A.A.P.L. FORM 610 - MODEL FORM OPERATING AGREEMENT - 1982
“B”. The assignments or leases so limited shall encompass the “drilling unit” upon which the well is located. The payments by, and the
assignments or leases to, the assignees shall be in a ratio based upon the relationship of their respective percentage of participation in the
Contract Area to the aggregate of the percentages of participation in the Contract Area of all assignees. There shall be no readjustment of
interests in the remaining portion of the Contract Area.
the well in the interval or intervals then open other than the royalties retained in any lease made under the terms of this Article. Upon re-
quest, Operator shall continue to operate the assigned well for the account of the non-abandoning parties at the rates and charges con-
templated by this agreement, plus any additional cost and charges which may arise as the result of the separate ownership of the assigned
well. Upon proposed abandonment of the producing interval(s) assigned or leased, the assignor or lessor shall then have the option to
repurchase its prior interest in the well (using the same valuation formula) and participate in further operations therein subject to the pro-
visions hereof.
Consenting Parties in the event of the proposed abandonment of any well excepted from said Articles; provided, however, no well shall be
permanently plugged and abandoned unless and until all parties having the right to conduct further operations therein have been notified
of the proposed abandonment and afforded the opportunity to elect to take over the well in accordance with the provisions of this Article
VI.E.
shall be liable only for its proportionate share of the costs of developing and operating the Contract Area. Accordingly, the liens granted
among the parties in Article VII.B. are given to secure only the debts of each severally. It is not the intention of the parties to create, nor
shall this agreement be construed as creating, a mining or other partnership or association, or to render the parties liable as partners.
of oil and/or gas when extracted and its interest in all equipment, to secure payment of its share of expense, together with interest thereon
at the rate provided in Exhibit “C”. To the extent that Operator has a security interest under the Uniform Commercial Code of the
state, Operator shall be entitled to exercise the rights and remedies of a secured party under the Code. The bringing of a suit and the ob-
taining of judgment by Operator for the secured indebtedness shall not be deemed an election of remedies or otherwise affect the lien
rights or security interest as security for the payment thereof. In addition, upon default by any Non-Operator in the payment of its share
of expense, Operator shall have the right, without prejudice to other rights or remedies, to collect from the purchaser the proceeds from
the sale of such Non-Operator’s share of oil and/or gas until the amount owed by such Non-Operator, plus interest, has been paid. Each
purchaser shall be entitled to rely upon Operator’s written statement concerning the amount of any default. Operator grants a like lien
and security interest to the Non-Operators to secure payment of Operator’s proportionate share of expense.
Operator, the non-defaulting parties, including Operator, shall, upon request by Operator, pay the unpaid amount in the proportion that
the interest of each such party bears to the interest of all such parties. Each party so paying its share of the unpaid amount shall, to obtain
reimbursement thereof, be subrogated to the security rights described in the foregoing paragraph.
and operation of the Contract Area pursuant to this agreement and shall charge each of the parties hereto with their respective propor-
tionate shares upon the expense basis provided in Exhibit “C”. Operator shall keep an accurate record of the joint account hereunder,
showing expenses incurred and charges and credits made and received.
of their respective shares of the estimated amount of the expense to be incurred in operations hereunder during the next succeeding
month, which right may be exercised only by submission to each such party of an itemized statement of such estimated expense, together
with an invoice for its share thereof. Each such statement and invoice for the payment in advance of estimated expense shall be submitted
on or before the 20th day of the next preceding month. Each party shall pay to Operator its proportionate share of such estimate within
fifteen (15) days after such estimate and invoice is received. If any party fails to pay its share of said estimate within said time, the amount
due shall bear interest as provided in Exhibit “C” until paid. Proper adjustment shall be made monthly between advances and actual ex-
pense to the end that each party shall bear and pay its proportionate share of actual expenses incurred, and no more.
pursuant to the provisions of Article VI.B.2. of this agreement. Consent to the drilling or deepening shall include:
A.A.P.L. FORM 610 - MODEL FORM OPERATING AGREEMENT - 1982
ARTICLE VII
continued
o | Option No. 1: All necessary expenditures for the drilling or deepening, testing, completing and equipping of the well, including |
necessary tankage and/or surface facilities.
o | Option No. 2: All necessary expenditures for the drilling or deepening and testing of the well. When such well has reached its |
authorized depth, and all tests have been completed, and the results thereof furnished to the parties, Operator shall give immediate notice
to the Non-Operators who have the right to participate in the completion costs. The parties receiving such notice shall have
twenty-four (24) hours ( inclusive of Saturday, Sunday and legal holidays) in which to elect to participate in the setting of casing and the completion at-
tempt. Such election, when made, shall include consent to all necessary expenditures for the completing and equipping of such well, in-
cluding necessary tankage and/or surface facilities. Failure of any party receiving such notice to reply within the period above fixed shall
constitute an election by that party not to participate in the cost of the completion attempt. If one or more, but less than all of the parties,
elect to set pipe and to attempt a completion, the provisions of Article VI.B.2. hereof (the phrase “reworking, deepening or plugging
back” as contained in Article VI.B.2. shall be deemed to include “completing”) shall apply to the operations thereafter conducted by less
than all parties.
2. Rework or Plug Back: Without the consent of all parties, no well shall be reworked or plugged back except a well reworked or |
plugged back pursuant to the provisions of Article VI.B.2. of this agreement. Consent to the reworking or plugging back of a well shall
include all necessary expenditures in conducting such operations and completing and equipping of said well, including necessary tankage
and/or surface facilities.
3. Other Operations: Without the consent of all parties, Operator shall not undertake any single project reasonably estimated |
to require an expenditure in excess of | Twenty-Five Thousand | Dollars ($ | 25,000.00 | ) |
except in connection with a well, the drilling, reworking, deepening, completing, recompleting, or plugging back of which has been
previously authorized by or pursuant to this agreement; provided, however, that, in case of explosion, fire, flood or other sudden
emergency, whether of the same or different nature, Operator may take such steps and incur such expenses as in its opinion are required
to deal with the emergency to safeguard life and property but Operator, as promptly as possible, shall report the emergency to the other
parties. If Operator prepares an authority for expenditure (AFE) for its own use, Operator shall furnish any Non-Operator so requesting
an information copy thereof for any single project costing in excess of | Twenty-Five Thousand |
Dollars ($ | 25,000.00 | ) but less than the amount first set forth above in this paragraph. |
E. | Rentals, Shut-in Well Payments and Minimum Royalties: |
Rentals, shut-in well payments and minimum royalties which may be required under the terms of any lease shall be paid by the |
Operator and then billed to the Parties. | In the event two or more parties own and have con- |
tributed interests in the same lease to this agreement, such parties may designate one of such parties to make said payments for and on
behalf of all such parties. Any party may request, and shall be entitled to receive, proper evidence of all such payments. In the event of
failure to make proper payment of any rental, shut-in well payment or minimum royalty through mistake or oversight where such pay-
ment is required to continue the lease in force, any loss which results from such non-payment shall be borne in accordance with the pro-
visions of Article IV.B.2.
