Document:

bayou_10q-ex1005.htm

EXHIBIT 10.5

   

TURNKEY DRILLING CONTRACT

    

THIS AGREEMENT is made and entered into as of the 9th day of April, 2012 by and between the parties herein designated as “Partnership” and “Contractor.”

      

	 	Partnership:	2012 Bayou City Squeeze Box Offset Program, L.P.
	 	Address:	
632 Adams Street, Suite 710

Bowling Green, Kentucky 42101

	 	 	 
	 	Contractor:	Bayou City Exploration, Inc.
	 	Address: 	
632 Adams Street, Suite 710

Bowling Green, Kentucky 42101

     

IN CONSIDERATION of the mutual promises, conditions and agreements herein contained, Partnership engages Contractor as an Independent Contractor to furnish the equipment, labor and services to drill, test, and complete its working interest portion, as per Exhibit “1”, of the well to be drilled on the Partnership Prospect in Cameron Parish, Louisiana in search of oil and/or gas.

As a Management Fee for the supervision and management of the affairs of the Partnership during the work over, drilling and testing periods of Initial Operations, the Managing General Partner will receive an amount equal to the excess, if any, of the Turnkey Drilling Price over the actual cost of such operations.  Likewise, during the completion period of Initial Operations, if completion is attempted on the Prospect Well, the Managing General Partner will receive an amount equal to the excess, if any, of the Turnkey Completion Price over the actual costs of such operations.  The Managing General Partner intends to enter into one or more Operating Agreements (the “Operating Agreements”) with third party operators which will perform certain services with respect to the work over, drilling, testing and, if applicable, completion of the Prospect Well.  We cannot accurately predict the actual amount constituting compensation to be paid to any third party operator for its services under the Operating Agreements and therefore, it also cannot accurately predict the excess amount, if any, of the Turnkey Drilling Price over the actual cost of such operations that the Managing General Partner will receive.  Costs to be expended under the Operating Agreements are a direct result of the work over, drilling, testing and completion risks encountered.  During work over, drilling, testing and completion operations, a variety of conditions may be encountered, such as loss of circulation, blowouts, detachment and/or loss of drilling equipment, necessity for the purchase and installation of down-hole equipment to keep the wellbore intact, and repair of inadequate cement to hold production casing in place.  As such costs are unpredictable with any degree of certainty, in the event of totally uneventful operations, compensation payable pursuant to the Operating Agreements could equal or exceed the actual work over, drilling, testing and completion costs.  Likewise, in the event that a series of major difficulties are encountered, these costs could equal or exceed the amount of Initial Capital, and Bayou City Exploration, Inc. would be responsible for such excess costs.  Bayou City Exploration, Inc. may use any funds it receives from management fees and/or profits, if any, for any purpose, including payment of General and Administrative Expenses of Bayou City Exploration, Inc. such as employee salaries and office expenses.

1.    LOCATION OF PARTNERSHIP WELL(S):

See Exhibit "1" attached hereto and made a part hereof.

    

  

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2.    TERMINATION DATE:

Contractor agrees to use its best efforts to complete operations for the acquisition, drilling and testing of the Partnership Well by December 31, 2012, and Contractor and the Partnership agree that time is of the essence under this Agreement.

3.    BASIS OF DETERMINING AMOUNTS PAYABLE TO CONTRACTOR:

Contractor shall be paid at the following rate for the work performed hereunder:

Turnkey Drilling Price ($709,333) and Completion Price in the event that completion is attempted ($145,667) = Total $855,000.

   

4.    DEPTH:

Subject to the right of the Partnership to direct the stoppage of work at any time (as provided in paragraph 7), the Partnership Well shall be drilled to the depth as specified in Exhibit “1” or to the depth at which the production casing (production string) is set, whichever depth is first reached, which depth is hereinafter referred to as the “Contract Depth.”

    

5.           TIME OF PAYMENT:

5.1  Basis:  Payment by the Partnership to the Contractor of the Drilling Price becomes due and payable upon the receipt by the Partnership of an invoice from the Contractor.  Neither commencement nor completion of Contractor’s performance shall be a condition precedent to this obligation to pay.

5.2  Attorneys’ Fees:  If this Agreement is placed in the hands of an attorney for collection of any sums due hereunder, or suit is brought on same, or sums due hereunder are collected through bankruptcy or probate proceedings, then the Partnership agrees that there shall be added to the amount due reasonable attorneys' fees and costs.

