ASSIGNMENT AGREEMENT
SPECIFIC
TERMS OF THIS EXHIBIT HAVE BEEN OMITTED PURSUANT TO A REQUEST TO THE SECURITIES
AND EXCHANGE COMMISSION. THE OMITTED INFORMATION HAS BEEN SEPARATELY
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THE OMITTED TERMS
HAVE BEEN MARKED AT THE APPROPRIATE PLACE WITH TWO ASTERISKS (**).
THIS
ASSIGNMENT AGREEMENT (this “Agreement”) is made effective as of March 1, 2009
(the “Effective
Date”), by and between RANCHER ENERGY CORP., a Nevada corporation (“Assignor” or
“Rancher”), and MERIT ENERGY COMPANY, LLC, a Delaware limited liability company
(“Assignee” or
“Merit”).
WHEREAS,
as of the Effective Date, Assignor holds all right, title and interest, powers
and privileges in and to that certain Carbon Dioxide Sale & Purchase
Agreement dated as of February 1, 2008 by and between ExxonMobil Gas & Power
Marketing Company (a division of ExxonMobil corporation) (“Exxon”), as seller,
and Rancher Energy Corp., as buyer (the “Contract”;
capitalized terms used but not otherwise defined herein shall have the same
meanings ascribed to such terms in the Contract), which governs Exxon’s
agreement to sell, and Assignor’s agreement to purchase, certain quantities of
Carbon Dioxide;
WHEREAS,
Assignor wishes to assign to Assignee, and Assignee wishes to assume, that
portion of Assignor’s right, title and interest in and to the Contract as it
relates solely to Assignor’s right to purchase from Exxon and obligations
related thereto, a Daily Contract Quantity of thirty-seven and one-half (37.5)
MMCF per day of Carbon Dioxide during the Initial
Merit Term (as hereinafter defined), (collectively, the “Assigned Interests”);
and
WHEREAS,
Assignor also wishes to grant to Assignee, and Assignee wishes to receive, an
option to purchase a portion of the Carbon Dioxide to which Assignor is
otherwise entitled or obligated to purchase under the Contract.
NOW,
THEREFORE, for One Hundred Dollars ($100.00) and other good and valuable
consideration including without limitation the mutual promises exchanged herein,
the receipt and sufficiency of all of which are hereby acknowledged, the parties
hereto agree as follows:
1.
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Term Assignment and Assumption: | |
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(a)
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As
of the Effective Date, Assignor hereby TRANSFERS, CONVEYS, SELLS and
ASSIGNS to Assignee all of its right, title and interest in and to the
Assigned Interests, together with every right, privilege, and appurtenance
relating to the Assigned Interests, free and clear of all liens and
encumbrances arising by, through or under Assignor (the “Term
Assignment”). The Initial Merit Term is hereby defined as the
period beginning on the Start-Up Date and continuing for two years
thereafter.
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(b)
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Assignor
and Assignee agree that this Agreement shall have the effect of creating
two (2) contracts with Exxon that are separately performable and
separately terminable. Assignor and Assignee agree that the
parties shall perform under the Contract as two (2) separate and distinct
contracts, one as between Assignee and Exxon with respect to the Assigned
Interests (the “Merit Contract”) and one as between Assignor and Exxon
with respect to Assignor’s remaining rights under the Contract (subject to
Assignee’s other rights hereunder, including the Options (as defined
herein)). For sake of clarity, in the event Assignee terminates
the Merit Contract in accordance with the Assumption, Assignee shall have
no obligation to purchase any Carbon Dioxide from Assignor, but shall
retain the Options and such other rights as may exist under this Agreement
(including, without limitation, those rights under Section
2(h)).
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(c)
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During
the Initial Merit Term, Assignee hereby affirmatively and unconditionally
assumes all of the obligations of Assignor under or by virtue of the
Assigned Interests arising from and after the Effective
Date.
