Document:

EX-10.2 OIL & GAS OPERATIONS AND SALE AGREEMENT

 

Exhibit 10.2

OIL AND GAS OPERATIONS AND SALE AGREEMENT

     THIS OIL AND GAS OPERATIONS AND SALE AGREEMENT (this “Agreement”) is effective as of
January 1, 2006, by and between GREAT PLAINS EXPLORATION, LLC, an Ohio limited liability company
(“Great Plains”), and JOHN D. OIL AND GAS COMPANY, a Maryland corporation (the
“Company”).

     WHEREAS, the Company desires to receive services related to the operations of its oil and gas
wells in Northeast Ohio (attached as Exhibit A is a list of the “Wells” as of the date
hereof, subject to modification from time to time by the Company) from Great Plains and obtain the
benefit of the experience of Great Plains in the oil and gas industry generally;

     WHEREAS, Great Plains is willing to provide Well Services (as hereinafter defined) to the
Company and the compensation arrangements set forth in this Agreement are designed to compensate
Great Plains for such services; and

     WHEREAS, the Company desires to sell and deliver to Great Plains, and Great Plains desires to
purchase and accept from the Company, the Company’s production of natural gas under the terms and
conditions set forth herein; and

     NOW, THEREFORE, in consideration of the foregoing premises and the respective agreements
hereinafter set forth and the mutual benefits to be derived here from, Great Plains and the Company
hereby agree as follows:

     1. Engagement. The Company hereby engages Great Plains to provide Well Services and
Great Plains hereby agrees to provide Well Services to the Company, all on the terms and subject to
the conditions set forth below.

     2. Services of Great Plains. As requested by the Company, Great Plains hereby agrees
during the Term (as hereinafter defined) to provide the following well services to the Company
(“Well Services”):

	 	(a)	 	drilling (until April 1, 2006, at which time the Company will assume
responsibility for drilling activities);
	 
	 	(b)	 	well tending;
	 
	 	(c)	 	water supply and disposal; and

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	 	(d)	 	gathering (i.e., transporting the gas from the well to the main gas line).

The Company may discontinue, add, or reactivate any and all Well Services at any time during the
Term by providing Great Plains with thirty (30) days written notice of any desired changes in Well
Services.

     3. Personnel. Great Plains shall provide and devote to the performance of this
Agreement such employees, agents and third party service providers of Great Plains as Great Plains
shall deem appropriate for the furnishing of the Well Services.

     4. Compensation. As compensation for the Well Services, the Company agrees to pay
Great Plains as follow:

	 	(a)	 	for drilling, the actual cost of drilling charged by the third-party
contractor, in addition to a management fee equal to seven percent (7%) of the drilling
cost;
	 
	 	(b)	 	for well tending, three hundred dollars ($300) per Well per month;
	 
	 	(c)	 	for water supply and disposal, nine thousand dollars ($9,000) per Well until
April 1, 2006, after which the Company will pay on an hourly basis at a rate of seventy
dollars ($70) per hour; and
	 
	 	(d)	 	$0.30 per mcf (1,000 cubic feet) for gathering.

     5. Sale of Natural Gas. Company agrees to sell and to deliver to Great Plains all of
the Company’s production of natural gas from the Wells and Great Plains agrees to purchase such
natural gas; provided, however, if the total monthly volume of natural gas produced by the Company,
Great Plains and its affiliated companies exceeds the volume sold by Great Plains to (a) Interstate
Gas Supply, Inc. (“IGS”) pursuant to a Natural Gas Purchase Agreement, dated January 7,
2006, between Great Plains and IGS and (b) WPS Energy Services, Inc. (“WPS”) pursuant to a
Base Contract for Sale and Purchase of Natural Gas, dated April 22, 2005, between Great Plains and
WPS (WPS and IGS referred to collectively as “Purchasers of Natural Gas”), Great Plains
shall be responsible for purchasing only the volume of natural gas produced by the Company
calculated by multiplying (a) the total monthly volume of natural gas sold by Great Plains to
Purchasers of Natural Gas by (b) the fraction expressed by dividing (x) the total monthly volume of
natural gas produced by the Company by (y) the total monthly volume of natural gas produced by
Company, Great Plains and its affiliated companies. Company will sell natural gas to Great Plains
at the prices paid by Purchasers of Natural Gas pursuant to the terms and conditions set forth in
the above-referenced agreements with Purchasers of Natural Gas, any future amendments or
modifications thereto, and/or replacement agreements (“Purchase Agreements”). Great Plains
may deduct from its remittance to the Company of the purchase price of the natural gas any
applicable taxes, transportation costs of $0.95 per mcf, or Well Services fees due under this
Agreement. Great Plains shall notify Company in the event of any material change to the Purchase
Agreements with Purchasers of Natural Gas.

