CITGO Petroleum Corporation
MARKETER FRANCHISE AGREEMENT
Between CITGO Petroleum Corporation and THE PANTRY INC.
As a Franchised Marketer, under this Marketer Franchise Agreement you will be entitled to the protections of the Petroleum Marketing Practices Act, a federal law which was enacted on June 19, 1978. Title I of this law is intended to protect you against arbitrary or discriminatory termination or non-renewal of your Franchise. As a Franchisor under the Petroleum Marketing Practices Act, CITGO Petroleum Corporation will provide you with a summary of Title I of the Act whenever notification of termination or non-renewal of your Franchise is given. However, CITGO wishes to ensure that you are now totally familiar with your rights in this regard even prior to executing this Marketer Franchise Agreement. Accordingly, CITGO has produced the concise summary of the provisions of Title I as prepared and published by the U.S. Secretary of Energy in the Federal Register. Please review this summary carefully. You should resolve with your lawyer, or other appropriate parties any questions you might have, prior to executing this Marketer Franchise Agreement.
[***] Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission. Omitted portions have been filed separately with the Commission.
MARKETER FRANCHISE AGREEMENT
On this 7 th day of September, 2010, CITGO Petroleum Corporation, a Delaware corporation, having a principal place of business at 1293 Eldridge Parkway,
P.O. Box 4689, Houston, TX 77210-4689, hereinafter called “CITGO,” and The Pantry,
Inc. a Delaware corporation, having a principal office and place of business at 305 Gregson Drive, Cary NC hereinafter called “MARKETER,” hereby enter into this Marketer Franchise Agreement (the “Agreement”). In the Agreement, CITGO and MARKETER may be collectively referred to as the “Parties.”
NOW, THEREFORE, CITGO and MARKETER agree as follows:
This Agreement shall be effective for the Term of three (3) years, beginning the first day of Sept., 2010, and expiring on the last day of August, 2013. MARKETER may cancel this Agreement by providing CITGO with ninety (90) days written notice prior to the end of the Term. Unless validly terminated or not renewed in accordance with the PMPA, this Agreement shall automatically renew for successive three (3) year periods.
a. MARKETER shall purchase and lift or accept delivery of quantities of CITGO Motor Fuels as set forth below during the respective monthly periods and CITGO shall sell and deliver to MARKETER the specified quantities of CITGO Motor Fuels during the respective monthly periods. MARKETER hereby acknowledges and agrees that the purchase and Ratable Basis lifting of the monthly quantities of Motor Fuels specified herein by MARKETER are reasonable, important and of material significance to the franchise relationship. The term “Ratable Basis” is defined in the Addendum to the Agreement.
b. MARKETER understands and agrees that, subject to the provisions of Section 8 or Section 13 hereof or the provisions of any Addendum hereto, any failure by MARKETER to purchase a minimum of ninety percent (90%) of the monthly quantity of CITGO-branded Gasoline listed below in Subsection 2(d) during any month on a Ratable Basis shall be a violation of this Agreement. CITGO shall have no obligation at any time to provide more than one hundred ten percent (110%) of the quantities listed below.
c. The monthly quantities of CITGO Motor Fuels, as set forth below, are based on the sale of Motor Fuels projected by MARKETER at retail locations or other facilities owned, leased, operated, supplied, franchised, or licensed by or through MARKETER and which CITGO has approved for branding with the CITGO trade name and trademark (“MARKETER’s Locations” or “Locations”). The terms “MARKETER’s Locations” and “Locations” include, but are not limited to, CITGO-branded retail stations. In the event that CITGO agrees to brand additional Locations, the monthly quantities of Motor Fuels set forth below shall be increased by the projected sales of Motor Fuels at the newly branded Locations. Likewise, if any Location is debranded, the monthly quantities of Motor Fuels set forth below shall be decreased by the projected sales at such formerly branded Location. These adjustments to the monthly quantities of CITGO Motor Fuels shall be effective beginning with the month in which the installation (or removal and return) of all CITGO signs, poles and identification items is completed, and shall be confirmed by an Amendment to this Agreement. It is acknowledged that the purpose of this paragraph is to allow the Parties to adjust the volume requirements resulting from new brandings and debrandings that may take place from time to time in the ordinary course of MARKETER’s business and does not supercede (i) a branding commitment for a particular Location agreed to by the MARKETER in a separate marketing agreement or program or (ii) other provisions of this Agreement including the term of the Agreement. MARKETER and CITGO will review the addition or deletion of Locations at least annually.
