UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-SB/A
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS
(UNDER SECTION 12(B) OR (G) OF THE SECURITIES EXCHANGE ACT OF 1934)
INDUSTRIAL DATA SYSTEMS CORPORATION
(Name of Small Business Issuer in its Charter)
NEVADA 76-0157248
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
600 CENTURY PLAZA DRIVE, BUILDING 140
HOUSTON, TEXAS 77073-6016
(Address of principal executive offices) (Zip Code)
Issuer's Telephone Number: (281) 821-3200
SECURITIES TO BE REGISTERED UNDER SECTION 12(B) OF THE ACT:
Title of each class Name of each exchange on which
to be so registered each class is to be registered
None None
SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
COMMON STOCK:
75,000,000 $.001 PAR VALUE
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PART I
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE
READ IN CONNECTION WITH THE MORE DETAILED INFORMATION CONTAINED HEREIN AND IN
THE COMPANY'S CONSOLIDATED FINANCIAL STATEMENTS, AND THE NOTES THERETO, INCLUDED
ELSEWHERE IN THIS REGISTRATION STATEMENT. REFERENCES TO "THERMAL" REFER TO THE
RECENT ACQUISITION OF THERMAIRE, INC., DBA THERMAL CORP. THE HISTORICAL AND PRO
FORMA FINANCIAL STATEMENTS RELATED TO THE THERMAL ACQUISITION FOR THE YEAR ENDED
DECEMBER 31, 1996, ARE INCLUDED IN THIS REGISTRATION STATEMENT ON FORM 10-SB/A.
REFERENCES TO THE "COMPANY" OR TO "IDS" REFER TO INDUSTRIAL DATA SYSTEMS
CORPORATION.
BUSINESS
GENERAL
Industrial Data Systems Corporation ("IDS") was incorporated in the
State of Nevada in June 1994. The Company's principal executive offices are
located at 600 Century Plaza Drive, Building 140, Houston, Texas 77073. The
Company's telephone number is (281) 821-3200.
IDS has never filed for protection under the bankruptcy protection act,
nor has the Company or any of its assets been in receivership or any other
similar proceedings.
The Company's revenue is derived from two operating segments: the
Industrial Products Division ("IPD") and the IDS Engineering Division ("IED").
The IPD is a provider of specialized microcomputer products that are targeted to
be sold to the industrial market. The IPD manufactures and sells industrial and
portable computers, microcomputers and color CRT monitors under the Company's
trade name, which include the SafeCase Series 3000, 4000, 5000 and 7000. The
microcomputer and peripheral products are designed to be used in industrial
applications, which include manufacturing, process control, discrete
manufacturing, data acquisition and man-machine interfaces. The computers and
monitors that are manufactured by the Company are different from conventional,
commercial desktop and portable computers by its architecture, packaging,
functionality, integration services and value-added software. The computer
products manufactured by the IPD are "open systems" that support "off-the-shelf"
software operated under DOS or Windows. The Company also derives revenue from
the integration and resale of industrial computer products manufactured by other
companies.
The IPD positions itself to provide engineered industrial personal
computers. The IPD adds value to standard computer components by packaging these
components in enclosures which withstand tough environmental conditions and/or
enclosures that have a special form factor. The Company also adds value by
integrating and technically supporting advanced microcomputer systems.
The IDS Engineering Division ("IED") offers engineering services to the
pipeline division of major integrated oil companies. These services are
performed on facilities that include cross-country pipelines, pipeline pump
stations, compressor stations, metering facilities, underground storage
facilities, tank storage facilities and product loading terminals. The
management team of the IED has the capability of developing a project from the
initial planning stages through detailed design and construction management. The
services provided include project scoping, cost estimating, engineering design,
material procurement, mechanical fabrication, in addition to project and
construction management.
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The IED has ten blanket service contracts currently in place to provide
services on a time and materials reimbursable basis. The IED also performs
services for its clients on a turnkey lump sum basis. The Company has a long
standing relationship with Exxon Pipeline Company, Arco Pipeline Company,
Marathon Pipeline Company and Texas Eastern Products Pipeline Company. New
business relationships with other major oil companies are developed through
in-house personnel.
ACQUISITION OF INDUSTRIAL DATA SYSTEMS, INC.
On August 1, 1994, the Company entered into an agreement to purchase all
of the issued and outstanding shares of Industrial Data Systems, Inc., a Texas
corporation, in a tax-free exchange of Common Stock. The Company issued
9,500,000 shares of its Common Stock to William A. Coskey and Hulda L. Coskey,
with each individual beneficially holding 4,762,800, and 4,750,000,
respectively. William A. Coskey and Hulda L. Coskey beneficially held all of the
issued and outstanding shares of the Common Stock of Industrial Data Systems,
Inc., a Texas corporation, at the time of the acquisition. William A. Coskey
held the positions of Chairman of the Board, Chief Executive Officer and
President of Industrial Data Systems, Inc., and Hulda L. Coskey held the
positions of Director, Vice President and Secretary/Treasurer of Industrial Data
Systems, Inc. The executive officers, management team and beneficial ownership
of securities held by the executive officers were the same in both companies at
the time of the transaction.
ACQUISITION OF THERMAIRE, INC.
The Company entered into an Agreement with the owners of Thermaire, Inc.
on August 15, 1995 to acquire Thermaire, Inc. in a contingent purchase
transaction. The Company issued 600,000 shares of Common Stock which are
currently held in an escrow account pending completion of the acquisition by the
Company exercising its option to pay $600,000 and obtain a release of the
shares. The Company's option to acquire Thermaire, Inc. will expire on February
15, 1997. In connection with this transaction, the Company has entered into an
agreement to purchase the facilities of Thermaire, Inc., subject to the
completion of the contingent purchase transaction for cash consideration of
$500,000, on or before February 15, 1997. The Company exercised its option to
purchase Thermaire, Inc., effective as of December 31, 1996, with the delivery
of all documentation and funds to occur and be fully exchanged on February 15,
1997.
The Company acquired Thermaire, Inc., a Texas corporation, doing
business as Thermal Corp. ("Thermal") on February 15, 1997. Mr. Joe
Hollingsworth, the former President and owner, acquired the industrial air
handling division assets of a predecessor business known as Thermal Engineering
("Old Thermaire") in 1972, and operated the Company until 1990, at which time
Old Thermaire was sold to 20th Century Holding Company, as a wholly owned
subsidiary. 20th Century Holding Company encountered financial difficulties and
filed for protection under the bankruptcy code in July, 1992. The assets of Old
Thermaire were placed in receivership and Mr. Hollingsworth reaquired these
assets in October, 1992, with the intention of continuing the company in its
present form. Thermal, was incorporated on November 17, 1992. Throughout its
history, Thermal has built a prominent reputation in the commercial and
industrial air handling industry for its quality products which are distributed
throughout the United States.
Thermal owns and operates a metal fabrication facility in Houston,
Texas. The Company's IED intends to use this facility to secure turn-key
engineering contracts which require the delivery of certain manufactured
components. This facility can also provide the IPD with an alternative source of
supply
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for its customized metal enclosures. The Company believes that the benefits
derived from the utilization of the metal fabrication facility by the IED and
IPD, will have a beneficial impact on the financial condition of the Company.
As of April 30, 1997, Thermal employed approximately 45 employees.
Thermal owns and occupies a 37,735 square foot facility on approximately 4.5
acres which consists of approximately 2,500 square feet of office space and
35,200 square feet of manufacturing area located in Houston, Texas.
Thermal's product lines consist of a variety of cooling, heating and
ventilating equipment. The wide range of sizes and models in each product line
coupled with Thermal's manufacturing flexibility provides vast freedom in air
handling equipment choice. Thermal's quality air handling products include
Central Plant Air Conditioners, Multizone Air Conditioners, High Pressure Air
Conditioners, and Air Cooled Condensers. Thermal also manufactures Fan Coil
Units, Cooling and Heating Coils, and Roof Top Air Handlers.
Thermal's product lines are sold and distributed through an extensive
network of national sales representatives made up of approximately 30
representative organizations in the US. Many sales leads have been obtained
through visibility gained at industry trade shows around the country, the most
prominent of which is the annual ASHRAE show. Thermal's ability to customize
their standard product line to meet non-standard applications allows them to
command a premium pricing structure for their air handling products. Thermal
obtains a large percentage of their sales based on their ability to manufacture
and deliver the air handling products in an expedient manner. Thermal's products
are sold nationwide to Fortune 500 companies. A significant reduction in orders
from any of the Company's largest customers could have a material adverse effect
on the Company's financial condition and results of operations.
Major competitors of Thermal in the commercial segment are Trane,
Carrier, and York. Those competitors who have a strategy similar to Thermal are
Temptrol, Pace, and LaSalle Manufacturing. Thermal's maket share is estimated to
be less than 1% in the United States. We believe that this is a unique market
with few competitors. The Company plans to expand its share of the market
through increased marketing efforts and by replacing dormant sales
representatives with those with higher profile in existing territories. We plan
to offer units which have more value added features which include integrated
electronic control systems
The most prominent trend in the air handling industry is the movement
toward double wall design of the air handling units as opposed to single wall
design. A single wall unit has one outer wall with interior insulation which is
in constant contact with the air flow. In a double wall unit, the insulation is
enclosed between two layers of metal, both interior and exterior, thus
preventing the air flow to come in contact with the insulation. This method of
design relieves environmental concerns about the quality of air provided to
inhabitants of commercial buildings. More than 80% of Thermal's products
incorporate this double wall design feature. See "Acquisitions - Acquisition of
Thermaire, Inc. dba Thermal Corp." for additional information relating to this
acquisition.
INTRODUCTION OF SAFECASE SERIES 400
On August 14, 1996, the Company announced the introduction of the
SafeCase Series 400 computer as its latest entry into the industrial portable
computer market. This computer is the industrial equivalent of a contemporary
commercial grade notebook computer. The size of the computer is 9" wide by 12"
in length and 5" in height and provides the same basic footprint as
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commercial grade laptop computers, and complements the performance, durability
and reliability of the Company's other industrial computers. The SafeCase Series
400 is designed to be utilized in an environment with mild and severe weather
conditions, from light rain to gusting winds and temperatures ranging from nine
to 50 degrees Celsius, and is constructed to withstand shock at 10G and
vibration loads of 0.5mm within a five to 100 Hz range. The SafeCase Series 400
is a fully featured portable computer with an introduction price of $4,695. The
Company has experienced minor delays in the product testing phase of the
SafeCase 400, and initial deliveries of this computer are now scheduled to
commence during the third quarter of 1997.
The Company plans to increase sales through the introduction of
additional computer products in 1997, and it is in the process of researching
complementary computer products which are suitable to the industrial computer
market.
INDUSTRY OVERVIEW
The market for computer products and services has experienced
significant growth in recent years and the use of such products and services
within organizations has been impacted by several concurrent trends. The
introduction of LANs (local area networks) and WANs (wide area networks) has
allowed organizations to supplement or replace expensive, centralized mainframe
computer systems with more flexible and affordable PC-based client/server
platforms. The emergence of widely accepted industry standards for hardware and
software has increased the acceptance of open architecture LANs and WANs which
can and frequently do contain products from numerous manufacturers and
suppliers. Industrial personal computers and workstations are displacing other
controllers in a growing number of applications. Suppliers of office grade
(white box) personal computers have a price advantage. However, the necessity of
"hardened" units for difficult industrial environments ensures growth in the
sales of industrial personal computers and workstations.
The worldwide industrial personal computer and workstation industry is
one that predominantly services OEM and systems integrator applications. Growth
is expected to be slightly higher for OEM and systems integrator applications
than for end-user applications. Quality, reliability, shock resistance and speed
of operation are key factors of significance for the user. The ability of the
user to use the industrial personal computer in rugged environments, such as
harsh office, light industrial and heavy industrial applications is also
essential.
Users have needs and expectations that will affect product designs in
the industrial computer market. The type of backplane that is used, is of
critical importance as it affects ruggedness, expandability and price. The
supply side of the market is moving in diverse directions depending on price and
performance. High-end industrial personal computer and workstation vendors are
shifting more to active backplanes in order to lower prices, while low-end
vendors are continuing to use predominantly passive backplanes to meet user
demands for expansion and ease of servicing.
The industrial personal computer market is following the desktop market
in terms of bus architectures with industrial modifications. The ISA (Industry
Standard Architecture) bus will remain the industry standard for primary buses,
and will be integrated in hybrid form with PCI (Peripheral Component
Interconnect) in a large percentage of shipments. The average number of board
expansion slots is expected to increase over the next five years. The number of
PCMCIA slots is expected to remain the same, but more industrial PCI computers
and workstations will have these features. The industrial personal computer and
workstation market is moving heavily in the direction of Pentium, which will be
followed by P-6, P-7 and Power PC microprocessors.
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The most popular enclosure type for industrial personal computers and
workstations is rack mount. Panel mount is the second most popular enclosure for
light and heavy industrial conditions, and third most popular for harsh office
conditions. Bench top, desktop and tabletop is the second most popular for harsh
office, and the third most popular enclosure type for light and heavy industrial
environments. Relative use of these enclosures are expected to shift only
slightly over the next five years, as are those of lesser used pedestal mounts,
hand held, notebooks and luggable portables.
Distribution channels for computer products changed significantly
commencing in the early 1990's. During that period, many manufacturers of
computers began to scale back their sales forces and, in order to ensure the
continued wide distribution of their products, started to offer their products
to wholesale computer distributors which previously had sold only software and
peripheral equipment. In addition, manufacturers also began allowing resellers
to purchase products from more than one distributor, a practice known as "open
sourcing". Expanding computer sales to distributors and allowing open sourcing
intensified price competition among suppliers.
Rapid technological improvements in computer hardware and the
introduction of new software operating systems have also created the need to
expand or upgrade existing networks and systems. At the same time, price
decreases have made such networks and systems affordable to a larger number of
organizations. The Company believes that these trends have increased the general
demand for computer products and related information technology services.
The advent of open architecture networks has also impacted the market
for information technology services. Wider use of complex networks involving a
variety of manufacturer's equipment, operating systems and application software
has made it increasingly difficult to diagnose problems and maintain the
technical knowledge and repair parts necessary to provide support services.
Increasingly, organizations seeking computer products often require prospective
vendors not only to offer products from many manufacturers and suppliers, but to
have available and proficient service expertise to assist them in product
selection, system design, installation and post-installation assistance and
service. The Company believes that the ability to offer customers a
comprehensive solution to their information technology needs, including the
ability to work within its customers' industrial environments as integral
members of their management information system staff, are increasingly important
in the marketplace.
BUSINESS STRATEGY
The Company intends to increase market share and market penetration
through its existing product line, and also increase its sales through strategic
relationships with other computer manufacturers. On September 20, 1996, the
Company announced that it had entered into a Volume Purchasing Agreement with
Texas Microsystems, a division of Sequoia Systems, Inc. Under the terms of the
Purchasing Agreement, the Company will purchase OEM subsystems from Texas
Microsystems and act as an authorized systems integrator for their industrial
computer products. Texas Microsystems is a leading manufacturer of industrial
computer CPU boards and chassis products. The Company is actively pursuing
similar OEM contracts with several major suppliers in the industrial computer
and desktop workstation marketplace.
The Company also intends to continue to pursue potential acquisitions of
complementary businesses. The success of this strategy depends not only upon the
Company's ability to acquire complementary businesses on a cost-effective basis,
but also upon its ability to integrate acquired
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operations into its organization effectively, to retain and motivate key
personnel and to retain customers of acquired firms. No specific acquisitions
are being negotiated or planned as of the date of this Registration Statement
and there can be no assurance that the Company will be able to find suitable
acquisition candidates or be successful in acquiring or integrating such
businesses. Furthermore, there can be no assurance that financing required for
any such transactions will be available on satisfactory terms.
In order to achieve its growth objective, the Company intends to
commence with the expansion of its national marketing network to increase sales
of its current line of proprietary industrial computer products. This expansion
into new locations within the United States will require additional in-house
sales personnel and sales representatives.
PRODUCTS
INDUSTRIAL PRODUCTS DIVISION
The Company's Industrial Products Division ("IPD") provides Intel
microprocessor-based microcomputer systems and system components that are
extremely dependable and can withstand harsh weather conditions and demanding
work environments. These computer systems are designed to withstand a wide
fluctuation in temperatures, shock waves, vibration, electromagnetic and radio
frequency interference, in addition to airborne dust particles and excessive
moisture.
SAFECASE SERIES 3000
The SafeCase Series 3000 is a microcomputer designed to be operated at sites
where temperature, vibration and airborne dust particles are of primary concern.
This microcomputer is designed to accommodate either active motherboard CPUs or
passive backplanes with plug-in CPUs. Being extremely adaptable, it can be
configured to accommodate various types of CPU boards, in addition to the
installation of various floppy and hard drives. The microcomputer enclosure is
constructed of 16 gauge steel and is pressurized by a filtered push-pull fan
cooling system to prevent dust particles and other matter from entering into the
computer. All of the computer components are modularly installed and shock
mounted. The SafeCase Series 3000 is suitable for installation in a standard 19"
equipment rack.
SAFECASE SERIES 4000
The SafeCase Series 4000 is a durable, rugged portable computer designed
to be operated under extremely harsh environmental conditions normally
encountered at industrial and commercial locations. The computer is constructed
with a four slot passive backplane and three full-size open bus slots to allow
the user to customize it with industry standard add-in boards. These computers
are designed with dual cooling fans to control heat build-up, are fully gasketed
to prevent the penetration of moisture and dust particles, and has a shock
mounted disk drive which together enhance its service life. The locations and
sites under which these computers are generally operated are unlike the
environmental conditions under which the plastic notebook and laptop computers
are operated. To complement the durability of the SafeCase Series 4000, its
sturdy aluminum carrying case has been designed to withstand excessive
mechanical loads.
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SAFECASE SERIES 5000
The SafeCase Series 5000 is a color CRT computer monitor designed with a
resolution of 1024 x 768 pixels, positive pressure fan and filter which protects
against internal damage from airborne dust particles, and is mountable in a 19"
equipment rack. This monitor can be interfaced with a touch screen adapter. The
color CRT computer monitor is available in 14" and 20" diagonal models.
SAFECASE SERIES 7000
The SafeCase Series 7000 is a microcomputer designed for applications
which require an industrial computer to be mounted on a wall or attached to
machinery or other equipment. The features of this microcomputer include a six
slot passive backplane and plug-in CPU board, a positive pressure, filtered
cooling system, two drives which will accommodate either floppy or hard disks in
addition to a 150 watt power supply.
IPD PRODUCT DEVELOPMENT
The Company's engineering strategy is to continue to develop
differentiated microprocessor based capabilities that can be delivered in
"open-systems" using industry standard technology. Through this product
development strategy, the Company is able to provide highly reliable and readily
available microcomputers that are compatible with "off-the-shelf" application
software and hardware. These microcomputers can also provide a much greater
degree of system availability to users by focusing on reliability as its main
feature.
Product development during calendar 1997 will be concentrated on the
completion of and revisions to the previously announced SafeCase 400 product.
Revisions will also be made to the current SafeCase 4000 product line to
increase functionality and reduce cost. In addition, the Company will continue
to extend its products offerings to include high-end computer platforms. These
enhancements will include the latest Pentium, Pentium Pro and/or Sun Sparc
processors.
SALES AND MARKETING
IPD
Revenues derived from the IPD are approximately 53% in-house direct
sales, approximately 42% from sales representatives and approximately 5% from
catalog distributors sales.
IED
Revenues derived from the Company's IED are 100% direct in-house sales.
DIRECT SALES
The Company's SafeCase Series of computer products are primarily
marketed through commissioned third-party sales representatives. These sales
representatives are teamed with in-house sales managers and are assigned to
territories within the United States. The Company believes that this method of
selling leads to increased account penetration, proper management of its
products, and enhanced customer service which create and maintain the foundation
for long-term relationships with
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its customers. The Company's in-house sales personnel receive a salary in
addition to commission, which is based upon a percentage of their sales. The
Company believes that its past and future growth depends in large measure on its
ability to attract and retain qualified sales representatives and sales
management personnel. The Company promotes its products and services through
general and trade advertising, participation in trade shows and through
telemarketing. The Company's records reflect that approximately 30% of its sales
of SafeCase series originates through word-of-mouth referrals from existing
customers and industry members, such as manufacturer's representatives.
Additionally, the sales personnel of its IPD seek to capitalize on customer
relationships that have been developed by its IED personnel. Sales leads
developed by this synergy are then jointly pursued. The IPD's customer base of
over 200 accounts consists primarily of Fortune 500 companies in all industry
segments within the United States.
OTHER METHODS OF SALES
Sales of the IPD are primarily through commissioned sales
representatives and its in-house direct sales force. The Company also has an
arrangement with two catalog distributors that offer industrial computer
products and related peripherals. The SafeCase 4000 product is sold through
catalog distribution. This method of sales currently accounts for approximately
5% of IPD's total revenue.
All in-house sales personnel are located at the Company's principal
executive offices in Houston, Texas. The IPD does not anticipate hiring direct
regional sales managers who would be located in other states.
GOVERNMENT CONTRACTS
Sales to branches of the United States government have accounted for
less than 1% of total revenue.
CUSTOMERS
The Company's top ten customers (which varied from period to period)
accounted in the aggregate for approximately 90% and 82% of the Company's total
revenue during 1995 and 1996, respectively. Exxon Pipeline Company, Inc., its
major customer, accounted for 65% and 39% of the Company's total revenue for the
same periods. Currently, the top ten customers are:
Arco Pipeline Company
Exxon Pipeline Company, Inc.
Marathon Pipeline Company
Baker Hughes Inteq
Texas Eastern Products Pipeline
SAIC
Union Pacific Resources
Industrial Computer Source
Cummins Engine Co., Inc.
CNG Transmission Corp.
Based upon historical results and existing relationships with customers,
the Company believes that a substantial portion of its total revenue and gross
profit will continue to be derived from sales to existing customers. There are
no long-term commitments by such customers to purchase products or services from
the Company. Sales of the Company's computer products are typically made on a
purchase order basis. A significant reduction in orders from any of the
Company's largest customers could have a material adverse effect on the
Company's financial condition and results of operations. Similarly, the loss of
any one of the Company's largest customers or the failure of any one of such
customers to pay its accounts receivable on a timely basis could have a material
adverse effect on the
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Company's financial condition and results of operations. There can be no
assurance that the Company's largest customers will continue to place orders
with the Company or that orders by such customers will continue at their
previous levels. There can be no assurance that the Company's customers for its
engineering services will continue to enter into contracts with the Company for
such services or that existing contracts will not be terminated. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" - "Business" and "Customers."
CUSTOMER SERVICE AND SUPPORT
The Company provides service and technical support to its customers in
varying degrees depending upon the product line and on customer contractual
arrangements. The Company's Houston based technical support staff provides
initial telephone trouble shooting services for end-user customers and
distributors. These services include isolating and verifying reported product
failures, authorizing product returns and tracking completion of repaired goods
in support of customer requirements. Technical support also provides on-site
engineering support in the event that a technical issue can not be resolved over
the telephone. The Company generally provides end-user purchasers of its systems
with a one year warranty.
DEPENDENCE UPON SUPPLIERS
The Company's business depends upon its ability to obtain an adequate
supply of products and parts at competitive prices and on reasonable terms. The
Company's suppliers are not obligated to have products on hand for timely
delivery to the Company nor can they guarantee product availability in
sufficient quantities to meet the Company's demands. There can be no assurance
that such products will be available as required by the Company at prices or on
terms acceptable to the Company. The Company procures a majority of its
computers, computer systems and computer components from distributors in order
to obtain competitive pricing, maximize product availability and maintain
quality control. In some cases, the Company's computer components are purchased
through a single source. The Company does not always have a long term purchasing
contract in place to purchase computer components from single sources. In the
normal course of business, the Company executes blanket purchase orders with its
major suppliers for a period of one year in order to maintain competitive
pricing and service. The purchase orders include provisions for the delivery, on
a monthly basis, of an adequate supply of computer parts to fulfill the
Company's orders for a one year period.
The Company relies on a few key contract manufacturers for the
manufacture of some components used in the assembly of its microcomputers.
Suntronic, Inc. and Arrow Manufacturing, Inc., provide contract assembly of PC
boards to the Company, on an as needed basis. No long term contracts are in
place for the use of these services. The Company's single source suppliers are
Microbus, Inc., Zero Enclosures, and Promed Keyboard Group. These manufacturers
are the single sources for the Company's CPU boards, enclosures and keyboards,
respectively. Although such subcontracting arrangements offer cost and capacity
advantages, and would eliminate the need to incur certain capital expenditures
associated with manufacturing, reliance on third party manufacturers gives the
Company less control over the manufacturing process for these components than if
it undertook such activities itself. Any failure of such subcontractors to
manufacture and deliver components as planned, or any problems with the quality
of such components, could have a material adverse effect on the Company's
operations.
The Company purchases from other manufacturers substantially all
peripheral devices and
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components used in its products. A majority of the components and peripherals
are available from a number of different suppliers, although certain major items
are procured from single sources. The Company believes that alternate sources
could be developed for such single source items, if necessary, however, in the
event that certain peripheral or component shortages were to occur, it could
have an adverse effect on the Company's operations.
There can be no assurance that the Company will be able to continue to
obtain the necessary computer components from its single sources on terms
acceptable to the Company, if at all. There can be no assurance that such
relationship will continue or that, in the event of a termination of its
relationship, it would be able to obtain alternative sources of supply without a
material disruption in the Company's ability to provide products to its
customers. Any material disruption in the Company's supply of products would
have a material adverse effect on the Company's financial condition and results
of operations.
RAPID TECHNOLOGICAL CHANGE
The business in which the Company competes is characterized by rapid
technological change and frequent introduction of new products and product
enhancements. The Company's success depends in large part on its ability to
identify and obtain products that meet the changing requirements of the
marketplace. The metal enclosures for the Company's SafeCase 4000 portable
computer are subject to manufacturer and distributor allocations due to its
customized design. The LCD flat panel display used in the SafeCase 4000 portable
computer may also be subject to distributor allocations due to its high demand
in the marketplace. The Company could experience delays in the receipt of these
integral products. During the past five years since this product was introduced,
the Company has not encountered any delays in the delivery of these products.
There can be no assurance that the Company will be able to identify and offer
products necessary to remain competitive or avoid losses related to obsolete
inventory and drastic price reductions. The Company attempts to maintain a level
of inventory required to meet its near term delivery requirements by relying on
the ready availability of products from its principal suppliers. Accordingly,
the failure of the Company's suppliers to maintain adequate inventory levels of
computer products demanded by the Company's existing and potential customers and
to react effectively to new product introductions could have a material adverse
affect on the Company's financial condition and results of operations. Failure
of the Company to gain sufficient access to new products or product enhancements
could also have a material adverse affect on the Company's financial condition
and results of operations.
PATENTS, TRADEMARKS, LICENSES
The Company's success depends in part upon its proprietary technology,
and relies primarily on trade secrecy and confidentiality agreements to
establish and protect its rights in its proprietary technology. The Company does
not own the rights to any U.S. or foreign patents. There can be no assurance
that the Company's present protective measures will be adequate to prevent
unauthorized use or disclosure of its technology or independent third party
development of the same or similar technology. Although the Company's
competitive position could be affected by its ability to protect its proprietary
and trade secret information, the Company believes other factors, such as the
technical expertise and knowledge of the Company's management and technical
personnel, and the timeliness and quality of support services provided by the
Company, to be more significant in maintaining the Company's competitive
position.
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EMPLOYEES
As of December 31, 1996, the Company employed approximately 48
individuals. Of these, approximately four were employed in sales, marketing and
customer services, 40 were employed in engineering and technical production
positions and four were employed in administration, finance and MIS. The Company
believes that its ability to recruit and retain highly skilled and experienced
technical, sales and management personnel has been, and will continue to be,
critical to its ability to execute its business plan. None of the Company's
employees are represented by a labor union or are subject to a collective
bargaining agreement. The Company believes that relations with its employees are
good.
COMPETITION
The Company competes against various companies across its different
product lines. The Company's line of industrial portable computers compete with
products manufactured by Fieldworks, Dolch and Kontron. The Company's industrial
computer products which are mountable in a 19" equipment rack compete with
products from Advantek, Contec and Industrial Computer Source. There is also
competition from much larger suppliers of commercial grade computers, such as
Compaq, Dell, Toshiba and IBM. This commercial competition effectively sets
pricing for the Company's product line, since the Company's customers are
willing to pay a premium for industrial grade computers which is usually limited
to approximately two times the equivalent of commercial grade products.
The Company believes that its products compete effectively based on its
engineering responsiveness to specific industrial market requirements, the
resulting functional specialization of its products, and its strategy of
focusing on relatively "sheltered" market niches where major competitors have
difficulty in tailoring their offerings to specific application requirements.
These strategies help offset the greater name recognition and broader service
and support resources of the Company's major competitors.
The Company is engaged in business activities that are targeted to
industrial markets which are less competitive and typically generate greater
profit margins. The Company believes that the principal competitive factors in
the business in which it operates are price and performance, product
availability, technical expertise, adherence to industry standards, financial
stability, service support and reputation. The pricing competition for the
Company's IPD segment is from large manufacturers of commercial grade computer
products. The IPD's pricing of its computer product line is governed by pricing
in the commercial market. The pricing competition of the IED segment has
intensified as a result of an increase in temporary personnel contracting
agencies who can perform services at a higher volume level and lower profit
margin. Some of the Company's current and potential competitors have longer
operating histories and financial, sales, marketing, manufacturing,
distribution, technical and other competitive resources which are substantially
greater than those of the Company. As a result, the Company's competitors may be
able to adapt more quickly to changes in customer demands or to commit resources
to sales and service of its products than the Company has available. Such
competitors could also seek to increase their presence in the markets where the
Company is providing sales and services by creating strategic alliances with
other competitors of the Company, by offering new or improved products and
services to the Company's customers or increasing their efforts to gain and
retain market share through competitive pricing.
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FACILITIES
The Company does not own any real property and currently leases all of
its existing facilities. The Company leases its principal executive offices in
Houston, Texas, which consists of approximately 18,155 square feet that has been
divided into administrative offices, computer production operations and
warehouse facilities. This lease will expire on August 31, 2000. The Company
also leases office space which consists of approximately 180 square feet in
Clarksburg, West Virginia, for the purpose of providing an office facility for
engineering and technical employees who reside in that State. This lease will
expire on May 31, 1997. The Company believes that suitable facilities will be
available as needed.
HISTORY
Industrial Data Systems, Inc., a Texas corporation, was incorporated in
May 1985, to provide engineering consulting services to the pipeline divisions
of major integrated oil companies. The Company grew slowly to ten employees in
1989. At that time, a strategic decision was made by management to enter the
industrial computer marketplace. In 1989, the Company designed and built its
first industrial computer and in 1991, hired its first marketing manager. The
Company continued to support both businesses and developed its industrial
computer business through nationwide advertising. Its product sales grew through
the creation of new product lines.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion is qualified in its entirety by, and should be
read in conjunction with, the Company's Consolidated Financial Statements
including the Notes thereto, included elsewhere in this Annual Report on Form
10-KSB/A.
OVERVIEW
The Company was formed in 1985 to engage in the business of providing
engineering consulting services to the pipeline divisions of major integrated
oil and gas companies. For the period 1985 through 1989, most of its revenues
were derived from the IED segment. In 1989, the Company introduced its IPD
segment and has continued to introduce new products to the marketplace. The IPD
segment has generated sales as a percent of total revenue of 29.9% and 37.4%,
for 1995 and 1996, respectively, while the IED segment has generated sales as a
percent of total revenue of 70% and 62.6% for the same period.
The gross margin varies between each of its operating segments. Computer
product sales have produced a gross margin ranging from 26.5% in 1995 to 28.6%
in 1996 due to the intense price competition characteristic of the computer
products market. The gross margin for pipeline engineering services, which
reflects direct labor costs, has ranged from 27.9% in 1995 to 28.3% in 1996. The
variation is primarily attributable to the pricing and the mix of services
provided, and to the level of direct labor as a component of cost during any
given period. The overall gross margin for Industrial Data Systems Corporation,
which includes both product sales and pipeline consulting services, has varied
between 27.5% in 1995 to 28.4% in 1996. This variation reflects the different
mix of product sales and the amount of revenue derived from pipeline engineering
consulting services from period to period. Revenue from computer product sales
accounted for 37.4% of the
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Company's total revenue for the year ended December 31, 1996. Revenue from
pipeline engineering consulting services accounted for 62.6% of the Company's
total revenue for the year ended December 31, 1996.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, certain
financial data derived from the Company's consolidated statements of operations
and indicates percentage of total revenue for each item.
YEARS ENDED DECEMBER 31,
------------------------------------
1995 1996
----------------- -----------------
AMOUNT % AMOUNT %
---------- ----- ---------- -----
Revenue:
Computer Products ...................... $1,354,888 29.9 $2,068,517 37.4
Consulting Services .................... 3,170,298 70.1 3,468,443 62.6
---------- ----- ---------- -----
Total revenue ........................ 4,525,186 100.0 5,536,960 100.0
Gross Profit:
Computer Products ...................... 359,681 26.5 591,303 28.6
Consulting Services .................... 885,113 27.9 980,899 28.3
---------- ----- ---------- -----
Total gross profit ................... 1,244,794 27.5 1,572,202 28.4
Selling, general and administrative
expenses ................................. 758,784 16.8 1,049,879 19.0
Depreciation ............................. 17,631 0.4 33,689 0.6
---------- ----- ---------- -----
Operating income ....................... 468,379 10.4 488,616 8.8
Other income (expense) ................... 143,153 3.2 120,169 2.2
---------- ----- ---------- -----
Income before provision
for income taxes ....................... 611,532 13.5 608,785 11.0
Provision for income taxes ............... 244,109 5.4 206,367 3.7
---------- ----- ---------- -----
Net income after income taxes ............ $ 367,423 8.1 $ 402,418 7.3
========== ===== ========== =====
YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995
TOTAL REVENUE. Total revenue increased by $1,011,774 or 22.4% from
$4,525,186 in 1995 to $5,536,960 in 1996. Revenue from the IPD, which comprised
37.4% of total revenue in 1996 increased by $713,629 or 52.7%. The increase in
IPD revenue was generally attributable to increased sales to new and existing
customers which resulted from the hiring of additional sales personnel, in
addition to the introduction of new product lines. Revenue from the IED which
comprised 62.6% of total revenue in 1996 increased by $298,145 or 9.4%.
IED revenue is derived from engineering services provided to the
pipeline division of major integrated oil companies. These services are
performed on facilities that include cross-country pipelines, pipeline pump
stations, compressor stations, metering facilities, underground storage
facilities, tank storage facilities and product loading terminals. The IED has
the capability of developing a project from the initial planning stages through
detailed design and construction management. The services provided include
project scoping, cost estimating, engineering design, material procurement,
mechanical fabrication, in addition to project and construction management. The
IED has ten blanket service contracts currently in place to provide services on
a time and
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materials reimbursable basis. The IED also performs services for its clients on
a turnkey lump sum basis.
The IED client base consists of major oil companies such as Exxon
Pipeline Company, Arco Pipeline Company, Marathon Pipeline Company, Praxair,
Inc., Sonsub, CNG Transmission and Texas Eastern Products Pipeline Company. New
business relationships with other major oil companies are developed through
in-house personnel.
The 1995 increase in IED revenue was due to additional engineering
consulting projects resulting from increased drilling and exploration activity
in the oil and gas industry and from the recent industry trend to outsource more
engineering projects to consulting firms such as IED.
GROSS PROFIT. Gross profit increased by $327,408 or 26.3% from
$1,244,794 in 1995 to $1,572,202 in 1996. The gross margin for the IED increased
from 27.9% in 1995 to 28.3% in 1996. The increase was attributable to increased
rates for consulting services which were not totally offset by increased payroll
expenses. The gross margin for the IPD increased from 26.5% in 1995 to 28.6% in
1996. This increase was primarily attributable to a sales blend of products that
have higher gross margins.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased by $291,095 or 38.4% from $758,784 in 1995 to
$1,049,879 in 1996. As a percentage of total revenue, selling, general and
administrative expenses increased from 16.8% in 1995 to 19.0% in 1996. The
dollar increase was primarily attributable to an increase in general and
administrative expenses and sales compensation to accommodate the Company's
growth. Personnel costs, the largest other component of general and
administrative expenses, increased at a slower rate than total revenue. Certain
general and administrative expenses are relatively fixed, and the Company was
able to leverage these expenses as revenue increased during 1996.
The following table details the significant increases in selling,
general and administrative expense increases for the year ended December 31,
1996:
<TABLE>
<CAPTION>
Selling, general and $ Increase % of % of 1996
Administrative Expense 1995 to 1996 Increase Revenue Comments
- ------------------------- ---------- -------- -------- --------
<S> <C> <C> <C> <C>
Building lease expense .. 18,403 23% 2% Scheduled increase
Administrative expense .. 156,891 115% 5% Transfer of certain officer from Engineering
Dept. to Admin. Dept. and one additional employee
Thermal expenses ........ 64,768 325% 2% Reflects General Manager salary for 12 months
in 1996 and 6 months in 1995
IPD sales expenses ...... 100,859 200% 2% Reflects Sales Manager salary for 12 months
in 1996 and only 6 months in 1995
</TABLE>
OPERATING INCOME. Operating income increased by $20,237 or 4.3% from
$468,379 in 1995 to $488,616 in 1996. Operating income decreased as a percentage
of total revenue from 10.4% in 1995 to 8.8% in 1996. The increase in operating
income was a result of a increased revenues, slightly higher gross margins
coupled with increased selling, general and administrative expenses.
OTHER INCOME (EXPENSE). Other income decreased by $22,984 or 16.1% from
$143,153 in 1995 to $120,169 in 1996. This decrease was primarily due to smaller
gains in marketable securities, and by additional interest expense due to higher
utilization of the Company's line of credit.
NET INCOME. Net income after taxes increased by $34,995 or 9.5% from
$367,423 in 1995 to $402,418 in 1996. Net income after taxes decreased as a
percentage of total revenue from 8.1% in
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<PAGE>
1995 to 7.3% in 1996.
LIQUIDITY AND CAPITAL RESOURCES
Historically, the Company has satisfied its cash requirements
principally through borrowings under its line of credit and through operations.
As of December 31, 1996, the Company's cash position, including marketable
securities, was sufficient to meet its working capital requirements. The Company
had, as of December 31, 1996, $25,000 in additional advances available under its
line of credit with a bank. This line of credit provides for maximum borrowings
of $350,000, which bears interest at prime plus 1% is for a term of one year,
matures on June 11, 1997, and will be renewed at that time. The line of credit
is secured by accounts receivable, inventory and the personal guarantees of
certain stockholders and officers of the Company. The Company has established
with its bank, an additional line of credit for Thermal, which will provide for
maximum borrowings of $400,000. The additional line of credit is secured by
accounts receivable and inventory of Thermal, and a guaranty from the Company.
On August 2, 1996, the Company issued 2,499,999 shares of its common
stock in exchange for promissory notes due February 15, 1997, totaling $999,999.
These notes were subsequently paid in full on January 27, 1997. The Company
believes that it has sufficient working capital and does not intend to sell
shares of its common stock within the next twelve months.
The Company's working capital was $1,158,758 and $2,579,571 at December
31, 1995 and December 31, 1996, respectively.
CASH FLOW
Operating activities provided net cash totaling $317,205 and $128,863
during 1995 and 1996, respectively. The Company has not generated significant
cash flow from operating activities due to the working capital requirements
resulting from the rapid growth of the Company. Trade accounts receivable
increased $281,908 and decreased $28,773 for the years ended December 31, 1995
and 1996, respectively. Inventory increased by $42,000 and 81,582 for the same
periods.
Investing activities used cash totaling, $28,805 and $234,920,
respectively, during the years ended December 31, 1995 and 1996. The Company's
investing activities that used cash during these periods was primarily related
to cash advances to an affiliate (Thermaire, Inc. dba Thermal Corp.)
and capital expenditures.
As of December 31, 1996, the Company had a portfolio of marketable
securities which had a fair market value of $457,129 and consisted of common
stocks, preferred stocks, bonds and mutual funds. The common stocks, preferred
stocks and bonds that the company holds consists of securities which are traded
on three national exchanges - the New York Stock Exchange, the American Stock
Exchange and the NASDAQ National Market System. These securities are frequently
traded by the Company. The mutual funds that the Company has available for sale
are open end stock funds which are managed by Aim, Pioneer, and Smith Barney &
Co. These mutual fund investments are generally held for longer than a one year
period. These securities are traded by the Company as part of its plan to
provides additional cash for working capital requirements.
The marketable securities to be held to maturity are stated at amortized
cost. Marketable securities classified as available-for-sale are stated at
market value, with unrealized gains and losses
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<PAGE>
reported as a separate component of stockholder's equity, net of deferred income
taxes. If a decline in market value is determined to be other than temporary,
any such loss is charged to earnings. Marketable Securities accounted for as
trading Securities are stated at market value, with unrealized gains and losses
changed to income. William A. Coskey, the Company's President and Chief
Executive Officer, is responsible for managing the Company's portfolio of
marketable securities. The funds used in this portfolio were from generally
available cash reserves. During 1996, the Company made no new investment of
funds in the securities portfolio.
The Company has implemented a policy that restricts it from purchasing
any securities on margin, and also limits the investment of any one security or
mutual fund to represent no more than 10% of the Company's investment portfolio.
The Company believes that the risks associated with its investment portfolio are
slightly higher than the risk of loss in a Standard & Poor's 500 Index Fund.
This higher risk is due to the less diverse distribution of the Company's
portfolio as compared to the broadly based Standard & Poor's 500 Stock Index.
Financing activities provided cash totaling $16,375 and $507,325 during
1995 and 1996. During 1996, $190,000 was provided from the issuance of Common
Stock. Additionally, financing activities provided net cash of $42,325 as a
result of the net sale of treasury stock, and an increase in borrowings of
$275,000 under its line of credit. The Company has additional financing amounts
available on its line of credit ($25,000 at December 31, 1996), and the proceeds
of $1,000,000 from a private placement of common stock. The line of credit has
been used principally to finance accounts receivable and inventory purchases. Of
the $1,000,000 proceeds received from the sale of securities, $200,000 was
received in 1996 with the remaining balance being paid in full in January, 1997;
$787,437 is expected to be used for working capital, and the balance of $212,563
was used to purchase Thermaire, Inc. dba Thermal Corp. Additional bank financing
in the amount of $450,000 has been obtained for the purchase of the facilities
that Thermaire, Inc. dba Thermal Corp. had been leasing.
Upon the consummation of the acquisition of Thermal on February 15, 1997
the Company immediately implemented a cost reduction program which reduced the
operating costs during the first quarter of 1997. During this time, the Company
also experienced a backlog of orders from its commercial and industrial
customers which are currently being filled. The revenues generated from the sale
of its products combined with its ongoing efforts in controlling costs will
provide the Company with sufficient cash to meet working capital requirements
during the next twelve months. The Company anticipates that the acquisition of
Thermal will increase revenues by approximately 54% during the next twelve
months.
During the next twelve months, the Company expects to incur an estimated
$100,000 for capital expenditures, a majority of which is expected to be
incurred for specialized computer production equipment. The actual amount and
timing of such capital expenditures may vary substantially depending upon, among
other things, the Company's level of growth.
ASSET MANAGEMENT
The Company's cash flow from operations has been affected primarily by
the timing of its collection of trade accounts receivable. The Company typically
sells its products and services on short-term credit terms and seeks to minimize
its credit risk by performing credit checks and conducting its own collection
efforts. The Company had trade accounts receivable of $622,512 and $593,739 at
December 31, 1995 and 1996, respectively. The number of days' sales outstanding
in trade accounts receivable was 50 days and 39 days, respectively. Bad debt
expenses have been
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<PAGE>
insignificant (approximately .01%) for each of these periods.
ITEM 7. FINANCIAL STATEMENTS
The audited financial statements for Thermaire, Inc. dba Thermal Corp.,
as of December 31, 1996 are attached hereto and made a part hereof as Exhibit 99
in connection with the Company's acquisition of Thermaire, Inc. dba Thermal
Corp. on February 14, 1997. The unaudited proforma condensed consolidated
financial information of the combined companies as of December 31, 1996 and for
the year then ended are attached hereto and made a part hereof as Exhibit 99.1.
DESCRIPTION OF PROPERTY
The Company has a lease for a term of five years in Houston, Texas,
which consists of 18,155 square feet of office space, which will expire on
August 31, 2000. This lease has been divided into administrative offices,
computer production operations and warehouse facilities. Management believes
that it has the ability to sustain a 100% sales growth without having to expand
its facilities or relocate its offices. The Company also leases a small office
in Clarksburg, West Virginia to provide a facility for its technical and
engineering personnel who reside in that State. The Company does not own any
real property.
Rent expense for the years ended December 31, 1994 and 1995, and the
nine months ended September 30, 1996 was $33,910, $79,269 and $75,000,
respectively. The Company is obligated to pay rent expense under its lease in
the amounts of $109,000, $109,000, $109,000 and $73,000 for each of the years
ending 1997, 1998, 1999 and 2000, respectively.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the
beneficial ownership of the Company's Common Stock as of the date of this
Registration Statement, by (i) each person or entity known to the Company to own
beneficially 5% or more of the outstanding shares of Common Stock, (ii) each of
the Company's directors, (iii) each of the named executive officers, and (iv)
all officers and directors as a group, as of March 31, 1997.
Name and Address Amount and Nature of Percentage
Title Of Class Of Beneficial Owner Beneficial Ownership Of Class
- -------------- ------------------- -------------------- --------
Common William A. Coskey, P.E.(1) 4,759,800 36.30%
600 Century Plaza Drive
Building 140
Houston, Texas 77073
Common Hulda L. Coskey(2) 4,750,000 36.18%
600 Century Plaza Drive
Building 140
Houston, Texas 77073
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<PAGE>
All executive officers and directors as a group (2) 9,512,800 72.48%
- ----------
(1) William A. Coskey is the beneficial owner of 4,750,000 shares of the
Company's Common Stock. Include in this amount is 9,800 shares of the
Company's Common Stock that are held in the name William A. Coskey, as
Custodian for minor children.
(2) Hulda L. Coskey is the beneficial owner of 4,750,000 shares of the
Company's Common Stock.
CHANGE IN CONTROL
The Company does not have any agreements in place with any of its
executive officers or employees that would be affected by a change in control of
the Company.
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS
AND CONTROL PERSONS
The directors and executive officers of the Company are as follows:
Name Age Position Held
- ---- --- -------------
William A. Coskey, P.E. (1) 44 Chairman of the Board, Chief
Executive Officer and President
Hulda L. Coskey (1) 41 Chief Financial Officer, Vice President
- Finance, Director
Rex S. Zerger 60 Vice President - Sales & Marketing,
Director
David W. Gent, P.E. 43 Director
Robert S. Moreland (2) 46 Director
(1) William A. Coskey and Hulda L. Coskey are husband and wife.
(2) Mr. Moreland resigned as a director effective as of September 15, 1996.
WILLIAM A. COSKEY is the founder of the Company and has served as
Chairman of the Board, Chief Executive Officer and President since the Company's
formation in September 1985. Prior to founding the Company, Mr. Coskey served as
Manager of Corporate Development for Keystone International, Inc., a public
company listed on the New York Stock Exchange, and was responsible for all
acquisition and merger activities of Keystone International, Inc. during the
period 1984 to 1985. Mr. Coskey had formerly held the position of President of
Syntech Associates, Inc., an engineering services company located in Houston,
Texas for the period 1979 to 1984. Mr. Coskey, an Honors Graduate, received a
B.S. in Electrical Engineering from Texas A&M University in 1975. He is a
Registered Professional Engineer, and is also a member of the Instrument Society
of America.
HULDA L. COSKEY has served as Chief Financial Officer of the Company
since June 1994. Prior to that time, and since 1985, Mrs. Coskey has held the
positions of Vice President and Secretary/Treasurer of Industrial Data Systems,
Inc., a Texas corporation. Her primary
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<PAGE>
responsibilities were to develop and initiate procedures for daily operations of
the company and to oversee those operations, including but not limited to all
accounting, finance and personnel functions. Mrs. Coskey received a B.S. in
Accounting from the University of Houston in 1978.
REX S. ZERGER has served as Vice President - Sales and Marketing for the
Industrial Products Division since June 1, 1996. Mr. Zerger was elected as a
Director on December 15, 1996. For more than the past ten years, Mr. Zerger held
various management positions with Texas Microsystems, including Senior Vice
President - Sales and Marketing and Senior Vice President Mobile Products Group.
His responsibilities included the establishment of domestic and international
sales channels. Most recently, Mr. Zerger was responsible for the establishment
of the Mobile Products Group of Texas Microsystems which developed the hand
held, rugged PC branded "Hardbody@. He was also responsible for the formation of
Texas Micro Express, a direct marketing channel. Mr. Zerger received a B.S. in
Mechanical Engineering from the University of SW Louisiana in 1960.
DAVID W. GENT, P.E. has served as a director of the Company since June
1994. Mr. Gent has held the position of Vice President - Engineering of Bray
Valve & Controls, a subsidiary of Bray International, Inc., located in Houston,
Texas, with the responsibility of overseeing several departments that include
Engineering, Data Processing, Quality Control and Purchasing, since September
1991. Prior to that time, Mr. Gent founded and served as President of SofTest
Design Corporation, a privately held electronic test equipment company for the
period 1986 to 1991. Mr. Gent, an Honors Graduate, received a B.S. in Electrical
Engineering from Texas A&M University in 1975. He is a Registered Professional
Engineer, and a member of the Instrument Society of America.
ROBERT S. MORELAND resigned as a member of the board of directors in
September 1996 to pursue other personal interests. Mr. Moreland served as a
Director for the period June 1994 to September 15, 1996. Mr. Moreland is the
President and Chief Executive Officer of Micrologic, Inc., a company engaged in
electronics manufacturing, located in Houston, Texas.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company does not have a Compensation Committee. Compensation for the
past several years for the Company's executive officers and employees has been
determined by the President and Chief Executive Officer.
EXECUTIVE COMPENSATION
DIRECTOR'S COMPENSATION
Employee directors of the Company do not receive any additional
compensation for their services as a member of the board of directors of the
Company. Independent directors do not receive any compensation for each board
meeting attended, nor do they receive compensation for each committee meeting
attended. The Company does not pay out-of-pocket expenses incurred by
independent directors to attend board and committee meetings.
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<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth information concerning compensation for
services in all capacities awarded to, earned by, or paid to, the Company's
Chief Executive Officer and the most highly compensated executive officer of the
Company whose aggregate cash compensation exceeded $100,000 (the "Named
Executive Officers') during the years ended December 31, 1994, 1995 and for the
nine months ended September 30, 1996.
Annual Compensation
-----------------------------------
Name and Principal Other Annual All other
Position Year Salary Bonus Compensation Compensation
- --------------------- ---- ------ ------- ------------ ------------
($) ($) ($) ($)
William A. Coskey, .. 1996 54,000 -- -- --
P.E., Chief Executive 1995 72,000 103,305 -- --
Officer and President 1994 51,000 -- -- --
At December 31, 1995, investments in real estate limited partnerships
were assigned to William and Hulda Coskey. The transaction was recorded on the
Company's books at a value of $103,305, and was in lieu of cash compensation
during 1995.
The Company believes that its success is attributed in part to its
ability to attract and keep quality management personnel. The Company intends to
pursue growth using an entrepreneurial management style, giving responsible
management broad latitude to manage the administration, sales, consulting and
production operations, including profit and loss responsibility.
EMPLOYMENT AGREEMENTS
The Company has not entered into any employment agreements with any of
its executive officers or employees.
401(K) PLAN
On January 1, 1993, the Company adopted a Section 401(k) Profit
Sharing Plan and Trust (the "Plan"). The Plan is intended to qualify for tax
exemption under Section 401(k) of the Code and is subject to the Employee
Retirement Income Security Act of 1974. The Plan is administered by management
of the Company and all of the Company's employees are allowed to participate,
who, as of the enrollment eligibility dates under the Plan, have completed at
least 90 days of service with the Company and have elected to participate in the
Plan. Employees may contribute up to 15% of their annual compensation, which is
matched by the Company under a defined formula. In addition, the Company may
make discretionary contributions to the Plan, for the benefit of all
participants, at the election of the board of directors. Employee contributions
are fully vested at all times and contributions by the Company vest on a
schedule of 20% per year over a six-year period, commencing with the second year
of employment.
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KEY MAN INSURANCE
William A. Coskey is a key employee of the Company and the loss of Mr.
Coskey could adversely affect the Company's business. The Company maintains, and
is the beneficiary of, a life insurance policy on the life of Mr. Coskey. The
face amount of such policy is $600,000. The continuance of such policy is at the
discretion of the Board of Directors and may or may not continue in the future.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The board of directors has adopted a policy requiring that all
transactions between the Company and its officers, directors, principal
stockholders and their affiliates be on terms no less favorable to the Company
than could be obtained from unrelated third parties and that any such
transactions be approved by a majority of the disinterested members of the
Company's board.
CERTAIN SHAREHOLDER AGREEMENTS
The Company does not have, nor has it ever had, any shareholder
agreements in place with any of its shareholders.
CONSULTING AGREEMENT
The Company has entered into consulting agreements with professionals who
provide engineering and design services on a contract basis. In 1995, the
Company entered into consulting contracts with Control Systems Consultants,
Scada Design Specialists and Transcontinental Engineering, Inc., ("TEI") to
provide engineering and design services. The terms of the engagement for each of
these companies are for services rendered on an hourly basis, as required and
are terminable at will. The Company does not pay a monthly retainer fee to any
of these companies. Scada Design Specialists were paid $71,591 and $10,334 in
1995 and 1996, respectively, Control Systems Consultants were paid $94,891 and
$81,728 in 1995 and 1996, respectively, and TEI was paid $33,583 in 1995. No
services were required by TEI in 1996.
LOANS
The Company has not made any loans to any of its directors, executive
officers or employees.
