Exhibit 10.34

EXECUTION COPY

 

SPECIFIC TERMS IN THIS EXHIBIT HAVE BEEN REDACTED BECAUSE CONFIDENTIAL TREATMENT
OF THOSE TERMS HAS BEEN REQUESTED. THE REDACTED MATERIAL HAS BEEN SEPARATELY
SUBMITTED TO THE SECURITIES AND EXCHANGE COMMISSION, AND THE TERMS HAVE BEEN
MARKED AT THE APPROPRIATE PLACE WITH THREE ASTERISKS (***).

MASTER PRODUCT PURCHASE AGREEMENT

This Master Product Purchase Agreement (this “Agreement”) is made and entered
into effective as of the 1st day of January 2018 (the “Effective Date”), by and
between Smart Sand, Inc. a Delaware corporation, or its designee, with a place
of business at 1000 Floral Vale Blvd., Suite 125, Yardley, Pennsylvania 19067
(“Smart Sand”) and WPX Energy Production LLC, a Delaware limited liability
company with a place of business at 3500 One Williams Center, Tulsa, OK 74172
(“Buyer”).

RECITALS

A.Whereas, Smart Sand mines, processes and sells certain industrial sand
products; and

B.Whereas, Smart Sand and Buyer desire to provide for the terms under which
Smart Sand will sell such products to Buyer, based on firm monthly and yearly
commitments as more particularly described herein.

AGREEMENT

Now therefore, in consideration of the mutual covenants herein, the parties
hereto agree as follows:

1.Products, Forecasts and Quantity Commitments

1.1Subject to the terms and conditions of this Agreement, during the Term (as
defined in Section 7.1), Smart Sand agrees to sell and deliver to Buyer, and
Buyer agrees to purchase and accept from Smart Sand, *** (and subject to
availability as determined by Smart Sand in its sole discretion, ***) mesh frac
sand products based on the specifications (the “Specifications”) set forth in
Appendix A attached hereto and incorporated by reference (each a “Product” and
collectively, the “Products”), in the product mix specified in Appendix B
attached hereto and incorporated by reference, and in quantities set forth as
follows:

Prior to March 15, 2018

Prior to March 15, 2018 (the “Contract Year Commencement Date”), Buyer shall
purchase *** tons of Products per month (which amount shall be prorated with
respect to partial months) (the “Pre-Commencement Date Minimum Tons per Month”)
in the product mix set forth on Appendix B and at the Contract Prices set forth
on Appendix C attached hereto and incorporated by reference. Subject to
availability as determined by Smart Sand in its sole discretion, Buyer may
purchase Products in excess of the Pre-Commencement Date Minimum Tons per Month
prior to the Contract Year Commencement Date at the Contract Prices set forth on
Appendix C. In no event shall Products purchased prior to the Contract Year
Commencement Date apply towards satisfying the Minimum Tons per Year in any
Contract Year.

 

 

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On and After March 15, 2018

After the Contract Year Commencement Date, Buyer shall purchase the following
minimum quarterly and annual tonnage amounts (as applicable, the “Minimum Tons
per Quarter” and the “Minimum Tons per Year”):

 

Contract Year

Contract Year Term

Minimum

Tons per Year

Minimum Tons per Quarter

1

March 15, 2018 – March 14, 2019

***

***

2

March 15, 2019 – March 14, 2020

***

***

 

Nothing in this Agreement shall be construed as limiting either party’s right to
enter into a purchase or sale agreement with respect to any of the Products with
a third party at any time.

1.2For purposes of this Agreement, a “Contract Year” shall mean the periods
specified in Section 1.1.  Buyer shall provide to Smart Sand a non-binding
forecast for all Product requirements in each quarter at least thirty (30) days
prior to the first day of the first month of the applicable quarter.

1.3In no event will Smart Sand be required to provide to Buyer: (i) in any given
month prior to the Contract Year Commencement Date, an aggregate amount of
Products exceeding the Pre-Commencement Date Minimum Tons per Month (as prorated
with respect to partial months); and (ii) in any given month after the Contract
Year Commencement Date, an aggregate amount of Products exceeding *** of the
Minimum Tons per Year specified in Section 1.1.

1.4Prior to the Contract Year Commencement Date, in the event Buyer purchases
less than the Pre-Commencement Date Minimum Tons per Month (the amount of such
shortfall, as prorated with respect to partial months, the “Pre-Commencement
Product Shortfall Amount”), Smart Sand shall invoice after such month and Buyer
shall pay to Smart Sand within *** of such invoice an amount (the
“Pre-Commencement Monthly Shortfall Payment”) equal to $*** multiplied by the
difference between the Pre-Commencement Product Shortfall Amount and all
Replacement Products (as defined in Section 4.2) purchased during such month
(the resulting amount, the “Pre-Commencement Net Shortfall Tons”) (i.e.
Pre-Commencement Monthly Shortfall Payment = $*** * Pre-Commencement Net
Shortfall Tons). If the Pre-Commencement Net Shortfall Tons are equal to or less
than zero, then the Pre-Commencement Monthly Shortfall Payment shall be $***.
Smart Sand shall have no obligation to deliver to Buyer all or any portion of
any Pre-Commencement Product Shortfall Amount and Buyer shall not be entitled to
any refund in connection with any Pre-Commencement Product Shortfall Amount.

