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EXHIBIT 10.23
CONTRACT NO. 86-C-414
EL FURRIAL
GAS COMPRESSION SERVICES CONTRACT
BETWEEN
LAGOVEN, S.A.
AND
▇▇▇▇▇▇▇▇ INTERNATIONAL COMPANY AND PRODUCTION OPERATORS, INC.
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CONTRACT NO. 86-C-414
CONTENTS
CLAUSE DESCRIPTION PAGE
------ ----------- ----
1 ONE DEFINITIONS 06
2 TWO PURPOSE OF THE CONTRACT 09
3 THREE DURATION 11
4 FOUR OBLIGATIONS AND GUARANTEES OF
OPERATOR 13
5 FIVE OBLIGATIONS OF LAGOVEN 19
6 SIX SAFETY AND HEALTH STANDARDS 20
7 SEVEN TECHNICAL INFORMATION 23
8 EIGHT PERMITS 25
9 NINE FIRES AND OTHER EMERGENCIES 26
10 TEN START OF SERVICE 26
11 ELEVEN METERING 28
12 TWELVE RATE AND ADJUSTMENTS 31
13 THIRTEEN PRICE OF UTILITIES 34
14 FOURTEEN RECOGNITION OF INVESTMENTS 35
15 FIFTEEN BONUS AND PENALTY 36
16 SIXTEEN FORM OF PAYMENT 36
17 SEVENTEEN ACCOUNTING 38
18 EIGHTEEN AUDITING 39
19 NINETEEN LIABILITY FOR DAMAGES 40
20 TWENTY BONDS AND INSURANCE 41
21 TWENTY ONE APPLICABLE LAW 45
22 TWENTY TWO MECHANISMS FOR RESOLVING
DISPUTES 45
23 TWENTY THREE PATENTS, TRADEMARKS, LICENSES
AND COPYRIGHTS 48
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CONTRACT NO. 86-C-414
CONTENTS
CLAUSE DESCRIPTION PAGE
------ ----------- ----
24 TWENTY FOUR CONFIDENTIALITY 49
25 TWENTY FIVE FORCE MAJEURE OR ACT OF GOD 50
26 TWENTY SIX ASSIGNMENT AND TRANSFER OF
THE CONTRACT 53
27 TWENTY SEVEN CONFLICT OF INTEREST 54
28 TWENTY EIGHT HIRING OF PERSONNEL 56
29 TWENTY NINE TERMINATION FOR NONCOMPLIANCE 56
30 THIRTY REPRESENTATIVES, ANNOUNCEMENTS
AND NOTIFICATIONS 58
31 THIRTY ONE TAXES, FEES AND CONTRIBUTIONS 59
32 THIRTY TWO LEGAL ATTACHMENTS 60
33 THIRTY THREE RATE ADJUSTMENTS 61
34 THIRTY FOUR INTEGRAL CONTRACT, WAIVERS AND
MODIFICATIONS 61
35 THIRTY FIVE LANGUAGES AND COPIES 62
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CONTRACT NO. 86-C-414
ATTACHMENTS
ATTACHMENT A PERFORMANCE BOND LETTER OF CREDIT
ATTACHMENT B FORMULA FOR INCREASES
ATTACHMENT C TERMS OF PAYMENT, BONUS AND PENALTY
- PRICE OF THE CONTRACT.
ATTACHMENT C-1 TERMS OF PAYMENT, BONUS AND PENALTY
- HIGH PRESSURE SYSTEM.
ATTACHMENT C-2 TERMS OF PAYMENT, BONUS AND PENALTY
- MEDIUM PRESSURE SYSTEM.
ATTACHMENT D-1 TECHNICAL SPECIFICATIONS
- HIGH PRESSURE SYSTEM
ATTACHMENT D-2 TECHNICAL SPECIFICATIONS
- MEDIUM PRESSURE SYSTEM
ATTACHMENT E CONFIDENTIALITY AGREEMENT
ATTACHMENT F PERFORMANCE BOND LETTER FROM THE
▇▇▇▇▇▇▇▇ COMPANIES AND PRODUCTION OPERATORS
CORPORATION
ATTACHMENT G TECHNICAL PROPOSAL.
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CONTRACT NO. 86-C-414
EL FURRIAL GAS COMPRESSION SERVICES
Between LAGOVEN, S.A., affiliate of Petr--▇▇▇▇ de Venezuela, S.A., domiciled in
Caracas, constituted by document recorded in the First Government Registry of
Commercial Affairs in the Judicial Circuit of the Federal District and State of
Miranda on 18 December 1975 under No. 56, Volume 116-A and published in the
Municipal Gazette of the ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇. ▇▇▇▇▇ on 20 December 1975,
hereinafter called LAGOVEN, represented herein by ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, domiciled in
Caracas and holder of Identification Certificate No. 1.753.884, acting under
power of attorney granted by LAGOVEN, S.A. authenticated before Notary Public
Office Number Sixteen in Caracas, on February 1st, 1995, recorded under Number
52, Volume 07, of the books of authentications and recorded in the Government
Registry of Commercial Affairs of the Judicial Circuit of the Federal District
and State of Miranda, on March 1st, 1995, recorded under Number 36, Volume
2-C-SGDO, for one part and for the other ▇▇▇▇▇▇▇▇ International Company,
affiliate of The ▇▇▇▇▇▇▇▇ Companies, incorporated and existing under the laws
of the State of Delaware and domiciled in Tulsa, Oklahoma, United States of
North America, represented herein by ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇, a United States
citizen and holder of passport No. ▇▇▇▇▇▇▇▇▇, domiciled in the city of Tulsa,
Oklahoma, acting under power of attorney granted by ▇▇▇▇▇▇▇▇ International
Company, authenticated before Notary Public of the State of Oklahoma and
certified by the Consulate of Venezuela in the city of Houston, Texas; and
Production Operators Incorporated, affiliate of Production Operators
Corporation and incorporated and existing under the laws of the State of
Florida and domiciled in the city of Houston, Texas, United States of North
America, represented herein by ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, a United States citizen
and holder of passport No. ▇▇▇▇▇▇▇▇▇, domiciled in the city of Houston, Texas,
acting as Vice President and duly authorized to act hereunder, hereinafter
called THE OPERATOR, an agreement has been made to enter into the contract
contained in the following clauses.
[STAMP:]
LAGOVEN, S.A.
LEGAL DEPARTMENT - CARACAS
D.B.A.
ILLEGIBLE SIGNATURE
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CONTRACT NO. 86-C-414
EL FURRIAL GAS COMPRESSION SERVICES
1. CLAUSE ONE
DEFINITIONS
The words and terms that appear in this contract, whether written in
plural or singular form, will have the following meaning:
1.1 START UP CERTIFICATE: Document signed by the REPRESENTATIVES of
LAGOVEN and THE OPERATOR, one for each Plant, indicating the start
date of the SERVICE of each Plant.
1.2 CONTRACT YEAR: Period of twelve (12) months that begins January 1 and
ends the following December 31 in accordance with the Gregorian
calendar. Except the first CONTRACT YEAR which begins on the date of
the START UP CERTIFICATE and ends December 31 of that year and the
last CONTRACT YEAR which begins January 1 of the CONTRACT YEAR and
ends on the anniversary date of the date of START UP CERTIFICATE.
1.3 CONTRACT: The terms and conditions established in this document and
its Attachments.
1.4 DAY: Corresponds to the 24 hour period that begins at 12:00 am, local
time.
1.5 DOLLARS: Refers to United States of America Dollars.
1.6 METERING STATION: Refers to the set of metering instruments belonging
to THE OPERATOR which OPERATOR will construct and maintain in
accordance with the specifications indicated in CLAUSE ELEVEN -
METERING.
1.7 GAS: Gas handled and compressed at the INSTALLATIONS in accordance
with the conditions established in the TECHNICAL SPECIFICATIONS that
comprise Attachment "D" of the CONTRACT.
1.8 INSTALLATIONS: The infrastructure, equipment and pipeline systems
belonging to THE OPERATOR to be designed, constructed, maintained
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CONTRACT NO. 86-C-414
and operated by THE OPERATOR to guarantee the SERVICE on reliable
bases including the installations for prevention and control of
hazards.
1.9 UTILITIES: Natural Gas and Electricity supplied directly or
indirectly by LAGOVEN at the interconnection points specified in
Attachment "D" TECHNICAL SPECIFICATIONS.
1.10 MONTH: Calendar month that begins on the first day of each month.
1.11 MMSCFD: Million standard cubic feet per DAY.
1.12 PROJECT: Refers to the design and construction of the INSTALLATIONS.
1.13 PARTY(IES): Individually LAGOVEN or THE OPERATOR, and both
collectively.
1.14 PDVSA AND AFFILIATES: PDVSA is Petr--▇▇▇▇ de Venezuela, S.A., company
owning one hundred percent (100%) of the stock of LAGOVEN. AFFILIATES
are companies in which PDVSA directly or indirectly owns at least
fifty percent (50%) of the stock.
1.15 INITIAL PERIOD: Corresponds to the first 20 years of SERVICE for the
High Pressure Plant and 15 years for the Medium Pressure Plant,
calculated from the signing of the START UP CERTIFICATE of the gas
compression operation for each plant.
1.16 PERIOD OF SERVICE: Is the time consisting of the INITIAL PERIOD and
the extensions agreed upon by the PARTIES.
1.17 SERVICE CONNECTION POINT: Points where the following connections are
made in accordance with specifications established in Attachment "D",
TECHNICAL SPECIFICATIONS.
o Electrical feed connection to High and Medium Pressure Compression
Plants.
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CONTRACT NO. 86-C-414
o Firewater line from the Jusep'n area to the Medium Pressure
Compression Plant.
o Points where the condensate discharge and oily water drainage from
the Medium Pressure Plant are connected to the corresponding
Jusep'n systems.
1.18 INTERCONNECTION POINT: Points where the following connections are
made in accordance with the specifications established in Attachment
D, TECHNICAL SPECIFICATIONS.
o Suction pipeline of the Medium Pressure Plant to the Jusepin
production installations.
o Discharge pipeline of the Medium Pressure Plant to ACOGAS Plant.
o ACOGAS Plant to pipeline that transports the Gas to the High
Pressure Compression Plant.
o ACCRO Plant Discharge to feed pipeline of the High Pressure
Compression Plant.
o MUSCAR Plant Discharge to feed pipeline of the High Pressure
Compression Plant.
o Connection of gas distribution pipelines to LAGOVEN and CORPOVEN
gas injection ▇▇▇▇▇.
1.19 PPM: Refers to parts per million.
1.20 SAFETY AND HEALTH: Refers to all the activities related to Industrial
Safety or Accident Prevention, Fire Prevention and Control,
Environmental Protection and Industrial Hygiene.
1.21 REPRESENTATIVE(S): The Person(s) designated by each PARTY in
accordance with this CONTRACT to fulfill the
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CONTRACT NO. 86-C-414
duties and obligations of LAGOVEN and/or THE OPERATOR, respectively.
1.22 SERVICE: Refers to all the activities inherent to the receipt,
compression, transportation and distribution of gas in accordance with
the conditions and amounts specified in Attachment "D", TECHNICAL
SPECIFICATIONS.
1.23 SITE: Areas of land where the INSTALLATIONS will be constructed as
indicated in Attachment "D", TECHNICAL SPECIFICATIONS.
