The quantity of crude oil shall be the amount specified in Part 1 of the Agreement. There shall be no operational tolerance unless specified in Part 1 of the Agreement.

All crude oil delivered hereunder shall be consistent with normal stream quality for the type of crude specified in Part 1 of the Agreement, and acceptable to the carriers involved.

Seller shall give Buyer a prompt written notice of any sudden and unforeseen significant change in the quality of crude oil at Seller’s source of supply which would render it impossible to deliver with the qualities specified in Part 1 of the Agreement.

Any and all claims either as to a shortage in quantity or a defect in quality with respect to any delivery of crude oil hereunder shall be made by the claiming party in writing to the other party within 90 days after delivery of such crude oil and shall include documentation supporting the claim (provided however, no claim shall be made hereunder for any indirect, special, incidental, or consequential damages). If no such written notice of claim is received within 90 days after delivery of the crude oil to the Buyer, the claim shall be deemed to have been waived.

Upon either party’s receipt of a valid claim notice by the other party, the Parties shall make best efforts to resolve the claim within 30 days of said receipt. If resolution cannot be reached during the 30 day time period, the Parties shall jointly select an independent arbitrator to decide the dispute and the cost of the arbitrator’s services shall be shared equally by the parties. The arbitrator shall have expert knowledge for determination of the matter in question and findings shall be based on actual evidence available, including retests if samples were retained.

and provide copies of such to the Buyer and Seller. The inspector’s determinations as to quantity and quality recorded on the certificates shall be conclusive and binding upon both parties (except in cases of manifest fraud or error). Seller shall arrange for inspection.

The gross quantity of ANS crude oil delivered hereunder shall be determined by one of the following methods beginning preferentially with:

1. Calibrated positive displacement meter measurements; or
2. Manual shore tank gauge measurements taken before and after delivery into such shore tanks. Insofar as possible, such tanks shall be settled for a minimum of 6 hours before gauging. Lines between the ship’s flange and receiving tanks shall be proven to be full before discharge; or
3. Closed measurement devices, such as sonic tape devices, as available on the vessel. Sonic tape shall be provided by and certified accurate by the inspectors.

Neither party may require a corroboration of the volume measurements thus obtained, using any other method of ANS crude oil volume measurement without the written consent of the other party. Volumes shall be reported in barrels, and temperature corrections to 60°F shall be made in accordance with Table No. 6A of the latest revision of the Petroleum Measurement Tables of the American Society for testing Materials and the Institute of Petroleum (ASTM D1250, IP 200).

The quality of ANS crude oil delivered hereunder shall be determined by one of the following methods beginning preferentially with:

1. A continuous sample collected by a U.S. customs approved flow proportioned in-line sampler as the ANS crude oil discharges from the vessel; or
2. Water cuts and a composite sample made up of running or all-level samples taken from each of the vessel’s tanks upon arrival at the delivery port. This method shall not be used for vessels equipped with an Inert Gas System (IGS) unless such vessels are also equipped with valves that permit hand measurement and thieving without lifting the inert gas blanket or releasing the blanket pressure; or
3. Water cuts and composite sample (made up of upper, middle and lower samples) taken from the shore tanks both taken immediately before and no sooner than 6 hours after the deliver into such shore tanks.

The quantity and quality of common stream crude oil to be transferred in-line or in-tank into a third party facility or via a third party common carrier shall be evidenced by the third party’s delivery ticket.

The quantities, quality, and gravities of crude oil delivered hereunder shall be determined in accordance with generally accepted industry practices in effect at the time and place of delivery for the receiving carrier.

Volumes shall be reported in barrels, and temperature corrections to 60°F shall be made in accordance with the latest revision of the Petroleum Measurement Tables of the American Society for Testing Materials and the Institute of Petroleum (ASTM D1250, IP200)

Delivery of ANS crude oil shall be from a vessel arranged for by Seller to a safe berth reachable on her arrival and of sufficient depth for the vessel, provided the vessel can proceed thereto, lie at, and depart therefrom always safely afloat, Buyer warrants that conditions at the facility conform to those previously approved by Seller. Said berth shall be provided by the Buyer free of all charges (including but not limited to: line handling, set-upon gangways, cargo port fees, wharfage, dockage, and quay dues), at the Buyer’s designated marine terminal facilities. Any additional costs incurred to make the berth and channels thereto and therefrom safe for the vessel, or as required by governmental or port authorities (including but not limited to additional tugs and pilots), are for the Buyer’s account.

