Build, Operate and Transfer Construction Contract

ADMINISTRATOR:COSACOL LTDA.


GHK COMPANY COLOMBIA, TIN 08001854403, branch office of a foreign corporation legally organized under the laws of Colombia through Public Deed No. 0118 of January twenty one (21) of 1993 of the Sixteenth (16) Notary Public's Office of Santafe de Bogota, with domicile in Santafe de Bogota (hereinafter called "GHK"), represented in this act by its Legal representative, Claudia Milena Vaca, identified as shown below his signature, acting with the power to commit GHK in this Contract and COSACOL LTDA, corporation organized through Public deed No. 2199 of 24 of November of 1994 , with domicile in Bogota, (hereinafter called the "ADMINISTRATOR"), represented in this act by its Manager and Legal Representative Rafael Delgado Gonzalez, identified as shown below his signature, acting with the power to commit the ADMINISTRATOR in this CONTRACT, as recorded in the Legal Incorporation and Representation Certificate attached and makes integral part herein, have entered the present CONTRACT, that shall be governed by the relevant regulations of the Civil Code, the Trade Code and. in particular, by the following clauses:


ONE. INTERPRETATIONS ANNEXES AND DEFINITIONS. -


INTERPRETATIONS:


1.1 In this CONTRACT, and where the context requires so, the words in singular will include the plural and vice-versa. Likewise, for the purpose of this CONTRACT any reference that is made to a decree, law, resolution, statute or regulation will refer to that decree, law, resolution, statute or regulation with their amendments and modifications.


1.2 All terms in capital letters and not defined elsewhere in this CONTRACT, shall have the meaning established below. Such meanings shall apply both to the singular and the plural form of the terms defined:


1.3 In case of conflict or contradiction between the Bid documents GHK-006-00 and the technical proposal and this instrument, the CONTRACT stipulations will prevail. Additionally in case of conflict or contradiction between the Bid documents and the ADMINISTRATOR'S technical proposal, the Bid Documents GHK-006-00 will prevail.


ANNEXES : 2
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1.4 ANNEX No. 1: Document containing the technical specifications of Bid documents GHK-006-00 including the addendums to the same.


1.5 ANNEX No. 2: Document containing the unit prices that serve as benchmark for contracting of extra works GKK authorizes the ADMINISTRATOR to contract.


1.6 ANNEX No. 3: Document containing the quantities and unit prices of the geotechnical works for the pipeline.


1.7 ANNEX No. 4: Document containing project progress curve.


1.8 ANNEX No. 5: Document containing project program of the ADMINISTRATOR


1.9 ANNEX No. 6: The technical proposal presented by the ADMINISTRATOR dated November 7 2000.


1.10 ANNEX No.7: Procedures. This include the procedure for the operation of the WORKS COMMITTEE, procedure for the operation of the PURCHASES AND CONTRACT COMMITTEE and the procedure for the operation of the payments legalization done by the ADMINISTRATOR with charge to the OLEODUCTO GUADUAS ROTATING FUND.


DEFINITIONS:


1.11 ADMINISTRATOR: The ADMINISTRATOR, its agents, including their personnel, but without limiting to their respective officials, employees, assignees and successors.


1.12. CONTRACTOR: Individual or corporation hired by the ADMINISTRATOR, other than its employees, to perform part of this CONTRACT'S object, provided it has been authorized in advance by GHK.


1.13 PROJECT COST : Summation of all DIRECT COSTS AND INDIRECT COSTS associated with the project execution.


1.14 DIRECT COST: For the effects of the PLUS definition in this contract, it shall be all costs of materials equipment, labor hand, contract and subcontracts incurred in the CONTRACT, that affect the progress of the project and that have a direct relation with the project execution . These costs do not include taxes.


1.15 INDIRECT COST: For the effects of the PLUS definition in this contract, it shall be all costs associated with the project execution but independent of the project progress such as : rentals, public utilities, cafeteria, personnel transport etc. These costs do not include taxes. 3
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1.16 REAL COST: Summation of all DIRECT COSTS AND INDIRECT COSTS approved and reimbursed by GHK, the PLUS of the project and the IVA on the PLUS.


1.17 OLEODUCTO GUADUAS FUND : Rotating account created to reimburse the payments needed for the execution of the CONTRACT.


