EXHIBIT 10.03
OPERATING AGREEMENT
THIS AGREEMENT, entered into by and between MOUNTAINEER GAS TRANSMISSION,
[NC., a corporation, whose place of business is 000 00xx Xxxxxx, Xxxxxxxxxxx,
XX 00000, herein designated and referred to as "OPERATOR" and WASATCH
PHARMACEUTICAL, INC. whose office and place of business is located at 000 Xxxx
0000 Xxxxx, Xxxxxxx, XX. 00000 herein designated and referred to as
"NONOPERATOR" .
WITNESSETH
WHEREAS, the parties hereto desire to enter into an agreement for the
operating and management of Fifty (50) number of oil and gas xxxxx as listed
and described on Exhibit A attached, hereinafter referred to as XXXXX and
provide that the OPERATOR shall have exclusive charge of, control and
supervision of, all operations of every kind to be conducted on the XXXXX for
the production, treating, handling, and deliveries of oil and gas, and other
minerals therefrom, as well as the operating expenses and other charges in
connection with such operations.
NOW THEREFORE, for and in consideration of the promises and the mutual
covenants and agreements herein contained, the parties hereto agree, as
follows:
1.
DUTIES OF THE OPERATOR
A. OPERATOR shall have full direction, management, supervision and
control of the XXXXX subjected hereto and subject to the provisions hereof and
shall conduct and manage the development and operation of said XXXXX for the
production of oil and/or gas for the joint account of the parties hereof.
B. The number of employees, the selection of such employees, the hours
of labor, and the compensation for services to be paid any and all such
employees shall be determined by OPERATOR, and all such employees shall be the
employees of OPERATOR.
C. The OPERATOR herein is an independent contractor and all purchases,
including labor and outside well servicing contracts, shall be in the name of
the OPERATOR, and the selection of same shall be at the sole discretion of the
OPERATOR.
D. OPERATOR shall keep an accurate record showing the actual costs and
expenses incurred and charges made and all credits and returns made and
received, which record shall be available at all reasonable times during
normal business hours for the consideration, examination, and inspection of
the NONOPERATOR or their representatives.
E. It is expressly understood that all marketing agreements, contracts,
and division orders for the sale of oil and gas and other products produced
hereunder shall be made and executed by OPERATOR. OPERATOR is hereby granted
power of attorney for NONOPERATOR and is hereby authorized to sign on behalf
of NONOPERATOR any documents necessary to market oil and gas or other
products. OPERATOR shall have authority to do all things customary to
deliveries and other functions incident thereto under such marketing
agreements.
F. OPERATOR is hereby authorized to withhold from production receipts,
any expenses incurred by the OPERATOR including, but not limited to, operating
fees, extraordinary expenses, and state severance taxes. OPERATOR will, within
thirty (30) days following receipt of production income, mail to NONOPERATOR,
its proportionate part after expenses have been deducted as well as a
breakdown of the income and expenses. NONOPERATOR shall have thirty (30) days
following receipt of such information to question mistakes in either income or
expenses. If no question is pointed out to OPERATOR in writing, within thirty
(30) days, the income and expenses will be considered correct and acceptable
by NONOPERATOR and no further liability shall attach to OPERATOR regardless of
the circumstances. This provision does not relieve OPERATOR from the exercise
of proper care and diligence in the accounting and preparation of all
statements and checks for NON-OPERATOR.
G. OPERATOR shall carry general liability insurance on its operations
for services it renders to the XXXXX operated hereunder as is reasonable and
prudent in the OPERATOR'S discretion and which currently is:
1. General Public Liability in an amount not less than $1.000.000.00 for
injuries in any one accident and $2.000.000.00 for injuries in the aggregate.
2. Automotive Public Liability and Property Damage in an amount not less
than $1.000.000.00 for bodily injury and property damage combined single
limit.
3. A copy of such insurance certificate shall be furnished to
NONOPERATOR upon request.
H. OPERATOR shall comply with all applicable Federal and State Laws and
all applicable rules and regulations of Federal and State Governmental
Agencies having jurisdiction.
I. NONOPERATOR shall be furnished by OPERATOR upon request, at
reasonable times during normal business hours, the following:
1. Access to the XXXXX to inspect operations hereunder.
2. The right to inspect all geological and engineering information in
OPERATOR'S possession or control specifically relating to the properties
operated hereunder.
