SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (date of earliest event reported):
September 16, 1998
VALERO ENERGY CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 1-13175 74-1828067
(State of incorporation) Commission File (I.R.S. Employer
jurisdiction Number Identification No.)
of incorporation
7990 I.H. 10 West, San Antonio, Texas 78230
(Address of principal executive offices) (Zip Code)
(210) 370-2000
(Registrant's telephone number, including area code)
Not applicable
(Former name or address, if changed since last report)
Item 2. Acquisition or Disposition of Assets
On September 16, 1998, Valero Refining Company-New Jersey ("Valero-NJ"),
a wholly owned, indirect subsidiary of Valero Energy Corporation ("Valero"),
and Mobil Oil Corporation ("Mobil") entered into an asset sale and purchase
agreement for the acquisition by Valero-NJ of substantially all of the assets
and the assumption of certain liabilities of Mobil's 155,000 barrel-per-day
Paulsboro refinery in New Jersey ("Paulsboro Refinery"). As part of the
transaction, Valero Marketing and Supply Company, a wholly owned, indirect
subsidiary of Valero ("VMSC") and Mobil signed long-term agreements for VMSC to
supply Mobil with fuels and lubricant basestocks, and Mobil Sales and Supply
Corporation, an affiliate of Mobil, signed a long- term agreement with VMSC
to continue to supply the Paulsboro Refinery with high-quality crude
feedstocks. As a result of the acquisition of the Paulsboro Refinery, Valero
now owns and operates five refineries in the Gulf Coast and Northeast regions
of the United States.
Valero-NJ acquired the Paulsboro Refinery assets for $228 million, plus
approximately $102 million representing the estimated value of inventories and
certain other items acquired in the transaction. The final inventory valuation
amount is currently being determined. The purchase price was paid in cash from
borrowings under Valero's bank credit facilities.
The acquisition is being accounted for using the purchase method of
accounting. Therefore, the results of operations of the Paulsboro Refinery
will be included in Valero's consolidated financial statements beginning on
September 17, 1998.
The assets acquired from Mobil will continue to be used for the same
purposes they were used prior to the acquisition. The foregoing descriptions
of the acquisition and the long-term agreements are qualified in their
entirety by reference to the complete text of the acquisition agreement and
the long-term agreements which are filed as exhibits to this form.
Item 7. Financial Statements and Exhibits
(a) Financial statements of businesses acquired.
Pursuant to Rule 3.05(b) of Regulation S-X under the Securities Exchange
Act of 1933, as amended (the "Act"), no financial statements are required in
this filing.
(b) Pro forma financial information.
Pursuant to Rule 11.01(c) of Regulation S-X under the Act, no pro forma
financial information is required in this filing.
(c) Exhibits. Filed as part of this Form 8-K are the following
exhibits:
2.1 Asset Sale and Purchase Agreement dated as of September 16, 1998,
between Valero Refining Company-New Jersey and Mobil Oil Corporation.
2.2 Light Products Offtake Agreement dated as of September 16, 1998,
between Valero Marketing and Supply Company and Mobil Oil Corporation.
2.3 Lubricant Base Oils Offtake Agreement dated as of September 16, 1998,
between Valero Marketing and Supply Company and Mobil Oil Corporation.
2.4 Lubricant Crude Oil Supply Agreement dated as of September 16, 1998,
between Valero Marketing and Supply Company and Mobil Sales and Supply
Corporation.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this Current Report on Form 8-K to be signed on its
behalf by the undersigned hereunto duly authorized.
VALERO ENERGY CORPORATION
By: /s/ John D. Gibbons
John D. Gibbons
Chief Financial Officer,
Vice President Finance
and Treasurer
Dated: September 30, 1998
ASSET SALE AND PURCHASE AGREEMENT
between
MOBIL OIL CORPORATION
and
VALERO REFINING COMPANY - NEW JERSEY
dated September 16, 1998
TABLE OF CONTENTS
ARTICLE I DEFINITIONS AND RULES OF INTERPRETATION. . . . . . .1
RULES OF INTERPRETATION . . . . . . . . . . . . . 14
ARTICLE II SALE AND PURCHASE. . . . . . . . . . . . . . . . . 15
2.1 Sale and Purchase of the Assets; Excluded Assets and
Liabilities. . . . . . . . . . . . . . . . . . . . . . 15
2.1.1 The Assets. . . . . . . . . . . . . . . . . . 15
2.1.2 Working Capital Assets. . . . . . . . . . . . . . 15
2.1.3 Purchase Price and Working Capital. . . . . . . . 15
2.1.4 Additional Consideration. . . . . . . . . . . . . 15
2.1.5 Assumed Liabilities . . . . . . . . . . . . . . . 15
2.1.6 Excluded Assets . . . . . . . . . . . . . . . . . 16
2.1.7 Retained Liabilities. . . . . . . . . . . . . . . 17
2.1.8 Disclaimer. . . . . . . . . . . . . . . . . . . . 17
2.1.9 Year 2000 Disclaimer. . . . . . . . . . . . . . . 18
ARTICLE III THE CLOSING . . . . . . . . . . . . . . . . . . . 18
3.1 Closing. . . . . . . . . . . . . . . . . . . . . . . . . 18
3.1.1 Time and Place. . . . . . . . . . . . . . . . . . 18
3.1.2 Deliveries by Valero. . . . . . . . . . . . . . . 19
3.1.3 Deliveries by Mobil . . . . . . . . . . . . . . . 19
3.1.4 Agreements. . . . . . . . . . . . . . . . . . . . 20
3.1.5 Transfer Costs. . . . . . . . . . . . . . . . . . 20
3.1.6 Post-Closing Adjustments to Closing Adjustments.. 20
3.2 Working Capital Assets.. . . . . . . . . . . . . . . . . 22
3.2.1 Estimated Working Capital Amount. . . . . . . . . 22
3.2.2 Statement . . . . . . . . . . . . . . . . . . . . 22
3.2.3 Inventory . . . . . . . . . . . . . . . . . . . . 23
3.2.4 Final Statement . . . . . . . . . . . . . . . . . 23
3.2.5 Notice of Disagreement. . . . . . . . . . . . . . 23
3.2.6 Disputes as to Working Capital Assets . . . . . . 23
3.2.7 Independent Accounting Firm . . . . . . . . . . . 23
3.2.8 Payment . . . . . . . . . . . . . . . . . . . . . 24
3.2.9 Method of Calculation . . . . . . . . . . . . . . 24
3.2.10 Valuation . . . . . . . . . . . . . . . . . . . . 25
3.2.11 Access. . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE IV CONDITIONS TO CLOSING . . . . . . . . . . . . . . 25
4.1 Conditions to Obligations of Valero. . . . . . . . . . .25
4.2. Conditions to Obligations of Mobil. . . . . . . . . . . 25
4.3 Conditions to Obligations of Each Party . . . . . . . . 26
4.4 Waiver of Closing Conditions . . . . . . . . . . . . . .27
ARTICLE V REPRESENTATIONS AND WARRANTIES OF MOBIL . . . . . . 27
5.1. Due Organization, Good Standing and Power. . . . . . .27
5.2. Authorization and Validity of Agreements . . . . . . . .27
5.3. Absence of Conflicts. . . . . . . . . . . . . . . . . .28
5.4. Financial Statements . . . . . . . . . . . . . . . . . .28
5.5 Material Contracts. . . . . . . . . . . . . . . . . . .28
5.6. Proceedings. . . . . . . . . . . . . . . . . . . . . . .29
5.7 Compliance with Legal Requirements (Other than
Environmental Laws) and Permits. . . . . . . . . . . . 29
5.7.1 Legal Requirements. . . . . . . . . . . . . . . . 29
5.7.2 Permits . . . . . . . . . . . . . . . . . . . . . 29
5.8 Intellectual Property. . . . . . . . . . . . . . . . .29
5.9 Employee Matters . . . . . . . . . . . . . . . . . . . .29
5.10 Taxes. . . . . . . . . . . . . . . . . . . . . . . . .29
5.11 Assets Other Than Real Property Assets.. . . . . . . . .30
5.11.1 Title. . . . . . . . . . . . . . . . . . . . . . 30
5.11.2 Personal Property . . . . . . . . . . . . . . . . 30
5.11.3 Exclusions. . . . . . . . . . . . . . . . . . . . 30
5.11.4 Inventory . . . . . . . . . . . . . . . . . . . . 30
5.11.5 Capacity of the Process Units . . . . . . . . . . 30
5.12 Real Property Assets.. . . . . . . . . . . . . . . . . .30
5.13 Working Capital Assets . . . . . . . . . . . . . . . 31
5.14 Compliance with Environmental Laws . . . . . . . . . 31
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF VALERO . . . . . 32
6.1 Due Organization, Good Standing and Power. . . . . . . . 32
6.2 Authorization and Validity of Agreements . . . . . . . . 32
6.3 Absence of Conflicts . . . . . . . . . . . . . . . . . . 32
6.4 Benefit Plans. . . . . . . . . . . . . . . . . . . . . . 33
6.5 Authorizations and Consents. . . . . . . . . . . . . . . 33
6.6 Proceedings. . . . . . . . . . . . . . . . . . . . . . . 33
6.7 Reporting. . . . . . . . . . . . . . . . . . . . . . . . 33
ARTICLE VII COVENANTS AND AGREEMENTS. . . . . . . . . . . . . 33
7.1 Information. . . . . . . . . . . . . . . . . . . . . . . 33
7.2 Logos, Trade Names and Trademarks. . . . . . . . . . . . 33
7.3 Compliance with Environmental Laws . . . . . . . . . . . 33
7.4 Liability for Voluntary Remediation. . . . . . . . . . . 34
7.5 Remediation In Connection With Permitted Activities. . . 33
7.6 Remediation Notification Procedures. . . . . . . . . . . 33
7.7 Environmental Controls and Restrictions. . . . . . . . . 33
7.8 Financial Assurances . . . . . . . . . . . . . . . . . . 35
7.9 Consents . . . . . . . . . . . . . . . . . . . . . . . . 35
7.10 Cooperation. . . . . . . . . . . . . . . . . . . . . . .35
7.11 Tax Returns. . . . . . . . . . . . . . . . . . . . . . .35
7.12 Collection of Receivables. . . . . . . . . . . . . . . .35
7.13 Municipally Financed Property. . . . . . . . . . . . . .36
7.13.1 Valero's Intentions. . . . . . . . . . . . . . .36
7.13.2 Valero's Liabilities. . . . . . . . . . . . . . .36
7.13.3 Qualifying Purpose. . . . . . . . . . . . . . . .36
7.14 Employee Matters . . . . . . . . . . . . . . . . . . 37
7.15 Books, Records and Personnel . . . . . . . . . . . . 37
7.15.1 Mobil Access to Books, Records and Personnel. . .37
7.15.2 Valero Access to Books, Records and Personnel. .38
7.16 Further Documents. . . . . . . . . . . . . . . . . . 38
7.17 Shared Contracts . . . . . . . . . . . . . . . . . . 38
7.18. Payment of Certain Taxes and Expenses. . . . . . . 39
7.19 Deed Covenants . . . . . . . . . . . . . . . . . . . 40
7.20 Certain Expenditures.. . . . . . . . . . . . . . . . 41
7.21 Intellectual Property. . . . . . . . . . . . . . . . 41
7.22 Retained Areas . . . . . . . . . . . . . . . . . . . 41
7.22.1 Subdivision of Real Property Assets . . . . . . .41
7.22.2 Reconveyance by Valero. . . . . . . . . . . . . .41
7.22.3 Survey. . . . . . . . . . . . . . . . . . . . . .41
7.23 Tax Proceedings. . . . . . . . . . . . . . . . . . . 41
ARTICLE VIII LIABILITIES; INDEMNIFICATION. . . . . . . . . . 42
8.1 Indemnification by Mobil . . . . . . . . . . . . . . . . 42
8.2 Indemnification by Valero. . . . . . . . . . . . . . . . 42
8.3 Tax Indemnification. . . . . . . . . . . . . . . . . . . 43
8.4 Environmental Liabilities; Indemnification . . . . . . . 43
8.4.1 Mobil's Limited Environmental Obligations . . . . 43
8.4.2 Valero's Assumption of Environmental Liabilities. 43
8.4.3 Valero's Release of Mobil . . . . . . . . . . . . 44
8.4.4 Environmental Indemnification by Mobil. . . . . . 44
8.4.5 Environmental Indemnification by Valero . . . . . 53
8.5 Interpretation . . . . . . . . . . . . . . . . . . . . . 54
8.6 Claims Procedures. . . . . . . . . . . . . . . . . . . . 54
8.7 Survival of Representations and Warranties;
Limitation of Liability; Subrogation. . . . . . . . . .56
8.8 Joint Defense Privilege. . . . . . . . . . . . . . . . . 57
ARTICLE IX MISCELLANEOUS. . . . . . . . . . . . . . . . . . . 57
9.1. Bulk Transfer Laws . . . . . . . . . . . . . . . . . . .57
9.2. Notices. . . . . . . . . . . . . . . . . . . . . . . . .57
9.3 Entire Agreement . . . . . . . . . . . . . . . . . . . .58
9.4 Priority . . . . . . . . . . . . . . . . . . . . . . . .58
9.5. Third-Party Rights . . . . . . . . . . . . . . . . . . .58
9.6. Assignability. . . . . . . . . . . . . . . . . . . . . .59
9.7. Waiver and Amendment . . . . . . . . . . . . . . . . . .59
9.8. Counterparts . . . . . . . . . . . . . . . . . . . . . .59
9.9. Governing Law. . . . . . . . . . . . . . . . . . . . . .59
9.10 Consent to Jurisdiction; Waivers . . . . . . . . . . . .59
9.11 Waiver of Jury Trial . . . . . . . . . . . . . . . . . .60
9.12. Arbitration. . . . . . . . . . . . . . . . . . . . . . 60
9.13 Equitable Relief.. . . . . . . . . . . . . . . . . . . 61
9.14 Headings . . . . . . . . . . . . . . . . . . . . . . . 61
9.15 Schedules and Exhibits . . . . . . . . . . . . . . . . 61
9.16 Severability . . . . . . . . . . . . . . . . . . . . . 61
9.17 Brokers. . . . . . . . . . . . . . . . . . . . . . . . 61
9.18 Expert Procedure . . . . . . . . . . . . . . . . . . . 61
LIST OF SCHEDULES AND EXHIBITS
Schedules
1.2 Acquired Employees
1.6 Assigned Contracts
1.28 Employees
1.31 Environmental Documents
1.38 Facilities
1.44 Historical Financial Statements
1.55 Licensed Intellectual Property
1.79 Personal Property
1.90 Real Property
1.96 Retained Areas
1.98 Retained Employees
1.103 Servitudes
1.104 Shared Contracts
2.1.5 Assumed Proceedings
2.1.6 Excluded Personal Property
3.1.2 Closing Adjustments
3.2.1 Estimated Working Capital Amount
3.2.10 Working Capital Assets Valuation Methodology
5.5 Material Contracts
5.6 Proceedings
5.7 Compliance with Legal Requirements
5.7.2 Mobil Permits
5.10 Tax Proceedings and Audits
5.11 Liens On Assets Other than Real Property Assets; Capacity of
Each of the Major Process Units
5.12 Material Ground Leases
5.14 Environmental Matters
6.4 Employee Matters
6.5 Valero Authorizations
7.13 Municipally Financed Property
7.20 Certain Expenditures
9.4 Priority Schedule
Exhibits
A Earn-Out Calculation
B Valero-Legal Opinion (3.1.2(xii))
C Mobil-Legal Opinion (3.1.3(viii))
ASSET SALE AND PURCHASE AGREEMENT
ASSET SALE AND PURCHASE AGREEMENT (the "Agreement"), dated September 16, 1998,
between MOBIL OIL CORPORATION, a New York corporation ("Mobil") and VALERO
REFINING COMPANY-NEW JERSEY, a Delaware corporation ("Valero") (each, a
"Party" and, collectively, the "Parties").
RECITALS
WHEREAS, Valero desires to purchase, and Mobil desires to sell to Valero, the
Purchased Assets (as defined herein), and Valero is willing to purchase the
Purchased Assets and assume the Assumed Liabilities (as defined herein) and be
responsible for certain other liabilities and obligations related thereto, all
upon the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the aforesaid premises and of the mutual
covenants contained herein, the Parties hereby agree as follows:
ARTICLE I
DEFINITIONS AND RULES OF INTERPRETATION
The following terms shall have the following meanings for purposes of this
Agreement:
1.1 "Access Agreements" shall mean the three access agreements between and
among Mobil, MPLC, Mobil Technology Company and Valero dated as of the date of
this Agreement.
1.2 "Acquired Employees" shall mean those Employees who shall be employed
by Valero after the Closing Date as listed on Schedule 1.2.
1.3 "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 a Person.
1.4 "Apportioned Obligations" shall have the meaning given that term in
Section 7.18.1.
1.5 "Assets" shall have the meaning given to that term in Section 2.1.1.
1.6 "Assigned Contracts" shall mean those contracts assigned to, and assumed
by, Valero as set forth on Schedule 1.6.
1.7 "Assumed Liabilities" shall have the meaning given to that term in
Section 2.1.5.
1.8 "Authorizations" shall mean any and all permits, authorizations,
approvals, registrations, certificates, orders, waivers, variances or other
governmental approvals and licenses relating to compliance with any Legal
Requirements, including any Environmental Law, which are necessary to transfer
the Purchased Assets and to enable Valero to own, maintain, and operate the
Purchased Assets in the same manner as they were operated in accordance with
Mobil's Past Operating Standards.
1.9 "Bonds" shall have the meaning given that term in Section 7.13.
1.10 "Books and Records" shall mean all lists, files and documents related
solely to the ownership or the operation of the Purchased Assets.
1.11 "Business Day" shall mean any day other than a Saturday, Sunday, any day
which is a legal holiday or any day on which banking institutions are
permitted to close in the city of New York, and which is also a day on which
dealings in U.S. dollar deposits are carried out in the London Interbank
market.
1.12 "CERCLA" shall mean the Comprehensive Environmental Response Compensation
and Liability Act of 1980, as amended by the Superfund Amendments and
Reauthorization Act of 1986, 42 U.S.C. Sections 9601, et seq.
1.13 "Charges" shall mean the power, utility, permit, tariff, usage and other
similar charges incurred with respect to the operation of the Purchased
Assets.
1.14 "Chemical Substance" shall mean all regulated radioactive materials or
substances, hazardous or toxic substances, wastes or chemicals, petroleum
(including crude oil and any fraction thereof) or petroleum by-products,
asbestos or asbestos-containing materials, polychlorinated biphenyls and any
other chemicals, materials or substances which are designated, classified or
regulated as hazardous or toxic or as a pollutant or contaminant under any or
pursuant to any Environmental Law.
1.15 "Closing Date" shall mean September 16, 1998, and "Closing" shall mean
the consummation of the transactions contemplated herein on such day.
1.16 "Closing Inventory Volumes" shall mean the volumes of crude oil,
additives, blend stocks, feedstocks, petrochemicals, catalysts and chemicals
(including catalysts and chemicals in each process unit's storage facilities,
and platinum in the process units but otherwise excluding catalysts and
chemicals in the process units), by-products, unfinished or partially finished
refined products, and finished refined products including water bottoms,
bottom sediment, sludge, slop, line fill whether located on the Real Property
Assets, or in transit by pipeline to the Real Property Assets or by vessel to
the Real Property Assets or located elsewhere, whether in the possession of
Mobil or any other Person (other than the MLDW Catalyst which is the subject
of the MLDW Catalyst Lease Agreement), as of the Closing Date.
1.17 "Code" shall mean the Internal Revenue Code of 1986, as amended.
1.18 "Consent" shall mean any consent, waiver, approval, authorization,
exemption, registration, license or declaration of or by any Person or any
Governmental Entity, or expiration or termination of any applicable waiting
period under any Legal Requirements, required with respect to any Party in
connection with (i) the execution and delivery of this Agreement or any of the
Related Agreements or (ii) the consummation of any of the transactions
provided for hereby or thereby.
1.19 "Consent Order" shall mean, collectively, (i) the administrative consent
order for the Paulsboro Refinery entered into with the NJDEP Division of
Hazardous Waste Management having an effective date of May 10, 1991 as amended
in or about February, 1995, and (ii) the administrative consent orders
entered into with NJDEP Division of Water Resources dated September 10, 1979
and September 29, 1980.
1.20 "Contracts" shall mean any and all contracts and agreements, including
those that are franchises, warranties, understandings, arrangements, leases,
licenses, registrations, authorizations, mortgages, bonds, notes and other
instruments as the same have been amended or supplemented.
1.21 "Crude Oil Sales and Purchase Agreement" shall mean the crude oil supply
agreement between Valero Marketing and Supply Company and Mobil dated as of
the date of this Agreement.
1.22 "Crude Reference Price" or "CRP" shall mean the annual average of the
daily spot prices (such period beginning on the day immediately after the
Closing Date, and ending on the subsequent anniversary thereof, and yearly
thereafter) of West Texas Intermediate, delivered at Cushing, Oklahoma, based
on the first month mean price as quoted by Platt's, less the Saudi per barrel
discount for Arabian Light Crude cif U.S. Gulf Coast as published monthly in
the Petroleum Intelligence Weekly.
1.23 "Current Assets" shall mean, with respect to the Assets, (i) stores
inventory and spare parts, in each case whether located on the Real Property
Assets or located elsewhere and intended for use in the operation of the
Purchased Assets, whether in the possession of Mobil or any other Person,
(ii) certain prepaid expenses, and (iii) other current assets, in each case as
listed on Schedule 3.2.1.
1.24 "Current Liabilities" shall mean, (i) certain accrued Liabilities, and
(ii) Assumed SFAS 106 Liabilities relating to Acquired Employees, in each case
as listed on Schedule 3.2.1.
1.25 "Damages" shall mean any and all obligations, liabilities, damages,
fines, liens, penalties, deficiencies, losses, Judgments, settlements, costs
and expenses (including costs and expenses incurred in connection with
performing obligations, bonding and appellate costs and attorneys',
accountants', engineers', health, safety, environmental and other consultants'
and investigators' fees and disbursements or other payments in respect of such
payments), regardless of whether any of the foregoing are foreseeable or
unforeseeable, matured or unmatured.
1.26 "Directive" shall mean a verbal directive from a Governmental Entity that
is (i) confirmed by representatives of Mobil and Valero at a meeting (in
person or by teleconference) with such Governmental Entity or (ii) is
otherwise communicated to Valero by the Governmental Entity, subsequently
provided by Valero to Mobil in writing and confirmed by Mobil to its
reasonable satisfaction with such Governmental Entity.
1.27 "Effective Time" shall mean 11:59 PM on the Closing Date.
1.28 "Employees" shall mean those individuals who are employed in the
operation of the Purchased Assets, including certain shared services
employees, as listed on Schedule 1.28.
1.29 "Environmental Condition" shall mean the existence of Chemical Substances
in or on the soil, sediments, surface water or groundwater on, under or from,
or migrating from the Real Property Assets, to the extent the levels of any
such Chemical Substances exceed naturally occurring background levels in such
areas.
1.30 "Environmental Costs" shall mean any actual costs or expenses, including
reasonable and appropriate fees and disbursements for outside attorneys,
engineers, health, safety, environmental and other outside consultants and
investigators, except as otherwise provided in the definition of Minimum
Required Capital Expenditure, incurred pursuant to an Environmental Law as
such Environmental Law is in effect at the Closing but only to the extent such
costs or expenses are incurred as a result of any of the following: (1) Third
Party Environmental Claim; (2) Governmental Environmental Fine or Penalty; (3)
Required Remediation; or (4) Minimum Required Capital Expenditures; provided,
however, Environmental Costs shall not include costs or expenses for services
performed by Valero's or its Affiliates' employees. With respect to
Required Remediation, Environmental Costs shall include (i) those minimum
capital expenditures (as reasonably determined by Mobil and Valero or a
mutually selected Expert if the Parties cannot agree) necessary to implement
the Required Remediation and (ii) any fees paid to NJDEP for oversight
pursuant to Environmental Law and any written invoice by NJDEP therefor. For
purposes of this Agreement, Environmental Costs shall be incurred when the
relevant services are performed and the costs and expenses associated
therewith are paid. Notwithstanding the immediately preceding sentence,
Environmental Costs for a service or contract may be paid prior to performance
of the relevant service or contract only if such prepayment (i) is
commercially reasonable, (ii) not intended to circumvent the indemnification
provisions of Section 8.4.4, and (iii) is pre-approved by Mobil and Valero or
a mutually selected Expert if the Parties cannot agree. In the event that any
such prepayment is for a service or contract that by its terms extends beyond
the time periods set forth in Section 8.4.4(iii)(f)(2) and (g)(2), the amount
of the prepayment shall be apportioned on a prorata basis between Mobil and
Valero based upon the relative portion of time before and after the
indemnities set forth in 8.4.4(iii)(f)(2) and g(2) expire.
1.31 "Environmental Documents" shall mean those documents listed on Schedule
1.31.
1.32 "Environmental Law"or "Environmental Laws" shall mean all applicable
laws, regulations, enforceable requirements that have the effect of law,
orders, decrees, judgments, injunctions, permits, approvals, authorizations,
licenses, variances issued, promulgated, entered into by any Governmental
Entity, relating to the environment, preservation or reclamation of natural
resources, human health and safety, or to the management (including treatment,
storage, disposal or other handling), Release or threatened Release of
Chemical Substances, including CERCLA, the Federal Water Pollution Control
Act, as amended by the Clean Water Act of 1977, 33 U.S.C. Sections 1251 et
seq., the Clean Air Act of 1970, as amended, 42 U.S.C. Sections 7401 et seq.,
the Toxic Substances Control Act of 1976, 15 U.S.C. Sections 2601 et seq., the
Emergency Planning and Community Right-to- Know Act of 1986, 42 U.S.C.
Sections 11001 et seq., the Safe Drinking Water Act of 1974, as amended, 42
U.S.C. Sections 300(f) et seq., the Hazardous Materials Transportation Act, 49
U.S.C. Sections 1801 et seq., the Resource Conservation and Recovery Act, 42
U.S.C. Sections 6901 et seq., the Endangered Species Act, 16 U.S.C. Sections
1531, et seq., the Marine Mammal Protection Act, 16 U.S.C. Sections 1361 et
seq., the Occupational Safety and Health Act of 1970, 29 U.S.C. Sections 651
et seq., ISRA, the New Jersey Spill Compensation and Control Act, N.J.S.A.
58:10-23.11 et seq., the New Jersey Solid Waste Management Act, N.J.S.A.
13:1E, et seq., the New Jersey Water Pollution Control Act, N.J.S.A. 58:10A-1,
et seq., the New Jersey Air Pollution Control Act, N.J.S.A. 26:2C-1, et seq.,
the New Jersey Hazardous Discharge Site Remediation Act, N.J.S.A. 58:10B-1, et
seq., and any similar or implementing state or local law, and all amendments
thereto or regulations promulgated thereunder.
1.33 "Environmental Liabilities" shall mean any Damages or Liabilities
(whether incurred, existing or first occurring on, before or after the Closing
Date) arising under or pursuant to (i) any Environmental Law or otherwise
relating to the environment, preservation or reclamation of natural resources,
human health and safety, or (ii) an Environmental Condition, or the management
(including treatment, storage, disposal or other handling), Release or
threatened Release of Chemical Substances, including Damages or Liabilities
incurred in connection with (a) any non-compliance with Environmental Law, (b)
any Third Party Environmental Claim, (c) any Governmental Environmental Fine
or Penalty, or (d) any Required Remediation of an Environmental Condition.
Environmental Liabilities shall not include Liabilities for Off-Site Disposal
Activities performed by, or on behalf of, Mobil prior to the Closing Date or
Liabilities caused by or resulting from the operation of the facilities, after
the Closing Date, on the Excluded Assets and Retained Areas or from the
Excluded Assets located on the Assets by or on behalf of Mobil or its
Affiliates (other than by or on behalf of Valero and its Affiliates).
1.34 "Estimated Working Capital Amount" shall have the meaning given to that
term in Section 3.2.1.
1.35 "Excluded Assets" shall have the meaning given to that term in Section
2.1.6.
1.36 "Excluded Employees" shall mean those Employees who are neither Acquired
Employees nor Retained Employees.
1.37 "Expert" shall mean one or more nationally recognized firms mutually
selected by Mobil and Valero or selected by the procedures set forth in
Section 9.18.
1.38 "Facilities" shall mean the lube and fuel process units, tank farms,
utilities, wharves, office buildings and other structures and improvements
located on the Real Property Assets, which are owned or leased by Mobil as of
the Closing Date, and are more fully described on Schedule 1.38.
1.39 "Filing" shall mean any filing with any Person or Governmental Entity
required by any Party in connection with (i) the execution and delivery of
this Agreement or any of the Related Agreements or (ii) the consummation of
any of the transactions provided for hereby or thereby.
1.40 "Final Statement" shall have the meaning given to that term in Section
3.2.4.
1.41 "Fraudulent Misrepresentation" shall mean, in connection with the
representation set forth in Section 5.14, an intentional, knowing and wilful
misrepresentation of a material fact.
1.42 "Governmental Entity" shall mean any of the following having jurisdiction
over the Assets: federal, state or local government, or any court of competent
jurisdiction, or any administrative agency or commission, or any other
governmental authority or instrumentality, and "Governmental Entities"shall be
construed accordingly.
1.43 "Governmental Environmental Fine or Penalty" shall mean any monetary fine
or penalty levied by any Governmental Entity for noncompliance with an
Environmental Law.
1.44 "Historical Financial Statements" shall mean the financial statements
listed on Schedule 1.44.
1.45 "Indemnified Party" and "Indemnifying Party" shall have the meanings
given to those terms in Section 8.6.
1.46 "Industrial Site Recovery Act" or "ISRA" shall mean N.J.S.A. 13:1K-6
et. seq., together with its implementing regulations.
1.47 "Intellectual Property" shall mean any and all patents, patent
applications, trade secrets, trade names, know-how, technology, invention
disclosures, registered copyrights, registered service marks or trademarks,
any applications to register any copyrights, service marks, or trademarks, any
unregistered copyrights, service marks, trade names or trademarks and any
computer software programs (including source code and object code).
1.48 "Intellectual Property Rights Agreements" shall mean the MLDW Catalyst
Lease Agreements, the Intellectual Property Rights License Agreement, the
Technical Support Services Agreement and the Mobil Engineering Practices
Technology Agreement between Mobil Technology Company and Valero of even date
herewith.
1.49 "Intellectual Property Rights License Agreement" shall mean the
intellectual property license agreement between Valero and Mobil dated as of
the date of this Agreement.
1.50 "Judgments" shall mean any and all judgments, orders, writs, directives,
rulings, decisions, injunctions, settlement agreements or awards of any
Governmental Entity or arbitrator.
1.51 "Known Environmental Conditions" shall mean Pre-Closing Environmental
Conditions that are identified in the Environmental Documents or could be
reasonably extrapolated therefrom.
1.52 "Legal Requirements" shall mean any and all applicable (i) federal, state
and local laws, ordinances, regulations, (ii) codes, standards, rules,
requirements and criteria issued under any federal, state or local laws,
ordinances or regulations and (iii) Judgments.
1.53 "Liabilities" shall mean any and all liabilities, claims, losses, causes
of action, responsibilities, or obligations, and the Damages arising therefrom
or relating thereto, whether known, unknown, absolute, contingent, accrued,
secured, unsecured, liquidated, unliquidated, choate, inchoate, or otherwise.
1.54 "LIBOR" shall mean, as of any date of determination, the three-month
London Interbank Offered Rate for U.S. 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 U.S. 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 U.S. dollars are transacted on
the London interbank market.
