Exhibit 10.2

 

TERMINAL STORAGE AND THROUGHPUT AGREEMENT

 

This TERMINAL STORAGE AND THROUGHPUT AGREEMENT (the “Agreement”) is made,
entered into and effective as of January 15, 2004, by and between VALERO
LOGISTICS OPERATIONS, L.P., a Delaware limited partnership (“VLI”), and VALERO
MARKETING AND SUPPLY COMPANY, a Delaware corporation (“VMSC”).

 

INTRODUCTION

 

WHEREAS, VLI has entered into an agreement to purchase asphalt terminals and
asphalt blending and related facilities in Rosario, New Mexico (near Santa Fe)
and Catoosa, Oklahoma (near Tulsa) (each a “Terminal” and collectively, the
“Terminals”);

 

WHEREAS, VMSC is engaged in the asphalt marketing business in New Mexico and
Oklahoma; and

 

WHEREAS, upon the purchase of the Terminals, VLI desires to make available the
Terminals to VMSC and perform the services set forth herein as reasonably
requested by VMSC and VMSC desires to utilize the Terminals for the storage,
blending and throughput of asphalt and asphalt related products.

 

AGREEMENT

 

NOW, THEREFORE, in and for consideration of the premises and mutual covenants
contained herein, VLI and VMSC hereby agree as follows:

 

ARTICLE ONE

 

DEFINITIONS

 

For the purposes of this Agreement, the following definitions shall apply:

 

“Adjustment Year Index” means the Index published the month before the first day
of the Contract Year in which an annual adjustment is to be made to the
Throughput Fee.

 

“Agreement” means this Terminal Storage and Throughput Agreement, including all
exhibits, schedules, and other attachments hereto, as each may be amended,
supplemented or modified from time to time.

 

“Applicable Law” shall mean any applicable statute, law, regulation, ordinance,
rule, judgment, rule of law, order, decree, permit, approval, concession, grant,
franchise, license, agreement, 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

 

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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.

 

“Arbitrable Dispute” means any and all disputes, Claims, counterclaims, demands,
causes of action, controversies and other matters in question between VLI, and
VMSC, arising out of or relating to this Agreement, the alleged breach hereof,
the subject matter of this Agreement or the transactions contemplated hereby,
and/or the relationship between VLI and VMSC created by this Agreement;
provided, however, that the term Arbitrable Dispute shall not include any matter
that is to be resolved in accordance with the procedures set forth in Section
4.6.

 

“Ardmore Refinery” means the refinery located at Ardmore, Oklahoma, which, as of
the date hereof, is owned and operated by an affiliate of VMSC.

 

“Asphalt” means all vacuum tower bottoms produced at the Ardmore Refinery and
all Asphalt Products produced at the McKee Refinery.

 

“Asphalt Products” means asphalt, asphalt base stocks, emulsion base stocks,
polymer modified asphalt, and other asphalt-related products and materials.

 

“Base Year Index” means the Index published the month before first day of year
prior to the Contract Year in which an annual adjustment is to be made to the
Throughput Fee.

 

“Claim” means any existing or threatened future claim, demand, suit, action,
investigation, proceeding, governmental action or cause of action of any kind or
character (in each case, whether civil, criminal, investigative or
administrative), known or unknown, under any theory, including those based on
theories of contract, tort, statutory liability, strict liability, employer
liability, premises liability, products liability, breach of warranty or
malpractice.

 

“Commencement Date” means the date upon which VLI takes title to the Terminals.

 

“Contract Year” means the period beginning January 1st, and ending at the
following December 31st of each calendar year; provided, however, the first
Contract Year shall commence on the Commencement Date and terminate on December
31, 2004.

 

“Controlled Affiliates” means an entity that directly or indirectly through one
or more intermediaries is controlled by Valero Energy Corporation (including,
without limitation, VMSC), excluding the Partnership Parties and Subsidiaries.
For the purposes of this definition, "control" (including with correlative
meaning, the term “controlled by”), as used with respect to any such entity,
shall mean the possession, directly or indirectly, of the power to direct or
cause the direction of the management or policies of such entity, whether
through the ownership of voting securities, by agreement or otherwise.

 

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“Day” means each period of twenty-four consecutive hours, beginning and ending
at 7:00am, Central Time.

 

“Facilities” means the Terminals.

 

“Governmental Authority” means any federal, state, local or foreign government
or 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.

