EXHIBIT 10 (J)
GHK/SEVEN SEAS
MANAGEMENT SERVICES AGREEMENT
THIS MANAGEMENT SERVICES AGREEMENT has been made and entered into
this ___ day of July, 1996, by and among GHK COMPANY COLOMBIA ("GHK Colombia"),
an Oklahoma corporation, SEVEN SEAS PETROLEUM, INC. ("Seven Seas"), a
corporation organized under the laws of the Province of British Columbia,
Canada, and THE GHK COMPANY L.L.C. (the "Manager"), an Oklahoma limited
liability company, with reference to the following circumstances.
A. GHK Colombia is a wholly-owned subsidiary of Seven Seas Petroleum
Colombia, Inc. ("SS Colombia") which in turn is wholly owned by Seven Seas. GHK
Colombia has a branch in Colombia, South America, and holds a participating
interest in the Dindal and Rio Seco association contracts with Empresa
Colombiana de Petroleos SA (the "Association") and is the operator of the
Association and also operator under a Joint Operating Agreement dated August 1,
1994 (the "JOA"), among it and the other participating interest owners in the
Association.
B. The parties have agreed, subject to the terms of this Agreement,
that (i) the Manager provide from its offices in Oklahoma City and Denver
administrative services and support to GHK Colombia in connection with its
activities in the Association and under the JOA, and (ii) certain employees of
the Manager (the "Service Group") shall serve as directors and officers of GHK
Colombia, namely:
NAME OFFICE
Xxxxxx X. Xxxxxx III President and Director
Xxxxx X. Xxx Executive Vice President
and Director
Xxxxxx X. May Vice President (Finance)
and Assistant Treasurer
Xxxx Xxxxx Assistant Secretary
Xxxx X. Xxxxxxxxxx Vice President (Geology)
It should be noted that Xxxxxx X. Xxxxxx III (i) is to become a director of
Seven Seas, (ii) was the sole stockholder of GHK Colombia prior to the date
first above written and (iii) is the principal owner of the Manager. It is also
understood that Xx Xxxxxxxxx is Chairman of the Board, and that Xxxxxxx X.
Xxxxxxxx and Xxxxx X. XxXxxx also serve as directors of GHK Colombia.
C. The parties intend, subject to this Agreement, that the Service
Group shall act on behalf of GHK Colombia in performing its duties and
responsibilities as a member of the Association and as operator under the JOA,
subject to the direction of the directors of GHK Colombia.
ACCORDINGLY, premises considered and for the purpose of providing a
basis among which the Manager will provide certain administrative services and
make available certain of its employees to GHK Colombia, the parties have
entered into this Agreement.
1. MANAGER SERVICES. The Manager will make available, on an as
needed basis, the Service Group, together with its offices and facilities in
Oklahoma City, Oklahoma, and Denver, Colorado, U.S.A. to provide such services
and administrative support as may be required to enable GHK Colombia to perform
its duties and obligations as the operator of the Association and under the JOA.
The services shall be performed, in part, by causing the Service Group to serve
as directors and officers of GHK Colombia as hereinafter provided.
2. SERVICE GROUP. Members of the Service Group shall serve as
officers and directors of GHK Colombia without compensation or benefits and the
Manager shall be solely responsible for matters relating to their compensation
and for other associated issues relating to employment including but not limited
to payroll taxes, income taxes, unemployment and xxxxxxx'x compensation and
health, accident and other insurances. Subject to the direction of the Board of
Directors of GHK Colombia, the Service Group shall have such authority to act on
behalf of GHK Colombia as are usual and customary for the offices and positions
that they hold; provided, however, no person shall be hired as an employee of
GHK Colombia without specific authorization from the Board of Directors. The
Manager will cause the Service Group to perform their duties as officers and
managers of GHK Colombia in such a way as to enable GHK Colombia to perform its
duties as operator and conduct operations under the JOA and the Association. The
Manager shall cause the Service Group to devote such part of their time as is
reasonably needed to fulfill these duties and manage GHK Colombia and its
business in such a way as to be, at all times during the term of this Agreement,
in compliance with its duties and obligations as a member and operator of the
Association and as operator under the JOA. It is understood that the performance
of such duties will not require the full time services of any member of the
Service Group and nothing in this Agreement shall be construed to prohibit any
member of the Service Group from performing services for the Manager in
connection with its other business activities or to engage in any other activity
that they see fit, subject only to the obligations provided under this
Agreement.
