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Exhibit 10.24
OPERATING AGREEMENT
XXXXXXXXX-XXXXX PIPELEINE
THIS AGREEMENT, entered into this 11th day of September, 1995, but
effective January 1, 1995, by and between OMIMEX DE COLOMBIA, LTD., hereinafter
designated and referred to as "Operator", and SABACOL, INC., hereinafter
referred to as "Non-Operator", collectively called the Parties,
WITNESSETH:
WHEREAS, the Parties to this agreement are owners of the Xxxxxxxxx-Xxxxx
Pipeline, Colombia, S.A. identified in Exhibit "A", and the Parties hereto have
reached an agreement to develop and operate this Pipeline,
NOW, THEREFORE, it is agreed as follows:
ARTICLE I
DEFINITIONS
As used in this agreement, the following words and terms shall have the
meanings here ascribed to them:
A. The term "Contract Area" or "Pipeline" shall mean the
Xxxxxxxxx-Xxxxx Pipeline and its associated facilities Such
being described in Exhibit "A".
Unless the context otherwise clearly indicates, words used in the singular
include the plural, the plural include the singular, and the neuter gender
includes the masculine and the feminine.
ARTICLE II
EXHIBITS
The following exhibits, as indicated below and attached hereto, are
incorporated in and made a part hereof:
A. Exhibit "A" - Identification of the Pipeline subject
to this agreement and the interests of the Parties.
B. Exhibit "B" - Accounting Procedure
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C. Exhibit "C" - Insurance
ARTICLE III
INTEREST OF THE PARTIES
Unless changed by other provisions, all costs and liabilities incurred in
operations under this agreement shall be borne and paid, and all equipment and
materials acquired in operations on the Contract Area shall be owned, by the
Parties as their interests are set forth in Exhibit "A". In the same manner,
the Parties shall also share in the revenues from the Contract Area.
Nothing contained in this Article III shall be deemed an assignment or
cross-assignment of interests covered hereby.
ARTICLE IV
OPERATOR
OMIMEX DE COLOMBIA, LTD., shall be Operator of the Contract Area, and
shall conduct and direct and have control of all operations on the Contract Area
as permitted and required by, and within the limits of this agreement. It shall
conduct all operations in a good and workmanlike manner, but it shall have no
liability as Operator to the other party for losses sustained or liabilities
incurred, except such as may result from gross negligence or willful misconduct.
Operator may resign at any time by written notice thereof to
Non-Operator. If Operator terminates its legal existence, no longer owns an
interest in the Contract Area, or is no longer capable of serving as Operator
because Operator is insolvent, bankrupt or is placed in receivership, Operator
shall be deemed to have resigned without any action by Non-Operator, except the
selection of a successor. Operator may be removed by Non-Operator by majority
vote or if it fails or refuses to carry out its duties hereunder. Such
resignation or removal shall not become effective until 7:00 A.M. on the first
day of the calendar month following the expiration of (90) days after giving of
the notice of resignation by Operator or action by the Non-Operator to remove
Operator, unless a successor Operator has been selected and assumes the duties
of Operator at an earlier date.
Upon the resignation of Operator or removal by Non-Operator, a
successor Operator shall be selected by Parties owning an interest in the
Contract Area at the time such successor Operator is selected, excluding the
ownership of the retiring or removed Operator.
The number of employees used by the Operator in conducting operations
hereunder, their selection, and the hours of labor and the compensation for
services performed shall be determined by Operator, and all such employees
shall be the employees of Operator.
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ARTICLE V
ACCESS TO CONTRACT AREA AND INFORMATION
Each party shall have access to the Contract Area at all reasonable
times, at its sole cost and risk to inspect or observe operations, and shall
have access at reasonable times to information pertaining to the development or
operation thereof, including Operator's books and records relating thereto.
Operator, upon request, shall furnish each of the other Parties with copies of
all forms and reports filed with governmental agencies and reports of crude oil
volumes transported by the Pipeline. The cost of gathering and furnishing
information to Non-Operator, other than that specified above, shall be charged
to the Non-Operator that requests the information.