CERTAIN RELATED BUSINESS TRANSACTIONS
On December 31, 1995, the Company entered into an agreement with William
A. Coskey to purchase real estate and other investment assets valued at
$103,305, which were held by the Company and exchanged at fair book value. These
assets consisted of two real estate limited partnerships for the development of
commercial property located in Houston, Texas with a combined book value of
approximately $94,000; 5,000 shares of common stock of Entron Computer
Corporation, a privately held company, which represented a value of $5,000; and
a life insurance policy held in the name of William A. Coskey. The decision to
sell these assets was based upon Management's belief that these assets made no
material contribution to the Company. The Company's records reflect a total
value of $103,305 for the assets that were purchased. During the time that it
held these interests, the Company did not receive any cash consideration as a
participant in these investments. These assets were exchanged in lieu of cash
compensation to William A. Coskey.
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DESCRIPTION OF SECURITIES
The following summary outlines certain provisions with respect to the
number of shares authorized, par value, and does not purport to be complete and
is subject to, and qualified in its entirety by reference to, the Company's
Articles of Incorporation and Bylaws are being filed herein as Exhibits to this
Registration Statement, in accordance with applicable laws.
COMMON STOCK
The Company is authorized to issue 75,000,000 shares of its Common
Stock, $.001 par value, of which 13,129,999 shares were issued and outstanding
prior to this Registration Statement. Holders of shares of the Company's Common
Stock are entitled to one vote for each share held of record on matters to be
voted on by the stockholders of the Company. Holders of shares of Common Stock
will be entitled to receive dividends if any, when, as and if declared by the
board of directors and to share ratably in the assets of the Company legally
available for distribution to its stockholders, in the event of the liquidation,
dissolution or winding-up of the Company. Holders of Common Stock have no
preemptive, subscription, redemption or conversion rights. On August 15, 1995,
the Company issued 600,000 shares of Common Stock which are currently held in an
escrow account pending completion of the acquisition by the Company exercising
its option to pay $600,000 and obtain a release of the shares.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Company's Common Stock is
Pacific Stock Transfer, P.O. Box 93385, Las Vegas, Nevada 89193.
PART II
MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT=S
COMMON STOCK AND OTHER SHAREHOLDER MATTERS
The Company's Common Stock, $.001 par value per share, is quoted on
the NASDAQ Electronic Bulletin Board System under the symbol "IDDS".
HIGH LOW
---- ---
YEAR ENDED DECEMBER 31, 1995
First Quarter................................ 0.750 0.750
Second Quarter............................... 1.000 0.375
Third Quarter................................ 1.000 0.875
Fourth Quarter............................... 1.000 0.750
YEAR ENDED DECEMBER 31, 1996
First Quarter................................ 1.125 0.750
Second Quarter............................... 0.875 0.375
Third Quarter................................ 4.250 0.875
Fourth Quarter. ............................. 7.250 3.125
23
<PAGE>
THREE MONTHS ENDED MARCH 31, 1997............ 9.250 6.500
The foregoing figures, are based on information published by financial
sources, do not reflect retail markups or markdowns and may not represent actual
trades.
Management believes that the Company has received positive response from
the investment community as a result of recent press releases regarding the
introduction of several new products including the Company's Series 400 SafeCase
industrial portable PC and the Candere Series Sun Ultrasparc-based workstation.
The press releases are distributed through Dow Jones, Bloomberg, Reuters, AP,
UPI and other investor wire services. These press releases are also distributed
to approximately 50 industrial computer trade publications.
As of March 31, 1997, the Common Stock was held by approximately 393
shareholders of record.
DIVIDEND POLICY
The Company has never declared or paid a cash dividend on the Common
Stock. The payment of dividends in the future will depend on the Company's
earnings, capital requirements, operating and financial position and general
business conditions. The Company intends to retain any future earnings for
reinvestment in its business and does not intend to pay cash dividends in the
foreseeable future. The Company has not entered into any agreement which
restricts its ability to pay dividends on its Common Stock in the future. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."
LEGAL PROCEEDINGS
From time to time, the Company is involved in various legal
proceedings arising in the ordinary course of business. To management's
knowledge, the Company is not currently involved in any material legal
proceedings and is not aware of any legal proceeding threatened against it.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
There are no changes in and disagreements with the Company's
accountants on accounting and financial disclosure.
RECENT SALES OF UNREGISTERED SECURITIES
The following table summarizes the date, name, title and amount of all
transactions which relate to the sale of the Company's Common Stock that have
not been registered under the Securities Act of 1933, as amended, (the "Act")
during the past three years:
Amount of
Date Name and Title of Purchaser Securities Sold
- ---------------- --------------------------- ---------------
July 23, 1994 John Cameron (1) 15,000
July 23, 1994 Charles Pollock, et ux (2) 15,000
July 26, 1994 Nevada investors - 504 Reg. D Offering 500,000
(1994) (3)
24
<PAGE>
August 1, 1994 William A. Coskey (4) 4,759,800
Chairman, President, Chief Executive
Officer, Director
August 1, 1994 Hulda L. Coskey (5) 4,750,000
Chief Financial Officer,
Vice President - Finance, Director
July 30, 1996 Investors 504 Reg. D Offering (1996)(6) 2,499,000
February 14, 1997 Thermal Corp. Shareholders (7) 193,719
- ----------
(1) The amount of 15,000 shares of the Company's Common Stock were issued to
John Cameron in consideration of a loan that was made to the Company in
the amount of $5,000 on July 23, 1994. Mr. Cameron was an original
shareholder of the Company, and he represented that he was a
sophisticated investor. These shares of Common Stock were issued in
reliance upon the exemption under Section 4(2) of the Act. These shares
of Common Stock will not be available for sale in the open market
without prior registration and are subject to Rule 144 under the Act.
(2) The amount of 15,000 shares of the Company's Common Stock were issued to
Charles Pollock, et ux, in consideration of a loan that was made to the
Company in the amount of $5,000, on July 23, 1994. Mr. Pollock was an
original shareholder of the Company, and he represented that he was a
sophisticated investor. These shares of Common Stock were issued in
reliance upon the exemption under Section 4(2) of the Act. These shares
of Common Stock will not be available for sale in the open market
without prior registration and are subject to Rule 144 under the Act.
(3) The amount of 500,000 shares of the Company's Common Stock were issued
in reliance upon the exemption contained in Rule 504, promulgated by the
Securities and Exchange Commission as part of Regulation D. The
investors were primarily residents of Nevada and employees of the
Company. The Company raised $150,000 for the sale of the common stock,
and after paying all offering costs realized $81,227.
(4) The amount of 4,759,800 shares of Common Stock issued to William A.
Coskey, a founder of the Company, include 4,750,000 shares that were
issued in exchange for the consideration of fifty percent (50%) or
100,000 shares of Industrial Data Systems, Inc., a Texas corporation
that was merged into Industrial Data Systems Corporation on August 1,
1994, and 9,800 shares of Common Stock that are held in the name of
William A. Coskey, as Custodian for Minor Children. The 9,800 shares of
Common Stock were purchased through the private placement offering on
November 5, 1994. The 9,800 shares of Common Stock were issued in
reliance upon the exemption under Section 4(2) of the Act. The 4,759,800
shares of Common Stock will not be available for sale in the open market
without prior registration and are subject to Rule 144 under the Act.
25
<PAGE>
(5) The amount of 4,750,000 shares of Common Stock were issued to Hulda L.
Coskey, a founder of the Company, in exchange for the consideration of
fifty percent (50%) or 100,000 shares of Industrial Data Systems, Inc.,
a Texas corporation which was merged into Industrial Data Systems
Corporation on August 1, 1994. These shares of Common Stock were issued
in reliance upon the exemption under Section 4(2) of the Act. The
4,750,000 shares of Common Stock will not be available for sale in the
open market without prior registration and are subject to Rule 144 under
the Act.
(6) On July 30, 1996, the Company issued 2,499,999 shares of Common Stock to
five investors in exchange for the consideration of $999,999. These
shares of Common Stock were issued in reliance upon the exemption
contained in Rule 504, promulgated by the Securities and Exchange
Commission as part of Regulation D. The investors represented that each
was a sophisticated investor and that the purchase was made for
investment purposes. The Company paid a commission of $50,000 to a
registered broker-dealer for the transaction. The Company realized
$949,999 from the sale.
(7) The Company closed the purchase of 100% of the outstanding shares of
Thermal on February 14, 1997. The Company acquired the shares from Joe
Hollingsworth and trusts established for his children and William
Jackson. Mr. Hollingsworth was the former owner and operator of Thermal.
He and Mr. Jackson jointly owned the land on which Thermal's
manufacturing facility is located. The acquiring shareholders are
sophisticated and knowledgeable investors. The shares were issued in
reliance upon the exemption under Section 4(2) of the Act. These shares
cannot be sold without being subject to a registration statement or
exemption such as that afforded by Rule 144 under the Act.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Articles of Incorporation provide that, to the fullest
extent permitted under Nevada corporation law, the Company will indemnify any
officer or director who is, was, or is threatened to be made a party to any
proceeding because he or she (1) is or was a director or officer, or (2) while a
director or officer, at the Company's request, was serving as a director,
officer, partner, venturer, proprietor, trustee, employee or agent of another
entity.
The Company's Articles of Incorporation also provide that a director
of the Company shall not be personally liable to the Company or its stockholders
for monetary damages from breaches of fiduciary duties, except for liability (i)
for any breach of the duty of loyalty to the Company or its stockholders; (ii)
for acts or omissions not in good faith or in knowing violation of the law; or
(iii) for any transaction from which a director or officer has derived an
improper personal benefit.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the Company pursuant to the foregoing provisions, or otherwise, the
Company has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable.
26
<PAGE>
In the event that a claim for indemnification against such liabilities
(other than the payment by the Company of expenses incurred or paid by a
director, officer or controlling person of the Company in the successful defense
of any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Company will unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
27
<PAGE>
PART IV
INDEX TO FINANCIAL STATEMENTS
Page
----
Independent Auditor's Report ............................................... 29
Consolidated Balance Sheets, December 31, 1995 and 1996 .................... 30
Consolidated Statements of Income for the Years
Ended December 31, 1995 and 1996 ...................................... 31
Consolidated Statement of Stockholders' Equity for the
Years ended December 31, 1995 and 1996 ................................ 32
Consolidated Statements of Cash Flows for the Years
Ended December 31, 1995 and 1996 ...................................... 33
Notes to Consolidated Financial Statements ................................. 34
28
<PAGE>
INDEPENDENT AUDITOR'S REPORT
Board of Directors and Stockholders
Industrial Data Systems Corporation and Subsidiary
dba IDS Technical Services
We have audited the accompanying consolidated balance sheets of Industrial Data
Systems Corporation and Subsidiary as of December 31, 1995 and 1996, and the
related consolidated statements of income, stockholders' equity and cash flows
for the years then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above, present fairly, in
all material respects, the financial position of Industrial Data Systems
Corporation and Subsidiary as of December 31, 1995 and 1996, and the results of
its operations and its cash flows for the years then ended, in conformity with
generally accepted accounting principles.
Hein & Associates, L.L.P.
Certified Public Accountants
Houston, Texas
February 19, 1997
29
<PAGE>
INDUSTRIAL DATA SYSTEMS CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31,
-------------------------
1995 1996
----------- -----------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents:
Cash in bank .................................... $ 342,304 $ 637,217
Mutual funds .................................... 231,528 337,883
----------- -----------
573,832 975,100
Marketable securities, at market value:
Trading ......................................... 238,423 400,348
Available-for-sale .............................. 32,655 56,781
----------- -----------
271,078 457,129
Account receivable - trade, less allowance for
doubtful accounts of approximately $11,000 and
$16,000 in 1996 and 1995, respectively ............ 622,512 593,739
Note receivable from an affiliate ................. -- 84,936
Inventory ......................................... 139,514 221,096
Note receivable from sale of common stock ......... -- 799,999
Note receivable from stockholder .................. -- 50,000
Advances to affiliate ............................. -- 30,000
Prepaid assets and deferred costs ................. 48,858
----------- -----------
Total current assets ......................... 1,606,936 3,260,857
----------- -----------
PROPERTY AND EQUIPMENT, net ........................ 106,283 122,578
OTHER ASSETS ....................................... 2,000 2,000
----------- -----------
Total assets ................................. $ 1,715,219 $ 3,385,435
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Note payable to bank .............................. $ 50,000 $ 325,000
Accounts payable .................................. 113,478 57,698
Income taxes payable .............................. 166,986 128,065
Accrued expenses and other current liabilities .... 117,714 170,523
----------- -----------
Total current liabilities .................... 448,178 681,286
DEFERRED INCOME TAX ................................ 31,423 34,010
COMMITMENTS AND CONTINGENCIES (Notes 6, 8 and 13)
STOCKHOLDERS' EQUITY:
Common stock, $.001 par value; 75,000,000
shares authorized; 13,129,999 shares issued
in 1996; 10,630,000 shares issued in 1995 ....... 10,630 13,130
Additional paid-in capital ........................ 817,397 1,829,684
Retained earnings ................................. 439,977 842,395
Net unrealized gain on marketable securities ...... 1,289 1,068
----------- -----------
2,686,277 1,269,293
Treasury stock, 38,700 and 19,800 shares in
1995 and 1996, respectively, at cost ............ (33,675) (16,138)
----------- -----------
Total stockholders' equity ........................ 1,235,618 2,670,139
----------- -----------
Total liabilities and stockholders' equity ... $ 1,715,219 $ 3,385,435
=========== ===========
30
<PAGE>
INDUSTRIAL DATA SYSTEMS CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31,
--------------------------
1995 1996
----------- ------------
OPERATING REVENUES:
Product sales ................................... $ 1,354,888 $ 2,068,517
Consulting fees ................................. 3,170,298 3,468,443
----------- ------------
4,525,186 5,536,960
OPERATING EXPENSES:
Cost of revenues:
Product ....................................... 995,207 1,477,214
Consulting .................................... 2,285,185 2,487,544
Selling, general and administrative ............. 758,784 1,049,897
Depreciation .................................... 17,631 33,689
----------- ------------
4,056,807 5,048,344
OTHER INCOME (EXPENSE):
Realized gains on marketable securities, net .... 97,727 86,824
Net unrealized gains (losses) on
marketable securities ......................... 29,932 20,389
Interest income (expense), net .................. 8,653 (456)
Other income .................................... 6,841 13,412
----------- ------------
143,153 120,169
----------- ------------
INCOME BEFORE PROVISION FOR INCOME TAXES ......... 611,532 608,785
PROVISION FOR INCOME TAXES:
Federal ......................................... 217,572 185,468
State ........................................... 26,537 20,899
----------- ------------
244,109 206,367
----------- ------------
NET INCOME ....................................... $ 367,423 $ 402,418
=========== ============
NET INCOME PER COMMON SHARE ...................... $ .04 $ .04
=========== ============
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING ....... $10,002,630 $ 11,244,269
=========== ============
31
<PAGE>
INDUSTRIAL DATA SYSTEMS CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1995 AND 1996
<TABLE>
<CAPTION>
NET
UNREALIZED
COMMON STOCK GAIN (LOSS)
------------------- ADDITIONAL RETAINED ON MARKETABLE TREASURY
SHARES AMOUNT PAID-IN CAPITAL EARNINGS SECURITIES STOCK TOTAL
---------- ------- --------------- -------- ------------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCES, January 1, 1995 ................ 10,000,000 $10,000 $ 808,977 $ 72,554 $ 3,057 $ -- $ 894,588
Stock issuance ($.30 share) ............ 30,000 30 8,970 -- -- -- 9,000
Purchases of treasury stock
(64,500 shares) ...................... -- -- -- -- -- (58,750) (58,750)
Sales of stock from treasury
(25,800 shares) ...................... -- -- 50 -- -- 25,075 25,125
Stock issued in connection with
contingent purchase .................. 600,000 600 (600) -- -- -- --
Change in unrealized gain on
marketable securities ................ -- -- -- -- (1,768) -- (1,768)
Net income ............................. -- -- -- 367,423 -- -- 367,423
---------- ------- --------------- -------- ------------- -------- -----------
BALANCES, December 31, 1995 .............. 10,630,000 10,630 817,397 439,977 1,289 (33,675) 1,235,618
Stock issuance ($.40 share), net
of $10,000 of offering costs ......... 2,499,999 2,500 987,499 -- -- -- 989,999
Purchases of treasury stock
(10,500 shares) ...................... -- -- -- -- -- (8,188) (8,188)
Sale of stock from treasury
(29,400 shares) ...................... -- -- 24,788 -- -- 25,725 50,513
Change in unrealized gain on
marketable securities ................ -- -- -- -- (221) -- (221)
Net income ............................. -- -- -- 402,418 -- -- 402,418
---------- ------- --------------- -------- ------------- -------- -----------
BALANCES, December 31, 1996 .............. 13,129,999 $13,130 $ 1,829,684 $842,395 $ 1,068 $(16,138) $ 2,670,139
========== ======= =============== ======== ============= ======== ===========
</TABLE>
32
<PAGE>
INDUSTRIAL DATA SYSTEMS CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED
DECEMBER 31,
---------------------
1995 1996
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ............................................ $ 367,423 $ 402,418
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation ........................................ 17,631 33,689
Increase in trading securities, net ................. (81,435) (161,925)
Changes in:
Accounts receivable - trade ...................... (281,908) 28,773
Inventory ........................................ (42,200) (81,582)
Accounts payable ................................. 42,965 (55,780)
Income tax payable ............................... 101,426 (38,921)
Accrued expenses and other current liabilities ... 48,891 52,809
Deferred income tax expense ......................... 41,098 14,617
Non-cash compensation provided to officers .......... 103,305 --
Other, net .......................................... 9 (65,235)
--------- ---------
Net cash provided by operating activities ........ 317,205 128,863
CASH FLOWS FROM INVESTING ACTIVITIES:
Note receivable from affiliate ........................ -- (84,936)
Advances on note receivable from stockholder .......... -- (50,000)
Capital expenditures .................................. (85,388) (49,984)
Purchases of available-for-sale securities ............ (76,367) (24,000)
Proceeds from sale of available-for-sale securities ... 132,950 4,000
Advances to affiliate ................................. -- (30,000)
--------- ---------
Net cash used in investing activities ............ (28,805) (234,920)
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in notes payable, net ........................ 50,000 275,000
Proceeds from issuance of common stock, net ........... -- 190,000
Purchase of treasury stock ............................ (58,750) (8,188)
Sales of stock from treasury .......................... 25,125 50,513
--------- ---------
Net cash provided by financing activities ........ 16,375 507,325
--------- ---------
NET INCREASE IN CASH AND CASH EQUIVALENTS .............. 304,775 401,268
CASH AND CASH EQUIVALENTS, at beginning of year ........ 269,057 573,832
--------- ---------
CASH AND CASH EQUIVALENTS, at end of year .............. $ 573,832 $ 975,100
========= =========
SUPPLEMENTAL DISCLOSURES:
Interest paid ......................................... $ 4,103 $ 12,350
Income taxes paid ..................................... $ 40,000 $ 241,483
========= =========
NON-CASH TRANSACTIONS:
Issuance of common stock for services provided ........ $ 9,000 $ --
Issuance of common stock (600,000 shares) during
1995 in connection with a contingent business
acquisition (see Note 13) ........................... $ -- $ --
Common stock issued in exchange for notes
receivable (see Note 9) ............................. $ -- $ 799,999
========= =========
33
<PAGE>
INDUSTRIAL DATA SYSTEMS CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
ORGANIZATION - The accompanying consolidated financial statements include
the accounts of Industrial Data Systems Corporation (IDS or the Company),
a Nevada corporation, and its wholly-owned subsidiary Industrial Data
Systems, Inc., a Texas corporation, dba IDS Technical Services. All
significant intercompany balances and transactions have been eliminated in
consolidation.
INVENTORY - Inventory is composed of computer components and finished
goods and is carried at the lower of cost or market value, with cost
determined on the first-in, first out (FIFO) method of accounting. The
majority of inventory at December 31, 1996 and 1995 consisted of computer
components.
MARKETABLE SECURITIES - Marketable securities to be held to maturity are
stated at amortized cost. Marketable securities classified as
available-for-sale are stated at market value, with unrealized gains and
losses reported as a separate component of stockholders' equity, net of
deferred income taxes. If a decline in market value is determined to be
other than temporary, any such loss is charged to earnings. Trading
securities are stated at fair value, with unrealized gains and losses
recognized in earnings. The Company records the purchases and sales of
marketable securities and records realized gains and losses on the trade
date. Realized gains or losses on the sale of securities are recognized on
the specific identification method.
PROPERTY AND EQUIPMENT - Property and equipment is stated at cost,
adjusted for accumulated depreciation. Depreciation is calculated using an
accelerated method over the estimated useful lives of the related assets,
which is five years.
INVESTMENTS IN REAL ESTATE LIMITED PARTNERSHIPS - Investments in real
estate limited partnerships were carried at the lower of cost or estimated
fair market value of the underlying real estate. These investments were
assigned to two officers, who are also major stockholders of the Company,
during 1995 in lieu of cash compensation.
INCOME TAXES - The Company accounts for deferred income taxes in
accordance with the asset and liability method, whereby deferred income
taxes are recognized for the tax consequences of temporary differences by
applying enacted statutory tax rates applicable to future years to
differences between the financial statement and tax bases of its existing
assets and liabilities. The provision for income taxes represents the
current tax payable or refundable for the period plus or minus the tax
effect of the net change in the deferred tax assets and liabilities during
the period.
CASH AND CASH EQUIVALENTS - Cash and cash equivalents include cash in
bank, investments in highly liquid money market mutual funds, and other
investments with a remaining maturity of 90 days or less on the date of
purchase.
USE OF ESTIMATES - The preparation of the Company's consolidated financial
statements in conformity with generally accepted accounting principles
requires the Company's management to make estimates and assumptions that
affect the amounts reported in these financial statements and accompanying
results. Actual results could differ from these estimates.
RECLASSIFICATIONS - Amounts in the prior year financial statements have
been reclassified as necessary to conform to the current year
presentation.
34
<PAGE>
INDUSTRIAL DATA SYSTEMS CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
NEW ACCOUNTING PRONOUNCEMENT - The FASB issued Statement of Financial
Accounting Standards No. 128, entitled "Earnings Per Share", during
February 1997. The new statement, which is effective for financial
statements issued after December 31, 1997, including interim periods,
establishes standards for computing and presenting earnings per share. The
new statement requires retroactive restatement of all prior-period
earnings per share data presented. The Company does not believe the new
statement will have a material impact upon previously presented earnings
per share information.
2. MARKETABLE SECURITIES:
Marketable securities at December 31, 1996 are summarized as follows:
Gross Gross
Unrealized Unrealized Fair
Cost Gains Losses Value
-------- -------- --------- --------
Trading:
Common stocks ........... $225,027 $ 40,981$ (10,258) $255,750
Bond .................... 100,000 -- -- 100,000
Other ................... 25,000 19,598 -- 44,598
-------- -------- --------- --------
350,027 60,579 (10,258) 400,348
Available-for-sale:
Mutual fund ............. 55,713 1,068 -- 56,781
-------- -------- --------- --------
$405,740 $ 61,647 $ (10,258) $457,129
======== ======== ========= ========
Marketable securities at December 31, 1995 are summarized as follows:
Gross Gross
Unrealized Unrealized Fair
Cost Gains Losses Value
-------- -------- --------- --------
Trading:
Common stocks ........... $183,491 $ 26,896$ (6,973) $203,414
Other ................... 25,000 10,009 -- 35,009
-------- -------- --------- --------
208,491 36,905 (6,973) 238,423
Available-for-sale:
Mutual fund ............. 31,366 1,289 -- 32,655
-------- -------- --------- --------
$239,857 $ 38,194 $ (6,973) $271,078
======== ======== ========= ========
35
<PAGE>
INDUSTRIAL DATA SYSTEMS CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. NOTE RECEIVABLE FROM STOCKHOLDER:
The Company has a note receivable due from a stockholder. The note
receivable is unsecured, due on demand and bears interest at a rate of 9%
per annum. Interest on the note is due annually.
4. PROPERTY AND EQUIPMENT:
Property and equipment consists of the following:
DECEMBER 31,
---------------------
1995 1996
--------- ---------
Furniture and fixtures ....... $ 42,859 $ 43,610
Computer equipment ........... 104,226 153,459
--------- ---------
147,085 197,069
Accumulated depreciation ..... (40,802) (74,491)
--------- ---------
$ 106,283 $ 122,578
========= =========
5. NOTE PAYABLE TO BANK:
The Company has a line of credit with a bank of $350,000 at prime plus 1%
(9.25% at December 31, 1996). The line of credit, which expires on June
11, 1997, is collateralized by accounts receivable, inventory and is
guaranteed by the stockholders of the Company. There was $325,000
outstanding under the line at December 31, 1996. Interest on the
outstanding borrowings is due and payable monthly.
6. LEASE:
The Company leases office space under a non-cancelable operating lease.
Total rent expense for the years ended December 31, 1995 and 1996 was
$79,269 and $99,187, respectively. Future minimum rentals due under
non-cancelable operating leases with an original term of at least one year
are as follows:
YEARS ENDING DECEMBER 31,
-------------------------
1997 $ 108,573
1998 108,936
1999 108,936
2000 72,624
---------
$ 399,069
=========
36
<PAGE>
INDUSTRIAL DATA SYSTEMS CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. PROFIT SHARING PLAN:
The Company has a 401(k) profit sharing plan covering substantially all
employees. Under the terms of the plan, the Company will make matching
contributions equal to 50% of employee contributions up to 3% of employee
compensation, as defined. Employees may make contributions up to 15% of
their compensation, subject to certain maximum contribution limitations.
The employer's contributions vest on a schedule of 25% per year for four
years. The Company made contributions to the plan of $33,214 and $44,496
for the years ended December 31, 1995 and 1996, respectively.
8. CONCENTRATION OF CREDIT RISK AND MAJOR CUSTOMERS:
The Company manufactures and distributes industrial and portable computers
and computer monitors to commercial companies primarily in the southern
states and provides pipeline engineering services primarily to major
integrated oil and gas companies. The Company performs ongoing credit
evaluations of its customers and generally does not require collateral.
The Company assesses its credit risk and provides an allowance for
doubtful accounts for any accounts which it deems doubtful for collection.
The Company maintains deposits in banks which may exceed the amount of
federal deposit insurance available. Management periodically assesses the
financial condition of the institutions and believes that any possible
deposit loss is minimal.
The Company had sales to two major customers totaling approximately
$2,967,000 (of which $2,139,000 was for pipeline engineering services
provided and $828,000 represents product sales), respecively for 1996,
representing 39% and 15%, respectively of total revenues for the year. For
1995, the Company provided pipeline engineering services to one major
customer totaling approximately $2,927,000 which represents 65% of total
revenues for that year. At December 31, 1996, amounts due from four
customers who individually had amounts due in excess of 10% of trade
receivables, totaled $298,829. At December 31, 1995, amounts due from
customers in excess of 10% of trade accounts receivable amounted to
$220,680, all of which was due from a single customer.
9. STOCKHOLDERS' EQUITY:
The Company issued 2,499,999 shares of common stock in exchange for five
non-interest bearing notes totaling $999,999. During fiscal 1996, the
Company received the payment on one of the notes totaling $200,000. On
January 27, 1997, the four remaining notes were paid in full and the
Company received the remaining $799,999.
37
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INDUSTRIAL DATA SYSTEMS CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. FEDERAL INCOME TAXES:
The Company's income tax provision differs from the amount expected by
applying the federal statutory rate of 34%. The following is a
reconciliation of the expected versus actual provision.
YEAR ENDED DECEMBER 31,
--------------------------
1995 1996
-------- ---------
Expected provision at 34% .................. $207,921 $ 206,986
State income taxes ......................... 26,537 20,899
Other ...................................... 9,651 (21,518)
-------- ---------
$244,109 $ 206,367
======== =========
The Company has deferred tax assets and liabilities at December 31, 1995
and 1996 as follows:
1995 1996
-------- --------
Deferred tax assets - allowance for doubtful accounts .... $ 6,000 $ 4,235
Deferred tax liabilities:
Unrealized gain on trading securities ............... (11,224) (18,870)
Accumulated depreciation on property on equipment ... (26,199) (19,375)
-------- --------
(37,423) (38,245)
Net deferred tax .................................... $(31,423) $(34,010)
======== ========
The Company files a consolidated federal income tax return with the
company it acquired in 1997 (see Note 13). The amounts reflected herein
represent the Company's tax activity as if it filed a separate return,
which would not vary significantly from allocating its portion of the
consolidated amounts.
11. SEGMENT INFORMATION:
<TABLE>
<CAPTION>
Revenues Operating Earnings Identifiable Assets
Year Ended December 31, Year Ended December 31, December 31
------------------------- ---------------------- -------------------------
1995 1996 1995 1996 1995 1996
---------- ---------- -------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Industrial Products Division (IPD) ......... $1,354,888 $2,068,517 91,991 219,796 $ 432,398 $ 455,488
IDS Engineering Division (IED) ............. 3,170,298 3,468,443 379,738 275,221 415,717 458,635
---------- ---------- -------- --------- ---------- ----------
Total .......................... $4,525,186 $5,536,960 $471,729 $ 495,017 $ 848,115 $ 914,123
========== ========== ======== ========= ========== ==========
Interest expense ........................... -- -- 8,653 (456) -- --
General corporate .......................... -- -- 131,150 114,224 867,104 2,471,312
Consolidated income before
income taxes ......................... -- -- $611,532 $ 608,785 -- --
======== ========= ---------- ----------
Total assets ......................... -- -- -- -- $1,715,219 $3,385,435
========== ==========
</TABLE>
38
<PAGE>
Year Ended December 31,
--------------------
1995 1996
------- -------
Depreciation and Amortization, net of
amounts included in cost of service and
rentals:
Industrial Products Division (IPD) .......... $ 2,116 $ 4,043
------- -------
IDS Engineering Division (IED) .............. 12,165 23,245
------- -------
General corporate ........................... 3,350 6,400
------- -------
Total ................................. $17,631 $33,689
======= =======
Capital Expenditures:
Industrial Products Division (IPD) .......... $18,358 $10,747
------- -------
IDS Engineering Division (IED) .............. 67,030 39,237
------- -------
Total ................................. $85,388 $49,984
======= =======
12. TRANSACTIONS WITH AFFILIATE:
The Company is providing working capital financing to the company it
acquired in 1997 (see Note 13). Under the terms of this agreement, the
Company pays 98% of the face value of selected sales invoices. The Company
funds 85% of the face value of the invoice upon acceptance and the
remaining 13% upon ultimate collection of the invoice. The advances are
collateralized by the accounts receivable, inventory and machinery and
equipment of the borrower.
The Company has an advance to the company it acquired in 1997 (see Note
13). The advances, totaling $30,000 at December 31, 1996, are unsecured,
bear no interest rate and contain no terms of repayment.
During 1996, the Company employed an individual to perform the general
manager function at the company it acquired in 1997 (see Note 13). The
Company incurred salary and related payroll costs for this individual
totaling approximately $93,000.
13. SUBSEQUENT EVENT:
In February 1997, the Company acquired Thermaire, Inc. dba Thermal
Corporation (Thermal) in a stock purchase. The Company paid $600,000,
consisting of $212,563 in cash and 193,719 shares of the Company's common
stock, which may be put back to the Company for $2 per share at the option
of the holder. Additionally, the Company purchased the facilities that
Thermal had been leasing from an affiliate for $500,000. The Company
obtained bank financing totaling $450,000 related to the
39
<PAGE>
acquisition of these facilities. The acquisition has been accounted for on
the purchase method of accounting. Goodwill arising as a result of this
transaction totaled approximately $125,000. Previously, in 1995, the
Company had issued 600,000 shares of its common stock to Thermal on a
contingent basis. These shares were held in an escrow account pending
completion of the acquisition, at which time these shares were released
from escrow and cancelled. The aforementioned 193,719 shares were issued
under revised terms of the purchase agreement.
The following is the computation of goodwill recorded in connection with
Thermal and the related land and building previously leased by Thermal:
Purchase price .............................. $ 1,100,000
Fair value of net assets of
Thermal acquired ..................... (336,178)
Appraised value of land and building acquired (695,000)
-----------
Goodwill .................................... $ 68,822
===========
The financial statements do not reflect the accounts of Thermal because
the acquisition did not close until February 1997. The shares of common
stock issued by the Company and held in escrow have not been reflected as
issued and outstanding in the accompanying financial statements.
40
<PAGE>
DESCRIPTION AND INDEX OF EXHIBITS
2 Agreement and Plan of Reorganization for the Purchase of Industrial Data
Systems, Incorporated, dated August 1, 1994 (1)
2.1 Action by Written Consent of the Board of Directors for the Purchase of
Industrial Data Systems, Incorporated, a Texas corporation, dated August
1, 1994 (1)
2.2 Action by Written Consent of the Stockholders for the Purchase of
Industrial Data Systems, Incorporated, a Texas corporation, dated August
1, 1994 (1)
2.3 Stock Acquisition Agreement for the Purchase of Thermaire Incorporated,
dba Thermal Corp., dated August 15, 1995 (1)
2.4 Escrow Agreement for the Purchase of Thermaire Incorporated, dba Thermal
Corp., dated August 15, 1995 (1)
2.5 Earnest Money Contract for the Purchase of Thermaire Incorporated, dba
Thermal Corp.'s Manufacturing Facility, dated August 15, 1995 (1)
2.6 Offering Memorandum, 504D Offering of 500,000 Shares of Common Stock in
the State of Nevada, dated July 26, 1994 (1)
2.7 Action by the Board of Directors regarding the 504D Stock Offering of
2,499,999 Shares of Common Stock, dated July 10,1996 (1)
2.8 Agreement for Amendment and Substitution of Subscription Agreement and
Notes, dated July 10, 1996 (1)
2.9 Stock Purchase Subscription Agreement from World Glory Company Limited,
dated July 10, 1996 (1)
2.10 Stock Purchase Subscription Agreement from Asian Harvest Corporation
Limited., dated July 10, 1996 (1)
2.11 Stock Purchase Subscription Agreement from Silver Course Corporation,
dated July 10, 1996 (1)
2.13 Stock Purchase Subscription Agreement from Pines Intervest Corporation,
dated July 10, 1996 (1)
2.14 Stock Purchase Subscription Agreement from Wilton Assets Corp., dated July
10, 1996 (1)
41
<PAGE>
3 Articles of Incorporation, dated June 20, 1994 (1)
3.1 Corporate Charter, dated June 22, 1994 (1)
3.2 Bylaws dated June 22, 1994 (1)
4.1 Revolving Credit Line with Texas Commerce Bank, N.A., dated June 11, 1996
(1)
4.2 Promissory Note plus Restricted Common Stock to John H. Cameron, dated
July 23, 1994 (1)
4.3 Promissory Note plus Restricted Common Stock to Charles B. Pollock, et ux,
dated July 23, 1994 (1)
4.4 Promissory Note payable to Industrial Data Systems Corporation from World
Glory Company Limited., dated July 15, 1996 (1)
4.5 Promissory Note payable to Industrial Data Systems Corporation from Asian
Harvest Corporation, Ltd., dated July 15, 1996 (1)
4.6 Promissory Note payable to Industrial Data Systems Corporation from Silver
Course Corporation, dated July 15, 1996 (1)
4.7 Promissory Note payable to Industrial Data Systems Corporation from Pines
Intervest Corporation, dated July 15, 1996 (1)
4.8 Promissory Note payable to Industrial Data Systems Corporation from Wilton
Assets Corp. dated July 15, 1996 (1)
10 Lease Agreement between Industrial Data Systems, Incorporated, a Texas
corporation, and American General Life Insurance Company, dated January
16, 1991 (1)
10.1 First Amendment to Lease Agreement between Industrial Data Systems,
Incorporated, a Texas corporation, and American General Life Insurance
Company, dated December 7, 1993 (1)
10.2 Second Amendment to Lease Agreement between Industrial Data Systems
Corporation, a Nevada corporation, and American General Life Insurance
Company, dated December 29, 1994 (1)
10.3 Third Amendment to Lease Agreement between Industrial Data Systems
Corporation, a Nevada corporation, and American General Life Insurance
Company, dated December 8, 1995 (1)
10.4 Lease Agreement between Industrial Data Systems Corporation, a Nevada
corporation,
42
<PAGE>
and Clarksburg, West Virginia Masonic Building, dated June 1, 1995 (1)
10.5 Adoption Agreement for Nonstandardized Code 401(k) Profit Sharing Plan,
dated January 1, 1993 (1)
10.6 Blanket Service Contract - Exxon Pipeline Company (3)
10.7 Blanket Service Contract - Marathon Oil Company (3)
10.8 Blanket Service Contract -Texas Eastern Transmision Corporation (3)
10.9 Blanket Service Contract -Trunkline Gas Company (3)
10.10 Blanket Service Contract -Panhandle Eastern Pipeline Company (3)
10.11 Blanket Service Contract -ARCO Pipe Line Company (3)
10.12 Blanket Service Contract -CNG Transmission Corporation (3)
10.13 Blanket Service Contract -Columbia Gas Transmission Corporation (3)
10.14 Blanket Service Contract -Praxair, Inc. (3)
10.15 Blanket Service Contract -Texas Products Pipeline Company (3)
10.16 Volume Purchase Agreement (3)
21 Subsidiary of the Registrant (2)
23 Consent of Lindsey, Keys & Shannon (2)
24 Power of Attorney (2)
27 Financial Data Schedule (3)
99 Audited Financial Statements of Thermaire, Inc. dba Thermal Corp.as of and
for the year ended December 31, 1996 (3)
99.1 Unaudited Pro Forma Condensed Consolidated Balance Sheet and Statement of
Income as of and for the year ended December 31, 1996 for Industrial Data
Systems Corporation and Thermaire, Inc. dba Thermal Corp. (3)
(1) Exhibits incorporated by reference on the Company's Registration Statement
on Form 10-SB filed with the Securities and Exchange Commission on January
27, 1997.
(2) Exhibits incorporated by reference on the Company's Annual Report on Form
10-KSB for the year ended December 31, 1996 filed with the Securities and
Exchange Commission on April 14, 1997.
43
<PAGE>
(3) Exhibits included herein with the Company's Registration Statement on
Form 10SB/A filed with the Securities and Exchange Commission on May 14,
1997.
44
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
Registrant has caused this Registration Statement to be signed on its behalf by
the undersigned, thereunto duly authorized.
INDUSTRIAL DATA SYSTEMS CORPORATION
Dated: May 14, 1997 By: /s/ WILLIAM A. COSKEY
William A. Coskey, P.E., Chairman of
the Board, President and Chief Executive
Officer
By: /s/ HULDA L. COSKEY
Hulda L. Coskey, Chief Financial Officer,
Director
By: /s/ REX S. ZERGER
Rex S. Zerger, Vice President - Sales &
Marketing, Director
By: /s/ DAVID W. GENT
David W. Gent, P.E., Director
45
EXHIBIT 10.6
CONTRACT NUMBER: HOU-2083
EXXON PIPELINE COMPANY
ENGINEERING SERVICES CONTRACT
This Contract made the __ day of _____________, 1996 between EXXON
PIPELINE COMPANY, a Delaware corporation, having offices at 800 Bell Street,
Houston, Texas 77002 (hereinafter referred to as "EXXON") and IDS TECHNICAL
SERVICES.,a Texas Corporation having offices located at 600 Century Plaza Drive,
Building #140, Houston, TX. 77073 - 6016 (hereinafter referred to as
"Contractor"). NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the Parties agree as follows:
ARTICLE 1 SERVICES
1.1 Contractor shall provide EXXON with the services set out in Exhibit "A"
together with all equipment incidental to providing such services ("Services").
1.2 The Services performed under this Contract shall be performed solely by
Contractor and such of its subsidiaries, subcontractors, suppliers, agents, and
their respective employees as EXXON may approve in advance ("Subcontractors").
No such approval shall relieve Contractor from any of the obligations of this
Contract. Contractor shall be liable and responsible for all activities of its
Subcontractors under this Contract.
1.3 Contractor acknowledges that this is a non-exclusive Contract for providing
Services and that EXXON is under no obligation and has made no representation to
Contractor that any additional Services will be required during the Term other
than specified in Exhibit "A."
ARTICLE 2 DESCRIPTION OF SPECIFICATIONS AND EXHIBITS
The exhibits and related attachments listed below ("Exhibits")
constitute terms and conditions of this Contract. In the event of conflict
between any term(s) of any Exhibit(s) and the term(s) of the Principal Document,
the term(s) of the Principal Document shall take precedence and shall govern.
Description Title
Exhibit "A" Job Description for Engineering Services
Exhibit "B" Bid Sheet
Exhibit "C" Drug and Alcohol Provision
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF CONTRACTOR
3.1 Contractor represents and warrants that it is engaged either as its sole
business or as a primary aspect of its business in providing the Services; that
it has the expertise, experience, capability and specialized knowledge
("Competence") to perform the Services; it has the necessary tools, equipment
and personnel to provide the Services; that it has or will obtain at its expense
before performing any Services all the necessary certificates, permits, licenses
and authorizations to perform the Services; that it shall perform all Services
in accordance with all applicable federal, state, and local laws, rules and
regulations; and that it shall perform all Services in good faith, promptly,
with due diligence and Competence.
01/25/96 1
<PAGE>
CONTRACT NUMBER: HOU-2083
3.2 Contractor represents and warrants that it shall not perform any aspect of
the Services if it knows or has reason to believe that such aspect of such
Services cannot be performed in a manner in conformity with the provisions of
this Contract. In such case, Contractor shall immediately advise EXXON and work
with EXXON to develop a mutually satisfactory resolution for the inability to
perform. Contractor further represents and warrants that, if provided under this
Contract, it shall ascertain whether the drawings and specifications are at
variance with the law before starting performance of any Services. If Contractor
discovers any such variance, it shall promptly notify EXXON in writing and the
necessary changes shall be made before proceeding with the part of Services
affected.
3.3 Contractor represents that all work will be performed in a good, workmanlike
manner and in accordance with generally accepted professional engineering
practices. All work will be in conformity with Release Order, Work Proposal,
Change Order and/or the Target Schedule as described in Attachment I and all
other provisions of this Contract.
3.4 Contractor guarantees and warrants that all Services performed hereunder
(including goods and equipment provided in connection therewith) shall be
without deficiency or defect and in conformity with this Contract. In the event
that any defect, deficiency or lack of conformity is discovered by Exxon, Exxon
shall promptly notify Contractor in Writing. Contractor shall at Exxon's option,
immediately redesign or otherwise correct the work at no cost to Exxon in
accordance with the representations contained in this Article 3 and this
Contract, or Exxon or its designee shall redesign or otherwise correct the work,
and Contractor shall reimburse Exxon for the reasonable expenses of such
corrective work. Contractor shall also be liable to Exxon for all cost
associated with correcting or redoing work done based on services provided under
this Contract, including without limitation, costs of disassembly or removal,
costs of all labor, materials and equipment necessary for the correction, costs
of any ancillary work related to the correction, and all reassemble or
reconstruction costs. This warranty is in addition to any other warranty,
express or implied under statute or law, to which Exxon may be entitled for
goods and services. The remedies described herein are without limitation of the
rights that Exxon may otherwise have at law or equity.
3.5 All warranties and representations stated or referred to in this Contract
shall remain in effect for such time, after expiration or termination of this
Contract, as is reasonably necessary to determine whether Contractor has
fulfilled its obligations under all warranties.
ARTICLE 4 TERM
4.1 This contract shall be for a term of three (3) years commencing upon the
execution of this contract; provided, however, that EXXON may terminate this
Contract upon seven (7) days written notice to Contractor and Contractor may
terminate this Contract upon thirty (30) days written notice to EXXON. In the
event of termination, the provisions of Article 20 shall be applicable.
ARTICLE 5 COMPENSATION
5.1 Contractor shall be paid for Services performed by it and its Subcontractors
based on the fixed rates set out in Exhibit "B" ("Fixed Rates"). The Fixed Rates
are defined as hourly and/or daily rates for each individual designated as
performing Services, including regular hours and overtime hours. Contractor
shall not incur any overtime hours without the prior written approval of EXXON.
Fixed Rates specified in Exhibit "B shall include but not be limited to
supervision, burdens, overhead, reproduction, computer operations, insurance,
taxes, profits and fees and shall be the only charges for which EXXON shall be
liable in the performance of the Services.
01/25/96 2
<PAGE>
CONTRACT NUMBER: HOU-2083
5.2 Reimbursable expenses of Contractor under this Contract must be approved in
advance by EXXON. Contractor will not be reimbursed for automobile mileage
expense or any other travel expenses unless specifically requested to travel
outside the Houston area(s). Invoices for expense reimbursement will contain an
appropriate accounting of expenses incurred with receipts or other appropriate
evidence attached.
ARTICLE 6 INVOICING AND PAYMENT
6.1 Contractor shall submit invoices to Exxon Pipeline Company in accordance
with specific Release Orders. Each invoice shall set out separately the amounts
chargeable to each phase of the Services, the Contract number and shall be
accompanied with supporting documentation as EXXON may from time to time
specify. Contractor shall submit invoices in accordance with instructions in the
Release Order. EXXON shall pay all invoices submitted by Contractor within
thirty (30) days of receipt of a correct invoice with supporting documentation
subject to the provisions of Article 8 and subject to any retainage required by
law.
6.2 Contractor shall furnish each day to EXXON's representative authorizing the
work to be performed hereunder, or to such person as he may designate, a copy of
Contractor's daily time report applicable to the work being performed under this
contract, which report shall be certified by Contractors supervisor or foreman
to be true and correct. Such report shall include the applicable contract
number, the name of EXXON's representative who requested the work, the name of
each employee of the Contractor engaged in work hereunder, his occupational
classification, the number of hours worked by him, a description of the work on
which he was engaged, and the specific location of such work. The report shall
also include, where transportation or equipment is used by Contractor in
performing work hereunder, a statement of the kind and amount of transportation
used, the description of equipment used, whether such equipment was furnished
with or without operator, the number of hours used, a description of the work on
which it was engaged, and the specific location of such work. If equipment is
furnished with operator or driver, the name of the operator or driver shall be
shown. EXXON and its duly authorized representative shall have the right to
check the number of men employed on such work, their occupational
classification, and the time they were engaged in such work, and to check all
equipment used hereunder by Contractor and the length of time it was used in the
performance of such work under this contract. Invoices submitted for such work
shall be supported by properly approved daily time reports. If an invoice covers
more than one job, charges applicable to each job shall be clearly segregated.
Invoices submitted for such work shall be supported by properly approved daily
time reports.
ARTICLE 7 CHANGES
7.1 In the event any change, alteration, deletion or addition ("Change") in the
Services is required by EXXON then such Change shall be made pursuant to a
written Change Order. Any such Change shall not be effective until there is a
Change Order duly executed by the Parties. Any Change Order shall be deemed to
include all costs associated with the change(s) being made. The provisions of
this Contract shall be deemed to apply to any Change Order.
ARTICLE 8 LIENS
8.1 Contractor agrees to furnish, at EXXON's request, a list of all
Subcontractors, if any, providing Services, together with all evidence
satisfactory to EXXON upon completion of Services that all claims for payment of
Services performed have been satisfied and paid and that there are no
unsatisfied claims for injuries to persons or properties. EXXON retains the
right to withhold from any payments to Contractor such amounts as EXXON deems
sufficient to
01/25/96 3
<PAGE>
CONTRACT NUMBER: HOU-2083
protect EXXON and its property against any claim by Contractor, its
Subcontractors and their respective employees which could or may become a lien
or claim against EXXON or its property. EXXON may, at any time, pay and
discharge such lien or claim and deduct the amount so paid, together with costs
and attorneys' fees, from any payment then due or thereafter to become due to
Contractor or from any other sum owing to the Contractor under this Contract or
any other contract. If any lien or claim remains unsatisfied after payment has
been made by EXXON to the Contractor under this Contract, Contractor shall
refund to EXXON the entire sum that EXXON may then be compelled to pay for
discharging such lien or claim, together with all related costs and attorneys'
fees. Contractor shall indemnify and save EXXON completely harmless from all
costs (including attorneys' fees and other litigation costs) and claims
associated with the payment and discharge of any liens arising under this
Contract.
ARTICLE 9 TAXES, LICENSES, FEES, AND CONTRIBUTIONS
9.1 Contractor shall be solely liable for and pay any and all licensee fees,
contributions, and taxes related to Services performed under this Contract,
including sales and use taxes, license fees, all employment taxes and
contributions at law or under contract such as (but not limited to) unemployment
compensation insurance, old age benefits, welfare fund, pensions and annuities
and disability insurance. Should Contractor fail to make any such payments,
EXXON shall be entitled to make such payments on behalf of the Contractor and
deduct such sums as may be due under this Contract. Further, Contractor shall
provide EXXON with all necessary information to make such payments, shall
reimburse EXXON with respect to all moneys paid by EXXON, and shall indemnify
and save EXXON completely harmless against all costs, penalties, losses,
liabilities and damages which EXXON may suffer, sustain, pay or incur with
respect to Contractor's failure to make any of the payments referenced in this
Article 9.
ARTICLE 10 APPLICABLE LAW, COMPLIANCE WITH LAW, ATTORNEYS' FEES
THIS CONTRACT SHALL BE GOVERNED AND INTERPRETED ACCORDING TO THE LAWS OF THE
STATE OF TEXAS.
10.1 Contractor shall comply and secure compliance by its Subcontractors, with
all federal, state, county, parish, and municipal laws and regulations in
connection with the Services to be performed hereunder; including, but not
limited to, all safety orders prescribed by law and any rules and regulations
applicable to environmental pollution; the Fair Labor Standards Act of 1938, as
amended; and all applicable laws, orders, or regulations prohibiting
discrimination against any person by reason of race, color, religion, national
origin, sex or age. Contractor shall fully accept both State and Federal
Unemployment and Social Security Acts and pay all contribution and payroll taxes
as to all employees performing Services hereunder. Contractor shall comply with
the provisions of Article 26. Contractor shall, upon request, furnish EXXON
evidence of compliance with applicable laws, governmental orders, rules and
regulations.
10.2 Should Contractor violate any law or regulation relating to the performance
of Services, Contractor shall defend, indemnify, and hold EXXON completely
harmless from any liability or penalty which may be imposed on EXXON by reason
of any alleged violation of law or regulation by Contractor or its
Subcontractors and also from all claims, suits, or proceedings that may be
brought against EXXON arising under, growing out of, or by reason of,
Contractor's performance of Services with respect to such alleged violation of
law or regulation whether brought by employees of Contractor, by third parties,
or by national, state or local governmental authority or any political
subdivision thereof.
10.3 Should it become necessary for EXXON to engage in legal proceedings for the
purposes of resisting, adjusting and compromising any claims or demands arising
out of the subject matter
01/25/96 4
<PAGE>
CONTRACT NUMBER: HOU-2083
of this Contract, or for the purposes of enforcing this Contract or recovering
damages sustained by EXXON due to breach of the Contract by Contractor, EXXON
will be entitled to reimbursement from the Contractor for costs, attorneys' fees
and any other reasonable expenses incurred in connection with such legal
proceedings.
ARTICLE 11 INSPECTIONS
11.1 Although Contractor shall provide its own representative(s) to supervise
and inspect all materials and workmanship in performance of Services hereunder,
EXXON reserves the right at any time, to inspect any part of the work and the
materials to be used in providing the Services. Exxon's rights and Contractor's
obligation with regard to deficiencies in the work or lack of conformity with
the Contract shall be as provided in Article 3.4. Neither Exxon's inspection,
waiving of inspection, review, acceptance of Contractors work nor EXXON's
payment of any invoice shall relieve Contractor of its responsibility for full
performance under the terms of the Contract, including Contractor's warranty
obligations.
ARTICLE 12 DISTRIBUTION OF RISKS BETWEEN EXXON AND CONTRACTOR
12.1 Contractor shall be responsible for and shall hold EXXON harmless for loss
of or damage, howsoever caused, to Contractor or its Subcontractors' tools and
equipment and rented items which are used or intended for use in the Services
hereunder to be performed, and for any consequential, special or indirect
damages, or loss of anticipated profits sustained by Contractor or its
Subcontractors, EVEN IF SUCH LOSS OR DAMAGE RESULTS FROM EXXON'S NEGLIGENCE.
12.2 Contractor's responsibility to compensate EXXON for loss of or damage to
EXXON's existing property which is in reasonable proximity of the Work Site or
for any resulting consequential, special or indirect damages or loss of
anticipated profits sustained by EXXON shall not exceed the amount recoverable
by Contractor or its subcontractors under the valid and collectible insurance
carried by Contractor and its subcontractors, or the amount which would have
been recoverable under such insurance if all conditions, requirements, and
warranties imposed on the insured by the insurer are being or had been met.
EXXON shall hold Contractor free and harmless from liability to EXXON for loss
or damage exceeding the amounts so recoverable. Contractor's responsibility
shall include the value of any deductible or self-insured retention applicable
under such insurance.
12.3 EXXON and Contractor ("Indemnitor') shall indemnify, defend, and hold the
other harmless from claims, demands, and causes of action asserted against the
other ("Indemnitee") by any person (including, without limitation, Contractor's
and EXXON's employees, Contractor's Subcontractors and employees of such
Subcontractors, or any other third party) for personal injury or death or for
loss of or damage to property and resulting from the Indemnitor's negligence or
willful misconduct hereunder. Where personal injury, death, or loss of or damage
to property is the result of the joint negligence or willful misconduct of EXXON
and Contractor, the Indemnitor's duty of indemnification of Indemnitee shall be
in proportion to its allocable share of such joint negligence or willful
misconduct.
ARTICLE 13 INSURANCE
13.1 During the term of this agreement Contractor agrees to carry at least the
following types of insurance:
(1) Workers Compensation Insurance in compliance with the appropriate
laws and amendments thereto of each state in which work is performed under this
contract. However, if
01/25/96 5
<PAGE>
CONTRACT NUMBER: HOU-2083
Contractor qualifies under the appropriate state laws as a self-insurer of its
statutory workmen's compensation obligations, Contractor may self-insure said
obligations for purposes of this contract.
(2) Employer's Liability Insurance in an appropriate amount and not less
than $1 00,000.
