THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST

 

<PAGE>

                                                                    Exhibit 10.4

 

       THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL

      TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH "[*****]" AND HAS

       BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION

 

 

                       THROUGHPUT AND DEFICIENCY AGREEMENT

 

     This Throughput and Deficiency Agreement (the "AGREEMENT"), with an

effective date of April 25, 2005 (the "EFFECTIVE DATE"), by and between [*****],

a [*****] which is principally located at [*****] ("SHIPPER"), on the one hand,

and Sunoco Pipeline L.P., a Texas limited partnership which is located at 1801

Market Street, Philadelphia, PA 19103 ( referred to as either "SUNOCO" or

"CARRIER"), is made with reference to the following facts and circumstances:

 

                                  INTRODUCTION

 

     A. SUNOCO's affiliate owns and operates a marine storage and terminaling

facility which is located at or near Nederland, Texas (the "NEDERLAND TERMINAL")

for the storage and throughput of crude oil and other refinery feedstocks

(collectively, the "FEEDSTOCKS").

 

     B. SUNOCO owns a 43.8% interest in and operates a twenty-six inch (26")

nominal diameter pipeline designed principally for the transportation of

Feedstocks that originates at a valve at the origin of West Texas Gulf Pipe Line

Company's ("WTG") pipeline at Nederland, Texas, and runs, in part, to a valve

which is situated within WTG's Wortham Station located at or near Wortham, Texas

(said pipeline being referred to herein as the "WTG 26" PIPELINE").

 

     C. Furthermore, SUNOCO intends to acquire a storage and terminaling

facility that is situated at or near Corsicana, Texas for the storage and

throughput of Feedstocks and which is located approximately 20 miles from a

prospective pipeline connection/tie-in point on the WTG 26" Pipeline near

Wortham, Texas (the "CORSICANA TERMINAL"), and the rights, duties and

obligations of SUNOCO and Shipper hereunder are expressly conditioned upon

SUNOCO's acquisition of the Corsicana Terminal as particularly set forth in

paragraph 14 hereof.

 

     D. SUNOCO also intends to acquire and operate a sixteen-inch (16") nominal

diameter pipeline which is designed principally for the transportation of

Feedstocks and that runs between (1) SUNOCO's valve which is situated within the

Corsicana Terminal, and (2) the

 

 

<PAGE>

 

       THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL

      TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH "[*****]" AND HAS

       BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION

 

 

separate valves in or near the [*****] Terminal and the [*****] Terminal (as

both of those terms are defined in Recital E, below) (said pipeline system being

collectively referred to herein as the "SUNOCO PIPELINE") and the rights, duties

and obligations of SUNOCO and Shipper hereunder are expressly conditioned upon

SUNOCO's acquisition of the SUNOCO Pipeline as more particularly set forth in

paragraph 14 hereof.

 

     E. [*****] ("[*****]") owns and operates breakout tanks in or near [*****]

(the "[*****] Terminal") and a storage terminal in or near [*****](the

"[*****]TERMINAL"). Both the [*****]Terminal and the [*****]Terminal are tied

into the SUNOCO Pipeline and a [*****]pipeline system which is owned and

operated by one or more third-party pipeline operators, including [*****].

 

     F. [*****], [*****], owns and operates a [*****] in or near [*****] (the

"[*****]"). The [*****]is tied into the [*****]Terminal via a pipeline system

owned and operated by [*****].

 

     G. [*****] owns and operates a [*****]in or near [*****], [*****] (the

"[*****]"). The [*****] is tied into the [*****] Terminal via a pipeline system

which is also owned and operated by [*****] (the "[*****] TO [*****] PIPELINE")

that runs between the [*****] Terminal and the [*****] Pump Station which is

located in [*****] County, [*****].

 

     H. Shipper desires to transport Feedstocks to certain [*****] facilities

that are owned and/or operated by [*****], which includes both the [*****] and

the [*****], through the use of the Nederland Terminal, the WTG 26" Pipeline,

the New Pipeline (as that term is defined in Recital I, below), the Corsicana

Terminal, the SUNOCO Pipeline, the [*****] Terminal, and/or the [*****]

Terminal, as the case may be, with all such origin, intermediary, and

destination points and related facilities being generally depicted on Attachment

A hereto.

 

     I. In order to transport Feedstocks from the Nederland Terminal to [*****],

SUNOCO will be required to make certain capital expenditures including, without

limitation, those associated with designing, engineering, installing, testing,

inspecting, protecting,

 

 

 

                                      -2-

<PAGE>

 

       THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL

      TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH "[*****]" AND HAS

       BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION

 

 

commissioning, operating, acquiring, and maintaining approximately 20 miles of

pipeline and related equipment between the WTG 26" Pipeline (near Wortham,

Texas) and the Corsicana Terminal (collectively, the "NEW PIPELINE"). For the

purposes of this Agreement, (1) the WTG 26" Pipeline, the New Pipeline, the

Corsicana Terminal, and the SUNOCO Pipeline up to the point where such pipeline

physically ties into both the [*****] Terminal and the [*****] Terminal shall be

hereinafter collectively referred to as the "N-[*****] PIPELINE ROUTE," and (2)

each segment of the SUNOCO Pipeline located between the Corsicana Terminal and

the [*****] Terminal, including the [*****] Terminal, which is tied into a

Third-Party Pipeline System (as that term is defined in paragraph 3, below)

pipeline connection shall hereinafter be collectively referred to as the

"C-[*****] PIPELINE ROUTE."

