MASTER SUPPLY AND OFFTAKE AGREEMENT
dated as of April 29, 2011
J. ARON & COMPANY,
LION OIL COMPANY
LION OIL TRADING & TRANSPORTATION, INC.
TABLE OF CONTENTS
ARTICLE 1 DEFINITIONS AND CONSTRUCTION 1
ARTICLE 2 CONDITIONS TO COMMENCEMENT 21
ARTICLE 3 TERM OF AGREEMENT 25
ARTICLE 4 COMMENCEMENT DATE TRANSFER 25
ARTICLE 5 PURCHASE AND SALE OF CRUDE OIL 26
ARTICLE 6 PURCHASE PRICE FOR CRUDE OIL 34
ARTICLE 7 TARGET INVENTORY LEVELS AND WORKING CAPITAL ADJUSTMENT 34
ARTICLE 8 PURCHASE AND DELIVERY OF PRODUCTS 34
ARTICLE 9 ANCILLARY COSTS; MONTH END INVENTORY; CERTAIN DISPOSITIONS; TANK MAINTENANCE 34
ARTICLE 10 PAYMENT PROVISIONS 34
ARTICLE 11 INDEPENDENT INSPECTORS; STANDARDS OF MEASUREMENT 41
ARTICLE 12 FINANCIAL INFORMATION; CREDIT SUPPORT; AND ADEQUATE ASSURANCES 42
ARTICLE 13 REFINERY TURNAROUND, MAINTENANCE AND CLOSURE 44
ARTICLE 14 TAXES 45
ARTICLE 15 INSURANCE 46
ARTICLE 16 FORCE MAJEURE 47
ARTICLE 17 REPRESENTATIONS, WARRANTIES AND COVENANTS 48
ARTICLE 18 DEFAULT AND TERMINATION 54
ARTICLE 19 SETTLEMENT AT TERMINATION 59
TABLE OF CONTENTS
ARTICLE 20 INDEMNIFICATION 63
ARTICLE 21 LIMITATION ON DAMAGES 64
ARTICLE 22 AUDIT AND INSPECTION 64
ARTICLE 23 CONFIDENTIALITY 64
ARTICLE 24 GOVERNING LAW 65
ARTICLE 25 ASSIGNMENT 66
ARTICLE 26 NOTICES 66
ARTICLE 27 NO WAIVER, CUMULATIVE REMEDIES 66
ARTICLE 28 NATURE OF THE TRANSACTION AND RELATIONSHIP OF PARTIES 67
ARTICLE 29 MISCELLANEOUS 67
Schedule A Products and Product Specifications
Schedule B Pricing Benchmarks
Schedule C Monthly True-up Amounts
Schedule D Operational Volume Range
Schedule E Tank List
Schedule F Insurance
Schedule G Daily Settlement Schedule
Schedule H Form of Inventory Reports
Schedule I Initial Inventory Targets
Schedule J Scheduling and Communications Protocol
Schedule K Monthly Excluded Transaction Fee Determination
Schedule L Monthly Working Capital Adjustment
Schedule M Notices
Schedule N FIFO Balance Final Settlements
Schedule O MTD Performance Report
Schedule P Pricing Group
Schedule Q Form of Trade Sheet and Nomination Template
Schedule R Form of Step-Out Inventory Sales Agreement
Schedule S Shipping Dock Report
Schedule T Excluded Transaction Trade Sheet
Schedule U Available Storage and Transportation Arrangements
Schedule V Aron Crude Receipts Pipelines
Schedule W Product Pipeline Systems/Included Terminals
Schedule X Marketing and Sales Agreement
Schedule Y LOTT Inventory Sales Agreement
Schedule Z Lion Oil Inventory Sales Agreement
Schedule AA Storage Facilities Agreement
Schedule BB Designated Cargo Contract
Schedule CC Excess LC Amount and Excess LC Rate
Schedule DD Existing Financing Agreements
Schedule EE Form of Letter of Credit
Schedule FF Illustration of Calculation of Interim Payments
MASTER SUPPLY AND OFFTAKE AGREEMENT
This Supply and Offtake Agreement (this " Agreementnone" ) is made as of April 29, 2011 (the " Effective Datenone" ), among J. Aron & Company (" Aronnone" ), a general partnership organized under the laws of New York and located at 200 West Street, New York, New York 10282-2198, Lion Oil Company (the " Companynone" ), a corporation organized under the laws of Arkansas located at 7102 Commerce Way, Brentwood, Tennessee 37027, and Lion Oil Trading & Transportation, Inc. (" LOTTnone" ), a corporation organized under the laws of Arkansas located at 7102 Commerce Way, Brentwood, Tennessee 37027 (each referred to individually as a " Partynone" or collectively as the " Partiesnone" ).
