Operating Agreement between Viking Gas Transmission Company and Northern Plains Natural Gas Company dated January 17, 2003
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This agreement is between Viking Gas Transmission Company and Northern Plains Natural Gas Company. Viking hires Northern Plains as the operator of its interstate gas pipeline, outlining each party’s responsibilities, including operations, recordkeeping, indemnity, insurance, and financial practices. The agreement covers employee standards, intellectual property, confidentiality, and dispute resolution. It specifies the term, conditions for termination, and procedures for handling force majeure events. Both parties’ rights and obligations are clearly defined to ensure proper management and operation of the pipeline.
EX-10.18 3 h03425exv10w18.txt OPERATING AGREEMENT DATED 1/17/2003 EXHIBIT 10.18 VIKING GAS TRANSMISSION COMPANY OPERATING AGREEMENT TABLE OF CONTENTS
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EXHIBIT A - ACCOUNTING PROCEDURE I-2 OPERATING AGREEMENT This Agreement dated as of the ____ day of January, 2003, by and between Viking Gas Transmission Company, a Delaware Corporation, ("Viking"), and Northern Plains Natural Gas Company, a Delaware Corporation ("Operator"). Viking and Operator are sometimes referred to collectively herein as the "parties" and individually as a "party". RECITALS WHEREAS, Viking desires to engage Operator to operate the Line (as defined herein) in accordance with the terms and conditions set forth in this Agreement; and WHEREAS, Operator is willing and able to operate the Line in accordance with the terms and conditions set forth in this Agreement. NOW THEREFORE, in consideration of the representations, covenants and premises hereinafter set forth the parties agree as follows: ARTICLE I DEFINITIONS SECTION 1.01 - DEFINITIONS Except as otherwise indicated by the context, all capitalized terms used in this Agreement including this Article, the recitals and the exhibits attached hereto, shall have the meanings set forth below: (a) "Accounting Procedure" shall mean the accounting procedure set forth in Exhibit "A" hereto. (b) "Certified Public Accountants" shall mean a firm of independent public accountants selected from time to time by the Partnership Policy Committee. (c) "Line" shall mean the interstate gas pipeline and related facilities owned by Viking, which extends from a point near Emerson, Manitoba to its terminus near Marshfield, Wisconsin, and any extensions, expansions, additions, betterments or renewals thereof. (d) "Partnership Policy Committee" shall mean the Partnership Policy Committee provided for in Section 6.1 of the Amended and Restated 1 Agreement of Limited Partnership of Northern Border Partners, L.P. dated as of October 1, 1993. (e) "Required Accounting Practice" shall mean the accounting rules and regulations, if any, at the time prescribed by the regulatory body or bodies under the jurisdiction of which Viking is at the time operating and, to the extent of matters not covered by such rules and regulations, generally accepted principles of accounting at the time prevailing for companies engaged in a business similar to that of Viking. ARTICLE II REPRESENTATIONS SECTION 2.01 - VIKING'S REPRESENTATIONS Viking shall cooperate with Operator, including reimbursing Operator on a timely basis for all reasonable costs, including overhead, administrative and general expenses incurred by the Operator and overhead, administrative and general expenses incurred by the Operator's parent and affiliates in rendering their services in order to facilitate the services to Viking specified herein. SECTION 2.02 - OPERATOR'S REPRESENTATIONS Operator represents that in performing the responsibilities set forth in Article III, it shall carry out such responsibilities or shall cause contractors selected to carry out such responsibilities with the same degree of diligence and care that Operator would exercise if operating its own property in a sound, workmanlike and prudent manner and it shall comply, and shall require all contractors to comply, with all relevant laws, statutes, ordinances, safety codes, regulations and rules applicable to the operation of the Line. ARTICLE III OBLIGATIONS OF OPERATOR SECTION 3.01 - OPERATOR'S RESPONSIBILITIES Operator, subject to budget authorizations by the Partnership Policy Committee, shall perform administrative services and procure and furnish all materials, equipment, services, supplies and labor necessary for the design, 2 construction, operation and maintenance of the Line including, without limitation, the following: (a) provide the day-to-day management supervision, operating and maintenance services, administrative and related services to Viking, including, without limitation, legal, accounting, engineering, planning, budgeting, public relations, human resources, purchasing, treasury, finance, technical services, insurance administration, tax services and regulatory matters; (b) make reports to and consult with the Partnership Policy Committee in the form and at the times requested by the Partnership Policy Committee; (c) except as otherwise provided by applicable governmental regulations, retain all charts, records, books of account, tax