PARTICIPATION AGREEMENT
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This AGREEMENT dated this 4 day of July 2001, between Olympic Resources Ltd
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(Arizona (the "Corporation") and Xxxxxx Stinghi (the "Participant").
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WHEREAS:
1. The Participant desires to participate with the Corporation in the
development of oil and gas properties in Fresno County the State of California;
2. The Corporation has agreed to the participation, and will manage the
interests of the Participant earned under this agreement.
IN CONSIDERATION of the premises and covenants contained in this agreement, the
parties agree as follows:
1. Interpretation
(1) In this agreement, terms defined in the Operating Agreement, and not
otherwise defined, shall have the meanings ascribed and are incorporated by
reference and, in addition, the following defined terms shall be applicable:
(a) "Accounting Procedure" means the Xxxxx 1984 onshore Accounting procedure
attached to the Operating Agreement.
(b) "Operations" means all operations conducted by the Corporation on the
Program Lands, including conducting, where appropriate: delineation by seismic;
acquisition by farmin or otherwise of Program Lands; drilling, testing,
completing, equipping or abandoning Prospects; the installation of processing
facilities; and the production and marketing of petroleum substances;
(c) "Operating Agreement" means the 1982 American Association of Petroleum
Landmen Operating Agreement with the elections as attached hereto as Schedule
"A".
(d) "Participating Interest" means an undivided 12.5% of a Prospect Working
Interest;
(e) "Program" means the drilling program to be conducted by the Corporation and
the Participant on the Program Lands;
(f) "Program Land" means all of the oil and gas properties now owned or
acquired by the Corporation and which are located in the State of California;
DP ES
(g) "Program Period" means the period commencing on the date of this agreement
and continuing until the earliest of:
(i) the date on which the Participant has elected either directly or
indirectly to terminate the Program, or
(ii) the date the Corporation ceases to hold on interest in the Program
Lands.
(h) "Prospect" means a geological prospect delineated as to prospective
horizons and geographic boundaries conceived and developed by the Corporation or
its agents, and representing the lands to be earned or acquired by the
Corporation under its agreements with third parties;
(i) "Prospect Lands" means the lands within the Prospect;
(j) "Prospect Acquisition Costs" means the Corporation's cost of lease
acquisition and all lease rentals of a Prospect incurred or attributable to the
period before the commencement of drilling on a Prospect;
(k) "Prospect Well" means the well which is to be drilled on a Prospect;
(l) "Prospect Working Interest" means the working interest in the Prospect
Lands to be acquired by the Corporation pursuant to the terms of agreements with
third parties, before reduction by joint venture, participation or farmout
arrangements between the Corporation and third parties, except where the
Participant has consented to the reduction of its participation by the
arrangements by operation of the Operating Agreement.
(2) The headings in this agreement are inserted for convenience of reference
only and shall not affect the meaning or construction of this agreement.
(3) Nothing shall be construed as creating a partnership of any kind or as
imposing on any party to this agreement any partnership duty, obligation or
liability to any other party.
2. Participation
(1) The Corporation has agreed that the Participant is entitled to participate
in conducting the Program contemplated by this agreement.
(2) The Corporation agrees to make available to the Participant during the
Program Period opportunities to earn a Participating Interest in the Program
Lands. The Corporation will provide to the Participant or a representative of
the Participant the following information with respect to each Prospect to each
Prospect Well proposed by the Corporation for the Program:
(a) a description of the Prospect and the location and target depth of the
Prospect Well;
(b) the lands to be earned by the drilling of the Prospect Well;
(c) the royalties, net profit interest or other charges applicable to the
Prospect Lands;
(d) the estimated cost of any geophysical work contemplated; and
(e) the estimated Prospect Acquisition Costs, drilling costs, completion
costs and equipping costs of the Prospect Well.
With the consent of the Participant, the Corporation may provide to the
Participant only a portion of the information described above for a
particular Prospect.
(3) The Participant agrees that it will be make available, and the
Corporation agrees that it will make available, for the Program their respective
shares of the costs associated with any Prospect on the terms and conditions
contained in this agreement.
3. Participating interests and costs
(1) The Participant shall pay his Participating Interest share of all Prospect
Acquisition Costs, third party exploration costs, drilling costs, completion
costs and equipping costs relating to all Prospect Xxxxx and the Corporation
shall, either itself or through third parties, pay all remaining costs of
Prospect Xxxxx.
(2) The Corporation shall be entitled to make monthly calls for cash advances
from the Participant:
(a) for the Participant's share of expenditures anticipated to be incurred
in the coming month; and
(b) for any excess of the Participant's share of actual expenditures
incurred on behalf of the Participant with respect to the Prospect
over amounts previously advanced by the Participant with respect to
the Prospect pursuant to previous calls by the Corporation under this
paragraph.
(3) Cash advances requested by the Corporation from the Participant pursuant to
paragraph 3(2) shall be due and payable within 48 hours of making the request.
