Document:

Exhibit 4.1

 

REGISTRATION RIGHTS AGREEMENT

 

This
REGISTRATION RIGHTS AGREEMENT (this “Agreement”) is made and entered
into as of April 28, 2011, by and among Silverthorne Energy Partners LP, a
Delaware limited partnership (the “Partnership”), Hicks Oils & Hicksgas, Incorporated,
an Indiana corporation (“HOH”), NGL Holdings, Inc., a Delaware corporation
(“NGL Holdings”), Krim2010, LLC, an Oklahoma limited liability company (“Krimbill”), Infrastructure
Capital Management, LLC, a New York limited liability company (“ICM”),
Atkinson Investors, LLC, a Texas limited liability company (“Atkinson,”
and together with Krimbill and ICM, the “IEP Group”), and the other
Holders identified on the signature pages hereto (such Holders
collectively and together with HOH, NGL Holdings and the IEP Group, the “Initial
Holders”).  The Partnership and the
Initial Holders are referred to collectively herein as the “Parties.”

 

WHEREAS,
the Initial Holders have acquired, and may (together with their respective
Affiliates) acquire in the future, certain Registrable Securities; and

 

WHEREAS,
as an inducement to the willingness of the Initial Holders and their respective
Affiliates to hold certain Registrable Securities, the Parties desire to
provide certain registration rights to the Initial Holders with respect to any
Registrable Securities held by them upon the terms and subject to the
conditions set forth herein.

 

NOW,
THEREFORE, IN CONSIDERATION of the mutual covenants and agreements
contained in this Agreement, and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the Parties hereby agree
as follows:

 

1.                                       Definitions.  As used in this Agreement, the following
terms shall have the respective meanings set forth in this Section 1:

 

“5%
Holder” has the meaning set forth in Section 3(o).

 

“Affiliate”
means, with respect to any Person, any other Person that directly or indirectly
through one or more intermediaries controls, is controlled by or is under
common control with, the Person in question. 
As used in this definition, the term “control” means the possession,
direct or indirect, of the power to direct or cause the direction of the
management and policies of a Person, whether through ownership of voting
securities, by contract or otherwise. 
Without limiting the foregoing, for purposes of this Agreement, any
Person that, individually or together with its Affiliates, has the direct or
indirect right to designate or cause the designation of at least one member to
the Board of Directors of the General Partner, and any such Person’s
Affiliates, shall be deemed to be Affiliates of the General Partner.  Notwithstanding anything in the foregoing to
the contrary, HOH and its respective Affiliates (other than the General Partner
or any Group Member), on the one hand, NGL Holdings and its Affiliates (other
than the General Partner or any Group Member), on another hand, and the IEP
Group and their respective Affiliates (other than the General Partner or any
Group Member), on another hand, will not be deemed to be Affiliates of one
another hereunder unless there is a basis for such Affiliation independent of
their respective Affiliation with any Group Member, the General Partner or any

 

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Affiliate
(disregarding the immediately preceding sentence) of any Group Member or the
General Partner.

 

“Agreement”
has the meaning set forth in the preamble.

 

“Atkinson”
has the meaning set forth in the preamble.

 

“Automatic
Shelf Registration Statement” means an “automatic shelf registration
statement” as defined under Rule 405.

 

“Business
Day” means Monday through Friday of each week, except that a legal holiday
recognized as such by the government of the United States of America or the
State of New York shall not be regarded as a Business Day.

 

“Commission”
means the Securities and Exchange Commission.

 

“Common
Units” has the meaning set forth in the Partnership Agreement.

 

“Conflicts
Committee” has the meaning set forth in the Partnership Agreement.

 

“Contribution,
Purchase and Sale Agreement” means the Contribution, Purchase and Sale
Agreement, dated as of September 30, 2010, by and among the Parties,
Hicksgas Gifford, Inc., an Indiana corporation, Gifford Holdings, Inc.,
an Indiana corporation, NGL Supply, Inc., an Oklahoma corporation, and the
General Partner.

 

“Demand
Notice” has the meaning set forth in Section 2(a)(i).

 

“Demand
Registration” has the meaning set forth in Section 2(a)(i).

 

“Effective
Date” means the time and date that a Registration Statement is first
declared effective by the Commission or otherwise becomes effective.

 

“Effectiveness
Period” has the meaning set forth in Section 2(a)(ii).

 

“Exchange
Act” means the Securities Exchange Act of 1934, as amended.

 

“General
Partner” means Silverthorne Energy Holdings LLC, a Delaware limited
liability company, and its successors and permitted assigns that are admitted
to the Partnership as general partner of the Partnership, in its capacity as
general partner of the Partnership (except as the context otherwise requires).

 

“Group
Member” means a member of the Partnership Group.

 

“HOH”
has the meaning set forth in the preamble.

 

“Holder”
means (i) any Initial Holder who holds Registrable Securities; or
(ii) any holder of Registrable Securities to whom the registration rights
conferred by this Agreement have been transferred in compliance with
Section 6(e) hereof.

 

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“ICM”
has the meaning set forth in the preamble.

 

“IEP
Group” has the meaning set forth in the preamble.

 

“Indemnified
Persons” has the meaning set forth in Section 5(a).

 

“Initial
Holders” has the meaning set forth in the preamble.

 

“Initial
Public Offering” means the first firm commitment underwritten, public
offering of Common Units pursuant to a registration statement that is filed and
declared effective under the Securities Act, with net proceeds to the
Partnership of at least $50 million.

 

“Initiating
Holder” has the meaning set forth in Section 2(a)(i).

 

“IPO
Date” means the closing date of the first sale of Common Units in the
Initial Public Offering.

 

“Krimbill”
has the meaning set forth in the preamble.

 

“Lock-Up
Period” has the meaning set forth in Section 3(o).

 

“Losses”
has the meaning set forth in Section 5(a).

 

“NGL
Holdings” has the meaning set forth in the preamble.

 

“Ownership Percentage” means, with
respect to a Holder, a percentage obtained by dividing (i) the total
number of Registrable Securities owned by such Holder by (ii) the total
number of outstanding Common Units.

 

“Parties”
has the meaning set forth in the preamble.

 

“Partnership”
has the meaning set forth in the preamble.

 

“Partnership
Agreement” means the First Amended and Restated Agreement of Limited
Partnership of the Partnership, dated as of the date hereof, as amended from
time to time.

 

“Partnership
Group” means the Partnership and its subsidiaries treated as a single
consolidated entity.

 

“Person”
means an individual or a corporation, firm, limited liability company,
partnership, joint venture, trust, unincorporated organization, association,
government agency or political subdivision thereof or other entity.

 

“Piggyback
Notice” has the meaning set forth in Section 2(b)(i).

 

“Piggyback
Registration” has the meaning set forth in Section 2(b)(i).

 

“Piggyback
Request” has the meaning set forth in Section 2(b)(i).

 

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“Proceeding”
means any action, claim, suit, proceeding or investigation (including a
preliminary investigation or partial proceeding, such as a deposition) pending
or known to the Partnership to be threatened.

 

“Prospectus”
means the prospectus included in a Registration Statement (including a
prospectus that includes any information previously omitted from a prospectus
filed as part of an effective Registration Statement in reliance upon Rule 430A,
Rule 430B or Rule 430C promulgated under the Securities Act), as
amended or supplemented by any prospectus supplement, with respect to the terms
of the offering of any portion of the Registrable Securities covered by a
Registration Statement, and all other amendments and supplements to the
Prospectus, including post-effective amendments, and all information
incorporated by reference or deemed to be incorporated by reference in such
Prospectus.

 

“Registrable
Securities” means Common Units beneficially owned by a Holder, including
any Common Units acquired by a Holder upon the conversion of Subordinated
Units; provided, however,
that Registrable Securities shall not include any Common Units: (i) that
have been sold or disposed of in accordance with an effective Registration
Statement covering such Common Units; (ii) that are held by any Group
Member; (iii) for which Rule 144 or another exemption from
registration is available to enable the Holder of such Common Units to dispose
of the number of Common Units it desires to sell at the time it desires to do
so without registration under the Securities Act or other similar applicable
law; or (iv) that have been sold or disposed of in accordance with Rule 144
(or any similar provision then in force under the Securities Act).

 

“Registration
Expenses” has the meaning set forth in Section 4.

 

“Registration
Statement” means a registration statement in the form required to register
the sale or resale of the Registrable Securities under the Securities Act, and
including any Prospectus, amendments and supplements to each such registration
statement or Prospectus, including pre- and post-effective amendments, all
exhibits thereto, and all information incorporated by reference or deemed to be
incorporated by reference in such registration statement.

 

“Requisite
Ownership Threshold” means, with respect to any Significant Holder, a
number of Registrable Securities held by such Significant Holder and its
Affiliates constituting at least a 5% Ownership Percentage.

 

“Rule 144”
means Rule 144 promulgated by the Commission pursuant to the Securities
Act, as such Rule may be amended from time to time, or any similar rule or
regulation hereafter adopted by the Commission having substantially the same effect
as such Rule.

 

“Rule 405”
means Rule 405 promulgated by the Commission pursuant to the Securities
Act, as such Rule may be amended from time to time, or any similar rule or
regulation hereafter adopted by the Commission having substantially the same
effect as such Rule.

 

“Rule 415”
means Rule 415 promulgated by the Commission pursuant to the Securities
Act, as such Rule may be amended from time to time, or any similar rule or
regulation hereafter adopted by the Commission having substantially the same
effect as such Rule.

 

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“Rule 424”
means Rule 424 promulgated by the Commission pursuant to the Securities
Act, as such Rule may be amended from time to time, or any similar rule or
regulation hereafter adopted by the Commission having substantially the same
effect as such Rule.

 

“Rule 430A”
means Rule 430A promulgated by the Commission pursuant to the Securities
Act, as such Rule may be amended from time to time, or any similar rule or
regulation hereafter adopted by the Commission having substantially the same
effect as such Rule.

 

“Rule 430B”
means Rule 430B promulgated by the Commission pursuant to the Securities
Act, as such Rule may be amended from time to time, or any similar rule or
regulation hereafter adopted by the Commission having substantially the same
effect as such Rule.

 

“Rule 430C”
means Rule 430C promulgated by the Commission pursuant to the Securities
Act, as such Rule may be amended from time to time, or any similar rule or
regulation hereafter adopted by the Commission having substantially the same
effect as such Rule.

 

“Securities
Act” means the Securities Act of 1933, as amended.

 

“Selling
Expenses” means all underwriting discounts, selling commissions and stock
transfer taxes applicable to the sale of Registrable Securities and fees and
disbursements of counsel or any other advisor for any Holder.

 

“Shelf
Registration Statement” means a “shelf” Registration Statement providing
for the registration of, and the sale on a continuous or delayed basis by the
Holders, of the Registrable Securities pursuant to Rule 415.

 

“Significant
Holder” means each of (i) NGL Holdings, (ii) HOH and
(iii) the IEP Group (acting together in their capacities as Holders), in
each case only for so long as such Significant Holder continues to hold a
Requisite Ownership Threshold.

 

“Subordinated
Units” has the meaning set forth in the Partnership Agreement.

 

“Suspension”
has the meaning set forth in Section 2(c)(v).

 

“Trading
Market” means the principal national securities exchange on which the
Common Units are or will be listed or admitted to trading.

 

“Transaction
Documents” means (i) the Partnership Agreement, (ii) the First
Amended and Restated Limited Liability Company Agreement of the General
Partner, dated as of the date hereof, as amended from time to time; and
(iii) the Contribution, Purchase and Sale Agreement.

 

“WKSI”
means a “well known seasoned issuer” as defined under Rule 405.

 

The
division of this Agreement into sections and other portions and the insertion
of headings are for reference purposes only, and shall not affect in any way
the meaning or interpretation of this Agreement.  Unless otherwise indicated, all references to
a “Section” followed by a number or a letter refer to the specified Section of
this Agreement.  The terms

 

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“this
Agreement,” “hereof,” “herein” and “hereunder” and similar expressions refer to
this Agreement as a whole and not to any particular provision of this
Agreement.

 

Unless
otherwise specifically indicated or the context otherwise requires,
(i) all references to “dollars” or “$” mean United States dollars,
(ii) words importing the singular shall include the plural and vice versa,
and any pronoun used in this Agreement shall include the corresponding
masculine, feminine or neuter forms, (iii) “include,” “includes,” “including”
or words of like import shall be deemed to be followed by the words “without
limitation,” and (iv) references to any law or statute shall include all rules and
regulations promulgated thereunder, and references to any law or statute shall
be construed as including any legal and statutory provisions consolidating,
amending, succeeding or replacing the applicable law or statute.  If any date on which any action is required
to be taken hereunder by any of the Parties is not a Business Day, such action
shall be required to be taken on the next succeeding day that is a Business
Day.  Reference to any Party hereto is
also a reference to such Party’s permitted successors and assigns.

 

The
Parties have participated jointly in the negotiation and drafting of this
Agreement.  No provision of this
Agreement will be interpreted in favor of, or against, any of the Parties by
reason of the extent to which any such Party or its counsel participated in the
drafting thereof or by reason of the extent to which any such provision is
inconsistent with any prior draft of this Agreement, and no rule of strict
construction will be applied against any Party hereto.

 

2.                                       Registration.

 

(a)                                  Demand Registration.

 

(i)                                     At any time following the date that is one hundred and eighty (180) days
after the IPO Date, any Significant Holder that holds Registrable Securities
(the “Initiating Holder”) that desires to sell shall have the option and
right, exercisable by delivering a written notice to the Partnership (a “Demand
Notice”), to require the Partnership to, pursuant to the terms of and
subject to the limitations contained in this Agreement, prepare and file with
the Commission a Registration Statement registering the offering and sale of
the number of Registrable Securities on the terms and conditions specified in
the Demand Notice in accordance with the intended timing and method or methods
of distribution thereof specified in the Demand Notice (the “Demand
Registration”).

 

(ii)                                  Within five (5) Business Days of the receipt of the Demand Notice,
the Partnership shall give written notice of such Demand Notice to all Holders
and shall, subject to the limitations of this Section 2(a), use all commercially
reasonable efforts to file a Registration Statement covering all of the
Registrable Securities that the Holders shall in writing request (such request
to be given to the Partnership within ten (10) Business Days of receipt of
such notice of the Demand Notice given by the Partnership pursuant to this
Section 2(a)(ii)) to be included in such Demand Registration as promptly
as practicable as directed by the Initiating Holder in accordance with the
terms and conditions of the Demand Notice and use commercially reasonable
efforts to cause such Registration Statement to become effective under the
Securities Act and remain effective under the Securities Act for not less than
six (6) months following the Effective Date or such shorter period when
all Registrable Securities covered by such

 

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Registration Statement
have been sold (the “Effectiveness Period”); provided,
however, that the Partnership shall not
be required to effect the registration of Registrable Securities pursuant to
this Section 2(a) unless the Registrable Securities are offered at an
aggregate proposed offering price of not less than $10 million.

 

(iii)                               Subject to the other limitations contained in this Agreement, the
Partnership is not obligated hereunder to effect more than (A) one (1) Demand
Registration by each Significant Holder; (B) three (3) Demand
Registrations in total; (C) one (1) Demand Registration on Form S-1
(or any equivalent or successor form under the Securities Act) in any twelve
(12) month period; or (D) two (2) Demand Registrations on Form S-3
(or any equivalent or successor form under the Securities Act) in any twelve
(12) month period.