returns, plans, designs, studies and reports and other documents related to the design, construction, operation and maintenance of the Line for a period of at least three (3) years from the date of completion of the activity to which such records relate; (d) except as delegated to Operator's parent and affiliates, purchase materials, equipment and supplies in the name of Viking necessary for the design, construction, operation and maintenance of the Line and sell or exchange such materials, equipment and supplies; (e) except as delegated to Operator's parent and affiliates, purchase, option or otherwise acquire in the name of Viking rights-of-way, land in fee and permits necessary for construction, operation and maintenance of the Line; resist the perfection of any liens against Viking property and, to the extent permitted by law, hold Viking property free from all liens; (f) review with and advise Viking regarding engineering plans and outlines for all necessary design of improvements, additions or replacements of the Line; (g) supervise and report to Viking regarding readings of all measuring equipment required in connection with the Line; (h) review the qualifications of and retain outside consultants, contractors, and other services; (i) utilize, as Operator deems necessary, the services of its parent and affiliates, provided that such services are utilized on terms materially no less favorable to Viking than those prevailing at 3 the time for comparable services of unaffiliated independent persons or entities. (j) prepare and file all administrative forms or reports (including any regulatory filings, Viking tax returns, safety reports, operating reports and any other reports required) with governmental and other agencies required for the construction and day-to-day operations of the Line; all reports in connection with emergency or unusual circumstances shall be made as expeditiously as reasonably possible; (k) make immediate reports to Viking of all unusual or significant occurrences in relation to the Line, regardless of whether or not such reports have been required pursuant to Section 3.01(b); (l) make recommendations to Viking as required by the Partnership Policy Committee for the proposed budgets required for the Line and operations in connection therewith for the next calendar year or portion thereof; (m) provide an adequate number of qualified supervisory and professional and craft personnel to perform the obligations contemplated hereunder; (n) require all contractors, vendors and suppliers to perform their services in accordance with sound, prudent and workmanlike industry practices; (o) have or provide custody of funds, notes, drafts, acceptances, commercial paper and other securities belonging to Viking; keep funds belonging to Viking on deposit in one or more banking institutions as approved by the Partnership Policy Committee; and, subject to direction by the Partnership Policy Committee, invest available funds in the manner provided for by the Partnership Policy Committee, disburse such funds, and keep appropriate records in connection with all the above transactions. (p) meet the standard of care set forth in Section 2.02. SECTION 3.02 - OPERATOR'S AND OTHER'S RECORDS All of the books, records, charts and other documents prepared and retained by Operator in connection with the obligations set forth in Section 3.01 shall, as provided in Section 5.05, be made available during normal business hours to Viking or their respective representatives to permit them to 4 audit and verify the accuracy of any statement, billing, charge or computation made by Operator in connection with this Agreement. Operator shall obtain similar rights from contractors, consultants and suppliers performing in connection with the Line and, to the extent reasonably possible, obtain similar rights for Viking. SECTION 3.03 - OPERATOR'S INDEMNITY Operator shall indemnify and hold harmless Viking, its employees or agents from and against: (a) all actions or failures to act by Operator which are not in accordance with the terms of this Agreement or an express direction by Viking; (b) claims for non-payment of any and all contributions, withholding deductions or taxes measured by the wages, salaries or compensation paid to persons employed by Operator in connection herewith. SECTION 3.04 - VIKING'S INDEMNITY (a) Viking shall indemnify and save harmless the Operator against all actions, claims, demands, costs and liabilities arising out of the acts (or failure to act) of Operator in good faith within the scope of its authority in the course of Viking's business and Operator shall not be liable for any obligations, liabilities, or commitments incurred by or on behalf of Viking as a result of any such acts (or failure to act). Operator shall not be indemnified for its willful misconduct. (b) Any and all claims, damages or causes of action in favor of anyone other than Viking arising out of the construction, operation, maintenance, upkeep, repair, replacement, improvement and expansion of the Line which are not covered by insurance pursuant to Section 3.05 shall be settled or litigated and defended by Operator in accordance with its best judgment and discretion when (i) the amount involved is less than a ceiling amount to be established by the Partnership Policy Committee; (ii) no injunctive or similar relief is sought; and (iii) no criminal sanction is sought; otherwise, such decision shall be made by the Partnership Policy Committee, and any settlement or defense thereof shall be controlled by the Partnership Policy Committee. 