LIGHT PRODUCTS OFF-TAKE AGREEMENT
BETWEEN
VALERO MARKETING AND SUPPLY COMPANY
AND
MOBIL OIL CORPORATION
Dated September 16, 1998
TABLE OF CONTENTS
ARTICLE I - DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . .1
ARTICLE II - AGREEMENT TO PURCHASE; TERM . . . . . . . . . . . . . . . . .4
2.1 Purchase of Products . . . . . . . . . . . . . . . . . . . . . . . .4
2.2 Inhaul . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
2.3 Valero's Obligation. . . . . . . . . . . . . . . . . . . . . . . . .4
2.4 Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
2.5 Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
2.6 Default. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
ARTICLE III - PROGRAMMING OF DELIVERIES. . . . . . . . . . . . . . . . . .6
3.1 Jet Fuel Estimate . . . . . . . . . . . . . . . . . . . . . . . . .6
3.2 Monthly Requirements . . . . . . . . . . . . . . . . . . . . . . . .6
3.3 Monthly Delivery Plan. . . . . . . . . . . . . . . . . . . . . . . .6
3.4 Daily Lifting Schedule . . . . . . . . . . . . . . . . . . . . . . .7
3.5 Daily Delivery Schedule. . . . . . . . . . . . . . . . . . . . . . .7
3.6 Periodic Meetings. . . . . . . . . . . . . . . . . . . . . . . . . .7
ARTICLE IV - SCHEDULING PROCEDURES . . . . . . . . . . . . . . . . . . . .7
4.1 MPLC G & D Pipeline Schedule . . . . . . . . . . . . . . . . . . . .7
4.2 Jet Fuel Pipeline Schedule and Other Jet Fuel Deliveries . . . . . .8
4.3 Colonial Pipeline Schedule . . . . . . . . . . . . . . . . . . . . .8
4.3.1 Colonial Pipeline Inhauls. . . . . . . . . . . . . . . . . . . .8
4.3.2 Colonial Pipeline Outhauls . . . . . . . . . . . . . . . . . . .8
4.4 Marine Provisions. . . . . . . . . . . . . . . . . . . . . . . . . .8
4.5 LPT Batch Schedule.. . . . . . . . . . . . . . . . . . . . . . . . 10
4.6 Schedule Changes . . . . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE V - PRICE . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5.1 Price Structure. . . . . . . . . . . . . . . . . . . . . . . . . . 10
5.2 Non-Standard Product Price . . . . . . . . . . . . . . . . . . . . 10
5.3 Change in Price Structure. . . . . . . . . . . . . . . . . . . . . 10
ARTICLE VI - ADDITIVES . . . . . . . . . . . . . . . . . . . . . . . . . 11
6.1 All Season Diesel Fuel . . . . . . . . . . . . . . . . . . . . . . 11
6.2 All Season Diesel Fuel Additive. . . . . . . . . . . . . . . . . . 11
6.3 Injection. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
6.4 Tank Conversion. . . . . . . . . . . . . . . . . . . . . . . . . . 12
6.5 Conductivity Improver Additive . . . . . . . . . . . . . . . . . . 12
ARTICLE VII - PAYMENT. . . . . . . . . . . . . . . . . . . . . . . . . . 12
7.1 Invoicing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
7.2 Payment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
7.3 Late Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.4 Disputed Invoices. . . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE VIII - WARRANTY, QUANTITY AND QUALITY DETERMINATIONS . . . . . . 13
8.1 Warranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
8.2 Disclaimer . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
8.3 Mobil Warranty . . . . . . . . . . . . . . . . . . . . . . . . . . 14
8.4 Quality Determinations . . . . . . . . . . . . . . . . . . . . . . 14
8.5 Quantity Determinations. . . . . . . . . . . . . . . . . . . . . . 15
8.5.1 Pipeline Quantities. . . . . . . . . . . . . . . . . . . . . . 15
8.5.2 Wharf Quantities . . . . . . . . . . . . . . . . . . . . . . . 15
8.5.3 LPT Quantities . . . . . . . . . . . . . . . . . . . . . . . . 15
8.5.4 Meters . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
8.5.5 Out of Service Meters. . . . . . . . . . . . . . . . . . . . . 16
8.6 Off-Spec Product . . . . . . . . . . . . . . . . . . . . . . . . . 16
8.6.1 Notification. . . . . . . . . . . . . . . . . . . . . . . . . 16
8.6.2 Costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
8.6.3 Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
8.6.4 Additional Costs . . . . . . . . . . . . . . . . . . . . . . . 17
8.6.5 Mis-Deliveries . . . . . . . . . . . . . . . . . . . . . . . . 17
8.7 Waiver for Off-Spec Product. . . . . . . . . . . . . . . . . . . . 17
8.8 Off-Spec Inhauls . . . . . . . . . . . . . . . . . . . . . . . . . 17
8.8.1 Notification. . . . . . . . . . . . . . . . . . . . . . . . . 17
8.8.2 Costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
8.8.3 Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
8.9 Waiver for Off-Spec Inhauls. . . . . . . . . . . . . . . . . . . . 18
ARTICLE IX - TRANSFER OF TITLE, RISK OF LOSS AND INCORRECT DELIVERY . . 18
9.1 Transfer of Title. . . . . . . . . . . . . . . . . . . . . . . . . 18
9.2 Under-Deliveries . . . . . . . . . . . . . . . . . . . . . . . . . 18
9.3 Waiver of Under-Delivery . . . . . . . . . . . . . . . . . . . . . 19
9.4 Jet Fuel Underproduction . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE X - FORCE MAJEURE. . . . . . . . . . . . . . . . . . . . . . . . 19
10.1 Excuse from Obligations; Definition . . . . . . . . . . . . . . . 19
10.2 Notice. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
10.3 Duty To Mitigate. . . . . . . . . . . . . . . . . . . . . . . . . 20
10.4 Sales Allocation. . . . . . . . . . . . . . . . . . . . . . . . . 20
10.5 No Make Up Volumes. . . . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE XI - CONFIDENTIALITY . . . . . . . . . . . . . . . . . . . . . . 20
11.1 No Disclosures. . . . . . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE XII - RESOLUTION OF DISPUTES . . . . . . . . . . . . . . . . . . 21
12.1 Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
12.2 Equitable Relief. . . . . . . . . . . . . . . . . . . . . . . . . 22
12.3 Expert Proceedings. . . . . . . . . . . . . . . . . . . . . . . . 22
12.3.1 Qualifications. . . . . . . . . . . . . . . . . . . . . . . . 22
12.3.2 Notice. . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
12.3.3 Time Frames . . . . . . . . . . . . . . . . . . . . . . . . . 23
12.3.4 Expert's Determination. . . . . . . . . . . . . . . . . . . . 23
12.3.5 Continuance of Agreement. . . . . . . . . . . . . . . . . . . 23
12.3.6 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE XIII - MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . 23
13.1 Hazardous Warning Responsibilities. . . . . . . . . . . . . . . . 23
13.2 Assignment. . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
13.3 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . 24
13.4 Waiver and Amendment. . . . . . . . . . . . . . . . . . . . . . . 24
13.5 Claims. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
13.6 No Consequential Damages. . . . . . . . . . . . . . . . . . . . . 24
13.7 Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
13.8 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
13.9 Entire Agreement. . . . . . . . . . . . . . . . . . . . . . . . . 25
13.10 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . 25
13.11 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
13.12 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . 26
13.13 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . 26
13.14 Third-Party Rights . . . . . . . . . . . . . . . . . . . . . . . 26
EXHIBITS
Exhibit A - Standard Products
Exhibit B - MOBIL Marine Provisions
Exhibit C - LPT Provisions
Exhibit D - All Season Diesel Provisions
Exhibit E - Jet Fuel Quality
Exhibit F - Historical Volumes
Exhibit G - Monthly Throughput Fee Determination
Exhibit H - Terminalling Procedures
Exhibit I - Conductivity Improver Additization Requirements
SCHEDULES
Schedule 1 - Pricing Terms
LIGHT PRODUCTS OFF-TAKE AGREEMENT
This Light Products Off-take Agreement (the "Agreement"), dated September 16,
1998 ("Effective Date"), is made by and between Valero Marketing and Supply
Company, a Delaware corporation ("Valero"), and Mobil Oil Corporation, a New
York corporation ("Mobil"). (Valero and Mobil are each individually referred
to herein as a "Party", and collectively referred to herein as the "Parties").
WHEREAS, on even date herewith, pursuant to the Asset Sale and Purchase
Agreement between Mobil and Valero Refining Company-New Jersey (the "Asset
Sale and Purchase Agreement"), Valero Refining Company-New Jersey, an
Affiliate of Valero ("VRC-NJ"), purchased from Mobil certain Assets (as
defined therein) located in Paulsboro, New Jersey; and
WHEREAS, VRC-NJ intends to operate the assets as a refinery to produce, among
other things, gasoline, diesel fuel, jet fuel and heating oil; and
WHEREAS, Mobil desires to purchase and Valero desires to sell certain
quantities of gasoline, diesel fuel, jet fuel and heating oil.
