exv10w10



 




Exhibit 10.10


OPERATING AGREEMENT




     THIS AGREEMENT, entered into as of the sixth day of May, 1993, by and between REFINERY
HOLDING COMPANY L.P., a Delaware limited partnership (“RHC”), and CHEVRON U.S.A. INC, a
Pennsylvania corporation (“Chevron”).



W I T N E S S E T H:




     WHEREAS, Chevron owns and operates a petroleum products refinery located at 6501 Trowbridge
Drive, El Paso, Texas (the “Chevron Refinery”);



     WHEREAS, concurrently herewith RHC has acquired the currently closed petroleum products
refinery located at 6500 Trowbridge Drive, E1 Paso, Texas (the “EPR Refinery”);



     WHEREAS, RHC and Chevron believe that significant efficiencies and synergies can be achieved
by utilizing certain of the processing units at the EPR Refinery in connection with the refining of
crude oil at the Chevron Refinery and Chevron has trained personnel qualified to operate the EPR
Refinery;



     WHEREAS, RHC is willing to allow Chevron to utilize various operating units at the EPR
Refinery in connection with Chevron’s operations at the Chevron Refinery; and



     WHEREAS; RHC desires that from time to time (as RHC may request) Chevron process for RHC
certain quantities of crude oil into finished petroleum products and Chevron is willing to do so on
the terms and conditions set forth herein;



     NOW, THEREFORE, the parties hereto agree as follows:



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     1. Term.



          The initial term of this agreement shall commence on the date of this agreement (the
“Commencement Date”), and shall continue until December 31, 2003. Chevron shall have the option to
extend such initial term for two successive periods of five years each by giving RHC at least one
year’s prior written notice of Chevron’s intention to exercise each such option. If Chevron fails
to exercise either such option, RHC shall have during the remainder of the term of this agreement
(i) a right of first refusal to purchase the Chevron Refinery and (ii) the right to purchase the
Chevron Refinery at the book value thereof.




     2. Use of EPR Facilities.



          (a) During the term of this agreement, Chevron shall have the exclusive right to utilize all
facilities and equipment at the EPR Refinery except those specified in Exhibit A (the “Excluded
Facilities”). (The facilities and equipment at the EPR Refinery which Chevron has the exclusive
right to use during the term hereof, i.e., all facilities at the EPR Refinery other than the
Excluded Facilities, are hereinafter referred to as the “Designated Facilities”.) The Designated
Facilities shall, to the extent rights thereto are acquired by RHC (and RHC shall use all
commercially reasonable efforts to obtain such rights), include all equipment and facilities
located on pipeline and utility rights of way appurtenant to the EPR Refinery, including but not
limited to those described in Exhibit B. Chevron shall at all times have the right at its own
expense to make such modifications, rearrangements or additions to the Designated Facilities as
Chevron may deem desirable to provide for the appropriate operation of the Designated Facilities in
conjunction with the Chevron Refinery (the Designated Facilities and the Chevron Refinery being
sometimes hereinafter collectively referred to as the “Combined Facility”). Chevron, at its own
expense, shall cause the major processing units included within the Designated Facilities to




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be maintained in good order and repair, subject to normal wear and tear, in accordance with
normal industry practice, and in accordance with the same standards applied by Chevron to the
maintenance of the Chevron Refinery and other refineries in Chevron’s U.S. refinery system.
Chevron shall diligently endeavor to comply with all governmental laws, rules, regulations, orders,
permits and licenses applicable to the maintenance and operation of the Designated Facilities.
Title to any improvements, changes, rearrangements, repairs, replacements (excluding vehicles), or
reconfigurations made by Chevron to the Designated Facilities shall immediately vest in RHC.
Chevron may abandon, and shall have no obligation to maintain, all equipment and facilities
included within the Designated Facilities other than major processing units, and also may abandon,
and shall have no obligation to maintain, major processing units included within the Designated
Facilities which have reached the end of their useful life as reasonably determined by Chevron in
accordance with normal industry practice. Whenever Chevron elects to abandon any such equipment,
it shall give RHC written notice of such abandonment. Chevron shall have the right, by written
notice to RHC given prior to the end of the Transition Period referred to in Section 5, to add to
the Excluded Facilities any storage tanks which Chevron elects not to utilize. RHC shall be
responsible for any costs and expenses associated with disposing of any wastes that may be located
in any such tanks so added to the Excluded Facilities.




          (b) RHC may use the Excluded Facilities for any purpose which does not interfere with the
operation of the Designated Facilities and the Chevron Refinery.