d. MARKETER agrees that the monthly quantity of Motor Fuels set forth below shall be purchased and lifted on a Ratable Basis during each month. CITGO may establish limitations and restrictions, upon MARKETER’s purchases of Motor Fuels that in CITGO’s sole judgment, are necessary or appropriate to enforce MARKETER’s obligations to make ratable purchases.
e. Quantities shall
be determined at the time and place of loading. For quantities
delivered by truck, MARKETER elects to use Net Gallons /
3. DELIVERY OF CITGO MOTOR FUELS.
CITGO Motor Fuels will be made available to MARKETER at terminals or other locations selected by CITGO, or by delivery to some other mutually agreeable destination by a method of transportation selected by CITGO. MARKETER shall strictly comply with all applicable rules and regulations of terminals and facilities at which MARKETER receives Motor Fuels from CITGO. Prior to transfer to MARKETER, MARKETER shall ensure that all trucks, tankers and fuel lines are clean and ready to receive CITGO Motor Fuels, so that said fuel is not mixed, blended or adulterated with any other substance or product. CITGO or the terminal operator may refuse to deliver CITGO Motor Fuels to any vehicle which, in the sole judgment of CITGO or the terminal operator, is contaminated, unsafe or inadequate. Unless prohibited by applicable state law, MARKETER agrees to obtain insurance coverage for MARKETER’s liability for any negligent, grossly negligent, or willful acts it commits in connection with the loading, transporting and delivery of Motor Fuels. MARKETER further agrees to provide CITGO with a copy of said insurance policy at CITGO’s request. Title and risk of loss on all Motor Fuels covered by this Agreement shall pass to MARKETER at the time and place of delivery. Time and place of delivery shall be when and at the point that Motor Fuels pass connections between the terminal’s truck rack or pipeline flange and MARKETER or its agent’s receiving connections, transport trucks, tank cars, or vessels. All demurrage is MARKETER’ s responsibility.
MARKETER shall pay CITGO’s MARKETER prices in effect for each Grade of CITGO Motor Fuel at the time and place of delivery as determined by CITGO. [***] is defined by identifying the specification of the gasoline or diesel product, including, but not limited to, the following: [***]. MARKETER prices will be established by CITGO on an FOB, terminal basis, or other point of sale basis, including, upon mutual agreement, on a delivered basis. MARKETER shall also pay to CITGO amounts equivalent to any tax, duty or impost now or hereafter imposed by the United States and/or any state, municipality, or any other governmental authority. In a manner consistent with the Addendum to the Agreement, CITGO retains the right at any time during the term of this Agreement to establish, alter, or modify the price, methods of price delivery, pricing areas, or classes of trade.
5. TERMS OF PAYMENT.
a. MARKETER agrees to pay CITGO in accordance with such terms as CITGO’s Credit Department may from time to time prescribe in writing. At the present time, CITGO’s credit terms are [***]. The failure by MARKETER to pay any invoice within the terms then prescribed by CITGO’s Credit Department may result in the restriction of credit, the denial of access to the terminals from which MARKETER is authorized to obtain its supply of CITGO Motor Fuels, the withholding of any rebates, discounts or benefits from CITGO programs that may otherwise be available to MARKETER, and shall constitute grounds for termination and/or non-renewal of this Agreement. Further, failure to make payment in accordance with CITGO’s payment terms authorizes the imposition of finance charges in an amount [***] of (i) [***] (ii) [***]. MARKETER agrees to provide CITGO’s Credit Department with a current, audited or certified financial statement within ninety (90) days after the end of each fiscal year and such other business related information as may be requested by CITGO’s Credit Department from time to time.
b. At the time of execution of this Agreement and thereafter upon CITGO’s request, in order to maintain a credit limit, MARKETER may be required to furnish CITGO with security agreements, financing statements, or letters of credit in an amount sufficient to secure payment of all CITGO Motor Fuels purchased by MARKETER and unpaid from time to time.
