EXHIBIT 10.17
MASTER SERVICE AGREEMENT
FOR
PROJECT MANAGEMENT SERVICES
BETWEEN
BELLWETHER INTERNATIONAL, INC.
AND
TECNIE S.A.C.
November 1, 1999
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CHARAPA FIELD
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TABLE OF CONTENTS
ARTICLE PAGE
1.0 Purpose.......................................... 1
2.0 Effective Date & Term............................ 6
3.0 Contractor's Obligations......................... 7
4.0 Payments & Audit Rights.......................... 9
5.0 Independent Contractor........................... 10
6.0 Taxes & Social Obligations....................... 11
7.0 Insurance........................................ 12
8.0 Indemnity........................................ 13
9.0 Termination...................................... 14
10.0 Confidentiality.................................. 16
11.0 Force Majeure.................................... 16
12.0 Applicable Law................................... 17
13.0 Dispute Resolution............................... 17
14.0 Assignment....................................... 18
15.0 Warranty as to Illegal Payments.................. 18
16.0 Miscellaneous.................................... 19
Signature Page................................... 19
ANNEXES
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ANNEX A...........Scope of Service
ANNEX B...........Compensation Schedule
ANNEX C...........First Year Budget
ANNEX D...........Insurance Requirements
MASTER SERVICE AGREEMENT
This Master Service Agreement (the "Agreement") is made this 21st day of October
1999, but effective as November 1, 1999, by and between Bellwether
International, Inc. (hereinafter called "Bellwether" or "Operator") and Tecnie
S.A.C. (hereinafter called "Contractor").
WHEREAS, Petroecuador, Petroproduccion, on the one hand and Bellwether and
Tecnipetrol, Inc. ("Tecnipetrol"), on the other hand, initialed on June 29, 1999
and later shall enter into that certain contract for exploration and
exploitation of the Charapa Marginal Field (the "Chapara Contract"); and
WHEREAS, Bellwether is designated "Operator" under the "JOA" (defined below) for
operations to be undertaken pursuant to the Charapa Contract and Bellwether, as
Operator, requires the "Services" (defined below) be performed for the benefit
of Operator and Tecnipetrol.
NOW THEREFORE, Operator and Contractor desire to enter into this Agreement to
govern the performance of the Services and the respective right and duties of
Operator and Contractor and based on such premises and the mutual covenants set
forth below, do hereby agree as follows:
1.0 PURPOSE
1.1 This Agreement is a master service agreement which shall be the underlying
document controlling all Services described in the Annexes and performed by
Contractor for the duration of this Agreement, and shall be specifically
applicable to and shall control all Services undertaken by Contractor.
1.2 This Agreement is an exclusive service agreement and Contractor shall not
render the same Services or any services similar to the Services to any
Third Party which conflict with Operator's interests or which would use the
same Contractor Personnel without the express written approval of the
Operator. If Contractor, with Operator's approval, renders such services to
a Third Party, appropriate adjustments shall be made to the rates of
compensation set forth on Annex B. If Operator and Contractor are unable to
agree on such adjustments to the rates of compensation, either party shall
have the right to terminate this Agreement pursuant to Article 9.1.
1.3 Subject to Article 14.0, Operator shall have the right to contract with a
Third Party to perform the same Services or any services which are in
addition to or outside the scope of the Services.
1.4 This Agreement includes Annexes A through D, which are attached to and
incorporated into this Agreement for all purposes.
1.5 For purposes of this Agreement and the Annexes the following defined terms
shall have the meanings given them below:
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"AD-HOC SERVICES" means those certain services, including the supply of
personnel, material, equipment or products, that are not included in the
Services, and that are specifically described in the applicable Ad-Hoc
Service Commitment for the respective Ad-Hoc Services.
"AD-HOC SERVICE COMMITMENT" means a contract, purchase order, service
order or other agreement or commitment between Operator and an Affiliate of
Contractor or a Third Party or between Contractor and a Third Party for the
performance of Ad-Hoc Services.
AFFILIATE: means a company, partnership or other legal entity, which
controls, or is controlled by or which is controlled by an entity which
controls, a Party. In this definition, the term "control" and derivatives
thereof means the ownership directly or indirectly of fifty (50) percent or
more of the voting rights in a company, partnership or legal entity.
"ANNUAL BUDGET" shall have the meaning given in Article 2.3.
"APPLICABLE LAW" means the Hydrocarbons Law (as defined to in the Charapa
Contract) and any other statute, decree, order, directives, regulation, or
rule (of whatever nature) including without limitation tax legislation,
regulations and decrees incorporated by the terms of the Contract or as may
be validly issued by the Government and in effect from time to time.
"BASE CHARGES" means the Contractor's Personnel Costs and the Ecuador
Operations Overhead Costs, as both such terms are described in Section 1.1
of Annex B.
"B&B" means the burdens and benefits applicable to salary paid to each of
Contractor Personnel under Applicable Law as described in Section 1.1.2 d
of Annex B.
"BUSINESS RECORDS AND DATA" means Operator's contracts, accounting
documents, invoices, checks, statements, receipts, correspondence, vouchers
and includes all files, records, data, information, and maps related to
such information and the Contract Area, including, without limitation,
computer-readable copies of all computer records pertaining to the files,
contracts, production records and other technical data, geological and
geophysical information and maps, well logs and related data, or seismic
data, including basic field tapes, observers' logs, survey notes, base maps
and all other business records relating to Operator's business operations.
"CALENDAR QUARTER" means a period of three (3) months commencing with
January 1 and ending on the following March 31, a period of three (3)
months commencing with April 1 and ending on the following June 30, a
period of three (3) months commencing with July 1 and ending on the
following September 30, or a period of three (3) months commencing with
October 1 and ending on the following December 31.
"CALENDAR YEAR" means a period of twelve (12) months commencing on the 1st
of January and ending on the 31st of December.
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"CHANGE ORDER" means the written agreement between Operator and Contractor
covering the terms and provisions to govern a revision of the Services.
"CHARAPA CONTRACT" means the instrument initialed by and to be concluded
between Petroecuador, Petroproduccion, Bellwether and Tecnipetrol and
referred to in the first recital paragraph of this Agreement and any
extension, renewal or amendment thereof agreed to in writing by the
Parties.
"CHARAPA FACILITIES" means the xxxxx, facilities and surface and subsurface
equipment located within the Contract Area and used in Operations and the
pipeline, facilities and equipment located outside the Contract Area used
to transport hydrocarbons from the Contract Area to storage facilities at
the Lago Agrio Norte storage facility or other storage facility as
designated by Operator.
"COMPETITIVE TENDER" means an invitation or request for a proposal or an
offer for an Ad-Hoc Service Commitment with a value estimated to be
$50,000 USD (or equivalent in Sucre) or greater in respect of which
Contractor shall: (i) prepare and deliver to Operator a list of the
entities whom Contractor proposes to invite to tender for the Ad-Hoc
Service Commitment; (ii) submit written invitations to tender to all
entities determined by Contractor and Operator to be qualified to perform
under the Ad-Hoc Service Commitment; (iii) complete the tendering process
within a reasonable period of time; (iv) deliver to Operator a competitive
bid analysis recommending the entity to award the Ad-Hoc Service
Commitment; and (v) obtain Operator's prior approval before awarding the
Ad-Hoc Service Commitment for such tender and before incurring any
commitments or expenditures in respect of same.
"CONTRACT AREA" means the surface area covered by the Charapa Contract and
described in Annex I to the Charapa Contract and as such area may vary from
time to time during the term of validity of the Contract.
"CONTRACTOR GROUP" means (i) the Contractor and its parent, subsidiary and
Affiliates; (ii) the Contractor's contractors and subcontractors; and (iii)
the Contractor Personnel, and all other agents, consultants, underwriters,
and employees, directors and/or officers of both (i) and (ii) above; but
excluding any member of the Operator Group.
"CONTRACTOR PERSONNEL" means the personnel described in and provided under
this Agreement in accordance with Section 2.1 of Annex A and any other
officers, employees, agents and consultants and other individuals employed,
hired, contracted or otherwise engaged by Contractor or an Affiliate of
Contractor in connection with the performance of the Services and any Ad-
Hoc Services.
"CONTRACTOR'S BASE XXXX-UP" shall have the meaning given in Section 4.1.1
of Annex B.
"CONTRACTOR'S ADDITIONAL XXXX-UP" shall have the meaning given in Section
4.1.2 of Annex B.
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"CTT" means the Capital Transfer Tax, being the Impuesto a la Circulacion
de Capitales.
"DNH" means the Direcion Nacional de Hidrocarburos.
"ECUADOR OPERATIONS OVERHEAD" means the office space, furniture, fixtures,
supplies and materials to be provided by Contractor, all as more
particularly described in Section 2.7 of Annex A.
"EFFECTIVE DATE" means the date this Agreement comes into effect as stated
in Article 2.1.
"EXTERNAL SERVICES" means legal, accounting, tax and other professional
counsel or advisory services.
"FORCE MAJEURE" means an event or cause which is beyond the reasonable
control of the party claiming force majeure and which could not have been
avoided or prevented by reasonable foresight, planning and implementation.
Such causes shall include, without limitation, acts of God, natural
disasters, extreme adverse climate conditions such as violent storms, war
(declared or undeclared), insurrections, hostilities, strikes, work
stoppages or delays, labor disputes, boycotts or lockouts (other than when
such labor matters involve Contractor's employees, which shall be deemed
not to be a force majeure event), civil unrest, riots, fire, storm,
expropriation and interference or hindrance of governmental authority
(including any political subdivision thereof).
"GOVERNMENT" means the government of the Republic of Ecuador and any
political subdivision, agency, entity or instrumentality thereof, including
without limitation the Ministry of Energy and Mines (Ministro del Energia y
Minas) Petroecuador, Petroproduccion and the DNH.
"INITIAL TERM" shall have the meaning given in Article 2.1.
"I.V.A." means the value added tax, being the Impuesto al Valor Agregado.
"JOA" means the Joint Operating Agreement by and between Bellwether and
Tecnipetrol entered into on October 21,1999, but effective as of the date
provided therein, covering the conduct of exploration and exploitation
operations on the Contract Area.
"OPERATIONS" means all work conducted under the Charapa Contract,
including, without limitation, work to increase the production of
hydrocarbons from existing wellbores on the Contract Area; drilling,
deepening or sidetracking development xxxxx to previously discovered
reservoirs; the recompletion, workover, plug back, or installation of
equipment or pumps in or on a well or xxxxx; fracturing or stimulating
xxxxx with chemicals or pressure; and exploration to discover new
reservoirs or additional reserves of hydrocarbons including by geophysical
data acquisition or reprocessing and by drilling, deepening or sidetracking
of a well or xxxxx.
"OPERATOR GROUP" means (i) the Operator and its parent, subsidiary and
Affiliates; (ii) the Operator's co-venturers (including Tecnipetrol),
contractors, and subcontractors; and (iii) the
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agents, underwriters and employees, directors and/or officers of both (i)
and (ii) above; but excluding any member of the Contractor Group.
"OPERATOR'S REPRESENTATIVE" means the person or persons designated in
writing from time to time with authority to represent the Operator under
the terms of this Agreement.
"PARTICIPATION AGREEMENT" means that certain Participation Agreement dated
August 25, 1999, entered into by and between Bellwether and Tecnipetrol
covering rights, benefits, duties and obligations of the Parties under the
Charapa Contract.
"PETROECUADOR" means the state oil company of Ecuador, being "la Empresa
Estatal Petroleos del Ecuador."
"PETROPRODUCCION" means the affiliate of Petroecuador responsible for
exploitation and production, being "la Empresa Xxxxxxx xx Xxxxxxxxxxx x
Xxxxxxxxxx xx Xxxxxxxxx xxx Xxxxxxx."
"REIMBURSABLE COSTS" means the actual amounts (excluding any Contractor's
Additional Xxxx-Up) paid by Contractor to Third Parties for which
Operator is obligated to reimburse Contractor under the terms of this
Agreement.
"SCHEDULED HOURS" means the number of hours in a calendar month a member of
Contractor Personnel are required under Applicable Law to be paid for
regular time (not overtime); which in the case of Full Time employees is
160 hours per calendar month and in the case of Part Time employees is 80
hours per calendar month.
"SERVICES" means (i) the supply of Contractor's Personnel to perform the
operational, reporting, clerical and financial duties to be conducted by
the Contractor under this Agreement, and (ii) the provision of Ecuador
Operations Overhead; all as more particularly described in Annex A.
"TASK SCHEDULE" means a general itemization of on-going or routine work in
the conduct of Operations that Contractor is to perform on a regular basis
as a part of the Services.