NOW, THEREFORE, in consideration of the aforesaid premises and the mutual
covenants contained herein, the Parties agree as follows:
ARTICLE I
DEFINITIONS
The following terms shall have the following meanings for purposes of this
Agreement:
"Affiliate" shall mean any entity directly or indirectly controlled by,
controlling or under common control with a Party. For purposes of this
definition, "control" shall mean the ownership of more than fifty percent
(50%) of the equity interests and voting rights in an entity.
"Barrel" shall mean forty-two (42) Gallons.
"Business Day" shall mean any day other than a Saturday, Sunday or a legal
holiday in the State of New Jersey, and, for purposes of determining LIBOR,
any day on which dealings in US dollar deposits are carried out in the London
Interbank market other than a Saturday, Sunday or a day on which banking
institutions are permitted to close in the city of New York.
"Certificate of Analysis" shall mean the list of laboratory test results that
Valero affirms to be representative of the quality of the product shipped to
Mobil.
"Colonial Pipeline" shall mean Colonial Pipeline Company, a Delaware
corporation with an address at Resurgens Plaza, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇.
"Daily Delivery Schedule" shall have the meaning given to that term in Section
3.5.
"Daily Lifting Schedule" shall have the meaning given to that term in Section
3.4.
"First Renewal Term" shall have the meaning given to that term in Section 2.4.
"Gallon" shall mean a unit of volume equivalent to 231 cubic inches or
3.785412 liters or 0.003785412 cubic meters, all measured at 15.56 degrees
Celsius or 60 degrees Fahrenheit.
"Historical Volumes" shall mean the volume of each Light Product by grade
produced by the Refinery in the 12 calendar months prior to the Effective Date
as set forth on Exhibit F.
"Inhauls" shall mean the movements by Mobil of Light Products into the
Refinery by wharf, pipeline, rail or truck.
"Initial Term" shall have the meaning given to that term in Section 2.4.
"Jet Fuel Pipeline" shall mean the jet fuel pipeline from the Refinery to the
Philadelphia airport owned and operated by MPLC (as defined below).
"LIBOR" shall mean, as of any date of determination, the three-month London
Interbank Offered Rate for US dollars, determined at 11:00 a.m., London time,
on the first day of the calendar quarter in which the date of determination
occurs (or, if the first day of such calendar quarter is not a London Banking
Day, the immediately preceding London Banking Day), as such rate appears on
Telerate Page 3750, or any successor page thereto. If Telerate Page 3750 or
any successor page ceases to publish the three-month London Interbank Offered
Rate for US dollars, the Parties shall designate an alternative mechanism
consistent with Eurodollar market practices for determining such rate. For
purposes of this definition, a "London Banking Day" is a day on which dealings
in deposits in US dollars are transacted on the London Interbank market.
"Light Products" shall mean Standard Products and/or Non-Standard Products, as
applicable from the context, and "Light Product" shall be construed
accordingly.
"Light Products Terminal" or "LPT" shall mean the facilities, owned by Mobil,
located adjacent to the Refinery used to deliver Light Products into trucks,
including equipment for measuring and dispensing such Light Products.
"LPT Provisions" shall mean the provisions attached to this Agreement as
Exhibit C.
"Mobil's Product Marketing Requirements" shall mean Mobil's required quantity,
quality, and delivery method of each Light Product by grade, as determined by
Mobil.
"Monthly Delivery Plan" shall have the meaning given to that term in Section
3.3.
"Monthly Requirements" shall have the meaning given to that term in Section
3.2.
"MPLC" shall mean Mobil Pipe Line Company, a Delaware corporation with an
address at ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇.
"MPLC G & D Pipelines" shall mean the gasoline and distillate pipelines owned
by Mobil Pipe Line Company which are supplied, in part, by the Refinery.
"Non-Standard Products" shall mean gasolines or distillates that are not
Standard Products.
"Off-Spec Product" shall have the meaning given to that term in Section 8.6.
"Outhauls" shall mean the movements by Mobil of Light Products out of the
Refinery by wharf, pipeline, rail or truck.
"▇▇▇▇▇'▇" shall mean "▇▇▇▇▇'▇ Oilgram Price Report", published by McGraw Hill,
Inc. (or any successor thereto).
"Refinery" shall mean the Assets located in Paulsboro, New Jersey owned by
Valero Refining Company-New Jersey as of the Effective Date, and owned by
Mobil prior to the Effective Date.
"Reuters" shall mean Reuters Information Services.
"RVP" shall mean ▇▇▇▇ Vapor Pressure.
"Second Renewal Term" shall have the meaning given to that term in Section
2.4.
"Subsequent Renewal Periods" shall have the meaning given to that term in
Section 2.5.
"Standard Products" shall mean gasolines or distillates meeting the
descriptions and corresponding technical specifications set forth in Exhibit
A, and any amendments thereto.
"TBD" shall mean thousands of Barrels per calendar day.
"Ten Day Period" shall have the meaning given that term in Section 3.4.
"Under-Deliveries" shall have the meaning given to that term in Section 9.2.
"Wharf" shall mean the facilities located at the Refinery for delivering Light
Products into ships or barges.
"Winter Season" shall have the meaning given to that term in Section 6.1
"Woodbury" shall mean the Colonial Pipeline tank farm located in Woodbury, New
Jersey.
"Year" shall mean the twelve month period from January 1 through December 31,
according to the Gregorian calendar.
RULES OF INTERPRETATION
The words "include," "includes" and "including" are not limiting.
A reference to an Article, Section, Exhibit, or Schedule is to the Article,
Section, Exhibit, or Schedule of this Agreement unless otherwise expressly
indicated.
References to any document, instrument or agreement shall include all
exhibits, schedules and other attachments thereto.
The words "hereof," "herein" and "hereunder" and words of similar import shall
refer to the Agreement as a whole and not to any particular provision of the
Agreement.
The words "deliver", "delivers", "delivered" and "deliveries" when used in
connection with Light Products, shall refer to the movements of Light Products
to and from the title transfer points or the custody transfer points, as
applicable, set forth in this Agreement.
References to "days" shall mean calendar days, unless the term "Business Days"
shall be used.
References to a time of day shall mean such time in Paulsboro, New Jersey,
unless otherwise specified.
This Agreement is the result of negotiations among, and has been reviewed by,
Mobil, Valero and their respective counsel. Accordingly, this Agreement shall
be deemed to be the product of all Parties hereto and no ambiguity shall be
construed in favor of or against Mobil or Valero.
VRC-NJ, as owner of the Refinery, will be operating and producing Light
Products to be sold hereunder. Accordingly, references herein to the
operations of Valero or to the production of Valero shall be deemed to be, as
applicable, in the context where used herein, the operations and/or production
of VRC-NJ.
ARTICLE II
AGREEMENT TO PURCHASE; TERM
2.1 Purchase of Products. During the term of this Agreement, Mobil agrees to
purchase and receive from Valero, and Valero agrees to sell and deliver to
Mobil, all Light Products produced at the Refinery, by grade, up to Historical
Volumes, in accordance with the terms and conditions of this Agreement and at
the prices determined under this Agreement. At Mobil's option, Valero agrees
to sell and deliver to Mobil all such Light Products requested by Mobil, by
grade, produced at the Refinery above Historical Volumes in accordance with
the terms and conditions of this Agreement and at the prices determined under
this Agreement. Notwithstanding the foregoing, with respect to No. 2 fuel,
Mobil agrees to purchase and receive from Valero, and Valero agrees to sell
and deliver to Mobil, all No.2 fuel produced at the Refinery up to Mobil's
Product Marketing Requirements in accordance with the terms and conditions of
this Agreement and at the prices determined under this Agreement.
2.2 Inhaul. Subject to Section 2.3, Mobil shall have the right to Inhaul any
and all Light Products to meet Mobil's Product Marketing Requirements if
Valero does not meet Mobil's Product Marketing Requirements, by grade. Mobil
agrees to pay a monthly throughput fee for certain Inhauls in accordance with
Exhibit G.
2.3 Valero's Obligation. Valero shall be obligated to provide Refinery
capacity to meet Mobil's Product Marketing Requirements, by grade, up to a
total, for all grades (excluding jet fuel), on an average annual basis of one
hundred fifteen (115) TBD, and on a daily basis of one hundred forty (140)
TBD. Valero shall provide such capacity for each grade by either: (i)
producing and selling to Mobil Mobil's Product Marketing Requirements, (ii)
inhauling and selling to Mobil Mobil's Product Marketing Requirements, (iii)
terminalling Inhauls, in accordance with Exhibit H, to meet Mobil's Product
Marketing Requirements or (iv) any combination of (i), (ii) and (iii), at
Valero's option to meet Mobil's Product Marketing Requirements. Valero shall
use reasonable efforts to provide Refinery capacity to Mobil above, on an
average annual basis, one hundred fifteen (115) TBD and, on a daily basis, one
hundred forty (140) TBD, by grade, provided, however, Valero shall not be
obligated to make capital investments to provide to Mobil Refinery capacity
above one hundred fifteen (115) TBD annually or one hundred forty (140) TBD
daily.