The date that the Seller tenders NOR (as described in Section 6.6), and not the actual discharge date, shall be deemed to be the date that determines the Sellers compliance or non-compliance with its contractual delivery period obligation as set forth in Part 1 of the Agreement.

Title to, and risk of loss, damage, contamination, deterioration, and evaporation of the ANS crude oil delivered hereunder shall pass to Buyer as the ANS crude oil passes the flange connection between Seller’s vessel and the Buyer’s receiving hose, at which point Seller’s responsibility shall cease.

The Buyer shall ensure that appropriate facilities and personnel are available for the receipt of the Seller’s declaration of the scheduled 3 day date range between 9:00 am and 5:00 pm, local time for the Seller’s address as set forth in Part 1 of the Agreement. Nomination/scheduled date ranges shall be based on the local time zone and working days at the discharge terminal.

If Buyer has not provided the minimum 5 day arrival date range and port nomination as set forth in Section 6.3, Buyer shall not be relieved of its obligation to purchase ANS crude oil under the Agreement. In that event, Seller shall use its best efforts to schedule its vessels to meet nominations that are subsequently submitted by Buyer. In the absence of timely nominations, as set forth in Section 6.3, Seller shall, at any time after the due date for nominations, notify the Buyer in writing that a delivery vessel and/or 3 day arrival date range has been scheduled by Seller to meet Buyer’s delivery requirements, no later than 10 days prior to the first day of the scheduled 3 day date range. Any additional direct costs, including but not limited to demurrage, deadfreight and vessel deviation, incurred by Seller in meeting Buyer’s nominations as subsequently submitted, shall be for Buyer’s account.

Buyer may not change the discharge port, the scheduled 3 day arrival date range, or require multiple berth/port discharge without Seller’s written approval, and Seller shall not be obligated to honor said change but shall make reasonable efforts to accommodate the change. Buyer shall be responsible for the cost of all vessel deviation and incremental lightering or other costs directly associated with any such change. Upon Buyer’s request, Seller shall provide Buyer with the best available estimate of additional costs. Seller shall subsequently make all reasonable efforts to minimize such costs.

If the vessel tenders NOR within the scheduled 3 day date range, the vessel shall await its proper turn and laytime shall commence upon the expiration of 6 hours after the tendering of NOR, or upon the vessel’s arrival in berth, whichever occurs first.

If the vessel tenders NOR before the scheduled 3 day date range, laytime shall commence upon the expiration of 6 hours after tendering of NOR but not prior to 0001 hours local time of the first day of the scheduled 3 day date range, or upon vessel’s arrival in berth, whichever occurs first. If the vessel arrives after the scheduled 3 day date range, the vessel shall be berthed as soon as possible, in its proper turn with the other such vessels, and laytime shall commence upon the vessel’s arrival in berth. In the event that the vessel arrives later than the fifth day of the month following the delivery period named in Part 1 of the Agreement, Buyer shall have the right to terminate the Agreement. Termination shall be subject to Seller receiving Buyer’s written termination notice no later than 0001 hours on the eighth day of the month following the delivery period named in Part 1 of the Agreement.

Time consumed due to cargo-gauging and sampling of vessel or shore, including time spent to perform and gauge line displacements, shall count as used laytime, or if the vessel is on demurrage, as time on demurrage.

Laytime, or if the vessel is on demurrage, time on demurrage shall cease upon disconnection of cargo hoses following completion of discharge. If the vessel is delayed in excess of 2 hours after such disconnection of cargo hoses solely for Buyer’s purposes, laytime, or if the vessel is on demurrage, time on demurrage shall be deemed to have continued without interruption from the disconnection of cargo hoses until the termination of such delay.