5 SECTION 3.05 - INSURANCE (a) At all times during the term of this Agreement, Operator shall carry and maintain in force the insurance coverages set forth in Exhibit "B" hereto. Operator shall require that all of its contractors, subcontractors or consultants engaged in any aspect of the operations hereunder or exposed to the risk of any of the operations hereunder carry and maintain insurance coverages commensurate with risks involved in accordance with Operator's established operating practices. (b) The premiums for insurance coverages for which Operator is responsible under this section shall be a reimbursable cost pursuant to Section 5.01(b). (c) Operator may carry and maintain such other insurance for its own account as it may deem necessary, but in the event other insurance is carried, Operator agrees to waive and agrees to have its insurers waive any rights of subrogation they may have against Viking, or its affiliates, parent of any of them, and/or their directors, officers, employees, servants or agents. (d) With respect to claims and losses for damage, injury or destruction of property which is a part of the Line, which property is covered by insurance other than insurance provided for in Section 3.05(a), it is agreed that neither Operator nor Viking shall have any rights of recovery against one another, nor against the affiliates of each, nor the insurers of any of them, and their rights of recovery are mutually waived. All such policies of insurance purchased to cover the Line or any part thereof, or the operation (in any respect) of the Line or any part thereof, or any gas transported or handled therein, shall be endorsed properly to effectuate this waiver of recovery. ARTICLE IV EMPLOYEE'S, CONSULTANTS AND SUBCONTRACTORS SECTION 4.01 - OPERATOR'S EMPLOYEES, CONSULTANTS AND SUBCONTRACTORS Operator shall employ or retain and have supervision over the persons (including consultants and professional service providers or other 6 organizations) required by Operator to perform its duties and responsibilities hereunder in an efficient and economically prudent manner. Operator shall pay all reasonable expenses in connection therewith, including compensation, salaries, wages and overhead and administrative expense incurred by Operator's parent and affiliates, and, if applicable, social security taxes, workers' compensation insurance, retirement and insurance benefits and other such expenses. Subject to the provisions of Section 6.2 of the Amended and Restated Agreement of Limited Partnership of Northern Border Partners, L.P. dated as of October 1, 1993, the compensation for Operator's employees shall be determined by Operator. All authorized expenses pursuant to this Section shall be reimbursed to Operator by Viking as provided in the Accounting Procedure. SECTION 4.02 - STANDARDS FOR EMPLOYEES All employees, workmen, foremen and supervisors ("employees") engaged or directed by Operator to perform Operator's obligations under this Agreement shall be duly qualified and experienced to perform such obligations. Operator shall at all times enforce strict discipline and maintain good order among such employees, and shall require such employees to comply with all relevant laws, statutes, ordinances, safety codes, regulations and rules applicable to the operation of the Line. SECTION 4.03 - CONSULTANTS AND SUBCONTRACTORS The provisions of Sections 4.02 shall be applicable to any contractors, consultants and/or subcontractors retained in connection herewith. ARTICLE V FINANCIAL, ACCOUNTING AND BILLING PRACTICES SECTION 5.01 - ACCOUNTING AND COMPENSATION (a) Operator shall keep a full and complete account of all costs, expenses and expenditures incurred by it in connection with its obligations hereunder in the manner set forth in the Accounting Procedure. (b) Operator shall be reimbursed by Viking for all reasonable and proper costs, expenses and expenditures paid by it for Viking at the rate and in the manner set forth in the Accounting Procedure; provided, however, that costs incurred by the Operator under 7 Section 3.03 shall not be reimbursed by Viking. It is the intent of the parties that Operator shall carry out its services hereunder on a fully reimbursed basis without profit or loss. To the extent that a deviation from this standard occurs, appropriate adjustments will promptly be made. (c) To the extent that Operator enters into activities other than the discharge of its responsibilities as Operator, Operator shall separately account for such costs, expenses and expenditures and Viking shall not be billed for such costs, expenses, or expenditures. SECTION 5.02 - BUDGETS On or before each November 1, Operator shall prepare and submit for approval by the Partnership Policy Committee an estimate of capital expenditures and operating income and expenses which Operator anticipates for the next calendar year. Except as the Partnership Policy Committee may otherwise direct, the budget approved by the Partnership Policy