Operator shall notify Non-Operator of the anticipated completion of a shut-in gas well, or the shutting in or return to production |
of a producing gas well, at least five (5) days (excluding Saturday, Sunday and legal holidays), or at the earliest opportunity permitted by
circumstances, prior to taking such action, but assumes no liability for failure to do so. In the event of failure by Operator to so notify
Non-Operator, the loss of any lease contributed hereto by Non-Operator for failure to make timely payments of any shut-in well payment
shall be borne jointly by the parties hereto under the provisions of Article IV.B.3.
Beginning with the first calendar year after the effective date hereof, Operator shall render for ad valorem taxation all property |
subject to this agreement which by law should be rendered for such taxes, and it shall pay all such taxes assessed thereon before they
become delinquent. Prior to the rendition date, each Non-Operator shall furnish Operator information as to burdens (to include, but not
be limited to, royalties, overriding royalties and production payments) on leases and oil and gas interests contributed by such Non-
Operator. If the assessed valuation of any leasehold estate is reduced by reason of its being subject to outstanding excess royalties, over-
riding royalties or production payments, the reduction in ad valorem taxes resulting therefrom shall inure to the benefit of the owner or
owners of such leasehold estate, and Operator shall adjust the charge to such owner or owners so as to reflect the benefit of such reduc-
tion. If the ad valorem taxes are based in whole or in part upon separate valuations of each party’s working interest, then notwithstanding
anything to the contrary herein, charges to the joint account shall be made and paid by the parties hereto in accordance with the tax
value generated by each party’s working interest. Operator shall bill the other parties for their proportionate shares of all tax payments in
the manner provided in Exhibit “C”.
If Operator considers any tax assessment improper, Operator may, at its discretion, protest within the time and manner |
prescribed by law, and prosecute the protest to a final determination, unless all parties agree to abandon the protest prior to final deter-
mination. During the pendency of administrative or judicial proceedings, Operator may elect to pay, under protest, all such taxes and any
interest and penalty. When any such protested assessment shall have been finally determined, Operator shall pay the tax for the joint ac-
count, together with any interest and penalty accrued, and the total cost shall then be assessed against the parties, and be paid by them, as
provided in Exhibit “C”.
Each party shall pay or cause to be paid all production, severance, excise, gathering and other taxes imposed upon or with respect |
to the production or handling of such party’s share of oil and/or gas produced under the terms of this agreement.
25
A.A.P.L. FORM 610 - MODEL FORM OPERATING AGREEMENT - 1982
ARTICLE VII
continued
At all times while operations are conducted hereunder, Operator shall comply with the workmen’s compensation law of |
the state where the operations are being conducted; provided, however, that Operator may be a self-insurer for liability under said com-
pensation laws in which event the only charge that shall be made to the joint account shall be as provided in Exhibit “C”. Operator shall
also carry or provide insurance for the benefit of the joint account of the parties as outlined in Exhibit “D”, attached to and made a part
hereof. Operator shall require all contractors engaged in work on or for the Contract Area to comply with the workmen’s compensation
law of the state where the operations are being conducted and to maintain such other insurance as Operator may require.
In the event automobile public liability insurance is specified in said Exhibit “D”, or subsequently receives the approval of the |
parties, no direct charge shall be made by Operator for premiums paid for such insurance for Operator’s automotive equipment.
ARTICLE VIII.
ACQUISITION, MAINTENANCE OR TRANSFER OF INTEREST
The leases covered by this agreement, insofar as they embrace acreage in the Contract Area, shall not be surrendered in whole |
or in part unless all parties consent thereto.
However, should any party desire to surrender its interest in any lease or in any portion thereof, and the other parties do not |
agree or consent thereto, the party desiring to surrender shall assign, without express or implied warranty of title, all of its interest in
such lease, or portion thereof, and any well, material and equipment which may be located thereon and any rights in production
thereafter secured, to the parties not consenting to such surrender. If the interest of the assigning party is or includes an oil and gas in-
terest, the assigning party shall execute and deliver to the party or parties not consenting to such surrender an oil and gas lease covering
such oil and gas interest for a term of one (1) year and so long thereafter as oil and/or gas is produced from the land covered thereby, such
lease to be on a mutually accepted form ”. Upon such assignment or lease, the assigning party shall be relieved from all
obligations thereafter accruing, but not theretofore accrued, with respect to the interest assigned or leased and the operation of any well
attributable thereto, and the assigning party shall have no further interest in the assigned or leased premises and its equipment and pro-
duction other than the royalties retained in any lease made under the terms of this Article. The party assignee or lessee shall pay to the
party assignor or lessor the reasonable salvage value of the latter’s interest in any wells and equipment attributable to the assigned or leas-
ed acreage. The value of all material shall be determined in accordance with the provisions of Exhibit “C”, less the estimated cost of
salvaging and the estimated cost of plugging and abandoning. If the assignment or lease is in favor of more than one party, the interest
shall be shared by such parties in the proportions that the interest of each bears to the total interest of all such parties.
Any assignment, lease or surrender made under this provision shall not reduce or change the assignor’s, lessor’s or surrendering |
party’s interest as it was immediately before the assignment, lease or surrender in the balance of the Contract Area; and the acreage
assigned, leased or surrendered, and subsequent operations thereon, shall not thereafter be subject to the terms and provisions of this
agreement.
B. | Renewal or Extension of Leases: |
If any party secures a renewal of any oil and gas lease subject to this agreement, all other parties shall be notified promptly, and |
shall have the right for a period of thirty (30) days following receipt of such notice in which to elect to participate in the ownership of the
renewal lease, insofar as such lease affects lands within the Contract Area, by paying to the party who acquired it their several proper pro-
portionate shares of the acquisition cost allocated to that part of such lease within the Contract Area, which shall be in proportion to the
interests held at that time by the parties in the Contract Area.
If some, but less than all, of the parties elect to participate in the purchase of a renewal lease, it shall be owned by the parties |
who elect to participate therein, in a ratio based upon the relationship of their respective percentage of participation in the Contract Area
to the aggregate of the percentages of participation in the Contract Area of all parties participating in the purchase of such renewal lease.
Any renewal lease in which less than all parties elect to participate shall not be subject to this agreement.
Each party who participates in the purchase of a renewal lease shall be given an assignment of its proportionate interest therein |
by the acquiring party.
The provisions of this Article shall apply to renewal leases whether they are for the entire interest covered by the expiring lease |
or cover only a portion of its area or an interest therein. Any renewal lease taken before the expiration of its predecessor lease, or taken or
contracted for within six (6) months after the expiration of the existing lease shall be subject to this provision; but any lease taken or con-
tracted for more than six (6) months after the expiration of an existing lease shall not be deemed a renewal lease and shall not be subject to
the provisions of this agreement.