36 running hours shall be allowed as laytime for discharging a full cargo (including crude oil washing and/or cargo stripping, if performed), and a pro-rata amount of hours shall be allowed for discharging partial cargoes subject to a minimum of 12 running hours. If the vessel is simultaneously discharging to more than one Buyer, each Buyer shall be liable for incurred demurrage on a pro-rated volume basis. Time used shifting between berths, unless at the request of Seller, shall count as laytime, or if the vessel is on demurrage, as time on demurrage.

Time consumed due to any of the following shall not count as laytime, or if the vessel is on demurrage, as time on demurrage when spent or lost:

3. Due to prohibition of discharging at any time by the Owner or operator of the vessel, unless such prohibition is caused by unsafe conditions at the berth and/or channels thereto and therefrom; or
1. In ballasting or bunkering not concurrent with discharging; or
2. As a result of a strike, lockout, stoppage, or restraint of labor, of the vessel, or tugboats, or pilots, except when all of the aforesaid are owned by or otherwise are under Buyer’s direct control.

Demurrage shall be paid, as provided herein, per running hour and pro-rata for a part thereof all the time that laytime as specified above is exceeded by the time taken to discharge cargo (including crude oil washing and/or cargo stripping) and the time which, under the provisions of this Agreement, counts as laytime or time on demurrage.

Any and all demurrage claims (and supporting documentation) incurred under these provisions, shall be sent by BP Oil Supply Company (or its affiliate or its appointed agent) to its initial Buyer within 90 days of completion of cargo discharge. In the event that such Buyer has resold the cargo, Buyer, and any other subsequent resellers of the cargo, shall send a copy of said demurrage claim and supporting documentation to its respective buyer within 5 days of its receipt of said demurrage claim and supporting documentation.

Valid demurrage charges between Seller and the Buyer shall be paid by the Buyer no later than 60 days from receipt of such demurrage claim and supporting documents. Any Buyer agreement with a third party, or Buyer’s inability to collect demurrage from said third party, for whatever reason, shall not be an excuse, waiver, or defense to a claim for payment to Seller. Demurrage charges shall be presumed to be valid if not objected to in writing by Buyer within 45 days of receipt of invoice. If valid demurrage claims are not paid within 60 days from receipt of invoice, Seller shall charge interest on the unpaid balance for each day payment is delinquent at 2 percentage points above the accrued Prime Interest Rate as quoted in the Wall Street Journal.

The rate of demurrage shall be the demurrage rate provided in the American Tanker Rate schedule current as of the date of commencement of loading for a vessel of the size employed in the delivery multiplied by the spot market level current as of the date of commencement of discharging for a vessel of the size employed in the delivery eligible to trade permanently in the United State coastwise trade.

The rate of demurrage shall be reduced to one-half (1/2) of the amount stated in Section 6.8 above per running hour for demurrage incurred as a result of any of the following:

1. Fire, explosion, breakdown, or failure of machinery or equipment in or about the receiving facility; or
2. Severe weather and/or sea conditions, including fog; or
3. Prohibition of discharging by Port Authorities, including awaiting daylight restriction, unless such prohibition is caused by the receiving facility’s failure to comply with applicable laws or regulations; or
4. Strike, lockout, or stoppage of Buyer or terminal operator labor/personnel.

Costs of lightering to the customary arrival draft of the originally scheduled port shall be for Seller’s account. This draft shall be determined by the approach channel areas, including seasonal variations of the discharge terminal. Costs of further lightering required to accommodate specific berth constraints shall be for Buyer’s account.

Title to and risk of loss, damage, contamination, deterioration, and evaporation of the crude oil delivered hereunder shall pass from Seller to Buyer as the crude oil is delivered into the delivery facilities named in Part 1 of the Agreement; or, in the case of an in-line transfer, when the transfer order is written by appropriate authorized personnel of the carrier; or, in the case of a book transfer/net scheduling, upon the issuance of documentation evidencing the parties mutual agreement of the book transfer/net scheduling.

