Document:

ex104.htm

COASTAL PACIFIC MINING CORP.

 2009 STOCK OPTION

AND STOCK AWARD PLAN

  

  

  

COASTAL PACIFIC MINING CORP.

 2000 STOCK OPTION

AND STOCK AWARD PLAN

(this “PLAN”)

1.           Definitions

Each of the following terms shall have the respective meanings set forth below for purposes of this Plan, whether employed in the singular or plural unless the particular context in which said term is used clearly indicates otherwise:

	
  

	
(a)

	
“Administrator” shall mean, during the entire term of this Plan, the person or persons appointed by the Board to administer this Plan or in the event that no such person is appointed, the Board.

(b)           “Board” shall mean the Company’s Board of Directors.

	
  

	
(c)

	
“Common Stock” shall mean the common stock of the Company, no par value.

	
  

	
(d)

	
“Company” shall mean COASTAL PACIFIC MINING CORP., an Alberta corporation.

	
  

	
(e)

	
“Directors” shall mean each and every member of the Board of Directors of the Company (as such term is defined below) as presently constituted and as may otherwise be constituted during the term hereof.

(f)           “Effective Date” shall mean as of June 10, 2009.

	
  

	
(g)

	
“Option” shall mean the right to purchase a specified number of shares of the Common Stock pursuant to the terms and conditions set forth in this Plan.

	
  

	
(h)

	
“Optionee” shall mean the recipient of Options hereunder.  Any reference herein to the employment or consultancy of an Optionee by the Company shall include Optionee’s employment or consultancy by the Company or its subsidiaries, if any.

(i)           “Plan Termination Date” shall mean the date upon which this Plan terminates.

	
  

	
(j)

	
“Stock Award” shall mean the granting and issuance of the Common Stock pursuant to the terms and conditions set forth in this Plan.

	
2.

	
Purpose

The purpose of this Plan is to maintain the ability of the Company to attract and retain highly qualified and experienced directors, officers, employees and consultants (“Participants”) and to give such Participants a continued proprietary interest in the success of the Company. Pursuant to this Plan, eligible Participants will be provided the opportunity to participate in the enhancement of shareholder value through the grants of options, stock appreciation rights, awards of free trading stock and restricted stock, bonuses and/or fees payable in stock, or any combination thereof.

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3.

	
Administrator(s) of this Plan

	
(a)  

	
Powers of the Administrator: .Subject to the provisions of paragraph 5 hereof, this Plan shall be administered by the Administrator, and the Administrator shall have the authority, in its discretion:

	
(i)  

	
to determine the fair market value of the securities to be issued under this Plan;

	
(ii)  

	
to select the participants to whom the Options and Stock Awards may be granted hereunder;

	
  

	
(iii)

	
to determine whether and to what extent Options or Stock Awards or any combination thereof, are granted hereunder;

	
(iii)  

	
to determine the number of shares of Common Stock or equivalent units to be covered by each Option and Stock Award granted hereunder;

(v)           to approve forms of agreement for use under this Plan;

	
(iv)  

	
to determine the terms and conditions, not inconsistent with the terms of this Plan, of any Option or Stock Award granted hereunder.  Such terms and conditions include, but are not limited to, the exercise price, the time or times when Options may be exercised (which may be based on performance criteria), any vesting acceleration, and any restriction or limitation regarding any Option or Stock Award or the shares of Common Stock relating thereto, based in each case on such factors as the Administrator, in its sole discretion, shall determine;

	
  

	
(vii)

	
to construe and interpret the terms of this Plan and Options or Stock Awards;

	
(v)  

	
to prescribe, amend and rescind rules and regulations relating to the Plan, including rules and regulations relating to sub-plans established for the purpose of qualifying for preferred tax treatment under foreign tax laws;

	
  

	
(ix)

	
to modify or amend each Option or Stock Award (subject to Section 18(c) of the Plan);

	
(vi)  

	
to authorize any person to execute on behalf of the Company any instrument or treasury order required to effect the grant of an Option or Stock Award previously granted by the Administrator;

	
  

	
(xi)

	
to make all other determinations deemed necessary or advisable for administering this Plan.

	
  

	
(b)

	
Effect of Administrator's Decision:  The Administrator's decisions, determinations and interpretations shall be final and binding on the Company, all participants and any other holders of Options or Stock Awards.

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(c)

	
Each grant or award made pursuant to this Plan shall be evidenced by an Option Agreement or Stock Award Agreement (the "Agreement").  No person shall have any rights under any option, restricted stock or other award granted under this Plan unless and until the person to whom such Option, restricted stock or other Stock Award shall be granted shall have executed and delivered an Agreement to the Company.  The Administrator(s) shall prescribe the form of all Agreements. A fully executed counterpart of the Agreement shall be provided to both the Company and the recipient of the grant or award.

	
  

	
(d)

	
The Company shall indemnify and hold harmless the Directors and the Administrator(s) from and against any and all liabilities, costs and expenses incurred by such persons as a result of any act, or omission to act, in connection with the performance of such persons' duties, responsibilities, and obligations under this Plan, other than such liabilities, costs and expenses as may result from the gross negligence, bad faith, willful misconduct, and/or criminal acts of such persons.

4.           Shares of Stock Subject to this Plan

The maximum number of shares of the common stock,  no par value,  that may be optioned or awarded under this Plan is 5,000,000 shares, subject to adjustment as provided in Section 15 hereof.  Any shares subject to an Option which for any reason expires or is terminated unexercised and any restricted stock which is forfeited may again be optioned or awarded under this Plan; provided, however, that forfeited shares shall not be available for further awards if the Participant has realized the benefits of ownership from such shares.  Shares subject to this Plan may be either, authorized and un-issued shares or issued shares repurchased or otherwise acquired by the Company.

5.           Grant of Options

	
  

	
(a)

	
The Administrator(s) shall have the authority and responsibility, within the limitations of this Plan, to determine the Directors, employees and consultants to whom and the times at which Options are to be granted, the number of shares of Common Stock which may be purchased under each Option, the provisions of the respective Option Agreements (which need not be identical) including provisions concerning the time or times when, and the extent to which, the Options may be exercised, and the Option exercise price.  All Options pursuant to this Plan shall be granted on or before the Plan Termination Date.

	
  

	
(b)

	
In determining the Directors, employees and consultants to whom Options shall be granted, the number of shares of Common Stock to be covered by each such Option, and the provisions of the respective Option Agreements, the Administrator(s) shall take into consideration the employee’s or consultant’s present and potential contribution to the success of the Company and such other factors as the Administrator(s) may deem proper and relevant.

 

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6.           Eligibility

Directors, employees, including officers, of the Company, and consultants who provide bona fide services to the Company are eligible to be granted Options, free trading stock, restricted stock and other Stock Awards under this Plan and to have their salaries, bonuses and/or consulting fees payable in free trading stock, restricted stock and other Stock Awards.  Any issuances of free trading stock shall be subject to the regulatory rules pursuant to the jurisdiction in which the stock is to be issued.  The Directors, employees, and consultants who shall receive awards or options under this Plan, and the criteria to be used in determining the award to be made, shall be determined from time to time by the Administrator(s), in their sole discretion, subject to the limitations set forth in Section 8 below, from among those eligible, which may be based upon information furnished to the Administrator(s) by the Company's management; and the Administrator(s) shall determine, in their sole discretion, the number of shares to be covered by each Stock Award and option granted to each Director, employee or consultant selected.

7.           Duration of this Plan

No award or Option may be granted under this Plan after more than ten (10) years from the earlier of the date this Plan is adopted by the Board.

8.           Terms and Conditions of Stock Options

Options granted under this Plan may be either incentive stock options, or Options other than incentive stock options.  Each Option shall be subject to all the applicable provisions of this Plan, including the following terms and conditions, and to such other terms and conditions not inconsistent therewith as the Administrator(s) shall determine:

	
  

	
(a)

	
The Option price per share shall be set by the Board of Directors at the time of each Stock Award issuance or Option grant.

	
  

	
(b)

	
The exercise of certain Options granted under this Plan may be subject to the attainment of such performance goals, and/or during such period as may be determined by the Administrator(s) and stated in the Agreement.

 

 

	
  

	
(c)

	
An Option shall not be exercisable with respect to a fractional share of Common Stock or with respect to the lesser of fifty (50) shares or the full number of shares then subject to the Option. No fractional shares of Common Stock shall be issued upon the exercise of an Option. If a fractional share of Common Stock shall become subject to an Option by reason of a stock dividend or otherwise, the Optionee shall not be entitled to exercise the Option with respect to such fractional share.

	
  

	
(d)

	
Each Option shall state whether it will or will not be treated as an incentive stock option.