WHEREAS , the Company owns and operates a crude oil refinery located in El Dorado, Arkansas (the " Refinerynone" ) for the processing and refining of crude oil and other feedstocks and the recovery therefrom of refined products;
WHEREAS , LOTT is in the business of buying, selling and transporting of crude oil and other petroleum feedstocks in connection with the processing and refining operations of the Company;
WHEREAS , Aron wishes to deliver crude oil and other petroleum feedstocks to the Company for use at the Refinery and purchase all refined products produced by the Refinery (other than certain excluded products);
WHEREAS , the Company wishes to purchase such crude oil and other petroleum feedstocks from Aron for use at the Refinery and to sell such refined products to Aron, all in accordance with the terms and conditions hereinafter set forth;
WHEREAS , the Parties have agreed that, for the Term of the Agreement, the Company will provide professional consulting, liason, and other related services to assist Aron in the marketing and sale of the refined products acquired by Aron hereunder in accordance with the terms and conditions of the Marketing and Sales Agreement (as defined below); and
WHEREAS , it is contemplated that upon the scheduled termination of this Agreement, Aron will sell and the Company will purchase all of Aron' s crude oil, feedstocks and products inventory held at the Included Locations as set forth and in accordance with the terms and conditions of the Step-Out Inventory Sales Agreement (as defined below).
NOW, THEREFORE , in consideration of the premises and respective promises, conditions, terms and agreements contained herein, and other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Parties do hereby agree as follows:
DEFINITIONS AND CONSTRUCTIONnone
1.1 Definitionsnone .
For purposes of this Agreement, including the foregoing recitals, the following terms shall have the meanings indicated below:
" Acceptable Financial Institutionnone" means a U.S. commercial bank or a foreign bank with a U.S. branch office, with the respective rating then assigned to its unsecured and senior long-term debt or deposit obligations (not supported by third party credit enhancement) by S&P or Moody' s of at least " A" by S&P or " A2" by Moody' s.
" Actual Month End Crude Volumenone" has the meaning specified in Sectionnone .
" Actual Month End Product Volumenone" has the meaning specified in Sectionnone .
" Actual Monthly Crude Runnone" has the meaning specified in Section 6.4(c)none .
" Actual Net Crude Consumptionnone" means, for any Delivery Month, the actual number of Crude Oil Barrels run by the Refinery for such Delivery Month minus the number of Other Barrels actually delivered into the Crude Storage Tanks during such Delivery Month.
" Additional Financing Agreementnone" has the meaning specified in Section 17.2(i)none .
" Adequate Assurancenone" has the meaning specified in Section 12.5none .
" Affected Obligationsnone" has the meaning specified in Section 16.3none .
" Affected Partynone" has the meaning specified in Section 16.1none .
" Affiliatenone" means, in relation to any Person, any entity controlled, directly or indirectly, by such Person, any entity that controls, directly or indirectly, such Person, or any entity directly or indirectly under common control with such Person. For this purpose, " control" of any entity or Person means ownership of a majority of the issued shares or voting power or control in fact of the entity or Person.
