Related Party Transactions

Commercial Agreements

The Partnership entered into various long-term, fee-based commercial agreements with Delek at the completion of the Offering. Each of these agreements, described below, became effective on November 7, 2012, concurrent with the completion of the Offering. Each of these agreements include minimum quarterly volume or throughput commitments and have tariffs or fees indexed to inflation, provided that the tariffs or fees will not be decreased below the initial amount. Fees under each agreement are payable to us monthly by Delek or certain third parties to whom Delek has assigned certain of its rights. In most circumstances, if Delek or the applicable third party assignee fails to meet or exceed the minimum volume or throughput commitment during any calendar quarter, Delek, and not any third party assignee, will be required to make a quarterly shortfall payment to us equal to the volume of the shortfall multiplied by the applicable fee. Carry-over of any volumes in excess of such commitment to any subsequent quarter is not permitted. Exceptions to this requirement that Delek make minimum payments under a given agreement can exist if (i) there is an event of force majeure affecting our asset, or (ii) after the first three years of the applicable commercial agreement's term (a) there is an event of force majeure affecting Delek's asset, or (b) if Delek shuts down the applicable refinery upon giving 12 months' notice, which such notice may only be given after the first two years of the applicable commercial agreement's term. In addition, Delek may terminate any of these agreements under certain circumstances.

Under each of these agreements, we are required to maintain the capabilities of our pipelines and terminals such that Delek may throughput and/or store, as the case may be, specified volumes of crude oil and refined products. To the extent that Delek is prevented by our failure to maintain such capacities from throughputting or storing such specified volumes for more than 30 days per year, Delek's minimum throughput commitment will be reduced proportionately and prorated for the portion of the quarter during which the specified throughput capacity was unavailable, and/or the storage fee will be reduced, prorated for the portion of the month during which the specified storage capacity was unavailable. Such reduction would occur even if actual throughput or storage amounts were below the minimum volume commitment levels.

Each of the Partnership's commercial agreements with Delek, other than the marketing agreement described under "Wholesale Marketing and Terminalling—East Texas," has an initial term of five years, which may be extended at the option of Delek for up to two additional five-year terms. The marketing agreement has an initial term of ten years and may be renewed annually, thereafter.

The tariffs, throughput fees and the storage fees under our agreements with Delek are subject to increase or decrease on July 1 of each year, beginning on July 1, 2013, by the amount of any change in the FERC oil pipeline index or, in the case of the east Texas marketing agreement, the consumer price index; provided, however, that in no event will the fees be adjusted below the amount initially set forth in the applicable agreement.

Pipelines and Transportation

Lion Pipeline System. We entered into a pipelines and storage facilities agreement with Delek under which we provide transportation and storage services to the El Dorado Refinery. Under the pipelines and storage facilities agreement, Delek is obligated to meet certain minimum aggregate throughput volumes on the pipelines of our Lion Pipeline System and our SALA Gathering System as follows:

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Lion Pipeline System. The minimum throughput commitment on the Lion Pipeline System crude oil pipelines is an aggregate of 46,000 bpd (on a quarterly average basis) of crude oil shipped on the El Dorado, Magnolia and rail connection pipelines, other than crude oil volumes gathered on our SALA Gathering System, at a tariff rate of $0.85 per barrel. For the Lion Pipeline System refined products pipelines, the minimum throughput commitment is an aggregate of 40,000 bpd (on a quarterly average basis) of diesel or gasoline shipped on these pipelines at a tariff rate of $0.10 per barrel.

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SALA Gathering System. The minimum throughput commitment is an aggregate of 14,000 bpd (on a quarterly average basis) of crude oil transported on the SALA Gathering System at a tariff rate of $2.25 per barrel. Volumes initially gathered on the SALA Gathering System before injection into the Lion Pipeline System are not subject to an additional fee for transportation on our Lion Pipeline System to the El Dorado Refinery.

For a discussion of a third party's involvement in this agreement, see "El Dorado Refinery Crude Oil and Refined Products Supply and Offtake Arrangement."

