Document:

exv10w1

 

EXHIBIT 10.1

CONTRACT FOR

CONVERSION TO A MIXED COMPANY

BETWEEN

CORPORACIÓN VENEZOLANA DEL PETRÓLEO, S.A.,

HARVEST-VINCCLER, S.C.A.

AND

HNR FINANCE B.V.

September 11, 2007

 

 

INDEX

	 	 	 	 	 
	Article 1. INCORPORATION OF THE MIXED COMPANY
	 	 	3	 
	 
	 	 	 	 
	1.1 Incorporation
	 	 	3	 
	1.2 Purpose
	 	 	6	 
	1.3 Initial Capital and Ownership Interests
	 	 	4	 
	1.4 Transactions on the Closing Date
	 	 	4	 
	1.5 Other Contributions or Loans
	 	 	4	 
	1.6 Failure to Make Contributions or Loans
	 	 	6	 
	1.7 Business Plan
	 	 	7	 
	1.8 Sole Risk Projects
	 	 	7	 
	1.9 Policies and Procedures of the Mixed Company
	 	 	8	 
	1.10 Compliance with Applicable Law
	 	 	9	 
	 
	 	 	 	 
	Article 2. CANCELLATION OF THE OPERATING AGREEMENT
	 	 	9	 
	 
	 	 	 	 
	2.1 Liabilities
	 	 	9	 
	2.2 Environmental Claims
	 	 	10	 
	 
	 	 	 	 
	Article 3. SALE OF HYDROCARBONS
	 	 	10	 
	 
	 	 	 	 
	Article 4. OPERATION, PERSONNEL AND TECHNOLOGY
	 	 	10	 
	 
	 	 	 	 
	4.1 Operating Company
	 	 	10	 
	4.2 Personnel
	 	 	11	 
	4.3 Technology
	 	 	11	 
	 
	 	 	 	 
	Article 5. TERM
	 	 	12	 
	 
	 	 	 	 
	Article 6. ASSIGNMENT AND TRANSFERS OF SHARES
	 	 	12	 
	 
	 	 	 	 
	6.1 Assignment
	 	 	12	 
	6.2 Transfer of Shares
	 	 	12	 
	6.3 Change of Control of HNR Finance
	 	 	13	 
	 
	 	 	 	 
	Article 7. APPLICABLE LAW AND JURISDICTION
	 	 	14	 
	 
	 	 	 	 
	Article 8. AMENDMENTS AND WAIVERS
	 	 	14	 
	 
	 	 	 	 
	Article 9. CAPACITY AND REPRESENTATIONS OF THE PARTIES
	 	 	14	 
	 
	 	 	 	 
	9.1 Basic Representations of the Parties
	 	 	14	 
	9.2 Certain Practices
	 	 	15	 
	 
	 	 	 	 
	Article 10. NOTICES
	 	 	15	 
	 
	 	 	 	 
	Article 11. ENTIRE AGREEMENT
	 	 	16	 
	 
	 	 	 	 
	Article 12. HEADINGS AND REFERENCES
	 	 	16	 

 

 

	 	 	 	 	 
	Article 13. LANGUAGE
	 	 	17	 
	 
	 	 	 	 
	Article 14. COUNTERPARTS
	 	 	17	 

 

 

CONTRACT FOR

CONVERSION TO A MIXED COMPANY

     This contract (hereinafter the “Contract”) is entered into on the ___ day of September, 2007,
among CORPORACIÓN VENEZOLANA DEL PETRÓLEO, S.A. (hereinafter “CVP”), a corporation duly
incorporated in accordance with the laws of the Bolivarian Republic of Venezuela (hereinafter the
“Republic”), registered in the Second Commercial Registry of the Judicial Area of the Distrito
Federal (currently Distrito Capital) y Estado Miranda on December 23, 1975, under N° 24, Volume
58-A Segundo, which Charter and By-laws were reinstated as evidenced from registration N° 141,
Volume 86-A Pro., of November 12, 1981, made in the First Commercial Registry of the Judicial Area
of the Distrito Federal (currently Distrito Capital) y Estado Miranda, amended thereafter as
evidenced by the Minutes of the Special Shareholders’ Meeting dated September 30, 2004, filed in
the Second Commercial Registry of the Judicial Area of the Distrito Federal (currently Distrito
Capital) y Estado Miranda, on October 27, 2004 under N° 75, Volume 179-A-Sgdo., represented herein
by Eulogio Del Pino, Venezuelan, of legal age, domiciled herein, and bearer of Identity Card N° [
    ], acting in his capacity as President of the company; HARVEST-VINCCLER, S.C.A. (hereinafter
“Harvest Vinccler”) (formerly Benton Vinccler, C.A.), a corporation domiciled in the city of
Caracas and registered in the Second Commercial Registry of the Judicial Area of the Distrito
Federal y Estado Miranda, on June 29, 1993, under No. 13, Volume 146-A Sgdo., which last amendment
to its Charter and By-laws in which it acquired its current corporate name was made as evidenced by
the Minutes of the Special Shareholders’ Meeting dated September 5, 2006, registered in the Second
Commercial Registry of the Judicial Area of the Distrito Capital y Estado Miranda under N° 40,
Volume 186-A-Sgdo.; represented herein by its General Manager Karl Nesselrode, American, of legal
age, domiciled in the City of Houston, Texas and bearer of Passport No. [     ] issued by the United
States of America, which appointment is evidenced in the same Minutes of the Special Shareholders’
Meeting, duly authorized hereof; and HNR FINANCE B.V. (hereinafter “HNR Finance”), a corporation
incorporated in accordance with the laws of the Netherlands, which deed of incorporation was
executed on May 19, 2003, with a civil-law Notary in Amsterdam, The Netherlands, represented herein
by its Managing Director, Kurt A. Nelson, American, of legal age, domiciled in the City of Houston,
Texas and bearer of Passport No. [     ] issued by the United States of America, appointed on May 19,
2003 (CVP, Harvest Vinccler and HNR Finance shall hereinafter be referred to collectively as the
“Parties” and individually as a “Party”).

     WHEREAS, (i) Lagoven, S.A., as one party, and Benton Oil and Gas Co. and Venezolana de
Inversiones y Construcciones Clerico, C.A. (Vinccler, C.A.), as the other party, both as members of
the Benton-Vinccler Consortium; signed the document named Convenio de Servicios de Operación Unidad
Monagas Sur dated July 31, 1992

 

 

(hereinafter, and including all of its addenda and modifications, the “Operating Agreement”),
and (ii) subsequently, PDVSA Petróleo, S.A. (hereinafter “PPSA”) and Harvest Vinccler became
Parties to the Operating Agreement;

     WHEREAS, on April 12, 2005, the Ministry for Energy and Petroleum of the Republic (hereinafter
the “Ministry”) issued Instructions to the respective Boards of Directors of Petróleos de
Venezuela, S.A. (hereinafter “PDVSA”) and of CVP, based on the reasons set forth in such text, for
the conversion of the Operating Agreement to the form of a mixed company in which the State or an
entity owned by the State will have control by virtue of a majority participation in the capital
stock, in accordance with the Ley Orgánica de Hidrocarburos published in the Official Gazette of
the Republic No. 38,493 on August 4, 2006 (hereinafter, and including all its amendments and
modifications, the “Organic Hydrocarbons Law”);

     WHEREAS, on August 4, 2005, Harvest Vinccler and PPSA signed a Convenio Transitorio with the
purpose of agreeing on the conversion to a mixed company that has as its purpose to carry out the
activities of exploration in search of hydrocarbons reservoirs, their extraction in their natural
state, initial gathering, transportation and storage referred to in Article 9 of the Organic
Hydrocarbons Law (hereinafter the “Primary Activities”);

     WHEREAS, on October 18, 2005, an Executive Transitory Committee was established for the
purpose of planning for the year 2006 the operations carried out by Harvest Vinccler in the Monagas
Sur area and to coordinate the conversion to a mixed company;

     WHEREAS, on November 4, 2005, the Ministry issued complementary Instructions to the Boards of
Directors of PDVSA and CVP, in relation to the process of conversion to a mixed company;

     WHEREAS, in accordance with Article 33 of the Organic Hydrocarbons Law, the National Assembly
has approved the formation of a mixed company , which shall be incorporated in accordance with this
Contract and the conditions that will govern the conduct of Primary Activities by such mixed
company by virtue of the Acuerdo published in the Official Gazette of the Republic No. 38.430 on
May 5th, 2006, reprinted in the Official Gazette of the Republic N° 38.474 dated July
7, 2006, as a result of a clerical error, and subsequently partially amended by the Acuerdo
published in the Official Gazette of the Republic N° 38,706 of June 15, 2007 (hereinafter the
“Acuerdo of the National Assembly”), which is attached to this Contract as Annex A; and

     WHEREAS, in compliance with the provisions of the last paragraph of Article 37 of the Ley
Orgánica de Hidrocarburos, the Council of Ministers has approved the direct selection of the Mixed
Company that will be incorporated in accordance with this Contract, and the Ministry has resolved
thereupon, by means of Resolution N° 141 published in the Official Gazette of the Republic No.
38.462 on June 20, 2006, partially amended by Resolution N° 217 published in the Official Gazette
of the Republic N° 38.484 of July 21, 2006, which is attached to this Contract as Annex B;

 

 

     WHEREAS, the National Executive, duly authorized by the National Assembly and in accordance
with Article 101 of the Ley Orgánica de la Administración Pública, has authorized the formation of
the mixed company that will be incorporated in accordance with this Contract, by means of the
Decree N° 4.580, originally published in the Official Gazette of the Republic No. 38.464 on June
22, 2006, reprinted for clerical errors in the Official Gazette of the Republic N° 38.484 on July
21, 2006 (hereinafter the “Decree of Formation”), which is attached to this Contract as Annex C;
and

     WHEREAS, in compliance with the provisions of Article 23 of the Ley Orgánica de Hidrocarburos,
the Ministry has delimited the geographical areas in which the Mixed Company incorporated in
accordance with this Contract may operate (hereinafter the “Designated Areas”) by means of
Resolution N° 174, published in the Official Gazette of the Republic N° 38.467 on June 27, 2006,
and its partial amendments published in the Official Gazette of the Republic No. 38.497 on August
10, 2006 and on No. 38.757, on August 29, 2007, which is attached to this Contract as Annex D.

     NOW, THEREFORE, the Parties agree as follows:

ARTICLE 1.

INCORPORATION OF THE MIXED COMPANY

          1.1 Incorporation. Promptly after the date hereof, CVP and HNR Finance shall
incorporate Petrodelta, S. A. (hereinafter the “Mixed Company”), in accordance with the form of
Charter and By-laws attached hereto as Annex E, the terms and conditions of the Acuerdo of the
National Assembly and the provisions of the Commercial Code.

          1.2 Purpose. The purpose of the Mixed Company shall be to carry out Primary
Activities in the Designated Areas in accordance with the terms and conditions set forth in the
Acuerdo of the National Assembly, in the Decree of Formation and in the Decree that transfers to
the Mixed Company the right to carry out the Primary Activities in the Designated Areas
(hereinafter the “Transfer Decree”, the proposed terms of which are included in Annex F). In
addition, the Mixed Company is authorized to render services in exchange for arm’s length prices to
other mixed companies, to companies owned exclusively by the State or to other entities, provided
that the rendering of such services is in the interests of the Mixed Company, it being understood
that (i) the principal purpose of the Mixed Company is the carrying out of the Primary Activities
and the rendering of such services may not prejudice the carrying our of such principal object, and
(ii) the foregoing does not contemplate either the provision of petroleum services to third parties
outside of the Designated Areas or the transfer of technology to third parties.

          1.3 Initial Capital and Ownership Interests. The initial capital stock of the Mixed
Company shall be one billion Bolívares (Bs.1,000,000,000) and shall consist of one hundred thousand
(100,000) shares of common stock with a par value of ten thousand Bolívares (Bs. 10,000) each,
which shall be classified as Class A and

 

 

Class B. CVP and HNR Finance shall make the capital contributions necessary to incorporate the
Mixed Company in cash and in proportion to their stock ownership in the Mixed Company by means of
wire transfer to the account that it may designate. The initial stock ownership of CVP and HNR
Finance in the Mixed Company shall be as follows:

	 	 	 	 	 
	 

	 	CVP:
	 	60,000 Class A shares, representing a 60% interest in the capital stock of the Mixed Company.
	 
	 	 	 	 
	 

	 	HNR Finance:
	 	40,000 Class B shares, representing a 40% interest in the capital stock of the Mixed Company.

In accordance with the Organic Hydrocarbons Law, the State, directly or through companies or
entities that it owns exclusively, must at all times own more than a fifty percent (50%) interest
of the capital stock of the Mixed Company.

          1.4 Transactions on the Closing Date. On the date that CVP fixes (hereinafter the
“Closing Date”), which shall be (i) within the course of ten (10) calendar days (hereinafter
“Days”) following the date on which the Transfer Decree is published in the Official Gazette of the
Republic, and (ii) notified to HNR Finance at least five (5) Days in advance, CVP and HNR Finance
shall effect the following transactions with the Mixed Company:

          (A) Fourteen Billion Bolívares (Bs. 14,000,000,000) must be contributed in cash by CVP and HNR
Finance in proportion to their stock ownership in the Mixed Company, by means of wire transfers of
funds to the bank account of the Mixed Company that it designates;

          (B) Harvest Vinccler and HNR Finance shall (i) transfer to the Mixed Company ownership of all
of the tangible assets located in the Republic that are owned by Harvest Vinccler or by HNR Finance
and utilized in connection with the operations derived from the Operating Agreement prior to the
Closing Date, which are listed in Annex G, and (ii) exercise its best efforts to assign to the
Mixed Company the contracts, permits and rights (including, among others, easements, water rights,
rights-of-way and surface rights) which pertain to the petroleum operations carried out pursuant to
the Operating Agreement prior to the Closing Date, and are listed in Annex G, it being understood
that all contracts that are not listed in such Annex shall be maintained under the exclusive
responsibility of Harvest Vinccler and HNR Finance; and

          (C) CVP shall (i) ensure that the tangible assets of PPSA that are used in the activities
carried out under the Operating Agreement and those used in the fields Temblador, Isleño and El
Salto and required for the operations of the Mixed Company which are listed in Annex H, are
immediately made available to the Mixed Company for the carrying out of its activities, and that
thereafter ownership thereof is transferred as

 

 

soon as possible to the Mixed Company, complying with applicable legal formalities, (ii)
exercise best efforts to ensure that PPSA assigns to the Mixed Company the contracts, permits and
rights (including, among others, easements, water rights, rights-of-way and surface rights) which
pertain to petroleum operations carried out pursuant to the Operating Agreement prior to the
Closing Date and those contracts, permits and rights (including, among others, easements, water
rights, rights-of-way and surface rights) used in the fields Temblador, Isleño and El Salto prior
to the Closing Date and listed in Annex H, and (iii) ensure that PPSA enters into the Contract for
Sale and Purchase of Hydrocarbons with the Mixed Company in accordance with the form attached
hereto as Annex K.

It is understood and agreed that the assets and rights referred to in clauses (B) and (C) of this
Article 1.4 shall be transferred to the Mixed Company in the condition in which they exist (“as
is”), without any cost or charge and without the Parties agreeing to any express or implied
guarantee with respect to the condition of such assets and rights at the time of transfer, but with
guaranty of title and of non-existence of liens over them. CVP and HNR Finance will agree in good
faith on the value of the non-monetary assets contributed. Except for the part of the contribution
in cash set forth in clause (A) of this Article 1.4 that corresponds to the par value of the shares
to be issued to the shareholders in proportion to their participation in the capital of the Mixed
Company, the value of all other contributions made to the Mixed Company pursuant to this Article
1.4 shall be reflected in the financial statements of the Mixed Company as paid-in surplus. The
Parties understand that the transactions contemplated in this Article 1.4 and in Article 2.1 will
not generate any tax liabilities in the Republic.

          1.5 Other Contributions or Loans. The Shareholders’ Meeting of the Mixed Company may
from time to time request from CVP and HNR Finance, in accordance with the Business Plan referred
to in Article 1.7, additional contributions or loans (at arm’s length conditions) that it deems
necessary for the performance of its corporate purpose. All additional contributions or loans made
by CVP and HNR Finance to the Mixed Company shall be made in proportion to their respective
ownership interests in the Mixed Company, in United States of America dollars by wire transfer of
funds to the bank account of the Mixed Company that it designates within a period of thirty (30)
Days after the date on which such contributions or loans are requested by the Shareholders’ Meeting
of the Mixed Company. No later than five (5) Days prior to expiration of the agreed term to make
an additional contribution or loan, each shareholder of the Mixed Company shall have the right to
require written confirmation from the other shareholder that it is willing to make its share of the
contribution or loan in question, and to suspend its payment of the contribution or loan until it
has received such confirmation. In the event it is authorized by the Shareholders’ Meeting, the
Mixed Company will seek to obtain financing for its working capital and for investment projects on
terms and conditions deemed appropriate by the Shareholders’ Meeting, which terms and conditions
should be in accordance with standards in the financial market and consistent with this Contract,
the Business Plan mentioned in Article 1.7, the policies and procedures of the Mixed Company
referred to in Article 1.9 and the Charter and By-laws of the Mixed Company.

