INTERNATIONAL DAYWORK DRILLING CONTRACT – LAND
Exhibit
10.1
THIS
INTERNATIONAL DAYWORK DRILLING CONTRACT-LAND (hereinafter called the
“Contract”), dated the 12th day of September, 2008 is made between Zion Oil
& Gas Inc. a corporation organized under the laws of State of Delaware USA
having offices at 0000 Xxxxxx Xxxx, Xxxxx 000 Xxxxxx, Xxxxx 00000 XXX and 00
Xxxxxxx Xx. Xxxxx Xxxxxxxxxx Xxxx Xxxxxxxx, 00000, Xxxxxx (hereinafter called
“Operator”), and Aladdin Middle East Ltd. a corporation organized under the laws
of State of Delaware USA with the offices at 000 Xxxxx Xxxxxx, Xxxxxxx Xxxxxx
00000 XXX and at Sogutozu Caddesi No: 23 Xxxxxx 00000 Xxxxxx, Xxxxxx
(hereinafter called “Contractor). Each of Operator and Contractor shall
hereinafter be individually referred to as a “Party” and collectively as the
“Parties”.
WHEREAS,
Operator desires to have xxxxx drilled on land in the Operating Area, as defined
below, and to have performed or carried out all auxiliary operations and
services as detailed in the Appendices hereto or as Operator require;
and
WHEREAS,
Contractor is willing to furnish a 3 DH F 320 drilling rig (hereinafter called
the “Drilling Rig“), personnel and other equipment, insurances all as detailed
in the Appendices hereto for the purpose of drilling the said xxxxx and
performing the said auxiliary operations and services for Operator.
NOW
THEREFORE THIS CONTRACT WITNESSETH that in consideration of the covenants herein
agreed as follows:
ARTICLE
– 1 INTERPRETATION
101.
Definitions
In
this
Contract, unless the context otherwise requires;
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(a)
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“Commencement
Date” means
the point in the time that the Drilling Rig is rigged up, passed
the rig
acceptance test detailed in the Appendices and ready, to drill the
rat
hole and mouse hole in the Operating Area;
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(b)
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“Operator’s
Items” mean
the equipment, material and services which are listed in the Appendices
that are to be provided by or at expense of
Operator;
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(c)
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“Contractor’s
Items” mean
the equipment, material and services which are listed in the Appendices
that are to be provided by or at expense of
Contractor;
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(d)
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“Contractor’s
Personnel” mean
the personnel as listed in the Appendices that are to be provided
by
Contractor from time to time to conduct operations hereunder as listed
in
the Appendices;
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(e)
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“Country
of Operations” means
the State of Israel.
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(f)
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“Operating
Area” means
those areas of land in the Country of Operations where Operator may
from
time to time be entitled to conduct drilling
operations;
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(g)
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“Affiliated
Company” means
a company owning 50% or more of the stock of Operator or Contractor,
a
company in which Operator or Contractor owns 50% or more of its stock,
or
a company 50% or more of whose stock is owned by the same company
that
owns 50% or more of the stock of Operator or
Contractor;
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(h)
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“Operations
Base” means
the place or places designated as such by Operator from time to time,
in
the Country of Operations.
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(i)
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“Transportation”:
means
the loading, unloading, trucking, safety vehicle, permits, insurance
and
other expenses normally associated with moving heavy
equipment
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102.
Currency
In
this
Contract, all amounts expressed in dollars are United States dollar
amounts.
103.
Conflicts
The
Appendices hereto are incorporated herein by reference. If any provision of
the
Appendices conflicts with a provision in the body hereof, the latter shall
prevail.
104.
Headings
The
paragraph headings shall not be considered in interpreting the text of this
Contract.
105.
Further Assurances
Each
Party shall perform the acts and execute and deliver the documents and give
the
assurances necessary to give effect to the provisions of this
Contract.
106.
Contractor’s Status
Contractor,
in performing its obligations hereunder, shall be an independent contractor.
107.
Governing Law
This
Contract shall be construed and the relations between the Parties determined
in
accordance with the substantive laws of England, not including, however, any
of
its conflicts of law rules which would direct or refer to the laws of another
jurisdiction. In the event any provision of the Contract is inconsistent with
or
contrary to any applicable law, rule or regulation, said provision shall be
deemed to be modified to the extent required to comply with said laws, rule
or
regulation, and as so modified said provision and this Contract shall continue
in full force and effect.
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2
ARTICLE
II – TERM
201.
Effective Date and Duration
This
Contract shall enter into effect upon execution by the Parties, subject to
the
terms and conditions written in the Protocol made by and between Operator and
Contractor, dated June 18, 2008 and Amendment to Protocol made by and between
Operator and Contractor dated July 31, 2008 (hereinafter referred to as the
“Protocol”); and shall remain in full force and effect until the completion of
the services by Contractor and payment of rates specified in this Contract
to
Contractor by Operator, as per the Contract, for a period of drilling of at
least 1 (one) exploration well of 4500 meter nominal depth or additional 1
(one)
well to be mutually agreed by and between the Parties in writing, unless
terminated in accordance with Article 202 below.
202.
Termination
Without
derogating from the Parties' rights under law, this Contract may be terminated
as follows;
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(a)
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In
case the Contractor can not mobilize the Drilling Rig by June 30th
2009 at
latest, Operator shall have the right to terminate Contract, without
any
prejudice to the accrued rights of the Parties prior to such termination.
However, Parties can delay the deadline specified herein above for
4
(four) additional months by a mutual written agreement.
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(b)
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Operator
shall have right to terminate this Contract until October 15th,
2008 and no additional payments shall be due to Contractor other
than
already paid sums as per this
Contract.
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(c)
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Provided
that if the Contract is terminated on or after October 15th,
2008 by a written notice from Operator to Contractor, prior to the
commencement of the mobilization, Operator shall pay Contractor,
as
liquidated damages and not as a penalty the sum of USD 1.225.000
(one
million two hundred and twenty five thousand) less any payments made
by
Operator until such termination as per this
Contract.
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(d)
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Immediately
if the Drilling Rig becomes an actual or constructive total loss.