1.5Subject to Section 1.6 below, in the event that Buyer purchases less than the
Minimum Tons per Quarter in any quarter during any Contract Year (the amount of
such shortfall, the “Product Shortfall Amount”), Smart Sand shall invoice after
such quarter and Buyer shall pay to Smart Sand within *** of such invoice an
amount (the “Quarterly Shortfall Payment”) equal to $*** multiplied by the
difference between the Product Shortfall Amount and all Replacement Products
purchased during such quarter (the resulting amount, the “Quarterly Net
Shortfall Tons”) (i.e. Quarterly Shortfall Payment = $*** * Quarterly Net
Shortfall Tons).  If the Quarterly Net Shortfall Tons are equal to or less than
zero, then the Quarterly Shortfall Payment shall be $***. Except as set forth in
Section 1.6, Smart Sand shall have no obligation to deliver to Buyer all or any
portion of any Product Shortfall Amount and Buyer shall not be entitled to any
refund in connection with any Product Shortfall Amount.

1.6After the Contract Year Commencement Date, Buyer may defer the purchase of up
to a maximum of *** tons of Products (the “Maximum Deferred Tons”) until the end
of the Term. If Buyer purchases less than *** tons in any given month (the
“Monthly Benchmark”), then the total amount of deferred tons then outstanding
(the “Outstanding Deferred Tons”) shall automatically increase by an amount
equal to the difference between the Monthly Benchmark and the amount of tons
purchased during the month (the “Monthly Shortfall Tons”) (but in no event shall
the Outstanding Deferred Tons be increased to above the Maximum Deferred Tons),
and Buyer shall pay to Smart Sand an amount equal to the Monthly Shortfall Tons
multiplied by $*** (the resulting amount, the “Deferral Balance”).  If Buyer
purchases more than the Monthly Benchmark in any given month (the “Monthly

 

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Excess Tons”), then: (i) the Outstanding Deferred Tons shall be automatically
reduced by an amount equal to the Monthly Excess Tons (but in no event shall the
Outstanding Deferred Tons be reduced to below ***; and (ii) Smart Sand shall
provide a credit (the “Monthly Excess Credit”) in an amount equal to the lesser
of (A) the Monthly Excess Tons multiplied by $*** or (B) the Deferral Balance,
and the Deferral Balance shall be reduced by an amount equal to the Monthly
Excess Credit (but in no case shall the Deferral Balance be reduced to below
***). If Buyer does not pay any Quarterly Shortfall Payment when due (and fails
to cure such nonpayment within *** after such Quarterly Shortfall Payment is
due), Smart Sand may, in its sole discretion, eliminate Buyer’s deferral right
hereunder by providing written notice of such elimination to Buyer, and Smart
Sand shall have no obligation to deliver the Outstanding Deferred Tons to Buyer
or to refund the Deferral Balance to Buyer.

1.7Within *** after the date of the completion of the Term or the earlier
termination of this Agreement (the “Determination Date”), Buyer shall pay to
Smart Sand (the “Deferment Payment”) an amount equal to the then-applicable
Contract Price multiplied by the amount of Outstanding Deferred Tons as of the
Determination Date minus any Deferral Balance (i.e. Deferment Payment =
(Contract Price * Outstanding Deferred Tons) – Deferral Balance).  Within ***
after receiving the Deferment Payment, Smart Sand shall deliver to Buyer, in one
or more shipments to be determined in Smart Sand’s sole discretion, the
Outstanding Deferred Tons as of the Determination Date. Buyer may, at its
option, choose to not take delivery of all or any portion of the Outstanding
Deferred Tons in connection with the foregoing; provided, however, that if Buyer
chooses to forego delivery of such Products, Buyer shall not be entitled to any
refund of all or any portion of the Deferment Payment, any Quarterly Shortfall
Payments or any other amounts paid to Smart Sand. Buyer’s choice to not take
delivery shall be irrevocable and Buyer shall forfeit any title to or right to
receive the Products that Buyer has chosen not to receive.

1.8Buyer shall issue purchase orders to Smart Sand setting forth the quantities
of Products, applicable prices, and other details related to a specific order.
All purchase orders are subject to written acceptance and acknowledgement by
Smart Sand.