The price shall be the price as set forth in Part 1 of the Agreement, calculated in U.S. Dollars per barrel. No gravity adjustment shall apply unless specified in Part 1 of the Agreement.

Buyer shall pay the full ANS crude oil purchase price without deductions, discounts, or offsets on or before 5 days after the date of completion of discharge, or 10 days after tendering of NOR, whichever occurs first, for each delivery of ANS crude oil under the Agreement. Payment shall be made to Seller’s bank via telegraphic transfer in immediately available funds against Seller’s Commercial Invoice and, a copy of the independent inspector’s report evidencing actual delivery quantities if said report is required by this Part 2

If payment due date falls on a Saturday, or a New York bank holiday other than Monday, payment shall be effected on the preceding day. If payment due date falls on a Sunday or a Monday New York bank holiday, payment shall be effected on the next business day. If payment is late, Seller shall charge interest on the unpaid balance for each day payment is delinquent at 2 percentage points above the accrued Prime Interest Rate as quoted in the Wall Street Journal from the payment due date.

are determined. Any resultant underpayment shall be paid immediately by Buyer to Seller and any resultant overpayment shall be immediately refunded by Seller to Buyer. Interest on any underpayment or overpayment shall be calculated from the payment due date using the accrued 30 day commercial paper rate as quoted in the Wall Street Journal on the payment due date.

Buyer shall pay the full exchange crude oil purchase price without deductions, discounts, or offsets on or before the 20^th day after the end of the delivery month to Seller’s bank via telegraphic transfer in immediately available funds against Seller’s Commercial Invoice and documentation from the pipeline carrier or shipper evidencing actual delivery quantities and/or documentation evidencing a book transfer. If payment due date falls on a Saturday or a New York bank holiday other than Monday, payment shall be effected on the proceeding day. If payment due date falls on a Sunday or a Monday New York bank holiday, payment shall be effected on the next business day. If payment is late, Seller shall charge interest on the unpaid balance for each day payment is delinquent at 2 percentage points above the accrued Prime Interest Rate as quoted in the Wall Street Journal from the payment due date.

If specified in Part 1 of the Agreement, Buyer must provide Seller with Financial security for payment in one of the following forms of security:

1. An irrevocable Letter of Credit, in a form acceptable to Seller and in conformity with Seller’s procedures and requirements (including adequate coverage of load tolerances). The amount of the Letter of Credit shall be in an amount equal to the total purchase price of crude oil being purchased on the said date of delivery plus a total purchase price load tolerance of either (i) 10% for crude oil delivered by pipeline, or (ii) 10% for ANS delivered by vessel to either a U.S. West Coast or Hawaii location, or (iii) 15% for ANS delivered by vessel to a location other than the U.S. West Coast or Hawaii. The issuing bank must be approved by Seller in advance of the opening of the Letter of Credit. All bank charges, including but not limited to issuing, confirming, advising, and negotiating fees, shall be for Buyer’s account.

2. Payment prior to delivery, whereby Buyer shall make payment to Seller in an amount equal to the full purchase price of the scheduled delivery quantity (the "pre-payment"), less accrued interest from the pre-payment date to the payment due date. Interest on the pre-payment shall be calculated from the pre-payment date to the payment due date, 365 days per year convention, using the accrued 30 day commercial paper rate as quoted in the Wall Street Journal from the pre-payment due date.

In the event that the Buyer is required by Part 1 of the Agreement, and fails to provide financial security under the conditions outlined herein, Seller retains the right to withhold delivery of crude oil and/or terminate the Agreement. Termination as a result of failing to provide financial security shall be effective upon the receipt by the Buyer of the Seller’s written termination notification. Any and all delay, demurrage, storage, or other charges arising out of Buyer’s failure to provide financial security as outlined herein, shall be borne solely by Buyer.

that such Reopener Notice shall be delivered promptly after the announcement and/or publication of such action in the Federal Register or the equivalent state or local publication or in any prominent newspaper or magazine of general circulation in the crude oil industry. Terms of negotiation shall be according to Article 10 of this Part 2 of the Agreement, except if the governmental action occurs later than 30 days from the effective date of the Reopener Notice, then termination would occur at the effective date of the governmental action.