2.4 Term. This Agreement is effective as of the Effective Date and shall
continue in effect for a period of ten (10) years from the Effective Date (the
"Initial Term"). Upon the expiration of the Initial Term, this Agreement
shall be automatically renewed for five (5) years unless terminated in
accordance with the terms hereof ("First Renewal Term"). Upon the expiration
of the First Renewal Term, this Agreement shall be automatically renewed for
five (5) years unless terminated in accordance with the terms hereof ("Second
Renewal Term").
2.5 Termination. Mobil may terminate this Agreement without cause by giving
Valero written notice of termination at least twelve (12) months prior to the
expiration of the Initial Term or the First Renewal Term. This Agreement shall
terminate at the end of the Second Renewal Period unless the Parties mutually
agree to renew this Agreement for a twelve (12) month period, and any twelve
month periods thereafter ("Subsequent Renewal Periods") at least twelve (12)
months prior to the expiration of the Second Renewal Term or any Subsequent
Renewal Periods.
2.6 Default. In addition to the provisions of Section 2.5, this Agreement
may be terminated by a non defaulting Party, upon notice to the other Party,
if one or more of the following events shall have occurred and be continuing:
(i) the other Party shall default, other than in accordance with (ii)
below, in any material respect, in the performance or observance of any term,
covenant or agreement contained in this Agreement and such default shall not
have been cured within thirty (30) days, or the other Party is not diligently
trying to cure such default which takes longer than thirty (30) days to cure,
following receipt by the other Party of written notice of such default from
the non defaulting Party; provided, however, in the latter case, the Parties
shall have met to review the situation and discuss the appropriate course of
action for a default that can not be cured within thirty (30) days;
(ii) the other Party shall fail to pay any amount owed hereunder on the
due date for such payment, except for any amounts being disputed in good
faith, and such amount (and any interest accrued thereon) shall remain unpaid
for fifteen (15) days following receipt by such Party of written notice from
the non defaulting Party of such failure to pay;
(iii) (a) the other Party shall commence any case, proceeding or any
other action (1) under any existing or future law of any jurisdiction relating
to bankruptcy, insolvency, reorganization or relief of debtors, seeking to
have an order for relief entered with respect to it, or seeking to adjudicate
it a bankrupt or insolvent, or seeking reorganization, arrangement,
adjustment, winding-up, liquidation, dissolution, composition or other relief
with respect to it or its debts, or (2) seeking appointment of a receiver,
trustee, custodian or other similar official for it or for all or any
substantial part of its assets or the other Party shall make a general
assignment for the benefit of its creditors;
(b) there shall have been commenced against the other Party any case,
proceeding or other action of a nature referred to in clause (iii) (a) above
that shall not have been dismissed within sixty (60) days;
(c) there shall be commenced against the other Party any case, proceeding
or other action seeking issuance of a warrant of attachment, execution or
similar process against all or any substantial part of its assets; or
(d) the other Party shall take any action in furtherance of, or
indicating its consent to, approval of, or acquiescence in, any of the acts
set forth in Section 2.6 (iii) (a), (b), or (c) above.
ARTICLE III
PROGRAMMING OF DELIVERIES
3.1 Jet Fuel Estimate. With respect to jet fuel, twelve (12) months prior to
the beginning of any Year, Valero shall deliver to Mobil an estimate, within
five thousand (5000) barrels per day, of the volume of jet fuel Valero
requires Mobil to Outhaul in the next succeeding Year ("Jet Fuel Estimate")
provided, however, Valero shall deliver to Mobil by October 1, 1998 the Jet
Fuel Estimate for the next Year. Mobil shall rely on the Jet Fuel Estimate for
purposes of entering into jet fuel sales agreements with its customers.
3.2 Monthly Requirements. Commencing on the Effective Date, on or before the
fifteenth (15th) day of each month, Mobil shall deliver to Valero Mobil's
Product Marketing Requirements for the next succeeding month and a revised
forecast of Mobil's Product Marketing Requirements for the subsequent two
months ("Monthly Requirements") provided, however, Mobil shall deliver to
Valero on the Effective Date its Monthly Requirements for the current month
and the next succeeding month.
3.3 Monthly Delivery Plan. Within five (5) days after receipt of the Monthly
Requirements, Valero shall deliver to Mobil the delivery plan, subject to
Section 2.3, for the next succeeding month, and a preliminary delivery plan
for the subsequent two months, for Mobil's Product Marketing Requirements and
the Inhauls and Outhauls, by grade, to the pipelines, barges and LPT as
designated by Mobil ("Monthly Delivery Plan), provided, however, Valero shall
deliver to Mobil within five (5) days after the Effective Date a Monthly
Delivery Plan for the current month and the next succeeding month.
3.4 Daily Lifting Schedule. Commencing on the Effective Date, each Business
Day Mobil shall deliver to Valero Mobil's daily lifting schedule, by grade,
for the next thirty (30) days which shall include the method of delivery for
Mobil's Product Marketing Requirements and the Inhauls and Outhauls ("Daily
Lifting Schedule"). The liftings for a month shall be grouped into three
periods of ten (10) days: (a) the first of the month to the tenth of the
month; (b) the eleventh of the month to the twentieth of the month; and (c)
the twenty first of the month to the end of the month (each a "Ten Day
Period"). The volume of Light Product, by grade, set forth in the Daily
Lifting Schedule fifteen (15) days prior to the commencement of each Ten Day
Period, and any mutually agreed changes to the volume, shall be the volume
Mobil is obligated to lift and shall be the volume used to determine
Under-Deliveries. If no Daily Lifting Schedule is delivered to Valero fifteen
(15) days prior to the commencement of a Ten Day Period, the Daily Lifting
Schedule last delivered shall govern. The method of delivery shall be batch
specific for the first twenty (20) days, and rateable the last ten (10) days,
of the thirty (30) days. The method of delivery for the Inhauls and Outhauls
shall be finally set no later than three (3) days prior to the actual Inhaul
or Outhaul.
3.5 Daily Delivery Schedule. Commencing on the day following the Effective
Date, each Business Day Valero shall deliver to Mobil a daily delivery
schedule for the next thirty (30) days setting forth daily deliveries, by
grade, to meet Mobil's Daily Lifting Schedule ("Daily Delivery Schedule").
To the extent there is a scheduling conflict, Mobil and Valero shall use their
best efforts to resolve the conflict with the understanding that Valero must
meet its obligations as set forth in Section 2.3.
3.6 Periodic Meetings. Mobil and Valero shall meet, as needed, to discuss
Mobil's Product Marketing Requirements and Valero's available capacity,
including any investments to upgrade or change the production of Light
Products at the Refinery and any investments to upgrade or change the Refinery
to accommodate Mobil's Light Product needs above one hundred fifteen (115)
TBD, and how such investments should be shared between Mobil and Valero, if at
all.
ARTICLE IV
SCHEDULING PROCEDURES
4.1 MPLC G & D Pipeline Schedule. Mobil shall provide the Daily Lifting
Schedule to Valero by 2:00 PM each Business Day and shall specify the batch
type, if applicable, timing and volume of Light Products, by grade, to be
shipped on the MPLC G & D Pipeline.
4.2 Jet Fuel Pipeline Schedule and Other Jet Fuel Deliveries. The Daily
Lifting Schedule shall specify the batch type, timing and volume of jet fuel
to be shipped to the Philadelphia airport on the Jet Fuel Pipeline. Mobil
will coordinate with Valero the daily pumping operations to the Philadelphia
airport. To the extent Valero produces jet fuel in excess of Mobil's Product
Marketing Requirements, such product shall be shipped on the Colonial
Pipeline, to the extent the Colonial Pipeline is available. Valero, in the
Daily Delivery Schedule, shall specify the approximate pump dates for
shipments to Woodbury for Colonial Pipeline liftings. If any volume of such
jet fuel cannot be shipped on Colonial Pipeline, then such volumes of jet fuel
shall be barged in accordance with Section 4.4. In the event that jet fuel
must be lifted by barge, Valero shall process the slop water generated from
cleaning activities from Mobil's fleet, (currently the B-240, Iroquois, and
M-70 barges), at no charge, up to an annual volume of 5000 barrels.
4.3 Colonial Pipeline Schedule.
4.3.1 Colonial Pipeline Inhauls. The Inhauls to be sourced from
Colonial Pipeline, shall be scheduled for delivery by Mobil into Woodbury to
meet the MPLC, Mobil Trenton Terminal and LPT lifting requirements specified
in the Daily Lifting Schedule. Valero shall schedule the trans- shipment of
such Inhauls from Woodbury to the Refinery, the MPLC G & D Pipelines, the
Mobil Trenton Terminal and the LPT, respectively.