The provisions in this Article shall also be applicable to extensions of oil and gas leases. |
C. | Acreage or Cash Contributions: |
While this agreement is in force, if any party contracts for a contribution of cash towards the drilling of a well or any other |
operation on the Contract Area, such contribution shall be paid to the party who conducted the drilling or other operation and shall be
applied by it against the cost of such drilling or other operation. If the contribution be in the form of acreage, the party to whom the con-
tribution is made shall promptly tender an assignment of the acreage, without warranty of title, to the Drilling Parties in the proportions
26
A.A.P.L. FORM 610 - MODEL FORM OPERATING AGREEMENT - 1982
ARTICLE VIII
continued
said Drilling Parties shared the cost of drilling the well. Such acreage shall become a separate Contract Area and, to the extent possible, be
governed by provisions identical to this agreement. Each party shall promptly notify all other parties of any acreage or cash contributions
it may obtain in support of any well or any other operation on the Contract Area. The above provisions shall also be applicable to op-
tional rights to earn acreage outside the Contract Area which are in support of a well drilled inside the Contract Area.
If any party contracts for any consideration relating to disposition of such party’s share of substances produced hereunder, such |
consideration shall not be deemed a contribution as contemplated in this Article VIII.C.
D. | Maintenance of Uniform Interests: |
For the purpose of maintaining uniformity of ownership in the oil and gas leasehold interests covered by this agreement, no |
party shall sell, encumber, transfer or make other disposition of its interest in the leases embraced within the Contract Area and in wells,
equipment and production unless such disposition covers either:
1. | the entire interest of the party in all leases and equipment and production; or |
2. | an equal undivided interest in all leases and equipment and production in the Contract Area. |
Every such sale, encumbrance, transfer or other disposition made by any party shall be made expressly subject to this agreement |
and shall be made without prejudice to the right of the other parties.
If, at any time the interest of any party is divided among and owned by four or more co-owners, Operator, at its discretion, may |
require such co-owners to appoint a single trustee or agent with full authority to receive notices, approve expenditures, receive billings for
and approve and pay such party’s share of the joint expenses, and to deal generally with, and with power to bind, the co-owners of such
party’s interest within the scope of the operations embraced in this agreement; however, all such co-owners shall have the right to enter
into and execute all contracts or agreements for the disposition of their respective shares of the oil and gas produced from the Contract
Area and they shall have the right to receive, separately, payment of the sale proceeds thereof.
E. | Waiver of Rights to Partition: |
If permitted by the laws of the state or states in which the property covered hereby is located, each party hereto owning an |
undivided interest in the Contract Area waives any and all rights it may have to partition and have set aside to it in severalty its undivided
interest therein.
ARTICLE IX.
INTERNAL REVENUE CODE ELECTION
This agreement is not intended to create, and shall not be construed to create, a relationship of partnership or an association |
for profit between or among the parties hereto. Notwithstanding any provision herein that the rights and liabilities hereunder are several
and not joint or collective, or that this agreement and operations hereunder shall not constitute a partnership, if, for federal income tax
purposes, this agreement and the operations hereunder are regarded as a partnership, each party hereby affected elects to be excluded
from the application of all of the provisions of Subchapter “K”, Chapter 1, Subtitle “A”, of the Internal Revenue Code of 1986, as per-
mitted and authorized by Section 761 of the Code and the regulations promulgated thereunder. Operator is authorized and directed to ex-
ecute on behalf of each party hereby affected such evidence of this election as may be required by the Secretary of the Treasury of the
United States or the Federal Internal Revenue Service, including specifically, but not by way of limitation, all of the returns, statements,
and the data required by Federal Regulations 1.761. Should there be any requirement that each party hereby affected give further
evidence of this election, each such party shall execute such documents and furnish such other evidence as may be required by the
Federal Internal Revenue Service or as may be necessary to evidence this election. No such party shall give any notices or take any other
action inconsistent with the election made hereby. If any present or future income tax laws of the state or states in which the Contract
Area is located or any future income tax laws of the United States contain provisions similar to those in Subchapter “K”, Chapter 1,
Subtitle “A”, of the Internal Revenue Code of 1986, under which an election similar to that provided by Section 761 of the Code is per-
mitted, each party hereby affected shall make such election as may be permitted or required by such laws. In making the foregoing elec-
tion, each such party states that the income derived by such party from operations hereunder can be adequately determined without the
computation of partnership taxable income.
27
A.A.P.L. FORM 610 - MODEL FORM OPERATING AGREEMENT - 1982
ARTICLE X.
CLAIMS AND LAWSUITS
Operator may settle any single uninsured third party damage claim or suit arising from operations hereunder if the expenditure |
does not exceed | Twenty-Five Thousand | Dollars |
($ | 25,000.00 | ) and if the payment is in complete settlement of such claim or suit. If the amount required for settlement ex- |
ceeds the above amount, the parties hereto shall assume and take over the further handling of the claim or suit, unless such authority is
delegated to Operator. All costs and expenses of handling, settling, or otherwise discharging such claim or suit shall be at the joint ex-
pense of the parties participating in the operation from which the claim or suit arises. If a claim is made against any party or if any party is
sued on account of any matter arising from operations hereunder over which such individual has no control because of the rights given
Operator by this agreement, such party shall immediately notify all other parties, and the claim or suit shall be treated as any other claim
or suit involving operations hereunder.
ARTICLE XI.
FORCE MAJEURE
If any party is rendered unable, wholly or in part, by force majeure to carry out its obligations under this agreement, other than |
the obligation to make money payments, that party shall give to all other parties prompt written notice of the force majeure with
reasonably full particulars concerning it; thereupon, the obligations of the party giving the notice, so far as they are affected by the force
majeure, shall be suspending during, but no longer than, the continuance of the force majeure. The affected party shall use all reasonable
diligence to remove the force majeure situation as quickly as practicable.
The requirement that any force majeure shall be remedied with all reasonable dispatch shall not require the settlement of strikes, |
lockouts, or other labor difficulty by the party involved, contrary to its wishes; how all such difficulties shall be handled shall be entirely
within the discretion of the party concerned.
The term “force majeure”, as here employed, shall mean an act of God, strike, lockout, or other industrial disturbance, act of |
the public enemy, war, blockade, public riot, lightning, fire, storm, flood, explosion, governmental action, governmental delay, restraint
or inaction, unavailability of equipment, and any other cause, whether of the kind specifically enumerated above or otherwise, which is
not reasonably within the control of the party claiming suspension.
ARTICLE XII.
NOTICES
All notices authorized or required between the parties and required by any of the provisions of this agreement, unless otherwise |
specifically provided, shall be given in writing by mail or telegram, postage or charges prepaid, or by telex or telecopier and addressed to
the parties to whom the notice is given at the addresses listed on Exhibit “A”. The originating notice 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 notice in
response thereto shall run from the date the originating notice is received. The second or any responsive notice shall be deemed given
when deposited in the mail or with the telegraph company, with postage or charges prepaid, or sent by telex or telecopier. Each party
shall have the right to change its address at any time, and from time to time, by giving written notice thereof to all other parties.
ARTICLE XIII.