2. CLAUSE TWO
PURPOSE OF THE CONTRACT
2.1 THE OPERATOR will perform the SERVICE for account of LAGOVEN, but at
risk and cost of THE OPERATOR, it being understood that:
2.1.1 The OPERATOR'S remuneration for the SERVICE will only
consist of the remuneration stipulated in CLAUSE TWELVE: RATE AND
ADJUSTMENTS and will not include rights of ownership on the gas,
compressed or to be compressed, or the hydrocarbons.
2.1.2 The rights of THE OPERATOR arising from this CONTRACT
do not include rights over the economic benefits resulting from
LAGOVEN'S commercial activities.
2.1.3 This CONTRACT is entered into with THE OPERATOR with
regard to its particular conditions for which it is considered a
personal service contract. As a consequence of the above, THE
OPERATOR may not merge, associate or change its stockholder
structure or transfer the ownership of more than thirty three
percent (33%) of its voting shares without notifying LAGOVEN in
writing with at least (3) months notice prior
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CONTRACT NO. 86-C-414
to the date on which any of the above mentioned situations is
directed to take effect and must provide to LAGOVEN any
documentation the latter requests. The authorization of LAGOVEN
may not be arbitrarily denied; however, if in relation to this
CONTRACT, LAGOVEN deems it not convenient to its interests that
any of the above referenced circumstances take place, it will so
advise THE OPERATOR and if THE OPERATOR notwithstanding LAGOVEN'S
objection insists on carrying out its decision, LAGOVEN may cancel
this CONTRACT. In this event, the provisions of CLAUSE TWENTY
NINE - TERMINATION FOR NONCOMPLIANCE, Section 29.2 shall be
applied.
2.1.4 The following attachments are part of this CONTRACT:
ATTACHMENT A Performance Bond Letter Of Credit
ATTACHMENT B Formula For Increases
ATTACHMENT C Terms Of Payment, Bonus And Penalty
- Price Of The Contract.
ATTACHMENT C-1 Terms Of Payment, Bonus And Penalty
- High Pressure System.
ATTACHMENT C-2 Terms Of Payment, Bonus And Penalty
- Medium Pressure System.
ATTACHMENT D-1 Technical Specifications
- High Pressure System
ATTACHMENT D-2 Technical Specifications
- Medium Pressure System
ATTACHMENT E Confidentiality Agreement
ATTACHMENT F Performance Bond Letter From The
▇▇▇▇▇▇▇▇ Companies And Production
Operators Corporation
ATTACHMENT G Technical Proposal.
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CONTRACT NO. 86-C-414
3. CLAUSE THREE
DURATION
3.1 This CONTRACT will take effect on the date it is signed and will have
a duration of twenty (20) years calculated from the date the START UP
CERTIFICATE is signed for the service of the High Pressure Plant, plus
the time it takes to design and construct the INSTALLATIONS.
However, as regards the Medium Pressure Plant, the time of operation
that Lagoven states it requires according to the TECHNICAL
SPECIFICATIONS, Attachment "D", is fifteen (15) years, calculated from
the START UP CERTIFICATE corresponding to said Plant. At the end of
that time, there will be no obligation on Lagoven's part to receive
SERVICE from the Medium Pressure Plant and the provisions of Section
3.3 below will apply unless the PARTIES agree to extend the SERVICE in
accordance with Section 3.2 of this clause.
3.2 LAGOVEN may request the extension of the CONTRACT for additional
periods and to that end will notify THE OPERATOR in writing at least
two (2) years prior to the termination of the INITIAL PERIOD, stating
the duration of the requested extension. After THE OPERATOR receives
the notification, the parties will meet to agree on the terms and
conditions of the extension of the CONTRACT. Any extension agreed
upon between the PARTIES will be in writing.
3.3 If the parties cannot reach an agreement for the extension of the
CONTRACT, LAGOVEN with at least two (2) months prior to the expiration
of the INITIAL PERIOD or of any of its eventual extensions, may:
3.3.1 Request return of the SITE, in which case THE OPERATOR will
proceed to dismantle the INSTALLATIONS upon expiration of the
INITIAL PERIOD or of any of its extensions and do everything
necessary to return the SITE free of structures,
installations,
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CONTRACT NO. 86-C-414
machinery, equipment, waste and in the same environmental
conditions it was in at the time it was received. To these
effects, THE OPERATOR will have a period of one hundred twenty
(120) days calculated from the termination of the CONTRACT.
For the area of each Plant, it will not be required that THE
OPERATOR restore the original topography and vegetation to
conditions prior to construction but it will be the OPERATOR'S
responsibility to completely withdraw all structures,
equipment or material, whether on the surface or below it
within the area of each Plant including any equipment,
structures and materials outside the area of same that have
formed an integral part of said Plant, leaving the place
completely cleared and clean.
In the case of gas pipelines outside the Plants, THE OPERATOR
must remove all equipment, material or surface structure that
forms part of or is associated with said pipelines (example:
vents, manifolds, pipe, valves, fences, platforms, foundation
slabs, etc.) leaving these areas in the same cleaned up
conditions as specified for the Plants, it not being necessary
to remove the structures located in the subsoil.
3.3.2 Acquire all or part of the INSTALLATIONS, materials, machinery
and equipment utilized or destined to render the SERVICE for a
price that will be agreed upon among the parties. If LAGOVEN
decides to acquire only part of the INSTALLATIONS and other
property, the provisions of Section 3.3.1 above will apply to
those which it does not wish to acquire.
Each one of the PARTIES will assume its legal costs related
with the sales-purchase operation.
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3.4 In the event that LAGOVEN notifies THE OPERATOR of its intent to
acquire all or part of the INSTALLATIONS, THE OPERATOR is obligated
to:
3.4.1 Not make any change in the accounting practices, operation,
maintenance, contracts and in general of any kind that might
affect the receiving, compression and distribution of gas or
the INSTALLATIONS.
3.4.2 Take all reasonably necessary and appropriate actions to
preserve and protect the value and usefulness of all the assets
belonging to THE OPERATOR necessary to completely fulfill the
obligations of THE OPERATOR specified in this CONTRACT.
3.4.3 Not execute or omit any action or permit any action to be
executed or omitted which may cause an infraction or violation
of THE OPERATOR on any contract for goods or services, or
supply of materials, or on third parties and which could affect
any of the properties or assets of THE OPERATOR.
4. CLAUSE FOUR
OBLIGATIONS AND GUARANTEES OF OPERATOR
4.1 THE OPERATOR will develop and carry out under its entire and exclusive
responsibility all the activities necessary to provide the SERVICE on
the terms established in the CONTRACT and in accordance with terms and
conditions of its proposal dated September 17, 1996, and the
subsequent technical clarifications contained in documents
POI-WIC/IGAS-P-026 / 027 / 028 / 029 / 030 / 031 / 032 and 033, all of
which is part of Attachment G of this CONTRACT.
The INSTALLATIONS to be executed by THE OPERATOR are the ones defined
in its technical proposal dated September 17, 1996 as GAS
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AND ELECTRIC DRIVERS ALTERNATE CASE for the High Pressure Plant and
HIGH SPEED OPTION for the Medium Pressure Plant.
4.2 In the event of noncompliance with the provisions stipulated in the
above section, LAGOVEN will have the option of cancelling the CONTRACT
in accordance with Clause Twenty Nine - TERMINATION FOR NONCOMPLIANCE,
Section 29.1.
4.3 THE OPERATOR must begin the service with the compression in the High
Pressure Plant of a stable 300 MMSCFD of gas in accordance with the
technical specifications included in TECHNICAL SPECIFICATIONS,
Attachment "D-1", seventeen (17) months after signing the CONTRACT and
increase it by an additional stable 150 MMSCFD of gas twenty (20)
months after signing the CONTRACT.
4.4 THE OPERATOR must begin the service in the Medium Pressure Plant with
the compression of the rate of flow established in the base profile
eight (8) months after signing the CONTRACT.
4.5 THE OPERATOR will construct the INSTALLATIONS the principal parts of
which are:
4.5.1 Suction pipeline from the Medium Pressure Plant and its
connection to the Jusep'n production installations.
4.5.2 Medium Pressure Compression Plant.
4.5.3 Discharge pipeline from the Medium Pressure Plant and its
connection to the ACOGAS Plant.
4.5.4 Pipeline for transporting from ACOGAS Plant property of LAGOVEN
to the High Pressure Compression Plant.
4.5.5 Pipeline for transporting gas from ACCRO to High Pressure
Plant.
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4.5.6 High pressure gas compression plant. (High Pressure Plant).
4.5.7 Pipeline for transporting gas at high pressure to gas injection
▇▇▇▇▇.
4.6 The plants will be constructed on LAGOVEN lands which will be assigned
by gratuitous bailment to THE OPERATOR. The pipelines, for their
part, will be constructed on lands where LAGOVEN will establish
easements which will be extended to THE OPERATOR. These pipelines
must be placed maximizing the use of existing corridors, THE OPERATOR
being responsible for the design of the route which must be submitted
to LAGOVEN for approval prior to carrying out the above mentioned
easements.
4.7 THE OPERATOR agrees to include in the design of the INSTALLATIONS the
provisions necessary to minimize the effect that the operation, stable
or not, of its INSTALLATIONS might have on the operation of the systems
of LAGOVEN and AFFILIATES. These provisions will be part of the
PROJECT.
4.8 THE OPERATOR must construct, maintain and operate THE METERING
STATIONS, in the amount, location and arrangement established in
Attachment "D", TECHNICAL SPECIFICATIONS.
4.9 Without prejudice to any other declarations contained in this CONTRACT,
THE OPERATOR expressly declares the following:
4.9.1 It is completely knowledgeable of the nature of the SERVICE to
be provided and is fully and technically prepared for it.
4.9.2 It is fully familiar with the prevailing conditions in
Venezuela and communities adjacent to the INSTALLATIONS, as well as
legislation applicable to the SERVICE and the local regulations.
Likewise, THE OPERATOR declares it knows the SITE, the general and
local conditions, as well as
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all the factors that could have an impact on the SERVICE during
the design, construction, operation and maintenance of the
INSTALLATIONS, such as the physical, meteorological and climatic
conditions that prevail at the SITE, the topography and
accessibility of the SITE, the availability of labor, materials,
equipment, electricity, transportation resources, docks, lodging,
industrial services and special services.
4.9.3 That any lack, carelessness, error or omission in obtaining the
information referenced in number 4.9.2 above as well as any other
of equal or similar nature, will not relieve it of its
responsibility in complying with its obligations that are derived
from this CONTRACT.
4.9.4 It guarantees that it will provide the SERVICE according to the
requirements of this CONTRACT.
4.9.5 That it will correct, in the shortest time possible, any
failure that occurs during the design or construction of the
INSTALLATIONS or during the rendering of the SERVICE at its sole
and exclusive account, without cost whatsoever for LAGOVEN.
4.10 THE OPERATOR guarantees that it will hire qualified personnel
necessary for the operation and maintenance of the INSTALLATIONS. THE
OPERATOR is the sole party responsible for fulfilling the obligations
relative to said personnel stipulated in the Organic Labor Law in
effect in Venezuela, as well as any other law, regulation, decree or
resolution issued by the competent authorities, THE OPERATOR being
subject to that expressly established in same.
4.11 THE OPERATOR guarantees that the personnel and other resources
associated with the INSTALLATIONS are appropriate and sufficient to
maintain optimum operation and suitable maintenance of the
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INSTALLATIONS, to permit guaranteeing a reliable, continuous,
efficient and safe SERVICE.
