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Crude Oil Purchase/Sale Agreement

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FOIA CONFIDENTIAL TREATMENT REQUEST


COPY
WITH
REDACTED AREAS


CRUDE OIL PURCHASE/SALE AGREEMENT


INDEX OF CONFIDENTIAL TERMS


(i) Page 1, Title Page, Heading
(ii) Page 3, Table of Contents
(iii) Pages 5, 8 and 9, Article 2.1
(iv) Page 11, Articles 3.1 and 3.2
(v) Page 12, Article 4.1
(vi) Page 15, Article 7.2(b)(ii)
(vii) Page 22, Articles 10.2, 10.4 and 10.5
(viii) Page 36, Article 17


GIANT INDUSTRIES, INC.


FORM 10-K


FISCAL YEAR ENDED DECEMBER 31, 2003


PORTIONS HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED BY THE REGISTRANT WITH THE COMMISSION. THE OMITTED PORTIONS HAVE BEEN FILED SEPARATELY WITH THE COMMISSION. ===========================================================================


***** CRUDE OIL
PURCHASE / SALE AGREEMENT
2004 - 2008


between


STATOIL MARKETING & TRADING (US) INC.


and


GIANT YORKTOWN, INC.


Contract Reference Number - CTC 2004/01


*****Confidential treatment requested. Confidential information redacted.


===========================================================================


TABLE OF CONTENTS


ARTICLE PAGE #
---------------------------- ------ 1. CONTRACT PARTIES 4 2. DEFINITIONS AND CONSTRUCTION 5 3. QUALITY 11 4. VOLUME AND DELIVERY RATE 12 5. TITLE 13 6. RISK OF LOSS 13 7. SUPPLY AND DELIVERY 14 8. SHIPPING AND DISCHARGE PORT 17 9. NOMINATION 19 10. PRICE COMPONENTS 20 11. PAYMENT 23 12. MEASUREMENT AND INSPECTION 25 13. LAYTIME AND DEMURRAGE 28 14. CREDIT CONDITIONS 31 15. TAXES, DUTIES AND CHARGES 34 16. INSURANCE 35 17. TERM OF AGREEMENT 36 18. REPRESENTATIONS, WARRANTIES AND COVENANTS 36 19. AUDIT AND INSPECTION RIGHTS 39 20. SUSPENSION AND TERMINATION 39


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21. OBLIGATIONS AT TERMINATION 42 22. INDEMNIFICATION AND CLAIMS 44 23. DAMAGES 46 24. ASSIGNMENT 46 25. NOTICES AND ADDRESSES 47 26. WARRANTIES AND WAIVERS 48 27. APPLICABLE LAW, LITIGATION AND ARBITRATION 49 28. VOICE RECORDING 51 29. DISPOSAL 51 30. NOTICE OF NORWEGIAN STATE'S SOURCED CRUDE OIL 51 31. CONFIDENTIALITY 52 32. MISCELLANEOUS 52


APPENDIX I ADJUSTMENT TO QUALITY DIFFERENTIALS FOR ***** APPENDIX II THE ***** CRUDE OIL ASSAY APPENDIX III BUYER'S PRICING TRIGGER PROCEDURE APPENDIX IV CRUDE OPTIMIZATION PROCEDURE APPENDIX V INVENTORY AND DELIVERY STATEMENTS APPENDIX VI INTERCREDITOR AGREEMENT APPENDIX VII TANK OWNER'S AGREEMENT


*****Confidential treatment requested. Confidential information redacted.


3


ARTICLE 1
CONTRACT PARTIES


THIS CRUDE OIL PURCHASE/SALE AGREEMENT (this "AGREEMENT"), is made and entered into as of the Effective Date between:


BUYER: Giant Yorktown, Inc. 23733 North Scottsdale Road Scottsdale, AZ 85255


SELLER:


Statoil Marketing & Trading (US) Inc. 225 High Ridge Road Stamford, CT 06905


WHEREAS, the Parties agree that Seller shall sell and Buyer shall purchase Oil on the terms and conditions set forth in this Agreement;


NOW, THEREFORE, in consideration of the premises and the respective promises, conditions and agreements contained herein, and other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Parties hereby agree as follows:


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ARTICLE 2
DEFINITIONS AND CONSTRUCTION


2.1 DEFINITIONS.


For purposes of this Agreement, the following terms shall have the meanings indicated below:


"ACIDIC" means that the total acid number ("TAN") of the crude oil
analyzed is more than 1.3 mgKOH/Kg.


