Sample Purchase Order · Web viewThe word “Owner” or “Customer” wherever used in this Purchase Order shall mean Nexen Inc. The word “Buyer” wherever used in this Purchase

PO No. A5YP-4-0204-01 Page 2 of 16

TABLE OF CONTENTS

Article Description Page No.

1.0 PURCHASE ORDER CONFIRMATION....................................................................32.0 DEFINITIONS...................................................................................33.0 COMMUNICATIONS..........................................................................44.0 COMMERCIAL NOTES.......................................................................55.0 TERMS OF PAYMENT........................................................................66.0 INVOICING INFORMATION................................................................67.0 TAXES............................................................................................88.0 SCHEDULE & REPORTS.....................................................................89.0 DOCUMENTATION............................................................................910.0 SELLER’S QUALITY PLAN REQUIREMENTS..........................................911.0 TRAFFIC & LOGISTICS....................................................................1012.0 PROJECT MANAGER/EXECUTIVE SPONSOR.......................................1213.0 FIELD SERVICES............................................................................1214.0 SPARE PARTS REQUIREMENTS........................................................1215.0 ORIGIN OF MATERIALS...................................................................1316.0 SURPLUS/RESTOCKING..................................................................1417.0 BACKCHARGES AND REWORK.........................................................1418.0 PREVENTATIVE MAINTENANCE/STORAGE.........................................1519.0 APPLICABLE LAWS, REGULATIONS & STANDARDS............................1520.0 SUB-SUPPLIERS & SUBCONTRACTORS.............................................1521.0 INFORMATION BROKERING.............................................................1522.0 MODIFICATIONS TO TERMS AND CONDITIONS..................................1523.0 ATTACHMENTS..............................................................................16

Copyright © 2012, Fluor Corporation. All Rights Reserved. Purchasing 2

PO No. A5YP-4-0204-01 Page 3 of 16

For this project Seller shall supply the materials, labor, or services described under the heading "Description of Purchase", subject to the conditions herein, Terms and Conditions of Purchase and all other attachments hereto (which by this reference are hereby made a part of this Purchase Order).

This Purchase order shall become a binding agreement of Seller and Buyer upon Seller signing and returning an acceptance copy of this Purchase Order without exceptions, or Seller commencing performance of this Purchase Order, whichever occurs first.

ORDER OF PRECEDENCE

In the event of conflict, the order of precedence for the technical and commercial documents will be as follows:

1. Commercial Purchase Order (excluding attachments)2. Terms and Conditions of Purchase3. Other commercial attachments referenced above4. Engineering Notes5. Fluor Drawings6. Fluor Data Sheets7. Fluor Specifications8. Owner drawings9. Owner Specifications10. Industry Code Standards

In case of any conflict between the requirements of the attached documents, the conflicts shall be brought to the attention of Buyer's commercial representative for resolution.

PURCHASE ORDER CONFIRMATION

1.1 Confirming Buyer’s written commitment to Seller’s Neil Holmes by Buyer’s Abhinandan Goyal on 09 May 2012.

DEFINITIONS

The word “Owner” or “Customer” wherever used in this Purchase Order shall mean Nexen Inc.

The word “Buyer” wherever used in this Purchase Order shall mean Flour Canada Ltd, acting as Agent to Owner.

The word “Work” wherever used in this Purchase Order will be defined as furnishing Goods or Services under the scope of supply.

The word “Seller” wherever used in this Purchase Order shall mean Foremost Universal L.P.


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COMMUNICATIONS

3.3E-mails and other forms of electronic communication. (collectively referred to herein as E-mails)

3.4 Communication between Supplier and Buyer by E-mail is for the expedient transfer of preliminary technical data and non-contractual information only.

3.5 Electronic transfer of engineering data is acceptable for the Kinosis SAGD 1A Project via the Projects OnLine website, provided Seller has executed a System Access Security and Connectivity agreement. If this agreement has not been established, Seller shall contact Buyer to arrange for the establishment of an agreement. However, if an agreement has been established, data may be transferred based on the agreement and its procedures for implementation.

3.6 Both Buyer and Seller shall transmit all documentation for Buyer approval/review at no extra cost to either party. Use of regular mail services will not be considered as proof of receipt of documentation for Buyer approval/review. No courier or mail deliveries shall be made on a “collect” basis.