In this
case, termination shall be without any prejudice to the accrued rights
of
Contractor arising out of this Contract.
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(e)
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In
accordance with the terms of the
Protocol.
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For
greater certainty it is hereby agreed that each of the above subsections (a
- e)
are independent and that if the Agreement is terminated under one of these
subsections then the remainder of the subsections shall not apply.
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3
203.
Continuing Obligations
Notwithstanding
the termination of this Contract, the Parties shall continue to be bound by
the
provisions of this Contract that reasonably require some action or forbearance
after the cessation of the day rates provided for hereafter.
204.
Return of Operator’s Items
Upon
termination of this Contract, Contractor shall return to Operator any of
Operator’s Items which are at the time in Contractor’s possession.
ARTICLE
III – CONTRACTOR’S PERSONNEL
301.
Number, Selection, Hours of Labor and Remuneration
Except
where herein otherwise provided, the selection, replacement, hours of labor
and
remuneration of Contractor’s Personnel shall be solely determined by Contractor.
Such employees shall be the employees solely of Contractor. Contractor
represents that its personnel will be competent and efficient.
302.
Providing Personnel
Contractor
shall have its personnel available at the proper drilling location or at a
mutually agreed place ready to conduct operations. Both Parties shall work
together to obtain all visas, work permits and all other government
authorization or documentation required in connection with the entry to,
presence at and/or exit of Contractor’s Personnel from the Country of
Operations, provided that Operator shall bear all expenses to third parties
related thereof in the Country of Operations and Contractor shall bear expenses
to third parties related thereof outside the Country of Operations, and
Contractor shall be solely responsible for and shall meet all costs incurred
in
connection with the employment in Turkey and administration of its Personnel
and
all other matters relating thereto. Contractor can not be held responsible
for
any delay of receiving the work permits after submitting the required documents
to the Operator, if such documents are submitted in a timely manner. It is
understood that the Drilling Rig will not be mobilized until the work permits
are in place.
303.
Contractor’s Representative
Contractor
shall nominate one of its personnel as Contractor’s Representative who shall be
in charge of the remainder of Contractor’s Personnel and who shall have full
authority to resolve all day-to-day matters, which arise between Operator and
Contractor. All communications between the Parties concerning this Contract
shall be in English and Contractor’s Representative shall be fully conversant
with the English language so as to enable Operator’s Designated Representative
to issue instructions and to receive verbal and written reports in
English
304.
Increase in Contractor’s Personnel
Operator
may, at any time, request to increase the number of Contractor’s Personnel and,
subject to the Contractor’s approval of such request and providing additional
Personnel, the day rates provided herein shall be adjusted
accordingly.
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305.
Replacement of Contractor’s Personnel
Contractor
shall remove and replace in reasonable time any of Contractor’s Personnel if
Operator so requests in writing provided that Operator submits reasonable
grounds for its requirement.
ARTICLE
IV – CONTRACTOR’S ITEMS
401.
Obligation to Supply
Contractor
shall provide Contractor’s Items and Personnel and perform the services to be
provided or performed by it in accordance with the Appendices hereto and at
all
times in a professional manner. Operator shall move or pay the cost of moving
Contractor’s spare parts if it becomes necessary to shift the site of these
items from one location to another in the Country of Operations during the
term
of this Contract.
402.
Maintain Stocks
Contractor
shall be responsible, at its cost, for maintaining adequate stock levels of
Contractor’s Items and replenishing as necessary.
403.
Maintain and Repair Equipment
Contractor
shall, subject to clause 1001, be responsible for the maintenance and repair
of
all Contractor’s Items and will provide all spare parts and materials required
therefore, Contractor shall, if requested by Operator in writing, also maintain
or repair, at its cost, any of Operator’s Items which Contractor is qualified to
and can maintain or repair with Contractor’s normal complement of personnel and
equipment; provided, however, that Operator shall at its cost provide all spare
parts and materials required to maintain or repair Operator’s Items and basic
responsibility and liability for furnishing and maintaining such items shall
remain with Operator, and Operator shall release, indemnify, defend and hold
harmless the Contractor from and against any and all liability, expense
including defense costs and legal fees, and claims for damages of any nature
whatsoever related thereof other than those related to Contractor's, wilful
intent or bad faith.
404.
Damage and loss of Contractor’s downhole equipment
Operator
shall assume liability at all times for damage to or destruction of Contractor’s
downhole equipment, unless such damage is the result of Contractor’s negligence
or wilful misconduct, including, but not limited to, drill pipe, drill collars
and tool joints. If Contractor’s downhole equipment is damaged or lost in the
well below the rotary table, the Operator shall reimburse to the Contractor
for
the lesser of:
-
The
cost of repair of such equipment either owned by Contractor or by third parties,
or
-
The
replacement value of such lost or damaged equipment as shown in Appendix A
Part
IV
Page
5
All
costs
relating to repair and/or replacement of Contractor’s downhole equipment which
are damaged or lost, including but not limited to inspection, testing, repair,
replacement shall be paid by the Operator to the Contractor at cost plus 15
(fifteen) percent, and the time beginning from the occurrence of such loss
elapsing until restart of drilling shall be paid on the basis of the Standby
Rate.
ARTICLE
V – CONTRACTOR’S GENERAL OBLIGATIONS
501.
Performance of the Drilling Rig
Contractor
represents that the Drilling Rig is capable of drilling to a depth of 20.000
(Twenty Thousand) feet. Any drill pipe in excess of that furnished by Contractor
shall be supplied by Operator at Operator’s cost.
502.
Contractor’s Standard of Performance
Contractor
shall carry out all operations hereunder on a daywork basis. For purposes hereof
the term “daywork basis” means Contractor shall furnish equipment, labor, and
perform services as herein provided, for a specified sum per day under the
direction, supervision and control of Operator (the term of which is deemed
to
include any employee, agent, consultant or subcontractor engaged by Operator
to
direct drilling operations). When operating on a daywork basis, Contractor
shall
be fully paid at the applicable rates of payment and assumes only the
obligations and liabilities stated herein. Except for such obligations and
liabilities specifically assumed by Contractor, Operator shall be solely
responsible and assumes liability for all consequences of operations by both
Parties while on a daywork basis, including results and all other risks or
liabilities incurred in or incident to such operations, and Operator shall
release, indemnify, defend and hold harmless the Contractor from and against
any
and all liability, expense including defense costs and legal fees, and claims
for damages of any nature whatsoever related thereof other then those related
to
Contractor's wilful intent or bad faith.