 

     J. SUNOCO is willing to make such expenditures provided that it has

obtained a commitment from Shipper to ship a minimum throughput of Feedstocks

along, on an aggregate basis, the N-[*****] Pipeline Route and the C-[*****]

Pipeline Route.

 

     K. Shipper is willing to make such a commitment to ship a minimum

throughput of Feedstocks along, on an aggregate basis, the N-[*****] Pipeline

Route and the C-[*****] Pipeline Route, in consideration of SUNOCO using

commercially reasonable efforts and taking the necessary steps (including

eminent domain/condemnation proceedings) to (1) design and install the New

Pipeline, (2) connect the Nederland Terminal to the WTG 26" Pipeline, (3)

connect the WTG 26" Pipeline to the New Pipeline, and (4) connect the Corsicana

Terminal to both the New Pipeline and the SUNOCO Pipeline, provided that SUNOCO

(or one of its affiliates) maintains in place and continuously operates (except

for emergency shutdowns and routine, scheduled maintenance) throughout the term

of this Agreement fully-operational pipeline connections between (i) the

Nederland Terminal and the WTG 26" Pipeline, (ii) the WTG 26" Pipeline and the

New Pipeline, (iii) the New Pipeline and the Corsicana Terminal, (iv) the

Corsicana Terminal and the SUNOCO Pipeline, and (v) the SUNOCO Pipeline and both

the [*****] Terminal and the [*****] Terminal. Notwithstanding the foregoing,

while SUNOCO

 

 

 

 

                                      -3-

<PAGE>

 

       THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL

      TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH "[*****]" AND HAS

       BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION

 

 

will use commercially reasonable efforts to cause the WTG 26" Pipeline

connections described herein to be maintained in place and continuously operated

(except for emergency shutdowns and routine, scheduled maintenance) throughout

the term of this Agreement, the parties hereto acknowledge that such operation

and maintenance is not entirely within the control of SUNOCO and hereby agree

that a failure to maintain and operate such connections would not constitute a

breach of the Agreement by SUNOCO; provided, however, under such circumstances,

Shipper may still pursue the rights and remedies that are set forth in

subparagraph 6.G., below, to which it may be entitled.

 

     NOW, THEREFORE, in consideration of the mutual covenants herein contained,

SUNOCO, on the one hand, and Shipper, on the other hand, agree as follows:

 

1.   Commencement Date.

     -----------------

 

     A.   SUNOCO shall notify Shipper promptly upon SUNOCO's acquisition of the

          SUNOCO Pipeline, and such notice shall include the effective date of

          such acquisition. On or before October 1, 2005, SUNOCO will use

          commercially reasonable efforts to have the N-[*****] Pipeline Route

          ready to receive, transport and deliver Feedstocks as provided for

          under the terms of this Agreement. Shipments of Feedstock shall

          commence, and the first Contract Year shall begin, on the first day of

          the calendar month following Carrier's written notice to Shipper that

          the N-[*****] Pipeline Route is ready to receive and transport no less

          than [*****] barrels of Feedstocks per hour (the "COMMENCEMENT DATE").

          In addition, on or before March 1, 2006, SUNOCO will use commercially

          reasonable efforts to have the C-[*****] Pipeline Route ready to

          receive, transport, and deliver Feedstocks as provided for under the

          terms of this Agreement.

 

     B.   If the N-[*****] Pipeline Route is not ready to receive and transport

          at least [*****] barrels of Feedstock per hour by October 1, 2005,

          then SUNOCO, at its

 

 

 

 

                                      -4-

<PAGE>

 

       THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL

      TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH "[*****]" AND HAS

       BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION

 

 

          sole cost and expense, shall use commercially reasonable efforts to

          provide a temporary pipeline route in order to move Feedstocks between

          the Nederland Terminal and the [*****] Terminal or the [*****]

          Terminal, by utilizing an existing [*****] [*****]-inch nominal

          diameter pipeline (the "[*****] PIPELINE CONNECTION") which is

          currently connected to the WTG 26" Pipeline and the Corsicana

          Terminal, or by using an existing [*****][*****]-inch nominal diameter

          pipeline (the "[*****] PIPELINE CONNECTION") between Nederland, Texas

          and Corsicana, Texas, until such time as the N-[*****] Pipeline Route

          is ready to receive and transport at least [*****] barrels of

          Feedstock per hour. If, and for so long as, SUNOCO is required to use

          any portion of a temporary route that is owned and/operated by any

          unaffiliated entity, including the [*****] Pipeline Connection and the

          [*****] Pipeline Connection, as provided for under the preceding

          sentence, SUNOCO agrees to suspend Shipper's Minimum Monthly

          Throughput Obligation (as that term is defined in subparagraph 6.A,

          below).

 

     C.   Notwithstanding any of the other provisions set forth in this

          Agreement, if SUNOCO is unable or unwilling to receive and transport

          at least [*****] barrels of Feedstock per hour along the N-[*****]

          Pipeline Route within fifteen (15) months after SUNOCO (or one of its

          subsidiaries or affiliates) acquires the SUNOCO Pipeline, then Shipper

          has the option (within 30 days after the above referenced 15 month

          period), but not the obligation, to terminate this Agreement without

          penalty to either party or either party being in breach thereof, upon

          giving no less than ten (10) days written notice of termination.