The effective date of any Reopener Notice shall be the date written notice thereof is received by the party to whom it is directed. The Parties agree to negotiate in good faith for a period not to exceed 30 days following the effective date of any Reopener Notice in order to establish a new price/exchange differential. During such period of renegotiation, the price/exchange differential in existence on the effective date of the Reopener Notice shall remain in effect. If the Parties are able to agree upon a new price/exchange differential during the aforesaid 30 day period, such new price/exchange differential shall become effective at the time agreed to by the Parties and shall be evidenced by a duly authorized amendment, in writing, to the Agreement.

If the Parties are unable to agree upon a new price/exchange differential within such 30 day period, then either party may terminate the Agreement at the end of the 30 day period by delivering written notice of termination to the other party no later than 35 days following the effective date of the Reopener Notice.

In the event either party delivers such notice of termination, either party may then elect, by delivering an additional written notice within 5 days after receipt of the foregoing termination notice, to continue this Agreement for a period from the 31^st day up to but not beyond the 90^th day following the effective date of the Reopener Notice at the price/exchange differential last proposed in writing by the other party. Such last proposed price/exchange differential must have been proposed in good faith during the negotiations.

the foregoing under governmental regulations, the Buyer hereby agrees to include a similar provision in any contract for resale of the ANS crude oil delivered to it under the Agreement.

The Parties agree that except as set forth in the Agreement, no obligation to buy, sell or exchange oil has been established. The parties further agree that the Agreement does not form a supplier-purchaser relationship similar in form or substance to that concept as previously defined under Department of Energy Regulations pursuant to the Emergency Petroleum Allocation Act of 1973, as amended. In the event any such similar conceptual relationship were to be mandated and enforced in the future, whether pursuant to federal, state, or local law, and whether on a retroactive and/or prospective basis, it is agreed by the Parties that either party, without limiting its other rights may immediately cancel the Agreement by giving written notice to the other.

In the event the State of Alaska or the U.S. Government elects to take in-kind all or any portion of its royalty share of ANS crude oil produced from the Prudhoe Bay Unit, or from any other production which at that time constitutes BP Oil Supply Company’s supply of ANS crude oil, BP Oil Supply Company at its option may reduce accordingly the quantity of ANS crude oil to be exchanged or sold by it hereunder, with a corresponding reduction in the quantity of crude oil to be exchanged by the Buyer to BP Oil Supply Company hereunder. BP Oil Supply Company shall notify Buyer of any action by the State of Alaska or the United States Government as soon as BP Oil Supply Company learns of such action. Any reduction in quantity under this provision shall not begin prior to the date the State of Alaska or the United States Government receives title to and takes delivery of its royalty share of ANS crude oil in-kind.

Quantities affected by any declarations of Force Majeure shall be deleted from supply obligations for the period in questions and need not be made up unless and to the extent otherwise mutually agreed in writing by the Parties. In any such event, the party claiming Force Majeure shall notify the other party in writing and, if possible, of the extent and duration thereof and shall exercise due diligence to prevent, eliminate or overcome such cause where it is possible to do so and resume performance at the earliest possible date.

Notwithstanding the above, and in the event that the Agreement is an exchange of crude oil, the Parties shall have the rights and obligations described below in the circumstances described below:

