxation





31.10 Any vahe adfcd^UiM*‘VAT^»diiIl be cresidcml as a PetrukesanCad and shall hecw*





66/164


31.11 Any value added tax ("VAT*), not ithcrwisc recoverable b> ihc CONTRACTOR under


VAT law. fJnll be considered as ■ Petroleum Cost and shall he cost recovered in


amordaacc wWi tlw provisions of Ankles I and 25.


II I? Notwithstanding ary other provlsun to Ihc contrary in this Contract. the Panics


acknowledge and agree ihat the provisions of this Article 31 shall apply irdividimlly


and separately to all CONTRACTOR Ini it ics under this Contract and that there shall


he no joint aad several fcabilily in respect of aay liability, duty or obiigaticn referred


loin lh* Artrlr II.





AR11CI.B 32 BONUSES





Signature Bonus


32.1 A signature bonus of ten million Dollars (l)S$l0.000,0(10). less live million DoUon


(1ISS5.000.000I in lecogrition of work already carried out by the CONTRACTOR n the


Contract Area rS**natir* Bonn '), shall be payable to the GOVERNMENT by the


CONTRACTOR within thirty (30) day* of the Effective Date








32.2 A capacity building bonus of fltleen million Dollars (l S$|?.000.000) (Capacity


lluilillig Bobu") shall be payable to the GOVERNMENT by the CONTRACTOR


within thirty (30) days of the Effective Date.











3? 3 Ir Ihc event of a Crude Oil Cotwrcfcia Discovery, the CONTRACTOR shal pay


the following relevant Crude Oil Production Bonus to the GOVT.RNMENT within


thirty (10) days of the frilnwiag relevant occurence:


(i) two m illicit five hundred thousand Dollars (US S1500.CO0) a hen First


Production of Cmdc Oil from the Contract Area canmcaccv




Contract Are* reaches a cumulative amount of ten millkn Barrels of Cmdc Oil


(10 mmbo)


(c) ten million Delias (US Sl0.000.i00) when production erf Crude OH from the


Contract Area reaches a cumulative amount of ts«cnlv five million Barrels of


Crude Oil (25 mmbo) ;and


(d) twenty million Dollars (US $20,000,000) when production of Crude Oil from


lha Contraci Aren riches n riimulative amount of fitly million Barrels of


Cmdc Oil (50 mmbo).


32.4 la the even of a Nun-Associated Natural Gas Commercial Discovery, the


CONIRACTOR dull pay ihc following relcvanl Nw-Avwurd Mitural Gas


huduction Bonus to tie GOVERNMENT within thirty (30) day* of the following


relevant occumime;








67/164


(■) two nillioa five hunJred thousand Dollars (US S2.500.OTO) when First


Prediction of Non-Avsocated Natural Gas from the Contract Area


commences;




Natural Gas from live Contract Area reaches a cumulative nmouM of ten milium


barrel* of oil equividrnt (10 mmhnc);


(e) icn million Dollars (l!S S 10.000.000) when production of Non-Assoaated


Natural Gas from the Contract Area readies a cumulative amount of twent) live


million barrels of oil equivalent (25 mmhnr); nrd


(d) rwmty millrai Dollars (IJS S20.000.000) when priductum of Non-.\»ocialed


Natural Gas from the Contract Arcs reache* a cumutativc amotnt of fifty


million barrel* of oil •qurvalenl (50mmhw)


32.J For the purpose* nl this Article 32. a Commercial Discovery shall be declared by the


CONTRACTOR lo l*e either a CnuJe Oil Cotnmcreial Discovery or u Non-


AaaoeUlsd Goa Com mare i ul Discovery and under noeireumtfnnre* shall a Prediction


Bonus he due in respect of both Crude Oil and Non-Astwciatal Natural Gas fir the


sane Commercial Discovery.


32.6 No bona* due punaar* lolhi» Article 32 shall he deemrd In hr a IVtrelrun Coa





ARTICLE 33 - PIPELINES


33.1 Ihe GOVERNMENT slinll obtain any required Pcnnits fie die transportation of


Petroleum in the Kurdiwnn Region and in Iraq as well ns nny necessary Permits and


easement rights for the constrictior of ary pipelines and related facilities required for





33J











33J Ptot to the ronsductios of any pipeline and related facilities as provided in Article


33.2. the CONTRACTOR dw.lt wbrne follow** information to fcr Mawpmmi


Comm nee:




















(«) consWudkm tchrduW.











61/164








(i) any other information relating 10 the pipeline project


IV Mimecncnl ( omnutcc Utatll examine all the above nfomwion and shall within


nnety (90) Jays. approv* tV proposed pipeline preyed « "xadMaa with the


paovtsaom of Article 1-5





33.4 Sabjeci to sfurc capacry being


Hard parties stall be cntkkd to transport tie* rttrcfcum trough any pipeline


construxcd by the CONTRACTOR in axordancc with this Aricie 33 on asms to he


afreed between tV CONTRACTOR and sach third pny. Those terns shall be


raronahle crenmocial Btm and stall tax dscnrmrutc among third party user* The


CONTRACTOR stall always have priority of acce» to sach pipelines.


33.5 To the extol that they are incused tpstream of the Delivery Point, any emu


awoctaed with the deskn. constnartkwi. operation and irainteaance of the pipelines


ad related frcilitrs by CONTRACTOR under this Arkk 33 rffipribe CaataT


stall hr considered Prtnkwr Cos* and staU be recovered by the CONTRACTOR


■r accordant with the provisuns of Articles I and 25.


33.fc The CONTRACTOR doll have the absolute right without any exxpncm aid fie


facilities conanaxed by CONTRACTOR utder tns Article 33 and to tramport


IVtrolcum produced fnrn any Production Are* aail to nprratr ard mnintair any


pipeline and its related facilities, freely ami without any additional ants.


33.7 To the exteat related to transportation upstream of the Delivery Point, any tariffs


received fnrn third pwlies for ut« of any pipeline and relat'd facilities by


CONTRACTOR undet this Artkk 33 shall V applied to the recovery of Petroleum


Coots until all Pipeline CirWs have been fully recovered by the CONTRACTOR


pursuant lo he provixmas of Artkles I and 25 and shall not he included in income for


corporate Income lax puposet. Tlie GOVERNMENT dull be entitled to receive any


such tariffs from third pirties for I heir use of such ppclinc and related facilities when


the said Pipeline t twin have teen Hilly lecovctod by llic CONTRACTOR Flic costs





Delivery l*oint shall he considered Pipeline Costs and therefore Petroleum Cost* and


shall be recovered by the CONTRACTOR in accordance with the provisions of


Ankles I and 25.


33M l pon recovery by the CONTRACTOR of aH the Pipelne Coals. the operating and


maintenance cost* of «iy ppclinc and its related facilities shall be borne by the


CONTRACTOR and shall V considered Petroleum Costs and shall be recovered by


the CONTRACTOR in accordance with the provisum of Artkks I and 25.


33.9 The GOVERNMENT shall have the same rights us the CONTRACTOR for use.


free of charge, of any pipeline and related facililki constructed hy CONTRACTOR





W/IM


uoder this Article 33 frr the tranvpofUl <«n of the share of Pttmlcum to which the


GOVERNMENT is entitled wider this C untract up t> the Delivery Pont, provided that


w*vcrc (he GOVFHNMFNT is pnrtkipatiiv in ifc capacity * • CONTRACTOR Entity


pursuant to Article 4. it shall lie liable f«* ib share of Prtmlcun Cote.


33.10 The CONTRACrOR shull bear the of operation and mnmicnancc of ary pipeline


uod related facllltlr* constructed by CONTRACTOR under this Article 33 nnl all


risks of accidental loss it damage to such pipeline and related facilities while they ore


required for IVrtrokum Operation.








ARTICLE 34 - DNITISATION


34.1 In the event a Reservoir extends beyond the Contract Area into an adjacent area which


is the uibjaui of another Petroleum Contract (as defined hy the Kurdistan Region Oil


and Gas l aw) (an "Adjacent Contract Area'* or in the event a Reservoir of an


Adjoecnl Contract Area extend* into the Contract Are*. the provisions of Article 47.


Paragraph Second of the Ktrditfan Region Oil sal Gas l*w shad apply and the


GOVERNMENT shall require the CONTRACTOR and the contractor of the


Adjacent Contract Area to agree upon a >cbedi)e for reaching agreement cf the terms


of die iNiilisatkNi of the Reservoir, which terras shall bo based on reliable technical,


operational and economical parameters, all in accordance with prudent international


petroleum Industry practice. In the event that the Minister of Natural Resources


decides the unitiuition purauant In Article 47. Paragraph T hird of the Kurdistan


Region Oil und tias law. aid II the CONTRACTOR docs ik* agree with the


Minister of Natunl Resource's decision, the CONTRACTOR shall be entitkd to


arbitration pursuant to Ike provisions of Article42.1.


342 For clanlicacion and tie avoidance ol doubt and notwithstanding Artkk 47 of the


Kurdistan Region Oil and Gas Law. in the event that a Reservoir extends beyond the


boundaries of the C ontract Area into art adjacent area ahicD is im the subject of


another Petroleum Contract (as defined by the KuidivUr Keyon Ol and Gas aw|.


the GOVERNMENT shall, upon die CON I K ACTOR'S icqueti. take the nc

steps to extend the boundaries of Contract Area so as to include the entire Reservoir


within the Contract Area, provided that the CONTRACTOR can ofTer the


GOVERNMENT a competitive minimum work pre-grant for such adiaccn: area.


ARTICLE 35 - LIABILITY AND INSURANCE





Liability


35.1 Subject to the tither provisions ol this Contract, the CON I KAt I'OK. In Its capacity


as the entity responsible for die execution of the Petroleum Operations within the


Contract Area, shall he liable to third panics is the extent provided under applicable


law far any losses anJ damage » mas cauw to them in conducting the Petroleum


Operations, and stall defend, mdermify aid htdd harmless the GOVERNMENT with


respect to all claims for such loss or damage.


353 Notwidistimding the other provisions of this Contract, the CONTRACTOR and the


CON'IKAC TOR Fntltcs slaall not be liable to the GOVERNMENT or tlic Public








7tVI64


Campasy or other gusemment atenciev autoorilies or brefies. coats or pJilfoal


sahdiviuoRS far any damage or loss cr dains of mty kind resulting from its coaduct of the


Mrotam Operatic**. urfcss sach dunagr or kos is tie result of wilful misconduct or a


rrtocnb firilue to conduct Pcrolcim Operation in accordance w ith the terms of this


Contract: provided, however. That such liahrily cannot result in the event of any


omissions, errors cr misakes committed in good faitfr by the CONTRACTOR a the


•icrcise of toe powers and authorisation* conferred upm the «»MW*CT()fi hy


vrtue of this Contract. rod fjnhcr provided that in no event shall the


CONTRACTOR and the CONTRACTOR f nines hr liable for any indirect or


consequential loss or dimage whatsoever or any lots, ckmages. cots, esperoes or


labilities caraed (directly or hdireetly) by any of thr following arising out oC mating


to. or connected with th s Contract or the Petroleum Operations carried out under this


CuoUact. (i) resenoir or formation damage, (ii) inability to produce. -se or dispose of


Petroleum; (ui) lots or defement of income; liv) special or puiitive damages; or (v)


other iBdirec damages ct loses whether or not similar to die foregoing.


35.) The CONTRACTOR shall indemnify and liuld hanafan toe GOVERNMENT


against all losses, damages and liability ansirg under am clam, demanc. aaim or


proceeding trough: or irMHutaJ against the GOVERNMENT by any employee of the


CONTRACTOR or of any Subcontractor or by ary defender* thereoC for personal


injuries, industrial illness deton or Cmnage to pxsonal property wsaired in connection


with, reluted to or arising out of the performarcc or noo-ferfomance of this Contract


regardless of the fault or neglgcnce in wtofc cr in party of any entity or indivHiiHi


35.4 Notwithstanding Mick 15.1. toe GOVERN MIN I shall indemnify aad boid harmless


the CON TRACTOR ad the CONTRACTOR Entries ajainst all loses, damages and


liability arising under any claim, dcmanl. ad»m « prooxdinj brought a instituted


against the CONTRACTOR or any CONTRACTOR lutity by any anpfoyec of the


GOVERNMENT or of my Pabiic Company or of any wbartraaor o the foregone or


by any dcpcrdcnl of any such employee. for personal injuries. inCustrid illness, doth or


damage to pavuna property sustained m connection with, related to or arising out of the


prrforTwance or non-performarre of this Contract regardless of toe faah or negligence


b w hoc or in part of any entity or ridividual.


355 The CONTRACTOR

rweify toe GOVERNMENT of. all emergency and •ther events (inchding explosions,


leaks and splls). occurring in relation to the Petroleum Opcratom which are causing


cr likely to MteraTcroironnientti danwye nr martial mi to health and safety


Such rrticc shall include a summary descriptkn of toe cireum vanco and fleps taken


*sd pLinrwc by the CONTRACTOR to control and remedy the oration The


CONTRACTOR *aU provide suck addooral reports to the GOVERNMENT as arc


reasonably necessary ir reaped of the effect* of luch events and the course of all


rotions taken to prevent forther loss and to mitigate dcleteriow effects.


356 Ii the event of eracrgency btobs as sa oU in Article 35.4 . at tic rccuest of the


CONTRACTOR, the GOVERNMENT, without prejtofcx aad -> adda«i to any


bdcmrificatfoa cWigatons the GOVERNMENT miy have, than assifl the


CONTRACTOR, to the CMC* possible, *1 any emergency rcsfwnsc. rcmtxlal or repoii


effort by making svailaNe any Librur. nulrrials and equipment in rcawnabfc quantities


requested by the CONTRACTOR which arc not ahcrvhe ratdBy avaibbk to the


CONTRACTOR and by fociltflingthe treasures taken by toe CONTRACTOR tohnng





71/164


into the Kurdistan Region personnel materials and equipment to he used in any such


emergency response or remedial or repair c(Fon Ihc CONTRACTOR shall reimburse


the GOVERNMENTS reasonable aid necessary yens incurred in such c(Twtv which


reimbursed amounts shall he omsidcred Petroleum Costs and shall be recovered by the


CONTRACTOR n aermianrr with the paivisirm of Ankles I aad 25.


35 7 TV GOVERNMENT »hall indemnify aid hdd harm lew the CONTRACTOR and


each CONTRACTOR Entity from and against all costs (inclining legal costs)


C'prnw*. Imwv damages anl liability whkh suck Person may suffer cr incur, or


may mult from such Person being denied, hindered or prevented from fully


•*ereUing it* righti or laking tho lull benefit of Articles 20 4. and 70.6 to 20.11.








35.1 In acuwtlanoa with pnidonl irtrmntioniil primleum industry practice, each


CONTRACTOR Entity shall maintain ary insurance required by applicable Kurdistan


Kogion I jiw, m wet aa ary inti ranee approved by the Mniuipnnmt t 'nmmittrr


Knell insurance policies may cover


(a) loss rtf ant damage In material and equipment used in the Petroleum


Opcntxmvund


(b) personal irqury. damage to friird panics and risks of pollution associated with


Petroleum Operations fie reasonable ■mounts, within tke limits approved by


the Management Committee


35.0 Any insurance policy relating to this Contract shall tame the GOVERNMENT as an


additional Insured party and shall include a waiver of vubrcgalion prorectinj thr


GOVERNMENT again* any clam, loss and damage resulting from any hrtredeum


Operation cmductcd by or oa behalf of the CONTRACTOR under this Contms. to


the extent lha the CONTRACTOR is liable fcr such clain. loss or damage under this


Contrast. The CONTRACTOR shell n« he liable for and daU act purchase insurance


GOVERNMENT or of oiy Pitot*. Canpny or of any ofbadn wfosnakna of


my pervnocl of aay of He foregoing.


35.10 lpan its written request the GOVERNMENT stall be provided with insurance


certificates. nchaSng necessary details, for aay inwnr poUy nainu.«d by the


CONTRACTOR whk* relates to his Contract


35.11 Each CONTRACTOR Entity shad be responsible fur tfv filug of all cUims made


indcr any insurance policy nuintaiacd by such CONTRACTOR Entity wkkh relate*


tc this Contract. Any premiums and payments relating to such insurance policies shall


he amudered Pttolctini Cota and shaT be recovered by the CONTRACTOR in


accordoicc with the pmvtskmsof Aracles I and 25.


15 12 la *tynsur®cc|»licy maintained by a CONTRACTOR Entity whkhreblc* to this


Contract, the amoont for which the CONI HALT OR itself is table (the UrdactibR


AbmT) stall V reasonably determined between the CONTRACTOR Entity and


tke man aid n*± Deduct** Armrt shall m the even of any ntmr ebon be








72/164


 considered a Petroleum Cost and shall be recovered by the CONTRACTOR in


accordance with the provision* of Articles I oral 25.





ARTICLE 36 - INFORMATION AND CONFIDENTIALITY


(he CONTRACTOR shall keep all records, daw and information relating to the


36.1


Petroleum Operations in accordance with the kurdiitan Region Oil and Cias Uw and


prudent international petroleum irdustry practice. In addition, it shall provide the


36.2 GOVERNMENT with such information and data os it is obliged to provide under


this Cmtract


Upon the GOVERNMINI’s written resjuest. the CONTRACTOR dull provide the


GOVERNMENT with samples of any rocks or any »*hcr items extracted during the


36 3 IVtralaim (Vvmt*h\\


Ihr GOVERNMENT dull hive tide lo all data and information, whether raw. densest,


p-occsed. interpreted or analysed, obtained pursuant to this Contract


36.4 Inch CONTRACTOR I ntity shall have the right, without any liiaitalkn. lo send Ahrood





copies of nil reports nnd technical ctala. magnetic tapes und oilier data relating to llsc


Petroleum Operations Magnetic tapes or other data, the original of which mist he


363 analysed and processed AhmnH. inn> be transported out of the Kurdistan Region.


Any rppn*sriitml*es niiihonsed Sy the GOVERNMENT and notified to the





CONTRACTOR shall, upon reasonable prior written notice. have rcasotuhlc access


to any information amt data rrlatmg to the Contract Area in the pnvaessmn of the


CONTRACTOR which the CONTRACTOR is obt.gc« to provide to the


366 GOVERNMENT pursuant to this Conrad It ■ andmtnnd that when nereis*f


such ryfat he GOVERNMENT shall ensure - «toes not unduly nterfere wth or


itoidcr the CONTRACTOR srigfes and activeins


The CONTRACTOR Mall proved. the GOVERNMENT upon the


GOVERNMENTS wrtten request any analysis information. reports. n^s or other


sfiua (geological. icuptnskal logs, inter,icuions. drilling reports. *2c.> related to th«


Petroleum Operations in the possession of (he CONTRACTOR. Al available


367 OTginsIs of such data Mall be transferred to toe GOVERNMENT * the end cf this


ContrvL


Apart from the exception* stored h this -Ankle 36. the Parties undertake to keep al I











such consent not to be unreasonaMy withheld or delayed. The foregoing


confidential ty ot> igalKtt shall not apply to information or data whicl:


(a) is or. through no fault of any Party , becomes part of the public domain;





(b) is kimwn to the recipient at the date of disclosure;











73/164


(c) s retired lo be funashed m ccenptianc* *«h «n> applicable law. by a


(oxrrwncirt agervy ha.mg jradetion over a C ONTRACTOR FaWy. yy a


cn*m ruder ar am other Iced proceeds*!*, or


(di « rewired lo he disclosed pursuant to tfcc roles or rcitslatioes of any


•overament or recoptiscd stock exchange having jurisdiction over a


CONTRACTOH Entity.


Ml VwwitKtanrlng hr forrgong a Anicle 36.7. in accordance witk prudent


irrcmatonal ^ctndcum rtdustry practice, such lata md tnfcwmniion may be disclosed


to:




(hi employers, officers and directors of each CONTRACTOR Entity and Iheir


respective Affiliated Companies for the purpose of the Petroleum Operator*,


rubject to pat h such entity taking customary precautions lo ensure such


information is kcpl confidential;


consultant* or agents retained by any CONTRACTOR Entity or its Affiliates


for th* purj»>u» of analysing or evaluating infnonotnn nr data;


(d) hanks or flaanrial insMutioas retained hy any CONTRACTOR Ratify nr its


Affiliates with a view to financing Petroleum Opcntkmi including any


pro feta irwval coo-olwn*. reutned by such ban* nr financial inshtirtma;


(e) A<»i.r fit)/ pmtpactivc assignees of a pnrticipiting interest under this Contract


(including my entity with whom a CONTRACTOR Entity and/or iu Alllliotcs


JTC conducting fitir ncgrtialkns dinctad knvardv a rrrrger cons..lklalnn nr


die sale of a material pntion of its ce at Alllliaw shares):


(fi prospective or actual Subcontractors aid suppliers engaged by a P»*y where


*


work for such Party- aid




provided that Jhaln---n shall not hr made pursuant to paragraphs (ek (dX (e) a»*l (fX


unless such third party his entered into a confidentially urdcrtaiing.


36.* Any data and infoemaum relating to rrlmquvhrd or swrcntfcred anas undo this














36.10 Subject to tie peovisfoas of his Article 36. the CONTRACTOR ray not veil nor


etchange any dau reined to the rctiokuni OpcraiH«u withoai the approval cf the


GOVERNMENT which approval shal not be uarravoabh withheld or delayed


where. ■ the CONIKALIOKs renewable upinkm. suJi sAe or caclroigs wuuU


benefit the Petroleum Operations.





7VI64


 ARTICLE 37 - ENVIRONMENTAL PROVISIONS





37.1 During ihc performance of I he Petroleum Operations. the CONTRACTOR shall take


reasonable measure? to ensure that it the Operator, its Subcontractors and agents


attend to the protection of the environment and prevention of prilutkn, in accordance


with prudent intcmatnn.il petroleum ndustry practice in simitar physical and


(votogiral environments and any then applicable Kurdistan Region I-aw.


37.2 Prior to surrendering a port so. of the Contract Area, the CONTRACTOR shall take


reasonable measures to abandon the area so be surrendered in accordaace with pradent


international petroleum industry practice in similar physical and ecological


eavironmenb Such measures shall include removal or closure in place of facilities,


nwerta and norther with reasonable measures necessary for die


preservation of Uuna. flora and ccos>«cras. ail in accordance •* pradent


.rtmunoiul petroleum mdustry pracuce n similar physical and emlcgical


eavironmentv Die CONTRACTOR shall only he responsible foe sie rcaoratwi or


cavirunmcnUJ damage to the ex lent the same pertain. solely and directly to Petroleum


Operations conducted ptnuar* to this Contract


37.J The CONTRACTOR dull take reasonable precautions and measures in occortance


ccologcal ervironnents hi prevert any pollution wtich may arise dreclly as a result


of the feu oleum Operations and to protect the environment (buna and flora), water


sesirco and «iy otter natural -esotaces when carrying out Petrocum Operations.





37.4 TV CONTRACTOR


etke in uni physical and ecological


of peoperty.








37.5 Ihc < ON I KAt IOK slat I conduit and submit on cnvIumuciMl In |«u avscsaoicni


to I he GOVERNMENT within six (6) months after the Effective Date.

















37.6 The CONTRACTOR shall take reasonable measures lo minimise nny adverse


nuitertiil Impact on nuilonul parks and nature reserves wMeli may ntlne directly ns n


result of Ihc Petroleum Operations, in accordance with prudent International


petroleum Industry practice in simitar physical and ecological environment).


37.7 Ihc

arc no national parks, nature reserves or other protected areas located in whole or in


port within the Cmtract Area where the CONTRACTOR shall not be entitled to


cany toil Petroleum Operations and (ii) covenants that during the term of this


Contract will not designate or create or pens it the creation ol any national farts,


nature reserves or other prtfcctcd areas, located in whole or in part within the


Contract Area.











75/164


F.iacndrtarra


37J Aay rwnvMc expendcure incurred by ihc CONTRACTOR in retailor with Urn


Article 37 shall be deeroe< Pttokun C om aad shall be recovered by die


CONTRACTOR «i accordant w nh the pros mom of Article* and 25.








37* TV CONTRACTOR is «* responsible for any pre-erating cmronmentti


auditions or any Kts of unrelated Dird parties





ARTICLE 38 - DECOMMISSIONING


38. To enable the CONTRACTOR to recover the costs associated with future C .-tract


At* Decoram running Operation* under the Contact, the COrtTKACTOK dull


have the right to establish a reserve fund for fature dccmmivaoning and site


restoration (a “ Decora niiwioaiag Reserve Faad~) The Dccommimonirg Reserve


Fand may V established at aay time during the final ten (10) Calcrviar Yean d the


term of the Production Operations of a Productice Area but. upon the reasoaable


request by the CONTRACTOR, he GOVERNMENT shall allow the


CONTRACTOR to establish such fund over a longer period. Once cstaMidird. the


CONTRACTOR dull nakc regular cortribuoons to the Decanmiraaonirx Reserve


land based upon estimated Petroleum Field ckanmissaonotf and she restoration


cart* in acccdanc* with prudent mmutmil amlam industry pra.ticr. and t*k mg


Mo account interest received and futut Merest expected to be earned oa the


PtUukranTo!*!*when paid into fee reserve fund and dull V nemrad bj the


CONTRACTOR in accordance with the promfciM of Articres I and 25.


Conti llutkim to tic Ihxonutiivvninng Reserve Fund dual he placed with a firs rale


hank approved by ihc Management Committee in acionlarcc with Ankle 8.5.


38.2 If, at tkc end of the tern of the Production Ope rati, ms of the Production Area, the


GOVERNMENT dixMca to »kc over piuducti.in operation* In the Production Area.