	
  

	
(e)

	
Each Option will be deemed exercised on the day written notice specifying the number of shares to be purchased, accompanied by payment in full including, if required by law, applicable taxes, is received by the Company.  Payment, except as provided in the Agreement shall be:

(i)           by check or bank draft, or

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(ii)  

	
by tendering to the Company shares of Common Stock already owned for at least six months by the person exercising the Option, which may include shares received as the result of a prior exercise of an Option, and having an aggregate fair market value, on the date on which the Option is exercised,  equal to the total cash exercise price applicable to the Options being exercised, or

	
(iii)   

	
by a combination of cash and shares of Common Stock valued as aforesaid.

For purposes of this Plan, fair market value shall be the mean between the highest and lowest prices at which the Common Stock is traded on a national securities exchange or an automated securities quotation exchange on the relevant date, provided however, if there is no sale of the Common Stock on such exchange on such date, fair market value shall be the mean between the bid and asked prices on such exchange at the close of the market on such date.  No Optionee shall have any rights to dividends or other right of a shareholder with respect to shares of Common Stock subject to his or her Option until he or she has given written notice of exercise of such Option and paid in full for such shares.

	
  

	
(f)

	
Notwithstanding the foregoing, the Administrator(s) may, in their sole discretion, include in the Agreement a provision to allow for the cashless exercise of any Options granted by such Agreement under this Plan.

	
  

	
(g)

	
The Administrator(s) may, in their discretion, include in the grant of any Option the right of a grantee (hereinafter referred to as a “stock appreciation right”) to elect, in the manner described below, in lieu of exercising his or her Option for all or a portion of the shares of Common Stock covered by such Option, to relinquish his or her Option for all or a portion of the such shares and to receive from the Company a payment equal in value to (x) the fair market value, as determined in accordance with Section 8(e), of a share of Common Stock on the date of such election, multiplied by the number of shares as to which the grantee shall have made such election, less (y) the exercise price for that number of shares of Common Stock for which the grantee shall have made such election under the terms of such Option.  A stock appreciation right shall be exercisable at the time the tandem option is exercisable, and the “expiration date” for the stock appreciation right shall be the amount described in (x) above exceeds the amount described in (y) above.  An election to exercise stock appreciation rights shall be deemed to have been made on the day written notice of such election, addressed to the Administrator(s), is received by the Company.  An Option or any portion thereof with respect to which a grantee has elected to exercise a stock appreciation right shall be surrendered to the Company and such Option shall thereafter remain exercisable according to its terms only with respect to the number of shares as to which it would otherwise be exercisable, less the number of shares with respect to which stock appreciation rights have been exercised.  The grant of a stock appreciation right shall be evidenced by an Agreement.  The Agreement evidencing stock appreciation rights shall be personal and will provide that the stock appreciation rights will not be transferable by the grantee otherwise than by will or the laws of descent and distribution and that they will be exercisable, during the lifetime of the grantee, only by him or her.

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(h)

	
Except as provided in the applicable Agreement, an Option may be exercised only if at all times during the period beginning with the date of the granting of the Option and ending on the date of such exercise, the grantee was a consultant or employee of either the Company (or of a division).  The Agreement shall provide whether, and to what extent, an Option may be exercised after termination of continuous employment, but any such exercise shall in no event be later than the termination date of the Option.  If the grantee should die, or become permanently disabled as determined by the Administrator(s) at any time when the Option, or any portion thereof, shall be exercisable, the Option will be exercisable within a period provided for in the Agreement, by the Optionee or person or persons to whom his or her rights under the Option shall have passed by will or by the laws of descent and distribution, but in no event at a date later than the termination of the Option. The Administrator(s) may require medical evidence of permanent disability, including medical examinations by physicians selected by it.

	
  

	
(i)

	
Each Option by its terms shall be personal and shall not be transferable by the Optionee otherwise than by will or by the laws of descent and distribution.  During the lifetime of an Optionee, the Option shall be exercisable only by the Optionee.  In the event any Option is exercised by the executors, administrators, heirs or distributees of the estate of a deceased Optionee as provided in Section 8(h) above, the Company shall be under no obligation to issue Common Stock thereunder unless and until the Company is satisfied that the person or persons exercising the Option are the duly appointed legal representatives of the deceased Optionee’s estate or the proper legatees or distributes thereof.

	
  

	
(j)

	
No incentive stock option shall be granted to an employee  who owns or would be treated as owning by attribution immediately before the grant of such incentive stock option, directly or indirectly, stock possessing more than 10% of the total combined voting power of all classes of stock of the Company.  This restriction shall not apply if, (i) at the time such incentive stock option is granted, the Option price is at least 110% of the fair market value of the shares of Common Stock subject to the Option, as determined in accordance with Section 8(e) on the date of grant, and (ii) the incentive stock option by its terms is not exercisable after the expiration of five years from the date of its grant.

	
  

	
(k)

	
An Option and any Common Stock received upon the exercise of an Option shall be subject to such other transfer restriction and/or legending requirements as are specified in the applicable Agreement and pursuant to the regulations of the jurisdiction in which the Optionee resides.

	
  

	
(l)

	
No Options or Stock Awards shall be made to any consultant in exchange for or as compensation for capital raising, investor relations or stock promotion.

	
  

	
(m)

	
Any Options or Stock Awards that are made to any Directors shall be held in trust by the Company until such issuance or issuances are approved by shareholders of the Company holding no less than a majority of the Company’s outstanding shares of common stock at the time of such approval.

9.           Terms and Conditions of Restricted Stock Awards

Awards of restricted stock under this Plan shall be subject to all the applicable provisions of this Plan, including the following terms and conditions, and to such other terms and conditions not inconsistent therewith, as the Administrator(s) shall determine:

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(a)

	
Awards of restricted stock may be in addition to or in lieu of Option grants.  Awards may be conditioned on the attainment of particular performance goals based on criteria established by the Administrator(s) at the time of each award of restricted stock.  During a period set forth in the Agreement (the "Restriction Period"), the recipient shall not be permitted to sell, transfer, pledge, or otherwise encumber the shares of restricted stock; except that such shares may be used, if the Agreement permits, to pay the option price pursuant to any Option granted under this Plan, provided an equal number of shares delivered to the Optionee shall carry the same restrictions as the shares so used.

	
  

	
(b)

	
Subject to the regulations of the requisite jurisdictions in which the Optionee resides, Shares of restricted stock shall become free of all restrictions if during the Restriction Period, (i) the recipient dies, (ii) the recipient's directorship, employment, or consultancy terminates by reason of permanent disability, as determined by the Administrator(s), (iii) the recipient retires after attaining both 59 1/2 years of age and five years of continuous service with the Company and/or a division or subsidiary, or (iv) if provided in the Agreement, there is a "change in control" of the Company (as defined in such Agreement).  The Administrator(s) may require medical evidence of permanent disability, including medical examinations by physicians selected by it.

	
  

	
(c)

	
Unless and to the extent otherwise provided in the Agreement, shares of restricted stock shall be forfeited and revert to the Company within 30 days of the recipient's termination of directorship, employment or consultancy during the Restriction Period for any reason other than death, permanent disability, as determined by the Administrator(s), retirement after attaining both 59 1/2 years of age and five years of continuous service with the Company and/or a subsidiary or division, or, to the extent provided in the Agreement, a "change in control" of the Company (as defined in such Agreement), except to the extent the Administrator(s), in their sole discretion, finds that such forfeiture might not be in the best interests of the Company and, therefore, waives all or part of the application of this provision to the restricted stock held by such recipient.

 

 

	
  

	
(d)

	
Stock certificates for restricted stock shall be registered in the name of the recipient but shall be appropriately legended and returned to the Company by the recipient, together with a stock power endorsed in blank by the recipient.  The recipient shall be entitled to vote shares of restricted stock and shall be entitled to all dividends paid thereon, except that dividends paid in Common Stock or other property shall also be subject to the same restrictions.

	
  

	
(e)

	
Restricted Stock shall become free of the foregoing restrictions upon expiration of the applicable Restriction Period and the Company shall then deliver to the recipient Common Stock certificates evidencing such stock.

	
  

	
(f)

	
Restricted stock and any Common Stock received upon the expiration of the restriction period shall be subject to such other transfer restrictions and/or legending requirements as are specified in the applicable Agreement.

10.           Bonuses and Past Salaries and Fees Payable in Stock

	
  

	
(a)

	
In lieu of cash bonuses otherwise payable under the Company’s or applicable division’s or subsidiary’s compensation practices to Directors, officers, employees and consultants eligible to participate in this Plan, the 

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Administrator(s), in their sole discretion, may determine that such bonuses shall be payable in Common Stock or partly in Common Stock and partly in cash.  Such bonuses shall be in consideration of services previously performed and as an incentive toward future services and shall consist of shares of Common Stock which shall be free trading unless otherwise determined by the Administrator(s) in their sole discretion and subject to the regulations of the jurisdiction in which the Optionee resides.  The number of shares of Common Stock payable in lieu of a bonus otherwise payable shall be determined by dividing such bonus amount by the fair market value of one share of Common Stock on the date the bonus is payable, plus ten percent with fair market value determined as of such date in accordance with Section 8(e).

