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 INDEX


Article Nos Title


Article No: Title


Artiole XXVII Governing Law


Articlo I Grant


Article XXVIII Termination


Article II Definitions


Article XXIX Assignment


Article III Ethiopian Company


Article rv Article XXX Effective Date


Tern


Article V Surrender





Article VI Activities prior to Commercial


Operations


Article VII Management of Operations


Article VIII Financing


Article IX Royalty and Value





Article X Royalty in kind and Government


Purchases of Petroleum


Article XI Taxation


Article XII Bonus Payments and Rent





Article XIII Government Participation


Article xrv . Refinery


Article XV Immigration and Emigration





Article XVI Payments and Foreign Exchange





Article XVII Employment and Training of Ethiopian


Personnel and Employee Benefits


Article XVIII Promotion of National Interests





Article XIX Imports, Disposal and Exports of


Property and Products


Article XX Settlement of Disputes





Article XXI Force Majeure


Article XXII Amendments





Article XXIII Covenant of Peaceful Possession


Article XXIV Controlling Calendar





Article XXV Offices and Notices


Article XXVI Covenant against Payment of Commission


 INDEX


Article Nos Title


Article No: Title


Artiole XXVII Governing Law


Articlo I Grant


Article XXVIII Termination


Article II Definitions


Article XXIX Assignment


Article III Ethiopian Company


Article rv Article XXX Effective Date


Tern


Article V Surrender





Article VI Activities prior to Commercial


Operations


Article VII Management of Operations


Article VIII Financing


Article IX Royalty and Value





Article X Royalty in kind and Government


Purchases of Petroleum


Article XI Taxation


Article XII Bonus Payments and Rent





Article XIII Government Participation


Article xrv . Refinery


Article XV Immigration and Emigration





Article XVI Payments and Foreign Exchange





Article XVII Employment and Training of Ethiopian


Personnel and Employee Benefits


Article XVIII Promotion of National Interests





Article XIX Imports, Disposal and Exports of


Property and Products


Article XX Settlement of Disputes





Article XXI Force Majeure


Article XXII Amendments





Article XXIII Covenant of Peaceful Possession


Article XXIV Controlling Calendar





Article XXV Offices and Notices


Article XXVI Covenant against Payment of Commission


 ETHIOPIA





Model Petroleum Agreement Issued April 1973 By


Imperial Ethiopian Government, Ministry Of Mines


 ETHIOPIA





Model Petroleum Agreement Issued April 1973 By


Imperial Ethiopian Government, Ministry Of Mines


This Agreement (hereinafter Agreement) is made subject to the


Mining Proclamation of 1971 and Regulations issued thereunder on


this • . - day of . 19


by and between:


THE IMPERIAL ETHIOPIAN GOVERNMENT (hereinafter oalled


Government) represented by H.E, Ato Emmanuel Abraham,


Minister of Mines


OP THE FIRST PART


and. ■


(hereinafter the Company) represented by





\ OP THE SECOND PART


WZ\ S S E-,T''H V





WHEREAS, the area;-, described in. Schedule "A” hereto and being


hereinafter called the ’Subjeot\!AreaV'is believed to oontain deposits


of petroleums susceptibl.e'"df\cd'mmeroial exploitation; and


WHEREAS, the Cbmpany’has all the necessary modem technical


skill, experience and financial resources to explore for, develop*


produoe, process, market end sell all such deposits;


NOW THEREFORE, the parties hereto, for and in consideration of


the premises and mutual covenants and agreements herein contained,


do hereby agree as follows:








ARTICLE I


GRANT


(a) The Government hereby grants to the Company the sole and





exclusive right and privilege for the term provided in the present


Agreement and in accordance with the terms hereof to prospect and


explore for, develop and produce petroleum and its derivative


constituent substances (as hereinafter defined) within the Subjeot


Area and to process, market and sell within and outside of the Empire


of Ethiopia all such petroleum produced.


1 9


This Agreement (hereinafter Agreement) is made subject to the


Mining Proclamation of 1971 and Regulations issued thereunder on


this • . - day of . 19


by and between:


THE IMPERIAL ETHIOPIAN GOVERNMENT (hereinafter oalled


Government) represented by H.E, Ato Emmanuel Abraham,


Minister of Mines


OP THE FIRST PART


and. ■


(hereinafter the Company) represented by





\ OP THE SECOND PART


WZ\ S S E-,T''H V





WHEREAS, the area;-, described in. Schedule "A” hereto and being


hereinafter called the ’Subjeot\!AreaV'is believed to oontain deposits


of petroleums susceptibl.e'"df\cd'mmeroial exploitation; and


WHEREAS, the Cbmpany’has all the necessary modem technical


skill, experience and financial resources to explore for, develop*


produoe, process, market end sell all such deposits;


NOW THEREFORE, the parties hereto, for and in consideration of


the premises and mutual covenants and agreements herein contained,


do hereby agree as follows:








ARTICLE I


GRANT


(a) The Government hereby grants to the Company the sole and





exclusive right and privilege for the term provided in the present


Agreement and in accordance with the terms hereof to prospect and


explore for, develop and produce petroleum and its derivative


constituent substances (as hereinafter defined) within the Subjeot


Area and to process, market and sell within and outside of the Empire


of Ethiopia all such petroleum produced.


1 9


Nothing said In the above paragraph in any manner restricts


the Government from granting mining rights for minerals other than


those covered by this Agreement over the same area, provided that


suoh grants shall not prejudice the rights of the Company hereunder*


(b) The Company shall, within ninety (90) days of commencing each


stage of the Exploration Programme outlined in Schedule "B" attaohed


hereto, exeoute and deliver to the Government a performance bond or


bank guarantee ("Performance Bond") substantially in the form


attaohed hereto as Sohedule "C" from a financial institution aooeptable


to the Government for the amount (G*S* dollars) as follows:


& ( ) for Stage 1 $


8 ( ) for Stage 2;


8 ( V' ) for Stage 3»


which Performance Bond..shdli-. secure the ictue. and punctual performance


of all work obligations -contained , in .Schedule ”B" during the stage


involved and the Performance. BQizid for Stage 1 as shown in Sohedule nB"


in the amount of 8 •••'"’• shall be executed and delivered


within ninety (90) days of the Effeotive Bate of this Agreement*


(o) Notwithstanding the provisions hereof, the Company, rather than


deposit a new Performance Bond for a subsequent stage, may deposit


a Performance Bond in an amount equal to the difference between


the Performance Bond required for the stage involved and the


Performance Bond(s) theretofore deposited for a prior stage(s) and


all suoh Performance Bonds shall be applicable to ( and considered


deposited for) such subsequent stage, and so on from time to time*


(d) The Performance Bonds deposited by the Company shall, subjeot


to paragraph (0) above, be released, discharged and returned to the


Company as follows, namely:


Nothing said In the above paragraph in any manner restricts


the Government from granting mining rights for minerals other than


those covered by this Agreement over the same area, provided that


suoh grants shall not prejudice the rights of the Company hereunder*


(b) The Company shall, within ninety (90) days of commencing each


stage of the Exploration Programme outlined in Schedule "B" attaohed


hereto, exeoute and deliver to the Government a performance bond or


bank guarantee ("Performance Bond") substantially in the form


attaohed hereto as Sohedule "C" from a financial institution aooeptable


to the Government for the amount (G*S* dollars) as follows:


& ( ) for Stage 1 $


8 ( ) for Stage 2;


8 ( V' ) for Stage 3»


which Performance Bond..shdli-. secure the ictue. and punctual performance


of all work obligations -contained , in .Schedule ”B" during the stage


involved and the Performance. BQizid for Stage 1 as shown in Sohedule nB"


in the amount of 8 •••'"’• shall be executed and delivered


within ninety (90) days of the Effeotive Bate of this Agreement*


(o) Notwithstanding the provisions hereof, the Company, rather than


deposit a new Performance Bond for a subsequent stage, may deposit


a Performance Bond in an amount equal to the difference between


the Performance Bond required for the stage involved and the


Performance Bond(s) theretofore deposited for a prior stage(s) and


all suoh Performance Bonds shall be applicable to ( and considered


deposited for) such subsequent stage, and so on from time to time*


(d) The Performance Bonds deposited by the Company shall, subjeot


to paragraph (0) above, be released, discharged and returned to the


Company as follows, namely:


<0 The Performanee Bond for Stage 1 as set forth in Schedule


"3" as soon as possible after and in any event within six (6)


months after the date the geologioal report referred to In


Stage 1 of Schedule "B" 1b submitted to the Minister;


(2) The Performance 3on& for Stage £ as- «et -forth, in Schedule


"B" as soon as possible after and in any event within six (6)


months after the date the Evaluation Report referred to in


Stage 2 of Sohedule ”3" is submitted to the Minister; and





(5) The Performance Bond for Stage 3 as set forth in Sohedule


"3" as soon as possible after and in any event within six (6)


months of the date the drilling rigie released from the


initial test well:


Provided that in the event.-or a surreiider twftubnk to Artiole V haneof


or termination before thewdrk and reporton a stage is oaspletad


and delivered, the Government :fceednot release, discharge and return


the performance bond eo. deposited until the provisions of Artiole VI


(b) hereof have be eh complied with by the, Company*








ARTICLE II


BEFIHITIORS


Wherever used herein unless the context shall otherwise


require:


(a) "Affiliate" shall mean:


(1) any corporation in which the Company holds five percent


(3%) or more of the oompany(s shares;


(2) any company which, directly or indirectly, is controlled


by, or oontrols, or is under common oontrol with the


Company; or


(3) any shareholder or group of shareholders of the Company


of any Affiliate and any individual or group of


individuals in the employ of the Company*


Por the purposes of this paragraph "company” shall inolude corporations


partnerships, unincorporated associations, firms and other business


organisations* 21


<0 The Performanee Bond for Stage 1 as set forth in Schedule


"3" as soon as possible after and in any event within six (6)


months after the date the geologioal report referred to In


Stage 1 of Schedule "B" 1b submitted to the Minister;


(2) The Performance 3on& for Stage £ as- «et -forth, in Schedule


"B" as soon as possible after and in any event within six (6)


months after the date the Evaluation Report referred to in


Stage 2 of Sohedule ”3" is submitted to the Minister; and





(5) The Performance Bond for Stage 3 as set forth in Sohedule


"3" as soon as possible after and in any event within six (6)


months of the date the drilling rigie released from the


initial test well:


Provided that in the event.-or a surreiider twftubnk to Artiole V haneof


or termination before thewdrk and reporton a stage is oaspletad


and delivered, the Government :fceednot release, discharge and return


the performance bond eo. deposited until the provisions of Artiole VI


(b) hereof have be eh complied with by the, Company*








ARTICLE II


BEFIHITIORS


Wherever used herein unless the context shall otherwise


require:


(a) "Affiliate" shall mean:


(1) any corporation in which the Company holds five percent


(3%) or more of the oompany(s shares;


(2) any company which, directly or indirectly, is controlled


by, or oontrols, or is under common oontrol with the


Company; or


(3) any shareholder or group of shareholders of the Company


of any Affiliate and any individual or group of


individuals in the employ of the Company*


Por the purposes of this paragraph "company” shall inolude corporations


partnerships, unincorporated associations, firms and other business


organisations* 21


(b) "Control" shall mean the possession, directly or indirectly


of the power to direct or cause the direction of the management and


policies of a company exercised by any other company where a series


of companies can be specified beginning with the parent company or


companies and ending with the particular company, in which each


company of the series, except the parent company or companies, is


directly or indirectly controlled by one or more of the companies


in the series.


(c) "Company" shall mean '


a company incorporated under the laws of . and


shall indicate such an Ethiopian Company as defined in paragraph (d)


below after it has been incorporated; under Ethiopian Law as provided


for in Article III of thi.s\Agreement andshdli thereafter mean such


Ethiopian Company only;-,.


(d) "Ethiopian Company" .shall mean the company incorporated under,


the laws of the Empire., of-Ethiopia,


(e) "Date of CoizflnencSment of Operations" shall mean the date when


the Company shall’liave commenced the regular and recurrent production


of petroleum in the Subject Area in Payable Quantities.


(f) "Government" shall mean the IMPERIAL ETHIOPIA!! GOVERNMENT.


(g) "Bank" shall mean the National Bank of Ethiopia.


(h) "Acceptable Currency" shall mean any foreign currency which


is acceptable to the Bank for the particular purpose in view.


(i) "Gross Income" shall mean the total amount of all gains,


profits and other income received by or accrued to the Company


either directly or indirectly from business operations and activities


of the Company under this Agreement, plus any income from other


sources which forms part of the Company*s earnings, provided,


however, that in computing such Gross Income, sales within and


outside of Ethiopia shall, subject to the provisions of


subparagraph (5) hereunder, be taken into account as follows?


.2 2


(b) "Control" shall mean the possession, directly or indirectly


of the power to direct or cause the direction of the management and


policies of a company exercised by any other company where a series


of companies can be specified beginning with the parent company or


companies and ending with the particular company, in which each


company of the series, except the parent company or companies, is


directly or indirectly controlled by one or more of the companies


in the series.


(c) "Company" shall mean '


a company incorporated under the laws of . and


shall indicate such an Ethiopian Company as defined in paragraph (d)


below after it has been incorporated; under Ethiopian Law as provided


for in Article III of thi.s\Agreement andshdli thereafter mean such


Ethiopian Company only;-,.


(d) "Ethiopian Company" .shall mean the company incorporated under,


the laws of the Empire., of-Ethiopia,


(e) "Date of CoizflnencSment of Operations" shall mean the date when


the Company shall’liave commenced the regular and recurrent production


of petroleum in the Subject Area in Payable Quantities.


(f) "Government" shall mean the IMPERIAL ETHIOPIA!! GOVERNMENT.


(g) "Bank" shall mean the National Bank of Ethiopia.


(h) "Acceptable Currency" shall mean any foreign currency which


is acceptable to the Bank for the particular purpose in view.


(i) "Gross Income" shall mean the total amount of all gains,


profits and other income received by or accrued to the Company


either directly or indirectly from business operations and activities


of the Company under this Agreement, plus any income from other


sources which forms part of the Company*s earnings, provided,


however, that in computing such Gross Income, sales within and


outside of Ethiopia shall, subject to the provisions of


subparagraph (5) hereunder, be taken into account as follows?


.2 2


Sales to independent parties, including sales to Government


under Article X hereof, shall be taken into account at


actual realised prices, provided that such prices are


negotiated on an armfs length basis and with the objective


of maximising profits as set out in Article VII(c) hereof.


Sales to affiliate shall be taken into account-at the Market -


Value of the products sold. As regards sales to affiliates,


it is the intent of the parties that such sales shall be


accounted for at prices at which the sales would have


occurred if the buyer and seller had not been affiliated.


In order to ensure that this inherit is carried out, in all


sales to affiliates the..Go,Eipaiiy will .submit to the Government


the method according.. £o'which th©.;''Market Value above described


was calculated*'>.T-his submission'.will include the published


price used, if any, prices/of sales by the Company to


independent parties-,’where relevant, any adjustment made,


for example ip’>.reflect content of petroleum, and the charges


deducted for the calculation of an f.o.b, price, including


their source. In the event that the Minister so requests,


the Company shall provide evidence of the Market Value for


any sale and, if the Company fails to do so within thirty


(30) days thereafter, the Wellhead Value as provided in


Article IX hereof shall be used in determining tho Market


Value of such sale.


Sales to independent parties and sales to affiliates may be


deemed to have been consummated f.o.b. Ethiopian port of


shipment by the deduction of the following, to the extent


that they are incurred by the Company as evidenced by


invoices s


(i) ocean freight,


(ii) marine insurance,


f S £ £ \ port and handling charges at the port of discharge,


\ J.JLX /


2 3


Sales to independent parties, including sales to Government


under Article X hereof, shall be taken into account at


actual realised prices, provided that such prices are


negotiated on an armfs length basis and with the objective


of maximising profits as set out in Article VII(c) hereof.


Sales to affiliate shall be taken into account-at the Market -


Value of the products sold. As regards sales to affiliates,


it is the intent of the parties that such sales shall be


accounted for at prices at which the sales would have


occurred if the buyer and seller had not been affiliated.


In order to ensure that this inherit is carried out, in all


sales to affiliates the..Go,Eipaiiy will .submit to the Government


the method according.. £o'which th©.;''Market Value above described


was calculated*'>.T-his submission'.will include the published


price used, if any, prices/of sales by the Company to


independent parties-,’where relevant, any adjustment made,


for example ip’>.reflect content of petroleum, and the charges


deducted for the calculation of an f.o.b, price, including


their source. In the event that the Minister so requests,


the Company shall provide evidence of the Market Value for


any sale and, if the Company fails to do so within thirty


(30) days thereafter, the Wellhead Value as provided in


Article IX hereof shall be used in determining tho Market


Value of such sale.


Sales to independent parties and sales to affiliates may be


deemed to have been consummated f.o.b. Ethiopian port of


shipment by the deduction of the following, to the extent


that they are incurred by the Company as evidenced by


invoices s


(i) ocean freight,


(ii) marine insurance,


f S £ £ \ port and handling charges at the port of discharge,


\ J.JLX /


2 3


(iv) other costs properly incurred by the Company in


delivering1 the petroleum from the Ethiopian port


to the buyer, including those costs allowable for


the purpose of computing royalty as specified in


Article IX(c)(4)*


If any of the above payments are made to affiliates, the


deductions thereof shall not be in excess of competitive


rates. The Company shall justify the reasonableness of


such deductions for payments to affiliates by reference to


published freight rates, rate schedules offered by


independent parties, or charges incurred by the Company in


transactions with non-affiliates,


(*) "Market Value" shall mean the '■•market price of the petroleum,


duo consideration being given* to', and appropriate adjustment being


made for differences in'Mhd",- quality," nature and quantity of the


petroleum pro due t$ '•involve d and. the duration of the contract under


which it is sold. Such Market Value shall be determined as of


the effective date of "tire contract under which the sale is made, or


if no such contract; exists, as of the date of shipment from an


Ethiopian port. In the event that a prevailing market price cannot


be established by comparison to prices at which independent sales


have been effected at the actual port or ports of discharge,


comparison shall be made to the port or ports nearest thereto at


which a prevailing market price exists, with due allowance for any


differential attributable to distance or variations in particular


charges for port dues and expenses. In the event that no such


market price exists, references may be made to formulas used by


taxing authorities of other countries which export such petroleum


products, with appropriate adjustments for the quality of petroleum,


length of sale agreement, quantity of petroleum, terms of sale and


cost of delivery. In no case shall the Market Value so established


be less than the price at which the Company sells petroleum products





24


(iv) other costs properly incurred by the Company in


delivering1 the petroleum from the Ethiopian port


to the buyer, including those costs allowable for


the purpose of computing royalty as specified in


Article IX(c)(4)*


If any of the above payments are made to affiliates, the


deductions thereof shall not be in excess of competitive


rates. The Company shall justify the reasonableness of


such deductions for payments to affiliates by reference to


published freight rates, rate schedules offered by


independent parties, or charges incurred by the Company in


transactions with non-affiliates,


(*) "Market Value" shall mean the '■•market price of the petroleum,


duo consideration being given* to', and appropriate adjustment being


made for differences in'Mhd",- quality," nature and quantity of the


petroleum pro due t$ '•involve d and. the duration of the contract under


which it is sold. Such Market Value shall be determined as of


the effective date of "tire contract under which the sale is made, or


if no such contract; exists, as of the date of shipment from an


Ethiopian port. In the event that a prevailing market price cannot


be established by comparison to prices at which independent sales


have been effected at the actual port or ports of discharge,


comparison shall be made to the port or ports nearest thereto at


which a prevailing market price exists, with due allowance for any


differential attributable to distance or variations in particular


charges for port dues and expenses. In the event that no such


market price exists, references may be made to formulas used by


taxing authorities of other countries which export such petroleum


products, with appropriate adjustments for the quality of petroleum,


length of sale agreement, quantity of petroleum, terms of sale and


cost of delivery. In no case shall the Market Value so established


be less than the price at which the Company sells petroleum products





24


to indopendont parties in comparable circumstances as to quantity,


quality, length of sale agreement, terms of sale and cost of


delivery, if the terms of sale are c.i.f. foreign port, the c.i.f.


price may be reduced to an f.o.b. i>rice Ethiopian port of


shipment by the deduction of freight, insurance and other customary


charges as provided in subparagraph (3) of paragraph (i) above.


