HomeMy WebLinkAbout20022240.tiff RESOLUTION
RE: APPROVE CONSENT TO ASSIGNMENT OF ROAD MAINTENANCE AND
IMPROVEMENTS AGREEMENT FOR USE BY AND AUTHORIZE CHAIR TO SIGN -
ENVIRO-CYCLE, LLC, AND MARCUM MIDSTREAM 1995-2 EC HOLDING, LLC
WHEREAS, the Board of County Commissioners of Weld County, Colorado, pursuant to
Colorado statute and the Weld County Home Rule Charter, is vested with the authority of
administering the affairs of Weld County, Colorado, and
WHEREAS, the Board has been presented with an Assignment of Road Maintenance
and Improvements Agreement for Use by Special Review Permit#1198 between the County of
Weld, State of Colorado, by and through the Board of County Commissioners of Weld County,
and Enviro-Cycle, LLC, 103 Sierra Vista, P.O. Box 169, Sterling, Colorado 80751, and Marcum
Midstream 1995-2 EC Holding, LLC, do Conquest Oil Company, 1610 29th Avenue Place,
Suite 200, Greeley, Colorado 80631, with terms and conditions being as stated in said
assignment, and
WHEREAS, after review, the Board deems it advisable to consent to said assignment, a
copy of which is attached hereto and incorporated herein by reference.
NOW, THEREFORE, BE IT RESOLVED by the Board of County Commissioners of
Weld County, Colorado, that the Assignment of Road Maintenance and Improvements
Agreement for Use between the County of Weld, State of Colorado, by and through the Board
of County Commissioners of Weld County, and Enviro-Cycle, LLC, and Marcum Midstream
1995-2 EC Holding, LLC, be, and hereby is, approved and consented to.
BE IT FURTHER RESOLVED by the Board that the Chair be, and hereby is, authorized
to sign said assignment.
The above and foregoing Resolution was, on motion duly made and seconded, adopted
by the following vote on the 14th day of August, A.D., 2002.
BOARD OF COy NTY COMMISSIONERS
WEL COU LORADO
ATTEST: iati � �.,., ,®
GI Crrco
Weld County Clerk to th1/42
f & )o,�
S ' � David E. L ro-Tem
BY: AL. X01 f ``e 4`
Deputy Clerk to the Board r `' ,f,
M. J. eile
APP VED A RM: /-t-.i2//...b. 'Ili7 for J e
C
7 unty At ney ��
S? Robert D. asden
Date of signature:
_ 2002-2240
00 1 6 Ai 1/4,426 ✓n/t1f'C'!(rr7 PL1259
/
ASSIGNMENT OF
ROAD MAINTENANCE AND IMPROVEMENTS AGREEMENT
THIS ASSIGNMENT of Road Maintenance and Improvements Agreement (hereinafter
referred to as this "Assignment"), is made this 7i 7/ day of August, 2002, by and between
Envirocycle, LLC, also sometimes known as Enviro-Cycle, LLC ("Envirocycle"), a Colorado
Limited Liability Company whose address is 103 Sierra Vista, PO Box 169, Sterling, Colorado,
80751, and Marcum Midstream 1995-2 EC Holding, LLC ("EC Holding") a Delaware limited
liability company whose address is do Conquest Oil Company, 1610 29ih Avenue Place, Suite
200, Greeley, Colorado 80631.
BACKGROUND OF AGREEMENT. The following background statements are
provided to aid in the understanding and interpretation of this Assignment:
A. Envirocycle was granted Weld County Use by Special Review Permit No.1198 ("USR
Permit") for an oil and gas support and service facility(brine water disposal) operation
located on portions of the N2 NW4 of Section 32, Township 4 North, Range 65 West of
the 6`h P.M. ("Disposal Well").
B. Envirocycle, as part of the USR Permit process, agreed to a Road Maintenance and
Improvements Agreement dated July 12, 1999 ("Road Maintenance Agreement").
C. The Road Maintenance Agreement, at paragraph 14, states: "This Agreement shall not be
assignable without prior written consent of County or Enviro-Cycle, whichever is the
non-assigning party."
D. Envirocycle has agreed to sell the Disposal Well, including an assignment of the USR
Permit, to EC Holding.
E. EC Holding has contracted with Conquest Oil Company to operate the Disposal Well and
Weld County has approved of Conquest Oil Company as the operator.
F. The parties hereto desire by this Assignment for Envirocycle to assign to EC Holding all
of the rights and obligations of Envirocycle and for EC Holding to accept such
assignment, all upon the terms and subject to the conditions which are hereinafter set
forth.
NOW, THEREFORE, FOR AND IN CONSIDERATION of the mutual entry into this
Assignment by the parties hereto, and for other good and valuable considerations, the receipt and
adequacy of which are hereby acknowledged by each party hereto, the parties agree as follows:
1. Assignment. Envirocycle hereby assigns to EC Holding the rights and responsibilities of
Envirocylce under the Road Maintenance Agreement, and EC Holding agrees to fully and
faithfully perform such Road Maintenance Agreement.
4,0,2-rya
2. Effectiveness. This Assignment shall become effective on and only on its execution and
delivery by each party hereto.
IN WITNESS WHEREOF, each party hereto has executed this Assignment by its duly
authorized representative, the day and the year first above written.
Mar m Mid 1995-2 EC Holding, LLC
By � ,1,C./J.-.4is
Envirocycle, LLC
By: Beutler Bros. & Cervi Rodeo Co., its sole Member and Manager
-,
By
Mike Cervi, ' 'dent
CONSENT AND APPROVAL
r
Pursuant to Paragraph 14 of the Road Maintenance Agreement, the County of Weld, State
of Colorado hereby consents and agrees to the above Assignment.
