PRODUCT SALE & PURCHASE CONTRACT BY & BETWEEN RANCHER ENERGY CORP. (BUYER) and ANADARKO PETROLEUM CORPORATION (SELLER) DATED December 15, 2006
PRODUCT
SALE & PURCHASE CONTRACT
BY
& BETWEEN
(BUYER)
and
ANADARKO
PETROLEUM CORPORATION
(SELLER)
DATED
December
15, 2006
INDEX
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ARTICLE
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PAGE
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I
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DEFINITIONS
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1
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II.
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CONTRACT
TERM
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4
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III.
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SCOPE
OF CONTRACT
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4
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IV.
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QUANTITIES
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5
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V.
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PRODUCT
PRICE
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7
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VI.
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DELIVERY
POINT AND PRESSURE
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9
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VII.
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TAXES
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9
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VIII.
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ACCOUNTING
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10
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IX.
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QUALITY
SPECIFICATIONS
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11
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X.
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MEASUREMENT
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13
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XI.
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MEASURING
EQUIPMENT AND TESTING
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14
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XII.
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WARRANTIES
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15
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XIII.
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INDEMNIFICATION
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15
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XIV
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FORCE
MAJEURE
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16
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XV.
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SUCCESSORS
AND ASSIGNS
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16
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XVI.
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NOTICES
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17
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XVII.
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MISCELLANEOUS
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18
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XVIII.
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DISPUTE
RESOLUTION
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20
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EXHIBIT
“A”
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22
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EXHIBIT
“B”
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23
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PRODUCT
SALE & PURCHASE CONTRACT
THIS
PRODUCT SALE & PURCHASE CONTRACT (the “Contract”),
is made
and entered into as of December 15, 2006 by and between Anadarko Petroleum
Corporation with a business address of ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇ (“Seller”) and Rancher Energy Corp. with a business address of
1050-17th
Street,
Suite 1700 ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (“Buyer”).
WITNESSETH:
WHEREAS,
Seller
owns certain rights to market carbon dioxide (“Product”) and Seller desires to
sell and tender for delivery to Buyer, and Buyer desires to purchase and accept
from Seller, certain quantities of Product under the terms and conditions of
this Contract; and
WHEREAS,
Seller
has certain rights to transport Product on ExxonMobil’s 60-mile, 20-inch
CO2
pipeline
from La Barge to Bairoil, Wyoming (the “ExxonMobil Pipeline”). Seller also has
certain rights to transport Product on Seller’s 125-mile, 16-inch CO2
pipeline
from Bairoil to Seller’s Salt Creek oil field (the “Anadarko Pipeline”); and
WHEREAS,
Buyer
wishes to purchase and accept Product from Seller
from the Anadarko Pipeline at the Delivery Point and Buyer will be responsible
for the construction and operation of a CO2
pipeline
from the Delivery Point to the southeastern portion of Buyer’s fields in the
South Glenrock Area of Wyoming (“Buyer’s Pipeline”);
NOW,
THEREFORE,
for and
in consideration of the premises and the mutual benefits and covenants herein
contained, Seller and Buyer hereby agree as follows:
ARTICLE
I - DEFINITIONS
1.1 Defined
Words and Terms.
Except
where the context otherwise requires another or different meaning or intent,
the
following words and terms as used herein shall have the meanings
indicated:
(a) “Actual
Monthly Amount”
means an
amount determined by multiplying the actual quantity of Product, in Mcf,
delivered to Buyer at the Delivery Point during the Month, by the Unit Price
for
such Month; provided, however, that if Buyer fails to take 25MMcf on any Day
during such Month, the Actual Monthly Amount shall be the sum of the Unit Price
multiplied by (i) plus the Unit Price multiplied by (ii), where (i) is the
actual quantity of Product delivered to Buyer for each Day during the Month
on
which Buyer was delivered 25 MMcf or more, and (ii) is 25 MMcf for each Day
during the Month on which Buyer was delivered less than 25 MMcf.
(b) “Annual
Quantity”
means
for each Contract Year, the DCQ multiplied by the number of Days in that
Contract Year.
(c) “Bcf”
means 1
Billion Cubic Feet.
Page
1
(d) “Calendar
Quarter”
means
a
three-month period beginning on January 1, April 1, July 1, or October 1 of
any
Contract Year.
(e) “CO2”
or
“Carbon
Dioxide”
means a
substance composed of molecules, each containing one atom of carbon and two
atoms of oxygen.
(f) “Contract
Year”
means a
one-year period beginning on the first Day of the first Month following the
date
on which Product has first been delivered hereunder and on each subsequent
anniversary of such first Day, provided that any period from the date of first
deliveries to the first Day of the Month next following shall be deemed a part
of the first Contract Year.
(g) “Cubic
Foot”
means
the amount of Product which would occupy one cubic foot of space at a base
pressure of 14.65 Psia and at a base temperature of 60o
degrees
Fahrenheit.
(h)
“DCQ”
or
“Daily
Contract Quantity”
for any
period means the Daily quantity of Product set out in Exhibit “A” or as
otherwise determined under this Contract for such period.
(i) “Day”
means a
period beginning at 7:00 a.m. (Mountain Time) on a calendar day and ending
at
7:00 a.m. (Mountain Time) on the next succeeding calendar day. The date of
a Day
shall be that of its beginning.
(j)
“Delivery
Point”
means
the outlet flange of the meter station at the end of the Anadarko Pipeline
in
the Salt Creek oil field, as made available to Seller and as requested by
Buyer.
(k)
“Mcf”
means
1,000 Cubic Feet.
(l) “MCQ”
or
“Minimum
Contract Quantity”
means
the quantity of Product determined by multiplying 25 MMcf by the number of
Days
in the Primary Term.
(m) “MMA”
or
“Minimum
Monthly Amount”
means
the amount determined by multiplying the Minimum Monthly Quantity by the Unit
Price.
(n) “MMQ”
or
“Minimum
Monthly Quantity”
means
the arithmetical sum for each Day during any given Month of the quantity of
Product nominated for delivery hereunder by Buyer and confirmed by
Seller.
Notwithstanding
the foregoing, and except as excused by events of force majeure as defined
in
Article XIV or as provided in Paragraph 3.2, the Minimum Monthly Quantity shall
not be less than 25 MMcf multiplied by the number of Days in the
Month.
(o) “MPR”
or
“Minimum
Purchase Requirement”
means
the product
of 25 MMcf multiplied by 365 multiplied by 10.
(p) “MMcf”
means
1,000,000 Cubic Feet.
(q) “MMcf/d”
means
1,000,000 Cubic Feet per Day.
Page
2
(r) “Month”
means a
period beginning at 7:00 a.m. (Mountain Time) on the first Day of a calendar
month and ending at 7:00 a.m. (Mountain Time) on the first Day of the next
succeeding calendar month.
(s)
“Psia”
means
pounds per square inch absolute.
(t)
“Psig”
means
pounds per square inch gauge.
(u) "Product"
means a
substance composed primarily of Carbon Dioxide and meeting the specifications
set forth in Article IX hereof.
(v) “Tender
for Delivery”
means
Seller making a certain quantity of Product available to Buyer at the Delivery
Point(s) pursuant to the terms and conditions herein.
(w) “Termination
Payment”
means an
amount of money Buyer will pay Seller if Buyer elects to terminate this contract
pursuant to Paragraph 5.6.
(x) “Total
Contract Quantity”
means
the sum of the Annual Quantity for each Contract Year during the Primary Term
of
the Contract, which shall be reduced at the end of each Contract Year in
accordance with Paragraph 4.1 hereof.