" Aggregate Disposed Asphalt Quantitynone" means, as of any date, the aggregate quantity of Asphalt previously disposed of under the Ergon Asphalt Sales Agreement for which Ergon A&E has received final and complete payment pursuant to the Ergon Asphalt Sales Agreement, but only if such final and complete payment has been demonstrated to Aron' s reasonable satisfaction by written evidence provided by the Company.
" Ancillary Contractnone" has the meaning specified in Section 19.1(c)none .
" Ancillary Costsnone" means all freight, pipeline, transportation, storage, tariffs and other costs and expenses incurred by Aron as a result of the purchase, movement and storage of Crude Oil or Products undertaken in connection with or required for purposes of this Agreement (whether or not arising under Procurement Contracts), including, ocean-going freight and other costs associated with waterborne movements, inspection costs and fees, wharfage, port and dock fees, vessel demurrage, lightering costs, ship' s agent fees, import charges, waterborne insurance premiums, fees and expenses, broker' s and agent' s fees, load port charges and fees, pipeline transportation costs, pipeline transfer and pumpover fees, pipeline throughput and scheduling charges (including any fees and charges
resulting from changes in nominations undertaken to satisfy delivery requirements under this Agreement), pipeline and other common carrier tariffs, blending, tankage, linefill and throughput charges, pipeline demurrage, superfund and other comparable fees, processing fees (including fees for water or sediment removal or feedstock decontamination), merchandise processing costs and fees, importation costs, any charges imposed by any Governmental Authority (including Transfer Taxes (but not taxes on the ne t income of Aron) and U.S. Customs and other duties), user fees, fees and costs for any credit support provided to any pipelines with respect to any transactions contemplated by this Agreement and any pipeline compensation or reimbursement payments that are not timely paid by the pipeline to Aron. Notwithstanding the foregoing, (i) Aron' s hedging costs in connection with this Agreement or the transactions contemplated hereby shall not be considered Ancillary Costs (but such exclusion shall not change or be deemed to change the manner in which losses, costs and damages in connection with hedges and related trading positions are addressed under Articles 18none and 19none below), (ii) any Product shipping costs of Aron, to the extent incurred after Aron has removed such Product from the Product Storage Facilities for its own account, shall not be considered Ancillary Costs and (iii) any costs and expenses of Supplier' s Inspector shall not be considered Ancillary Costs.
" Annual Feenone" means the amount set forth as the " Annual Fee" in the Fee Letter.
" Applicable Lawnone" means (i) any law, statute, regulation, code, ordinance, license, decision, order, writ, injunction, decision, directive, judgment, policy, decree and any judicial or administrative interpretations thereof, (ii) any agreement, concession or arrangement with any Governmental Authority and (iii) any license, permit or compliance requirement, including Environmental Law, in each case as may be applicable to either Party or the subject matter of this Agreement.
" Asphalt Transfer Completion Datenone" means the date as of which Ergon A&E has received final and complete payment of all amounts due to it under the Ergon Asphalt Sales Agreement, but only if such final and complete payment has been demonstrated to Aron' s reasonable satisfaction by written evidence provided by the Company.
" Available Storage and Transportation Facilitiesnone" has the meaning specified in Section 17.2(g)none .
" Bank Holidaynone" means any day (other than a Saturday or Sunday) on which banks are authorized or required to close in the State of New York.
" Bankruptnone" means a Person that (i) is dissolved, other than pursuant to a consolidation, amalgamation or merger, (ii) becomes insolvent or is unable to pay its debts or fails or admits in writing its inability generally to pay its debts as they become due, (iii) makes a general assignment, arrangement or composition with or for the benefit of its creditors, (iv) institutes a proceeding seeking a judgment of insolvency or bankruptcy or any other relief under any bankruptcy or insolvency law or other similar law affecting creditors' rights, or a petition is presented for its winding-up or liquidation, (v) has a resolution passed for its winding-up, official management or liquidation, other than pursuant to a consolidation, amalgamation or merger, (vi) seeks or becomes subject to the appointment of an administrator, provisional liquidator, conservator, receiver, trustee, custodian or other similar official for all or
substantially all of its assets, (vii) has a secured party take possession of all or substantially all of its assets, or has a distress, execution, attachment, sequestration or other legal process levied, enforced or sued on or against all or substantially all of its assets, (viii) files an answer or other pleading admitting or failing to contest the allegations of a petition filed against it in any proceeding of the foregoing nature, (ix) causes or is subject to any event with respect to it which, unde r Applicable Law, has an analogous effect to any of the foregoing events, (x) has instituted against it a proceeding seeking a judgment of insolvency or bankruptcy under any bankruptcy or insolvency law or other similar law affecting creditors' rights and such proceeding is not dismissed within fifteen (15) days or (xi) takes any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the foregoing events.