4.12 THE OPERATOR guarantees that all the materials, equipment, flanges and
accessories to be used in the construction of the INSTALLATIONS will
be of the appropriate quality on a world-wide level for similar
installations; that internationally recognized engineering practices
will be used; and that it will use during the design and construction
of the INSTALLATIONS one of the following codes: European, Japanese
or United States of America. In the event of using European or
Japanese code, THE OPERATOR will provide to LAGOVEN its equivalent to
the United States of America code.
Likewise it guarantees that the flanges and piping accessories to be
used in the INSTALLATIONS will be of recognized reputation and
reliable origin and its quality must not be questioned by national or
foreign specialized companies or institutions.
4.13 THE OPERATOR guarantees that all the components, installations and
equipment of the INSTALLATIONS will be maintained in good condition
and that the maintenance work will be performed to achieve levels of
availability of the units equal to or greater than those contemplated
in the original design of the plant and which are stated in the
proposal in order to minimize the sporadic deficiencies in plant
capacity which will be subject to penalties established in Attachment
"C" of this CONTRACT.
4.14 Without prejudice to the provisions stipulated in CLAUSE TWENTY FIVE -
FORCE MAJEURE or ACT OF GOD, during the period of validity of this
CONTRACT,THE OPERATOR will be the sole party responsible for the
continuity of the SERVICE, being obligated to proceed with the actions
that may be necessary with greatest speed possible and assuming all
related expenses when said continuity is interrupted.
4.15 THE OPERATOR guarantees ON-SITE availability of the usual and
customary spare parts necessary to repair in the briefest possible
time any failure of any component of the INSTALLATIONS.
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4.16 THE OPERATOR will be responsible for handling and disposal of
contaminated waste such as: contaminated rain water, sewage and any
other waste from the INSTALLATIONS in an environmentally safe and
reliable manner complying with the legal dispositions on the matter.
4.17 THE OPERATOR is obligated to comply with all Venezuelan laws,
regulations, ordinances, decrees, resolutions and other dispositions
relative to rendering the SERVICE. It is expressly understood that
the violation of the legal dispositions, wilfully, through ignorance
or misinterpretation will not relieve THE OPERATOR from repairing
without delay to its exclusive account the damages and losses
resulting from its action or omission or relieve it of its
responsibility of satisfactorily rendering the SERVICE or complying
with the obligations derived from this CONTRACT.
4.18 THE OPERATOR must inform LAGOVEN in writing of any modification in the
INSTALLATIONS that could affect the SERVICE.
4.19 THE OPERATOR must deliver to LAGOVEN, within thirty (30) days after
signing the CONTRACT the PROJECT Performance Schedule describing its
sequence and duration covering the period between the date when the
CONTRACT comes into effect and the DATE OF THE START UP CERTIFICATE of
each one of the Plants (High and Medium Pressure). Any change that
may occur on said Performance Schedule prior to the start of the
SERVICE must be reported in writing to LAGOVEN providing a detailed
description of the reasons for such change and attaching the modified
Performance Schedule. In any event, THE OPERATOR is obligated to keep
LAGOVEN informed on the progress of the projects and fulfillment of
the Performance schedule.
4.20 THE OPERATOR will obtain prior written authorization from LAGOVEN to
publish any information related to the SERVICE and/or the SITE. THE
OPERATOR will also require its subcontractors to comply with this
requirement.
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4.21 THE OPERATOR will maintain all the original data and information
resulting from the SERVICE including but not limited to geophysical
data, engineering, records and completion reports of THE PROJECT and
any other data that THE OPERATOR may compile while the CONTRACT is in
effect. Said data and information may be reviewed by LAGOVEN at any
time and will be delivered to LAGOVEN in the event the installations
are acquired upon termination of the CONTRACT.
4.22 THE OPERATOR will permit LAGOVEN representatives access to all the
installations associated with this CONTRACT in order to conduct
inspections, audits or investigation of any kind related to the
construction, operation or maintenance of the INSTALLATIONS that may
affect the SERVICE and will facilitate the performance of the
activities of said representatives.
5. CLAUSE FIVE
OBLIGATIONS OF LAGOVEN
5.1 LAGOVEN will pay THE OPERATOR for the SERVICE according to the volume
of gas compressed and according to the terms and conditions stipulated
in this CONTRACT.
5.2 LAGOVEN will assign by gratuitous bailment to THE OPERATOR two lots of
land. Lot A, located in the area of EL FURRIAL where the High
Pressure Plant will be constructed and Lot B where the Medium Pressure
Compression Plant will be constructed located in the area of Jusep'n.
Said lots of land will be assigned for a period equal to the SERVICE
of each Plant, plus the time period that construction lasts on each of
the lots, as well as the time period needed for dismantling
INSTALLATIONS, when the SERVICE is completed. LAGOVEN will deliver
Lot A in a period no greater than five (5) months and Lot B in a
period not greater than two (2) months, both periods calculated from
the date the CONTRACT is signed. These periods will apply for
purposes of availability of the lands for starting construction; but
will not affect the possibility that THE OPERATOR has, from the date
the
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CONTRACT is signed to have access to the lands for purposes of
performing studies and/or surveys that do not alter existing
conditions of said lands.
The referenced lots will be returned upon termination of the service
in the same physical and environmental conditions in which they were
delivered.
In addition to the lands, LAGOVEN will supply the rights of way for
laying the gas gathering , transportation and distribution lines
outside the Compression Plants. The rights of way will be obtained by
LAGOVEN in a period no greater than three (3) months calculated from
the date on which LAGOVEN receives from THE OPERATOR the route plans
with the detailed topographical information together with the
descriptive report and technical specifications of the lines.
In the event of delay in obtaining lots A and B, or the easements,
beyond the maximum periods previously indicated, LAGOVEN will
recognize an extension of the PROJECT completion date if said delay
directly causes a delay in the construction which must be demonstrated
by THE OPERATOR. In no event may the delay in construction be greater
than the time of the delay in obtaining the easements or obtaining
lots A and B.
5.3 The lands that are assigned (lots A and B) will be the object of an
environmental inspection (Base Line Study) conducted by a company
qualified for that purpose contracted and paid by LAGOVEN. The result
of said inspection will be accepted by the PARTIES as proof of the
pre-existing environmental condition for which LAGOVEN assumes
responsibility. The result of the environmental inspection will be an
attachment to the gratuitous bailment contract that the PARTIES will
execute.
5.4 LAGOVEN will be responsible for negotiating and completing those
agreements with third parties, holders of lands and owners of
properties within the site required by THE OPERATOR to carry out the
SERVICE. Said rights granted by third parties to LAGOVEN will be
extended to THE OPERATOR throughout the duration of the SERVICE.
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6. CLAUSE SIX
SAFETY AND HEALTH STANDARDS
6.1 THE OPERATOR will at all times maintain all its work areas in safe,
orderly and cleaned up conditions during construction, operation and
maintenance of the INSTALLATIONS as well as all the installations
associated with same.
6.2 THE OPERATOR will be responsible upon termination of this CONTRACT,
for cleaning up and returning the SITE to the original condition it
was in at the time it was delivered excluding only the underground
sections of the pipelines located outside the limits of the areas
denominated Lot "A" and Lot "B" defined in Section 5.2. THE OPERATOR
will not be responsible for preexisting environmental conditions.
6.3 THE OPERATOR guarantees to establish and SAFETY AND HEALTH program
suitable to the characteristics and type of work that will be
performed during the design phases, construction, start up, operation,
maintenance and dismantling of the INSTALLATIONS.
6.4 THE OPERATOR will take the necessary steps for preservation and safety
of life, property, crops, vegetation, environmental protection,
prevention of environmental contamination and health and safety of
personnel taking all necessary precautions to avoid harming the
environment during the design phases, construction, start up,
operation, maintenance and dismantling of the INSTALLATIONS. Likewise
it will take the necessary steps so as, in the event of disasters
and/or accidents, to minimize the effects of same on people, the
environment and property.
6.5 THE OPERATOR will have supervisory personnel duly trained in the
performance of the activities of the PROJECT and the SERVICE and in
aspects of SAFETY AND HEALTH related to same. Likewise it will be
responsible for training its personnel on matters of SAFETY AND HEALTH
and will provide suitable training that,
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at a minimum, conforms with internationally accepted practices and
standards.
6.6 THE OPERATOR declares it is fully aware of and agrees to comply with
Venezuelan laws, regulations and other legal dispositions on matters
of SAFETY AND HEALTH and further agrees to comply with the standards
and procedures of SAFETY AND HEALTH presented by THE OPERATOR in its
proposal and approved by LAGOVEN which is an integral part of this
CONTRACT.
6.7 THE OPERATOR declares it is knowledgeable of the systems of
notification, reporting and investigation of accidents utilized by
PDVSA and agrees to follow them strictly.
6.8 THE OPERATOR must comply with the design standards of PDVSA'S Hazards
Engineering Manual contemplated in Attachment "D", TECHNICAL
SPECIFICATIONS, which it states it knows and is considered an integral
part of this CONTRACT.
6.9 It is understood that the design, operation and maintenance of the
fire fighting systems and equipment of the INSTALLATIONS will be the
exclusive responsibility of THE OPERATOR.
6.10 THE OPERATOR will be responsible for the performance of a "Hazop" risk
analysis of operability and a quantitative risk analysis of the design
of the INSTALLATIONS. This analysis must be performed by a
specialized company selected by THE OPERATOR and approved by LAGOVEN
and will be contracted and paid by THE OPERATOR. The final design of
the installations must comply with the risk tolerance criteria
established by PDVSA, according to the standards indicated in
Attachment "D", TECHNICAL SPECIFICATIONS.
Throughout the period of SERVICE, THE OPERATOR agrees to conduct
technical safety audits, at the time LAGOVEN requires, of THE
OPERATOR'S INSTALLATIONS through a specialized company previously
approved by LAGOVEN and contracted and paid by THE OPERATOR. THE
OPERATOR must execute, at its cost and in the briefest time possible,
the actions and/or
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improvements necessary to eliminate the unsafe conditions of the INSTALLATIONS
identified in the audit report which might affect the safety of the
installations owned by LAGOVEN. LAGOVEN may request up to a maximum
of one (1) audit every six (6) months.
7. CLAUSE SEVEN
TECHNICAL INFORMATION
7.1 LAGOVEN reserves the right, and OPERATOR so agrees, to request from
OPERATOR any information on any technical aspect relative to the
design and/or construction of the INSTALLATIONS, each time LAGOVEN
deems it necessary for the purpose of verifying the compliance with
standards on SAFETY AND HEALTH. Thereafter, LAGOVEN may make
suggestions or comments relative to design and/or construction
aspects, without this signifying the acquisition of a commitment,
responsibility or obligation whatsoever on LAGOVEN'S part, for the
design and/or construction of the INSTALLATIONS, or the partial or
total release of THE OPERATOR from any of the responsibilities or
obligations that THE OPERATOR has contracted according to this
CONTRACT.
7.2 In accordance with Section 7.1 above, THE OPERATOR will deliver to
LAGOVEN, for its information during the design phase of the
INSTALLATIONS a copy of the documents and plans that are listed in
this section.
THE OPERATOR is free to make as many deliveries of said documents and
plans during the design phase of the INSTALLATIONS as it deems
convenient; but at least must make two (2) formal deliveries: One
upon completion of the basic engineering and another upon completion
of the approved construction plans before starting construction of the
INSTALLATIONS.