Contractor shall be informed regarding all current laws and regulations covering
Contactor’s operation of the Drilling Rig in the Country of Operations before
the mobilization of the Drilling Rig to the Country of Operations and Contractor
will comply with such laws and regulations. Operator shall not be liable for
all
consequences of operations related
to Contractor's wilful intent or bad faith.
503.
Operation of the Drilling Rig
Contractor
shall be solely responsible for the operation of the Drilling Rig, including,
without limitation, supervising the moving operations, and positioning the
Drilling Rig and camp at location as required by Operator, as well as such
operations at the drilling location as may be necessary or desirable for the
safety of the Drilling Rig. Operations under this Contract will be performed
on
a 24-hour per day basis.
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504.
Compliance with Operator’s Instructions
Contractor
shall comply with all instructions of Operator consistent with the provisions
of
the Contract including, without limitation, drilling, well control and safety
instructions. Such instructions shall, if Contractor so requires, be confirmed
in writing by the authorized representative of the Operator. In such case,
until
receiving written instructions from the Operator to the Contractor, the Standby
Rate shall be applied However, Operator shall not issue any instructions which
would be inconsistent with Contractor’s rules, policies or procedures pertaining
to safety of its personnel, equipment or the Drilling Rig, and current laws
and
regulations. Contractor shall have the right to stop or suspend the work in
case
Contractor evaluates the instructions of the Operator to be outside of the
scope
of this Contract or to cause damage or loss of Contractor’s Items excluding
downhole equipment or Contractors personnel or inconsistent with the laws and
regulations of the County of Operations. However, it is recognized that Operator
has superior knowledge of the laws and regulations of the Country of Operations
and Operator is responsible to issue verbal or written instructions consistent
with the said laws and regulations.
505.
Mud and Casing Program
Contractor
shall take all reasonable care to follow the mud and casing program as specified
by Operator. Operator shall provide Contractor with these programs reasonably
in
advance of Commencement Date of
each
well to be drilled hereunder.
506.
Cutting/Coring Program
Upon
Operator’s request, Contractor
shall save and identify cutting and cores in accordance with the Operator’s
instructions and shall place them in containers furnished by Operator at
Operator’s sole cost and expense on a cost plus 15% basis.
507.
Records to be kept by Contractor
Contractor
shall keep and furnish Operator with an accurate record of the work performed
and formations drilled on the IADC-API Daily Drilling Report Form or other
form
acceptable to Operator. A legible copy of the said form signed by Contractor’s
Representative shall be furnished by Contractor to Operator.
508.
Difficulties during Drilling
In
the
event of any difficulty arising which precludes either drilling ahead under
reasonably normal procedures or the performance of any other operations planned
for a well, Contractor may suspend the work in progress and shall immediately
notify the Representative of Operator, in the meantime exerting reasonable
effort to overcome the difficulty.
509.
Safety Equipment
Contractor
shall maintain its well control equipment listed in the Appendices in good
condition at all times and shall use all reasonable means to control and prevent
fires and blowouts and to protect the hole.
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ARTICLE
VI – OPERATOR’S OBLIGATIONS
601.
Equipment and Personnel
Operator
shall, at its cost, provide Operator’s Items and Personnel and perform the
services to be provided or performed by it in accordance with the Appendices.
In
addition to providing the initial supply of Operator’s Items, Operator shall be
responsible, at its cost, for maintaining adequate stock levels and replenishing
as necessary of such items. When, subject to Contractor’s acceptance upon
Operator’s written request, the Contractor furnishes or subcontracts for certain
items which Operator is required herein to provide, for purposes of the Contract
said items or services shall be deemed to be Operator furnished items or
services, any subcontractors so hired shall be deemed to be Operator’s
subcontractor, and Operator shall not be relieved of any of its liabilities
in
connection therewith; for furnishing said items and services Operator will
reimburse Contractor its entire cost plus 15% (fifteen percent) for handling.
and Operator shall release, indemnify, defend and hold harmless the Contractor
from and against any and all liability, expense including defense costs and
legal fees, and claims for damages of any nature whatsoever related thereof
other than those related to Contractor's wilful intent or bad faith.
602.
Maintenance and Repair
Operator
shall be responsible, at its cost, for the maintenance and repair of all
Operator’s Items which Contractor is not qualified to or cannot maintain or
repair with Contractor’s normal complement of personnel and the
equipment.
603.
Operator’s Personnel
Operator
shall ensure that Operator’s Personnel shall be competent and efficient and
Contractor may treat Operator’s Representative for time being as being in charge
of all Operator’s Personnel.
604.
Replacement of Operator’s Personnel
Contractor
shall have the right to request in writing Operator to remove and replace any
of
Operator’s Personnel provided that Contractor can show reasonable grounds for
such request.
605.
Operator’s Representative
Operator
may, from time to time, designate a representative(s) for the purposes of this
Contract who shall at all times have access to the Drilling Rig and may, among
other things, observe tests, check and control the implementation of the mud
program, examine cuttings and cores, inspect the work performed by Contractor
or
examine records kept on the Drilling Rig by Contractor.
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8
606.
Customs or Excise Duties
Operator
shall obtain and pay all import and export charges or customs or excise duties
including, without limitation, local sales taxes, value added taxes, clearing
agent’s fees, or other similar taxes or fees that are levied on Contractor’s
and/or Operator’s Items, and Operator shall release, indemnify, defend and hold
harmless the Contractor from and against any and all liabilities, all expenses
including defense costs and legal fees, and claims for damages of any nature
whatsoever related thereof other than those related to Contractor's wilful
intent or bad faith..
607.