 

“Index” means the average Consumer Price Index, All Items Indexes, All Urban
Consumers applicable to Dallas, Texas, published by the Bureau of Labor
Statistics of the United States Department of Labor, for the most recently
completed twelve-month period immediately preceding the most current Contract
Year. If a substantial change is made in the Index, then the Index shall be
adjusted to reflect the value that would have been obtained if no such change
has been made. If the Index is no longer published, then a reliable cost of
living indicator from the United States Government or a reputable financial
publication shall be substituted, and shall thereafter be deemed to be the Index
for the purpose of calculating adjustments to the Throughput Fee or the Adjusted
Throughput Fee.

 

“McKee Refinery” means the refinery located near Dumas, Texas, which, as of the
date hereof, is owned and operated by an affiliate of VMSC.

 

“Partnership Parties” shall mean VLI, Valero L.P., Riverwalk Logistics, L.P.,
Valero GP, LLC, and Valero GP, Inc.

 

“Refineries” means, collectively, the Ardmore Refinery and the McKee Refinery.

 

“Shortfall” means, for any Contract Year, the excess of the Minimum Obligation,
as such number may be reduced pursuant to Article 3, if any, over the volume of
Asphalt Products actually Throughput during the Contract Year.

 

“Shortfall Obligation” means the amount of any Shortfall for a Contract Year
expressed in tons, multiplied by the Throughput Fee in effect as of the last day
of the Contract Year in question.

 

“Subsidiaries” means all entities in which VLI, directly or indirectly through
one or more intermediaries has an ownership interest.

 

“Terminal” or “Terminals” has the meaning designated in the Introduction to this
Agreement.

 

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“Throughput” means the delivery into trucks, rail-cars, barges or other means of
conveyance from storage at the Terminals of Asphalt Products on behalf of VMSC
or VMSC’s customers. The quantity of Asphalt Products Throughput at the
Terminals shall be measured in accordance with Article Seven.

 

“Throughput Fee” means the Base Throughput Fee, as adjusted by the Volume
Incentive Discount, if any, plus any applicable Blending Fee, as adjusted by the
Blending Volume Incentive Discount.

 

Other Definitions. The following terms used in this Agreement have the meaning
provided in the article or section noted below:

 

Adjusted Throughput Fee   Section 4.5     Base Throughput Fee   Section 4.1    
Blending Fee and         Blending Volume Incentive Discount   Section 4.3    
Cure Period   Article 8     Defaulting Notice   Article 8     Defaulting Party  
Article 8     Facilities   Section 2.1     Force Majeure and         Force
Majeure Event   Section 12.2     Initial Term   Article 5     Minimum Obligation
  Article 3     Non-Defaulting Party   Article 8     Notice of Dispute   Article
8     Throughput Shortfall   Section 4.6     Total Throughput   Section 4.6    
Volume Incentive Discount   Section 4.2    

 

ARTICLE TWO

 

FACILITIES AND OPERATIONS

 

2.1 VLI will, on a non-exclusive basis, receive, store, blend, handle and/or
redeliver Asphalt Products at its Terminals in accordance with VMSC's reasonable
requirements and will tender said Product to VMSC or its or its customers'
carriers for shipment as directed by VMSC. VLI shall furnish and perform all
labor, supervision and materials necessary for its timely and efficient
performance of the receipt, storage handling, redelivery, and/or related
operations pursuant to this Agreement and contemplated hereunder, which in all
cases shall be conducted in accordance with generally accepted terminalling
practices and in compliance with all Applicable Laws.

 

2.2

Delivery; Access. VMSC may deliver Asphalt Products to the Facilities by truck,
railcar or barge delivery, as applicable, during the Terminal's operating hours.
VMSC will retain

 

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responsibility for all dispatch services associated with delivery of Asphalt
Products to and from the Terminal. VMSC and VLI will cooperate with each other
in scheduling deliveries and receipts. VLI grants to VMSC and its employees,
agents and representatives reasonable access at all times during the term of
this Agreement to the Facilities, including ingress and egress to the Facilities
through the Terminal premises. VLI grants VMSC's customers access to the
Facilities including the loading rack(s), at all reasonable times for the
purpose of receiving Asphalt Products.

 

2.3 Receipts; Loading. Receipts will be issued by VLI to VMSC or VMSC's
customers for all Asphalt Products delivered to the Facilities by or for VMSC or
its customers. Asphalt Products will be supplied into trucks and/or railcars at
loading at a minimum temperature of 325F. During the asphalt season, Facilities
are available 24 hours a day every day with the exception of regular holidays
observed by VLI. Outside of the asphalt season, the Facilities will be made
available at mutually agreed times.

 

2.4 Blending Services. At VMSC's request, VLI shall perform specified Asphalt
Products blending services with components supplied by VMSC. With respect to
such blending services:

 

  (a) VMSC shall provide VLI with all necessary blending components;

 

  (b) VMSC shall provide VLI with the desired blending formulations; and

 

  (c) VLI shall perform such blending services in accordance with the blending
formulations provided by VMSC.