(a) I lie GOVERNMENT tJiull become liable Tor its l\iturc IVcontmisaioning


Operations;


(b) the contributions nnd any interest accumilotcd In the Decommissioning


Kcscivc I end, to the eaten, that xui.li tonliibutiun* Imvq l>ccn recovered os


Petroleum Costs, shall be paid to the GOVERNMENT; and


(c) the GOVERNMENT shall release the CONTRACTOR and the


C UNIKAITOK Entitles from any obligations rclatini to Docunmtaaioning


Operations and shall indemnify the CONTRACTOR and the


( ONI KACIOK Entitles lor any costs, liabilities, expenses, claims or


obligations associated therewith.


38.3 If the CONTRACTOR undertakes the Production Ana Decommissioning Operations,


the contributions and any interest accumulated in the Uecommisstonlag Kctcrvc Fund


dull be paid to tkc CONTRACTOR and shall be used for the lCommissioning





76/164


Opcralimv The CONTRACTOR shill uuien^e nay such Decommissioning


Operations ia accordance whh pruJenl .mermtioful petroleum indastiy practice in


similar physical and ecological environments.


IK 4 II ihe Dcccwimiv'iunim Reserve Fund is pod to the CONTRACTOR and the


Decommissioning Reserve Fund is not sufficient to coverall Decomnisskning Costs


for ihc Contract Area, tf* holme shall he paid by the CONTRACTOR and miy be


recovered, if applicable by the CONTRACTOR Entities or any of their Affiliates


from ary oiler ana which is ihe subject of ancfher Petroleum Contra^ (as defined hy


tie Kufdistn Region Oil and Gas U») anywhere ir. the Kurdisan Region and. lo the


catcni me bounce i not recoverable as aforesaid. such retraining balance shall be paid


by the GOVERNMENT to the CONTRACTOR •


38.5 If the Decommissioning Reserve Fond is paid to the CONTRACTOR and the


Decomnissroning Reserv e Find exceeds all I>reocnmissi«iing Costs far the Contact


Area, the balance shall be transferred to the GOVERNMENT.


38.6 Any expenditure neural by the CONTRACTOR in rdatioe with this Artiefc 38.


ircludiag any comnbutbna to the Decoomisaoning Reserve Fund, shall be deemed


Petroleum Casts aid shill be recovered by the CONTRACTOR in accordance with


the provisions of Articles I and 25.


38.7 TTic CONTRACTOR shall submit to the Management Committee for ^prosal in


accordance w ith Article 8.5 a detailed plan for dccommssiormg thr Contract Area


facilities and site restoration (the DcconmfcMioalas PUa-). sach Orcon*ni»ioning


Pan to be submitted no later than twenty four (24) Months prior to the date estimated


by the CONTRACTOR for the end of Correncrcnl Production Rum the CoMract


Area. The Macagcmenl Committee shall provide comments, if am. or. the


Decommissioning Plan within ninety (90) days after receipt. The CONTRACTOR s


completion of tlur Decommissioning Operations in accordance, in nil material


respects, with the Decommissioning Plan lor a Production Area approved by the


Management Committee shall satisfy nil of the CONTRACTOR’S obligations with


respect to ihc performance of Decommissioning Operation* for such Production Aren.


In the event the GOVERNMENT does not agree thnt Decommissioning Operations


for a Production Area were carried out m accordance with the approved


Decommissioning Plnn. it must advise the CONTRACTOR within six (61 months of


CONTRACTOR’S completion of such operations.


ARTICLE 39 - ASSIGNMENT ANI) CHANGE OF CONTROL


Assignment lo Affiliates


39.1 Fach CONTRACTOR Entity shill lie free to sell, assign, transfer or otherwise


dispose of nil or part of it* rights, obligations and interests under this Contract to an


Affiliated Company nr to another CONTRACTOR Entity with the prior consent of


the GOVERNMENT, which consent shall not he unreasonably delayed or withheld

















77/164


39,2 Each CONTRACTOR Emily shall have ihc right to sell. assign. 'nimfcr oc otherwise


dispose of all or part of it* right* aid interests under this Contract to any third pony


(not hc-ny nn Affiliated Company or another CONTRACTOR Utility) with the prior


consent of GOVERNMENT, which consent shall not he unreasonably delayed or


withheld Any CONTRACTOR Entity proposing to sell, assign, transfer or otherwise


dispose of al or part of its rights and interests under this Conrad to any such third


party Out 11 request *uch consent in writing, which request shod hr arconpanied hy


reasonable evidence of the technical and financial capability of the propped third


party aaaignao.


.)*>.) In order lor any deed of sale, assignment, transfer or other disposal n« provided ureter


Articlet 39.1 or 39.2 to be effective, the hulks and the relevant third parly, if any.


dial I entei Into a binding nnJ cnforccoblc instrument of awipuneal und novation,


which shall include u undertaking hy the tramferee or assignee to fulfil the


obligation* under llilr- Contract which correspond to the interest tnuiafcncd

39.4 Ifty way of darll'iuiUon, and not In limitation of the foregoing provisions of this


Article 39, tie GOVERNMENT shall not be considered to be acting unreasonably in


withholding convent to any such assignment if the assignment to such proposed


atsigntx is deemed contrary to the GOVERNMENT'S interests, as evidenced in


writing to that effect signed by die duly authorised representative of the


(GOVERNMENT below.


39.5 In the event a CONTRACTOR Entity assigns or in any other way transfers its rights


oad interests under this Contract, including through the exercise of the Option of


Government Participation or the Option of Third Pam Participation. shelter in


whole or in part, neb assignment cr transfer shall (fc* give rise to any Tax. metaling


oa the consiticratkn paid or received or cn the mean* or gain tterefran


39.4 The GOVERNMENT may not al any time tnwsfcr any or all its rights and


obfigatons aider this Contract to my Person. including to a Public (omputy or any


tCMtDH


39.7 "Change of Coatror (or the purpose of this Article 39.7 means any direct or indirect


Change of the identity to the Person who Controls a CONTRACTOR Entity (whether


ibmugb merger, sale of shares or of other equity rilcrviy or otherwise) through a


single transortion or series of transactions, from aoe or more transferors to one or


more transferee*. in which trie market value of scch entity's participating interest


(•huh shall he as specified in the Joint Operating Agreement relatrig to this


(nmrrnfi. nr where there is ml> nar CONTRACTOR fnlity. one Hundred (IWS)


per cert) in this Contract reyresert* mere thin seventy five per cent (75%) cf the


the Change m CoaooL For the purpose of this defintxm -ComroT meat* the direct


or ndwcl o^wrehip or coodol of the majority of eve v.ro, «f the applt-ahlr











71/164


 I Kh C ONIRACTOR Cnlit* which b or artittpacs with ■ reasonable degree of


.crtamtv that it wil be subject to a Change in Coatrol. other than to an AlTikatcd


t «>ipfta» or I CONTRACTOR I riitv. shall notify the GOVERN Ml NT as mb a*


practicable a ter it become* aware of the Change in Control or anticipated Change in


• •oiml and request th* control of GOVERNMENT. which consent shill nat he


urrcascnably delayed or withheld


A Change in Control shall not give rise to any Tax iicloding on ihe ccm idem! ion paid





ni received or on the income or gain therefrom





ARTICI.F 40 - FORCE MA.IM HI


40 I No delay. detauk breach or otnivsicn of tie C ONTRACTOR b the execu .on of any





of ht obligation* under this Contract shill he considered a failure to perform this


C otract or be the subject of a dispute if uch debv. default. breach or omisuon ii due


to a care of force Majetre In «uch event ihe CONTRACTOR shall pnanptly notify


the GOVERNMENT n wrung and take al reasonably appropriate treasures to


perform its obligations, under ibis Contract to 'be extent pvuihle Ibe lim* revi limy


fp«m ary such delay or curtairncnt in the execution of such oMgaUxtv inrvawd by


the time necessary- to repair a»y dartag* rv-nil tig from or occurred during uwh 4el«y


or curtailment, stall be added to any time period provided under dm Contract


(including the Exploration Period and no, c.s«*n*ion thereto, any Sub INred and any


eilcnxkm thereto md any [>cvckiprrcnl Period and any extension thereto). The Italic*


shall meet as soon as possible ultci the itotiniaiioii of Fcxcc SVajeurs wid a view u>


“ting reasonable endeavour* to mitigate tor f Meets thereof


40.2 For the purpose of this Cam. "Forte Majrwrr' mears my event the b





u# foreseeable. mstmwiraaMc and nrviuibfe. nut dac to any error or umbaton by the


CONTRACTOR but due to c.rvimvtaaca bcyool its control which (reverts or


impedes cxecutior of *1 or pari oC Os obligator* under tots Cimmna. Such events


shall ircludethe following:





<•> war. whether declared or not. civil war. iwnoctoM. r ots. civil ojnwwtxwv


terrorism. aiy ottar h.rstilc ms. whether internal create


<*) strikes or ether labour conllcts;





(0 accidents or blowouts;








w quarantine restrictions ur cpidernks.


(«) any act, event, tappcalng t* UCUMIUIkc due to natural causes, in particular.


but without limitatun. flood*. st.ems. cyclooev fires, lightning, or


earthquakes:


(0 environmental nstricum*. which the GOVEKNMKNI has not nobbed to the





CONTRACTOR;


(I) except in respect of the GOVERNM ENT awl/or any Public Com|wny which


may he a CONTRACTOR I ntity. any acts or order* of the








7WI64


 0)








element thereof, or aay corporation owned and/cr controlled by any of the








40 \ The intention of the Parties is that Forte Muicurc shall receive the interpretation that


complies mo* with prudent international petroleum industry practice. Force Mnjeure


n fleeting a CONTRACTOR Entity or an Afflllinted Company of n CONTRACTOR


Entity shall be deemed Fcrce Mnjeure affecting the CONTRACTOR if the


Oons«qMfK« of such Force Mnjeure prevents the performance of any of the


CONTRACTOR’S obligations under this Contract








ARTICLE 41 - WAIVER OF SOVEREIGN IMMUNITY


Ok GOVERNMENT an! any Puhle Company which may he a CONTRACTOR Frtlity at


any time hereby fully and irrevocably waives aay claim to immmity for itself or any >>f its





Thin waiver include* any claim to immunity from:








(a) aay expert determination, mediation, or arbitration proceedings commenced pursuant


to Arlkle 42;





(b) aay judicial administrative or proceedings » aid the expert determination,


to Article 4?: and





























ARTICl r 42 - ARBITRATION AMI EXPERT OFTFRMINATION











42 1 For the purpose of this Article 4? I ‘Mpatf’ shall mean any dispute, cortroveray or


Claim (of aay and every kind of type, whether based on contract. I«t, sutule.


regulation or otherwise) arising out of. relating lo. re connected with this Contract nr


the operation earned out under this Cortract inclading any dispute as the


contraction. existence, valkhty. irtaepretabo*. enfareeafclity hrrwh nr Wmimtinn


of this Conrad, which arises between the Patties (or between aay of* or more


cstrtK- conMtutiiw the CONTRACTOR and *• GOVERNMENT:








»VI64


In the event or u Dispute, the parties to the Dispute shall use their reasonable


endeavours to negotiate promptly in good faith a mutually acceptable resolution of


such Dispute


Subject to the provisions of Article 42.2. a Party who desires to submit a Dispute for


resolution which has net been promptly resolved as aforesaid shall commence die


dispute resolution process hy providing the other parties to the Dispute written notice


of the Dispute ("Notice of Dispute-)* I he Notice of Dispute shall identify the parties


lo the Dispute, '•lull contain n brief statement of the nature of the Dispute and the


relief requested nnd shall request negotiations among Senior Representatives.


(a) In the event that any Notice of Dispute is given in accordance with this Article


12.1. the pirtics to the Dispute ‘hall first crelc settlement of the diepuv hy


negotiation between Senior Representatives. "Senior Representative" means


any individual who hn* authority «o negotiate the settlement of the Dispute for a


party to ilic Dispute, which for the GOVERNMENT sha3 mean the Minister of


Natural Reunite***. Within thirty (30) days after die date of delivery of the


Notice of Dispute, the Senior Representatives representing tbc parties to the


Dispute shall meet nl a mutually acceptable date, lime and place to exchange


relevant information in an attempt to resolve the Dispute. If a Saiior


Kcprescmaitvc Intends to be accompanied at the meeting by a legal adviser, each


oilier party shall he given written notice of such intention and its Senior


Representative may nlw he accompunicd at the meeting by a legal adviser.


|b) It live Dispute cannot be resolved by negotiation in accoahncc with Article 42.1


(u) within sixty (60) days after the date of the receipt by eadi party to toe Dispute


of the Notice of Dispute or such further period as the partes to the Dsputc may


agree in writing, nny party to the Dispute may seek seoknvait of the dispac by


mediation In accordance with the London Court of International \rbitraion


(“LCIA") Mediation Procedure, which Procedure shall be decried t> be


incorporated by reference into this Article, and toe parties to such Dispute


shall submit to such mediation prreedurc.


(c) If the Dispute is not settled within the carter of (A) sixty (60) days cf the


appointment of the mediutor. or such further period as the paries to the


Dispute mny otherwise ngree in writing under the mediation procedure under


Article 42.1 (b). and (B) one hundred and twenty (120) days after the delivery of


die Dispute Notice, nny party In thr Dispute may refer the Dispute in. and seel


final resolution by. arbitration under the LCIA Rules, which Rules shall be


deemed to bo incorporated by reformed into this Article


(i) Any arbitration shall he conducted by three (1) arbitrators


(ii) If the parties to thr Dispute are thr GOVERNMENT and all the


CONTRACTOR Entities, the GOVERNMENT and the


CONTRACTOR shall each appoint one (I) arbitrator If the parties to


the Dispute arc the GOVERNMENT und more than one. but not all


the CONTRACTOR Entitles, the GOVERNMENT shall oppoint


onc( I) arbitrator and such CONTRACTOR Entities shall appoint one


(I) arbitrator. If the parties to die Dispute arc the GOVERNMENT








81/164


and one CONTRACTOR Entity, the GOVERNMENT and such


CONTRACTOR Entity shall each appoint one (I) arbitrator.


(iii) In any event. the two arbitrator* so appointed shall, In good faillt. use


nil reasonable rrwlcavour* to nyrrr on the appointment of the third


arbitrator. who will chair the arbitral tribunal. In ease ol failure to


appoint ah irbhmtor or to agtw cn the ttppointmmt of the third


urbitnitor. Rules of the LCIA shall apply.


(vi) Arbitration shall take place in London. England The language to he


used in any prior negotiation, mediation and in the arbitration shall he


English During the arbitration procedure and until the arbitral


decision, the I‘union shall continue to perform their obligation* and take


no tetions tlint would impair th; Contract. The arbitral awurd may Ire


enfold'd by any court of competent jurisdiction, including in the


Kurdistan Region. Any award shall be expressed in Dollars.


(v) Hie Parties ugree that the arbitral award shall he final and not subject


to any uppcol, including to the Courts of England on issues of Law.


(vi) With respect to any matter referred to arbitration under Article 43.4.


the arbitral tribunal shall have the authority to amend this Contract to


restore llic economic position referred to in Ankle 43.3.


Eipert Iktcrnilnalkm


42.2 Any disagreement between die Parties relating to Articles 15.9. 27.2 and 27.9. as well


as any disagreement the Parties agree to refer to an expert, shill be submitted :o an


expert. Die Management Committee shill prepare and agree appropriate term of


rcfcrciKc relating to the disagreement to be wibmiled to the expert, in accordance


with Article 1.5 (“Terms of KcfereaceT as soon as possiMe a net the Ltleetive Date.


(a) The disagreement shill be submitted to an expert appointed by mutual


agreement of the Parties withia thirty (W) days following the date of


preparation and agreement of the I cm* ol Kelcrencc by the Management


Comnittcc If the Partes cannot igree on the choke of ihc expert within such


thirty (30) day period, at the request of either Party the expert shall be


appointed by the President yf the Energy Institute in Ixmdoa, England Any


expert appointed must have the necessary qualifications for reviewing and


dec king or. the subjee master of the diwgrcemcnt.


(b) The duties of the expert shall be stated in the Terms of Rfforesee prepared and


*gnxd by the Management Committee. The Msnagereent Committee shall


promptly ptovidc the expert with he agreed Terms of Reference relating t> the


disagreement. Each Paty shall have the rigft to give to the expert in writing


any irfnrmation which it corsiden useful, provided it doe* so withir forty-five


(45) days after tfc expert’s ippointmen Such informauon stall be provided


to the orher Party at the vane time and such other Parry shall he entitled to


provide comments on such snfonration to the first Party and the expert within


thirty (30) day* after receiving wch iaformat ion The expert dial have the











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 right to review aid verify any information he deems useful lo assist him n his


review of the disagreement





(c) The expert shall render his decision within forty-five (45) days of his receipt


of the Icrms of Reference and the information referred to in Article 42.2


Subject to ihc provisions of Article 159. any decision of the expert shall he


final and shall rvii he subject lo any appeal, except in the cose of manifest


error, fraud or malpractice. Any costs anti expenses associated with the expert


determination shall bo shared equally Mwemt the Pnrties





Gj>»tral





4? \ Nn negotiation, mediation, arbitration or expert determination procedure under this


Article 42 shall exempt the Partes from fulfil ling their respective legal and/or


contractual obligation-.


ARTICLE 43 - GOVERNING LAW. FISCAL STABILITY AND AMENDMENTS





Govcrnlw U*





43.1 This Contract, including an> disfiulc arising therefrom, thcmmde' or n trillion


thereto and the agreement to arbitrate in Article 42. shall be gosemec by English law


(except any rule of English law whch would refer the matter ic another jieisdictiaoX


ti-yeiher with any irlevant rules, cuilom* nnd practices ofintemiticwl taw as well as


by principles and rrail ice generally accepted In petroleum prodacmg counrics and in











43.7 The obligations of the CONTRACTOR In rasped of this Contract d»ll not he


changed by the GOVERNMENT and the general ami overall equilibrium between


the Parties under this Contract shall n-»l he alT«1ed in n substantial nod li»uin(-


manner.


43 J Tbc GOVERNMENT juarartecs to the CONTRACTOR, for the entire duration of





this Centroct. that it will maintain the stability of the legal, lived and cconxnic


conditions of this Contract, us they result frora this Contract asd as they result from


the laws and regulation* in forte on Ihc date of rignahire of this Contract. Ihc


CONTRACTOR has entered into this Contract on the hisis cf the legal, fisc*! and


economic frame work i«cvniling at the l.rrctllvc Dale. If. at any time alter the


Effective Dare, there is any change in the legal, fiscal and/or economic framework


under the Kurdistan Region Law or other I aw i|tplkahlc in or m tlie Kurdistan Region


which detrimentally alTecta Ihc CONTRACTOR, the CONTRACTOR Entities cm


any oilier Person entitled to benefits under fills Contract, the tents and conditions of


the Contract shall he tillered so at to restore Ihc CONTRACTOR, the


CONTRACTOR Entities and tiny other Person entitled to benefits under this


Contract lo Ihc some overall economic position (Inking into account home country


taxes) us that which such Person would have been in. had no such change in the legal,


fiscal und/or economic framework occurred.











•J/I64








Wi.





 43.4 If ihc CONTRACTOR helloes thil its economic position. or the economic portion


of ■ CONTRACTOR Entity or any other Person entitled to benefits under this


Contract. ha* heea detrimentally affected as provided «*> Ankle 43J. upon the


CONTRACTOR'* written request, the tonic* dull meet to agree oa an> ncccisary


mea*ure* or rucking any appreprialr anmlmnK to the terms of fbk Contrail t> rr-


cstablishing the ctpiilihrum between the Parties and reacting the CONTRA* TOR.


the CONTRACTOR lntifi«% or wry ochar Parser entitled la benefits under this


Contract to the position (lakinf into account home country taxes) it was in prior to the


occurrence of Ihc change having tuKh detrimental effect. Should the Parties be unable


to agree on the merit of amending this Contract and/or on any amendments to he made


to 111 b Contra witliln ninety (W) days of the CONTRACTOR’* request (or such other


period as may he agreed by the I’artion), the CONTRACTOR may refer the nutter in


dispute Ui nrl’ilrutkit as provided In Article 42.1. without the necessity of firfl referring


th: mater to acgothlion and mediation


43.5 Without prejudice to the generality of the foregoing, the CONTRACTOR shall be





entitled to the benefit of any Mture changes to the petroleum legislation or any other


legislation complement mg. amending or replacing it.





43.6 The Parties agree to cooperate in al possible ways with a view to fully ackicvii* the


objectives ot this Contra. Ihc GOVERNMENT shall feci Hue the perfcrnuuKC of


the Petroleum Operations by promptly granting to *c CONTRACTOR any


necessary' authorisation, permit, licence or accevs right and making available any


existing facilities and services with a view to he I’artics obtaining maximum mutual


benefit from the Contrail.





Amendment?





43.7 Any amendment to this Contract shall he the subject of a fomal *ncnd»>cnC duly


approved in writing by the Parties and aibjec: to the same coaditi




tfis Qntract Notwithstanding the foregreng. the GOVERNMENT has the right and


aathoriry to waive or nudity the applictfioa of the protons of rtaCo^ract on a

















43.4 Ibilaaa otWi« expressly reared rUrwVre n this Comet, so faiure re drlay of


aay Party to exetcue any rigta. power or remedy wider this Conrad-hall epera* as a


remedy preclude aay caber or future exercise thereof or the exercise of" any other right,





puwer re remedy.








4).I0 As wgratonc* to ihn Comet for aad on behalf of tf* GOVERNMENT, the M.airtry


of Natiral Resources in the Kurdiaan Region and he Regional Coancil for the Oil


aad Cl® Affairs of Ihc Kurdinan Regior Irwj hereby represent that they agree and


approve this Contra for the purpmes of the Kjrdts&n Region Oil and Gas law.











E4T64


 ARTICLE 44 - NOTICES





44.1 All notices, demands, instructions, waivers, consents or otltcr communications to be


provided pursuant to this Contract shall be in writing in English, shall he effective


upon receipt and shall be sent by receipted hind delivery or by email Hollowed hy


delivery by reputable international lir courier company w*h nn establishment in Hrbil


in the Kurdistnn Region) to the following nddrrssrs:


To the GOVERNMENT:


Attention:


His Excellency the Minister of Natural Resources


Address:


Minisuy of Natural Resources


Kurdistan Regional Government


Hrblk Kurdistan


Email: mnr@krgoil.com











To the CONTRACTOR:





Attention The Directors


Address: Ilir/el Court. S Peter Fort. Guernsey. Channel l»lands.GYI 2NI.





Email: infiyr-bcrmgcoicorp.com

















A notice delivered by craail (followed by air courier) shall save for manifest cmr. be


deemed to have been defivered upoa its transmission by email.


44.2 The atovc address and'or designated representative of any of the Parties may be


changed on giving ten (10) days poor nrtice to the other Pam delivered pursuant to


Article 44.1.








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 ARTICLE 45 - TERMINATION





45.1 Subject lo the provisions of Article 45.5, the GOVERNMENT shall have the right to


terminate this Contract in the event the CONTRACTOR:


(a) fails to meet a material financial obligation expressly Mated in this Contract; or


(b) during the First Sub-Period docs rot curry out drilling and seismic acquisition,


as detailed in Article 102 or. during the Second Sub-Period (or earlier), docs


not curry out drilling and seismic acquisition, as detailed in Article 10.3; or


(c) interrupts Production for a period of more than ninety (90) consecutive days vs ith


no cause or justification acceptable tn accordance with this Contract or under


prudent international petroleum industry practice, it being recognised that Force


Mnjeurr is an nccrptnhfc justification for such interruption*: nr


(d) Intentionally extracts or produces any mineral which is not covered by the object


of this Contract, unless such extraction or production is expressly authorised or


unavoidable as a result of operations carried out in accordance with prudent


international petroleum industry pncticc; or


(c) if the CONTRACTOR comprises solely ore entity, is declared bankn.pt in


accordance with applicable law;


(I) wilfully refuses to abide by negotiation, mediation, arbitration <* exprfl decision


under Article 42 ;or


(g) if u CONTRACTOR Entity named as a pony to the agreement contained in


Anna C fails tn meet a finonria) obligation expressly stated in that anrex


45 J The GOVERNMENT may also terminate the Cnnlnrl only in respect of one


CONTRACTOR Entity if such entity is subject to a Chaage of Control for which the


GOVERNMENT hoi nrt given its author satin* in aaxmtaoce *th Amcle N.7.


45.1 At any time prior to thr Development Period, the CONTRACTOR shal Hav the


right to term note to Contract by •urrendcring the entire Contract Area in accordance


with the provisions of Ankle 7.


•IS.I During the DevcfopnwM Period. the CONTRACTOR shall have the right to


tcrminnlc this Conroct at any time by suTcndcring *11 Production Areas. provided its


(hen Ctfrent obligations have been wiisfied in accordance with tfris Contract


45.5 If the GOVERNMENT intend, lo exercise hi right to terrains* thi» Contract


ptrsuaat to Article 45.1. it dull Tint comply wih the following provisionv


(a) The GOVERNMENT dull notify the CONTRACTOR of its intention to


termhate to Contract stotiag the rcasms for such term nation and requesting


the latter


(1) to remedy the defautu or


(n) to propo* acceptable compensation.





Sb/IM


«h» If. within three (3) Months oiler the notice referred to in Article A5S(a\ the


CONTRACTOR has not remedied the situation complained of b) the


GOVERNMENT to its satisfaction or offered compensation acceptable to the


GOVERNMENT in each case tiding reasonably, the GOVERNMENT shall


notify the CONTACTOR in writing that the Contract shall he terminated


from the termination date detailed In such notice. Pits Contract shall terminate


on such lamination date unle8» the CONTRACTOR issues u notice of


dispute as provided under Article 42. in which case this Contract shall remain


In Ibrtc until a (Inal settlement of the dispute lias been reached in accordance


with the dispute resolution provisions of Article 42.


