MEMORANDUM OF AGREEMENT
BETWEEN
PT PATRINDO PERSADAMAJU
AND
XXXXXX EXPLORATION PTY. LTD.
This MEMORANDUM OF AGREEMENT (the "MOA") is made and entered into effective as
of August 24, 1998, by and between:
PT. PATRINDO PERSADAMADJU (the "Patrindo"), a private company that is under the
law of Republic of Indonesia, residing in XX. Xxxxxxxxx 0/00, Xxxxxxxxx Xxxx,
Xxxxxxx 00000, Xxxxxxxxx. For the purpose of this MOA, Patrindo will be
represented by Baskara Sukarya as the President Director of Patrindo.
AND,
XXXXXX EXPLORATION PTY. LTD (the "XXXXXX"), a corporation that is under the law
of Australia, residing in Suite 3 ECH House, 000 Xxxxxxxxx Xxxx, Xxxxxxxx 0000,
Xxxxx Xxxxxxxxx. For the purpose of this MOA, XXXXXX will be represented by Xxxx
X. Xxxxxx as the CEO and Director of XXXXXX.
RECITALS
Patrindo has entered into a Technical Assistance Contract (the "TAC") in the
form attached hereto as Exhibit A of the TAC with Perusahean Pertanbengan Mtnyak
xxx Gas Bumi Negara (the "PERTAMINA"), an Indonesia State Enterprise established
on the basis of Law No. 8/1971, relating to the development of the Contract Area
(which falls within the Contract Area as defined in the TAC). PERTAMINA and
Patrindo are now the sole parties to the TAC and Patrindo is the sole Contractor
thereunder. Patrindo has incurred certain costs and expenses in connection of
Petroleum Operations (as defined in the TAC) as from the date Patrindo commenced
the Petroleum Operations. Patrindo is not legally bound or committed to any
third party with respect to the development of the Petroleum Operations in the
Contract Area. The Parties hereto desire to establish a joint venture for the
further development of the Contract Area. For the purpose of satisfying the
intention expressed in Recital D, the parties shall establish a joint venture
company to carry out the purposes subject to certain conditions as stipulated
below. NOW THEREFORE IT IS AGREED: Prior to establishment of the JV, XXXXXX has
performed a technical evaluation of the Contract Area and will perform a program
to commercialize the existing recoverable petroleum reserves of the area which
will take up to 9 (nine) months. An extension of 3 (three) months is permissible
should XXXXXX require to do so (this period hereinafter will be called the
"Pre-commercial Period"). All data obtained and evaluation reports prepared by
XXXXXX should be made available to Patrindo and PERTAMINA on a timely basis.
During the Pre-commercial Period, XXXXXX will bear all the costs of the
Petroleum Operations in the Contract Area which will be classified as
recoverable costs of the TAC and be incorporated as a continuation of the
Financial Books of Patrindo.
During the Pre-commercial Period, XXXXXX will employ the necessary personnel to
legally maintain the TAC and has no obligation to hire the current existing
personnel of Patrindo. XXXXXX will consider to hire those Patrindo personnel
which in the opinion of XXXXXX are usable. Such recruitment will be through an
evaluation/screening undertaken by XXXXXX. The hiring process should commence at
the commencement date of this MOA. During the Pre-commercial Period, for the
purpose of such Petroleum Operations, XXXXXX will pay Patrindo for any materials
presently owned by Patrindo and considered to be usable by XXXXXX in the present
operations at cost. During the Pre-commercial Period, for the purpose of such
Petroleum Operations XXXXXX also agrees to pay Patrindo for mechanical equipment
or machinery or services hired from PT. Panata Burni Sarana Pelita and be used
by XXXXXX for such Petroleum Operations at cost. Provided the results of the
Pre-commercial Period are positive, Patrindo shall assign 80% (eighty percent)
of its Rights and Interests in the TAC contract to XXXXXX. This is done
according to PERTAMINA - Patrindo TAC Contract Subsection 4.2.6 dated July 14,
1994.
Provided the results of Pre-commercial Period are positive then XXXXXX shall be
entitled to first recover from initial commercial production 50% (fifty percent)
of the costs spent during the Pre-commercial Period. The remaining 50% (fifty
percent) of the XXXXXX costs of the Pre-commercial Period will be accumulated
with the ongoing Petroleum Operations costs which are the responsibility of
XXXXXX. Such costs will be recovered through the allowed 65% Costs Recovery
which Patrindo and XXXXXX will share on a pro rata basis. The prorate ratio will
be based on the agreed sunk costs of Patrindo and the costs accumulated and
spent by XXXXXX. The calculated interest to be incorporated in the prorate ratio
will be based on the same Debt Fund Ratio and interest rate for both parties.
The agreed sunk costs will exclude those materials belonging to Patrindo which
are not required by XXXXXX for the Pre-commercial Period program and subsequent
oil field development programs. XXXXXX will incorporate those materials
belonging to Patrindo if available during the formation of the work program.
During the Pre-commercial Period XXXXXX will perform a financial due diligence
of the Patrindo financial interests in the TAC for the establishment of cost
recover not later than 6 (six) months from the commencement of this MOA. The
commencement date of the Pre-commercial Period will be on the date the field
trip is mobilized. This field trip will be mobilized within 30 (30) days of the
signing of this MOA. XXXXXX agrees to pay Patrindo a sum of USA $300,000 (United
States Dollars Three Hundred Thousand) within 90 (ninety) days of the TAC being
declared commercial by PERTAMINA. XXXXXX does not take any responsibility for
the previous debts of Patrindo which are linked directly or indirectly to this
project. Patrindo hereby holds harmless and warrants XXXXXX against any such
actions by its creditors and suppliers. XXXXXX will assume responsibility for
payment of direct field operations expenses upon the mobilization of its
equipment to carry out the Pre-commercial Programs. This amount which XXXXXX
will bear responsibility for will not exceed US$150,000 (United States Dollars
Hundred and Fifty Thousand). Patrindo has the option to participate an
additional 10% (ten percent) in the exploration and development of any new
structures within the Contract Area.
If at the conclusion of this Pre-commercial Period during which time XXXXXX will
have technically re-evaluated and tested at least 4 (four) Mogoi xxxxx and 2
(two) Wasian xxxxx and XXXXXX decides that the Contract Area is uneconomical for
whatever reasons, XXXXXX hereby has the right to withdraw without any penalty or
further obligations. Such notice will be issued to Patrindo prior to the expiry
date of the Pre-commercial Period. If XXXXXX decides not to continue with the
project, XXXXXX agrees to return all data supplied to XXXXXX by Patrindo at the
expenses of XXXXXX.
FT. PATRINDO PERSADAMAJU XXXXXX EXPLORATION PTY LTD.
________________________ ________________________
BASKARA SUKARYA XXXX X. XXXXXX
WITNESSETH BY
________________________ ________________________