Committee and then in effect shall constitute authorization of Operator to incur the expenditures contained in such budget. SECTION 5.03 - DISPUTED CHARGES Viking may, within the time provided in the Accounting Procedure, take written exception to any bill or statement rendered by Operator for any expenditure or any part thereof, on the ground that the same was not a reasonable, authorized, and proper cost incurred by Operator in connection with the operation, maintenance, upkeep or repair of the Line. Viking shall nevertheless pay in full when due the amount of all statements submitted by Operator. Such payment shall not be deemed a waiver of the right of Viking to recoup any contested portion of any bill or statement. However, if the amount as to which such written exception is taken or any part thereof is ultimately determined by Viking not to be a reasonable, authorized, and proper expense incurred by Operator in connection with the operation, maintenance, upkeep or repair of the Line, such amount or portion thereof (as the case may be) shall be refunded by Operator to Viking together with interest thereon at an annual rate (which in no event shall be higher than the maximum rate permitted by applicable law) equal to the prime rate charged by Citibank of New York, or its successor entity, from time to time to responsible commercial and 8 industrial borrowers during the period from the date of payment by Viking to the date of refund by Operator. SECTION 5.04 - RATE REVIEWS Operator shall review from time-to-time the rates and fees charged for transportation services and recommend to Viking revision in such rates and fees as necessary to reflect increased or decreased costs or other changes in the conditions of service in order to assure that all costs are reflected in the tariffs of Viking. SECTION 5.05 - AUDIT Viking or its designated representatives, after fifteen (15) days' notice in writing to Operator, shall have the right during normal business hours to audit, at its own expense, all books and records of Operator as well as the relevant books of account of Operator's contractors relating to the construction and operation of the Line. Such audits shall not be commenced more often than twice each calendar year. Viking shall have two (2) years after the close of a calendar year in which to make an audit of Operator's records for such calendar year. Absent fraud or intentional concealment or misrepresentation by Operator or its employees, and except for any adjustments which may arise from FERC compliance audits, Operator shall neither be required nor permitted to adjust any item unless a claim therefor is presented or adjustment is initiated within two (2) years after the close of the calendar year in which the statement therefor is rendered, and in the absence of such timely claims or adjustments, the bills and statements rendered shall be conclusively established as correct; provided, however, this shall not prevent adjustment resulting from physical inventory of the Line. ARTICLE VI INDEPENDENT CONTRACTOR SECTION 6.01 - INDEPENDENT CONTRACTOR (a) In performing services pursuant to this Agreement, Operator shall be an independent contractor and not an employee, agent or servant of Viking and this Agreement does not create any partnership or joint venture between Viking and the Operator. 9 (b) Operator shall comply with all relevant laws, statutes, ordinances, safety codes, regulations and rules applicable to the operation of the Line. ARTICLE VII INTELLECTUAL PROPERTY SECTION 7.01 - INVENTIONS AND COPYRIGHTS Any inventions, whether patentable or not, developed or invented or copyrightable material, developed by Operator or its employees during the performance of services under this Agreement shall, unless otherwise directed, be assigned to Viking, which shall have the exclusive right to the exploitation thereof. SECTION 7.02 - CONFIDENTIALITY Because the information and knowledge gained during the performance of services hereunder may consist of valuable proprietary information, the misuse or disclosure of which could cause substantial damage to Viking, any and all information obtained by Operator in performance of its obligations hereunder shall be held in strict confidence by Operator, its employees or agents except as needed to comply with the purposes of this Agreement. Any contracts entered into by Operator related to its obligations under this Agreement shall contain a provision which similarly restricts the use and disclosure of such information. ARTICLE VIII TERM SECTION 8.01 - TERM This Agreement shall be effective as of January 1, 2003 and shall continue for a term of five (5) years, and thereafter on a year-to-year basis unless terminated on six (6) months prior written notice by either party hereto. SECTION 8.02 - UPON TERMINATION Termination of this Agreement shall not relieve either party from paying amounts of money due hereunder which were due prior to or become due after or as a result of such termination. 