Document:

exv10w11

 

Exhibit 10.11

EMPLOYMENT AGREEMENT

     This Employment Agreement (the “Agreement”), dated as of April 25, 2005, effective as of
April 1, 2005 (the “Effective Date”), is executed by and between Virbac Corporation, a Texas
corporation with its principal place of business located at 3200 Meacham Blvd., Ft. Worth , TX
76137 (the “Company”), and Laurent Cesar, an individual residing at 3605 Autumn Drive, Ft. Worth,
TX 76109.

     In consideration of the mutual covenants and the mutual benefits provided in this Agreement,
the receipt and sufficiency of which are hereby acknowledged, the Company and Employee agree as
follows:

     1.0. REPRESENTATIONS AND WARRANTIES.

          1.1. The Employee represents and warrants to the Company that the Employee (a) is authorized
to work in the United States, (b) is not bound by any restrictive covenants or territorial
restrictions, and (c) has no prior or concurrent obligations or commitments of any kind that would
in any way prevent, restrict, or interfere with the Employee’s acceptance of employment or the
performance of all duties and services required under this Agreement to the fullest extent of the
Employee’s ability.

     2.0. TERMS OF EMPLOYMENT.

          2.1. The Company offers, and the Employee accepts, employment with the Company under the terms
and conditions set forth in this Agreement. The Employee’s employment with the Company (the
“Employment Period”) shall continue on an at-will basis unless it is terminated in accordance with
this Agreement.

     3.0. DUTIES AND FUNCTIONS.

          3.1. The Employee shall initially be employed as an Executive Vice President of Operations.
The duties and responsibilities of that position include directing the industrial operations of
Virbac Corporation’s industrial facilities in the U.S., directing and supervising corporate
departments including manufacturing, warehouse, distribution, and quality control at Virbac’s
industrial sites, and will supervise and manage budget preparation and compliance, and any other
duties as determined by the Company from time to time in its sole discretion. The Employee agrees
to devote his/her full-time business efforts, attention and energies to the diligent performance of
all assigned duties on behalf of the Company.

     4.0. COMPENSATION.

          4.1. Base Salary. As compensation for his/her services under this Agreement as an
Executive Vice President of Industrial Operations, the Company agrees to pay the Employee an annual
base salary at the rate of $163,000.00 ($13,583.22 per month), payable in accordance with the
Company’s normal payroll schedule, or on such other periodic basis as may be mutually agreed upon
between the Employee and the Company. Such salary shall be subject to annual review by the Company
in its sole discretion for possible adjustment based on the Employee’s and the Company’s
performance, the Company’s policies, and the contributions made by the Employee to the Company’s
financial success. Any salary adjustment will be prorated based upon hire date. The Company may
withhold from any

 

 

amounts payable under this Agreement such federal, state, local or other taxes as shall be
required to be withheld pursuant to any applicable law or regulation.

          4.2. Fringe Benefits. In addition to his/her base salary, the Employee will be
eligible to participate in the fringe benefits programs available generally to Company employees
pursuant to the eligibility requirements of such programs, including personal leave, paid holidays,
disability, group life insurance, and educational assistance, as the case may be, as determined
from time to time by the Company in its sole discretion. In addition, the employee will receive up
to $16,400.00 for his children’s education per year, and $4,900 for travel expenses back to France.

          4.3 Bonus. The Employee shall be eligible to receive an annual cash bonus award based
on (a) the Employee’s performance and (b) the Company’s overall performance, as determined by the
Company’s compensation committee in its sole discretion. The full bonus potential will equal
$36,000.00 annually and will be pro-rated based upon hire date.

          4.4 Business Expenses. The Employee will be reimbursed for all ordinary, reasonable
and necessary business expenses incurred by the Employee in carrying out his assigned duties on
behalf of the Company in accordance with the Company’s existing rules and procedures in effect at
the time the reimbursement is sought, which may require the presentation of an itemized accounting
of the expenses incurred supported by itemized receipts of each expenditure. Included within the
component is a $1,000.00 per month car allowance which will begin after relocation is complete and
the employee starts using his own vehicle. Additionally, the employee is eligible for relocation
expenses according to Virbac Corporation’s Relocation Policy.

     5.0. CONFIDENTIAL INFORMATION.

          5.1. Definition. The Employee acknowledges and agrees that due to the nature of
his/her employment with the Company, and the position of trust that s/he will hold, the Employee
will have special access to learn, be provided with, and in some cases, will prepare and create for
the Company and/or any of its affiliated entities (hereinafter referred to as the “Virbac Group”),
trade secrets and other confidential and proprietary information relating to the business and
operations of the Virbac Group and of its customers, including without limitation (a) the identity
of customers and customer contacts and terms of the relationships and profit margins with customers
and potential customers of the Virbac Group, (b) the identity of the suppliers and contractors of
the Virbac Group and the terms of the relationships with such suppliers and contractors, including
price information, (c) information relating to the Virbac Group’s technology, (d) the procedures,
methods, standards, specifications, concepts, policies, and techniques of, or relating to, the
operation of the Virbac Group, (e) manuals, including, without limitation, training, service, and
policy and procedures manuals, (f) business opportunities, business plans, marketing information
and business strategies, and (g) earnings and other financial data of the Virbac Group (all of
which is collectively referred to as “Confidential Information”).

          5.2. Restriction on Disclosure. The Employee acknowledges and agrees that such
Confidential Information is the exclusive property of the Virbac Group, that is has been and will
continue to be of central importance to the business of the Virbac Group, and that the disclosure
of it to, or use by, others will cause the Virbac Group substantial and irreparable harm.
Accordingly, the Employee shall not, either during his/her employment or at any time after the
termination of employment with the Company or any other member of the Virbac Group for any reason,
use, reproduce or disclose any such Confidential Information, except as may be necessary in
discharging his/her assigned duties as an employee of the Company. In addition, the Employee
agrees to hold Confidential Information in strict confidence and to use all reasonable precautions
to assure that it is not disclosed to unauthorized persons or used in an unauthorized manner, both
during and after employment with the Company or any other member of the Virbac Group.

	6.0.	 	ADDITIONAL RESTRICTIONS ON UNFAIR COMPETITION.
	 

 

 

 

          6.1. Protectable Interests. In addition to other business activities, the Virbac
Group is engaged in the private label and contract manufacturing of (1) companion and livestock
animal health products, and (2) home, lawn and garden products in North America. Among other
duties, the Employee shall be responsible for directing the industrial operations of Virbac
Corporation’s industrial facilities in the U.S., directing and supervising corporate departments
including manufacturing, warehouse, distribution, and quality control at Virbac’s industrial sites,
and will supervise and manage budget preparation and compliance, and enhancing the Virbac Group’s
good-will and business relationships with customers, all for the benefit of the Virbac Group; and
the Employee acknowledges that due to the nature of his/her employment, s/he will have special
access to, contact with confidential, proprietary and trade secret information relating to the
Virbac Group’s business operations and that of the Virbac Group’s customers and prospective
customers. The Employee also acknowledges that the Virbac Group has incurred considerable expense
and will invest considerable time and resources in developing and maintaining its confidential,
proprietary and trade secret information, and its relationships with customers, and that such
information and relationships are critical to the success of the Virbac Group’s business. In
addition, any attempt on the part of the Employee to induce others to leave the Virbac Group’s
employ, or any efforts by the Employee to interfere with the Virbac Group’s relationships with
other employees, also would be harmful and damaging to the Virbac Group’s business.

          6.2. Specific Restrictions on Competition & Solicitation. Accordingly, the Employee
agrees that during the Employment Period and for a one-year period after the termination of his/her
employment for any reason, s/he shall not, either on his/her own behalf or on behalf of any third
party, except on behalf of any member of the Virbac Group, directly or indirectly:

               a. engage as an individual proprietor, partner, stockholder, officer, employee, director,
joint venturer, investor, lender, or in any other capacity whatsoever (other than as the holder of
not more than one percent (1%) of the total outstanding stock of a publicly held bank), in any
business that is offering competing products and services to that of any member of the Virbac Group
in any geographic market that any member of the Virbac Group is conducting business or is actively
attempting to conduct business; or

               b. solicit, encourage, or induce any customer of any member of the Virbac Group to purchase
from, or otherwise contract with, another person or entity for the types of products or services
that are offered by any member of the Virbac Group, or otherwise solicit, encourage, or induce any
such customer to terminate or adversely modify any business relationship with any member of the
Virbac Group, or not to proceed with, or enter into, any business relationship with any member of
the Virbac Group; or

               c. solicit, encourage or induce any employee of any member of the Virbac Group to terminate
his/her employment with any member of the Virbac Group , or otherwise interfere with or disrupt any
member of the Virbac Group’s relationships with its employees.

          6.3 The parties acknowledge and agree that the restrictions placed upon the Employee by the
Agreement are reasonable and necessary to protect the Virbac Group’s Confidential Information,
customer relationships, and goodwill. The Employee acknowledges and agrees that the above
restrictions will not prevent him/her from earning a living upon the termination of employment with
the Company or any member of the Virbac Group.

          6.4 If any restriction set forth in this Section 6.0 is found by any court or other authority
of competent jurisdiction to be unenforceable because it extends for too long a period of time or
over too great a range of activities or geographic area, the parties agree that such court shall
have the power to interpret and/or modify the covenant to extend over the maximum period of time,
range of activities or geographic areas as to which it may be enforceable.

