Exhibit 10.12
THIRD ADDENDUM TO DISTRIBUTOR
FRANCHISE AGREEMENT
This Third Addendum to Distributor
Franchise Agreement is entered into by and between CITGO Petroleum
Corporation (“CITGO”) and SSP Partners
(“SSP”) on September 6, 1999.
WHEREAS, CITGO and SSP have entered
into a Distributor Franchise Agreement as amended on
January 15, 1996 and as amended on June 23, 1998
(collectively the “DFA”);
WHEREAS, SSP has received offers
from other suppliers to purchase motor fuels on a formula related
basis, and therefore, has requested that CITGO sell branded
gasoline on a formula related basis; and
WHEREAS, CITGO has agreed to sell
CITGO branded motor fuels to SSP in accordance with the terms as
provided herein; provided that no marketing programs, other than
branding and credit card are provided to SSP for company operated
units; and provided further, that SSP extends the term of the DFA
to August 1, 2006.
NOW THEREFORE in consideration of
the premises and covenants contained herein, it is agreed as
follows:
1. The term of the DFA is extended
to August 1, 2006.
2. The purchase price for motor
fuels sold by CITGO to SSP and lifted on and after August 2,
1999, for CITGO branded stations (and certain unbranded stations
that are conflicting with other CITGO branded stations) that are
operated by SSP (collectively, the “Stores”) shall be
equal to (i) the [***] for the applicable grade of motor fuel
as of the date of lifting, (ii) less [***] per gallon,
(iii) plus CITGO’s product delivery costs (PDC) for the
applicable terminal, (iv) plus a portion of each Store’s
gasoline profits and merchandise profits as described to
subparagraphs 2.3 and 2.4 below and (v) plus any applicable
taxes. The purchase price will not be reduced by any prompt payment
discount. The Stores are identified in the attached Exhibit A,
which Exhibit will be amended from time to time as
necessary.
2.1 Should Platts not be published
on the date of lifting, the immediate preceding date upon which
Platts is published shall be used to determine the purchase
price.
2.2 This purchase price shall only
be available for motor fuels delivered to the Stores.
2.3 As a part of the purchase price
for motor fuels, SSP shall pay CITGO [***] of SSP’s gross
margins from its sales of gasoline at the Stores. For purposes
herein, gross margins from its sales of gasoline shall be the
difference between SSP’s costs for the motor fuels, excluding
the portion of the costs determined under the first sentence of
this subparagraph 2.3 and under subparagraph 2.4, but, including
applicable
|
*
|
CONFIDENTIAL
TREATMENT REQUESTED: INFORMATION FOR WHICH CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED IS OMITTED AND IS NOTED WITH
“[***].” AN UNREDACTED VERSION OF THIS DOCUMENT HAS
BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.
|
taxes and transportation costs, and
the price at which SSP sells the motor fuels at the Stores, and
calculated in a manner consistent with SSP’s past accounting
practices.
2.4 As a part of the purchase price
for motor fuels, SSP shall pay CITGO [***] of SSP’s gross
profit net from the sale of merchandise (excluding motor fuels) at
the Stores. For purposes herein, gross profit net from the sale of
merchandise shall mean the selling price of such merchandise less
(i) the costs of such merchandise (reduced by vendor rebates)
and (ii) the costs associated with unsaleable inventory, net
inventory shrinkage, and net cash shortages, calculated in a manner
consistent with SSP’s past accounting practices.
2.5 CITGO’s PDC shall be
reviewed and adjusted annually to reflect CITGO’s actual
costs for having the product available at the particular terminal,
including exchange differential, without allocation of indirect
costs such as corporate overhead, Listed on Exhibit B attached
hereto is CITGO’s current PDC for each of the terminals, both
primary and secondary, presently used to supply motor fuels to SSP.
It is acknowledged that the PDC information is proprietary and
confidential and SSP agrees not to disclose it to any third
party.
2.6 SSP shall provide to CITGO on or
before the 23rd day of each month, SSP’s monthly income
statement for the immediate preceding month for the Stores in
sufficient detail to calculate the portion of the purchase price
set forth in subparagraphs 2.3 and 2.4. Furthermore, SSP shall
furnish to CITGO on an annual basis an audited income statement.
CITGO may, during normal business hours and upon reasonable notice
and at its own expense, inspect and audit the books and records of
SSP for the Stores.
2.7 SSP shall pay CITGO’s
invoices based on rack price by EFT in accordance with
CITGO’s payment terms (the “Invoice Price”).