"AGREEMENT" or "THIS AGREEMENT" means this ***** Crude Oil Purchase/Sale
Agreement, as it may be amended, modified, supplemented, extended, renewed
or restated from time to time in accordance with the terms hereof,
including the Appendices and Exhibits hereto.


"API" means American Petroleum Institute.


"ASTM" means American Society for Testing Materials.


"BANKRUPT" means a Person that (i) 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 or
arrangement for the benefit of its creditors, (iv) has instituted against
it a proceeding seeking a judgment of insolvency or bankruptcy or any
other relief under any similar law affecting creditor's rights, or a
petition is presented against it for its winding-up or liquidation, (v)
institutes a proceeding seeking a judgment of insolvency or bankruptcy or
any other relief under any bankruptcy or insolvency law or for
reorganization relief under the winding-up or liquidation, (vi) has a
resolution passed for its winding-up or liquidation, other than pursuant
to a consolidation, amalgamation or merger, (vii) 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, (viii) 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,
(ix) 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 or (x) takes any other action to authorize any of the
actions set forth above.


"BANKRUPTCY CODE" means Chapter 11 of Title 11, U.S. Code, as amended.


"BARREL" means a volume of forty-two (42) US gallons corrected for
temperature to sixty (60) degrees Fahrenheit, unless stated otherwise.


"BFO" means Brent/Forties/Oseberg.


*****Confidential treatment requested. Confidential information redacted.


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"BUSINESS DAY" means a day on which commercial banks are open for business
(including dealings in foreign exchange and foreign currency deposits) in
New York, New York.


"BUYER'S REFINERY UPGRADING TURNAROUND" means the scheduled upgrade of the
Refinery, including the installation of metallurgy and desalting
facilities, that Buyer shall implement and complete during the fourth
quarter of 2004.


"BUYER'S SUPPLY WINDOW" has the meaning given such term in Article 9(a).


"CARGO" means any particular quantity of Oil loaded or to be loaded into
Vessel as set out in this Agreement and includes part Cargoes.


"COLLATERAL" has the meaning given such term in Article 14.3.


"COLLATERAL EVENT" has the meaning given such term in Article 14.3.


"COMMODITY EXCHANGE ACT" means 7 U.S.C. Section 1, et seq.


"COMPLETION OF DISCHARGE" means, in respect of a Cargo, the final
disconnection from a Vessel's discharge manifold following the discharge
of Oil.


"CRUDE FIELD" means Buyer's crude oil storage tanks, including VEPCO tanks
"C", "D", and "E" if agreed to in advance by Seller, but excluding Buyer's
Daily Charge Tanks.


"DAILY CHARGE TANKS" means Buyer's crude oil tanks used to charge crude
oil to Buyer's crude units, excluding Buyer's Crude Field tanks.


"DEFAULT INTEREST RATE" means the lesser of (i) the applicable LIBOR rate
plus two (2) percentage points and (ii) the maximum rate of interest
permitted by Law.


"DELIVERED" or "DELIVERY" or "DELIVER" means when the Oil passes the title
transfer point from Seller to Buyer.


"DISCHARGE PORT" means the customary dockage, anchorage or place where a
Vessel may lie in connection with discharging a Cargo to the Refinery.


"DOLLARS" or "USD" or "US DOLLARS" or "$" means dollars of the United
States of America.


"EFFECTIVE DATE" means the date on which Buyer obtains all necessary
amendments to (i) the Credit Agreement referenced in Article 14.1 of this
Agreement and (ii) the term Loan Agreement dated as of May 14, 2002 (as
the same has been amended from time to time, the "Term Loan Agreement")
between Giant Yorktown, Inc., Wells Fargo Bank Nevada,


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National Association, and each of the Lenders named on Schedule IA of the
Term Loan Agreement, and the Parent Guaranty Agreement related to the Term
Loan Agreement.