Drilling Location and Access [THE OPERATING AREA(S) ARE THE LICENSE(S) HELD
BY
OPERATOR]
Operator
shall provide Contractor with access to the drilling location as well as any
drilling permits, licenses or certificates needed to conduct operations
hereunder. The drilling location so provided shall be surveyed and marked by
Operator and shall be free of obstructions. Operator also shall prepare sound
locations capable of properly supporting the Drilling Rig, and shall be
responsible for a conductor pipe program adequate to prevent soil and subsoil
washout. It is recognized that Operator has superior knowledge of the location
and access routes to the location, and shall advise Contractor of any subsurface
conditions, or obstructions which Contractor might encounter while enroute
to
the drilling location or during operation hereunder. In the event subsurface
conditions cause a cratering or shifting of the drilling location surface and
loss or damage to the Drilling Rig or its associated equipment results
therefrom, Operator shall, without regard to the other provisions of this
Contract, including paragraph 1001 hereof, reimburse Contractor to the extent
not covered by Contractor’s insurance, for such loss or damage including payment
of Force Majeure Rate during repair.
608.
Taxes
Contractor
agrees to prepare and timely file all required income or other tax returns
or
declarations required by the government of the area where the Drilling Rig
operates. Upon notification by the Contractor of the amount or amounts of such
taxes paid by it which pertain to the performance by Contractor under this
Contract, accompanied by copies of each such return or declaration, Operator
hereby agrees to reimburse Contractor such amount or amounts less any interest
or penalties arising from the fault of Contractor and levied by any of the
aforementioned governmental bodies. Contractor shall consult with Operator
before filling any such tax returns or paying the applicable taxes.
Operator
will provide utmost amount of assistance to Contractor in fulfilling any
taxation issue in the Country of Operations.
609.
Bank Letter of Credit
On
or
after October 31, 2008, Operator will provide a bank Letter of Credit to the
Contractor within 10 days following the date of Contractor’s written
notification to Operator of for the commencement of mobilization from the
Drilling Rig’s current location in Turkey to the exportation port in Turkey for
US$
675,000
(Six
Hundred
and Seventy Five Thousand United States Dollars). Contractor shall return the
bank letters of credit upon receiving all payments hereunder including but
not
limited to the Operating, Stand By, Force Majeure rates Mobilization,
Demobilization, Transportation fees, Lost In Hole charges arising out of this
Contract. The Letter of Credit shall be acceptable to Citibank and be
irrevocable.
INTERNATIONAL
DAYWORK DRILLING CONTRACT – LAND
Page
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ARTICLE
VII – OPERATOR’S INSTRUCTIONS
701.
Instructions to Contractor
Operator
may, from time to time, through its authorized representative or
representatives, issue written or oral instructions to Contractor covering
operations hereunder. Operator’s instructions may be general or may deal with
specific matters relating to operations hereunder including, without limitation,
instructions to stop operations, as to safety and well control, and drilling
instructions, but Operator shall have no right to require Contractor to drill
deeper than 20,000 feet unless Contractor agrees in writing.
ARTICLE
VIII – RATES OF PAYMENT
801.
Payment
Operator
shall pay the Contractor the amounts from time to time due calculated according
to the rates of payment herein set forth, in accordance with the terms and
provisions of this Contract. No other payment shall be due from Operator unless
specifically provided for in this Contract, or agreed to in writing by
Operator.
802.
Mobilization Fee
For
mobilizing Drilling Rig, Contractor’s Items and Personnel including all
shipping, trucking, airfreight, dock expenses, customs agent fees in Turkey
and
other charges, a fee of US$ 675.000 (Six Hundred and Seventy Five Thousand
United States dollars-hereinafter referred to as the “Mobilization Fee”) shall
be paid to Contractor. The mobilization shall be deemed to be completed when
the
Drilling Rig, and Contractor’s Items have been delivered to the customs of
Country of Operations at Haifa Port, and payment of the Mobilization Fee shall
be as follows:
| (a) |
USD
175.000 (one
hundred seventy five thousand) out of the Mobilization Fee has been
paid as per the Protocol;
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| (b) |
$300,000,
shall be paid upon execution of this Contract and upon receipt of
the
related invoice, by Operator;
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| (c) |
$200,000
shall be paid upon delivery of the Drilling Rig to the customs of
Country
of Operations and upon receipt of the related invoice by Operator.
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| (d) |
The
Transportation of the Drilling Rig from Haifa Port to Operator’s first
well location in Israel shall be invoiced to Operator by Contractor
on a
cost plus 15% Handling Fee basis.
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INTERNATIONAL
DAYWORK DRILLING CONTRACT – LAND
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803.
Demobilization Fee
Operator
shall pay Contractor a Demobilization Fee of US$ 675.000 (Six-Hundred and
Seventy-Five Thousand United States dollars) except that no Demobilization
Fee
shall be due if this Contract is terminated pursuant to Clause 202 (b) hereof.
The
demobilization shall be deemed to be completed when the Drilling Rig, and
Contractor’s Items have been delivered to the customs of Country of Operations
at Haifa Port.
a)
75% of
the Demobilization Fee shall be paid upon the Rig Release Date (the time and
date when the operations on the final well are complete and the drill string
is
laid out in its entirety from the xxxxxxx. Date and time of release is to be
noted in the IADC tour report, as the official Rig Release Date of this
Contract, and
signed
off by both Operator and Contractor designated representatives) of the last
well
and upon receipt of the related invoice,
b)
25% of
the Demobilization Fee shall be paid upon delivery of the Drilling Rig to the
customs of Country of Operations and upon receipt of the related
invoice.
The
Transportation of the Drilling Rig from Operator’s last well location in the
Country of Operations to Haifa Port shall be invoiced separately to Operator
by
Contractor on a cost plus 15% Handling Fee basis. 75% of the estimated cost
of
the Transportation shall be paid on the Rig Release Date as advance for the
Transportation and the remaining balance shall be invoiced upon completion
of
the Transportation from the last well location to the Country of Operations’
Haifa Port.
In
case
of execution of a drilling contract with another operator in the Country of
Operations after the last well of Operator within the scope of this Contract,
Contractor shall reimburse the Demobilization Fee to Operator, provided that
any
sum is received by the Contractor further to such drilling contract.