4.3.2 Colonial Pipeline Outhauls. The Outhauls shall be nominated by
Mobil for injection into the Colonial Pipeline. Injection timing shall be
provided to Valero for inclusion in the Daily Delivery Schedule. Valero shall
deliver the Light Products from the Refinery to Woodbury as required to meet
injection timing. The minimum batch size for Colonial Pipeline liftings shall
be 25,000 barrels, or less if mutually agreed by the Parties. Valero shall
schedule such Outhauls to Woodbury such that they do not interfere with the
Inhauls required to meet Mobil's Product Marketing Requirements.
4.4 Marine Provisions. The Daily Lifting Schedule shall include a detailed
schedule for barge liftings to meet Mobil's Product Marketing Requirements,
including at the Mobil Trenton Terminal. For Inhauls, Mobil shall nominate a
preliminary three (3) day lifting window approximately thirty (30) days prior
to the scheduled Inhaul delivery date. For Outhauls, Valero shall nominate a
preliminary three (3) day lifting window approximately thirty (30) days prior
to the scheduled Outhaul delivery date. For both Inhauls and Outhauls, Mobil
shall nominate an exact three (3) day lifting window five (5) days prior to
the scheduled Inhaul or Outhaul delivery date, shall provide Valero the name
of the inspector to be used and the vessel details for the barge and shall
arrange for the barge equipment required to be used. Any changes to the barge
lifting schedule, including the date, time, volume, barge details and
inspector, may be made at any time if agreed by Mobil and Valero. Valero shall
make the Wharf available during the three (3) day lifting window and shall
provide for a minimum lifting of 100,000 barrels, excluding barges intended
for delivery to Mobil Trenton Terminal. Lifting sizes less than 100,000
barrels shall be discounted in cents per gallon as follows, unless Mobil
initially nominates a smaller lifting:
Barge Lifting Size Price Discount
(Barrels) (cents per gallon)
90,000 .07
80,000 .15
70,000 .22
60,000 .29
50,000 & below .40
To the extent there is no conflict with any of the provisions of this
Agreement, the terms of Mobil's Marine Provisions for Inland/Coastwise Barges
& Tankers (for vessels of 16,000 Dead Weight Tons or over), which are attached
to and incorporated into this Agreement as Exhibit B, shall apply to Outhauls
of Light Products at the Wharf.
4.5 LPT Batch Schedule. Mobil shall provide to Valero, weekly, Mobil's
estimated demand at the LPT for inclusion in the Daily Delivery Schedule.
Actual timing of deliveries shall be coordinated with the LPT. The LPT shall
notify Valero of gasoline and heating oil pumpings as required to meet day
tank requirements. Heating oil and diesel fuel deliveries shall be scheduled
with the Refinery. Jet fuel shall be delivered automatically into trucks on
demand.
4.6 Schedule Changes. If, due to limited availability or unavailability of
pipelines, the Wharf, the LPT delivery facilities or due to significant
fluctuations in Mobil's Product Marketing Requirements, it is necessary to
make changes in Light Product production, or delivery methods, times and
volumes, the Parties shall negotiate and agree to such changes. The Parties
shall continually communicate with each other with respect to the need for
such changes, as they become aware of them, and will exercise good faith
efforts to agree to needed changes and modifications without undue hardship to
either Party, and such agreed changes shall alter the volumes used to
determine Under-Deliveries.
ARTICLE V
PRICE
5.1 Price Structure. The price for Light Products shall be as set forth on
Schedule 1.
5.2 Non-Standard Product Price. The Parties may agree in writing to the
specifications, production and delivery of a Non-Standard Product in
accordance with the Annual Forecast. The Parties shall agree the price and
volume for such Non-Standard Product prior to its production at the Refinery.
5.3 Change in Price Structure. The price structure contained in this Article
V is subject to review by Mobil and Valero if either Party believes there is a
significant change in the Light Products market. If the Parties should fail
to reach agreement with respect to a new price structure or price reference
within sixty (60) days from the commencement of negotiations with respect
thereto, either Party may submit such question for resolution by a independent
expert pursuant to Section 12.3. If any such question is submitted to an
expert for resolution, the existing price structure or price reference shall,
unless otherwise agreed by the Parties, remain in effect until such question
is resolved by the expert. The decision of the expert with respect to any
dispute under this Section 5.3 shall be retroactive to the date upon which the
question was submitted to such expert and, within ten (10) days of the receipt
of any such decision, an adjusting payment shall be made by Valero or Mobil,
as the case may be.
ARTICLE VI
ADDITIVES
6.1 All Season Diesel Fuel. During the period of approximately October 15
through February 15 (the "Winter Season"), Mobil requires a low sulfur diesel
fuel which has unique specifications ("All Season Diesel Fuel") and requires
injection of an additive ("All Season Diesel Additive") at the Refinery. All
Season Diesel Fuel is considered "proprietary". Valero agrees to inject the
All Season Diesel Additive into low sulfur diesel fuel to meet Mobil's All
Season Diesel Fuel marketing requirements.
6.2 All Season Diesel Fuel Additive. Prior to the commencement of each
Winter Season, Mobil shall specify the All Season Diesel Additive to be used.
As of the Effective Date, Mobil requires the use of the Paramins additive
Paraflow 521 stored in Tank 1321. Valero shall be responsible for
maintaining, ordering and purchasing, an adequate level of All Season Diesel
Additive throughout the Winter Season to meet Mobil's marketing needs. If the
additive is not available from the manufacturer, Valero shall immediately
notify Mobil in writing. Valero shall not be responsible for additive dosage
requirements should the additive not be available. New All Season Diesel
Additive receipts must be tested, prior to offloading, for API gravity (ASTM
D287/D4052) and appearance (visual clear and bright). The results of such
tests should be within the plus or minus 0.5 Deg. API when compared to the
certificate of origin provided by the supplier. If the delivered All Season
Diesel Additive is off-spec, Valero shall contact Mobil Fuel Technical Support
and Paramins personnel. Valero shall invoice Mobil monthly for the All Season
Diesel Additive based on usage and the actual price paid for the additive.
Payment for such invoices shall be due ten (10) days after receipt. Mobil shall
negotiate a price for the All Season Diesel Additive which shall be fixed for
the Winter Season. Usage shall be determined by the metered volume of All
Season Diesel Additive using specified dosages provided by Mobil. Mobil
requires the meters measuring All Season Diesel Additive to be calibrated the
month prior to the Winter Season.
6.3 Injection. Upon receipt of low sulfur diesel fuel during the Winter
Season, Valero shall follow the procedures in Exhibit D. The procedure
specifies All Season Diesel Additive treat rates upon receipt of product for
the Winter Season and testing to determine if additional All Season Diesel
Additive is required upon product Outhaul. Each All Season Diesel Additive
treatment on Inhauls and Outhauls shall be within plus or minus 5% of the
specified All Season Diesel Additive treat rate. After each Inhaul or Outhaul
of All Season Diesel Fuel, Valero shall provide an All Seasons Diesel Fuel
Transfer Report to Mobil Fuel Technical Support and Distillate Team. If the
calculated All Season Diesel Additive treat rate exceeds the metered All Season
Diesel Additive treat rate by 10%, the overage in All Season Diesel Additive
treatment will be Valero's responsibility.
6.4 Tank Conversion. At the beginning of each Winter Season the level of All
Season Diesel Additive required may vary from those in the procedure in
Exhibit D. Mobil shall supply the additional All Season Diesel Additive
information required for the conversion of tanks for the Winter Season.
Valero shall contact Mobil if there is any change to the procedure in Exhibit
D. Likewise, Mobil shall contact Valero if there is a change to the
specifications required by Mobil.
6.5 Conductivity Improver Additive. In accordance with Mobil's written
instructions set forth on Exhibit I, which Mobil may from time to time modify,
Valero shall additize or cause to be additized low sulfur diesel fuel and No.2
fuel deliveries into the MPLC G & D Pipeline and to the LPT to meet the
specifications set forth on Exhibit ▇. ▇▇▇▇▇▇ shall, at its sole cost and
expense, maintain, calibrate and operate all equipment necessary to additize
low sulfur diesel fuel and No.2 fuel. Valero shall invoice Mobil monthly for
the additive based on usage and the actual price paid for the additive.
Payment for such invoices shall be due ten (10) days after receipt.