[***] Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission. Omitted portions have been filed separately with the Commission.
c. CITGO shall have the right to audit all delivery, inventory and sales records of the MARKETER and of any Location through which MARKETER markets, distributes or sells CITGO Motor Fuels. MARKETER shall provide CITGO with access to MARKETER’s Locations during normal business hours.
d. If MARKETER fails to comply with the terms and conditions of payment and credit established by CITGO, or if CITGO has reasonable grounds for insecurity with respect to MARKETER’s performance of any of MARKETER’s obligations under this Agreement, then, in addition to all other rights and remedies afforded to CITGO under this Agreement and applicable law, CITGO may take such action as CITGO deems reasonable.
e. As referenced in Section 12 of this Agreement, CITGO shall have the right, but not the obligation, to apply the proceeds of Payment Card (as defined in Section 12) invoices, or any other credits which may be otherwise owing to MARKETER, toward the payment of any indebtedness which is owed or may be owed by MARKETER to CITGO. MARKETER grants to CITGO a security interest in all Payment Card invoices and proceeds from such Payment Card invoices to secure the payment of Motor Fuel(s) purchases from CITGO, and agrees to execute documents reasonably necessary to perfect such security interest.
6. BRANDS AND TRADE NAMES.
Subject to the following, CITGO hereby grants to MARKETER for the term of this Agreement, the right to use CITGO’s applicable brand names, trademarks and other forms of CITGO’s identification, in the manner established by CITGO from time to time, in connection with the resale by MARKETER of CITGO Motor Fuels.
a. CITGO reserves the right to control fully the quality and branding of CITGO Motor Fuels which may be sold and/or distributed under CITGO’s brands and trade names. This includes the right to terminate or add types of Motor Fuel(s) to those which are currently available for purchase from CITGO, or to change the name or names of any CITGO Motor Fuels. MARKETER shall offer for sale all branded CITGO Motor Fuels that are delivered under such brand names, trademarks and trade names of CITGO as may be in use at the time of sale thereof. MARKETER shall not adulterate, change or alter the nature, quality or appearance of any of the Motor Fuels purchased hereunder.
b. If MARKETER elects to sell Motor Fuel(s) not purchased or acquired under this Agreement, MARKETER shall not allow nor permit the use of CITGO’s brand names, trademarks, trade dress, and all other forms of CITGO identification, in connection with the resale of such Motor Fuel(s). CITGO’s “brand names and trademarks,” as used herein, include CITGO’s logos, brand identification, product and service advertising, payment cards, product names and service marks. CITGO’s “trade dress” refers to the manner and style of advertising material, including color graphics and art work on product labels, point of purchase (“POP”) material, buildings, signs, pumps and other equipment.
c. Any non-CITGO Motor Fuels sold by or through MARKETER shall be clearly identified and labeled in such language and print at least comparable in size to CITGO’s brand names, trademarks, trade dress, and other forms of CITGO identification in order to make it unmistakably clear that such Motor Fuels are not CITGO Motor Fuels; the intent of this requirement is to preclude any likelihood of public confusion, mistake or deception. As an example, but not by way of limitation, if a MARKETER sells Motor Fuel(s) from a product dispenser which was not purchased or acquired under this Agreement, the MARKETER shall completely obliterate the CITGO brand names, trademarks, trade dress, and all other forms of CITGO identification. The designation “NO BRAND, THIS IS NOT A CITGO PRODUCT” shall appear in print at least comparable in size to the largest CITGO identification being used on any similar Motor Fuel(s) dispenser.
d. MARKETER agrees that if a customer of the MARKETER requests CITGO Motor Fuel(s) and such Motor Fuel(s) is not available, the customer of the MARKETER will be orally advised by the MARKETER that such CITGO Motor Fuel(s) is not available.