"TENDER" means an invitation or request for a proposal or an offer for an
Ad-Hoc Service Commitment with a value estimated to be greater than
$10,000 USD and less than $50,000 USD (or equivalent in Sucre), either
verbally or in writing, made to two (2) or more entities determined to be
qualified to render the proposed service or supply requirement in
connection with Operations, for such entities to make a firm written offer
to conduct or provide such supply or service obligation.
"THIRD PARTY" means any person or entity that is not an Affiliate of either
Contractor or Operator; provided, such person or entity may be a member of
either the Operator Group or the Contractor Group.
"USD" means United States Dollar.
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"WORK HOUR" means the number of hours in a calendar month a member of
Contractor Personnel is actually engaged in the performance of the
Services.
2.0 EFFECTIVE DATE & TERM
2.1 This Agreement is and shall be in effect from November 1, 1999; provided,
however, the commencement of the Services and payment of the rates of
compensation shall gradually occur as provided in Annex A and Annex B.
Subject to Article 9.0, the term of this Agreement shall be for a period of
three (3) years from the Effective Date (referred to as the "Initial Term")
and may be continued for subsequent periods of one (1) year each upon
written agreement of the Parties.
2.2 The rates of compensation and costs set forth on Annex B are fixed until 31
December 2000; provided, however, if at any time during a Calendar Year,
Contractor desires to revise such rates and costs, Contractor shall deliver
to Operator its Contractor's proposed amendment to Annex B for the
remainder of the then current Calendar Year and detailing with
justification the reasons for such adjustment. Operator and Contractor
shall endeavor in good faith to mutually agree on the amended Annex B. If
the parties are unable to agree on the amended Annex B proposed by
Contractor, the existing Annex B shall not be amended; however Contractor
shall have the right to propose an amended Annex B at such time as it
submits the next proposed Annual Budget to Operator.
2.3 Attached to this Agreement as Annex C is the first Annual Budget (defined
below) to cover costs of the Base Charges and certain Reimbursable Costs
from the commencement of the Services until 31 December 2000. Not later
than September 1st, of each Calendar Year, Contractor shall deliver to
Operator a proposed budget itemizing the costs of the Base Charges and
certain Reimbursable Costs to be incurred in performing the Services during
the following Calendar Year ("Annual Budget"). Operator and Contractor
shall endeavor to agree on the Annual Budget for such following Calendar
Year. If by October 31, Operator and Contractor are unable to agree on the
Annual Budget or on certain line items within the Annual Budget for the
Calendar Year, the Annual Budget for the following Calendar Year shall be
comprised of (i) all line items on which the Parties can agree and (ii) the
line items from the then current Annual Budget covering the same line item
matters on which the parties cannot agree plus ten percent (10%) of such
current Annual Budget line items. If the Parties are unable to agree upon
at least eighty percent (80%) of the total value of the Annual Budget of
any Calendar Year by March 31 of such Calendar Year, either party shall
have the right to terminate this Agreement pursuant to Article 9.1.
2.4 For expenditures on any line item of an approved Annual Budget, Contractor
shall be entitled to incur an overexpenditure for such line item up to ten
percent (10%) of the amount for such line item; provided that the
cumulative total of all overexpenditures for a Calendar Year shall not
exceed five percent (5%) of the total Annual Budget in question without
Operator's prior written approval and Operator shall have no obligation to
pay any compensation or Reimbursable Costs in excess of such amounts.
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3.0 CONTRACTOR'S OBLIGATIONS
3.1 Contractor shall perform all Services with due diligence and in a good,
competent, professional and safe manner in accordance with the highest
standards of petroleum industry practices and the specifications and/or
instructions of Operator and this Agreement. Contractor shall fully comply
with the Scope of Service attached as Annex A.
3.2 Contractor shall provide the Contractor Personnel described on Annex A and
represents and warrants that Contractor Personnel shall at all times be
competent and qualified to perform the Services contemplated by this
Agreement. Contractor shall not reassign or substitute Contractor Personnel
without written consent of Operator; provided, however, Operator shall have
the continuing right to request that Contractor remove or substitute any or
all such personnel, and on such request, Contractor shall promptly
substitute such personnel. This right shall not be exercised unreasonably.
All costs of any such removal or substitution shall be paid by Contractor;
provided, if Operator unreasonably requires or causes the termination of
employment of any Contractor Personnel, Operator shall pay the costs of
severance compensation to terminate such person. If Contractor Personnel
are engaged in other activities in addition to the Services under this
Agreement, the cost of such personnel shall be allocated on an equitable
basis as set forth in Annex A and Annex B or as may be otherwise mutually
agreed between Operator and Contractor.
3.3 The Operator may order any variation to the Services by altering, adding to
or deducting from the same. No departure from the Services as specified in
the Annexes shall be made by Contractor and no additional Services or Ad-
Hoc Services shall be performed and no alterations or reduction in the
Services shall be made by Contractor unless specifically authorized by
Operator. Whenever Operator orders a variation to the Services, the
Contractor shall submit a proposal and estimate of the cost of the proposed
variation. The Parties' agreement to this variation will be evidenced by
the issuance of a Change Order by Operator. No variations to the Services
shall be allowed without a duly signed Change Order; and no Ad-Hoc Services
shall be allowed without a duly signed Ad-Hoc Service Commitment.
3.4 Contractor shall cause an Affiliate of Contractor or a Third Party to
perform any Ad-Hoc Services in accordance with the terms and conditions
stated in a written Ad-Hoc Service Commitment.
3.5 Contractor is subject to and shall comply with Applicable Law, which now or
in the future may pertain to its business, material, equipment and
Contractor Personnel engaged in, or in any manner connected with,
Contractor's performance of Services under this Agreement, including
without limitation, the "Ley de Regimen Tributario Interno", the "Codigo
del Trabajo", the "Ley de Seguro Social Obligatorio" and the "Ley de
Ejercicio Profesional de la Ingenieria" and those applicable to
safeguarding the environment, safeguarding of indigenous people, safety,
health, cleanliness, industrial security, medical requirements and accident
prevention. Contractor warrants that it has knowledge of Operator's
obligations under the Charapa Contract and that Contractor shall strictly
comply with, and Contractor shall cause Contractor Group to strictly comply
with all obligations, provisions and conditions of such Charapa Contract
within the Scope of Service and other provisions of
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this Agreement. Operator shall notify Contractor of such non-compliance and
Contractor shall have fifteen (15) days (unless a shorter period of time is
required under the Charapa Contract) from receipt of such notice to remedy
such non-compliance, failing which Operator shall have the right to pursue
other remedies under his Agreement.
3.6 Contractor shall promptly disclose to Operator the work product and/or any
data or information received, made or otherwise obtained during the
Services and such product shall be deemed to be owned exclusively by
Operator. All intellectual property prepared or supplied by Operator in
respect of the Services shall remain in Operator and the Contractor shall
ensure that the originals and all copies (if any) shall be returned to the
Operator on completion of the Services.
3.7 Contractor shall be responsible for and shall pay all claims for personnel
and labor, equipment, materials, services and supplies furnished by
Contractor Group under this Agreement and shall protect, defend and
indemnify and hold Operator harmless from any such claims. Contractor shall
remove any lien or charge fixed upon the Operator Group's interest in the
Charapa Contract, any well, the Contract Area or other property of Operator
as a result of Contractor Group's failure to pay the above described
claims. Contractor shall not have authority to incur any debt, liability or
obligation on behalf of Operator without the prior written permission of
Operator.
3.8 Contractor Group shall comply with Operator's drug and alcohol use policies
including, without limitation, testing for drug, alcohol or illegal
substance use, and inspection for possession of drugs, alcohol or illegal
substances and/or weapons in compliance with Applicable Law. Contractor
shall ensure that no drugs, alcohol, illegal substances or weapons are
permitted on the Contract Area by Contractor Personnel except for weapons
required for security purposes.
3.9 Contractor, at its expense, will obtain all permits, licenses,
registrations, certificates, or other administrative authorizations as may
be required by the Government or any other governmental authority
(including any political subdivision thereof) from time to time or as may
be necessary or incident to Contractor's performance of the Services
including, without limitation, the operation of Contractor's business in
Ecuador. Contractor shall, at its sole cost and expense, cause such
registration, domicile, permits and license to continue in full force and
effect during the term of this Contract.
3.10 Contractor warrants that all equipment and products provided by Contractor
Group and used in the Services are "Year 2000 Compliant." Any such
equipment is deemed to be Year 2000 Compliant if:
(A) the functions, calculations, and other computing processes of the
equipment (collectively "Processes") perform in a consistent manner
regardless of the date in time on which the Processes are actually
performed and regardless of the date on which data was input into the
equipment, whether before, on, or after January 1, 2000 and whether or
not the dates are affected by leap years;
(B) the equipment accepts, calculates, compares, sorts, extracts,
sequences, and otherwise processes date inputs and date values, and
returns and displays date values
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in a consistent manner regardless of the dates used, whether before,
on, or after January 1, 2000;
(C) the equipment will function without interruptions caused by the date
in time on which the Processes are actually performed or by the date
input to the system, whether before, on or after January 1, 2000;
(D) the equipment accepts and responds to year input in a manner that
resolves any ambiguities as to century in a defined and predetermined
and appropriate manner; and
(E) the equipment stores and displays date information in ways that are
unambiguous as to the determination of the century.
If Year 2000 Compliance of any such equipment is dependent in any manner on
the associated use of a specific operating system, interface, hardware,
software, or the like, or is otherwise restricted in any manner, Contractor
shall notify the Operator in writing of such restriction without delay. If
any such equipment is not Year 2000 Compliant, Contractor shall notify
Operator in writing without delay and Contractor shall work diligently to
correct such deficiency at no cost to Operator and to a schedule
satisfactory to Operator. Notwithstanding anything in this Agreement to the
contrary, if Contractor is unable to comply with any provisions of this
Article 3.10, Operator may deem Contractor to have materially breached this
Agreement. Operator shall notify Contractor that it is in breach of this
Agreement and Contractor shall have forty-five (45) days from receipt of
such notice to comply with this Article 3.10 and remedy the equipment or
products not Year 2000 Compliant, and if Contractor does not remedy such
default within such forty-five (45) days Operator shall have the right to
terminate this Agreement with thirty (30) days notice.
4.0 PAYMENTS & AUDIT RIGHTS
4.1 Contractor shall be compensated for Services performed under this Agreement
in accordance with the Compensation Schedule attached as Annex B. The
Compensation Schedule attached to this Agreement shall not be revised
except in accordance with Article 2.2 and Article 2.3.
4.2 As soon as possible after the end of each calendar month, Contractor shall
prepare its invoice for Services rendered during such month in U.S. Dollars
and shall deliver such invoice to Operator at the address set forth on the
last page. Contractor shall issue to Operator, on a monthly basis: (i) a
consolidated invoice billing in advance for Base Charges due plus
Contractor's Base Xxxx-Up; and (ii) a consolidated invoice billing in
arrears for Reimbursable Costs plus Contractor's Additional Xxxx-Up
Calculation. If Ad-Hoc Services have been provided during such month under
an Ad-Hoc Service Commitment between Contractor and a Third Party or
Operator, Contractor will invoice the applicable charges in a separate,
consolidated invoice billing for such Ad-Hoc Services. All invoices will be
prepared on a line item basis with supporting documentation (including
Third Party receipts, if applicable and time sheets) and in accordance with
the current Government Invoicing Regulations.
4.3 Without prejudice to Paragraph 4.7, Operator will pay (i) the Base Charges
plus Contractor's Base Xxxx-Up within five (5) days of receipt of each
invoice for the Base Charges; and (ii)
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the Reimbursable Costs plus Contractor's Additional Xxxx-Up within thirty
(30) days of receipt of each invoice for Reimbursable Costs; provided,
Operator may withhold from any payment to Contractor all amounts reasonably
disputed by Operator, and if Operator disputes any amount, the parties
shall use all reasonable efforts to resolve such dispute as promptly as
possible. Contractor's Base Xxxx-Up and Contractor's Additional Xxxx-Up is
payable in accordance with Section 4.1 of Annex B.
4.4 If Contractor receives from any person or entity a credit or refund or
other rebate for goods or services paid for by Operator, Operator shall be
entitled to receive the same and or apply it to payments otherwise made
hereunder in accordance with Section 2.6.3 of Annex A.
4.5 To the extent that Operator is required to withhold taxes from payments due
Contractor under this Agreement, Operator is authorized to do so and shall
notify Contractor promptly of such withholding.
4.6 Upon written request from Contractor, Operator may agree that certain
amounts properly payable by Operator to Contractor (and which are not in
dispute) under this Agreement may be credited against invoice costs,
expenses, Cash Calls or other obligations owed or payable to Operator by
Tecnipetrol under the JOA (referred to as an "MSA Credit"), in which event,
Operator's payment obligations to Contractor in respect of such amounts
shall be deemed to have been paid in full under this Agreement by an amount
equal to the MSA Credit.