(k)(l) "Exploration Operations” shall, subject to the Mining


Proclamation, mean the carrying out of any one or more of


the acts or investments reasonably necessary in exploring


for petroleum, including but not limited to the following:


the exploration of the Sjobjep't Area by use of gravity


meter, magnetometer,---s.dijbniic or qther geological or


geophysical methods.; obtaining. ^nd:..dev'eloping aerial


photographs, ma£pin£''hy use .of aerial photographs or


by other method^ the drilling-..of core holes, strati


graphic ..tesb-.h’oles 5 the-drilling, testing and completion


of 1 oxpiq3?a.ik>ry and development wells of all kinds and


all services with" f-es/p.ect thereto; the study of surface


and subsurface 'geological data; the acquisition by


purchase or..o'£harWise of geological and geophysical


data, photographs or information on the Subject Area


and the ge'ne-ral area around it; the processing, study,


correlation or interpretation of all data obtained;


and ancillary operations carried on either on or off


the Subject Area in building roads, camps and other


facilities; recruiting, maintaining and transporting


employees, their families, contractors and their


personnel, equipment and services; obtaining and


furnishing seismic services, including processing,


correlating, playback or interpretative services;


obtaining and furnishing materials, supplies, equipment,


housing, offices, storage, transportation, insurance,


accounting and supervision and other things useful in


carrying out Exploration Operations on the Subject Area.


(2) "Mining Operations” shall, subject to the Mining Proclamation,


mean all acts or investments reasonably necessary for


producing, working, getting and raising to the surface


the petroleum found on, in or under the Subject Area, and


treating, refining, separating, dehydrating, or otherwise


making the petroleum marketable;storing, loading and


marketing or otherwise disposing thereof; including but


not limited to, the following0


2 5


to indopendont parties in comparable circumstances as to quantity,


quality, length of sale agreement, terms of sale and cost of


delivery, if the terms of sale are c.i.f. foreign port, the c.i.f.


price may be reduced to an f.o.b. i>rice Ethiopian port of


shipment by the deduction of freight, insurance and other customary


charges as provided in subparagraph (3) of paragraph (i) above.


(k)(l) "Exploration Operations” shall, subject to the Mining


Proclamation, mean the carrying out of any one or more of


the acts or investments reasonably necessary in exploring


for petroleum, including but not limited to the following:


the exploration of the Sjobjep't Area by use of gravity


meter, magnetometer,---s.dijbniic or qther geological or


geophysical methods.; obtaining. ^nd:..dev'eloping aerial


photographs, ma£pin£''hy use .of aerial photographs or


by other method^ the drilling-..of core holes, strati


graphic ..tesb-.h’oles 5 the-drilling, testing and completion


of 1 oxpiq3?a.ik>ry and development wells of all kinds and


all services with" f-es/p.ect thereto; the study of surface


and subsurface 'geological data; the acquisition by


purchase or..o'£harWise of geological and geophysical


data, photographs or information on the Subject Area


and the ge'ne-ral area around it; the processing, study,


correlation or interpretation of all data obtained;


and ancillary operations carried on either on or off


the Subject Area in building roads, camps and other


facilities; recruiting, maintaining and transporting


employees, their families, contractors and their


personnel, equipment and services; obtaining and


furnishing seismic services, including processing,


correlating, playback or interpretative services;


obtaining and furnishing materials, supplies, equipment,


housing, offices, storage, transportation, insurance,


accounting and supervision and other things useful in


carrying out Exploration Operations on the Subject Area.


(2) "Mining Operations” shall, subject to the Mining Proclamation,


mean all acts or investments reasonably necessary for


producing, working, getting and raising to the surface


the petroleum found on, in or under the Subject Area, and


treating, refining, separating, dehydrating, or otherwise


making the petroleum marketable;storing, loading and


marketing or otherwise disposing thereof; including but


not limited to, the following0


2 5


the construction, operation or maintenance of


buildings, installations, plants, machinery,


appliances, storage and loading facilities5 obtaining


and furnishing materials, supplies, dams, railways,


roads, pipelines, communication facilities and other


facilities or services, and ancillary operations


carried on either on or off tho Subject Area in


building roads, camps and other facilities? obtaining,


maintaining and transporting employees and their


families, contractors and their personnel, services,


materials, supplies, equipment,, housing, storage, and


transportation, processing, treating, refining and


marketing facilities, insurance, accounting and


supervision and other things useful in carrying out


Mining Operations.


(3) "Operations" shall mean either Exploration Operations or


Mining Operations or both.


(l) "Petroleum" shall mean crupLe. o.i’l, natural gas, natural gas


liquids, tar sands, oil shales and other..hydrocarbons, all before


refining. v. '• \ \


(m) "Natural &as;'r- or "Gas’A s'hkl.1 mean all gaseous substances


(hydrocarbons and non~hy'dr.Oca'rbonn) including sulphur, produced


from wells in a yaporoUd or gaseous form, which existed in a


gaseous form in'-.the reservoir or in solution with the crude oil,


but excluding condensates which by normal field methods of petroleum


gas processing are separated and recovered as liquids.


(n) "Oil" or "Crude Oil" shall mean all liquid petroleum before


refining and excludes Natural Gas but includes condensates which


by normal field methods of petroleum gas processing are separated


and recovered as liquids.


C°)(1) "Exploration Cost" shall mean all reasonable expenditures


wholly, necessarily and exclusively made and obligations


and liabilities incurred by the Company in carrying out


Exploration Operations hereunder including, without


limitation to tho generality of the foregoing, the costs


specified in subparagraph (5) below.











the construction, operation or maintenance of


buildings, installations, plants, machinery,


appliances, storage and loading facilities5 obtaining


and furnishing materials, supplies, dams, railways,


roads, pipelines, communication facilities and other


facilities or services, and ancillary operations


carried on either on or off tho Subject Area in


building roads, camps and other facilities? obtaining,


maintaining and transporting employees and their


families, contractors and their personnel, services,


materials, supplies, equipment,, housing, storage, and


transportation, processing, treating, refining and


marketing facilities, insurance, accounting and


supervision and other things useful in carrying out


Mining Operations.


(3) "Operations" shall mean either Exploration Operations or


Mining Operations or both.


(l) "Petroleum" shall mean crupLe. o.i’l, natural gas, natural gas


liquids, tar sands, oil shales and other..hydrocarbons, all before


refining. v. '• \ \


(m) "Natural &as;'r- or "Gas’A s'hkl.1 mean all gaseous substances


(hydrocarbons and non~hy'dr.Oca'rbonn) including sulphur, produced


from wells in a yaporoUd or gaseous form, which existed in a


gaseous form in'-.the reservoir or in solution with the crude oil,


but excluding condensates which by normal field methods of petroleum


gas processing are separated and recovered as liquids.


(n) "Oil" or "Crude Oil" shall mean all liquid petroleum before


refining and excludes Natural Gas but includes condensates which


by normal field methods of petroleum gas processing are separated


and recovered as liquids.


C°)(1) "Exploration Cost" shall mean all reasonable expenditures


wholly, necessarily and exclusively made and obligations


and liabilities incurred by the Company in carrying out


Exploration Operations hereunder including, without


limitation to tho generality of the foregoing, the costs


specified in subparagraph (5) below.











(2) "Minting Cost* ehai3. mean all reasonable expenditures,


wholly, necessarily and exclusively made and obligations


and liabilities incurred by the Company in carrying out


Mining Operations hereunder including, without limiting


the generality of the foregoing, the costs in sub-paragraph


(3) below.


(3) Such costs shall include all costs incurred for materials,


equipment, supplies, work and services performed by contractors


and sub-contractors, salaries, fees and other compensation


paid to employees of the Company and/or other persons


engaged in carrying out the Operations? building oosts,


maintenance, rentals and'rel'^'ted costs for all offices,


houses, warehouses-, •pipelines, casing* pipe, roads,


production..equai>m6nt and facilities, storage, treating,


loading and shipping’facilities j and such costs of other


facilities and-epst-s.'of equipment, furniture, fixtures,


supplies and - Services necessary for the operation of such


buildings and facilities acquired for the purposes of


gaining or producing income; the coBt of buying, renting,


furnishing or otherwise obtaining, maintaining, supporting,


repairing, transporting, insuring, storing accounting for


the supervising of the use of equipment, materials, services,


supplies and personnel; the cos4, of vehicles, and other


transportation equipment, professional or other outside


services, and other costs and expenses of exploring for


and producing petroleum; and costs in connection with such


operations and all costs incurred in furnishing the facilities


and services required under the provisions of Article XVII


(b) and (c) hereof.


(4) "Operating Costs" shall mean Exploration Costs and Mining Costs,





27


(2) "Minting Cost* ehai3. mean all reasonable expenditures,


wholly, necessarily and exclusively made and obligations


and liabilities incurred by the Company in carrying out


Mining Operations hereunder including, without limiting


the generality of the foregoing, the costs in sub-paragraph


(3) below.


(3) Such costs shall include all costs incurred for materials,


equipment, supplies, work and services performed by contractors


and sub-contractors, salaries, fees and other compensation


paid to employees of the Company and/or other persons


engaged in carrying out the Operations? building oosts,


maintenance, rentals and'rel'^'ted costs for all offices,


houses, warehouses-, •pipelines, casing* pipe, roads,


production..equai>m6nt and facilities, storage, treating,


loading and shipping’facilities j and such costs of other


facilities and-epst-s.'of equipment, furniture, fixtures,


supplies and - Services necessary for the operation of such


buildings and facilities acquired for the purposes of


gaining or producing income; the coBt of buying, renting,


furnishing or otherwise obtaining, maintaining, supporting,


repairing, transporting, insuring, storing accounting for


the supervising of the use of equipment, materials, services,


supplies and personnel; the cos4, of vehicles, and other


transportation equipment, professional or other outside


services, and other costs and expenses of exploring for


and producing petroleum; and costs in connection with such


operations and all costs incurred in furnishing the facilities


and services required under the provisions of Article XVII


(b) and (c) hereof.


(4) "Operating Costs" shall mean Exploration Costs and Mining Costs,





27


(p) "Payable Quantities" shall mean sufficient quantities of


petroleum to enable the Mining Operations to be undertaken or


continued on a profitable basis#


(q) "Mining Proclamation" shall mean the Mining Proclamation


of 1971 and existing regulations passed thereunder and amendments


thereto which qualify under paragraph (a) of Article XX7TI hereof.


(r) "Minister" shall mean the Minister of Mines of the


Government or the person for the time being acting in the place


of such Minister. "Ministry" shall mean the Ministry of Mines


of the Government or such other ministry of the Government authorised


to supervise petroleum exploration and'iaining operations in Ethiopia


by whatever name called. The /’Minister", or* in, i*io absence his


duly authorised repre sen tati-yd, shall b'e\the 'Government * s


representative visra/rvis’ the Company•


(s) "Tax Year" or "Fiscal .Ye.a'r" shall mean a calendar year or


such other fiscal period-.'of‘twelve (12) calendar months according


to the Gregorian ^Calendar as the Company may elect with the


concurrence of the tax authorities.


(t) "Calendar Year" shall mean the period from January 1st through


December 31 ot of the same year according to the Gregorian Calendar


and "Calendar Quarter" and "Calendar Month" shall mean a quarter


of such year or month according to the Gregorian Calendar.


(u) "Contract Year" or "Year", unless the context otherwise


requires, shall mean a period of twelve (12) months according to


the Gregorian Calendar, commencing on the Effective Pate and on each


anniversary of the Effective Pate.








ARTICLE III


ETHIOPIAN COMPANY


(a) In order to carry out the programme properly and effectively,





the Company shall establish before the Pate of Commencement of


Operations an Ethiopian Company, organised and existing under the


2 8 .


(p) "Payable Quantities" shall mean sufficient quantities of


petroleum to enable the Mining Operations to be undertaken or


continued on a profitable basis#


(q) "Mining Proclamation" shall mean the Mining Proclamation


of 1971 and existing regulations passed thereunder and amendments


thereto which qualify under paragraph (a) of Article XX7TI hereof.


(r) "Minister" shall mean the Minister of Mines of the


Government or the person for the time being acting in the place


of such Minister. "Ministry" shall mean the Ministry of Mines


of the Government or such other ministry of the Government authorised


to supervise petroleum exploration and'iaining operations in Ethiopia


by whatever name called. The /’Minister", or* in, i*io absence his


duly authorised repre sen tati-yd, shall b'e\the 'Government * s


representative visra/rvis’ the Company•


(s) "Tax Year" or "Fiscal .Ye.a'r" shall mean a calendar year or


such other fiscal period-.'of‘twelve (12) calendar months according


to the Gregorian ^Calendar as the Company may elect with the


concurrence of the tax authorities.


(t) "Calendar Year" shall mean the period from January 1st through


December 31 ot of the same year according to the Gregorian Calendar


and "Calendar Quarter" and "Calendar Month" shall mean a quarter


of such year or month according to the Gregorian Calendar.


(u) "Contract Year" or "Year", unless the context otherwise


requires, shall mean a period of twelve (12) months according to


the Gregorian Calendar, commencing on the Effective Pate and on each


anniversary of the Effective Pate.








ARTICLE III


ETHIOPIAN COMPANY


(a) In order to carry out the programme properly and effectively,





the Company shall establish before the Pate of Commencement of


Operations an Ethiopian Company, organised and existing under the


2 8 .


laws of tho Empire of Ethiopia and having its registered office


in Ethiopia, which shall be controlled initially by the Company.


It is understood and agreed that, aa soon as the Ethiopian Company


is established, all of the rights and obligations conferred and


imposed by this Agreement to and upon the Company shall be


transferred and assigned to tho Ethiopian Company.


(b) Notwithstanding the provisions of paragraph ($ above,


->>-iii-iishall guarantee the


performance by the Ethiopian Company of all its obligations hereunder


and shall remain liable to the Government therefor.


ARTICLE.. IV\


.♦’-TERM/ V‘


This Agreement '-shall have a •.t.e'rya of thirty (30) years from


the Effeotive Date": he roof, as.;‘def£iied in Article XXX, and is


renewable on fair and jprpjpe'r terms so long as petroleum continues


to be produced or is capable of being produoed in payable quantities


in each year o:f renewal term.


ARTICLE Y


SURRENDER


(a) The Company may at any time before completion of the entire


programme specified in Schedule "B" surrender all of the Subject


Area by giving written notice to the Minister at least ninety (90)


days prior to the date specified in said notice on which suoh


surrender is to become effective and all rights and obligations of


both parties hereunder shall cease on the date specified in suoh


written notioe, except as herein specifically set out, and if a


surrender notioe is given, the Company shall not be obligated to


commence or complete a stage subsequent to the date of the notioe


but must complete tho stage then in progress or make payment in


lieu thorefor as provided in Article VI (b) hereof if it has not


theretofore completed the stage involved.


laws of tho Empire of Ethiopia and having its registered office


in Ethiopia, which shall be controlled initially by the Company.


It is understood and agreed that, aa soon as the Ethiopian Company


is established, all of the rights and obligations conferred and


imposed by this Agreement to and upon the Company shall be


transferred and assigned to tho Ethiopian Company.


(b) Notwithstanding the provisions of paragraph ($ above,


->>-iii-iishall guarantee the


performance by the Ethiopian Company of all its obligations hereunder


and shall remain liable to the Government therefor.


ARTICLE.. IV\


.♦’-TERM/ V‘


This Agreement '-shall have a •.t.e'rya of thirty (30) years from


the Effeotive Date": he roof, as.;‘def£iied in Article XXX, and is


renewable on fair and jprpjpe'r terms so long as petroleum continues


to be produced or is capable of being produoed in payable quantities


in each year o:f renewal term.


ARTICLE Y


SURRENDER


(a) The Company may at any time before completion of the entire


programme specified in Schedule "B" surrender all of the Subject


Area by giving written notice to the Minister at least ninety (90)


days prior to the date specified in said notice on which suoh


surrender is to become effective and all rights and obligations of


both parties hereunder shall cease on the date specified in suoh


written notioe, except as herein specifically set out, and if a


surrender notioe is given, the Company shall not be obligated to


commence or complete a stage subsequent to the date of the notioe


but must complete tho stage then in progress or make payment in


lieu thorefor as provided in Article VI (b) hereof if it has not


theretofore completed the stage involved.


(b) $he Company may at any time and from time to time after


completion of the programme specified in Schedule "B" surrender all


or any part of the Subject Area by giving written notice to the


Minister at least sixty (60) days prior to the date specified in


the said notioe on whioh suoh surrender is to become effective and


all rights and obligations of both parties hereunder in connection


with the surrendered area shall cease on the date speoified in suoh


written notice, except as herein specifically set out.


(o) At the end of the third (jrd) year from the Effective Bate


of this Agreement, the Company shall surrender exploration rights


on sufficient acreage (selected by it) so that) after such surrender


the Company holds exploration rights on:not more .than eighty poroont


(80#) of the area held on the'.'E£f active Bate \of\this Agreement.


The area or areas so retained' shall be. , shown-. ciearly on a map to


be submitted to the Government at' the end of this period.


(d> At the end of the sixth '(’6th) year from the Effective Bate


of this Agreement, the Company shall surrender exploration rights


on sufficient acreage (selected by it) so that, after suoh surrender


the Company holds exploration rights on not more than sixty percent


(60%) of the area held on the Effective Bate of this Agreement. The


area or areas so retained shall be shown clearly on a map to be


submitted to the Government at the end of this period.


(e) Within five (5) yearBafter (1) the end of the sixth (6th)


year from the Effective Bate of this Agreement, or (2) the Bate


of Commencement of Operations, whichever first ocours, the Company


shall surrender exploration rights on sufficient acreage (selected


by it) so that, after such surrender, the Company holds exploration


rights on not more than forty percent (A0%) of the area held on


the Effective Bate of this Agreement. The area or areas so retained


shall be shown dearly on a map to be submitted to the Government at


the end of this period.


(f) It is agreed that areas voluntarily surrendered by the


Company pursuant to paragraph (b) hereof shall be considered In


3 0


(b) $he Company may at any time and from time to time after


completion of the programme specified in Schedule "B" surrender all


or any part of the Subject Area by giving written notice to the


Minister at least sixty (60) days prior to the date specified in


the said notioe on whioh suoh surrender is to become effective and


all rights and obligations of both parties hereunder in connection


with the surrendered area shall cease on the date speoified in suoh


written notice, except as herein specifically set out.