1.9The terms and conditions of this Agreement are the controlling terms and
conditions for the purchase of Products by Buyer.  The printed terms and
conditions of any purchase order, acknowledgment form, invoice or other business
form of Buyer and Smart Sand shall not apply to any order. Buyer and Smart Sand
agree that any purchase order issued by Buyer is for quantity and timing
purposes only, and such purchase order does not amend the terms of this
Agreement.

2.Price and Payment Terms

2.1The pricing for each of the Products shall be as set forth on Appendix C
(“Contract Price”).  The parties agree that all Products ordered by Buyer will
be loaded onto Smart Sand supplied railcars, and shipped as specified in the
purchase order, provided, however, that (i) Buyer agrees to comply with all
freight scheduling mechanisms and timeframes designated by Smart Sand in writing
to Buyer from time to time, (ii) Buyer shall place orders in a reasonably
consistent manner so as to avoid late month backlogs, and (iii) delivery of the
Products shall be FCA ***, Incoterms 2010. If any railcar is short of the
expected tonnage or contains damaged Products, Buyer must notify Smart Sand
within *** of such railcar’s arrival at Buyer’s transload facility and the
parties shall work in good faith to resolve such shortage or damage, as the case
may be. If Buyer does not notify Smart Sand of such shortage or damage within
such *** period, then the Products shall be automatically deemed accepted by
Buyer. All quoted prices in Appendix C include rail shipment charges (consisting
of the base rail rate and rail fuel surcharges charged by the rail carrier) for
transporting the Products to ***; provided, however, that (A) such rail shipment
charges are based upon current prices set by the rail carrier and may be
increased by Smart Sand at any time (including, without limitation, prior to the
Contract Year Commencement Date) in connection with any price increases set by
the rail carrier, and (B) such rail shipment charges are calculated based upon
unit train configurations of at least *** and the delivery and return of such
railcars at least *** (“Minimum Railcar Turnaround”), and such rail shipment
charges may be increased by Smart Sand if such train configuration or Minimum
Railcar Turnaround does not occur. All quoted prices in Appendix C, except with
respect to increases related to higher rail shipment charges, shall not increase
more than *** in any given Contract Year. Buyer shall promptly return all
railcars to Smart Sand, and Smart Sand shall have no liability hereunder for
delivery delays caused by Buyer’s failure to promptly return railcars. For the
avoidance of doubt, other than the rail shipment charges described above and
railcar rental charges, all of which are included in Smart Sand’s price quote,
all rail and shipping costs, fees, expenses, and charges, including, without
limitation, transloading charges (including

 

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transloader related switching fees), diversion charges, and detention and
demurrage charges (except for such detention or demurrage charges caused solely
by Smart Sand’s negligence or willful misconduct) shall be borne and paid
exclusively by Buyer as an additional amount due hereunder. The Contract Price
shall be subject to adjustments implemented during the Term in accordance with
this Section 2.1 and as set forth in Appendix C.  

2.2Unless stated otherwise in an order (and agreed to in writing by Smart Sand),
prices quoted by Smart Sand do not include sales, VAT, use or similar
taxes.  Any such taxes, fees, duties, and customs charges imposed on Smart Sand
or imposed on Buyer and charged to or paid by Smart Sand in the country or area
of operations at any time shall be reimbursed to Smart Sand by Buyer.  The terms
“taxes” and “duties” shall mean all fees or charges imposed, assessed or levied
at any time by any governmental or other (including tribal) authority and shall
include, but shall not be limited to, property, sales, use taxes, value added
and excise taxes or other charges of a similar nature, customs or other duties,
customs agent fees, or other charges and fees of a similar nature.  The
provisions of this clause shall continue after termination of this Agreement.

2.3Except for invoices issued pursuant to Section 1.4 and Section 1.5, Smart
Sand shall invoice Buyer upon shipment of Products.  Payment by Buyer shall be
due and payable within *** after the date the invoice is received by Buyer. Past
due invoices are subject to a monthly service charge at a rate equal to *** per
month or the maximum rate from time to time permitted by applicable law. Buyer
shall have the right to dispute in good faith all or any portion of an invoice
by providing written notice of such dispute (together with reasonable detail of
the facts underlying such dispute) to Smart Sand on or before *** after the date
the invoice is received by Buyer.  If Buyer disputes any portion of an invoice
in good faith, the undisputed portion shall be paid and the parties shall work
in good faith to resolve such dispute. When the dispute is resolved, Smart Sand
shall issue an adjustment invoice, if applicable, and Buyer shall pay any
remaining amount owing as reflected on the adjustment invoice.

2.4Buyer shall reimburse Smart Sand for reasonable attorneys’ fees, necessary
court costs, and other expenses incurred by Smart Sand to collect any amounts
due hereunder or enforce the terms and conditions stated herein.