3.7 Invoices and all supporting documents shall be transmitted via hard copy in original and 2 (two) copies:

Sold to: Nexen Inc.c/o Fluor Canada Ltd.Attn: Accounts Payable55 Sunpark Plaza SECalgary, Alberta, Canada T2X 3R4

Project No.: A5YPProject Name: Nexen Inc. Kinosis SAGD 1A Purchase Order No.: A5YP-4-0204-01

3.8 Seller’s Contacts are to be completed by Seller and Fluor expeditor at time of Purchase Order Acknowledgement:Project Manager (name/phone/ e-mail):Shop Order No.:Shop Contact (name/phone):


3.2 Mail all engineering data submittals to:

Fluor Canada Ltd.Attn: Technical Data Control, Toni Elliott 55 Sunpark Plaza SECalgary, Alberta, Canada T2X 3R4Telephone: (403) 537-4141Project Fax: (403) 537- 4636Email address: [email protected]

Project No.: A5YPProject Name: Nexen Inc. Kinosis SAGD 1APurchase Order No.: A5YP-4-0204-01Note: All drawings & technical data

3.1 Direct all Communications whether commercial or technical to:

MAILING ADDRESS:

Fluor Canada Ltd.Attn: Abhinandan Goyal 6th Floor, Building No.8Tower C, DLF Cyber City DLF Phase II, Gurgaon-122002Telephone: +91 124 4570700 Ext 2774Project Fax: +91 124 4263269Email address: [email protected]

Project No.: A5YP

mailto:[email protected]

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COMMERCIAL NOTES

4.1 Status of Buyer and Owner.

This Purchase Order is executed by Owner acting through Agent for such purpose. Seller understands and agrees that although Agent may make disbursement of payments for and on behalf of Owner, Agent shall have no liability for payment of any amounts due to Seller under this Purchase Order, unless and until Owner has provided such amounts to Agent for Seller’s account

4.2 Pricing Notes

Prices detailed in this Purchase Order are fixed, firm and free of escalation or any currency rate fluctuation through to completion of the Purchase Order unless agreed and shown otherwise in this Purchase Order.

The cost of all drawings, documentation, installation manuals, shop inspection, shop testing, NDE reports, test certificates and code data books as specified herein is included in the prices detailed in this Purchase Order.

Pricing Details as follows:

ITEM # Tag No. BASE PRICES INCLUDING OPTIONS*

001 TK28700-T-009 GLYCOL MAKE-UP TANK $63,800.00 Adder for radiography charges $650.00 Adder for hydrotest charges $1,800.00 Adders for standard roof platform 4'x6' c/w hand railing and safety gate $3,500.00 Adder for nitrogen blanketing TBAAdder to change nozzle L2 from 2" to 8" $540.00 Adder for PVRV $2,355.78

Purchase value for this tag $72,645.78

002 TK28700-T-011 POTABLE WATER TANK $71,810.00 Adder for radiography charges $780.00 Adder for hydrotest charges $2,200.00 Adders for standard roof platform 4'x6' c/w hand railing and safety gate $3,500.00 Adder for electric heater TBA


003 TK28700-T-015 RECOVERED WATER TANK $98,700.00 Adder for radiography charges Included Adder for hydrotest charges $2,800.00 Adders for standard roof platform 4'x6' c/w hand railing and safety gate $3,500.00 Adder for nitrogen blanketing TBAAdder for FRP Lining TBAAdder for external heating pads TBA


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TOTAL PURCHASE VALUE $255,935.78

4.3 Material Substitutions

Seller shall make no material substitutions without prior written authorization of Buyer.