ARTICLE VII
PAYMENT
7.1 Invoicing. Valero shall submit to Mobil after each delivery an invoice
and supporting documents for the Light Products delivered to Mobil at the
Wharf, the Colonial Pipeline, the MPLC G & D Pipeline, and the Jet Fuel
Pipeline, together with payment instructions therefor (the " Non LPT
Invoice"). No later than the fifteenth (15th) day following the end of each
Ten Day Period, Valero shall submit to Mobil an invoice and supporting
documents for the Light Products delivered to Mobil at the LPT during such Ten
Day Period, together with payment instructions therefor (the "LPT Invoice")
(Non LPT Invoices and the LPT Invoices together shall be referred to herein as
Invoices). Each Invoice shall be prepared using the information set forth in
the relevant ▇▇▇▇ of Lading or meter ticket and shall contain such other
information relating to the calculation of the price for such Light Products
specified in the Invoice as Mobil may reasonably request.
7.2 Payment. Payment for the Light Products delivered to Mobil at the Wharf,
the Colonial Pipeline, the MPLC G & D Pipeline, and the Jet Fuel Pipeline
shall be made by Mobil to Valero no later than two (2) Business Days following
the date of receipt of the Non LPT Invoice if the Non LPT Invoice is received
before 12:00 noon local time at the billing address or no later than three (3)
Business Days following the date of receipt of the Non LPT Invoice if the Non
LPT Invoice is received after 12:00 noon local time at the billing address
(the "Due Date"). Payment for the Light Products delivered to Mobil at the LPT
shall be made by Mobil to Valero no later than five (5) Business Days
following the date of receipt of the LPT Invoice if the LPT Invoice is
received before 12:00 noon local time at the billing address or no later than
six (6) Business Days following the date of receipt of the LPT Invoice if the
LPT Invoice is received after 12:00 noon local time at the billing address(the
"Due Date"). All payments hereunder shall be made in U.S. dollars, by means
of a wire transfer of immediately available funds or through the Automated
Clearing House (ACH), to the account designated by Valero in the relevant
Invoice and, except to the extent required by applicable law or in accordance
with Section 7.4, without any discount, allowance, set-off, retention or
deduction.
7.3 Late Payments. If any payment due hereunder is not made in full on or
prior to the Due Date, any unpaid amount shall attract interest at LIBOR plus
three (3) percent, compounded annually, from (and including) the Due Date to
(but excluding) the date paid. To the extent interest is due on any payment,
the Party to whom the interest is owed shall invoice the Party who owes the
interest, within ninety (90) days of the Due Date for such payment, or the
interest shall be waived.
7.4 Disputed Invoices. In the event Mobil disagrees with any Invoice, it
shall pay the undisputed portion of the Invoice and immediately notify Valero
of the reasons for the dispute. The Parties shall endeavor to resolve the
dispute within thirty days. Failing resolution, the matter shall be referred
to an Expert for determination in accordance with Section 12.3. Promptly
after resolution of any dispute, the amount of any overpayment or underpayment
shall be paid to Mobil or Valero, as applicable, together with interest
thereon at LIBOR plus three (3) percent.
ARTICLE VIII
WARRANTY, QUANTITY AND QUALITY DETERMINATIONS,
OFF-SPEC PRODUCT AND LIABILITY
8.1 Warranty. Valero hereby warrants that the Standard Products delivered
(including Valero's inhauls) pursuant to this Agreement shall meet the
specifications set forth in Exhibit A and Exhibit E and the Non-Standard
Products shall meet the specifications mutually agreed in writing prior to the
delivery thereof by Valero to Mobil. Valero further warrants that it will
convey good title to all Light Products sold hereunder and that such Light
Products will be delivered to Mobil free and clear of any lien, encumbrance or
security interest. Valero further warrants that at the time of delivery, all
Light Products produced by Valero or, to its knowledge, inhauled by Valero and
delivered to Mobil shall be free and clear of any infringement or claim of
infringement of any third party U.S. patent, trademark, copyright or, to its
knowledge, trade secret rights (other than any infringement claims that might
be brought as a consequence of Valero's use, in accordance with the terms of
the Intellectual Property License Agreement, of Mobil Proprietary Technology
(as defined in the Intellectual Property License Agreement referred to in the
Asset Sale and Purchase Agreement)). THE PRECEDING SENTENCE IS VALERO'S SOLE
AND EXCLUSIVE WARRANTY FOR ANY INFRINGEMENT OR CLAIM OF INFRINGEMENT OF ANY
THIRD PARTY U.S. PATENT, TRADEMARK, COPYRIGHT OR TRADE SECRET RIGHTS. In the
event that Valero reasonably believes that any Light Products meeting the
specifications set forth on Exhibits A and E infringe, at the time of
delivery, on the rights of any third party U.S. patent, trademark, copyright
or trade secret rights, Valero shall notify Mobil and Mobil shall not be
obligated to take delivery of any such Light Product. Further, Valero shall
not be obligated to produce such Light Product that infringes, at the time of
delivery, on the rights of any third party U.S. patent, trademark, copyright
or trade secret rights. In the event that the Parties modify the
specifications so that there is no claim of infringement, at the time of
delivery, on the rights of any third party U.S. patent, trademark, copyright
or trade secret rights, the Light Product produced to meet the modified
specification will not be deemed to be Off-Spec Product for purposes of this
Agreement (unless the Light Product does not meet the modified specification)
nor will delivery of the Light Product meeting the modified specification be
treated as an Under-Delivery of the Light Product meeting the original
specification.
8.2 Disclaimer EXCEPT FOR THE WARRANTIES SET FORTH IN SECTION 8.1, VALERO
MAKES NO OTHER REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, CONCERNING
THE LIGHT PRODUCTS SOLD HEREUNDER, INCLUDING WITHOUT LIMITATION, WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
8.3 Mobil Warranty. Mobil hereby warrants that the Inhauls delivered pursuant
to this Agreement shall meet the Colonial Pipeline specifications. EXCEPT FOR
THE PRECEDING SENTENCE, MOBIL MAKES NO OTHER REPRESENTATIONS OR WARRANTIES,
EXPRESS OR IMPLIED, CONCERNING THE INHAULS, INCLUDING WITHOUT LIMITATION,
WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
8.4 Quality Determinations. Valero shall provide a Certificate of Analysis
for each shipment of Light Products. Mobil may utilize independent spot
inspections to verify the quality of products loaded onto marine vessels,
except when quality is altered by product on the vessel prior to loading. In
such case, product quality shall be determined by line sample or shore tank.
The cost for the barge inspections required hereunder shall be divided equally
between Mobil and Valero. Notwithstanding the foregoing, Valero shall be
obligated to collect a representative sample of each delivery of Light Product
to a marine vessel and retain such sample for at least thirty (30) days. For
deliveries into MPLC G & D Pipelines, MPLC tests shall prevail. For deliveries
into Colonial, Colonial tests for quality shall prevail. At Mobil's sole cost,
Mobil may utilize independent spot inspections to verify the quality of
products produced at the Refinery and transported by Pipeline, provided,
however, if an independent spot inspection is required to validate an Off-Spec
Product, the cost of the inspection shall be divided equally between Mobil and
Valero. Notwithstanding the foregoing, Mobil shall be obligated to collect a
representative sample of each delivery of Light Product to the LPT, to the
MPLC G & D Pipelines or to Colonial and retain such sample for at least thirty
(30) days. Mobil shall have the right to be present at any test or inspection
conducted under this Section 8.4.
8.5 Quantity Determinations.
8.5.1 Pipeline Quantities. The quantity of Light Products delivered
by Valero to Mobil through the MPLC G & D Pipelines and the Colonial Pipeline
shall be determined by the meter tickets issued by the pipeline (either
Colonial Pipeline or MPLC G & D Pipelines, as applicable). Absent manifest
error, such pipeline tickets with respect to the volume measurement shall be
final and binding on the Parties.
8.5.2 Wharf Quantities. The quantity of Light Products delivered by
Valero to Mobil at the Wharf shall be determined at the load tank gauge,
provided it is static. If such tank is not static, then the measurement shall
be determined at the receiving tank gauge, provided it is static. If neither
tank is static then the measurement shall be made at the barge gauge at the
Refinery. All gauging shall be done by the independent inspector jointly
selected by the Parties. Absent manifest error such inspector's determination
shall be final and binding on the Parties.