ARTICLE VI
REVENUES, EXPENDITURES AND LIABILITIES, OF PARTIES
A. Liability of Parties:
The liability of the Parties shall be several, not joint or collective.
Each party shall be responsible only for its obligations, and shall be liable
only for its proportionate share of the costs of developing and operating the
Contract Area. Accordingly, the liens granted among the Parties are given to
secure only the debts of each severally. It is not the intention of the
Parties to create, nor shall this agreement be construed as creating, a mining
or other partnership or association, or to render the Parties liable as
partners.
B. Liens and Payment Defaults:
Each Non-Operator grants to Operator, a lien on all of each
Non-Operator's right in the Contract Area, and a security interest in its
interest in all equipment and the revenues received from Third Parties for the
transportation of crude oil, to secure payment of its share of expense,
together with interest thereon at the rate shown in Exhibit "B". Operator
grants a like lien and security interest to the Non-Operators to secure payment
of Operator's proportionate share of expense.
C. Payments and Accounting:
Except as otherwise specifically provided, Operator shall promptly pay
and discharge expenses incurred in the development and operation of the
Contract Area pursuant to this agreement and shall charge each of the Parties
hereto with their respective proportionate shares upon the expense basis
provided in Exhibit "B". Operator shall keep an accurate record of the joint
account hereunder, showing expenses and charges and credits made and received.
Operator may request advance payment of estimated expenses. If any party fails
to pay its share of said estimated expenses within the time specified, the
amount due shall bear interest as provided in Exhibit "B". Such request shall
include a detail listing of the expenses to be covered by the advance payment.
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Revenue for transport of Third Party crude oil by the Pipeline shall shared
by the Parties in the proportionate shares as set forth on Exhibit "A".
Payment by Operator to Non-Operator shall be made within 30 days of the date of
receipt by Operator of payment from the Third Party.
Exhibit "B" shall detail the accounting procedures for the Contract Area.
D. Limitation of Expenditures:
Operator shall notify all Parties in writing and an AFE shall be
prepared before incurring any item of expense, which is equal to or exceeds
US $50,000.00. Such item of expense shall not be incurred unless a majority
in interest of the Parties signify their consent thereto in writing within 10
days of the written notice.
E. Insurance:
Operator shall also carry or provide insurance for the benefit of the joint
account of the Parties as outline in Exhibit "C", attached to and made a part
hereof. Operator shall require all contractors engaged in work on or for the
Contract Area to maintain statutorily required insurance and insurance equal to
that shown on Exhibit "C".
F. Annual Budget Meeting:
Operator shall, with at least 30 days written notice, call an annual
meeting of the Parties for the purpose of approving an annual budget and
capital expenditures program.
ARTICLE VII
MAINTENANCE OF UNIFORM INTEREST
For the purpose of maintaining uniformity of ownership of the
interests covered by this agreement, no party shall sell, encumber, transfer or
make other disposition of its interest in the Contract Area and in the xxxxx,
equipment and production unless such disposition covers the entire undivided
interest of the party.
ARTICLE VIII
CLAIMS AND LAWSUITS
Operator may settle any single uninsured third party damage claim or
suit arising from operations hereunder if the expenditure does not exceed Twenty
Thousand Dollars (US $20,000.00) and if the payment is in complete settlement of
such claim or suit. If the amount required for settlement exceeds the above
amount, the Parties hereto shall assume and take over further handling of the
claim or suit, unless such authority is delegated to Operator. All costs and
expenses of handling, settling or otherwise discharging such claim or suit shall
be the joint expense of the Parties participating in the operation from which
the claim or suit arises. If a claim is made against any
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party or any party is sued on account of any matter arising from operations
hereunder over which such individual has no control because of the rights given
Operator by this agreement, such party shall immediately notify all other
Parties, and the claim or suit shall be treated as any other claim or
suit involving operations hereunder.
ARTICLE IX
FORCE MAJEURE
If any party is rendered unable, wholly or in part, by force majeure to
carry out its obligations under this agreement, other than the obligation to
make money payments, that party shall give to all other Parties prompt written
notice of the force majeure with reasonably full particulars concerning it;
thereupon, the obligations of the party giving the notice, so far as they are
affected by the force majeure, shall be suspended during, but no longer than,
the continuance of the force majeure. The affected party shall use all due
diligence to remove the force majeure situation as quickly as practicable.