 

  (d) OTHER THAN THE WARRANTY SET FORTH IN THE PRECEDING SENTENCE, VLI MAKES NO
OTHER WARRANTY, EXPRESS OR IMPLIED, INCLUDING AS TO THE FORMULATIONS THEMSELVES
OR AS TO THE COMPONENTS PROVIDED BY OR ON BEHALF OF VMSC AND INCLUDING THE
IMPLIED WARRANTY OF MERCHANTABILITY AND THAT OF FITNESS FOR A PARTICULAR
PURPOSE.

 

2.5 Remedy. As VMSC’s sole remedy for a breach by VLI of its warranty set forth
in Section 2.4, VLI shall reperform the blending services at no additional cost
to VMSC, including in its reperformance the cost of any blending components the
replacement of which results from VLI's failure to perform the blending service
in accordance with the blending formulations provided by VMSC.

 

ARTICLE 3

 

MINIMUM OBLIGATION

 

3.1 Minimum Obligation. Subject to the provisions of this Agreement, VMSC agrees
to Throughput an amount of Asphalt Products through the Terminals on an
aggregate annual basis equal to a minimum of 18 ½% of all Asphalt produced at
the Refineries during each Contract Year (the “Minimum Obligation”).

 

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3.2 Adjusted Minimum Obligation. At all times during the term of this Agreement,
VLI shall have the option to solicit and contract third-party throughput
agreements to fill unused capacity at the Terminals. If VLI throughputs Asphalt
Products on behalf of third parties, then: (i) the Minimum Obligation shall be
adjusted such that the combined volume of the Throughput and third-party
throughput volume at the Terminals in the aggregate is equal to 18 ½% of all
Asphalt produced at the Refineries, and (ii) VLI shall provide VMSC with written
notice of the amount of such third-party throughput volumes, which notice shall
delivered to VMSC within 15 days of the end of the calendar quarter in which
such throughput occurred. Additionally, if a Force Majeure Event at either
Terminal prevents VMSC from Throughputing any amount of Asphalt Products, then
the Minimum Obligation for the applicable Contract Year shall be reduced by an
amount equal to the amount such Asphalt Products that VMSC could not Throughput
due to the Force Majeure Event.

 

3.3 If this Agreement is terminated pursuant to Article 8 other than at the end
of a Contract Year, the Minimum Obligation shall be prorated accordingly.

 

ARTICLE 4

 

FEES

 

4.1 Base Throughput Fee. Subject to terms of this Agreement, VMSC will pay VLI a
throughput fee equal to $20.00 (as adjusted pursuant to Section 4.5, the “Base
Throughput Fee”) per ton of Asphalt Products Throughput through the Terminals;
provided, however, the Base Throughput Fee applicable to each Terminal shall not
exceed the lowest terminal throughput fee then being paid by an unaffiliated
third party at the applicable Terminal; provided further that if the third party
throughput fee that is the basis for the Base Throughput Fee reduction is no
longer in effect or is no longer less than the Base Throughput Fee, then the
Base Throughput Fee shall immediately revert to the Base Throughput Fee prior to
the reduction.

 

4.2 Volume Incentive Discount. For volumes of Asphalt Products that exceed
248,200 tons during any Contract Year, VMSC will receive a discount off the Base
Throughput Fee of $10.00 per ton for each ton in excess of 248,200 tons (the
“Volume Incentive Discount”).

 

4.3

Blending Fee. (a) In addition to the Base Throughput Fee, VMSC will pay to VLI a
blending fee of $7.50 per ton for all polymer modified asphalt blending services
performed under Section 2.4 of this Agreement (as adjusted pursuant to Section
4.5, the “Blending Fee”) provided, however, the Blending Fee applicable to each
Terminal shall not exceed the lowest blending fee then being paid by an
unaffiliated third party at the applicable Terminal; provided further that if
the third party blending fee that is the basis for the Blending Fee reduction is
no longer in effect or is no longer less than the Blending

 

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Fee, then the Blending Fee shall immediately revert to the Blending Fee prior to
the reduction .

 

(b) For polymer modified asphalt blending services performed under Section 2.4
of this Agreement, VMSC will receive a discount off the Blending Fee of $2.50
per ton for each ton that VMSC is entitled to receive the Volume Incentive
Discount pursuant to Section 4.2 of this Agreement (the “Blending Volume
Incentive Discount”).