1.55 "Licensed Intellectual Property" shall mean the Intellectual Property
specified in Schedule 1.55, which Intellectual Property consists of (i)
Intellectual Property owned entirely by Mobil (or its Affiliates) and used in
the operation of the Assets at the Closing Date or (ii) Intellectual Property
owned in part or in its entirety by Persons other than Mobil (and its
Affiliates) and used by Mobil in the operation of the Assets at the Closing
Date pursuant to license agreements with such Persons, and which Intellectual
Property will be made available to Valero pursuant to the Intellectual
Property Rights Agreements.
1.56 "Lien" shall mean any mortgage, pledge, hypothecation, charge,
assignment, deposit arrangement, encumbrance, security interest, lien, and any
security or similar agreement of any kind or nature whatsoever.
1.57 "Light Products Offtake Agreement" shall mean the gasoline and
distillates offtake agreement between Valero Marketing and Supply Company and
Mobil dated as of the date of this Agreement.
1.58 "Light Products Terminal" or "LPT" shall have the meaning given that term
in Section 2.1.6.
1.59 "Lubricants Blending and Packaging Plant" or "LOBP" shall have the
meaning given that term in Section 2.1.6.
1.60 "Material Contract" shall mean any Contract associated with the Purchased
Assets (whether associated solely with the Purchased Assets or associated
partly with the Purchased Assets and partly with the other businesses of
Mobil) that is material to the operation of the Purchased Assets including
Contracts that involve payments to or from Mobil in excess of $100,000 or
which may not be terminated on sixty (60) days notice without payment, penalty
or premium.
1.61 "Minimum Remediation Cost" shall mean the minimum cost necessary to
implement the Minimum Remediation Method.
1.62 "Minimum Remediation Method" shall mean the minimum method of Remediation
allowable under, and which satisfies the requirements of, Environmental Laws
in effect at the time of such Remediation, as such may be modified on a
case-by-case basis by the appropriate Governmental Entity to achieve the least
stringent remediation standard or clean-up criteria for the type of property
affected consistent with its actual use at the Closing Date, which Remediation
method utilizes demonstrated and proven technology or methods, and would be
allowable by the applicable Governmental Entity. Minimum Remediation Method
shall not include any Remediation method that would materially and
unreasonably interfere with the operations of the Assets as they were operated
in accordance with Mobil's Past Operating Standards; provided, however, that
the following Remediation methods shall not be considered as materially and
unreasonably interfering with the operations of the Assets: passive
remediation, natural attenuation, and institutional controls, including
establishing a declaration of environmental restriction or deed notice and
groundwater classification exception areas for the entire site covered by the
Consent Order. Engineering controls are presumed not to materially and
unreasonably interfere with the operations of the Assets; provided, however,
Valero shall have the right to demonstrate to Mobil's reasonable satisfaction
that a particular engineering control, as proposed, would materially and
unreasonably interfere.
1.63 "Minimum Required Capital Expenditure" shall mean any capital expenditure
(including cost of services performed by outside engineers and consultants
which are capitalized, but excluding costs of services performed by Valero's
or its Affiliates' employees, operation and maintenance expenditures,
expenditures for ordinary course wear and tear, and capital expenditures for
Required Remediation) to the extent such expenditure: (i) is required by a
government order, a notice of violation or a written directive to Valero by or
from a Governmental Entity; (ii) would have been required to be made on or
before the Closing Date to bring Mobil into compliance at the Closing with an
Environmental Law as in effect on the Closing Date and requiring compliance on
or before the Closing Date; (iii) is necessary to operate the Facilities in
the same manner as they were operated under Mobil's Past Operating Standards;
and (iv) as mutually agreed to by the Parties, or by a mutually selected
Expert if the Parties cannot agree, does not exceed the minimum capital
expenditure necessary, utilizing the least stringent standards for the type of
equipment affected based upon the use of the Assets under Mobil's Past
Operating Standards, to comply with the applicable Environmental Law in effect
and requiring compliance at the Closing Date.
1.64 "MLDW Catalyst Lease Agreements" shall mean the MLDW Catalyst Lease
Agreements between Mobil and Valero dated as of the date of this Agreement.
1.65 "Mobil Apportioned Obligations" shall mean the Apportioned Obligations
apportioned to Mobil pursuant to Section 7.18.1.
1.66 "Mobil's Past Operating Standards" shall mean the operation of the
Purchased Assets by Mobil in the normal course of business prior to the
Closing, including its crude and product mix, its process configuration, its
process units operating capacity as set forth on Schedule 5.11 and taking into
account that the Purchased Assets were operated as part of Mobil's refinery
system.
1.67 "Mobil Technical Center" or "MTC" shall have the meaning given that term
in Section 2.1.6.
1.68 "MPLC" shall mean Mobil Pipe Line Company, an Affiliate of Mobil.
1.69 "Municipally Financed Property" shall have the meaning given that term
in Section 7.13.
1.70 "Net Working Capital" shall mean all Current Assets minus all Current
Liabilities, in each case as of the Closing Date.
1.71 "NJDEP" shall mean the New Jersey Department of Environmental Protection.
1.72 "Notice of Disagreement" shall have the meaning given that term in
Section 3.2.5.
1.73 "Off-Site Disposal Activities" shall mean any off-site transportation,
off-site storage, off-site disposal, or off-site treatment of any Chemical
Substance, and any Release from the foregoing, provided however, that the term
Off-Site Disposal Activities shall in no event include the discharge, Release,
emission, spill, leak or migration of Chemical Substances at, on, under or
from the Real Property Assets or the Facilities.
1.74 "Offtake Agreements" shall mean the Purchase and Sales Agreement for
Lubricant Base Oils and the Light Products Offtake Agreement.
1.75 "Permitted Activities" shall mean (i) any emergency response action of
Valero, to the extent such action is required by a reasonable and prudent
refinery operator, to respond to an emergency situation resulting from an act
of God or other sudden and unexpected emergency event which Valero could not
reasonably anticipate or prevent, which emergency situation represents an
immediate threat or imminent danger to the health or safety of employees, the
public or the environment, provided that such emergency situation or event in
no way whatsoever is caused by, relates to, arises out of, results from or is
in connection with any negligent actions or omissions by or on behalf of
Valero, its Affiliates, or their respective employees, agents, contractors,
licensees or invitees, (ii) any activity required of Valero to install or
reconfigure any equipment meeting the requirements of a Minimum Required
Capital Expenditure, in the event that such expenditure is triggered under
this Agreement, (iii) any action required of Valero to comply with Legal
Requirements, other than Environmental Laws, in effect and requiring
compliance prior to the Closing Date, provided that such Legal Requirements do
not arise out of any Voluntary Remediation or voluntary activity by or on
behalf of Valero, its Affiliates, or their respective employees, agents,
contractors, licensees or invitees, and provided such action is necessary to
operate the Assets in the same manner as they were operated under Mobil's Past
Operating Standards and/or (iv) any reporting of a solely Pre-Closing
Environmental Condition, made by Valero under the New Jersey Spill
Compensation and Control Act and the reporting regulations promulgated
thereunder provided, however, the report is required to be made at the time
the report is made, and the Pre-Closing Environmental Condition which is the
subject of the report is discovered by or on behalf of Valero only after
Closing and only as a result of (a) passive observation, (b) Required
Remediation using the Minimum Remediation Method, or (c) the installation or
reconfiguration or removal of equipment meeting the requirements of a Minimum
Required Capital Expenditure in the event that such expenditure is triggered
under this Agreement.
1.76 "Permitted Encumbrances" shall mean (i) all (a) title exceptions, defects
and other matters set forth in the title insurance commitment referenced in
Section 3.1.3 hereof, and (b) such other matters, whether or not of record,
affecting the Real Property Assets on the Closing Date which shall have arisen
out of, or by reason of, any acts of Valero or its representatives, agents,
contractors, advisors or consultants; (ii) zoning, building and all other
similar laws applicable to the ownership, use or development of, or the right
to maintain or operate such Real Property Assets; (iii) those encumbrances
shown on the survey of the Real Property Assets delivered by Mobil to Valero
at Closing; (iv) Liens for unpaid taxes, assessments, Charges, and any other
Governmental Entity or quasi-governmental charges, which are not yet
delinquent; (v) all leases, easements and Servitudes as disclosed on the
Schedules and in effect on the Closing Date and the rights of parties
thereunder; (vi) any other Liens, provided the title companies, at the
Closing, will insure, at no additional cost to Valero, against collections of
such Liens from the Real Property Assets; (vii) environmental Liens described
in the title commitment, disclosed to Valero by Mobil in writing prior to
Closing or contained in the deed delivered at Closing, (viii) such other
matters as do not interfere in any material respect with the ownership, use,
occupancy or operations of Valero upon the Real Property Assets as used in the
normal course on the Closing Date; and (ix) such other matters with respect to
which Valero has agreed to take pursuant to the terms of this Agreement.
1.77 "Permits" shall mean those permits, authorizations, approvals,
registrations, certificates, orders, waivers, variances or other approvals and
licenses, which are in the name of Mobil or a Mobil Affiliate and are related
solely to the Assets, issued by or required to be filed with any Governmental
Entity relating to compliance with any Legal Requirement or Environmental Law.
1.78 "Person" shall mean an individual or a corporation, partnership, trust,
limited liability company, unincorporated organization, joint stock company,
joint venture, association or other business entity.
1.79 "Personal Property" shall mean (i) the equipment, furnishings, machinery,
tools and other tangible personal property listed on Schedule 1.79 which is
located on the Real Property Assets; (ii) the equipment, furnishings,
machinery, tools and other tangible personal property listed on Schedule 1.79,
which is not located on the Real Property Assets; (iii) the motor vehicles,
trucks, trailers and other equipment listed on Schedule 1.79; (iv) the
vessels and related shore equipment listed on Schedule 1.79; and (v) computer
equipment and hardware listed on Schedule 1.79.
1.80 "Pipeline Operating Agreements" shall mean the Pipeline Connection
Agreement between MPLC and Valero of even date herewith, the Operating
Agreement between Mobil and Valero Natural Gas Pipeline Company of even date
herewith, and the Scheduling Services Agreement between Mobil and Valero of
even date herewith.
1.81 "Pre-Closing Environmental Conditions" shall mean Environmental
Conditions existing at the Closing Date.
1.82 "Prior Bonds" shall have the meaning given that term in Section 7.13.
1.83 "Proceeding" shall mean any suit, action or legal, administrative or
arbitration proceeding (including any citation, complaint, consent order,
compliance schedule or other similar enforcement order) or any governmental
investigation, and "Proceedings" shall be construed accordingly.
1.84 "Product Reference Price" or "PRP" shall mean the sum of the annual
averages of the daily posted prices (such period beginning on the day
immediately after the Closing Date, and ending on the subsequent anniversary
thereof, and yearly thereafter) of (a) 55% of the Platt's New York Barge Spot
mean price per gallon of Conventional Unleaded Regular Gasoline (87 octane)
multiplied by 42 gallons/barrel; and (b) 45% of the Platt's New York Barge
Spot mean price per gallon of No. 2 Oil (High Sulfur) multiplied by 42
gallons/barrel.
1.85 "Property Taxes" shall mean any and all ad valorem taxes, real property
taxes, personal property taxes, and similar obligations.
1.86 "Purchase and Sales Agreement for Lubricant Base Oils" shall mean the
purchase and sales agreement for lubricant base oils between Valero Marketing
and Supply Company and Mobil dated as of the date of this Agreement.
1.87 "Purchased Assets" shall mean the Assets and the Working Capital Assets.
1.88 "Qualifying Purpose" shall have the meaning given that term in Section
7.13.
1.89 "Rail Car Services Agreement" shall mean the rail car services agreement
between Mobil and Valero dated as of the date of this Agreement.
1.90 "Real Property Assets" shall mean the owned real property as listed on
Schedule 1.90, and all rights, easements, privilege, improvements and
appurtenances belonging, pertaining or relating to such real property.
1.91 "Real Property Conveyances" shall mean (i) the bargain and sale deeds
conveying irrevocable fee simple title to the Real Property Assets including
the Retained Areas; and (ii) the assignment of Servitudes to all Real Property
Assets.
1.92 "Related Agreements" shall mean the Crude Oil Sales and Purchase
Agreement, the Pipeline Operating Agreements, the Offtake Agreements, the
Special Products Marketing Agreement, the Propane Marketing Agreement between
Mobil and Valero Marketing and Supply Company of even date herewith, the
System Sharing Agreement between Mobil Oil Telecom Ltd. and Valero of even
date herewith, the MTBE Swap Agreement between Mobil and Valero Marketing and
Supply Company of even date herewith, the Landfill Lease between Mobil and
Valero, the Butane Storage Agreement between Mobil and Valero Marketing and
Supply Company of even date herewith, the Emergency Response Services
Agreement among Mobil, MPLC, Mobil Technology Company and Valero, the Rail Car
Services Agreement, the Intellectual Property Rights Agreements, the Access
Agreements, the Utility Services Agreements, the Transition Services
Agreement, the Stock Sale and Purchase Agreement between Valero Refining and
Marketing Company, MPLCO and Mobil of even date herewith, and the Retained
Area Lease.
1.93 "Release" shall mean any release as defined in Section 101(22) of CERCLA.
1.94 "Remediation" shall mean any investigation, study, assessment, testing,
monitoring, containment, removal, disposal, closure, corrective action,
remediation, passive remediation, natural attenuation, bioremediation,
response, cleanup or abatement, whether on-site or off-site, of any
Environmental Condition, including institutional or engineering controls.
1.95 "Required Remediation" shall mean the Remediation required from time to
time by an applicable Governmental Entity pursuant to Environmental Laws in
effect at the time of such Remediation, including the Consent Order, the
Valero Consent Order and Technical Requirements for Site Remediation, N.J.A.C.
7:26E-1 et seq. (the application of which may be modified on a case- by-case
basis to be less stringent, or as same may be (a) amended or (b) superseded),
as such Environmental Laws may be applied to the Assets; provided however,
such Remediation is approved, either in writing or by Directive, by the
applicable Governmental Entity prior to implementation of such Remediation.
Required Remediation shall not include any Remediation that is Voluntary
Remediation or any Remediation that is required by a Governmental Entity as a
result of, in connection with, relating to, or arising out of any Voluntary
Remediation.
1.96 "Retained Areas" shall mean the real property set forth on Schedule 1.96,
provided however, that Mobil and Valero acknowledge that in the subdivision
process the boundaries of the Retained Areas may have to be adjusted to
satisfy Governmental Entities having jurisdiction over such subdivision and
each of Mobil and Valero agrees to consent to amendments in the boundaries of
the Retained Areas required by any Governmental Entity in connection with the
subdivision of the Retained Areas provided that any such amendment does not
have a material adverse impact on either Mobil or Valero. If such an
amendment shall be required and is consented to, the definition of Retained
Areas herein and under the lease shall automatically be amended to reflect
such change and the deed shall convey the Retained Areas as so amended to
Mobil or its designee.
1.97 "Retained Area Lease" shall mean the lease agreement relating to the
Retained Areas by and between Mobil and Valero as of the date hereof.
1.98 "Retained Employees" shall mean those Employees who shall remain in the
employment of Mobil after the Closing Date as listed on Schedule 1.98.
1.99 "Retained Liabilities" shall have the meaning given that term in Section
2.1.7.
1.100 "Returns" shall mean any and all returns, statements, forms and
reports for Taxes related to ownership or operation of the Assets.
1.101 "Scope" shall mean the scope, breadth and areas addressed, including the
financial and physical level of effort and the pace.
1.102 "Senior Supervisory Personnel" shall mean Dennis Sherman, Darryl Harris,
Neal Ryan, Vicki Holloman, Steve Doerr, and Steve Sobey.
1.103 "Servitudes" shall mean the servitudes and rights of way relating to the
Real Property Assets listed on Schedule 1.103.
1.104 "Shared Contracts" shall mean those Contracts specified in Schedule
1.104 to which Mobil is a party as of the Closing Date and which relate partly
to the Purchased Assets and partly to the other businesses of Mobil.
1.105 "Special Products Marketing Agreement" shall mean the special products
marketing agreement between Valero and Mobil dated as of the date of this
Agreement.
1.106 "Statement" shall have the meaning given that term in Section 3.2.2.
1.107 "Tax" or "Taxes" shall mean all taxes and similar governmental charges,
imposts, levies, duties, fees and assessments or other like charges, however
denominated, including any interest, penalties or additions to such tax that
may become payable in respect thereof, imposed by any Governmental Entity or
any agency or political subdivision of any such Governmental Entity, which
taxes shall include all income taxes (including United States federal income
taxes and state and local income taxes), payroll and employee withholding
taxes, unemployment insurance, social security, sales and use taxes, excise
taxes, estimated taxes, franchise taxes, gross receipt taxes, occupation
taxes, real and personal property taxes, customs duties, value added taxes,
stamp taxes, transfer taxes, withholding taxes, and other obligations of the
same or of a similar nature, whether arising before, on or after the Closing
Date.
1.108 "Technical Support Services Agreement" shall mean the technical support
services agreement between Valero and Mobil Technology Company dated as of the
date of this Agreement.
1.109 "Third Party" shall mean:
(a) any Person other than:
(i) any Party;
(ii) any Affiliate;
(iii) any employee of a Party to the extent covered by such
Party's workers' compensation with respect to such matter;
(iv) any agent, successor, assign, transferee, director or
officer of an Indemnified Party; and
(b) any Governmental Entity acting solely in the role as private property
owner and not to any extent in its role as sovereign, trustee, or protector of
the environment or natural resources.
1.110 "Third Party Environmental Claim" shall mean a written claim by any
Third Party alleging personal injury or property damage (including any Damages
for Remediation undertaken by a Third Party at its property) resulting from
exposure to, or off-site migration of, a Chemical Substance and shall not
include claims for Environmental Costs incurred by or on behalf of or at the
request of Valero for (1) Required Remediation (2) Governmental Environmental
Fines or Penalties, (3) claims alleging damages to natural resources which are
addressed exclusively in Schedule 5.14 or (4) Minimum Required Capital
Expenditures.
1.111 "Transfer Costs" shall have the meaning given to that term in Section
3.1.5.
1.112 "Transition Services Agreement" shall mean the transition services
agreement between Valero and Mobil dated as of the date of this Agreement.
1.113 "Unknown Environmental Conditions" shall mean Pre-Closing Environmental
Conditions which are not Known Environmental Conditions.
1.114 "Utility Services Agreements" shall mean the three (3) Utility Services
Agreements between Mobil, MPLC and Mobil Technology Company and Valero dated
as of the date of this Agreement.
1.115 "Valero Apportioned Obligations" shall have the meaning given that term
in Section 7.18.1.
1.116 "Valero Consent Order" shall mean the Consent Order, as amended in
whatever form may be approved by NJDEP, which at a minimum: (i) names Valero
as an ordered party with respect to the obligations under the Consent Order,
including payment of any penalties and NJDEP oversight costs thereunder, and
(ii) provides for Valero to provide a remediation funding source in place of
Mobil's; unless Valero and Mobil are relieved by a Legal Requirement from such
obligations. It is the intent of Mobil and Valero that Valero shall be the
lead responsible party for the Valero Consent Order.
1.117 "Voluntary Remediation" shall mean any Remediation that is not Required
Remediation using the Minimum Remediation Method at the Minimum Remediation
Cost. Voluntary Remediation includes: (i) in connection with Remediation that
is ongoing pursuant to the Consent Order or the Valero Consent Order and as
performed by Valero, any significant expansion or acceleration, unless
required in writing or by Directive (provided, however, the Directive is
limited to undertaking specific Remediation tasks which do not first require
approval of a work plan) of, a Governmental Entity, of the Scope of Required
Remediation in comparison to the Scope of Remediation performed by Mobil prior
to the Closing Date pursuant to the Consent Order, (ii) any modifications,
expansions or acceleration of the Scope of the Minimum Remediation Method for
Required Remediation, (iii) any Remediation performed "at risk" or prior to
approval, either in writing or by a Directive of, NJDEP or other Governmental
Entity, (iv) any Remediation resulting from, in connection with, relating to
or arising out of any voluntary activities undertaken by, or arising out of
any omissions of, Valero, (v) any Remediation performed in connection with any
brownfields legislation that provides for expedited review or action upon
Remediation proposed for abandoned or underutilized properties that are being
remediated for redevelopment purposes, or (vi) any Remediation that is
required as a result of, in connection with, relating to or arising out of any
of the foregoing. Required Remediation resulting from Permitted Activities
shall not be considered Voluntary Remediation provided that such Required
Remediation is limited to the Minimum Remediation Method at the Minimum
Remediation Cost and otherwise does not meet the foregoing criteria.
1.118 "Warehouse Stock" shall have the meaning given that term in Section
3.2.
1.119 "Working Capital Assets" shall mean the Closing Inventory Volumes and
the Net Working Capital.
RULES OF INTERPRETATION
1. The singular includes the plural and the plural includes
the singular.
2. A reference to one gender includes the other gender.
3. Unless specifically stated otherwise, a reference to a Legal
Requirement includes any amendment or modification of such Legal Requirement,
and all regulations, rulings and other Legal Requirements promulgated under
such Legal Requirement as such Legal Requirement exists on the Closing Date.
4. "Knowledge", "known", "to the knowledge of" or "within the
knowledge of", with respect to Mobil, shall be construed as the
reasonable knowledge of any officer or Senior Supervisory Personnel and
with respect to Valero, shall be construed as the reasonable knowledge of
any officer of Valero.
5. The words "include," "includes" and "including" are not limiting.
6. A reference to an Article, Section, Exhibit, or Schedule is to
the Article, Section, Exhibit, or Schedule of this Agreement unless
otherwise expressly indicated.
7. References to any document, instrument or agreement shall include
all exhibits, schedules and other attachments thereto.
8. 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.
9. 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.
10. 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.
ARTICLE II
SALE AND PURCHASE
2.1 Sale and Purchase of the Assets; Excluded Assets and Liabilities.
2.1.1 The Assets. On the terms and subject to the conditions of this
Agreement, Mobil shall sell, transfer and deliver or cause to be sold,
transferred and delivered to Valero, and Valero shall purchase and receive
from Mobil, at the Closing, all of Mobil's right, title and interest in and to
the following, free and clear of all Liens other than Permitted Encumbrances,
which taken together shall be the "Assets":
(i) the Real Property Assets;
(ii) the Facilities;
(iii) the Personal Property;
(iv) the assigned Permits;
(v) the Assigned Contracts; and
(vi) the Books and Records.
2.1.2 Working Capital Assets. On the terms and subject to the
conditions of this Agreement, Mobil shall sell, transfer and deliver to Valero
and Valero shall purchase and receive from Mobil, at the Closing, all of
Mobil's right, title and interest in and to the Working Capital Assets free
and clear of all Liens other than Permitted Encumbrances.
2.1.3 Purchase Price and Working Capital. The transactions
contemplated herein shall be considered a sale of assets by Mobil to Valero
and not the sale of a business. The purchase price for the Assets shall be
$228,000,000 (US). In addition to the purchase price, Valero shall pay to
Mobil an amount equal to the value of the Working Capital Assets, as
determined in Section 3.2.
2.1.4 Additional Consideration. As additional consideration for the
sale of the Purchased Assets, Valero shall make additional annual payments to
Mobil in accordance with Exhibit A.
2.1.5 Assumed Liabilities. At the Closing, Valero shall assume and be
liable and responsible for the following Liabilities (the "Assumed
Liabilities"):
(i) all Liabilities arising after the Effective Time under the
Assigned Contracts, assigned non-environmental Permits and Servitudes;
(ii) Current Liabilities;
(iii) one-half of the Transfer Costs;
(iv) all Environmental Liabilities relating to, in connection
with or arising out of the Purchased Assets;
(v) all Liabilities relating to Assumed Proceedings listed on
Schedule 2.1.5;
(vi) all Liabilities on Schedule 6.4 assumed by Valero;
(vii) all Liabilities related to Taxes due after the Effective Time
as they relate to the period after the Effective Time, including
those Liabilities allocated to Valero in Section 7.18; and
(viii) all Liabilities specifically set forth and assumed by
Valero herein.
In addition, from and after the Closing, Valero shall be liable for
all Liabilities whatsoever, other than Retained Liabilities, that arise out of
or are related to the ownership, use, maintenance or operation of the
Purchased Assets after the Effective Time and to any event relating to the
Purchased Assets occurring after the Effective Time.
2.1.6 Excluded Assets. At the Closing, Mobil shall continue to own all
assets, other than the Purchased Assets, presently owned by Mobil and its
Affiliates located on or near the Real Property Assets or connected with the
Real Property Assets, including the following assets:
(i) any and all assets owned by MPLC, including the pipelines and
pumping stations owned by MPLC located on the Real Property Assets as
shown on the survey to be delivered in accordance with this Agreement;
(ii) the real and personal property associated with the adjoining
Light Products Terminal ("LPT") at N. Delaware Street, Paulsboro, NJ 08066,
subject to the Retained Area Lease;
(iii) the real and personal property associated with the Mobil
Technical Center at 600 Billingsport Road, Paulsboro, NJ 08066 ("MTC"),
including the personal property set forth on Schedule 2.1.6;
(iv) the real and personal property associated with the Lubricants
Blending and Packaging Plant at 1001 Billingsport Road, Paulsboro, NJ 08066
(the
"LOBP"), including the personal property set forth on Schedule 2.1.6;
(v) accounts receivable;
(vi) certain prepaid expenses;
(vii) exchange differentials and exchange volumes associated
with the operation of the Facilities;
(viii) all cash and cash equivalents of Mobil;
(ix) all bank accounts of Mobil;
(x) all intercompany accounts due to or from Mobil or a Mobil
Affiliate;
(xi) except as assumed by Valero hereunder, all rights, claims and
benefits relating to or arising from any Proceeding, including any Tax
Proceeding, pending as of the Closing Date, with respect to the ownership and
operation of the Purchased Assets on or prior to the Closing;
(xii) all of Mobil's insurance policies, and all its rights under
such insurance policies, including insurance policies related to the ownership
and operation of the Purchased Assets;
(xiii) all rights, claims and benefits of Mobil to the extent relating
to any Excluded Asset or any Retained Liability;
(xiv) the books and records (other than the Books and Records);
(xv) the Intellectual Property of Mobil or of any Third Party;
(xvi) the railway cars located on the Real Property Assets;
(xvii) the equipment and goods not owned by Mobil located on the
Real Property Assets; and
(xviii) the MLDW catalyst which is subject to and used under the
MLDW Catalyst Lease Agreement
2.1.7 Retained Liabilities. Notwithstanding any other provision of this
Agreement, the Liabilities of Mobil which are retained by Mobil hereunder (the
"Retained Liabilities") are:
(i) all Liabilities related to Excluded Assets except as
specifically assumed by Valero in Article VIII;
(ii) all Liabilities relating to Proceedings which relate to the
ownership or operation of the Purchased Assets prior to the Effective Time,
except as specifically assumed by Valero herein;
(iii) all Liabilities retained by Mobil on Schedule 6.4.
(iv) all Liabilities related to Taxes due prior to the Closing Date as
they relate to the period before the Closing Date, including those Liabilities
allocated to Mobil in Section 7.18;
(v) all Liabilities under any Contract or Servitude related to the
Purchased Assets which are not assigned to Valero or under any Permits related
to the Purchased Assets which are not assigned, transferred or reissued to
Valero, except for Environmental Liabilities assumed by Valero pursuant to
Section 2.1.5(iv);
(vi) all Liabilities related to Off-Site Disposal Activities performed
by, or on behalf of, Mobil or its Affiliates.
(vii) accounts payable;
(viii) all Liabilities, other than the Assumed Liabilities, that arise
out of or are related to Mobil's ownership, use, maintenance or operation of
the Purchased Assets prior to Closing and to any event relating to the
Purchased Assets occurring prior to Closing.
2.1.8 Disclaimer. Valero acknowledges it has examined the Purchased
Assets and has made its own independent investigation, analysis, evaluation
and verification of the Purchased Assets. EXCEPT AS PROVIDED IN ARTICLE V AND
IN THE REAL PROPERTY CONVEYANCES AND BILLS OF SALE EXECUTED IN CONNECTION
HEREWITH, THE PURCHASED ASSETS, SOLD BY MOBIL AND ACCEPTED BY VALERO ARE SOLD
AND ACCEPTED "AS IS, WHERE IS," AND "WITH ALL FAULTS" WITH NO REPRESENTATIONS
OR WARRANTIES WHATSOEVER, EXPRESS OR IMPLIED, OF MERCHANTABILITY, FITNESS FOR
A PARTICULAR PURPOSE, CONDITION, DESIGN, OPERATION, CAPACITY, QUALITY, VALUE
OR OTHERWISE.
2.1.9 Year 2000 Disclaimer. The Parties are fully aware of and
acknowledge the challenge facing the global business community concerning the
transition to the Year 2000 and beyond. The Parties further acknowledge that
unless repaired, replaced or retired, some computer software, equipment and
systems may not be able to properly handle dates in the transition to year
2000 and beyond which may result in unpredictable and potentially unfavorable
business performance. MOBIL MAKES NO WARRANTY, REPRESENTATION OR PROMISE,
EXPRESS OR
IMPLIED, THAT THE PURCHASED ASSETS ARE "YEAR 2000 COMPLIANT". As used herein,
the term Year 2000 Compliant shall mean that the Purchased Assets, including
all computer software, hardware, firmware, business processes and business
systems, process controls and equipment, containing date-sensitive chips are
now or will in the future be able to correctly recognize, process, interface
with, exchange or receive date-related data for the dates within and between
the 20th and 21st centuries and all other centuries.
ARTICLE III
THE CLOSING
3.1 Closing.
3.1.1 Time and Place
(i) The Closing of the transactions contemplated hereby shall
be held at the offices of Mobil Oil Corporation, 3225 Gallows Road, Fairfax,
Virginia at 2:00 p.m. on the date first written above.
(ii) Notwithstanding anything to the contrary contained in
this Agreement, to the extent that the sale, assignment, transfer, conveyance
or delivery or attempted sale, assignment, transfer, conveyance or delivery to
Valero of any Asset is prohibited by any applicable Legal Requirement or would
require any Authorizations and such Authorizations, shall not have been
obtained prior to the Closing, this Agreement shall not constitute a sale,
assignment, transfer, conveyance or delivery or any attempted sale,
assignment, transfer, conveyance or delivery, thereof. Following the Closing,
the Parties shall use reasonable efforts, and cooperate with each other, to
obtain promptly such Authorizations, provided, however, that neither Mobil
nor Valero shall be required to pay any consideration therefor, other than
Filing or similar fees payable to any Governmental Entity. Pending such
Authorizations, the Parties shall cooperate with each other in any reasonable
and lawful arrangements designed to provide to Valero the benefits and
Liabilities of use of such Asset. Once such Authorization for the sale,
assignment, transfer, conveyance or delivery of an Asset not sold, assigned,
transferred, conveyed or delivered at the Closing is obtained, Mobil shall
promptly assign, transfer, convey and deliver, or cause to be assigned,
transferred, conveyed and delivered, such Asset to Valero for no additional
consideration.
(iii) Mobil and Valero acknowledge that the Real Property
Assets exclude the Retained Areas, but that the Retained Areas are part of tax
lots that, by and large, constitute Real Property Assets. Mobil and Valero
further acknowledge that the conveyance by Mobil of less than a full tax lot
is prohibited by applicable Legal Requirements and that a subdivision of the
Retained Areas from the Real Property Assets cannot be achieved before the
Closing. Therefore, Mobil and Valero agree that at Closing, that Mobil shall
convey the Retained Areas to Valero, and Valero shall enter into a lease of
the Retained Areas to Mobil.
