Document:

EX-10.2

 Exhibit 10.2 

EMPLOYMENT AND CHANGE 

OF CONTROL AGREEMENT 

THIS EMPLOYMENT AND CHANGE OF CONTROL AGREEMENT (this “Agreement”) is made and entered as of the 1st day of November, 2014 by and among Entegra Financial Corp. ( “Entegra”), Macon Bank, Inc. (the “Bank”) (Entegra and the Bank are collectively referred to as the
“Employer”), and David A. Bright (“Executive”). 
 BACKGROUND 

WHEREAS, the expertise and experience of Executive, and Executive’s relationships and reputation in the financial institutions industry
are extremely valuable to the Employer; and 
 WHEREAS, it is in the best interests of the Employer to maintain an experienced and sound
executive management team to manage the Employer and to further the Employer’s overall strategies to protect and enhance the value of its shareholders’ investments; and 

WHEREAS, the Employer and Executive desire to enter into this Agreement to establish the scope, terms and conditions of Executive’s
employment by the Employer 
 NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants and agreements set forth herein,
and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 

1. Effective Date. The effective time and date of this Agreement shall be deemed to be 12:00:01 o’clock, a.m., on the date of its
making set forth above (the “Effective Date”). 
 2. Definitions. The following defined terms are defined in the
referenced Sections of this Agreement. 
  

			
	 Term
	  	 Section

	Accrued Obligations	  	Section 8(a)(i)(A)
	Base Salary	  	Section 6(a)
	Bank Board	  	Section 6(a)
	Bank Group	  	Section 12(a)
	Benefit Plans	  	Section 6(c)
	Business	  	Section 12(a)
	Cause	  	Section 7(b)
	Change of Control	  	Section 9(b)
	Change of Control Termination	  	Section 9(a)
	Change of Control Termination Date	  	Section 9(a)
	COBRA	  	Section 8(d)
	Code	  	Section 4
	Commissioner	  	Section 14(b)
	Date of Termination	  	Section 7(f)

			
	Disability	  	Section 7(a)
	Disability Effective Date	  	Section 7(a)
	Effective Date	  	Section 1
	Employment Period	  	Section 4
	Entegra Board	  	Section 7(b)
	FDIC	  	Section 14(d)
	Good Reason	  	Section 7(c)
	Group	  	Section 9(b)
	Incumbent Directors	  	Section 9(b)
	Insurance Benefit Plans	  	Section 6(d)
	ISOs	  	Section 8(b)
	Management	  	Section 7(b)
	Notice of Termination	  	Section 7(e)
	NSOs	  	Section 8(b)
	Other Benefits	  	Section 8(b)
	Person	  	Section 9(b)
	Restricted Period	  	Section 12(a)
	Rules	  	Section 12(f)
	Section 409A	  	Section 4
	Terminate	  	Section 4
	Welfare Benefit Plans	  	Section 6(d)
	Without Cause	  	Section 7(d)

 3. Employment. Executive is employed as the Chief Financial Officer of Entegra and the Bank.
Executive’s responsibilities, duties, prerogatives and authority in such executive offices, and the clerical, administrative and other support staff and office facilities provided to him, shall be those customary for persons holding such
executive offices of institutions that are a part of the financial institutions industry. 
 4. Employment Period. Unless extended by
renewal as provided below or earlier Terminated in accordance with Sections 7 or 9 hereof, Executive’s employment shall be for a twenty-four (24) month term beginning as of the Effective Date; provided, however, that the term shall be
extended on each anniversary of the Effective Date for successive one (1) year periods unless the Employer shall give Executive notice of non-renewal at least six (6) months prior to the expiration of the then existing term (the
“Employment Period”). Upon the expiration of the Employment Period, this Agreement shall terminate and Executive shall be an “at will” employee of the Employer. For purposes of this Agreement, “Terminate”
(and variations and derivatives thereof) shall mean, when used in connection with a cessation of employment, that the Executive has incurred a separation from service as defined in Section 409A of the Internal Revenue Code of 1986, as amended
(the “Code”), and guidance and regulations issued thereunder (“Section 409A”). 
 5. Extent of
Service. During the Employment Period, and excluding any periods of vacation, sick or other leave to which Executive is entitled under this Agreement, Executive agrees to devote reasonable attention and time to the business and affairs of the
Bank commensurate with his offices, and, to the extent necessary to discharge the responsibilities assigned to Executive hereunder, to use Executive’s reasonable best efforts to perform faithfully and efficiently Executive’s
responsibilities and duties under this Agreement. 

  
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 6. Compensation and Benefits. 

(a) Base Salary. During the Employment Period, the Employer will pay to Executive a base salary at the rate of at least $180,000 per
year (“Base Salary”), less normal withholdings, payable in equal monthly or more frequent installments as are customary under the Bank’s payroll practices from time to time. In accordance with the policies and procedures of the
Board of Directors of the Bank (the “Bank Board”), the Employer shall review Executive’s total compensation at least annually and in its sole discretion may adjust Executive’s total compensation from year to year;
provided, however, that periodic increases in Base Salary, once granted, shall not be subject to revocation nor shall the Base Salary be subject to reduction. The annual review of Executive’s total compensation will consider, among other
things, changes in the cost of living, Executive’s own performance and the Entegra’s consolidated performance. 
 (b) Incentive
Plans. During the Employment Period, Executive shall be entitled (i) to participate in all of executive management incentive plans of the Employer, and any successor or substitute plans; and (ii) to participate in all stock option,
stock grant, management stock right recognition and similar plans of the Employer, and any successor or substitute plans. 
 (c) Savings
and Retirement Plans. During the Employment Period, Executive shall be entitled to participate in all savings, deferred compensation, pension and retirement plans (including supplemental retirement plans), practices, policies and programs
applicable generally to senior executive employees of the Employer (the “Benefit Plans”). 
 (d) Welfare Benefit
Plans. During the Employment Period, Executive and/or Executive’s family, as the case may be, shall be eligible for participation in and shall receive all benefits under all welfare benefit plans, practices, policies and programs provided
by the Employer (including, without limitation, medical, hospitalization, prescription, dental, disability, employee life, group life, accidental death and dismemberment, and travel accident insurance plans and programs) (“Welfare Benefit
Plans”) to the extent applicable generally to members of the senior executive management of the Employer. The Welfare Benefit Plans pertaining to medical, hospitalization, prescription and dental insurance coverages are referred to herein
as the “Insurance Benefit Plans”. The Bank Board may also designate Executive as a participant in other similar plans in its discretion. 

(e) Expenses. During the Employment Period, Executive shall be entitled to receive prompt reimbursement for all reasonable expenses
incurred by Executive in accordance with the policies, practices and procedures of the Employer to the extent applicable generally to any employee who is a member of the senior executive management of the Employer. The expenses eligible for
reimbursement under this item (e) in any year shall not affect any expenses eligible for reimbursement or in-kind benefits in any other year. Executive’s rights under this item (e) are not subject to liquidation or exchange for any
other benefit. 

  
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 (f) Fringe and Similar Benefits. During the Employment Period, Executive shall be entitled
to fringe benefits in accordance with the plans, practices, programs and policies of the Employer in effect for employees who are members of its senior executive management. 

(g) Vacation, Sick and Other Leave. During the Employment Period, Executive shall be entitled annually to that number of paid time off
days specified in the employment policies of the Employer and shall have such rights with respect to such days as are provided in those policies. 

7. Termination of Employment (Other Than In Connection With A Change Of Control). 

(a) Death or Disability. Executive’s employment with the Employer shall Terminate automatically upon Executive’s death during
the Employment Period. If the Employer determines in good faith that the Disability of Executive has occurred during the Employment Period (pursuant to the definition of Disability set forth below), it may give to Executive written notice in
accordance with Section 7(e) of this Agreement of its intention to Terminate Executive’s employment. In such event, Executive’s employment with the Employer shall Terminate effective on the 45th day after receipt of such written
notice by Executive (the “Disability Effective Date”), provided that, within the 30 days after such receipt, Executive shall not have returned to full-time performance of Executive’s duties on a continuing basis. For purposes
of this Agreement, “Disability” shall mean the absence of Executive from Executive’s duties with the Employer on a full-time basis for at least 30 of any 45 consecutive business days as a result of incapacity due to mental or
physical illness or injury which is determined to be total and permanent by a physician selected by the Employer, or the insurers of the Employer, and acceptable to Executive or Executive’s legal representative, which acceptance shall not be
unreasonably withheld, subject to the Employer’s obligations, and Executive’s rights, under (A) the Americans With Disabilities Act, 42 U.S. C. §§ 1210 et seq., and (B) the Family and Medical Leave Act, 29 U.
S.C. §§ 2601 et seq. (and the regulations promulgated under the foregoing Acts). 
 (b) Cause. The Employer may
Terminate Executive’s employment with the Employer for Cause. For purposes of this Agreement, “Cause” shall mean: 
  

	 	(i)	the continued failure of Executive to perform substantially Executive’s duties with the Employer, other than any such failure resulting from Disability, after a written demand for substantial performance is
delivered to Executive by the President and Chief Executive Officer of the Employer (“Management”) which specifically identifies the manner in which Management believes that Executive has not substantially performed Executive’s
duties; 

  

	 	(ii)	the engaging by Executive in illegal conduct or gross misconduct which is materially and demonstrably injurious to the Employer; 

  
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	 	(iii)	insubordination with respect to one or more directives of Management after receipt of a written warning from the Management with respect thereto; or 

 

	 	(iv)	an act by Executive which constitutes a material breach of Executive’s fiduciary duty to the Employer and which has an adverse impact upon the reputation or business of the Employer. 

Any act, or failure to act, based upon authority given pursuant to resolutions duly adopted by the Bank Board or the Board of Directors of Entegra
(“Entegra Board”) or based upon the advice of legal counsel for the Employer, shall be conclusively presumed to be done, or omitted to be done, by Executive in good faith and in the best interests of the Employer and to not
constitute insubordination or a failure to perform. 
 (c) Voluntary Termination; Good Reason. Executive may Terminate
Executive’s employment with the Employer voluntarily or for Good Reason. For purposes of this Agreement, “Good Reason” shall mean: (i) a material diminution in Executive’s authority, duties, or responsibilities;
(ii) a material change in the geographic location at which Executive must perform the services to be performed by Executive pursuant to this Agreement; and (iii) any other action or inaction that constitutes a material breach by the
Employer of this Agreement. Executive must provide notice of voluntary Termination at least 30 days prior to the applicable Date of Termination. Executive must provide notice to the Employer of the condition Executive contends is Good Reason within
30 days of the initial existence of the condition, and the Employer must have a period of at least 30 days to remedy the condition. If the condition is not remedied, Executive must provide a Notice of Termination as set forth in Section 7(e)
within 30 days of the end of the Employer’s remedy period.  
 (d) Without Cause. The Employer may Terminate
Executive’s employment without Cause (“Without Cause”). 
 (e) Notice of Termination. Any Termination (other
than for death) shall be communicated by a Notice of Termination given in accordance with Section 16(g) of this Agreement. For purposes of this Agreement, a “Notice of Termination” means a written notice which
(i) indicates the specific termination provision in this Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for Termination of Executive’s
employment under the provision so indicated, and (iii) if the Date of Termination (as defined below) is other than the date of receipt of such notice, specifies the Date of Termination (which date shall be not more than 30 days after the giving
of such notice except as otherwise provided in Section 7(a)). The failure to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Disability, Cause, or Good Reason shall not waive any right of
Executive or the Employer hereunder or preclude Executive or the Employer from asserting such fact or circumstance in enforcing Executive’s or the Employer’s rights hereunder. 

(f) Date of Termination. “Date of Termination” means (i) if Executive’s employment is Terminated by the
Employer for Cause or Without Cause, the date of receipt of 

  
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the Notice of Termination or any later date specified therein, as the case may be, (ii) if Executive’s employment is Terminated by Executive for Good Reason, the date of receipt of the
Notice of Termination, (iii) if Executive’s employment is Terminated by Executive voluntarily, the Date of Termination shall be the 30th day following the date of receipt of the Notice
of Termination, and (iv) if Executive’s employment is Terminated by reason of death or Disability, the Date of Termination shall be the date of death of Executive or the Disability Effective Date, as the case may be. 

8. Obligations of the Employer Upon Termination (Other Than In Connection With A Change Of Control). The provisions of this
Section 8 apply only to Terminations that are not in connection with a Change of Control. 
 (a) Termination Without Cause or for
Good Reason. If, during the Employment Period, the Employer shall Terminate Executive’s employment Without Cause or the Executive shall Terminate Executive’s employment for Good Reason, then in consideration of Executive’s
services rendered prior to such Termination; 
  

	 	(i)	the Employer shall pay to Executive: 

  

	 	A.	a lump sum in cash on the 30th day after the Date of Termination equal to (1) Executive’s Base Salary through the Date of Termination to the extent not
theretofore paid, and (2) any accrued vacation pay, in each case to the extent not theretofore paid (the sum of the amounts described in clauses (1) and (2) shall be hereinafter referred to as the “Accrued
Obligations”); and 

  

	 	B.	a lump sum in cash on the 30th day after the Date of Termination equal to the product of (1) Executive’s aggregate cash bonus for the last completed fiscal
year, whether paid to Executive under Section 6 above or otherwise paid to Executive, and (2) a fraction, the numerator of which is the number of days in the current fiscal year through the Date of Termination and the denominator of which
is 365; and 

  

	 	C.	in four (4) as nearly as equal as possible semi-annual installments, beginning on the 30th day after the Date of Termination an amount equal to two
(2) times Executive’s Base Salary; 

  

	 	(ii)	 for a period of 12 months from and after the Date of Termination the Employer shall continue to provide benefits to Executive and/or Executive’s
family at least equal to those which would have been provided to them in accordance with the Insurance Benefit Plans if Executive’s employment had not been Terminated; provided, however, that if Executive becomes employed with

  
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another employer and is eligible to receive substantially the same benefits under the other employer’s plans as Executive would receive under the Insurance Benefit Plans under this item
(ii), the benefits provided under this item (ii) shall be terminated; 

  

	 	(iii)	to the extent not theretofore paid or provided, the Employer shall timely pay or provide to Executive any other amounts or benefits required to be paid or provided herein or which Executive is eligible to receive under
any Welfare Benefit Plan; and 

  

	 	(iv)	provided, however, that if during the Restricted Period Executive violates Section 12, no payments otherwise due following the date of such violation shall be due or paid under item (i)(C). 

(b) Death. If Executive’s employment is Terminated by reason of Executive’s death during the Employment Period, this
Agreement shall terminate without further obligations to Executive’s legal representatives under this Agreement, except that: (i) Accrued Obligations shall timely be paid as provided below; (ii) Other Benefits shall be timely paid or
provided as described below; (iii) all stock options that are “incentive stock options”, as described in Section 422 of the Code (“ISOs”), previously granted to Executive that vested at or prior to the Date of
Termination shall remain exercisable for the longer of 12 months and the exercise period in effect immediately prior to the Date of Termination; (iv) all nonqualified stock options (“NSOs”) previously granted to Executive that
vested at or prior to the Date of Termination shall remain exercisable for the period of exercise in effect immediately prior to the Date of Termination; (v) all options previously granted to Executive and scheduled to vest in the year of death
shall immediately vest and be exercisable for the applicable period set forth in the preceding items (iii) and (iv); and (vi) Executive’s rights to all benefits under all Benefit Plans that are “non-qualified” plans shall be
100% vested, regardless of Executive’s age or years of service, at the time of Executive’s death. Accrued Obligations shall be paid to Executive’s estate or beneficiary, as applicable, in a lump sum in cash on the 30th day after the
Date of Termination. With respect to the provision of Other Benefits, the term “Other Benefits” as utilized in this Section 8(b) shall mean, and Executive’s estate and/or beneficiaries shall be entitled to receive, all
benefits under the Employer’s Welfare Benefit Plans relating to death benefits. Without limiting the foregoing, for one (1) year after Executive’s death, the Employer shall pay any premium required for any “qualified
beneficiary” to continue his or her health care coverage in accordance with Title 1, Part 6 of the Employee Retirement Security Act of 1974, as amended. 

(c) Disability. If Executive’s employment is Terminated by reason of Executive’s Disability during the Employment Period,
this Agreement shall terminate without further obligations to Executive, except that: (i) Accrued Obligations shall be timely paid as provided below; (ii) Other Benefits shall be timely paid or provided as described below; (iii) all
stock options that are ISOs previously granted to Executive that vested at or prior to the Date of Termination shall remain exercisable for the longer of 12 months and the exercise period in effect immediately prior to the Date of Termination;
(iv) all NSOs previously granted to Executive that vested at or prior to the Date of Termination shall remain exercisable for the period of exercise in effect immediately prior to the Date of Termination; and (v) all options

  
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previously granted to Executive and scheduled to vest in the year in which the Disability Effective Date occurs shall immediately vest and be exercisable for the applicable period set forth in
the preceding items (iii) and (iv). Accrued Obligations shall be paid to Executive in a lump sum in cash on the 30th day after the Date of Termination. With respect to the provision of Other Benefits, the term Other Benefits as utilized in this
Section 8(c) shall include, without limitation, and Executive shall be entitled after the Date of Termination to, (1) receipt of all disability benefits under all Welfare Benefit Plans relating to disability, (2) receipt, for the
remainder of the then current Employment Period, of all benefits available to Executive under all Insurance Benefit Plans, subject to the Employer Benefit Election, and (3) for the remainder of the then current Employment Period continued
participation in group life and employee life insurance programs generally available to senior executive officers. 
 (d) Voluntary
Termination; Cause. If Executive voluntarily Terminates his employment or if Executive’s employment shall be Terminated for Cause during the Employment Period, this Agreement shall terminate without further obligations to Executive, except
that (i) the Accrued Obligations shall be paid in a lump sum in cash on the 30th day after the Date of Termination, and (ii) Other Benefits shall be paid or provided in a timely manner, in each case to the extent theretofore unpaid;
provided, however, that Executive’s right to continue to participate in Welfare Benefit Plans shall terminate on the 30th day following the Date of Termination, subject to Executive’s rights under the Consolidated Omnibus Budget
Reconciliation Act of 1985, 29 U.S.C. §§ 1161 et seq. (“COBRA”). 
 9. Termination In Connection With a
Change of Control. 
 (a) Change of Control Termination. In the event that, at the time of, within 90 days prior to, or within
one (1) year after, a Change of Control, and during the Employment Period, the Employer Terminates Executive’s employment Without Cause or Executive Terminates Executive’s employment for Good Reason (each a “Change of Control
Termination”), Executive shall be entitled to receive the payments and benefits specified in this Section 9. The date on which the Employer or Executive receives notice in accordance with Section 16(h) of a Change of Control
Termination shall be deemed the “Change of Control Termination Date.” 
 (b) Definition of Change of Control.
“Change of Control” shall mean (i) a Change of Ownership; (ii) a Change in Effective Control; or (iii) a Change of Asset Ownership; in each case, as defined herein and as further defined and interpreted in
Section 409A. 
 A. “Change in Effective Control” shall mean the date either (i) any
“Person” or “Group” (as those terms are defined in or pursuant to Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended, but not including Entegra or any “employee benefit plan” (as defined in or
pursuant to the Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1002(3) of Entegra or the Bank) acquires (or has acquired during the preceding 12 months) ownership of outstanding stock of Entegra possessing 30% or more of the total
voting power of Entegra’s outstanding stock or (B) a majority of the Entegra Board is replaced during any 12 month period by directors whose election is not endorsed by a majority of the members of the Entegra Board prior to such election.