4.7 Contractor shall maintain books and records in accordance with generally
accepted accounting principles applied on a consistent basis and shall
retain such books and records for a period of not less than the three (3)
year period as required under Applicable Law, but in any event not less
than two (2) years after completion of the Services. Operator and its duly
authorized representatives shall have access at all reasonable times to the
books and records maintained by Contractor relating to the Services
performed under this Agreement and shall have the right to audit such books
and records at any reasonable time or times during such three (3) year
period for the purpose of determining the correctness of the charges made
to Operator and of compliance with this Agreement. For the purposes of
audit, Operator shall have the right to examine, in Contractor's offices,
during business hours and for a reasonable length of time, books, records,
accounts, correspondence, instructions, specifications, plans, drawings,
receipts and memoranda insofar as they are pertinent to this Agreement or
for verifying invoices and shall be entitled to copies (free of charge) of
all such data, documentation and supporting information. Contractor shall
reconcile its books and records in accordance with the results of any such
audit, and Operator or Contractor, as the case may be, shall promptly pay
any adjustments necessary to give effect to such reconciliation. The
provisions of this Article 4.7 shall continue in force notwithstanding the
expiration or prior termination of this Agreement.
5.0 INDEPENDENT CONTRACTOR
Contractor and all Contractor Personnel shall render Services as an
independent contractor and neither Contractor nor any member of Contractor
Group shall be considered an agent, servant, or employee of Operator for
any purpose. It is expressly understood that Contractor
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Personnel shall not in any manner be nor be deemed to be an employee of
Operator nor entitled to any benefits Operator makes available for its
employees. Accordingly, Operator shall not: (i) pay any B&B in Contractor's
behalf; (ii) provide workers' compensation insurance; or (iii) withhold
income taxes in respect of Contractor Personnel. Neither Contractor nor any
Contractor Personnel will be entitled to participate in any programs or
plans, including insurance, maintained by Operator for the benefit of
Operator's employees. Except as expressly provided in this Agreement,
Contractor Personnel shall not have the right or authority to commit
Operator to any work or financial obligation without Operator's prior
written approval. Operator shall not provide any insurance for Contractor's
property or Contractor Personnel. Operator shall not interfere with the
methods used by Contractor to compensate Contractor Personnel.
6.0 TAXES & SOCIAL OBLIGATIONS
6.1 Contractor shall promptly pay directly to the appropriate Government
authority, and shall indemnify and hold Operator harmless from, any
liability for all taxes, levies and assessments imposed on Contractor Group
by any Government authority arising out of or in connection with
Contractor's performance under this Agreement, excluding any such taxes,
levies and assessments paid by Contractor on behalf of Operator, including,
without limitation, corporate and personal income taxes, employment taxes,
sales taxes, excise taxes, and social insurance taxes or payments and any
fines, penalties or late fees on any of such taxes. Further, Contractor
shall be responsible for, indemnify, defend and hold harmless the Operator
against any claims whatsoever arising in connection with all taxes assessed
or levied against Contractor or on account of wages, salaries, benefits
paid, or benefits deemed payable to Contractor Personnel.
6.2 Contractor shall comply, and shall cause Contractor Group to comply, with
Applicable Law, including without limitation, all resolutions and
regulations issued by the Ministry of Labor, Ministry of Social Welfare,
Ministry of Health and the Social Security Institute (i.e. "IESS").
Contractor shall be solely responsible, at its sole cost and expense, for:
(i) all wages, salaries, taxes and expenses, of any nature, arising out of
or in connection with the employment, support, administration and
maintenance of Contractor Group, including, but not limited to, food,
lodging, provision of the required safety equipment, medical attention, and
all transportation required for Contractor Group; (ii) all costs, expenses,
contributions and charges for all benefits, of any nature, which accrue to
Contractor Group, which include, without limitation, overtime, vacation,
severance, rest and holiday pay, as well as compensation due to accidents,
sickness, disability and death of any member of Contractor Group; and (iii)
all taxes, fines and penalties in respect of (i) and (ii); and without
prejudice to Article 8.2, Contractor shall indemnify, defend and hold
harmless Operator Group from and against all liabilities, demands, claims
and expenses, of any nature, described or referred to above or related
thereto. Except as otherwise expressly provided in this Agreement, it is
understood and agreed that Operator shall pay to Contractor only the
compensation as set forth on Annex B and such compensation covers and
includes all of Contractor's costs and expenses in relation to such of
Contractor's Personnel.
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7.0 INSURANCE
7.1 Contractor shall procure, carry and maintain, at Contractor's sole expense,
and at all times while this Agreement is in effect, insurance coverages as
set forth on Annex D.
7.2 Should insurance maintained by Contractor be less than such minimum
requirements, Operator may purchase insurance necessary to provide such
minimum coverage and deduct the amount of such premiums for such coverage
from amounts otherwise payable to Contractor.
7.3 The insurance coverages set forth in this Article 7.0 and on Annex D are
minimum requirements to be maintained by Contractor and do not (and shall
not be construed to): (a) void or limit the indemnity obligations or other
liabilities undertaken by Contractor under this Agreement; or (b) represent
in any manner a determination or recommendation of the insurance coverage
Contractor or any subcontractor should maintain for its own
responsibilities and protection.
7.4 All insurance policies required of Contractor under this Agreement, as
provided above and on Annex D, shall be issued by insurance carriers
satisfactory to Operator. However, the insolvency, reorganization,
bankruptcy, or failure of any such insurance carrier, the loss of license
or other authority to do business or the failure of any such carrier to pay
claims as they accrue for any reason, shall not affect, diminish, negate or
waive any indemnity or other liability obligation of Contractor (or any
member of Contractor Group) under this Agreement nor shall it be deemed a
release by Operator of Contractor of any obligation to pay such claims or
obligations as they accrue. Each insurance policy shall contain
endorsements that the carriers or underwriters issuing such policies:
(i) shall not cancel or materially change the respective policy
without furnishing at least thirty (30) days prior written
notice to Operator;
(ii) waive all rights of subrogation and any other rights of recourse
or recovery against Operator Group, but only to the extent of
indemnities given by Contractor hereunder;
(iii) name Operator Group as a Named Insured;
(iv) name Petroecuador as an Additional Insured and waive all rights
of subrogation and any other rights of recourse or recovery
against Petroecuador; and
(v) stipulate that the insurance covered by such policy shall be
primary to and shall receive no contribution from any insurance
policies or coverages maintained by or on behalf of Operator
Group.
7.5 Contractor shall furnish to Operator the Certificates of Insurance for
itself (and each of its subcontractors) evidencing the coverages, limits,
endorsements and extensions required above and on Annex D before being
allowed to commence the Services; provided, however, commencement of the
Services without furnishing such Certificates shall not be deemed a waiver
of Operator's rights under this Article 7.0. At least thirty (30) days
before the expiration of any coverage Contractor shall provide to Operator
a Certificate of Insurance reflecting that such coverage has been renewed
or that new coverage has been obtained from a carrier previously approved
by Operator, together with proof satisfactory to Operator of
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Contractor's payment of all insurance premiums for such coverages. Upon
request, Contractor shall provide to Operator certified and complete copies
of all insurance policies reflecting the coverages that Contractor is
required to procure, carry and maintain under this Agreement.
7.6 All deductibles, co-insurance penalties, defense costs or self-insured
retention set forth in such policies shall be assumed by, and be for the
account of and at the expense of Contractor. Operator Group shall not be
responsible or liable for and is hereby released from the payment of any
such costs.
7.7 Operator shall cause insurance policies it carries in respect of the
Operations and the Services to name Contractor as a Named Insured on
Operator's insurance coverage and provide that insurance companies and
underwriters waive all rights of subrogation against Contractor, to the
extent of indemnities given by Operator under this Agreement.
8.0 INDEMNITY
8.1 Operator shall defend, indemnify and hold harmless Contractor Group, from
any and all costs, expenses (including reasonable attorneys' fees) and
liabilities incidental to claims, demands or causes of action of every kind
and character, brought by any person or entity, for injury to, illness or
death of any member of Operator Group or for damage to or loss of the
property of Operator Group which injury, illness, death, damage or loss
arises out of or is incidental to the Services performed under this
Agreement, regardless of whether caused by pre-existing conditions or
defect, strict liability, the negligence or other legal fault of Operator
Group, unless caused by the gross negligence or willful misconduct of
Contractor or any member of Contractor Group. Operator shall fully hold
harmless Contractor Group against any such claims, demands or actions at
Operator's sole expense, even if the same are groundless.
8.2 Contractor shall defend, indemnify and hold harmless Operator Group from
any and all costs, expenses (including reasonable attorneys' fees) and
liabilities incidental to claims, demands or causes of action of every kind
and character, brought by any person or entity, for injury to, illness or
death of any member of Contractor Group or for damage to or loss of the
property of Contractor Group, which injury, illness, death, damage or loss
arises out of or is incidental to the Services performed under this
Agreement, regardless of whether caused by pre-existing conditions or
defect, strict liability, the negligence or other legal fault of Contractor
Group, unless caused by the gross negligence or willful misconduct of
Operator or any member of Operator Group. Contractor shall fully hold
harmless Operator Group against any such claims, demands or actions at
Contractor's sole expense, even if the same is groundless.
8.3 Except as otherwise provided in this Article 8, Contractor shall be liable
for, and shall indemnify and hold harmless Operator Group from any and all
costs, expenses (including reasonable attorneys' fees) and liabilities
incidental to claims, demands or causes of action of every kind and
character, brought by any person or entity, for injury to, illness or death
of any Third Party (which under this Article 8.3 shall exclude a member of
Contractor Group or
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Operator Group) or for damage to or loss of any Third Party property (which
under this Article 8.3 shall exclude the property of the Contractor Group
or Operator Group), which injury, illness, death, damage or loss arises out
of or is incidental to the Services performed under this Agreement,
regardless of whether caused by pre-existing conditions or defect, strict
liability, the negligence or other legal fault of Contractor Group, except
to the extent that any such injury, illness, death, damage or loss is
caused by the sole negligence, gross negligence, or willful misconduct of
Operator or any member of Operator Group.
8.4 Contractor shall be responsible for, indemnify, defend and hold harmless
the Operator from and against any and all claims which arise out of or in
any way relate to, any patent, registered design, copyright, trademark or
trade name or any patent application or other propriety right asserted by
any member of Contractor Group or any Third Party in respect of performing
the Services.
8.5 Notwithstanding any other provision in this Agreement:
(A) Neither party (nor any member of the Operator Group or Contractor
Group, as the case may be) shall be liable to the other for exemplary,
indirect, consequential or punitive damages including, without
limitation, those arising from business interruption or loss of
profits, regardless of the negligence or other legal fault of either
party, and each party hereby releases the other in this regard.
(B) Each party shall notify the other party promptly of any claim, demand,
or action that may be presented to or served upon it by any party
arising out of or as a result of Services performed pursuant to this
Agreement, and shall afford such other party full opportunity to
assume the defense of such claim, demand, or action and to protect
itself under the obligations of this Article 8.
(C) Neither party shall make any form of admission of liability in respect
of any claim for which the other party is or might be liable to
indemnify such party hereunder, or take any action to settle or
compromise any such claims, without the prior written approval of the
other party.
(D) The obligations and responsibilities contained in this Article 8 are
continuing obligations and responsibilities and shall survive the
expiration or prior termination of this Agreement.
9.0 TERMINATION
9.1 Without prejudice to Article 1.2 and Article 2.3, at any time after the end
of the second year of the Initial Term, this Agreement may be terminated by
either party upon ninety (90) days written notice to the other party.
9.2 If a condition of Force Majeure is declared by either party and continues
for a period of at least forty-five (45) consecutive days, then either
party may terminate this Agreement on fifteen (15) days prior written
notice to the other. In such event, Operator shall pay Contractor all
compensation earned by Contractor under this Agreement up to the date of
termination and not previously paid.