     7.0 OWNERSHIP AND ASSIGNMENT OF INVENTIONS.

 

 

          7.1 As part of his/her employment with the Company, the Employee is expected to make new
contributions of value. Accordingly, during his/her employment with the Company, the Employee
shall promptly disclose to the Company any and all inventions, ideas, discoveries, trade secrets,
works of authorship, computer software programs, know-how, processes, or improvements (collectively
as “Inventions,” which terms shall include the singular) whether or not patentable or
copyrightable, that the Employee may make, devise, conceive, create, design, invent or develop,
either solely or jointly, whether or not at the Company’s suggestion, during or outside of normal
working hours, that relate to, or are capable of use in connection with, the Company’s, or any
member of the Virbac Group’s, business including any services or products offered by any member of
the Virbac Group. All such Inventions shall immediately become the exclusive property of the
Company and shall be deemed as “works for hire.” If any of the foregoing are determined not to be
“works for hire”, then the Employee hereby agrees to assign any and all rights, including rights to
obtain patents or copyright registrations, to such Inventions directly to the Company. At any time
upon the Company’s request, the Employee shall, without additional compensation, assist the Company
in any way necessary, including executing documents, to accomplish the following: (a) perfect the
Company’s right, title and interest in the Invention, (b) file or obtain patent or copyright
registration on the Invention, and (c) protect and enforce the Company’s rights in the Invention.

     8.0 RETURN OF COMPANY PROPERTY.

          8.1 All correspondence, records, documents, manuals, and promotional materials, including all
copies, in any format whatsoever, and all other Company and/or Virbac Group property, including
keys, passwords, access codes, credit cards, mobile telephones, pagers, and computer equipment
which come into the Employee’s possession by, through or in the course of his/her employment,
regardless of the source and whether created by the Employee, are the sole and exclusive property
of the Company and/or the Virbac Group, as the case may be. Immediately upon the termination of
the Employee’s employment, the Employee shall return to the Company, or the appropriate member of
the Virbac Group as the case may be, all such Company and/or Virbac Group property. The Employee
acknowledges and agrees that the Company may withhold any sums otherwise due to the Employee upon
termination until the Employee has satisfied all of his/her obligations under this Section 8.1.

     9.0 TERMINATION OF EMPLOYMENT.

          9.1 In furtherance of the at-will nature of employment with the Company, both the Employee and
the Company may terminate the employment relationship at any time for any reason whatsoever.

          9.2 Upon termination, the Employee shall receive payment for (a) base salary through the date
of termination, (b) accrued vacation, (c) any unreimbursed business expenses for which the Employee
may be eligible for reimbursement pursuant to Company policy as referenced in Section 4.4 of this
Agreement, and (d) any other amounts to which Employee may be eligible for pursuant to any Employee
benefit plans then in effect pursuant to the terms of such plans. If the employment relationship
is terminated on the basis of evidence that Employee engaged in fraud, embezzlement, theft,
dishonesty, harassment, discrimination or other gross misconduct, as determined by the Company, the
Employee acknowledges and agrees that he/she shall forfeit claims after the Employee’s last day of
employment for any unreimbursed business expenses or accrued vacation time.

          9.3 The Employee’s employment will terminate immediately upon his/her death or permanent
disability, and the Company shall not have any further liability or obligation to the Employee,
his/her executors, heirs, assigns or any other person claiming under or through his/her estate,
except that the Employee or the Employee’s estate shall receive any amounts due to the Employee
upon termination of employment pursuant to Section 9.2 of this Agreement. The term “permanently
disabled” for the purposes of this Agreement means the inability, due to physical or mental ill
health, to perform the Employee’s essential duties, with or without a reasonable accommodation, for
120 days or more during any consecutive 365-day period.

 

 

     10.0. SURVIVAL OF EMPLOYEE’S OBLIGATIONS.

          10.1. The Employee’s obligations under Sections 5-8 and 12 of this Agreement shall continue
and survive the termination of the Employee’s employment or the termination of this Agreement for
any reason. The Employee’s obligations under Sections 5-8 and 12 of this Agreement also shall
survive any breach of this Agreement or of any other obligation by the Company, and the Company’s
breach shall not in any way alter or relieve the Employee of his/her obligations hereunder.

     11.0. ASSIGNMENT.

          11.1. This Agreement shall be binding upon the parties and inure to the benefit of the Company
and its successors, assigns, and affiliated entities. The parties acknowledge and agree that the
obligations of the Employee are personal and may not be assigned by him/her without the prior
written consent of the Company.

     12.0 ARBITRATION OF EMPLOYMENT DISPUTES.

          12.1 All employment disputes shall first be discussed with Human Resources and, ultimately, if
necessary, with the President of the Company. If the dispute cannot be resolved internally, the
parties may mutually agree to submit the dispute to non-binding mediation. To the extent that
mediation is not selected or fails to resolve the matter, the parties mutually agree to final and
binding arbitration pursuant to the terms of the “Agreement to Arbitrate Employment Disputes” that
is attached to this Employment Agreement as Schedule A, and which is incorporated by reference
herein, in order to efficiently and justly resolve any employment related disputes that may arise
between them.

     13.0 ENTIRE AGREEMENT; AMENDMENTS WRITTEN AND SIGNED.

          13.1. This Agreement contains the entire understanding of the parties with respect to all
matters contained herein and it supersedes any and all prior understandings, written or oral;
provided, however, that nothing in this Agreement shall limit the Company’s authority to issue,
modify or evoke any oral or written Company policy, rule or procedure in its sole discretion; and
provided further that nothing in this Agreement shall limit the Employee’s obligation to abide by
the Company’s policies, rules and procedures that may be in effect as of the Effective Date of this
Agreement, or that may be issued or modified by the Company in the future, in its sole discretion.
This Agreement may not be amended orally, but only by an instrument in writing, specifically
identified as an amendment to this Agreement, and signed by all parties after the date of this
Agreement. By entering into this Agreement, the Employee certifies and acknowledges that he/she
has carefully read all of the provisions of this Agreement and that the Employee voluntarily and
knowingly enters into it.

     14.0 SAVINGS CLAUSE AND SEVERABILITY.

          14.1. All provisions of this Agreement are severable and if any provision is determined to be
invalid or unenforceable for any reason, the remaining provisions and portions of this Agreement
shall remain unaffected and in full force to the fullest extent permitted by law. Without limiting
the foregoing, it is specifically agreed that each of the covenants set forth in Section 6 of this
Agreement is severable. If any such covenant is held invalid or unenforceable for any other
reasons, the parties request and specifically empower the adjudicating entity to reform any such
covenant to the extent necessary to cure any invalidity and to enforce the covenant to the fullest
extent of the law.

     15.0. GOVERNING LAW AND SUBMISSION TO JURISDICTION.

          15.1 This Agreement shall be governed by, and construed and enforced in accordance with, the
laws of the State of Texas without regard to its choice or conflict of law rules. The Employee
expressly consents to the jurisdiction of the state and federal courts in the state where his/her
principal Company office is/was located at the time the acts giving rise to the claim or cause of
action, under the limited circumstances provided for in this Agreement, and acknowledges and agrees
that venue is proper

 

 

in the judicial district(s) covering such office. For the purposes of expediting the resolution of
any claim or dispute that may be brought in court pursuant to this Agreement, the parties waive a
trial by jury.

     16.0. NOTICES.

          16.1. Any notice provided for in this Agreement shall be provided in writing. Notices shall
be effective on (a) the date of service, if served personally on the party to whom notice is to be
given, or (b) the third business day after mailing, if mailed by first class mail, postage prepaid.
Notices shall be properly addressed to the parties at their respective addresses as set forth in
the preamble to this Agreement (in the case of notices to the Company, to the attention of the
Company’s President) or to such other address as either party may later specify by written notice
to the other.

     17.0. MISCELLANEOUS.

          17.1. No Waiver. No delay or omission by the Company in exercising any right under
this Agreement shall operate as a waiver of that or any other right. A waiver or consent given by
the Company on any one occasion shall e effective only in that instance and shall not be construed
as a bar or waiver of any right on any other occasion. No waiver shall be effective unless in
writing and signed by the Company.

          17.2. Captions Descriptive. The captions of the sections of this Agreement are for
convenience of reference only and in no way define, limit or affect the scope of this Agreement.

          17.3. Joint Review. The Company and the Employee have had the opportunity to review
this Agreement. Accordingly, it is agreed that no rule of construction shall apply against either
the Company or the Employee or in favor of either of them. This Agreement shall be construed as if
the Company and the Employee jointly prepared this Agreement, and any uncertainty or ambiguity
shall not be interpreted against either of them or in favor of either of them.

          17.4. Counterparts. This Agreement may be executed and delivered by each party in
separate counterparts, each of which shall be deemed an original and all of which, when taken
together, shall constitute one and the same Agreement, notwithstanding that both parties may not
have signed the same counterpart.

          IN WITNESS WHEREOF, each of the parties to this Agreement has caused this Agreement to be duly
executed and delivered, by its authorized officers or individually, as of the date first written
above.