The foregoing precisions of this Article 45.5 arc subject to the proviso that, in case of


a dispute where there has been breach of this Contract which lui> luen submitted to


dispute resolution pursuant to Article 42, the GOVERNMENT shall not be entitled to


exercise its right tc terminate this Comma prior to a tlnal determination under Article


42 in favour of die GOVERNMENT


45.6 If the GOVERNMENT terminates this Contract pursuant to the provisions of Articles


45.1 and 43..\ the CONTRACTOR shall lose all Ks rights ur.l Interests under this


Contract. Notwithstanding the foregoing, the provisions of Articles 14.10. 16.7, JO.


31, 35.1, 35.3, 35.4, 35.7, 36, 38.2(c), 41.42. 43.1 to 43.6 and Annex C shall survive


the termination or expiry of this Contract


45.7 If □ CONTRACTOR Entity breaches Article 46.1 or 462 the GOVERNMENT or


another CONTRACTOR Entity aav terminate this Contract n re vied of the first


CONTRACTOR Entity.


45.8 If the Contact is Etmirsted aider Ardoc 452 cr 45.7. the oncre-J of the relevant


CONTRACTOR Entity dull h: transferred to th: other CONTRACTOR Entities ia the


proportions in which their respective percentage irtercstt bear to the aggregate of


their respective percentage interests under the relevant joint Operating Agreement or


in such other proportions as sich CONTRACTOR Entities shall agree between hem


I or the market value thereof (as such temi is defitrd in Article 39.7L Such transfer dull


not give rise to any Tax including on the consideration paid or received nr of the


income or gain therefrom.


ARTICLE 46 - APPLICATION OP CORRUPTION LAWS


46.1 If this Contract is reasonably proven to have been obtained in violation of Kurdistan


Region I .aw concerning corruption, this Contract is void ah initio


46.2 Each CONTRACTOR Entity agrees that ifii is, at any time, reasonably proven to be in


breach of Kurdistan Region Law concerning comiption the provisions of Article 45.7


apply.




















87/164


 ARTICLE 47 - EFFECTIVE DATE





Tlli» Cot iU art dial hccmiK effective and be binding on the Parties up»n ibe sigraiurc of the


Contrud b» the duly auhoriied represeniaiivcs of the GOVTRNM F.N'T ord the


COMRAC TOR as provided bdow.


Entered inloin four (4)orig«u*ls *i Eftil. the Kurdistan Rcgxm on luesday 2 October. 2007


For the KURDISTAN REGIONAL GOVERNMENT





























By:. By


Nee In tv mi Bar/aai Ashti llawami


Prime Minister Minister of Natural Resources


KurdiSan Regional Government Kurdistan Kegkmal Government


Cm behalf of the Regional Council On behalf of tte Ministry of Natural


for the Oil and Gas A flairs of Resources in the Kurdistan Region


the Kurdistan Region - Iraq











For end. CONTRACTOR Entity


HERITAGE ENERGY Ml 1)1)IE EAST LIMITED
























































XX’164


 yj c^r*-y











Sj5Ji8*


 ANNi'-XJj


ACCOUNTING PROf FmrRF











PARAGRAPH I - GENERAL PROVISIONS





1.1 Pi r pose


To classify expenditures, define further Petroleum Costs (in addition to those


defined as such in the Aniclcs of the Contract), and prescribe the manner in


which the CONTRACTOR'S Accounts shall be prepared and approved.


1.2 HcflnitioBs


Words and phrases to which a meaning has been assigned in Article I or other


Articles of lire Contract shall have the same meaning when used in this Annex.


1.3 lacnasblency


In the event of any inconsistency or conflict between the provisions of this


Annex and the other provisions of the Contract, then the other provisions of


the Contract shrill prevail.


1.4 Accounting Records and Reports


1.4.1 The CONTRACTOR shall maintain the Accounts in accordance with ArtLtc


15.1 and in accordance with this Accoutring Procedure, induling in


accordance with the chars of Accounts apreed under Paragraph 1.4.2.


1.4.2 Within sixty (60) days of Effective Dale, the CONTRACTOR shill


submit k> and discuss wish the GOVERNMENT a proposed outline of darts


of Acecsmts. which ouLine shall he in accordance with generally accepted


standards and recognized accounting systems and coroi stent with noma I


pcmiletm industry practice and procedures Within ninety (00) days of


receiving the above submission, th: GOVERNMENT dull either provide


written notifeatior. of its approval of the proposal or request in writing


revisions to the pnposal Within oik hundred and eighty (180) days after die


Effective l>at*. the CONTRACTOR and the GOVERNMENT shall agree on


the outline ctf chans of Accounts which dull describe the basis of tic


accounting system and procedure? to be developed and used under this


Centred Following such agreement the CONTRACTOR shall cxpeduuxaly


prepare and provide the GOVERNMENT with tomal copies of tic


comprehensive charts of Accounts and manuals related to the accountieg.


nxunllng and reporting functions, and procedures *tncti are, and stall he,


observed under the Contract.


1.4 J Nrtwithoanding thr generality of the foregoing. the CONTRACTOR dull


make regular SuBcmctts resting to the Petroleum operations. Ihcse


Sutemeats art as shown:








90,164


(a) Production Statement (as indented in Paragraph 6).


(b) Value of Production and Pricing Statement (is indicated in Piragroph


7)


(e) Cost Recovery and Share Account Statement (as indicated in


Paragraph «).


(di Stutcineni of Expenditures and Receipts (us inJicuicd in Paragraph *>)-


(cl final Knd-of-Ycar Statement (as indicated in Paragraph 10).


(0 Budget Statement (as indicated in Paragraph 12).


1.4.4 Al reports an) statement shall be prepared in accordance with the Contract


Kurdistan Region Law. and where there are no relevant provisions of either of


these. in accordance with prudent intcmatxmnl petroleum industry practice.


1.5 laaguage and linitsof Account


All Accounts shall be maintained and prepared in the English liinguugo ind


shill lie recorded in Dolluis. Where necessary for clarification, the


CONTRACTOR muy also maintain Accounts in other cuirencies.


1.6 A adit a ad Inspection RighU of the GOVERNMENT


In addition to the provisions of Articles 153 to 15.7 and 15.9. the following


provisions shill apply to any audit carried out in accordance with Articles I J.3


to 15.7:


1.6.1 Fer purposes of mhum. the GOVERNMENT, acting reasonably and in


accocdaacc with prudent infcraaUmal petroleum industry practice, ay


exwnine and verify, at reasonable tmc\ upon reasonable prior written notax


to the CONTRACTOR all char*.-* an) credits relating to he Prtrolcam


inventories. vouchcr\ payrolls invoices and any other documertx.


correspondence »*d record. includin' eleetroric record* rvttonaklv


considered necessary by the (GOVERNMENT to audit and verify the charges




















1.6.3 W'tcrc he GOVERNMENT restores vct.fVji.un of charge* made by an


Affiliated Company of the CONTRACTOR the GOVERNMENT shall


have th; nail to obtan an null cent Ovale for such charges 'nni an


internationally recognized firm of public accountants scceptabe to both tfvc


GOVERNMENT and the CONIKAtTOK. whKh may be tic


CONTRACTOR’S daluuiry auditor





91164


I 64 All agreed adjustments resulting from nn audit duill he promptly maifc in the


CONTRACTOR'S Accounts and any consequential adjustments to payments


due to die CONTRACTOR o« to the GOVERNMENT. us the case mny he.


shall be made promptly.


1.6.4 When issues an; outNtanding with respect to an audit, the CONTRACTOR


shall maintain tho relevant documents and permit imipectioo thereof until the


issue is resolved.


1.7 Payment*


Unless us otherwise provided in Article 24. Article 29 or other Articles of the


Contract:


1.7.1 All payments between the PnrtiM shall, unleao otherwiio agreed. he in Dollars


and be made through a bank designated in writing by each receiving party: and


all •ums due under the Contract ahall be paid within thirty (.10) days following


the end of the Month in which the obligation to make such payment occurred.


1.7.2 All sums due by one party to the other uiklcr the Contract shall, for each day


such sums arc overdue, bear interest compounded monthly at UBOR plus two


percent (2%).


I.H Currency Exchange Kates


In addition to the provisions of Article 29. the following provisions shall apply


to any exchanges ofeurreoey canicd out in accordance with Article 29:


I.H.I Amounts received and Petroleum Costs incurred, shall be coaverted from


other currencies into Dollars in accordance with the CONTRACTOR s usual


accounting procedures which ahull reflect generally accepted m*.>unti»g


practices in the irlemational petroleum industry, and with reference :o


exclumgt rules obtained in accordance with Article 29


1.9 Accrual llanin, C ash Flow Basts and Reports


All IhhiKs and Accounts shall be prepared on an acciuul tests ia ace-dome


with generally accepted accounting principles used in the mtcnututul


petroleum Industry.


1.10 Values and Treatments


Values ami treatments proposed by the CONTRACTOR relating lo ull


Petroleum Cods shrill be subject to challenge by the GOVERNMENT in the


course of audit to ensure that they arc in accordance with the provisions of this


Accounting Procedure.

















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PAN ACNAl’II 2 - CLASSIFICATION. DEFINITION AND ALLOCATION OF


COSTS AND EXPENSES


2.1 Segregation of Costs and Expenses


Petroleum Costs shall be segregated in accordance with the purposes for


which such Pomlcum Costs are made. lire purposes which shall qualify are:


(a) those which have been included in the approved Work Program and


Budget for the ycur in which the Costs and Expenditures are made:


(b) expenditures incurred in eases of emergency as set out in Articles 111.


11.5.13.9 35.5. 35.6 and any other Articles of the Contract:


(c) any other purposes agreed in the Articles of the Contract: and




All Petroleum Costs recoverable under Paragraph 3 relating to Petroleum


Operations shall be classified, defined and allocated as set out below.


2.2. Exploration Costs


Exploration Costs arc all direct and allocated indirect costs and expenditures


incurred In carrying out the Exploration Operations, including all direct and


allocated indirect costs and expenditures incurred in the search for 1’etrolcum


in an urea which is. or was at the time when such costs and expenses were


incurred, pun of the Contract Area ircluding:


12.1 Aerial geophysical, geochemical, pakoncologtal geological topographical


anc seismic surveys arel -Julies and their intrnvrtatim and pirchavd


geological and geophysical infermatoo


222 Stratigraphic lest hole driling and water well drilling


2.2.3 Labour, materab. applies, and services used ir. drill ng wells with the object


of rinding Petroleum or Appraisal Wells excluding any coot of the MiKrquent


conpletbn of such well* *\ prefacing wefls.


22.4 Facilities to tie extent used in aippod of the purposes described m Paragraphs


22.1. 222 and 111 including access made


2.2.5 Thu portion of all service expenditures ind that prrtion of all general aad


administrative expenditures dreed;y atuibutaNe to l-Jiploraiun Costs or


allocated thereto on a consistent and equitable basis.


2.2.6 Any other expenditures incurred in ihc seech far and appraisal of Petroleum


after the Effective Due ard not otherw ise covered under dm Paragraph 22.














9 VI64


33 Cia* Marketing Cmtn


Gas Marketing Costs ire oil direct and allocated indirect costs and


expenditures incurred in carrying out Gns Marketing Operations and Include


ihm portion of nil servlet- expenditures end that portion of nil general and


administrative expenditures directly attributable to Gas Marketing Costs or


allocated thereto on a comistenl and equitable basis.


2.4 I>rvrlii|itnent Coats


Development Costs are nil direct and allocated indirect costs and expenditures


incurred in carrying out Development Operations including all direct and


allocated indirect costs nixl expenditures incurred in:


2.4 I Drilling wells which are completed ns producing wells and drilling wells for


putposes of producing from n Petroleum reservoir, whether these wells arc dry


or producing and drilling wulli for the injoction or water or gas to enhance


recovery of Petroleum.


2.4.2 Completing wells by way of installation of casing or equipment or otherwise


ntlcr a well has been drilled for the purpose of bringing the well into use as a


producing well or as n well for the injcciitm of water or gas to enhance


recovery of Petroleum.


2.4.3 The costs of Petroleum production, transport mhJ v^agt facilities such as


pipelines, flow lines, products*! ard treatmert unit, wtllhcal equipmem.


sufciurfaec equipment. enhanced recovery systems. Petroleum storage


facilities, and access roads for production activitex.


2.4.4 F.njinccnng and design studies for the wells and facilities referred to in


I'amgiapts 2.4.1. 2.4.2 anj 2.4J.


And Including tfuii porthai or all service expenditures and that portkn of all


general «nd administrative expenditures dmxtly attrouiahc to IVcvcbpmcnt


Costs or allocated thereto on n consistent and equitable basis; aid ary otter


expenditure incurred in the Development Operations and not otherwise


covered under Paragraph 2.3.


2.3 Production Costs


Production Costs ore all direct and allocated indirect costs and expenditures


incurred in carrying oul Production Operations, including all direct ard


allocated indirect costs and expense* Incurred m I'ctrolcum Operations niter


First Productiio which are other than l-xploration Costs, Gas Marketing Costs.


Development Costs and Decommissioning CoSs. Production Costs include


that portion of all service expenditures and that portion of all general und


administrative expenditures directly attributable to Production Costs or


allocated thereto on a consistent and equitable basis.














04/164


2.fc Ihrommiwoninc Costs





Decommissioning Costs are nil direct and allocated indirect costs anil


expenditures incurred in carrying out Decommissioning Operations and


Include thnt portion of all service expenditures and that portion of all general


and administrative expenditures directly attributable to Decommissioning


Cealx or allocated thereto on n consistent «nd equitable basis, and the


Decommissioning Reserve Fund shall be determined on such basis, in advance


of incurring such costs, W provided in Article 38 and, for the purpose; of cost


recovery, the contributions to the Decommissioning Reserve Fuml shall be


recovered In accordance with Article 38.


2.7 Service Kapcadlturva


Service expenditure., Of* expenditures in support of Petroleum Operation*


including warehouses, vehicles, motorized rolling equipment aircraft, fire and


security Maliimn, work diops, water and sewerage plants, power plants,


housing, community and recreational facilities and furniture, tools and


equipment used in llicac activities. Service expenditures in any Calendar Year


shall include the costs incurred in such year to purchase and/or consltud live


said tncilltlcf us well as Hie annual costs of maintaining and operating the


same. Ml service expenditures dull be regularly allocated as specified in


Paragraphs 2,2.3. 2.J, 2.4. 2.3 and 2.0 to I'xploratlon Costs. Gas Mattering


Costs, Development Costs. Production Costs and Decommissioning Costs


re'pcclivcly and shall lie separately shown under each of these categories.


Where service expenditures ate mode in respect of dvared facilities, the basis


of allocation of costs to frtiolcum Operations shall be consistent and equitable


and shall be specified.


2.8 (Uaeral aod Administrative hipciditnrcs





General and alminsrati'c cxfcnditarcs arc:


2.8.1 Al main office, field office and general administrative cxpcixlitures in itc


Kurdistan Region inclading supervisory, axourting. procurcmenl and


ctrployee relations services.


2.8.2 Where the CONTRACTOR a an Affiliate of a group of companies whose


headquarters a Abroad (a “Foreig. CONTRACTOR"), an onaual overhead


charge dial I be made for servees rendered (excluding the direct cxpcndituies


as referred n Paragraph 3.l.2.(t)) by any Affiliate of the Foreign


CONTRACTOR outside the Kuidistaa Region to support and manage


Petroleum Operatkns under tie Cor tract, or where the CONTRACIT>K. rot


heng a foreign CONTRACTOR draw* up»« the servires of an WTilute


within the Kurdistan Region, an amual overhead charge shall be rude tor


services rendered (excluding the direct expendeure* « referred in Paragraphs


3.1.1(a) and (b)) by uich Affiliate to support and manage Petrokun


Operations uixlcr the Contract C*Parcat Company Overhead").


Parent Company Overhead w.ll be deemed to cover the actual cora (berig


sabriev wages and labuar burden, employee benefits, travel, hotel aad other





05 IM


nn*mall> rammrvaWc rucmo paid by the AffHale of a CONTRACTOR m


rrrvmna of office Mtmmoklioi and r^vninn of vrvke n»onaH>


necessary for operation and mamtainmj such staff office*) incurred lor


Mfvice* itixM bj Iho« function, of CONTRACTOR* Affiliate, such M.


but not limited to. international productioa headquarters, intenationil


exploration hca*k|iwrtcn. irva-uiry. payroll, taxation, insurance, legal,


communications, computer services, controllers. personnel, executive


administrative management, research and development, eenlrnl engineering


and process engineering which:


(a) cannot, without unreasonable effort andor expenditure or without the


icleu.se of confidential data proprietory to any of the


CONTRACTOR'S Affiliates, be charged under any oilier section of


this Annex: and


(b) ore properly allocable to Petroleum Operations undo die Contract. It is


understood, however, that services perfo-med by the deportments listed


above and other corporate departments which directly benefit


Petroleum Operations under the Contract shill be charged a. direct


costs in accordance with Paragraph 3.


In respeet ol the cott* ol the CONI KACTOK s Parent Company Oserhe^d.


as described above, the CONTRACTOR shall charge monthly to Petroleum


Operations an amount equal to the total of the following:


2.8.2.1 lixplomtion Overhead


The CONTRACTOR shill he entitled to an annual charge hosed on a sliding


scale percentage and charged raonthy to Petroleum Operations The fasts far


applying this percentage shall be the trtoJ of iixploralian Costs and Cos


Maietkg CtBts daring each Calendar Year (exclusive of dm I xpfantran


OverheaJ) or fraction thereof less expenditures which have bee* subjected to


the two 2) per ear fee. referred to in Paragraph VI 8(b). The diditK scale


percentage shall be iic folowitg;


For the fira four oiUioc Dollars (ISJ4.C00.0W) foor per cent |4S)


For the next four nillioa Dot fan (l SS4.W0.0i0) three per cent (3%)


Over eight million Dollars (US$8,000,000) (wo per cent (2%)


The foregoing percentages may be reviewed but not more often than innually,


und uny approved appropriate nd«ustmcnt shall be iiukIc, if necessary,


prospectively.


2.8.22 Development. I'rodiictioriand Decommissioning Operation.' Overhead


The overhead rites applicable to Development. Production ami


Decommissioning Operations shall be agreed between the Parties in due


course and shell incorporate the following guidelines:





dtwirwt


 (■) TV CONTRACTOR’* clur*r* musl V charged a* direct charges


whenever possible. Overhead charges exist only to etimpemale the


CONTRACTOR c Affiliates ft«r m*U which are properly allowable to


Petroleum Operations under the Contract bu which cannot, without


unreasonable cfTarl and/or nletua of confidential data proprietary to


the CONTRACTOR’* Affilale*. V charged unde* any *her xectkm


Overhead «xs*s a«e billed HKnthlv Overhead mu* V axnnxruurac


with services rendered and hised on actual cent studies but nay not


exceed on amount calculated a* a pcivcjmkc of certain










overhead and Ukbc. %*h».h du not. shall be agteed among he Pmtev





(C) The maximum | unci Huge iuio may be revised by mutual ugicement


not more often than annually. IV initial maximum percentage rales


and the types ol expenditures to which they apply shall be agreed as


won at dtc Parties possess reasonably reliable cost estimates for the


relevant Producticn Area.





(d) OverVad charges are not sublet to audit by (.OVKKNMENT


(c| Ihc CONTRACTOR shall upon request fiimlsli u the end of each


re levari Calendar Year to the GOVERNMENT a confirmatkn by its


statutory auditor that the nverhc.nl costa actually churgcd do not


duplicate any other charges ttiul that the method used in allocating


overhead to Petroleum Operations hereunder us opposed to other


activates is reasonable anil in accordance with generally accepted


accounting practices.


(0 Ihc CONTRACTOR oust kidget for overhead charges.


2.8.3 All general and administrative cxpcndrttacs shall h: regularly allocated as


specified in Paragraphs 2.2.5. 2.3. 24. 2.J and 2.6 to txpkmica Cost*. Gas


Marketing Costs. Development Costs. PnxJuclUn Costs and Decommissioning


Cotta respectively and shall be wparalcly shown under each of the*


categories.





PARAGRAPH 3 - COSTS. EXPENSES. > \PI M)H I KIS AND CREDITS OP


THE CONTRACTOR


J.l Coals Recoverable Without Eurther Approval of the GOVERNMENT


Petroleum Costs incurred by ihc CONTRACTOR pursuant to the Contract as


classified under the headings referred to in Panigraph 2 shall he recoverable


for the purpose of Article 25 of Ihc Conlrnct (except to the extent provided in


Paragraph 4 or elsewhere in this Annex), subject to audit us provided for in


Article !5 and in Paragraph 1.6














07/1M


3.1.1 Outface Right-





All direct cost necessary for the a:quistion. renewal or relinquishment of


surface rights acquired and maintained in face tx ihe purposes of the


Contract





3.1.2





(a) The CONTRACTOR s locJh m noted employeei fated in tv


KurdisUm Region Cons of all CONTRACTOR s locally recruited


employees who are directly engaged n the conduct of Petmlean


Operations inder ihe Contract in the Kurdistan Regiot. Such costs


shall include the cods of salaries, wages, bonuses, overtime, employee


benefits anc GOVERNMENT tenefns for emfJoyces and leves


imposed on the CONTRACTOR as an employer, transportation aad


relocaL-on costs within he Kurdistan Region cf the employee and sudi


members of the employee's family (limited t> spouse asd dependent


children) as required by law or custotrary practice in die KardisUn


Region. If >och employees arc cngagal in other activities in the


Kurdistan Region in addition to Petroleum Operations the cost of


such employees stall be apportioned on * time sheet basis according to


sound and acceptable accounting principles.


(b) Assigned Personnel: Costs of salaries aid wages ircludiag bonuses of


the CONTRACTOR'S cmpbyecs directly crgaged m the onduct ol


the Petroleum Operatkm unicr the Contract whether temporarily or


[Krmaoetuly assigned, rrespcctivc ol the location ol such employees,


it being understood that in the case of those personnel only a pert ion of


who* time is wholly dedicated to Petroleum Operatkm under the


Comma, only that probata portion of applicable salaries, wages, aid


other costs as delineated in Paragraphs 3.1.2(c), (d). (c)» (f) and (gX


dull be charged and tic basis of such pro-rata allocation shall be


specified.


(c) Ihe CONTRACTOR S co*s regarding holiday, vacation, sickness


and disability benefits and living and housing and other customary


allowances applicable to thr salaries and wages chargeable under


Paragraph 1.1 ?

(d) Fapenvs or eontrbutkm made pirsuan- lo assessments nr obligations





imposed under Law waich arc applicable In the CONTRACTOR *


cost of salaries and wages chargeable under Paragraph 1 I 7(h)


(e) The CONTRACTOR'* cost of rswhlishrd pirns for emfdoyees' groop


life imuratKc. hspilali/alion. pension, stick fore hates. savings,


bonus, and other Scncfil pUr-v of • like nature CtMtomarly granted to


the CONTRACTORS employees provided however that such costs


are in accordance with generally accepted standard-, in the inlcnalioral


petroleum iadnsby. applicable to salaries aad wages chargeable to


fVuokuiii Operations imdcr raingraph 3 I -2(b)








OR/IM


 (0 Actual transportation anti travel expenses of employees of


CONTRACTOR, including those mad: for travel and rckKilion of


the expatriate employees, including their families and personal effects,


assigned to the Kurdistan Region whose salaries and wages are


chargeable to Petroleum Operation* under Paragraph 3.1.2(b).


Actual transportation expenses of expatriate personnel transferred to





Petroleum Operations from their country of origin shall be charged to die


Petroleum Operations. Transportation expenses of personnel transferred fn»n


Petroleum Operations to a country other than the country or their origin shill


not be charged to the Petroleum Operations, Transportation cost is used in this


section shall mean the cost of freight and passenger service, meals, hotels,


insurance and oilier expenditure* related to vacation and transfer travel and


uilbrirwol under the CONTRACTOR** standard personnel golkfes The





CONTRACTOR shall ensure that all expenditures related to transponaiXui


costs are equitably allocated to the activities, which have benefited from ihc


personnel concerned.





(gl Reasonable personal expenses of personnel whose salaries and wages


arc chargeable to Petroleum Operations under Paragraph 3.1.2(b) and


lor winch expenses such personnel are reimbursed under the


CONTRACTOR’S slindnrd personnel policies. In the event such


expenses arc not wholly attributable to Petroleum Operations, the


Petroleum Operations dud I he charged with only the applicable portion


thereof, which dial I be determined on an equitable basis.





3.1.3 j; mfi'ASZ lion mid I mplj.iy.ee Costs





The cofl of transportation of employees, equpmen, material' and vuppbes


other than as prxmlcd ia Paragraph 3.1.2(0 orccssary for the coodurt of the


Petroleum Oycratkns under the Contract along with other related costs such


as. but lot limited to. import duties cuaoms fees, unloading charges, deck


fees, and inlaid and ocean freight charges





3.1.4 Chanm for Services





(a) Third Parties


The actual costs of contract services, services of professional


consultants, utilitfes. ani other services reccssary fer the conduct of the


Petroleum Operations aider the Contract performed by thinJ parties


rther than a* Affiliate of the CONTRACTOR.