County of Weld, Board of Commissioners
Date August 14, 2002 By Sual iel " n/�
Glenn !> �
Its Chair
ATTEST: LI
/ly�' q ,��
WELD COUNTY CLERK 86
BY: DEPUTY CLERK TO y�
C\WINDOWS\TEMP\fma1.8-13-02.wpd 2
STATE OF COLORADO )
)
County of Weld )
The foregoing instrument was acknowledged before me this a a day of August, 2002, by
Beutler Bros. & Cervi Rodeo Co., as Sole Member and Manager of Envirocycle, LLC, by Mike
Cervi, Vice President.
Witness my h..:ri'.,c.. o • .N eal.
/%t..p ..............:'1j�111
•
MyCommi iot4ExJ�r� tdot i0S
,io
1. SNOW i $
4- --
II%ltt .-.. Qr Notary Public
cot'
STATE OF COLORADO )
)
County of Weld )
The fore oing_instrumen1 was a knowledged before me this =2 a day of August, 2002, by
1:g _ as Manager for Marcum Midstream 1995-2 EC Holding, LLC.
°7-,..-0‘, , — m-.A•-J..-0 .. ;99 5- a I3....a.--r `-u,..i. m
Witness my hand and official seal.
My Commission Expires: I t) aol o s
Notary Public
pBY`ri,
I JEANFTw'
i mm-
2
C'.\WINDOWS\TEMP\final.8-1]-02 wpd 3
Aug• 7. 2002 4:33PM West Greeley Law Center No• 0003 P. 5/8
Draft 7-29-02
AMENDMENT NO.2
TO
DISPOSAL FACILITIES OPERATING AGREEMENT
THIS AMENDMENT NO. 2 (this "Amendment"), made and entered into as of August
2002, amends the Disposal Facilities Operating Agreement,dated as ofFebnrary 8, 1996,as previously
amended on April 3,2002(as so amended,the"Agreement"),by and among Conquest Oil Company,a ) ,_
Colorado corporation("Operator"), Marcum Midstream 1995-2 Business Trust, a Delaware business
trust ("Owner"), end Marcum Midstream 1995-2 EC Holding, LLC, a Delaware limited liability
company("Qwner Sob").
WITNESSETIt:
WHEREAS,Owner and Operator had previously entered into the Agreement,which provides,
among other things,for the Operator to operate two produced water disposal facilities located in Weld
County,Colorado(the"Original Facilities");and
WHEREAS, Operator has entered into a certain Asset Purchase Agreement, dated April 3,
2002 (the "Purchase Agreement"), with Envirocycle, LLC, a Colorado limited liability company(the
"Seller"), providing for, among other things, the purchase by Operator from the Seller of a water
disposal facility located in Weld Country,Colorado known as the"Envirocycle Facility";and
WHEREAS, Operator intends to assign its rights and obligations under the Purchase
Agreement to Owner Subsidiary, a wholly owned subsidiary of the Owner, and Owner Subsidiary
intends to assume Operator's rights and obligations under the Purchase Agreement and acquire the
Envirocycle Facility and operate it under the Weld Country, Colorado USR permit to be issued to
Operator;and
WHEREAS, Owner and Owner Subsidiary desire that Operator operate the Envirocycle
Facility under the Agreement on the same basis as it currently operates the Original Facilities, and
Operator desires to do the same;and
WHEREAS,pursuant to Section 10.8 of the Agreement,the Agreement may be amended only
by an instrument executed by the party to be charged with such amendment•,and
WHEREAS, Owner, Owner Sub and Operator desire to amend the Agreement as set forth
herein to provide for Operator to operate the Envirocycle Facility for an additional compensation
commensurate with its additional duties payable by Owner Sub;
NOW, THEREFORE) in consideration of the premises and mutual agreements hereinafter set
forth,"and for other good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto, being all the parties to the Agreement and intending to be legally
bound hereby, agree as follows:
Aug• 7 . 2002 4:34PM West Greeley Law Center No.0003 P• 6/8
Section 1. Definitions. Capitalized terms used in this Amendment and not otherwise
defined herein shall have the respective meanings given to them in the Agreement.
Section 2. Amts. The Agreement is hereby amended as follows:
(a) Amendment to Recitals The Recitals to the Agreement arc hereby amended in
their entirety to read as follows:
"A. Pursuant to that certain Option Purchase Agreement dated September 8,
1995 with Operator (the "Purchase Agreement), Owner purchased from Operator
certain Assets as defined herein, which included two produced water disposal facilities
located in Weld County,Colorado,and the real property interests, equipment and other
personal property, permits, contract rights and other property rights associated
Therewith(collectively,the"Original Facilities").
B. Subsequently, pursuant to that certain Asset Purchase Agreement dated
April 3, 2002 (the "2002 Purchase Agreement) with Envirocyde, LLC, Marcum
Midstream 1995-2 EC Holding, LLC, a Delaware limited liability company and
wholly-owned subsidiary of the Owner ("Owner Sub") purchased certain additional
assets, which included a third produced water disposal facility located in Weld County,
Colorado, and the real property interests, equipment and other personal property,
permits, contract rights and other property rights associated therewith(collectively,the
"Additional Facility"and,collectively with the Original Facilities,the"Facilities").
C. Owner desires to retain Operator to operate the Original Facilities, and
Owner Sub desires to retain Operator to operate the Additional Facility under the Weld
Country, Colorado USR permit to be issued to Operator, and Operator desires to
operate the Facilities, and the parties desire to set forth herein their agreement
concerning the Operator's operation of the Facilities."
(b) Amendment to xmrodustiop of the Agreement. The introduction to the Agreement,
below the caption "AGREEMENT" and before Article I, is hereby amended by
adding",Owner Sub"after the word"Owner".