(o) At the end of the third (jrd) year from the Effective Bate


of this Agreement, the Company shall surrender exploration rights


on sufficient acreage (selected by it) so that) after such surrender


the Company holds exploration rights on:not more .than eighty poroont


(80#) of the area held on the'.'E£f active Bate \of\this Agreement.


The area or areas so retained' shall be. , shown-. ciearly on a map to


be submitted to the Government at' the end of this period.


(d> At the end of the sixth '(’6th) year from the Effective Bate


of this Agreement, the Company shall surrender exploration rights


on sufficient acreage (selected by it) so that, after suoh surrender


the Company holds exploration rights on not more than sixty percent


(60%) of the area held on the Effective Bate of this Agreement. The


area or areas so retained shall be shown clearly on a map to be


submitted to the Government at the end of this period.


(e) Within five (5) yearBafter (1) the end of the sixth (6th)


year from the Effective Bate of this Agreement, or (2) the Bate


of Commencement of Operations, whichever first ocours, the Company


shall surrender exploration rights on sufficient acreage (selected


by it) so that, after such surrender, the Company holds exploration


rights on not more than forty percent (A0%) of the area held on


the Effective Bate of this Agreement. The area or areas so retained


shall be shown dearly on a map to be submitted to the Government at


the end of this period.


(f) It is agreed that areas voluntarily surrendered by the


Company pursuant to paragraph (b) hereof shall be considered In


3 0


determining compliance with the surrender obligations of paragraphs


(c), (d) and (e) hereof and further agreed that any one surrender


(voluntary or otherwise) can consist of not more than four (4)


blocks generally of rectangular shape, each block comprised of


at least one thousand (1,000) square kilometres provided that if


more than one block is so surrendered they need not be contiguous


to one another.


(g) On any surrender by the Company or termination by the


Government the Company shall have the right, within a period of


one (1) year from such surrender or termination to remove and dispose


of all movable property located on or .U§ed in connection with the


lands subject to the surrender o«r-te^ination.





article


ACTIVITIES-4rI0R TO 'cb^feciAL OPERATION'S


(a) The Company shal-l'-projiiptly after the Effective Date of this


Agreement and subject". bo-its rights of surrender commence and


diligently pursue the conduct of the Work Programme in the Subject


Area referred to in Schedule The Work Programme and time limits,


mutually drawn up by the parties, are attached hereto as Schedule "B"


and by' reference the same becomes an integral part of this Agreement.


(b) It is agreed and understood that the commitments under


Schedule "B” are firm until surrender of all of the Subject Area or


termination and all commitments thereunder for work to be performed


prior to surrender or termination must, to the extent only of any


deficiency in the Stage involved, be paid by the Company to the


Government or spent elsewhere in Ethiopia where the Company may


be carrying on mining operations or exploration activities if the


Government so agrees.


(c) The Government may, by giving sixty (60) days prior written


notice terminate this Agreement if the Company for reasons other


than Eoree Majeure fails to act within the time limits specified


determining compliance with the surrender obligations of paragraphs


(c), (d) and (e) hereof and further agreed that any one surrender


(voluntary or otherwise) can consist of not more than four (4)


blocks generally of rectangular shape, each block comprised of


at least one thousand (1,000) square kilometres provided that if


more than one block is so surrendered they need not be contiguous


to one another.


(g) On any surrender by the Company or termination by the


Government the Company shall have the right, within a period of


one (1) year from such surrender or termination to remove and dispose


of all movable property located on or .U§ed in connection with the


lands subject to the surrender o«r-te^ination.





article


ACTIVITIES-4rI0R TO 'cb^feciAL OPERATION'S


(a) The Company shal-l'-projiiptly after the Effective Date of this


Agreement and subject". bo-its rights of surrender commence and


diligently pursue the conduct of the Work Programme in the Subject


Area referred to in Schedule The Work Programme and time limits,


mutually drawn up by the parties, are attached hereto as Schedule "B"


and by' reference the same becomes an integral part of this Agreement.


(b) It is agreed and understood that the commitments under


Schedule "B” are firm until surrender of all of the Subject Area or


termination and all commitments thereunder for work to be performed


prior to surrender or termination must, to the extent only of any


deficiency in the Stage involved, be paid by the Company to the


Government or spent elsewhere in Ethiopia where the Company may


be carrying on mining operations or exploration activities if the


Government so agrees.


(c) The Government may, by giving sixty (60) days prior written


notice terminate this Agreement if the Company for reasons other


than Eoree Majeure fails to act within the time limits specified


in Schedule HBMj provided, however, that the Government may at its


own option agree that the Company retain its rights and privileges


under the Agreement, if the Company pays a penalty to the Government


at the following ratess


(1) Twelve percent (12%) of the sum unexpended per month


for the first three (3) months of delay?


(2) Fifteen percent (15%) of the sip unexpended including


the penalty of twelve percent (12%) per month for the


next three (3) months?


(3) Twenty percent (20%) of the su unexpended including the


penalty of fifteen percent (15%) per month thereafter,


unless the Government decides otherwise.


Subject always to the surrender rights., of the Company in accordance


with this Agreement and the Mining proclamation•


V, V’ABTICLE VII..\ \


V;fo&JAGEMEHT •0>--'OPERATIONS


(a) The Compary will. ensdre that a representative of the Govern¬


ment designated in-.waiting may attend meetings of the Board of


Directors of the Ethiopian Company. Such Government representative


shall have no voting rights and shall keep confidential all


information, secrets and data of the Company, its assets, operations


and prospects.


(b) The Company, subject to paragraph (c) hereof, shall have


full and effective control and management of all matters relating


to the operation of the project including the production and


marketing of its products in accordance with sound, long-term policies


and without prejudice to the provisions of the Mining Proclamation.


The Company may make expansions, modifications, improvements and


replacements of the project facilities, and may add new facilities,


as the Company shall consider it necessary for the operation of


the project or to provide services or to carry on activities ancillary


or incidental to the project. All such expansions, modifications,


improvements, replacements and additions shall be considered part


of the project facilities. " *


in Schedule HBMj provided, however, that the Government may at its


own option agree that the Company retain its rights and privileges


under the Agreement, if the Company pays a penalty to the Government


at the following ratess


(1) Twelve percent (12%) of the sum unexpended per month


for the first three (3) months of delay?


(2) Fifteen percent (15%) of the sip unexpended including


the penalty of twelve percent (12%) per month for the


next three (3) months?


(3) Twenty percent (20%) of the su unexpended including the


penalty of fifteen percent (15%) per month thereafter,


unless the Government decides otherwise.


Subject always to the surrender rights., of the Company in accordance


with this Agreement and the Mining proclamation•


V, V’ABTICLE VII..\ \


V;fo&JAGEMEHT •0>--'OPERATIONS


(a) The Compary will. ensdre that a representative of the Govern¬


ment designated in-.waiting may attend meetings of the Board of


Directors of the Ethiopian Company. Such Government representative


shall have no voting rights and shall keep confidential all


information, secrets and data of the Company, its assets, operations


and prospects.


(b) The Company, subject to paragraph (c) hereof, shall have


full and effective control and management of all matters relating


to the operation of the project including the production and


marketing of its products in accordance with sound, long-term policies


and without prejudice to the provisions of the Mining Proclamation.


The Company may make expansions, modifications, improvements and


replacements of the project facilities, and may add new facilities,


as the Company shall consider it necessary for the operation of


the project or to provide services or to carry on activities ancillary


or incidental to the project. All such expansions, modifications,


improvements, replacements and additions shall be considered part


of the project facilities. " *


(o) The Company ehall exorcise these prerogatives in good faith


with the objective of realising the maximum profits consistent


with good production, engineering and business practices. The


Company shall employ in the said operations modem production


techniques and methods determined by the Company to be consistent


with:


(1) the size of the deposits of petroleum discovered, and


(2) the most ooonomical production of the petroleum discovered.


The Company will exercise its best efforts and diligence in the


selection of production techniques and methods to avoid any waste


of petroleum and if, after the Date of Commencement of Operations


production for any year is expected\to .bo less than twenty percent


(20%) of production capacity:fori reasons pther tlmn Force Majeure,


the Company shall infapm; the Government -pf the reasons therefor.


ASt'Elbj.E-VlII


■••-"•••.'••."FINANCIHG


The Company;- shall, subject to the terms hereof, havo the


sole responsibility of financing the Operations and determining


the terms on which the said finanoing shall bo obtained, including


tho extent to which the finanoing shall be accomplished in acoordanoe


with the current money market conditions through the issuance of


shares or through borrowing. It is recognised that it may be


necessary or dosirable to obtain finanoing or finanoing guarantees,


or both, from international and foreign national finanoing


institutions, private finanoial institutions or other enterprises.


The Government undertakes to cooperate with the Company to


facilitate the finanoing of the project insofar nr and provided


that the terms of the finanoing agreement have the consent and


approval of the Government and the Bank. In the event that an


agreement or investment guarantees should be concluded between


the Government of the Empire of Ethiopia and the Government of


t (or other oountry designated by the Company


3 3


(o) The Company ehall exorcise these prerogatives in good faith


with the objective of realising the maximum profits consistent


with good production, engineering and business practices. The


Company shall employ in the said operations modem production


techniques and methods determined by the Company to be consistent


with:


(1) the size of the deposits of petroleum discovered, and


(2) the most ooonomical production of the petroleum discovered.


The Company will exercise its best efforts and diligence in the


selection of production techniques and methods to avoid any waste


of petroleum and if, after the Date of Commencement of Operations


production for any year is expected\to .bo less than twenty percent


(20%) of production capacity:fori reasons pther tlmn Force Majeure,


the Company shall infapm; the Government -pf the reasons therefor.


ASt'Elbj.E-VlII


■••-"•••.'••."FINANCIHG


The Company;- shall, subject to the terms hereof, havo the


sole responsibility of financing the Operations and determining


the terms on which the said finanoing shall bo obtained, including


tho extent to which the finanoing shall be accomplished in acoordanoe


with the current money market conditions through the issuance of


shares or through borrowing. It is recognised that it may be


necessary or dosirable to obtain finanoing or finanoing guarantees,


or both, from international and foreign national finanoing


institutions, private finanoial institutions or other enterprises.


The Government undertakes to cooperate with the Company to


facilitate the finanoing of the project insofar nr and provided


that the terms of the finanoing agreement have the consent and


approval of the Government and the Bank. In the event that an


agreement or investment guarantees should be concluded between


the Government of the Empire of Ethiopia and the Government of


t (or other oountry designated by the Company


3 3


unless the Government on grounds ox national interest objects laieretoy


in the future, the Government shall use its best efforts in good


faith to facilitate obtaining any approval required for such


guarantee* Further the Government shall undertake to facilitate,


in accordance with the Exchange Control Laws of Ethiopia, the


repayment of all loans that the Company may have incurred for the


purpose of financing operations.


ARTICLE XIX


ROYALTY AND VALUE


(a) The Company shall pay to the Government a royalty of twelve


and one half percent (12%$>) of the Wellhead Value of the petroleum


produced, either in kind or in cash,, \atjthe option of the Government.


(b) The "Wellhead Valuq "-.df the petro leuin. :f 6r the purposes of


assessing Government roya.ity'- under this Agreement, whether it is


taken in cash or in‘kind, shali be .computed as follows?


Sales to independent;-"buyers and affiliates shall be


taken into account-'oh the basis of Market Value as


defined in. AiticjLe II (h) hereof.


(c) For the purpose of this Agreements


(1) "Wellhead Value" of natural gas shall mean the gross sales


received by the Company from sales of natural gas delivered


to a plant or other purchaser less Permissive Deductions;


(2) "Wellhead Value" of crude oil shall mean the gross sales


received by the Company from sales of crude oil which shall


be stated in the then effective price notice furnished by


the Company to the Government less Permissive Deductions:


(5) "Posted Price" shall mean the f.o.b. prices published by


the Government in consultation with the Company for each


grade, gravity and quality of petroleum offered for sale


to buyers generally for export at the relevant point of


export in Ethiopia, which price shall be a p^ioe established


with due regard to any other prices for petroleum of


comparable grade, gravity and quality and having regard


to geographical locations: 3 4


unless the Government on grounds ox national interest objects laieretoy


in the future, the Government shall use its best efforts in good


faith to facilitate obtaining any approval required for such


guarantee* Further the Government shall undertake to facilitate,


in accordance with the Exchange Control Laws of Ethiopia, the


repayment of all loans that the Company may have incurred for the


purpose of financing operations.


ARTICLE XIX


ROYALTY AND VALUE


(a) The Company shall pay to the Government a royalty of twelve


and one half percent (12%$>) of the Wellhead Value of the petroleum


produced, either in kind or in cash,, \atjthe option of the Government.


(b) The "Wellhead Valuq "-.df the petro leuin. :f 6r the purposes of


assessing Government roya.ity'- under this Agreement, whether it is


taken in cash or in‘kind, shali be .computed as follows?


Sales to independent;-"buyers and affiliates shall be


taken into account-'oh the basis of Market Value as


defined in. AiticjLe II (h) hereof.


(c) For the purpose of this Agreements


(1) "Wellhead Value" of natural gas shall mean the gross sales


received by the Company from sales of natural gas delivered


to a plant or other purchaser less Permissive Deductions;


(2) "Wellhead Value" of crude oil shall mean the gross sales


received by the Company from sales of crude oil which shall


be stated in the then effective price notice furnished by


the Company to the Government less Permissive Deductions:


(5) "Posted Price" shall mean the f.o.b. prices published by


the Government in consultation with the Company for each


grade, gravity and quality of petroleum offered for sale


to buyers generally for export at the relevant point of


export in Ethiopia, which price shall be a p^ioe established


with due regard to any other prices for petroleum of


comparable grade, gravity and quality and having regard


to geographical locations: 3 4


(4) "Permissive Deduo iaons" snaii mean coats and expenses of


all kinds incurred in transporting petroleum, crude oil or


natural gas from the point of production to the point of


sale? in processing, otherwise treating or making marketable


or storing petroleum, crude oil or natural gas prior to the


point of sale; of the kind referred to in subparagraph (5)


of Article II(i) if terras of sale are c.i.f. foreign ports


or incurred in mining operations after the point of


productions or otherwise incurred prior to the point of


sale, it being the intention that from gross sales received


there be deducted all costs and expenses incurred beyond


the wellhead where produced and'3.rior to sale in arriving at


the true V/ellhead Value


(d) If a difference aridos} between th^'papties concerning the


determination of Postpd 'Fri-ocs or V/ellhead'• Value which cannot bo


solved by mutual Agreement, such prices and/or value shall be


determined by arbitration as; provided for in Article XX hereunder*


(e) Except as otherwise provided in Article X hereof, all


royalty shall be\.payable in cash in acceptable currency and shall


be calculated and paid on a calendar month basis, and payment


thereof shall bo made not later than the first (1st) day of the


eeoond (2nd) calendar month following that during which the


petroleum on which ouch royalty is payable is delivered to the


purchaser or other taker.


(f) The Company shall perform all measurement of petroleum in


such manner, selected by the Company, but always consistent with


sound petroleum industry practices.


(g) In the. event of the Mining Operations under this Agreement


entailing the segregation of petroleum of different quality and/or


grade, and in the event of the Company and the Government not


othorwise agreeing, the Government's royalty shall bo computed


separately on ea'ch grade of petroleum produced and segregated during


the particular period for which the royalty is computed being on


gross sales received less Permissive Deductionst


3 ^


(4) "Permissive Deduo iaons" snaii mean coats and expenses of


all kinds incurred in transporting petroleum, crude oil or


natural gas from the point of production to the point of


sale? in processing, otherwise treating or making marketable


or storing petroleum, crude oil or natural gas prior to the


point of sale; of the kind referred to in subparagraph (5)


of Article II(i) if terras of sale are c.i.f. foreign ports


or incurred in mining operations after the point of


productions or otherwise incurred prior to the point of


sale, it being the intention that from gross sales received


there be deducted all costs and expenses incurred beyond


the wellhead where produced and'3.rior to sale in arriving at


the true V/ellhead Value


(d) If a difference aridos} between th^'papties concerning the


determination of Postpd 'Fri-ocs or V/ellhead'• Value which cannot bo


solved by mutual Agreement, such prices and/or value shall be


determined by arbitration as; provided for in Article XX hereunder*


(e) Except as otherwise provided in Article X hereof, all


royalty shall be\.payable in cash in acceptable currency and shall


be calculated and paid on a calendar month basis, and payment


thereof shall bo made not later than the first (1st) day of the


eeoond (2nd) calendar month following that during which the


petroleum on which ouch royalty is payable is delivered to the


purchaser or other taker.


(f) The Company shall perform all measurement of petroleum in


such manner, selected by the Company, but always consistent with


sound petroleum industry practices.


(g) In the. event of the Mining Operations under this Agreement


entailing the segregation of petroleum of different quality and/or


grade, and in the event of the Company and the Government not


othorwise agreeing, the Government's royalty shall bo computed


separately on ea'ch grade of petroleum produced and segregated during


the particular period for which the royalty is computed being on


gross sales received less Permissive Deductionst


3 ^


(k-> ty s/'t&jU paid with respect to petroleum ueed by


the Company in the course of its operations hereunder or re---introduced


into petroleum deposits or lost or not used in any way*


ABTICLE X


BOYALTY IN KIM) AND GOVERMEIfT PURCHASES OF PETROLEUM


(a) Ninety (90) days prior to the beginning of each calendar


quarter, commencing with the first quarter during which the Company


expects to produce petroleum from the Subject Area, the Company


shall notify the Government in writing (herein called "Quantity


Notices”) of the approximate quantity of petroleum which the Company


intends to produce from the Subject A-rea./during such calendar


quarter. Within th: :iy (30) day's-, after its receipt of each Quantity


Notice, the Government shall-have the right, by notice given to the


Company in writing (herbiif called.."Acceptance Notice") to select


to receive a quantity of petroleum from the Company daring such


calendar quarter0 } ’*


(b) Failure by the-Government to furnish the Company with an


Acceptance Notice with respect to any calendar quarter within the


aforesaid thirty (50) day period, shall constitute a waiver by the


Government of any rights to receive any petroleum produced by the


Company from the Subject Area during such quarter. In such event,


all royalty attributable to such calendar quarter shall be payable


in cash, and shall be paid monthly, as provided in paragraph (e)


of Article IX hereof.


(0) The quantity of petroleum stated, or deemed to be stated, as


provided in paragraph (a) of this Article, in each Acceptance Notice


(hereinafter called "Government Share") shall constitute either


royalty in kind or a combination of royalty in kind and petroleum


purchased for cash from the Company by the Government, depending upon


the total quantity of petroleum actually produced and saved by the


Company from the Subject Area during the calendar quarter to which


(k-> ty s/'t&jU paid with respect to petroleum ueed by


the Company in the course of its operations hereunder or re---introduced


into petroleum deposits or lost or not used in any way*


ABTICLE X


BOYALTY IN KIM) AND GOVERMEIfT PURCHASES OF PETROLEUM


(a) Ninety (90) days prior to the beginning of each calendar


quarter, commencing with the first quarter during which the Company


expects to produce petroleum from the Subject Area, the Company


shall notify the Government in writing (herein called "Quantity


Notices”) of the approximate quantity of petroleum which the Company


intends to produce from the Subject A-rea./during such calendar


quarter. Within th: :iy (30) day's-, after its receipt of each Quantity


Notice, the Government shall-have the right, by notice given to the


Company in writing (herbiif called.."Acceptance Notice") to select


to receive a quantity of petroleum from the Company daring such


calendar quarter0 } ’*


(b) Failure by the-Government to furnish the Company with an


Acceptance Notice with respect to any calendar quarter within the


aforesaid thirty (50) day period, shall constitute a waiver by the


Government of any rights to receive any petroleum produced by the


Company from the Subject Area during such quarter. In such event,


all royalty attributable to such calendar quarter shall be payable


in cash, and shall be paid monthly, as provided in paragraph (e)


of Article IX hereof.