 

(iv)                              Notwithstanding any other provision of this Section 2(a), the
Partnership shall not be required to effect a registration or file a
Registration Statement pursuant to this Section 2(a): (A) during the
period starting with the date sixty (60) days prior to a good faith estimate,
with the approval of the Board of Directors of the General Partner, of the date
of filing of, and ending on a date ninety (90) days after the effective date
of, a Partnership-initiated registration; provided that
the Partnership uses commercially reasonable efforts to cause such registration
statement to become effective; (B) for a period of up to ninety (90) days
after the date of a Demand Notice for registration pursuant to this Section 2(a)
if at the time of such request (1) the Partnership is engaged, or has
plans with the approval of the Board of Directors of the General Partner to
engage, within ninety (90) days of the time of such Demand Notice, in a firm
commitment underwritten public offering of Common Units in which the Holders of
Registrable Securities were or will be provided the opportunity to include Registrable
Securities pursuant to Section 2(b), or (2) the Partnership is
currently engaged in a self-tender or exchange offer and the filing of a
Registration Statement would cause a violation of the Exchange Act; or (C) for
a period of up to ninety (90) days, if the Conflicts Committee, proceeding in
good faith, determines that a postponement is in the best interest of the
Partnership due to a pending transaction, desire to avoid disclosure of
non-public information or otherwise; provided, however,
that in no event shall the Partnership postpone or defer any Demand
Registration pursuant to this Section 2(a)(iv) and/or Section 3(o) for
more than an aggregate of one hundred and eighty (180) days in any twelve (12)
month period.

 

(v)                                 Notwithstanding any other provision of this Section 2(a), if
(A) the Holders intend to distribute the Registrable Securities covered by
a Demand Registration by means of an underwritten public offering and
(B) the managing underwriter advises the Partnership that the inclusion of
all of the Holders’ Registrable Securities in the subject Registration
Statement would have a material adverse effect on the timing or success of the
offering, then the Partnership shall so advise all Holders of Registrable
Securities that would otherwise be underwritten pursuant hereto, and the number
of Registrable Securities that may be included in the underwriting shall be
reduced to equal the number of Registrable Securities that such managing
underwriter advises the Partnership can be sold without having such adverse
effect.  The reductions shall be
allocated pro rata among the Holders seeking to include their Registrable
Securities in the underwriting, based, for each such Holder, on the percentage
derived by dividing (A) the number of Registrable Securities owned by such
Holder by (B) the total number of Registrable Securities owned by all the
Holders seeking to include their

 

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Registrable Securities in
the underwriting.  Any Registrable
Securities excluded or withdrawn from such underwriting shall be withdrawn from
the registration.

 

(vi)                              The Partnership may include in any such Demand Registration other
Partnership securities for sale for its own account or for the account of any
other Person; provided that if the managing
underwriter for the offering determines that the number of Common Units
proposed to be offered in such offering would have a material adverse effect on
the timing or success of such offering, then the Registrable Securities to be
sold by the Holders shall be included in such registration before any
Partnership securities proposed to be sold for the account of the Partnership
or any other Person.

 

(vii)                           Subject to the limitations contained in this Agreement, the Partnership
shall effect any Demand Registration on Form S-3 (except if the
Partnership is not then eligible to register for resale the Registrable
Securities on Form S-3, in which case such Demand Registration shall be
effected on another appropriate form for such purpose pursuant to the
Securities Act) and if the Partnership becomes, and is at the time of its
receipt of a Demand Notice, a WKSI, the Demand Registration for any offering
and selling of Registrable Securities through a firm commitment underwriting
shall be effected pursuant to an Automatic Shelf Registration Statement, which
shall be on Form S-3 or any equivalent or successor form under the
Securities Act (if available to the Partnership).

 

(viii)                        Without limiting Section 3, in connection with any Demand
Registration pursuant to and in accordance with this Section 2(a), the
Partnership shall (A) promptly prepare and file or cause to be prepared
and filed: (1) such additional forms, amendments, supplements,
prospectuses, certificates, letters, opinions and other documents, as may be
necessary or advisable to register or qualify the securities subject to such
Demand Registration, including under the securities laws of such states as the
Holders shall reasonably request; provided, however, that no such qualification shall be required in any
jurisdiction where, as a result thereof, the Partnership would become subject
to general service of process or to taxation or qualification to do business in
such jurisdiction solely as a result of registration and (2) such forms,
amendments, supplements, prospectuses, certificates, letters, opinions and
other documents as may be necessary to apply for listing or to list the
Registrable Securities subject to such Demand Registration on the Trading
Market and (B) do any and all other acts and things that may be necessary
or appropriate or reasonably requested by the Holders to enable the Holders to
consummate a public sale of such Registrable Securities in accordance with the
intended timing and method or methods of distribution thereof.

 

(ix)                                In the event a Holder transfers Registrable Securities included on a
Registration Statement and such Registrable Securities remain Registrable
Securities following such transfer, at the request of such Holder, the
Partnership shall amend or supplement such Registration Statement or related
Prospectus as may be necessary in order to enable such transferee to offer and
sell such Registrable Securities pursuant to such Registration Statement.

 

(b)                                 Piggyback Registration.

 

(i)                                     If the Partnership shall at any time propose to file a Registration
Statement, other than pursuant to any Demand Registration, for an offering of
Common Units for

 

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cash (whether in connection with a public offering of Common Units by the Partnership, a public offering of Common Units by unitholders, or both, but excluding an offering relating solely to an employee benefit plan, an offering relating to a transaction on Form S-4 or an offering on any registration statement form that does not permit secondary sales), the Partnership shall promptly notify all Holders of such proposal reasonably in advance of (and in any event at least five (5) Business Days before) the anticipated initial filing date of such Registration Statement (the “Piggyback Notice”).  The Piggyback Notice shall offer the Holders the opportunity to include for registration in such Registration Statement the number of Registrable Securities as they may request (a “Piggyback Registration”).  The Partnership shall use commercially reasonable efforts to include in each such Piggyback Registration such Registrable Securities for which the Partnership has received written requests within three (3) days after mailing of the Piggyback Notice (“Piggyback Request”) for inclusion therein.  If a Holder decides not to include all of its Registrable Securities in any Registration Statement thereafter filed by the Partnership, such Holder shall nevertheless continue to have the right to include any Registrable Securities in any subsequent registration statement or registration statements as may be filed by the Partnership with respect to offerings of Common Units, all upon the terms and conditions set forth herein.

 

(ii)                                  If the Registration Statement under which the Partnership gives notice under this Section 2(b) is for an underwritten offering, the Partnership shall so advise the Holders of Registrable Securities.  In such event, the right of any such Holder to be included in a registration pursuant to this Section 2(b) shall be conditioned upon such Holder’s participation in such underwriting and the inclusion of such Holder’s Registrable Securities in the underwriting to the extent provided herein.  If the managing underwriter or managing underwriters of such offering advise the Partnership in writing that, in their opinion, the inclusion of all of such Holders’ Registrable Securities in the subject Registration Statement would have a material adverse effect on the timing or success of the offering, the Partnership shall include in such offering only that number or amount, if any, of Registrable Securities held by the Holders that, in the opinion of the managing underwriter or managing underwriters, will not have a material adverse effect on the timing or success of the offering.  Any reductions in the amount of Registrable Securities to be included in the underwriting shall be allocated pro rata among the Holders seeking to include their Registrable Securities in the underwriting, based, for each such Holder, on the percentage derived by dividing (A) the number of Registrable Securities owned by such Holder by (B) the total number of Registrable Securities owned by all the Holders seeking to include their Registrable Securities in the underwriting.  If any Holder disapproves of the terms of any such underwriting, such Holder may elect to withdraw therefrom by written notice to the Partnership and the managing underwriter(s) delivered on or prior to the time of pricing of such offering.  Any Registrable Securities excluded or withdrawn from such underwriting shall be withdrawn from the registration.

 

(iii)                               The Partnership shall have the right to terminate or withdraw any registration initiated by it under this Section 2(b) prior to the Effective Date of such Registration Statement whether or not any Holder has elected to include Registrable Securities in such Registration Statement.  The registration expenses of such withdrawn registration shall be borne by the Partnership in accordance with Section 4 hereof.

 

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(c)                                  General Provisions.

 

(i)                                     All registration rights granted under this Section 2 shall continue to be applicable with respect to any Holder for so long as may be required for each such Holder to sell all of the Registrable Securities held by such Holder as provided in this Agreement.

 

(ii)                                  Any Demand Notice or Piggyback Request shall (i) specify the Registrable Securities intended to be offered and sold by the Holder making the request, (ii) express such Holder’s present intent to offer such Registrable Securities for distribution, (iii) describe the nature or method of the proposed offer and sale of Registrable Securities and (iv) contain the undertaking of such Holder to provide all such information and materials and take all action as may reasonably be required in order to permit the Partnership to comply with all applicable requirements in connection with the registration of such Registrable Securities.

 

(iii)                               No Holder shall have any right to obtain or seek an injunction restraining or otherwise delaying any such registration as the result of any controversy that might arise with respect to the interpretation or implementation of this Section 2.

 

(iv)                              The Partnership has not entered into any agreement which (a) conflicts with the provisions hereof in any material respect or (b) would allow any holder of Common Units (other than the General Partner) to include Common Units in any Registration Statement filed by the Partnership on a basis that is superior or more favorable in any material respect to the rights granted to the Significant Holders hereunder.

 

(v)                                 Notwithstanding any provision of this Agreement to the contrary, the Partnership may voluntarily suspend the effectiveness of any Shelf Registration Statement or may otherwise require the discontinuance of offers under the Shelf Registration Statement for a period of up to ninety (90) days if the Conflicts Committee, proceeding in good faith, determines the offering of any Registrable Securities pursuant to such Shelf Registration Statement would not be in the best interests of the Partnership due to a pending transaction, desire to avoid disclosure of non-public information or otherwise (in either case, a “Suspension”); provided, however, that in no event shall the Partnership effect Suspensions under this Section 2(c)(v) for more than an aggregate of one hundred and eighty (180) days in any twelve (12) month period.  The Partnership shall notify each Holder eligible to sell Registrable Securities under such Shelf Registration Statement as promptly as reasonably practicable of any Suspensions and, upon receipt of such notice, each such Holder shall forthwith discontinue disposition of such Registrable Securities under such Shelf Registration Statement until such Holder’s receipt of the copies of the supplemental Prospectus or amended Shelf Registration Statement or until it is advised in writing by the Partnership that the use of the applicable Prospectus may be resumed, and, in either case, has received copies of any additional or supplemental filings that are incorporated or deemed to be incorporated by reference in such Shelf Registration Statement.

 

3.                                       Registration Procedures.

 

The procedures to be followed by the Partnership and each Holder electing to sell Registrable Securities in a Registration Statement pursuant to this Agreement, and the respective rights and obligations of the Partnership and such Holders, with respect to the preparation, filing and effectiveness of such Registration Statement, are as follows:

 

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(a)                                  The Partnership will, at least three (3) Business Days prior to the anticipated filing of a Registration Statement or any related Prospectus or any amendment or supplement thereto (other than amendments and supplements filed principally for the purpose of naming Holders and providing information with respect thereto), (i) unless available to the Holders through public filings with the Commission, furnish to such Holders copies of all such documents proposed to be filed and (ii) give good faith consideration to such comments as any Significant Holder reasonably shall propose within two (2) Business Days of the delivery of such copies to such Significant Holder.

 

(b)                                 The Partnership will use commercially reasonable efforts to as promptly as reasonably practicable (i) prepare and file with the Commission such amendments, including post-effective amendments, and supplements to each Registration Statement and the Prospectus used in connection therewith as may be necessary under applicable law to keep such Registration Statement continuously effective with respect to the disposition of all Registrable Securities covered thereby for its Effectiveness Period and, subject to the limitations contained in this Agreement, prepare and file with the Commission such additional Registration Statements in order to register for resale under the Securities Act all of the Registrable Securities held by the applicable Holders; (ii) cause the related Prospectus to be amended or supplemented by any required prospectus supplement, and as so supplemented or amended to be filed pursuant to Rule 424; and (iii) respond to any comments received from the Commission with respect to each Registration Statement or any amendment thereto and, as promptly as reasonably practicable, provide such Holders true and complete copies of all correspondence from and to the Commission relating to such Registration Statement that pertains to such Holders as selling Holders, but not any comments that would result in the disclosure to such Holders of material and non-public information concerning the Partnership.

 

(c)                                  The Partnership will comply in all material respects with the provisions of the Securities Act and the Exchange Act with respect to the Registration Statements and the disposition of all Registrable Securities covered by each Registration Statement.

 

(d)                                 The Partnership will notify such Holders as promptly as reasonably practicable: (i)(A) when a Prospectus or any prospectus supplement or post-effective amendment to a Registration Statement is proposed to be filed, (B) when the Commission notifies the Partnership whether there will be a “review” of such Registration Statement and whenever the Commission comments in writing on such Registration Statement (in which case the Partnership shall provide true and complete copies thereof and all written responses thereto to each of such Holders that pertain to such Holders as selling Holders, but not information which the Partnership believes would constitute material and non-public information); and (C) with respect to each Registration Statement or any post-effective amendment thereto, when the same has been declared effective; (ii) of any request by the Commission or any other federal or state governmental authority for amendments or supplements to a Registration Statement or Prospectus or for additional information that pertains to such Holders as sellers of Registrable Securities; (iii) of the issuance by the Commission of any stop order suspending the effectiveness of a Registration Statement covering any or all of the Registrable Securities or the initiation of any Proceedings for that purpose; (iv) of the receipt by the Partnership of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Registrable Securities for sale in any jurisdiction, or the initiation or threatening of any

 

11

 

Proceeding for such purpose; and (v) of the occurrence of (but not the nature or details concerning) any event or passage of time that makes any statement made in such Registration Statement or Prospectus or any document incorporated or deemed to be incorporated therein by reference untrue in any material respect or that requires any revisions to such Registration Statement, Prospectus or other documents so that, in the case of such Registration Statement or the Prospectus, as the case may be, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading (provided, however, that no notice by the Partnership shall be required pursuant to this clause (v) in the event that the Partnership either promptly files a prospectus supplement to update the Prospectus or a Form 8-K or other appropriate Exchange Act report that is incorporated by reference into the Registration Statement, which in either case, contains the requisite information that results in such Registration Statement no longer containing any untrue statement of material fact or omitting to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading).

 

(e)                                  The Partnership will use commercially reasonable efforts to avoid the issuance of, or, if issued, obtain the withdrawal of (i) any order suspending the effectiveness of a Registration Statement, or (ii) any suspension of the qualification (or exemption from qualification) of any of the Registrable Securities for sale in any jurisdiction, at the earliest practicable time, or if any such order or suspension is made effective during any Suspension period, at the earliest practicable time after the Suspension period is over.

 

(f)                                    During the Effectiveness Period, the Partnership will furnish to each such Holder, without charge, at least one (1) conformed copy of each Registration Statement and each amendment thereto and all exhibits to the extent requested by such Holder (including those incorporated by reference) promptly after the filing of such documents with the Commission; provided, that the Partnership will not have any obligation to provide any document pursuant to this clause that is available on the Commission’s EDGAR system.

 

(g)                                 The Partnership will promptly deliver to each Holder, without charge, as many copies of each Prospectus or Prospectuses (including each form of prospectus) and each amendment or supplement thereto as such Holder may reasonably request during the Effectiveness Period.  The Partnership consents to the use of such Prospectus and each amendment or supplement thereto by each of the selling Holders in connection with the offering and sale of the Registrable Securities covered by such Prospectus and any amendment or supplement thereto.

 

(h)                                 The Partnership will have caused or will cause, as the case may be, all Registrable Securities registered pursuant to this Agreement to be listed on the Trading Market and will have provided or will provide, as the case may be, a transfer agent and registrar for Registrable Securities covered by a Registration Statement not later than the Effective Date of such Registration Statement.