10 ARTICLE IX ACCOUNTING AND TAXES SECTION 9.01 - FISCAL YEAR The fiscal year of Viking shall be the calendar year. SECTION 9.02 - LOCATION OF RECORDS The books of account for Viking shall be kept and maintained at the principal office of Viking or at such other place as the Partnership Policy Committee shall determine. SECTION 9.03 - BOOKS OF ACCOUNT The books of account for Viking shall be: (a) maintained on an accrual basis in accordance with Required Accounting Practice; and (b) audited by the Certified Public Accountants at the end of each fiscal year. SECTION 9.04 - ANNUAL FINANCIAL STATEMENTS As soon as practicable following the end of each fiscal year of Viking, the Operator shall prepare and deliver to the Partnership Policy Committee a profit and loss statement, a statement of changes in financial position for such fiscal year, and a balance sheet as of the end of such fiscal year, together with a report thereon of the Certified Public Accountants. SECTION 9.05 - TAX RETURNS As soon as practicable following the end of each fiscal year of Viking, the Operator shall prepare and deliver to the Partnership Policy Committee federal, state and local income tax returns and supporting accounting and tax information and schedules for such fiscal year. Matters of tax policy for Viking shall be the responsibility of, and ultimately determined by the Partnership Policy Committee. 11 SECTION 9.06 - GOVERNMENTAL REPORTS Operator, on behalf of Viking, shall prepare and file all reports prescribed by the FERC and any other commission or governmental agency having jurisdiction. SECTION 9.07 - INSPECTION OF FACILITIES AND RECORDS Each member of the Partnership Policy Committee shall have the right at all reasonable times during usual business hours to inspect the facilities of Viking and to examine and make copies of the books of account and other records of Viking. Such right may be exercised through any agent or employee of such member of the Partnership Policy Committee designated in writing by it or by an independent public accountant, petroleum engineer, attorney or other consultant so designated. That member of the Partnership Policy Committee shall bear all costs and expenses incurred in any examination for such member's account. SECTION 9.08 - DEPOSIT OF FUNDS Funds of Viking shall be deposited in such banks or other depositories as shall be designated by the Partnership Policy Committee. ARTICLE X LAW OF THE CONTRACT AND ARBITRATION SECTION 10.01 - LAW OF THE CONTRACT This Agreement and all other agreements relating thereto shall be construed and interpreted under the laws of the State of Nebraska. SECTION 10.02 - ARBITRATION (a) In the event that the parties are unable to agree on any of the matters set forth herein, except as provided in Section 5.03, either Viking or Operator may upon written notice call for submission of such matter to arbitration. The party requesting arbitration shall set forth in such notice in adequate detail the issues to be arbitrated, and within ten (10) days from the receipt of such notice, the other party may set forth in adequate detail additional related issues to be arbitrated. If arbitration is 12 invoked by either party, the decision of the arbitrators shall be final and binding upon both parties. (b) Such binding arbitration shall be conducted by a person or entity knowledgeable and experienced in pipeline operations matters. In the event the parties are unable to agree upon such person or entity, they shall then each select a person or entity having the qualifications set forth above, and such persons or entities selected shall mutually agree upon a similarly qualified third person or entity to complete the arbitration panel. In the event that the persons selected by the parties are unable to agree on a third member of the panel within sixty (60) days after their selection, such person shall be designated by the American Arbitration Association or such other person the parties mutually agree upon. Upon final selection of the entire panel, such panel shall, as expeditiously as possible, render a decision on the matter submitted for arbitration. (c) Upon the determination of any such dispute, the arbitrators shall bill the costs attributable to such binding arbitration to the party whose position they determine is farthest away from the actual decision rendered; provided, however, that the arbitrators shall be empowered to apportion such costs between the parties if they deem it appropriate. (d) It is the intent of the parties that the matters agreed upon to be arbitrated be decided as set forth herein and they shall not seek to have this Article X rendered unenforceable or to have such matter decided in any other way. ARTICLE XI FORCE MAJEURE SECTION 11.01 - EFFECT OF FORCE MAJEURE In the event that either Viking or Operator is rendered unable, by reason of an event of force majeure, to perform, wholly or in part, any obligation or commitment set forth in this contract, then upon such party's giving notice and full particulars of such event as soon as practicable after the occurrence thereof, the obligations of both parties, except for unpaid 13 financial obligations arising prior to such event of force majeure, shall be suspended to the extent and for the period of such force majeure condition. SECTION 11.02 - NATURE OF FORCE MAJEURE The term "force majeure" as employed in this Agreement shall mean acts of God, strikes, lockouts or industrial disputes or disturbances, civil disturbances, arrests and restraint from rulers of people, interruptions by government