3.1.2 Deliveries by Valero. At the Closing, Valero shall deliver,
or cause to be delivered, to Mobil the following:
(i) $228,000,000 in immediately available funds by wire transfer
to an account which is designated by Mobil not less than two Business Days
prior to the Closing, plus or minus the net Closing Adjustments as set forth
on Schedule 3.1.2;
(ii) a guarantee from Valero Energy Corporation guaranteeing
all obligations of Valero and its Affiliates hereunder, and in the Related
Agreements;
(iii) an amount equal to the Estimated Working Capital Amount
in immediately available funds by wire transfer to an account which is
designated by Mobil not less than two Business Days prior to Closing;
(iv) such instruments of assumption and other instruments or
documents, as may be necessary to effect Valero's assumption of the Assumed
Liabilities;
(v) certified copies of resolutions of the Boards of Directors of
Valero Energy Corporation, Valero and Valero Marketing and Supply Company,
authorizing this Agreement, the transactions contemplated herein and the
Related Agreements;
(vi) a certificate of incumbency for the officer of Valero executing
this Agreement and the Related Agreements;
(vii) a certificate of incumbency for the officer of Valero Marketing
and Supply Company executing the Related Agreements;
(viii) a certificate of incumbency for the officer of Valero Energy
Corporation executing the Valero Energy Corporation guarantee;
(ix) such other instruments and documents, as may be necessary to
effect the Closing;
(x) a duly executed copy of each of the Related Agreements;
(xi) the certificates and other documents to be delivered pursuant
to Section 4.2;
(xii) an opinion of counsel to Valero which shall be Exhibit B;
(xiii) one-half of the cost of the title insurance policy and survey; and
(xiv) except as set forth on Schedule 6.5, executed copies of the
documents necessary to transfer, assign or reissue material Permits, to the
extent transferable, assignable or capable of being reissued to Valero.
3.1.3 Deliveries by Mobil. At the Closing, Mobil shall deliver to
Valero the following:
(i) the Real Property Conveyances;
(ii) bills of sale transferring to Valero, as of the Effective Time,
the Personal Property;
(iii) executed copies of consents to assignment of the Assigned
Contracts;
(iv) executed copies of the documents necessary to transfer, assign
or reissue material Permits, to the extent transferrable, assignable or
capable of being reissued to Valero, as specifically identified on Schedule
5.7.2;
(v) such other instruments or documents, as may be necessary to effect
the Closing;
(vi) a duly executed copy of each of the Related Agreements;
(vii) certificate of incumbency for the officer of Mobil executing this
Agreement and the Related Agreements;
(viii) an opinion of counsel to Mobil which shall be Exhibit C;
(ix) the certificates and other documents to be delivered pursuant
to Section 4.1;
(x) a commitment of title insurance to ensure good and marketable
title, subject to Permitted Encumbrances, to all Real Property Assets,
one-half of the cost of which shall be reimbursed by Valero to Mobil;
(xi) a boundary and servitudes survey of the Real Property Assets
one-half of the cost of which shall be reimbursed by Valero to Mobil; and
(xii) the documents set forth on Schedule 5.14.
3.1.4 Agreements. The following agreements shall be entered
into by Valero and Mobil on the Closing Date:
(i) the Related Agreements;
(ii) the assignment and assumption of the transferrable Permits;
(iii) the assignment and assumption of the Assigned Contracts; and
(iv) the assignment and assumption of the Consent Order, in the
form of the Valero Consent Order, which assignment shall have been approved
by the NJDEP.
3.1.5 Transfer Costs. Sales taxes, transfer taxes and recording fees,
if any, imposed upon the transfer of the Purchased Assets and the Filings
associated therewith shall be the responsibility of, and shall be paid by,
Valero and Mobil in equal shares.
3.1.6 Post-Closing Adjustments to Closing Adjustments.
(i) On or before January 15, 1999, Mobil shall prepare and deliver
to Valero a statement prepared in the same or similar form as the Closing
Adjustment Schedule described in Section 3.1.2 hereof using revised
information (the "Post-Closing Adjustment Statement"). The Post-Closing
Adjustment Statement shall also state the difference, if any, between the
Closing Adjustment and the final amount determined in the Post-Closing
Adjustment Statement (the "Post-Closing Adjustment"). Valero shall cause the
Acquired Employees to assist Mobil as reasonably necessary in the preparation
of the Post-Closing Adjustment Statement.
(ii) During the twenty (20) day period following Valero's receipt of
the Post- Closing Adjustment Statement, Valero shall be permitted to review
the working papers of Mobil relating to, and shall be given reasonable access,
upon reasonable notice, to the employees of Mobil who have knowledge relevant
to, the Post-Closing Adjustment Statement. Subject to subparagraph (iii)
below, the Post-Closing Adjustment Statement shall become final and binding
upon the Parties on the twentieth (20th) day following delivery thereof to
Valero ("Final Post-Closing Adjustment Statement").
(iii) If Valero disputes any item on the Post-Closing Adjustment
Statement, Valero shall give written notice of dispute to Mobil within such
twenty (20) day period. Any notice of dispute shall specify in reasonable
detail the nature of the dispute and shall only be based on mathematical error
and inaccurate information.
(iv) If a timely notice of dispute is received by Mobil, during the
twenty (20) day period following receipt of the notice, Mobil and Valero shall
seek in good faith to resolve in writing any differences which they may have
with respect to the matters specified in the notice of dispute. During such
period, Mobil shall have access to the working papers of Valero prepared in
connection with its notice of dispute. If at the end of such period, Mobil
and Valero resolve their differences, the Post-Closing Adjustment Statement
shall be modified and as modified shall be binding upon the Parties and shall
become the Final Post- Closing Adjustment Statement.
(v) If at the end of such twenty (20) day period Mobil and Valero are
unable to resolve their differences, Mobil and Valero shall submit the dispute
to the Accounting Firm as described in Section 3.2.7 for review and
resolution, and:
(a) the Accounting Firm shall be a nationally recognized independent
public accounting firm and shall be agreed upon by Mobil and Valero in
writing;
(b) the Accounting Firm shall make a final and binding determination
as to the submitted matters within twenty (20) days after its appointment.
The scope of the dispute to be resolved by the Accounting Firm shall be
limited to whether there are any mathematical errors or incorrect information
in the Post-Closing Adjustment Statement. The Accounting Firm shall not make
any other determination, including any determination as to whether generally
accepted accounting principles were followed in preparation of the
Post-Closing Adjustment Statement. The Accounting Firm's determination shall
be in the form of an opinion as is appropriate under the circumstances. The
Post-Closing Adjustment Statement shall be modified forthwith in accordance
with the determination of the Accounting Firm and as modified shall be binding
upon the Parties and will become the Final Post-Closing Adjustment Statement.
(c) Mobil and Valero agree that judgment may be entered upon the
determination of the Accounting Firm in any court having jurisdiction over the
Party against whom such determination is to be enforced.
(d) The fees and expenses of the Accounting Firm and the reasonable
attorneys' fees and expenses of the Parties incurred in connection with the
matters submitted to the Accounting Firm shall be borne by Valero and Mobil in
inverse proportion as they may prevail on matters resolved by the Accounting
Firm, which proportionate allocations shall also be determined by the
Accounting Firm at the time the determination of the Accounting Firm is
rendered on the merits of the matters submitted.
(e) The fees and expenses of Mobil incurred in connection with its
preparation of the Post-Closing Adjustment Statement and Final Post- Closing
Adjustment Statement, except as provided in subparagraph (d) above, shall be
borne by Mobil, and the fees and expenses of Valero incurred in connection
with its review of the Post-Closing Adjustment Statement, preparation of any
notice of dispute, and the Final Post- Closing Adjustment Statement, except as
provided in subparagraph (d) above, shall be borne by Valero.
(vi) If the Post-Closing Adjustment is greater than the Closing
Adjustment, then Valero shall, or if the Post-Closing Adjustment is less than
the Closing Adjustment, then Mobil shall, within ten (10) days after the Final
Post-Closing Adjustment Statement becomes binding, make payment to the other
Party by wire transfer in immediately available funds of the amount equal to
the difference between the Post-Closing Adjustment and the Closing Adjustment,
together with interest thereon at LIBOR calculated using a fraction, the
numerator of which shall be the actual number of days elapsed from and
including the Closing Date to, but excluding, the date of such payment, the
denominator of which shall be three hundred sixty (360).
(vii) During the period of time from and after the Closing Date through
the resolution of any dispute as to the amount of the Post-Closing Adjustment,
Valero shall afford to Mobil and any accountants, counsel, or financial
advisors retained by Mobil in connection with any such dispute, reasonable
access, at all reasonable times and upon reasonable notice to the Assets, the
Acquired Employees, and the Books and Records for the purpose of allowing
Mobil to prepare the Post-Closing Adjustment Statement and address such
dispute.
3.2 Working Capital Assets.
3.2.1 Estimated Working Capital Amount. For purposes of determining
the amount of immediately available funds to be paid on the Closing Date by
Valero, the amount equal to the estimated value of the Working Capital Assets
shall be $97,390,373.50 (the "Estimated Working Capital Amount") as more fully
described on Schedule 3.2.1.
3.2.2 Statement As soon as practicable and in no event later than 60
days immediately following the Closing Date, Mobil shall prepare and deliver
to Valero a Working Capital Assets Statement (the "Statement") setting forth
the value of the Working Capital Assets, together with a detailed analysis
thereof, and certified by an officer of Mobil to the effect that the Statement
has been prepared in compliance with the requirements of this Section 3.2.
Valero shall cause the Acquired Employees to assist Mobil as reasonably
necessary in the preparation of the Statement.
3.2.3 Inventory. The Closing Inventory Volumes portion of the
Statement shall be prepared based on a physical inventory (conducted by an
Expert, the cost of which shall be shared equally by Mobil and Valero and
witnessed by representatives of Mobil and Valero). In the case of stores
inventory and spare parts ("Warehouse Stock"), a physical inventory shall be
conducted for the purpose of identifying the number of items of Warehouse
Stock and shall be based on a reasonable sampling of Warehouse Stock which may
be commenced prior to the Closing Date; provided, however, that if either
Mobil or Valero in good faith concludes that such reasonable sampling does not
adequately identify the number of Warehouse Stock items, then, at such Party's
request, the physical inventory of Warehouse Stock shall be based on a full
physical inventory of all Warehouse Stock items (which shall also be conducted
for the purpose of identifying the number of items of Warehouse Stock).
Valero may participate in the preparation of the Statement, by witnessing the
taking of the physical inventory; provided, however, that Valero acknowledges
that Mobil shall have the primary responsibility and authority for preparing
the Statement, including the taking of the physical inventory.
3.2.4 Final Statement. During the 20-day period following Valero's
receipt of the Statement, Valero shall be permitted to review the working
papers of Mobil relating to, and shall be given reasonable access, upon
reasonable notice, to the employees of Mobil who have knowledge relevant to,
the Statement. Subject to Section 3.2.5, the Statement shall become final and
binding upon the Parties on the twentieth day following delivery thereof to
Valero ("Final Statement").
3.2.5 Notice of Disagreement. If Valero disagrees with the Statement,
Valero must give written notice of its disagreement with the Statement
("Notice of Disagreement") to Mobil within such 20-day period. Any Notice of
Disagreement shall (i) specify in reasonable detail the nature of any
disagreement so asserted and (ii) only include disagreements based on
mathematical errors or based on noncompliance with this Section 3.2.
3.2.6 Disputes as to Working Capital Assets. If a timely Notice of
Disagreement is received by Mobil, during the 20-day period following the
delivery of such Notice of Disagreement, Mobil and Valero shall seek in good
faith to resolve in writing any differences which they may have with respect
to the matters specified in the Notice of Disagreement. During such period,
Mobil shall have access to the working papers of Valero prepared in connection
with its Notice of Disagreement. If at the end of such period, Mobil and
Valero resolve their differences, the Statement shall be modified and as
modified shall be binding upon the Parties and will become the Final
Statement.
3.2.7 Independent Accounting Firm. If at the end of such 20-day
period Mobil and Valero are unable to resolve their differences, Mobil and
Valero shall submit to an independent accounting firm (the "Accounting Firm")
for review and resolution, any and all matters which remain in dispute and
which were properly included in the Notice of Disagreement and:
(i) the Accounting Firm shall be a nationally recognized
independent public accounting firm and shall be agreed upon by Mobil and
Valero in writing.
(ii) the Accounting Firm shall make a final and binding
determination as to the submitted matters within 20 days after its
appointment. The scope of the disputes to be resolved by the Accounting Firm
shall be limited to whether the Statement was prepared in compliance with the
requirements of this Section 3.2 and whether there are any mathematical errors
in the Statement. The Accounting Firm is not to make any other determination,
including any determination as to whether generally accepted accounting
principles were followed in preparation of the Statement. The Accounting
Firm's determination shall be in the form of an opinion as is appropriate
under the circumstances. The Statement shall be modified forthwith in
accordance with the determination of the Accounting Firm and as modified shall
be binding upon the Parties and will become the Final Statement.
(iii) Mobil and Valero agree that judgment may be entered upon the
determination of the Accounting Firm in any court having jurisdiction over the
Party against whom such determination is to be enforced.
(iv) The fees and expenses of the Accounting Firm and the
reasonable attorneys' fees and expenses of the Parties incurred in connection
with the matters submitted to the Accounting Firm shall be borne by Valero and
Mobil in inverse proportion as they may prevail on matters resolved by the
Accounting Firm, which proportionate allocations shall also be determined by
the Accounting Firm at the time the determination of the Accounting Firm is
rendered on the merits of the matters submitted.
(v) The fees and expenses of Mobil incurred in connection with
its preparation of the Statement and the Final Statement, except as provided
in Section 3.2.7(iv), shall be borne by Mobil, and the fees and expenses of
Valero incurred in connection with its review of the Statement, preparation of
any Notice of Disagreement, and the Final Statement, except as provided in
Section 3.2.7(iv), shall be borne by Valero.
3.2.8 Payment. If the value of the Working Capital Assets as
determined pursuant to the Final Statement is more than the Estimated Working
Capital Amount, Valero shall, or if the value of the Working Capital Assets as
determined pursuant to the Final Statement is less than the Estimated Working
Capital Amount, then Mobil shall, within 10 days after the Final Statement
becomes binding, make payment by wire transfer in immediately available funds
of the amount of such difference not otherwise paid by such Party, together
with interest thereon at LIBOR calculated using a fraction the numerator of
which shall be the actual number of days elapsed from and including the
Closing Date to but excluding the date of payment, the denominator of which
shall be 360. Either Party may elect, at any time in advance of the Final
Statement, to pay to the other Party any portion of such difference between
the amount of the Working Capital Assets and the Estimated Working Capital
Amount. Such payment shall include interest thereon at LIBOR calculated using
the same fraction.
3.2.9 Method of Calculation. The items and accruals included in the
components of Current Assets and Current Liabilities in the Final Statement
(with the exception of Warehouse Stock) shall be determined, and the amounts
of such items and accruals shall be calculated, in the same manner as the
corresponding line items were determined and calculated, and using the same
policies, practices, assumptions, procedures, classifications, methods,
estimates and judgments as are used, in preparing Schedule 3.2.1. In the case
of the inventory of Warehouse Stock, Schedule 3.2.1 reflects book value as set
forth in the Warehouse Inventory Management System Reports. The Final
Statement shall include changes as mutually agreed by Valero and Mobil as a
result of the physical inventory, and shall include adjustments to the
Warehouse Stock Valuation resulting from use and purchases of Warehouse Stock
since the date of such valuation through the Closing Date. The Parties shall
not adjust the value if the changes, due to the physical inventory, in the
aggregate do not exceed $100,000. If Valero and Mobil cannot agree, the
procedures of 3.2.7 will be followed.
3.2.10 Valuation. Valuation of the Working Capital Assets shall
be in accordance with Schedule 3.2.10.
3.2.11 Access. During the period of time from and after the Closing
Date through the resolution of any dispute as to the value of the Working
Capital Assets, Valero shall afford to Mobil, and any accountants, counsel or
financial advisers retained by Mobil in connection with any such dispute,
reasonable access, at all reasonable times and upon reasonable notice to the
Assets, the Acquired Employees and the Books and Records for the purpose of
allowing Mobil to prepare the Statement and address such dispute.
ARTICLE IV
CONDITIONS TO CLOSING
4.1 Conditions to Obligations of Valero. The obligation of Valero to
consummate the transactions contemplated herein is subject to the satisfaction
at or prior to the Closing of each of the conditions set forth below;
provided, however, that notwithstanding the failure of any one or more of such
conditions, Valero may nevertheless proceed with the Closing without
satisfaction, in whole or in part, of any one or more of such conditions, but
only if a written waiver thereof is executed by Valero:
(i) The representations and warranties of Mobil made in this Agreement
shall be true and correct as of the time of the Closing as though made as of
such time, except to the extent such representations and warranties expressly
relate to an earlier date (in which case such representations and warranties
shall be true and correct on and as of such earlier date). Mobil shall have
performed or complied in all material respects with all obligations and
covenants required by this Agreement to be performed or complied with by Mobil
by the time of the Closing;
(ii) Mobil shall have delivered to Valero a certificate dated the Closing
Date and signed by an authorized officer of Mobil, confirming satisfaction of
the conditions described in Section 4.1; and
(iii) Valero shall have received all documents and deliveries in
accordance with Sections 3.1.3 and 3.1.4.
4.2. Conditions to Obligations of Mobil. The obligation of Mobil to
consummate the transactions contemplated herein is subject to the satisfaction
at or prior to the Closing of each of the conditions set forth below;
provided, however, that notwithstanding the failure of any one or more of such
conditions, Mobil may nevertheless proceed with the Closing without
satisfaction, in whole or in part, of any one or more of such conditions, but
only if a written waiver thereof is executed by Mobil:
(i) The representations and warranties of Valero made in this Agreement
shall be true and correct as of the time of the Closing as though made as of
such time, except to the extent such representations and warranties expressly
relate to an earlier date (in which case such representations and warranties
shall be true and correct on and as of such earlier date). Valero shall have
performed or complied in all material respects with all obligations and
covenants required by this Agreement to be performed or complied with by
Valero by the time of the Closing;
(ii) Valero shall have delivered to Mobil a certificate dated the Closing
Date and signed by an officer of Valero confirming satisfaction of the
conditions described in Section 4.2;
(iii) Mobil shall have received approval from the NJDEP (a) pursuant to
ISRA to consummate the transactions contemplated by this Agreement in the form
of an amendment to the Consent Order or remediation agreement, and (b) to
transfer to Valero, as evidenced by a fully executed Valero Consent Order,
Mobil's Liability for any Remediation of Pre-Closing Environmental Conditions,
without any significant expansion or acceleration of the Scope of Required
Remediation in comparison to the Scope of Remediation performed by Mobil prior
to the Closing Date and pursuant to the Consent Order as measured by Mobil in
its reasonable opinion. In connection with obtaining NJDEP's approval for the
foregoing, Valero shall have (i) executed any and all relevant documentation
necessary to effectuate such transfer on such terms, including any remediation
agreement application, remediation agreement, the Valero Consent Order or
other relevant documentation, and (ii) provided to the NJDEP any financial
assurances required under the Valero Consent Order;
(iv) Mobil shall have received all documents and deliveries in accordance
with Sections 3.1.2 and 3.1.4.
4.3 Conditions to Obligations of Each Party. The obligations of each of
the Parties to consummate the transactions contemplated herein are subject to
the satisfaction at or prior to the Closing of each of the conditions set
forth below; provided, however, that notwithstanding the failure of any one or
more of such conditions, each Party may nevertheless proceed with the Closing
without satisfaction, in whole or in part, of any one or more of such
conditions, but only if a written waiver thereof is executed by such Party:
(i) No Legal Requirement or Judgment enacted, entered, promulgated,
enforced or issued by a Governmental Entity or other legal restraint or
prohibition preventing the purchase and sale of the Purchased Assets shall be
in effect;
(ii) No Proceeding, except as set forth on Schedules 2.1.5, 5.6, and
5.10, shall be pending seeking to restrain, prohibit or declare illegal, or
seeking substantial Damages in connection with:
(a) any of the transactions contemplated hereby or by the Related
Agreements;
(b) the ownership by Valero (including enjoyment of any
rights relating thereto) of the Purchased Assets at and after the Closing; or
(c) the operation of the Assets by Valero at and after the
Closing in a manner consistent with Mobil's Past Operating Standards;
(iii) The Related Agreements shall have been executed and delivered
by the parties thereto, and shall constitute the legal, valid and binding
obligations of such parties, enforceable against such parties in accordance
with their terms, except as the same may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws relating to or affecting
creditors rights generally and by general equity principles. The parties to
the Related Agreements shall have performed all acts, made all payments and
executed and delivered all documents that are to be performed, made or
executed by each of them or on their behalf at or prior to the Closing
pursuant to such agreements; and
(iv) The waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 shall have expired or been terminated.
4.4 Waiver of Closing Conditions. The Parties acknowledge and agree
that if Mobil, on the one hand, or Valero, on the other, specifically
identifies, in a written notice furnished to the other Party prior to the
Closing Date, a failure to satisfy any of the conditions set forth in Sections
4.1, 4.2 or 4.3 and such failure was not the result of a wilful or intentional
action taken by such Party, and the other Party proceeds with the Closing, the
other Party shall be deemed to have waived such condition and the other Party
and its successors, assigns and Affiliates shall not be entitled to be
indemnified pursuant to Article VIII, to sue for Damages or to assert any
other right or remedy for any Liabilities arising out of or from any matters
relating to such condition, notwithstanding anything to the contrary contained
herein or in any certificate delivered pursuant hereto.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF MOBIL
Mobil hereby represents and warrants to Valero as of the Closing Date, as set
forth on Schedule 5.14 and as follows (except that no representation or
warranty shall be made with respect to any projections provided by Mobil to
Valero):
5.1. Due Organization, Good Standing and Power. Mobil is a corporation
duly organized, validly existing and in good standing under the laws of the
state of New York and has the power and authority to own, lease and operate
its assets and to conduct the business now being conducted by it. Mobil has
all requisite power and authority to enter into this Agreement and the Related
Agreements to which it is a party and to perform its obligations hereunder and
thereunder.
5.2. Authorization and Validity of Agreements. The execution, delivery
and performance by Mobil of this Agreement and the Related Agreements to which
it is a party and the consummation by it of the transactions contemplated
hereby and thereby have been duly authorized and approved by all necessary
corporate action on the part of Mobil. This Agreement has been executed and
delivered by Mobil and is a legal, valid and binding obligation of Mobil,
enforceable against Mobil in accordance with its terms, except as the same may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other laws relating to or affecting creditors' rights generally and by general
equity principles. Each of the Related Agreements to which Mobil (or any
Affiliate of Mobil) is a Party is a legal, valid and binding obligation of
Mobil (or such Affiliate), enforceable against Mobil (or such Affiliate) in
accordance with its terms, except as the same may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other laws relating to
or affecting creditors' rights generally and by general equity principles.
5.3. Absence of Conflicts. The execution, delivery and performance by
Mobil and each of its Affiliates of this Agreement and the Related Agreements
to which each is a party, and the consummation by each of the transactions
contemplated hereby and thereby, does not and will not (i) violate any Legal
Requirement applicable to Mobil and each of its Affiliates, (ii) conflict
with, or result in the breach of any provision of, the charter or by-laws or
similar governing or organizational documents of Mobil and each of its
Affiliates, (iii) result in the creation of any Lien upon any of the Purchased
Assets, other than Permitted Encumbrances and those that are, individually and
in the aggregate, immaterial to the Purchased Assets or (iv) violate, conflict
with or result in the breach or termination of, or otherwise give any other
Person or Governmental Entity the right to terminate, or constitute a default,
event of default or an event which with notice, lapse of time or both, would
constitute a default or event of default under the terms of, any material
assigned Permit or Assigned Contract to which Mobil and each of its Affiliates
is a party, except for violations, conflicts, breaches, terminations and
defaults, the adverse consequences of which are, individually and in the
aggregate, immaterial to the Purchased Assets and which would not unreasonably
and materially impair Valero's ownership, use and operation of the Purchased
Assets from and after Closing.
5.4. Financial Statements. The Historical Financial Statements fairly
represent the pro- forma financial performance of the Assets for the periods
indicated therein as used by Mobil to evaluate the Assets taking into account
that the Purchased Assets are not a stand alone business.
5.5 Material Contracts.
(i) Schedule 5.5 lists all Material Contracts held by Mobil as of the
Closing Date and indicates, with respect to each Material Contract, whether
such Contract is assignable and, if assignable, whether any Consent is
required in order for Mobil to assign such Material Contract to Valero and
whether any such Consent has not been obtained. Schedule 5.5 also identifies
all Material Contracts that are Shared Contracts.
(ii) All Material Contracts listed on Schedule 5.5 are legal, valid and
binding upon and enforceable by Mobil, and if assigned to and assumed by
Valero at the Closing, will be legal, valid and binding upon and enforceable
by Valero after the Closing, in accordance with their respective material
terms (except as the same may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws relating to or affecting creditors'
rights generally and by general equity principles) and Mobil is not in
material default under any such Material Contract. To Mobil's knowledge, no
other party to any such Material Contract is in material default thereunder
nor to Mobil's knowledge does there exist any event or condition which, upon
the giving of notice or the lapse of time or both, would (i) constitute a
material default or event of default thereunder by any such other party or
(ii) entitle any other party thereto to be released therefrom or refuse
performance thereunder.
(iii) Prior to the Closing Date, Mobil has provided Valero and its
representatives access to correct and complete copies of all Material
Contracts, other than Shared Contracts.
5.6. Proceedings. Except as set forth on Schedule 5.6, there are no
Proceedings pending or, to Mobil's knowledge, threatened, before any
Governmental Entity or arbitrator (i) seeking to restrain or prohibit the
execution of this Agreement or the Related Agreements or the consummation of
the transactions contemplated hereby or thereby, (ii) relating to the
Purchased Assets (including any Proceedings relating to any alleged violations
of any Environmental Law or other Legal Requirement), or (iii) seeking to
modify, suspend, revoke, withdraw, terminate or otherwise limit any assigned
Permit or Servitude used or held by Mobil in connection with the Purchased
Assets. Except as set forth on Schedule 5.6, there are no Judgments
outstanding against Mobil in relation to the Purchased Assets.
5.7 Compliance with Legal Requirements (Other than Environmental Laws)
and Permits.
5.7.1 Legal Requirements. With respect to the Purchased Assets,
excluding the Real Property Assets, except as specified on Schedule 5.7, Mobil
is in compliance in all material respects with all applicable Legal
Requirements (other than Environmental Laws).
5.7.2 Permits. Schedule 5.7.2 sets forth a list of the material
Permits, known to Mobil, which are specific to the Assets and used in
connection with the Assets. Except as set forth on Schedule 5.7.2, to Mobil's
knowledge, after consultation with Valero, Mobil has, as required, made all
Filings necessary to transfer or assign or reissue such Permits to Valero, to
the extent such Permits are transferrable, assignable, or capable of being
reissued. With respect to non- environmental Permits set forth on Schedule
5.7.2, to Mobil's knowledge, such Permits are in full force and effect. With
respect to non-Environmental Permits set forth on Schedule 5.7.2, to Mobil's
knowledge, the non-Environmental Permits set forth on Schedule 5.7.2
constitute the material non- environmental Permits necessary for Mobil to own,
operate, maintain and use the Assets as of the Closing.
5.8 Intellectual Property.
(i) There is no Intellectual Property included in the Purchased Assets.
(ii) Schedule 1.55 sets forth (i) a true and complete list of all
material Intellectual Property used in connection with the conduct or
operation of the Purchased Assets, (ii) the name of the Person who owns such
Intellectual Property and (iii) in the case of such Intellectual Property not
owned by Mobil, identifying information regarding the agreement pursuant to
which Mobil uses such Intellectual Property. Except as otherwise specified,
Mobil has the right to extend to Valero the use of the Mobil Proprietary
Technology (as defined in the Intellectual Property Rights License Agreement)
upon the consummation of the transactions contemplated hereunder, pursuant to
the Intellectual Property Rights License Agreement.
5.9 Employee Matters. These matters are addressed on Schedule 6.4.
5.10 Taxes.
(i) Mobil has timely filed or caused to be timely filed, or will timely
file or cause to be timely filed, with the appropriate taxing authorities, all
Returns that are required to be filed by, or with respect to, the Assets on or
prior to the Closing Date. Such Returns have materially reflected and, in the
case of Returns to be filed, will materially reflect, all Liability for Taxes
with respect to the Assets for the periods covered thereby.
(ii) All Taxes and Tax Liabilities relating to the Assets and all Taxes
and Tax Liabilities which may be asserted against the Assets for all taxable
years or other taxable periods (including portions thereof) prior to the
Closing Date have been timely paid by Mobil or will be timely paid by Mobil,
subject to Mobil's right to reasonably contest any such assertion.
(iii) There are no Liens with respect to any Taxes upon the Assets
except as set forth on Schedule 5.10.
(iv) None of the Assets is "tax-exempt use property" within the meaning
of Section 168(h) of the Code.
(v) Schedule 5.10 sets forth a complete list of all audits and
Proceedings pending as of the Closing Date against Mobil, and no written
notification of any other such Proceedings has been received by Mobil, with
regard to any Tax Return (or, in the case of consolidated or combined state
and local Tax Returns, the relevant portions thereof) related to the Assets.
5.11 Assets Other Than Real Property Assets.
5.11.1 Title. Mobil has good and marketable title to the Assets and the
Working Capital Assets in each case free and clear of all Liens except (a)
such as are set forth in Schedule 5.11, (b) mechanics', carriers', workmen's,
warehousemen's, repairmen's or other like Liens arising or incurred in the
ordinary course of business, Liens arising under original purchase price
conditional sales contracts and equipment leases with Third Parties entered
into in the ordinary course of business, and Liens for Taxes which are not due
and payable or which may thereafter be paid without penalty, and (c) other
imperfections of title or encumbrances, if any, which do not, individually or
in the aggregate, impair the continued use, ownership and operation of the
Assets to which they relate.
5.11.2 Personal Property. The condition of the Personal Property taken
as a whole, is generally consistent with the respective ages and stages of
useful life (repair cycle) of such property as would be maintained by a
reasonably prudent operator of the Purchased Assets.
5.11.3 Exclusions. This Section 5.11 does not relate to the Real
Property Assets, such items being the subject of Section 5.12, or to Excluded
Assets.
5.11.4 Inventory. All inventory constituting a part of the Closing
Inventory Volumes (other than "tank bottoms" accumulated in the ordinary
course of the operation of the Assets, consistent with Mobil's past practices)
will be of a quality usable or saleable in the ordinary course of business.
5.11.5 Capacity of the Process Units. The information set forth on
Schedule 5.11 with respect to capacity of each of the major process units of
the Assets is true and correct as of the Closing Date. At the Closing Date,
the process units set forth on Schedule 5.11 are being operated at levels
consistent with Mobil's Past Operating Standards.
5.12 Real Property Assets.
(i) Schedule 1.90 sets forth a complete list of the Real Property Assets
owned in fee by Mobil (individually, an "Owned Property" and collectively, the
Real Property Assets).
(ii) Mobil has good and marketable title to all Owned Property free and
clear of all Liens except the Permitted Encumbrances. Schedule 5.12 sets
forth a list of material ground leases related to the Purchased Assets where
Mobil is the lessor.
(iii) Except as set forth on Schedule 1.90, there are no condemnation or
eminent domain Proceedings pending (for which written notice has been provided
to Mobil) or, to the knowledge of Mobil, threatened against the Real Property
Assets by any Governmental Entity. Except as set forth on Schedule 1.90, no
written notice from any Governmental Entity has been received by Mobil that is
currently in effect requiring any material work, repair, construction,
alteration or installation on, or in connection with, the Real Property
Assets. Except as set forth on Schedule 1.90, to the knowledge of Mobil,
Mobil's use and operation of the Assets as conducted at Closing are lawful
uses under all applicable zoning and height regulations. Except as set forth
in Schedule 1.90, to the knowledge of Mobil, there are no variances, special
exceptions or other similar zoning conditions or agreements pertaining to the
Real Property Assets imposed or granted by, or entered into by Mobil with, or,
to the knowledge of Mobil, enforceable by, any Governmental Entity.