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The documents to be delivered to LAGOVEN are the following:
a) Process Flow Diagrams ("PFD's")
b) Piping and Instrumentation Diagrams ("P&ID's")
c) Equipment Layout Plan ("Plot Plan")
d) Piping Layout and Underground Masonry
e) ESD Systems Cause and Effect Diagram
7.3 THE OPERATOR must submit to review and approval of LAGOVEN the
construction plans of any portion of the INSTALLATIONS to be
interconnected to installations of LAGOVEN and/or any AFFILIATE. The
referenced plans must be submitted, at the latest, three (3) months
before construction starts on any of the systems involved. LAGOVEN
will issue the approval and/or comments on the construction plans
within a period not greater than thirty (30) continuous days
calculated from the date of formal receipt of same.
It is understood that this will be the only portion of the
INSTALLATIONS where the design will be approved by LAGOVEN, without
this relieving THE OPERATOR of its responsibility for errors,
omissions, defects or failures in the design and construction of such
systems or installations.
7.4 Given the importance of the reliability of the SERVICE, all the
technical documents related to the INSTALLATIONS such as criteria and
bases of design, drawings, sketches and plans, specifications and/or
materials sheets, installation manuals, equipment testing reports,
final construction plans, detailed time schedules, operations and/or
maintenance manuals, mechanical catalogs and any other similar and/or
engineering document must be available for information and/or
inspection by LAGOVEN which shall have the right to reproduce and use
them at their discretion with prior consent of THE OPERATOR which
shall not deny same unless there are sufficiently justifiable reasons
for such and without this implying a violation of right of ownership
or any other right of THE OPERATOR but always subject to the
confidentiality to which CLAUSE TWENTY FOUR - CONFIDENTIALITY refers.
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7.5 The access and activities mentioned in this clause must be performed
in such a way as to not disturb or interrupt the construction or
operation of the INSTALLATIONS.
7.6 LAGOVEN assumes no obligation of reviewing, detecting errors or
omissions or correcting any deficiency in the technical information
supplied by THE OPERATOR for information.
8. CLAUSE EIGHT
PERMITS
8.1 THE OPERATOR will be responsible and defray its own expenses for the
timely processing and obtaining of all the permits, licenses,
certificates and visas required by competent governmental authorities
which have jurisdiction over THE OPERATOR, its employees and/or agents
by reason of the design, construction, operation and maintenance of
the INSTALLATIONS, including those necessary for importing any
material and equipment throughout the period of validity of this
CONTRACT.
8.2 THE OPERATOR will also be responsible for the performance of any
environmental or other kind of study required by competent authorities
except for the environmental inspection contemplated in Clause 5.3 of
this CONTRACT.
8.3 LAGOVEN may cooperate, according to its capability and availability of
personnel, in the processing of permits, licenses or certificates
required by THE OPERATOR but in no case will LAGOVEN assume any
responsibility over the result of its effort.
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9. CLAUSE NINE
FIRES AND OTHER EMERGENCIES
9.1 At OPERATOR'S request, LAGOVEN may provide support fighting fires
occurring at the INSTALLATIONS or SITE, it being understood that
LAGOVEN will not be responsible for material damages or bodily
injuries resulting from its intervention.
9.2 LAGOVEN at OPERATOR'S request, in accordance with the availability and
capability of LAGOVEN'S personnel, will provide support in
transporting injured people from the INSTALLATIONS or SITE to
assistance centers during the fires and/or any other emergency. THE
OPERATOR relieves LAGOVEN from all responsibility that may arise from
transporting injured people and will be in charge of obtaining the
permits, authorizations or certificates necessary for transporting
injured people.
9.3 In the event of coinciding fires or other emergencies in a LAGOVEN
INSTALLATION and in the INSTALLATIONS or SITE, it is understood that
LAGOVEN will give preference to attending said fires or other
emergencies in its own installations and/or injured people.
9.4 In the event that LAGOVEN supports THE OPERATOR in an emergency at the
INSTALLATIONS or SITE, THE OPERATOR will reimburse LAGOVEN the
expenses incurred by said support. To that effect LAGOVEN will
present an invoice for such expenses that must be paid within thirty
(30) days after it is presented.
10. CLAUSE TEN
START OF SERVICE
10.1 For each Plant, THE OPERATOR must report to LAGOVEN in writing thirty
(30) days in advance of the date on which the PROJECT will be
completed and testing will begin on the INSTALLATIONS.
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At the same time as this notification or on an earlier date, THE
OPERATOR will deliver to LAGOVEN the detailed start up procedure of
the INSTALLATIONS.
For each Plant, THE OPERATOR will ask LAGOVEN in writing two (2)
months in advance for the gas requirements to conduct the equipment
start up tests. Subject to THE OPERATOR'S compliance with the
conditions described in this section, LAGOVEN will guarantee the
availability of the volume of gas required for the High Pressure Plant
upon completion of thirteen (13) months calculated from the signing of
the CONTRACT and for the Medium Pressure Plant upon completion of
seven (7) months calculated from the signing of the CONTRACT.
10.2 For each on of the Plants that comprise the INSTALLATIONS, after
operations testing has been completed and THE OPERATOR deems that
SERVICE may begin, the latter will notify LAGOVEN as to the date
scheduled for said start up at least seven (7) days in advance.
In the case of the High Pressure Plant, the START UP CERTIFICATE will
only be signed upon completion of a minimum period of seven (7)
continuous days of operation during which the injection rate is
greater than or equal to 300 MMSCFD during at least ninety seven
percent (97%) of the time, in which case the starting date of the
SERVICE will be the first day of said period.
For the purposes of signing the START UP CERTIFICATE, if on the date
scheduled for starting operation, LAGOVEN does not provide the
required volume of 300 MMSCFD, operation must be carried out based on
injection volume that LAGOVEN is capable of providing, the other
requirements established in the preceding paragraph being fulfilled
for this new injection volume. Upon completion of these requirements,
the signing of the START UP CERTIFICATE can take place.
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The date of the START UP CERTIFICATE will be used for purposes of
applying the penalty and bonus established in CLAUSE FIFTEEN - BONUS
AND PENALTY.
For the Medium Pressure Plant, the START UP CERTIFICATE will only be
signed after completion of a minimum period of seven (7) continuous
days of operation during which the compression rate is equal to or
greater than 55 MMSCFD during at least ninety seven percent (97%) of
the time, in which case the starting date of the SERVICE will be the
first day of said period.
For the purposes of signing the START UP CERTIFICATE, if on the date
scheduled for starting of operation, LAGOVEN does not provide the
required volume of 55 MMSCFD, operation must be carried out based on
compression volume that LAGOVEN is capable of providing, the other
requirements established in the preceding paragraph being fulfilled
for this new compression volume. Upon completion of these
requirements, the signing of the START UP CERTIFICATE can take place.
The date of the START UP CERTIFICATE will be used for purposes of
applying the penalty in the event of delay, CLAUSE FIFTEEN - BONUS AND
PENALTY.
11. CLAUSE ELEVEN
METERING
11.1 REQUIREMENTS OF INSTRUMENTS
11.1.1 All the gas metering instruments will be located in the
METERING STATIONS. The information from those metering
instruments will be centralized in control rooms in each of THE
OPERATOR'S plants. The metering will be real time utilizing on
line instruments and computer devices unless otherwise determined
by mutual agreement. THE OPERATOR, by mutual agreement with
LAGOVEN,
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will have available output signals from the transmission and
computer devices to LAGOVEN for monitoring purposes. In the event
it is necessary, additional equipment will be installed to protect
and ensure suitable operation of the transmission and computer
devices.
11.1.2 LAGOVEN will have access at all times to the METERING STATIONS.
11.1.3 The readings, calibration, repair and adjustment of meters of
UTILITIES and of GAS including analytical equipment will be for
the account of THE OPERATOR.
11.1.4 The records of the metering instruments prepared by THE
OPERATOR will belong to it and THE OPERATOR will maintain them on
file for a period not less than two (2) years. Throughout this
period, THE OPERATOR at LAGOVEN'S request will deliver the records
and calculations for inspection and verification subject to their
return by LAGOVEN within a period of twenty (20) days following
receipt. LAGOVEN will have a similar obligation to maintain the
records.
11.2 CALIBRATION OF THE INSTRUMENTS
11.2.1 Calibration of the metering instruments means "the verification
that each instrument is within the metering tolerance accepted in
this CONTRACT".
11.2.2 At any time at LAGOVEN'S request or at least once a MONTH, THE
OPERATOR will calibrate the meters, instruments and accessories,
including the analyzers in the presence of REPRESENTATIVE(S) of
LAGOVEN as indicated below and the REPRESENTATIVES of both PARTIES
will observe together any adjustment that is made. The primary
metering elements will be inspected at each calibration.
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11.2.3 THE OPERATOR must maintain technical manuals from manufacturers
and calibration manuals on the instruments utilized to meter the
SERVICE. THE OPERATOR must establish and maintain the documented
procedures for calibration and agreement or lack of agreement of
the instruments and calibration equipment. THE OPERATOR must
train the personnel assigned to calibration of the metering
instruments of the SERVICE. THE OPERATOR must have an instrument
shop which will house the certified equipment and calibration
tools required for the metering instruments of the service.
11.2.4 THE OPERATOR will notify LAGOVEN in writing about the
performance of all the calibrations, tests and/or repairs of the
meters and accessory instruments at least seventy two (72) hours
prior to performing said calibrations, tests and/or repairs. The
cost of the calibrations, tests and/or repairs will be for THE
OPERATOR'S account.
11.2.5 THE OPERATOR will timely provide to the other PARTY a copy of
all the equipment tests, calibrations, repairs and/or test reports
and forms even when said activity is witnessed or not by LAGOVEN.
The percentage of error of the metering devices must not exceed
the limits indicated below:
Parameter Limits
--------- ------
Differential Pressure: + 1 % of the scale ("full scale")
-
Static Pressure: + 0.5 % of the scale ("full scale")
-
Temperature: + 1 % of the scale ("full scale")
-
If a deviation is detected in any official flow meter greater
than two percent (2%), LAGOVEN may adjust the volume metered
by the equipment that shows said deviation by a percentage
equal to half the difference existing between the
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percentage of deviation detected and the maximum tolerable two
percent (2%), to be applied from the date of the last
calibration to the date that the exceeding deviation is
detected.
12. CLAUSE TWELVE
RATE AND ADJUSTMENTS
12.1 The SERVICE will be compensated by applying two rates per million
standard cubic feet processed, which are indicated in attachment "C-1"
for the High Pressure Plant, and Attachment "C-2" for the Medium
Pressure Plant.
12.2 Said rates include all the costs of OPERATOR related to the SERVICE
such as national or foreign labor costs, maintenance, administration,
utilities, depreciation, profit, bonds, insurance, emergencies and all
applicable taxes, with the exception of the Wholesale and Luxury Tax
(ICSVM), which will be invoiced by THE OPERATOR and paid by LAGOVEN at
the applicable rate.
12.3 The rates will be adjusted after written request by THE OPERATOR by
applying the following procedures that are indicated for each cost
item, as follows:
NATIONAL DIRECT LABOR
Includes only personnel considered Lower Payroll. The base salary
offered will be adjusted in the same proportion of salary increases as
are produced by Applicable Collective Bargaining Contract and/or Laws
and/or Governmental Decrees.
The base benefits offered will be adjusted in proportion to the
changes that are produced by Applicable Collective Bargaining Contract
and/or Laws and/or Governmental Decrees.