(3) Comprehensive General Liability Insurance in the minimum amount of
$300,000 for injury or death for any one occurrence and with minimum property
damage of $25,000 for any one occurrence. Such insurance shall include
contractual liability, insuring the indemnity agreements contained in this
contract.
(4) Automobile Liability Insurance covering owner, now-owned, and hired
automobile equipment with minimum limits of $1 00,000 for injury or death of any
one person, and $300,000 for each occurrence and with minimum property damage of
$25,000 for any one occurrence.
Contractor further agrees to purchase the insurance in keeping with the minimum
requirements hereof from companies acceptable to EXXON, and to furnish EXXON
when requested to do so, with satisfactory evidence that such insurance is being
properly carried and with certified copies of all policies and a certificate of
insurance as to each policy. If marine insurance is required for inland water
and /or offshore operations, the insurance requirements will be set forth on
Form PL- 649, attached hereto and made a part hereof.
13.2 Nothing contained in this Article 13 - INSURANCE, shall limit or waive
Contractor's legal or contractual responsibilities to EXXON or others.
ARTICLE 14 SAFETY AND DRUG & ALCOHOL POLICIES
The following safety provisions shall apply:
(1) Contractor shall place the highest priority on safety and health while
performing work. It will be the responsibility of Contractor to provide and
maintain a safe working environment for its employees during the progress of
work and to adequately protect the health and safety of Contractor's agents and
subcontractors and their respective employees, EXXON's employees, the public,
and other third parties. All tools, equipment, facilities and other item used by
Contractor and practices employed by Contractor in accomplishing the work are
considered to be part of the working environments.
(2) EXXON has furnished Contractor with a copy of EXXON's employee health and
safety rules, receipt of which Contractor hereby acknowledges by execution of
this Contract. When performing work on EXXON's premises, Contractor shall be
required to comply with health and safety laws and regulations and to adopt
safety practices at least equivalent to those applicable to EXXON employees.
Additionally, Contractor shall adopt and enforce such other safety rules,
practices and procedures which are necessary to the safe performance of the work
which Contractor is required to perform under this Contract and which are
necessary to provide and maintain a safe working environment. Contractor agrees
that the health and safety rules which it adopts and enforces will comply with
all applicable federal, state and local safety and health laws and regulations,
including, but not limited to, standards and regulations promulgated by the
Secretary of Labor under the Occupational Safety Health Act of 1970.
(3) Contractor shall be responsible for ensuring that its employees and
subcontractors have a clear understanding of (a) the health and safety rules
which Contractor adopts for carrying out the work it is required to perform
under this Contract, (b) the known health and safety hazards of the jobs, and,
(c) all health and safety laws and regulations applicable to the work to be
done.
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CONTRACT NUMBER: HOU-2083
(4) Before commencing work, Contractor shall inspect the work site and ascertain
whether any health or safety hazards exist. It shall be Contractor's
responsibility to review all material safety data sheets which EXXON provides
pertaining to known toxic and hazardous substances to which Contractors
employees or subcontractors are likely to be exposed while performing any
particular or individual work task required to be done under this Contract. It
shall be Contractor's sole responsibility to notify its employees and
subcontractors of all health and safety hazards to which Contractor's employees
or subcontractors will be exposed during the performance of the work required by
this Contract.
Contractor also shall provide to EXXON material safety data sheets for all toxic
and hazardous substances which Contractor brings upon or introduces to the work
site. Additionally, Contractor, as part of the performance required under this
Contract, shall provide its employees and subcontractors with any and all
personal protective equipment that is necessary for safe and healthful work
performance. Should EXXON ever be requested by Contractor to provide, and agree
to provide, assistance in obtaining any personal protective equipment, such
contract or assistance shall not be deemed to relieve Contractor of its
responsibility under this Contract to provide such protective equipment to its
employees and subcontractors that is necessary for safe and healthful work
performance and to inspect and approve such protective equipment, prior to
providing it to its employees or subcontractors.
(5) Contractor at all times after commencing work shall be responsible for
inspecting the work site to determine whether any changed conditions or specific
health and safety hazards will be encountered during the work to be done.
(6) Contractor shall not permit or tolerate a hazardous, unsafe, unhealthy, or
environmentally unsound condition or activity over which it has control to exist
or to be conducted on EXXON's property or to exist or to be conducted in the
course of performing the work to be done under this Contract. A hazardous,
unsafe, unhealthy, or environmentally unsound condition includes, but is not
limited to, a violation of the safety practices which Contractor has agreed to
adopt in paragraph (2) herein above. Contractor agrees to immediately notify
EXXON when it becomes aware of any such condition, regardless of whether
Contractor has authority to correct the condition. Notwithstanding this
provision, however, Contractor has the sole responsibility to take whatever
steps are necessary to eliminate, terminate, abate, or rectify hazardous,
unsafe, unhealthy and environmentally unsound conditions which arise out of the
performance of the work required by this Contract.
(7) Contractor agrees to notify its employees that:
(1) EXXON prohibits the unauthorized sale, use, or possession of alcohol, drugs,
drug paraphernalia, weapons, firearms, explosives, and hazardous substances or
articles on EXXON property, including any property owned by or under lease to
EXXON, any property under EXXON's control and any property burdened by an
easement in EXXON's favor. Being unfit for work due to alcohol consumption is
not permitted. Only drugs prescribed in the last 12 months taken in accordance
with the prescribing physician's instructions and legal non-prescription drugs
which do not contribute to impaired or unsafe work performance are authorized
for possession or use on EXXON property; those using prescription drugs must
additionally notify their supervisors in advance of work if such use may
adversely affect job safety. Contract employees, common carrier personnel,
vendors, and others violating these guidelines will be expelled from EXXON
premises and will be denied future entry; and,
(2) Entry onto EXXON property constitutes consent to and recognition of the
right of the EXXON and its authorized representatives to search the person,
automobile, and other property of individuals entering on or departing the
premises, for alcohol, drugs, drug paraphernalia, firearms, explosives, weapons,
and hazardous substances or articles not permitted without proper authorization
upon EXXON property.
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CONTRACT NUMBER: HOU-2083
(8) Contractor shall promptly notify EXXON, in writing, of injuries that occur
on the work site or in connection with any work being performed hereunder and
will provide EXXON with copies of all reports or other documents filed or
provided to both Contractors insurers of the relevant state of federal agency in
connection with such injury.
(9) The requirements of this paragraph 14 of the Contract are applicable to all
subcontractors hired by Contractor to perform any of the work hereunder and
Contractors Contract with any such subcontractor shall provide that
subcontractor will be subject to the requirements of this paragraph 14.
(10) Section (1) through (9) above are agreed by both EXXON and Contractor to be
of highest importance. A breach or violation of any of the terms of said
sections by Contractor will be considered to be a material and substantial
breach of this Contract. If Contractor fails to promptly take the necessary
steps to cure said breach or violation or to otherwise comply with this
paragraph 14, EXXON may take any action permitted by the terms of this Contract
or under the law including termination of Contract. Nothing contained in this
paragraph 14 shall be interpreted as enlarging the legal duty of EXXON to
Contractor or Contractors agents, employees, subcontractors, or third parties or
altering the status of Contractor as set forth in paragraph 3 (independent
contractor).
14.2. Contractor shall comply with EXXON's Drug & Alcohol Policy as set out in
Exhibit "C."
ARTICLE 15 CONFIDENTIAL INFORMATION, PATENTS, COPYRIGHTS AND
INDEMNITIES REGARDING INTELLECTUAL PROPERTY
15.1. Contractor agrees to hold in confidence all technical information
disclosed to Contractor by EXXON or developed by Contractor hereunder, except:
(A) Technical information which at the time of development by Contractor or of
disclosure by EXXON to Contractor is in the public domain; (B) Technical
information which, after development by Contractor or after disclosure by EXXON
to Contractor, becomes part of the public domain by publication or otherwise
through no fault of Contractor; or (C) Technical information which Contractor
can show was in Contractor's possession at the time of Contractor's development
hereunder or EXXON's disclosure to Contractor and was not acquired, directly or
indirectly, from EXXON.
15.2. Contractor agrees that Contractor will not, without the written permission
of EXXON, use the technical information which Contractor is required to keep
confidential under this Contract for any purpose other than the accomplishment
of Services to be performed under this Contract. Contractor understands that
EXXON accepts no obligation of confidence with respect to any information
disclosed to EXXON by Contractor under this Contract unless specifically covered
by a separate, written confidentiality agreement. In the absence of such
separate confidentiality agreement, Contractor agrees that it will not place any
restrictive notices on any document (including drawings) provided by Contractor
to EXXON under this Contract. Nevertheless, if Contractor does place such
notices on such documents, EXXON is hereby authorized to nullify, obliterate,
remove, or disregard any such restrictive clauses. EXXON shall be free to use or
disclose any or all of the information contained therein to third parties
without accounting to Contractor therefore.
15.3 Contractor shall defend and indemnify EXXON against all other such claims,
demands, and causes of action based on the actual or alleged infringement of any
such third-party right. The indemnities set forth in this paragraph 15.3 shall
include without limitation all penalties, awards, and judgments; all court and
arbitration costs; attorneys fees; and other reasonable out-of-pocket costs
incurred in connection with such claims, demands and causes of action. However,
the Contractor may not settle or compromise such claim or lawsuit without the
written consent of the indemnified party if such settlement or compromise (1)
requires the indemnified
01/25/96 8
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CONTRACT NUMBER: HOU-2083
party to part with any right or make any payment not indemnified, or (2)
subjects the indemnified party to any injunction.
15.4 If any action results in an injunction against EXXON with respect to the
goods or facilities provided pursuant to this agreement, Contractor agrees that
it will, at its option and its sole expense, either (1) procure for EXXON the
right to continue using the infringing subject matter, or (2) replace or modify
the same so that it becomes non-infringing. ARTICLE 16 OWNERSHIP OF DRAWINGS
16.1 Contractor agrees that all reports, tracings, drawings, field notes,
specifications, computer programs in whatever form, and any other document
developed by Contractor under this Contract shall be the property of EXXON.
Contractor may retain one archival copy of each such document. Contractor shall
keep such archival copy confidential and shall not use it directly or indirectly
in providing any services to any other customer of the Contractor or for any
other purpose unless required by law. In such event, Contractor shall promptly
notify EXXON of the purpose and requirements of such use. Contractor agrees that
all such documents are works made for hire, or if they do not so qualify,
Contractor agrees to assign the copyrights in all such documents to EXXON.
16.2 All drawings, designs, and other written documents supplied by EXXON to
Contractor shall remain the property of EXXON and shall be returned to EXXON
upon completion of the Services and Contractor may not, without written approval
of EXXON, retain any copies of said documents.
ARTICLE 17 AUDIT
17.1 Contractor shall maintain and cause its Subcontractors to maintain adequate
books, payrolls, and other records satisfactory to EXXON in connection with any
and all Services performed, and retain all such books, payrolls, and records
("Records") for a period of not less than three years after completion of such
Services. Contractor's records supporting all labor, material, equipment, travel
and Subcontractor charges, and any other charges invoiced, shall be in
sufficient form to clearly document and support, and permit verification by
EXXON representatives of Contractor charges rendered to EXXON. All charges
invoiced should be identified to the specific Contract to which they relate.
Contractor shall maintain supporting documents and accounting records in
accordance with generally accepted accounting principles.
17.2 Contractor shall permit EXXON and its duly authorized representatives to
have access during the performance of Services and for a period of three (3)
years after performance of Services to the Records maintained by Contractor and
its Subcontractors and to interview Contractor's personnel relating to any of
the Services performed hereunder. EXXON and its duly authorized representatives
shall have the right to interview such personnel, audit such Records at any
reasonable time or times for purposes of auditing and verifying cost of Services
or for any other reasonable purpose with respect to this Contract upon prior
notice to Contractor. Contractor shall ensure that these rights of access extend
to any Subcontractor engaged by Contractor for Services performed hereunder.
EXXON shall have the right to reproduce any Record. Contractor will not charge
for its costs incurred in complying with this Article 17.
17.3 If an audit indicates errors in Contractors invoices, Contractor shall make
appropriate invoice adjustments or promptly refund over-payments.
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CONTRACT NUMBER: HOU-2083
ARTICLE 18 CONFLICT OF INTEREST AND ETHICS
18.1 Contractor, in performing its obligations under Contract, shall establish
and maintain appropriate business standards, procedures and controls including
those necessary to avoid any real or apparent impropriety or adverse impact on
the interests of EXXON or its affiliates. Contractor shall review with EXXON at
reasonable frequency during performance of Services, such business standards and
procedures including, without limitation, those related to the activities of
Contractor's employees and agents in their relations with EXXON's employees,
agents and representatives, vendors, subcontractors and other third parties.
18.2 Contractor agrees that all financial settlements, billings, and reports
rendered to EXXON, as provided for in this agreement and/or any amendments to
it, will reflect properly the facts about all activities and transactions
handled for the account of EXXON, which data may be relied upon as being
complete and accurate in any further recordings and reportings made by EXXON,
for whatever purpose. Contractor agrees to notify EXXON promptly upon discovery
of any instance where the Contractor fails to comply with provisions of Article
18.
ARTICLE 19 SUSPENSION
19.1 EXXON may suspend at any time and for any reason any part of Services under
this Contract by specifying to Contractor the part of Services to be suspended
and the effective date of suspension. Contractor shall cease performing said
part of Services on the effective date of suspension but shall continue to
perform any unsuspended part of Services. EXXON may, at any time, authorize
resumption of the suspended part of Services by notifying Contractor of the part
of Services to be resumed and the effective date of suspension withdrawal.
Services shall be promptly resumed by Contractor after receipt of such notice.
19.2 For the part of Services suspended, compensation to Contractor during the
suspension period shall be in accordance with a written agreement, if any, which
EXXON and Contractor may determine; otherwise EXXON shall not be liable for any
costs of Contractor. EXXON's sole liability to Contractor for suspension shall
be determined in accordance with this Article and EXXON shall not be liable for
any other damages including, without limitation, loss of anticipated profit or
reimbursement for Services unperformed.
ARTICLE 20 TERMINATION
20.1 In the event EXXON or Contractor terminates this Contract as provided in
Article 4, then the following provisions shall apply: (i) If any part of or all
of Services is terminated, EXXON, with respect to such Services, shall pay
Contractor, pursuant to Exhibit "B", only for Services performed and obligations
incurred prior to the effective date of termination and for such additional
amounts directly related to Services performed by Contractor in terminating,
provided said Services were authorized in advance by EXXON; and (ii) EXXON's
sole liability to Contractor for termination shall be determined in accordance
with this Article 20 and EXXON shall not be liable for any other damages
including, without limitation, loss of anticipated profits or reimbursement for
Services unperformed.
ARTICLE 21 ASSIGNMENT
21.1 Contractor shall not, without the written approval of EXXON, assign or
sublet this Contract in whole or in part (including any sum that may accrue to
Contractor under this Contract); provided, that no such assignment or sublease,
if approved by EXXON, shall relieve
01/25/96 10
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CONTRACT NUMBER: HOU-2083
Contractor of his responsibility hereunder. EXXON may assign Contract including
all its rights and obligations hereunder to its affiliates without consent of
Contractor.
ARTICLE 22 NOTICES
22.1 All notices required or permitted to be given hereunder shall be deemed to
be properly given if delivered in writing personally or deposited in the United
States mail addressed to EXXON or Contractor, as the case may be, at the
addresses set forth below, with postage thereon fully prepaid or by facsimile
to:
In the case of EXXON: In the case of Contractor:
Exxon Pipeline Company 800 Bell Street IDS Technical Services
P. 0. Box 2220 600 Century Plaza Drive, Building #140
Houston, Texas 77252-2220 Houston, Texas 77073 - 6016
Attn: Contracts Group Attn: William A. Coskey
Phone: 713/656-3265 713/821-3200
Fax: 713/656-1580 713/821-3230
ARTICLE 23 INDEPENDENT CONTRACTOR
23.1 Contractor, in performing Services and other obligations under Contract,
shall be deemed an independent Contractor and not the agent or employee of
EXXON. While Contractor's Services hereunder shall meet with the approval of
EXXON's engineers or inspectors, EXXON is interested in the results to be
achieved under this Contract and, accordingly, the detailed manner and method of
performing Services shall be the responsibility of and under the supervision and
control of Contractor.
ARTICLE 24 FORCE MAJEURE
24.1 Neither EXXON nor Contractor shall hold the other responsible for damages
or delays in performance caused by Force Majeure or other events beyond the
control of the other party and which could not reasonably have been anticipated
or prevented. For purposes of this Contract, Force Majeure shall include, but
not necessarily be limited to: adverse weather conditions, floods, epidemics,
war, riots, strikes, lockouts and other industrial disturbances, unknown site
conditions, accidents, sabotage, fire, court orders, acts of God or acts,
orders, laws or regulations of any governmental agency.
ARTICLE 25 USE OF TRADEMARK AND PUBLICITY RELEASES
25.1 Contractor agrees that it will not make or consent to publicity releases or
announcements concerning this Contract or Contractors participation under this
Contract without EXXON's prior written consent. Contractor shall not take
photographs of the work site or any of EXXON's property without EXXON's prior
written consent. Contractor shall cause its Subcontractors to comply with this
requirement.
25.2 Contractor is not entitled, authorized or permitted to use the trademark or
trade name, or any other identifying symbol or name owned by EXXON or Exxon
Corporation or photographs of EXXON equipment, products or facilities in
advertisements, brochures, releases or similar materials without the express
prior written approval of EXXON.
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ENGINEERING SERVICES CONTRACT HOU-2086
EXHIBIT "A"
TABLE OF CONTENTS
Page
A. Scope 1
B. Releases 1
C. Contractors Engineering Classifications 2
Attachment I 3
Administration of Project Design Work 3
Attachment 11 4
Project Design Work Scope Changes 4
Attachment IIA 5
FORMAT FOR CHANGE INQUIRY 5
Attachment IIB 6
FORMAT FOR CHANGE PROPOSAL 6
Attachment I[C 7
FORMAT FOR CHANGE ORDER 7
NM mm
<PAGE>
EXXON PIPELINE COMPANY
JOB DESCRIPTION FOR
ENGINEERING SERVICES
A. SCOPE
Provide engineering services from time to time as-requested by Exxon which may
include but not be limited to providing electrical, civil and mechanical design
or other specialized engineering and related work, project material cost
estimates, design criteria preparation, computations, analysis, calculations,
P&ID drawings, detailed construction drawings, fully documented software
programs, OTCC operating instructions, stations operating instructions, and
project start-up assistance. Contractor shall provide Professional Engineering
Certification for all work product submitted to Exxon. The administration of
project design work is more fully described in the following attachments:
Attachment I Administration of Project Design Work
Attachment 11 Project Design Work Scope Changes
Attachment IIA Format for Change Inquiry
Attachment IIB Format for Change Proposal
Attachment IIC Format for Change Order
This contract shall not require exclusivity of business dealings by either party
and shall not commit EXXON to contract a stated volume of services during the
term of the contract.
B. RELEASES
Release Orders under this Contract shall be made by an EXXON Representative
either in verbal or written form, however, all Release Orders expected to exceed
$10,000 must be in writing.
Each Release Order will provide:
1. This Contract Number and a Release Order number to be referenced by
Contractor when invoicing or communicating with EXXON.
2. The description, location and schedule of work to be performed.
3. The contract price basis such as a) lump sum; or b) time and materials. (For
the majority of releases Contractor shall be compensated on a Unit Rate or Time
and Material basis in accordance with the Rate Schedules of this Contract,
however, EXXON reserves the right to request lump sum quotes for specific work
tasks.)
<PAGE>
C. CONTRACTOR'S ENGINEERING CLASSIFICATIONS
Contractor shall ensure that the classifications listed below meet the minimum
experience and professional qualifications shown.
PROJECT ENGINEER (possesses engineering degree and has approximately 15 years
relative experience)
o Directs the consultants input in major projects
o Ensure all work has appropriate review/approval
o Prepares and monitors project budget/schedule
o Provides written project status reports and other communications with EPC
o Monitors/controls consultants costs
SR. ENGINEER (possesses engineering degree and approximately 10 years of
relative experience)
o Provides complete design package for projects
o Develops cost and schedules data
o Provides detail design/specifications/work procedures
o Prepare bills of materials and requisitions.
o Assist field personnel as needed with construction and start up activities
o Electrical design includes PLC programs and SCADA hub systems
ENGINEER (possesses engineering degree and approximately 5 years of relative
experience)
o Does detail design including bill of materials and specifications
o Provides input on cost/schedule/design alternates/work procedures
o Gathers relative data on existing systems/procedures
o Assists field personnel as needed.
o Electrical design includes PLC programs and SCADA hub systems
DESIGN TECHNICIAN (Has at least 10 years of relative experience)
o Assist Engineers with design details, specifications and material
requisitions
o Develops CAD drawings for pipeline facilities including upgrading of
existing drawings
ASSOCIATE DESIGN TECHNICIAN (Has at least 5 years of relative experience)
o Assist Engineers with design details, specifications and material
requisitions
o Develops CAD drawings for pipeline facilities including upgrading of
existing drawings
CAD OPERATOR/DRAFTSMAN
Does CAD/manual drawings of project facilities designed by others
2
<PAGE>
ATTACHMENT I
ADMINISTRATION OF PROJECT DESIGN WORK
The following detailed requirements and procedures shall govern the
administration and monitoring of assigned project design work:
1 . All work assigned to Contractor will be outlined either verbally or in
writing at the onset. Generally, the project work will be outlined in the form
of a written design criteria, from which, the Contractor shall prepare and
submit to Exxon a Work Proposal consisting of an estimate of total hours
required to complete the outlined work and a target completion date. If
requested by the Design Coordinator, the Contractor shall prepare and submit to
Exxon (as part of the Work Proposal) a Target Schedule for the assigned work.
The Target Schedule shall include without limitation, the following detail:
(a) The Target Schedule shall be in the form of a bar graph showing all
major design categories.
(b) The Target Schedule shall address the logical sequence of all
activities.
(c) Start and completion dates for all major activities (Milestones)
shall be clearly shown as well as an estimate of hours for each activity.
2. The Contractor will submit weekly, an updated Target Schedule, or as
requested by the Design Coordinator. The updated schedule will contain the
originally proposed schedule as well as the actual elapsed time. The causes
for any changes in the original Target Schedule shall be documented and
submitted with the updated schedule.
3. The Contractor will include enough information in the Target Schedule and
progress report so that they can be used readily as a basis for measuring
the progress of the work.
4. If the Contractor discovers an error or a need to change the estimate of
hours, the Contractor shall notify Exxon promptly. If the error or change
exceeds ten per cent (10%) of the original total estimate of hours, the
Contractor will stop working on the project until Exxon approves the new
estimate.
5. Work assignments that are outlined verbally to the Contractor will require
Work Proposal submitted to Exxon, that contain estimates of total hours and
a completion dates. When submitting the Work Proposal, it is the
Contractor's responsibility to understand the scope of the work involved
and to convey it to Exxon within the contents of the proposal, so that
Exxon can approve the proposal and both parties are assured of a mutual
understanding of the assigned work.
<PAGE>
ATTACHMENT 11
PROJECT DESIGN WORK SCOPE CHANGES
The following detailed requirements and procedures shall govern changes to
assigned project design work if requested by Exxon or the Contractor:
1. Exxon or the Contractor may initiate consideration of a possible change in
the assigned work BY issuing a document to be referred to as a "Change
Inquiry", generally in the format of Attachment IIA. In response, the
Contractor shall promptly prepare and issue to Exxon a document to be
referred to as a "Change Proposal". The Change Proposal shall propose
reasonable adjustments to the Work Proposal as previously outlined in
Attachment 1.
2. The Change Proposal shall be generally in the format shown in Attachment
IIB to this section and shall be numbered to match corresponding Change
Inquiries.
3. The Change Proposal shall specify whether the estimated hours will be
adjusted upward or downward because of the change.
4. Within a reasonable time after receipt of the Change Proposal, Exxon shall
respond to it. Exxon shall not be obliged to accept any Change Proposal,
but may do so, or may negotiate further with the Contractor on the change
in question. If Exxon decides to proceed with a change, it may direct the
Contractor to make the change by issuing a Change Order. Change Orders
shall be signed by EXXON's project manager, or his designee. If the Change
Order sets forth matters specifically agreed to by the Contractor, then
both project managers, or their designees, should sign the Change Order.
5. The Change Order shall be numbered to match corresponding Change Inquiries
and Change Proposals and shall be generally in the format shown in
Attachment IIC of this section.
6. Change Inquiries, Change Proposals, and Change Orders shall be distributed
to EXXON's and Contractors respective project managers. For convenience,
the parties may choose to issue corresponding Change Inquiries, Change
Proposals, and Change Orders as a unified document.
<PAGE>
ATTACHMENT IIA
FORMAT FOR CHANGE INQUIRY
(Contractor Name and Address)
ATTENTION: (CONTRACTOR'S PROJECT MANAGER)
SUBJECT: CHANGE INQUIRY NO. _____ FOR AFE NO. _____
We request your proposal for performing the following change to AFE No.
DESCRIPTION OF CHANGE: (Describe briefly)
PORTION OF SPECIFICATION AFFECTED:(State reference to drawings or other affected
parts of the Specification)
REASON FOR CHANGE:(Safety, operability, maintainability, economy, design
development, etc.)
INITIATOR OF CHANGE:(Contractor, Exxon)
ADDITIONAL ESTIMATED HOURS: Add or subtract the estimated number of additional
hours to the original Estimated Hours. Specifically state the original estimate,
the change, and the total new estimate.
INFORMATION REQUESTED: (Select one or more items below and delete others)
o An estimate of the effect on the Contract Price.
o An estimate of the effect, if any, on the Target Schedule and the Scheduled
Completion Date, with appropriate backup, or, if no effect, the latest date
on which the change must be ordered so as not to have any effect.
o A statement of the effect, if any, of the change on Contractor's warranty.
Please provide a proposal for accomplishing this change as described. Upon
receipt of your fully documented proposal, Exxon will consider whether to
proceed with the change. Until that authorization is received, you shall take no
action to implement the change other than those actions requested herein.
5
<PAGE>
ATTACHMENT IIB
FORMAT FOR CHANGE PROPOSAL
Exxon (Date)
ATTENTION:(Exxon's Project Manager)
SUBJECT: CHANGE PROPOSAL NO._________ FOR AFE NO._____
The following Change Proposal to AFE No.___________ is hereby
presented in accordance with your Change Inquiry No._____________
dated _____________
OR
The following Change Proposal is hereby presented for your consideration:
DESCRIPTION OF CHANGE: (Brief description)
PORTION OF SPECIFICATION AFFECTED: (Reference to drawings or other parts of the
Specification)
REASON FOR CHANGE: (Safety, operability, maintainability, economy, design
development, etc.)
INITIATOR OF CHANGE: (Contractor/Exxon)
EFFECT ON ESTIMATED HOURS: (Backup material such as quantities and rates should
also be provided as an attachment)
PERIOD OF TIME FOR WHICH THIS ESTIMATE WILL BE VALID:
EFFECT ON TARGET SCHEDULE AND SCHEDULED COMPLETION DATE:
EFFECT ON CONTRACTOR'S WARRANTY.
REFERENCES:(Include reference to any correspondence, interim authorizations,
etc.)
6
<PAGE>
ATTACHMENT IIC
FORMAT FOR CHANGE ORDER
Contractor's Name and Address (Date)
ATTENTION: (contractor's Project Manager)
SUBJECT: CHANGE ORDER NO._________ FOR AFE NO._______
The following change to AFE______________ is hereby directed in
accordance with Change Proposal No._________ dated
______________.
DESCRIPTION OF CHANGE:
PORTION OF SPECIFICATION AFFECTED: (Reference to drawings or other parts of the
Specification)
REASON FOR CHANGE: (Safety, operability, maintainability, economy, design
development, etc.)
INITIATOR OF CHANGE: (Contractor, Exxon)
EFFECT ON ESTIMATED HOURS:
EFFECT ON TARGET SCHEDULE AND SCHEDULED COMPLETION DATE:
EFFECT ON CONTRACTOR'S WARRANTY:
REFERENCES; (include reference to any correspondence, interim authorizations,
etc.)
ACKNOWLEDGED:
- ----------------------- --------------------
Contractors Project Manager Exxon's Project Manager
7
<PAGE>
CONTRACT NUMBER HOU - 2083
EXHIBIT "B"
EXXON PIPELINE COMPANY (EXXON)
ENGINEERING SERVICES
BID SHEET
Exxon Pipeline Company
800 Bell Street, Room 705
Houston, Texas 77002
Attention: R. A. Canobbio:
As full compensation for Contractor's performance for each Release Order to be
issued by EXXON pursuant to this CONTRACT, EXXON shall pay Contractor either: 1)
A lump sum amount agreed to by the parties for a specific work task and written
into the specific Release Order; or 2) A reimbursement in accordance with the
Rate Schedule below.
1.0 LABOR RATES:
Contractor shall attach its Rate Schedule listing the labor classifications
typically provided by Contractor covering engineering services and the
respective billing charges for same.
1.1 Certain classifications, as described in Job- Description of the CONTRACT,
shall be charged as follows:
Project
Overtime Minimum Construction
Hourly Rate Multiplier Callout Hours Daily Rate
----------- ---------- ----------- ----------
Project Engineer . 60.00 1.0 1 $ 540
----------- ---------- ----------- ----------
Sr. Engineer ..... 55.00 1.0 1 495
----------- ---------- ----------- ----------
Engineer ......... 45.00 1.0 1 405
----------- ---------- ----------- ----------
Design Technician 42.00 1.0 1 380
----------- ---------- ----------- ----------
Asst. Design Tech 37.50 1.0 1 340
----------- ---------- ----------- ----------
CAD Operator/
Draftsman ..... 30.00 1.0 1 270
----------- ---------- ----------- ----------
Engineering Clerk 22.50 1.0 1 205
----------- ---------- ----------- ----------
Secretary ........ 18.00 1.0 1 165
----------- ---------- ----------- ----------
* Daily Rate may be used when assignments of individuals exceed one week at,
but not limited to, a project construction location.
<PAGE>
CONTRACT NUMBER HOU - 2083
EXHIBIT "B"
1.2 Overtime Definition:
Contractor's definition of overtime is as follows:
NOT APPLICABLE
OVERTIME SHALL. BE CHARGED ONLY WHEN APPROVED IN ADVANCE BY EXXON.
All charges shall commence subsequent to an approved Release Order and
Contractor shall be paid for actual work completed.
2.0 REIMBURSABLE EXPENSES
Reimbursable expenses shall be allowed in accordance with provision 5.2 of the
CONTRACT.
Contractor should list below the list of expense items for which it typically
seeks reimbursement:
1. BUSINESS TRAVEL AND LIVING EXPENSES
3.0 EQUIPMENT, INSTRUMENTS AND TOOLS
Contractor shall attach its Rate Schedule listing the different equipment,
instruments and tools owned and typically used by Contractor in providing
services described in the CONTRACT and the itemized billing rates for same.
Contractor's charge for rented equipment, instruments and tools is cost plus
0 %.
4.0 VEHICLE USE CHARGES AND MILEAGE
Vehicle Use and Mileage rates are as follows:
Describe Vehicle Hourly Rate Daily Rate Mileage
PERSONAL VEHICLES $0.30
<PAGE>
CONTRACT NUMBER HOU-2083
EXHIBIT "B"
5.0 SUBCONTRACTED WORK
Subcontracted work at cost plus 5%
Contractor should list below any work that is typically subcontracted:
SURVEYING
TESTING SERVICES
Contractor shall not subcontract work without advance approval from
EXXON.
6.0 CONTRACTOR IS LICENSED TO PERFORM ENGINEERING WORK IN THE STATES LISTED
BELOW AND MEETS THE ENGINEERING SEALING REQUIREMENTS OF THE STATE:
TEXAS WASHINGTON LOUISIANA (APPLIED FOR)
PENNSYLVANIA OREGON WEST VIRGINIA (APPLIED FOR)
OHIO IDAHO
CALIFORNIA
6.1 CONTRACTOR HAS OFFICES IN THE FOLLOWING CITIES:
HOUSTON, TX
CLARKSBURG, WV
Submitted by:
IDS Technical Services,
A Division of
Industrial Data Systems, Inc 600 Century Plaza Dr. Bldg 140
---------------------------- ------------------------------
COMPANY STREET ADDRESS OR P.O. BOX
\S\ HOUSTON, TX 77073-6016
---------------------------- -----------------------------
SIGNATURE CITY, STATE, AND ZIP
William A. Coskey, P. E.
President
----------------------------
TITLE
9/5/95
----------------------------
DATE
<PAGE>
CONTRACT NUMBER HOU - 2083
EXHIBIT "C"
Ref: LR
CONTRACTOR DRUG AND ALCOHOL REQUIREMENTS
1 Contractor, contractors employees, agents, subcontractors and the employees
and agents of subcontractors ("Contractor's Group") shall not perform any
service for Exxon while under the influence of alcohol or any controlled
substance. Contractor's Group shall not use, possess, distribute or sell
alcoholic beverages, illicit or unprescribed drugs or drug paraphernalia,
or misuse legitimate prescription drugs on any property in which Exxon owns
an interest, at the job site or while performing work for Exxon.
2. Contractor has adopted, or will adopt prior to performing work under this
contract, its own policy to assure a drug and alcohol free work place while
performing work for Exxon.
3. Exxon shall be entitled to remove, and Contractor shall be obligated to
remove, any member of Contractor's Group from performing work for Exxon any
time that (i) either Contractor or Exxon suspects such person may have
used, possessed or been impaired by alcohol or drugs on any property in
which Exxon owns an interest, at the job site or while performing work for
Exxon or (ii) an incident occurs where drug or alcohol use by such person
could have been a contributing factor. In such cases, such person may only
be considered for return to performing work for Exxon if Contractor
certifies as a result of a for-cause test, conducted immediately following
removal, that said person was in compliance with this contract at that
time. Contractor shall not use an employee to perform services for Exxon
who either refuses to take, or tests positive in, any alcohol or drug test.
4. Exxon may, without prior notice, search the person, possessions, and
vehicles of Contractor's Group located on premises owned or controlled by
Exxon. Any person who refuses to cooperate with such search will be removed
from the premises and not allowed to return.
5. Contractor shall comply with all applicable federal, state, and local drug
and alcohol related laws and regulations. Exxon shall be entitled to
terminate this contract without prior notice at any time that Contractor is
found to have violated any of such laws or regulations or any of the drug
and alcohol abuse requirements contained herein.
RMS
1/18/93
Ref: LR
1 Of7/93
01/25/96
mm
EXHIBIT 10.7 Contract No. CON96495
CONSULTING, DESIGN AND INSPECTION AGREEMENT
THIS AGREEMENT, made and executed this 12TH day of MARCH , 1996, between
Marathon Oil Company, an Ohio corporation, of 539 South Main Street, Findlay,
Ohio, hereinafter called "Marathon" and IDS TECHNICAL SERVICES hereinafter
called "Consultant";
W I T N E S S E T H
The purpose of this Agreement is to state the terms under which
Consultant will be providing consulting, engineering design, inspection,
testing, surveying or other services to Marathon. In consideration for the
services to be rendered by Consultant and in consideration of the funds Marathon
will pay Consultant for such services (it being understood that if Consultant
does not assess a charge for a given job or a portion of the work, consideration
for that job will be funds paid for the balance of the work), the parties agree
as follows:
1. SCOPE OF WORK
Unless in good faith he is unable to do so, Consultant shall perform
hereunder upon oral or written order of Marathon. The work to be performed shall
be described in the order. Marathon is not hereby obligated to order any minimum
amount of services from Consultant.
2. TERM
The term of this Agreement shall be for a period of one (1) year
commencing the date indicated above and shall continue thereafter from month to
month until terminated by either party giving not less than thirty (30) days
prior written notice.
<PAGE>
3. PAYMENTS
Unless agreed otherwise in a written work order, Marathon shall pay for
all services performed to Marathon's satisfaction at the rates specified in the
Consultant's cost schedule attached hereto. Upon written notice to Marathon,
Consultant may change the rates specified in the cost schedule, except as such
rates apply to work in progress. If services are rendered other than those shown
on the Consultant's cost schedule, the rate shall be as agreed upon by the
parties prior to the performance of the work, or in the absence of such an
agreement, the prevailing rate in the same or similar locality.
4. TERMS OF PAYMENT
Marathon shall be invoiced for services rendered only after they have
been completed and accepted by Marathon. Consultant agrees to invoice Marathon
in triplicate for all services performed, including but not limited to itemizing
in detail material and labor, showing quantity, price, number of hours, truck
mileage rate, and labor rate, if applicable. Payment shall be due thirty (30)
days after receipt of invoice and may be made by Marathon's check.
5. INDEPENDENT CONTRACTOR
In the performance of all work under this Agreement, Consultant is an
Independent Contractor, with the sole right to supervise, manage, control, and
direct the performance of all details. Marathon is interested only in the
results to be obtained, but the work must meet with the approval of Marathon,
whose representatives shall be entitled to make any such inspections as may be
necessary to assure such results.
OIL
<PAGE>
6. EMPLOYEE BENEFITS
It is intended by the parties that any personnel supplied to Marathon
pursuant to this Agreement shall not be considered to be employees of Marathon
and shall remain solely the employees of the Consultant or its approved
subcontractors, if any. Consultant agrees to be solely responsible for the
maintenance and operation of all the employee benefit plans it maintains with
respect to personnel supplied to Marathon under this Agreement and shall be
solely responsible for any and all obligations and liabilities arising under
such employee benefit plans. Consultant agrees to indemnify and hold Marathon
harmless from any and all claims for employee benefits of any type which may be
made against Marathon by personnel (including their heirs and assigns) supplied
to Marathon by the Consultant or its approved subcontractors, if any pursuant to
this Agreement, including any and all attorneys' fees and other costs of any
kind incurred by Marathon in connection with such claims.
7. FEDERAL AND STATE TAXES
Consultant agrees to accept full and exclusive liability for and will
indemnify Marathon against the payment of any and all contributions,
assessments, rates, and taxes, of whatever kind or nature, which might be
imposed or attempted to be imposed upon Marathon pertaining to the compensation
paid or to be paid in connection with the services rendered to Marathon by
personnel supplied under this Agreement, including, but not limited to, federal,
state, county, city or otherwise, income, unemployment (FUTA) and social
security (FICA) taxes.
<PAGE>
8. SUPERINTENDENCE
Consultant shall maintain at the site a competent foreman in complete
charge of work at all times while engaged in site work on Marathon premises.
9. WORK AREA
When proceeding with site work on Marathon premises, Consultant shall
provide and maintain a guard fence, lights, and other safety measures that may
be required for the protection of the general public.
It shall be the Consultant's responsibility to supply weatherproof
protection when necessary for any facilities Consultant may expose while
performing services hereunder and for any electrical or mechanical equipment
which must be stored for use in providing services. Any damage caused by failure
of the Consultant to protect said facilities and equipment shall be paid for by
the Consultant.
10. JOB SAFETY AND HEALTH
If Consultant is required to perform site work on Marathon premises as indicated
in Consultant's work order, Consultant shall comply with Marathon's safety
policies then and there in effect. Consultant agrees to properly inform, educate
and train all employees performing work hereunder as to all applicable safety
and health laws and regulations including, but not limited to the Hazard
Communication Standard, 29 CFR, Part 1910.1200, issued by the Occupational
Safety and Health Administration, U.S. Department of Labor. Consultant agrees to
take the necessary steps to become familiar with all chemicals and substances to
which its employees foreseeably could be exposed while performing work on
Marathon's premises. Consultant further agrees to educate and train its
employees as to the chemicals and substances to which they foreseeably could be
-4-
<PAGE>
exposed in accordance with the requirements set forth in the Hazard
Communication Standard, 29 CFR Part 1910.1200(h) prior to the commencement of
any work hereunder. Material Safety Data Sheets for Marathon products which may
be encountered by Consultant at the work site are available for inspection from
the Marathon representative.
Consultant also agrees to take the necessary steps to ensure that its
subcontractors, if any, comply with Marathon's contractor safety policies, and
all Federal and State job safety and health regulations, including, but not
limited to, the Hazard Communication Standard, 29 CFR Part 1910.1200.
Consultant agrees to indemnify and hold Marathon harmless from any and
all citations or complaints which may be assessed against Marathon by any and
all federal, state or other job safety and health enforcement agencies for
personnel supplied hereunder based upon any and all alleged unsafe or unhealthy
working conditions created or caused by the Consultant or its approved
subcontractors including holding Marathon harmless from any and all attorneys'
fees and other costs of any kind incurred by Marathon in connection with said
citations or complaints.
11. WORKERS COMPENSATION INDEMNIFICATION
Consultant agrees to be responsible for the workers' compensation
insurance on personnel supplied under this Agreement. If any direct claim for
workers' compensation benefits or awards is asserted against Marathon by any of
said personnel or, in the event of death, by their personal representatives,
then Consultant shall indemnify and hold Marathon harmless from and against such
claim(s) to the extent of all benefits and awards, cost of litigation,
disbursements and reasonable attorneys' fees Marathon may incur in connection
-5-
<PAGE>
therewith. At Marathon's option, and upon written notice, Consultant will
undertake to defend Marathon against such claim(s).
12. GENERAL INDEMNIFICATION
A. Consultant shall protect, defend, indemnify and hold Marathon
and the employees of Marathon harmless from and against any and
all claims, demands, causes of action of every kind and
character including, without limitation by enumeration, death,
injury and damages to all persons and property (including
employees or property of Marathon), together with the amount of
judgments, penalties, interest, court costs, legal and other
fees and expenses in connection therewith (hereinafter
collectively referred to as "Claims"), directly or indirectly
arising out of, resulting from, incident to, or in connection
with, this Agreement or the performance of work hereunder or
breach of the terms hereof, EXCEPT, but only to the extent that,
such claims are found to have been proximately caused by the
negligent act or omission of Marathon, its agents, servants or
employees.
B. Consultant's obligation to defend, indemnify and hold Marathon
harmless against liability as provided for in subparagraph 12A
above specifically includes, without limitation, liability
based, in whole or in part, upon theories of strict liability,
intentional tort or negligence of Consultant and its agents,
servants and employees, or Consultant's subcontractors or
licensees and their agents, servants and employees. Consultant's
obligation, as aforesaid, is not diminished or affected in any
way by a claim that Marathon is jointly or severally liable
therefor. Nothing in this subparagraph 12B shall be construed to
increase the obligations of Consultant as set forth in
Subparagraph 12A above.
C. Without limiting the generality of the foregoing requirements,
Consultant agrees that in the performance of his obligations
hereunder, he will observe any and all local, state, and federal
safety, health, and environmental regulations which may be
applicable; and contractor further agrees to save Marathon
harmless from any losses, damages, claims, or demands of
whatever nature which might arise as a result of Consultant's
failure to observe any applicable safety, health, and
environmental regulations.
D. Marathon reserves the right, in the event it so elects, to
participate at its own expense in the defense of any suit
covered by this provision, however, such participation shall not
excuse Consultant of any obligation hereunder.
-6-
<PAGE>
13. INSURANCE
Without limiting in any way the scope of any obligations and/or
liabilities assumed hereunder by Consultant, Consultant shall purchase from
reputable insurance companies and maintain, at all times while conducting
operations under this Agreement, the following minimum insurances to protect
Consultant from claims which may arise out of or result from the Consultant's
operations under this Agreement.
A. WORKER'S COMPENSATION
(i) Worker's Compensation in compliance with the laws of any
applicable state.
(ii) Employer's Liability with a limit of at least $500,000 per
accident.
B. PUBLIC LIABILITY to cover liability for bodily injury, including death,
and property damage with a combined single limit of at least $500,000
per occurrence. This coverage shall include:
(i) Contractual Liability to cover any assumed liability for damages
because of bodily injury or property damage to third parties
arising out of the performance of this Agreement.
(ii) Independent Contractors to cover work assigned or subcontracted.
(iii) Completed Operations.
Explosion Hazard, Collapse Hazard and Underground Property
Damage.
C. PROFESSIONAL LIABILITY if applicable, to cover liability for damages
resulting from professional services rendered under this Agreement with
a combined single limit of at least $500,000 per occurrence and
$1,000,000 aggregate.
D. BUSINESS AUTOMOBILE LIABILITY including Contractual Liability to cover
owned, non-owned, and hired automotive equipment with a combined single
limit of at least $500,000 each accident.
<PAGE>
GENERAL PROVISIONS
i. Insurance mentioned in items B & C above shall be endorsed
whereby Marathon shall be named as an additional insured under'
the liability policies to the extent of the liability assumed by
Consultant hereunder.
ii. Insurance mentioned in item "A" shall be endorsed to provide a
waiver of subrogation in favor of Marathon.
iii. BEFORE PERFORMING ANY work hereunder, Consultant shall furnish
certificates (Acord Form 25 or 25-S) to Marathon evidencing the
insurances required above and containing the unequivocal
agreement on the part of the insurer to notify Marathon of the
cancellation, non-renewal, or any material changes in said
insurances at least thirty (30) days prior to such cancellation
or change.
F. DEDUCTIBLES
Consultant shall bear the cost of the deductibles of insurance policies
Consultant has procured.
14. DRUG AND ALCOHOL POLICY
Consultant agrees to notify its employees, subcontractors, agents and
representatives of Marathon's Drug and Alcohol Policy. The Policy prohibits
Consultant's employees, subcontractors, agents, and representatives from:
A. using, possessing, distributing, purchasing or selling drugs or
alcohol (except with proper authorization) while on Marathon
premises or while engaged in Marathon business;
B. reporting to and/or performing work for Marathon with
unauthorized drugs or alcohol in excess of the Policy limit
(.04% B.A.C.) in their body; or
C. refusing to submit to routine searches of their person, their
personal property, and Marathon or Consultant-assigned property,
while entering on or leaving Marathon premises.
In addition, Consultant certifies that all of its employees,
subcontractors, agents and representatives who may perform work covered by this
Contract are subject to Laboratory Testing Provisions which are substantially
equal to Marathon's Policy in all respects (a summary of Marathon's Laboratory
Testing Requirements is attached
-8-
<PAGE>
hereto). Consultant agrees to permit Marathon, or its authorized representative,
access to Consultant's property and records, without prior notification, for the
purposes of examining/auditing Consultant's policies, practices and procedures
pertaining to this requirement. Any deficiencies, as determined by Marathon, can
result in Consultant being removed from the work and/or being required to
implement specified modifications prior to proceeding with work.
Consultant agrees to remove and replace, for the purposes of fulfilling
its obligations to Marathon under this Contract, any of its employees,
subcontractors, agents and representatives found to be in violation of its own
anti-drug plan and/or Marathon's Drug and Alcohol Policy, or those that Marathon
believes to be in violation of the Drug and Alcohol Policy whose compliance with
the Policy cannot be certified to by the Consultant based upon laboratory
testing acceptable to Marathon.
15. MATERIALS, APPLIANCES, EMPLOYEES
Unless otherwise stipulated, the Consultant shall provide and pay for
all materials, labor, water, tools, equipment, temporary light, temporary heat,
transportation, and other facilities necessary for the rendering of services
hereunder. Workmanship and materials shall be of good quality.
16. FAULTY MATERIALS AND/OR WORKMANSHIP
Consultant shall promptly revise all work product Marathon has deemed
unacceptable under this Agreement or any Marathon work order, and in such
instances Consultant shall promptly re-execute his own work in accordance with
this Agreement without expense to Marathon.
<PAGE>
17. CARE OF PREMISES
Consultant shall at all times keep the premises free from accumulations
of waste material or rubbish caused by his employees or work; and at the
completion of work, he shall remove all his rubbish, tools, scaffolding,
toolboxes, surplus materials (not purchased by Marathon), and temporary sheds
and structures of all kinds from the premises, leaving the work "broom clean" or
its equivalent.
18. USE OF VEHICLES
Consultant shall comply with parking regulations established by
Marathon's Facility Manager. In no event shall Consultant's vehicles be parked
so as to prevent ingress or egress into and from operating areas.
19. PAYMENT DEDUCTIONS
Marathon shall be entitled to deduct, from any sum or sums owing to
Consultant hereunder, any amounts owed by Consultant to Marathon, and amounts
due or to become due Marathon arising out of indemnification, if applicable, and
to withhold from sums due Consultant hereunder any amount necessary to protect
Marathon against Consultant's failure to pay indebtedness outstanding against
the services performed hereunder and against any loss or damage by reason of any
default of Consultant.
In the event that Marathon disputes any item on a particular invoice,
Marathon shall be entitled to withhold from payment, without payment of
interest, the amount in dispute, until such time as Marathon is satisfied as to
the disputed item.
20. SMOKING PRECAUTIONS
Smoking will not be permitted inside the fence of Marathon's facility
except in areas specifically designated for smoking by the Facility Manager.
<PAGE>
21. FACILITY OPERATION
Before starting work, Consultant shall contact the Facility Manager.
Unless advised to the contrary, Marathon's facility must be kept in full
operations during the performance of services. The Consultant shall schedule his
work so as not to unduly interfere with such operations. After hours work and
weekend work must be coordinated with and approved by the Facility Manager.
22. EXCAVATION
To the best of Marathon's knowledge, all underground facilities in the
construction area have been shown on drawings or other information provided by
Marathon, if any. However, this information is not to be construed as complete.
It is the responsibility of the Consultant to use its best efforts to locate
underground facilities including, but not limited to, cathodic protection
systems, product piping, and electrical conduits before digging. The Consultant
shall then be responsible for the protection of these facilities from any damage
as a result of his operations and is financially liable for their repair.
However, Consultant shall not be held responsible for damage to
underground facilities which are located and shown incorrectly on drawings
provided by Marathon, if Consultant relies on such information and is unable to
locate such facilities by its own efforts, and if Consultant has exercised
reasonable care to avoid damaging such unidentified facilities.
Prior to excavation in any area not owned by Marathon (e.g. public
right-of-way, street, highway, etc.), Consultant shall inquire at state, local
or municipal agencies and the offices of any utilities or utilities protection
service, concerning location of underground facilities.
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<PAGE>
23. CATHODIC PROTECTION SYSTEM--ELECTRICAL BONDING
Marathon has installed cathodic protection systems at its facilities for
the purpose of protecting the facility's tanks and piping systems from
corrosion. In the event cables are exposed or damaged, Marathon's Representative
shall be notified immediately and they will inspect the cable to determine the
extent of the damage. All exposed cables will be inspected for nicks, cuts, or
other minor damage. Damaged cables will be left exposed and qualified corrosion
personnel will be notified to repair the damage. The Consultant shall comply
with the procedures as listed herewith below.
A. Prior to excavation, the location of direct burial cables, test
leads, bond cables, etc., shall be determined by consulting with
the Marathon Representative and referring to the facility's
Cathodic Protection Drawings.
B. Prior to excavation, the cables shall be located and marked in
the field by Marathon's Representative.
C. Rectifiers should be turned "OFF" by Marathon's Representative
prior to excavation near the cathodic protection facilities or
when any portion of the facility's structures (piping, fittings,
conduits, or metallic conductors) are to be separated or
removed. Consultant shall notify the Marathon Representative
when a system will be out of service for any extended period.
D. Excavations across cables shall be by hand. (Cathodic protection
systems installed after 1977 all have direct burial cables
marked with plastic ribbon approximately 4 inches to 6 inches
below grade).
24. RESPONSIBILITIES OF MARATHON
Marathon will assist Consultant by providing information pertinent to
the site of the project such as records, maps, data and other material to which
Marathon has access and which Consultant has need of for the performance of the
services provided for herein.
<PAGE>
Marathon will designate a representative or representatives who will be
authorized to make necessary decisions required on behalf of Marathon in
connection with the execution of this Agreement and who will serve as liaison to
Consultant and will serve to provide the necessary direction and coordination
for this project.
25. RIGHT OF REVIEW
Marathon shall, without limit, have final right of review and approval
of all reports and/or drawings prepared by Consultant, however, review and
approval shall not be unreasonably withheld. Once approved, Consultant shall
seal all drawings as specified in the work order.
26. OWNERSHIP OF MATERIALS
It is agreed that upon receipt of final payment, all final documents,
studies, surveys, drawings, maps, models, photographs and reports prepared by
Consultant under this Agreement shall be considered the property of Marathon.
Upon completion of the service as specified in this Agreement, and upon request
of Marathon, those items which it requires shall be turned over to it, provided
that in any case the Consultant may, at no additional expense to Marathon, make
and retain such copies thereof as Consultant desires. In the event Marathon
should use these documents for another project in a manner that does not relate
to the fitness of purpose of the documents, Marathon agrees to indemnify and
hold harmless the Consultant from any claim or legal action arising out of
liability from the improper use of said documents at a different site or
project, unless the Consultant is involved with such site or project.
27. COMPLETION TIME
Time is of the essence. Completion time will be the number of calendar
days intervening between the date work is commenced and the completion date
specified in
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<PAGE>
a work order under this Agreement. A work project shall be considered completed
when all services are performed and accepted by Marathon. The time stipulated
for completion anticipates a margin for reasonable delays. Any claim by the
Consultant for extension of the performance period for reason of unusual
conditions or conditions beyond the Consultant's control must be made in writing
to Marathon's Representative at the time the event occurred. In his claim, the
Consultant shall describe the condition or event causing the delay and shall
state the extension of time he is requesting. The above claim procedure is the
sole method by which the completion date hereunder may be extended.
28. CHANGES
Marathon or Consultant may, from time to time, during the course of this
Agreement, request modifications of it or changes in the Scope of Work to be
performed hereunder. Such changes, including any increase or decrease in the
amount of Consultant's compensation, which are mutually agreed upon by and
between Marathon and Consultant, shall be incorporated in written amendments to
this Agreement.
29. RIGHT TO TERMINATE
Marathon may, at any time, in its sole discretion, upon written notice
to Consultant, terminate the work provided for hereunder, in which event,
Consultant shall be reimbursed for actual costs incurred to the date of such
notice of termination, at the rates specified in the cost or fee schedules.
However, in no event shall such reimbursement include compensation for work
unperformed. In the event of such termination, all finished or unfinished
documents, data, studies, surveys, drawings, maps, models, photographs, and
reports prepared by Consultant shall, at the option of Marathon, become property
of Marathon.