TERM OF AGREEMENT
This agreement shall remain in full force and effect as to the oil and gas leases and/or oil and gas interests subject hereto for the |
period of time selected below; provided, however, no party hereto shall ever be construed as having any right, title or interest in or to any
lease or oil and gas interest contributed by any other party beyond the term of this agreement.
o | Option No. 1: So long as any of the oil and gas leases subject to this agreement remain or are continued in force as to any part |
of the Contract Area, whether by production, extension, renewal, or otherwise.
o | Option No. 2: In the event the well described in Article VI.A., or any subsequent well drilled under any provision of this |
agreement, results in production of oil and/or gas in paying quantities, this agreement shall continue in force so long as any such well or
wells produce, or are capable of production, and for an additional period of | 90 | days from cessation of all production; provided, |
however, if, prior to the expiration of such additional period, one or more of the parties hereto are engaged in drilling, reworking, deepen-
ing, plugging back, testing or attempting to complete a well or wells hereunder, this agreement shall continue in force until such opera-
tions have been completed and if production results therefrom, this agreement shall continue in force as provided herein. In the event the
well described in Article VI.A., or any subsequent well drilled hereunder, results in a dry hole, and no other well is producing, or capable
of producing oil and/or gas from the Contract Area, this agreement shall terminate unless drilling, deepening, plugging back or rework-
ing operations are commenced within | 90 | days from the date of abandonment of said well. |
It is agreed, however, that the termination of this agreement shall not relieve any party hereto from any liability which has |
accrued or attached prior to the date of such termination.
28
A.A.P.L. FORM 610 - MODEL FORM OPERATING AGREEMENT - 1982
ARTICLE XIV.
COMPLIANCE WITH LAWS AND REGULATIONS
A. | Laws, Regulations and Orders: |
This agreement shall be subject to the conservation laws of the state in which the Contract Area is located, to the valid rules, |
regulations, and orders of any duly constituted regulatory body of said state; and to all other applicable federal, state, and local laws, or-
dinances, rules, regulations, and orders.
This agreement and all matters pertaining hereto, including, but not limited to, matters of performance, non-performance, breach, |
remedies, procedures, rights, duties, and interpretation or construction, shall be governed and determined by the law of the state in which
the Contract Area is located. If the Contract Area is in two or more states, the law of the state of | California |
shall govern.
Nothing herein contained shall grant, or be construed to grant, Operator the right or authority to waive or release any rights, |
privileges, or obligations which Non-Operators may have under federal or state laws or under rules, regulations or orders promulgated
under such laws in reference to oil, gas and mineral operations, including the location, operation, or production of wells, on tracts offset-
ting or adjacent to the Contract Area.
With respect to operations hereunder, Non-Operators agree to release Operator from any and all losses, damages, injuries, claims |
and causes of action arising out of, incident to or resulting directly or indirectly from Operator’s interpretation or application of rules,
rulings, regulations or orders of the Department of Energy or predecessor or successor agencies to the extent such interpretation or ap-
plication was made in good faith. Each Non-Operator further agrees to reimburse Operator for any amounts applicable to such Non-
Operator’s share of production that Operator may be required to refund, rebate or pay as a result of such an incorrect interpretation or
application, together with interest and penalties thereon owing by Operator as a result of such incorrect interpretation or application.
Non-Operators authorize Operator to prepare and submit such documents as may be required to be submitted to the purchaser |
of any crude oil sold hereunder or to any other person or entity pursuant to the requirements of the “Crude Oil Windfall Profit Tax Act
of 1980”, as same may be amended from time to time (“Act”), and any valid regulations or rules which may be issued by the Treasury
Department from time to time pursuant to said Act. Each party hereto agrees to furnish any and all certifications or other information
which is required to be furnished by said Act in a timely manner and in sufficient detail to permit compliance with said Act.
ARTICLE XV.
OTHER PROVISIONS
See provisions attached as pages 14A and 14B
29
A.A.P.L. FORM 610 - MODEL FORM OPERATING AGREEMENT - 1982
ARTICLE XVI.
MISCELLANEOUS
This agreement shall be binding upon and shall inure to the benefit of the parties hereto and to their respective heirs, devisees, |
legal representatives, successors and assigns.
This instrument may be executed in any number of counterparts, each of which shall be considered an original for all purposes. |
IN WITNESS WHEREOF, this agreement shall be effective as of | 5th | day of | December | , (year) | 2003 | . |
Longbow, LLC , who has prepared and circulated this form for execution, represents and warrants that the form
was printed from and with the exception listed below, is identical to the AAPL Form 610-1982 Model Form Operating Agreement, as
published in diskette form by Forms On-A-Disk, Inc. No changes, alterations, or modifications, other than those in Articles | IV, VI, |
VII, VIII, and XV
, have been made to the form.
O P E R A T O R
LONGBOW, LLC
Brad C. Califf – President
N O N - O P E R A T O R S
ARCHER EXPLORATION, INC. | SILVER STAR ENERGY, INC. |
John W. Howe – President | Rob McIntosh - President |
30
EXHIBIT “C”
Attached to and made a part of that certain Operating Agreement dated December 5, 2003 by and between Longbow, LLC. and Archer Exploration, Inc., et al.
ACCOUNTING PROCEDURE
JOINT OPERATIONS
I. GENERAL PROVISIONS
"Joint Property" shall mean the real and personal property subject to the agreement to which this Accounting Procedure
is attached.
“Joint Operations" shall mean all operations necessary or proper for the development, operation, protection and
maintenance of the Joint Property.
"Joint Account" shall mean the account showing the charges paid and credits received in the conduct of the Joint
Operations and which are to be shared by the Parties.
"Operator" shall mean the party designated to conduct the Joint Operations.
"Non-Operators" shall mean the Parties to this agreement other than the Operator.
"Parties” shall mean Operator and Non-Operators.
"First Level Supervisors" shall mean those employees whose primary function in Joint Operations is the direct
supervision of other employees and/or contract labor directly employed on the Joint Property in a field operating
capacity.
"Technical Employees" shall mean those employees having special and specific engineering, geological or other
professional skills, and whose primary function in Joint Operations is the handling of specific operating conditions and
problems for the benefit of the Joint Property.
"Personal Expenses" shall mean travel and other reasonable reimbursable expenses of Operator's employees.
"Material" shall mean personal property, equipment or supplies acquired or held for use on the Joint Property.
"Controllable Material" shall mean Material which at the time is so classified in the Material Classification Manual as
most recently recommended by the Council or Petroleum Accountants Societies.
Operator shall bill Non-Operators on or before the last day of each month for their proportionate share of the Joint
Account for the preceding month. Such bills will be accompanied by statements which identify the authority for
expenditure, lease or facility, and all charges and credits summarized by appropriate classifications of investment and
expense except that items of Controllable Material and unusual charges and credits shall be separately identified and
fully described in detail.