However, each month the parties agree to reconcile the difference
between the purchase price, as determined under paragraph 2, and
the Invoice Price. If the purchase price is less than the Invoice
Price, CITGO shall credit SSP the difference. If the purchase price
is more than the Invoice Price, SSP shall pay CITGO the
difference.
3. For each Store that SSP operates
that is branded with CITGO on August 2, 1999, or subsequently
becomes a CITGO branded outlet operated by SSP, SSP will receive a
CITGO branding allowance of up to [***] for branding materials,
including cladding, signage, quad band and round corners. SSP will
pay for all installation and incremental cost of backlit letters.
CITGO also agrees to provide brand maintenance materials up to an
aggregate amount for all Stores of [***] per year.
|
*
|
CONFIDENTIAL
TREATMENT REQUESTED: INFORMATION FOR WHICH CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED IS OMITTED AND IS NOTED WITH
“[***].” AN UNREDACTED VERSION OF THIS DOCUMENT HAS
BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.
|
2
4. CITGO’s credit card
services and fees will be the same regardless if the motor fuels
are priced under paragraph 2 of this Addendum or otherwise;
provided that SSP will not be charged more than any other CITGO
distributor except the 7-Eleven Company.
5. Except as otherwise provided
under paragraphs 3 and 4 above, SSP shall not receive any benefits
from any CITGO marketing program for the Stores as the pricing
formula is being provided in lieu of other marketing programs,
including but not limited to the Image Allowance Program (IAP).
Dealer sites are not subject to this Addendum and shall remain
eligible for all programs for which such sites qualify.
6. Within a sixty day period each
year, thirty days before and 30 days after the anniversary of the
effective date of this Addendum, either party may request in
writing that the pricing provisions of this Addendum be
renegotiated because of a material or significant change in
(i) market conditions, (ii) SSP’s gasoline sales
and gross margins, (iii) SSP’s merchandise sales and
gross margins, (iv) Platt’s being recognized as a market
indicator, (v) senior management changes at either SSP or
CITGO or (vi) other conditions that affect either
party’s economics under this Addendum. Upon a written request
of renegotiation, both parties will attempt to negotiate a new
purchase price for motor fuels. If the parties are unable to reach
an agreement on the purchase price, either party may terminate the
pricing provisions of paragraph 2 upon providing a minimum of
ninety (90) days written notice prior to January 31 of
the following year. In such event, the date of termination shall be
January 31 of the year immediately following the year in which
notice was given. The then current pricing provision shall remain
in effect until termination. Upon termination of such pricing
provision, this Third Addendum shall also terminate and the
parties’ rights, duties and obligations with respect to the
DFA, are as set forth in the DFA as amended and modified, including
the January 15, 1996 and June 23, 1998 Addendums. SSP has
certain termination rights under paragraph 1 of the
January 15, 1996 Addendum and SSP may provide the 90 day
termination notice of the DFA at the same time that it provides
notice of termination of the pricing provisions and of this Third
Addendum. Furthermore, should CITGO provide notice of termination
of the pricing provisions of this Third Addendum, SSP may provide
notice of termination of the DFA provided such notice is either
provided (i) on or before 90 days prior to January 31 of
the immediate following year or (ii) within thirty
(30) days of receipt of CITGO’s notice of termination of
the pricing provisions. It is acknowledged that if the volume of
SSP’s branded gasoline purchases from CITGO for a Contract
Year falls ten percent (10%) or more below the immediate
preceding Contract Year’s volume, CITGO may request a
renegotiation of the pricing provisions of this Addendum. For
purpose of this Addendum, Contract Year shall mean August 2 to
August 1 of the next year.
7. SSP will offer to brand with
CITGO all new or acquired company operated stores in Texas,
Oklahoma, Louisiana, Arkansas, and New Mexico, outside of Harris
County, Texas, provided that, any stores acquired under contractual
commitments would not be required to be branded with CITGO until
expiration of the commitment. CITGO agrees to supply SSP’s
current and future motor fuel requirements; provided that, CITGO
will attempt, but is not required, to supply SSP’s additional
motor fuel requirements in Shreveport, West Texas and New
Mexico.
3
8. Except with respect to the
7-Eleven Company, CITGO shall not give a formula price for the
purchase of motor fuels to any other CITGO branded marketer in any
terminal area in which SSP lifts CITGO branded motor fuels, which
formula price CITGO could reasonably expect to result in a lower
motor fuels price than that being paid by SSP hereunder, unless
such formula price is also offered to SSP for such terminal area.
Furthermore, CITGO shall not give a Platt’s related formula
price with a sharing of the marketer’s margin for the
purchase of motor