The requirement that any force majeure shall be remedied with all
reasonable dispatch shall not require the settlement of strikes, lockouts, or
other labor difficulty by the party involved, contrary to wishes; how all such
difficulties shall be handled shall be entirely within the discretion of the
party concerned.
The term "force majeure", as here employed, shall mean an act of God,
strike, lockout, or other industrial disturbance, act of the public enemy, war,
blockade, public riot, lightning, fire, storm, flood, explosion, governmental
action, governmental delay, restraint or inaction, unavailability of equipment,
and any other cause, whether of the kind specifically enumerated above or
otherwise, which is not reasonably within the control Of the party claiming
suspension.
ARTICLE X
NOTICES
All notices authorized or required between the Parties and required by any
of the provisions of this agreement, unless otherwise specifically provided,
shall be given in writing by mail or telegram, postage or charges prepaid, or by
telex or telecopier and addressed to the Parties to whom the notice is given at
the addresses listed in Exhibit "A". The originating notice given under any
provision hereof shall be deemed given only when received by the party to whom
such notice is directed, and the time for such party to give any notice in
response thereto shall run from the date the originating notice is received.
The second or any responsive notice shall be deemed given when deposited in the
mail or with the telegraph company, with postage or charges prepaid, or sent by
telex or telecopier. Each party shall have the right to change its address at
any time, and from time to time, by giving written notice thereof to all other
Parties.
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ARTICLE XI
TERM OF AGREEMENT
This agreement shall remain in full force and effect as to the Contract
Area for so long as the Pipeline is in operation. Upon termination of this
agreement the Parties shall remain responsible for the proportionate share of
any costs attributable to the final plugging and abandonment of the xxxxx and
the facilities associated therewith. It is agreed however, that the
termination of this agreement shall not relieve any party from any liability
which has accrued or attached prior to the date of such termination.
ARTICLE XII
APPLICABLE LAW
This agreement, its meaning and interpretation and the relationship of the
Parties hereunder, shall be governed by the laws of the United States of
America and all matters arising therefrom shall be brought before and submitted
exclusively to the courts of United States.
ARTICLE XIII
MISCELLANOUS
A. US INTERNAL REVENUE CODE ELECTION
It is the express and specific intent of the Parties that a partnership
relationship not be created between them or among them and any other co-owner of
an interest in the Contract Area. In accordance with the applicable provision
of the US Internal Revenue Code of 1954 and regulations promulgated pursuant and
further thereto, the Parties do hereby elect not to be treated or considered as
partners and further elect that none of the provisions of Sub-Chapter K of said
Code shall be appicable with respect to the operation of the Contract Area. The
Parties expressly authorize Operator to file with the proper authorities
executed copies of this agreement, and such copies when filed, shall be
conclusive notice to said authorities of this election pursuant to said Contract
Area from all of the provisions of said Sub-Chapter K and said regulations.
Operator may in lieu of filing copies hereof, notify said authorities of this
election by separate instrument in proper form.
B. HEADINGS:
The topic heading used herein are inserted for convenience only and shall
not be construed as having any substantive significance or meaning.
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C. MODIFICATION:
There shall be no modification or amendment of this agreement except by
written instrument signed by all Parties.
D. ASSIGNMENT:
Except as otherwise provided herein, this agreement shall be binding
upon and inure to the benefit of the Parties, their respective successors and
assigns.
This instrument may be executed in any number of counterparts, each of
which shall be considered an original for all purposes.
IN WITNESS WHEREOF, this agreement is executed as of the date first above
mentioned.
WITNESS OPERATOR:
[SIG]
____________________________ OMIMEX DE COLOMBIA, LTD.
[SIG] [SIG]
____________________________ ______________________________
WITNESS NON-OPERATOR:
SABACOL, INC.
[SIG]
____________________________
[SIG] [SIG]
____________________________ ______________________________
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EXHIBIT "A"
Attached to and made a part of that certain Operating Agreement covering
Xxxxxxxxx-Xxxxx Pipeline by and between OMIMEX DE COLOMBIA, LTD. and SABACOL,
INC. dated the 11th day of September, 1995, but effective January 1, 1995.