 

2.   Capacity of Pipeline System. The N-[*****] Pipeline Route will have a

     design capacity of no less than [*****] barrels per hour of Feedstocks

     (based on a viscosity of [*****] SUS @ 60(Degree)F and an API gravity of

     [*****].0) to the [*****] Terminal and the [*****]

 

 

                                      -5-

<PAGE>

 

       THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL

      TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH "[*****]" AND HAS

       BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION

 

 

     Terminal. The C-[*****] Pipeline Route will also have a design capacity of

     no less than [*****] barrels per hour of Feedstocks (based on a viscosity

     of [*****] SUS @ 60(Degree)F and an API gravity of [*****].0) to the

     [*****] Terminal and the [*****] Terminal.

 

3.   Common Carriage; Published Tariffs; Tariff Rates. SUNOCO is expected to be

     a common carrier for hire with respect to the operation of the New Pipeline

     and the SUNOCO Pipeline. With respect to the WTG 26" Pipeline, SUNOCO is a

     shareholder of WTG, which is also a common carrier. The transportation of

     any Feedstock which is performed by SUNOCO or WTG hereunder along either

     the N-[*****]Pipeline Route or the C-[*****] Pipeline Route, as the case

     may be, shall be subject to the rules and regulations, that are set forth

     in such carrier's oil tariff publication (each a "RULES TARIFF"). Based on

     the applicable rules and regulations set forth in each Rules Tariff, SUNOCO

     will, with WTG, file or cause to be filed a joint proportional incentive

     tariff (the "JOINT INCENTIVE TARIFF") with the Federal Energy Regulatory

     Commission ("FERC") in order to cover the movement of Feedstocks from the

     Nederland Terminal, the Corsicana Terminal, or a Third Party Pipeline

     System (as defined below) and on to either the [*****] Terminal or the

     [*****] Terminal.

 

          The Joint Incentive Tariff shall apply only to those shippers which

     agree in writing to deliver the Aggregate Throughput Obligation (as that

     term is defined in subparagraph 6.A, below). The initial tariff rates under

     the Joint Incentive Tariff are set forth in Attachment B (entitled

     "Pipeline Rate Schedule"), a copy of which is attached to and made a part

     of this Agreement. The applicable rates, rules, and regulations set forth

     in both the Rules Tariff and the Joint Incentive Tariff may be adjusted by

     the Carrier to reflect the terms and conditions set forth in this Agreement

     in accordance with the applicable rules and regulations of the FERC.

 

 

                                      -6-

<PAGE>

 

       THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL

      TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH "[*****]" AND HAS

       BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION

 

 

          Shipper reserves the right to separately nominate and deliver barrels

     of Feedstock along and as part of the C-[*****] Pipeline Route which are

     received from one or more third party-owned and/or -operated pipeline

     systems that are tied into either the Corsicana Terminal or the SUNOCO

     Pipeline at any location between the Corsicana Terminal and the [*****]

     Terminal (each hereinafter called a "THIRD-PARTY PIPELINE SYSTEM") and

     which are then to be transported by SUNOCO (or its designated pipeline

     operator) to either the [*****] Terminal or the [*****] Terminal. Each

     barrel of Feedstock shipped each month by or on behalf of Shipper along the

     C-[*****] Pipeline Route shall also be credited against the applicable

     Minimum Monthly Throughput Obligation for that particular month, but shall

     be measured and accounted for separately from any barrels of Feedstock

     moved along the N-[*****] Pipeline Route. However, regardless of when and

     whether Shipper has exceeded its Minimum Monthly Throughput Obligation for

     any given calendar month, all of the barrels of any Feedstocks that are

     received from any Third-Party Pipeline System and moved along the C-[*****]

     Pipeline Route shall be subject to the then-current Joint Incentive Tariff.

 

          To the extent permitted by any applicable federal and state law, rule,

     and regulation, the tariff rates that are set forth in the Joint Incentive

     Tariff may only be adjusted in accordance with the annual index which is

     set forth in Title 18, Code of Federal Regulations, Section 342.3, as such

     regulation may be amended, supplemented, or otherwise modified from time to

     time. Shipper agrees not to challenge or protest any of the tariff rates

     set forth in the Joint Incentive Tariff, provided that such tariff rates

     are proposed to be adjusted only in accordance with the terms of this

     Agreement.

 

4.   Service and Storage Agreements.

     ------------------------------

 

     A.   [*****] intends to enter into a separate, contractual arrangement with

          SUNOCO following the execution of this Agreement (the "SERVICES

          AGREEMENT"). Under

 

 

                                      -7-

<PAGE>

 

       THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL

      TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH "[*****]" AND HAS

       BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION

 

 

          the terms of the Services Agreement, based on the separate

          consideration recited therein, SUNOCO will operate and supply (or

          arrange to operate and supply) electrical power to the pumps at the

          [*****] Terminal in order to facilitate the movement of Feedstocks

          coming off of the SUNOCO Pipeline into and along the [*****] to

          [*****] Pipeline.