	
  

	
(b)

	
In lieu of salaries and fees otherwise payable by the Company to Directors, officers, employees and consultants eligible to participate in this Plan that were incurred for services rendered at any time to the Company, in the event such Directors, officers, employees or consultants elect, the Administrator(s) may provide that such unpaid salaries and fees shall be payable in Common Stock or partly in Common Stock and partly in cash.  Such awards shall be in consideration of services previously performed and as an incentive toward future services and shall consist of shares of Common Stock subject to such terms as the Administrator(s) may determine in their sole discretion.  The number of shares of Common Stock payable in lieu of salaries and fees otherwise payable shall be determined by the Administrator.

11.           Change in Control

Each Agreement may, in the sole discretion of the Administrator(s), provide that any or all of the following actions may be taken upon the occurrence of a change in control (as defined in the Agreement) with respect to the Company:

	
  

	
(a)

	
acceleration of time periods for purposes of vesting in, or realizing gain from, or exercise of any outstanding Option or stock appreciation right or shares of restricted stock awarded pursuant to this Plan;

	
  

	
(b)

	
offering to purchase any outstanding Option or stock appreciation right or shares of restricted stock made pursuant to this Plan from the holder for its equivalent cash value, as determined by the Administrator(s), as of the date of the change in control; or

	
  

	
(c)

	
making adjustments or modifications to outstanding Options or stock appreciation rights or with respect to restricted stock as the Administrator(s) deems appropriate to maintain and protect the rights and interests of the Participants following such change in control, provided, however, that the exercise period of any option may not be extended beyond 10 years from the date of grant.

12.           Transfer, Leave of Absence

For purposes of this Plan:

	
  

	
(a)

	
transfer of an employee from the Company or a division of the Company, whether or not incorporated, or vice versa, or from one division of the Company to another, and

	
  

	
(b)

	
a leave of absence, duly authorized in writing by the Company or a division of the Company, shall not be deemed a termination of employment.

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13.           Rights of Directors, Employees and Consultants

	
  

	
(a)

	
No person shall have any rights or claims under this Plan except in accordance with the provisions of this Plan and each Agreement.

	
  

	
(b)

	
Nothing contained in this Plan and Agreement shall be deemed to give any Director, employee or consultant the right to continued employment by the Company or its divisions or subsidiaries.

14.           Withholding Taxes

The Company shall require a payment from a Participant to cover applicable withholding for income and employment taxes upon the happening of any event pursuant to this Plan which requires such withholding.  The Company reserves the right to offset such tax payment from any funds which may be due the Participant from the Company or divisions or, in its discretion, to the extent permitted by applicable law, to accept such tax payment through the delivery of shares of Common Stock owned by the Participant or by utilizing shares of the Common Stock which were to be delivered to the Participant pursuant to this Plan, having an aggregate fair market value, determined as of the date of payment, equal to the amount of the payment due.

15.           Adjustments

In the event of stock dividends, stock splits, recapitalizations, mergers, consolidations, combinations, exchanges of shares, spin-offs, liquidations, reclassifications or other similar changes in the capitalization of the Company, the number of shares of Common Stock available for grant under this Plan shall be adjusted appropriately by the Board, and, where deemed appropriate, the number of shares covered by outstanding stock options and stock appreciation rights outstanding and the number of shares of restricted stock outstanding, and the option price of outstanding stock options, shall be similarly adjusted. If another corporation or other business entity is acquired by the Company, and the Company has assumed outstanding employee option grants under a prior existing plan of the acquired entity, similar adjustments are permitted at the discretion of the Administrator(s).  In the event of any other change affecting the shares of Common Stock available for awards under this Plan, such adjustment, if any, as may be deemed equitable by the Administrator(s), shall be made to preserve the intended benefits of this Plan giving proper effect to such event.

16.           Miscellaneous Provisions

	
  

	
(a)

	
This Plan shall be unfunded.  The Company shall not be required to establish any special or separate fund or to make any other segregation of assets to assure the issuance of shares or the payment of cash upon exercise of any option or stock appreciation right under this Plan.  The expenses of this Plan shall be borne by the Company.

	
  

	
(b)

	
The Administrator(s) may, at any time and from time to time after the granting of an Option or the award of restricted stock or bonuses payable in Common Stock hereunder, specify such additional terms, conditions and restrictions with respect to such Option or stock as may be deemed necessary or appropriate to ensure compliance with any and all applicable laws, including, but not limited to, the provincial, federal and state securities laws and methods of withholding or providing for the payment of required taxes.

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If at any time the Administrator(s) shall determine in its discretion that the listing, registration or qualification of shares of Common Stock upon any national securities exchange or under any state or federal law, or the consent or approval of any governmental regulatory body, is necessary or desirable as a condition of, or in connection with, the sale or purchase of shares of Common Stock hereunder, no Option or stock appreciation right may be exercised or restricted stock or stock bonus may be transferred in whole or in part unless and until such listing registration, qualification, consent or approval shall have been effected or obtained, or otherwise provided for, free of any conditions not acceptable to the Administrator(s).

	
(c)  

	
By accepting any benefit under this Plan, each Participant and each person claiming under or through such Participant shall be conclusively deemed to have indicated his acceptance and ratification, and consent to, any action taken under this Plan by the Administrator(s), the Company or the Board.

	
(d)  

	
This Plan shall be governed by and construed in accordance with the laws of the Company’s province of incorporation.

	
  

	
(f)

	
Administrator(s) members exercising their functions under this Plan are serving as directors of the Company and they shall therefore be entitled to all rights of indemnification and advancement of expenses accorded directors of the Company.

	
17.

	
Limits of Liability

	
  

	
(a)

	
Any liability of the Company or a subsidiary of the Company to any Participant with respect to any option or award shall be based solely upon contractual obligations created by this Plan and Agreement.

	
  

	
(b)

	
Neither the Company nor a division or subsidiary of the Company, nor any member of the Administrator(s) or the Board, nor any other person participating in any determination of any question under this Plan, or in the interpretation, administration or application of this Plan, shall have any liability to any party for any action taken or not taken in connection with this Plan, except as may expressly be provided by statute.

18.           Amendments and Termination

The Board may, at any time, amend, alter or discontinue this Plan; provided, however, no amendment, alteration or discontinuation shall be made which would impair the rights of any holder of an award of restricted stock, Option, stock appreciation rights or stock bonus theretofore granted, without his or her written consent, or which, without the approval of the shareholders would:

	
  

	
(a)

	
except as provided in Section 15, increase the maximum number of shares of Common Stock which may be issued under this Plan;

	
  

	
(b)

	
except as provided in Section 15, decrease the option price of an Option (and related stock appreciation rights, if any) to less than 100% of the fair market value (as determined in accordance with Section 8(e)) of a share of Common Stock on the date of the granting of the Option (and related stock appreciation rights, if any);

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(c)

	
materially change the class of persons eligible to receive an award of restricted stock or Options or stock appreciation rights under this Plan;

(d)           extend the duration of this Plan; or

(e)           materially increase in any other way the benefits accruing to Participants.

	
19.

	
Duration

This Plan shall be adopted by the Board and approved by the Company’s shareholders and such regulatory bodies as may in each case be necessary, which approvals, if required, must occur either before, or no later than the period ending twelve months after the date, this Plan is adopted.  Subject to such approvals, grants and awards may be made under this Plan between the date of its adoption and receipt of such approvals.  This Plan shall terminate upon the earlier of the following dates or events to occur:

(a)           upon the adoption of a resolution of the Board terminating this Plan;

	
  

	
(b)

	
the date all shares of Common Stock subject to this Plan are purchased according to this Plan’s provisions; or

	
  

	
(c)

	
ten years from the date of adoption of this Plan by the Board.

	
  

	
No such termination of this Plan shall adversely affect the rights of any Participant hereunder and all Options or stock appreciation rights previously granted and restricted stock and stock bonuses awarded hereunder shall continue in force and in operation after the termination of this Plan, except as they may be otherwise terminated in accordance with the terms of this Plan.

20.           Other Compensation Plans

This Plan shall not be deemed to preclude the implementation by the Company or its divisions or subsidiaries of other compensation plans which may be in effect from time to time, nor adversely affect any rights of Participants under any other compensation plans of the Company or its divisions or subsidiaries.

21.           Non-Transferability

No right or interest in any award granted under this Plan shall be assignable or transferable, except as set forth in this Plan and required by law, and no right or interest of any participant in any award shall be liable for, or subject to, any lien, obligation or liability except as set forth in this Plan or as required by law.

 

11exhibit10-1.htm

 

 

Exhibit 10.1

 

 

 

 

 

 

 

 

 

 

 

Throughput Capacity Agreement

 

Between

Vitol Inc.