804.
Operating Rate
The
“Operating Rate” will be US$ 28,500 (Twenty-Eight Thousand and Five Hundred) per
24-hour day and will first be paid on the Commencement Date, pro-rated to the
nearest hour. The Operating Rate shall continue to be paid except as herein
otherwise provided.
Operating
rate will be applicable during rigging up and down of equipment for electric
logging and any wire line operations.
805.
Standby Rate
The
“Standby with Crew Rate” will be 90% of the Operating Rate per 24-hour day and
will be paid;
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(a)
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During
production testing of a well, excluding running and pulling of
tubulars.
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INTERNATIONAL
DAYWORK DRILLING CONTRACT – LAND
Page
11
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(b)
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During
any period of delay when Contractor is unable to proceed because
of an act
or omission of Operator including, without limitation, the failure
of any
of Operator‘s Items, or the failure of Operator to issue instructions,
provide Operator’s Items or furnish services.
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(c)
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During
any period Contractor is waiting for equipment that is supplied at
Operator 's request.
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(d)
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During
any delay in operations solely due to the fault of Operator, its
contractors (except Contractor and its Subcontractors) or subcontractors,
including, but not limited to delay in providing access to the drilling
location.
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(e)
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During
the time which operations hereunder are suspended due to abnormal
or
hazardous formations and/or adverse weather conditions.
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(f)
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From
the moment Contractor could have spudded the first well had it not
been
delayed solely by Operator until the Operating Rate first becomes
payable;
or
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(g)
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During
any period that the Drilling Rig is in transit between drilling locations
or in transit to the sea port of Israel for the demobilization to
Turkey
after the last well; provided that if, at the termination of this
Contract, Drilling Rig is not moved to the sea port of Israel or
the
nearest place as mutually agreed in writing, the period shall not
exceed
the reasonable estimated time required to arrive at such
place.
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The
“Standby with Reduced Crew Rate” will be 70% of the Operating Rate per 24-hour
day and will be paid during periods of shutdown requested by Operator when
Operator anticipates that the Drilling Rig will be shut down for more than
five
(5) consecutive days and part or all of Contractor’s Personnel are released as
mutually agreed between Operator and Contractor. However, Operator shall have
the right to cause Contractor to recommence operations at any time after 10
(ten) days from shutdown, by giving written notice to Contractor of 10 (ten)
days in advance of the date when operations are to be recommenced, provided
that
there are available flights to the Country of Operations and there is not any
problem in obtaining the visas or work permits in scope of this Contract.
Operator shall reimburse Contractor for costs incurred in returning released
personnel to their point of origin and for costs of remobilizing personnel
on
the re-commencement of operations. Operator shall be responsible for providing
security services at its own cost to protect Contractor's Items during the
period of such shutdown.
The
“Standby without Crew Rate” will be 60% of the Operating Rate per 24-hour day
and will be paid during periods as defined in Article 302.
806.
Repair Rate
The
“Repair Rate” will be 100% of the Operating Rate per 24-hour day and will be
paid as follows:
(a)
The
Operating Rate up to an accumulation of 72 (seventy-two) hours per calendar
month.
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(b)
No
compensation for the hours beyond a total of 72 (seventy-two) accumulated hours
per calendar month.
For
the
purpose of this rate calculation, partial days and months are to be pro-rated.
Contractor will use due diligence in effecting all repairs, replacements or
inspection in a good and competent manner and will use its best efforts to
replace any defective items in the time possible. Preventive maintenance should,
as much as it is possible, be carried out during periods when the drilling
equipment is idle.
807.
Force Majeure Rate
The
“Force Majeure Rate” will be 60% of the Operating Rate per 24-hour day and will
be paid during any period in which operations are not being carried because
of
Force Majeure. If Force Majeure exceeds 45 (forty five) consecutive days, either
Party may elect to end the Contract. In such case, Contractor shall be paid
the
Demobilization Fee and the Transportation fee to the Haifa Port together with
all re-exportation expenses of the Contractor’s Items.
808.
Moving Fee
The
“Moving Fee” will be the actual cost of moving (trucking, loading/unloading and
insurance) plus 15% handling fee and Stand-by with Crew Rate for a maximum
of 12
days for any location within 60 km distance from the first well as addressed
in
the Contract in details. If the distance of the next location exceeds 60 km.,
the additional number of days of the above total of days will be subject to
a
mutual written agreement.
809.
Variation of Rates
The
rates
and/or payments herein set forth shall be revised by the actual amount of the
change in Contractor’s cost if an event as described below occurs or if the cost
of any of the items hereinafter listed shall vary by more than the amount
indicated below from the Contractor’s cost thereof by 5% or by the same amount
after the date of any revision pursuant to this clause, all as evidenced by
reasonable written documentation supplied to the other Party:
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(a)
|
if
labor costs, including all benefits and the cost of foreign income
taxes
paid by Contractor for its expatriate employees vary by more than
five
percent;
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(b)
|
if
Operator requests Contractor to increase the number of Contractor’s
Personnel in accordance with Clause 304
;
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(c)
|
if
it becomes necessary for Contractor to change the work schedule of
its
personnel as a result of a written request from
Operator;
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(d)
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in
the event described in Clause 1202
(Assignment)
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(e)
|
if
there is any change in legislation (other than Corporate tax legislation)
by the Country of Operations granting Operator the concession in
which
Contractor is working that alters Contractor’s financial
burden;
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(f)
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if
the cost of insurance premiums varies by more than five
percent;
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(g)
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if
Contractor’s interest rate varies by more than one-half of one percent.
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ARTICLE
IX – INVOICES AND PAYMENTS
901.
Monthly Invoices
Contractor
shall invoice Operator, at the end of each month, for all daily charges earned
by Contractor during that month. Other charges shall be invoiced as earned.
Invoicing for daily charges will reflect details of the time spent (calculated
to the nearest hour) and the rate charged for the time; invoices for other
charges will be accompanied by invoices supporting costs incurred for Operator
or other substantiation as required.
902.