	 	 	 
	 

	 	Virbac Corporation
	 
	 	 
	 

	 	Carole Buys-Michela, SPHR

Vice President, Human Resources
	 
	 	 
	 

	 	Laurent Cesar
	 

	 	 
	 

	 	Employee Name
	 
	 	 
	 

	 	/s/ Laurent Cesar
	 

	 	 
	 

	 	Employee Signature
	 
	 	 
	 

	 	April 25, 2006
	 

	 	 
	 

	 	Date

 

 

SCHEDULE A

VIRBAC CORPORATION

AGREEMENT TO ARBITRATE EMPLOYMENT DISPUTES

By this Agreement To Arbitrate Employment Disputes, my employer, Virbac Corporation (the Company),
and I agree to refer any Significant Dispute or Claim relating to my employment, as defined below,
to arbitration at the election of the party against whom the claim is asserted. I am entering into
this Agreement freely and voluntarily to establish the means of justly resolving any such claim
that may arise or exist between the Company and me.

1. SIGNIFICANT DISPUTE OR CLAIM.

The disputes that we are agreeing to subject to arbitration are those that would otherwise be
resolved by a legal proceeding (“Significant Dispute or Claim”). Specifically, we are agreeing to
subject to arbitration any dispute or claim by or against either party that (a) has caused the
Company or me to terminate my employment with the Company; (b) involves allegations of wrongful
discrimination, harassment or retaliation by or against me; or (c) arises under any wage payment or
collection law, or any other federal, state, or local statute, law, regulation, or ordinance
regarding employment. Accordingly, the term “Significant Dispute or Claim” includes any claim
under Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1991, 42 U.S.C. Sec. 1981,
the Age Discrimination in Employment Act, the Fair Labor Standards Act, the Americans With
Disabilities Act, and the Family and Medical Leave Act. It also includes any claim for breach of
contract, wrongful discharge, breach of express or implied promises or covenants of good faith and
fair dealing, intentional or negligent infliction of emotional distress, or defamation. The term
does not include claims involving workers’ compensation benefits, unemployment benefits, or
benefits under plans covered by the Employee Retirement Income Security Act of 1974, as amended,
for which the dispute resolution process is limited by law. All other disputes and claims will
continue to be handled by the Company’s normal informal dispute resolution process.

2. ELECTION TO ARBITRATE.

In consideration of my being employed, or continuing to be employed, by the Company, and the wages
and benefits paid or to be paid to me by the Company, I agree that any Significant Dispute or Claim
may be resolved by impartial binding arbitration at the election of the party against whom the
claim is asserted. If such election is made, arbitration will be the exclusive, final, and binding
forum for the resolution of such disputes and claims.

I understand that this agreement to arbitrate means that I will not be able to pursue an action
against the Company in a court of law regarding any Significant Dispute or Claim that the Company
elects to arbitrate, and vice versa. I also agree that the obligation to arbitrate any employment
dispute is fully enforceable under the Federal Arbitration Act, and that judgment upon the
arbitration award rendered by the arbitrator may be entered in any court having jurisdiction over
such claims. I further understand, acknowledge and agree that this Agreement does not alter any of
the substantive rights I or the Company may have under law, including any statutory right to file a
charge with an administrative agency for investigative purposes or other action by such an agency.
This Agreement simply transfers final resolution of my right or the Company’s right to seek relief
from either a judge or a jury to an impartial arbitrator for the mutual benefit of both parties.

 

 

3. PROCEDURES.

     A. Notice of Significant Dispute or Claim.

Either the Company or I may initiate the process for resolving a Significant Dispute or Claim by
providing written notice to the other party of the existence of such a dispute or claim. The
notice shall describe the circumstances giving rise to the dispute or claim in detail and state the
type of remedy the notifying party (the “Claimant”) proposes to accept for the dispute or claim.

     B. Election to Arbitrate.

The party receiving notice of a Significant Dispute or Claim (the “Respondent”) shall, within 14
days after receipt, notify the Claimant in writing whether the Respondent elects to refer the
dispute or claim to arbitration. If the Respondent does not elect to refer the dispute or claim to
arbitration within said 14 days, the Claimant may proceed to process the claim in any other lawful
manner, including the initiation of a lawsuit.

     C. Initiation of Arbitration.

If the Respondent elects arbitration, the Claimant may file a demand for arbitration with the
American Arbitration Association (“AAA”), whose National Rules for the Resolution of Employment
Disputes (“Rules”) as then in effect shall govern the proceedings. The demand shall be accompanied
by the applicable AAA filing fee. In addition, the Claimant shall simultaneously serve a copy of
the demand on the Respondent. For purposes of any statute of limitations applicable to the
underlying substantive claim, the claim will be deemed to have been filed on the date that the
demand for arbitration is received by the AAA.

     D. Arbitration Procedures.

          (1) Any arbitration will be conducted in accordance with the AAA Rules and in accordance with
procedures specifically set forth in this Agreement. A copy of the AAA Rules may be obtained from
the Company’s Human Resources Department. The dispute shall be heard and determined by one
arbitrator who may grant any remedy or relief that would have been available to the parties had the
matter been heard in court. Unless otherwise mutually agreed upon, the arbitration shall be heard
within Tarrant County.

          (2) Within 30 days after submission of the demand for arbitration, the Respondent shall submit
to the arbitrator and the Claimant a written answer or a motion to dismiss on the ground that the
claim is barred as a matter of law. The answer will admit or deny each claim and set forth any
affirmative defenses and counterclaims.

          (3) If a motion to dismiss is filed, the moving party shall set forth the legal authorities in
support of its position.

          (4) The Claimant shall have 20 calendar days to submit a written opposition to the motion to
dismiss. The opposition shall be submitted to the arbitrator along with a copy to the moving
party.

          (5) If the Respondent’s answer includes a counterclaim, the Claimant shall have 20 days to
file an answer or motion to dismiss on the same basis as the Respondent in subsection D(2) of this
Section 3, as set forth above.

          (6) The arbitrator shall rule on a motion to dismiss in writing within 30 days of receipt and
shall set forth the reasons and authority relied on for the ruling. If the motion to dismiss is
denied, the moving party must file an answer within 15 days after the Arbitrator’s ruling.

 

 

     E. Discovery.

          (1) The parties shall cooperate in the voluntary exchange of documents relevant to the claims
at issue in the arbitration. The parties shall have the right to take depositions and obtain
specified documents to the extent leave to do so is granted by the arbitrator. In granting or
denying leave to take discovery, the arbitrator shall be guided by the applicable federal rules of
civil procedure.

          (2) All discovery must be completed 30 days prior to the arbitration hearing date.

     F. Hearing Procedure.

          (1) The parties shall state the issue(s) to be determined in the arbitration and they shall
determine whether the arbitration is to be governed by the federal rules of evidence.

          (2) The hearing shall be transcribed verbatim by a certified court reporter and the Company
shall provide a copy of the transcript to the employee at no cost to the employee.

          (3) All testimony shall be under oath administered by the Arbitrator. Depositions may be used
for testimony in accordance with the federal rules of civil procedure to the extent that a witness
is unavailable to testify at the hearing.

          (4) The Claimant shall have the burden of proof on each element of a claim as required by law.
The Respondent shall have the burden of proving any affirmative defenses. The Claimant shall
present its case in chief first, provided that the Respondent shall have the right to cross-examine
the Claimant’s witnesses. At the conclusion of the Claimant’s case in chief, the Respondent may
submit an oral or written motion for a directed verdict. If the motion is denied, then the
Respondent may present its case in chief.

          (5) The parties may call rebuttal witnesses and the Arbitrator may question any witness for
clarification of testimony already presented.

          (6) The parties shall have the right to present closing arguments at the conclusion of all
testimony and shall also have the right to submit post-hearing briefs and reply briefs. The
arbitrator shall set the schedule for the submission of post-hearing briefs with input from the
parties.

     G. Opinion and Award.

          (1) The Arbitrator shall issue a written opinion within 90 days after receiving post-hearing
briefs or reply briefs.

          (2) The written opinion, which shall be signed and dated, shall set forth the factual and
legal basis for the decision. The Arbitrator shall be authorized only to award those remedies
requested by the parties and that are permitted under applicable law and that are supported by
credible and relevant evidence.

          (3) The parties shall have 20 days following the issuance of the opinion and award to submit a
motion for reconsideration setting forth any errors of fact or law. Any opposition to the motion
for reconsideration must be submitted within 14 days after receipt of the motion. The Arbitrator
shall rule on the motion in writing within 30 days after receipt of the motion or opposition,
whichever is later. The written opinion shall set forth the factual and legal basis for the
decision.

     H. Fees and Costs.

          (1) Other than the initial filing fees an employee may be required to pay, the Company will
pay any other filing or other administrative fees required by AAA for the cost of providing
administrative services. All expenses of the arbitration, including required travel, hourly fees,
and other costs of the arbitrator, shall be borne by the Company, the AAA Rules notwithstanding.

 

 

          (2) Each party shall be responsible for its own attorneys’ fees, except as provided by law.

          (3) Each party shall be responsible for all costs associated with discovery that party
initiates, provided that a party being deposed or attending a third-party deposition shall be
responsible for transcript costs if that party chooses to order a copy.

4. MISCELLANEOUS.

     A. I recognize that nothing in this Agreement constitutes an express or implied contract of
employment for any definite period of time or for the warranty of any benefits, and that this
Agreement does not alter the at-will relationship of my employment.