(b) AffUiaes of the CONTIACIOR


(i) Profession! aid Administrative Services F.ipeascs cos* of





professoral and aCm migrative services provided by my


AffiStfes of the CONTRACTOR for the direct benefit of


Petroleum Operations, includieg services provided by die


product io*. exploration, legal. procure inert. franciaL


insurance, acciunling and computer servers divisions other








WI64


than those covered by paragraph! 3.1 * (b) (ii), ' I .ft owl ' I 8


(b) which CONTRACTOR may use in lieu of having its own


employees Such chiryes shall reflect the cost of providing


their services. Such charge* shall not include any element of


profit and shall he no mere or lc«* favourable than simihr


charges for other operations carried «n by the


CONTRACTOR anti its AfT.liMe* 1ha chargwM.1 r» vh.ll


include all cods tnrurreC by AfTihatev incidental to the


oniptaymcat of such personnel ioe udinj, all L*b-ur aad


Associated Labour Costs and the cost of mamtamng aad


operating officei and providing all 'upport services for -toch


pcrscnnel. Costs of travel of such personnel in re'pcct of


Pciruknim Operations will be directly duugeil Tim charges for


such services shall not exceed those prevailing if pcrfnoncd by


iton-AITiliatcd third panics, taking Into account the quality and


availability of

outside the home office base of such personnel, the daily rate


shall be charged from die dale such personnel leave tin: home


office hose where they usually work up to their return thereto,


including days which ore not working days in the location


where the work is performed, excluding any holiday


entitlements derived by such personnel from their employment


at their home office base.


(H) Scientific or Technical Personnel cost of scientific or


technical personnel services provided by any Affiliate of the


CONTRACTOR fw the direct benefit of Pttrokun


Operation*. w*i* coa dull be charjed ns i enu of arrve-r


basis and 'full not indude any dement of profit The chargco*


the anpkwmcnr of nidi personnel including «E Labour »d


operating offices and providing all sapport services far su;h


personnel costs of ravel of M.h personnel n icopcci of


Petrdeum Operations will be directly charged Tlsc charges for


such services shall nu exceed thne pretdilaig If performed hy


nonaffiliaied third parties, taking into account the quality aad


availability of such services. Unless the wort to be done Sy


such persomel s covered by an approved Wirt Program aid


Budget the COVIRACIOK dull nu autfunsc woat by su:h


perscnnel wnhtut apjrovalof the V?.RNMEfCT.


’" * S£d^d faULhcd by *c CONTRACTOR-* A Hi kales, at


currently prevailing for tie simply of lice cunpment aid


facilities an comparable trims in the area where tie Pdrolcun


Opendom are bemg conduced md shall be on v armMcnsfh


basis Oa the request of the GOVERNMENT, ac








lor.iM


CONTRACTOR shall provide the GOVERNMENT wilh


evidence of such rales being on on arm’s length basis. (If the


GOVERNMENT considers I hit any such rale is not on an arm's


length basis then the GOVERNMENT hits the right to refer the


mutter to an expat pursuant to Article 4J ? of the ContRk-l). The


equipment and facilities referred to herein shall exclude major


investment items such as (but not limited to) drilling rigs,


producing platforms, oil trailing facilities, oil and gas loading


and transportation systems, storage and terminal facilities nod


other major facilities, rates for which shill he subject 10


sc pm ale agreement with die GOVERNMENT.


3.15 &fflUUVjitcatifg3


Com of acquiring, leasing, installing, operating, repairing and maintaining


communication systems including radio and microwave facilities within and


between die Contract Ana and die CONTRACTOR** nearest base facility.





3.1.6 Office and MfeceflqitCOt is Facilities





Ncl cost to the CONTRACTOR of establishing, maintaining and operating


any office, sub-office, warehouse, housing or other facility directly serving the


Petroleum Operations. If any such facility services more than one coiilrixt


arc* the net costs thereof shall be allocated on an equitable basis in accordance


with prudent international petroleum industry practice.





3.1.7 Illogical and Environment


(a) Costs ncurrrd in the Contract Area e» a result of legislation for


archaeological and geophysical surveys relating to identification ard


protection ol cultural sites or resources;


(b) Costs incurred in environmental or ecological surveys requ red by


regulatory aalhonjev including at environmenUl impact assessment


commissioned pursuant to Article 37.3 of the Contact and ary other


costs incurred in complying with the requremenls of Article 37.


(c) Costs to provide cr have available pollution containment and removal





(d) Costs of actnl cxotrol and cleanup of cm! spills, and of such further


responsibilities resulting therefrom as may be required by applicable


bws ard regulations;


(e) Costs of restoration of the operating cnvronrrenl ircurreJ pursuant to


aa approved scheme prepared in accordance with Ankle 38 of the


Cootract;





(f) Any costs incurred for the decommissioning of facilities and s*c


restoration, including my related activity required by the


GOVERNMENT or other competent authority or by the Contract; and





101 IM


(i>) Any conlrttutnas raade by the CONTRACTOR ID ike


recommissioning Reserve Find ir accordance with Artck 31. when


such contributionsare made


3.1« MgedaUhiLtiaiurmw* c<**3


Costs nf materials

goals of n similar nature used cr consumed in Petroleum Operations subject to


the following-


(n> Acquisition - the CONTRACTOR shall only supply or purchase


materials for use in Petroleum Operations that may be used in the


foraGcwbk future Ihe accumulation of surplus stocks and inventory


shull be avoided so far as is rcascnably practical and consistent with


efficient ond economical operations. Inventory levels shall, however,


take into account the time lag far replacement, emergency needs,


weather conditions affecting operations «ukI similar considerations.


(b) Coni pone uts uf coats arm’s length transaction* except ss


otherwise provided in paragraph 3.1.8(d). material purchased by the


CONTRACTOR in arm’s length transactions in tfe open market for


ate in the Petroleum Operations under the Contract shall be valued to


Include Invoice price less trade and cadi discounts (if any), licence


fees, purchase and procurement fees plus freight and forward it g


charges between point til supply and point of shipment, freight to pen


of destination. Inairuncc, taxes, customs duties, consular fees, cxciw


taxes, other items chargeable ugninsl imported materials and. where


applicable, handling aid trunsportaticn expenses frtni print of


importation to warehouse or operating vie. Where an Affiliate of the


CONTRACTOR has arranged the purchase, coordinated the


forwarding end expediting effort, its costs rrtould not exceed those


carrendy prevailing in aornul arm's kagth transactions on the open


market and in any case shall not exceed a fee equal to two per cent


(3%) of the value of th* materials added lo the end of ihr materials


pachMd.


(c) Accouating - sues material costs shall be charged to the account it g


records and hooks m accordance wih the Tint la. Ural Oaf*(FIFO)


method;


(d) Material purchased fron or arid to Affi&atcs of the CONTRACTOR


or transferred front other activities of the CONTRACTOR to or frrm


Prtrokum Operations under this Contract shaB be valued and chargtd


or credited oi the prices spec mod ia Paragraph-* ). 1 Aid Hi). 3.1 K

aad3.l^dXr.i):


(i) New material, including used new material moved from


invertors (Condition “A"), shall be valued at the correal


interrationil net price which shall not exceed the price


prevailing in normal arm's length trait vie ions in tlx open


market








102,164


(ii) I IwH matrrial (Condition* -B”. “C~ and “IT:





(A) Material which is in sound and serviceable condition


and is suitable for rc-usc without reconditioning shall he


clou)fled os Condition “B" and priced at seventy five


per cent (75%) of the current prior of new material


defined in Paragraph 3.1.1(d)(1);


(B) Materiel which cannot be classified os Condition “B"


but which alter reconditioning will be further


serviceable for itn origino) function shall he clasiilicd as


Condition and priced at not more than fill)' per cent


(50%) of the current price of new material as defined in


Paragraph 3.1 K

Ik charged to the reconditioned material provided tluit


the value of Condition “C" material plus the coM of


reconditioning do not exceed the value of Condition


"B" material;


(C) Material which cannot be classified as Condition “B" or


C ondition "C" shall be classified us Condition *1)“ and


priced at a value commensurate with its use by the


CONTRACTOR. If material is not fit for use by the


CONTRACTOR it shall be disposed of as junk.


(iii) Material involving ereclicn costs shall be charged at be


applicable condition percentage of the current knocked-down


price of new material «s defined h Paragraph 3 l.&dRi)


(iv) When the use of material is temporary and its -crvic* to the


Petroleum Operations under the Contact dies nit junify the


reduction in price os provided for in paragraph Vl.S.fdXiiXb).


such material dull be pricoJ on a basil thut wiff rcMdi m a net


charge to the accounts under the Contract consiUcnt with the


value of the service rendered.


(v) Premium prices • whenever material is not readily obtainable at


published nr 11 Wed prices because of national amergancicHt,


Strikes or oilier unusual causes ewer which the


CONTRACTOR has no control, tlu- CONTRACTOR may


charge Petroleum Operations for the required material at the


CONTRACTOR’* actual cost incurred in providing -uch


material, in making it suitable for use. and in moving it to the


Cuutiucl Area, provided undue in writing ft furnished to die


GOVERNMENT of the proposed charge prior to charging


Petroleum t >jvr«ilun% lor such material and the


GOVERNMENT shall have the right to challenge the


transaction on nulll.


(vi) Warranty of mincrtnl llirnlshcd by the CONTRACT OK - the


CONTRACTOR does not warrant the material furnished. In





I03;|M


ciu* of dr foci i vr material, credit 'hull not hr passed lo


Petroleum Operations until adjustment ha* been received by the


CONTRACTOR from the manufacturers of the material nr


their agents.


(vii) Adjustments arising from material inventories conducted in


accordance wilh Paragraph S.2.


(o) Equipment of ihc CONTRACTOR chnrgod at rate* not lo exceed die


average commercial rales of non-afliHated third parties for equipment,


facilities. imtnllutinn.'i and utilities for use in iho area where (lie same


arc used. On request, the CONTRACTOR shall furnish a list of rases


and die basU of application. Such rates dmll he revised when found lo


be either excessive or insufficient, but not more tluin once every six (6)


Months.


Orilling Units und other equipment lost In die hole or damaged beyond


repair may be charged at replacement cost less depreciation phis


transportation costs to deliver like equipment to the location where


used.


(0 Use of leased or hired machinery and/or equipment in ihc Petroleum


Operations shall he charged at lull cost to the CON I KACI OK. I Ins


may include mobilisation and de-mobilisation charges, lease and hire


foes, av well as other contractual costs.


3.1.9 Rentals and fixes


All rentals of every kind and nature levied by any GOVERNMENT and ill


Taws imposed in connection with the CONTRACTOR'* assets, income or


activities under the Contract ard paid directly by the CONTRACTOR or any


CONTRACTOR Entity (save where the contrary is expressly provided in ihc


Contract) with the exception of Taxes described in Article 312) are! boms


payments made under Article 32.


If the CONTRACTOR, any CONTRACTOR Entity or my of its Affiliated


Companies is subject to income or withholdiag tax as a result of services


performed at cost for the Petrocum Operations under the ContrarL its chants


for such services may be increased by Ihc amoutf retired to cover suA taxes


(grossed up) deluding taxes on such gross up





3 1.10





Insurance premiums and costs incurred for insurance carried for ihc benefit of


Ihc Petroleum Operations provided that such insurance is customary , affords


prvdenl protection againfl risk and is at a premiam no higher «hoa that charged


on a ccmpcttivc basis by irsurartc cranparics which ore aot Affiliated


Companies of the CONTRACTOR. Except in cun of failure to insure


where insurant coverage is require*: purwant to the Contract, actual costs and


loves incurred dial be recoverable to the vxtea* not nude good by imurawc


uncss such bsses resuk solely from aa act of wilful misconduct by the








IQVI64


 at of property


fire, floed.








3.1.11 Expenses


AH raaxonabt* costs and wxpmmmm rr%uhi.g from the handling, mvcoigatir*.


asserting, defending, or vetting of any claim or legal «3km necessary or


expediert foe the procvrmg. perf«viin& retention and protection of IV


Contract Area, aivi in defending or prosecating lawsaits iivolvmg the


Cun tract Area or any third pari? claim oriMng oat or the P«r*>tcum Operation,


under the Contract, or sums paid in respect of legal services necessary for the


prutcutlcn of Use Joint Imcioi of the GOVERNMENT nod the


CONTRACTOR shall he recoverable. SueJt expenditures shall include


attorney's fees, court costs, arbitration costs, costs of investigation, uiui


procurement of evidence and amount* paid in serfcnvni or satisfaction of any


such litigation and claims provided micIi costs arc not covered elsewhere in the


Amex. Where legal services are rendered in such mailers by salaried or


regularly retained lawyers of tic CONTRACTOR

of the CONTRACTOR, such compensation shall be inebded instead under


Paragraph 3.1.2 or 3.1 4(b) as applicable.


3.1.12 Claims


Expenditures nuidc in the settlement or satisfaction of any loss, claim, damage,


judgement or other expense arising out of or relating to Petroleum Operations,


except ns may otherwise be covered elsewhere in the Annex.











All cose and expenses irvurred by the CONTRACTOR u the traimag ol ts


employees encased in Petroleum Opmlina under the Contract











Thz costs described in Paragraph 2J.I and the charge described in Paragraph


2.12.














incurred by He








3.1.16








Other reas»>nablc expenditure' not covered or deal with in the freegohg


prevision* of Paragraph 3 which are necessarily incurred by the


CONTRACTOR for the proper, ccoromicil and efficient conduct of


Petroleum Operations.














IOVIM


3.2 Credit l oder tbe f natract





The proceeds. other than I he proceeds from the uk of Petroleum received


from Petroleum Operatkns under he Contract, including the tom listed


he low dull be credi'ed to the Account under thr Cortract Gw I hr purposes of


Article 25 of tic Co#trad:


3.2.1 The proceeds of am insurance or claim or judicial awards in coancction with


Petroleum Operation under the Contract or any assets chirpnl to the


Accounts under the Contract where such operations or assets hast been


insured nnd the premia chirped to the Account* under the Contra* t


3.3.2 I cgal costs chirped to the uccounU under Paragraph ^ I 11 and tuhs

recovered hy the CONTRACTOR





3,2.3 Revenue received from third parlies for the use of property or assets the um


of which has been charged to the Accounts under the Contract.





3.2.4 Any adjustment received by the CONTRACTOR from the


sufplicrymanalacurers cr their agcrl* in connection with a defective material


the cost of which woa previously (horned by the CONTRACTOR to the


Accounts under the ContracL





3.2.5 Rentals, refunds, including refunds of taxes paid, or other credits received hy


the CONTRACTOR which apply to any iliaigc whbh Im. been made to the


Accounts under the Contract, hut excluding any award granted to the


« om RACT OR under arbitration or cxjiert proceedings.


3J.6 COR* origmaly charged to the Account* unda the Contract for materials


suHesjuently exported from the Kirdistta Refion w traesferred to another


i2J Proceeds Bor# the sale or exchange by the CONTRACTOR of plant ur


facilities used in Petroleum Operafuns Ike ac^uisitmn ccsls of which ha*


been charged to the AoowU under tie t uttia














3.2.9 Pnxeesh derived from tie ak. exchange lease, hire, truster or disposal in


any meaner whatsoever of aay other item tf* costs of which have been





3 J Duplication of Charges «ad ( rrdit.


Nexwithtfandng any provision » the contrary m the AcxxMrtag Precedure.


there shall be no duplication of charges or credits lo the Accowts uadcr the


Contract











lOfc'IM


 PARAGRAPH 4-COSTS AND EXPENSES NOT TO BF. TREATED AS


RECOVERABLE





The following costs «nd expenditures shall no* be included in the Petroleum Costs


recoverable umlcr Article 25:


4.1. Taxes os income or profit pwd to any GOVERNMENT auCSnnty except


taws aid dutkrs that may be iocludtd in the ccsts of material and cqjipmcnt


purchased for die Petroleum Operation?;


4i Any paymcol made to the GOVERNMENT by reason of the failure of the


CONTRACTOR to fulfil its Minimum Exploration Obligations in roped of


the relevant Sab-Period trader the Contract


43. The cos* of any letter of guarantee, if any. required under the Cortract;


4.4 The bon jscs set out in Article 32 of tfve Ccnlract;


43. Costs of marketing or transportation of Petroleum beyond the Delivery Pont


(excluding Gas Mattering Costs):


4.6. Attorney's fees and other costs of proceedings in connection * th arbitral) >n


under Article 42 of the Contract or inlematknally recognised independent


expert detemunatioo as provided in 'he Contract or this Accounting


Pnccduic;


4.7 Any interests, fees, costs and expenses paid by the CONTRACTOR for loans


and any other form of financing or advances for the financiag of the Pttrolcun


Costs cracred into by the CONTRACTOR with third parties or Affiliated


Companies;


4.8 Any accounting pnivision for depreciation and/or amortisahon. excluding aay


adjustments in value pui.suaiit to Partigtupli 3.1.8,


4.V DivlticuJs, repay ment of equity oi repayment of intercompany loans.


4.10 Fines and penalties im|>ox:«J aider l.aw.





PARAGRAPH 3 - RECORDS AND VALUATION OF ASSETS


5.1 Record*


The CONTRACTOR shall maintain detailed records of property in use for


Petroleum Operations under the Contract in accordance with prudent


international petroleum industry practice for cxploraticn and production


activities.





5.2 Inventories


Invent ores of property in ua* in Petroleum Operations shall be taken at


reasonaNc intervals but ■ lead one* a year with respect to movable tacts aad





107/164


 once every three (3) yenrv with mpert t<* immovable assets. The


CONTRACTOR shall give the GOVERNMENT at least thirty (30) days


written notice of its intention Intake such Inventory and the GOVERNMENT


shall have the right to be represented when such Inventory is taken.


Failure of the GOVERNMENT (<• be represented at an inventory shall bind


the GOVERNMENT to ocoopl the inventory taken hy the CONTRACTOR


the CONTRACTOR shall clearly Inform GOVERNMENT about the


principles up

CONTRACTOR shall make every effort to provide to the GOVERNMENT


a full report on such inventory within thirty (30) days of the taking of the


Inventory. When an avtlgimiciil of rights under the Contract takes place the


CONTRACTOR may. nt the request of the assignee, lukc a special inventory


provided that tt»c costs of such Inventory uiv borne by the assignee.





PARAGRAPH 6 PRODUCTION STATEMENT





6.1 Production Information


Wiihout prejudice to the rights and obligations of the Parties under Article 16


of die Contract, from the date of l int Production from die Contract Area the


CONTRACTOR shall submit n monthly production statement to the


GOVERNMENT showing lltc following Information separately for each


producing Development Area und in aggregate for the Contract Area;


6.1.1 The quuntity of Crude OU produced md saved.


6.1.2 The qually chiracisisic? of such Crude Oil produced and saved.





6.1.3 The quarthy of Nalual Gas produced and raved


6.1.4 Hie quality characteristics of scch Natural Gas produced and saved.


6.1.5 The quantities of Grade 00 nd Natml Gas used for the purposes of canyiig








6.1.6 The qumiiiics of Crude Oil and Nstiral Gas unavoidably loa.


6.1.7 The quoelilica of Natural Gas tiered aid vented.





6.1.1 The size of Petroleum stocks held »■ the begin*.ng of the calendar Month m


question.


6.1.9 The size of Petroleum flocks held si be end of the calendar Month in


questkn.


6.1.10 The quariitics of Natural Gms rrinjccied mm the lUffivoir.


6.1.11 In respect of the Contract Awa as a whole, the quanMiev of Petroleum


transferred at die Measurement Poirt. All quantities show, in this Statement








108 164











WU -





shall he expressed in both volumetric tcrmMBaiTcIs of oil wd cubic meters of


gas) and in weight (metric tonnes).


6.2 Submission of Production Statement


The Production Statement lor each calendar Month *10111 lie .submitted to the


GOVF.RNMPNT no Inter than ten (10) days alter die end of such calendar


Menth.


PARAGRAPH 7-VALUE OF PRODUCTION AND PRICING STATEMENT


7.1 Value of Productnu aud Pricing Statemeat Information


The CONTRACTOR shall for the purposes of Article 25 of the Contract,


prepare a statement providing calculations of the value of Crude Oil produced


and saved during each Ouirter


Ths “Value of ProCudkn and Priciag SuaemesT shill contain :hc fdlowiag


information:


7.1.1 I he quantities and prices realized therefor by the CONTRACTOR in respect


of ales of Neural Gas and Crude Oil delivered to third pirties made duriag


the Quancr in question.


7.1.2 The qualities and prices realized therefor by thr CONTRACTOR in respect


of ales of Natural Gas and Crude Or delivered during the Quarter in qjesticn.


other titan to Third Parties.


7.2 Sulim iasion of Value of Production and Pricing Statement


The Value of Production and Pricing Statement for each Quarter .'hall be


submitted to the GOVERNMENT not Inter than twenty-one (21) days oiler


the end of such Quarter.


PARAGRAPH 8-COST RECOVERY AND SHARE ACCOUNT


STATEMENT


8.1 Coil Recovery Statement


The CONTRACTOR shall prepare with respect to each Quarter u Cost


Rocovcry Statement containing the following informnlion:-


8.1 I Recoverable Petroleum Costs carried forward from the previous Quarter, if


any.


8.1.2 Recoverable Petroleum Costs for the Quarter in question.


8.1.3 ( redits under ihe Contract for the Quirlcr in question.


8.1.4 Total Recoverable Petroleum Costs lor ihe Quarter in question (Paragraph


8.1.1 plui Paragraph 8.1 X net of Paragraph 8.1 J ).





KWIM


8.1 5 Quantify and xaluc of Perolctrn applied to cos recovery ourvuani to Article


25 taken by the CONTRACTOR for the Quarter in qocstkn.


8.1.6 AnxHint of recoverable Petroleum Costs to be earned forward into the next


Quarter (Paragraph *14 net of Paragraph 1.1.5)


8_2. Cumnlaiivr Production Stalratrat


The CONTRACTOR thill prepare with respect to e*:h Otnrter l Curaulalive


Production Siatrmcrl cortainirg the following hforaation


8.2.1 The cumulative production petition at the end of the Quiner preceding Ac


Quincr in queOion


8 2.2 Production of Export Petroleum for tkr Quirter h queaion


824 The cumulative pmeuetko position M the end of the Quarter in questioa.


8.2.5 The ameunt of Petroleum applied to Royalty pursuant to Article 24. cost


recovery pursuant to Article 25 and Profit Petiokun pursuant to Ancle 26


taken by the GOVERNMENT and by the CONTRACTOR, respectively,


durng the Quarter ra question


8.2.6 The forecast of production and the shore of Petroleum applied to Royaky


pursuant to Article 24. o*«l rurovrry pursuant to Article 25 aid Profit Oil


pursuant to Artide 24 due to the GOVERNMENT md lo tie


CONTRACTOR, respectively, for the next succeeding Quarter.


8.3 Preparation and Submission of Coal Recovery and Cnaralarirr


Production Statements


8.3.1 Provisional Cost Recovery and Cumulative Production Statements, containing


estimated information where necessary, shall Sc submitted by the


CONTRACTOR on the last day of each Quarter for the purposes of Article


25 or the Contract.


8.3.2 rin.il quarterly Cost Recovery nnJ Cumulative Production Statements dud I bo


submitted within thirty (30) days of the end of the Quarter in question.


8.4 Annual Statement


For the purposes of Article 25 or the Contract, an Annuul Cost recovery mid


Cumulative Production Statement shall be submitted within ninety' (90) days


of the end of each Year. The Annuul Statement shall contain the categories of


intbnnaliuii listed in Paragraphs 8.1 and 8.2 for the Year in question, scpuiatid


into the Quarters of the Year in question and showing the cumulative positions


at the end of the Year in question with respect to cumulative unrecovercd


Petroleum Costs and Cumulative Production.














II0JIM


 PARAGRAPH 9-STATEMENT OPEXPENDfrilRF. AND RECEIPTS





0.1 TV CONTRACTOR Ov.ll prepare with -expect to each Quarter a Statement


of Expenditure an! Receipt1, under the Cofltmci Hie Statement will


dixtingui&h between Exploration ('.win. Guv Marketing CnKts, Development


Costt. Production Costs and Dccomm Unioning Costs und will identify major


llama of expenditure within mono entegoricn. The Statement will show the


lol lowing:


9.1.1 Actual expenditures and receipts for the (jourlcr in question.


9.1.2 Cumulative expenditure and receipts fee the budget Calendar Year in


quvntion.


9.1.3 Latent forecast cumulative expenditure* nt the Calendar Year end.


9.1.4 Variations between budget forecau and latent forecast and explanation*


thereof.





9.2 The Statement of Expenditure and Receipts of each (Quarter shall he submitted


to the GOVERNMENT no l*er than thirty (30) days after the end of vueh


Quarter.





PARAGRAPH 10 PINAL END OF-YEAR STATEMENT


The CONTRACTOR will prepare a Finul F.nd-of-YcAr ^Ul.-merit The Sutement


will contain infermatiun us provided in the Production Stutcnicm. Value of ^reduction


und Pricing Slaicmcrt. Cort Recovery and Cun-ulatisc Prcducujo Suicmcnti aad


Statement of Expenditures and Receipts fat wi3 be based on actual quantities of


Pet r\ I cun i produced and expenses inverted Fhb Statement will be used to make aay


adjustment that are rexevsiry to the payments made by the CONTRACTOR under


ibe Contract. The final Lnd-eT-Yc« Staxmert of each Calendar Year •hall be


submitted to the GOVERNMENT withic ninety (90) days of the end of such


Calendar Tear.








PARAGRAPH 11 --- AUDITS


Each such report and statement provided for ir. Paragraph 6 through 10 shall be


considered true and correct unless the GOVERNMENT >»•<> a> exception thereto


within the timeframe usd uadcr Ike process art out in Article 15 of die Contract.