e. MARKETER recognizes that the identification, trademark and brand names of CITGO are the property of CITGO and the requirements as herein stated relating to the use of such identification, including their incorporation in any advertising campaign organized, supervised or paid for by MARKETER (to include advertisements on motor vehicles and dispensing equipment), are reasonable and of material significance to the franchise relationship. Accordingly, it is further agreed that a failure by the MARKETER to comply with the terms and provisions of this Section 6 shall constitute grounds for termination and/or non-renewal of this Agreement.
f. All signs, poles and identification items (collectively, “CITGO Branding Material”) furnished to MARKETER by CITGO for display at locations through which MARKETER supplies CITGO Motor Fuels for resale, shall be erected, installed and maintained in accordance with CITGO’s image specifications. MARKETER shall bear all responsibility for costs involved in such maintenance and repair of CITGO Branding Material, as well as any removal costs.
g. MARKETER understands and agrees that CITGO Branding Material will only be provided to those Locations that fulfill CITGO’s image standards and requirements. Therefore, MARKETER shall not make available or erect any CITGO Branding Material at any location that has not been approved in writing by CITGO nor shall MARKETER relocate any CITGO Branding Material without CITGO’s prior written consent.
h. MARKETER agrees to purchase insurance sufficient to cover the repair and/or replacement value of all CITGO Branding Material. MARKETER further agrees to indemnify and hold CITGO harmless from and against any and all damages and/or claims for damages arising out of the installation, use, repair, maintenance, or removal of all CITGO Branding Material or other equipment, furnished or leased to MARKETER by CITGO.
i. CITGO retains title to and all ownership rights in all CITGO Branding Material that bears CITGO ‘s name, trademarks and/or trade dress. MARKETER agrees to advise the owners and/or occupants of the Locations to which it supplies CITGO Motor Fuels (“MARKETER’s Retailers” or “Retailers”) of CITGO’s ownership of CITGO Branding Material. MARKETER further agrees to notify its Retailers that MARKETER, CITGO, or an authorized representative of either party, has the right to remove same from the premises at any time.
j. All CITGO Branding Material that has been furnished by CITGO to any Location, including any installation costs paid by CITGO, shall be amortized over a sixty (60) month period on a straight-line basis. Should any such Location be debranded within the sixty (60) month amortization period, the MARKETER shall pay to CITGO the unamortized portion of the costs associated with the CITGO Branding Material as of the date of debranding. Notwithstanding the MARKETER’s obligation to pay the unamortized portion of the costs, the ownership of that portion of the CITGO Branding Material that does not contain CITGO’s name and trademarks shall pass to MARKETER upon installation of the Branding Material. Further, after the CITGO Branding Material is fully amortized, title to such Branding Material shall pass to MARKETER. Notwithstanding anything to the contrary, CITGO shall permanently retain ownership of sign faces, decals and other identification items that contain CITGO’s name and trademarks.
k. MARKETER agrees to comply with applicable federal, state or local laws, statutes, codes, rules, ordinanaces, regulations and orders (collectively, “Laws”) regarding the filing and payment of any taxes, fines, and fees regarding all signage, CITGO Branding Material, POP, EPOS and/or Payment Card equipment.
l. Upon debranding a Location, MARKETER shall remove all identification items, including CITGO Branding Material, furnished or leased by CITGO within thirty (30) days. Identification items shall be removed by MARKETER, CITGO or an authorized representative of either Party, at MARKETER’s expense. CITGO has the right to remove all CITGO Branding Material not removed in a timely manner and charge MARKETER for the cost of removal.