East Texas Crude Logistics System. We entered into a five-year pipelines and tankage agreement with Delek pursuant to which we provide crude oil transportation and storage services for Delek's Tyler Refinery. This agreement replaced the pipelines and tankage agreement between Delek and our Predecessor. Under the current pipelines and tankage agreement, Delek is obligated to meet minimum aggregate throughput volumes of crude oil of at least 35,000 bpd, calculated on a quarterly average basis, on our East Texas Crude Logistics System for a transportation fee of $0.40 per barrel. For any volumes in excess of 50,000 bpd, calculated on a quarterly average basis, Delek is required to pay an additional fee of $0.20 per barrel. In addition, Delek pays a storage fee of $250,000 per month for the use of our crude oil storage tanks along our East Texas Crude Logistics system.

Wholesale Marketing and Terminalling

East Texas. We entered into a marketing agreement with Delek pursuant to which we market 100% of the output of the Tyler Refinery, other than jet fuel and petroleum coke. This agreement has a ten year initial term and automatically renews annually thereafter unless notice is given by either party ten months prior to the end of the then current term and replaced the marketing agreement between Delek and our Predecessor. Under the marketing agreement, Delek is obligated to make available to us for marketing and sale at the Tyler Refinery and/or our Big Sandy terminal an aggregate amount of refined products of at least 50,000 bpd, calculated on a quarterly average basis. In exchange for our marketing services, Delek pays us a base fee of $0.5964 per barrel of products it sells. In addition, Delek has agreed to pay us 50% of the margin, if any, above an agreed base level generated on the sale as an incentive fee, provided that the incentive fee shall not be less than $175,000 nor greater than $500,000 per quarter.

Terminalling. We entered into two five-year terminalling services agreements pursuant to which Delek pays us fees for providing terminalling services to Delek at our Memphis and Big Sandy terminals, as well as for storing product at our Big Sandy terminal. The minimum throughput commitments under these agreements are 10,000 bpd (on a quarterly average basis) for the Memphis terminal, representing approximately 75% of maximum loading capacity, and 5,000 bpd (on a quarterly average basis) for the Big Sandy terminal, representing approximately 55% of maximum loading capacity, in each case at a fee of $0.50 per barrel. The Big Sandy terminal is currently not operational because a pipeline owned by a third party, which is necessary for the use of the terminal is out of service. Though we are currently negotiating an agreement with the third party to purchase the pipeline or return it to service, we cannot currently predict whether or when we will be able to acquire the pipeline and/or complete the repairs necessary to return the Big Sandy terminal to operational status. However, although the terminal is not currently operational, Delek pays us to terminal at the Big Sandy terminal a minimum of 5,000 bpd of refined products from the Tyler Refinery and a storage fee of $50,000 per month, the minimum payment due per the agreement.

The amounts paid under these agreements during 2012 are as follows:


•	Delek paid us approximately $5.1 million pursuant to the Lion Pipeline System pipeline and storage facilities agreement and the Memphis terminalling agreement for the period between November 7, 2012 and December 31, 2012 and paid our Predecessor approximately $13.2 million for the period between January 1, 2012 and November 6, 2012 for similar pipeline and storage facilities services.

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Delek paid us approximately $1.8 million pursuant to the East Texas Crude Logistics System pipeline and tankage agreement for the period between November 7, 2012 and December 31, 2012, and paid our Predecessor approximately $9.7 million for the period between January 1, 2012 and November 6, 2012, under a similar pipeline and tankage agreement that was in place during that period but was replaced by the agreement referenced above dated November 7, 2012;

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Delek paid us approximately $2.1 million pursuant to the East Texas marketing agreement for the period between November 7, 2012 and December 31, 2012, and paid our Predecessor approximately $10.5 million for the period between January 1, 2012 and November 6, 2012, under a similar marketing agreement that was in place during that period but was replaced by the agreement referenced above dated November 7, 2012; and


•	Delek paid us approximately $0.2 million pursuant to the terminalling agreement for services at our Big Sandy terminal in 2012.