          (c) RHC shall use its best efforts to cause all governmental permits necessary for the
operation of the Designated Facilities to be transferred to Chevron or, if such permits are not
transferable, shall cooperate fully with Chevron’s efforts to obtain new permits in Chevron’s name
with regard to the Designated Facilities. RHC shall cooperate fully with Chevron’s efforts


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           to obtain any necessary new permits for connections between the Chevron Refinery and the
Designated Facilities. Chevron shall keep RHC fully advised of all significant developments with
regard to obtaining such permits. If any such permits have not been transferred to Chevron or
Chevron has not been able to obtain any such necessary new permits in its own name within six
months following the Commencement Date, Chevron shall have the right to terminate this agreement by
written notice to RHC.




          (d) Upon termination of this agreement, Chevron shall have the right, but not the obligation,
to remove from the EPR Refinery any new process unit added to the EPR Refinery by Chevron and any
connections between the Designated Facilities and the Chevron Refinery; provided, however if RHC
determines in good faith that failure to remove any such new unit shall be a material burden for
RHC, RHC shall have the right to require that Chevron remove the same. Upon such removal Chevron
shall repair any damage that may have been occasioned thereby. Upon the termination of this
agreement, Chevron shall return possession of all major processing units within the Designated
Facilities to RHC in good working order, except for any such major processing units previously
abandoned by Chevron pursuant to Section 2(a).




     3. Processing Agreement.



          (a) Chevron agrees to process West Texas Intermediate crude oil at the Combined Facility for
RHC during the term of this agreement. All crude oil to be processed on behalf of RHC shall meet
the quality requirements set forth in Exhibit C.




          (b) For all crude oil provided to Chevron by RHC and processed hereunder by Chevron for RHC,
Chevron shall deliver to RHC a 95% yield (based on the volume of crude oil processed) of petroleum
products, as follows: (60% regular unleaded motor gasoline, 20% jet fuel (including 2,000 barrels
per day of military jet fuel), 10% low sulphur diesel fuel, and 5%




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high sulfur diesel fuel. For example, for each 25,000 barrels of West Texas Intermediate
crude oil processed by Chevron for RHC, RHC shall be entitled to receive 15,000 barrels of regular
unleaded motor gasoline, 3,000 barrels of commercial jet fuel, 2,000 barrels of military jet fuel,
2,500 barrels of low sulfur diesel fuel, and 1,250 barrels of high sulfur diesel fuel. All such
products shall conform to the quality specifications set forth in Exhibit D. Notwithstanding the
foregoing, it is understood and agreed that military jet fuel and low sulfur diesel fuel shall not
be available to RHC until October 1, 1993, and that prior to such date, RHC shall receive
commercial jet fuel in lieu of military jet fuel and high sulfur diesel fuel in lieu of low sulfur
diesel fuel.




          (c) In consideration for such crude oil processing, RHC shall pay to Chevron a processing fee
of $1.20 per barrel of crude oil processed, payable by wire transfer of immediately available funds
on the last business day of the month following the month in which such processing occurs. Such
processing fee shall be subject to adjustment during the term of this agreement as provided in
Exhibit E.




          (d) To the extent nominated by RHC pursuant to Section 3(g), Chevron shall, during the term of
this agreement process for RHC at the Combined Facility up to 25,000 Barrels per Day (the “Base
Volume”) of West Texas Intermediate crude oil. If during any three-month period the total quantity
of crude oil inputs to the Combined Facility exceeds 90,000 barrels per day, the quantity of West
Texas Intermediate crude oil to be processed by Chevron for RHC for the subsequent month shall be
increased (over the Base Volume) by an amount equal to 30% of the average amount (on a per-day
basis) by which total crude oil inputs to the Combined Facility during the prior three-month period
exceeded 90,000 barrels per day. RHC shall have no right to have additional quantities of crude
oil (over 25,000 barrels per day) processed by Chevron




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hereunder to the extent that crude oil inputs to the Combined Facility in excess of 90,000
barrels per day are properly attributable to new process units, or discretionary capital
improvements to existing processing units, installed by Chevron at Chevron’s sole expense; provided
that this limitation shall not apply if RHC, by written notice to Chevron, agrees that the per
barrel processing fee otherwise provided for in Section 3(c) shall be increased by an amount equal
to:




     (The initial cost of such discretionary capital improvements) times 12% times 30%
times (1/25,000) times (1/365),


to reflect Chevron’s investment in such discretionary capital improvements.




