DATEDMzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBASEPTEMBER 1997 (1) THE GOVERNMENT OF THEREPUBLICOFZAMBIA W and (2)CHtBuLuMAMINESPLC DEVELOPMENT AGREEMENT L CLIFFORDCHANCE 200 Aldersgale Street London ECIA 4JJ Telephone: 0171600 1000 Fax: 01716005555 Reference: VCH/G2181/00030/MWC CONTENTS PART A GENERAL 1. Delidtionsand Interpretations .................................. 2 PART B OPERATIONALANDEMPUXMENTISSUES 2. Obligationsto Develop ....................................... 9 3. ................ 10 Ri~tstExportand~portandArms'Length~lings W .............................................. 11 4. ~ent 5. LocalBusinessDevelopment .................................... 11 6. Training and HumanResources Management ........................ 12 7. Illsurance ................................................ 14 8. Suspensionof Production ..................................... 15 9. Social Assets .............................................. 16zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA 10. RecordsandOperati.ngReports ................................. 22 PARXC UNDERTAKINGSNECESSAKYFOR OPERATIONS 11. Foreign Exchange .......................................... 24 12. Emiroomental Issues ........................................ 26 PARTD TAXATION 13. GewralObligationtoPay Tax .................................. 29 14. Clarification of Taxation Legislation .............................. 30 15. Taxation Stability .......................................... 30 16. Assignment .............................................. 32 17. ExtensionstoTime .......................................... 34 18. Termination .............................................. 34 19. Arbitrationand SoleExpert . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 20. LawApplicable ............................................ 40 40 21.zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAForcehlajeure ............................................ 22. Variation ................................................ 41 23. Consultation . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 24. Notices ................................................. 43 25. Waiver ................................................. 44 LJ 26. Severability .............................................. 44 27. Further Acts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 28. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 29. Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 SCHEDULE1 ................................................. 47 APPROVEDPROGRAMMEOFMINING OPERATIONS SCHEDULE2 ................................................. 49 LOCALBUSINESS DEVELOPMENTPROGRAMME SCHEDULE3 ................................................. 50 d PARTI CONTRACTAREA PART11 LARGESCALEMINING LICENCES PARTI11 MINING AREA SCHEDULE4 ................................................. 51 PARTI MEDICALSERVICES PART iI EDUCATIONSERVICES PART111 RECREATIONALSERVICES PARTIV MUNICIPALINFRASTRUCTlJR4LSERVICES PARTV PHYSKXLSOCIALASSETS !XHEDULE5 ................................................. 52 Pm1 ENVIRONMENTALPLANzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA PART I1 ENVIRONMENTALCLEANUPOBLIGATlONS SCHEDULE6 ................................................. 55 TRAINlNG ANDHUMAN RESOURCESMANAGEMEKTPROGRAMME SCHEDULE7 ................................................. 56 REQUIREDINSURANCES W SCHEDULES ................................................. 57 TAXSCHEDULE L THIS AGREEMENTismade on 30September 1997 BETWEEN: (1) THE GOWRNMENTOFTHEREPUBLICOFzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAZAMBIA, acting through the Ministry of Minesand Minerals Development and the Ministry of Finance ("GRZ"); and (2) CHIBULUMAMINJC3PLC,acompany incorporated in the Republic of Zambia (registered no. 39097),whose registered office is at Second Floor, Kafue !Iouse, 1Nairobi Place, Cairo Road, Lusaka, Zambia (Box 30030,Lusaka)("ChibCo"and who shall includeany pemtted assignsor successors of the rights and obligations of ChibCo). WHEREAS: Proposals have been submitted on behalf of ChibCo by the Metorex Consortium lbr the acquisition and subsequent rehabilitation, development and operation of the facilities at ChibulumaWest Mine and the Chibuluma South area in the Copperbelt Province of Zambia (the "Facilities"),the location of which is more specifically idcn:ified by reference to the plan annexed hereto as Exhibit 1 to the First Schedule. (2) GRZ has approved thesr proposals, which are hereafter referred to as the "Approved Programmeof Mining Operations'. (3) The rehabilitation, development and operation of the Facilities will be of major economic significance to tie people of Zambia. (4) GRZ wishes to ensure that the continued development and esploitationof the cmnmercial deposits of copper and cobalt ore at the Chibuluma West Miwand future development of Chibuluma South will secure the maximum benefit for. an2 adequately contribute to the advancement and the social and economic welfare of, the pecple of Zambia, including the people in the vicinity of the Contract Area in a manner consi4+mtwith their needs and the protection of the environment and secure an appropriate return on investment commensurate with the risks involved to ChibCo. GIG5 and ChibCohave agreed on a numberof nutters which iIrc set out in this Agreement and wish the nutters agreed upon to be an enduring arrangtmut of national interest. GRZhas granted to the Minister of Mines and Minerals De:*cI!)pment and the Minister of hmxstatutory authority under Section 9 of the Act to ewrhothisAgreement on behalf of GRZ, and GRZ and ChibCo agree to be bound by all thc imns and conditionsrelating thereto. The Minister has sought and received the advice of thc MiningAdvisory Committee in accordance with Section 88 of the Act and is acting in accordmcewithsuch advice. (7) GRZ,ChibCo,ZCCM and the Metorex Consortiumhave entLr:rl into the Saleand Purchase Agreement which requires on its Completion (as thereh defined) the entry into of this Agreement. PART A - 1 - GENERAL 1. Definitions and Interpretations 1.1 hthis Agreement, unless the context otherwise requires: "Act" *wmthe Zambian Mines and Minerals Act, 1995 (Act No. 31of 1995)as from time to time amended and in effect; "Aftiliate, Afliliated Fbrty, or AfiihotedzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAh-ties~~means: (i) any company m which ChibCo or a Shareholder (as thecase mybe) holds twenty per cent. (20%)or more of the ordinary voting shares or which holds twenty per cent. (20%) or more of ChibCo's or a Shareholder's (as the case mybe) ordinary shares; U (ii) any person which, directly or indirectly, is coatroktl hy or Controls, or is under Common Control with ChibCo or a Shareholder (as tlw case mybe); or (iii) any persou or group of persons being directors or esccutive officers of, or in the employment of ariy person referred to in (i) or (ii) above, and "Control"means: (i) the power (whether directly or indirectly) and whetl~rby the ownership of share capital, the possession of voting power, contract or othcrwise to appoint andor remove all or such of the board of directors or other governing body of a person as are able tocast a majority of the votes capable of being cast by the members of that board as body, or otherwise to control or have power to control tie policies and affairs of that person; and/or (ii) the holding and/or the ownership of the beneficial inicrests in and/or the ability to .d exercise the voting rights applicable toshares or other securities in any person which confer in aggregsu on the holders whether directly or by means of holding such interests in one or more other persons (eitller directly mindirectly) more than fifty per cent. (50%)of the voting rights exercisable at gencral meetings of that person, and "Controlled by" shall be construed accordingly and "Common Control"means the circumstances where two (2) or more persons are controlled by the same person or its Affiliates; "Agreement" means this agmment as varied from time to time in accordance with the terms hereof; "Approved Programme of Mining Operatious" means the proposals for rehabilitating, developing and operating the Facilities submitted on behalf of ChibCo by the Metorex Consortium which have been approved by the Ministry and whkh is set out in Schedule 1. -2- "Arms'Length Terms"meansa transaction where: the parties in negotiating the transaction have sou$!r to promore their own best interests m accordance with hir and honest business methods; the consideration expressed in the agreement for the transaction entered mmis the only consideration for the transaction; the price and otherterms of the transaction have not been affected by, nor determined as a consequence of,any otheraqementor any direcl or indirect relationship(other than the relationship created by the transaction agreement) between the selling party or shareholders of the selling party, or a company in which the selling party is a shareholder, and buying party or shareholders of the buying party, or a company in which the buying party is a shareholder; and neither the selling party, nor any person or company COM~C~~with it through shareholding or otherwise, has any direct or indimt interest in the subsequent disposal,if applicable, by the buying party of any of heproductsor servicesobtained pursuant to the transaction agreement; "Assets"mans all the property and assets to be transferred ly ZCCM to ChibCopursuant to rhe provisions of the Sale and Purchase Agreement as arc more particularly described therein; "BulkSupply Agreement"has the definition given in the Sale and Purchase Agreement; "BusinessDay"means a day, other than a Saturday or SundJy upon which banks are open for business in London, New York and Lusaka; "CentralBank"means the Bank of Zambia; "CollectiveAgreement(s)" means the Standard Conditions otEmployment and Service as agrtxd between ZCCM and the Mineworkers Union of Zambia ineffect at the date of closing of the Sale and Purchase Agreement (which for the avoidance ofdoubt includes the Standard Code Book, the Discipiinary Code Book, the 1981 Joint Job Evaluation Agreement and the I997 Redundancy Agrtwnen~),as these may be renegothwl Ily ChibCo from time to time lollwing theexpiry thcrcof; "CompaniesAct"mans the Zambian Companies Act, 1994 (Act No. 26 of 1994) as from time to time an~endedand in efiiit; "ContractArea"'mans that land area covered by the Leases and which is described in Schedule3 Rut I; "Controlof Goods Regulations" means the Control of G:.9 (Import DeclarationzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAFix) Regulations, 1995 (SI. No.148 of 1995) as executed undct the Control of Goods Act (Chapter690 of the Laws of Zambia) as from time to time mcnded and in effect; -3- "Copperbelt"means CopperbeitProvince m Zambia comprising tie main copperzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAmining area5 inZambia; "Coststo Resume Operations" means 1.2 (one and two-tenths) times the costs (which includesthe cost of new capital expenditures) required to resume Normal Operationsplus 1.2 (oneand two-tenths) times the sum of CtibCo estimateof: (a) royalties; (b) OperatingCosts; and (c) all other mcidental costs, necessary tocontinueNormal Operationsfora furtherperiodof twelve (12) months. "Distributable Profits"means accumulated aftertaxprofits and reserves of ChibCo, available for distributionas dividends in accordancewith Section84 of the Companies Act, as shown in the financial statements of ChibCo; U "Education Services"means the education servicesset out in Schedule4, Part XI; "EtfectiveDate" means the date on which this Agreement was executed by the Rmies. and in the event that it was executed by different Parties on different dates, means the date on which itwas executed bj the Rmywho was the lastParty toexecute tiesame; "Envinmmental CleanUpObligations"means those obligations more particularlydescribed in Schedule5, Part 11; "EwirmmenldLaws"means the Mining (MintmlksourccExtrxlions)Regulations, 1994zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA (S1 119/1994);the Environmental Protection and Pollution Control Act, 1990 (Act No. 12 of 1990)and regulations enacted thereunder; and Sections 75 to82of the Minesand Minerals Act, 1995 (Act No. 31 of 1995) and the Mines and Minerals (Environmental) Regulations, 1997,save for the provisions contained in each of such hvsmdregulations which relate to minc sakty andhrthesaletyof persons rather than to thc prouhnof the environment,as each myfrom time to time beamendedand in etiect; d %mironmentalPlan"means the programme forenvironmental clean up and protection and, where applicable, the proposals to bring ChibCo into compliance with the Environmental Laws with which it is not in compliance as atthe Effective Date. as set out inSchedule5 Part 1; "Environmental ProtectionFund" means the find set up for environmental protection by Section82 of tie Act and the Mines and Minerals (Environmental) Regulations SINo. 29 of 1997; "Facilities"has the meaning ascribed to it in Recital (1); "Force Mqjeure"has the meaning given to the term mClause21.2; "GRZ"meansthe Governmentof the Republic of Zambia and includesany authorised agent -4- of the Governmentof the Republicof Zambia; "ImportDeclarationFee" mansthe fee payable under the Conrrol of Goods Regulations; "Investment Commitment"means the obligation todevelop Cllibuluma South as specified as such in the Approved Programme of Mining Operations and the other Scheduled Pmgrammes; "Kwcha"means the lawful currency of Zambia; %wgeScalehtiningLicences"meansLargeScale Mining Licence Numbers23and 24 held by ChibCopursuant to the Act (or mysuccessoror additional licences issued in replacement or substitutiontherchr), the current form of which being set out in Schedule3 Part II; "Leases" means the leases set out in the Saleand Purchase Agreement; "LIBOR"means the London hterbank Offered Rates for US dollarsfor six month advances which appearson the Telerate Rtge 3750 as of 11.OOam,London time, on the date which is two (2) Business Days preceding the final Business Day of each month monies are outstanding or, if payment is not made on the final Business Day of a month, two (2) BusinessDays preceding the Business Day on which paymem is made; "LocalBusinesszyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBADevelopment Programme" means the programme for local business development which is described in Clause 5and which is set out inSchedule2; "Medical!kvices"means the medical servicesas set out in Schedule4, Part I; "Mine Products''means the oresorconcentratesorotherMinerdsproduced from the Mining Area and all smelter and refinery produca produced in Zamhin (including acid) derived therefrom; "MinenW~meansallminerals excludingpetroleumand otherhydrocarbons,asthesame may be located in the Contract Area; "Minister"means the person for the time being entitled to exercisc the powers of the Minister ofMines and Minerals Development under the Act; "Mining" has the meaning given to the term in the Act arJ. for the purpose of this Agreement. includes all concentrating, smelting, refining and treatment and transport operationsassociated wifh and necessary for the production ofnx~rketableproducts thereto; "MiningArea"means the areas covered by the Large ScalehliningLicences, the same being setout in Schedule3 RutHI; "hlhiswy"means the Ministry of Mines and Minerals DCK:qment or other successor ministry from time to time; "MunicipalInfrastmcturol!3ervices"nxansthe municipal infrasuucturalservicesassetout -5- in Schedule4, Pti IV; ttNodOperations"means the operationof the Facilities in accordance with the Scheduled Programmes; ''Notices" means any notice, consent,demand, apprcnd or othcr communication requiredor pemttedto be given under Clause24; "OperatingCosts" for any period means the costs incurred by ChibCo during Normal Operationsexcluding (a) depreciation and other non-cash costs (b) capital costs other than replacement capital costs and (c) financing charges; Warties"means the persons who are for the time being original partiestothisAgreement or parties added or substituted pursuant to Clause 16; "Physical SocialAssets" means those assets listed in Schalulc4, RutV; "Quarter";means: (a) January, February, and March; or (b) April, May and June; or (c) July, August and September; or (d) October, November and December. "RecreationdServices"means tielibraries, social clubs, cantcens andsportsfacilitiesas the same are listed in Schedule4, Part 111; "Redundancy Terms" means those term relating to enWenmt to certain payments and other rights in the event of loss of employment dueto redundancy which are applicableto the Transferring Employees as set mtin the Collective Agreemem; "Registered Deptmhnts" mans the dependants of employres who, at the date of thiszyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA Agreement, are registered and thereafter those that shall be registered in accordance with Clause9.1, in the records of ZCCM as being entitled to use some or all of the ZCCM Social .d ServiceAssets; "Rural Electrification Levy" means the rural electrification levy initially agreed between ZCCM and subsequently with the purdmer of ZCCM Jbwcr Division and the Zambia Electricity Supply Corporation for the electrification of the rural areas of Zambia; "Sale and Purchase Agreement"means the agreement for the sale and purchase of theassets of ChibulumaWest Mine and Chibuluma South and certain arv% at Kalulushi dated 30September 1997 and made between ZCCM, the Metorex Consortium,ChibCoand GRZ; "Scheduled Programmes" means the Approved Progranunc of Mining Operations, the Environmental Plan, the Environmental Clean Up Obligations, the Training and Human Resources Management Programme and the Local Business IkvelopmentProgramme; -6- "Shareholder"means a holder of ordinary shares m ChibCo or the holder of the Special Sharewhose rights are set out mChibCo's Articles ofAssoci~tion; Wuweholders' Agreemeot" mans the agreement of even date herewith amongst certainzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA Shareholders in ChibCo, including ZCCM, governing the rclationship between them as Shareholdersin ChibCo; Y3ocial Assets" means the Physical Social Assets and the SodServiceAssets; "!hcialServiceAssets"means the Medical Services, the Education Services,the