or court orders, present and future valid orders, decisions or rulings of any governmental entity having proper jurisdiction, acts of the public enemy, wars, riots, blockades, insurrections, inability to secure labor or inability to secure materials, including inability to secure materials by reason of allocations promulgated by authorized governmental agencies epidemics, landslides, lightning, earthquakes, fire, storms, floods, washouts, inclement weather which necessitates extraordinary measures and expense to construct facilities and/or maintain operations, explosions, breakage or accident to machinery or lines of pipe, freezing of wells or pipelines inability to obtain or delays in obtaining easements or rights-of-way, the making of repairs or alterations to wells, pipelines or plants, partial or entire failure of gas supply or any other cause, whether of the kind herein enumerated or otherwise, not reasonably within the control of the party claiming force majeure. SECTION 11.03 - NON-FORCE MAJEURE SITUATIONS Neither Operator nor Viking shall be entitled to the benefit of the provisions of Section 11.01 under the following circumstances: (a) To the extent that the failure was caused by the party claiming suspension having failed to remedy the condition by taking all reasonable acts, short of litigation, if such remedy requires litigation, and having failed to resume performance of such commitments or obligations with reasonable dispatch; (b) If the failure was caused by lack of funds, or with respect to the payment of any amount or amounts then due hereunder; (c) To the extent that the failure was caused or contributed to by the negligence of Operator or the Partnership and such negligence shall be the cause of such failure. 14 SECTION 11.04 - RESUMPTION OF NORMAL PERFORMANCE Should there be an event of force majeure affecting performance hereunder, such events shall be remedied with all reasonable dispatch to insure resumption of normal performance. SECTION 11.05 - STRIKES AND LOCKOUTS Settlement of strikes and lockouts shall be entirely within the discretion of the party affected, and the requirement in Section 11.04 that any event of force majeure shall be remedied with all reasonable dispatch shall not require the settlement of strikes or lockouts by acceding to the demands of the persons or entities directly or indirectly involved in such strikes or lockouts when such course is inadvisable in the discretion of the party having such difficulty. ARTICLE XII MISCELLANEOUS SECTION 12.01 - AMENDMENT This Agreement shall only be amended by an instrument in writing executed by both parties. SECTION 12.02 - WAIVERS A waiver by a party at any time of its rights with respect to a default under this Agreement, or with respect to any other matter in connection with this Agreement, shall not be deemed a waiver with respect to any other or subsequent default or matter. SECTION 12.03 - SEVERABILITY If any provision of this Agreement shall be invalid or unenforceable to any extent, the remainder of this Agreement shall not be affected thereby and shall be enforced to the greatest extent permitted by law. SECTION 12.04 - GOVERNMENTAL BODIES This Agreement is subject to all valid orders, rules and regulations of any governmental body having jurisdiction over the parties hereto, or this Agreement. 15 SECTION 12.05 - ENTIRETY This Agreement contains the entire agreement between the parties and except as stated herein there are no oral promises, agreements or warranties affecting it. SECTION 12.06 - RECITALS For the purpose of interpreting this Agreement, the Recitals shall be considered incorporated herein as if set forth in full. SECTION 12.07 - REMEDIES CUMULATIVE Remedies provided under the provisions of this Agreement shall be cumulative and, except as to the agreement for binding arbitration contained in Article X hereof, shall be in addition to the remedies provided by law or in equity. SECTION 12.08 - CONFLICTS In the event there is any conflict between this Agreement and any schedule or subsequent agreement referred to herein, the provisions hereof shall be deemed controlling. SECTION 12.09 - REPORTING Operator shall report to the Partnership Policy Committee. SECTION 12.10 - OPERATING AND MAINTENANCE PLAN Operator shall submit to Viking for approval an operating and maintenance plan for the Line, as required by the Minimum Federal Safety Standards, Part 192, of the Department of Transportation. SECTION 12.11 - OPERATOR'S OFFICE Operator may select the location of its office or offices to perform its obligation hereunder. SECTION 12.12 - ATTORNEYS' FEES Should any litigation be commenced between the parties concerning any provision of this Agreement or the rights and duties hereunder, the party prevailing in such litigation shall be entitled, in addition to such other relief as may be granted in such proceeding, to a reasonable sum as and for 16 their attorneys' fees in such litigation, which sum shall be determined in such litigation or in a separate action for such purpose. SECTION 12.13 - COUNTERPART EXECUTION This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together constitute one and the same instrument. ARTICLE XIII NOTICES SECTION 13.01 - NOTICES Unless herein provided to the contrary, any notice called for in this Agreement shall be in writing and shall be considered as having been given if delivered personally or by mail or telegraph with all postage or charges prepaid, to either Viking or Operator at the places designated. Routine communication, including monthly statements and payments shall be considered as duly delivered when mailed by ordinary mail. Normal operating instructions can be made by telephone. Unless changed, the addresses of the parties are as follows. "OPERATOR" NORTHERN PLAINS NATURAL GAS COMPANY 13710 FNB Parkway Omaha, Nebraska 68154-5200 "VIKING" VIKING GAS TRANSMISSION COMPANY 13710 FNB Parkway Omaha, Nebraska 68154-5200 Any notice given to Viking under this Agreement shall be promptly transmitted by it to the Partnership Policy Committee. 