 

4.4 Payment of Throughput Fees. VLI shall invoice VMSC for Throughput Fees
monthly within ten business days after the end of each calendar month for
throughput and blending that occurred during the preceding calendar month. VMSC
agrees to pay VLI within ten business days of receipt of VLI’s invoice.

 

4.5 Adjustments to Throughput Fees. At the beginning of each Contract Year,
starting January 1, 2005, the Throughput Fee shall be recalculated using a
factor that is 80% of the year-over-year percentage change in the Index (the
“Adjusted Throughput Fee”). The year-over-year percentage change in the Index
shall be calculated by taking the quotient of the Adjustment Year Index over the
Base Year Index minus one. Under no circumstances will the Adjusted Throughput
Fee for any given Contract Year ever be reduced to an amount that is less than
the initial Throughput Fee, as applicable. Within 35 days after the beginning of
each Contract Year, VLI shall send VMSC a statement setting forth its
calculation of the fee adjustment and indicating what the Adjusted Throughput
Fee will be for then-current Contract Year.

 

4.6 Certification and Shortfall Payment.

 

  (a) Certification. Not later than 45 days after the end of each Contract Year,
the chief financial officer of VMSC shall deliver a certificate (the
“Certificate”) certifying whether or not there has been a Shortfall with respect
to such Contract Year and if so, the amount of any Shortfall Obligation that
VMSC is obligated to pay with respect to such Contract Year pursuant to Section
4.6(e). The Certificate shall further set forth calculations and other
information evidencing compliance with Article 3.

 

  (b)

Review of Information. During the 45-day period following receipt of the
Certificate, VLI and its independent public accountants will be permitted to
review the accounting records of VMSC and any applicable Controlled Affiliates,
any working papers of independent public accountants of VMSC and its Controlled
Affiliates prepared in connection with the Certificate and such additional
information as VLI or its independent public accountants shall reasonably
request for the purpose of determining whether VMSC has correctly calculated
whether there is a Shortfall with respect to the Contract Year covered by the
Certificate and, if so, the amount of any Shortfall Obligation

 

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for such Contract Year. In this connection, VMSC and VLI and their respective
independent public accountants shall, and VMSC shall cause its Controlled
Affiliates to, cooperate with each other.

 

  (c) Notice of Disagreement. If, in connection with the period of review and
consultation provided for in Section 4.6(b), VLI has reason to believe that VMSC
has not correctly calculated the amount of any Shortfall or Shortfall Obligation
with respect to such Contract Year in accordance with this Agreement, then
within 45 days following receipt of the Compliance Certificate, VLI may give
VMSC a written notice of its disagreement (a “Notice of Disagreement”). Any
Notice of Disagreement shall specify in reasonable detail VLI’s calculation of
the Shortfall and Shortfall Obligation. If a Notice of Disagreement is received
by VMSC in a timely manner, then the determination of whether VMSC has correctly
calculated the amount of any Shortfall or Shortfall Obligation with respect to
such Contract Year in accordance with this Agreement, and, if it has not, the
amount of the Shortfall or Shortfall Obligation, shall become final and binding
upon all parties hereto on either (i) the date the chief financial officers of
VMSC and the general partner of VLI (on behalf of VLI) resolve in writing any
differences they have with respect to the matters specified in the Notice of
Disagreement or (ii) the date any disputed matters are finally resolved in
writing by the Accounting Firm pursuant to Section 4.6(d), as applicable. In the
event a Notice of Disagreement is not delivered by VLI or timely received by
VMSC, then the Compliance Certificate will automatically be deemed accepted by
VLI and accurate and shall become final and binding upon all parties hereto at
11:59 p.m. on the 45th day after delivery of the Compliance Certificate from
VMSC to VLI.

 

  (d)

Settling of Disagreements. If a Notice of Disagreement is timely delivered to
VMSC, within 15 days thereafter, the chief financial officers of VMSC and the
general partner of VLI (on behalf of VLI) shall meet or communicate by telephone
at a mutually acceptable time and place, and thereafter as often as they
reasonably deem necessary and shall negotiate in good faith to attempt to
resolve any differences which they may have with respect to matters specified in
the Notice of Disagreement. During the 30-day period following delivery of the
Notice of Disagreement, VMSC and its independent public

 