CONTRACT AREA & INTERESTS OF THE PARTIES
CONTRACT AREA: XXXXXXXXX - XXXXX PIPELINE
Being the Pipeline described in Attachment 6 of
that certain Purchase and Sale Agreement dated
April 20, 1995 by and between Texas Petroleum
Company and Omimex de Colombia, Ltd. and
Sabacol, Inc. covering the Cocorna and Nare
Associations and Xxxxxxxxx- Xxxxx Pipeline.
INTERESTS OF THE PARTIES:
PERCENT
OMIMEX DE COLOMBIA LTD. 50%
0000 Xxxxxx, Xxxxxxxxx Xxxxx Xxxxxxx 00 No. 93-82 Off. 303
Xxxx Xxxxx, Xxxxx 00000 Santafe De Bogota, Colombia
Phone: (000) 000-0000 Phone: 000-000-0000
Fax: (000) 000-0000 Fax: 000-000-0000
SABACOL, INC. 50%
00000 Xxx Xxxxxx Xxx. 109 No. 15-60 Off. 301
Xxxxxx, Xxxxxxxxxx 00000 Santafe De Bogota, Colombia
Phone: (000) 000-0000 Phone: 000-000-0000
Fax: (000) 000-0000 Fax: 000-000-0000
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EXHIBIT "B"
JOINT OPERATIONS ACCOUNTING PROCEDURE
In the event of a conflict between the provisions of this Accounting
Procedure and the provisions of the Agreement to which this Accounting
Procedure is attached, the provisions Agreement shall prevail.
The purpose of this Accounting Procedure is to establish equitable
methods for determining charges and credits applicable to operations under the
Agreement. The Parties agree that if any of such methods prove unfair or
inequitable to Operator or Non-Operator(s), the Parties will meet and in good
faith endeavor to agree on changes in methods deemed necessary to correct any
unfairness or inequity.
1- GENERAL PROVISIONS
1.1 Definitions
1.1.1. Agreement means the Joint Operating Agreement to which this
Accounting procedure is attached.
1.1.2. Contract Area shall have the same definition as contained in
the Agreement.
1.1.3. Controllable Material shall mean material which the Operator
according to good oil field practice, subjects to record
control and inventory. A list of types of such material shall
be furnished to Non-Operator(s) upon request.
1.1.4. Days shall in all cases mean calendar days.
1.1.5. Field Supervisors as used herein the term "Field Supervisors"
shall mean those employees whose primary function in Joint
Operations is the direct supervision of other employees and/or
contract labor directly employed on the Joint Property in a
field operating capacity.
1.1.6. Joint Account shall be the set of accounts maintained by the
Operator to record all expenditures and other transactions
under the provisions of the Agreement.
1.1.7. Joint Operations shall mean all activities necessary and
proper under the provisions of the Agreement.
1.1.8. Joint Property shall mean the real and personal property
acquired and held for use in connection with operations under
the Agreement.
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1.1.9. Material shall mean personal property, including supplies and
use charge, acquired and held for use in Joint Operations.
1.1.10 Non-Operator(s) shall mean the parties to the Agreement other
than the Operator.
1.1.11 Operator shall have the same definition as contained in the
Agreement.
1.1.12. Party or Parties shall have the same definitions as contained
in the Agreement.
1.1.13. Technical Employees as used herein the term "Technical
Employees" shall mean those employees having special and
specific engineering, geological or other professional skills,
and whose primary function in Joint Operations is handling of
specific operating conditions and problems for the benefit of
the Joint Property.
1.1.14. Operating Committee as used herein shall mean such committee
as may be appointed by the parties consisting of one
representative of the Operator and one representative of each
Non-Operator.
1.2 Statements, Xxxxxxxx and Adjustments
1.2.1. Each Party to the Agreement is responsible for preparing its
own accounting, statistical and tax reports to meet Contract
Area and any other country or corporate requirements, except
that Operator shall be responsible for preparation and filling
of any United States Partnership Income Tax Returns that may
be required. The parties may elect out of Subchapter K.