3. | Advances and Payments by Non-Operators |
A. | Unless otherwise provided for in the agreement, the Operator may require the Non-Operators to advance their |
share of estimated cash outlay for the succeeding month's operation within fifteen (15) days after receipt of the
billing or by the first day of the month for which the advance is required, whichever is later. Operator shall adjust
each monthly billing to reflect advances received from the Non-Operators.
B. | Each Non-Operator shall pay its proportion of all bills within fifteen (15) days after receipt. If payment is not made |
within such time, the unpaid balance shall bear interest monthly at the prime rate in effect at | BankAmerica in San Francisco |
on the first day of the month in which delinquency occurs plus 1% or the
maximum contract rate permitted by the applicable usury laws in the state in which the Joint Property is located,
whichever is the lesser, plus attorney's fees, court costs, and other costs in connection with the collection of unpaid
amounts.
Payment of any such bills shall not prejudice the right of any Non-Operator to protest or question the correctness thereof;
provided, however, all bills and statements rendered to Non-Operators by Operator during any calendar year shall
conclusively be presumed to be true and correct after twenty-four (24) months following the end of any such calendar
year, unless within the said twenty-four (24) month period a Non-Operator takes written exception thereto and makes
claim on Operator for adjustment. No adjustment favorable to Operator shall be made unless it is made within the same
prescribed period. The provisions of this paragraph shall not prevent adjustments resulting from a physical inventory of
Controllable Material as provided for in Section V.
COPYRIGHT © 1985 by the Council of Petroleum Accountants Societies.
31
A. | A Non-Operator, upon notice in writing to Operator and all other Non-Operators, shall have the right to audit |
Operator's accounts and records relating to the Joint Account for any calendar year within the twenty-four
(24) month period following the end of such calendar year; provided, however, the making of an audit shall not
extend the time for the taking of written exception to and the adjustments of accounts as provided for in
Paragraph 4 of this Section I. Where there are two or more Non-Operators, the Non-Operators shall make
every reasonable effort to conduct a joint audit in a manner which will result in a minimum of inconvenience
to the Operator. Operator shall bear no portion of the Non-Operators' audit cost incurred under this
paragraph unless agreed to by the Operator. The audits shall not be conducted more than once each year
without prior approval of Operator, except upon the resignation or removal of the Operator, and shall be made
at the expense of those Non-Operators approving such audit.
B. | The Operator shall reply in writing to an audit report within 180 days after receipt of such report. |
6. | Approval By Non-Operators |
Where an approval or other agreement of the Parties or Non-Operators is expressly required under other sections of this
Accounting Procedure and if the agreement to which this Accounting Procedure is attached contains no
contrary provisions in regard thereto, Operator shall notify all Non-Operators of the Operator's proposal, and the
agreement or approval of a majority in interest of the Non-Operators shall be controlling on all Non-Operators.
II. DIRECT CHARGES
Operator shall charge the Joint Account with the following items:
1. | Ecological and Environmental |
Costs incurred for the benefit of the Joint Property as a result of governmental or regulatory requirements to satisfy
environmental considerations applicable to the Joint Operations. Such costs may include surveys of an ecological or
archaeological nature and pollution control procedures as required by applicable laws and regulations.
Lease rentals and royalties paid by Operator for the Joint Operations.
A. | (1) | Salaries and wages of Operator's field employees directly employed on the Joint Property in the conduct of |
Joint Operations.
(2) | Salaries of First level Supervisors in the field. |
(3) | Salaries and wages of Technical Employees directly employed on the Joint Property if such charges are |
excluded from the overhead rates.
(4) | Salaries and wages of Technical Employees either temporarily or permanently assigned to and directly |
employed in the operation or the Joint Property if such charges are excluded from the overhead rates.
B. | Operator's cost of holiday, vacation, sickness and disability benefits and other customary allowances paid to |
employees whose salaries and wages are chargeable to the Joint Account under Paragraph 3A of this Section II.
Such costs under this Paragraph 3B may be charged on a "when and as paid basis" or by "percentage assessment"
on the amount of salaries and wages chargeable to the Joint Account under Paragraph 3A of this Section II. If
percentage assessment is used, the rate shall be based on the Operator's cost experience.
C. | Expenditures or contributions made pursuant to assessments imposed by governmental authority which are |
applicable to Operator’s costs chargeable to the Joint Account under Paragraphs 3A and 3B of this Section II.
D. | Personal Expenses of those employees whose salaries and wages are chargeable to the Joint Account under |
Paragraphs 3A and 3B of this Section II.
Operator's current costs or established plans for employees' group life insurance, hospitalization, pension, retirement,
stock purchase, thrift, bonus, and other benefit plans of a like nature, applicable to Operator's labor cost chargeable to the
Joint Account under Paragraphs 3A and 3B of this Section II shall be Operator's actual cost not to exceed the percent
most recently recommended by the Council of Petroleum Accountants Societies.
32
Material purchased or furnished by Operator for use on the Joint Property as provided under Section IV. Only such
Material shall be purchased for or transferred to the Joint Property as may be required for immediate use and is
reasonably practical and consistent with efficient and economical operations. The accumulation of surplus stocks shall be
avoided.
Transportation of employees and Material necessary for the Joint Operations but subject to the following limitations:
A. | If Material is moved to the Joint Property from the Operator's warehouse or other properties, no charge shall be |
made to the Joint Account for a distance greater than the distance from the nearest reliable supply store where like
material is normally available or railway receiving point nearest the Joint Property unless agreed to by the Parties.
B. | If surplus Material is moved to Operator's warehouse or other storage point, no charge shall be made to the Joint |
Account for a distance greater than the distance to the nearest reliable supply store where like material is normally
available, or railway receiving point nearest the Joint Property unless agreed to by the Parties. No charge shall be
made to the Joint Account for moving Material to other properties belonging to Operator, unless agreed to by the
Parties.
C. | In the application of subparagraphs A and B above, the option to equalize or charge actual trucking cost is |
available when the actual charge is $400 or less excluding accessorial charges. The $400 will be adjusted to the
amount most recently recommended by the Council of Petroleum Accountants Societies.
The cost of contract services, equipment and utilities provided by outside sources, except services excluded by Paragraph
10 of Section II and Paragraph i, ii, and iii, of Section III. The cost of professional consultant services and contract
services of technical personnel directly engaged on the Joint Property if such charges are excluded from the overhead
rates. The cost of professional consultant services or contract services of technical personnel not directly engaged on the
Joint Property shall not be charged to the Joint Account unless previously agreed to by the Parties.
8. | Equipment and Facilities Furnished By Operator |
A. | Operator shall charge the Joint Account for use of Operator owned equipment and facilities at rates commensurate |
with costs of ownership and operation. Such rates shall include costs of maintenance, repairs, other operating
expense, insurance, taxes, depreciation, and interest on gross investment less accumulated depreciation not to
exceed | twelve | percent ( | 12 | %) per annum. Such rates shall not exceed average commercial |
rates currently prevailing in the immediate area of the Joint Property.
B. | In lieu of charges in Paragraph 8A above, Operator may elect to use average commercial rates prevailing in the |
immediate area of the Joint Property less 20%. For automotive equipment, Operator may elect to use rates
published by the Petroleum Motor Transport Association.