     B. This Agreement supersedes any prior oral or written agreements or understandings regarding
the resolution of employment claims, and cannot be modified except by a subsequent writing signed
by me and by the Vice President of the Company. This Agreement shall be binding upon the
parties and inure to my benefit and the benefit of the Company and its respective successors and
assigns. The language of all parts of this Agreement shall in all cases be construed as a whole,
according to its fair meaning, and not strictly for or against any of the parties.

     C. This Agreement has been prepared and executed in accordance with the laws of Tarrant
County, and its interpretation, application and enforcement, and all causes and controversies
arising hereunder, shall be governed by and determined in accordance with the laws of Tarrant
County without giving effect to its conflicts of laws principles.

     D. If any terms of this Agreement are found by an arbitrator, court or other authority of
competent jurisdiction to be inoperative for any reason, the remaining provisions will remain in
full force and effect.

     E. I am entering into this Agreement voluntarily with a full understanding of its terms and
effect. I acknowledge that I have been given the opportunity to ask any questions that I may have
had regarding this Agreement and that I was afforded the opportunity to consult with any advisor of
my choosing before signing it.

     YOU MAY WISH TO CONSULT AN ADVISOR OF YOUR CHOICE PRIOR TO SIGNING THIS AGREEMENT. IF SO,
TAKE A COPY OF THIS FORM WITH YOU. HOWEVER, YOU CANNOT BEGIN OR CONTINUE EMPLOYMENT UNTIL THIS
FORM IS SIGNED AND RETURNED BY YOU.

	 	 	 	 	 	 	 
	Laurent Cesar

	 	 	 	April 25, 2006	 	 
	 

	 	 	 	 	 	 
	Employee Name (Please Print)

	 	 	 	Date	 	 
	 
	 	 	 	 	 	 
	/s/ Laurent Cesar
	 	 	 	 	 	 
	 	 	 	 	 	 	 
	Employee Signature<PAGE>
                                                                   EXHIBIT 10.1

                            PIPELINE LEASE AGREEMENT

                                 by and between

                         MID-AMERICA PIPELINE COMPANY,

                                   as LESSOR,

                                      and

                            NAVAJO PIPELINE COMPANY,

                                   as LESSEE
<PAGE>

                            PIPELINE LEASE AGREEMENT

      THIS PIPELINE LEASE AGREEMENT (this "Lease" or this "Agreement") is
entered into by and between MID-AMERICA PIPELINE COMPANY, a Delaware corporation
("Lessor") and NAVAJO PIPELINE COMPANY, a Delaware corporation ("Lessee").

                                 R-E-C-I-T-A-L-S

      A.    Lessor is the owner of an 8" natural gas liquids pipeline currently
running from Lessor's Kutz Station in San Juan County, New Mexico to Lessor's
Hobbs Station in Gaines County, Texas. Lessor currently uses the 8" pipeline to
transport NGL south from its Kutz Station past White Lakes Station to its Hobbs
Station.

      B.    Lessee, and/or its affiliates, is engaged in the business of
refining crude oil into gasoline and other petroleum products and the
transportation and sale of such products. Lessor and Lessee desire to enter into
a transaction in which Lessee will lease the 8" pipeline from White Lakes
Station to Kutz Station running from Milepost 80.65 through Milepost 415.29, as
encompassed in the Alignment Sheets attached hereto as Exhibit A, together with
all attendant equipment and systems (hereinafter collectively referred to as the
"Pipeline System") and 100% of its capacity on an exclusive basis, subject to
common carrier requirements, for the purpose of transporting petroleum products
from White Lakes Station to Kutz Station. The origin of the Pipeline System will
be Lessor's White Lakes Station and the terminus will be at Lessor's Kutz
Station.

                               W-I-T-N-E-S-S-E-T-H

      NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which being hereby acknowledged, Lessor and Lessee agree as
follows:

      1.    DEMISE. Lessor, for and in consideration of the covenants and
agreements hereinafter set forth to be kept and performed by both parties, does
hereby demise and lease to Lessee for the Lease Term (hereinafter defined) the
Pipeline System and 100% of its capacity for transporting petroleum products
and/or crude oil from White Lakes Station to Kutz Station (provided; however, if
Lessee elects to transport crude oil: (1) it may do so only subject to any
Applicable Laws, which, at Lessee's expense, Lessor shall take reasonable steps
to address; and (2) if NGLs shipped on the Pipeline System by Lessor after
surrender of the Pipeline System by Lessee as referenced in Paragraph 18 are
crude-contaminated in excess of Lessor's specifications in an amount in excess
of 5,000 barrels, Lessor shall notify Lessee and Lessor and Lessee in
consultation and at Lessee's expense shall decontaminate all contaminated NGLs
and take such other steps as are reasonably necessary to resolve the
contamination.).

      2.    LESSOR'S WORK. Attached to this Lease as Exhibit "B" is a
description of

PIPELINE LEASE AGREEMENT--PAGE 1

<PAGE>

work to be performed by Lessor, at its sole cost and expense (hereinafter,
"Lessor's Work"). Such work involves reversing and converting the Pipeline
System from its current use to transportation of petroleum products with a
minimum capacity of 16,000 barrels per day. Lessor covenants and agrees to
perform Lessor's Work as described on Exhibit "B" in a good and workmanlike
manner, in accordance with Applicable Laws (hereinafter defined) and industry
standards and within 180 days of Lessee's providing Lessor written notice to
proceed on Lessor's Work. Lessor may continue to use the Pipeline System until
the onset of Lessor's Work prohibits it.

      3.    LEASE TERM.

            A.    Initial Term. While the Lease will be effective upon
execution, the "Initial Term" of the Lease will commence on the Commencement
Date (hereinafter defined) and expire on that day that is the tenth (10th)
anniversary thereof. The "Commencement Date" will be the earlier to occur of (i)
that date that is the first (1st) day of the sixteenth calendar (16th) month
following the date of this Lease, (ii) one hundred eighty (180) days after
Lessee has provided written notice to Lessor that Lessee desires to commence
shipments on the Pipeline System, or (iii) such earlier date as Lessee actually
commences shipments on the Pipeline System. In the event upon the occurrence of
(i) or (ii) above Lessee's shipments cannot commence by virtue of Lessor not
having fulfilled its obligations hereunder, the Commencement Date shall be
delayed until such time as Lessee is able to commence shipments.

            B.    Option to Renew. Provided that Lessee is not in default under
this Lease beyond applicable notice and cure periods at the time of the exercise
of the Option granted herein, Lessee is granted the option (the "Option") to
renew this Lease for one (1) additional term of ten (10) years (the "Renewal
Term") commencing on the next day after the expiration of the Initial Term.
Lessee shall exercise the Option, if at all, by delivering Lessor written notice
of the exercise of the Option at least one year prior to the expiration of the
Initial Term. Lessee's lease of the Pipeline System during the Renewal Term will
be upon the same terms as for the Initial Term, except that the Base Rent
(hereinafter defined) will adjust as hereinafter provided and during the Renewal
Term Lessee will have no further right to renew this Lease.

            C.    Lease Term. The "Lease Term" shall initially be the Initial
Term and, if Lessee exercises the Option, the "Lease Term" will also include the
Renewal Term.

            D.    Lease Year. As used in this Lease, a "Lease Year" shall
initially mean the twelve (12) month period commencing on the Commencement Date
and ending on the first anniversary thereof. The term "Lease Year" will
thereafter mean the successive twelve (12) month periods ending on the
anniversary of the Commencement Date.

      4.    BASE RENT.

            A.    Initial Term. Lessee agrees to pay to Lessor rent for the
Pipeline System

PIPELINE LEASE AGREEMENT--PAGE 2

<PAGE>

during the Initial Term in one hundred twenty (120) monthly installments, in
advance, beginning on the Commencement Date ("Base Rent"), as follows:

      -     Lease Year 1: $316,666.67 per month ($3,800,000.00 total);

      -     Lease Year 2: $341,666.67 per month ($4,100,000.00 total);

      -     Lease Year 3: $375,000.00 per month ($4,500,000.00 total);

      -     Lease Year 4: $408,333.33 per month ($4,900,000.00 total);

      -     Lease Year 5: $441,666.67 per month ($5,300,000.00 total);

Commencing Lease Year 6 of the Initial Term, and for each Lease Year of the
Initial Term thereafter, the Base Rent shall be the greater of (1) the Base Rent
for Lease Year 5 of the Initial Term or, (2) an amount determined by multiplying
the Base Rent for the immediately preceding Lease Year by the Base Rent
Adjuster. The "Base Rent Adjuster" shall be determined by dividing the Producer
Price Index for Finished Goods (as found in Table 1 of the Product Prices and
Price Indexes published by the U.S. Department of Labor, Bureau of Labor
Statistics) ("PPIFG") for the last month of the immediately preceding Lease Year
for which such index has been published by the United States Government by the
PPIFG published for the same month of the second immediately preceding Lease
Year and subtracting one one-hundredth (0.01) from the quotient so obtained. In
the event the United States Government should no longer publish the PPIFG, then
the parties shall mutually agree upon an alternative index that most nearly
captures the change in prices reflected therein for purposes of calculating the
Base Rent Adjuster.