          (e) Chevron shall keep strict accounting records of all crude oil delivered to the Combined
Facility by RHC, of all crude oil processed by Chevron for RHC, of all products produced for RHC,
and of all products lifted from the Combined Facility by RHC. Notwithstanding Section 3(b), RHC
shall have no right (following the Transition Period referred to in Section 5) to lift any products
from the Combined Facility unless RHC has established at the Combined Facility a minimum crude oil
balance on Chevron’s books of at least 325,000 barrels. If at the end of any day, RHC’s crude oil
balance would otherwise fall below 325,000 barrels, the quantity of crude oil deemed run for RHC
during that day shall be reduced in order to maintain a minimum crude oil balance in favor of RHC
of 325,000 barrels. Following termination of this agreement, RHC shall be entitled to receive from
Chevron a yield of products (upon payment of the then-current processing fee) based on the crude
oil balance in favor of RHC on the date of termination.




          (f) Subject to Sections 7 and 11, Chevron’s obligation to deliver products to RHC as specified
in this Section 3 shall remain in effect regardless whether Chevron is utilizing




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the Designated Facilities for the processing of crude oil, and any election by Chevron not to
utilize the Designated Facilities shall not affect in any way the obligations of Chevron hereunder.




     4. Crude Oil and Product Nominations and Deliveries.



          (a) RHC shall have no obligation to nominate crude oil hereunder and may at its option
nominate for any calendar month any quantity of crude oil between 0 and 25,000 Barrels per Day.
(Quantities in excess of 25,000 barrels per day may be nominated only to the extent authorized by
Section 3(d).) RHC shall deliver crude oil to the Combined Facility by pipeline ratably over the
month.




          (b) At least ten days prior to the beginning of any calendar month during the term of this
agreement, RHC shall advise Chevron in writing of (i) RHC’s crude oil nominations, (ii) the
schedule for its crude oil deliveries during the applicable month, and (iii) the schedule for its
pipeline product deliveries for the applicable month. At the same time, RHC shall provide Chevron
with RHC’s tentative nominations, crude oil delivery schedule, and pipeline product delivery
schedule for the following month. RHC and Chevron shall cooperate in scheduling such deliveries.




          (c) RHC shall lift products from the Combined Facility reasonably evenly over the month. If
at any time RHC’s failure to lift such products creates operating difficulties at the Combined
Facility, Chevron may (after consultation with RHC in an effort to resolve the problem) suspend
RHC’s right to process crude oil at the Combined Facility until the problem is corrected. Products
shall be delivered by Chevron to RHC into pipelines at the Combined Facility as directed by RHC;
provided that RHC shall be entitled to lift products from the truck loading rack at the Combined
Facility pursuant to such terms and conditions as may be negotiated between the parties.




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     5. Transition Period.



          Notwithstanding Section 3, the maximum crude oil quantities that RHC may have processed by
Chevron hereunder during the period between the Commencement Date and November 30, 1993 (while the
Combined Facility is being connected to and integrated with the Chevron Refinery) (the “Transition
Period”) shall be as follows:




	 	 	 	 	 
	Month	 	Barrels per Day
	May
	 	 	0	 
	June
	 	 	5,000	 
	July
	 	 	5,000	 
	August
	 	 	10,000	 
	September
	 	 	10,000	 
	October
	 	 	15,000	 
	November
	 	 	20,000	 





The minimum crude oil balance required of RHC pursuant to Section 3(e) shall be phased in as
appropriate to accommodate such Transition Period.




     6. Mandatory Expenditures.



          (a) As used in this agreement, “Mandatory Expenditures” means:





     (1) Expenditures required because changes in applicable laws and regulations
mandate a change in permissible product specifications and capital investment is
necessary to allow the Combined Facility to continue to produce at least 90,000
barrels per day of marketable products;




     (2) Expenditures required because changes in applicable laws and regulations
require that capital investments be made at the Combined Facility in order to allow
the Combined Facility to continue to meet environmental or other compliance
standards; or



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     (3) Environmental cleanup or remediation expenses incurred by Chevron in
connection with the Combined Facility other than those referred to in Sections 9(d)
and 9(e) hereof.




          (b) If in any calendar year during the term hereof Mandatory Expenditures are required at the
Combined Facility in excess of $10 million, Chevron shall so notify RHC in writing and RHC and
Chevron shall meet and confer regarding appropriate modifications to this agreement to address such
Mandatory Expenditures. If the parties are unable to agree to such modifications within 30 days
following the time such notice is given to RHC by Chevron, then this agreement shall continue in
effect and Chevron shall cause such Mandatory Expenditures to be made; provided that the per barrel
processing fee otherwise provided for in Section 3(c) shall be increased by an amount equal to:




     (The initial cost of such Mandatory Expenditures in excess of $10 million) times 12%
times (1/90,000) times (1/365),


to reflect the value of such Mandatory Expenditures by Chevron. An example of such calculation is
set forth in Exhibit F. Such processing fee shall be subject to being increased only for Mandatory
Expenditures incurred by Chevron in years subsequent to 1993. Any such increased fee shall apply
beginning with the first calendar month during the year after the month during which the $10
million threshold is exceeded, and shall be further increased thereafter to reflect additional
Mandatory Expenditures by Chevron during such year.