    

6.    COMPLETION PROGRAM:

The Contractor, in its capacity as Managing General Partner of the Partnership (the “Managing General Partner”), along with other participating Partnership Well working interest owners, shall determine whether Contractor shall set a production string on the Prospect Well.  In the event the Managing General Partner directs that drilling operations cease and to abandon the Partnership Well, Contractor shall plug the Partnership Well, remove all drilling apparatus from the well site and the obligations of the parties hereunder shall cease.  In the event the Managing General Partner directs Contractor to set a production string on the Prospect Well and makes timely payment to the Contractor of the Completion Price, Contractor shall commence the operations necessary to attempt to complete the Prospect Well for commercial production, including the setting of a production string and the acquisition, delivery and installation of a pump jack, holding tank and all other necessary equipment needed to extract and contain oil and/or gas from the Partnership Well.

  

7.    STOPPAGE OF WORK BY THE PARTNERSHIP:

Notwithstanding the provisions of paragraph 3 with respect to the depth to be drilled, the Managing General Partner shall have the right to direct the stoppage of the work to be performed by the Contractor hereunder at any time prior to reaching the Contract Depth and even though Contractor has made no default hereunder.  If the Partnership exercises its right to discontinue drilling the well(s), the Partnership will not receive a refund for any unused portion of the Drilling Price allocable to the discontinued well(s).

       

  

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8.    REPORTS TO BE FURNISHED BY CONTRACTOR:

8.1  Contractor shall keep and furnish to the Partnership an accurate record of the work performed and formations drilled on the IADC-API Daily Drilling Report form or other form acceptable to the Partnership.  A legible copy of said form signed by Contractor’s representative shall be furnished by Contractor to the Partnership.

8.2  Delivery tickets, if requested by the Partnership, covering any material or supplies furnished by the Partnership shall be turned in each day with the daily drilling report.  The quantity, description and condition of materials and supplies so furnished shall be checked by Contractor and such tickets shall be properly certified by Contractor.

   

9.    RESPONSIBILITY FOR A SOUND LOCATION:

Contractor shall prepare a sound location, adequate in size and capable of properly supporting the drilling rig.  Contractor shall be responsible for a conductor pipe program adequate to prevent soil and subsoil washout.  In the event subsurface conditions cause a cratering or shifting of the location surface, and loss or damage to the rig or its associated equipment results therefrom, the Partnership shall not be responsible for reimbursing Contractor for any such loss or damage including payment of work stoppage rate during repair and/or demobilization if applicable.

10.           RESPONSIBILITY FOR ROAD AND LOCATIONS:

Contractor agrees at all times to maintain roads to locations and each location in such a condition that will allow free access and movement to and from the drilling site in an ordinarily equipped highway type vehicle.

11.           PAYMENT OF CLAIMS:

Contractor agrees to pay all claims for labor, material, services and supplies to be furnished by Contractor hereunder, and agrees to allow no lien or charge to be fixed upon the lease, the Partnership Well or other property of the Partnership or the land upon which said Partnership Well is located.

12.           RESPONSIBILITY FOR LOSS OR DAMAGE:

12.1  Contractor’s Surface Equipment:  Contractor shall assume liability at all times for damage to or destruction of Contractor’s surface equipment, including but not limited to all drilling tools, machinery and appliances, for use above the surface, regardless of when or how such damage or destruction occurs.

12.2  Contractor’s In-Hole Equipment Basis: Contractor shall assume liability at all times for damage to or destruction of Contractor’s in-hole equipment, including but not limited to drill pipe, drill collars and tool joints, and the Partnership shall be under no liability to reimburse Contractor for any such loss.

    

  

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12.3  Partnership’s Equipment: The Partnership shall assume liability at all times for any defective equipment owned by it, including but not limited to casing, tubing, well head equipment, and Contractor shall be under no liability to reimburse the Partnership for any such loss or damage.

12.4  Fire or Blow-Out:  Should a fire or blowout occur or should the hole for any cause attributable to Contractor's operators be lost or damaged while Contractor is engaged in the performance of work hereunder, all such loss of or damage to the hole including cost of regaining control of a fire or blowout, shall be borne by Contractor; and if the hole is not in condition to be carried to the Contract Depth as herein provided, Contractor shall, if requested by the Partnership, commence a new hole without delay at Contractor's cost; and the drilling of the new hole shall be conducted under the terms and conditions of this Agreement in the same manner as though it were the first hole and Contractor shall be responsible for replacement of any casing lost in a junked and abandoned hole as well as the cost of preparing a new drill site for the new hole and the road thereto.  In such case, Contractor shall not be entitled to any payment or compensation for expenditures made or incurred by Contractor on or in connection with the abandoned hole.

   

13.    NO WAIVER EXCEPT IN WRITING:

It is fully understood and agreed that none of the requirements of this Agreement shall be considered as waived by either party unless the same is done in writing, and then only by the persons executing this Agreement, or other duly authorized agent or representative of the party.