Recreational Servicesand the Municipal InfrasuucturalServices; "SoleExpert" means a person appointed (i) pursuant Clauses 3.3(c), 6.4, 7.3, 8.8, 9.10, 12.5, 12.8, 163(b)(ii), 16.7, 18.6(c), 22.2(b) and 22.4(d) of this Agreement or (ii) by agreement between the parties to resolw any difference of view or disagreement between them and, m the event the parties in dispute hi1to agree on the person to be so appointed, a person appointed on an application by either party by the Secretary-General for the time being of the International Centre for the Settlement of Investment Disputes(ICSID). For the purposesof this agreement, tie Sole Expert shall not be, or have been m employee of GRZ or ChibCo or my Shareholder or any of their respective Affiliates or any authority or corporationof GRZ; "SpeculativeCurrency Transaction" means a transaction imdving the purchase or sale of Zambian currency, the primary object of which is the makins of a profit on the exchange of currency but does not include the taking out of forward cover ::gains[ reasonablypredictable incomes or costs; "'IhiningandHumanResources Management Programme"means the programme which is set out in Schedule6; "Trmukrrmg Employees"means those employees previously employed by ZCCM whose employmenthasbeen transferred (with their consent) to ChibCo with effect from the Closing of the Sale and Purchase Agreement; "US$","USdollars"or "UnitedSlates dollars"means the lawful currency of the UnM States of America; VAT" means value added tax payable under the Value Adt;d Tax Act, 1995 (No. 4 of 1995) as from time to time amended and in effect; "2hmbia"means the Republic of Zambia; "ZCCM"means Zambia Consolidated Copper Mines Limited; "ZCCM!h&l Services Access Agreement" means tk..;.wment concluded between ZCCM and ChibCo of even date with this Agreement affordin; (on the terms and conditions therein contained) certain persons access to certain of tie So&! ServiceAssets; - 7 - "ZambiaElectricity Supply CorporationTuitf"means the tariffpayable by ZCCM under the term of the Bulk Supply Agreement; 1.2 In this Agreement, unless the context otherwise requires: monetary references are rekrences to United Sktes dollars unless otherwise specifically expressed; the headings do not affect the interpretation or construction; references to an Act includes the amendments to thnt Act for the time being m hce and also to any Act passed m substitution therefor and any regulations for the time being in force thereunder; words importing the singular include the plural and vice versa; words importing my gender include the other gender; G/ references to a person include a partnership, firm or corporation and any instnmlentality of GRZ or any political subdivision thereof; and the recitals form part of this Agreement. -8- PART B OPERATIONAL ANDzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAEMPLOYMJWT ISSWS 2. ObligationstoDevelop 2.1 ChibCo shall, follmving the date on which the Large Scale h:i;ling Licences are granted to ChibCoand, subject to the terms of the Act, regulations nwk thereunder, the Large Scale Mining Licences and this Agreement, implement the Apprmed Programme of Mining Operationsin accordance with the timetable contained therein nnd good international mining and metal treatment standards and practices. 2.2 Without prejudice to the obligation contained in Clause 2.1, ChibCo shall expend the Investment Commitment substantially in the manner, on the temx and in the amounts setout in the ScheduledProgrammes. It being specifically recorded tii3fcompletionof the Approved Programmeof Mining Operations m respect of the development of Chibuluma South for less than the amount specified as the Investment Commitment shall constitute tie satishctory discharge of the Investment Commitment provided that the development of the Chibulwna South No. 1 Shaft and the construction of the Chibuluma Soulh new concentratorhave been completed in accordance with tie Approved Programme of Mining Operations and that payment is made to ZCCMinaccordance with Clause 2.3 lxknv. 2.3 Subject in all cases to the provisions of this Agreement, GRZ hereby acknowledges its agreement to the Scheduled Programmes and the compliance of the Scheduled Programmes with Section 24(3) of tie Act and further ackncwledges that the Scheduled Programmes comply with Section Z(1)of the Act. 2.4 GRZconfirms that it considers the proposed mining and treatnmt practices describedin the Approved Programme of Mining Operationsnot to constitute “mstefulmining practices”for the purposes of Section 81of the Act. Thisconfirmation is wihout prejudice to tie rights of the Director of Mines Safety (acting on behalf of GRZ) LO dcrermine that mining practices slot specifically referred to in the Approved Programme of hfining Operations constitute wdstefd mining practices for the purposes of Section 81 of thc Act. Nothing in this Clause 2.4shall prevent or restrict or otherwise limit GRZfrom takingall actions within its power to protect public health and safety. 2.5zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAGMconfirms that it shall procure that no action shall be takcn by the Water Development Board against ChibCo for its operation without Water Rights (as defined in the Sale and Purchase Agreement) for a period of ninety (W) days herdor in the event of any action being taken, fully compensate ChibCo for any costs or pena11It.sincurred. 2.6 ChibCoconfirmsthat it shall use iis best endeavours to obtain a full public listing m Lusaka, Johannesburg andor London within a two (2) year hepericd iiom the date hereof subject to suitable marker conditionsprevailing at the time. 3. Rights to Export and Import and Arm’ Length Dealings -9- Subjectto Clause4 and the payment of applicable dutiesand tmxnot otherwiseexempted 3.1 or deferred pursuant to this Agreement. ChibCo myimport md where it so desires, re- export without further reference to GRZ, materials, equipmect and services to be used in implementing the Scheduled Programmesprovided that GRZ has not notified ChibCothat the importadorre-export (asapplicable)of such materials, equipment and serviceswould give rise to the matters specified in Clause 3.2(b)(i) or (ii). 3.2 ChibComay marketandexport withoutfurtherrekrencetoGRZall Mine ProductszyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAand shall have solecontrol and management of the sale of such Mine Products, including tie fimvard selling of such Mine Products, and shall assume all risks therefor, provided that: (a) ChibCosellsits products on Arms’ Length Terms; (b) GRZhas not notified ChibCo that the export of the Mine Products would: (i) breach an obligation of GRZ arising under international law (including mandatory sanctions imposed by the United Na:ions); or (ii) result in dealing or contracting with nationals of a state with which GRZis in a state of declaredor undeclared war; (c) rnanufitcmrers of processed and semi-processed goods involving copper content with processing facilities located in Zambia which are willing and able to purchase copper cathodeor other products atcurrentlyprevailing inmxhnalmarket prices payable inUSdollarsto ChibCo’s account outside Zambia d~llbeafforded a preference over manufacturers whose processing facilities are not so located Provided that this obligation shall only apply to an mount of copper which does notzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAexceed ten per cent. (10%)of ChibCo’s annual copper production from time to time and that the application of this preference shall not result in ChihCo breaching its delivery obligations with respect to any of the sales contracts which are transferred toChibCo pursuant to the Sale and Purchase Agreement; and (d) no order has been made by the Minister pursuant toSecth69 of the Act. 3.3 ChibCo shall advise GRZ of each agreement concerning sales or processing of Mine Products, patent licensing, engineering, construction or managem.:nt serviceswhich isentered into with an Affiliate. Such agreements shall be copied to GRZ forthwith upon execution. If, in the opinion of GRZ, any such agreement is not on Arms’ Length Terms, GRZ may, within thirty (30) days of receipt of such agreement, give notice to ChibCo of the terms which GRZ considersto beArms’ Length Terms. Upon receipt of GRZ’s notice ChibCo: (a) may terminate the agreement; or (b) may renegotiate tie agreement using the termconsidereJarm’lengthby GRZ; or (c) if ChibCodisagreeswith the terms so consideredby GXZ,it may refer the dispute - 10- to a Sole Expert in accordance within Clause 19for a determination as to what are Arm' LengthTerm. Uponreceipt of tie Sole Expert's determination,ChibCoshall renegotiate tie agreement,if necessary, to embody those term decided by the SoleExpert fobe Arm' Length Terms or temnawthe agreement. . . Procurement 4. 4.1 ChibCo shall, on an ~MUAbasis, identify and invire regirmrionof busmesses m Zambia (particularly in tie Copperbelt and with particular emphasis on businesses direclly or indirectly mjoriry owned tyZambian citizens) which are capable of supplying materials, equipment and servicesto ChibCo. 4.2 Where materials, equipment and services required for the implementation of the Scheduled Programmes are manufactured or substantially assembled (or in the case ofzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAservices, are L procurable) withinZambia fromabusinessorbusinesses pre-qualified pursuant toClause4.1, such busmess(es)shall have the opportunity to tender and if a tender submission from my such business: (i) meets the specifications of the invitation to tender; (ii) is competitive in cost with international sources;and (iii) meets the delivery requirements of tie Facilities, then the Company shall not discriminate against such businesses in its award of such tender. 4.3 In assessing tie tenders from local contractorsand suppliers, ChibCowill considerthe extra costs it would incur if it was to grant the contract to a foreign supplieror contractor. These extra costs shall include, but are not necessarily restricted to, HIxfigecosts, Shipping costs, suxedoringcosts,custom clearance costs, customs duties, and demumge charges. L 4.4 ChibCoshall adviseGRZof each such agreement for the supply ofgoods andserviceswhere the counterparty is an Affiliate in which event the provisions of Clause 3.3 (other than tie first sentence) shall apply mutatis mumdis. 5. Local Busimss Development 5.1 ChibCoshall: (a) comply with the Local Business Development Programme so as to encourage and assist the establishment of businesses within Zambia (particularly in the Copperbelt and with a particularemphasis on businesses directlyor iudirectly majority owned by Zambian citizens) to supply materials, equipment and mvices to ChibCo, provided that ChibCo shall not be obliged to grant or lend money toany person; (b) conductan annualreview of progressbeing made on the implementation of thezyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBALaal - 11 - Business Development Programme and make such variations to it as required by changing circumstances; and (c) designate a responsible and experienced person to be involwd m setting up and managing small business enterprises: (i) to assist Zambian citizenswho wish to or have set up busmesses to service ChibCoand the Facilities; (ii) to assist in the implementation of thezyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBALocal Business Development Programme and variations thereof; (iii) to liaise with the appropriate officials from GRZ;and (h) to compile and maintain the register referred to inClause4.1. 6.zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBATraining and HumanResourcesManagement W 6.1 ChibCoshallcomply withthe Training and Human Resources Management Programme. 6.2 ChibComay, with the consent of GRZ (which consent shall notbe unreasonably withheld), amend or alter the Training and Human Resources Management Programme, with a view to securing the maximum training of and benefits to Zambian citizens from the Facilities If ChihCo is unable to comply with sonx aspwb of thc Tmining and Human Resources Management Progrmme as a result of: (a) circumstancesor events beyond its control;or (b) a directionofthe Director of MineSafety undcr theAct (orregulations made thereunder), hen such noncomplianceshallnotconstitute a dehult undcr thisClause6 and ChibComy give notice of alternative or revised plans to the part of thc Training and Human Resources ~ Management Programme affected. 6.3 S~muldChibCogive notice pursuant to Clause 6.2 (a) or (b), GRZ shall within thirty (30) days either: (a) approve those alternative or revised plans, or (b) meetwith ChibCoto discuss and agree upon the alternative or revised plans. 6.4 If the discussionsunder Clause 6.3 do not lead to GRZ’s approval of alternative or revised plans and ChibCoconsidersGRZ’s decisionto be unreasonable. ChibComay elect to reiix the reasonableness of GRZ’s decisionto a Sole Expert in accordance with Clause 19. 6.5 If the Sole Expert detemnes that GRZ’s decision is not unreasonable, he shall identify m ChibCothe changes to the Training and Human Resources Management Programme as will be necessary to bring such programme into compliance with GM3requirements in this - 12- regard. However, if the SoleExpert determines that GRZ’s decision is unreasonable,heshall declare his detemnation to both parties and the proposed amcndmmt or alternationto the Training and Human Resources Management Programme shall deemed approved. 6.6 ChibCo shall not, save as provided below, be restricted in its employment, selection, assignmentor dischargeof pmonnel Provided, however, that hetmployment and the temls and conditionsof such employment and the discharge or dixiplining of personnel within Zambia shallbecarriedout in compliance with (i) the laws and regulations of Zambia whichzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA are, from time to time, of general application,(ii) the Collcc~iveAgreements and (iii) the terms of individual employmcnt contracts from time to rime. The Training and Human Resources Management Programme identifies a minimum nundxr of employees necessary to conduct Normal Operations from time to time. ChibCo will ensure that the number of its employees will not be reduced below such levels without ninety (90) days prior notification tozyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAGM. 6.7 ChibCo will, in its recruitment, selection, promotion and assignment of personnel not L discriminateagainst comparably qualified and experienced Zambian citizens. . 6.8 ChibCoacknowledges GRZ’s policy to attract qualified Zambian citizens working overseas back to emplqmcnt within the Zambian mining industry. In order to facilitate the fblfilment of this policy, ChibCo will tieall reasonable efforts in its recruitment and employment of employees in professional, managerial, engineering and scimific gdes(including, but not limited to tie advertising of positions in international press and trade journals likely to have circulationamongst suitably qualified potential employees) to bring to the attention of such qualified Zambians positions of employment available withinChibCo. 6.9 ChibCowill honour and perform the terms and conditionsof the contractsof empkynentof the Transferring Employees save that such contracts mybe varied with the Transkmng Employees’ consent. such variation to be made and ohrained in compliance in all respects with Zambian law and regulations and the terms of tie relevant Collective Agreements. 6.10 ChiKo will recognise, for collective bargaining purposes, the trade union currently representing the Transferring Employees and the Collective Agreements covering the Transferring Employees in force atthe date hereof. 6.11 ChibCoadopts the Redundancy Terms currently applicable to Transferring Employees (and agrees that years previously worked for ZCCM shall form part of the accrued serviceof such Transferring Employees when calculating any subsequent redundancy payment to which they may become entitled upon being terminated by ChibCo) aml qpesthat no amendment or variation will be proposed or made to the Redundancy Terms which would adversely affect the Transfkrring Employees (or any of them) if such Redundancy Terms were to be implemented without the Transferring Employees’ consent. 6.12 Notwithstanding the provisions of this Clause 6, ChibCo (and its cm~ractorsor sub- contractors)may bring into Zambia such non-Zambian citizens X,in the reasonable judgment of ChibCo’s management, are required to carry out specifid operations efficiently and successfully and, at ChibCo’s request (which shall be accompanied by the requisite information concerning the education, experience and other qualifications of tie personnel - 13- concerned)GRZ shall cause all necxsary permits (including entry and exit pemts, work permits, visas and such other permits or permissions as mybe requested) to be issued to such persons and their entitleddependents without undue delay and without hampering the continuousand efficient performanceof ChibCo's obligations under thisAgreement Provided that GRZ shallbe under nosuch obligationto issue the permits aforesaidtoany nonZambian citizen who is disqualified from entry by reason of previous criminal convictions, health regulationszyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAand like restrictions set out in immigration regulations of general applicationin Zambia from time to time. 7. Insurance 7.1 ChibCoshallensurethat those aspects of the Facilities that arc normally and commercially insurable (and where such insurance is customarily obtaind in the mining industry in accordancewith good international mining practice) are insured and GRZ shallbe advisedof the policy or policies m place and shall forward copies to GRZ. 7.2 GRZagrees that the insurances specified in Schedule 7arethose which, asat the date hereof. would otherwisebe required by: (a) sratumy instrument referredzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAto Section lOl(1) of the Act; andlor (b) the Director pursmnt to Section lOl(3) of the Act. 7.3 ChibCo shall, unless the policies of the insurance or any of its loan agreements state oherwise or GRZ otherwiseagrees. use any amount paid to it pursuant to my damage or dcstruclionprovisions in any contract of insurdnce to reinsL~rc s!