7. RETAIL APPEARANCE.
MARKETER shall operate or cause to operate MARKETER’s Locations, including all
buildings, equipment, restrooms, sidewalks, parking lots and driveways located on the premises, in a clean, healthful and lawful manner, and in compliance with CITGO’s image guidelines.
a. MARKETER further acknowledges that CITGO does not want its brand and trademarks associated with illegal merchandise. Further, MARKETER will not sell or allow MARKETER’s Locations to sell illegal materials, or to sell legal materials in a manner disparaging to CITGO’s brand image, upon premises displaying the CITGO brand and trademarks.
b. MARKETER shall participate in CITGO’s sales and advertising programs including displaying POP advertising materials where legally permissible.
c. MARKETER is responsible for ensuring that MARKETER’s Locations comply with CITGO’s image guidelines and other applicable provisions of this Agreement.
d. CITGO shall have the right to debrand or require MARKETER to debrand any Location that fails to meet the provisions of this Section 7. CITGO shall have the right to inspect the retail location to confirm compliance with this Section 7.
If CITGO, because of a shortage of crude oil, raw materials, products, or refining capacity, either of its own, or of its other regular sources of supply, or in the industry generally, or because of governmental regulations, or for any other reason, deems that it may be unable to meet all of its supply requirements, CITGO may allocate its CITGO Motor Fuels among its various customers pursuant to a plan, method or formula as CITGO believes fair and reasonable. MARKETER agrees to be bound by any such allocation. During the period of such allocation, the provisions of Section 2 relating to volume requirements shall not be effective, and the quantity deliverable under this Agreement shall then be such quantity as CITGO determines it can allocate to MARKETER. Upon cessation of any such period of allocation, neither CITGO nor MARKETER shall be obligated to make up any quantities omitted pursuant to the provisions herein.
Any claim for defect or variance in quality of CITGO Motor Fuels furnished hereunder shall be made in writing to CITGO within five (5) business days after discovery of the defect or variance. CITGO shall be furnished samples adequate to test the Motor Fuels claimed to be defective and shall be afforded the opportunity to take its own samples. Any and all claims not made within the time and in the manner herein provided shall be deemed waived and released by the MARKETER.
10. WARRANTIES AND DISCLAIMERS.
a. CITGO warrants good title to the Motor Fuels delivered to MARKETER, as set forth in Section 3, and further warrants that the Motor Fuels: (1) will meet, in all material respects, CITGO’s specifications and octane ratings for the Motor Fuels, and (2) will comply with all applicable federal, state and local laws and regulations in effect at the time and place of delivery.
b. CITGO MAKES NO OTHER WARRANTIES OF ANY KIND OR NATURE WHATSOEVER, EXPRESS OR IMPLIED, INCLUDING, WITHOUT LIMITATION, ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
11. LIMITATION OF LIABILITY.
a. MARKETER’S SOLE AND EXCLUSIVE REMEDY FOR ANY CLAIM ARISING FROM OR IN CONNECTION WITH ANY ALLEGED FAILURE OF OR DEFECT IN ANY BRANDED MOTOR FUELS SOLD BY CITGO (WHETHER THAT CLAIM IS FOR BREACH OF CONTRACT OR WARRANTY OR IS UNDER TORT, STRICT LIABILITY, STATUTE OR OTHERWISE) IS (1) AT CITGO’S OPTION, REPLACEMENT OF THE FAILED, DEFECTIVE OR NON-CONFORMING BRANDED MOTOR FUELS OR REIMBURSEMENT OF THE PURCHASE PRICE THEREOF, AND (2) REIMBURSEMENT OF THE REASONABLE COST OF REPAIR OR REPLACEMENT OF ANY PARTS THAT ARE DAMAGED DIRECTLY BY THE USE OF THE FAILED, DEFECTIVE OR NON-CONFORMING BRANDED MOTOR FUELS.
b. IN NO EVENT WILL CITGO BE LIABLE OR RESPONSIBLE FOR ANY INCIDENTAL, INDIRECT, SPECIAL, EXEMPLARY, PUNITIVE, OR CONSEQUENTIAL DAMAGES (INCLUDING, WITHOUT LIMITATION, ECONOMIC LOSS AND LOSS OF PROFITS), WHETHER UNDER TORT, BREACH OF CONTRACT OR WARRANTY, STRICT LIABILITY, STATUTE OR OTHERWISE.