   

14.    FORCE MAJEURE:

If either party hereto is rendered unable, wholly or in part (and its performance hereunder is not rendered merely commercially impracticable) by force majeure to carry out its obligation under this Agreement, it shall give the other party prompt written notice of the force majeure with reasonably full particulars.  Thereupon, the obligations of the notifying party, so far as they are affected by the force majeure, shall be suspended during, but not longer than, the continuance of the force majeure, and the notifying party agrees to use reasonable diligence to remove the force majeure as quickly as possible.  This paragraph shall not relieve either party hereto for its obligations to expend sums of money or to indemnify the other party hereto, as provided elsewhere in this Agreement. The term "force majeure" as herein employed shall mean an act of God, strike, lockout or other industrial disturbance, act of the public enemy, war, blockade, public riot, lightning, fire, storm, flood, explosion, extreme weather conditions, or governmental restraint.

   

15.    INFORMATION CONFIDENTIAL:

Upon written request by the Partnership, information obtained by Contractor in the conduct of drilling operation on the Partnership Well, including, but not limited to depth, formations penetrated, the results of coring, testing and surveying, shall be considered confidential and shall not be divulged by Contractor or its employees, to any person, firm or any corporation other than the Partnership’s designated representative.

     

16.    NOTICES AND PLACE OF PAYMENT:

All notices to be given with respect to this Agreement unless otherwise provided for shall be given to Contractor and to the Partnership respectively at the addresses hereinabove shown.  All sums payable hereunder to Contractor shall be payable at the address hereinabove shown unless otherwise specified herein.

     

  

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	 	BAYOU CITY EXPLORATION, INC.	 
	 	 	 	 
	
 

	
By: 

	/s/ 	 
	 	 	Charles T. Bukowski, Jr., President & CEO	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	
2012 BAYOU CITY SQUEEZE BOX OFFSET PROGRAM, L.P.,

A KENTUCKY LIMITED PARTNERSHIP

	 
	 	 	 	 
	 	 	 	 
	 	By:	Bayou City Exploration, Inc.	 
	 	 	Managing General Partner	 
	 	 	 	 
	 	 	 	 
	 	By:	 	 
	 	 	Stephen C. Larkin, Chief Financial Officer	 

  

 

             

  

5

  

 

EXHIBIT "1" TO EXHIBIT "C"

 

April 9, 2012

The primary investment objective of the Partnership is, assuming all Units are sold, the acquisition of up to 5.0% Working Interest, which is approximately 3.6% of the Net Revenue Interest in one additional offset well to be drilled on the Squeeze Box Prospect (the “Squeeze Box Prospect Well”).  The Squeeze Box Prospect will consist of oil and gas leases in Cameron Parish, Louisiana and will be drilled to a depth sufficient to test the five objective sands.

 

 

 

 

 

 

 

 

 

 

 

6velatel_8k-ex1001.htm

Exhibit 10.1

 

Equipment Contract – Montenegro

 

among

 

Montenegro Connect, d.o.o

 

and

 

VelaTel Global Communications, Inc.

 

(collectively, “Customer”)

 

and

 

ZTE Corporation

 

(“Supplier”)

 

Contract No.: DTZF2012050802WMXTH403

 

Date: May 10, 2012

 

Signing Place: Shenzhen, PRC

  

  

  

This Equipment Contract is made on this 10th day of May, 2012

 

AMONG

 

Montenegro Connect, d.o.o, a company incorporated under the laws of the Republic of Montenegro, having its registered office at DzordzaVaslingtona 65, Podgorica, Montenegro (hereinafter referred to as “Montenegro Connect”);

 

AND

 

VelaTel Global Communications, Inc., a company incorporated under the laws of the United States in the State of Nevada, having its registered office at 12656 High Bluff Drive, Suite 155, San Diego, California 92130 USA (hereinafter referred to as “VelaTel”);

 

Montenegro Connect and VelaTel are sometimes collectively referred to as “Customer.”

 

AND 

 

ZTE Corporation, a company incorporated under the laws of the Peoples’ Republic of China (“PRC”)  having its registered office at ZTE Plaza, Keji Road South, Hi-Tech Industrial Park, Nanshan District, Shenzhen, PRC (hereinafter referred to as “Supplier” or sometimes referred to as "ZTE"), which expression shall deem to mean and include all its successors-in-interest and assigns;

 

Montenegro Connect, VelaTel and ZTE are each referred to as a “Party” and together as the “Parties”.

 

WHEREAS:

 

A.Customer wishes to acquire a solution for the expansion and upgrade of its wireless broadband network in the Republic of Montenegro (hereinafter referred to as the “Project,” as further defined below) and to select Supplier to supply the Equipment (as defined herein below) for the Project to conform to the description and specifications included within the terms and conditions to this contract and its annexes referred to and attached hereto.

 

B.Supplier has agreed to supply and supervise the installation of the Equipment, subject to the terms and conditions of this contract and its annexes referred to and attached hereto.