" Bankruptcy Codenone" means chapter 11 of Title 11, U.S. Code.
" Barrelnone" means forty-two (42) net U.S. gallons, measured at 60b0 F.
" Base Agreementnone" means any agreement between the Company or LOTT and a third party pursuant to which the Company or LOTT has acquired rights to use any of the Included Third Party Storage Tanks, the Included Crude Pipelines or the Included Product Pipelines.
" BS&Wnone" means basic sediment and water.
" Business Daynone" means any day that is not a Saturday, Sunday, or Bank Holiday.
" Change of Controlnone" means the failure of Guarantor to (a) hold and own, directly or indirectly, Equity Interests representing at least 51%, on a fully diluted basis, of the aggregate ordinary voting power of the Company and LOTT or (b) control the Company and LOTT. For this purpose, " control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise. " Controlling" , " Controlled" and " under common Control with" have meanings correlative thereto
" Commencement Datenone" has the meaning specified in Section 2.3(a)none .
" Commencement Date Crude Oil Volumesnone" means the total quantity of Crude Oil in the Crude Storage Tanks, Included Third Party Crude Storage Tanks and the Included Crude Pipelines purchased by Aron on the Commencement Date, pursuant to the Inventory Sales Agreements.
" Commencement Date Products Volumesnone" means the total quantities of the Products in the Product Storage Facilities purchased by Aron on the Commencement Date, pursuant to the Inventory Sales Agreements.
" Commencement Date Purchase Valuenone" means, with respect to the Commencement Date Volumes, initially the Estimated Commencement Date Value until the Definitive Commencement Date Value has been determined and thereafter the Definitive Commencement Date Value.
" Commencement Date Volumesnone" means, collectively, the Commencement Date Crude Oil Volumes and the Commencement Date Products Volumes.
" Company Partynone" has the meaning specified in Section 17.2(a)none .
" Company Purchase Agreementnone" has the meaning specified in the Marketing and Sales Agreement.
" Contract Cutoff Datenone" means, with respect to any Procurement Contract, the date and time by which Aron is required to provide its nominations to the Third Party Supplier thereunder for the next monthly delivery period for which nominations are then due.
" Contract Nominationsnone" has the meaning specified in Section 5.4(b)none .
" CPTnone" means the prevailing time in the Central time zone.
" Crude Delivery Pointnone" means the outlet flange of the Onsite Crude Storage Tanks.
" Crude Intake Pointnone" means the inlet flange of the Crude Storage Tanks and the Included Crude Pipelines owned by the Company or LOTT.
" Crude Oilnone" means all crude oil that Aron purchases and sells to the Company or for which Aron assumes the payment obligation pursuant to any Procurement Contract.
" Crude Oil Linefillnone" means, at any time, the aggregate volume of Crude Oil linefill on the Included Crude Pipelines for which Aron is treated as the exclusive owner by the Included Crude Pipelines; provided that such volume shall be determined by using the volumes reported on the most recently available statements from the Included Crude Pipelines.
" Crude Purchase Feenone" has the meaning specified in Sectionnone .
" Crude Storage Facilitiesnone" means, collectively, the Crude Storage Tanks and the Included Crude Pipelines.
" Crude Storage Tanksnone" means any of the Onsite Crude Storage Tanks or Offsite Crude Storage Tanks.