El Dorado Refinery Crude Oil and Refined Products Supply and Offtake Arrangement

Pursuant to an arrangement with Delek and Lion Oil, to which we are not a party, J. Aron & Company, or Aron, acquires and holds title to all crude oil and refined products transported on our Lion Pipeline System and SALA Gathering System. Aron is therefore considered the shipper on the Lion Pipeline System and the SALA Gathering System. Aron also has title to the product stored at our Memphis terminal. Under our pipelines and storage agreement with Lion Oil relating to the Lion Pipeline System and the SALA Gathering System and our terminalling agreement with Lion Oil relating to the Memphis terminal, Lion Oil has assigned to Aron certain of its rights under these agreements, including the right to have Aron's crude oil and refined products stored in or transported on or through these systems and the Memphis terminal, with Lion Oil acting as Aron's agent for scheduling purposes. Accordingly, even though this is effectively a financing arrangement for Delek and Aron sells the product back to Delek, Aron is our primary customer under each of these agreements. Aron will retain these storage and transportation rights for the term of its arrangement with Delek and Lion Oil, which currently runs through April 30, 2014, and will pay us for the transportation and storage services we provide to it. The rights assigned to Aron will not alter Lion Oil's obligations to throughput minimum volumes under our agreements with respect to the transportation, terminalling and storage of crude oil and refined products through our facilities, but Aron's throughput will be credited toward Lion Oil's minimum throughout commitments. Accordingly, Lion Oil will be responsible to make any shortfall payments incurred under the pipelines and storage agreement or the terminalling agreement which may result from minimum throughputs or volumes not being met.

Other Agreements with Delek

In addition to the the commercial agreements described above, the Partnership entered into the following agreements with Delek upon the completion of the Offering:

Omnibus Agreement

We entered into an omnibus agreement with Delek under which Delek agreed not to compete with us under certain circumstances and granted us a right of first offer to acquire certain of its retained logistics assets, including certain terminals, storage facilities and other related assets located at the Tyler and El Dorado Refineries and, under specified circumstances, logistics and marketing assets that Delek may acquire or construct in the future. The omnibus agreement also contains the terms under which Delek will have a right of first refusal to purchase our assets that serve its refineries, including the Lion Pipeline System, the SALA Gathering System, the East Texas Crude Logistics System, the Big Sandy terminal, the Memphis terminal and the Paline Pipeline System. In addition, the omnibus agreement contains the terms under which Delek will have a right of first refusal to enter into an agreement with respect to all or a portion of the capacity of the Paline Pipeline System's 185-mile, 10-inch crude oil pipeline running between Longview and Nederland, Texas following the termination of our current contract with a major integrated oil company. Under the omnibus agreement, Delek also is required, under certain circumstances, to offer us the opportunity to purchase additional logistics assets that Delek may acquire or construct after the Offering. The omnibus agreement also requires us to pay a $2.7 million annual fee to Delek, indexed for inflation, for Delek's provision of centralized corporate services, including executive management services of Delek employees who devote less than 50% of their time to our business, financial and administrative services, information technology services, legal services, health, safety and environmental services, human resource services, and insurance administration. In addition, the omnibus agreement provides for Delek's reimbursement to us for certain operating expenses and certain maintenance capital expenditures and Delek's indemnification of us for certain matters, including environmental, title and tax matters. The omnibus agreement also requires Delek to indemnify us during the period from November 1, 2012 through December 31, 2013 for any lost service fees attributable to the failure to complete the reversal of the Paline Pipeline System and sign the connection agreement described below under "Other Agreements." We paid Delek approximately $0.4 million pursuant to this agreement and Delek paid us approximately $0.4 million pursuant to this agreement during 2012 as indemnification relative to the Paline Pipeline.

Delek has also agreed to reimburse us for any operating expenses in excess of $500,000 per year that we incur for inspections, maintenance and repairs to any of the storage tanks contributed to us by Delek that are necessary to comply with the DOT pipeline integrity rules and certain American Petroleum Institute storage tank standards through November 7, 2017. Furthermore, for each of (i) the twelve months ending September 30, 2013 and (ii) each calendar year through December 31, 2017, Delek will reimburse us for all non-discretionary maintenance capital expenditures, other than those required to comply with applicable environmental laws and regulations, in excess of $3.0 million for such twelve month period and per year that we make with respect to the assets contributed to us by Delek for which we have not been reimbursed as described in the preceding sentence. Delek's reimbursement obligations will not survive any termination of the omnibus agreement. In addition, Delek has agreed to reimburse us for capital expenditures in connection with certain capital improvements that were in progress as of November 7, 2012, which include (i) a pipeline connecting a rail offloading facility on the El Dorado Refinery to our Lion Pipeline System; (ii) any additional costs for the reversal of the Paline Pipeline System and (iii) the cost of capital improvements necessary to enable bi-directional flow on our Nettleton Pipeline.