8.5.3 LPT Quantities. The quantity of Light Products delivered by
Valero to Mobil at the LPT shall be determined by meter readings at the
custody meters, or the truck rack meters if no custody meter is available,
located at the LPT. Calculations from the meter readings for determining such
quantities shall conform to the procedures set out below:
8.5.4 Meters. Mobil agrees to maintain and calibrate all its meters
and associated equipment in accordance with the latest edition of API Manual
of Petroleum Measurement Standards Chapters 4,5,6,12. Custody meters shall be
calibrated at least monthly for pipeline meters and every 90 days for truck
rack meters. Mobil shall provide twenty-four (24) hours notice to Valero of
the date and time of such calibration tests. Valero shall be entitled to have
representatives present to witness such tests and to verify Mobil's
calibrations. Mobil shall retain the records of such calibrations for one year
and make such records available to Valero at their written request. Additional
calibrations may be requested by Valero at their expense. If any test shows
that the metering equipment is in error so that the total measurement error
does not exceed one quarter of one percent (0.25%), previous readings of such
equipment will be considered as correct and (a) in the case of truck rack
meters, such meters shall be properly adjusted immediately to zero error and
(b) in the case of pipeline meters, no adjustment shall occur unless the
cumulative error, from the time the meter was last taken out of service and
repaired, exceeds one half of one percent (0.50%) and in that event such meter
shall be taken out of service and repaired to correct for the error. If any
test shows that a truck rack meter is in error so that the total measurement
error exceeds one quarter of one percent (0.25%) such meter will be properly
adjusted at once to zero, or, if any test shows that the change in error from
the last calibration of any pipeline meter exceed one quarter of one percent
(0.25%) such pipeline meter shall be taken out of service at once and
repaired, and the previous readings from such equipment and the resulting
invoices will be corrected for any prior period of inaccuracy which is
definitely known or agreed upon. In case such period is not definitely known
or agreed upon, such correction will be for a period covering the last half of
the time elapsed since the date of the last equipment test, not exceeding, in
any case, fifteen (15) days.
8.5.5 Out of Service Meters. If for any reason any meter utilized
hereunder is out of service so that the quantity of Light Product delivered
through the meter cannot be ascertained, the quantity of Light Product so
delivered during the period the meter is out of service will be estimated and
agreed upon by Valero and Mobil upon the basis of the best available data
using, in order of preference, the following methods:
(a) By using static shore tank measurement.
(b) By using any measuring equipment which Mobil may have installed
if operating properly; or
(c) By using any check-measuring equipment of Valero, if installed
and operating properly; or
(d) By using any recognized independent oil expert as agreed by the
Parties. The decision of the expert shall be final, conclusive and binding on
the Parties.
8.6 Off-Spec Product. If Valero delivers Light Product pursuant to this
Agreement which does not meet the specifications applicable to such Light
Product hereunder (an "Off-Spec Product"), the following provisions apply:
8.6.1 Notification. Upon discovery by Mobil or Valero (including
notification by a common carrier) that an Off-Spec Product was delivered by
Valero, such discovery will be communicated to Mobil or Valero within one hour
of discovery and Valero shall determine whether Mobil should:
(i) return the Off-Spec Product for re-processing, or
(ii) sell or dispose of the Off-Spec Product on Valero's behalf.
8.6.2 Costs. For returning Off-Spec Product, in addition to the
damages that may be available pursuant to Section 9.2, Valero shall reimburse
Mobil for the costs for returning the Off- Spec Product from its terminals,
any government fines received as a result of the Off-Spec Product, and any
costs incurred in replacing the Off-Spec Product. Mobil shall provide to
Valero documentation for all such costs.
8.6.3 Credit. If so directed by Valero, Mobil shall sell the
Off-Spec Product on behalf of Valero at the best price that Mobil can obtain.
Mobil shall remit to Valero the proceeds, if any, from such sale or disposal,
after deducting damages and the costs of disposal. In addition, Valero shall
issue a credit to Mobil for the amount which Mobil had paid for the Off-Spec
Product. Mobil shall provide to Valero documentation of the sale price and of
Mobil's damages and costs.
8.6.4 Additional Costs. In addition to the foregoing and the rights
of Mobil under Section 9.2, Valero shall reimburse Mobil for any costs
incurred to recall and recover any Off-Spec Product from its terminals,
including costs incurred cleaning any tanks at its terminals contaminated with
Off-Spec Product and any other equipment at its terminals contaminated with
Off-Spec Product and the cost of replacing any product at its terminals
contaminated by the Off-Spec Product. Mobil shall provide to Valero
documentation for all such costs.
8.6.5 Mis-Deliveries. If Valero delivers a specific Light Product
that meets the specifications for a Standard Product or the specifications
agreed to in advance by the Parties for a Non-Standard Product, but the
applicable Monthly Forecast requires a different type of Light Product with a
different specification, it is a "Mis-Delivery." In the event of a
Mis-Delivery, Mobil shall be entitled to the costs and credit as calculated in
Sections 8.6.2 and 8.6.3 and 8.6.4.
8.7 Waiver for Off-Spec Product. Notwithstanding the foregoing, Section 8.6
shall not be construed to limit or prevent Mobil from waiving the
specifications or from reaching a price adjustment with Valero for taking
delivery of any Off-Spec Product, providing that such waiver or price
adjustment is in writing.
8.8 Off-Spec Inhauls. If an Inhaul does not meet the specifications
applicable to such Inhaul (an "Off-Spec Inhaul"), the following provisions
apply:
8.8.1 Notification. Upon discovery by Mobil or Valero (including
notification by a common carrier) of an Off-Spec Inhaul, such discovery will
be communicated to Mobil or Valero within one hour of discovery and Mobil
shall determine if Valero should:
(i) deliver the Off-Spec Inhaul to Mobil;
(ii) reprocess the Off-Spec Inhaul.
8.8.2 Costs. For returning any Off-Spec Inhaul, Mobil shall
reimburse Valero for the costs, if any, to return the Off-Spec Inhaul, any
government fines received as a result of the Off- Spec Inhaul, any costs
incurred cleaning any tanks and any other equipment contaminated with the
Off-Spec Inhaul, and the cost of replacing any product contaminated by the
Off-Spec Inhaul. Valero shall provide to Mobil documentation for all such
costs.
8.8.3 Credit. If the Off-Spec Inhaul is reprocessed into alternate
products (i) the reprocessed products shall be delivered to Mobil and Mobil
shall pay to Valero its documented costs of reprocessing, or (ii) at Valero's
option, Valero and Mobil shall agree to the price for such Off-Spec Inhaul,
based upon its use, and Valero shall pay to Mobil such price.
8.9 Waiver for Off-Spec Inhauls. Notwithstanding anything to the contrary,
Section 8.8 shall not be construed to limit or prevent Valero from waiving the
specifications and taking delivery of an Off-Spec Inhaul provided that such
waiver is in writing.
ARTICLE IX
TRANSFER OF TITLE, RISK OF LOSS AND INCORRECT DELIVERY
9.1 Transfer of Title. Title and risk of loss for the Light Product shall
transfer as follows:
(i) for pipeline deliveries, title and risk of loss shall pass from
Valero to Mobil as the Light Product crosses the custody transfer meter of the
applicable common carrier pipeline at the Refinery, and
(ii) for LPT truck deliveries, title and risk of loss shall pass from
Valero to Mobil as the Light Product passes the inlet flange of the truck
loading meter, and
(iii) for Wharf deliveries, title and risk of loss shall pass from
Valero to Mobil as the Light Product passes the inlet flange of Mobil's
designated ship, barge or other marine vessel.
(iv) for LPT deliveries, title and risk of loss shall pass from Valero to
Mobil as the Light Product passes the custody transfer meter located at the
LPT.
9.2 Under-Deliveries. If, during a Ten Day Period, Valero delivers, or has
available for delivery, less than ninety percent (90%) of the volume of any
individual Light Product required to be delivered during such Ten Day Period
including Inhauls (to the extent the Inhaul is fully available for Valero to
take delivery), it is an "Under-Delivery." The amount of the Under-Delivery
shall be equal to the difference between one hundred percent (100%) of the
volume specified for lifting in such Ten Day Period and the volume actually
delivered during such Ten Day Period. In the event of an Under-Delivery:
(i) if the Under-Delivery is due to unscheduled outages or other
unintentional and unexpected operational problems, Valero shall compensate and
pay to Mobil, Mobil's documented actual costs associated with not receiving
such Light Product in a timely manner including all costs associated with
replacing such Light Product up to a maximum of one (1) cent per Gallon for
each Gallon of the Under-Delivery;
(ii) if the Under-Delivery is because (a) the Light Product is not
produced for any reason other than an unscheduled outage or other
unintentional and unexpected operational problem, or (b) the Light Product is
sold to a third party and the sale of product to a third party results in
Valero being unable to satisfy its obligations to Mobil during such Ten Day
Period as provided in the Ten Day Period provision of Section 3.4; Valero, in
each case, shall compensate and pay to Mobil $.03 per Gallon for each Gallon
of the Under-Delivery, provided, however, Valero shall not be obligated to pay
the $.03 Under-Delivery penalty if there is an unscheduled outage or other
unintentional and unexpected operational problem following a sale as provided
in (b) above; and
(iii) in addition to 9.2 (i) and (ii) above, Valero shall provide
Mobil, at Mobil's option, immediate access to the Refinery to Inhaul the
volume of the Under-Delivery.
9.3 Waiver of Under-Delivery. Nothing in Section 9.2 shall be construed to
limit or prevent Mobil from waiving its rights relating to an Under-Delivery,
provided that the waiver shall be in writing.
9.4 Jet Fuel Underproduction. To the extent Valero delivers to Mobil, in any
given month, less than the Jet Fuel Estimate for that Year and Mobil must
purchase jet fuel from third parties to meet its obligations to its customers,
Valero shall pay to Mobil the difference between the price Mobil paid for the
jet fuel and the price Mobil would have paid under this Agreement for the jet
fuel plus any additional transportation costs.