Operator is required to furnish Non-Operator(s) statements and
xxxxxxxx in such form as required to facilitate discharging
such responsibilities.
1.2.2. Operator shall xxxx Non-Operator(s) on or before the last day
of each month for their proportionate share of expenditures
for the preceding month. Such xxxxxxxx shall be accompanied
by statement of charges and credits to the Joint Account
summarized by appropriate accounting classifications
indicative of the nature thereof, except that items of
Controllable Material and unusual charges and credits shall be
detailed. Such xxxxxxxx shall indicate the monetary origin
(Colombian Pesos or U.S. Dollars) of the charges and credits.
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1.2.3. Operator shall, upon request by Non-Operator(s), furnish a
description of such accounting classifications.
1.2.4. In accordance with Colombian law, Operator shall keep the
Joint Account in Colombian pesos. The Operator will also
maintain these accounts in U.S. dollar equivalency or shall
provide the applicable exchange rate(s) monthly so that
Non-Operator(s) may convert these Colombian peso accounts to
U.S. Dollars each month. The parties shall agree as to the
procedure to be used in establishing the exchange rate(s) to
be used in making the conversion from Colombian pesos to U.S.
dollars or vice-versa. Expenditures made in U.S. Dollars
shall be separately identified and reported to Non-Operator(s)
on a monthly basis. Accounts maintained for recording
property, plant and equipment shall be maintained in both
Colombia pesos and U.S. dollars and such accounts shall
reflect the monetary origin (pesos or dollars) of each item of
property, plant and equipment purchased for the Joint Account.
In the conversion of currencies and in accounting for advances
of different currencies as provided for in Paragraph 1.3 of
this Article, or any other currency transactions affecting the
Joint Operations, it is the intent that none of the Parties
shall experience gain or loss at the expense of, or to the
benefit of, the other Parties.
1.2.5. Payment of the bills referred to in paragraph 1.2.2. of this
article shall not prejudice the rights of any Non-Operator(s)
to protest or question the correctness thereof; however, all
bills and statements rendered to Non-Operator(s) by operator
during any calendar year shall conclusively be presumed to be
true and correct after twenty-four (24) months following the
end of any such calendar year, unless within the said
twenty-four month period a Non-Operator takes written
exception thereto and makes claim on Operator for adjustment.
No adjustment favorable to Operator shall be made unless it is
made within the same prescribed period. The provisions of
this paragraph shall not prevent adjustments resulting from a
physical inventory of the Joint Property acquired for Joint
Operations.
1.2.6. The accrual method of accounting shall be used for the Joint
Account.
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1.3 Advances and Payment
1.3.1. Non-Operator(s) shall advance by immediately available funds
to Operator within 15 days of notice by Operator their share
of estimated cash requirements for the succeeding month's
Operations in accordance with Article VI of the Agreement.
Such advance shall be credited when the actual xxxxxxxx per
1.2.2. above are issued.
1.3.2. Should the Operator be required to pay any large (in excess of
U.S. $50,000.00) sums of money on behalf of the Joint
Operation, which were unforeseen at the time of providing the
Non-Operator(s) with said monthly estimates of its
requirements, the Operator shall make a written request of the
Non-Operators(s) for special advances covering the
Non-Operators' share of such payments. Non-Operator(s) shall
make their proportional special advances within fifteen (15)
days after receipt of such notice.
1.3.3. If Non-Operator(s) advances exceed their share of the
expenditures, the next succeeding cash advance requirements,
after such determination, shall be reduced accordingly or
deducted from the next billing, whichever comes first.
However, Non-Operator(s) may request that excess advances be
refunded. The Operator shall make such refund within fifteen
(15) days after receipt of Non-Operator(s) request. Such
refund shall be made in the currency so advanced.
1.3.4. If Non-Operator(s) advances are less than their share of
actual expenditures, the deficiency shall, at Operator's
option, be added to subsequent cash advance requirements or be
paid by Non-Operator(s) within thirty (30) days following
receipt of Operators for such deficiency.
1.3.5. If Operator does not request Non-Operator(s) to advance their
share of estimated cash requirements, Non-Operator(s) shall
pay their share of actual expenditures within thirty (30) days
following receipt of Operator's billing.