3.Specifications

In the event Buyer desires to change the Specifications, a request for change
shall be submitted to Smart Sand in writing.  Smart Sand is free to accept or
reject any requested changes to Specifications in its sole discretion and no
change in Specifications shall be operative unless such changes are memorialized
in a writing signed by Smart Sand.  Smart Sand shall notify Buyer of any
adjustment to the Contract Price resulting from the changes to the
Specifications requested by Buyer.  Buyer must agree to the adjustment to the
Contract Price in writing prior to any changes to the Specifications.

4.Delivery

4.1The Products shall be delivered in accordance with Section 2.1 of this
Agreement.

4.2In the event that Smart Sand is unable to supply Buyer’s purchases (which
purchases shall not exceed the monthly maximum amount of Products set forth in
Section 1.3), Buyer shall have the right to purchase replacement Products
(“Replacement Products”) from alternative sources (which amount of Replacement
Products shall not exceed the amount that Smart Sand is unable to supply) after
receipt of notification from Smart Sand of Smart Sand’s failure or inability to
supply. All Replacement Products purchased by Buyer shall count towards meeting
Buyer’s purchase obligations set forth in Section 1.1 above (subject to the
maximum monthly amount of Products set forth in Section 1.3). Except to the
extent Smart Sand’s inability to supply is the result of an excusable delay set
forth in Section 9, if Replacement Products are purchased by Buyer at a price
that is higher than the then-applicable Contract Price, Smart Sand shall pay
Buyer an amount equal to the difference between the Contract Price and the price
of the Replacement Products (subject to the maximum set forth in the immediately
following sentence), which shall be paid by Smart Sand to Buyer within *** of
Buyer’s notification to Smart Sand of the amounts so owed. Notwithstanding the
foregoing, in no event shall Smart Sand’s liability above exceed *** per ton of
Replacement Products purchased by Buyer.

 

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5.Inspection

Smart Sand shall test the Products for compliance with the Specifications in
accordance with the testing procedures set forth on Appendix D attached hereto
and incorporated by reference. Smart Sand shall retain all testing records for a
period of *** and shall, at Buyer’s request, supply to Buyer a copy of Smart
Sand’s test sheets, certified by Smart Sand to be a true copy.  Because
deliveries made pursuant to this Agreement shall be via large individual loads
by rail, any inspection by Buyer shall be made at the point of loading.  Buyer
may, at its expense, have a representative at Smart Sand's facility for the
purpose of such inspection.  Buyer does not have the right to reject any
Products that are in compliance with the Specifications, as determined by Smart
Sand pursuant to its testing procedures.

6.Warranty

6.1Smart Sand warrants to Buyer that Smart Sand shall have complied in all
material respects with the testing procedures set forth on Appendix D with
respect to each Product.  

6.2Buyer acknowledges that Products may become damaged by improper handling
after delivery and that Smart Sand shall have no obligation to replace such
damaged Products.

6.3THIS WARRANTY IS EXPRESSLY IN LIEU OF ALL OTHER WARRANTIES.  SMART SAND MAKES
NO OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO ANY
WARRANTIES OF MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE WITH RESPECT
TO ANY PRODUCTS.

7.Term and Termination

7.1This Agreement expire at 11:59 p.m. central time on the last day of Contract
Year 2 (the “Term”), unless sooner terminated as provided herein.  

7.2Either party may terminate this Agreement, immediately upon written notice to
the other party (i) if such other party is in material breach of any of its
obligations under the Agreement and fails to cure such breach within thirty (30)
business days (ten (10) business days for any breach relating to the nonpayment
of undisputed invoices) after written notice thereof to such other party, or
(ii) if such other party is insolvent or makes any arrangement with its
creditors generally, or has a receiver appointed for all or a substantial part
of its business of properties, or an insolvency, bankruptcy or similar
proceeding is brought by or against such other party and involving such other
party which is not dismissed within sixty (60) business days of its institution,
or if such other party goes into liquidation or otherwise ceases to function as
a going concern.

7.3Subject to Section 7.4 below, in the event of termination of this Agreement
as provided in Section 7.2, there shall be no further liability or obligation on
the part of any party hereto; provided, that (i) any such termination shall not
relieve any party from liability for any willful breach of this Agreement or any
fraud, and (ii) the provisions of this Section 7.3 (Effect of Termination) and
Sections 1.4 (Pre-Commencement Shortfalls), 1.5 (Post-Commencement Shortfalls),
1.6 (Deferrals), 2.2 (Taxes), 2.3 (Payments), 2.4 (Credit/Collections7.4
(Termination Payments), 7.5 (Damages), 8 (Confidentiality), 10 (Limitation of
Liability), 12 (Notices), 13 (Resolution of Disputes) and 15 (Miscellaneous) of
this Agreement shall remain in full force and effect and survive any termination
of this Agreement. Upon termination, Smart Sand shall have no further
obligations to pay any costs for any Replacement Products.