  
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 B. “Change of Asset Ownership” shall mean the date any Person or
Group acquires (or has acquired during the preceding 12 months) assets from Entegra or the Bank that have a total gross fair market value that is equal to or exceeds 40% of the total gross fair market value of all of Entegra’s consolidated
assets immediately prior to such acquisition. 
 C. “Change of Ownership” shall mean the date any Person or
Group acquires ownership of outstanding stock of Entegra that, together with stock previously held, constitutes more than 50% of the total fair market value or total voting power of the stock of Entegra provided that such Person or Group did not
previously own 50% or more of the value of voting power of the outstanding stock of Entegra. 
 (c) Change of Control Payments and
Benefits. Upon a Change Of Control Termination: 
  

	 	(i)	The Employer shall pay to Executive in a lump sum in cash on the 30th day after the Change of Control Termination Date the aggregate of the following amounts: 

 

	 	(A)	the sum of the Accrued Obligations; and 

  

	 	(B)	in four (4) as nearly as equal as possible semi-annual installments beginning on the 30th day after the Change of Control Termination Date, an amount equal to
two (2) times the total of Executive’s average annual compensation as calculated for purposes of Code Section 280G; 

  

	 	(C)	provided, however, that if during the Restricted Period Executive violates Section 12, no payments otherwise due following the date of such violation shall be due or paid under item (i)(B). 

 

	 	(ii)	for a period of 12 months from and after the Change of Control Date of Termination the Employer shall continue to provide benefits to Executive and/or Executive’s family at least equal to those which would have
been provided to them in accordance with the Insurance Benefit Plans if Executive’s employment had not been Terminated; provided, however, that if Executive becomes employed with another employer and is eligible to receive substantially the
same benefits under the other employer’s plans as Executive would receive under the Insurance Benefit Plans under this item (ii), the benefits provided under this item (ii) shall be terminated; 

  
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	 	(iii)	All options previously granted to Executive that are unvested as of the Change of Control Termination Date shall be deemed vested, fully exercisable and non-forfeitable as of the Change of Control Termination Date
(provided, however, that options granted less than six (6) months before the Change of Control Termination Date shall not be exercisable until the first day subsequent to the six (6) months following their dates of grant) and all
previously granted options that are vested, but unexercised, on the Change of Control Termination Date shall remain exercisable, in each case for the period during which they would have been exercisable absent the Termination of Executive’s
employment except as otherwise specifically provided by the Code. 

  

	 	(iv)	Executive’s benefits under all Benefit Plans that are non-qualified plans shall be 100% vested, regardless of Executive’s age or years of service, as of the Change of Control Termination Date.

  

	 	(v)	Notwithstanding the foregoing provisions of this Section 9, the Employer may reduce any amount, distribution, acceleration of vesting or other right described in this Section 9, in whole or part, such that the
aggregate value of all payments, distributions and benefits received by Executive shall not constitute an “excess parachute payment” within the meaning of Section 280G of the Code subject to the excise tax imposed by Section 4999
of the Code; provided, however, that the Employer will endeavor to effect any such reduction in a way that results in the most favorable tax consequences for Executive and that such reduced aggregate amount shall be the maximum amount which would
not constitute an “excess parachute payment”. 

 10. Non-Exclusivity of Rights. Nothing in this Agreement
shall prevent or limit Executive’s continuing or future participation in any plan, program, policy, or practice provided by the Employer and for which Executive may qualify, nor shall anything herein limit or otherwise affect such rights as
Executive may have under any contract or agreement with the Employer. Amounts which are vested benefits or which Executive is otherwise entitled to receive under any plan, policy, practice or program of or any contract or agreement with the Employer
at or subsequent to a Date of Termination or Change of Control Termination Date shall be payable in accordance with such plan, policy, practice or program or such contract or agreement except as explicitly modified by this Agreement. 

11. Full Settlement. The Employer’s obligation to make the payments provided for in this Agreement and otherwise to perform its
obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Employer 

  
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may have against Executive or others. The Employer agrees to recognize as an indebtedness to Executive and shall reimburse all legal fees and expenses which Executive may reasonably incur as a
result of any contest by the Employer, Executive or others of the validity or enforceability of, or liability under, any provision of this Agreement or any guarantee of performance thereof (including as a result of any contest by Executive about the
amount of any payment pursuant to this Agreement) in which the outcome is deemed by a court of competent jurisdiction to have been in majority part favorable to Executive, plus in each case interest on any delayed payment at the “applicable
federal rate” provided for in Section 7872(f)(2)(A) of the Code. 
 12. Covenants. 

(a) Covenant Not to Compete. During the Restricted Period, Executive shall not, within the geographic areas composed of the circles
surrounding the Bank’s then existing banking offices from or through which it provides loan and/or deposit taking services with each circle having the applicable such banking office as its center point and a radius of 50 miles (the
“Territory”), directly or indirectly, in any capacity, render services, or engage or have a financial interest in, any business that shall be competitive with any of those business activities in which Entegra or any of the
Entegra’s subsidiaries or affiliates (the “Bank Group”) is engaged as of the date of this Agreement, which business activities include, but are not limited to, the provision of banking services (collectively, the
“Business”); provided, however, that Executive’s ownership of less than five percent (5%) of the outstanding securities of any entity engaged in the Business that has a class of securities listed on a securities exchange
or qualified for quotation on any over-the-counter market shall not be a violation of the foregoing. For purposes of this Agreement, except as otherwise provided in Section 17, “Restricted Period” shall mean the period of 24
months following the Termination of Executive’s employment as provided by this Agreement. 
 (b) Covenant Not to Solicit
Customers. During the Restricted Period, Executive shall not, directly or indirectly, individually or on behalf of any other person or entity (other than a member of the Bank Group), offer to provide banking services to any person, partnership,
corporation, limited liability company, association, or other entity who is or was (i) a customer of any member of the Bank Group during any part of the 12 month period immediately prior to the Date of Termination, or (ii) a potential
customer to whom any member of the Bank Group offered to provide banking services during any part of the 12 month period immediately prior to the Date of Termination. 

(c) Covenant Not to Solicit Employees. During the Restricted Period, Executive shall not, directly or indirectly, individually or on
behalf of any other person or entity, solicit, recruit or entice, directly or indirectly, any employee of any member of the Bank Group to leave the employment of such member to work with Executive or with any person, partnership, corporation,
limited liability company or other entity with whom Executive is or becomes affiliated or associated. 
 (d) Non-Disparagement;
Confidentiality. Executive covenants and agrees that following Termination of Executive’s employment for any reason, Executive shall not disparage, hold up to ridicule or make false statements, whether directly or by inference, regarding
Entegra 

  
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or the Bank or any of their respective directors, officers, employees or agents, the financial results or financial condition of either of Entegra or the Bank, or the prospects of Entegra or the
Bank. 
 Executive further covenants and agrees that during the Employment Period and thereafter, Executive shall hold inviolate and
secret, and shall not use for Executive’s personal benefit or the benefit of any Person other than Entegra or the Bank, all confidential and/or proprietary information of either Entegra or the Bank, including, but not limited to, all processes,
procedures, programs, know-how, trade secrets, pricing strategies and techniques, investment strategies and techniques, marketing plans and strategies, personnel information, customer lists, analyses and compilations of customer information,
financial projections, and other similar information, regardless of the form in which such information is obtained, retained or maintained by or on behalf of Entegra or the Bank. Executive agrees that the foregoing obligations are in addition to,
and not in limitation of Executive’s confidentiality obligations or duties under applicable corporate law, federal securities laws, or federal or state financial institution laws. 

(e) Reasonableness of Scope and Duration. The parties hereto agree that the covenants and agreements contained in this Section 12
are reasonable in their time, territory and scope, and they intend that they be enforced, and no party shall raise any issue of the reasonableness of the time, territory or scope of any such covenants in any proceeding to enforce any such covenants.

 (f) Enforceability. Executive agrees that monetary damages would not be a sufficient remedy for any breach or threatened breach of
the provisions of this Section 12, and that in addition to all other rights and remedies available to Entegra and the Bank, they shall be entitled to specific performance and injunctive or other equitable relief as a remedy for any such breach
or threatened breach. Any determination of whether Executive has violated such covenants shall be made by arbitration in Greensboro, North Carolina under the Rules of Commercial Arbitration (the “Rules”) of the American Arbitration
Association, which Rules are deemed to be incorporated by reference herein. 
 (g) Separate Covenants and Severability. The covenants
and agreements contained in this Section 12 shall be construed as separate and independent covenants. Should any part or provision of any such covenant or agreement be held invalid, void or unenforceable in any court of competent jurisdiction,
no other part or provision of this Agreement shall be rendered invalid, void or unenforceable by a court of competent jurisdiction, no other part or provision of this Agreement shall be rendered invalid, void or unenforceable as a result. If any
portion of the foregoing provisions is found to be invalid or unenforceable by a court of competent jurisdiction unless modified, it is the intent of the parties that the otherwise invalid or unreasonable term shall be reformed, or a new enforceable
term provided, so as to most closely effectuate the provisions as is validly possible. 

  
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 13. Assignment and Successors. 

(a) Executive. This Agreement is personal to Executive and without the prior written consent of the Employer shall not be assignable by
Executive otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by Executive’s legal representatives. 

(b) The Employer. This Agreement shall inure to the benefit of and be binding upon the Employer and its successors and assigns. Entegra
and the Bank will each require any successor to it (whether direct or indirect, by stock or asset purchase, merger, consolidation or otherwise) to all or substantially all of its business or more than 50% of its assets to assume expressly and agree
to perform this Agreement in the same manner and to the same extent it would be required to perform it if no such succession had taken place. 

14. Regulatory Intervention. Notwithstanding anything in this Agreement to the contrary, the obligations of the Employer under this
Agreement are subject to the following terms and conditions: 
 (a) If Executive is suspended and/or temporarily prohibited from
participating in the conduct of the Bank’s affairs by a notice served under Section 8(e)(3) or (1) of the Federal Deposit Insurance Act (12 U.S.C. § 1818 (e)(3) and (g)(1)), the Bank’s obligations hereunder, as applicable,
shall be suspended as of the date of service unless stayed by appropriate proceedings. If the charges in the notice are dismissed, all of the Employer’s obligations which were suspended shall be reinstated. 

(b) If Executive is removed and/or permanently prohibited from participating in the conduct of the Bank’s affairs by an order issued
under Section 8(e)(4) or (g)(1) of the Federal Deposit Insurance Act (12 U.S.C. § 1 818 (e)(4) and (g)(1)) or by an order of the North Carolina Commissioner of Bank (the “Commissioner”), all obligations of the Employer
under this Agreement shall terminate as of the effective date of the order, but vested rights of the parties shall not be affected. 
 (c)
If the Bank is in default (as defined in Section 3(x)(1) of the Federal Deposit Insurance Act (12 U.S. C. § 1813 (X)(1)), all obligations of the Employer under this Agreement shall terminate as of the date of default, but any vested rights
of Executive shall not be affected. 
 (d) All obligations of the Employer under this Agreement shall be terminated, except to the extent
determined that continuation of the contract is necessary for the continued operation of the Bank, if so ordered by the Commissioner at the time the Federal Deposit Insurance Corporation (“FDIC”) enters into an agreement to provide
assistance to or on behalf of the Bank under the authority contained in Section 13 (c) of the Federal Deposit Insurance Act (12 U.S.C.§ 1823 (c)), or if so ordered b the Commissioner at the time the FDIC approves a supervisory merger
to resolve problems related to operation of the Bank or when the Bank is determined by the Commissioner to be in an unsafe or unsound condition. Any rights of Executive that shall have vested under this Agreement shall not be affected by such
action. Provided that any termination of this Agreement, in whole or in part, shall be in compliance with Section 409A to the extent Section 409A applies to any portion of this Agreement. 

  
 13 

 (e) With regard to the provisions of this Section 14(a) through (d): 

 

	 	(i)	The Bank agrees to use its best efforts to oppose any such notice of charges as to which there are reasonable defenses; 

  

	 	(ii)	In the event the notice of charges is dismissed or otherwise resolved in manner that will permit the Employer to resume its obligations to pay compensation hereunder, the Employer will promptly make such payment
hereunder; and 

  

	 	(iii)	During any period of suspension under Section 14(a), the vested rights of Executive shall not be affected except to the extent precluded by such notice. 

(f) The Employer’s obligations to provide compensation or other benefits to Executive under this Agreement shall be terminated or limited
to the extent required by the provisions of any final regulation or order of the FDIC promulgated under Section 18(k) of the Federal Deposit Insurance Act (12 U.S.C. § 1828(k)) limiting or prohibiting any “golden parachute
payment” as defined therein, but only to the extent that the compensation or payments to be provided by the Employer under this Agreement are so prohibited or limited. 

15. Certain Payments Delayed for a Specified Employee. If Executive is a “specified employee” as defined in
Section 409A, then, notwithstanding any other provision herein, any payment(s) required under this Agreement on account of a “separation from service” as defined in Section 409A shall be made and/or shall begin on the first day
of the seventh (7th) month following the date of Executive’s Termination to the extent such payments are not exempt from Section 409A, and the six (6) month delay in payment is
required by Section 409A. 
 16. Miscellaneous. 

(a) Waiver. Failure of either party to insist, in one or more instances, on performance by the other in strict accordance with the
terms and conditions of this Agreement shall not be deemed a waiver or relinquishment of any right granted in this Agreement or of the future performance of any such term or condition or of any other term or condition of this Agreement, unless such
waiver is contained in a writing signed by the party making the waiver. 
 (b) Severability. If any provision or covenant, of any
part thereof, of this Agreement should be held by any court to be invalid, illegal or unenforceable, either in whole or in part, such invalidity, illegality or unenforceability shall not affect the validity, legality enforceability of the remaining
provisions or covenants, or any part thereof, of this Agreement, all of which shall remain in full force and effect. 

  
 14 

 (c) Other Agents. Nothing in this Agreement is to be interpreted as limiting the Employer
from employing other personnel on such terms and conditions as may be satisfactory to it. 
 (d) Entire Agreement. Except as provided
herein, this Agreement contains the entire agreement between the Employer and Executive, with respect to the subject matter hereof and supersedes and invalidates any previous employment and severance agreements or contracts with Executive. No
representations, inducements, promises or agreements, oral or otherwise, which are not embodied herein, shall be of any force or effect. 

(e) Compliance with Section 409A. It is intended that this Agreement shall conform with all applicable Section 409A
requirements to the extent Section 409A applies to any provisions of the Agreement. Accordingly, in interpreting, construing or applying any provisions of the Agreement, the same shall be construed in such manner as shall meet and comply with
Section 409A, and in the event of any inconsistency with Section 409A, the same shall be reformed so as to meet the requirements of Section 409A. Executive acknowledges that the Employer has not made any representation or warranty
regarding the treatment of this Agreement or the benefits payable under this Agreement under federal, state or local income tax laws, including but not limited to Section 409A. 

(f) Governing Law. Except to the extent preempted by federal law, the laws of the State of North Carolina shall govern this Agreement
in all respects, whether as to its validity, construction, capacity, performance or otherwise. 
 (g) Notices. All notices, requests,
demands and other communications required or permitted hereunder shall be in writing and shall be deemed to have been duly given if delivered or seven (7) days after mailing if mailed, first class, certified mail, postage prepaid: 

To the Employer: 

Entegra Financial Corp. 

One Center Court 

Franklin, North Carolina 28734-3445 

Attention: Chairman of the Board 

To Executive: 

David A. Bright 

468 Cedar Grove Church Road 

Laurens, South Carolina 29360 

Any party may change the address to which notices, requests, demands and other communications shall be delivered or mailed by giving notice thereof to the
other party in the same manner provided herein. 

  
 15 

 (h) Amendments and Modifications. This Agreement may be amended or modified only by a
writing signed by all parties hereto, which makes specific reference to this Agreement. Provided, further, that no amendment or modification to this Agreement shall be adopted unless it complies with Section 409A to the extent Section 409A
applies to this Agreement and/or to the amendment or modification. 
 17. Regulatory Prohibition. In the event that the Bank shall be
deemed a “troubled bank” by the FDIC with the result that the payment of severance payments to Executive upon Termination of Executive’s employment shall be prohibited by federal statutes or regulations (including, but not limited to,
Part 359 of the regulations of the FDIC), then the term “Restricted Period” used in Section 12 shall be deemed to be three (3) months from the Date of Termination or Change of Control Termination Date, as applicable. 

IN WITNESS WHEREOF, the parties hereto have duly executed and delivered this Employment and Change of Control Agreement as of the date first
above written. 
  

			
	ENTEGRA FINANCIAL CORP.
		