1.18 SITE OF THE WORKS: The physical site where the object of this CONTRACT will be developed, corresponding to PF1 Station in Guaduas, the Guaduas Pipeline layout and the Reducing and Metering Station in La Dorada. The ADMINISTRATOR declares knowing THE SITE OF THE WORKS and expressly states having studied it carefully and having considered all the site's factors when preparing his proposal and signing the present CONTRACT.


1.19. PARTY: GHK or the ADMINISTRATOR considered separately.


1.20 PLUS: The revenue that the ADMINISTRATOR will make for the project execution and corresponding to 13% of the COST OF THE PROJECT .


1.21 GHK's REPRESENTATIVE: Person or persons GHK appoints to coordinate all this CONTRACT-related activities with the ADMINISTRATOR.


1.22 ADMINISTRATOR REPRESENTATIVE: Person or persons the ADMINISTRATOR appoints to coordinate all the activities related to this CONTRACT.


TWO. OBJECT. -


The ADMINISTRATOR in a timely and expeditious manner acting in an independent manner, with its own staff, with full administrative, technical, directive and financial autonomy, becomes liable before GHK for the Delegated Administration system to build the Guaduas-La Dorada Pipeline as per this CONTRACT and its annexes in exchange for the price herein stipulated.


THREE. CONTRACT VALUE -


3.1 The present contract has an indetermined quantity and its final value will be the one resulting from liquidating in favor of the ADMINISTRATOR, a PLUS equivalent to thirteen percent (13%) of the PROJECT COST, plus the "IVA" added value Tax over the revenue . The PLUS will be liquidated and payed in Colombian pesos.


3.2 The parties leave express record that PLUS herein is the payment that corresponds to the ADMINISTRATOR for the works executed for GHK in the CONTRACT execution and shall be maintained fixed and unchanged during its enforcement or extensions, if any, without affecting the bonus or malus 4
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contemplated in this CONTRACT. Consequently, the expressly waives to any right on readjustments, compensations and indemnification and claims filed during the development of the CONTRACT for the concept of the PLUS herein.


FOUR. COST OF THE PROJECT.-


4.1 The PROJECT COST shall be determined by the summation of all DIRECT COSTS AND INDIRECT COSTS imputable to the execution of the contracted works, that were contracted according to the procedures of ANNEX 7 of this CONTRACT and according to the Scope of Work indicated in ANNEX 1. The taxes arising from the execution of the project, shall be paid by GHK but will not be part of the PROJECT'S COST.


4.2 The REAL COST shall be determined by the summation of the PROJECT COST, the PLUS agreed upon for the ADMINISTRATOR according to the percentage stipulated in the previous clause and the IVA on the PLUS. The calculation of the REAL COST will be made in US dollars and will take into account:


a. The payments and that are part of the PROJECT COST shall be converted
inot US dollars at the exchange rate certified by the "Superintendencia
Bancaria" at the date of the invoice of the respective CONTRACTOR.


b. The PLUS, which is payable in Colombian pesos, shall be converted into
US dollars at the exchange rate certified by the "Superintendencia
Bancaria" at the date of the invoice by the ADMINISTRATOR.


FIVE. - EXTRA WORKS AND WORK REDUCTIONS. -


5.1 For the calculation of the extra works not included in the Scope of Work of ANNEX 1 and that are approved by GHK prior to execution, the Unit prices of ANNEX 2 will be used.


5.2 Any of the PARTIES may determine the need to conduct extra works, whose approval shall be subject to the following procedure: a. Should the need to conduct the extra work be determined by the ADMINISTRATOR, he shall provide GHK with a technical opinion justifying the need to conduct such work, and an estimate of its cost as well as the estimated time for its execution. b. GHK shall analyze the ADMINISTRATOR's technical opinion and shall determine whether the extra works are technically indispensable to guarantee the stability of the works entrusted to the ADMINISTRATOR. 5
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c. If GHK, despite the ADMINISTRATOR's technical opinion, determines that the proposed works are not indispensable to guarantee the stability of the works, it may deny its approval and the ADMINISTRATROR may not be held responsible for the stability corresponding to the part of the project for which the ADMINISTRATOR estimates extra works are required. d. Should GHK determine that extra works are technically indispensable, GHK shall ask for an opinion on the impact by those works from the WORKS COMMITTEE during the term of the CONTRACT, after which it shall proceed to determine the approval conditions. In this event, the PARTIES shall sign an Additional Clause to the CONTRACT.