7.4Notwithstanding anything to the contrary in Section 7.3: (i) in the event
Buyer terminates this Agreement pursuant to Section 7.2, Buyer shall pay to
Smart Sand, within thirty (30) days of the effective date of termination, all
amounts due and owing to Smart Sand for Products delivered by Smart Sand prior
to the effective date of termination, all other amounts due and owing under this
Agreement (including, without limitation, all taxes, transportation costs, rail
shipment charges, railcar rental charges, fuel surcharges, collection costs
(including court costs and expenses related thereto), attorneys’ fees and
expenses, and interest) and all other amounts payable by Buyer that have accrued
but remain unpaid at the effective date of termination; and (ii) in the event
Smart Sand

 

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terminates this Agreement pursuant to Section 7.2, Buyer shall pay to Smart
Sand, within thirty (30) days of the effective date of termination, an amount
equal to:

 

(A)

all amounts due and owing to Smart Sand, including without limitation, amounts
due for Products delivered by Smart Sand prior to the effective date of
termination, taxes, transportation costs, rail shipment charges, railcar rental
charges, fuel surcharges, collection costs (including court costs and expenses
related thereto), attorneys’ fees and expenses, interest, and all other amounts
payable by Buyer that have accrued but remain unpaid at the effective date of
termination; plus

 

(B)

an amount equal to: (i) $***, multiplied by (ii) the difference between the ***
(i.e. the ***) and the actual tons of Products purchased by Buyer during the
Term; minus

 

(C)

***.

7.5The parties agree that quantifying losses arising from a breach or
termination of this Agreement are inherently difficult to measure and have
therefore negotiated the provisions set forth above for the express purpose of
avoiding any later disagreement regarding the quantum of damages.  The parties
further stipulate that the agreed mechanism for calculating damages is not a
penalty, but rather a reasonable measure or forecast of damages based upon the
parties’ experience in the frac sand industry and given the nature of the losses
that may result from a breach or termination of this Agreement.

8.Confidentiality

8.1The parties acknowledge that either party may disclose (orally or in writing)
to the other confidential and proprietary information relating to the Products
or each party's business (together with the terms of this Agreement relating to
product mix, pricing, volume, payments, and product specifications, the
“Confidential Information”).  Each party agrees that it will keep the
Confidential Information of the other party disclosed to it in confidence by
using at least the same degree of care to prevent unauthorized disclosure or use
thereof as such party uses to protect its own confidential information of like
nature, and that it will not use for its own benefit or disclose, directly or
indirectly, any item of Confidential Information to any person, without the
prior written consent of the disclosing party, except (i) only to those of the
recipient’s affiliates, employees or advisors who need to know the same in the
performance of their duties for the recipient in connection with this Agreement;
or (ii) to comply with any law, rule, regulation, or legal or regulatory process
(including without limitation in connection with any stock exchange or the
Securities and Exchange Commission (“SEC”) review process or filing
requirements) applicable to such party; provided, that such party shall use
reasonable best efforts to obtain confidential treatment from the SEC or any
other court or governmental authority with respect to the disclosure of such
Confidential Information.  

8.2The parties’ non-use and non-disclosure restrictions hereunder shall continue
with respect to any item of Confidential Information until the earlier of the
expiration of two (2) years following the termination of this Agreement for any
reason, or until such item:  (i) is or has become publicly available; or (ii)
was in the possession of, or known by, the recipient without an obligation to
keep it confidential; or (iii) has been disclosed to the recipient by an
unrelated third party, without an obligation to keep it confidential; or (iv)
has been independently developed by the recipient without regard to the
Confidential Information.

9.Excusable Delay

Neither party shall be liable for any delay or failure to perform to the extent
caused by fire, flood, adverse weather conditions, explosion, war, riot,
embargo, unavoidable delay in rail transportation, shortages in railcar
availability, labor disputes, shortage of utilities, compliance with any laws,
regulations, orders, acts or requirements from the government, civil or military
authorities of which the party was unaware at the execution of this Agreement,
acts of God or the public enemy, or any act or event of any nature reasonably
beyond such party’s control; provided, however, that, for the avoidance of
doubt, a party’s failure to perform due to a general economic downturn, industry
specific downturn, or any change in a party’s financial condition or results of
operations not directly caused by any of the causes set forth in this sentence
or any similar cause shall not constitute an excusable delay hereunder.  In such
circumstances, Buyer or Smart Sand may cancel the portion of any order subject
to such

 

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delay by giving prompt written notice, provided that such cancellation shall
apply only to that portion of the order affected by the foregoing circumstances
and the balance of the order shall continue in full force and effect.  If Smart
Sand’s production capacity is impaired as a result of one of the foregoing
events of force majeure, then Smart Sand may allocate to Buyer a pro rata
portion of Smart Sand’s total remaining production capacity taking into account
Smart Sand’s impaired production capacity, Buyer’s requirements pursuant to the
forecast provided by Buyer in accordance with Section 1.2, and Smart Sand’s
aggregate requirements for Products under purchase agreements with other
customers.