ARTICLE X
FORCE MAJEURE
10.1 Excuse from Obligations; Definition. No failure, delay or omission by a
Party to fulfill any of its obligations under this Agreement (other than the
obligation to make payments when due) shall give rise to any claim against
such Party or be deemed to be a breach of this Agreement if and to the extent
that such failure, delay or omission arises from any of the following (each an
"Event of Force Majeure"): strikes, boycotts, lockouts and other labor or
employment difficulties, earthquakes, tremors, landslides, avalanches, floods,
hurricanes, tornadoes, storms, other natural phenomena or calamities,
epidemics, quarantines, wars (declared or undeclared), hostilities, guerrilla
activities, terrorist acts, riots, insurrections, civil disturbances, acts of
sabotage, blockades, embargoes, third party power outages or acts of state or
any governmental body or any order, judgment, ruling, decision or other act or
failure to act, of any governmental, civil or military authority which
directly affects such Party's ability to perform its obligations hereunder.
10.2 Notice. If a Party cannot perform any obligation under this Agreement
because of an Event of Force Majeure, such Party shall notify the other Party
in writing as promptly as possible giving the reason for non-performance, the
particulars of the Event of Force Majeure and the obligation affected thereby.
Any obligation of a Party shall be temporarily suspended during the period in
which such Party is unable to perform by reason of an Event of Force Majeure,
but only to the extent of such inability to perform. The obligations of the
Parties to perform as provided by this Agreement through facilities not
affected by the Event of Force Majeure shall continue. The Party affected by
an Event of Force Majeure will notify the other Party as soon as such Event
has been removed and no longer prevents the performance by the affected Party
of its obligations, and the affected Party shall promptly thereafter resume
full performance of its obligations under this Agreement.
10.3 Duty To Mitigate. In the event that a Party is affected by an Event of
Force Majeure, it shall use reasonable efforts to mitigate the effects of such
Event of Force Majeure on the performance of its obligations hereunder. In the
case of Valero, its duty to mitigate shall be subject to Section 2.3 (and
Valero's options contained therein.). If an Event of Force Majeure continues
for more than sixty (60) days, the Parties shall meet to review the situation
and its implications for the Parties' obligations under this Agreement and to
discuss the appropriate course of action under the circumstances.
10.4 Sales Allocation. The Parties agree that if for any reason Valero is
unable to fulfill its obligations due to an Event of Force Majeure, Mobil
shall be given priority to all the Light Products available so that Mobil can
meet Mobil's Product Marketing Requirements.
10.5 No Make Up Volumes. Valero shall not be obligated to make up any
quantities of Light Product it does not deliver hereunder as a result of an
Event of Force Majeure. Mobil shall not be obligated to make up any quantities
of Light Product it does not receive hereunder as a result of an Event of
Force Majeure.
ARTICLE XI
CONFIDENTIALITY
11.1 No Disclosures Each Party shall treat the contents of this Agreement and
the transactions contemplated hereby as proprietary and confidential and shall
make no disclosures with respect to such matters without the express written
consent of the other Party. A Party may make disclosures to the extent they
are required by applicable law provided the disclosing Party provides the non
disclosing Party with as much notice as possible, and shall take all
reasonable steps to preserve confidentiality as permitted by law. A Party may
also make disclosures to its Affiliates or its professional representatives or
consultants if such Affiliate, professional representative or consultant, as
the case may be, agrees in writing to treat the disclosed information as
proprietary and confidential.
ARTICLE XII
RESOLUTION OF DISPUTES
12.1 Arbitration. Except as provided in Sections 12.2 and 12.3, any
controversy, dispute or claim arising out of, in connection with, or in
relation to the interpretation, performance, nonperformance, validity or
breach of this Agreement, including any claim based in contract, tort, statute
or constitution, shall be settled exclusively and finally by arbitration. The
arbitration shall be conducted and finally settled by three (3) arbitrators in
New York, NY, in accordance with the then- existing Rules for Complex
Arbitration of the American Arbitration Association (the "Rules"), and any
Judgment rendered by the arbitrators shall be final, binding and unappealable,
and Judgment may be entered by any state or Federal court having jurisdiction
thereof. The pre-trial discovery procedures of the then-existing Federal
Rules of Civil Procedure and the then-existing Rules 46 and 47 of the Civil
Rules for the United States District Court for the Southern District of New
York shall apply to any arbitration. Mobil and Valero shall each select one
such arbitrator, and the two arbitrators so selected shall select the third
arbitrator. Each arbitrator shall sign an oath agreeing to be bound by the
Code of Ethics for Arbitrators in Commercial Disputes promulgated by the AAA
for Neutral Arbitrators. It is the intent of the Parties to avoid the
appearance of impropriety due to bias or partiality on the part of any
arbitrator. Prior to each arbitrator's formal appointment, such arbitrator
shall disclose to the Parties and the other arbitrators any financial,
fiduciary, kinship or other relationship between such arbitrator and any Party
or its counsel, or between such arbitrator and any individual or entity with
any financial, fiduciary, kinship or other relationship with any Party. For
the purpose of this Agreement, "appearance of impropriety" shall be defined as
such relationship or behavior as would cause a reasonable person to believe
that bias or partiality on the part of the arbitrator may exist in favor of
any Party. Any award or portion thereof, whether preliminary or final, shall
be in a written opinion containing findings of fact and conclusions of law
signed by each arbitrator. The arbitrators shall hear and determine any
preliminary issue of law asserted by a Party to be dispositive of any claim or
for summary judgment, pursuant to such terms and procedures as the arbitrators
deem appropriate. It is the intent of the Parties that, barring extraordinary
circumstances, any arbitration hearing shall be concluded within two months of
the date the statement of claim is received by the American Arbitration
Association. The arbitrators shall use their best efforts to issue the final
award or awards within a period of 30 days after closure of the proceedings.
Failure to do so shall not be a basis for challenging the award. The Parties
and the arbitrators shall treat all aspects of the arbitration proceedings,
including discovery, testimony, and other evidence, briefs and the award, as
strictly confidential. The Parties intend that the provisions to arbitrate
set forth in this Agreement be valid, enforceable and irrevocable. In their
award the arbitrators shall allocate, in their discretion, among the Parties
to the arbitration all costs of the arbitration, including the fees and
expenses of the arbitrators and reasonable attorneys' fees, costs and expert
witness expense of the Parties. The undersigned agree to comply with any
award made in any such arbitration proceedings that has become final in
accordance with the Rules and agree to the entry of a Judgment in any
jurisdiction upon any award rendered in such proceedings becoming final under
the Rules. The arbitrators shall be entitled, if appropriate, to award any
remedy in such proceedings, including monetary damages, specific performance
and all other forms of legal and equitable relief.
12.2 Equitable Relief. Notwithstanding any other provision of this
Agreement, it is understood and agreed that in the case of any breach by
Valero of Section 2.3 the arbitration procedures may not be adequate to
provide injunctive relief which is required on an accelerated or expedited
basis to prevent Mobil from suffering harm. Accordingly, Valero agrees that
in such instances Mobil, shall be entitled to preliminary equitable relief.
Further, if Mobil has a claim for specific performance or other injunctive
relief, and pursuant to Section 12.1 the arbitrators are not impaneled for
thirty (30) days, Mobil shall be entitled to seek relief in the Supreme Court
of the State of New York, New York County, or the United States District Court
for the Southern District of New York. Each of the Parties hereto irrevocably
submits to the exclusive jurisdiction of (a) the Supreme Court of the State of
New York, New York Country, and (b) the United States District Court for the
Southern District of New York, for the purposes of any suit, action or other
proceeding arising out of a breach of Section 2.3 of this Agreement, or any
transaction contemplated thereby. Each of the Parties hereto agrees to
commence the action, suit or proceeding relating thereto either in the United
States District Court for the Southern District of New York or if such suit,
action or other proceeding may not be brought in such court for jurisdictional
reasons, in the Supreme Court of the State of New York, New York County. Each
of the Parties hereto further agrees that service of any process, summons,
notice or document by U.S. registered mail to such Party's respective address
set forth below shall be effective service of process for any action, suit or
proceeding in New York with respect to any matters to which it has submitted
to jurisdiction in this Agreement. Each of the Parties hereto irrevocably and
unconditionally waives any objection to the laying of venue of any action,
suit or proceeding arising out of Section 2.3, or the transactions
contemplated thereby in (i) the Supreme Court of the State of New York, New
York County, or (ii) the United States District Court for the Southern
District of New York, and hereby further irrevocably and unconditionally
waives and agrees not to plead or claim in any such court that any such
action, suit or proceeding brought in any such court has been brought in an
inconvenient forum.