TERMS OF PAYMENT

5.1 Payment will be made 100% Net 30 Days from receipt of a correctly rendered invoice following satisfactory completion of payment milestones as detailed below:

Milestone Description Forecasted Date

Value of Payment

Milestone 110%

Shall be invoiceable by Seller when Buyer is in receipt of Submission of Acceptable GA Drawings and Purchase Order Acknowledgement

8 Weeks ARO $ 25,593.58

Milestone 2 20%

Shall be invoiceable by Seller when Seller has submitted documented proof of Procurement of Major Material (Plate, Heads etc)

10-12 weeks ARO $ 51,187.16

Milestone 3 20%

Shall be invoiceable by Seller Upon Mechanical Completion and inspection by Buyer 16-18 weeks

ARO $ 51,187.16

Milestone 445%

Shall be invoiceable by Seller when Seller has submitted documented proof of readiness to ship and completion of final inspection by Buyer

20-22 weeksARO $ 115,171.10

Milestone 55%

Shall be invoiceable by Seller upon receipt by Buyer of final acceptable documentation 22-24 weeks

ARO $ 12,796.79

Seller agrees that changes to the scope, that have a commercial impact, will not revise the agreed progress payment amounts as detailed above.If the change value is large and Seller requires timely compensation, Buyer agrees to issue change order/s at a lump sum amount, in order that Seller may invoice for the completed additional work.If the change value is small to medium for the additional work and Seller does not require timely compensation, Seller agrees to issue an invoice for the completed additional work as a lump sum amount, at the end of the contract.

INVOICING INFORMATION

6.1 In order to process Seller’s invoices for payment, Buyer or Buyer’s Agent must be in receipt of the signed Seller’s unconditional acceptance of this Purchase Order and/or Change Order(s).

6.2 Seller is to provide the following information at time of Purchase Order Acknowledgement so payment can be made by electronic funds transfer.

Bank NameBank addressABA Number (9 digit #)Bank NameBank address


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Swift Code

6.3 Any of the following conditions will be considered just cause for withholding payment and/or returning invoices to Seller without loss of applicable discount privileges:

a) The specified number of copies of the Seller’s invoice has not been received.b) The invoice, packing list and/or Purchase Order do not agree in all respects.c) Errors or omissions have been made in the Seller's invoice.d) Wire transfer instructions are not included on the invoice.e) Buyer not in receipt of signed Seller’s acceptance of this Purchase Order.f) Buyer not in receipt of Seller data required in this Purchase Order.g) Buyer does not possess “Proof of Material Receipt” confirmation. h) Seller’s GST Registration number not shown on the Invoice.

6.4 Invoices must include the following information:

a) Buyer's Purchase Order number.b) Purchase Order item numbers for each item on the invoice.c) Quantity for each item.d) Material description.e) Material tag number (if applicable).f) Net price per item.g) Extended total value for the quantity invoiced.h) Payment terms.i) Signed bill of lading for shipped goods.j) Packing listk) Progress payments – Description of Milestone payment and documented proof milestone has been

met.l) Assigned Tax Exemption Certificate Number.m) Federal Tax Identification Number.

6.5 Combining two or more of Buyer's Purchase Orders on one invoice is not acceptable.

6.6 The payment period will begin on the date that the Buyer’s office making the payment receives an acceptable invoice from Seller (at the address specified above) in proper order with all supporting documents.

6.7 A signed Bill of Lading or Forwarders Certificate of Receipt must accompany the invoice as proof of shipment.

6.8 Buyer reserves the right to refuse payment, without loss of cash discount, on invoices for changes not previously authorized in writing by Buyer.

6.9 Receipt of major materials by Seller, as required by the progress payments schedule, shall be physically validated by Owner’s SQS representative. Where validation is required, seller shall provide Owner’s SQS representative with Bill of Lading for materials as well as the associated Certified Material Test Reports (CMTR'S) or Certificates of Compliance (C of C).

6.10 Where inspection is required all final invoices shall be supported by a Surveillance Release.

6.11Final payment may be held pending resolution of backcharges. Costs accumulated due to backcharges will be unilaterally deducted from any amounts owed Seller.

6.12Order Completion Retention Provision.Copyright © 2012, Fluor Corporation. All Rights Reserved. Purchasing 7

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Seller’s performance of its obligations hereunder will not be considered complete until Buyer is in receipt, in proper form, of all engineering data requirements as specified in this Purchase Order. If the required data is not received by Buyer or Buyer’s Agent by the date of receipt of Seller’s invoice, Buyer or Buyer’s Agent will withhold payment of five (5) percent of the total Purchase Order value or percent agreed in the progress payments , pending Buyer’s receipt of all data and documents.