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accountants shall have access to the working papers of VLI, the Partnership
Parties and Subsidiaries relating to the Notice of Disagreement and the working
papers of their independent public accountants prepared in connection with or
relating to the Notice of Disagreement. If such differences are not resolved
within 30 days following delivery of the Notice of Disagreement, either VMSC or
VLI may, submit to a dispute resolution group of an independent public
accounting firm (the “Accounting Firm”) for review and resolution any and all
matters which remain in dispute and which were properly included in the Notice
of Disagreement, in the form of a written brief. The scope of the Accounting
Firm’s review shall include determining whether there has been a Shortfall with
respect to such Contract Year and, if so, the amount of the Shortfall Obligation
with respect to such Contract Year. The Accounting Firm shall be a nationally
recognized independent public accounting firm as shall be agreed upon by VMSC
and VLI in writing. The Accounting Firm’s decision shall be accompanied by a
certificate of the Accounting Firm that it reached its decision in accordance
with the provisions of this Section 4.6(d). The parties agree to use
commercially reasonable efforts to cause the Accounting Firm to render a
decision resolving the matters submitted to the Accounting Firm within 30 days
following submission. The parties agree that judgment may be entered upon the
determination of the Accounting Firm in any District Court in Bexar County,
Texas. The fees and expenses of the Accounting Firm shall be borne by VMSC and
VLI in inverse proportion as they may prevail on matters resolved by the
Accounting Firm, which proportionate allocations shall also be determined by the
Accounting Firm at the time the determination of the Accounting Firm is rendered
on the merits of the matters submitted. Any fees and disbursements of
independent public accountants of VMSC or VLI incurred in connection with their
preparation or review of the Compliance Certificate or the Notice of
Disagreement shall be borne by the party retaining such independent public
accountants.

 

  (e) If it is finally determined pursuant to this Section 4.6 that there is a
Shortfall Obligation with respect to any Contract Year VMSC shall promptly pay
such Shortfall Obligation to VLI.

 

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4.7 Utility Reimbursement. In addition to the Throughput Fees, VMSC shall
reimburse VLI monthly VMSC’s proportionate share (based on the volume of Asphalt
Products stored at the Terminal for the month in question) of the cost of
utilities (including electricity, natural gas and water) actually incurred by
VLI for the month preceding the month of invoice to the extent that the use of
the utilities relates to the services provided to VMSC pursuant to this
Agreement.

 

4.8 Late Charge. VLI reserves the right to assess a late charge on any payment
hereunder (or undisputed portion thereof) which is more than 30 days past due.
Such late charge shall not exceed the lesser of (a) ten percent (10%) per annum
or (b) the maximum interest rate permitted by applicable law for agreements of
this nature.

 

ARTICLE 5

 

TERM

 

Subject to early termination pursuant to Article 8, the initial term of this
Agreement (the “Initial Term”) shall commence on the Commencement Date and shall
continue through December 31, 2008; provided, however, if VLI has not taken
title to the Terminals on or before March 1, 2004, this Agreement shall
automatically terminate. Following the Initial Term, this Agreement shall
automatically renew for consecutive 12-month terms unless either party provides
the other with at least 365 days’ prior written notice of its election to
terminate this Agreement such termination to take effect at the end of the
Initial Term or any renewal term, as applicable.

 

ARTICLE SIX

 

TITLE AND RISK OF LOSS

 

6.1 Title. VMSC shall retain title to all Asphalt Products delivered by it to
the Terminal. Care, custody and control of Asphalt Products shall pass to VLI at
the inlet to the storage tanks and shall remain with VLI until such Asphalt
Products are delivered to VMSC or its customers (or their carriers) by VLI.

 

6.2 No Security Interest. VLI shall not create, incur or suffer to exist any
pledge, security interest, lien, levy or other encumbrance of or upon any of the
Asphalt Products delivered by VMSC to the Terminal. VMSC shall not create, incur
or suffer to exist any pledge, security interest, lien, levy or other
encumbrance of or upon any of the Facilities.

 

ARTICLE SEVEN

 

MEASUREMENT

 

7.1

Measurement Procedures; Loss Allowance. Measurement shall be in accordance with
VLI’s standard measurement procedures, which shall be in accordance with
applicable API standards. For receipt acknowledgment, the tank upgauge at the
storage tanks and/or

 

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certified weight scale, mutually agreed between the parties shall be used. For
delivery acknowledgment and measurement of Throughput, a certified weight scale
mutually agreed between the parties shall be used. A loss allowance of 0.5% on
all volumes Throughput through the Terminals shall be permitted. Throughput Fees
charged for Asphalt Products where there are losses in excess of 0.5% (measured
as the difference between volumes delivered into the storage tanks and volumes
delivered to VMSC, its customer or its carriers) will be adjusted accordingly.

 

7.2 Measurement Records. VLI shall keep accurate records of the receipt, storage
and delivery of Asphalt Products hereunder and, subject to the loss allowance
provided in Section 7.1, shall account for Asphalt Products at such time and in
such manner as shall be reasonably requested by VMSC.