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These adjustments will be effective on the same date that the salary
increases or benefit changes are produced by Applicable Collective
Bargaining Contract and/or Laws and/or Governmental Decrees.
FOREIGN DIRECT LABOR
To be adjusted at the beginning of the CONTRACT YEAR applying the
inflation index of the United States of America denominated the
Consumer Price Index.
MAINTENANCE
Includes the yearly costs of labor, equipment, etc., related to the
maintenance and repairs of any type (ordinary and extraordinary
maintenance) of the INSTALLATIONS as well as the costs related to
replacement of equipment and/or their parts, transportation,
nationalization and installation. Additionally includes the costs of
catalysts, oils lubricants and any other substance required for
maintenance of the INSTALLATIONS.
The portion in Bolivars will be adjusted quarterly in accordance with
the Price Indexes published by the Central Bank of Venezuela by
applying the formula for increases included in Attachment B of this
CONTRACT. The portion indicated in DOLLARS will be adjusted at the
beginning of each CONTRACT YEAR utilizing the inflation index of the
United States of America denominated the Producer Price Index.
In the event that any of the indexes used to adjust the prices ceases
to be published by the corresponding organization, the PARTIES agree
to define and immediately agree on an alternate index that will be
incorporated in the price adjustment mechanism.
The PARTIES agree to adjust the values of the indexes used in the
price adjustment mechanism in the event that the base year
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used as a reference is changed by the corresponding organization.
ADMINISTRATION
Includes the costs related to the administration of the INSTALLATIONS
such as: support personnel, including personnel considered Upper
Payroll, accounting, telephone, fax, stationery, mail, courier, bonds
and insurance, etc. In no event will it include "overhead" expenses
or expenses corresponding to parent organization of THE OPERATOR.
The portion in Bolivars will be adjusted semiannually in accordance
with the Price Indexes published by the Central Bank of Venezuela
applying the formula for increases included in Attachment B of this
CONTRACT.
The portion indicated in DOLLARS will be adjusted at the beginning of
each CONTRACT YEAR utilizing the inflation index of the United States
of America denominated the Producer Price Index.
UTILITIES
The cost associated with the utilities will be adjusted when there is
a change in their prices whether by Laws or Decrees or when LAGOVEN
deems it necessary. The date of the adjustment associated with
UTILITIES will take effect on the date when the change in price of
same takes effect.
DEPRECIATION
Corresponds to the amount of depreciation of the INSTALLATIONS. This
item will not be the object of adjustment at any time of the PERIOD OF
SERVICE.
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PROFIT
The profit is expressed in Dollars and Bolivars. Neither of the two
portions will be the object of adjustment at any time of the PERIOD OF
SERVICE.
EMERGENCIES
The costs and expenses related to fires and other emergencies
indicated in CLAUSE NINE - FIRES AND OTHER EMERGENCIES will not be
considered for purposes of requesting price adjustments by reason of
SERVICE nor for any reason.
12.4 THE OPERATOR accepts and agrees that, in the event LAGOVEN
requests OPERATOR to increase the capacity of the High Pressure Plant
to 600 MMSCFD according to the terms of Attachment "D", TECHNICAL
SPECIFICATIONS, the RATE to be applied calculated from the time in
which THE OPERATOR begins compression of 600 MMSCFD at the High
Pressure Plant shall be that which is presented in the proposal for
said capacity.
13. CLAUSE THIRTEEN
PRICE OF UTILITIES
LAGOVEN will deduct from the invoice presented by THE OPERATOR the
costs related to the UTILITIES corresponding to the month the invoice
is presented, consumed by THE OPERATOR, in accordance with CLAUSE
SIXTEEN - FORM OF PAYMENT.
The electricity will only be supplied by LAGOVEN temporarily, the
provision of this service will be assumed later by the company in
charge of supplying electricity.
THE OPERATOR will pay the electricity at the beginning of the CONTRACT
in an amount in Bolivars equivalent to 0.016975 Dollars for each
kilowatt
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hour. This rate may be adjusted by LAGOVEN when it deems necessary
and as long as it is the supplier of electricity.
14. CLAUSE FOURTEEN
RECOGNITION OF INVESTMENTS
14.1 In the event that by express written requirement from LAGOVEN THE
OPERATOR needs to optimize and/or expand the INSTALLATIONS and that to
take such actions it is necessary to make an investment of capital in
the INSTALLATIONS, the PARTIES will meet and analyze the reasonably
possible options for making such investments of capital before
committing any related funds.
THE OPERATOR will provide in writing to LAGOVEN in a period no greater
than sixty (60) continuous DAYS calculated from the date of receipt by
OPERATOR of LAGOVEN'S written requirement, an estimate of the cost of
the capital investment and the impact it might have on the rate. Once
the additional capital is approved by LAGOVEN, the PARTIES will agree
to adjust the rate according to CLAUSE TWELVE - RATE AND ADJUSTMENTS.
14.2 If an agreement is not reached on the options of the investment of
capital within a period of sixty (60) continuous DAYS calculated from
the date LAGOVEN receives the cost estimate, LAGOVEN may maintain the
SERVICE on the terms initially agreed or recur to the mechanisms for
resolving disputes in accordance with that provided in CLAUSE TWENTY
TWO - MECHANISMS FOR RESOLVING DISPUTES in order to make a decision
relative to the estimate of the cost of capital investment and the
impact that it might have on the rate.
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15. CLAUSE FIFTEEN
BONUS AND PENALTY
15.1 MEDIUM PRESSURE PLANT
The terms and conditions to be applied regarding Bonus and Penalty
both on STARTING the SERVICE as well as the normal operation of the
Medium Pressure Plant are those established in Attachment "C-2", TERMS
OF PAYMENT, BONUS AND PENALTY.
15.2 HIGH PRESSURE PLANT
The terms and conditions to be applied regarding Bonus and Penalty
both on STARTING the SERVICE as well as the normal operation of the
High Pressure Plant are those established in Attachment "C-1", TERMS
OF PAYMENT, BONUS AND PENALTY.
16. CLAUSE SIXTEEN
FORM OF PAYMENT
16.1 THE OPERATOR must present within the first five (5) work days of each
month a monthly invoice for providing the SERVICE to LAGOVEN during
the previous month which clearly states the total amount of GAS as
well as the amount owed in bolivars and DOLLARS in accordance with
CLAUSE TWELVE - RATE AND ADJUSTMENTS. The invoice must comply with
the requirements established in the applicable legal dispositions, be
printed on THE OPERATOR'S letterhead, be duly signed by THE OPERATOR'S
REPRESENTATIVE and be delivered to the office of LAGOVEN'S
REPRESENTATIVE.
16.2 The invoices presented by THE OPERATOR may be objected to, totally or
partially, by LAGOVEN within the 10 days following their
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receipt. The objections will be reported to THE OPERATOR within the
time frame indicated. THE OPERATOR in this event may elect to present
an invoice that does not include the amounts objected to which will be
paid within the period indicated in Section 16.4 or may retain the
objected to invoice until explaining the objections with LAGOVEN. It
is understood that the presentation of an invoice that does not
include amounts objected to does not imply THE OPERATOR'S waiver of
said amounts. Likewise it is understood that the objected to amounts
will not earn interest of any kind.
16.3 LAGOVEN may suspend up to 20% of the total payment to which OPERATOR
has a right to protect or indemnify LAGOVEN for losses due to actions
solely imputable to THE OPERATOR in accordance with clause NINETEEN of
this CONTRACT, LAGOVEN will inform OPERATOR of the amount withheld and
the reasons for said withholding; it is understood that the withheld
amount will not generate interests of any kind.
16.4 LAGOVEN will pay to THE OPERATOR within thirty (30) calendar days
following presentation of the invoices the balance resulting after
having made any withholdings such as: Income Tax (ISLR), cost of
UTILITIES, municipal taxes and, if appropriate, the withholding to
which Section 16.3 above refers. The payment will be made by bank
deposit to the account that THE OPERATOR indicates through written
communication.
16.5 Any change that THE OPERATOR makes relative to the Account Number or
Banking Institution to which this Clause refers must be timely
reported to LAGOVEN in writing and signed by THE OPERATOR'S
REPRESENTATIVE.
16.6 LAGOVEN will pay to THE OPERATOR the amount of the portion in DOLLARS
in equivalent bolivars calculated at the exchange rate that is
applicable for the date the payment is processed, it being THE
OPERATOR'S responsibility to convert said payment to equivalent
DOLLARS. LAGOVEN will pay the exchange rate difference that may arise
between the rate of exchange utilized by LAGOVEN on the
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payment and the exchange rate in effect on the date said payment is
converted to DOLLARS so long as THE OPERATOR makes said conversion
within a maximum period of two (2) working days following the date of
the deposit or credit to account of THE OPERATOR. To make said
payment effective, THE OPERATOR will have eight (8) continuous days
following the date of the deposit or credit to account to submit the
request for the exchange difference by presenting the original receipt
for DOLLARS indicated on the invoice and the rate of exchange applied
by the financial institution. If the claim for the exchange
difference is not submitted within the indicated time period, it will
be understood that THE OPERATOR waives the right to present any claim.
On the other hand, THE OPERATOR must reimburse LAGOVEN the amounts in
bolivars in the event that the exchange difference results in a
decrease in the bolivar exchange rate with respect to the DOLLAR.
In the event that due to some law or governmental resolution such as
establishing an exchange rate control system it is impossible for THE
OPERATOR to acquire DOLLARS, LAGOVEN will pay in DOLLARS in a United
States of America bank the portion of payments that correspond to said
currency through credit to account at the bank indicated by THE
OPERATOR.
16.7 The invoice must break down the amount corresponding to the general
wholesale sales and luxury excise tax or any other tax of this kind
that is applicable.
17. CLAUSE SEVENTEEN
ACCOUNTING
17.1 All the books, invoices and records of THE OPERATOR related to the
operations under this CONTRACT will be maintained on a calendar year
basis, will be in accordance with Applicable Law and will be available
for audit by LAGOVEN.
17.2 Furthermore, THE OPERATOR must comply with those special instructions
or requirements not provided in legal dispositions or
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general-type accounting principals relative to the operations under
this CONTRACT which are indicated by LAGOVEN relative to its books,
records, invoicing processes, so long as such instructions or
requirements are reasonable in the context of general accounting
practices.
18. CLAUSE EIGHTEEN
AUDITING
18.1 During the life of the CONTRACT and up to two (2) years after
termination or resolution of same, representatives of LAGOVEN, duly
authorized, will have access at all times to all the books, records,
receipts, vouchers, personnel files and any other documents of
OPERATOR related to the SERVICE for the purpose of verifying
OPERATOR'S compliance with its contractual obligations.
18.2 The scope of the review by authorized REPRESENTATIVES of LAGOVEN may
also be extended to aspects related to the components of costs, cost
recovery factors, rates, other administrative, computer and
operational aspects which are advisable.
18.3 The auditing right may be extended to external auditing (independent
auditors), the latter being performed by specialized companies with
LAGOVEN'S Auditing Department maintaining strict interaction to ensure
the degree of independence that must exist and the technical and
operational performance of the work according to the scope of the
review conducted.
18.4 The result of the audit will be reported to THE OPERATOR. If from the
audit there is a credit in LAGOVEN'S favor, THE OPERATOR upon
LAGOVEN'S requirement will proceed to make the payment of the
resulting amount and must bear the reasonable costs incurred in
conducting the audit. Likewise if the audit results in a credit in
THE OPERATOR'S favor, LAGOVEN upon
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OPERATOR'S requirement will proceed to make the payment of the
resulting amount.