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(d)
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Assignee
hereby agrees to pay to Assignor an amount equal to (**) per MCF of Carbon
Dioxide for which Assignee is required to pay Exxon as a result of this
Assignment; provided, however, for the sake of clarity, this fee paid by
Assignee to Assignor shall not apply to (i) Make-Up Volumes, (ii) volumes
not meeting Quality Specifications, (iii) volumes for which Assignee is
not obligated to pay Exxon under the Contract, or (iv) to the extent Merit
terminates the Merit Contract in accordance with the
Assumption. Payments by Assignee shall be made to Assignor
monthly on or before the end of the month following the month in which
volumes were paid for by Assignee to
Exxon.
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(e)
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Assignee
agrees to indemnify and hold the Assignor Indemnified Parties (as defined
below) harmless from and against any and all claims, demands and causes of
action of any kind and all losses, damages, liabilities, costs and
expenses of whatever nature (including court costs and reasonable
attorneys’ fees) (collectively, “Claims”)
arising out of, or incident to, or occurring in connection with or
relating to the Assigned Interests during the Initial Merit Term,
including, without limitation, any non-compliance by Assignee with the
terms and conditions of the Contract during the Initial Merit Term, but
only insofar as such Claims pertain to the Assigned
Interests. As used herein, the “Assignor Indemnified
Parties” shall mean Assignor and its successors, permitted assigns,
and their respective affiliates, subsidiaries, shareholders, members,
partners, officers, directors, employees, and
agents.
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(f)
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Assignor
agrees to indemnify, defend, and hold the Assignee Indemnified Parties (as
defined below) harmless from and against any and all Claims arising out
of, or incident to, or occurring in connection with or relating to the
Assigned Interests prior to the Effective Date and after the expiration of
the Initial Merit Term and any additional Merit Terms, including without
limitation, any non-compliance by Assignor with the terms and conditions
of the Contract prior to the Effective Date. As used herein,
the “Assignee
Indemnified Parties” shall mean Assignee and its successors,
permitted assigns, and their respective affiliates, subsidiaries,
shareholders, members, partners, officers, directors, employees, and
agents.
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(g)
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Assignor,
Assignee and Exxon (by virtue of its consent hereto) each acknowledge and
agree that Assignee is accepting and assuming the Assigned Interests and
only those rights and obligations under the Contract which are essential
to give effect to the Assigned Interests conveyed to Assignee hereby
during the Initial Merit Term, including,
but not limited to, Merit’s compliance with a Proportionate Share of any
Performance Assurances and,
except as otherwise expressly provided herein, all other rights,
privileges, obligations and liabilities of Assignor arising under or by
virtue of the Contract (the “Retained Exxon Agreement”) shall remain with
Assignor and are expressly not accepted or assumed by
Assignee. Assignor agrees to indemnify, defend, and hold the
Assignee Indemnified Parties harmless from and against any and all Claims
arising out of, or incident to, or occurring in connection with or
relating to the Retained Exxon Agreement, whether arising prior to or from
and after the Effective Date.
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2.
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Option to Purchase: | |
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(a)
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During
the Initial Merit Term, Merit shall have the option, in its sole
discretion, to purchase from Rancher an additional six and one half (6.5)
MMCF per day of CO2 (the “First Option”). Merit shall exercise
the First Option by providing written notice to Rancher of the amount of
additional CO2 it desires to purchase pursuant to its option at least
fifteen (15) days prior to the beginning of the month in which such
additional volumes are to be delivered. Any election by Merit
to purchase additional CO2 pursuant to the First Option hereunder shall be
deemed to continue month to month until Merit provides written notice to
Rancher of any change at least fifteen (15) days prior to the beginning of
the calendar month in which such change is to be
effective.
