SETTLEMENT AGREEMENT

 

(A)

FMICL a wholly owned captive insurance company of FCX based in Bermuda, issued an all risks first party policy of insurance to FCX, referred to as the Original Policy and bearing a policy number FMI-1001-03 (hereafter the "Original Policy").

(B)

Reinsurers reinsure FMICL under certain all risks policies described in Schedule A ("the Reinsurance Policies") in respect of FMICL's liability to FCX under the Original Policy.

(C)

On 9 October 2003 and 11 December 2003, slope failures ("the Failures") occurred at the south wall of the Grasberg open pit mine situated in Tembagapura, Papua Indonesia.

(D)

As a result of the Failures, FCX has asserted that there is coverage for the loss under the Original Policy and FMICL has submitted a claim under the Reinsurance Policies.

(E)

There is a dispute between Reinsurers and FMICL/FCX as to the nature of the loss or losses, the facts surrounding the Failures, the amount and/or extent of any loss suffered by FMICL/FCX as a result of the Failures and the application of policy provisions.

(F)

The Parties now wish to settle all disputes and differences between them as a compromise and without admission on any matter in dispute on the following terms:

Reinsurers shall pay to FMICL the amount of US$125 million (ONE HUNDRED AND TWENTY FIVE MILLION DOLLARS) in full and final settlement of all or any claim(s) under the Reinsurance Policies arising from or in any way connected with the Failures.

The amount of US$125 million referred to in paragraph 1.1 is:

inclusive of the interim payment of US$20 million (TWENTY MILLION DOLLARS) previously paid by Reinsurers to FMICL/FCX;

inclusive of interest;

net of the self-insured retention under the Reinsurance Policies.

Reinsurers shall each pay their respective share of the balance due of US$105 million (ONE HUNDRED AND FIVE MILLION DOLLARS) in the proportions set out in the Schedule by no later than 11 am on 21 January 2005 New York time. Reinsurers intend to use reasonable commercial efforts to pay such amounts if possible before December 31, 2004. All such payments shall be made by wire transfer to:

This Agreement is in full and final settlement of all and any causes of action which the Parties may have against any other howsoever arising from the Failures, including matters which are not yet contemplated by a Party either because of their factual knowledge or because of the status of the law.

Except for the enforcement of the obligations under this Agreement, FMICL, FCX, and Reinsurers do hereby irrevocably and unconditionally release, waive and withdraw any and all claims, defences, demands, actions, agreements, causes of action, obligations, right of reimbursement or repayment, expenses, attorneys’ fees, damages, or liabilities, whether arising in contract, tort, law, equity or otherwise, in common law or statute, whether now known or unknown, suspected or unsuspected, and whether or not concealed or hidden, past, existing, potential, or future, that have in the past, now are, or in the future may be made against or by Reinsurers, FMICL or FCX with respect to the Failures, including:

any claim regarding any payment made or not made by the Reinsurers;

any disputes among FMICL/FCX and the Reinsurers as to the cause of the Failures or the applicability of the Original Policy and/or Reinsurance Policies to the Failures;

any disclosure or failure to disclose information relating to the Failures as to the Original Policy or Reinsurance Policies by any Party or any agent of any Party.

Each Party expressly assumes the risk that acts, omissions, matters, causes or things may have occurred which it does not know or does not suspect to exist. Each Party hereby waives the terms and provisions of any statute, rule or doctrine of law which either (i) narrowly construes releases purporting by their terms to release claims in whole or in part based upon, arising from, or related to such acts, omissions, matters, causes or things or, (ii) which restricts or prohibits the releasing of such claims.

insofar as may be necessary for the purposes of the implementation of this Agreement;

insofar as they may be bound to do so under compulsion of law and/or where required to do so by regulatory agencies and/or to their professional advisors where reasonably necessary for the performance of their professional services including but not limited to their lawyers, accountants, auditors and actuaries; to their parent and/or holding companies and/or associated companies and/or past or present shareholders and/or the reinsurers of such shareholders and/or any agents retained by these entities as may be reasonably necessary;

to their reinsurers and their reinsurers' parent and/or holding companies and/or associated companies and/or past or present shareholders and/or any agents retained by these entities as may be reasonably necessary;

to persons or entities with rights to revenues from the operations of the Grasberg Mine as may be reasonably necessary.

Headings in this Agreement are inserted for convenience only and shall not affect the construction of the Agreement.

The various provisions and sub-provisions of the Agreement are severable and if any provision or other identifiable part is held to be unenforceable by any court of competent jurisdiction then such unenforceability shall not affect the enforceability of the remaining provisions or identifiable parts of the Agreement.

The Agreement may be executed in any number of counterparts which when executed and delivered shall be an original but all of which when taken together shall constitute a single instrument.

All references to Reinsurers, FMICL or FCX shall include any successor in title or assignee.

All references to Reinsurers, FMICL or FCX shall include any subsidiaries.

The Parties each acknowledge that this Agreement represents the entire agreement between them, or any of them, regarding its subject matter and that they are not relying on any representation or commitment made by any of the others in entering into it, otherwise than as set out in this Agreement

Other than as expressly provided elsewhere in the Agreement no variation of the Agreement or any other documents in the agreed form shall be valid unless in writing and signed by or on behalf of each of the parties to the Agreement.

A person who is not a Party to this Agreement shall have no right under the Contracts (Rights of Third Parties) Act 1999 to enforce any term of this Agreement. This clause does not affect any right or remedy of any person which exists or is available otherwise than pursuant to that Act.