 

 

          1.6 Failure to Make Contributions or Loans. In the event that either shareholder of
the Mixed Company (hereinafter the “Debtor Party”) does not comply with its obligation to make any
contribution or loan on the date such contribution or loan was due (hereinafter the “Contribution
Date”):

          (A) The other shareholder of the Mixed Company shall have the right, but not the obligation,
to make such contribution or loan on behalf of the Debtor Party within the period of thirty (30)
Days following the Contribution Date, in which case the Debtor Party shall be obligated to
reimburse the other shareholder (hereinafter “the Creditor Party”) for all funds contributed or
granted as loans on behalf of the Debtor Party within one hundred and twenty (120) Days following
the date that such funds are paid in the name of the Debtor Party, together with all interest
accrued from the date such funds are paid on behalf of the Debtor Party to the date on which the
amounts owed are totally reimbursed by the Debtor Party at an annual rate equal to LIBOR plus ten
(10) percentage points. For purposes of this Article 1.6(A), LIBOR means, for each consecutive
period of thirty (30) Days, the London Inter-Bank Offering Rate for a month as indicated in the
Telerate page 3750 at 11:00 a.m. (London time) on the first Day of the applicable period or, if
commercial banks are not open for international operations in London on such Day, the rate on the
next Day on which banks in London are open for international operations. The Debtor Party shall
have no right to receive dividends from the Mixed Company until the date on which it fully pays all
amounts owed to the Creditor Party. Any annual dividend payment, advanced dividend (loan to
shareholders), reduction of capital or distribution of paid-in surplus that corresponds to the
shares of the Debtor Party and which is effected before payment in full of all amounts owed by the
Debtor Party, will be paid to the Creditor Party and will be credited against the amounts owed by
the Debtor Party until, after deducting any tax that may be applicable, all amounts owed, including
interest, have been paid. Until the date on which the Debtor Party fully pays all amounts owed to
the Creditor Party, the latter shall not be obligated to make contributions or grant loans to the
Mixed Company.

          (B) If the Debtor Party is HNR Finance and the amounts owed are not paid in their entirety
within one hundred and twenty (120) Days from the Contribution Date, CVP shall have the right
(assuming that CVP has made its contribution or loan), at its election, to (i) apply the provisions
of Article 1.6(A) or (ii) demand the transfer in its favor, at the price established in the next
sentence, of the number of Class B shares of the Mixed Company owned by HNR Finance that is
necessary to repay the total amount of the unpaid indebtedness calculated in accordance with
Article 1.6(A). (unless the amounts owed have been fully paid before the exercise of the option set
forth in this clause (ii)). For the purposes of this Article 1.6(B), the price of the Class B
shares of the Mixed Company owned by HNR Finance shall be equal to the average of the valuations of
such shares made by two (2) internationally recognized independent experts, one to be designated by
CVP and the other by HNR Finance, provided that: (a) if CVP or HNR Finance does not designate an
independent expert during a period of thirty (30) Days following the date on which CVP shall have
notified its decision to demand the transfer of the shares, the Minister of Energy and Petroleum
(hereinafter the “Minister”) may designate such expert on behalf of such Party; (b) the independent
experts so designated shall present their valuations within ninety (90) Days after their
appointment;

 

 

(c) if one of such valuations exceeds the other by more than fifteen percent (15%), both CVP
and HNR Finance shall have the right to request new valuations by two (2) new internationally
recognized independent experts, which shall be designated in the same manner as the ones previously
designated (the same procedure will be repeated until CVP and HNR Finance either agree on the price
of the Class B shares or the new valuations of the independent experts do not differ by more than
fifteen percent); (d) the fees of such independent experts shall be paid in equal parts by CVP and
HNR Finance; and (e) CVP shall not have the obligation to accept the results of such valuations and
the transfer of the shares, maintaining the application of Article 1.6(A) with respect to the
amounts owed in case that CVP elects not to receive the transfer of such shares. The shares which
HNR Finance transfers to CVP by application of this Article 1.6(B) shall automatically be converted
into Class A shares of the Mixed Company.

          1.7 Business Plan. The Mixed Company shall undertake its operations in accordance with
the business plan that is attached hereto as Annex I (“hereinafter the “Business Plan”). The work
programs and budgets that are adopted annually pursuant to the Charter and By-laws of the Mixed
Company shall be consistent with the Business Plan, it being understood that the Business Plan may
be modified by decision of the Shareholders’ Meeting of the Mixed Company in accordance with its
Charter and By-laws.

          1.8 Sole Risk Projects. In the event that CVP notifies HNR Finance by means of a
detailed proposal to that effect presented for the consideration of the Shareholders’ Meeting of
the Mixed Company, of CVP’s intention that the Mixed Company carry out a new investment project
that can be technically and economically segregated from the ongoing petroleum operations of the
Mixed Company, then HNR Finance shall, within thirty (30) Days following the date of receipt of the
notification from CVP, notify CVP of its agreement or disagreement with the new project. In the
case that HNR Finance does not notify its disagreement within such period, it shall be deemed to
have agreed and the new project shall be carried out by the Mixed Company. In the case that HNR
Finance notifies its disagreement within such period, CVP shall have sixty (60) Days from the date
of receipt of such notice from HNR Finance to decide whether it wishes to proceed with the new
project at its sole risk (hereinafter the “Sole Risk Project”). If CVP decides to proceed in that
manner, it shall so notify HNR Finance within such period of sixty (60) Days. CVP and HNR Finance
shall negotiate in good faith and agree, within a period of sixty (60) Days commencing with the
date of receipt by HNR Finance of such notice, on the means of separating the Sole Risk Project
from the ongoing operations of the Mixed Company, including the waiver by the Mixed Company of any
rights relating to the Sole Risk Project, such that CVP or an affiliate thereof can proceed with
the Sole Risk Project exclusively assuming the risks and costs derived therefrom. The Mixed Company
will act as operator for the Sole Risk Project, provided that: (a) all investment, costs, expenses
and liabilities related to the Sole Risk Project shall be borne by CVP or its affiliate in a direct
manner through the appropriate advances of funds to the Mixed Company, which must maintain such
funds separately from its own funds and keep separate accounting records of the same and of the
associated investments, expenses, and liabilities, and (b) the Mixed

 

 

Company shall not have any participation in production or revenues generated by the Sole Risk
Project, but shall have the right to receive remuneration for the services rendered based on the
cost of such services and taking into consideration the market prices of similar services. Sole
Risk Projects shall not interfere or affect in a negative and substantial manner the existing or
planned petroleum operations of the Mixed Company. CVP or its affiliate shall indemnify the Mixed
Company for any loss, cost, expense, damage or other responsibility suffered or incurred by the
Mixed Company resulting from Sole Risk Projects, and shall maintain the Designated Areas free and
clear of any liens that may be created in relation to or resulting from Sole Risk Projects.

          1.9 Policies and Procedures of the Mixed Company. The Mixed Company shall adopt
policies and procedures governing its operations, including, among others, policies and procedures
for safety, health and environment, contracting, maintenance of insurance, accounting, banking and
treasury, and human resources, following the guidelines established by CVP. To the extent
possible, such policies and procedures shall be consistent with the policies and procedures of
PDVSA and the ultimate parent company of HNR Finance, it being understood that nothing in such
policies and procedures may alter the respective rights and obligations of CVP and HNR Finance
under this Contract or the Charter and By-laws of the Mixed Company. Attached as Annex J to this
Contract are certain of the initial policies and procedures of the Mixed Company, it being
understood that such policies and procedures will be modified by CVP and HNR Finance in accordance
with the principles established in this Article 1.9. In all cases, the policies and procedures of
the Mixed Company shall have as their objective that the Mixed Company carries out its operations
in an efficient and transparent manner, in accordance with prudent petroleum industry practices and
applicable laws, it being understood that, in the event of conflict, the applicable laws shall
prevail over petroleum industry practices. The Mixed Company shall maintain bank accounts outside
of the Republic, in which it may keep sufficient funds to make all payments that must be made
abroad, including, but not limited to, those related to dividend distributions, reductions in
capital, purchases, debt services (including those relating to loans from shareholders), and
contractors’ and suppliers’ fees and expenses. These funds may come from any source, including
sales, shareholders’ contributions or loans or third party financing.

          1.10 Compliance with Applicable Law. In the conduct of its operations the Mixed
Company will comply with the terms and conditions of the Acuerdo of the National Assembly, the
Decree of Formation, the Transfer Decree and the Organic Hydrocarbons Law and its Regulations, as
well as all other legal provisions applicable in the Republic. Neither CVP nor HNR Finance shall
take any action or decision which constitutes grounds for revocation of the Transfer Decree or any
other permit, license or authorization of any kind required for the conduct of the operations of
the Mixed Company. The Mixed Company shall be responsible for the producing and filing of tax
returns with the competent tax authorities of the Republic, as well as, subject to applicable
legislation, the payment of the rates, taxes and contributions, as well as the requesting of
refunds when applicable.

 

 

ARTICLE 2.

CANCELLATION OF THE OPERATING AGREEMENT

          2.1 Liabilities. Harvest Vinccler and HNR Finance acknowledge and accept the
cancellation of the Operating Agreement, effective on the Closing Date and without the need for any
additional act or instrument, without Harvest Vinccler, HNR Finance or any of their affiliates
having a right to receive any compensation derived from the Operating Agreement (except for the
payments corresponding to the first quarter of 2006 calculated as set forth in the Transitory
Agreement) or without Harvest Vinccler, HNR Finance or any of their affiliates, being able to
assert any claim as a consequence of the cancellation of the Operating Agreement. Harvest Vinccler
and HNR Finance shall defend and indemnify the Republic, the Mixed Company, PDVSA, PPSA, CVP and
their respective affiliates for any action, claim, judgment, lawsuit, loss, cost, expense, damage
or other liability arising from or related to the Operating Agreement or to any activities derived
therefrom, it being understood that this obligation to indemnify does not extend to liabilities (i)
attributable to acts or omissions of PPSA or (ii) derived from circumstances or activities of any
person prior to the date of execution of the Operating Agreement. Harvest Vinccler’s and HNR
Finance’s indemnification obligation shall include any third-party claim of any nature arising from
acts or omissions of Harvest Vinccler or of HNR Finance in connection with the Operating Agreement
on or prior to the Closing Date, it being understood that for these purposes the Republic, PDVSA,
PPSA, CVP and their respective affiliates shall not be considered as third parties. The Mixed
Company shall not assume any liabilities derived from the activities and the acts or omissions of
Harvest Vinccler or of HNR Finance relating to the Operating Agreement (including, without
limitation, labor liabilities and those derived from contributions other than taxes such as those
provided for in the Ley del INCE, the Instituto Venezolano del Seguro Social and the Ley que Regula
el Subsistema de Seguridad Social, de Vivienda y Política Habitacional), from the cancellation of
the Operating Agreement, or from acts or omissions of CVP, PPSA, PDVSA or their respective
affiliates done prior to the commencement of operations under the Operating Agreement.

          2.2 Environmental Claims. Without limiting the generality of the foregoing, the Mixed
Company shall not assume any responsibility for environmental claims or liabilities arising from
operations or events prior to the date of the Decreto de Transferencia. The Parties shall prepare
or cause to be prepared by an internationally renowned environmental consulting company an
environmental audit in accordance with applicable regulations and standard petroleum industry
practices for the purpose of determining the environmental conditions existing in the Designated
Areas on the Closing Date. Such environmental audit shall include a base line natural physical
environment study, which shall constitute full proof of the existing environmental conditions. The
environmental audit done at the beginning of operations under the Operating Agreement shall
constitute full proof of the environmental conditions existing in the area of the Operating
Agreement at such time.

 

 

ARTICLE 3.

SALE OF HYDROCARBONS

     The Mixed Company shall sell to PPSA, or any other of the entities referred to in article 27
of the Organic Hydrocarbons Law that is designated by PPSA, all the liquid and gaseous hydrocarbons
that it produces in the Designated Areas, except for the liquid hydrocarbons and associated natural
gas that the Mixed Company utilizes in its operations or for payment of royalties that the National
Executive may have decided to receive in kind. Such sales shall be in accordance with the form of
Contract for Sale and Purchase of Hydrocarbons attached to this Contract as Annex K.

ARTICLE 4.

OPERATION, PERSONNEL AND TECHNOLOGY

          4.1 Operating Company. The Mixed Company shall be the operating company of the
Designated Areas and, provided that it may not forego its function as operator, the Mixed Company
may enter into such service agreements as it deems necessary for the implementation of its
operations. The Parties shall cooperate to ensure a successful and safe transfer of the operations
in the Designated Areas to the Mixed Company.

          4.2 Personnel. Harvest Vinccler shall use its best efforts to transfer or second to
the Mixed Company the technicians and other experts that the Board of Directors of the Mixed
Company may reasonably request for the performance of the Primary Activities in the Designated
Areas, whose fees or salaries shall be borne by the Mixed Company (either directly in case such
experts become employees of the Mixed Company, or through secondment agreements). Harvest Vinccler
and HNR Finance agree to train the personnel designated by the Board of Directors of the Mixed
Company to replace any of the employees transferred or seconded by Harvest Vinccler or by HNR
Finance. During the first two (2) years of operations of the Mixed Company, the expenses of such
training shall be the sole cost of Harvest Vinccler or HNR Finance up to an amount of Sixty
Thousand United States of America dollars (US$ 60,000), such expenses being the cost of the Mixed
Company after such period has elapsed. In case that it is required by the Board of Directors of
the Mixed Company, Harvest Vinccler or HNR Finance shall also train other employees of the Mixed
Company, in which case the cost of such training shall be the sole cost of the Mixed Company. The
appointment of all management personnel for the Mixed Company shall be subject to the prior
approval of CVP. A percentage of such management personnel equivalent to the ownership percentage
of HNR Finance in the Mixed Company shall be nominated by HNR Finance. The management of the Mixed
Company shall be composed of first line executives that shall occupy the offices of General
Manager, Technical and Operations Manager, Manager of Human Resources, Manager of External Affairs,
Purchasing Manager, Systems Manager, Planning Manager, Manager of Administration and Finances,
Legal Manager, and Manager of Safety, Health and Environment. The General Manager shall be
nominated by CVP and the Technical and Operations

 

 

Manager shall be nominated by HNR Finance. The Mixed Company shall also have a Manager of
Prevention and Control of Losses who, due to the nature of his functions, shall be nominated by
CVP. CVP and HNR Finance agree that certain of these positions may be filled by personnel of CVP or
HNR Finance who are seconded to the Mixed Company on a part-time basis and performs similar
functions in other mixed companies or in companies holding non-associated natural gas licenses in
the Republic. The management structure of the Mixed Company shall be reviewed periodically by CVP
and HNR Finance for the purpose of assuring that it responds to the objectives and purpose of the
Mixed Company.

          4.3 Technology. To the extent it is legally possible, Harvest Vinccler and HNR
Finance shall put at the Mixed Company’s disposal the rights to utilize the most modern and
efficient technologies available to Harvest Vinccler, HNR Finance and its affiliates at present for
the development of the petroleum operations in the Designated Areas. It is understood that neither
Harvest Vinccler nor HNR Finance, nor any of their affiliates shall charge the Mixed Company any
fees, royalties or charges for licenses or other rights of use for the technologies owned by
Harvest Vinccler, HNR Finance or their affiliates, except for expenses necessary to put such
technologies at the disposition of the Mixed Company. In every negotiation held with their
technology suppliers, Harvest Vinccler and HNR Finance shall use their best efforts to obtain the
necessary contractual rights to permit the continuous transfer and application of the technology
relevant to the Mixed Company’s business. The Mixed Company will maintain the confidentiality of
such transferred technologies.

ARTICLE 5.

TERM

     This Contract shall be effective commencing on the date indicated at the beginning hereof and
shall continue in effect until the date on which the first of the following events occurs: (i) CVP
or any other entity directly or indirectly owned by the State acquires all of the issued and
outstanding shares of the Mixed Company, or (ii) the right to carry out Primary Activities granted
pursuant to the Transfer Decree shall terminate, whether such termination occurs at the expiration
of the maximum term set forth in the Acuerdo of the National Assembly or earlier as a result of the
revocation of the Transfer Decree in accordance with the terms and conditions of the Acuerdo of the
National Assembly and the Ley Orgánica de Hidrocarburos. Notwithstanding the foregoing, in the
event that within ninety (90) Days after the date of this Contract (a) the Transfer Decree is not
published in the Official Gazette of the Republic or (b) PPSA and the Mixed Company have not
executed the Contract for Sale and Purchase of Hydrocarbons referred to in Article 3, this Contract
shall have no effect, it being understood that each Party shall bear any costs it may have incurred
in the preparation of this Contract and the formation of the Mixed Company.