(iv) Except as set forth in Schedule 1.90, all public utilities serving
the Assets, and all public or quasi-public improvements upon or adjustments to
any land occupied by such Assets (including all applicable electric lines,
water lines, gas lines and telephone lines), are adequate on the Closing Date
in all material respects to serve the Purchased Assets.
(v) To Mobil's knowledge, there is no trespass by any Third Party or of
any Third Parties with adverse possession of any of the Real Property Assets
and none of the Facilities or any related improvement or structure encroach on
any adjacent property not included in the Real Property Assets, title to which
is being transferred to Valero. Notwithstanding the foregoing, a subdivision
may be required to obtain legally permissible set backs for MTC and LPT.
(vi) All pipelines, pipeline easements, utility lines, utility easements
and other easements, leaseholds, Servitudes and rights-of-way burdening or
benefitting any of the Real Property Assets do not at Closing unreasonably and
materially interfere with or prevent any operations conducted on the Real
Property Assets by Mobil. Except as set forth on Schedule 1.90, with respect
to any pipeline, utility, access or other easements, Servitudes or leaseholds
owned or used by Mobil in connection with the Assets: (i) Mobil is the legal
and beneficial owner of the respective easement and leasehold established
thereunder; (ii) such leaseholds, easements and the rights and interests of
Mobil thereunder are in full force and effect; and (iii) to Mobil's knowledge,
no material defaults exist thereunder and no events or conditions exist which,
with or without notice of lapse of time or both, would constitute a material
default thereunder or result in a termination.
5.13 Working Capital Assets. Each of the accruals, prepaid items and
other Current Assets and Current Liabilities included in the Working Capital
Assets arose in connection with Mobil operating the Assets in the ordinary
course prior to Closing.
5.14 Compliance with Environmental Laws. With respect to the
operation of the Assets, Mobil is at the Closing Date in compliance with
Environmental Laws in effect and requiring compliance as of the Closing Date,
except (a) as set forth on Schedule 5.14, (b) as set forth in the
Environmental Documents or as could reasonably extrapolated therefrom, or (c)
to the extent any noncompliance with Environmental Law would not reasonably be
expected to materially affect Mobil's ability to operate the Assets in the
manner in which they were being operated within the seven (7) days prior to
the Effective Time.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF VALERO
Valero hereby represents and warrants to Mobil as follows:
6.1 Due Organization, Good Standing and Power. Valero is a corporation
duly organized, validly existing and in good standing under the laws of the
state of Delaware and has the power and authority to own, lease and operate
its assets and to conduct the business now being conducted by it. Valero has
all requisite power and authority to enter into this Agreement and the Related
Agreements to which it will be a party and to perform its obligations
hereunder and thereunder, and is qualified as a foreign corporation to do
business in the state of New Jersey.
6.2 Authorization and Validity of Agreements. The execution, delivery
and performance by Valero of this Agreement and the Related Agreements to
which it is a party and the consummation by it of the transactions
contemplated hereby and thereby have been duly authorized and approved by all
necessary corporate action on the part of Valero. This Agreement has been
executed and delivered by Valero and is the legal, valid and binding
obligation of Valero, enforceable against Valero in accordance with its terms,
except as the same may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws relating to or affecting creditors'
rights generally and by general equity principles. Each of the Related
Agreements to which Valero is a party will, upon its execution and delivery,
be the legal, valid and binding obligation of Valero, enforceable against
Valero in accordance with its terms, except as the same may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other laws
relating to or affecting creditors' rights generally and by general equity
principles.
6.3 Absence of Conflicts. The execution, delivery and performance by
Valero and each of its Affiliates of this Agreement and the Related Agreements
to which each is a party, and the consummation by each of the transactions
contemplated hereby and thereby, does not and will not (i) violate any Legal
Requirement applicable to Valero and each of its Affiliates, (ii) conflict
with, or result in the breach of any provision of, the charter or by-laws or
similar governing or organizational documents of Valero and each of its
Affiliates, (iii) result in the creation of any Lien upon any of the assets of
Valero and each of its Affiliates, other than those that are, individually and
in the aggregate, immaterial to its assets and business, or (iv) violate,
conflict with or result in the breach or termination of, or otherwise give any
other Person or Governmental Entity the right to terminate, or constitute a
default, event of default or an event which with notice, lapse of time or
both, would constitute a default or event of default under the terms of, any
contract or permit to which Valero and each of its Affiliates is a party or by
which its properties or businesses are bound, except for violations,
conflicts, breaches, terminations and defaults the adverse consequences of
which are, individually and in the aggregate, immaterial to its assets and
business.
6.4 Benefit Plans. These matters are discussed on Schedule 6.4.
6.5 Authorizations and Consents. Valero represents and warrants that,
to Valero's knowledge and except as set forth on Schedule 6.5, it has all
material Authorizations and Consents, including any required financial
assurances, necessary to own, operate, use and maintain the Purchased Assets,
after the Closing Date in accordance with this Agreement and the Related
Agreements.
6.6 Proceedings. There is no Proceeding pending, or to Valero's
knowledge, threatened, before any Governmental Entity or arbitrator seeking to
restrain or prohibit the execution of this Agreement or the Related Agreements
or the consummation of the transactions contemplated hereby or thereby.
6.7 Reporting. Valero represents and warrants that, as of the Closing
Date, Valero is not actually aware of any Pre-Closing Environmental Conditions
for which Valero believes there would be a duty to report on the Closing Date,
except to the extent that Mobil has already reported the same to a
Governmental Entity.
ARTICLE VII
COVENANTS AND AGREEMENTS
7.1 Information. Valero acknowledges that (i) except as expressly set
forth in this Agreement (including the Schedules and Exhibits hereto), or in
the Related Agreements neither Mobil, nor any other Person has made any
representation or warranty, express or implied, as to the accuracy or
completeness of any information regarding the Purchased Assets furnished or
made available to Valero and its representatives and (ii) except as expressly
set forth in this Agreement (including the Schedules and Exhibits hereto)
neither Mobil nor any other Person shall have or be subject to any Liability
to Valero or any other Person resulting from the distribution to Valero, or
Valero's use of, any such information, including any information, documents or
material made available to Valero in certain "data rooms", management
presentations or in any other form in expectation of the transactions
contemplated hereby or in the Related Agreements.
7.2 Logos, Trade Names and Trademarks. Valero shall remove the word
"Mobil" or any word or expression similar thereto, and any logos, trade names
or trademarks belonging to Mobil, from the Purchased Assets, including the
building, signage, equipment, personal property, stationery and literature
related to the Purchased Assets, within one hundred eighty (180) days after
the Closing Date and thereafter shall not use any logos, trade names or
trademarks belonging to Mobil or any of its Affiliates.
7.3 Compliance with Environmental Laws. From and after the Closing
Date until Section 8.4.4(iii)(g) no longer applies, Valero covenants to Mobil
that Valero shall operate and maintain the Purchased Assets in compliance with
Environmental Laws except (a) as set forth on Schedule 5.14, (b) as set forth
in the Environmental Documents or as could be reasonably extrapolated
therefrom, or (c) to the extent any noncompliance with Environmental Law would
not reasonably be expected to materially affect Mobil's indemnification or
defense obligations to Valero.
7.4 Liability for Voluntary Remediation. Any Voluntary Remediation
undertaken by Valero shall be at its sole cost and expense. Valero shall not
seek any indemnification from Mobil for any Environmental Costs, Liabilities
or Damages relating to, resulting from, arising out of, or in connection with
such Voluntary Remediation. This shall not prevent Valero from seeking
indemnification for Required Remediation for which it reasonably believes it
is entitled under Section 8.4.4(iii) hereof, nor shall Valero be deemed to
have breached this Agreement on account of doing so. Valero acknowledges that
for purposes of this Agreement, any Appendices attached to the Consent Order
and the Valero Consent Order, individually or as may be incorporated into the
Consent Order or the Valero Consent Order, and the feasibility study referred
to in the Consent Order itself, shall not without a separate written directive
or Directive from a Governmental Entity after Closing, in any way constitute
Required Remediation nor a Directive.
7.5 Remediation In Connection With Permitted Activities. From and after
the Closing Date until Section 8.4.4(iii)(g) no longer applies, Valero agrees
to take all reasonable and prudent precautions to minimize the need for any
Remediation in connection with any Permitted Activities, including avoiding,
to the extent reasonably possible, any excavation activities.
7.6 Remediation Notification Procedures. From and after the Closing
Date until Section 8.4.4(iii)(g) no longer applies, Valero and Mobil shall
promptly provide each other with copies of all relevant and material
correspondence that either Party sends to or receives from the appropriate
Governmental Entity relating to any Required Remediation. Valero shall
provide Mobil with a reasonable opportunity to review and consult in
accordance with Section 8.4.4(iii) with Valero regarding the Minimum
Remediation Method, the Minimum Remediation Cost, the Scope and content of any
work plan and the content of any reports submitted to the Governmental Entity,
all in connection with any Required Remediation.
7.7 Environmental Controls and Restrictions. Valero shall cooperate
with Mobil in any reasonable manner in connection with obtaining any
approvals, authorizations or agreements of any Governmental Entities to
transfer to Valero the Purchased Assets and any Liability for any Remediation
of Pre-Closing Environmental Conditions, whether such Liability is under the
Consent Order or pursuant to ISRA, as previously set forth in Section
4.2(iii). From and after the Closing Date until Section 8.4.4(iii)(g) no
longer applies, in connection with Required Remediation, Valero's covenant to
cooperate shall include taking all reasonably necessary steps and making all
reasonable efforts to seek and obtain the approval of NJDEP, or other
appropriate Governmental Entity, to allow Required Remediation using the
Minimum Remediation Method, including proposing, applying for, consenting to,
executing, recording, implementing and maintaining any engineering and/or
institutional controls, and where technologically and economically feasible,
seeking alternative soil remediation standards, alternate concentration limits
and/or aquifer reclassification. Institutional controls may include, without
limitation, structure, land and natural resource use restrictions, well
restrictions, declarations of environmental restriction or other forms of deed
notice regarding the presence of contamination, and establishment of
groundwater classification exception areas. Engineering controls may include,
without limitation, caps, covers, dikes, trenches, leachate collection
systems, signs, fences and access controls. In connection with the foregoing,
and without limiting the foregoing, Valero shall use all reasonable efforts to
seek, obtain and record, as applicable, a declaration of environmental
restriction or deed notice and ground water classification exception areas for
the entire site covered by the Consent Order and Mobil shall reasonably
cooperate with such efforts.
7.8 Financial Assurances. Intentionally Left Blank
7.9 Consents. For a period of twelve (12) months from the Closing
Date, Mobil shall cooperate with Valero, upon the request of Valero, in any
reasonable manner in connection with Valero obtaining any Consents and waivers
with respect to the transactions contemplated herein that may be required from
the parties to the Contracts listed on the Schedules; provided, however, that
such cooperation shall not include any requirement of Mobil or any of its
Affiliates to expend money, incur any Liability, commence or participate in
any Proceeding or offer or grant any accommodation (financial or otherwise) to
any Third Party.
7.10 Cooperation. Valero, on the one hand, and Mobil, on the other,
shall cooperate with each other, and shall cause their officers, employees,
agents, auditors and representatives to cooperate with each other to ensure
the orderly transition of the Purchased Assets from Mobil to Valero and to
minimize any disruption to the respective businesses of Mobil and Valero or
the operation of the Assets that might result from the transactions
contemplated hereby. From and after the Closing, upon reasonable written
notice, Valero, on the one hand, and Mobil, on the other, shall furnish or
cause to be furnished to each other and their employees, counsel, auditors and
representatives access to, during normal business hours, such information and
assistance relating to (i) the Purchased Assets as is reasonably necessary for
financial reporting and accounting matters, employee benefit matters, the
preparation and Filing of any Tax Returns, reports or forms or the defense of
any Tax claim or assessment or (ii) any Excluded Asset or Retained Liability.
Valero, on the one hand, and Mobil, on the other, shall reimburse the other
for reasonable out-of-pocket costs and expenses incurred in assisting the
other pursuant to this Section. Neither Party shall be required by this
Section to take any action that would unreasonably interfere with the conduct
of its business or unreasonably disrupt its normal operations.
7.11 Tax Returns. From and after the Closing Date, to the extent
reasonably requested by Valero, Mobil shall provide copies to Valero of any
Tax Returns, reports or forms to the extent that they relate to the Purchased
Assets, are separate Returns or contain a separate Tax Liability.
7.12 Collection of Receivables. Any payment received by Valero in
payment of any accounts receivable retained by Mobil at the Closing ("Mobil
Receivables") shall be held in trust for the account of Mobil and any payment
received by Mobil in payment of any accounts receivable of Valero ("Valero
Receivables") shall be held in trust for Valero. Mobil and Valero shall each
account for and forward such payments to each other promptly after such
payments are received. Neither Party shall in any way request or direct any
customer who is indebted under both a Mobil Receivable and a Valero
Receivable, to pay such Party rather than the other Party. Upon request from
the other Party, each of Valero and Mobil shall (i) promptly deliver or cause
to be delivered to the other any tangible evidence of Mobil Receivables and
Valero Receivables then in possession (or under control) of Valero or Mobil,
respectively and (ii) execute and deliver or cause to be executed and
delivered to the other such instruments and other documents as reasonably
requested to assist in collection efforts.
7.13 Municipally Financed Property. Mobil has informed Valero that certain
of the Assets described on Schedule 7.13 (the "Municipally Financed Property")
have been financed with the proceeds of certain bonds (the "Bonds") issued as
part of two refinancings, on December 9, 1993 of certain bonds issued to
refund the then outstanding bonds issued in 1975 and 1978 (the "Prior Bonds").
The Bonds have maturity dates of December 1, 2003 and December 1, 2028. Mobil
has provided Valero copies of the relevant agreements and the final Offering
Circular issued in connection with the Bonds and copies of the relevant
agreements issued in connection with the Prior Bonds. (Such documents are
listed on Schedule 7.13.)
7.13.1 Valero's Intentions. Valero represents and warrants to Mobil
that it has no present intention of allowing the disposal or abandonment of
the Municipally Financed Property nor of directing the use of the Municipally
Financed Property for purposes other than pollution control (a "Qualifying
Purpose") and that it intends to cause the Municipally Financed Property to be
operated as pollution control facilities.
7.13.2 Valero's Liabilities. Valero shall have no Liability under
the Bonds.
7.13.3 Qualifying Purpose Valero agrees that if any of the
Municipally Financed Property is retired from service, or ceases to be used
for the Qualifying Purposes, it will provide written notice to Mobil within
ten (10) days of the decision to retire such property or the date such
property ceases to be used for such Qualifying Purpose, describing in such
detail as Mobil may reasonably require the facilities or equipment retired
from service or ceasing to be used for a Qualifying Purpose and the use, if
any, that is intended to be made of such property. Valero further agrees to
notify Mobil within ten (10) days of the occurrence of any of the following
events and Valero shall not be obligated to take any further action with
respect to the Bonds:
(i) the Municipally Financed Property is damaged or destroyed to
such an extent that either (a) the required restoration and repair could not
reasonably be expected to be completed within a period of six (6) months after
commencement of restoration or repair, (b) Valero (or any subsequent assignee)
is prevented or would likely be prevented from using the Municipally Financed
Property for its normal purposes for a period of six (6) months or more or (c)
the cost of restoration and repair would exceed twenty-five percent (25%) of
approximately $41MM; or
(ii) title to the whole or any part of the Municipally Financed
Property or the use of possession thereof is taken or condemned by a
Governmental Entity to such an extent that Valero (or any subsequent assignee)
is prevented or would likely be prevented from using the Municipally Financed
Property for its normal purposes for a period of six (6) months or more; or
(iii) changes, which Valero cannot reasonably control or overcome,
in the economic availability of materials, supplies, labor, equipment and
other properties and things necessary for the efficient operation of the
Municipally Financed Property as pollution control or sewage facilities shall
have occurred, or technological or other changes shall have occurred, which
render the continued operation of the Municipally Financed Property uneconomic
for such purposes; or
(iv) unreasonable burdens of excessive Liabilities are imposed
upon Valero (or any subsequent assignee) with respect to the Municipally
Financed Property or the operation of the Municipally Financed Property,
including, Taxes other than such Taxes as are currently imposed on the Closing
Date, including, but without limitation, ad valorem taxes imposed on the
Closing Date, upon privately owned property used for the same general purposes
as the Municipally Financed Property.
7.13.4 Valero agrees not to sell or otherwise transfer the
Municipally Financed Property to any person unless the purchaser or transferee
undertakes to comply with the requirements of this Section 7.13. Valero
further agrees that, upon any sale, conveyance or other transfer of the
Municipally Financed Property or transfer of control of the Municipally
Financed Property to any Person, it shall include a provision similar to this
Section 7.13 in any document of sale, conveyance or other transfer of the
Municipally Financed Property or any document transferring control of the
Municipally Financed Property.
7.13.5 In addition, Valero shall allow Mobil and its agents
reasonable access to the Municipally Financed Property at reasonable times and
on reasonable notice and shall provide such additional information as Mobil
may reasonably request for the purpose of determining whether the Municipally
Financed Property is being used for a Qualifying Purpose or for determining
whether or demonstrating that the Bonds (or any bonds issued to refund the
Bonds) are, were or will be exempt from Tax.
7.13.6 Mobil agrees to give Valero notice within ten (10) days after
any refinancing of the Bonds using tax exempt bonds. Mobil also agrees to
give Valero notice within ten (10) days after any redemption of the bonds and,
to the extent all Bonds have been redeemed, Valero's obligation under this
Section 7.13 would cease.
7.14 Employee Matters These matters are addressed on Schedule 6.4.
7.15 Books, Records and Personnel
7.15.1 Mobil Access to Books, Records and Personnel. From and after the
Closing Date, Valero shall afford to Mobil, its counsel, accountants and other
authorized representatives, during normal business hours, reasonable access
to, and the right to duplicate at Mobil's expense, the Books and Records,
including Contracts, Permits and other data relating to the Purchased Assets
and to the Acquired Employees to the extent reasonably required by Mobil to
facilitate (i) the preparation by Mobil of any Returns it may be required to
file with respect to or in connection with the Purchased Assets, or in
connection with any audit, amended Return, claim for refund or any Proceeding
with respect thereto, (ii) participation in any Proceedings in connection with
the Retained Liabilities, the Excluded Assets or the Purchased Assets, (iii)
any Filings required by Mobil, including Filings required by any Environmental
Law, or (iv) any other reasonable business purpose. Valero agrees to preserve
Books and Records for a period of at least seven (7) years from the Closing
Date or until the expiration of any applicable statute of limitations or
extension thereof, whichever is later, unless Valero shall have given Mobil
ninety (90) days written notice of intent to destroy certain Books and Records
with a reasonable description thereof, and shall have given Mobil the option
to take possession of such Books and Records. Notwithstanding the foregoing,
nothing in this Section 7.15 shall be construed as extending any applicable
statute of limitations.
7.15.2 Valero Access to Books, Records and Personnel. From and after
the Closing Date, Mobil shall afford to Valero, its counsel, accountants and
other authorized representatives, during normal business hours, reasonable
access to, and the right to duplicate at Valero's expense, the Books and
Records in Mobil's possession, books and records related to Excluded Assets
and to employees of Mobil, in each case to the extent reasonably required by
Valero to facilitate (i) the preparation by Valero of any Returns it may be
required to file with respect to or in connection with the Purchased Assets,
or in connection with any audit, amended Return, claim for refund or any
Proceeding with respect thereto, (ii) participation in any Proceedings in
connection with the Assumed Liabilities or the Purchased Assets, (iii) any
Filings required by Valero, including Filings required by any Environmental
Law, or (iv) any other reasonable business purpose. Mobil agrees to preserve
the Books and Records in Mobil's possession for a period of at least seven (7)
years from the Closing Date or until the expiration of any applicable statute
of limitations or extension thereof, whichever is later, unless Mobil shall
have given Valero ninety (90) days written notice of intent to destroy such
Books and Records with a reasonable description thereof, and shall have given
Valero the option to take possession of such Books and Records.
Notwithstanding the foregoing, nothing in this Section 7.15 shall be construed
as extending any applicable statute of limitations.
7.16 Further Documents. Until the second anniversary of the Closing Date:
7.16.1 In addition to this Agreement and the Real Property
Conveyances, Mobil shall execute and deliver, or shall cause to be executed
and delivered, to Valero after the Closing such appropriate deeds and bills of
sale, assignments, endorsements, certificates and such other appropriate
instruments of transfer and conveyance as Valero shall reasonably request and
as shall be effective to transfer to Valero all of Mobil's title to and
interest in the Purchased Assets.
7.16.2 Subject to Section 7.21 and the Intellectual Property Rights
License Agreement, Mobil shall execute and deliver, or shall cause to be
executed and delivered, to Valero after the Closing such appropriate
agreements, documents or other instruments as may be reasonably necessary in
connection with Valero's use of the Licensed Intellectual Property following
the Closing.
7.16.3 In addition to this Agreement, Valero shall execute and deliver
to Mobil after the Closing such other appropriate agreements and instruments
of assumption as shall be effective to assign and transfer to Mobil, all of
Valero's title to and interest in the Excluded Assets, if any.
7.17 Shared Contracts. Mobil shall make available to Valero, to the extent
permitted by the applicable Shared Contract, for the operation of the Assets,
the benefits and rights under the Shared Contracts until December 31, 1998;
provided, however, that Valero shall assume and discharge (or reimburse Mobil
for) the Liabilities under the Shared Contracts associated with the benefits
and rights so made available to Valero.
7.18. Payment of Certain Taxes and Expenses.
7.18.1 All Property Taxes attributable to the Assets with respect to the
Tax period in which the Closing Date occurs, shall be apportioned as of the
Closing Date between Mobil and Valero (the "Apportioned Obligations"). The
Apportioned Obligations shall be apportioned based on the number of days in
any such period falling on or prior to the Closing Date, on the one hand (the
"Mobil Apportioned Obligations"), and after the Closing Date, on the other
hand (the "Valero Apportioned Obligations"). Valero and Mobil shall cooperate
in assuring that the Mobil Apportioned Obligations, or information, reports
and Returns incident to the Mobil Apportioned Obligations, the payment or
Filing of which is due on or prior to the Closing Date, are billed directly to
and paid or filed (as the case may be) by Mobil, and that the Valero
Apportioned Obligations, or information, reports and Returns incident to the
Valero Apportioned Obligations, the payment or Filing of which is due after
the Closing Date shall be billed directly to and paid or filed (as the case
may be) by Valero. Mobil shall deliver to Valero any bill received by Mobil
in respect of any Valero Apportioned Obligations due and payable after the
Closing Date. In the event that Mobil shall make a payment for any Valero
Apportioned Obligations, Mobil shall be entitled to reimbursement, and Valero
shall make such payment promptly upon the presentation of such supporting
evidence as may be reasonably requested. With respect to the Mobil
Apportioned Obligations that are due and payable after the Closing Date,
Valero shall promptly send Mobil an invoice setting forth the amount of such
Mobil Apportioned Obligations, and Mobil shall pay promptly to Valero such
Mobil Apportioned Obligations. Mobil and Valero shall cooperate, including,
without limitation, during any audit by Taxing authorities, to avoid payment
of duplicate or inappropriate Taxes of any kind or description which relate to
the Assets and each Party shall furnish, at the request of the other, proof of
payment of any such Taxes or other documentation which is a prerequisite to
avoiding payment of a duplicate or inappropriate Tax.
7.18.2 In the event that any refund, rebate or similar payment is
received by either Valero or Mobil for any of the Apportioned Obligations,
Valero and Mobil agree that such payment will be apportioned between Valero
and Mobil on the basis of their respective periods of ownership of the Asset
subject to the Tax during the assessment period.
7.18.3 Except as otherwise provided in this Section 7.18, Valero and
Mobil agree that as between Valero and Mobil, (i) Mobil shall be responsible
for and pay all Taxes levied or imposed upon, or in connection with or
attributable to, the Assets before and on the Closing; (ii) Valero shall be
responsible for and pay all Taxes levied or imposed upon, or in connection
with or attributable to, the Assets after the Closing; and (iii) Valero and
Mobil will each be responsible for its own income and franchise Taxes, if any,
arising from the transactions to be consummated pursuant to this Agreement and
the Related Agreements.
7.18.4 Mobil shall be responsible for the timely Filing (taking into
account any extensions received from the relevant Tax authorities) of all
Returns required by any Legal Requirement to be filed at any time prior to the
Closing Date, except for the Tax period in which the Closing Date occurs, in
respect of the ownership and operation of the Purchased Assets on or prior to
the Closing Date. All Taxes indicated as due and payable on such Returns
shall have been paid or will be paid by Mobil, subject to reimbursement by
Valero if required pursuant to this Section 7.18, as and when required by such
Legal Requirement, except for such Taxes as may be contested by Mobil in good
faith and in appropriate Proceedings. Valero shall be responsible for the
timely Filing of all Returns required by any Legal Requirement to be filed at
any time after the Closing Date, including the Tax period in which the Closing
Date occurs, in respect of the ownership and operation of the Purchased Assets
after the Closing Date. All Taxes indicated as due and payable on such
Returns shall have been paid or will be paid by Valero, subject to
reimbursement by Mobil if required pursuant to this Section 7.18, as and when
required by law, except for such Taxes as may be contested by Valero in good
faith and in appropriate Proceedings.
7.18.5 Except as otherwise provided in this Agreement, any deficiencies,
interest and penalties arising in connection with Taxes due under this Section
7.18 shall be the responsibility of the Party required to timely file correct
Returns concerning such Taxes; provided, however, that any amounts paid in
respect of deficiencies will be subject to reimbursement by the Party liable
pursuant to this Section 7.18 for the Taxes. Control of any Proceedings
concerning any such Taxes, and entitlement to any refunds or awards with
respect to any such Taxes, shall rest with the Party responsible for payment
therefor under this Section 7.18.
7.18.6 Neither Valero nor Mobil shall destroy or otherwise dispose of
any Tax-related records relating to any open period. Prior to destroying or
disposing of any Tax-related records, each Party shall offer the other Party
an opportunity to take possession thereof.
7.18.7 Mobil and Valero shall adjust and apportion all Charges as of the
Closing Date. All Charges incurred on or prior to the Closing Date shall be
for the account of Mobil and all Charges incurred after the Closing Date shall
be for the account of Valero.
7.18.8 After the Closing, Mobil shall (to the extent permitted by any
Legal Requirement) make reasonably available to Valero, and to any taxing
authority, all information, records or documents relating to the Liability of
the Purchased Assets for Taxes, or potential Liability of the Purchased Assets
for Taxes, for all periods prior to or including the Closing Date and will
preserve such information, records or documents until the expiration of any
applicable statute of limitations or extensions thereof.
7.18.9 All of the provisions of this Section 7.18 shall survive the
Closing. Any claim arising out of any breach of the agreements and covenants
contained in this Section 7.18 shall continue until ninety (90) days after the
expiration of the period of limitations applicable to the related Tax or other
payment.
7.19 Deed Covenants Valero agrees to insert in any deed, lease or other
interest or in any agreement transferring, conveying all or any portion of
Valero's interest in and to the Real Property Assets, environmental covenants
having the same effect, to the extent applicable, as those contained in the
bargain and sale deed conveying the Real Property Assets.
7.20 Certain Expenditures. Mobil and Valero agreed that prior to
Closing, Mobil would conduct certain projects as more fully set forth on
Schedule 7.20. Valero shall reimburse Mobil, at the Closing, for all costs
and expenses associated with such projects paid by Mobil from June 1, 1998 to
the Closing as reflected on Schedule 7.20.
7.21 Intellectual Property. With respect to the Intellectual Property
not owned by Mobil, Valero shall be responsible for payment of any charges or
royalties to the owners of such Intellectual Property which may be associated
with the transfer to Valero of the right to use such Intellectual Property,
and Valero shall reimburse Mobil for any payments made to such owners
(including pre- paid-up royalties) for rights which will accrue to Valero
after the Closing.
7.22 Retained Areas.
7.22.1 Subdivision of Real Property Assets. After Closing, Valero shall
execute and deliver to Mobil or its designee, such appropriate Filings,
certifications, consents or similar documents as requested by Mobil and at
Mobil's expense as are necessary to cause the Retained Areas to be subdivided
from the Real Property Assets and, upon obtaining subdivision of any portion
of the Retained Areas from the Real Property Assets, such appropriate deeds,
bills of sale, assignments, endorsements, certificates and such other
appropriate instruments of transfer and conveyance as Mobil or its designee
shall reasonably request and as shall be effective to transfer to Mobil or its
designee all of Valero's title to and interest in such Retained Areas. Mobil
will use reasonable efforts to cause the Retained Areas to be subdivided from
the Real Property Assets as soon as reasonably practicable and will keep
Valero reasonably informed of the status of such Filings.
7.22.2 Reconveyance by Valero. Valero shall convey each portion of the
Retained Areas to Mobil or its designee as soon as such portion of the
Retained Areas has been legally subdivided from the Real Property Assets.
Title to each portion of the Retained Areas shall be conveyed to Mobil or its
designee in the same form (bargain and sale deed with covenants) and in the
same condition as it was conveyed by Mobil to Valero except for any
institutional and engineering controls mutually agreed to by the Parties,
except that title shall also be subject to the lease to Mobil entered into
with Valero at Closing.
7.22.3 Survey. Mobil shall cause a complete survey to be made of the
Real Property Assets and the Retained Areas. To the extent practicable, Mobil
shall first cause the surveyor to produce a perimeter survey that contains a
sufficient metes and bounds description to convey the Real Property Assets
together with the Retained Areas to Valero, and a metes and bounds description
of the Retained Areas to be included in the lease to be entered into between
Mobil and Valero at Closing. Thereafter, Mobil shall cause all improvements,
easements, rights of way, other matters of title and other matters requested
by Valero to be located on the survey. Mobil shall cause copies of each phase
of the survey work to be delivered to Valero.
7.23 Tax Proceedings. Mobil and Valero agree and understand that there are
pending Tax appeals contesting the valuation of the Assets for the Tax years
1993, 1994, 1995, 1996, 1997, and 1998. The docket numbers of those appeals
are: 007358-1993; 002286-1994; 001475-1995; 001530- 1996; 001550-1997;
000461-1998; 000462-1998; 000463-1998 and 002806-1998. It is agreed and
understood that, to any extent necessary, Valero shall cooperate fully with
Mobil's efforts to prosecute and resolve these Tax appeals including, but not
limited to, making the Assets available and providing, upon reasonable demand
and subject to a protective order, any and all documents necessary for the
resolution of said Tax appeals. It is further agreed and understood that all
refunds for overpayment of Property Taxes and interest thereon resulting from
the foregoing Tax appeals covering the period of time 1993-1997 are Mobil's
sole and exclusive property. All refunds, and any interest thereon, for
overpayment of Property Taxes resulting from the foregoing Tax appeal for the
year 1998 shall be allocated in accordance with Section 7.18. If, for any
reason, any part of any refund and interest thereon which is due to Mobil is
credited against Taxes payable by Valero, Valero shall pay to Mobil as such
Taxes become due and payable, without set off, such amount which Mobil would
have received by way of refund and interest thereon. The Parties further
agree that for the Tax year 1998, Mobil and Valero shall both be participants
in that appeal and shall work together and fully cooperate in litigating same.