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<PAGE>
30. FORCE MAJEURE
Any delay in or failure of performance of either Marathon or Consultant
shall not constitute default hereunder or give rise to any claims for damage if
and to the extent such delay or failure of performance is caused by occurrences
beyond the control of the party affected including, but not limited to, acts of
God or the public enemy; expropriation or confiscation of facility; compliance
with any order or request of any governmental authority; acts of war, rebellion
or sabotage or damage resulting therefrom; fires, floods, explosion, accidents;
riots; or any causes whether or not of the same class or kind as those
specifically above named which are not within the control of the party affected,
and which by the exercise of reasonable diligence, said party is unable to
prevent or provide against; and provided, further, that prompt notice is made in
writing to the other party, giving the cause of any such delay or failure to
perform at the time the event occurs.
31. CONFLICT OF INTEREST
Consultant covenants that he presently has no interest and shall not
acquire any interest which would conflict with the performance of the services
required under this Agreement.
32. GUARANTEE
Consultant guarantees and warrants that Consultant will use that degree
of skill and care ordinarily exercised under similar conditions by reputable
members of its profession practicing in the same or similar locality. This
guarantee does not in any way limit Marathon's right to pursue any other
remedies allowed by law.
33. DEFAULT
Consultant shall be considered in default hereunder if Consultant fails
to proceed diligently and carefully in the execution of his work, or fails to
comply with any of his obligations hereunder, and any such failure: (a)
continues beyond
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the completion date called for in this Agreement, or (b) continues for ten (10)
days or more after receipt of written notice from Marathon or reoccurs after
receipt of such notice. In the event of any such default, Marathon shall have
the right, in addition to all other rights and remedies available to it at law
or in equity, to terminate this Agreement and complete the work itself or to
hire a substitute Consultant. In the event of such termination, Consultant shall
be liable to Marathon for all damages allowed by law, including any costs
incurred to complete the work which are in excess of any applicable contract sum
specified in this Agreement or any work order issued hereunder. In addition, in
the event of such termination, Consultant shall not be entitled to any
compensation for the work performed prior to said termination until Marathon has
had the opportunity to complete the contemplated project and to determine the
exact amount of damages caused by Consultant's default. The rights and remedies
available to Marathon contained in this Agreement shall be construed as
cumulative, and no one of them as exclusive of the other or exclusive of any
rights or remedies allowed by law or equity.
34. WAIVER
Marathon's waiver of any of the terms and conditions set forth in this
Agreement shall not be construed or deemed to be a waiver of any future
enforcement thereof or of any other terms and conditions of this Agreement.
35. ASSIGNMENT
Consultant shall not assign this Agreement or any part of the duties to be
performed hereunder without the written consent of Marathon.
36. SUBCONTRACTORS
No subcontractors shall be retained by Consultant to perform
sub-consulting services under this Agreement without prior written approval from
Marathon.
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<PAGE>
37. CONFIDENTIAL INFORMATION
Consultant agrees that any information which pertains to Marathon
received by Consultant during any furtherance of Consultant's obligations in
accordance with this Agreement will be held by Consultant in full confidence and
will not be revealed to any other persons, firms, or organizations, except as
provided for in Marathon's work order.
38. PATENT INDEMNITY
Consultant agrees to forever protect, indemnify and hold Marathon
harmless from and defend Marathon against any and all losses, claims, demands,
proceedings, costs, damages, charges and expenses that may arise or accrue by
reason of the infringement or alleged infringement of any patent, copyright,
design, trademark, violation of process or other protected rights of any person
or entity in the performance of the work hereunder, or by reason of the manner
in which the same is performed, or through the use by Consultant of any patented
article or device.
Consultant agrees to reimburse Marathon for any royalties, or other
similar payments that Marathon shall be obligated to pay by virtue of the use of
Consultant of any such protected rights unless such costs have been specifically
agreed to be borne by Marathon. Consultant shall obtain a patent indemnity, if
obtainable, for any items manufactured or supplied by others for the benefit of
Marathon.
Consultant shall ensure that any subcontracts between Consultant and its
subcontractors, suppliers, or consultants contain a provision substantially
similar to this Provision.
39. CONSULTANT'S PERSONNEL
All personnel employed on or assigned to the work by Consultant shall be
competent and have the requisite qualifications and/or experience for the work
to be performed and Consultant shall assign personnel in such numbers as are
required for
-17-
<PAGE>
the due performance of the work in the time required.
Marathon's representative shall be entitled, without prejudice to any
other rights or remedies available to Marathon under this Contract or otherwise
in law, to object to the work performed and to require Consultant to remove from
the work any person who, in the opinion of Marathon's representative is
incompetent, misconducts himself, is negligent in the proper performance of his
duties or is otherwise considered to be undesirable, and in such event
Consultant shall forthwith remove such person from the work, and such person
shall not be again employed upon the work without the approval of Marathon's
representative. Consultant shall at no additional cost to Marathon forthwith
replace any such removed person with a suitably qualified/experienced person
satisfactory to Marathon's representative.
40. AUDIT RIGHTS
Consultant, its subcontractors and its affiliates shall maintain true and
correct sets of records in connection with the work and all transactions related
thereto and shall retain all such records for a period of not less than twenty
four (24) months after the final acceptance of the work by Marathon.
From the Effective Date of this Contract and within the time period
mentioned above, Marathon shall have the right, during regularly scheduled
business hours, to inspect and audit the procedures, controls, records and
accounting data of a reasonable nature, related to the performance of this
Contract including without limitation all reimbursable costs and the application
of fixed rates, unit rates or fixed lump sums. Such audit shall not apply to the
composition of fixed rates, unit rates, day rates or fixed lump sums contained
in this Contract at the effective date of this Contract nor to the composition
of subsequently agreed lump sums.
<PAGE>
41. ETHICAL BUSINESS CONSIDERATIONS
No director, employee or agent of Consultant shall give or receive any
commission, fee, rebate, gift or entertainment or significant cost or value in
connection with the work, or enter into any business arrangement with any
director, employee or agent of Marathon or any affiliate thereof other than as a
representative of Marathon or affiliate, without prior written notification
thereof to Marathon. Consultant shall promptly notify Marathon of any violation
of this paragraph and any consideration received as a result of such violation
shall be paid over or credited to Marathon.
IN WITNESS WHEREOF the parties hereto have executed the Agreement, the
day and year first above written.
IDS TECHNICAL SERVICES MARATHON OIL COMPANY
- --------------------------------
Consultant
600 Century Plaza Dr. - Bldg 140 By: /s/ ??
- -------------------------------- --------------------------------
Street Address
Houston, TX 77073-6016 Title: Engineering Supervisor
- --------------------------------
City, State, Zip Code
(713) 821-3200
- --------------------------------
Telephone
76-0157248
- --------------------------------
Tax ID No.
By: /s/
- --------------------------------
Title: President
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<PAGE>
SUMMARY OF MARATHON'S DRUG & ALCOHOL LABORATORY TESTING REQUIREMENTS
1. The facilities performing the tests (laboratory analysis) shall be
properly licensed and fully accredited.
2. Marathon conducts drug and alcohol testing under the following
circumstances:
a. Pre-employment Testing - All applicants for employment are
required to submit to Laboratory Testing following their
acceptance of a contingent job offer and prior to beginning work
(drug screen only).
b. Reasonable Suspicion Testing - Undertaken when responsible
officials have reasonable suspicion to believe an employee is in
violation of Marathon's Policy. For example, Laboratory Testing
may be conducted in connection with a search if contraband is
found in common areas and ownership cannot be determined; if an
employee's performance, involvement in an accident, actions or
appearance leads local management to believe there may be a
violation of the Policy; or if an employee is charged with or
being investigated in connection with a drug-related or alcohol-
related criminal offense. The foregoing examples are not meant
to be exclusive; other circumstances may arise which would
constitute reasonable suspicion to request Laboratory Testing.
C. Random Testing - All employees performing work in safety
sensitive positions at all Company locations are subject to
random drug and alcohol testing as outlined below, with the
exception of employees who are covered by a D.O.T. random
testing program.
Marathon defines a SAFETY SENSITIVE POSITION as one in which the
incumbent employee can directly influence operations to the extent that
an improper action or failure to take appropriate action could result in
irremediable consequences leading to injury or death of employees or
others and/or significant property or environmental damage and where
others may have no opportunity to recognize, intervene or rectify a
mistake before the harm occurs.
Random Testing will be conducted at an annualized rate of 25%.
d. Return to Work Testing - Employees who are permitted to return
to work following a positive laboratory test or other Policy
violation and/or rehabilitation are subject to Laboratory
Testing as determined by Health Services, and as outlined in a
Return to Work Agreement.
e. Aviation Department Testing - Employees in Marathon's Aviation
Department are subject to periodic unannounced testing at least
once per year.
f. Periodic Testing - Employees in positions requiring periodic
Department of Transportation (Federal Highway Administration
(FHWA) or Federal Aviation Administration (FAA) physical
examinations will be required to submit to Laboratory Testing
when they undergo their periodic physical examination.
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EXHIBIT 10.8
CONTRACT NO. ES-TE- 115
ENGINEERING DESIGN SERVICES AGREEMENT
BETWEEN
TEXAS EASTERN TRANSMISSION CORPORATION
AND
IDS TECHNICAL SERVICES
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS.............................. 1
1.1 Affiliates................... 1
1.2 Engineer..................... 1
1.3 Crew......................... 2
1.4 Site......................... 2
1.5 Specifications............... 2
1.6 Work......................... 2
ARTICLE 2
EXHIBITS................................. 2
2.1.1 Exhibit A.................... 2
2.1.2 Exhibit B.................... 2
2.1.3 Exhibit C.................... 2
2.1.4 Exhibit D.................... 2
2.1.5 Exhibit E.................... 2
2.1.6 Exhibit F.................... 2
ARTICLE 3
<PAGE>
ACTIVATION ORDER......................... 3
ARTICLE 4
MANNER OF PERFORMANCE OF THE WORK........ 4
ARTICLE 5
<PAGE>
COMPLIANCE WITH PLANS AND
SPECIFICATIONS.........................I 6
ARTICLE 6
CONSIDERATION............................ 6
ARTICLE 7
STATE AND LOCAL TAXES.................... 7
ARTICLE 8
INSURANCE................................ 8
ARTICLE 9
RIGHT TO SUSPEND THE WORK OR
TERMINATEAGREEMENT ................... 10
ARTICLE 10
CONTRACTOR'S RECORD OF CONSTRUCTION
COSTS.................................. 10
ARTICLE 11
WORK NOT TO INTERFERE WITH COMPANY
OPERATIONS ............................ 11
ARTICLE 12
ASSIGNMENT AND SUBCONTRACTING ........... 11
ARTICLE 13
DRUG TESTING/ALCOHOL .................... 11
ARTICLE 14
NOTICES ................................. 12
<PAGE>
ARTICLE 15
ARBITRATION ............................. 12
ARTICLE 16
ETHICS .................................. 13
<PAGE>
ENGINEERING SERVICES AGREEMENT
This Engineering Services Agreement ("AGREEMENT") IS made and entered into
this 25th day of July, 1994, by and between IDS TECHNICAL SERVICES,
("CONTRACTOR"), a Texas Corporation, and TEXAS EASTERN TRANSMISSION CORPORATION,
("COMPANY"), A Delaware Corporation;
WITNESSETH:
WHEREAS, Contractor represents that it is in the business of providing
Engineering Design Services; and,
WHEREAS, the Company desires to enter into this Agreement to enable
Company to utilize Contractor, on an "as needed" basis, to perform the Work and
other Work for which Contractor is qualified, pursuant to this Agreement and a
work order ("ACTIVATION ORDER") to be executed at the time of performance by
Contractor and Company; and,
WHEREAS, Contractor desires to enter into this Agreement and is willing,
on an "as available" basis, to perform the Work for Company, pursuant to this
Agreement, including the relevant Activation Order.
NOW, THEREFORE, in consideration of the mutual covenants herein contained
Contractor and Company agree as follows:
ARTICLE I
DEFINITIONS
In this Agreement the following definitions shall apply:
1.1 Affiliates shall mean any corporation, partnership, joint venture,
division or other legal entity, directly or indirectly, through one or more
intermediaries, controlling, controlled by, or under common control with
Company. Without limiting the foregoing, Panhandle Eastern Corporation and all
of its subsidiaries of every tier are Affiliates.
1.2 Engineer shall mean Company's authorized engineer in charge of the
Work covered by an Activation Order, acting directly or through field or
resident engineers or inspectors, such field or resident engineers or inspectors
acting within the scope of the particular duties assigned to them.
<PAGE>
1.3 Crew shall mean a complete complement of personnel, which ordinarily
performs one kind of task incident to the performance of Work under the
Agreement.
1.4 Site shall mean the location or immediate area of the Work.
1.5 Specifications, if applicable, shall mean the Standards and
Specifications contained in Exhibit B hereto.
1.6 Work shall mean all of those personnel, tasks, services, labor,
supervision, materials, equipment, supplies, transportation and all other
tangible or material things required to be undertaken, produced, delivered, or
furnished by Contractor or any of its subcontractors of every tier as specified
in or reasonably inferable from this Agreement and the Exhibits, and shall
include items, services or tasks incidental or preliminary thereto, including
procurement of any necessary permits, licenses, or agreements or other matters
related to the Work not otherwise finished by Company. The Work shall be more
particularly described in the relevant Activation Order.
ARTICLE 2
EXHIBITS
2.1 The following Exhibits are part of this Agreement whether or not
physically attached hereto:
2.1.1 Exhibit A - Form of Activation Order.
2.1.2 Exhibit B - Standards and Specifications.
2.1.3 Exhibit C - Contractor's current Labor and Equipment Rate
Schedule and/or Unit Price Lists.
2.1.4 Exhibit D - Special Instructions.
2.1.5 Exhibit E - Notice Information.
2.1.6 Exhibit F - Insurance Requirements.
2
<PAGE>
2.2 Should any conflict exist between this Agreement and the Exhibits
attached hereto, this Agreement shall prevail except to the extent a specific
exception to this Agreement is stated in Exhibit D, in which case the exception
shall prevail. All provisions of Exhibit D shall take precedence over Exhibits A
and B. In the event of any conflict, omission, discrepancy, or ambiguity in the
Agreement, the resolution of which is not specifically provided for, the
decision of Engineer shall govern the performance of the Work, and to the extent
such Work is not within the reasonable intent of the Agreement, such Work shall
be paid for as extra work.
ARTICLE 3
ACTIVATION ORDER
3.1 All Work shall be identified in an Activation Order which shall
reference this Agreement and be signed by Contractor and Company prior to the
commencement of the Work. From time to time as Company requires Work to be
performed by Contractor, Company shall issue an Activation Order for the
performance of the Work.
3.2 Company shall prepare the Activation Order, clearly describing the
scope of Work to be provided, any insurance requirements in addition to those
provided in this Agreement, and any special instructions or conditions. Upon
execution of the Activation Order by Company and Contractor, Contractor shall
perform the Work.
3.3 The Activation Order may specify changes, additions, deletions or
qualifications to the Standards and Specifications contained in Exhibit B,
Contractor's current Labor and Equipment Rate Schedule and/or Unit Price Lists
contained in Exhibit C, and the Special Instructions contained in Exhibit D. The
Activation Order shall not change, delete or amend this Agreement (including the
Exhibits thereto) other than Section 7. 1, and Exhibits B, C and D. If there is
a conflict between the terms of the executed Activation Order and the terms of
this Agreement, other than Section 7.1 and Exhibits B, C and D, the terms of
this Agreement shall prevail over the terms of the executed Activation Order.
3.4 The provisions contained in any Activation Order shall be effective
only for that Activation Order, and shall not affect any past, current or future
Work under any other Activation Order.
3.5 All Work shall be performed in accordance with the Standards and
Specifications contained in Exhibit B.
3
<PAGE>
3.6 Company shall have the right to secure performance and/or payment
bonds to guarantee the performance of the Work by Contractor. Any bonding
requirements shall be stated in the Activation Order.
3.7 Company shall have the right to retain ten percent (10%) of all sums
due Contractor. Company shall hold the ten percent (10%) retainage pending final
acceptance of the Work by Company and the furnishing by Contractor of evidence
satisfactory to Company that Contractor has made payment of all bills and claims
of any nature, after which the net amount owing Contractor shall be paid;
provided, however, Company at its option may pay to Contractor any part of such
retained sum which Company believes is not necessary to protect Company for
uncompleted Work or unpaid material or labor bills, or other claims of which
Company has knowledge. Notwithstanding anything contained in the foregoing,
Company shall have the right, at its sole discretion, to withhold any of such
retainage for a minimum period, after completion of the Work, equal to the
greater of thirty (30) days, or the period during which, under the laws of the
applicable jurisdiction, a mechanic's and/or materialman's lien could properly
be perfected by the filing of the necessary lien documents in the appropriate
governmental office. Any retainage requirement shall be stated in the Activation
Order.
3.8 Contractor agrees to commence the Work on the date specified in the
Activation Order and to pursue it diligently so that the Work will be completed
by the date or within the time specified, or if no date or time is specified,
then as quickly as is reasonably possible.
3.9 The Activation Order shall be binding only when executed by
representatives of Company and Contractor authorized to commit for such Work and
the estimated cost of such Work.
3.10 Nothing contained herein shall preclude the parties, by means of
mutually agreed upon amendments to this Agreement, from permanently altering in
whole or in part the Labor and Equipment Rate Schedule and/or Unit Price Lists
contained in Exhibit C hereof.
ARTICLE 4
MANNER OF PERFORMANCE OF THE WORK
4.1 Contractor agrees to finish the required materials, supplies,
supervision, labor, equipment, implements, machines, trucks, and all other
things necessary for and to do and perform the Work. Contractor is to perform
the Work as an independent contractor, free of the control and/or supervision of
Company as to means and method of performing same. All persons engaged in the
performance of the Work shall be solely the servants or employees of Contractor
or of the relevant subcontractor, where subcontracting is
4
<PAGE>
authorized by Company. Engineer shall have the right to make such inspection of
the Work as is necessary,, to insure compliance by Contractor with the
obligations assumed hereunder, but Company shall not be deemed obligated to
perform any such inspection. Engineer shall accept the Work performed by
Contractor or reject such Work if it is not in compliance with this Agreement.
4.2 Contractor shall exercise a high degree of skill, care, and diligence
in the performance of the Work. Contractor warrants that the Work shall be
performed in a good and workmanlike manner and in strict accordance with this
Agreement.
4.3 Contractor at all times shall enforce strict discipline and good order
among its employees and those of its subcontractors. Company shall have the
right at all times to require the removal from the Work and the Site, of any
employee of Contractor or any subcontractor if that employee, in Company's good
faith judgment, appears unqualified or otherwise unfit to continue.
4.4 If required by Company, Contractor shall inform Company in writing of
the names of the personnel to be assigned to the Work, and shall not remove or
replace such personnel without written notice to Engineer.
4.5 Contractor shall give due consideration to the interest of property
owners and tenants wherever involved and shall conduct the Work in a manner
causing minimum inconvenience and damage. Contractor shall provide and maintain
a safe condition at any crossing of public roads and/or private roads, and any
entrances that may be opened by the Contractor to perform the Work.
4.6 If Contractor is delayed by reason of Company's failure to supply
Contractor with any necessary information, access to right-of-way or any of the
materials, machinery, or equipment specified by this Agreement to be supplied by
Company, the completion date of the Work provided for in the Activation Order
shall be extended to the extent that Contractor is delayed in carrying on the
Work by reason of such failure by Company. In the event Contractor incurs
additional costs as a result of such delay, the consideration shall be equitably
adjusted. Such extension and adjustment to the consideration shall constitute
Contractor's sole and exclusive remedy for damages caused by reason of such
delay. The foregoing notwithstanding, if such delay results in Contractor's
being totally unable to proceed with the Work, such delay will be considered as
a suspension required by Company within the meaning of Article 9.
5
<PAGE>
4.7 Contractor shall not open up work to the prejudice of Work already
started and shall arrange its Work and dispose of materials in a manner to
insure the least possible interference with and inconvenience to the landowners
on whose property the Work is being performed.
4.8 Contractor shall employ such number of Crews as are reasonably
necessary to perform the Work within the time allotted; provided, that Company
may, should this Agreement be for Work to be furnished on a fixed price basis,
at no extra cost to Company, require the employment of additional Crews if, in
its judgment, it is necessary in order to complete the Work within the time
provided.
ARTICLE 5
COMPLIANCE WITH PLANS AND SPECIFICATIONS
5.1 Unless otherwise agreed in writing, all materials and supplies
required to be furnished by Contractor shall conform to and be in accordance
with the requirements set out in the Exhibits, plus any detailed drawings for
the Work which may be prepared and furnished by Company, all of which shall be
furnished in advance of their actual need in order that the Work may be
performed with due diligence.
5.2 If any Work performed by Contractor is determined by Engineer not to
have been performed in a good and workmanlike manner or otherwise not to be in
compliance with this Agreement, Contractor shall, at its own expense,
immediately repair or replace the defective Work in a manner complying with this
Agreement.
ARTICLE 6
CONSIDERATION
6.1 Company shall pay Contractor for the Work performed and all materials
supplied by Contractor hereunder in the amount and manner provided in Exhibit C
and the Activation Order.
6.2 Exhibit C and the Activation Order shall cover and include all the
considerations to be received by Contractor from Company for the performance of
the Work described in the Activation Order, whether or not specifically
enumerated in Exhibit C, and shall cover and include all overhead,
superintendence, labor, use of equipment furnished, and all other cost and
expense incurred by Contractor in the performance of said Work.
6
<PAGE>
6.3 Contractor shall pay promptly all indebtedness for equipment,
materials, supplies and labor used in the Work for each Activation Order.
Contractor shall not permit any lien or charge to attach to the result produced
by the Work or the premises upon which the Work is being performed, but if any
shall so attach, Contractor promptly shall remedy all damage and pay every
expense incidental thereto. Contractor shall hold Company free and harmless from
all claims, losses, and liability resulting from Contractor's failure to pay any
such charges or to discharge any mechanics' and materialmen's liens or similar
charges.
ARTICLE 7
STATE AND LOCAL TAXES
7.1 The prices, sums, rates and other charges set forth in Exhibit C and
the Activation Order shall not include sales, use, value added or any other
excise tax ("Tax" or "Taxes")which may be applicable to the Work.
7.2 It is the responsibility of Contractor to familiarize itself with all
applicable state and local Taxes and to observe and comply with all state and
local laws, ordinances, regulations, orders and decrees that relate thereto,
including the filing of all applicable state and local Tax returns. In addition,
it is the responsibility of Contractor to be familiar with all state and local
Tax exemptions for which the Work qualifies and to avail itself of those
exemptions.
7.3 It is the obligation of Contractor to ascertain the applicability of
Taxes for each Activation Order. If Taxes are determined to be applicable,
Contractor shall timely invoice Company for such Taxes. Such Taxes shall be
separately stated on the invoice, and if only a portion of the Work is
determined to be taxable, then the taxable portion and the non-taxable portion
shall be separately stated with Tax applied only to the taxable portion.
7.4 If Taxes are determined by Contractor to be not applicable, Contractor
shall notify Company in writing prior to the commencement of the Work. If
Company thereafter determines that the Tax is applicable to part or all of the
Work, Company shall notify Contractor in writing within thirty (30) days of the
commencement of the Work and Contractor shall invoice Company for the Tax in
accordance with Section 7.3. Failure by Contractor to timely invoice for Tax
timely shall relieve Company of any applicable interest or penalty.
7
<PAGE>
7.5 If Company does not notify, Contractor pursuant to Section 7.4,
Company shall reimburse Contractor for any Tax, interest and penalty which may
be levied by any applicable taxing authority on the Work performed by
Contractor. However, this obligation is contingent upon Contractor giving
Company proper notice of any proposed or actual assessment, adjustment,
determination or finding of Tax by any taxing authority relating to the Work
performed by Contractor within ten (10) days of Contractor's receipt of such
notice. Company shall have the sole right to direct Contractor in the handling
of all matters relating to the assessment, adjustment, determination or finding
of Tax relating to the Work performed by Contractor, including the filing of
protest and any appeals resulting therefrom. Any costs, other than
administrative costs incurred by Contractor's employees, incurred in the pursuit
of such protest or appeals shall be the responsibility of Company.
7.6 If the Tax cannot be separately stated because it is included in the
prices, sums, rates and other charges, the invoice must clearly state that all
applicable sales or use tax is included in the invoiced amount. Charges for
labor and materials shall also be separately stated on- the invoice.
7.7 Notwithstanding anything to the contrary contained in this Agreement,
any Activation Order may provide otherwise than is provided in this Article 7.
ARTICLE 8
INSURANCE
8.1 Prior to commencement of the Work and at all times during the term of
this Agreement, Contractor shall provide and maintain in full force and effect,
insurance of the types and with limits not less than those specified in Exhibit
F of this Agreement.
8.2 Prior to commencement of the Work and at all times during the term of
this Agreement, Contractor shall require each of its subcontractors, of every
tier, to provide and maintain (a) Worker's Compensation, (b) Employer's
Liability, (c) Automobile Liability and (d) General Public Liability insurance
coverage having minimum limits consistent with those required to be carried by
Contractor.
8
<PAGE>
8.3 All insurance policies provided and maintained by Contractor and each
subcontractor shall:
8.3.1 Be underwritten by insurers which are rated "A VII" or higher
by the most current edition of BEST'S KEY RATING GUIDE, and
which are authorized to write insurance in the state or states
in which the Work is to be performed;
8.3.2 Be endorsed to specifically name Company and its Affiliates as
additional insured, excluding, however, Worker's Compensation;
8.3.3 Be endorsed to provide that each underwriter waives its rights
of subrogation against Company and its Affiliates;
8.3.4 Provide that such policies are without right of contribution
from any other insurance available to Company and its
Affiliates; and,
8.3.5 Contain cross liability and severability of interest
provisions.
Evidence of such specific endorsements shall be provided with Contractor's
certificate of insurance furnished pursuant to Section 8.4.
8.4 Contractor shall provide Company with certificate(s) of insurance,
satisfactory to Company, evidencing all required insurance under this Article
prior to commencement of the Work, and replacement certificate(s) of insurance
during the term of this Agreement. Such certificate(s) of insurance shall be on
a form provided by Company and shall contain a provision that Company will
unqualifiedly receive at least thirty (30) days written notice prior to any
cancellation of or material change in the required insurance. Company at its
sole discretion, may require Contractor to submit the original or a certified
copy of Contractor's insurance policies for inspection by Company.
8.5 All insurance required herein shall be written to protect Contractor
against liability for damage, loss or expense arising from damage to property or
injury to or death of any person or persons arising in any way out of, in
connection with, or resulting from the Work.
9
<PAGE>
8.6 Contractor shall pay promptly all premiums for insurance in strict
accordance with the obligations to its carrier or carriers such that Contractor
at all times shall have full insurance coverage as herein provided.
8.7 Contractor's compliance with the provisions of this Article and the
limits of insurance specified and to be provided by Contractor shall not
constitute a limitation of Contractor's liability for its acts or omissions or
in any way limit, modify, or otherwise affect Contractor's indemnification
obligation pursuant to this Agreement. The insolvency, bankruptcy, or failure of
any insurance company carrying insurance for Contractor, or failure of any such
insurance company to pay claims asserted, shall not abrogate, waive or alter any
of Contractor's responsibilities or liabilities hereunder.
8.8 Any failure to comply with all of the provisions of this Article by
Contractor or any of its insurance companies, or the insolvency, bankruptcy or
failure of any such insurance company, shall permit Company to suspend all Work
until compliance is achieved or a solvent insurance company utilized. At the
option of Company, Company may pay any insurance premiums in order to achieve
compliance for Contractor and deduct the amount of the premiums, and all other
costs incurred by Company in achieving compliance, from amounts to be paid to
Contractor. If compliance is not achieved or a solvent insurance company
utilized within a reasonable time, in the opinion of Company, Company may
terminate this Agreement and Contractor's sole and exclusive remedy shall be to
receive payment for the percentage of Work actually completed by Contractor.
ARTICLE 9
RIGHT TO SUSPEND THE WORK
OR TERMINATE AGREEMENT
In the event Company is prevented by legal proceedings or conditions
beyond its reasonable control from continuing with the Work, then Company may
require Contractor to suspend the Work or Company may terminate this Agreement.
In either such event, Contractor's sole and exclusive remedy shall be to receive
payment for the Work actually completed by Contractor.
10
<PAGE>
ARTICLE 10
CONTRACTOR'S RECORD OF CONSTRUCTION COSTS
10.1 Upon request, Contractor shall furnish Company conformed and true
copies of all proposals, purchase orders and detailed invoices for all materials
and supplies purchased and used, and for all labor furnished by Contractor, in
the performance of the Work. Such information shall be supplied in the form
prescribed by Company and may be retained by Company in its permanent files.
Contractor shall assist Engineer in every reasonable way in securing daily
records of unit costs and man-hour performance that may be requested.
10.2 Contractor shall maintain and shall require its subcontractors of
every tier to maintain adequate books and records according to generally
accepted accounting principles consistently applied which reflect all costs,
labor, hours, equipment time and other expenses of whatever nature incurred by
Contractor in accordance with the Agreement. Company shall be entitled from time
to time during the performance of the Work and for a period of three (3) years
after final acceptance of the Work to audit the books and records so maintained.
If audit by Company reveals charges or costs charged to or paid by Company as
costs or fees which are not proper or exceed the rates or amounts permitted
under this Agreement for any such matters, then Company shall be entitled upon
demand for a refund from Contractor of all such amounts, plus interest thereon
from the date of payment by Company until the date of refund by Contractor at
the rate of the lesser of (i) eighteen percent (18%) per annum or (ii) the
maximum rate allowed by law.
ARTICLE 11
WORK NOT TO INTERFERE WITH COMPANY OPERATIONS
Contractor agrees to carry on its Work with extreme care to permit the
continuous and safe operation of Company's pipeline system as well as the
pipelines, sewers, water or gas mains, electric or telephone lines or other
facilities of other companies. Contractor shall perform the Work in a manner
that offers a minimum of interference with Company's operations. Contractor's
employees shall not enter Company's buildings except when required by
construction. Contractor shall not permit smoking or open fires in any areas
other than those specified by Engineer.
<PAGE>
ARTICLE 12
ASSIGNMENT AND SUBCONTRACTING
12.1 Contractor shall not assign this Agreement or subcontract any of the
Work without the written consent of Company, and any such assignment or
subcontracting of any such Work without such consent shall be null and void.
Company's consent to subcontracting or assignment, if granted, shall not relieve
Contractor of any of its liabilities and responsibilities hereunder. Company
shall have the right to approve or disapprove the specific subcontractor as well
as the right to subcontract in general. Each approved subcontract shall contain
provisions which specifically bind the subcontractor to the applicable terms and
provisions of this Agreement.
12.2 Notwithstanding the foregoing, Contractor shall have the right to
assign all, but not part, of the sums owing it by Company. Such assignment shall
not become effective until thirty (30) days after written notice thereof, signed
by Contractor, has been received by Company at its -Houston office, and all
payments made by Company prior to such effective date shall be valid.
ARTICLE 13
DRUG TESTING/ALCOHOL
Company does not condone in any way the use of illegal drugs or the
illegal use of controlled substances. Company does not condone in any way the
consumption of alcoholic beverages during the performance of the Work or any
person at the Site being under the influence of alcohol. Any person under the
influence of alcohol, or in possession of alcohol or any illegal drug, or in the
illegal possession of a controlled substance, will be removed from the Work. In
addition, where required by the Department of Transportation, Contractor shall
have in place a drug testing program meeting the requirements imposed by the
Department of Transportation as specified in Title 49 of the Code of Federal
Regulations, Parts 40 and 199, and shall furnish to Company proof of compliance
with such regulations. Such proof shall consist of a copy of Contractor's drug
testing plan and an affidavit stating that Contractor is in compliance and will
remain in compliance for the duration of the Agreement. Upon request, Contractor
will furnish Company with copies of the records of employee drug test results
required to be kept under the provisions of 49 C.F.R. subsection 199.23 (a)(2)
and (3). Contractor will indemnify and hold harmless Company from any and all
liability for (a) Contractor's employees who fail a drug test given under the
Department of Transportation regulations, and (b) any claims made by a
Contractor's employee resulting from removal from the Work as provided in this
Article. If Contractor fails to comply with these regulations while performing
under this
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Agreement, such non-compliance will be deemed a breach of such Agreement and
Contractor shall be liable for such breach as well as for all damages arising
out of such non-compliance,
ARTICLE 14
NOTICES
14.1 All notices required or permitted to be given by this Agreement,
except where oral notice is specifically authorized, shall be in writing, shall
identify this Agreement by contract number and shall be mailed, delivered, or
sent via facsimile to the party at the address set out in Exhibit E.
14.2 Written notices shall be deemed delivered on the date of actual hand
delivery, or the date that a facsimile is actually received, or if sent in the
United States mail postage prepaid, correctly addressed, then on the third
business day after the day on which mailed. Either party's address for notice
may be changed by written notice given in accordance with this Article 14. This
Agreement shall apply with respect to all Work requested by Company on or before
July 25, 1995.
ARTICLE 15
ARBITRATION
15.1 Any controversy or claim arising out of or relating to this
Agreement, or the breach, termination or validity thereof, that cannot be
resolved by the parties through the process of negotiation, shall be settled by
arbitration in accordance with the Center for Public Resources Rules for
Non-Administered Arbitration of Business Disputes, by three (3) arbitrators, of
whom each party shall appoint one (1). The arbitration shall be governed by the
United States Arbitration Act, 9 U.S.C. ss. 1-16, and judgment upon the award
rendered by the arbitrators may be entered by any court provided in Section
15.2.
15.2 CONTRACTOR AND COMPANY HEREBY IRREVOCABLY SUBMIT TO THE JURISDICTION
OF ANY STATE OR FEDERAL COURT SITTING IN HARRIS COUNTY, TEXAS, IN ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT, AND AGREE THAT NO SUCH
PARTY SHALL BRING ANY SUCH ACTION OR PROCEEDING IN ANY OTHER COURT, OR SEEK TO
REMOVE SUCH ACTION OR PROCEEDING TO ANY OTHER COURT.
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ARTICLE 16
ETHICS
Contractor, its directors, officers, employees, representatives, agents,
subcontractors and assignees of Contractor or any such subcontractor
(collectively the "CONTRACTOR WORK PARTIES") shall not at any time solicit,
accept, offer or bestow gratuities of more than nominal value from or to one or
more of the Companv and its affiliates, the employees, agents, or
representatives of Company or its affiliates, any of Company's other
contractors, the employees, agents, or representatives of such other
contractors, one or more of the Contractor Work Parties, or anyone else
associated with the Work. Violation of this policy by any of the Contractor Work
Parties shall constitute a material breach of Contractor's obligations under the
Agreement, and the party who is found to have violated the provisions of this
Section shall be immediately removed from the Work by Contractor at Contractor's
sole risk, cost and expense.
ARTICLE 17
MISCELLANEOUS PROVISIONS
17.1 Contractor, its subcontractors and assignees shall not publish or
make known to others the subject matter or results of the Work or any
information concerning Company, other than that in the public domain, furnished
to or acquired by Contractor, its subcontractors and assigns without Company's
written approval. The obligations established in this Section shall survive and
remain enforceable after any termination of the Agreement.
17.2 If the enforcement of the obligations of Contractor, its
subcontractors or assigns hereunder is referred to any attorney by the Company,
then Contractor shall pay the Company's reasonable attorney's fees and court
costs in addition to any other relief which may be obtained.
17.3 Contractor shall comply with all applicable laws, orders, rules and
regulations bearing upon its obligations hereunder.
17.4 In the event that any statute or rule of law should be held
applicable to any provisions contained in this Agreement which would render
void, voidable or unenforceable any such provision(s) by reason of such
provision(s) being contained herein, then, and only in such event, such
provision(s) shall be read, construed and enforced as to the parties as if such
provision(s) which is held to violate the statute or
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rule of law was excluded from this Agreement, but only to the extent or degree
by which such provision(s) is so held, and this Agreement shall otherwise remain
in force and effect and binding upon the parties.
17.5 This Agreement and the attached Exhibits constitute the entire
agreement between Company and Contractor. None of these documents may be amended
except by a writing signed by both parties. No promise, agreement or
representation not set forth in this Agreement or an attached Exhibit shall be
of any force or effect.
17.6 All headings appearing in this Agreement are for convenience only,
and shall not be considered a part of this Agreement for any purpose or as in
any way interpreting, construing or modifying this Agreement.
17.7 No waiver by either party of any right, or waiver of any default of
the other in the performance of any of the provisions of this Agreement shall
operate or be construed as a waiver of any future right or default, whether of a
like or of a different nature.
17.8 In the event of any dispute under this Agreement, Contractor shall,
notwithstanding the pendency of such dispute, diligently proceed with the
performance of this Agreement without prejudice to the rights of either party.
17.9 The individual executing this Agreement on behalf of Contractor does
hereby represent and warrant that he or she is fully authorized and empowered to
execute same on behalf of Contractor, and to fully bind Contractor to all of the
terms hereof.
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IN WITNESS WHEREOF, Contractor and Company have executed this Agreement as of
the date first above written. COMPANY:
TEXAS EASTERN TRANSMISSIONS
CORPORATION
BY: /s/ S.L. HORTON
S.L. Horton
TITLE: Vice President
CONTRACTOR:
IDS TECHNICAL SERVICES
BY: /s/ WILLIAM A. COSKEY
William A. Coskey
TITLE: PRESIDENT
16
EXHIBIT 10.9
CONTRACT NO. ES-TGC-115
ENGINEERING DESIGN SERVICES AGREEMENT
BETWEEN
TRUNKLINE GAS COMPANY
AND
IDS TECHNICAL SERVICES
TABLE OF CONTENTS
ARTICLE I Page
DEFINITIONS........................................ 1
1.1 Affiliates.......................... 1
1.2 Engineer............................ 1
1.3 Crew................................ 2
1.4 Site................................ 2
1.5 Specifications...................... 2
1.6 Work................................ 2
ARTICLE 2
EXHIBITS........................................... 2
2.1.1............Exhibit A.................... 2
2.1.2............Exhibit B.................... 2
2.1.3............Exhibit C.................... 2
2.1.4............Exhibit D.................... 2
2.1.5............Exhibit E.................... 2
2.1.6............Exhibit F.................... 2
ARTICLE 3
ACTIVATION ORDER.............................. 3
ARTICLE 4
MANNER OF PERFORMANCE OF THE WORK............. 4
ARTICLE 5
<PAGE>
COMPLIANCE WITH PLANS AND SPECIFICATIONS...... 6
ARTICLE 6
CONSIDERATION................................. 6
ARTICLE 7
STATE AND LOCAL TAXES......................... 7
ARTICLE 8
INSURANCE..................................... 8
ARTICLE 9
RIGHT TO SUSPEND THE WORK OR TERMINATE
AGREEMENT.. ................................ 10
ARTICLE 10
CONTRACTOR'S RECORD OF CONSTRUCTION COSTS.......... 10
ARTICLE 1 1
WORK NOT TO INTERFERE WITH COMPANY OPERATIONS...... 11
ARTICLE 12
ASSIGNMENT AND SUBCONTRACTING...................... 11
ARTICLE 13
DRUG TESTING/ALCOHOL............................... 11
ARTICLE 14
NOTICES............................................ 12
ARTICLE 15
ARBITRATION........................................ 12
ARTICLE 16
ETHICS............................................. 13
<PAGE>
ARTICLE 17
MISCELLANEOUS PROVISIONS........................... 13
EXHIBIT A
FORM OF ACTIVATION ORDER........................... A - I
EXHIBIT B
STANDARDS AND SPECIFICATIONS ...................... B - I
EXHIBIT C
CONTRACTOR'S CURRENT LABOR AND EQUIPMENT RATE SCHEDULE AND/OR
UNIT PRICE LISTS......................... C - I
EXHIBIT D
SPECIAL INSTRUCTIONS............................... D - I
EXHIBIT E
NOTICE INFORMATION................................. E - I
EXHIBIT F
INSURANCE REQUIREMENTS............................. F - I
<PAGE>
ENGINEERING SERVICES AGREEMENT
This Engineering Services Agreement ("Agreement") is made and entered into
this 25th day of July, 1994, by and between IDS TECHNICAL SERVICES,
("CONTRACTOR"),A Texas Corporation, and TRUNKLINE GAS COMPANY, ("COMPANY"),A
Delaware Corporation;
WITNESSETH:
WHEREAS, Contractor represents that it is in the business of providing
Engineering Design Services; and,
WHEREAS, the Company desires to enter into this Agreement to enable
Company to utilize Contractor, on an "as needed" basis, to perform the Work and
other Work for which Contractor is qualified, pursuant to this Agreement and a
work order ("ACTIVATION ORDER") to be executed at the time of performance by
Contractor and Company; and,
WHEREAS, Contractor desires to enter into this Agreement and is willing,
on an "as available" basis, to perform the Work for Company, pursuant to this
Agreement, including the relevant Activation Order.
NOW, THEREFORE, in consideration of the mutual covenants herein contained
Contractor and Company agree as follows:
ARTICLE I
DEFINITIONS
In this Agreement the following definitions shall apply:
1.1 Affiliates shall mean any corporation, partnership, joint venture,
division or other legal entity, directly or indirectly, through one or more
intermediaries, controlling, controlled by, or under common control with
Company. Without limiting the foregoing, Panhandle Eastern Corporation and all
of its subsidiaries of every tier are Affiliates.
1.2 Engineer shall mean Company's authorized engineer in charge of the
Work covered by an Activation Order, acting directly or through field or
resident engineers or inspectors, such field or resident engineers or inspectors
acting within the scope of the particular duties assigned to them.
<PAGE>
1.3 Crew shall mean a complete complement of personnel, which ordinarily
performs one kind of task incident to the performance of Work under the
Agreement.
1.4 Site shall mean the location or immediate area of the Work.
1.5 Specifications, if applicable, shall mean the Standards and
Specifications contained in Exhibit B hereto.
1.6 Work shall mean all of those personnel, tasks, services, labor,
supervision, materials, equipment, supplies, transportation and all other
tangible or material things required to be undertaken, produced, delivered, or
furnished by Contractor or any of its subcontractors of every tier as specified
in or reasonably inferable from this Agreement and the Exhibits, and shall
include items, services or tasks incidental or preliminary thereto, including
procurement of any necessary permits, licenses, or agreements or other matters
related to the Work not otherwise furnished by Company. The Work shall be more
particularly described in the relevant Activation Order.
ARTICLE 2
E XHIBITS
2.1 The following Exhibits are part of this Agreement whether or not
physically attached hereto:
2.1.1 Exhibit A - Form of Activation Order.
2.1.2 Exhibit B - Standards and Specifications.
2.1.3 Exhibit C - Contractor's current Labor and Equipment Rate
Schedule and/or Unit Price Lists.
2.1.4 Exhibit D - Special Instructions.
2.1.5 Exhibit E - Notice Information.
2.1.6 Exhibit F - Insurance Requirements.
2
<PAGE>
2.2 Should any conflict exist between this Agreement and the Exhibits
attached hereto, this Agreement shall prevail except to the extent a specific
exception to this Agreement is stated in Exhibit D, in which case the exception
shall prevail. All provisions of Exhibit D shall take precedence over Exhibits A
and B. In the event of any conflict, omission, discrepancy, or ambiguity in the
Agreement, the resolution of which is not specifically provided for, the
decision of Engineer shall govern the performance of the Work, and to the extent
such Work is not within the reasonable intent of the Agreement, such Work shall
be paid for as extra work.
ARTICLE 3
ACTIVATION ORDER
3.1 All Work shall be identified in an Activation Order which shall
reference this Agreement and be signed by Contractor and Company prior to the
commencement of the Work. From time to time as Company requires Work to be
performed by Contractor, Company shall issue an Activation Order for the
performance of the Work.
3.2 Company shall prepare the Activation Order, clearly describing the
scope of Work to be provided, any insurance requirements in addition to those
provided in this Agreement, and any special instructions or conditions. Upon
execution of the Activation Order by Company and Contractor, Contractor shall
perform the Work.
3.3 The Activation Order may specify changes, additions, deletions or
qualifications to the Standards and Specifications contained in Exhibit B,
Contractor's current Labor and Equipment Rate Schedule and/or Unit Price Lists
contained in Exhibit C, and the Special Instructions contained in Exhibit D. The
Activation Order shall not change, delete or amend this Agreement (including the
Exhibits thereto) other than Section 7. 1, and Exhibits B, C and D. If there is
a conflict between the terms of the executed Activation Order and the terms of
this Agreement, other than Section 7.1 and Exhibits B, C and D, the terms of
this Agreement shall prevail over the terms of the executed Activation Order.
3.4 The provisions contained in any Activation Order shall be effective
only for that Activation Order, and shall not affect any past, current or future
Work under any other Activation Order.
3.5 All Work shall be performed in accordance with the Standards and
Specifications contained in Exhibit B.
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3.6 Company shall have the right to secure performance and/or payment
bonds to guarantee the performance of the Work by Contractor. Any bonding
requirements shall be stated in the Activation Order.
3.7 Company shall have the right to retain ten percent (10%) of all sums
due Contractor. Company shall hold the ten percent (10%) retainage pending final
acceptance of the Work by Companv and the furnishing by Contractor of evidence
satisfactory to Company that Contractor has made payment of all bills and claims
of any nature, after which the net amount owing Contractor shall be paid;
provided, however, Company at its option may pay to Contractor any part of such
retained sum which Company believes is not necessary to protect Company for
uncompleted Work or unpaid material or labor bills, or other claims of which
Company has knowledge. Notwithstanding anything contained in the foregoing,
Company shall have the right, at its sole discretion, to withhold any of such
retainage for a minimum period, after completion of the Work, equal to the
greater of thirty (30) days, or the period during which, under the laws of the
applicable jurisdiction, a mechanic's and/or materialman's lien could properly
be perfected by the filing of the necessary lien documents in the appropriate
governmental office. Any retainage requirement shall be stated in the Activation
Order.
3.8 Contractor agrees to commence the Work on the date specified in the
Activation Order and to pursue it diligently so that the Work will be completed
by the date or within the time specified, or if no date or time is specified,
then as quickly as is reasonably possible.
3.9 The Activation Order shall be binding only when executed by
representatives of Company and Contractor authorized to commit for such Work and
the estimated cost of such Work.
3.10 Nothing contained herein shall preclude the parties, by means of
mutually agreed upon amendments to this Agreement, from permanently altering in
whole or in part the Labor and Equipment Rate Schedule and/or Unit Price Lists
contained in Exhibit C hereof.
ARTICLE 4
MANNER OF PERFORMANCE OF THE WORK
<PAGE>
4.1 Contractor agrees to furnish the required materials, supplies,
supervision, labor, equipment, implements, machines, trucks, and all other
things necessary for and to do and perform the Work. Contractor is to perform
the Work as an independent contractor, free of the control and/or supervision of
Company as to means and method of performing same. All persons engaged in the
performance of the Work shall be solely the servants or employees of Contractor
or of the relevant subcontractor, where subcontracting is
4
<PAGE>
authorized by Company. Engineer shall have the right to make such inspection of
the Work as is necessary to insure compliance by Contractor with the obligations
assumed hereunder, but Company shall not be deemed obligated to perform any such
inspection. Engineer shall accept the Work performed by Contractor or reject
such Work if it is not in compliance with this Agreement.
4.2 Contractor shall exercise a high degree of skill, care, and diligence
in the performance of the Work. Contractor warrants that the Work shall be
performed in a good and workmanlike manner and in strict accordance with this
Agreement.
4.3 Contractor at all times shall enforce strict discipline and good order
among its employees and those of its subcontractors. Company shall have the
right at all times to require the removal from the Work and the Site, of any
employee of Contractor or any subcontractor if that employee, in Company's good
faith judgment, appears unqualified or otherwise unfit to continue.
4.4 If required by Company, Contractor shall inform Company in writing of
the names of the personnel to be assigned to the Work, and shall not remove or
replace such personnel without written notice to Engineer.
4.5 Contractor shall give due consideration to the interest of property
owners and tenants wherever involved and shall conduct the Work in a manner
causing minimum inconvenience and damage. Contractor shall provide and maintain
a safe condition at any crossing of public roads and/or private roads, and any
entrances that may be opened by the Contractor to perform the Work.
4.6 If Contractor is delayed by reason of Company's failure to supply
Contractor with any necessary information, access to right-of-way or any of the
materials, machinery, or equipment specified by this Agreement to be supplied by
Company, the completion date of the Work provided for in the Activation Order
shall be extended to the extent that Contractor is delayed in carrying on the
Work by reason of such failure by Company. In the event Contractor incurs
additional costs as a result of such delay, the consideration shall be equitably
adjusted. Such extension and adjustment to the consideration shall constitute
Contractor's sole and exclusive remedy for damages caused by reason of such
delay. The foregoing notwithstanding, if such delay results in Contractor's
being totally unable to proceed with the Work, such delay will be considered as
a suspension required by Company within the meaning of Article 9.
5
<PAGE>
4.7 Contractor shall not open up work to the prejudice of Work already
started and shall arrange its Work and dispose of materials in a manner to
insure the least possible interference with and inconvenience to the landowners
on whose property the Work is being performed.
4.8 Contractor shall employ such number of Crews as are reasonably
necessary to perform the Work within the time allotted; provided, that Company
may, should this Agreement be for Work to be furnished on a fixed price basis,
at no extra cost to Company, require the employment of additional Crews if, in
its judgment, it is necessary in order to complete the Work within the time
provided.
ARTICLE 5
COMPLIANCE WITH PLANS AND SPECIFICATIONS
5.1 Unless otherwise agreed in writing, all materials and supplies
required to be furnished by Contractor shall conform to and be in accordance
with the requirements set out in the Exhibits, plus any detailed drawings for
the Work which may be prepared and furnished by Company, all of which shall be
furnished in advance of their actual need in order that the Work may be
performed with due diligence.
5.2 If any Work performed by Contractor is determined by Engineer not to
have been performed in a good and workmanlike manner or otherwise not to be in
compliance with this Agreement, Contractor shall, at its own expense,
immediately repair or replace the defective Work in a manner complying with this
Agreement.
ARTICLE 6
CONSIDERATION
6.1 Company shall pay Contractor for the Work performed and all materials
supplied by Contractor hereunder in the amount and manner provided in Exhibit C
and the Activation Order.
6.2 Exhibit C and the Activation Order shall cover and include all the
considerations to be received by Contractor from Company for the performance of
the Work described in the Activation Order, whether or not specifically
enumerated in Exhibit C, and shall cover and include all overhead,
superintendence, labor, use of equipment furnished, and all other cost and
expense incurred by Contractor in the performance of said Work.
6
<PAGE>
6.3 Contractor shall pay promptly all indebtedness for equipment,
materials, supplies and labor used in the Work for each Activation Order.
Contractor shall not permit any lien or charge to attach to the result produced
by the Work or the premises upon which the Work is being performed, but if any
shall so attach, Contractor promptly shall remedy all damage and pay every
expense incidental thereto. Contractor shall hold Company free and harmless from
all claims, losses, and liability resulting from Contractor's failure to pay any
such charges or to discharge any mechanics' and materialmen's liens or similar
charges.
ARTICLE 7
STATE AND LOCAL TAXES
7.1 The prices, sums, rates and other charges set forth in Exhibit C and
the Activation Order shall not include sales, use, value added or any other
excise tax ("Tax" or "Taxes")which may be applicable to the Work.
7.2 It is the responsibility of Contractor to familiarize itself with all
applicable state and local Taxes and to observe and comply with all state and
local laws, ordinances, regulations, orders and decrees that relate thereto,
including the filing of all applicable state and local Tax returns. In addition,
it is the responsibility of Contractor to be familiar with all state and local
Tax exemptions for which the Work qualifies and to avail itself of those
exemptions.
7.3 It is the obligation of Contractor to ascertain the applicability of
Taxes for each Activation Order. If Taxes are determined to be applicable,
Contractor shall timely invoice Company for such Taxes. Such Taxes shall be
separately stated on the invoice, and if only a portion of the Work is
determined to be taxable, then the taxable portion and the non-taxable portion
shall be separately stated with Tax applied only to the taxable portion.
7.4 If Taxes are determined by Contractor to be not applicable, Contractor
shall notify Company in writing prior to the commencement of the Work. If
Company thereafter determines that the Tax is applicable to part or all of the
Work, Company shall notify Contractor in writing within thirty (30) days of the
commencement of the Work and Contractor shall invoice Company for the Tax in
accordance with Section 7.3. Failure by Contractor to timely invoice for Tax
timely shall relieve Company of any applicable interest or penalty.
<PAGE>
7.5 If Company does not notify Contractor pursuant to Sextion 7.4, Company
shall reimburse Contractor for any tax, interest, and penalty which may be
levied by any applicable taxing authority on the Work performed by Contractor.
However, this obligation is contigent upon Contractor giving Company proper
notice of any proposed or actual assessment, adjustment, determination or
finding of Tax by any taxing authority relating to the work performed by
Contractor, including the filing of protest and any appeals resulting therefrom.
Any costs, other than administrative costs incurred by Contractor's employees,
incurred in the pursuit of such protest or appeals shall be the responsibility
of the Company.
7.6 If the Tax cannot be separately stated because it is included in the
prices, sums, rates, and other charges, the invoice must clearly state that all
applicable sales or use tax is included in the invoiced amount. Charges for
labor and materials shall also be separately stated on the invoice.
7.7 Notwithstanding anything to the contrary contained in this Agreement,
any Activation Order may provide otherwise than is privided n this Article 7.
ARTICLE 8
INSURANCE
8.1 Prior to commencement of the Work and at all times during the term of
this Agreement, Contractor shall provide and maintain in full force and effect,
insurance of the types and with limits not less than those specified in Exhibit
F of this Agreement.
8.2 Prior to commencement of the Work and at all times during the term of
this Agreement, Contractor shall require each of its subcontractors, of every
tier, to provide and maintain (a) Worker's Compensation, (b) Employer's
Liability, (c) Automobile Liability and (d) General Public Liability insurance
coverage having minimum limits consistent with those required to be carried by
Contractor.