 

 

ARTICLE 6.

ASSIGNMENT AND TRANSFERS OF SHARES

          6.1 Assignment. Neither Party may assign or transfer this Contract, in whole or in
part, or any of the rights or obligations hereunder, without the prior written consent of the other
Parties and of the Minister, except for (i) the authority of CVP to assign or transfer this
Contract to any other entity that is, directly or indirectly, exclusively owned by the Republic, in
which case CVP shall notify HNR Finance, and (ii) the authority of Harvest Vinccler or HNR Finance
to assign or transfer this Contract to any other company that is, directly or indirectly,
exclusively owned by Harvest Vinccler and HNR Finance’s ultimate parent entity, provided that
Harvest Vinccler or HNR Finance, as the case may be, jointly and severally guarantees the
performance of the obligations assumed by the assignee.

          6.2 Transfer of Shares. Neither CVP nor HNR Finance may, without the prior written
consent of the Minister, transfer, assign or pledge in any way its shares in the Mixed Company or
permit the transfer, assignment or pledge of such shares or any shareholder rights or interests,
except for a transfer of such shares to an entity that is, directly or indirectly, exclusively
owned by the ultimate parent entity of such Party, in which case, this Contract shall be assigned
to such entity pursuant to Article 6.1.

          6.3 Change of Control of HNR Finance. HNR Finance shall ensure that there shall be no
direct or indirect change of control of HNR Finance (understanding as “control” of a corporation,
the power to appoint a majority of directors of its board of directors or the ability to direct in
any other manner its management or policies) during the term specified in the Acuerdo of the
National Assembly for the carrying out of Primary Activities by the Mixed Company without the prior
written consent of the Minister, to an entity that is involved in any judicial, arbitral or
administrative proceeding, the latter of a significant nature, with the Republic, PDVSA, PPSA, CVP
or any of its affiliates, it being understood that in the event of non-compliance with the
foregoing: HNR Finance’s ownership in the Mixed Company shall be deemed terminated and all of HNR
Finance’s shares in the Mixed Company shall be transferred to CVP, without CVP having to pay any
amount for the transferred shares. In addition to the foregoing, in case that a change of control
of HNR Finance occurs (irrespective of the fact that the acquiring party is involved in any of the
aforementioned proceedings) and such change of control is not approved by the Minister, CVP shall
acquire, within a period of twelve (12) months from the date of the notice of that change in
control, all of the Class B shares of the Mixed Company owned by HNR Finance at a price equal to
the average valuations of such Class B shares made by two (2) internationally recognized
independent experts, one to be designated by CVP and the other by HNR Finance, provided that: (a)
if neither CVP nor HNR Finance designate an independent expert during a period of thirty (30) Days
following the date on which CVP shall have notified its decision to demand the transfer of the
shares, the Minister may designate such expert on behalf of such Party; (b) the independent experts
so designated shall present their valuations within a period of ninety (90) Days after their
appointment; (c) if one of such valuations exceeds the other by more than fifteen

 

 

percent (15%), both CVP and HNR Finance shall have the right to request new valuations by two
(2) new internationally recognized independent experts, which shall be designated in the same
manner as the ones previously designated (the same procedure will be repeated until CVP or HNR
Finance either agree on the price of the Class B shares or the new valuations of the independent
experts do not differ by more than fifteen percent); (d) the fees of such independent experts shall
be paid in equal parts by CVP and HNR Finance; and (e) the corresponding price shall be paid in
cash in United States Dollars within thirty (30) days following the determination of such price in
accordance with Article 6.3.

ARTICLE 7.

APPLICABLE LAW AND JURISDICTION

     This Contract shall be governed by and interpreted in accordance with the laws of the Republic
and any dispute or controversy that may arise in connection with this Contract which cannot be
resolved amicably by the Parties shall be submitted exclusively to the courts of the Republic
having jurisdiction. Before initiating any litigation, the Parties shall in good faith and within
the framework of the Organic Hydrocarbons Law explore the possibility of utilizing mechanisms to
amicably resolve controversies of any nature that may arise, including for technical matters, the
possible request of opinions of independent experts appointed by mutual agreement. It is understood
that any important dispute, including, for example, disputes relating to the Business Plan, work
programs, development plans and related budgets, shall be referred to the chief executives of the
parties involved in the dispute, who shall meet to endeavor to resolve the differences. In case
such dispute is not resolved within sixty (60) Days following the meeting held for such purpose by
CVP, Harvest Vinccler and HNR Finance, they shall inform the Minister of the relevant details of
the dispute.

ARTICLE 8.

AMENDMENTS AND WAIVERS

     This Contract may not be amended without the prior written consent of the Parties. Any waiver
of rights conferred by this Contract must be in writing and signed by the authorized
representatives of the Party that is waiving such rights.

ARTICLE 9.

CAPACITY AND REPRESENTATIONS OF THE PARTIES

          9.1 Representations of the Parties. Each Party acknowledges that the other Parties
are entering into this Contract in their own name and in their capacity as legal entities empowered
to contract on their own behalf. In addition, each Party represents and warrants to the other
Parties that: (i) it has full legal authority for the execution and performance of this Contract;
(ii) it has complied with all corporate and

 

 

other action required for the execution and performance of this Contract; (iii) it has
obtained all governmental and other authorizations required for the execution and performance of
this Contract; and (iv) this Contract constitutes a legal, valid and binding obligation of such
Party, enforceable against such Party in accordance with its terms.

          9.2 Certain Practices. Each Party represents and warrants to the other Parties that
neither it nor any of its affiliates, contractors or subcontractors or their affiliates, and no
employee, agent or representative of any of the foregoing, directly or indirectly, has offered,
promised, authorized, paid or given money or anything of value to any official or employee of any
government or international or national public organization, or to any political party, any
official or employee thereof or any candidate for public office to influence his or her actions or
decisions, or to gain any undue advantages, in connection with this Contract or any of the
activities that shall be carried out in accordance with this Contract. CVP and HNR Finance agree,
in relation to any business activity to be conducted pursuant to this Contract, to require their
contractors and subcontractors to agree and comply with contractual clauses substantially
equivalent to those contained in this Article 9.2. CVP and HNR Finance also agree to: (i) maintain
adequate internal controls; (ii) duly record all transactions; and (iii) comply with the laws
applicable to them as well as with the provisions of this Article 9.2. CVP and HNR Finance shall
immediately notify the Mixed Company of any noncompliance with this Article 9.2 and shall
investigate and promptly remedy such noncompliance. Except in cases in which it receives such
notification, each shareholder of the Mixed Company can assume that the other shareholder is in
compliance with this Article 9.2, that it has adequate internal control systems, and that the
factual, financial and other information of any nature submitted in relation to the operations
conducted by the Mixed Company is adequate, complete and truthful. No Party is authorized in any
way to take action on behalf of the other Parties that would result in the inadequate or inaccurate
recording or reporting of assets, liabilities or any transaction that would put the other Parties
in a position of violation of obligations set forth in the laws applicable to the operations to be
conducted under this Contract.

ARTICLE 10.

NOTICES

     All notices and other communications between the Parties must be in writing and shall be
deemed effective upon receipt by the recipient at the following addresses:

 

 

	 	 	 	 	 
	 

	 	CVP:
	 	Corporación Venezolana del Petróleo, S.A.
	 

	 	 	 	Edificio PAWA
	 

	 	 	 	Calle Cali
	 

	 	 	 	Urb. Las Mercedes
	 

	 	 	 	Caracas 1010-A
	 

	 	 	 	República Bolivariana de Venezuela
	 
	 	 	 	 
	 

	 	 	 	Attention: Eulogio Del Pino
	 

	 	 	 	Fax: 708-4771
	 

	 	 	 	E-Mail: delpinoeb@pdvsa.com
	 
	 	 	 	 
	 

	 	Harvest Vinccler:
	 	Harvest-Vinccler, S.C.A.
	 

	 	 	 	Centro Profesional Eurobuilding, Piso 9, Oficina 9-D
	 

	 	 	 	Calle La Guairita
	 

	 	 	 	Chuao, Caracas
	 

	 	 	 	República Bolivariana de Venezuela
	 
	 	 	 	 
	 

	 	 	 	Attention: General Counsel
	 

	 	 	 	Fax: (0212) 9933638
	 

	 	 	 	E-Mail: jrivas@harvestnr.com
	 
	 	 	 	 
	 

	 	HNR Finance:
	 	HNR Finance B.V.
	 
	 	 	 	 
	 

	 	 	 	Harvest Natural Resources, Inc.
	 

	 	 	 	1177 Enclave Parkway, suite 300
	 

	 	 	 	Houston, Texas 77077
	 
	 	 	 	 
	 

	 	 	 	Attention: General Counsel
	 

	 	 	 	Fax: (281) 899-5702
	 

	 	 	 	E-Mail: kbrittain@harvestnr.com

or at such other address as any Party may indicate to the others in writing, with at least ten (10)
Days’ prior notice, in accordance with the terms of this Article 10.

ARTICLE 11.

ENTIRE AGREEMENT

     This Contract represents the entire agreement of the Parties with respect to the subject
matter hereof and supersedes any previous agreement or understanding regarding the same subject
matter. All Annexes to the Contract are an integral part hereof.

 

 

ARTICLE 12.

HEADINGS AND REFERENCES

     The headings of the Articles in this Contract are included solely for convenience and shall
not be considered in the interpretation of this Contract. All references herein to Articles and
Annexes are to the Articles and Annexes of this Contract, unless otherwise indicated.

ARTICLE 13.

LANGUAGE

     This Contract is entered into in the Spanish language, which is the language by which it
should be interpreted. Any translation of this Contract shall be solely for convenience and shall
not be considered in the interpretation hereof.

ARTICLE 14.

COUNTERPARTS

     This Contract is executed in four counterparts, with one meaning and effect, each of which
shall be considered an original.

     This Contract has been executed in the city of Caracas, on the 11th day of the month of
September, in the year 2007.

	 	 	 	 	 
	 	CORPORACIÓN VENEZOLANA DEL PETRÓLEO, S.A.

 	 
	 	By:  	 	 
	 	 	 	 
	 	 	 	 
	 
	 	HARVEST-VINCCLER, S.C.A.

 	 
	 	By:  	 	 
	 	 	 	 
	 	 	 	 
	 
	 	HNR FINANCE B.V.

 	 
	 	By:  	 	 
	 	 	 	 
	 	 	 	 

 

 

	 	 	 	 	 

CONTRACT FOR

CONVERSION TO A MIXED COMPANY

ANNEXES

	 	 	 
	Annex A:

	 	Acuerdo of the National Assembly
	 
	 	 
	Annex B:

	 	Resolution of the Ministry – Direct Selection
	 
	 	 
	Annex C:

	 	Decree of Formation
	 
	 	 
	Annex D:

	 	Designated Areas
	 
	 	 
	Annex E:

	 	Form of Charter and By-laws of the Mixed Company
	 
	 	 
	Annex F:

	 	Form of Transfer Decree
	 
	 	 
	Annex G:

	 	Assets and Contracts to be transferred by Harvest-Vinccler and HNR Finance
	 
	 	 
	Annex H:

	 	Assets to be transferred by PPSA
	 
	 	 
	Annex I:

	 	Business Plan
	 
	 	 
	Annex J:

	 	Policies and Procedures of the Mixed Company
	 
	 	 
	Annex K:

	 	Form of Contract for Sale and Purchase of Hydrocarbons

 

 

ANNEX A

ACUERDO OF THE NATIONAL ASSEMBLY

 

 

ANNEX B

RESOLUTION OF THE MINISTRY –

DIRECT SELECTION

 

 

ANNEX C

FORMATION DECREE

 

 

ANNEX D

DESIGNATED AREAS

 

 

ANNEX E

FORM OF CHARTER AND BY-LAWS

OF THE MIXED COMPANY

 

 

INDEX

	 	 	 	 	 
	CHAPTER I Name, Purpose, Domicile and Duration
	 	 	1	 
	 
	 	 	 	 
	Article 1. Name
	 	 	1	 
	Article 2. Purpose
	 	 	1	 
	Article 3. Domicile, Branches
	 	 	2	 
	Article 4. Duration
	 	 	2	 
	 
	 	 	 	 
	CHAPTER II Capital, Shares and Shareholders
	 	 	3	 
	 
	 	 	 	 
	Article 5. Capital
	 	 	3	 
	Article 6. Subscription of Capital Stock
	 	 	3	 
	Article 7. Shares
	 	 	4	 
	Article 8. Single Ownership
	 	 	4	 
	Article 9. Certificates
	 	 	4	 
	Article 10. Equality of Rights
	 	 	5	 
	Article 11. Right of First Refusal for the
Purchase of Class B Shares
	 	 	5	 
	Article 12. Authorization for Transfer of Shares
	 	 	6	 
	 
	 	 	 	 
	CHAPTER III Shareholders’ Meetings
	 	 	7	 
	 
	 	 	 	 
	Article 13. General Powers
	 	 	7	 
	Article 14. Ordinary and Extraordinary Meetings
	 	 	7	 
	Article 15. Notice
	 	 	7	 
	Article 16. Quorum and Decisions
	 	 	8	 
	Article 17. Representation in the Shareholders’ Meetings
	 	 	13	 
	Article 18. Minutes of the Meeting
	 	 	13	 
	 
	 	 	 	 
	CHAPTER IV Administration
	 	 	14	 
	 
	 	 	 	 
	Article 19. Board of Directors
	 	 	14	 
	Article 20. The President
	 	 	15	 
	Article 21. Directors’ Term of Office
	 	 	15	 
	Article 22. Obligation to Deposit Shares
	 	 	16	 
	Article 23. Meetings of the Board of Directors
	 	 	16	 
	Article 24. Quorum and Decisions of the Board of Directors
	 	 	17	 
	Article 25. Powers of the Board of Directors
	 	 	18	 
	Article 26. The General Manager and Other Management Personnel
	 	 	20	 
	 
	 	 	 	 
	CHAPTER V Legal Representative
	 	 	21	 
	 
	 	 	 	 
	Article 27. Legal Representative
	 	 	21	 
	 
	 	 	 	 
	CHAPTER VI Statutory Auditor
	 	 	22	 
	 
	 	 	 	 
	Article 28. Statutory Auditor
	 	 	22	 
	 
	CHAPTER VII Balance Sheet, Capital, Reserves,
Earnings and Dividend Distribution
	 	 	23	 
	 
	 	 	 	 
	Article 29. Fiscal Year of the Corporation
	 	 	23	 

-i -

 

	 	 	 	 	 
	Article 30. Corporate Reserves
	 	 	23	 
	Article 31. Additional Reserves
	 	 	23	 
	Article 32. Dividends and Other Distributions
	 	 	24	 
	 
	 	 	 	 
	CHAPTER VIII Liquidation of the Corporation
	 	 	25	 
	 
	 	 	 	 
	Article 33. Liquidation
	 	 	25	 
	 
	 	 	 	 
	CHAPTER IX Audit and Access to Information
	 	 	25	 
	 
	 	 	 	 
	Article 34. Shareholders’ Audit Right and
Access to Information of the Corporation
	 	 	25	 
	 
	 	 	 	 
	CHAPTER X Final Provisions
	 	 	26	 
	 
	 	 	 	 
	Article 35. Approval of Amendments to this Charter and By-laws
	 	 	26	 
	Article 36. Matters not Provided for Herein
	 	 	26	 
	 
	 	 	 	 
	CHAPTER XI Transitory Provisions
	 	 	26	 

-ii -

 

CHARTER AND BY-LAWS

OF THE MIXED COMPANY

CHAPTER I

NAME, PURPOSE, DOMICILE AND DURATION

     Article 1. Name. The corporation is named Petrodelta, S.A. (hereinafter the
“Corporation”).

     Article 2. Purpose. The purpose of the Corporation is to carry out the activities of
exploration in search of hydrocarbons reservoirs, extraction of hydrocarbons in their natural
state, gathering, transportation and initial storage as defined in Article 9 of the Ley Orgánica de
Hidrocarburos, published in the Official Gazette of the Bolivarian Republic of Venezuela No. 37.323
dated November 13, 2001 and its amendments (hereinafter the “Organic Hydrocarbons Law” and the
“Primary Activities”) in the geographic areas designated by the Ministry of Energy and Petroleum
(hereinafter the “Designated Areas”) by means of Resolution No. 174, published in the Official
Gazette of the Republic (hereinafter the “Official Gazette”) No. 38.497, dated August 10, 2006 and
its amendment published in the Official Gazette of the Republic No. 38.757 of August 29 2007. In
addition, the Corporation may render services to other mixed companies, to companies owned
exclusively by the State or other entities, in exchange for fees on an arm’s length basis, provided
that the rendering of such services is in the interests of the Mixed Company, it being understood
that the principal purpose of the Mixed Company is the carrying out of the Primary Activities, that
the rendering of such services may not prejudice the carrying out of such principal object, and
that the foregoing does not contemplate either the provision of petroleum services to third parties
outside of the Designated Areas or the transfer of technology to third parties.