"ENVIRONMENTAL LAW" means any 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, as may be amended or modified from time
to time.


"ESTIMATED WEEKLY QUANTITY" or "EWQ" means the approximate quantity of Oil
Delivered to Buyer during a period of one (1) week (between midnight on a
Wednesday to midnight on the previous Wednesday), as estimated by Buyer
and stated on the EWQ statement in the format of Appendix V.


"E.T." means the applicable, local Eastern Time in New York, New York.


"EVENT OF DEFAULT" or "DEFAULT" has the meaning given such term in Article
20.1.


"FORCE MAJEURE" means any cause or event reasonably beyond the control of
a Party including perils of navigation, fires, acts of God, wars (declared
or undeclared), terrorism, or any act, order, directive or necessity of
any governmental, civil or military authority (de facto or de jure), or
any regulation or interference (including regulation or interference
requiring the shutting down of the Refinery or any of its operating units
or requiring a substantial change in the manner of operating same), labor
disputes (whether or not involving a Party's employees), or partial
failure of producing, transportation, utility, loading or delivery
facilities, inability of Seller or Vessels selected by it to obtain war
risk insurance from usual commercial markets, closing of or restrictions
on use of harbors, docks, canals, or other assistance to or adjuncts of
shipping or navigation, actions by Seller to comply with directives of a
member government or agency thereof in the implementation of an emergency
allocation program of the International Energy Agency, or any other cause
reasonably beyond the control of either Party whether or not similar to
the foregoing and whether or not foreseeable, all of which by the exercise
of due diligence such Party is unable to prevent or overcome. For purposes
hereof, "failure of producing facilities" means a major disruption to the
Production Facilities and Loading Terminal associated with them.


"FOUR-DAY SUPPLY WINDOW" has the meaning given such term in Article 9(c).


"GALLON" means a U.S. standard gallon of 231 cubic inches at 60 degrees
Fahrenheit.


7


"GIANT" means Giant Industries, Inc., a Delaware corporation. Giant is the
ultimate parent company of Buyer and the Guarantor described in Article
14.1(c).


"GOVERNMENTAL AUTHORITY" means any federal, state, regional, local, or
municipal governmental body, agency, instrumentality, authority or entity
established or controlled by a governmental or subdivision thereof,
including any legislative, administrative or judicial body, or any Person
purporting to act therefore.


"GPW" means Gross Product Worth as defined in Appendix I.


"*****" means ***** crude oil of normal export quality.


"INDEPENDENT INSPECTOR" means a company that is approved by U.S. Customs
and that is mutually appointed by the Parties for reporting the
measurement of quality and quantity of Oil.


"INTERCREDITOR AGREEMENT" means the Intercreditor Agreement substantially
in the form attached hereto as Appendix VI.


"INVENTORY" OR "INVENTORIES" means the Oil inventories that Seller owns
and intends to sell to Buyer under this Agreement, wherever located,
including at the Refinery, VEPCO tanks `C', `D' or `E', loaded upon
Vessels and injected into or received from pipelines or other transport.


"IPE" means International Petroleum Exchange.


"LAW" 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, in each case
applicable to either Party and as amended or modified from time to time.


"LIABILITIES" means any losses, claims, charges, damages, deficiencies,
assessments, interests, penalties, costs and expenses of any kind
(including reasonable attorneys' fees and other fees, court costs and
other disbursements), including any Liabilities directly or indirectly
arising out of or related to any suit, proceeding, judgment, settlement or
judicial or administrative order and any Liabilities with respect to
Environmental Law.


"LIBOR" means, as of the date of any determination, the London Interbank
Offered Rate for One-Month U.S. Dollar deposits appearing on page 3750 of
the Telerate screen (or any successor page) at approximately 11:00 a.m.
(London time). If such rate does not appear on page 3750 of the Telerate
screen (or otherwise on such screen), LIBOR shall be determined by
reference to such other comparable publicly available service for
displaying Eurodollar rates as the Parties may mutually select. LIBOR
shall be established on the first day on which a determination of the
interest rate is to be made


*****Confidential treatment requested. Confidential information redacted.


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under this Agreement and shall be adjusted daily based on the LIBOR quotes
made available through the foregoing sources.