~h&mm of the Facilities (exceptfor Mine Products) in respect of which such mount was paid, provided that ChibCo shall not k required to repair or restore any portion of the F~ciliticsthat, prior to the damage or destruction, had been obsolete or were of no material w!ae to the actual or potential operations of ChibCo or where ChibCo, following a review of the facts with GRZ, has nwkdGRZthat initsjudgment the cmof so doing is mfjustified by the incremental ccotromic tmc11~wlr~lrChbCo will drrive ~herclrom. III hc event that GRZ notifies ChibCothat it disagreeswith such judgement, the matter dullixreferred for determination U toa Sole Expert in accordancewith Clause 19. 8. Suspeusion of Production 8.1 The parties acknowledgethat ChibCo's right to suspend and curtail production is governed by Section28 of the Act and that, in the event of any such wspension or currailment,the Ministermyexercise powers under Section 28(3) of the Act. 8.2 GRZhereby agrees' that: (a) the Minister's approval shall be deemed given in accordmx with Section28(3)(a) of the Act upon con~plianceby ChibCowith this Clause;;:;Id (b) in such event, any direction capable of being given pursuant toSection28(3)(b) of the Act will only be given either: - 14- (i) in compliance with this Clause;or (ii) if ChibCo has not complied with any provisim of this Clause and has not remedied such noncompliancewithin thirtyzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAW)days of being given notice of such non-comp~ianceby GM. 8.3 ChibComyelectto suspend production if in its reasonable opinion the Company forecasts in the following six (6) month period operating losses, shor!.r~esof suppliesand materials, inwmptionof transportation, smelting, power, labour and o1l:c.r servicesessential to Normal Operations, or othereconomicor practical reasons making il‘ pdentto suspend production. Assoonaspossibleaftergiving notice under this Clause, ChihCo shallsubmita reportgiving reasons why, in its opinion, it is necessary to cease producli~~:l,zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA 8.4 Where pursuantzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAto Clause 8.3 or otherwise in accordancewidrSection 28 of tie Act, ChibCo has elected to suspend production, it shall maintain, sul?]t.ct to fair wear andzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAtear, the Facilities so as to prevent significant deterioration until Norml Operationsare resumed. U 8.5 No lawthan twelve (12) months from the date on which ChibCo suspended production pursuant toClause8.3or otherwisein accordancewith Section28 of the Act and thereafter at no longer than twelve (12)month intervals until Normal Operationsare resumed, ChibCo shall submit a furtherreport showing its projection of the CMS to Resume Operationsand of revenue from Normal Operations(if resumed) for the smcperiod. 8.6 If a report submitted pursuant to Clause 8.5 shows ChibCo’s projection of revenues from Normal Operationsfor the succeeding twelve (12)month period is greaterthan its projection of the Costs to Resume Operationsfor the said twelve (12) month period then ChibCoshall promptlytiesuch measures necessary to ensure that Normal Operations areresumexl within a reasonable time period. 8.7 Where production has been suspended for a continuous periodofnot lessthan three(3) years, the Minister may direct ChibCo to resume Normal Opmrims if he is of the reasonable opinion that the Costs to Resume Operations is less than projected revenue from Normal Operationsfor the same period. The Minister will provide ChibCo with a copy of GRZs projectionsof costs and revenues supporting such opinion. 8.8 If ChibCo disagrees with the Minister’s direction pursuant toClause 8.7 it may elect to submitGM’Sand ChibCo’s respective projections of rcvenur from Normal Operationsand the Costs to Resume Operationsto a Sole Expert for his opinion in accordancewith Clause 19. 8.9 Where projections made by GRZ and ChibCo have been rcfcrxd 10 the Sole Expertpursuant toClause8.8,the’SoleExpert shall determinewhatprojections would be reasonableto make in respect of the twelve (12) month period under review and the opinion of tie SoleExpert shall be binding on the Parties sothat in the went that the S& Expert accepts tieprojections of ChibCoor is otherwise of the opinion that if Normal Opmtions were resumed ChibCo’s revenue from the Facilities would be less than the Costs to R:,ume Operations in respect of the twelve (12)month period, the direction given by the Miniser pursuantto Clause8.7shall be deemed to have been withdrawn. - 15 - Where pursuanttoClause8.7the Ministerhasdirectexi ChibCoto resume NormalzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAOperations 8.10 and that directionhas not been or is not deemed to have been withdrawn, ChibCo. if it does not promptly tiesuch measures to ensure that Normal Operationsare resumed within a reasonable time period, shall be deemed for the purposes of this Agreement to have abandonedall the land subject to the Large Scale Mining Licences pursuant to Section49 of the Act Provided however, that where projectionsof revenue from Normal Operationsand the Costsm Resume Operations have, pursuanttoClause8.8,kenreferred toa SoleExpert, tietime period shall run from tie date the SoleExpertgave hisopinionon the projections. 8.11 Nothing herem contained shall prejudice ChibCo’s rights to suspend or curtail operations under Section 28 of tie Act for any other reason and the ewcise by the Minister of his powers under said section weas specifically described herein. 9. social hsets 9.1 The Rmies acknowledge that ChibCo has, as at the date hereof, assumed ownership and operationalcontrol of, and responsibility for the Social Assets, which comprisethe Physical W Social Assets, tie Medical Services, the Education Services, the Municipal Infrastructural Services and the Recreational Services. ChibCo agrees to continue to employ the same registration practice for determining the eligibility of dependants to qualify as Registered Dependantsas tie practice for determining the same which was in place at the date of this Agreement. 9.2 Medical Services Subject to Clause 9.8, ChibCoshall: (a) ensure that the Medical Servicesare available to: (i) all employees of ChibCo and the Registered Dependants of such employees (including for the avoidance of doubt all persons to whom access to the Medical Services is granted by virtue of relevant redundancy or retirement provisions); and (ii) such persons as may be entitled to the provision of the Medical Services under the terms of the ZCCM Social ServicesAccess Agreement, provided, in the case of persons efltiM to access pursuant to paragraph (ii) above, that the agreement is kingperformed by the counterparry thereto (b) make available the Medical Services at the following ~rvcls: (i) at the time of this Agreement coming intoeffect, at the level prevailing at the date hereof which is specified in Schedule 4, PrtI; (ii) thereafter, at a level appropriate to the number of persons entitled thereto from time to time, namely the sum of (aa)the number of ChibCoemployees - 16- and their Registered Dependants (including pcrsons to whom access mthe MedicalServicesis grantedby virtueof rduadmcy or retirement provisions) and(bb)the number of personnel entitled toh!;:dical Servicespursuant to the provisions of the ZCCM Social Services Access Agreement, taking into account improvements inefliciency adortechnology which resultm the same standards of servicescapableof king pmvidedzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAby fewer people. ensure that the Medical Services are pmvided to such persons described in Clause9.2(a)above at least to the same standard (as to range and quality of service) as that currentlyavailable as at the date of this Agreement; and ensurethat charges for the provision of Medical Services: (i) to such persons described mClause 9.2(a)(i)above are no greater m real terms than those levied by ZCCM immedia:ely prior to completion of tie Saleand Purchase Agreement;. 'U (ii) to such persons described in Clause 92(a)(ii) above are charged in accordance with the relevant provisions of the ZCCM Social ServicesAccess Agreement. 9.3 Education !h-vices Subjectto Clause9.8. ChibCo shall: (;i) pmrdctheEducaicrn Serviusin hdl umpliancc 'X biilzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA:hc Lducarion Act (CAP 234) and the rules, regulations, curriculaand standards of general application in Zambia imposed by the Ministry of Education; (b) ensurethat the children of (i) all employeesof ChibCo (including for Ilk avoidance of doubt, all persons to whose children access to the Education Services is granted by virtue of relevant redundancy or retirement'provisions); and (ii) such persons as mybe entitled to the use of the Education Servicesunder the terms of the ZCCM Social ServicesAccess Agreement, shall be considered for places at the relevant educational facilities (recognising that such children will be subject to selection for such places as is currentlythe practice); (c) make Education Services available at the following levels: (i) at the time of this Agreement coming into efftxt, at the level prevailing at the date hereof which is specified in Schedule 4, hrt11; and (ii) thereafter, at a level appropriate to the number of persons entitled to - 17- considerationfor access thereto from time to time, namely the sumof (aa)the number of children of ChibCo employees of sdmol age (including children to whom access to EducationalServicesis gIWited by virtue of redundancy or retirement provisions) and (bb) tie number of children of personnel entitled to Education Servicespursuant to the provisions of the GRZzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBASocial ServicesAccess Agreement; (d) ensure that the Education Servicesare provided to such persons described in Clause 9.3(b)above at least to the same standard (as to rangc .! quality of service)as that currentlyavailable as at the date of this Agreement; acd (e) ensure that charges for the provision of EducationSmides: (i) m such persons described in Clause 9.3(b)(i)above are no greater in real terms than those levied by ZCCM immediate!y prior to the closing of the Saleand Purchase Agreement; and (ii) to such persons described m Clause 9.3(h)(ii) above are charged in W accordance with the relevant provisions of the ZCCM Social ServicesAccess Agreement. 9.4 Recreational Services Subjectto Clause9.8, ChibCo shall: (a) ensurethat the Recreational Services are available to: (i) all employees of ChibCo and the Registered Dqendants of such emplqees (including for the avoidance of doubt, all persons to whom access to the Recreational Services is granted by virtue of relevant redundancy or retirement provisions); and (ii) such persons as mybe entitled to the use of theRecreational Servicesunder d the terms of the ZCCM Social ServicesAccess Agreement; (b) make available to those persons described in Clause9.4(a), the Recreational Services at the time of this Agretment coming into efkct, at the level and standard then applying and thereafter, at a level appropriate to the number of persons entitled thereto. namely the sum of (aa)the number of ChibCo employees their Registered Dependants from time to time, and (bb) the number of personnel entitled to Recreational Servicespursuantto the provisions of the ZCCM SocialServicesAccess Agreement; (c) ensurethatthe Recreational Services are provided to such persons described in Clause 9.4(a) at least to tie same standard (as to range and quality of service) as that currentlyavailable at the date of this Agreement; and (d) ensure that the charges for tie provision of the Ftecreational Services: - 18- (i) to such persons described in Clause 9.4(a)(i);tlxwe are no greater in realzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA terms than those currentlylevied as at the date cjf this Agreement; and (ii) to such persons described in Clause 9.4(a)(ii)hweare m accordancewith the relevant provisions of the ZCCM Social ServicesAccess Agreement. 9.5 MukipdhfrastructuralServices SubjecttoClause9.8, ChibCoshall,until such time as alternative arrangements are apedwith GRZ by twenry four (24)months from the date hereof: (a) prwide the Municipal lnfrasuuctural Services in full compliance with the public health legislation and the rules, regulations and smdnrds of general applicationm Zambia imposed by the Ministry of Local Government and Housing; (b) ensure that the Municipal InfrasuucturalServices arc available to: (i) all employeesof ChibCo and their Registered Dependants (including, for the avoidance of doubt), all persons to whom access m the Municipal Infrastructural Services is granted by virtue of relevant redundancy and retirement provisions) ;and (ii) such persons as mybe entitled to receive the Municipal Infrastructural Servicesunder thezyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA terms of the ZCCM SocialScrvicesAccess Agreement; (c) make available the Municipal Infrastructural Services at the time of this Agreement coming into effect. at the level and standard then applying and thereafter, at a level appropriateto the number of persons entitled thereto, namely, the sum of (aa)the number of ChibCo employees with their Registered Dependants from time to time and (bb) the number of personnel entitled to Municipl Infrastructural Services pursuant to the provisions of the ZCCM Social ServicesAccess Agreement; and (d) ensure that the charges for the provisions of the Municipal lnfrastructural Services: (i) to those persons described in Clause 9S(b)(i)above are no greater in real terms than those levied by ZCCM immediately prior to the closing of the Sale and Purchase Agreement; and (ii) to such persons described in Clause9S(b)(ii)above, are in accordance with the relevant provisions of the ZCCM Social SerAcesAccess Agreement. (e) Inaddition to the foregoing, ChibCo will: (i) allow the public and GRZ to use free of charge any mads constructed (&or maintained) by ChibCo which by custom and practice have been freely available for public use, provided however, tha: such use shall not unduly prejudice or interfere with ChibCo's operations hereunder; - 19- (ii) allow GRZ and third partiestohave access owr theContractArea, provided that such access does not unduly prejudice or interkre with ChibCo’s operationshereunder;and (iii) allow GRZ to place,zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAliee of charge at its own expense, telegraph and telephone wires on the poles of the lines of ChibCo, pmided titsuch installation does not unduly interlixe with ChibCo’s efficient use of such poles and lines. 9.6 PhysicalSocial Assets ChibCohas agreed that it will maintain the Physical Social Assets in a good state of repair and, except as mybe agreed pursuanttoClause9.8 belmv, will onlydisposeof the Physical SocialAssets: (a) to the extent they are surplus to the level of Physial Social Assets required by ChibCoin order to meet its commitmentsas set out in Clauses 9.2(b)(ii), 9.3(c)(ii), ti 9.4(b)and 9.3~)above; or (b) to the extent such Physical Social Assets mybe outsourced pursuant to9.7(b). 9.7 ChibCo will be free to effect the maintenance of the Medkrl Services, the Education Services, the Recreational Services, the Municipal Infrastructural Servicesand the Housing Servicespursuant toClauses9.2,zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA9.3, 9.4 and 9.5 either: (a) itself; or (b) through outsourcing or other third party provision, such outsourci~~g orthird party provision being effected by personsof suitable compc~c~~ceor professional standing. For tie avoidance of doubt, if ChibCo wishes to sell thc Physical Social Assets and contract with third parties for the provision of the Medical Services. the Education Services,theRecreational Servicesand the Municipal hfrastructuralServicesit shall be entitled to do so provided that ChibCo continue to comply with Clause 9.3(d), 9.4(c) and 93~). G 9.8 In theeventhatChibCo determinesthat itwill becomeunable tocomply with the provisions of Clauses 9.2, 9.3, 9.4. 9.5, 9.6 for any reason whatsoevcr, it shall forthwith give notice toGRZof this fact. GRZagreesthat itwillaccept such non-cunpliancewith Clauses9.2, 9.3, 9.4, 9.5 and 9.6 (as the case mybe) and that no action will be taken under this Agreemntif, simul~meouslywith the giving of such notice, (i) ChibCo subnutsproposals to GRZ for: (a) an increase in general levels of remuneration or other employment benefits to employeesof ChibCo;and (b) compensation to be paid to ZCCM in orderto compensate ZCCM for thewithdrawal of rights to occupy or use (as the case mybe) the Physical Social Assets, the Medical Services,the Education Services, the Recreatkml Servicesand the Housing - 20 - Servicesand (ii) if ChibCo also provides GRZ ~iihrcsonable evidence that such proposalsareagreed withany trades union(s) thenrepresenting enlployees of ChibCo. 9.9 Pending cdi~tionfrom GRZ that such proposals for increases in general levels of remunerationsor other benefits are acceptable to it, ChibCo willcomply in all respects with Clauses9.2, 9.3, 9.4, 9.5 and 9.6zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA and GRZ agrees that it willrespond to ChibCo’s proposal within sixty (60) days of receipt of the same from ChibCo. 9.10 If the Parties disagree about: (a) the level of SocialAssets to be maintained and the wz~ilabilityof the Social Service AssetspursuanttoClause9.2(a)and 9.2(b),Clauses9.W)and9.3(c),Clauses9.4(a) and 9.4(b). Clauses9.5(b) and 9S(c), and/or Clause 9.6 (as the case mybe); (b) the state of repair of Physical Social Assets or the cxtdthat ChibCo is permitted to disposeof the same pursuant to Clause9.7; (c) the standard of, or charges made for, the provision of the Medical Services, the Education Services, the Recreational Services, the Municipal Infrasmctural Services antior the Housing Servicespursuant to Clauses 9.2(c) and 9.2(d), Clauses9.3(d) and 9.3(e), Clauses9.4@)and 9.4(d)and Clause 9.34; (d) the competence of persons or- companies providing outsourcing or third party provision pursuant to Clause 9.7(b); or (e) the acceptability of proposalsmade by ChibCo pursuant to Clause 9.8, either party myelect to submit the matter in issue to a Sole Expert for determination in accordancewith the provisions of Clause 19. 