     7. Casualty and Insurance.



          (a) Neither Chevron nor RHC shall have any obligation to insure the Designated Facilities, but
either may do so at its option. In the event of any casualty to the Designated Facilities, Chevron
shall have no obligation to repair or replace the Designated




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Facilities unless such casualty was the result of gross negligence or willful misconduct by
Chevron or its employees or agents. In the event of any casualty to the Designated Facilities, RHC
shall have no obligation to repair or replace the Designated Facilities, but shall have the right
to do so should it so elect.




          (b) In the event of any material casualty to the Designated Facilities or the Chevron
Refinery, the obligations of the parties under Sections 3 and 4 (and, if applicable, Section 5)
hereof shall be suspended for such period of time as would be required for Chevron with due
diligence to repair the effect of the casualty. If the Combined Facility is able to operate at a
reduced level despite such casualty, RHC’s entitlement to process crude oil and to receive
petroleum products pursuant to Section 3 shall be adjusted in a fair and equitable manner to
properly allocate the effect of the casualty between the parties.




          (c) Notwithstanding Section 7(b), Chevron shall have no obligation to repair or replace any
casualty to the Designated Facilities or to the Chevron Refinery; provided that following that time
period which would be reasonably required with due diligence to repair the effect of such casualty,
Chevron’s obligations to provide products to RHC as provided in Section 3 shall resume.




          (d) If any casualty renders any of the Designated Facilities inoperable and Chevron elects to
reconstruct any such facility, such facility shall be rebuilt on the EPR Refinery and shall
thereafter be deemed to be part of the Designated Facilities.




     8. Property Taxes.



          RHC shall pay any and all property taxes on the EPR Refinery, the Designated Facilities, and
all facilities located at the EPR Refinery, except any facilities which may be installed on the EPR
Refinery which are owned by Chevron. Chevron shall pay all property




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taxes related to the Chevron Refinery and to any equipment installed by Chevron and owned by
Chevron at the EPR Refinery.




     9. Environmental Liabilities.



          (a) Except as otherwise provided herein, Chevron shall have no liability for any environmental
contamination which resulted from operations at the EPR Refinery prior to the Commencement Date
regardless whether such contamination is now or hereafter located on or off the EPR Refinery, and
RHC hereby agrees that Chevron has no responsibility therefor. Except as otherwise provided
herein, RHC shall have no liability for any environmental contamination which resulted from
operations at the Chevron Refinery regardless whether such contamination is now or hereafter
located on or off the Chevron Refinery, and Chevron hereby agrees that RHC has no responsibility
therefor.




          (b) Chevron is currently engaged in making an environmental assessment of the EPR Refinery.
If prior to the end of the Transition Period specified in Section 5, Chevron discovers any
information regarding the environmental condition of the EPR Refinery which in Chevron’s reasonable
judgment would materially impair the benefit of this agreement to Chevron, Chevron shall have the
right to terminate this agreement upon giving written notice to RHC of such termination prior to
the end of the Transition Period.




          (c) Chevron and RHC acknowledge the existence of certain governmental remedial and cleanup
requirements with regard to the EPR Refinery. Chevron agrees to operate the Combined Facility
subsequent to the Commencement Date in a prudent manner so as to comply with any such existing
remedial or cleanup requirements or any such remedial or cleanup requirement that may be imposed in
the future to the extent such requirements are applicable to the Designated Facilities.




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          (d) Chevron shall assume initial responsibility for compliance with any governmental
requirements with regard to all solid waste management units subject to corrective action under the
Resource Conservation Recovery Act (“RCRA”) or the Texas Water Code or hazardous waste management
activities subject to regulation under RCRA or the Texas Water Code, associated with operations at
the EPR Refinery prior to the Commencement Date (whether currently identified or identified in the
future), including but not limited to those sites identified in Exhibit H (“RCRA Sites”). Chevron
shall invoice RHC each month for Chevron’s reasonable costs and expenses incurred in complying with
any such remedial or cleanup requirements with regard to such RCRA Sites. RHC shall pay such
invoice prior to the end of the month following the month in which such costs and expenses were
incurred by Chevron. RHC shall have the right at any time to assume direct responsibility for
compliance with any such remedial or cleanup requirements.