 

NOW THEREFORE, in consideration of mutual representations, covenants and other valuable consideration, it is hereby agreed by and between the Parties as follows.

 

	
ARTICLE 1

	
DEFINITIONS AND INTERPRETATION

 

Unless the context otherwise requires, the following terms whenever used in this Contract shall have the meaning ascribed in this Article.  Defined terms importing the singular also include the plural and vice versa where the context so requires.  Any term which appears in other sections of this Contract in “bold,” but which is not otherwise defined in this Article shall have the meaning ascribed by the words or clause immediately preceding such reference to the term in “bold.”

 

	 PROPRIETARY AND CONFIDENTIAL	 	Page 1 of 11

  

  

  

 

(a)“Contract” means the present Equipment Contract between Customer and Supplier, any Annex attached and any valid amendment, any supplementary agreements and succeeding amendments thereto, defining the principal rights and duties of the Parties.

 

(b)“Supply Price” or “Price” means the price payable to Supplier under the Contract for the full and proper performance of its contractual obligations under the Contract.

 

(c)“Day” means respectively the Gregorian calendar year, month and day.

 

(d)“Business Day” means the weekdays excluding public holidays recognized in Montenegro.

 

(e)“Equipment” means the physical items and their corresponding software to be provided by Supplier under the Contract as required for the satisfactory implementation of the Project or as specifically provided for in the Contract. 

 

(f)“Parties” means Supplier and Customer collectively, and “Party” means either of Supplier or Customer individually, as the context dictates.

 

(g)“Confidential Information” means any information disclosed in any form whatsoever (including, but not limited to, disclosure made in writing, orally or in the form of samples, models, computer programs or otherwise) by the disclosing Party to the receiving Party under this Contract, provided that (i) if such information is disclosed by the disclosing Party in writing, it shall be marked as confidential at the time of disclosure, (ii) if such information is disclosed by the disclosing Party orally, it shall be identified as confidential at the time of disclosure and shall also be summarized and designated as confidential in a written memorandum delivered to the receiving Party within thirty (30) days of disclosure, (iii) if disclosed in any other manner, it shall be designated in writing as confidential at the time of disclosure or (iv) notwithstanding subparagraphs (i), (ii) and (iii) of this definition, the nature of such information makes it obvious that it is confidential.

 

(h)“Documentation” includes but is not limited to Equipment operation manuals, technical pamphlets, catalogues, advertising material, specifications and all other materials in relation to the Equipment and the business of the Supplier embodied either by hard copy or in any electronic form. 

 

(i)“Site” means any land and other place on, under, in or through which the works of the Contract are to be executed and any other lands and places designated by Customer for working space or any other purpose as may be specifically stipulated in the Contract as forming part of a Site.

 

(j)“Software” means the software bundled with, embedded, or supplied by Supplier with other equipment which is described in the Specifications, or any improvements and/or enhancements thereof, including: (i) man-machine executable object code version of the user loadable programs, (ii) the microcode embedded in Supplier’s equipment, (iii) any updated or revision of these programs or the microcode delivered to Customer.

 

(k)“Specifications” means the technical specifications for Supplier’s Equipment.

 

 

	 PROPRIETARY AND CONFIDENTIAL	 	Page 2 of 11

  

  

  

 

(l)“USD” or “U.S. Dollars” or “$” means the lawful currency of the United States of America.

 

(m)“Network” means the network connecting the Equipment by which Customer operates its telecommunications system; 

 

(n)“Sub-supplier” means one party to any Subcontract as may be concluded between a Sub-supplier and Supplier by which Supplier delegates performance of certain obligations for the purpose of implementation of this Contract.

 

(o)“Territory” means any geographic area under the jurisdiction of the Republic of Montenegro.

 

(p)“Taxes” means all taxes, tariffs, levies, duties, withholdings and imposts, or any similar tax-related charges or levies imposed by any Governmental Authority within the Territory from time to time. 

 

(q)“Affiliate” means, in respect of a Party, any person or entity which directly or indirectly Controls, is Controlled by or is under common Control with that Party; “Control” or “Controlled” means in relation to a company, that the Controlling company, directly or indirectly and whether by ownership of share capital, possession of voting power, contract or otherwise, appoints and removes, or is able to appoint or removes, the majority of the members of the governing body of the Controlled company or otherwise controls or has the power to control the affairs and policies of that company.

 

(r)“Project” means the telecommunications network to be provided by Supplier under the terms and conditions of the Contract.

 

(s)“BoQ” means the Bill of Quotation that is an Annex to this Contract and applicable to the Phase One Equipment, and/or to any future PO, containing the itemized components of Equipment, unit pricing (FCA Hong Kong), unit quantities, and any other details the Parties deem appropriate.