19. CLAUSE NINETEEN
RESPONSIBILITIES FOR DAMAGES
19.1 THE OPERATOR agrees to indemnify LAGOVEN in the event of claims,
suits, actions, losses, expenses or obligations, including attorneys
fees and/or expenses, costs and costs incurred by LAGOVEN that may
result from the injury or death of a LAGOVEN employee or for damages
or losses of material goods owned by LAGOVEN which are caused by
imprudence, negligence, incompetence, fault and/or wilful misconduct
of THE OPERATOR, its contractors, subcontractors, employees or any
other person, animal or thing for which THE OPERATOR must respond
civilly.
19.2 LAGOVEN agrees to indemnify THE OPERATOR in the event of claims,
suits, actions, losses, expenses or obligations, including attorneys
fees and/or expenses, costs and costs incurred by THE OPERATOR that
may result from the injury or death of an employee of THE OPERATOR or
for damages or losses of material goods owned by THE OPERATOR which
are caused by imprudence, negligence, incompetence, fault and/or
wilful misconduct of LAGOVEN, its contractors, subcontractors,
employees or any other person, animal or thing for which LAGOVEN must
respond civilly.
19.3 THE OPERATOR will indemnify and defend LAGOVEN in the event of claims,
suits, rights or actions, losses or obligations, including attorneys
fees and/or expenses, costs and costs incurred by LAGOVEN that may
result from injury or death of third parties, or damages of their
goods caused by imprudence, negligence, incompetence, fault and/or
wilful misconduct of THE OPERATOR, its contractors, subcontractors,
employees or any other person, animal or thing for which it must
respond civilly.
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19.4 LAGOVEN will indemnify and defend THE OPERATOR in events of claims,
suits, rights or actions, losses or obligations, including attorneys
fees and/or expenses, costs and costs incurred by THE OPERATOR that
may result from injury or death of third parties, or damages of their
goods caused by imprudence, negligence, incompetence, fault and/or
wilful misconduct of LAGOVEN, its contractors, subcontractors,
employees or any other person, animal or thing for which it must
respond civilly.
19.5 The PARTIES, among themselves, will only be responsible for the direct
damages that may arise during the life of the contract and will not
respond for loss of profit or indirect damages.
20. CLAUSE TWENTY
BONDS AND INSURANCE
20.1 LABOR BOND: THE OPERATOR agrees to obtain and maintain from the start
of the SERVICE a labor bond to guarantee to LAGOVEN the faithful and
sound performance of labor obligations assumed by THE OPERATOR towards
its workers in accordance with that established in the Organic Labor
Law and its Regulations in effect in Venezuela as well as the legal,
contractual benefits that may be agreed upon in the future to the
benefit of the workers or employees of THE OPERATOR. The bonded sum
will be the amount equal to ten percent (10%) of the annual payroll of
THE OPERATOR'S personnel in Venezuela for providing the SERVICE. This
bond must be delivered to LAGOVEN when the first START UP CERTIFICATE
is signed and must be in effect until fourteen (14) months after
termination of the CONTRACT, unless THE OPERATOR presents the
respective release forms endorsed by the competent Labor Inspector's
office.
LAGOVEN may withhold an amount equal to the amount guaranteed if THE
OPERATOR does not provide the referenced bond, keeping said
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withholding until THE OPERATOR provides such bond to LAGOVEN'S
satisfaction.
THE OPERATOR must obtain for its workers, the workers of its Assignees
and the workers of its subcontractors who are not Venezuelan and who
work in Venezuela the policies "Workers Compensation Insurance" for
North American employees and "Employers Liability Insurance" or its
equivalent if the workers are of a nationality other than North
American.
20.2 CIVIL LIABILITY INSURANCE: In order to ensure discharge of the
liability that is incumbent exclusively upon THE OPERATOR to indemnify
the eventual damages and losses caused by THE OPERATOR, its employees,
contractors or subcontractors on property, installations and/or
workers of LAGOVEN or third parties as a result of the construction of
the INSTALLATIONS or provision of the SERVICE which is the object of
this CONTRACT, THE OPERATOR must obtain a policy on civil liability to
third parties from an insurance company with a minimum coverage of
five million (US$ 5,000,000.00) DOLLARS throughout the life of this
CONTRACT.
The civil liability policy assists in the discharge of the liability
that THE OPERATOR assumes before third parties but in no event limits
it.
It is understood that during the phase prior to starting the SERVICE,
THE OPERATOR will only respond, as regards damages to property of
LAGOVEN, for damages not covered in LAGOVEN'S policy, for the
deductible and for any amount that exceeds the maximum limit of
coverage of said policy. LAGOVEN will advise THE OPERATOR as to the
risks covered in its policy as well as the deductible and the maximum
amount of coverage.
20.3 EMPLOYER'S LIABILITY INSURANCE: THE OPERATOR, as sole employer of the
workers utilized in the performance of the CONTRACT and in order to
respond for injuries, sickness or death of its personnel due to the
construction,
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operation and/or maintenance of the INSTALLATIONS must obtain and
maintain throughout the entire life of the CONTRACT an employer's
liability insurance policy.
The employer's liability insurance must cover the difference between
the amount of the indemnification that corresponds to Obligatory
Social Security and that established in the Collective Bargaining
Contract that may be applicable.
This insurance must cover the obligations derived from:
a) Title VIII of the Organic Labor Law.
b) Collective bargaining labor contract that may be applicable.
c) Any legal other disposition on the matter.
20.4 CIVIL LIABILITY INSURANCE FOR VEHICLES: In order to ensure discharge
of the responsibility that is exclusively incumbent upon THE OPERATOR
to indemnify eventual damages and losses caused by vehicles of THE
OPERATOR or of its subcontractors to property, installations and/or
workers of LAGOVEN or of third parties due to the construction of the
INSTALLATIONS or the provision of the SERVICE, which is the object of
this CONTRACT, THE OPERATOR must obtain a Civil Liability policy for
vehicles in the amount to be indicated by LAGOVEN.
20.5 GUARANTEE OF DISMANTLING: In the event that 12 months prior to
expiration of the INITIAL PERIOD or any of the extensions the PARTIES
have not agreed to extend the SERVICE, THE OPERATOR must obtain a
performance bond issued by a bank or insurance company domiciled in
Venezuela of recognized solvency and to LAGOVEN'S satisfaction in the
amount of fifteen million DOLLARS (US$ 15,000,000.00) to guarantee the
dismantlement of the installations upon finalization of the contract.
This bond must be in effect for a period of twenty four (24) months.
20.6 GENERAL PROVISIONS
20.6.1 The Bonds mentioned in this CONTRACT must be joint and
several and constituted by authenticated document
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issued by a banking institution or insurance company domiciled
and with offices in Venezuela, of recognized solvency and to
LAGOVEN'S satisfaction and will include express mention that
the surety waives the right to the benefits that are conferred
by Articles 1833, 1834 and 1836 of the Venezuelan Civil Code.
It must include the reference to the number and purpose of the
CONTRACT. The bond documents must be presented before signing
for approval by LAGOVEN.
20.6.2 If THE OPERATOR does not comply with the requirements
stipulated in Sections 20.2, 20.3 and 20.4 above, or if for
any circumstance having complied fails to pay the premiums or
payments to renew the insurance policies indicated in
mentioned numbers, LAGOVEN at its discretion may pay said
premiums or payments, subsequently deducting from any invoice
presented by THE OPERATOR the amount paid.
20.6.3 All the Insurance stipulated in this clause must include a
clause obligating the insurer to inform THE OPERATOR and
LAGOVEN in writing thirty (30) days prior to the expiration
date of any payment pending relative to said insurance or the
date of expiration of the policy. Except as regards the Civil
Liability Policy established in Section 20.4 above.
20.6.4 All the Insurances stipulated in this clause will be
contracted with Insurance Companies approved by the Insurance
Commissioner, of recognized solvency, to LAGOVEN'S
satisfaction, through authentic documents in 3 copies, one of
which must be delivered to LAGOVEN and must comply with that
stipulated in the Law and Regulations of Insurance and
Reinsurance Companies as well as any other standard in effect
on the matter. Prior to contracting any insurance policy, THE
OPERATOR must obtain approval from
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LAGOVEN to contract with the proposed Insurance Company.
20.6.5 Prior to starting the activities that require such
insurance, LAGOVEN may require THE OPERATOR to present the
insurance policies described in this Clause or the documents
that substantiate that these have been contracted such as
receipt of premium or temporary coverage.
Likewise, THE OPERATOR is obligated to deliver annually to
LAGOVEN substantiation of the renewal of the insurance
referenced in this clause issued by the insurer.
20.6.6 The insurance policies mentioned in this clause must include
LAGOVEN as co-insured.
20.6.7 The expiration of the policies must be December 31 of each
year.
21. CLAUSE TWENTY ONE
APPLICABLE LAW
The interpretation, validity and execution of this CONTRACT will be made in
accordance with the laws of the Republic of ▇▇▇▇▇▇▇▇▇.
▇▇. CLAUSE TWENTY TWO
MECHANISM FOR RESOLVING DISPUTES
In the event of disputes, either of the PARTIES may submit them to the
non-binding procedures indicated in this clause or they may have
recourse directly to the arbitration procedure. Nevertheless, if the
non-binding procedure has begun, same must be concluded before having
recourse to arbitration. The mechanisms for resolving disputes are:
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22.1 AMICABLE ARRANGEMENT
22.1.1 Through the negotiation of an executive and an attorney,
(hereinafter NEGOTIATORS) who represent each one of the
PARTIES. For purposes of this section, any of the PARTIES
will notify the other PARTY in writing of any dispute,
controversy or claim not resolved in the normal course of its
negotiations. The PARTY thus notified must respond in writing
to the other PARTY within fifteen (15) days following receipt
of the notification. Both the notification as well as the
response must include: (a) the position of the PARTY and a
summary of its arguments; and (b) the name and position of its
NEGOTIATORS.
22.1.2 Thirty (30) days following the notification, the NEGOTIATORS
of each PARTY will meet to try to arrive at an agreement.
22.1.3 All the negotiations conducted in accordance with this
section will be confidential and may not be revealed or raised
in any subsequent judicial or extrajudicial proceedings.
22.1.4 If the dispute, claim or controversy is not resolved by the
NEGOTIATORS within forty five (45) days following the
notification or if the NEGOTIATORS have not met within thirty
(30) days following the notification, the PARTIES will submit
the dispute, claim or controversy to conciliation.
22.2 CONCILIATION
In the event that the disputes or controversies cannot be resolved in
accordance with the above number, the PARTIES may submit such disputes
or controversies to the consideration of a conciliator. The
conciliator will be designated by joint agreement between the PARTIES
and the costs of the conciliation will be defrayed equally among them.
The PARTIES will report their reasonings and positions to the
conciliator
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who must structure a solution acceptable to both PARTIES within a
reasonable period. This solution will be non-binding or obligatory
for the PARTIES. The discussions or solutions effected during the
conciliation procedure may not be presented totally or partially in
any subsequent proceedings whether judicial or extrajudicial. Once
the mechanisms of amicable and conciliatory resolution have been
exhausted, the PARTIES may submit to arbitration for the solution of
the disputes or controversies in accordance with that stipulated in
Section 22.3 below.
22.3 ARBITRATION
22.3.1 Any dispute, claim or controversy related, connected or
derived from this CONTRACT, its non compliance, termination or
validity which has not been resolved in accordance with the
mechanisms indicated in the preceding Sections will be
resolved finally by arbitration.