8
<PAGE>
8.3 All insurance policies provided and maintained by Contractor and each
subcontractor shall:
8.3.1 Be underwritten by insurers which are rated "A VII" or
higher by the most current edition of Best's Key Rating
Guide, and which are authorized to write insurance in the
state or states in which the Work is to be performed
8.3.2 Be endorsed to specifically name Company and its
Affiliates as additional insured, excluding, however,
Worker's Compensation;
8.3.3 Be endorsed to provide that each underwriter waives its
rights of subrogation against Company and its Affiliates;
8.3.4 Provide that such policies are without right of
contribution from any other insurance available to Company
and its Affiliates;-and,
8.3.5 Contain cross liability and severability of interest
provisions.
Evidence of such specific endorsements shall be provided with Contractor's
certificate of insurance furnished pursuant to Section 8.4.
8.4 Contractor shall provide Company with certificate(s) of insurance,
satisfactory to Company, evidencing all required insurance under this Article
prior to commencement of the Work, and replacement certificate(s) of insurance
during the term of this Agreement. Such certificate(s) of insurance shall be on
a form provided by Company and shall contain a provision that Company will
unqualifiedly receive at least thirty (30) days written notice prior to any
cancellation of or material change in the required insurance. Company at its
sole discretion, may require Contractor to submit the original or a certified
copy of Contractor's insurance policies for inspection by Company.
8.5 All insurance required herein shall be written to protect Contractor
against liability for damage, loss or expense arising from damage to property or
injury to or death of any person or persons arising in any way out of, in
connection with, or resulting from the Work.
9
<PAGE>
8.6 Contractor shall pay promptly all premiums for insurance in strict
accordance with the obligations to its carrier or carriers such that Contractor
at all times shall have full insurance coverage as herein provided.
8.7 Contractor's compliance with the provisions of this Article and the
limits of insurance specified and to be provided by Contractor shall not
constitute a limitation of Contractor's liability for its acts or omissions or
in any way limit, modify, or otherwise affect Contractor's indemnification
obligation pursuant to this Agreement. The insolvency, bankruptcy, or failure of
any insurance company carrying insurance for Contractor, or failure of any such
insurance company to pay claims asserted, shall not abrogate, waive or alter any
of Contractor's responsibilities or liabilities hereunder.
8.8 Any failure to comply with all of the provisions of this Article by
Contractor or any of its insurance companies, or the insolvency, bankruptcy or
failure of any such insurance company, shall permit Company to suspend all Work
until compliance is achieved or a solvent insurance company utilized. At the
option of Company, Company may pay any insurance premiums in order to achieve
compliance for Contractor and deduct the amount of the premiums, and all other
costs incurred by Company in achieving compliance, from amounts to be paid to
Contractor. If compliance is not achieved or a solvent insurance company
utilized within a reasonable time, in the opinion of Company, Company may
terminate this Agreement and Contractor's sole and exclusive remedy shall be to
receive payment for the percentage of Work actually completed by Contractor.
ARTICLE 9
RIGHT TO SUSPEND THE WORK
OR TERMINATE AGREEMENT
In the event Company is prevented by legal proceedings or conditions
beyond its reasonable control from continuing with the Work, then Company may
require Contractor to suspend the Work or Company may terminate this Agreement.
In either such event, Contractor's sole and exclusive remedy shall be to receive
payment for the Work actually completed by Contractor.
10
<PAGE>
ARTICLE 10
CONTRACTOR'S RECORD OF CONSTRUCTION COSTS
10.1 Upon request, Contractor shall furnish Company conformed and true
copies of all proposals, purchase orders and detailed invoices for all materials
and supplies purchased and used, and for all labor furnished by Contractor, in
the performance of the Work. Such information shall be supplied in the form
prescribed by Company and may be retained by Company in its permanent files.
Contractor shall assist Engineer in every reasonable way in securing daily
records of unit costs and man-hour performance that may be requested.
10.2 Contractor shall maintain and shall require its subcontractors of
every tier to maintain adequate books and records according to generally
accepted accounting principles consistently applied which reflect all costs,
labor, hours, equipment time and other expenses of whatever nature incurred by
Contractor in accordance with the Agreement. Company shall be entitled from time
to time during the performance of the Work and for a period of three (3) years
after final acceptance of the Work to audit the books and records so maintained.
If audit by Company reveals charges or costs charged to or paid by Company as
costs or fees which are not proper or exceed the rates or amounts permitted
under this Agreement for any such matters, then Company shall be entitled upon
demand for a refund from Contractor of all such amounts, plus interest thereon
from the date of payment by Company until the date of refund by Contractor at
the rate of the lesser of (i) eighteen percent (18%) per annum or (ii) the
maximum rate allowed by law.
ARTICLE I I
WORK NOT TO INTERFERE WITH COMPANY OPERATIONS
Contractor agrees to carry on its Work with extreme care to permit the
continuous and safe operation of Company's pipeline system as well as the
pipelines, sewers, water or gas mains, electric or telephone lines or other
facilities of other companies. Contractor shall perform the Work in a manner
that offers a minimum of interference with Company's operations. Contractor's
employees shall not enter Company's buildings except when required by
construction. Contractor shall not permit smoking or open fires in any areas
other than those specified by Engineer.
<PAGE>
ARTICLE 12
ASSIGNMENT AND SUBCONTRACTING
12.1 Contractor shall not assign this Agreement or subcontract any of the
Work without the written consent of Company, and any such assignment or
subcontracting of any such Work without such consent shall be null and void.
Company's consent to subcontracting or assignment, if granted, shall not relieve
Contractor of any of its liabilities and responsibilities hereunder. Company
shall have the right to approve or disapprove the specific subcontractor as well
as the right to subcontract in general. Each approved subcontract shall contain
provisions which specifically bind the subcontractor to the applicable terms and
provisions of this Agreement.
12.2 Notwithstanding the foregoing, Contractor shall have the right to
assign all, but not part, of the sums owing it by Company. Such assignment shall
not become effective until thirty (30) days after written notice thereof, signed
by Contractor, has been received by Company at its Houston office, and all
payments made by Company prior to such effective date shall be valid.
ARTICLE 13
DRUG TESTING/ALCOHOL
Company does not condone in any way the use of illegal drugs or the
illegal use of controlled substances. Company does not condone in any way the
consumption of alcoholic beverages during the performance of the Work or any
person at the Site being under the influence of alcohol. Any person under the
influence of alcohol, or in possession of alcohol or any illegal drug, or in the
illegal possession of a controlled substance, will be removed from the Work. In
addition, where required by the Department of Transportation, Contractor shall
have in place a drug testing program meeting the requirements imposed by the
Department of Transportation as specified in Title 49 of the Code of Federal
Regulations, Parts 40 and 199, and shall furnish to Company proof of compliance
with such regulations. Such proof shall consist of a copy of Contractor's drug
testing plan and an affidavit stating that Contractor is in compliance and will
remain in compliance for the duration of the Agreement. Upon request, Contractor
will furnish Company with copies of the records of employee drug test results
required to be kept under the provisions of 49 C.F.R. subsection 199.23 (a)(2)
and (3). Contractor will indemnify and hold harmless Company from any and all
liability for (a) Contractor's employees who fail a drug test given under the
Department of Transportation regulations, and (b) any claims made by a
Contractor's employee resulting from removal from the Work as provided in this
Article. If Contractor fails to comply with these regulations while performing
under this
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Agreement, such non-compliance will be deemed a breach of such Agreement and
Contractor shall be liable for such breach as well as for all damages arising
out of such non-compliance.
ARTICLE 14
NOTICES
14.1 All notices required or permitted to be given by this Agreement,
except where oral notice is specifically authorized, shall be in writing, shall
identify this Agreement by contract number and shall be mailed, delivered, or
sent via facsimile to the party at the address set out in Exhibit E.
14.2 Written notices shall be deemed delivered on the date of actual hand
delivery, or the date that a facsimile is actually received, or if sent in the
United States mail postage prepaid, correctly addressed, then on the third
business day after the day on which mailed. Either party's address for notice
may be changed by written notice given in accordance with this Article 14. This
Agreement shall apply with respect to all Work requested by Company on or before
July 25, 1995.
ARTICLE 15
ARBITRATION
15.1 Any controversy or claim arising out of or relating to this
Agreement, or the breach, termination or validity thereof, that cannot be
resolved by the parties through the process of negotiation, shall be settled by
arbitration in accordance with the Center for Public Resources Rules for
Non-Administered Arbitration of Business Disputes, by three (3) arbitrators, of
whom each party shall appoint one (1). The arbitration shall be governed by the
United States Arbitration Act, 9 U.S.C. ss. 1- 16, and judgment upon the award
rendered by the arbitrators may be entered by any court provided in Section
15.2.
15.2 CONTRACTOR AND COMPANY HEREBY IRREVOCABLY SUBMIT TO THE JURISDICTION
OF ANY STATE OR FEDERAL COURT SITTING IN HARRIS COUNTY, TEXAS, IN ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT, AND AGREE THAT NO SUCH
PARTY SHALL BRING ANY SUCH ACTION OR PROCEEDING IN ANY OTHER COURT, OR SEEK TO
REMOVE SUCH ACTION OR PROCEEDING TO ANY OTHER COURT.
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<PAGE>
ARTICLE 16
ETHICS
Contractor, its directors, officers, employees, representatives, agents,
subcontractors and assignees of Contractor or any such subcontractor
(collectively the "CONTRACTOR WORK PARTIES") shall not at any time solicit,
accept, offer or bestow gratuities of more than nominal value from or to one or
more of the Company and its affiliates, the employees, agents, or
representatives of Company or its affiliates, any of Company's other
contractors, the employees, agents, or representatives of such other
contractors, one or more of the Contractor Work Parties, or anyone else
associated with the Work. Violation of this policy by any of the Contractor Work
Parties shall constitute a material breach of Contractor's obligations under the
Agreement, and the party who is found to have violated the provisions of this
Section shall be immediately removed from the Work by Contractor at Contractor's
sole risk, cost and expense.
ARTICLE 17
MISCELLANEOUS PROVISIONS
17.1 Contractor, its subcontractors and assignees shall not publish or
make known to others the subject matter or results of the Work or any
information concerning Company, other than that in the public domain, furnished
to or acquired by Contractor, its subcontractors and assigns without Company's
written approval. The obligations established in this Section shall survive and
remain enforceable after any termination of the Agreement.
17.2 If the enforcement of the obligations of Contractor, its
subcontractors or assigns hereunder is referred to any attorney by the Company,
then Contractor shall pay the Company's reasonable attorney's fees and court
costs in addition to any other relief which may be obtained.
17.3 Contractor shall comply with all applicable laws, orders, rules and
regulations bearing upon its obligations hereunder.
17.4 In the event that any statute or rule of law should be held
applicable to any provision(s) contained in this Agreement which would render
void, voidable or unenforceable any such provision(s) by reason of such
provision(s) being contained herein, then, and only in such event, such
provision(s) shall be read, construed and enforced as to the parties as if such
provision(s) which is held to violate the statute or
14
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rule of law was excluded from this Agreement, but only to the extent or degree
by which such provision(s) is so held, and this Agreement shall otherwise remain
in force and effect and binding upon the parties.
17.5 This Agreement and the attached Exhibits constitute the entire
agreement between Company and Contractor. None of these documents may be amended
except by a writing signed by both parties. No promise, agreement or
representation not set forth in this Agreement or an attached Exhibit shall be
of any, force or effect.
17.6 All headings appearing in this Agreement are for convenience only,
and shall not be considered a part of this Agreement for any purpose or as in
any way interpreting, construing or modifying this Agreement.
17.7 No waiver by either party of any right, or waiver of any default of
the other in the performance of any of the provisions of this Agreement shall
operate or be construed as a waiver of any future right or default, whether of a
like or of a different nature.
17.8 In the event of any dispute under this Agreement, Contractor shall,
notwithstanding the pendency of such dispute, diligently proceed with the
performance of this Agreement without prejudice to the rights of either party.
17.9 The individual executing this Agreement on behalf of Contractor does
hereby represent and warrant that he or she is fully authorized and empowered to
execute same on behalf of Contractor, and to fully bind Contractor to all of the
terms hereof.
15
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IN WITNESS WHEREOF, Contractor and Company have executed this Agreement as of
the date first above written. COMPANY:
TRUNKLINE GAS COMPANY
BY: /s/ S. L. HORTON
S. L. Horton
TITLE: Vice President
CONTRACTOR:
IDS TECHNICAL SERVICES
BY: /S/
TITLE: PRESIDENT
16
EXHIBIT 10.10
CONTRACT NO. ES-PE-115
ENGINEERING DESIGN SERVICES AGREEMENT
BETWEEN
PANHANDLE EASTERN PIPE LINE COMPANY
AND
IDS TECHNICAL SERVICES
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS ........................1
1.1 Affiliates..............1
1.2 Engineer................1
1.3 Crew....................2
1.4 Site....................2
1.5 Specifications..........2
1.6 Work....................2
ARTICLE 2
EXHIBITS ........................2
2.1.1 Exhibit A...............2
2.1.2 Exhibit B...............2
2.1.3 Exhibit C...............2
2.1.4 Exhibit D...............2
2.1.5 Exhibit E...............2
2.1.6 Exhibit F...............2
ARTICLE 3
ACTIVATION ORDER.........................3
ARTICLE 4
MANNER OF PERFORMANCE OF THE WORK .......4
<PAGE>
ARTICLE 5
COMPLIANCE WITH PLANS AND
SPECIFICATIONS.........................6
ARTICLE 6
CONSIDERATION............................6
ARTICLE 7
STATE AND LOCAL TAXES....................7
ARTICLE 8
INSURANCE................................8
ARTICLE 9
RIGHT TO SUSPEND THE WORK OR TERMINATE
AGREEMENT.............................10
ARTICLE 10
CONTRACTOR'S RECORD OF CONSTRUCTION
COSTS.................................10
ARTICLE I 1
WORK NOT TO INTERFERE WITH COMPANY
OPERATIONS............................11
ARTICLE 12
ASSIGNMENT AND SUBCONTRACTING...........11
ARTICLE 13
DRUG TESTING/ALCOHOL....................11
<PAGE>
ARTICLE 14
NOTICES.................................12
ARTICLE 15
ARBITRATION.............................12
ARTICLE 16
ETHICS..................................13
<PAGE>
ENGINEERING SERVICES AGREEMENT
This Engineering Services Agreement ("Agreement") is made and entered into
this 25th day of July, 1994, by and between IDS TECHNICAL SERVICES,
("Contractor"),a Texas Corporation, and PANHANDLE EASTERN PIPE LINE COMPANY,
("Company"),a Delaware Corporation;
WITNESSETH:
WHEREAS, Contractor represents that it is in the business of providing
Engineering Design Services; and,
WHEREAS, the Company desires to enter into this Agreement to enable
Company to utilize Contractor, on an "as needed" basis, to perform the Work and
other Work for which Contractor is qualified, pursuant to this Agreement and a
work order ("ACTIVATION ORDER") to be executed at the time of performance by
Contractor and Company; and,
WHEREAS, Contractor desires to enter into this Agreement and is willing,
on an "as available" basis, to perform the Work for Company, pursuant to this
Agreement, including the relevant Activation Order.
NOW, THEREFORE, in consideration of the mutual covenants herein contained
Contractor and Company agree as follows:
ARTICLE I
DEFINITIONS
In this Agreement the following definitions shall apply:
1.1 Affiliates shall mean any corporation, partnership, joint venture,
division or other legal entity, directly or indirectly, through one or more
intermediaries, controlling, controlled by, or under common control with
Company. Without limiting the foregoing, Panhandle Eastern Corporation and all
of its subsidiaries of every tier are Affiliates.
1.2 Engineer shall mean Company's authorized engineer in charge of the
Work covered by an Activation Order, acting directly or through field or
resident engineers or inspectors, such field or resident engineers or inspectors
acting within the scope of the particular duties assigned to them.
<PAGE>
1.3 Crew shall mean a complete complement of personnel, which ordinarily
performs one kind of task incident to the performance of Work under the
Agreement.
1.4 Site shall mean the location or immediate area of the Work.
1.5 Specifications, if applicable, shall mean the Standards and
Specifications contained in Exhibit B hereto.
1.6 Work shall mean all of those personnel, tasks, services, labor,
supervision, materials, equipment, supplies, transportation and all other
tangible or material things required to be undertaken, produced, delivered, or
furnished by Contractor or any of its subcontractors of every tier as specified
in or reasonably inferable from this Agreement and the Exhibits, and shall
include items, services or tasks incidental or preliminary thereto, including
procurement of any necessary permits, licenses, or agreements or other matters
related to the Work not otherwise furnished by Company. The -Work shall be more
particularly described in the relevant Activation Order.
ARTICLE 2
EXHIBITS
2.1 The following Exhibits are part of this Agreement whether or not
physically attached hereto:
2.1.1 Exhibit A - Form of Activation Order.
2.1.2 Exhibit B - Standards and Specifications.
2.1.3 Exhibit C - Contractor's current Labor and Equipment Rate
Schedule and/or Unit Price Lists.
2.1.4 Exhibit D - Special Instructions.
2.1.5 Exhibit E - Notice Information.
2.1.6 Exhibit F - Insurance Requirements.
2
<PAGE>
2.2 Should any conflict exist between this Agreement and the Exhibits
attached hereto, this Agreement shall prevail except to the extent a specific
exception to this Agreement is stated in Exhibit D, in which case the exception
shall prevail. All provisions of Exhibit D shall take precedence over Exhibits A
and B. In the event of any conflict, omission, discrepancy, or ambiguity in the
Agreement, the resolution of which is not specifically provided for, the
decision of Engineer shall govern the performance of the Work, and to the extent
such Work is not within the reasonable intent of the Agreement, such Work shall
be paid for as extra work.
ARTICLE 3
ACTIVATION ORDER
3.1 All Work shall be identified in an Activation Order which shall
reference this Agreement and be signed by Contractor and Company prior to the
commencement of the Work. From time to time as Company requires Work to be
performed by Contractor, Company shall issue an Activation Order for the
performance of the Work.
3.2 Company shall prepare the Activation Order, clearly describing the
scope of Work to be provided, any insurance requirements in addition to those
provided in this Agreement, and any special instructions or conditions. Upon
execution of the Activation Order by Company and Contractor, Contractor shall
perform the Work.
3.3 The Activation Order may specify changes, additions, deletions or
qualifications to the Standards and Specifications contained in Exhibit B,
Contractor's current Labor and Equipment Rate Schedule and/or Unit Price Lists
contained in Exhibit C, and the Special Instructions contained in Exhibit D. The
Activation Order shall not change, delete or amend this Agreement (including the
Exhibits thereto) other than Section 7. 1, and Exhibits B I C and D. If there is
a conflict between the terms of the executed Activation Order and the terms of
this Agreement, other than Section 7.1 and Exhibits B, C and D, the terms of
this Agreement shall prevail over the terms of the executed Activation Order.
3.4 The provisions contained in any Activation Order shall be effective
only for that Activation Order, and shall not affect any past, current or future
Work under any other Activation Order.
3.5 All Work shall be performed in accordance with the Standards and
Specifications contained in Exhibit B.
3
<PAGE>
3.6 Company shall have the right to secure performance and/or payment
bonds to guarantee the performance of the Work by Contractor. Any bonding
requirements shall be stated in the Activation Order.
3.7 Company shall have the right to retain ten percent (10%) of all sums
due Contractor. Company shall hold the ten percent (10%) retainage pending final
acceptance of the Work by Company and the furnishing by Contractor of evidence
satisfactory to Company that Contractor has made payment of all bills and claims
of any nature, after which the net amount owing Contractor shall be paid;
provided, however, Company at its option may pay to Contractor any part of such
retained sum which Company believes is not necessary to protect Company for
uncompleted Work or unpaid material or labor bills, or other claims of which
Company has knowledge. Notwithstanding anything contained in the foregoing,
Company shall have the right, at its sole discretion, to withhold any of such
retainage for a minimum period, after completion of the Work, equal to the
greater of thirty (30) days, or the period during which, under the laws of the
applicable jurisdiction, a mechanic's and/or materialman's lien could properly
be perfected by the filing of the necessary lien documents in the appropriate
governmental office. Any retainage requirement shall be stated in the Activation
Order.
3.8 Contractor agrees to commence the Work on the date specified in the
Activation Order and to pursue it diligently so that the Work will be completed
by the date or within the time specified, or if no date or time is specified,
then as quickly as is reasonably possible.
3.9 The Activation Order shall be binding only when executed by
representatives of Company and Contractor authorized to commit for such Work and
the estimated cost of such Work.
3.10 Nothing contained herein shall preclude the parties, by means of
mutually agreed upon amendments to this Agreement, from permanently altering in
whole or in part the Labor and Equipment Rate Schedule and/or Unit Price Lists
contained in Exhibit C hereof.
<PAGE>
ARTICLE 4
MANNER OF PERFORMANCE OF THE WORK
4.1 Contractor agrees to furnish the required materials, supplies,
supervision, labor, equipment, implements, machines, trucks, and all other
things necessary for and to do and perform the Work. Contractor is to perform
the Work as an independent contractor, free of the control and/or supervision of
Company as to means and method of performing same. All persons engaged in the
performance of the Work shall be solely the servants or employees of Contractor
or of the relevant subcontractor, where subcontracting is
4
<PAGE>
authorized by Company. Engineer shall have the right to make such inspection of
the Work as is necessary to insure compliance by Contractor with the obligations
assumed hereunder, but Company shall not be deemed obligated to perform any such
inspection. Engineer shall accept the Work performed by Contractor or reject
such Work if it is not in compliance with this Agreement.
4.2 Contractor shall exercise a high degree of skill, care, and diligence
in the performance of the Work. Contractor warrants that the Work shall be
performed in a good and workmanlike manner and in strict accordance with this
Agreement.
4.3 Contractor at all times shall enforce strict discipline and good order
among its employees and those of its subcontractors. Company shall have the
right at all times to require the removal from the Work and the Site, of any
employee of Contractor or any subcontractor if that employee, in Company's good
faith judgment, appears unqualified or otherwise unfit to continue.
4.4 If required by Company, Contractor shall inform Company in writing of
the names of the personnel to be assigned to the Work, and shall not remove or
replace such personnel without written notice to Engineer.
4.5 Contractor shall give due consideration to the interest of property
owners and tenants wherever involved and shall conduct the Work in a manner
causing minimum inconvenience and damage. Contractor shall provide -and maintain
a safe condition at any crossing of public roads and/or private roads, and any
entrances that may be opened by the Contractor to perform the Work.
4.6 If Contractor is delayed by reason of Company's failure to supply
Contractor with any necessary information, access to right-of-way or any of the
materials, machinery, or equipment specified by this Agreement to be supplied by
Company, the completion date of the Work provided for in the Activation Order
shall be extended to the extent that Contractor is delayed in carrying on the
Work by reason of such failure by Company. In the event Contractor incurs
additional costs as a result of such delay, the consideration shall be equitably
adjusted. Such extension and adjustment to the consideration shall constitute
Contractor's sole and exclusive remedy for damages caused by reason of such
delay. The foregoing notwithstanding, if such delay results in Contractor's
being totally unable to proceed with the Work, such delay will be considered as
a suspension required by Company within the meaning of Article 9.
5
<PAGE>
4.7 Contractor shall not open up work to the prejudice of Work already
started and shall arrange its Work and dispose of materials in a manner to
insure the least possible interference with and inconvenience to the landowners
on whose property the Work is being performed.
4.8 Contractor shall employ such number of Crews as are reasonably
necessary, to perform the Work within the time allotted, provided, that Company
may, should this Agreement be for Work to be furnished on a fixed price basis,
at no extra cost to Company, require the employment of additional Crews if, in
its judgment, it is necessary in order to complete the Work within the time
provided.
ARTICLE 5
COMPLIANCE WITH PLANS AND SPECIFICATIONS
5.1 Unless otherwise agreed in writing, all materials and supplies
required to be furnished by Contractor shall conform to and be in accordance
with the requirements set out in the Exhibits, plus any detailed drawings for
the Work which may be prepared and furnished by Company, all of which shall be
furnished in advance of their actual need in order that the Work may be
performed with due diligence.
5.2 If any Work performed by Contractor is determined by Engineer not to
have been performed in a good and workmanlike manner or otherwise not to be in
compliance with this Agreement, Contractor shall, at its own expense,
immediately repair or replace the defective Work in a manner complying with this
Agreement.
ARTICLE 6
CONSIDERATION
6.1 Company shall pay Contractor for the Work performed and all materials
supplied by Contractor hereunder in the amount and manner provided in Exhibit C
and the Activation Order.
6.2 Exhibit C and the Activation Order shall cover and include all the
considerations to be received by Contractor from Company for the performance of
the Work described in the Activation Order, whether or not specifically
enumerated in Exhibit C, and shall cover and include all overhead,
superintendence, labor, use of equipment furnished, and all other cost and
expense incurred by Contractor in the performance of said Work.
6
<PAGE>
6.3 Contractor shall pay promptly all indebtedness for equipment,
materials, supplies and labor used in the Work for each Activation Order.
Contractor shall not permit any lien or charge to attach to the result produced
by the Work or the premises upon which the Work is being performed, but if any
shall so attach, Contractor promptly shall remedy all damage and pay every
expense incidental thereto. Contractor shall hold Company free and harmless from
all claims, losses, and liability resulting from Contractor's failure to pay any
such charges or to discharge any mechanics' and materialmen's liens or similar
charges.
ARTICLE 7
STATE AND LOCAL TAXES
7.1 The prices, sums, rates and other charges set forth in Exhibit C and
the Activation Order shall not include sales, use, value added or any other
excise tax ("Tax" or "Taxes")which may be applicable to the Work.
7.2 It is the responsibility of Contractor to familiarize itself with all
applicable state and local Taxes and to observe and comply with all state and
local laws, ordinances, regulations, orders and decrees that relate thereto,
including the filing of all applicable state and local Tax returns. In addition,
it is the responsibility of Contractor to be familiar with all state and local
Tax exemptions for which the Work qualifies and to avail itself of those
exemptions.
7.3 It is the obligation of Contractor to ascertain the applicability of
Taxes for each Activation Order. If Taxes are determined to be applicable,
Contractor shall timely invoice Company for such Taxes. Such Taxes shall be
separately stated on the invoice, and if only a portion of the Work is
determined to be taxable, then the taxable portion and the non-taxable portion
shall be separately stated with Tax applied only to the taxable portion.
7.4 If Taxes are determined by Contractor to be not applicable, Contractor
shall notify Company in writing prior to the commencement of the Work. If
Company thereafter determines that the Tax is applicable to part or all of the
Work, Company shall notify Contractor in writing within thirty (30) days of the
commencement of the Work and Contractor shall invoice Company for the Tax in
accordance with Section 7.3. Failure by Contractor to timely invoice for Tax
timely shall relieve Company of any applicable interest or penalty..
7
<PAGE>
7.5 If Company does not notify Contractor pursuant to Section 7.4, Company
shall reimburse Contractor for any Tax, interest and penalty which may be levied
by any applicable taxing authority on the Work performed by Contractor. However,
this obligation is contingent upon Contractor giving Company proper notice of
any proposed or actual assessment, adjustment, determination or finding of Tax
by any taxing authority relating to the Work performed by Contractor within ten
(10) days of Contractor's receipt of such notice. Company shall have the sole
right to direct Contractor in the handling of all matters relating to the
assessment, adjustment, determination or finding of Tax relating to the Work
performed by Contractor, including the filing of protest and any appeals
resulting therefrom. Any costs, other than administrative costs incurred by
Contractor's employees, incurred in the pursuit of such protest or appeals shall
be the responsibility of Company.
7.6 If the Tax cannot be separately stated because it is included in the
prices, sums, rates and other charges, the invoice must clearly state that all
applicable sales or use tax is included in the invoiced amount. Charges for
labor and materials shall also be separately stated on the invoice.
7.7 Notwithstanding anything to the contrary contained in this Agreement,
any Activation Order may provide otherwise than is provided in this Article 7.
ARTICLE 8
INSURANCE
8.1 Prior to commencement of the Work and at all times during the term of
this Agreement, Contractor shall provide and maintain in full force and effect,
insurance of the types and with limits not less than those specified in Exhibit
F of this Agreement.
8.2 Prior to commencement of the Work and at all times during the term of
this Agreement, Contractor shall require each of its subcontractors, of every
tier, to provide and maintain (a) Worker's Compensation, (b) Employer's
Liability, (c) Automobile Liability and (d) General Public Liability insurance
coverage having minimum limits consistent with those required to be carried by
Contractor.
8
<PAGE>
8.3 All insurance policies provided and maintained by Contractor and each
subcontractor shall:
8.3.1 Be underwritten by insurers which are rated "A VII" or
higher by the most current edition of BEST'S KEY RATING
GUIDE, and which are authorized to write insurance in the
state or states in which the Work is to be performed;
8.3.2 Be endorsed to specifically name Company and its
Affiliates as additional insured, excluding, however,
Worker's Compensation;
8.3.3 Be endorsed to provide that each underwriter waives its
rights of subrogation against Company and its Affiliates;
8.3.4 Provide that such policies are without right of
contribution from any other insurance available to Company
and its Affiliates;-and,
8.3.5 Contain cross liability and severability of interest
provisions.
Evidence of such specific endorsements shall be provided with Contractor's
certificate of insurance furnished pursuant to Section 8.4.
8.4 Contractor shall provide Company with certificate(s) of insurance,
satisfactory to Company, evidencing all required insurance under this Article
prior to commencement of the Work, and replacement certificate(s) of insurance
during the term of this Agreement. Such certificate(s) of insurance shall be on
a form provided by Company and shall contain a provision that Company will
unqualifiedly receive at least thirty (30) days written notice prior to any
cancellation of or material change in the required insurance. Company at its
sole discretion, may require Contractor to submit the original or a certified
copy of Contractor's insurance policies for inspection by Company.
8.5 All insurance required herein shall be written to protect Contractor
against liability for damage, loss or expense arising from damage to property or
injury to or death of any person or persons arising in any way out of, in
connection with, or resulting from the Work,
9
<PAGE>
8.6 Contractor shall pay promptly all premiums for insurance in strict
accordance with the obligations to its carrier or carriers such that Contractor
at all times shall have full insurance coverage as herein provided.
8.7 Contractor's compliance with the provisions of this Article and the
limits of insurance specified and to be provided by Contractor shall not
constitute a limitation of Contractor's liability for its acts or omissions or
in any way limit, modify, or otherwise affect Contractor's indemnification
obligation pursuant to this Agreement. The insolvency, bankruptcy, or failure of
any insurance company carrying insurance for Contractor, or failure of any such
insurance company to pay claims asserted, shall not abrogate, waive or alter any
of Contractor's responsibilities or liabilities hereunder.
8.8 Any failure to comply with all of the provisions of this Article by
Contractor or any of its insurance companies, or the insolvency, bankruptcy or
failure of any such insurance company, shall permit Company to suspend all Work
until compliance is achieved or a solvent insurance company utilized. At the
option of Company, Company may pay any insurance premiums in order to achieve
compliance for Contractor and deduct the amount of the premiums, and all other
costs incurred by Company in achieving compliance, from amounts to be paid to
Contractor. If compliance is not achieved or a solvent insurance company
utilized within a reasonable time, in the opinion of Company, Company may
terminate this Agreement and Contractor's sole and exclusive remedy shall be to
receive payment for the percentage of Work actually completed by Contractor.
ARTICLE 9
RIGHT TO SUSPEND THE WORK
OR TERMINATE AGREEMENT
In the event Company is prevented by legal proceedings or conditions
beyond its reasonable control from continuing with the Work, then Company may
require Contractor to suspend the Work or Company may terminate this Agreement.
In either such event, Contractor's sole and exclusive remedy shall be to receive
payment for the Work actually completed by Contractor.
10
<PAGE>
ARTICLE 10
CONTRACTOR'S RECORD OF CONSTRUCTION COSTS
10.1 Upon request, Contractor shall furnish Company conformed and true
copies of all proposals, purchase orders and detailed invoices for all materials
and supplies purchased and used, and for all labor furnished by Contractor, in
the performance of the Work. Such information shall be supplied in the form
prescribed by Company and may be retained by Company in its permanent files.
Contractor shall assist Engineer in every reasonable way in securing daily
records of unit costs and man-hour performance that may be requested. 10.2
Contractor shall maintain and shall require its subcontractors of every tier to
maintain adequate books and records according to generally accepted accounting
principles consistently applied which reflect all costs, labor, hours, equipment
time and other expenses of whatever nature incurred by Contractor in accordance
with the Agreement. Company shall be entitled from time to time during the
performance of the Work and for a period of three (3) years after final
acceptance of the Work to audit the books and records so maintained. If audit by
Company reveals charges or costs charged to or paid by Company as costs or fees
which are not proper or exceed the rates or amounts permitted under this
Agreement for any such matters, then Company shall be entitled upon demand for a
refund from Contractor of all such amounts, plus interest thereon from the date
of payment by Company until the date of refund by Contractor at the rate of the
lesser of (i) eighteen percent (18%) per annum or (ii) the maximum rate allowed
by law.
ARTICLE I 1
WORK NOT TO INTERFERE WITH COMPANY OPERATIONS
Contractor agrees to carry on its Work with extreme care to permit the
continuous and safe operation of Company's pipeline system as well as the
pipelines, sewers, water or gas mains, electric or telephone lines or other
facilities of other companies. Contractor shall perform the Work in a manner
that offers a minimum of interference with Company's operations. Contractor's
employees shall not enter Company's buildings except when required by
construction. Contractor shall not permit smoking or open fires in any areas
other than those specified by Engineer.
<PAGE>
ARTICLE 12
ASSIGNMENT AND SUBCONTRACTING
12.1 Contractor shall not assign this Agreement or subcontract any of the
Work without the written consent of Company, and any such assignment or
subcontracting of any such Work without such consent shall be null and void.
Company's consent to subcontracting or assignment, if granted, shall not relieve
Contractor of any of its liabilities and responsibilities hereunder. Company
shall have the right to approve or disapprove the specific subcontractor as well
as the right to subcontract in general. Each approved subcontract shall contain
provisions which specifically bind the subcontractor to -the applicable terms
and provisions of this Agreement.
12.2 Notwithstanding the foregoing, Contractor shall have the right to
assign all, but not part, of the sums owing it by Company. Such assignment shall
not become effective until thirty (30) days after written notice thereof, signed
by Contractor, has been received by Company at its Houston office, and all
payments made by Company prior to such effective date shall be valid.
ARTICLE 13
DRUG TESTING/ALCOHOL
Company does not condone in any way the use of illegal drugs or the
illegal use of controlled substances. Company does not condone in any way the
consumption of alcoholic beverages during the performance of the Work or any
person at the Site being under the influence of alcohol. Any person under the
influence of alcohol, or in possession of alcohol or any illegal drug, or in the
illegal possession of a controlled substance, will be removed from the Work. In
addition, where required by the Department of Transportation, Contractor shall
have in place a drug testing program meeting the requirements imposed by the
Department of Transportation as specified in Title 49 of the Code of Federal
Regulations, Parts 40 and 199, and shall furnish to Company proof of compliance
with such regulations. Such proof shall consist of a copy of Contractor's drug
testing plan and an affidavit stating that Contractor is in compliance and will
remain in compliance for the duration of the Agreement. Upon request, Contractor
will furnish Company with copies of the records of employee drug test results
required to be kept under the provisions of 49 C. F. R. subsection 199.23 (a)(2)
and (3). Contractor will indemnify and hold harmless Company from any and all
liability for (a) Contractor's employees who fail a drug test given under the
Department of Transportation regulations, and (b) any claims made by a
Contractor's employee resulting from removal from the Work as provided in this
Article. If Contractor fails to comply with these regulations while performing
under this
12
<PAGE>
Agreement, such non-compliance will be deemed a breach of such Agreement and
Contractor shall be liable for such breach as well as for all damages arising
out of such non-compliance.
ARTICLE 14
NOTICES
14.1 All notices required or permitted to be given by this Agreement,
except where oral notice is specifically authorized, shall be in writing, shall
identify this Agreement by contract number and shall be mailed, delivered, or
sent via facsimile to the party at the address set out in Exhibit E.
14.2 Written notices shall be deemed delivered on the date of actual hand
delivery, or the date that a facsimile is actually received, or if sent in the
United States mail postage prepaid, correctly addressed, then on the third
business day after the day on which mailed. Either party's address for notice
may be changed by written notice given in accordance with this Article 14. This
Agreement shall apply with respect to all Work requested by Company on or before
July 25, 1995.
ARTICLE 15
ARBITRATION
15.1 Any controversy or claim arising out of or relating to this
Agreement, or the breach, termination or validity thereof, that cannot be
resolved by the parties through the process of negotiation, shall be settled by
arbitration in accordance with the Center for Public Resources Rules for
Non-Administered Arbitration of Business Disputes, by three (3) arbitrators, of
whom each party shall appoint one (1). The arbitration shall be governed by the
United States Arbitration Act, 9 U.S.C. ss. 1-16, and judgment upon the award
rendered by the arbitrators may be entered by any court provided in Section
15.2.
15.2 CONTRACTOR AND COMPANY HEREBY IRREVOCABLY SUBMIT TO THE JURISDICTION
OF ANY STATE OR FEDERAL COURT SITTING IN HARRIS COUNTY, TEXAS, IN ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT, AND AGREE THAT NO SUCH
PARTY SHALL BRING ANY SUCH ACTION OR PROCEEDING IN ANY OTHER COURT, OR SEEK TO
REMOVE SUCH ACTION OR PROCEEDING TO ANY OTHER COURT.
1 3
<PAGE>
ARTICLE 16
ETHICS
Contractor, its directors, officers, employees, representatives, agents,
subcontractors and assignees of Contractor or any such subcontractor
(collectively the "CONTRACTOR WORK PARTIES") shall not at any time solicit,
accept, offer or bestow gratuities of more than nominal value from or to one or
more of the Companv and its affiliates, the employees, agents, or
representatives of Company or its affiliates, any of Company's other
contractors, the employees, agents, or representatives of such other
contractors, one or more of the Contractor Work Parties, or anyone else
associated with the Work. Violation of this policy by any of the Contractor Work
Parties shall constitute a material breach of Contractor's obligations under the
Agreement, and the party who is found to have violated the provisions of this
Section shall be immediately removed from the Work by Contractor at Contractor's
sole risk, cost and expense.
ARTICLE 17
MISCELLANEOUS PROVISIONS
17.1 Contractor, its subcontractors and assignees shall not publish or
make known to others the subject matter or results of the Work or any
information concerning Company, other than that in the public domain, furnished
to or acquired by Contractor, its subcontractors and assigns without Company's
written approval. The obligations established in this Section shall survive and
remain enforceable after any termination of the Agreement.
17.2 If the enforcement of the obligations of Contractor, its
subcontractors or assigns hereunder is referred to any attorney by the Company,
then Contractor shall pay the Company's reasonable attorney's fees and court
costs in addition to any other relief which may be obtained.
17.3 Contractor shall comply with all applicable laws, orders, rules and
regulations bearing upon its obligations hereunder.
<PAGE>
17.4 In the event that any statute or rule of law should be held
applicable to any provisions contained in this Agreement which would render
void, voidable or unenforceable any such provision(s) by reason of such
provision(s) being contained herein, then, and only in such event, such
provision(s) shall be read, construed and enforced as to the parties as if such
provisions which is held to violate the statute or
14
<PAGE>
rule of law was excluded from this Agreement, but only to the extent or degree
by which such provision(s) is so held, and this Agreement shall otherwise remain
in force and effect and binding upon the parties.
17.5 This Agreement and the attached Exhibits constitute the entire
agreement between Company and Contractor. None of these documents may be amended
except by a writing signed by both parties. No promise, agreement or
representation not set forth in this Agreement or an attached Exhibit shall be
of any force or effect.
17.6 All headings appearing in this Agreement are for convenience only,
and shall not be considered a part of this Agreement for any purpose or as in
any way interpreting, construing or modifying this Agreement.
17.7 No waiver by either party of any right, or waiver of any default of
the other in the performance of any of the provisions of this Agreement shall
operate or be construed as a waiver of any future right or default, whether of a
like or of a different nature.
17.8 In the event of any dispute under this Agreement, Contractor shall,
notwithstanding the pendency of such dispute, diligently proceed with the
performance of this Agreement without prejudice to the rights of either party.
17.9 The individual executing this Agreement on behalf of Contractor does
hereby represent and warrant that he or she is fully authorized and empowered to
execute same on behalf of Contractor, and to fully bind Contractor to all of the
terms hereof.
15
<PAGE>
IN WITNESS WHEREOF, Contractor and Company have executed this Agreement as
of the date first above written.
COMPANY:
PANHANDLE EASTERN PIPE LINE
COMPANY
BY: /s/ S. L. HORTON
S. L. Horton
TITLE: Vice President
CONTRACTOR:
IDS TECHNICAL SERVICES
BY: ________________________________
TITLE: PRESIDENT
16
<PAGE>
EXHIBIT 10.10
PANHANDLE EASTERN PIPE LINE COMPANY
A UNIT OF PANHANDLE EASTERN CORPORATION
November 15, 1995
IDS TECHNICAL SERVICES
Attn: William A. Coskey
14900 Woodham Drive, Suite 170
Houston, TX 77073-6016
Re: Engineering Design Services Contract No. ES-PE-1 1 5
Gentlemen:
As you are aware Contract Number ES-PE-1 1 5 between IDS TECHNICAL SERVICES and
PANHANDLE EASTERN PIPE LINE COMPANY to furnish engineering design services will
expire on December 31, 1995.
In order to ensure continuity in our work schedule Panhandle Eastern wishes to
extend the term of your existing contract though December 31, 1996 under the
same rates, terms and conditions and insurance requirements of the current
contract.
If you are in Agreement with the extension of this contract please sign and
return both copies of this letter to my attention; R.E. Keyser, General Manager,
Engineering, P.O. Box 1642, Houston, Texas 77251-1642.
After execution by the Company one fully executed original of this letter will
be returned to you for your files.
Our records indicate that your insurance coverage will expire on 12/18/95. If
you elect to renew your contract it will be necessary to furnish a new
certificate of insurance on the enclosed Company form indicating that you have
the insurance coverage required by the contract.
Should you have any questions, please contact R.E. Keyser, General Manager,
Engineering, (713) 989-2241 or W.R. Malone, Manager, Engineering Contracts,
(713) 989-2235.
Sincerely,
/s/ W.R. MALONE for
R. E. Keyser
General Manager
Engineering
PANHANDLE EASTERN PIPE LINE COMPANY IDS TECHNICAL SERVICES
By: /s/ S.L. HORTON By: /s/ WILLIAM A. COSKEY
S.L. Horton William A. Coskey
Title: Vice President Title: PRESIDENT
P.O. BOX 1642 HOUSTON, TEXAS 77251-1642 5444 WESTHEIMER 77056-5388
713-627-5400
EXHIBIT 10.11
MASTER CONTRACT FOR
ENGINEERING, CONSULTING AND FABRICATION SERVICES
CONTRACT NO. SI-4
FOR SERVICES TO BE PROVIDED BY:
INDUSTRIAL DATA SYSTEMS CORPORATION, D/B/A IDS ENGINEERING
<PAGE>
MS-48157-GN
RATE
SCHEDULE
PAGE 1 OF 1
IDS TECHNICAL SERVICES
a division of
INDUSTRIAL DATA SYSTEMS, INC.
600 Century Plaza Drive Building 140
Houston, TX 77073-6016
RATES FOR ENGINEERING SERVICES
Effective February 1, 1995 all work authorized by Company will be done for the
following rates. These rates include all Contractor's charges for insurance,
taxes, overhead, and profit. Computer work stations and software for normal
engineering and drafting projects are included in these rates.
Engineering Std. Rate O.T. Rate
- ----------- --------- ---------
Project Manager 65.00 65.00
Project Engineer 65.00 65.00
Senior Engineer 55.00 55.00
Engineer 50.00 50.00
Senior Designer 48.00 64.00
Designer 42.00 56.00
Operator/Draftsperson 35.00 46.00
Engineering Technician 48.00 64.00
Clerical 20.00 27.00
TRAVEL EXPENSES
All job related travel and expenses will be reimbursed at cost.
REPRODUCTION
All reproduction costs will be billed at cost plus 10 percent.
MISCELLEANEOUS COSTS
All miscelleaneous and third party costs will be billed at cost plus 10 percent.
<PAGE>
TABLE OF CONTENTS
ARTICLE I DEFINITIONS ................................. 1
ARTICLE 2 CONTRACTOR'S WORK ........................... 2
ARTICLE 3 DESCRIPTION OF SERVICES ................. 2
ARTICLE 4 CONTRACT TERM ............................. 3
ARTICLE 5 AUTHORIZATION OF SERVICES .................. 3
ARTICLE 6 EQUIPMENT, TOOLS, MATERIALS AND SUPPLIES
FURNISHED BY COMPANY ................. 3
ARTICLE 7 MANAGEMENT TEAM ............................. 4
ARTICLE 8 CONTRACTOR COORDINATION ..................... 4
ARTICLE 9 ADMITTANCE TO SITE .......................... 5
ARTICLE 10 COMPLIANCE ............................ 5
ARTICLE I I SAFETY ............................. 6
ARTICLE 12 ACCIDENT/ILLNESS REPORTS ............ 7
ARTICLE 13 NOTIFICATION OF VIOLATION OR
INSPECTION ........................... 7
ARTICLE 14 COMPENSATION ....................... 8
ARTICLE 15 AUDIT RIGHTS AND RECORD KEEPING ....... 9
ARTICLE 16 REMEDIES .............................. 9
ARTICLE 17 INDEPENDENT CONTRACTOR STATUS ......... 10
ARTICLE 18 SUBCONTRACTS ....................... 10
ARTICLE 19 CHANGES IN WORK ....................... 11
ARTICLE 20 ACCEPTANCE OF WORK .................... 12
ARTICLE 21 GUARANTEE OF WORK ..................... 12
ARTICLE 22 SUSPENSION OF WORK .................... 12
ARTICLE 23 TERMINATION ........................... 13
ARTICLE 24 FORCE MAJEURE ....................... 14
ARTICLE 25 REPRESENTATIONS, WARRANTIES AND
COVENANTS .......................... 15
ARTICLE 26 INDEMNIFICATION ....................... 16
ARTICLE 27 LIENS AND OTHER ENCUMBRANCES ........... 17
ARTICLE 28 WAIVER OF RIGHTS TO LIENS ............ 17
ARTICLE 29 INSURANCE ............................ 17
ARTICLE 30 RESPONSIBILITY FOR TAXES AND CHARGES
FOR BENEFITS ....................... 19
ARTICLE 31 INTELLECTUAL PROPERTY ................ 19
ARTICLE 32 DRAWINGS, SPECIFICATIONS AND OTHER
DOCUMENTS ............................. 22
ARTICLE 33 CONFLICTS OF INTEREST ................. 22
ARTICLE 34 ASSIGNMENT ............................. 23
ARTICLE 35 NOTICES ............................. 23
ARTICLE 36 SEVERABILITY ....................... 23
<PAGE>
ARTICLE 37 ARTICLE AND SECTION HEADINGS .......... 23
ARTICLE 38 CONFLICTING PROVISIONS ........... 23
ARTICLE 39 WAIVER ............................. 24
ARTICLE 40 GOVERNING LAW ....................... 24
ARTICLE 41 ENTIRE AGREEMENT ...................... 24
EXHIBIT A CONTRACTOR INFORMATION
EXHIBIT B COMPENSATION AND INVOICING
EXHIBIT C ARCO PIPE LINE COMPANY SAFETY AND HEALTH MANUAL 1995
IDS/SW.MSC Contract No. SI-4
<PAGE>
MASTER CONTRACT FOR
ENGINEERING, CONSULTING AND FABRICATION SERVICES
CONTRACT NO. SI-4
This Contract, effective September 1, 1996, is entered into by and between
COMPANY (as hereinafter defined) and Industrial Data Systems Corporation, d/b/a
IDS Engineering, a Nevada corporation, with offices located at 600 Century Plaza
Drive, Building 140, Houston, Texas 77073-5016 (hereinafter "CONTRACTOR").
NOW, THEREFORE, in consideration of the promises and of the covenants and
agreements contained herein, the parties hereto agree as follows:
ARTICLE 1 DEFINITIONS
1.1 COMPANY
"COMPANY" shall mean Seaway Pipeline Company, a Texas general partnership, by
ARCO Pipe Line Company, as Operator, with offices located at 16500 J.F. Kennedy
Boulevard, Suite 300, Houston, Texas 77032-2352
1.2 COMPANY's Project Representative
"COMPANY's Project Representative" shall mean that person designated by COMPANY
herein or in a subsequent notice to act on behalf of COMPANY with respect to the
Work. The authority and responsibilities of COMPANY's Project Representative are
more fully described in Article 7 of this Contract.
1.3 Change Order
A "Change Order" shall mean a written authorization for a change in the Work
and/or the dollar value of any outstanding Work Release, executed by COMPANY and
CONTRACTOR pursuant to Article 20 of this Contract.
1.4 Contract
The "Contract" shall mean this Master Contract for Engineering, Consulting, and
Fabrication Services, together with all of its Exhibits, Attachments, and fully
executed Work Releases and Change Orders.
1.5 Contractor's Representative
"CONTRACTOR's Representative" shall mean that person designated by CONTRACTOR
herein or in a subsequent notice to act on behalf of CONTRACTOR with respect to
the Work. The authority and responsibilities of CONTRACTOR's Representative are
more fully described in Article 7 hereof.
1.6 Final Acceptance
"Final Acceptance" of the Work shall mean the date on which the Work authorized
pursuant to a Work Release is accepted pursuant to Article 20 hereof.
IDS/SW.MSC Contract No. SI-4
<PAGE>
1.7 Force Majeure
A "Force Majeure" occurrence shall mean an occurrence beyond the control and
without the fault or negligence of the party affected and which such party is
unable to prevent or provide against by the exercise of reasonable diligence,
including, but not limited to, acts of God or a public enemy, expropriation or
confiscation of facilities, changes in applicable law, failure to obtain or
delays in governmental approvals, war, rebellion, sabotage or riots,
earthquakes, floods, fires, explosions or other catastrophes. Strikes and other
labor-related delays shall not be considered force Majeure occurrences.
1.8 Health or Safety Incident
A "Health or Safety Incident" shall include any injury, illness, first aid case,
accident involving equipment, or near miss that occurs during the performance of
the Work.
1.9 Invoice Requirements
The "Invoice Requirements" shall mean those standards for submitting invoices
for payment by COMPANY described in Exhibit B, attached hereto and incorporated
by reference herein.
1.10 Site
The "Site" shall mean the location or locations at which the Work is performed,
except that the Site shall not include CONTRACTOR' permanent offices and
laboratories.
1.11 Work
The "Work" shall mean the work to be performed by CONTRACTOR pursuant to this
Contract. The Work is more particularly described in any Work Releases or Change
Orders issued pursuant to this Contract.
1.12 Work Release
A "Work Release" shall mean an authorization for the performance of Work issued
to CONTRACTOR by COMPANY pursuant to Article 5 of this Contract.
ARTICLE 2 CONTRACTOR'S WORK
CONTRACTOR shall perform the Work to the good faith satisfaction of COMPANY and
in accordance with this Contract. Except as otherwise specified in this
Contract, CONTRACTOR shall provide all labor, transportation, insurance,
materials, supplies, tools, equipment, licenses, permits, or other
authorizations, application fees, services, inspections, coordination,
supervision and other items necessary for the satisfactory completion of the
Work.
ARTICLE 3 DESCRIPTION OF SERVICES
CONTRACTOR will perform work based on Work Orders, Change Orders or Work
Releases against this Contract, Engineering Consulting Work and/or Fabrication
Work as specified in said Work Orders, Change Orders, and Work Releases issued
by COMPANY authorized personnel.
ARTICLE 4 CONTRACT TERM
This Contract shall be effective as of the day and year first written above and
shall expire on December 11, 1997, or upon completion of the Work under any Work
Release issued prior to such expiration date, whichever occurs last.
IDS/SW.MSC 2 Contract No. SI-4
<PAGE>
ARTICLE 5 AUTHORIZATION OF SERVICES
5.1 General
From time to time throughout the term of this Contract, and subject to its
conditions, COMPANY may call upon CONTRACTOR to perform Work via the issuance of
a Work Release. A Work Release shall be signed by a representative of COMPANY
and may authorize CONTRACTOR to provide any Work permissible hereunder. Any Work
Release so issued and accepted by CONTRACTOR hereunder shall incorporate by
reference this Contract and shall indicate all specifications required to
complete the Work. COMPANY makes no guarantee, express or implied, as to the
actual quantity and extent of Work, if any, which may be required from time to
time throughout the term of this Contract.
5.2 Emergency Work
In the event of an emergency that COMPANY determines endangers human health or
property, COMPANY may authorize up to $15,000 of Work by oral instruction to
CONTRACTOR, with a written Work Release to follow as soon as practicable. Unless
otherwise agreed to by the parties, COMPANY shall pay CONTRACTOR its actual
costs (on a time and materials basis), as described in Exhibit B, for such Work,
until such time as agreement on acceptable compensation is reached for such
emergency work. In no event shall CONTRACTOR perform Work that exceeds $15,000
in total value pursuant to oral orders from COMPANY that have not been confirmed
with a written Work Release.
5.3 Responsibility for Costs of Work
Except as provided for in section 5.2, CONTRACTOR shall not proceed with Work
that is not properly authorized by a Work Release according to this Article and
shall be solely responsible for the cost and expense of any Work it undertakes
that has not been so authorized. COMPANY shall not be liable for payments above
the amounts specifically authorized by properly executed Work Releases.
ARTICLE 6 EQUIPMENT, TOOLS, MATERIALS AND SUPPLIES FURNISHED BY COMPANY
6.1 Title
COMPANY shall at all times retain title to any and all equipment, tools,
materials and supplies furnished by COMPANY, unless otherwise agreed to in
writing by COMPANY.