(y) “Unit
Price”
means,
as to any period, the applicable Product price per Mcf determined pursuant
to
Article V.
ARTICLE
II - CONTRACT TERM
2.1 Primary
Term.
The
Primary Term of this Contract will commence upon the later to occur of January
1, 2008, or the date of the first delivery of Product hereunder. The Primary
Term of this Contract shall terminate on the earlier of (i) the Day that the
Total Contract Quantity has been taken and paid for by Buyer, or (ii) ten (10)
years from the commencement of the Primary Term.
ARTICLE
III - SCOPE OF CONTRACT
3.1 Sale
and Commitment of Product.
Subject
to the terms, conditions and limitations of this Contract, Seller shall sell
and
Tender for Delivery to Buyer, and Buyer shall purchase and receive from Seller,
at the Delivery Point, the quantities of Product requested by Buyer up to the
Daily Contract Quantity as specified in Exhibit “A,” and, if applicable, up to
the amount of any Excess Deliveries, pursuant to the provisions of Section
4.4
hereof. It is intended that the Daily Contract Quantity will be 40 MMcf/d,
but
Seller will endeavor to Tender for Delivery quantities up to 120% of the DCQ
and
Buyer will nominate at least 25 MMcf/d.
3.2 Other
Sales/Purchases.
Seller
reserves the right to utilize Product for its own needs and to sell or contract
to deliver Product to parties other than Buyer. At all times, Seller shall
be
entitled to fully satisfy its own needs for Product before having any obligation
to Buyer hereunder. If at any time, or from time to time after satisfying its
own needs for Product, Seller is unable to deliver the entire amount of Buyer’s
nominated Product requirements hereunder as well as the daily contract quantity
of other parties, Buyer shall be entitled to receive its share of Seller’s
available deliverability based on the ratio that Buyer’s Product requirements
bear to the daily contract quantities of all parties other than Seller.
Subsequent to the execution of this Contract, Seller shall make a good faith
effort to anticipate Product availability to meet Buyer’s requirements, and
shall not knowingly utilize, sell, or contract to deliver volumes of Product
to
third parties so as to cause Seller to be unable to deliver Buyer’s
requirements. Buyer
recognizes and agrees that Seller will use commercially reasonable efforts
to
deliver Buyer’s requirements but if Seller is unable to meet such requirements
for any reason, including its own needs exclusive of third parties, there shall
be no penalty to Seller and adjustments shall be made to Buyer’s minimum
obligations hereunder.
Page
3
3.3 Carbon
Dioxide Reserves/Transportation.
Seller
and Buyer understand and agree that Seller makes no warranty, either expressed
or implied, of carbon dioxide volumes or reserves at any source, carbon dioxide
deliverability, or the transportation of carbon dioxide.
3.4
Operations.
Seller
reserves the sole and exclusive right to control, manage, and operate the
sources of the Product as Seller in its sole discretion shall determine. Buyer
agrees to take appropriate action to obtain and reserve the greenhouse gas
reduction rights addressed in Paragraph 5.8, and otherwise Buyer reserves the
sole and exclusive right to control, manage, and operate Buyer’s fields on which
the Carbon Dioxide is used.
3.5
Seller’s
Processing Rights.
Seller
reserves the right, prior to delivery, to process and/or treat the Carbon
Dioxide sold hereunder for any purpose, provided only that any Product delivered
shall meet the quality specifications hereof unless waived by Buyer pursuant
to
Paragraph 9.3.
3.6. Right
of First Refusal.
(a) If
for any reason Buyer elects to sell Buyer’s Pipeline or any of its interests
within the Area of Mutual Interest (“Interest”), Buyer shall not transfer or
convey such Interest except in accordance with this Paragraph 3.6. Any proposed
transfer or conveyance of any such Interest shall be made subject to Article
XV
and to the preferential right of Seller to purchase the Interest under the
same
terms and conditions as the proposed transferee. In such case, Buyer shall
notify
Seller in writing of the same and provide at least sixty (60) Days’ notice for
Seller to determine if it desires to purchase the Interest. Such
notice, to be effective, shall be accompanied by an agreement executed by Buyer
and the proposed transferee (the "Purchase Agreement") containing all
relevant information regarding the proposed sale, transfer, assignment or
conveyance, including the name and address of the prospective transferee (who
must be ready, willing and able to purchase), the purchase price, a legal
description sufficient to identify the property, and all other terms of the
proposed transfer or sale.
The
Purchase Agreement shall demonstrate that completion of the sale is contingent
only upon (i) the non-exercise of rights of first refusal under this Paragraph
3.6, (ii) obtaining any required governmental approvals and (iii) the
satisfaction of a standard due diligence review, including such items as title,
environmental, and certain other specifically itemized defects. Seller shall
have the option to purchase such Interest on the same terms as set forth in
the
Purchase Agreement by giving written notice (the “Election Notice”) to Buyer
prior to the expiration of the sixty (60) day period set forth above. If Seller
has elected to purchase such Interest within the sixty (60) day period, Seller
shall be irrevocably obligated to purchase such Interest. Such sale, transfer,
assignment and/or conveyance to Seller shall occur as soon as reasonably
possible following the receipt by Buyer of the Election Notice from Seller.
Upon
completion of the transaction, the Interest shall be 100% vested in Seller.
(b)
If
Seller does not exercise its preferential right to purchase by providing written
notice within such sixty (60) day period, then Buyer may effect the transfer
described in the notice at any time not later than ninety (90) days after the
end of the sixty (60) day option period, at a price not less than and on terms
no more favorable to the transferee than the price and term stated in the notice
provided for hereinabove. If such a transfer is made, the preferential right
to
purchase shall continue as to the Interest acquired by said transferee. If
the
Interest is not transferred within such ninety (90) day period, then any
subsequent proposal to transfer the same shall be subject to the provisions
of
this Paragraph 3.6 as though such Interest had never been offered for transfer.
If
the
sale or transfer is not completed within the one hundred fifty (150) day period,
all of the Interest originally offered shall again become subject to the
provisions of this Paragraph 3.6.
Page
4
(c)
All
such
transfers or conveyances of any such Interest of Buyer shall be made expressly
subject to this Contract, and shall not be binding on Seller until a certified
or other verifiable copy of the instrument evidencing such transfer or
conveyance has been delivered to Seller, together with an agreement in writing,
satisfactory to all parties, whereby the transferee agrees to be bound by the
terms and provisions of this Contract and expressly assumes all of the
obligations of Buyer as set forth herein.
ARTICLE
IV - QUANTITIES
4.1 Commencement
of Deliveries and Daily Contract Quantity.
Commencing with the first Day of the Primary Term, Seller shall Tender for
Delivery and Buyer shall take at the Delivery Point, all quantities of Product
requested by Buyer, up to Buyer’s then currently effective DCQ, as specified in
Exhibit “A.” The Total Contract Quantity shall be reduced at the end of each
Contract Year on a cumulative basis through the Primary Term of this Contract
("Contract Quantity Balance"), by the greater of: (i) the actual quantity of
Product delivered to Buyer in that Contract Year, or (ii) by the Annual Quantity
applicable for that Contract Year, until the Contract Quantity Balance equals
zero (0).
4.2 Delivery
Rates.
Buyer
and Seller recognize that due to actual operating conditions, the delivery
or
take of Product may not necessarily be of a constant rate. However, Buyer and
Seller agree to cooperate fully with one another to maintain as constant a
rate
of take as is operationally possible and in adjusting Daily and Monthly
deliveries hereunder.