22.3.2 The arbitration will be conducted in accordance with the Rules
of Arbitration of the International Chamber of Commerce
(I.C.C.) in effect at the time arbitration begins. In the
event that said Rules conflict with the requirements of this
section, the requirements of this CONTRACT will prevail.
22.3.3 The arbitration will take place in the city of Caracas,
Venezuela, unless the parties mutually agree in writing to
hold all or part of the procedure in a different place.
22.3.4 The arbitration tribunal will be comprised of three
arbitrators bound by legal principles. Each party will
nominate one arbitrator and these, after they have been
elected and their nominations have been accepted will nominate
by mutual agreement the third arbitrator who will serve as
president of the arbitration tribunal. If the two nominated
arbitrators do not reach an agreement to designate the third
arbitrator within a period of sixty (60) days from the date on
which the last of said two (2) arbitrators was
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nominated, the third arbitrator will be designated by the
International Arbitration Court of the International Chamber
of Commerce.
22.3.5 Any decision of the arbitration tribunal must be in writing
and reasoned, being final and binding upon the PARTIES in the
arbitration procedure. The PARTIES agree that the ruling may
be executed in the arbitration procedure against one of them
or their goods and that the confirmation and respective
execution of the arbitral ruling may be required of any
competent tribunal or Court.
23. CLAUSE TWENTY THREE
PATENTS, TRADEMARKS, LICENSES AND COPYRIGHTS
23.1 THE OPERATOR is obligated to obtain and pay royalties or premiums for
any licenses, patents, trademarks, copyrights and other rights that
cover the materials, machinery, tools, equipment or combinations,
mixtures of substances or goods, methods or procedures required during
the execution of THE PROJECT or during the rendering of the SERVICE.
23.2 In the event that THE OPERATOR does not obtain the patents and/or
licenses or fails to pay the royalties or other items which are the
conditions on which the license has been granted, it will be obligated
to pay any damages and losses caused to LAGOVEN and in particular all
type of court and out-of-court costs arising as a result of claims,
suits or other actions in or outside of Venezuela.
23.3 THE OPERATOR will expeditiously report to LAGOVEN when it has
knowledge of the existence of a patent, trademark, license, copyrights
or other rights relative to which LAGOVEN may be sued or subject to
claims by reason of the direct or indirect use of materials,
machinery, tools, composition, methods or
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procedures during the construction of THE PROJECT or during the
rendering of the SERVICE.
23.4 With respect to any subcontract that THE OPERATOR enters into with
third parties, THE OPERATOR will require its subcontractors to grant
to LAGOVEN and PDVSA and AFFILIATES the same protection with regard to
patents, copyrights or other obligations or rights that THE OPERATOR
has in the execution of the CONTRACT.
23.5 THE OPERATOR is required to include, in its user contracts on
licenses, assignment of patents, trademarks, copyrights and any user
licenses on intellectual property, a clause according to which, in the
event that all or part of the INSTALLATIONS, materials, equipment or
inventories become property of LAGOVEN, the latter automatically
obtains the right to use and/or exploit the intellectual or industrial
rights relative to the INSTALLATIONS. THE OPERATOR must provide
substantiation of the inclusion of the assignment clause mentioned.
24. CLAUSE TWENTY FOUR
CONFIDENTIALITY
24.1 The PARTIES agree to not reveal the confidential information handled
by each PARTY to third parties or use it for purposes other than those
inherent to this CONTRACT without prior written consent from the other
PARTY.
24.2 Information not considered confidential is all that: a) has been
acquired or has been in the possession of the PARTIES prior to signing
this CONTRACT except the information supplied in the Request for
Proposal Document, b) is or has been or comes to be public knowledge
without the intervention of the PARTY, its employees, contractors or
subcontractors, and c) has been obtained in good faith from a third
party prior to signing this CONTRACT.
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24.3 All confidential information that due to legal requirements is
requested by governmental authorities or must be provided to auditors,
financial institutions, consultants, buyers, shareholders,
constructors for use in the performance of the work related to this
CONTRACT may be provided upon authorization of the PARTY to whom said
information belongs and after signing a confidentiality agreement
essentially identical to the one contained in Attachment "E" of this
CONTRACT.
24.4 In the event that any of the PARTIES is required by judicial or
governmental authorities to provide confidential information, the
PARTY receiving the request must, before providing it, report in
writing to the other PARTY in order for the latter to have the
opportunity, should it so desire, to take the actions necessary to
prevent or limit the supply of the information.
25. CLAUSE TWENTY FIVE
FORCE MAJEURE OR ACT OF GOD
Force Majeure or Act of God will be considered as: (1) any cause or
factor outside and foreign to the PARTIES produced by Man or by
Nature, (2) the occurrence of which is impossible to foresee, or (3)
if foreseeable such occurrence is irresistible, unavoidable through
the due diligence of the PARTY whose obligation is affected (4) and
makes it absolutely impossible to fully or partially comply with the
obligations that said PARTY has contracted by virtue of this CONTRACT.
25.1 Events of Force Majeure include among others the following acts of
Man: labor strikes, disturbances or civil disobedience, vandalism,
assaults, riots, insurrections, rebellions, wars (declared or not),
acts of sabotage or terrorism, governmental orders and dispositions
that meeting the characteristics indicated in the above paragraph
absolutely prevent total or partial compliance with any of the
obligations contained in this CONTRACT.
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Events of Act of God include among others the following acts of
Nature: epidemics, floods, earthquakes, seaquakes, hurricanes, storms
of any kind, fire and other acts of Nature that meeting the
characteristics indicated in the above section absolutely prevent the
total or partial compliance of any of the obligations contained in
this CONTRACT.
25.2 In the event of labor strikes it is expressly understood that neither
of the PARTIES will be obligated to accept any demands or requests of
its workers or unions that said PARTY at its sole discretion deems
unreasonable.
25.3 Both PARTIES agree to use their best efforts to maintain the
continuity of THE SERVICE and likewise agree to perform all the
activities or actions necessary to minimize the negative consequences
that might affect THE SERVICE.
25.4 No difficulty in complying with the obligations contained in this
CONTRACT, including difficulties of a financial type, will be
considered causes of FORCE MAJEURE or ACT OF GOD. Nor will FORCE
MAJEURE or ACT OF GOD be considered for events or situations such as:
a) The delayed delivery of equipment or construction materials
caused by backlog at the manufacturer's plant or other place,
oversold market conditions, inefficiency or similar events.
b) Delayed compliance of THE OPERATOR or any of its
subcontractors caused by scarcity of supervisors, manpower,
inefficiency or similar events and scarcity of services.
c) Lack of electricity or GAS supply, when it is possible for
LAGOVEN to use alternative sources of supply in sufficient
quantities.
25.5 The PARTIES will not be responsible for noncompliance with one or more
of the obligations they have assumed by virtue of this CONTRACT in
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the event that an act of FORCE MAJEURE or ACT OF GOD occurs and while
it continues which makes it absolutely impossible to comply with one
or more obligations except as regards the obligation of making the
payments due for amounts of money already owed.
25.6 In all the events of FORCE MAJEURE AND ACT OF GOD the obligations
which cannot be carried out will be suspended during the time the
obstacle endures except for that provided in number 25.8.
25.7 The PARTY that alleges FORCE MAJEURE or ACT OF GOD must notify the
other PARTY in writing regarding the obstacle and its effects on the
former's ability to meet the obligation concerned. This notification
must be issued as soon as the PARTY alleging the ACT OF GOD or FORCE
MAJEURE knows or should have known about the obstacle.
25.8 If the effects of the FORCE MAJEURE or ACT OF GOD prevent compliance
with all or part of the obligations of this CONTRACT for a period of
six (6) months calculated from the date of the notification provided
in the above section, either of the PARTIES will have the right to
cancel this CONTRACT for which it must notify the other PART of its
decision to cancel.
25.9 In the event the CONTRACT is terminated because of FORCE MAJEURE or
ACT OF GOD, LAGOVEN will have the right to select: (a) the return of
the site free of all construction in the same conditions in which it
was found within a period not to exceed one hundred eighty (180) DAYS.
The costs incurred for dismantling or taking down the projects and the
environmental restoration will be the exclusive responsibility of THE
OPERATOR; or (b) to purchase all or part of the INSTALLATIONS,
materials, equipment and/or inventories at a reasonable price agreed
upon by the PARTIES.
25.10 The delay derived from a situation of FORCE MAJEURE or ACT OF GOD that
affects the manufacturers, suppliers or subcontractors of THE OPERATOR
and an acceptable alternative source of service, equipment,
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parts or materials is not available may constitute for purposes of
this CONTRACT a situation of FORCE MAJEURE or ACT OF GOD.
26. CLAUSE TWENTY SIX
ASSIGNMENT AND TRANSFER OF THE CONTRACT
26.1 LAGOVEN has the right, upon notification to THE OPERATOR to assign or
transfer all or part of this CONTRACT to PDVSA or its operating
AFFILIATES with the condition that PDVSA or THE AFFILIATE assumes all
the rights and obligations that LAGOVEN has in accordance with this
CONTRACT.
26.2 THE OPERATOR may not assign, delegate, transfer or subcontract the
operation of the installations, all or in part, the rights and
obligations it has assumed in this CONTRACT without prior
authorization from LAGOVEN. In any event of assignment or transfer,
it is understood that THE OPERATOR will guarantee that the assignee
will comply with the requirements relative to THE SERVICE as though it
were THE OPERATOR. The PARTIES agree that no assignment or transfer
of the CONTRACT in this sense will diminish the responsibility of any
of the PARTIES in accordance with the terms of the CONTRACT.
26.3 THE OPERATOR may contract the services required to fulfill its
obligations, except for that provided in section 26.2 above, so long
as the subcontracts are subject to reasonable market conditions and
granted to technically and financially reliable subcontractors;
furthermore, THE OPERATOR will be responsible for the execution by
said subcontractors as if the corresponding activities were performed
by THE OPERATOR itself.
26.4 Without prejudice to the responsibility assumed by THE OPERATOR in
accordance with this CONTRACT, THE OPERATOR must require any assignee
or subcontractor to obtain insurance policies and
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bonds to back their responsibilities in accordance with the terms and
conditions stipulated in this CONTRACT.
Likewise, THE OPERATOR will protect and indemnify LAGOVEN for any
payment made by LAGOVEN to an assignee or subcontractor of THE
OPERATOR which results from noncompliance of THE OPERATOR with any
obligation that it has according to the assignment or subcontract.
27. CLAUSE TWENTY SEVEN
CONFLICT OF INTEREST
27.1 THE OPERATOR states that no situation exists that would be a "Conflict
of Interest" that affects the execution or performance of this
CONTRACT.
27.2 A "Conflict of Interest" will exist when on a decision, act or
contract of LAGOVEN, one or several LAGOVEN employees taking part or
influencing such decision, act or contract, personally benefit or
favor their immediate families (ascendents/descendents, brothers,
nephews and other relatives to the 4(i) of blood relationship and the
2(i) by marriage) or the persons who depend directly or even
indirectly through other individuals or even businesses, that is,
associations, corporations or companies.
27.3 In accordance with section 27.2 above, "Conflict of Interest" will be
considered in the following situations, without being limited to same:
27.3.1 Maintain commercial relationships or have interest of any
other kind that could give rise to the possibility of granting
preferential treatment to any individual or corporation that
is conducting or trying to conduct business with LAGOVEN.