9.11 ChibCowill not be required to make Social ServiceAssets wailableto persons who are not: (a) employeesof ChibCoor their Registered Dependants iincluding for the avoidance of doubtall persons to whom accessto the Social ServiceAssets is granted by virtueof releum redundancy or retirement provisions); and (b) entitled tothe use of the Social ServiceAssets under theterms of the ZCCM Social ServicesAccess Agreement. 10. Recordsand Operating Reports 10.1 . ChibCoshall,pursuantto Section 104of the Act, keep GRZ, through the Ministry, advised concerningChiKo’s operations through submission of proycss reports, beginning with the first quarter following the date of this Agreement, as to thc prcyess and results of ChibCo’s mining operations and any prospecting and appraisal activhiesunder this Agreement. 10.2 Pursuant to Sections 2(d) and (e) of the Fourth Schedule to the Act, ChibCo shall provide - 21- quarterly reports to the Ministry, broken outon a mine by mine basis in the case of (a) to (c) below on: (a) quantitiesof ore minedzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAand average head grades; (b) quantitiesof waste'mind; (c) quantitiesof copper and cobalt concentrates produced and quantities of contained copperand cobalt; (d) OperatingCosts;and (e) progress in implementing the Scheduled Programmes, the extent of any continuing non-complianceby ChibCo with Envimnmentallaws and progress made in remedying this m accordance with the Environmental Plan. 10.3 ChibCo shall file with the Ministry a summary of my geological and metallurgical U investigations and such other material data mybe obtained from any prospecting activities and a sample representative of each principal type of mineralisation encountered in such investigations subject to the Ministry retainiug such data in accordance with Section89 of the Act. 10.4 ChibCoshallprovide quarterlyreporrs relating to anyprospectillg, appraisal and development activities to the Ministry which shall include such information as to the progress of operations in the Mining Area as the Ministry may from time to time reasonably require. 10.5 All information furnished to GRZshall be in English and, in tieevent that such infixmation isa translation from the original, shall be a certified true translation. All financial data shall be recorded in US.dollars. 10.6 ChibCoshallmaintain all original records and reports relating to its activities and operationszyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA under this Agreement including all documents relating to financial and commercial transactionswith independent parties and Affiliates in its principal office in Zambia. These records and reports shall be opened to inspection by GRZ through an authorised ~4 representative during normal working hours. Such reports and records shall be maintamed in the English language and all financial data shall be recordd inU.S. dollars. 10.7 Allrecords, reports, plans, maps, charts,accounts, and informa~ionwhich ChibCois or my be from time to time required to supply under the provisions of this Agreement shall be suppliedat the expenseof ChibCo. - 22 - PrnC UNDERTANNGSNECESSARYFOROPERATIONS 11. ForeignzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAlixhange 11.1 The Parties acknowledge that under legislation and practice currently in force in Zambia, ChibCo is free to: (a) remit foreign currency outofZambia; (b) maintain foreign cumucyaccounts outside of and within Zambia; and (c) remit foreign currency accruing toor eamed by itoutsidr: Zambia into Zambia. 11.2 In the event foreign exchange controls were to be re-introduccd inZambia within fifteen (15) U years of the date hereof, ChibCo shall have the right to: (a) retain both outside Zambia and within Zambia, in accounts established for that purpose, foreign currency, and to have paid to it and nuintain in such accounts the following: (i) proceeds of the sale of Mine Products; (ii) payments made by insurers not resident in Zambia under contracts of insurance in ChibCo’s favour; (iii) proceeds of any disposal of capital assets received from persons not resident in Zambia for foreign exchange purposes; (iv) the mount of any funds received pursuant to any loan finance provided by persons not resident in Zambia for foreign exchngepurposes; (v) any share capital received in foreign currency from persons not resident in Zambia for foreign exchange purposes; and (vi) any other foreign currency earned or accrued in the ordinary course of business from persons not resident in Zambia for foreign exchange purposes. (b) use freely the foreign currency accounts maintained by ChibCo to: (i) service payments ofprincipal and interest. service charges and other tkes and expenses in respect of any loans arranged with non-Zambian institutions to implement the Scheduled Programmes or othcnvise finance or refinance the Facilities; (ii) make payments due (aa)to suppliers outside Zambia for the supply of goods and services to ChibCo (including capital goods and services of foreign - 23 - employees and consultants) where goods and services are required to implement the Scheduled Programmes; (bb) to suppliersinsideZambia with respect to the treatmentirefining of ores and concentratesand to the supply of electricity or acid to the Facilities;zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA(cc) in respect of the payment of managementfees under the Management Agreement which is Schedule28 to the Saleand Purchase Agreement; (iii) finance the payment of dividends to shareholders who are not resident m Zambia for foreign exchange purposes Provided hatsuch paymentsare made out of Distributable Profits (as defined m the Companies Act); (h) pay expatriate employees whose contractsof employment specify that they be paid (in whole or mpart) in a currencyother than Kwacha; and (v) effect such other payments in hreign currency to persons not resident in Zambia for foreign exchange purposes as mybe necessary or desirablein the ordinarycourse of ChibCo’s business. b4 11.3 ChibCoshallsubmitto the Central Bank: (a) within fifieen(15)days of the end of each Quarter - (0 a statement of the foreign currency accounts maintained overseas by ChibCo showing movements on the accounts during the Quarter with Quarter-end balances; (ii) a statement of the foreign currency accounts maintained at banks within Zambia by ChibCo showing movements on theaccounts during the Quarter with Quarterend balances; (iii) a statement of the foreign exchange converted into Kwacha and the total mountofKwacha converted into foreign exchange duringthe Quarter; and W aforecastof theforeign currency which itexpects toreceive and retain in a 4‘ foreign currency account overseas or within Zanhiaand that which it expects toconvert into Kwxhaduring the ensuing Quawr, and (b) within five (5) months of the end of each year, audited financial statements showing the amount of Distributable Profits. 11.4 In the absence of exchange controlsin Zambia, ChibCo shall have the same rights to buy and sell currenciesfrom authorised dealers as othercommercialconcernsin Zambia. In the event exchange controls were to be reimposed (and without prejudice to ChibCo’s rights under Clause 11.2) such controlsshall not be applied to ChibCo in a manner less favourable to it than the manner in which they are generally applied to other large commercial concerns in Zambia. ChibCoshall be enthkd tobuy and sell foreign exchange in accordance with such controls at rates of exchange no less favourable than those available to other commercid buyers and sellersof the currency concerned. - 24 - 11.5 ChibCo shall remit to Zambia and convert into Kwacha for crcdit to a bank account m the name of ChibCo in an orderly hshion sufficient of its foreign currency earnings tozyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBApay such conunitments as ChibCo my have incurred in Kwacha (hcluding, without limitation, obligations to pay dividends to local shareholders payable in local currency, taxes, royalties and customduties). 11.6 ChibCo shall not engage in or use any provisions of this Clause 11 or any authority or approval given by the Central Bank to engage in Speculative Currency Transactions. If ChibCois in breach of this Clause 11 it shall pay to GRZ as liquidated damages an mount equal to the amount of any net after tax profit or gain which ChibCo makes on the Speculative Currency Transaction and any cost incurred by GRZ in establishing that the transaction was a Speculative Currency Transaction. 11.7 Where any right or assurance given to ChibCo under this Clause 11 requires the Central BXk (a) to approve any act, matter or thing; or ‘U (b) to grant authority under applicable law and reguhtions for its exercise or performance, and ChibCo has supplied any necessary infbrmation tothe Central Bank and othcrwise met the conditions of this Clause 11, GRZshall, upon request frmChibCo. ensure by policy directions to the Central Bank or otherwise that such approval is given or such authority is granted. 11.8 ChibCo will emure that(wllessdwwiseagreed wilh the Mitliswy and heCentral Bank)any borrowings it myincur denominated in Kwacha will not exceed the Kwacha equivalent from time to time of ten million United States dollars (US$10,000,000). 11.9 ChibCo will ensure that the Central Bank will not suffer discrimination by ChibCoin access totoreign exchange sold by ChibCo for Kwacha. ‘W 12. EnvimumentrrlIssues 12.1 ChibCo will (subject to the provisions of and save to the cxtcnt provided otherwise m this Clause 12) conlply with: (i) environmental and safety laws and regulations enacted or promulgated within Zambia from time to time which are of general application (including, for the avoidance of doubt, make such contribution as is required under Scction 82 of the Act fix the Environmental Protection Fund); and (ii) the Environmental Plan. 12.2 Without prejudice to the foregoing, ChibCo shall perform [!:c Environmental Clean Up Obligations in accordance with the provisions thereof and of the Environmental Plan and within the timescale and subject to tie conditions tnerein setcut. -25- 12.3 Subjecttocomplianceby ChibCowith the Environmental Plan and the Environmental Clean Up Obligations and save as provided in Clause 12.6below, GRZ hereby confirms that it will not for a period of fifteen (15) years from the Effective Date take any action (and will procurenoaction is taken by any of its Ministries, departmms or agencies over which it has operationalcontrolacting on its behalf) under, or in enforcing, any applicableEnvironmental Laws with tie intent of: (a) securing ChibCo’s earlier compliance with Environmental Laws or earlier implementation of the Enviromnental Clean Up Obligahns than that envisaged by the timetable and conditionsset out in the Environmental Plan; or (b) requiring ChibCoto clean up andor remove any stock of pollumts which was pre- existing as at the Effective Date and which is not included as an Envimnnxmtal Clean Up Obligation; or (c) imposing fines or penalties upon ChibCo payable under Environmental Laws (or enacting new fines and penalties thereunder) which are payable m xespect of ChibCo’s noncompliance with such Environmental Laws and where tie Environmental Plan provides for the remedy of the same m accordance with a specified timetable and ChibCo is in compliance with that timetable; or (d) imposing increased fines or penalties in respect of ChibCo’s breach of Envimmrmtal Laws inexcess of those applying on the Effective Date, adjusted (where denominated in Kwacha) to tieaccount of Zambian inflation sincethat date, having, in the case of (a) and (b) above, a material adverse economic effect on the implementation of the Approved Programme of Mining OperationsudorNormal Operations. 12.4 In the event of a material non-compliance with the Environmental Plan or the Environmental Clean Up Obligations, GRZ will (in the event that such material non-compliance is not remedied within three (3) months notice thereof being provided by GRZ to ChibCoor, in the event of a dispute regarding non-compliance being referred to the Sole Expert pursuant to this Clause 12.4, such period as the Sole Expert may decide in any determination that he makes) cease to be bound by the provisions of Clause 12.3 and the Parties acknowledge that GRZ(oritsMinistries. departments or such agencies acting on its behalf) shall be freeto tie such action under, or inenforcing, applicable EnvironmentalLaws as itor they shall consider appropriateor necessary. 12.5 Any dispute regarding a material non-compliance with the Environmental Plan or the Environmental Clean Up Obligations mybe referred by either Party to a Sole Expert in accordance with Clause 19, for determination within thirty (30) days of notice given by a Pdwto the other of its intention to refer to the matter to the Sole Expert. 12.6 The Ministeron behalf of GRZmayproposean amendment to the Environmental Plan if (a) at any time the conduct of Normal Operationsin accordancewith the Environmental Plan for whatever reason poses a material danger to public health and safety or my result in significant damage to the ecology of the area which was not contemplated - 26 - in the original E~~vironmmtalPlan and is or mybcconw irreversibleor only become reversible or only be reversed after the lapse ofzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAlilicw ( 15) years; or (b) the environmental impact of Normal Operations shall prove substantially more thananticipated m the Environmental Plan; or adversezyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA (c) technology or procedures, or improvements thereof shall have been available and economc subsequentm the Effective Date and, if applied to the operation of the Facilities, could materially mitigate the environmenr in:pct of Normal Operations. 12.7 In the event of a variation of the Environmental Plan proposed by the Minister on behalf of GRZunder the circumstan~sset forth in Clause 12.6, ChihCo undertakes to consider the proposed variation in good faith and, unless by notice of objection served on the Minister within fourteen (14)days of receipt of the proposal madepursuant to Clause 12.6, it informs the Minister that it considers the proposed variation to be unrcasonable it shall be deemed to have agreed the same. A notice of objection shall includea written statement of the reasons why ChibCoconsiders the proposed variation to be unreascmh~esetting out: (a) its estimateof the diwtcosts to implement such change; ib) its analysis of the variation in the environmental impact that would be effectedby such change; and (c) its appraisal of the economic and other effects of the change proposed by GRZ. 12.8 Following receipt of a notice of objection under Clause 12.7, ihe Minister shall, as soon as possible, inform ChibCo by notice in writing whether or not the Minister’s proposal for variation of the Environmental Plan is or is not withdrawn. In the event that the Minister’s proposal for variation is not withdrawn it will be deemed to have been agreed unless ChibCo elects to submit for the opinion of a SoleExpert in accordancewith Clause 19, the question of whether GRZ’sproposal for variation is unreasonable. Sl~ouldChibComake that election, heopinionofthe Sole Expert will be binding on the panics wihcflect that: (i) if the Sole Expert determines that GRZsproposal for variation is not unreasonable the proposal for variation will be deemed to have been agreed; or (ii) if the Sole Expert determines that GRZ’s proposal for variation is unreasonable the proposal will be deemed to have been withdrawn; Provided that the Sole Expert may in his sole discretion suggest alternative proposalsor time sdxdules or mitigation of cost proposalsto the Parties who willconsider the same ingood faith prior to the determination being rendered by the Sole Expert. Theperiod during which such proposals shall be considered by the Parties shall not cxcalthree (3) months. 12.9 Where a variation to the Environmental Plan proposed by f!x Minister has been agreed by ChibCo or is deemed to have been agreed by them pmumt to this Clause 12, the - 27 - Environmental Plan shall be ammded accordingly. 12.10 NothinginthisClause 12 shallbe deemedto limitthe right of GRZ to take suchotheractions within its power, such as those rights givenzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAto the Director of Mine Safety under Section 81 of the Act, mprotect the public health andzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAsakty. 12.11 ChibCo shall be entitkd to amend the Environmental Plan or the Environmental Clean Up Obligationsfrom time to time, provided that following such amendment the Enviromntal Plan or the Envmnrnental Clean Up Obligations (as the case may be) conform m specifications and practices established by Zambian standards for the management of the environmentas it is affected by mining operations,soas to reflect changes in operationsand othcr circumstances consideredmbe appropriate by ChibCoandshalldeliver a copy of such mended plan or obligations (as the case may be) m the Minister whereupon it shall be annexedtothe Large Scale Mining Licenses in substitutionfor the Envirommmal Plan or the EnvironmentalClean Up Obligations (as the case may be) so amended. If however, GRZ considersthat any such amendment would constitute a Major Change (as defimd in Clause 22.3herein)the pmvisions of Clause23 shall apply. ti 12.12 Notwithstanding the provisions of this Clause 12, ChibCo shall, at the invitation of the Minister responsible for the environment, participate either individually or on an industry-wide basis, in discussions relating m the impact and effectiveness of the Environmental Laws or on any prospective changes thereto. 12.13 For the avoidance of doubt, nothing in this Clause 12shall be construedto render ChibCo liable for penalties or fines imposed, or third party claims made, in respect of activities undertakenprior to the Effective Date by ZCCM. PARTD TAXATION 13. GeneralObligationto Ray Tax 13.1 The provisions of Schedule8 correctly reflect, in respect of hematters therein specifically described,the currentzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAtax regime applicable to ChibCo in the conduct of its activities under this Agreement. Whilst Schedule 8 is not intended m override applicable legislation, in the eventof any ambiguitybetween applicable legislation and Schedule 8, GRZand ChibCoagree that the provisions of Schedule8 shall apply, it being the intent of the parties that Schedule 8 clarify any ambiguities in the legislation and tax regime applicable to ChibCo or its operations. 