9.3 If any of the following events occur:
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(A) Contractor files a petition in bankruptcy, appoints a receiver over
any portion of its assets, makes an involuntary assignment for the
benefit of creditors, begins dissolving its business, authorizes the
sale of all or substantially all of its assets, is named as a debtor
in an involuntary bankruptcy which is not dismissed within thirty (30)
days or otherwise represents or it becomes evident that Contractor is
unable to perform the Services for financial reasons;
(B) for reasons other than those in Operator's control, but without
prejudice to Article 3.10, Contractor Personnel or Contractor's
performance or equipment are not in compliance with the requirements
of this Agreement or Contractor's performance is otherwise
unsatisfactory under this Agreement and Contractor is notified in
writing by Operator of such non-compliance or unsatisfactory
performance and Operator describes in detail such non-compliance or
unsatisfactory performance in such notice and Contractor does not
remedy such non-compliance or unsatisfactory performance to Operator's
satisfaction within fifteen (15) days of receipt of Operator's notice;
(C) for reasons other than those in Operator's control, Contractor's
performance of the Services is not conducted in a safe manner and
causes an unsafe condition which is an immediate threat to life,
property or the environment;
(D) the performance in an unprofessional manner or improper behavior of
any officer, director or senior manager of Contractor Group is
detrimental to or jeopardizes Operator's relationship with the
Government or any agency thereof (including without limitation,
Petroecuador or Petroproduccion); or
(E) any member of Contractor Group commits any illegal act associated with
the performance of this Agreement which is detrimental to or
jeopardizes Operator, the Charapa Contract or the performance of this
Agreement;
then Operator shall have the right to terminate this Agreement immediately
on written notice to Contractor stating in detail the reasons for such
termination. Any such cancellation shall conclude all obligations; and,
subject to Article 4.0, Operator shall pay Contractor the amount of
compensation earned up to the time of the termination; provided, however,
Operator shall be entitled to deduct from such compensation any expenses or
damages incurred by Operator by reason of such termination.
9.4 If (i) Tecnipetrol sells, transfers or assigns all of its interest in the
Charapa Contract and JOA; (ii) Tecnipetrol withdraws from or forfeits its
interest under the Charapa Contract or the JOA; or (iii) if the ownership
or management and control of Contractor or Tecnipetrol is sold, transferred
or assigned to a Third Party, Operator shall have right to terminate this
Agreement on sixty (60) days written notice to Contractor. If Operator
terminates this Agreement under this Article 9.4, Operator shall pay
Contractor all compensation earned by Contractor under this Agreement up to
the date of termination and not previously paid.
9.5 Upon termination of this Agreement, Contractor shall return to Operator:
(A) all data, information, documents and other materials referred to or
relating to or concerning that referred to in Article 10.0; and
(B) all notes, memoranda, work product and other information concerning
the information referred to in Article 10.0 or made or received by
Contractor Group during the performance of the Services and all
materials supplied by Operator.
-15-
10.0 CONFIDENTIALITY
10.1 Contractor acknowledges that all information or data obtained by Contractor
Group in the performance of the Services or otherwise under this Agreement
including, without limitation, Business Records and Data, is the property
of the Operator and/or the Government or was obtained pursuant to an
undertaking to hold such information and data confidential. Contractor
warrants that Contractor Group shall hold such data and information
strictly confidential and shall not disclose such information or data to
anyone other than members of Operator Group without the prior written
consent of Operator. Moreover, Contractor warrants that Contractor Group
shall not in any manner use such information or data in a manner injurious
to Operator or its business interests or opportunities or detrimental to
the achievement of Operator's objectives.
10.2 All Business Records and Data and all data, logs, charts, drawings,
tracings, documents, calculations, computer printouts and items of a
similar nature, produced or developed exclusively as part of the Services
performed under this Agreement shall be Operator's property, and shall be
furnished to Operator at any time at Operator's request and not later than
completion of Services. Operator shall thereafter have the unrestricted
right to use such items.
10.3 Contractor shall establish and comply with commercially reasonable security
procedures during the term of this Agreement for the security of the
Business Records and Data. Operator may periodically, at reasonable
frequencies and time, inspect Contractor's facilities to ensure compliance
with this Article. As Contractor Personnel may have access to Operator's
financial information and other information that, if utilized or disclosed
could lead to violations of United States securities laws, Contractor
covenants that it (i) will not trade in securities of Operator in violation
of applicable securities laws; and (ii) will maintain a policy that
Contractor Personnel will not trade (buy or sell) in securities of Operator
in violation of any applicable securities laws.
10.4 The provisions of this Article 10.0 are continuing obligations and
responsibilities and shall survive the expiration or prior termination of
this Agreement
11.0 FORCE MAJEURE
11.1 Neither Contractor nor Operator shall be responsible for failure to perform
under this Agreement when performance is hindered or prevented by causes of
Force Majeure.
11.2 Any party which is unable, in whole or in part, to perform its obligations
under this Agreement shall give written notice to that effect to the other
party within twenty four (24) hours from the time of occurrence of the
Force Majeure event stating in reasonable detail the circumstances
underlying such Force Majeure and the estimated time to remedy such event.
11.3 Any party claiming Force Majeure shall diligently use all reasonable
efforts to remove the cause of such Force Majeure, shall promptly give
written notice to the other party of the
-16-
termination of such Force Majeure, and shall resume performance of any
suspended obligations as soon as reasonably possible after termination of
such Force Majeure.
12.0 APPLICABLE LAW
THIS AGREEMENT SHALL BE CONSTRUED UNDER AND IN ACCORDANCE WITH THE
SUBSTANTIVE LAWS OF THE REPUBLIC OF ECUADOR, EXCEPTING ANY LAWS WHICH WOULD
REFER THE DISPUTE TO THE LAWS OF ANOTHER JURISDICTION.
13.0 DISPUTE RESOLUTION
13.1. Any dispute, controversy or claim arising out of or relating to this
Agreement, including without limitation, a dispute related to breach,
termination or invalidity of this Agreement between Operator and
Contractor which cannot be amicably resolved by the parties shall be
finally and exclusively settled by binding arbitration conducted in
accordance with the Rules of the Ecuador American Chamber of Commerce of
Quito, Ecuador ("EACC Rules"). The award of the arbitrators shall be
final, binding on the parties and not subject to appeal.
13.2 The arbitration tribunal shall be composed of three (3) arbitrators. Each
party shall appoint one (1) arbitrator. If, within thirty (30) days after
receipt of the claimant's notification of the appointment of an
arbitrator, the respondent has not notified the claimant in writing of
the name of the arbitrator it appoints, the claimant may request the
Ecuador American Chamber of Commerce of Quito, Ecuador ("EACC ") to
appoint the second arbitrator. The arbitrators thus appointed shall
choose the third arbitrator who will act as the presiding arbitrator of
the tribunal. If within thirty (30) days after the appointment of the
second arbitrator, the two arbitrators have not agreed upon the choice of
the presiding arbitrator, then either party may request the EACC to
appoint the presiding arbitrator. In no event shall the presiding
arbitrator be a citizen or resident of either the United States of
America or the Republic of Ecuador.
13.3 The language of the arbitration shall be English. The arbitral tribunal
shall not award special, indirect, consequential, exemplary or punitive
damages. The arbitral tribunal may grant interim or injunctive relief or
demand specific performance. The arbitration proceedings, including the
making of the award, shall take place in Quito, Ecuador and shall be
administered by the EACC.
13.4 The award may be entered in any court having jurisdiction and application
may be made in such court for a judicial acceptance of the award or an
order of enforcement, as the case may be.
13.5 The above terms and provisions governing arbitration of disputes under
this Agreement shall not be deemed to or in any way amend, modify or
otherwise affect in any manner whatsoever the dispute resolution
mechanism set forth in the JOA or the Participation Agreement.
-17-
13.6 If for whatever reason the EACC cannot conduct the arbitration, the
parties agree the Quito Chamber of Commerce shall administer the
arbitration in accordance with the Rules of the Quito Chamber of Commerce
and the provisions of Article 13.0 mutatis mutandis.
13.7 The provisions of this Article 13.0 shall continue in force
notwithstanding the expiration or prior termination of this Agreement.
14.0 ASSIGNMENT
14.1 The Operator shall be permitted to assign and re-assign (whether on one
or several occasions) all or any of the provisions of this Agreement to
any Affiliate and/or any co-venturer member of Operator Group with notice
only to Contractor; or to any other entity with prior written consent of
Contractor. However, the Operator shall be permitted to freely assign
this Agreement to any person or entity designated as "Operator" under the
JOA, on notice to but without the consent of Contractor, unless the
Contractor can demonstrate on reasonable grounds that such assignee is
unable to meet the financial obligations hereunder.
14.2 Contractor shall not assign this Agreement in whole or in part without
the prior written consent of Operator. Contractor shall not have the
right to subcontract the performance of the Services contained within the
Base Charges exceeding sixty percent (60%) of the value of the Base
Charges in a Calendar Year or any single subcontract with an estimated
value of more than USD$100,000 without the consent of Operator. Except as
provided herein, in a Change Order or a Ad-Hoc Service Commitment,
Contractor shall be solely responsible for paying any subcontractors it
uses to provide Services under this Agreement. Subcontracting shall not
relieve Contractor of obligations under this Agreement.
14.3 Subject to the above in Article 14.0, this Agreement shall transfer to
and be binding on the transferees, successors and assigns of such party.
15.0 WARRANTY AS TO ILLEGAL PAYMENTS
Contractor warrants that neither it nor any member of the Contractor
Group has made or will make, with respect to the matters provided for
hereunder, any offer, payment, promise to pay or authorization of the
payment of any money, or any offer, gift, promise to give or
authorization of the giving of anything of value, directly or indirectly,
to or for the use or benefit of any official or employee of the
Government or to or for the use or benefit of any Ecuadorian political
party, official, or candidate for the purpose of (i) influencing an
official act or decision of that person; (ii) inducing that person to do
or omit to do any act in violation of his or her lawful duty; or (iii)
inducing that person to use his or her influence within the Government to
affect any Government decision unless such offer, payment, gift, promise
or authorization is authorized by written laws or regulations of Ecuador.
Contractor further warrants that neither it nor any member of Contractor
Group has made or will make any such offer, payment, gift, promise or
authorization to or for the use or benefit of any other person if the
Contractor or any member of Contractor Group knows, has a firm belief,
-18-
or is aware that there is a high probability that the other person would
use such offer, payment, gift, promise or authorization for any of the
purposes described in the preceding sentence. The foregoing warranties do
not apply to any facilitating or expediting payment to secure the
performance of routine Government action. Routine Government action, for
purposes of this Article 15.0, shall not include, among other things,
Government action regarding the terms, award, amendment, or continuation
of the Charapa Contract. Contractor shall respond promptly, and in
reasonable detail, to any notice from Operator or its auditors pertaining
to the above stated warranty and representation and shall furnish
documentary support for such response upon request from Operator.
16.0 MISCELLANEOUS
16.1 If any portion of this Agreement is held to be invalid or unenforceable
for any reason by a court of competent jurisdiction, then such portion
will be deemed to be stricken and the remainder of this Agreement shall
continue in full force and effect.
16.2 A waiver by either party to this Agreement of any of the terms and
conditions of this Agreement in any instance shall not be deemed or
construed to be a waiver of such term and condition for the future, or of
any subsequent breach thereof, or of any other term and condition of the
Agreement.
16.3 Headings are for ease of reference only and have no effect on the
interpretation or construction of this Agreement.
16.4 This Agreement is the entire agreement of the parties, supersedes any
prior communications relating to the text of this Agreement, and this
Agreement may not be modified except by written amendment signed by the
authorized representatives of both parties.
16.5 Notice may be given by hand, fax (when confirmed by return fax), or
registered mail to the addresses set forth below and will be effective
upon receipt.
In witness whereof, each party has caused it authorized representative to sign
in the space provided below as of the day and year hereinabove first written.
CONTRACTOR: OPERATOR:
TECNIE S.A.C. BELLWETHER INTERNATIONAL INC.
By: _______________________________ By: _________________________
Name: _____________________________ Name: _______________________
Title: ____________________________ Title: ______________________
Xx. Xxxxxxxxx xx Xx Xxxxxxxx 000 0000 Xxxxx Xxxxxx Xxxxx 0000
Ed. Xx Xxxxxxx - Xxxx 0 Xxxxx, Xxxxxxx Xxxxxxx, Xxxxx 00000 XXX
Fax: 000.0.000000 Fax: 000.000.0000
-19-
ANNEX A
===================================
SCOPE OF SERVICE
===================================
ANNEX 'A'
SCOPE OF SERVICE
--------------------------------------------------------------------------------
ATTACHED TO AND MADE A PART OF THE MASTER SERVICE AGREEMENT, EFFECTIVE AS OF
NOVEMBER 1, 1999 BETWEEN BELLWETHER INTERNATIONAL, INC. ("OPERATOR") AND TECNIE
S.A.C. ("CONTRACTOR").
1. GENERAL PROVISIONS
1.1 This Scope of Service describes the Services to be performed by Contractor
and includes Contractor's provision of Contractor Personnel to perform
certain local operational, planning, lease operations, logistics,
accounting, clerical, administrative, communications, Government reporting
and liaison, office space, and other duties for the Operations, performance
of the Services and requirements of Operator, as set forth below.
1.2 Contractor shall appoint a Country Manager who will report to Operator's
Representative. Any delegation of authority to Contractor and to the
Country Manager will be given as is deemed appropriate by Operator.
Operator and Contractor shall agree upon two (2) other persons acceptable
to Operator for delegation and assignment of the Country Manager's duties
and authorities in the event of the absence or incapacity of the Country
Manager. The Country Manager's duties and authorities may be delegated to
such other persons upon prior written notice to Operator.