 

(t)“PO” means any purchase order signed by Customer and Supplier for any Equipment under this Contract.

 

(u)“Phase One” means the Equipment that relates to the initial expansion of the Customer’s Network, which includes 25 base transceiver stations and related Equipment, all as described in the BoQ that is an Annex to this Contract.

 

	
ARTICLE 2

	
SCOPE OF SUPPLIES

 

Customer agrees to purchase from Supplier and Supplier agrees to sell to Customer, the Equipment and the related services named Montenegro National Wireless Broadband Network, which consists of a telecommunications network employing wireless broadband technology as set out in the final BoQ provided by Supplier to Customer for Phase One of the Project.

 

 

	 PROPRIETARY AND CONFIDENTIAL	 	 	Page 3 of 11

  

  

  

 

	
ARTICLE 3

	
CONTRACT PRICE FOR PHASE ONE EQUIPMENT

 

	
Item Description

	
Total Price – USD 

	
Equipment (One Year Warranty Included)

	
$ 820,304.28

	
Value Added Tax (known as PDV in Montenegro)

	
Paid by Customer

	
Delivery and Other Expenses

	
Paid by Customer

	
Total Contract Price

	
$820,304.28

The trade terms shall be subject to the "International Rules for the Interpretation of Trade Terms" (INCOTERMS 2000) provided by International Chamber of Commerce (ICC) unless otherwise stipulated herein. 

 

Supplier shall grant Customer generally the same discounts from list prices for the same units of Equipment specified in the BOQ for the 3 years following the date of this Contract, until May __, 2015.

 

	
ARTICLE 4

	
TERMS OF PAYMENT

 

4.1Payment terms for all the Equipment shall be as follows:

 

	
Credit facility:

	
Vendor Financing

	
Buyer:

	
Montenegro Connect, d.o.o

	
Supplier:

	
ZTE Corporation

	
Credit purpose:

	
To finance the purchase by Buyer of system Equipment from ZTE.

	
Down payment:

	
$175,732.53 (Among which, $117,155.02 has already be paid by Customer, $35,146.51 shall be paid within 15 days after signing this Contract, and $23,431.00 shall be paid within 15 days after goods available for Customer’s inspection at Delivery Port.)

	
Facility amount:

	
$644,571.75

	
Currency:

	
United States Dollars

	
Tenor:

	
2.5 years (Including Grace Period)

	
Grace period:

	
1 year commencing from first Bill of Lading date under each PO.

	
Interest Rate

	
6 months LIBOR plus 2.5% per annum

	
Principal Repayment:

	
Three semi-annually equal installments, with first one beginning on the 180th day from end of Grace Period.

	
Interest Payment:

	
Together with each principal repayment.

	
Security:

	
1. Unconditional and irrevocable Corporate Guarantee by Montenegro Connect’s parent company VelaTel for 100% of the financed amount.

2. Mortgage of 100% of System Equipment that is supplied by ZTE.

	
Assignment:

	
Supplier has right to assign all the account receivables to a third party with a written notice to Customer.  Customer shall accommodate necessary assistance to complete such assignment, including but not limited to acknowledging and signing any receivable assignment notice. A detailed financing agreement shall be entered into between Customer and Supplier for the financing arrangement.

 

 

	 PROPRIETARY AND CONFIDENTIAL	 	 	Page 4 of 11

  

  

  

 

4.2Unless otherwise directed by Supplier, all payments shall be made to Supplier’s bank account stated as follows:

 

	 	Account name:	
ZTE CORPORATION

	 	 	 
	 	
Account number USD:

	810100277908092014
	 	 	 
	 	
Bank name:

	BANK OF CHINA SHENZHEN BRANCH
	 	 	 
	 	
Swift code:

	BKCHCNBJ45A
	 	 	 
	 	Bank address:	INTERNATIONAL FINANCIAL BLDG., 2022 JIANSHE ROAD,SHENZHEN, P.R. CHINA, POST CODE:518001 

 

 

4.3Issuance of Purchase Order and Payment

 

4.4For the avoidance of any doubt and notwithstanding anything to the contrary in this Contract, VelaTel shall be responsible for issuing all payments stipulated herein to the Supplier if Montenegro Connect cannot perform its payment obligation to Supplier as per this Contract.

 

	
ARTICLE 5

	
PACKAGING

 

All goods shall be packaged to prevent damage from dampness, rust, moisture, erosion and shock, and shall be suitable for transportation.

 

Seller shall be liable to Customer for any damage and loss of the goods attributable to inadequate or improper packaging.

 

The measurement, gross weight, net weight of each package and any necessary cautions such as "Do not Stack Upside Down", "Keep Away From Moisture", "Handle With Care" shall be indicated on the surface of each package with fadeless pigment, whenever necessary.

