WATER PURCHASE CONTRACT
EXHIBIT
10.46
This
Water Purchase Contract (“Agreement”) is entered into as of the 1st day of
January, 2007, (the “Effective Date”) between SHELL
FRONTIER OIL & GAS, INC., a
Delaware corporation (hereinafter referred to as the “Purchaser”), and NATURAL
SODA, INC., a Colorado corporation (hereinafter referred to as the
''Seller'').
Recitals:
Whereas,
Seller is the lessee of four federal sodium leases (“Sodium Leases”)
comprising
approximately 8,224 acres in the Piceance Creek Basin and Yellow Creek
Basin in
Rio ▇▇▇▇▇▇ County, Colorado, and pertaining to the land areas described
on the
attached Exhibit A; and
Whereas,
Seller is also the owner of the water rights described in Findings
of Fact, Conclusions of Law, Judgment and Decree of the Water
Court,
entered
by the District Court in and for Water Division No. 5 on August 13, 1991
in Case
No. 88CW420, and recorded at the office of the Rio ▇▇▇▇▇▇ County Clerk
and
Recorder on August 16, 1991 as Reception No. 243688 (“88CW420 Decree”);
and
Whereas,
Purchaser is constructing a commercial office facility to be located at
▇▇▇ ▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ (the “Facility”) and constructing
and operating other test and production facilities in the vicinity of the
Facility; and
Whereas,
the parties have agreed to terms and conditions for the Seller to
sell
water to
the Purchaser and the parties desire to define and state the terms and
conditions for the
sale of
water.
Therefore,
for adequate consideration and the mutual agreements, benefits, and obligations
provided for in this Agreement, Seller and Purchaser agree as
follows:
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1.
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(Quantity)
Subject to the terms and conditions specified in this Agreement,
Seller
agrees to sell to the Purchaser at the points of delivery specified
in
this Agreement, or any renewal or extension thereof, water in
such
quantity as may be required by the Purchaser determined in its
sole
discretion not to exceed One Hundred and Twenty (120) acre feet
of water
per year.
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2.
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(Quality)
The water to be provided to the Purchaser shall be withdrawn
from a well
or ▇▇▇▇▇ constructed to withdraw water from the geologic formation
commonly known as the “A Groove,” and the quality of the water shall be
“as is” upon withdrawal from the geologic formation without any treatment
by the Seller. Seller does not make any representation or warranty
regarding the quality of the water delivered to the Purchaser.
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3.
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(Delivery)
The water to be provided to the Purchaser shall be delivered
at a location
to be determined by the Seller on the Sodium Leases,
at
which location Seller
shall be required to provide
for the Purchaser
a
connection to existing facilities for either,
or both, (1) filling
water transport trucks,
and (2) connecting to a pipeline to transport the water to the
Facility.
In the event the Purchaser intends to transport the water to
the Facility
by use of a pipeline, the Purchaser shall be solely and exclusively
responsible for construction of the pipeline.
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4.
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(Metering
Equipment) The Seller shall furnish, install, operate, and maintain
at its
own expense, the necessary metering equipment, including a meter
house or
pit, and required devices of standard type for properly measuring
the
quantity of water delivered to the Purchaser. Seller shall be
responsible
for calibrating such metering equipment whenever requested by
the
Purchaser but not more frequently than once every twelve (12)
months. A
meter registering not more than two percent (2%) above or below
the test
result shall be deemed to be accurate. The previous readings
of any meter
readings of any meter disclosed by test to be inaccurate shall
be
corrected in accordance with the percentage of inaccuracy found
by such
test.
If any meter fails to register for any period, the amount of
water
furnished during such period shall be deemed to be the amount
of water
delivered in the corresponding period immediately prior to the
failure,
unless Seller and Purchaser shall agree upon a different amount.
The
metering equipment shall be read by the Seller as the water is
delivered,
and the Seller shall provide to the Purchaser the total volume
of water
delivered to the Purchaser during each month. An appropriate
official of
the Purchaser at all reasonable times shall have access to the
meter for
the purpose of verifying its
readings.