          (e) RHC shall reimburse Chevron for a percentage (specified below) of all costs and expenses
incurred by Chevron in connection with cleanup or remediation of contamination located off of the
EPR Refinery or the Chevron Refinery. Such percentage shall be equal to the percentage of such
cleanup and remediation costs and expenses reasonably attributable to the cleanup or remediation of
environmental contamination originating from operations at the EPR Refinery prior to the
Commencement Date. Chevron shall invoice RHC each month for RHC’s percentage of such costs and
expenses. RHC shall pay such invoice prior to the end of the month following the month in which
such costs and expenses were incurred by Chevron. The parties hereto shall cooperate in seeking to
recover such costs and expenses from potentially responsible third parties.




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     10. Indemnity.



          Chevron shall save, and shall protect, indemnify and save harmless RHC, and its officers,
directors, incorporators, shareholders, partners, employees, agents and servants from and against
all liabilities, losses, obligations, claims, damages, penalties, fines, causes of action, suits,
costs and expenses (including, without limitation, attorneys’ fees and expenses and such fees and
expenses incurred in enforcing this indemnity) or judgments of any nature (collectively the
“Indemnified Risks”) to the extent they arise from or relate to Chevron’s use, maintenance and
operation of the Combined Facility during the term of this agreement. If any claim, action, suit
or proceeding arising from any of the foregoing is brought against RHC or any other person
indemnified or intended to be indemnified pursuant to this Section 10, Chevron shall, at Chevron’s
expense, resist and defend such action, suit or proceeding or cause the same to be resisted and
defended by counsel designated by Chevron and acceptable to the person or persons indemnified or
intended to be indemnified under this Section 10, but such party shall be entitled to participate
jointly in such defense, in which case such party shall be responsible for its own legal fees or
other expenses, if any, related to such defense incurred subsequent to the joint participation by
such party in such defense other than the reasonable costs of investigation. The obligations of
Chevron under this Section 10 shall survive the termination of this agreement.




     11. Force Majeure.



          Either party shall be excused from the performance of its obligations under this agreement in
the event and to the extent that such performance is delayed or prevented by any cause beyond its
reasonable control, including without limitation acts of God, floods, fire, explosion, war
(declared or undeclared), insurrection, strikes or other differences with employees (regardless
whether such labor disturbance could be settled by acceding to the demands of a




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labor group), major process unit failure, or acts or orders of governmental authorities;
provided in the event of any such contingency such party shall take all reasonable action to
mitigate the effect or duration of such contingency. If the Combined Facility is able to operate
at a reduced level despite such contingency, RHC’s entitlement to process or nominate crude oil and
to receive petroleum products pursuant to Section 3 shall be adjusted in a fair and equitable
manner to properly allocate the effect of the contingency between the parties.




     12. Condition and Use of Designated Facilities; Quiet Enjoyment.



          (a) RHC hereby warrants to Chevron that Chevron shall have the exclusive and uninterrupted
right during the term hereof to utilize the Designated Facilities.




          (b) The Designated Facilities are made available in the present condition thereof, without
representations and warranties of any kind as to their condition by RHC or any person acting on
behalf of RHC. CHEVRON ACKNOWLEDGES AND AGREES THAT THE DESIGNATED FACILITIES HAVE NOT BEEN
DESIGNED, CONSTRUCTED, MANUFACTURED OR MAINTAINED BY RHC, THAT RHC HAS NOT SUPPLIED ANY
SPECIFICATIONS WITH RESPECT TO THE DESIGN, CONSTRUCTION, MANUFACTURE OR MAINTENANCE OF ANY
DESIGNATED FACILITIES AND THAT RHC (i) IS NOT A MANUFACTURER OF, OR VENDOR OF, OR MERCHANT WITH
RESPECT TO, ANY OF THE DESIGNATED FACILITIES, (ii) HAS NOT MADE ANY RECOMMENDATION, GIVEN ANY
ADVICE OR TAKEN ANY OTHER ACTION WITH RESPECT TO THE CHOICE OF ANY MANUFACTURER, SUPPLIER OR
TRANSPORTER OF, OR ANY VENDOR OF OR OTHER CONTRACTOR WITH RESPECT TO, THE DESIGNATED FACILITIES,
(iii) HAS NEVER HAD PHYSICAL POSSESSION OF SUCH DESIGNATED FACILITIES OR MADE ANY INSPECTION
THEREOF, AND (iv) HAS NOT




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MADE AND IS NOT MAKING ANY WARRANTY, EXPRESS OR IMPLIED, RELATING TO THE DESIGNATED
FACILITIES, WITH RESPECT TO MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR OTHERWISE, WHETHER
ARISING PURSUANT TO THE UNIFORM COMMERCIAL CODE OR ANY OTHER PRESENT OR FUTURE LAW OR OTHERWISE.
CHEVRON EXPRESSLY WAIVES THE PROVISIONS OF CHAPTER 17, SUBCHAPTER E, SECTION 17.41 THROUGH 17.63,
INCLUSIVE (OTHER THAN SECTION 17.555, WHICH IS NOT WAIVED), VERNON’S TEXAS CODE ANNOTATED BUSINESS
& COMMERCIAL CODE.