PARAGRAPH 12 - ANNUAL WORK PROGRAM AND IIUDGKT


III lioch oniual Work Program and Bodget to be prepared in aceordaive with


Articles II. 12 and 14 of the Contract, it respect of Kxpbraticn Costs. Gas


Maketirg Curts. Development Costs and Prodjclk* Cost* respectively w.ll


show the following:











ill'164


11.12 (imula&sc cspcndtum lo the end of aid budget Caendar Year








11.13 A schedule sftowirv (he mu* unpofUnt individual rteim of Deveopment


Com (tf^Hfeabte) lor -id hulgn Y«r





PARAGRAPH U - CONTRACTOR ENTrTY INCOV1F. TAX


COMPUTATION


13.1 For (he purpme of Artkie 313(b) of the Contract. tic net taxabk profit* of


each CONTRACTOR I ni it y from all (he Petrokun Operatioas carried cut


uifcJer this CnMwi. iKall Sr calculated in accordance «* ith Rm Paragraph


132

















13 J Far purposes of drtemuring tke net taxabk profits cC each CONTRACTOR


13.3.1 I Ik profit and low account of *uch CONTRACTOR Entity shall be credited


with I he following.


(a) if the Royalty is paid in cash puntuitnl ti A rick 24. reu-nuci ammg





from ihc diipovtl of Royally volumes) at recordrd in such entity’ll


Accounts and detennirwd In accordance with the provisions of Artick


24;


(b) revenue* arising liuui die dispotal of any Available Pclrokum to


wfckh such entity is entitled for recovery of its Petroleum Cosit as


rcconfcd In its Accounts end determined in accord* ice with Ik


provisions of Ailkk 23;


(c) revenues from the disposal of aay Profit Petroleum to which u*'h


entity Is entitled under Ankle 26 as Is recorded in its Accounts and


determined in acoirdarcc with the provisions of Artick 26;


(d) any oilier revenues or proceeds directly corrected to die Petroleum


Openmons incluJing those arising ftom the disposal of related


Petroleum substances, or from llw trcaimcnU tforuge and transportation


of products for third parties;


(c) any cschanjc gams realised or eRher financial Income earned by such


entity in connection widi die Petroleum Operations;








II2/IM











■^T


13.3-2 ihe profit and **s Mount for such CONTRACTOR Entity dudl he iebiled


win all charges ircuncl for the purposes of the Petroleum Operations


whether ncurred iruide or outride the Kwdiclas Reg on. which charges shall


incude the following:


(a) ir addilion tc the charges specifically set forth below in this Pangraph,


al other Petroleum Cotf*. bsludiag the cosU of -upplie*. pmonwl


aad manpower expenses, and the cost of service, provided to the


CONTRACTOR in connection with the Petroleum Costs


(b) if the Royalty is pud in cash pursuant to Article 24. Royalty payments


made end as reccnied in such entity's Accaints and tfctcrmmcd n


axoidtncc with the provisions of Article 24;


(e) General and administrative expenditures rented to the Pesrolcton


Operations performed under this Contract


(d) deprecation of capital expenditure in axordincc with «hc follow irg


provisions:


(!) capital expenditures meurred by the CONTRACTOR for the


purposes of the Petroleum Operations shall tc depreciated on a


reducing balance basis


(it) the depreciation rales, which stall be applicable from the


Calendar Year during which sach capital cxpenilitircs are


incurred, or fnxn the Calendar Year during whfch the axxt>


corresponding to said capital expenditures are pu: into normal


service, whichever b later, for the first Calendar Year u


question and for ctKh subsequent (akrvlar Year, are «s


folknw:





Nature of the capital lobe Annual 4cpreenCk« Kale


depreciated








Pemanert buildings 10.O'.


Temporary buiklings 20.0V,





OfTtx and home furriture and fixture* 20.0%


Productive wclb 20.0%


Production and delivery equipment 20,0%





Drilling equipment 20.0%


Pipelines 20.0%











I HIM


 Automotive equipment 20.0%





Marine and nvialinn equipment 70.0%





All other capital tissris 70.0%








(e) Exploration Costs (which for the avoidance of (lout* include appraisal


expenditures! shall he deductible on a reducing balance basts at the


rate of 20% per annum


(0 irtcrcsl and fees paid to creditors of the CONTRACTOR, for their


actual amount;


(g) losses of Assets rt?»ulting from destruction or damage, assets which are


renounced nr ahnndorved during the year, assets which are transferred


under Article 20.2, bod debts, indemnities paid to third parties as


compensation for damage:


(b) any other costs, expenses, losses or charges dircclly related to the


Petroleum Operations, including exchange losses realised in


connection with the Petroleum Operations *s well as the bonuses


provided in Article 32. ihc Exploration Rental provided in Article 6-3.


the Production Rental provided in Article 13.10. the allocation to


training, provided in Article 23.7 and the allocation to the Environment


Fund provided In Article 239. llw vo*t> qiesilkd in Articles 23.11.


38.1 aad 3*6 ard transportation and marketing com* beyond the


fhrlivciy Potat;


(i) the ainuunt of iwn-ofl

Years, which shall be earned forward for an indefinite period until fell


scttlcnvnt of said losses or termination of this Contract;


I3.3J. the net prollt cl suck CONTRACTOR Lrtity snail be equal to nc difference


between all the amounts credited and all the amounts debited in be profit and


loss acccxmt; and


(a) it this amour* is negative n stall comiittle a loss.





(b) it the amour* is positive, it shall be grossed t*> to take accoura of the


fact that such entity's corporate income tax is being sealed oa of the


(A»VFR.NMtfVTs share ot the Prolit Petroleum n accordant: with


Article 31.2. by applying the following formula in order to provide


sach ertity's net taxable profits for corporate income tax purposes


Net Taxable Net Profit^ (100-Apotkabk Rate of Corporate Ireomc





Profits Tax >














114.164


13.4 For purposes of determinini* each CON’TRACTOR Entity's linWIity to


corporate income tax for n tax year in respect of the Petroleum Operations


earned out under this Contract, the net taxable profits (if any) for such lax year


sliflll be multiplied by the applicable rate of corporate income tax, ns provided





in Article 3l.3(o).
























































































































































115/164

















'N0S





 ki;hm:rv -ioint development agreement


























Dated Tuesday 2 October. 2007











tenveen











THE KURDISTAN REGIONAL GOVERNMENT OF IRAQ


and





HERITAGE ENERGY MIDDLE EAST LIMITED






















































































116/164


VL.








 TABLE Of CONTENTS





I DfflNmOW AND INTERPRETATION ---





1.1


1.2





2. INCORPORATION OP Hit COMPANY. FINAL DECISION TO PROCEED


AND TRANSFER OF PROJECT ASSETS----------126





2.1 Incorporation of the Company ---------------------------------------------126


Z2 FitMi Deenkn to Proceed------------12*


2-3 Transfer cf Project Aocts------------126





3 GOVERNANCE AND SCOPE OF ACTIVmiS OF THE COMPANY------------ .127





3.1


3 2


3-3


3-4


15


3.6


3.7


3.8


3.9





4. CAPITALISATION AND FI NDfNG OF DIE COMPANY __131





4.1 Initial Shirr Capital of Canpanv . -131


4.2 Increased Share Capiat -13:


4.3 Payment of Additional Capital C(Hllributioos. ...132


4.4 liirding Requirements oftbe Company......... »•«•••***«••........ 132





5. MANAGEMENT OF THE COMPANY 134





5.1 Board of Direxiare............. -..............................................................135


5-2 OfTiocn.........................


5.3 management (ommittcc. ..... _______________139





6. SHAREHOLDERS'ACTIONS **••---•* «•*••••••••••». it •• •••«•• ••••••*«••(«• »••* •••••••*•••••« ....................I4U





6. 1 CkiWral MCCtflgV .nwa44H»»MM---•■---»»---»«>»*>•••• *«»♦••»#.«»»•*•••»•••••»


6.2 Shareholder Voting.......................................................................


7. RELATIONS! IIP OF Till- SHAREHOLDERS AND I HE COMPANY...








7.1 General ------------... • «••••» ••••••• •••#** ...---143


7.2 Confltd of Interest... _______HJ


7-3 Internal Cent*........... .......,143











117/164


 X DIVIDENDS AND OTHER PAYMENTS 143





II Dividends...


1.2 Other pasmet





9 IN I'AULT-- ---144





9.1


•-2


9.3


94





W RfSTWCTTONSON TRANSFER 147





10 I • *#*»••• •• •( $ •• »••••• •••«# •••••••«« • 147


10.2 Minimum Shareholding


101 ............... ........ ■ nntM»«« 147


10.4 ..................................... ........ ■!■■■«■ i> 14®


I0.J Tnnxfrrx to AffitiaOrx.......... ......................... I 4^


10.4 Right of Fin* Refusal ................................................. I 49


10.7 -----------------------------150


101 Restricts l««md ---..................15®


10.4


10.10 RexignaiHKi of Nttninee......«... ---ISI


10.11 laklal Pubtk OflfariiaB_..«J MMtHhtlMMINII •••••■••••••* ____151


10.12 --ISI


I0.IJ ___ISI





II. ItKMOF AGR11 MINT. __ISI





-.151


n4T,


-151


-152


li WINDING UT OF TIC COMPANY 152



































W'RKSENTATIONS AND WARRANTIES





|4.| i||r fiiiiMiii ...................................................


I4J ------;»


...................................---------l?o








MUM


15. INDEMNIFICATION AND LIABILITY----- ______156





15.1 General Liability anJ Indemnity................. »•»••••••• 1 5^





15.2 Consequential Damages......





16. FORCE MAJEURE.............................. ..137





16.1 Force Majeun: Event.......................


........137


16.2 Burden of Proof..... -------157


>••••••••••••••• ••• ••••• ____137


16 J Excused Performance ..................


16.4 Other EicuseC -----158


-----158


17. MISCELLANEOUS.™.........








• r * • ■ ••••»»» pi.t.t...'.* .............. - - ------------------^


I \q


172 AmendncmlK ................... i i i i t i * . t i t r ' ivtiiiiiti t vtittiianinnAiintittiiii A % .


17.3 Waiver * • ••••••••••»•••••••••••••••• *• ••••••••• • "


174 I nt.fi* Agreement .............................................159





I7J Scvcr»Kility .....................


17* Cmfiilcitia) Inforrralion__





17 7 Public Announcements........ .......................161


17.8 Flirt Kit \wiinncis „...................... ...... - 162


17.4 A.I *V r| I..•••*.•«


17.10 W ^ ^ m » ^^ ^^ ~ ^ ^ - W m -


No Ilird Person RinhlSt*..


17.11 Currency of Puynicni......... .................................................................................. 16?


17.12


Counterparts.................


17.13 Waiver of Immunity.......... 1


17.14 Governing law...-----------





17.15 Coni lifts...... ........


17.16 Expenses................... - 1


17.17 Successors and Assigns......







































































119 164


This REFINERY JOINT DEVELOPMENT AGREEMENT (th., for a


refinery to be erected in theTaq Taq / Miron are*, is entered into the second day of October.


Ml. between:


THE KURDISTAN REGIONAL GOVERNMENT OF IRAQ (“GOVERNMENT"); and


HERITAGE ENERGY MIDDLE EAST I IMI I I I), a company organised mid doing


business under the laws of Nevis, having a registered office on the date hereof ut P.0. Box


(401. Hamilton Estate. Charlestown. Nevig ('Heritage").


RECITALS


Capitalised tcmi.i used in this Agreement, including in the reeiulil. shall luve the meanings


set out in Clause 1.1


A. The Oil and Gas Law of the Kurdistan Region - Iriuj (Uw No.


22 of 2007) applies to petroleum operations In the Kurdistan


Region, including the refining of petroleum, and authorises the


Ministry of Natural Resources ol the Kurdistan Regional


Government to regulate refinery infrastructure and to licence


petroleum operations to third parties.


B. The Shareholders ore entering into this joint development


agreement to record their agreement on certain initial matters


relating to their collaboration on the Prujeci-


C. The Shareholders wish to incorporate a joint venture company


(Ibe Company-) in t mutually acceptable, tax efficient


jurisdiction lor the purpose of developing, constructing


financing, owning and operating the Project


D. To facilitate the development of the Project through the


Company, the Shareholders mate to enter into this Agreement


(or a separate definitive shareholders' agreement on


substantially the uiw terms as this Agrwment (the


"Shareholders' Agreement *)) to set out their respective rights


and obligations in connection with the management, operations


and funding of the Company


E. The Company will be incorporated withm thirty (30) days from


the date of Cus Agreement is entered into (the Teapuy


Incorporation Dale").


F. The Shareholders acknowledge tbat the implementation and


operation of the Project will require compliance wth the


principle* and mer human* «ct out in this Agreement I be


Shareholders agree to cause the Company to participate in the


Project on the terms and condition- consistent wrth the


provisions of this Agreement and the Project Documents to


wtech it is, or will be. a party.





120/1M


 NOW | lIPKt.FOKI. In um*u]ctalk>n of the ftregoing. and fof other good and valuable


Mttsafcntton. foe receipt and wfficicacy of which are ackrowledgcd by each Shareholder,


the Shareholders agree as follow*


I. DKKINII IONS AND INTERPRETATION


l.l DtHMfitm





Unless the context of thi s Agrecmni uhcrwiw require?:


Acreptaace Notice- has foe meaning given to lhai tern in Clause 10 Afh).





'A filial*’ means in rclatkn to any Penon. any r«her N-rxnr that, directly or indirectly. IS in


control ol is controlled b>. or b under common control wife, such Person. For purposes of


more that 50 per cent of the recurkia hiving ortfirary mcing power for the dcctxn of


directors of such Pen*at or(b) Jnvt w iau» the direction of the reanayroeir and policies of


such Person wtoher by contract or otherwise


APiliaie Trmasfrr' has the meaning given to dut terra m Cause 10 5.


"AppolaMag Authority " has the mewing given Id that term in Clause 132(c).








of the Company as the


amended fnim umc to I





business |>aj” means any day (other than a Saturday, Sunday or public holiday), upon


which baiks arc permitted to be open for businevi in the Region and New York.


"Capital Expenditures* mcam expenditures incurred or to be iacurred by the ( anpaiy to





uapiirc or construct llxcd assets, plum and c»p.i|M.cni

replacements, but excluding repairs) competed ir accordance with IAS


'Capital F.ipendifarr* Badge;' marts the mruaJ bulge! for Capital I xpcaditum for each


yea foiling on or attar the Comnereal Operate «> Itam to be prepared by th* Oiid Financial


Officer and approved by the Shareholders


TaaamW Operat»a Dale* means, with respect to (he Faciity. foe dare on which such














the purpnes cf. and in accordance with, fob Ag-cemtm











"Construction Plume'* means the |x-iiod from the Final Decision in Proceed Date until thr


Cemmereial Operation I talc








121/164


"Conduction Phase lludgct" means the budget itemizing all carte w*l expenses (including


Capital Expenditures) anticipated to be incurred by the Corrpony in connection with activities


•chcdulcd » occur during die ConsUuctiun Mum: and indiuitiiig the item or type of


expenditures, the purpose thereof aal the timing of such expenditures, as agreed by the


Shareholders and as such budget may be modified from time to time by resolution ol the


Shareholders in accordance with Clause 6.2B>Xv),


'funtlruction Phase Finineine Plan" menas die plan for the sources and amounts of


financing for tbo costs und expenses referred to in the Construction Plane Budget, including a


timctnblo for the um>« of fund#, ns such financing plan may he iivxlifirtl from time to time by


resolution of the Shareholders in accordance with Clause 6.2(hXv).


'Continuing Shareholders" has the meaning given to dial term in Clouse 10.4(a).


’Defaulting Shareholder" means a Shareholder who defaults in its obligations and fails to


remedy suefi default, as more particularly described in Clou* 9.1.


Development lludgct” means the budget for costs and expenses of developing the Piojcxi


during the Development Phase as such budget may he modified from time to time by


resolution of the Shareholders in accordance with Clouse 6.2(bXv).


Development Cost*' means costs and expenses within the Development Budge


’Development Period Fimmeiag Plan” means the plan far th: financing of fac ex sis aad


expenses referred lo m the Develop™ enJ Budget by the SharrK>lderv including a timetable


far the use of funds, a> such financing plan may be nudified from time to fane by. resoluti on


of die Shareholders in accordance with Claw 62(bX*g


' l>rt clupnu-tii Phase* means lie penud fiwoi lie dau of cxccrtion of ihb Agreement until


the Final IXxision lo Proceed Dote.


Dispute” has the meaning given to that term in Clause 13.1.


'Facility" means the commcrciul oil refinery to he developed in the Taq Taq / Miran area in


the Region


'Fair Martel Value* of any Shares on any particular date means the fair rmriet value ol


n»ch Shares at the date of a proposed transfer pursuant to Clause 10 as determined b> m


^dependent thirl party appraiser with the requisite experience and qualifications in dccidng


such matters as selected by the Offering Shareholder (wh.w free, costs and expenses in


connection with such determination shall be paid by the Offering Shareholder).


’Final Decision to Proceed Dale" means the date «i which each of the conditions set out


below (as the same may he modified or supplemented from time to time by resolution of die


Shareholders in accordance with Clouse 6.2(b)) has been satisfied:


(a) the due incorporation of the Company in accordance with this Agreement;


(b) agreement by the Parties on the Development Budget . the Development


Period Financing Plan, the Construction Phase Budget and the Construction


Phase Finarring Plan:





122/104


(C) ibc issuance by ihc Guvcmmcni of a report on the basic design and


engineering work* (incorporating the form of (he call for lender to be


submittal in raped ol (he design and construction o! the facility id


prospective con motion and providing • price estimate for (he capital cost of


the Facility);


(d) a feasibility stud) has been carried out by Heritage or. ui its option, an


indepereteni third party which corfinm (hut the costs of commissioning and


implementing the Project and achieve tic Commercial Operation Ihitc will not


exceed U.S.$ MO million;


(C) u full scoping Mudy bus been uiukilakcn by independent consultants


incorporating details of the guaranteed feedstock, operations, off-take


agreements und tinancinl viability ol the facility; and


(0 purchase arrangements lor oil and gas to be processed at the facility arc n


place and in full force and efleet


"Kinaace Committee' has the mean in/ given to that term in Clause 5 J(aXii).


"Fore* Majrare Event" ha* the meaning given In that term in Clause 16.1.


"UNP Implicit Price Deflator" meant ihc (iron National Product Implicit l*rice Defmtor as


published from time to lime in Ihc United Slates Department of Commerce lluicau of


Economic Analysis publication entitled "Survey of Current Buvneos"; provided lhal if such


(irosa National Product Implicit Price Deflator a* published front time to time is unavailable,


the OKI* Implicit Price Deflator shall mean on index, in substance simiar thereto. selected by


*«l----1- I t---


UbC MumlUKlCn.














political


agency, authority, board, bircau.


of the Ki





"IAS" means the intcmahoaal accounting standards u issued arvl updated from lima U> line


by the International Accounting Standards Committee.


Inflated' mean*, as of any date, with respect to any amount of U.S. Dollars (which omouit


'hall, for the purposes of this definition. be deemed to be expressed In Jaiuary I. 20t7 VS.


Dollars). such amount ad)listed » reflect changes in the GNP Implicit Pnee Urflaior from


January I. 2007 to such date

















123/164


"Law" 11 teams llie name of llic applicable legislation which governs iIk> Company’s


incorporation, us amended from time to time or any statutory rc-cnoctincnt thereof, and


where \cr the context requires, any statutory rules framed thereunder.


"Management C ommittee' has the meaning given to that term in ( louse 5J(a)(il.


"Nominee- means any Person nominated to be a member of the Board ol Directors of th:


Company in accordance with Clause 5.1.


'Offer' has the n-enning given to that term in Clouse I0.6(bi


“Offering Shareholder' tww the meanng given to that term iaCbuae 10.4(a).


“Operating Bndcrt“ mean* the inniui operating budget to he psrpaml foe each year falling


on or alter he Commercial Operation Date by the Chief Knanc al Officer and approved by


the Shareholders.


Tanks- shall mean collectively all die Parties from lime to lime party to this Agrccmcat


aad "Party- shall meat any such party


•Pmdactioi Shariog Agreement" cr PSA" mean* a definitive agreement excelled on


around live date of this Agreement by Heritage and the Oovemment which governs Or


production Uuuing arrangement between the Patties n respect of their involvement in the


Project, and to which this Agreement constitutes .Annex C.


'Project- means the development, construction, ownership, testing, ttwimssoain*.


operation, maintenance and financing (including any refinancing) of the facility and of dl


ancillary equipment or facilities related thereto.


"Project Avvefa" mcaas all rights and benefits uidcr any licenses, permits or any available


Project Document all of which arc to be legally tramfcrml lo die Company in accordance


with this Agreement.


"Project Documents" means, collectively, all material contracts and agreements relating to


the Project lo which the Company may be. cr becomes, a purty.


"Proposed Transferee Croup" has the meaning given to Out term in Clause 10.4(a).


"Region” means (he Federal Region of Kurdistan recognised by the Constitution of Iraq und


having ihr same moaning as ‘Region* in the Kurdistan Region Oil and Gas Law.


“Share" means any vesing »h-rv of the Company, including, as the cement may require, ary


voting share of the Company not yet issued.


“Shareholder Laan” meant any financial acconmodalion made available by a Shareholder


to the Company on such tonus and coadiuons (including in relation to interest rate,


repayment schedule and security) at the time such financial jcconmodation is to be provided.














124/164


 ■nytf





'Shareholder*' Agreement" has ihc meaning asrnbeti to H in Recital C io tus Agx««aeiii


“Shareholding Interest” means, in respect of any Person Irom lime lo time, the proportion


that the number of thut Person's Shares bears to the number of all issued Shores, as adjusted


in accordance with this Agreement from time to time Initially, the Shareholding Interest of


inch Shareholder shall he as follows:








Sharrholder Initial lnterr.it liUercit after fall coat


rrecvtry and financing


rrpayment


Ihe Government 50V. 51%


Heritage 50% d9%








~1 rchnie.l ComaitH#*- hat ihr meaning given to that Irrm in Clause S.KaKiii).


TnUMfem' has the meaning given lo I ha I term in Cl»u*r 10 (\





D.S. Dollars”, "5” and "U.S.S" moans the lawful currency of the United Xuum of America





1.2 IsmimiAiHW





Unless the context of this Agreement otlrawi.se icquitcs.





<•> words of any gender include each odw gonto.


(b) words asing the angular or plural nurrher aiw iaclude the pturri u* Miigulu


number, respectively:


(c)


references tc a "Perso#" include a reference to any


patnenhip. joint .omre. trust, aay other le$al Person and any Govcrancnul




ary rcurcivc lo any Person in any capacity indole* a rrfermcr lo it*


permitted successors aid assigns in arch capacty aad. ir the case of aay


GorctnncoUl Ajhonty, any Pence wccccmg lo its Aasctioaa aad


(c)


tit terms "bereor. 'herein’, ‘hfretoy’. 'hereto' and similar words refer lo





this entire Agreement and not any particular Clause of oilier suMIVlMons of


this Agreement;





(f) references to 'Clause0 arc to such subdivisions contained in this Agreement;





(g> the words 'include" and "including' shall be deemed to he followed by


“without limitation' or 'but not limited to' whether or not they are followed


b; such phrases or words of like import;





125/IM


(h> references U. any statue or s*«t*or> provision shall he comtrurd as a


reference lo the same as it nay lave been, or may frun tine to time be,


amended. modified or re-enacted:


(i) rrfrtrtvr* to any agreement « Acumen (mcudini this \grwmcnt shall be


comtnrd at a reference to such agrccmcat or document as amended, modified


or .upfd.-mcaicd arsd in cITecl from time to time and dull include a reference


lo any document which amende modifies or supplements it. or it entered iMo.


made or given punuart to or in accordance wifi its terms;


(j) "ihU Agreement" and words or similar import shall mean this Agreement:


(k) tin* haullngs contained in thin Agreement an: inserted for convenience of


reference only and shall not affect the interpretation of this Agreement;


(l) references to "days’ shall refer to calendar days unless Husstess l>ays ore


•pacifiad; reference* to "wrek.". 'mnaths" or "years’ shall he lo calendar


weeks, months or years respectively; and


(m) all accounting terms used but net expressly defined herein shall have the


meaning* mpactively given lo them under IAS.


2. INCORPORATION OK THE COMPANY. FINAL DECISION TO PROCEED


AM) TRANSFER OF PROJECT ASSETS


2.1 iNconroKxtwN or Dir. Company


Within thirty (JO) days fiom the dale of #ic signing of this Agreement. Heritage, in


coasuliatkm with the (k»cmnvm. will incorporate the Company under the Ians of a


jursdktoo to be idenufed by the Partin as being tie oftimun chocc anethc by


The Company will be finned with corporate >hjcc«vrx appropriate for the further


operation and development of tic Project. I he Company shall be incerponued with a


capital suusttav and in a manner ©oa>i*eal with this Agreement which will optimise


tax benefits mad muimisr advene tax consequences to the Company and the Paries


As at the C ompany liwomoratun Dale ami subjoel toC'lau* 4. esc Parties will be the


2J FliAiDMnwvioPittitD


l^h of the Panic* shat use its best cnJcascun lr satisfy endt of the conditions


wlich Is Ms uMigaUxi lo Juchargc compramg the defmiticn «>f the “Fmal Decision to


Proceed Date" with the mention that the final Decision to Proceed Date shall be no


more than one huntfred aad fifty <154) days Dura the date of this hpeement


2J I kaiwd.ii tar I’mi >.t « i Assets


Within teven (7) day* fism the Final Devaion to Proceed Dale, die Government dial!


compkte the legal transfer of the Pri ject Asset* lo the Company








126/IM


3. CiOVKRNANCE AND SCOPE OF ACTIVITIES OF THE COMPANY


J-l Gfl'llN.MI or TMT COMPANY


Follmint execution of this Agreement aid fa the term hereof the Part** Ml


conply. and * all times act consiscntly with. the lenm and pnntolom of Bu>


Agreemcat and ihc Shareh.ldcn shall act to cans: the Company to comply. «d ai all


limes ad comment>> with. the tenra and provision- ol Uis Agreement Withjut


iimeing ihc fentont each **areholder shall sole and lake all after necessary


actum to ensure dm the By-Laws do no* con Ok* witj ihc pnmaons ol ton


AgrrrtnrM and that the provnkms af this Apeement arc complied with by aach


Shareholder and ihc v ompmy.