13.2 Subject to Clause 15, ChibCo shall pay tax, royalties and duties from time to time in accordancewith applicable legislation. 14. Vat Refunds - 28 - GRZshallensurethat VAT collec&d on goods and servicesprocured by ChibCois refunded 14.1 to ChibCo as soon as practicable from the date of submissionof ChibCo’s monthly VAT return. 15. Taxation Stability 15.1 GRZ undertakes that it will not for a period of fikm(15) years commencing on the date hereof (a) increase corporate income tax or withhoiding tax rates applicable to ChibCo (or decreased~owancesavailabletoChibCo in computing its liabilitytosuchtaxes) from thoseprevailing at tie date hereof; or (b) otherwiseamend the VAT and corporate tax regime applicable to ChibCofromthat prevailing as at the date hereof (as set out in Schedule 8);or (c) imposenew taxes or fiscal inqwsrs on conductof Normal Operations,or (d) alter the right ofzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAany non-Zambian citizens (and entitled depemdents) (on his or their arrivalor permanent departurefrom Zambia) to: (i) import free of dutyand tax, for per~o~luse, household and personal effects; (ii) export, without Icr c)rhindrance or the imposition of duty or tax on export, all personal effects originally imported or acquired during residency in Zambia; and (iii) freely remit all income earned within Zambia duringsuch residency, so as to have, in each case, a nuterial adverse effect (the issue of whether or not such effect is materially adverse to be dmmnedby a Sole Expert in accsrdance with Clause 19m tie event of disagreementbetween the Parties) on ChibCo’s Distributable Profits or the dividends received by its shareholders. GRZfurtherundertakes that for the same period of fifteen (15) years, it will not: (d) increase: the rate of royalty from the level prevailingzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA (0 Pthe date hereof; or (ii) import duty rates applicable to ChibCo (including the IDF) so as to result m the weighted average import duty rate (indusive of the IDF) to which ChibCo is subject on the import of goods and materials required for the Approved Programme of Mining Operations or Normal Operations and which would, at the date hereof, be exempt from customs and excise duties under Section97(1) of the Act, above a level of five per cent. (5W); or (iii) import duty rates (including the IDF) applicable to ChibCoso as to result in - 29 - the weighted average import duty me (inclusiw of the IDF) to which ChibCoissubject on the hpORof othergoodsand materials required for the Approved ProgrammeofMining OperationsorNorm1Operationsand which donot fall under Clause 15.l(d)(ii),above a level of twenty per cent. (20%); or (iv) thezyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBARural Electrification Levy applicable to ChibCo's purchases of puwr from the level applicable on the date hereof;or (e) impose other royalties or duties on Normal Operations, so as to have a material adverse effect on ChibCo's Distriburable Profits or the dividends received by its shareholders. 15.2 Upon expiry of the period specified in Clause 15.1, GRZ shall ensure that nozyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAlaw, statute, regulationor enactment shall be passed or made which would discriminateagainst ChibCo in respect of any such matters as are referred to in Clause 15.1or otherwisem its conduct of Normal Operationsor any other circumstances under thisAgreement when compared to othermining companiesor jointventures conducting similaroperationson a scaleequivalent m those conducted by ChibCo iu Zambia provided that GRZwill be at liberty to pass or make any such law, structure, regulation or enactment to enable the performance or amendmentof a development agreement entered into by it and another mining company or joint ventureprior to the expiry of such period. 15.3 GRZ covenants to reimburse ChibCo (or, at its option, make offsetting changes in any law, statute, regulation or enactment applicable to ChibCo) to ensure ChibCois fully and fkirly compensated for any costs incurred by it by reason of a hilure by GRZ to comply with the provisions of Clauses 15.1 and Clause 15.2 provided that (if GRZ opts to make such legislative changes) GRZ shall reimburse ChibCo for any costs incurred along with interest at a rate of six (6) month LIBOR whilst offsetting changes in any law, statute, regulation or enacment arebeing enacted. ChibCo acknowledges that this will be its soleremedy for such failure to comply with Clause 15.1and Clause 15.2. d - 30 - PART E FORMALCLAUSES Assignment 16. 16.1 ChibComy,with the consent of the Minister, assign its interest in any or all of the Large Scale Mining Licences and GRZ covenants that the consenr of the Minister to such an assignment will not be withheld in the circumstances set out in Clauses 16.4and 16.6. 16.2 If ChibCoassigns its entireinterest in all the Large Scale Mining Licences and its rights and obligationsunder this Agreement in accordance with Clause 16.1, then upon the assignee becomingparty to this Agreement, ChibCo shall be discharged from any furtherliability in respectof any obligation which accruesafter the date of that assignment withoutprejudiceto pre-exhhgrights accrued to GRZ against ChibCo. If ChibCo assigns its interests in less than all of the Large SdeMining Licences and the 16.3zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA rights and obligations attaching thereto under this Agreement. then ChibCo shall be discharged fromany furtherliability m respect of any obligation which accruesafter the date of that assignment as they relate to the Large Scale W:+g Licence@)so assigned which accrues after the date of that assignment without prejudice to pre-existing rights accrued to GRZ against ChibCo. 16.4 Notwithstanding the foregoing provisions of this Clause 16, ChibCo may: (d) charge by way of fixed or floating charge the whole or any part of its undertaking and assets including the Large Scale Mining Licences, the Leases, the Facilities, the Mine Products and uncalled capital (and premiums) to secure the repayment of principal, and payment of interest and other kes, costs and expenses relating to all loans made to ChibCo to finance or refinance the Scheduled Programmes; and (b) mortgageandchargeany sptxiliedasset (whetherrcal orpcrsonal property)to secure the purchase price thereof where such amount has been borrowed to finance the purchaseof that asset and this asset is to be used as part of Normal Operations; and GRZ covenants that the consent of the Minister to sud~mortgages and charges shall be gvcnprwidcdthat such mwgagcsadchargcsare notikd tohchlmiskr upon their grant (and, in any event, within sixty (60)days thereof). Subject to Clause 16.5, any mortgagee or chargee under a mortgage or charge given by ChibCo pursuant to this Clause myexercise all rights of sale and other rights included in such instrumentof mortgage or charge provided it shall first give to GRZ at thirty (30) days notice of its bmtion to exercise any rights of sale and five (5)days' notice in all other cases. 16.5 The rights of any mortgagee or chargee under a mortgage or charge given by ChibCo pursuant to Clause 16.4 shall be subject to and limited by thc rights of ChibCounder this Agreement and to GM'S right to teti~tethose rights under Clause 18.2. The rights of such mortgagee, chargee or lender to sell the assets of ChibCo so charged shall not be exercisable: - 31 - (a) unless all those assets and undertakings of ChibCo which are charged by the mortgageorchargearesoldasagoing concern (or withsuch exceptionsasGRZ my agree) to a purchaser approved by GRZ (which approval GRZ covenants not to unreasonablywithhold);or (b) if GRZ has within the thirty(30) day period of notice under Clause 16.4givennotice tothemortgagee, chargee, or lender that it will purchase some or all the assetswhich the mortgagee, chargee or lender wishes to sell at a price which is equivalent to: (i) the highest price which a bonajide purchaser who is at arms’ length from ChibCo, its shareholders and the mortgagee, chargee or lender has offered to pay for the assets and undertakings; or (ii) if there is no such offer, at a total price equal to the fair market value of the same as an ongoing concern m be determined by agreement betueen tie parties but tiling such agreement to be determined by a Sole Expert in accordance with Clause 19, ti and settles the purchase by makiifull payment of tieprice at tieprincipaladdress of the mortgagee, chargee, or lender and in the currency denominated mtie loan between the mortgagee, chargee or lender and ChibCowithin ninety (90) days after notificationto GRZ of such place for payment and designated currencyor otherwise on terms agreed with the mortgagee, charge or lender. 16.6 Where the Minister’s consent is necessary to effect: (a) an assignment under Section 54(1) of the Act or a change of control under Section55(1)of the Act; or (b) an assignmmpursuant to Clause 16.l, GRZwill procure that the Minister will not withhold his consent where, in the case of an assignment,the proposedasigneehas demonstrated its financial capacity and technical ability to meet its obligations hereunder or, in the case of a change of control of ChibCo, tie acquiring party has demonstrated that it is of appropriate financial standing having regard, herzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAdiu, to the obligations it will assume under the Share Purchase and Subscription Agreement and the Shareholders’ Agreement. 16.7 In the went that ChibCo considers that the Minister has acted unreasonably in considering that a proposed assigneeor the acquiring party has not demonstrated such financial capacity or technical ability as is referred to in Clause 16.6, it may refer the issue to a SoleExpert for its opinion in accordancewith Clause 19. If the Sole Expert delermines that the Minister: (a) has behaved reasonably in determining that the proposed assignee or the acquiring party has not demonstrated the requisite levels of finuncial or technical ability, the Minister’s determination shall stand; or (b) has behaved unreasonablyin sodetermining, the Minister’s determination shall be set - 32 - aside and the consents referred to in Clause 16.6(a) or Clause 16.6(b)(as the case mybe) shall be deemed given. 17. ExtensionstoTime 17.1 Notwithstanding any provision of this Agreement, the Parties by agreernem between the persons responsible for giving Notices under Clause 24, may from time to time extend my period referred to in this Agreement, or substitute for any date referred to in this Agreement such later date, as they think fit. 17.2 If ChibCo is prevented or hindered by any circumstances or event of a kind set out in Clause21 or by a reference to a Sole Expert or by an arbitration under Clause 19 from undertaking all or any of its obligations hereunder or exercisin,n any right granted, the period of time allowed for the performance of that obligation or exercisc of that right and all periods of time thereafter allcnved for the performance of obligations or exercise of rights whichzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAare dependentupon the first mentioned obligation or right, shall be extended by a period equal to the period during which such prevention or hindrance continues or during the period from W the time when the question,disputeor difference aroseuntil the time of its determination by the SoleExpert or settlement by agreementor arbitration, as the case may be. 17.3 Whereany period is, or is deemed to be, extended or any later date substituted for an earlier date under this Clause, that extended or substituted period or date shall be deemed to constitute the period or date referred to in this Agreement (notwithsmdmgthat at the time of such extension or substitution such period myhave cxpired or such date myhave pused). 18. Termination 18.I ChibCo myterminate this Agrtmwnt at any time afkr lhc lifiw~thanniversary of the Etiecri\e Dareby giving twhc.(I?) mmhsnorice to GRZ. 18.2 GRZmay terminate this Agreement by notice toChibCo if (a) all of the Large Scale Mining Licences have expired by afJiuxion of time and have not been renewed; or (b) the land the subject of the Large Scale Mining Liccnces is abandoned or for the purposes of this Agreement is deemed to have bwn abavhxd by ChibCo under Section49 of the Act. 18.3 In the event that: (a) ChibCo is in material default in the performance of the obligations of ChibCo set forth in Clauses 2, 3, 4, 5,6, 9 and 12 or is in material and persistent default of the performance of the obligations of ChibCo set forth in Clause 9; or (b) ChibCofails to treat as binding and comply with any award made by a Sole Expert or in an arbitration pursuant to Clause 19, - 33 - GRZmygive notice of such default or failure (hereinafterin this Clausecalled azyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA"Default Notice") to ChibCowhich shall specify the default or failure alleged. ChibCoshall at the sametime give a copy of the Default Notice to each lender to ChibCo, where the name and addressof that lenderhas previouslybeen notifiedto GRZ,and foeach mortgagee or chargee of any of ChibCo's assets under any mortgage or chxse norified to the Minister in accortLmce with Clause 18.4. . If ChibCodispuus the subject mmcr ofthe DehultNocice, it myrefer the issue to arbitration pursuant to Clause 19. 18.4 If within a period of three hundred and sixty (360)days following a Default Notice (or such longerperiodas may be fixed by anarbitrationaward where the subject matter of the Default Notice is submitted to arbitrationunder Clause 19) either: (a) the default or failure specified in the Default Notice has not been remedied (or active steps have not been commenced and continued to remedy the defaultor failureif it is not capable of speedy remedy); or (b) compensation is not paid in respect thereof (in the case of a default or failure not ti capable of remedy but where payment of compensation wuld be adequate recompense to GRZ). then, subject to Clauses 18.5, GRZ may by notice (hercinafter in this Clause called a "TerminationNotice") 10 ChibCo (which shall be copied to each lender, mortgagee or chargee who was given a copy of the Default Notice) bring about the termination of this Agreement on a date which is not less than one (1) month thereafter (hereinafter in this Clausecalled the "TerminationDate"). GRZshall ensurethat the Ministerdoes not make a decision to suspend or cancel any of the Large Scale Mining Licences, and that no other action is taken by or on behalf of GRZ without the approval of ChibCo to teti~tesuch Large Scale Mining Licences or any of the Leases prior to the Termination Date. 18.5 If ChibCoor GRZ contest: (a) the groundsfor the issue of the Default Notice; or (b) whether the debult or failure has been remedied; or (c) the adequacy of any compmationpaid pursuant to Clause 18.4(b), the matter shall be submitted for arbitration pursuant to Clause 19. If the arbitrator finds (in the case of paragraph (a) above) that adequate grounds exist for issue of the Default Notice, he shall fix a period during which ChibCo must comply withClause 18.4(a) or 18.4(b)and the mount of compensationpayable (if applicable). If the arbitrator finds (in the case of paragraph (b) above) in favour of GRZ, he shall fix a period during which ChibCo must remedy the default or failure. If the arbitrator finds (in the case of (c) above) in favour of GRZ,he shallfix the mount of compensation payable and the period for its payment. GRZshall notserveaTemnationNotice while arbitration bctween GRZand ChibCounder this subclauseis in progress and any Termination Notice already served will be suspended immediately upon the commencement of such arbitrdtion for the duration of any such - 34 - arbitration. If the arbitrator finds in favour of ChibCo, or within the period fixed by the arbitrator the dehult or hilure is substantially remedied or the compensation is paid, GRZ shall not serve a Termination Notice and myTermination Nor2e already served shall be deemed withdrawn. 18.6 If this Agreement is terminated by GRZ pursuant to Clauses 18.2or 18.3: (a) ChibCowill surrenderto GRZ the Large Scale Mining Licences and the Leases but without prejudice to the liability of any of the Parties in respect of any antecedent breach or default under this Agreement or in respect of my bdemnity given; (b) each Rmyshall forthwithpay to the other €?my all monks that mybe owing to the other ktyhereunder; (c) GRZ shall have the option to request that ChibCo abanc' m tie Facilities within the reasonable timetable specif~edby GRZ and the option to purchase (subject to my encun~brancestherem),allor any portionof the Facilities at a price equivalent to the fair market value of suchzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAassets, which fair market value is xo be determined by agreementbetween GRZ and ChibCo but failing such agreement by a SoleExpert m accordance with Clause 19. Such option tobe exercisableby notice toChibCowithin thirty (30) days following termination of this Agreemenr. Ifrequested to do so by GRZ, ChibCoshdialsoassign to GRZ such contracts 10 which it is a party as GRZ detemnesand deliver all records of the Facilities held by ChibCo to GRZ; (d) ChibCo shall have the right, within the one (1) year period fokwing the thirty (30) day notice period referred to in Clause 18.6(c): (1) mz,s&porukmissdispojt.zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAofd! or any p: 5::. .d:!Xremaining Facdiries to any person; or (ii) to remove and recover from the Mining Amand export from Zambia my of the remaining Faciliks on the conditionthat such removal does not cause irreparable damage to major assets which are not removed from the Mining Area; and (e) ChibCo shall leave the Mining Area in a safe an:! stable conditionto the reasonable satisfaction of the Director of Mine Safety having regard 10 natural conditionsin the area and applying generally accepted standards of good mining practice, provided that ChibCoslull not be required to alter the physical condilion ofthe mines, the tailings disposal sites, or other Facilities beyond the requirements of the Environmental Plan. 18.7 Upon the expiry of the one (1) year period referred to in Clause 18.6(d), all Facilities which remain on the Mining Area shall become tie property of GRZ without any cost to GRZor any liability for GRZ to pay compensation therefor. 