          (c) During the term of this agreement, RHC hereby assigns to Chevron the benefits in respect
of any manufacturer’s or vendor’s warranties or undertakings, express or implied, relating to any
item of Designated Facilities (including any equipment or parts supplied therewith), and to the
extent assignment of the same is prohibited or precludes enforcement of any such warranty or
undertaking, RHC hereby subrogates Chevron to its rights in respect thereof. RHC hereby authorizes
Chevron, at Chevron’s expense, to assert any and all claims, and to prosecute any and all suits,
actions and proceedings, in its own name or in the name of RHC, in respect of any such warranty or
undertaking and to retain the proceeds received. Notwithstanding anything else in this Section
12(c), RHC shall have the rights conferred on Chevron in this Section 12(c) if RHC incurs any
unindemnified damage or liability relating to or in connection with any manufacturer’s or vendor’s
warranty or undertaking.




     13. Representations and Warranties.



          (a) Chevron represents and warrants as follows:





     1. Chevron is a corporation duly organized, validly existing and in good
standing under the laws of the State of Pennsylvania. Chevron has all



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requisite corporate power and corporate authority to own its properties and
assets and to carry on its business as now conducted and as presently proposed to be
conducted. Chevron is duly qualified and in good standing in the State of Texas,
and is duly qualified and in good standing in each other United States jurisdiction
in which the failure so to qualify would have a material adverse effect on Chevron.




     2. Chevron has all necessary corporate power and corporate authority to execute
and deliver this agreement and to carry out the provisions hereof. All corporate
action on the part of Chevron which is required for the valid and binding execution
and delivery of, and compliance with, this agreement by Chevron has been duly and
effectively taken. This agreement constitutes a legal, valid and binding obligation
of Chevron, enforceable in accordance with its terms, except as the same may be
limited by bankruptcy, insolvency, reorganization or other laws relating to or
affecting the enforcement of creditors’ rights generally and by general principles
of equity.




     3. Neither Chevron nor any of its properties or assets is subject to any
contract or agreement, any provision of its Certificate of Incorporation or its By
Laws, or other corporate restriction, any order, ruling, certificate, license,
judgment, injunction or demand of any country, state, territory or political
subdivision thereof or of any court, agency, board, commission, governmental
instrumentality or other tribunal which materially adversely affects the ability of
Chevron to perform its obligations under this agreement.



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     4. To the best knowledge of Chevron, there presently exists no need to incur
mandatory Expenditures, except as specified in Exhibit H.



          (b) RHC represents and warrants as follows:





     1. RHC is a limited partnership duly organized, validly existing and in good
standing under the laws of the State of Delaware. RHC has all requisite partnership
power and partnership authority to own its properties and assets and to carry on its
business as now conducted and as presently proposed to be conducted. RHC is duly
qualified and in good standing in the State of Texas, and is duly qualified and in
good standing in each other United States jurisdiction in which the failure so to
qualify would have a material adverse effect on RHC.




     2. RHC has all necessary partnership power and partnership authority to execute
and deliver this agreement and to carry out the provisions hereof. All partnership
action on the part of RHC which is required for the valid and binding execution and
delivery of, and compliance with, this agreement by RHC has been duly and
effectively taken. This agreement constitutes a legal, valid and binding obligation
of RHC, enforceable in accordance with its terms, except as the same may be limited
by bankruptcy, insolvency, reorganization or other laws relating to or affecting the
enforcement of creditors’ rights generally and by general principles of equity.




     3. Neither RHC nor any of its properties or assets is subject to any contract
or agreement, any provision of its Agreement or Certificate of Limited Partnership
or its By-Laws, or other corporate restriction, any order, ruling, certificate,
license, judgment, injunction or demand of any country, state, territory



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or political subdivision thereof or of any court, agency, board, commission,
governmental instrumentality or other tribunal which materially adversely affects
the ability of RHC to perform its obligations under this agreement.




     14. Inspection; Right to Enter Premises; Information.



          (a) RHC or its authorized representatives may, (i) enter the premises of the EPR Refinery at
reasonable times upon reasonable advance notice in order to inspect the Designated Facilities
(subject to the availability thereof for inspection) and to inspect, audit and make copies of all
documents and instruments in the possession of Chevron that are reasonably necessary or appropriate
for RHC or such authorized representatives to determine the truth and accuracy of any statement,
schedule, annex, exhibit or representation delivered or made hereunder or compliance by Chevron
with any of the agreements herein contained and (ii) discuss the condition and performance of the
Designated Facilities with the responsible officers of Chevron, and Chevron agrees to take such
reasonable and customary steps as are appropriate to facilitate such inspections and discussions.
RHC shall not incur any liability or obligation for not making any such inspection or for not
conducting any discussion.