 

ARTICLE EIGHT

 

DEFAULT PROVISIONS

 

Except as otherwise specifically provided for under the terms of this Agreement,
if either party fails to perform any of the covenants or obligations imposed on
it by this Agreement (the “Defaulting Party”), then the party to whom the
covenant or obligation was due (the “Non-Defaulting Party”) may (without waiving
any other remedy for breach hereof), notify in writing the Defaulting Party,
stating specifically the nature of the default (the “Default Notice”). The
Defaulting Party will have 30 days after receipt of the Default Notice (the
“Cure Period”) in which to remedy the cause or causes stated in the Default
Notice, or provide adequate security to fully indemnify the Non-Defaulting Party
for any and all consequences of the breach, or to dispute the claim of breach.
If the Defaulting Party disputes the claim of breach (“Notice of Dispute”), then
the Defaulting Party shall notify the Non-Defaulting Party in writing of its
dispute within ten days after receipt of the Default Notice. If the Defaulting
Party either cures the default or provides adequate security within the Cure
Period or delivers a Notice of Dispute in a timely manner, then this Agreement
shall remain in full force and effect pending resolution of such dispute with
respect to a default addressed by the Defaulting Party. If the Defaulting Party
fails to cure the default, to provide adequate security, or timely deliver a
Notice of Dispute, or the parties are unable to resolve a dispute addressed in a
Notice of Dispute within 60 days after receipt of the Notice of Dispute, then
the Non-Defaulting Party may terminate this Agreement immediately upon giving
written notice of termination to the Defaulting Party.

 

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ARTICLE NINE

 

INDEMNIFICATION

 

9.1 Indemnity. To the fullest extent permitted by law and except as specified
otherwise elsewhere in the Agreement:

 

  a) VMSC shall defend, indemnify and hold harmless VLI, its partners and its
and their directors, officers, employees and agents from and against any loss,
damage, claim, suit liability, judgment and expense (including attorneys fees
and other costs of litigation) arising out of injury, disease or death of any
persons, damage to or loss of any property, or fines or penalties to the extent
caused by or resulting from negligence of VMSC, its employees or agents, in the
exercise of any of the rights granted hereunder or in the operations, loading or
unloading of any motor vehicle, barge, railcar or other conveyance owned or
hired by VMSC, its employees or agents except to the extent that such injury,
death, damage to or loss of property or fine or penalty may be caused by or
resulting from negligence on the part of VLI, its employees or agents.

 

  b) VLI shall defend, indemnify and hold harmless VMSC, its directors,
officers, employees and agents from and against any loss, damage, claim, suit,
liability, judgment and expense (including attorneys fees and other costs of
litigation) arising out of injury, disease or death of any persons, damage to or
loss of any property or fines or penalties to the extent caused by or resulting
from negligence of VLI, its partners and its and their directors, employees or
agents, in the performance of this Agreement, except to the extent that such
injury, death, damage to or loss of property may be caused by or resulting from
negligence on the part of VMSC, its employees or agents.

 

9.2 Term of Indemnity. The indemnification set forth in this Article Nine shall
survive the termination of this Agreement for a period of two (2) years.

 

9.3 Notice. VMSC or VLI, as soon as practicable after receiving notice of any
suit brought against it within this indemnity, will furnish to the other party
full particulars and shall render all reasonable assistance requested by the
other party in the defense.

 

9.4 No Consequential Damages. In no event, however, shall either party be liable
to, and each hereby waives all rights to recover from, the other for any
special, incidental, consequential, indirect, punitive, or exemplary damages of
any type or character, including loss of use, feedstock, or raw materials, loss
of contract, loss of profits or revenue (whether known or speculative) or
business interruption loss, however caused, or for Claims caused by, resulting
from, or arising out of negligence, breach of contract, breach of warranty,
strict liability in tort, or any other cause of action that either party may
have against the other.

 

ARTICLE TEN

 

AUDIT

 

Each party’s authorized representatives shall have access, during regular
business hours and upon reasonable notice, to such of the other party’s records
regarding deliveries and shipments

 

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made pursuant to this Agreement and Asphalt produced by the Refineries,
including data stored in computers and other memoranda, as may pertain to
volumes, measuring devices, and other similar records which would verify Asphalt
production, transactions, deliveries, product movements, and meter calibrations
and adjustments made pursuant hereto. Additionally, VMSC and its authorized
representatives shall have access, during regular business hours and upon
reasonable notice, to VLI’s (including the Partnership Parties and Subsidiaries)
records regarding third-party throughput fees and charges to confirm VLI’s
compliance with pricing provisions of Section 4.1. The aforementioned audit
rights shall be exercisable during the initial term of the Agreement and any
renewal terms, and for a period of two (2) years after the termination of this
Agreement.