(0) The quantity of petroleum stated, or deemed to be stated, as


provided in paragraph (a) of this Article, in each Acceptance Notice


(hereinafter called "Government Share") shall constitute either


royalty in kind or a combination of royalty in kind and petroleum


purchased for cash from the Company by the Government, depending upon


the total quantity of petroleum actually produced and saved by the


Company from the Subject Area during the calendar quarter to which


the said Acceptance Notice related (hereinafter called Total


Production, it being understood that Crude Oil Total Production


means Total Production of crude oil and Natural Gas Total Production


means Total Production of natural gas) as followss


(1) To the extent that the Government Share does not exceed


twelve and one half percent (12-J#) of the Total Production,


such Government Share shall constitute royalty in kind*


(2) If and to the extent that such Government Share exceed


twelve and one half percent (12-g?') of the Total Production,


such excess shall represent the quantity to be purchased


by the Government from the Company for such calendar quarter,


provided, however, that ,the-..dxerdise of such right by the


Government to take, more' than twelye’-and' one half percent


(12jf/o) of the Total "Production.'siiail not prevent the


Company from\pe rformiug.. 'contracts for the sale of petroleum


already coneluded'i;\


(?) If and to the extent that such Government Share is less than


twelve and ohe half percent (12-j^) of the Total Production,


such deficiency shall be payable by the Company to the


Government as a cash royalty, payable within fifteen (15)


days after the end of such calendar quarter.


(4) During each calendar quarter for which the Government has


furnished an Acceptance Notice in accordance with the


provisions of paragraph (a) above, the Company shall deliver


the Government Share to the Government at such reasonably


uniform weekly rate as the Government shall request*


(d) All purchases of petroleum by the Government from the Company


shall be f.o.b. the field of production. The purchase price thereof


shall be in United States dollars or other convertible currency and


in amount equal to the Market Value (as defined in Article II(h)


hereof) of such petroleum and shall be payable within thirty (30) days


of the Company's presentation to the Government of an invoice


37


therefor.


the said Acceptance Notice related (hereinafter called Total


Production, it being understood that Crude Oil Total Production


means Total Production of crude oil and Natural Gas Total Production


means Total Production of natural gas) as followss


(1) To the extent that the Government Share does not exceed


twelve and one half percent (12-J#) of the Total Production,


such Government Share shall constitute royalty in kind*


(2) If and to the extent that such Government Share exceed


twelve and one half percent (12-g?') of the Total Production,


such excess shall represent the quantity to be purchased


by the Government from the Company for such calendar quarter,


provided, however, that ,the-..dxerdise of such right by the


Government to take, more' than twelye’-and' one half percent


(12jf/o) of the Total "Production.'siiail not prevent the


Company from\pe rformiug.. 'contracts for the sale of petroleum


already coneluded'i;\


(?) If and to the extent that such Government Share is less than


twelve and ohe half percent (12-j^) of the Total Production,


such deficiency shall be payable by the Company to the


Government as a cash royalty, payable within fifteen (15)


days after the end of such calendar quarter.


(4) During each calendar quarter for which the Government has


furnished an Acceptance Notice in accordance with the


provisions of paragraph (a) above, the Company shall deliver


the Government Share to the Government at such reasonably


uniform weekly rate as the Government shall request*


(d) All purchases of petroleum by the Government from the Company


shall be f.o.b. the field of production. The purchase price thereof


shall be in United States dollars or other convertible currency and


in amount equal to the Market Value (as defined in Article II(h)


hereof) of such petroleum and shall be payable within thirty (30) days


of the Company's presentation to the Government of an invoice


37


therefor.


(e) The Government may pay the aforesaid purchase price in


Ethiopian currency to the extent that the Company then has need of


such currency to discharge any obligation to the Government under


this Agreement, notwithstanding that the terms hereof would otherwise


contemplate payment to the Government in acceptable currency, it


being agreed that the Company may at any time thereafter (applying


the same rate of exchange as that used by the Government in


effecting each such payment) use such currency to discharge any


obligations to the Government arising under this Agreement,


notwithstanding that the terms hereof would otherwise contemplate


payment in an acceptable currency. .....•.


(f) The Company shall provide’• storage ofvcrude oil constituting


the Government Share. Storage may've'‘-provided at any reasonable


place or places within'Or wit hout:. the-. Sub j e c t Area as may be


selected by the Company. .The •Go.v'ernment shall pay and/or reimburse


the Company for direct"*a’h&":'reasonable indirect costs incurred in such


storage, and the\ transportation of such crude oil from point of


production to such place of storage. Such payment shall be due


thirty (30) days after the presentation of the invoice to the


Government by the Company.


(g) Title and all risk of loss with respect to the Government


Share shall pass to the Government at such time and place as is


designated by the Company in writing to the Government, and delivery


shall be deemed effected at said time and place; provided, however,


that nothing herein shall constitute a waiver by the Government of


any rights which it might otherwise have against the Company in the


event of the Company!s negligent loss o.f the Government Share


subsequent to the time at which title and risk of loss with respect


thereto pass to the Government. In the event that any insurance


coverage maintained by the Company shall cover the Government Share,


proceeds collected by the Company thereunder shall be credited to


(e) The Government may pay the aforesaid purchase price in


Ethiopian currency to the extent that the Company then has need of


such currency to discharge any obligation to the Government under


this Agreement, notwithstanding that the terms hereof would otherwise


contemplate payment to the Government in acceptable currency, it


being agreed that the Company may at any time thereafter (applying


the same rate of exchange as that used by the Government in


effecting each such payment) use such currency to discharge any


obligations to the Government arising under this Agreement,


notwithstanding that the terms hereof would otherwise contemplate


payment in an acceptable currency. .....•.


(f) The Company shall provide’• storage ofvcrude oil constituting


the Government Share. Storage may've'‘-provided at any reasonable


place or places within'Or wit hout:. the-. Sub j e c t Area as may be


selected by the Company. .The •Go.v'ernment shall pay and/or reimburse


the Company for direct"*a’h&":'reasonable indirect costs incurred in such


storage, and the\ transportation of such crude oil from point of


production to such place of storage. Such payment shall be due


thirty (30) days after the presentation of the invoice to the


Government by the Company.


(g) Title and all risk of loss with respect to the Government


Share shall pass to the Government at such time and place as is


designated by the Company in writing to the Government, and delivery


shall be deemed effected at said time and place; provided, however,


that nothing herein shall constitute a waiver by the Government of


any rights which it might otherwise have against the Company in the


event of the Company!s negligent loss o.f the Government Share


subsequent to the time at which title and risk of loss with respect


thereto pass to the Government. In the event that any insurance


coverage maintained by the Company shall cover the Government Share,


proceeds collected by the Company thereunder shall be credited to


the Government to the extent game are payable by reason of or are


attributable to casualty losses suffered by the Government Share.


(h) The Company shall transport the Government Share from the


point or points of storage referred to in paragraph (f) of this


Article (or from the wellhead in case of natural gas) to such other


point or points within the Empire of Ethiopia as the Government may


request, at such transportation charge as may for the purpose of


this paragraph be from time to time agreed in advance by the Company


and the Government, but in no event shall such charge be less than


the Company*s reasonable direct and indirect costs.


(i) Subject to paragraph (f) of this.’.'jbrticle, if at any time


the quantity of Government Share .-then Vbbing stored by the Company is,


in the Company*s opinion, go/laifcgaas to r£sk\dn adverse effect upon


the Company*s orderly..production or expoird. operations, the Company


may notify the Government. and.reqUe&t 'the Government to remove


physically such quantity...o.£.' 'Gqve rnmen t Share as the Company regards


necessary. If the Government shall fail to comply with such request,


the Company shall notwithstanding the other provisions of this


Agreement, be entitled to take such action (including but not


limited to the borrowing of the Government Share, subject only to an


obligation with reasonable promptness to repay in kind or to sell


same and account for royalty on the basis of price received) as may


be necessary or desirable to avoid or reduce the risk of adverse


effect upon the Company*s orderly operations as aforesaid.


ARTICLE XI


TAXATION


(a) Further to the other payments contemplated under Articles


IX, X and XII, the Crmpany shall be liable to pay all income taxes


or taxes imposed on income or measued by income whether presently in


force or hereinafter imposed by law, in the same terms and


conditions as other traders or business organizations.


7 3


the Government to the extent game are payable by reason of or are


attributable to casualty losses suffered by the Government Share.


(h) The Company shall transport the Government Share from the


point or points of storage referred to in paragraph (f) of this


Article (or from the wellhead in case of natural gas) to such other


point or points within the Empire of Ethiopia as the Government may


request, at such transportation charge as may for the purpose of


this paragraph be from time to time agreed in advance by the Company


and the Government, but in no event shall such charge be less than


the Company*s reasonable direct and indirect costs.


(i) Subject to paragraph (f) of this.’.'jbrticle, if at any time


the quantity of Government Share .-then Vbbing stored by the Company is,


in the Company*s opinion, go/laifcgaas to r£sk\dn adverse effect upon


the Company*s orderly..production or expoird. operations, the Company


may notify the Government. and.reqUe&t 'the Government to remove


physically such quantity...o.£.' 'Gqve rnmen t Share as the Company regards


necessary. If the Government shall fail to comply with such request,


the Company shall notwithstanding the other provisions of this


Agreement, be entitled to take such action (including but not


limited to the borrowing of the Government Share, subject only to an


obligation with reasonable promptness to repay in kind or to sell


same and account for royalty on the basis of price received) as may


be necessary or desirable to avoid or reduce the risk of adverse


effect upon the Company*s orderly operations as aforesaid.


ARTICLE XI


TAXATION


(a) Further to the other payments contemplated under Articles


IX, X and XII, the Crmpany shall be liable to pay all income taxes


or taxes imposed on income or measued by income whether presently in


force or hereinafter imposed by law, in the same terms and


conditions as other traders or business organizations.


7 3


(b) The rate of income tax to be assessed and paid in respect


to income derived by the Company from Operations under this


Agreement shall be fifty-one percent (51%) of the Taxable Income


derived therefrom*


(c) (1) Notwithstanding the provisions of paragraph (b) preceding,


if the total of Eligible Taxes as hereinafter prescribed


together vrith income tax payable in any fiscal year, shall


exceed fifty-one percent (51%) of the Taxable Income in


that year, then the amount of income tax so payable shall


be reduced and remitted so that the total of such payments


to the Government shall be fift^-one percent (51%) of


Taxable Income* ... •’ • ' . V.


(2) If, notwithstanding'ihe complete '•remission of income tax


under the 'provisions of •■■the;'previous paragraph, the total


payment to the Government’ by way of income and Eligible


Taxes shall a'tii^L\in any fiscal year exceed fifty-one percent


(51%) of ;t he/Taxable Income, then the amount of such excess


may be carried forward and deducted in any subsequent year


against any future liability of the Company in respect of


income tax or any other Eligible Taxes or indebtedness to


the Government arising in. respect of the said Agreement,


but not against any liability in respect of royalty and rent.


(d) For the purposes of this Article "Eligible Taxes" shall be


any and all taxes and fiscal charges levied on the Company with


the exception ofs


(1) Income taxes as described in paragraph (b) preceding;


(2) Taxes on salaries or other compensation of employees and


which the Company has been required to withhold by law;


(3) Stamp duties and charges, imposts and duties for which


the Company may become liable under Article XIX hereof;


(b) The rate of income tax to be assessed and paid in respect


to income derived by the Company from Operations under this


Agreement shall be fifty-one percent (51%) of the Taxable Income


derived therefrom*


(c) (1) Notwithstanding the provisions of paragraph (b) preceding,


if the total of Eligible Taxes as hereinafter prescribed


together vrith income tax payable in any fiscal year, shall


exceed fifty-one percent (51%) of the Taxable Income in


that year, then the amount of income tax so payable shall


be reduced and remitted so that the total of such payments


to the Government shall be fift^-one percent (51%) of


Taxable Income* ... •’ • ' . V.


(2) If, notwithstanding'ihe complete '•remission of income tax


under the 'provisions of •■■the;'previous paragraph, the total


payment to the Government’ by way of income and Eligible


Taxes shall a'tii^L\in any fiscal year exceed fifty-one percent


(51%) of ;t he/Taxable Income, then the amount of such excess


may be carried forward and deducted in any subsequent year


against any future liability of the Company in respect of


income tax or any other Eligible Taxes or indebtedness to


the Government arising in. respect of the said Agreement,


but not against any liability in respect of royalty and rent.


(d) For the purposes of this Article "Eligible Taxes" shall be


any and all taxes and fiscal charges levied on the Company with


the exception ofs


(1) Income taxes as described in paragraph (b) preceding;


(2) Taxes on salaries or other compensation of employees and


which the Company has been required to withhold by law;


(3) Stamp duties and charges, imposts and duties for which


the Company may become liable under Article XIX hereof;


(4) Visa and other immigration and registration fees?


(5) Taxes, licence fees and other charges pertaining to the


registration or operation of the business organization's


vehicles, aircraft, vessels and such other facilities and


services for which registration or licensing is required by law;


(6) Taxes payable upon the local purchase or acquisition by


tho Company of goods, materials, suppli.es, equipment and


services?


(7) Pees and charges which may be levied by the Government in


accordance with law in respect of the provision or consumption


of any public service or facility; and


(8) Boyalty and rent payable under Articles IX and XII*


Provided always that; •.•*"•. V’’--- ./**••. \:-


(i) the payments*}sqt’'-out in subparagraphs (l) and (2) preceding


shall not bo * consideied-.as-’Deductible Costs;


(ii) the payments ali*d••.Charges set out in subparagraphs (3)


through (8) inclusive preceding shall be considered as


Deductible Costs; but


(iii) in no event shall the payments under paragraphs (2) through


(8) be construed as payments towards the fifty-one percent


(51%)^ payable by the Company to the Government as provided herein


(e) Por purposes of assessing the liability of the Company to


income tax pursuant to paragraph (b) above, the Taxable Income of


the Company shall be the Gross Income accruing to the Company in


that year less the following deductions, all determined in accordance


with generally accepted accounting principles applied on a consistent


basis;


(1) Deductible Costs as hereinafter specified in paragraph (f)


for such fiscal year;


(2) Deductions due in respect of such fiscal year by way of


depreciation or amortisation of cfapital or p re commencement


expenditure as hereinafter specified in paragraph Cg) *


41


(4) Visa and other immigration and registration fees?


(5) Taxes, licence fees and other charges pertaining to the


registration or operation of the business organization's


vehicles, aircraft, vessels and such other facilities and


services for which registration or licensing is required by law;


(6) Taxes payable upon the local purchase or acquisition by


tho Company of goods, materials, suppli.es, equipment and


services?


(7) Pees and charges which may be levied by the Government in


accordance with law in respect of the provision or consumption


of any public service or facility; and


(8) Boyalty and rent payable under Articles IX and XII*


Provided always that; •.•*"•. V’’--- ./**••. \:-


(i) the payments*}sqt’'-out in subparagraphs (l) and (2) preceding


shall not bo * consideied-.as-’Deductible Costs;


(ii) the payments ali*d••.Charges set out in subparagraphs (3)


through (8) inclusive preceding shall be considered as


Deductible Costs; but


(iii) in no event shall the payments under paragraphs (2) through


(8) be construed as payments towards the fifty-one percent


(51%)^ payable by the Company to the Government as provided herein


(e) Por purposes of assessing the liability of the Company to


income tax pursuant to paragraph (b) above, the Taxable Income of


the Company shall be the Gross Income accruing to the Company in


that year less the following deductions, all determined in accordance


with generally accepted accounting principles applied on a consistent


basis;


(1) Deductible Costs as hereinafter specified in paragraph (f)


for such fiscal year;


(2) Deductions due in respect of such fiscal year by way of


depreciation or amortisation of cfapital or p re commencement


expenditure as hereinafter specified in paragraph Cg) *


41


always provided that the same are in lieu of and not in addition


to the deductions allowed to corporations under Ethiopian Income


Tax Laws and Regulations issued thereunder as supplemented and/or


amended, and further provided that in no event shall deductions


be greater than costs actually incurred and that*


(i) all deductions are fairly, properly, exclusively and


necessarily incurred and directed towards or attributable


to the earning of Gross Income;


(ii) all activities with affiliates p,re conducted at arm^s


length as defined in Article II hereof; and


(iii) no item or expense is deducted*-from Gross Income more than once*


(f) Deductible Costs in any fi.sca,l -year shall include the


following, being attributab*l*e\to /that year;


(1) All Operating .{Exploration and.’Miriing) Costs as defined


herein including for this purpose the cost of equipment or


machinery used therefor ’‘which has an estimated useful life


of less than. |wo;(’2) years or costs less than five thousand


Ethiopian ■dollars (Eth.$5>000) (the costs of other equipment


and machinery so used shall be recovered through depreciation


as provided in paragraph (g));


(2) All losses actually sustained and charged off during the


fiscal year (including but not limited to casualty losses,


losses upon the sale or other disposition of property and


losses on account of bad debts) to the extent that they are


not compensated by insurance or otherwise;


(5) All costs of transporting the petroleum from the Subject


Area to the processing plant or refinery and/or the place. Qf sale;


(4) All security and communication coots including, without


limitation to, police and other security charges, postal


charges,.cable charges, radiogram charges, telegram and


tele-typewriter' charges incurred solely in connection with


always provided that the same are in lieu of and not in addition


to the deductions allowed to corporations under Ethiopian Income


Tax Laws and Regulations issued thereunder as supplemented and/or


amended, and further provided that in no event shall deductions


be greater than costs actually incurred and that*


(i) all deductions are fairly, properly, exclusively and


necessarily incurred and directed towards or attributable


to the earning of Gross Income;


(ii) all activities with affiliates p,re conducted at arm^s


length as defined in Article II hereof; and


(iii) no item or expense is deducted*-from Gross Income more than once*


(f) Deductible Costs in any fi.sca,l -year shall include the


following, being attributab*l*e\to /that year;


(1) All Operating .{Exploration and.’Miriing) Costs as defined


herein including for this purpose the cost of equipment or


machinery used therefor ’‘which has an estimated useful life


of less than. |wo;(’2) years or costs less than five thousand


Ethiopian ■dollars (Eth.$5>000) (the costs of other equipment


and machinery so used shall be recovered through depreciation


as provided in paragraph (g));


(2) All losses actually sustained and charged off during the


fiscal year (including but not limited to casualty losses,


losses upon the sale or other disposition of property and


losses on account of bad debts) to the extent that they are


not compensated by insurance or otherwise;


(5) All costs of transporting the petroleum from the Subject


Area to the processing plant or refinery and/or the place. Qf sale;


(4) All security and communication coots including, without


limitation to, police and other security charges, postal


charges,.cable charges, radiogram charges, telegram and


tele-typewriter' charges incurred solely in connection with


 (5) Interest paid on loan funds borrowed from abroad provided


that the loan agreement has been submitted to and approved


by the Government;


(6) Interest paid on loan funds borrowed in Ethiopia to the


extent and subject to the conditions prescribed in the


Income Tax Proclamation and Regulations;


(7) Losses incurred during any of the five (5) preceding years


(such losses being i,n excess of the deductions specified


herein and in xmrag^aph (g) over Gross Income) to the extent


that such losses have not been deducted in any prior year


or years; \'.....•.