 

     B.   In addition, Shipper intends to enter into a separate, contractual

          arrangement with SUNOCO following the execution of this Agreement with

          respect to leasing one or more storage tanks within the Corsicana

          Terminal (the "CORSICANA STORAGE AGREEMENT"). Under the terms of the

          Corsicana Storage Agreement, SUNOCO will lease to Shipper up to

          [*****] barrels of shell storage capacity ("LEASED STORAGE CAPACITY")

          at the Corsicana Terminal for the storage of Feedstocks based on the

          mutually agreeable terms and conditions set forth in such agreement;

          provided, however, there shall be no lease, storage, throughput or

          in-tank exchange fee or like charge associated with the Leased Storage

          Capacity under the Corsicana Storage Agreement, the compensation for

          such being already included in the Joint Incentive Tariff that is

          being assessed under paragraph 3, above.

 

     C.   Furthermore, Shipper intends to enter into another separate,

          contractual arrangement with SUNOCO's affiliate following the

          execution of this Agreement with respect to the receipt and delivery

          of Feedstocks through the Nederland Terminal (the "MARINE DOCK &

          TERMINALING Agreement"). Under the terms of the Marine Dock &

          Terminaling Agreement, Shipper will deliver Feedstocks to the

          Nederland Terminal for subsequent deliveries into the N-[*****]

          Pipeline Route at a rate (see Attachment C, entitled "Terminal Rate

          Schedule") based on mutually agreeable terms and conditions set forth

          in such agreement.

 

     D.   Furthermore, Shipper intends to enter into another separate,

          contractual arrangement with SUNOCO's affiliate following the

          execution of this Agreement

 

 

 

                                      -8-

<PAGE>

 

       THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL

      TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH "[*****]" AND HAS

       BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION

 

 

          with respect to leasing one or more storage tanks within the Nederland

          Terminal (the "TANK NO. [*****] STORAGE AGREEMENT"). Under the terms

          of the Tank No. [*****] Storage Agreement, SUNOCO's affiliate will

          lease to Shipper up to [*****] barrels of maximum fill storage

          capacity at the Nederland Terminal for the storage of one or more

          Feedstocks starting at an initial lease rate of $[*****] per maximum

          fill barrel and for a period of five (5) years, based on mutually

          agreeable terms and conditions set forth in such agreement.

 

     E.   With respect to the Agreements described in subparagraphs 4.B, 4.C and

          4.D, above, any additional services, such as receipts from other

          carriers, blending, or tank to tank transfers will be based on fees

          mutually agreed by both parties, all of which shall be set forth in

          such agreement, as may be amended from time to time.

 

5.   Contract Period. In recognition of the cost and expense being incurred by

     SUNOCO to (a) design, engineer, install, test, inspect, protect,

     commission, operate, and maintain the New Pipeline, (b) connect the

     Nederland Terminal to the WTG 26" Pipeline, (c) connect the WTG 26"

     Pipeline to the New Pipeline, and (d) connect the Corsicana Terminal to

     both the New Pipeline and the SUNOCO Pipeline, Shipper agrees to ship the

     Minimum Annual Throughput Obligation of Feedstocks, on a collective basis,

     along the N-[*****] Pipeline Route and the C-[*****] Pipeline Route, to the

     [*****] Terminal or the [*****] Terminal, under the Joint Incentive Tariff,

     as provided in this paragraph 5 and in paragraph 6 below. Subject to the

     remaining subparagraphs of this paragraph 5, Shipper's obligation to ship

     any Feedstocks along any portion of the N-[*****] Pipeline Route or the

     C-[*****] Pipeline Route pursuant to this Agreement shall cover a period of

     ten (10) years (the "CONTRACT PERIOD") from the Commencement Date. A

     "CONTRACT YEAR" as used in this Agreement shall mean a period of twelve

     (12) full months commencing on the Commencement Date or any anniversary

     thereof. Notwithstanding anything else to

 

 

                                      -9-

<PAGE>

 

 

       THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL

      TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH "[*****]" AND HAS

       BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION

 

 

     the contrary, this Agreement shall run simultaneously with the Corsicana

     Storage Agreement and the Marine Dock & Terminaling Agreement (collectively

     with this Agreement, the COTERMINOUS AGREEMENTS"), and should any of the

     Coterminous Agreements be terminated by either Shipper or SUNOCO in

     accordance with the provisions of such agreement, then all other

     Coterminous Agreements shall simultaneously terminate therewith, subject to

     any terminaling or transportation credits to be given and any payments to

     be made under each such agreement upon such early termination.

 

          If this Agreement is terminated by Shipper for any reason other than

     discontinuation of service as set out in subparagraph 6.G, below, prior to

     the end of the Contract Period, Shipper agrees to pay SUNOCO a lump sum

     equal to (i) the [*****] tariff rate set forth in the then current Joint

     Incentive Tariff, multiplied by (ii) the difference between (A) the sum of

     (1) the quantity actually shipped by or on behalf of Shipper, and (2) any

     quantity credited for shipment for Shipper's account as a Prepaid

     Transportation Credit (as that term is defined in subparagraph 6.D), during

     the term of this Agreement, and (B) the Aggregate Throughput Obligation.

     Shipper will make any such undisputed lump sum payment within 15 days after

     receipt of an invoice for same from SUNOCO upon the early termination of

     this Agreement by Shipper and, after having been given credit for all

     available Prepaid Transportation Credits under the formula set forth in the

     preceding sentence, Shipper shall forfeit all unused Prepaid Transportation

     Credits.