(c) Amendment to Article 1 Adding a New Section 1.6. Article I of the Agreement
shall be amended by adding a new Section 1.6 to the end of Article 1 to read in its
entirety as follows:
"As used herein,"Facilities" shall include the Original Facilities described on Exhibit A
attached hereto and the other Assets(as defined in the Purchase Agreement)conveyed
• by Operator to Owner pursuant to the Purchase Agreement, as well as the Additional
Facilities described on Exhibit E attached hereto and the other Assets(as defined in the
2002 Purchase Agreement) conveyed by Envirocycle,LLC to Owner Sub pursuant to
the 2002 Purchase Agreement,each under the Weld Country USR permit issued in the
name of Operator. With respect to the respective rights and obligations of Owner and
Owner Sub to Operator hereunder and the rights and obligations of Operator to Owner
and Owner Sub hereunder, notwithstanding any reference to "Owner" hereunder, all
OW07 VI 2
Aug• 7 . 2002 4: 34PM West Greeley Law Center No•0003 P . 7/8
rights and obligations of"Owner" hereunder shall accrue to and be borne by Owner
with respect to the Original Facilities (and conformingly with respect to Operator's
rights and obligations with respect to the Original Facilities), and all rights and
obligations of"Owner" hereunder shall accrue to and be borne by Owner Sub with
respect to the Additional Facility(and conformingly with respect to Operator's rights
and obligations with respect to the Additional Facility)."
(e) Amendment to Section 3.1. Section 3.1 of the Agreement shall be amended by
stilling"$50,000," and replacing it with the phrase"$75,000, of which $50,000 shall
be attributable to the Original Facilities and payable by Owner and $25,000 shall be
attributable to the Additional Facility and payable by Owner Sub (and, in accordance
with Section 1.6, all rights and obligations attributable to "Owner" under this Section
3.1 shall mean the rights and obligations of Owner, with respect to the Original
Facilities, and shall mean the rights and obligations of Owner Sub, with respect to the
Additional Facility), which operator's fee shall be". [Issue:Should CPI Adiustment
provision be diminared?/
Section 3. fiffectiverisss of Amendment. This Amendment shall be effective as of the
date first above written, and all references to the Agreement, including the terns "this Agreement,"
"hereof" "herein" and the like contained in the Agreement shall, as of and after such date, be deemed
to be iefe*euces to the Agreement as modified by the terms of this Amendment. Except as and to the
extent expressly modified by the terms of this Amendment, the Agreement shall remain in Rill force
and effect in accordance with its terms.
Section 4. Governing Law. This Amendment shall in all respects be governed by and
construed in accordance with the internal substantive laws of the State of Colorado, irrespective of the
law that would govern under applicable principles of choice or conflicts of law.
Section 5. Successors and Assigns. This Amendment shall inure to the benefit of and be
binding upon the parties hereto and their respective successors and permitted assigns.
Section 6. Captions. The captions used herein are solely for convenience of
reference and shall not be given any effect in the construction or interpretation of this Amendment.
Section 7. Counterparts. This Amendment may be executed in any number of
counterparts (including counterparts executed by less than all parties hereto), each of which shall be
deemed an original,but all of which together shall constitute one and the same instmment.
a a * * *
wxwra 3
Aug. 7 . 2002 4: 34PM West Greeley Law Center No•0003 P . 8/8
IN WITNESS WHEREOF,the parties hereto have caused this Amendment to be executed and
delivered by their respective duly authorized officers, effective as of the date first written above.
OPERATOR:
CONQUEST OIL COMPANY
By.
Its:
OWNER:
MARCUM MIDSTREAM 1995-2 BUSINESS
TRUST
By:Marcum Gas Transmission,Inc.,
Its Managing Trustee
By:
Its:
OWNER SUB:
MARCUM MIDSTREAM 1995-2 EC
HOLDING,LLC
By: Marcum Midstream 1995-2 Business Trust,
Its Manager
By:Marcum Gas Transmission,Inc.,
Its Managing Trustee
By:
Its:
mem ' 4
Jul . 12. 2002 4:26PM West Greeley Law Center No •9195 P . 2/13
DISPOSAL FACILITIES OPERATING AGREEMENT
THIS AGREEMENT dated February 8, 1996 (this "Agreement")is between
CONQUEST OIL COMPANY,a Colorado corporation("Operator"), 1610 29th Avenue Place,
Suite 200, Greeley,Colorado 80631,and MARCUM MIDSTREAM 1995-2 BUSINESS
TRUST,a Delaware business trust("Owner"), 1675 Broadway, Suite 2200,Denver,Colorado
80202.
RECITALS
A. Pursuant to that Option Purchase Agreement dated September 8, 1995 (the
"Purchase Agreement"),Owner purchased from Operator certain Assets as defined therein,
which included certain produced water disposal facilities located in Weld County,Colorado,and
the real property interests,equipment and other personal property,permits,contract rights and
other property and rights associated therewith. As used herein, "Facilities" shall mean the
disposal facilities described on Exhibit A attached hereto and the other Assets(as defined in the
Purchase Agreement)conveyed by Operator to Owner pursuant to the Purchase Agreement.
B. Owner desires to retain Operator to operate the Facilities and the parties
desire to set forth herein their agreement concerning the Operator's operation of the Facilities.