Payment
Operator
shall pay, by telegraphic transfer, all invoices within 15 (fifteen) days upon
the receipt thereof except that if Operator disputes an item invoiced, Operator
shall, within 10 (ten) days upon the receipt of the related invoice ,notify
Contractor of the item disputed, if any, in writing, specifying the reason
therefore, and payment of the disputed item shall be withheld by Operator until
the settlement of the dispute, but payment shall be made of any undisputed
invoices. Any sums not paid by Operator in accordance with the Contract within
15 (fifteen) days upon the receipt of invoice shall bear interest at the rate
of
12 (twelve) percent per annum from said due date until paid. In terms of the
disputed invoices, the due date for the disputed but ultimately paid amounts
shall be deemed to be the end of 15 days specified above beginning from the
date
of invoice, and thus, such disputed amounts shall bear interest at the rate
of
12 (twelve) percent per annum from the said due date until paid; .but not from
the date of settlement. If Operator refuses to pay undisputed items together
with the applicable interest, if any, in compliance with the Contract,
Contractor shall also have the right to terminate this Contract by a 10-day
written notice to Operator, unilaterally without any prejudice to the accrued
rights of Parties, including the right of Contractor to be paid the
Demobilization Fee.
903.
Method of Payment
All
payments due by Operator to the Contractor hereunder shall be made in United
States Dollars at Contractor’s bank account which is;
Beneficiary
: ALADDIN MIDDLE EAST, LTD.
Bank : INTRUST
BANK, N.A.
Wichita,
Kansas, USA
Account
No : 00000000
Routing
: 000000000
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Rates
specified in this Contract are based on current exchange rate (1 EURO= 1.5502
USD) and are subject to change if the rate reduces by more than 10% at the
time
of payment as published in the Wall Street Journal for the payment date.
ARTICLE
X – LIABILTY
1001.
Equipment or Property
Except
as
specifically provided herein to the contrary, each Party hereto shall, at all
times, be responsible for and shall hold harmless and indemnify the other Party
from and against any damage to or loss of its own equipment or property,
regardless of the cause of loss, including the negligence of such Party, and
despite the fact that a Party’s items may be under the control of other Party,
except that;
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(a)
|
Operator
shall, to the extent Contractor’s insurance does not compensate
Contractor, therefore, be responsible at all times for damage to
or
destruction of Contractor’s Items or property caused by exposure to
unusually corrosive or otherwise destructive elements, including
those
which are introduced into the drilling fluid from subsurface formations
or
the use of corrosive additives in the
fluid.
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(b)
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Operator
shall, to the extent Contractor’s insurance does not compensate
Contractor, therefore, be responsible for the damage to or loss of
Contractor’s drill string, and shall reimburse Contractor for such damage
or loss at lesser of the CIF replacement cost of the item so lost
or
damaged or the Lost in Hole prices as shown in Appendix A – Part IV; with
the understanding, however, that the indemnity granted in this Clause
1001
shall not indemnify either Party for liabilities incurred by it as
a
result of obligations undertaken in a contract with a third
party.
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1002.
The Hole
In
the
event the hole should be lost or damaged, Operator shall be solely responsible
for such damage to or loss of the hole, including the casing therein, unless
such loss or damage was caused by the wilful misconduct of Contractor, or its
employees, agents or subcontractors.
1003.
Inspection of Materials Furnished by Operator
Contractor
agrees to visually inspect all material furnished by Operator before using
same
and to notify Operator of any apparent defects therein. Contractor shall not
be
liable for any loss or damage resulting from the use of material furnished
by
Operator.
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1004.
Contractor’s Personnel
Contractor
agrees to protect, defend, indemnify, and save Operator, its officers,
directors, employees and joint owners harmless from and against all claims,
demands, and causes of action of every kind and character, without limit and
without regard to the cause or causes thereof or the negligence of any Party
or
Parties, arising in connection herewith in favor of Contractor’s employees or
Contractor’s subcontractors or their employees, or Contractor’s invitees, on
account of bodily injury, death or damage to property. If it is judicially
determined that the monetary limits of insurance required hereunder or of the
indemnities voluntarily and mutually assumed under paragraph 1004 (which
Contractor and Operator hereby agree will be supported either by available
liability insurance, under which the insurer has no right of subrogation against
the indemnitee, or voluntarily self-insured, in part or whole) exceed the
maximum limits permitted under applicable law, it is agreed that said insurance
requirements or indemnities shall automatically be amended to conform to the
maximum monetary limits permitted under such law.
1005.
Operator’s Personnel
Operator
agrees to protect, defend, indemnify, and save Contractor, its officers,
directors and employees harmless from and against all claims, demands, and
causes of action of every kind and character, without limit and without regard
to the cause or causes thereof or the negligence of any Party or Parties,
arising in connection herewith in favor of Operator’s employees or Operator’s
contractors or their employees, or Operator’s invitees, other than those parties
identified in paragraph 1004 on account of bodily injury, death or damage to
property. If it is judicially determined that the monetary limits of insurance
required hereunder or of the indemnities voluntarily and mutually assumed under
paragraph 1005 (which Contractor and Operator hereby agree will be supported
either by available liability insurance, under which the insurer has no right
to
subrogation against the indemnities, or voluntarily self-insured, in part or
whole) exceed the maximum limits permitted under applicable law, it is agreed
that said insurance requirements or indemnities shall automatically be amended
to conform to the maximum monetary limits permitted under such law.
1006.
Pollution and Contamination
Notwithstanding
anything to the contrary contained herein, it is understood and agreed by and
between the Contractor and Operator that the responsibility for pollution or
contamination shall be as follows:
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(a)
|
The
Contractor shall assume all responsibility for (including cleaning
up and
containment) of all pollution or contamination which originates above
the
surface from improper care or disposition of items in Contractor’s
possession and control and directly associated with Contractor’s Items and
facilities and shall protect, defend, indemnify and save the Operator
harmless from and against all claims, demands, and causes of action
of
every kind and character arising
thereform.