Mobil and Valero, for that tax year, shall share litigation expenses, to the
extent created after Closing, in the prosecution of that appeal. Valero
further understands that with regard to the Assets for the Tax year 1998, the
Township of Greenwich has changed the manner in which it has typically
assessed Assets and has bifurcated its assessment among real and personal
property. Mobil is disputing the constitutionality of that action and to
whatever extent necessary, Valero agrees to participate in the prosecution of
that dispute. Valero agrees that in order to maintain the integrity of the
pending Tax appeal, it shall make all real and personal property Tax payments
in a timely manner to the township of Greenwich. Valero has been advised that
the payment of Taxes in a timely manner is a jurisdictional prerequisite to
the continuation of prosecution of Tax appeals in the State of New Jersey.
ARTICLE VIII
LIABILITIES; INDEMNIFICATION
8.1 Indemnification by Mobil. From and after the Closing, subject to
the further provisions of this Article VIII, Mobil shall indemnify, hold
harmless and defend Valero and its Affiliates and directors, officers,
employees, agents and representatives of each of them, and all successors and
assigns of the foregoing, against and from any Damages (including Damages
resulting from a claim asserted by a third party) relating to, in connection
with or arising out of:
(i) any of the Retained Liabilities or the Excluded Assets;
(ii) the breach of any covenant or agreement of Mobil contained
herein; or
(iii) the breach of any representation or warranty of Mobil
contained herein.
Notwithstanding the foregoing, this Section 8.1 shall not apply to
any Environmental Costs or Damages arising out of, relating to or in
connection with Environmental Liabilities or to any matters arising under,
relating to or in connection with any Environmental Laws.
8.2 Indemnification by Valero. From and after the Closing, subject to
the further provisions of this Article VIII, Valero shall indemnify, hold
harmless and defend Mobil and its Affiliates and the directors, officers,
employees, agents and representatives of each of them, and all successors and
assigns of the foregoing, against and from any Damages (including any Damages
resulting from a claim asserted by a third party) relating to, in connection
with, or arising out of:
(i) the ownership, use, maintenance and operation of the Purchased
Assets after the Closing.
(ii) the Assumed Liabilities;
(iii) the breach of any covenant or agreement of Valero contained herein;
or
(iv) the breach of any representation or warranty of Valero contained
herein.
Notwithstanding the foregoing, this Section 8.2 shall not apply to any
Environmental Costs or Damages arising out of, relating to or in connection
with Environmental Liabilities or to any matters arising under, relating to or
in connection with any Environmental Laws.
8.3 Tax Indemnification. Mobil shall indemnify, hold harmless and
defend, Valero and its Affiliates and the officers, directors, employees,
agents and representatives and all successors and assigns of the foregoing,
and hold them harmless from all Liabilities for Taxes and Charges relating to
the ownership, use, or operation of the Purchased Assets prior to the
Effective Time. Notwithstanding the foregoing, Mobil shall not indemnify and
hold harmless Valero and its officers, directors, employees, agents, and
representatives, and all successors and assigns of the foregoing, from any
Liabilities for Taxes attributable to any action taken after the Closing by
Valero, any of its Affiliates, or any transferee of Valero or any of the
transferees' Affiliates, or attributable to a breach by Valero after the
Closing of any of its obligations under this Agreement. Valero shall
indemnify, hold harmless and defend Mobil and its Affiliates and the officers,
directors, employees, agents and representatives, and all successors and
assigns of the foregoing, and hold them harmless from all Liabilities for
Taxes and Charges related to the ownership, use, or operation of the Purchased
Assets after the Effective Time. Notwithstanding the foregoing, Valero shall
not indemnify and hold harmless Mobil and its officers, directors, employees,
agents and representatives from any Liabilities for Taxes attributable to any
breach by Mobil after the Closing of any of its obligations under this
Agreement.
8.4 Environmental Liabilities; Indemnification.
8.4.1 Mobil's Limited Environmental Obligations. Except to the extent
of the indemnities set forth in this Section 8.4 and as set forth in Schedule
5.14, from and after Closing, Mobil shall have no obligations or Liabilities
with respect to Environmental Liabilities, whether existing or first occurring
before, on or after the Closing Date.
8.4.2 Valero's Assumption of Environmental Liabilities. As set forth
in Section 2.1.5, from and after the Closing Date, Valero shall assume and be
liable for all Environmental Liabilities whether existing or first occurring
before, on or after the Closing Date and whether or not reflected in the
Environmental Documents, relating to, in connection with or arising out of the
Purchased Assets, including Liabilities relating to (i) non-compliance with
Environmental Law, (ii) Required Remediation of Environmental Conditions,
(iii) Third Party Environmental Claims, (iv) any Governmental Environmental
Fine or Penalty, and (v) the matters set forth on Schedule 5.14. In addition,
and without limiting the effect of the preceding sentence in any way, Valero
shall be liable for and shall indemnify, defend and hold harmless Mobil from
and against all Liabilities and Damages, including Environmental Costs, in
connection with, relating to, or arising out of any Voluntary Remediation.
From and after Closing, Valero shall assume and be liable for all
Environmental Liabilities, in connection with, relating to or arising out of,
Required Remediation of Environmental Conditions, from, under or migrating
from or under the Assets, at the Excluded Assets.
8.4.3 Valero's Release of Mobil. Without limiting the indemnities in
Section 8.4.4, and Schedule 5.14 in consideration of the negotiated amount of
the purchase price, which reflects Valero's assumption of Environmental
Liabilities pursuant to Section 8.4.2 and Valero's environmental
indemnification of Mobil pursuant to Section 8.4.5 and Schedule 5.14, Valero
shall unconditionally, completely and forever release and discharge Mobil, its
Affiliates, and employees, officers, directors, agents and representatives and
all successors and assigns of the foregoing, from all Environmental
Liabilities in connection with the subject matter of, relating to, arising out
of, or covered by the environmental indemnities made by Mobil set forth in
Section 8.4.4 or as set forth on Schedule 5.14, including any such
Environmental Liabilities that could be asserted under Environmental Law or
otherwise, whether such Environmental Liabilities are existing or first
occurring before, on or after the Closing Date.
8.4.4 Environmental Indemnification by Mobil. Notwithstanding anything
to the contrary in this Agreement, this Section 8.4.4 and Schedule 5.14 set
forth Mobil's sole and exclusive obligations with respect to any matters
arising under any Environmental Laws or otherwise relating to the environment,
any Environmental Condition, preservation or reclamation of natural resources,
human health and safety or to the management (including treatment, storage,
disposal or other handling), Release, or threatened Release of Chemical
Substances. Subject to the further provisions of this Article VIII, from and
after the Closing Date, Mobil shall indemnify, hold harmless and defend
Valero, its Affiliates and the directors, officers, employees, agents and
representatives of each of them, and all successors and assigns of the
foregoing, from and against any Environmental Costs incurred by Valero or any
such indemnified party (collectively referred to in the following subsections
as Valero), arising out of:
(i) any Third Party Environmental Claim resulting from events occurring
prior to the Effective Time and either caused by Mobil's operation of the
Assets or as a result of the actions or omissions of any Third Party at or
affecting the Assets prior to the Effective Time; provided, however that:
(a) Mobil shall have no indemnification or defense obligation for
any Environmental Costs relating to any such Third Party Environmental Claim
that is (1) made by a Third Party on or after the fifth anniversary of the
Closing Date, or (2) for any Third Party Environmental Claim that is made by a
Third Party prior to the fifth anniversary of the Closing Date but for which
Mobil has not received written notification from Valero (including a copy of
the Third Party Environmental Claim) of such Third Party Environmental Claim
within fifteen (15) days of such claim being received by Valero (or shorter
period of time if the Claim requires response within a shorter period of
time);
(b) Mobil shall have no indemnification or defense obligation for
any Environmental Costs incurred by Valero prior to Mobil's receipt of written
notice from Valero of such Third Party Environmental Claim;
(c) Valero shall make available all relevant information and
provide timely, reasonable access to all employees related to the Assets,
including the Acquired Employees, with knowledge of any relevant facts, and
shall cooperate fully with Mobil in connection with Mobil's defense of any
such Third Party Environmental Claim. If Valero unreasonably denies Mobil
such access, and Mobil is prejudiced by such denial, Mobil shall have no
indemnification or defense obligation for any Environmental Costs incurred by
Valero relating to such Third Party Environmental Claim; and
(d) Mobil shall have no indemnification or defense obligation for
any Environmental Costs relating to any events occurring after the Effective
Time, provided, however, to the extent any Third Party Environmental Claim is
made relating to events occurring both prior to and after the Effective Time,
Mobil's indemnification obligation for any such Third Party Environmental
Claim shall not exceed that portion of damages resulting from events occurring
prior to the Effective Time, and then shall not include any attorneys' fees or
professional fees incurred by Valero.
(ii) any Governmental Environmental Fine or Penalty levied on Valero and
resulting from Mobil's failure to operate the Assets prior to the Effective
Time in compliance with Environmental Law as in effect and that would have
required compliance on or before the Effective Time; provided, however, that:
(a) Mobil shall have no indemnification or defense obligation for
any Environmental Costs incurred by Valero relating to any such Governmental
Environmental Fine or Penalty: (1) which is imposed on or after the fifth
anniversary of the Closing Date, or (2) for any Governmental Environmental
Fine or Penalty which is imposed prior to the fifth anniversary of the Closing
Date but for which Mobil has not received written notification from Valero
(including a copy of the relevant notice of violation, order , notice of
penalty assessment or other document ("notification") issued by the
Governmental Entity) of such Governmental Environmental Fine or Penalty within
fifteen (15) days of any such notification being received by Valero (or
shorter period of time if the Claim requires response within a shorter period
of time);
(b) Valero shall make available all relevant information and
provide timely, reasonable access to all employees related to the Assets,
including the Acquired Employees, with knowledge of any relevant facts, and
shall cooperate fully with Mobil in connection with Mobil's defense of any
such Governmental Environmental Fine or Penalty. If Valero unreasonably
denies Mobil access, and Mobil is prejudiced by such denial, Mobil shall have
no indemnification or defense obligation for any Environmental Costs incurred
by Valero relating to such Governmental Environmental Fine or Penalty;
(c) Mobil shall have no indemnification or defense obligation for
any Environmental Costs incurred by Valero relating to any such Governmental
Environmental Fine or Penalty prior to Mobil's receipt of written notification
from Valero thereof; and
(d) Mobil shall have no indemnification or defense obligation for
any Environmental Costs relating to any failure to operate the Assets in
compliance with Environmental Law after the Effective Time provided, however,
to the extent any Governmental Environmental Fine or Penalty is levied
relating to any noncompliance occurring both prior to and after the Effective
Time, Mobil's indemnification obligation for any such Governmental
Environmental Fine or Penalty shall not exceed that portion of the
Governmental Environmental Fine or Penalty resulting from any noncompliance
occurring prior to the Effective Time, and then shall not include any
attorneys' fees or professional fees incurred by Valero.
(iii) Required Remediation to address Pre-Closing Environmental
Conditions provided, however, that:
(a) Mobil shall have no indemnification or defense obligation for
any Environmental Costs incurred by Valero in connection with Required
Remediation (i) conducted prior to Mobil's receipt of written and reasonable
advanced notice (together with the specific reasons for conducting such
Remediation) thereof, and (ii) unless Valero has first provided Mobil with (A)
a reasonable opportunity (thirty (30) days or such longer period of time as
may be mutually agreed to by the Parties or such shorter period of time if a
Governmental Entity requires submittal within a shorter time frame) to review
and consult in advance with Valero regarding the Minimum Remediation Method
and the Minimum Remediation Cost therefor, and any and all submittals to the
Governmental Entity, including any work plan or other report, relating to the
Scope or performance of any Required Remediation in advance of the same being
submitted, and (B) a reasonable opportunity to attend (as an observer) any
meetings (including meetings by teleconferences where substantive or
procedural matters (other than scheduling meetings) are discussed) with the
appropriate Governmental Entity relating to Required Remediation. The
requirements of this Subsection 8.4.4(iii)(a) (i) shall not be applicable to
any initial emergency response activities that meet the definition of
Permitted Activities and for which such advanced notice is not reasonably
practicable, provided, however, that such requirements shall be applicable to
any and all Remediation performed after the initial emergency response;
(b) Mobil shall have no indemnification or defense obligation for
any Environmental Costs that exceed the Minimum Remediation Cost for the
Minimum Remediation Method;
(c) The Parties agree to mutually determine, using risk-based
approaches and methodologies and taking into account the types of properties
affected, the Minimum Remediation Method, together with the Minimum
Remediation Cost, prior to Valero submitting any workplans or other documents
relating to Scope or performance of Required Remediation. In the event that
the Parties cannot agree within thirty (30) days (or such longer period of
time as may be mutually agreed to by the Parties, or such shorter period of
time if a Governmental Entity requires submittal within a shorter time frame),
then the Minimum Remediation Method and the Minimum Remediation Cost shall be
determined by a mutually selected Expert. Mobil shall have no indemnification
or defense obligation for any Environmental Costs incurred by Valero until
such final determination is made, and then only to the extent of the Minimum
Remediation Cost. In the event that Valero proceeds to undertake any
Remediation prior to such determination, and if any Expert determines that the
Remediation undertaken by Valero exceeds the Minimum Remediation Method and/or
the Minimum Remediation Cost, any and all Remediation in excess thereof shall
be considered Voluntary Remediation;
(d) Mobil shall have no indemnification or defense obligation for
any Environmental Costs arising out of, in connection with, or in any way
related to any Voluntary Remediation undertaken by or on behalf of Valero;
(e) Mobil shall have no indemnification or defense obligation for
any Environmental Costs incurred by Valero relating to Valero's failure to
perform Required Remediation as required by Environmental Law and/or the
Governmental Entity so requiring any such Required Remediation;
(f) For Required Remediation of Known Environmental Conditions, the
following provisos also apply:
(1) Mobil shall have no indemnification or defense obligation
for any Environmental Costs for Required Remediation of Known Environmental
Conditions incurred by Valero on or after the fifth anniversary of the Closing
Date; after which time Valero shall indemnify Mobil for the same as more fully
set forth in Section 8.4.5;
(2) Mobil shall have no indemnification or defense
obligation for any Environmental Costs incurred by Valero arising out of any
Required Remediation with respect to which Mobil has not received a written
claim from Valero (specifying in reasonable detail the basis for such claim)
on or before the fifth anniversary of the Closing Date; and
(3) Mobil shall have no indemnification or defense
obligation for any Environmental Costs incurred by Valero unless the aggregate
Environmental Cost for Required Remediation using the Minimum Remediation
Method at the Minimum Remediation Cost exceeds the following cumulative,
aggregate thresholds during the specified time frames and then, only to the
extent of the excess: (1) from the Closing Date and up to the first
anniversary of the Closing Date, $750,000, (2) after the first anniversary and
up to the second anniversary of the Closing Date, $1,500,000, (3) after the
second anniversary and up to the third anniversary of the Closing Date,
$2,250,000, (4) after the third anniversary and up to the fourth anniversary
of the Closing Date, $3,000,000, and (5) after the fourth anniversary and up
to the fifth anniversary of the Closing Date, $3,750,000. Valero shall be
liable for, indemnify and defend Mobil from and against each and every of the
foregoing Environmental Costs represented by the foregoing aggregate threshold
amounts as more fully set forth in Section 8.4.5.
(g) For Required Remediation of Unknown Environmental Conditions,
the following provisos also apply:
(1) Mobil shall have no indemnification or defense
obligation for any Environmental Costs for Required Remediation of Unknown
Environmental Conditions incurred by Valero on or after the seventh
anniversary of the Closing Date; after which time Valero shall indemnify Mobil
for the same as more fully set forth in Section 8.4.5;
(2) Mobil shall have no indemnification or defense
obligation for any Environmental Costs incurred by Valero arising out of any
Required Remediation with respect to which Mobil has not received a written
claim from Valero (specifying in reasonable detail the basis for such claim)
on or before the seventh anniversary of the Closing Date;
(3) Mobil shall have no indemnification or defense
obligation for any Environmental Costs incurred by Valero unless the aggregate
Environmental Cost for Required Remediation using the Minimum Remediation
Method at the Minimum Remediation Cost exceeds the following cumulative,
aggregate thresholds during the specified time frames, and then only to the
extent of the sharing percentages set forth in subsection 8.4.4(iii)(g)(4)
below: (i) from the Closing Date and up to the third anniversary of the
Closing Date, $450,000, (ii) after the third anniversary and up to the fifth
anniversary of the Closing Date, $750,000, and (iii) after the fifth
anniversary and up to the seventh anniversary of the Closing Date, $1,050,000.
Valero shall be liable for, indemnify, and defend Mobil from and against each
and every of the foregoing Environmental Costs represented by the foregoing
aggregate threshold amounts as more fully set forth in Section 8.4.5;
(4) Mobil shall have no indemnification or defense
obligation for any Environmental Costs incurred by Valero unless the aggregate
Environmental Costs have first exceeded the thresholds specified in subsection
8.4.4(iii)(g)(3) above, and then only to the extent set forth as follows: (i)
from the Closing Date and up to the third anniversary of the Closing Date,
only for 85% of the Environmental Costs incurred by Valero in excess of the
first $450,000 and up to $100,000,000, (ii) after the third anniversary and up
to the fifth anniversary of the Closing Date, only for 50% of the
Environmental Costs incurred by Valero in excess of the first $750,000 and up
to $100,000,000, and (iii) after the fifth anniversary and up to the seventh
anniversary of the Closing Date, only for 15% of the Environmental Costs
incurred by Valero in excess of the first $1,050,000 and up to $100,000,000.
Valero shall indemnify Mobil for the remaining percentages above the first
thresholds ("Remaining Percentages") during each of the specified time frames
as more fully set forth in Section 8.4.5; and
(5) From the Closing Date and up to the seventh
anniversary of the Closing Date, and subject to the provisions of this Article
VIII, including 8.4.4(iii)(g)(3) and (4) above, Mobil shall also (in addition
to its indemnification obligation pursuant to Section 8.4.4(iii)(g)(4))
indemnify Valero for any Environmental Costs in excess of $100,000,000
incurred by Valero in connection with Required Remediation of Unknown
Environmental Conditions.
(h) Impact of Post-Closing Releases Requiring Remediation. Without
limiting in any way Valero's indemnities pursuant to Section 8.4.5 and
Schedule 5.14 hereof, if a Release, discharge, leak, migration or spill of
Chemical Substances occurs in or on the soil, surface water or groundwater on,
under or from the Real Property Assets after the Closing Date (Post-Closing
Environmental Condition) and during the effective time periods for Mobil's
indemnities for Required Remediation provided in this Section 8.4.4, Valero
shall promptly notify Mobil and shall act promptly to minimize the effect of
any such Release, discharge, leak, migration or spill. If Mobil reasonably
determines that the effect of any such Post-Closing Environmental Condition
increases the cost of or extends the duration of the Required Remediation,
Valero and Mobil shall mutually determine, and if the Parties cannot agree, a
mutually selected Expert shall determine the effect of the Post-Closing
Environmental Condition on the Scope of the Required Remediation. Valero and
Mobil, as the case may be, or the Expert shall estimate the cost of the
additional Remediation that will be required due to the Post- Closing
Environmental Condition. Valero shall be liable for and indemnify and defend
Mobil from and against (as more fully set forth in Section 8.4.5) any and all
Damages, including such costs of Remediation associated with the Post-Closing
Environmental Condition and such costs shall not be included in the
Environmental Costs that are covered by the indemnities for Required
Remediation, provided, however, that (i) such Remediation costs are limited to
the minimum cost necessary to implement the minimum method of Remediation
allowable under, and which satisfies the requirements of, Environmental Laws
in effect at the time of such Remediation, as such may be modified on a
case-by-case basis by the appropriate Governmental Entity to achieve the least
stringent remediation standard or clean-up criteria for the type of property
affected consistent with its actual use at the Closing Date, and (ii) any
claims are otherwise handled in accordance with the claims procedures in
Section 8.6.
(i) Post-Closing Excluded Condition. During the effective time
periods for Mobil's indemnities for Required Remediation provided in this
Section 8.4.4, and without limiting in any way Mobil's indemnities pursuant to
Section 8.4.4, Mobil shall promptly notify Valero and shall promptly take
reasonable measures at the Excluded Assets to minimize the effects of any
Post-Closing Excluded Condition (defined below). If Valero reasonably
determines that the effect of any such Post-Closing Excluded Condition
increases the cost of or extends the duration of any Required Remediation,
Valero and Mobil shall mutually determine, and if the Parties cannot
determine, a mutually selected Expert shall determine, the effect of the
Post-Closing Excluded Condition, including its impact on the Scope of the
Required Remediation. Mobil and Valero or, as the case may be, the Expert,
shall estimate the cost of any additional Remediation that will be required
due to the Post-Closing Excluded Condition. Mobil shall defend, indemnify and
hold harmless Valero for any and all Damages, including costs of additional
Remediation, associated with the Post-Closing Excluded Condition; provided
however, that (i) such Remediation costs are limited to the minimum cost
necessary to implement the minimum method of Remediation allowable under, and
which satisfies the requirements of, Environmental Laws in effect at the time
of such Remediation, as such may be modified on a case-by-case basis by the
appropriate Governmental Entity to achieve the least stringent remediation
standard or clean-up criteria for the type of property affected consistent
with its actual use at the Closing Date, and (ii) any claims are otherwise
handled in accordance with the claims procedures in Section 8.6.
For purposes of this subsection 8.4.4(iii)(i), "Post-Closing
Excluded Condition" shall mean any of the following caused by or resulting
from the operations of the facilities on the Excluded Assets after Closing by
or on behalf of Mobil or its Affiliates (other than by or on behalf of Valero
and its Affiliates): (i) any Environmental Condition at the Real Property
Assets caused by, resulting from or exacerbated as a result of migration or
movement of Chemical Substances to the Real Property Assets after Closing, or
(ii) exacerbation of the Scope of Required Remediation undertaken by or on
behalf of Valero at the Excluded Assets to address any migration or movement
of Chemical Substances on, under or from the Real Property Assets onto or
beyond the Excluded Assets.
(iv) Minimum Required Capital Expenditures in the event that a Minimum
Required Capital Expenditure is required to cure a breach of Mobil's
representation and warranty set forth in Sections 5.14, provided, however,
that:
(a) Valero shall provide to Mobil (i) reasonable advance notice of
any planned activities (including any investigation) in connection with any
Minimum Required Capital Expenditure, together with the specific reasons for
conducting such activities, and (ii) the opportunity for Mobil to participate
in any such activities;
(b) Mobil shall have no indemnification obligation for any
Environmental Costs for Minimum Required Capital Expenditures to the extent
that such Environmental Costs exceed the minimum cost necessary to comply with
Environmental Law as in effect and requiring compliance on or before the
Closing Date as such Environmental Law applies to the operations of the
Assets, in the same manner as they were operated under Mobil's Past Operating
Standards;
(c) Mobil shall have no indemnification obligation for any
Environmental Cost for Minimum Required Capital Expenditures with respect to
which Mobil has not received a written claim from Valero (specifying in
reasonable detail the basis for such expenditure) within three years following
the Closing Date and which has not been incurred within such three year
period;
(d) Mobil shall have no indemnification obligation for any
Environmental Costs for Minimum Required Capital Expenditures unless the
aggregate amount of Environmental Costs under this Section 8.4.4(iv) exceeds
$200,000, and then, only to the extent that Mobil and Valero mutually
reasonably determine (or, if the Parties cannot agree, as determined by a
mutually selected Expert) that the aggregate claim made by Valero exceeds such
$200,000, and then only to the extent of the Minimum Required Capital
Expenditure;
(e) The Parties agree that this Minimum Required Capital
Expenditure indemnity is Valero's sole remedy for any breach of Mobil's
representation and warranty relating to compliance with Environmental Law
pursuant to Section 5.14, except in the event that any such breach is based on
any Fraudulent Misrepresentation by Mobil.
(v) Any Liabilities or Damages incurred by Valero in connection with,
arising out of, or relating to
(a) Off-Site Disposal Activities performed by or on behalf of
Mobil prior to the Effective Time, or
(b) solely as a result of Valero being or having been a record
title holder of the Retained Areas.
(vi) Notwithstanding any other provision of this Agreement to the
contrary, Mobil shall have no indemnification or defense obligation for any
Environmental Costs incurred by Valero, in connection with, relating to or
arising out of:
(a) actions or omissions by or on behalf of Valero, its Affiliates
or any third party at or affecting the Purchased Assets at any time after the
Effective Time, including (1) any change in the operations of the Assets after
the Closing, including the reconfiguration of any process units, the change in
any use of the Assets from the manner and extent to which they were being used
in connection with Mobil's Past Operating Standards, or the cessation of all
or a part of the operations of the Assets or the removal or demolition of all
or part of the Assets, and (2) any exacerbation, excavation or management
(including treatment, storage or disposal or other handling), whether
resulting in on-site or off-site impacts after the Closing of any
Environmental Condition existing prior to the Closing Date, except to the
extent that any such activity or cessation is pursuant to (i) Required
Remediation using the Minimum Remediation Method at the Minimum Remediation
Cost, or (ii) installation or reconfiguration or removal of equipment meeting
the requirements of a Minimum Required Capital Expenditure in the event that
such expenditure is triggered under this Agreement;
(b) any claim for consequential damages, including lost profits or
loss of production except for third party claims as provided in Section
8.5(i);
(c) any Damages relating to or arising out of Valero's failure to
comply with the Valero Consent Order.
(vii) For purposes of Section 8.4.4 and Schedule 5.14, where Mobil is the
indemnified party, the term "Mobil" shall include Mobil and its Affiliates and
the directors, officers, employees, agents and representatives, and all
successors and assigns of the foregoing.
8.4.5 Environmental Indemnification by Valero. From and after the
Closing Date, Valero shall indemnify, hold harmless and defend Mobil, its
Affiliates and their respective directors, officers, employees, agents and
representatives, and all successors and assigns of the foregoing, against and
from any Damages or Environmental Liabilities incurred by any such indemnified
party, other than for which indemnification is specifically provided by Mobil
pursuant to Section 8.4.4 and Schedule 5.14, as follows:
(i) subject to Mobil's indemnities provided in Section 8.4.4, any
Damages incurred in connection with the Environmental Liabilities assumed by
Valero;
(ii) any Damages incurred in connection with, relating to or arising out
of the operations or activities or omissions of Valero or any third party at
or affecting the Assets at any time after the Closing Date, including: (1)
any change in the operations of the Assets after the Closing Date, including
the reconfiguration of any process units, the change in any use of the Assets
from the manner and extent to which they were being used under Mobil's Past
Operating Standards, or the cessation of all or a part of the operations of
the Assets or the removal or demolition of all or part of the Assets; (2) any
exacerbation, excavation or management (including treatment, storage, disposal
or other handling) of or contribution to, after the Closing Date, (whether
resulting in on-site or off-site impacts) of any Environmental Condition
existing prior to the Closing Date; (3) any breach of Valero's covenants and
agreements and representations and warranties in Sections 6.5, 6.7, 7.3, 7.4,
7.5, 7.6, 7.7, 7.19 and Schedule 5.14; and (4) Valero's failure to comply with
any transferred, assigned or reissued environmental Permits, the Valero
Consent Order, or the other Judgments or Proceedings identified on Schedule
2.1.5 whether such obligations were assumed by Valero pursuant to this
Agreement or the Related Agreements or whether first occurring on or after the
Closing Date;
(iii) any Damages incurred in connection with, relating to or arising out
of any Voluntary Remediation performed by or on behalf of Valero, whether
on-site or off-site; and
(iv) except to the extent of Mobil's indemnity obligation to Valero
therefor, any Damages incurred in connection with, relating to or arising out
of any Required Remediation of Environmental Conditions existing on or before
the Closing Date, including any and all Damages for (1) the initial aggregate
thresholds excluded from Mobil's indemnity obligation to Valero in Sections
8.5.4(iii)(f) and (g), (2) the Remaining Percentages excluded from Mobil's
indemnification obligation to Valero in Section 8.5.4(iii)(f), (3) Required
Remediation of Known Environmental Conditions on and after the fifth
anniversary of the Closing Date, and (4) Required Remediation of Unknown
Environmental Conditions on and after the seventh anniversary of the Closing
Date.
8.5 Interpretation. The provisions of Sections 8.1, 8.2, 8.3, and 8.4
shall be interpreted in accordance with, and shall be in all respects subject
to, the following provisions:
(i) Except as provided in the following sentence, in no event shall any
indemnity pursuant to Sections 8.1, 8.2, 8.3, or 8.4 include any incidental,
consequential, indirect, special or punitive damages. Any indemnity, however,
pursuant to Sections 8.1, 8.2, 8.3, or 8.4 shall include any incidental,
consequential, indirect, special or punitive damages recovered by any Third
Party pursuant to a claim against an Indemnified Party.
(ii) EXCEPT AS PROVIDED IN THIS AGREEMENT, IT IS THE EXPRESS INTENTION OF
THE PARTIES HERETO THAT EACH PARTY TO BE INDEMNIFIED HEREUNDER SHALL BE
INDEMNIFIED AND HELD HARMLESS AGAINST ANY AND ALL MATTERS AS TO WHICH
INDEMNIFICATION IS PROVIDED FOR HEREUNDER, NOTWITHSTANDING THAT ANY SUCH
MATTERS ARISE OUT OF OR RESULT FROM THE ACTUAL OR ALLEGED ORDINARY, SOLE OR
CONTRIBUTORY NEGLIGENCE OR STRICT LIABILITY OF SUCH PARTY AND REGARDLESS OF
WHETHER ANOTHER PARTY TO THIS AGREEMENT OR ANY THIRD PARTY IS OR IS NOT ALSO
NEGLIGENT.
8.6 Claims Procedures. All rights of a Party to indemnification under this
Article VIII shall be asserted and resolved as follows:
(i) With respect to third party claims, including Third Party
Environmental Claims, and any Governmental Environmental Fine or Penalty,
within fifteen (15) days after receipt by a Party entitled to indemnification
under Sections 8.1, 8.2, 8.3, or 8.4 (an "Indemnified Party") of notice of any
pending or threatened claim, such Indemnified Party shall give notice to the
Party to whom the Indemnified Party is entitled to look for indemnification
(the "Indemnifying Party") of the commencement thereof. The Indemnifying
Party shall have fifteen (15) days from the receipt of the notice from the
Indemnified Party to notify the Indemnified Party whether or not the
Indemnifying Party disputes the liability of the Indemnifying Party to the
Indemnified Party hereunder with respect to such claim or demand. All costs
and expenses incurred by the Indemnifying Party in defending such claim or
demand shall be a liability of, and shall be paid by, the Indemnifying Party.
(ii) An Indemnifying Party shall assume the defense of such third party
claims, including any Third Party Environmental Claims, and any Governmental
Environmental Fine or Penalty with counsel reasonably satisfactory to the
Indemnified Party. Except as provided below, the Indemnifying Party shall not
be liable to the Indemnified Party under this Article VIII for any fees of
other counsel or any other expenses, incurred by such Indemnified Party in
connection with the defense thereof. Notwithstanding an Indemnifying Party's
assumption of defense, and except as provided in Section 8.4 and Schedule
5.14, the Indemnified Party shall have the right to employ separate counsel
and to participate in the defense of such claim, provided, however, the
Indemnifying Party shall only bear the reasonable fees, costs and expenses of
such separate counsel if the actual or potential defendants in, or targets of,
any such claim include both the Indemnifying Party and the Indemnified Party,
and the Indemnified Party shall have reasonably concluded that there may be
legal defenses available to it which are different from or additional to those
available to the Indemnifying Party (in which case the Indemnifying Party
shall not have the right to assume the defense of such claim on the
Indemnified Party's behalf). An Indemnifying Party shall not compromise or
settle a claim without the Indemnified Party's written consent unless (a)
there is no finding or admission of any violation of law or any violation of
the rights of any Person and the compromise or settlement will have no effect
on any other claims on the same subject matter that may be made against the
Indemnified Party and (b) the sole relief provided is monetary damages that
are to be paid in full by the Indemnifying Party.