" Cumulative Estimated Daily Net Settlement Amountnone" means, as of any day, the sum of the Daily Settlement Amounts for such date and all prior dates during the then current month and any prior month for which the Monthly True-up Payment has not been satisfied.
" Cumulative Interim Paid Amountnone" means, as of any day, the sum of (i) the most recent Interim Reset Amount and (ii) the sum of the Interim Payments actually received by Aron for all days from (and including) the most recent prior Monthly True-Up Date (or, if no Monthly True-Up Date has yet occurred, the Initial Delivery Date) to (but excluding) such day.
" Daily Pricesnone" means, with respect to a particular grade of Crude Oil or type of Product, the pricing index, formula or benchmark indicated on Schedule B as the relevant daily price.
" Daily Product Salesnone" means, for any day and Product Group, Aron' s estimate of the aggregate sales volume of such Product sold during such day, pursuant to (a) Included Transactions and Excluded Transactions (each as defined in the Marketing and Sales Agreement) or (b) any Company Purchase Agreements.
" Deemed Ergon Asphalt Quantitynone" means, as of any date, a quantity equal to the Starting Ergon Asphalt Quantity minus the Aggregate Disposed Asphalt Quantity as of such date.
" Defaultnone" means any event that, with notice or the passage of time, would constitute an Event of Default.
" Default Interest Ratenone" means the lesser of (i) the per annum rate of interest calculated on a daily basis using the prime rate published in the Wall Street Journal for the applicable day (with the rate for any day for which such rate is not published being the rate most recently published) plus two hundred (200) basis points and (ii) the maximum rate of interest permitted by Applicable Law.
" Defaulting Partynone" has the meaning specified in Section 18.2none .
" Deferred Portionnone" has the meaning specified in the Lion Oil Inventory Sales Agreement.
" Deferred Interim Payment Amountnone" means, as of any time, $********, except that, until the date that is 120 days after the Commencement Date, the Deferred Interim Payment Amount shall be $******** at any time that all of the Specified Cargo Procurement Conditions are satisfied.
" Definitive Commencement Date Valuenone" means the sum of the Lion Oil Definitive Commencement Date Value and the LOTT Definitive Commencement Date Value.
" Delivery Datenone" means any applicable 24-hour period.
" Delivery Monthnone" means the month in which Crude Oil is to be delivered to the Refinery.
" Delivery Pointnone" means a Crude Delivery Point or a Products Delivery Point, as applicable.
" Designated Affiliatenone" means, in the case of Aron, Goldman, Sachs & Co.
" Designated Cargo Contractnone" means the contract listed on Schedule BB.
" Designated Company-Sourced Barrelsnone" means, for any month, the aggregate number of Barrels of Crude Oil delivered by the Company to Aron with transfer of title occurring at the relevant Offsite Crude Storage Tanks, Included Third Party Storage Tanks or other upstream point, regardless of whether such delivery is via a pipeline that is not an Included Crude Pipeline or is pursuant to a Procurement Contract with delivery via an Included Crude Pipeline.
" Disposed Quantitynone" has the meaning specified in Sectionnone .
" Disposition Amountnone" has the meaning specified in Sectionnone .
" Early Termination Datenone" has the meaning specified in Section 3.2none .
" Effective Datenone" has the meaning specified in the introductory paragraph of this Agreement.
" Environmental Lawnone" means any existing or past Applicable Law, policy, judicial or administrative interpretation thereof or any legally binding requirement that governs or purports to govern the protection of persons, natural resources or the environment (including the protection of ambient air, surface water, groundwater, land surface or subsurface strata, endangered species or wetlands), occupational health and safety and the manufacture, processing, distribution, use, generation, handling, treatment, storage, disposal , transportation, release or management of solid waste, industrial waste or hazardous substances or materials.
" Equity Interestsnone" means, with respect to any person, any and all shares, interests, participations or other equivalents, including membership interests (however designated, whether voting or nonvoting), of equity of such person, including, if such person is a partnership, partnership interests (whether general or limited) and any other interest or participation that confers on a person the right to receive a share of the profits and losses of, or distributions of property of, such partnership, but excluding debt securi ties convertible or exchangeable into such equity.
