CRUDE OIL SUPPLY
AGREEMENT
THIS CRUDE OIL
SUPPLY AGREEMENT (this “ Agreement
”), dated as of September 1, 2009, is made and entered
into by and between CALUMET SHREVEPORT FUELS, LLC , an
Indiana limited liability customer (“ Customer
”), and LEGACY RESOURCES CO., L.P. , an Indiana
limited partnership (“ Supplier ”). Each
of Customer and Supplier is sometimes referred to hereinafter
individually as a “ Party ” and they are
collectively referred to as the “ Parties
.”
WHEREAS ,
Customer owns and operates a refinery in Shreveport, Louisiana (the
“ Refinery ”) for the processing and
refining of crude oil into specialty lubricating oils and other
refined products;
WHEREAS ,
Supplier is able to obtain certain commodities, including crude
oil, from various supply sources; and
WHEREAS ,
in order to meet the inventory requirements of the Refinery,
Customer desires to enter into an arrangement pursuant to which it
shall purchase from Supplier, and Supplier shall sell and supply to
Customer, crude oil on a just in time basis.
NOW,
THEREFORE , in consideration of the foregoing recitals and the
agreements contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the Parties, intending to be legally bound, do hereby
agree as follows:
1. Defined Terms. Unless otherwise provided to the
contrary in this Agreement, capitalized terms used in this
Agreement shall have the following meanings:
“
AAA ” has the meaning specified in
Section 17(a) .
“
AAA Rules ” has the meaning specified in
Section 17(a) .
“
Agreement ” has the meaning specified in the
Preamble.
“
Arbitration Panel ” has the meaning specified
in Section 17(b) .
“
Average Purchase Price ” means the sum of
(i) the monthly average per barrel price quoted for the first
nearby month for West Texas Intermediate crude oil on the New York
Mercantile Exchange and (ii) $1.40 per barrel, or such other price
as may be agreed by the Parties in accordance with
Section 5 .
“Brown Station Tanks” means
Customer’s storage tanks located at Brown Station,
Louisiana.
“
Business Day ” means any day other than a
Saturday, Sunday, or other day on which commercial banks in
Houston, Texas are authorized or required by law to
close.
“
Claiming Party ” has the meaning specified in
Section 12(a) .
“
Claims ” shall mean all claims or actions,
threatened or filed and whether groundless, false or fraudulent,
that directly or indirectly relate to the subject matter of an
indemnity, and the resulting losses, damages, expenses, fees of
attorneys, experts and consultants, and court costs, whether
incurred by settlement or otherwise, and whether such claims or
actions are threatened or filed prior to or after the termination
of this Agreement.
“
Customer ” has the meaning specified in the
Preamble.
“
Customer Indemnified Person ” means,
collectively, Customer, any Affiliates of Customer (other than
Supplier), any members, shareholders, partners or other equity
interest owners of Customer or its Affiliates (other than
Supplier), and their respective managing members, general partners,
managers, managing partners, directors, officers, employees,
agents, consultants, advisors, contractors, representatives,
successors and assigns.
“
Customer’s Existing Inventory ” has the
meaning specified in Section 7(a) .
“
Customer’s New Inventory ” has the
meaning specified in Section 10(d) .
“
Default Rate ” means an annual rate of interest
equal to 15% per annum.
“
Delivered Inventory Report ” has the meaning
specified in Section 9(a) .
“
Delivery Point ” has the meaning specified in
Section 8(a) .
“
Dispute ” has the meaning specified in
Section 17(a) .
“
Effective Date ” has the meaning specified in
Section 2 .