	By:	 	 /s/ Fred H. Jones

		 	Fred H. Jones, Chairman
	
	MACON BANK, INC.
		
	By:	 	 /s/ Jim M. Garner

		 	Jim M. Garner, Chairman
	
	EXECUTIVE:
	
	 /s/ David A. Bright

	David A. Bright

  
 16Exhibit 10.1 Crude Oil Throughput and Deficiency  Agreement

Exhibit 10.1

*** Where this marking appears throughout this Exhibit 10.1, information has been omitted pursuant to a request for confidential treatment and such information has been filed with the Securities and Exchange Commission separately. 

CRUDE OIL THROUGHPUT AND DEFICIENCY AGREEMENT

dated as of August 28, 2014

Knight Warrior LLC

and

Eaglebine Crude Oil Marketing LLC

CRUDE OIL THROUGHPUT AND DEFICIENCY AGREEMENT
THIS CRUDE OIL THROUGHPUT AND DEFICIENCY AGREEMENT (this “Agreement”), dated as of August 28, 2014 (the “Effective Date”), is by and between Eaglebine Crude Oil Marketing LLC, a Delaware limited liability company (“Shipper”), and Knight Warrior LLC, a Texas limited liability company (“Carrier”).  Shipper and Carrier are sometimes referred to herein individually as “Party,” and collectively as the “Parties.”
RECITALS
WHEREAS, Carrier intends to construct and operate a crude oil pipeline and associated gathering lines in Texas, extending from the Origin Points to the Delivery Points, as such terms are hereinafter defined, with  the pipeline facilities collectively referred to herein as the “Knight Warrior Pipeline” as further depicted on Exhibit A attached hereto; and
WHEREAS, Shipper desires to transport Crude Oil (as hereafter defined) on the Knight Warrior Pipeline to a Delivery Point; and 
WHEREAS, Carrier is willing to transport Shipper’s Crude Oil after received by Carrier at an Origin Point of the Knight Warrior Pipeline, all on and subject to the terms and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual promises, covenants, and agreements herein contained, and intending to be legally bound hereby, Shipper and Carrier hereby covenant and agree as follows:
Article 1
Certain Definitions
The terms defined in this Article 1 shall have, for all purposes of this Agreement, the meanings set forth below:
		
	1.1
	“Additional Term” is defined in Section 2.1.

		
	1.2
	“Affiliate” means any Person that directly or indirectly, through one or more intermediaries, controls or is controlled by or is under common control with another Person.  The term “control” (including its derivatives and similar terms) means possessing the power to direct or cause the direction of the management and policies of a Person, whether through ownership, by contract, or otherwise.  Without limiting the foregoing, any Person shall be deemed to be an Affiliate of any specified Person if such Person owns fifty percent (50%) or more of the voting securities of the specified Person, or if fifty percent (50%) or more of the voting securities of the specified Person and such Person are under common control.

		
	1.3
	“Agreement” is defined in the preamble of this agreement.

 1

		
	1.4
	Annual Volume Commitment” means the product of the Daily Volume Commitment and the number of days in the applicable Contract Year. 

		
	1.5
	“Applicable Law” means (i) any law, statute, regulation, code, ordinance, license, decision, order, writ, injunction, decision, directive, judgment, policy or decree of any Governmental Authority and any judicial or administrative interpretations thereof, or (ii)  any applicable license, permit or compliance requirement of any Governmental Authority applicable to either Party, including environmental laws.

		
	1.6
	“Bankrupt” shall mean a person or entity that (i) is dissolved, other than pursuant to a consolidation, amalgamation or merger, (ii) becomes insolvent or is unable to pay its debts or fails or admits in writing its inability generally to pay its debts as they become due, (iii) makes a general assignment, arrangement or composition with or for the benefit of its creditors, (iv) institutes or has instituted against it a proceeding seeking a judgment of insolvency or bankruptcy or any other relief under any bankruptcy or insolvency law or other similar law affecting creditor's rights, or a petition is presented for its winding-up or liquidation, (v) has a resolution passed for its winding-up, official management or liquidation, other than pursuant to a consolidation, amalgamation or merger, (vi) seeks or becomes subject to the appointment of an administrator, provisional liquidator, conservator, receiver, trustee, custodian or other similar official for all or substantially all of its assets, (vii) has a secured party take possession of all or substantially all of its assets, or has a distress, execution, attachment, sequestration or other legal process levied, enforced or sued on or against all or substantially all of its assets, (viii) causes or is subject to any event which, under Applicable Law, has an analogous effect to any of the events specified in clauses (i) through (vii) above, inclusive, or (ix) takes any action in furtherance of, or indicating its consent to, approval of, or acquiescence in any of the foregoing acts.

		
	1.7
	“Barrels” means forty-two (42) gallons of 231 cubic inches per gallon at sixty degrees Fahrenheit (60°F). 

		
	1.8
	“Batching Facilities” means the segregated storage and related facilities for batching services.

		
	1.9
	“Business Day” means any calendar day other than Saturdays and Sundays that commercial banks in Houston, Texas are open for business.

		
	1.10
	“Carrier” is defined in the preamble of this Agreement.

		
	1.11
	“Central Clock Time” means Central Standard Time, as adjusted for Central Daylight Time, as applicable.

		
	1.12
	“Change in Law” shall mean the adoption or implementation of any laws, rules or regulations by any Governmental Authority with jurisdiction subsequent to the Effective Date that was not reasonably foreseeable as of the Effective Date and which 

 2

generally affects pipeline carriers with operations which are similar to Carrier’s, irrespective of location or distance.
		
	1.13
	“Change in Law Event” shall mean the occurrence of a Change in Law that necessitates the expenditure of Compliance Costs in order to operate the Knight Warrior Pipeline, irrespective of whether such costs are to be incurred as a onetime expenditure or periodically for an extended period.

		
	1.14
	“Commencement Date” is defined in Section 3.3 of this Agreement.

		
	1.15
	“Committed Shipper” is defined in the Rules and Regulations. 

		
	1.16
	“Committed Shipper Credit” is defined in Section 5.1 of this Agreement. 

		
	1.17
	“Complete” means the Knight Warrior Pipeline, the Truck Stations, the origin facilities, the delivery facilities, and associated systems and facilities such as the Batching Facilities, etc., are substantially complete and all permits and approvals have been obtained, such that the Knight Warrior Pipeline is ready to commence commercial service with respect to the receipt, transportation, handling, and delivery of Shipper’s Crude Oil in accordance with this Agreement.

		
	1.18
	“Compliance Costs” means actual non-Affiliate third party out-of-pocket expenditures, without mark-up, in excess of two million dollars ($2,000,000) incurred by Carrier and arising directly from the physical operation of the Knight Warrior Pipeline.

		
	1.19
	“Compliance Cost Recovery Period” means the period during which a Compliance Costs Surcharge is imposed for the purpose of recovering Compliance Costs.

		
	1.20
	“Compliance Costs Surcharge” has the meaning set forth in Section 4.6(a).

		
	1.21
	“Contract Year” means a period commencing at 7:00 a.m., Central Clock Time, on the Commencement Date and ending at 7:00 a.m., Central Clock Time, on the first Day of the Month of the following calendar year that coincides with or next follows the expiration of 12 months and thereafter for succeeding periods of 12 consecutive Months each.

		
	1.22
	“Credit Enhancement” has the meaning set forth in Section 6.4.

		
	1.23
	“Crude Oil” means the grade or grades of crude oil or liquid products that meet the specifications and other requirements set forth in the Rules and Regulations.

		
	1.24
	“Daily Volume Commitment” means a minimum of Forty Thousand (40,000) Barrels per Day (bpd). 

 3

		
	1.25
	“Day” or “Daily” means a period of twenty-four (24) hours, commencing at 7:00 a.m., Central Clock Time, on a calendar day and ending at 7:00 a.m., Central Clock Time, on the next succeeding calendar day.  

		
	1.26
	“Defaulting Party” is defined in Section 15.2(a) of this Agreement.

		
	1.27
	“Deficiency Payment” is defined in Section 5.2(b) of this Agreement.

		
	1.28
	“Delivery Point” has the meaning set forth in the Rules and Regulations.

		
	1.29
	“Disputed Amount” is defined in Section 6.2(b) of this Agreement.

		
	1.30
	“Effective Date” is defined in the preamble of this Agreement.

		
	1.31
	“Event of Default” is defined in Section 15.1 of this Agreement.

		
	1.32
	“Extended Period” is defined in Section 9.3(a) of this Agreement.

		
	1.33
	“Extraordinary Operating Conditions” means operating conditions that result in the capacity of the Knight Warrior Pipeline available for shipments of Crude Oil, or a segment thereof, being reduced below the then committed volumes on the applicable segment(s), for any reason, including weather conditions, repairs or maintenance, but specifically excluding events of Force Majeure other than those related to weather or repairs or maintenance.

		
	1.34
	“FERC Index” means the current “Multiplier to Use” as identified in the “Oil Pipeline Index” published annually by the FERC at: http://www.ferc.gov/industries/oil/geninfo/pipeline-index.asp.

		
	1.35
	“Force Majeure” is defined in Section 9.1 of this Agreement.

		
	1.36
	“Force Majeure Volume” is defined in Section 9.3(b) of this Agreement.

		
	1.37
	“Governmental Authority” means (i) the United States of America, (ii) any state, county, parish, municipality or other governmental subdivision within the United States of America, and (iii) any court or any governmental department, commission, board, bureau, agency or other instrumentality of the United States of America or of any state, county, or municipality. 

		
	1.38
	“Increase Threshold” is defined in Section 4.6(b) of this Agreement.

		
	1.39
	“Initial Term” is defined in Section 2.1 of this Agreement.

		
	1.40
	“Investment Grade” means a credit rating for Long Term Debt of at least “BBB-”, if rated by S&P, and “Baa3”, if rated by Moody’s. 

		
	1.41
	“Knight Warrior Pipeline” is defined in the recitals of this Agreement.

 4

		
	1.42
	“Letter of Credit” means an irrevocable standby letter of credit, in form and substance, and issued by a financial institution, reasonably acceptable to Carrier, which, without limitation, allows Carrier to demand full or partial payment thereunder in the event (i) of a Shipper default, or (ii) Carrier is entitled to damages in connection with or arising out of this Agreement or the termination or breach of this Agreement (including a breach arising out of the termination or rejection of this Agreement under the U.S. Bankruptcy Code or other applicable insolvency legal requirements), or (iii) Shipper does not deliver to Carrier a new Letter of Credit or extension, in the amount required by subsection 6.4(a), that satisfies the requirements of subsection 6.4(a).

		
	1.43
	“Long Term Debt” has the meaning set forth in Section 6.4.

		
	1.44
	“Losses” means any actual loss, cost, expense, liability, damage to person (including death) or property (including damage to the environment), demand, suit, sanction, claim, judgment, or lien.

		
	1.45
	“Moody’s” means Moody’s Investor Services, Inc., or its successor.

		
	1.46
	“Month” means a period of time beginning at 7:00 a.m., Central Clock Time on the first Day of the calendar month and ending at 7:00 a.m., Central Clock Time on the first Day of the next succeeding calendar month.

		
	1.47
	“Monthly Volume Commitment” means the product of the Daily Volume Commitment and the number of days in the applicable Month.

		
	1.48
	“Nomination” means Notice from Shipper to Carrier requesting that Carrier transport for Shipper in a given Month a stated volume of Shipper’s Crude Oil from the Origin Point to the Delivery Point under this Agreement, at the times and in the manner provided in the Rules and Regulations.

		
	1.49
	“Notice” is defined in Section 13.1 of this Agreement.

		
	1.50
	“Origin Point” has the meaning set forth in the Rules and Regulations.

		
	1.51
	“Parties” is defined in the preamble of this Agreement.

		
	1.52
	“Party” is defined in the preamble of this Agreement.

		
	1.53
	“Performing Party” is defined in Section 15.2(a) of this Agreement.

		
	1.54
	“Person” means any individual, firm, corporation, trust, partnership, limited partnership, master limited partnership, limited liability company, association, joint venture, other business enterprise or Governmental Authority.

		
	1.55
	“Prepaid Transportation Credit” is defined in Section 5.2(c)(i) of this Agreement.

 5

		
	1.56
	“Quarter” means a three (3) consecutive Month period as follows: January through March, April through June, July through September, and October through December.

		
	1.57
	“Quarterly Deficiency Volume” is defined in Section 5.2(a) of this Agreement.

		
	1.58
	“Quarterly Volume Commitment” means the product of the Daily Volume Commitment and the number of days in the applicable Quarter.

		
	1.59
	“Rating Agencies” means Moody’s and S&P. 

		
	1.60
	“RRC” means the Railroad Commission of Texas or any successor agency.

		
	1.61
	“Rules and Regulations” is defined in Section 4.2 of this Agreement.

		
	1.62
	“S&P” means Standard & Poor’s Rating Services (a division of McGraw-Hill, Inc.) or its successor.

		
	1.63
	“Shipper” is defined in the preamble of this Agreement.

		
	1.64
	“Shipper History” is defined in the Rules and Regulations and shall be deemed to be the Annual Volume Commitment for the first twelve (12) months, and thereafter shall be deemed to be the greater of the Annual Volume Commitment and actual shipments.  

		
	1.65
	“Shipper’s Capacity” is defined in Section 15.2(b) of this Agreement

		
	1.66
	“Shipper’s Crude Oil” means all Crude Oil delivered by Shipper to the Origin Point for transportation on the Knight Warrior Pipeline by Carrier to the Delivery Point.

		
	1.67
	“Tank Bottoms” is defined in Section 3.4(a) of this Agreement.

		
	1.68
	“Taxes” means any or all taxes, fees, levies, charges, assessments and/or other impositions levied, charged, imposed, assessed, or collected by any Governmental Authority having jurisdiction.

		
	1.69
	“Term” is defined in Section 2.1 of this Agreement.

		
	1.70
	“Third Party Rates” is defined in Section 16.15 of this Agreement.

		
	1.71
	“Throughput Fees” are as set forth in Exhibit C.

		
	1.72
	“Truck Stations” means those facilities identified and described as Truck Stations in Exhibit A.

		
	1.73
	“Uncommitted Shipper” has the meaning set forth in the Rules and Regulations.

 6

Article 2
Term
		
	2.1
	Term.  The initial term of this Agreement shall commence on the Commencement Date and, unless terminated as provided below, shall remain in full force and effect until the end of the fifth (5th) Contract Year (the “Initial Term”).  Shipper has the option to extend the Initial Term of this Agreement for two additional terms of five (5) consecutive Contract Years each (each an “Additional Term”) by providing Notice to Carrier no later than 12 Months prior to the end of the Initial Term or the first Additional Term, as applicable.  The Initial Term, as it may be extended under Section 9.3(a), and any Additional Terms are collectively referred to herein as the “Term.” 

		
	2.2
	Early Termination.  This Agreement may be terminated early as follows:

		
	(a)
	by Carrier if (i) Shipper fails to perform any of its material obligations under this Agreement and (ii) such failure is not (x) excused by an event of Force Majeure under Article 9 or (y) cured by Shipper within sixty (60) Days after Notice thereof by Carrier to Shipper, or if such failure cannot be cured within such 60-Day period, Shipper has not commenced remedial action to cure such failure (and continued to diligently and timely pursue the completion of such remedial action);

		
	(b)
	by Shipper if (i) Carrier fails to perform any of its material obligations under this Agreement and (ii) such failure is not (x) excused by an event of Force Majeure under Article 9 or (y) cured by Carrier within sixty (60) Days after Notice thereof by Shipper to Carrier, or if such failure cannot be cured within such 60-Day period, Carrier has not commenced remedial action to cure such failure (and continued to diligently and timely pursue the completion of such remedial action);

		
	(c)
	by Carrier if Shipper fails to pay any undisputed amount when due under this Agreement (or fails to meet any of its other financial obligations hereunder) if such failure is not remedied within ten (10) Business Days after Notice of such failure is given by Carrier to Shipper;

Article 3
Construction and Commencement Date
		
	3.1
	Construction of Facilities.  Carrier, at its sole cost and expense, shall design, engineer, construct, and equip, or caused to be designed, engineered, constructed, and equipped, the facilities described in and in accordance with the general specifications in Exhibit A.

		
	3.2
	Pipeline Construction. As of the Effective Date, subject to the terms of this Agreement, Carrier shall begin project design, permitting, engineering, and other work with respect to the Knight Warrior Pipeline and shall use commercially 

 7

reasonable efforts to cause the Knight Warrior Pipeline to be Complete. Carrier will inform Shipper on a periodic basis of construction progress of the Knight Warrior Pipeline, the nature and extent of any delays, and plans to mitigate such delays.  
		
	3.3
	Commencement Date.  The “Commencement Date” under this Agreement shall be the first day of the Month following the date that is thirty (30) Days after Carrier Notifies Shipper that the Knight Warrior Pipeline is Complete.  

		
	3.4
	Tank Bottoms and Line Fill.  

		
	(a)
	Tank Bottoms.  Upon Completion of the Knight Warrior Pipeline (but in no event earlier than sixty (60) Days prior to the Commencement Date), and upon commissioning of any additional tanks, Carrier shall deliver to Shipper a request for Shipper’s pro-rata portion of Carrier’s tank bottoms required to be carried by Shipper.  Shipper shall be responsible for up to ten (10%) of the shell capacity of any Carrier tank or tanks designated by Carrier as a Shipper designated tank. Shipper or an affiliate of the Shipper shall provide to Carrier, at no cost to Carrier, Crude Oil required for tank bottoms to facilitate operation of the Knight Warrior Pipeline (the “Tank Bottoms”). Carrier will deliver to Shipper or an affiliate of the Shipper, at the Delivery Point, the Tank Bottoms within thirty (30) Days after Shipper ceases making shipments, provided that the parties may agree, if possible, to make physical delivery of the Tank Bottoms, arrange for a trade of like barrels to Shipper or an affiliate of the Shipper, otherwise financially settle the return of the Tank Bottoms, or a different time period for delivery. 