(iii) With respect to claims for indemnification of Environmental
Costs incurred by Valero in connection with Required Remediation of
Pre-Closing Environmental Conditions to which Valero is entitled under Section
8.4.4(iii), within thirty (30) days of the end of the calendar month in which
payment of an invoice occurred for which Valero is seeking indemnification and
no more frequently than once per month, Valero shall submit the following
information in writing to Mobil:
(a) the amount of the claim;
(b) copies of all invoices covered by the claim;
(c) a reasonable description of the work performed or cost incurred
covered by the claim, including identifying the work plan and whether the
claim relates to a Known or Unknown Environmental Conditions; and
(d) a year-to-date and aggregate recap of all prior Environmental
Costs by Remediation project incurred by Valero and/or indemnified by Mobil
for Required Remediation using the Minimum Remediation Method at the Minimum
Remediation Cost.
Mobil shall have thirty (30) days from receipt of the claim to
notify Valero whether or not Mobil disputes its liability to Valero hereunder
with respect to the claim. If Mobil does not dispute any portion of the
claim, it shall pay the claim within thirty (30) days of receipt of the
invoice, provided Valero has met its deductible as set out in Section
8.4.4(iii). Should the Parties not agree on a resolution within fifteen (15)
days (or longer if the Parties so agree), then the dispute shall be referred
to an Expert.
(iv) Except as provided in Section 9.13, with respect to claims of breach
("Breach") of any representation, warranty, covenant or agreement hereunder
other than as described in Section 8.4.4(iv), 8.6(i), 8.6(ii) or 8.6(iii),
each Party shall have thirty (30) days from its receipt of a written notice
from the other Party asserting such claim of Breach to (a) admit its liability
for such Breach, or (b) dispute the claim of Breach. Such written notice
shall describe in reasonable detail the nature of the claim of Breach, an
estimate of the amount of damages attributable to such claim of Breach and the
basis for the request for indemnification hereunder. If the Party receiving
such notice of claim of Breach does not notify the Party sending such notice
within such thirty (30) day period or that it disputes the claim for such
Breach, the Party sending such notice of claim may submit the claim for
arbitration in accordance with Section 9.12. Payment of all amounts owing by
a Party pursuant to Section 8.6 (iv) shall be made at the later of (i) the
expiration of the thirty (30) day period referenced above or (ii) within
thirty (30) days after an arbitration decision has become final under the
Rules (as defined in Section 9.12.
8.7 Survival of Representations and Warranties; Limitation of Liability;
Subrogation.
(i) Notwithstanding any investigation conducted or notice or knowledge
obtained by or on behalf of a Party, each representation, warranty, and the
agreements and covenants in Article VII and Schedules 5.14 and 6.4 of Mobil
contained in this Agreement and any certificates delivered pursuant to this
Agreement and each claim and cause of action with respect thereto, which is
not by its terms required to be fully performed or does not by its terms
expire on or prior to the Closing Date, shall survive the Closing for a period
of twelve (12) months unless by its terms it expires on a later date; provided
however, that the representation in Section 5.14 shall survive the Closing for
a period of thirty-six (36) months. Notwithstanding the foregoing, Mobil's
covenants and agreements contained in Sections 7.10, 7.11, 7.15.2 and 7.23
shall not expire. Each representation, warranty, and the agreements and
covenants in Article VII and Schedules 5.14 and 6.4 of Valero in this
Agreement shall have no expiration date except as expressly stated.
Notwithstanding the foregoing, the covenants and agreements of Valero in
Section 7.12 shall survive the Closing for a period of twelve (12) months. No
action for indemnity may be brought pursuant to this Agreement with respect to
any such representations, warranties, covenants or agreements unless a notice
of claim for such indemnity specifying the breach of the representation,
warranty, covenant or agreement forming the basis of such claim has been
delivered to the Indemnifying Party prior to the date on which such
representation, warranty, covenant or agreement expires.
(ii) In the event that an Indemnified Party has a right against a Third
Party with respect to any Damages paid to such Indemnified Party by an
Indemnifying Party, then such Indemnifying Party shall, to the extent of such
payment, be subrogated to the rights of such Indemnified Party.
8.8 Joint Defense Privilege. With respect to all Proceedings for which
Mobil has a defense obligation and until such time as Mobil satisfies such
obligation, the Parties shall maintain a joint defense privilege, where
applicable, in connection with such Proceedings for Mobil's and Valero's
post-Closing communications and those of their respective Affiliates, agents,
consultants, contractors and employees, which post-Closing communications
concern the matters subject to any such defense obligation.
ARTICLE IX
MISCELLANEOUS
9.1. Bulk Transfer Laws. Valero acknowledges that Mobil has not taken,
and does not intend to take, any action required to comply with any applicable
bulk sale or bulk transfer laws or similar laws and Valero waives the right to
any claim, suit or action with respect to, or damages arising from such
non-compliance.
9.2. 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: (a) when
received, if personally delivered; (b) 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 (c) 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 Energy Corporation
Post Office Box 500
San Antonio, Texas 78292-0500
Attention: General Counsel
Facsimile: 210-370-2490
(ii) if to Mobil, to:
Mobil Oil Corporation
3225 Gallows Road
Fairfax, Virginia 22037
Attention: Managing Counsel - Global OLC
Facsimile: 703-846-2316
or to such other address as Mobil or Valero shall have specified by notice in
writing to the others in the manner specified in this Section.
9.3. Entire Agreement. This Agreement (including the Exhibits and
Schedules hereto, which are hereby incorporated in the terms of this
Agreement) and the Related Agreements set forth the entire understanding and
agreement among the Parties as to matters covered herein and supersedes any
prior understanding, agreement or statement of intent (whether written or
oral) among the Parties with respect to the subject matter hereof.
9.4 Priority. To the extent there is a conflict between the terms of
this Agreement and any of the Related Agreements, the terms of this Agreement
shall prevail, except as provided on Schedule 9.4.
9.5. Third-Party Rights. This Agreement is for the sole benefit 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.
9.6. Assignability. This Agreement shall not be assignable by any
Party without the prior written consent of the other Party.
9.7. Waiver and Amendment. Except as provided herein, no waiver shall
be deemed to have been made by any Party of any of its rights under this
Agreement unless the same is in writing and is signed on its behalf by its
authorized officer. 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 or modification of this
Agreement must be effected by an instrument in writing signed by the Parties.
9.8. 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.
9.9. 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.
9.10 Consent to Jurisdiction; Waivers. Subject to Sections 9.11 and
9.12, each of the Parties hereto irrevocably submits to the exclusive
jurisdiction of (a) the Supreme Court of the State of New York, New York
County, 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 this Agreement, any Related Agreement or any transaction contemplated
hereby or thereby. Each of the Parties hereto agrees to commence any action,
suit or proceeding relating hereto 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 above
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 Section 9.10. 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 this Agreement, any Related Agreement or the
transactions contemplated hereby or 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. EACH OF THE PARTIES HERETO IRREVOCABLY AND
UNCONDITIONALLY WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY RIGHT
IT MAY HAVE TO CLAIM OR RECOVER IN ANY ACTION, SUIT OR PROCEEDING ANY SPECIAL,
EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES, EXCEPT AS PROVIDED IN SECTION
8.5(i).
9.11 WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO IRREVOCABLY AND
UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY ACTION, SUIT OR PROCEEDING
RELATING TO THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY AND FOR ANY
COUNTERCLAIM WITH RESPECT THERETO.
9.12. Arbitration. 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, or otherwise arising out
of, or in any way related to, this Agreement including any claim based in
contract, tort, statute or constitution, shall be determined, except as
otherwise provided in Section 9.13 at the request of any Party, by arbitration
conducted in New York, NY, before and in accordance with the then-existing
Rules for Complex Arbitration (the "Rules") of the American Arbitration
Association (the "AAA"), 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 pursuant to
this Section 9.12. 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 Section
9.12, "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 AAA. 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 Section 9.12 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 (subject to the limitation on consequential damages in
Section 8.5). The provisions of this Section 9.12 shall not apply to any
dispute between the Parties to be resolved by an Expert.
9.13 Equitable Relief. Notwithstanding any other provision of this
Agreement, it is understood and agreed that the remedy of indemnity monetary
payments pursuant to this Agreement may be inadequate in the case of any
breach by Valero of any of its covenants contained herein and 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, pursuant to Section
9.10, shall be entitled to preliminary equitable relief. Further, if Mobil
has a claim for specific performance or other injunctive relief, and pursuant
to Section 9.12, the arbitrators are not impaneled for thirty (30) days, Mobil
shall be entitled to seek relief pursuant to Section 9.10.
9.14 Headings. The headings referenced herein including any Schedules
and Exhibits, and the Table of Contents hereto are for convenience purposes
only, do not constitute a part of this Agreement and shall not be deemed to
limit or affect any of the provisions hereof.
9.15 Schedules and Exhibits. The disclosure of any matter in any
Schedule or Exhibit shall be deemed to be a disclosure for all purposes of
this Agreement to which such matter could reasonably be expected to be
pertinent, but shall expressly not be deemed to constitute an admission by
Mobil or Valero or to otherwise imply that any such matter is material for the
purposes of this Agreement.
9.16 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 Person or any
circumstance, is invalid or unenforceable, (a) 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 (b) the remainder of this Agreement and the
application of such provision to other Persons 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.
9.17 Brokers. Each Party hereby represents and warrants that no
brokers or finders have acted for such Party in connection with this
Agreement, any Related Agreement or the transactions contemplated hereby or
thereby and that no brokers or finders are entitled to any brokerage fee,
finder's fee or commission in respect thereof.
9.18 Expert Procedure. Where it is provided herein that a matter in
dispute may or shall be referred to an Expert or in the event of any dispute
between the Parties relating to this Agreement and the Parties agree that such
dispute may be settled by utilizing the services of an Expert, the dispute
shall be referred to, and determined by, an Expert in accordance with the
provisions of this Section 9.18.
9.18.1 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.
The Parties and Expert shall treat all aspects of the determination, including
all verbal and written communications as strictly confidential. The Parties
shall require the Expert to execute a confidentiality agreement prior to
implementing the terms of this Expert procedure.
9.18.2 The reference to an Expert will 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 9.18.
9.18.3 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.
9.18.4 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 each appoint an Expert and such Experts so
appointed will within a period of twenty (20) days of the Date of Reference
jointly appoint the Expert to whom the matter in dispute shall be referred as
soon thereafter as practicable in the circumstances.
9.18.5 If a Party fails to appoint an Expert in accordance with the
preceding Section 9.18.4 and only one Expert has been appointed, then Expert
shall be deemed to be the Expert appointed pursuant to the provisions of this
Section 9.18 and the matter in dispute shall be referred to such Expert
accordingly.
9.18.6 If the Experts appointed by the Parties under Section 9.18.4 fail
to appoint an Expert within twenty (20) days of the Date of Reference, any of
the Parties may ask the then President of the AAA 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.
9.18.7 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.
9.18.8 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. 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.
9.18.9 The Expert's opinion 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.
IN WITNESS WHEREOF, the Parties hereto have executed and delivered this
Agreement as of the date first above written.
VALERO REFINING COMPANY - NEW JERSEY
By: /s/ Gregory C. King
Name: Gregory C. King
Title: Vice President
MOBIL OIL CORPORATION
By: /s/ R.J. Kruep
Name: R.J. Kruep
Title: Attorney-in-Fact
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, 945 East Paces Ferry Road,
Atlanta, Georgia 30326.
"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 1201 Elm Street, Dallas, Texas, 75270.
"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.
"Platt's" shall mean "Platt's 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 Reid 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 A. Valero 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 Bill 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
500 Dallas Street, Suite 3200
Houston, Texas 77002
Attention: V.P. Marketing
Facsimile: 713-393-5486
(ii) if to Mobil, to:
Mobil Oil Corporation
3225 Gallows Road
Fairfax, Virginia 22037
Attention: Manager Supply Programs and Inventory Management
Facsimile: 703-846-6176
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 703-846-3002, and in the case of Valero, to the Light
Products Coordinator at the Refinery and at facsimile number 609-224-2050 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. Eugene Edwards By: /s/ R.J. Kruep
Name: S. Eugene Edwards Name: R.J. Kruep
Title: Senior Vice President Title: Attorney-in-Fact
PURCHASE AND SALES AGREEMENT
FOR
LUBRICANT BASE OILS
BETWEEN
VALERO MARKETING AND SUPPLY COMPANY
AND
MOBIL OIL CORPORATION
Dated September 16, 1998
TABLE OF CONTENTS
ARTICLE I - DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . 1
RULES OF INTERPRETATION. . . . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE II - -AGREEMENT TO PURCHASE; TERM. . . . . . . . . . . . . . . . 5
2.1 Purchase of Products . . . . . . . . . . . . . . . . . . . . . . . .5
2.2 Valero's Obligation. . . . . . . . . . . . . . . . . . . . . . . . .5
2.3 Inhaul . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
2.4 Term.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
2.5 Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
2.6 Default. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
ARTICLE III - PROGRAMMING OF DELIVERIES. . . . . . . . . . . . . . . . . 7
3.1 Annual Forecast. . . . . . . . . . . . . . . . . . . . . . . . . . .7
3.2 Annual Production Plan . . . . . . . . . . . . . . . . . . . . . . .8
3.3 Annual Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . .8
3.4 Monthly Requirements . . . . . . . . . . . . . . . . . . . . . . . .8
3.5 Monthly Production Plan. . . . . . . . . . . . . . . . . . . . . . .8
3.6 Monthly Meeting. . . . . . . . . . . . . . . . . . . . . . . . . . .8
3.7 Weekly Inventory and Production Schedule . . . . . . . . . . . . . .8
ARTICLE IV - SCHEDULING PROCEDURES . . . . . . . . . . . . . . . . . . . 9
4.1 Marine Provisions. . . . . . . . . . . . . . . . . . . . . . . . . .9
4.2 Daily LOBP Base Oil Transfer Schedule. . . . . . . . . . . . . . . .9
4.3 Schedule Changes . . . . . . . . . . . . . . . . . . . . . . . . . .9
ARTICLE V - PRICE. . . . . . . . . . . . . . . . . . . . . . . . . . . .10
5.1 Price Structure. . . . . . . . . . . . . . . . . . . . . . . . . . 10
5.2 Non-Standard Product Price . . . . . . . . . . . . . . . . . . . . 10
5.3 Review of Pricing Methodology. . . . . . . . . . . . . . . . . . . 10
ARTICLE VI - REDUCTION OF VOLUMES, CAPITAL PROJECTS
AND CRUDE OILS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
6.1 Reduction Of Volumes . . . . . . . . . . . . . . . . . . . . . . . 10
6.2 Capital Projects . . . . . . . . . . . . . . . . . . . . . . . . . 11
6.3 Additions To Mobil Approved Crude Oils . . . . . . . . . . . . . . 11
6.4 Arab Light Crude Oil . . . . . . . . . . . . . . . . . . . . . . . 11
6.4.1 Mobil's Lubricant Crude Oil Supply Contract. . . . . . . . . . 11
6.5 Intentionally Omitted . . . . . . . . . . . . . . . . . . . . . . .12
ARTICLE VII - PAYMENT. . . . . . . . . . . . . . . . . . . . . . . . . .15
7.1 Invoicing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
7.2 Payment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
7.3 Late Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . 15
7.4 Disputed Invoices. . . . . . . . . . . . . . . . . . . . . . . . . 15
7.5 Other Payments . . . . . . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE VIII - WARRANTY, QUANTITY AND QUALITY
DETERMINATIONS,. . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
8.1 Industry Certifications. . . . . . . . . . . . . . . . . . . . . . 16
8.2 Warranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
8.3 Disclaimer . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
8.4 Quality Determinations . . . . . . . . . . . . . . . . . . . . . . 17
8.5 Semi-Annual Quality Review Meetings. . . . . . . . . . . . . . . . 17
8.6 Quantity Determinations. . . . . . . . . . . . . . . . . . . . . . 18
8.6.1 Wharf Quantities . . . . . . . . . . . . . . . . . . . . . . . 18
8.6.2 LOBP Quantities. . . . . . . . . . . . . . . . . . . . . . . . 18
8.6.3 Meters . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
8.6.4 Out of Service Meters. . . . . . . . . . . . . . . . . . . . . 18
8.7 Valero's Off-Spec Product. . . . . . . . . . . . . . . . . . . . . 19
8.7.1 Notification. . . . . . . . . . . . . . . . . . . . . . . . . 19
8.7.2 Costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
8.7.3 Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
8.7.4 Additional Costs.. . . . . . . . . . . . . . . . . . . . . . . 19
8.7.5 Mis-Deliveries . . . . . . . . . . . . . . . . . . . . . . . . 20
8.8 Waiver for Off-Spec Product. . . . . . . . . . . . . . . . . . . . 20
8.9 Off-Spec Inhauls . . . . . . . . . . . . . . . . . . . . . . . . . 20
8.9.1 Notification. . . . . . . . . . . . . . . . . . . . . . . . . 20
8.9.2 Costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
8.9.3 Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
8.10 Waiver for Off-Spec Inhauls . . . . . . . . . . . . . . . . . . . 20
ARTICLE IX - TRANSFER OF TITLE, RISK OF LOSS AND
INCORRECT DELIVERY . . . . . . . . . . . . . . . . . . . . . . . . . . 21
9.1 Transfer of Title. . . . . . . . . . . . . . . . . . . . . . . . . 21
9.2 Under-Deliveries . . . . . . . . . . . . . . . . . . . . . . . . . 21
9.2.1 LOBP Deliveries. . . . . . . . . . . . . . . . . . . . . . . . 21
9.2.2 Wharf Deliveries . . . . . . . . . . . . . . . . . . . . . . . 21
9.3 Waiver of Under-Deliveries . . . . . . . . . . . . . . . . . . . . 22
9.4 Physically Unable. . . . . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE X
FORCE MAJEURE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
10.1 Excuse from Obligations; Definition . . . . . . . . . . . . . . . 22
10.2 Notice. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
10.3 Duty To Mitigate. . . . . . . . . . . . . . . . . . . . . . . . . 22
10.4 Sales Allocation. . . . . . . . . . . . . . . . . . . . . . . . . 23
10.5 No Make Up Volumes. . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE XI - CONFIDENTIALITY . . . . . . . . . . . . . . . . . . . . . .23
11.1 No Disclosures. . . . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE XII - RESOLUTION OF DISPUTES . . . . . . . . . . . . . . . . . .23
12.1 Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
12.2 Equitable Relief. . . . . . . . . . . . . . . . . . . . . . . . . 24
12.3 Expert Proceedings. . . . . . . . . . . . . . . . . . . . . . . . 25
12.3.1 Qualifications. . . . . . . . . . . . . . . . . . . . . . . . 25
12.3.2 Notice. . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
12.3.3 Time Frames . . . . . . . . . . . . . . . . . . . . . . . . . 25
12.3.4 Expert's Determination. . . . . . . . . . . . . . . . . . . . 26
12.3.5 Continuance of Agreement. . . . . . . . . . . . . . . . . . . 26
12.3.6 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . 26
ARTICLE XIII - MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . .26
13.1 Hazardous Warning Responsibilities. . . . . . . . . . . . . . . . 26
13.2 Assignment. . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
13.3 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . 26
13.4 Waiver and Amendment. . . . . . . . . . . . . . . . . . . . . . . 26
13.5 Claims. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
13.6 No Consequential Damages. . . . . . . . . . . . . . . . . . . . . 27
13.7 Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
13.8 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
13.9 Entire Agreement. . . . . . . . . . . . . . . . . . . . . . . . . 28
13.10 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . 28
13.11 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
13.12 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . 28
13.13 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . 28
13.14 Third-Party Rights . . . . . . . . . . . . . . . . . . . . . . . 28
EXHIBITS
Exhibit A Mobil Lubricant Base Oils Specifications
Exhibit B Industry Specifications
Exhibit C Mobil Marine Provisions
Exhibit D Pricing Provisions
Exhibit E Approved Mobil Crude Oils
Exhibit F Procedure for Metering
Exhibit G Procedure for Changing Crude Oils
Exhibit H Procedure for Changing Process
Exhibit I Terminalling Services
Exhibit J Mobil Base Oil Requirement Rate Cap
Exhibit K Quality Audit Procedure
SCHEDULES
Schedule 1 Example of Annual Forecast
Schedule 2 Example of Annual Production Plan
Schedule 3 Example of Monthly Requirements
Schedule 4 Example of Monthly Production Plan
Schedule 5 Example of Weekly Inventory
Schedule 6 Example of Daily Production Schedule
Schedule 7 Example of Lubricant Marine Schedule
Schedule 8 Example of Daily LOBP Base Oil Transfer Schedule
PURCHASE AND SALES AGREEMENT FOR LUBRICANT BASE OILS
This Purchase And Sales Agreement For Lubricant Base Oils (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, lubricant base oils; and
WHEREAS, Mobil desires to purchase and Valero desires to sell certain
quantities of lubricant base oils.
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.
"Annual Production Plan" shall have the meaning given to that term in Section
3.2.
"Annual Forecast" shall have the meaning given to that term in Section 3.1.
"Barrel" shall mean forty-two (42) Gallons.
"Business Day" shall mean any day other than a Saturday, Sunday, any day which
is a legal holiday or any day on which banking institutions are permitted to
close in the city of New York, and which is also a day on which dealings in US
dollar deposits are carried out in the London Interbank market.
"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 which shall meet the specifications set forth on Exhibit A.
"Cumulative Unplanned Outage Hurdle" shall mean, in any Year, with respect to
the Mobil Lube Dewaxing unit (MLDW), 10 days (including fractional days) that
it is out of service due to unplanned outages, and, with respect to Lube
Hydrotreater unit (LHDT) (Stocks 6051, 6287 and 6329), 10 days (including
fractional days) that it is out of service due to unplanned outages.
"Daily Production Schedule" shall have the meaning given to that term in
Section 3.7.
"Daily LOBP Base Oil Transfer Schedule" shall have the meaning given to that
term in Section 4.2.
"Expert" shall mean one or more nationally recognized firms mutually selected
by Mobil and Valero or as selected in accordance with the procedures set forth
in Section 12.3.
"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.
"Icis Lor" shall mean a Company of Reed Business Publications with offices at
3730 Kirby Drive Suite 1003 Houston, Texas 77098 which publishes the bi-weekly
Exxon Lubricant Base Oil Posted Prices in the Gulf Coast under the heading
Paraffinic Base Oils (USA).
"Inhauls" shall mean the movements of Lubricant Base Oils into the Refinery by
wharf, pipeline or other means agreed by Valero.
"Initial Term" shall have the meaning given to that term in Section 2.4.
"Initial Term For Valero's Production" shall have the meaning given that term
in Section 2.4.
"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.
"Lubricant Base Oils" shall mean those finished lubricant oil blending stocks
manufactured at the Refinery from Mobil Approved Crude Oil to the
specifications set forth on Exhibit A and the certifications set forth on
Exhibit B, those finished lubricant oil blending stocks manufactured at the
Refinery from Mobil Approved Crude Oil to any other specification ranges
agreed upon in writing by the Parties, and those finished lubricant oil
blending stocks Inhauled to the Refinery, and
"Lubricant Base Oil" shall be construed accordingly.
"Lubricant Oil Blending and Packaging Plant" or "LOBP" shall mean the
facilities, owned by Mobil, located adjacent to the Refinery used to blend and
package lubricant oils.
"Lubricant Marine Schedule" shall have the meaning given to that term in
Section 4.1.
"MLDW Catalyst Lease Agreement" shall mean the MLDW Catalyst Lease Agreement,
of even date herewith, between Mobil and VRC-NJ under which Mobil will provide
additional MLDW catalyst loads to VRC-NJ.
"Mobil Approved Crude Oil" shall mean the crude oils listed on Exhibit E.
"Mobil's Base Oil Requirements" shall mean Mobil's required quantity, quality,
and delivery method of each Stock, as determined by Mobil.
"Monthly Production Plan" shall have the meaning given to that term in Section
3.5.
"Monthly Requirements" shall have the meaning given to that term in Section
3.4.
"Non Standard Product" shall have the meaning given that term in Section 5.2.
"Normal Load" shall mean the quantity of MLDW-3 catalyst or MLDW-4 catalyst,
leased from Mobil pursuant to the MLDW Catalyst Lease Agreement, sufficient
for a full reactor load in the dewaxing reactor of the MLDW.
"Off-Spec Product" shall have the meaning given to that term in Section 8.7.
"Outhauls" shall mean the movements of Lubricant Base Oils out of the Refinery
by wharf, pipeline or other means agreed by Valero.
"Physically Unable" shall mean incapable of producing Lubricant Base Oils
because of scheduled downtime and unscheduled outages.
"Refinery" shall mean the Assets located in Paulsboro, New Jersey owned by
VRC-NJ as of the Effective Date, and owned by Mobil prior to the Effective
Date.
"Reuters" shall mean Reuters Information Services.
"Second Renewal Term" shall have the meaning given to that term in Section
2.4.
"Straight Cut Base Oils" shall mean those Lubricant Base Oils which are
produced directly from Mobil Approved Crude Oil and are not blended with other
Lubricant Base Oils.
"Stock" shall mean the types of Lubricant Base Oils set forth on Exhibit A
and any other type agreed by the Parties.
"Subsequent Renewal Periods" shall have the meaning given to that term in
Section 2.5.
"Subsequent Renewal Periods For Valero's Production" shall have the meaning
given to that term in Section 2.4.
"Substantially Economically Disadvantaged" shall mean that the producing
facilities for Lubricant Base Oils are operating at full capacity and the
Refinery, given the configuration of the Refinery on the Effective Date, is
losing at least two hundred fifty thousand dollars ($250,000) per month for a
period of six (6) consecutive months, or is losing a cumulative total of one
million five hundred thousand dollars ($1,500,000) within a period of at least
six (6) months from the initial loss but not more than twelve (12) months from
the initial loss, on an operating cash margin basis, versus operating the
producing facilities for Lubricant Base Oils in a manner that produces a
lesser volume of Lubricant Base Oils. The calculation of the loss shall be
based on a linear program using then current market tiered pricing for the
incremental/decremental barrels sold under this Agreement.
"TBD" shall mean thousands of Barrels per calendar day.
"Three Month Interval" shall mean each three month period commencing on the
date that feedstock is first fed to the MLDW after loading of the Normal Load
into the MLDW, and ending on the date that the used Normal Load is removed
from the MLDW for return to Mobil.
"Under-Deliveries" shall have the meaning given to that term in Section 9.2.
"Valero's Committed Production" shall mean Valero's Production that is
committed by Mobil to third party buyers through (i) term contracts of three
months or more, which term contracts have been approved by Valero for
quantity, Stock and term, or (ii) Wharf shipments previously agreed by Valero.
"Valero's Production" shall mean all the Lubricant Base Oils produced at the
Refinery in excess of Mobil's Base Oil Requirements.
"Weekly Inventory" shall have the meaning given to that term in Section 3.7.
"Weekly Production Schedule" shall have the meaning given to that term in
Section 3.7.
"Wharf" shall mean the facilities located at the Refinery for delivering and
receiving Lubricant Base Oils into or from marine vessels.
"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 Lubricant Base Oils, shall refer to the movements of Lubricant
Base Oils to and from the title transfer points or 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.
VRC-NJ, as owner of the Refinery, will be operating and producing Lubricant
Base Oils 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.
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.
.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 produce, sell and
deliver to Mobil, at the LOBP from the dedicated Lubricant Base Oils pipeline
system located at the Refinery and at the Wharf into marine vessels designated
by Mobil, Mobil's Base Oil Requirements in accordance with the terms and
conditions of this Agreement and at the prices determined under this
Agreement. In addition, from the Effective Date to the third anniversary of
the Effective Date, Mobil agrees to purchase and receive from Valero, at the
LOBP through the dedicated base oil pipeline system located at the Refinery
and at the Wharf into marine vessels designated by Mobil, Valero's Production
in accordance with the terms and conditions of this Agreement and at the
prices determined under this Agreement.
2.2 Valero's Obligation. Subject to Sections 6.1, 6.2, 6.4.1, 9.4 and
Article X, Valero shall be obligated to produce Mobil's Base Oil Requirements
up to a total for all Stocks, on an average monthly basis, of nine (9) TBD,
and for each individual Stock up to the volume for such Stock as set forth on
Exhibit J, provided however, Valero shall not be obligated to produce any new
Stock added to Exhibit A by Mobil, after the Effective Date, until the Parties
have agreed a price for such new Stock. Subject to Sections 6.1, 6.2, 6.4.1,
9.4 and Article X, Valero shall be obligated to produce Valero's Committed
Production. Valero shall be obligated to provide terminalling services, in
accordance with Exhibit I, to meet Mobil's Base Oil Requirements and Valero's
Committed Production for the volume of each Stock not produced at the
Refinery. To the extent that either Section 9.4 or Article X is applicable,
Valero shall be obligated to meet Mobil's Base Oil Requirements as a first
priority and shall not sell any Lubricant Base Oil to any third party without
prior approval from Mobil. Valero shall use its reasonable efforts to produce
Mobil's Base Oil Requirements above nine (9) TBD, provided, however, Valero
shall not be obligated to make capital investments to produce Mobil's Base Oil
Requirements above nine (9) TBD. To the extent applicable, the Parties may
amend this Section 2.2 in accordance with Sections 6.4 and 6.4.2.
2.3 Inhaul. Mobil shall have the right to Inhaul, in accordance with Exhibit
I, Lubricant Base Oils to meet Mobil's Base Oil Requirements, including any
new Stock added to Exhibit A, up to a total for all Stocks of twelve (12) TBD,
minus any volume produced at the Refinery to meet Mobil's Base Oil
Requirements.
2.4 Term. With respect to Mobil's Base Oil Requirements:
(i) 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"). With respect to Valero's Production:
(ii) this Agreement is effective as of the Effective Date and shall
continue for a period of three (3) Years from the Effective Date ("Initial
Term For Valero's Production"). Upon the expiration of the Initial Term For
Valero's Production, this Agreement may be renewed if mutually agreed by the
Parties for three (3) Year periods unless terminated in accordance with the
term hereof ("Subsequent Renewal Periods For Valero's Production").
2.5 Termination. With respect to Mobil's Base Oil Requirements:
(i) 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. With respect to Valero's Production:
(ii) Valero may terminate this Agreement without cause any time after the
first (1st) Year of the Initial Term For Valero's Production by giving Mobil
at least six (6) months prior written notice of termination. Either Party may
terminate this Agreement without cause by giving the other Party at least six
(6) months written notice of termination prior to the expiration of the
Initial Term For Valero's Production or any Subsequent Renewal Periods For
Valero's Production, provided, however, to the extent the term for the sale of
any of Valero's Committed Production expires after the then existing term for
Valero's Production, Valero shall continue to produce, sell and deliver to
Mobil, Lubricant Base Oils to satisfy Valero's Committed Production until such
third party commitments terminate.
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; or
(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 Annual Forecast. No later than August 1 of each Year, Mobil shall deliver
to Valero a preliminary forecast of Mobil's Base Oil Requirements, by month,
without specifying the method of delivery, for the next succeeding Year. No
later than October 1 of each Year, Mobil shall deliver to Valero a final
forecast of Mobil's Base Oil Requirements, by month, without specifying the
method of delivery, ("Annual Forecast"), for the next succeeding Year,
provided, however, Mobil shall deliver to Valero on the Effective Date an
Annual Forecast for the remainder of the current Year. In addition, as a
separate part of the Annual Forecast, Mobil shall deliver to Valero an
estimate for that Year of Valero's Committed Production, if any. The Stocks of
Lubricant Base Oils designated in the Annual Forecast may be changed only by
mutual agreement. An example of the Annual Forecast is attached hereto as
Schedule 1.