" Ergon Asphalt Sales Agreementnone" means that certain Asphalt Sales Agreement entered into as of April 29, 2011, between the Company and Ergon Asphalt & Emulsions, Inc. (" Ergon A&Enone" ).
" Estimated Commencement Date Valuenone" means the sum of the Lion Oil Estimated Commencement Date Value and the LOTT Estimated Commencement Date Value.
" Estimated Gathering Tank Injectionsnone" means, for any day, the aggregate quantity of Barrels of oil injected into the Gathering Tanks, calculated as, the inventory at the end of the day as referred to on Schedule H hereto from the Local Tank Gauge Report minus the ending inventory for Tank 192, 2002, 125, and 170, minus the inventory at the beginning of the day from the Local Tank Gauge Report, minus the beginning inventory for Tank 192, 2002, 125, and 170 plus the aggregate daily flow through meters H, M and Big Heart #3, and any addition al meters as mutually agreed upon by the Company and Aron.
" Estimated Termination Amountnone" has the meaning specified in Section 19.2(b)none .
" Estimated Yieldnone" has the meaning specified in Sectionnone .
" Event of Defaultnone" means an occurrence of the events or circumstances described in Section 18.1none .
" Excess Cumulative Amountnone" means, for any period starting on a Monthly True-Up Date (or, if no Monthly True-up Date has occurred, on the Initial Delivery Date) to (but excluding) the next Monthly True-Up Date, the excess, if any of Cumulative Interim Paid Amount as of the day prior to the start of such period minus the Gross Monthly Payment Amount for the month to which such first Monthly True-Up Date relates or, if there is no such excess, then zero.
" Excess LC Amountnone" means the amount described on Schedule CC.
" Excess LC Feenone" means, for any month, the product of (i) Excess LC Amount for such month, (ii) the Excess LC Rate and (iii) a fraction with a numerator equal to the number of days in such month and a denominator equal to 365.
" Excess LC Ratenone" means, for any month, the rate described on Schedule CC.
" Excluded Materialsnone" means any refined petroleum products other than those that are Products.
" Excluded Transactionsnone" has the meaning specified in the Marketing and Sales Agreement.
" Existing Financing Agreementsnone" mean the Financing Agreements listed on Schedule DD.
" Expiration Datenone" has the meaning specified in Section 3.1none .
" Fed Funds Ratenone" means, for any Notification Date, the rate set forth in H.15(519) or in H.15 Daily Update for the most recently preceding Business Day under the caption " Federal funds (effective)" ; provided that if no such rate is so published for any of the immediately three preceding Business Days, then such rate shall be the arithmetic mean of the rates for the last transaction in overnight Federal funds arranged by each of three leading brokers of U.S. dollar Federal funds transactions prior to 9:00 a.m., CPT, on that day, which brokers shall be selected by Aron in a commercially reasonable manner. For purposes hereof, " H.15(519)" means the weekly statistical release designated as such, or any successor publication, published by the Board of Governors of the Federal Reserve System, available through the worldwide website of the Board of Governors of the Federal Reserve System at http://www.federalreserve.gov/releases/h15/, or any successor site or publication and " H.15 Daily Update" means the daily update of H.15(519), available through the worldwide website of the Board of Governors of the Federal Reserve System at ht tp://www.federalreserve.gov/releases/h15/update/, or any successor site or publication.
" Fee Letternone" means the letter executed by the Guarantor and Aron prior to the Commencement Date specifying the amounts of the Annual Fee, the Level One Fee, the Level Two Fee and the Second Level Two Fee.
" Financing Agreementnone" means any credit agreement, indenture or other financing agreement under which the Guarantor or any of its subsidiaries (including the Company and LOTT) may incur or become liable for indebtedness for borrowed money (including capitalized lease obligations and reimbursement obligations with respect to letters of credit) but only if the covenants thereunder limit or otherwise apply to any of the business, assets or operations of the Company or LOTT.