Operation and Management Services Agreement

Our general partner operates our business on our behalf and is entitled under our partnership agreement to be reimbursed for the cost of providing those services. We and our general partner entered into an operational and management services agreement with Delek, pursuant to which our general partner uses employees of Delek to provide operational and management services with respect to our pipelines, storage and terminalling facilities and related assets, including operating and maintaining flow and pressure control, maintaining and repairing our pipelines, storage and terminalling facilities and related assets, conducting routine operational activities, and managing transportation and logistics, contract administration, crude oil and refined product measurement, database mapping, rights-of-way, materials, engineering support and such other services as our general partner and Delek may mutually agree upon from time to time. We and/or our general partner reimburse Delek for such services under the operation and management services agreement. We and our subsidiaries paid Delek approximately $1.3 million pursuant to this agreement during 2012.

Other Agreements

Paline Pipeline System Capacity Reservation. In 2011, prior to our purchase of the Paline Pipeline, a major integrated oil company contracted with Paline to reverse the pipeline to primarily run southbound. In exchange, the oil company agreed to pay for use of 100% of such southbound capacity for a monthly fee of $450,000 and $529,250 per month in 2012 and 2013, respectively, which will thereafter be subject to annual escalation based on the producer price index during any renewal periods. Under the contract, the pipeline was to be reversed in four segments and the amount of usage fees to be paid is based on the number of segments reversed. The monthly fees payable to us under our agreement with this customer will increase proportionately to the extent throughput volumes are above 30,000 bpd. The agreement extends through December 31, 2014 and will renew automatically each year unless terminated by either party at least six months prior to the year end.

Pursuant to the terms of the usage contract, this customer is required to make only payments of $229,000 per month in 2012 for this capacity until the final segment of the reversal of the Paline Pipeline System is completed and we enter into a connection agreement with an affiliate of the customer to connect our system with such affiliate's tanks. We completed our work on the fourth segment of the reversal in October 2012 and are currently waiting for our customer to complete its work on its tanks so that we can enter into the connection agreement. Because we have completed our necessary work, we believe we are owed the full payment under the contract beginning in November 2012 but our customer paid only $229,000 per month in 2012. Pursuant to our omnibus agreement with Delek (described above), Delek has agreed to indemnify us during the period from November 1, 2012 through December 31, 2013 for any lost service fees attributable to the failure of our customer to pay 100% of the full monthly fee if such failure is attributable to these conditions not being satisfied.

Delek Logistics Partners, LP Transactions

Revenues from affiliates consist of revenues from commercial agreements we entered into with Delek at the completion of the Offering and subsequent to the Offering under which Delek pays us fees for gathering, pipeline transportation, storage, wholesale marketing and products terminalling services. Pursuant to our omnibus agreement, we pay Delek a $2.7 million annual fee, indexed for inflation, for Delek’s provision of centralized corporate services, including executive management services of Delek employees who devote less than 50% of their time to our business, financial and administrative services, information technology services, legal services, health, safety and environmental services, human resource services, and insurance administration.

In accordance with our partnership agreement, our common, subordinated and general partner unitholders are entitled to receive quarterly distributions of available cash. We did not pay a quarterly distribution in 2012. On January 24, 2013, we declared a quarterly cash distribution of $0.224 per unit based on the results of the fourth quarter of 2012, which was paid on February 14, 2013.

Predecessor Transactions

Related-party transactions of our Predecessor were settled through division equity. The balances in receivables and accounts payable with affiliated companies represent the amount owed from or to Delek related to certain affiliate transactions. Revenues from affiliates in the consolidated statements of operations of our Predecessor consist of revenues from gathering, pipeline transportation, storage, wholesale marketing and products terminalling services to Delek and its affiliates based on regulated tariff rates.

Costs related specifically to us have been identified and included in the statements of operations. Prior to the Offering, we were not allocated certain corporate costs from Lion Oil. These costs were allocated as described further below. In the opinion of management, the methods for allocating these costs are reasonable. It is not practicable to estimate the costs that would have been incurred by us if we had been operated on a stand-alone basis.