-1-

 

The Corporation shall be governed by (i) the Organic Hydrocarbons Law, (ii) the terms and
conditions established in the Acuerdo of the National Assembly, published in the Official Gazette
of the Republic No. 38.430, dated May 5, 2006, reprinted in the Official Gazette of the Republic N°
38.474 dated July 7, 2006, as a result of a clerical error and subsequently amended by the Acuerdo
published in the Official Gazette of the Republic No. 38.706 dated June 15, 2007 (hereinafter the
“Acuerdo of the National Assembly”), (iii) the provisions of this Charter and By-laws, (iv) in the
Decree of authorization issued by the National Executive for the formation of the Corporation
published in the Official Gazette of the Republic No. 38.464 on June 22, 2006, reprinted in the
Official Gazette of the Republic N° 38.484 dated July 21, 2006, as a result of a clerical error
(hereinafter the “Decree of Formation”), (v) the Decree that transfers to the Corporation the right
to carry out the Primary Activities in the Designated Areas (hereinafter the “Transfer Decree”),
(vi) the Contract for Conversion to a Mixed Company between Corporación Venezolana del Petróleo,
S.A. (hereinafter “CVP”), Harvest-Vinccler, S.C.A. (hereinafter “Harvest Vinccler”) and HNR Finance
B.V. (hereinafter “HNR Finance”), dated September 11, 2007 (hereinafter the “Conversion Contract”),
(vii) the provisions of the Commercial Code, and (viii) all other laws of the Bolivarian Republic
of Venezuela (hereinafter the “Republic”).

     Article 3. Domicile, Branches. The domicile of the Corporation shall be the city of
Caracas, with the power to establish agencies, branches or offices in any other location within the
Republic or abroad when so decided by the Board of Directors.

     Article 4. Duration. The
term of the Corporation’s existence shall be the

-2-

 

period established in the Acuerdo of the National Assembly and in the Transfer Decree for the
Corporation to carry out the Primary Activities in the Designated Areas.

CHAPTER II

CAPITAL, SHARES AND SHAREHOLDERS

     Article 5. Capital. The Corporation’s capital shall be one billion Bolívares (Bs.
1,000,000,000), which shall be divided into one hundred thousand (100,000) shares of common stock,
with a par value of ten thousand Bolívares (Bs. 10,000) each.

     Article 6. Subscription of Capital Stock. The Corporation’s capital stock is divided
into two classes of shares: Class A and Class B. Only the State or companies owned exclusively by
the State may own Class A shares. The capital stock has been one hundred percent (100%) subscribed
and paid for in the following manner:

Class A

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Number of	 	Subscribed	 	 	 	 	 	Percentage of
	Shareholder	 	Shares	 	Capital	 	Paid-in Capital	 	Total Capital
	CVP
	 	 	60,000	 	 	Bs. 600,000,000	 	Bs. 600,000,000	 	 	60	%

Class B

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Number of	 	Subscribed	 	 	 	 	 	Percentage of
	Shareholder	 	Shares	 	Capital	 	Paid-in Capital	 	Total Capital
	HNR Finance
	 	 	40,000	 	 	Bs. 400,000,000	 	Bs. 400,000,000	 	 	40	%

The number of shares of the Corporation owned by the State or companies owned exclusively by the
State must always represent, at a minimum, a percentage greater than fifty percent (50%) of the
capital stock of the Corporation. Such requirement may

-3-

 

not be altered as a result of the issuance or cancellation of shares by the Corporation or by any
other circumstance.

     Article 7. Shares. The shares of stock of the Corporation shall be registered in the
names of the shareholders and shall not be convertible into bearer shares. Ownership of shares in
the Corporation is established by inscription in the Book of Shareholders, and transfer of the
shares may be effected by means of a written statement in the Book of Shareholders signed by the
assignor, the assignee and the President of the Board of Directors or the director to whom such
function has been delegated.

     Article 8. Single Ownership. The Corporation will recognize only one owner for each
share. If a share is owned by several persons, the Corporation shall not be obligated to register
or to recognize more than one such person as owner, who shall be designated by the owners of such
share for purposes of exercising shareholder rights derived from such share before the Corporation.

     Article 9. Certificates. The certificates representing shares shall be issued subject
to the requirements of Article 293 of the Commercial Code and must be executed by two (2)
directors. The Board of Directors, at the request of the shareholders, shall determine the number
of shares represented by each certificate. Shares may be redistributed in new certificates by
exchanging the prior certificates, if so decided by the Board of Directors at the request of the
owner of the shares. All such exchanges shall be recorded in the Book of Shareholders. In the
event of damage to or loss of one or more certificates, the affected shareholder shall request the
President to

-4-

 

issue new certificates, upon the cancellation of the lost or damaged certificates, and the
shareholder shall pay any related costs.

     Article 10. Equality of Rights. Except as otherwise provided in this Charter and
By-laws, all shares of stock in the Corporation grant their owners the same rights.

     Article 11. Right of First Refusal for the Purchase of the Class B Shares.
The Class A shareholder shall have a right of first refusal to acquire all (but not part) of the
Class B shares offered for sale by a Class B shareholder in accordance with this Article (except in
the case of a sale or transfer to an entity owned, directly or indirectly, exclusively by the
ultimate parent entity of the selling shareholder). A Class B shareholder wanting to sell all or
part of its Class B shares must first provide written notice to the remaining shareholders of both
Classes through the President of the Board of Directors, indicating the number of Class B shares
being offered, the price for such shares and all other conditions of the offer (hereinafter the
“Offer Notice”). Sales of Class B shares shall require all cash consideration. The selling
shareholder shall include in the Offer Notice the name and contact information of the party ready
to purchase the shares offered for sale. Within thirty (30) calendar days (hereinafter “Days”)
after receipt of the Offer Notice by the Class A shareholder, it must indicate whether or not it
desires to acquire the offered shares upon the terms and conditions contained in the Offer Notice
and must communicate this decision to the selling shareholder through the President of the Board of
Directors. In case that the Class A shareholder has not stated its intention to acquire all of the
offered shares during such period, the Class B shareholders shall have the right, in proportion to
their participation in the Class B shares, to acquire such shares upon the terms indicated in the
Offer

-5-

 

Notice by notifying the selling shareholder through the President of the Board of Directors of
their intention to acquire such Class B shares, such notice to be delivered within thirty (30) Days
after the expiration of the period set forth above for the exercise by the Class A shareholder of
its preferential right. The failure of any of the Class B shareholders to acquire the percentage
of shares to which it is entitled shall proportionately increase the right of the other Class B
shareholders. In case none of the Class A shareholder or the Class B shareholders has stated its
intention to acquire the Class B shares of the selling shareholder within the respective periods
indicated above, it shall be understood that such shareholders approve the sale on the same terms
and conditions contained in the Offer Notice. The selling shareholder may, subject to the
condition set forth in Article 12, conclude the approved sale of the Class B shares in accordance
with the terms and conditions described in the Offer Notice within a period of one hundred eighty
(180) Days after the foregoing period of thirty (30) Days for the Class B shareholders to exercise
their preferential right has lapsed. In case the sale is not concluded within such one hundred
eighty (180) Days period, the approval for such sale shall be deemed withdrawn and any subsequent
sale will be subject to the same preferential rights and procedures set forth above. Upon the
consummation of the transfer of the offered shares, the selling shareholder shall notify the
President of the Board of Directors thereof and shall certify the price, terms and conditions upon
which such transfer was made.

     Article 12. Authorization for Transfer of Shares. Notwithstanding anything in this
Charter and By-laws to the contrary, no holder of shares of the Corporation may pledge, grant as
guarantee, assign or transfer (except for a transfer to an entity which

-6-

 

is, directly or indirectly, exclusively owned by the ultimate parent entity of the
transferring shareholder) its shares without the prior written consent of the Minister of Energy
and Petroleum of the Republic. In the event of a change in control of any Class B shareholder
without the prior written consent of the Minister of Energy and Petroleum of the Republic, the
provisions of Article 6.3 of the Conversion Contract shall apply.

CHAPTER III

SHAREHOLDERS’ MEETINGS

     Article 13. General Powers. The ruling and definitive decisions of the Corporation
correspond to the shareholders duly convened in a meeting in which the respective quorum is present
(hereinafter a “Shareholders’ Meeting”), which shall have the powers granted to it by law and by
this Charter and By-laws.

     Article 14. Ordinary and Extraordinary Meetings. Ordinary Shareholders’ Meetings will
be held annually within ninety (90) Days after the close of the Corporation’s fiscal year and the
Extraordinary Shareholders’ Meetings shall be held when called by the Board of Directors or at the
request of the majority of the Class A or Class B shareholders. The Shareholders’ Meeting, duly
convened, represents the entirety of the shareholders. Its decisions adopted within the
limitations of its authority are obligatory for the Corporation, including the shareholders that
did not attend the meeting.

     Article 15. Notice. Ordinary and Extraordinary Shareholders’ Meetings shall be called
with at least fifteen (15) Days’ notice prior to the date fixed for the meeting by means of an
announcement prepared by the President that shall be published in one of the newspapers with major
national circulation. Such announcement will state the

-7-

 

location, date and time of the meeting as well as the agenda of the matters to be discussed.
The notices shall be confirmed by communication sent to all of the shareholders by fax, certified
mail or electronic mail not less than ten (10) Days prior to the date fixed for the Meeting, to the
last address duly given by the shareholders to the Corporation. Such communication shall also
indicate the location, date and time of the meeting as well as the agenda of the matters to be
discussed and shall have enclosed copies of any proposals to be presented, including proposals
which any shareholder may have notified to the President. If within a period of three (3) Days
following receipt of the notice any shareholder notifies the President in writing that it cannot
attend such meeting, the President shall, one time only, set (by means of a communication sent to
all of the shareholders by fax, certified mail or electronic mail at least seven (7) Days in
advance), a new date for holding the Shareholders’ Meeting within twenty one (21), but not earlier
than seven (7), Days following the date originally set, which date will be notified in writing to
all the shareholders. Any decision made without the previous compliance with what is set forth in
this Article 15 shall be null and shall have no legal effect. A Shareholders’ Meeting at which the
entire capital stock, including all of the Class A and Class B shares, is present or represented
shall be valid, provided that all of the shareholders indicate agreement in writing with the agenda
to be discussed at such meeting, without the required prior notice.

     Article 16. Quorum and Decisions. Ordinary and Extraordinary Shareholders’ Meetings
will be validly convened when more than fifty percent (50%) of the capital stock of the Corporation
is present, and for any resolutions adopted by the Shareholders’ Meeting to be valid, a favorable
vote of more than fifty percent (50%) of

-8-

 

the capital stock of the Corporation shall be required, except in those cases where decisions
require a qualified majority.

     (I) Simple Majority: In order to make the following decisions, among others, the
favorable vote of more than fifty percent (50%) of the shares in the capital stock of the
Corporation shall be required:

	(a)	 	Appoint the principal Statutory Auditor and his alternate and determine their compensation;
	 
	(b)	 	Approve any proposal to increase or reduce the capital stock of the Corporation as well as
any reclassification of shares, that does not alter the percentage participation of the
existing shareholders in the capital stock of the Corporation and whose purpose is consistent
with the Business Plan incorporated as Annex I to the Conversion Contract;
	 
	(c)	 	Approve the annual work programs and budgets of the Corporation in accordance with the
general framework established in the Business Plan incorporated as Annex I to the Conversion
Contract, without prejudice, in accordance with Article 1.8 of the Conversion Contract, to the
right of the Class B shareholders not to participate in new investment projects that can be
technically and economically segregated from the ongoing operations of the Corporation and the
right of CVP to carry out such projects at its sole risk;
	 
	(d)	 	Appoint and remove the secretary of the Shareholders’ Meeting; and
	 
	(e)	 	Decide as to any other matter specifically submitted to it for consideration and which, in
accordance with the following, should not be decided by a qualified majority of shareholders,
it being understood that the simple majority shall not

-9-

 

	 	 	take decisions contrary to the interests of the Corporation, including, among others, any
decision which would result in the revocation of the Transfer Decree or of any permit,
license or authorization of any kind required for the conduct of the Corporation’s business,
or in the early termination or breach of the Contract for the Purchase and Sale of
Hydrocarbons signed by the Company in accordance with Article 3 of the Conversion Contract,
or in the omission to act to preserve the rights of the Corporation under such Contract for
the Purchase and Sale of Hydrocarbons.

     (II) Qualified Majority: In order to make the following decisions, shareholders
owning at least three quarters (3/4) of the capital stock of the Corporation must be present or
represented at the Shareholders’ Meeting and shareholders owning at least three quarters (3/4) of
the shares of the Corporation must vote in favor:

	(a)	 	Approve any modifications to this Charter and By-laws (except changes to Articles 5 and 6, in
the case of increases or decreases of capital approved in accordance with Article 16(I)(b)),
it being understood that, in accordance with Article 35, the validity of such modifications
shall be subject to the approval of the Ministry of Energy and Petroleum and, in case of
amendments to this Article 16, of the National Assembly;
	 
	(b)	 	Approve any proposal for the increase or decrease in the capital stock of the Corporation
that alters the percentage participation of the current shareholders in the capital stock of
the Corporation or whose purpose is inconsistent with the Business Plan incorporated as Annex
I to the Conversion Contract;
	 
	(c)	 	Approve any liquidation or anticipated dissolution of the Corporation;

-10-

 

	(d)	 	Decide regarding the merger, consolidation, or combination of businesses with other companies
or the breaking up of the Corporation;
	 
	(e)	 	Decide regarding the disposition of all or a substantial part of the assets of the
Corporation, by sale, grant, lease, exchange, transfer or any other manner, except for the
disposition of assets in the ordinary course of business or assets that are no longer useful
to the Corporation in accordance with the Business Plan, all in accordance with the legal
provisions regarding reversion;
	 
	(f)	 	Decide the terms and conditions of any financing agreement for an amount greater than ten
million United States of America dollars (US$ 10,000,000) (or any group of lesser financing
agreements which, together, exceed such amount), or its equivalent in other currency, as well
as any modification of such contract;
	 
	(g)	 	Approve or modify the general balance sheet and profit and loss statement, duly audited,
pursuant to the information provided by the Statutory Auditor, it being understood that no
shareholder shall withhold its approval unless it demonstrates the existence of errors in such
financial statements;
	 
	(h)	 	Approve the creation and financing of any reserve fund that is not the legal reserve fund
referred to in Article 30 of this Charter and By-laws or others that may be provided for under
the applicable laws;
	 
	(i)	 	Order the distribution of dividends or distribution of paid-in surplus, it being understood
that no shareholder can withhold its approval of any Board of Directors proposal for
distributions that is consistent with the policy established in Article 32 of this Charter and
By-laws, and that any refund or distribution of paid-in surplus to the shareholders, as well
as its capitalization if that is the case,

-11-

 

	 	 	corresponds to such shareholders according to their participation in the capital stock
registered and paid in pursuant to Article 6 of this Charter and By-Laws;
	 
	(j)	 	Agree on any proposed changes to the policy regarding dividends and other distributions
established in Article 32 of this Charter and By-laws;
	 
	(k)	 	Agree on any proposal to change the Business Plan incorporated as Annex I of the Conversion
Contract (as the same may have been modified in accordance with this provision);
	 
	(l)	 	Agree on any amendment, early termination or submission to the dispute settlement procedure
in relation with the Contract for Sale and Purchase of Hydrocarbons that shall be entered into
by the Corporation, pursuant to Article 3 of the Conversion Contract;
	 
	(m)	 	Agree on any contract with shareholders or their affiliated companies that is not at market
price, it being understood that any contract with a shareholder or any of its affiliates shall
be notified to all other shareholders, who shall be given an opportunity to object in the case
that the contract is not at market price;
	 
	(n)	 	Agree on any social investment in excess of the amount required in the Acuerdo of the
National Assembly;
	 
	(o)	 	Agree on any waiver of material rights, including the rights to carry out Primary Activities
in the Designated Areas pursuant to the Transfer Decree, or the filing, initiation,
termination, settlement or any other act relating to or derived from any litigation,
proceedings, or judicial, arbitral or administrative action, in which the Corporation is a
party and that involves an amount in excess of one million

-12-

 

	 	 	United States of America dollars (US$1,000,000), or its equivalent in other currencies;

	(p)	 	Select the external auditors and approve their engagement;
	 
	(q)	 	Appoint the judicial representative or any general agent of the Corporation; and
	 
	(r)	 	Designate a liquidator in the event of the liquidation of the Corporation.

Every decision adopted without meeting the respective majorities set forth in this Article shall be
considered null and void. In addition, every decision not in conformity with any of the provisions
of the Acuerdo of the National Assembly, the Decree of Formation, the Transfer Decree, or the
Conversion Contract, shall be considered null and void.

     Article 17. Representation in the Shareholders’ Meetings. Every shareholder has the
right to be represented in the Shareholders’ Meetings by its attorney-in-fact. The power of
attorney, duly authenticated, shall be sent by fax or certified mail to the Secretary of the Board
of Directors.