1. If, because of Force Majeure, the ANS Seller is unable to deliver part or all of the quantity of ANS crude oil the ANS Seller is obligated to deliver hereunder, the ANS Buyer (referred to as the "Exchange Partner" in this Article 13) shall have the right but not the obligation to reduce its deliveries of the exchange crude oil to the ANS Seller hereunder by an amount not to exceed the exchange ratio multiplied by the number of barrels of ANS crude oil that the ANS Seller fails to deliver.
2. If, because of Force Majeure, the ANS Seller is unable to receive and take delivery for the full quantity of exchange crude oil to be delivered by the Exchange Partner hereunder, the Exchange Partner shall have the right but not the obligation to reduce its receipts of ANS from the ANS Seller hereunder by an amount not to exceed the ANS Seller’s shortfall.
3. If, because of Force Majeure, the Exchange Partner is unable to deliver part or all of the quantity of exchange crude oil to be delivered by the Exchange Partner hereunder, the ANS Seller may, at its option, nevertheless provide the full quantity of ANS crude oil to be delivered by it to the Exchange Partner hereunder, or reduce the quantity to by delivered to the Exchange Partner hereunder by not more than the inverse of the exchange ratio multiplied by the number of barrels of crude oil that the Exchange Partner fails to deliver hereunder.
4. If, because of Force Majeure, the Exchange Partner is unable to receive and take delivery of the full quantity of ANS crude oil to be delivered by the ANS Seller hereunder the ANS Seller shall have the right but not the obligation to reduce its receipts of exchange crude oil from the Exchange Partner hereunder by an amount not to exceed the exchange ratio multiplied by the Exchange Partner’s shortfall hereunder.

Neither Seller nor Buyer may assign its rights and obligations under the Agreement, in whole or in part, to any party without the written consent of the other party, except that each party may assign such rights and obligations to any affiliate, without the written consent of the other party. A written notice of such assignment shall be given by the assignor to the other Parties to the Agreement. No such assignment shall relieve the assignor of its obligations under the Agreement.

Seller expressly warrants that at the time of delivery the Seller shall hold full and unencumbered legal and equitable title to the crude oil sold by it hereunder and that Seller shall have full right, authority and power to transfer and convey such title to Buyer and to effect delivery of the crude oil to Buyer.

The Seller further warrants that the crude oil has been produced, handled, and transported to the delivery point, in accordance with the laws, rules and regulations of all local, state, or federal authorities having jurisdiction thereof.

The Seller further warrants that the crude oil delivered hereunder shall conform to the description of physical attributes and volumes stated under Part 1 of the Agreement. OTHERWISE THERE ARE NO GUARANTEES OR WARRANTIES, EXPRESSED OR IMPLIED OF MERCHANTABILITY, FITNESS OR SUITABILITY OF THE CRUDE OIL FOR ANY PARTICULAR PURPOSE. THERE ARE NO OTHER ORAL OR WRITTEN GUARANTEES OR WARRANTIES.

The delay or failure on the part of either party here to insist upon specific performance of one or more terms and conditions hereunder, shall not be constituted as a waiver of any such terms and conditions, rights and privileges. No waiver by either party of any of the terms or conditions of the Agreement shall be construed as a waiver of any subsequent breach of the same or any other terms and conditions.

As relates to Article 18 of this Part 2 of the Agreement, the Parties hereto acknowledge that the term "Forward Contract" means this Agreement or any other written agreement between the Parties for the purchase, sale, or exchange of crude oil that is a Forward Contract as defined in the U.S. Federal Bankruptcy Code or applicable banking laws or regulations, (b) the term "Contract Value" of any Forward Contract means the product of the number of barrels of crude oil covered by that Forward Contract multiplied by the price per barrel of the crude oil specified in that Forward Contract, and (c) the term "Market Value" of any Forward Contract at any time means the product of the number of barrels of crude oil covered by that Forward Contract multiplied by the then current market price per barrel for that type of crude oil covered thereby for delivery at the delivery date or in the delivery period specified in that Forward Contract, as determined by the Performing Party in any commercially reasonable manner.