1.3.6. Payment of advances or xxxxxxxx shall be made on or before the
due date, and if not so paid the unpaid balance shall be
treated as provided under Article VI of the Agreement.
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1.4 Audits
1.4.1. A Non-Operator, upon at least thirty (30) days written notice
to Operator and other Non-Operators shall have the right at
its sole expense to audit the Joint Account and related
records for any calendar year or portion thereof within the
twenty-four (24) month period following the end of such
calendar year; however, the conducting of an audit shall not
extend the time for the taking of written exception to and the
adjustment of accounts as provided for in Paragraph 1.2.5. of
this Article. Where there are two or more Non-Operators the
Non-Operators shall make every reasonable effort to conduct
joint or simultaneous audits in a manner which will result in
a minimum of inconvenience to the Operator.
1.4.2. Subject to unanimous prior approval of the Parties, the cost
of any special audit or verification of the Joint Account that
is for the benefit of all Parties shall be chargeable to the
Joint Account.
1.4.3. Normal recurring internal audits of the Joint Account made by
the operator to assess internal controls shall be chargeable
to the Joint Account and copies thereof shall be furnished to
Non-Operators upon request.
1.5 Interest
1.5.1 Should interest be accessed per the terms of the Agreement,
(1) the rate on non U.S. $ Cash Calls shall be the Colombian
Prime Rate as quoted by Banco Ganadero plus 10% and (2) on
U.S. $ Cash Calls Prime as quoted by Bank One, Texas, N.A.
plus 3%. Should said rate(s) exceed the maximum rate allowed
by law, then the maximum lawful rate(s) shall apply.
2. CHARGEABLE COST AND EXPENDITURES
Operator shall charge Joint Account for all costs necessary to conduct
Joint Operations in or with respect to the Contract Area. Such cost
shall include, but are not necessarily limited to:
2.1 Control, License or Permit Payments
2.1.1. All expenditures necessary to acquire and to maintain rights
to the Contract Area.
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2.2 Labor and Related Costs
2.2.1. Salaries. Salaries and wages of Operator's field employees
directly employed on the Joint Property in the conduct of
Joint Operations, salaries and wages of Field Supervisors, and
salaries and wages of Technical Employees that perform work
and services directly relating to or for the benefit of the
Joint Property.
2.2.2. Salary Benefits. Operator's cost of holiday, vacation,
sickness and disability benefits and other customary
allowances paid to employees whose salaries and wages are
chargeable to the Joint Account under Article 2.2.1 above.
Such costs under this Article 2.2.2 may be charged on a "when
and as paid basis" or by "percentage assessment" on the amount
of salaries and wages chargeable to the Joint Account under
Article 2.2.1 above. If percentage assessment is used, the
rate shall be based on the Operator's cost experience and
adjusted at least annually to the Operator's actual cost.
2.2.3. Assessments. Expenditures or contributions made pursuant
to assessments imposed by governmental authority which are
applicable to Operator's costs chargeable to the Joint Account
under Article 2.2.1 and 2.2.2 above.
2.2.4 Personal Related Expenses. Personal Expenses, including
but not limited to the following: travel and other reasonable
reimbursable expenses of Operator's employees, hospital and
medical expense, schools for employees and their children,
insurance policies, and all other reasonable activities
applicable to the employee and family, of those employees
whose salaries and wages are chargeable to the Joint Account
under Article 2.2.1 above.
2.2.5. Employee Benefit Plans. Operator's current cost of
established plans for employees' group life insurance,
hospitalization, pension, retirement, stock purchase, thrift,
bonus, and other customary benefit plans of a like nature
provided under Operator's usual practices, applicable to
Operator's labor cost chargeable to the Joint Account under
Article 2.2.1 above shall be at operator's actual cost.
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2.3. Material
2.3.1. Material purchased or furnished by Operator for use in Joint
Operations as provided under Article 3 of this Accounting
Procedure.
2.4 Transportation and Employee Relocation Costs
2.4.1. Transportation of Material and other related costs such as
expediting crating, dock charges, inland and ocean freight,
customs duties and taxes and unloading at destination.