1.3 Contractor shall ensure the Services are conducted in full compliance with
Applicable Law.
1.4 Capitalized terms not defined in this or any Annex shall have the same
meaning given them in the Agreement.
1.5 Contractor shall begin preparations for the commencement of the Services
after the final and unconditional award of the Charapa Contract by the
"CEL" (Comite Especial de Licitaciones ), such that Contractor shall be
able to commence the Services when operations under the Charapa Contract
are transferred from Petroecuador or Petroproduccion to "Contractor" (as
defined in the Charapa Contract).
2. CONTRACTOR'S DUTIES
Unless otherwise expressly indicated below, the duties and obligations described
in Section 2 of this Annex A shall be performed by Contractor at its expense as
part of and comprising the Services; and the costs and expenses incurred by
Contractor shall be included in the Base Charges or reimbursed by Operator as
Reimbursable Costs, as the case may be.
2.1 Contractor Personnel
2.1.1 Upon commencement of the Services Contractor shall provide the following
fully qualified personnel on a full-time basis ("FT") and others shown
below on a part-time basis ("PT") as follows:
A-1
a) Quito Office:
-----------------
(i) Country Manager (PT)
(ii) Operations Coordinator (FT)
(iii) Head Accountant (FT)
(iv) Senior Petroleum Engineer (FT)
(v) Systems Technician (PT)
b) Field Operations (All Full Time):
---------------------------------------
(i) Field Superintendent
(ii) Two (2) Drivers
(iii) Four (4) Field or Lease Operators
2.1.2 At some time after commencement of the Services, if the need arises for
additional Contractor Personnel, Contractor is authorized to and shall,
if required, provide the following fully qualified personnel on a full-
time basis ("FT") and others shown below on a part-time basis ("PT") as
follows:
a) Quito Office:
-----------------
(i) Finance Manager (PT)
(ii) Accounting Assistant (PT)
(iii) Junior Petroleum Engineer (FT)
(iv) Secretary (Bilingual) (PT)
(v) Receptionist (PT)
b) Field Operations (All Full Time):
---------------------------------------
(i) Field Coordinator
2.1.3 The compensation for all Contractor Personnel (all salary and B&B) shall
be included in and be a part of the Base Charges.
2.1.4 All personnel required by Contractor to perform the Services that are in
addition to the Contractor Personnel set forth in Section 2.1.1 and
Section 2.1.2 above, shall require the Operator's prior written approval.
Such additional personnel approved by Operator shall also require
amendment of the applicable Annual Budget. Any personnel furnished by
Contractor in addition to those set forth in Section 2.1.1 and 2.1.2 in
exigent circumstances or an emergency and not approved or requested in
writing by Operator shall be immediately notified to Operator along with
the rate of compensation (salary and B&B) for such personnel. In such
notice to Operator, Contractor shall justify such additional personnel
and, if not justified, Operator shall have the right to refuse same.
2.1.5 Payment for all Contractor Personnel shall be made by Operator as part of
the Base Charges only for time actually spent in the conduct of the
Services (i.e. Work Hours). Contractor shall only be compensated for
Contractor Personnel actually engaged in the performance of the Services
and to the extent any Contractor Personnel are engaged in activities
other than
A-2
ANNEX 'A'
SCOPE OF SERVICE
--------------------------------------------------------------------------------
the Services, the rates of compensation (as set forth in Section 1.1 of
Annex "B") for such personnel shall be allocated through the use of time
sheets in accordance with Annex B.
2.1.6 Prior to hiring Contractor Personnel whose functions are set forth in
Section 2.1.1 a) (ii)-(iv) and 2.1.1 b)(i) and Section 2.1.2 a)(i)-(iii)
and 2.1.2 b)(i) above, Contractor shall provide Operator with full
resumes and work experience of proposed personnel including copies of
safety certifications (if applicable), diplomas from universities (if
applicable) and industry references. In recruiting personnel for this
Agreement, Contractor shall use its best efforts to effectively control
costs to ensure that they are not in excess of the "going market rate."
2.2 Operator Liaison & Reporting
2.2.1 Contractor shall provide full coordination and communication with
Operator's Representative.
2.2.2 In the conduct of Operations, Operator and Contractor shall agree in
advance (or from time to time as the need arises) regarding whether a
party, an Affiliate of a party or a Third Party shall provide reporting
during all phases of the Services, including:
a) Competitive Tendering, Tendering and contracting progress reports;
b) accident reports;
c) environmental incident reports;
d) daily drilling reports;
e) timely cost estimate reports - during drilling, reconditioning,
workover and other Operations with a drilling or workover rig on
the Contract Area;
f) bottom hole pressure and flowrate reports;
g) well report;
h) well recap of consumables and assets and their reconciliation to
reports;
i) copies of all logs or surveys;
j) copies of all tests and core analysis reports;
k) copies of all plugging reports; and
l) other reports as frequently as is justified by the activities or
Operations or as reasonably requested by Operator.
2.2.3 All reports and all communications sent to Operator shall be in the
English language or, if not in English, shall be accompanied by a quality
translation (at Contractor's expense as a Reimbursable Cost) in English,
unless otherwise agreed by Operator's Representative; provided, all
reports submitted to the Government by Contractor as a part of the
Services shall be photocopied and delivered to Operator in the same form
as delivered to the Government.
2.3 Government Liaison & Reporting
2.3.1 Contractor shall coordinate all meetings and liaisons with Government
authorities to ensure all Operations are carried out in full compliance
with the terms of the Charapa Contract and
A-3
ANNEX 'A'
SCOPE OF SERVICE
________________________________________________________________________________
Applicable Law and all reporting requirements under the Charapa Contract
are completely and timely fulfilled. Contractor shall notify Operator as
soon as possible of any meetings with the Government and shall, if
requested by Operator, provide written reports of such meetings if
Operator is unable to attend, as promptly as possible after such
meetings.
2.3.2 Contractor shall prepare and deliver to the Government all reports,
records and information required to be furnished by "Contractor" under
the Charapa Contract and Applicable Law (other than reports Operator is
required to provide in respect of its own interests - e.g. income taxes).
2.4. General Duties
In performance of and as a part of the Services and included in the Base
Charges (unless expressly designated as a Reimbursable Cost), Contractor
shall at all times:
a) perform the Services in accordance with the provisions of the
Charapa Contract, Applicable Law and this Agreement;
b) obtain all permits, consents, approvals, or other rights that may
be required for or in connection with the conduct of Services
(provided that out-of-pocket costs paid by Contractor to the
Government to obtain such permits shall be a Reimbursable Cost);
c) pay and discharge all liabilities and expenses arising under all
commitments made by Contractor incurred in connection with the
Operations and the Services; and use its reasonable efforts to
keep and maintain the Contract Area and all Joint Property and
Exclusive Property (as such terms are defined in the JOA) free
from all liens, charges and encumbrances arising out of the
Services;
d) take all necessary and proper measures for the protection of
life, health, the environment and property, to the extent it is
reasonably able to do so, and in the case of an emergency,
immediately notify the Operator of the details of any such
emergency and measures recommended by Contractor;
e) in respect of all Ad-Hoc Services with a value estimated in
excess of $10,000 USD and less than $50,000 USD, Contractor shall
Tender for such supply or service; and
f) in respect of all Ad-Hoc Services with a value estimated in
excess of $50,000 USD, Contractor shall Competitive Tender for
such supply or service.
2.5 Operational Duties
2.5.1 Contractor Personnel Manpower Services:
---------------------------------------
In performance of and as a part of the Services, and included in the Base
Charges (unless expressly designated as a Reimbursable Cost), and subject
to the other provisions of this Agreement, Contractor shall provide
Contractor Personnel set forth in Section 2.1.1 and Section 2.1.2 (and
additional Contractor Personnel pursuant to Section 2.1.4) to supervise,
administer, coordinate, manage, account for, pay invoices in respect of
and otherwise ensure the performance of the duties and obligations set
forth below:
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________________________________________________________________________________
a) Perform all reporting to and liaison with the Government as required
and as requested by Operator.
b) Timely prepare and deliver to the Government all reports,
applications, permits and other requests as required by the Government
or Applicable Law for execution of the Operations (e.g. drilling or
workover permits, permits or consents for storage, allocation,
transportation and sale of Hydrocarbons).
c) Competitive Tender or Tender (as applicable) for and contract (either
for itself or on behalf of Operator) with a Third Party for the
initial environmental assessment (i.e. baseline) and the environmental
impact study for Operations, and any environmental reporting work
required by the Government or Applicable Law and as requested by
Operator.
d) Competitive Tender or Tender (as applicable) for and contract (either
for itself or on behalf of Operator) with a Third Party for a level of
security appropriate under the circumstances existing from time to
time on the Contract Area, required or as necessary during Operations
and as requested by Operator and, in particular, for the personnel,
equipment and other assets located on the Contract Area during
Operations while a drilling or workover rig or other Third Party
service contractor is on the Contract Area.
e) To the extent not provided by a Third Party service contractor (e.g.
drilling contractor), Competitively Tender or Tender (as applicable)
and contract (either for itself or on behalf of Operator) with a Third
Party or an Affiliate for the supply of locally obtained equipment,
consumables, materials, supplies and services as required or as
necessary and applicable to the Operations being conducted or as
required by Operator for use in Operations, including, without
limitation, ad-hoc fixed wing air charter, ad-hoc medevac rotary
aircraft charter, fresh water, fuel, security or additional security,
power generation, drilling fluids, roustabouts or laborers; access
road, drilling pad and location design, preparation, construction
and/or maintenance, catering, lodging or accommodations and vehicles.
f) Coordinate, administer and control the logistics procurement, supply,
transportation and storage of property of all types in connection with
Operations and to the extent not provided by a Third Party service
contractor (e.g. drilling contractor), including, without limitation,
the administration, documentation and supervision of the Tender or
Competitive Tender (as applicable) and contract (either for itself or
on behalf of Operator) with a Third Party or an Affiliate for the
procurement, and importation of equipment, consumables and materials
for use in Operations and the transportation of such equipment,
consumables and materials in Ecuador.
g) Prepare and deliver all documentation required by the Government or
Applicable Law for importation, transportation and storage (referred
to in Article 2.5.1 f), and for exemption from customs fees, duties
and I.V.A., and import taxes or other levies.
h) Comply with Operator's written policies and procedures for handling,
storing and inventorying all such equipment, consumables and materials
(including use of Operator's Materials Transfer System).
i) Maintain the communications system between Contract Area and Quito
office to mitigate or prevent interruptions in communication and
obtain and maintain all
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licenses and permits required by the Government or Applicable Law
for such communication equipment (unless provided by a Third
Party service contractor to Operator or Contractor).
j) Manage and oversee daily production of hydrocarbons in the
Contract Area, including metering or measuring daily production
of hydrocarbons.
k) Manage, maintain and oversee all hydrocarbons flowlines,
treatment facilities and storage facilities and all other Charapa
Facilities on the surface related to production, treatment,
transportation and storage of hydrocarbons.
l) Coordinate and communicate as required with the purchaser of
hydrocarbons in respect of meter calibration, tank measurements,
deliveries, volume adjustments and storage requirements and
perform other duties required under the contract or agreement
with such Third Parties for the purchase and sale of
hydrocarbons.
m) Conduct, with regular frequency, routine inspection and routine
maintenance (excluding major repairs or overhauls) on all Charapa
Facilities located above the surface.
n) Prepare and submit to the Government all environmental reports,
notices and all other data or information regarding the
environment as required by the Government or Applicable Law.
o) Immediately notify Operator of any damage, loss, spill, pollution
or other degradation of the natural environment or sociological
impact on the Contract Area or elsewhere caused during or in
connection with Operations and/or the Services.
p) Ensure all Contractor Personnel in the Contract Area have
adequate clothing, shoes and equipment necessary for the Services
being performed by such Contractor Personnel.
q) Competitive Tender or Tender (as applicable) for and contract
with a Third Party to provide environmental studies, surveys,
remediation, reporting or other environmental services as needed,
requested by Operator or required by the Government or Applicable
Law.
r) Manage and coordinate all community relations in and around the
Contract Area as necessary, required by the circumstances and as
required by Operator.
s) Act as liaison with community leaders in the Contract Area or
other Third Parties or persons (other than the Government or
Petroecuador) that make requests or demands upon Operator or
Contractor.
t) Incur expenditures to maintain good relations with the community
surrounding the Contract Area in accordance with the Annual
Budget; provided, Contractor shall obtain Operator's prior
written approval for any single expenditure under this Section
2.5.1 t) in excess of $5,000.
u) Comply with all Government requirements and Applicable Law
regarding community relations, sociological studies and programs
and other matters, including all reporting to and liaison with
the Government as required.
v) Endeavor to settle, negotiate or compromise the best position or
result for Operator Group regarding all demands or claims made by
any member of the community surrounding the Contract Area;
provided, Contractor shall not settle or compromise any such
claim or demand in excess of $2,500 USD without the prior written
consent of Operator.