          (b) RHC or its authorized representatives may enter the premises of Chevron at reasonable
times upon reasonable advance notice in order to inspect, audit and make copies of (i) the records
referred to in Section 3(e) hereof and (ii) all documents and instruments in the possession of
Chevron that are reasonably necessary or appropriate for RHC or such authorized representatives to
determine the truth and accuracy of any statement, schedule, annex or exhibit delivered or made
hereunder, or to determine compliance with any provisions of this agreement.




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          (c) Chevron shall upon request by RHC provide RHC with copies of any documents referred to in
Section 14(b) provided that the cost of such copies shall be borne by RHC.




          (d) Any data obtained by RHC pursuant hereto which is designated by Chevron as proprietary or
confidential shall be held in confidence by RHC.




     15. Liens.



          (a) Chevron shall not directly or indirectly create or permit to be created or to remain, and
shall discharge, any mortgage, attachment, lien (including any tax lien other than such arising
from the failure of RHC to discharge property taxes for which RHC is responsible pursuant to
Section 8), charge, security interest or other encumbrance of any nature whatsoever on, in or with
respect to the Designated Facilities or any part thereof (“Liens”) other than (i) Liens created
directly or indirectly or acquiesced in by RHC, (ii) any Lien being contested as permitted by
Section 15(b), (iii) Liens of mechanics, laborers, garagemen, garage-keepers, materialmen,
suppliers, vendors, workmen, carriers and any other statutory or common law possessory Liens
created in the ordinary course of business for sums of money (other than borrowed money) which
under the terms of the related contracts are not at the time due and (iv) Liens which are of record
on the Commencement Date.




          (b) After prior notice to RHC, Chevron may at its expense contest, by appropriate proceedings
conducted in good faith and with due diligence, any Lien which Chevron is obligated to discharge or
pay to any person other than RHC. Chevron shall pay, and save RHC harmless against, all losses,
judgments, decrees and reasonable costs, including attorneys’ fees and expenses and such fees and
expenses incurred in enforcing this indemnity, in connection with any such contest and shall,
promptly after the final determination of such




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contest, pay and discharge the amounts which shall be imposed or determined to be payable
therein; together with all penalties, reasonable costs and expenses incurred in connection
therewith.




     16. Events of Default and Remedies.



          (a) Each of the following acts or occurrences shall constitute an “Event of Default”
hereunder:





     1. default by a party in the performance of any covenant, liability or
obligation of such party to the other and the continuance of such default for 30
days after notice to such party of such default from the other; or




     2. any representation or warranty made by a party herein or otherwise in
writing in connection with or pursuant to this agreement shall be false or
misleading in any material adverse respect on the date as of which made or
reaffirmed; or




     3. a party shall (1) voluntarily commence any proceeding or file any petition
seeking relief under Title 11 of the United States Code or any other Federal or
state bankruptcy, insolvency or similar law, (2) consent to the institution of any
such proceeding or the filing of any such petition, (3) apply for or consent to the
appointment of a receiver, trustee, custodian, sequestrator or similar official for
a party or for a substantial part of its property, (4) file an answer admitting the
material allegations of a petition filed against it in any such proceeding, (5) make
a general assignment for the benefit of creditors, (6) admit in writing its
inability or fail generally to pay its debts as they become due or (7) take
corporate action for the purpose of effecting any of the foregoing; or



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     4. an involuntary proceeding shall be commenced or an involuntary petition
shall be filed in a court of competent jurisdiction seeking (1) relief in respect of
a party, or of a substantial part of its property, under Title ii of the United
States Code or any other Federal or state bankruptcy, insolvency or similar law, (2)
the appointment of a receiver, trustee, custodian, sequestrator or similar official
for a party or for a substantial part of its property or (3) the winding-up or
liquidation of a party; and such proceeding or petition shall continue undismissed
for 60 days and the other party determines in its sole discretion that such
proceeding or petition is not frivolous and notifies such party of such
determination (it being understood that the notifying party need not make any
investigation), or an order or decree approving or ordering any of the foregoing
shall continue unstayed and in effect for 60 days.