“
Force Majeure ” means an event or circumstance
that prevents a Party from performing its obligations under this
Agreement, which event or circumstance (a) was not anticipated
as of the Effective Date, (b) is not within the reasonable
control of, or the result of the negligence of, such Party, and
(c) by the exercise of due diligence, such Party is unable to
overcome or avoid or cause to be avoided, and shall include
strikes, lockouts, labor disturbances, acts of the public enemy,
wars, blockades, insurrections, riots, acts of God, epidemics,
landslides, lightning, earthquakes, fires, violent storms, floods,
washouts, environmental catastrophes, civil disturbances,
explosions, breakdown of necessary equipment, acts or failures to
act on the part of any Governmental Authority (including inability
to obtain governmental permits), failure of utility services,
sabotage, or any other similar causes.
“
Governmental Authority ” shall mean any nation
or government, any state or other political subdivision thereof,
and any entity exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to
government.
“
Indemnified Party ” has the meaning specified
in Section 11(c) .
“
Indemnitor ” has the meaning specified in
Section 11(c) .
“
Indication Date ” has the meaning specified in
Section 6(a) .
“
Indication of Need ” has the meaning specified
in Section 6(a) .
“
Party ” and “ Parties
” has the meaning specified in the Preamble.
“
Person ” means any individual, corporation,
company, voluntary association, partnership, joint venture, trust,
unincorporated organization or government or any agency,
instrumentality or political subdivision thereof, or any other form
of entity.
“
Pipeline ” means the Customer’s pipelines
running from Brown Station, Louisiana to the Refinery.
“
Premium ” means the amount calculated in
accordance with the table set forth on Exhibit A
attached hereto.
“
Raw Material ” has the meaning specified in
Section 4 .
“
Refinery ” has the meaning specified in the
Recitals.
“
Site Tanks ” means Customer’s storage
tanks located at the site of the Refinery, which tanks are more
specifically identified by serial number on Exhibit B
attached hereto.
“
Storage Tanks ” means the Brown Station Tanks
and the Site Tanks, collectively.
“
Supplier ” has the meaning specified in the
Preamble.
“
Supplier Indemnified Persons ” means,
collectively, Supplier, any Affiliates of Supplier (other than
Customer), any members, shareholders, partners or other equity
interest owners of Supplier or its Affiliates (other than
Customer), and their respective managing members, general partners,
managers, managing partners, directors, officers, employees,
agents, consultants, advisors, contractors, representatives,
successors and assigns.
“
Supply Period ” means the period beginning on
the Effective Date and ending upon the expiration of the Wind Up
Period.
“
Termination Notice ” has the meaning specified
in Section 10(b) .
“
Transition Period ” means the period commencing
on the Effective Date and ending on the date that Customer’s
Existing Supply is deemed to have been depleted in accordance with
Section 7(c) .
“
Wind Up Period ” has the meaning specified in
Section 10(d) .
2. Effectiveness. This Agreement shall be binding on
the Parties and effective as of 12:01 a.m., Houston, Texas time, on
September 1, 2009 (the “ Effective Date
”).
3. Term. The term of this Agreement shall commence on
the Effective Date and shall terminate at such time as terminated
by either Party in accordance with Section 10
.
4. Purpose. The Parties hereby agree that Supplier
shall obtain, sell, supply and deliver to Customer, and Customer
shall receive and purchase from Supplier, crude oil meeting the
specifications
set forth on
Exhibit C hereto (the “ Raw
Material ”), on and subject to the terms and
conditions of this Agreement.
5. Contract Price. Customer shall pay Supplier, for
each barrel of Raw Material delivered for sale by Supplier at the
Delivery Point, an amount expressed in U.S. Dollars equal to the
sum of (a) the Average Purchase Price for the applicable month,
plus (b) the Premium. Payment shall be made in
accordance with the procedures established in Section 9
. On a monthly basis, the Parties shall meet to determine if the
sum of the Average Purchase Price plus the Premium is
representative of the market prices for the Raw Material. In the
event that the Parties determine that the sum of the Average
Purchase Price plus the Premium is not representative of the market
prices for the Raw Material by more than $.10 per barrel of crude
oil, the Parties shall negotiate in good faith for a substitute
pricing mechanism for the following month’s sale of Raw
Material hereunder.