3. The right to inspect at all reasonable times the OPERATOR'S books,
records and invoices pertaining to the xxxxx covered by this agreement;
provided, however, that NONOPERATOR shall furnish OPERATOR with written notice
of intention to inspect, providing OPERATOR a list of the items to be
inspected and a list of at least three dates from which to select one and with
none sooner than ten (10) days of NONOPERATOR'S arrival.
J. The judgment and discretion of OPERATOR exercised in good faith
shall be the limit of the liability of OPERATOR to the other party hereto, and
OPERATOR shall never be liable to the other park hereto for any act done or
omitted to be done in good faith in the performance of any provisions of this
agreement. OPERATOR shall not be liable to NON-OPERATOR hereto for any failure
to perform or for any loss caused by strikes, riots, fires, tornadoes, floods,
theft, spills, or any other causes whether of like character or not, beyond
the control of the OPERATOR and which the exercise of reasonable diligence
could not avoid.
II.
OBLIGATIONS OF NONOPERATOR
A. NONOPERATOR hereby grants OPERATOR the right to deduct from
production income its prorata share of all operating expenses including normal
operating expenses and extraordinary expenses. NONOPERATOR agrees that
extraordinary expenses are limited as outlined in Paragraph III (A) except in
the case where work is ordered by a State or Federal agency having
jurisdiction. If such work is ordered, the OPERATOR is required to comply to
the order and NONOPERATOR grants OPERATOR the right to deduct the cost of said
work from production income. OPERATOR shall have the right to aggregate
revenue from all xxxxx listed herein and shall have the right to use the
aggregated funds to offset any operating fees and expenses owned from the
xxxxx. In the event any expenses are not covered by the most current
production revenue, OPERATOR may elect to invoice the NONOPERATOR at the
address listed herein and the NON-OPERATOR shall promptly pay the outstanding
balance. To secure the payment of the proportionate part owing by NONOPERATOR,
said NONOPERATOR hereby grants the OPERATOR a lien upon such NONOPERATOR'S
interest in the xxxxx, the production therefrom and on all fixtures,
improvements, or personal property now or hereafter located on the lease as
security for payment of the costs and expenses chargeable to it. OPERATOR
shall have the right to bring any action of law necessary to enforce
collection of such indebtedness with or without foreclosure of such lien. In
addition, upon default by the NONOPERATOR shall have the right to collect and
receive from the purchaser or purchasers the proceeds of such NONOPERATOR'S
share of oil and/or gas productions until paid. Each such purchaser shall be
entitled to rely upon OPERATOR'S statement concerning the existence and amount
of any such default. The rights granted to OPERATOR in this paragraph shall
not be construed as exclusive remedies, but shall be in addition to the
rights, privileges and remedies afforded OPERATOR by other provisions of the
agreement and by law. (See Exhibit "B") G.V.H.
B. Because of the uncertainty of variable well conditions, ownership
interests, and the necessity of relying on facts and information supplied by
others, the NON-OPERATOR agrees that the OPERATOR shall not be held
responsible for the use of such information. OPERATOR shall use its best
efforts in gathering and interpreting such information, but the NONOPERATOR
shall wholly indemnify the OPERATOR against any liability whatsoever which may
arise from the use of or interpretation of said information including, but not
limited to, the lack of such information.
C. Consideration payable by NONOPERATOR to OPERATOR for the services
rendered by OPERATOR hereunder shall be as follows:
1. $225.00 per active well per month or any part thereof as compensation
for well tending and revenue distribution services provided under this
contract.
2. $45.00 per hour or any part thereof for services of an engineer
and/or geologist required in excess and beyond the scope of normal and routine
prudent lease operations plus all mileage, transportation expense, and out-of-
pocket traveling expenses for such personnel if required to travel more than
50 miles from OPERATOR'S base of operations.
3. $38.00 per hour or any part thereof for services of a supervisor
required at a well site for the field supervision of any well to be worked on,
plus all mileage, transportation expense, and outofpocket traveling expenses
for such personnel if required to travel more than 50 miles from OPERATOR'S
base of operations.
4. Material, equipment, supplies, taxes, utilities and third-party
contract services purchased, procured or contracted for the development and
operation of the XXXXX shall be charged to the account of the NONOPERATOR at
the rate of actual cost plus 15% and shall be billed or deducted as outlined
in PARAGRAPH II (A).
5. The charges for services, which include but are not limited to, rigs,
trucks, dozers, laborers, etc..., provided by OPERATOR shall be the same as
OPERATOR charges other clients and nonoperators for like services.