     6. Books and Records. Company shall have the right to inspect, examine, and copy the
books, records, files and other documents maintained by Great Plains at all reasonable times and
shall also have the right to question Great Plains, its employees, and agents in regard to the Well
Services provided to the Company by Great Plains, charges for the Well Services, and the Company’s
sale of natural gas to Great Plains.

     7. Insurance. Great Plains shall carry and maintain comprehensive general liability
insurance, worker’s compensation insurance at statutory limits in accordance with the laws of the
state(s) of operations covering all of Great Plains’ employees, and comprehensive automobile
liability insurance with coverage in such amounts as customarily maintained by companies of similar
size and engaged in similar lines of business. Upon the Company’s request, Great Plains shall
deliver to the Company certificates of such insurance which stipulate that no less than thirty (30)
days’ notice will be given to the Company prior to any termination or reduction of the limits of
coverage. All stated insurance policies, where applicable, will designate the Company as an
additional insured, without qualifications or limitations, as its interest may appear.

     8. Term. This Agreement shall be for a period of one (1) year from the effective date
hereof and shall be extended for consecutive one (1) year periods unless terminated earlier. The
Company may terminate this Agreement, with or without cause, upon sixty (60) days written notice to
Great Plains. Great Plains may terminate this Agreement, with or without cause, upon 120 days
written notice to the Company prior to the expiration of the Initial Term or any extension thereof.
For purposes of this Agreement, the Initial Term, together with any extension thereof, shall be
referred to herein as the “Term.”

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     9. Indemnification. Great Plains shall indemnify the Company and hold the Company,
its officers and employees harmless from and against all liability, loss, expenses or damages
(including reasonable attorneys’ fees) however caused by reason of or arising from Great Plains’,
its employee’s, agent’s or third party contractor’s performance, or nonperformance, as the case may
be, of its obligations under or in connection with this Agreement, including but not limited to any
injury (whether to body or property), including death, sustained by any person or entity to a
person, entity or property. The terms of this Section 6 shall remain in full force and effect
regardless of any termination or the completion of Great Plains’s services under this Agreement or
the termination of this Agreement.

     10. Great Plains as Independent Contractor. Great Plains and the Company agree that
Great Plains shall perform services hereunder as an independent contractor, retaining control over
and responsibility for its own operations and personnel. Neither Great Plains nor its directors,
officers, employees, or third party contractors shall be considered employees or agents of the
Company as a result of this Agreement nor shall any of them have authority to contract in the name
of or bind the Company, except as expressly agreed to in writing by the Company. No duties or
obligations of Great Plains not expressed herein will be implied or inferred from this Agreement.

     11. Notices. All notices required or permitted to be given hereunder shall be in
writing and shall be deemed given when delivered in person, two (2) business days after being
deposited in the United States mail or one (1) business day after being sent by nationally
recognized overnight courier service, postage prepaid, registered or certified mail, addressed to
the applicable party as follows:

     If to Great Plains:

Great Plains Exploration, LLC

8500 Station Street, Suite 113

Mentor, OH 44060

Attn: President

     If to the Company:

John D. Oil and Gas Company

8500 Station Street, Suite 100

Mentor, OH 44060

Attn: President

and/or to such other respective addresses and/or addressees as may be designated by notice given in
accordance with the provisions of this Section 11.

     12. Entire Agreement; Modification. This Agreement (a) contains the complete and
entire understanding and agreement of Great Plains and the Company with respect to the subject
matter hereof; and (b) supersedes all prior and contemporaneous understandings, conditions and
agreements, oral or written, express or implied, respecting the engagement of Great Plains in
connection with the subject matter hereof. The provisions of this Agreement may be amended,
modified and waived only with the prior written consent of the Company and Great Plains.

     13. Severability. If any provision or provisions of this Agreement is held to be
invalid or unenforceable, such provision shall be automatically reformed and construed so as to be
valid, operative and enforceable to the maximum extent permitted by law or equity while most nearly
preserving its original intent. The invalidity of any part of this Agreement shall not render
invalid the remaining provisions of this Agreement and, to that extent, the provisions of this
Agreement shall be deemed to be severable.

     14. Waiver of Breach. The waiver by either party of a breach of any provision of this
Agreement by the other party shall not operate or be construed as a waiver of any subsequent breach
of that provision or any other provision hereof.

     15. Assignment. Neither Great Plains nor the Company may assign its rights or
obligations under this Agreement without the express written consent of the other.

     16. Successors. This Agreement and all the obligations and benefits hereunder shall
inure to the successor and permitted assigns of the parties.

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     17. Counterparts. This Agreement may be executed and delivered by each party hereto
in separate counterparts, each of which when so executed and delivered shall be deemed an original
and both of which taken together shall constitute one and the same agreement.