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w) Locate, Competitive Tender or Tender (as applicable) for the
hire, rental or sublet of and maintain and provide staff for a
warehouse or storage yard for Operator's movable property
(whether owned, leased or rented); such warehouse or storage yard
to be located on or off the Contract Area.
x) Comply with Operator's Material Transfer System and Operator's
procedures regarding warehouse and inventory control.
y) Provide security appropriate under the circumstances existing
from time to time for the warehouse and/or storage yard to
prevent loss or theft of Operator's property.
z) Provide other manpower Services as may be required and requested
in writing by Operator.
Except as may be expressly provided otherwise, the phrase "Contract
(either for itself or on behalf of Operator)" used above, refers to
the use of an Ad-Hoc Service Commitment.
2.5.2 Operations in General & Task Schedule:
--------------------------------------
a) Consistent with the above, it is the intent of the Parties that
Contractor shall conduct normal, routine and on-going lease
operations on the Contract Area and in connection with the Charapa
Contract.
b) Contractor shall be under the general direction of Operator's
Representative and Operator shall provide a general schedule of on-
going or routine tasks (as part of the Services) for Contractor to
perform on a continuing basis ("Task Schedule"). All Contractor
Personnel time in fulfillment of the Task Schedule shall be included
in the Base Charges (unless expressly designated a Reimbursable Cost)
and any reasonable and necessary out-of-pocket expenses incurred by
Contractor (other than Base Charges) to comply with the Task Schedule
shall be a Reimbursable Cost.
2.5.3 Safety:
------
Within sixty (60) days after the effective date of the Charapa Contract,
Contractor shall propose for Operator's written approval a written health
and safety policy and procedure for the Operations and performance of the
Services based on the procedures, rules and manuals provided by the
Operator under Section 3 of Annex A and as may be otherwise agreed by
Contractor and Operator. Contractor shall conduct the Operations and
perform Services in accordance with such health and safety policy.
2.6 Finance & Accounting Responsibilities
2.6.1 Accounting Functions:
--------------------
In performance of and as a part of the Services, and included in the Base
Charges (unless expressly designated a Reimbursable Cost), and subject to
the other provisions of this Agreement, Contractor shall provide
Contractor Personnel set forth in Section 2.1.1 and Section 2.1.2 (and
additional Contractor Personnel pursuant to Section 2.1.4) to supervise,
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administer, coordinate, manage, account for, pay invoices in respect of
and otherwise ensure the performance of the duties and obligations set
forth below:
a) Pay all Third Party and Affiliate invoices submitted to Operator
in Ecuador (other than those Operator requires to be paid from
its office in Houston, Texas) and all Third Party and Affiliate
invoices submitted to Contractor in connection with the
Operations and/or the Services in accordance with Government
Invoicing Regulations and Applicable Law. Contractor shall obtain
Operator's approval prior to paying any invoices for Services
performed by an Affiliate of Contractor in excess of $3,000.00.
b) Fax to Operator all invoices submitted to Operator in excess of
$5,000 USD (or $5,000 USD equivalent) for prior written approval
before payment from either of Operator's bank accounts in Quito
can be made (unless otherwise specifically agreed by Operator).
c) Send Operator an itemization of all invoices submitted to
Operator and paid from both of Operator's bank accounts in Quito
along with an original of all invoices and a copy of Operator's
bank accounts checkbook registers once each month. (Operator will
return the original invoices to Contractor after they have been
registered in the Operator's books and photocopied).
d) Supply to Operator, on a monthly basis, a sufficiently detailed
schedule containing an itemization of all charges incurred under
this Agreement, including without limitation, Base Charges,
Reimbursable Costs and all Third Party invoices paid, along with
all necessary supporting documentation.
e) Prepare all production accounting, including, tracking of the
volumes of hydrocarbons produced, in storage and delivered for
sale in accordance with Operator's policies and procedures.
f) Maintain current records of allocation of hydrocarbons under the
Charapa Contract with Petroecuador.
g) Prepare and submit to the hydrocarbons purchaser by the tenth
(10/th/) of the month following the month of production (or as
otherwise may be provided in the applicable hydrocarbons purchase
and sale agreement) an invoice covering the sale of
"Contractor's" (as defined in the Charapa Contract) share of the
hydrocarbons saved and sold;
h) If required by the Government or Applicable Law, prepare and
submit all invoices to Petroecuador for the "Base Curve Costs"
(as defined in the Charapa Contract), environmental costs and
other costs to be reimbursed by Petroecuador under the Charapa
Contract.
i) Manage, report and pay all administrative and accounting issues
and payments unique to Ecuador, including I.V.A. and C.T.T.,
filings and compliance which are required to be paid by
"Contractor" (as defined in the Charapa Contract).
j) Send "Vendor Set Up" form to Operator by fax for all new vendors
as soon as possible.
k) Prepare and fax to Operator the Material Transfer forms after
completion of such forms in accordance with Operator's Material
Transfer System.
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l) Invoice Operator for Services provided under this Agreement in
accordance with Article 4.0 of this Agreement.
m) Provide by the twentieth (20/th/) of each month a cash
requirements forecast to Operator with a estimate of Contractor's
US Dollar cash requirements for the following month and the "USD
Fix Amount" (defined below) for each Sucre invoice. This forecast
shall include all Base Charges and Reimbursable Costs anticipated
to be paid by Contractor in the following month.
n) Promptly forward to Operator all USD invoices erroneously
received in Quito which Operator will pay from Houston.
o) Maintain and keep true and correct records of the production and
disposition of all liquid and gaseous hydrocarbons and of all
costs and expenditures under this Agreement.
p) Maintain accounting records pertaining to the Services and
Operations in accordance with all applicable statutory
obligations of Ecuador as well as the provisions of the Charapa
Contract and this Agreement, using software, chart of accounts
and nomenclature as may be required by the Operator; provided,
Operator shall be responsible for the input of all accounting
data and information (payables, receivables, etc.) in the
Operator's books and chart of accounts in Houston, Texas and such
information will be transmitted to Contractor on a regular basis,
not less than once each month.
q) Maintain accounting records and reports in both the English and
Spanish language and in dual U.S. and Ecuador currency. The daily
rates of Sucre to US Dollar (and vice-versa) exchange published
in el Comercio shall be sent weekly to Operator covering the
daily rates for such week.
r) Engage, liase with and report to Operator regarding the firm of
public accountants acceptable to Operator to provide all
statutory accounting and financial reporting requirements in
accordance with Applicable Law and, subject to the provisions
herein, compensation payable to such firm for advice to or work
on behalf of Operator shall be a Reimbursable Cost.
2.6.2 Banking and Payment Authority:
------------------------------
a) As part of the Services and included in the Base Charges,
Contractor shall open and maintain in the name of Operator one
bank account in Sucres ("Sucre Bank Account") and one bank
account in US Dollars ("USD Bank Account") in a bank in Quito,
Ecuador acceptable to Operator. Authorization for withdrawals,
checks, drafts, transfers and other activity in each of such bank
accounts shall be in accordance with the signature authority
limitations as set forth in Section 2.6.2 c) below. Contractor
shall pay all Third Party invoices (and invoices from an
Affiliate of Contractor for performing Services) from either of
such accounts (as applicable, depending on the currency payment
requirement of the payee and Applicable Law). By the twentieth
(20/th/) of each month Contractor shall notify Operator in
writing with a request to electronically transfer funds to the
USD Bank Account in Ecuador in an amount sufficient to pay all
Third Party USD and Sucre invoices received by Contractor at that
time and payable within thirty (30) days. Such notice from
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Contractor requesting USD funds shall include a schedule of all
invoices to be paid and shall contain at least the following
information for each invoice to be paid:
. Payee;
. Services rendered;
. Amount in USD if a USD invoice; and
. Amount in Sucres if a Sucre invoice, and the "USD Fix
Amount" (defined in Section 2.6.4 below) for each Sucre
invoice.
If Operator approves the payment request, it shall immediately
transfer the USD funds to the USD Bank Account. The amount of USD
funds transferred by Operator to the USD Bank Account to pay the
Sucre invoices received in each month shall establish the
"Monthly USD Requirement" (as defined in Section 2.6.4 below).
Operator shall promptly consult with Contractor if Operator finds
errors or questions invoices on such schedule. In accordance with
Section 2.6.1 b) above, Contractor shall not pay any invoice in
the amount of $5,000 USD or more (or equivalent in Sucre) without
prior written approval from Operator (unless otherwise
specifically agreed by Operator).
b) The USD Bank Account and the Sucre Bank Account are to be used
for Operator's payment (by Contractor as part of the Services) of
all invoices submitted to Operator in Ecuador and all other
commitments or obligations of Operator which Operator elects not
to make payment from Houston, Texas. Unless specifically agreed
by Operator, Contractor's own costs to provide the Services (i.e.
Base Charges) shall be paid from Contractor's own bank accounts
and not from Operator's bank accounts.
c) Both the USD Bank Account and the Sucre Bank Account shall have
limitations of signature authority as follows:
USD or USD Equivalent
Amount of Payment Signatory
----------------- ---------
Up to $5,000 Single Signature - One of:
Country Manager, Head Accountant,
Contractor's General Manager, or
Operator's Representative
$5,000 or More Dual Signature - Two of:
Country Manager, Head Accountant,
Contractor's General Manager,
Operator's Representative or
Operator's Legal Representative
d) Operator shall have the right from time to time to revise or
revoke the above signature authority levels or to grant other
persons with signature authority on the USD Bank Account and the
Sucre Bank Account on written notice to the bank. Such accounts
and all other accounts maintained by Contractor on behalf of
Operator shall be reconciled by the twentieth (20/th/) day of the
following month and such reconciliation shall be delivered to
Operator not later than the thirtieth (30/th/) day of such
following month.
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e) Other than the USD Bank Account and the Sucre Bank Account opened
with the permission of Operator, Contractor shall have no
authority to open any other bank account in the name of Operator
nor to establish any line of credit or to create indebtedness in
the name or on behalf of Operator.
f) Pursuant to Article 4.6 of the Agreement, Contractor may request
an MSA Credit for any Base Charges and Reimbursable Costs.
2.6.3 Receipt of Funds or Refunds:
----------------------------
If on behalf of Operator or otherwise, Contractor receives any sum of
money, refunds or rebates owing to Operator, Contractor shall immediately
deposit such funds in the Sucre Bank Account or USD Bank Account, (based
on the currency in which the refund was made), and immediately notify
Operator. Operator shall have the right to have all or a part of such
funds paid immediately to Operator in any account designated by Operator
in the United States or to apply such funds to invoices payable to third
parties by Operator or to payment of Contractor's compensation under this
Agreement.
2.6.4 Currency Exchange Gains or Losses:
----------------------------------
a) Contractor shall request the transfer of USD funds and Operator
shall transfer all USD funds for payment of Sucre invoices
received by Contractor in performance of the Services in
accordance with Section 2.6.2 a) of Annex A. Contractor shall
have the right to transfer from the USD Bank Account to the Sucre
Bank Account or vice-versa (or otherwise exchange US Dollars
received from Operator to Sucre or vice-versa) based on US
Dollars to Sucre exchange rates at that time. Contractor shall
receive certain compensation for a "Quarterly Currency Gain"
(defined below) as further described in Section 2.6.4 d);
provided a "Quarterly Currency Loss" (defined below) shall be
borne by certain members of the Operator Group.
b) Contractor shall notify Operator by fax of any Quarterly Currency
Loss in excess of $1,000 USD within two (2) days after the
occurrence of such loss.
c) Notwithstanding anything in the Agreement or the Annexes to the
contrary, Operator shall have the right, in its discretion, to
revoke the Contractor's right to exchange currency and receive
compensation for Currency Gain as set forth in this Section 2.6.4
at any time on one (1) day notice in writing to Contractor. In
such event, Contractor shall be compensated for Quarterly
Currency Gain, if any, occurring during the Quarter such
termination notice was sent to Contractor.
d) The determination of currency gain or currency loss and
Contractor's compensation on Quarterly Currency Gain shall be as
set forth below:
1. Definitions:
A. "Fix Date" means the day on which Contractor receives a
Sucre invoice and stamps the date of receipt on the
face of such invoice.
B. "Exchange Rate" means the US Dollar buying (i.e.
"compra") rate as established by the free market for
Quito on the applicable Fix Date, as published in El
Comercio newspaper under the heading "Xxxxxxx Libre de
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Cambios" on such applicable date; provided, if not published in
El Comercio, then the parties shall mutually agree on another
publication.
C. "USD Fix Amount" means the amount of a Sucre invoice translated
into US Dollars using the Exchange Rate on the Fix Date for such
Sucre invoice.