4.3 Monthly
Delivery Nominations.
Buyer
shall notify Seller Monthly by giving at least seven (7) Days’ advance written
notice, of its daily Product volume requirements for the next succeeding Month.
In the event Buyer fails to give to Seller the requisite seven (7) Days’ prior
notice, then the daily Product volume requirements shall be the same as those
for the then current Month. Upon agreement by Seller, Buyer may request a change
in its daily requirements for any particular Month by giving Seller twenty-four
(24) hours’ prior notice of such changes in its daily requirements from time to
time. Upon receipt of such notice given to Seller at the location and number
set
out below, and subject to Seller’s agreement, Seller shall undertake to conform
its deliveries to Buyer’s revised requirements and shall notify Buyer as soon as
practical if it is unable to do so. Buyer shall utilize its commercially
reasonable efforts to minimize the number of changes in the Monthly nominations.
Each oral request for changes in Buyer’s requirements shall be confirmed by
written notice by Buyer to Seller within seven (7) business Days after such
request.
4.4 Excess
Deliveries.
On any
given Day during the Primary Term of this Contract, Buyer may request and Seller
may Tender for Delivery, a quantity of Product up to 120% of the Daily Contract
Quantity, provided however, it is at Seller’s sole discretion to make available
to Buyer deliveries in excess of 100 % of the Daily Contract Quantity, if
any.
4.5 Reduced
Deliveries Due to Common Carrier Obligations.
If any
of the ExxonMobil Pipeline, the Anadarko Pipeline or Buyer’s Pipeline is or
becomes a common carrier facility by operation of law or otherwise, and if
the
capacity of said pipeline is insufficient to accommodate (1) the shipments
tendered by Seller under all contracts (including this Contract) to which Seller
is a party which require transportation by Buyer’s Pipeline, and (2) all
shipments tendered by other shippers, then Seller shall be obligated to deliver
to Buyer only that volume which may be transported under common carrier rules
and regulations.
Page
5
4.6 Emergency
Shutdown.
In the
event of an emergency that poses danger to life or property, no prior notice
shall be necessary before partial or total shutdown by either Seller or Buyer,
but notice of such shutdown and the reason therefor shall be given as soon
as
practical thereafter, by telephone, facsimile, e-mail or other electronic means
at the locations and numbers set out below. The party causing the shutdown
shall
immediately take all steps reasonable under the circumstances to end such
shutdown. In the event any Government regulatory requirement mandates a shutdown
by either Seller or Buyer, notice shall be given to the other party to this
Contract as soon as practical after receipt of the governmental notice requiring
such shutdown.
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Seller:
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Buyer:
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Anadarko
Petroleum Corporation
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Attn.
▇▇▇▇▇ ▇▇▇▇▇:
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Attn.
▇▇▇▇ Works
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Production
Superintendent
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999-18th
Street,Suite ▇▇▇▇
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▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
|
▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇
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Phone:
▇▇.▇▇▇.▇▇▇.▇▇▇▇
|
Phone:
▇▇.▇▇▇.▇▇▇.▇▇▇▇
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Fax:
▇▇.▇▇▇.▇▇▇.▇▇▇▇
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4.7 Planned
Shutdown.
In the
event a planned shutdown becomes necessary for either Seller or Buyer on a
non-emergency basis, such party shall provide thirty (30) Days’ notice to the
other as provided in the Article XVI hereof.
ARTICLE
V - PRODUCT PRICE
5.1 Unit
Price.
(a)
Buyer
shall pay to Seller a Unit Price for each Mcf of Product. The Unit Price for
each Calendar Quarter shall be determined by indexing to the average price
per
barrel posted by Chevron Crude Oil Marketing and Tesoro Refining and Marketing
Company (or their successors) for Southwestern Wyoming Sweet Crude Oil price
as
follows:
(i)
the
preceding
Calendar Quarter's simple average of each Day's closing prices per barrel for
Southwestern Wyoming Sweet Crude Oil shall be calculated (“Wyoming
Sweet Average Price”)
(ii)
the
Wyoming Sweet Average Price shall be compared to an index price of $40.00 per
barrel (“Index Price”)
(iii)
if
the Wyoming Sweet Average Price is greater than the Index Price, the Unit Price
for such Calendar Quarter shall be increased by the arithmetic ratio of such
difference.
(iv)
if
the Wyoming Sweet Average Price is equal to at least $30.01, but is less than
$40.00, the Unit Price for such Calendar Quarter shall be $1.50
(v)
if
the Wyoming Sweet Average Price is $30.00 or less, the Unit Price for such
Calendar Quarter shall be $1.35.
Page
6
(b)
For the
initial Calendar Quarter (or portion thereof) under the Contract, the Unit
Price
shall be $1.50 per Mcf. For all subsequent Calendar Quarters under the Contract,
the Unit Price shall be calculated by as provided in this Article
V.
(c)
Notwithstanding
the provisions of Paragraph 5.1(b), the Unit Price shall never be less than
$1.35 per Mcf. If Seller’s cost of Product to be delivered under this Contract
ever exceeds the Unit Price, then at Seller’s option, Buyer will meet with
Seller and attempt in good faith to negotiate a revised Unit Price affording
Seller a reasonable return under this Contract. If Buyer and Seller are unable
to agree upon a revised Unit Price, then Seller may terminate this Contract
by
giving written notice of termination to Buyer and Buyer shall pay Seller the
Termination Payment due pursuant to Paragraph 5.6.
5.2 Take-or-Pay
Obligation.
(a) Each
Month during the Primary Term of this Contract, Buyer shall pay Seller an amount
equal to the greater of: (i) the Minimum Monthly Amount, or (ii) the Actual
Monthly Amount.
(b) The
Minimum Monthly Amount shall be reduced each Month for any deficiencies in
the
amount of Product made available by Seller to Buyer due to (i) force majeure
as
defined in Article XIV, or (ii) failure by Seller to deliver quantities of
Product up to Buyer’s take or pay obligation.
(c) Buyer
shall provide Seller with a surety bond to ensure Buyer’s payment of any take or
pay obligation incurred pursuant to this Paragraph 5.2. Such bond shall name
Seller as beneficiary, shall be approved by Seller as to form and issuer, shall
be maintained for the life of the Contract and shall be of sufficient size
to
cover Buyer’s yearly take or pay requirements and the DCQ requirements.
5.3 Overriding
Royalty.
As
further compensation hereunder Buyer shall convey to Seller an overriding
royalty interest in any production from its fields within the Area of Mutual
Interest described in Exhibit “B” attached hereto and incorporated herein by
this reference. Such overriding royalty interest shall be of 8/8ths interest
proportionally reduced to the working interest of Buyer and shall be equal
to
one percent (1%) in Contract Year Number One; two percent (2%) in Contract
Year
Number Two; three percent (3%) in Contract Year Number Three; four percent
(4%)
in Contract Year Number Four; and five percent (5%) in Contract Year Number
Five
and in all subsequent years. The Overriding Royalty shall be in the form of
a
recordable assignment acceptable to Seller and shall cover all depths in which
Product is utilized, whether by direct injection, recycling, zone recharge
or
other utilization in the lands subject to the Area of Mutual Interest.
5.4 Deficiency
Credit.