12. PAYMENT CARDS.
a. MARKETER shall accept as payment from retail customers CITGO-approved credit, debit and payment cards (collectively, “Payment Cards”) in accordance with the provisions of CITGO’s Payment Card Guide and Regulations, a copy of which has been provided to MARKETER. All Payment Cards are required to be processed through the CITGO Electronic Point of Sale (“EPOS”) Network.
b. CITGO shall have the right, in its sole discretion, to amend or terminate the Payment Card Guide and Regulations and/or discontinue its program at any time. CITGO may reject or charge back any Payment Card invoices not conforming to the Payment Card Guide and Regulations. MARKETER further agrees that upon such rejection or charge back, the value of the Payment Card invoices which were rejected or charged back shall become immediately due and owing from MARKETER to CITGO and may be deducted from subsequent settlements of Payment Card transactions.
c. MARKETER expressly agrees that CITGO shall have the right but not the obligation to apply the proceeds of Payment Card invoices or any other credits which may be owing to MARKETER toward the payment of any indebtedness owed by MARKETER to CITGO. MARKETER grants to CITGO a security interest in all Payment Card invoices and proceeds from such Payment Card invoices to secure the payment of Motor Fuel purchases from CITGO, and agrees to execute documents reasonably necessary to perfect such security interest.
d. MARKETER further agrees to maintain in good working order all of the EPOS Systems located at the Locations. For the purposes of this Section, “good working order” includes having the EPOS Systems properly configured and operating on the most current Payment Card Industry Data Security Standard-compliant version of the application software and hardware. CITGO shall have the right to deactivate the EPOS System for any Location that fails to comply with this “good working order” requirement.
13. FORCE MAJEURE.
a. In the event that either Party hereto is hindered, delayed or prevented from performing this Agreement because of Force Majeure, the obligation of the party so affected shall be suspended and proportionally abated during the continuance of the Force Majeure condition and the Party so affected shall not be liable in damages or otherwise for its failure to perform.
b. The term “Force Majeure” as used herein shall mean any cause or condition beyond the control of either Party hereto that hinders, delays or prevents performance of this Agreement, including, but not limited to (i) act of God, flood, fire, explosion, war, riot, strike and other labor disturbance; (ii) failure in, or inability to obtain on reasonable terms, raw materials, finished products, transportation facilities, storage facilities and/or manufacturing facilities; (iii) diminution, nonexistence or redirection of supplies as a result of compliance by CITGO, voluntary or otherwise, with any request, order, requisition or necessity of the government or any governmental officer, agent or representative purporting to act under authority, or with any governmental or industry rationing, allocation or supply program; (iv) governmental action not initiated by either Party (including legislation, regulation or court order), unusually severe economic conditions (including extraordinary increases in retail Motor Fuels prices), changes in fuel consumption standards (whether voluntary or mandated by law) or powertrain fuel source; and (v) CITGO’s inability to meet the demand for its Motor Fuels at CITGO’s normal and usual source points for supplying MARKETER, regardless of whether CITGO may have been forced to divert certain supplies from such source points in order to alleviate shortages at other distribution points.
c. If by reason of any Force Majeure condition, CITGO shall be unable to supply the requirements of all of its customers of any Motor Fuel(s) covered by this Agreement, CITGO’s obligation while such condition exists shall, at its option, be reduced to the extent necessary in its sole judgment and discretion to apportion fairly and reasonably among CITGO’s customers the amount of Motor Fuel(s) which it is able to supply. MARKETER shall not hold CITGO responsible in any manner for any losses or damages which MARKETER may claim as a result of any such apportionment. CITGO shall not be required to make up any deficiency in any Motor Fuel(s) not delivered as a result of any such apportionment. In no event shall any Force Majeure condition affect MARKETER’s obligation to pay for CITGO Motor Fuels when due.
14. TERMINATION AND NON-RENEWAL.
CITGO’s rights to terminate or elect not to renew this Franchise Relationship are as specified in Title I of the PMPA as may be amended from time to time.
MARKETER shall be entitled to terminate this Agreement (i) in the event of a material breach hereof by CITGO or (ii) in accordance with any addendum hereto.