 

ARTICLE ELEVEN

 

TAXES; INDEMNITY

 

11.1 VMSC’s Obligations. VMSC will pay, or cause to be paid, and shall indemnify
and defend VLI and VLI’s affiliates and partners from and against, all taxes and
assessments lawfully levied and imposed with respect to the Asphalt Products
throughput and/or stored hereunder.

 

11.2 VLI’s Obligations. VLI will pay, or cause to be paid, and shall indemnify
and defend VMSC and VMSC’s affiliates from and against, all taxes and
assessments lawfully levied and imposed with respect to its ownership and/or
operation of the Terminals.

 

ARTICLE TWELVE

 

FORCE MAJEURE

 

12.1 Declaration of Force Majeure Event. Except for VMSC’s obligation to pay VLI
the monetary amounts provided for in this Agreement, neither party shall be
liable to the other for any failure, delay, or omission in the performance of
its obligations under this Agreement, or be liable for damages, for so long as
and to the extent such failure, delay, omission, or damage arises directly or
indirectly from a Force Majeure occurrence and this Agreement shall not be
extended by such period of Force Majeure delay.

 

12.2

Force Majeure Defined. A “Force Majeure Event” includes, but is not limited to,
the following events to the extent beyond the reasonable control of the party
affected by such event: an act of God; fire; flood; hurricane; explosion;
accident; act of the public enemy; riot; sabotage; epidemic; quarantine
restriction; strike, lockout, or other industrial disturbance or dispute or
difference with workers; labor shortage; civil disturbance; compliance with a
request, recommendation, act, rule, regulation or order of a federal, state or
local government, and agency thereof or other authority having or purporting to
have jurisdiction; operational restriction of facilities; unanticipated or
emergency shutdowns or turnaround for maintenance and repair; the freezing or
plugging of lines of

 

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pipe; failure, destruction, or breakdown of facilities or equipment; the
necessity for making repairs to or alterations of machinery or pipelines; the
unavailability, interruption, or curtailment of firm gas transportation services
provided by third-party transporters; or, any other cause or causes beyond the
reasonable control of the party experiencing the occurrence, whether similar or
not to those listed. The settlement of strikes or differences with workers shall
be entirely within the discretion of the party experiencing the occurrence.

 

12.3 Notice of Force Majeure Event. If either party finds it necessary to
declare Force Majeure, then as soon as reasonably possible after the occurrence
of Force Majeure, such party shall immediately notify the other party, first by
telephone or facsimile, and then promptly by mail or overnight express courier,
giving reasonably full details of such occurrence and its estimated duration.
The cause of such Force Majeure occurrence shall, only if the affected party
deems it reasonable and economic, be remedied with all reasonable dispatch and
the other party shall be notified either of the date so remedied or the decision
not to remedy as soon as practicable.

 

ARTICLE THIRTEEN

 

GENERAL PROVISIONS

 

13.1 VMSC Intention as to Refineries. VMSC represents to the VLI that, as of the
date of this Agreement, it does not intend to close or dispose of either of the
Refineries or to cause any changes that would have a material adverse effect on
the operation of either of the Refineries. Furthermore, any such sale of one or
more of the Refineries shall not eliminate or diminish VMSC’s obligations under
Article 3.

 

13.2 Notice. All notices provided for or required to be given under this
Agreement shall be in writing and delivered, with postage or delivery charges
prepaid, by U.S. certified or registered mail, hand-delivery, facsimile,
nationally recognized overnight express courier, or electronic transmission,
addressed to the party at the respective addresses or numbers stated below, or
such other addresses or numbers as each shall designate in writing to the other
party:

 

If to VLI by U.S. Mail or Fax:

 

VALERO LOGISTICS OPERATIONS, L.P.

P.O. Box 696000

San Antonio, Texas 78269-6000

Attention: President

Fax: (210) 370-2943

 

If to VLI by Hand Delivery or Express Courier:

 

VALERO LOGISTICS OPERATIONS, L.P.

One Valero Place

San Antonio, Texas 78212

Attention: President

 

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If to VMSC by U.S. Mail or Fax:

 

Valero Marketing and Supply Company

P.O. Box 500

San Antonio, Texas 78292

210-370-2646

Attention: Vice President-Asphalt Marketing

 

If to VMSC for Hand Delivery or Express Courier:

 

One Valero Way

San Antonio, Texas 78249

Attention: Vice President-Asphalt Marketing

 

13.3 Applicable Laws. This Agreement is subject to and each party shall comply
with all Applicable Laws. If this Agreement or any provision of it is found
contrary to or in conflict with any such Applicable Laws, this Agreement shall
be deemed modified to the extent necessary to comply with same.