6. Scheduling; Storage of Raw Material.
(a) Orders and
Scheduling .
(i) No later than
the twentieth day of each calendar month during the Supply Period
(or if such twentieth day is not a Business Day, then on the
immediately succeeding Business Day) (the “ Indication
Date ”), Customer shall send to Supplier an
indication of its needs for Raw Material for the next succeeding
calendar month (an “ Indication of Need
”). The Parties hereby agree that the Indication of Need
shall not constitute a binding obligation of Customer and is
intended to provide Supplier with guidance for purposes of seeking
out and procuring the Raw Material.
(ii) Based on
Customer’s Indication of Need, Supplier shall be solely
responsible for procuring the necessary quantity of Raw Material
and for storing such Raw Material until such time as it is
delivered to Customer in accordance with the terms hereof. Supplier
shall have the right to source Raw Material from any producer of
crude oil selected by Supplier in its sole discretion.
(b)
Transportation and Storage of Raw Material . Supplier shall
be solely responsible for transportation and storage of the Raw
Material until such time as the Raw Material is delivered to
Customer in accordance with the terms hereof. In order to
facilitate and expedite the delivery of Raw Material to Customer,
during the Supply Period:
(i) Supplier shall
have the exclusive right to store the Raw Material in the Storage
Tanks; and
(ii) Supplier
shall be permitted to use the Pipeline for purposes of transporting
the Raw Material from the Brown Station Tanks to the Site Tanks at
the Refinery.
During the
Supply Period, Customer shall maintain the Storage Tanks and
Pipeline in good working order in accordance with customary
industry practices. Notwithstanding Supplier’s use of the
Storage Tanks and Pipeline for the storage and transportation of
Raw Material, the Parties hereby agree and acknowledge that
(A) the Storage Tanks and the Pipeline shall at all times
remain the property of and under the sole custody and control of
Customer, and Supplier shall not by virtue of this Agreement obtain
any rights to the Storage Tanks or the Pipeline other than the
right to use the same for the limited purposes specified in this
Section, and (B) title to and risk of
loss of the Raw
Material shall not pass to Customer except as contemplated by
Section 8(c) below.
(a) Beginning as
promptly as practicable after the Effective Date, Customer shall
commence to draw down, reduce and deplete the crude oil product
stored in the Storage Tanks. The crude oil stored in the Storage
Tanks shall be strapped at 8:00 a.m. Central time on the Effective
Date, such crude oil on such date being hereinafter referred to as
“ Customer’s Existing Inventory .
”
(b) Customer shall
use its commercially reasonable efforts to deplete Customer’s
Existing Inventory within 30 days after the Effective
Date.
(c) As
Customer’s Existing Inventory is reduced and depleted,
Supplier shall begin to store and commingle the Raw Material with
Customer’s Existing Inventory in the Storage Tanks. For
purposes of distinguishing between the Raw Material and
Customer’s Existing Inventory during the Transition Period
and determining when Customer’s Existing Inventory has been
depleted, the Parties agree that the crude oil in the Storage Tanks
shall be deemed to have been drawn down and reduced on a
first-in-first-out basis.
(8) Receipt and Delivery; Title and Risk of
Loss.
(a) Delivery
and Calculation of Usage .
(i) Supplier shall
deliver the Raw Material to Customer free and clear of any
mortgages, pledges, liens, charges or other security interests or
encumbrances. During the Supply Period, Customer may take delivery
of Raw Material at any time by removing the Raw Material from the
Storage Tanks, and the Raw Material shall be deemed to have been
delivered to Customer at the point where the Raw Material passes
the flange from each of the Site Tanks to the Refinery (the “
Delivery Point ”).
(ii) At 8:00 a.m.
