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EXHIBIT 10.12
PIPELAY SERVICES
CONTRACT # 9C
UNOCAL
&
TORCH, INC.
January 1, 2001 - December 31, 2001
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W A R N I N G
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THE INFORMATION CONTAINED HEREIN IS STRICTLY CONFIDENTIAL AND IS TO BE VIEWED
FOR BUSINESS PURPOSES BY UNOCAL EMPLOYEES. IF YOU ARE A NON-EMPLOYEE, OR YOU
KNOW ANY NON-EMPLOYEE WHO HAS ACCESS TO THIS INFORMATION, PLEASE NOTIFY THE
CONTRACTS ADMINISTRATOR IMMEDIATELY.
THIS INFORMATION MAY NOT BE REPRODUCED FOR DISTRIBUTION AND IS NOT TO BE
DISCLOSED BY ANY METHOD OR MANNER TO THIRD PARTIES OR NON-EMPLOYEES.
ANY EMPLOYEE FOUND TO HAVE VIOLATED THIS WARNING WILL BE SUBJECT TO DISCIPLINARY
ACTION, UP TO AND INCLUDING TERMINATION.
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CONTENTS
o Form of Contract Pages 3-6
o Contract Acceptance/Signature Page 7
o Attachment 1
Torch Rate Sheet
o Attachment 2
Invoicing & Payment
o Attachment 3
Reports, Tracking, Performance, Contracts & Addresses
o Attachment 4
HES Loss Control
Pipelay Services Contract
Unocal/Torch
January 1, 2000 - December 31, 2001
Page 2
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GOM SHELF PIPELAY SERVICES
CONTRACT # 9B
This Contract is made by and between UNION OIL COMPANY OF CALIFORNIA d.b.a.
Unocal ("UNOCAL") with offices at 4021-4023 Ambassador ▇▇▇▇▇▇▇ Parkway,
Lafayette, Louisiana 70596-9200 and Torch, Inc. ("TORCH") with offices at
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇. UNOCAL and TORCH
agree as follows:
1. CONTRACT DESCRIPTION
UNOCAL promises to pay for and TORCH promises to provide Pipelay Services at
the agreed contract pricing, per the contract terms and conditions.
2. CONTRACT TERM
The contract is effective as of January 1, 2001 and will expire on December
31, 2001. The contract may be extended annually for one year terms by mutual
agreement of both parties. If extended the contract terms and conditions
will be those of the primary term.
3. SCOPE
The contract covers Pipelay Services for UNOCAL's Spirit Energy 76 Gulf of
Mexico operations for pipelay burial and riser installation projects in the
Gulf of Mexico "Shelf" in water depths ranging from 10 feet to 200 feet.
Additional areas for consideration include Pipeline Repair; Dive Boat
Support; Diving Services, and Pipelay Operations beyond 200 feet.
4. INTENT
The intent of this contract is TORCH shall supply approximately 80% of
UNOCAL's Spirit Energy 76 Gulf of Mexico Operations Pipelay Services as
defined in Section 3 above. UNOCAL will contact TORCH to supply these
services at the contract prices. It is also the intent to involve TORCH in
the early planning stages of pipelay projects to assist in the design,
engineering, and scheduling of projects.
Further, TORCH is to provide the necessary vessels & services at the
contract prices to meet UNOCAL's construction requirements, to maintain
adequate supplies required to operate their equipment, to properly maintain
equipment to prevent delays, and to provide technical service & various
reports as necessary to complete projects.
5. PIPELAY PROJECT DEFINITIONS
The following definitions are listed for the purpose of contract
clarification.
Target Price- The price set during pre-project planning as the cost to
complete the project. All costs, profits and a factor to cover contingencies
are included in this number. Cost associated with potential weather delays
are not included. This will be used in calculating the amount of risk to be
shared.
Contingency- The factor added to the Target Price to cover unforeseen costs
due to mechanical maintenance or breakdowns, difficult soil conditions, or
other conditions causing delays or added expense. Weather related expenses
are not included in this amount.
RRSP- A reference number calculated by subtracting the amount included in
the Target Price for contingency from the Target Price. This will be used in
calculating the amount of reward to be shared.
Project Price- The actual amount of money charged to complete the project
inclusive of all costs and profits.
Pipelay Services Contract
Unocal/Torch
January 1, 2001 - December 31, 2001
Page 3
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Weather Related Delay- The amount billed to cover TORCH's costs for
non-productive periods of time due to weather. Costs will be incurred
depending upon the status of the men and equipment. There will be three
status conditions and a rate sheet covering each is included in Attachment
1.
o Full crew on board vessel not working.
o Skeleton crew on board vessel not working.
o Vessel tied up at dock.