"LOADING TERMINAL" means the port of loading of the Vessel for the
applicable Oil being Supplied.


"MONTH" means a calendar month. Where a specified Month is defined as
Month "M", Month M-1 shall mean the Month prior to Month M and Month M+1
shall mean the Month subsequent to Month M.


"OIL" means crude oil specified in this Agreement.


"NORMAL REFINERY OPERATIONS" means periods of time when the Refinery is
operating in a routine manner with all operating units on-line. Normal
Refinery Operations exclude maintenance turnarounds and shutdown periods.
For any periods of time other than during Normal Refinery Operations,
Buyer shall invoke the provisions of Articles 7.2 and/or 7.3.


"PARTY" or "PARTIES" means each Buyer and Seller defined in Article 1
"Contract Parties" and collectively, both Buyer and Seller.


"PERSON" means an individual, corporation, partnership, limited liability
company, joint venture, trust or unincorporated organization, joint stock
company or any other private entity or organization or Governmental
Authority, whether acting in an individual, fiduciary or other capacity.


"PREPRODUCTION ASSAY" means the ***** Crude Oil Assay, (Report number
04263/96, dated August 23, 1996) attached as Appendix II.


"PRODUCTION FACILITIES" means the offshore field production facilities
used for the production of *****.


"PROPERTY TAX" means any and all tangible personal property taxes, ad
valorem property taxes or the like imposed on the value of the Oil held
for sale by Seller to Buyer under this Agreement.


"REFINERY" means the petroleum processing and refining facilities located
in Yorktown, Virginia that are currently owned and operated by Buyer.


"SAMPLER" means an automatic in-line sampler located in the immediate
vicinity of the Vessel's discharge manifold and the Refinery's receiving
pipeline connection.


"SELLER'S SUPPLY WINDOW" has the meaning given such term in Article 9(b).


*****Confidential treatment requested. Confidential information redacted.


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"SUPPLIED" or "SUPPLY" or "SUPPLIES" means or refers to when the Oil
passes the flange connection between Seller's Vessel's permanent discharge
manifold and the receiving pipeline or hose at the Discharge Port.


"TANK OWNER'S AGREEMENT" means the Tank Owner's Agreement substantially in
the form attached hereto as Appendix VII.


"TAXES" means any and all (i) U.S. federal, state and local taxes, duties,
fees and charges of every description, including all fuel, excise,
environmental, spill, gross earnings, gross receipts and sales and use
taxes, however designated (except for taxes on income), paid or incurred
with respect to the purchase, storage, exchange, use, transportation,
resale, importation or handling of the Oil and (ii) Property Taxes.


"TERMINATION DATE" has the meaning given such term in Article 21.1.


"UCC" means the Uniform Commercial Code in effect in the relevant state
jurisdiction.


"VESSEL" means the ship or barge, whether owned or chartered or otherwise
obtained by Seller and employed by Seller to transport the Oil to the
Discharge Port.


2.2 CONSTRUCTION.


(a) All headings herein are intended solely for convenience of reference and shall not affect the meaning or interpretation of the provisions of this Agreement.


(b) Unless expressly provided otherwise, the word "including" as used herein does not limit the preceding words or terms.


(c) Unless expressly provided otherwise, all references to days, weeks, months and quarters mean calendar days, weeks, Months and quarters, respectively. For purposes of this Agreement, a calendar day shall begin at 12:00 a.m. E.T. and end at 11:59 p.m. E.T.


(d) Unless expressly provided otherwise, references herein to "consent" mean the prior written consent of the Party at issue, which shall not be unreasonably withheld, delayed or conditioned.


(e) The Parties acknowledge that they and their counsel have reviewed and revised this Agreement and that no presumption of contract interpretation or construction shall apply to the advantage or disadvantage of the drafter of this Agreement.


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ARTICLE 3
QUALITY


3.1 NORMAL EXPORT QUALITY. The Oil to be Supplied under this Agreement shall be ***** crude oil of normal export quality. Other crude oils may be Supplied under this Agreement to replace part of the ***** should a substitution be agreed to between the Parties. Any such substitution will be made in accordance with the procedures set out in Appendix IV.