Seller warrants that all documents including invoices, vouchers, financial settlements, billings, and reports submitted by Seller to Buyer in support of costs and/or fee shall truly reflect the facts about the activities and transactions to which they pertain, and Seller represents that in any further recording or reporting made by Buyer or Owner for whatever purpose, Buyer or Owner may rely upon all such documents and the data therein as being complete and accurate. Seller further agrees to promptly notify Buyer upon discovery of any instance where Seller has failed to comply with the provisions of this paragraph. Reimbursement to Seller by Buyer or Owner shall be limited to Buyer’s contractual obligations to pay for items covered by the aforesaid documents.

Seller shall keep in accordance with generally-accepted accounting practices, books, records, and accounts pertaining to performance of work, including Seller’s and sub-supplier and/or sub-contractor’s personnel records, correspondence, instructions, plans, drawings, receipts, vouchers, memoranda, data stored in computer libraries and such other documentation and related systems and controls necessary for an accurate audit and verification of costs. Seller shall preserve, and shall cause its sub-suppliers and/or sub-contractors to preserve said documents during the performance of work and for a period of three (3) years after termination of work or completion of the work.

Seller shall permit, at reasonable times during the performance of work and for a period of three (3) years after termination of work or completion, authorized representatives of Buyer or Owner to interview Seller’s personnel, review Seller’s and sub-suppliers and/or sub-contractor’s accounting and cost controls systems and inspect books, records, accounts, and other documents set forth above, and make copies thereof, as necessary to audit and verify the completeness and accuracy of reimbursable costs contained in invoices submitted by Seller, or for any other reasonable purpose.

TAXES

7.1 Taxable Purchase

The goods provided to Buyer pursuant to this Purchase Order are subject to Federal Goods and Service tax currently imposed at the combined rate of 5% . Seller shall segregate and identify such tax and tax rate separately on each invoice. If Seller is authorized to collect such taxes, Seller must invoice Buyer for such taxes with each invoice to Buyer. If seller is not licensed to collect such tax, Buyer will accrue and pay applicable tax directly to the appropriate taxing authorities. Seller shall not be entitled to reimbursement by Buyer for such taxes in the event Seller fails to invoice Buyer for such taxes applicable to each invoice.

SCHEDULE & REPORTS

8.1Deliverables

Documentation: Seller’s promised delivery date for P&IDs, GA drawing as detailed in Seller Drawing and Data Commitment (SDDC) form, will be eight (8) weeks after receipt of order (ARO), forecasted to be 20 July, 2012. Balance of documentation listed in SDDC form is as per dates stated.

Goods: Seller’s itemized promised ship date, after receipt of approved drawings (ARAD) is as follows:

Copyright © 2012, Fluor Corporation. All Rights Reserved. Purchasing

Item Tag No Promised delivery Estimated to be1. Tag #: 28700-T-009 8 Weeks ARAD 12 October 20122. Tag #: 28700-T-011 9 Weeks ARAD 19 October 20123. Tag #: 28700-T-015 10 Weeks ARAD 26 October 2012

8

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8.2 Shipment/Delivery

Seller shall take all necessary steps to ensure that the materials detailed in the Bill of Materials of this Purchase Order are delivered or shipped by the date (s) stated herein. Seller shall notify Buyer’s Expeditor ten (10) working days prior to shipment. Unless prior authorization is granted to Buyer, Buyer will not be responsible for any shipping costs incurred by the use of other carriers.

8.3 Progress Reporting

Within 10 days after Purchase Order award Seller shall submit a legible reproducible copy of the engineering, material procurement, and fabrication schedule established by this Purchase Order and/or change orders hereto. As a minimum this schedule shall include the following:

1. Engineering schedule containing Seller’s drawing submittal dates and desired return dates.

2. Material procurement schedule containing Seller’s suborder dates, sub-supplier’s name and expected material delivery dates.

3. Fabrication schedule containing:a. Start of fabrication dates.b. Starting and completion dates of all major steps during fabrication.c. Shipping date (s)

Seller shall thereafter submit regular progress reports showing actual progress against planned progress dates and shall detail specific or potential problems of which Buyer should be made aware. The frequency of the report shall be determined by duration and complexity of the Purchase Order but in no case be less frequent than bi-weekly until final delivery of the equipment/material. Once Buyer has accepted the schedule, the dates and milestones reflected therein shall become contractually binding upon Seller. In the event of a schedule change, Seller must immediately advise Buyer by phone, fax, or e-mail to Buyer (and confirm phone conversation by fax or e-mail), stating the reason for the schedule change, and Seller's proposal to redeem the original schedule or minimize any delay. Seller’s proposal shall show applicable item number(s) or identifying marks.