2.4.2. Transportation of employees as required in the conduct of
Joint Operations.
2.4.3. Relocation costs to the Contract Area vicinity or to other
locations in Colombia of employees permanently or temporarily
assigned to the Joint Operations. Such costs shall include
transportation of employees' families and their personal and
household effects and all other relocation costs in accordance
with Operator's usual practice. Relocation from Colombia shall
not be charged to the Joint Account.
2.5 Services
2.5.1. Contract services, professional consultants, and other
services covered by Paragraph 2.8
2.5.2. Technical services for specific projects resulting in a
presentation or a written report, such as, but not limited to,
laboratory analysis, drafting, geophysical interpretation,
engineering, and related data processing, performed by the
Operator and its Affiliates for the direct benefit of the
Joint Operations, provided such costs shall not exceed those
currently prevailing if performed by outside technical service
companies.
2.5.3 Use of equipment, services and facilities furnished by
Operator or Non-Operator(s) or their Affiliates provided such
equipment, services or facilities is of a quality and cost
commensurate and competitive with that offered by third
parties in the general vicinity of the Contract Area.
2.6 Damage and Losses to Joint Property
2.6.1 All costs or expenses necessary for the repair or replacement
of Joint Property resulting from
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damages or losses incurred by fire, flood, storm, theft,
accident, or any other cause. Operator shall furnish Non-
Operator(s) written notice of damages or losses in excess of
nominal value as soon as practicable. Any payment(s) by
insurance companies shall be deducted in determining the
amount due.
2.7 Insurance
2.7.1. Net premiums for insurance are required by the Parties of the
Agreement.
2.7.2. Actual expenditures in the settlement of all losses, claims,
damages, judgements, and other expenses for the benefit of the
Joint Operations as per the Agreement.
2.7.3. Credits for settlements received from the insurance policies
and others.
2.8 Legal Expense
2.8.1. All costs or expenses of litigation or legal services
otherwise necessary or expedient for the protection of the
Joint Property, including but not limited to attorney's fees,
court costs, cost of investigation or procuring evidence and
amounts paid in settlement or satisfaction of any such
litigation of claims. These services may be performed by the
Operator's legal staff or an outside firm as necessary.
Operator shall not incur more than Ten Thousand U.S. Dollar
(US $10,000) in costs for legal services in connection with
any single, suit, proceeding or matter without first obtaining
the prior approval of the other parties.
2.9 Duties and Taxes
2.9.1. All duties and taxes (except taxes based on income, net worth
and royalty based on production from the Contract Area and any
other taxes for which the Parties are liable severally but not
Jointly), fees and governmental assessment of every kind and
nature in relation with Joint Operations.
2.10 Offices, Camps and Miscellaneous Facilities
2.10.1. Cost of maintaining and operating any offices, suboffices,
camps, warehouses, housing and other facilities directly
serving the Joint Operations shall be charged to the Joint
Account. If such
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facilities serve operations in addition to the Joint
Operations, the costs shall be allocated to the properties
served on an equitable basis as may be approved by the
Operating Committee which approval shall not be unreasonably
withheld.
2.11 Administrative Overhead
2.11.1. An administrative overhead covering services and related
office costs of personnel performing administrative, legal,
accounting, purchasing, treasury, tax, employee relations,
computer services and other functions for the benefit of the
Operations provided they are not included elsewhere, shall be
charged to the Joint Account monthly.
2.11.2. The charge under the foregoing paragraph shall be for services
of all personnel and offices of Operator who are not directly
assigned to Operations and shall be charged each month at the
rate of 12% on total expenditures attributable to Joint
Operations in the preceding month, except only 5% shall be
charged on expenditures for capital expenditure items.
2.11.3. Notwithstanding anything to the contrary which might be
stated in the Accounting Procedure, it is understood that no
cost or expenditure included under sections 2.2.1 through 2.10
shall be included or duplicated in the administrative overhead
rate charged in this Article 2.11. Further, at any party's
request, the rates in 2.11.2 above shall be reviewed annually
and adjusted if determined to be inadequate or excessive.