AGREEMENT
In consideration of the mutual promises and covenants contained herein and other
good and valuable consideration,the receipt and sufficiency of which is acknowledged by the
parties,Owner and Operator hereby agree as follows:
ARTICLE 1
OPERATION OtFACILJTJES
1.1 Duties of Operator. Operator shall supervise and perform or have
performed all operations,maintenance, and repair of the Facilities or any modifications thereto
and conduct all operations hereunder in a good and workmanlike manner,and,in the absence of
specific instructions from Owner, shall have the right and duty to act in accordance with standard
industry practices and with its best judgment of what a prudent operator would do under the same
or similar circumstances(the"Prudent Operator Standard"). Operator shall have no liability to
Owner for losses sustained or liabilities incurred,except as may result from the gross negligence
or willftil misconduct of Operator,its agents,any subcontractor,anyone directly or indirectly
employed by any of them or anyone for whose acts any of them may be liable,or except which
reasonably could have been prevented by Operator through supervision in accordance with the
Prudent Operator Standard. Operator shall consult with Owner and keep Owner informed of all
174289-T.6
Jul • 12. 2002 4:26PM West Greeley Law Center No.9195 P. 3/13
matters arising under the operation and maintenance of the Facilities which,in the exercise of its
best judgment,it considers important and,upon reasonable request of Owner,of any and all other
matters relating thereto. Any material plan or significant change in operation,maintenance,
alteration or enlargement of the Facilities shall require the prior written consent of Owner.
Without limiting the foregoing and subject to such restrictions and the other provisions of this
Agreement,Operator shall carry out the following specific duties:
(a) Operator shall supervise all operations of the Facilities,perform all
acts necessary to fulfill the obligations of Operator and the Owner under all contracts relating to
the Facilities and supervise all other matters necessary,for the full accomplishment of the
purposes of this Agreement.
(b) Operator shall operate the Facilities in accordance with the
procedures currently being used, subject to amendments to such procedures as agreed to by
Operator and Owner.
(c) Operator shall conduct marketing activities regarding the Facilities
in the same manner as currently conducted,subject to such changes as agreed to by Operator and
Owner. Operator shall have the authority to enter into contracts with customers for disposal of
fluids at the Facilities not to exceed 500 barrels per day,provided that such contracts provide for
a disposal fee not lower than the current lowest disposal fees being charged at the Facilities. Any
disposal contracts not in accordance with the foregoing terms shall require the prior written
approval of Owner.
(d) Operator shall select Facilities personnel,the number of personnel
and their job responsibilities and training,their hours of labor and pay,and the salaries and
benefits of such Facilities personnel. All personnel matters shall be conducted by Operator in
accordance with the Personnel Manual to be attached hereto as Exhibit D when it has been
completed. All Facilities personnel shall be employees of Operator,or independent contractors
selected by Operator. Without Owner's prior written consent,the number of Facilities personnel
shall not exceed the number of personnel stated in the budget established pursuant to Article 2
for the year in question.
(e) Operator shall directly and promptly pay and discharge all costs and
expenses incurred in connection with the operation,maintenance and repair of the Facilities
pursuant to the procedures set forth in Article 2. Operator shall establish and maintain an
accounting system(with internal controls approved by Owner)regarding operation of the
Facilities,payment of expenses and collection of revenues,and Operator shall invoice all
customers of the Facilities on a monthly basis.
(f) Operator shall keep the Facilities and all real property,personal
property and equipment associated therewith free and clear of all liens and encumbrances on
account of any claims arising out of operation of the Facilities. Operator shall give Owner
742$9,..6 -2-
Jul • 12 . 2002 4:27PM West Greeley Law Center No•9195 P• 4/13
written notice of the filing of any lien or encumbrance against the Facilities within five days after
Operator receives notice of such filing.
(g) Operator shall abide by and conform to all applicable laws,orders,
rules and regulations of any governmental authorities having jurisdiction over the Facilities,and
prepare and timely submit to the proper authorities all reports required by law in connection with
the ownership,maintenance and operation of the Facilities. Operator shall provide Owner with
copies of all such reports within ten days after filing. Operator shall secure on Owner's behalf
and hold either in Owner's name or in Operator's name(as directed by Owner)and maintain in
full force and effect all necessary licenses,permits,consents and approvals for the ownership,
maintenance and operation of the Facilities.
(h) Operator shall constructor cause to be constructed all additions,
alterations or improvements to the Facilities approved pursuant to the budget procedures of
Article 2. Notwithstanding such budget procedures,Operator may make such expenditures and
incur such liabilities as in its sole judgment may be necessary to prevent or minimize loss or
destruction of Facilities property or personal injury or death in the event of emergency,in which
case Owner shall be notified as soon as practicable as to the amount and the cause for such
expenditure.
(i) Operator shall conduct all tests and measurements necessary and
appropriate for the operation of the Facilities in accordance with reasonable and prudent industry
practice and applicable laws and regulations. Copies of test results shall be furnished to Owner
upon request and shall be kept current and immediately accessible at all times at the Facilities.
a) Operator shall maintain custody of all Records regarding the Facility
purchased by Owner under the Option Purchase Agreement described in Section 4.1(b)as the
term"Records"is defined therein,and shall provide to Owner copies of such Records as Owner
may reasonably request.
1.2 Safety Responsibilities. Operator shall be responsible for initiating,
maintaining and supervising all safety precautions and programs in connection with operation of
the Facilities. It shall take all reasonable precautions for the safety of,and shall provide all
reasonable protection to prevent damage,injury or loss to(a)all Facilities employees and other
persons who may be affected thereby,(b)all materials,equipment and other property at the
Facilities or adjacent thereto,and(c)the environment. Operator shall prepare and keep current
written safety manuals complying with prudent industry standards,which manuals shall be in a
form approved by Owner. Operator shall give all notices and comply with all applicable federal,
state and local laws,ordinances,rules,regulations,codes,orders and other directives and
requirements of all governmental authorities bearing on the safety of persons and property and
their protection from damage,injury or loss. Operator abail furnish to owner copies of all
governmental orders,citations and notices of any kind relating to safety immediately upon
#14V9-v6 -3-
Jul • 12. 2002 4:27PM West Greeley Law Center No•9195 P . 5/13
receipt by Operator. Operator shall cooperate in any safety inspections conducted by Owner and
any and all governmental authorities having jurisdiction.