            B.    Renewal Term. Base Rent for the first Lease Year of the
Renewal Term (the eleventh (11th) Lease Year) shall be the greater of (1)
$441,666.67, multiplied by the quotient obtained by dividing Lessor's posted
tariff for NGL movement from Group 110 to Hobbs in effect on the day the Initial
Term expires by Lessor's posted tariff for NGL movement from Group 110 to Hobbs
on the last day of the fifth (5th) Lease Year of the Initial Term, or (2) the
Base Rent in effect during the tenth (10th) Lease Year of the Initial Term
multiplied by the Base Rent Adjuster; provided, however, in no event shall the
Base Rent be less than $441,666.67. The Base Rent in effect for each subsequent
Lease Year of the Renewal Term shall be the greater of (1) the Base Rent in
effect for the first (1st) Lease Year of the Renewal Term, or (2) the Base Rent
in effect for the immediately preceding Lease Year of the Renewal Term
multiplied by the Base Rent Adjuster.

            C.    Payment of Base Rent. Each installment of Base Rent shall be
due and payable on the first day of each month. Any installment of Base Rent due
for any fractional month shall be prorated based upon the actual number of days
in that month. All obligations of Lessee measured by Lease Years shall be
prorated as appropriate based upon the number of days in the applicable Lease
Year during the term of this Lease divided by the actual number of days in such
Lease Year. Base Rent shall be paid at the times and in the amounts provided for
herein in legal tender of the United States of America to Lessor by wire
transfer of immediately available funds at the address specified in Paragraph 21
hereof or to such other person or at such other

PIPELINE LEASE AGREEMENT--PAGE 3

<PAGE>

address as Lessor may from time to time designate in writing.

      5.    OPERATION OF THE PIPELINE. Lessor shall at all times during the
Lease Term use all reasonable efforts to operate the Pipeline System for the
benefit of Lessee, subject to common carrier requirements as more specifically
discussed herein. Lessor shall operate the Pipeline System and Lessee shall
operate its related facilities in accordance with all Applicable Laws and in
accordance with industry standards. As used herein, the term "Applicable Laws"
means and includes any and all federal, state and local laws, ordinances,
orders, easements and right-of-way agreements of record, rules, and regulations
of all governmental bodies (state, federal, tribal and municipal) applicable to
or having jurisdiction over the use, occupancy, operation and maintenance of the
Pipeline System, as such may be amended or modified from time to time. Lessor
shall not be responsible for measurement "overs and shorts" other than for
product losses arising from fault or failure of Lessor to satisfy its
obligations hereunder.

      6.    SHIPMENTS AND TARIFFS. Lessee shall at all times during the Lease
Term be solely responsible for shipments of product and will publish and file
tariffs in its own name and in accordance with Applicable Laws covering capacity
in the Pipeline System. Lessor shall have the right to review and approve such
tariffs prior to filing, with such approval not to be unreasonably withheld.
Lessee agrees that it will not impair and at its expense will take all
reasonable steps to protect Lessor's rights under all Applicable Laws respecting
the Pipeline System to the extent such rights are materially threatened by
virtue of any act or failure to act of Lessee hereunder. In the event counsel
jointly retained by Lessor and Lessee is of the opinion that such rights are
materially threatened by virtue of an act or failure to act of Lessee, Lessee
must take all the reasonable steps as referenced above in this paragraph 6.
Lessee shall collect for its own account all revenues payable by shippers
applicable to the Pipeline System. From and after the Commencement Date,
Lessee's designated shipper(s) will be responsible for all linefill in the
Pipeline System.

      7.    ALTERATIONS BY LESSEE. Except as expressly permitted hereby, Lessee
may not alter or make any modifications to the Pipeline System without Lessor's
prior written consent, such consent not to be unreasonably withheld. Lessee may,
however, without Lessor's prior written consent, but with notice to Lessor and
at Lessee's sole cost and expense, increase the capacity of the Pipeline System
through the introduction of drag reducing agents, increased horsepower or a
combination thereof. If Lessee desires to increase capacity through any other
means it must obtain the consent of Lessor, with such consent not to be
unreasonably withheld. Lessee may elect to undertake to increase the capacity of
the Pipeline System itself, in which event Lessor shall have the right to
oversee the increase in capacity, or request that Lessor perform such, in which
event Lessee and Lessor shall mutually agree upon a reasonable cost for such
increase in capacity.

      8.    MAINTENANCE AND REPAIR. Lessor, at its sole cost and expense, shall
maintain all aspects of the Pipeline System in good condition and repair, in
accordance with Applicable Laws and in accordance with industry standards. If
any changes, modifications or

PIPELINE LEASE AGREEMENT--PAGE 4

<PAGE>

alterations to the Pipeline System are required during the Lease Term due to the
enactment or amendment of Applicable Laws, then Lessor shall promptly make such
changes, modifications or alterations and will bear the cost thereof.
Notwithstanding Lessor's obligation to repair and maintain the Pipeline System
at its sole cost and expense, Lessee shall be responsible for the incremental
cost of maintaining and repairing those aspects of the Pipeline System relating
solely to alterations or modifications to the Pipeline System requested or made
by Lessee for the sole purpose of increasing the capacity of the Pipeline System
as provided in Paragraph 7 above. Such costs shall be paid by Lessee within
fifteen (15) days of receipt of invoice from Lessor.

      9.    ADDITIONAL PIPELINE CONNECTIONS. Lessor hereby grants Lessee
permission to connect petroleum terminals and pipeline connections to the
Pipeline System at points at or between Lessor's White Lakes Station and Kutz
Station provided that the construction, connection, operation and maintenance of
such will be at Lessee's sole cost and expense and subject to the terms and
provisions of Exhibit B attached hereto.

      10.   REPRESENTATIONS, WARRANTIES AND COVENANTS OF LESSOR. Lessor
represents, warrants and covenants to Lessee that:

            A.    Title. Lessor has good, marketable and indefeasible title to
the Pipeline System, subject only to the easements/rights-of-way on which the
Pipeline System exists and the agreements creating same.

            B.    Organization. Lessor is duly organized, validly existing and
in good standing under the laws of the state of its organization, and is duly
qualified to transact business in the state in which the Pipeline System is
situated.

            C.    Authority. Lessor has all requisite power and authority, has
taken all actions required by its organizational documents and applicable law,
and has obtained all necessary consents, to execute and deliver this Lease and
to consummate the transactions contemplated in this Lease.

            D.    Other Agreements, etc. Neither the execution of this Agreement
nor the confirmation by Lessor of the transactions contemplated hereby will (i)
conflict with or result in any breach of the terms, conditions or provisions of,
or constitute a default under, or result in any termination of easement or
right-of-way on which the Pipeline Systems is located; (ii) violate any
restriction to which Lessor or the Pipeline System is subject; (iii) constitute
the violation of any Applicable Laws; or (iv) result in the creation of any
lien, charge or encumbrance upon the Pipeline System or any part thereof.

            E.    Proceedings. There are no attachments, executions, assignments
for the benefit of creditors, or voluntary or involuntary bankruptcy
proceedings, or under any debtor relief laws, contemplated by or pending or
threatened against Lessor or the Pipeline System.

PIPELINE LEASE AGREEMENT--PAGE 5

<PAGE>

            F.    Litigation. Lessor is not now a party to any material
litigation, arbitration or administrative proceeding (i) with any person or
entity having or claiming any interest in the Pipeline System, or (ii) affecting
or questioning Lessor's title to the Pipeline System or Lessor's ability to
perform its obligations under this Lease. Lessor knows of no presently pending
or threatened material litigation, arbitration or administrative proceeding
affecting or questioning Lessor's title to, or use of, the Pipeline System or
any part thereof, or Lessor's ability to perform its obligations under this
Lease.

            G.    Compliance with Laws. To the best of Lessor's knowledge and
belief, all Applicable Laws bearing on the construction or operation of the
Pipeline System have been complied with, the Pipeline System currently complies
with all Applicable Laws, and the operation of the Pipeline System as
contemplated by this Lease will not violate any such Applicable Laws.

            H.    Consents. As of the Commencement Date, no consent to the
execution or implementation of this Lease is required from any third party,
including the grantor of any easement on which the Pipeline System is located
and the owner of any right-of-way on which the Pipeline System is located.

            I.    Administrative Notices. Lessor has not received notice of, and
has no other knowledge or information of, any pending or contemplated change in
any Applicable Laws applicable to the Pipeline System, or any pending or
threatened judicial or administrative action, or any action pending or
threatened, or of any natural or artificial condition upon or affecting the
Pipeline System, or any part thereof, any of which would result in any material
change in the condition of the Pipeline System, or any part thereof, or would in
any way limit or impede the operation of the Pipeline System.

            J.    Licenses. Lessor possesses all licenses, certificates and
permits that are required to fulfill all of its obligations hereunder.

            K.    Taxes. There are no unpaid taxes, assessments or charges
against the Pipeline System.

            L.    Condemnation. Lessor has no knowledge of any condemnation,
eminent domain or similar proceedings having been instituted or threatened
against the Pipeline System.

            M.    Encumbrances. Lessor may not further encumber the Pipeline
System or any part thereof without the prior written consent of Lessee, which
consent shall not be unreasonably withheld.

            N.    True and Correct. To Lessor's best knowledge, after reasonable
inquiry, all information and other items heretofore or hereafter submitted to
Lessee by or on behalf of Lessor are true, correct and complete. Lessor is not
aware of any omission to supply Lessee with any material information or other
items with respect to the Pipeline System, its history, prospects or

PIPELINE LEASE AGREEMENT--PAGE 6

<PAGE>

operations, or any information which may be required to prevent the information
or other items already supplied from being misleading.