(4) On payment of the costs for a Prospect specified in paragraph 3(2), the
Participant shall have earned the Participating Interest in the Prospect Working
Interest in the Prospect.
4. Representations
(1) The Corporation represents and warrants to the Participant:
(a) that it is a body corporate duly organized and validly existing under
the laws of the State of Arizona that it is registered to carry on
business in the State of California and that it will register and
maintain registration to carry on business in all other States where
registration becomes necessary to conduct the Program;
(c) that it has all requisite power and authority to carry on its business
as presently conducted, to enter into this agreement, and to perform
its obligations under this agreement;
(d) that the consummation of the transactions contemplated by this
agreement will not violate, nor be in conflict with, any material
provisions of its articles, by-laws or governing documents, or any
material provision of any agreement or instrument to which it is a
party or is bound;
(e) that the execution, delivery and performance of this agreement and
transactions contemplated by it have been duly and validly authorized
by all requisite action, corporate and otherwise, on its part; and
(f) that this agreement and all documents and instruments required under
it to be executed and delivered by it shall constitute legal, valid
and binding obligations of it enforceable in accordance with their
terms, subject, however, to the effects of bankruptcy, insolvency,
reorganization, moratorium and similar laws, as well as statues of
general application limiting contractual rights and equitable
limitations on the availability of remedies.
(2) The Corporation agrees to use its best efforts to convey legal title to the
Participant in the Prospect Lands in accordance with its Participating Interest.
If the assignment of any Prospect Working Interest is not possible, the
Corporation agrees that the interest shall be held in trust for each Participant
in accordance with its Participating Interest, and the Corporation shall deliver
a declaration of trust evidencing the same.
5. Covenants of the Participant
The Participant agrees to provide to the Corporation the Participant's share of
the costs associated with a Prospect or Prospects calculated in accordance with
the Cost Summary attached as Schedule "B".
6. Operations on Program Lands
(1) The management and supervision of Operations on Program Lands is entrusted
to and undertaken by the Corporation. The Corporation shall act in good faith
and shall
conduct all Operations in a good and workmanlike manner, in accordance with good
oilfield practice. In carrying out the responsibilities, the Corporation shall
provide either directly or through designated agents the following services:
(a) review on behalf of the Participant all reports tendered by any third
party operator, and provide any required expertise on behalf of the
Participant to facilitate the proper conduct of operations in respect
thereof;
(b) keep and maintain at all times true and accurate books, records and
accounts in which shall be contained full and complete particulars of
all operations, receipts and disbursements relating to the Program
Lands;
(c) arrange for and negotiate, as agent for each Participant, all
contracts with third parties for the proper management of the Program
Lands and endeavor to ensure that all necessary governmental licenses,
permits and approvals for work and projects in respect of the Program
Lands are obtained;
(d) maintain custody of and administer all the land records and documents
for the Program Lands, including timely payment of rentals and
royalties, the setting up and maintaining of document and
correspondence files, land files and rental records, and generally
supply all services provided by the lease and land records department
of an oil company;
(e) provide supervision of all petroleum engineering and geological
services, including the supervision of all surface and sub-surface
geological and geophysical examinations conducted in respect of the
Program Lands and of all drilling operations conducted on the lands
and the examination, analysis and evaluation of engineering and
geological data accumulated in the course of operation of the Program
Lands;
(f) in the ordinary course of business, arrange for and negotiate all
contracts with third parties for the acquisition of surface rights and
easements, and apply for all necessary government licenses, permits
and approvals of work and projects to be carried out;
(g) carry out all marketing services for the disposition of all oil, gas
sulfur, minerals and natural gas liquids which may be produced from
the Program Lands; and
(h) at the request and expense of the Participant, maintain in force with
a reputable insurance company the policies and amounts of insurance
(naming the Participant or their nominees as the named insured) which
the Corporation would prudently carry to protect itself against loss
or destruction of any of the assets of the Program and liability to
third parties for bodily injury, death and property damage with
applicable deductible limits, and the Participant agrees that any
further coverage it may require shall be its sole responsibility.
(2) Until the Participant shall have earned an interest in a Prospect, the
clauses of the Operating Agreement shall apply, mutatis mutandis, to this
agreement and to all Operations of the Corporation and the Participant carried
out with respect to the Program Lands pursuant to this agreement. The term
"Operator" in the Operating Agreement shall be deemed to refer to the
Corporation and its agent Production Specialties and Company shall be deemed to
refer to the Participant and shall be included as a non operating participant by
through and under the Corporation as provided for under the terms of this
agreement.
(3) All costs of work done or expenses incurred in relation to any Prospect
will be charged in accordance with the provisions of the Accounting Procedure,
to the extent the provisions of the procedure do not conflict with the
provisions of this agreement.
(4) The Participant shall indemnify the Corporation from and against all
liability, cost, risk and expense incurred or suffered by the Corporation
attributable to each Participant's interest in any of the Program Lands, or
attributable to any contract or agreement entered into by the Corporation on
behalf of the Participant, provided that the indemnification shall not apply if
the liability, cost, risk or expense arises from the negligence or willful
misconduct of the Corporation.