D. "Monthly USD Requirement" means the total of the USD funds
transferred to the USD Bank Account by Operator for the purpose
of paying the sum of the USD Fix Amount of all Sucre invoices
received by Contractor in the applicable calendar month (as
requested under Section 2.6.2 a) of Annex A).
E. "Quarterly USD Requirement" means the sum of the three Monthly
USD Requirements in the applicable Calendar Quarter.
F. "Quarterly USD Payments" means the total amount of USD
transferred from the USD Bank Account to the Sucre Bank Account
in the applicable Calendar Quarter for the purpose of paying the
Sucre invoices received during such Calendar Quarter and included
in the Quarterly USD Requirement.
G. "Quarterly Currency Gain" means the positive difference, if any,
resulting from subtracting the Quarterly USD Payments from the
Quarterly USD Requirement.
H. "Quarterly Currency Loss" means the negative difference, if any,
resulting from subtracting the Quarterly USD Payments from the
Quarterly USD Requirement.
2. Procedure:
A. Contractor shall stamp each Sucre invoice on receipt with the
date on which Contractor receives such invoice, being the Fix
Date. Using the Exchange Rate on the Fix Date shall determine the
USD Fix Amount of such Sucre invoice. In accordance with Section
2.6.2 a) of Annex A, Contractor shall request the USD funds to
pay the total amount of Sucre invoices received each calendar
month calculated on the total of USD Fix Amount of all such
invoices. Operator shall transfer the Monthly USD Requirement in
accordance with Section 2.6.2 a) of Annex A. After receipt of the
Monthly USD Requirement, Contractor shall use its reasonable and
prudent discretion and knowledge of US Dollar to Sucre currency
exchange fluctuations to determine the proper time or time period
in which to exchange all or part of the Monthly USD Requirement
at any time or from time to time, but shall not have the right to
incur interest or any penalty for late payment or otherwise fail
to comply with payment terms covering such invoice. Subject to
the foregoing, Contractor shall transfer the appropriate amount
of USD from the USD Bank Account to the Sucre Bank Account and
the sum of the USD funds transferred to the Sucre Bank Account,
for the purpose of paying Sucre invoices received in such
Calendar Quarter, shall establish the Quarterly USD Payments.
Unless expressly authorized in writing by Operator, other than
the Monthly USD Requirement, Contractor shall not have the right
to use any other USD funds received from Operator for payment of
USD invoices for purposes of currency exchange or trading in
Sucres.
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B. Not later than ten (10) days after the end of each Calendar
Quarter, Contractor shall submit a written report to Operator
containing all USD-Sucre exchange transactions in respect of the
Monthly USD Requirement for each calendar month during such
Calendar Quarter and summarized for the entire Calendar Quarter.
The report shall also contain an itemization of each Sucre
invoice paid, and if known, the currency gain or currency loss
for each such paid Sucre invoice and shall summarize the
Quarterly Currency Gain, if any or the Quarterly Currency Loss,
if any.
C. If a Quarterly Currency Gain occurs in a Calendar Quarter,
Contractor shall be entitled to twenty-five percent (25%) of such
Quarterly Currency Gain. In such event, Contractor shall invoice
Operator after the end of the applicable Calendar Quarter in
which a Quarterly Currency Gain occurred along with a copy of the
written report referred to in B. above. Operator shall pay all
undisputed amounts of such invoice within fifteen (15) days of
receipt.
D. If a Quarterly Currency Loss occurs in a Calendar Quarter,
Bellwether and Tecnipetrol, shall bear all such loss.
2.7 Ecuador Operations Overhead
In performance of and as a part of the Services and included in the Base Charges
(unless expressly designated a Reimbursable Cost), Contractor shall provide:
2.7.1 Quito Operations Overhead
--------------------------
a) Suitable office space in Quito for the required number of
Contractor Personnel (as set forth in Section 2.1) to perform the
Services. Initially, Contractor shall provide approximately 2,000
sq. ft. of office space allocated exclusively to the Services.
b) Office supplies, sundries and computer software, for the required
number of Contractor Personnel in Quito to be able to perform the
Services.
c) Office furnishings, fixtures and equipment (e.g. desks, chairs,
computers, telephone systems, facsimile, copiers, etc.) for an
office sufficient for the required number of Contractor Personnel
to be able to perform the Services.
d) All utilities (gas, water and power).
e) Security services for the Quito office.
f) Maintenance, janitorial services and insurance, property insurance
on the Quito office and all furnishings, equipment and supplies.
g) General Administration and overhead
2.7.2 Field Operations Overhead
-------------------------
a) Suitable office space in Lago Agrio with space for a minimum of
three (3) Contractor Personnel.
b) Storage yard and warehouse facility of sufficient size for safe and
secure storage and warehousing of Operator's property (whether
owned, leased or rented).
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c) Office supplies, sundries and computer software for the required
number of Contractor Personnel in Lago Agrio to be able to perform
the Services.
d) Office furnishings, fixtures and equipment (e.g. desks, chairs,
computers, telephone systems, facsimile, copiers, etc.) for an
office sufficient for the required number of Contractor Personnel
to be able to perform the Services.
e) Security for the office, warehouse and storage yard and the
accommodations in Lago Agrio.
f) Maintenance and fuel for two 4x4 vehicles dedicated to Contract
Area use.
g) All utilities (gas, water and power).
h) Maintenance and insurance for the office, warehouse and storage
yard and the accommodations in Lago Agrio.
i) Accommodations for three (3) persons in Lago Agrio, including
regular housekeeping services.
2.8 Contract Tendering and Awards
2.8.1 In performance of and as a part of the Services, and included in
the Base Charges, Contractor shall provide Contractor Personnel set
forth in Section 2.1.1 and Section 2.1.2 (and additional Contractor
Personnel pursuant to Section 2.1.4) to supervise, administer,
coordinate, manage, otherwise ensure that Contractor shall (i)
Competitive Tender prior to awarding all Ad-Hoc Service Commitments
with a value estimated greater than $50,000 USD (or equivalent in
Sucre) and (ii) Tender prior to awarding all Ad-Hoc Service
Commitments less than $50,000 USD but greater than $10,000 USD (or
equivalent in Sucre). Subject to the above and to the Charapa
Contract and Applicable Law, Contractor shall award each Ad-Hoc
Service Commitment with a value less than $10,000 USD to the best-
qualified Third Party without the obligation to Tender or
Competitive Tender and without seeking the prior written approval
of the Operator; provided, however, Contractor shall not award an
Ad-Hoc Service Commitment to an Affiliate of Contractor if the
value exceeds $3,000 USD (or equivalent in Sucres), without
Operator's prior written consent. Contractor shall maintain a
complete file on all Competitive Tenders and Tenders and all such
files shall be available for inspection by Operator pursuant to
Article 4.7 of the Agreement.
2.8.2 All Ad-Hoc Service Commitments shall be prepared on the applicable
contract, service order, purchase order or other forms furnished by
Operator and issued in the name of Contractor or in the name of
Operator and signed by the Country Manager or the Operator's
Representative. All Ad-Hoc Service Commitments shall be prepared in
accordance with the respective Tender or Competitive Tender
document or as required by Operator. The Country Manager shall not
have the right or authority to sign any Ad-Hoc Service Commitments
with a Third Party if the value exceeds $50,000USD (or equivalent
in Sucres) or with an Affiliate of Contractor if the value exceeds
$3,000 USD (or equivalent in Sucres), without Operator's prior
written consent. Operator shall have the right from time to time to
revise the
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Country Manager's signature authority or to grant other persons the
right to sign Ad-Hoc Service Commitments in the name of Operator.
2.8.3 Operator shall have the right to withhold payments to Contractor in
respect of any Ad-Hoc Service Commitment awarded in violation of
Section 2.8.1 or Section 2.8.2.
2.8.4 Contractor shall have written contracts, purchase orders or service
orders for all Ad-Hoc Service Commitments regardless of the value
(unless Operator otherwise agrees in writing). Contractor shall
retain one original of all such contracts, purchase orders or
service orders in its offices in Quito and promptly send one
original to Operator. Contractor shall maintain a proper filing and
retrieval system for all such documents and all correspondence and
other information pertaining to such documents.
2.9 Ad-Hoc Services
2.9.1 As provided in and subject to this Agreement, Contractor shall, and
Operator shall have the right to request from time to time that
Contractor provide, or contract with a Third Party to provide, Ad-Hoc
Services. Unless the value of the Ad-Hoc Services is estimated to be less
than $10,000, Contractor shall conduct a Tender or Competitive Tender (as
applicable) for such Ad-Hoc Services and shall notify Operator of the
results of same. Contractor or an Affiliate of Contractor shall have the
right to conduct the Ad-Hoc Services provided Contractor or such
Affiliate participates in the Tender or Competitive Tender (as
applicable) for such Ad-Hoc Services.
2.9.2 If Contractor or an Affiliate is selected to perform the Ad-Hoc Services,
then prior to incurring any commitment or expenditure, Operator and
Contractor or Operator and such Affiliate of Contractor shall enter into
an Ad-Hoc Service Commitment to govern the performance of the Ad-Hoc
Services. The Ad-Hoc Service Commitment shall cover all information
relevant to the Ad-Hoc Services, including:
. description of services or deliverables;
. rates or lump sum cost;
. proposed completion or delivery date; and
. required resource(s) to complete the Ad-Hoc Services.
Compensation properly payable to Contractor or an Affiliate of Contractor
under an Ad-Hoc Service Commitment shall be made as a payment for Ad-Hoc
Services and not as a Base Charge or a Reimbursable Cost and thus shall
not be subject to the Contractor's Additional Xxxx-Up.
2.9.3 If a Third Party is selected to perform the Ad-Hoc Services, Operator
shall have the option of entering into an Ad-Hoc Service Commitment with
such Third Party or requiring Contractor to enter into an Ad-Hoc Service
Commitment with such Third Party. If Operator so requires and Contractor
and such Third Party enter into an Ad-Hoc Service Commitment, Contractor
shall invoice Operator in accordance with the relevant Ad-Hoc Service
Commitment and all costs properly payable under the Ad-Hoc Service
Commitment shall be a Reimbursable Cost. If Operator and a Third Party
enter into an Ad-Hoc Service
A-15
ANNEX 'A'
SCOPE OF SERVICE
--------------------------------------------------------------------------------
Commitment, such Third Party shall invoice Operator directly and such
amounts shall not be a Reimbursable Cost. If Operator and an Affiliate of
Contractor enter into an Ad-Hoc Service Commitment, such Affiliate shall
invoice Operator directly and such amounts shall not be a Reimbursable
Cost. (Upon execution of an Ad-Hoc Service Commitment between Contractor
and a Third Party, if not already a member of the Contractor Group, such
Third Party shall thereupon be a member of Contractor Group. Likewise,
upon execution of an Ad-Hoc Service Commitment between Operator and a
Third Party, if not already a member of the Operator Group, such Third
Party shall thereupon be a member of Contractor Group.)
3. OPERATOR'S DUTIES:
3.1 Provision of Documents:
Operator shall provide the following:
a). Model Contracts and Tender Forms
b). All policies and procedures referenced in this Agreement
c). Vendor Set-up Form
d). Material Transfer Forms and procedures
e). General oversight and directions
3.2 Safety
Operator shall conduct periodic health safety audits at least two times
per Calendar Year to verify Contractor's compliance with the health and
safety manual promulgated by Contractor (and approved by Operator) in
Section 2.5.3 of Annex A.
A-16
ANNEX B
============================
COMPENSATION SCHEDULE
============================
ANNEX B
COMPENSATION SCHEDULE
_______________________________________________________________________________
ATTACHED TO AND MADE A PART OF THE MASTER SERVICE AGREEMENT, EFFECTIVE AS OF
NOVEMBER 1, 1999 BETWEEN BELLWETHER INTERNATIONAL, INC. ("OPERATOR") AND TECNIE
S.A.C. ("CONTRACTOR").
RATES OF COMPENSATION & CALCULATIONS
Contractor's compensation shall be divided into four (4) categories as set forth
below:
1.1 BASE CHARGES
1.1.1 Contractor Personnel Costs
--------------------------
(All amounts shown in Section 1.1.1 below are in US Dollars)
POSITION MONTHLY RATE B&B TOTAL MONTHLY RATE
---------------- ------------- ---- ------------------
EXEMPT:
---------
(i) Country Manager (PT) $8,000
(ii) Operations Coordinator (FT) $2,500
(iii) Finance Manager (PT) $2,000
(iv) Head Accountant (FT) $2,500
(v) Senior Petroleum Engineer (FT) $4,000
(vi) Junior Petroleum Engineer (FT) $1,500
(vii) Field Superintendent (FT) $3,500
(viii) Field Coordinator (FT) $ 800
NON-EXEMPT:
----------------
(i) Accounting Assistant (PT) $ 500
B-1
ANNEX B
COMPENSATION SCHEDULE
______________________________________________________________________________
(ii) Systems Technician (PT) $ 500
(iii) Receptionist (PT) $ 300
(iv) Secretary (Bilingual) (PT) $ 600
(v) Four (4) Field or Lease Operators (FT) $2,000 ($500 each)
(vi) Two (2) Drivers in Contract Area (FT) $1,200 ($600 each)
1.1.2 Miscellaneous Personnel Provisions
----------------------------------
a) The above "Total Monthly Rate" includes both Salary and proportionate
B&B for each Contractor Personnel. The Monthly Rate salary shall
include vacations under Contractor's employee policies and procedures.