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(b)
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During
the Term of the Contract with respect
to the Retained Exxon Agreement, but after the Initial Merit
Term, to the extent Rancher is not using for its own tertiary recovery
purposes any volumes of CO2 Rancher is otherwise obligated, or able, to
purchase from Exxon under the Contract (“Excess Volumes”), Merit shall
have the option, in its sole discretion, to purchase from Rancher so much
of such Excess Volumes as is elected by Merit (the “Second Option,” and,
together with the First Option, the “Options”). Merit shall
make any such election to purchase such Excess Volumes monthly (each, an
“Additional Merit Term”) by providing written notice of its election at
least fifteen (15) days prior to the beginning of such Additional Merit
Term. Merit’s election for the prior month shall continue month
to month unless Merit otherwise notifies Rancher in writing at least fifteen (15) days before the end of a
month of a change in such election. Such election under
the Second Option shall include the amount of such Excess Volumes Merit
desires to purchase.
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(c)
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Any
CO2 purchased by Merit from Rancher under the Options shall be purchased
at a price equal to (**) per MCF (the “Merit Price”). Rancher
shall invoice Merit monthly for any amounts owed to Rancher pursuant to an
exercise of the Options and Merit shall remit any undisputed amounts owed
by the later of (i) the fifteenth (15th)
day of the month following delivery of such invoice or (ii) seven (7) days
of receipt of such invoice by Merit. Merit shall make payments by wire
transfer to an account specified by Rancher. Merit shall
notify Rancher of any disputes within twenty (20) days of receiving such
invoice. All invoices provided by Rancher to Merit shall
contain the quantities sold, the Contract Prices paid by Rancher, and any
other information reasonably requested by Merit from time to
time. In the event Merit does not timely pay any undisputed
amounts due hereunder, Merit shall be subject to the same obligations as
would be imposed on Rancher for late payment under the Retained Exxon
Agreement (including, without limitation, interest payments and the
cessation of deliveries under Section 5.3 of the Exxon
Agreement). Except as otherwise provided in the Retained Exxon
Agreement, failure to timely make payments by Merit shall not constitute a
basis for the termination of the
Options.
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(d)
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All
CO2 purchased by Merit from Rancher under the Options shall be delivered
by Rancher to Merit at the existing flange connection between the
ExxonMobil Carbon Dioxide Pipeline at mile post 112 and the Merit Carbon
Dioxide pipeline near Baroil, Fremont County, Wyoming, and will meet the
same Quality Specifications as when acquired by Rancher under the Retained
Exxon Agreement.
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(e)
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In
the event it exercises one or both of the First Option and/or Second
Option, Merit hereby agrees to reimburse Rancher for Merit’s Proportionate
Share of (i) any reasonable third-party expenses incurred by Rancher in
connection with any performance obligations imposed on Rancher under the
Retained Exxon Agreement with respect to volumes taken pursuant to the
Options, and (ii) any additional fees charged by Exxon under the Retained
Exxon Agreement not already included in the Contract Price with respect to
volumes taken pursuant to the Options, and
shall comply with its Proportionate Share of any Performance Assurances
(provided that nothing in this Agreement shall be construed to require
Merit to reimburse Rancher for any costs incurred by Rancher in connection
with Rancher’s Performance Assurances). For purposes of this
Agreement, “Merit’s Proportionate Share” shall be a percentage determined
with respect to any applicable period by dividing the MMCF of CO2
purchased by Merit from Rancher pursuant to the Options during such period
by the total MMCF of CO2 purchased by Rancher under the Retained Exxon
Agreement during such period. Rancher shall provide written
notice to Merit of any such expenses and Merit shall pay Rancher any
amounts owed thereunder within thirty (30) days of its receipt of such
notice.
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(f)
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Merit
shall be entitled to Merit’s Proportionate Share of any GHGRR to which
Rancher is entitled under the Retained Exxon Agreement with respect to
volumes purchased pursuant to the Options. Merit agrees to be
responsible for Merit’s Proportionate Share of any performance assurances
required to be provided by Rancher to Exxon under the Retained Exxon
Agreement with respect to volumes purchased pursuant to the Options. Merit’s Proportionate Share of
performance assurances shall be provided at the same time and in the same
manner as required to be provided by Rancher under the Contract, so long
as Rancher provides Merit with written notice of such requirement in
advance of the time such performance assurance is to be provided under the
Contract so as to reasonably allow Merit to comply with its requirements
hereunder.