     Article 18. Minutes of the Meeting. The proceedings of the Shareholders’ Meetings
shall be recorded in minutes which shall set forth the names of those attending, the number and
Class of the shares they represent and the decisions and measures which were adopted. The minutes
referred to will be recorded in the appropriate Book duly approved by the Commercial Registry and
signed by all attendees and certified, as well as any extract therefrom, by the President or
Secretary of the Board of Directors or by any other officer or employee of the Corporation
designated by the Shareholders’ Meeting. The previously mentioned documents shall accurately
reflect the decisions made in the Meetings.

-13-

 

CHAPTER IV

ADMINISTRATION

     Article 19. Board of Directors. The governance and administration of the Corporation
shall be entrusted to a Board of Directors composed of five (5) members, one of whom shall be its
President. The Class A shareholders, making the decision on behalf of its Class in the
corresponding Shareholders’ Meeting, shall have the exclusive right to appoint three (3) principal
members of the Board of Directors, including the President, and their respective alternates. The
Class B shareholders, making the decision on behalf of its Class in the corresponding Shareholders’
Meeting, shall have the exclusive right to appoint, by vote of a simple majority of the Class B
shares, two (2) principal members of the Board of Directors and their respective alternates. In
case of the President’s absence, the Class A shareholders shall elect a substitute who shall assume
the same duties and powers attributed to such office by this document. In case of the absence of
any director, such director will be replaced in the exercise of his duties, by the corresponding
alternate, who shall be summoned by the Board of Directors. If the alternate of any director is
unable to replace such director, the President or whoever acts for him will call as the replacement
any of the alternates of the other directors corresponding to the same Class of stock with the
purpose of filling such alternate position. On the occurrence of the definitive absence of any
director, the President or whoever acts for him will call a Shareholders’ Meeting to elect a
substitute for the remaining term of office, with the understanding that such substitute will be
elected by shareholders of the Class which corresponds to the appointment of the absent director.
Chapter XI of this Charter and By-laws lists the current principal

-14-

 

directors, including the President, and their alternates, all of whom shall serve in such
capacity during the first statutory period.

     Article 20. The President. The President of the Board of Directors shall have the
following powers and duties:

	(a)	 	Call Shareholders’ Meetings, in accordance with Article 15 of this Charter and By-laws;
	 
	(b)	 	Call the meetings of the Board of Directors on his own initiative or that of two (2)
directors, in accordance with Article 23 of this Charter and By-laws;
	 
	(c)	 	Prepare the agenda and notices of the Shareholders’ Meetings and Board of Directors’
Meetings;
	 
	(d)	 	Preside over the Shareholders’ Meetings and Board of Directors’ Meetings, it being understood
that his absence shall not affect the validity of the meeting and the decisions taken;
	 
	(e)	 	Act as the Corporation’s legal representative, except for the judicial representation of the
Corporation, which is governed by Article 27 of this Charter and By-laws and applicable legal
provisions; and
	 
	(f)	 	All other powers or obligations conferred upon the President by the Shareholders’ Meeting or
by the Board of Directors.

If the President does not call the meetings mentioned in clauses (a) and (b) above within a period
of five (5) Days following the respective requests, any two (2) of the directors may call such
meetings.

     Article 21. Directors’ Term of Office. The members of the Board of Directors and
their respective alternates shall be elected for a term of three (3) years by the

-15-

 

shareholders of the corresponding Class meeting in a Shareholders’ Meeting. Any director who
is not replaced upon expiration of his term shall continue to exercise his functions with all
powers inherent thereto until his replacement is made effective. The Shareholders’ Meeting may
replace them at any time, by the vote of the majority of the shares of the Class that designated
such directors.

     Article 22. Obligation to Deposit Shares. Each member of the Board of Directors must
deposit with the Corporation one (1) share of the Corporation’s stock, which shall be stamped with
the seal of inalienability as provided by the Commercial Code. If the members of the Board of
Directors are not shareholders in the Corporation, such shares must be deposited by the shareholder
electing such directors and will remain on deposit as a guarantee of the directors’ performance of
their duties for the term set forth in the Commercial Code.

     Article 23. Meetings of the Board of Directors. The Board of Directors shall meet
with the frequency as it may itself determine but normally shall meet at least once a month. The
Board of Directors may also be convened at any time by the President on his own initiative or at
the request of two (2) directors. Notice of the meeting must be sent by fax, certified mail,
electronic mail or other proper means to all of the directors at the last addresses given by them
to the President with at least seven (7) Days notice prior to the meeting, except in emergency
situations, in which case the notice of the meeting may be given with fewer days’ notice. The
notice shall indicate the place, date and time of the meeting, as well as the matters to be
discussed at the meeting and should have enclosed copies of all proposals presented, including
proposals which any director may have notified to the President. The Board of Directors may not
adopt valid

-16-

 

resolutions or decisions on matters not included in the agenda except by unanimous agreement.
The notices may be made unnecessary when all of the principal directors, or their alternates in the
absence of the principals, are present. If within the three (3) Days following receipt of the
notice any Director notifies the President in writing that neither he nor his alternate can attend
the meeting, the President shall, one time only, fix a new date for holding of the meeting in
question within ten (10) Days following the date originally set, except when there is an emergency
situation, in which case the meeting shall not be postponed. The directors, or their respective
alternates, must attend the meetings of the Board of Directors for their votes to be validly cast.
This requirement may be met by means of teleconference or videoconference. Meetings of the Board
of Directors shall take place in Venezuela and, as an exception, may take place outside of the
country when required by special and duly justified reasons.

     Article 24. Quorum and Decisions of the Board of Directors. For the validity of the
deliberations and decisions of the Board of Directors the presence of no less than four (4) members
is required, except in the case expressly provided below in this Article. If in the meeting of the
first notice less than four (4) members of the Board of Directors attend, a second notice for
another meeting shall be given at least five (5) Days in advance with the understanding that for
the validity of the deliberations and decisions made in that second meeting, there shall only be
required the presence of at least three (3) members. Decisions of the Board of Directors shall be
taken by the favorable vote of at least three (3) of its members, except in the case of any
decision implementing a decision of the Shareholders’ Meeting relating to any of the matters listed
in Article 16(II) (Qualified Majority) or proposals relating to such matters, which

-17-

 

shall require the favorable vote of at least four (4) members. The meetings of the Board of
Directors shall be recorded in minutes which shall be recorded in the appropriate Book and signed
by the attendees. The minutes of the Board of Directors and all extracts therefrom must be
certified by the Secretary or the President of the Board of Directors or by the employees that it
designates, and they shall accurately reflect the decisions made in the Board of Directors’
meeting.

     Article 25. Powers of the Board of Directors. Except for those items specifically
reserved for the Shareholders’ Meeting, the Board of Directors shall have the most ample powers of
administration and disposition expressly granted in this Charter and By-laws, including, without
limitation, the following:

	(a)	 	Propose to the Shareholders’ Meeting the approval of the general budget applicable to the
following fiscal year of the Corporation, which general budget should be consistent with the
Business Plan incorporated as Annex I in the Conversion Contract, and once approved, forward
it to the National Budget Office before September 30 of the year preceding the year in which
the budget becomes effective;
	 
	(b)	 	Present to the Shareholders’ Meeting an annual report regarding the management of the
Corporation;
	 
	(c)	 	Appoint and dismiss personnel of the Corporation and, in addition, determine their
compensation, consistent with the provisions of this Charter and By-laws and the Conversion
Contract;
	 
	(d)	 	Make recommendations that it deems useful to the Shareholders’ Meeting regarding the
maintenance of reserves and the utilization of surplus;

-18-

 

	(e)	 	Prepare for the Shareholders’ Meeting the proposals for annual dividend distributions,
advance payments and distribution of surplus, in accordance with the policy contained in
Article 32 of this Charter and By-laws;
	 
	(f)	 	Agree upon the execution of contracts and actions necessary for the proper conduct of the
Corporation and its business, with the understanding that such contracts and actions (i) shall
be consistent with the work programs and budgets approved by the Shareholders’ Meeting in
accordance with this Charter and By-laws and with the policies and procedures adopted by the
Board of Directors, and (ii) in no case may affect the position and authority of the
Corporation as operator in the Designated Areas;
	 
	(g)	 	Authorize the opening, movement and closing of bank accounts, and designating the persons
authorized to manage them;
	 
	(h)	 	Make, accept, endorse and guarantee bank drafts and any other commercial instruments, it
being understood that such acts shall be consistent with the work programs and budgets
approved by the Shareholders’ Meeting in accordance with this Charter and By-laws;
	 
	(i)	 	Supervise the implementation of the policies and procedures necessary to carry forward the
business of the Corporation in accordance with the Conversion Contract; and
	 
	(j)	 	Carry out the resolutions of the Shareholders’ Meetings.

     The Board of Directors can, within the limits it determines to be suitable and reserving its
rights, delegate to officers of the Corporation the powers set forth in clauses (c), (f), (g), (h)
and (i) of this Article 25.

-19-

 

     Article 26. The General Manager and Other Management Personnel. The General Manager
shall be appointed and removed by the Shareholders’ Meeting. The General Manager shall be in
charge of the daily management of the business of the Corporation and shall have the following
powers and duties:

	(a)	 	Execute and cause to be executed the agreements and resolutions of the Shareholders’ Meeting
and the Board of Directors;
	 
	(b)	 	Authorize with his signature those documents or other materials to which he should attend
pursuant to resolutions of the Shareholders’ Meeting or the Board of Directors;
	 
	(c)	 	Direct the payment of day-to-day expenses of the Corporation, giving regard to the budget
approved by the Shareholders’ Meeting;
	 
	(d)	 	Present every semester to the Board of Directors a detailed account of the income, expenses
and assets of the Corporation, and a general report on the management;
	 
	(e)	 	Upon request of the Board of Directors, inform the Board of Directors on any matter regarding
the Corporation or the management thereof;
	 
	(f)	 	Direct and supervise on a daily basis the accounting of the Corporation;
	 
	(g)	 	Ensure that the employees of the Corporation carry out their duties, and request their
dismissal of the Board of Directors when justified or necessary, or carry out such dismissals
when such authority has been delegated to him; and
	 
	(h)	 	Implement the policies and procedures for the operation of the Corporation and carry out any
other actions of disposition or management as may be expressly authorized by the Board of
Directors.

-20-

 

     A percentage of management personnel of the Corporation equivalent to the ownership percentage
of the Class B shareholders of the Corporation shall be nominated by the Class B shareholders. In
addition to the General Manager, the management of the Corporation shall be composed of first line
executives that shall occupy the positions of Technical and Operations Manager, Manager of Human
Resources, Manager of External Affairs, Purchasing Manager, Systems Manager, Planning Manager,
Manager of Administration and Finances, Legal Manager and Manager of Safety, Health and
Environment. The General Manager shall be nominated by the Class A shareholder while the Technical
and Operations Manager shall be nominated by the Class B shareholder. The Corporation shall also
have a Manager of Prevention and Loss Control that shall be nominated by the Class A shareholder.
The management structure of the Corporation shall be reviewed periodically by the shareholders for
the purpose of assuring that it responds to the objectives and purposes of the Corporation.

CHAPTER V

LEGAL REPRESENTATIVE

     Article 27. Legal Representative. The legal representation of the Corporation shall
be carried out by a Legal Representative who shall be a legal professional. The Shareholders’
Meeting shall make the appointment for a period of three (3) years and upon the expiration of such
period, the Legal Representative shall remain in such position until a successor takes office. The
Shareholders’ Meeting may also make consecutive extensions of the term of office. In addition, the
Shareholders’ Meeting may proceed at any time to remove the Legal Representative. The Legal
Representative

-21-

 

shall attend Shareholders’ Meetings or meetings of the Board of Directors when summoned, it
being correspondent to him the legal representation of the Corporation in administrative, judicial
or legislative proceedings, that he shall exercise exclusively, subject to Articles 16 and 25 of
this Charter and By-laws. The Legal Representative who shall exercise his functions during the
first statutory period is designated in Chapter XI of this Charter and By-laws.

CHAPTER VI

STATUTORY AUDITOR

     Article 28. Statutory Auditor. The Corporation shall have a principal Statutory
Auditor and a corresponding alternate who shall have the functions set forth in the Commercial
Code. Both shall serve terms of three (3) years in their offices and their appointment or removal
corresponds to the Shareholders’ Meeting. If not replaced upon expiration of the aforementioned
term, the officers governed by this Article shall continue to perform their duties with all powers
inherent to their office until the appointment of their respective replacements. The principal
Statutory Auditor and his alternate who shall exercise their functions during the first statutory
period are designated in Chapter XI of this Charter and By-laws.

CHAPTER VII

BALANCE SHEET, CAPITAL,

RESERVES, EARNINGS AND DIVIDEND DISTRIBUTION

     Article 29. Fiscal Year of the Corporation. The Corporation’s fiscal year shall
commence on January 1 and end on December 31 of each year. However, the first fiscal year shall
commence on the date of registration of this Charter and By-laws and will end on December 31, 2007.
At the end of each fiscal year, the inventory and

-22-

 

financial statements shall be prepared in accordance with the provisions of the Commercial
Code and accounting principles generally accepted in the Republic. The Shareholders’ Meeting may
consider and approve by qualified majority such financial statements for shorter periods as may be
presented by the Board of Directors.

     Article 30. Corporate Reserves. Five percent (5%) of the Corporation’s net earnings
from the general balance sheet and profit and loss statement approved in accordance with Article
16, shall be set aside annually for the purpose of creating a legal reserve fund until such fund is
equal to ten percent (10%) of the total contributed capital.

     Article 31. Additional Reserves. In addition to contributed capital and established
reserve funds, or any other capital accounts that may exist in accordance with the law or generally
accepted accounting principles, the Corporation may create, with the prior consent of the
Shareholders’ Meeting in accordance with Article 16(II) of this Charter and By-laws, additional
capital reserve accounts. The amounts in such accounts may not be reduced or distributed in any
way except with the consent of the Shareholders’ Meeting. The capital reserve accounts shall be
considered a diminution of the losses, if any, for the determination of a diminution of the
contributed capital as established in Article 264 of the Commercial Code.

     Article 32. Dividends and Other Distributions. Subject to Article 1.6(A) of the
Conversion Contract, dividends and other distributions set forth in this Article 32 shall be paid
pro rata among the number of issued shares, independently of their Class. The Corporation’s
dividend policy, once the requirements for the reserve funds mentioned in Article 30, its
investment plans and its financial, fiscal and other

-23-

 

obligations are satisfied, shall consist of an annual payment in cash of the maximum amount of
dividends that is feasible, avoiding the unnecessary retention of funds. The policy of the
Corporation regarding distributions shall also contemplate the advance payment of dividends (loans
to shareholders), reductions in capital and distributions of surplus (which may not be distributed
as dividends), to the extent that the Board of Directors considers feasible and prudent given the
financial condition and projections of the Corporation, in order to pay to the shareholders
retained funds which are not required for the purposes set forth above. The Board of Directors
shall consider the possibility of making such distributions at least quarterly. All payments of
dividends, advances, reductions in capital or distributions of surplus in accordance with this
Article, shall be made by the Corporation to each shareholder registered as such at the moment of
the declaration or approval of such action by transfer of immediately available funds within five
(5) Days after the date of such declaration or approval. All payments to shareholders in accordance
with this Article 32 shall be made in United States of America dollars from accounts maintained by
the Corporation abroad. The right to receive the payment shall arise at the moment in which the
Shareholders’ Meeting approves it. In no event shall distributions be made to the shareholders if
the Corporation does not have available funds to make such payment.

CHAPTER VIII

LIQUIDATION OF THE CORPORATION

     Article 33. Liquidation. Except as otherwise provided by law, liquidation of the
Corporation shall be effected by one (1) liquidator appointed by the Shareholders’ Meeting that may
have approved the liquidation. In the liquidation, all of the

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Corporation’s assets of whatever nature, whether tangible or intangible, real or personal,
shall be transferred only to the owners of the Class A shares, except for cash not reserved for the
payment of expenses or other obligations, which shall be distributed to the shareholders in
proportion to their shareholdings in the Corporation.

CHAPTER IX

Audit and Access to Information

     Article 34. Shareholders’ Audit Right and Access to Information of the Corporation.
Any shareholder shall have the right to have an independent auditor verify the accounting and
financial books of the Corporation, for which purpose it shall give written notice to the
Corporation at least thirty (30) Days in advance. During the course of such audits, which shall
not interfere with the normal carrying out of activities of the Corporation, the Corporation shall
offer to the auditors designated by the shareholder reasonable access to its facilities during
working hours. The cost of such audits shall be assumed by the shareholder that requests them. In
addition to the foregoing, the shareholders shall have complete access to all information related
to the business of the Corporation. The Corporation will report periodically to all the Class A and
Class B shareholders the financial, tax, health, safety and environmental, and other types of
information necessary to enable them to prepare their reports and accounts in accordance with
regulations applicable to them.