Upon Buyer’s request Seller shall furnish one (1) electronic unpriced copy of each Purchase Order issued to its major sub-suppliers for materials or equipment on this Purchase Order, at the time of sub-order placement.

Buyer reserves the right to contact Seller's Sub-suppliers to determine the status of work being performed by the Sub-supplier.

DOCUMENTATION

9.1 Any review or approval of data or documentation submitted by Seller to Buyer shall not relieve Seller of the responsibility for the accuracy of documentation or data, or compliance with all requirements of the Purchase Order.

SELLER’S QUALITY PLAN REQUIREMENTS

Seller’s Quality System Requirements, Criticality Rating 3


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10.1Quality System RequirementsSeller shall operate a quality management system which meets the requirements of the applicable international quality system standard appropriate to the contracted scope of work throughout the duration of this Purchase Order.

Seller acknowledges full compliance unless Seller submits details of any proposed alternative quality systems standard at the bid stage or identifies areas of non-compliance with any part of the quality standard selected, and such proposed alternate or areas of non-compliance are accepted and included in this Purchase Order.

Buyer reserves the right to evaluate and audit the implementation of the quality system with the agreement and participation of Seller.

Buyer reserves the right to request Seller to provide formal records or certificates for any activity associated with Seller's quality system.

All documentation shall be in the original source state or a true copy of the original. Copies shall be of reproducible quality or considered unacceptable. Data transposition from the original is not acceptable.

All documentation shall uniquely identify the following on each sheet:a. The Purchase Order Number, including contract numberb. Tag number or Item Code.c. Item number.

Seller’s quality system documentation to be supplied is defined on the “Supplier Drawing and Data Commitment” form.

10.2Buyer Surveillance Standard Clause

Material and Equipment on this Purchase Order is subject to surveillance in accordance with Article 10 of the attached Terms and Conditions of Purchase. Seller shall not ship the goods on this Purchase Order without Buyer's surveillance or a written waiver thereof.

10.3Quality Plan Requirements

Seller shall submit a Quality Plan specifically developed to meet the requirements of this Purchase Order within 21 days of Purchase Order award. This plan shall integrate the practices and procedures contained in the Seller's Quality Control System with the Purchase Order requirements.

Seller’s Quality Plan shall be in one of the following formats:a) Seller’s own Quality Plan or document used as a method of identifying Inspection stages and the

controlling criteria used.b) A written statement describing the elements of Paragraph a).c) A copy, extract, from a relevant procedure that describes the Inspection stages and/or practices utilized.

A Quality Alignment meeting with Buyer and Seller may be held at the Seller's manufacturing facility prior to start of fabrication. The purpose of the meeting will be to review the Quality Plan, quality requirements, Purchase Order requirements and referenced documents.

TRAFFIC & LOGISTICS

11.1Seller must advise of any special shipping, handling or storage requirements necessary to ensure safekeeping of goods. Failure to advise may result in additional costs to Seller.


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11.2Shipping Terms

Ex works: Seller’s Lloydminster Facility , Alberta as per INCOTERMS 2010

a) Owner shall arrange all transportation and clearances. Seller shall only be responsible up to loading the material or equipment onto Buyer’s designated conveyance and assist with the securing of Goods and tarping when requested.

11.3Duty

Equipment or materials contained in this Purchase Order may be eligible for Duty Exemption or a Project specific single duty rate. It is Seller’s responsibility to ensure that the “Description” in all Seller’s documents matches exactly the description which appears in this Purchase Order, or as otherwise directed.

11.4Packing & Marking Instructions

Seller shall provide a pro forma packing list to Buyer a minimum of five (5) days prior to shipment in an electronic format (Microsoft Excel). It shall include Buyer’s Purchase Order number, Purchase order Line Item number, sub item number, Item Code, description, and quantity for the equipment/material to be shipped.