 

          Likewise, if this Agreement is terminated by SUNOCO for any reason

     other than (i) the failure of SUNOCO to acquire either the SUNOCO Pipeline

     or the Corsicana Terminal as more particularly set forth in paragraph 14

     hereof; or (ii) discontinuation of service as set out in subparagraph 6.G,

     below, prior to the end of the Contract Period, SUNOCO agrees to pay

     Shipper a lump sum equal to (i) the difference between (A) the

 

 

 

                                      -10-

<PAGE>

 

       THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL

      TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH "[*****]" AND HAS

       BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION

 

 

     [*****] tariff rate set forth in the then current Joint Incentive Tariff

     and (B) Shipper's [*****] aggregate transportation cost, as determined by

     Shipper, for substantially similar service to transport no less than

     [*****] barrels of Feedstocks per day to the [*****] Terminal or the

     [*****] Terminal (the "ALTERNATIVE PENALTY") multiplied by (ii) the

     quantity difference between (A) the quantity actually shipped (including

     any quantity credited for shipment to Shipper's account as a Prepaid

     Transportation Credit) during the term of this Agreement, and (B) the

     Aggregate Throughput Obligation (subject to reduction thereof pursuant to

     subparagraph 6.G). The Alternative Penalty shall not exceed $[*****] per

     barrel. SUNOCO will make any such undisputed lump sum payment within 15

     days after receipt of an invoice for same from Shipper upon the early

     termination of this Agreement by SUNOCO.

 

          In addition, within 60 days after Shipper's receipt of SUNOCO's early

     notice of termination under this paragraph 5, SUNOCO shall pay (or cause to

     be paid) to Shipper in immediately available funds to an account to be

     designated in writing by Shipper the entire amount of any outstanding

     (i.e., from the preceding [*****] Contract Years) Prepaid Transportation

     Credits that Shipper has accumulated with SUNOCO or any of SUNOCO's

     affiliates, under the terms of this Agreement.

 

6.   Shipments by Shipper.

     --------------------

 

     A.   Throughput Obligation: Subject to the early termination provisions set

          forth in paragraph 5, above, and subparagraph 6.G, below, during each

          Contract Year, Shipper will ship, or cause to be shipped, in the

          aggregate, along (1) the N-[*****] Pipeline Route, from the Nederland

          Terminal to the [*****] Terminal or the [*****] Terminal, and (2) the

          C-[*****] Pipeline Route, through the Corsicana Terminal to the

          [*****] Terminal or the [*****] Terminal, each pursuant to the

          applicable tariff for such origin and destination points, at least

 

 

 

 

                                      -11-

<PAGE>

 

       THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL

      TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH "[*****]" AND HAS

       BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION

 

 

          [*****] ([*****]) barrels of Feedstocks (the "MINIMUM ANNUAL

          THROUGHPUT OBLIGATION"), which equals a minimum throughput of [*****]

          ([*****]) barrels of Feedstock per calendar month (the "MINIMUM

          MONTHLY THROUGHPUT OBLIGATION"), and [*****] barrels of Feedstock of

          the entire term of this Agreement (the "AGGREGATE THROUGHPUT

          OBLIGATION").

 

               In the event that Shipper's shipments are prorated for any reason

          whatsoever through the N-[*****] Pipeline Route or any portion thereof

          affecting such movements, during any calendar month and, as a result,

          is unable to transport any portion of the quantity of Feedstocks that

          was nominated by Shipper (in accordance with subparagraph 6.B, below)

          to be shipped under this Agreement during such month, then Shipper

          shall still be given credit by Carrier against Shipper's Minimum

          Monthly Throughput Obligation for that same calendar month, on a

          barrel-for barrel basis, for the greater of either (1) the actual

          quantity of Feedstocks that Shipper was able to transport along such

          route (or any portion thereof) during the applicable time period, or

          (2) the lesser of (i) Shipper's Minimum Monthly Throughput Obligation,

          and (ii) Shipper's nominated volume of Feedstocks for such calendar

          month.

 

     B.   Pipeline Nominations; Scheduling; Waterborne Deliveries. After the

          Commencement Date and continuing throughout the entire term of this

          Agreement, on or before the 25th day of each calendar month, Shipper

          agrees (1) to separately nominate the volume of Feedstocks that

          Shipper wants to ship and have delivered by Carrier along (i) the

          N-[*****] Pipeline Route, and (ii) the C-[*****] Pipeline Route,

          during the following calendar month, and (2) to make a good faith

          effort to tender, or arrange to tender, the nominated volumes to

          Carrier at Carrier's Nederland Receipt Point or Carrier's Corsicana

          Receipt Point (as both

 

 

 

                                      -12-

<PAGE>

 

       THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL

      TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH "[*****]" AND HAS

       BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION

 

 

          terms are defined in paragraph 8, below), as the case may be. In turn,

          Carrier will use its commercially reasonable efforts (taking into

          account applicable law) to provide Shipper with the necessary line

          space or capacity to move all volumes tendered by or on behalf of

          Shipper to (x) Carrier's Nederland Receipt Point along the N-[*****]

          Pipeline Route to the [*****] Terminal or the [*****] Terminal, and

          (y) Carrier's Corsicana Receipt Point along the C-[*****] Pipeline

          Route to the [*****] Terminal or the [*****] Terminal during each

          calendar month and each Contract Year, as the case may be.