		
	(b)
	Line Fill. Subject to and in accordance with the provisions of the Rules and Regulations, when Shipper ceases making shipments, Carrier shall deliver to Shipper at the Delivery Point all of Shipper’s Crude Oil in the Knight Warrior Pipeline or otherwise available for shipment. Redelivery shall be completed as batches transit the Knight Warrior Pipeline with expected transit time based on batch size; provided, however, in no event shall the transit time exceed ninety (90) Days. As shipments are nominated an estimated window of delivery dates will be provided by Carrier.  Shipper, an affiliate of the Shipper or a party whom the Shipper has the right to transport that party’s Product will at all times retain title to its Crude Oil in transit and Tank Bottoms and Carrier will provide a monthly statement to Shipper of Crude Oil and Tank Bottoms.

		
	3.5
	Pre-Commencement Date Service.  Upon notification by Carrier to Shipper that a portion of the Knight Warrior Pipeline is operational prior to the Commencement Date, Shipper, at its sole option, may elect to tender Crude Oil to Carrier for service hereunder with respect to such portion of the Knight Warrior Pipeline.  If Shipper elects to transport Crude Oil on the Knight Warrior Pipeline prior to the Commencement Date, Shipper will provide its pro rata share of Crude Oil required for line fill on the applicable portion of the Knight Warrior Pipeline (and any 

 8

necessary tank bottoms) and pay the tariff (at the Committed Shipper rate) to Carrier for such transportation service, provided that except as otherwise provided in the following sentence, such shipments do not count against the Daily Volume Commitment, Monthly Volume Commitment, Quarterly Volume Commitment, or Annual Volume Commitment. 
Article 4
Transportation Services, Throughput Fees and Compliance Costs
		
	4.1
	Transportation Services.  Upon the Commencement Date, under and subject to the terms and conditions of this Agreement, Carrier shall provide receipt, transportation, and delivery services, including batching, subject to the proration provisions set forth in the Rules and Regulations, for volumes of Shipper’s Crude Oil, which have been properly Nominated and delivered by Shipper at an Origin Point, from such Origin Point to the Delivery Point.  Carrier shall also operate and maintain the Knight Warrior Pipeline at a level that is consistent with the level of operation and maintenance that is typical for other similar crude oil pipelines that meet all Applicable Laws and industry regulations and standards.  The operator of the Knight Warrior Pipeline shall be BKEP Pipeline, L.L.C. and, notwithstanding the provisions of Article 12, any replacement operator shall be subject to the prior written approval of Shipper, which approval shall not be unreasonably withheld. 

		
	4.2
	Rules and Regulations.  The Parties acknowledge that as of the Effective Date, Carrier is a common carrier for hire regulated by the RRC.  Shipper is a Committed Shipper for purposes of the Knight Warrior Pipeline.  As such, all transportation to be performed hereunder shall be subject to the rules and regulations in Carrier’s applicable tariffs in effect from time to time and on file with the RRC (as amended from time to time, the “Rules and Regulations”).  A copy of such Rules and Regulations on file as of the Effective Date with the RRC is attached hereto and incorporated herein as Exhibit B. The Parties agree that the Throughput Fees, the Annual Volume Commitment, and the other provisions contained herein are essential to support the respective commitments of the Parties as described in this Agreement.  Except as expressly provided herein, nothing in this Agreement shall be deemed to in any way restrict, waive, or otherwise limit Shipper’s right to initiate or participate in any governmental, regulatory, administrative or judicial proceedings.  The Parties further agree that nothing in this Agreement, and none of the rates associated with this Agreement, shall be used by either Party in any other proceeding to attempt to demonstrate any rate not subject to the specific terms of this Agreement is or is not just and reasonable or otherwise in compliance with applicable law, rules, or regulations.

		
	4.3
	Shipper History.  Shipper, an affiliate of the Shipper or a party whom the Shipper has given the right to transport the Shippers’ Crude Oil, shall, at all times during the Term, earn and hold one hundred percent (100%) of the Shipper History in its own name as the “shipper of record” of Shipper’s Crude Oil for purposes of any 

 9

apportionment or allocation of capacity on the Knight Warrior Pipeline as provided in the Rules and Regulations. 
		
	4.4
	Modification to Rules and Regulations.  Carrier retains the right to modify the Rules and Regulations applicable to the Knight Warrior Pipeline without the permission of Shipper so long as such modifications will not unreasonably interfere with Shipper’s rights under this Agreement or adversely affect Shipper.  Carrier will not support any modification to the applicable Rules and Regulations that would change Shipper’s rights as a Committed Shipper to transport up to the Daily Volume Commitment without proration if nominations by non-Committed Shippers exceed available capacity, except to the extent required by Applicable Law.  Carrier will provide written notice to Shipper thirty (30) Days in advance of the proposed effective date for any changes to the Rules and Regulations.

		
	4.5
	Escalation. Carrier may adjust the Throughput Fee annually each July 1 after the Commencement Date, to reflect inflation adjustments; provided however that in no event shall Carrier be required to reduce its Throughput Fee to reflect a negative inflation adjustment The inflation adjustment will be in accordance with the lower of (a) the inflation adjustment promulgated by the Federal Energy Regulatory Commission (the “FERC Index”) or (b) one hundred and four percent (104%).  In the event the FERC Index is greater than four percent (4.0%) in any given year, then the difference between the FERC Index and (b) above will be accrued and carried forward and added to future years FERC Index in subsequent years where the FERC Index is less than four percent (4.0%).  For example, if the FERC Index is five percent (5.0%) in a year three post the Commencement Date, and three percent (3.0%) in year four post the Commencement Date, then the FERC Index adjustment shall be capped at four percent (4.0%) in year three when the FERC Index is five percent (5.0%) and the FERC Index adjustment shall be increased to four percent (4.0%) in year four when the calculated FERC Index is three percent (3.0%).  If, during the term of this Agreement, the FERC’s indexing methodology is discontinued, the Throughput Fee shall continue pursuant to be escalated annually as of July 1 using the Producer Price index (“PPI”).  Shipper agrees to not oppose changes to the Throughput Fee that Carrier makes during the Term pursuant to this Section 4.5.  The Throughput Fees are based upon the Annual Volume Commitment, which shall be maintained throughout the Term until this Agreement is terminated or cancelled.

		
	4.6
	Compliance Costs.  

		
	(a)
	Carrier shall deliver written notice to Shipper and every other shipper on the Knight Warrior Pipeline of any Change in Law Event promptly upon learning of such event.  If during the Term, Carrier becomes obligated solely as a result of a Change in Law Event to bear Compliance Costs, Carrier shall be entitled to seek recovery of the Compliance Costs in accordance with the terms hereof.  Such Compliance Costs shall be recovered through a surcharge (“Compliance Costs Surcharge”) that is applicable equally to each Barrel 

 10

shipped on the Knight Warrior Pipeline.  Carrier shall reasonably determine the Compliance Costs Surcharge by taking into account the nature and estimated useful life of such costs, the segment(s) associated with such costs and dividing such cost by the total number of Barrels transported on the Knight Warrior Pipeline with respect to the immediately prior twelve (12) Month period, or such shorter period of time if the Knight Warrior Pipeline has been operating for less than twelve (12) Months at such time.  Carrier shall assume for purposes of calculating the Compliance Costs Surcharge that Shipper has transported at least the Quarterly Volume Commitment in all prior periods and that every other shipper that has entered into a transportation services agreement with Carrier (if any) has transported at least its required volume on the Knight Warrior Pipeline, as set forth in that transportation services agreement.  Carrier hereby represents to Shipper that as of the Effective Date, Carrier has no knowledge of any proposed or anticipated Change in Law that would result in a Compliance Costs Surcharge.  
		
	(b)
	Carrier shall notify Shipper, not less than ninety (90) Days prior to the implementation of any increase pursuant to this Section of the amount of such proposed increase, the reason for such increase, and the method of calculating such increase.   Shipper shall have the right to notify Carrier within thirty (30) Days after Shipper receives Carrier’s notice, of Shipper’s decision not to pay such increase, but only to the extent such increase is greater than twenty percent (20%) (“Increase Threshold”) of the unadjusted rate that is affected.  Shipper shall have no right to object to or refuse any increase in the rate up to the Increase Threshold, other than to object to Carrier’s calculations, and shall be bound by any increase up to the Increase Threshold.  If Shipper fails to timely notify Carrier of its decision, then it shall be deemed for purposes of this Agreement that Shipper accepts and approves such increase.  Carrier may, in its sole discretion, elect whether or not to request any such increase allowed under this Section. If the cost is over the Increase Threshold and Shipper decides not to pay such increase, Carrier may stop operating the Knight Warrior Pipeline with no liability to Shipper.

		
	(c)
	Any Compliance Costs Surcharge implemented, amended or modified by Carrier shall be supported with detailed work papers and reasonable support for the Compliance Costs expended or to be expended and shall be provided to Shipper and all other shippers, if any, on the Knight Warrior Pipeline.  Carrier shall have the right, in its sole good faith discretion, but subject to the other provisions of this Section 4.6, to amend or modify the Compliance Costs Surcharge with respect to the amount or duration of the Compliance Costs Surcharge.  Any such modification or amendment shall be included in the Rules and Regulations.  If Carrier proposes any increase pursuant to this section, Shipper shall be entitled to audit Carrier’s applicable books and 

 11

records for the limited purpose of determining if the amount of the increase is justified by the actually-incurred amount of costs of the improvements and/or expenses relating to the Knight Warrior Pipeline.  If such audit shall reflect that such increase was not justifiable in accordance with the foregoing, Carrier shall promptly credit the amount of such discrepancy to Shipper, unless Carrier disagrees with the results of such audit, in which case the matter shall be resolved in accordance with Article 10 of this Agreement.  Any price per Barrel increase in rates to Shipper hereunder shall not be greater than the lowest price per Barrel increase imposed for the same reason on any other shippers on the Knight Warrior Pipeline imposed at the same time.
		
	(d)
	Effective as of the date of Carrier’s recovery of the Compliance Costs through the Compliance Costs Surcharge, Carrier shall remove the Compliance Costs Surcharge from the Rules and Regulations and shall immediately stop collecting the Compliance Costs Surcharge from Shipper and all other shippers, if any, on the Knight Warrior Pipeline.  In such event, Carrier shall promptly provide written notice to Shipper and all other shippers, if any, on the Knight Warrior Pipeline, that such recovery of the Compliance Costs has been completed, which notice shall include a statement of the total Compliance Costs recovered and the volumes against which the Compliance Costs Surcharge were assessed in recovering such Compliance Costs.

Article 5
VOLUME COMMITMENT AND DEFICIENCY PAYMENTS
		
	5.1
	Volume Commitment.  

		
	(a)
	During the Term, Shipper agrees to (i) ship Crude Oil on the Knight Warrior Pipeline (A) in accordance with the terms of this Agreement, (B) at the then effective Throughput Fee, and (C) in quantities equal to the Quarterly Volume Commitment for each Quarter, or (ii) pay any Deficiency Payment.

		
	(b)
	Volume Increases.  On the Effective Date, the Daily Volume Commitment is 40,000 barrels. Shipper shall have the right to increase the Daily Volume Commitment by any amount up to 30,000 barrels (in increments of 5,000), prior to the Commencement Date, subject to Carrier’s availability on the Knight Warrior Pipeline, by providing written notice to Carrier.  After the Commencement Date, Shipper shall have the right to increase the Daily Volume Commitment (in increments of 5,000) by any amount up to 30,000 barrels (in increments of 5,000), less any increases in the Daily Volume Commitment by Shipper pre-Commencement Date, and will notify the Carrier in writing of such volumes within a commercially reasonable timeframe. In the event that Carrier does not have sufficient availability to accommodate the Shipper’s requested increase in the Daily Volume Commitment (after setting aside Available Capacity reserved for committed shippers plus a reserve of ten (10) percent of the Available Capacity of Knight 

 12

Warrior Pipeline for walk-up shippers), then the Carrier shall use commercially reasonable efforts to increase the Available Capacity sufficient to satisfy the Shipper’s requested Daily Volume Commitment increase within twelve (12) months of Shipper providing written notice.
		
	(c)
	Committed Shipper Volume Commitment Credit.  During the initial Term and any Additional Term (if any), the Shipper shall receive a *** reduction in Shipper’s Daily Volume Commitment, up to a maximum Daily Volume Commitment reduction of *** barrels (“Committed Shipper Credit”), for the time during which ***. At no time shall the Shipper’s Daily Volume Commitment, taking into account the Committed Shipper Credit, be lower than *** barrels, during the Term or any Additional Term.  The Carrier will be required to provide quarterly notifications to Shipper of the aggregate *** on the Knight Warrior Pipeline within ten (10) days of each calendar quarter end.  Prior to the Commencement Date, ***. The Committed Shipper Credit shall not be retro-active.  Any Quarterly Deficiency Volume calculated per Section 5.2 shall not be reduced on a retro-active basis by any Committed Shipper Credit.

5.2    Deficiency Payments.  
		
	(a)
	Definition.  For purposes of this Agreement, a “Quarterly Deficiency Volume” for a particular Quarter means the amount (in Barrels), determined as of the end of such Quarter, by which the Quarterly Volume Commitment exceeds the total volume (in Barrels) of Shipper’s Crude Oil received by Carrier at an Origin Point during such Quarter under this Agreement. 

Notwithstanding the foregoing, if an Extraordinary Operating Condition exists which does not constitute a Force Majeure event per Section 9.2 (b), and as a result of such Extraordinary Operating Condition, Carrier is unable in any Quarter to permit Shipper to ship and/or Shipper is unable in any Quarter to deliver or receive, sufficient volumes to meet its Quarterly Volume Commitment, then the Quarterly Deficiency Volume means the Shipper’s Adjusted Nomination (as defined in the proration policy in the Rules and Regulations) less the total volume (in Barrels) of Shipper’s Crude Oil received by the Carrier at an Origin Point during such Quarter under this Agreement; provided that the resulting number may not be less than zero.

 13

Should the Commencement Date not fall on the first Day of a Quarter or should the Term end on a Day other than the last Day of a Quarter, the Quarterly Deficiency Volume, if any, shall be proportionately adjusted.  For example, should the Commencement Date be on the twenty fifth (25th) date of a Quarter that has ninety one (91) days in the Quarter, then the Quarterly Deficiency Volume for the partial Quarter post Commencement Date would be proportionately adjusted by multiplying the Quarterly Deficiency Volume by 72.5% (i.e. 1 minus .275 = 72.5%, whereby .275 is derived by dividing 25 by 91 days in the Quarter).
		
	(b)
	Deficiency Payments.  Except as provided in Section 5.2(d), if a Quarterly Deficiency Volume exists as of the end of any Quarter, then Shipper shall pay to Carrier an amount equal to the product of (i) the Quarterly Deficiency Volume for such Quarter and (ii) the Throughput Fee in effect for such Quarter (such product being the “Deficiency Payment”).  Any Deficiency Payment due by Shipper hereunder shall be paid by Shipper as provided in Article 6. 

		
	(c)
	Prepaid Transportation Credits.

		
	(i)
	If Daily Volume Commitment is 20,000 bpd or more, then any Deficiency Payments made by Shipper to Carrier under the provisions of this Section 5.2 shall constitute prepayment for services hereunder (a “Prepaid Transportation Credit”) that may be carried forward for twelve (12) months; provided, however, such twelve (12) month period shall be extended on a month for month basis for every month that Shipper nominates volume in excess of its Monthly Volume Commitment but is unable to ship such excess volume as a result of the proration policy set forth in the Rules and Regulations. 

		
	(ii)
	If this Agreement has Terminated other than for termination pursuant to the provisions of Section 2.2(a), Section 2.2(c), or a Shipper default pursuant to Article 15 hereof, then any available Prepaid Transportation Credit shall carry forward in accordance with the periods set forth above.

		
	(iii)
	Prepaid Transportation Credits may be utilized solely against shipments of Crude Oil in excess of the Quarterly Volume Commitment, which are accepted for transportation by Carrier subject to available space and in accordance with the then-effective proration policy under the Rules and Regulations, and shall be applied against the transportation charges for such volumes at the rates set forth in this Agreement. 

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Article 6
Billing and Payment
		
	6.1
	Billing.  No later than the 15th day of each Month after the Commencement Date, Carrier shall deliver to Shipper a statement for transportation services provided in the preceding Month setting forth (i) the volumes of Shipper’s Crude Oil (in Barrels) received at the Origin Point in that preceding Month, (ii) the Throughput Fees for that preceding Month, (iii) any adjustments for prior periods, and (iv) all other amounts due by Shipper hereunder, including any Deficiency Payments.  Carrier’s invoices shall include information reasonably sufficient to explain and support any estimates and charges reflected therein, the reconciliation of any estimates made in a prior Month to any actual measurements, and any adjustments to prior period volumes and quantities.

		
	6.2
	Payment.

		
	(a)
	Subject to Section 6.2(b), Shipper shall remit to Carrier amounts due under Section 6.1 by wire transfer by the later of (i) ten (10) Days after Shipper’s receipt of the statement referenced above and (ii) the twentieth (20th) Day of each Month, to the bank account specified by Carrier on the face of the statement.  If such due date is not a Business Day, payment is due on the next Business Day following such date.

		
	(b)
	If Shipper disputes any portion of any invoice (the “Disputed Amount”), Shipper shall promptly Notify Carrier of the Disputed Amount and pay the undisputed portion according to the terms of this Article 6.  After receipt of such Notice, Carrier shall promptly work with Shipper to resolve the dispute.  If the Parties are unable to resolve such dispute within thirty (30) Days after receipt of such Notice, the Parties will submit to dispute resolution in accordance with Article 10.

		
	6.3
	Late Payments.  If Shipper fails to pay any amount hereunder when due (including disputed amounts that are not paid by the due date, but are later determined to be owed), interest thereon shall accrue on the unpaid amounts in the manner provided in the Rules and Regulations.