15. HANDLING OF MOTOR FUELS.
a. MARKETER acknowledges and agrees that the Motor Fuels being sold under this Agreement, by their nature, require special precautions in handling and that MARKETER, its employees, agents and Retailers are, and will remain, fully informed as to current and future governmental regulations and approved procedures relating thereto. MARKETER is solely responsible for compliance with all applicable Laws relative to receiving, transporting, storing, pricing, selling, dispensing, and distributing Motor Fuels covered hereunder. MARKETER will advise its employees, agents, and Retailers who are involved in the ordering, selling, dispatching, handling, transporting, transferring and delivery of Motor Fuels of the applicable Laws and further agrees to provide appropriate training to such personnel to ensure compliance therewith. MARKETER is also solely responsible for the proper disposal of waste materials generated at any of MARKETER’s Locations. MARKETER shall not adulterate, contaminate or add any components to CITGO Motor Fuels, or allow others to do so, the effect of which would result in Motor Fuels no longer complying with applicable Laws, without first obtaining CITGO’s written approval.
b. All CITGO-branded Locations must conform with CITGO’s quality assurance programs and thus, are subject to random and periodic Motor Fuels sampling. MARKETER shall allow CITGO, and its authorized representatives, access to the CITGO-branded Locations for the purpose of acquiring samples for testing under CITGO’s quality assurance programs to ensure that CITGO Motor Fuels marketed, distributed or supplied by MARKETER are in compliance with all applicable Laws. MARKETER shall allow the RFG Survey Association, its agents and contractors, the same access. CITGO shall provide to MARKETER a copy of the results of any such sampling and testing.
c. MARKETER shall provide to CITGO a copy of the results of any testing that was performed on the Motor Fuels by MARKETER, or that were received by MARKETER from the U.S. Environmental Protection Agency (“EPA”), its contractors, or any other third party. In the event that a violation of the federal or state requirements for gasoline is detected, whether by testing or otherwise, MARKETER shall immediately cease selling the non-complying Motor Fuel and take such further action as is necessary to remedy the violation, including such action as CITGO or the EPA may request. Furthermore, MARKETER must immediately report any violations to CITGO and advise CITGO of corrective actions, steps to prevent further violations, steps to identify the cause(s) of the violations and the results of resampling and testing. This reporting must be in writing.
d. FEDERAL VOLATILITY REGULATIONS AND RFG/ANTI-DUMPING REGULATIONS: The U.S. Environmental Protection Agency (“EPA”) has promulgated regulations restricting the maximum allowable reid vapor pressure (“RVP”) for gasoline (40 CFR Part 80, 80.27). Additionally, various states have promulgated regulations restricting the maximum allowable RVP of gasoline and, in some cases, these regulations exceed the federal requirement. These regulations provide for the imposition of substantial penalties whenever violations occur.
The EPA requires that only RFG may be delivered to retail locations that are located within various ozone nonattainment areas (“RFG Areas”).
While CITGO will supply MARKETER with Motor Fuels to meet the regulations, it is also MARKETER’s responsibility to comply with the regulations. These regulations prescribe various rules concerning segregation of RFG, product transfer documentation when transferring custody or title through the distribution chain, quality assurance programs, fuel additive requirements, retention of records for five years, varying specification by regions and registration with the EPA. These regulations also provide for the imposition of substantial penalties whenever violations occur.
MARKETER further agrees to comply with all applicable posting and labeling Laws and regulations, including but not limited to those pertaining to octane ratings, lead, oxygenates and Renewable Fuels. Under this Agreement, a Renewable Fuel is a fuel that is produced from renewable biomass and used to replace or reduce the quantity of fossil fuel present in a transportation fuel, home heating oil, or jet fuel. This includes, but is not limited to, denatured fuel ethanol, cellulosic biomass ethanol, waste derived ethanol, biodiesel (mono-alkyl ester), non-ester renewable diesel, and blending components derived from Renewable Fuel.