1.3 Property DamageLPersonal Injury. Operator shall promptly provide to
Owner a detailed written report on any property damage or personal injury arising on or in
connection with the Facilities. Operator shall promptly remedy,to Owner's satisfaction,all
damage or loss to any property(including,but not limited to,any property at the Facilities or
elsewhere),caused in whole or in part by Operator,any subcontractor or anyone directly or
indirectly employed by any of them,or by anyone for whose acts any of them may be liable,but
only to the extent such damage or loss is(a)attributable to the gross negligence or willful
misconduct of Operator's employees or agents or(b)reasonably could have been prevented by
Operator through supervision in accordance with the Prudent Operator Standard. If Operator
fails to promptly remedy,to Owner's satisfaction,any damage or loss to any property described
in the immediately preceding sentence,then Owner shall have the right,but not the obligation,to
remedy such damage or loss. In such event,Operator shall immediately upon demand reimburse
Owner for all costs incurred by Owner in remedying such damage or loss.
1.4 Testing. Operator shall test all pressure meters and the injection pump
meters used by the Facilities at least once each quarter for accuracy of measurement. Owner
shall have the right to witness Operator's measurement tests and calibration,if any,done to
correct meters and gauges. If Owner requests a special test of any measuring equipment at the
Facilities,Operator and Owner shall cooperate to secure a prompt verification of the accuracy of
such measuring equipment. The cost of special tests shall be borne by Owner if the measurement
equipment is found to be registering accurately. Operator shall give Owner notice of the time of
all tests of measurement equipment reasonably in advance of such test in order that Owner may
conveniently have a representative present.
1.5 Preservatloa of Records. Operator shall maintain all books,records or
charts for at least five years following the end of the calendar year to which they apply. All such
records shall be the property of Owner and shall not be removed from the Facilities.
ARTICLE 2
BUDGET PROCEDURES
2.1 Buda . (a) Operator shall prepare and submit to Owner for its approval
annual budgets covering(i)estimated costs and expenses for operation and anticipated
maintenance of the Facilities and(ii)planned capital expenditures,if any. The budget for the
remainder of the calendar year in which this Agreement is executed has been prepared and
approved by the parties simultaneously with the execution hereof and is attached hereto as
Exhibit B. Such budgets for succeeding calendar years shall be prepared by Operator in a format
similar to Exhibit B and submitted to Owner for its approval on or before October 1st for the
following calendar year. Budgets shall set forth estimated expenditures for monthly periods.
*142S9,.6 -4-
Jul • 12. 2002 4:28PM West Greeley Law Center No.9195 P . 6/13
Tentative annual budgets shall be approved in writing as submitted or as modified by Owner
each year prior to December 15. Notwithstanding the budget,Operator will use its reasonable
best efforts to obtain competitive pricing on all expense items,services,equipment and
expenditures,considering the need, quality and timeliness of services.
(b) Operator shall establish an operating account(the"Operating
Account")for the Facilities at First Choice Bank,Greeley,Colorado or such other bank as
approved by Owner,and such account shall be kept entirely separate from Operator's other
accounts. Operator shall directly and promptly pay and discharge out of the Operating Account
all costs and expenses incurred in connection with the operation,maintenance and repair of the
Facilities. Operator shall keep an accurate and itemized record of all costs and expenses paid
with regard to the Facilities. The budget set forth in Exhibit B provides for a two-month advance
to be made by Owner to Operator upon execution of this Agreement to provide funds for
payment of such operating expenses for the first two calendar months of operations hereunder.
After such initial two-month period,Owner will advance to Operator on or before the third
business day of each calendar month the budgeted amount allocated for such month in the
approved budget for that calendar year. Such advances shall be made by Owner directly into the
Operating Account. In addition,if projected capital expenditures due to be made in any calendar
month exceed such amount,then Operator may request that the advance for such month be
increased to include an amount sufficient to cover such capital expenditures. Such a request shall
be made in writing not later than ten days prior to the due date of the advance. Operator shall
review actual expenditures on a quarterly basis and report the results of such review to Owner for
its consideration. If actual expenditures are lower than budgeted amounts an appropriate refund
that is mutually acceptable to Operator and Owner shall be made to Owner.
(c) Operator will prepare and deliver to Owner a monthly operations
report on or before the 20th day of each calendar month covering the prior calendar month's
operations. Such report shall include an accounting of all expenditures made or incurred during
such month,the volume of produced water or other fluids delivered to the Facilities for disposal,
an accounting by customer of amounts due from customers for amounts delivered for disposal in
such month and the status of accounts receivable for prior months'operations,and such other
data and information as may be necessary for proper accounting. All line item variances of
$1,000,either positive or negative,from the approved budget shall be given a written
explanation.
(d) Except as specifically set forth in a budget,Operator shall have
Owner's prior written approval for the sale of any tangible personal property at the Facilities
(other than sales of recovered oil)having a value,at the time of sale,in excess of$1,000.
(e) If at any time during the calendar year Operator determines the
approved budget will not be sufficient to cover operating and capital expenditure costs for that
year, it shall promptly advise Owner and the parties shall attempt to agree on appropriate
amendments to the budget.
nues..a -5-
.:w"`"`- -Jul . 12. 2002' 4:28PM ' • West Greeley Law Center " No •9195 P . 7/13 • ""`
ARTICLE 3
OPERATORCOMFENSATION
3.1 Convent. Operator shall receive as compensation for carrying out its
obligations hereunder an annual operator's fee o
days after Owner's receipt of the monthly operations report for eac month submitted
Section 2.1(c),but in no event later than the 25th day of the following month provided such
report has been received by that date. If such report is not received by that date then the monthly
installment shall be due three days after Owner's receipt of such report. Operator also shall be
reimbursed by Owner for all direct out of pocket expenses paid or incurred by Operator in
connection with the operation of the Facilities as set forth in budgets approved pursuant to
Section 2.1. Operator shall not be reimbursed for any general or administrative expenses
associated with its Greeley office in carrying out its obligations hereunder,it being the parties'
intent that such general and administrative expenses shall be covered by the operator's fee. The
amount of the operator's fee shall be increased or decreased each calendar year commencing with
1997 by an amount which shall be calculated by comparing the Consumer Price Index,All Urban
Consumers—U.S.City Average—All Items(1982-1984 equals 100)(the"Index")for the first day
of each calendar year,with the Index fbr January 1, 1996. The operator's fee shall be increased
or decreased by the percentage change,if any,in the Index.