		
	6.4
	Financial Assurances.  

At all times during the Term, Shipper shall maintain at least one (1) credit rating for either its long-term issuer credit rating or its senior unsecured long term debt (either or both hereinafter “Long Term Debt”) from one of the Rating Agencies and shall have no credit rating for Long Term Debt from a Rating Agency that is lower than Investment Grade. 
Credit Enhancement.  If as of the Commencement Date Shipper does not satisfy Section 6.4, Shipper shall, within twenty-one (21) Days after demand by 

 15

Carrier, provide to Carrier credit enhancement reasonably acceptable to Carrier (the “Credit Enhancement”), as follows:
(a)The Credit Enhancement shall be a Letter of Credit in an amount equal to the product of (A) 365, multiplied by (B) the Daily Volume Commitment, and (C) the then applicable Throughput Fee.  For the avoidance of doubt, Carrier shall be entitled to draw on any Letter of Credit if, at least forty-five (45) days prior to the expiration of such Letter of Credit, Shipper does not deliver to Carrier a new Letter of Credit or extension that is in the amount required by this subsection 6.4(a) and that satisfies the requirements of the definition of “Letter of Credit” set forth in Section 1; provided that, if the Letter of Credit permits partial draws, the amount drawn shall be the lesser of (1) the then remaining balance of the Letter of Credit, and (2) the amount of the Letter of Credit then required under this subsection 6.4(a). For purposes of this subsection 6.4(a), the term “then applicable Throughput Fee” shall mean the applicable Throughput Fee set forth in Schedule C attached hereto.
(b)If agreed in writing between Carrier and Shipper, but not otherwise, in lieu of the Letter of Credit, Carrier may accept as Credit Enhancement (A) a guaranty, in form and substance acceptable to Carrier, of all of Shipper’s payment obligations from a guarantor that (1) maintains at least one (1) credit rating for its Long Term Debt from one of the Rating Agencies, (2) has no credit rating for Long Term Debt that is lower than Investment Grade, and (3) is either a direct or indirect parent of Shipper, or (B) other financial assurances acceptable to Carrier and Shipper, which are from Shipper or a third party issuer and in an amount and on terms and conditions acceptable to Carrier and Shipper.
In the event Customer provides Credit Enhancement pursuant to this Section 6.4(a), but thereafter satisfies Section 6.4, Carrier shall release the Credit Enhancement (and any cash proceeds thereof then held by Carrier), less any portion thereof that has been applied in accordance with Section 6.6, within ten (10) Days after written demand; provided that the provisions of this Section 6.4 shall again apply if the Long Term Debt rating requirement per Section 6.4 above thereafter again applies. 
		
	6.5
	Failure to Provide Credit Enhancement.  In the event Shipper fails to comply with any obligation in Section 6.4 on or before the due date therefore, Carrier shall not be obligated to provide Shipper with access to the Knight Warrior Pipeline or to provide Services pursuant to this Agreement until such requirement is fully met.

		
	6.6
	Use of Credit Enhancement.  Credit Enhancement may be applied by Carrier, in its sole discretion, against any losses suffered by Carrier in connection with this Agreement or damages to which Carrier is entitled in connection with this Agreement 

 16

or breach thereof by Shipper (including a breach arising out of the termination or rejection of this Agreement under the U.S. Bankruptcy Code or other applicable insolvency legal requirements).  The use, application or retention of the Credit Enhancement, or any portion thereof, by Carrier shall not prevent Carrier from exercising any other right or remedy provided by this Agreement, the Rules Tariff or which Carrier may otherwise have at law, in equity or by statute or regulation and shall not operate as a limita-tion on any recovery to which Carrier may otherwise be entitled.  
		
	6.7
	Ongoing Payment Obligations.  Notwithstanding that any Credit Enhancement shall have been provided under Section 6.4, Shipper shall continue to make ongoing payments under this Agreement, as and when such payments are due and payable under the terms hereof and thereof.  

Article 7
Title
		
	7.1
	Title Warranty.  Shipper represents and warrants to Carrier that Shipper has title to, or the right to transport, all of Shipper’s Crude Oil delivered hereunder.

		
	7.2
	Title to the Product.  Title to the Crude Oil transported, stored and/or handled hereunder shall always remain with Shipper, an affiliate of the Shipper or with a party whom the Shipper has the right to transport that party’s Crude Oil.

		
	7.3
	Title Indemnity.  SHIPPER AGREES TO INDEMNIFY AND HOLD CARRIER HARMLESS FROM ANY AND ALL CLAIMS AND LOSSES INCURRED BY CARRIER IN CONNECTION WITH, OR IN ANY MANNER WHATSOEVER RELATING TO, THE BREACH OF THE REPRESENTATION MADE BY SHIPPER IN SECTION 7.1.

Article 8
Waiver of Certain Damages/Limitation of Liability
NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS AGREEMENT, IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY, ANY SUCCESSORS IN INTEREST OR ANY BENEFICIARY OR ASSIGNEE OF THIS AGREEMENT FOR ANY CONSEQUENTIAL, INCIDENTAL, INDIRECT, SPECIAL, OR PUNITIVE DAMAGES ARISING OUT OF THIS AGREEMENT OR ANY BREACH HEREOF.  THIS ARTICLE 8 SHALL APPLY NOTWITHSTANDING THE SOLE, JOINT OR CONCURRENT NEGLIGENCE, FAULT OR RESPONSIBILITY OF THE PARTY WHOSE LIABILITY IS WAIVED BY THIS PROVISION, OR ANY OTHER EVENT OR CONDITION, WHETHER ANTICIPATED OR UNANTICIPATED, AND REGARDLESS OF WHETHER PRE-EXISTING PRIOR TO THE DATE OF THIS AGREEMENT; PROVIDED, HOWEVER, THE FOREGOING LIMITATION OF LIABILITY SHALL NOT 

 17

BE CONSTRUED AS LIMITING THE OBLIGATION OF EITHER PARTY HEREUNDER TO INDEMNIFY THE OTHER PARTY AGAINST TORT CLAIMS ASSERTED BY UNAFFILIATED THIRD PARTIES, INCLUDING, BUT NOT LIMITED TO, THIRD PARTY CLAIMS FOR PUNITIVE, INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES.
Article 9
Force Majeure
		
	9.1
	Definition.  For purposes of this Agreement, “Force Majeure” means acts of God, acts of federal, state, or local government or any agencies thereof, compliance with rules, regulations, or orders of any Governmental Authority or any office, department, agency, or instrumentality thereof, strikes, lockouts, or other industrial disturbances, acts of the public enemy, acts of terrorism, wars, blockades, insurrections, riots, epidemics, landslides, lightning, earthquakes, fires, hurricanes, floods, or other adverse and severe weather conditions, washouts, civil disturbances, explosions or breakage of machinery, equipment, or lines or pipes of a Party (provided that such breakage is not caused by a Party’s failure to maintain its machinery, equipment and lines of pipes in accordance with standard industry practices), freezing of wells or lines of pipes, embargoes, or expropriations of Governmental Authorities, inability to secure or obtain or delays in securing or obtaining necessary and properly sought rights‐of‐way, easements, or similar property rights or material permits or other authorizations in connection with the Knight Warrior Pipeline, and any other cause or event, not reasonably within the control of the Party claiming suspension, and the inability to deliver Crude Oil to the Delivery Point or receive and take away Crude Oil at the Delivery Point as a result of the foregoing events. Force Majeure shall not include (i) increases in costs of materials, (ii) a Party’s financial difficulties that impair its ability to perform, (iii) conditions resulting from changes in the price of, or the market for, Crude Oil or other hydrocarbons, (iv) the depletion of Shipper’s wells or other failure by Shipper to secure a source of Crude Oil (including by purchase) for a reason not specifically enumerated above; or (v) the inability of a third party to perform a service or supply a product or material, excepting services or supply of product or materials during the construction of facilities prior to the Commencement Date.

		
	9.2
	Effect of Force Majeure.  

		
	(a)
	Effect.  Subject to the provisions of this Article 9, if a Party is prevented from performing its obligations under this Agreement due to an event of Force Majeure then, to the extent that it is so prevented, that Party’s failure to perform shall not be considered a breach of its obligations under this Agreement, and the affected obligations of that Party shall be relieved during the continuance of that Party’s inability to perform caused by the event of Force Majeure, but for no longer period.

 18

		
	(b)
	Remedy.  The Party affected by an event of Force Majeure shall use commercially reasonable efforts to promptly remedy and mitigate the effects of the event of Force Majeure.  No Party shall be compelled to resolve any strikes, lockouts, or other industrial disputes other than as it shall determine to be in its best interests.

		
	(c)
	Termination by Carrier.  If an event of Force Majeure that prevents Shipper from delivering any volumes of Shipper’s Crude Oil under this Agreement continues for a period of one hundred eighty (180) consecutive Days or longer or more than one hundred eighty (180) Days at any time during the Term, then Carrier shall have the right to terminate this Agreement upon Notice to Shipper. 

		
	(d)
	Termination by Shipper.  If, except during the period preceding the Commencement Date, an event of Force Majeure that prevents Carrier from receiving and transporting any volumes of Shipper’s Crude Oil, or providing adequate means for alternate transportation, under this Agreement continues for a period of one hundred eighty (180) consecutive Days or longer or more than one hundred eighty (180) Days at any time during the Term, then Shipper shall have the right to terminate this Agreement upon Notice to Carrier with no liability of Shipper to Carrier for Throughput Fees, Deficiency Payments or Compliance Costs except as the foregoing was incurred prior to the termination by Shipper pursuant to this provision.  

		
	(e)
	Notice.  If a Force Majeure event renders a Party unable, in whole or in part, to carry out its obligations under this Agreement, that Party shall use commercially reasonable efforts to give a timely notice to the other Party Notice and full particulars and a reasonable, good-faith estimate of the number of days of Force Majeure delay that will be caused thereby.  The Party providing the Notice shall use commercially reasonable efforts to ameliorate the Force Majeure conditions

		
	9.3
	Volume Commitment Adjustments. If a Force Majeure event affects a Party’s ability to deliver or receive and transport hereunder the Daily Volume Commitment of Shipper’s Crude Oil on any Day in a Contract Year, then the following shall occur:

		
	(a)
	the Term shall be extended for a period corresponding to the duration of such event of Force Majeure (the “Extended Period”);

		
	(b)
	the Quarterly Volume Commitment corresponding to the period during which such Force Majeure event occurs will be reduced by an amount equal to the volume of Shipper’s Crude Oil not transported by Carrier due to such Force Majeure event (such volume reduction is referred to herein as the “Force Majeure Volume”); and

 19

		
	(c)
	a new Annual Volume Commitment shall be established for the Extended Period in an amount equal to the Force Majeure Volume and Shipper shall be obligated to deliver the Force Majeure Volume as the Annual Volume Commitment under this Agreement during the Extended Period.

Article 10
Governing Law; Venue; Dispute Resolution
		
	10.1
	Governing Law.  This Agreement is entered into in the State of Texas and shall be governed, interpreted and construed in accordance with the laws of the State of Texas without regard to the conflicts of laws provisions thereof.

		
	10.2
	Venue.  The Parties agree exclusive venue for any suit, action, or proceeding brought by either Party in connection with this Agreement or arising out of the terms or conditions hereof shall be in Harris County, Texas.  The Parties hereby irrevocably and unconditionally waive, to the fullest extent they may legally and effectively do so, any objection they may now or hereafter have to the laying of venue of any suit, action, or proceeding arising out of or relating to this Agreement or the transactions contemplated hereby in the state and federal courts situated in the City of Houston, Harris County, Texas.

		
	10.3
	Negotiation.  Prior to submitting any dispute for resolution by a court, a Party shall provide Notice to the other Party of the occurrence of such dispute.  If the Parties have failed to resolve the dispute within fifteen (15) Business Days after such Notice was given, the Parties shall seek to resolve the dispute by negotiation between senior management personnel of each Party.  Such personnel shall endeavor to meet and attempt to amicably resolve the dispute.  If the Parties are unable to resolve the dispute for any reason within thirty (30) Business Days after the original Notice of dispute was given, then either Party shall be entitled to pursue any remedies available at law or in equity; provided, however, this Section 10.3 shall not limit a Party’s right to initiate litigation prior to the expiration of the time periods set forth in this Section 10.3 if application of statutes of limitations (or other principle of law or equity) would prevent a Party from filing a lawsuit or claim within the applicable period for filing lawsuits.

Article 11
Taxes
		
	11.1
	Taxes.  Shipper shall pay any and all Taxes levied on Shipper’s Crude Oil including property Taxes on Shipper’s Crude Oil in the Knight Warrior Pipeline.  Carrier shall pay any and all Taxes levied on the Knight Warrior Pipeline.  Shipper shall not be liable for any Taxes assessed against Carrier based on Carrier’s income, revenues, gross receipts, or ownership of the Knight Warrior Pipeline, and all state franchise, license, and similar taxes required for the maintenance of Carrier’s corporate existence.

 20

		
	11.2
	Reimbursement.  If Carrier is required to pay any Tax or Taxes for Shipper, Shipper shall reimburse Carrier for such taxes within thirty (30) days after receipt of an invoice and supporting documentation provided by Carrier.  

Article 12
Assignment
		
	12.1
	Assignment.  This Agreement, and the rights and obligations created hereby, may not be assigned, in whole or in part, by either Party without the prior written consent of the other Party, which consent shall not be unreasonably withheld, conditioned, or delayed, except either Party may assign its rights under this Agreement to an Affiliate without such prior written consent, provided such Affiliate has a financial strength at least equal to that of the assignor, and (ii) Carrier may, subject to prior notification to Shipper, assign this Agreement to a third party purchasing substantially all of Carrier’s interest in the Knight Warrior Pipeline.  Any such permitted assignment shall require that the assignee assume and agree to discharge the duties and obligations of its assignor under this Agreement.  No such permitted assignment by Shipper shall effect or operate to discharge any obligations (including responsibility for and payment of any Deficiency Payment) of Shipper under this Agreement.  Notwithstanding the foregoing, either Party may, without the consent of the other Party, pledge, encumber, mortgage, grant a lien or security interest in or assign all or any portion of its interest in this Agreement to one or more third parties in connection with a financing transaction; provided, however, that none of the foregoing shall be deemed to relieve such Party from its obligations hereunder.  If the Person which owns or controls a majority of the voting shares/rights in Carrier at any time sells or disposes of such majority of voting shares/rights, or changes its identity for any reason (including a merger, consolidation or reorganization), such change of ownership or control shall constitute an assignment for purposes of this Section 12.1.

		
	12.2
	Notice of Assignment.  No such assignment, nor any succession to the interest of either Party, shall be effective and binding until the other Party is furnished with proper and satisfactory evidence of such assignment or succession.

Article 13
Notice and Statements
		
	13.1
	Notice.  Any notice, statement, payment (for which Carrier has not specified an account for wire transfer), claim or other communication required or permitted hereunder (each a “Notice”) shall be in writing and shall be sent by: (i) facsimile transmission (as to all Notices other than payments); (ii) delivered by hand; (iii) sent by United States mail with all postage fully prepaid; or (iv) by courier with charges paid in accordance with the customary arrangements established by such courier, in each of the foregoing cases addressed to the other Party at the following addresses:

 21

If to Carrier:    

Address: 201 NW 10th, Suite 200
Oklahoma City, Oklahoma 73103

Contact: General Counsel
Fax: 918-237-4138

If to Shipper:         

Vitol Inc.
Attn: Contracts
1100 Louisiana Street, Suite 5100
Houston, TX 77002
Fax: (713) 230-1185
E-Mail: xcontractshou@vitol.com 

SEI Energy, LLC
2120 Northgate Park Lane, Suite 402
Chattanooga, TN  37415
Fax: 423.875.6040
E-Mail: brad.sawyer@seienergy.com

Such Notices shall be deemed received as follows: (i) if delivered personally, upon delivery; (ii) if sent by United States mail, whether by express mail, registered mail, certified mail or regular mail, the notice shall be deemed to have been received on the day receipt is refused or is confirmed orally or in writing by the receiving Party; (iii) if sent by a courier service, upon delivery; or (iv) if sent by facsimile, on the Business Day following the day on which it was transmitted and confirmed by transmission report or such earlier time as confirmed orally or in writing by the receiving Party.
		
	13.2
	Change of Address.  Notices of change of address of either of the Parties shall be given in writing to the other Party in the manner aforesaid and shall be observed in the giving of all future Notices required or permitted to be given hereunder.

Article 14
Indemnity
		
	14.1
	Indemnification by Shipper.  SUBJECT TO ARTICLE 8, SHIPPER AGREES TO DEFEND AND INDEMNIFY CARRIER, ITS AFFILIATES, AND ITS AND THEIR RESPECTIVE DIRECTORS, OFFICERS, AND EMPLOYEES, CUSTOMERS, CONTRACTORS AND OTHER REPRESENTATIVES FROM AND AGAINST ALL LOSSES RESULTING FROM, ASSOCIATED WITH, OR ARISING OUT OF ITS PERFORMANCE OR NON-

 22

PERFORMANCE OF THIS AGREEMENT, OR ITS NEGLIGENCE, WILLFUL MISCONDUCT OR GROSS NEGLIGENCE.
		
	14.2
	Indemnification by Carrier.  SUBJECT TO ARTICLE 8, CARRIER AGREES TO DEFEND AND INDEMNIFY SHIPPER, ITS AFFILIATES AND THEIR RESPECTIVE DIRECTORS, OFFICERS, AND EMPLOYEES, CUSTOMERS, CONTRACTORS AND OTHER REPRESENTATIVES FROM AND AGAINST ANY LOSSES RESULTING FROM, ASSOCIATED WITH, OR ARISING OUT OF CARRIER’S PERFORMANCE OR NON-PERFORMANCE OF THIS AGREEMENT, OR ITS NEGLIGENCE, WILLFUL MISCONDUCT, OR GROSS NEGLIGENCE. 

		
	14.3
	Joint Liability.  UNDER THE FOREGOING INDEMNITIES, WHERE THE PERSONAL INJURY TO OR DEATH OF ANY PERSON OR LOSS OF OR DAMAGE TO PROPERTY IS THE RESULT OF THE JOINT OR CONCURRENT NEGLIGENCE, GROSS NEGLIGENCE, OR WILLFUL ACTS OR OMISSIONS OF SHIPPER AND CARRIER, EACH PARTY’S DUTY OF INDEMNIFICATION WILL BE IN PROPORTION TO ITS SHARE OF SUCH JOINT OR CONCURRENT NEGLIGENCE, GROSS NEGLIGENCE, OR WILLFUL MISCONDUCT.