e. SUBSEQUENT RENEWABLE FUEL BLENDING: Except when required
by Law, MARKETER may not blend Renewable Fuel into CITGO Motor Fuels without prior written consent from CITGO. MARKETER may request permission for such blending by providing a written request to CITGO that contains, at minimum, the following information: blending location, blending rate, and description of
MARKETER’s quality assurance program. Provided that it is not prohibited by Law, in the event that MARKETER elects to blend Renewable Fuel into CITGO Motor Fuels, MARKETER shall release, defend and indemnify CITGO from and against any and all lawsuits, claims, damages, costs and expenses which arise from or relate to such blending. With respect to Reformulated Blendstock for Oxygenate Blending (RBOB), only CITGO or its designee may blend Renewable Fuel.
f. DIESEL FUEL REGULATIONS: The EPA has promulgated regulations restricting the maximum allowable sulfur in diesel fuels (40 CRF Part 80, 80.500). The highway diesel fuel sulfur program, finalized in 2001, resulted in the nationwide transition in 2006 of most diesel fuel from low-sulfur diesel (LSD) containing a maximum of 500ppm sulfur, to ultra-low sulfur diesel (ULSD), containing a maximum of 15ppm sulfur. Federal regulations require the labeling of diesel fuel pumps with specific language notifying persons dispensing diesel fuel into vehicles of the sulfur standard of the fuel, and the vehicles for which it is appropriate. MARKETERS and/or Retailers that fail to comply with the diesel pump labeling and ULSD sales and transfer requirements (1) are subject to penalties under the Clean Air Act and (2) will be responsible for defending and indemnifying CITGO for any fees, penalties, or fines associated with the failure to comply with the above-referenced federal requirements.
g. MARKETER further agrees to comply or to require compliance with all Laws pertaining to underground storage tanks and fuel lines which hold or transfer CITGO Motor Fuels. MARKETER’s obligations include, but are not limited to, compliance with Laws relating to leak detection, spill protection, remediation, corrosion control, reporting, closure, recordkeeping, financial responsibility and/or pollution insurance.
h. CITGO shall have the right to inspect all CITGO-branded Locations and to obtain samples of all CITGO Motor Fuels that are sold at those Locations. Upon written request, CITGO shall provide to MARKETER a copy of the results of such sampling. Should CITGO determine that such samples are not CITGO Motor Fuels, CITGO may take such action as it deems appropriate, including imposing fines, debranding the Location or terminating this Agreement.
16. INDEMNITY AND WAIVER OF EXPRESS NEGLIGENCE.
a. MARKETER hereby releases and agrees to defend, indemnify and hold CITGO, its parent, subsidiaries, affiliates, agents, servants, employees, successors and assigns (collectively, the “CITGO Parties”), harmless from and against any and all claims, suits, losses, obligations, liabilities, injuries, and damages, including attorneys’ fees and costs of litigation, for death, personal injury, property damage or any other claim whatsoever arising out of any failure by MARKETER, to perform, fulfill or observe any obligation or liability of MARKETER as set forth in this Agreement, or any negligent act or omission by MARKETER, or any cause or condition of any kind directly or indirectly arising in connection with the use, occupancy, maintenance, upkeep, repair, replacement or operation of any place of business, service station or marketing premises (including, but not limited to, adjacent sidewalks, driveways, parking lots, curbs, signs, poles and all other fixtures and equipment located thereon) which place of business, service station or marketing premise is or was either directly or indirectly owned, leased, operated, supplied, franchised, or licensed by or through MARKETER.
b. MARKETER hereby releases and agrees to defend, indemnify and hold the CITGO Parties harmless from and against any and all claims, suits, losses, obligations, injuries, liabilities and damages, including attorneys’ fees and costs of litigation, resulting from or relating to the shipment, delivery, use, storage, handling, pricing, dispensing and sale of Motor Fuels, including, but not limited to, the seepage or leakage of any Motor Fuels from storage tanks, pumps, dispensers and piping, and fire or explosion at any place of business, service station or marketing premises, which place of business, service station or marketing premises is or was either directly or indirectly owned, leased, operated, supplied, franchised or licensed by or through MARKETER, whether such claims, suits, losses, obligations, injuries, liabilities, and damages, including attorneys’ fees and costs of lit