ARTICLE 4
INDEMNIFICATION
4.1 Indemnj> on. (a) Operator shall indemnify and hold harmless Owner,
its members and their respective trustees,officers,directors,members,managers,agents and
employees from and against all claims,damages,losses and expenses,including,but not limited
to, attorneys'fees,in any way arising out of or resulting from(i)operation of the Facilities and
attributable to the gross negligence or willful misconduct of Operator,its agents,any
subcontractor,anyone directly or indirectly employed by any of them or anyone Sr whose acts
any of them may be liable,or which reasonably could have been prevented by Operator through
supervision in accordance with the Prudent Operator Standard, (ii)any breach of,or failure to
comply with,any term or provision of this Agreement by Operator,its agents,any subcontractor,
anyone directly or indirectly employed by any of them or anyone for whose acts any of them
may be liable,or(iii)the enforcement of Owner's rights under this indemnity. The indemnity
obligation of Operator under this Section 4.1 shall not be construed to negate,abridge or
otherwise reduce any right or obligation of indemnity which would otherwise exist as to any
party or person described in this Section 4.1. In any and all claims against Owner or its
members,or any of their respective officers,directors,agents or employees by any employee of
Operator,its agents,any subcontractor,anyone directly or indirectly employed by any of them or
anyone for whose acts any of them may be liable,the indemnification obligation under this
me215.,.6 -6-
Jul . 12. 2002 4:28PM West Greeley Law Center No•9195 P . 8/13
Section 4.1 shall not be limited by the limitation on the amount or type of damages,
compensation or benefits payable by or for Operator,its agents or any subcontractor under
workers'or workmen's compensation acts,disability benefit acts or other employee benefit acts.
(b) Operator's liability under Section 4.1(a)shall be subject to the following
limitations:
(i) Operator's indemnity shall cover lost profits only in the event that an
event subject to such indemnity causes an interruption of operations of the Facilities lasting for
more than 30 days,and in such event Operator's liability for lost profits shall not exceed$5,500
per day commencing with the 31st day of such interruption.
(ii) In addition,Operator's liability for lost profits under Section 4.1(a)
shall not exceed,in the aggregate,the portion of the Deferred Purchase Amount(as defined in
that certain Option Purchase Agreement dated September 8, 1995 between Conquest Disposal
Service Ltd.Liability Co.and Marcum Gas Transmission,Inc.)that remains unpaid on the date
of the event giving rise to the liability.
ARTICLE 5
INSURANCE
5.1 Inaurannagairtmenia.At all times during the term of this Agreement,
Operator shall comply with the Worker's Compensation Laws of the State of Colorado. Operator
shall require all subcontractors,engaged in work at or for the benefit of the Facilities,to comply
with the Worker's Compensation Laws of the State of Colorado. Operator shall,at all times
during the term of this Agreement,maintain the insurance coverage set forth on Exhibit C.
All such insurance(i)shall be carried by an acceptable company or companies;
(ii)shall be maintained in full force and effect during the term of this Agreement;and(iii)shall
not be canceled,altered or amended without thirty(30)days'prior written notice to Owner. Each
policy shall be endorsed to name Owner as additional Insured with respect to operation of the
Plant. Simultaneously with the execution of this Agreement Operator shall provide a Certificate
of Insurance evidencing the coverages set forth in this Agreement,naming Owner as an
additional insured party. Operator shall give Owner prompt written notice of any inspections of
the Facilities to be conducted by any insurance carrier so that Owner may have a representative
present for such inspection.
xr+re9-v.6 -7-
Jul . 12 . 2002 4:29PM West Greeley Law Center No.9195 P. 9/13
ARTICLE 6
FORCE MAJEURE,,
6.1 Force Majeure. The term"Force Majeure"shall mean an act of God,
stnice,lockout or other labor dispute,failure or inability to obtain(at a reasonable cost)any
required governmental permit,approval or authorization,act of a public enemy,war(whether
declared or undeclared),blockade,revolution,riot,insurrection,civil commotion,lightning,fire,
storm,flood,earthquake,explosion,governmental restraint or embargo,the inability of a party to
obtain critical equipment,transport,material or supplies,or any other cause,whether of a kind
specifically enumerated above or otherwise,which is not reasonably within the control of the
party claiming an event of Force Majeure. A party claiming an event of Force Majeure shall give
notice of such fact to the other party within 24 hours of the occurrence of the event in question.
Such notice shall describe the event in question,including the time and date of its occurrence,
shall describe the performance hereunder which is prevented or reduced by such occurrence,
shall provide the party's best estimate of the period of time that its performance will be prevented
or reduced by such event and will outline generally the steps which the party in question intends
to take in order to cure the event of Force Majeure and resume its fill performance under this
Agreement. The party giving such notice shall use commercially reasonable diligence to resume
the performance of its obligations under this Agreement,as soon as possible and shall keep the
other party reasonably apprised of its efforts to eliminate or overcome the event of Force
Majeure;provided,however,that the foregoing requirement of diligence shall not compel a party
suffering an event of Force Majeure to accede to any demand or position of any other person
involved in a strike,lockout or other difference with workmen,nor shall such requirement
impose upon such party an obligation to make expenditures which it deems extraordinary or
unreasonable in order to cure such event of Force Majeure. Neither party shall be responsible or
liable to the other for damages or expenses incurred or sustained because of any delay or failure
to perform which is the result of an event of Force Majeure.