If in
any Month the MMQ is less than 25 MMcf multiplied by the number of Days in
such
Month and Buyer makes a payment to Seller under Paragraph 5.2 applicable to
such
Month, the amount of such Paragraph 5.2 payment will be credited to Buyer as
a
“Deficiency Credit.” If a Deficiency Credit balance has been established, the
Deficiency Credit balance will be increased each Month by any amount that Buyer
pays pursuant to Paragraph 5.2 or decreased each Month by the amount that
Buyer’s payment for such Month exceeds the product of 40 MMcf per Day of such
Month multiplied by the applicable Unit Price. Seller’s monthly invoice to Buyer
will be adjusted to reflect any decreases in the Deficiency Credit by the lesser
of the Deficiency Credit or the amount of the latest payment Buyer has made
to
Seller pursuant to Paragraph 5.2. In no event will the Deficiency Credit balance
be increased or decreased until Buyer makes payment to Seller pursuant to
Section 5.2, and in no event will the Deficiency Credit balance be less than
zero.
Page
7
5.5 Deficiency
Credit Expiration.
Buyer
may carry forward Deficiency Credit balances for a period not to exceed 48
months after the Month that the Deficiency Credit is earned, and with a time
limit of 24 months after the end of the Primary Term. Any Deficiency Credit
not
applied by the earlier of (a) within 48 months after it is earned or (b) within
24 months after the end of the Primary Term, shall automatically terminate
without further action or obligation of Buyer or Seller.
5.6 Termination
Payment.
Buyer
shall have the right to terminate this Contract at any time during the Primary
Term by delivering a written notice to Seller and a payment in the amount of
the
Termination Payment. The Termination Payment shall equal an amount determined
by
multiplying the Unit Price for the Calendar Quarter immediately preceding
Seller’s receipt of such termination notice by a volume of Product equal to
one-fourth (1/4) of the arithmetical difference between the Total Contract
Quantity and cumulative quantity of Product paid for by Buyer at the time of
the
notice.
For
purposes of illustration only, the Termination Payment shall be calculated
as
follows:
P
Term
=
P
Unit
x
(146 BCF - V cum)
4
| Where |
P
Term
=
Termination Payment
|
P
Unit
=
Unit
Price at time Termination Payment is determined
V
Cum
=
Cumulative quantity of Product paid for by the Buyer at the time of the
notice
If
this
Contract is terminated due to Buyer's default, then Buyer shall on or before
sixty (60) Days following the receipt of notice from Seller of such default,
pay
to Seller an amount equal to the Termination Payment. Without limiting either
party’s rights to indemnification hereunder, Seller’s right to receive the
Termination Payment shall be Seller’s sole remedy under this Contract for any
such default by Buyer. If the Contract is terminated due to Seller’s default,
Buyer will not be obligated to make any Termination Payment.
5.7Commencement
of Payment.
Buyer’s
obligation to pay Seller pursuant to this Article V shall begin on the first
Day
of the Primary Term.
5.8Greenhouse
Gas Reduction Rights.
Greenhouse
Gas Reduction Rights (“GHGRR”) means the recognition, award, or allocation of
credits, allowances, permits, or other tangible rights, whether created through
government program or private contract now or in the future, associated with
the
production, avoidance, capture, sequestration, or other control of greenhouse
gases.
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a.)
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Buyer
and Seller agree that Buyer shall retain 25% of the GHGRR and provide
or
convey to Seller 75% of the GHGRR in kind or in value at Sellers
sole
discretion.
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b.)
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Buyer
and Seller agree that Buyer and Seller each shall have the exclusive
right
to apply for, claim, use, or sell all GHGRR associated with its share
of
the carbon dioxide sold under this Contract as specified in paragraph
5.8(a) consistent with applicable laws of the United States and
international law, including the right to sell or
trade domestically or internationally. This right includes the right
to count or claim any applicable reductions pursuant to the Department
of
Energy’s Climate Challenge Program as modified from time to time, to
register all such reductions pursuant to § 1605 of the Energy Policy Act
of 1992 and other related public and private registries, and any
other
governmental, public, or private program designed to encourage or
reward
the reduction of greenhouse gas emissions or emission
reductions.
|
Page
8
|
c.)
|
Seller
and Buyer each agrees to provide the necessary information and to
take
reasonably appropriate action to obtain and reserve GHGRR's and
to monitor, document and preserve GHGRR in such form needed to qualify
as
an emission reduction.
|
ARTICLE
VI - DELIVERY POINT AND PRESSURE
6.1 Delivery
Point and Pressure.
Seller
shall Tender Product for Delivery to Buyer at the Delivery Point. Title to
and
ownership of all Product delivered under this Contract shall pass to and vest
in
Buyer at the Delivery Point. Seller shall Tender Product
for Delivery at a sufficient pressure to enter the
Delivery Point; provided, however, Seller shall not be obligated to deliver
Product at a pressure greater than 2,500 Psig. Seller shall install a tap and
control station as required to supply Buyer with Product at Delivery Point,
and
Buyer shall reimburse Seller for Seller’s actual cost incurred to install such
tap and control station.
ARTICLE
VII - TAXES
7.1
Tax
Liability.
Seller
shall pay or cause to be paid all taxes and assessments imposed on Seller with
respect to the Product delivered hereunder prior to its delivery to Buyer,
and
Buyer shall pay or cause to be paid all taxes and assessments imposed on Buyer
with respect to the Product delivered hereunder upon and after its receipt
by
Buyer. Neither party shall be responsible or liable for any taxes or other
statutory charges levied or assessed on or against any of the facilities of
the
other party.
7.2
Tax
Reimbursement.
Subject
to the conditions hereinafter set forth, Buyer shall pay to Seller fifty percent
(50%) of any new or additional tax imposed on the Product delivered hereunder
by
any governmental authority. The term "new or additional tax" shall mean any
occupation, service, production, severance, gathering, transmission, value-added
or excise fee, tax or assessment levied, assessed or fixed by governmental
authority and shall include taxes similar in nature or equivalent in effect
(but
not including income, excess profits, capital stock, franchise, or general
property taxes) in respect of or applicable to the Product delivered hereunder,
in addition to or greater than any being assessed as of the effective date
of
this Contract, and for which Seller shall be liable, either directly or
indirectly, or through an obligation to reimburse others. Reimbursement of
any
additional tax shall be effected as a part of Buyer's regular monthly payment
for Product hereunder. The tax reimbursement provided for herein shall not
apply
to any delinquent interest or penalty payments associated with any such new
or
additional tax.
7.3
Transaction
Taxes.
Buyer
agrees that the Unit Price under this Contract does not include sales, use,
or
like taxes (“Transaction Tax”) currently or prospectively imposed by a Federal,
State, or local taxing authority. As applicable, Seller shall collect any such
Transaction Tax from Buyer at the time the invoice for the Carbon Dioxide is
due. Seller shall separately state the amount of Transaction Tax, the
Transaction Tax rate, and name of the taxing authority on the invoice. In lieu
of remitting any billed Transaction Tax, Buyer may submit a properly completed
and signed exemption certificate or other written evidence of exemption, so
long
as the evidence meets requirements cited by the applicable taxing
authority.
Page
9
7.4 Termination
by Seller.
Buyer
will begin accepting delivery of Product by January 1, 2008. If Buyer has not
initiated delivery of Product hereunder by January 1, 2008, Seller may
terminate
this Contract by giving written notice of termination to Buyer and Buyer shall
pay Seller the Termination Payment due pursuant to Paragraph 5.6. If Buyer
fails
to take delivery of Product hereunder in any six months within any twelve
consecutive month period, then Seller may terminate this Contract by giving
written notice of termination to Buyer and Buyer shall pay Seller the
Termination Payment due pursuant to Paragraph 5.6.