5.3 The cost of any extra works that GHK authorizes will no be part of the PROJECT COST for the effects of determining a bonus of this CONTRACT.


5.4 Should GHK determine a reduction in the works to be performed, as a result of duly supported techniques, the WORKS COMMITTEE shall evaluate the impact on the project's term and cost. The PARTIES shall agree the relevant reduction as to the term and cost, by signing an additional clause to the present CONTRACT, stating the new PROJECT'S COST in order to calculate the bonus foreseen herein.


SIXTH. - COMMITTEES. -


The PARTS will create a WORKS COMMITTEE, and a PURCHASES AND CONTRACT COMMITTEE as per the procedure established in ANNEX 7 of this CONTRACT for its operations.


SEVEN. - OLEDUCTO GUADUAS FUND. -


7.1 Once the present CONTRACT is signed, GHK shall open a joint management account in a Colombian bank with an authorized signature of a GHK representative and of the ADMINISTRATOR. This account will be named OLEDUCTO GUADUAS FUND and with charge to this account all payments to be done by the ADMINISTRATOR due to Contract or purchases made for the project execution, taking into account the procedure for the payments legalization of ANNEX 7 of this CONTRACT. This fund will be fed by GHK with resources in one of its overseas bank account with sufficient resources to meet the fund requirements for the project. Costs incurred as a result of the transfer to the fund's account in Colombia, shall be borne by GHK and shall not be part of the PROJECT'S COST.


7.2 The ADMINISTRATOR authorizes GHK to periodically audit the administration of the OLEDUCTO GUADUAS FUND and the legalizing of the payments by the ADMINISTRATOR.


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7.3 For payments to be made abroad, GHK shall charge them to its checking accounts abroad, pursuant to ANNEX No. 7.


EIGHTH. - CALCULATION OF THE PLUS BY THE ADMINISTRATOR. -


8.1 To calculate the PLUS that corresponds to the ADMINISTRATOR, the 13% will be applied to the accumulated PROJECT COST(Summation of all DIRECT COSTS AND INDIRECT COSTS) to the date of closing of the period. To the result of this calculation, the accumulated previous payments will be subtracted. DIRECT COSTS will be multiplied by the fraction of the real divided by the projected progress. The projected progress curve from which the project progress is measured shall be determined using 120 calendar days from the Kickoff Minute and as cost the sum of NINE MILLION NINE HUNDRED THOUSAND US DOLLARS (US $9,900,000). If, in any event, the project's actual curve exceeds the projected curve, GHK shall not reimburse more than one hundred percent (100%) of reimbursable costs.


8.2 For the calculation of the PLUS, the payments that shall be done in US dollars by purchases or payment to CONTRACTORS shall be converted inot Colombian pesos at the exchanged rate certified by the "Superintendencia Bancaria" at the date of the invoice of the respective purchase or respective CONTRACTOR.


NINE. PAYMENT AND INVOICING BY THE ADMINISTRATOR. -


9.1 For the invoicing of the PLUS, the ADMINISTRATOR will present as support the Minutes of the WORKS COMMITTEE duly approved and stating the fees to be paid to the ADMINISTRATOR, as well as an identification of the PROJECT COSTS that had been legalized via the OLEODUCTO GUADUAS FUND in the terms of this CONTRACT.


9.2 The ADMINISTRATOR shall present within the first five (5) days of each month following the one on which the works or services object of the CONTRACT were performed or rendered an original and two (2) copies of the invoices for the PLUS of the works performed or the services provided together with the Minute of the WORKS COMMITTEE and the identification of the PROJECT COSTS that had been legalized via the OLEODUCTO GUADUAS FUND , at GHK's offices located on Calle 114 No. 9-01 Torre A Oficina 707, Bogota, D.C. The Invoices shall be made in Colombian pesos and will discriminate IVA corresponding to the PLUS.


9.3 Invoices shall be sent to: 7
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GHK Company Colombia
Accounting Department/ Accounts Payable
Address: Celle 114 No. 9 -01 Torre A Oficina 707
Bogota, D.C.