		
	14.4
	Procedures Relating to Indemnification.  To receive the foregoing indemnities, the Party seeking indemnification must notify the other in writing of a claim or suit promptly (provided that any failure to provide such notice shall not limit a Party’s right to indemnification except to the extent that the indemnifying Party shall have been materially prejudiced thereby) and provide reasonable cooperation (at the indemnifying Party’s expense) and full authority to defend the claim or suit.  Notwithstanding the foregoing, no indemnifying Party shall be entitled to settle any claim or suit without the consent of the indemnified Party unless such settlement contains a full release of the indemnified Party without any liability for any monetary damages or any type of equitable relief.  Neither Party shall have any obligation to indemnify the other under any settlement made without its written consent.

Article 15
Other Provisions
		
	15.1
	Events of Default. Notwithstanding any other provision of this Agreement, an event of default (“Event of Default”) shall be deemed to occur with respect to a Party when:

		
	(a)
	Such Party fails to make any undisputed payment when due under this Agreement, within thirty (30) Business Days of a written demand therefor;

		
	(b)
	Other than an Event of Default described in Paragraph (a) above, such Party fails to perform any obligation or covenant to the other Party under this Agreement and such matter is not in dispute, which failure is not cured to 

 23

the reasonable and commercially acceptable satisfaction of the other Party within thirty (30) Days from the date that such Party receives written notice that corrective action is needed;
		
	(c)
	Such Party becomes Bankrupt; or

		
	(d)
	An assignment or purported assignment of this Agreement in violation of the provisions of Article 12.

15.2    Remedies.  
		
	(a)
	Notwithstanding any other provision of this Agreement, upon the occurrence of an Event of Default with respect to either Party (the “Defaulting Party”), the other Party (the “Performing Party”) shall in its reasonable discretion, in addition to all other remedies available to it and without incurring any liabilities to the Defaulting Party or to third parties, be entitled as long as such Event of Default is continuing, to do one or more of the following: (a) suspend its performance under this Agreement with prior notice of five (5) Business Days to the Defaulting Party, (b) proceed against the Defaulting Party for damages occasioned by the Defaulting Party’s failure to perform, and (c) upon five (5) Business Days’ notice to the Defaulting Party, terminate this Agreement.  Notwithstanding the foregoing, in the case of an Event of Default described in Section 15.1(c) above, no prior notice shall be required.  The Defaulting Party shall reimburse the Performing Party for all costs and expenses related to the Performing Party’s claim with respect to such breach, including but not limited to reasonable attorneys’ fees.  The remedies provided in this provision are in addition to any and all other remedies available to the Performing Party under this Agreement and Applicable Law.

		
	(b)
	If Carrier exercises its termination right under Section 15.2, then, (i) Carrier shall have the right, but absolutely no obligation, to hold an open season with respect to, or otherwise market or offer to third parties, a volume equal to Shipper’s Quarterly Volume Commitment (the “Shipper’s Capacity”) and (ii) if, as a result of any such open season, or otherwise, Carrier enters into one or more new transportation services agreements with respect to some or all of the Shipper’s Capacity, Carrier will credit to Shipper’s Quarterly Volume Commitment any revenues received by Carrier from such new shipper(s) as transportation charges or deficiency payments for committed volumes, as and when actually received by Carrier, less Carrier’s costs in marketing such Shipper’s Capacity to secure a new commitment; provided that Shipper shall not be entitled to any such credit for revenues that may accrue to the extent the tariff rate payable under such new transportation services agreement exceeds the applicable tariff rate for services to Shipper hereunder.  Shipper expressly acknowledges that it shall have no right to challenge or dispute the terms and conditions of any new transportation services agreements entered into by Carrier as a result of any such open 

 24

season, or otherwise, and that, without limitation, such new transportation services agreement(s) may expire before the last day of this Agreement and the tariff rate payable under such new transportation services agreement(s) may be less than the applicable tariff rate.  In the event that Carrier holds an open season with respect to a volume equal to the committed volumes of more than one defaulting customer, Carrier shall allocate among such defaulting customers, on an equitable basis, any revenues actually received by Carrier under any new transportation services agreements executed as a result of such open season.
		
	15.3
	Carrier Representations.  Carrier hereby represents to Shipper as follows:

		
	(a)
	This Agreement and all documents executed by Carrier required hereby are duly authorized, executed, and delivered by Carrier, are legal, valid, and binding obligations of Carrier, and do not violate any provisions of any agreement to which Carrier is a party or to which it is subject and do not violate any duties to which Carrier is subject.

		
	(b)
	There are no pending, or to Carrier’s knowledge, threatened actions, suits, arbitrations, claims or proceedings, at law or in equity, that could materially and adversely affect the development, ownership or operation of the Knight Warrior Pipeline.

Article 16
Other Provisions
		
	16.1
	Amendments.  All modifications, amendments, or changes to this Agreement, whether made simultaneously with or after the execution of this Agreement, shall be in writing, and executed by both Carrier and Shipper.

		
	16.2
	Confidentiality.

		
	(a)
	Confidentiality.  Each Party agrees that it shall maintain all terms and conditions of this Agreement in strictest confidence, and that it shall not cause or permit disclosure of this Agreement or any provisions contained herein without the written consent of the other Party.

		
	(b)
	Permitted Disclosures.  Notwithstanding Section 16.2(a) of this Agreement, disclosures of any terms and provisions of this Agreement otherwise prohibited may be made by either Party: (i) to the extent necessary for such Party to enforce its rights hereunder against the other Party; (ii) to the extent to which a Party is required to disclose all or part of this Agreement by a statute or by the order or rule of a court, agency, or other Governmental Authority, by order, by regulations, or by other compulsory process (including deposition, subpoena, interrogatory, or request for production of documents); (iii) to the extent required by the applicable regulations of a 

 25

securities or commodities exchange; (iv) to a third Person in connection with a proposed sale or other transfer of a Party’s interest in this Agreement, provided such third Person agrees in writing to be bound by the terms of this Section 16.2; (v) to its own directors, officers, employees, agents and representatives; (vi) to an Affiliate (and its employees, officers, and members); (vii) to a co-working interest owner or royalty owner of Shipper’s Crude Oil delivered hereunder, or (viii) if and to the extent such information is or becomes public other than by a violation of the terms of this Section 16.
		
	(c)
	Notification.  If either Party (the disclosing Party) is or becomes aware of a fact, obligation, or circumstance that has resulted or may result in a disclosure of any of the terms and conditions of this Agreement in connection with (i) litigation between private parties or (ii) a request or requirement by any legislative, regulatory, or administrative body, and such request or requirement identifies the non-disclosing Party by name, then to the extent permitted by the court or legislative, regulatory, or administrative body, the disclosing Party will provide the non-disclosing Party with prompt notice of such request or requirement in order to afford the non-disclosing Party an opportunity to seek an appropriate protective order or motion to quash.  

		
	(d)
	Public Announcements.  If Carrier chooses to make a press release with respect to this Agreement or the transaction represented herein using Shipper’s name, Carrier shall provide Shipper with a copy of the proposed announcement or statement. Carrier shall obtain Shipper’s prior written approval of the public announcement or statement. If approval is not granted, Carrier shall remove Shipper’s name before making the press release. Nothing contained in this section shall be construed to require either Party to obtain approval of the other Party to disclose information with respect to this Agreement or the transaction represented herein to any Governmental Authority to the extent required by Applicable Law or necessary to comply with disclosure requirements of the Securities and Exchange Commission, New York Stock Exchange, or any other regulated stock exchange.

		
	(e)
	Survival.  The provisions of this Section 16.2 shall survive any expiration or termination of this Agreement for a period of one (1) year.

		
	16.3
	Waiver.  No waiver of any term, provision or condition of this Agreement shall be effective unless in writing signed by the Parties, and no such waiver shall be deemed to be or construed as a further or continuing waiver of any such term, provision or condition or as a waiver of any other term, provision or condition of the Agreement, unless specifically so stated in such written waiver.

		
	16.4
	No Third Party Beneficiaries.  This Agreement does not confer any right, remedy, obligation, or liability upon any Person not a Party hereto.

 26

		
	16.5
	No Partnership.  It is not the intention of the Parties to create, nor is there created hereby, a partnership, trust, joint venture or association.  The status of each Party hereunder is solely that of an independent contractor.

		
	16.6
	Headings.  The headings and captions in this Agreement have been inserted for convenience of reference only and shall not define or limit any of the terms and provisions hereof.

		
	16.7
	Rules of Construction.  In construing this Agreement, the following principles shall be followed:

		
	(a)
	examples shall not be construed to limit, expressly or by implication, the matter they illustrate;

		
	(b)
	the word “includes” and its syntactical variants mean “includes, but is not limited to” and corresponding syntactical variant expressions; 

		
	(c)
	the plural shall be deemed to include the singular and vice versa, as applicable; 

		
	(d)
	all references in this Agreement to an “Article,” “Section,” “subsection,” or “Exhibit” shall be to an Article, Section, subsection, or Exhibit of this Agreement, unless the context requires otherwise;

		
	(e)
	unless the context otherwise requires, the words “this Agreement,” “hereof,” “hereunder,” “herein,” “hereby,” or words of similar import shall refer to this Agreement as a whole and not to a particular Article, Section, subsection, clause, Exhibit or other subdivision hereof; and

		
	(f)
	each Exhibit to this Agreement is attached hereto and incorporated herein as a part of this Agreement, but if there is any conflict or inconsistency between the main body of this Agreement and any Exhibit, the provisions of the main body of this Agreement shall prevail.

		
	16.8
	Entire Agreement.  This Agreement contains the entire agreement between the Parties relating to the subject matter hereof and there are no oral promises, agreements, or warranties affecting same.

		
	16.9
	Applicable Laws.  This Agreement, and the performance hereunder, shall be subject to valid and applicable Federal, State and local laws and rules, orders or regulations, of any Federal, State or local agencies having appropriate jurisdiction; provided however, nothing contained herein shall be construed as a waiver of any right to question or contest any such law, order, rule, or regulation in any forum having appropriate jurisdiction.

		
	16.10
	Severability.  If any provision of this Agreement shall be held to be invalid, illegal or unenforceable, (i) the validity, legality and/or enforceability of the remaining provisions shall not, in any way, be affected or impaired thereby and (ii) in lieu of 

 27

such invalid, illegal or unenforceable provision, there shall be automatically added to this Agreement a provision as similar to such invalid, illegal or unenforceable provision as may be possible and be legal, valid and enforceable.
		
	16.11
	Joint Preparation.  Shipper and Carrier acknowledge and mutually agree that this Agreement and all contents herein were jointly prepared by the Parties.

		
	16.12
	Further Assurances.  Each Party shall take such acts and execute and deliver such documents as may be reasonably required to effectuate the purposes of this Agreement.

		
	16.13
	No Inducements.  No director, employee, or agent of any Party shall give or receive any commission, fee, rebate, gift, or entertainment of significant cost or value in connection with this Agreement.

		
	16.14
	Counterpart Execution.  This Agreement may be executed in any number of counterparts, each of which shall be considered an original, and all of which shall be considered one and the same instrument.

		
	16.15
	“Most Favored Nation” Treatment.  Carrier agrees that if Carrier extends committed rates for services to any party regarding matters set forth in this Agreement (the “Third Party Rates”), and the Third Party Rates are more favorable than the Throughput Fees under this Agreement, the Throughput Fees under this Agreement shall be adjusted to reflect the Third Party Rates.  Shipper and Carrier shall facilitate review by a third party of the Third Party Rates of agreements with other parties or amendments thereto to monitor Carrier’s compliance with this Section.  Such agreements may be redacted to conceal the identity of the contracting party and the third party conducting such review shall be subject to appropriate confidentiality obligations.

		
	16.16
	Area of Mutual Interest (“AMI”).  During the Initial Term or any Additional Terms of this Agreement, the Shipper and Shipper’s equity owners, SEI Energy, LLC (“SEI Energy”) and Vitol, Inc, (“Vitol”), collectively the AMI Parties (“AMI Parties”), hereby agree that any crude oil originated or marketed by the AMI Parties from any of the following counties located in the state of Texas:  Grimes County, Houston County, Leon County, Madison County and Walker County and being transported via a crude oil pipeline to destinations in either Harris County, TX or Jefferson County, TX shall be transported on the Carrier’s pipeline.

 28

IN WITNESS WHEREOF, the Parties have executed this Agreement to be effective as of the Effective Date.
	
		
	Carrier

	 
	 

	By:
	/s/ Mark A. Hurley

	Name:
	Mark A. Hurley

	Title:
	CEO

	 
	 

	 
	 

	Shipper
	 

	 
	 

	By:
	/s/ Thomas Ramsey

	Name:
	Thomas Ramsey

	Title:
	Manager

IN WITNESS WHEREOF, the following Parties are hereby agreeing to be legally bound as it relates solely to the provisions outlined per Section 16.16 contained herein.
	
		
	Vitol, Inc.

	 
	 

	By:
	/s/ M. A. Loya

	Name:
	M. A. Loya

	Title:
	President

	 
	 

	 
	 

	SEI Energy, LLC

	 
	 

	By:
	/s/ John B. Sawyer

	Name:
	John B. Sawyer

	Title:
	President

 29

EXHIBIT A
CARRIER PIPELINE

See Attached Exhibit A Map for Approximate Routing of Carrier Pipeline

Exhibit A

Exhibit A

EXHIBIT B
RULES AND REGULATIONS

See Attached Exhibit B

Exhibit B

EXHIBIT B

Texas R.R.C.  No. 1

Knight Warrior LLC

LOCAL TARIFF
CONTAINING
RULES AND REGULATIONS
GOVERNING
THE GATHERING AND TRANSPORTATION
OF CRUDE PETROLEUM
BY PIPELINE
GENERAL APPLICATION

The rules and regulations published herein apply only under tariffs making specific reference by number to this tariff; supplements hereto and successive issues hereof. Specific rules and regulations published in individual tariffs will take precedence over rules and regulations published herein.

The Provisions published herein will, if effective, not result in an effect on the quality of the human environment.

	
		
	ISSUED:  __________, 201_
	EFFECTIVE:  __________, 201_

	
		
	Issued by:
	Compiled by:

	Mark Hurley, President
	Diane Stephens

	Knight Warrior LLC
	Knight Warrior LLC

	201 NW 10th, Suite 200
	201 NW 10th, Suite 200

	Oklahoma City, Oklahoma 73103
	Oklahoma City, Oklahoma 73103

	 
	405.278.6448

 
  

                                                                                                                             
SECTION I
RULES AND REGULATIONS OF RAILROAD COMMISSION OF TEXAS 
RULE 71.  PIPELINE TARIFFS.

		
	1. 
	ALL MARKETABLE OIL TO BE RECEIVED FOR TRANSPORTATION:  By the term "marketable oil" is meant any crude petroleum adapted for refining or fuel purposes, properly settled and containing not more than two percent (2%) of basic sediment, water, or other impurities above a point six (6) inches below the pipeline connection with the tank.  Pipelines shall receive for transportation all such "marketable oil" tendered; but no pipeline shall be required to receive for shipment from any one person an amount exceeding three thousand (3,000) barrels of petroleum in any one (1) day; and, if the oil tendered for transportation differs materially in character from that usually produced in the field and being transported therefrom by the pipeline, then it shall be transported under such terms as the shipper and the owner of the pipeline may agree or the Commission may require.

		
	2. 
	BASIC SEDIMENT, HOW DETERMINED -- TEMPERATURE:  In determining the amount of sediment, water or other impurities, a pipeline is authorized to make a test of the oil offered for transportation from an average sample from each such tank, by the use of centrifugal machine, or by the use of any other appliance agreed upon by the pipeline and the Shipper. The same method of ascertaining the amount of the sediment, water or other impurities shall be used in the delivery as in the receipt of oil.  A pipeline shall not be required to receive for transportation, nor shall consignee be required to accept as a delivery, any oil of a higher temperature than ninety degrees Fahrenheit (90° F), except that during the summer oil shall be received at any atmospheric temperature, and may be delivered at like temperature.  Consignee shall have the same right to test the oil upon delivery at destination that the pipeline has to test before receiving from the Shipper.

		
	3. 
	"BARREL" DEFINED:  For the purpose of these rules, a "barrel" of crude petroleum is declared to be forty-two (42) gallons of 231 cubic inches per gallon at sixty degrees Fahrenheit (60° F).

		
	4. 
	OIL INVOLVED IN LITIGATION, ETC. -- INDEMNITY AGAINST LOSS:  When any oil offered for transportation is involved in litigation, or the ownership is in dispute, or when the oil appears to be encumbered by lien or charge of any kind, the pipeline may require of Shippers an indemnity bond to protect it against all loss.

		
	5. 
	STORAGE:  Each pipeline shall provide, without additional charge, sufficient operational storage, such as is incidental and necessary to the transportation of oil, including storage at destination or so near thereto as to be available for prompt delivery to destination point, for five (5) days from the date of order of delivery at destination.

		
	6. 
	IDENTITY OF OIL, MAINTENANCE OF:  A pipeline may deliver to Consignee, either the identical oil received for transportation, subject to such consequence of mixing with other oil as are incident to the usual pipeline transportation, or it may make delivery from its common stock at destination; provided, if this last be done, the delivery shall be of substantially like kind and market value.

		
	7. 
	MINIMUM QUANTITY TO BE RECEIVED:  A pipeline shall not be required to receive less than one (1) tank carload of oil when oil is offered for loading into tank cars at destination of the pipeline.  When oil is offered for transportation for other than tank car delivery, a pipeline shall not be required to receive less than five hundred (500) barrels.

		
	8. 
	GATHERING CHARGES:  Tariffs to be filed by a pipeline shall specify separately the charges for gathering of the oil, for transportation, and for delivery.  (See amendment to this rule in Item No. 50, Section  hereof.)