 

               Any scheduling procedures for waterborne deliveries into the

          Nederland Terminal shall be set forth either in the Rules Tariff or in

          SUNOCO's affiliate's Nederland Terminal Port Manual.

 

     C.   Billing and Payment

 

          Billing. Carrier shall invoice Shipper on or before the tenth (10th)

          day of each month for amounts owing for the preceding month under the

          terms of this Agreement. Subject to the subitem, below, of this

          subparagraph 6.C. entitled "Disputed Payment," Shipper shall pay

          Carrier within twenty (20) days from invoice date, regardless of

          whether billed before, on, or after the tenth (10th) day of the month,

          the amount specified on the invoice. Such payment shall be by

          electronic transfer of federal funds to the bank and bank account set

          forth on each invoice. For any invoice submitted hereunder, Carrier

          shall provide any supporting documentation reasonably requested by

          Shipper.

 

          Monthly Payment. Beginning on the Commencement Date and continuing

          throughout the term hereof, Shipper shall pay Carrier each month the

          undisputed

 

 

 

                                      -13-

<PAGE>

 

       THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL

      TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH "[*****]" AND HAS

       BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION

 

 

          sum of each of the following: (1) the product of (i) the applicable

          tariff rate in the then-current Joint Incentive Tariff (depending on

          the viscosity of the Feedstock(s) having been shipped) provided for

          under the terms of this Agreement, multiplied by (ii) the quantity of

          Feedstock (in barrels) measured at either the [*****] Meter or the

          [*****] Meter (as both such terms are defined in paragraph 9, below)

          for movements along the N-[*****] Pipeline Route during such month and

          allocated to Shipper from such quantity, and (2) the product of (i)

          the applicable tariff rate in the then-current Joint Incentive Tariff

          (depending on the viscosity of the Feedstock(s) having been shipped)

          provided for under the terms of this Agreement, multiplied by (ii) the

          quantity of Feedstock (in barrels) measured at either the [*****]

          Meter or the [*****] Meter for movements along the C-[*****] Pipeline

          Route during such month and allocated to Shipper.

 

          Loss Allowance. For the purposes of this Agreement, the term "LOSS

          ALLOWANCE" means [*****] percent ([*****]%) of the volumes of

          Feedstocks received either (a) into Carrier's Nederland Receipt Point

          and which are then shipped along the N-[*****] Pipeline Route, through

          the Corsicana Terminal, and on to either the [*****] Terminal or the

          [*****] Terminal, or (b) into Carrier's Corsicana Receipt Point from a

          Third Party Pipeline System or via truck and which are then shipped

          through the Corsicana Terminal, along the C-[*****] Pipeline Route,

          and on to either the [*****] Terminal or the [*****] Terminal, as the

          case may be, which shall be deducted and retained by Carrier to cover

          any loss(es) due to shrinkage and evaporation incident to

          transportation on Carrier's facilities. All volumes

 

 

 

                                      -14-

<PAGE>

 

       THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL

      TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH "[*****]" AND HAS

       BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION

 

 

          delivered to Shipper from Carrier's facilities under the terms of this

          Agreement shall be net of such deduction. No loss allowance will be

          assessed under the Corsicana Storage Agreement. However, Shipper and

          SUNOCO hereby agree that for all volumes of Feedstocks delivered from

          Tank No. [*****] at the Nederland Terminal into crude storage tankage

          at the Nederland Terminal for the purpose of blending, there shall be

          an additional loss allowance of [*****]percent ([*****]%), which shall

          be reflected in the Marine Dock & Terminaling Agreement.

 

          Disputed Payment. Shipper may dispute, in good faith, the amount of

          any such invoice for a period of ninety (90) days after such invoice

          is received by Shipper. Shipper shall timely pay to Carrier all

          amounts which Shipper concedes are correct. Shipper and Carrier agree

          to begin discussions to settle any amount in dispute within thirty

          (30) days of notification by one party to the other of such dispute.

          If Shipper fails to pay any disputed amount within ten (10) days after

          the date on which the Parties have finally resolved or settled such

          amount or payment of such disputed amount has been finally adjudicated

          or otherwise resolved, whichever occurs first, Carrier, in addition to

          any other remedies it may have, may suspend service under this

          Agreement. No payment by Shipper of the amount of a disputed invoice

          shall prejudice the right of Shipper to claim an adjustment of the

          disputed invoice so long as such invoice is disputed in accordance

          with this paragraph.

 

 

 

                                      -15-

<PAGE>

 

       THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL

      TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH "[*****]" AND HAS

       BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION

 

 

          Default. Should Shipper fail to pay part or all of the amount of any

          undisputed invoice or any disputed invoice which has been resolved,

          Carrier may charge interest at the rate equal to [*****]% of the prime

          rate of Citibank, N.A., New York, New York (or any successor thereof)

          on the unpaid portion of the bill computed from the date payment is

          due until the date payment is received. If such failure to pay

          continues for sixty (60) days after such payment is due, Carrier, in

          addition to any other remedy it may have hereunder or otherwise, may

          suspend further service for Shipper under this Agreement until such

          undisputed amount is paid.