3. SEVEN SEAS FINANCIAL SUPPORT. Seven Seas shall, as the sole
shareholder of GHK Colombia, elect Messrs. Xxxxxx and Xxx as directors of GHK
Colombia and shall cause the GHK Colombia directors to elect members of the
Service Group to the offices herein agreed upon. Seven Seas shall also provide
GHK Colombia capital funds sufficient for it to pay all obligations incurred by
it in connection with the performance of its duties under the Association, the
JOA and hereunder.
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4. MANAGER COMPENSATION. As compensation for services, GHK Colombia
will pay the Manager a monthly sum equal to 100% of the overhead charges
authorized under the JOA, plus $15,000. In addition, GHK Colombia will reimburse
the Manager and members of the Service Group for all direct expenses and
third-party costs incurred and paid by them in connection with the performance
of their duties hereunder or as officers and managers of GHK Colombia. Except as
authorized by the directors of GHK Colombia, neither the Manager nor any member
of the Service Group shall be authorized to incur costs and expenses not
authorized under the JOA. There shall be no duplication of reimbursed direct
expenses and third party costs and JOA overhead charges. GHK Colombia will not
be liable to the Manager for the termination by the Manager of any of the
Manager's employees, including those performing services for the benefit of GHK
Colombia hereunder. Seven Seas hereby guarantees the obligations of GHK Colombia
under this paragraph.
5. INDEMNIFICATION. Neither the Manager nor any member of the
Service Group shall be liable or responsible for damages to GHK Colombia or
Seven Seas for any acts taken or performed or for any omission to act, if such
conduct does not constitute willful misconduct or gross negligence. In any
threatened, pending or completed action, suit or investigation in which the
Manager or any member of the Service Group was or is a party by virtue of its or
their activities under this Agreement or in connection with any member of the
Service Group serving as an officer, employee, director, agent or manager of GHK
Colombia, then GHK Colombia and Seven Seas, jointly and severally, shall
indemnify the Manager, its members, officers, employees and agents against all
judgments, settlements, penalties, fines or expenses, including attorneys' fees
incurred by the Manager or any member of the Service Group in connection
therewith, so long as the Manager's, or the member of the Service Group's,
action or failure to act does not constitute willful misconduct or gross
negligence.
6. TERM. This Agreement shall continue in effect until the earlier
to occur of (i) the drilling and completion of both the second year well under
the Rio Seco Association Contract and the fourth year well under the Dindal
Association Contract or (ii) such time as "commerciality" is established under
either the Dindal or Rio Seco Association Contracts; provided, however, GHK
Colombia, Seven Seas, or Manager may terminate this Agreement at any time upon
180 days' prior written notice. Upon termination of this Agreement, the Manager
shall cause the members of the Service Group to tender their resignations as
officers and directors of GHK Colombia. Such resignations shall release the
Company from further obligations relating to compensation and other employee
benefits.
7. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Oklahoma.
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8. NO ASSIGNMENT. No party may assign its rights or delegate its
duties under this Agreement without the prior written consent of the other
parties.
9. COUNTERPARTS. This Agreement may be executed in any number of
identical counterparts, each of which shall be considered an original for all
purposes but all of which shall constitute one and the same agreement.
EXECUTED as of the day and year first above written.
GHK COMPANY COLOMBIA
By
President
SEVEN SEAS PETROLEUM, INC.
By
President
THE GHK COMPANY L.L.C.
By
Manager
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