And

BKEP Crude, L.L.C

 

 

 

 

 

 

 

 

 

  

  

 

  

 

 

	
TABLE OF CONTENTS

	  
	  	  	  	
Page

	
ARTICLE I

	
DEFINITIONS

	
1

	  	
1.1

	
Definitions

	
1

	  	
1.2

	
Construction of Agreement

	
5

	
ARTICLE II

	
TERM

	
6

	  	
2.1

	
Initial Term

	
6

	  	
2.2

	
Renewal Term

	
6

	
ARTICLE III

	
SCOPE OF AGREEMENT

	
6

	  	
3.1

	
Capacity

	
6

	  	
3.2

	
Use of Capacity

	
7

	  	
3.3

	
New Facilities

	
7

	  	
3.4

	
Common Carrier; Line Fill

	
7

	  	
3.5

	
Third Party Throughput Agreement

	
7

	
ARTICLE IV

	
USE, OPERATION, AND MAINTENANCE OF CAPACITY

	
7

	  	
4.1

	
Operation of Capacity

	
7

	  	
4.2

	
Coordination of Operations

	
8

	  	
4.3

	
Sustained Unavailability of Capacity

	
8

	  	
4.4

	
Books and Records Pertaining to Capacity

	
8

	
ARTICLE V

	
CHARGES AND PAYMENTS

	
8

	  	
5.1

	
Prepaid Fee

	
8

	  	
5.2

	
Additional Fees

	
9

	
ARTICLE VI

	
REPRESENTATIONS AND WARRANTIES OF BKEP

	
9

	  	
6.1

	
Existence

	
9

	  	
6.2

	
Authorization; Execution and Validity

	
9

	  	
6.3

	
Brokers

	
9

	  	
6.4

	
Litigation

	
10

	  	
6.5

	
Permits

	
10

	  	
6.6

	
Condition of System

	
10

	  	
6.7

	
Title and Absence of Liens

	
10

	  	
6.8

	
Environmental Matters

	
10

	  	
6.9

	
Compliance with Applicable Laws

	
10

	
ARTICLE VII

	
REPRESENTATIONS AND WARRANTIES OF VITOL

	
11

	  	
7.1

	
Organization and Existence

	
11

	  	
7.2

	
Authority Relative to this Agreement

	
11

	  	
7.3

	
Brokers

	
11

	  	
7.4

	
Litigation

	
11

	  	
7.5

	
Title to Crude Oil

	
11

  

i

 

  

 

 

	
ARTICLE VIII

	
EVENTS OF DEFAULT

	
11

	  	
8.1

	
Event of Default

	
11

	  	
8.2

	
Remedies Upon Event of Default

	
12

	
ARTICLE IX

	
INDEMNIFICATION AND LIMITATION OF LIABILITY

	
12

	  	
9.1

	
Indemnification by BKEP

	
12

	  	
9.2

	
Indemnification by Vitol

	
12

	  	
9.3

	
Indemnification Notice

	
13

	  	
9.4

	
Indemnification Prodecure

	
13

	  	
9.5

	
Settlement of Indemnity Claims

	
14

	  	
9.6

	
Limits on Indemnification

	
14

	  	
9.7

	
No Special Damages

	
14

	
ARTICLE X

	
TERMINATION

	
14

	  	
10.1

	
Termination

	
14

	  	
10.2

	
Effect of Termination

	
15

	
ARTICLE XI

	
FORCE MAJEURE

	
15

	  	
11.1

	
Force Majeure

	
15

	  	
11.2

	
Notices

	
15

	  	
11.3

	
Termination and Curtailment

	
15

	  	
11.4

	
Resumption of Performance

	
16

	
ARTICLE XII

	
MISCELLANEOUS

	
16

	  	
12.1

	
Expenses

	
16

	  	
12.2

	
Cooperation; Further Documents

	
16

	  	
12.3

	
Severability

	
16

	  	
12.4

	
Notices

	
16

	  	
12.5

	
Successors and Assigns

	
17

	  	
12.6

	
Assignment

	
17

	  	
12.7

	
Amendment

	
17

	  	
12.8

	
Entire Agreement

	
17

	  	
12.9

	
Counterparts

	
17

	  	
12.10

	
Governing Law

	
18

	  	
12.11

	
Waiver

	
18

	  	
12.12

	
No Third Party Beneficiaries

	
18

	  	  	  	  
	
Exhibit A

	
Improvements

	  

 

 

  

ii

 

  

 

THROUGHPUT CAPACITY AGREEMENT

 

THIS THROUGHPUT CAPACITY AGREEMENT (this “Agreement”), dated August 31, 2010 to be effective as of March 30, 2010 (the “Effective Date”), is entered into by and between Vitol Inc. (“Vitol”) and BKEP Crude, L.L.C. (“BKEP”).  Vitol and BKEP are sometimes referred to in this Agreement individually as a “Party” or collectively as the “Parties.”

 

WITNESSETH:

 

WHEREAS, BKEP owns and operates that certain 8-inch crude oil pipeline currently running from Ardmore, Oklahoma to Drumright, Oklahoma, commonly known as the Eagle North Pipeline System (the “System”); and

 

WHEREAS, Vitol desires to use 100% of the throughput capacity on the System during the Term of this Agreement for the purpose of transporting crude oil, which capacity is currently estimated to be approximately 17,500 Barrels of crude oil per day;

 

NOW, THEREFORE, in consideration of the premises and of the mutual promises herein contained, and other good and valuable consideration, the sufficiency of which is hereby acknowledged, the Parties hereby agree as follows:

 

ARTICLE I

DEFINITIONS

 

1.1 Definitions.  Unless the context specifically indicates otherwise, for purposes of this Agreement, including the foregoing Recitals, the following terms shall have the meanings indicated below:

 

“Action” means any action, suit, arbitration, inquiry, proceeding or investigation by or before any Governmental Authority.

 

“Affiliate” means, in relation to a Party, any Person that (i) directly or indirectly controls such Party, (ii) is directly or indirectly controlled by such Party or (iii) is directly or indirectly controlled by a Person that directly or indirectly controls such Party.  For this purpose, “control” of any entity or Person means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of any Person, whether through the ownership of a majority of equity interests or voting power or control in fact of the entity or Person or otherwise.   For purposes of this Agreement, (i) Vitol and its affiliates shall not be deemed to be Affiliates of Blueknight Energy Partners, L.P., Blueknight Energy Partners G.P., L.L.C. and any of their respective subsidiaries (including BKEP) and (ii) Blueknight Energy Partners, L.P., Blueknight Energy Partners G.P., L.L.C. and any of their respective subsidiaries (including BKEP) shall not be deemed to be Affiliates of Vitol.

 

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

 

  

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“Bankrupt” means that a Party or its guarantor, if any, (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) files an answer or other pleading admitting or failing to contest the allegations of a petition filed against it in any proceeding of the foregoing nature or (ix) takes any other action to authorize any of the actions set forth above.

 

“Barrel” means 42 gallons.

 

“BKEP Indemnified Parties” has the meaning set forth in Section 9.2.

 

“Books & Records” has the meaning set forth in Section 4.4.

 

“Business Day” means any day other than a Saturday, Sunday or other day on which commercial banks in Oklahoma are authorized or required to close.

 

“Capacity” has the meaning set forth in Section 3.1.

 

“Claim Notice” has the meaning set forth in Section 9.3.

 

“Completion Date” means the first day of the first month after the System is placed into service and can transport at least 17,500 Barrels of crude oil per day.

 

“Contract Year” means each 12 month period during the Term with the first Contract Year commencing on the Completion Date.

 

“Damages” means all losses, claims, damages, costs, fines, penalties, obligations, payments and liabilities (including those arising out of any Action), together with all reasonable costs and expenses (including reasonable outside attorneys’ fees and reasonable out-of-pocket expenses) incurred in connection with any of the foregoing.

 

“Defaulting Party” has the meaning set forth in Section 8.2.

 

“Deficiency Payment” has the meaning set forth in Section 5.2.

 

“Easements” means rights-of-way, servitudes, rights of egress and ingress and other similar rights related to the use or enjoyment of the System.

  

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“Environmental Law” means any Law pertaining to health (with respect to exposure to Hazardous Materials) or the environment currently in effect in any or all jurisdictions in which the System is located, including the Clean Air Act, as amended, the Comprehensive Environmental, Response, Compensation, and Liability Act of 1980, as amended, the Federal Water Pollution Control Act, as amended, the Resource Conservation and Recovery Act of 1976, as amended, the Safe Drinking Water Act, as amended, the Toxic Substances Control Act, as amended, the Hazardous & Solid Waste Amendments Act of 1984, as amended, the Superfund Amendments and Reauthorization Act of 1986, as amended, the Hazardous Materials Transportation Act, as amended, the Oil Pollution Act of 1990, and any state and local Laws implementing or comparable to the foregoing federal Laws.

 

“Event of Default” has the meaning set forth in Section 8.1.