		
	9. 
	GAUGING, TESTING, AND DEDUCTIONS:  All crude oil tendered to a pipeline for transportation shall be measured and tested by a representative of the pipeline prior to its receipt by the pipeline.  The Shipper may be present or represented at the gauging and testing.  Quantities shall be determined in accordance with applicable A.P.I. Manual of Petroleum Measurement Standards.  A pipeline may deduct sediment, water, and other impurities as shown by the centrifugal method, Karl Fischer method or other test agreed upon and two tenths of one percent (.2 %) for evaporation and loss during transportation.*  The net balance shall be the quantity deliverable by the pipeline.  In allowing the deductions, it is not the intention of the Commission to affect any tax or royalty obligations imposed by the laws of Texas on any producer or shipper of crude oil.

The gauging and testing of oil by the pipeline representative is directed toward and intended to require tank gauge measurement, or other type measuring device when authorized by the Commission, of produced crude prior to the transfer of custody to the initial transporter from a producing property.  A transfer of custody of crude between transporters is subject to measurement as agreed upon by the transporters.  (See exceptions to this rule in Item No. 45, Section  hereof.)
  

     __________________
		
	*
	This deviates from Rule 71.9 of the General Conservation Rules in that a deduction of less than one percent (1%) will be made for evaporation and loss during transportation.

		
	10.
	DELIVERY AND DEMURRAGE:  Each pipeline shall transport oil with reasonable diligence, considering the quality of the oil, the distance of transportation, and other material elements, but at any time after receipt of a consignment of oil, upon twenty-four (24) hours' notice to the Consignee, may offer oil for delivery from its common stock at the point of destination, conformable to Section 6 of this rule, at a rate not exceeding ten thousand (10,000) barrels per day of twenty-four (24) hours.  Computation of time of storage (as provided for in Section 5 of this rule) shall begin at the expiration of such notice.  At the expiration of the time allowed in Section 5 of this rule for storage at destination, a pipeline may assess a demurrage charge on oil offered for delivery and remaining undelivered, at a rate for the first ten (10) days of one-tenth of one cent per barrel; and thereafter at a rate of three-fourths of one cent per barrel, for each day of twenty-four (24) hours or fractional part thereof.

		
	11.
	PAYMENT OF TRANSPORTATION AND OTHER CHARGES*:  The Shipper or Consignee shall pay all applicable gathering, transportation, and all other lawful charges accruing on petroleum delivered to and accepted by Carrier for shipment, and, if required, shall prepay or guarantee the same before acceptance by the Carrier, or pay the same before delivery.  Carrier shall have a lien on all petroleum in its possession belonging to Shipper or Consignee to secure the payment of any and all unpaid gathering, transportation, or any lawful charges that are due Carrier that are unpaid by Shipper or Consignee, and may withhold such petroleum from delivery until all unpaid charged have been paid.

If any charge remains unpaid after the due date specified in Carrier's invoice, then such amount shall bear interest from the day after the date of the invoice until paid, calculated at an annual rate equivalent to 125% of the prime rate of interest, as of the date of Carrier's invoice, charged by the Citibank N.A. of New York, New York, for ninety (90) day loans made to substantial and responsible commercial borrowers or the maximum rate allowed by law, whichever is the lesser.  If the invoice is not paid within thirty (30) days from the date due, Carrier shall have the right, either directly or through an agent, at any time after such publication of notice of such sale in a daily newspaper of general circulation published in the town, city, or general area where the sale is to be held, stating the time and place of sale and the quantity and location of the petroleum to be sold.  At said sale, Carrier shall have the right to bid, and, if it is the highest bidder, to become the purchaser.  The proceeds of disposition shall be applied in the following order:  (A)  To the reasonable expenses of holding, preparing for sale, selling, and to the extent allowed by law, reasonable attorney's fees and legal expense incurred by Carrier; and (B) To the satisfaction of the indebtedness secured hereby including interest herein provided from due date of invoice to date of sale.  The balance of the proceeds of the sale remaining, if any, shall be held for whomsoever may be lawfully entitled thereto.  (This item 11, Section I is amended by item 100, Section II below)

		
	12.
	NOTICE OF CLAIMS:  Notice of claims for loss, damage or delay in connection with the shipment of oil must be made in writing to the pipeline within ninety-one (91) days after the damage, loss, or delay occurred.  If the claim is for failure to make delivery, the claim must be made within ninety-one (91) days after a reasonable time for delivery has elapsed.

		
	13.
	TELEPHONE-TELEGRAPH LINE -- SHIPPER TO USE:  If a pipeline maintains a private telegraph or telephone line, a Shipper may use it without extra charge, for message incident to shipments.  However, a pipeline shall not be held liable for failure to delivery any messages away form its office or for delay in transmission or for interruption of service.

		
	14.
	CONTRACTS OF TRANSPORTATION:  When a consignment of oil is accepted, the pipeline shall give the Shipper a run ticket, and shall give the Shipper a statement that shows the amount of oil received for transportation, the points of origin and destination, corrections made for temperature, deductions made for impurities, and the rate for such transportation.

		
	15.
	SHIPPER'S TANKS, ETC. --INSPECTION:  When a shipment of oil has been offered for transportation, the pipeline shall have the right to go upon the premises where the oil is produced or stored, and have access to any and all tanks or storage receptacles for the purpose of making any examination, inspection, or test authorized by this Rule.

		
	16.
	OFFERS IN EXCESS OF FACILITIES:  If oil is offered to any pipeline for transportation in excess of the amount that can be immediately transported, the transportation furnished by the pipeline shall be apportioned among all Shippers in proportion to the amounts offered by each; but no offer for transportation shall be considered beyond the amount which the person requesting the shipment then has ready for shipment by the pipeline.  The pipeline shall be considered as a Shipper of oil produced or purchased by itself and held for shipment through its line, and its oil shall be entitled to participate in such apportionment.  (This item 16, Section I is amended by item 125, Section II below)

		
	17.
	INTERCHANGE OF TONNAGE:  Pipelines shall provide the necessary connections and facilities for the exchange of tonnage at every locality reached by two or more pipelines, when the Commission finds that a necessity exists for connection, and under such regulations as said Commission may determine in each case.

		
	18.
	RECEIPT AND DELIVERY -- NECESSARY FACILITIES FOR:  Each pipeline shall install and maintain facilities for the receipt and delivery of marketable crude petroleum of Shippers at any point on its line if the Commission finds that a necessity exists therefor, and under regulations by the Commission.

__________________

*    This deviates from Rule 71.11 of the General Conservation Rules.

                                                                                       
		
	19.
	FIRES, LIGHTNING AND LEAKAGE, REPORTS OF LOSS FROM:

		
	A. 
	Each pipeline shall immediately notify the Commission, by telegraph, telephone, or letter of each fire that occurs at any oil tank owned or controlled by the pipeline, or of any tank struck by lightning.  Each pipeline shall in like manner report each break or leak in any of its tanks or pipelines from which more than five (5) barrels escapes.  Each pipeline shall report in writing to the Commission, by the fifteenth (15th) day of each Calendar Month, the estimated amount of loss of oil by fire or leakage from its tanks and pipelines for the preceding month; but not including leakage or evaporation ordinarily incident to transportation.

		
	B. 
	No risk of fire, storm, flood or act of God, and no risk resulting from riots, insurrection, rebellion, war, or act of the public enemy, or from quarantine or authority of law or any order, requisition or necessity of the government of the United States in time of war, shall be borne by a pipeline, nor shall any liability accrue to it from any damage thereby occasioned.  If loss of any crude oil from any such causes occurs after the oil has been received for transportation, and before it has been delivered to the Consignee, the Shipper shall bear a loss in such proportion as the amount of his shipment is to all of the oil held in transportation by the pipeline at the time of such loss, and the Shipper shall be entitled to have delivered only such portion of his shipment as may remain after a deduction of his due proportion of such loss, but in such event the Shipper shall be required to pay charges only on the quantity of oil delivered.  This rule shall not apply if the loss occurs because of negligence of the pipeline.

		
	20.
	PRINTING AND POSTING:  Each pipeline shall have Sections 1 through 19 of this rule printed on its tariff sheets, and shall post the printed sections in a prominent place in its various offices for the inspection of the shipping public.  Each pipeline shall post and publish only such Rules and Regulations as may be adopted by the Commission as general rules or such special rules as may be adopted for any particular field.

SECTION II 
RULES AND REGULATIONS 

		
	5.
	DEFINITIONS:

  
"A.P.I. Gravity," as used herein, means gravity determined in accordance with American Society for Testing Materials Designation D-287. 

"Carrier" means the pipeline company, Knight Warrior LLC, which accepts Nominations for transportation of, and transports, Crude Oil on its Pipeline system.

“Committed Shipper” means a Shipper that has committed to ship, or pay a deficiency payment for failure to ship, certain minimum volumes of Crude Oil pursuant to a Throughput Agreement entered into with Carrier. 

“Consignee” means the party owning and/or operating the destination facility for the crude petroleum transported hereunder.

"Crude Petroleum," as used herein and sometimes referred to as crude oil, oil, or petroleum (each of which may or may not be a capitalized term), means the direct product of oil wells.

“Delivery Point” means the storage or other connection where delivery is made as set forth in the rate tariff or an applicable Throughput Agreement.

“Origin Point” means the point at which Carrier takes custody of the Crude Petroleum as set forth in the rate tariff or an applicable Throughput Agreement.

“Pipeline” or “System” means the Knight Warrior Pipeline.

“Uncommitted Shipper” means a Shipper other than a Committed Shipper. 

		
	10.
	APPLICATION OF RATES FROM AND TO INTERMEDIATE POINTS:  For shipments accepted for transportation from any point not named in tariffs making reference hereto which is intermediate to a point from which rates are published in said tariffs, through such unnamed point, the rate published therein from the next more distant point specified in the tariff will apply from such unnamed point, and the gathering charge at the next more distant point shall apply when gathering service is performed.  For shipments accepted for transportation to any point not named in tariffs making reference hereto which is intermediate to a point to which rates are published in said tariffs, through such unnamed point, the rate published therein to the next more distant point specified in the tariff will apply.

                
                                                                                                               
		
	25.
	SPECIFICATIONS AS TO QUALITY AND LEGALITY OF SHIPMENTS:  Carrier reserves the right to reject any and all of the following shipments:

		
	A. 
	Crude Oil having a vapor pressure in excess of ten (10) pounds absolute at a temperature of 100 degrees Fahrenheit and/or an A.P.I. gravity in excess of 65 degrees.

		
	B. 
	Crude Oil where the Shipper or Consignee has failed to comply with all applicable laws, rule, and regulations made by any governmental authorities regulating shipments of Crude Oil.

		
	C. 
	Crude Oil received from tanks containing basic sediment, water, or other impurities in excess of one percent (1%) average in suspension above the pipeline connection.  Where crude oil is delivered to pipeline through automatic custody transfer measurement facilities, Carrier may require use of a monitor which rejects oil containing in excess of one percent (1%) basic sediment and water.  (This limitation by Carrier is supplementary to the two percent (2%) basic sediment and water limit above a point 6 inches below pipeline connection provided for in Item 1 of Railroad Commission of Texas Rule 71.)

		
	D. 
	If Carrier determines that a Shipper has delivered to Carrier’s facilities Crude Petroleum that has been contaminated by the existence of and or excess amounts of impure substances, including but not limited to chlorinated and/or oxygenated hydrocarbons, arsenic, lead and/or other metals which results in harm to other shippers, carriers, users of the contaminated Crude Petroleum or Carrier, such Shipper will be excluded from further entry into applicable segments of the pipeline system until such time as the quality of the Crude Petroleum is to the satisfaction of the Carrier.  Carrier is not responsible for monitoring receipts or deliveries for contaminants.  Further, Carrier reserves the right to dispose of any contaminated Crude Petroleum blocking its pipeline system.  Disposal thereof may be made in any reasonable manner including but not limited to commercial sales, and any liability associated with the contamination or disposal of any Crude Petroleum shall be borne by the Shipper introducing the contaminated Crude Petroleum into Carrier’s system.  Shipper liability includes claims of cross contamination from other shippers, carriers, or users of the contaminated Crude Petroleum and the costs of any regulatory or judicial proceeding.

		
	E. 
	Carrier will not accept Crude Oil containing any of the following: Waste oils, Lube oils, Crankcase oils, PCB’s or Dioxins.

		
	30.
	APPLICATION OF RATES:  Crude Oil accepted for gathering and/or transportation shall be subject to the rates in effect on the date of receipt by Carrier, irrespective of the date of the tendered.

		
	31.
	TENDERS REQUIRED:

		
	A. 
	Crude Oil for shipment through lines of Carrier will be received only on properly executed tenders from the Shipper showing the point at which the Crude Oil is to be received, point of delivery, consignee, and amount of Crude Oil transported.  Carrier may refuse to accept Crude Oil for transportation unless satisfactory evidence be furnished that the Shipper or Consignee has made provision for prompt receipt thereof at destination.

		
	B. 
	Any Shipper desiring to tender Crude Oil for transportation shall make such tender to the initial Carrier in writing on or before the twenty-fifth day of the month preceding the month during which the transportation under the tender is to begin; except that, if space is available for current movement, a Shipper may tender Crude Oil for transportation after the twenty-fifth day of the month preceding the month during which the transportation under the tender is to begin.

		
	36.
	LINE FILL AND TANK BOTTOM INVENTORY:  Except as may be provided for in a Throughput Agreement with a Committed Shipper, either prior to or after the acceptance of Crude Oil for transportation through the System, Carrier may, upon reasonable notice, require each Shipper to provide a pro rata part of the volume of Crude Oil necessary for pipeline fill, unavailable stocks below tank connections, and reasonable additional minimum quantities required for the efficient operation of the System.  Upon the termination of shipments by Shipper, Carrier will deliver to Shipper at the Delivery Point all of Shipper’s Crude Oil in the pipeline or otherwise available for shipment. Redelivery shall be completed as batches transit the pipeline with expected transit time based on batch size. As shipments are nominated an estimated window of delivery dates will be provided by Carrier. Expected transit time is not guaranteed. Tank bottoms belonging to Shipper will be made available for removal by Shipper from the tank within 90 days after Shipper ceases making shipments, provided that the Carrier may, if possible, make physical delivery of the tank bottoms, arrange for a trade of like barrels to Shipper, or otherwise financially settle the inventory. Shipper will at all times retain title to its Crude Oil in transit and tank bottoms and Carrier will, at the discretion of Carrier, provide to or have available for Shipper, a monthly statement of Shipper’s inventory.

		
	40.
	UNLOADING OR TRANSFER CHARGES:

		
	A. 
	All common stream shipments and all shipments that are to be moved in batches of less than [10000] bbls that are received from tank truck unloading facilities or gathering pipeline facilities provided by others, either of which delivers into Carrier's trunkline facilities, will be subject to an unloading or transfer charge of nine cents (9¢) per barrel, except that no charge in either case shall be made if the initial trunkline pumping is provided by others. This provision is not applicable to Committed Shippers unless otherwise agreed to in the applicable Throughput Agreement.

		
	B. 
	All shipments received from tank truck unloading facilities into Carrier's gathering facilities will be subject to the applicable gathering charge for the particular gathering facility but will not be subject to a truck unloading or transfer charge.

                                                                                                               
		
	45.
	DEDUCTIONS AND QUANTITIES DELIVERABLE:  (Exception to Rule 9, Section  hereof and not applicable to Committed Shippers unless otherwise agreed to in the applicable Throughput Agreement).

		
	A. 
	All common stream shipments and all shipments that are to be moved in batches of less than 10,000 bbls that are of 45  degrees or above shall be subject to a deduction to cover the shrinkage resulting from the mixture thereof, in the facilities of Knight Warrior LLC, with Crude Oil of A.P.I. Gravity of 44.9 degrees or less according to the following table:        

        
	
				
	A.P.I. Gravity    
	 
	% Deduction

	

	 
	 
	 

	45.0° through 49.9°    
	 
	0.5
	

	50.0° through 59.9°    
	 
	1.0
	

	60.0° through 65.0°    
	 
	1.5
	

Carrier will not accept any Crude Oil for shipment above sixty-five degrees (65°) A.P.I. Gravity at sixty degrees Fahrenheit (60°F) and any Crude Oil with a Reid vapor pressure in excess of 10.0.

		
	B.
	The quantity deliverable shall be reduced by deduction for sediment, water, other impurities, loss for evaporation and loss during transportation as provided for in Rule 9, Section  hereof, less the applicable deduction for shrinkage.

		
	50.
	GATHERING CHARGES:  (Amendment to Rule 8 Section  hereof.)  When gathering service is performed by Carrier, gathering charges will be assessed on the net volume remaining after adjustment for temperature and deduction for basic sediment, water, other impurities, and losses, provided for in Rule 9, Section  hereof, with no deduction being made for shrinkage.

		
	55.
	COMMON STREAM PETROLEUM-CONNECTING CARRIERS:  When both receipts from and deliveries to a connecting Carrier of substantially the same grade of Crude Oil are scheduled at the same interconnection, Carrier reserves the right, with cooperation of the connecting Carrier, to offset like volumes of such common stream Crude Oil in order to avoid the unnecessary use of energy which would be required to physically pump the offsetting volumes.  When this right is exercised, Carrier will make the further deliveries for the Shipper involved from its common stream Crude Oil.

		
	60.
	CHARGE FOR FUND COMPENSATION:  In addition to all other charges accruing on Crude Petroleum accepted for gathering and/or transportation, a per barrel charge will be assessed and collected in the amount of any tax, fee, or other charge levied against Carrier by any Federal, State or local act, regulation or agency for the purpose of providing a fund for the reimbursement of parties who sustain costs or losses resulting from oil pipeline industry operations.  Such charge will be included in the appropriate tariff filed with the Commission.

		
	65.
	WARRANTIES: Shipper warrants that the Crude Oil tendered to Carrier will conform with the Specifications stated in Item 25, it will be merchantable and will not be contaminated. Shipper will be liable to Carrier, other Shippers and/or Consignees for any damage including special, incidental, and consequential, as well as attorney fees, arising from a breach of contract. Transportation of the Crude Oil may be refused or canceled if Carrier determines or is advised the the Crude Oil does not meet the requirements of these Rules and Regulations. In addition, if Carrier samples the Crude Oil prior to or after tendered by Shipper and if test results determine that the Crude Oil is non-merchantable, Shipper will be liable to Carrier for all costs and expenses incurred for such tests for non-merchantable or contaminated Crude Oil.