6.2 No Warranties
EXCEPT AS MAY BE EXPRESSLY STATED IN THIS CONTRACT, COMPANY MAKES NO WARRANTY,
EXPRESS OR IMPLIED, AS TO THE FITNESS OR SUITABILITY OF ANY EQUIPMENT, TOOLS,
MATERIALS AND SUPPLIES FURNISHED BY COMPANY FOR THEIR INTENDED USE, OR FOR ANY
PARTICULAR PURPOSE OR USE.
6.3 Damage to Equipment Furnished by COMPANY
By CONTRACTOR's acceptance and use of any equipment, tools, materials and
supplies furnished by COMPANY, CONTRACTOR shall be deemed to have waived, and
shall be precluded from, any
IDS/SW.MSC 3 Contract No. SI-4
<PAGE>
subsequent claim by CONTRACTOR that such items were received in a damaged, or
unusable condition or with shortages. CONTRACTOR shall provide appropriate
security and suitable protection for all equipment, tools, materials and
supplies furnished by COMPANY. CONTRACTOR shall assume the risk of, and be
responsible for, any loss of or damage to any equipment, tools, materials and
supplies furnished by COMPANY, except for (i) reasonable wear and tear, or (ii)
consumption during the normal course of the Work.
ARTICLE 7 MANAGEMENT TEAM
7.1 COMPANY's Project Representative
COMPANY shall designate its Project Representative in each Work Release. Unless
otherwise specified by COMPANY, COMPANY's Project Representative is authorized
to act on behalf of COMPANY in connection with the performance of the Work.
Unless otherwise expressly stated herein, any review, approval, authorization or
direction by COMPANY pursuant to this Contract shall be deemed to mean the
review, approval, authorization or direction of the Project Representative.
COMPANY or its Project Representative may from time to time throughout the term
hereof delegate the functions and authority of the Project Representative to
others, in whole or in part, provided such actions are confirmed in writing to
CONTRACTOR. The Project Representative shall be available as often as is
reasonably necessary for inspecting and reviewing the Work. No such review,
approval, authorization, direction, or inspection shall relieve CONTRACTOR of
any of its obligations under this Contract.
7.2 CONTRACTOR's Representative
As soon as practicable after the acceptance of each Work Release, CONTRACTOR
shall designate its Representative. The Representative shall be authorized to
act on behalf of CONTRACTOR and shall be available to consult with COMPANY's
Project Representative at all reasonable times with respect to the Work, and
whose instructions, requests and decisions shall be binding upon CONTRACTOR as
to all matters pertaining to the Work. CONTRACTOR or its Representative may from
time to time throughout the term hereof delegate the functions and authority of
CONTRACTOR's Representative to another CONTRACTOR employee, in whole or in part,
provided such actions are confirmed in writing to COMPANY.
ARTICLE 8 CONTRACTOR COORDINATION
COMPANY MAY, FROM TIME TO TIME, SUPPLY SUPPORT SERVICES FOR THE WORK, AT NO COST
TO CONTRACTOR, DURING THE PROGRESS OF THE WORK IF COMPANY DETERMINES IN ITS SOLE
GOOD FAITH DISCRETION THAT PROVISION OF SUCH SUPPORT SERVICES WILL BENEFIT THE
EXECUTION OF THE WORK. ADDITIONALLY, COMPANY HAS THE RIGHT TO SEEK BIDS AND TO
LET OTHER CONTRACTS COVERING OTHER WORK RELATED TO THE WORK AND CONTRACTOR SHALL
COOPERATE WITH ALL SUCH BIDDERS AND CONTRACTORS. CONTRACTOR AGREES TO ADMIT SUCH
OTHER BIDDERS AND CONTRACTORS TO THE SITE.
ARTICLE 9 ADMITTANCE TO SITE
When CONTRACTOR is required to perform the Work at the Site or has control over
persons who perform the Work at the Site, CONTRACTOR shall not admit any person
to the Site unless such person is essential to the completion of the Work.
Notwithstanding the foregoing, CONTRACTOR shall (i) allow COMPANY personnel and
COMPANY designated persons to enter the Site; and (ii) permit and facilitate
access to of the Site and the Work by any public authorities at all times, but
only after complying with the provisions of Article 12 hereof. CONTRACTOR shall
ensure that all such persons comply with all relevant safety requirements while
they are on the Site.
IDS/SW.MSC 4 Contract No. SI-4
<PAGE>
ARTICLE 10 COMPLIANCE
10.1 Prior to commencing the Work, CONTRACTOR shall obtain in writing and
provide COMPANY with copies of all licenses, permits and authorizations required
for the Work.
10.2 CONTRACTOR and its affiliates, subcontractors, agents, employees and
representatives shall at all times comply with any and all applicable Federal,
State and local laws, ordinances, statutes, standards, rules and regulations,
including, but not limited to, those relating to working hours, working
conditions, safety and health, environment, and discrimination in employment,
including but not limited to, Title VII of the Civil Rights Act of 1964, the Age
Discrimination in Employment Act of 1967 and the Americans with Disabilities Act
of 1990. Additionally, CONTRACTOR shall comply with all licenses, permits and
authorizations required for the Work by all governmental authorities having
jurisdiction over the Work.
10.3 Section 202 of Executive Order 11246, as amended by Executive Order 11375,
relating to equal employment opportunities, the implementing rules and
regulations of the Secretary of Labor, and all contract clauses and requirements
which are applicable and set forth therein are incorporated herein by specific
reference. In particular, the CONTRACTOR hereby certifies that it does not
maintain segregated facilities. In making this certification, CONTRACTOR
incorporates each and all of the provisions of the approved form of
certification contained in 41 C.F.R. Section 60-1.8(b) the same as if such
provisions were fully set forth herein and signed by the CONTRACTOR. Sections
503 and 504 of the Rehabilitation Act of 1973 and Title IV of the Vietnam Era
Veterans Readjustment Assistance Act of 1974, 38 U.S.C. Section 2012, relating
to employment and advancement in employment of qualified handicapped
individuals, disabled veterans and veterans of the Vietnam era; the implementing
rules and regulations of the Secretary of Labor; and all contract clauses and
requirements which are applicable and set forth therein are incorporated herein
by specific reference pursuant to 41 C.F.R. Sections 60-250.22 and 60-741.22.
Section 211 of public law 95-507 and Executive Orders 11625 and 12138, relating
to the utilization of small and minority business concerns, small business
concerns owned and controlled by socially and economically disadvantaged
individual and women-owned business concerns; the implementing rules and
regulations of the General Services Administration; and all contract clauses and
requirements which are applicable and set forth therein are incorporated herein
by specific reference.
10.4 CONTRACTOR shall comply with applicable laws, executive orders and
regulations concerning listing job vacancies, including 41 C.F.R. Part 60-250
which is incorporated herein by reference.
ARTICLE 11 SAFETY
11.1 General
CONTRACTOR shall initiate, maintain and supervise all necessary safety
precautions and programs in connection with the Work. CONTRACTOR shall take all
necessary precautions to prevent damage, injury or loss to (i) all persons on
the Site, and all persons who may be affected by the Work; (ii) all the Work,
and all materials or equipment to be incorporated therein, whether in storage on
or off the Site; and (iii) other property at the Site or adjacent thereto.
11.2 Safety Programs
CONTRACTOR shall adopt and maintain a formal, written safety program which meets
regulatory and generally accepted industry standards. Additionally, CONTRACTOR
shall maintain records of its safety program and provide COMPANY with access to
such records. CONTRACTOR shall also comply with any COMPANY safety standards
which COMPANY provides to CONTRACTOR, including but not limited to ARCO PIPE
LINE COMPANY 1995 SAFETY AND HEALTH MANUAL, attached hereto as Exhibit C.
IDS/SW.MSC 5 Contract No. SI-4
<PAGE>
11.3 Safety Equipment
CONTRACTOR shall furnish all safety equipment necessary for the personal
protection of its personnel. Additionally, CONTRACTOR shall ensure that each of
its employees and its subcontractors' employees are trained in the use of all
such safety equipment. CONTRACTOR shall be responsible for all costs of delays
caused by CONTRACTOR's failure to provide necessary safety equipment or to
ensure that its employees are properly trained in the use of such equipment,
whether or not such delays result in suspension or termination of the Work
pursuant to Articles 19 or 20.
11.4 Hazard Communication
CONTRACTOR shall (i) provide to COMPANY and maintain on the Site all Material
Safety Data Sheets required by law; (ii) notify COMPANY at least three working
days prior to bringing any hazardous material, equipment or process, or using
the same, on the Site; and (iii) immediately notify COMPANY in writing of any
hazard which it discovers on the Site.
11.5 Emergency Medical Treatment
CONTRACTOR shall provide all emergency medical treatment or facilities necessary
or prudent in performing the Work. However, at any time, COMPANY may, at its
sole discretion, provide emergency services to CONTRACTOR's employees, agents or
representatives or any of its subcontractors' employees, agents, or
representatives. CONTRACTOR shall reimburse COMPANY for the cost of any such
emergency services rendered and indemnify, defend and hold COMPANY, its
subsidiaries and affiliates and any of their directors, officers,
representatives and employees free from harm against all claims, demands,
losses, and causes of action of every kind and character (including reasonable
attorney fees and court costs) arising or alleged to arise from any such
emergency services.
11.6 Housekeeping
CONTRACTOR shall keep the Site free from any unnecessary accumulation of waste
materials and rubbish and shall keep the Site and the Work in a neat and orderly
condition.
11.7 Removal of CONTRACTOR
COMPANY may, at any time, without written notice, remove CONTRACTOR, any of its
subcontractors, or any of their employees or agents from the Site for safety
concerns. Additionally, CONTRACTOR shall remove any employee, agent, or
representative of CONTRACTOR or any employee, agent, or representative of any
subcontractor from the Site or the Work upon the request of COMPANY, which may
be given for any reason.
ARTICLE 12 ACCIDENT/ILLNESS REPORTS
12.1 Maintenance of Records
CONTRACTOR shall maintain health and safety records in accordance with
applicable laws, rules and regulations. Additionally, CONTRACTOR shall make such
records available to COMPANY at COMPANY's request.
IDS/SW.MSC Contract No. SI-4
<PAGE>
12.2 Accident/Illness Reports
12.2.1 Immediate Reports
CONTRACTOR shall immediately report to COMPANY all Health or Safety Incidents.
Additionally, CONTRACTOR shall immediately fully investigate any such Incident
and shall provide to COMPANY, CONTRACTOR's corrective action plan for such
Incident as soon as possible after the Incident occurs.
12.2.2 Monthly Reports
Prior to the end of each calendar month, CONTRACTOR shall submit to COMPANY's
Representative a written summary of all Health or Safety Incidents and the total
amount of man hours worked at the Site, which occurred during that month.
12.2.3 Other Reports
CONTRACTOR shall submit to COMPANY copies of all other accident and injury
reports it prepares that relate to the performance of the Work, including
information and statements submitted by CONTRACTOR to its insurer or others
regarding any accident or injury reportable hereunder.
ARTICLE 13 NOTIFICATION OF VIOLATION OR INSPECTION
If CONTRACTOR receives a notice, notice of inspection, warning, asserted
violation or similar correspondence from a government agency concerning the Work
or the Site, or the Work or the Site become the subject of a government
inspection, CONTRACTOR shall provide immediate oral notification of such
correspondence or inspection to COMPANY, and shall follow with a written
notification, including a copy of the correspondence and/or notice, as soon as
practicable. CONTRACTOR shall provide such oral notification to COMPANY prior to
allowing government representatives access to the Site in connection with such
an event and acknowledges that COMPANY has a right to participate in all Site
visits by government representatives.
ARTICLE 14 COMPENSATION
14.1 Compensation
Provided that CONTRACTOR is not in default or breach of this Contract and
faithfully keeps and performs all of the TERMS and conditions of this Contract
to COMPANY's good faith satisfaction, COMPANY shall compensate CONTRACTOR for
the performance of the Work in accordance with Exhibit B hereto and any
applicable Work Release or Change Order.
14.2 No Compensation for Corrective Action
Notwithstanding anything to the contrary herein, no compensation shall be paid
to or claimed by CONTRACTOR for the Work required to correct unsatisfactory Work
deficiencies caused by the failure of CONTRACTOR to perform the Work in
accordance with the terms and conditions of this Contract.
14.3 Offset
CONTRACTOR hereby authorizes COMPANY to deduct from any amount payable by
COMPANY to CONTRACTOR all amounts which may be payable by CONTRACTOR to COMPANY
(whether or not arising out of this Contract).
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14.4 Costs Incurred By COMPANY
COMPANY shall have the right to deduct expenses or costs incurred by COMPANY
because of CONTRACTOR's or any subcontractor's halting the Work in progress from
the compensation due CONTRACTOR at the time of payment.
14.5 Costs Arising From Health or Safety Incidents
Notwithstanding anything herein to the contrary, CONTRACTOR shall not be
compensated for any expenses incurred or for lost time, productivity, or profits
caused by the suspension of the Work for health or safety reasons.
14.6 Payment on Account
CONTRACTOR agrees that all payments to CONTRACTOR hereunder shall be on account
only and that no payment shall constitute acceptance of any charge until such
payment has been verified by audit nor shall any payment be construed as an
acceptance of any portion of the Work or as a waiver of CONTRACTOR's duties,
liabilities, warranties, or guarantees under this Contract.
14.7 Limitation of Liability of Partners and Operators
Contractor agrees that it shall look solely to the assets of Seaway Pipeline
Company for the satisfaction of any claim or demand that it might have arising
under this Contract, and hereby expressly waives its right to assert any claim
or demand against any of the current, former or future partners or operators of
Seaway Pipeline Company individually based upon or arising out of this Contract.
ARTICLE 15 AUDIT RIGHTS AND RECORD KEEPING
15.1 Audit Rights
Throughout the term of this Contract and for a period of three years following
the completion or termination of this Contract and for so long thereafter as
there may remain any unresolved questions or disputes regarding any item,
COMPANY shall, at all reasonable times and upon prior notice to CONTRACTOR, have
access to all CONTRACTOR'S, subcontractors', and vendors' personnel, books,
records, correspondence, instructions, plans, equipment maintenance records,
drawings, receipts, vouchers, financial accounts and memoranda of every
description pertaining to the Work for the purpose of auditing and verifying
costs of the Work, CONTRACTOR's safety performance under this Contract, or for
any other reasonable purpose. COMPANY shall have the right to reproduce any of
the aforesaid documents. In the event that any audit reveals an error or
discrepancy of any nature whatsoever, such error or discrepancy will be
corrected promptly, and any moneys owing and due either COMPANY or CONTRACTOR
will be paid promptly by the other party. CONTRACTOR shall not charge for any
costs incurred by it in assisting COMPANY with audits performed pursuant to this
Article. CONTRACTOR's obligations under this Article shall survive the
termination of this Contract.
15.2 Record Keeping
CONTRACTOR shall maintain all supporting data and accounting records required
pursuant to this Contract in accordance with generally accepted accounting
principles and also shall retain all safety records required pursuant to this
Contract. CONTRACTOR shall preserve all of such documents for a period of three
years after the completion and acceptance or termination of the Work.
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ARTICLE 16 REMEDIES
In addition to other remedies available to COMPANY by law and under this
Contract, COMPANY shall have available to it the following remedies:
16.1 Completion of Work
Notwithstanding anything herein to the contrary, if, in COMPANY's sole good
faith opinion, CONTRACTOR fails to prosecute the Work properly or in a timely
manner, or fails to perform any term, condition or provision of this Contract,
COMPANY shall give prompt written notice of such deficiency to CONTRACTOR.
CONTRACTOR shall commence corrective action of such deficiency within five days
after receipt of such notice and diligently pursue correction of such deficiency
to completion and to COMPANY's good faith satisfaction. COMPANY may direct that
such corrective action include additional measures such as, but not limited to,
an increase in CONTRACTOR's work force, an increase in the number of shifts,
overtime operations, and/or additional days of work per week. Such additional
measures shall be undertaken by CONTRACTOR at no additional cost to COMPANY. If
CONTRACTOR fails to commence and diligently pursue such corrective action,
COMPANY may, without prejudice to any other available remedy, take over and
complete all or any part of the Work, and make good such deficiencies.
CONTRACTOR shall not be compensated for any Work undertaken by COMPANY pursuant
to this section. Additionally, COMPANY shall be entitled to deduct from
CONTRACTOR's compensation hereunder (or recover from payments already made to
CONTRACTOR if necessary) any costs incurred by COMPANY in performing Work under
this section that exceed the costs that would have been incurred by COMPANY had
CONTRACTOR fully performed its responsibilities under this Contract.
16.2 Withholding of Payments
Notwithstanding anything herein to the contrary, COMPANY shall have the right to
withhold from payments due CONTRACTOR such sums that COMPANY believes are
reasonably necessary to protect COMPANY against any loss or damage that may
result from CONTRACTOR's failure to perform, CONTRACTOR's negligence or
unsatisfactory Work, or for such acts or omissions by CONTRACTOR's
subcontractors, affiliates, agents or employees, or for claims filed against
COMPANY by third parties relating to CONTRACTOR's performance of the Work. Any
sums withheld from CONTRACTOR as provided in this Article shall be due and
payable to CONTRACTOR only if COMPANY determines in its sole good faith
discretion that the condition necessitating the withholding has been remedied by
CONTRACTOR.
ARTICLE 17 INDEPENDENT CONTRACTOR STATUS
In performing the Work, CONTRACTOR shall act at all times as an independent
contractor and shall have responsibility for and control over the details and
means of performing the Work. CONTRACTOR acknowledges that it has the duty to
provide continuous adequate supervision of its personnel. Nothing in this
Contract shall be construed or implied to make CONTRACTOR, or any of its
subcontractors, affiliates, employees, agents, or representatives an employee,
representative, or agent of COMPANY. CONTRACTOR shall be subject to the
directions of COMPANY only with respect to the scope of the Work and the general
results required. CONTRACTOR shall not make any commitment or incur any charge
or expense in COMPANY's name.
ARTICLE 18 SUBCONTRACTS
18.1 Prior Approval of Subcontractors
CONTRACTOR shall not retain any subcontractors, vendors, outside associates or
consultants in connection with the Work that have not been previously approved
in writing by COMPANY. Additionally,
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COMPANY shall have the right to disapprove the use of any personnel,
subcontractors, or purchased service or equipment.
18.2 Provisions of Subcontracts
CONTRACTOR shall not engage any subcontractor or vendor to perform part of the
Work unless CONTRACTOR has a written agreement with that subcontractor or
vendor. Except as otherwise specifically approved by COMPANY, CONTRACTOR agrees
to include in each subcontract for some or all of the Work all provisions of
this Contract necessary to ensure that the rights conferred to COMPANY by this
Contract shall not be affected or diminished by such subcontract, with
appropriate modifications to reflect the proper rights, responsibilities and
relationships of COMPANY, CONTRACTOR and subcontractor. Such provisions shall
include, but need not be limited to, Articles 9 (ADMITTANCE TO SITE), 10
(COMPLIANCE), I I (SAFETY), 12 (ACCIDENT/ILLNESS REPORTS), 13 (NOTIFICATION OF
VIOLATION OR INSPECTION), 15 (AUDIT RIGHTS AND RECORD KEEPING), 22 (SUSPENSION
OF WORK), 23 (TERMINATION), 26 (INDEMNIFICATION), 28 (WAIVER OF RIGHTS TO
LIENS), 31 (INTELLECTUAL PROPERTY), 34 (ASSIGNMENT), and Section 25.2 (TRAINING
AND CERTIFICATION OF PERSONNEL).
18.3 No Contractual Relationship
There shall be no contractual, agency, or partnership relationship intended,
implied or created between COMPANY and any subcontractor with respect to the
Work. CONTRACTOR shall be responsible for paying directly any subcontractor or
vendor used in the performance of the Work. Additionally, CONTRACTOR shall be as
fully responsible to COMPANY for the acts and omissions of any of its
subcontractors or vendors as CONTRACTOR is for its own acts and omissions.
ARTICLE 19 CHANGES IN WORK
19.1 Change Orders
COMPANY may, at any time, make additions, deletions, or changes in the Work of
either a major or minor nature. All such modifications shall be authorized by
written Change Orders. COMPANY may at any time, by such Change Orders, change or
issue additional instructions, specifications and/or drawings, and change, omit
or require additional Work to be performed by CONTRACTOR. In such event, COMPANY
shall have full authority to specify the amount and kind of Work to be done or
omitted, the materials to be used, and the equipment to be furnished as fully as
though such changes had been incorporated in the original Contract.
19.2 Compensation for Change Orders
Any authorized change in the Work that does not increase the cost of the Work to
Contractor shall not be made the basis of any claim for extra compensation. Any
change in the Work authorized by a written Change Order pursuant to Section 19.1
which increases the cost of the Work to CONTRACTOR or which includes an item of
work not within the scope of this Contract shall be an item of extra work. Such
items of extra work shall be paid for, at COMPANY's sole option, (i) on the
basis of unit prices where such are established in Exhibit B, (ii) by a
negotiated lump sum amount prior to commencement of the changed Work, or (iii)
on a time and materials basis. All extra work performed on a time and materials
basis shall be paid for as described in Exhibit B.
19.3 Emergency Work
In the event of an emergency that COMPANY determines endangers human health or
property, additional Work shall be performed on oral orders from COMPANY and
confirmed by written Change Order as soon
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as practicable. In the event of such a situation, CONTRACTOR shall keep accurate
records of actual costs (on a time and materials basis), as described in Exhibit
B, until such time as agreement on acceptable compensation is reached for such
emergency work as described in section 19.2.
19.4 Deletion of Work
COMPANY may at any time delete any portion of the Work, and CONTRACTOR shall
perform all nondeleted portions of the Work pursuant to this Contract.
CONTRACTOR shall not be entitled to payment for the deleted work, except that
the parties shall negotiate an equitable adjustment required for the recovery of
reasonable overhead expenses incurred by CONTRACTOR and related to the deleted
Work.
19.5 Failure to Negotiate Change Order
If the parties are unable to negotiate equitable changes to the Contract
Schedule or to CONTRACTOR's compensation, COMPANY shall have the right to
perform the desired changes in the Work itself or to retain a third party to
perform such changes in the Work. If the parties are unable to negotiate
equitable changes to the Contract for a proposed Change Order that deleted a
portion of the Work, CONTRACTOR shall nonetheless remain obligated to perform
all non-deleted portions of the Work.
19.6 Responsibility for Costs of Work
CONTRACTOR shall not proceed with Work that is not authorized by this Contract,
or by changes in the Work conducted in accordance with this Article and shall be
solely responsible for the cost and expense of any Work it undertakes that has
not been so authorized. COMPANY shall not be liable for payments above the
amounts specifically authorized by this Contract or by properly executed Change
Orders.
ARTICLE 20 ACCEPTANCE OF WORK
CONTRACTOR shall notify COMPANY in writing when the Work authorized by a Work
Release has been completed. If, in the sole good faith discretion of COMPANY,
the Work conforms to all of the requirements of this Contract, COMPANY shall
accept the Work within 10 working days after receipt of such written notice. If,
in the sole good faith discretion of COMPANY, the Work or any portion of the
Work does not conform to all of the requirements of this Contract, COMPANY shall
give CONTRACTOR notice of any non-conforming Work. Within five working days
after receiving such notice from COMPANY, CONTRACTOR shall correct all
non-conforming Work or provide a mutually accepted written plan of work for
correction of the non-conforming Work. Corrected Work shall be resubmitted for
acceptance by COMPANY and the above approval process shall be repeated until the
Work is acceptable.
ARTICLE 21 GUARANTEE OF WORK
21.1 Correcting Defects Prior to Completion
If, at any time prior to Final Acceptance of the Work, any of the Work performed
by CONTRACTOR, or any of the materials or equipment supplied by CONTRACTOR
hereunder, or any portion thereof, is rejected by COMPANY as unsound, improper,
or failing in any way to conform to the provisions of this Contract, CONTRACTOR,
upon receiving from COMPANY written notice thereof, shall immediately make
corrections in the Work to the good faith satisfaction of COMPANY. CONTRACTOR
shall bear the cost of such corrective action (including but not limited to any
damage to other Work or property resulting from those defects or the curing of
those defects) to the extent that the defects to be corrected are due to the
negligence of CONTRACTOR or the failure of CONTRACTOR to comply with the
provisions of this Contract.
21.2 Correcting Defects After Completion
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If at any time during the three year period following either Final
Acceptance of the Work or termination of this Contract under Article 23,
whichever occurs later, any of the Work performed by CONTRACTOR fails to conform
with the provisions of this Contract, CONTRACTOR, upon receiving from COMPANY
written notice thereof, shall immediately correct any such defective Work
(including but not limited to any damage to other work or property resulting
from such defective Work or the curing of such defective Work) so that it
conforms to the provisions of this Contract to the good faith satisfaction of
COMPANY. CONTRACTOR shall bear the cost of all such corrective action.
21.3 No Limitation of COMPANY's Rights
The guarantees contained in this Article shall not be construed to modify or
limit, in any way, any rights or actions that COMPANY may otherwise have against
CONTRACTOR by law or statute, or in equity.
ARTICLE 22 SUSPENSION OF WORK
COMPANY may, at any time, without prior written notice, suspend all or any part
of the Work for any reason. However, any oral notice of suspension of Work shall
be followed as soon as practicable with written notice. CONTRACTOR shall cease
all Work so suspended on the date specified by COMPANY's Project Representative
and shall take all reasonable steps to minimize the incurrence of costs
allocable to the Work covered by the notice of suspension during the period of
work stoppage. Said suspension shall end when COMPANY, by written notice to
CONTRACTOR, either requires CONTRACTOR to resume the suspended Work or
terminates that portion of the Work that has been suspended.
Only costs that are reasonably and directly related to the suspended Work and
approved by COMPANY prior to expenditure shall be payable to CONTRACTOR for any
suspended Work during the period of such suspension. Additionally, such costs
shall not be payable to CONTRACTOR if COMPANY suspends the Work because of
CONTRACTOR's negligence, willful misconduct, failure to satisfactorily perform
the Work, or breach of any provision of this Contract. COMPANY shall not be
liable to CONTRACTOR for any consequential or incidental damages which may arise
from a suspension of Work.
ARTICLE 23 TERMINATION
23.1 With Cause
COMPANY may terminate this Contract with cause if any of the following events
occur:
Within five days after receipt of COMPANY's written notice to do so, CONTRACTOR
fails to diligently conduct the Work;
ii. CONTRACTOR commits a breach or default of any of its duties, liabilities,
obligations, guarantees, representations or warranties hereunder and fails to
proceed in good faith and with due diligence to cure or remedy such breach or
default within five days after written notice thereof from COMPANY; or
iii. CONTRACTOR makes an assignment for the benefit of creditors, is adjudicated
a bankrupt, or files a voluntary petition in bankruptcy or in corporate
reorganization, or if a receiver is appointed for any of CONTRACTOR's assets.
23.2 Without Cause
COMPANY shall have the right to terminate the Contract or the Work, in whole or
in part, without cause at any time, by giving written notice of termination to
CONTRACTOR.
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23.3 Termination Procedure
If COMPANY terminates this Contract or the Work, in whole or in part, pursuant
to this Article 23, CONTRACTOR shall, on the effective date of said termination,
discontinue all Work as soon as practicable and discontinue contracting for the
purchase of materials or for the performance of any of the Work. CONTRACTOR
shall also make every effort to cancel all existing purchase orders and
subcontracts on terms satisfactory to and with the approval of COMPANY. However,
if COMPANY so requests, CONTRACTOR shall perform any portion of the Work that
COMPANY desires to have CONTRACTOR complete, including, but not limited to, work
necessary to preserve and protect materials at the Site or which may have been
purchased by CONTRACTOR. COMPANY, at its option, but without obligation to do
so, may enter upon the Site and take possession thereof and of all records,
drawings, equipment and supplies furnished by CONTRACTOR to COMPANY.
Additionally, COMPANY may take possession of all of CONTRACTOR's equipment and
materials necessary for the Work, and may complete the Work by whatever method
it desires. If COMPANY takes possession of any of CONTRACTOR's equipment, it
shall pay CONTRACTOR monthly for the rental of such equipment on the basis of
the equipment rental charges in Exhibit B. CONTRACTOR shall deliver to COMPANY
all documents and materials containing "confidential information" and all work
product, including all copies or excerpts thereof. Such termination shall not
affect the rights and obligations of either party to this Contract with respect
to the Work performed before the effective date of termination, incomplete Work
performed after the effective date of termination at COMPANY's request, or of
COMPANY's obligation to pay in full all amounts due CONTRACTOR by COMPANY for
Work properly performed before the effective date of termination. After
termination hereof, CONTRACTOR acknowledges that COMPANY may retain another
contractor to complete the Work.
23.4 Assignment of Subcontracts
If COMPANY terminates this Contract pursuant to this Article 23, COMPANY may
assume any obligations or commitments that CONTRACTOR may have in good faith
undertaken or incurred in accordance with this Contract prior to the date of
termination of the Contract. If COMPANY does assume any such obligations or
commitments, CONTRACTOR shall execute, deliver and assign, as applicable, all
documents, purchase orders and subcontracts and take all additional actions
COMPANY may require to vest in COMPANY all the rights and benefits of CONTRACTOR
under such obligations or commitments.
23.5 Payments in the Event of Termination
Upon termination of this Contract, COMPANY shall pay to CONTRACTOR compensation
due CONTRACTOR for Work performed by CONTRACTOR prior to the date of
termination, and which has not yet been paid to CONTRACTOR. Additionally,
COMPANY shall pay to CONTRACTOR all sums that CONTRACTOR is in good faith
obligated to pay to others on account of services performed or purchase orders
entered into prior to termination of this Contract; provided, however, that
COMPANY may, in its sole good faith discretion, in lieu of paying CONTRACTOR
such sums that CONTRACTOR is obligated to pay to others, assume such obligation
and pay such sums to the persons entitled thereto. Finally, provided termination
is not pursuant to section 23. 1, COMPANY shall pay to CONTRACTOR all reasonable
and necessary demobilization costs incurred by CONTRACTOR in closing down the
Work. However, if the cost to COMPANY to complete the Work exceeds the
difference between any Contract or fixed price agreed to by the parties and the
amount already paid or due CONTRACTOR, CONTRACTOR shall pay to COMPANY, or
COMPANY may withhold from CONTRACTOR, such difference.
23.6 The termination of this Contract or the completion of any Work performed
under this Contract shall not relieve CONTRACTOR of any other unfulfilled duty
or continuing obligations with respect to this Contract, including, without
limitation, CONTRACTOR's continuing obligations under Articles 13
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(NOTIFICATION OF VIOLATION OR INSPECTION), 14 (COMPENSATION), 15 (AUDIT
RIGHTS AND RECORD KEEPING), 21 (GUARANTEE OF WORK), 25 (REPRESENTATIONS,
WARRANTIES AND COVENANTS), 26 (INDEMNIFICATION), 27 (LIENS AND OTHER
ENCUMBRANCES), and 31 (INTELLECTUAL PROPERTY). Final payment by COMPANY shall
not constitute a waiver by COMPANY of possible claims for continuing obligations
on the part of CONTRACTOR.
ARTICLE 24 FORCE MAJEURE
Any delay or failure in performance by either party hereto shall not constitute
default or give rise to any claim for damages if, and to the extent, such delay
or failure is caused by a Force Majeure occurrence.
CONTRACTOR shall promptly give notice to COMPANY of any Force Majeure
occurrence. CONTRACTOR shall take all reasonable measures to minimize the
effects of such Force Majeure occurrence and shall provide documentation of its
impacts to COMPANY. Rates and prices fixed by this Contract shall not be subject
to adjustment as a result of a Force Majeure occurrence, but the period of
performance for Work being performed may be extended by agreement of the
parties.
ARTICLE 25 REPRESENTATIONS, WARRANTIES AND COVENANTS
CONTRACTOR represents, warrants and covenants as follows:
25.1 Standard of Work
Work performed by CONTRACTOR under this Contract shall be of the kind and
quality designated and required to accomplish the purposes set forth in this
Contract and shall be performed by qualified personnel in accordance with good
and proper professional practices, and in accordance with standards imposed by
law and with the standards of care and diligence regularly practiced by
recognized national professional firms performing work of a similar nature.
25.2 Training and Certification of Personnel
All personnel performing Work under this Contract shall have received all
required training and possess all certifications and licenses necessary to
perform their assigned work and to perform such work in a safe manner and
CONTRACTOR shall maintain records of such training and certification. Such
training may include, but is not limited to, hazard communication, respiratory,
confined space, hearing conservation and first aid/CPR.
25.3 Timing
CONTRACTOR shall perform the Work in a timely manner as TIME IS OF THE ESSENCE
to COMPANY in completion of Work.
25.4 Outstanding Claims
There are no outstanding claims, suits, proceedings, contracts or other projects
that in any way conflict with CONTRACTOR's performance or the performance of its
employees and if any such claim, suit or proceeding is hereafter instituted,
CONTRACTOR shall promptly notify COMPANY.
25.5 Violation of Obligation
The execution, delivery and performance by CONTRACTOR of this Contract will not
conflict with, result in a breach of or constitute default under any law,
regulation, order, writ, injunction or decree of any court
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or governmental authority or result in the violation of any obligation to which
CONTRACTOR is a party or by which it is bound.
25.6 Binding Obligation
Assuming its due execution by COMPANY, this Contract constitutes a legal, valid
and binding obligation of CONTRACTOR, enforceable in accordance with its terms.
25.7 Drug and Alcohol Policy
CONTRACTOR represents and warrants that it has established, maintains, and
enforces a drug and alcohol policy. Additionally, to the extent that
CONTRACTOR's employees and representatives are, in COMPANY's judgment, subject
to the United States Department of Transportation's regulations covering control
of drug use in natural gas, liquefied natural gas and hazardous liquid pipeline
operations (49 CFR Part 199, as amended), CONTRACTOR (i) warrants that its drug
and alcohol testing, education and training program shall fully comply with such
regulations; and (ii) agrees to allow access to its property and records by
COMPANY, the Department of Transportation, and any appropriate state agency for
the purpose of monitoring CONTRACTOR's compliance with the requirements of such
regulations.
25.8 Review of Information
CONTRACTOR covenants that before commencing the Work, CONTRACTOR shall, in the
exercise of its expert and professional judgment, examine and verify all
information contained in or furnished in connection with the Work, and shall at
once report in writing to COMPANY any error, omission or discrepancy in such
information. Any information furnished by COMPANY is not a representation or
warranty by COMPANY, and COMPANY is not responsible for the accuracy or
completeness of such information. Notwithstanding the preceding sentence,
CONTRACTOR warrants that it has the right to provide any information furnished
in connection with the Work under the terms stated herein.
25.9 Site Conditions
By commencing the Work authorized under any Work Release, CONTRACTOR shall be
deemed to represent that it has (i) made a careful examination of the Site and
all drawings and specifications provided to it; (ii) conducted sufficient
examinations and tests to determine the difficulties and hazards incident to the
performance of the Work, whether arising from the location of the Site,
conditions at the Site; or proximity of the Site to adjacent facilities,
structures or otherwise, and (iii) determined the nature and extent of such
difficulties and hazards as are reasonably determinable from such examination.
Consequently, CONTRACTOR shall not be entitled to bring any claim for
compensation or time extensions arising from such difficulties or hazards
ARTICLE 26 INDEMNIFICATION
26.1 CONTRACTOR's Indemnity
CONTRACTOR shall defend (with counsel approved by COMPANY), protect, indemnify
and hold COMPANY, its subsidiaries and affiliates and any of their directors,
officers, agents representatives and employees free from harm against all
claims, demands, losses, penalties, fines and causes of action of every kind and
character (including reasonable attorney fees and court costs) actually or
alleged to be arising directly or indirectly from the Work performed hereunder
by CONTRACTOR or its employees, agents or subcontractors, or actually or alleged
to be arising directly or indirectly from a breach of any of CONTRACTOR's
representations, warranties, covenants, or obligations contained herein; SUCH
CONTRACTOR INDEMNITY OBLIGATION SHALL INCLUDE, BUT NOT BE LIMITED TO, CLAIMS,
DEMANDS, LOSSES, PENALTIES, FINES AND CAUSES OF ACTION TO THE EXTENT DIRECTLY OR
INDIRECTLY ARISING OR ALLEGEDLY ARISING
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FROM COMPANY'S CONTRIBUTORY NEGLIGENCE.. CONTRACTOR shall not be required to
indemnify COMPANY pursuant to this section for any claim, demand, loss, penalty,
fine or cause of action if it results from COMPANY's sole negligence or to the
extent it arises from COMPANY's willful misconduct. CONTRACTOR's indemnity
obligation shall not be limited by the amount of insurance required in the
Article entitled "INSURANCE" herein. COMPANY shall have the right, at its sole
expense, to join in the defense of any action in which it is made a defendant.
26.2 Failure to Comply with Laws
CONTRACTOR shall defend (with counsel approved by COMPANY), protect, indemnify
and hold COMPANY, its subsidiaries and affiliates and any of their directors,
officers, agents, representatives and employees free from harm against all
claims, demands, losses, penalties, fines and causes of action of every kind and
character (including reasonable attorney fees and court costs) arising or
alleged to be arising directly or indirectly from CONTRACTOR's failure to comply
with any law set forth in Article 10, or any licenses, permits or authorizations
applicable to the Work.
ARTICLE 27 LIENS AND OTHER ENCUMBRANCES
CONTRACTOR covenants and agrees to protect and keep the Site, any and all
interests and estates therein, and all improvements or materials now or
hereafter placed thereon pursuant to this Contract, free from any and all
claims, liens, charges or encumbrances in the nature of mechanics, labor, or
material liens or otherwise, arising out of or in connection with performance of
the Work by CONTRACTOR or any of its subtier contractors (including the
furnishing of any materials hereunder), and to promptly have any such lien
released by bond or otherwise. If CONTRACTOR disputes in good faith any lien or
claim or encumbrance of any laborer, materialman or subcontractor, in lieu of
the immediate payment thereof, CONTRACTOR shall post adequate security to
protect COMPANY from liability for the payment thereof and from any expense of
defending against that liability, until the dispute is finally resolved.
'COMPANY may, at its sole discretion, post or place upon the Site notices of
nonresponsibility or do any other act permitted by law to exempt COMPANY, the
Site, any and all interests and estates therein, and any improvements or
materials thereon from any liability to third parties for the performance of the
Work. The failure of COMPANY to perform any of the actions described in the
previous sentence shall not release or discharge CONTRACTOR of any of its
obligations hereunder.
ARTICLE 28 WAIVER OF RIGHTS TO LIENS
CONTRACTOR hereby covenants and agrees to waive and does hereby waive any rights
to liens to which CONTRACTOR might be entitled for Work performed and materials
or other property and labor furnished under this Contract. CONTRACTOR
additionally covenants and agrees to require or cause all of its subcontractors
and vendors performing or finishing any portion of the Work to consent, prior to
the performance thereof, to the waiver of any such rights to liens which might
accrue to such subcontractor or vendor.
ARTICLE 29 INSURANCE
29.1 General
CONTRACTOR shall, from the time of commencement of the requested Work until
completion of the Work, provide and maintain in effect the types and amounts of
insurance as indicated below with insurance companies satisfactory to COMPANY.
29.2 Workers' Compensation Insurance
CONTRACTOR shall maintain Workers' Compensation Insurance including Occupational
Disease coverage in accordance with the laws of the states where the Work is to
be performed and Employers' Liability Insurance with limits of not less than
$1,000,000 for each accident.
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29.3 Commercial General Liability Insurance
CONTRACTOR shall maintain Commercial General Liability Insurance including
contractual liability, insuring the indemnity agreement set forth in this
Contract with a combined single limit of not less than $5,000,000 applicable to
bodily injury, sickness or death and loss of or damage to property in any one
occurrence.
29.4 Automobile Liability Insurance
CONTRACTOR shall maintain Automobile Liability Insurance covering owned,
non-owned, hired and all vehicles used by CONTRACTOR with a combined single
limit of not less than $1,000,000 applicable to bodily injury, sickness or death
and for loss of or damage to property in any one occurrence.
29.5 Additional Insureds
Except for Workers' Compensation Insurance, COMPANY, its subsidiaries and
affiliated companies, and their employees, directors, officers, representatives,
and agents shall be named as additional insureds in each of the policies
required pursuant to this Article; however, such extensions of coverage shall
not apply with respect to any obligations for which COMPANY has specifically
agreed to indemnify CONTRACTOR.
29.6 Subrogation
All policies required under this Article shall be endorsed to provide that
underwriters and insurance companies of CONTRACTOR shall not have any right of
subrogation against COMPANY, its subsidiaries or affiliated companies, or their
agents, employees, officers, directors, invitees, servants, contractors,
subcontractors, underwriters and insurance companies.
29.7 Certificates
Prior to commencing Work hereunder, CONTRACTOR shall finish Certificates of
Insurance to COMPANY evidencing the insurance required under this Article. Each
certificate shall provide that at least 30 days' prior written notice shall be
given COMPANY in the event of cancellation or material change in the policies.
CONTRACTOR understands that in order to avoid delays in commencing Work,
Certificates of Insurance shall be addressed to the person named in the Article
entitled "NOTICES" herein. All Certificates of Insurance must contain reference
to endorsements (i.e., additional insureds, waiver of subrogation, etc.) as
required herein.
29.8 Premium
All policies shall be endorsed to provide that there shall be no recourse
against COMPANY for payment of premium.
29.9 Subcontractor's Insurance
CONTRACTOR shall require all subcontractors to obtain, maintain and keep in
force during the time in which they are engaged in performing the Work, adequate
coverage in accordance with CONTRACTOR's normal practice and furnish COMPANY
acceptable evidence of such insurance upon request. All policies of
subcontractors shall be endorsed to provide a waiver of subrogation as set forth
above.
29.10 CONTRACTOR's or Rented Equipment
IDS/SW.MSC 17 Contract NO. SI-4
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All equipment, supplies and materials belonging to CONTRACTOR, or used by or on
behalf of CONTRACTOR for its performance, that are brought to and kept at the
Site shall be done so at CONTRACTOR's sole risk, and COMPANY shall not be liable
for any loss or damage to such property or equipment; and any insurance policies
carried by CONTRACTOR or a third party on the equipment, supplies and materials
shall provide for a waiver of underwriter's right of subrogation against
COMPANY, its subsidiaries or affiliates and their agents, employees, officers,
directors, invitees, servants, contractors, subcontractors, underwriters and
insurance companies.
29.11 Primary Insurance
It is hereby understood and agreed that any coverage provided to COMPANY by
CONTRACTOR's insurance under this Contract is primary insurance and shall not be
considered contributory insurance with any insurance policies of COMPANY, its
subsidiaries or affiliated companies; however, CONTRACTOR's insurance shall not
be primary with respect to any obligations for which COMPANY has specifically
agreed to indemnify CONTRACTOR.
29.12 Deductibles
CONTRACTOR shall be totally responsible for any and all deductibles in the
above-described insurance policies.
ARTICLE 30 RESPONSIBILITY FOR TAXES AND CHARGES FOR BENEFITS
30.1 CONTRACTOR shall have full and exclusive liability for and shall pay before
delinquency any and all taxes and contributions for payroll tax, unemployment
insurance, retirement benefits, life insurance, pensions, annuities and similar
benefits that may now or hereafter be imposed by law or collective bargaining
agreements with respect to persons or entities employed or subcontracted by
CONTRACTOR for performance of the Work.
30.2 CONTRACTOR shall pay all applicable excise, sales, consumer, use, service,
occupation, privilege or other similar taxes required by law, including any
resulting interest and penalties, unless otherwise specifically set forth in
this Contract. CONTRACTOR shall also pay all federal, state and local income and
personal property taxes, if any, arising in connection with the Work.
ARTICLE 31 INTELLECTUAL PROPERTY
31.1 Confidentiality
CONTRACTOR agrees to hold in confidence, and not to disclose to third parties or
use for any purpose other than performance of Work, all or any part of the
information (including the location and type of Work performed) maps, data,
plans, reports, manuscripts, procedures, schedules, drawings, specifications,
results, models, computer programs or any Work product that is (i) received or
ascertained by CONTRACTOR, directly or indirectly, from COMPANY, its licensers
or other contractors, or (ii) originated or otherwise acquired by CONTRACTOR,
its employees, representatives, or subcontractors, in connection with, as a
result of, or incident to performance of Work ("Information"). CONTRACTOR shall
secure prior written agreements from its employees, subcontractors and suppliers
who will be engaged in the performance of Work or may be exposed to Information
ensuring their compliance with the provisions of this Contract. Nothing herein
contained should preclude CONTRACTOR from providing information to any federal,
state or local agency or agencies to the extent CONTRACTOR is required to do so
by applicable laws, rules, codes or regulation of any federal, state or local
agency or agencies.
CONTRACTOR shall have no confidentiality obligation with respect to information
that:
IDS/SW.MSC 18 Contract No. SI-4
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i. is or becomes part of the public knowledge through no fault of CONTRACTOR
or its subcontractors;
ii. is received from a third-party without any obligation of confidence; and
iii: is in CONTRACTOR's possession prior to the effective date of this Contract
and is not received in contemplation of this Contract.
CONTRACTOR agrees to comply with all the laws and regulations governing the
export of goods and Information from the United States.
31.2 Ownership of Work Product
CONTRACTOR hereby grants and agrees to grant to COMPANY all right, title and
interest in and to any and all things of value, including, but not limited to,
all Work product, materials, inventions (patentable or unpatentable), trade
secrets, and copyrights, together with any applications for patents and, the
patents which may issue thereunder and registrations of copyrights, which are
first discovered, created, developed, or otherwise acquired by CONTRACTOR or any
of its representatives, or subcontractors in connection with as a result of, or
incident to performance of the Work or which are based on Information. Upon
request of COMPANY, CONTRACTOR shall, at COMPANY's expense, do or cause to be
done all things necessary to enable COMPANY to register, file, prosecute,
maintain and protect trade secrets, copyrights, and applications for patents and
patents issuing on such applications, and to perfect the full ownership and
right, title and interest in and to all the rights and properties described
hereinabove in this Article.
CONTRACTOR shall ensure that Information furnished by CONTRACTOR shall bear the
following legend: "Property of ARCO Pipe Line Company".
All Information and all copies thereof shall be delivered to COMPANY promptly at
COMPANY's request from time to time, within fifteen days after the completion of
the Work or at the termination of this Contract, which ever is earlier.
31.3 Background Rights
CONTRACTOR agrees to grant, and hereby grants to COMPANY an irrevocable, paid
up, non-exclusive worldwide license:
i. to make, use and sell under any and all patent rights, owned or controlled by
CONTRACTOR to the extent needed for making, using, selling or licensing
equipment, materials or other goods based on or using documents or tangible
materials supplied by CONTRACTOR; or
ii. to display, perform, use, reproduce, prepare derivative works based on or
distributed under any and all copyrights owned or controlled by CONTRACTOR on
documents or other tangible materials supplied by CONTRACTOR;
iii. to disclose and use any and all of the information contained in such
documents or tangible materials.
IDS/SW.MSC 19 Contract No. SI-4
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31.4 Intellectual Property Indemnity
CONTRACTOR, and to the extent applicable, its subcontractors and suppliers shall
protect, defend, indemnify and hold harmless COMPANY and its subsidiaries,
affiliated companies, co-owners and joint ventures (if any), and their
respective officers, directors, agents and employees and parties against loss or
damage arising out of any claim or suit for misappropriation of trade secret or
for patent, copyright, or other proprietary right infringement actually or
alleged to be arising out of, incident to, or in connection with (i) delivery of
goods or performance of Work by CONTRACTOR, (ii) COMPANY's possession, use, or
sale of goods, equipment, or materials furnished by CONTRACTOR, or (iii)
COMPANY's production of copyrighted works incorporating or prepared according to
documents or other tangible materials supplied by CONTRACTOR and COMPANY's
possession, modification, use, sale, distribution, copying or licensing of such
documents, materials or works, or (iv) COMPANY's manufacture, use or sale of
goods, equipment or materials based on designs or methods contained in documents
or other tangible materials supplied by CONTRACTOR. COMPANY shall promptly
notify CONTRACTOR of any such claim or suit and afford CONTRACTOR an opportunity
at CONTRACTOR's expense to undertake the defense of any such suit, provided
that, at COMPANY's election, COMPANY may join in such defense at its expense. If
CONTRACTOR refuses or fails to defend such suit, CONTRACTOR shall reimburse
COMPANY in full for COMPANY's costs and expenses in the defense of such suit
including attorneys' fees. CONTRACTOR shall pay promptly any judgments or
decrees which may be entered against COMPANY in such suit, and in event of the
grant of injunctive relief, CONTRACTOR shall provide nonviolating Information,
goods, equipment, and/or material equal in value and efficiency and failing so
to do, shall pay COMPANY all damages suffered by reason of such failure.
31.5 Access to COMPANY Computers
If required for CONTRACTOR to perform the Work, CONTRACTOR may have access to
certain parts of COMPANY's computer facilities and programs. CONTRACTOR agrees
that such access shall be subject to the following conditions:
i. Access to COMPANY's computers shall be made only in the manner prescribed by
the COMPANY Project Representative. Access shall be made using only equipment
owned or controlled by COMPANY and only by CONTRACTOR.
ii. Any user access code provided by COMPANY shall be used solely for access to
the computers for conduct of the Work for COMPANY and only by CONTRACTOR.
iii. CONTRACTOR shall not access software or data on COMPANY's computer system
other than CONTRACTOR's software or data without COMPANY's prior written
consent.
iv. In the event that CONTRACTOR should accidentally or inadvertently access any
COMPANY software or data that CONTRACTOR is not authorized to access, then
CONTRACTOR shall immediately inform COMPANY and shall deliver to COMPANY or
destroy as COMPANY may advise any tangible materials (and all copies thereof)
resulting from such improper access.
V. COMPANY may copy, use, disclose, distribute, dispose of or destroy anything
placed on COMPANY's computer system by CONTRACTOR.
IDS/SW.MSC 20 Contract No. SI-4
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31.6 Promotions
CONTRACTOR shall not use COMPANY's name, tradenames or trademarks, or those of
COMPANY's affiliates, in any promotional material or publication or make any
publicity release regarding the Work or Information without first obtaining the
written permission of COMPANY.
31.7 No Limitation
CONTRACTOR's obligations under this Article 31 shall not be limited by any other
warranty, liability, damages, insurance or indemnification provision of this
Contract.
ARTICLE 32 DRAWINGS, SPECIFICATIONS AND OTHER DOCUMENTS
32.1 COMPANY's Approval
In accordance with the Contract Schedule, CONTRACTOR shall submit all plans,
drawings, specifications, supporting design calculations and other related
design information prepared in connection with the Work to COMPANY for COMPANY's
approval as such documents are completed.
32.2 Other Documents
CONTRACTOR further agrees that, in addition to the documents described in
Section 32.1, CONTRACTOR shall submit to COMPANY, at COMPANY's request, any
other documents relating to costs, estimates, schedules, progress, accounting,
purchasing, results of calculations, computer output data, construction, and
vendors' materials that are prepared or obtained in connection with the Work.
32.3 CONTRACTOR's Duty
Review or approval by COMPANY of any of THE aforementioned documents shall not
relieve or release CONTRACTOR of any of its duties, obligations or liabilities
provided for under the terms of this Contract.
32.4 Final Documents Furnished
CONTRACTOR shall furnish COMPANY with final approved drawings and data sheets,
results of civil, structural, and hydraulic design calculations, loading
diagrams, equipment manufacturers' drawings and data (including construction
data and parts lists) and final approval specifications in such number as
COMPANY may request.
ARTICLE 33 CONFLICTS OF INTEREST
CONTRACTOR agrees to notify COMPANY in advance of any potential conflicts of
interest relating to work performed by CONTRACTOR or its affiliated companies
prior to or during the term of this Contract. The final determination of whether
a conflict or potential conflict of interest exists shall be made by COMPANY in
its sole good faith discretion.
IDS/SW.MSC 21 Contract No. SI-4
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ARTICLE 34 ASSIGNMENT
All obligations and covenants contained in this Contract shall be binding upon
the successors and assigns of COMPANY and CONTRACTOR. CONTRACTOR may not assign
this Contract or any part of this Contract without the written consent of
COMPANY. CONTRACTOR shall give written notice to COMPANY prior to the sale of
all or substantially all of the assets or stock of CONTRACTOR or such other
acquisition, merger or transaction which could result in a change in the
management or control of CONTRACTOR.
ARTICLE 35 NOTICES
All communications and notices provided for herein shall be in writing and shall
be deemed to have been given either (i) when delivered in person to the
recipient named below; (ii) on the date of delivery shown on the return receipt,
after deposit in the United States mail in a sealed envelope or other container,
either certified or charges prepaid, addressed to the party intended as below;
or (iii) on the date of delivery by overnight delivery service or confirmed
facsimile transmission to the party intended as follows:
If to COMPANY: Seaway Pipeline Company
By: ARCO Pipe Line Company, as Operator 15600 J.F. Kennedy Blvd., Suite 300
Houston, Texas 77032-2352
Attention: Steve Alexander
Facsimile: (713) 986-5479
If to CONTRACTOR: Industrial Data Systems Corporation
d/b/a IDS Engineering 600 Century Plaza Drive, Building 140 Houston, Texas
77073-6016
Attention: William A. Coskey
Facsimile: (713) 821-3230
ARTICLE 36 SEVERABILITY
If any provision or any portion of any provision of this Contract is deemed
illegal or unenforceable, all other provisions of and the other portions of any
provisions of this Contract shall be given effect separately therefrom and shall
not be affected thereby.
ARTICLE 37 ARTICLE AND SECTION HEADINGS
Article and section headings in this Contract have been inserted for convenience
of reference only, and shall not in any manner affect the construction, meaning,
or effect of anything contained in this Contract, nor govern the rights and
liabilities of the parties.
ARTICLE 38 CONFLICTING PROVISIONS
In the event of a conflict between this Contract and its Exhibits, Attachments
or any specific Change Order, the provisions contained in the Contract shall
govern. If CONTRACTOR discovers any conflict, variation or inconsistency between
this Contract and any Exhibits or Change Orders attached hereto or between any
parts of this Contract, the matter shall be submitted immediately by CONTRACTOR
to COMPANY for decision and such decision shall be final. Any Work affected by
such conflict, variation or inconsistency that is performed by CONTRACTOR prior
to COMPANY's determination shall be at CONTRACTOR's sole risk and expense.