 

“Force Majeure” means any cause or event reasonably beyond the control of a Party, including fires, earthquakes, lightning, floods, explosions, storms, adverse weather, landslides and other acts of natural calamity or acts of God; strikes, grievances, actions by or among workers or lock-outs (whether or not such labor difficulty could be settled by acceding to any demands of any such labor group of individuals and whether or not involving employees of BKEP or Vitol); accidents at, closing of, or restrictions upon the availability or use of pipelines or other transportation mechanisms; disruption or breakdown of, explosions or accidents to wells, storage plants, terminals, machinery, pump stations, receipt and delivery facilities, measurement and testing facilities or other facilities; acts of war, hostilities (whether declared or undeclared), civil commotion, embargoes, blockades, terrorism, sabotage or acts of the public enemy; any regulation by or any act or omission of any Governmental Authority; good faith compliance with any order, request or directive of any Governmental Authority; curtailment, interruption, interference, failure or cessation of supplies, facilities or equipment reasonably beyond the control of a Party; or any other cause reasonably beyond the control of a Party, whether similar or dissimilar to those above and whether foreseeable or unforeseeable, which, by the exercise of due diligence, such Party could not have been able to avoid or overcome.

 

“Governmental Authority” means any federal, state or local government, any of its subdivisions, agencies, authorities, commissions, boards or bureaus, any federal, state or local court or tribunal and any arbitrator or arbitral tribunal.

 

“Hazardous Materials” means any waste or other substance that is listed, defined, designated, or classified as, or otherwise determined to be, hazardous, radioactive, or toxic or a pollutant or a contaminant under or pursuant to any Environmental Law, including any mixture or solution thereof, and specifically including petroleum and all derivatives thereof or synthetic substitutes therefore and asbestos or asbestos-containing materials.

 

“Improvements” has the meaning set forth in Section 3.4.

 

“Indemnified Party” has the meaning set forth in Section 9.3.

 

“Indemnifying Party” has the meaning set forth in Section 9.3.

 

“Indemnity Claim has the meaning set forth in Section 9.3.

 

  

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“Initial Term” has the meaning set forth in Section 2.1.

 

“Interest Rate” means the lesser of (i) the applicable three-month LIBOR rate of interest, as adjusted from time to time, and (ii) the maximum rate of interest permitted by applicable Law.  LIBOR shall be established on the first day on which a determination of the Interest Rate is to be made under this Agreement and shall be adjusted daily based on available LIBOR quotes.

 

“LIBOR” means the London Interbank Offered Rate for three-month U.S. dollar deposits (rounded upwards, if necessary, to the nearest 1/100 of 1%) appearing on Reuters Screen LIBOR01 Page (or any successor page) at approximately 11:00 a.m. (London, England time), two (2) Business Days prior to the first (1st) day of such three-month period.  If for any reason such rate is not available, LIBOR shall be, for any specified period, the rate per annum reasonably determined by the parties in good faith as the rate of interest at which U.S. Dollar deposits in the approximate subject amount would be offered by major banks in the London interbank Eurodollar market at their request at or about 10:00 a.m. (London, England time) two (2) Business Days prior to the first day of such period for a term comparable to such period.

 

“Knowledge” means (i) with respect to a Person other than an individual, after due investigation or inquiry, actual knowledge of a particular fact by an officer, director, partner, manager or by any individual serving in a similar capacity of such Person or individuals directly reporting to such individuals, and (ii) with respect to an individual, the actual knowledge of a particular fact and the knowledge that a reasonably prudent individual could be expected to discover or otherwise become aware of in the ordinary course of business after due investigation or inquiry.

 

“Law” means any applicable law, statute, or ordinance of any nation, state or municipality, including the United States of America, and any political subdivision thereof, including any state of the United States of America, and any political subdivision of a state, any regulation, policy, protocol, proclamation, or executive order promulgated by any Governmental Authority, any rule or regulation of any self-regulatory organization such as a securities exchange or public utilities commission, or any applicable judgment, Order, decree, or decision of any court, arbitral tribunal or other Governmental Authority having the effect of law or legally enforceable in any such jurisdiction.

 

“Lien” means any lien, mortgage, deed of trust, security interest, charge, pledge, retention of title agreement, Easement, encroachment, condition, covenant or other encumbrance affecting title or the use, benefit or value of the System.

 

“Order” means any order, judgment, injunction, decree, determination or award of any Governmental Authority.

 

“Performing Party” has the meaning set forth in Section 8.2.

 

“Permit” has the meaning set forth in Section 6.5.

 

“Person” means any natural person, corporation, partnership, limited liability company, trust, unincorporated organization, municipality, subdivision or agency within a municipality or other entity.

 

  

4

 

  

“Prepaid Fee” has the meaning set forth in Section 5.1.

 

“Purchaser Indemnified Party has the meaning set forth in Section 9.1.

 

“Real Property” means the fixtures, Easements, leases of real property and all other rights in real property owned, leased, held or used by BKEP in connection with the operation of the System.

 

“System” has the meaning set forth in the Recitals.

 

“Tax” means all income, profits, franchise, gross receipts, capital, sales, use, withholding, value added, ad valorem, transfer, employment, social security, disability, occupation, property, severance, production, excise and other taxes, duties and similar governmental charges and assessments imposed by or on behalf of any Governmental Authority (including interest and penalties thereon).

 

“Term” has the meaning set forth in Section 2.2.

 

“Third Party Throughput Agreement” means that certain Throughput and Deficiency Agreement, effective as of March 30, 2010, by and among BKEP, BKEP Pipeline, L.P. and certain third parties named therein.

 

“Usage Fee” has the meaning set forth in Section 5.2.

 

“Vitol Indemnified Party” has the meaning set forth in Section 9.1.

 

1.2 Construction of Agreement.

 

(a) Unless otherwise specified, all references herein are to the Articles, Sections and Exhibits of this Agreement and all Exhibits are incorporated herein.

 

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

 

(c) Unless expressly provided otherwise, the word “including” as used herein does not limit the preceding words or terms and shall be read to be followed by the words “without limitation” or words having similar import.

 

(d) Unless expressly provided otherwise, all references to days, weeks, months, quarters and years mean calendar days, weeks, months, quarters and years, respectively.

 

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

 

(f) A reference to any Party to this Agreement or another agreement or document includes the Party’s permitted successors and assigns.

 

  

5

 

  

(g) Unless the contrary clearly appears from the context, for purposes of this Agreement, the singular number includes the plural number and vice versa; and each gender includes the other gender.

 

(h) Except where specifically stated otherwise, any reference to any applicable Law or agreement shall be a reference to the same as amended, supplemented or re-enacted from time to time.

 

(i) The words “hereof,” “herein” and “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement.

 

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

 

(k) All references herein to “dollars” shall mean dollars of the United States.

 

ARTICLE II

TERM

 

2.1 Initial Term.  The initial term of this Agreement shall commence on the Effective Date and shall terminate on the date that is four years after the Completion Date (the “Initial Term”); provided, that BKEP’s obligations to provide the Capacity of the System shall not commence until after the Completion Date.  The Parties shall memorialize the Completion Date, as well as the end date of the Initial Term, in a written letter signed by each Party.

 

2.2 Renewal Term.  This Agreement may be renewed upon the expiration of the initial term for additional one-year terms by the mutual agreement of the Parties.  The Initial Term and any renewal term shall constitute the “Term” of this Agreement.

 

ARTICLE III

SCOPE OF AGREEMENT

 

3.1 Capacity.  Subject to the terms and conditions set forth in this Agreement, Vitol hereby purchases from BKEP 100% of the pipeline capacity on the System (the “Capacity”), which shall be approximately 17,500 Barrels of crude oil per day.  Vitol shall have no right, title or interest in or to any portion of the System, except to the extent otherwise expressly set forth in this Agreement with regard to the Capacity.  Except as expressly set forth in this Agreement with respect to the Improvements, Vitol shall have no right to construct or cause to be constructed any modifications or additions to, or any expansion of, the Capacity or the System.  Vitol agrees that its rights to utilize the Capacity are solely as set forth in this Agreement and in accordance with any and all necessary regularity authorizations of Governmental Authorities regarding the use and enjoyment of the Capacity.  Upon termination or expiration of this Agreement, all of the Capacity and all rights of use and enjoyment related thereto shall revert to BKEP.

 

  

6

 

  

3.2 Use of Capacity.  Subject to Section 3.5, Vitol shall have the right to use the full operational capacity of the Capacity in accordance with the terms of this Agreement and all applicable Laws, and not otherwise. 

 

3.3 New Facilities.  BKEP shall timely construct, own, operate and maintain, at its sole cost and expense, the improvements to the System more specifically set forth on Exhibit A attached hereto (the “Improvements”).  BKEP represents and warrants that the Improvements shall be completed in accordance with standard industry practices using that degree of care as would a reasonably prudent operator of a crude oil pipeline.  BKEP acknowledges that its duty to construct the Improvements constitutes fundamental consideration for this Agreement.