 

(i)                                     The Partnership will cooperate with such Holders to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be delivered to a transferee pursuant to a Registration Statement, which certificates shall be free of all restrictive

 

12

 

legends indicating that the Registrable Securities are unregistered or unqualified for resale under the Securities Act, Exchange Act or other applicable securities laws, and to enable such Registrable Securities to be in such denominations and registered in such names as any such Holder may request in writing.  In connection therewith, if required by the Partnership’s transfer agent, the Partnership will promptly, after the Effective Date of the Registration Statement, cause to be delivered to its transfer agent appropriate authorizations, certificates and directions required by the transfer agent which authorize and direct the transfer agent to issue such Registrable Securities without any such legend upon sale by the Holder of such Registrable Securities under the Registration Statement.

 

(j)                                     Upon the occurrence of any event contemplated by Section 3(d)(v), as promptly as reasonably possible, the Partnership will prepare a supplement or amendment, including a post-effective amendment, if required by applicable law, to the affected Registration Statement or a supplement to the related Prospectus or any document incorporated or deemed to be incorporated therein by reference, and file any other required document so that, as thereafter delivered, no Registration Statement nor any Prospectus will contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading.

 

(k)                                  Such Holders may distribute the Registrable Securities by means of an underwritten offering; provided that (i) such Holders provide written notice to the Partnership of their intention to distribute Registrable Securities by means of an underwritten offering, (ii) the right of any Holder to include such Holder’s Registrable Securities in such registration shall be conditioned upon such Holder’s participation in such underwriting and the inclusion of such Holder’s Registrable Securities in the underwriting to the extent provided herein, (iii) the managing underwriter or managing underwriters thereof shall be designated by the Initiating Holder in the case of a Demand Registration (provided, however, that such designated managing underwriter or managing underwriters shall be reasonably acceptable to the Partnership) or by the Partnership in the case of a registration initiated by the Partnership, (iv) each Holder participating in such underwritten offering agrees to enter into an underwriting agreement in customary form and sell such Holder’s Registrable Securities on the basis provided in any underwriting arrangements approved by the Persons entitled to select the managing underwriter or managing underwriters hereunder and (v) each Holder participating in such underwritten offering completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents reasonably required under the terms of such underwriting arrangements.  The Partnership hereby agrees with each Holder that, in connection with any underwritten offering in accordance with the terms hereof, it will negotiate in good faith and execute all indemnities, underwriting agreements and other documents reasonably required under the terms of such underwriting arrangements, including using all commercially reasonable efforts to procure customary legal opinions and auditor “comfort” letters.

 

(l)                                     In the event such Holders seek to complete an underwritten offering, for a reasonable period prior to the filing of any Registration Statement and throughout the Effectiveness Period, the Partnership will make available upon reasonable notice at the Partnership’s principal place of business or such other reasonable place for inspection by the managing underwriter or managing underwriters selected in accordance with Section 3(k) such

 

13

 

financial and other information and books and records of the Partnership, and cause the officers, employees, counsel and independent certified public accountants of the Partnership to respond to such inquiries, as shall be reasonably necessary (and in the case of counsel, not violate an attorney-client privilege in such counsel’s reasonable belief) to conduct a reasonable investigation within the meaning of Section 11 of the Securities Act.

 

(m)                               In connection with any registration of Registrable Securities pursuant to this Agreement, the Partnership will take all commercially reasonable actions as are necessary or advisable in order to expedite or facilitate the disposition of Registrable Securities by such Holders, including using commercially reasonable efforts to cause appropriate officers and employees to be available, on a customary basis and upon reasonable notice, to meet with prospective investors in presentations, meetings and road shows.

 

(n)                                 The Partnership will have no obligation to include in a Registration Statement or Piggyback Registration Registrable Securities of a Holder who has failed to timely furnish such information which, in the opinion of counsel to the Partnership, is reasonably required in order for the Registration Statement or related Prospectus to comply with the Securities Act.

 

(o)                                 In connection with any underwritten offering of Common Units, each Holder beneficially owning five percent (5%) or more of the Partnership’s voting securities (each a “5% Holder”) hereby agrees that such Holder shall not sell, transfer, make any short sale of, grant any option for the purchase of, or enter into any hedging or similar transaction with the same economic effect as a sale of, any Common Units held by such Holder (other than those included in such offering) for a period specified by the representative of the underwriters of Common Units not to exceed ninety (90) days following the closing date of the offering of Common Units (the “Lock-Up Period”); provided that all officers and directors of the General Partner and holders of at least five percent (5%) of the Partnership’s voting securities enter into similar agreements and only if such Persons remain subject thereto (and are not released from such agreement) for such Lock-Up Period.  In addition, if (A) during the last seventeen (17) days of the Lock-Up Period, the Partnership issues an earnings release or material news or a material event relating to the Partnership occurs or (B) prior to the expiration of the Lock-Up Period, the Partnership announces that it will release earnings results during the sixteen (16) day period beginning on the last day of the Lock-Up Period, then the restrictions imposed by this Section 3(o) shall continue to apply until the expiration of the eighteen (18) day period beginning on the issuance of the earnings release or the announcement of the material news or the occurrence of the material event.  Each 5% Holder agrees to execute and deliver such other agreements as may be reasonably requested by the Partnership or the underwriter which are consistent with the foregoing or which are necessary to give further effect thereto.  In addition, if requested by the Partnership or the representative of the underwriters of Common Units, each Holder shall provide, within three (3) days of such request, such information as may be required by the Partnership or such representative in connection with the completion of any public offering of the Common Units pursuant to a Registration Statement.  The obligations described in this Section 3(o) shall not apply to a registration relating solely to employee benefit plans on Form S-1 or Form S-8 or similar forms that may be promulgated in the future, or a registration relating solely to a transaction on Form S-4 or similar forms that may be promulgated in the

 

14

 

future.  The Partnership may impose stop-transfer instructions with respect to the Common Units subject to the foregoing restriction until the end of the Lock-Up Period.

 

4.                                       Registration Expenses.  All Registration Expenses incident to the Parties’ performance of or compliance with their respective obligations under this Agreement or otherwise in connection with any Demand Registration or Piggyback Registration (excluding any Selling Expenses) shall be borne by the Partnership, whether or not any Registrable Securities are sold pursuant to a Registration Statement.  “Registration Expenses” shall include, without limitation, (i) all registration and filing fees (including fees and expenses (A) with respect to filings required to be made with the Trading Market, (B) in connection with any filings required to be made with the Financial Industry Regulatory Authority, Inc. and (C) in compliance with applicable state securities or “Blue Sky” laws), (ii) printing expenses (including expenses of printing certificates for Common Units and of printing prospectuses if the printing of prospectuses is reasonably requested by a Holder of Registrable Securities included in the Registration Statement), (iii) messenger, telephone and delivery expenses, (iv) fees and expenses of counsel (including local and special), auditors and accountants (including the expenses of any “cold comfort” letters required or incidental to the performance of such obligations)  for the Partnership, (v) Securities Act liability insurance, if the Partnership so desires such insurance, (vi) fees and expenses of all other Persons retained by the Partnership in connection with the consummation of the transactions contemplated by this Agreement, (vii) the costs and expenses related to investor presentations on any road show undertaken in connection with the marketing of the Common Units, including, expenses associated with any electronic road show, travel and lodging expenses of the underwriters and officers and employees of the General Partner or any Group Member, (viii) the costs and expenses of qualifying the Common Units for inclusion in the book-entry settlement system of the DTC and (ix) the fees and expenses of the transfer agent and registrar.  In addition, the Partnership shall be responsible for all of its expenses incurred in connection with the consummation of the transactions contemplated by this Agreement (including expenses payable to third parties and including all salaries and expenses of their officers and employees performing legal or accounting duties), the expense of any annual audit and the fees and expenses incurred in connection with the listing of the Registrable Securities on the Trading Market.  All Selling Expenses shall be borne by the selling Holders pro rata in proportion to the number of Registrable Securities sold by each selling Holder or as they may otherwise agree.

 

5.                                       Indemnification.

 

(a)                                  By the Partnership.  If underwriters are engaged in connection with any registration referred to in Section 2, the Partnership shall provide indemnification, representations, covenants, opinions and other assurances to the underwriters in form and substance reasonably satisfactory to such underwriters and the Partnership.  In the event of a registration of any Registrable Securities under the Securities Act pursuant to this Agreement, in addition to and not in limitation of the Partnership’s obligations under Section 7.7 of the Partnership Agreement, the Partnership shall indemnify and hold harmless each Holder thereunder, its directors and officers, and each Person, if any, who controls such Holder within the meaning of the Securities Act and the Exchange Act, and any agent thereof (collectively, “Indemnified Persons”), to the fullest extent permitted by applicable law, from and against any losses, claims, damages, liabilities, joint or several, costs (including reasonable costs of

 

15

 

preparation and reasonable attorneys’ fees) and expenses, judgments, fines, penalties, interest, settlements or other amounts arising from any and all claims, demands, actions, suits or proceedings, whether civil, criminal, administrative or investigative, in which any Indemnified Person may be involved, or is threatened to be involved, as a party or otherwise, under the Securities Act or otherwise (collectively, “Losses”), as incurred, arising out of, based upon or resulting from any untrue statement or alleged untrue statement of any material fact contained in the Registration Statement, the related Prospectus, preliminary prospectus or free writing prospectus, or any amendment or supplement thereto, or arise out of, are based upon or resulting from the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading; provided, however, that the Partnership shall not be liable in any such case or to any Indemnified Person to the extent that any such Loss arises out of, is based upon or results from an untrue statement or alleged untrue statement or omission or alleged omission so made in reliance upon or in conformity with information furnished by or on behalf of such Indemnified Person in writing specifically for use in the preparation of the Registration Statement, the related Prospectus, preliminary prospectus or free writing prospectus, or any amendment or supplement thereto.  Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such Indemnified Person, and shall survive the transfer of such securities by such Holder.

 

(b)                                 By Each Holder.  Each Holder agrees, severally and not jointly, to indemnify and hold harmless the Partnership, its directors and officers, and each Person, if any, who controls the Partnership within the meaning of the Securities Act or of the Exchange Act (excluding such indemnifying Holder) to the same extent as the foregoing indemnity from the Partnership to the Indemnified Persons, but only with respect to information furnished in writing by or on behalf of such Holder specifically for use in the preparation of the Registration Statement, the related Prospectus, preliminary prospectus or free writing prospectus, or any amendment or supplement thereto.

 

6.                                       Miscellaneous.

 

(a)                                  Discontinued Disposition.  Each Holder agrees by its acquisition of such Registrable Securities that, upon receipt of a notice from the Partnership of the occurrence of any event of the kind described in clauses (ii) through (v) of Section 3(d), such Holder shall forthwith discontinue disposition of such Registrable Securities under the Registration Statement until such Holder’s receipt of the copies of the supplemental Prospectus or amended Registration Statement or until it is advised in writing by the Partnership that the use of the applicable Prospectus may be resumed, and, in either case, has received copies of any additional or supplemental filings that are incorporated or deemed to be incorporated by reference in such Prospectus or Registration Statement.  The Partnership may provide appropriate stop orders to enforce the provisions of this Section 6(a).

 

(b)                                 Specific Performance.  Damages in the event of breach of this Agreement by a Party may be difficult, if not impossible, to ascertain, and it is therefore agreed that each such Party, in addition to and without limiting any other remedy or right it may have, will have the right to an injunction or other equitable relief in any court of competent jurisdiction, enjoining any such breach, and enforcing specifically the terms and provisions hereof, and each

 

16

 

of the Parties hereby waives any and all defenses it may have on the ground of lack of jurisdiction or competence of the court to grant such an injunction or other equitable relief.  The existence of this right will not preclude any such Party from pursuing any other rights and remedies at law or in equity which such Party may have.

 

(c)                                  Amendments.  This Agreement may be amended only by means of a written amendment signed by the Partnership and the Holders of 50% of the then-outstanding Registrable Securities; provided, however, that no such amendment shall materially and adversely affect the rights of any Holder hereunder without the consent of such Holder.  The Partnership shall provide prior notice to all Significant Holders of any proposed amendment.

 

(d)                                 Notices.  All notices and other communications provided for or permitted hereunder shall be made in writing by facsimile, courier service, email or personal delivery:

 

(i)                                     if to a Holder, at (A) the most current mailing address given by such Holder to the Partnership in accordance with the provisions of this Section 6(d), which addresses initially are, with respect to the Holders, the addresses set forth in the Contribution, Purchase and Sale Agreement; or (B) the email address set forth opposite such Holder’s name in the signature pages hereto;

 

(ii)                                  if to a transferee of a Holder, to such Holder at the mailing address or email address provided pursuant to Section 6(e); and

 

(iii)                               if to the Partnership, at 6120 S. Yale, Suite 805, Tulsa, OK 74136 or Email: cjones@ngl-supply.com, Attention: Craig Jones, notice of which is given in accordance with the provisions of this Section 6(d).

 

All such notices and communications shall be deemed to have been received (i) at the time delivered by hand, if personally delivered; (ii) when receipt is acknowledged, if sent via email; (iii) the date of transmission, if such notice or communication is delivered via facsimile prior to 5:00 p.m. (Central Time) on a Business Day; (iv) the Business Day after the date of transmission, if such notice or communication is delivered via facsimile later than 5:00 p.m. (Central Time) on any date and earlier than 11:59 p.m. (Central Time) on such date; or (v) when actually received, if sent by any other means.

 

(e)                                  Successors and Assigns.  This Agreement shall be binding upon and inure to the benefit of the Parties hereto and their heirs, executors, administrators, successors, legal representatives and permitted assigns.  Except as provided in this Section 6(e), this Agreement, and any rights or obligations hereunder, may not be assigned without the prior written consent of the Partnership and the Significant Holders.  Notwithstanding anything in the foregoing to the contrary, the registration rights of a Holder pursuant to this Agreement with respect to all or any portion of its Registrable Securities may be assigned without such consent (but only with all related obligations) with respect to such Registrable Securities (and any Registrable Securities issued as a dividend or other distribution with respect to, in exchange for or in replacement of such Registrable Securities) by such Holder to a transferee of such Registrable Securities; provided (i) the transfer of the underlying Registrable Securities was made in accordance with the terms of the Partnership Agreement; (ii) the Partnership is, promptly after such transfer,

 

17

 

furnished with written notice of the name, mailing address and email address of such transferee or assignee and the Registrable Securities with respect to which such registration rights are being assigned; and (iii) such transferee or assignee agrees in writing to be bound by and subject to the terms set forth in this Agreement.  The Partnership may not assign its respective rights or obligations hereunder without the prior written consent of each of the Significant Holders.

 

(f)                                    Execution and Counterparts.  This Agreement may be executed in counterparts, all of which together shall constitute an agreement binding on all the Parties hereto, notwithstanding that all such Parties are not signatories to the original or the same counterpart.  Each Party shall become bound by this Agreement immediately upon affixing its signature hereto.  In the event that any signature is delivered by facsimile or electronic mail transmission, such signature shall create a valid binding obligation of the Party executing (or on whose behalf such signature is executed) the same with the same force and effect as if such signature delivered by facsimile or electronic mail transmission were the original thereof.

 

(g)                                 Governing Law.  This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware without regard to the principles of conflicts of law.

 

(h)                                 Submission to Jurisdiction.  Each of the Parties irrevocably and unconditionally submits, for itself and its property, to the exclusive jurisdiction of the Court of Chancery of the State of Delaware, and any appellate court from and thereof, in any action or proceeding arising out of or relating to this Agreement, or for the recognition or enforcement of any judgment, and each of the Parties irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such Delaware court or, to the fullest extent permitted by applicable law, in such federal court.  The Parties agree that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law.