A final packing list detailing actual contents must be enclosed in each package. A Master Packing List must be attached by Seller to the outside of Box No.1 or Package No. 1 and must be enclosed in waterproof envelopes. The Packing list shall also include Buyer’s Purchase Order number, the Purchase Order Line Item number, sub item number, and the Item Code number after incorporating any comments to the pro forma packing list.

Buyer’s Purchase Order Number, Item Numbers, Shipping marks, Tag number, equipment identification, identification numbers or code as referred to in the Purchase Order, or any other marks as required shall be shown by Seller on each package, bundle, or individual piece inside the package (and match the packing lists.)

No equipment or material shall be released for shipment unless the above requirements are met.

11.5Handling and Storage

Seller shall advise Buyer in writing of any special shipping, handling or storage measures or procedures required to assure safekeeping of the goods. Failure by Seller to so advise Buyer may result in a back charge to Seller of Buyer’s costs arising from such failure.

11.6Tagging

Packaged material: The Purchase order number must be indelibly shown on the package or container. A packing list must be enclosed showing the Purchase Order number, Purchase Order item number and item code number. Line items bearing a common item code number may be grouped and such numbers shown only once. Loose mixing of materials with different code numbers shall be avoided whenever possible.

Improperly tagged material may be returned by Buyer to Seller at Seller’s expense, or the additional expenses incurred by Buyer to meet the Purchase Order tagging requirements will be backcharged to Seller.

Equipment: All equipment shall be properly identified with stainless steel tags permanently affixed to each item or equipment assembly by Seller. The minimum information required on tags is identified in the Purchase Order technical documents. For items not specifically identified, the minimum information, which shall be included by Seller on the tag, is the Purchase Order number, equipment tag number, date of manufacture, Seller’s name, model number, and serial number.


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11.7Transportation Clearance

Transportation clearance is the responsibility of Owner.

11.8 Shipping & Documentation Instructions

For shipping and documentation requirements see attached form/s.

11.9 Shipping Notification

Seller shall provide a ten- (10) day advance notice of shipment to Buyer’s Expeditor and provide forty-eight (48) hours advanced notice prior to actual ready for ship date.

Buyer’s Logistics Person’s Name Scott BrucePhone Number 403-873-3494Cell Number 403-807-1095Email address [email protected]

PROJECT MANAGER/EXECUTIVE SPONSOR

12.1Project Manager

At time of Purchase Order Acknowledgement, Seller is to confirm the Project Manager that has been assigned for the execution of this Purchase Order, including the issue of notices and all communications. The Project Manager shall be responsible for the implementation and management of all activities required for successful completion of the work. Seller shall at all times insure that the Project Manager is provided with resources that are appropriate and adequate to ensure completion in accordance with Buyer’s requirements, by the agreed upon date.

FIELD SERVICES

13.1Upon request, Seller shall provide a technical representative(s) at the construction or other designated locations, to advise Buyer in installation and start-up of Seller-supplied equipment and, as required, to train Owner’s personnel in the operation and maintenance of Seller’s equipment

13.3Any Site Contract issued for Field Services will be issued by Owner as a separate Contract to Seller or Seller’s affiliated company. The Terms and Conditions shall be in accordance with the Field Service Contract issued by the Owner.

SPARE PARTS REQUIREMENTS

14.1Buyer reserves the right to purchase spare parts against Seller’s quotations for a period of six months after final shipment of Purchase Order Equipment.

14.2Seller shall provide a spare parts quotation for spare parts in accordance with the following:

Seller is in agreement with providing Spare Parts to the Owner in the procedure and format as detailed in Equipment and Spare Parts Instructions, document number SO-PIM-STD-121 at no additional costs.

a) Mandatory Spares ( Also known as Insurance or Capital Spares)

Mandatory spares are parts or assemblies or complete warehouse units, which are purchased along with the original equipment because of the cost and long lead time required to fabricate these types of spares.


mailto:[email protected]

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Mandatory spares are usually one of a kind assemblies or units manufactured at the same time as the original parent equipment. (Ex: Rotors, reduction gear sets, special forgings, etc.)