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(g)
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During the period that Merit is purchasing volumes
pursuant to the Options, Rancher shall take all actions reasonably
required to comply with the terms and conditions of the Retained Exxon
Agreement and to otherwise maintain the Retained Exxon Agreement as a
valid, enforceable Agreement. In the event Rancher is, or
anticipates it will be, unable to perform its obligations under the
Retained Exxon Agreement during such
period, Rancher shall immediately provide Merit with notice
thereof, and Merit shall have the right, in its sole discretion, to
satisfy any such obligations in order to comply with or otherwise maintain
the Retained Exxon Agreement. In any such event, Rancher shall
reimburse Merit for any third party expenses incurred by Merit (less an
amount equal to Merit’s Proportionate Share of such
expenses).
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(h)
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In
an Event of Default (as hereinafter
defined) during the period that Merit
is purchasing CO2 volumes pursuant to the Options, Rancher shall be
obligated, in Merit’s sole discretion but subject to Exxon's rights and
remedies and any other terms and conditions for Exxon’s benefit only in
the Retained Exxon Agreement (including without limitation, Exxon’s right
to terminate under Section 5.4(d) of the Retained Exxon Agreement), to
assign the Retained Exxon Agreement to Merit. Merit may
exercise its election upon written notice to Rancher and Rancher shall
deliver such assignment within five (5) days after receipt of Merit’s
notice. For purposes of this Agreement, an “Event of
Default” will be deemed to occur if Rancher: (a) makes an
assignment for the benefit of creditors, or transfers or assigns to a
creditor legal or equitable title, however effected, to any asset
comprising all or a substantial portion of Rancher’s properties (other
than cash) which is collateral or security for a debt or guarantee
obligation owed to such creditor; (b) files a voluntary petition in
bankruptcy; (c) is adjudged as bankrupt or insolvent, or has entered
against it a final order of relief in any bankruptcy or insolvency
proceeding; (d) files a petition or answer seeking for it any
reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief under any statute, law or regulation; (e)
files an answer or other pleading admitting or failing to contest the
material allegations of a petition filed against it in any proceeding of
this nature; (f) seeks, consents to or acquiesces in the appointment of a
trustee, receiver or liquidator of it or of all or any substantial part of
its properties; (g) within 90 days after the commencement of any
proceeding against it seeking reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under any
statute, law or regulation, has not had such proceeding dismissed, or if
within 90 days after the appointment without its consent or acquiescence
of a trustee, receiver or liquidator of it or of all or any substantial
part of its properties, the appointment is not vacated or stayed, or
within 90 days after the expiration of any such stay, the appointment is
not vacated.
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(i)
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Rancher
shall not enter into any amendment to the Retained Exxon Agreement that adversely affects Merit’s rights under the
Options without the prior written consent of Merit, which shall not be unreasonably withheld,
conditioned or delayed.
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(j)
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To the extent volumes are delivered under the
Options, this Agreement incorporates by reference the following provisions
of the Contract substituting Rancher for “Seller” and Merit for
“Buyer:” Section 7.2, Royalty Reimbursement; Article 8, Taxes;
Section 9.2, Passage of Title; Article 10, Measurement and Computation of
Volumes; Section 11.2, Disclaimer of Certain Warranties; Section 11.3,
Failure of Carbon Dioxide to Meet Quality Specifications; Section 11.4,
Limitation of Liability and General Indemnities; Section 11.6, Force
Majeure; Section 11.7, Assignment; and Section 11.18,
Confidentiality. To the
extent any of the foregoing impose financial or other quantifiable
obligations on Merit, such obligations shall only be imposed on Merit on a
proportionate basis in accordance with Merit’s Proportionate
Share.