17 ARTICLE XIV ASSIGNMENT SECTION 14.01 - ASSIGNABILITY As to the assignment of this Agreement: (a) This Agreement shall not be assigned by either Viking or Operator without the written consent of the other. (b) Consent to assignment hereunder shall not be unreasonably withheld by either party hereto. SECTION 14.02 - SUCCESSORS AND ASSIGNS This Agreement and all of the obligations and rights herein established shall extend to and be binding upon and shall inure to the benefit of the respective successors and assigns of the respective parties hereto. SECTION 14.03 - EFFECTIVE DATE Any assignment hereunder shall be effective on the first day of the month following the month during which the assignment is completed. IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first written. NORTHERN PLAINS NATURAL GAS COMPANY VIKING GAS TRANSMISSION COMPANY /s/ JERRY L. PETERS /s/ WILLIAM R. CORDES - ------------------------------------ ---------------------------------- NAME: JERRY L. PETERS NAME: WILLIAM R. CORDES TITLE: VICE PRESIDENT AND TREASURER TITLE: PRESIDENT 18 EXHIBIT A TO OPERATING AGREEMENT ACCOUNTING PROCEDURE ARTICLE I GENERAL PROVISIONS 1.01 STATEMENTS AND BILLINGS. Operator may bill Viking on the first day of each month for the estimated costs and expenses for the month and any adjustment which may be necessary to correct prior estimated billings to actual. Such bills will be summarized by appropriate classifications indicative of the nature thereof. 1.02 PAYMENT BY VIKING. Viking shall pay all bills presented in the Operating Agreement on or before the 15th day after the billing date. If payment is not made within such time, the unpaid balance shall bear interest until paid at a rate (which in no event shall be higher than the maximum rate or rates permitted by applicable law) equal to the prime rate charged by the Citibank of New York, or its successor entity, from time to time to responsible commercial and industrial borrowers; provided, however, that if employees of Operator are responsible for writing Viking's checks and Viking has sufficient funds to make payment, no interest charge shall be imposed for late payment. Payment by or on behalf of Viking shall not be deemed a waiver of the right to recoup any amount in question. 1.03 ADJUSTMENTS. Except for any adjustments which may arise from FERC Compliance Audits, payment of any such bills shall not prejudice the right of Viking to protest or question the correctness thereof; provided however, all bills and statements rendered to Viking by Operator during any calendar year shall conclusively be presumed to be true and correct after 24 months following the end of any such calendar year, unless A-1 prior to the end of said 24 month period Viking takes written exception thereto and makes claim on Operator for adjustment; provided, however, this shall not prevent adjustment resulting from physical inventory of the Line. No adjustment favorable to Operator shall be made unless it is made within the same prescribed period. 1.04 FINANCIAL RECORDS. Operator shall maintain accurate books and records in accordance with the Federal Energy Regulatory Commission's Uniform System of Accounts for Class A and B natural gas companies or any successor system thereto covering all of Operator's actions under this Operating Agreement. ARTICLE II CAPITAL ITEMS AND CONSTRUCTION COSTS Except for items included in a previously approved budget, prior to the acquisition of any property, real or personal, costing more than a ceiling amount to be established by the Partnership Policy Committee in the name or on behalf of Viking which under the accounting rules and regulations, if any, at the time prescribed by the regulatory body or bodies under the jurisdiction of which Viking is at the time operating, might be capitalized, Operator shall prepare and submit to Viking a forecast of the cost of all such property. Upon approval of such forecast by Viking, Operator shall have authority to purchase such property in Viking's name or in Operator's name for the benefit of Viking without further approval or action by Viking. To the extent Operator owns property necessary or desirable for the operation and maintenance of the Line which (i) under the accounting rules and regulations, if any, at the time prescribed by the regulatory body or bodies under the jurisdiction of which Viking is at the time operating, might be capitalized, (ii) Operator in its sole discretion is willing to transfer for consideration to