9. | Damages and Losses to Joint Property |
All costs or expenses necessary for the repair or replacement of Joint Property made necessary because of damages or
losses incurred by fire, flood, storm, theft, accident, or other cause, except those resulting from Operator’s gross
negligence or willful misconduct. Operator shall furnish Non-Operator written notice of damages or losses incurred as
soon as practicable after a report thereof has been received by Operator.
Expense of handling, investigating and settling litigation or claims, discharging of liens, payment of judgments and
amounts paid for settlement of claims incurred in or resulting from operations under the agreement or necessary to
protect or recover the Joint Property, except that no charge for services of Operator's legal staff or fees or expense of
outside attorneys shall be made unless previously agreed to by the Parties. All other legal expense is considered to be
covered by the overhead provisions of Section III unless otherwise agreed to by the Parties, except as provided in Section
I, Paragraph 3.
All taxes of every kind and nature assessed or levied upon or in connection with the Joint Property, the operation thereof,
or the production therefrom, and which taxes have been paid by the Operator for the benefit of the Parties. If the ad
valorem taxes are based in whole or in part upon separate valuations of each party's working interest, then
notwithstanding anything to the contrary herein, charges to the Joint Account shall be made and paid by the Parties
hereto in accordance with the tax value generated by each party's working interest.
33
Net premiums paid for insurance required to be carried for the Joint Operations for the protection of the Parties. In the
event Joint Operations are conducted in a state in which Operator may act as self-insurer for Worker's Compensation
and/or Employers Liability under the respective state's laws, Operator may, at its election, include the risk under its self-
insurance program and in that event, Operator shall include a charge at Operator's cost not to exceed manual rates.
13. | Abandonment and Reclamation |
Costs incurred for abandonment of the Joint Property, including costs required by governmental or other regulatory
authority.
Cost of acquiring, leasing, installing, operating, repairing and maintaining communication systems, including radio and
microwave facilities directly serving the Joint Property. In the event communication facilities/systems serving the Joint
Property are Operator owned, charges to the Joint Account shall be made as provided in Paragraph 8 of this Section II.
Any other expenditure not covered or dealt with in the foregoing provisions of this Section II, or in Section III and which
is of direct benefit to the Joint Property and is incurred by the Operator in the necessary and proper conduct of the Joint
Operations.
III. OVERHEAD
1. | Overhead - Drilling and Producing Operations |
i. | As compensation for administrative, supervision, office services and warehousing costs, Operator shall charge |
drilling and producing operations on either:
( | X | ) Fixed Rate Basis, Paragraph lA, or |
() Percentage Basis, Paragraph lB |
Unless otherwise agreed to by the Parties, such charge shall be in lieu of costs and expenses of all offices and
salaries or wages plus applicable burdens and expenses of all personnel, except those directly chargeable under
Paragraph 3A, Section II. The cost and expense of services from outside sources in connection with matters of
taxation, traffic, accounting or matters before or involving governmental agencies shall be considered as included in
the overhead rates provided for in the above selected Paragraph of this Section III unless such cost and expense are
agreed to by the Parties as a direct charge to the Joint Account.
ii. | The salaries, wages and Personal Expenses of Technical Employees and/or the cost of professional consultant |
services and contract services of technical personnel directly employed on the Joint Property:
() shall be covered by the overhead rates, or |
( | X | ) shall not be covered by the overhead rates. |
iii. | The salaries, wages and Personal Expenses of Technical Employees and/or costs of professional consultant services |
and contract services of technical personnel either temporarily or permanently assigned to and directly employed in
the operation of the Joint Property:
() shall be covered by the overhead rates, or |
( | X | ) shall not be covered by the overhead rates. |
A. | Overhead - Fixed Rate Basis |
(1) | Operator shall charge the Joint Account at the following rates per well per month: |
Drilling Well Rate $ | 7,500.00 |
Producing Well Rate $ | 750.00 |
(2) | Application of Overhead - Fixed Rate Basis shall be as follows: |
(1) | Charges for drilling wells shall begin on the date the well is spudded and terminate on the date |
the drilling rig, completion rig, or other units used in completion of the well is released, whichever
34
is later, except that no charge shall be made during suspension of drilling or completion operations
for fifteen (15) or more consecutive calendar days.
(2) | Charges for wells undergoing any type of workover or recompletion for a period of five (5) |
consecutive work days or more shall be made at the drilling well rate. Such charges shall be
applied for the period from date workover operations, with rig or other units used in workover,
commence through date of rig or other unit release, except that no charge shall be made during
suspension of operations for fifteen (15) or more consecutive calendar days.
(1) | An active well either produced or injected into for any portion of the month shall be considered as |
a one-well charge for the entire month.
(2) | Each active completion in a multi-completed well in which production is not commingled down |
hole shall be considered as a one-well charge providing each completion is considered a separate
well by the governing regulatory authority.
(3) | An inactive gas well shut in because of overproduction or failure of purchaser to take the |
production shall be considered as a one-well charge providing the gas well is directly connected to
a permanent sales outlet.
(4) | A one-well charge shall be made for the month in which plugging and abandonment operations |
are completed on any well. This one-well charge shall be made whether or not the well has
produced except when drilling well rate applies.
(5) | All other inactive wells (including but not limited to inactive wells covered by unit allowable, lease |
allowable, transferred allowable, etc.) shall not qualify for an overhead charge.
(3) | The well rates shall be adjusted as of the first day of April each year following the effective date of the |
agreement to which this Accounting Procedure is attached. The adjustment shall be computed by multiplying
the rate currently in use by the percentage increase or decrease in the average weekly earnings of Crude
Petroleum and Gas Production Workers for the last calendar year compared to the calendar year preceding as
shown by the index of average weekly earnings of Crude Petroleum and Gas Production Workers as published
by the United States Department of Labor, Bureau of Labor Statistics, or the equivalent Canadian index as
published by Statistics Canada, as applicable. The adjusted rates shall be the rates currently in use, plus or
minus the computed adjustment.
B.
2. | Overhead - Major Construction |
To compensate Operator for overhead costs incurred in the construction and installation of fixed assets, the expansion of
fixed assets, and any other project clearly discernible as a fixed asset required for the development and operation of the
Joint Property, Operator shall either negotiate a rate prior to the beginning of construction, or shall charge the Joint
35
Account for overhead based on the following rates for any Major Construction project in excess of $ | 25,000.00 | : |
A. | 6 | % of first $100,000 or total cost if less, plus |
B. | 4 | % of costs in excess of $100,000 but less than $1,000,000, plus |
C. | 2 | % of costs in excess of $1,000,000. |
Total cost shall mean the gross cost of any one project. For the purpose of this paragraph, the component parts of a single
project shall not be treated separately and the cost of drilling and workover wells and artificial lift equipment shall be
excluded.