 

(i)                                     Waiver of Venue.  The Parties irrevocably and unconditionally waive, to the fullest extent permitted by applicable law, (i) any objection that it may now or hereafter have to the laying of venue of any action or proceeding arising out of or relating to this Agreement in any court referred to in Section 6(h) and (ii) the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.

 

(j)                                     Cumulative Remedies.  The remedies provided herein are cumulative and not exclusive of any remedies provided by law.

 

(k)                                  Invalidity of Provisions.  If any provision or part of a provision of this Agreement is or becomes for any reason, invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions and part thereof contained herein shall not be affected thereby and this Agreement shall, to the fullest extent permitted by law, be reformed and construed as if such invalid, illegal or unenforceable provision, or part of a provision, had never been contained herein, and such provision or part reformed so that it would be valid, legal and enforceable to the maximum extent possible.

 

18

 

(l)                                     Entire Agreement.  This Agreement, together with the other Transaction Documents, constitute the entire agreement among the Parties with respect to the subject matter hereof and supersede all prior contracts or agreements with respect to the subject matter hereof and the matters addressed or governed hereby or in the other Transaction Documents, whether oral or written.  Without limiting the foregoing, each of the Parties acknowledges and agrees that (i) this Agreement is being executed and delivered in connection with each of the other Transaction Documents and the transactions contemplated hereby and thereby, (ii) the performance of this Agreement and the other Transaction Documents and expected benefits herefrom and therefrom are a material inducement to the willingness of the Parties to enter into and perform this Agreement and the other Transaction Documents and the transactions described herein and therein, (iii) the Parties would not have been willing to enter into this Agreement in the absence of the entrance into, performance of, and the economic interdependence of, the Transaction Documents, (iv) the execution and delivery of this Agreement and the other Transaction Documents and the rights and obligations of the parties hereto and thereto are interrelated and part of an integrated transaction being effected pursuant to the terms of this Agreement and the other Transaction Documents, (v) irrespective of the form such documents have taken, or otherwise, the transactions contemplated by this Agreement and the other Transaction Documents are necessary elements of one and the same overall and integrated transaction, (vi) the transactions contemplated by this Agreement and by the other Transaction Documents are economically interdependent and (vii) such Party will cause any of its successors or permitted assigns to expressly acknowledge and agree to this Section 6(l) prior to any assignment or transfer of this Agreement, by operation of law or otherwise.

 

[Signature Pages Follow]

 

19

 

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

 

 

	
 
    	
SILVERTHORNE   ENERGY PARTNERS LP
    
	
 
    	
By:
    	
Silverthorne   Energy Holdings LLC,
    
	
 
    	
 
    	
its   General Partner
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    	
/s/   H. Michael Krimbill
    
	
 
    	
 
    	
 
    	
H.   Michael Krimbill
    
	
 
    	
 
    	
 
    	
Chief   Executive Officer
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    

 

	
Attention:
    	
Todd   Coady and
    	
HICKS   OILS & HICKSGAS, INCORPORATED
    
	
 
    	
Shawn   Coady
    	
 
    
	
Email:
    	
toddc@hicksoffice.com
    	
By:
    	
 
    	
/s/   Shawn Coady
    
	
 
    	
shawnc@hicksoffice.com
    	
 
    	
Name:
    	
Shawn   Coady
    
	
 
    	
 
    	
Title:
    	
Vice   President
    
						

 

	
 
    	
 
    
	
Attention:   William Zartler
    	
NGL   HOLDINGS, INC.
    
	
Email:   bill.zartler@denhamcapital.com
    	
 
    
	
 
    	
By:
    	
 
    	
/s/   William Zartler
    
	
 
    	
 
    	
Name:
    	
William   Zartler
    
	
 
    	
 
    	
Title:
    	
Director
    

 

	
 
    	
 
    
	
Attention:   H. Michael Krimbill
    	
KRIM2010,   LLC
    
	
Email:   mkrimbill@cox.net
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   H. Michael Krimbill
    
	
 
    	
 
    	
H.   Michael Krimbill
    
	
 
    	
 
    	
Manager
    

 

	
 
    	
 
    
	
Attention:   Jay Hatfield
    	
INFRASTRUCTURE   CAPITAL MANAGEMENT, LLC
    
	
Email:   jay.hatfield@infracapllc.com
    	
 
    
	
 
    	
By:
    	
/s/   Jay Hatfield
    
	
 
    	
 
    	
Jay   Hatfield
    
	
 
    	
 
    	
Manager
    

 

Signature Page to Registration Rights Agreement

 

 

	
Attention:   Bradley K. Atkinson
    	
ATKINSON   INVESTORS, LLC
    
	
Email:   atkinsonbk@aol.com
    	
 
    
	
 
    	
By:
    	
/s/   Bradley K. Atkinson
    
	
 
    	
 
    	
Bradley   K. Atkinson
    
	
 
    	
 
    	
Manager
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
/s/   Stanley A. Bugh
    
	
 
    	
Stanley   A. Bugh
    
	
 
    	
Address:
    	
5537   E. 106th Place
    
	
 
    	
 
    	
Tulsa,   OK 74137
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
/s/   Robert R. Foster
    
	
 
    	
Robert   R. Foster
    
	
 
    	
Address:
    	
58   Aberdeen Crossing Place
    
	
 
    	
 
    	
The   Woodlands, TX 77381
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
/s/   Brian K. Pauling
    
	
 
    	
Brian   K. Pauling
    
	
 
    	
Address:
    	
6109   E. 106th Street
    
	
 
    	
 
    	
Tulsa,   OK 74137
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
/s/   Stanley D. Perry
    
	
 
    	
Stanley   D. Perry
    
	
 
    	
Address:
    	
7309   S. 5th Street
    
	
 
    	
 
    	
Broken   Arrow, OK 74011
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
/s/   Stephen D. Tuttle
    
	
 
    	
Stephen   D. Tuttle
    
	
 
    	
Address:
    	
6211   E. 105th Street
    
	
 
    	
 
    	
Tulsa,   OK 74137
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
/s/   Craig S. Jones
    
	
 
    	
Craig   S. Jones
    
	
 
    	
Address:
    	
3451   E. 87th Place
    
	
 
    	
 
    	
Tulsa,   OK 74137
    
				

 

Signature Page to Registration Rights Agreement

 

 

	
 
    	
/s/   Daniel Post
    
	
 
    	
Daniel   Post
    
	
 
    	
Address:
    	
12800   W. 123rd Court
    
	
 
    	
 
    	
Overland   Park, KS 66213
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
/s/   Mark McGinty
    
	
 
    	
Mark   McGinty
    
	
 
    	
Address:
    	
5416   E. 109th Street
    
	
 
    	
 
    	
Tulsa,   OK 74137
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
/s/   Sharra Straight
    
	
 
    	
Sharra   Straight
    
	
 
    	
Address:
    	
8422   S. 71st East Avenue
    
	
 
    	
 
    	
Tulsa,   OK 74133
    

 

Signature Page to Registration Rights AgreementExhibit 10.6

 

 

STORAGE SPACE LEASE

by and between

PHILLIPS PETROLEUM COMPANY

and

NGL SUPPLY, INC.

 

 

 

TABLE OF CONTENTS

 

	
Article
    	
 
    	
Page
    
	
 
    	
 
    	
 
    	
 
    
	
I.
    	
Definitions
    	
 
    	
2
    
	
 
    	
1.01
    	
Defined Terms
    	
 
    	
2
    
	
 
    	
 
    	
AAA
    	
 
    	
2
    
	
 
    	
 
    	
AAA Rules
    	
 
    	
2
    
	
 
    	
 
    	
Affiliate
    	
 
    	
2
    
	
 
    	
 
    	
ASTM
    	
 
    	
2
    
	
 
    	
 
    	
Barrel
    	
 
    	
2
    
	
 
    	
 
    	
Business Day
    	
 
    	
2
    
	
 
    	
 
    	
Claim
    	
 
    	
2
    
	
 
    	
 
    	
Day
    	
 
    	
2
    
	
 
    	
 
    	
Default Rate
    	
 
    	
2
    
	
 
    	
 
    	
Dispute Resolution Procedures
    	
 
    	
3
    
	
 
    	
 
    	
Due Date
    	
 
    	
3
    
	
 
    	
 
    	
Effective Date
    	
 
    	
3
    
	
 
    	
 
    	
EFT
    	
 
    	
3
    
	
 
    	
 
    	
Entire Business
    	
 
    	
3
    
	
 
    	
 
    	
Event of Default
    	
 
    	
3
    
	
 
    	
 
    	
Event of Force Majeure
    	
 
    	
3
    
	
 
    	
 
    	
Executive
    	
 
    	
4
    
	
 
    	
 
    	
Facility
    	
 
    	
4
    
	
 
    	
 
    	
FTC
    	
 
    	
4
    
	
 
    	
 
    	
Gallon
    	
 
    	
4
    
	
 
    	
 
    	
Governmental Authority
    	
 
    	
4
    
	
 
    	
 
    	
Initiating Party
    	
 
    	
4
    
	
 
    	
 
    	
In-Place Transfer
    	
 
    	
4
    
	
 
    	
 
    	
Law
    	
 
    	
4
    
	
 
    	
 
    	
Lease
    	
 
    	
4
    
	
 
    	
 
    	
Leased Space
    	
 
    	
4
    
	
 
    	
 
    	
Lease No. I Leased Space
    	
 
    	
4
    
	
 
    	
 
    	
Lease No. I Leased Space Term
    	
 
    	
4
    
	
 
    	
 
    	
Lease No. II Leased Space
    	
 
    	
4
    
	
 
    	
 
    	
Lease No. II Leased Space Term
    	
 
    	
5
    
	
 
    	
 
    	
Lessee
    	
 
    	
5
    
	
 
    	
 
    	
Lessor
    	
 
    	
5
    
	
 
    	
 
    	
Letter of Credit
    	
 
    	
5
    
	
 
    	
 
    	
Merger Agreement
    	
 
    	
5
    
	
 
    	
 
    	
Month of Monthly
    	
 
    	
5
    
	
 
    	
 
    	
Monthly Statement
    	
 
    	
5
    
	
 
    	
 
    	
Normal Business Hours
    	
 
    	
5
    
	
 
    	
 
    	
Notice
    	
 
    	
5
    
	
 
    	
 
    	
Parties
    	
 
    	
5
    
	
 
    	
 
    	
Party
    	
 
    	
5
    
	
 
    	
 
    	
Person
    	
 
    	
5
    

 

 

	
 
    	
 
    	
Propane
    	
 
    	
5
    
	
 
    	
 
    	
Propane Assets
    	
 
    	
5
    
	
 
    	
 
    	
Provisional Consent Order
    	
 
    	
6
    
	
 
    	
 
    	
Prudent Industry Practice
    	
 
    	
6
    
	
 
    	
 
    	
PTTT
    	
 
    	
6
    
	
 
    	
 
    	
Regular Facility Operating Hours
    	
 
    	
6
    
	
 
    	
 
    	
Sale Agreement
    	
 
    	
6
    
	
 
    	
 
    	
Taxes
    	
 
    	
6
    
	
 
    	
 
    	
Term
    	
 
    	
6
    
	
 
    	
 
    	
Turn
    	
 
    	
6
    
	
 
    	
1.02
    	
Other Defined Terms
    	
 
    	
6
    
	
 
    	
1.03
    	
Terms Generally
    	
 
    	
6
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
II.
    	
Leased No. I Leased Space
    	
 
    	
6
    
	
 
    	
2.01
    	
Lease No. I Leased Space
    	
 
    	
6
    
	
 
    	
2.02
    	
No Excess Space
    	
 
    	
7
    
	
 
    	
2.03
    	
Use of Lease No. I Leased Space
    	
 
    	
7
    
	
 
    	
2.04
    	
Non-Dedicated Leased Space
    	
 
    	
7
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
III.
    	
Leased No. II Leased Space
    	
 
    	
7
    
	
 
    	
3.01
    	
Lease No. II Leased Space
    	
 
    	
7
    
	
 
    	
3.02
    	
No Excess Space
    	
 
    	
7
    
	
 
    	
3.03
    	
Use of Lease No. II Leased   Space
    	
 
    	
8
    
	
 
    	
3.04
    	
Non-Dedicated Leased Space
    	
 
    	
8
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
IV.
    	
Rental
    	
 
    	
8
    
	
 
    	
4.01
    	
Lease No. I Leased Space Rental
    	
 
    	
8
    
	
 
    	
4.02
    	
Lease No. II Leased Space Rental
    	
 
    	
8
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
V.
    	
Billing Practices and Payment
    	
 
    	
9
    
	
 
    	
5.01
    	
Monthly Statement
    	
 
    	
9
    
	
 
    	
5.02
    	
Payment
    	
 
    	
10
    
	
 
    	
5.03
    	
Adjustments
    	
 
    	
10
    
	
 
    	
5.04
    	
Records and Audit Rights
    	
 
    	
10
    
	
 
    	
5.05 
    	
Financial Responsibility
    	
 
    	
10
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
VI.
    	
Term
    	
 
    	
11
    
	
 
    	
6.01
    	
Lease No. I Leased Space Term
    	
 
    	
11
    
	
 
    	
6.02
    	
Lease No. II Leased Space Term
    	
 
    	
11
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
VII.
    	
Event of Default
    	
 
    	
11
    
	
 
    	
7.01
    	
Event of Default
    	
 
    	
11
    
	
 
    	
7.02
    	
Obligations Not Relieved
    	
 
    	
11
    
	
 
    	
7.03
    	
Damages
    	
 
    	
11
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
VIII.
    	
Receipt/Withdrawal of Propane
    	
 
    	
12
    
	
 
    	
8.01
    	
Receipt of Propane into Leased Space
    	
 
    	
12
    
	
 
    	
8.02
    	
Withdrawal of Propane
    	
 
    	
12
    
	
 
    	
8.03
    	
No Over-Withdrawal
    	
 
    	
12
    

 

ii

 

	
 
    	
8.04
    	
Withdrawal Prior to End of Term
    	
 
    	
12
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
IX.
    	
Scheduling
    	
 
    	
12
    
	
 
    	
9.01
    	
Scheduling
    	
 
    	
12
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
X.
    	
Propane Losses; Casualty Losses
    	
 
    	
12
    
	
 
    	
10.01
    	
Propane Losses
    	
 
    	
12
    
	
 
    	
10.02
    	
Casualty Losses
    	
 
    	
13
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
XI.
    	
Title; Custody
    	
 
    	
13
    
	
 
    	
11.01
    	
Title
    	
 
    	
13
    
	
 
    	
11.02
    	
Custody
    	
 
    	
13
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
XII.
    	
Volume Determinations
    	
 
    	
13
    
	
 
    	
12.01
    	
Volume Determinations
    	
 
    	
13
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
XIII.
    	
Event of Force Majeure
    	
 
    	
13
    
	
 
    	
13.01
    	
Event of Force Majeure
    	
 
    	
13
    
	
 
    	
13.02
    	
Stikes or Lockouts
    	
 
    	
14
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
XIV.
    	
Operation and Maintenance of Facility
    	
 
    	
14
    
	
 
    	
14.01
    	
Operation and Maintenance of Facility
    	
 
    	
14
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
XV.
    	
Notices
    	
 
    	
14
    
	
 
    	
15.01
    	
Notices
    	
 
    	
14
    
	
 
    	
15.02
    	
Effective Date
    	
 
    	
14
    
	
 
    	
15.03
    	
Change of Address Notice
    	
 
    	
15
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
XVI.
    	