 

	
ARTICLE 6

	
DELIVERY TERMS

 

6.1The term of delivery is FCA Hong Kong, which shall be interpreted in accordance with INCOTERMS 2000 of the International Chamber of Commerce.

 

6.2The time of delivery: The time of delivery will be according to each corresponding PO. 

 

6.3Port of Delivery: Hong Kong, China

 

6.4Supplier shall forward a copy of the following documents to Customer by way of facsimile at least seven (7) days prior to each delivery:

 

(a)Transport document (bill of lading or airway bill, as the case may be);

(b)Commercial invoice;

(c)Packing list; 

(d)Insurance policy;

(e)Contract Number/PO Number;

 

 

	 PROPRIETARY AND CONFIDENTIAL	 	 	Page 5 of 11

  

  

  

 

(f)Description of the Equipment components;

(g)The actual loading quantity of the Equipment;

(h)The total gross weight of the Equipment;

(i)The total volume of the Equipment;

(j)The vessel name or flight Number;

(k)The estimated date of dispatch (ETD);

(l)The estimated date of arrival at the port of delivery (ETA).

 

6.5In view of Supplier’s prior experience, Supplier shall assist Customer with obtaining any import license or other official authorization and carrying out all customs formalities for the importation of the Equipment, and for its transit through any other countries. All customs duties, tariffs, fees, taxes, assessments and the charges of any nature whatsoever imposed and levied in the Territory in connection with the importation of the Equipment shall be paid by Customer.

 

6.6The detailed delivery information for each shipment, including but not limited to the type and number of Equipment, the time and place of delivery, and the means of delivery, shall be specified in each corresponding PO.  If there is any discrepancy between any PO and this Contract regarding the delivery of Equipment, the PO shall prevail.

 

	
ARTICLE 7

	
SPARE PARTS

 

Supplier shall supply to Customer necessary spare parts, which shall be sufficient for system maintenance during the warranty period as specified in the BoQ. The quantity of the spare parts should accord to each PO.

 

	
ARTICLE 8

	
LIQUIDATED DAMAGES

 

8.1From Supplier – If Supplier fails to deliver any Equipment and/or Services within the specified schedule time, except under those conditions defined as Force Majeure or due to Customer’s fault, Customer may claim from Supplier as liquidated damages a sum equivalent to zero point one percent (0.1%) of the contract value of the Equipment and/or Services delayed, which shall be applied on daily basis, from the due date until the full settlement of the delayed Equipment or Services.  In any event, the aggregate sum of liquidated damages for any such delay shall not exceed five per cent (5%) of the total value of the Equipment and/or Services delayed or any part thereof.

 

8.2From Customer – If Customer fails to pay any sum due within the specified schedule, except under those conditions defined as Force Majeure or due to Supplier’s fault, Supplier may claim from Customer as liquidated damages a sum equivalent to zero point one percent (0.1%) of the overdue amount, which shall be applied on daily basis, from the due date until the full settlement of the delayed payment.  In any event, the aggregate sum of liquidated damages for any such delay shall not exceed one percent (1%) per month of the outstanding unpaid balance due.

 

8.3Demands of liquidated damages – Upon demand for liquidated damages, the non-defaulting Party shall notify the defaulting Party the payable amount of liquidated damages in writing. The defaulting Party shall pay the liquidated damages within ten (10) Business Days after the receipt of the written notice. If the defaulting Party disagrees with the amount of liquidated damages, it shall notify the non-defaulting Party within five (5) Business Days after the receipt of the written notice. The liquidated damages shall be paid within ten (10) Business Days after consensus has been reached in respect of the amount of damages.

 

 

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ARTICLE 9

	
TERMINATION

 

At any time prior to the Expiration Date, a Party (“Notifying Party”) may terminate this Contract through notice to the other Party in writing if: 

 

(a)the other Party materially breaches this Contract, and such breach is not cured within 6 months; or

 

(b)the other Party becomes bankrupt, or is the subject of proceedings for liquidation or dissolution, or ceases to carry on business or becomes unable to pay its debts as they come due; or 

 

(c)the conditions or consequences of Force Majeure which have a material adverse effect on the affected Party's ability to perform and which continues for a period in excess of six (6) months and the Parties have been unable to find an equitable solution.

 

In case the Contract is terminated according to cause (a), (b), (c) above, any obligations of the Parties defined in this Contract, which expressly or by implication is intended to come into or remain valid on or after termination of this Contract, shall continue in full force and effect notwithstanding any such termination.

 

	
ARTICLE 10

	
ASSIGNMENT AND SUBCONTRACT

 

Either Party may assign this Contract or any part thereof, to its Affiliates. Except for the above, neither Party may assign this Contract, or any part thereof, to any third Party without the express written authorization of the other Party. This Contract shall be binding upon the successors and permitted assigns of both parties.For the avoidance of any doubt and notwithstanding anything on the contrary in this Contract, the Customer shall not assign its Payment obligation against the Supplier under this Contract to its Affiliates or any third Party without the express written authorization of the Supplier.