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|
(b)
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Excluding
matters for which Contractor is responsible as per (a) above, Operator
shall assume all responsibility for (including control and removal
of the
pollutant involved) and shall protect, defend, indemnify and save
the
Contractor harmless from and against all claims, demands, and causes
of
action of every kind and character arising directly or indirectly
from all
pollution or contamination, which may occur from the negligence of
Contractor or otherwise during the term of this Contract or as a
result of
operations hereunder, including, but not limited to, that which may
result
from fire, blowout, cratering, seepage or any other uncontrolled
flow of
oil, gas, water or other substance, as well as the use or disposition
of
oil emulsion, oil base or chemically treated drilling fluids, contaminated
cuttings or cavings, lost circulation and fish recovery materials
and
fluids.
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(c)
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In
the event a third party commits an act or omission which results
in
pollution or contamination for which either the Contractor or Operator
for
whom such Party is performing work is held to be legally liable,
the
responsibility therefore shall be considered, as between the Contractor
and Operator, to be the same as if the Party for whom the work was
performed had performed the same and all of the obligations respecting
defense, indemnity, holding harmless and limitation of responsibility
and
liability, as set forth in (a) and (b) above, shall be specifically
applied.
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1007.
Cost of Control
Operator
shall be liable for the cost of regaining any control of any wild well and
shall
defend, release, hold harmless and indemnify Contractor for any such cost
regardless of the cause thereof, excepting the negligence or wilful misconduct
of Contractor, its agents, employees or subcontractors.
1008.
Underground Damage
Operator
agrees to defend, release, hold harmless and indemnify the Contractor for any
and all claims except the negligence or wilful misconduct of Contractor, its
agents, employees or subcontractors against Contractor resulting from operations
under this Contract on account of injury to destruction of, or loss or
impairment of any property right in or to oil, gas or other mineral substance
or
water, if at the time of the act or omission causing such injury, destruction,
loss, or impairment, said substance had not been reduced to physical possession
above the surface, and for any loss or damage to any formation, strata, or
reservoir beneath the surface.
1009.
Consequential Damages
Neither
Party shall be liable to the other for special, indirect, consequential damages
resulting from or arising out of this Contract, including, without limitation,
loss or profit of business interruptions, however same may be
caused.
ARTICLE
– XI INSURANCE
1101.
Contractor’s Insurance
Contractor
shall carry and maintain the insurance shown in Appendix B. Contractor may
from
time to time, with the prior approval of Operator, change the insurance it
carries. Contractor will increase its insurance beyond the limits provided
for
herein or will change its insurance if required by Operator, but additional
cost
will be paid by Operator.
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1102.
Operator’s Insurance
Operator
shall purchase a Control of Well insurance policy against blow-outs and/or
any
risks that are associated with the well condition due to high pressure gas
that
may come out from the well. Such policy should cover Contractor’s Drilling Rig
and Items on location priced at US$15,000,000 as well as any possible losses
to
Contractor’s Personnel. Contractor shall be made a party as beneficiary to such
policy. Upon completion of mobilization, Operator shall provide Contractor
with
a copy of the policy. In case that Operator cannot obtain such insurance policy,
Operator shall pay for the value of the Drilling Rig and Items as per the
provisions of Appendix C in case of any blow-outs and/or any risks that are
associated with the well condition due to high pressure gas that may come out
from the well within 30 days upon occurrence.
1103.
Policies and Receipts
Upon
execution of this Contract, Contractor will furnish Operator with certificates
of all its insurance policies relating to Contractor’s operations
hereunder.
1104.
Subrogation
For
liabilities assumed hereunder by Contractor, its insurance shall be endorsed
to
provide that the underwriters waive their right of subrogation against Operator.
Operator will, as well, cause its insurer to waive subrogation against
Contractor for liability it assumes.
ARTICLE
XII – SUBLETTING AND ASSIGNMENT
1201.
Subcontractors by Operator
Operator
may employ other contractors to perform any of the operations or services to
be
provided or performed by it according to Appendix A.
1202.
Assignment
Neither
Party may assign this Contract to anyone other than an affiliated company
without the prior written consent of the other, and prompt notice of any such
intent to assign shall be given to the other Party. In the event of such
assignment, the assigning Party shall remain liable to the other Party as a
guarantor of the performance by assignee of the terms of this Contract. If
any
assignment is made by Operator that alters Contractor’s financial burden,
Contractor’s compensation shall be adjusted to give effect to any increase or
decrease in Contractor’s operating costs or in taxes in the new operating
area.
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ARTICLE
XIII – NOTICES
1301.
Notices
Notices,
reports and other communications required or permitted by this Contract to
be
given or sent by one Party to the other shall be delivered by hand, overnight
courier, confirmed facsimile or confirmed e-mail transmission to:
Operator’s
Address: Zion
Oil & Gas, Inc.
Bareket
15, XX Xxx 0000
Xxxxxxxx
Xxxxxxxxxx Xxxx
Xxxxxx
00000
Tel:
x000.0.0000000
Fax:
x000.0.0000000
E-mail:
xxxxxx@xxxxxxx.xxx
Attn:
Xxxx Xxxxx, President
Contractor’s
Address: Aladdin
Middle East Ltd.
Sogutozu
Caddesi No: 23
Xxxxxx,
00000, Xxxxxx, Xxxxxx
Tel:
x00.000.0000000
Fax:
x00.000.0000000 / 2875768
E-mail:
xxxxxxxxxxxxxx@xxxxxxxxxx.xxx
Attn:
Xxxxxxx Xxxxx Mumcuoglu, General Manager
as
the
case may be. Either Party shall inform the other Party in writing of any change
in address. Otherwise, notifications made to the addresses of Parties written
in
this Clause shall be valid and be deemed to be duly made..
ARTICLE
XIV – GENERAL
1401.
Confidential Information
All
information obtained by the Contractor in the conduct of operations hereunder
shall be confidential and not be divulged by Contractor or its employees, agents
or subcontractors without the written consent of Operator.
1402.
Dispute Resolution
All
disputes arising out of or in connection with this Contract shall be finally
settled under the Rules of Arbitration of the International Chamber of Commerce
by one or more arbitrators appointed in accordance with the said Rules.
Arbitration language shall be English. The place of arbitration shall be in
London, United Kingdom.
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1403.