Central time on the first calendar day of each month, Customer will
strap the Site Tanks. The Customer shall calculate on such day the
amount of Raw Material consumed by Customer during the preceding
month by (A) adding to the ending inventory from the
immediately preceding month the sum of all Raw Material delivered
by Supplier to the Site Tanks during such month, based on
Supplier’s purchase and other Raw Material movement records
for such month (subject to adjustment for variances objectively
demonstrated by Supplier or Customer), and (B) subtracting
from such sum the ending inventory balance of Raw Material
determined by strapping the Site Tanks. In the event of any
disagreement by the Parties regarding the results of the foregoing,
the Parties shall work together in good faith to attempt to resolve
any differences.
(b) Transfer of
Title; Risk of Loss; Indemnity .
(i) As between the
Parties, Supplier shall be deemed to be in exclusive control of the
Raw Material purchased and sold hereunder up to delivery thereof to
Customer at the Delivery Point, and Customer shall be deemed to be
in exclusive control of the Raw Material purchased and sold
hereunder at and after the time the Raw Material
is delivered at
the Delivery Point. Title to and risk of loss related to the Raw
Material purchased and sold hereunder shall transfer from Supplier
to Customer upon delivery thereof by Supplier at the Delivery
Point.
(ii) Prior to
delivery of the Raw Material at the Delivery Point, Customer shall
have no rights to or interest therein and Supplier shall have the
right to remove Raw Material from the Storage Tanks from time to
time and to sell such Raw Material to third parties, and Supplier
shall be given sufficient ingress and egress rights by Customer,
all to the extent necessary to facilitate Supplier’s removal
of the Raw Material.
(iii) Supplier
shall fully protect, indemnify and defend Customer and each
Customer Indemnified Person and hold each such Person harmless from
and against any and all Claims relating to the Raw Material arising
from any act or omission of Supplier occurring prior to or at the
time the Raw Material is delivered at the Delivery Point, except to
the extent caused by the joint, sole, concurrent, comparative or
contributory fault or negligence, fault imposed by law, strict
liability, gross negligence, or willful misconduct of Customer or
any Customer Indemnified Person. Customer shall fully protect,
indemnify and defend Supplier and each Supplier Indemnified Person
and hold each such Person harmless from and against any and all
Claims related to the Raw Material arising out of any act or
omission of Customer occurring before or after the time the Raw
Material is delivered at the Delivery Point, except to the extent
caused by the joint, sole, concurrent, comparative or contributory
fault or negligence, fault imposed by law, strict liability, gross
negligence, or willful misconduct of Supplier or any Supplier
Indemnified Person.
(c) Taxes .
Supplier shall be responsible for all sales, use, excise, ad
valorem, and any other taxes, imposed or levied by any Governmental
Authority applicable to the Raw Material sold and delivered
hereunder up to the sale and delivery thereof to Customer at the
Delivery Point. Customer shall be responsible for all sales, use,
excise, ad valorem and any other taxes imposed or levied by any
Governmental Authority applicable to the Raw Material after the
sale and delivery hereunder to Customer at the Delivery Point. Each
Party shall be responsible for taxes assessed on its income or
operations. Each Party shall indemnify, defend and hold harmless
the other Party from and against any and all liability for taxes
imposed or levied by any Governmental Authority with respect to the
Raw Material sold, delivered and received hereunder that are the
responsibility of such Party pursuant to this
Section 8(d) .
(d)
Insurance . Supplier shall, at its sole expense, be
responsible for maintaining insurance coverage on the Raw Material
prior to delivery of the Raw Material at the Delivery Point. In no
even shall either Supplier or Customer be subrogated to
(i) the claims of the other against any insurance provider, or
(ii) any other claims otherwise arising hereunder, it being
the intention of the parties hereto to waive all subrogation rights
that may arise hereunder or in connection with the transactions
contemplated herein and relating to insured claims.
(a) Payment
. On a weekly basis, Customer shall provide to Supplier a summary
report of the Raw Material removed from each Site Tank during the
immediately preceding calendar week, and setting f
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