 

Without violation of this Article, Supplier shall be entitled to subcontract all or any part of this Contract to competent Sub-supplier(s), provided that, Supplier guarantees Customer that the Sub-supplier(s) will perform its obligations in the same manner as Supplier in accordance with this Contract.  Notwithstanding any such subcontract, Supplier shall be responsible for the satisfactory performance of the whole Contract.

 

	
ARTICLE 11

	
LIMITATION OF LIABILITY

 

Except as provided in Article 8, Supplier shall not be liable to Customer for damages for loss of revenues or profits, loss of goodwill or any incidental, consequential, indirect or special damages in connection with the performance or non-performance of this Contract, whether or not Supplier was advised of the possibility of such damage.  The aggregate liability of Supplier for all claims for any loss, damage or indemnity whatsoever resulting from its performance or non-performance of this Contract shall in no case exceed the payment actually received by it under this Contract. These limitations shall apply notwithstanding the failure of the essential purpose of any limited remedy.

 

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ARTICLE 12

	
FORCE MAJEURE

 

Where the performance of either Party under this Contract is hindered by or rendered impossible on account of Force Majeure, including earthquakes, typhoon, flood, fires, war and other unexpected or unavoidable forces in respect of their consequence or results, the Party in contingency shall provide notice to the other Party of such contingency immediately, and within 15 days shall present valid documents signed by the notarial agency of the locale, stating the details of the incident and proving the circumstance and the extended time of performance required. The Party in contingency shall be exempt from liability for damages caused to the other Party as a result of and during the pendency of any event constituting Force Majeure.

 

	
ARTICLE 13

	
APPLICABLE LAW AND RESOLUTION OF DISPUTES

 

This contract, including without limitation its conclusion, validity, construction, performance and settlement of the disputes, shall be governed by the law of Hong Kong, without giving effect to the principles of conflict of law.

 

Any dispute arising from, or in connection with the contract shall be first settled through friendly negotiation by both Parties. In case no settlement to disputes can be reached through amicable negotiation by both Parties, the disputes shall then be submitted to Hong Kong International Arbitration Center (“HKIAC”) for arbitration in accordance with its Arbitration Rules in force at the time of application for arbitration.  The arbitration shall proceed in Hong Kong. The arbitral award is final and binding upon both Parties.  The arbitration fees shall be borne by the losing party except otherwise awarded by the arbitration commission.

 

To the fullest extent permitted by law, this arbitration proceeding and the arbitrator’s award shall be maintained in confidence by the parties so as to protect relevant valuable information or intellectual property rights.

 

Notwithstanding any reference to arbitration, both Parties shall continue to perform their respective obligations under the Agreement except for those matters under arbitration.

 

	
ARTICLE 14

	
GOVERNING LANGUAGE

 

The Contract is entered in the English language.  Should a translation of the Contract into any other language be made for any reason, all matters involving interpretation shall be governed by the English text.  The day-to-day language of communication and document transfer between the parties shall be English.

 

 

	 PROPRIETARY AND CONFIDENTIAL	 	 	Page 8 of 11

  

  

  

 

	
ARTICLE 15

	
CONFIDENTIALITY

 

15.1All Confidential Information shall remain the property of the disclosing Party and shall only be used by the other Party for the purposes of the Contract.  Each Party agrees to prevent unauthorized disclosure, sale, transfer, modification, translation, or reproduction of the other Party’s confidential information in accordance with the terms and conditions of the Non-Disclosure Contract entered into between the Parties.

 

15.2Each Party acknowledges that any violation of the duty of confidentiality set forth in the Non-Disclosure Contract is considered to be acting in bad faith and illegal.  A party acting in bad faith during the term of the Contract/Contract shall indemnify the damages caused to the other Party.

 

	
ARTICLE 16

	
INTELLECTUAL PROPERTY RIGHTS

 

16.1All patents, trade and service marks, design rights, copyrights, know-how, trade secrets and other intellectual and industrial property interests or rights (collectively, “Intellectual Property Rights”) in and to the Equipment, and all associated materials in any form, shall remain the property of Supplier and its Sub-suppliers, as appropriate.  Nothing contained in this Contract shall be understood, construed, and interpreted to be a transfer of such rights to Customer.

 

16.2Subject to terms and conditions of this Contract, Supplier grants to Customer a non-exclusive, non-transferable right to use any Software delivered with the Equipment, if any.  Customer shall not directly or indirectly, sell, transfer, offer, disclose, lease, or license any Software to any third party without prior authorization from Supplier.