10.LIMITATION OF LIABILITY.

NEITHER PARTY SHALL BE LIABLE FOR ANY SPECIAL, INDIRECT, INCIDENTAL OR
CONSEQUENTIAL DAMAGES OF ANY KIND OR NATURE WHATSOEVER, INCLUDING, WITHOUT
LIMITATION, LOST GOODWILL, LOST PROFITS, WORK STOPPAGE OR IMPAIRMENT OF OTHER
GOODS, AND WHETHER ARISING OUT OF BREACH OF ANY EXPRESS OR IMPLIED WARRANTY,
BREACH OF CONTRACT, TORT (INCLUDING NEGLIGENCE), STRICT LIABILITY OR OTHERWISE,
EVEN IF ADVISED OF THE POSSIBILITY OF SUCH DAMAGE OR IF SUCH DAMAGE COULD HAVE
BEEN REASONABLY FORESEEN.  

11.PRODUCT NOTIFICATION

WARNING!  MATERIAL SOLD PURSUANT TO THIS AGREEMENT MAY CONTAIN FREE SILICA – IN
SUCH CIRCUMSTANCES, SEE MATERIAL WARNINGS AND DO NOT BREATHE DUST OR USE FOR
SANDBLASTING.  If you breathe fine silica dust possibly contained in Products
you can suffer severe, irreversible lung damage and death.  Some medical reports
state inhalation of silica dust may cause lung cancer.   Medical reports also
link breathing silica dust to crippling arthritis and skin and eye irritation.  
NEVER USE PRODUCTS CONTAINING SILICA DUST WITHOUT NIOSH/MSHA APPROVED
RESPIRATORY PROTECTIVE EQUIPMENT.

Buyer acknowledges the above warning and assumes responsibility and shall be
liable for communicating this warning and providing to its employees,
contractors and/or agents any equipment necessary for their protection.

12.Notice

Any notice or other communication hereunder shall be in writing and shall be
deemed given and effective when delivered personally or by overnight carrier,
addressed to a party at its address stated below or to such other address as
such party may designate by written notice to the other party in accordance with
the provisions of this Section.

 

To Smart Sand:

 

 

 

 

Smart Sand, Inc.

 

 

1000 Floral Vale Blvd., Suite 125

 

 

Yardley, Pennsylvania 19067

 

 

Attention:  James D. Young

 

 

 

With a copy to:

 

Fox Rothschild LLP

 

 

Fox Rothschild LLP

 

 

Lawrenceville, New Jersey 08648

 

 

Attention:  Vincent A. Vietti

 

 

 

To Buyer:

 

WPX Energy Production LLC

 

 

3500 One Williams Center

 

 

Tulsa, Oklahoma 74103

 

 

Attention:  Manager, Supply Chain Management

 

 

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13.Resolution of Disputes

13.1Except (i) when either party reasonably seeks temporary injunctive relief to
avoid irreparable injury or (ii) in the case of termination in accordance with
this Agreement, it is expressly agreed that prior to initiating any legal
proceedings or other dispute resolution proceeding in connection with this
Agreement, the party seeking relief shall provide *** prior written notice to
the other party and, within such *** period (or longer, if extended by mutual
written consent of the parties), authorized representatives of the parties shall
meet (or confer by telephone) at least once in good faith to resolve amicably
any such dispute  Neither party shall be under an obligation to provide any
privileged or confidential documents that it is not otherwise obligated to
provide under this Agreement and each party may seek equitable relief subject to
the terms of the Agreement as it determines in its sole judgment is necessary.
Unless parties otherwise agree, if the period of *** or extended period referred
to above has expired and the dispute remains unresolved, parties may, by mutual
written agreement, submit the dispute to arbitration or, if no such agreement is
reached, either party may submit the dispute to the appropriate court or agency.
For the avoidance of doubt, neither party is under any obligation to resolve any
dispute through arbitration and may decline arbitration in its sole discretion.

13.2EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY THAT MAY ARISE UNDER
THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES AND,
THEREFORE, EACH SUCH PARTY UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A
TRIAL BY JURY IN RESPECT OF ANY LEGAL ACTION ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

13.3It is the intent of the parties to exclude the application of the United
Nations Convention on Contracts for the International Sale of Goods
(1980).  Nothing herein shall prohibit a party from availing itself of a court
of competent jurisdiction for the purpose of injunctive relief.  The parties
acknowledge and agree that the respective parties may have available to them
laws or remedies available under applicable local legislation; it is the intent
of the parties to have the terms of this Agreement apply in every instance,
including, without limitation, the choice of law and forum provisions and the
respective parties agree not to avail themselves of such alternate local
legislation or remedies available thereunder.  The parties acknowledge that this
is a fundamental foundation for the risk allocation undertaken in this Agreement
and should this provision be breached it would deny the other party the full
benefit of its risk allocation and the agreed pricing structure.  Accordingly,
should a party avail itself of local legislation that conflicts or negates the
risk allocation contained in this Agreement, then such party shall be liable to
the non-breaching party for all damages arising therefrom.