(8) Taxes, r*nt and roya,lty'paidAby the Gompany within the


Tax Year to the Government or ahyvpolitical subdivision


thereof (othQ.r ythah income-taxes "and Eligible Taxes, as


described in paragraphs\(a-)» (b) and (d) of this Article,


and any ponaltle's'-azid interest on taxes) including, but


not limited tp,*‘"all charges referred to in subparagraphs


(5) through (8) of paragraph (d) above, as well as levies


of any nature whatsoever for highways, development,


education, health, water or utilities as may be provided


from time to time.


(g) Depreciation and amortisation shall include eligible


deductions duo in any fiscal year on account of the depreciation


or writing off of cp.pital or expenditures previously incurred by


the Company, until the same have been fully depreciated and


amortisaa, as proa^ided below, viss


(1) On all Exploration Costs incurred after the Effective Date


and prior to the seventh (7th) year following the Date


of Commencement of Operations at such rate as the Company


may from time to time choose, not exceeding the followings


 (5) Interest paid on loan funds borrowed from abroad provided


that the loan agreement has been submitted to and approved


by the Government;


(6) Interest paid on loan funds borrowed in Ethiopia to the


extent and subject to the conditions prescribed in the


Income Tax Proclamation and Regulations;


(7) Losses incurred during any of the five (5) preceding years


(such losses being i,n excess of the deductions specified


herein and in xmrag^aph (g) over Gross Income) to the extent


that such losses have not been deducted in any prior year


or years; \'.....•.


(8) Taxes, r*nt and roya,lty'paidAby the Gompany within the


Tax Year to the Government or ahyvpolitical subdivision


thereof (othQ.r ythah income-taxes "and Eligible Taxes, as


described in paragraphs\(a-)» (b) and (d) of this Article,


and any ponaltle's'-azid interest on taxes) including, but


not limited tp,*‘"all charges referred to in subparagraphs


(5) through (8) of paragraph (d) above, as well as levies


of any nature whatsoever for highways, development,


education, health, water or utilities as may be provided


from time to time.


(g) Depreciation and amortisation shall include eligible


deductions duo in any fiscal year on account of the depreciation


or writing off of cp.pital or expenditures previously incurred by


the Company, until the same have been fully depreciated and


amortisaa, as proa^ided below, viss


(1) On all Exploration Costs incurred after the Effective Date


and prior to the seventh (7th) year following the Date


of Commencement of Operations at such rate as the Company


may from time to time choose, not exceeding the followings


(i) in tho first (1st) year following the Date of


Commencement of Operations twenty percent (20%)


of such coots incurred prior to the end of such yearj


(ii) in the second (2nd) year following the Date of


Commencement of Operations that amount of such costs


which results when the sum of all such' costs


incurred prior to such year and not theretofore


deducted and all such costs incurred in that year


is divided by six (6);


(iii) in the third (3rd) year following the Date of


Commencement of Operations that amount of such costs


which results wfien‘‘4£e sum of all such costs incurred


prior to - such'-year and. riot theretofore deducted and


all' s deh'-- Costs incurred‘in that year is divided by


five" (5)5


(iv) in the”‘fourt-h’ (4th) year following the Date of


Ciommencement of Operations that amount of such


costs which results when the sum of all such costs


incurred prior to such year and not theretofore


deducted and all such costs incurred in that year


is divided by four (4)5





(v) in the fifth (5th) year following the Date of


Commencement of Operations that amount of such costs





which results when the sum of all such costs incurred


prior to such year and not theretofore deducted


and all such costs incurred in that year is divided


by three (3)»


(vi) in the sixth (6th) year following the Dn,te of


Conmencoment of Operations that amount of such costs


which results when the sum of all such costs incurred


prior to such year and not theretofore deducted and


all s ich costs incurred in that year is divided


4 4


by two (2)s


(i) in tho first (1st) year following the Date of


Commencement of Operations twenty percent (20%)


of such coots incurred prior to the end of such yearj


(ii) in the second (2nd) year following the Date of


Commencement of Operations that amount of such costs


which results when the sum of all such' costs


incurred prior to such year and not theretofore


deducted and all such costs incurred in that year


is divided by six (6);


(iii) in the third (3rd) year following the Date of


Commencement of Operations that amount of such costs


which results wfien‘‘4£e sum of all such costs incurred


prior to - such'-year and. riot theretofore deducted and


all' s deh'-- Costs incurred‘in that year is divided by


five" (5)5


(iv) in the”‘fourt-h’ (4th) year following the Date of


Ciommencement of Operations that amount of such


costs which results when the sum of all such costs


incurred prior to such year and not theretofore


deducted and all such costs incurred in that year


is divided by four (4)5





(v) in the fifth (5th) year following the Date of


Commencement of Operations that amount of such costs





which results when the sum of all such costs incurred


prior to such year and not theretofore deducted


and all such costs incurred in that year is divided


by three (3)»


(vi) in the sixth (6th) year following the Dn,te of


Conmencoment of Operations that amount of such costs


which results when the sum of all such costs incurred


prior to such year and not theretofore deducted and


all s ich costs incurred in that year is divided


4 4


by two (2)s


In the seventh (7th) year following the Date of Commencement


of Operations and all years subsequent thereto all


Exploration Costs incurred during the tax year involved


and all Exploration Costs incurred in year prior to the


tax year involved not theretofore deducted, or such parts


thereof as the Company may chooses


On expenditure incurred by the Company for the extension,


prolongation or improvement of the life of an existing


Mining Operation at the rate of fifteen percent (15%)


of cost per annum, provided always that such expenditure


has obtained the prior writ ten., approval of the Government


and provided further tfcst?"../^


(i) the criui.pme'nt''..ahd/or machinery acquired is not a


secondhand asset, aini'ess- otherwise agreed by the


parties;


(ii) the equipment and/or machinery is not disposed


af in"the next five (5) years from the date it is


brought into use in the Subject Area;


(in) the equipment and/or machinery does not become


obsolete or useless for the next three (3) years


from the date that such equipment or machinery is


brought into use; and


(iv) the funds for the acquisition of the machinery


and/or equipment are not borrowed funds unless the


Minister otherwise agrees;


for the purpose of this subparagraph "Existing Mining


Operations" shall mean any Mining Operation after operations


have been commenced thereat - the depreciation or writing


off of any expenditure inourred prior to that date shall


begin on the date that such Mining Operation commencess


On all plant and machinery an annual rate of sixteen percent


(16%) for the first year and twelve percent (12%) for the


4 5


following yearss


In the seventh (7th) year following the Date of Commencement


of Operations and all years subsequent thereto all


Exploration Costs incurred during the tax year involved


and all Exploration Costs incurred in year prior to the


tax year involved not theretofore deducted, or such parts


thereof as the Company may chooses


On expenditure incurred by the Company for the extension,


prolongation or improvement of the life of an existing


Mining Operation at the rate of fifteen percent (15%)


of cost per annum, provided always that such expenditure


has obtained the prior writ ten., approval of the Government


and provided further tfcst?"../^


(i) the criui.pme'nt''..ahd/or machinery acquired is not a


secondhand asset, aini'ess- otherwise agreed by the


parties;


(ii) the equipment and/or machinery is not disposed


af in"the next five (5) years from the date it is


brought into use in the Subject Area;


(in) the equipment and/or machinery does not become


obsolete or useless for the next three (3) years


from the date that such equipment or machinery is


brought into use; and


(iv) the funds for the acquisition of the machinery


and/or equipment are not borrowed funds unless the


Minister otherwise agrees;


for the purpose of this subparagraph "Existing Mining


Operations" shall mean any Mining Operation after operations


have been commenced thereat - the depreciation or writing


off of any expenditure inourred prior to that date shall


begin on the date that such Mining Operation commencess


On all plant and machinery an annual rate of sixteen percent


(16%) for the first year and twelve percent (12%) for the


4 5


following yearss


(5) On buildings and facilities therein (other than plant


and machinery) an annual rate of five percent (5%)i


(6) On aircraft, vessels and motor vehicles an a,nnual rate


of twenty percent (20%)%


(7) On all other physical assets an annual rate in accordance


with the provisions of the Ethiopian Income Tax Regulations,


unless a special rate of depreciation is mutually agreed


upon.


GO Notwithstanding the provisions of the preceding sections,


if the Company shall at any time recover by way of compensation,


insurance money, sale or otherwise, afty part or the whole of any


expenditure which has been deduc-tedy-\depreciated or written off


for tax purposes, the ajpoukt..-.of• such redovb.D^r shall be brought to-


account and treated-, as>ihcome for-.-tax purposes in the year in


which it accrues. \ \





(i) Any deduot’ions-fbr payments to affiliates shall be shown


to the satisfaction of the Government to be fair and reasonable


and not greater than the amount that would have been paid to an


independent party.


(j) Nothing in this Article shall be taken as permitting the


deduction of the following items of expenditure in determining the


Company*s net profits?


(1) Penalties paid or any sum forfeited under this Agreement


or any law from time to time in force in the Empire of


Ethiopia, or any political subdivision thereof;


(2) Foreign taxa-tion paid on income from sources within Ethiopia;


(5) Rents or leasing charges paid to affiliates for properties


or facilities located in or outside the Empire of Ethiopia


unless previously approved by the Minister;





46


(5) On buildings and facilities therein (other than plant


and machinery) an annual rate of five percent (5%)i


(6) On aircraft, vessels and motor vehicles an a,nnual rate


of twenty percent (20%)%


(7) On all other physical assets an annual rate in accordance


with the provisions of the Ethiopian Income Tax Regulations,


unless a special rate of depreciation is mutually agreed


upon.


GO Notwithstanding the provisions of the preceding sections,


if the Company shall at any time recover by way of compensation,


insurance money, sale or otherwise, afty part or the whole of any


expenditure which has been deduc-tedy-\depreciated or written off


for tax purposes, the ajpoukt..-.of• such redovb.D^r shall be brought to-


account and treated-, as>ihcome for-.-tax purposes in the year in


which it accrues. \ \





(i) Any deduot’ions-fbr payments to affiliates shall be shown


to the satisfaction of the Government to be fair and reasonable


and not greater than the amount that would have been paid to an


independent party.


(j) Nothing in this Article shall be taken as permitting the


deduction of the following items of expenditure in determining the


Company*s net profits?


(1) Penalties paid or any sum forfeited under this Agreement


or any law from time to time in force in the Empire of


Ethiopia, or any political subdivision thereof;


(2) Foreign taxa-tion paid on income from sources within Ethiopia;


(5) Rents or leasing charges paid to affiliates for properties


or facilities located in or outside the Empire of Ethiopia


unless previously approved by the Minister;





46


(4) Sales commissions or other payments of a similar nature


to an affiliate for the sale of the petroleum to other


affiliates*


(k) Uo withholding or other taxes shall be levied on the following


payments effected by the Ethiopian Company to the Company or


other persons, firms or corporations resident abroad in respect ofs


(l) Interest and amortisation of loans approved under


Article VIII?


(2) Dividends on shares of the Ethiopian Company incorporated


tinder Article III.


AS'nijRT.W'xif*


BOITO--PAlkEltTS AND -iSMS \


(a) The Company .sball"* pay to the 'Government in United States


dollars or other aCceptable currency after the Date of Commencement


of Operations a single■.j^i&ent by way of production bonus on the


following rates {


(1) When daily production during the preceding month averages


nineteen thousand (19,000) barrels, a bonus of United States


dollars ;


(2) When daily production during the preceding month averages


thirty-eight thousand (38,000) barrels a bonus of United


States dollars s


(3) When daily production during the preceding month averages


seventy-five thousand barrels a bonus of United States


dollars ___ *


The amount thereof shall not be a Deductible Cost for the purpose


of calculating the Taxable Income of the Company.


(4) Sales commissions or other payments of a similar nature


to an affiliate for the sale of the petroleum to other


affiliates*


(k) Uo withholding or other taxes shall be levied on the following


payments effected by the Ethiopian Company to the Company or


other persons, firms or corporations resident abroad in respect ofs


(l) Interest and amortisation of loans approved under


Article VIII?


(2) Dividends on shares of the Ethiopian Company incorporated


tinder Article III.


AS'nijRT.W'xif*


BOITO--PAlkEltTS AND -iSMS \


(a) The Company .sball"* pay to the 'Government in United States


dollars or other aCceptable currency after the Date of Commencement


of Operations a single■.j^i&ent by way of production bonus on the


following rates {


(1) When daily production during the preceding month averages


nineteen thousand (19,000) barrels, a bonus of United States


dollars ;


(2) When daily production during the preceding month averages


thirty-eight thousand (38,000) barrels a bonus of United


States dollars s


(3) When daily production during the preceding month averages


seventy-five thousand barrels a bonus of United States


dollars ___ *


The amount thereof shall not be a Deductible Cost for the purpose


of calculating the Taxable Income of the Company.


(b) The Company shall pay to the Government in United States


dollars or other acceptable currency during each year as hereinafter


provided starting from the first (1st) anniversary of the Effective


Date of this Agreement an annual rent payable in advance in


respect of the Subject Area held from time to time by the Company


at the following rates?


(1) During the second (2nd) year after the Effective Date


of this Agreement at the rate of United States dollars


for each square kilometre then


held by the Company;


(2) During the third (3rd) year after the Effective Date of


this Agreement at the rate': of United \Sta.t90 dollars


__ %' ; % " for each square kilometre then


held by the'..dompahy; . - '


(3) During the fourth (4th)-year after the Effective Date of


this Agreement’ ah ’-the rate of United States dollars


_'v _ for each square kilometre then


held by the Company;


(4) During the fifth (5th) year after the Effective Date of


this Agreement at the rate of United States dollars


__for each square kilometre then


held by the Company;


(5) During the sixth (6th) year after the Effective Date Of


this Agreement at the rate of United States dollars


for each square kilometre then


held by the Company;


(6) During the seventh(7th) and each subsequent year after the


Effective Date of this Agreement at the rate of United States


dollars __ for each square


kilometre then held by the Company.





48


(b) The Company shall pay to the Government in United States


dollars or other acceptable currency during each year as hereinafter


provided starting from the first (1st) anniversary of the Effective


Date of this Agreement an annual rent payable in advance in


respect of the Subject Area held from time to time by the Company


at the following rates?


(1) During the second (2nd) year after the Effective Date


of this Agreement at the rate of United States dollars


for each square kilometre then


held by the Company;


(2) During the third (3rd) year after the Effective Date of


this Agreement at the rate': of United \Sta.t90 dollars


__ %' ; % " for each square kilometre then


held by the'..dompahy; . - '


(3) During the fourth (4th)-year after the Effective Date of


this Agreement’ ah ’-the rate of United States dollars


_'v _ for each square kilometre then


held by the Company;


(4) During the fifth (5th) year after the Effective Date of


this Agreement at the rate of United States dollars


__for each square kilometre then


held by the Company;


(5) During the sixth (6th) year after the Effective Date Of


this Agreement at the rate of United States dollars


for each square kilometre then


held by the Company;


(6) During the seventh(7th) and each subsequent year after the


Effective Date of this Agreement at the rate of United States


dollars __ for each square


kilometre then held by the Company.





48


If prior to the commencement of any of the foregoing years, the


Company has drilled at least three (5) wells in the Subjeot Area,


no further rental shall be due under this Agreement* If, prior


to the commencement of the eighth (8th) year (i) the Company has


not drilled at least three (3) wells in the Subject Area, or (ii)


the Date of Commencement of Operations has not occurred, the annual


rental shall continue at the rate of United States dollars


. ' ' for each square kilometre then held by the


Company*











A&CIC^E XIII , •, \>.y*


QQTO^i^’-PARTICIFA^Iofe. '


(a) Commencing with the -first issue, of. any voting shares of the


Ethiopian Company to any person'-,.;’ firm or corporation other than


• ; and/or its


respective affiliates,, .and continuing thereafter with respect to


all subsequent issues of such shares, twenty-five percent (25%)


of each issue of such shares issued or proposed to be issued by


the Company shall first be offered in Ethiopian dollars to the


Government and/or its agents for subscription by the Government and/or


its agents for a period of four (4) months from the date of the


offering of such particular issue* The purchase price of the voting


shares subscribed to by the Government and/or its agents shall be


met out of:




















4 9


If prior to the commencement of any of the foregoing years, the


Company has drilled at least three (5) wells in the Subjeot Area,


no further rental shall be due under this Agreement* If, prior


to the commencement of the eighth (8th) year (i) the Company has


not drilled at least three (3) wells in the Subject Area, or (ii)


the Date of Commencement of Operations has not occurred, the annual


rental shall continue at the rate of United States dollars


. ' ' for each square kilometre then held by the


Company*











A&CIC^E XIII , •, \>.y*


QQTO^i^’-PARTICIFA^Iofe. '


(a) Commencing with the -first issue, of. any voting shares of the


Ethiopian Company to any person'-,.;’ firm or corporation other than


• ; and/or its


respective affiliates,, .and continuing thereafter with respect to


all subsequent issues of such shares, twenty-five percent (25%)


of each issue of such shares issued or proposed to be issued by


the Company shall first be offered in Ethiopian dollars to the


Government and/or its agents for subscription by the Government and/or


its agents for a period of four (4) months from the date of the


offering of such particular issue* The purchase price of the voting


shares subscribed to by the Government and/or its agents shall be


met out of:




















4 9


(1) that part of the Company* s profits to which the Government


would be entitled as a shareholder;


(2) royalties (in cash or in kind) accruing to the Government


after subscription;


(3) bonus and other amounts of all kinds accruing to the Government


he reminder;


(4) income and other taxes payable by the Company after suoh


subscription by the Government;


and the Company may apply such amounts or proceeds realised therefrom


against such liability until fully satisfied,


(b) The obligation to keep available twenty-five peroent (25%)


of eaoh successive issue of votiug'Shaie's for subscription by the


Government and/or its agents-vfer-.the corresponding four (4) month


period shall not be minimised or affected by the fact that at the


date of any particular'issue of’ suoh share the Government and/or its


agents are already shareholder’s of the Company, The Company shall


submit quarterly reports' irb the Ministry of Mines of the number of


voting shares of each issue which initially were made available to


the Government and/or its agents, the number of voting shares subscribed


by the Government and/or its agents, the number of voting share


remaining unsubscribed at the end of the corresponding four (4) month


period and the number subsequently disposed of,


(o) Nothing herein shall:


(1) prohibit issuance of non-voting shares with preferences as


to dividends and capital, always provided that suoh non-voting


preferred shares are redeemable for cash at the sole election


of the Company; or


(1) that part of the Company* s profits to which the Government


would be entitled as a shareholder;


(2) royalties (in cash or in kind) accruing to the Government


after subscription;


(3) bonus and other amounts of all kinds accruing to the Government


he reminder;


(4) income and other taxes payable by the Company after suoh


subscription by the Government;


and the Company may apply such amounts or proceeds realised therefrom


against such liability until fully satisfied,


(b) The obligation to keep available twenty-five peroent (25%)


of eaoh successive issue of votiug'Shaie's for subscription by the


Government and/or its agents-vfer-.the corresponding four (4) month


period shall not be minimised or affected by the fact that at the


date of any particular'issue of’ suoh share the Government and/or its


agents are already shareholder’s of the Company, The Company shall


submit quarterly reports' irb the Ministry of Mines of the number of


voting shares of each issue which initially were made available to


the Government and/or its agents, the number of voting shares subscribed


by the Government and/or its agents, the number of voting share


remaining unsubscribed at the end of the corresponding four (4) month


period and the number subsequently disposed of,


(o) Nothing herein shall:


(1) prohibit issuance of non-voting shares with preferences as


to dividends and capital, always provided that suoh non-voting


preferred shares are redeemable for cash at the sole election


of the Company; or


 (2) limit the type and number of authorised shares of the


Company? or


(5) limit the transferability of issued shares.