IDS/SW.MSC 22 Contract No. SI-4
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ARTICLE 39 WAIVER
No waiver of any term or condition of this Contract shall be construed as a
waiver of any other term or condition. In addition, any delay, waiver or
omission by COMPANY to exercise any right or power arising from any breach or
default by CONTRACTOR of any terms or provisions of this Contract shall not be
construed as a waiver by COMPANY of any subsequent breach or default by
CONTRACTOR of the same or other terms or provisions.
ARTICLE 40 GOVERNING LAW
This Contract shall be interpreted and construed under, and the rights of the
parties shall be governed by, the laws of the State of Texas.
ARTICLE 41 ENTIRE AGREEMENT
This Contract constitute the entire agreement between COMPANY and CONTRACTOR and
supersede any prior written or oral agreements, or contemporaneous
communications with respect to this subject matter. No subsequent amendment to
this Contract between the parties shall be binding on either party unless
reduced to writing and signed by an authorized representative of both parties.
IN WITNESS WHEREOF, the parties hereto have executed this Contract effective the
day and year first above written.
COMPANY CONTRACTOR
BY: /s/ STEVE D. ALEXANDER BY: /s/ WILLIAM A. COSKEY
NAME: STEVE D. ALEXANDER NAME: WILLIAM A. COSKEY
TITLE: PROCUREMENT MGR - MID CONTINENT TITLE: PRESIDENT
DATE: 09/09/96 DATE: 09/09/96
IDS/SW.MSC 23 Contract No. SI-4
EXHIBIT 10.12
ORIGINAL
MASTER SERVICE CONTRACT
THIS CONTRACT, made and entered into this 23 day of MAY, 1995, by and
between CNG TRANSMISSIONS CORPORATION, a corporation of 445 West main street,
Clarksburg, West Virginia 263022450, hereinafter referred to as "CNGT" and
INDUSTRIAL DATA SYSTEMS, INC. DBA IDS TECHNICAL SERVICES hereinafter referred to
as "Contractor.
WORK TO BE PERFORMED
In consideration of the service or work which has been performed and
is to be performed by Contractor, as herein contemplated, and in consideration
of the payments which have been made and are to be made by CNGT therefor, it is
contemplated that Contractor will, from time to time, be requested by CNGT,
through its duly authorized representatives, to perform certain work or furnish
certain services to CNGT. The jobs contemplated are any such work or services
performed by Contractor in the scope of its usual business. Contractor will
begin each particular job at such time as is agreed upon between Contractor and
CNGT's representatives and, once having commenced any such job, Contractor will
perform all such services or work in a good and workmanlike manner and to the
full and complete satisfaction of CNGT. It is specifically understood that all
services and work shall be performed subject to all the terms and conditions of
this Contract, and this Contract shall become effective and operative when
Contractor first commences the performance of any job or the rendering of any
particular service.
II.
INDEPENDENT CONTRACTOR
It is expressly understood that Contractor is an independent
contractor and that neither Contractor nor Contractor's principals, partners,
employees, or subcontractors, are servants, agents or employees of CNGT. As an
independent contractor, Contractor agrees to comply with all laws, rules and
regulations, whether federal, state or municipal, including, but not limited to
laws, rules and regulations designed to protect the environment which, now or in
the future, may be applicable to all services or work performed hereunder or
applicable to Contractor's business, equipment or employees engaged in or in any
'manner connected with its performance hereunder. Further, Contractor, as an
independent contractor, assumes full responsibility for loss of or damage to its
materials, machinery, equipment or other property while performing hereunder,
provided that Contractor's responsibility for loss of or damage to materials
which are the subject of a sale to CNGT shall cease upon delivery of such
material
<PAGE>
to CNGT's well site or other job site, or any other point of delivery as
specified by CNGT. Contractor specifically releases CNGT, its agents, servants,
invitees, employees, co-lessees, co-owners, contractors and subcontractors, from
liability for damage to any of Contractor's material, machinery, equipment or
other property, except where such damage is caused solely as a result of CNGT's
negligence.
III.
INSURANCE-AND WORKERS, COMPENSATION
contractor agrees to procure, maintain and amend, at its sole
expense, policies of insurance in the amounts no less than those outlined below,
which may from time to time be changed in accordance with CNGT's request as its
needs and requirements change:
Coverages.................................. Limits
Comprehensive General Liability
Bodily Injury..........................$1,000,000 Each Person
.......................................$1,000,000 Each Occurrence
.......................................$1,000,000 Aggregate Products
.......................................$1,000,000 Aggregate Operations
Property Damage........................$1,000,000 Each Occurrence
.......................................$1,000,000 Aggregate Operations
.......................................$1,000,000 Aggregate Protective
.......................................$1,000,000 Aggregate Products
Contractual Liability........................$1,000,000 Aggregate
Automobile Liability
(Owned, non-owned, hired)
Bodily Injury..........................$1,000,000 Each Person
.......................................$1,000,000 Each Occurrence
Property Damage........................$1,000,000 Each Occurrence
Contractor shall furnish to CNGT, either on forms supplied by
Contractor's insurer or by CNGT, certificates of insurance evidencing the fact
that proper insurance as set forth above has been secured and no work shall be
commenced unless and until the certificates are on file with CNGT. Such
insurance policies and certificates must provide that at least thirty (30) days'
prior written notice will be mailed to CNGT if the policies are materially
changed or canceled and, upon receipt of such notice, CNGT shall have the right
to promptly cancel this Contract without waiting for the period provided in
Section VII below. Said policies shall further contain endorsements naming CNGT
as an additional insured under said policies and waive the underwriters' rights
of subrogation in favor of
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CNGT, its affiliates, subsidiaries, parent, co-owners, co-lessees and joint
venturers.
Contractor shall comply with the Workers' Compensation laws of the
state in which the work is to be performed or the services are to be rendered
and shall, before commencing work hereunder, furnish CNGT (a) a certificate,
issued by the workers' compensation officer or department of the state in which
the work is to be performed or the services are to be rendered, that Contractor
is entitled to all rights and benefits of the Workers-' compensation laws of
such state or (b) a certified copy of the insurance policy under the terms of
which %, Contractor's workers' compensation liability is insured under the laws
of such state or a certificate of such insurance.
IV.
INDEMNITY
Contractor shall be responsible, and CNGT shall never be liable, for
property damage suffered by any person, firm or corporation, or personal injury
to or death of any person, including, but not limited to, Contractor, any of
Contractor's employees or the employees of Contractor's subcontractors, and
Contractor agrees to indemnify and hold harmless CNGT, its affiliates,
subsidiaries, parent corporation, co-owners, co-lessees and joint venturers
against any and all claims, demands or suits (including, but not limited to,
claims, demands, or suits for property damage, bodily injury, illness, disease,
death, or loss of services, property or wages) which may be brought against CNGT
by any party, including, but not limited to, any third party, any employee of
Contractor, subcontractor of Contractor, or by any employee of subcontractor of
Contractor, or the legal representative or successor of any such employee, in
anywise arising out of or incident to the work to be performed under this
Contract by Contractor, or Contractor's subcontractors, or Contractor's presence
in, on or about CNGT's property or job site, irrespective or whether such
claims, demands or suits are based on the relationship of master and servant,
third party, or otherwise, and even though occasioned, brought about, or caused
by, arising out of or resulting from Contractor's work, or its acts, activities,
or presence on any location or structure, or travel to and from such location or
structure or by or from any other means, relationship, or cause, without
limitation whatsoever; provided, however, that nothing herein shall obligate
Contractor to indemnify CNGT when such claims, demands or suits arise from the
sole and exclusive negligence of CNGT.
By way of illustration, but not by way of limitation, with respect
to whom shall be considered an employee, any person who is on Contractor's
payroll and receives, has received or is entitled to receive payment from
Contractor in connection with the work performed or to be performed hereunder
shall be the employee of Contractor, even though CNGT reimburses Contractor for
the amount paid or to be paid such employee. Contractor further agrees to
investigate, handle, respond to, provide defense for, and defend any such claim,
demand, or suit at its sole expense, and agrees to bear all other costs and
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or services rendered hereunder prior to the time this Contract is terminated.
Notwithstanding anything herein to the contrary, CNGT shall have the option but
not the obligation, to declare this Contract terminated effective immediately in
the event Contractor fails to comply with any of the provisions hereof,
including, but not limited to Items III, IV, IX and X. It is expressly agreed
that Contractor's duties and obligations arising under Item IV shall survive
cancellation, termination or expiration of the Contract.
VIII.
CONFLICT
Should the parties hereto enter into any future formal written
contract especially prepared to provide for a particular job to be done by
Contractor, then in the event any term of such contract conflicts with the terms
of this Contract, the terms of this Contract shall prevail with respect to such
conflict. No parole agreement of whatsoever nature entered into between CNGT's
representative or representatives and Contractor shall ever be deemed to alter
or affect the provisions of this Contract.
IX.
FAIR AND EQUAL EMPLOYMENT
Contractor executes simultaneously with this Contract, and agrees to
maintain in a current status during the life of this Contract, the Equal
Employment Opportunity Compliance Certificate which is supplemental to CNGT
Transmission Corporation contracts, purchase orders and sales agreements.
X.
SAFETY
Contractor and CNGT expressly recognize the fact that the
Legislative body or bodies of the state or states in which the work is to be
performed or services are to be rendered and the Congress of the United States
of America have enacted laws relating to minimum safety standards for
Occupational Safety and Health and that governmental agencies have adopted and
will hereafter adopt and modify regulations under those laws. Included, without
limitation, are the Occupational Safety and Health Act of 1970, as amended, (29
U.S.C.S. 651 et seq.) the Occupational Safety and Health Standards promulgated
thereunder at 29 CFR Part 1910 and the Safety and Health Regulations for
Construction at 29 CFR Part 1926. Contractor shall take all precautions
necessary for the safety of personnel engaged in the performance of the work or
the rendering of the services and shall comply in every respect with all
applicable laws and regulations in order to prevent accidents or injuries to
persons on, about or adjacent to the premises where the work is being performed
or the service is to be rendered. Contractor shall provide sufficient
supervision and training of its employees concerning all applicable
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expenses related thereto, even if it is groundless, false or fraudulent, but
Contractor may make such investigation, negotiation and settlement of any such
claim, demand or suit as it deems expedient.
CNGT shall notify Contractor immediately of any claim, demand, or
suit that may be presented to it by any party, affording Contractor full
opportunity to assume the defense of such claim, demand, or suit, and to protect
CNGT and itself under the obligations of this Section.
V.
SUBCONTRACTING
In the event Contractor subcontracts any of the work to be performed
or services to be rendered hereunder, or contracts for the furnishing of any
services or material required to be furnished by a subcontractor, then such
Contracts shall contain releases of liability for damage to property of such
subcontractor, insurance and workers' compensation requirements, and a hold
harmless provision equivalent to Sections II, III and IV above. Unless such
Contracts contain such equivalent provisions, any personnel engaged and property
used in the furnishing of such services or work shall be deemed employees and
property of Contractor for the purpose of Sections II, III and IV set forth
above and for the purposes of all other provisions of this Contract.
VI.
LIENS
Contractor shall pay promptly any and all amounts owed by it for
work performed, services rendered, or materials furnished in connection with
jobs performed under this Contract so that no lien shall ever attach, or be
permitted to attach, to CNGT's property, whether real or personal, and
Contractor hereby indemnities CNGT for any and all such claims and liens. In the
event Contractor fails to secure a release of any such liens which may attach to
CNGT's property, CNGT shall have the right to set-off any amounts due Contractor
in order to obtain the release of said liens.
VII.
TERM
This Contract will continue in full force and effect until
terminated by either party so that Contractor may perform, from time to time,
such work and/or render such services as the parties mutually may agree: it
being understood and agreed that either party hereto may cancel this Contract by
giving the other party thirty (30) days' written notice of such cancellation,
but neither party hereto shall, by the termination of this Contract, be relieved
of its respective obligations and liabilities arising from or incident to work
performed
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safety laws, rules and regulations, including but not limited to those referred
to above. When on CNGT's work location Contractor shall also comply with CNGT's
safety rules. In the event Contractor subcontracts any of the work to be
performed or services to be rendered hereunder, such contracts will contain
equivalent language to the above.
XI.
NOTICES
In the event of any accident involving herein Contractor, Contractor
agrees to immediately submit a written report of such accident to CNGT's
representative, and to notify the proper legal authorities.
All notices, reports and invoices other correspondence required or
made necessary by the terms of this contract shall be deemed to have been
properly served when received by the addressee at the address hereinafter
listed, via:
CNG TRANSMISSION CORPORATION
445 West Main Street
Clarksburg, West Virginia 26302-2450
Attention:M.D. REASER
CONTRACTOR
Name: INDUSTRIAL DATA SYSTEMS, INC. DBA IDS TECHNICAL SERVICES
Address: 600 CENTURY PLAZA DRIVE, BLDG. 140
City & State: HOUSTON, TEXAS 77073-6016
ATTN:T. E. DISEL
XIII.
APPLICABLE LAW
This Contract shall be governed by the applicable laws of the state
wherein the work contemplated hereunder is performed.
XIII.
SEVERABILITY
In the event one or more of the provisions contained in this
Contract shall be held, for any reason, to be invalid, void, illegal or
unenforceable in any respect, such invalidity, voidness, illegality or
unenforceability shall not affect the remaining provisions hereof, and this
Agreement shall remain unaffected and shall be construed as if such invalid,
void, illegal or unenforceable provision never had been contained herein.
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XIV.
AUDIT
CNGT shall have the right to audit Contractor's records relating to
all work performed by or on behalf of Contractor for CNGT's account for any
calendar year within the thirty-six (36)-month period following the end of such
calendar year. This provision shall continue in full force and effect for a
period of thirty-six (36) months from the effective date of any termination of
this Contract.
XV.
WARRANTIES
In the event that Contractor hereunder primarily sells items,
equipment, supplies, etc. to CNGT with some support services incidentally
associated with the said sale, Contractor specifically warrants the
merchantability of the items being the subject of sale. Contractor warrants such
items to be free of defects. In instances where CNGT purchases from Contractor
certain items with specifications for a particular purpose and the requirements
are given to Contractor, the latter warrants fitness for the particular purpose
disclosed to Contractor.
IN WITNESS WHEREOF, the parties hereto have executed this Contract
as of the date first above written, and warrant, individually, that they have
the full right, power and authority to enter into this Contract on behalf of the
respective parties hereto. This Contract is intended to supplant in its entirety
all previous Master Service Contracts executed between the parties hereto.
WITNESS: CNG TRANSMISSION CORPORATION
/s/ M.D.REASER BY:
Its
WITNESS: INDUSTRIAL DATA SYSTEMS, INC
DBA IDS TECHNICAL SERVICES
/s/ DIANNA M. TUCKER BY:/s/ WILLIAM A. COSKEY
Its PRESIDENT
INDUSTRIAL DATA SYSTEMS INC.
WITNESS:
DBA IDS TECHNICAL SERVICES
By: WILLIAM A. COSKEY
Its PRESIDENT
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EQUAL EMPLOYMENT OPPORTUNITY
COMPLIANCE CERTIFICATE
For purposes of this Equal Employment Opportunity Compliance
Certificate, the words "Contract", "Purchase order" or "Sales Agreement" shall
mean any agreement or arrangement between CNG Transmission Corporation,
hereinafter referred to as '"CNGT", and the Contractor - for the purchase or
sale of gas, materials, supplies, or services or for the use of real or personal
property, including lease arrangements, which, in whole or in part, are
necessary to the performance or any one or more contracts between CNG and the
United States of America or under which any portion of CNGT's obligation under
any one or more contracts is performed, undertaken, or assumed.
(A) Contractor is aware of and is fully informed of Contractor's
responsibilities under Executive Order 11246 and shall file
compliance reports as required by Section 203 of Executive
Order 11246 and otherwise comply with the requirements of such
Orders.
(B) Contractor shall be bound by and agrees to the following
provisions as contained in Section 202 of Executive Order
11246, to wit:
(1) The Contractor will not discriminate against any
employee or applicant for employment because of race,
color, religion, sex, age or national origin. The
Contractor will take affirmative action to ensure that
applicants are employed, and that employees are
employed, and that employees are treated during
employment, without regard to their race, color,
religion, sex, age or national origin. Such action shall
include, but not be limited to the following:
employment, upgrading, demotion, or transfer,
recruitment, or recruitment advertising; layoff or
termination; rates of pay or other forms of
compensation, and selection for training, including
apprenticeship. The Contractor agrees to post in
conspicuous places, available to employees and
applicants for employment, notices to be provided by the
contracting officer setting forth the provisions of this
non-discrimination clause.
(2) The Contractor will, in all solicitations and
advertisements for employees placed by or on behalf of
the Contractor, state that all qualified applicants will
receive
<PAGE>
consideration for employment without regard to race,
color, religion, sex, age or national origin.
(3) The Contractor will send to each labor union or
representative of workers with which he has a collective
bargaining agreement or other contract or understanding,
a notice, to be provided by the agency contracting
officer, advising the labor union or workers'
representative of the Contractor's commitments under
Section 202 of Executive Order No. 11246 of September
24, 1965, and shall post copies of the notice in
conspicuous places available to employees and applicants
for employment.
(4) The Contractor will comply with all provisions of
Executive Order No. 11246 of September 24, 1965, and of
the rules, regulations, and relevant orders of the
Secretary of Labor.
(5) The Contractor will furnish all information and reports
required by Executive Order No. 11246 of September 24,
1965, and by the rules, regulations, and orders of the
Secretary of Labor, or pursuant thereto, and will permit
access to his books, records, and accounts by the
contracting agency and the Secretary of Labor for
purposes of nvestigation to ascertain compliance with
such rules, regulations and orders.
(6) In the event of the Contractor's noncompliance with the
non-discrimination clauses of this contract or with any
of such rules, regulations, or orders, this contract may
be canceled, terminated, or suspended in whole or in
part and the Contractor may be declared ineligible for
further Government contracts in accordance with
procedures authorized in Executive Order No. 11246 of
September 24, 1965, and such other sanctions may be
imposed and remedies invoked as provided in Executive
Order No. 11246 of September 24, 1965, or by rule,
regulation, or order of the Secretary of Labor, or as
otherwise provided by law.
(7) The Contractor will include the provisions of Paragraphs
(1) through (7) in every subcontract or purchase order
unless exempted by rules, regulations or orders of the
Secretary
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of Labor issued pursuant to Section 204 of .Executive
Order No. 11246 of September 24, 1965, so that such
provisions will be binding upon each subcontractor or
vendor. The Contractor will take such action with
respect to any sub-contract or purchase order as the
contracting agency may direct as a means of enforcing
such provisions including sanctions or non-compliance:
Provided, however, that in the event the Contractor
becomes involved in, or is threatened with, litigation
with a sub-contractor or vendor as a result of such
direction by the contracting agency, the Contractor may
request the United States to enter into such litigation
to protect the interests of the United States.
(C) And further, pursuant to the rules and regulations, if the
value of the contract or purchase order exceeds $50,000 and
the Contractor has 50 or more employees, Contractor will:
(1) File, on or before March 31 of each year or within 30
days of accepting a new order, complete and accurate
reports on Standard Form 100 (EEO-1) with the appropriate
government agency (Section 1.7, Chapter 60, Title 41 of
the Code of Federal Regulations).
CERTIFICATION OF NONSEGREGATED FACILITIES
Contractor certifies that he does not maintain or provide for his
employees any-segregated facilities at any of his establishments, and that he
does not permit his employees to perform their services at any location, under
his control, where segregated facilities are maintained. He certifies further
that he will not maintain or provide for his employees any segregated facilities
at any of his establishments, and the he will not permit his employees to
perform their services at any location, under his control where segregated
facilities are maintained. Contractor agrees that a breach of this certification
is a violation of the Equal Employment Opportunity Clause in this agreement. As
used in this certification the term "segregated facilities" means any waiting
rooms, work areas, rest rooms and wash rooms, restaurants and other eating
areas, time clocks, locker rooms and other storage or dressing areas, parking
lots, drinking fountains, recreation or entertainment areas, transportation, and
housing facilities provided for employees which are segregated by explicit
directive or are in fact segregated on the basis of race, creed, color, or
national origin, because of habit, local custom or otherwise. He further agrees
that (except where he has obtained identical certifications from proposed
subcontractors or specific time periods) he will obtain identical certifications
from proposed
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<PAGE>
subcontractors prior to the award of subcontracts exceeding $10,000 which are
not exempt from the provisions of Equal Employment Opportunity Clause; that he
will retain such certification in his files; and that he will forward the
following notice to such proposed subcontractors (except where the proposed
subcontractor has submitted identical certifications for specific time periods).
NOTICE TO PROSPECTIVE SUBCONTRACTORS OF REQUIREMENT FOR CERTIFICATIONS OF
NONSEGREGATED FACILITIES. A Certification of Nonsegregated Facilities, as
required by the May 9, 1967, order on Elimination of Segregated Facilities, by
the Secretary of Labor (32 Fed. Reg. 7439, May 19, 1967) must be submitted prior
to the award of subcontract exceeding $10,000 which is not exempt from the
provisions of the Equal Employment Opportunity Clause. The certification may be
submitted either for each subcontract or for all subcontracts during a period
(i.e., quarterly, semiannually, or annually). (1968 MAR.) (Note: The penalty for
making false statements in offers is prescribed in 18 U.S.C. 1001).
CONTRACTOR AND SUBCONTRACTOR LISTING REQUIREMENT
The Contractor agrees to comply with the requirements of Executive
Order 11701 and the rules and regulations issued thereunder, and that all
employment openings of the contractor which exist at the time of execution of
this contract and those which occur during the performance of this contract,
including those not generated by the contract and including those occurring at
an establishment of the contractor other than the one wherein the contract is
being performed by excluding those of independently operated corporate
affiliates, shall, to the maximum extent feasible, be offered for listing at an
appropriate local office of the States employment service system wherein the
opening occurs and to provide such periodic reports to such local office
regarding employment openings and hires as may be required: Provided, that this
provision shall not apply to openings which the Contractor fills from within the
Contractor's organization or are filled pursuant to a customary and traditional
employer-union hiring arrangement and that the listing of employment openings
shall involve only the normal obligations which attach to the placing of job
orders.
The Contractor agrees further to place the above provision in any
subcontract directly under this contract.
MINORITY BUSINESS ENTERPRISE
Executive Order 11625 provides that it is the policy of the
Government that minority business enterprises shall have the maximum practicable
opportunity to participate in the performance of Government contracts.
The Contractor agrees to use his best efforts to carry out this
policy in the award of his subcontracts in excess of $500,000 to the fullest
extent consistent with the efficient
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<PAGE>
performance of the contract. As used in the contract, the term "Minority
Business Enterprise" means a business, at least 50 percent of which is owned by
minority group members or, in the case of publicly owned business, at least 51
percent of the stock of which is owned by minority group members. For the
purposes of this definition, minority group members are Negroes,
Spanish-speaking American persons, American-Orientals, American-Indians,
American-Eskimos and American Aleuts. Contractors may rely on written
representations by subcontractors regarding their status as minority business
enterprises in lieu of an independent investigation.
EMPLOYMENT OF HANDICAPPED PERSONS
In accordance with Executive Order 11758, the Contractor certifies
that, in employing persons to carry out contracts entered into with CNG
Transmission Corporation, it will take affirmative action to employ and advance
in employment qualified handicapped individuals, defined as "any individual who
has a physical or mental disability which for such individual constitutes or
results in a substantial barrier to employment..-"
Contractor further certifies that it will obtain identical
certifications from proposed subcontractors prior to the award of subcontracts
exceeding $2,500 covering the procurement of personal property and nonpersonal
services (including construction).
INDUSTRIAL DATA SYSTEMS, INC.
DBA IDS TECHNICAL SERVICES
(Contractor)
DATE: 5-9-95 By: /S/ WILLIAM A. COSKEY
Its PRESIDENT
Address: 600 CENTURY PLAZA DRIVE, BLDG 140
Street
HOUSTON, TEXAS 77073-6016
City, State, Zip
Tele. No: (713) 821-3200
EXHIBIT 10.13
Agreement No. MS-48157-GN
COLUMBIA GAS TRANSMISSION CORPORATION
GENERAL SERVICES AGREEMENT
THIS GENERAL SERVICES AGREEMENT, made this 11TH day of AUGUST, 1995, by
and between Columbia Gas Transmission Corporation, a Delaware corporation having
its principal office at 1700 MacCorkle Avenue, S. E., (P. 0. Box 1273)
Charleston, West Virginia 25314, hereinafter called "Transmission", and IDS
TECHNICAL SERVICES, A DIVISION OF INDUSTRIAL DATA SYSTEMS, INC., having its
principal office AT 600 CENTURY PLAZA DRIVE, BLDG. 140, HOUSTON, TX 77073-6016
hereinafter called "Contractor".
WITNESSETH that, WHEREAS, Transmission desires that certain services be
performed and Contractor is willing to provide certain services as required from
time to time by Transmission during the term hereof.
NOW, THEREFORE, in consideration of mutual premises, the parties hereto
agree as follows:
Contractor agrees to perform the below indicated services in accordance
with: (1) this General Services Agreement (2) Transmission's "Provisions of
General Services Agreement" (Edition April 1995), (3) Schedule of services and
pricing consisting of 1 page(s), (4) Service Authorization(s) and, (5) other
appendices [NONE].
This General Services Agreement shall remain in full force and effect
until canceled by either Transmission or Contractor by giving thirty (30) days
notice, in writing, to the other.
IN WITNESS WHEREOF, the parties have executed this Contract as of the day
and year first above written.
COLUMBIA GAS TRANSMISSION
CORPORATION
IDS TECHNICAL SERVICES,
A DIVISION OF INDUSTRIAL DATA
SYSTEMS, INC.
By: /s/ R. LARRY ROBINSON By: /s/ WILLIAM A. COSKEY
Its: PRESIDENT Its: PRESIDENT
Edition APRIL, 1995
<PAGE>
COLUMBIA GAS TRANSMISSION CORPORATION
PROVISIONS OF GENERAL SERVICES AGREEMENT
Edition April, 1995
<PAGE>
COLUMBIA GAS TRANSMISSION CORPORATION
PROVISIONS OF GENERAL SERVICES AGREEMENT
TABLE OF CONTENTS
ARTICLE 1. DOCUMENTS WHICH COMPRISE THE CONTRACT .............. 1
1.01 Composition of the Contract ........................ 1
ARTICLE 2. INTERPRETATION OF DOCUMENTS ........................ 1
2.01 Resolution of Conflict in Documents ................ 1
ARTICLE 3. OBLIGATION OF CONTRACTOR ........................... 1
3.01 Timely Completion................................... 1
3.02 Performance Warranties.............................. 1
3.03 Environmental Warranties .......................... 2
3.04 Supervision ....................................... 3
3.05 Payment of Creditors................................ 3
3.06 Compliance With Applicable Laws .................... 4
3.07 Safety.............................................. 4
3.08 Substance Abuse..................................... 4
ARTICLE 4. SUBCONTRACTORS ................................... 5
4.01 Need for Prior Approval; Qualifications ............ 5
4.02 Notification and Documentation ..................... 5
4.03 Liability for Subcontractor's Work ................. 5
ARTICLE 5. INDEMNITY........................................... 5
5.01 Basic Indemnification............................... 5
5.02 Exclusion from Indemnification .................... 6
5.03 Responsibilities Within Rights-of-Way .............. 6
ARTICLE 6. CONTRACTOR'S INSURANCE ........................... 7
6.01 Basic Insurance .................................. 7
6.02 Special Provisions in Insurance Contracts .......... 9
6.03 Subcontractors...................................... 9
6.04 Evidence of Insurance............................... 9
ARTICLE 7. INSPECTION AND APPROVAL; PAYMENT ................... 10
7.01 Inspection ....................................... 10
7.02 Approval .......................................... 10
7.03 Payment............................................. 10
7.04 Audit............................................... 10
<PAGE>
COLUMBIA GAS TRANSMISSION CORPORATION
PROVISIONS OF GENERAL SERVICES AGREEMENT
TABLE OF CONTENTS (CONTINUED)
ARTICLE 8. TERM AND TERMINATION . . . . . . . . . . . . . . . 11
8.01 General Provisions . . . . . . . . . . . . . . . 11
8.02 Termination by Transmission . . . . . . . . . . . 11
ARTICLE 9. MISCELLANEOUS . . . . . . . . . . . . . . . . . 11
9.01 Independent Contractor . . . . . . . . . . . . 11
9.02 Notice . . . . . . . . . . . . . . . . . . . . . 11
9.03 Effect of Waivers . . . . . . . . . . . . . . . 12
9.04 Assignment and Delegation . . . . . . . . . . . 12
9.05 Nondiscriminatory Employment Practices . . . . . 12
9.06 Rights and Remedies Cumulative . . . . . . . . 12
9.07 Setoff . . . . . . . . . . . . . . . . . . . 12
9.08 Headings . . . . . . . . . . . . . . . . . . . 12
9.09 Choice of Law . . . . . . . . . . . . . . . . 12
9.10 Severability . . . . . . . . . . . . . . . . 13
9.11 Entire Agreement . . . . . . . . . . . . . . . 13
9.12 Confidentiality . . . . . . . . . . . . . . . 13
Edition April, 1995
<PAGE>
COLUMBIA GAS TRANSMISSION CORPORATION
PROVISIONS OF GENERAL SERVICES AGREEMENT
ARTICLE 1. DOCUMENTS WHICH COMPRISE THE CONTRACT
1.01 COMPOSITION OF THE Contract. The Contract consists of the General
Services Agreement executed by Contractor and Transmission, these Provisions,
the schedule of services and pricing prepared in connection with the particular
General Services Agreement, the service authorizations and any other .Appendix
prepared in connection with the General Services Agreement.
ARTICLE 2. INTERPRETATION OF DOCUMENTS
2.01 RESOLUTION OF CONFLICT IN DOCUMENTS. If there is a conflict among the
documents which comprise the Contract, the documents will rank in the following
order, with the terms of the earlier-listed documents controlling the terms of
the later-listed documents:
a) General Services Agreement
b) Provisions of General Services Agreement
c) Service Authorization
d) Schedule of Services and Pricing
e) Additional Appendixes
ARTICLE 3. OBLIGATION OF CONTRACTOR
3.01 TIMELY COMPLETION. Contractor agrees to perform the services in a
timely manner. Time is of the essence in the performance of this Contract.
3.02 PERFORMANCE WARRANTIES: Contractor warrants to Transmission that:
(a) The services will be provided by Contractor in accordance with, and for
the price provided in, the Contract, and when completed, will be free from
defects.
(b) All material supplied directly or indirectly by Contractor will be new,
free from defects, and in accordance with the requirements of the Contract.
(c) All labor involved in performance of the services will be first class,
performed only by employees qualified to do the job to which they are assigned,
and supervised at all times by one or more qualified superintendents employed by
Contractor.
(d) Contractor will at all times enforce strict discipline of, and good
order among, its employees, and Contractor will immediately remove and not
reemploy any employee who is incompetent, disorderly, unreliable, or otherwise
unsatisfactory.
Edition April, 1995 MS-48157-GN
<PAGE>
3.03 ENVIRONMENTAL WARRANTIES.
(a) Contractor warrants and agrees to perform its work in accordance with
all applicable environmental laws and regulations, including all amendments
relating thereto and to conduct all other activities in an environmentally
responsible manner and in accordance with accepted industry practices and
regulatory standards.
(b) Transmission shall furnish to Contractor, upon request, copies of all
licenses, permits, certificates, authorizations, etc. including any special
environmental or other conditions relating to the work to be performed under
this Agreement that Transmission has obtained or received.
(c) Contractor shall furnish to Transmission upon request copies of all
licenses, permits, certificates, authorizations, etc. including any special
environmental or other conditions relating to the work to be performed under
this Agreement that Contractor has obtained or received.
(d) Contractor shall furnish as required by Transmission satisfactory
evidence of its compliance with such licenses, permits, certificates,
authorizations and all special environmental or other conditions attached to
such authorizations.
(e) Contractor where required by law to have its employees licensed,
trained, certified, etc. by any governmental body or by a qualified training
institution to perform any or all of the work contemplated by this Agreement
shall furnish a copy of each such person's currently valid license, training
acknowledgment, certification, etc. to Transmission upon request at least ten
days prior to starting such work.
(f) Contractor will immediately notify Transmission in writing of (1) any
reports made to any environmental agency in connection with Contractor's
operations or work performed under this Agreement and (2) any environmental
complaints, notices, warnings, alleged violations communicated to Contractor,
its officers, directors, employees, agents, Subcontractors, representatives or
others acting for Contractor by any governmental agency which relate to the work
Contractor is performing under this Agreement. Contractor will immediately
supply Transmission with copies of any written reports, complaints, notices,
warnings or alleged violations.
(g) Contractor shall comply with all of the requirements of 29 C.F.R. ss.
1910.1200 commonly known as the hazard communication standard, plus the
applicable portions of the Emergency Planning and Community Right-to-Know Act of
1986, and the Federal, state and local Emergency Response organization's rules
and regulations.
Edition April, 1995 - 2 MS-48157-GN
<PAGE>
(h) Contractor shall continuously maintain adequate protection of all its
work from damage; shall protect Transmission's property from damage or loss
arising in connection with the Agreement; shall at all times exercise due care
with regard to all excavations, equipment, machinery and materials to prevent
loss or injury to persons and property, including livestock: and shall use such
adequate protective devices, warning signs, barriers and trench shoring as
required by governmental authority and by safe construction practices.
(i) In situations where the Contractor creates or refuses to correct
environmental, health or safety situations having the potential of causing
serious injury to the public, Transmission's customers, employees of
Transmission or the Contractor, or the environment, the authorized Transmission
representative shall have the right to stop work until Contractor corrects the
situation to the satisfaction of the Transmission representative.
(j) Contractor shall not bury or otherwise discard wastes on property of
Transmission or any leases, right-of-way or easements acquired by Transmission
during the performance of the work covered by this Agreement.
(k) Contractor, at the completion of work covered by this Agreement, shall
remove any and all materials, substances and/or chemicals brought onto the work
site by Contractor or Transmission which are unused, used but suitable for
reuse, or wastes including spill residues of such materials, substances and/or
chemicals unless Transmission, in writing, accepts title to such.
(1) Contractor, when directed to perform work on or near Transmission's
pressurized gas facilities, shall perform such work only when an authorized
Transmission representative is present.
(m) Contractor agrees that Transmission may appoint an authorized
Transmission representative for each work site and Contractor agrees to abide by
such representative's advice and counsel in matters affecting the environment
and in health and safety issues related to Transmission's equipment on premises.
3.04 SUPERVISION. Contractor will: supervise the services efficiently and
with its best skill and attention; be responsible for the means and methods of
performance of the Contract; and have a qualified superintendent, acceptable to
Transmission, at each location where services will be performed, who is vested
with full authority to represent Contractor under the Contract and in
performance of the services.
3.05 PAYMENT OF CREDITORS. (a) Contractor will promptly pay the claims of
all:
(1) Vendors, materialmen, suppliers, employees, subcontractors,
consultants, representatives, agents, and all other persons and entities;
Edition April, 1995 - 3 MS-48157-GN
<PAGE>
(2) Federal, state, and local governments for taxes and other
obligations; and
(3) Other creditors, which Contractor is obligated to pay and whose
obligations are connected, directly or indirectly, with the services.
(b) If Contractor notifies Transmission, in writing received by
Transmission prior to Transmission's payment of any claim, that Contractor
reasonably and in good faith contests the validity or amount of the claim,
Transmission will not pay the claim so long as Contractor is actively contesting
the claim; provided, that Transmission may pay the claim irrespective of
Contractor's contesting the claim, if (1) the claim becomes a lien on any assets
of Transmission, or (2) the creditor asserts the claim against Transmission, and
Transmission believes that there is a reasonable basis for the creditors'
assertion.
3.06 COMPLIANCE WITH APPLICABLE LAWS. Contractor, in performing the duties
hereunder, shall comply with all applicable laws and with all applicable orders,
rules and regulations of duly constituted authorities having jurisdiction.
3.07 SAFETY. Contractor will observe all applicable Federal, state and
local safety requirements, useadequate protective devices, warning signs, and
barriers as may be required by Transmission's and Contractor's permits and
licenses, and otherwise as may reasonably be needed under the circumstances.
Contractor-will perform the work safely and will exercise care to ensure that
persons and property will not be injured or damaged in performance of the
services.
3.08 SUBSTANCE ABUSE. (a) For the purposes of this section, the
below-listed terms are defined as follows:
(1) "Alcohol" and "drug(s)" include any substance with the potential
to produce the effect of intoxication and/or any substances with the
potential to produce physical, mental, emotional, or behavioral change in
the user.
(2) "Abuse" includes the use of any substance that deviates from the
intent of this policy or from specific medical direction.
(3) "Transmission or Contractor premises" is used in its broadest
sense, and includes all land (including leaseholds, easements, and other
job sites), property, buildings and other structures, vehicles owned by or
leased to Transmission or Contractor, and personal vehicles while used on
business.
(4) "On the job" includes paid and unpaid meal periods during the
business day, including paid and unpaid overtime.
Edition April, 1995 - 4 MS-48157-GN
<PAGE>
(b) ALCOHOL. The use or possession of alcohol on Transmission or
Contractor premises, or being under the influence of alcohol on the job, is
prohibited. In addition, off-the-job abuse of alcohol which adversely affects a
person's job performance, or adversely affects or threatens to adversely affect
other interests of Transmission or other persons, is prohibited.
(c) DRUGS. The use or illegal possession of drugs on the job or on
Contractor or Transmission premises is prohibited; provided, that an employee of
either Transmission or Contractor may continue to work, even though under the
influence of a legal drug, if Transmission and Contractor determine that the
person does not pose a threat to his or her own safety or the safety of others
and that the person's job performance is not significantly affected by the legal
drug. In addition, the off-the-job abuse or illegal possession of drugs which
adversely affects a person's job performance, or adversely affects or threatens
to affect other interests of Transmission or other persons, is prohibited.
ARTICLE 4. SUBCONTRACTORS
4.01 NEED FOR PRIOR APPROVAL; QUALIFICATIONS. Unless Transmission gives
its prior written consent, (a) Contractor will not delegate any of its duties
under the Contract or (b) subcontract any of the duties to be performed by it
hereunder. Contractor will employ only competent, experienced, and skilled
Subcontractors. Any delegation or subcontract of Contractor's duties hereunder,
regardless of whether such delegation or subcontract has been approved by
Transmission, shall not relieve Contractor of its responsibilities hereunder and
Contractor shall remain liable to Transmission with respect to such
undertakings.
4.02 NOTIFICATION AND DOCUMENTATION. If Contractor desires to subcontract
any of the services to be performed under the Contract, Contractor will notify
Transmission in writing of the names of any Subcontractors it proposes to employ
and will, if requested by Transmission, submit to Transmission a copy of the
subcontract Contractor proposes to use. In any event, the subcontract must
contain a provision requiring the Subcontractor to be bound by the terms of the
Contract so far as applicable to the services to be performed by the
Subcontractor. If requested by Transmission, Contractor will furnish
Transmission with a signed copy of any subcontract.
4.03 LIABILITY FOR SUBCONTRACTOR'S WORK. Irrespective of whether
Transmission has approved a Subcontractor and/or a subcontract, Contractor
warrants that all work performed by all Subcontractors will comply with all of
the terms and conditions of the Contract.
ARTICLE 5. INDEMNITY
Edition April, 1995 - 5 - MS-48157-GN
<PAGE>
5.01 BASIC INDEMNIFICATION. Contractor shall indemnify and hold harmless
Transmission from and against any and all loss, damage, and liability from any
and all claims for damages on account of or by reason of bodily injury,
including death, which may be sustained or claimed to be sustained by any
person, including the employees of Contractor and of any Subcontractor of
Contractor, and from and against any and all damages to property, including loss
of use, and including property of Transmission, caused by o ' r arising out of
or claimed to have been caused by or to have arisen out of an act or omission of
Contractor or its agents, employees or Subcontractors in connection with the
performance of this Agreement, or caused by or arising out of or claimed to have
been caused by or to have arisen out of the concurrent negligence of Contractor
and Transmission, their agents and employees, respectively, in connection with
the performance of this Agreement, whether or not insured against; provided,
however, that the foregoing indemnification will not cover loss, damage, or
liability arising from the sole negligence or willful misconduct of
Transmission, its agents and employees. Contractor shall, at its own cost and
expense, defend any claims, suits, actions, or proceedings, whether groundless
or not, which may be commenced against Transmission in connection with
performance of this Agreement, and Contractor shall pay any and all judgments
which may be recovered in any such actions, claims, proceedings, or suits, and
defray any and all expenses, including costs and attorney's fees, which may be
incurred in or by reason of such actions, claims, proceedings, or suits.
Notwithstanding the foregoing, in the event of such actions, claims, proceedings
or suits, Transmission shall be entitled, if it so elects, to representation by
attorneys of its own selection, including attorneys employed by Transmission.
The obtaining by Contractor of a release or discharge, running to Contractor or
Transmission or either or both of them for damages in connection with this
Contract shall not diminish or affect in any way the rights of Transmission and
the obligations of Contractor as set forth in this Article 5. To the extent
permitted by law, Contractor expressly waives the benefit, for itself and all
Subcontractors, insofar as the indemnification of Transmission is concerned, of
the provisions of any applicable workers' compensation law limiting the tort or
other liability of an employer on account of injuries to the employer's
employees.
5.02 EXCLUSION FROM INDEMNIFICATION. The foregoing indemnification does
not extend to Transmission's contractual obligation to compensate landowners as
provided in deeds, leases, licenses, or other contracts between Transmission and
the owners of the land on which any portion of this Contract between
Transmission and the owners of the land on which any portion of this Contract is
to be performed, except to the extent that the requirement of compensation is
the result of:
(a) Contractor's default under this Contract;
(b) Contractor's trespass on or other improper damage to the property of
others; or
(c) Contractor's other act or failure to act which is actionable (whether
negligent, willful, reckless, wanton, intentional,
Edition April, 1995 - 6 - MS-48157-GN
<PAGE>
or otherwise tortious), or for which strict, absolute, statutory, or
other type of liability may be imposed.
5.03 RESPONSIBILITIES WITHIN RIGHTS-OF-WAY. Unless otherwise provided in
the Agreement, Transmission shall bear the liability and pay for damage to
crops, shrubs, trees, grass and plantings within the right-of-way, except where
Contractor, its agents, employees, or Subcontractors through negligence,
carelessness, or any other reason, cause unreasonable damage thereto, in which
event that portion of the damages so caused shall be the sole responsibility of
Contractor. In addition, Contractor shall be responsible for the damages arising
from its exercise of the right of access to and from the right-of-way.
ARTICLE 6. CONTRACTOR'S INSURANCE
6.01 Insurance. Contractor shall provide, at its own cost and expense,
insurance of the kinds and in the amounts specified in the following schedule,
to cover all loss or liability for damages on account of bodily injury,
including death resulting therefrom, and damage to or destruction of property
caused by or arising out of any and all operations Carried on or any and all
work performed under this Agreement.
(a) WORKERS' COMPENSATION Coverage shall include the following:
(i) Workers' Compensation - Statutory coverage applicable in
each state where work is to be performed, including coverage
for occupational disease, if and as required.
(ii) Employer's Liability - Minimum limit of $1,000,000 per
occurrence. If coverage is obtained from a state fund (Ohio
or West Virginia), Employer's Liability coverage may not be
available. In such cases, Contractor will purchase "Stop
Gap" coverage, with minimum limits of $1,000,000 per
occurrence, from a commercial insurer.
(iii) All States Endorsement (or equivalent). -If coverage is
obtained from a state fund (Ohio or West Virginia) an All
States endorsement may not be available. In such cases,
Contractor will obtain Workers' Compensation insurance in
every state in which operations may be conducted or work may
be performed under the terms of this Agreement.
(iv) U. S. Longshoremen's and Harbor Workers' Compensation Act
coverage, U. S. Defense Bases Act Coverage, Outer
Continental Shelf Land Act coverage, when applicable:
Statutory Limits.
(v) Jones Act coverage when applicable. Minimum Limits re-
quired: $1,000,000 per accident.
Edition April, 1995 - 7 - MS-48157-GN
<PAGE>
(b) COMMERCIAL GENERAL LIABILITY OR COMPREHENSIVE GENERAL LIABILITY
INSURANCE: Policy to include Blanket Contractual and Broad Form Liability
endorsements, or their equivalents, Completed Operations Coverage and, when
applicable, Products Coverage. The Contractual Liability section must
specifically cover Contractor's obligations under the indemnity provisions of
this Agreement.
MINIMUM LIMITS REQUIRED:
Bodily Injury and Personal Injury: $1,000,000 per
occurrence, Combined Single Limit.
Products/Completed Operations: . . $1,000,000 per
occurrence, Combined Single Limit.
Personal Injury:................. $1,000,000 per occurrence.
When coverage obtained in accordance with this paragraph is written on a
"Claims Made" or "Claims First Made" form, Completed Operations coverage must be
specifically endorsed to provide that it will respond to claims made for at
least 24 months after completion of the work. The Fellow Employee and Explosion,
Collapse and Underground Exclusions must be deleted.
(c) AUTOMOBILE LIABILITY: Coverage shall include all owned, nonowned,
leased or hired vehicles.
MINIMUM LIMITS REQUIRED:
Bodily Injury/Property Damage . . . $1,000,000 per
occurrence, Combined Single Limit.
Contractor warrants that it is in full compliance with any "No Fault"
provision of any state in which it operates motor vehicles.
(d) PROFESSIONAL LIABILITY (ARCHITECTS AND ENGINEERS): If Contractor or any
of its Subcontractors shall render any architectural or engineering services,
then Contractor shall maintain and shall require any such Subcontractor to
maintain professional liability insurance, including coverage for errors and
omissions with minimum limits of $1,000,000 per claim. The Case Custody and
Control and Contractual Liability exclusions shall be deleted.
(e) ENVIRONMENTAL IMPAIRMENT LIABILITY. If Contractor or any Subcontractor
will conduct any operations or perform any work related to the handling,
removal, transportation or disposal of materials classified as Hazardous Waste,
or involving Site Assessment, Remediation or other activities associated with
the restoration of contaminated land, water or atmosphere,
Edition April, 1995 - 8 - MS-48157-GN
<PAGE>
then Contractor shall maintain, and require any such Subcontractor to maintain
Environmental Impairment Liability insurance appropriate to the type of
operations to be conducted or work to be performed, with minimum limits.
Additionally, Contractor will provide Transmission with copies of all current
licenses and/or permits required by the State(s) or local jurisdictions where
the work is to be performed.
6.02 SPECIAL PROVISIONS IN INSURANCE CONTRACTS. All insurance policies
required by this section will be written by insurance companies acceptable to
Transmission, will be primary with respect to any insurance maintained by
Transmission and will be endorsed to provide at least 30 days advance notice to
Transmission of any cancellation, non-renewal or material change in coverage,
except that cancellation for non-payment of premium will require 10 days advance
notice to Transmission. Insurance policies required by paragraphs b, c, d, e,
and g of Section 6.01 will name Transmission as an additional insured. All
insurance policies required by this Section will contain a waiver of subrogation
as against Transmission, will contain a standard "Cross Liability" endorsement.
6.03 SUBCONTRACTORS. Contractor warrants that any Subcontractors of
Contractor who conduct any operations or perform any work under the terms of
this Agreement shall maintain insurance coverages with limit at least equal to,
and coverages at least as broad as those required by this Section.
6.04 EVIDENCE OF INSURANCE. Contractor shall furnish, on behalf of
itself and any Subcontractor(s), not later than the time of signing of this
Agreement, copies of all insurance policies intended to meet the requirements
of this Section. Properly executed Certificates of Insurance may be substituted
for insurance policies provided that such Certificates contain positive
statements of compliance with all the terms of this Agreement which apply to the
type of insurance represented by the Certificate. Insurance Policies whose terms
expire during the term of this Agreement will be renewed or replaced with no
gaps in coverage, and evidence of such renewal or replacement will be provided
to Transmission under the same conditions as prescribed above.
ARTICLE 7. INSPECTION AND APPROVAL; PAYMENT
7.01 INSPECTION. (a) Transmission's authorized representatives will at all
times have access to the work for the purpose of inspection, and Contractor will
provide proper facilities for such access and inspection.
(b) Contractor will maintain adequate financial records of all work
performed hereunder. Upon request of Transmission, Contractor will make such
records available to Transmission for inspection and verification.
7.02 APPROVAL. Transmission has no obligation to pay for any services until
approved and as provided in Section 7.03.
Edition April, 1995 - 9 MS-48157-GN
<PAGE>
7.03 PAYMENT. For the approved performance of services performed by
Contractor, Transmission agrees to pay the sum(s) specified in the Schedule of
Services and Pricing which relate to the services performed within thirty (30)
days after the services have been completed by Contractor, approved by
Transmission, and Contractor has furnished an invoice and satisfactory evidence
that all liabilities which could result in a lien or claim against Transmission
or its property have been paid or bonded.
7.04 Audit. (a) Contractor shall permit Company to audit the books and
records of Contractor relating to all payments received or invoiced pursuant to
this Agreement upon reasonable notice at any time during the pendency of this
Agreement and for a period of three (3) years after the termination of this
Agreement. In the event Company finds any discrepancy from that which should
have been made pursuant to this Agreement, Contractor, upon receipt of
documentation substantiating such discrepancy , shall immediately repay the
disputed amount plus interest at the rate of prime (as set forth in The Wall
Street Journal on a monthly basis during the repayment period).
(b) Company, and its duly authorized representatives, shall have access, at all
reasonable times, during the term of this Agreement, and for a period of three
(3) years following the completion or termination of work and final billing of
Company, to all of Contractor's and its Subcontractor I s, personnel, books,
records, correspondence, instructions, plans, drawings, receipts, vouchers and
memoranda of every description pertaining to or related in any way to the
services performed hereunder for the purpose of auditing and verifying the cost
of work or to determine the Company's rights or the Contractor's obligations
hereunder or, to ascertain any facts relative to any claim against the
Contractor which has or may become a charge against the Company or the work, or
for any other reasonable purpose. Said Company representatives shall have the
right to reproduce the aforesaid articles, as such representatives deem
necessary or appropriate. The Company shall have sufficient audit access to the
Contractor's costs in the fixed rate area to satisfy themselves that all
services that are supposed to be included in set fixed rates are so included.
ARTICLE 8. Term AND TERMINATION
8.01 General PROVISIONS. The Contract between the parties shall remain in
effect until the termination date specified in the General Service Agreement or
the earlier occurrence of one of the following: (a) mutual agreement in writing
that the Contract should be terminated; (b) termination by either party on
thirty days written notice to the other; (c) termination by Transmission in
accordance with Section 8.02 of this Contract; or (d) the expiration or
termination of or Contractor's failure to renew any insurance coverage required
hereunder. Transmission shall not be liable to Contractor for Services performed
after an event of termination.
Edition April, 1995 10 MS-48157-GN
<PAGE>
8.02 TERMINATION BY TRANSMISSION. If (a) Contractor fails to perform the
services covered by this Contract in an efficient, workmanlike, skillful and
careful manner or to the complete satisfaction of Transmission, or (b) the work
is not proceeding with such speed as in the reasonable judgment of Transmission
is necessary to complete the same within the time herein provided, or (c)
Contractor fails to comply with any of the requirements of this Contract,
Transmission may give written notice to Contractor stating the particulars in
which Contractor is failing to comply with the terms of this Contract. If
Contractor does not remedy such failure or proceed with due diligence as is
reasonably required by Transmission within three (3) days after such notice is
given, then Transmission shall have the right to terminate this Contract
regardless of its state of completion and without prejudice to any claim
Transmission may have. Additionally, Transmission may award a contract as to
such work that remains to be done hereunder to another Contractor or perform all
or any part of said services. In the event Transmission takes over the work or
awards all or any part of it to another Contractor, and the total cost of
performing the work provided for herein is more than the aggregate amount to be
paid Contractor herein, then Contractor shall pay to Transmission, upon demand,
the amount of such excess.
ARTICLE 9. MISCELLANEOUS
9.01 INDEPENDENT CONTRACTOR. Contractor is an independent contractor.
Nothing in the Contract or the relation of the parties is to be construed as
creating any other type of relationship.
9.02 Notice. Whenever any provision of the Contract requires or allows the
giving of written notice, such notice will be properly given if delivered
personally to the party, sent by telecopy or telefax to the party, or mailed to
the party given at the address first set forth above or to such other address as
the party provides pursuant to written notice in compliance with this section.
The written notice will be deemed to have been received when delivered
personally, the day after the telecopy or telefax is sent, or the third day
after mailing.
9.03 Effect OF WAIVERS. No waiver by either party of one or more defaults
by the other party in the performance of any provisions of the Contract will
operate or be construed as a waiver of any further defaults, whether of a like
or of a different character.
9.04 ASSIGNMENT AND DELEGATION. The rights of Contractor may not be
assigned and the duties of Contractor may not be delegated without the prior
written consent of Transmission; provided, however, that any such delegation
shall not operate to relieve Contractor of its responsibilities hereunder, and
notwithstanding any such delegation Contractor shall remain obligated to
Transmission with respect to such undertakings.
Edition April, 1995 -11 - MS-48157-GN
<PAGE>
9.05 NONDISCRIMINATORY EMPLOYMENT PRACTICES. (a) Contractor certifies that,
during the performance of this Contract, Contractor's employment practices shall
comply with all Federal, state and local laws and regulations regarding
discrimination because of race, color, religion, national origin, sex, age,
handicap, or veteran status.
(b) The following Federal laws are incorporated herein, if
applicable: the Equal Opportunity Clause required under Executive Order 11246
and implemented by Title 41 C.F.R. ss. 60-1.4; the Affirmative Action Clause
required under the Vietnam Era Veterans Readjustment Act of 1974 and implemented
by Title 41 C.F.R. ss. 60-250.4; the Affirmative Action Clause required under
the Rehabilitation Act of 1973 and implemented by Title 41 C.F.R. ss. 60741.4;
and the Utilization of Minority Business Enterprises Clause required under
Executive Order 11458 and implemented by Federal Procurement Regulations Subpart
1- 1.13.