3.2 BUSINKK Ol Jilt COMPAW


(a) The business of (he Company shall be to implement ihc Pn>,cct. incbding by


hi entry into nml performance of. all Project Documents. Ihc Company shall


(subsequent to the transfer of such assets lo Ihc Company) have all nghl. title


and interest in the Pmjerl Assets and the Facility.


(b) The Cenpany shall (if irquinrd) erter into, anj perfcwm as obligations under,


any financing documents, as borrower fa the purposes of the Project


(c) Ihc Company nuy generally engage in any activity unil cndeuvair in the


pursuit and in cnnhwinHy with the objectives, activities and purposes


mentioned i« the two preceding pamgraphs anJ to condiKt its actisites fa its


own account or in cof^unctioa with other Persons, all m sach manner and form


at may be required in accordance with th: By-Laws.


33 M»s*umsrorCoMron





(a)





Th: Company ard operated in with setmd


shall hr managed and u


•f the Preset mall be













^A*lS OandlSrS ttoSrss probity and





business ethics, and die Tactics shall lake all reasonable action within rhea power that


is necessary or desirable lo ensure ctenpliance with this C lause 3.3(b) Each Tarty


stall detenu, mdornlfy Hid held the olho Partes hamtlaae for *> breach by rt of the














127/IM


 (c) Business Principles Policy


ITk Confwny shall establish a business principles policy which shall lake ialo


account the business prim ates observed by the Shareholders and icikvi ihc icmu «hI


conditions of this Agreement.


3.4 (iOVERNMKNTAL AlTBOftUATIONS


Immediately upon ih: exccutum of th* Agreement, or as sewn as reaaoaabty practaal


thereafter. ihc Parties shall lake the follow tag actions.


(a) Apply for each Governmental Authorisation required or dcababk to enable ihc


transfer of the Project Assets l> the Company.


(b) Each Party shall obtain all corporate approvals and Governmental


Authorisation required •* desirable lor entering into and performing this


Agreement.


(c) Each Party shall apply for and obtain an; requred approvals f« such Party to


make the investments ufdcr this Agreement.


(d) Each Party shall notify the other lliat it hus otxaliKd die required approval*


slated in thisCtausc 3.4


3.4 Ac rorvriNC Mattus and financing Plan


la) Accounting Policy


(i) The mounts fir the Ctaw *al' * P^mcC m axordancc with


IAS and. to the cttcri retired by appticaHc taw. the jurisficrio* of


incorporat on of the Compaiy (if appl cable u in each ease consistently


applied and auJited by a lirm ol registered public atcuutuim of


internal ioral rcpile appointed by the Shareholder*


fii) All hooks and moats of tie Cempary shaJ be kept ■ fcnghsh ard in


U.S. Dollars


(iii) At any lime, any Sliaicholder may require by giving reasonable written


notice an audit of the Company's accounts by (haI Shareholder's


audkors. which audit dull be carried out M the cost of such


Shareholder.




The financial year of the Conpany shall commence on January I of each ycai and


shall enJ on the foBowir^ December 31.


(c) Rudgcts/Fiiumcing Plan


(i) As soon as reasonably practicable following 4tc cuxutkm of this


Agreement, the Parlies shall agree the fkvelopmcnt Budget the








128/164








Ifu





Development Period Financing Plan, the Construction Phase Budget


jnd lhe ConitrucUm Phase I inane mg Plan.


(ii) The Shareholders shall caus: the thief Financial Officer u> prepare


and submit to the Shareholders for approval not later than 60 days


before the Commercial Operation Date: (i) an annual Capital


fxperaJitures Budget: and (ii) an annual Operating Budget, vvhich


annua.1 Operating Budget shall include tfce fiolbwing:


(A) an estimate of the working capital requirements of the


Company;


(II) an estimate of rroposed maintenance expenditure Including the


item or type of expenditure, the necessity therefore araJ the tine


of sach openddure:


(O an estimate of proposed expenses of operating the. including


the item or type of expenditure, the purpose thereof and the


liming of such expenditure;


(D) a projected deoiled profit and less account:


(F) a review of the projected business: and


(F) a summary of business objectives


3.6 Dl'IRIKI TIONOF IMIIKMAIION


(»> Rich Party (through its appointed representative) shall at all reasonable times


during normal business hours at the place where the relevant books and


records are IcpC have nghts of aacv> la all books and records relared to the


Compaiy and the Project la addition. cnch Party diall have the nghtto reek


put) iavolved in tfsat aipect (including third party contractors and suppliers).


(b) With.*»t prejudicing the generality of the preccdng paragraph, the





(>) cnxure thre iSr Bored cf Directors provides all budgeting and


accounting in format kn that a Shareholder may reasonably request;


(ii) cause the Chief I mancial OfTree* to ensure tie pmmpt preparation and


prowkm of the following nfonaation to the Board of Directors and to





(A) uiuudital quretcrly and audited annual financial stafcmcnts of


the Company :

















129/164


 (C) a report of any iwlual it anticipated Begragate expenditure*. h)


the Company during u period that exceed the aggregate budget


expenditure-; for such periods by S % in the nugrepite or more


than 10% for any particular item;


(D) any ariicipaicd deviation*. fn>m the estimate* set forth in the


Development Budget, die Construction Phase Budget or any


annual Operating Budget or Capital Fxpenditures Budget of the


amounts and liming of fundi, tluil will be required with respect


to the agreed expenditures; and


(E) copies of all documentation provided to any lenders to the





Project,


(iir> cause die general manager to cn.-ure the prompt preparation and


provision to the Board of Directors and to each Shareholder copies of


all reports or oilier material information (both in Fngliah) provided to


the Company;


(iv) cause the project manager to ensure the prompt preparation and


provision of tbc following information to die Board of Directors and to


each SharcholiJcr.


(A) quarterly and annual construction and operating reports of the


Company.


(B) a report of any unexpected occurrence which will, or is likely


to, materially affect the construction or eperaton of the Project


and


(Q copies of all reputs or ocher material laforuuikun provided lo


cr by ck Ccmvtniction Contractor or any other major contractor


retained for the pcrposcs of the Project.


(c) I he Parties shall cause the t unjuny to jse ns reasonabc endeavours tc


ensue tha all material agreements with third party contractors aad suppliers


in rclatior to the Ciwnpany or the Pioiecl contain iniormaaon rghts which


mirror the provisions of Clause 16(a).





3." MUUNCK


The Company shall obtain ard ma main insurance o cover its assets and labilites for





toe benefit of itself arvl of toe MarehoMers al competitive rates at all tanes during


constructior and operational phases in accordance with appicablc laws. rules and


reguhtkms and with good interratioful oil and gas isdustry practice fix Mmilar


facilities ard acivrfics provided suet insurance is available in the marirt on


Such rauranccs shall be of the type ard for amotnts in line with the Shareholders





requirements to tbc extent they arc available on the commercial market oe reasonable








130/164











\0U


If'








All inuirantc shall he sibscrbed:


ia) in accordance with th: Region's laws. rules and regulaton*:


ib» with rcpuablc nsurcr* and reinsurers havitg a Truncal Mrcn«th satisfactory


in al respects to the Shareholders; and


|cl in U.S.S. mless the Shareholders otherwise Jclemine.


34 EMfLOVtKVSrCOWWEM 0» PERSONNEL


(a) The Company shall employ- such number cf individuals, having *tc requisite


experience and skills, a% 'lull be necessary for the purposes of the ProjecL


lb) The Shaft holders shill be entitled to second to the Company a number of


senior managenent pcrxomel ia proportioo to their respective Shareholding


Interests IHe Sharehnldcn shall second personnel from its own organsatioe


to tie Company on the Company’s written request to provide suck personnel


If Ihr Company determines hy resoltfion of die Shareholders in accordance


w ith Clause 63(b) that any pcn.mncl so seconded is not sukable for the type


of work lo he perforrwd. r may rrquoe I hr relevant Sharrh<>ldcr to withdraw


and replace such peronncl or to take such «ttps as the Board of Directors may


decn neevuary The detailed temw and coral it inr« for vcondmmt of


personnel shall be agreed between the Company otd ereh of the Slarehtldcrs


34 Promotion or me Proji c i


(a) Each Party shall use its reasonable endeavours to develop, implement and


maintain die Project m accordance with good and prudent international oil and


gas industry practice


(b) Each Party shill tale reasonable measures to procure tlut the Coopany.


without undue delay, enters into the Project Document on termc acceptable to


the Company.


ic) Each Party shall famish technical assistance to he Compuiy

Company's request oad the Party’s agreement to provide such assstoncc- The


Partes shill caase the Company to request aechnial assistant frtm the Party


whkh in the Ccnipony’s opinion has the bess niitiblc resources fc* the ask in


question. The detailed terns and condition, for tcchncal atsistaacc shall be


agreed between the Company and each of tie Parties.


4. CAPITALISATION AND FUNDING OF THE COMPANY


4.1 ImiialSH-UU. Capital at-CoMrany


The *karc capital of tb* Company shall initially be the minimun required by lh= law*


of the juris!ictkn of incorporation of the Compmy. Each Share will entitle the


bolder thereof to one »ute each in each noler incscntcd to ire St or tinklers of the


Company, ind each Siiare will catitle each Shareholder to siare equally wrtk each


other in the profits of the Company. The Inkling of Sure' dull be evidenced by





131/164


 share cerUfcalca of the Cooipaiy. Each Shareholder *h»l be allotud one-half of ihe


issued Shares.





4.2 Increased Shirk Capital


Phe share capital of the Company shall be increased to tie equivalent in the currency


of the jurisdiction of incorporaaon of the Company af U S S 40 million lhc entire*


of the aforesaid share captal shall be subscribed for by Hen tape but each Shareholder


shall be llloaed oac-hrf of the nrtditnnal issued Shares. The amxmt of the


contribute shill always b* such that »len thr convrrwon h.-twem II S Dollars and


the cvuracy of the janadciion of ircoeperaboo of the C .mpoey is nade. the number


of Share* to be issued to each Shareholder will be a whole number


4J PAYMEVT OR' ADDITIONAL C.'APfTAL C’O.' I Kit* IIOHN


Following the date of the increase in the Companys share capital (as set out in Clause


4 2 above), the further costs of the Project to a:h»cvr the Commercial Operation Dare


shall be met as follows:


(a) by Heritage in tie form of a Sharchr Idcr Loan, paid in iratalmfnts ap


to II S Sion million *> cower the ongoing Project costs: and


(5) thereafter, by each Shareholder prt> n*a to their SharehoUing inters


and is the form of a Shareholder Lorn by such means as mall be fixed


by lhc unanimous approval of lhc Board of Directors and the


Shareholders.


4.4 FUNDING RKQtllDKMKNTH OP t HR COMPANY


(a) Funding PoR-Coremorcial Operation Date


I he Shareholders ajrec hnt the cods associated with the Project subsequent to the


Commercial Operation Dale shall he met with the profits earned by the Company


renulling from iu involvement in lhc Project, to ihe extent that such profits shall he


available for the lawful use of the Company.


(b) Bank Accounts and Procedures


As soon as practicable alter the Company Incorporation Date. Ihc Shareholders shall


ensure llial die ('oiii|>uii) establishes the procedures, bank accounts (which shall be


located in a jurisdiction to he agreed upon by the Shareholders) md other facilities


necessary for it to receive the funding for the Company in connection with the Project


and disburse funds far Ihe purposes of the Project.























132/164


 tc) Noo-Pa>r*cni of the Fundis* Rcquircncm far the Company


Where a shareholder d*» not pay any of the Company'* funding requirements by the


due date therefor in accordance with any funding make received in the manner


.IrwriYd ia Chare 4.4(e). such Shareholder shal be in defiult and subject to the


pntvittons of Clause 9.


id) Shareholder Ixwns





Other than as provided far in tois Clause 4. the Company dull na mew any


^fuuTa accordance wkh Clamc 62(b) that the Conpany s fandm^wnment.


n eorarrtinn wrh the Project are lo hr met by sad. leans. All *fcarctuldrr Loam


dull be made or an uteres free basis and “hall Fe pursuant to a Shareholder Loaa


•grrvatenl and »iaM tgrerd to in wiling by the Crenpary and


approved before execution thereof by all of d* Sharehokerx.




I l»c Shareholders shall cause the Chief financial Officer to give cadi Shareholder not


Imu. than 60 Business Days notice prior to the date on which any funds are required hy


the Company, and any such notice shall specify:

•baolvto discretion as to how to meet such funding obligation*; ami (ii) the dale upon


which such funding obligations are due to be |uid by the relevant Shareholder.


|0 lhiid P*ry Financing


In relation to third party financing for the Project, ai and when required, tbc Company


dull .sc its best endeavour.to arrange fee bad ponibla fmoming pan for the Projea





mdnukinp sbnl be pwidaM^ each SharehoWer on a pv rum and ocveml bub.





Any Shareholder can directh or though an Affifiae provide toird jarty fiiuncng far


.he PtDfcct prtn tied the peovttkn of such financing itoc. rw jcxpanlbc mboa


terms and condibons ao lest favourable lo toe Compary dun any other third party


financing





(g) Noo-Kecourxc Obligations


the rartcj shall uve mwmNc endeavours us ensure iluu all Project (X*. uncut*


under which the Company shall incur aay inJcbtcJncw for borrowed money


.including Shareholder Loaas) or the drlcrrol purchase price of pepert) (other tfu»


trade payaNcs ard uMgatkiH for the deferred purchase price of property incirrcd ia


the ordinary course of msmess) shall peov.de specdkally that such obligation shall be


recotrac orfy lo the assets cf the Company, as the care requires, and non-raxursc at


extent pcmiticd yy the applcabtehw. toe SharehoUm and tbc.r rmpectire AIT. lures


shall have ao pcnooal Habilky for the obligations and habdit.es of thr Company,


including arty indebtedness of tte Can par- for bnrrrwcd money or toe deferred


purchase price of property. is addbon.no Skarrhclder





135 164








\




(i) no:d provide uny financial accommodation to the Company oilier than


as provided in this Agreement; or


(ii) dull he required to |uumntoe, or provide uny other loon ol'


undertaking in <»ip|xirt of. the obligations of the Company from lime to


time.







S’othiag in *is Agreement b intewted. oof stall rt be coasmicd. to amit the aMity of


*ny Shareholder to finance its jiirtkipolion in the Cenipam in any manner such


Shareholder sees fit (subject to the resrictkns on assigning its Stares cuntaricd ia


*is Agreenent ind tattler ippliaihlr iaw). provtied that such fisanriag dull nrt


•equire the provision of security or undertakings by. or rtcoine to the Company ct


(he other St*reh<4der»


to Issuance of Shares





(0 lowing die IVvelopment Phase, no Shares shall he isoied other ttwn at


provided by Clause 4.1.


(ii) Shares shall not be issued other than in accordance win dm


A jrremml and ihe By-Lawc


V| ANACEVtCNT OF THE COMPANY





Board of DnarroRs





(a) Composifcon ard Flection »f Boird of Directors


With cfTcci from the Company Incorporation Dare, th: Boird of Directors of the


Company dial I consist of four members, such members are to he elected *r upturned.


Hie initial Board of Dirrrhrs shall comprise two individuals nominated by Heritage


and two individuals nominnted by the ( kvemment.





|h) Management by Board of Directors


Subject to Clauses 5.2 and 5.3. the management of the Company shall, in accordance


with ihe By-Law*. l\c vested In the Board of Directors, except foe the rights of


Shareholders exclusively reserved to Shareholders as expressly set out in this


Agreement and the Law. To the extent that mxy twines* (me lading hut mt limited to


Jee irons, jropc**iv appointment! and jetioes) is to be transarted h conacctkm with


(he Project by th* Board of Director* in advarce of the Company lr«orp.ratior Date,


such business shall be transacted by be Management Committee (os described ta


Clause 5.3) to be agreed by the Sharettokkr? in good frith, aid any reference to the


•Board of Directors" ia this Agreement in such a context shall be deemed to mean the


Management Cnominee.

















134/1W


5.! OtTKUK





la) Charman


(i) Th: first chairman of ihe Board of Directors shall be nomiiated by the


Gcvemncnt. and thereafter the afpomenent of the chairman shat


rotate between the Shareholders cn every anniversary of the daw


hereof


(ii) The duties of the chairman shalL with si the guidriines and limits


established b> the Board of Dhectorv incLide:


(A) ree-'idns o'er rrcctmzs of the 3oard of Directors acd the


general meeting of the Shareholder.:


(B) calling meetings of th: Board of Directors as ard when he


deems it neerssary: and


(O nakin* vudi public aanoureremeats. * ma> be required tn


replicable liw. on behalf of nc Canpany.


lb) General Manager





(i) Heritage shall have vole discretion to appoint a general mirager to be


the principal administrative nntl executive officer of the Crrapmy. The


general manager shall report in English to the Board of Directors oo a


quarterly hash (or at such Intervals w may he otherwise derermiaed by


the Board of Directors) and comply with all decisions and Cirectkms of


the Board of Directors. The general manager shall have surh authority


os is delegated to him by the Btuird of Directors.


(ii) The general raanagrr shall be -espoasibie for the administration of the


CctDjwun’ oo a day Unby basis wiihin tihe pofclo laid (bun by the


Ik anl of Directors in respect of the following:


(A) representing the Company with respect to ill it* rights and





(Hi nfonring the Chairmaa and the Viinagcmcnl Committee of the


rdcvaat da* to thy activities and decisions in relation to the


Company’s operations:


(O carrying out or having carried out the decisions of the Heard o'*


Directors;


(D) signing documents refating to the Company's operations as


authorised by the Board ofDraury


(Cl preparing the wort, programne for the Project and enmrag the


rnplencnt&ion thereof after approval b> the Boon) of


Directors, and lie Shueboders in «u:ordancc with Clause


6-2




135/164


 (FI uxwtinaiiiK during the CcasJniction Phase with the project


manager to ensure the efficient aid timely realisation of the


Projects:


(Cil ensuring that the Facility is operated and maintained wifely,


reliably, efficiently, economralh and ir accordance with good


/ind pmilenl operating practices:





(lit determining the level of spare parts, chemicals and other stores


olid equipment to be maintained by Company;


(I) making recommendations to the Board of Directors regarding


improvements, additions and alterations tfl the Facility:


(J) insuring thil the Company complies with its operational


responsibilities under any agreement relating to the use of the


Facility;


(K) Mihmining. as requested by the Board of Director, development


plans for approval by the Board of Directors covering the


requirement* of the Company for personnel and I hr


qualifications and numbers of such personnel;


(L| ‘electing and employing, in accordance with the recruitment


policies approved by the Board of Directors, all n«c*viar>


personnel;


(M) preparing recommendations to the Board of DirccUrs on


mnttcri relating to personnel, irvrludirg remuneration, othc-


condilons of service, career dcvclopmcrt and training;





(N) ensuring that all the books and record* of the Company arc


p^^edy kepi;


(O) ensuring that the Company obtaics adequate insurance cover,





as required by the Board of Directors and in accordance w ith





(I*) obtain ng all Governmental \uthcrisotkwtt a-vociatcd w ith the


implementation of tlie Project m;ludirg release of land and


lights of way upon which the Futility is located, ami


(Q) ensuring tbei the Company obtoim unrestricted rights of use ir


respect of and appropriate parcel or parcels of land convenient


h* the construction of ihc Facility and Uiai die Facility shall be


timely and properly cmstnictcd. as required by the Board of


Directors.


(lii) Unless otherwise agreed by the StmreluiUkrx the gencml manager





shall serve for u minimum term of 3 years and a maximum term of 5


years or. II later, the date on which the Herbage Shareholder Loan


(advanced pursuant to Clause 4.3(l)) is repaid in full.





136/164











ml.





(c) Chief Flnanclnl Officer


(i) I Icrltagc shall hove sole discretion lo appoint a Chief Finunciiil OITiccr


lo he the principal financial officer of the Company, fhc Chief


Financial Officer (hall report to the general manager. The Chief


Financial Officer shull hive, such authority as shall be delegated to


him hy the Beard nf Director*.


(ii) rhp Chief Fiiumclal Officer shall:


(A) prepare the annual Capital Expenditures Budect and the annual


Operating Budget and ensure the implementation thereof alkf


approval by the Board <>r Directors and the Shareholders In


accordance with Clause 6.2(b).


(B) prepare and distribute to the Board of Directors «nd lo each


Shareholder the information referred to in Clause 1 h(h)(i');


(O tame on behalf of the Company any notice of defimlt under


Clause 9.1(a);


(D) notify each Shareholder of all advances and payments made in


connection with all financial agreements on the same rinlr ni


instructions therefore arc given und immediately notify ull


I'tulieg of nny advances or payment not made on the duo date


with reason* therefore;


(10 ensure that the Company complies with its obligations under


nny financing document;


(F) ensure that effective oort accounting aad control stems are


established and rmintaned; and


(G) qjbmr to tfr B

progress report covering expenditure to «klc and ftfcwt


expenditure for the cuncrtt financial year


(iii) Unless otherwise agreed by the Shareholder!. the Chief Financial


Officer dull verve for a minimum term of 3 years and a maaimure


tenn of 5 years or. if later, the date on which the Heritage Shareholder


Lean (advanced pursuant lo Clause 0(0) » repaid in full.





td) Project Manager


(I) Heritage shaE have sok disc'd km to appoint a prvijcvt manager u>


serve daring the Constnetior Phate (and. if applicable, thereafter!


The project manager shall be respuisibk during the design


engineering, procurcmcre. comtmctatn and commissioning phases for


the technical ispects of ae Project ind shall provide assistance Junnj


performance testing of the Facility. Ihc project manager shall repor


lo the general manager ao a qiaitcrty basn. I h: project iranogcr shad





137/164


 have such uuhorily as 'hull he delegated to him by the Board of


Directors.





(il) Th: project manager shall:


(A) inform the Technical Committee of th: relevant iloy to day





activities and decisions In relation to the execution of the


Projects;





IB) tc assisted by two deputy project managers, we of whore shall


he responsible for the Facility:


(O exercise general supervision of the services performed by the


two project teams under each of tire deputy project managers


and he responsible for the coordination of such services,


including without limitation, debating nny possible synergies,


giving approval to planning and organisation ch,,rt* prepared hy


the project teams, secondment, replacement of seconded





personnel to he assigned to the project teams;


(D) he responsible for all relationships lx-tween ihe project teams


and the Company and bo the sole oontacl within the Company


for the project teams;


(E) submit to the general manager and the Board of Directors ui


regular intervals as decided by the general manager and the


Board of Directors u written progress report on worl performed


by each project team during that period:


(F) develop aid propose to the Board of Director* after


confutation with ihe general manager! hief Financial Officer


criteria with respect to *c foBowing.


(i) fiual.salioa of die project definition tor each frujcc.





team; and


(a) periodic revision of the budget for the Facility handled


by each project cam.


(Gl develop, afccr eonsultalion with the general it onagri for


approval by the Board of Directors, co-ordtnrfing procurrroen








(HI Ocvclcp. afxr consultation with the general manager for


approval by the Board of Directors, design pcJicy ia relation tc


cnvinnmcnal issues, operations and mamtcnarce, health,


safety and fire criteria:


(I) appraise activities and progress of the Facility, establish





gukfclnes for acfctcvm* interchangeability ard Maodardivatiori


of machinery, electrical ard inarument equipment, advise





138/164








)(?u.





tpcrationr. and maintenance managers of the technical


requirements lor spare parts and all buildings necessary for


ivpcralijmN including workshops, officct and warehouses, und


devise a material coding system ami prepare operating manuals


(J) establish u co-ordinal ion and correspondence procedure


Including formaH for each project team to use :.n reporTin£


progress oa engineering, procurement. constnxtion. com


control and *ch«-ilnllng mnltcfv;


(K) .tfablkh anil supervise n systrm for scheduling the use of port


facilities by the Project if required;


(1,1 co-ordinate allocation of locally readily available resources


uich in comiroctnn material, labour nnd transport;


(M) iwnrtl, sign und adm inkier, within limit* of authority set by the


Board of Directors, contracts related to support serv ices seeded


by the Project (murine facilities, trucking, air transportation,


material handing and customs clearance, etc.);


(N) conduct periodic progress meetings with the projects teams


with the object of achieving central coordination work


progress, budgets and scheduling; and


(O) provide documentation and representation at all meetings


■c^uiicd by the Company in connection with all upaett of the


Project.


(iii) The project manager shall serve until th: completion ef the


Ccrutrctiun Phase or. if lata. uni.I the dale on which fee Ikritogc


Sharehdder loan (advarecd ponuart to Clause 4 J(i)) is repaid m full


(e) Other Officers


The «xbcr senior stafT of the Company shall be appointed by the Boat! of Direct** oa


die terms and conditions approves: by the Bond of Director*. Such senior staff vital


be responsible for operatic**, ackniniflraik*, finance and such ether areas as the


Boon) of Onctcn Shall deem appropriate. Before die Cooncrchl Operation Halt,


the Board of Director* shall appoiat a pfant manager for tf»c operations of the Facility.