(5) The Corporation shall indemnify the Participant from and against all
liability, cost, risk and expense incurred or suffered by the Participant
attributable to the Corporation's interest in any Program Lands.
(6) In connection with its duties under the Program, the Corporation shall be
entitled to charge to and recover from the Participant, proportionate to the
Participant's share of costs for a Prospect, all third party costs as are
incurred for service furnished pursuant to this paragraph.
7. Operating Agreements
(1) Subject to the provisions of this agreement, all Operations to be
conducted on the Program Lands from and after the date that the Corporation and
the Participant earn or acquire an interest in the Prospect shall be conducted
in accordance with the Operating Agreement and the Corporation and its duly
authorized agent shall be designated as the initial operator under this
agreement. The interests and obligations of the Corporation and the Participant
for the purposes of the Operating Agreement will be in accordance with their
respective Participating Interests.
(2) In the event of any conflict between the provisions of this agreement and
the provisions of the Operating Agreement, then, as between the parties, this
agreement shall govern.
(3) In the event that the Corporation and the Participant pursuant to this
agreement, acquire or become entitled to acquire an interest in any Prospect
which is subject to another accounting procedure and Operating Agreement ('Third
Party Operating Agreement"),
operations will be conducted in accordance with the Third Party Operating
Agreement. In the event there is not an existing operating agreement relating
to the Prospects, the Corporation is authorized to negotiate an operating
agreement on the most favorable terms available to the parties. To the extent
that Operations are governed by the provisions of a Third Party Operating
Agreement, the parties acknowledge that as between the parties with respect to
in any proposed abandonment's, surrenders, dispositions or independent
operations, the time period for notices with respect to it shall be the time
specified in the Third Party Operating Agreement as the time for giving notices
and the time for replying to the notices shall be one-half of the time specified
in the Third Party Operating Agreement, the intention being that the parties
shall make their elections as between themselves in priority to communicating
the elections to third parties.
(4) Notwithstanding paragraph 7(1) and (3), and casing point elections,
independent operation elections and surrender or abandonment elections which may
be required under the Operating Agreement or Third Party Operating Agreement
shall be made by the Corporation without regard to the interests of the
Participants, and the Participants shall be bound by the elections.
8. Terminations
This agreement shall terminate at the end of the Program Period, save for the
Accounting Procedure and paragraph 7 which shall continue to apply to the lands
earned by the Participant under this agreement for the period set out in the
Operation Procedure or Third Party Operating Agreement, as the case may be.
General
(1) This agreement shall be governed and interpreted in accordance with the
laws of the State of California and shall, for all purposes, be deemed to have
been made in the Province of British Columbia.
(2) The terms of this agreement express and constitute the entire agreement
between the parties and no implied covenant or liability of any kind is created
or shall arise by reason of these presents or anything in this agreement
contained.
(3) Whether or not so stipulated, all notices, communications and statements
which may be required or permitted under this agreement shall be in writing and
may be served personally by leaving them with the party on whom they are to be
served or by telexing or mailing them to the parties to whom they are addressed
at the address given. If a notice is sent by
registered mail, it shall be deemed validly served and to have been received by
the addressee of this agreement on the third day following the mailing of it in
Canada, provided that no notice shall be sent by mail during any period in which
Canadian postal workers are on strike or if a strike is imminent and it may be
anticipated to affect normal delivery of it. The addresses of the parties are
as follows: The Corporation: care of 000-000 Xxxx Xxxxxxxx Xxxxxx, Xxxxxxxxx,
XX, X0X 0X0 and the Participant: of Xxx Xxxxxx X'Xxxxxxx #00,
Xxxxxxx, Xxxxx. Any party to this Agreement may change its address by notice
served as mentioned.
(4) Each party shall do further acts and execute and deliver all further deeds
and documents as shall be reasonably required in order to fully perform and
carry out the terms of this agreement.
(5) Subject to the terms and conditions of this agreement, this agreement shall
enure to the benefit and be binding on the parties and their respective
successors.
(6) No party shall make any application for partition or take any similar
proceedings relating to the Program Lands.
(7) Neither party may assign their interest without the express prior consent
in writing of the other party.
(8) All schedules are incorporated by reference as fully as though contained I
the body of this agreement provided that where any provisions of any schedule
conflicts with any provisions of the agreement, the provisions of this agreement
shall prevail.
IN WITNESS WHEREOF, the parties hereto have hereunto executed this Agreement
effective as of the day and year first above written.
THE CORPORATE SEAL OF OLYMPIC )
RESOURCES (ARIZONA) LTD. WAS )
HEREWITH AFFIXED IN THE ) C/S
PRESENCE OF: )
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)
/s/ Xxxxx Xxxxxxx )
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)
THE CORPORATE SEAL OF XXXXXX )
STINGHI WAS HEREWITH )
AFFIXED IN THE PRESENCE OF ) C/S
)
/s/ Xxxxxx Stinghi )
_________________________________)
)
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)