MAPCO Express, Inc. (Express) provided general and administrative support for us, including services such as corporate management, accounting and payroll. In exchange for these services, we paid Express a monthly management fee. Total management fees paid to Express for the years ended December 31, 2012, 2011 and 2010 were $1.0 million, $0.7 million, and $0.8 million, respectively, which is recorded in general and administrative expenses in the accompanying combined statements of operations.

Payroll expenses for certain employees of Delek were transferred to us. In the years ended December 31, 2012, 2011 and 2010, $1.7 million, $1.0 million and $1.3 million, respectively, in payroll expenses were reclassified to us from Delek and are included in general and administrative expenses in the accompanying combined statement of operations.

Lion Oil provided general and administrative support for us, including services such as corporate management, insurance, accounting and payroll. There were no property and liability insurance cost allocations for 2012 as actual costs were billed and recorded in operating expenses in the accompanying consolidated statement of operations through the date of the Offering. Subsequent to the Offering, these expenses are included in amounts paid to Delek as administrative fees under the omnibus agreement. The property and liability insurance costs that were allocated to us based on a percentage of property and equipment cost were $0.5 million for the year ended December 31, 2011 and are recorded in general and administrative expenses in the accompanying consolidated statements of operations. The remaining shared services costs that were allocated based on a percentage of salaries expense were $1.5 million through the date of the Offering and were $1.1 million for the year ended December 31, 2011, which are recorded in general and administrative expenses in the accompanying consolidated statements of operations.

J. Christy Construction Inc., a subsidiary of Lion Oil, provided certain repairs, maintenance and other contract services to us totaling $0.5 million and $0.1 million for the years ended December 31, 2012 and 2011, which are recorded in operating expenses in the accompanying combined statements of operations.

We had revenues from Lion Oil related to the SALA Gathering and Lion Pipeline Systems totaling $13.2 million and $9.8 million for the period through the Offering and for the year ended December 31, 2011, respectively. We had revenues from Lion Oil related to the Nashville terminal totaling $0.7 million for the period through the Offering and $0.8 million for the year ended December 31, 2011. Following its initial public offering, the Partnership has third party revenues regarding the SALA Gathering and Lion Pipeline Systems and the Nashville terminal. In addition, we had pipeline maintenance services revenue of $1.4 million from Paline for the period from April 29, 2011 through December 19, 2011 (the period it was owned by Ergon). Historically, we participated in Lion Oil’s centralized cash management program under which cash receipts and cash disbursements were processed through Lion Oil’s cash accounts with a corresponding credit or charge to an affiliate account. The affiliate account is included in division equity. Following its initial public offering, the Partnership maintains separate cash accounts.

We entered into a service agreement with Delek effective October 1, 2006, which among other things, required Delek to pay service fees to us based on the number of gallons sold at the Tyler Refinery and a sharing of a portion of the marketing margin achieved in return for providing marketing, sales and customer services. Service fees income received from Delek Refining for the years ended December 31, 2012, 2011 and 2010 were $10.5 million, $12.2 million and $10.6 million, respectively, and are recorded in net sales in the accompanying combined statements of operations.

We and Delek had a service agreement, which among other things, required Delek to pay us throughput and storage fees based on the amount of the crude transported and/or stored. This fee equates to $0.35 per barrel transported into the refinery, plus $0.3 million per month for storage, or $0.7 million, whichever is greater. Additionally, Delek pays us a quarterly fee of approximately $0.2 million to compensate us for the tax consequences resulting from the depreciation expense that will not be incurred by us due to the accounting treatment of the acquisition of the pipeline assets. Total fees paid to us in conjunction with pipeline storage fees were $9.7 million, $10.1 million and $9.5 million for the years ended December 31, 2012, 2011 and 2010, respectively. Total fees paid to us related to tax depreciation were $0.8 million for the years ended December 31, 2012, 2011 and 2010 and are recorded as a reduction of general and administrative expenses in the accompanying combined statements of operations.

During the years ended December 31, 2012, 2011 and 2010, Delek sold finished product to us in the amounts of $32.6 million, $12.8 million and $15.6 million, respectively.

We recognized $0.5 million, $0.5 million and $0.6 million for the years ended December 31, 2012, 2011 and 2010, respectively in compensation expense related to stock-based compensation awards to related party employees, for allocated related party services and an allocation of director and executive officer equity-based compensation.