S3 HAiucEMurr CoHMnra


fa) The Parties shall establish for the period up to the Company Incorporate*


Date and thereafter, if required:


(0 a an payment committee computing OIK Person nominated by cock


Pwty (tbc "Management Committee");


(ii) a finance ccramiftce coreprisng one Person nominated by each Party


(the -KUnnee Committee-): aid








139/164


(iii) a technical committee compels ng one Person nominated by each Party


(the Tcchakal Committee')


lb) Ihe Management Comm nee. the finance Committee aod the Technical


Commiitee shall each operate in l-nullxh and:


(i) perform such duties as may be delegated to it by the Panics:


(ii) have the power to designate and appoint such persons as it think);


appropriate to assist it in its duties; and


(iii) comply with all decisions nnd directions of the Panics


6. SHAREHOLDERS' ACTIONS


h.l Gknkhal Meetings


(a) General


H»c Shareholders shall have at least one general meeting of Shareholders each year,


and shall meet more frequently if required. All general meetings of Shareholders


shall he located and conducted in a manner consistent with the Hy-Laws.


(b) Observers and Advisors


Each Shareholder may invite any Person selected by it to attend a general meeting of


Shareholders as its advisor. In addition, the chairman of the Board of Directors may


invite observers from any Person, including any Construction Cortractcr. th<


Company and other third Panics, to attend ary general racctirvs of Shareholders and


to give reports and advice to the Shareholders. Each observer invited to anend a


fcncol meeting of Shareholder* dull have such wtic ration rigtls (excluding the


right to vote) as may he agreed by the Shareholders at the relevant meeting. An*


■darner may he requested Ip absent it'etf from any deliberations of a general meeting


of Sfurchoi jers. as thoaght fit by die Sharehoders at the relevant meeting


62 Sharimolmr Von*c


Resolutions of the Shareholders shall be adopted on the basis of a unanimous


moUoa!


ta) a drcisxM regarding the transfer of Shares or rights in the fVnjcct by a


Shaicboltfcr to a third pmty. t» the extent not otherwise permitted under


(V« 10 of this Agreement and the By-laws and approval of all terms,


conditions and agreenents related thereto;


lb) subject to Clause 62(c) bebw the following matters:


(i) rati Heat on of dealings of Directors cr offcers w ith the Company.


(ii) change n the numhre of Directors:


(iii) amendment of the By-Laws;





140/164


 flv) approval or any dealings or contficiual arrangements between the


Company and any Shareholder, or any Affiliate, director or officer of





' t.2(b)mvi);





(*) approval of each of the














(vO approval anti ratification af the wori for the Project:





(vii> an, chnngr 10 ttv general lequiranvcnts rrgurdmt the method of


contribution described in Clause 4 md any subsequent change lo any


method of contritnitioo which liau Scon implemented in accordance


whh this paragraph;


(viiit entry into Shareholder Loan igrecatcnls and approval of all related











(ix) the ptuvhtuo. (tale, lease, pledge or other disposition of assets of the


Company lor n value exceeding in the ngjngflle for any year. L.S.S I


million (liilUted), other ihnn un wpoelflwilly contcmpluted by or


provided in a prqject Document;


(x) adoption or implementation of a plan of merger, amalgamation,


consoliikliiHi or mxganisaiioa of tire Company wife or into *---


mity;













<


required to distribute trapped cash) of. or * Of


of shores in. the Compaiy. aid lire of a any other


ctfiity capital in the Company;





(xiiil entry tmo any Project or any thereto.


by tfi





(Xhr) of


(av) to the JM folky


I:





(xvi I afprova. of a/i Jgreemerf lo he entered into by a prepose*: Transferee


In conncviiun with its pctfutuuuicc of all of die ibligaikms of the


relevant transferring Shareholder.

















141/164














)L


%~C





 ('ocnpary. Itc apcomincni of or any charge ia Ihe Company's





(xix) the initatiun of mbiUMkm •« lUftfloa by he Company «rd an,


settlement or compromise of any arbitration or litigation to which the


Compoay b a parly;


(U) iIk Issuance of redemption of any stares in tin; Company, other equity


securities, debt or convert ibb securities. warrants or rights by the


Compary or he grant of options in >cspu.i of any such iasinmcnt or


security.


(xxi) Ihe creation or accuisitun of any rnhsiduny ®f the Company or the


making of any cquty mvedment by the company In mother Prraon.


(xxM) any prepayment under ary financing doemms rctauig to the rvjcxt


(xxiii) identifying irtemal costs of each Sfa/ch Uct is be hchafcd as pan tf


the Development Coats aid the train for repayment cf nick costs;


| xx»v) any modificajons of or supplement to the conditions to be satisfied ia


order to achieve the f inal Deerskin to Proceed Dale.


(xx») the establishment and approval of the annual Operating Budget and


ary modifications herct.


(xxri) the approval of the Company's anneal report, balance sheet pnifrt araJ


loss statement;


(xxril) the extension of the curpM&ic existence of ihe Cotnpuiy.


(xx«iii)thc olaWbhricnt of box guxklmes punuanl to wkkh the < unpany


is to operate;


(xxix) th: dectaralk* of dividends as contemplated by Clauie H.l.


(xxx) w-thdrawaJ o'seconded posoanel as contempUed by Class* 3.1; and


(xxxi) ary ocher matters from time to time identified^ -vrating^by


6-2rt»-





142/164


(c) In relatkjn lo any 'otc involving aav contract, agreement. undertaking or other


arrangement to which a Shareholder or its AfTiliaic (other thin the Company)


is a part)', such Slurclx»dcr rfuill be cxdudcd (kotn die applicable rote


lo the extent that the resolution of any business by the Shareholders is reqtared m


advance of the Company Incorporation Dae. the Shareholders shall negotiate in good


faith and agree upon any such resolutions anc use their best endeavours to reach a


commercially reasonable consensus in a timely manrer.


7. RF1.ATIONXIIIP OF THF SHAREHOLDERS AND THE COMPANY


7.1 CCMKAL


Nutting cuntai xxl it this Agreement is intended, nor shall it be construed, as erealing


a partnership, agency or trust relationship between or among the Shareholders. The


relationship of the .Shareholders to the Company shall be ih* of shareholders with


limited liability The undertakings of the Shareholders pursuint to this Agreement


shall be oa a several basis


7.2 Conflict or Interest


Except as expressly staled in this Agreement there shall be no restriction on the


freedom of am Shareholder to conduct its business as it sees St. ard no Shareholder


shall owe any fiduciary obligations, directly or indirectly, express or implied, to any


other SluL-chuUkr solely by reason of being a Shareholder under this Agreemert.


7J Internal Costs


All reasonable and proper out-of pocket costs and expenses incurred by anyone in the


Management Committee. I;irunce Committee or Technical Committee or by a


Shareholder acting cm behalf of the Company is authorised by the Board of Drcctors


ami costs and expenses from time lo time identified by the Shareholders pursuant »


Clause 6.2(b)(xxiii) shall be considered part of the Development Costs pay able in tie


first instance by the relevant Shareholders, but repayable to each such SharehoMrr by


the Company as determined by the Shareholders in accordance *ith Clauie


6.2(bXxxiiij. Internal ewta fur momgement tia»c stall be charged os agreed h:t««xn


the Shareholders. Records of any such costs and expenses shall be prepared on a


continuing boas and the Shareholders shall cause the Chief Fimixiof OPiker w


provide details thereof uf*>n requesL


8. DIVIDENDS AND OTHER PAYMENTS


8.1 Dividivbs


Each Shareholder shall cause the directors) ncminxrd by it to vote 'or the


dcclaratkn and pay ment of dividends on the Shares to the maximum exent possible


out of legally available finds. Froai time to time, the Shareholders shall coore the


Board of Directors to determine whether the Company has funds available for


distribution to the Shareholders by way of dividend, after uking into account the


Company's anticipated legal, operating, capital and any debt serv ice requirements and


the Comjeny's ability in the future to generate revenue* or procirc financing Ike





143/1*4


 Conoany shall distribute to the Shin-lvJ.kT* by way of dividend any such fund*


which the Bom! of IWrectors. subject to the approval of the Shareholders, aid


applicable law. dctcminci aie available Ui thm purple pursuant lo thi* Clause 8.1


&2 OnUMVMDtn





To Qe ecent Cut after aa> distributor* lo the Shaehokters try way of divkfcnd n


acco-dance with Clause LI. and alter hiving taken into account all other natien


referred to in Clause 8 1. there rema ns in the Company available cash for payment to


the Shareholders, the Company Owl apply such available cash in the following ways


and in die following proportions


(i) 40 per cent, of such available cash shall be paid irat to the


Sluidioldcxs by way of a pr» rat* repayment of the Shareholder


Loam; and


(ii> 60 per cent of such imulublc cash shad be paid secondly to the


Shareholders in proportion lo their Shareholding Interest





9. DEFAULT


9.1 Default








(a) Default





Where any Shareholder fails to:


(i) pay any sums due in respect of a funding notice reccivec pursuant :o


('Inure 4.4(

made such payment within 60 Business Days of the due date hr


puyiicm (“Payaicwi D»f*«h"|.oc





(it) comply wth ary nuteml obligatioe umkr this .Agreement and dues


not remedy- its breach of such material obligation within 60 Business


Days after be mg given oolke b> the Board of Directors or a


Shareholder (with a copy to the other Shareholder and the Board of


Directors, as the case requires) rcqicring such remedy if tine breach is


capable of heop remedied within that period ot if 30C fails to


dcnwmstrac to the reasonable satisfacioa of the noo-defauluog


diligently pursued. *ach breach is net remedied in my even! w-thin 60


Business Days of hcatg given sach iwtice Noa-Payoiea. DcfaulD.





(the 'Defaulting Shareholder-), the lMauling Shareholders ngfet to purtlo|wu: in


the Company through its ownership of Shares stall h: suspended as provided in


paragraph (c) below





(b) Notice of Default





The Company shall cause the gcreral manager to issue a notice of dcfaul under


Cloaw 9 KaK*) «° Defaulting Shareholder (with a copy to the other Shareholder)


on the Business Day immediately following the dale of such dcfsult; provided that


144/If*





iw.





 failuir in jtivi* miy such notice shall noi obviate nny m»ch default nor relieve any


Shareholder from nny of its obligations hereunder


(c) Suvpemkn


Dunne ■"> °T wspcmioo rftbc rights of the Detattag Shmhokfcr under tho


nMu«l:


appovntavent ^rpnsy) vuil t* enulcd »o be tountoJ in a quorum cr








respect of my miner or dcc.vioa where Shareholder apprtval is


required or soi»ght (although such ^prevntalivea shall hr rattled to


attend all general meetings of Sbarehclders dunag the perod d


•u .pension as observers);





(ii) nny director who has been elected from ilitr nomination of Detailing


Shareholder shall not be entitled m be counted in a quorum of oierclsc


inch d I lector's right to vote at nny meeting of the llonrd of Directors


and, in the ease of ihe chairman of llu? Board of Directors, shall not he


entitled to preside over the genera! meeting!, of Slutrcholdcra} and


(iii) the Defaulting Shareholder shall not be entitled to receive any


dividends or distribution*. payments or tthcr returns of any naiurc on


equity or any payment of any ainoum in napotl of Muvicliokkr Imuii.


(including payments of principal and interest thereon) tnm the


Company.


(d) Remedy





&y


to curing the default a I costs


or recovery or or recovery (IrxUJMi* In aJ


dies) that tuve been incuneJ


by the Company or the noe-de faulting by rcavn of such Jetaut have


been paid by the Detaching Shareholder to Party





92 KL.Mimr.s(» Default





(a) Default Transfer


If the Detailing Shareholder has not remedied lie default within 60 Business Days


then: (i) in the case ol a Non-Payment Drftah. Ok norwlctaalting Shareholder sha !


be entitled (by notice without reservalkm or condition, to the I)cflatting Shareholder


with a cop) to th: Board of Directors) to acquire from the Dctauttirg Shareholder the


5**o»«fcr *■! p^J^^nsfer all of its t^STJldtmSSL





Martel Value or such price as may be agreed by th: Shareholders, and (ii) in the ease


dm Payment Default the twvdctaltB* SherchoUcr shall be entiled to verve notice


and lave tramfened la it the Defaulting Shareholder * Shares as pamded above and





145/164


 he entitled 10 the PSA


the PSA for failure on F«ft tf








<*»


The I Waul* n* Shareholder doll wirfyut dea> fokm*g an>


. do aay anj all tets required to he docc h>


92(a)


obttnmg all'


execute «n\ and all ekcumc-its ard* lak; suck other aeiinnc at may he


order to effect a prune* and valid muster of I If ai:


<. ■vcm-ncrtlal Audsoraatiora arc •** ootained in a limly nanmr. the


Dcfaut.nc Shareholder dull hold te Shires in trasl for the nm-defaulting





(c) further Claims


Where o transfer of a Defaulting Shareholder's Share; occur* pervuu* to Clause





9.2(a) or 9.2(b). the Defaulting Shareholder shall have no farther rights or clainu


amki (hi* Apcencni » relation to the Company or the Pro}** and all Panic* aha!


tike a!l action necessary or desirable to effect any requite changes in the officers of


fie Cempany.


hJ) Remedy Not Exclusive





■uenefed lopecj ufa.aH> affect the avalabilty or exenhe uC any other lights and





remedies of the Company ard the non-dcfaukmg Shareholder agairst the Defnihing


Shardtohlet under this Agreement, both at law and m equity.





(c) Power or Attorney


lor the purposes of giving effect w the share transfer pruvblwu. of this CIuuk 9. d'


soon t' reasonably practicable upon execution of this Agreement. the Shareholders


shall iigicc upon a forms ol power of unomey in favour of the Chief finance Officer


ami cause lo be executed such agreed powers of attorney promptly thcrvnllcr.


9.J Continuing Oiii.icaiions


Any Shareholder which ceases to Ire a Shandiolder pursuant to any of the provisions


ol tills Clause 9 shall nevertheless remain bound by lo obligations to keep


information confidential as provided in Clause 17.6, regardless of (he fart thal it no


longer holdi Shares, lor a period of 5 years from the date upon which it ceased t> hold


Shares.


9.4 |ND* UNITY


Any Shareholder whkh becomes a Dcfauimg Sharehokkr shall indemnify the


Com piny and the non-dclnullmg Shareholder in respect of. ind bald each ol their


harmless from and against, iny aid all liabiities. losses, damage, claims, expenses.


146/164


 line* nr penalties suffered. incurred or uislained by- any of llxrm or lo which my of


hem becomes subject.


It RESTRICTIONS ON TRANSFER





Itl (iKNUAL





(a) Restrictions on Transfer


No Shareholder sAall transfer any of its Share- unless:





(0 of the By-Laws aiw








(ii) the transfer cctnplio in oil resets with the retirements of applicable


law. the Project Documents. any financing documents and the


transferring Shareholder and proposed rccipimt hove received al


necessary Governmental Authorisations fer such transfer; and





(iii) the proposed reciptent of such Shares has delivered to the Company


(At n written acknowledgement tliat the Shares to bo received by it arc


subject to this Agreement; and

substance approved by the nro-rrmslcrring Shareholder. pursuant in


Clause 6.2(a)) to lire clTcct that such recipient shall perfonn oil of the


obligation* of the Irumd'crring Shareholder in rwpect of the Share-


being transferred and that such recipient and its successors in interest


shall be bound by die terms of Ibis Agreement and my other relevant


agreement as agreed to by the Shareholders.







Any attempted transfer of Shares in volaticii of the toms cf die By-Laws ar thh





and shall not reflect or. its records any change in the registered ow-vershp of Share-


pui munt to such transfer.





10.2 Miniwtt.wSHAROJOi.MrrG





in the case of • all of its Shorn, no •h-T


any of its Shares if. as a or the


r«n tc» than 5 pc*








IC3 DtSAlLT





Subject to any transfer of the Shares of a Defaulting SJurchokJcr pursuant to Clause


*.2. cavil Sliarchuldcr agree* that It -hall nut li.nsfo any of its Share* If. at the time of


the transfer, such Shareholder is in dcfaalt under this Agreement.














147/164


10.4 Conskvi of Otjii h SjiAHNioinrus





'■> Notification to Other Shareholder*





Except for an Affiliate Transfer or • transfer from one Shareholder to another


i including pursuant to Clause 9.2), Upon any Shareholder (an '’Offering


Shareholder") wishing to transfer any Shares, the Offering Shareholder aha 11 by


notice in writing to the other Shareholder (the "Continuing Shareholder") suite it*


wish to transfer Shares, the number ol Share* proposed to he transferred and give


reasonable particulars of the proposed Transferee, including its kknnt>. bu.incw


financial standing and detail* of it* hokting .vn panics a*d material Affiliate*, if any,


(such holding companies and mat era I Affiliates. together with the proposed


transferee. being the ‘Propped I rwa.frrre Croup" t aa m«e«*ar> to perra.i ih*


Contraumg Shareholder to evaluate the Proposed Transferee Group (including a


Kims iff the molten described in (wagraph (b) hck-~). An Offering Sha.vhokk. dial


a








ib> future* K*fee


b ithia 20 day* of such nutitc of •■**•***• to tran*fc> Share* being gives (uakaa 4 it


Sm withdrawn), the Coounamg Swehrtdcr may (by cornier twice in wnungio the


Offer big SsretnWcr) veto he planed uwter. but cnly if such Shaichokkt ha*


reasonable grounds to believe that any of the following apply:





(i) the proposed Transferee is not an ertity duly iivorperatcd and ia good


sanding In the place of its Incaporalan; or


(ii) the Proposed Transferee Cltwop does not have the necessary ffmiK-ui





resources or ability to raise sufficient finance to meet the proposed


I ransferce s landing and other obligations under this Agreement it the


proposed Transferee were to become a Shareholder; or


(iii) the Proposed 1 ranstcrcc Group is or is owned, contrived

in any way with, any Person or interest which has or has had a


reputation in the international community for having any criminal,


illegal, fraudulent t* otherwise dishonest conduct, which would in the


reasonable vew of that Continuing Shareholder, if the proposed


transfer went ahead, hare an adverse effect oa the reputation of the


Company- andtor on any of the Shareholders.


(c) Ability to Proceed





If a counter notice described in Clause 10.4(b) is validly given by the Continuing


shareholder (as the case requires) within Mich 20-dny period, the proposed transfer


dull aot proceed Otherwise, if do such notice is given, or if givoi is sibseegicnth


withdrawn then, subject to all apfTicable provision* of this A pee mem, the proposed


transfer ma* proceed.














14*1*4


 1(1.5 Transi ms 10 Affiliates





Subject to compliance with Clause 10.1. a Shareholder may transfer the whole or pan


of its Shnics to an Affiliate (an "Affiliate Tranufcr'). provided (hat:





(a) such Shareholder shall along with the Shares, transfer all the corresponding


rights and obligations under this Agreement.


(b) such Shareholder shall have given 15 days’ notice of such transfer and


assignment to the other Shareholder.





(c) such Shareholder shall remain liable to the other Shareholder for the


performance of the obligations of such Affiliate under this Agreement if such


Affiliate fails to perform any of such obligations to the extent that such


obligations are not the subject of any parent compmy guarantee: anti





(d) if such Affiliate ceases to be an Affiliate of the original Shareholder, then the


Share hokfcr shall procure the re-transfer of Shares and the re-assignment of


such rights and obligations to itself (provided it remains nn Affiliate of such


parent company) or another Affiliate of such purent company.


io.6 Right of First Refusal





Subject to compliance with die Other provisions of this Clause 10 and the coodhkms


out below, a Shareholder may tramfer .’II or pan of its Shares ahng with the


corresponding rights und obligations unJer this Agreement (ircludiag all of its rights


W a lender under Shareholder Loans, if any) to the other Shareholder or • third party


(either being referred to as the Transferee-) Hie following c.mditons shall apply to


any such transfer, other than any Affiliate Transfer.


(a) Where un Offering Shareholder wishes to sell all or part of its Shwe* l>





anotlter party (ineJudmg another Shareholder), hi addition to the notice it n


required to give pursuant to Clause 10.4

promptly give written notice of the proposed details of such sale, demised ir


Clause 10.6(b). to the Continuing Shareholder.


(1>) Once the Offering Shareholder end u projioscd Transferee have negotiated all





the material terms and conditions of a proposed transfer of Shares (including


price, terms, representations and warranties, indemnities mid covennnlsX »uch


terms and conditions shall be disclosed in detail to the Continuing Shareholder


in a notice (an ' Offer") from the OiTering Shareholder. Tlie Continuing


Shareholder shall have the right to acquire from the Offering Shareholder all


(but not part only) of such Shares oflcrcd on the same terms and contUttom


agreed by the proposed Transferee if. within 30 days of the date of the Offer,


such Continuing Shareholder deliver, to the other Continuing ShareholArr and


to the Offering Shareholder an acceptance notice (an "Acceptance Notice"!


stating; that it accepts the agreed terms and conditions of the transfer without


reservations or conditions: provided that if the Continuing Shareholder wishes


to acquire such Shares, such acquiring Continuing Shareholder 'Jull have the


right to acquire such Shares pro nua in proportion to their rcspxtivc


Shareholding Interests. Failure by any Continuing Shareholders to provide nn


149/164











)L





. Wcpcncc Kobe* within *uch 10-doy prooi shot! he termed a decirion not


to purchase the offered shares, loch Continuing Shareholder tha: delivers an


Accept*** Notice shall be bound lo purchase tfec Shires and the Offering


Shareholder dull be bound to sell the Shares, at the date specified in the


Acceptance Notice, but tn n> event later than 30 day* alter the date of the


Acceptance Notice.


(c) If the Continuing Shareholder delivers an Acceptmcc Notice to he Offering


Shareholder in accordance with Clauic 10.6(b) or. if the purchase is not


consummated within the TO-day penotl ^lccified in Clause 10.6(b). the


Offering Shareholder shall be entitled to proceed with the transfer lo the


piM|K>*cd Transferee, under tomtl and conditions no more favourable to the


I nnslercc than those set out in the Offer; pfgyidsd Out the transfer shall be


concluded within 90 days from tl*c due of the OITci, plus such rcaaonoNc


additional period as miy be required lo secure third party approvals. If the


transfer is f*« corccumnuitcd within such 90-day cr such additional period, the


Offering Shareholder -hall not he permitted to transfer all or clause of Us


Share* without again complying with this rght of fira refusal procedure *t


forth In this Clau* 10 6


(d) It the Offering Shurclwiklcr’ii proposed transfer of Shares involves


consideration oilier than cash or involves other non-cash assets included in a


wider transaction (i.c.. global package). then the consideration payable for the


Shares exclusively shall be allocated a reasonable and justifiable Fair Market


Value in hard currency by that Shareholder in its notification to the Continuing


Shareholder* and such Continuing Shareholders may utisfv the requiremerts


of (his Clause 10.6 by agreeing to pay tuch Fair Market Value a turd


currency


10.7 TRANKranoiTu Coi*n*tr*c Obi icatio**


Each Uanferar of Shares shall remain Found by its obl:g«n

confidential at provided in (lauae 17.6. regardless of the fact that it has made a


transfer, for a period of 5 yean ftutu the dole uf the Assignment.


10.8 RtSTHKTIVK Lf.Cf >D


The Shareholders shall cause the Company to include on all ccrti/kaua evidencing


the Shares tltc following restrictive legend;


"THB SALE. ASSIGNMENT. IRANSITK. PLED0E OK


OTHER DISPOSITION OF I III SHARES EVIDENCED BY


mis CERTIFICATE. OR OK ANY INTEREST IN HIE


SHARES. IS RESTRICTED UY THE TERMS OF THE


COMPANY^ DY-LAWS AM) A REFINERY JOIN!


DEVELOPMENT AGREEMENT DATED 2 OCTOBER.


2007 NO SUCH SALE, ASSIGNMENT. TRANSFER.


PLEDGE OR OTHER DISPOSITION SHALL BE


EFFECTIVE UNLESS AND UN ML I III- TERMS AND


CONDITIONS OF THE AFORESAID BY-LAWS AND


I3U/IM


 JOINT DEVELOPMENT AGREEMENT SHALL HAVE


BEEN COM 1*1.1 HD WITH IN FULL.'





10.9 KM.i'i raiion c>* Shark. Transfers


I he Share balden promptly shall direvJ the Compuny to regfJer. ind the Com p«n\


promptly shall register any transfer of Shares whch occurs n accordance wth the


provisions of the By-Laws aad dm Agreemert.


10.10 Kr.Mf.nation or Nomink*.


Immediate I* upoa complcikn of fee Transfer of aD ihc Shares of nay Paly pirsuaxt


m the provisions of this Claasc 10. the Party transferring its Shares shall pcocue the


resigmiton of am Nominee which it has apjwmtcd to th: Boord of Directors without


tuch director bring era it led to ary ebbn for dan-age* or ermpemation for loss of


office of any kind whatsoever.


10.11 Lnttial PtIIJC Oftuimg


An initial public offering of Sham may be nade it any time with the consent of aE


Shareholders 11 poo each consent the Parties shall cooperate in tie impk-mcBtatioe


of such offering. Each Shareholtfcr may elect to partic pale -n a public offering of


Share* on a pm rain basis


10.12 Transfer Nor PtttMrrrKOBV Lsw


In the cveni that a Party u n

ihc Party holding the right shall have the right to propose a third party legally


qualified purchaser who will be able to acquire the offered Shares.


10.1 J Covkrnmintai. Aithohisahonk


In the event thnt any assignment or ir natter of Shares under this Mauve If) shall lv


subject to any (governmental Authorisation, such assignment or transfer shall not


become effective until such validation or nppmval has been obtained


11. TERM OF AGREEMENT


11.1 COMMkM UIBwr a.NDTermINA HON


This A green lent shall commence on the datr hereof and shnll terminate, subject to


Clause 12.5. upon the date the Shareholders have each agreed in writing Jo terminate


this Agreement. Subject to Clauses 9.3. 9.4. and 10.7, this Agreement shall no longer


apply to nny Shareholder upon that Shareholder ceasing to hold Shares.