(Seller to submit priced list as scheduled in attached Form SO-PIM-STD-121)

b) Commissioning & Start-Up Spare Parts

Commissioning & Start-up spares are parts and assemblies that are subject to damage, breakage, deterioration or consumption during commissioning, start-up and the initial run-in period. These parts are similar to and may be redundant to Operations spares. If not already included in the Purchase Order, Seller to submit a list of recommended spare parts priced list for Buyer to evaluate and include in the next Change Order.

c) Two (2 ) Year Operation Spare Parts

Two year operation spares are parts, assemblies or pieces normally consumed during scheduled maintenance, minor repair, overhaul or inspection. Generally this classification is related to parts that encounter wear, corrosion, erosion or deterioration while in normal service and where those parts may be reasonably expected to be required during the first two years of operation, under normal conditions.

Bulk commodities such as small bore pipe fittings, piping bolts and gaskets, and lubricants are also included in this category. Maintenance equipment, non-specialty tools and fuels are not included in this definition.

Seller shall provide an assignable guarantee of the availability of recommended operational spare parts for a period of four years year after equipment is placed in commercial operation. It is understood that such parts may not be “shelf” items and will require manufacture at the time of ordering.

d) Construction Spare Parts Requirements

Construction spare parts are parts and assemblies normally used or consumed during installation prior to and in preparation for start-up, including hydro testing, cleaning, flushing, and inspection prior to commissioning. This is usually limited to gaskets and other sealing devices, filters, screens, etc. These spares shall be shipped with the original equipment. If not already included in the Purchase Order, Seller to submit priced list of recommended spare parts for Buyer to evaluate and include in the next Change Order.

Suggested Construction Spares are listed but not limited below:a) Gaskets and external bolting shall be furnished by the Seller for manholes, handholes and other openings that call for a blind flange or cover. Three sets of these gaskets shall be furnished:

- one set for shop testing and shipping- two sets unused and shipped separately with proper protection.

b) Full service bolting shall be provided for these connections (bolting used for shop hydro test is not acceptable). Seller shall furnish 10 percent extra bolting for special length studs, alloy, or sizes 2 inches and greater.

ORIGIN OF MATERIALS

Compliance to Material Origin requirements shall be physically validated by an Owner SQS representative prior to Seller’s release of materials to manufacturing. Method of validation by the Owner SQS representative shall be Certified Material Test Reports (CMTR'S) or Certificates of Compliance (C of C) provided by the Seller.


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Failure by the Seller to comply with this requirement shall result in the immediate issuance of an Owner Non Conformance Report regardless of what stage of manufacturing the materials have entered.

SURPLUS/RESTOCKING

Not Applicable

BACKCHARGES AND REWORK

17.1 Should Buyer incur excess costs in inspection, transportation, customs clearance, storage, erection or installation due to a failure of the material, equipment, packaging or export documentation to conform to the requirements of the Purchase Order, Buyer shall backcharge such costs to Seller and shall deduct such amounts from unpaid amounts owed Seller.

17.2 Buyer will advise Seller upon discovery of any such nonconformance prior to expenditure of backchargeable funds, and shall afford Seller a reasonable time to respond. However, should Buyer’s construction schedule not permit advance notification, Buyer shall proceed with the repairs or rework and a fair settlement shall be negotiated between Buyer and Seller. A flat rate of $225.00 may be applied to effort hours expended by Buyer. Field material/expenditure deficiencies which are minor in nature but of the recurring type which create expenditure of effort hours to correct will be accumulated and backcharged to Seller prior to closeout of the Purchase Order.

17.3 If during the course of the manufacturing cycle it is determined that the Buyer’s baseline level of inspection effort (as defined in the Quality and Certification Requirements Form) needs to be increased due to the unsatisfactory implementation of Seller’s Quality Plan, to the extent that additional SQS effort hours/ resources are required to provide the necessary level of assurance that the product quality is not compromised, these additional SQS service costs (effort hours and expenses) may, at the discretion of Buyer, be backcharged to Seller. This situation will be formally documented as the unsatisfactory performance occurs, so that Seller is fully cognizant of the potential for backcharge and has the opportunity to remedy the unsatisfactory quality performance. In such cases, the expended effort hours will be backcharged at a flat rate of $225.00 with associated expenses billed at cost.

17.4 Buyer’s rights under this provision do not in any way decrease or infringe upon Buyer’s rights under the warranty provision of the Terms and Conditions of Purchase.