(d) The price at which voting shares shall be offered for sale


to the Government and/or its agents shall be the book value of


the shares and Ethiopian dollars received in respect of .sales


hereunder shall be convertible into United States dollars or other


acceptable convertible currencies for repatriation.


(e) When twenty-five percent (23%) of the voting shares of the


Ethiopian Company outstanding have been transferred to the Government


and/or its agents as provided in this Article, the Government and/or


its agents shall have the right sa.'lphg as such percentage is so


held to nominate one quarter \o£ the’ members efVthe Board of Directors


of the Ethiopian Company;;^n.d "affiliates,-o;£ the Ethiopian Company


who are shareholders 'will vote in, favour of such nominees.


Each holder of y.oting, shares of the Ethiopian Company shall


have the right to cast' -one vote for each share held on all matters


submitted to a vote of shareholders.


ARTICLE XIV


REFINERY


After the Date of Commencement of Operations the Company,


if requested by the Government, shall effect feasibility studies and,


if favourable, construct or cause to be constructed a refinery in


Ethiopia, provided that the Company need not construct a refinery


if the local regional market conditions and prices, supply conditions


and prices, cost of labour, equipment and materials, cost and


availability of financing or any other factor or matter would not


make the refinery operation a profitable and economic refinery


operation or investment.





c 1


w* I


 (2) limit the type and number of authorised shares of the


Company? or


(5) limit the transferability of issued shares.


(d) The price at which voting shares shall be offered for sale


to the Government and/or its agents shall be the book value of


the shares and Ethiopian dollars received in respect of .sales


hereunder shall be convertible into United States dollars or other


acceptable convertible currencies for repatriation.


(e) When twenty-five percent (23%) of the voting shares of the


Ethiopian Company outstanding have been transferred to the Government


and/or its agents as provided in this Article, the Government and/or


its agents shall have the right sa.'lphg as such percentage is so


held to nominate one quarter \o£ the’ members efVthe Board of Directors


of the Ethiopian Company;;^n.d "affiliates,-o;£ the Ethiopian Company


who are shareholders 'will vote in, favour of such nominees.


Each holder of y.oting, shares of the Ethiopian Company shall


have the right to cast' -one vote for each share held on all matters


submitted to a vote of shareholders.


ARTICLE XIV


REFINERY


After the Date of Commencement of Operations the Company,


if requested by the Government, shall effect feasibility studies and,


if favourable, construct or cause to be constructed a refinery in


Ethiopia, provided that the Company need not construct a refinery


if the local regional market conditions and prices, supply conditions


and prices, cost of labour, equipment and materials, cost and


availability of financing or any other factor or matter would not


make the refinery operation a profitable and economic refinery


operation or investment.





c 1


w* I


Aiii'jLOiiJJi aV


IMMIGRATION AND EMIGRATION


The Government shall, in accordance with law, cause to be





issued to persons designated by the Company for the performance


of Operations contemplated or permitted by this Agreement, and to


their dependents, such visas, work permits and other documentation


as may be required for free access to and exist from the Empire


of Ethiopia and for the performance of such Operations under


this Agreement.








ARTICLE XVI ....


PAYMENTS AMD, P0-BEI.GH- -jfeXCHAHGE


(a) It is contemplated --that-..the foreign, exchange requirements


to establish and ope the Operatip-np. will require little or no


need to transfer Ethiopian dollars'-into foreign currency and that


generally all of the do^reatic costs of the operations will be


met through conve^&i',o^i..-into Ethiopian dollars of freely oonverticle


foreign currency obtained by the Company from sources outside of


Ethiopia.


(b) In order to keep the Government and the Exchange Control


authorities informed of its prospective and actual foreign exchange


transactions the Company shall inform the Government and the Bank


in writing and in such form and detail as the Government or the


Bank may requests


(1) Of the location of the Company*s bank accounts in


Ethiopia and abroad, which latter (that is external)


accounts shall be opened in banks approved by the


National Bank of Ethiopia;


(2) Annually, before the commencement of each fiscal year,


of the Company*s estimated receipts and disbursements


of foreign exchange by principal headings during that


year (which statement nay be amended from time to time


N 52


if this appears necessary);


Aiii'jLOiiJJi aV


IMMIGRATION AND EMIGRATION


The Government shall, in accordance with law, cause to be





issued to persons designated by the Company for the performance


of Operations contemplated or permitted by this Agreement, and to


their dependents, such visas, work permits and other documentation


as may be required for free access to and exist from the Empire


of Ethiopia and for the performance of such Operations under


this Agreement.








ARTICLE XVI ....


PAYMENTS AMD, P0-BEI.GH- -jfeXCHAHGE


(a) It is contemplated --that-..the foreign, exchange requirements


to establish and ope the Operatip-np. will require little or no


need to transfer Ethiopian dollars'-into foreign currency and that


generally all of the do^reatic costs of the operations will be


met through conve^&i',o^i..-into Ethiopian dollars of freely oonverticle


foreign currency obtained by the Company from sources outside of


Ethiopia.


(b) In order to keep the Government and the Exchange Control


authorities informed of its prospective and actual foreign exchange


transactions the Company shall inform the Government and the Bank


in writing and in such form and detail as the Government or the


Bank may requests


(1) Of the location of the Company*s bank accounts in


Ethiopia and abroad, which latter (that is external)


accounts shall be opened in banks approved by the


National Bank of Ethiopia;


(2) Annually, before the commencement of each fiscal year,


of the Company*s estimated receipts and disbursements


of foreign exchange by principal headings during that


year (which statement nay be amended from time to time


N 52


if this appears necessary);


(3) Quarterly, within thirty (30) days of the end of each


quarter, of the Company*s actual receipts and disbursements


of foreign exchange by principal headings during the


preceding quarter.


(c) Subject to compliance with paragraph (b) and all relevant


foreign exchange regulations, and to the deposit with-the Bank


of copies of this Agreement and all foreign loan contracts as


approved by the Government and the Bank, the Company shall be


entitled to purchase for payment abroad, to the same that same


cannot be covered by or purchased with its current and prospective


resources of foreign exchange, the foxeign currencies needed in


pursuance of the Operations under‘t]iis Agreement and to pay for


goods and services acquirei.-abr'dad, service £interest and amortisation)


of external debt, ..and-.dividends payable-on the Ethiopian Company*s


shares held abroad. '' .•••' \


(d) Subject 16 the’-Company making payments to the Government


when due for royalty, rent, income and other taxes as well as other


payments contemplated by this Agreement, and subject to compliance


with paragraphs (b) and (c) above, the Company may retain abroad


temporarily the proceeds of foreign capital raised by my of


equity shares or loans borrowed abroad, and of foreign sales of


petroleum, to the extent that those are foreseen to be required


to meet its current obligations under paragraph (c) above.


(e) All payments contemplated under this Agreement shall be


made in acceptable currency, unless the Government consents


otherwise* Payments shall be effected by the Company depositing


the same in the Bank (or such other bank within the Empire of


Ethiopia as the Government may designate) for the account of the


Government.


(3) Quarterly, within thirty (30) days of the end of each


quarter, of the Company*s actual receipts and disbursements


of foreign exchange by principal headings during the


preceding quarter.


(c) Subject to compliance with paragraph (b) and all relevant


foreign exchange regulations, and to the deposit with-the Bank


of copies of this Agreement and all foreign loan contracts as


approved by the Government and the Bank, the Company shall be


entitled to purchase for payment abroad, to the same that same


cannot be covered by or purchased with its current and prospective


resources of foreign exchange, the foxeign currencies needed in


pursuance of the Operations under‘t]iis Agreement and to pay for


goods and services acquirei.-abr'dad, service £interest and amortisation)


of external debt, ..and-.dividends payable-on the Ethiopian Company*s


shares held abroad. '' .•••' \


(d) Subject 16 the’-Company making payments to the Government


when due for royalty, rent, income and other taxes as well as other


payments contemplated by this Agreement, and subject to compliance


with paragraphs (b) and (c) above, the Company may retain abroad


temporarily the proceeds of foreign capital raised by my of


equity shares or loans borrowed abroad, and of foreign sales of


petroleum, to the extent that those are foreseen to be required


to meet its current obligations under paragraph (c) above.


(e) All payments contemplated under this Agreement shall be


made in acceptable currency, unless the Government consents


otherwise* Payments shall be effected by the Company depositing


the same in the Bank (or such other bank within the Empire of


Ethiopia as the Government may designate) for the account of the


Government.


(f) Every expatriate employee of the Company, being employed


and residing in Ethiopia in pursuance of the provisions of this


Agreement, shall be entitled to remit to his home country or the


country of which he is a citizens


d) Up to thirty-five percent (35%) each month of the net


salary after tax received by him in Ethiopia? plus


(2) On approval by the Bank any additional sumo payable out


of his salary received in Ethiopia, as may be required


to meet insurance premia, maintenance of dependents,


tuition and other costs for his children incurred abroad?


(5) On termination of his employment, in Ethiopia such stuns as


he can show to have be an-reasonably accumulated by way


of savings from h±p\aaf&ry received\in Ethiopia or from


the disposal-, (subject to the provisions of this Agreement)


of movable property ..owned In Ethiopia,


(g) Except as otherwi's’e-.-.p'rovided herein, the Exchange Control


Laws and Regulations’normally applicable in the Empire of Ethiopia


shall apply to the Company’s Operations hereunder* In any foreign


exchange transaction arising out of this Agreement the Company


and its employees shall be entitled to the relevent exchange


facilities, rates and charges on no less favourable terms than


those which are currently applied in respect of similar transactions


with other mining operations or the general public*


ARTICLE TTTi'.t


EMPLOYMENT AND TRAINING OF ETHIOPIAN PERSONNEL ART) EMPLOYEE BENEFITS


(a) The Company shall employ Ethiopian Nationals in the various


phases of its activities to the maximum extent possible and shall


to this end educate, train and give experience to same in the


various branches (both technical and administrative) of the


petroleum industry, it being understood that the Company shalls


5 4


(f) Every expatriate employee of the Company, being employed


and residing in Ethiopia in pursuance of the provisions of this


Agreement, shall be entitled to remit to his home country or the


country of which he is a citizens


d) Up to thirty-five percent (35%) each month of the net


salary after tax received by him in Ethiopia? plus


(2) On approval by the Bank any additional sumo payable out


of his salary received in Ethiopia, as may be required


to meet insurance premia, maintenance of dependents,


tuition and other costs for his children incurred abroad?


(5) On termination of his employment, in Ethiopia such stuns as


he can show to have be an-reasonably accumulated by way


of savings from h±p\aaf&ry received\in Ethiopia or from


the disposal-, (subject to the provisions of this Agreement)


of movable property ..owned In Ethiopia,


(g) Except as otherwi's’e-.-.p'rovided herein, the Exchange Control


Laws and Regulations’normally applicable in the Empire of Ethiopia


shall apply to the Company’s Operations hereunder* In any foreign


exchange transaction arising out of this Agreement the Company


and its employees shall be entitled to the relevent exchange


facilities, rates and charges on no less favourable terms than


those which are currently applied in respect of similar transactions


with other mining operations or the general public*


ARTICLE TTTi'.t


EMPLOYMENT AND TRAINING OF ETHIOPIAN PERSONNEL ART) EMPLOYEE BENEFITS


(a) The Company shall employ Ethiopian Nationals in the various


phases of its activities to the maximum extent possible and shall


to this end educate, train and give experience to same in the


various branches (both technical and administrative) of the


petroleum industry, it being understood that the Company shalls


5 4


(1) Always give priority in employment to Ethiopian Nationals


possessing the requisite qualifications?


(2) Give equal treatment, facilities and opportunities to all


employees in the same job classification regardless of


'nationality;


(5) Cooperate in programmes of grants to educational institutions


in Ethiopia, after the Date of Commencement of Operations.


(b) The Compt?,ny shall furnish such free medical care to all its


employees and all Government officials employed in the Operations


Area as is reasonably adequate and after the Date of Commencement


of Opera-tions shall establish, staff: (and maintain a dispensary,


clinic or hospital which shall*’'be‘'3?e'&sonably adequate under the


circumstances» Provided',", however, tha t \wh"'eiie ver the Company


employs more than •two.--iiundred and;' fifty- (250) employees in any


one region, it shall maintaih-.a-. dispensary or hospital headed by


a medical director.


(c) After the;' Date""of Commencement of Operations, the Company


shall provide, free of charge, primary and secondary school


education for children of all employees residing in or around


the Subject Area, if and when there is no school or a shortage of


schools. Rules, regulations and standards established by the


Ministry of Education shall be strictly observed.








ARTICLE XVIII


PROMOTION OF NATIONAL INTERESTS


(a) In the conduct of its activities under this Agreement the


Company and its contractors and subcontractors shall utilise





Ethiopian services, materials produced from Ethiopian sources,


and products manufactured in Ethiopia to the extent that such


services, materials and products are available on competitive


terms, delivery, availability of parts and quantity bdsis.


(1) Always give priority in employment to Ethiopian Nationals


possessing the requisite qualifications?


(2) Give equal treatment, facilities and opportunities to all


employees in the same job classification regardless of


'nationality;


(5) Cooperate in programmes of grants to educational institutions


in Ethiopia, after the Date of Commencement of Operations.


(b) The Compt?,ny shall furnish such free medical care to all its


employees and all Government officials employed in the Operations


Area as is reasonably adequate and after the Date of Commencement


of Opera-tions shall establish, staff: (and maintain a dispensary,


clinic or hospital which shall*’'be‘'3?e'&sonably adequate under the


circumstances» Provided',", however, tha t \wh"'eiie ver the Company


employs more than •two.--iiundred and;' fifty- (250) employees in any


one region, it shall maintaih-.a-. dispensary or hospital headed by


a medical director.


(c) After the;' Date""of Commencement of Operations, the Company


shall provide, free of charge, primary and secondary school


education for children of all employees residing in or around


the Subject Area, if and when there is no school or a shortage of


schools. Rules, regulations and standards established by the


Ministry of Education shall be strictly observed.








ARTICLE XVIII


PROMOTION OF NATIONAL INTERESTS


(a) In the conduct of its activities under this Agreement the


Company and its contractors and subcontractors shall utilise





Ethiopian services, materials produced from Ethiopian sources,


and products manufactured in Ethiopia to the extent that such


services, materials and products are available on competitive


terms, delivery, availability of parts and quantity bdsis.


(b) To maximise the regional economic aid and social benefits


which the Operations can generate, the Company will also;


(1) Coordinate all of its studies of the Operations1 infra¬


structure requirements with local and regional infrastructur


studies undertaken by the Government and interested local,


foreign and international public and private entities,


with a view towards the integration of the infrastructure


of the Company with that of the region;


(2) Assist and advise the Government in its planning of the


infrastructure and regional development which the Company


may deem useful to the Operations and to the existing and


future industries and activities in the region of the


Operations* V''- . \ •


pTlC^E..-' XIX


IMPORTS t IISPOSA-hCAirO'EXPHTS OF PROPERTY AlTD PRODUCTS


(a) Tho Corapahy,-for itself, its contractors and subcontractors,


shall be entitled to import into the Empire of Ethiopia any and


all drilling, geological, geophysical, production, refining,


processing, transportation and other machinery and equipment


useful in the Mining or Exploration Operations, including aircraft,


vessels, vehicles and other transportation equipment and parts


therefor (other than sedan cars, and fuel therefor), fuels,


chemicals, lubricants, films, seismic tapes, house-trailors,


office-trailers, disassembled prefabricated structures and other


property of any kind or nature free of import taxes, charges,


duties, levies and imposts of any kind, provided always thats


(’]) i)ll the items are wholly and exclusively destined for


use in tho Operations hereunder and are imported into


Ethiopia in the name of or consigned to the Company?


(2) That similar goods of fairly equal quality, delivery,


parts availability and price are not being produced in


5 6


Ethiopia;


(b) To maximise the regional economic aid and social benefits


which the Operations can generate, the Company will also;


(1) Coordinate all of its studies of the Operations1 infra¬


structure requirements with local and regional infrastructur


studies undertaken by the Government and interested local,


foreign and international public and private entities,


with a view towards the integration of the infrastructure


of the Company with that of the region;


(2) Assist and advise the Government in its planning of the


infrastructure and regional development which the Company


may deem useful to the Operations and to the existing and


future industries and activities in the region of the


Operations* V''- . \ •


pTlC^E..-' XIX


IMPORTS t IISPOSA-hCAirO'EXPHTS OF PROPERTY AlTD PRODUCTS


(a) Tho Corapahy,-for itself, its contractors and subcontractors,


shall be entitled to import into the Empire of Ethiopia any and


all drilling, geological, geophysical, production, refining,


processing, transportation and other machinery and equipment


useful in the Mining or Exploration Operations, including aircraft,


vessels, vehicles and other transportation equipment and parts


therefor (other than sedan cars, and fuel therefor), fuels,


chemicals, lubricants, films, seismic tapes, house-trailors,


office-trailers, disassembled prefabricated structures and other


property of any kind or nature free of import taxes, charges,


duties, levies and imposts of any kind, provided always thats


(’]) i)ll the items are wholly and exclusively destined for


use in tho Operations hereunder and are imported into


Ethiopia in the name of or consigned to the Company?


(2) That similar goods of fairly equal quality, delivery,


parts availability and price are not being produced in


5 6


Ethiopia;


Ho ‘building w-bxvto-bvtxoa o* o-tehea? ©omrtvuo tion materials


may bo imported for use in the construction of offioee


or living quarters except prefabricated struoturos, or


suoh other materials as are not included in the preceding


subparagraph;


(4) Foodstuffs, beverages, tobaoco products, toilet articles,


and clothing, imported by the Company and destined for


personal use and consumption by its personnal, shall not


be exempted fxoa any duty except, as regards clothing and


similar goods, wheat© the principal use of suoh items shall


be of a specialised character relevant to the Mining


Operations and which have been': apjocovod as Buoh for duty-free


importation by the Governments


(b) The Government shall'-..have' the right to -verify that any items


imported meet the . conditions set forth' in paragraph (a) above.