3.2 Annual Production Plan. No later than thirty (30) days after receipt of
each Annual Forecast, Valero shall deliver to Mobil a monthly production plan
by Stock which shall be subject to Section 2.2, and which shall include, among
other things: (i) a production plan to meet (a) the Annual Forecast, and (b)
Valero's Committed Production; (ii) a forecast of Valero's Production by
Stock; and (iii) the timing and duration of scheduled downtime, ("Annual
Production Plan"), for the next succeeding Year, provided, however, Valero
shall deliver to Mobil thirty (30) days after the Effective Date an Annual
Production Plan for the remainder of the current Year. The Stocks of Lubricant
Base Oils designated for Valero's Production in the Annual Production Plan may
be changed only by mutual agreement. Notwithstanding the foregoing, Valero's
Committed Production and Valero's Production shall in no event be included in
any volume limits set forth in Sections 2.2 or 2.3. An example of the Annual
Production Plan is attached hereto as Schedule 2.
3.3 Annual Meeting. No later than October 1 of each Year, Mobil and Valero
shall meet to discuss the next Annual Forecast, the next Annual Production
Plan and the Lubricant Base Oils business, including any upgrades or changes
to the Refinery which shall effect the production of Lubricant Base Oils and
any changes to Lubricant Base Oils specifications required by Mobil.
3.4 Monthly Requirements. Commencing on the Effective Date, on or before the
fifteenth (15th) day of each month, Mobil shall deliver to Valero Mobil's Base
Oil Requirements and Valero's Committed Production for the next succeeding
month, including delivery method (LOBP deliveries and Wharf liftings and
dates) and a revised forecast of Mobil's Base Oil Requirements and Valero's
Committed Production for the subsequent two months, including delivery method
(LOBP deliveries and Wharf liftings and dates), ("Monthly Requirements").
Mobil's Base Oil Requirements for LOBP deliveries shall be available for
delivery by Valero on a ratable basis by Stock. An example of the Monthly
Requirements is attached hereto as Schedule 3.
3.5 Monthly Production Plan. Within ten (10) days after receipt of the
Monthly Requirements, Valero shall deliver to Mobil the daily production and
delivery plan, by Stock, which shall be subject to Section 2.2, for the next
succeeding month, and a preliminary daily production and delivery plan, by
Stock, which shall be subject to Section 2.2, for the subsequent two months,
for Mobil's Base Oil Requirements and Valero's Production, which shall include
the timing and duration of any scheduled downtime ("Monthly Production Plan).
Valero shall use reasonable efforts to mitigate the effects of any scheduled
downtime by managing its Lubricant Base Oil inventory to reasonably meet
Mobil's Base Oil Requirements. Valero shall make Mobil's Base Oil Requirements
for the LOBP available for delivery on a ratable basis by Stock. An example
of the Monthly Production Plan is attached hereto as Schedule 4.
3.6 Monthly Meeting. No later than the tenth (10th) of each month, Mobil
and Valero shall meet to discuss Lubricant Base Oils supply and demand issues,
pricing and any other key business issues.
3.7 Weekly Inventory and Production Schedule. Commencing on the Effective
Date, on the first Business Day of each week, by 4:00 PM, Valero shall deliver
to Mobil an inventory of finished and unfinished Lubricant Base Oils then at
the Refinery, including Inhauls ("Weekly Inventory") and a daily production
schedule for the next thirty (30) days ("Daily Production Schedule") setting
forth daily production to meet Mobil's Monthly Requirements. Examples of the
Weekly Inventory and Daily Production Schedule are attached hereto as
Schedules 5 and 6, respectively.
ARTICLE IV
SCHEDULING PROCEDURES
4.1 Marine Provisions. Commencing on the Effective Date, by Wednesday of each
week, Mobil shall deliver to Valero a forecast of Wharf liftings and receipts
for the next thirty (30) days ("Lubricant Marine Schedule"). The Lubricant
Marine Schedule shall include a detailed schedule for marine vessel liftings
and receipts to meet Mobil's Base Oil Requirements and liftings to meet
Valero's Production. Mobil shall nominate a preliminary three (3) day window
approximately thirty (30) days prior to the scheduled lifting or receipt date.
Valero shall accept or reject the nomination within five (5) days. Mobil
shall nominate an exact three (3) day window five (5) days prior to the
scheduled lifting or receipt date, shall provide Valero the name of the
inspector to be used and the vessel details for the marine vessel and shall
arrange for the marine vessel equipment required to be used. Valero shall
accept the nomination the next day. Any changes to the marine vessel lifting
schedule, including the date, time, volume, marine vessel details and
inspector, may be made at any time if agreed by Mobil and Valero. 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 Sections 2.2 and 3.4. Valero shall make the
Wharf available during the three (3) day lifting window. 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, which are
attached to and incorporated into this Agreement as Exhibit C, shall apply to
liftings of Lubricant Base Oils at the Wharf. An example of the Lubricant
Marine Schedule is attached hereto as Schedule 7.
4.2 Daily LOBP Base Oil Transfer Schedule. Commencing on the Effective Date,
by 6:00 AM each day, Mobil shall deliver to Valero Mobil's daily LOBP
Lubricant Base Oil transfer schedule, by Stock, for the Lubricant Base Oils,
including Inhauls, to be delivered to the LOBP in the twenty four (24) hour
period commencing at 6:00 AM that day ("Daily LOBP Base Oil Transfer
Schedule"). Valero shall enable the pumps to allow the LOBP to pump the
Lubricant Base Oils. An example of the Daily LOBP Base Oil Transfer Schedule
is attached hereto as Schedule 8.
4.3 Schedule Changes. If, due to limited availability or unavailability of
the Wharf or the dedicated Lubricant Base Oils pipeline system or due to
significant fluctuations in Mobil's Base Oil Requirements, it is necessary to
make changes in Lubricant Base Oils 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.
ARTICLE V
PRICE
5.1 Price Structure. The price for Mobil's Base Oil Requirements and
Valero's Production shall be determined monthly in accordance with Exhibit D
which is market based.
5.2 Non-Standard Product Price. The Parties may agree to the specifications,
production and delivery of a product which is not listed on Exhibit A
("Non-Standard Product"). The Parties shall agree the price and volume for
such Non-Standard Product prior to its production at the Refinery.
5.3 Review of Pricing Methodology. The pricing methodology contained in
Exhibit D is subject to review by Mobil and Valero if either Party believes
there is a significant change in the Lubricant Base Oils market, provided,
however, such reviews shall be no more frequent than one (1) per year. 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
REDUCTION OF VOLUMES, CAPITAL PROJECTS AND CRUDE OILS
6.1 Reduction Of Volumes. Other than for the reasons set forth in Article X,
if the Parties agree, or if they fail to agree an Expert determines, that
Valero would be Substantially Economically Disadvantaged by producing Mobil's
Base Oil Requirements and Valero's Committed Production, the volume of Mobil's
Base Oil Requirements and Valero's Committed Production which Valero is
obligated to produce shall be reduced by the minimum volume necessary to
eliminate the Substantial Economic Disadvantage. Prior to any reduction in the
production of Mobil's Base Oil Requirements and Valero's Committed Production
due to a Substantial Economic Disadvantage, Valero shall give Mobil at least
ninety (90) days written notice of the potential Substantial Economic
Disadvantage, including its impact on production. Mobil shall respond in
writing to Valero's notice within thirty (30) days of receipt of such notice
stating Mobil's agreement and disagreements with such notice. After any
reduction in the production of Mobil's Base Oil Requirements and Valero's
Committed Production due to a Substantial Economic Disadvantage, with respect
to the remaining volume of Lubricant Base Oils produced at the Refinery,
Valero shall be obligated to produce and deliver to Mobil, as a first
priority, those Stocks as determined by Mobil, provided however, that the mix
of Stocks requested by Mobil does not perpetuate the Substantial Economic
Disadvantage. Notwithstanding the foregoing, this Section 6.1 shall in no way
relieve Valero of its obligation in Section 2.2 to provide terminalling in
accordance with Exhibit I. To the extent there is any dispute with respect to
this Section 6.1, Valero shall produce Mobil's Base Oil Requirements and
Valero's Committed Production until the earlier of ninety (90) days or until
the dispute is finally settled, whether by agreement or Expert. The Parties
agree that arbitration shall not be used to resolve any disputes under this
Section 6.1.
6.2 Capital Projects. If, due to changes in Exhibit B, Valero would be
obligated to make a capital expenditure in excess of one million dollars
($1,000,000) to meet Mobil's Base Oil Requirements, Valero and Mobil shall
meet and mutually determine the best course of action, including whether to
make such capital expenditure, provided however, Valero shall not be obligated
to meet that volume of Mobil's Base Oil Requirements which requires such
capital expenditure, prior to such capital expenditure. In no event shall
Valero be obligated to incur a capital expenditure due to changes in Exhibit B
in excess of one million dollars ($1,000,000) to meet Mobil's Base Oil
Requirements.
6.3 Additions To Mobil Approved Crude Oils. Exhibit E sets forth the Mobil
Approved Crude Oils. Either Valero or Mobil may add crude oils to Exhibit E by
following the Mobil Lube Crude Qualification Procedure attached hereto as
Exhibit G. The Party adding the crude oil or requesting the recertification
of a Mobil Approved Crude Oil shall be responsible for all costs associated
with the procedure set forth on Exhibit G.
6.4 Arab Light Crude Oil. If Arab Light crude oil is no longer available in
the market place, or the supply of Arab Light crude oil in the market place is
significantly reduced, the Parties shall meet, in good faith, to amend this
Agreement to reflect changes attributable to processing alternate crude oils,
while minimizing the economic impact to both Parties. In no event shall this
Agreement terminate due to the unavailability of Arab Light crude oil. If the
Parties can not agree, the matter shall be referred to an Expert.
6.4.1 Mobil's Lubricant Crude Oil Supply Contract. If Mobil does not
make Arab Light crude oil available and is in breach of the Lubricant Crude
Supply Contract between Mobil and Valero (the "Crude Supply Contract"), Valero
shall use all reasonable efforts to put in place an alternate source of supply
of Lubricant crude oil. In addition, Valero shall be relieved of its
obligations hereunder but only for the limited time period and to the extent
necessary for Valero to put in place an alternate source of supply of
Lubricant crude oil.
6.4.2 Allocation of Arab Light Crude Oil. If Mobil supplies less
than an average of one hundred (100) MBPD of Arab Light crude oil pursuant to
the Crude Supply Contract for any reason other than Section 6.4.1, the Parties
shall meet, in good faith, to amend this Agreement, if necessary, to reflect
changes attributable to processing alternate crude oils, while minimizing the
economic impact to both Parties. If the Parties cannot agree, the matter
shall be referred to an Expert. In no event shall this Agreement terminate
due to the unavailability of Arab Light crude oil.
6.5 Intentionally Omitted.
ARTICLE VII
PAYMENT
7.1 Invoicing. No later than the fifth (5th) day following the end of each
month, Valero shall submit to Mobil an invoice for the Lubricant Base Oils
delivered to Mobil at the LOBP and the Wharf during such month, together with
payment instructions therefor (the "Invoice"). Each Invoice shall be prepared
using the information set forth in the relevant Bill of Lading or meter ticket
and shall contain such other information relating to the calculation of the
price for such Lubricant Base Oils as Mobil may reasonably request.
7.2 Payment. Payment for the Lubricant Base Oils delivered hereunder shall
be made by Mobil to Valero no later than the fifteenth (15th) day of each
month (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 and 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.
7.5 Other Payments. Any other payment due from one Party to the other Party
shall be made within thirty (30) days of the demand for such payment. In the
event a Party disputes the demand for payment, the Parties shall endeavor to
resolve the dispute within thirty days. Failing resolution, the matter shall
be referred to arbitration or an Expert, as applicable, 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 OFF-SPEC INHAULS AND LIABILITY
8.1 Industry Certifications. The Parties acknowledge that the industry
certifications for Lubricant Base Oils will be changed from time to time by
the major equipment manufacturers, industry standards groups and trade
associations. The Parties agree that Mobil will update Exhibit B from time to
time to comply with the current industry certifications. Valero shall ensure
that each Lubricant Base Oil is certified by either Mobil's laboratories or a
third party's laboratories to meet Exhibit B. A Lubricant Base Oil shall be
deemed certified if the Lubricant Base Oil meets the certification using
market general additive packages of at least two additive suppliers. The
Parties agree that an update of Exhibit B could require a change in the
specifications set forth on Exhibit A, and Mobil and Valero shall agree any
change to the specifications of a Stock set forth on Exhibit A. If the
Parties do not agree to a specification change to a Stock set forth on Exhibit
A, Mobil shall have the right to add a new Stock to Exhibit A. Valero shall
not be obligated to produce such new Stock until a price is agreed, provided
however, subject to Section 2.3, Mobil shall have the right to Inhaul such new
Stock. Nothing herein shall be construed as allowing either Party to remove a
Stock from Exhibit A. Valero acknowledges that the processes and catalyst
fills are integral in maintaining the specifications on Exhibit A and the
certifications on Exhibit B. If as a result of any updated Exhibit A or
Exhibit B Valero is required to make a processing change, Valero agrees to
make any processing changes in accordance with Mobil Base Oil Processing
Sequence, Technology, and Change Procedure which is attached hereto as Exhibit
H.
8.2 Warranty. Valero hereby warrants that the Lubricant Base Oils delivered
pursuant to this Agreement will meet the specifications set forth on Exhibit A
and certifications set forth on Exhibit B. Valero further warrants, that it
will convey good title to all Lubricant Base Oils sold hereunder and that such
Lubricant Base Oils will be delivered to Mobil free and clear of any lien,
encumbrance or security interest. Valero further warrants, until the fifth
anniversary of the Effective Date, to its knowledge, and, after the fifth
anniversary, without such knowledge qualification, that, at the time of
delivery, all Lubricant Base Oils produced 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 Lubricant Base Oils meeting the specifications
set forth on Exhibits A 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 Lubricant Base Oils. The Parties shall meet to determine any
appropriate actions while minimizing both the economic and legal ramifications
to both Parties, provided however, Valero shall not be obligated to produce
such Lubricant Base Oils 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
Lubricant Base Oils produced to meet the modified specification will not be
deemed to be Off-Spec Product for purposes of this Agreement (unless the
Lubricant Base Oils does not meet the modified specification) nor will
delivery of the Lubricant Base Oils meeting the modified specification be
treated as an Under-Delivery of the Lubricant Base Oils meeting the original
specification.
8.3 Disclaimer EXCEPT FOR THE WARRANTIES SET FORTH IN SECTION 8.2, VALERO
MAKES NO OTHER REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, CONCERNING
THE LUBRICANT BASE OILS SOLD HEREUNDER, INCLUDING WITHOUT LIMITATION,
WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
8.4 Quality Determinations. Valero agrees that the Lubricant Base Oils
delivered hereunder to meet Mobil's Base Oil Requirements shall be Straight
Cut Lubricant Base Oils (except Stock 6329) produced from crude oils on the
then current list of Mobil Approved Crude Oils. Valero agrees to maintain
quality procedures consistent with Mobil maintaining a QS-9000 certification
at the LOBP. Valero shall provide a Certificate of Analysis for each shipment
of Lubricant Base Oils. For deliveries through the dedicated Lubricant Base
Oils pipeline system, Valero shall provide a Certificate of Analysis for each
batch of Lubricant Base Oils. If a Lubricant Base Oils delivery tank consists
of more than one batch of previously certified batches, the tanks shall be
recertified utilizing top, middle and bottom samples. Mobil may utilize an
independent inspector to verify the quality of products loaded onto marine
vessels. The independent inspector shall inspect the marine vessel's shipping
compartments and verify that they are free and clean of potential contaminants
and shall verify the quality of the Lubricant Base Oil before and during
loading. The results of the independent inspector, with respect to quality,
shall be final and binding on the Parties. The cost of the independent
inspector shall be paid by Mobil. Mobil may utilize an independent inspector
to verify the quality of products produced at the Refinery and delivered
through the dedicated Lubricant Base Oils pipeline system, the cost of the
inspection shall be paid by Mobil, unless the Parties dispute the quality of
the products, in which case the costs shall be divided equally between Mobil
and Valero. Valero shall be responsible for ensuring that the dedicated
Lubricant Base Oils pipeline system is clean, up to the title/custody transfer
point, for each Stock of Lubricant Base Oils delivered to the LOBP. Mobil
shall have the right to be present at any test or inspection conducted under
this Section 8.4.
8.5 Semi-Annual Quality Review Meetings. Commencing six (6) months after the
Effective Date and once every six (6) months thereafter, Valero shall meet
with Mobil and provide documentation to Mobil in accordance with Exhibit K for
the purpose of determining whether Valero has met the requirements set forth
in Exhibits A, E, G and H.
8.6 Quantity Determinations.
8.6.1 Wharf Quantities. The quantity of Lubricant Base Oils delivered
by Valero to Mobil at the Wharf shall be determined at the shore tank gauge,
provided it is static. If the shore tank is not static then the measurement
shall be made at the marine vessel gauge. All gauging shall be done by an
independent inspector jointly selected by the Parties. Absent manifest error
such inspector's determination shall be final and binding on the Parties.
8.6.2 LOBP Quantities. The quantity of Lubricant Base Oils delivered
by Valero to Mobil at the LOBP shall be determined by meter readings at the
custody meters located at the LOBP, or, if no custody meter is available, in
accordance with Exhibit F. Calculations from the meter readings for
determining such quantities shall conform to the procedures set out below.
8.6.3 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 pipeline
meters shall be calibrated at least monthly. 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 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 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.
8.6.4 Out of Service Meters. If for any reason any meter utilized
hereunder is out of service so that the quantity of Lubricant Base Oils
delivered through the meter cannot be ascertained, the quantity of Lubricant
Base Oils 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 Exhibit F;
(b) By using static Refinery tank measurement;
(c) By using any measuring equipment which Mobil may have installed
if operating properly;
(d) By using any check-measuring equipment of Valero, if installed
and operating properly; or
(e) 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.
8.7 Valero's Off-Spec Product. If Valero delivers Lubricant Base Oils
pursuant to this Agreement which do not meet the specifications and
certifications applicable to such Lubricant Base Oil (an "Off Spec Product"),
the following provisions apply:
8.7.1 Notification. Upon discovery by Mobil or Valero 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.
8.7.2 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 the LOBP, from
marine vessels at the Wharves and from rail cars at the LOBP or the Refinery,
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.
8.7.3 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 the sale or 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.
8.7.4 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 the LOBP, including
costs incurred cleaning any tanks at the LOBP and any other equipment at the
LOBP contaminated with Off-Spec Product and the cost of replacing any product
at the LOBP contaminated by the Off-Spec Product. Mobil shall provide to
Valero documentation for all such costs.
8.7.5 Mis-Deliveries. If Valero delivers a specific Lubricant Base
Oil that meets the specifications for a Lubricant Base Oil or the
specifications agreed to in advance by the Parties for a Non-Standard Product,
but the applicable Monthly Requirements requires a different type of Lubricant
Base Oil 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 8.7.2 and 8.7.3 and 8.7.4.
8.8 Waiver for Off-Spec Product. Notwithstanding the foregoing, Section 8.7
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, provided that such waiver or price
adjustment is in writing.
8.9 Off-Spec Inhauls. If Mobil Inhauls Lubricant Base Oils pursuant to this
Agreement which do not meet the specifications and certifications applicable
to such Lubricant Base Oil (an "Off Spec Inhaul"), the following provisions
apply:
8.9.1 Notification. Upon discovery by Mobil or Valero of an Off-Spec
Inhaul, such discovery will be communicated to Mobil or Valero within one hour
of discovery and Mobil shall determine whether Valero should:
(i) return the Off-Spec Inhaul for re-processing,
(ii) blending in another product so that the Off-Spec Inhaul meets
the applicable specification, or
(iii) reprocess the Off-Spec Inhaul into alternate products.
8.9.2 Costs. Mobil shall reimburse Valero for the costs for returning
or blending 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.
8.9.3 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.
8.10 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 Lubricant Base Oils
shall transfer as follows:
(i) for Wharf deliveries, title and risk of loss shall pass from Valero
to Mobil as the Lubricant Base Oils passes the inlet flange of Mobil's
designated marine vessel.
(ii) for LOBP deliveries, title and risk of loss shall pass from Valero
to Mobil as the Lubricant Base Oils passes the custody transfer meter located
at the LOBP.
9.2 Under-Deliveries. Unless subsequently agreed by the Parties for either a
specific delivery or any group of deliveries:
9.2.1 LOBP Deliveries: If, during a Monthly Requirements period,
Valero delivers, or has available for delivery, on a daily basis less than
ninety percent (90%) of the prorata volume of any Stock of Lubricant Base Oil
required to be delivered during such Monthly Requirements period, it is an
"Under-Delivery." (For purposes of this Section, prorata volume shall mean on
the x day of a thirty day month Valero must have made available to the LOBP
for lifting x/30 of each Stock of Lubricant Base Oil in the Monthly
Requirements). The amount of the Under-Delivery for any Monthly Requirements
period shall be equal to the maximum difference between one hundred percent
(100%) of the volume required to be made available on any day in the month and
the volume actually delivered on any day in which there was an Under-delivery.
Valero shall compensate and reimburse Mobil for fifty percent (50%) of its
documented actual out of pocket costs, including all costs associated with
replacing the Stock, provided that Mobil's documented actual out of pocket
costs do not exceed eight (8) cents per Gallon for each Gallon of the
Under-Delivery. In addition, Valero shall provide Mobil, at Mobil's option,
immediate access to the Refinery to Inhaul the volume of the Under-Delivery.
9.2.2 Wharf Deliveries: If, during a three day lifting window, Valero
delivers, or has available for delivery, less than ninety percent (90%) of the
volume of any Stock of Lubricant Base Oil required to be delivered during such
lifting window, 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 three day lifting window and the volume
actually delivered during such three day lifting window. Valero shall
compensate and reimburse Mobil for fifty percent (50%) of its documented
actual out of pocket costs, including all costs associated with replacing the
Stock, provided that Mobil's documented actual out of pocket costs do not
exceed eight (8) cents per Gallon for each Gallon of the Under-Delivery.
9.3 Waiver of Under-Deliveries. Nothing in Section 9.2 shall be construed to
limit or prevent Mobil from waiving its rights relating to Under-Deliveries.
9.4 Physically Unable. During any period when the Refinery is Physically
Unable of producing Mobil's Base Oil Requirements and Valero's Committed
Production, Valero shall use reasonable efforts to manage its inventory of
Lubricant Base Oils to meet Mobil's Base Oil Requirements and Valero's
Committed Production. The provisions of Section 9.2 shall apply for thirty
(30) days after Mobil receives notice of any unplanned outage and the
Cumulative Unplanned Outage Hurdle has been met. For purposes of this
Section, unplanned outage shall mean any outage that is not scheduled, or is
scheduled for less than three (3) months in the Monthly Production Plan. The
provisions of Section 9.2 shall not apply to any planned production shortage
of Lubricant Base Oils during the period of any scheduled downtime, or to any
unplanned outages prior to Valero meeting the Cumulative Unplanned Outage
Hurdle. For purposes of this Section, scheduled downtime shall mean downtimes
that were scheduled for at least three (3) months in the Monthly Production
Plan. During any period when the Refinery is Physically Unable of producing
Mobil's Base Oil Requirements, Valero shall use reasonable efforts to keep
Mobil informed of the extent and duration of the outage.
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.
Valero's duty to mitigate the effects of an Event of Force Majeure shall be
subject to Section 2.2. To the extent that Valero is unable to perform its
obligations hereunder as a result of an Event of Force Majeure, Mobil shall
have the right to Inhaul Lubricant Base Oils, and, to the extent not affected
by the Event of Force Majeure, use the Refinery to store and transport
Lubricant Base Oils needed to replace those volumes Valero is unable to
supply. 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. If, as a result of an Event of
Force Majeure, Valero is unable to produce all Stocks of Lubricant Base Oils,
Mobil shall determine which Stocks of Lubricant Base Oils shall be produced.
In no event shall Valero have a duty to Inhaul Lubricant Base Oils.
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 Lubricant Base Oils available so that Mobil
can meet Mobil's Base Oil Requirements.
10.5 No Make Up Volumes. Valero shall not be obligated to make up any
quantities of Lubricant Base Oils it does not deliver hereunder as a result of
Force Majeure. Mobil shall not be obligated to make up any quantities of
Lubricant Base Oils it does not receive hereunder as a result 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 (subject to the limitation
on consequential damages in Section 13.6).
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 2.2 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 County, 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 2.2 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 2.2, 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 Lubricant Base Oils delivered hereunder.
Each Party acknowledges that it is aware of hazards or risks in handling or
using such Lubricant Base Oils. Valero and Mobil shall maintain compliance
with all safety and health related governmental requirements concerning such
Lubricant Base Oils 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 Lubricant Base Oils, 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 an 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
500 Dallas Street, Suite 3200
Houston, Texas 77002
Attention: V.P. Marketing
Facsimile: 713-393-5486
(ii) if to Mobil, to:
Mobil Oil Corporation
3225 Gallows Road
Fairfax, Virginia 22037
Attention: General Manager, US Lubricant Marketing
Facsimile: 703-849-2020
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 703-849-3763, and in the case of Valero, to the Lubricant
Base Oils Coordinator at the Refinery and at facsimile number 609-224-2050, 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 Lubricant Base Oils 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. Eugene Edwards By: /s/ R.J. Kruep
Name: S. Eugene Edwards Name: R.J. Kruep
Title: Senior Vice President Title: Attorney-in-Fact
LUBRICANT CRUDE OIL SUPPLY AGREEMENT
This Lubricant Crude Oil Supply Agreement (the "Agreement") is dated as of
this 16 day of September 1998, by and between Mobil Sales and Supply
Corporation ("SELLER"), a corporation incorporated under the laws of the State
of Delaware, United States of America, having an address at 3225 Gallows Road,
Fairfax, Virginia 22037 and Valero Marketing and Supply Company ("BUYER"), a
corporation incorporated under the laws of Delaware, having an address at 500
Dallas Street, Suite 3200, Houston, Texas 77002.
RECITALS:
WHEREAS, BUYER's Affiliate, Valero Refining Company - New Jersey, owns a
refinery for the refining and processing of various crude oils and other
feedstocks in Paulsboro, New Jersey; and
WHEREAS, BUYER wishes to purchase and SELLER wishes to sell to BUYER One
Hundred Thousand (100,000) Barrels per day of lubricant quality crude oil
(currently intended by the parties to be Saudi Arabian Arabian Light crude
oil) for processing only at the Refinery (as defined herein), unless otherwise
agreed, on the terms and conditions contained in this Agreement; and
WHEREAS, SELLER purchases certain grades and quantities of crude oil from the
Saudi Arabian Oil Company ("Saudi Aramco") and SELLER and BUYER intend that
sales of Oil (as defined herein) and other grades made by SELLER to BUYER
pursuant to this Agreement be made on terms and conditions substantially
similar to those terms and conditions governing sales of crude oil made by
Saudi Aramco to SELLER unless contradicted, modified or supplemented by the
terms hereof; and
WHEREAS, SELLER and BUYER recognize that Saudi Aramco may, in the future,
change the terms and conditions relating to sales of crude oil made by Saudi
Aramco to SELLER; and
WHEREAS, SELLER and BUYER recognize that suppliers of Alternative Lube Crude
(as defined herein) may, in the future, change the terms and conditions
relating to sales of Alternative Lube Crude to SELLER; and
WHEREAS, an Affiliate of SELLER, Mobil Oil Corporation, will enter into a
Purchase and Sales Agreement for Lubricant Base Oils (the "Lube Agreement")
for the purchase of its Mobil's Base Oil Requirements (as that term is defined
in the Lube Agreement); and
WHEREAS, BUYER wishes to enter into this Agreement for supply of lubricant
quality crude oil feedstocks to produce Mobil's Base Oil Requirements.
NOW, THEREFORE, in consideration of these premises and of the mutual covenants
contained herein, the parties agree as follows:
Article 1
Definitions, Intent and Construction
1.1 The following terms shall have the following meanings for the purposes of
this Agreement:
"API" shall mean the American Petroleum Institute.
"ASTM" shall mean the American Society for Testing Materials.
"API/ASTM Standard" shall mean the API and ASTM standard references as such
are in effect as of the date hereof. In the event such standards are revised
or modified during the term of this Agreement, the revised or modified
standards shall apply after such revisions or modifications have been
evaluated and accepted by the parties.
"Accepted Date Range" shall mean a period for the delivery of each cargo of
Oil by SELLER to BUYER at a Load Port as accepted, agreed or otherwise
established pursuant to this Agreement.
"Affiliate" shall mean (i) with respect to SELLER, Mobil Corporation and any
entity directly or indirectly controlled by Mobil Corporation; (ii) with
respect to BUYER, any entity directly or indirectly controlled by Valero
Energy Corporation; and (iii) with respect to Saudi Aramco, any entity
directly or indirectly controlled by Saudi Aramco. For purposes of this
definition, "control" shall mean the ownership of more than fifty percent of
the equity interests and voting rights in a corporation, partnership, trust,
limited liability company or joint stock company.
"Alternative Lube Crude" shall mean a crude oil or other petroleum feedstock
mutually agreed by the parties as being a lubricants quality crude oil
suitable and commercially available for processing at the Refinery and the
processing of which would strictly meet Mobil's Base Oil Requirements.
"Barrel" shall mean a unit of volume equivalent to 42 Gallons.
"Business Day" shall mean any day that is not a Saturday, Sunday or other day
on which commercial banking institutions in New York are authorized or
required by law to close. "Business Day for Trading" shall mean a day on which
the NYMEX is open for the trading of light "sweet" crude oil futures contracts
for delivery at Cushing, Oklahoma.
"Caribbean Deliveries" shall mean a delivery of Oil made at either the St.
Eustatius Terminal or the St. Lucia Terminal or other Load Terminal in the
Caribbean as referred to in Schedule 1, clause 3.2.
"Contract Quantity" shall mean One Hundred Thousand (100,000) Barrels per day
or otherwise as mutually agreed in writing by the parties.
"Delivery Period" shall mean a calendar period during the term of this
Agreement commencing on May 1st of any given year and ending on April 30th of
the subsequent year (or if changed by SELLER and Saudi Aramco, such other
calendar period equal to the renewal periods in the Saudi Aramco Contract).
"FOB" shall mean Free On Board as described in Incoterms.
"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.
"Incoterms" shall mean the 1990 edition of the trade terms published by the
International Chamber of Commerce, and any amendments or revisions thereto,
which shall apply to this Agreement to the extent that they do not conflict
with the provisions of this Agreement.
"Invoice" shall mean a written document sent by SELLER to BUYER setting forth
the particulars of any delivery of Oil, or Alternative Lube Crude, as the case
may be, made by SELLER pursuant to this Agreement.
"LIBOR" shall mean, as of any date of determination, the one-month London
Interbank Offered Rate for U.S. dollars, determined at 11:00 a.m., London
time, on the first day of the calendar month in which the date of
determination occurs (or, if the first day of such calendar month is not a
London Banking Day, the immediately preceding London Banking Day) offered by
the National Westminster Bank or any successor thereto. For purposes of this
definition, a "London Banking Day" is a day on which dealings in deposits in
U.S. dollars are transacted on the London interbank market.
"Load Port" shall mean a crude oil terminal, port, offshore or onshore
installation, vessel certain or other location at which Oil is to be loaded
for delivery to BUYER.
"Load Terminal" shall mean the delivery facilities for the loading of Oil at a
Load Port.
"Market Price" shall mean (i) in respect of Oil, SELLER's acquisition cost for
Oil paid to Saudi Aramco as more particularly described in Schedule 1, clause
1; or if applicable (ii) in respect of Alternative Lube Crudes, the market
price paid for Alternative Lube Crudes as mutually agreed by SELLER and BUYER.
"MPMS" shall mean the Manual of Petroleum Measurement Standards.