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5.
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(Billing
Procedure) Seller shall monthly submit to Purchaser an itemized
statement
of the amount of water furnished to the Purchaser, and the billing
statement shall be submitted to the address provided by the Purchaser.
Payment terms will be net 30 days from the date of the
invoice.
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6.
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(Rate
and Payment Date) Purchaser shall pay to Seller for water delivered
to
Purchaser from Seller during each month based on the number of
gallons
delivered to the Purchaser. The purchase price of the water shall
initially be Two and One-Half Cents ($0.025) per gallon of water
(“Base
Rate”). In the event this Agreement is extended beyond the Initial
Term of
this Agreement, the Base Rate shall be adjusted as of the Effective
Date
of the extended term of this Agreement in accordance with the
following
formula:
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AP
=
BR(LI/LB)
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Where:
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AP
is the adjusted price per gallon of water
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BR
is the Base Rate of Two and One-Half Cents ($0.025) per gallon
of
water
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LI
is the Consumer Price Index for all urban consumers, all items,
U.S. City
Average as published for January of the year of adjustment. If
the
Consumer Price Index is changed, the LI shall be converted in
accordance
with the conversion factor published by the Bureau of Labor Statistics.
Should the Consumer Price Index be discontinued, the Parties
agree to
substitute another index generally recognized to be authoritative.
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LB
is the base value of the above described index, which shall be
the
published value for January
2006.
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In
the
event the Consumer Price Index for all urban consumers, all items, U.S.
City
Average (LI in the above formula) decreases, the adjusted purchase price
for the
water shall not be decreased and shall remain the same as previously determined.
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7.
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(Term
of Agreement) This Agreement shall become effective on the
Effective Date.
Unless otherwise terminated pursuant to its terms, the Agreement
will
remain in effect through December 31, 2011 (the “Initial Term”). This
Agreement will be extended automatically for successive periods
of five
(5) years after the Initial Term and each renewal term on the
same terms
and conditions, subject to adjustment of the water purchase
rate pursuant
to paragraph 6 herein. Purchaser may elect to terminate this
Agreement (i)
as of the last day of the Initial Term, upon sixty (60) days
prior written
notice to Seller and (ii) as to any renewal term, upon written
notice to
Seller to be received no later than sixty (60) days prior to
the
commencement of such renewal term. In addition, Purchaser may
terminate
this Agreement at any time by delivering to Seller no later
than one
hundred twenty (120) days prior to the intended termination
date, a
written notice of termination. Seller may terminate this Agreement
(i) as
of the last day of the Initial Term, and (ii) as to the last
day of any
renewal term, upon written notice to Purchaser to be received
by Purchaser
no later than one hundred twenty (120) days prior to the end
of the
Initial Term or any renewal term. In addition, in the event
the Seller’s
interest in the Sodium Leases is terminated or revoked, this
Agreement
shall terminate on the date of termination of Seller’s interest in the
Sodium Leases.
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8.
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(Water
Supply Failure) The parties acknowledge and agree that the well
or ▇▇▇▇▇
used to deliver water pursuant to this Agreement will periodically
need to
be redrilled or reconstructed and may need to have the pump and
other
equipment replaced. In the event the well or ▇▇▇▇▇ are not operational
for
any reason, the Seller shall notify the Purchaser as soon as
reasonably
possible of the failure of the water supply and Seller shall
exercise its
best efforts to supply alternative water supplies to the Purchaser.
Seller
shall not be liable for any failure of the water supply due to
failure of
the well or ▇▇▇▇▇ or any associated structures.
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9.
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(Replacement
of Water Well Depletions) The parties acknowledge and agree
that the
operation of the well, and any replacement well, will cause
depletions to
Piceance Creek and Yellow Creek, which are calculated pursuant
to the
terms of the 88CW420 Decree. The Seller shall be solely and
exclusively
responsible for replacement of all depletions to Piceance Creek
and Yellow
Creek associated with the operation of the well, and any replacement
well,
including, but not limited to depletions occurring to Piceance
Creek and
Yellow Creek associated with the operation of the well, and
any
replacement well, after termination of this Agreement. The
Purchaser
agrees that the Purchaser will not assert a call or request
for water to
be replaced to Yellow Creek pursuant to the terms of the 88CW420
Decree,
including, but not limited to, the terms of Paragraph 56.c.
of the 88CW420
Decree.