ARTICLE 7
SUBCONTRACTING:ASSIGNMENT
7.1 Subcontracting. (a) Operator shall not subcontract any portion of its
obligations under this Agreement without Owner's prior written consent.
(b) Operator shall be responsible for the control and supervision of its
subcontractors,if any. Nothing in this Agreement shall,or is intended to,create any contractual
relationship between Owner and any subcontractor,nor any obligation on the part of Owner to
pay directly any money due any subcontractor.
7,2 Assignment. Except as otherwise provided herein,neither this Agreement
nor any claim against Owner arising directly or indirectly out of or in connection with this
#74289-v.6 -8-
Jul 12 . 2002 4: 29PM West Greeley Law Center No.9195 P , 10/13
Agreement shall be assignable or transferable by Operator,without the prior written consent of
Owner.
ARTICLE 8
PRIVILEGES OF OWNF,R
8.1 Default or Nonwaiver. No waiver by Owner of any one or more defaults
by Operator in the performance of any provisions of this Agreement shall operate or be construed
as a waiver of any future default or defaults,whether of a like or different character.
8.2 Right of Audit. Owner shall have the right at its own expense to examine
and audit at any time the books,records and charts of Operator to the extent necessary to verify
the accuracy of any statement,charge,computation or demand made under or pursuant to any of
the provisions of this Agreement Within 60 days after the receipt of the initial audit report,
Operator shall make the necessary adjustments to the accounts and/or respond with a complete
explanation of the denial(s)of the audit exception(s). Operator shall not be required to maintain
books,records or charts for a period of more than five years following the end of the calendar
year to which they are applicable. Owner and any of its members shall have no right to question
or contest any charge or credit if the matter is not called to the attention of Operator in writing
within three years of the end of the calendar year in question.
8.3 Right of Inspection. Operator at any time shall permit personnel of Owner
access to the Facilities and the right to observe the operations being carried on for any and all
purposes relative to this Agreement,subject to Operator's security and safety precautions.
ARTICLE 9
AW.OF MUTUAL,INTEREST
9.1 Area of Mutual Interest and Non-Compe thin, (a) During the team of
this Agreement, if Owner,Operator or any shareholder or affiliate of Operator identifies or
acquires any Opportunity(as defined in Section 9.1(b)below),then it shall promptly provide
written notice of such Opportunity to the other party. Such notice shall contain reasonably
complete information concerning such Opportunity and the participation cost related thereto.
The other party shall have the option for 30 days from receipt of the notice to elect to participate
in 50%of such Opportunity on an actual cost basis. Such option shall be exercised by written
notice to the notifying party committing the other party electing to participate to pay its share of
costs within 7 days after written request therefor from the notifying party. If the other party
elects not to participate in such Opportunity,the notifying party shall be free to deal with the
Opportunity in such manner as it sees fit.
#742$9-v.6 -9-
Jul . 12. 2002 4:29PM West Greeley Law Center No .9195 P . 11/13
(b) For purposes of this Section 9.1,an"Opportunity"shall mean an
acquisition of,or opportunity to make an investment,whether directly or indirectly,equity or
otherwise,in:(i)any entity engaged in the produced water disposal or directly related business
(but excluding oil and gas drilling and producing property acquisition)within a 60 mile radius of
any of the Facilities(the"Territory"); (ii)any water disposal facility located within the Territory
that would compete with or adversely affect the Facilities;or(iii)any other activity,either inside
or outside of the Territory,that is reasonably likely to have a material economic effect on the
Facilities.
(c) During the term of this Agreement,no party or any party's members
or managers shall(1)take any action that would allow or assist any water disposal facility either
inside or outside of the Territory to compete with the Facilities;(ii)take any action to compete
for or interfere with existing customers using the Facilities;or(iii)take or assist others in taking
any other action that would adversely affect the Facilities.
ARTICLE 10
GENERAL PROVISIONS
10.1 lent (a) 'This Agreement shall commence on the date hereof and will
continue until terminated as set forth below.
•
(b) Operator may terminate this Agreement at any time upon 90 days
prior written notice to Owner. Operator also may terminate this Agreement upon 30 days prior
written notice if necessary budget amendments under Section 2.1(e)are not agreed to or if
payments due from Owner hereunder are not made by Owner after notice of non-payment and a
ten-day cure period.
(c) Owner may terminate this Agreement at any time upon 30 days prior
written notice to Operator,provided that such action has been approved by a majority of Owner's
Board of Trustees. Owner also may terminate this Agreement immediately for good cause upon
written notice to Operator. For purposes hereof,"good cause" shall mean gross negligence,
willful misconduct,or the material breach or inability to meet the standards of operation or other
obligations of Operator under this Agreement.
(d) After a notice of termination has been given by either party,
Operator shall continue to operate the Facilities in the manner provided in this Agreement until
the effective date of the termination specified in the notice. Operator shall cooperate in
instructing Owner's representatives or its designees on all operating and administrative
procedures concerning the Facilities and shall take all other reasonable steps to facilitate the
transfer of operations,including without limitation the transfer of any permits or licenses held in
Operator's name with regard to the Facilities and the delivery to Owner or its designee of all files,
records,procedures manuals and other written materials related to the Facilities.
naas...e -10-
Jul • 12. 2002 4:30PM West Greeley Law Center No.9195 P. 12/13
(e) Within 30 days after the effective date of termination Operator shall
deliver to Owner an accounting of all outstanding amounts for which Operator is entitled either
to reimbursement under the provisions of Article 2 above or payment under Section 3.1,and the
parties shall attempt to reach a final settlement of all such amounts within 30 days after delivery
of such accounting. Notwithstanding the foregoing,if this Agreement is terminated for good
cause Owner shall not be obligated to pay the portion of the operator's fee under Section 3.1
attributable to periods after the date of the notice of termination.