ARTICLE
VIII - ACCOUNTING
8.1 Payment.
Seller
shall notify Buyer of the total volume of Product delivered by Seller at the
Delivery Point during any Month by the tenth (10th) business Day following
the
end of such Month. Seller shall furnish to Buyer a Monthly invoice showing
the
total quantity of Product delivered hereunder during the preceding Month and
such invoice shall include any Deficiency Credit balance calculated under
Paragraph 5.4. Buyer shall make payment to Seller of the amounts of such
invoices on or before twenty (20) Days after the date of receipt of such
invoice. All payments shall be mailed or electronically transferred
to:
|
Electronic
Transfer Payments:
|
Mail
Check Payments to:
|
8.2 Failure
to Pay.
If Buyer
fails to pay an amount payable to Seller hereunder when due, Seller shall have
the right, upon five (5) Days’ prior written notice to Buyer, to stop delivery
of the Product until Buyer pays said amount, plus interest, and brings Buyer’s
account current. If Buyer disputes the amount or a portion of the amount
invoiced by Seller, Buyer shall pay the invoiced amount and shall notify Seller
of the amount in dispute. Buyer and Seller shall reconcile such disputes within
a reasonable time period, but not to exceed sixty (60) Days, whereupon either
party discovered to be owed monies, shall submit an invoice to the other party
for the amount owed plus interest. The other party shall make payment in
immediately available U.S. funds by check or electronic transfer to the owed
party and tender such to the owed party on or before the twentieth (20th) Day
after the date of such invoice. Interest shall accrue and be payable at the
lesser of: (i) the highest legally permissible rate allowed by the State of
Wyoming, or (ii) the Prime or Base lending rate established by the ▇.▇. ▇▇▇▇▇▇
▇▇▇▇▇ Bank, N.A., New York. Interest will accrue from the date when the disputed
amount was due until the date payment of the disputed amount is made. The
exercise of such rights shall not constitute a waiver of, nor in any way
prejudice, other remedies available to such party. If any disputes can not
be
settled within sixty (60) Days, then the matter shall be settled in accordance
with Article 18 hereof.
8.3 Refunds.
If at
any time it is determined that Buyer or Seller has made an inaccurate payment
to
the other party under this Contract, and such deficiency or excess payment
is
the result of a good faith error in the Monthly statement furnished by Seller,
or is or becomes the subject of a good faith dispute between Seller and Buyer,
then Seller or Buyer shall, within thirty (30) Days of such determination,
pay
or refund to the other party the full amount of the deficiency or excess payment
together with interest calculated and paid as set forth in Paragraph
8.2.
The
exercise of such rights shall not constitute a waiver of nor in any way
prejudice other remedies available to such party.
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ARTICLE
IX - QUALITY SPECIFICATIONS
9.1 Specifications.
The
Product delivered by Seller to Buyer at the Delivery Point shall meet the
following specifications, which herein are collectively called “Quality
Specifications”:
|
(a)
|
Product.
Substance containing at least ninety-five mole percent (95%) of Carbon
Dioxide.
|
|
(b)
|
Water.
Product shall contain no free water, and shall not contain more than
thirty (30) pounds of water per MMcf in the vapor
phase.
|
|
(c)
|
Hydrogen
Sulfide.
Product shall not contain more than twenty (20) parts per million,
by
weight, of hydrogen sulfide.
|
|
(d)
|
Total
Sulfur.
Product shall not contain more than thirty-five (35) parts per million,
by
weight, of total sulfur.
|
|
(e)
|
Temperature.
Product shall not exceed a temperature of one hundred twenty degrees
Fahrenheit (120oF).
|
|
(f)
|
Nitrogen.
Product shall not contain more than four mole percent (4%) of
nitrogen.
|
|
(g)
|
Hydrocarbons.
Product shall not contain more than five mole percent (5%) of hydrocarbons
and the dew point of Product (with respect to such hydrocarbons)
shall not
exceed minus twenty degrees Fahrenheit (-20oF).
|
|
(h)
|
Oxygen.
Product shall not contain more than ten (10) parts per million by
weight,
of oxygen.
|
|
(i)
|
Glycol.
Product shall not contain more than 0.3 (three tenths) gallons of
glycol
per MMCF and at no time shall such glycol be present in a liquid
state at
the pressure and temperature conditions of the
pipeline.
|
9.2 Testing.
Seller
shall ensure that tests to determine the quality of Product are made as often
as
reasonably required, but at least quarterly, by approved standard methods in
general use by the industry. Buyer may from time to time request, and Seller
shall ensure performance of, such additional tests as Buyer reasonably deems
necessary; provided, however, Buyer shall not request such additional tests
more
than once during any ninety (90) Day period. Buyer shall reimburse Seller for
all expenses associated with such additional tests unless such additional tests
show that the substance does not meet the Quality Specifications. Seller shall
promptly furnish Buyer with copies of all test results upon
request.
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11
9.3 Failure
to Meet Quality Specifications.
In the
event any Volumes delivered hereunder to Buyer fail to meet the Quality
Specifications, Buyer shall have the right to waive such failure by written
notice to Seller and to continue to accept and receive such Volumes. However,
Buyer shall also have the right to refuse to accept such Volume in whole or
part, at any time including after a waiver of such failure in accordance with
the prior sentence, and may require Seller to immediately cease or reduce
deliveries of such Volume to Buyer hereunder. Subject to the provisions hereof,
Buyer shall have no obligation to receive or purchase any volumes which fail
to
meet Quality Specifications at the Delivery Point under this Contract. If Seller
has so reduced or ceased deliveries hereunder, then Seller may elect, after
written notice from Buyer as provided above, to remedy the cause of such failure
and, if Seller so elects, Seller shall proceed with all due diligence, to timely
effect such remedy. Notwithstanding anything herein to the contrary, if Seller
does not satisfactorily remedy such defect within ninety (90) Days after written
notice of failure to meet Quality Specifications, Buyer may cancel this Contract
by written notice to Seller. As to such cancellation, the respective duties
and
obligations of Seller and Buyer hereunder shall terminate without further
duties, obligations, and liabilities to either party, subject to settlement
of
previously incurred duties, obligations and liabilities. The cancellation of
this Contract as herein provided shall not serve to alter Buyer’s obligations to
pay for Product received. Any
such
termination shall be without waiver of any remedy to which the party not in
default may be entitled for violation of this Contract.
ARTICLE
X - MEASUREMENT
10.1 Measurement
Point.
The
measurement point shall be located at a mutually agreeable point at or upstream
of the Delivery Point, in accordance with the standards set out in this Article
X. Seller shall ensure that the Product delivered hereunder shall be measured
for custody transfer at the Delivery Point in accordance with the standards
set
forth herein.
10.2 Procedure.
Custody
transfer measurement of Product shall be determined on the basis of pound-mass
quantities, which will be converted to cubic foot quantities on the basis of
the
molecular weight of the metered stream of Product calculated from the
compositional analyses. The calculations for the conversion of pound mass units
to cubic foot units will be made on the basis of equation-of-state calculations
embodied in the CO2PROP
program or another mutually acceptable method correcting for the non-ideal
behavior of high content Product mixtures. Upon request, Seller shall give
Buyer
legible copies of recent measurement documents.
10.3 Atmospheric
Pressure.
The
atmospheric pressure at the Delivery Point shall be based upon 14.73 Psia at
sea
level, corrected to actual elevation in accordance with the October 1981
standards in the American Petroleum Institute, Manual of Petroleum Standards,
and may be assumed to be constant for calculation purposes.
10.4 Meter
Standards.