 

13.4 Governing Law. The interpretation of this Agreement shall be governed by
and construed in accordance with the laws of the State of Texas without regard
to the choice of law doctrine of the State of Texas.

 

13.5 Successors; Assignability. The provisions of this entire Agreement shall be
binding upon the respective successors and assigns and successive assigns of
each of the parties hereto. Neither party may assign this Agreement to a third
party without the prior consent of the other party, which consent may not be
unreasonably withheld, delayed, or conditioned; provided, however, that without
the consent of the other party, either party may assign its rights and
obligations under this Agreement to its parent entity, subsidiary, or affiliate.

 

13.6 Headings; Reference. The headings appearing at the beginning of each
article are inserted solely for convenience and shall never be considered or
given any effect in construing any provision of this Agreement, or in
determining the duties, obligations or liabilities of the respective parties or
in ascertaining the intent, if any questions of intent should arise.

 

13.7 Waivers. No waiver of any provision of this Agreement shall be valid unless
it is in writing and signed by the party against whom the waiver is sought to be
enforced. No failure or delay in exercising any right hereunder, and no course
of conduct, shall operate as a waiver of any provision of this Agreement. No
single or partial exercise of a right hereunder shall preclude further or
complete exercise of that right or any other right hereunder.

 

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13.8 Severability. If any provision of this Agreement shall be held invalid or
unenforceable by a court or regulatory body of competent jurisdiction, the
remainder of this Agreement shall remain in full force and effect.

 

13.9

Arbitration Provision. Any and all Arbitrable Disputes must be resolved through
the use of binding arbitration using three arbitrators, in accordance with the
Commercial Arbitration Rules of the American Arbitration Association, as
supplemented to the extent necessary to determine any procedural appeal
questions by the Federal Arbitration Act (Title 9 of the United States Code). If
there is any inconsistency between this Section and the Commercial Arbitration
Rules or the Federal Arbitration Act, the terms of this Section will control the
rights and obligations of the parties. Arbitration must be initiated within the
applicable time limits set forth in this Agreement and not thereafter or if no
time limit is given, within the time period allowed by the applicable statute of
limitations. Arbitration may be initiated by a party (“Claimant”) serving
written notice on the other party (“Respondent”) that the Claimant elects to
refer the Arbitrable Dispute to binding arbitration. Claimant’s notice
initiating binding arbitration must identify the arbitrator Claimant has
appointed. The Respondent shall respond to Claimant within 30 days after receipt
of Claimant’s notice, identifying the arbitrator Respondent has appointed. If
the Respondent fails for any reason to name an arbitrator within the 30 day
period, Claimant shall petition to the American Arbitration Association for
appointment of an arbitrator for Respondent’s account. The two arbitrators so
chosen shall select a third arbitrator within 30 days after the second
arbitrator has been appointed. The Claimant will pay the compensation and
expenses of the arbitrator named by or for it, and the Respondent will pay the
compensation and expenses of the arbitrator named by or for it. The costs of
petitioning for the appointment of an arbitrator, if any, shall be paid by
Respondent. The Claimant and Respondent will each pay one-half of the
compensation and expenses of the third arbitrator. All arbitrators must (a) be
neutral parties who have never been officers, directors or employees of VMSC,
VLI or any of their affiliates and (b) have not less than seven years experience
in the energy industry. The hearing will be conducted in San Antonio, Texas and
commence within 30 days after the selection of the third arbitrator. VMSC, VLI
and the arbitrators should proceed diligently and in good faith in order that
the award may be made as promptly as possible. Except as provided in the Federal
Arbitration Act, the decision of the arbitrators will be binding on and
non-appealable by the parties hereto. The arbitrators

 

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shall have no right to grant or award indirect, consequential, punitive or
exemplary damages of any kind.

 

13.10  Entire Agreement. This Agreement constitutes the entire agreement between
the parties regarding these matters. No variation, modification or change of the
Agreement shall be binding upon either party unless contained in a written
instrument executed by a duly authorized representative of each of the parties.

 

Effective as of the date first written above.

 

VALERO LOGISTICS OPERATIONS, L.P.

By: Valero GP, Inc., its General Partner

By:   /s/    CURTIS V. ANASTASIO            

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    Curtis V. Anastasio, President and CEO

 

VALERO MARKETING AND SUPPLY COMPANY By:   /s/    MICHAEL T. STONE            

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    Michael T. Stone, Vice President

 

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