To compensate Operator for overhead costs incurred in the event of expenditures resulting from a single occurrence due
to oil spill, blowout, explosion, fire, storm, hurricane, or other catastrophes as agreed to by the Parties, which are
necessary to restore the Joint Property to the equivalent condition that existed prior to the event causing the
expenditures, Operator shall either negotiate a rate prior to charging the Joint Account or shall charge the Joint Account
for overhead based on the following rates:
A. | 6 | % of total costs through $100,000; plus |
B. | 4 | % of total costs in excess of $100,000 but less than $1,000,000; plus |
C. | 2 | % of total costs in excess of $1,000,000. |
Expenditures subject to the overheads above will not be reduced by insurance recoveries, and no other overhead
provisions of this Section III shall apply.
The overhead rates provided for in this Section III may be amended from time to time only by mutual agreement
between the Parties hereto if, in practice, the rates are found to be insufficient or excessive.
IV. PRICING OF JOINT ACCOUNT MATERIAL PURCHASES, TRANSFERS AND DISPOSITIONS
Operator is responsible for Joint Account Material and shall make proper and timely charges and credits for all Material
movements affecting the Joint Property. Operator shall provide all Material for use on the Joint Property; however, at
Operator's option, such Material may be supplied by the Non-Operator. Operator shall make timely disposition of idle and/or
surplus Material, such disposal being made either through sale to Operator or Non-Operator, division in kind, or sale to
outsiders. Operator may purchase, but shall be under no obligation to purchase, interest of Non-Operators in surplus condition
A or B Material. The disposal of surplus Controllable Material not purchased by the Operator shall be agreed to by the Parties.
Material purchased shall be charged at the price paid by Operator after deduction of all discounts received. In case of
Material found to be defective or returned to vendor for any other reasons, credit shall be passed to the Joint Account
when adjustment has been received by the Operator.
2. | Transfers and Dispositions |
Material furnished to the Joint Property and Material transferred from the Joint Property or disposed of by the Operator,
unless otherwise agreed to by the Parties, shall be priced on the following basis exclusive of cash discounts:
A. | New Material (Condition A) |
(1) | Tubular Goods Other than Line Pipe |
To be purchased based on competitive bid practices.
(
36
To be purchased based on competitive bid practices.
(3) | Other Material shall be priced at the current new price, in effect at date of movement, as listed by a reliable |
supply store nearest the Joint Property, or point of manufacture, plus transportation costs, if applicable, to the
railway receiving point nearest the Joint Property.
(4) | Unused new Material, except tubular goods, moved from the Joint Property shall be priced at the current |
new price, in effect on date of movement, as listed by a reliable supply store nearest the Joint Property, or
point of manufacture, plus transportation costs, if applicable, to the railway receiving point nearest the Joint
Property. Unused new tubulars will be priced as provided above in Paragraph 2.A.(l) and (2).
B. | Good Used Material (Condition B) |
Material in sound and serviceable condition and suitable for reuse without reconditioning:
(1) | Material moved to the Joint Property |
At seventy-five percent (75%) of current new price, as determined by Paragraph A.
(2) | Material used on and moved from the Joint Property |
(a) | At seventy-five percent (75%), as determined by Paragraph A, if Material was |
originally charged to the Joint Account as new Material or
(b) | At sixty-five percent (65%), as determined by Paragraph A, if Material was |
originally charged to the Joint Account as used Material
(3) | Material not used on and moved from the Joint Property |
At seventy-five percent (75%) as determined by Paragraph A.
The cost of reconditioning, if any, shall be absorbed by the transferring property.
Material which is not in sound and serviceable condition and not suitable for its original function until
after reconditioning shall be priced at fifty percent (50%) of current new price as determined by
Paragraph A. The cost of reconditioning shall be charged to the receiving property, provided Condition
C value plus cost of reconditioning does not exceed Condition B value.
37
Material, excluding junk, no longer suitable for its original purpose, but usable for some other purpose
shall be priced on a basis commensurate with its use. Operator may dispose of Condition D Material
under procedures normally used by Operator without prior approval of Non-Operators.
(a) | Casing, tubing, or drill pipe used as line pipe shall be priced as Grade A and B seamless line pipe |
of comparable size and weight. Used casing, tubing or drill pipe utilized as line pipe shall be
priced at used line pipe prices.
(b) | Casing, tubing or drill pipe used as higher pressure service lines than standard line pipe, e.g. |
power oil lines, shall be priced under normal pricing procedures for casing, tubing, or drill pipe.
Upset tubular goods shall be priced on a non upset basis.
Junk shall be priced at prevailing prices. Operator may dispose of Condition E Material under
procedures normally utilized by Operator without prior approval of Non-Operators.
Material which is serviceable and usable for its original function but condition and/or value of such Material
is not equivalent to that which would justify a price as provided above may be specially priced as agreed to by
the Parties. Such price should result in the Joint Account being charged with the value of the service
rendered by such Material.
(1) | Loading or unloading costs may be charged to the Joint Account at the rate of twenty-five cents (25¢) |
per hundred weight on all tubular goods movements, in lieu of actual loading or unloading costs
sustained at the stocking point. The above rate shall be adjusted as of the first day of April each year
following January 1, 1985 by the same percentage increase or decrease used to adjust overhead rates in
Section III, Paragraph 1.A.(3). Each year, the rate calculated shall be rounded to the nearest cent and
shall be the rate in effect until the first day of April next year. Such rate shall be published each year
by the Council of Petroleum Accountants Societies.
(2) | Material involving erection costs shall be charged at applicable percentage of the current knocked-down |
price of new Material.
Whenever Material is not readily obtainable at published or listed prices because of national emergencies. strikes or other
unusual causes over which the Operator has no control, the Operator may charge the Joint Account for the required
Material at the Operator's actual cost incurred in providing such Material, in making it suitable for use, and in moving it
to the Joint Property; provided notice in writing is furnished to Non-Operators of the proposed charge prior to billing
Non-Operators for such Material. Each Non-Operator shall have the right, by so electing and notifying Operator within
ten days after receiving notice from Operator, to furnish in kind all or part of his share of such Material suitable for use
and acceptable to Operator.
4. | Warranty of Material Furnished By Operator |
Operator does not warrant the Material furnished. In case of defective Material, credit shall not be passed to the Joint
Account until adjustment has been received by Operator from the manufacturers or their agents.
V. INVENTORIES
The Operator shall maintain detailed records of Controllable Material.
1. | Periodic Inventories, Notice and Representation |
At reasonable intervals, inventories shall be taken by Operator of the Joint Account Controllable Material. Written notice
of intention to take inventory shall be given by Operator at least thirty (30) days before any inventory is to begin so that
Non-Operators may be represented when any inventory is taken. Failure of Non-Operators to be represented at an
inventory shall bind Non-Operators to accept the inventory taken by Operator.
2. | Reconciliation and Adjustment of Inventories |
Adjustments to the Joint Account resulting from the reconciliation of a physical inventory shall be made within six
months following the taking of the inventory. Inventory adjustments shall be made by Operator to the Joint Account for
38
overages and shortages, but, Operator shall be held accountable only for shortages due to lack of reasonable diligence.