Taxes
    	
 
    	
15
    
	
 
    	
16.01
    	
Taxes
    	
 
    	
15
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
XVII.
    	
Insurance
    	
 
    	
15
    
	
 
    	
17.01
    	
Insurance
    	
 
    	
15
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
XVIII.
    	
Applicable Law
    	
 
    	
15
    
	
 
    	
18.01 
    	
Applicable Law
    	
 
    	
15
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
XIX.
    	
Indemnity
    	
 
    	
15
    
	
 
    	
19.01
    	
Indemnity
    	
 
    	
15
    
	
 
    	
19.02
    	
Special Damages
    	
 
    	
16
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
XX.
    	
Assignment; Sublease
    	
 
    	
16
    
	
 
    	
20.01
    	
Assignment; Sublease
    	
 
    	
16
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
XXI.
    	
Miscellaneous
    	
 
    	
17
    
	
 
    	
21.01
    	
Relationship of the Parties
    	
 
    	
17
    
	
 
    	
21.02
    	
Use of Facsimile/Telecopy
    	
 
    	
17
    
	
 
    	
21.03
    	
Disputes Between the Parties
    	
 
    	
18
    
	
 
    	
21.04
    	
No Third-Party Rights
    	
 
    	
18
    
	
 
    	
21.05
    	
Compliance with Laws
    	
 
    	
18
    

 

iii

 

	
 
    	
21.06
    	
Severability
    	
 
    	
18
    
	
 
    	
21.07
    	
Non-Waiver
    	
 
    	
18
    
	
 
    	
21.08
    	
Entire Agreement
    	
 
    	
18
    
	
 
    	
21.09
    	
Amendments
    	
 
    	
18
    
	
 
    	
21.10
    	
Counterparts; Multiple Originals
    	
 
    	
18
    
	
 
    	
21.11
    	
Headings
    	
 
    	
19
    
	
 
    	
21.12
    	
Exhibits
    	
 
    	
19
    
	
 
    	
21.13
    	
Construction
    	
 
    	
19
    
	
 
    	
21.14
    	
Modification
    	
 
    	
19
    
	
 
    	
21.15
    	
Rescission
    	
 
    	
19
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Exhibit
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
A
    	
Dispute Resolution Procedures
    	
 
    	
 
    
						

 

iv

 

STORAGE SPACE LEASE

 

THIS STORAGE SPACE LEASE is made and entered into this 7th day of November, 2002, by and between PHILLIPS PETROLEUM COMPANY, a Delaware corporation (“Lessor”), and NGL SUPPLY, INC., an Oklahoma corporation (“Lessee”).

 

W I T N E S S E T H:

 

WHEREAS, Lessor and Conoco Inc. entered into an Agreement and Plan of Merger dated as of November 18, 2001 (the “Merger Agreement”); and

 

WHEREAS, in connection with and subject to obtaining regulatory approvals of the Merger Agreement under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, Seller and Conoco Inc. entered into a provisional consent order with the United States Federal Trade Commission (the “FTC”), providing for, among other things, the sale of certain assets; and

 

WHEREAS, contemporaneously with the execution and delivery of this Lease, Lessor sold certain propane-related assets and certain volumes of propane inventory to Lessee and NGL Supply Terminal Company, LLC, a wholly owned subsidiary of Lessee, pursuant to (i) that certain Asset Purchase and Sale Agreement, dated September 6, 2002, among Lessor, Phillips Pipe Line Company, and Lessee, as amended by the Amendment to Asset Purchase and Sale Agreement dated October 21, 2002 (as so amended, the “Sale Agreement”), and (ii) that certain Assignment dated October 22, 2002, made by Lessee to NGL Supply Terminal Company, LLC; and

 

WHEREAS, Lessor owns and operates an underground propane storage cavern which is located at or near Borger, Texas (the “Facility”); and

 

WHEREAS, Lessee has requested Lessor to lease certain underground propane storage space in the Facility to Lessee for the storage the propane inventory to be purchased under the Sale Agreement by Lessee and additional inventory owned by Lessee; and

 

WHEREAS, Lessor has agreed to lease such propane storage space to Lessee as part of the consideration given for the purchase by Lessee of the propane inventory; and

 

WHEREAS, by entering into this Lease, Lessor does not concede or acknowledge that the merger would tend to restrain competition any relevant market or otherwise contravene any provision of any antitrust or competition law of any jurisdiction;

 

NOW, THEREFORE, in consideration of the foregoing, the mutual covenants and promises contained herein, and other good and valuable consideration, the receipt

 

1

 

and sufficiency of which are hereby acknowledged by Lessor and Lessee, and intending to be legally bound, Lessor and Lessee, agree as follows:

 

Article I.                Definitions

 

1.01        Defined Terms.  The following definitions shall, for all purposes, unless clearly indicated to the contrary, apply to the capitalized terms used in this Storage Space Lease:

 

(a)           “AAA” means the American Arbitration Association.

 

(b)           “AAA Rules” means the Commercial Arbitration Rules of the AAA.

 

(c)           “Affiliate” means any Person that, directly or indirectly, controls, or is controlled by or under common control with, another Person. For purposes of this definition, “control” (including the terms “controlled by” and “under common control with”), as used with respect to any Person, means the power to direct or cause the direction of the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities or by contract or otherwise.

 

(d)           “ASTM” means the American Society for Testing Materials.

 

(e)           “Barrel” means forty-two (42) Gallons.

 

(f)            “Business Day” means any Day other than a Saturday, a Sunday, or a Day on which banks in the State of Texas are authorized or obligated by Law or executive order to close.

 

(g)           “Claim” means any and all judgments, claims, causes of action, demands, lawsuits, suits, proceedings, governmental investigations or audits, losses, assessments, fines, penalties, administrative orders, obligations, costs, expenses, liabilities and damages, including interest, penalties, reasonable attorneys’ fees, disbursements and costs of investigations, deficiencies, levies, duties and imposts.

 

(h)           “Day” means the period of time commencing at 0000 hours on one day and running until 2400 hours on the same day, according to local time at the Facility.

 

(i)            “Default Rate” means a simple interest rate per annum (no compounding) equal to the lesser of (i) two (2) points over prime, base, or equivalent annual lending rate published from time to time by Chase Manhattan Bank (or any successor thereto) at its principal New York City office or such other bank as may be mutually agreed upon by the Parties as in effect for any given Day based on a year of three hundred sixty five (365) Days (whether or not such rate is actually charged by the Chase Manhattan Bank, or such other bank, as the case may be), or (ii) the maximum rate permitted by applicable Law.

 

2

 

(j)            “Dispute Resolution Procedures” has the meaning set forth in Section 21.03 hereof.

 

(k)           “Due Date” has the meaning set forth in Section 5.02 hereof.

 

(l)            “Effective Date” means the date set forth in the opening paragraph hereof.

 

(m)          “EFT” means electronic funds transfer.

 

(n)           “Entire Business” means, with respect to Lessor, substantially the refining business at Lessor’s refinery at Borger, Texas, at which the Facility is located, and, with respect to Lessee, substantially the wholesale Propane marketing business of Lessee.

 

(o)           “Event of Default” means any of the following: (i) if Lessee shall fail to pay any rent payable hereunder for more than ten (10) Days after the same becomes due and payable; (ii) if Lessee shall fail to perform or comply with any of the terms and conditions hereof and such failure shall continue for more than ten (10) Days after Lessor has given Notice to Lessee describing with specificity such failure or failures to Lessee; (iii) if Lessee shall make an assignment for the benefit of creditors, or shall admit in writing its inability to pay its debts as they become due, or shall file a petition in bankruptcy, or shall be adjudicated bankrupt or insolvent, or shall file a petition seeking any reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under any present or future Law, or shall file an answer admitting or not contesting the material allegations of a petition filed against it in any such proceeding, or shall seek or consent to or acquiesce in the appointment of any trustee, receiver or liquidator for itself or any substantial part of its properties; (iv) if, within sixty (60) Days after the commencement of any proceeding against Lessee seeking any reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under any present or future statute, law or regulation, such proceeding shall have not been dismissed, or if within sixty (60) Days after the appointment without the consent or acquiescence of Lessee of any trustee, receiver, or liquidator for itself or of any substantial part of its properties, such appointment shall not have been vacated; or (v) if Lessee or its directors or majority stockholders take any action to effect the dissolution or liquidation of Lessee, as the case may be.

 

(p)           “Event of Force Majeure” means any event or circumstance that (i) directly or indirectly prevents a Party from performing an obligation under this Lease, (ii) is beyond the reasonable control of, and occurs without the negligence of, the Party obligated to perform the relevant obligation, and (iii) was not reasonably foreseeable by such Party and reasonably preventable by such Party through the exercise of reasonable diligence.

 

3

 

(q)           “Executive” has the meaning set forth in Exhibit A.

 

(r)           “Facility” has the meaning set forth in the fourth WHEREAS clause hereof.

 

(s)           “FTC” has the meaning set forth in the second WHEREAS clause hereof.

 

(t)            “Gallon” means a United States gallon of two hundred thirty-one (231) cubic inches of liquid at Sixty Degrees (60°) Fahrenheit, and at the equivalent vapor pressure of the liquid.

 

(u)           “Governmental Authority” means any government, any governmental administration, agency, instrumentality or other instrumentality or other political subdivision thereof or any court, commission or other governmental authority of competent jurisdiction.

 

(v)            “Initiating Party” has the meaning set forth in Exhibit A

 

(w)           “In-Place Transfer” means a transfer of title to Propane being stored in the Facility from Lessor’s or another Person’s inventory to Lessee’s inventory hereunder, pursuant to a PTTT.

 

(x)           “Law” means all constitutions, laws (including common law), treaties, statutes, orders, decrees, rules, injunctions, licenses, permits, approvals, agreements, regulations, codes, and ordinances issued by any Governmental Authority, and including judicial or administrative orders, consents, decrees, and judgments, and all published directives, guidelines, governmental authorizations, requirements or other governmental restrictions which have the force of law, and determinations by, or interpretations of any of the foregoing by any Governmental Authority having jurisdiction over the matter in question and binding on a given Person, whether in effect as of the date hereof or thereafter and, in each case, as amended.

 

(y)           “Lease” means this Storage Space Lease, together with all exhibits attached hereto, as it may be amended, supplemented or restated from time to time in accordance with the provisions hereof.

 

(z)           “Leased Space” means Lease No. I Leased Space and Lease No. II Leased Space, collectively.

 

(aa)         “Lease No. I Leased Space” shall have the meaning set forth in Section 2.01 hereof.

 

(bb)         “Lease No. I Leased Space Term” has the meaning set forth in Section 6.01 hereof.

 

(cc)         “Lease No. II Leased Space” has the meaning set forth in Section 3.01 hereof.

 

4

 

(dd)         “Lease No. II Leased Space Term” has the meaning set forth in Section 6.02 hereof.

 

(ee)         “Lessee” has the meaning set forth in the introductory paragraph hereof.

 

(ff)           “Lessor” has the meaning set forth in the introductory paragraph hereof.

 

(gg)         “Letter of Credit” has the meaning set forth in Section 5.05 hereof.

 

(hh)         “Merger Agreement” has the meaning set forth in the first WHEREAS clause hereof.

 

(ii)           “Month” or “Monthly” means a period of time commencing at 0000 hours on the first Day of a calendar month and running until 2400 hours on the last Day thereof, according to local time at the Facility.

 

(jj)           “Monthly Statement” has the meaning set forth in Section 5.01 hereof.

 

(kk)        “Normal Business Hours” means the period of time commencing at 0800 hours on one Day and running until 1700 hours on the same Day, according to local time at the Facility.

 

(ll)           “Notice” means any notice, request, instruction, correspondence or other communication permitted or required to be given under this Lease in accordance with Article XV. hereof.

 

(mm)       “Parties” means Lessor and Lessee, collectively.

 

(nn)         “Party” means Lessor or Lessee, individually.

 

(oo)         “Person” means, without limitation, an individual, corporation (including a non-profit corporation), general or limited partnership, limited liability company, joint venture, estate, trust, association, organization, labor union, or other entity or Governmental Authority, and shall include any successor (by merger or otherwise) of such entity.

 

(pp)         “Propane” means a hydrocarbon product composed predominantly of propane which conforms to the definition of and specifications for commercial grade and/or “Propane HD-5” as defined in NGPA Publication 2140 (NGPA Liquefied Petroleum Gas Specifications and Test Methods) as revised in 1962 or later revision.

 

(qq)         “Propane Assets” means collectively the Loading Racks and Tanks, as such terms are defined in the Sale Agreement.

 

5

 

(rr)         “Provisional Consent Order” means the Agreement Containing Consent Orders accepted by the FTC for public comment in the matter of Lessor and Conoco Inc. prior to the entry of the final order in respect thereto.

 

(ss)         “Prudent Industry Practice” means such practices, methods, acts, techniques and standards as are in effect at the time of performance of Lessor’s obligations under this Lease that are consistent with applicable underground Propane storage cavern standards generally followed by the refining industry in the State of Texas.

 

(tt)           “PTTT” means a Product Title Transfer Ticket, generated at the time title is transferred, that records a receipt that increases Buyer’s Propane inventory in storage hereunder.

 

(uu)         “Regular Facility Operating Hours” means the twenty four (24) hours per Day, seven (7) Days per week.

 

(vv)          “Sale Agreement” has the meaning set forth in the third WHEREAS clause hereof.

 

(ww)                        “Taxes” means any income, sales, use, excise, transfer, and similar taxes, fees and charges including ad valorem taxes), including any interest or penalties attributable thereto, imposed by any Governmental Authority.

 

(xx)         “Term” means the Lease No. I Leased Space Term or the Lease No. II Leased Space Term, as applicable.

 

(yy)         “Turn” means lease capacity volume in and lease capacity volume out during each twelve (12) Month period of the applicable Term.

 

1.02        Other Defined Terms. Other terms may be defined elsewhere in this Lease, and, unless otherwise indicated, shall have such meanings throughout this Lease.

 

1.03        Terms Generally. The definitions in this Lease shall apply equally to both singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The word “include,” “includes” and “including” shall be deemed to be followed by the phrase “without limitation.” All references herein to Articles, Sections and exhibits shall be deemed references to Articles and Sections of, and exhibits to, this Lease unless the context shall otherwise require.

 

Article II.                                           Leased No. I Leased Space

 

2.01        Lease No. I Leased Space. Subject to the terms and conditions hereinafter set forth, Lessor hereby leases to Lessee, and Lessee hereby rents from Lessor, during the Lease No. I Leased Space Term, such space in the Facility as is necessary for the storage

 

6

 

of the greater of: (i) up to eight hundred fifty thousand (850,000) Barrels of Propane at any one time, or (ii) an amount of Barrels of Propane which is equal to the Borger Inventory (as such term is defined in the Sale Agreement and as adjusted as provided therein) (the “Lease No. I Leased Space”).

 

2.02                        No Excess Space. In no event shall Lessee store in Lease No. I Leased Space hereunder a volume of Propane in excess of its Lease No. I Leased Space, and in no event shall Lessor have any obligation to accept or store in Lease No. I Leased Space a volume of Propane in excess of Lessee’s Lease No. I Leased Space. If Lessee shall store any volume of Propane hereunder in excess of its Lease No. I Leased Space, Lessor may, in its sole discretion, impose upon Lessee a penalty charge of Ten Cents ($00.10) per Barrel per Month for each Barrel of Propane so stored in excess of Lessee’s Lease No. I Leased Space, which charge shall be paid by Lessee as additional rental for its Lease No. I Leased Space. If Lessor elects to impose a penalty charge for excess volumes of Propane stored hereunder, Lessor shall bill such charge after the end of each Month during the term hereof, and Lessee shall pay such charge within ten (10) Days of its receipt of such bill.