		
	100.
	GENERAL APPLICATION:  Carrier will provide working tankage that is incident and necessary to the transportation of Crude Oil, but does not provide or offer storage service.  Shipper or Consignee may, by request on the original tender or shipper order, or by order for diversion or reconsignment enroute, have Crude Oil tendered for shipment stored in tanks furnished by the Shipper or Consignee at points on the lines of Carrier, when intermediate to the destination shown on the tender of shipments, subject to the conditions provided in this Section.                                                                                               

		
	105.
	RATES APPLICABLE AND PAYMENT TERMS:

		
	A. 
	The following modifies and supercedes Item 11 of Section I: 

Transportation charges will be computed and collected as set forth in the Rate Tariff or the agreed upon contract rate for Commited Shippers. 
(i)  Billing.  No later than the 15th business day of each month, Carrier shall deliver to Shipper a statement for transportation services in the preceding month setting forth (i) the volumes of Shipper’s Crude Oil (in Barrels) received at the origin point, (ii) the throughput fees for that month, (iii) any adjustments for prior periods, and (iv) all other amounts due by Shipper, including any deficiency payments.  Carrier’s invoices shall include information reasonably sufficient to explain and support any estimates and charges reflected therein, the reconciliation of any estimates made in a prior month to any actual measurements, and any adjustments to prior period volumes and quantities.

(ii)  Payment terms for Committed Shippers.

(a)  Subject to Item 100(b)(ii) of Section II, Shipper shall remit to Carrier amounts due under Item 100(a) of Section II by wire transfer by the later of (X) 10 days after Shipper’s receipt of the statement referenced above and (Y) the 20th day of each month, to the bank account specified by Carrier.  If such due date is not a business day, payment is due on the next business day following such date.

(b)  If Shipper disputes any portion of any invoice (the “Disputed Amount”), Shipper shall promptly notify Carrier of the disputed amount and pay the undisputed portion according to the terms of this Item 100 of Section II.  After receipt of such notice, Carrier shall promptly work with Shipper to resolve the dispute.
    
(iii)  Payment terms for other than Committed Shippers. All transportation charges shall be paid upon delivery of the Crude Petroleum at the Destination Point or may be required in advance of transportation at the option of Carrier.

(iv)  Late Payments.  Carrier shall have a lien on all petroleum in its possession belonging to Shipper or Consignee to secure the payment of any and all unpaid gathering, transportation, or any lawful charges that are due Carrier that are unpaid by Shipper or Consignee, and may withhold such petroleum from delivery until all unpaid charged have been paid.  If Shipper fails to pay any amount hereunder when due (including disputed amounts that are not paid by the due date, but are later determined to be owed), interest thereon shall accrue on the unpaid amounts at an annual rate equivalent to 125% of the prime rate of interest, as of the date of Carrier's invoice, charged by the Citibank N.A. of New York, New York, for ninety (90) day loans made to substantial and responsible commercial borrowers or the maximum rate allowed by law, whichever is the lesser.  If the invoice is not paid within thirty (30) days from the date due, Carrier shall have the right, either directly or through an agent, at any time after such publication of notice of such sale in a daily newspaper of general circulation published in the town, city, or general area where the sale is to be held, stating the time and place of sale and the quantity and location of the petroleum to be sold.  At said sale, Carrier shall have the right to bid, and, if it is the highest bidder, to become the purchaser.  The proceeds of disposition shall be applied in the following order:  (i)  To the reasonable expenses of holding, preparing for sale, selling, and to the extent allowed by law, reasonable attorney's fees and legal expense incurred by Carrier; and (ii) To the satisfaction of the indebtedness secured hereby including interest herein provided from due date of invoice to date of sale.  The balance of the proceeds of the sale remaining, if any, shall be held for whomsoever may be lawfully entitled thereto.

                                                                        
		
	B. 
	Except as may be provided for in a Throughput Agreement with a Committed Shipper,in the absence of a through rate from point of origin to the storage point, the rate to the next point beyond shall be applied.

		
	C. 
	Crude Oil will be subject to the local rate for movement into the storage point and Crude Oil not forwarded from storage points within the specified time will be subject to the local rate into, and out of the storage point published in Carrier's tariffs lawfully on file with the Railroad Commission of Texas.

		
	D. 
	After a shipment has had time to arrive at destination, and on 24 hours notice to Shipper or Consignee, Carrier may begin delivery of such shipment from its common stock to Consignee at Carriers current rate of pumping.  If Shipper or Consignee is unable or refuses to receive said shipment, a demurrage charge of six cents (6.0 cents) per barrel per 24 hours shall accrue from the time said notice expires, on that part of such shipment which is not received by Consignee.  Carrier reserves the right, if deemed necessary to clear its pipeline system to make whatever arrangements for disposition of the shipment that are appropriate which includes selling the shipment to the first available purchaser at the best price attainable.  Any expenses incurred by the Carrier in making such arrangements shall be borne by the Shipper or Consignee, in addition to any demurrage charges.

		
	110.
	DELIVERY INTO STORAGE TANKS:  Upon delivery of Crude Oil into storage tanks furnished by the Shipper or Consignee, its custody and possession shall be that of the Shipper or Consignee and not that of Carrier, and Carrier shall not be liable for loss of or damage to such Crude Oil while in storage.    

120. NOMINATION PROCEDURE: Crude Oil for shipment through lines of the Carrier will be received only on proper notice showing the point at which the Crude Oil is to be received, point or points of delivery, Consignee, and amount of Crude Oil to be transported.  The notice shall be received by the Carrier on or before the twentieth (20th) day of the calendar month preceding the desired shipment date.  If the twentieth (20th) day of the month falls on a weekend or holiday, nominations are due on the last workday before the twentieth (20th).  The nomination may be e-mailed or faxed.  A nomination must specify, for each shipment, the quantity, product, grade, origin, destination, supply sources, and Shipper, and must meet any requirements of the Delivery Point.

		
	125.
	PRORATION POLICY: The Proration Policy attached hereto supercedes Item 16 of Section I.

126.        SHIPPER HISTORY - ASSIGNMENT PERMITTED. Except as may be prohibited by a regulatory agency Shipper may assign its Shipper History to another Shipper (“Assignee Shipper”) (“Assigned Shipper History”). Carrier shall be given notice of such assignment in writing by the twenty-fifth (25th) day of the month prior to the month in which an apportionment decision by the Carrier is expected to include the Assigned Shipper History in apportionment. For any purpose under these Rules and Regulations for which Shipper History is relevant, Assigned Shipper History shall apply to the Assignee Shipper as though it had been performed by the Assignee Shipper itself.

Section 130.   SURCHARGES.  Carrier shall list as a separate line item on monthly billing invoices and accounting statements to Shippers any Carrier surcharges (if any) imposed by Carrier on Shippers.

2. Will there be a provision for pipeline loss allowance? See #9]

EXPLANATION OF REFERENCE MARKS AND ABBREVIATIONS

	
		
	A.P.I.
	American Petroleum Institute

	A.S.T.M
	American Society for Testing Materials

	[U]
	Unchanged

	[W]
	Wording Change

	[N]
	New Wording

	[C]
	Cancelled

KNIGHT WARRIOR PIPELINE
PRORATION POLICY

The intention of this Proration Policy is twofold: 

		
	•
	To allocate the capacity of a specific Pipeline segment among the Regular Shippers and New Shippers on an equitable basis in the Nomination process.

 
		
	•
	To maximize the actual utilization of the capacity of a specific Pipeline segment.

Carrier shall implement this Proration Policy anytime the Nominations on a specific Pipeline segment exceed the Available Capacity on that Pipeline segment. 

Definitions: 

Actual Shipments means the volume of Crude Oil transported over a specific Pipeline segment.

Affiliate means any Person that directly or indirectly, through one or more intermediaries, controls or is controlled by or is under common control with another Person.  The term “control” (including its derivatives and similar terms) means possessing the power to direct or cause the direction of the management and policies of a Person, whether through ownership, by contract, or otherwise.  Without limiting the foregoing, any Person shall be deemed to be an Affiliate of any specified Person if such Person owns more than fifty percent (50%) of the voting securities of the specified Person, or if the specified Person owns more than fifty percent (50%) of the voting securities of such Person, or if more than fifty percent (50%) of the voting securities of the specified Person and such Person are under common control.

Allocation Month means any month in which the Nominations of all Shippers on a specific Pipeline segment exceed the Available Capacity, thereby causing Carrier to implement this Proration Policy. 

Available Capacity means the capacity of the Pipeline not subject to prior commitment to other shippers to transport Crude Oil. 

Base Period means the twelve (12) consecutive month period ending with the second month prior to the Allocation Month for which Nominations are being apportioned, during which current Shippers establish their Shipper History.  

BPM means barrels per month. 

Carrier means the pipeline company, Knight Warrior LLC, which accepts Nominations for transportation of, and transports, Crude Oil on its Pipeline system. 

Committed Shipper means a Shipper that has committed to ship, or pay a deficiency payment for failure to ship, certain minimum volumes of Crude Oil pursuant to a Throughput Agreement entered into with Carrier. 
 

Committed Volume means, with respect to a Committed Shipper, the minimum daily volume of Crude Oil that such Committed Shipper committed to ship, or pay a deficiency payment for failure to ship set out in the Commited Shipper’s Throughput Agreement with Carrier. 

Extraordinary Operating Conditions means (i) operating conditions that result in the capacity of the Pipeline available for shipments of Crude Oil, or a segment thereof, being reduced below the then committed volumes on the applicable segment(s), for any reason, including events of force majeure, other weather conditions, repairs or maintenance or (ii) a force majeure event at the destination point resulting in Carrier being unable to deliver Crude Oil into the applicable receipt facilities at the destination point.

Minimum Volume means the volume set forth in the Rules and Regulations.

New Shipper means any Shipper who is not a Regular Shipper. 

Nomination means a notice from a Shipper to Carrier requesting that Carrier transport for Shipper in a given month a stated volume of Shipper’s Crude Oil on the Pipeline, at the times and in the manner provided in the Rules and Regulations. 

Person means any individual, firm, corporation, trust, partnership, limited partnership, master limited partnership, limited liability company, association, joint venture, other business enterprise or governmental authority.

Pipeline means the Knight Warrior Pipeline.

Prepaid Transportation Credits means credits generated by deficiency payments made by a Committed Shipper under its Throughput Agreement that may be applied as prepayment for transportation by such Committed Shipper.

Proration Policy means this document, which is the official written description of the process by which Carrier will allocate Available Capacity when Nominations on any segment of the Pipeline exceed the Available Capacity. 

Regular Shipper means (i) a Committed Shipper (excluding any Committed Shipper whose rights with respect in the event of prorationing have been terminated by the Carrier in accordance with its Throughput Agreement), and (ii) a Shipper that has Actual Shipments during at least 9 months of the Base Period.  

Shipper means the transporter of Crude Oil on the Pipeline segment and the entity that submitted Nominations to the Carrier. 

Shipper History means (a) for a Regular Shipper other than a Committed Shipper, the monthly average of such Regular Shipper’s volumes of Crude Oil actually shipped over the Base Period, and (b) for a Committed Shipper, the greater of (i) the monthly average of such Committed Shipper’s volumes of Crude Oil actually shipped over the Base Period (or such portion of such monthly average that shall not result in an allocation to any other Committed Shipper under step 2 below that reduces such other Committed Shipper below its Committed Volume) and (ii) the Committed Shipper’s Committed Volume.

Throughput Agreement means a transportation services agreement executed by the Carrier and a Committed Shipper. 

Allocation Methodology: 

During an Allocation Month, Available Capacity on an affected Pipeline segment will be allocated as follows: 

		
	1.
	In the aggregate, New Shippers will be allocated 10% of the Available Capacity of the prorated Pipeline segment in any Allocation Month, on a pro rata basis but not to exceed the lesser of a New Shipper’s Nomination or 2.5% of Available Capacity in any Allocation Month. If the pro rata allocation in an Allocation Month, based on the number of New Shippers making Nominations, results in no New Shipper being allocated the Minimum Volume, then Carrier will administer a lottery process for the total number of Minimum Volume allocations available to New Shippers in the Allocation Month. A New Shipper will not be allocated capacity through the lottery process if it is: (a) an Affiliate of a Regular Shipper, or (b) an Affiliate of another Shipper who received an allocation through the lottery process. The lottery process will be conducted as follows:

		
	A.
	Carrier will use a random number generating software to randomly assign each New Shipper a number from one to the number representing the total number of New Shippers participating in the lottery (i.e. if there are fifty New Shippers, numbers one through fifty will be assigned).

		
	B.
	The New Shipper assigned number one will receive the first Minimum Volume allocation.  Thereafter, Minimum Volume allocations will be assigned to New Shippers sequentially, from lowest assigned number to highest assigned number, until 10% of Available Capacity is fully allocated.

		
	2.
	For each prorated Pipeline segment, 90% of Available Capacity will be allocated to Regular Shippers proportionately based on the lesser of each Regular Shipper’s Shipper History or its Nomination in the Allocation Month. 

		
	3.
	Any Remaining Capacity after implementing steps #1 and #2 will be allocated on a pro rata basis to Committed Shippers nominating volumes to be shipped with the application of Prepaid Transportation Credits, based on the excess of such Committed Shippers’ Nomination over the capacity allocated to such Committed Shipper pursuant to Step #2.

		
	4.
	Any Remaining Capacity after implementing steps #1, #2 and #3 will be allocated on a pro rata basis among all Shippers which were allocated Available Capacity pursuant to steps #1, #2 or #3 based on the excess of such Shipper’s Nomination over the capacity allocated to such Shipper pursuant to Steps #1, #2 and #3.

		
	5.
	No Nominations will be considered above the amount that the Shipper has been allocated for shipment, nor will Carrier accept a Nomination which exceeds the Available Capacity.  Shippers shall not make Nominations which are inflated beyond the volume such Shipper reasonably expects to be able to ship.   Carrier may require written assurances from responsible officials of a Shipper, stating that this requirement has not been violated.  Furthermore, during any Allocation Month no New Shipper Nomination shall be considered beyond 10% of Available Capacity.  Nominations in excess of these limits will be reduced accordingly. 

		
	6.
	Once Carrier has determined each Shipper’s adjusted nominationfor any prorated Pipeline segment in accordance with the foregoing Allocation Methodology (the “Adjusted Nomination”), Carrier will notify each Shipper of its Adjusted Nominations for the Allocation Month, if any, which shall be binding on the Shipper absent manifest error by Carrier.

		
	7.
	In the event that a Regular Shipper or New Shipper releases all or any part of its allocated capacity in sufficient time prior to the Allocation Month to permit Carrier to reallocate and revise the schedule, and as a result the Carrier is then able to solicit other Shippers to fully utilize that capacity, that Shipper's allocation will be reduced without penalty (other than any deficiency payments payable by Committed Shippers for their allocated capacity). 

		
	8.
	If the allocated capacity awarded to a Regular Shipper or New Shipper on a prorated Pipeline segment goes unused by that Shipper ("Unused Allocation"), then that Shipper is accountable for payment of the tariff fees for the Actual Shipments, or 100% of the Adjusted Nomination, whichever is greater. These charges will be waived when there exists Unused Allocation as a result of deliveries having been reduced at the request of the Carrier, or where Extraordinary Operating Conditions prevented full receipt or delivery of barrels nominated by the Shipper.

		
	9.
	In the event that a Shipper, who in spite of having a binding Adjusted Nomination on the prorated Pipeline segment, then attempts to withdraw that binding Adjusted Nomination, and as a result the Available Capacity is not fully allocated following application of items #1 through #3 above, the newly available portion of the Available Capacity shall be allocated in the following manner: 

		
	A.
	Each Regular Shipper with Nominations exceeding its Adjusted Nomination for such Pipeline segment will be allocated a portion of the newly available portion of the Available Capacity in the same proportion as that which it has been assigned on the allocated Pipeline segment. 

		
	B.
	Each New Shipper who was allocated Available Capacity pursuant to Step #1 above whose Nominations exceeded its Adjusted Nomination will be allocated a portion of the newly available portion of the Available Capacity in the same proportion as that which it has been assigned on the allocated Pipeline segment. 

		
	C.
	If there are no Shippers who have Nominations exceeding their Adjusted Nominations all Shippers who have Nominations on the allocated Pipeline segment will be notified that there is additional Available Capacity on the Pipeline segment. All Nominations from these Shippers will be honored in the same proportion that their Adjusted Nomination bears to the aggregated Adjusted Nominations from all Nominations from Shippers. 

EXHIBIT C
THROUGHPUT FEES
(in $’s per barrel, except bpd amounts)
 Subject to Shipper Daily Volume Commitment(s) per Section 5.1, the following are the throughput rate fee tiers available to Shipper on volumes committed by Shipper and either shipped or subject to deficiency payment:

	
				
	Volume Commitment, bpd
	 Throughput Fee (in $/Bbl) from Midway or North Zulch Stations to Houston 
	 Rate Application 
	Batch Segregation

	***
	***
	Rate applies to all barrels shipped 
	Segregation available

	***
	***
	Rate applies to all barrels shipped
	Segregation available

	***
	***
	Rate applies to all barrels shipped
	Segregation available

	***
	***
	Rate applies to all barrels shipped
	Segregation available

	***
	***
	Rate applies to all barrels shipped
	Segregation available

	***
	***
	Rate applies to all barrels shipped
	Segregation available

Provided the Shipper has provided written notice per Section 5.1 to increase the Shipper’s Daily Volume Commitment, the Shipper shall be entitled to the tiered rates specified above for Shipper’s indicated Daily Volume Commitment tier.  Volumes shipped by Shipper above the Shipper’s Daily Volume Commitment shall be made on an as available basis by Carrier and shall incur a Throughput Fee equal to the Shipper’s Daily Volume Commitment tier indicated above

Exhibit C

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00237-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00237-of-00352.parquet"}]]