 

     D.   Deficiency Volume/Payment. Within 60 days after the end of each

          Contract Year (including the last Contract Year of the Contract

          Period), Shipper and Carrier shall meet and make a good faith and

          diligent effort to separately reconcile and verify the aggregate

          volume of Feedstock that Shipper (i) nominated to be transported, and

          (ii) actually shipped, in either case, during the previous Contract

          Year under the terms of this Agreement. If, at the end of any such

          Contract Year (including the last Contract Year of the Contract

          Period), Shipper's shipments as provided in subparagraph 6.A hereof,

          since the start of such Contract Year, are insufficient due to any

          cause whatsoever other than that provided in the first subpart of

          subparagraph 6.G (i.e., cessation of operations), hereof, to meet the

          Minimum Annual Throughput Obligation (a "DEFICIENCY VOLUME"), then

          subject to the credits provided pursuant to the provisions of

          subparagraph 6.A, above, and also subject to subparagraph 6.E., below,

          Shipper shall be obligated within twenty (20) days after receipt of

          invoice from Carrier to promptly pay to the Carrier under the

          then-current Joint Incentive Tariff, the undisputed amount equal to

          the Deficiency Volume for the Contract Year in question, multiplied by

          the [*****]

 

 

 

                                      -16-

<PAGE>

 

       THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL

      TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH "[*****]" AND HAS

       BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION

 

 

          tariff rate set forth in the then-current Joint Incentive Tariff

          provided for under the terms of this Agreement (the "DEFICIENCY

          PAYMENT"). Any such Deficiency Payment shall constitute prepayment for

          transportation (each a "PREPAID TRANSPORTATION CREDIT") by Shipper in

          the N-[*****] Pipeline Route or C-[*****] Pipeline Route applicable to

          the [*****] succeeding Contract Years.

 

     E.   Pre-Paid Transportation Credits. Shipper must first exceed the Minimum

          Annual Throughput Obligation for the applicable, succeeding Contract

          Year before any Prepaid Transportation Credits shall be applied

          against the transportation charges at the applicable tariff rate(s)

          set forth in the then-current Joint Incentive Tariff (depending on the

          viscosity of the Feedstock(s) having been shipped) for quantities in

          excess of the Minimum Annual Throughput Obligation.

 

          For example, Prepaid Transportation Credits from Contract Year No. 1

          can be used only during the [*****] subsequent Contract Years (i.e.,

          Contract Year Nos. [*****]), but only to the extent that the

          deliveries of Feedstocks to Carrier for movement by or on behalf of

          Shipper along the N-[*****] Pipeline Route and/or the C-[*****]

          Pipeline Route, in the aggregate, exceed the Minimum Annual Throughput

          Obligation for the particular, subsequent Contract Year in question.

 

          Upon expiration of this Agreement and subject to the force majeure

          provisions referred to in paragraph 10, below, Shipper shall have the

          [*****] full calendar months following expiration of this Agreement in

          which to use any Prepaid Transportation Credits that are available to

          Shipper from the [*****] preceding Contract Years, after which time

          any unused amount thereof shall be forfeited.

 

 

 

                                      -17-

<PAGE>

 

       THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL

      TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH "[*****]" AND HAS

       BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION

 

 

     F.   Early Compliance with the Aggregate Throughput Obligation. If, at any

          time prior to the expiration or early termination of this Agreement,

          Shipper has transported in excess of the Aggregate Throughput

          Obligation, then Shipper's obligations to Carrier under this Agreement

          shall immediately cease and be deemed satisfied; PROVIDED, HOWEVER,

          Shipper may continue to transport any Feedstock pursuant to this

          Agreement. If Shipper continues to transport Feedstocks along the

          N-[*****] Pipeline Route, then Carrier agrees to maintain (subject to

          permitted escalations in the applicable tariff rates pursuant to

          paragraph 3 hereof) each of the tariff rates set forth in the then

          current Joint Incentive Tariff as provided for under paragraph 3 and

          subparagraph 6.D, above, throughout the term of this Agreement for any

          additional barrels of Feedstocks delivered by Shipper from Carrier's

          Nederland Receipt Point. If Shipper continues to transport Feedstocks

          along the C-[*****]Pipeline Route, then Carrier agrees to maintain

          (subject to permitted escalations in the applicable tariff rates

          pursuant to paragraph 3 hereof) each of the tariff rates set forth in

          the then-current Joint Incentive Tariff as provided under paragraph 3

          and subparagraph 6.D, above, throughout the term of this Agreement for

          any additional barrels of Feedstocks delivered by Shipper to Carrier's

          Corsicana Receipt Point.

 

     G.   Cessation of Operations.

 

               If (1) SUNOCO (or any of its successors or assigns) either

          permanently (i) discontinues operation of the Nederland Terminal or

          ceases to provide transportation service along any portion of the

          N-[*****] Pipeline Route between the Nederland Terminal and the

          [*****] Terminal or the [*****] Terminal, or (ii) disconnects any

          portion of the N-[*****] Pipeline Route from the Nederland Terminal,

          the Corsicana Terminal, or the SUNOCO Pipeline but not at the request

          of Shipper, and not as a direct result of Shipper's own affirmative

          act or actions, or

 

 

                                      -18-

<PAGE>

 

       THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL

      TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH "[*****]" AND HAS

       BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION

 

 