 

2.03                        Use of Lease No. I Leased Space. Lessee shall use the Lease No. I Leased Space solely for the storage of Propane.

 

2.04                        Non-Dedicated Leased Space. Lessee understands and acknowledges that the Lease No. I Leased Space is not dedicated storage space in the Facility. Lessee expressly grants to Lessor the right to store Lessee’s Propane in commingled storage in the Facility with other Person’s similar Propane meeting Lessor’s Propane specifications therefor in effect on the date of receipt of Lessee’s Propane.

 

Article III.                                       Leased No. II Leased Space

 

3.01                        Lease No. II Leased Space. Subject to the terms and conditions hereinafter set forth, Lessor hereby leases to Lessee, and Lessee hereby rents from Lessor, during the Lease No. II Leased Space Term, such space in the Facility as is necessary for the storage of up to eight hundred fifty thousand (850,000) Barrels of Propane at any one time (the “Lease No. II Leased Space”).

 

3.02                        No Excess Space. In no event shall Lessee store in Lease No. II Leased Space hereunder a volume of Propane in excess of its Lease No. II Leased Space, and in no event shall Lessor have any obligation to accept or store in Lease No. II Leased Space a volume of Propane in excess of Lessee’s Lease No. II Leased Space. If Lessee shall store any volume of Propane hereunder in excess of its Lease No. II Leased Space, Lessor may, in its sole discretion, impose upon Lessee a penalty charge of Ten Cents ($00.10) per Barrel per Month for each Barrel of Propane so stored in excess of Lessee’s Lease No. II Leased Space, which charge shall be paid by Lessee as additional rental for its Lease No. II Leased Space. If Lessor elects to impose a penalty charge for excess volumes of Propane stored hereunder, Lessor shall bill such charge after the end of each 

 

7

 

Month during the term hereof, and Lessee shall pay such charge within ten (10) Days of its receipt of such bill.

 

3.03                        Use of Lease No. II Leased Space. Lessee shall use the Lease No. II Leased Space solely for the storage of Propane.

 

3.04                        Non-Dedicated Leased Space. Lessee understands and acknowledges that the Lease No. II Leased Space is not dedicated storage space in the Facility. Lessee expressly grants to Lessor the right to store Lessee’s Propane in commingled storage in the Facility with other Person’s similar Propane meeting Lessor’s Propane specifications therefor in effect on the date of receipt of Lessee’s Propane.

 

Article IV.                                      Rental

 

4.01                        Lease No. I Leased Space Rental.

 

(a)                                  Base Rental. The base rental for Lease No. I Leased Space shall be $21,250 per Month; provided, however, that such base rental rate shall be increased at the rate of Two and One-Half Cents ($00.025) per Barrel per Month if, and to the extent, the Lease No. I Leased Space exceeds eight hundred fifty thousand (850,000) Barrels of Propane; provided, further, if the Effective Date is a Day other than the first Day of a Month, the rental for the period from the Effective Date through the remainder of such first Month shall be prorated by such number of Days remaining in such first Month.

 

(b)                                  Additional Rental. For every Barrel of Propane delivered out of Lease No. I Leased Space during the Lease No. I Leased Space Term over the maximum amount of the Lease No. I Leased Space and up to one million seven hundred thousand (1,700,000) Barrels, Lessee shall pay an additional rental of Ten Cents ($00.10) per Barrel. Lessee understands that the additional rental is based on volumes of Propane delivered out of Leased No. I Leased Space and that Lessee shall not have the right to store more than the maximum amount of the Lease No. I Leased Space in Lease No. I Leased Space at any one time.

 

4.02                        Lease No. II Leased Space Rental.

 

(a)                                  Base Rental  Subject to Section 4.02 (c) hereof, the base rental for the “one-Turn” storage of up to eight hundred fifty thousand (850,000) Barrels of Propane during each year of the Lease No. II  Leased Space Term shall be as follows:

 

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Year:
    	
 
    	
Base   Rental:
    
	
04-01-03 - 03-31-04
    	
 
    	
$29,750.00 per Month
    
	
04-01-04 - 03-31-05
    	
 
    	
$29,750.00 per Month
    
	
04-01-05 - 03-31-06
    	
 
    	
$31,875.00 per Month
    
	
04-01-06 - 03-31-07
    	
 
    	
$31,875.00 per Month
    
	
04-01-07 - 03-31-08
    	
 
    	
$31,875.00 per Month
    
	
04-01-08 - 03-31-09
    	
 
    	
$34,000.00 per Month
    
	
04-01-09 - 03-31-10
    	
 
    	
$34,000.00 per Month
    
	
04-01-10 - 03-31-11
    	
 
    	
$36,125.00 per Month
    
	
04-01-11 - 03-31-12
    	
 
    	
$36,125.00 per Month
    

 

(b)                                  Additional Rental. For every Barrel of Propane delivered out of Lease No. II Leased Space during each year during the Lease No. II Leased Space Term over Eight Hundred Fifty Thousand (850,000) Barrels and up to One Million Seven Hundred Thousand (1,700,000) Barrels, Lessee shall pay an additional rental of Ten Cents ($00.10) per Barrel, and for every Barrel of Propane delivered out of Lease No. II Leased Space during each year during the Lease No. II Leased Space Term over One Million Seven Hundred Thousand (1,700,000) Barrels, Lessee shall pay an additional rental of Twenty Cents ($00.20) per Barrel. Lessee understands that the additional rental is based on volumes of Propane delivered out of Lease No. II Leased Space and that Lessee shall not have the right to store more than Eight Hundred Fifty Thousand (850,000) Barrels of Propane in Lease No. II Leased Space at any one time.

 

(c)                                  Temporary Adjustments to Base Rental. If  at any time during the Lease No. II Leased Space Term Lessor’s actual cost to operate the Facility increases by more than Fifty Thousand Dollars ($50,000.00) per year because of new Laws, Lessor shall have the right, on ninety (90) Days’ advance Notice to Lessee, to temporarily increase the base rentals set out in Section 4.02 (a), on a prospective basis, by an amount necessary to recover such increased costs on a percentage basis compared with all other Persons utilizing the Facility. Lessee shall not have the right to dispute the applicability of any such new Laws. However, in the event Lessee disputes the amount of any increased base rental resulting from such new Laws, Lessee shall pay the disputed amount subject to challenge in accordance with Article II of Exhibit A, and, upon resolution of the dispute, any portion of the increased base rentals which was determined to exceed Lessor’s actual increased of complying with such new Laws shall be refunded with interest at the Default Rate.

 

Article V.                                          Billing Practices and Payment

 

5.01                        Monthly Statement. Promptly after the end of each Month during the Term hereof, Lessor shall provide Lessee with a statement showing, with respect to such Month: (i) beginning inventory in Leased Space; (ii) ending inventory in Leased Space;

 

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(iii) volumes of Propane receive pursuant to In-Place Transfers; and (iv) the rental, base rentals and additional rentals due for such Month (“Monthly Statement”).

 

5.02                        Payment.  Lessee shall pay each such Monthly Statement received by it from Lessor, in cash without offset or deduction, in U. S. Dollars within five (5) Business Days of its receipt thereof (the “Due Date”) by EFT. If payment of any Monthly Statement is not received by Lessor on or before the Due Date, such overdue amount shall accrue interest at the Default Rate from the Due Date, which interest shall be paid at the same time as such overdue Monthly Statement is paid. In the event that Lessee disputes all or any portion of a Monthly Statement, Lessee shall pay the disputed amount subject to challenge in accordance with Article II of Exhibit A, and, upon resolution of the dispute, any portion of the Monthly Statement which was not owed shall be refunded with interest at the Default Rate.

 

5.03                        Adjustments.  The payment of any Monthly Statement shall not prejudice the right of Lessee to protest or question the correctness thereof; provided, however, each Monthly Statement submitted to Lessee shall conclusively be deemed to be true and correct as to both Parties after twenty four (24) Months following the date of such Monthly Statement unless, prior to the end of said twenty four (24) Month period, a Party takes written exception thereto and makes a claim against the other Party for adjustment.

 

5.04                        Records and Audit Rights.  Each  of Lessor and Lessee shall maintain a true and correct set of records pertaining to all activities relating to its performance hereunder and all transactions related thereto. Each of Lessor and Lessee further agrees to retain all such records for a period of time not less than twenty four (24) Months after the receipt or generation of same. On thirty (30) Days advance notice, either Lessor or Lessee, or its authorized representative or representatives, shall have the right during the other’s Normal Business Hours to audit, copy and inspect, at such inspecting Party’s sole cost and expense, any and all records of such other Party relating to such other Party’s performance of its obligations hereunder (but not any other books and records of such other Party). Audits shall not be commenced more than once during each year and shall be completed within a reasonable time frame not to exceed thirty (30) Days. Each of Lessor and Lessee may request information from the other’s books and records relating to the other’s obligations hereunder from time to time and such requests shall not constitute an audit for that year. Each of Lessor and Lessee shall have twenty four (24) Months after the end of a year during which to conduct an audit of the other’s books and records for such year, and any Claim arising out of or based in whole or in part on the information produced or obtained by the performance of any such audit must be made, if at all, within such twenty four (24) Month period.

 

5.05                        Financial Responsibility.  Notwithstanding anything to the contrary in this Lease, should Lessor reasonably believe it necessary to assure payment, Lessor may at any time and from time to time during the continuance of this Lease require, by Notice to Lessee: (i) advance cash payment, or (ii) satisfactory security in the form of an irrevocable standby letter or letters credit at Lessee’s expense in form and from a bank acceptable to Lessor (“Letter of Credit”), to cover amounts owed to Lessor by Lessee

 

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hereunder. If Lessee does not provide the Letter of Credit on or before five (5) Business Days after receipt of Lessor’s Notice requiring same, either Party may suspend this Lease forthwith until receipt thereof and, during the period of such suspension, Lessee grants to Lessor a lien on all of its Propane in storage hereunder, which lien shall be subordinate to all prior liens on such Propane. In no event shall Lessor be obligated to accept Propane for storage hereunder until said Letter of Credit is found acceptable to Lessor. Lessor shall not have reasonable grounds to doubt Lessee’s financial responsibility except in the event of a material adverse change in the financial condition of Lessee from the financial condition of Lessee at the Effective Date.

 

Article VI.                                      Term

 

6.01                        Lease No. I Leased Space Term.  Subject to Article VII. hereof, Lease No. I Leased Space shall be for a term commencing on the Effective Date and ending on March 31, 2003 (the “Lease No. I Leased Space Term”).

 

6.02                        Lease No. II Leased Space Term.  Subject to Article VII. hereof, Lease No. II Leased Space shall be for a term commencing on April 1, 2003, and ending on March 31, 2012 (the “Lease No. II Leased Space Term”).

 

Article VII.                                  Event of Default

 

7.01                        Event of Default.  If one or more Events of Default shall occur, Lessor at any time thereafter may give Notice of termination to Lessee describing with specificity the Event of Default and specifying a date (which shall be at lest ten (10) Days after the giving of such Notice) on which this Lease shall terminate, and on such date, subject to Sections 7.02 and 7.03, this Lease shall expire and terminate and all rights of Lessee under this Lease shall cease, unless before such date (i) all arrears of rental payable by Lessee under this Lease shall have been paid by Lessee; and (ii) all other Events of Default at the time of and specified in the termination Notice existing under this Lease shall have been cured. Lessee shall have the right to contest whether an Event of Default has occurred in accordance with Exhibit A. All costs and expenses incurred by or on behalf of the prevailing Party (including, without limitation, attorneys’ fees and expenses) occasioned by any claim of Event of Default that has not been cured shall be paid by the non-prevailing Party.

 

7.02                        Obligations Not Relieved. No termination of this Lease by Lessor pursuant to Section 7.01 shall relieve Lessee from its obligations hereunder, all of which shall survive any such termination or repossession.

 

7.03                        Damages. In the event  of any termination pursuant to this Article, Lessee shall promptly pay to Lessor any unpaid rent due and payable as of the time of such termination. Such payment, together with the rental payment(s) previously made by

 

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Lessee hereunder prior to the time of termination, shall be deemed to be liquidated and agreed damages for Lessee’s default in lieu of all other payments by Lessee hereunder.

 

Article VIII.                              Receipt/Withdrawal of Propane

 

8.01                        Receipt of Propane into Leased Space.  All Propane received from Lessor into Leased Space hereunder shall be received into the Facility via In-Place Transfers.

 

8.02                        Withdrawal of Propane.  All Propane stored in Leased Space hereunder shall be withdrawn from such Leased Space and delivered into receiving common carrier pipelines connected to the Facility during Regular Facility Operating Hours. Lessee shall be responsible to provide documentation required to authorize withdrawals from the Leased Space. Upon such delivery of Propane to Lessee, Lessee shall be solely responsible for all Claims arising out of the possession or use of such Propane.

 

8.03                        No Over-Withdrawal.  In no event shall Lessee withdraw from the Facility more Propane than it has in Leased Space in such Facility at the time of withdrawal.

 

8.04                        Withdrawal Prior to End of Term.  Lessee shall withdraw all of its Propane from Leased Space prior to the end of the Term hereof.

 

Article IX.                                      Scheduling

 

9.01                        Scheduling.  Lessee shall provide Lessor with a written schedule at least ten (10) Days prior to the Days during which Lessee desires to make withdrawals out of Leased Space, advising Lessor of the volume(s) of Propane, and estimated withdrawal date(s) thereof; provided, however, that Lessor shall use reasonable business efforts to accommodate written schedules received from Lessee less than ten (10) Days in advance of estimated withdrawals. Lessor will review and confirm its ability to deliver such Propane according to the schedule by the end of the Business Day following the Business Day in which written schedules are received during Normal Business Hours.

 

Article X.                                          Propane Losses; Casualty Losses

 

10.01                 Propane Losses.  Any Propane loss not caused by the negligent acts or omissions of Lessor or on account of any mysterious disappearance 1 or mis-measurement shall be shared proportionately by Lessee with any other Persons having Propane in storage in the Facility at the time of the loss, based on the volume each had in storage at the time of the loss, as recorded on the Facility’s inventory records. Lessor shall have no responsibility or liability for such loss. Lessor’s liability for Propane losses caused by its negligent acts or omissions or on account of any mysterious disappearance or mis-measurement shall be limited to the replacement of such Propane in storage in the Facility, or, at Lessor’s option, payment of the market value for each Gallon of Propane

 

12

 

equal to the daily average of the daily high and low Oil Price Information Service spot prices for Conway, Kansas, as determined during the week in which the loss or damage occurred, less a $00.00500 per Gallon location differential.

 

10.02                 Casualty Losses.  In the event of condemnation of, or damages to, or destruction of one or more of the Propane underground storage caverns in the Facility, any remaining useable Propane storage capacity in the Facility shall be apportioned among all users thereof based on the relative portion of the total Propane underground storage space leased or otherwise employed by each in the Facility.

 

Article XI.                                      Title; Custody

 

11.01                 Title.  Title to all of Lessee’s Propane received, stored and redelivered out by Lessor hereunder shall remain at all times in the name of Lessee. Lessor shall at no time take or have title to such Propane.

 

11.02                 Custody.  Custody of all Propane received by Lessor hereunder pursuant to In-Place Transfers shall pass to Lessee from Lessor upon completion of the documentation for such In-Place Transfers, pursuant to PTTT’s. Custody of all Propane delivered by Lessor hereunder from Leased space into receiving common carrier pipelines connected to the Facility shall pass from Lessor to such receiving pipelines when such Propane passes the flange connection between the Facility’s delivery piping and such receiving pipelines.