9.06 RIGHTS AND REMEDIES CUMULATIVE. All rights and remedies of the
parties hereunder are cumulative.
9.07 Setoff. Any amounts paid by Transmission which Contractor is
obligated to pay pursuant to this Contract or otherwise, will be reimbursed to
Transmission by Contractor (together with (a) Transmission's attorney fees
incurred as a result of a default or other fault of contractor, and (b) annual
interest at 15% if this rate is allowed by law, otherwise at the highest rate
allowed by law), and, if not reimbursed, may be deducted (with attorney fees and
interest as above provided) by Transmission from any amounts then or thereafter
due Contractor. These rights of reimbursement and deduction are in addition to
Transmission's right to indemnity pursuant to Article 5.
9.08 HEADINGS. The headings on the sections of the Contract are for the
convenience of the parties and are not to be used in interpreting or construing
the Contract.
9.09 Choice of Law. The validity and construction of the Contract and the
rights and duties of the parties will be determined by the laws of West Virginia
without reference to its choice of law rules.
9.10 SEVERABILITY. If any Section or provision of the Contract or the
application thereof is held invalid, unlawful, or unenforceable in any respect,
such invalidity, unlawfulness, or unenforceability shall not be deemed or
construed to affect other Sections or provisions of the Contract. To this end,
the Sections and provisions of the Contract are agreed to be severable; and as a
rule of construction, the Contract shall be construed and applied as if such
invalid, unlawful, or unenforceable Section, provision, or application had never
been contained in the Contract.
9.11 Entire AGREEMENT. The Contract is the sole evidence of the agreement
between the parties. There are no representations, agreements, or
Edition April, 1995 - 12 - MS-48157-GN
<PAGE>
understandings except as stated in the Contract. No modification, alteration, or
amendment of the Contract will be binding on Transmission unless in writing and
signed by Transmission's Authorized Representative.
9.12 CONFIDENTIALITY. All information and/or materials provided to or
discovered by Contractor, its agents, employees, or sub-contractors, including,
but not limited to, drawings, sketches, architectural ideas, work product,
blueprints, job specifications, and data will be considered propriety
information and materials intended for Transmission's use only. Reproduction or
use of these materials and/or information for the purpose of sharing said
materials and/or information with any agencies, competitors, other persons or
entities is expressly forbidden. The provided information and/or materials will
remain property of Transmission and is not intended for external use,
distribution or publication. Contractor shall be obligated to return all
provided information and/or materials to Transmission upon completion of each
project and is liable for damages as a result of improper use, distribution or
publication of such information and/or materials.
Edition April, 1995 - 13 - MS-48157-GN
B PRAXAIR, INC. CHANGE NOTICE - 01
U PO BOX 44
Y TONAWANDA, N.Y. 14151-0044 PURCHASE ORDER: 81581763P-01
E MAIL INVOICE IN DUPLICATE TO: THE ABOVE P.O. NUMBER, LINE ITEM NUMBER,
R INVOICE AUDITING DEPT. AND RELEASE NUMBER IF APPLICABLE MUST
PRAXAIR INC. APPEAR ON ALL CORRESPONDENCE, SHIPPING
PO BOX 808, PAPERS, AND PACKAGES.
TONAWANDA, N.Y. 14151-0808 TELEPHONE: (716) 879-2000
DATE 09/19/95
N/A 2269 456090895
S NOT APPLICABLE S IDS TECHNICAL SERVICES H T ON THIS ORDER E 600 CENTURY PLAZA
DR. I O L SUITE 140 P L HOUSTON TX 77073-6016 E R BUYER HEREBY ORDERS UPON THE
TERMSHEREIN CONTAINED, INCLUDING HTE ADDITIONAL TERMS ON THE REVERSE SIDE
HEREOF:
- --------------------------------------------------------------------------------
SHIP BY REQUISITIONED BY ROUTING CODE
10/01/95 BAEHR COMMODITY CODE: 3550
- --------------------------------------------------------------------------------
PURCHASING AGENT REFER QUESTIONS TO: CONFIRMING TO: TAX STATUS
J. NAFFKY J. NAFFKY 879-7305(S) DIRECT PAY TX
- --------------------------------------------------------------------------------
F.O.B. POINT SHIP VIA FREIGHT TERMS PAYMENT TERMS TEXAS SEE
N/A N/A NET 45 SPECIAL INSTRUCTIONS
- --------------------------------------------------------------------------------
ITEM QUANTITY U/M DESCRIPTION UNIT PRICE EXTENDED AMOUNT
NO.
- --------------------------------------------------------------------------------
**ACKNOWLEDGEMENT REQUIRED**
CHANGE NOTICE - 01
EFFECTIVE DATE - 10/13/95
001 THIS LINE IS CHANGED
1 LT LCRC H2 METER 65,000.00 65,000.00
CHANGE **** UNIT PRICE ****
FROM 34,000.00
TO 65,000.00
ACCT# PRO 080 2269 7500
002 THIS LINE IS CHANGED
1 LT ARCO CHEM.H2 METER 90,000.00 90,000.00
CHANGE **** UNIT PRICE ****
FROM 40,000.00
TO 90,000.00
ACCT# PRO 080 2720 7500
003 THIS LINE IS CHANGED
1 LT GEON N2 LETDOWN STATION 45,000.00 45,000.00
CHANGE **** UNIT PRICE ****
(CONTINUED NEXT PAGE)
- --------------------------------------------------------------------------------
SPECIAL INSTRUCTIONS
TEXAS
DO NOT BILL TAXES. TEXAS DIRECT
PAY PERMIT NO. 3-01136-8104-0 TAXABLE
MATERIAL
- ---------------------------------------
TO SELLER PURCHASING AGENT
<PAGE>
ADDITIONAL TERMS
QUALITY : Seller warrants that the goods will conform to description and
specifications and will be free from all defects in material and workmanship and
all defects due to design (other then Buyer's design). Buyer shall have the
right to inspect and test any goods before acceptance if such inspection and
test are made within a reasonable time or as provided in the specifications.
Seller shall pay the cost of inspecting and testing of goods rejected and all
transportation charges thereon. Upon request of Buyer, Seller, at its sole
expense, shall repair, or replace f.o.b. Seller's plant, all or any part of any
machinery or equipment covered by this order which proves to be defective in
material or workmanship within one (1) year from the date it is either used or
placed in operation.
QUANTITY : Goods shipped in excess of quantity designated in this order may be
returned at Seller's expense.
TRANSPORTATION CHARGES : Except as otherwise mutually agreed to in writing, (a)
where transportation charges are separately charged to Buyer by Seller, such
charges shall in no event exceed the lowest legal freight charges via the
carrier or routing specified herein, in effect on the date of shipment, and (b)
where transportation charges are allowed to Buyer by Seller, such allowance
shall not be low than the actual freight charges paid by Buyer or, where Buyer
performs the transportation, such allowance shall be in an amount equal to the
freight charges which would have been assessed for a like movement via common
carrier.
DELIVERY : The goods shall be properly packaged for shipment. Each package shall
be numbered and labeled with Buyer's order number, stock number, contents, and
weight, and shall contain an itemized packing slip. No charges will be allowed
for packing, crating, freight express or cartage unless specified on the face
hereof. Time is of the essence hereof. If any goods are not delivered within the
time specified in this order, or within a reasonable time if no time is
specified, Buyer may either (I) refuse to accept such goods and terminate this
order, or (II) cause Seller to ship the goods by the most expeditious means of
transportation whereupon any additional transportation charges in excess of
those which would apply for the usual means of transportation shall be for the
account of Seller.
INVOICES Unless otherwise requested by Buyer, invoices shall (a) be rendered
separately for each delivery; (b) cover not more than one order; (c) be rendered
with order number noted thereon.
PATENTS Except as hereinafter limited, Seller shall protect and indemnify Buyer
from and against claims, damages, judgments, expenses and loss arising from
infringement or alleged infringement of any patent of the United States by any
of the goods delivered hereunder, and Seller shall defend or settle at its own
expense any suit or proceeding brought against Buyer for such infringement,
provided that Seller is notified promptly in writing of the commencement of such
suit or proceeding and is given authority, information and assistance by Buyer
for the defense or settlement thereof, and provided further that Buyer shall not
settle or compromise any such suit or proceeding without the prior written
consent of Seller . Furthermore, in the event that Buyer should be enjoined in
such suit or proceeding from using any of the goods delivered hereunder, Seller,
at its option, shall promptly either (I) secure termination of the injunction
and procure for Buyer the right to use such goods without any obligation or
liability, III) replace said goods with no infringing goods or modify same to
become non-infringing, all at Seller's expense and to Buyer's satisfaction, or
(iii) remove said goods at Seller's expense and refund to Buyer the amount paid
to Seller therefor. The provisions of this paragraph, however, shall not apply
to the use of any of the goods delivered hereunder in combination with other
materials or in the practice of any process, or to infringement by reason of
such use.
INSTALLATION AND WORK : In the event that any of the goods requires, in
connection with the installation thereof or work thereon, the services of a
supervisor, expert or other person connected with or employed by Seller, and
Seller agrees to furnish the same, either with or without charge, such
supervisor, expert or other person in performing such services shall not be
deemed to be the agent or employee of Buyer, and Seller assumes full
responsibility for his acts and omission and exclusive liability for any payroll
taxes or contributions imposed by any Federal or State law dealing with any of
the subjects covered by the Federal Social Security Act approved August 14,
1936, as amended.
INSURANCE : Prior to Seller's commencing any work under the QUALITY paragraph or
other terms of this order on property owned or controlled by Buyer or by any
other party on whose property the goods are installed, Seller shall, at its
expense, procure and maintain Workmen's Compensation to @ extent required by law
and Contractor's Bodily Injury Liability and Property Damage Liability insurance
(including Contractual Liability covering the indemnity set forth in the next
paragraph) in such amounts as are approved by Buyer. Prior to commencing any
such work, Seller shall furnish to Buyer written certificates establishing that
the above insurance has been procured and is being maintained, which
certificates Shall provide that written notice of cancellation shall be given to
Buyer at least fifteen 11 6) days prior to the effective date of such
cancellation.
INDEMNITY; PHYSICAL DAMAGE RESPONSIBILITY : Seller shall indemnify and save
harmless Buyer, any party on whose property the goods are installed, and their
employees and agents, against all claims, liabilities, losses, damages and
expenses, of any character whatsoever, for bodily injury, sickness and/or
disease, including death at anytime resulting from any of the foregoing,
sustained by any employee of Seller, or of a subcontractor of Seller, while in,
on or about the property of Buyer or the site of installation of the goods, if
or where such injury, sickness, disease arid/or death was in any way connected
with any work under the QUALITY paragraph or other terms of this Order or with
the performance of or failure to perform said work, unless such injury,
sickness, disease and/or death was the result of the sole negligence of Buyer,
the aforesaid party, or any of their employees or agents. Seller shall be
responsible and liable for lose or destruction of, or damage to, all tools,
equipment and other personal property of Seller, any subcontractor of Seller, or
any of their employees or agents, unless such loss, destruction or damage was
the result of the sole negligence of Buyer, the aforesaid party, or any of their
employees or agents.
FORCE MAJEURE : Neither party hereto shall be liable to the other for default or
delay in performing its obligations hereunder if caused by fire, strike, riot,
war, act of God, delay of carriers, governmental order or regulation, complete
or partial shutdown of plant by reason of
<PAGE>
inability to obtain sufficient raw materials or power, and/or any other similar
or different occurrence beyond the reasonable control of the party so defaulting
or delaying. The party whose performance is prevented by any such occurrence
shall notify the other party thereof in writing as soon as is reasonably
possible after the commencement of such occurrence, setting forth the full
particulars in connection therewith, shall remedy such occurrence with all
reasonable dispatch, and shall promptly give written notice to the other party
of the cessation of such occurrence. No payment shall be made by Buyer to Seller
for any expenses incurred by Seller by reason of such default or delay.
DRAWINGS AND OTHER ITEMS : Unless otherwise expressly provided in this order,
all drawings, blueprints, dies, patterns, tools, printing plates, and other
items used in connection with the manufacture of the goods hereunder, which are
prepared or constructed by Seller pursuant to the terms of this order, shall be
the property of, Buyer, and upon completion of deliveries of the goods
hereunder, or upon termination of this order, shall be delivered to Buyer.
FAIR LABOR STANDARDS ACT : Seller hereby agrees that the goods will be produced
in compliance with the Fair Labor Standard Act, as amended, and agrees to so
certify on its invoices.
COMPLIANCE WITH LAWS : Seller shall comply with and shall indemnify and hold
harmless Buyer from and against all damages or penalties arising out of Seller's
failure to comply, all laws, ordinances, and government rules, regulations and
orders applicable to this order, including but not limited to, applicable
Federal Acquisition Regulation Clauses relating to SELLER'S CERTIFICATION OF
NONSEGREGATED FACILITIES FAR 62.222-21, EQUAL OPPORTUNITY FAR 62.222-26,
AFFIRMATIVE ACTION FOR SPECIAL DISABLED AND VIETNAM ERA VETERANS FAR 52.222-36,
AFFIRMATIVE ACTION FOR HANDICAPPED WORKERS FAR 62.222- 36, UTILIZATION OF SMALL
BUSINESS CONCERNS AND SMALL DISADVANTAGED BUSINESS CONCERNS FAR 62.219-8,-9, THE
IMMIGRATION REFORM AND CONTROL ACT OF 1986 AND UTILIZATION OF LABOR SURPLUS AREA
CONCERNS FAR 62.220-3,-4, which to the extent applicable are hereby incorporated
into this order. The provisions of Executive Order 1 1 246, as amended by
Executive Order 1 1 376 (Equal Employment Opportunity), 38 USC 421 2 (Vietnam
Ere Veterans Adjustment Assistance Act), Section 603 of the Rehabilitation Act
of 1973 (Handicapped Regulations), and the implementing regulations found at 41
CFR 60-1 & 2, 41 CFR 60-260, and 41 CFR 60-741, respectively, are hearby
incorporated by reference.
ASSIGNMENT Any assignment of this order without the prior written consent of
Buyer shall be void.
NON-WAIVER No waiver by either party of any breach of any of the terms of this
order to be performed by the other party shall be construed as a waiver of any
subsequent breach, whether of @ same or of any other term of this order.
REMEDIES : The rights and remedies of Buyer set forth in this order are not
exclusive and are in addition to all other rights and remedies of Buyer.
GOVERNING LAW The validity, interpretation, and performance of this order shall
be governed by the law of the State in which this order is issued by Buyer.
MISCELLANEOUS If this order constitutes an offer, Seller's acceptance of this
order is hereby expressly limited to the terms of this order and shipment of any
part of the goods covered hereunder shall be deemed to constitute such
acceptance. If this order constitutes an acceptance of an offer, such acceptance
is expressly made conditional on Seller's assent to the terms of this order, and
shipment of any part of the goods covered hereunder shall be deemed to
constitute such assent. This order constitutes the entire agreement between the
parties hereto pertaining to the subject matter hereof, and there are no oral
understandings, representations or warranties affecting it. Neither course of
performance nor course of dealing nor usage of trade shall be used to interpret,
construe, qualify, explain or supplement any of the terms of this order. This
order shall not be amended except in writing signed by @ parties hereto.
<PAGE>
B PRAXAIR, INC. CHANGE NOTICE - 01
U PO BOX 44
Y TONAWANDA, N.Y. 14151-0044 PURCHASE ORDER: 81581763P-01
E MAIL INVOICE IN DUPLICATE TO: THE ABOVE P.O. NUMBER, LINE ITEM NUMBER,
R INVOICE AUDITING DEPT. AND RELEASE NUMBER IF APPLICABLE MUST
PRAXAIR INC. APPEAR ON ALL CORRESPONDENCE, SHIPPING
PO BOX 808, PAPERS, AND PACKAGES.
TONAWANDA, N.Y. 14151-0808 TELEPHONE: (716) 879-2000
DATE 09/19/95
N/A 2269 456090895
S NOT APPLICABLE S IDS TECHNICAL SERVICES H T ON THIS ORDER E 600 CENTURY PLAZA
DR. I O L SUITE 140 P L HOUSTON TX 77073-6016 E R BUYER HEREBY ORDERS UPON THE
TERMSHEREIN CONTAINED, INCLUDING HTE ADDITIONAL TERMS ON THE REVERSE SIDE
HEREOF:
- --------------------------------------------------------------------------------
SHIP BY REQUISITIONED BY ROUTING CODE
10/01/95 BAEHR COMMODITY CODE: 3550
- --------------------------------------------------------------------------------
PURCHASING AGENT REFER QUESTIONS TO: CONFIRMING TO: TAX STATUS
J. NAFFKY J. NAFFKY 879-7305(S) DIRECT PAY TX
- --------------------------------------------------------------------------------
F.O.B. POINT SHIP VIA FREIGHT TERMS PAYMENT TERMS TEXAS SEE
N/A N/A NET 45 SPECIAL INSTRUCTIONS
- --------------------------------------------------------------------------------
ITEM QUANTITY U/M DESCRIPTION UNIT PRICE EXTENDED AMOUNT
NO.
- --------------------------------------------------------------------------------
FROM 30,000.00
TO 45,000.00
ALL INVOICES TO BE SUBMITTED TO: PRAXAIR INC.
222 PENNBRIGHT DR. -STE.300
HOUSTON, TX. 77090
ATT: G.J. HAEHR
PRICES INDICATED HEREIN ARE ESTIMATES ONLY AND SHALL NOT BE EXCEEDED WITHOUT
BUYER'S APPROVAL. SELLER'S 2/1/95 BILLING RATE SHEET ATTACHED HERETO SHALL
APPLY. MATERIALS ARE INVOICED AT COST PLUS 15%.
ACCT# PRO 080 2720 7500
** ACKNOWLEDGEMENT REQUIRED **
NET CHANGE TO TOTAL 96,000.00
----------
TOTAL AMOUNT 200,000.00
- --------------------------------------------------------------------------------
SPECIAL INSTRUCTIONS
TEXAS
DO NOT BILL TAXES. TEXAS DIRECT
PAY PERMIT NO. 3-01136-8104-0 TAXABLE
MATERIAL
- ---------------------------------------
TO SELLER PURCHASING AGENT SIGNATURE ILLEGIBLE
EXHIBIT 10.15
AGREEMENT NO. PDC-3180
HOUSTON
CONSULTING AGREEMENT
THIS AGREEMENT ("Agreement") is made FEBRUARY 6, 1997 between TE Products
Pipeline Company, Limited Partnership ("Client"), a Delaware limited partnership
acting by and through its general partner, Texas Eastern Products Pipeline
Company, and IDS Engineering Services ("Consultant"), a division of Industrial
Data Systems, Inc., a Texas corporation.
Consultant and Client (the "Parties"; each a "Party") agree as follows:
1. SERVICES: Consultant shall perform the following "Services" to the
satisfaction of Client: Consultant shall provide engineering and design
support through Consultant's personnel for Client's Houston office. The
Services also may include additional work, pursuant to Paragraph 9 of this
Agreement. Consultant shall have access to Client's staff and resources as
necessary, in the reasonable discretion of Client, to perform the
Services. Consultant shall document to Client's reasonable satisfaction
its time and expenses incurred to perform the Services; and Client shall
have the right to approve all Services performed and verify all time and
expenses documented by Consultant, prior to payment.
2. TERM: The "Term" of this Agreement shall commence on the date above and
continue through December 31, 1997. Either Party may terminate this
Agreement prior to that termination date by giving one (1) week's written
notice to the other Party at the address below, or such other address as
the Party to be notified may specify. Either Party, additionally, may
terminate this Agreement at any time for breach, without waiving any other
remedy therefor, at law or in equity.
3. CLIENT'S REPRESENTATIVE: Gary Daileda or his designee shall represent
Client during the performance of the Services, and shall have authority on
behalf of Client to add, delete or otherwise revise the scope of Services.
Mr. Daileda will identify any alternate Client representative, and the
term and limits of his responsibilities, prior to the effective date of
designation.
4. PAYMENT FOR SERVICES: Client shall pay Consultant for Services
satisfactorily performed according to Consultant's Rates for Engineering
Services, dated January 10, 1997 (the "Rate Schedule"), attached hereto.
Payment shall be due thirty (30) days
AGREEMENT NO. PDC-3180
<PAGE>
following receipt of a proper invoice for Services rendered and expenses
incurred, documented to the reasonable satisfaction of Client. Client
shall have the right to dispute any charge in good faith, and to withhold
payment of any disputed amount, without interest, pending resolution of
that dispute. In the event of breach by Consultant of Paragraph 5, below,
Consultant, without prejudice to any other remedy of Client therefor,
promptly will refund to Client all sums theretofore paid Consultant by
Client hereunder, plus interest at the highest lawful rate.
5. CONFIDENTIAL INFORMATION, CONFLICT OF INTEREST: Client, Consultant and
their employees and agents shall not disclose to any party confidential
information, trade secrets or research, development or business affairs
information disclosed in the performance of this Agreement, except
information generally known to the public or as required by law. If
Consultant at any time becomes aware of a conflict or potential conflict
between its activities or any activities of its employees or
representatives, whether or not part of the Services, and Client's
activities, Consultant immediately will cease performance of all Services
and advise Client's Representative of the conflict or potential conflict.
"Conflict," for purposes of this Agreement, will mean any legal, ethical,
professional or other conflict of interest, unauthorized disclosure or use
of Confidential Information, solicitation of an employee of Client, or any
other act or omission of Consultant of potential detriment to Client,
including but not limited to Client's business interests or competitive
position, present or future. "Activities," for purposes of this Agreement,
will include, without limitation, any business function of Consultant or
Client, whether or not relevant to any Services performable under this
Agreement. The failure of Consultant faithfully to honor the terms hereof,
or immediately to alert Client to any conflict or potential conflict of
which Consultant is or reasonably should be aware, will constitute breach
of this Agreement, irreparable harm to Client and gross negligence, for
which punitive damages, among other remedies, without limitation, will be
recoverable by Client. Client will have no liability to Consultant for any
loss to Consultant suffered as a result of cessation of any Services or
termination of this Agreement pursuant to this Paragraph. The obligations
of this Paragraph shall survive termination of this Agreement by four (4)
years.
6. INDEPENDENT CONTRACTOR: Consultant shall perform under this Agreement as
an independent contractor, and shall not act as nor be deemed an agent,
employee or legal representative of Client. Neither Party shall have
authority to assume or create any commitment or obligation on behalf of,
nor bind the other Party. Consultant shall not be entitled to any benefits
to which Client's employees may be entitled, such as group life, health,
dental and similar medical plans; thrift, ESOP and incentive compensation
plans; vacations; sick pay; or similar benefits. Consultant shall be
responsible for wage payments; federal and state income taxes, FICA taxes,
FUTA taxes and unemployment taxes; all tax withholding; and all other
payroll-related tax payments for the individuals providing Services
pursuant to this Agreement.
AGREEMENT NO. PDC-3180
2
<PAGE>
7. USE OF WORK PRODUCT: Client shall have exclusive ownership of deliverable
products derived or generated as a result of Services described in
Paragraph 1 and the ideas embodied in those products.
8. TAXES: Any and all taxes-imposed by this Agreement or its performance,
including but not limited to sales or use taxes, but excluding income,
payroll and other taxes called for by Paragraph 6, shall be paid by
Client.
9. ADDITIONAL WORK: Client may add, delete or otherwise revise the scope of
Services to be performed under this Agreement. Any such revision to the
scope of Services shall be confirmed by Client in writing; and, if a
revision requires additional Services by Consultant or any increase to the
amount payable to Consultant under paragraph 4, that revision also shall
be confirmed in writing by Consultant.
10. APPLICABLE LAW: This Agreement shall be construed in accordance with the
laws of the State of Texas, and venue shall lie in Harris County, Texas.
Consultant shall comply with all applicable laws and regulations in
performing this Agreement.
11. SEVERABILITY: The provisions of this Agreement are severable; and if any
Services or any phrase, sentence, paragraph, section or other part of this
Agreement is held by any court of competent jurisdiction to be invalid or
unconstitutional, the remainder of this Agreement shall not be affected
thereby.
12. ASSIGNMENT: This Agreement may not be assigned by either Party without the
prior, written consent of the other Party, and shall be binding upon and
inure to the benefit of the permitted heirs, successors, assigns and legal
representatives of the Parties.
13. LIABILITY: Consultant shall perform all Services to at least the
prevailing standards of its industry or profession, in a good and
workmanlike manner and to Client's satisfaction; and shall protect,
defend, indemnify and hold Client harmless from any and all claims or
causes of action in connection with the Services, except to the extent of
Client's gross negligence or willful misconduct. It expressly is the
intent of Consultant to protect, defend, indemnify and hold Client
harmless from any simple or ordinary negligence of Client. Under no
circumstance will Client be responsible hereunder to Consultant or any
third party for consequential, exemplary, incidental, punitive or
speculative damages; and it expressly is the intent of Consultant,
further, to protect, defend, indemnify and hold Client harmless therefrom.
AGREEMENT NO. PDC-3180
3
<PAGE>
14. LICENSES AND PERMITS: Consultant shall obtain any and all licenses and
permits required by city, county, state and federal law and regulation
necessary for the performance of Services pursuant to this Agreement.
15. COMPLETE AGREEMENT: This Agreement constitutes the entire agreement of the
Parties, and supersedes all prior agreements between Client and Consultant
relative to the subject matter of this Agreement. No representation made by
either Party not stated herein shall be binding. No modification or
amendment hereof shall be binding unless prepared as provided herein.
16. NOTICES:
(i) Notices to Client shall be sent to:
Sandra Dobbs
TEPPCO
P.O. Box 2521
Houston, Texas 77252-2521
Telephone: 713-759-3817
Fax: 713-759-3783
(ii) Notices to Consultant shall be sent to:
William Coskey, President
IDS Engineering a division of Industrial Data Systems, Inc.
600 Century Plaza Drive, Bldg. 140
Houston, Texas 77073-6016
Telephone: 281-821-3200
Fax: 281-821-3230
4
<PAGE>
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the
date first written above.
CLIENT:
TE PRODUCTS PIPELINE COMPANY LIMITED
PARTNERSHIP, BY TEXAS EASTERN PRODUCTS
PIPELINE COMPANY, ITS GENERAL PARTNER
By: /s/ 0. HORTON CUNNINGHAM
0. Horton Cunningham
Vice President, Technical Services
CONSULTANT:
IDS ENGINEERING, A DIVISION OF
INDUSTRIAL DATA SYSTEMS, INC.
By: /s/ WILLIAM A. COSKEY
William A. Coskey
President
AGREEMENT NO. PDC-3180
5
<PAGE>
IDS ENGINEERING a division of INDUSTRIAL DATA SYSTEMS, INC.
Quality Engineering and Fabrication for the Pipeline Industry
January 10, 1997
Sandra Dobbs
TEPPCO
P.O. Box 2521
Houston, Texas 77252-2521
Re: Agreement No. PDC - 2940 Engineering Services Dear 3&s. Dobbs:
We are pleased to submit our proposal for comprehensive engineering,
project/construction management, and related technical consulting services as
may periodically be required by your company. T. he attached ENGINEERING
SCHEDULE of RATES is included to establish our commercial terms. More important
than targeting specific upcoming projects, our principal objective is in
developing a long-term association through which we can readily support TEPPCO
on demand regardless of how small assignments might be. Allow me to emphasize
our range of expertise encompasses all engineering disciplines, we maintain
strong in-house project capabilities for execution of turnkey, project-managed
efforts. The following will apply:
RATES FOR ENGINEERING SERVICES
Effective January 1, 1997 all work authorized by the company will be at the
following rates. These rates include contractors charges for insurance, taxes,
overhead and profit. Computer work stations and software for normal engineering
and drafting projects are included.
CLASSIFICATION STD RATE O.T. RATE
Project Manager 65.00 65.00
Project Engineer 60.00 60.00
Senior Engineer 55.00 55.00
Engineer 50.00 50.00
Engineering Technician 48.00 64.00
Senior Designer 48.00 64.00
Designer 43.50 56.00
Operator/Draftsperson 39.00 52.00
Project Clerk 30.00 40.00
Senior Clerk 25.00 34.00
Clerk/Secretary 20.00 27.00
CORPORA 7E OFFICE.
600 CENTURY PLAZA DRIVE, BLDG. 140
HOUSTON TX 77073-6016
PHONE: (281) 821-3200
FAX: (281) 821-3230
PLAZA DRIVE
10500 WINDFERN ROAD
HOUSTON, TX 77064
PHONE: (281) 897-8015
FAX: (281) 897-9007
<PAGE>
HERE
TRAVEL EXPENSES
Project related travel expenses will only be incurred when required and
authorized by your firm and will be billed at cost, . For prolonged assignments
performed out of our home office area, a reasonable per deim allowance will be
established in lieu of certain expenses and charges for applicable personnel
subject to your firm's approval.
REPRODUCTION EXPENSE
AR reproduction costs will be billed at cost plus 15 percent.
OPTION TO HIRE IDS ENGINEERING PERSONNEL
In the event that TEPPCO elects to directly hire personnel offered by IDS
Engineering prior to, during, or for twelve (12) months following a client
assignment, a fee equal to 25% of the individual's annualized IDS salary (Hourly
]IDS wage rate X 2080)will be paid by client to IDS within 30 days of
individual's date of hire.
MISCELLANEOUS COST
ALL miscellaneous and third party costs will be billed at costs plus 15 percent.
We sincerely appreciate this opportunity to continue offering our services
and look forward to responding formally and specifically to your needs as they
arise. In the meantime, kindly advise should you have questions or should you,
in anyway, require our assistance.
Very truly yours
/s/ PAUL PLATH
Paul Plath
Manager Business Development
PP/ljm
EXHIBIT 10.16
TEXAS
MICRO
VOLUME PURCHASE AGREEMENT
This agreement is made between Texas Microsystems, a corporation, hereinafter
referred to as SELLER, and
Company INDUSTRIAL DATA SYSTEMS
Address 600 CENTURY PLAZA DRIVE, BLDG. 140
City HOUSTON State TX Zip 77073
Hereinafter referred to as BUYER, to be effective on the 22 day of JULY ,
1996. It is understood by all parteis that this agreement shall be
governed by the laws of the State of Texas. This agreement governs the
purchase by BUYER of hardware and software products of Seller hereinafter
referred to as PRODUCT.
DEFINITONS
ORDERING PERIOD - Period of time which commences on the dae of this agreement
and terminates on the followin September 30th (not to exceed 12 calendar
months); during which BUYER shall order PRODUCT under this agreement.
DELIVERY PERIOD - Period of time which commences on the date of this
agreement and terminates on the following September 30th (not to exceed 12
calendar months); during which BUYER shall take delivery of PRODUCT
ordered under this agreement.
TERMS AND CONDITIONS OF SALES
Except as modified in this agreement, Seller's Standard Terms and
Conditions, hereto attached, will apply to all purchases.
VOLUME PURCHASE TERMS
VOLUME PRICING - BUYER shall submit, at the time of execution of this
agreement, a Product Quantity Esimate listing the total quantities of each
PRODUCT item to be ordered under this agreement. BUYER will receive
pricing according to the schedules in the Seller's Domestic Quantity
Discount Schedule, based upon Product Dollar Volume Estimate for PRODUCT.
The estimated yearly dollar volume is $500,000.
MILESTONES - BUYER shall submit, at the time of execution of this
agreement, a purchase order for at least 5% of the estimated yearly dollar
volume listed above. Further ordering of PRODUCT item under this agreement
shall proceed in accordance with the followin schedule.
Months After Cumulative Orders
Date of Agreement Dollar Requirement
3 10%
6 30%
9 60%
12 90%
If BUYER fails to meet a milestone, the discoutns previously granted will
be recalculated based upon an annual quantity extrapolated from the the
actual quantity purchased. If the commencement date of this agreement is
less than 12 calendar months, the preceeding schedule shall be adhered to
in order to meet volume.
BUYER
SELLER
1
<PAGE>
FORFEITURE OF VOLUME PRICING - Volume prices granted are subject to forfeiture
on orders delayed by BUYER to a date more than 30 days beyond the original
scheduled date or for which payment is not received by Deller within 45 days
after shipment.
PURCHASE ORDERS - Purchase Orders for all PRODUCT items to be purchased under
this agreement shall specify hardward and software model munbers, quanities,
difinite delivery date(s) within the Delivery Period, and shall refer to this
agreement by munber and date. Deliveries will be scheduled upon receipt of a
telephone order form BUYER confirmed wihtin 10 days.
All purchase orders will be acceped n writing by Seller. WARRANTY PRODUCT items
are covered by a one-year waranty from the date of shipment.
This warranty is contingent upon proper use of the PRODUCT and does not cover
PRODUCT items that have been abused or modified without Seller's approval. Full
conditions of the Seller's warranty are detailed in the attached Standard Terms
and Conditions.
TERMINATION
Seller shall have the right to terminate this agreement 30 days after BUYER is
notified in writing concerning any of the following events:
* BUYER neglects or fails to perform or observe any of its
obligations to Seller under this agreement, including
but not limited to the timely payment of nay sum due
Seller.
* There is a change in ownership of the controlling
interest of BUYER; or
* There is a reason to question BUYER'S financial
condition.
BUYER may, at any time before the end of the Ordering Period, terminate this
agreement by written notice given at least thirty (30) days in advance of the
effective date. During the said period of not less than thirty (30) days,
deliveries of all previously orderd units shall continue in accordance with the
existing delivery schedule. Payment is due upon receipt of invoice.
GENERAL
This agrment wupersedes all prior agreements and understandings between the
parties relating to quantity purchases of PRODUCT, and is intended by both
parties to be the complete and exclusive statement of the terms of the
agreement. No modifications, addition to, or waiver of the terms and conditions
of this agreement shall be effective unless in writing and signed by both
parties. No agent, employee, or represenative of Seller has any authority to
bind Seller to any afirmation, representation, or warranty concernint the
PRODUCT furnished under this agreement unless such affirmation, representation,
or warranty concerning the PRODUCT is specifically included within this
agreement or is stated in writing and signed by an officer of Seller.
In witness whereof, the parties hereeto have executed this agreement.
FOR BUYER: FOR TEXAS MICROSYSTEMS, INC.:
Signature /s/ WILLIAM A. COSKEY Signature /s/ RON GROEN
Printed WILLIAM A. COSKEY Printed RON GROEN
Name INDUSTRIAL DATA SYSTEMS Name TEXAS MICROSYSTEMS, INC.
Title PRESIDENT Title VICE PRESIDENT
Date 07/18/96 Date 08/13/96
2
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE COMPANY'S REGISTRATION STATEMENT ON FORM 10SB IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 975,100
<SECURITIES> 457,129
<RECEIVABLES> 593,739
<ALLOWANCES> 11,000
<INVENTORY> 221,096
<CURRENT-ASSETS> 3,260,857
<PP&E> 197,069
<DEPRECIATION> (74,491)
<TOTAL-ASSETS> 3,385,435
<CURRENT-LIABILITIES> 681,286
<BONDS> 0
0
0
<COMMON> 13,130
<OTHER-SE> 2,657,009
<TOTAL-LIABILITY-AND-EQUITY> 3,385,435
<SALES> 2,068,517
<TOTAL-REVENUES> 5,536,960
<CGS> 1,477,214
<TOTAL-COSTS> 3,964,758
<OTHER-EXPENSES> 1,083,586
<LOSS-PROVISION> (5,000)
<INTEREST-EXPENSE> (456)
<INCOME-PRETAX> 608,785
<INCOME-TAX> 206,367
<INCOME-CONTINUING> 402,418
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 402,418
<EPS-PRIMARY> .04
<EPS-DILUTED> .04
</TABLE>
EXHIBIT 99
THERMAIRE, INC.
DBA THERMAL CORP
FINANCIAL STATEMENT
AND INDEPENDENT AUDITOR'S REPORT
YEAR ENDED DECEMBER 31, 1996
39
<PAGE>
INDEX
PAGE
INDEPENDENT AUDITOR'S REPORT...............................................41
BALANCE SHEET - December 31, 1996..........................................42
STATEMENT OF INCOME & RETAINED EARNINGS (DEFICIT) -
Year Ended December 31, 1996........................................43
STATEMENT OF CASH FLOWS - Year Ended December 31, 1996.....................44
NOTES TO FINANCIAL STATEMENTS..............................................45
40
<PAGE>
Independent Auditor's Report
Board of Directors and Stockholders
Thermaire, Inc.
We have audited the accompanying balance sheet of Thermaire, Inc., dba Thermal
Corp, as of December 31, 1996 and the related statements of income and retained
earnings, and cash flows for the year then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above, present fairly, in
all material respects, the financial position of Thermaire, Inc. as of December
31, 1996, and the results of their operations and cash flows for the year then
ended, in conformity with generally accepted accounting principles.
Lindsey, Keys & Shannon, P.C.
Spring, Texas
March 1, 1997
41
<PAGE>
THERMAIRE, INC.
DBA THERMAL CORP
BALANCE SHEET
AS OF DECEMBER 31, 1996
ASSETS
CURRENT ASSETS:
Cash .......................................................... $ 3,301
Accounts Receivable ........................................... 271,906
Inventory ..................................................... 239,367
Prepaid Expenses .............................................. 4,680
---------
519,254
---------
PROPERTY AND EQUIPMENT, At Cost ............................... 297,480
Less Accumulated Depreciation ................................. (161,741)
---------
135,739
---------
OTHER ASSETS, Net of Amortization ............................. 425
---------
TOTAL ASSETS ............................................ $ 655,418
=========
LIABILITIES & SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes Payable Short Term:
Affiliate .................................................. $ 109,086
Insurance Financing ........................................ 3,014
Accounts Payable - Trade ...................................... 168,659
Accounts Payable - Shareholders ............................... 96,131
Other Accrued Expenses ........................................ 1,850
---------
378,740
---------
SHAREHOLDERS' EQUITY:
Common Stock,
Voting, no par value, 1,000,000
shares authorized, 10,000 shares
issued and outstanding .................................. 25,000
Non-voting, $1.00 par value, 500,000
shares authorized, 451,292 shares
issued and outstanding .................................. 451,292
Retained Earnings (Deficit) ................................ (199,614)
---------
276,678
---------
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY ................ $ 655,418
=========
SEE ACCOMPANYING NOTES TO THESE FINANCIAL STATEMENTS.
42
<PAGE>
THERMAIRE, INC.
DBA THERMAL CORP
COMBINED STATEMENT OF INCOME (LOSS) AND RETAINED EARNINGS
FOR THE YEAR ENDING DECEMBER 31, 1996
NET SALES $ 2,404,375
COST OF GOODS SOLD 2,150,642
----------------
GROSS MARGIN 253,733
----------------
OTHER OPERATING EXPENSES:
Sales & Marketing 32,416
General & Administrative 309,118
----------------
341,534
----------------
LOSS FROM OPERATIONS (87,801)
OTHER INCOME (EXPENSE):
Net Gain on Sale of Property & Equipment 11,865
Interest Expenses (10,959)
----------------
NET INCOME (LOSS) (86,895)
RETAINED EARNINGS (DEFICIT)
Beginning of Year (112,718)
----------------
End of Year $ (199,614)
================
SEE ACCOMPANYING NOTES TO THESE FINANCIAL STATEMENTS.
43
<PAGE>
THERMAIRE, INC.
DBA THERMAL CORP
STATEMENT OF CASH FLOW
FOR THE YEAR ENDED DECEMBER 31, 1996
NET CASH FLOW FROM (USED BY) OPERATING ACTIVITIES:
Net Income (loss) ........................................ $ (86,896)
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Depreciation and Amortization ......................... 41,869
(Increase) Decrease in Current Assets:
Accounts Receivable ................................ (104,746)
Inventory .......................................... (89,298)
Prepaid Expenses ................................... (620)
Increase (Decrease) in Current Liabilities:
Accounts Payable - Trade ........................... 98,270
Amounts Payable - Shareholders ..................... 41,005
Other Accrued Expenses ............................. (661)
---------
Net Cash Flow Provided by (Used by) Operating Activities . (101,077)
---------
CASH FLOW FROM (USED BY) INVESTING ACTIVITIES:
Acquisition of Property and Equipment .................... (14,783)
Disposition of Property and Equipment - Net .............. 13,059
---------
Net Cash Flow from (Used by) Investing Activities ........ (1,724)
---------
CASH FLOW FROM FINANCING ACTIVITIES:
Increase in Notes Payable:
Loans and Advances from Affiliate, Net ................ 109,086
Insurance Financing, Net .............................. 3,014
---------
Net Cash Provided by Financing Activities ................ 112,100
---------
NET INCREASE IN CASH ..................................... 9,299
CASH (OVERDRAFT) AT BEGINNING OF YEAR .................... (5,998)
---------
CASH AT END OF YEAR ...................................... $ 3,301
=========
SUPPLEMENTAL DISCLOSURES:
Interest Paid ............................................ $ 10,959
Income Taxes Paid ........................................ $ - 0 -
SEE ACCOMPANYING NOTES TO THESE FINANCIAL STATEMENTS.
44
<PAGE>
THERMAIRE, INC.
DBA THERMAL CORP
NOTES TO FINANCIAL STATEMENTS
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
BUSINESS ACTIVITY - Thermaire, Inc., dba Thermal Corp (the Company), is a
custom manufacturer of air conditioning and related equipment primarily for sale
to independent sales representatives located throughout the United States. The
Company's business is tied closely to the commercial and industrial construction
industry; consequently, the Company's ability to sell products and collect
amounts due from customers is affected by economic fluctuations in these
industries.
Starting in January, 1996 and continuing for approximately seven months,
the Company manufactured and sold stainless steel electrical enclosures to a
special group of acquired customers. This business generated gross margins of
approximately $39,000 on sales of $218,000. The business was discontinued in
August resulting in a loss of approximately $8,000 which was netted against the
gain on sale of fixed assets. These operations have not been reported as
discontinued operations in the accompanying Statement of Income (Loss) due to
materiality considerations.
CASH AND CASH EQUIVALENTS - For purposes of the statements of cash flows,
the Company considers only immediately available demand deposits to be cash
equivalents.
INVENTORY - Inventory consists primarily of raw materials used in
manufacturing and is carried at the lower of cost or market value, with cost
determined on the first-in, first out method of accounting. Costs related to
current jobs in process are valued at actual cost of material and labor expended
on the job to date and include a factor for overhead.
PROPERTY AND EQUIPMENT - Property and equipment is stated at cost,
adjusted for accumulated depreciation. Depreciation is calculated using a
straight line method with lives of seven years for used equipment and ten years
for new equipment. Salvage value is not considered.
INCOME TAXES - The Company's taxable income (loss) is included in a
consolidated tax return filed by an affiliated company (see Note 7). Taxable
income for 1996 exceeded book income by approximately $17,000 which represents
the difference between book and tax methods of depreciation. A provision has not
made on the Company's books to reflect the benefits accruing to the consolidated
entity from the reduction of taxable income from operating losses of the
Company.
USE OF ESTIMATES - The preparation of the Company's financial statements
in conformity with generally accepted accounting principles requires the
Company's management to make estimates and assumptions that affect the amounts
reported in these financial statements and accompanying results. Actual results
could differ from these estimates. The Company performs ongoing credit
evaluations of its customers and regularly sells on open account with out
payment in advance. The Company assesses its credit risk and provides an
allowance for doubtful accounts for accounts, if any, which is deemed doubtful
for collection.
45
<PAGE>
THERMAIRE, INC.
DBA THERMAL CORP
NOTES TO FINANCIAL STATEMENTS
PROPERTY AND EQUIPMENT:
Property and equipment consists of the following:
Machinery and equipment $ 276,197
Fixtures and office equipment 11,451
Leasehold improvements 9,332
Other 500
---------
297,480
Less accumulated depreciation (161,741)
---------
$ 135,739
=========
NOTE PAYABLE SHORT TERM - AFFILIATE:
The Company is provided working capital by an affiliated company through
financing of sales invoices. Under the terms of the agreement, the Company
receives 98% of the face amount of selected invoices, of which 85% of the face
value of the invoice is received upon acceptance and the remaining 13% upon
ultimate collection of the invoice. The advances are collateralized by all
accounts receivable, inventory and property and equipment of the Company. As of
December 31, 1996, $79,086 is owing under this arrangement.
The Company has received additional advances from the same affiliate.
These advances, totaling $30,000 at December 31, 1996, are unsecured, bear no
interest rate and contain no terms of repayment.
SERVICES PROVIDED BY AFFILIATE:
During 1996, the Company received management services, at no cost, from a
affiliated company with an estimated value of $93,000.
ACCOUNTS PAYABLE SHAREHOLDERS:
Included in payable to shareholders is $59,500 of rent accrued between
August 1, 1995 and December 31, 1996. Subsequent to year end, this amount due
was forgiven by the shareholders in connection with the acquisition of the land
and buildings by the Company (see note 7).
46
<PAGE>
THERMAIRE, INC.
DBA THERMAL CORP
NOTES TO FINANCIAL STATEMENTS
MAJOR CUSTOMER:
During 1996, approximately 30% of the Company's sales were made to another
corporation located in the Houston market. The stock of this corporation is
owned by individuals who are relatives of the shareholders of the Company. These
sales were made at gross margins approximating those to other large customers.
As of December 31, 1996, approximately $153,000 of open invoices are due from
this corporation and all are considered current and collectible by management.
SUBSEQUENT EVENT:
On August 15, 1995, the Company became a party to a Stock Acquisition
Agreement for the contingent sale of all of its issued and outstanding stock.
Shares of stock of the acquiring corporation were placed in escrow and the
acquiring corporation became responsible for management of the business. In
February 1997, the transaction was completed and the Company is now owned 100%
by the acquiring corporation. In connection therewith, the Company entered into
a loan agreement to purchase the facilities from the prior owners. The purchase
price of the property was $500,000, payable $50,000 at closing and 59 monthly
installments of four thousand five hundred thirty two and 13/100 dollars
($4,532.13) including interest at 8.88% per annum with a 60th payment due for
any remaining balances. The acquiring corporation advanced funds for the down
payment and closing costs. The loan is secured by the assets acquired, along
with the guarantee of the acquiring corporation.
On July 1, 1996, Industrial Data Systems, Inc., the parent company of
Thermaire, Inc. dba Thermal Corp., entered into a lease agreement with Joe B.
Hollingsworth (Lessor) for the Thermal premises situated on 10500 Windfern Rd.,
Houston, Harris County, Texas. The lease agreement is for a period of eighteen
months commencing July 1, 1995 and ending on December 31, 1996 with a fixed
monthly rate of $3,500 per month. Total rent expenses for the years ended
December 31, 1995 and 1996 was $42,000 and $42,000, respectively.
Prior to this formal lease agreement, for the months of January through
June, 1995, Thermal had a verbal month-to-month lease agreement with Mr.
Hollingsworth for the same property at a rate of $3,500 per month, which was
paid as agreed.
The prior owners of the facilities were Mr. Joe Hollingsworth and Mr.
William A. Jackson. Mr. Joe Hollingsworth, one of the owners, was a founder of
Thermal. There were no affiliations among Industrial Data Systems Corporation
and Thermal prior to the date of the Stock Acquisition Agreement nor did the
Company have any affiliations with Mr. Joe Hollingsworth or Mr. William A.
Jackson prior to the date of the Stock Acquisition Agreement.
47
EXHIBIT 99.1
INDUSTRIAL DATA SYSTEMS CORPORATION
AND SUBSIDIARY
UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL INFORMATION
AS OF DECEMBER 31, 1996
48
<PAGE>
INDEX
PAGE
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION...........50
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET AS
OF DECEMBER 31, 1996.................................................51
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED INCOME STATEMENT
YEAR ENDED DECEMBER 31, 1996.........................................52
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION..53
49
<PAGE>
INDUSTRIAL DATA SYSTEMS CORPORATION
AND SUBSIDIARY
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
The following unaudited pro forma condensed consolidated balance sheet is
presented as of December 31, 1996. The pro forma balance sheet has been prepared
giving effect to the acquisition of Thermaire, Inc. for $1,100,000 and the
related purchase accounting adjustments and the collection of the balance due of
$799,999 under the note receivable from sale of common stock, as if all such
transactions had occurred on December 31, 1996. The unaudited pro forma
condensed statement of income is presented as if these transactions occurred at
the beginning of the year presented. The acquisition was accounted for under the
purchase method of accounting. Pro forma adjustments are explained in the Notes
to Unaudited Condensed Consolidated Financial Information.
The pro forma condensed consolidated balance sheet does not purport to be
indicative of the financial position that would have occurred had the proposed
acquisition been consummated on December 31, 1996, nor is the pro forma
condensed consolidated statement of income necessarily indicative of
consolidated results of operations had the transactions occurred at the
beginning of the year presented, or future operating results. The unaudited pro
forma condensed consolidated financial information should be read in conjunction
with the Company's historical financial statements and the related notes thereto
and other financial information.
50
<PAGE>
INDUSTRIAL DATA SYSTEMS CORPORATION
AND SUBSIDIARY
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1996
<TABLE>
<CAPTION>
INDUSTRIAL
DATA PRO FORMA
SYSTEMS THERMAIRE, PRO FORMA COMBINED
CORPORATION INC. ADJUSTMENTS BALANCES
----------- ----------- ----------- --------
(Historical)(Historical) Dr (Cr)
<S> <C> <C> <C> <C>
Cash and cash equivalents ...... $ 975,100 $ 3,301 799,999(a) $ 1,515,838
(212,562)(b)
(50,000)(c)
Marketable securities .......... 457,129 -- 457,129
Accounts receivable ............ 593,739 271,906 865,645
Advances and note receivable due
from affiliate and stockholder 164,936 -- (109,086)(d) 55,850
Inventory ...................... 221,096 239,367 460,463
Note receivable from sale of
common stock .................. 799,999 -- (799,999)(a) --
Other current assets ........... 48,858 4,680 53,538
---------- --------- -----------
Total current assets ...... 3,260,857 519,254 3,408,463
-- 500,000(c)
Property and equipment, net .... 122,578 135,739 195,000(b) 953,317
Goodwill ....................... -- -- 68,822(b) 68,822
Other assets ................... 2,000 425 2,425
---------- --------- -----------
Total assets .............. $3,385,435 $ 655,418 $ 4,433,027
========== ========= ===========
Note payable to bank ........... $ 325,000 $ -- $ 325,000
Note payable to seller ......... -- -- (450,000)(c) 450,000
Accounts payable ............... 57,698 168,659 226,357
Account payable to an affiliate -- 96,131 59,500(b) 36,631
Advances and notes payable
due to an affiliate ........... -- 109,086 109,086(d) --
Accrued expenses and other
current liabilities ........... 170,523 4,864 175,387
Income taxes payable ........... 128,065 -- 128,065
---------- --------- -----------
Total current liabilities . 681,286 378,740 1,341,440
Deferred income tax ............ 34,010 -- 34,010
-- 276,678(b)
Stockholders' equity .......... 2,670,139 276,678 (387,438)(b) 3,057,577
---------- --------- -----------
Total liabilities and
stockholders' equity ... $3,385,435 $ 655,418 $ 4,433,027
========== ========= ===========
</TABLE>
51
<PAGE>
INDUSTRIAL DATA SYSTEMS CORPORATION
AND SUBSIDIARY
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED INCOME INFORMATION
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
INDUSTRIAL
DATA PRO FORMA
SYSTEMS THERMAIRE, PRO FORMA COMBINED
CORPORATION INC. ADJUSTMENTS BALANCES
----------- ---------- ----------- --------
(Historical) (Historical) Dr (Cr)
<S> <C> <C> <C> <C>
NET REVENUES .............. $ 5,536,960 $ 2,404,375 $ 7,941,335
OPERATING EXPENSES:
Cost of revenues:
Product ................ 1,477,214 2,150,642 3,627,856
Consulting ............. 2,487,544 -- 2,487,544
Selling, general and
administrative ....... 1,083,586 341,534 5,000(e) 1,460,120
30,000(f)
----------- ----------- -----------
5,048,344 2,492,176 7,575,520
OTHER INCOME, net ......... 120,169 906 40,000(g) 81,075
----------- ----------- -----------
INCOME BEFORE PROVISION FOR
INCOME TAXES ............. 608,785 (86,895) 446,890
PROVISION FOR INCOME TAXES 206,367 -- (50,000)(h) 156,367
----------- ----------- -----------
NET INCOME ................ $ 402,418 $ (86,895) $ 290,523
=========== =========== ===========
NET INCOME PER COMMON
SHARE .................... $ .03
=========
WEIGHTED AVERAGE COMMON
OUTSTANDING .............. 10,250,454
==========
</TABLE>
52
<PAGE>
INDUSTRIAL DATA SYSTEMS CORPORATION
AND SUBSIDIARY
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
DECEMBER 31, 1996
In preparing the pro forma condensed consolidated financial information as of
and for the year ended December 31, 1996, the Company made the following
adjustments:
(a) To give effect to the January 1997 collection of the notes
receivable from sale of common stock.
(b) To give effect to the acquisition of Thermaire, Inc. for $600,000
($212,562 in cash, and $387,438 in Common Stock) and the related
purchase accounting adjustments. The following is the computation of
goodwill recorded in connection with Thermal and the related land
and building previously leased by Thermal:
Purchase price .............................. $1,100,000
Fair value of net assets of
Thermal acquired ...................... (336,178)
Appraised value of land and building acquired (695,000)
----------
Goodwill .................................... $ 68,822
==========
(c) To give effect to acquisition of the building and land previously
leased by Thermaire, Inc. dba Thermal Corp. which was acquired with
debt of $450,000 and cash of $50,000.
(d) To eliminate amounts due by Thermaire, Inc. to Industrial Data
Systems Corporation.
(e) To give effect to amortization of goodwill on the straight line
method over 10 years.
(f) To give effect to depreciation expense on the building acquired in
the transaction, which is being depreciated over 20 years.
(g) To give effect to interest expense on the $450,000 of acquisition
debt. The acquisition debt consists of a note payable to a bank, due
in 59 monthly installments of $4,532, including interestr at 8.88%,
with a sixtieth and final installment due on February 28, 2002.
(h) To give effect to taxes on the pro forma adjustments.
53