          (b) Upon the occurrence and during the continuance of any Event of Default, the non-defaulting
party may in its discretion do any one or more of the following:





     1. proceed by appropriate judicial proceedings, either at law or in equity or
in bankruptcy, to enforce performance or observance by the defaulting party of the
applicable provisions of this agreement, or to recover damages for the breach of any
thereof; or




     2. by notice to the defaulting party terminate this agreement; provided that
RHC shall have no right to terminate this agreement except based on a breach by
Chevron of Chevron’s obligation under Section 3(b) to deliver petroleum products to
RHC and Chevron shall have no right to terminate this agreement except based on a
breach by RHC of its obligation to pay processing



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fees under Section 3(c). No such termination shall relieve the defaulting
party of its obligations to the other party accruing prior to termination.



          (c) The remedies herein provided in case of an Event of Default shall not be deemed to be
exclusive, but shall be cumulative and shall be in addition to all other remedies existing at law,
inequity or in bankruptcy.




          (d) Notwithstanding Section 11, if the Combined Facility is shut down for a period of six
months by reason of any governmental order or an injunction issued on behalf of a governmental
entity, RHC shall have the right to terminate this agreement by written notice to Chevron.




     17. Notices.



          All notices to be given under this agreement shall be in writing and shall be deemed to have
been duly given if delivered personally, delivered by a recognized overnight commercial carrier, or
telecopied with receipt acknowledged, to the party at the address set forth below or such other
address as such party shall have designated by 10 days’ prior written notice to the other:



If to Chevron:

Chevron U.S.A. Products Company

6501 Trowbridge Drive

El Paso, Texas 79905

Attention: Refinery Manager


If to RHC:

Refinery Holding Company, L.P.

Attention: Timothy J. Bennett, Manager

c/o Capital Equipment Financing, Inc.

1211 Avenue of the Americas


New York, New York 10036




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     18. Entire Agreement.



          This agreement and the exhibits hereto constitute the entire agreement between RHC and Chevron
with respect to the subject matter hereof, and supersede all prior oral or written agreements,
commitments or understandings with respect thereto. No amendment to this agreement shall be
binding on the parties unless in writing and signed by authorized representatives of both parties.
The headings in this agreement are for convenience of reference only and shall not be used to
construe or interpret the meaning of any provision.




     19. Assignment.



          Either party hereto shall have the right to assign its rights or delegate its duties hereunder
if it first obtains the written consent of the other party, which consent shall not unreasonably be
withheld.




     20. Governing Law.



          This agreement shall be governed by the laws of the State of Texas, without regard to rules
concerning choice of law.




     21. Dispute Resolution.



          In the event of any dispute between the parties hereto, each party shall promptly appoint a
negotiator, other than legal counsel (unless the parties agree otherwise), knowledgeable about the
subject matter under dispute to represent them in settlement negotiations. The negotiator for each
party should be a person that has (or can expeditiously obtain) settlement authority for resolving
disputes of the nature in question. If the negotiators are unable to resolve such dispute, they
may, if they so elect, select a mutually satisfactory third party mediator having expertise in the
area under dispute to help expedite a resolution of the matter. The cost of any such mediator
shall be borne equally by the parties. If the parties are unable to resolve the




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dispute within 60 days following the appointment of the negotiators (or such longer period as
may be mutually agreed upon), the matter shall be referred for arbitration pursuant to Section 22.




     22. Arbitration.



          Any dispute, controversy or claim arising out of or relating to his agreement, or the breach,
termination or validity thereof, shall be submitted for arbitration at E1 Paso, Texas, in
accordance with the Commercial Arbitration Rules of the American Arbitration Association by three
arbitrators appointed in accordance with such rules; provided that, unless otherwise agreed to in
writing by the parties, the award rendered by the arbitrators shall not be binding on the parties.
Any party dissatisfied with such award shall retain all rights to have such matter adjudicated de
novo by a court.




     23. Conflict of Interest.



          No director, employee or agent of either party has given or received or shall give or receive
any commission, fee, rebate, gift of entertainment of significant value, or has entered or shall
enter into any business arrangement (without that party’s prior written consent) with any director,
employee or agent of the other party. Either party shall have the right to have the books of the
other audited by a third party for the purpose of assuring compliance with this Section 23.




          IN WITNESS WHEREOF, the parties hereto have executed this agreement as of the date first set
forth above.




	 	 	 	 	 	 	 
	 	 	REFINERY HOLDING COMPANY, L.P.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	REFINERY COMPANY, L.C.,	 	 
	 

	 	 	 	general partner	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Timothy J. Bennett	 	 
	 

	 	 	 	 

Timothy J. Bennett

Manager
	 	 






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	 	 	CHEVRON U.S.A. INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ D. R. Hoyer	 	 
	 

	 	 	 	 

D. R. Hoyer

Executive Vice President
	 	 







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