18.8 Clauses 18.6. 18.7, 19, 20 and 21shallcontinuein force notwhhtandingthe termination of the rest of this Agreement. - 35 - GRZcovenants that it will not acquire compulsorily the Facilities or my interest in or over 18.9 a property comprising the Facilities except fix public purposes under an Act of hrliament relating to the compulsory acquisition of property which provides for payment of compensation in respect thereof. 19. Arbitrationand SoleExpert 19.1 For the purposesof this Clause, Wispute"means any dispute, disagreement,controversy or claim arising out of or relating m this Agreement, or the inre~pretation orpXfOmlimU? of provisionsof this Agreementor the breach, termination or validity thereof, which the hties are unable m resolve by mutual agreement within a reasonablerime. It does not includezyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAany , difference of view or disagreement which, pursuant to provisions of this Agreement, mybe submitted for determination of a SoleExpert. 19.2 GKZ and ChibCo hereby consent to submit to the Lntem.hml Centre for Settlementof lnvestnxmDisputes(the "Ceuue")any Dispute for setrlenxntby arbitrationpursuant m the Convention on the Settlement of Investment Disputesbetween States and Nationals of Other 'ci States (the "Convention").Arbitration shall be held in London, or such other place as the Parties myagree in writing. 19.3 It is hereby agreed that, although ChibCo is a national of Zambia, it is controlledby nationals of South Africa and shall be treated as a national of SouthAlkafor the purposes of the Convention. 19.4 Any arbitd tribunal (the ""mud") constituted pursuant to this agreementshall consistof a sole arbitrator appointed by qyeement, and an arbitrator, who shall be President of the Tribunal, appointed by agreement of tie parties or, fiiling such agreement by a neutral oilicial. 19.5 Anyarbitrationproceeding pursuant to this Agreement shall be conducted in accordance with the arbitrationrules of the Centre in effect on the date on which tie proceeding is instituted. 19.6 Anaward in arbitration proceedingsheld pursuant tothe Convention shall be binding on the parties and judgement thereon may be entered in my court having jurisdiction for the d purpose. 19.7 GMhereby irrevocably waives any claimto immunity - (a) in respect of proceedings to enforce any such award including, without limitation, immunity from service of process and from the jurisdictionof tie Court, and (b) in respect of execution of any such award against the property of GRZ outside Zambia. 19.8 The waiver of immunities referred toherein constitutes only a li.nited and specificwaiver for the purposesof this Agreement and under nocircumstances shall itbe interpretedas a general waiver by GRZor a waiver with respect to proceedings unrelated to this Agreement. GRZ has not waived such immunity in respect of property which is (i) located in Zambia; (ii) used - 36 - by a diplomaticor consularmission of GRZ (except as my bc nrsessary to effectserviceof proces), (iii) properq of a military character and under the control of a military authority or defence agency, or (iv) located m Zambia. Unlessotherwiseagreed or provided, the costof any arbitration procedure will be borne- 19.9 (a) equally by the tw(2) parties to tie Dispute where it has been referred jointly by them, or otherwise, (b) by the unsuccessful party. 19.10 Where a Dispute has been referred to the Centre for arbitration then the Parties to the extent practicable myotherwise exercise their rights and perform their obligations under this Agreement. Neither Party shall be entitled to exercise any rights or election arising in consequence of any alleged default by the other arising out of the subject matter of the Disputeuntil the Dispute has been resolved by the decision of hearbitrators. W 19.11 A difference of view or disagreement may be referred by a Party to a Sole Expert pursuant to Clauses3.3(c), 6.4, 7.3, 8.8, 9.11, 12.5, 12.8, 16.5(b)(ii), 16.7, 18.6(c),23.2 and 23.4 hereof. Where any difference of view or disagreement is referred by a Party or Rmies to the Sole Expert, the other Parties shall have twenty (20)days to consent to such redixral and upon the consent of all tie Parties, the difference of view or disagreementshall bezyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBArefixred promptly upon consent. In the absence of consent in writing by all the Parties, such difference of view or disagreement may be considereda Dispm pursuant to Clause 19.1. Any such reference mybe made by a Party mybe made by notice served pursuant to Clause24. 19.12 To the extent practicable, a party intending to make a reference to a SoleExpert shallprovide reasonable advance notice to the F%rty(s)of such intention and shall allow such hrty(s) to discuss the basis for such reference and affording a reasonablcopportunityto such Party@) to tiewhatever steps itithey considers appropriate to remove thebasis of the dispute. Where mydifference of view or disagreenlent is referred by an individual Party to the Sole Expert,consideration of the difference of view or disagreement in question shall be initiated by the hrty who is seeking cowideration of the difference ol‘ view or disagreement by the Sole Expert submitting to both the Sole Expert and the other htywritten materials setting forth: (i) a descriptionof the diflerence of view or disagreement; (ii) a statement of the submitting Party’s position;and (iii) copies of records (if relevant) supporting the submitting Rrty’s position. 19.13 Where mydifference of view or disagreement is referred by hePartiesjointly to the Sole L+rt, consideration of the difference of view or disagreemm inquestion shall be initiated by the Parties jointly by each party submitting to the Sole Expert and the other Party or Parties (as the case mybe) the written materials refixred to in Clause 19.12. - 37 - 19.14 Within ten (1Gj BusinessDays of the date that a--Fhas submitted writren materials-tothe Sole Expert pursuant to Clause 19.12, the otherzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAPmy or Rrries (as the case mybe) my each submit to the SoleExpert: (i) a descriptionof the difference of view oAisagreement; (ii) a statement of their position;and (iii) copies of records (if relevant) supporting their position. 19.!5 The Sole Expert shall consider any information submitted bythe responding Party/krties widlin the period provided for in Chse19.14and, in the S& Expert’s discretion, my considerany addhiod informationsubmitwily any Ruty ata later date. ~ ~~ 19.16 The Parties shall not be entitled to apply for discovery of documentsbut shallbe entitled to~ have access to tie other Party or Parties (as the case mybe) relevtit-recordsand to receive copies of herecords submitted by the other-Party or Ruties (as the case may be). h& 19.17 Each Party shall designate one person knowledgeable about I!E issuewhich hasbeen redixred ~~~ to the SoleExpert who shall be wailableto the SoleExpert to answer questionsand provide ~~~ ~ any additionalinformation requested by the Sole Expert. Except for such .person, a Ruty shall not be required to, but may, provide oral swements or presentations to the SoleExpert or make any particularindividuals availableto the Sole Expert. ~ ~ 19.18 Except as provided in Clause 19.26with respect to the payment of costs-thedetermination of the Sole Expert shall be without prejudice to any Party and any evidence given or statements made in ihe course of this pracess mynot be used against a hrty in myother proceeding. The process shall not be regarded as an arbitration and the laws relating to ccmnercial arbitrationshall not apply ~~ ~ 19.19 When aSoleExpert’s determination isinitiated, tieWe Expertshall be requested to providezyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA a determinationwithin fifteen (15) Business Days after the~-ten(10) Business Day response ~~ lperiod provided inClause 19.14above has run. If the Sole Expert’s determination is givem within such fifteen (15) Business Day period, or if the Sole Expert’s determination is given d at a later time md no Party has at such time initiated any other proceeding concerning the ditiixence of view or disagreement, the Parties shall review- and discussthe determination witheach other in good faith for a period of ten (10) Business Days following deliver of tie ~ ~ determinationbefore proceeding withany other actions. ~~~ 19.20 Thecostsofengaging B Sole Expert dullbe borne by the unsuccessful party. 19.21 The SoleExpert’s determination Witbe final and binding on the Parties save in the case! of manifest error- ~~~ 20. Law Applicalde 20.1 This Agrement shall be governed by and construed inaccordance with the laws QfZambia which the Parties acknowledge and agree includes, so-far as they are relevant, tie ruksof - 38 - international law. 21. ForcezyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAMajeure 21.1 Any tilure on the part of a Ruty hereto to comply with any of the terms, conditions and provisions of this Agreement (except any obligation of a htytomake payment of money to the other Party) shall not be grounds for temnation or give the other krty hereto any claim for damages ins& as such arises from Force Majeure, if the firstmentioned Rmy: (a) has taken all appropriate precautions, due care and reasonable alternative measures with the objective of avoiding such iilure and of carrying out is obligations under this Agreement; and (b) has given notice to the other Party of the ommence of Force Majeure on becoming aware of such an event. The first-mentioned Rwty shall take all reasonable measures toovercome the hceMajeure and tofiMtermsand conditions of this Agreement with the minimum of delay (provided that no htyhas an obligation to settle a labour dispute or to rcst the constitutionality of any legislation or law) and shall given notice to the other Pdt:y on the restoration of normal conditions. 21.2 For the purposes of this Agreement, Force Majeure shall ixlude war, insurrection, civil disturbances, blockades, riot, embargoes, strikes, lock-outs UKI other labour-confiicts, land disputes, epidemics, volcanic eruptions, earthquakes, C)ddilcs, floods, explosions, fires, lightning, governmental restrictions, change in applicable IriW or unavailability of materials or equipment and any other went which the party claiming Force Majeure could not reasonably be expected toprevent or control. 21.3 In the event of any circumstances or event of a kind set out in this Clause 21 the period of time akwtxl for the performance of those obligations or excrcise of those rights which are delrryed by such event of Force Majeure and the periods oflime thereafter alkwed for the performance ofobligations or exercise of rights which are drpcndant upon the first mentioned obligations or rights, shall be extended by a period equal tothe period during which such event of Force Majeure continues until thetime of its settlmcnrby agreement. 21.4 Wllere any period is, or is deemed to be, extended or any lawdate substituted for an earlier date under this Clause, that extended or substituted period or date shall be deadto constitue the period or day referred to in this Agreement (xxwithstanding that at the time of such extension or substitution such period my have @red or such date myhave passed). 22. Variation 22.1 TheParties may from time totime by agreement in writing .dd to, substitute for, camelor vary all or any of the provisions of this Agreement, the Approved Programme of Mining Operations, the Large Scale Mining Licences or any programme (including all of the Scheduled Programmes), proposal or plan approved for the purpose of more efficiently or - 39 - satisfixtorily implementingor facilitating the objectivesof this Apeement. 22.2 (a) Except as otherwiseprovided in Clause 22.4, where ChibCoproposes to modify or vary the Approved Programme of Mining Operations (hereinafterzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAcalled a "Modificationtt)and.by such Modification ChibCo would not be m substantial compliance with the Approved Programme of Mining Operations, ChibCo shall provide notice of such Modification toGRZ. Such Modification shall be deemed to be approved by GRZ and the Approved Programme of Mining Operationsshall be amended to theextent necesary toreflect such Modification unless GRZ withinthirty (30) businessdays of the notice being given to it notifies ChibCothat GRZconsiders the Modification'to be a Major Change. If ChibCo acceptsthat the Modification is a Major Change it is deemed that notice has been given pursuant to Clause22.4(a) on the date GRZ gave notice it considered the Modification is a Major Change. (b) If ChibCodoes notzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAagree that the Modification is a Major Change then it may refkr m the Sole Expert m accordance with Clause 19, the question whether the kd Modification isa Major Change. If the SoleExpert determines that the Modification is a Major Change then it is deemed that notice has been given pursuant to Clause 22.2(a) as of the date of the Sole Expert's decision and the provisions of Clause 22.4(b) to (e), inclusive, apply, unless ChibCo has hnplemented or commend has occurred or implementation of the Major Change. If such in~plcmentation commenced then the Sole Expert shall alsodetermine: (i) what action ChibCo must tie;or (ii) what compensation ChibCo must pay and to whom such compensation shall be paid. If the Sole Expert determines that the Modification is not a Major Change, such Modification shall be deemed approved by GRZ and the Approved Mining Programme of Operations shall be amended to the extent necessary to reflect such Modification withoutfurthervariation or payment of compensationby ChibCo. 22.3 For the purpose of this Clause 22, a proposed Major Change to the Approved Programme of Mining Operations meansaproposed material change involving the eliminationor material dilutioninthe capacity or availability of the Facilities or in thcnrhcphor mineproduction schedule if a consequenceof such proposed material change would be to materially reduce or materially delay receipt of GRZ's tax revenues or royalties derived from the Facilities' operations or in a material respect adversely impact or incrcase the adverse impact of ChibCo's mining activities on the environment. 22.4 No Major Change shall take effect unless it has been approved or is deemed to have been approved by GRZ and where ChibCo intends to make a Major Change the follawing provisions shall apply - (a) ChibCo shall, by notice to GRZ of the proposed Major Change, give full details including an economic analysis of the proposed Major Change entitled "Proposed -40- Major Change to the Approved Programme of Mining Operations";zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA if GRZ does not notiw ChibCo that it objects to thc h!,;jor Change within thirty (30) days of the notice, GRZ shall be deemed to have approved the Major Change; where GRZ requires additionaltime toevaluate tie Major Change, it shall within the thirty (30)days stipulated in Clause22.4(b), extend the period by an additionalthirty (30) days and if within that thirty (30)day period GRZ does not notify ChibCoof any objections it shall be deemed to have approved the Major Change; where GRZ objects tothe Major Change and ChibCo considersthe objectionto be unreasonable, ChibComyelectto refix the question of the reasonableness of GRZ's objection to the Sole Expert under Clause 19. In assessing the reasonableness or otherwiseof GR23objections the SoleExpert shall have regard tothe impact which withholding approval to the change would have on the economic viability of the project, as well as the impact on GRZ revenues; if the Sole Expert detemnes that GRZ's objection is unreasonable, GRZ shall be deemed to have approved the Major Change. 22.5 Where GRZ approves or is deemed to have approved a Major Change. the Approved Programmeof Mining Operations shallbe varied or amended to the extent necessary tozyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAreflect the Major Change. 22.6 For the purposes of this Agreement, a reduction in the number of employees of ChibCo notified (whereapplicable) to GRZ in accordance with Clause 6.6shall not, m and of itself, constitute a Major Change. 23. Cousultation 23.1 A Committeeshall be formed, comprising of one member fromeach of the Ministry, ChibCoand the Municipal Council and chaired by a representative of the Ministry of Enlploynwnt, which shall have no powers to bind rhcCompany but shall monitor 'W the implementation of the Training and HumRcsourccs Management Programme. This Committee shall operate during the term of his Agreement and ChibCo shall furnish it with quarterly reports outlining the progress of the Training and Hum Resources Management Programme, problems encomered, positions filled and the number of local people employed. 23.2 ACommittee shall be formed, comprised of one member from each of the Ministry of Mines and Minerals Development, the local Govmment and ChibCoand chaired by a representative of the Ministry of Commerce, Trade & Industry, which shall monitor the supply and procurement of goods and scrvices to the Facilities. The Committee shall operate during the term of this Agreement and ChibCo shall furnish it with six monthly reports setting out the contracts awarded during the six month period comprising the fohving information: - 41- (i) a list of successful tenderers which shall include the iwns supplied, residence of tenderers and tie reasons for awarding the tender; and (ii) a list of unsuccessful locally based tenderers which shall include reasons for not awarding tie tender. Notices 24. 