Lessor acknowledges that the execution of this Lease by Lessee has been made,
and the lease of the Pipeline System by Lessee will have been made, in material
reliance by Lessee on Lessor's representations and warranties contained in this
Paragraph 10.

      11.   REPRESENTATIONS, WARRANTIES AND COVENANTS OF LESSEE. Lessee
represents, warrants and covenants to Lessor that:

            A.    Organization. Lessee is duly organized, validly existing and
in good standing under the laws of the state of its organization, and is duly
qualified to transact business in the state in which the Pipeline System is
situated.

            B.    Authority. Lessee has all requisite power and authority, has
taken all actions required by its organizational documents and Applicable Laws,
and has obtained all necessary consents, to execute and deliver this Lease and
to consummate the transactions contemplated in this Lease.

            C.    Proceedings. There are no attachments, executions, assignments
for the benefit of creditors, or voluntary or involuntary bankruptcy
proceedings, or under any debtor relief laws, contemplated by or pending or
threatened against Lessee.

            D.    Consents. No consent to the execution or implementation of
this Lease is required from any third party.

            E.    Licenses. Lessee possesses or will possess all licenses,
certificates and permits that are required to fulfill its obligations hereunder.

            F.    Liens. Lessee has no authority, express or implied, and will
not create or place any lien or encumbrance of any kind or nature whatsoever
upon, or in any manner bind the interest of Lessor or Lessee in the Pipeline
System or charge the Rent payable hereunder for any claim in favor of any person
dealing with Lessee, including those who may furnish materials or perform labor
for any construction or repairs.

            G.    Litigation. Lessee is not now a party to any material
litigation, arbitration or administrative proceeding affecting or questioning
Lessee's ability to perform its obligation under this Lease.

            H.    True and Correct. To Lessee's best knowledge, after reasonable
inquiry, all information and other items heretofore or hereafter submitted to
Lessor by or on behalf of Lessee are true, correct and complete.

PIPELINE LEASE AGREEMENT--PAGE 7

<PAGE>

Lessee acknowledges that the execution of this Lease by Lessor has been made,
and the lease of the Pipeline System by Lessor will have been made, in material
reliance by Lessor on Lessee's representations and warranties contained in this
Paragraph 11.

      12.   CONTINGENCY FOR REVIEW OF RIGHT OF WAY AGREEMENTS. Lessor agrees to
provide Lessee with copies of all easement, license and right-of-way agreements
and other documents and information pertaining to the Pipeline System, its right
to exist and be operated in its current location and condition and the impact
thereof on the rights of the parties defined under this Lease. As soon as
practicable, if Lessee in good faith determines based upon a review of such
documents and information that the intent and purpose of this Lease cannot be
realized, Lessee will give Lessor written notice thereof. The parties will then
undertake to use their best efforts to overcome the impediment discovered by
Lessee to realizing the intent and purpose of this Lease. If such cannot be
resolved to Lessee's reasonable satisfaction prior to the 180 day notice
referenced in paragraph 2 above, Lessee, at its option, may elect to terminate
this Lease.

      13.   INDEMNIFICATION. Each party hereto shall indemnify, defend, protect
and hold the other free and harmless from and against any and all claims,
liabilities, damages, costs, penalties, forfeitures, losses or expenses
(including attorneys' fees) for death or injury to any person or damage to any
property whatsoever arising or resulting in whole or in part, directly or
indirectly, out of the acts or omissions of the indemnifying party or its
employees, contractors or agents or arising out of any breach by the
indemnifying party of this Lease.

      14.   POWER COSTS. Lessee will be responsible for paying all power costs
associated with the Pipeline System in accordance with Exhibit B hereto and the
method of allocation to be agreed upon within sixty (60) days of execution of
this Agreement. Such costs shall be paid by Lessee within fifteen (15) days of
receipt of invoice from Lessor.

      15.   TAXES AND ASSESSMENTS. Lessor shall be solely responsible for and
shall timely pay all taxes, charges, royalties, levies, assessments and similar
fees and charges which arise from federal or state governmental authorities,
tribal authorities, or private action (collectively, "Taxes") applicable to the
Pipeline System or the easements/rights-of-ways on which the Pipeline System is
located. However, if after the date of this Lease new Taxes are levied against
the Pipeline System or such easements/rights-of-ways, by statute or otherwise,
Lessee will reimburse Lessor for Lessee's appropriate share of such additional
Taxes. Furthermore, Lessor will not agree to any new Taxes without first
conferring with and seeking the input of Lessee.

      16.   INSURANCE.

            A.    Maintenance of Existing Coverage. Lessor and Lessee will
maintain such or similar insurance coverages in place as exist at the time of
execution of this Agreement to the extent pertinent to the respective
obligations of each herein.

PIPELINE LEASE AGREEMENT--PAGE 8

<PAGE>

            B.    Waiver of Subrogation. Lessor and Lessee and all parties
claiming under them mutually release and discharge each other from all claims
and liabilities arising from or caused by any casualty or hazard which is
covered by insurance carried on the Pipeline System or carried in connection
with property on or activities conducted on the easements/rights-of-ways on
which the Pipeline Systems is located, and waive any right of subrogation which
might otherwise exist in or accrue to any person on account thereof.

      17.   ASSIGNMENT. This Lease may not be assigned by either party without
the prior written consent of the other party, with such consent not to be
unreasonably withheld, conditioned or delayed. The foregoing restrictions on
assignment shall not apply to (a) a transfer by a party to an affiliate; (b) a
transfer that is part of a merger or consolidation of a party or an affiliate of
a party with another entity in which the aggregate consideration for such merger
or consolidation is at least $100 million; or (c) a transfer that is part of a
broader sale of assets by a party or an affiliate of a party in which the
aggregate purchase price of such assets sold is at least $100 million. Any
assignment or purported assignment in violation of this paragraph 17 shall be
void.

      18.   SURRENDER UPON TERMINATION. Upon the expiration of the Lease Term,
Lessee shall surrender up the Pipeline System to Lessor with all of Lessee's
obligations hereunder fully performed. To the extent that Lessee has made (or
paid for) any alterations, improvements or modifications to the Pipeline System
that can be removed without damage to the Pipeline System, at Lessee's option
such shall remain the property of Lessee and Lessee may remove such at its sole
cost; provided that Lessee shall promptly repair any damage to the Pipeline
System caused thereby and ensure that after the removal of such equipment the
Pipeline System has a minimum capacity of 16,000 barrels per day. If such
improvements cannot readily be removed by Lessee without substantial damage to
or deprivation of the Pipeline System, such shall become the property of Lessor
upon the expiration of the Lease and Lessor shall pay an amount to be agreed
upon by Lessor and Lessee within thirty (30) days after the expiration of the
Lease, with such agreed upon amount not to exceed the depreciated value.

      19.   EVENTS OF DEFAULT

            A.    Events of Default by Lessor. The occurrence of any of the
following shall constitute a material default and breach of this Lease by
Lessor.

                  (1) A failure by Lessor to observe and perform any material
      provision or covenant of this Lease to be observed or performed by the
      Lessor, where such failure continues for thirty (30) days after written
      notice thereof by Lessee to Lessor, except that this thirty (30) day
      period shall be extended for a reasonable period of time if the alleged
      default is not reasonably capable of cure within said thirty (30) day
      period and Lessor proceeds to diligently cure the default.

PIPELINE LEASE AGREEMENT--PAGE 9

<PAGE>

                  (2) Any failure of Lessor's representations or warranties to
      remain true and correct throughout the Lease Term; provided that no event
      of default shall occur if such representation or warranty is again true
      and correct within thirty (30) days after receipt of written notice from
      Lessee.

                  (3) The making by Lessor of any general assignment for the
      benefit of creditors, the filing by or against Lessor of a petition to
      have Lessor adjudged a bankrupt, or a petition for reorganization or
      arrangement under any law relating to bankruptcy (unless, in the case of a
      petition filed against Lessor, the same is dismissed within sixty (60)
      days), the appointment of a trustee or receiver to take possession that is
      not restored to Lessor within thirty (30) days.

            B.    Events of Default by Lessee. The occurrence of any of the
following shall constitute a material default and breach of this Lease by
Lessee:

                  (1)   Any failure by Lessee to pay Rent or make any other
      payment required to be made by Lessee hereunder, where such failure
      continues for thirty (30) days after receipt of written notice from the
      Lessor, subject to the right of Lessee, reasonably exercised, to contest
      any such payment. In the event Lessee withholds any such payment, and it
      is determined that such withholding was wrongful, Lessee shall pay
      interest to Lessor on such monies wrongfully withheld at the rate of 15%
      per annum or the maximum amount allowed by law, whichever is less.

                  (2)   A failure by Lessee to observe and perform any other
      material provision or covenant of this Lease to be observed or performed
      by the Lessee, where such failure continues for thirty (30) days after
      written notice thereof by Lessor to Lessee, except that this thirty (30)
      day period shall be extended for a reasonable period of time if the
      alleged default is not reasonably capable of cure within said thirty (30)
      day period and Lessee proceeds to diligently cure the default.

                  (3)   Any failure of Lessee's representations or warranties to
      remain true and correct throughout the Lease Term; provided that no event
      of default shall occur if such representation or warranty is again true
      and correct within thirty (30) days after receipt of written notice from
      Lessor.