2.12 Other Expenditures
2.12.1. Any other expenditures not covered or dealt with in the
foregoing provisions which are incurred by the Operator and
its Affiliates for the ordinary, necessary and proper conduct
of the Joint Operations.
3- MATERIALS
The cost of material, equipment and supplies purchased or furnished by
the Operator for use on the Joint Property shall be charged to the Joint
Account on the basis set forth below. So far as it is reasonably
practical and consistent with efficient and economical operation, only
such material shall be purchased for or transferred to the Joint
Property as may be required for immediate use, and the accumulation of
surplus stock shall be avoided.
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3.1 Materials Cost, Purchase, Furnishing
3.1.1. Material purchased shall be charged at the actual net cost
incurred by Operator or its Affiliates to obtain the material
from third parties. Net cost shall include, but shall not be
limited to, such items as the cost of purchasing,
transportation, duties, license fees and applicable taxes.
3.1.2. New Material (Condition "1") purchased for the Joint Account
or transferred from Operator's stock or other properties shall
be priced at Operator's book cost. Good used Material
(Condition "2") being used Material in sound and serviceable
condition, suitable for reuse without reconditioning shall be
priced at seventy-five percent (75%) of such book cost.
Material which cannot be classified as "Condition 2" but
which, after reconditioning will be further serviceable for
original function as good second-hand material (Condition 2)
or is serviceable for original function, but substantially not
suitable for reconditioning, shall be classified as "Condition
3" material and priced at fifty percent (50%) of "Condition 1"
price. Material which cannot be classified as "Condition 2"
or "Condition 3" shall be priced at a value commensurate with
its use. If the Operator wishes to use a method other than
the above for charging used material to the Joint Account,
such other method shall first be approved by the Operating
Committee.
3.2 Disposal
3.2.1. Operator shall be under no obligation to purchase the interest
of Non-Operator(s) in new or used surplus Material.
3.2.2. Operator shall have the right to dispose of surplus Materials
but shall advise and secure prior agreement of Non-Operators
of all proposed disposition of Materials valued in the
aggregate One Hundred-Thousand U.S. Dollars (U.S. $100,000)
or more per year.
3.2.3. Proceeds from all sales shall be credited to the Joint Account
at the net amount actually collected.
3.3 Inventories
3.3.1. Periodic inventories shall be taken by Operator of all
Controllable Materials at least annually or more frequently if
required by the Parties.
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Operator shall give thirty (30) days written notice of
intention to take such inventories to allow Non-Operator(s) to
be represented when any inventory is taken. Failure of any
Non-Operator to be represented shall bind such Non-Operator
to accept the inventory taken by Operator.
3.3.2. Reconciliation of inventory with the Joint Account
shall be made and a list of overages and shortages as well as
obsolete and surplus materials shall be furnished to the
Non-Operator(s). Inventory adjustments shall be made to the
Joint Account in accordance with good accounting practices.
3.3.3. Whenever there is a sale or change of interest
in the Joint Property, a special inventory shall be taken by
the Operator if required by the seller and/or purchaser and
the seller and/or purchaser of such interest shall bear all of
the expense thereof. In such cases, both the seller and the
purchaser shall be entitled to be represented and shall be
governed by the inventories taken.
4- FIXED ASSETS
Inventories of Fixed Assets will be taken as determined by the Parties
but not less than every five (5) years. Operator shall give
thirty (30) days written notice of intention to take such inventories to
allow Non-Operator(s) to be represented when any inventory is taken.
Failure of any Non-Operator to be represented shall bind such
Non-Operator to accept the inventory taken by Operator.
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EXHIBIT "C"
Attached to and made a part of that certain Operating Agreement covering
Xxxxxxxxx-Xxxxx Pipeline by and between OMIMEX DE COLOMBIA, LTD. and SABACOL,
INC. dated the 11th day of September, 1995, but effective January 1, 1995.
INSURANCE
Operator shall, in the performance of its obligations hereunder, carry
statutorily required insurance and Public Liability Insurance in amounts of not
less than US $1,000,000.00 per occurance or accident with an aggregate limit of
not less than US $2,000,000.00. Operator shall likewise cause all contractors
to carry insurance in such amounts commensurate with those set forth above.