IL2 Survival


Without intending to exclude the provisions hereof which by their future survive, the


provlaiona ofClauMM 9. 12. 14 and IJ and CIuum* 17.1. It* and 17.14 mxl dill


Clause 11.2 shall survive any completion or earlier termination of this Agreement.








151/164


 11J CONtlOWCTS Of TfJtMINtTK*


Where dm A^ccmcnl n icrmina^d. ike obRgsrieos of the Shareholder, up lo anil


including the dale of termination dial I not he affected. When: a Shareholder ceases


its involvement in the Company (by die sale or dilution of that Shareholder's


Shareholding Interest), or by its withdrawn! during the Development Phase), the


obligations of the continuing Shareholders tirxler this Agreement shall not he affected


by that event and the obligations of the retiring SKirehddcr up to and including the


dale of cessation of its involvement in ihe Project shall remain unaffected by that


event


II WINDING UP OF THE COMPANY


III General


Upon termination of this Agreement pursuant to Clause 11 or upon dissolution of the





Company. the Company shall he liquidated in accordance with the laws of the


jurisdktion of incorporation of the Company, the requirements of this Clause 12 und


the By-Laws.


12.2 ArroiNTMlNT OF LlQUIDAIOR





Subject to applicable law. a third party liquidator (not being an Affiliate of any


Shareholder) selected by the Board of Directors shall be appointed who shell use


reasonable commercial efforts to sell or otherwiM? liquidate or make a cutiodian


arrangement for. the assets or the Company, either as a going concern or as separate


items, and shall seek to maximise the proceeds received for such usieis and shall use


his best efforts to obtain the best prices for such assets Ihe Sharehokfcrs stall be


bound by the terms of any sale or disposition effected by a liquidator


I2.J Purchase »y 8h*hmkm non


Subject to applicable Uw ard the prov^iom of Clause 12.2. «ch Shareholder may


bid for and purchase the aswts ( f the Company to be sold or dnpo-oJ of k> the


liquidator.


12.4 DlSIKIBtmON





After establishment of such o«ah reserve* os the Iquidator itctcmun,! to be


reasonably necessary to fund any contingent or foreseeable Cntbilifj or ahligat.m of


die Company, the liquidator shall dlitribulc Ihe proceeds of liquidation m IIk


following order, subject to lbs provblora of any applicable law:





(u) first, to the payment of the liquidator reasonable expenses In liquidating the


Company;


(b) second, to (lie |uy incut of4 die reasonable expenses in causing the Company to


be liquidated or wourd up;


(c) third, to creditors of the Company other than the Shareholders; and








152/164











VfU.





(d) fourih. to the extent there is any surplus, to the Shareholders in respect of the


repayment of Shareholder loans, if any; and the balance as a return of capital


to the Shareholders in proportion to the paid-up nominal value of tlvc total


Shares owned by each Shareholcfcr at the time of any such distribution.


If any Shareholder receives from the liquidator proceeds in excess of what it is


entitled lo receive under this Clause 12.4. it shall hold such excess proceeds Is trust


for the other Shareholder in proportion to their respective Shareholding I Mere « and


■hall promptly distribute such excess proceeds lo the other Shareholder


12.5 Tkrmination on CoMPi.rnoN o* I-KH'Idation


Upon completion of the liquidation of the Company, this Agreement shall he


terminated for all purposes, save as provided in Clause 11.2. Termination of this


Agreement in accordance with the provisions of this Clause 12.5 shall nrt affect any


rights or obligations which may have accrued to any Shareholder before such


termination.


13. DISPUTE RESOLUTION


13.1 AMICABLK SSTTUCMEMT


I he Parties shall attempt in good faith to resolve all disputes arising in cnanectkifl


with the interpretation or application of th: provisions of this Ngreemeot or in


connection with the drtcrmmaiksn of any natters wtuch arc subject to objective


determination punuant to this Agreement (each, a "Dtspalc') by mutual agreement it


accordance with Jib. Clause 13. If a Dispute arises under this Agreement betweer


two Of more Parties, ary such Pam may request dal the Dispute be submitted to the


respective chief executive officers of the Parties lo ihc D sputc for resolutim. If such


chief executive olliccrs foil to resolve ihc Dispute within JO days of’.he dtfc on which


the matter was llrst submitted to the lost of litem fe« tvs* lutiuo. tin any Party lo iIk


Dispute muy demand that such nutfter be resolved by hireling arbitration, as presided


in Clause IJ.2.


I J.2 AMBIIKAIION


(a) Submission to Arbitration


ir any Dispute cannot be resolved between die Panics pursuant to Clause IJ.I or


otherwise, then such Dispute shall be ststied exclusively and finally by arbitration. It


Is specifically understood and agreed that any Dispute that cannot he resolved


between Ihc Parties shull be submitted to arbitration irrespective of the magnitude


thcrool, Hie amount in question or whettor su:h Dispute would otherwise he


considered justiciable or ripe for resolution by any court or urbitral tribunal, fills


Agreement and the rights and obligations of the Parties shall remain in full force and


•fleet pending the award in such arbitration proceeding, which award -.hall determine,


if the clrcum«anccs so require, whether and when termination of this Agreement shall


become cflcetivc.














153/164


lb> Rules of Arbitration





Each urttitr.ilion shall follow the Rules of Artitraticn and Conciliation of the


International Chamber of Commerce m in effect on the date of this Agreemmt or


such other rules as agreed by the disputing Parties








(c) Arbitral Tribunal


Each arbitral tribunal shall consist of three independent arbitrators, appointed a.'


follows:


(i) if there are only two Parties to the Dispute:


(Ai the claimant shall nominate one arbitrator and shall by notice


call or. the other Party to the Dispute to nominate n second


arbitrator within 30 diys of the notice, failing which such


arbitral nr shill at tlw request of the clamant be aopom*d h>


be lrtemalional Court of Arbitration of the Liternaiona


Chamber ofCormnerre(the *App>«ntia« A«tfcori*y"k; ard




(and. shall he apponted by agreement between the two


arbitral on appointed uadcr paragraph (A) above or. in default


of agreemert w ithm 30 days of the appiintment of the second


arbitrator, oa the aocninadon of the Appointing Authority at the


writtcr request of either or bc

(ii) if there lire more than two Partes to hr Dispute


(A) each Piuly to the arbitration sltall propose to the ether Parties


by notice the nurocs of one or more Persons, one or more of


whom (up to three in total) would

(B) if the Partiet ure unable lo agree at all three arbitrators within


30 days of the tlrat notice given undci paragraph (A) above,


then the Appointing Authority shall appoint the remaining


arbitrators ai the written request of any Party lo the Dispute.


(iii) Should a vacancy arise bccaure any arbitrator dies, resigns refuses to


act or becomes incapable of performing his (Unctions, the vacancy


shill be filled by the method by which die arbitrator was originally


appointed.


(d) Location of Arbtiraiion


Each arbitration shall he conducted in London. England and the Parties agree to


exclude any right uf application to any court or tribunal of conipcitni Jurisdiction In


connection with any question oflmv arising in the course of any arbitration.








154/164


 (c) Uncuiac of Artitratbo





!he teigoape to he u»cd in each arbitratim shall be English.


(0 Decision f inal and Binding


An> decision or award of an arbitral tribunal appointed pursuant to this Clause 13.2


.•hall fce by majority vote and shall be final anil binding upon the Parties, ITte Parties


waive, lo the extent permitted by law. any rights to appeal or any review of such


award by any court or tribunal of competent jurisdiction I he Parties agree thU any


arbitruiioii award made may be enforced by a Party against assets of the relevant Party


wherever they nrr located cr may be found, and a judgment upon any arbitration


■ward may he entered by any court having jurisdiction thereof Hie Parties expressly


submit to the jurisdiction of any such court.




No Person who Is, or has been, an employee or agent of. or consultant or counsel to,


ony Party or any Affiliate of a Party shall he eligible to act as an arbitrator ill any time


Cm*


The losing Party shall be accountable for all the expenses incurred in the arbitration


The Parties agree that .such arbitration tribunal shall take into account the time value


of the dllipuM nmoiint in determining any mmuint the arbitration tribunal may award


to the prevailing Parly*


(i) Cooperation in good faith


Each Patty shall cooperate in good faith to expoJite to the maximum practicable


extent the conduct of any arbitral prncredngx commenced under this Aerwment


Any Party who believes that another Patty has dcfajltcd n its obligation to cooperate


under this Claus* 132 may apply «° the arbitrator* during the coarse of the


proceedings for a determination to that effect If the arbiraton determine that a Pans


las defaulted under thb CUusc 13.2. he fnal a-ord .hall contan an asscaencnt


against the defaulting Party of dl costs incurred by the nm-dc aulting Party in


connection with tbc jrbiuwion routing 'mm tliat default. including. without


limitation, the reasonable fee. and disbursements of its camseL


14. REPRESENTATIONS AND WARRANTIES


14.1 The Governments Warranty


The Government warrants and represents to Heritage (and acknowledges and


confirms liial Heritage i:« entering into this agreement on the basts of. aid reliance


upon, such representation) that there arc no disputes, litigation proceedings, land


claims, tribunals ur legal actions, whether pending, current or threatened, by any third


party in respect of the Project Assets or the transfer of the Project Assets as


contemplated by and In accordance with this Agreement.











155/164


 14 ? viiahiihm r»m\H»rttts»vr*noss *M»w*wu»ms





(JKh Shareholder reprevents Bid wanans 10 each ether Shareh>ldcr that (ID I he extert


VpIkaWc.





'*)





(h)





il h»s ihr power and authrrity in execute. deliver and carry out the terms and


provisions of (hits Agreement, und it U and shall renuin subject to civil and


private commercial law nn

(c) Agreement and the Project IXKuncnts to which h is. or will he. a party;





all necessary ftMlon lias teen uken to authorise its execution, delivery and


performance o( this Agnwnitfnl and this Agreement hn% hern duly executed


and delivered by It and constitutes its valid. Icyul mid hind in* obligation


enforceable again*! il in accordance with its Uima. uuhjcvi to hankniptcy,


(d) inwdvcncy, reorganisation, moratorium or other iliniluf laws affecting


cimllturs’ 11 glits gciK inlly.





ihi Governmental Aathoriiation is required for it* valid elocution, delivery


and performance under this Agreement except suih as luve been duly


obtained or made, aiai





(c) none of the cxesuUui or delivery of this Agree, nm. the performance of the


obligators in connection with the transactions conlcmptacd hereby at the


Mflmcni of the Urrm> aid ccndkWxr. hereof by that SharctaAkf will




currently in effect: or (a) coaflid with, viotec or resul in • breach ot





instumeri to which I is a party or by which il or any cf its properties or assets


arc bound





15. INDEMNIFICATION AND LIAB1UTY





15.1 GENUAL LlAMLITV AND IHDCMNITO





Subject to Clause I5Z each Sharchoder mall ndcmaify aid held tunnies each


other Shareholder, its respective Affiliaies and the respective directory employees,


aad apmts of such other Shareholder and such Allilatcv against any


loss, tiamair. chin cr expense (inefading reasmaNe lepl fees anl


v) and fries or penalties of wtaieve' natire. arsing out of or n connection





Tkis inJemnty is in addhkn to all ether rights and remedies a


for breach of the














156*164


IA2 CONnoiiuniAL Damages


NotwshsUrxling anything to the contrary set forth elsewhere in lbs Agreement. no


Shareholder shall, in any ocnl be liable under Ihn Agreement to any other


shareholder for may incidental mdimx special punitive exemplary nr ccreseqicnito


Ins or damages arising out of. or in coancctwn with, th s Agreement including loss


of revenue. loss of profits, loss of product cost of capital and Iocs of husinew


reputation or opportunity. whether such liabilty arises oat of contra;!, tort (htc'udmg


rcgligmce), strict BabJky. itatutr or otherwise. «d «Kh Shareholder 'ekasrs the


other Shareholder from such lability.


16. FORCE MAJEIKE


16.1 FORCE MAJEURS Evwt


•Fore* Majrarr Eveaf means ary act or event that presents the affected Part) frotr.


performing iu okligatims under this Agreement or complyrrg widi any condition*


required by any other Party under this Agreement if such act or event is bey cod the


iCAvorwhlc control of the affected Party and of any Affiliate of the affected Party and


•oc the fauh of the affected Party or of any Affiliate of the affected Pam. and suck


ratty has been urobk to overcome such act or even: which falls within ooe or more of


tie following categories: flood, tornado, hurricane, typhoon. lightning, earthquake,


fire, Ciplovkm. civil diOurbancc. war. riot, rebellion, dissstnxo maritime colliwun or


jinking act of God or the public enemy, srikes or labour depots (of the kinds


described ir the text sentence) or action of « court or public authcrity. Strikes and


labour dispites of the following kinds only, namely, national strikes and labour


disputes noi aimed manly at the affected Party or a an Affiliae of he afcctcd Party


(where a trade or labour union has requested or required all or a majority of its


members to engage in the relevant strike or labour dispuic), stall be convdcrec to be


Force Majeure Events. Any other strikes or labour disputes, collective bargaining


agreements of any Party or of any Affiliate of any Party r.-suliiig in a delay or


stoppage of the services and other work hereunder, tote delivery of equipment or


malcrinls (not caused by a Force Majeure Event); and economic hardship, are


explicitly excluded from a Force Majeure Event and arc solely the rcspunNib.it> o:


the affected Party.


16.2 Burden OF Proof


III the event that the Panics arc unable in good fiiith to agree tliat a Force Majeure


Event has occurred, or the effect thereof, the Parties shall submit the dispute to


arbitration pursuant to Clause 13. provided Ihnt the burden of proof as to whether e


Force Mujeore Event has occurred shall be upon the Pars cla ming a Force Myeure


Event.


16.3 EXCUSED PERFORMANCE


If any Party is rendered wholly or partially unable to perform its obligations untfcr this


Agreement hreai.se of a Force Majeire Event such Party will he excused freer


whatever performance is affected by the Force Majeare Event to the extent so


•Heeled: provided that:








157/564


 (a) llic non-performing Party sluill give the other Parties prompt notice describing


the particulars of the occurrence, including an estimation of its expected


duration and probably impact on the performance of such Party's obligations


hereunder and continue to furnish timely regular reports with respect ihcrelc


during the continuaticn of the Force Mijeurr Event;


(h) lb.- uivpenvinn of performance dial I hr of no greater «c«pc and of no longer


duration than is rcawnably required by the force Majcire Event:





(c) no liability of nay Party that aro*c before the occurrence of the Force Majeure


Event causing the suspension of performareo shill he evented n« a result of


the cccurrencc;


(d) the aon-perforning Party shall exercise all reasonable efforts to mitigate or


limit tlomoga* to the other Parties;





(o) 'bo ron-performlng Party shall iwe its best nuleuvoiire to continue to perform


its obllgiitmtiN licreunder atid to correct or core the event or condition excusing


porlWmuiKo; rust


(0 when the mm performing Pony in able to resume performance of its


obligations under this Agreement, such Party sluill give the other Parties


written notice to that effect and slmll promptly romimo perfomanoe hereunder.





16.4 OniCR EXt OMiD I'MtlORMANCT





If by ir under the authevity of any Governmental Authority, all or a lubuantial part of


the Shures or the shares of a Party which is a private company cr the whole or i


mtrtfrtUI pul of the revenues or assets of the Company or a Party which is a f»ual«


realised, ccnfiscaicd or expropriated then (I) m the asc of the


Party will be excused from the prefianuMsc of its obligation;


(i) in the ease d an afleefcd Party, k will be excused from the








17. MISCELLANEOUS





17.1 Nonas





Excep. os odicrwac specified in lkt> Agreement, aay notice, demand for .nforraalior


or documents required or authorised by dm Agreerrent to be given to a Party shill, be


given in wraing aid stull be suffkicnll* given if Uouuiillcd aid clearly received by


facsimile transmission addressed as set out below, with a confirming copy in writing


or If delivered by rcglsttrd air mail, courier or haul delivered ogoitst wiiUcn receipt


to the address set out be km cr to soch odicr address os su:h Party may dcugnale from


tune to tune, by notice given m accredancr with Out Clone ILL All notices


addressed oad sett in axordance with Uis Chose 17.1 Mil be effective upon actual


delivery or tecetf* thereof, provided the all web iwtices shall be deemed rtccired at


of 5 days frevn the troc the twice n icnt Irrespective of method 1 The


or documents to each Party oad the











15*164


 THE GOVERNMENT








Add revs:


Minim? of Natural Resource;*


Kurdistan Regional Government


I'.rbil. Kurdistan








Kmullt mnrwkrgoil.com








HERITAGE


Address; Hired Court St Peter Pori. (fccmxcy, Channel IslanJs. GY I 2NL


Atlcrtion: The Directors


Tel: -44 1481 727 664


Fax: -44 1481 724 662








17.2 AMKiSDMENTS


No amendment of any provision ol this Agrccmcit shall be cflcct.vc unless « is ir


writing and signed by each Party.


I7J WAivnt


No wuiver of any provision of this Agreement shall be effective unless it in vntinj.


and sijned by each Party who is waiving rights or against whom the waivo is ctaimcc


and each such waiver sliall be effective only in the specific instance and for the


specified purpose for which it was given. Ir addition, oo failure

Party w exercise, and no course of dealing wfch respect to. and no delay in exercising,


any right power or remedy under this Agreement shall operate as a waiver thereof


The rights and remcdcs provided in this Agreement shall be cumulative and not


exclusive of any rights or remedies provided by law.


17.4 F.ntim: A«;ar.fcMr-N r


This Agreement nnd the applicable provisions of the PSA. constitute the entire


underaandiitB between the Parties mid supersedes any and all previous


understandings, whether written or oral, between the Panics with respect to the


uibjccr mailer hereof


17.*: XlfVltlABllJTV


Any provision of this Agreement that is prohibited or unenforceable ia an)


jurisdiction shall not invalidate or render unenforceable such provision m any other





159/164


jurisdiction, and shall not invalidate t>r render unenforceable any of the other


provisions hereof in any jurisdiction.


17.6 CoNmuiNiMi. Information




Party in relation to the Company and the Project that is either marked


’confidential" or is by its nature intended to be for the knowledge of the


recipient nlonr. shall he considered confidential and shill he kept confidential


and shall not be disclosed during the term of this Agreement and for n period


of 5 years utter the expiration or earlier terminal bn of this Agreement to any


Person or entity who is not a Party except:


(i) with the prior written consent of the Party that originally disclosed the


confidential information;


(ii) to an Affiliate, provided that sveh Affiliate maintain* confidentiality at


provided m this Clause 17.6;


(iii) to a (joscmmeriial Authority when required by applicable law.


(iv) to the extent that ach doa and information is required to be furnished


in compliance with any applicable laws or regulation* nr pursuant Ui


any legal proceedings or because of any order of nny court binding


upon n Party;


(v» oubjeet to Clause 17.6(b). to o bona fi

(including an entity with whom a Shareholder b cooductirg borofnk


negotiations directed toward a merger, consol bain* or the mIc of ■


majority of its or an Affiliate's shares);


(vi) subject to Clause 17.6(b). to a third party consultant engaged to


prepare a dteumcni required for any of the Company's fending


requirements:


(vii) to a bark or other financial lastitubon. to the extern necessary for a


Party arranging for funding of to oblgalkns unicr th.s Agreement.


(viii) to die c.Mcnt LujI suJi d** and inforualHX mud be tfecluxd pmuant


to any rules jr requirements of any goieminent or stock exchange


ha.ing jurisdiction over such Party or iu Affifiaies. provided dial if


an;. Party desires to diickwe informal kn in an arnual or periodic


report tc its cr its Affiliate-.' siarcbotdcr* and to the public, and such


duclosure is rot required pursaant to any rules or requirements of an)


go. emir cm or stock exchange, then such Party shall comply wrh dm


Clause 17.6;




the Project aad to its legal counsel, auditors and other consultants


subject to caci Party tafchg customary precautions to ensure such dau


ani information are kept confiCenlia ;





I6IVI64


become* part of the publb domain;




confidci'tial hul* by suck Party; and


(w»> wkctc my iWji nr Mnnralinn is Utrt lawfully acquired by such Parly


fnm vurccs other than the Party who originally furnished suck


confuterii.il iaformilinn in w*h Party, which sources arc not found In


keep such daU confidcntnl


lb) Disclosure punuanl to purigrnpls (v) and ivi) of Clause 17.6(a) shall no* he


mads unlm, btfow iuch diirknufr. the divining Pam Ka\ nhlawd •


written undertaking from clu recipient Party to keep the data and Information


strictly coulidcnlinl and net to u« or disclose the duty and information except


for the express purpose for which disclosure is to he made.


(c) If this Agreement is terminated, such Part) and its Affiliates will, and will use


their best c(T«*t» to c«uie thdf rc:p«xlnc officers, director*. employees


acccuntants. counsel, consultant*. ads son and agents ». destroy or deliver to


the Party which originally furnished such rmifirtmthl infermatiun to suck


Party, upon request, all documents anJ other male rials and all copies thereof,


obtained by such Party or Its AID Holes In connection with this Agreement tin


are subject to such confidence Ihc obligations of each Shareholder under this


Clause 17.6 shall survive termination of this Agreement.




purpose of their involvement in the Company


<«) Confidential internal too is. aiW shall remain. owned by. md proprietary la


the disc toting rally and its Afliiatcv Ihc dtsckstng Pans and is AfTlIiaiet


reserve the right to dtsdose, aaaiga. transfer, sell trade and Ikease it*


Confidential Information. in whole or in jnrt, at any time and from Lmc to


time, to any Person, entity or governmental body ri thdr sob discretion


without obtaining any content from, or providing any notice to. the receiving


Parts.


17.7 Pl'BUT ANMMlNC’fc.M».NIJ»


If a Party wishes to issue or make any public anmamceaent or statement in any way


connected with this Agreement, the Company or the Pn?ccL h shall not do so unless,


before its release, that Party famishes the other Parties with a copy of such


annoujeement or statement and obtains the approval of the other Parties, except that


no Party shill he prohibited from issuing or milking any such public announcement or


statement if it is ncccisuiy to do » in order to comply with the applicable laws, rules


or regulations of any flovommonml Authority, legal proceedings or stock exchange


having Jurisdiction over such Party as vet out in paragraphs (iii) and (viii) of Clause


17.6(a) Iw addition, wtvere any proposed public amouixrmrd nr ojicmmt of a lyp-


Jescribed a this Clause 17.7 idetiifies or otherwise refers to a Party (otocr than the








161/164


•hall rot he made without the prior content of the Party so dentiled cr otherwise


referred to.


17J Fl HI H» K MOTUHOB


bach Party agrees to dx or cause to be done. all arts and thiags ard to exccinc and


deliver such furtte wrtlcn «recr»cnt5 and irsanarertv to may from time to tine be


reasonably required to carry mu the terms and pros mom jf this Agrecmcrt.


17.9 S». !-<)»»


All payments to be nude by any Shareholder under Ihs Agreement dull be made


without sct-olTor deduction on am account whatsoever


17.10 No Titiku Pkrson Ktcirrs


This Agreement is not for the benefit c* any Pcrvn or entity other than the Part**


and no other Person or entity shall he deemed to be a third party bcrvficuiy hereof or


entitled to any benefits hereunder.


17.11 Currency of Payment


Payments l«> he made by or to any Pars dial I be denominated and payable ia U S


Dollars, unless otherwise determined by the Parties to he ia anther freely


exchangeable currency, and any payments nade prior to th.s Agreement shall be


denominated in U.S. Dollars at the applicable exchange rale then presailing at the


rime of surh payment. F.xcrp* '•here otherwise r«frrssl> provided herrm al


payments uadcr Ms Agreenerfl toail be made by tranter or credt of lands to the


17.12 fomnvwtan


This Agmwnt may hr executed in more thin one coustrrpvt. c*h of whick dial,


be deemed » be to original.


17.13 WAIVE* Of I.MMl NtTY


To the extent that any of the Parties nay be or here a ter become entiled, in any


jurisdiction. lo claim fnr itxdf or its property, asset* or mvoiiev immunity (for any


reason whatsoever) in respect of its obligations under this Agreement fron scrsice of


proto*. suit, juriidiction of iny court, jldgirvnl. crt\cr. ivsi.nl altathmrr* (before or


after judgment or award). setoff. execution of a judgment or «

•f its properly, assets or revenues such an mmimly (whether or »4 clamed) each


Party hereby nruovaHj agrees ao* «c claim and hereby irrevocably waives web


17.14 Govuwihc Law














162/164


 17.15 CONFLICT*


:n the event of any codlict between this Agreemctt and the Bs-U* v the provision*


of this Agreement shall prevail. In addition, the Shareholders shall talc all actio#


accessary i» desfable to effect all nmmliwnK to the By-l iwt to avoid any sue*


conflicts.


17.16 EXKftSCS


Except us otherwise provided herein, ull costs and expenses incurred in connection


with this Agreement shill he paid by the Party incurring such a»st or expense.


17.17 SurrnssoRS and Assigns





The provisions of this Agreement thull be binding upon and inure to tire benefit of tin;


Parties and their respective successors and assigns; provided that no Party may assign,


delegate or otherwise transfer nn> of its rights or obligations under this Agreement


without the prior written consent of the other Pirtics. except otherwise provided


herein.
















































































163/164








)<*■








IN WITNESS WHEREOF, the Panics, by their respective officers duly authorised, have


caused this Agreement to be duly executed and delivered as or the date hereof.


THE KURDISTAN REGIONAL


GOVERNMENT OF IRAQ














Ashti Hawrani


Minister of Natural Resources





On behalf of the Ministry of Natural


Resources in the Kurdistan Region

















HERITAGE ENERGY MIDDLE













































































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