[***] DENOTES CONFIDENTIAL
MATERIALS OMITTED AND FILED
by and between
Alon Refining Krotz Springs, Inc.
Valero Marketing and Supply Company
July 3, 2008
THIS OFFTAKE AGREEMENT (this “ Agreement ”) is entered into on July 3, 2008 to be effective as of July 1, 2008 (the “ Effective Date ”), by and between ALON REFINING KROTZ SPRINGS, INC. , a Delaware corporation (“ Seller ”), and VALERO MARKETING AND SUPPLY COMPANY , a Delaware corporation (“ VMSC ”, and sometimes “ Buyer ”).
WHEREAS, Seller and Valero Refining and Marketing Company, a Delaware corporation (“ VRMC ”), have entered into a Stock Purchase Agreement, dated as of May 7, 2008 (the “ SPA ”), pursuant to which VRMC will sell and transfer, and Seller will purchase and take title to and delivery of the Shares (as defined in the SPA).
WHEREAS, Seller and VMSC (collectively, the “ Parties ”, and each individually a “ Party ”) are desirous of entering into an agreement whereby Seller will sell and VMSC will purchase a quantity of Products (as defined below); and
WHEREAS, Seller desires to sell to VMSC and VMSC desires to purchase from Seller the Products pursuant to the terms and conditions of this Agreement;
WHEREAS, Seller and VMSC acknowledge and agree that VMSC will resell certain of the Products to VMSC customers at the Refinery Truck Rack;
NOW THEREFORE, in consideration of the premises, the terms and conditions hereinafter set forth and for other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the Parties hereby agree as follows:
1 DEFINED TERMS
As used in this Agreement, the following terms shall have the following meanings: “Affiliate” has the same meaning as that term is defined in the SPA.
“ Applicable Law ” shall mean any applicable statute, law, regulation, ordinance, rule, judgment, rule of law, order, decree (including, without limitation, any consent decree), permit, approval, license, requirement, or other governmental restriction or any similar form of decision of, or any provision or condition of any permit, license or other operating authorization issued under any of the foregoing by, or any determination by any Governmental Authority having or asserting jurisdiction over the matter or matters in question, whether now or hereafter in effect and in each case as amended (including without limitation, all of the terms and provisions of the common law of such Governmental Authority), as interpreted and enforced at the time in question.
“ Argus ” means the various daily reports published by Argus Media including the U.S. Products Report.
“ BPD ” means Barrels per Day.
“ Business Day ” has the same meaning as that term is defined in the SPA.
“ CMAI ” means Chemical Market Associates, Inc.
“ Contract Year ” means a period of 365 days (or 366 days in case the period includes a February 29) beginning on the Effective Date, and ending on each subsequent anniversary thereof during the effectiveness of this Agreement.
“ cpg ” means United States cents per Gallon.
“ Day ” means each period of twenty-four consecutive hours, beginning and ending at 12:00 am (midnight), Central Time.
“ Gallon ” means one standard United States gallon at 60 degrees Fahrenheit.
“ Governmental Authority ” means any federal, state, local, foreign government, any provincial, departmental or other political subdivision thereof, or any entity, body or authority exercising executive, legislative, judicial, regulatory, administrative or other governmental functions or any court, department, commission, board, bureau, agency, instrumentality or administrative body of any of the foregoing.
“OPIS” means Oil Price Information Service.
“ Platt’s ” means Platt’s Oilgram Price Report.
“ Refinery ” means the petroleum refinery of Seller located in Krotz Springs, St. Landry Parish, Louisiana.
“ Term ” has the meaning set forth in Section 3.
Any other capitalized terms in this Agreement not otherwise defined above shall have the meaning as defined herein.
2 PURCHASE AND SALE
2.1 Products . Seller will sell and deliver to VMSC, and VMSC will purchase and receive from Seller, the products (the “Products”, and each individually a “Product”) set forth on Schedule 2.1 and Schedule 2.2 attached hereto and incorporated by reference and such other products as may be mutually agreed from time to time by the Parties.
2.2 Specifications . The specifications for the Products are as set forth in Schedule 2.1 and Schedule 2.2 .
2.3 Volumes . Subject to Schedule 2.1 and Schedule 2.2 , the applicable volumes of the Products to be purchased and sold hereunder shall be equal to 100% of the Refinery’s production of the Products.
2.4 Liftings . Products will be delivered and lifted ratably throughout the applicable month based upon the applicable Final Offtake Nomination (as defined in Section 2.6 ) and Final Forecast (as defined in Section 2.7 ).
2.5 Delivery Points . Product will be delivered to the requested delivery points (each individually, a “ Delivery Point ” and collectively, the “ Delivery Points ”) identified on Schedule 2.1 and Schedule 2.2 . In the event Seller is unable to load or deliver any Products at the specific Delivery Points designated by VMSC, Seller shall provide VMSC prompt notice thereof. Deliveries shall be as specified in Schedule 2.1 and Schedule 2.2 .