Notwithstanding any other provisions of this or any other commodity contract between the Parties, in the event (each "default") either party ("the Defaulting Party") shall (a) default in the payment or performance, when due, of any obligation to the other party under the Agreement or any other Forward Contract(s), or (b) file a petition or otherwise commence or authorize the commencement of a proceeding or case under any bankruptcy, insolvency, reorganization, or similar law for the protection of creditors, or have any such petition filed or proceeding or case commenced against it and it is not successful in having such petition, proceeding, or case dismissed within 60 days, or (c) have a liquidator, administrator, receiver or trustee appointed with respect to it or any substantial portion of its property or assets, or (d) become bankrupt or insolvent, however evidenced, or be unable to pay its debts as they fall due, or (e) fail to provide adequate security for, or assurances of its ability to perform, all of its obligations under the Agreement or any other Forward Contracts(s) within 48 hours of a demand therefor when the other party has reasonable grounds for insecurity;

then in any such default the other party (the "Performing Party") shall have the right to liquidate the Agreement and any and all Forward Contracts then outstanding at any time or from time to time thereafter by:

1. Closing out each Forward Contract being liquidated at its Market Value at the time of liquidation, so that each such Forward Contract is canceled and a settlement payment in an amount equal to the difference between such Market Value and the Contact Value of such Forward Contract shall be due to the Buyer under that Forward contract if such Market Value exceeds such Contract Value and to the Seller under such Forward Contract if the opposite is the case; and
2. Discounting each amount then due under clause (i) to the present value as at the time of liquidation (to take account

3. Setting off or aggregating, as appropriate, any of all settlement payments, and (at the election of the Performing Party) any or all other amounts owing between the parties hereunder or under any Forward Contract, so that all such amounts are aggregated and/or netted to a single liquidated amount payable by one party to the other.

The net amount due after any such liquidation shall be paid by the close of business on the next business day via telegraphic transfer in immediately available funds.

Section 18.3 Set Off

The Preforming Party’s rights under this Article shall be in addition to, and not in limitation or exclusion of, any other rights which the Performing Party may have (whether by operation of law or otherwise), including any rights and remedies under the Uniform Commercial Code. If a default occurs, the Performing Party may (at is own election) from time to time set off any or all amounts which the Defaulting Party owes to it, whether or not then due (expressly excluding any contracts for off-exchange commodity transactions pursuant to 17CFR 32.4, as amended, and Commodity Exchange Act of 1936, as amended) against any or all amounts which it owes to the Defaulting Party, whether or not then due (expressly excluding any contracts for off-exchange commodity transactions pursuant to 17CFR 32.4, as amended, and the Commodity Exchange Act of 1936, as amended), provided that any amount not then due which is included in such setoff shall be discounted to present value as at the time of setoff ( to take into account the period between the date of setoff and the date on which such amount would have otherwise been due) at the applicable Commercial Paper rate for that period as determined by the Performing Party in any commercially resonable manner.

Section 18.4. Indemnification

The Defaulting Party shall indemnify and hold the Performing Party harmless from any and all costs and expenses of collection, including reasonable attorneys fees, incurred in the exercise of any remedies hereunder; provided however, no claim shall be made hereunder for any indirect, special, incidental, or consequential damages.

ARTICLE 19: GOVERNING LAW

Any notice required hereunder shall be sent in writing by certified mail, telefax, or telex, to the address specified in Part 1 of the Agreement. The effective date of a notice shall be the date of receipt by the addressee. Changes of contacts or addresses of either party shall be notified immediately in writing to the other party.

In the event that the Agreement is an exchange of crude oil, the Parties undertake to exchange equal amounts of crude oil as set forth in the Agreement and shall make best efforts to keep delivery quantities equal on a monthly basis. In the event that the quantities actually delivered during the term of the Agreement are not equal, the Parties agree to balance the quantity as set forth in this Article 21.

As relates to Article 21 of these Terms and Conditions, "Imbalance Buyer" shall be considered as the party that delivered a greater amount of crude, "Imbalance Seller" shall be considered as the party that delivered a lesser amount of crude, and the "Imbalance" shall be the difference between the nominal delivery volume of exchange crude oil as described in Part 1 of the Agreement, and the actual delivery volume of ANS as described in Part 1 of the Agreement. The Imbalance of less than 5000 net U.S. barrels shall be treated as a net sale hereunder without further physical delivery.

The Imbalance crude type shall be domestic sweet crude oil as delivered by Arco Pipeline Company at Cushing, OK.