     18. Choice of Law. This Agreement shall be governed by, and construed and enforced in
accordance with, the internal laws of the State of Ohio applicable to contracts made and performed
in that State, without giving effect to the principles of conflicts of law.

     IN WITNESS WHEREOF, Great Plains and the Company have caused this Oil and Gas Operations and
Sale Agreement to be duly executed and delivered on the date and year first above written.

	 	 	 	 	 	 	 
	 	 	GREAT PLAINS EXPLORATION, LLC
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Richard M. Osborne
	 	 
	 

	 	 	 	 	 	 
	 	 	Its: Managing Member
	 
	 	 	 	 	 	 
	 	 	JOHN D. OIL AND GAS COMPANY
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Gregory J. Osborne	 	 
	 

	 	 	 	 	 	 
	 	 	Its: President and Chief Operating Officer

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27EX-10.3 REVOLVING DEMAND NOTE

 

Exhibit 10.3

Revolving Demand Note

	 	 	 
	Cleveland, Ohio

	 	January 1, 2006

     For Value Received, John D. Oil and Gas Company, an Ohio Corporation (“Maker),
promises to pay to the Richard M. Osborne Trust, Richard M. Osborne Trustee (“Holder”), such
amounts as Holder loans to Maker from time to time, plus accrued interest, as described below.

     This Revolving Demand Note (“Note”) discharges and cancels the existing debt evidenced by a
Promissory Note, dated as of October 24, 2001, between Liberty Self-Stor, Inc. (now known as John
D. Oil and Gas Company), as Maker, and Holder (“Existing Note”). As of the date of this Note, the
principal balance of the Existing Note is $591,910, which will continue in existence under the
terms of this Note.

     This Note evidences indebtedness for amounts advanced and to be advanced by Holder to the
Maker from time to time. The principal sum outstanding at any time and from time to time under
this Note shall be equal to the unpaid amount of these advances as reflected on the books and
records of the Maker. Interest shall be at the Prime Rate. The “Prime Rate” shall be a
fluctuating daily rate equal at all times to the prime rate of interest as such prime rate of
interest is determined by FirstMerit Bank, N.A., Cleveland, Ohio. As of the date hereof, the Prime
Rate is seven and three-fourths percent (7.75%) per annum.

     The Holder may call for payments under this Note at any time or from time to time by giving
notice to Maker in writing at least five business days before the date payment is due. This Note
may be prepaid in whole or in part at any time without penalty.

     The Makers shall make all payments due under this Note to 8500 Station Street, Suite 113,
Mentor, Ohio 44060, Attn: Richard M. Osborne, as Trustee for Richard M. Osborne Trustee or, at the
option of Holder, at such other place or such other person(s) as the Holder may, at any time and
from time to time, designate to Maker in writing.

     If an Event of Default, as defined below, occurs, then, the entire balance of principal then
remaining unpaid, with accrued interest thereon (the “Debt”), shall bear interest at the Prime Rate
plus 5% per annum or the maximum interest rate permitted by law, which ever is lower, until paid in
full. The occurrence of any of the following constitutes an “Event of Default:” (a) Maker fails to
make full and timely payments when due under this Note, (b) Maker applies for or consents to the
appointment of a receiver, trustee, custodian or liquidator of it or any of its property or assets,
(c) Maker makes a general assignment for the benefit of its creditors, (d) Maker commences, or has
commenced against it, proceedings under any bankruptcy, insolvency or debtor’s relief law, (d)
Maker is liquidated or dissolved, (e) Maker is adjudicated bankrupt or insolvent or is the subject
of an order for relief under Title 11 of the United States Code, or (f) a final judgment for the
payment of money is rendered against Maker, and the same shall remain undischarged for a period of
ten (10) days thereafter.

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     If Maker fails to make full and timely payments of principal or interest when due under this
Note, the Maker shall pay to Holder, in addition to such amounts due, all costs of collection,
including reasonable attorneys’ fees.

     Maker hereby waives presentment, demand, protest and notice of dishonor or non-payment, and
hereby waives, to the extent permitted by law, any right to have a jury participate in resolving or
determining any dispute, whether sounding in contract, tort or otherwise, between Maker and the
Holder arising out of or in any way relating to this Note.

     Holder’s failure to exercise any right or remedy available to it hereunder or at law or in
equity, or any delay in exercising any such right or remedy, shall not operate as a waiver of any
of Holder’s rights.

     This Note shall be governed, construed, and enforced in accordance with the laws of the State
of Ohio.

	 	 	 	 	 
	John D. Oil and Gas Company  
	 
	 	 	 	 
	By:

	 	/s/ Gregory J. Osborne	 	 
	 

	 	 	 	 
	Itd: Gregory J. Osborne, President

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