17.5 Depending upon the source of the problem, rework and compensation (i.e. back charges) for rework will be handled as follows:

Problem Source

Problem Discovered Correction Plan/Compensation

Buyer By Seller in Shop (or in the engineering and purchasing phase)

If problem requires rework, Seller submits Change Order to Buyer. Buyer resolves and notifies Seller of direction.

Buyer By Constructor on Construction site

If problem requires rework, Constructor processes a NCR (Non-Conformance Report) with rework estimate. NCR is submitted to Buyer. Buyer resolves and provides direction to Constructor.


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Problem Source

Problem Discovered Correction Plan/Compensation

Seller By Seller or Owner during Audit in Shop

Seller corrects problem. If problem is significant and requires Buyer assistance or concurrence for corrective action plan, then Seller notifies Buyer. If problem is minor (ex: weld reject, nozzle projection, etc.) and can be handled by Seller’s normal quality process, then Seller corrects error. Seller is responsible for rework costs.

Seller By Constructor on Construction site

Constructor contacts Buyer and provides a description of the problem. Buyer contacts Seller. Buyer, Constructor and Seller work together to determine best economical/efficient corrective action plan that meets the construction schedule requirements. Seller has first right of refusal to self-correct the problem unless Seller is unable to remedy within the time required by Buyer. (This may include sending resources to the construction site or shipping item back to Seller’s shop).

If Seller self corrects the problem, then Seller is responsible for all cost directly involved with the rework.

If Constructor corrects the problem, then Seller reimburses Buyer for reasonable cost directly involved with the rework.

PREVENTATIVE MAINTENANCE/STORAGE

18.1 Equipment / material ordered herein may be stored or installed without operation for a period of up to 4-6 months during construction. Seller shall provide a preventative maintenance program based upon storage in Norther Alberta , Kinosis SAGD construction site for a 4-6 month period.

APPLICABLE LAWS, REGULATIONS & STANDARDS

Not Applicable

SUB-SUPPLIERS & SUBCONTRACTORS

Not Applicable

INFORMATION BROKERING

Buyer and Owner are aware of a practice (referred to as “Illegal Information Brokering”) where certain parties approach contractors, subcontractors or suppliers, and offer confidential information or illicit influence in order to obtain business through corruption of competitive bidding processes. Buyer and Owner recognize that the practice of Illegal Information Brokering or any other corruption of the Purchase Order award process is not permitted by Owner/Buyer and Seller represents that it has not and will not utilize or participate in Illegal Information Brokering in connection with this Purchase Order.

Seller agrees that it will promptly notify Buyer if anyone approaches Seller for the purpose of Illegal Information Brokering concerning this Purchase Order or any other related business interest of Buyer or Owner.


PO No. A5YP-4-0204-01 Page 16 of 16

MODIFICATIONS TO TERMS AND CONDITIONS

Seller is in agreement with the attached Terms and Conditions with the modification/s listed below:

Article 18, Allocation of Liability and IndemnificationAdd: “Notwithstanding any provision of this Purchase Order or any other obligation of the Vendor, express or implied, to contrary, the Contractor liability to the Owner for any loss, damage, claim or indemnity hereunder shall be limited to two million dollars ($2,000,000.00 CAD).”

ATTACHMENTS

Attachment Description Date Rev. No.

A Priced Bill of Material, 1 page

B Terms and Conditions of Purchase, Goods and Services Purchase Order, 5 pages

Oct 7b Version

C Engineering Documents List and Notes No. EDL-04-0204-RQ-01Including but not limited to

a) Narrative Scope of Supplyb) Engineering Notesc) Data Sheetsd) Supplier Drawing and Data Commitmentse) Quality and Certification Requirementsf) Specifications.g) Drawings

10 May 2012

D Supplier Quality Plan, Form 000.450.F1533, 1 page 06 Oct 2008

E Shipping & Documentation Instructions, Form 000.460.30005 pages

29 Oct 2008

F General or Domestic Packing Requirements, Form 000.460.30204 pages

01 Oct 2008

G Supplier’s Advanced Shipment Notification, Domestic2 pages

H Hazardous and Toxic Substances Disclosure Requirements, 1 page 26 Jan 2011