CHAPTER X

MISCELLANEOUS

     Article 35. Approval of Amendments to this Charter and By-laws. Except as provided
under sections I(b) and II(b) of Article 16 of this Charter and By-laws, any

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amendment to this Charter and By-laws in order to be valid shall be approved by the Ministry
of Energy and Petroleum and, in case of an amendment to Article 16, by the National Assembly.

     Article 36. Matters not Provided for Herein. All matters not provided for in this
Charter and By-laws shall be governed by the laws of the Bolivarian Republic of Venezuela. Except
for what is established in the applicable laws and regulations of Public Law (Derecho Público), the
Corporation shall be governed by the laws and regulations of Private Law (Derecho Privado),
including, among the latter, the provisions of the Commercial Code that are applicable.

CHAPTER XI

TRANSITORY PROVISIONS

FIRST: The following persons are designated to carry out the duties of member of the Board of
Directors, President of the Board of Directors, Statutory Auditor and Legal Representative, both as
principal and alternate, which persons shall exercise their functions during the first statutory
period until the Shareholders’ Meeting shall appoint their successors:

	 	 	 	 	 
	 

	 	-C.I.
	 	- President
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	-C.I.
	 	- Director (Principal)
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	-C.I.
	 	- Director (Principal)
	 

	 	 	 	 
	 
	 	 	 	 
	José María Rivas , -C.I. [           ]	 	- Director (Principal)
	 
	 	 	 	 
	Karl L. Nesselrode, American Passport No. [           ]	 	- Director (Principal)
	 
	 	 	 	 
	 

	 	-C.I.
	 	- Director (Alternate)
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	-C.I.
	 	- Director (Alternate)
	 

	 	 	 	 

-26-

 

	 	 	 	 	 
	 

	 	-C.I.
	 	- Director (Alternate)
	 

	 	 	 	 
	 
	 	 	 	 
	Steven W. Tholen, American Passport No. [           ]	 	- Director (Alternate)
	 
	 	 	 	 
	Kurt Nelson, American Passport No. [            ]	 	- Director (Alternate)
	 
	 	 	 	 
	 

	 	-C.I.
	 	- Statutory Auditor
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	-C.I.
	- Statutory Auditor (Alternate)
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	-C.I.
	 	- Legal Representative
	 

	 	 	 	 

SECOND: We hereby authorize                     , Venezuelan and holder of identity card number
                    , to make the presentation of the Corporation before the Commercial Registry of
Judicial Inscription of the Capital District and the State of Miranda, as well as the publication
of this document, so as to comply with the provisions of the Commercial Code of Venezuela.

Caracas, on the date of presentation.

	 	 	 	 	 
	 	CORPORACIÓN VENEZOLANA DEL PETRÓLEO, S.A.

 
	 	By:  	 	 
	 	 	 	 
	 	 	 	 
	 

	 	 	 	 	 
	 	HNR FINANCE, B.V.

 	 
	 	By:  	 	 
	 	 	 	 
	 	 	 	 
	 

-27-

 

ANNEX F

FORM OF TRANSFER DECREE

 

ANNEX F

TRANSFER DECREE PROJECT

BOLIVARIAN REPUBLIC OF VENEZUELA

Decree No.                      of                      2007

TRANSFER DECREE

HUGO CHÁVEZ FRÍAS

PRESIDENT OF THE BOLIVARIAN REPUBLIC OF VENEZUELA

     Exercising the powers conferred by Article 156, Paragraph 16 and Article 236, Paragraphs 2
and 24, all of the Constitución de la República Bolivariana de Venezuela; Articles 100 and 101 of
the Ley Orgánica de la Administración Pública; and Articles 24 and 37 of the Ley Orgánica de
Hidrocarburos,

     In Council of Ministers,

WHEREAS

     That the Ley Orgánica de Hidrocarburos, sets forth that hydrocarbon primary activities may be
directly carried out by the State, either through the National Executive or through companies which
it exclusively owns; or through companies in which it holds control of its decisions for having an
interest greater than 50% of the capital stock, stating for this purpose that companies engaged in
the performance of primary activities shall be operating companies,

 

 

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WHEREAS

     That the company Harvest Vinccler, S.C.A. or any of its subsidiaries, have been directly
chosen by the Ministry of Energy and Petroleum to become minority partners in the joint venture
with Petrodelta, S.A. prior approval by the Council of Ministers in accordance with Article 37 of
the Ley Orgánica de Hidrocarburos, and that the National Assembly has approved the incorporation of
the corresponding mixed company on May 4 and July 6, 2006, in compliance with the provisions in
Article 33 of the Ley Orgánica de Hidrocarburos,

WHEREAS

     That Article 24 of the referred Ley Orgánica de Hidrocarburos sets forth the authority of this
Office to transfer by decree to the operating companies the right to carry out primary activities
and also to revoke such rights when the operators do not fulfill their obligations in such a way as
to prevent achieving the purpose for which such rights were transferred,

WHEREAS

     That the State, as exclusive owner of the hydrocarbons, which are depletable and non-renewable
resources, has the sovereign right to regulate production and to decide on the forms of
exploitation that are most convenient for the national interests, the social and endogenous
development and for the protection of the environment and the maintenance of the existing
ecological balance,

WHEREAS

     That it is necessary to demand from the operating companies their active cooperation in the
tasks of technological experimentation, research and development, and, in addition, that the
activities carried out by operating companies should contribute to the integral development of the
country and its workers by giving the most strict compliance to the guidelines and rules on which
the Rule of Law (Estado Social de Derecho) is based,

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DECREES

     The transfer of the right to carry out primary activities and the determination of the Areas

     Article 1. The right to carry out the primary activities provided in Article 9 of the Ley
Orgánica de Hidrocarburos is hereby transferred to Petrodelta, S.A., subject to the conditions set
forth in the Acuerdo issued by the National Assembly on May 4, 2006 and published in the Official
Gazette of the Bolivarian Republic of Venezuela on May 5, 2006, reprinted in the Official Gazette
of the Republic N° 38.474 dated July 7, 2006, as a result of a clerical error and amended by the
Acuerdo published in the Official Gazette No. 38.706 of June 15, 2007, in this Decree and in the
Venezuelan legal framework. Consequently, Petrodelta, S.A., shall carry out primary exploration
activities in search of hydrocarbon reservoirs, their extraction in their natural state, initial
gathering, transportation and storage in the geographical areas designated by the Ministry of
Energy and Petroleum in accordance with the provisions of Article 23 of the abovementioned Law
governing this matter, through Resolution No 174, published in the Official Gazette of the Republic
No 38.467, dated June 27, 2006 and its partial amendments published in the Official Gazette of the
Republic No. 38.497 on August 10, 2006 and in the Official Gazette of the Republic No. 38.757
dated August 29, 2007 (“Designated Areas”).

     Duration of the mixed company

     Article 2. Petrodelta, S.A. may carry out the abovementioned primary activities during twenty
(20) year from the date of publication of this Decree in the Official Gazette of the Republic.

     Capacity as operator and exclusion of contracts dealing with primary activities

     Article 3. Petrodelta, S.A., shall be the operator in the Designated Areas and may, in
accordance with the provisions of Article 25 of the Ley Orgánica de Hidrocarburos, contract the
specific petroleum services that may be necessary to assist it with the performance of its
activities, such as, for example, seismic, drilling and maintenance services, it being understood
that Petrodelta, S.A., may not enter into any contract or set of contracts by which it transfers,
either directly or indirectly, its function as operator.

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     Payment of the royalty and taxes

     Article 4. Petrodelta, S.A., shall pay the Republic the royalty based on the hydrocarbons
volumes extracted from any reservoir and the taxes established in the law. The royalty may be
demanded by the National Executive either in kind or in cash, in the modalities provided for in
Articles 46 and 47 of the Ley Orgánica de Hidrocarburos.

     Special advantages

     Article 5. Petrodelta, S.A., shall deliver to the Republic as “ventajas especiales”: (a) a
participation, in the form of an additional royalty of three point thirty three percent (3.33%) of
the volumes of hydrocarbons produced from the Designated Areas and delivered to PDVSA Petróleo,
S.A. (or to any other of the companies referred to in Article 27 of the Ley Orgánica de
Hidrocarburos that PDVSA Petróleo, S.A. may designate), which shall be distributed as follows:
directly for the municipalities conforming the Designated Areas, two point twenty two percent
(2.22%), which shall replace the payments that will no longer be received by such municipalities on
account of municipal taxes, due to the termination of the Operating Agreement, and one point eleven
percent (1.11%) to create a fund to finance endogenous development projects according to the
guidelines of the National Development Plan in the respective region; and (b) an amount equal to
the difference, if any, between (i) fifty percent (50%) of the value of hydrocarbons produced in
the Designated Areas and delivered to PDVSA Petróleo, S.A. (or to any other of the companies
referred to in Article 27 of the Ley Orgánica de Hidrocarburos that PDVSA Petróleo, S.A. may
designate) during each calendar year (determined in accordance with the prices established for such
hydrocarbons in the contract for sale and purchase of hydrocarbons that will be entered into
between Petrodelta, S.A., and PDVSA Petróleo, S.A. or its affiliate), and (ii) the sum of all
payments made by Petrodelta, S.A., to the Republic, in respect of the activities carried out by the
Mixed Company during such calendar year on account of applicable royalties on the hydrocarbons
produced (including the additional royalty described in clause (a) above), income taxes, any other
tax or levy calculated based on revenues (whether gross or net), and the investments in endogenous
development projects of one percent (1%) of its profits before taxes required pursuant to Article
Nine below. The amount of the “ventaja especial” described in the preceding clause (b) above shall
be equal to zero (0) when the sum of the payments described in clause (b)(ii) is equal to or
greater than the amount calculated in accordance with clause (b)(i). For purposes of the
calculation indicated in (b)(ii) above, if royalty is taken in kind, then the value of such royalty
shall be equal to the amount that would have been payable as royalty if the same had been payable
in cash. The “ventaja especial” described in clause (b) shall be paid on April 20 of each year,
beginning on April 20, 2007, being it possible to use tax refund certificates of Petrodelta, S.A.,
for purposes of such payment, in which case such certificates shall be assigned in favor of the
Republic. On or before each payment date, Petrodelta, S.A., shall deliver to the Ministry of Energy
and Petroleum a written

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report setting forth the calculation of the payment obligation for such “ventaja especial.”
The reimbursement of any amount for income taxes that was taken into account in the calculation of
any payment of such “ventaja especial” and that had the effect of reducing the same, shall obligate
Petrodelta, S.A., to pay to the Republic the amount reimbursed to the extent of such reduction in
the payment of the respective “ventaja especial”, within thirty (30) consecutive days following the
reimbursement. In no event shall the Bolivarian Republic of Venezuela reimburse any amounts paid on
account of this “ventaja especial”, but any amount which in relation to any calendar year has been
paid by Petrodelta, S.A., in excess of what would have been applicable computing any due adjustment
within the parameters of calculation here established, may be deducted by Petrodelta, S.A., from
the payment of this “ventaja especial” in subsequent years.

     Authority to revoke of the executive

     Article 6. The National Executive may revoke the rights transferred through this Decree, as
well as any other rights that may have been transferred, such as the property right or other rights
on real or personal property of the Republic’s private domain, if Petrodelta, S.A., does not
fulfill the obligations set forth in the Ley Orgánica de Hidrocarburos, the Acuerdo of the National
Assembly and this Decree, in such a way as to prevent achieving the purpose for which such rights
were transferred, as provided in Article 24 of the law regulating the hydrocarbons activity.

     Property of the information collected

     Article 7. All the geological, geophysical and any other technical information related to the
primary activities carried out within the Designated Areas shall be the property of the Republic as
of the time in which it is obtained and Petrodelta, S.A., shall only have the right to use it in
order to carry out the transferred activities. If for any reason the right to perform primary
activities is extinguished, Petrodelta, S.A., shall deliver to the Ministry of Energy and Petroleum
the originals comprising the information.

     Conservation measures

     Article 8. Petrodelta, S.A., should plan and carry out all the steps necessary to restore the
Designated Areas and any other geographical area affected by the activities of Petrodelta, S.A, to
the condition it had on the date of this Decree. Similarly, unless otherwise instructed by the
Ministry of Energy and Petroleum and the Ministry of the Environment and the Natural Resources,
before completion of the period established in this Decree, Petrodelta, S.A., shall remove and
dispose of the contaminants resulting from the primary activities, in compliance with the
procedures and quality standards required by the el Ministry of the Environment and the Natural
Resources and, lacking them, by those generally accepted scientifically and technically and the
standards of the oil industry for such activities.

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     Social and Endogenous Development

     Article 9. Petrodelta, S.A., shall prepare and carry out an endogenous development policy
based on the principles of cultural and biological diversity preservation, the minimization of
adverse environmental impacts and the social responsibility expressed in the National Development
Plan. Moreover, based on the abovementioned policy, Petrodelta, S.A., shall prepare and implement
a social investment plan aimed at developing improvement programs, which shall be submitted to the
National Executive for approval. Petrodelta, S.A. shall, within any calendar year, invest in such
programs a sum equal to one per cent (1%) of its profits in the previous calendar year before taxes
in accordance with its duly audited financial statements, it being understood that, with regard to
the investment corresponding to the first calendar year, such sum shall be calculated based on the
profits that Petrodelta, S.A., expects to obtain during such period.

     Duty to maintain the facilities and reversion

     Article 10. Petrodelta, S.A., shall maintain in good condition the land lots and permanent
works, including the facilities, accessories and equipment that are an integral part of them, and
any other assets acquired for the performance of such activities, irrespective of their nature or
their acquisition title, which shall be delivered to the Republic free of liens and without any
indemnity upon extinguishment, for whatsoever reason, of the rights granted in order to guarantee
the possibility of continuing with the activities, if this were the case, or their cessation with
the less economic and environmental damage possible.

     No guarantee of exploitable substances or obligation to redress

     Article 11. The Republic does not guarantee the existence of substances within the Designated
Areas, nor does the Republic undertake its redress. The performance of the activities shall be at
full risk of those performing them with regard to the existence of such substances.

     Applicable jurisdiction

     Article 12. The conflicts and controversies arising from the non-compliance of the
conditions, guidelines, procedures and proceedings constituting the object of this Decree or
arising therefrom, shall be resolved in accordance with the legislation of the Republic and before
its jurisdictional bodies.

HUGO CHAVEZ FRIAS

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ANNEX G

ASSETS AND CONTRACTS TO BE

TRANSFERRED BY HARVEST VINCCLER AND HNR

FINANCE

 

 

ANNEX G

ASSETS AND CONTRACTS TO

BE TRANSFERRED BY HARVEST VINCCLER AND HNR FINANCE 

[Note: The list of assets and contracts of Harvest Vinccler and HNR Finance that will constitute
this Annex shall be determined in each case in accordance with Article 1.4(B) of the Conversion
Contract.]

 

 

ANNEX H

ASSETS TO BE

TRANSFERRED BY PPSA

 

 

ANNEX H

ASSETS TO BE TRANSFERRED BY PPSA

[Note: The list of assets that shall be transferred by PPSA that will constitute this Annex shall
be determined in each case by the Decree of the National Executive that will transfer them to the
MC.]

 

 

ANNEX I

BUSINESS PLAN

 

 

ANNEX I

BUSINESS PLAN

[Note: To be determined in accordance with Article 1.7 of the Conversion Contract.]

The following is the initial Business Plan, which may be modified in accordance with the provisions
of Article 1.7 of the Conversion Contract. In case of conflict between the Business Plan (or any
revision thereof) and the other provisions of the Conversion Contract or the Charter and By-laws of
the Mixed Company, the latter shall prevail.

 

 

ANNEX J

POLICIES AND PROCEDURES

OF THE MIXED COMPANY

 

 

ANNEX J

POLICIES AND PROCEDURES

OF THE MIXED COMPANY

     The Parties are still reviewing the specific policies and procedures to be followed by the
Mixed Company, which will be discussed in the first Shareholder Meetings. Pending the adoption of
such policies and procedures, the Mixed Company will follow PDVSA’s policies and procedures (a copy
of which has been sent to the Class B Shareholder) subject to adjustments in accordance with the
terms and conditions established in Article 1.9 of the Conversion Contract and the Charter and
By-laws of the Mixed Company.

In case of conflict between the policies and procedures adopted (or any adjustment thereof)
and the other provisions of the Conversion Contract or the Charter and By-laws of the Mixed
Company, the latter shall prevail.

 

 

ANNEX K

FORM OF CONTRACT FOR SALE AND PURCHASE

OF HYDROCARBONS

 

 

ANNEX K

FORM OF CONTRACT FOR SALE AND

PURCHASE OF HYDROCARBONS

between

PETRODELTA, S.A.

and

PDVSA PETRÓLEO, S.A.