2.6 Nominations . Upon the Effective Date of this Agreement and on each anniversary thereafter, VMSC shall provide Seller with a good faith non-binding forecast of its monthly requirements (the “ Initial Offtake Nomination ”) for each of the Products listed on Schedule 2.2 (stating volumes and gasoline grade splits) for the following Contract Year. The estimates set out in Schedule 2.6 hereto shall be VMSC’s annual estimates for the first Contract Year. On or before the twentieth Day of each calendar month, VMSC shall provide Seller with monthly nominations by week for each Product for the following month stating volumes, gasoline grade splits and Delivery Points (the “ Final Offtake Nomination ”); provided, however that the Final Offtake Nomination for each month shall not vary by more than plus or minus twenty percent (20%) in the aggregate from the Initial Offtake Nomination for such month and the aggregate volume of each Product identified in all monthly nominations for months within any Contract Year shall not vary by more than twenty percent (20%) from the aggregate volumes thereof to be purchased and sold hereunder during the applicable Contract Year (or, with respect to any portion of a Contract Year, the ratable portion thereof for which monthly nominations shall have been made). Seller agrees to deliver the Products and VMSC agrees to lift the Products in accordance with the Final Offtake Nomination for each month in which deliveries are scheduled unless mutually agreeable changes are made.
2.7 Scheduling . Upon the Effective Date of this Agreement and on the 15 th day of each month, Seller shall provide VMSC with a good faith non-binding forecast of its monthly production (the “ Forecast ”) for each of the Products (stating volumes and grades, as applicable) listed on Schedule 2.1, to the extent VMSC is required to purchase the same volume, for the following month on a weekly basis and for any subsequent months on a monthly basis. The estimates set out in Schedule 2.7 hereto shall be Seller’s Forecast for the three month period ending on September 30, 2008. On or before the twentieth Day of each calendar month, VMSC shall provide Seller with monthly nominations by week for each Product for the following month stating volumes, gasoline grade splits, if applicable, and Delivery Points (the “ Transitional Offtake Nomination ”). Based upon the Transitional Offtake Nomination, the Parties will develop a delivery schedule for each of the Products (each a “ Schedule ”). The Schedules will be updated in good faith by the parties as appropriate.
2.8 Planned Maintenance . In each month during the Term, Seller will provide VMSC with a twelve (12) month rolling forecast of scheduled downtime of the Refinery and Product availability to the nearest Day (“ Maintenance Outage Days ”). Schedule 2.8 sets forth Seller’s known Maintenance Outage Days as of the Effective Date.
2.9 Remedies . The Parties acknowledge that the remedies available to them at law or in equity for a breach of delivery or receipt may include “cover” and “resale” damages subject to and in accordance with the applicable provisions of the Uniform Commercial Code as adopted by the State of Texas.
2.10 Retained Offtake Products . The Parties acknowledge the Retained Offtake Products, as such term is defined in the Feedstock and Product Inventory Sales Agreement attached to the SPA as Exhibit D, shall be treated by the Parties for purposes of this Agreement in accordance with Section 5 of the Feedstock and Product Inventory Sales Agreement.
2.11 Sale of Products by VMSC . Certain Products to be purchased by VMSC hereunder are not produced at the Refinery. As such, the Parties have agreed that Seller will purchase from VMSC and VMSC will sell and deliver to Seller such Products, pursuant to the terms and conditions of the Sales Contract attached hereto as Exhibit B .
The “Term” of this Agreement shall be from the Effective Date through the earlier of the date that all of the purchase and sale obligations for all Products set forth in Schedule 2.1 and Schedule 2.2 end or the termination of this agreement pursuant to Section 6.1 . For avoidance of doubt, Schedule 2.1 and Schedule 2.2 contain specific terms for the purchase and sale obligations for each Product, and the termination of such obligation as to one Product, pursuant to such terms, shall not impact the obligations as to the other Products or this Agreement.
4 PRICING/INVOICES/PAYMENT TERMS
4.1 Pricing . The prices for the Products are as set forth on Schedule 2.1 and Schedule 2.2 . Prices shall be rounded to six (6) decimal places. For any Product having a contract term exceeding one (1) year, the Parties shall meet anytime after the expiration of six (6) months from the Effective Date to reexamine the price for such Product. If the Parties determine that the pricing formula set forth herein results in a price which is materially different than the then prevailing “market price” for such Product at one or more applicable Delivery Points, the Parties shall mutually agree on a new price for any such Product at any such Delivery Point, as appropriate. If the Parties cannot agree on a new pricing formula or if the Parties cannot agree that the pricing formula set forth herein results in a material difference when compared to the then prevailing “market price” for such Product at one or more applicable Delivery Points, then the Parties shall hire a mutually acceptable independent third party to determine the materiality of the difference and/or a prevailing market price formula based upon the factors set forth above. The Parties shall share equally the costs of the independent third party.
4.2 Replacement Publications . In the event that the publisher of any price set forth on the schedules hereto ceases operation and/or publication of the relevant price or materially alters the method for calculating a price, the Parties agree to meet within ten (10) days to agree to a replacement publication for use hereunder. In addition, VMSC reserves the right to change from Argus to Platt’s or another pricing index prior to execution.