14.Compliance with Law

14.1Subject to the limitations of this Agreement, it is agreed that in the
performance of this Agreement all matters shall be conducted in compliance in
all material respects with any and all applicable federal, state, provincial and
local (including tribal) laws, rules and regulations in the area(s) in which the
matters are being conducted.  Any performance obligation arising under this
Agreement is contingent on the prior receipt of all necessary government
authorizations.  If either party is required to pay any fine or penalty, or is
subject to a claim from the other party’s failure to comply with applicable
laws, rules or regulations, the party failing to comply shall defend, indemnify
and hold harmless the other party for all damages, fees and/or fines for such
failure to comply to the extent of the indemnifying party’s allocable share of
the failure to comply.  

14.2Notwithstanding anything to the contrary, neither party shall be required to
take any action or be required to refrain from taking any action prohibited,
penalized or required, as applicable, under the laws of the United States,
including, without limitation, the U.S. antiboycott laws.

15.Miscellaneous.

15.1This Agreement constitutes the entire agreement between the parties hereto
relating to the subject matter hereof and supersedes all prior oral and written
agreements and all contemporaneous oral negotiation, commitments and
understandings of the parties.  This Agreement may not be changed or amended
except by a writing executed by both parties hereto.

 

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15.2No party may assign this Agreement without the prior written consent, not to
be unreasonably withheld, conditioned or delayed, of the other party; provided,
however, that either party may assign or otherwise transfer this Agreement
without the other party’s consent to (i) one of its affiliates, (ii) any of its
successors (including but not limited to the purchaser of substantially all of
its assets), or (iii) any financial institution providing it financing. With
respect to Smart Sand, any assignment pursuant to subsections (ii) or (iii)
above must be to a party having a substantially similar or better financial
condition than Smart Sand.  With respect to Buyer, any assignment pursuant to
subsections (i), (ii) or (iii) above must be to a party having a substantially
similar or better financial condition than Buyer.  Any prohibited assignment or
attempted assignment without the other party’s prior written consent shall be
void.

15.3This Agreement shall be governed by and construed and enforced in accordance
with the internal laws of the State of Delaware without giving effect to that
state’s conflicts of laws principles or choice of law rules.

15.4No delay or failure by either party to exercise or enforce at any time any
right or provision of this Agreement shall be considered a waiver thereof or of
such party’s right thereafter to exercise or enforce each and every right and
provision of this Agreement.  A waiver to be valid shall be in writing, but need
not be supported by consideration.  No single waiver shall constitute a
continuing or subsequent waiver.

15.5This Agreement may be executed in two or more counterparts and delivered via
facsimile or pdf, each of which when executed shall be deemed to be an original,
and all of which shall constitute one and the same agreement.

15.6The headings herein are for reference purposes only and are not to be
considered in construing this Agreement. This Agreement shall be interpreted and
construed without regard to customary principles of interpretation and
construction of legal instruments which construe ambiguities against the party
causing an instrument to be drafted. For purposes of this Agreement, the neuter
shall include the masculine and feminine, the masculine shall include the
feminine, the feminine shall include the masculine, the singular shall include
the plural, and the plural shall include the singular, as the context may
require.

15.7If any provision of this Agreement shall be held illegal, invalid or
unenforceable, in whole or in part, such provision shall be modified to render
it legal, valid and enforceable while to the fullest extent possible preserving
the business and financial intent and impact of the original provision, and the
legality, validity and enforceability of all other provisions of the Agreement
shall not be affected thereby.

[signature page follows]

 

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first above written.

 

Smart Sand, Inc.

 

WPX Energy Production, LLC

(“Smart Sand”)

 

(“Buyer”)

 

 

 

 

 

 

 

By:

 

/s/ Lee E. Beckelman

 

By:

 

/s/ Alan R. Killion

Name:

 

Lee. E. Beckelman

 

Name:

 

Alan R. Killion

Title:

 

CFO

 

Title:

 

Vice President

 

 

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APPENDIX A

Specifications

As of the Effective Date the standards of ISO 13503-2 and API RP 19C are
identical and as indicated below.