24.1 (a) Any notice, consent, demand, approval or other communication (a "Notice")required or permitted tobe given shall be deemed to hekengiven if - (i) in tie case of a Notice given by GRZ. such Notice is signed on behalf of GRZ by either the Minister or Rmnanent Secretary tothe Ministry as their respective responsibilities require; or (ii) in the case of a Notice to be given by ChibCo, such Notice is signed by a director or by tie Secretary of ChibCo. U (b) Each such Notice shall, as elected by tie Party giving such notice, be personally delivered or transmitted by telex to the otherzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAParty as follows - A Notice to GRZ If by facsimile - If by hand - Permanent Secretary hmmentSecretary Ministry of Mine and hlinerals Ministry of Mine and Minerals Development Developmeut + 260 1251244/252916 P0Box 31969 Haile Selassie Avenue Lusaka, Zambia A Notice to ChibCo If by facsimile- If by hand - The Secretary The Secretary Fax number: W260 1226915 Chibuluma hfines Plc doDPServices Limited 2nd Floor, Kafue House 1Nairobi Place, Cairo Road Lusaka 24.2 Except as otherwise specified herein, all Notices and other conununications shall bed to have been duly given on the earlier of - (i) tie date of receipt if delivered personally and receipt xknowledged;and - 42 - (ii) the date of transmission withconhned mswerback it' trmmiwdby telex. Either hrty mychange its address by Notice to the otherzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAh-ty in accordance with the provisions of this Clause. All Notices and all documcnts or instruments delivered in connection with this transaction shall be in the English languag?. 24.3 Where ChibCois required to submit any plans, proposals or oher mauxid for the approval of GRZ, the date of submission shall be deemed to be the datc on which GRZ received the said plans, proposals or other materials. 25. Waiver 25.1 The failure of any €+myto enforce at any time any of the provisions of this Agreement shall in no way be construedtobe a waiver of the provision or any part thereof or the right of any Party thereafter to enforce each and every pmof the provision in respect of any subsequent default or breach. W 26. Severability 26.1 Theprovisions of this Agreement shall be separate and severable each from the otherto the extent that if any portionor any one provision or portionis deemcd to be inoperative then the reminderof this Agreement shall remain binding upon and enforceableby the Rmies hereto. Nothing herein shall preclude one Party from requesting the other Party to renegotiate any provisionherein. 27. Further Acts 27.1 The Parties shall execute such documents and do and perform such acts that lie within their power and are necessaryto give fulleffect to this Agreement. 28. Counterparts U 28.1 ThisAgreemtmtmybeexecutedinany number of counterpms.each of which exewced shall be deemed to be an original, and such counterparts shall togcthcr constitute one Agreement. 29. Representations and Warranties 29.1 Except as expressly stated in this Agreement, no representation, inducement or wrranty was, prior tothe executionof this Agreement, given or made by oneof the Parties hereto with the intent of including the other Party to enter into this Agreement, and any representations, inducements or warranties that myhave kenso given are hercby denied and negated. - 43 - INWITNESWHEREOF this Agreementhas beendulyexecutedby the Parties on the day of ,zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA1997 SIGNE+$ixand on behalf of the } GOVERJ3PUJhTAMJDITOFTHE l l l \ THECOMMONSEALof CHIBULUMAMINESPLC l 1 was heremto 1 ahedby authority of the Board 1 4 -44-zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA scu.EDl'LE1 APPROVEDPROGRLMMEOFMIhlNGOPLR-iTIOSSzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA ChibulumaWest The mine will remain in production using existing methods or variations thereof for as long as possible at current levels and the emphasis will be placed on maximum recovery of known ore resources and the search for extensions. Ore would continue to be railed to the Nkana concentrator, and copper and cobalt metal will be produced on a toll basis at the rate of approximately 9,500 tons of "A"Gradecoppercathode and 200 tonsof cobaltof various grades per annum. Sufficient reserves exist to maintain a mill feed rate of 390,000 tons per annum at a grade of approximately2,596 Cu for 3 to 4 years. Reserves indicated by initial drilling below the 620 level will be accessed by a W subvertical or inclined shaft, and the mining method will be adapied for the shallow dip of the orebody. Production levels will decrease progressively as the orebody approaches exhaustion and ore remnantsare mined. ChibuhmaSouth The Chibuluma South sulphide orebody is scheduled to be developed to the production stage to coincide with the decline of Chibuluma West as early as is consistent with the establishment of the necessary infrastructure and the rate of shaft sinking and plant construction. The orebody has m average dip of 40' and width of 15 metres, necessitating a horizontal slice cut and fill method of mining to minimise dilutionand maximise extraction. Suitable fill will be sourced from classified tailings on site. A vertical shaft system will be sunk to the north of the orebody to a minimumlevel of 700m. More rapid production mybe achieved by the sinking of a shaft to 400m m!mining ore above 350 level tollowed by a later subvertical shaft for lower levels. Level intervals are expected to be Wm. U lnterlevel devdopment will be by footwdl ramps for trackless mining equipment comprising scooptram,drilljumbosand utility vehicles. Ore atthe rate of approximately 40,000tonsper month will be transported to the shaft orepasses by articulated trucks or by rail over a projected life of 11 years and hoisted for milling and concentration by flotation on site. A milling and ore flotation plant capable of treating the entire output of the mine will be constnmed adjacent to he shaft. Copper concentrates are to be transported to the Nkana smeltinghefining complex for treatment interms of a tolling agreement with the owners d rhe Nkana complex for the productionof grade "A"cathode amounting to between 15,000and 17,000tons per annum. The development commitmentof approximately $34million will be expended or surfaceinfrastructure such as power, buildings, roads and drainage, shaft sinking, mine development and mining equipment,a ~r~illingand flotation plant and various ancillaries. Thc k~dopnentprogramme will take approximmAy 3 years. - 45 - Exhibit 1 Map of facilitiesat Chibuluma West Mine and ChibulumaSouth. - 46 - c c MINING AND SURFACE RIGHTS FOR ZCCM, CH1BULUhM MINE r'*Ooooo 13zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA 4- a8zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA m 1s SCHEDULEOFCAPITALzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAEXPENDITURE FIGURESINUS$X 1000 YEAR 1 2 3 4 5 6 7on Total xnfiastructure 1500 50 1550 , Surhce Plant and Equipment 350 150 500 Concentrator 2000 2550 4550 Mining Equipment 2200 1500 1200 800 5700 SurhceShaft Sinking 2300 2680 350 5330 L1 Level and Stope Development 800 2820 200 3820 Sub-knicalShaft 1600 2060 3600 Level and Stope Development 100 1180 1900 Ongoing Capex 500 2400 Sub-TiNds 4150 7730 7370 3000 2960 1800 500 29410 Contingency (20%) 830 1546 1474 600 592 360 5402 'IOTAL 4980 9276 8844 3600 3552 2160 500 34812 - 47 - SCHEDULE2 LOCALBUSINESS DEVELOPMENT PROGRAMME Philosophy Thereisan expectationby ChibCo that local businesswill benefit from the opportunitiesarisingfrom the privatisation and combined operation of a successful mine. ChibCo beliews in helping and ficiliuting local business and will supportthe development of local entrepreneurs. Mechanism The development of local business will occur as the programme of capital expenditure fix the developmentof Chibuhma South commenceswith emphasison both the formal and in.fonnalsectors of the economy. Asthe ChibulumaWestoperation becomesa decemalisedpront centre,competitive local suppliersof goodsand serviceswill be encouraged to deal directly with the mine. ChibCowill submit to GRZ a detailed programme for local business development within 12 months of Closing. specific JbmpltszyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA i/ 1. Specific local business developments to be !kcilitated by ChibCo include the privatisation of the Kalulushi Hospital and the primary school. Both institutions provide services of high quality to the localcommunity, and ChibCois committedtomaintaining the benefits currently enjoyed by ZCCM employees. Current staff would be fully engaged in the transformation process, which would mmmcreatea number of local ancillary serv’ice suppliers. A hnal proposal for privatisation will be hnulated in due course. 2. Within the mans available, ChibCo will endeavour to utilise the assets of the Engineering Departmentto spawn a numberof smaller private engineeringenterprisesto serveChibuluma inilially and ultimately the entire Copperbelt. Local entreprencurswill be encouraged to compete for non-coreitems required by ChibCo. 3. It is also anticipated that as the privatisation of ZCCM progresses, many of the technical servicesnow provided on a group basiswillderive from smaller specialised units ona market basis. Again, ChibCo would support such development of local husinesses. 4. It islikely that otheropportunitiesfor local businessdevelopmcnt by Chibco will be identified in the future. W Rxsonnel ChibCo has designated Mr E. Legg as the responsible person withinzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAthc company to take an active role in assisting Zambian citizens in the setting up and management of small business enterprises, haking with GRZ. compiling and maintaining a register in compliance with Clause 4.1 of the Development Agreement and assisting generally with the implementation of the Local Business Development Programme. - 48 - scHEDuLE3 Pm1 coNTILcr AREA - 49 - PART11 FORM OFLARGESCALEMININGLICENCE Mmskmn103M Sddb)MIlES~~zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA ImBI439W6 RNX3TRATIONNo.LML.................................. REPUBLIC OFZAMBIA LARGJMCAJJ3 MININGLICENCE (Section2.5 of the Mines and MinemlsAct, 1995, No. 31 ofzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA1995) Applcan~s~mne.................................................. Address ........................................................ Prospecting Licence No. ............................................. The mining area shall be tie area described in the Schedule and annexed hereto and bordered ... ...............................zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAonthePlan. ti The Licence is granted for a period of. ................... commencing on the .... day of ..................... The programme of mining and development operations shall be as shown in the Appendix hereto. The following conditions included in Prospecting Licence No. PL ........ shall continue toapply: Issued at. ........... this. ............. day of .......... ..................... Director ENDORSEMENTOFREGISTRATION U This large-scale mining licence has this ............ day of .................... kenregistered in the Register of Mining Rights. ..................... Director - 50 - RENEWALSANDAMENDMENTS Date of Details of Renewal or Date of Registration am SignatureofDixectol Amendment Amendment Registration No. - 51 - PARTIllzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA MININGzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAAREA L - 52- SCHEDULE4zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA PART I MEDICAL SERVICES The existing hospital and clinics provide a range of medical services to both ChibCo employees, other ZCCM personnel and outside parties. ChibCo, as tendered, will attempt toprivatise the hospital but will retain bothof tieclinics for treatment of minor aliments prior to hospital services being sought. Non-Chibuluma employees using the hospital services on ZCCM/ACo payroll will be charged for use of hospital services effective 1 October 1997. In the initial period ZCCM will becharged for these services pending privatisation of ACo. Charges are as per Social Access Agreement. An "Audit" procedure will be establishedto ensure that tiequality and standard of service at tie hospital will be maintained both prior to and afier privatisation. Both ZPA and ZCM- will be consulted during the privatisation process. CHIHULUMAMINEHOSPITAL Chibuluma mine hospital is situated in Kalulushi 15km north west of Kitweand caters for Mine employees and their dependants and fee paying non-mine patients. Thehospital caters fixboth contributory (high cost) and non-contributory (low cost) clients. In-patient and out-patient care m addition to specialised clinical services and paramedical services are available. The four clinics at Chibuluma and twoclinics at Chambishi are run by Chibuluma mine hospital public health services and compliment that of the local municipality and Distict Health Board. The hospital has a bed capacity of 162 (116 beds and 46 cotskribs). Bed occupancy is 37.5% at High cost and 41.9% atzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBALow cost. Table 1: LABOUR DISTRIBUTION BY FUNCHON CATEGORY LOCAL EXPATRIATE TOTAL Doctors * 10 3 13 Nurses 117 0 117 Paramedical 27 0 27 Admin Staff 47 0 47 Total 201 3 204 - 53 - *Two on specialist training in the UK-zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBADr. U Simanwe and Dr D hlweemba Table 2: LABOURDISTRIBUTION BY GRADE CATEGORY LOCAL EXPATRIATE TOTAL G14 2 2 4 1zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA G13 I l 1 G12 8 1 9 G11 6 0 6 G1 16 0 16 G2 45 0 45 G3 73 0 73 G4 5 0 5 G5 10 0 10 G6 16 0 16 G7 19 0 19 TOTL\L 201 3 204 1 -54- PART I1 EDUCATIONSERVICE!3 Theprimary schoolprovidesan educationservicefor the benefit of the children of Chibuluma Mine employees and the general populace. Themineprimary school will continuetooperate and to offer a standard of education and childcare no less than that currently pertaining. It is envisage that whilst day m day affairs and teaching practiceof tie school will continuelargely as they are, the school will become more financially self suppmhg. This will be achieved by offering education facilities to c!:i!drtn of ChibCoemployees and other residents on a fee-paying basis related to the quality of scrvice provided. ChibCo employeescurrentlyat Kalulushi primary school will continueto be paid the school fees as at present and fiswill be charged as per the social access agreement. ChibCo will for pay its proportionaoe share of the school until such time as it becomes a fully privatised and self-sustaining entity, and will continue supportinthe form of sponsorshipfor specific projects. Limited use of school facilities myalso be required for adult education and community developmentafter normal school hours. Payments for other school fets of Chibuluma employees currentlybeingpaidwill continueto be paid. KALULUSHIPRIMARYSCHOOL Established in 1973to cater for children of expatriate miners. Zambian boys 109 1!l97/98 Budget - Zambian girls 122 Capacity 250 Actual 235 Expatriak boys 1 Cost per Child: K800OOO/ Expatriate girls 3 year Minepupils 222 School Fees Per Child Non-Minepupils 13 - Mine: K79500/year Chibdunu Mine children 76 - Non-Mines: K1 200zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAOOO/ Nkana Mine children 35 year NonChib/Nkana 96 Retired Miners children 5 Deceased Parents children 3 Redundancy hckage children 2 Medical Discharge children 5 Non-Miw(Economic Fees) 13 children . STAFFING Apart from the Headteacher, all member of stafiare Zambian employees broken down as - 55 - f01bws:- Deputy Headteacher G12 1 School Teachers G1 6 Class Twhers G2 6 SeCR3iil-y G4 1 Teacher Aides G4 2 CrewBoss G5 1 Sanitary Hand G7 1 Pool Attendant G7 1 General Workers G8 4 Casual Teacher Aidea 2 PART111 RECREATIONAL SERVICES Various sports and recreational clubs and facilities exist for tie benefit of Chibuluma and non- Chibuluma employees These include tie Recreational Club, Golf Club, Tennis Club, Bowliag Club, Squash Club, Rugby Club. The clubs are autonomous concerning management, administration and policy, andzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAare subsidised by ZCCM. ZCCM also have a power of veto in tie affairs of the clubs. ChibCowill continue to offer sports and recreation facilities of standard no less than those currently available to employees and club members, and will be supportiw of proposals to improve facilities. The ZCCM veto will be transferred to ChibCo to be utilised in the event the affairs of a particular club are being mismanaged. WOMENCENTRES kd Number of Women Centres: 01 Name of Women Centres: Lubuto Women Centre Location: hthe ZCCM Medium Cost Residential Am at No. 1 Mululu Abznue FacilitiesOffered: Offers training toyoung women and wives of miners in Home Economics and cover the following subjects- House wiftxy Knitting Sewing Embroidery Cookery Nutrition and Child Care Number oftrainees per year: Eighty (80) Sixty (60)in the Basic Class Twenty (20) in the Advance Class Number of full time ZCCM staff Two (2) assisted by one (1) part-time employee. PART 1V MUNICIPAL INFR4!XRUCTURAL SEIWICES - 57 - The Municipal Infrdstructud Servicescurrentlycomprise normal township servicesmanaged and funded by KdulushiMunicipality, ZCCM and ChibulunuMine. Chibuluma Mine provides and manages drinkmg water and sewage matment facilities, and electric poxer is distributedto the township from the rnine busbar. Theseservicesareprovided on a reimbursable basis. h addition, Chibuluma Mine provides labour for other municipal requirements such a stomwater dmncleaning. Residents pay for such servicesat a nominal rate. MunicipalInfrastructureServiceswill continue at a current level and standard no wrsethan that applyingprior tothis agreement, and made available to residents of Kalulushi and Chibuluma terms related to the cost of provision of such services. Subsequentto townships on commercialzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA privatisation 2nd the allocation of ZCCM houses for purchase by employees the occupants of such houses are liablefor municipal charges for water, electricity, sewage and refuse disposal, road and parks maintenance, all other municipal servicestogether with rates appropriateto the developmentof a viable municipal administrative and execution unit, ChibCowill procure that payment for n~unicipdservicesprovided to the houses of ChibCo employees and its proportional W shareof other municipal services. On the basis of the number of Chibuluma having units Kalulushi as a proportionof the total number of housing units. ChibCowill chargeZCCM on a monthly basis for all municipal servicesrendered to ZCCM employees in Kalulushi. All non-C~~ibuluma,ZCCM residents will be levied directly by ChibCo. ChibCowill work towards transferring of these Services to the Municipality ald assist in establishing a commercially viable municipality within 2 years of the date of Completion. The follwing broad financial supportwas provided by ZCCM for the municipal servicesbefore the Completion Date . ChibCo willcontinueto provide their propmXiona1 shareof these expensesand servicesat the same standard as currently being supplied. It is intended that these servicesof the assets necessary to provide their services will be transitioned by the Chibuluma Town Councilon an ordered manner on a commercial basis over a 24 month period from date of Completion. The agreed objective of both ChibCoand ZCCM is to establish a commercially viable municipality at the town of Kalalushi.. UzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA ROADSIN‘I0WN”S Maintenance is done by the Municipal Council. However ZCCM gets involved when the Municipal Council fails. REFUSE COLLECTION Responsibility of the Municipal Council, ZCCM helps when the need arises. SEWAGESERVICES Anaverage of K100000 on a monthly basis is spent on Sewage Lift Pump maintenance supervision A furtherK180000 is spenton unblocking chocked sewer lines per month. - 58 - MATERPROVWOS ZCCM spendsaboutk10.7mllionper month inproviding treated wdtcr tothe Council. CEMETERY Responsibility of tie Local Council. STREETLIGHTING Responsibility of the Local Council but ZCCM helps ifwhere ZCChl employees suy are badlyzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA affected. 