                     , 2007

 

 

INDEX

	 	 	 	 	 
	 	 	Page No.
	WHEREAS
	 	 	1	 
	FIRST. PURPOSE
	 	 	2	 
	SECOND. QUANTITY AND QUALITY
	 	 	2	 
	THIRD. TITLE AND CUSTODY
	 	 	3	 
	FOURTH. CALCULATION OF PAYMENTS
	 	 	3	 
	FIFTH. INVOICES AND DATE OF PAYMENT
	 	 	3	 
	SIXTH. ADJUSTMENTS
	 	 	4	 
	SEVENTH. PENALTY INTEREST
	 	 	4	 
	EIGHTH. ASSIGNMENT
	 	 	4	 
	NINTH. FORCE MAJEURE
	 	 	4	 
	TENTH. LIMITATION OF LIABILITY
	 	 	5	 
	ELEVENTH. TERM
	 	 	5	 
	TWELFTH. REPRESENTATIONS OF THE PARTIES
	 	 	5	 
	THIRTEENTH. NOTICES
	 	 	6	 
	FOURTEENTH. AMENDMENTS AND WAIVERS
	 	 	6	 
	FIFTEENTH. APPLICABLE LAW AND JURISDICTION
	 	 	6	 
	SIXTEENTH. ENTIRE AGREEMENT
	 	 	7	 
	SEVENTEENTH. HEADINGS AND REFERENCES
	 	 	7	 
	EIGHTEENTH. LANGUAGE
	 	 	7	 
	NINETEENTH. COUNTERPARTS
	 	 	7	 

 

 

FORM OF CONTRACT FOR SALE AND PURCHASE

OF HYDROCARBONS

     This Contract for sale and purchase of natural hydrocarbons (the “Contract”) is entered into
on the ___, 2007, between Petrodelta, S.A. (the “Mixed Company”), a corporation established in
accordance with the laws of the Bolivarian Republic of Venezuela (the “Republic”), represented
herein by                                         , as one party, and PDVSA Petróleo, S.A. (“PPSA”), a corporation
established in accordance with the laws of the Republic, represented herein by                                         , as
the other party (hereinafter, the Mixed Company and PPSA shall be referred to collectively as the
“Parties” and individually as a “Party”).

WHEREAS

     The Mixed Company shall carry out activities of exploration, extraction, gathering,
transportation and initial storage of hydrocarbons (the “Primary Activities”) in the areas
designated by the Ministry of Energy and Petroleum (the “Ministry”) pursuant to Resolution No. 174,
published in the Official Gazette of the Republic No. 38.467, dated June 27, 2006 and its partial
amendments published in the Official Gazette of the Republic No. 38.497 dated August 10, 2006 and
in the Official Gazette of the Republic No. 38.757 dated August 29, 2007 (the “Designated Areas”),
in accordance with the Transfer Decree published in the Official Gazette of the Republic No.                     ,
dated                     , 2007, issued by the National Executive in accordance with the Ley Orgánica de
Hidrocarburos, published in the Official Gazette of the Republic No. 37.323 and its amendments (the
“Organic Hydrocarbons Law);

     In accordance with the Acuerdo of the National Assembly approving the formation of the Mixed
Company and the terms and conditions that will govern the conduct of the Primary Activities by the
Mixed Company, published in the Official Gazette of the Republic No. 38.430 on May 5, 2006 and
reprinted in the Official Gazette of the Republic N° 38.474 dated July 7, 2006, as a result of a
clerical error, and subsequently amended by the Acuerdo published in the Official Gazette of the
Republic N° 38.706 of June 15, 2007, the Mixed Company is obligated to sell all of the hydrocarbons
produced by it and not used in its operations in the Designated Areas (except for the hydrocarbons
corresponding to the payment of the royalty in kind, if applicable, and the associated natural gas
which PPSA has not accepted to receive) to PPSA or another entity owned exclusively by the State;
and

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     PPSA, in its character as a company exclusively owned by the State, presently receives, treats
and commercializes the hydrocarbons produced in the Designated Areas, and desires to continue to do
so.

NOW, THEREFORE, the Parties hereby agree as follows:

ARTICLES

FIRST

PURPOSE

     In accordance with the terms and conditions set forth in this Contract, the Mixed Company
agrees to sell and deliver to PPSA, and PPSA agrees to purchase and receive from the Mixed Company,
the crude oil and associated natural gas that the Mixed Company produces from the Designated Areas
and does not use in the conduct of its Primary Activities or for the payment of royalties that the
National Executive has decided to receive in kind (the “Hydrocarbons”).

SECOND

QUANTITY AND QUALITY

     Within the first twenty (20) calendar days (hereinafter “Days”) of each calendar month
(hereinafter “Month”), the Mixed Company shall inform PPSA of the volume of Hydrocarbons it
estimates to deliver to PPSA the following Month. The delivery points for the Hydrocarbons shall
be the fiscalization points established by the Ministry (the “Delivery Points”), and the conditions
of delivery, the volume and quality (API grades and sulfur content) of the Hydrocarbons actually
delivered, shall be determined in accordance with the royalty Resolution issued by the Ministry in
effect at the time of delivery. Each Party and each shareholder of the Mixed Company shall have
the right to request tests of the meters in place at the Delivery Points by an independent expert,
and to witness such tests and receive the test results.

THIRD

TITLE AND CUSTODY 

     The Mixed Company shall assume the risk of loss or contamination of the Hydrocarbons until the
receipt of such Hydrocarbons by PPSA at the Delivery Points, where the title and custody of the
Hydrocarbons shall be deemed transferred to PPSA. All costs incurred by PPSA at or downstream of
such Delivery Points, including, among others, costs of receiving, transportation, treatment,
processing and commercialization of the Hydrocarbons, shall be the exclusive responsibility of
PPSA.

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FOURTH

CALCULATION OF PAYMENTS 

     PPSA shall pay to the Mixed Company the amounts calculated in accordance with Annex A for the
volumes of Hydrocarbons delivered in accordance with this Contract in any Month, net of volumes
corresponding to royalty which the National Executive decides to receive in kind.

FIFTH

INVOICES AND DATE OF PAYMENT

     Within the first fifteen (15) Days of each Month, the Mixed Company shall send to PPSA an
invoice setting forth, in relation to the immediately preceding Month: (i) the volume of each type
of Hydrocarbons delivered to PPSA net of the volumes corresponding to royalty which the National
Executive decides to receive in kind; (ii) the detailed calculations of the payment in Bolívares
owed for the methane gas delivered and the payment in United States of America dollars owed for the
crude oil and natural gas liquids delivered, determined in accordance with Annex A; and (iii) the
total amounts that PPSA must pay to the Mixed Company for the Hydrocarbons delivered, net of the
volumes corresponding to royalties which the National Executive decides to receive in kind, in
accordance with this Contract during the prior Month. The payments owed in accordance with each
invoice shall be effected on the last Day of the second Month following the Month in which the
Hydrocarbons covered by such invoice were delivered. PPSA shall make payment of each invoice by
wire transfer, in United States of America dollars in the case of payment for crude oil and natural
gas liquids delivered, and in Bolivars in the case of payment for methane gas delivered, in
immediately available funds, without any set-off or discount, to the bank accounts that the Mixed
Company indicates in writing.

SIXTH

ADJUSTMENTS

     Upon reaching a definitive resolution of any adjustment resulting from errors in the
determination of the quantity or quality (API grades or sulfur content) of the delivered
Hydrocarbons, or in the calculation of the payments owed, the creditor Party resulting from the
adjustment shall send to the other Party an invoice with details of the cause and amount of the
adjustment and indicating the bank account for payment of the invoice, and the other Party shall,
within fifteen (15) Days following the receipt of such invoice, pay the adjustment by means of an
electronic transfer of United States of America dollars in immediately available funds to such
account.

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SEVENTH

PENALTY INTEREST

     For any period of delay in making payments owed in accordance with this Contract, the Party
that incurs such delay shall pay to the other Party interest on the amount owed and not paid, at an
annual rate equal to LIBOR plus four (4) percentage points. For the purposes of this Contract,
LIBOR means, for each consecutive period of thirty (30) Days, the London Inter-Bank Offering Rate
for a Month as indicated in the Telerate page 3750 at 11:00 a.m. (London Time) on the first Day of
the applicable period or, if commercial banks are not open for international operations in London
on such Day, the rate on the next Day on which commercial banks in London are open for
international operations.

EIGHTH

ASSIGNMENT

     Neither Party may assign or transfer this Contract or any of the rights or obligations
hereunder, without the prior written consent of the other Party. Notwithstanding the foregoing,
PPSA can assign its rights and obligations under this Contract to any other of the entities
referred to in Article 27 of the Organic Hydrocarbons Law, and the Mixed Company can assign its
rights for receipt of payment derived from the sale of Hydrocarbons under this Contract.

NINTH

FORCE MAJEURE

     Neither Party shall be liable to the other Party for losses or damages resulting from
interruptions, reductions or delays in the delivery or receipt of Hydrocarbons caused by events of
force majeure. The following, among others, shall be considered force majeure events: natural
disasters; wars, blockades, sabotage or other similar hostilities; labor conflicts; interruptions
in electricity service; accidents or other problems with equipment or installations for production,
processing, delivery, receipt or transportation of Hydrocarbons; and governmental acts. The Party
that believes that it has been affected by an event of force majeure shall notify the other Party
as soon as possible of the occurrence, duration and effect of the event in question, as well as its
termination. No event of force majeure shall excuse the failure to pay any amount due in
accordance with this Contract by either of the Parties.

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TENTH

LIMITATION OF LIABILITY

     Neither Party shall be responsible to the other for indirect or incidental damages of any kind
resulting from the breach of this Contract.

ELEVENTH

TERM

     The term of this Contract shall be from the date it is executed until the date on which the
right of the Mixed Company to carry out the Primary Activities in the Designated Areas expires or
is revoked in accordance with its terms and the Mixed Company has been paid for all of the
Hydrocarbons delivered in accordance with this Contract.

TWELFTH

REPRESENTATIONS OF THE PARTIES

     Each Party acknowledges that the other Party is entering into this Contract in its own name
and in its capacity as a legal entity empowered to contract on is own behalf. In addition, each
Party represents and warrants to the other Party that: (i) it has full legal authority to execute
and perform this Contract; (ii) it has complied with all corporate and other actions required for
it to execute and perform this Contract; (iii) it has obtained all governmental and other
authorizations required for the execution and performance of this Contract; (iv) this Contract
constitutes a legal, valid and binding obligation of such Party, enforceable against such Party in
accordance with its terms; and (v) neither it nor any of it affiliates, contractors or
subcontractors or their affiliates, and no employee, agent or representative of any of the
foregoing, directly or indirectly, has offered, promised, authorized, paid or delivered money or
anything of value to any official or employee of any government or public national or international
organization or political party, any official or employee thereof or any candidate for public
office to influence his or her action or decision, or to gain any undue advantage, in connection
with this Contract or any of the activities that are carried out in accordance with this Contract.

THIRTEENTH

NOTICES

     All notices and other communications between the Parties shall be in writing and shall be
deemed effective upon receipt by the intended recipient at the following addresses, or at any other
address timely indicated by either of the Parties in writing to the other:

-5-

 

To the Mixed Company:

To PPSA:

or at such other address as either Party may indicate to the other in writing, with at least ten
(10) Days’ prior notice, in accordance with the terms of this Article.

FOURTEENTH

AMENDMENTS AND WAIVERS

     This Contract may not be amended without the prior written consent of both Parties. Any
waiver of rights conferred by this Contract must be in writing and signed by the authorized
representatives of the Party that is waiving such rights.

FIFTEENTH

APPLICABLE LAW AND JURISDICTION

     This Contract shall be governed by and interpreted in accordance with the laws of the
Republic. Any dispute or controversy that may arise from or in connection with this Contract shall
be submitted exclusively to the courts of the Republic having jurisdiction. Before initiating any
litigation, the Parties shall in good faith and within the framework of the Organic Hydrocarbons
Law, explore the possibility of utilizing mechanisms to amicably resolve controversies of any
nature that my arise, including, for technical matters, the possible request of opinions of
independent experts appointed by mutual agreement. In case that it is decided to use such
mechanisms, there shall be a written record of the contents of such agreement.

SIXTEENTH

ENTIRE AGREEMENT

     This Contract represents the entire agreement of the Parties regarding the subject matter
hereof. The Annexes of this Contract are an integral part hereof.

-6-

 

SEVENTEENTH

HEADINGS AND REFERENCES

     The headings of the Articles of this Contract are included solely for convenience and shall
not be considered in the interpretation of this Contract. All references herein to Articles and
Annexes shall be considered references to Articles and Annexes of this Contract.

EIGHTEENTH

LANGUAGE

     This Contract is entered into in the Spanish language, which is the language by which it
should be interpreted. Any translation that is made shall not be considered for purposes of the
interpretation hereof.

NINETEENTH

COUNTERPARTS

     This Contract is executed in four counterparts, with one meaning and effect, each of which
shall be considered an original.

     This Contract has been executed in the City of Caracas, Bolivarian Republic of Venezuela, on
the ___ day of                     , 2007.

	 	 	 	 	 	 	 
	 	 	PETRODELTA, S. A.,	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 

	 	 

	 	 	 	 	 	 	 
	 	 	PDVSA PETRÓLEO, S.A.	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 

	 	 

-7-

 

ANNEX A

CALCULATION OF PAYMENTS 

Payments to the Mixed Company by PPSA for the volumes of Hydrocarbons delivered in any Month under
this Contract, net of any volume corresponding to royalties that the National Executive may decide
to receive in kind, shall be calculated in accordance with the formulas set forth below in numerals
(1) and (2) of this Annex A.

(1) Calculation of Payment for Crude Oil Delivered.

PPC = VPC * (PRG * FPG + PRC * FPC + PRE * FPE + PRA * FPA)

Where:

	 	 	 	 	 
	PPC

	 	=
	 	Payment for crude oil delivered by the Mixed Company to PPSA during the Month in
question (US$).
	 
	 	 	 	 
	VPC

	 	=
	 	Volume of crude oil delivered by the Mixed Company to PPSA during the Month in
question, net of any volume corresponding to royalties that the National
Executive decides to receive in kind (barrels).
	 
	 	 	 	 
	PRG

	 	=
	 	Reference price for Merey 16 crude oil destined for the Gulf of Mexico during
the Month in question (US$/barrel), determined pursuant to the following
formula:
	 
	 	 	 	 
	 

	 	 	 	PRG = 0.60 * (WTS + FO3) - 0.20 * WTI + AGA - ACC + K
	 
	 	 	 	 
	 

	 	 	 	Where:

	 	 	 	 	 	 	 
	 

	 	WTS
	 	=
	 	Average of the daily high and low spot prices during the
Month in question of West Texas Sour crude oil delivered in Midland, Texas, as
reported in Platts Oilgram Price Report (US$/barrel).
	 
	 	 	 	 	 	 
	 

	 	FO3
	 	=
	 	Average of the daily high and low spot prices during the
Month in question of fuel oil with a 3% sulfur content in the Gulf of Mexico
(No. 6 Fuel Oil, 3% S, Waterborne, USGC), as reported in Platts Oilgram Price
Report (US$/TM), expressed in US$/Barrel using a conversion factor of 6,35
barrels/TM.
	 
	 	 	 	 	 	 
	 

	 	WTI
	 	=
	 	Average of the daily high and low spot prices during the
Month in question of West Texas Intermediate crude oil

 

 

	 	 	 	 	 	 	 
	 

	 	 	 	 	 	delivered in Cushing, Oklahoma, as reported in Platts Oilgram Price
Report (US$/barrel).
	 
	 	 	 	 	 	 
	 

	 	AGA
	 	=
	 	Sum of the adjustments for variations of gravity and sulfur
content of the crude oil delivered from the standard of Merey 16 crude oil
(16.5o API; 2.5% sulfur) during the Month in question, which values shall be
published monthly by the Ministry, for all crude oils destined to the Gulf of
Mexico for which Merey 16 is the reference crude oil (US$/barrel). These
adjustments are intended to reflect the values of such variations in gravity
and sulfur content in the Gulf of Mexico during the Month in question.
	 
	 	 	 	 	 	 
	 

	 	ACC
	 	=
	 	Adjustments for commercialization costs, during the Month in
question, consisting of the sum of (a) US$0.00125 per barrel and kilometer,
indexed in accordance with the United States of America consumer price index
from April 1st, 2006 and multiplied by the distance in kilometers
between the delivery point and the shipping port, plus (b) an amount equivalent
to the fee set forth by the Institute of Channeling for the use of channeling
works in Lake Maracaibo and in the Gulf of Venezuela during the applicable
Month, which on the date of this Contract is equivalent to US$0,1972 per
transported barrel, plus (c) US$______ per barrel, indexed in accordance with the
United States of America consumer price index from April 1st, 2006,
on account of other handling costs of crude oil between delivery and shipping,
plus (d) US$0.05 per barrel, indexed in accordance with the United States of
America consumer price index from April 1st, 2006, on account of
commercialization fees, plus (e) any other tax or duty applicable to the export
of Merey 16 crude oil, denominated in US$  per barrel.
	 