                  (4)   The making by Lessee of any general assignment for the
      benefit of creditors, the filing by or against Lessee of a petition to
      have Lessee adjudged a bankrupt, or a petition for reorganization or
      arrangement under any law relating to bankruptcy (unless, in the case of a
      petition filed against Lessee, the same is dismissed within sixty (60)
      days), the appointment of a trustee or receiver to take possession that is
      not restored to Lessee within thirty (30) days.

      20.   ESTOPPELS. Each party agrees, from time to time, within ten (10)
days after

PIPELINE LEASE AGREEMENT--PAGE 10

<PAGE>

request of the other, to deliver to the requesting party, or its designee, an
estoppel certificate stating whether or not this Lease is in full force and
effect, the date to which Base Rent has been paid, the unexpired term of this
Lease and such other factual matters pertaining to this Lease as deemed
reasonably necessary by the requesting party.

      21.   NOTICES. Any notice or communication required or permitted in this
Lease shall be given in writing, sent by (a) personal delivery, or (b) expedited
delivery service with proof of delivery, or (c) United States mail, postage
prepaid, registered or certified mail, return receipt requested, addressed:

      if to Lessor, as follows:

                                Mid-America Pipeline Company
                                1800 South Baltimore
                                Tulsa, OK 74119
                                Attn: President

      and, if to Lessee, as follow

                               Navajo Pipeline Company
                               P. O. Box 159
                               Artesia, NM 88210
                               Attn: President

or to such other address or to the attention of such other person as shall be
designated by the applicable party and on fifteen (15) days notice from time to
time in writing and sent in accordance herewith. Any such notice or
communication shall be deemed to have been given either at the time of personal
delivery or, in the case of delivery service or mail, upon receipt.

      22.   RIGHT OF FIRST REFUSAL. If during the Lease Term (or any extension
thereof) or upon the termination of the Lease Lessee should receive a bona fide
third party offer expressing all material terms for the acquisition of any of
its terminals and pipelines connected to or used solely in connection with the
Pipeline System (herein the "Assets") that Lessee wishes to accept, then prior
to accepting such offer, Lessee shall first provide Lessor with notice of the
offer and its terms. Lessor will have thirty (30) days from its receipt of such
offer to elect to acquire the Assets on the same terms and conditions as are set
forth in the third party offer. If Lessor elects to purchase the Assets on such
terms, then the parties will promptly enter into a formal asset sale agreement
embodying the terms contained in the third party offer. If Lessor fails to elect
in writing to purchase the assets on the terms of the third party offer within
this thirty (30) day time period, then Lessor will have forever waived the right
of first refusal with respect to this offer. The right of first refusal granted
herein applies only to a contemplated sale of assets of Lessee in which the
Assets constitute all or substantially all of the assets subject to the sale.
Additionally, the right of first refusal shall not apply to any sale or transfer
of the Assets to an

PIPELINE LEASE AGREEMENT--PAGE 11

<PAGE>

affiliate of Lessee.

      Notwithstanding the above, the term "Assets" specifically excludes any
pipeline or terminals and related equipment constructed by Lessee and running
from Lessee's Artesia, New Mexico refinery to the Lessor's White Lakes Station.
Such pipeline, terminals and related equipment will at all times not be subject
to the foregoing right of first refusal.

      23    NO RENT ABATEMENT FOR PROBLEM AT LESSEE'S FACILITIES. In no event
shall a problem at Lessee's facilities, either its refining facilities or the
petroleum terminals and pipeline connections referenced in paragraph 9 above,
excuse Lessee's obligations to pay rent hereunder, unless and to the extent such
problem was caused or contributed to by Lessor.

      24.   LIMITATION OF LIABILITY. Neither party shall be liable for punitive
or consequential damages of any kind arising out of or in any way connected with
the performance of or failure to perform this Agreement.

      25.   MISCELLANEOUS.

            A.    Confidentiality. Provided that express consent of both parties
has been given, the parties may discuss the existence of this Agreement, but not
the particulars of its terms and conditions.

            B.    Headings/Gender. Words of any gender used in this Lease shall
be held and construed to include any other gender, and words in the singular
number shall be held to include the plural, unless the context otherwise
requires. The captions inserted in this Lease are for convenience only and in no
way define, limit or otherwise describe the scope or intent of this Lease, or
any provision hereof, or in any way affect the interpretation of this Lease.

            C.    Successors and Assigns. Without limiting the terms of
Paragraph 17 above, the terms, provisions and covenants and conditions contained
in this Lease shall apply to, inure to the benefit of, and be binding upon, the
parties hereto and upon their respective heirs, executors, personal
representatives, legal representatives, successors and assigns, except as
otherwise herein expressly provided.

            D.    Entire Agreement. This Lease constitutes the entire
understanding and agreement of the Lessor and Lessee with respect to the subject
matter of this Lease, and contains all of the covenants and agreements of Lessor
and Lessee with respect thereto. Lessor and Lessee each acknowledge that no
representations, inducements, promises or agreements, oral or written, have been
made by Lessor or Lessee, or anyone acting on behalf of Lessor or Lessee, which
are not contained herein, and any prior agreements, promises, negotiations, or
representations not expressly set forth in this Lease are of no force or effect.
This Lease may not be altered, changed or amended except by an instrument in
writing signed by both parties hereto.

PIPELINE LEASE AGREEMENT--PAGE 12

<PAGE>

            E.    Severability. If any clause or provision of this Lease is
illegal, invalid, or unenforceable under present or future laws effective during
the term of this Lease, then and in that event, it is the intention of the
parties hereto that the remainder of this Lease shall not be affected thereby,
and it is also the intention of the parties to this Lease that in lieu of each
clause or provision of this Lease that is illegal, invalid or unenforceable,
there be added, as a part of this Lease, a clause or provision as similar in
terms to such illegal, invalid or unenforceable clause or provision as may be
possible and be legal, valid and enforceable.

            F.    Date of Lease. All references in this Lease to "the date
hereof" or similar references shall be deemed to refer to the last date, in
point of time, on which all parties hereto have executed this Lease.

            G.    Counterparts. This Lease may be executed in counterparts, each
being deemed an original, but together constituting only one instrument.

            H.    Time for Performance TIME IS OF THE ESSENCE WITH RESPECT TO
ALL PERFORMANCE OBLIGATIONS CONTAINED IN THIS LEASE.

            I.    Attorneys' Fees. In the event it becomes necessary for either
party hereto to file a suit respecting the subject matters of this Lease
including without limitation to enforce this Lease or any provisions contained
herein, the party prevailing in such action shall be entitled to recover, in
addition to all other remedies or damages, reasonable attorneys' fees incurred
in such suit.

            J.    Law Governing and Venue. THIS LEASE SHALL BE GOVERNED BY THE
LAWS OF THE STATE OF NEW MEXICO WITHOUT REGARD TO ITS CONFLICT OF LAWS, AND
VENUE AND JURISDICTION FOR ANY ACTION OR PROCEEDING RESPECTING THE SUBJECT
MATTERS OF THIS LEASE INCLUDING WITHOUT LIMITATION TO ENFORCE THIS LEASE OR ANY
PROVISIONS CONTAINED HEREIN SHALL BE EXCLUSIVELY IN THE STATE AND FEDERAL COURTS
LOCATED IN ALBUQUERQUE, NEW MEXICO.

            K.    Waiver. No waiver by either party of any provision of this
Lease or of any default, event of default or breach hereunder shall be deemed to
be a waiver of any other provision of this Lease, or of any subsequent default,
event of default or breach of the same or any other provision. Either party's
consent to or approval of any act requiring consent or approval shall not be
deemed to render unnecessary the obtaining of consent to or approval of any
subsequent act requiring consent. No act or thing done by Lessor or Lessor's
agents during the term of this Lease shall be deemed an acceptance of a
surrender of the Pipeline System, unless done in writing signed by Lessor.

            L.    Interpretation. The parties hereto agree that it is their
intention hereby to

PIPELINE LEASE AGREEMENT--PAGE 13

<PAGE>

create only the relationship of Lessor and Lessee, and no provision hereof, or
act of either party hereunder, shall ever be construed as creating the
relationship of principal and agent, or a partnership, or a joint venture or
enterprise between the parties hereto.

            M.    Amendments. This Lease may not be modified or amended, except
by an agreement in writing signed by Lessor and Lessee. The parties may waive
any of the conditions contained herein or any of the obligations of the other
party hereunder, but any such waiver shall be effective only if in writing and
signed by the party waiving such conditions or obligations, except as
specifically set forth herein.

            N.    Exhibits. All exhibits referenced herein as being attached
hereto are hereby incorporated herein by reference as if set forth in full in
this Lease

      EXECUTED BY LESSOR, this 11th day of March, 1996.

                                           MID-AMERICA PIPELINE COMPANY,
                                           a Delaware corporation

                                           By: /s/ Robert G. Sachse
                                               --------------------
                                           Name:  Robert G. Sachse
                                           Title: Chairman

      EXECUTED BY LESSEE, this 8th day of March, 1996.