12.3 Expert Proceedings. Notwithstanding the foregoing, any dispute arising
out of or concerning Articles IV, V, VIII and IX hereof and any dispute which
the Parties agree shall be settled by an expert, shall be exclusively and
finally settled by a single expert unanimously selected by the Parties or,
failing such a selection, appointed by the President of the International
Court of Arbitration of the International Chamber of Commerce in accordance
with the Rules for Expertise of the International Chamber of Commerce. Mobil
and Valero shall provide the single expert with a proposal with terms
addressing and resolving all unresolved issues (a "Proposal"). The single
expert shall then choose one of the Proposals, and the new terms contained
therein shall become final and binding upon the Parties.
12.3.1 Qualifications. The expert shall be a person suited by reasons
of his qualifications, experience and expertise for the determination in
question. Such expert shall, unless otherwise agreed by the Parties, be
appointed and act as an expert and not as an arbitrator and the provisions
relating to arbitration hereunder shall not apply to the Proceedings and
determination.
12.3.2 Notice. The reference to an expert shall be initiated by one
Party giving written notice to the other Party (the date on which such notice
is given being hereinafter called the "Date of Reference") that it requires
the matter in dispute to be referred to an expert in accordance with the
provisions of this Section 12.3.
12.3.3 Time Frames. If the Parties can agree upon the expert within
ten (10) days of the Date of Reference, the matter in dispute shall thereupon
be referred to such expert. If the Parties cannot agree upon the expert within
the said period of ten (10) days, they will forthwith and in any event within
fifteen (15) days of the Date of Reference ask the then President of the
International Court of Arbitration of the International Chamber of Commerce to
appoint an expert and the matter in dispute shall thereupon be referred to the
expert appointed by the said President as soon thereafter as practicable in
the circumstances. The expert shall, unless otherwise agreed by the Parties,
be required to make a determination and report in writing to the Parties
within a period of thirty (30) days after its acceptance of the appointment,
giving the reasons for its determination.
12.3.4 Expert's Determination. The expert's determination shall be
final and binding on the Parties and not subject to appeal, to arbitration or
court proceedings except in cases of fraud or manifest mistake of fact. The
expert may make such determination as shall be fair and reasonable and in
accordance with this Agreement, and may award reasonable and incurred legal
costs and other costs to any Party.
12.3.5 Continuance of Agreement. Notwithstanding the fact that any
matter in dispute between the Parties is to be referred, or has already been
referred, to an expert, the Parties shall continue to observe and perform
their respective obligations and duties hereunder as if no such dispute has
arisen.
12.3.6 Confidentiality. The Parties and the expert shall treat all
aspects of the expert proceedings as strictly confidential.
ARTICLE XIII
MISCELLANEOUS
13.1 Hazardous Warning Responsibilities. Valero shall provide Mobil with a
Material Safety Data Sheet for any Light Product delivered hereunder. Each
Party acknowledges that it is aware of hazards or risks in handling or using
such Light Products. Valero and Mobil shall maintain compliance with all
safety and health related governmental requirements concerning such Light
Product and shall take steps as are reasonable and practicable to inform their
employees, agents, contractors and customers of any hazards or risks
associated with such Light Product, including but not limited to,
dissemination of pertinent information contained in the Material Safety Data
Sheet, as appropriate.
13.2 Assignment. This Agreement may not be assigned by any Party without the
prior written consent of the other Party, except that Mobil may assign this
Agreement, in whole or in part, to a wholly owned Affiliate without the
consent of Valero. Valero may assign this Agreement to an Affiliate provided
it provides to Mobil a parent company guarantee.
13.3 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS
MADE AND TO BE PERFORMED ENTIRELY WITHIN NEW YORK, WITHOUT REGARD TO THE
CONFLICTS OF LAW PRINCIPLES OF NEW YORK.
13.4 Waiver and Amendment. No waiver shall be deemed to have been made by any
Party of any of its rights under this Agreement unless the waiver is in
writing and is signed by the Party against whom it is sought to be enforced.
Any such waiver shall constitute a waiver only with respect to the specific
matter described in such writing and shall in no way impair the rights of the
Party granting such waiver in any other respect or at any other time. To be
binding, any amendment of this Agreement must be effected by an instrument in
writing signed by the Parties.
13.5 Claims. Any quantity or quality claims by a Party with respect to a
delivery hereunder shall be communicated in writing (together with all
necessary supporting documentation) promptly after the basis for such claim is
discovered, but in no event later than ninety (90) days from the date of such
delivery. Any notice of claim or documentation received later than ninety
(90) days from the date of such delivery shall be considered time barred and
the claim shall be deemed waived and any related liability extinguished.
13.6 No Consequential Damages. Notwithstanding anything to the contrary
contained in this Agreement, in no event shall any Party be liable to the
other Party for any incidental, indirect, special, punitive or consequential
damages that such other Party may suffer.
13.7 Headings. The headings contained in this Agreement are for convenience
of reference only and shall not in any way affect the meaning or
interpretation of this Agreement.
13.8 Notices. All notices, demands, instructions, waivers, consents or other
communications that are required or may be given under this Agreement shall be
in writing and shall be deemed to have been duly given: (i) when received, if
personally delivered; (ii) when transmitted, if transmitted by telecopy or
other electronic or digital transmission method, subject to the sender's
facsimile machine receiving the correct answerback of the addressee and
confirmation of uninterrupted transmission by a transmission report or the
recipient confirming by telephone to the sender that the recipient has
received the facsimile message, provided, however, that written confirmation
thereof has been promptly sent by mail or hand delivered to the recipient
following such telecopy or other electronic transmission; and (iii) upon
receipt, if sent by certified or registered mail, return receipt requested or
if sent by a recognized overnight delivery service; provided, that a notice
given in accordance with this sentence but received on a non-working day or
after business hours in the place of receipt will be deemed to be given on the
next working day in that place. In each case notice shall be sent to the
following addresses:
(i) if to Valero, to:
Valero Marketing And Supply Company
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: V.P. Marketing
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
(ii) if to Mobil, to:
Mobil Oil Corporation
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Manager Supply Programs and Inventory Management
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
or to such other address as Mobil or Valero shall have specified by notice in
writing in the manner specified in this Section. For purposes of Articles III
and IV, any notices required pursuant to such Articles shall be sent, in the
case of Mobil, to the Paulsboro Scheduler, at the address above and at
facsimile number ▇▇▇-▇▇▇-▇▇▇▇, and in the case of Valero, to the Light
Products Coordinator at the Refinery and at facsimile number ▇▇▇-▇▇▇-▇▇▇▇ or
to such other address as Mobil or Valero shall have specified by notice in
writing.
13.9 Entire Agreement. This Agreement, including the Exhibits hereto, which
are hereby incorporated by reference, the Asset Sale and Purchase Agreement
and the Related Agreements as defined therein, set forth the entire
understanding and agreement between the Parties as to matters covered herein
and therein and supersedes any prior understanding, agreement or statement
(written or oral) of intent among the Parties with respect to the subject
matter hereof and thereof. In the event that there is a conflict between this
Agreement and the Exhibits hereto and any Related Agreements, the terms of
this Agreement shall prevail.
13.10 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which
together shall be deemed to be one and the same instrument.
13.11 Taxes. Any and all taxes, fees, or other charges imposed or
assessed by governmental or regulatory bodies, the taxable incident of which
is the transfer of title or the delivery of the Light Product hereunder, or
the receipt of payment therefore regardless of the character, method of
calculation, or measure of the levy or assessment, shall be paid by the Party
upon whom the tax, fee, or charge is imposed by law.
13.12 Compliance with Laws. During the performance of this Agreement,
each Party shall comply with all laws, rules, regulations, ordinances and
requirements of federal, state and local governmental or regulatory bodies
which are applicable to this Agreement.
13.13 Severability. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof. If any
provision of this Agreement, or the application thereof to any Party or any
circumstance, is invalid or unenforceable, (i) a suitable and equitable
provision shall be substituted therefor in order to carry out, so far as may
be valid and enforceable, the intent and purpose of such invalid or
unenforceable provision and (ii) the remainder of this Agreement and the
application of such provision to the other Party or circumstances shall not be
affected by such invalidity or unenforceability, nor shall such invalidity or
unenforceability affect the validity or enforceability of such provision, or
the application thereof, in any other jurisdiction.
13.14 Third-Party Rights. This Agreement is for the sole benefits of the
Parties hereto and their permitted assigns and nothing herein express or
implied shall give or be construed to give to any person, other than the
Parties hereto and such assigns, any legal or equitable rights hereunder.
IN WITNESS WHEREOF, the Parties have caused their duly authorized
representatives to execute this Agreement as of the day and year first above
written.
VALERO MARKETING AND SUPPLY MOBIL OIL CORPORATION
COMPANY
By: /s/ S. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ By: /s/ ▇.▇. ▇▇▇▇▇
Name: S. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Name: ▇.▇. ▇▇▇▇▇
Title: Senior Vice President Title: Attorney-in-Fact