The Government shall' ensure ..ah. adejixidte procedure to expedite the


admission and olearano.e. 'by.i'Guotoms of all imports destined exclusively


for use in the Operations hereunder and Governmental verification


of suoh use#


(0) It is agreed and understood by the parties hereto that,


subject to the provisions of paragraph (e) hereunder, none of items


which have been imported free of taxes, ohargos, duties, levies


and imposts pursuant to paragraph (a) above shall be used in


operations other than those permitted or contomplated by this


Agreement,


(d) The Company, for itself, its contractors and subcontractors,


shall have the right to re-export free of all taxes, oharges,


duties, levies or imposts of any kind or nature imposed in oonneotion


with or collected at tho time of export, property whioh is no longer


required for use in the Operations carried out hereunder whioh was


originally imported free of oharges, taxes, duties, levies and


imposts as provided in paragraph (a) above, as well as their other


property on whioh duty was paid at the time of import, and shall


5 7


Ho ‘building w-bxvto-bvtxoa o* o-tehea? ©omrtvuo tion materials


may bo imported for use in the construction of offioee


or living quarters except prefabricated struoturos, or


suoh other materials as are not included in the preceding


subparagraph;


(4) Foodstuffs, beverages, tobaoco products, toilet articles,


and clothing, imported by the Company and destined for


personal use and consumption by its personnal, shall not


be exempted fxoa any duty except, as regards clothing and


similar goods, wheat© the principal use of suoh items shall


be of a specialised character relevant to the Mining


Operations and which have been': apjocovod as Buoh for duty-free


importation by the Governments


(b) The Government shall'-..have' the right to -verify that any items


imported meet the . conditions set forth' in paragraph (a) above.


The Government shall' ensure ..ah. adejixidte procedure to expedite the


admission and olearano.e. 'by.i'Guotoms of all imports destined exclusively


for use in the Operations hereunder and Governmental verification


of suoh use#


(0) It is agreed and understood by the parties hereto that,


subject to the provisions of paragraph (e) hereunder, none of items


which have been imported free of taxes, ohargos, duties, levies


and imposts pursuant to paragraph (a) above shall be used in


operations other than those permitted or contomplated by this


Agreement,


(d) The Company, for itself, its contractors and subcontractors,


shall have the right to re-export free of all taxes, oharges,


duties, levies or imposts of any kind or nature imposed in oonneotion


with or collected at tho time of export, property whioh is no longer


required for use in the Operations carried out hereunder whioh was


originally imported free of oharges, taxes, duties, levies and


imposts as provided in paragraph (a) above, as well as their other


property on whioh duty was paid at the time of import, and shall


5 7


■fitjLoO' have the right to dispose within the Empire of Ethiopia of


any property provided that, in the case of property imported under


import duty privileges as provided in paragraph (a), all taxes,


charges, duties, levies and imposts due thereupon in accordance


with the law then in force shall first he paid.


(e) The Company, for itself, its contractors and subcontractors, .


shall have the right at any time, with the approval of the Minister,


to remove from the Subject Area and transfer to any other area or


zone in which it may be carrying on operations pursuant to any


agreement with the Government or any subdivision thereof, any or


all of its installations, machinery, .equipment and facilities


without loss of rights granted .b^-..this'’’Articlo.


(f) The Company shall h4ye‘the’right..;to\ekp'ort from the Empire


of Ethiopia, without restriction rmd-'.'freo'of taxes, duties or other


charges on such exports, all. of. the-'Company*s petroleum produced


under this Agreement. The./Government shall ensure an adequate


procedure to expedite., thb clearance by Customs and the shipment of


♦all petroleum so exported.


(g) The Company may, for itself, its contractors and subcontractors


import personal and household goods and effects of employees and


their families taking up residence in Ethiopia, within six (6)


months of their arrival, free of all taxes, charges, duties, levies


and imposts. Such employees shall have, in addition to all other


rights reoognioed in Ethiopia with respect to such property, the


right to export same as well as any other property on which duty


was paid at the time of import, without payment of any taxes,


charges, duties, levies or imposts.


ARTICLE XX


SETTLEMENT OF DISPUTES


(a) If at any time during the continuance of this Agreement or


thereafter, there shall be any question or dispute with respect to


the construction, meaning or effect of this Agreement or arising


out of this Agreement or concerning the rights and obligations


■fitjLoO' have the right to dispose within the Empire of Ethiopia of


any property provided that, in the case of property imported under


import duty privileges as provided in paragraph (a), all taxes,


charges, duties, levies and imposts due thereupon in accordance


with the law then in force shall first he paid.


(e) The Company, for itself, its contractors and subcontractors, .


shall have the right at any time, with the approval of the Minister,


to remove from the Subject Area and transfer to any other area or


zone in which it may be carrying on operations pursuant to any


agreement with the Government or any subdivision thereof, any or


all of its installations, machinery, .equipment and facilities


without loss of rights granted .b^-..this'’’Articlo.


(f) The Company shall h4ye‘the’right..;to\ekp'ort from the Empire


of Ethiopia, without restriction rmd-'.'freo'of taxes, duties or other


charges on such exports, all. of. the-'Company*s petroleum produced


under this Agreement. The./Government shall ensure an adequate


procedure to expedite., thb clearance by Customs and the shipment of


♦all petroleum so exported.


(g) The Company may, for itself, its contractors and subcontractors


import personal and household goods and effects of employees and


their families taking up residence in Ethiopia, within six (6)


months of their arrival, free of all taxes, charges, duties, levies


and imposts. Such employees shall have, in addition to all other


rights reoognioed in Ethiopia with respect to such property, the


right to export same as well as any other property on which duty


was paid at the time of import, without payment of any taxes,


charges, duties, levies or imposts.


ARTICLE XX


SETTLEMENT OF DISPUTES


(a) If at any time during the continuance of this Agreement or


thereafter, there shall be any question or dispute with respect to


the construction, meaning or effect of this Agreement or arising


out of this Agreement or concerning the rights and obligations


hereunder, whioh cannot oe mutually resolved by the parties within


sixty (60) days, either party shall have the right to refer the


dispute to the International Centre for the Settlement of


Investment Disputes by Conoiliation and Arbitration as hereinafter


provided* Any of the parties to such dispute may oommenoe


conciliation or arbitration proceedings by giving notice to the


other party and to the Secretary General, International Centre for


the Settlement of Investment Disputes (inoluding in such notice a


statement of the question or dispute and of the olaim or contention


of the person giving notice).


(b) Ethiopian Law shall govern the conciliation and arbitration*


The place of conciliation and arbitration shall be in Addis Ababa


(Ethiopia) or such other place as thp parties may mutually agree*


(o) Pending the issue of., ei. decision or .avra,r.df..-tho operations or


activities that shall #avo’••given rise-.to \the'arbitration need not


be discontinued, •/b&t.Vlf' tho decision 'or award recognises that a


complaint was justified, .provision may be made in tho award for


suoh reparation or compensation in .vmpoct of suoh continued


operations and aotiyi-ties as shall be decided by tho arbitrator


to be appropriate. In the event of a dispute as to the Market Value


of petroleum (as definod in Artiole Il(j)) for the purpose of


taxation or payment by the Government for petroleum purchased by it,


the Market Value ponding the arbitration determination shall be tho


Posted Price (as defined in Artiole IX hereof) of the petroleum


involved, and if tho arbitration award fixes a different value,


appropriate reparation or compensation in respeot thereof shall


forthwith bo made, done or effected by the parties hereto and


provision thorofor may bo made in tho award*


(d) The decision of the award of the arbitrator shall be final


and binding upon the parties to this Agreement and upon any person


who participated as a party in such arbitration proceedings, and


such a person shall complay in good faith with tho decision*


(e) Should the International Centre for tho Settlement of


Investment Disputes be replaoed by, or its functions substantially


5 9


hereunder, whioh cannot oe mutually resolved by the parties within


sixty (60) days, either party shall have the right to refer the


dispute to the International Centre for the Settlement of


Investment Disputes by Conoiliation and Arbitration as hereinafter


provided* Any of the parties to such dispute may oommenoe


conciliation or arbitration proceedings by giving notice to the


other party and to the Secretary General, International Centre for


the Settlement of Investment Disputes (inoluding in such notice a


statement of the question or dispute and of the olaim or contention


of the person giving notice).


(b) Ethiopian Law shall govern the conciliation and arbitration*


The place of conciliation and arbitration shall be in Addis Ababa


(Ethiopia) or such other place as thp parties may mutually agree*


(o) Pending the issue of., ei. decision or .avra,r.df..-tho operations or


activities that shall #avo’••given rise-.to \the'arbitration need not


be discontinued, •/b&t.Vlf' tho decision 'or award recognises that a


complaint was justified, .provision may be made in tho award for


suoh reparation or compensation in .vmpoct of suoh continued


operations and aotiyi-ties as shall be decided by tho arbitrator


to be appropriate. In the event of a dispute as to the Market Value


of petroleum (as definod in Artiole Il(j)) for the purpose of


taxation or payment by the Government for petroleum purchased by it,


the Market Value ponding the arbitration determination shall be tho


Posted Price (as defined in Artiole IX hereof) of the petroleum


involved, and if tho arbitration award fixes a different value,


appropriate reparation or compensation in respeot thereof shall


forthwith bo made, done or effected by the parties hereto and


provision thorofor may bo made in tho award*


(d) The decision of the award of the arbitrator shall be final


and binding upon the parties to this Agreement and upon any person


who participated as a party in such arbitration proceedings, and


such a person shall complay in good faith with tho decision*


(e) Should the International Centre for tho Settlement of


Investment Disputes be replaoed by, or its functions substantially


5 9


»pon oar be transj crred to any new international body of


similar type and competence, the function of the Arbitration


Tribunal of the International Centre for the Settlement of


Investment Disputes provided by this Article shall be exercised


by the chief officer of such international body without' further


agreement among the parties*


(f) For the purposoo of such convention, the parties to this


Agreement hereby agree that the Company shall be troatec as a


national of ’ or of such other country designated


by the Company, unless the Government on grounds of Hatioj^al Interest


objects thereto*


(g) If the services of tho Centi;p\ are unavailable to tie parties


to this Agreement, then suph.. imsettled dispnteS--bhall be referred to


the International Chamb'an'.pf Commerco ’-to'-be settled under tl© rules


of nrooedure of tiie 'said Chambef -.df ..Commerce •


. ARTICLE y&X


.... frOR&B- MAJEURE


M The partie'n'heroto shall be excused from performance hereunder


if and so long as and to the extent that failure or delay in


perfomrnaoo is duo to fires, flood, general strike or a lookout*,


accident, epidemic, act of God, war, insurrection, riot, hostile acts;:


inability or delay in obtaining or transporting materials, equipment


or supplies; acts, orders, rules or regulations of governments other


than the Government of Ethiopia; proven technical and commercial


limitations of a nature of being insurmountable by the application


of reasonable diligence; or any other cause whether similar,


dissimilar, foreseen or unforeseen, which a party, having taken due


care, is unable to overcome by the exercise of reasonable diligence


and at a reasonable cost; and further without limitation, but applying


only to the Company, acts, rules or regulations or orders of the


Government or any public authority in Ethiopia or court which may


create delay despite good faith attempts to comply, which causes are


referred to in this Agreement as causes or reasons of Force Eajeure*


6 0


»pon oar be transj crred to any new international body of


similar type and competence, the function of the Arbitration


Tribunal of the International Centre for the Settlement of


Investment Disputes provided by this Article shall be exercised


by the chief officer of such international body without' further


agreement among the parties*


(f) For the purposoo of such convention, the parties to this


Agreement hereby agree that the Company shall be troatec as a


national of ’ or of such other country designated


by the Company, unless the Government on grounds of Hatioj^al Interest


objects thereto*


(g) If the services of tho Centi;p\ are unavailable to tie parties


to this Agreement, then suph.. imsettled dispnteS--bhall be referred to


the International Chamb'an'.pf Commerco ’-to'-be settled under tl© rules


of nrooedure of tiie 'said Chambef -.df ..Commerce •


. ARTICLE y&X


.... frOR&B- MAJEURE


M The partie'n'heroto shall be excused from performance hereunder


if and so long as and to the extent that failure or delay in


perfomrnaoo is duo to fires, flood, general strike or a lookout*,


accident, epidemic, act of God, war, insurrection, riot, hostile acts;:


inability or delay in obtaining or transporting materials, equipment


or supplies; acts, orders, rules or regulations of governments other


than the Government of Ethiopia; proven technical and commercial


limitations of a nature of being insurmountable by the application


of reasonable diligence; or any other cause whether similar,


dissimilar, foreseen or unforeseen, which a party, having taken due


care, is unable to overcome by the exercise of reasonable diligence


and at a reasonable cost; and further without limitation, but applying


only to the Company, acts, rules or regulations or orders of the


Government or any public authority in Ethiopia or court which may


create delay despite good faith attempts to comply, which causes are


referred to in this Agreement as causes or reasons of Force Eajeure*


6 0


The time within which the party affected may do or perform any act


or thing shall be extended for a period equivalent to the period


during which any of such Force Majeure causes-shall exist#


(b) Promptly, and in no event later than forty (40) days, after


any of the said causes shall have commenced to Operate and within


forty (40) days after any of the said causes shall have ceased to


operate, the party claiming benefit from this Article shall give the


other party notice of the fact that such cause has commenced to


operate and the date of such commencement, or such cessation, as the


case may be, unless .by reason of the existence of such cause the


said party is unable with reasonable ..diligence to do so, in which


event the said notioe shall be..glydi£ as' soon as is permitted by the


exercise of reasonable dil^gehc.©■;


(c) The existence Vof"cause specified in this Article shall not


constitute excuse for failure, of ^performance unless said notice is


given as provided he re in-..above.


(d) The party .claiming suspension or excuse from performance of


its obligations as'aforesaid shall promptly take appropriate measures


and precautions to remedy the cause and effect of Force Majeure


described in the said notice insofar as it is reasonably able to do


so at no increased costs with a view to restoration of normal


conditions with a minimum of delay? provided that the terms, of


settlement of any strike, lockout or other industrial disturbance


shall be wholly in the discretion of tho party claiming suspension


or excuse hereunder by reason thereof? and that party shall not be


required to accede to the demands of its opponents in any strike,


lockout, or industrial disturbance solely to remedy promptly the


Force Majeure theregy constituted.


(e) No delay, omission or course of dealing by either party


shall be interpreted or construed without that party*s oonsent to


be a waiver of any right or acquiesence in any default.


61


The time within which the party affected may do or perform any act


or thing shall be extended for a period equivalent to the period


during which any of such Force Majeure causes-shall exist#


(b) Promptly, and in no event later than forty (40) days, after


any of the said causes shall have commenced to Operate and within


forty (40) days after any of the said causes shall have ceased to


operate, the party claiming benefit from this Article shall give the


other party notice of the fact that such cause has commenced to


operate and the date of such commencement, or such cessation, as the


case may be, unless .by reason of the existence of such cause the


said party is unable with reasonable ..diligence to do so, in which


event the said notioe shall be..glydi£ as' soon as is permitted by the


exercise of reasonable dil^gehc.©■;


(c) The existence Vof"cause specified in this Article shall not


constitute excuse for failure, of ^performance unless said notice is


given as provided he re in-..above.


(d) The party .claiming suspension or excuse from performance of


its obligations as'aforesaid shall promptly take appropriate measures


and precautions to remedy the cause and effect of Force Majeure


described in the said notice insofar as it is reasonably able to do


so at no increased costs with a view to restoration of normal


conditions with a minimum of delay? provided that the terms, of


settlement of any strike, lockout or other industrial disturbance


shall be wholly in the discretion of tho party claiming suspension


or excuse hereunder by reason thereof? and that party shall not be


required to accede to the demands of its opponents in any strike,


lockout, or industrial disturbance solely to remedy promptly the


Force Majeure theregy constituted.


(e) No delay, omission or course of dealing by either party


shall be interpreted or construed without that party*s oonsent to


be a waiver of any right or acquiesence in any default.


61


 AATlCLfi xxu


AMENDMENTS


(a) except as is specifically provided in Article XXV hereof,


this Agreement may not be modified or amended except by written


agreement between the parties hereto.


(b) It is agreed and understood that the titles of the various


Articles of the present Agreement are for reasons of convenience only


and shall, therefore, in no way affect the construetionthereof.


ARTICLE XXIII


COVENANT Off PEACEFUL POSSESSION


The Government warrants that it has full ownership and property


rights in the Subject Area for the granting of this Agreement and


for the exploration and produc^ijdn. petroleun, and shall protect


the rights of the Company t‘o ':*tihe- peaceful possession and quiet


enjoyment thereof. .. \ ’


y:S'V* 'articlexfiflr, ’*■


CONTRG-LLiN'G CALENDAR


The Gregorian{Calendar shall be used and shall be the


Controlling Calendar-*’for the purposes of this Agreement.


ARTICLE XXV


OFFICES AND NOTICES


(a) The Company shall establish and maintain an office in the


Empire of Ethiopia as may be necessary or convenient for carrying


out the Operations hereunder.


(b) All communications and notices required to be sent by one


party hereto to the other shall be in writing in the English language


and shall be delivered in person or sent by mail (registered mail,


if available, with return receipt requested) with postage thereon


duly prepaid, or by telegraph or cable, to the address of such other


party as hereinafter is set out and shall be effective upon receipt;


provided, however, that any such communication or notice sent from


Ethiopia to a location in another country or from a location in


another country to Ethiopia sh&ll be sent by cable and confirmed


by airmail letter. All noticed shall be addressed to the Government


62


 AATlCLfi xxu


AMENDMENTS


(a) except as is specifically provided in Article XXV hereof,


this Agreement may not be modified or amended except by written


agreement between the parties hereto.


(b) It is agreed and understood that the titles of the various


Articles of the present Agreement are for reasons of convenience only


and shall, therefore, in no way affect the construetionthereof.


ARTICLE XXIII


COVENANT Off PEACEFUL POSSESSION


The Government warrants that it has full ownership and property


rights in the Subject Area for the granting of this Agreement and


for the exploration and produc^ijdn. petroleun, and shall protect


the rights of the Company t‘o ':*tihe- peaceful possession and quiet


enjoyment thereof. .. \ ’


y:S'V* 'articlexfiflr, ’*■


CONTRG-LLiN'G CALENDAR


The Gregorian{Calendar shall be used and shall be the


Controlling Calendar-*’for the purposes of this Agreement.


ARTICLE XXV


OFFICES AND NOTICES


(a) The Company shall establish and maintain an office in the


Empire of Ethiopia as may be necessary or convenient for carrying


out the Operations hereunder.


(b) All communications and notices required to be sent by one


party hereto to the other shall be in writing in the English language


and shall be delivered in person or sent by mail (registered mail,


if available, with return receipt requested) with postage thereon


duly prepaid, or by telegraph or cable, to the address of such other


party as hereinafter is set out and shall be effective upon receipt;


provided, however, that any such communication or notice sent from


Ethiopia to a location in another country or from a location in


another country to Ethiopia sh&ll be sent by cable and confirmed


by airmail letter. All noticed shall be addressed to the Government


62


ox* "Vtifi Oorox>aiiy* ao the case uiay b© at "til© addresses shown helow


or to such other addresses as the addressee shall from time to time


specify by giving thirty (30) days prior notice thereof to the


other party, in which case the Agreement shall be deemed amended


accordingly.


TOs (GOVERNMENT)


H.E. the Minister of Mines,


Ministry of Mines of the Imperial Ethiopian Government,


P,0. Box /j.86,


Addis Ababa, Ethiopia.


TO: (COMPANY)


ARTICLE XXVlC...