	 	 	 	 	 	 
	 

	 	K =
	 	 	 	Constant for Merey 16 crude oil in the Gulf of Mexico during
the Month in question, as published monthly by the Ministry, for all crude oils
destined to the Gulf of Mexico for which Merey 16 is the reference crude oil
(US$/barrel). This constant is intended to neutralize any distortions that may
occur given the reference prices for Merey 16 crude oil and the prevailing
market conditions for such crude oil in the Gulf of Mexico during the Month in
question (competition, refining and other factors that may affect demand and
supply).

	 	 	 	 	 
	FPG

	 	=
	 	Weighting factor for the reference price of Merey 16 crude oil destined to the Gulf of
Mexico, which will be equal to 0.7097 for the year 2006. In January 2007, and in January of
each year thereafter, the Ministry will publish the FPG for such year based on the proportion
of exports of Merey

-2-

 

	 	 	 	 	 
	 

	 	 	 	16 crude oil and related crude oils to the Gulf of Mexico during the prior calendar year to the total exports of Merey 16 crude oil
and related crude oils during the prior calendar year, expressed in decimal form.
	 
	 	 	 	 
	PRC

	 	=
	 	Price reference for Merey 16 crude oil destined to the Caribbean during the Month in question, determined
in accordance with the formula for the calculation of the reference price for the Merey 16 crude oil
destined to the Gulf of Mexico (PRG), except for the constant K, which shall be published monthly by the
Ministry for the Merey 16 crude oil destined to the Caribbean, and which will reflect the difference in
transportation costs as between the Gulf of Mexico (Houston) and the Caribbean (Curacao) (US$/barrel).
	 
	 	 	 	 
	FPC

	 	=
	 	Weighting factor for the reference price of Merey 16 crude oil destined to the Caribbean, which shall be
equal to 0.2345 during 2006. In January 2007, and in January of each year thereafter, the Ministry will
publish the FPC for such year based on its estimate of the proportion of exports of Merey 16 crude oil and
related crude oils to the Caribbean during the prior calendar year to the total exports of Merey 16 crude
oil and related crude oils during the prior calendar year, expressed in decimal form.
	 
	 	 	 	 
	PRE

	 	=
	 	Reference price for Merey 16 crude oil destined to Europe during the Month in question (US$/barrel),
determined in accordance with the following formula.
	 
	 	 	 	 
	 

	 	 	 	PRE = 0.75 * (BRD + FO3.5) – 0.50 * FRT + AGA - ACC + K
	 
	 	 	 	 
	 

	 	 	 	Where:

	 	 	 	 	 	 	 
	 

	 	BRD
	 	=
	 	Average of the daily high and low spot prices during the
Month in question of the North Sea Dated Brent crude oil, delivered in Sullom
Voe, U.K., as reported in Platts Oilgram Price Report (US$/barrel).
	 
	 	 	 	 	 	 
	 

	 	FO3.5
	 	=
	 	Average of the daily high and low spot prices during the
Month in question of fuel oil CIF with a 3.5% sulfur content delivered in
Rotterdam (Fuel Oil, 3.5% S, CIF ARA), as reported in Platts Oilgram Price
Report (US$/TM), expressed in US$/Barrel using a conversion factor of 6,39
barrels/TM.
	 
	 	 	 	 	 	 
	 

	 	FRT
	 	=
	 	Average of the daily high and low spot prices during the
Month in question of North Sea Forties crude oil delivered in Hound Point,
U.K., as reported in Platts Oilgram Price Report (US$/barrel).
	 
	 	 	 	 	 	 
	 

	 	AGA
	 	=
	 	Sum of the adjustments for variations of gravity and sulfur
content of the crude oil delivered from the standard of Merey

-3-

 

	 	 	 	 	 	 	 
	 

	 	 	 	 	 	16 crude oil (16.5o API; 2.5% sulfur) during the Month in question,
which values shall be published monthly by the Ministry, for all
crude oils destined to Europe for which Merey 16 is the reference
crude oil (US$/barrel). These adjustments are intended to reflect the
values of such variations in gravity and sulfur content in Europe
during the Month in question.
	 
	 	 	 	 	 	 
	 

	 	ACC
	 	=
	 	Shall have the same meaning as provided above in the
definition of the term ACC included in the formula for the price calculation of
the Merey 16 crude oil destined to the Gulf of Mexico (PRG).
	 
	 	 	 	 	 	 
	 

	 	K
	 	=
	 	The constant for the Merey 16 crude oil destined to Europe
during the Month in question, as published monthly by the Ministry, for all
crude oils destined to Europe for which Merey 16 is the reference crude oil
(US$/barrel). This constant is intended to neutralize any possible distortions
that may occur given the reference prices for Merey 16 crude oil and the
prevailing market conditions for such crude oil in Europe during the Month in
question (competition, refining and other factors that may affect demand and
supply).

	 	 	 	 	 
	FPE

	 	=
	 	Weighting factor for the reference price of Merey 16 crude oil
destined to Europe, which will be equal to 0.0250 during 2006.
In January 2007, and in January of each year thereafter, the
Ministry will publish the FPE for such year based on the
proportion of exports of Merey 16 crude oil and related crude
oils to Europe during the prior calendar year to the total
exports of Merey 16 crude oil and related crude oils for the
prior calendar year, expressed in decimal form.
	 
	 	 	 	 
	PRA

	 	=
	 	Reference price for the Merey 16 crude oil destined to Asia
during the Month in question (US$/barrel), determined in
accordance with the following formula:
	 
	 	 	 	 
	 

	 	 	 	PRA = 0.30 * DUB + 0.70 * FO2 + AGA - ACC + K
	 
	 	 	 	 
	 

	 	 	 	Where:

	 	 	 	 	 	 	 	 	 
	 

	 	DUB
	 	=
	 	Average of the daily high and low spot prices during the
Month in question for Dubai crude oil delivered in Fateh, Dubai, as reported in
Platts Oilgram Price Report (US$/barrel).
	 
	 	 	 	 	 	 	 	 
	 

	 	 	,2	 	 	=
	 	Average of the daily high and low spot prices during the
Month in question for fuel oil 180 CST with a 2% sulfur

-4-

 

	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	content delivered in Singapore (Fuel Oil, 2% S, 180. Singapore), as
reported in Platts Oilgram Price Report (US$/TM), expressed in
US$/Barrel using a conversion factor of 6,5 barrels/TM.
	 
	 	 	 	 	 	 	 	 
	 

	 	AGA
	 	=
	 	Sum of the adjustments for variations of gravity and sulfur
content of the crude oil delivered from the standard of Merey 16 crude oil
(16.5o API; 2.5% sulfur) during the Month in question, which values shall be
published monthly by the Ministry, for all crude oils destined to Asia for
which Merey 16 is the reference crude oil (US$/barrel). These adjustments are
intended to reflect the values of such variations in gravity and sulfur content
in Asia during the Month in question.
	 
	 	 	 	 	 	 	 	 
	 

	 	ACC
	 	=
	 	Shall have the same meaning as provided above in the
definition of the term ACC included in the formula for the price calculation of
the Merey 16 crude oil destined to the Gulf of Mexico (PRG).
	 
	 	 	 	 	 	 	 	 
	 

	 	K	 	 	 	=
	 	The constant for the Merey 16 crude oil destined to Asia
during the Month in question, as published monthly by the Ministry, for all
crude oils destined to Asia for which Merey 16 is the reference crude oil
(US$/barrel). This constant is intended to neutralize any distortions that may
occur given the reference prices for Merey 16 crude oil and the prevailing
market conditions for such crude oil in Asia during the Month in question
(competition, refining and other factors that may affect demand and supply).

	 	 	 	 	 
	FPA

	 	=
	 	Weighting factor for the reference price of Merey 16 crude oil destined to Asia, which will
be equal to 0.0308 during 2006. In January of 2007, and in January of each year thereafter,
the Ministry will publish the FPA for such year based on the proportion of exports of Merey 16
crude oil and related crude oils to Asia during the prior calendar year to the total volume of
exports of Merey 16 crude oil and related crude oils during the prior calendar year, expressed
in decimal form.

In the event that one of the Parties or any shareholder of the Mixed Company, believes that due to
changes in the markets or in the application of the adjustment factors published by the Ministry,
any formula included in this Annex A no longer accurately reflects the export value to the market
in question of the crude oil delivered by the Mixed Company to PPSA, such Party or shareholder may
request a prospective adjustment to such formula. Once this request has been made, the Parties and
shareholders will meet as soon as possible to discuss in good faith the necessity of the requested
prospective adjustment and, if appropriate, the specific amount of such adjustment.

-5-

 

The intention of the Parties is that the formulas contained in this Annex A should adequately
reflect the long term export value to the relevant markets of the crude oil delivered, in the
understanding that no request for adjustment may be based on disagreements regarding such value in
the short term, or the use of Merey 16 as the reference crude oil.

In case that the Platts Oilgram Price Report ceases to be published or is otherwise unavailable,
the Parties will agree on an alternate source of information for the reference prices reported
therein. If any such reference price is not available in any alternate source of information, the
Parties will select a new reference price.

(2) Calculation of payment for Associated Natural Gas Delivered

PM = (PG / 0.6667) * TC * VG

Where:

	 	 	 	 	 
	PM

	 	=
	 	Payment for the associated natural gas delivered by the Mixed Company
to PPSA during the Month in question (Bs.)
	 
	 	 	 	 
	PG

	 	=
	 	1.03 US$/MPCE (one United States dollar and three cents per each
thousand standard cubic feet)
	 
	 	 	 	 
	TC

	 	=
	 	Value of the United States dollar expressed in Bolívares, in
accordance to the official exchange rate published by the Central
Bank of Venezuela for the last Day of the Month in question.
	 
	 	 	 	 
	VG

	 	=
	 	Volume of associated natural gas delivered by the Mixed Company to
PPSA during the Month in question, net of the volume corresponding to
any royalty that the National Executive decides should be paid in
kind (MPCE).

-6-exv10w18

 

Exhibit 10.18

USA MOBILITY, INC.

EQUITY INCENTIVE PLAN

RESTRICTED STOCK AGREEMENT

          THIS RESTRICTED STOCK AGREEMENT (the “Agreement”), dated effective as of [              ] (the
“Grant Date”), between USA Mobility, Inc., a Delaware corporation (the “Company”),
and  (the “Participant”).

WITNESSETH:

          WHEREAS, the Participant is a non-executive director of the Company; and

          WHEREAS, all capitalized terms not defined in this Agreement shall have the meanings given
such terms in the USA Mobility, Inc. Equity Incentive Plan (the “Plan”).

          NOW, THEREFORE, in consideration of the various covenants and agreements herein contained, and
intending to be legally bound hereby, the parties hereto agree as follows:

1. Eligibility, Grant of and Vesting of Restricted Stock

     (a) The Participant shall be eligible to participate in the Company’s Plan on the terms and
subject to the conditions contained herein and in the Plan.

     (b) The Company hereby grants to the Participant ___[Number] shares of Restricted
Stock, having a fair market value of $10,000 [$12,500 for the Audit Committee Chairman] on the
Grant Date subject to the terms, restrictions and other conditions set forth in this Agreement and
the Plan. The fair market value of the Restricted Stock is based upon the closing price of a Share
as reported by Bloomberg Capital Markets on the NASDAQ® Global Market on the last day of trading of
the quarter immediately preceding the Grant Date.

     (c) The shares of Restricted Stock granted under this Agreement are subject to forfeiture
until vested, and such Shares shall vest on the earlier of a Change in Control or the first
anniversary of the Grant Date, provided that the Director maintains continuous service on the
Company’s Board of Directors from the Grant Date through the vesting date.

     (d) As the Company declares cash dividends or distributions on the Shares, the per share
amount of each dividend or distribution shall be set aside and held by the Company with respect to
each outstanding share of Restricted Stock granted to a Director, and shall be paid over to the
Director when the shares of Restricted Stock vest and are no longer subject to forfeiture, subject
to applicable withholding.

     (e) At the election of Participant, the Company shall cause to be forfeited Shares of
Restricted Stock upon the vesting date for purposes of withholding and paying on behalf of
Participant such income taxes as he may owe arising from the vesting of such Shares, based upon the
closing per share price of a Share on the date of vesting as reported by Bloomberg Capital Markets
on the
NASDAQ® Global Market.

 

 

     (f) The Company shall cause the Shares to be issued and a stock certificate or certificates
representing the Shares to be registered in the name of the Participant or held in book entry form
promptly upon execution of this Agreement. If a stock certificate or certificates is issued, it
shall be delivered to and held in custody by the Company until such shares are forfeited, or vest
and are distributed to the Participant or Participant’s estate, in accordance with this Agreement.

2. Rights and Responsibility of Shareholder

     (a) Rights As A Stockholder. Except as otherwise set forth in this Agreement, the
Participant shall have all rights and privileges of a stockholder of the Company with respect to
the Shares, including voting rights and the right to be credited on an unvested basis with
dividends and distributions paid with respect to such Shares as provided in Section 1(d) herein.

     (b) Spendthift Clause. No Shares or any interest or right therein or part thereof,
prior to vesting in accordance with the terms hereof, shall be liable for the debts, contracts or
engagements of the Participant or his or her successors in interest or shall be subject to
disposition by transfer, alienation, anticipation, pledge, hypothecation, encumbrance, assignment
or any other means, whether such disposition be voluntary or involuntary or by operation of law by
judgment, levy, attachment, garnishment or any other legal or equitable proceedings (including
bankruptcy), any attempted disposition thereof shall be null and void and of no effect; provided
however, that this subsection shall not prevent transfers by will or by the applicable laws of
descent and distribution.

3. Tax Withholding. 

     The Company shall notify the Participant of the amount of tax which must be withheld by the
Company under all applicable federal, state and local tax laws. The Participant agrees to make
arrangements with the Company to (a) remit a cash payment of the required amount to the Company or
(b) authorize the Company to withhold (repurchase) a portion of the shares, equivalent to the
estimated tax liability as provided in section 1(e) herein.

4. Conditions to Issuance of Stock Certificates.

     The Company shall not be required to issue or deliver any certificate or certificates for
shares of stock pursuant to this Agreement prior to the payment by the Participant (or prior to
arrangements made by the Participant to pay which shall be satisfactory to the Company) all amounts
which, under federal, state or local tax law, the Company (or other employer corporation) is
required to withhold upon issuance of the Shares and/or the lapse or removal of any of the
restrictions.

5. Adjustments. 

     If the outstanding shares of the Stock of the Company are increased, decreased, changed into
or exchanged for a different number of kind of shares or securities of the Company through (a) a
distribution or payment of a dividend on the Stock in shares of Stock, (b) subdivision of
reclassification, in a stock split or similar transaction, of the

 

 

outstanding shares of Stock into a greater number of shares, (c) combination or
reclassification of, in a reverse stock split or similar transaction, the outstanding shares of
Stock into a lesser number of shares, or (d) issuance of any shares of capital stock by
reclassification of the Stock, then an appropriate and proportionate adjustment shall be made in
the number and kind of Shares. Adjustments made pursuant to this Section 5 shall be made by the
Committee, whose determination as to what adjustments shall be made, and the extent thereof, shall
be final, binding and conclusive.

6. Miscellaneous.

     (a) This Agreement may be executed in one or more counterparts, all of which taken together
will constitute one and the same instrument.

     (b) The terms of this Agreement may only be amended, modified or waived by a written agreement
executed by both of the parties hereto.

     (c) The validity, performance, construction and effect of this Agreement shall be governed by
the laws of the State of Delaware, without regard to conflict of law principles.

     (d) This Agreement and the Plan constitutes the entire agreement between the parties hereto
with respect to the transactions contemplated herein.

     (e) Except as otherwise herein provided, this Agreement shall be binding upon and shall inure
to the benefit of the Company, its successors and assigns, and of the Participant and the
Participant’s personal representatives.

7. Change in Control

     “Change in Control” for purposes of this Agreement means (i) the dissolution or
liquidation of the Company; or (ii) (A) a merger, consolidation or reorganization of the Company
with one or more other corporations or entities in which the Company is not the surviving
corporation, (B) a sale of substantially all of the assets of the Company to another corporation,
person or entity, or (C) any transaction (including, without limitation, a merger or reorganization
in which the Company is the surviving corporation) approved by the Board, that upon the closing or
completion of any transaction referred to in (A), (B), or (C) results in any person or entity
(other than persons who are holders of stock of the Company immediately prior to such transaction
and other than an affiliate of the Company as defined in Rule 144(a)(1) under the Securities Act)
owning eighty percent (80%) or more of the combined voting power of all classes of stock of the
Company.

 

 

     IN WITNESS WHEREOF, the parties have executed this Agreement as of the Grant Date.

	 	 	 
	 

	 	USA MOBILITY, INC.
	 
	 	 
	 

	 	By:                                         
	 

	 	Vincent D. Kelly
	 

	 	President and Chief Executive Officer
	 
	 	 
	 

	 	PARTICIPANT
	 
	 	 
	 

	 	Signature:                                         
	 
	 	 
	 

	 	Print Name:

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