Viking, and (iii) can be transferred by Operator to Viking free and clear of all prior liens and encumbrances, Operator, if approved by Viking, may so transfer such property to Viking and charge Viking the net book value thereof as reflected on the books of Operator on the date of transfer. A-2 ARTICLE III COSTS, EXPENSES AND EXPENDITURES Subject to the limitations hereinafter prescribed and the provisions of the Operating Agreement to which this Accounting Procedure is an exhibit, Operator shall charge Viking for all costs and expenses incurred by Operator (except those costs incurred under Section 3.03 of the Operating Agreement) in connection with the performance of the responsibilities set forth in Article III of the Operating Agreement, including without limitation, the administration, planning, accounting, design, construction, operation, maintenance, or abandonment of the Line (hereinafter collectively referred to as "Operation of the Line"). Such costs and expenses shall include, without limitation, the following: 3.01 RENTALS. All rentals paid by Operator. 3.02 LABOR COSTS. (a) Salaries and wages of employees of Operator and Operator's parent and affiliates providing services in connection with the Operation of the Line and, in addition, amounts paid as salaries and wages of others temporarily employed in connection therewith. Cost of holiday, vacation, sickness, jury service and other fringe benefits and customary allowances paid to persons whose salaries and wages are chargeable under this paragraph (a). (b) Expenditures or contributions made pursuant to assessments imposed by governmental authority which are applicable to salaries, wages and costs chargeable under paragraph (a) above. The reasonable cost of plans for employees' group life insurance, hospitalization, disability, pension, retirement, savings and other benefit plans, applicable to labor costs chargeable under paragraph (a) above. 3.03 REIMBURSABLE EXPENSES OF EMPLOYEES. Reasonable personal expenses of employees whose salaries and wages are chargeable under Section 3.02(a) of this Exhibit A. As used herein, the term "personal expenses" shall mean the usual out-of-pocket expenditures incurred by employees in the performance of their duties and for which such employees are reimbursed. A-3 Operator shall maintain documentation for such expenses in accordance with the standards of the Internal Revenue Service. 3.04 MATERIAL, EQUIPMENT AND SUPPLIES. It is contemplated that all material; equipment and supplies will be owned by Viking and purchased or furnished for its account. So far as is reasonably practical and consistent with efficient and economical operation, only such material shall be obtained for the Line as may be required for immediate use, and the accumulation of surplus stock shall be avoided. To the extent reasonably possible, Operator shall take advantage of discounts available by early payments and pass such benefits on to Viking. Material, equipment and supplies furnished by Operator, if any, shall be priced at cost plus carrying costs to be established by Operator based on actual experience. 3.05 TRANSPORTATION. Transportation of employees, equipment and material and supplies necessary for the Operation of the Line. It is anticipated that all transportation equipment will be owned by Viking; provided, however, any automobiles, airplanes and trucks owned or obtained from Operator's parent or affiliates by Operator and approved for use for the Operation of the Line will be billed to Viking at reasonable rates based on Operator's actual costs. 3.06 SERVICES. (a) The cost of contract services and utilities procured from outside sources. (b) Use and services of vehicles, equipment and facilities furnished by Operator as provided in Section 3.05 of this Exhibit A. 3.07 LEGAL EXPENSES AND CLAIMS. All costs and expenses of handling, investigating and settling litigation or claims arising by reason of the Operation of the Line or necessary to protect or recover any Line property, including, but not limited to, attorney's fees, court costs, cost of investigation or procuring evidence and any judgments paid or amounts paid in settlement or satisfaction of any such litigation or claims. Operator shall credit Viking for judgments received or amounts A-4 received in settlement of litigation, with respect to any claim asserted on behalf of Viking. 3.08 TAXES. All taxes of every kind and nature assessed or levied upon or incurred in connection with the Operation of the Line or on the Line or other property of Viking and which taxes have been paid by the Operator for the benefit of Viking or in connection with the Operation of the Line, including charges for late payment arising from extensions of the time for filing which are caused by Viking. 3.09 INSURANCE. Net of any returns, refunds, or dividends, all premiums paid and expenses incurred for insurance required to be carried under the Operating Agreement. 3.10 PERMITS, LICENSES AND BOND. Cost of permits, licenses and bond premiums necessary in the performance of Operator's duties. 3.11 OVERHEAD, ADMINISTRATIVE AND GENERAL EXPENSE. All overhead, administrative and general expenditures of Operator and Operator's parent and affiliates incurred in connection with the Operation of the Line. A-5