"Part Time" shall be defined as eighty (80) Scheduled Hours per
calendar month. "Full Time" shall be defined as one hundred sixty
(160) Scheduled Hours per calendar month.
b) Contractor shall receive compensation in respect of Contractor's
Personnel only to the extent that such personnel are engaged in
performance of the Services and not engaged in other activities not
related to or a part of the Services. All Contractor Personnel shall
record their respective time engaged in performance of the Services
(i.e. Work Hours) on time sheets. Contractor shall receive
compensation (as part of the Base Charges) only for the actual Work
Hours each calendar month out of the total Part Time Scheduled Hours
or Full Time Scheduled Hours in a calendar month, as applicable as to
each of Contractor Personnel; provided, Contractor Personnel have
recorded their respective Work Hours on time sheets. Accordingly,
Contractor shall be entitled to a percentage of the Contractor
Personnel Costs based on the pro rata part of the total number of Work
Hours (Part Time or Full Time) versus the Scheduled Hours (Part Time
or Full Time) during the applicable calendar month, depending on
Exempt or Non-Exempt nature of Contractor Personnel.
c) Contractor Personnel designated as "Exempt" above are not entitled to
overtime pay and the compensation payable by Operator for such
Contractor Personnel as part of the Base Charges shall not exceed the
Total Monthly Rate set forth in Section 1.1.1 above. Contractor
Personnel designated above as "Non-Exempt" shall be entitled to
overtime pay for Work Hours in excess of their applicable Scheduled
Hours (i.e. Full Time or Part Time) in accordance with Applicable Law.
If the overtime for any Non-Exempt Contractor Personnel exceeds twenty
percent (20%) of the applicable Scheduled Hours for such Non-Exempt
Contractor Personnel, Operator and Contractor shall discuss possible
increased personnel needs or other methods to
B-2
ANNEX B
COMPENSATION SCHEDULE
______________________________________________________________________________
mitigate the overtime and overtime compensation. Contractor shall not
have right to allow Non-Exempt Contractor Personnel to exceed twenty-
five percent (25%) of their applicable Scheduled Hours without prior
approval of the Operator. Contractor shall report overtime properly
payable by Operator (in accordance with the above) as part of and in
addition to the Base Charges.
d) "B&B" shall include the following benefits and burdens Contractor
Personnel are entitled under Applicable Law:
. Supplementary Bonus (Bonif Comple)
. Cost of Living Compensation (Compen Cost Vida)
. 13th, 14th, 15th & 16th Salaries (Sueldos)
. Medical and Insurance Benefit (Salud y Vida)
. IESS Employer Contribution (IESS Patronal)
. Vacations (Vacaciones)
. Reserve Funds (Fondos de Reserva)
. Sick Leave
. Severance Pay (Indemnizacion por Despido)
e) Pursuant to Section 2.1.2 of Annex A, only certain of the above
Contractor Personnel will be on payroll on the Effective Date; others
will be added as required.
1.1.3 Ecuador Operations Overhead Costs:
----------------------------------
Covering Contractor's cost and expenses to provide the items described in
Section 2.7.1 and 2.7.2 of Annex A.
a) Quito Operations (described in Section. 2.7.1 of Annex A): The
compensation for the fixed overhead charges for items described in
Section 2.7.1of Annex A and provided by Contractor shall be:
(i) For the period from the Effective Date until 31 December 2000
(subject to Article 2.2 and Article 2.3 of the Agreement) the
sum of USD$14,141.00 per month.
(ii) For the period of time after 31 December 2000 (subject to
Article 2.2 and Article 2.3 of the Agreement) the amount
mutually agreed by the parties in the Annual Budget.
b) Field Operations (described in Section 2.7.2 of Annex A) The
compensation for the fixed overhead charges for items described in
Section 2.7.2 of Annex A shall be:
(i) For the period from the Effective Date until 31 December 2000
(subject to
B-3
ANNEX B
COMPENSATION SCHEDULE
______________________________________________________________________________
Article 2.2 and Article 2.3 of the Agreement) the sum of USD$12,076.00 per
month.
(ii) For the period of time after 31 December 2000 (subject to Article 2.2 of
the Agreement) the amount mutually agreed by the parties in the Annual
Budget.
c) Notwithstanding the above in Sections 1.1.3 a) and 1.1.3 b) above, the
compensation for the Ecuador Operations Overhead shall only be due and
payable by Operator as and when such costs and expenses are incurred by
Contractor as and when the Services described in Sections 2.7.1 and 2.7.2 of
Annex A are provided by Contractor; and a deduction from the above amounts
or agreed amounts shall be made to the extent that Ecuador Operations
Overhead is not provided by Contractor.
2.1 REIMBURSABLE COSTS:
2.1.1 Reimbursable Costs are certain pass-through costs and expenses
specifically designated in this Agreement paid by Contractor and to
be reimbursed by Operator, including, without limitation:
. Third Party charges to perform the Services, excluding however,
such costs and expenses covered by or included in the Base
Charges;
. out-of-pocket costs paid by Contractor for permits, customs fees
or other Government fees;
. Transfer Tax, but only if not deducted from or credit to
Contractor's tax liability (and excluding income and all other
taxes specifically applicable to Contractor or an Affiliate);
. Ad-Hoc Services performed by a Third Party pursuant to an Ad-Hoc
Service Commitment between Contractor and such Third Party;
. External Services (as defined in and in accordance with the
Annual Budget);
. Quito Office Expenses (as defined in and in accordance with the
Annual Budget); and
. Field Expenses (as defined in and in accordance with the Annual
Budget).
2.1.2 Contractor shall obtain prior written approval of Operator for any
External Services estimated to be in excess of $3,500.
3.1 Ad-Hoc Services:
Compensation for Ad-Hoc Services will be made on the basis of and in
accordance with the applicable Ad-Hoc Service Commitment governing the
respective Ad-Hoc Services, in accordance with Section 2.9.3 of Annex A.
4.1 CONTRACTOR'S XXXX-UP:
Contractor's Xxxx-Up is comprised of: (i) Contractor's Base Xxxx-Up and
(ii) Contractor's
B-4
ANNEX B
COMPENSATION SCHEDULE
______________________________________________________________________________
Additional Xxxx-Up, as set forth below.
4.1.1 Contractor's Base Xxxx-Up Calculation:
-------------------------------------
Contractor's Base Xxxx-Up shall be calculated by reference to a
sliding scale percentage of the sum of the Base Charges (described in
Section 1.1 above) paid (or deemed paid under an MSA Credit) by the
Operator to Contractor per Calendar Year under this Agreement as set
forth below:
BASE CHARGES PER CALENDAR YEAR XXXX-UP PERCENTAGE
------------------------------ ------------------
(USD or USD/Sucre Equivalent)
On the amounts from $0 to $350,000 30%
On the excess above $350,000 and up to $1,000,000 25%
On the excess above $1,000,000 and up to $2,000,000 15%
On the excess above $2,000,000 To be Negotiated
4.1.2 Contractor's Additional Xxxx-Up Calculation:
--------------------------------------------
Contractor's Additional Xxxx-Up shall be fifteen percent (15%) of the
Reimbursable Costs payable by the Operator under this Agreement.
4.1.3 Contractor's Xxxx-Up - Additional Provisions
----------------------------------------------
a) Contractor's Base Xxxx-Up shall be payable in accordance with the
percentages set forth in Section 4.1.1 on a monthly basis, in
accordance with the percentage applicable to the cumulative total
amount of the Base Charges paid by Operator to Contractor from the
beginning of the Calendar Year to the end of the applicable month
and in accordance with Article 4.2 and Article 4.3 of the
Agreement.
b) Contractor's Additional Xxxx-Up shall be payable monthly based on
the percentage applicable to Reimbursable Costs under Section
4.1.2 for the Reimbursable Costs payable by Operator to Contractor
each month in accordance with Article 4.2 and Article 4.3 of the
Agreement.
c) Payments made by Operator to Contractor or an Affiliate of
Contractor for rendering Ad-Hoc Services pursuant to an Ad-Hoc
Service Commitment between Operator and Contractor or between
Operator and an Affiliate of Contractor are deemed to include the
Contractor's Additional Xxxx-Up for the entity rendering the Ad-
Hoc Services and shall be as agreed in the applicable Ad-Hoc
Service Commitment and shall not be a Reimbursable Cost subject to
Contractor's Additional Xxxx-Up. Contractor shall be entitled to
Contractor's Additional Xxxx-Up on Ad-Hoc Services (as a
Reimbursable Cost) only when the Ad-Hoc Services are performed by
a Third Party under a Ad-Hoc Service Commitment between such Third
Party
B-5
ANNEX B
COMPENSATION SCHEDULE
______________________________________________________________________________
and Contractor and the amounts paid under such Ad-Hoc Service
Commitment shall be added to the "Reimbursable Costs Per Calendar
Year" (above) for purposes of determining Contractor's Additional
Xxxx-Up.
d) I.V.A. tax will be added to invoices submitted to Operator by
Contractor.
B-6
ANNEX C
================================
FIRST YEAR ANNUAL BUDGET
================================
ANNEX 'C'
FIRST YEAR ANNUAL BUDGET
================================================================================
ATTACHED TO AND MADE A PART OF THE MASTER SERVICE AGREEMENT, EFFECTIVE AS OF
NOVEMBER 1, 1999 BETWEEN BELLWETHER INTERNATIONAL, INC. ("OPERATOR") AND TECNIE
S.A.C. ("CONTRACTOR").
[INSERT 1/st/ YEAR BUDGET]
C-1
ANNEX D
==============================
INSURANCE REQUIREMENTS
==============================
ANNEX `D'
INSURANCE REQUIREMENTS
--------------------------------------------------------------------------------
ATTACHED TO AND MADE A PART OF THE MASTER SERVICE AGREEMENT, EFFECTIVE AS OF
NOVEMBER 1, 1999 BETWEEN BELLWETHER INTERNATIONAL, INC. ("OPERATOR") AND TECNIE
S.A.C. ("CONTRACTOR").
The types and minimum insurance coverages that Contractor is required to
procure, carry and maintain are as follows:
1. Worker's Compensation Insurance or similar insurance covering persons
employed by or a member of Contractor Group, during any period while
Services are being performed by a member of the Contractor Group as
required by and in amounts sufficient to comply with Applicable Law. This
insurance shall be extended to include an "Alternate Employer" endorsement
designating the Operator on such endorsement.
2. Employer's Liability Insurance with limits of not less than USD $1,000,000
(or Sucre equivalent thereof) for each person and USD $1,000,000 (or Sucre
equivalent thereof) for each occurrence for Bodily Injury by Accident and
USD $1,000,000 (or Sucre equivalent thereof) policy limit for Bodily Injury
by Disease. The insurance shall be extended to include an "Alternate
Employer" endorsement designating the Operator on such endorsement.
3. Commercial General Liability Insurance with a combined single limit for
Bodily Injury and Property Damage of not less than USD $1,000,000 (or Sucre
equivalent thereof) per occurrence, and such coverage shall be written on
an "occurrence" form and shall include broad form comprehensive general
liability coverage, broad form Contractual liability coverage
(contemplating and insuring the indemnity obligations of Contractor under
the Agreement), products and completed operations liability coverage,
premises/operations liability coverage, and such other coverage as may be
necessary to cover all the Services and all risk and liabilities assumed by
Contractor under this Agreement.
4. Business Automobile Liability Insurance covering all owned, non-owned,
hired and leased vehicles used by Contractor Group in connection with the
Services with a combined single limit of not less than USD $1,000,000 (or
the foreign currency equivalent thereof) for Bodily Injury and Property
Damage.
5. Umbrella or Excess Liability Insurance with limits of not less than USD
$5,000,000 (or Sucre equivalent thereof) per occurrence in excess of all
coverage and limits in the policies listed in Articles 2, 3, and 4 above.
Provide, upon Operator's approval, Contractor shall have the right to reduce the
limits on the coverages shown above if Contractor can demonstrate such limits
are excessive in the Ecuador insurance market or are significantly more
expensive than lower limits and, further, that such lower limits adequately
protect the parties under the circumstances.
D-1