Special inventories may be taken whenever there is any sale, change of interest, or change of Operator in the Joint
Property. It shall be the duty of the party selling to notify all other Parties as quickly as possible after the transfer of
interest takes place. In such cases, both the seller and the purchaser shall be governed by such inventory. In cases
involving a change of Operator, all Parties shall be governed by such inventory.
4. | Expense of Conducting Inventories |
A. | The expense of conducting periodic inventories shall not be charged to the Joint Account unless agreed to by the |
Parties.
B. | The expense of conducting special inventories shall be charged to the Parties requesting such inventories, except |
inventories required due to change of Operator shall be charged to the Joint Account.
39
EXHIBIT “D”
Attached to and made a part of that certain Operating Agreement dated December 5, 2003 by and between Longbow, LLC., and Archer Exploration, Inc., et al.
_______________________________________________________________________
1. Worker’s Compensation Insurance including Employers’ Liability, in compliance with the State of California.
2. Comprehensive General Liability Insurance, excluding products, within limits of One Million Dollars ($1,000,000.00) for injuries or death to one person; One Million Dollars ($1,000,000.00) for each accident.
3. Operator shall require that each independent contractor and subcontractor carry and maintain insurance at its/his own expense in amounts deemed necessary to cover the risks inherent to the work or services being performed. Operator will furnish, or cause to be furnished, evidence of insurance coverage maintained by its contractors and subcontractors when required by Non-operators.
4. Well Control-Seepage-Pollution Insurance with coverage in an amount not less than One Million Dollars ($1,000,000.00) per occurrence and such other insurance, self-insurance, or combination thereof as deemed necessary and agreed to in writing by the parties to this agreement, to cover the risks inherent to the work being performed by Operator.
40
EXHIBIT “F”
Attached to and made a part of that certain Operating Agreement dated December 5, 2003 by and between Longbow, LLC., and Archer Exploration, Inc., et al.
________________________________________________________________________
A. | Equal Opportunity Clause (41 CFR 60-1.4) |
During the performance of this contract, Operator agrees as follows:
(1) | Operator will not discriminate against any employee or applicant for | |
| employment because of race , color, religion, sex, age or national origin. | |
| Operator will take affirmative action to ensure that applicants are employed, |
| and that employees are treated during employment, without regard to their | |
| 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. Operator agrees to post in conspicuous places, available to employees and applicants for employment, notices setting forth the provisions of this nondiscrimination clause.
(2) Operator will, in all solicitations or advertisements for employees placed by or on behalf of Operator, state that all qualified applicants will receive consideration for employment without regard to race, color, religion, sex, age or national origin.
(3) Operator will send to each labor union or representatives of workers with which Operator Has a collective bargaining agreement or other contract or understanding, a notice advising the labor union or workers’ representative of Operator’s commitments under section 202 of Executive Order 11246 of September 24, 1965, and shall post copies of the notice in conspicuous places, available to employees and applicants for employment.
(4) Operator will comply with all provisions of Executive Order 11246 of September 24, 1965, and of the rules, regulations, and relevant orders of the Secretary of Labor.
(5) Operator will furnish all information and reports required by Executive Order 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 Secretary of Labor and his representatives for purposes of investigation to ascertain compliance with such rules, regulations, and orders.
41
(6) In the event of Operator’s noncompliance with the nondiscrimination 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 Operator may be declared ineligible for further g government contracts in accordance with procedures authorized in Executive Order 11246 of September 24, 1965, and such other sanctions may be imposed and remedies invoked as provided in Executive Order 11246 of September 24, 1965, and by the rule, regulation and order of the Secretary of Labor, or as otherwise provided by the law.
(7) Operator 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 of Labor issued pursuant to section 204 of Executive Order 11246 of September 24, 1965, so that such provisions will be binding upon each subcontractor or vendor. Operator will take such action with respect to any subcontract or purchase order as the contracting agency may direct as a means of enforcing such provisions including sanctions for noncompliance; provided, however, that in the event Operator becomes involved in, or is threatened with, litigation with a subcontractor or vendor as a result of such direction by the contracting agency, Operator may request the United States to enter into such litigation to protect the interests of the United States.
B. | Employee Information Reports (41 CFR 601.7) |
Operator acknowledges that it may be required to file Standard Form 100 (EEO-1) promulgated jointly by the Office of Federal Contract Compliance, the Equal Employment Opportunity Commission and Plans for Progress with Joint Reporting Committee, Federal Depot, Jeffersonville, Indiana, within thirty (30) days of the date of contract award if such report has not been filed for the current year and otherwise comply with or file such other compliance reports as may be required under Executive Order 11246, as amended, and Rules and Regulations adopted thereunder.
C. | Affirmative Action Programs (41 CFR 60-1.40) |
Operator further acknowledges that it may be required to develop a written affirmative action compliance program as required by the Rules and Regulations approved by the Secretary of Labor under authority of Executive Order 11246 and supply Non-Operator with a copy of such program if they so request.
D. | Certification of Non-segregeted Facilities (41 CFR 60-1.8) |
Operator certifies that it does not maintain or provide for its employees any segregated facilities at any of its establishments, and that it does not permit its employees to perform their services at any location under its control, where
42
segregated facilities are maintained. It certifies further that it will not maintain or provide for its employees any segregated facilities at any of its establishments, and that it will not permit its employees to perform their services at any location under its control where segregated facilities are maintained. Operator agrees that a breach of this certification is a violation of the Equal Employment Opportunity Clause in this contract. 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, 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. It further agrees that (except where it has obtained identical certifications from proposed subcontractors for specific time periods) it will obtain identical certifications from proposed subcontractors prior to the award of subcontractors exceeding $10,000.00 which are not exempt from the provisions of Equal Employment Opportunity Clause; that it will retain such certification in its files; and that it will forward the following notice to such proposed subcontractors (except where the proposed subcontractors have submitted identical certifications for specific time periods) : NOTICE TO PROSPECTIVE SUBCONTRACTORS OF REQUIREMENT FOR CERTIFICATIONS OF NON-SEGREGATED FACILITIES. A certification of Non-segregated 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 $10,000.00 which is not exempt from the provisions of the Equal Opportunity Clause. The certification may be submitted either for each subcontract or for all subcontracts during a period (i.e., quarterly, semi-annually, or annually). (Note: The penalty for making false statements in offers is prescribed in 18 U.S.C. 1001.)
E. | Listing of employment Openings (41 CFR 50-250) |
Operator agrees to comply with the rules and regulations of the Department of Labor concerning the listing of employment openings, including the contract clause set forth in 41 C.F.R. 50-250.2, which clause is incorporated herein by reference. Operator also agrees to place the foregoing provision in any subcontract directly under this contract.
F. | Employment of Handicapped Individuals |
In employing persons to carry out this Agreement, Operator will take affirmative action to employ and advance in employment qualified handicapped individuals as defined in Section 7 (6) of the Federal Rehabilitation Act of 1973.
43