6. Distribution is limited to payment of royalties and overrides, State
of West Virginia severance taxes and no more than one check to NONOPERATOR
Additional checks and computations will be billed at prevailing rates. There
will be no additional charge for collecting, computing and paying severance
taxes provided the xxxxx are in production and operating fees are earned and
paid. In the case of unearned or unpaid operating fees and non-producing
xxxxx, a $50.00 per well service charge will apply.
7. OPERATOR is not required to collect or pay personal property tax.
However, OPERATOR may elect to complete the returns on behalf of the
NONOPERATOR on a best effort basis, and forward the returns to NONOPERATOR for
payment. There will be no additional charge for this service provided the
xxxxx are in production and operating fees are earned and paid. In the case of
unearned or unpaid fees and non-producing xxxxx, a $50.00 per well service
charge will apply.
D. In addition to the foregoing, OPERATOR shall be reimbursed for the
following:
1. Legal and accounting expenses occurring outside the scope of normal
well operations.
2. Mileage and/or transportation expense of employees over and above
normal well operations.
3. All telephone, telegraph and facsimile expense attributable to
operations of the property.
4. $82.50 per year per well to help defray the cost of the General
Public Liability Policy in place with coverage on herein mentioned xxxxx.
E. Normal and routine well operations are defined as those operations
which are performed by the well tender during his normal work day which
include the changing of charts, pressure regulation, and flowing, and which do
not affect or change the characteristics of a well bore or the location upon
which the xxxxx are situated. Such functions as deepening, plugging back,
squeezing, perforating, fracturing, acidizing, rig work, dozer work, repairs
to equipment or any other operation of a similar nature are classified as
beyond normal routine operations.
F. The above specific rates of compensation may be amended from time to
time by notice from the OPERATOR to the NONOPERATOR if, in practice, they are
found to be insufficient or in excess of the prevailing rates for the area.
The operating fees as stipulated herein shall be adjusted on a annual basis
for the term of this agreement by an increase of 4%, beginning on the first
anniversary of the effective date of this agreement.
III.
GENERAL TERMS AND CONDITIONS
A. Without first obtaining the approval of the NONOPERATOR, no
expenditure shall be made by OPERATOR in operating the XXXXX or for capital
investment in excess of $1.000.00 for any one well in any one calendar month
except in connection with an order from a State or Federal agency as herein
detailed in Paragraph II (A). This shall not, however, prevent OPERATOR from
taking such action on behalf of all parties as a prudent OPERATOR would take
in case of emergency such as fire, blowout, flood or the like, where immediate
consent of NON-OPERATOR cannot be obtained.
B. OPERATOR will not plug, sell for salvage nor abandon any well without
first obtaining approval of the NONOPERATOR unless ordered to do so by a
governmental agency having jurisdiction.
C. This contract is entered into and shall be deemed effective upon
completion of the first well and shall supersede any and all understandings of
the parties with respect to the subject matter hereof The term of this
contract shall be for ten (10) years, and shall be automatically extended for
like terms.
D. The rights and liabilities of the parties hereunder shall be
individual and not joint or collective. Each party hereto shall be
responsible only for its proportionate share of the cost of developing and
operating the xxxxx subjected hereto. It is the express purpose and intention
of the parties hereto that their ownership in the xxxxx shall be as tenants in
common, and it is hereby expressly agreed that it is not the purpose or
intention of this agreement to create as between the parties a partnership,
nor shall same be construed as creating any mining partnership, commercial
partnership or other partnership relation, nor shall the operations of the
respective parties hereunder be considered or construed as a joint venture.
Whenever any term is used herein, the parties hereto use such language merely
as a convenient method of referring to the accounting necessary between them,
and no such phraseology shall ever be construed as creating any joint
liability upon the part of the parties hereto for any obligation incurred
under this agreement or as setting apart or as creating a common fund for any
other purpose. Each of the parties hereto recognizes that its rights and
liabilities hereunder are individual, and are binding upon themselves, their
heirs, assigns, and successors of interest.
E. OPERATOR has the right to comingle funds from the production of oil
and gas from the XXXXX with other funds under the control of the OPERATOR.
OPERATOR shall provide a statement each month to the NON-OPERATOR detailing
all revenue and expenses associated with the xxxxx listed herein.
IV.
CHANGES OF OWNERSHIP; NOTICES, BINDING EFFECT
A. All notices, change, of ownership notice, reports and correspondence
permitted or required to be given to any party hereunder, except as otherwise
specifically provided herein, shall be given in writing by U.S. Mail or by
over-night carrier, postage or charges prepaid, addressed to the party to whom
such notice is given at the address listed herein, or as such address may be
changed in accordance with the provisions hereof.