 

3.4 Common Carrier; Line Fill.  The System will be operated and maintained as an intrastate, common carrier pipeline, and all services performed by BKEP or its Affiliates for the benefit of Vitol shall be in accordance with any filed tariffs and this Agreement.  If Vitol is the sole shipper on the System, Vitol shall be responsible, at all times hereunder, to provide the line fill and tank fill for the System.  If Vitol is not the sole shipper on the System, Vitol shall be responsible, at all times hereunder, to provide its proportionate share of line fill and tank fill as determined in accordance with any published tariffs.

 

3.5 Third Party Throughput Agreement.  The Parties hereto acknowledge that (i) BKEP has entered into the Third Party Throughput Agreement relating to the System and the Capacity and (ii) Vitol has been provided a copy of the Third Party Throughput Agreement and is familiar with the terms and conditions therein.  Notwithstanding anything herein to the contrary, the Parties hereto agree that Vitol’s rights to the Capacity and the System under this Agreement are subordinate to the rights of the third parties to the Capacity and the System under the Third Party Throughput Agreement.  During the Term of this Agreement and for so long as a default by Vitol relating to payments under this Agreement has not occurred and is continuing, BKEP agrees to remit to Vitol any and all tariffs and deficiency payments received by BKEP or its Affiliates from such third parties pursuant to the Third Party Throughput Agreement.

 

ARTICLE IV

 OPERATION, AND MAINTENANCE OF CAPACITY

 

4.1 Operation of Capacity.  Subject to the terms and conditions of this Agreement, BKEP or one or more of its Affiliates at all times during the Term shall operate the Capacity as necessary to enable Vitol, to the fullest extent reasonably practicable, to utilize the Capacity as if it were Vitol’s own capacity.  In respect of System operations and as between the Parties, BKEP shall be solely responsible for, and will have sole and exclusive control over, all aspects of the operation and maintenance of the System, and shall operate and maintain the System in accordance with this Agreement, sound and prudent crude oil pipeline industry practice, BKEP’s standard operating and maintenance policies, and the applicable requirements of Law.  Vitol shall have no right or duty to operate or maintain the System or to supervise, direct or otherwise control in any manner the operation and maintenance of the System.  Prior to the commencement of the Term, the Parties shall meet to establish operational guidelines, procedures and timeframes for scheduling crude oil receipts and deliveries.

 

  

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4.2 Coordination of Operations.  The Parties agree to coordinate operation of the System and any Vitol facilities receiving crude oil from the Capacity.  In the event of Force Majeure or the occurrence of any other event which requires BKEP to interrupt, curtail or otherwise restrict the availability of any of the Capacity, including without limitation scheduled maintenance or repair of the System, the quantity of capacity available for Vitol’s use under this Agreement shall be reduced to the minimum extent necessary.  BKEP shall give Vitol reasonable prior notice, but in no event less than three (3) days’ prior notice, of any scheduled maintenance or repair or of any other activity within the reasonable control of BKEP, which requires or reasonably could be expected to require BKEP to so restrict the availability of the Capacity.  The Parties will, to the fullest extent practicable, coordinate scheduling of maintenance of their respective facilities to minimize limitations on the use of the Capacity.

 

4.3 Sustained Unavailability of Capacity.  To the extent that, for any reason other than an event of Force Majeure, BKEP fails to make the entire amount of Capacity available for use by Vitol on any day after the Completion Date in accordance with this Agreement for more than 60 days, whether consecutive or nonconsecutive, during the Term of the Agreement, then Vitol shall have the right to terminate this Agreement within six months following such lack of capacity (without prejudice to its right to receive any damages to which it may be entitled at Law or in equity) by the provision of thirty (30) days’ prior written notice to BKEP.

 

4.4 Books and Records Pertaining to Capacity.  BKEP shall keep and maintain, in accordance with generally accepted practices, consistently applied, books, records, accounts and other documents sufficient to record accurately charges assessed, operations and maintenance activities, services performed on behalf of Vitol, and all other matters related to the performance of BKEP’s obligations under this Agreement (collectively “Books and Records”).  Vitol shall have access during regular daytime business hours, upon reasonable advance notice, to the Books and Records for purposes of auditing and verifying the related services rendered, charges assessed, operations and maintenance activities performed and all other matters related to the performance of BKEP’s obligations under this Agreement.

 

ARTICLE V

CHARGES AND PAYMENTS

 

5.1 Prepaid Fee.  Vitol shall pay BKEP a prepaid capacity reservation fee (the “Prepaid Fee”) equal to $5.5 million ($5,500,000) to reserve the Capacity for the Initial Term.  The Prepaid Fee shall be due and payable in full within seven days after the execution of this Agreement by all Parties hereto, by wire transfer of immediately available funds to the account heretofore specified by BKEP.

 

  

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5.2 Additional Fees.  Vitol shall pay BKEP an amount equal to $0.37 per Barrel (the “Usage Fee”) for each Barrel of crude oil delivered for or on behalf of Vitol (or for or on behalf of any third party pursuant to the Third Party Throughput Agreement) on the System during the Term.  BKEP shall invoice Vitol on a monthly basis for any such Usage Fees accrued in the prior month, which invoice shall include substantiating documentation as reasonably requested by Vitol.  BKEP’s invoice shall be due and payable within thirty (30) days of receipt by Vitol.  In addition, if the payments made by Vitol in any Contract Year are in the aggregate less than $2,364,892, then Vitol shall pay BKEP a deficiency payment (the “Deficiency Payment”) equal to $2,364,892 minus the aggregate amount of all payments made by Vitol during such Contract Year.  Any Deficiency Payment required hereunder shall be paid within thirty days after the end of such Contract Year.  Vitol’s obligation to make any Deficiency Payment hereunder shall be subject to the condition that BKEP remits to Vitol the deficiency payments received from third parties pursuant to the Third Party Throughput Agreement, as more specifically set forth in Section 3.5.  In the event that BKEP fails to remit such deficiency payments, or any part thereof, to Vitol pursuant to Section 3.5, Vitol may similarly reduce or suspend, as applicable, its payment of any Deficiency Payment to BKEP to correspond to the amount remitted by BKEP to Vitol.

 

ARTICLE VI

REPRESENTATIONS AND WARRANTIES OF BKEP

 

BKEP represents and warrants to Vitol that:

 

6.1 Existence.  BKEP is a limited liability company validly existing under the Laws of the State of Delaware, and has all requisite power to own and operate the System and to carry on its business as now conducted.

 

6.2 Authorization; Execution and Validity.  This Agreement constitutes the legal, valid, and binding obligations of BKEP in accordance with its terms.  BKEP has the absolute and unrestricted right, power, authority, and capacity to execute and deliver this Agreement and the documents required herein and to perform its obligations under this Agreement and the documents required herein.  The execution, delivery and performance by BKEP of this Agreement and the consummation by BKEP of the transactions contemplated hereby to be consummated by it have been duly authorized.  This Agreement has been duly and validly executed and delivered by BKEP and is enforceable against BKEP in accordance with its terms, except to the extent that the enforcement hereof may be limited by (i) bankruptcy, insolvency, reorganization, moratorium or other similar Laws now or hereafter in effect relating to creditors’ rights generally, and (ii) general principles of equity regardless of whether enforceability is considered in a proceeding in equity or at law.

 

6.3 Brokers.  There is no broker, finder or other party that is entitled to receive from BKEP any brokerage or finder’s fee or other fee or commission as a result of this Agreement or any transactions contemplated by this Agreement.

 

  

9

 

  

6.4 Litigation.  Other than as disclosed in the Annual Report on Form 10-K filed by Blueknight Energy Partners, L.P. with the Securities and Exchange Commission on March 30, 2010, there are no Actions pending, or to the Knowledge of BKEP threatened, against BKEP or its subsidiaries or their respective properties, assets, operations or business which would materially delay, prevent or hinder BKEP’s performance of this Agreement or otherwise materially affect the Capacity.

 

6.5 Permits.  BKEP has or will obtain all material licenses, certificates, permits and other authorizations (the “Permits”) necessary to operate the System.  No Action is pending or, to BKEP’s Knowledge, threatened to revoke or limit any such Permit in a manner that would have a material adverse effect on the System or the Capacity.  All of the Permits are valid and in full force and effect and BKEP is not in default, and no condition exists that with notice or lapse of time or both would constitute a default, under such Permits except to the extent that would not have a material adverse effect.  BKEP has not received from any Governmental Authority notification that any Permit is not in full force and effect, has been violated in any respect, or is subject to any suspension, revocation, modification or cancellation.  No Permit will be revoked, invalidated or otherwise amended as a result of the transaction contemplated in this Agreement.

 

6.6 Condition of System.  BKEP represents that since BKEP’s acquisition and construction of the System, the System has been operated in all material respects in accordance with applicable Laws, including all applicable pipeline safety standards, and in accordance with prudent industry practices.

 

6.7 Title.  BKEP has good and marketable title to the System, including all material Real Property rights and Easements necessary to operate the System.