9.4 GHK shall pay the ADMINISTRATOR, the unpaid invoices duly approved., on the following Friday, thirty (30) calendar days after the proper submission of the invoice..


9.5 Payments shall be made in the above-mentioned offices or at the place GHK indicates. GHK shall not make no payments in cash or with checks drawn to the holder, related to this CONTRACT. GHK shall only make payments with checks or electronic transfers to the name of the ADMINISTRATOR. GHK shall not pay to third parties on behalf of the ADMINISTRATOR, except express approval for such purpose by the ADMINISTRATOR.


9.6 To the extent applicable to the contracted service, all the invoices shall comply with the following requisites:


a. ADMINISTRATOR's name and TIN, address and phone number.. b. GHK COMPANY COLOMBIA's name and TIN (TIN: 08001854403). c. The legend "Sales Invoice" or "Purchase/Sale Invoice" or "Invoice for
Technical Services", as required. d. To be numbered (numbering shall match a consecutive billing system). e. Issuance date for the invoice. f. AFE code (Authorization For Expenditure) No. 01.001.09 g. CONTRACT number. h. Specific or general description of the works performed and/or services
provided, site where they were performed/provided, period during which they
were performed/provided.. i. Total value of the operation and IVA disaggregation, indicating it is under
the Common System and whether IVA withholder or not. j. Name or trade name and TIN of the invoice's printer and DIAN's Resolution
number authorizing the invoice's print. k. Invoices shall bring the corresponding supporting documents that enable
determining that works or services have been accepted satisfactorily by
GHK's REPRESENTATIVE. l. The economic activity and applicable Industry and Trade Tax rate for
taxpayers of Santa Fe de Bogota, D.C. m. They shall be submitted in Spanish. n. Should the ADMINISTRATOR be self-withholder, certified photocopy of DIAN's
corresponding resolution, for just one time, and indicating (in each one of
the invoices) the number of the resolution. o. Invoices shall include the withholding values as guarantee set forth in the
CONTRACT. 8
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Letters a, c, d and j shall be submitted in print.


9.7 Invoice payment shall be subject to proof, on the part of the ADMINISTRATOR, of the establishment of insurance policies for the amounts and other conditions set forth in the clause on policies herein.


9.8 GHK may object the invoices not prepared pursuant to this clause and the objection shall be notified to the ADMINISTRATOR in the ten (10) working days following the receipt of the invoice, specifying the reason for the objection. Whenever an invoice is returned to the ADMINISTRATOR, due to reasons imputable to him, the term for its payment shall start on the date in which GHK receives the invoices again with the relevant corrections. Notwithstanding the above, GHK shall proceed to pay the non-objected or undisputed amounts within the term set forth in number 4.3 of the present clause.


9.9 Notwithstanding the above, GHK reserves the right to request a clarification or correction of the invoices or bills prepared by the ADMINISTRATOR, even if they have already been paid for, provided this right is exercised in the twenty four (24) months following its payment, stating the reasons for its objection. Should there be no objections in this period of time, the invoices shall be considered as correct, unless the mistakes were arithmetic mistakes.


9.10 Payments to which this clause makes reference to, shall be subject to the relevant tax withholdings. The withholdings GHK makes to the ADMINISTRATOR shall be made in the same currency in which the payment is made. Likewise, refunds made by GHK to the ADMINISTRATOR shall be made in the same currency in which the withholding were made, without interests or adjustments of any kind..


9.11 Whenever invoices are prepared in dollars, the ADMINISTRATOR shall submit its invoices to GHK in a period of time not exceeding the one stipulated in number 4.1. Should the ADMINISTRATOR fail to submit the invoice in this stipulated term, the ADMINISTRATOR authorizes GHK to deduct one percent (1%) of the value of the invoice for every month of delay in the submittal of the invoice, starting on the month following the one in which the ADMINISTRATOR rendered the services or performed the works.