 

Article XII.                                  Volume Determinations

 

12.01                 Volume Determinations.  All volume determinations herein shall be corrected to Sixty Degrees (60°) Fahrenheit and shall be measured in Gallons in accordance with the latest ASTM Petroleum Measurement Tables. The volume of Propane received into Leased Space by In-Place Transfers shall be determined by PTTT’s evidencing such transfers. The volume of Propane delivered out of Leased Space into connecting common carrier pipelines shall be as determined by such pipelines’ meter tickets.

 

Article XIII.                              Event of Force Majeure

 

13.01                 Event of Force Majeure.  In the event either Party hereto is rendered unable, wholly or in part, by an Event of Force Majeure, to carry out its obligations under this Lease, other than to make money payments when due, such Party shall give Notice and full particulars of such Event of Force Majeure to the other Party within a reasonable time after the occurrence of the cause relied on, and the obligations of the Party giving such Notice, so far as they are affected by such Force Majeure, shall be suspended during the continuance of any inability so caused but for no longer period, and such cause shall as far as possible be remedied with all reasonable dispatch. The settlement of strikes and

 

13

 

lockouts shall be entirely within the discretion of the Party having the difficulty and the above requirement that any Force Majeure shall be remedied with all reasonable dispatch shall not require the settlement of strikes or lockouts by acceding to the demands of an opposing party when such course is inadvisable in the discretion of the Party having the difficulty.

 

13.02                 Strikes or Lockouts.  It is understood and agreed that the settlement of strikes or lockouts shall be entirely within the discretion of the Party having the difficulty and that the requirement in Section 13.01 that any Event of Force Majeure shall be remedied with all reasonable dispatch shall not require the settlement of strikes or lockouts by acceding to the demands of an opposing Person when such course is inadvisable in the discretion of the Party having the difficulty.

 

Article XIV.                             Operation and Maintenance of Facility

 

14.01                 Operation and Maintenance of Facility.  During the Term hereof, Lessor shall, at its sole cost, risk and expense, operate, maintain, repair, and inspect the Facility in accordance with Prudent Industry Practice and applicable Laws.

 

Article XV.                                 Notices

 

15.01                 Notices.  Any and all Notices between the Parties given under or in relation to this Lease shall be made in writing and shall be deemed to have been properly given if: (i) personally delivered (with written confirmation of receipt); (ii) delivered and confirmed by telecopier or like transmission service; (iii) delivered by a recognized overnight courier delivery service (with delivery fees prepaid); or (iv) sent by certified United States mail (postage prepaid, return receipt requested), in each case to the appropriate address set forth below:

 

	
If   to Lessor:
    	
 
    	
 
    	
If   to Lessee:
    	
 
    
	
 
    	
 
    	
 
    
	
Phillips Petroleum Company
    	
 
    	
NGL Supply, Inc.
    
	
600 N. Dairy Ashford
    	
 
    	
6120 S. Yale, Suite 805
    
	
Houston, TX 74602
    	
 
    	
Tulsa, OK 74136
    
	
Attn:
    	
MGR NGL
    	
 
    	
Attn:
    	
C. Dwight Creveling
    
	
Telephone:
    	
(281) 293-2230
    	
 
    	
Telephone:
    	
(918) 481-1119
    
	
Facsimile:
    	
(281) 293-5553
    	
 
    	
Facsimile:
    	
(918) 492-0990
    
							

 

15.02                 Effective Date. Any Notice given by United States mail in the manner set forth in Section 15.01 shall be effective as of the date deposited in the United States mail. Any Notice given by personal delivery, telecopier or like transmission service, or overnight courier delivery service in the manner set forth in Section 15.01 shall be effective upon actual receipt if received during the recipient’s Normal Business Hours, or at the

 

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beginning of the recipient’s next business day if not received during the recipient’s Normal Business Hours.

 

15.03                 Change of Address Notice.  Either Party may change its Notice address by giving Notice to the other Party in the manner set forth in Section 15.01; provided, however, that no change of address Notice shall be effective until actually received by the other Party.

 

Article XVI.                             Taxes

 

16.01                 Taxes.  Lessee shall be responsible for and shall pay all Taxes now or hereafter imposed by any Governmental Authority in respect of or measured by the Propane stored hereunder or the manufacture, storage, delivery, receipt or inspection thereof, and Lessee agrees to promptly reimburse Lessor, upon receipt of invoice therefor, for any such Taxes that Lessor is legally required to pay by reason of or resulting from Propane being in Leased Space hereunder (with the exception of income taxes).

 

Article XVII.                         Insurance

 

17.01                 Insurance.  The  rental specified herein does not include any insurance on the Propane covered by this Lease while in Lessor’s custody. Insurance for such Propane, if any, that may be desired by Lessee, shall be carried by Lessee at its sole expense. Should Lessee elect to carry Propane insurance, then each policy of insurance shall be endorsed to provide a waiver of subrogation in favor of Lessor.

 

Article XVIII.                     Applicable Law

 

18.01                 Applicable Law. REGARDLESS OF THE PLACE OF CONTRACTING, PLACE(S) OF PERFORMANCE, OR OTHERWISE, THE PROVISIONS OF THIS LEASE AND ALL AMENDMENTS, MODIFICATIONS, ALTERATIONS OR SUPPLEMENTS THERETO SHALL BE GOVERNED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAW OR OTHER PRINCIPLE THAT MIGHT REFER THE GOVERNANCE OR INTERPRETATION OF THIS LEASE TO THE LAW OF ANOTHER JURISDICTION.

 

Article XIX.                             Indemnity

 

19.01                 Indemnity.  FROM AND AFTER THE EFFECTIVE DATE, EACH OF LESSOR AND LESSEE SHALL DEFEND, INDEMNIFY AND HOLD HARMLESS THE OTHER, ITS DIRECTORS, OFFICERS, EMPLOYEES, AND

 

15

 

 

AGENTS, FROM, AGAINST AND IN RESPECT OF ANY AND ALL CLAIMS, WHETHER FOR PERSONAL INJURY, DEATH, ILLNESS, PROPERTY DAMAGE, OR OTHERWISE, WHICH OCCURS AS A RESULT OF THAT PARTY’S SOLE NEGLIGENCE, PRODUCT LIABILITY OR OTHER FAULT (COLLECTIVELY “SOLE FAULT”) OF THAT PARTY OR ITS RESPONSIBLE PARTIES (AS HEREINAFTER DEFINED) OR BREACH OF ANY PROVISION OF THIS LEASE BY THAT PARTY; IT BEING UNDERSTOOD AND AGREED THAT EACH OF LESSOR AND LESSEE SHALL BE LIABLE ONLY TO THE EXTENT OF ITS OWN SOLE FAULT AND THE SOLE FAULT OF ITS RESPONSIBLE PARTIES AND NEITHER LESSOR NOR LESSEE SHALL BE LIABLE FOR THE SOLE FAULT OF THE OTHER OR ITS RESPONSIBLE PARTIES. AS USED HEREIN, THE “RESPONSIBLE PARTIES” OF A PARTY SHALL MEAN THAT PARTY’S EMPLOYEES, AFFILIATES AND SUBCONTRACTORS AND THE EMPLOYEES OF SUCH AFFILIATES AND SUBCONTRACTORS.

 

19.02      Special Damages.   NOTWITHSTANDING ANYTHING IN THIS LEASE TO THE CONTRARY, IN NO EVENT SHALL EITHER LESSOR OR LESSEE BE LIABLE TO THE OTHER FOR ANY EXEMPLARY, INDIRECT, INCIDENTAL, SPECIAL, OR PUNITIVE DAMAGES RESULTING FROM OR ARISING OUT OF THIS LEASE, INCLUDING, WITHOUT LIMITATION, LOSS OF PROFITS OR BUSINESS INTERRUPTIONS, HOWEVER THEY MAY BE CAUSED; PROVIDED, HOWEVER, THAT THIS SECTION 19.02 SHALL NOT LIMIT A PARTY’S ABILITY TO OBTAIN DIRECT DAMAGES OR LESSEE’S RIGHTS UNDER SECTION 10.01.

 

Article XX.           Assignment; Sublease

 

20.01      Assignment; Sublease. This Lease shall inure to the benefit of and shall be binding upon the Parties and their respective successors and assigns; provided, however, that neither this Lease or any interest in this Lease may be assigned or sublet by any Party, whether directly or indirectly, without the prior written consent of the other Party, which consent shall not be unreasonably withheld or delayed, except as follows:

 

(a)                             Each of Lessor and Lessee shall have the right to assign and delegate its obligations under this Lease to an Affiliate of such Party without the consent of the other, provided that the assigning Party shall remain liable for its obligations hereunder.

 

(b)                             Either Lessor or Lessee shall have the right to assign its rights and delegate its obligations under this Lease to a successor to the Entire Business of the assigning Party, whether through merger, joint venture, purchase or otherwise, without the consent of the other Party.

 

(c)                             Lessee shall have the right to assign its rights and delegate its obligations to a

 

16

 

purchaser or assignee of the entire and total ownership interest of the Propane Assets, without the consent of Lessor.

 

(d)                                  Lessor shall have the right to assign its rights and delegate its obligations to a purchaser or assignee of the entire and total interest in the Facility where the assigned rights and delegated obligations are to be performed, without the consent of Lessee.

 

(e)                                  All of Lessee’s rights and obligations under this Lease shall automatically and without further act be assigned to and assumed by any successor in interest, owner, or subsequent purchaser of the Propane Assets; provided, that the assignee must meet the criteria set forth in either (a), (b) or (c) above.

 

(f)                                    All of Lessor’s rights and obligations under this Lease shall automatically and without further act be assigned to and assumed by any successor in interest, owner, or subsequent purchaser of the Facility; provided, that the assignee must meet the criteria set forth in either (a), (b) or (d) above.

 

(g)                                 An assignment of rights and delegation of obligations hereunder shall become effective upon delivery to the Lessor or Lessee, as the case may be, of a properly executed assignment and assumption agreement evidencing the assignment and delegation.

 

(h)                                 An assignor shall be automatically released from its liabilities under this Lease without the written consent of the other Party if: (i) the assignee is a successor to the assigning Party as set forth in either (b), (c) or (d), as applicable; and (ii) the assignee agrees to perform all of assignor’s obligations under the Lease in all respects, in a binding written document duly executed by or on behalf of such assignee; provided, however, that in no event shall any assignor be released from any pre-assignment Claims under this Lease without the separate written consent of the other.

 

Article XXI.          Miscellaneous

 

21.01      Relationship of the Parties. The relationship of the Parties under this Lease shall be solely that of lessor and lessee. By virtue of entering into this Lease neither Party shall be deemed to be an agent, employee, independent contractor or attorney-in-fact of the other Party.

 

21.02      Use of Facsimile/Telecopy. Execution of any instruments, Notices, consents or other documents required or permitted by this Lease which have been telecopied, faxed, or transmitted by other electronic transmission device, and/or following execution thereof returned by such device, shall be deemed to be effective and constitute an original instrument.

 

17

 

21.03      Disputes Between the Parties. The Parties agree that they will use the Dispute Resolution Procedures outlined in Exhibit A (“Dispute Resolution Procedures”) to resolve disputes that may arise between them under or related to this Lease, including disputes regarding the Parties’ respective rights and obligations hereunder.

 

21.04      No Third-Party Rights. Except as expressly provided for herein, nothing in this Lease is intended to confer upon any Person other than the Parties, and their respective successors and assigns, any rights, benefits or obligations.

 

21.05      Compliance with Laws. This Lease is in all respects subject to all applicable Laws. The Parties shall at all times comply with such Laws as are applicable to their performance of this Lease. If applicable, the Parties shall comply with the provisions of Executive Order 11246 (Equal Employment Opportunity), as amended, together with all Laws of the United States Department of Labor.

 

21.06     Severability. If any provision of this Lease or the application thereof is found by any court of competent jurisdiction to be invalid, illegal or unenforceable, to any extent and for any reason, it shall be adjusted rather than voided, if possible, in order to achieve the intent of the Parties. In any event, the remainder of this Lease and the application of such remainder shall not be affected thereby and shall be enforced to the greatest extent permitted by Law.

 

21.07      Non-Waiver. The failure of either Party to enforce any provision, condition, covenant or requirement of this Lease for any occurrence shall not be construed to be a waiver of such provision, condition, covenant or requirement unless the Party failing to do the enforcing gives a Notice to the other Party that such failure to do the enforcing was intended to be a waiver. No waiver by either Party of any default in the performance of any provision, condition, covenant or requirement contained herein shall be deemed to be a waiver of, or in any manner release, such other Party from performance of any other provision, condition, covenant or requirement herein contained, nor be deemed to be a waiver of the same provision, condition, covenant or requirement.

 

21.08      Entire Agreement. This Lease constitutes the entire agreement between the Parties relating to the subject matter hereof, and it supersedes all prior and contemporaneous agreements, understandings, negotiations and discussions, whether oral or written, between the Parties relating to the subject matter hereof, and there are no warranties, representations, or other agreements between the Parties in connection with the subject matter hereof except as specifically set forth herein.

 

21.09      Amendments. This Lease shall not be modified or amended, in whole or in part, except by a supplemental agreement signed by both Parties.

 

21.10      Counterparts; Multiple Originals. This Lease may be executed in any number of counterparts, all of which together shall constitute one agreement binding on each of the Parties. Each of the Parties may sign any number of copies of this Lease. Each

 

18

 

signed copy shall be an original, but all of them together shall represent the same agreement.

 

21.11      Headings. The Article and Section headings used in this Lease have been inserted only for convenience to facilitate reference and shall not be determinative in construing the meaning, effect  or application of any Article, Section, or provision hereof.

 

21.12      Exhibits. The exhibits referred to herein are attached hereto and by this reference are incorporated herein and made a part hereof. In the event there is any conflict between this Lease and any exhibit, the provisions of this Lease shall be controlling.

 

21.13      Construction. The Parties have participated jointly in the negotiation and drafting of this Lease. In the event an ambiguity or question of intent or interpretation arises, this Lease shall be construed as if drafted jointly by the Parties and no presumption or burden of proof shall arise favoring or disfavoring either Party by virtue of the authorship of any of the provisions of this Lease.

 

21.14      Modification. In the event the FTC conditions its final approval of the Provisional Consent Order on, or otherwise requires modification of, this Lease, the Parties agree to use their reasonable best efforts to make or cause to be made such required modifications, subject to Section 21.15; provided, however, that Lessee shall not be required to make or cause to be made any such required modifications if such required modifications would reasonably be expected to have a material adverse effect on Lessee, and Lessor shall not be required to make or cause to be made any such required modifications if such required modifications would reasonably be expected to have a material adverse effect on Lessor.

 

21.15      Rescission. In the event the FTC withdraws the Provisional Consent Order or conditions its final approval of the Provisional Consent Order in a manner or otherwise requires changes to this Lease (including withdrawal after expiration of the public comment period), that taken as a whole are or would reasonably be expected to be materially adverse to a Party hereto, such Party shall have the right to require that this Lease be rescinded.

 

IN WITNESS WHEREOF, the Parties have signed this Lease as of the date first set forth above.

 

 

	
PHILLIPS PETROLEUM COMPANY
    	
 
    	
NGL SUPPLY, INC.
    