Attorney’s Fees
In
any
suit or arbitration proceedings respecting this Contract the Parties agree
that
the successful Party shall be entitled to recover its reasonable attorney’s fees
and costs.
1404.
Force Majeure
Except
as
otherwise provided in this Clause 1404, each Party shall be excused from
complying with the terms of this Contract, except for the payment of monies
then
due, if and for so long as such compliance is hindered or prevented by riots,
strikes, wars (declared or undeclared), insurrections, rebellions, terrorist
acts, civil disturbances, dispositions or order of governmental authority,
whether such authority be actual or assumed, acts of God (other than weather
conditions), inability to obtain equipment, supplies of fuel, or by act or
cause
which is reasonably beyond the control of such Party, such causes being herein
sometimes called “Force Majeure”. If any failure to comply is occasioned by a
governmental law, rule, regulation, disposition or order as aforesaid and the
affected Party is operating in accordance with good oilfield practice in the
area of operations and is making reasonable effort to comply with such law,
rule, regulation, disposition or order, the matter shall be deemed beyond the
control of the affected Party. In the event that either Party hereto is rendered
unable, wholly or in part, by any of these causes to carry out its obligation
under this Contract, it is agreed that such Party shall give notice and details
of Force Majeure in writing to the other Party as promptly as possible after
its
occurrence. In such cases, the obligations of the Party giving the notice shall
be suspended during the continuance of any inability so caused except that
Operator, shall be obliged to pay to Contractor the Force Majeure Rate provided
for in clause 807 (Force Majeure Rate)
1405.
Right to Audit
Contractor
shall keep proper books, records and accounts of operations hereunder and shall
permit Operator at all reasonable times during the term of this Contract to
inspect the portions thereof related to any variation of the rates
hereunder.
1406.
Waivers
It
is
fully understood and agreed that none of the requirements of this Contract
shall
be considered as waived by either Party unless the same is done in writing,
and
then only by the persons executing this Contract or other duly authorized agent
or representative of the Party.
1407.
Entire Agreement
This
Contract with its Appendices shall be the entire agreement between the Parties
and supersedes and replaces any oral or written communications heretofore made
between the Parties relating to the subject matter hereof.
1408.
Inurement
This
Contract shall inure to the benefit of and be binding upon the Parties and
their
respective permitted successors and assigns.
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1409.
Expropriation, Confiscation, Nationalization and War Risks
(a)
In
the event the Drilling Rig or any or all of Contractor’s Items, spare parts
and/or supplies directly associated therewith (i) cannot lawfully be exported
from the Country of Operations in which it was operating following termination
of drilling operations under this Contract because Contractor cannot obtain
an
export license or permit because of other governmental restrictions and not
directly related to Contractor's act or failure to act; or (ii) are lost to
Contractor through confiscation, expropriation, nationalization or governmental
seizure and not directly related to Contractor's act or failure to act; or
(iii)
are seized or damaged or destroyed as a result of insurrection, terrorist acts,
riot or war (declared or undeclared) or other similar occurrences during the
term of this Contract, Operator will within sixty (60) days following the
occurrence of any such event pay Contractor the value (as set out in Appendix
C)
of all such property so restricted, confiscated, expropriated, nationalized,
seized, damaged or destroyed, from which value shall be subtracted the total
of
the following;
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(1)
|
any
amount paid Contractor by such governmental unit or
body;
|
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(2)
|
any
amount paid Contractor from
insurance;
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(3)
|
depreciation
in accordance with the schedule attached hereto as Appendix C, but
not to
exceed 30% of said value. Depreciation shall be computed commencing
with
the date upon with each component of Contractor’s Items is placed into
service under this Contract.
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Following
the payment by Operator for Contractor’s property under the conditions set forth
(which shall be made in the currency in which the original purchase thereof
was
made), to Contractor and at the time of such payments, Operator shall have
the
option to require Contractor to immediately assign all of its right, title
and
interest in the Drilling Unit to Operator.
(b)
Should a change of political or other condition occurs which would enable
Contractor again to assume possession of the Drilling Rig and/or its Items,
spare parts and supplies directly associated therewith, Contractor agrees to
repay to Operator such amounts as Operator may have paid to Contractor under
this Clause 1409, less such amounts as agreed between the Parties, if any,
as
may be required to restore the Drilling Rig, Contractor’s Items, spare parts and
supplies directly associated therewith to the same condition they were in at
the
time of suspension of drilling operations, and also less such amount (to be
agreed upon by Operator and Contractor) as shall equitably compensate Contractor
for deterioration, and/or depreciation thereof during the period of nonuse
resulting from the causes set forth in this Clause 1409. In the event of such
resumption of possession of the Drilling Rig, Operator shall reassign all of
its
right, title and interest in said Drilling Rig, Contractor’s Items, spare parts
and/or supplies to Contractor as of such time of resumption of
possession.
(c)
All
costs and other charges provided for in this Clause 1409 are subject to
adjustment after audit.
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(d)
If
requested by Operator in writing, Contractor agrees to obtain to the extent
then
and thereafter available, insurance covering all or such portion of the risks
specified in this Clause 1409 as Operator may direct.
Operator
shall be named as co-insured in any such policy or policies of insurance, which
shall provide for the payment of losses thereunder in United States dollars
or
at the option of Operator, in the currency in which the original purchase was
made. The provisions of such insurance and cost thereof shall be subject to
Operator’s approval prior to the issuance thereof.
The
cost
of such insurance shall be paid by Operator to Contractor within twenty (20)
days after invoice from Contractor evidencing the payment by Contractor of
the
premiums for such specified insurance.
(e)
Contractor shall pay to Operator any monies with respect to such expropriation,
etc., which Contractor receives and for which Operator has not already received
credit after payment has been made by Operator to Contractor under Clause
1409.
IN
WITNESS WHEREOF, each Party has executed this Contract in two original copies,
as of the date first written above.
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OPERATOR
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:
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By
|
:
Cetin Mumcuoglu
|
|
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Title
|
:
General Manager
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CONTRACTOR
|
:
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By
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:
Xxxxxxx Xxxxxxx
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Title
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:
Chief Executive Officer
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