B. The originating notice unless sent by registered mail to be given
under any provision hereof shall be deemed given only when received by the
party to whom such notice is directed, and the time for such party to give any
response thereto shall run from the date the originating notice is received.
The second or any subsequent responsive notice shall be deemed given when
deposited in the U.S. Main.
C. Any party hereto shall have the right to change its address for the
purposes of this agreement by notifying the other party hereto in writing of
such change of address and such change shall be effective upon receipt of such
notification by all parties hereto.
D. This contract shall be binding upon the parties hereto and their
heirs, successors and assigns. Any sale by the NONOPERATOR of all or any part
of its interest in the xxxxx subjected hereto shall be made expressly subject
to this agreement and the terms, conditions and stipulations of this agreement
shall extend to the respective heirs, executors, administrators, successors,
and assigns of the NONOPERATOR herein.
E. This is the entire agreement between the parties, no other terms or
conditions are expressed or implied and any waiver of a condition of this
agreement does not constitute a waiver of any other condition set forth
herein. Any waiver granted hereunder shall not be considered a permanent
waiver, and may be revoked at any times unless said waiver is written and
signed by a corporate officer of the OPERATOR.
F. This Agreement is not assignable without the expressed written
consent of the OPERATOR.
This agreement shall be governed and enforced under the laws of the
State of West Virginia.
V.
EXECUTED IN counterparts and execution by any one of the parties hereto
is the same as if all the parties had executed the one and same instrument,
this 20th day of November, 1996.
MOUNTAINEER GAS TRANSMISSION, INC.
/S/ P.A. Xxxxxx /S/ Xxxxxx Xxxxxxx, Sec.
---------------------------- -----------------------
Its Agent Witness
/S/ Xxxx X. Xxxxxx /S/ Xxxxx X. Xxxxx
---------------------------- -----------------------
NONOPERATOR Witness
EXHIBIT "A"
WELL NAME API NO.
--------- -------
1. Xxxxx #2 47-073-1830
2. Ball #1A 00-000-0000
4. Xxxxxx #1 47-073-1819
5. Xxxxxx #2 47-073-1941
6. Xxxxxxxxxx #1 47-073-1755
7. Xxxxxxxxxx #3 47-073-1949
8. Xxxxx #1 47-085-5928
10. Chichester #1X 00-000-0000
12. Xxxxxxx #2 47-073-1824
13. Xxxxxxx #3 47-073-1829
14. Xxxxxxx #4 47-073-1881
15. Xxxxxxx #2 47-073-1807
16. Xxxxxxx #3 47-073-1795
17. Xxxxxxx #4 47-073-1796
18. Xxxxxxx #6 47-073-1794
19. Xxxxxxx #7 47-073-1801
20. X. Xxxxxxxx 00-000-0000
21. Xxxxxxx #2 47-073-1820
22. Xxxxxxx #3 47-073-1846
23. Xxxxx #1 47-107-1133
24. Xxxxx #2 47-107-1134
25. Fell Heirs #1 47-073-1095
27. X. Xxxxx #1 47-073-1841
28. Green #1 47-073-1725
29. Green #5 47-073-1833
30. Xxxxxxx #1 47-073-1754
31. Xxxxxxx #10 47-085-6569
32. Xxxxxxx #13 47-085-6560
33. Xxxxxxx #1X 00-000-0000
34. Xxxxxxx #20 47-085-5868
35. Xxxxxxx #3 47-085-6248
36. Xxxxxxx #4 47-085-5642
37. Xxxxxxx #6 47-085-6346
38. Xxxxxxx #7 47-085-6545
40. X. Xxxxxx #1 47-073-1784
41. X. Xxxxxx #2 47-073-1828
42. X. Xxxxxxx #1 47-073-1782
43. Xxxxxxx #1 47-085-6636
44. Mees #1 47-073-1435
45. Mees #2 47-073-2010
46. Xxxxxx #1 47-107-1132
47. X. Xxxxxxxx #1 47-107-1140
48. Xxxxxx #1 47-073-1785
49. Sharp #7 47-107-1131
50. Xxxxxxxxx #1 47-073-1785
51. Xxxxxxxxx #2 47-073-1811
52. Xxxxxxxxxx #1 47-073-1919
53. Nay #1 47-085-5858
54. Xxxxxxxx #2 47-073-1638
55. Xxxxxxx #1 47-085-6648
EXHIBIT B
The invoicing of the NONOPERATOR by the OPERATOR for any such expenses and/or
non payment for such billing not covered by the current production will be
deducted from any future production revenues.