TENTH. BONUS AND PENALTIES.-


10.1 In the event the REAL COST of the project is lower than or equal to NINE MILLION NINE HUNDRED THOUSAND DOLLARS (US$ 9.900.000.oo), and the works are executed within one hundred and twenty (120) calendar days following the date on which the works commencement minutes are signed, or within the authorized extensions, GHK shall grant the ADMINISTRATOR as bonus, a total 9
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additional fee, including VAT, amounting to fifty percent (50%) of the difference between US$ 9.900.000.oo and the REAL COST. This bonus will be paid once signed the liquidation minute of the CONTRACT and for its invoicing and payment the same rules provided for the invoicing and payment of the PLUS.


10.2 If the REAL COST is lower than or equal to NINE MILLION NINE HUNDRED THOUSAND DOLLARS (US$ 9.900.000.oo), but the works are conducted in a period of time exceeding one hundred and twenty (120) calendar days following the signature of the works commencement minutes, or once the authorized extensions have elapsed, GHK shall not grant the ADMINISTRATOR the bonus mentioned in the previous item. In this case the ADMINISTRATOR shall pay for the penalties foreseen herein and in the penalty clause when required.


10.3 If the REAL COST exceeds NINE MILLION NINE HUNDRED THOUSAND DOLLARS (US$ 9.900.000.oo), and is lower than or equal to TEN MILLION THREE HUNDRED THOUSAND DOLLARS (US$ 10.300.000), GHK shall grant no bonus at all to the ADMINISTRATOR, despite the works are conducted in the one hundred and twenty (120) days following the signature of the works commencement minutes or of its duly authorized extensions..


10.4 If the project's REAL COST exceeds NINE MILLION NINE HUNDRED THOUSAND DOLLARS (US$ 9.900.000.oo), and is lower than or equal to TEN MILLION THREE HUNDRED THOUSAND DOLLARS (US$ 10.300.000), and the works are conducted in a term exceeding one hundred and twenty (120) calendar days or the additional authorized term, the ADMINISTRATOR shall pay the penalties foreseen herein and in the penalty clause when required.


10.5 If the REAL COST exceeds TEN MILLION THREE HUNDRED THOUSAND DOLLARS (US$ 10.300.000), the ADMINISTRATOR shall pay GHK a penalty as provided hereforth:
a. If the works are executed in a period less or equal to one hundred
and twenty calendar (120) days, the ADMINISTRATOR will pay GHK
fifty per cent (50%) of the difference between TEN MILLION THREE
HUNDRED THOUSAND DOLLARS (US$ 10.300.000) and the PROJECT'S COST.
b. If the works are executed in a term greater than one hundred and
twenty calendar (120) days or the additional term has elapsed, the
ADMINISTRATOR will pay GHK fifty per cent (50%) of the difference
between TEN MILLION THREE HUNDRED THOUSAND DOLLARS (US$
10.300.000) and the PROJECT'S COST up to day 120; from that
day onwards GHK will either charge the fines and penalty clause
provided in this contract or fifty per cent (50%) of the
PROJECT'S COST above TEN MILLION THREE HUNDRED 10
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THOUSAND DOLLARS (US$ 10.300.000) and until project completion.


10.6 When the ADMINISTRATOR'S penalty is to pay fifty per cent (50%) of the PROJECT'S COST as indicated above, the calculation for this penalty shall be made by the WORKS COMMITTEE, within the month following GHK'S request. For the payment of the penalty, this CONTRACT shall be considered to convey an enforceable right and the ADMINISTRATOR authorizes GHK to discount the value of the penalty from the value withheld in guarantee as herein provided and, if not sufficient, withholding the value of the invoices pending to be paid by the ADMINISTRATOR. The balance, if any, shall be paid by the ADMINISTRATOR in the thirty (30) days following the date on which GHK submitted the total invoice. The ADMINISTRATOR shall be the only responsible before GHK for the payment of the penalty foreseen herein , without prejudice of the right of the ADMINISTRATOR to repeat against the CONTRACTORS, should this had been stipulated in the respective contracts.


10.7 For the effects of determining the fifty percent (50%) that the ADMINISTRATOR shall pay , he authorizes GHK to carryout periodical audits with respect to payments legalized via the OLEODUCTO GUADUAS FUND.


ELEVENTH. TERM.-


The term of the present CONTRACT is one hundred and twenty (120) calendar days starting on the date the Works Commencement Minute is signed, and the creation of the OLEODUCTO GUADUAS FUND.