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10.
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(Event
of Default) An “Event of Default” shall mean, with respect to a party (a
“Defaulting Party”), the occurrence of any of the
following:
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10.1.
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the
failure to make, when due, any payment required pursuant to this
Agreement;
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10.2.
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any
representation or warranty made by such party herein is false
or
misleading in any material respect when
made;
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10.3.
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the
failure to perform any material covenant or obligation set
forth in this
Agreement (except to the extent constituting a separate Event
of Default,
and except for Seller’s obligation to deliver Water pursuant to paragraph
8 herein);
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10.4.
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such
party files a petition or otherwise commences, authorizes or
acquiesces in
the commencement of a proceeding or cause of action under any
bankruptcy,
insolvency, reorganization or similar law, or has any such petition
filed
or commenced against it, (ii) makes an assignment or any general
arrangement for the benefit of creditors, (iii) otherwise becomes
bankrupt
or insolvent (however evidenced), (iv) has a liquidator, administrator,
receiver, trustee, conservator or similar official appointed
with respect
to it or any substantial portion of its property or assets, or
(v) is
generally unable to pay its debts as they fall due;
or
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10.5.
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such
party consolidates or amalgamates with, or merges with or into,
or
transfers all or substantially all of its assets to, another
entity and,
at the time of such consolidation, amalgamation, merger or transfer,
the
resulting, surviving or transferee entity fails to assume all
the
obligations of such party under this Agreement to which it or
its
predecessor was a party by operation of law or pursuant to an
agreement
reasonably satisfactory to the other party.
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10.6.
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if
an Event of Default occurs during the term of this Agreement,
the party
not in default (the “Non-Defaulting Party”), shall provide notice to the
Defaulting Party, and the Defaulting Party shall have the opportunity
to
cure the Event of Default within thirty (30) days following
the notice of
the Event of Default. In the event the Defaulting Party does
not cure the
Event of Default within thirty (30) days following the notice
of the Event
of Default, the Non-Defaulting Party may, by giving written
notice to the
Defaulting Party, immediately terminate this Agreement (the
“Early
Termination Date”). If an Early Termination Date occurs and the
Non-Defaulting Party is the Seller, the Purchaser shall pay
to the Seller
an amount equal to five times the payment made by the Purchaser
for water
delivered pursuant to this Agreement during the immediately
preceding
year. If an Early Termination Date occurs and the Non-Defaulting
Party is
the Purchaser, the Seller shall pay to the Purchaser an amount
equal to
five times the payment made by the Purchaser for water delivered
pursuant
to this Agreement during the immediately preceding year. The
Defaulting
Party shall make the payment within ten days after the expiration
of the
period for cure. The payments described in this paragraph shall
be the
sole and exclusive remedy for an Event of Default.
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10.7 At
the time for payment of any amount due under paragraph 10.6, and unless
disputed
in good faith, each party shall pay to the other party all additional
amounts
payable by it to the other party pursuant to this Agreement, but all
such
amounts shall be netted and aggregated with any payment made pursuant
to
paragraph 10.6 hereunder. Both parties hereby stipulate that the payment
obligations set forth in paragraph 10 herein are reasonable in light
of the
anticipated harm and the difficulty of estimation or calculation of actual
damages and each party hereby waives the right to contest such payments
as an
unreasonable penalty. In the event either party fails to pay amounts
in
accordance with paragraph 10 herein when due, the aggrieved party shall
have the
right to exercise any remedy available at law or in equity to enforce
payment of
such amount plus interest.
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11.