 

6.8 Environmental Matters.  The System is in compliance in all material respects with applicable Environmental Laws and, to the Knowledge of BKEP, there are no past or present Actions, activities, circumstances, conditions, events or incidents, including, but not limited to, the release, emission, discharge or disposal of any Hazardous Material, that could form the basis of any claim against, or violation by BKEP of any Environmental Law with respect to the System and that would have a material adverse effect on the System.  No notice, notification, demand, request for information, citation, summons, complaint or Order has been received by, and no Action is pending, or to BKEP’s Knowledge threatened, by any Person against BKEP with respect to any Environmental Law.

 

6.9 Compliance with Applicable Laws.  Since BKEP’s acquisition and construction of the System, BKEP has, in connection with the ownership and operation of the System, complied in all material respects with applicable Laws, and no Actions have been filed against BKEP alleging a violation of any such Law.  No event has occurred, and no circumstances or condition exists, that (with or without notice or lapse of time) would reasonably be expected to constitute or result in a failure of the System to comply with the terms of any applicable Laws.

 

  

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ARTICLE VII

REPRESENTATIONS AND WARRANTIES OF VITOL

 

Vitol represents and warrants to BKEP that:

 

7.1 Organization and Existence.  Vitol is an unincorporated division of Vitol, Inc, a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has all requisite power to enter into and perform this Agreement.

 

7.2 Authority Relative to this Agreement.  The execution, delivery and performance by Vitol of this Agreement and the consummation by Vitol of the transactions contemplated hereby to be consummated by it have been duly authorized by all necessary company action.  This Agreement has been duly and validly executed and delivered by Vitol, constitutes a valid and binding obligation of Vitol and is enforceable against Vitol in accordance with its terms, except to the extent that the enforcement hereof may be limited by (i) bankruptcy, insolvency, reorganization, moratorium or other similar Laws now or hereafter in effect relating to creditors’ rights generally, and (ii) general principles of equity regardless of whether enforceability is considered in a proceeding in equity or at law.

 

7.3 Brokers.  There is no broker, finder or other party that is entitled to receive from Vitol any brokerage or finder’s fee or other fee or commission as a result of this Agreement or any transactions contemplated by this Agreement.

 

7.4 Litigation.  There are no Actions pending, or to the Knowledge of Vitol threatened, against Vitol or its properties, assets, operations or business that might delay, prevent or hinder Vitol’s performance of this Agreement.

 

7.5 Title to Crude Oil.  Vitol shall hold unencumbered title to all crude oil delivered to BKEP pursuant to this Agreement and all such crude oil shall comply with the crude oil specifications set forth in the System’s tariff.

 

ARTICLE VIII

EVENTS OF DEFAULT

 

8.1 Event of Default.  Notwithstanding any other provision of this Agreement, an event of default (an “Event of Default”) shall be deemed to occur when:

 

(a) Either Party fails to make payment when due under this Agreement within three (3) Business Days of a written demand therefore.

 

(b) Other than as described in Sections 8.1(a), either Party fails to perform any obligation or covenant to the other under this Agreement, which is not cured to the satisfaction of the other Party (in its sole discretion) within fifteen (15) Business Days from the date that such Party receives written notice that corrective action is needed.

 

  

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(c) Either Party breaches any representation or warranty made or any warranty or representation proves to have been incorrect or misleading in any material respect when made; provided, however, that if such breach is curable, such breach is not cured to the satisfaction of the other Party (in its sole discretion) within fifteen (15) Business Days from the date that such Party receives notice that corrective action is needed.

 

(d) Either Party becomes Bankrupt.

 

8.2 Remedies Upon Event of Default.  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 sole discretion and upon one (1) Business Day’s prior written notice to the Defaulting Party, be entitled to suspend its obligations under this Agreement (including suspending the availability to Vitol of the Capacity if Vitol is the Defaulting Party), in addition to the remedies set forth in Article X and any other remedy available under applicable Law or in equity.

 

ARTICLE IX

INDEMNIFICATION AND LIMITATION OF LIABILITY

 

9.1 Indemnification by BKEP.  Subject to the other provisions of this Article IX, BKEP agrees to indemnify, defend and hold harmless Vitol and its officers, directors, managers, members, partners, employees, Affiliates, agents and shareholders (each a “Vitol Indemnified Party” and, collectively, the “Vitol Indemnified Parties”) against any and all Damages suffered by any Vitol Indemnified Party arising, either directly or indirectly, out of:

 

(a) Any actions against any Vitol Indemnified Parties arising out of the actions or inactions of BKEP or the ownership or operation of the System (other than any actions or inaction that are taken at the specific direction of Vitol);

 

(b) any actions, omissions, circumstances or conditions which arise under Environmental Laws or relate to Hazardous Materials with respect to the System; and

 

(c) the breach of any covenant, representation or warranty made by BKEP in this Agreement.

 

9.2 Indemnification by Vitol.  Subject to the other provisions of this Article IX, Vitol agrees to indemnify, defend and hold harmless BKEP its officers, directors, managers, members, partners, employees, Affiliates, agents and shareholders (collectively, the “BKEP Indemnified Parties”), against any Damages suffered by any BKEP Indemnified Parties arising out of:

 

(a) the failure of Vitol to have title to crude oil introduced by it into the System pursuant to this Agreement;

 

  

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(b) the failure of any crude oil delivered to the System by Vitol to conform to the System’s specifications, as published in the applicable tariff; and

 

(c) the breach of any covenant, representation or warranty made by Vitol in this Agreement.

 

9.3 Indemnification Notice.  Each Party entitled to indemnification pursuant to Section 9.1 or Section 9.2 (“Indemnified Party”) who determines that an event has occurred giving rise (or which may give rise) to a right of indemnification hereunder in favor of such Indemnified Party (an “Indemnity Claim”), shall promptly notify the Party obligated to provide indemnification or from whom indemnification is being or will be sought (the “Indemnifying Party”) in writing of such Indemnity Claim (a “Claim Notice”) describing in reasonable detail the facts giving rise to the claim for indemnification hereunder and shall include in such Claim Notice (if then known) the amount or the method of computation of the amount of such Indemnity Claim; provided, however, the failure of any Indemnified Party to give timely notice thereof shall not affect any of its rights to indemnification hereunder nor relieve the Indemnifying Party from any of its indemnification obligations hereunder, except to the extent the Indemnifying Party is materially prejudiced by such failure.

 

9.4 Indemnification Procedure.  Any obligation to provide indemnification shall be subject to the following terms and conditions:

 

(a) Upon receipt of a Claim Notice, the Indemnifying Party shall, at its cost and expense and upon notice to the Indemnified Party within thirty (30) days of its receipt of such Claim Notice (or any shorter time period as the circumstances may warrant), assume and control the defense, compromise, settlement and investigation of such Indemnity Claim, including the management of any proceeding relating thereto, and shall employ and engage counsel reasonably acceptable to the Indemnified Party; provided, however, that if there exists a material conflict of interest (other than one of a monetary nature) or if the Indemnified Party has been advised by counsel that there may be one or more legal or equitable defenses available to it that are different from or additional to those available to the Indemnifying Party, which, in either case, would make it inappropriate for the same counsel to represent both the Indemnifying Party and the Indemnified Party, then the Indemnified Party shall be entitled to retain its own counsel at the cost and expense of the Indemnifying Party (except that the Indemnifying Party shall not be obligated to pay the fees and expenses of more than one separate counsel, other than local counsel, for all Indemnified Parties, taken together).

 

  

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(b) The Indemnified Party may, at its own cost and expense, participate in the defense of such Indemnity Claim and agrees to cooperate with the Indemnifying Party in such efforts and make available to the Indemnifying Party all witnesses, records, materials and information in the Indemnified Party’s possession, under its control or to which it may have access as may be reasonably required by the Indemnifying Party.  The Indemnifying Party will keep the Indemnified Party reasonably informed of the progress of the defense of any such Indemnity Claim.  If the Indemnifying Party fails to so assume the defense and investigation of any such Indemnity Claim, (i) the Indemnified Party shall have the right to undertake the defense, compromise, settlement and investigation of such Indemnity Claim on behalf of, and at the cost and expense of and for the account and risk of the Indemnifying Party, (ii) the Indemnifying Party agrees to cooperate with the Indemnified Party in such efforts and (iii) the Indemnified Party will keep the Indemnifying Party reasonably informed of the progress of the defense of any such Indemnity Claim.

 

9.5 Settlement of Indemnity Claims.  The Indemnifying Party shall not, without the written consent of the Indemnified Party, (a) settle or compromise any Indemnity Claim or consent to the entry of any final judgment which does not include as an unconditional term thereof the delivery by the claimant or plaintiff of a written release or releases from all liability in respect of such Indemnity Claim of all Indemnified Parties affected by such Indemnity Claim, or (b) settle or compromise any Indemnity Claim if the settlement imposes equitable remedies or material obligations on the Indemnified Party other than financial obligations for which such Indemnified Party will be indemnified hereunder.  No Indemnity Claim that is being defended in good faith by the Indemnifying Party shall be settled or compromised by the Indemnified Party without the written consent of the Indemnifying Party.