 

 

ISO 13503-2

Turbidity (NTU)

***

Kumbein Shape Factors:

 

    Roundness

***

    Sphericity

***

Clusters (%)

***

Sieve Analysis:

 

    <0.1% of sample larger than first specified sieve size

 

                                           % In Size ***

***

                                           % In Size ***

***

                                           % In Size ***

***

                                           % In Size ***

***

    <1.0% in pan

 

Solubility in 12/3 HCL/HF for 0.5 HR

@150oF (% Weight Loss)

***

 

 

 

 

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APPENDIX B

Product Mix Parameters

Buyer acknowledges the need for a balanced Product sales mix output from Smart
Sand’s facilities.  Therefore, the following shall serve as a benchmark Product
volume mix for each month during the Term.    

The following product mix shall apply to this Agreement:

 

Product*

Monthly Product Mix (%)

***

***

***

***

Total

100%

 

*  Subject to availability, as determined by Smart Sand in its sole discretion,
Buyer may, in lieu of purchasing *** and *** mesh Products, purchase *** and ***
mesh Products at the Contract Price for *** mesh Products set forth herein.

 

 

 

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APPENDIX C

Product Pricing

Base Prices consist of the price for frac sand Products, rail shipment charges
and railcar rental charges, and are calculated based upon transport to ***.
Contract Prices are the sum of Base Prices and quarterly fuel surcharges, as
detailed below.  Pricing for shipments each month shall be based on the Contract
Prices for the current quarter.

(1)

Base Prices:

Base Prices for Products, on a per ton basis, shall be as follows, subject to
adjustment as set forth in Section 2.1.

 

Product

Contract Year 1

Contract Year 2

***

***

***

***

***

***

 

(2)

Fuel Surcharges:

Quarterly natural gas or propane surcharges, starting on the Effective Date,
with details below:

Natural Gas Surcharge: A Natural Gas Surcharge will be applied if the Henry Hub
Average Natural Gas Price (ANGP) Spot Price as listed on WWW.EIA.DOE.GOV
(https://www.eia.gov/dnav/ng/ng_pri_fut_s1_m.htm) for the preceding calendar
quarter is above the Bench Mark, set at $*** per MMBTU, and shall be adjusted at
the end of each calendar quarter for the duration of the Agreement. A surcharge
of $*** per ton for every $*** per MMBTU increase for the ANGP for the preceding
calendar quarter will apply in addition to the Base Price for all products. The
calculation will be prorated, i.e., if the ANGP for a prior quarter averages
$*** per MMBTU, the surcharge will be $*** per ton for the following quarter.

As an example, if the average of the monthly closes of ANGP for January,
February and March is $***, then $*** will be added to the applicable Base Price
for April, May and June. Additionally, if the average of the monthly closes of
ANGP for April, May and June is $*** or less, then $*** will be added to the
Base Price for July, August and September.

For the avoidance of doubt, there shall be no Natural Gas Surcharge in any
quarter where the Henry Hub ANGP Spot Price for the preceding quarter is at or
below the Bench Mark.

Propane Surcharge: A Propane Surcharge will be applied if the Average Quarterly
Mont Belvieu, TX Propane Spot Price (AMBTX) as listed on WWW.EIA.GOV
(http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=pet&s=eer_epllpa_pf4_y44mb_dpg&f=m)
for the preceding calendar quarter is above the Bench Mark, set at $0.75 per
gallon of Propane ((Month 1 Average + Month 2 Average + Month 3
Average)/3=AMBTX), and shall be adjusted at the end of each calendar quarter for
the duration of the Agreement. A surcharge of $*** per ton for every $*** per
gallon increase in the AMBTX for the preceding calendar quarter will apply in
addition to the Base Price for all products. The calculation will be prorated,
i.e., if the AMBTX for a prior quarter averages $*** per Gallon, the surcharge
will be $*** per ton for the following quarter.

As an example, if the average of the monthly closes of Mont Belvieu, TX Propane
Spot for January, February and March is $***/gallon, then $*** will be added to
the applicable Base Price for April, May and June. Additionally, if the average
of the monthly closes of AMBTX propane for April, May and June is $***/gallon or
less, then $*** will be added to the Base Price for July, August and September.

For the avoidance of doubt, there shall be no Propane Surcharge in any quarter
where the AMBTX Propane Spot Price for the preceding quarter is at or below the
Bench Mark.

 

 

 

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APPENDIX D

Testing Procedures

This schedule provides an explanation of how Smart Sand will test its Products
to confirm that they are compliant with the Specifications set forth in Appendix
A.  All testing shall be conducted during periods when Smart Sand’s facility is
operational and not during down time.  Testing shall be conducted on sand
samples taken from the transfer area that leads to Smart Sand’s storage
silo(s).  

The testing to be performed and its frequency, shall be as follows:

1.  ***

2.  ***

3.  ***

4.  ***

In addition, Smart Sand will test and provide a sieve analysis of every rail car
and send a Certificate of Analysis for each car with the corresponding invoice.