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(No
Consequential Damages) NEITHER PARTY SHALL BE LIABLE FOR CONSEQUENTIAL,
INCIDENTAL, PUNITIVE, EXEMPLARY OR INDIRECT DAMAGES, LOST PROFITS
OR OTHER
BUSINESS INTERRUPTION DAMAGES, BY STATUTE, IN TORT OR CONTRACT,
UNDER ANY
INDEMNITY PROVISION OR OTHERWISE. IT IS THE INTENT OF THE PARTIES
THAT THE
LIMITATIONS HEREIN IMPOSED ON REMEDIES AND THE MEASURE OF DAMAGES
BE
WITHOUT REGARD TO THE CAUSE OR CAUSES RELATED THERETO, INCLUDING
THE
NEGLIGENCE OF ANY PARTY, WHETHER SUCH NEGLIGENCE BE SOLE, JOINT
OR
CONCURRENT, OR ACTIVE OR PASSIVE.
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12.
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(Regulatory
Agencies) This Agreement is subject to such rules, regulations,
or laws as
may be applicable to similar agreements in the State of Colorado
and the
United States of America (federal lands) and the Seller and Purchaser
will
collaborate in obtaining such permits, certificates, or the like,
as may
be required to comply therewith.
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13.
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(Exclusivity)
Seller may enter into agreements with third parties for the purpose
of
granting or delivering water to any third parties, but such delivery
of
water shall be subordinate to the delivery of water to the
Purchaser.
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14.
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(Right
to Assign) Purchaser has the right at any time, without the consent
of
Seller, to assign this Agreement and the rights granted, in whole
or in
part, but only so long as the assignee is bound by and limited
to the
terms of this Agreement. Any assignment will not relieve Purchaser
of its
obligations under this Agreement unless Seller expressly consents
to the
assignment. Seller's consent will not be unreasonably
withheld.
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15.
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(Warranty)
Seller warrants title to the water to be sold to the Purchaser,
and Seller
further warrants that it has the full right and authority to
enter into
this Agreement and grant the rights set out in this Agreement,
including,
but not limited to, selling the annual maximum quantity of water
as set
forth herein to Purchaser for Purchaser’s uses set forth above. Seller
further warrants that Seller is in compliance with and will continue
to be
in compliance with, during the term of this Agreement, all water
right
decrees relating to the water. The water delivered to the Purchaser
pursuant to this Agreement is sold and delivered to the Purchaser
on an
“as is” basis and the Seller makes no representations or warranties
regarding the quality of the water delivered to the
Purchaser.
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16.
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(Notices)
All notices and other communications under this Agreement shall
be in
writing and shall be deemed to have been received on the date
of service,
if served personally or via facsimile on the person to whom notice
is
given, or on the third day after mailing, if mailed to the party
to whom
notice is to be given by certified, first class mail, postage
prepaid,
return receipt requested and properly addressed as
follows:
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Purchaser:
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Shell
Frontier Oil & Gas Inc.
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Attention:
▇.▇. ▇▇▇▇▇▇▇, Onshore Land Manager
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▇.▇.
▇▇▇ ▇▇▇
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▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
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Facsimile:
▇▇▇-▇▇▇-▇▇▇▇
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Seller:
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Plant
Manager
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Natural
Soda, Inc.
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▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇
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▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇
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Facsimile:
▇▇▇-▇▇▇-▇▇▇▇
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With a copy to:
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▇▇▇▇
▇▇▇▇, President
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Natural
Soda, Inc.
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3200
RBC 31
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▇▇▇▇▇,
▇▇ ▇▇▇▇▇
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Facsimile:
▇▇▇-▇▇▇-▇▇▇▇
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Any
Party
may change its address by giving notice in the manner provided
hereunder.
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17.
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(Recording)
A mutually agreeable redacted form of this Agreement may be
recorded at
the office of the Clerk and Recorder of Rio ▇▇▇▇▇▇ County,
Colorado.
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18.
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(Miscellaneous)
THIS
AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED, INTERPRETED AND
ENFORCED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF COLORADO WITHOUT REGARD
TO
PRINCIPLES OF CONFLICT OF LAWS.