	
(“Lessor”)
    	
 
    	
(“Lessee”)
    
	
 
    	
 
    	
 
    
	
By:
    	
/s/ S. R. Barham
    	
 
    	
By:
    	
/s/ Brian K. Pauling
    
	
 
    	
S. R. Barham
    	
 
    	
 
    	
Brian K. Pauling
    
	
 
    	
Vice President
    	
 
    	
 
    	
President
    

 

19

 

Exhibit A
 Dispute Resolution Procedures

 

ALTERNATIVE DISPUTE RESOLUTION (ADR)

 

Except as otherwise expressly stated in the Agreement, any dispute arising out of or relating to this Agreement shall be resolved in accordance with the procedures specified in Article I of this Exhibit A. The prevailing Party in any legal proceeding or alternative dispute resolution brought to enforce any provision of this Agreement shall be entitled to recover against the non-prevailing Party the reasonable attorneys’ fees, court costs, and other expenses incurred by the prevailing Party, including all costs and expenses and attorneys’ fees incurred as a result of arbitration of the dispute.

 

Article I
 Formal ADR/Arbitration

 

1.             Negotiations Between Executives

 

The Parties shall attempt in good faith to resolve any dispute arising out of or relating to this Agreement promptly by negotiation between executives who have authority to settle the controversy and who are at a higher level of management than the persons with direct responsibility for the matter in dispute. Any Party may give the other Party written Notice of any dispute not resolved in the normal course of business. Within fifteen (15) Days after delivery of the Notice, the receiving Party shall submit to the other a written response. The Notice and the response shall include a statement of each Party’s position and a summary of arguments supporting that position, and the name and title of the executive who will represent that Party and of any other Person who will accompany the executive. Within thirty (30) Days after delivery of the disputing Party’s Notice, the executives of both Parties shall meet at a mutually acceptable time and place, and thereafter as often as they reasonably deem necessary, to attempt to resolve the dispute. All reasonable requests for non-privileged and/or non-proprietary information made by one Party to the other will be honored.

 

All negotiations pursuant to this clause shall be considered confidential and shall be treated as compromise and settlement negotiations for purposes of applicable rules of evidence.

 

Notwithstanding the foregoing, nothing contained in this Agreement shall limit or restrict in any way the right or power of a Party at any time (A) to commence and prosecute a proceeding for a preliminary or temporary injunction or other temporary order pending mediation or arbitration under this Agreement (i) to restrain a Party from breaching this Agreement, or (ii) for specific enforcement of this Exhibit A, or (B) to consult with the other Party in an attempt to negotiate a resolution of the dispute.

 

 

The Parties agree that any legal remedy available to them with respect to a breach of this Article I  will not be adequate and that, in addition to all legal remedies, each Party is entitled to an order specifically enforcing this Exhibit A.

 

2.             Mediation

 

If the dispute has not been resolved by negotiation described in Subsection 1. of this Article I. within forty five (45) Days after the receipt of the disputing Party’s Notice by the other Party, the Parties shall endeavor to settle the dispute by mediation conducted in the English language under the then current Center For Public Resources’ CPR Model Mediation Procedure for Business Disputes. The mediation will be conducted at a site agreed upon by the Parties. Each Party shall be responsible for its own attorney’s fees and costs, provided that the prevailing Party shall be entitled to recover its attorneys’ fees and costs incurred during mediation if the mediation is unsuccessful and the Parties proceed with arbitration.

 

3.             Arbitration

 

If a dispute or controversy shall arise between the Parties with respect to any matter covered by this Agreement that has not been resolved pursuant to either Subsections 1. or 2. above, either Party involved in such controversy shall have the option of submitting the matter to arbitration in the English language pursuant to the guidelines set forth below. Demand and submission to arbitration as provided in this Agreement must, unless otherwise agreed, be made to the other Party in writing by the requesting Party within the later of (A) ten (10) Days after negotiations and mediation held pursuant to Subsections 1. and 2. above have failed, and (B) sixty (60) Days following the effective date of Notice of the dispute or controversy. The failure to timely submit the matter to arbitration shall constitute a waiver of the Parties to submit their dispute to arbitration. If submitted to arbitration, the arbitration shall be binding on the Parties and the dispute shall be settled in accordance with the guidelines below.

 

Any controversy or claim arising out of or relating to this Agreement, or the breach hereof, or the commercial or economic relationship of the Parties, shall, if an election is so made pursuant to this Agreement, be settled by arbitration in accordance with the AAA Rules, and judgment upon the award rendered by the arbitrators may be entered in any court having jurisdiction thereof. The arbitration shall be administered by the AAA. The AAA Rules are incorporated into this Agreement and, as amended from time to time by the AAA, shall establish the procedures for any arbitration brought under this Agreement, except as modified by the following provisions:

 

(A)                          Monetary Limitations. Any Party may initiate arbitration in accordance with the terms of this Agreement and the AAA Rules irrespective of the amount in controversy.

 

(B)                          Number of Arbitrators. If a dispute involves an amount in controversy of $100,000 or less, there shall be one (1) arbitrator. If a dispute involves an amount

 

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in controversy in excess of $100,000 or a request for preliminary injunction, there shall be three (3) arbitrators.

 

(C)                               Arbitrators’ Qualifications and Selection. For disputes involving three (3) arbitrators, each Party involved in the arbitration shall have the right to submit to the other Party involved in the proceeding a proposed list of five (5) qualified arbitrators. Each Party must select one of the proposed candidates nominated by the other Party within ten (10) Days after receiving the list of candidates. The arbitrators selected by the Parties shall then select a third qualified arbitrator to act as chairman. Each arbitrator shall be fully active in his or her profession or occupation. All arbitration proceedings shall be conducted in Tulsa, Oklahoma. If the dispute will be heard by three (3) arbitrators, the arbitrator to be selected by the Party-appointed arbitrators shall be a lawyer experienced in arbitrating large commercial issues of the kind or type similar to those being disputed by the Parties. For disputes involving only one (1) arbitrator, the arbitrator shall be selected in the manner prescribed by the AAA Rules. Should the Parties fail to timely join in the appointment of the arbitrators or should more than two (2) Parties be involved in the arbitration, the arbitrators shall be appointed in accordance with the AAA Rules. The arbitrators shall be fully compensated in accordance with their normal hourly or per diem rates for all time spent by them in connection with the arbitration proceeding, and pending final award, their compensation and expenses shall be advanced equally between or among all Parties participating in the arbitration. Each arbitrator, including those nominated by a Party, shall conduct himself or herself as a neutral, and once each arbitrator has been appointed, there shall be no substantive ex parte communication between any Party or its representative and any arbitrator regarding the arbitration proceeding or its subject matter.

 

(D)                               Preliminary Hearing. Within fifteen (15) Days after the arbitrators have been appointed, an initial meeting (preliminary hearing) among the arbitrators and counsel for the Parties shall be held for the purpose of developing a plan for the management of the arbitration, which shall then be memorialized in an appropriate stipulation and order. The matters which may be addressed by such plan and order include the following, among others: (i) definition of issues and, if appropriate, their division into preliminary and substantive or liability and damages issues; (ii) scope, timing, and types of discovery, if any; (iii) exchange of documents and filing of detailed statements of claim and defense and pre-hearing and other memoranda, either on all issues or on preliminary or liability issues in the first instance; (iv) whether and to what extent the direct testimony of witnesses (or categories of witnesses, such as experts) will be received by affidavit or written witness statement; (v) schedule and places of hearings; (vi) setting of other timetables; (vii) whether and to what extent expert testimony will be required, whether the arbitrators should engage one or more neutral experts, and whether, if this is done, engagement of experts by the Parties can be obviated or minimized; (viii) self-authentication of documents; and (ix) any other matters

 

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which may promote the efficient, expeditious, and cost-effective conduct of the proceeding.

 

If the Parties cannot agree on the matters to be addressed in such a plan (including what evidentiary rules shall apply), such plan shall be developed by the arbitrators.

 

(E)                                 Discovery. The arbitrators shall permit and facilitate such discovery as it shall determine is appropriate under the circumstances, taking into account the needs of the Parties and the desirability of making discovery expeditious and cost-effective. Such discovery may include prehearing depositions, particularly depositions of witnesses who will not appear personally to testify, if there is a substantial, demonstrated need therefor. The arbitrators may issue orders to protect the confidentiality of proprietary information, trade secrets, and other sensitive information disclosed in discovery. Discovery shall be conducted and completed within the following time periods: (i) if the dispute involves an amount in controversy of $100,000 or less, within two (2) Months after the selection of the arbitrator has been completed; (ii) if the dispute involves an amount in controversy in excess of $100,000, but less than $500,000, within four (4) Months after the selection of the arbitrators has been completed; and (iii) if the dispute includes an amount in controversy of $500,000 or more, within nine (9) Months after the selection of the arbitrators has been completed.

 

(F)                                 Efficient Communications. Papers, documents, and written communications shall be served by the Parties directly upon each other and the arbitrators, with a simultaneous copy to the AAA tribunal administrator.

 

(G)                               Time Limits and Schedules. The proceedings shall be conducted in an expeditious manner, and a final award shall be rendered within the following time periods: (i) if the dispute involves an amount in controversy of $100,000 or less, within three (3) Months after the selection of the arbitrator has been completed, (ii) if the dispute involves an amount in controversy in excess of $100,000 but less than $500,000, within six (6) Months after the selection of the arbitrators has been completed, and (iii) if the dispute involves an amount in controversy of $500,000 or more, within one (1) year after the selection of the arbitrators has been completed. The arbitrators are empowered to impose time limits they consider reasonable for each phase of the proceeding including, without limitation, the time allotted to each Party for presentation of its case and for rebuttal.

 

(H)                               Conduct of Evidentiary Proceedings. The arbitrators shall actively manage the proceeding as they deem best so as to make the same fair, expeditious, economical, and less burdensome and adversarial than litigation. The arbitrators may, inter alia and without litigation, limit the issues so as to focus on the core of the dispute, limit the time allotted to each Party for presentation of its case, and

 

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exclude testimony and other evidence that they deem irrelevant, cumulative, or inadmissible.

 

(I)                                    Self-Authentication of Documents. All documents that a Party proposes to offer in evidence, except for those objected to by an opposing Party, shall be self-authenticating.

 

(J)                                 Neutral Experts. Whenever expert testimony is required, the arbitrators may use their power to designate a neutral expert or experts in consultation with the Parties and shall explore with the Parties whether the retention of such neutral experts may render it unnecessary for each Party to proffer testimony by its own expert; provided, however, that each Party retains the right to proffer testimony by its own expert.

 

(K)                               Stenographic Transcripts. There shall be a stenographic transcript of the proceedings, the cost of which shall be borne equally by the Parties pending the final award. The arbitrators may require the Parties jointly to construct summaries of and indexes to testimony and to furnish copies to the arbitrators.

 

(L)                                Direct Testimony via Written Statements. The arbitrators may order that the direct testimony of all or of certain witnesses be furnished by a written, sworn statement. Any witness whose direct testimony is furnished by a written, sworn statement shall be subject to cross-examination in person.

 

(M)                        Governing Law; Limiting Arbitrators’ Equitable Discretion. The arbitrators shall determine the claims of the Parties and render their final award in accordance with Oklahoma Law as determined by the Agreement.

 

(N)                          Pre-Award Interest; Punitive Damages. The arbitrators may, in their discretion, grant pre-award interest and, if so, such interest shall be at commercial rates during the relevant period; provided, however, that under no circumstances shall the interest rate exceed the maximum legal rate as in effect during the relevant period. THE ARBITRATORS MAY NOT AWARD SPECIAL, CONSEQUENTIAL, EXEMPLARY, OR PUNITIVE DAMAGES UNDER ANY CIRCUMSTANCES AND WITHOUT REGARD TO FORUM OR JURISDICTION.

 

(O)                         Draft of Proposed Award. Prior to rendering their final award, the arbitrators shall submit to the Parties an unsigned, written draft of the proposed award, and each Party, within 15 days after receipt of such draft, may serve on the other Party and file with the arbitrators a written statement outlining any alleged errors of fact, computation, law, or otherwise in said draft. The arbitrators, in their discretion, may disregard and treat as a nullity any Party statement if and to the extent that the same is in substance an application for re-argument. Within 20 days after receipt of such Party statements, the arbitrators shall render their final award, which award shall be supported by a written decision.

 

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4.             Confidentiality

 

The entire dispute resolution process is a compromise negotiation. All offers, promises, conduct, and statements, whether oral or written, made in the course of the proceeding by any of the Parties, their agents, employees, experts, and attorneys, and by the mediator or arbitrator are confidential. Such offers, promises, conduct, and statements are privileged under any applicable mediation or arbitration privilege, are subject to Rule 408 of the Federal Rules of Evidence and any state counterpart rules or doctrine and are inadmissible and not discoverable for any purpose, including impeachment, in litigation between the Parties to the mediation or other litigation; provided, however, that evidence that is otherwise admissible or discoverable shall not be rendered inadmissible or non-discoverable as a result of its presentation or use at the mediation or arbitration. Any mediator will be disqualified as a witness, consultant, or expert for any Party, and as arbitrator between the Parties, and his or her oral and written opinions will be inadmissible for all purposes in this or any other dispute involving the Parties hereto.

 

5.             Performance to Continue

 

During the period that the Parties are engaged in mediation or arbitration, each Party is required to continue to perform its obligations under this Agreement, subject to the terms and conditions of any applicable court order to the contrary, pending final resolution of any dispute arising out of or relating to this Agreement, unless to do so would be impossible or impracticable under the circumstances.

 

Article II

Expedited ADR/Expert Determination

 

In the event of a disagreement between the Parties regarding payment of rental issues, or as otherwise specified in the Agreement, then either Party may submit a written request to the other Party requesting a meeting of the Parties’ respective representatives to attempt to resolve the dispute. Such representatives shall meet within three (3) Business Days thereafter at the receiving Party’s offices. If such meeting fails to resolve the dispute within seven (7) Days following the written request for meeting, either Party (the “Initiating Party”) may request in writing to the other that the disputed issue be referred to executives of the respective Parties who are at a higher level of management than the representatives and who have authority to settle the dispute (“Executive”). The Initiating Party shall include in its notice a summary of its position regarding the disputed issue, and the receiving Party shall serve a response thereto on the Initiating Party within five (5) Days thereafter. An Executive from each Party will meet at the receiving Party’s corporate or principal headquarter offices, or at such location as the Parties may mutually agree within seven (7) Days following mailing of the receiving Party’s response. If the Parties do not resolve the dispute within twenty-one (21) Days following the request for referral to Executives, then either Party may request that the dispute be referred to an expert. An expert is a person generally recognized as an expert in the field or fields of expertise relevant to the dispute. Except per specific agreement of both Parties, no

 

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Person shall serve as an expert who has ever been previously employed in any capacity or hired as a consultant for either one of the Parties or any of their Affiliates. In the event that the Parties cannot agree on the expert within seven (7) Days after request for referral, then either Party may obtain designation of an expert by a nationally recognized professional society or organization in the discipline to which the dispute relates. Once designated, the expert will consult with both Parties and review all the relevant material submitted by each Party. Oral submission to the expert shall be made by representatives of both Parties in the presence of each other at a mutually satisfactory date and place or, in absence of agreement of the Parties, as specified by the expert, within thirty (30) Days following selection of the expert. The expert shall provide his or her written decision, together with reasons therefor, simultaneously to both Parties within fourteen (14) Days following the oral submission. The expert may, subject to prior written approval of the Parties, obtain independent or technical advice as he or she may deem necessary. The rules of arbitration either in general or as set forth in Article I shall not apply to this process. Each Party shall bear its respective costs, and the Parties shall share equally the cost of the expert and any independent advisers hired by the expert.

 

The decision of the expert made under this Article II shall be final and binding on both Parties and may be enforced in any court with competent jurisdiction.

 

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