 

9.6 Limits on Indemnification.  Nothing in this Article IX shall in any manner limit the Parties’ rights related to direct claims for breach of this Agreement or actions based in fraud or willful misconduct.

 

9.7 No Special Damages.  IN NO EVENT SHALL ANY PARTY BE LIABLE UNDER THIS ARTICLE IX OR OTHERWISE IN RESPECT OF THIS AGREEMENT FOR EXEMPLARY, SPECIAL, PUNITIVE, INDIRECT, REMOTE, SPECULATIVE OR CONSEQUENTIAL DAMAGES EXCEPT TO THE EXTENT ANY SUCH PARTY SUFFERS SUCH DAMAGES TO AN UNAFFILIATED THIRD PARTY IN CONNECTION WITH AN INDEMNITY CLAIM HEREUNDER.

 

ARTICLE X

TERMINATION

 

10.1 Termination.  This Agreement may be terminated prior to the expiration of the Term only as follows:

 

(a) by mutual written consent of the Parties;

 

  

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(b) by Vitol pursuant to Section 4.3;

 

(c) by the Performing Party following the occurrence of an Event of Default; or

 

(d) by either Party for extended Force Majeure pursuant to Section 11.3.

 

10.2 Effect of Termination.  In the event of termination of this Agreement as provided above, this Agreement shall forthwith become void, and there shall be no liability on the part of BKEP or Vitol; provided, however, that this Section 10.2 shall not release either Party from any such liability for a breach by such Party of this Agreement or liability that otherwise existed as of the date of such termination.  In addition, in the event that this Agreement is terminated by Vitol during the Initial Term as a result of an Event of Default by BKEP, Vitol’s damages shall be equal to the pro rata portion of the Prepaid Fee (calculated by multiplying the Prepaid Fee by the product of the remaining months in the Initial Term divided by the full number of months during the Initial Term) plus interest on such amount at the Interest Rate from the Effective Date to the date of such termination of the Agreement.

 

ARTICLE XI

FORCE MAJEURE

 

11.1 Force Majeure.  Neither Party shall be liable to the other Party if it is rendered unable by an event of Force Majeure to perform in whole or in part any of its obligations hereunder, for so long as the event of Force Majeure exists and to the extent that performance is hindered by the event of Force Majeure; provided, however, that the Party unable to perform shall use all commercially reasonable efforts to avoid or remove the event of Force Majeure.  During the period that performance by one of the Parties of a part or whole of its obligations has been suspended by reason of an event of Force Majeure, the other Party likewise may suspend the performance of all or a part of its obligations to the extent that such suspension is commercially reasonable, except for any payment and indemnification obligations.

 

11.2 Notices.  The Party rendered unable to perform its obligations hereunder shall give notice to the other Party within twenty-four (24) hours after becoming aware of the occurrence of an event of Force Majeure, including, to the extent feasible, the details and the expected duration of the event of Force Majeure and the volume of the Capacity affected.  Such Party shall promptly notify the other Party when the event of Force Majeure is terminated.

 

11.3 Termination and Curtailment.  In the event that a Party’s performance is substantially suspended due to an event of Force Majeure in excess of forty-five (45) consecutive days from the date that notice of such event is given, and so long as such event is continuing, the non-claiming Party, in its sole discretion, may terminate this Agreement by notice to the other Party, and neither Party shall have any further liability to the other Party in respect of this Agreement except for the rights and remedies previously accrued under this Agreement, including any payment and indemnification obligations by either Party under this Agreement.

 

  

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11.4 Resumption of Performance.  If this Agreement is not terminated pursuant to this Article 11 or any other provision of this Agreement, performance of this Agreement shall resume to the extent made possible by the end or amelioration of the event of Force Majeure in accordance with the terms of this Agreement; provided, however, that the Term of this Agreement shall not be extended for the period of any event of Force Majeure.

 

ARTICLE XII

MISCELLANEOUS

 

12.1 Expenses.  Each of the Parties will pay all costs and expenses of its performance of and compliance with this Agreement.

 

12.2 Cooperation; Further Documents.  Each of the Parties hereto agrees to use its commercially reasonable efforts to take or cause to be taken all action, and to do or cause to be done all things necessary, proper or advisable under applicable Laws, regulations or otherwise, to consummate and to make effective the transactions contemplated by this Agreement, including, the timely performance of all actions and things contemplated by this Agreement to be taken or done by each of the Parties hereto.

 

12.3 Severability.  If any provision of this Agreement as applied to the Parties hereto or to any circumstance shall be held invalid, illegal or unenforceable by any court of competent jurisdiction, (i) the validity, legality and enforceability of the remaining provisions of this Agreement will remain in full force and effect and (ii) the application of such provision to any other part or to any other circumstance shall not be affected or impaired thereby.

 

12.4 Notices.  All notices, requests and other communications hereunder shall be in writing and shall be deemed to have been given if personally delivered or mailed, first class, registered or certified mail, postage prepaid, overnight courier or facsimile transmission, and shall be deemed received when actually delivered as reflected by the postal return receipt, courier’s receipt or facsimile record:

 

(a) If to BKEP, to:

 

BKEP Crude, L.L.C.

6120 South Yale Ave., Suite 5005

Tulsa, Oklahoma 74136

Attention:  Chief Financial Officer

Telecopy:  918-237-4001

with a copy to:

  

16

 

  

BKEP Crude, L.L.C.

2575 Kelley Pointe Parkway, Suite 100

Edmond, Oklahoma 73013

Attention:  Chief Operating Officer

Telecopy:  405-231-4701

 

(b) If to Vitol, to:

 

VITOL INC.

1100 Louisiana Street, Suite 5500

Houston, Texas 77002

Attention:  Mr. James C. Dyer, IV

Telecopy:  713-230-1111

 

or at such other address as shall be given in writing by either Party to the other.

 

12.5 Successors and Assigns.  The terms and conditions of this Agreement shall inure to the benefit of and be binding upon the successors, whether by merger, consolidation or otherwise, and permitted assigns of the Parties hereto.

 

12.6 Assignment.  No Party hereto may assign this Agreement, in whole or in part, except with the prior written approval of the other Party, which approval shall not be unreasonably withheld, delayed or conditioned; provided, that Vitol may assign its rights to the Capacity to the third parties that are party to the Third Party Throughput Agreement without the consent of BKEP.  Notwithstanding the foregoing, each Party may assign, without the prior written consent of the other Party, all, but not less than all, of its rights and obligations hereunder to an Affiliate of such Party; provided, that (i) the proposed assignee provides to the non-assigning Party a direct covenant that it will observe and perform all of the assigning Party’s obligations under this Agreement and (ii) a copy of the assignment or other transfer document has been delivered to the non-assigning Party.

 

12.7 Amendment.  This Agreement may be amended only by an instrument in writing executed by the Parties hereto.

 

12.8 Entire Agreement.  This Agreement and the exhibits hereto constitute the entire agreement, understanding, representations and warranties of the Parties hereto and supersede all prior agreements, understandings, representations and warranties of the Parties hereto, whether written or oral, regarding the matters addressed herein.

 

12.9 Counterparts.  This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which shall constitute one and the same instrument.

 

  

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12.10 Governing Law.  This Agreement shall be construed in accordance with and governed by the Laws of the State of Texas, without regard to conflicts of law principles.

 

12.11 Waiver.  Any of the terms or conditions of this Agreement may be waived in writing at any time by the Party which is entitled to the benefits thereof.  Neither the failure nor any delay by any Party in exercising any right, power or privilege under this Agreement shall operate as a waiver of such right, power or privilege, and no single or partial exercise of any such right, power or privilege will preclude any other or further exercise of such right, power or privilege or the exercise of any other right, power or privilege.

 

12.12 No Third Party Beneficiaries.  This Agreement is made and entered exclusively for the benefit of Vitol and BKEP and is not intended to create any obligation of either Vitol or BKEP to any other party.

 

 

[Remainder of page intentionally left blank]

 

  

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IN WITNESS WHEREOF, each of the Parties has caused this Agreement to be executed by its duly authorized officer as of the date set forth below.

 

	
BKEP CRUDE, L.L.C.

	  	  
	
By:

	
/s/ Alex G. Stallings

	
Name:

	
Alex G. Stallings

	
Title:

	
Chief Financial Officer

	
Date:

	
September 2, 1010

	  	  
	
VITOL INC.

	  	  
	
By:

	
/s/ M.A. Loya

	
Name:

	
M.A. Loya

	
Title:

	
President

	
Date:

	
August 31, 2010

 

 

Signature Page to Throughput Capacity Agreement

  

  

 

  

EXHIBIT A

IMPROVEMENTS TO EAGLE NORTH PIPELINE SYSTEM

 

Refurbishment and completion of the Eagle North Pipeline System and related improvements and equipment associated therewith.

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