3.2 VARIATIONS IN QUALITY. Both Parties recognize that the quality of ***** may vary from the quality of ***** defined in the Preproduction Assay and as included as Appendix II. A significant variation in the quality of ***** from the Preproduction Assay to subsequent assays will result in an adjustment of the price as set out in Appendix I. Notwithstanding any quality variation, Seller shall Supply the ***** and Buyer shall receive of the ***** subject to the following:


(a) In the event the quality of the ***** is substantially different
from the quality defined in the Preproduction Assay, and this
directly results in significant technical problems to Buyer's
Refinery or Buyer is not able to manufacture finished petroleum
products meeting current specifications for the products in Buyer's
normal markets except under significant economic hardship, then the
Parties agree to meet in an expeditious manner to resolve the
situation in good faith. In order to resolve the technical problems
associated with the quality of the ***** being substantially
different from the quality defined in the Preproduction Assay, Buyer
shall take reasonable measures to receive alternative crude oils or
crude oil blends (Acidic or non-Acidic crude oils) Supplied by
Seller in substitution for the *****.


(b) In the event that the quality of the ***** is substantially
different from the quality defined in the Preproduction Assay such
that ***** is clearly worth substantially more than the Agreement
price based on market prices obtained by Seller from third parties,
the Parties agree to meet and discuss in good faith how to reduce
Seller's economic disadvantage from Supplying ***** to Buyer
according to the agreed prices. Buyer shall take reasonable measures
to receive alternative crude oils or crude oil blends (Acidic or
non-Acidic crude oils) Supplied by Seller in substitution for the
*****. Seller shall take reasonable measures to Supply crude oils or
crude oil blends at prices that provide Buyer with comparable
economics as if Buyer were receiving ***** as defined in the
Preproduction Assay.


- ----------


***** Confidential treatment requested. Confidential information redacted.


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ARTICLE 4
VOLUME AND DELIVERY RATE


4.1 TOTAL VOLUME. Seller shall Deliver, and Buyer shall take Delivery of, a minimum of ***** Barrels of Oil under this Agreement. Buyer shall take delivery of all Oil Supplied under this Agreement to the Refinery. The intent of the Parties is that the first Cargo shall be Supplied during February 2004. The last Cargo to be Supplied under this Agreement will include the ***** Barrel, so that it is ensured that the minimum quantity is Supplied. Any quantity in addition to the minimum that is Supplied in the last Cargo will be considered to be part of the quantity to be Delivered under the Agreement.


4.2 DELIVERY RATE.


(a) Delivery Prior to Buyer's Refinery Upgrading Turnaround. From March 1st 2004, until the last day prior to Buyer's Refinery Upgrading Turnaround, Buyer shall take Delivery of the Oil ratably at twenty thousand (20,000) Barrels per day during periods of Normal Refinery Operations.


(b) Delivery Subsequent to Buyer's Refinery Upgrading Turnaround. From the first day after the completion of Buyer's Refinery Upgrading Turnaround, Buyer shall take Delivery of the Oil ratably at forty thousand (40,000) Barrels per day during periods of Normal Refinery Operations; except that, if Buyer is able to complete its turnaround prior to the end of September 2004, Seller shall have the right to Deliver Oil at the rate of twenty thousand (20,000) Barrels per day until September 30, 2004 and shall increase the rate of delivery of Oil to forty thousand (40,000) Barrels per day beginning October 1, 2004. Notwithstanding the foregoing, Buyer and Seller may mutually agree to an increase in the rate of Deliveries prior to October 1, 2004, should this be acceptable to both Parties. If Buyer is unable to take delivery at the higher rate as soon as reasonably practical following Buyer's Refinery Upgrading Turnaround, then Buyer shall invoke the provisions of Article 7.2 below, citing unscheduled downtime.


(c) Intended Delivery Rate. Buyer shall make best efforts to take Delivery of the Oil at a rate as close as operationally possible to the agreed rate. For the avoidance of doubt, this shall not mean that Buyer shall be required to take Delivery on any day at that exact rate but that, as a maximum deviation from ratability, should Buyer be taking Deliveries at a higher or lower rate than the agreed rate for a period of approximately two (2) Mon
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