 

16.3The Customer shall not:

 

(a)use the Software for any purpose other than as expressly provided by the terms of this Software License;

 

(b)allow anyone other than Customer’s employees, agents and/or representatives with a “need to know” to have access to the Software;

 

(c)make any copies of the Software except such limited number of object code copies as may be reasonably necessary for execution or archival purposes only;

 

(d)make any changes to the Software, other than those arising from Customer’s normal use of the Software as explained in the associated documentation; or

 

(e)reverse engineer or in any other manner decode the Software, in order to derive the source code form or for any other reason.

 

	
ARTICLE 17

	
NO JOINT VENTURE

 

Nothing in this Contract shall be construed to constitute, create, give effect or recognize a joint venture partnership or formal business entity of any kind.  Nothing shall be construed as providing for the sharing of profits or losses arising out of the efforts of either Party except as may be provided in any separate contract entered into between the parties (if any).

 

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ARTICLE 18

	
NOTICES

 

Notices under this Contract must be in writing, to be sent via the regular post, postage prepaid, or by overnight courier service, personal delivery, or by confirmed facsimile.  If sent by confirmed facsimile, notice will be effective one business day after being sent.  If sent by confirmed personal delivery, notice will be effective at the time of delivery.  If sent by overnight courier service, notice will be effective upon the actual time of delivery.  Notices should be sent to the following addresses:

 

Customer: VELATEL GLOBAL COMMUNICATIONS, INC.

12526 High Bluff Drive, Suite 155, San Diego, CA  92130

Tel: +1 (760) 230-8986

Fax: +1 (760) 359-7042

Attn: Kenneth L. Waggoner

Supplier: ZTE CORPORATION

ZTE Plaza, Keji Road South, Hi-Tech Industrial

Park, Nanshan District, Shenzhen, P.R.China

Tel: 0086 -755 -26770000

Fax: 0086 -755 -26771999

Attn: Gao Ping

	
ARTICLE 19

	
NO WAIVER

 

The failure of either party to insist upon strict adherence to any term or condition of this Agreement on any occasion shall not be considered a waiver of any right to insist upon strict adherence to that term or condition or any other term or condition of this Agreement.

	
ARTICLE 20

	
MISCELLANEOUS

 

20.1This Contract shall come into force on the date (“Effective Date”) appearing in the preamble upon the signature by the Parties and shall valid until December 31, 2025 (“Expiration Date”).

 

20.2This Contract and its Annexes constitutes the entire Contract and understanding between the Parties with respect to the subject matter hereof, and there are no additional or other promises, representations, warranties or contracts or understandings, whether written or oral, except those as contained herein. 

 

20.3All the sections of this Contract which by their nature are intended to survive the termination, shall survive any termination of this Contract

 

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20.4If any term or provision of this Contract is held to be illegal or unenforceable, the validity or enforceability of the remainder of this Contract will not be affected.

 

20.5This Contract may not be altered, modified, or waived in whole or in part, except in writing, signed by the Parties.

 

20.6If there are any discrepancies exist between this Contract and its Annexes, the provisions of this Contract shall prevail. 

 

IN WITNESS WHEREOF, this Contract has been duly signed by the Parties hereto, in quadruplicate, on the day written above.

 

	
For and on behalf of Customer:

	 	 	  
	 	 	 	 
	
NOVI-NET, d.o.o

	 	
VELATEL GLOBAL COMMUNICATIONS, INC.

	 	 	 	 	 
	 	 	 	 	 
	
By:

	/s/ Sasa Rakocevic	 	By:	/s/ Colin Tay
	Name:	
Sasa Rakocevic

	 	Name:	Colin Tay
	Title:	Deputy Chief-Executive Officer	 	
Title: 

	President
	 	 	 	 	 
	 	 	 	 	 
	Witness: 	 	
Witness:

	 	 	 	 	 
	 	 	 	 	 
	By:	 	 	By:	 
	
Name: 

	 	 	
Name: 

	 
	Title:	 	 	Title:	 
	 	 	 	 	 
	 	 	 	 	 
	
For and on behalf of Supplier:

	 	 	 
	 	 	 	 	 
	
ZTE CORPORATION

	 	 	 
	 	 	 	 	 
	By:	/s/ Gong Yue Zhong	 	 	 
	
Name:

	Gong Yue Zhong	 	 	 
	
Title:

	Executive Vice President	 	 	 
	 	 	 	 	 
	
Witness:

	 	 	 
	 	 	 	 	 
	 	 	 	 	 
	By:	 	 	 	 
	Name:	 	 	 	 
	
Title:

	 	 	 	 

Annex 1: BoQ for Phase 1 Equipment

 

 

	 PROPRIETARY AND CONFIDENTIAL	 	 	Page 11 of 11

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