This Agreement shall bind and inure to the benefit of and be
enforceable
by Purchaser and Seller and their respective successors and assigns.
If
any provision of this Agreement shall be held to be illegal or
unenforceable, the validity of the remaining portions of this
Agreement
shall not be affected. This Agreement may not be amended (nor
may any of
its terms be waived) except in a writing signed by both the Purchaser
and
Seller. This Agreement constitutes the entire agreement between
Purchaser
and Seller with respect to the subject matter hereof.
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19.
(Withdrawal of Statements of Opposition) The parties agree to the following
with
respect to pending water rights applications:
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19.1
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Purchaser
has filed water rights applications in the following cases
pending in the
District Court for Water Division ▇▇. ▇, ▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇:
▇▇▇▇ ▇▇.
▇▇▇▇▇▇▇ and Case No. 04CW110 (collectively, “Shell Cases”). Seller has
filed statements of opposition in the Shell Cases. Within ten
days after
the effective date of this Agreement, Seller shall withdraw
the statements
of opposition that it filed in the Shell Cases. Purchaser hereby
consents
to the withdrawal of Seller’s statements of opposition.
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19.2
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Seller
has filed water rights applications in the following cases pending
in the
District Court for Water Division ▇▇. ▇, ▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇: ▇▇▇▇
▇▇.
▇▇▇▇▇▇▇ and Case No. 05CW41 (collectively, “Natural Soda Cases”).
Purchaser has filed statements of opposition in the Natural Soda
Cases.
Within ten days after the effective date of this Agreement, Purchaser
shall withdraw the statements of opposition that it filed in
the Natural
Soda Cases. Seller hereby consents to the withdrawal of the Puchaser’s
statements of opposition.
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In
witness whereof, the parties hereto have caused this Agreement to be duly
executed in two counterparts, each of which shall constitute an
original.
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NATURAL
SODA, INC.
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SHELL
FRONTIER OIL & GAS, INC.
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By:
/s/
▇▇▇▇ ▇. ▇▇▇▇
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By:/s/
▇.▇. ▇▇▇▇▇▇▇
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Name:
▇▇▇▇ ▇. ▇▇▇▇
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Name:
▇.▇. ▇▇▇▇▇▇▇
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Title:
President
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Title:
Attorney-in-Fact
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Exhibit
A
Lease
No. C-0118326
Township
1 South, Range 98 West, 6th P.M.
Section
13: Lots 9 to 24 inclusive (All)
Section
14: ▇▇▇ ▇, ▇▇▇▇ ▇ ▇▇ ▇▇ ▇▇▇▇▇▇▇▇▇ (▇▇▇)
Section
15: Lots 1 to 13 inclusive
Section
21: NE1/4NE1/4, S1/2NE1/4, NE1/4SW1/4, SE1/4
Section
22: ▇▇▇▇ ▇▇, ▇▇, ▇▇▇ ▇▇
▇▇▇▇▇
▇▇▇▇ = 2,159.64 Acres
Lease
No. C-0118327
Township
1 South, Range 98 West, 6th P.M.
Section
23: Lots 1 to 16 inclusive (All)
Section
24: Lots 1 to 16 inclusive (All)
Section
25: Lots 1 to 16 inclusive (All)
Section
26: Lots 1 to 16 inclusive (All)
Total
area = 2,483.36 Acres
Lease
No. C-0119986
Township
1 South, Range 98 West, 6th P.M.
Section
21: S1/2SW1/4
Section
27: Lots 1 to 16 inclusive (All)
Section
28: All
Section
29: SE1/4NE1/4, S1/2S1/2, NE1/4SE1/4
Section
33: All
Section
34: Lots 3 to 6 inclusive
Total
area = 2,379.60 Acres
Lease
No. C-37474(out of C-0119985)
Township
1 South, Range 98 West, 6th P.M.
Section
16: N1/2NE1/4, SW1/4NE1/4, W1/2, NW1/4SE1/4
Section
17: All
Section
20: NE1/4NE1/4
Section
21: NW1/4NW1/4
Total
area = 1,200.00 Acres