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3. |
Miscellaneous.
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(a)
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Merit
may, in its sole discretion, file a memorandum of this Agreement in the
county records acknowledging the existence of the Term Assignment and the
Options.
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(b)
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Each
of the parties hereto hereby represents and warrants to the other party
hereto that it has the capacity set forth on the signature pages hereof
with full power and authority to bind the party on whose behalf it is
executing this Agreement, and its authority is not inhibited by any
private agreement or legal
proceeding.
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(c)
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Assignor
hereby represents and warrants to Assignee that: (a) all of the Assigned
Interests are fully assignable, subject to
obtaining Exxon’s consent; (b) it has not assigned, transferred,
mortgaged, pledged or otherwise encumbered any of its right, title and
interest in, to and under the Assigned Interests; (c) its right, title and
interest therein is free and clear of all liens and
encumbrances. This Agreement is expressly conditioned on, and
subject to those terms and conditions contained in, Exxon’s consent to
Assignor’s assignment of the Assigned Interests, as required by the
Contract, in substantially the form of the (i) Consent to Assignment, and
(ii) Assumption and Ratification of Carbon Dioxide Sale and Purchase
Agreement; Partial Interest Assignment attached hereto as Exhibit A (the
”Assumption”) or as otherwise provided in Article 11.7 of the
Contract. In the event Exxon does not consent within ninety
(90) days of the Effective Date, this Agreement shall terminate with no
further liability or obligation by either
party.
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(d)
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Assignor
shall promptly execute and deliver such further instruments of assignment,
transfer, conveyance, endorsement, direction or authorization and other
documents as may be necessary to effectuate the purposes of this
Agreement.
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(e)
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This
Agreement is governed by Colorado law, without regard to its conflicts of
law provisions. This Agreement may be executed in any number of
counterparts, each of which may be executed by any one or more of the
parties hereto, but all of which shall constitute one and the same
instrument, and shall be binding and effective when all parties hereto
have executed and delivered at least one
counterpart.
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(f)
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The
terms and provisions of this Agreement shall be binding upon and inure to
the benefit of the respective parties hereto, and their respective
successors and assigns.
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(g)
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In
the event of any conflict between the Contract and this Agreement, the Contract shall
control.
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(h)
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This
Agreement is the complete and final agreement between the parties hereto
and supersedes all prior negotiations and agreements, whether written or
oral. This Agreement may only be amended by written agreement
signed by both parties.
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[Remainder
of this Page Intentionally Left Blank]
IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the day and year first written above.
ASSIGNOR/RANCHER:
a
Nevada corporation
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By:
/s/Xxxx
Works
Name:
Xxxx
Works
Title:
President and
CEO
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STATE
OF COLORADO
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§
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§
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COUNTY
OF DENVER
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§
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The
foregoing instrument was acknowledged before me by Xxxx Works, the President and
CEO of RANCHER ENERGY CORP., a Nevada corporation, on behalf of said corporation
this 17th day of
March, 2009.
/s/Xxxxxx
X. York
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Notary Public in and for the State of
Colorado
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(SEAL)
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My
Commission Expires: 09/24/2011
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ASSIGNEE/MERIT:
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MERIT
ENERGY COMPANY, LLC,
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A
DELAWARE LIMITED LIABILITY COMPANY
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BY:
/S/XXXXXX X.
XXXXXXX
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NAME:
XXXXXX X.
XXXXXXX
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TITLE:
PRESIDENT
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STATE
OF TEXAS
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§
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§
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COUNTY
OF DALLAS
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§
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The
foregoing instrument was acknowledged before me by Xxxxxx X. Xxxxxxx, the
President of MERIT ENERGY COMPANY, LLC, a Delaware limited liability company, on
behalf of said limited liability company this 16th day of
March, 2009.
/s/Xxxxxxxxx Xxxx
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Notary Public in and for the State of
Texas
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(SEAL) | My commission expires: 10/07/2012 |