The
Product delivered hereunder shall be measured with orifice meters constructed
and installed in accordance with the October 1981 standards in the American
Petroleum Institute, Manual of Petroleum Measurement Standards,
Chapter
14, with any subsequent amendments, revisions, and additions which may be
mutually acceptable to Seller and Buyer.
10.5 Temperature.
The
temperature of the Product shall be determined by an on-line thermometer so
installed that it will sense the temperature of the Product flowing through
the
meters. The thermometer will be accurate to plus or minus 0.1o
Fahrenheit.
10.6 Density.
The
density of the Product shall be determined by equation-of-state calculation
based on the composition of the Product or by another mutually acceptable
method.
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12
10.7 Samples.
A
composite sample of the metered Product stream shall be accumulated during
each
month and analyzed for its composition. Composition of the Product stream may
also be determined by using a mean monthly average of an on-line
chromatograph.
ARTICLE
XI - MEASURING EQUIPMENT AND TESTING
11.1 Meter
Stations.
Seller
shall ensure that the measuring station for measurement of Product delivered
hereunder is installed, operated, and maintained in accurate working order
at or
near the Delivery Point at no cost or expense to Buyer. Such meter station
shall
be equipped in accordance with the standards referenced in Article X and will
initially consist of orifice meters of standard type, sensors, and transmitters
for pressure and temperature measurement and a flow computer for real-time
calculation of metered Product flow. Measurement equipment will be subject
to
change to allow use of improved technology under such standards if the parties
mutually agree to such a change.
11.2 Meter
Tests.
Seller
shall ensure that its measuring equipment is accurate and is operated and
maintained in good repair, and that tests are made at least once each Month
to
ensure the accuracy of such metering equipment. Seller shall ensure that Buyer
is given at least forty-eight (48) hours’ notice of each such test of the
measuring equipment in order that, if Buyer desires, Buyer may have its
representative present to witness such tests. If, upon any test, the measuring
equipment is found to be inaccurate to the extent that it affects the aggregate
measurement accuracy by an amount exceeding two percent (2%), registrations
thereof shall be corrected for a period extending back to the time such
inaccuracy occurred. If such time is not ascertainable, then the registrations
will be corrected for the period extending back one-half (1/2) of the time
elapsed since the last date of calibration; provided, no retroactive correction
shall be made for recorded inaccuracies of two percent (2%) or less in the
aggregate. Meters will be adjusted or repaired on a timely basis. Special tests
of the measuring equipment can be requested of Seller by Buyer at any time,
with
the cost thereof being paid by Buyer unless the meter is found to be inaccurate
by an amount exceeding two percent (2%).
11.3 Meter
Out of Service.
If, for
any reason, any meter is out of service or under repair so that the amount
of
Product delivered cannot be ascertained or computed from the readings thereof
or
corrected under Section 11.2, the Product delivered during the period such
meter
is out of service or under repair shall be estimated and agreed upon by Buyer
and Seller upon the basis of the best data available.
11.4 Record
Retention.
Buyer
and Seller agree to retain detailed delivery records and measurement documents
for metered quantities of Product for a period of two (2) calendar years
following the end of the calendar year in which the documents are generated.
Seller and Buyer shall have the right to examine and audit at reasonable times
such delivery records and documents of the other party to the extent necessary
to verify the accuracy of any statements, charges, computations, or demands
made
under or pursuant to any of the provisions of this Contract. Any inaccuracies
shall be promptly corrected when discovered. Copies of such delivery records
and
documents will be provided to the other party upon the inquiring party’s written
request and at the inquiring party’s expense. This Section shall survive any
termination of this Contract for a period of six (6) Months.
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13
ARTICLE
XII - WARRANTIES
12.1 Seller’s
Warranty of Title.
Seller
warrants title to the Product sold and delivered to Buyer
hereunder.
12.2 Title
Passage.
As to
the Product delivered and sold hereunder, title and risk of loss shall pass
from
Seller to Buyer at the Delivery Point.
12.3 Other
Warranties.
Neither
party hereto makes any warranties, including any warranties of merchantability
or fitness for a particular purpose, except as expressly set forth in this
Contract.
ARTICLE
XIII - INDEMNIFICATION
13.1 BUYER
ASSUMES ALL LIABILITY FOR AND AGREES TO DEFEND, RELEASE, INDEMNIFY AND HOLD
SELLER, ITS AFFILIATES, ITS AND THEIR DIRECTORS, OFFICERS, EMPLOYEES, AGENTS,
INSURERS, AND SUBCONTRACTORS (COLLECTIVELY “SELLER INDEMNITEES”), HARMLESS FROM
ALL CLAIMS FOR: (i) BODILY INJURY, DEATH OR DAMAGE TO THE PROPERTY OF BUYER’S
EMPLOYEES, SUBCONTRACTORS AND THEIR EMPLOYEES, AND BUYER’S INVITEES; AND (ii)
DAMAGE TO BUYER’S PROPERTY, ARISING OUT OF OR RESULTING FROM THE PERFORMANCE OF
THIS CONTRACT, EVEN
IF A PART OR ALL THE CLAIM IS CAUSED BY THE NEGLIGENCE, WILLFUL MISCONDUCT,
STRICT LIABILITY, OR OTHER FAULT, OF ANY MEMBER OF SELLER INDEMNITEES, AND/OR
INVITEES OR THIRD PARTIES.
13.2 SELLER
ASSUMES ALL LIABILITY FOR AND AGREES TO DEFEND, RELEASE, INDEMNIFY AND HOLD
BUYER, ITS AFFILIATES, ITS AND THEIR DIRECTORS, OFFICERS, EMPLOYEES, AGENTS,
INSURERS, AND SUBCONTRACTORS (COLLECTIVELY “BUYER INDEMNITEES”), HARMLESS FROM
ALL CLAIMS FOR: (i) BODILY INJURY, DEATH OR DAMAGE TO THE PROPERTY OF SELLER’S
EMPLOYEES, SUBCONTRACTORS AND THEIR EMPLOYEES, AND SELLER’S INVITEES; AND (ii)
DAMAGE TO SELLER’S PROPERTY, ARISING OUT OF OR RESULTING FROM THE PERFORMANCE OF
THIS AGREEMENT, EVEN
IF A PART OR ALL OF THE CLAIM IS CAUSED BY THE NEGLIGENCE, WILLFUL MISCONDUCT,
STRICT LIABILITY, OR OTHER FAULT, OF ANY MEMBER OF BUYER INDEMNITEES, AND/OR
INVITEES OR THIRD PARTIES.
13.3 The
above
indemnities do not include claims for special, consequential or indirect damages
suffered by a party to this Contract, and each party waives any claim it may
have against the other party for such damages. The above indemnity obligations
also do not include indemnification for punitive or exemplary
damages.
ARTICLE
XIV - FORCE MAJEURE
14.1 Force
Majeure.
If
Buyer or Seller is rendered unable, in whole or in part, by an event of force
majeure to carry out its obligations hereunder (except obligations to pay money
either (a) which have already been incurred at the time of the occurrence of
the
event of force majeure, or (b) which accrue under Buyer’s Take or Pay
obligations as set out in Paragraph 5.2), then upon such party’s giving notice
and reasonably full particulars of such event of force majeure in writing,
or by
facsimile, by e-mail, or other equivalent means, to the other party within
a
reasonable time after the occurrence of the event of force majeure, the
obligations of the party giving such notice, so far as they are affected by
such
event of force majeure, shall be suspended during the continuance of any
inability so caused, but for no longer period, and such cause shall so far
as
possible be remedied with all reasonable dispatch.