4 - 59 - PARTV PHYSICALSOCIALASSETS l. The Physical Social Assets owned by ChibCoKalulushi Hospital and clinics 2. Kalulushi Primary School 3. Golf Club 4. Recreational Club 5. TennisClub 6. Rugby Club 7. BadrninmClub 8. Bowling Club WzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA -60- SCHEDULE5 , Pm1 ENVIRONMENTALPLAN The Chibuluma Mine has been in production for more than 40 years and, under new ownership, is approaching the end of its life. ChibCo undertakes to conduct rehabilitation relating to previous and current mining operations identified in the Environmental Impact Statement prepared by Steffan Robenson and Kirsten, toconduct an environmental management plan ("the EnvmnmentaiPlan")toan acceptable standard designed tomininlise the efktof mining on the environment, and toeffect a closure certificate for Chibuluma West. ChibCo will also adhere to the plan for environmental protection prepared for the Environmental Impact Statement as part of the mining licence protocol for Chibuluma South Mine. It is envisaged that the Environmental Plan will cover the following aspects; 0) dust and water pollution will be minimised by revegetation of disturbed areaszyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAand by control of ~tormwaterthrough crest and toe paddocks and related drainage of tailings and rock disposal areas. (ii) a monitoring programme for water flow, levels, qualities and discharges into the Fikondi Stream will be established. (iii) Old shafts will be sealed and the concentrator site rehabiliued by removal of foundations, structures and scrap prior tocontouring and megetation. W) Surface caving resulting from mining will be monitored and land use restricted in areas of potential danger. TheEnvironmental Plan incorporates tie clean up obligations described in Part 11, and will constitute a significant component of operations prior toand post closure of Chibuluma Wkst and Chibulurna South. Regular audits will bemade ofthe environmencd management issues covered by the Environmental Plan and the post closure monitoring period will continue until stable condilionsat a satisfactory standard are achieved. TunehMc Date Produchm of the EIS Chib South: 6months from the date hereof Production of the Environmental Plan Chib South: 9 monrhs from the date hereof Chib West : 6 months from the date hereof - 61- PriRT 11 ENVIRONMENTAL CLEANUPOBLIGATIONS ChibCo will assume responsibility for the historic liabilities and obligations of ZCCM relating to impacts on the environment of previous and current mining operations as defined in the Environmental Impact Smement (EIS) for tie Nkana Division, Chibuluma Mining Licence Area - ML18 prepared by Steffen Robertson and Kirsten h1996and 1997. The company will also assume all obligations for clean up following mine closure until such time as a closure certificate is granted. The principal components of the Chibuluma Mining Lease Area affecting rehabilitation, decommissioning and closure activities have been identified mtieEIS and are as follows: shafts, buildings and land subsidence at Chibuluma East and Chibuluma West; Ore Stockpile No. 3; Waste Rock Dump No. 5;Tailings Dams TDl and TD2; the oldConcrntrator. Progressive rehabilitation of old mine workings and monitoring of water and air quality will be undertaken U priortoandduringmine closure and decommissioning. 1. Ongoing Rehabilitation and CleanUp Obligations 1.1 OreStockpile No. 3: the 3 ha site requires final clean up and development of a vegetative cover after removal of contaminated soil andlor the laying of a 0.5m thick soil cover. 1.2 Wuste Rock DumpNo. 5: thiscomprises scattered wsterock piles 2 - 3m high over a total area of less than 1 ha. Some of the piles are rnetallitlxous and mybe reclaimed. Stormwater and run-off are tobe controlkd. 1.3 TailingsDams TDl and TD2: dustand erosion control measures will be introduced to the bare areas on dam surfaces. Critical areas will be covered with material such as laterite, muhA or slag. Crest bund wllsand toepaddocks will be constructed and decants will be plugged. The No. 2 dam breached wall is to L be sealed. Dams are tobe vegetated with suitable trees and grasses. 1.4 Old Concentrulor: Plant facilities have been partially removed and ongoing rehabilitation will comprise: disassembly of buildings and steel ~tructure~not required for future use; bred-up and removal ofconcrete slabs, foundations and other structures and the removal of scrap steel and other materials; removal or matmem ofsoilscontaminated by chemicals, concentrates, fuels and oils; top soiling and xvegetation. A survey of soil contamination over 24 ha of the plant site will aid in assessing the need and extent of the top soil. 1.5 Cbibulwna East: The environmental impacts relate tothe sealing of three surface shafts, and land subsidence over an area of approxinutely 4 ha. Theprogressive rehabilitation programme will include concrete capping of the three shafts and appropriate fencing, surveying and monitoring of the area affected byzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAmining - 62 - subsidenceand the posting of warning signs for the smallarea ofpotential caving south of Chibuluma East, the removal of any associatrd surfxe muctures and rehabilitation of the local surface. 1.6 General: Thecompany will establish disposal sites for contaminated soil and scrap materials. Monitoring and maintenance of vegetated areas and pollution control measures such as crest and toe paddocks will be conduad regularly until closure. A water flowand quality monitoring system will be est;hlis!ml, particularly with regard todischarges into the Fikondi Stream. 2. MineClmwe Mine closure will follcnv exhaustion of ore reserves at Chibuhma West. ChibCo will undertake to decommission 7 Shaft by sealing according to appropriate regulations all openings to surfice after salvage of underground equipment, dismantling and removal of all surface structures for which there is no use, and contouring and revegetating of disturbed surfaces. Surface caving over a potential area of apprc~xinlateiy 25 ha north of 7 Shaft will be monitored and warning notices placed. A water monitoring programme will record ground water levels and qualities until such time as results indicate that conditions have stabilised andzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAare representative of post-closure conditions. 3. ChibdumaSouth An Environmental Impact Statement will be prepared for the new mine in accordance with the timetable in Part I and the environmental management plan dtfined and approved therein will be adhered to. d - 63- .SCHEDULE6 TRAINING AND HUMANRESOURCESMANAGEMENTPROGRAMME It is the intention of the Consortium to undertake a comprehensive education and training programme aimed at ensuring the technical competence and productiviry and higher safety standards of all employees. Basic skihtraining will ensure that every employee possesses the technical knowledge to successfdlycomplete the job required of him. Courseswill be timed at ensuring technical competence together with the acquisition of knowledge in areas unfamiliar to the particular employee. An Advanced SkillTraining Programme willensurethat each higher level employee reaches a level of competence in his or her specified fkd. The training given at this level mayzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA takeplace outside Zambia, depending on requirements, and will be undertakenat the expense of the Company. It will be aimed at expanding the knowledge base and will also ensure that the mine employees import a range of skills that may not be available within Zambia at the time. TheConsortiumisprepared to work with local administration m providing assistance with L/ schooling facilities for employees. Mine workers and their immediate family members will be encouragedto have access to these facilities. The education would be designed to have a posih impact on the general abilities of all mine workers and their family members, and will comprise basic coursessuch as English, Maths and technical subjects. The curriculumwill be based on the needs of the community, wherever possible. Especially gifted employees or immediate fhmily members, may be offered the chance of furtheringtheir studiesat a reputable institution within Zambia or inrernationally at a private school, technical college or university. Bursaries and loans may be set up to assist employees in this regard. The developnxntof hunmresources at Chibulunuwill beof paramou~~~importancein the strategy for improving efficiencies, reducing costs and promoting job sa~isfactionand safety amongst employees. The impomnceof correct assessment of individual character, experience and isrecognised aud a conp~ent~ummresource~eamon mine will monitor individual pote~thl ‘W perlim~~ance and encourage each emphyee todeline goals aui to awlin hm. Conversely, staff identilied as unsuitable for their posts will be counselled and encouragcd. The human resource management plan adopted will be similar to others applied successfu~~y throughout industry, with local adaptations to fit unique cirtxrw&mces. The budget for such plan has not been defined. It is in the interests of the mine operator to maintain as high a level of Zambian employment as possiblein view of the general level and depth of education, experience and competence within the industry. The terms of Clause 6.7 and 6.12 of the Development Agreement will be adhered to. There will be occasion, particularlyat the start-up of Chibduma South, when the requisite knowledge and skills for successful commissioning and operation of the mine, machinery and processing plant will derive from non-Zambians, and the number of “expatriates” willdeclineas the mine reaches maturity. ChibCowill be in the position to submit a detailed training -64- programme within 12months of Close. Theminimum number of employees necessary to conduct Normal Opx~tionsfrom time to time is 700persons, whih number may be reduced to 100in tieevent of Force Majeure to conduct basic pumping, securityand municipal services. - 65 - SCHEDULE7 REQUIRJDINSURANCES The following insurance policies shall be taken out with insured amounts and excesses appropriate to the ChibCo scale of Operation and the risk profile pertaining from time to the. This summarised schedule confbrms tothe dedsof Schedule 11of the Sale and Purchase Agreement relating to the types of iawancepoliciestaken outby ZCCM. 1. Property Insurance 2. Motor insurance 3. Money Insurance 4. Fidelity Guarantee 5. Liability insurance 6. Umbrella Excess Liability 7. Plant AllRisks Insurance 'U - 66 - SCHEDULE8 TAXSCHEDULE Theprincipalapplicabletaxes and the rates applicable to ChibCoinh conductof Normal Operationsfrom the date hereof are as folhvs: (1) IncomezyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBATu: ChibCoshall pay to GRZ incometax in accordancev. i!h the provisions of this Agreement and the Income Tax Act (CAP668) as ameuded on itsnet income arising fromall mining, concentration,smelting and tcining and other operations. The income tax rate applying as at tie date of this Agreement shall be thirty five per cent (35%)save that if ChibCowere to obtain a fill1listing on the Lusaka Stock Exchange such rate shall be thirty per cent (30%)from the year of such listing. kd Thecarry forward of losses shall be permitted for a period of ten (10) years from the date at which the loss was incurred. Losses should be used on a first in, first out basis with earlierlossesused before later losses. ChibCoshall be entitled to maintain books of account stated inUnited States dollars inaccordancewith generally accepted accounrirlg principles. For the purposes of Third Schedule to the Act, the Facilities dullbedeemed a "1975new mine" allowing the deduction of one hundred per cent. (100%) of capital expenditure (as defined in the Act) in the year in which the capital expenditurewas incurred. Royalties: (i) ChibCo shall pay to GMaroyalty on the net back value of minerals d produced in the Mining Area at a rate of twopcr cm(2%). (ii) For the purposeof the !oregohg, the words "ucl back value" shall mean: (aa) the market value of Mine Products frce-on-board at the point of export from Zambia or, in the case ofconsumptionwithin Zambia, at the point of delivery within Zamhia. less: (i) the cost of transport, including insurance and handling charges, from the Mining Arc;1 m the point of export or delivery; and (ii) the cost of smelting and refiniq (where applicable) or other - 67 - processing costs except such otkrprocessingcostsas relate to processing normally carried cltit in Zambia in the Mining Area; and (bb) the term "market value"zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAmeans tie realised price for a sale free- on-board at tie point of export from Zambia or point of delivery within Zambia, GRZconfirmthat for Stability kriod, royalty payable under the Act shall be deductible against liability for income tax The circumstances where the discretion availableto GRZ under Section67 of the Act to defer the payment of royaltywould be exercised are: (aa) under the terms of Section67(1) where the cash operating margin of ChibCo mining operations is less than nil; and (bb) under tie terms of Section67(2) on samples of minerals acquired for the purposes of assay, analysis or other examination. For the purposes of the foregoing "cash operating krgin"means tie amount derived by deducting operating costs (not including capital expenditure during or required for the development of the Facilities) from revenue. (3) Other Tues, Chges and Fees: (1) Customs and Excise Duties Subjectto the provisions of Clause 13 and Section 97 of heAct, ChibCoshall be liable topay cus~msand excise duties on all assets iqxwtcd tix the purposesof the Approved Programme for MiningOperationsatsuch rates and on the terms and conditions as are set out in the Customs and Excise Act. (ii) Illlport DechJutloli Fee (r'mP): Inaccordancewith the Control of Goods (ImportFee) Raglations, 1995ChibCo shall be required to pay the IDFata rate of five per cent. (5%)on the value of all imported goods save where these goods comprisecapitid expenditure (as definedin the Third Schedule of the Mines and Minerals Act) where value is calculated by adding together the free-on-board value, all transpomtioncosts,insurancecosts and freight costs. (iii) Rutd Ekctn!utionLevy: - 6d - , GRZconfirmsthat this will be ten per cent. (10%)ofzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBArhe levy paid initially by ZCCMand subsequently by the purchaser of the ZCCXlhver Division. (iv) Other Taes, Chaqes and Fees: For the avoidance of doubt, ChibCo shall be liable topy(and these provisions will be without prejudice to such liability) all other taws, charges and fees payable to GRZor toany governmental authority in Zambia as of the date of this Agreement in relation to its mining, concentration, mclting or refining and other operations carried out in Zambia, including but not hiedto: (aa) any annual fees, company fees, land rents or other payments due to GRZ in accordance with applicable legislation and the provisions of this Agreement; and . (bb) taxes, charges and fees for services rendered by governmental authorities on request or to public or commercial enterprises generally. (4) ValueAdikdzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBATu("VT"): (i) In accordance with the provisions of the Value Added Tax Act, 1995Mine Products are chargeable to VAT at a rate of zero pcr cent. (0%). (ii) GRZconfirmsthat input VAT shall be credited to ChiEowithin a reasonable period of time from the date of submissionof ChibCo's monthly VAT return in respect of each accounting period. (iii) For the purposes of this Clause, "input VAT" shall mea11 VAT payable in respect of the supply of goods or services supplied toa registered supplier during a prescribed accounting period for the purposes of the hcilities comprising the J Facilities. (5) Relief from WithholdingTax The race of withholding tax applicable to ChibCo shall be ten pcr cent. (10%). GRZconfirms its intention toenter into Double Taxation Agreements with its major trading partners which should, infer alia, reduce the level of Wi[!iholding tax suffered on distributions and payments of interest by ChibCo. For the purposes of Second Schedule totie Act, the Facilities d!Al be deemed a "1975 new mine". (6) Deductions for Mining Expenditure on a non-producingand non-contiguousmine - 69 - - 70-