TWELVE. RETENTION IN GUARANTEE. -


12.1 The ADMINISTRATOR expressly authorizes GHK to make a three percent (3%) withholding every time GHK must pay the fees related to this contract, as a performance guarantee deposit by the ADMINISTRATOR for all the obligations it assumes by virtue of the present CONTRACT. This withholding shall not be applies to the VAT, provided it is disaggregated in the invoices. The withheld amounts shall be reimbursed by GHK to the ADMINISTRATOR deducting, when required, the amounts GHK destined to pay, indemnify, repair damages, obligations or fines for which the ADMINISTRATOR is liable. It is expressly understood and agreed that the sums withheld earn no interest.


12.2 In order to request the refund of the amount withheld, the ADMINISTRATOR must wait until the last invoice for the works or services object of the CONTRACT has been paid to him, and shall submit the following documents, to the extent they are applicable to the contracted service: 11
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a. Invoice for the withheld value, listing each one of the invoices submitted
and the withheld amount. b. Insurance policies or their extensions, under the terms required herein, in
force until the term provided for in the CONTRACT, and with the payment
records of the corresponding premiums. c. All expenses paid certificates by suppliers and CONTRACTORS. d. All expenses paid certificates for the land and properties the pipeline will
cross, stating the agreement of the owners of the works conducted by the
ADMINISTRATOR in their properties. e. All labor costs paid certificates both of the ADMINISTRATOR'S and the
CONTRACTOR'S employees, as well as a certification by the Labor Inspection
in Bogota, certifying there are no labor claims against the ADMINISTRATOR,
the CONTRACTORS and/or GHK.


THIRTEENTH . ADMINISTRATOR'S AND CONTRACTORS PERSONNEL. -


13.1 The parties expressly state that, due to its nature, the present CONTRACT is not an employment contract, giving rise to no labor relation at all in any of the relations between the ADMINISTRATOR, its employees, or agents at its service with GHK. Even when GHK facilitates and makes available for the ADMINISTRATOR, its employees, or agents, its facilities and infrastructure such as secretary support, office space or establishments, among others.


13.2 Pursuant to the above the ADMINISTRATOR shall be and shall be considered as an independent ADMINISTRATOR and not as GHK's agent, representative, employee or mere intermediary.


13.3 Neither GHK nor its representatives shall have the power to exercise any type of subordination in front of the ADMINISTRATOR's employees or representatives, not assigned to the project's execution. The development of the CONTRACT and of the project shall be exclusively supervised and controlled by the ADMINISTRATOR.. Notwithstanding the above, in the event of a crisis or public order disruption, the special recommendations issued by GHK's Security Manager shall be considered.


13.4 It is expressly understood and stipulated that each and all the officials, technicians and other personnel assigned by the ADMINISTRATOR for the compliance of this CONTRACT, give rise to a unique and exclusive labor relation with the ADMINISTRATOR. Therefore, the ADMINISTRATOR shall be responsible for the payment of all salaries, legal and additional benefits, indemnification, additional work, uniforms, insurance and, in general, the compliance with all the affiliation obligations and contributions to the Integral Social Security General System and other additional payments (ICBF, SENA, Cajas de Compensacion Familiar, etc.) the law imposes on it as the only employer of its workers. GHK reserves the right to conduct Labor Audits during 12
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the term of the CONTRACT and one more year, to guarantee the compliance by the ADMINISTRATOR of the respective labor obligations.


13.5 GHK authorizes the ADMINISTRATOR to contract, charging it to the contract, the services of temporary service companies for the supply of personnel exclusively destined to the project. The contract with such company(s) shall be previously approved by the PURCHASES and CONTRACTS COMMITTEE.


13.6 If as a result of the failure by the ADMINISTRATOR to comply with the legal and contractual obligations mentioned in the previous paragraph and as provided for in article 34 of the Labor Code and the regulations added to it or that amend it, a legal decision determines GHK is jointly and severally liable for payments and indemnities corresponding to the ADMINISTRATOR, for one or several of its employees, GHK shall be entitled to repeat against the ADMINISTRATOR and may exercise the withholding right on any amount owed to the ADMINISTRATOR, up to the values being judicially and extrajudicially charged.


13.7 The ADMINISTRATOR shall execute the object of this CONTRACT through its own staff, equipment and materials. The staff is fully ...