Page
14
The
term
"event of force majeure" as used herein shall mean any cause not reasonably
within the control of the party claiming suspension and which, by the exercise
of due diligence such party is unable to prevent or overcome. Such term shall
include but not be limited to: acts of God; strikes, lockouts, or other
industrial disturbances; acts of a public enemy; wars; blockades; insurrections;
riots; epidemics; landslides; lightning; earthquakes; storms; floods; washouts;
civil disturbances; fires; freezing of ▇▇▇▇▇ or of pipelines, including any
interruption of Seller’s transportation rights on any third party pipeline, and
any other causes, whether of the kind herein enumerated or otherwise, affecting
the equipment or property of either party and not reasonably within the control
of the party claiming suspension.
The
settlement of strikes or lockouts or other labor disputes shall be entirely
within the discretion of the party having the difficulty, and the requirement
that any event of force majeure shall be remedied with all reasonable dispatch
shall not require the settlement of such dispute by acceding to the demands
of
an opposing party, when such course is inadvisable in the discretion of the
party having the difficulty.
ARTICLE
XV - SUCCESSORS AND ASSIGNS
15.1
Successors
and Assigns.
The
rights and obligations of Buyer under this Contract shall not be assigned or
delegated without the prior written consent of Seller, which consent may be
withheld at Seller’s discretion.
This
Contract shall extend to and be binding upon the respective successors and
assigns of the parties hereto. Any actual or attempted assignment, transfer,
or
conveyance of this Contract shall be only to a creditworthy entity and shall
expressly require that the assignee, transferee, or grantee shall assume and
agree to discharge the duties and obligations of its assignor under this
Contract, and any such actual or attempted assignment, transfer, or conveyance
hereof shall be ineffective as between the parties hereto unless such express
requirement shall therein be contained, and unless each assignee, transferee,
or
grantee shall agree to impose an identical requirement upon any subsequent
assignee, transferee, or grantee. No such actual or attempted assignment,
transfer, or conveyance shall in any way operate to enlarge, alter, or modify
any obligations of the other party hereto.
Any
entity which shall succeed by purchase, merger or consolidation to substantially
all of the assets of either party hereunder shall be subject to the duties
and
obligations of its predecessor in interest under this Contract.
Nothing
contained in this provision shall in any way prevent either party from pledging
or mortgaging its rights hereunder for security of its
indebtedness.
ARTICLE
XVI - NOTICES
16.1
Notices.
Except
as otherwise specifically set forth in this Contract, all notices, invoices,
and
other communications under this Contract must be in writing and shall be deemed
given on the date of the addressee’s receipt thereof and shall be given only by
U.S. Mail, hand delivery, overnight delivery, facsimile, e-mail, or other
electronic means as follows:
| If to Seller: |
Anadarko
Petroleum Corporation
|
Attn.
▇▇▇▇▇ ▇▇▇▇▇▇▇:
▇▇▇▇
▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telephone:
▇.▇▇▇.▇▇▇.▇▇▇▇
| If to Buyer: |
Attn.:
CO2
Contracts Dept.
▇▇▇
▇▇▇▇
▇▇▇▇▇▇
▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone:
▇▇▇-▇▇▇-▇▇▇▇
FAX:
▇▇▇-▇▇▇-▇▇▇▇
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15
ARTICLE
XVII - MISCELLANEOUS
17.1 Entirety
of Contract, Modification, and Non-Waiver.
This
Contract constitutes the entire agreement for the sale and purchase of Product
between Buyer and Seller. No statement or agreement, oral or written, made
prior
to or at the signing of this Contract, shall vary or modify the written terms
hereof, and neither party shall claim any amendment to, modification of, or
release from any provision by mutual agreement unless such agreement is in
writing, signed by the authorized representatives of the parties to this
Contract or by an exchange of facsimiles concerning the mutual agreement between
the parties of the particular modification or amendment thereof specifically
and
conspicuously stating that it is a modification or amendment of this Contract.
No provisions, terms, or conditions contained in any document including, by
way
of illustration but not by way of limitation, invoices or purchase orders,
shall
affect this Contract or be binding upon the parties unless the provisions,
terms, or conditions have been previously agreed to in writing by the authorized
representatives of the parties hereto. Buyer’s only authorized representatives
who may make a mutual written modification or amendment of this Contract include
Buyer’s Officers or Attorneys-in-Fact. Seller’s only representatives who may
make a mutual written modification or amendment to this Contract include
Seller’s Officers or Attorneys-in-Fact.
Waiver
of
performance of any obligations by either party or agreement by the other
hereunder shall not operate as a waiver of performance of any other obligation
or a future waiver of the same obligation or a waiver of any future
default.
17.2 Headings.
The
topical headings used herein are inserted for convenience only and shall not
be
construed as having any substantive significance or meaning whatsoever or as
indicating that all of the provisions of this Contract relating to any
particular topic are to be found in any particular Section.
17.3 Exhibits.
Each
exhibit referred to in this Contract hereby is incorporated in this Contract
by
reference. All obligations of any party under such exhibit shall be considered
as obligations under this Contract.
17.4 Counterpart
Execution.
This
Contract may be executed in any number of counterparts, each of which shall
be
considered an original for all purposes.
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16
17.5 Third
Party Rights.
This
Contract is intended for the exclusive benefit of the parties to this Contract
and their respective heirs, successors, and assigns, and nothing contained
in
this Contract shall be constructed as creating any rights or benefits in or
to
any third party.
17.6 Safety.
The
agents and employees of each party to this Contract shall comply with all safety
regulations of the other when such agents and employees are upon the premises
of
the other in connection with the performance of this Contract.
17.7 Termination
Upon Default.
If
either Seller or Buyer defaults in the performance of any material obligation
imposed hereunder, the other party may terminate this entire Contract by giving
written notice to the defaulting party of such election. The defaulting party
shall have thirty (30) Days after receipt of such notice in which to remedy
such
default or to indemnify the other party to the other party's reasonable
satisfaction, in which event this Contract shall continue in force and effect.
If such remedy or indemnity is not timely made, this Contract shall, at the
end
of said thirty (30) Day period, become null and void except for Buyer’s
obligations under Article V to make the Termination Payment if the default
is
Buyer’s default, and except for any other provisions of which this Contract
provides for survival after termination hereof. Notwithstanding anything
contained herein to the contrary, if Buyer terminates this Contract due to
a
default by Seller that is not remedied within the thirty (30) Day period, Buyer
shall have no obligation for the Termination Payment. Any
such
termination shall be without waiver of any remedy to which the party not in
default may be entitled for violation of this Contract.
17.8 Applicable
Law.
ALL
QUESTIONS CONCERNING THE VALIDITY OR MEANING OF THIS CONTRACT OR RELATING TO
THE
RIGHTS AND OBLIGATIONS OF THE PARTIES WITH RESPECT TO PERFORMANCE UNDER THIS
CONTRACT SHALL BE CONSTRUED AND RESOLVED UNDER THE LAWS OF THE STATE OF WYOMING
EXCEPT TO THE EXTENT SPECIFICALLY REGULATED BY FEDERAL LAWS, EXCLUDING ONLY
ANY
RULE OR PRINCIPLE CONCERNING CONFLICT OF LAWS WHICH MIGHT REFER TO THE LAWS
OF
ANOTHER JURISDICTION.
17.9 Relationship
to the Parties.
Notwithstanding any provision contained in this Contract to the contrary, this
Contract is not intended to create, nor shall it be construed to create, a
relationship of partnership, an association for profit, or any other
relationship except that of seller and purchaser.