Cost- The billing rate less all profit.
6. EXCLUSIONS
UNOCAL retains the right to acquire services from another supplier for any
service considered critical and not immediately available from TORCH. In
such cases, work performed by other pipelay service companies shall be
treated as though TORCH performed the work when measuring performance toward
meeting UNOCAL business share commitments described in Section 4 of this
contract.
UNOCAL does not guarantee any estimated dollar purchase of products or
services in whole or part. TORCH will be the first call for projects meeting
the scope of work defined herein.
7. PRICING
Prices for pipelay vessels & services will be those submitted by TORCH and
listed in Attachment 1 of this contract. The pricing identified in
Attachment 1 shall remain firm for the contract duration.
Risk & Reward Projects:
When mutually agreeable a risk and reward program will be developed for
projects. The specifics will be defined for each project prior to beginning
work. If a risk and reward program is not established between the parties,
then the project will be billed as Time & Materials using the rate schedule
listed in Attachment 1 or based upon on a mutually agreed lump sum price.
When a risk and reward program is developed the following guidelines will be
utilized.
When a scope of work is defined two different dollar reference points will
be established as follows:
(i) Target Price Will be developed using the rate sheets in
Attachment 1 and the time estimates for models, previous
projects and/or any benchmark mutually agreed between the
parties. The price will include a factor for contingencies.
Weather related delay costs will not be included in this
number.
(ii) RRSP Will be determined by subtracting the contingencies (i)
from the Target Price. For projects completed at a cost higher
than the Target Price, the cost overrun will be shared equally
between both parties. TORCH's share of the overrun cost will
be capped. The amount of the cap will be defined in the Work
Order. For projects that are completed for less than the RRSP,
a bonus will be paid to TORCH equal to one-half (50%) the
amount of the actual project price less than the determined
RRSP. All costs attributed to weather related delays shall be
subtracted from the project price when the risk/reward
calculations are determined.
Projects with a risk and reward program will be handled as a fixed profit
contract. The portion of the Target Price attributed to profit will be
identified and paid in proportion to project completion. Invoices will be
presented at the end of a project or once per month (whichever is shorter)
for the actual costs incurred inclusive of the earned profits portion.
Pipelay Services Contract
Unocal/Torch
January 1, 2001 - December 31, 2001
Page 4
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Third Party Billing:
Third party purchases paid by UNOCAL shall be billed the actual invoiced
price to TORCH plus a 10% markup. Should third party buyouts exceed $10,000
for any given project, only a 5% markup will be charged in excess of
$10,000. TORCH may order goods through UNOCAL's existing commercial
contracts for UNOCAL projects and have the vendor ▇▇▇▇ UNOCAL direct. Boat
charters are excluded from any markup or dollar limit. UNOCAL will however
pay the actual cost for boat charters plus a "broker commission" of $50 per
day.
Transportation Billing:
TORCH may invoice for construction crew transportation costs on short
duration projects of 4 day or less in cases when it is cost effective for
the crew to be removed prior to mobilization or demobilization. In such
cases TORCH shall invoice UNOCAL 75% of the actual transportation cost. In
such cases, TORCH may invoice UNOCAL 100% of the transportation cost for
construction material supply boats even when construction crews are
transported. TORCH is responsible for all crew transportation cost (per
draft) should the project exceed 4 days.
The UNOCAL Logistics Group shall be given the first right of refusal to
provide boat transportation for crew or supply boat charters. The UNOCAL
contact number is (▇▇▇) ▇▇▇-▇▇▇▇. Further, UNOCAL boat suppliers shall be
given 1st call consideration when TORCH bids supply boat charters for any
UNOCAL projects. If a UNOCAL boat supplier is selected, TORCH agrees to
contract directly with the supplier.
Hurricane Billing Guidelines:
Depending on the course of action required to protect crews and equipment
all billable rates are to be in accordance with the rate sheet included in
Attachment 1. For named storms threatening work in the GOM 75% of the third
party services cost (including tugs for lowing) will be billed at cost to
UNOCAL and TORCH agrees to pay the remaining 25% of charges. Tugs may be
held for the duration of the storm to facilitate return to the work site. In
most circumstances the crews shall remain with the laybarge. However, when
necessary TORCH may invoice UNOCAL for the actual cost of any transportation
required to safely demobilize and return crews to the Dulac, Louisiana
shorebase facility. The company representative shall determine when it is
necessary to demobilize and remobilization for storm threats.