COVENANT AGAINST• -PAYMENT OP .COMMISSION


The Company and ..thd-vdp:v,ei;nment .respectively covenant and


warrant the one to..t^d-..o'ther that;' tile:y':-have not paid, caused or


permitted to be paid, or promised to pay, and will not pay, cause


or permit to be paid..or\pfrhinise to pay any commission or fee of


any nature whatsdevoiv-’whether in cash or in kind, or any person or


entity other than persons in its full-time employ for services


rendered as agent, representative or intermediary in connection with


the negotiations and conclusion of the making of this Agreement#


ARTICLE XXVII


GOVERNING LAVj


(a) This Agreement shall be governed by the laws of the Empire


of Ethiopia, including the Mining Proclamation of 1971 and Regulations


issued thereunder, as such laws are set forth in duly adopted and


published legislation, and the Company shall in all its Operations


hereunder be entitled to the benefit of such laws; provided that


the rights and obligations of the parties specified herein shall


not be enlarged, reduced or otherwise modified by any future laws or


ox* "Vtifi Oorox>aiiy* ao the case uiay b© at "til© addresses shown helow


or to such other addresses as the addressee shall from time to time


specify by giving thirty (30) days prior notice thereof to the


other party, in which case the Agreement shall be deemed amended


accordingly.


TOs (GOVERNMENT)


H.E. the Minister of Mines,


Ministry of Mines of the Imperial Ethiopian Government,


P,0. Box /j.86,


Addis Ababa, Ethiopia.


TO: (COMPANY)


ARTICLE XXVlC...


COVENANT AGAINST• -PAYMENT OP .COMMISSION


The Company and ..thd-vdp:v,ei;nment .respectively covenant and


warrant the one to..t^d-..o'ther that;' tile:y':-have not paid, caused or


permitted to be paid, or promised to pay, and will not pay, cause


or permit to be paid..or\pfrhinise to pay any commission or fee of


any nature whatsdevoiv-’whether in cash or in kind, or any person or


entity other than persons in its full-time employ for services


rendered as agent, representative or intermediary in connection with


the negotiations and conclusion of the making of this Agreement#


ARTICLE XXVII


GOVERNING LAVj


(a) This Agreement shall be governed by the laws of the Empire


of Ethiopia, including the Mining Proclamation of 1971 and Regulations


issued thereunder, as such laws are set forth in duly adopted and


published legislation, and the Company shall in all its Operations


hereunder be entitled to the benefit of such laws; provided that


the rights and obligations of the parties specified herein shall


not be enlarged, reduced or otherwise modified by any future laws or


regulations in force in the Empire of Ethiopia, unless such future


laws are laws or regulations relating to conservation or ecology?,


or standards of safety and working- conditions of a type a,nd kind


consistent with those then in force in the mining industry


throughout the world,


(b) Notwithstanding anything herein to the contrary, reference


in this Agreement to the Mining Proclamation shall mean the law


(including regulations) as it exists on the Effective Date of this


Agreement with such future laws or regulations as quality Under


paragraph (a) above.


ARTICLE XXVIII


TERMINATION-.


If during any consecutive-, five (5) year period after the


third (3rd) year from the. f.ffeetive D.a't'e of'• this Agreement and


prior to the Date.; 'Cf.:-€’caLinencem^nt ..of- Operations a well has not


been drilled on the Subject ..Area-'held by the Company, the


Government may deliybr\tp'the Company a request to drill a well


on lands in the(Subject Area selected by the Company within a one


(l) year period commencing with the da,te on which such request is


given, and if the drilling of a well is not commenced within such


one (1) year period and such delay is not occasioned by anything


included in Eorce Majeure, the Government may terminate this


Agreement on the first day following the oxpiration of such year


by giving written notice of such termination to the Company.


ARTICLE XXIX


ASSIGNMENT


The Company has the right from time to time, this Agreement


constituting all required consent thereto, tos


(a) Assign from time to time to third persons, firms or


corporation an undivided interest in and to its rights,


privileges and obligations hereunder covering all or a


portion of the lands from time to time subject thereto?


64


regulations in force in the Empire of Ethiopia, unless such future


laws are laws or regulations relating to conservation or ecology?,


or standards of safety and working- conditions of a type a,nd kind


consistent with those then in force in the mining industry


throughout the world,


(b) Notwithstanding anything herein to the contrary, reference


in this Agreement to the Mining Proclamation shall mean the law


(including regulations) as it exists on the Effective Date of this


Agreement with such future laws or regulations as quality Under


paragraph (a) above.


ARTICLE XXVIII


TERMINATION-.


If during any consecutive-, five (5) year period after the


third (3rd) year from the. f.ffeetive D.a't'e of'• this Agreement and


prior to the Date.; 'Cf.:-€’caLinencem^nt ..of- Operations a well has not


been drilled on the Subject ..Area-'held by the Company, the


Government may deliybr\tp'the Company a request to drill a well


on lands in the(Subject Area selected by the Company within a one


(l) year period commencing with the da,te on which such request is


given, and if the drilling of a well is not commenced within such


one (1) year period and such delay is not occasioned by anything


included in Eorce Majeure, the Government may terminate this


Agreement on the first day following the oxpiration of such year


by giving written notice of such termination to the Company.


ARTICLE XXIX


ASSIGNMENT


The Company has the right from time to time, this Agreement


constituting all required consent thereto, tos


(a) Assign from time to time to third persons, firms or


corporation an undivided interest in and to its rights,


privileges and obligations hereunder covering all or a


portion of the lands from time to time subject thereto?


64


Sell, assign, transfer, mortgage or otherwise dispose of


its rights, privileges and obligations hereunder to all


or any part of the Subject Area to any person, firm or


corporation? and


Permit the sale, assignment or other transfer of ail or


a portion of the shares of capital stock of the Ethiopian


Company, provided that;


(1) The Company shall .remain responsible for its


obligations hereunder (including under the Mining


Proclamation) on any such sale, assignment, transfer


mortgage or other disposition unless the Minister


consents thereto or such-.consent is unreasonably


withheld? \


(2) The consent. df:the Minist:e.r\referred to in paragraph


(1) hereof'cannot be unreasonably withheld?


(3) If the MinisConsents thereto (or withholds consent


unreasonably.) ‘the assignee shall be solely responsible


for the-••Company*s obligations hereunder (including


those under the Mining Proclamation) involving that


part of the Subject Area included in such sale,


assignment, transfer or other disposition and, if


requested by the Company, such assignee and the


Government shall enter into an agreement covering


such area on the terns hereof and such area shall,


for all purposes, be deleted from Schedule "A”


hereto and the Subject Area covered hereby reduced


accordingly.


(4) The Minister may refuse consent to any sale,


assignment, transfer or other disposition if


recognition of such Assignee would be contrary to


the national interests of Ethiopia? and provided further


that 65


Sell, assign, transfer, mortgage or otherwise dispose of


its rights, privileges and obligations hereunder to all


or any part of the Subject Area to any person, firm or


corporation? and


Permit the sale, assignment or other transfer of ail or


a portion of the shares of capital stock of the Ethiopian


Company, provided that;


(1) The Company shall .remain responsible for its


obligations hereunder (including under the Mining


Proclamation) on any such sale, assignment, transfer


mortgage or other disposition unless the Minister


consents thereto or such-.consent is unreasonably


withheld? \


(2) The consent. df:the Minist:e.r\referred to in paragraph


(1) hereof'cannot be unreasonably withheld?


(3) If the MinisConsents thereto (or withholds consent


unreasonably.) ‘the assignee shall be solely responsible


for the-••Company*s obligations hereunder (including


those under the Mining Proclamation) involving that


part of the Subject Area included in such sale,


assignment, transfer or other disposition and, if


requested by the Company, such assignee and the


Government shall enter into an agreement covering


such area on the terns hereof and such area shall,


for all purposes, be deleted from Schedule "A”


hereto and the Subject Area covered hereby reduced


accordingly.


(4) The Minister may refuse consent to any sale,


assignment, transfer or other disposition if


recognition of such Assignee would be contrary to


the national interests of Ethiopia? and provided further


that 65


(3) Ho such consent shall be required in the event of a sale,


reorganization or merger affecting all or substantially


all of the shares or assets of _____








(d) Assign its obligations under Article XIV hereof to any person


firm or corporation upon receipt, if the Minister consents thereto,


which consent cannot be unreasonably withheld, and if the Minister


consents thereto or unreasonably withholds such consent, the


Assignee shall be solely responsible for the Company*s obligations


hereunder, and if the Company requests the Government, it shall


enter into an Agreement with such assignee on the terms of


Article XIV hereof. ’








V';.-...’'ARTICLE XXX*


V; * -EFFECTIVE BATE


This Agreement*., paving been initialled by representatives


of the Government and...the Company, shall be subject to the approval


of the Council of Ministers of the Government, and the Effective


Date of this Agreement shall be the date on which it has been signed


by the duly authorised representatives of the parties hereto.


IN VJTTNTSS WHEREOF the party of the first part has executed


these presents at the hand of the Minister and the party of the


second party has affixed its corporate seal hereto and the


authorised officer thereof has. set his hand in the presence of the


respective subscribing witnesses#


IMPERIAL ETHIOPIAN GOVERNMENT


Witnesses


(3) Ho such consent shall be required in the event of a sale,


reorganization or merger affecting all or substantially


all of the shares or assets of _____








(d) Assign its obligations under Article XIV hereof to any person


firm or corporation upon receipt, if the Minister consents thereto,


which consent cannot be unreasonably withheld, and if the Minister


consents thereto or unreasonably withholds such consent, the


Assignee shall be solely responsible for the Company*s obligations


hereunder, and if the Company requests the Government, it shall


enter into an Agreement with such assignee on the terms of


Article XIV hereof. ’








V';.-...’'ARTICLE XXX*


V; * -EFFECTIVE BATE


This Agreement*., paving been initialled by representatives


of the Government and...the Company, shall be subject to the approval


of the Council of Ministers of the Government, and the Effective


Date of this Agreement shall be the date on which it has been signed


by the duly authorised representatives of the parties hereto.


IN VJTTNTSS WHEREOF the party of the first part has executed


these presents at the hand of the Minister and the party of the


second party has affixed its corporate seal hereto and the


authorised officer thereof has. set his hand in the presence of the


respective subscribing witnesses#


IMPERIAL ETHIOPIAN GOVERNMENT


Witnesses


 SCHEDULE "B"





WORK PROGRAMME





Stage 1s Preliminary geological and geophysical work


Stage 2 s Geophysical and seismic work to establish the


structure pattern in the Subject Area


Stage 3 s Drilling of a first test well and detailed seismic


work


Stage 4s


Additional exploration work subsequent to the sixth


year and prior to the Date of Commencement of


Operations


Stage 1 s Start to eighteen (18) months from the Effective Date


Within thirty (30) days of the Effective Date, the Company shall


send a senior geologist to Addis Ababa to collect, collate and evaluate


all existing available data which is on’’op.e'nA file inythe Ministry of


Mines, and also obtain all other/dhta* from oth^f'*eodrCes to the extent


available to the Company, -Following on from this preliminary work,


field parties will be sent into the-^Subject Area for further detailed


exploration and mapping by use"frf\a e'r ia 1 photographs, air or landbome


magnetometer surveys or by other methods. A complete report covering


all work done during this first stage shall be submitted to the Minister


of Mines by the Company before the end of the twenty-first (21st)


month from the Effective Date. Necessary preparation for work in the


second stage shall be commenced before the end of the twenty-first(21st) mpnth


Stage 2; Twenty-one (21) months to thirty-three (33) months from the


Effective Date ......... • - - -.............





fromfsing areas indicated by work done during Stage 1 shall be


cohered by other geophysical means, either gravity and/or seismic





methods. The geophysical interpretation should be carried on as the


work progresses to the extent possible to the Company, including


geological interpretation of the geophysical data. From the preceding


work it is expected that promising targets for drilling will be


delineated. A complete report covering all work done to the end of


Stage 2 shall be submitted to the Minister by the Company before the


end of the thirty-fifth (35th) month,


67


 SCHEDULE "B"





WORK PROGRAMME





Stage 1s Preliminary geological and geophysical work


Stage 2 s Geophysical and seismic work to establish the


structure pattern in the Subject Area


Stage 3 s Drilling of a first test well and detailed seismic


work


Stage 4s


Additional exploration work subsequent to the sixth


year and prior to the Date of Commencement of


Operations


Stage 1 s Start to eighteen (18) months from the Effective Date


Within thirty (30) days of the Effective Date, the Company shall


send a senior geologist to Addis Ababa to collect, collate and evaluate


all existing available data which is on’’op.e'nA file inythe Ministry of


Mines, and also obtain all other/dhta* from oth^f'*eodrCes to the extent


available to the Company, -Following on from this preliminary work,


field parties will be sent into the-^Subject Area for further detailed


exploration and mapping by use"frf\a e'r ia 1 photographs, air or landbome


magnetometer surveys or by other methods. A complete report covering


all work done during this first stage shall be submitted to the Minister


of Mines by the Company before the end of the twenty-first (21st)


month from the Effective Date. Necessary preparation for work in the


second stage shall be commenced before the end of the twenty-first(21st) mpnth


Stage 2; Twenty-one (21) months to thirty-three (33) months from the


Effective Date ......... • - - -.............





fromfsing areas indicated by work done during Stage 1 shall be


cohered by other geophysical means, either gravity and/or seismic





methods. The geophysical interpretation should be carried on as the


work progresses to the extent possible to the Company, including


geological interpretation of the geophysical data. From the preceding


work it is expected that promising targets for drilling will be


delineated. A complete report covering all work done to the end of


Stage 2 shall be submitted to the Minister by the Company before the


end of the thirty-fifth (35th) month,


67


Stage, 5: After the thirty-fifth' ('35 H*) from the Effective Date


On the assumption that the work in Stage 2 has delineated a


prospective area then the Company shall mobilise a suitable drilling


rig to oommenoe drilling the first test well before the end of the


forty-first (41st) month. Such test well shall be drilled to


"Contract Depth” in order, to fully test all formations. For the


purposes of this Schedule "Contract Depth" shall mean a depth of


ten thousand (10,000) feet or such lesser depth if Pre-Cambrian


basement or other unfavourable lithological conditions are encountered,


which in the opinion of the Company do not geologically or economically


warrant further drilling.


If the first test well strikes apparently economic hydrocarbons,


then the Company shall commence., within a peri oh. .of. • • t hre e (3) months


the drilling of such additional wells as 'may be necessary to test


the field# In the event that the first teot well does not strike


apparently economic hydrooa.rbdnsthen the Company may commence a


second test well on., another‘site of the Company^ choosing within a


period of twelve (12)-months, unless otherwise agreed. During the


drilling of the first, and subsequent, test wells the Company shall


submit to the Minister of Mines copies of the "Morning Report" at


intervals not exceeding one (1) week.


Stage 4: Additional exploration work subsequent to the sixth (6th)


year and prior to the Date of Commencement of Operations


During each two (2) year period following the sixth (6th) year


and prior to the Date of Commencement of Operations, the Company shall


expend not less than one million United States dollars (US$1,000,000)


for exploration provided the conditions envisaged in Article XII B


of this Agreement have not then occurred, in which event, the Government


shall charge annual rentals of not more than five United States dollars


(US$5) per square kilometre unless otherwise agreed to by both parties


after review of the results of the exploration operations to date.


Stage, 5: After the thirty-fifth' ('35 H*) from the Effective Date


On the assumption that the work in Stage 2 has delineated a


prospective area then the Company shall mobilise a suitable drilling


rig to oommenoe drilling the first test well before the end of the


forty-first (41st) month. Such test well shall be drilled to


"Contract Depth” in order, to fully test all formations. For the


purposes of this Schedule "Contract Depth" shall mean a depth of


ten thousand (10,000) feet or such lesser depth if Pre-Cambrian


basement or other unfavourable lithological conditions are encountered,


which in the opinion of the Company do not geologically or economically


warrant further drilling.


If the first test well strikes apparently economic hydrocarbons,


then the Company shall commence., within a peri oh. .of. • • t hre e (3) months


the drilling of such additional wells as 'may be necessary to test


the field# In the event that the first teot well does not strike


apparently economic hydrooa.rbdnsthen the Company may commence a


second test well on., another‘site of the Company^ choosing within a


period of twelve (12)-months, unless otherwise agreed. During the


drilling of the first, and subsequent, test wells the Company shall


submit to the Minister of Mines copies of the "Morning Report" at


intervals not exceeding one (1) week.


Stage 4: Additional exploration work subsequent to the sixth (6th)


year and prior to the Date of Commencement of Operations


During each two (2) year period following the sixth (6th) year


and prior to the Date of Commencement of Operations, the Company shall


expend not less than one million United States dollars (US$1,000,000)


for exploration provided the conditions envisaged in Article XII B


of this Agreement have not then occurred, in which event, the Government


shall charge annual rentals of not more than five United States dollars


(US$5) per square kilometre unless otherwise agreed to by both parties


after review of the results of the exploration operations to date.


 PERFORMANCE BOND








KNOW ALL MEN BY THESE PRESENTS: that "W*


•and. . hereinafter oalled Principal,


__aa Surety,


hereinafter called Surety, are held and firmly hound unto the Ministry


of Mines, Imperial Ethiopian Government, Addis Ahaha, as Obligee, in


the amount of


for the payment whereof Principal and Surety bind themselves, their


heirs, exeoutors, administrators, successors and assigns, jointly and


severally, firmly by these presents.


WHEREAS, Principal did under date -of \ ‘ ••. . enter


into a Petroleum Agreement granted by the Imperial Ethiopian Government


and in aooordanoe wi th the'' term s of ..the said Agreement, Principal is


obligated to expend on operations as. defined in Article II, sub-article


(i) of the Petroleum Agreement the sum of Petroleum Agreement the


sum of US9x : ♦"" during Stage


as described in Schedule "B” of the said Agreement:


NOW THEREFORE, the condition of this obligation is such, that if the


above bounden Principal shall expend the sum of OS3


under and subject to the terms of the Petroleum Agreement, then this


obligation shall be null and void, otherwise to remain in full force


and effect.


WHEREAS, this bond shall run for a term of two years from the effective


date, any claim under this bond must be instituted within 120 days


of the completion of Stage of the Petroleum Agreement,





Signed, sealed and dated this day of





~n the presence of:





Principal








Surety 6.9


 PERFORMANCE BOND








KNOW ALL MEN BY THESE PRESENTS: that "W*


•and. . hereinafter oalled Principal,


__aa Surety,


hereinafter called Surety, are held and firmly hound unto the Ministry


of Mines, Imperial Ethiopian Government, Addis Ahaha, as Obligee, in


the amount of


for the payment whereof Principal and Surety bind themselves, their


heirs, exeoutors, administrators, successors and assigns, jointly and


severally, firmly by these presents.


WHEREAS, Principal did under date -of \ ‘ ••. . enter


into a Petroleum Agreement granted by the Imperial Ethiopian Government


and in aooordanoe wi th the'' term s of ..the said Agreement, Principal is


obligated to expend on operations as. defined in Article II, sub-article


(i) of the Petroleum Agreement the sum of Petroleum Agreement the


sum of US9x : ♦"" during Stage


as described in Schedule "B” of the said Agreement:


NOW THEREFORE, the condition of this obligation is such, that if the


above bounden Principal shall expend the sum of OS3


under and subject to the terms of the Petroleum Agreement, then this


obligation shall be null and void, otherwise to remain in full force


and effect.


WHEREAS, this bond shall run for a term of two years from the effective


date, any claim under this bond must be instituted within 120 days


of the completion of Stage of the Petroleum Agreement,





Signed, sealed and dated this day of





~n the presence of:





Principal








Surety 6.9