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27.3.2 Deliver or authorize the delivery of any data or information
relative to decisions, plans, projects, bids or any other
information of LAGOVEN.
27.3.3 Accept from any individual or corporation that is conducting
or trying to conduct business with LAGOVEN, commissions,
profit sharing, gifts in cash or in kind, donations in bonuses
or other payments, loans or advances, services, repairs,
improvements or cost free travel or any other grants of
similar nature.
27.3.4 Carry out executive or management missions or render service
as an employee, consultant or agent in any commercial,
industrial or financial institution, directly or indirectly,
related to or which are conducting or trying to conduct
business with LAGOVEN.
27.3.5 If LAGOVEN becomes aware that THE OPERATOR or the companies
that comprise same, subcontractors or assignees have given
place to a "Conflict of Interest" situation provided in
sections 27.2 and 27.3 above without having previously
notified LAGOVEN as referenced in section 27.3.6 below,
without prejudice to the rights that correspond to it, LAGOVEN
may make the decision to cancel this CONTRACT at its sole
determination and full right without need for judicial
decision or resolution and without LAGOVEN being obligated to
indemnify THE OPERATOR, subcontractor or assignee for damages
and losses or any other concept.
27.3.6 Each PARTY agrees to notify the other of any situation or
circumstance that occurs and which may create a "Conflict of
Interest" for the execution or performance of this CONTRACT
with the purpose of taking the steps necessary to avoid or
correct the situation outlined in accordance with the
provisions of this CONTRACT and applicable laws on this
matter.
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28. CLAUSE TWENTY EIGHT
HIRING OF PERSONNEL
The PARTIES agree to not conduct any activity to attract and hire
employees that are on the payroll of one of them, their parent
companies, affiliates or subsidiaries to incorporate them on their own
payroll. Likewise they agree to not hire personnel that have been on
the payroll of any of the PARTIES or its parent companies, affiliates
or subsidiaries unless at least six (6) months have transpired
calculated from the termination of the labor relationship with any of
the above referenced companies.
29. CLAUSE TWENTY NINE
TERMINATION FOR NONCOMPLIANCE
29.1 In the event of noncompliance or deficiency in the execution of the
obligations assumed in this CONTRACT by either of the PARTIES, the
other PARTY may issue written notification to the noncomplying PARTY
indicating clearly the nature of the noncompliance. In this event the
noncomplying PARTY will have a period of thirty (30) DAYS to correct
its action and adapt to the CONTRACT. In the event that the
referenced time is insufficient due to the nature of the failure or
noncompliance, the PARTY must request in writing thirty (30)
additional DAYS for correction. In the event that said period
transpires without having corrected the failure, the PARTY not in
noncompliance may cancel this CONTRACT immediately irrespective of the
exercising of other rights or actions conferred by law or the
CONTRACT.
29.2 In the event the contract is terminated for noncompliance of THE
OPERATOR, THE OPERATOR must pay to LAGOVEN the following sums of
money: Thirty (30) Million DOLLARS if the termination occurs during
the first five year period of the duration; Twenty (20) Million
DOLLARS if the termination occurs during the second
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five year period of the life of the CONTRACT; Fifteen (15) Million
DOLLARS if the termination occurs during the third five year period of
the duration; and Ten (10) Million DOLLARS if the termination occurs
during the fourth five year period of the CONTRACT.
THE OPERATOR must pay to LAGOVEN such sum, whatever the case, in the
course of forty five (45) continuous days calculated from the date THE
OPERATOR receives the Letter of Termination of the CONTRACT,
furthermore LAGOVEN will have the right to exercise one of the
following options:
a) Demand vacation of the SITE for which, unless LAGOVEN for
reasons of its own convenience decides otherwise, the SITE
must be returned free of all construction, machinery,
equipment, waste and environmentally sound, in the conditions
prevailing at the time it was delivered, within a period not
to exceed one hundred twenty continuous days.
b) Purchase, at a reasonable price agreed upon by the PARTIES,
all or part of THE INSTALLATIONS, materials, equipment and/or
inventories.
29.3 In the event noncompliance with the CONTRACT is due to causes
imputable to LAGOVEN, LAGOVEN will pay to THE OPERATOR the amount
corresponding to the undepreciated investment, calculated by
multiplying the depreciation component of the rates times the gas
volume to be compressed during the remaining time period, in
accordance with compression profiles of Attachments D-1 and D-2.
Additionally LAGOVEN will exercise one of the following options.
a) Require THE OPERATOR to vacate the SITE in a period no greater
than one hundred eighty (180) days. For which, unless LAGOVEN
for reasons of its own convenience decides otherwise, the SITE
must be returned free of all construction, machinery,
equipment, waste and environmentally sound, in the conditions
prevailing at the time it was
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delivered. The reasonable costs for vacating the SITE will be
the responsibility of LAGOVEN.
b) Purchase the INSTALLATIONS at a reasonable cost agreed upon by
the PARTIES.
29.4 It is understood that the amounts that the PARTIES are required to pay
in accordance with this Clause will be the only compensation payable
on demand in the event of termination of the CONTRACT for
noncompliance.
30. CLAUSE THIRTY
REPRESENTATIVES, ANNOUNCEMENTS AND NOTIFICATIONS
30.1 REPRESENTATIVES OF THE PARTIES
The REPRESENTATIVES of the PARTIES must establish by mutual agreement
the administration procedures of the CONTRACT and communication
between the PARTIES. It is expressly understood and agreed that no
REPRESENTATIVE of the PARTIES will have authority to modify all or
part of this corresponding CONTRACT.
30.2 NOTICES AND NOTIFICATIONS
All the notices, notifications and other communication issued by
virtue of, or required by this CONTRACT must be in writing signed by
the REPRESENTATIVE of the PARTIES and sent by certified mail or hand
delivered, with acknowledgement of receipt, or by fax and/or telex
with written confirmation to the addresses indicated in this Clause.
These addresses may be changed by written notice sent to the other
PARTY, the change of address taking effect fifteen (15) calendar days
calculated from the receipt of written notice of said change.
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LAGOVEN
Representative: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Address: Edificio Sede Lagoven
Avenida ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
Modulo IV - Nivel 2
Maturin, Estado Monagas
Venezuela
Telephone: 406924
Fax: ▇▇▇▇▇▇
THE OPERATOR
Representative: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Address: ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇
Telephone: ▇▇-▇▇▇-▇▇▇-▇▇▇-▇▇▇▇
Fax: 00-001-918-588-2103
A copy of notices sent to THE REPRESENTATIVE of THE OPERATOR will be sent to
▇▇. ▇▇▇▇▇ ▇▇▇▇▇▇▇, via fax ▇▇▇ ▇▇▇ ▇▇▇ ▇▇▇▇.
31. CLAUSE THIRTY ONE
TAXES, FEES AND CONTRIBUTIONS
31.1 THE OPERATOR will be the sole and exclusive party responsible for the
obligations of paying all the national, state or municipal fees,
duties, contributions and taxes that are established in Venezuela and
which are applicable, which may be imposed by virtue of the
construction or operation of the INSTALLATIONS or the provision of the
SERVICE.
31.2 It is likewise understood that any other charge, tax or contribution
that THE OPERATOR my eventually be required to pay outside of
Venezuela by reason of or due to this CONTRACT will be for THE
OPERATOR'S account.
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32. CLAUSE THIRTY TWO
LEGAL ATTACHMENT(S)
32.1 If at any time there are reasonable indications of any preventive or
executive legal attachment or claim directed against THE OPERATOR
and/or its subcontractors for noncompliance with its obligations
through which any charge or loss may be derived for LAGOVEN, the
latter will have the authority to withhold the amount it owes THE
OPERATOR up to an amount equal to the amount claimed. Said amount
withheld may be substituted by a bond presented by THE OPERATOR to
LAGOVEN issued by a bank or insurance company of recognized solvency
that guarantees to LAGOVEN faithful and sound compliance with the
obligations from which the legal attachment or claim is derived.
32.2 It is understood that if LAGOVEN has to make any payment for the items
stated in section 32.1 above because of a definitive judgement issued
by a judicial or competent government authority that establishes the
obligation of payment to third parties to the detriment of THE
OPERATOR, LAGOVEN will immediately notify THE OPERATOR. Likewise it
is expressly understood and agreed that the authority of withholding
provided in section 32.1 above will not be implemented in the events
of labor claims or legal attachments so long as THE OPERATOR maintains
in effect, for the time of the claim, a bond that protects LAGOVEN for
such items in accordance with the provisions established in CLAUSE
TWENTY - BONDS AND INSURANCE.
32.3 If for preventive, executive, judicial or any other kind of measures
such as those derived from processes of liquidation, bankruptcy or
delinquency not imputable to LAGOVEN the INSTALLATIONS cease to
compress the GAS, THE OPERATOR is obligated to immediately correct the
situation. If the situation continues for a period greater than forty
five (45) continuous days, LAGOVEN will have the right to cancel this
CONTRACT irrespective of the exercising of other rights or actions
conferred by law or the CONTRACT.
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In the event of termination of the CONTRACT for these circumstances,
LAGOVEN may exercise the options indicated in CLAUSE TWENTY NINE -
TERMINATION FOR NONCOMPLIANCE, section 29.2, and likewise will become
creditor by way of damages and losses of the amount that corresponds,
referenced in said Clause.
33. CLAUSE THIRTY THREE
RATE ADJUSTMENTS
For adjustments other than those provided in CLAUSE TWELVE - RATE AND
ADJUSTMENTS, the adjustments in the rate due to decrees, laws,
ordinances, collective bargaining contracts, exchange rate or
assessment measures must be submitted to LAGOVEN'S consideration by
THE OPERATOR in writing together with supporting documents.
LAGOVEN will study the rate request and finding it in keeping will
approve it. In the event it has objections to the request it will
notify THE OPERATOR and the PARTIES will meet in order to discuss the
requested adjustment.
34. CLAUSE THIRTY FOUR
INTEGRAL CONTRACT, WAIVERS AND MODIFICATIONS
34.1 This CONTRACT constitutes the entirety of the agreement between
LAGOVEN and THE OPERATOR and replaces other understandings, agreements
or previous contracts, written or verbal, of any kind except those
expressly indicated in this CONTRACT.
34.2 No waiver of the CONTRACT or part of same or failure to demand or
force fulfillment of any rights under the CONTRACT will constitute
waiver of any of the other rights under this CONTRACT.
34.3 The effects of the invalidity and unperformability of all or part of
any of the provisions contained in this CONTRACT will only be limited
to the entirety or part of such
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invalid or unperformable provisions without extending to the entirety
or part of the remaining provisions of this CONTRACT.
34.4 This CONTRACT may not be modified by any verbal commitment or
otherwise except by mutual agreement between the PARTIES in writing
and signed by the persons authorized to obligate the PARTIES.
35. CLAUSE THIRTY FIVE
LANGUAGES AND COPIES
Of this CONTRACT two (2) copies are made in Spanish, of the same
content and to one sole effect, in witness whereof the PARTIES sign
said copies in Caracas on the 4th day of the month of February of
1997.
For LAGOVEN: For THE OPERATOR:
--------------------------- -----------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ R. Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
ID.: 1.753.884 Passport No. ▇▇▇▇▇▇▇▇▇
Title: Director Title: Managing Director
▇▇▇▇▇▇▇▇ International
Company
-----------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Passport No. ▇▇▇▇▇▇▇▇▇
Vice President
Production Operators, Inc.
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