Fabrication Shop Rates:
Shop rates for fabrication work shall be billed @ $38.00/hr. and includes
payment of all crafts, supervisors, welding, welding rods, lifting
equipment, blasting sand & painting equipment.
8. ASSIGNMENT OF PROJECTS
A Work Order will be generated to define specific billable work performed
under this agreement. All work will be per the Terms and Conditions of the
Master Services Contract (MSC) executed between UNOCAL and TORCH. The Work
Order will define the scope of work for the project, the specific start and
finish dates, the Target Price, and the RRSP. The risk and reward program
will be detailed to include the maximum amount TORCH will place at risk for
the project. A project work team will also be identified.
It is understood that TORCH will commit certain resources to projects based
upon Spirit Energy's issuance and TORCH's acceptance of a Work Order. Both
parties are expected to commit to the terms of a Work Order and obligate
themselves to certain expenses related to the execution of the project.
Thus, either party may seek reasonable compensation for actual out of pocket
expenses incurred in the event the other party cancels and/or defaults on
the terms of a signed Work Order.
(THE WORK ORDER SHOULD BE SIGNED BY BOTH PARTIES 10 DAYS PRIOR TO START
OF PROJECT. CONTACT NAMES AND PHONE NUMBERS SHALL BE LISTED IN THE
PROJECT WORK ORDER.)
9. F.O.B. POINT
Project materials are F.O.B., Bayou Pipe, Port of Iberia and TORCH shall
arrange transportation services. The actual cost for transportation may be
included in the Project Price. Mobilization and demobilization charges will
be dependent on equipment location. Normal mob/demob will be from TORCH's
main facility in Dulac, Louisiana.
Pipelay Services Contract
Unocal/Torch
January 1, 2001 - December 31, 2001
Page 5
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Any reduction in costs due to a closer proximity of the previous or
successive jobs shall reduce the Mobilization/Demobilization costs
accordingly. Materials and services provided by TORCH are F.O.B. TORCH's
facility in Dulac, Louisiana.
10. INVOICE & PAYMENT REQUIREMENTS
Attachment 2 is a listing of the Invoicing & Delivery Ticket Requirements
applicable per this contract.
11. PERFORMANCE INCENTIVES
UNOCAL is constantly striving for better reliability, performance and
enhancement of services. We want to have the most cost effective pipelay
services in the Gulf of Mexico. It is expected that during the course of
this agreement, both TORCH and UNOCAL will from time to time put certain
performance incentives in place on a project by project basis. Section 7
above details a risk and reward program that will be compensated for cost
saving performance.
Cost Saving Ideas
During the term of the contract either UNOCAL or TORCH may identify ideas
which could reduce TORCH's operating cost. Communication of such ideas is
greatly encouraged and it should be agreed in principle between the parties
that savings resulting from such ideas should be shared in an equitable
manner between the parties.
12. REPORTS/CONTRACT TRACKING
Reports are required in Excel format and shall be submitted to the Contracts
Administrator of UNOCAL's Spirit Energy 76 Operations. Attachment 3 is a
listing of the Reports, Tracking & Performance Requirements applicable per
this contract.
13. HES REQUIREMENTS
Attachment 4 is a listing of the HES Requirements applicable per this
contract.
14. CHANGE OF OWNERSHIP/TRANSFERABILITY/BANKRUPTCY
This contract is not assignable in whole or in part, without the prior
written consent of both parties, and any purported assignment without such
consent shall be void. In addition, either party shall have the right to
terminate this contract immediately at any time if the other party becomes
insolvent, makes an assignment for the benefit of creditors, or has a
bankruptcy petition filed by or against it.
Also, in the event of a change of ownership of either party, the other may
elect at its sole discretion to terminate this contract. A change in
ownership shall mean a change in the person or persons having the power to
direct or cause the direction of the management and policies of TORCH,
whether through the ownership of voting securities or otherwise.
15. CONTRACT PERFORMANCE
Violation of any contract terms/conditions or unsatisfactory service
received from TORCH may result in cancellation of this contract. In the
event of such a violation UNOCAL will issue a written notice outlining the
problem(s). If TORCH is unable to resolve the problem(s) to UNOCAL's
satisfaction within thirty (30) days after receipt of such notice, UNOCAL
may terminate their contract altogether, or remove the location where the
problem occurred without affecting any volume discounts that may be in force
in this or other contracts.
Pipelay Services Contract
Unocal/Torch
January 1, 2001 - December 31, 2001
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