Delivery of the Imbalance shall be subject to the following provisions as applicable:

1. ANS Term Agreements with ANS delivered by Vessel or Pipeline.

The Imbalance Seller shall deliver the Imbalance ratably into the facilities of Arco Pipeline Company at Cushing, OK no later than the third calendar month immediately following the date the written notice of termination is received by the non-terminating party.

2. ANS Spot Agreements with ANS delivered by Vessel

The Imbalance Seller shall deliver the Imbalance ratably into the facilities of Arco Pipeline Company at Cushing, OK. If the ANS, as described in the Agreement, completes delivery prior to the 5^th business day, inclusive, before the U.S. crude oil pipeline scheduling day that occurs during the calendar month in which the ANS is delivered, the Imbalance shall be delivered during the month immediately following the month in which the ANS is delivered. If the ANS, as described in the Agreement, completes delivery after the 5^th business day, inclusive, before the U.S. crude oil pipeline scheduling day that occurs during the calendar month in which the ANS is delivered, the Imbalance shall be delivered during the second month immediately following the month in which the ANS is delivered.

3. ANS Spot Agreements with ANS delivered by Pipeline

The Imbalance Seller shall deliver the Imbalance ratably into the facilities of Arco Pipeline Company at Cushing, OK, during the month immediately after the Imbalance is determined.

In the event that domestic sweet crude oil delivered into Arco Pipeline Company at Cushing, OK, is one of the exchange crude oils in Part 1 of the Agreement, the Imbalance price shall be the price for domestic sweet crude oil delivered into Arco Pipeline Company at Cushing, OK, as defined in Part 1 of the Agreement, applicable for the last delivery month in which the Agreement is in effect. In the event that domestic sweet crude oil delivered into Arco Pipeline Company at Cushing, OK is not one of the exchange crude oils in Part 1 of the Agreement, the price shall be an average market price for the type of crude delivered during the delivery period as mutually agreed in writing between the Parties.

The payment for the Imbalance shall be subject to the provisions of Article 8 of this Part 2 of the Agreement.

Buyer whether paid directly to the governmental authority or as reimbursement to Seller. Any such reimbursement to Seller shall be due and payable to Seller by Buyer upon written demand (invoice) by Seller.

Part 1 and Part 2 of the Agreement constitutes the entire agreement between the Parties hereto regarding the subject matter hereof and supersede any and all prior negotiations, representations, or agreements related thereto, either written or oral. No changes, alterations, or modifications to Part 1 and/or Part 2 of the Agreement shall be effective unless agreed to in writing by an authorized representative of the Parties. The Article and Section headings have been included in this Agreement for convenience of reference only and shall not control or affect its construction or interpretation in any respect.

Where used in the Agreement, the terms listed hereunder shall have the following meanings:

1. The "Agreement" is defined as the contract between the Parties relating to the purchase sale, or exchange of ANS crude oil, and is comprised of Part 1 and Part 2. Part 1 is the document in which certain specific items have been agreed between the Parties including without limitation the volume, price and the delivery period of crude oil sold, purchased, or exchanged. Part 2 is comprised of these Common Terms and Conditions for the Sale and Exchange of ANS Crude Oil, Effective November 1, 1991 as set forth herein.
2. The term "Buyer" refers to the party receiving crude oil and the term "Seller" refers to the party delivering crude oil. Buyer and Seller are collectively referred to as the "Parties" .
3. The term "barrel" means 42 United States gallons of 231 cubic inches at 60° Fahrenheit.
4. The term "day" means a calendar day
5. The term "month" means a calendar month.
6. The term "barrels per day" means barrels per calendar day.
7. Every reference to money or price pertains to United States currency.
8. The term "net outturn" means FOB destination.
9. The term "S&W" means sediment and water
10. The term "ANS" means Alaskan North Slope crude oil and the term "exchange crude oil" means a non-ANS crude oil as set forth in Part 1 of the Agreement.
11. the term "delivery ticket" means a shipping/loading document(s) which states information regarding crude oil delivered, including without limitations the type and quality, the delivered volume quantity, the method of measurement, the corrected specific gravity, temperature,