4.3 Invoice Address . Until such times that the Parties use electronic data interchange (“ EDI ”), all invoices shall be transmitted to the following address:
Gasoline and Finished Distillate
Marketing and Supply Company
Ammonium Thiosulfate and NGLs (BBs, PC4, Butane, PPs)
Marketing and Supply Company
Intermediates (LCO, HSD Blendstock)
Marketing and Supply Company
Marketing and Supply Company
4.4 Invoices . Seller shall submit an invoice, together with such information as the Parties mutually agree is necessary to substantiate the invoice (collectively, the “ Invoice ”), to
VMSC for all Products delivered to VMSC within two (2) Business Days after delivery or lifting and VMSC agrees to pay Seller within two (2) Business Days of receipt of any such Invoice.
Each Invoice shall show the quantity, Product type and grade of Products nominated by VMSC and delivered by the Seller at each relevant Delivery Point together with the prices applicable for these Products and quantities. Seller shall deliver each Invoice to VMSC via facsimile or electronic transmission, unless otherwise agreed by the Parties. The Parties agree to work together in good faith to arrange for each Invoice to be sent via EDI as soon as reasonably practicable after entering into this Agreement.
Quantity of Product delivered shall be determined pursuant to the methods set forth in the General Terms and Conditions on a temperature adjusted (net) Gallon based on 60° Fahrenheit.
6.1 Termination . This Agreement may be terminated:
Written notice of termination shall be given by the terminating Party to the other Party.
Subject to and in accordance with Section 7.13 of the SPA (as applicable), during the Transition Term of this Agreement, VMSC will maintain the railcars it leases in connection with the transportation of Propane/Propylene from the Refinery (the “Propylene Railcars”) in accordance with the terms of such leases. At the end of the Transition Term of the Agreement VMSC will assign (subject to any applicable restrictions or limitation applicable to such assignment and provided that VMSC shall exercise its commercially reasonable efforts to overcome any such restrictions or limitations) and Seller will accept the assignment of the Propylene Railcars to Seller. If the lease of any Propylene Railcar expires during the Transition Term of the Agreement, VMSC will use commercially reasonable efforts to renew the lease of such Propylene Railcar consistent with VMSC’s past practices; provided, however, that VMSC will seek Seller’s input regarding the terms of any such renewal and will try to incorporate the same into the renewal to the extent commercially reasonable; provided further, that VMSC shall have the right to renew the lease on any such Propylene Railcars on such terms that it deems commercially reasonable; and provided, further, that VMSC shall have no liability whatsoever to Seller or any of its Affiliates if VMSC is unable to renew the lease of a Propylene Railcar or if it is unable to find and lease a replacement railcar using commercially reasonable efforts.
8.1 Exhibits . The exhibits attached hereto, including without limitation the General Terms and Conditions as Exhibit A and incorporated herein by this reference, are made a part of this Agreement. In the event of conflict between the provisions of the main body of this Agreement and any of the exhibits hereto, the provisions of the main body of this Agreement shall prevail.
8.2 Notices . Any and all notices herein prescribed shall be in writing and transmitted by personal delivery, by U.S. Postal Service as overnight or certified mail, by a nationally recognized delivery service for same Day or overnight delivery or by facsimile to the respective parties as follow:
Marketing and Supply Company
Krotz Springs, Inc.
Receipt of all notices shall be determined by date/time stamp on received, confirmed fax or receipt date on any other form of delivery.
8.3 Relationship of the Parties . It is not the purpose or intention of this Agreement to create (and it should not be construed as creating) a joint venture, partnership or any type of association, and the Parties are not authorized to act as an agent or principal for each other with respect to any matter related hereto.
8.4 Amendment . This Agreement may be amended only by an instrument in writing executed by the Parties hereto.
8.5 Successors Bound; No Third-Party Beneficiaries . Subject to the provisions of paragraph 15 of Exhibit A hereof, this Agreement shall be binding upon and inure to the benefit of the Parties hereto and their respective successors and permitted assigns. Nothing in this Agreement, express or implied, is intended to or shall confer upon any other person or entity any right, benefit or remedy of any nature whatsoever under or by reason of this Agreement.
8.6 Entire Agreement . This Agreement, the exhibits and the documents specifically referred to herein and any defined term of the SPA incorporated herein by reference constitute the entire agreement, understanding, representations and warranties of the Parties hereto with respect to the subject matter hereof.
8.7 Counterparts . This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which shall constitute one and the same instrument.
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IN WITNESS WHEREOF , the Parties have duly executed this Agreement effective as of the date first specified above.
[Signature Page to Offtake Agreement]
Products: As set forth in the table below. In addition, Premium Conventional and ULSD are not produced at the Refinery and are included below to satisfy VMSC rack demand requirements, such Products to be supplied to Seller by VMSC pursuant to the Sales Contract attached hereto as Exhibit B .
Schedule 2.1 - 1
Purchase and Sale obligations for the preceding Products shall be for a term of three (3) calendar months (the “ Transitional Term ”). Either Party may terminate the purchase and sale obligations contained in this Schedule 2.1 by providing the other with at least thirty (30) Days’ prior written notice.