"NYMEX" shall mean the New York Mercantile Exchange.
"Oil" shall mean Arabian Light crude oil produced by Saudi Aramco, sold to
SELLER pursuant to the Saudi Aramco Contract and resold to BUYER pursuant to
this Agreement.
"Platt's" shall mean Platts Crude Oil Marketwire, published by McGraw Hill,
Inc. (or any successor thereto).
"Purchase Price" shall mean the sum of (i) the Market Price for Oil (or
Alternative Lube Crude, as the case may be); plus (ii) US$0.04/per Barrel of
Oil (or Alternative Lube Crude, as the case may be) as indicated on the
relevant Bill of Lading; plus (iii) any and all other documented costs, fees
or expenses (but excluding sales commissions and indirect costs including
without limitation travel and entertainment costs) SELLER is liable to pay and
does pay in order to acquire Oil from Saudi Aramco (or Alternative Lube Crude
from suppliers of Alternative Lube Crude, as the case may be) including,
without limitation, any applicable terminalling fees, dues and other charges
at Load Terminals or Load Ports, the East West Pipeline Fee, if applicable,
referred to in Schedule 1, clause 1.3, which SELLER shall use reasonable
efforts to minimize such other costs, fees and expenses.
"Qualified Inspector" shall mean a recognized independent petroleum inspector
of international reputation in the industry.
"Reference Event" shall mean an event as specified in Schedule 1, clause 1.2,
used to determine the relevant month for determining the Reference Price for
WTI.
"Reference Price for WTI" shall mean a reference price calculated in
accordance with the provisions of Schedule 1, clause 1, used in the price
formula to calculate part of the Purchase Price for the Oil payable by BUYER
to SELLER.
"Refinery" shall mean the oil refinery owned by Valero Refining Company - New
Jersey for the refining and processing of various crude oils and other
feedstocks located at Paulsboro, New Jersey, U.S.A.
"S&W" shall mean the sediment and water present in the Oil.
"Saudi Aramco" shall mean the Saudi Arabian Oil Company.
"Saudi Aramco Contract" shall mean the Crude Oil Sales Agreement, as may be
amended from time to time, that SELLER has entered with Saudi Aramco for the
purchase of certain grades and quantities of crude oil from Saudi Aramco.
"Saudi Lube Crude" shall mean Oil and/or Arabian Extra Light crude oil
produced by Saudi Aramco and sold to SELLER pursuant to the Saudi Aramco
Contract which is acceptable to SELLER for the processing of lubricant base
oils in SELLER's Affiliates' refineries. The parties acknowledge that Arabian
Extra Light crude oil produced by Saudi Aramco is a blend of crude oils
controlled by Saudi Aramco, not by SELLER. From time to time, SELLER may or
may not deem Arabian Extra Light crude oil an acceptable lubricant quality
crude oil for processing into lubricant base oils at any or all of its
Affiliates' refineries.
"Scheduled Month of Delivery" shall mean a calendar month during which SELLER
and BUYER have agreed to deliver and receive delivery of Oil pursuant to this
Agreement.
"St. Eustatius Terminal" shall mean the Load Terminal located on St. Eustatius
Island, Netherlands Antilles, operated by Statia Terminals N.V. ("Statia").
"St. Lucia Terminal" shall mean the Load Terminal located at Cul de Sac, St.
Lucia, W.I., operated by Hess Oil St. Lucia Limited ("Hess").
"Terminal Procedures" shall mean all rules, procedures and customs practiced
by the operator of a Load Terminal with respect to notifications, nominations,
berthing, scheduling, vessel acceptance, documentation, departure, measurement
and other operational matters.
"WTI" shall mean West Texas Intermediate crude oil deliverable at Cushing,
Oklahoma, U.S.A.
1.2 BUYER acknowledges that SELLER and Saudi Aramco have entered into the
Saudi Aramco Contract for the purchase by SELLER of certain grades and
quantities of crude oil from Saudi Aramco and agrees that purchases of Oil
made by BUYER from SELLER pursuant to this Agreement result from, and shall be
subject to, those made by SELLER pursuant to the Saudi Aramco Contract.
1.3 Notwithstanding anything to the contrary, SELLER and BUYER agree that Oil
sold by SELLER and purchased by BUYER pursuant to this Agreement will be sold
and purchased on terms and conditions substantially similar to those terms and
conditions governing sales of crude oil made by Saudi Aramco to SELLER unless
expressly contradicted, modified or supplemented by the terms hereof.
1.4 Schedule 1 attached hereto reflects the terms and conditions of the Saudi
Aramco Contract upon which SELLER currently acquires from Saudi Aramco the Oil
sold to BUYER hereunder. Schedule 1 shall form part of this Agreement and is
hereby incorporated herein as fully as if set forth in this Article 1.4. The
parties acknowledge that Saudi Aramco may, in the future, change the terms and
conditions relating to sales of crude oil made by Saudi Aramco to SELLER and,
therefore, the parties agree that Schedule 1 shall be periodically and
automatically amended by SELLER on written notice to BUYER to conform to any
amendments made to the terms or conditions of the Saudi Aramco Contract.
SELLER agrees to discuss with BUYER the nature of such amendments as soon as
SELLER becomes aware of them and, at BUYER's request, SELLER shall endeavor to
ensure that any such amendments are in accordance with similar amendments
required by Saudi Aramco of its other term contract purchasers.
1.5 This Agreement is the result of negotiations among, and has been reviewed
by, SELLER, BUYER and their respective counsel. Accordingly, this Agreement
shall be deemed to be the product of both parties and no ambiguity shall be
construed in favor of or against SELLER or BUYER.
1.6 Both SELLER and BUYER are acting as independent parties in this
transaction. Neither party intends to be an agent of the other party and
neither party shall be deemed to be an agent of the other party.
Article 2
Term of Agreement
2.1 Subject to the provisions contained herein, this Agreement shall be
effective as of September 16, 1998, and shall continue in effect through and
including September 15, 2008 (the "Initial Term"). Upon expiration of the
Initial Term, this Agreement shall be automatically renewed for a period of
five (5) years if Mobil Oil Corporation does not exercise its right to
terminate the Lube Agreement at the end of the initial term of the Lube
Agreement (the "First Renewal Term"). Upon expiration of the First Renewal
Term, this Agreement shall be automatically renewed for a second period of
five (5) years if Mobil Oil Corporation does not exercise its right to
terminate the Lube Agreement at the end of the first renewal term of the Lube
Agreement (the "Second Renewal Term"). Upon the expiration of the Second
Renewal Term, this Agreement shall automatically terminate unless the parties
agree in writing to a subsequent renewal period.
2.2 Notwithstanding any provision herein to the contrary, BUYER shall have
the right to unilaterally terminate this Agreement or any renewal or extension
hereof without cause by giving SELLER written notice thereof by a date which
is not less than one hundred twenty (120) days prior to the commencement of a
Delivery Period. In the event BUYER gives SELLER written notice to terminate
this Agreement in accordance with this Article 2.2, such termination shall be
effective on the last day of the then current Delivery Period. If BUYER fails
to give SELLER written notice to terminate this Agreement in accordance with
this Article 2.2 for any year hereof, this Agreement shall remain in full
force and effect; provided, however, BUYER shall continue to have the right to
terminate this Agreement in accordance with this Article 2.2 in subsequent
years.
2.3 Notwithstanding any provision herein to the contrary, in the event (i)
the Saudi Aramco Contract is terminated or not renewed for any reason
whatsoever; or (ii) the Lube Agreement is terminated or not renewed for any
reason whatsoever, both SELLER and BUYER shall have the right to unilaterally
terminate this Agreement, or any renewal or extension hereof, immediately by
giving written notice to the other party. In such event, such termination
shall be effective on the same date that the termination or non-renewal of the
Saudi Aramco Contract or the Lube Agreement, as the case may be, is effective.
2.4 Notwithstanding any provision to the contrary, in the event BUYER or any
Affiliate of BUYER closes the Refinery, SELLER shall have the right to
unilaterally terminate this Agreement, or any renewal or extension hereof,
immediately by giving written notice to BUYER. Such termination shall be
effective on the date that the Refinery is closed.
2.5 Notwithstanding any provision to the contrary, in the event (i) Valero
Energy Corporation or any Affiliate of BUYER enters into an agreement to sell
directly or indirectly the Refinery or to sell directly or indirectly a
controlling interest in the entity which owns the Refinery; and (ii) the Lube
Agreement does not continue in existence after any such sale, the SELLER shall
have the right to unilaterally terminate this Agreement, or any renewal or
extension hereof, immediately by giving written notice to BUYER. Such
termination shall be effective on the date of closing of any such sale.
2.6 Neither BUYER nor SELLER shall be liable to the other party in any way as
a result of, or in connection with, BUYER or SELLER exercising their rights of
termination in accordance with this Agreement.
Article 3
Grade, Quantity and Quality
3.1 Subject to the availability of Oil as a result of scheduled and
unscheduled maintenance and the production policies of the Government of the
Kingdom of Saudi Arabia and the provisions of this Agreement, SELLER shall
sell and deliver to BUYER and BUYER shall purchase and receive delivery from
SELLER, FOB at Load Ports specified in Schedule 1, the Contract Quantity of
Oil. Unless otherwise agreed, the Contract Quantity of Oil and, if the
provisions of Article 3.3 apply, Alternative Lube Crude, to be sold and
delivered by SELLER and purchased and received by BUYER during the term of
this Agreement shall be spread over the term of this Agreement as evenly as
practicable. To assist SELLER's scheduling, BUYER shall submit to SELLER
every month BUYER's estimated liftings of Oil for each of the succeeding three
(3) months. Both parties shall give due consideration to a request by the
other to deem that, only for purposes of ratability of delivery over the
period of the Agreement (and not for any other purpose including, without
limitation, determining part of the Purchase Price or the date of payment for
the Oil), Oil delivered in the last five (5) days of any month would be deemed
to be delivered in the next month and that Oil delivered in the first five (5)
days of any month would be deemed to have been delivered in the preceding
month.
3.2 The parties acknowledge that Saudi Aramco and suppliers of Alternative
Lube Crudes may change the methodology of scheduling deliveries of Oil or
Alternative Lube Crudes to their customers, including to SELLER. BUYER and
SELLER agree to cooperate with each other to be flexible given potential
changes in the Saudi Aramco Contract and the time frames and schedules
involved in the supply and trading of Alternative Lube Crudes. Given the
current Saudi Aramco methodology of scheduling quantities of Oil for delivery
during Delivery Periods, the parties agree between One Hundred Eighty (180)
days and One Hundred Twenty (120) days prior to the commencement of any
Delivery Period to discuss the appropriateness and availability of different
grades of Saudi Arabian crude oils and Alternative Lube Crudes for delivery
for processing at the Refinery during the subsequent Delivery Period. On or
before One Hundred Twenty (120) days prior to the commencement of any Delivery
Period, SELLER shall send to BUYER a list (the "Crude Oil List") setting forth
BUYER's choices (which may, in SELLER's sole discretion, include choices in
addition to the Contract Quantity of Oil) for deliveries of Oil or Alternative
Lube Crudes, as the case may be, BUYER may have for the subsequent Delivery
Period; provided that one of BUYER's choices on the Crude Oil List shall
always be the Contract Quantity of Oil and further provided that each choice
will total the Contract Quantity. BUYER shall elect one, and only one, of the
choices as indicated on the Crude Oil List by sending SELLER its election, in
writing, within twenty (20) days of receipt of the Crude Oil List. Failure to
send SELLER such election shall be deemed to be an election by BUYER to
receive delivery of the Contract Quantity of Oil for the subsequent Delivery
Period.
3.3 In the event SELLER includes on the Crude Oil List a choice in which the
Contract Quantity is made up of certain quantities of Oil and certain
quantities of an Alternative Lube Crude and BUYER selects such choice for the
subsequent Delivery Period, then, during and only during the subsequent
Delivery Period:
(i) SELLER shall sell and deliver and BUYER shall purchase and receive
delivery of such quantities of Oil on the terms and conditions contained
herein;
(ii) SELLER shall sell and deliver and BUYER shall purchase and receive
delivery of such quantities of such Alternative Lube Crude on terms and
conditions to be negotiated by the parties in good faith based on industry
standard terms and conditions and as mutually agreed by the parties in writing
prior to the commencement of the subsequent Delivery Period; and
(iii) such quantities of such Alternative Lube Crude shall count towards
BUYER's obligation to purchase and SELLER's obligation to sell the Contract
Quantity during the subsequent Delivery Period.
3.4 The parties may agree by mutual agreement in writing that the Contract
Quantity of Oil may be reduced during the period of BUYER's planned Refinery
maintenance or turnarounds in which case after the period of Refinery
maintenance or turnaround the quantity of Oil shall be increased to the
Contract Quantity. SELLER will use its best efforts to accommodate BUYER's
request.
3.5 SELLER will use its best efforts to accommodate BUYER's request to obtain
other grades of Saudi Arabian crude oil in place of a portion of the Oil to
provide BUYER flexibility within the framework of the Saudi Aramco Contract in
order to diversify grades of Saudi Arabian crude oil processed at the
Refinery. SELLER will advise BUYER, as SELLER is advised by Saudi Aramco, of
the availability of each grade of Arabian crude oil from time to time in
accordance with the production policies of the Government of the Kingdom of
Saudi Arabia. In the event SELLER agrees to sell other grades of Saudi
Arabian crude oil to BUYER, such sales will be on substantially similar terms
and conditions as those terms and conditions that SELLER purchases such other
grades from Saudi Aramco unless otherwise specified by SELLER. SELLER
understands that BUYER currently has term contracts with Saudi Aramco and
SELLER is not involved with those contracts and is not an agent of BUYER.
3.6 The quality of the Oil sold and delivered hereunder shall be the usual
production quality of Arabian Light crude oil being made available by Saudi
Aramco at the time and place of delivery to BUYER at the Load Ports. THERE
ARE NO GUARANTEES OR WARRANTIES, EXPRESS OR IMPLIED, OF MERCHANTABILITY,
FITNESS OR SUITABILITY OF THE OIL FOR ANY PARTICULAR PURPOSE, USE OR
OTHERWISE, WHICH EXTEND BEYOND THE DESCRIPTION OF THE QUALITY OF THE OIL
CONTAINED IN THIS AGREEMENT.
3.7 Both parties will make reasonable efforts to accommodate each other's
requests with regard to changes in quantities of Oil (and/or Alternative Lube
Crudes, as the case may be) to be delivered in any Scheduled Month of Delivery
during the term of this Agreement and other reasonable operational requests.
Where variation from a Scheduled Month of Delivery initiated by either BUYER
or SELLER cannot be accommodated by Saudi Aramco, then flexibility within the
respective refinery networks of SELLER and BUYER and third party customers of
SELLER will be explored. Where such flexibility within the respective
refinery networks or with SELLER's third party customers does exist but at a
cost versus alternative crude economics, the requesting party (if the parties
agree to utilize that flexibility) shall indemnify and hold harmless the other
party versus such alternative economics.
Article 4
Price
4.1 BUYER shall pay SELLER the Purchase Price for Oil (or for Alternative
Lube Crude, as the case may be) purchased by and sold to BUYER pursuant to
this Agreement.
Article 5
Governing Law and Submission to Jurisdiction
5.1 This Agreement shall be construed and enforced in accordance with, and
governed by, the laws of the State of New York without regard to its rules
concerning conflicts of laws.
5.2 The United Nations Convention on Contracts for the International Sale of
Goods 1980 shall not apply to this Agreement or any delivery made pursuant
hereto.
5.3 Each of the parties hereby irrevocably submits to the exclusive
jurisdiction of the courts of, in and for the State of New York (including,
without limitation, United States courts having jurisdiction) for the
resolution and determination of any dispute between the parties relating to
the sale, purchase or delivery of, or the payment or non-payment for, Oil or
Alternative Lube Crude, as the case may be, or the rights and liabilities of
the parties hereunder in relation thereto. Each of the parties hereby
irrevocably waives actual personal service of process in connection with any
action initiated in any court to whose jurisdiction the parties have by
contract submitted relating to the matters described in the preceding sentence
and agrees to accept, in lieu of such personal service, written notice of such
action given by hand delivery or by certified or registered pre-paid mail
(provided that notice shall also be given by telex, facsimile, or other
teletype written communication that such mailed notice has been sent, no later
than the second day following the date of mailing) to its address set out
below or otherwise notified pursuant to this Agreement or to its principal
place of business, and addressed to the party in question except that either
party may cause service of process to be effected in any other lawful manner
rather than by use of the aforesaid procedure.
Article 6
Allocation and New Regulations
6.1 BUYER and SELLER acknowledge that SELLER must nominate to Saudi Aramco
SELLER's requests for quantities of Saudi Lube Crude to be purchased by SELLER
from Saudi Aramco for delivery during any Delivery Period. Unless otherwise
agreed by the parties, SELLER agrees to include the Contract Quantity of Oil
in its requests to Saudi Aramco for quantities of Saudi Lube Crude for
delivery for each Delivery Period. BUYER and SELLER acknowledge that SELLER
may or may not receive one hundred percent (100%) of its requests from Saudi
Aramco for delivery during any Delivery Period.
6.1.1 During the first three (3) years of this Agreement, if (i)
SELLER receives one hundred percent (100%) of its requests (inclusive of the
Contract Quantity) for Oil from Saudi Aramco for any Delivery Period; or (ii)
SELLER receives not less than one hundred seventy thousand (170,000) Barrels
per day of Oil for any Delivery Period, subject to the other provisions of
this Agreement, SELLER shall sell and BUYER shall purchase the Contract
Quantity of Oil during that Delivery Period. Subject to the provisions of
Article 6.2, if SELLER receives less than one hundred seventy thousand
(170,000) Barrels per day of Oil for any Delivery Period, SELLER shall have
the right, but not the obligation, to allocate available quantities of Oil for
that Delivery Period on the following formula basis:
BUYER's Allocation = 100 X C
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170
WHERE:
1. "BUYER's Allocation" = the quantity of Oil to be sold and
delivered by SELLER and purchased and received by BUYER during the Delivery
Period affected by the allocation.
2. "C" = the total quantity of Oil awarded by Saudi Aramco for
delivery to SELLER pursuant to the Saudi Aramco Contract during the subsequent
Delivery Period.
6.1.2 After the first three (3) years of this Agreement, if (i)
SELLER receives one hundred percent (100%) of its requests (inclusive of the
Contract Quantity) for Saudi Lube Crude from Saudi Aramco for any Delivery
Period; or (ii) SELLER receives not less than two hundred fifty thousand
(250,000) Barrels per day of Saudi Lube Crude for any Delivery Period, subject
to the other provisions of this Agreement, SELLER shall sell and BUYER shall
purchase the Contract Quantity of Oil during that Delivery Period. Subject to
the provisions of Article 6.2, if SELLER receives less than two hundred fifty
thousand (250,000) Barrels per day of Saudi Lube Crude for any Delivery
Period, SELLER shall have the right, but not the obligation, to allocate
available quantities of Oil for that Delivery Period on the following formula
basis:
BUYER's Allocation = A X C
--------
(A + B)
WHERE:
1. "BUYER's Allocation" = the quantity of Oil to be sold and delivered by
SELLER and purchased and received by BUYER during the Delivery Period affected
by the allocation, but not to exceed the amount of Oil awarded to SELLER by
Saudi Aramco.
2. "A" = quantity of Oil requested by BUYER for delivery during the
subsequent Delivery Period.
3. "B" = quantity of Saudi Lube Crude requested by SELLER for delivery by
Saudi Aramco for SELLER's use for the production of lubricants during the
subsequent Delivery Period.
4. "C" = the sum of (i) the total quantity of Oil awarded by Saudi Aramco
for delivery to SELLER pursuant to the Saudi Aramco Contract during the
subsequent Delivery Period, but only to the extent such Oil was nominated by
either BUYER or SELLER for the production of lubricants; plus (ii) the total
quantity of Arab Extra Light crude oil awarded by Saudi Aramco for delivery to
SELLER pursuant to the Saudi Aramco Contract during the subsequent Delivery
Period, but only to the extent such Arab Extra Light crude oil was nominated
by either BUYER or SELLER for the production of lubricants.
5. "(A + B)" does not exceed Two Hundred Fifty Thousand (250,000) Barrels per
day.
6. The definitions used in this Article 6.1 are intended only for purposes of
allocation pursuant to this Article 6.
6.2 Notwithstanding the provisions of Article 6.1, (i) BUYER's Allocation for
an allocated Delivery Period shall not exceed the lower of (a) the Contract
Quantity; or (b) BUYER's request for deliveries of Oil for that allocated
Delivery Period even if BUYER elected to purchase an Alternative Lube Crude in
accordance with Articles 3.2 and 3.3 above; (ii) for any allocated Delivery
Period, SELLER shall not be obligated to sell and deliver to BUYER for that
allocated Delivery Period a quantity of Oil greater than the quantity of Oil
BUYER requested for delivery during the prior Delivery Period; and (iii)
SELLER shall not be obligated to sell and deliver to BUYER for any Delivery
Period a quantity of Oil greater than the quantity of Oil sold by Saudi Aramco
to SELLER for that Delivery Period.
6.3 If, for any reason beyond the reasonable control of SELLER, during any
month during the term hereof, there is a shortage of SELLER's supply of Oil
and, as a result, SELLER is unable to meet its requirements, pursuant to the
Saudi Aramco Contract, as may be amended from time to time, for its own use of
Oil and for sales of Oil to BUYER, SELLER shall have the right, but not the
obligation, to allocate the available supply of Oil on a pro-rata basis.
6.4 In the event SELLER exercises its right to allocate available quantities
of Oil pursuant to the provisions of Articles 6.1 or Article 6.3 above, SELLER
shall not be obligated to replace the quantity of Oil allocated by SELLER and
BUYER may purchase crude oil to replace the quantity of Oil allocated by
SELLER. If requested by BUYER, SELLER will use its best efforts to assist
BUYER in locating replacement crude oil.
6.5 If (i) BUYER and SELLER have agreed for the purchase and sale of
Alternative Lube Crude pursuant to the provisions of Article 3.2 and Article
3.3 above; and (ii) for any reason beyond the reasonable control of SELLER,
during any month during the term hereof, there is a shortage of SELLER's
supply of Alternative Lube Crude to be delivered to BUYER pursuant to this
Agreement; and (iii) SELLER is unable to meet its requirements for its own use
and for sales to BUYER, SELLER may allocate the available supply of
Alternative Lube Crude on a pro-rata basis. By way of example only, in the
event SELLER's supply of Alternative Lube Crude during any month is reduced by
eight percent (8%), SELLER shall have the right to reduce quantities of
Alternative Lube Crude to be delivered to BUYER pursuant to this Agreement by
eight percent (8%).
6.6 In the event SELLER exercises its right to allocate available quantities
of Oil or Alternative Lube Crudes pursuant to this Article 6, SELLER shall
send to BUYER a certificate signed by an officer of SELLER verifying that such
allocation comports with the provisions of this Agreement.
6.7 BUYER and SELLER enter into this Agreement in reliance on (i) the laws
and regulations in effect on the effective date of this Agreement and (ii)
agreements, arrangements, and concessions entered into with government
agencies or governmental instrumentalities in effect on such date
(collectively referred to as "Regulations"). If, at any time during the term
of this Agreement, any Regulations are changed and the change (or the
cumulative effect of more than one change) has an adverse economic effect on
SELLER (directly on SELLER or indirectly on the SELLER by having an effect on
SELLER's supplier) and such change is not addressed by any other provision of
this Agreement, then SELLER at its option may provide written notice to BUYER
of adjusted Agreement terms to reflect the change or changes and list the
reason for such change or changes. If the parties fail to agree to new terms
within thirty (30) days of the notice, the SELLER shall have the right, but
not the obligation, to terminate this Agreement without liability. In the
event the parties fail to agree to new terms and the SELLER does not exercise
such right to terminate this Agreement, the Agreement shall continue in
accordance with the terms contained herein. In the event the parties fail to
agree to new terms and the SELLER exercises its right to terminate this
Agreement, the BUYER shall have the right, but not the obligation, to extend
the effective date of SELLER's termination for a period of not more than sixty
(60) days by paying to SELLER the amount of such adverse economic effect
notified by SELLER to BUYER (as determined in SELLER's sole discretion) during
the period of such extension. For any deliveries made during the extended
period following receipt by BUYER of SELLER's written notice for such change
in Agreement terms, BUYER shall pay to SELLER (in addition to other payments
required hereunder including, but not limited to the Purchase Price for Oil)
the amount by which SELLER claims it is affected by such adverse economic
effect.
Article 7
Other Terms
7.1 This Agreement shall be binding upon and inure to the benefit of the
successors and assigns of the parties to this Agreement; however, neither
party may assign or transfer this Agreement, either in whole or in part,
without first obtaining the written consent of the other which shall not be
unreasonably withheld.
7.2 Each party shall treat the contents of this Agreement as proprietary and
confidential and shall make no disclosures without the express written consent
of the other party. A party, however, may make disclosures to the extent they
are in response to legal process with as much notice as possible to the other
party and shall take reasonable steps to preserve confidentiality after such
disclosure 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 to treat the disclosed information as proprietary and confidential and
agrees not to make further disclosures without the express written consent of
the parties.
7.3 This Agreement, consisting of this signed document, the Schedule and any
attachments hereto and other documents referred to herein, is intended by the
parties as a final expression of their agreement with regard to the subject
matter hereof and as a complete and exclusive statement of the terms of their
agreement.
7.4 Notwithstanding any other provisions of this Agreement, neither party
shall be required to take any action or refrain from any action if such action
or refraining from action would be penalized under US laws or regulations.
7.5 Notices and other communications (other than those referred to in
Schedule 1, clause 2) required or permitted to be given or sent by one party
to the other under this Agreement shall be in writing, shall be effective upon
receipt (except for notices sent by telex which shall be effective when sent
and confirmed by answerback), and shall be sent by hand, facsimile, telex, air
courier or registered mail, return receipt requested as follows:
If to SELLER:
Mobil Sales and Supply Corporation
3225 Gallows Road
Fairfax, Virginia 22037
Ph: 703-846-7363
Fax: 703-846-6811
Telex: 232561 ATTN: /CROA/
ATTN: General Manager, Global Crude
If to BUYER:
Valero Marketing and Supply Company
500 Dallas Street, Suite 3200
Houston, Texas 77002.
Phone: 713-393-5195
Mobile Phone: 713-829-7869
Fax: 713-393-5284
ATTN: Vice President of Supply
Either party may change the names, addresses, facsimile number, telex numbers
or answerback for notices and other communications by means of a written
notice given to the other party at least five (5) days prior to the effective
date of such change in accordance with the provisions of this Article 7.5.
7.6 BUYER shall indemnify and hold SELLER harmless:
(i) from and against all costs, claims, damages, expenses and liabilities
SELLER incurs acting as a purchaser pursuant to the Saudi Aramco Contract
insofar as such costs, claims, damages, expenses or liabilities relate to,
arise out of or are in connection with Oil resold by SELLER to BUYER pursuant
to this Agreement; and
(ii) from and against obligations imposed on SELLER by, or incurred by
SELLER to, Saudi Aramco (whether contractually or unilaterally imposed) that
relate to, arise out of or in connection with the purchase of Oil from Saudi
Aramco and the resale of Oil to BUYER (including, but not limited to, any
obligation to buy minimum quantities of Oil and any court or other awards made
against SELLER);
except that this indemnity shall not apply to costs, claims, damages, expenses
or other obligations imposed on SELLER as a result of (i) a breach by SELLER
of the Saudi Aramco Contract to the extent not caused or contributed to in any
way by an act or omission of BUYER; or (ii) SELLER's negligent or willful act
or omission to the extent not caused or contributed to in any way by BUYER; or
(iii) SELLER's failure to obtain approval from Saudi Aramco to resell Oil to
BUYER; and except further that any costs, claims, damages, expenses or other
obligations imposed on SELLER as a result of any negligent or willful act or
omission of SELLER caused or in any way contributed to by a negligent or
willful act or omission of BUYER shall be shared by SELLER and BUYER on a
comparative fault or negligence basis. SELLER shall endeavor (without being
obliged to incur any cost or expense as a result) to minimize the effect of
any such condition. SELLER shall notify BUYER of any such costs, claims,
damages, expenses or other obligations as soon as practicable following
notification to the SELLER by Saudi Aramco. Notwithstanding anything to the
contrary, SELLER's liability to BUYER arising out of or in connection with
this Agreement shall be no greater than the amount, if any, SELLER can recover
from Saudi Aramco, whether such liability arises in contract, tort, or
otherwise, and including but not limited to demurrage claims and claims for
non-delivery.
7.7 Without prejudice to Article 7.6 hereof, neither SELLER nor BUYER shall
be liable, whether in contract or in tort or otherwise, for prospective
profits, consequential, indirect or special losses or damages of any kind
arising out of, or in any way connected with, the performance of or failure to
perform this Agreement. In particular, SELLER shall in no circumstances be
liable for any loss of profit, cost of overheads or loss resulting from
shut-down or slow-down of the Refinery or any unit or process in the Refinery.
7.8 No waiver shall be deemed to have been made by a party of any of its
rights under this Agreement unless the same is in writing and is signed on its
behalf by its authorized officer. 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.
7.9 The headings contained in this Agreement and the Schedule to this
Agreement are for convenience of reference only and shall not in any way
affect the meaning or interpretation of this Agreement.
7.10 This Agreement is not intended to confer any benefits upon, or create any
rights in favor of, any person or entity other than the parties. All rights
and remedies of the parties pursuant to this Agreement or at common law or in
equity shall be cumulative to all others.
7.11 If at any time either party determines that reasonable grounds for
insecurity have arisen with respect to the other party's performance of any of
its obligations under this Agreement, the party making this determination may
demand such assurance, as is adequate under the circumstances, of the other
party's due performance of the obligations in question and, until that
assurance has been received, may suspend the performance of its obligations
under this Agreement (but not its obligation to make payments of amounts due
hereunder); except , however, that such suspension shall not affect the rights
or obligations with respect to deliveries of Oil made prior to the effective
date of such suspension. If Saudi Aramco requests assurances from SELLER and
SELLER similarly requests assurance from BUYER, the failure of BUYER to
provide such assurance within a reasonable time not exceeding six (6) calendar
days shall entitle SELLER to terminate this Agreement by two (2) calendar days
prior written notice to BUYER (given no earlier than the first calendar day
following the end of the six (6) calendar day period referred to above).
SELLER will use best efforts to communicate to BUYER by phone as soon as
SELLER receives a request for assurances from Saudi Aramco. If BUYER requests
assurance from SELLER and SELLER similarly requests assurances from Saudi
Aramco, the failure of SELLER to provide such assurance within a reasonable
time not exceeding fourteen (14) calendar days shall entitle BUYER to
terminate this Agreement by eight (8) calendar days prior written notice to
SELLER (given no earlier than the first calendar day following the end of the
fourteen (14) calendar day period referred to above). A party's failure to
provide such assurance within the time periods set forth in this Article 7.11
shall constitute a material breach of this Agreement.
7.12 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.
7.13 BUYER shall have the right to request SELLER to document that the Market
Price for Oil accurately reflects SELLER's acquisition cost for Oil. In the
event BUYER is not satisfied with SELLER's documentation, BUYER may request a
third party who shall be mutually acceptable to the parties to audit at
SELLER's offices during normal business hours SELLER's relevant books and
records in order to verify that the Market Price for Oil accurately reflects
SELLER's acquisition cost for Oil.
IN WITNESS WHEREOF, the parties have caused their respective duly authorized
representatives to execute this Agreement on the date first written above.
MOBIL SALES AND SUPPLY CORPORATION
BY: /s/ R.J. Kruep
TITLE: Attorney-in-Fact
VALERO MARKETING AND SUPPLY COMPANY
BY: /s/ S. Eugene Edwards
TITLE: Senior Vice President