17.10 Invalidity.
In the
event any part of this Contract is declared to be invalid for any reason, this
ruling shall not affect the validity of the rest of the Contract or any other
part thereof.
17.11 Origin
of Contract.
This
Contract has been jointly prepared by Buyer and Seller and there shall be no
presumptions regarding such preparation which will be used against either party
in connection with any subsequent judicial construction of this
Contract.
17.12 Confidentiality.
Notwithstanding anything to the contrary contained in this Contract, the
provisions of this Contract shall be considered “Confidential
Information.”
The
phrase “Confidential Information” as used in this Contract shall also mean all
other proprietary and non-public information, data, reports, and records which
were disclosed to either Buyer or Seller, in the course of negotiation or
performance of this Contract, whether in writing or orally; provided however,
the information described above shall not be considered “Confidential
Information” to the extent it falls into the following categories:
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17
a.
Information specifically allowed in writing to be disclosed to third
parties;
b.
Information which at the time of disclosure was already in the public
domain;
c.
Information which enters the public domain through no act or failure on the
part
of
the
other party;
d.
Information which prior to disclosure was already in the possession of the
recipient; and,
e.
Information disclosed to a party’s successors and assigns or to third parties
that have entered into a confidentiality agreement with such party in a form
satisfactory to such party in its sole discretion.
Buyer
and
Seller shall keep the Confidential Information secret and confidential
throughout the term of this Contract.
If
either
party is requested or required by legal process to disclose any of the
Confidential Information, it will provide to the other party notice of such
request or requirement so that the other party may seek an appropriate
protective order or other remedy.
The
confidentiality obligations and restrictions of this Section 17.12 shall not
apply to a disclosure to a governmental agency, to the public, including press
releases, or in judicial, administrative, or governmental proceedings pursuant
to a valid subpoena or other applicable valid rule or order, but only to the
extent the party intending to make a disclosure in good faith believes it is
required by law or by the rules of any stock exchange or securities regulatory
authority; provided however, that: (i) Prior to making any such disclosure,
it
shall notify the other party, and such notice shall specify and include: (A)
the
written statement (of the party intending to disclose) as to why such disclosure
is required, (B) the date on which it intends to make such disclosure, and
(C)
the text of the proposed stock exchange announcement or other disclosure; (ii)
The party intending to disclose shall give due consideration to any comments
received from the other party within three (3) days following the date notice
was received by such other party; provided however, that if the party intending
to disclose believes such disclosure must be made prior to the end of such
three
(3) days, its notice to the other party shall convey such belief and it shall
give due consideration to comments received from the other party prior to the
date that it intends to make such disclosure; (iii) The party intending to
disclose shall disclose only that portion of the Confidential Information
required to be disclosed and shall take all reasonable efforts to preserve
the
confidentiality thereof, including obtaining protective orders; and (iv) The
party intending to disclose shall have the burden of proving that disclosure
under this Paragraph 17.12 was required.
ARTICLE
XVIII - DISPUTE RESOLUTION
18.1
Dispute
Resolution.
(a) The
senior managements of Buyer and Seller will attempt to resolve any and all
disputes arising from this Contract. Failing a settlement between the parties,
any matters shall be handled as set forth in this Section 18.1.
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18
(b) Arbitration. Any
controversy, cause of action, dispute or claim arising out of, relating to,
or
in connection with, this Contract, or the breach, termination or validity
thereof, shall be settled by arbitration in accordance with the Commercial
Arbitration Rules (the “Rules”) of the American Arbitration Association, as
amended and in effect from time to time. The tribunal for the arbitration shall
consist of three arbitrators, one to be designated by each party and the third
to be selected by the mutual agreement of the two arbitrators. Each party shall
designate its arbitrator within twenty (20) Days of receiving a notice of
arbitration. Prior to acceptance of appointment as an arbitrator, each
arbitrator shall have read and affirmatively agreed to observe all provisions
of
the American Arbitration Association’s Code of Ethics for Arbitrators in
Commercial Disputes. THE EXPEDITED PROCEDURES SET FORTH IN THE RULES SHALL
APPLY
AND THE SUBSTANTIVE AND PROCEDURAL LAWS OF THE STATE OF WYOMING (EXCLUDING
ANY
CONFLICTS OF LAWS RULES OR PRINCIPLES AS APPLIED IN WYOMING) SHALL APPLY. This
Contract involves interstate commerce in several ways, including, without
limitation, the fact that Seller’s facilities buy and sell materials in
interstate commerce and work performed in Seller’s facilities affects interstate
commerce. The choice of Wyoming law shall not be interpreted as a choice to
exclude applicability of the Federal Arbitration Act to the enforceability
and
scope of this arbitration provision. It is therefore specifically understood
that both Wyoming and federal law, neither to the exclusion of the other, apply
to the enforceability and scope of this provision, and, in the event of a
conflict between Wyoming and federal law, the law maximizing the enforceability
and scope of this provision, including laws relating to appellate remedies,
may
be invoked, without excluding applicability of other law, by the Party seeking
to compel arbitration. If, for purposes of determining Wyoming or federal law,
a
conflict or difference of opinion exists between lower state courts and lower
federal courts, as the case may be, this arbitration provision, by contract,
selects the precedent of that lower state court or that lower federal court
that
maximizes the enforceability and scope of this arbitration provision. The
arbitration shall take place in Denver, Colorado. The parties specifically
agree
that the judgment or award of the tribunal shall be final and binding on each
party and for all purposes. Judgment upon an arbitration award may be entered
in
any court having jurisdiction. This arbitration provision shall survive the
termination of this Contract. Should the parties ever be prevented by applicable
law from utilizing arbitration to resolve disputes hereunder, then the choice
of
law and forum provisions of this Section shall nevertheless remain in full
force
and effect.
IN
WITNESS WHEREOF,
this
Contract shall be effective as set forth in this Contract.
|
BUYER:
|
|
| Date: ________________________ |
By:
_____________________________________
Printed
Name: ▇▇▇▇
Works
Title:
President and CEO
|
|
SELLER:
Anadarko
Petroleum Corporation
|
|
| Date: ________________________ |
By:
_____________________________________
Printed
Name:
Title:
|
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19
EXHIBIT
“A”
TO
PRODUCT SALE AND PURCHASE CONTRACT
December
15, 2006
Attached
to and made a part of that certain Product Sale and Purchase Contract dated
December 15, 2006 by and between Anadarko Petroleum Corporation as Seller and
Rancher Energy Corp. as Buyer.
|
Contract
Quantity Schedule
|
||
|
DCQ*
|
Annual
Quantity
|
|
|
Contract
Year
|
Mcf/d
|
MMcf
|
|
1
|
40,000
|
14,600
|
|
2
|
40,000
|
14,600
|
|
3
|
40,000
|
14,600
|
|
4
|
40,000
|
14,600
|
|
5
|
40,000
|
14,600
|
|
6
|
40,000
|
14,600
|
|
7
|
40,000
|
14,600
|
|
8
|
40,000
|
14,600
|
|
9
|
40,000
|
14,600
|
|
10
|
40,000
|
14,600
|
| Total Contract Quantity |
146
BCF
|
|
*In
no
event shall the DCQ be less than 25,000 Mcf on any Day Subject to provisions
of
this Agreement.
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20
EXHIBIT
“B”
TO
PRODUCT SALE AND PURCHASE CONTRACT
December
15, 2006
Attached
to and made a part of that certain Product Sale and Purchase Contract dated
December 15, 2006 by and between Anadarko Petroleum Corporation as Seller and
Rancher Energy Corp. as Buyer.
Area
of Mutual Interest
See
Attached Map
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21