          (2) WTG either ceases operation of the WTG 26" Pipeline or disconnects

          any portion of the WTG 26" Pipeline from the N-[*****] Pipeline Route

          and, as a result of any one of the multiple situations set forth in

          subparts 6.G.(1) and (2), above, Carrier is no longer able, in the

          aggregate, to deliver either the Minimum Monthly Throughput Obligation

          or the Shipper's nominated volume of Feedstocks in or for a given

          month, whichever is less, for at least six (6) consecutive months to

          both the [*****] Terminal and the [*****] Terminal by means of either

          the N-[*****] Pipeline Route or the C-[*****] Pipeline Route, then (x)

          any obligations of Shipper pursuant to this Agreement which have not

          accrued prior to discontinuation of such applicable operation(s) shall

          be extinguished and Shipper shall be forever released by Carrier from

          shipping any additional volumes of any Feedstock or other substance

          through any portion of the Nederland Terminal, the N-[*****] Pipeline

          Route, or the C-[*****] Pipeline Route, or otherwise making any

          payments for any such associated, unaccrued monetary obligation(s)

          that may have been due and owing under this Agreement, and (y) Carrier

          shall be released from any obligation to ship any additional

          Feedstocks thereafter pursuant to this Agreement.

 

               If, at any time after the completion of Contract Year No. 5 of

          this Agreement, either the [*****] or the [*****] closes or announces

          publicly its intent in writing to close for more than 180 consecutive

          days, then SUNOCO and Shipper shall promptly negotiate, in good faith,

          a reduction (including a total cessation) in the minimum quantities of

          Feedstocks to be delivered by Shipper pursuant to this Agreement,

          taking into account the quantities of Feedstocks delivered to either

          the [*****] (via the [*****] Terminal) or the [*****] (via the [*****]

          Terminal) over the twelve-month period immediately preceding the

          effective date of the closing of such [*****]; provided, however, that

          if such

 

 

 

                                      -19-

<PAGE>

 

       THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL

      TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH "[*****]" AND HAS

       BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION

 

 

          closure does not take place, then the provisions of this particular

          subparagraph 6.G shall not apply.

 

     H.   New Law or Regulation:

 

          In the event that during the term of this Agreement, any existing

          codes and applicable law, codes, or regulations are amended or new

          laws, codes and regulations are enacted or promulgated which, in

          either case, (1) generally apply to, affect, or impact all domestic,

          common carrier crude oil pipelines which are located [*****] and which

          are of comparable size, age, throughput capacity, and operational

          capability as those pipelines which are part of the N-[*****] Pipeline

          Route, and (2) will require SUNOCO and/or WTG (either individually or

          the aggregate) to incur (i) a capital expense improvement to the

          N-[*****] Pipeline Route in excess of $[*****] prior to the end of the

          Contract Period, or (ii) an increase in the cost of operating the

          N-[*****] Pipeline Route in excess of $[*****] per Contract Year,

          SUNOCO shall, upon written notice to Shipper, have the right to

          initiate negotiations for an adjustment in any of the applicable

          tariff rates which are set forth in the Joint Incentive Tariff in

          order to compensate Sunoco for the required improvements.

 

               In connection with SUNOCO's request to initiate negotiations to

          adjust any of the tariff rates set forth in the Joint Incentive Tariff

          for the N-[*****] Pipeline Route, SUNOCO shall provide Shipper with a

          proper showing of the governmental requirement for such improvements

          and that such improvements are the most cost effective to conform to

          such governmental requirements.

 

               If the Parties hereto are unable to mutually agree on an

          adjustment in the applicable tariff rates set forth in the Joint

          Incentive Tariff before it becomes necessary for SUNOCO to take such

          action so as to be in compliance with the

 

 

                                      -20-

<PAGE>

 

       THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL

      TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH "[*****]" AND HAS

       BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION

 

 

          new or amended law, code or regulation, this Agreement shall terminate

          without further liability hereunder at the option of SUNOCO, except

          for payments due and owing as of the date of such early termination.

 

7.   Sampling, Testing, and Metering. All rules, regulations, procedures,

     policies, guidelines, or recommendations which pertain to or govern the

     sampling, testing, measurement, or metering of any Feedstock to be

     received, transported, or delivered under the terms of this Agreement shall

     be set forth under the Rules Tariff or the Joint Incentive Tariff.

 

8.   Carrier's Receipt Points; Point of Custody, Transfer, Title, and Risk of

     Loss; Use of [*****] Terminal. Except as specifically noted in the

     following paragraph, the discharge flange on the vessel designated by

     Shipper where Feedstock enters the hose or receiving arm that is currently

     owned and operated by SUNOCO (or any of its affiliates) and located at or

     in close proximity to Nederland Terminal shall be the point of custody

     transfer of all Feedstocks tendered by or on behalf of Shipper to SUNOCO at

     the Nederland Terminal for movement along the N-[*****] Pipeline Route (the

     "CARRIER'S NEDERLAND RECEIPT POINT") under the terms of this Agreement. The

     inlet side of the meter that is currently owned and operated by SUNOCO (or

     any of its affiliates) and located at or in close proximity to Corsicana

     Terminal shall be the point of custody transfer of all Feedstock tendered

     by or on behalf of Shipper to SUNOCO at the Corsicana Terminal for movement

     along the C-[*****] Pipeline Route (the "CARRIER'S CORSICANA RECEIPT

     POINT") under the terms of this Agreement. Subject to the provisions set

     forth in the last sentence of this paragraph 8, below, receipts of