10.2 Relationship of Parties. Operator is an independent contractor with
respect to the method and manner of performance of its obligations hereunder. Nothing herein or
in any course of dealing shall constitute Operator as an agent or employee of Owner in relation to
such methods or manners of performance. Operator shall hold Owner harmless from any and all
claims of whatever kind or nature(including reasonable attorney and expert fees)arising out of
any act or representation of Operator contrary to the terms of this section.
10.3 Notices. Any notice or communication to be given pursuant to this
Contract shall be deemed sufficiently given if in writing and addressed to the designated
representative of the party to which the notice is directed;or to such other address as either party
may direct by proper written notice to the other. All such notices and communications shall be
active upon receipt.
10.4 Taxes. Operator shall pay,and shall indemnify Owner against,all liability
(including penalties and interest and reasonable attorney and expert fees)for all taxes imposed
on,with respect to,or measured by amounts associated with performance of its obligations
hereunder,the compensation therefor,or the wages,salaries,and other remuneration paid to
persons employed or retained in connection with the performance of this Agreement. Operator
shall have no liability for ad valorem and property taxes related to the Facilities. Operator will,
however,timely prepare,handle,file and audit all tax returns,negotiate to final settlement,and
pay,all ad valorem taxes, sales and use taxes,and any other taxes(other than income taxes)
arising out of the operation of the Facilities.
10.5 Entire Agreement. This Agreement sets forth the entire understanding
between the parties with respect to the subject matter hereof,superseding all negotiations and all
prior discussions,agreements and understandings of the parties.
10.6 Hedinga. The headings of articles and sections of this Agreement are for
convenience of reference only and shall not limit or otherwise affect any of the provisions of this
Agreement.
10.7 Pawn References made in this Agreement,including use of a
pronoun,shall be deemed to include where applicable masculine or feminine, singular or plural,
individuals,partnerships,corporations or unincorporated associations.
#74x89-v.6 -11-
Jul . 12. 2002 4: 30PM West Greeley Law Center No.9195 P. 13/13
10.8 Amendment. This Agreement may not be altered or amended,nor any
rights hereunder waived,except by an instrument executed by the party to be charged with such
amendment or waiver. No right or obligation of,or default by,Owner or Operator shall be
deemed waived by any other waiver of the same or any other right,obligation,or default,or by
any previous or subsequent forbearance or course of dealing.
10.9 Governing Law. This Agreement and the transactions contemplated herein
shall be construed in accordance with and governed by the laws of the State of Colorado.
10.10 Counterpart Execution. This Agreement may be executed in as many
counterparts as deemed necessary and,when so executed,shall have the same effect as if all
Parties had executed the same instrument.
10.11 Waiver. Notwithstanding any other provision of this Agreement,no
waiver by either party or any breach or default in the performance of any of the covenants herein
contained to be performed by the other party shall operate or be construed as a waiver of any
other breach or default whether of a like or different character,neither shall any failure to
exercise any right hereunder be considered as a waiver of such right in the future.
Executed on the date first set forth above.
OPERATOR:
CONQUEST OIL COMPANY
By:
Brace , t 1, .
OWNER:
MARCUM MIDSTREAM, 1995-2 BUSINESS
TRUST,a Delaware business trust
By: MARCUM GAS TRANSMISSION,INC.,
Managing Trustee
By
Richard M. Wenger,President
nrxav-vs -12-
Aug• 7. 2002 4:32PM West Greeley Law Center No.0003 P. 1/8
orsOTIS, CCIAN& STEWART, LI.C
Attorneys And Counselors At Law
FACSIMILE TRANSMITTAL SHEET
The information contained in this facsimile message is privileged and confidential
information intended only for the use of the individual and/or entity named below. If the
reader of this message is not the intended recipient, or the employee or agent responsible
to deliver it to the intended recipient, you are hereby notified that any distribution or copying
of this communication Is strictly prohibited. If you have received this communication in
error, please notify us immediately by telephone and return the original message to us at
the above address. Thank ru.
IF YOU HAVE ANY PROBLEMS RECEIVING THIS FACSIMILE
TRANSMISSION, PLEASE CALL 970-330-6700.
TO: Lee Morrison
FAX No. 352-0242
FROM: Fred L. Otis
DATE: August 7, 2002
NO. OF PAGES:
(Mnehdng Ss corer sheet):
COMMENTS Lee, attached is the Assignment of Road Maintenance and
Improvements Agreement and Amendment to Disposal
Facilities Operating Agreement that we discussed regarding
the Cervi/Conquest Matter. FRED
The Day1e TheMing,1812 566 Avenue,Greeley,Colorado 80634
Telephone:970-330-6700 Pas 970-330-2969 Metro:303659-7576 E-Mail:OC$Law(dtsol.coni
OCS
OTIS, COAN & STEWART, LLC
Attorneys And Counselors At Law
Fred L Otis
flotis@ocslaw.com
September 3, 2002
HAND DELIVER
Ms. Esther E. Gesick
Weld County Clerk to the Board
915 10'h Street
Greeley, CO 80631
RE: Assignment of Road Maintenance and Improvements Agreement
between Envirocycle, LLC and Marcum Midstream 1995-2 EC Holding, LLC
Dear Ms. Gesick:
As requested, enclosed is the original of the August 22, 2002, Assignment of road Maintenance
and Improvements Agreement which was approved by Resolution on August 14, 2002.
Sincerely,
r7C2,;(1E
Fred L. Otis
FLO:mas
Enclosure
The Doyle Building, 1812 56th Avenue, Greeley, Colorado 80634
Telephone: 970-330-6700 Fax: 970-330-2969 Metro: 303-659-7576
Hello