                                           NAVAJO PIPELINE COMPANY,
                                           a Delaware corporation

                                           By: /s/ Christopher L. Cebla
                                               ------------------------
                                           Name:  Christopher L. Cebla
                                           Title: V.P. and Secretary

Exhibits:

Exhibit A: Alignment Sheets

Exhibit B: Scope of Work & Operating Procedures

PIPELINE LEASE AGREEMENT--PAGE 14

<PAGE>

                                    EXHIBIT A

                                ALIGNMENT SHEETS

<PAGE>

<TABLE>
<CAPTION>
ALIGNMENT SHEET           MILE POSTS                   COUNTY            STATIONS
---------------           ----------                   ------            --------
<S>               <C>                           <C>                     <C>
5818-AL-16        M.P.  79.96 to M.P.  84.89    Chaves                  White Lakes
                                                                        (M.P. 80.65)
5818-AL-17        M.P.  84.89 to M.P.  90.38    Chaves
5818-AL-18        M.P.  90.38 to M.P.  95.30    Chaves
5818-AL-19        M.P.  95.30 to M.P. 100.80    Chaves
5818-AL-20        M.P. 100.80 to M.P. 106.29    Chaves
5818-AL-21        M.P. 106.29 to M.P. 111.40    Chaves
5818-AL-22        M.P. 111.40 to M.P. 116.53    Chaves
5818-AL-23        M.P. 116.53 to M.P. 121.63    Chaves
5818-AL-24        M.P. 121.63 to M.P. 126.89    Chaves
5818-AL-25        M.P. 126.89 to M.P. 132.50    Chaves & DeBaca
5818-AL-26        M.P. 132.50 to M.P. 137.99    Debaca
5818-AL-27        M.P. 137.99 to M.P. 143.47    Debaca
5818-AL-28        M.P. 143.47 to M.P. 148.58    Debaca
5818-AL-29        M.P. 148.58 to M.P. 153.69    Debaca & Lincoln
5818-AL-30        M.P. 153.69 to M.P. 158.81    Lincoln
5818-AL-31        M.P. 158.81 to M.P. 164.30    Lincoln
5818-AL-32        M.P. 164.30 to M.P. 169.81    Lincoln & Guadalupe
5818-AL-33        M.P. 169.81 to M.P. 175.38    Guadalupe
5818-AL-34        M.P. 175.38 to M.P. 180.53    Guadalupe
</TABLE>

                            EXHIBIT A-1

<PAGE>

<TABLE>
<CAPTION>
ALIGNMENT SHEET           MILE POSTS                   COUNTY            STATIONS
---------------           ----------                   ------            --------
<S>               <C>                           <C>                      <C>
5818-AL-35        M.P. 180.53 to M.P. 185.64    Guadalupe & Torrance
5818-AL-36        M.P. 185.64 to M.P. 191.16    Torrance
5818-AL-37        M.P. 191.16 to M.P. 196.46    Torrance
5818-AL-38        M.P. 196.46 to M.P. 201.57    Torrance
5818-AL-39        M.P. 201.57 to M.P. 206.88    Torrance
5818-AL-40        M.P. 206.88 to M.P. 211.99    Torrance
5818-AL-41        M.P. 211.99 to M.P. 217.25    Torrance
5818-AL-42        M.P. 217.25 to M.P. 222.58    Torrance
5818-AL-43        M.P. 222.58 to M.P. 228.07    Torrance
5818-AL-44        M.P. 228.07 to M.P. 233.35    Torrance
5818-AL-45        M.P. 233.35 to M.P. 239.38    Torrance
5818-AL-46        M.P.  239.4 to M.P.  245.9    Torrance & Sante Fe
5818-AL-47        M.P.  245.9 to M.P.  250.3    Sante Fe
5818-AL-47A       M.P.  250.3 to M.P.  252.3    Sante Fe
5818-AL-47B       M.P.  252.2 to M.P.  255.3    Sante Fe
5818-AL-48        M.P.  255.3 to M.P.  259.6    Sante Fe & Bernalillo
5818-AL-49        M.P.  259.6 to M.P.  265.3    Sandoval & Bernalillo
5818-AL-50        M.P.  265.3 to M.P.  271.0    Sandoval
5818-AL-51        M.P.  271.0 to M.P.  276.5    Sandoval
5818-AL-52        M.P.  276.5 to M.P.  281.8    Sandoval
</TABLE>

                           EXHIBIT A-2

<PAGE>

<TABLE>
<CAPTION>
ALIGNMENT SHEET           MILE POSTS                   COUNTY            STATIONS
---------------           ----------                   ------            --------
<S>               <C>                           <C>                      <C>
5818-AL-53        M.P. 281.8 to M.P. 287.2      Sandoval
5818-AL-54        M.P. 287.2 to M.P. 292.4      Sandoval
5818-AL-55        M.P. 292.4 to M.P. 298.1      Sandoval
5818-AL-56        M.P. 298.1 to M.P. 304.5      Sandoval
5818-AL-57        M.P. 304.5 to M.P. 310.6      Sandoval
5818-AL-58        M.P. 310.6 to M.P. 316.4      Sandoval
5818-AL-59        M.P. 316.4 to M.P. 322.5      Sandoval
5818-AL-60        M.P. 322.5 to M.P. 328.7      Sandoval
5818-AL-61        M.P. 328.7 to M.P. 334.7      Sandoval
5818-AL-62        M.P. 334.7 to M.P. 340.6      Sandoval
5818-AL-63        M.P. 340.6 to M.P. 346.3      Sandoval & McKinley
5818-AL-64        M.P. 346.3 to M.P. 352.1      Sandoval & McKinley
5818-AL-65        M.P. 352.1 to M.P. 357.9      Sandoval
5818-AL-66        M.P. 357.9 to M.P. 363.8      Sandoval
5818-AL-67        M.P. 363.8 to M.P. 369.8      Sandoval & Rio Arriba
5818-AL-68        M.P. 369.8 to M.P. 374.5      Rio Arriba
5819
5819-AL-69        M.P. 374.5 to M.P. 380.3      San Juan & Rio Arriba
5819-AL-70        M.P. 380.3 to M.P. 386.3      San Juan
5819-AL-71        M.P. 386.3 to M.P. 392.1      San Juan
</TABLE>

                             EXHIBIT A-3

<PAGE>

<TABLE>
<CAPTION>
ALIGNMENT SHEET        MILE POSTS                 COUNTY                 STATIONS
---------------        ----------                 ------                 --------
<S>               <C>                           <C>                     <C>
5819-AL-72        M.P. 392.1 to 398.1           San Juan
5819-AL-73        M.P. 398.1 to 403.7           San Juan
5819-AL-74        M.P. 403.7 to 409.8           San Juan
5819-AL-75        M.P. 409.8 to 415.6           San Juan                Kutz
                                                                        (M.P. 415.29)
</TABLE>

                             EXHIBIT A-4

<PAGE>

                                    EXHIBIT B

                      SCOPE OF WORK & OPERATING PROCEDURES

<PAGE>

                      SCOPE OF WORK & OPERATING PROCEDURES

                 FOUR CORNERS 8" CONVERSION TO REFINED PRODUCTS

Summary

The Four Corners 8" pipeline from Kutz Station to White Lakes Station will be
converted from LPG service to refined products service. Flow of the line will be
reversed with product entering the line at White Lakes Station and flowing
northwest to Kutz Station.

History

The 8" Four Corners line was installed in 1972 to transport LPG from northwest
New Mexico to Gaines County, Texas. This line is currently paralleled with 10"
and 12" pipelines, all transporting LPG.

Future Service

Navajo Pipeline Company will transport refined products and/or crude oil from
Artesia, New Mexico to the White Lakes Station. The 8" Four Corners line will
transport the refined products to Navajo terminals which may be constructed at
points between White Lakes Station and Kutz Station.

Pump Stations

There is one existing pump at each of four existing pump stations on the 8" line
which will be dedicated to refined products service. The pumps are located at
White Lakes, Duran, Edgewood, and San Luis pump stations. All pumps are driven
by gas turbines with the exception of Edgewood which is powered by an electric
motor. MAPL will continue to operate two pumps in LPG service at each station.

Energy costs for the dedicated pumps utilized by Navajo will be paid by Navajo
and measured with dedicated meters. Energy use for shared services (electricity
for air compressors, motorized valve operators, controls, lights, etc.) will be
allocated 1/3 Navajo and 2/3 MAPL.

Measurement

Navajo will be responsible for operations and maintenance of receipt and
delivery meters on the system. MAPL will receive pressure, temperature, flow and
gravity information from the measurement facilities for use in pipeline control.

Operation and Maintenance

MAPL will continue to operate and maintain the existing 8" line from White Lakes
Station to Kutz Station in accordance with DOT Part 195 regulations, and Navajo
will also comply with all DOT Part 195 regulations with respect to any
connections Navajo may make to the 8" Four Corners Line, MAPL Pipeline Control
in Tulsa will continue to operate and schedule the line. Navajo will operate and
maintain the line to White Lakes Station as well as any delivery terminals and
related facilities it may have constructed.

                                   EXHIBIT B-1

<PAGE>

Over Pressure Protection

Navajo will provide adequate over pressure safety devices to protect any
delivery terminals. MAPL will deliver products at pressures not to exceed 1650
psig. MAPL will provide over pressure devices for the protection of its system.
Receipt pressure at White Lakes shall not exceed 1650 psig nor shall it be less
than 150 psig.

MAPL Modifications

MAPL will make the following modifications to its system at its own expense:

     Pipeline:         The existing 8" line will be reversed to allow for flows
                       from White Lakes Station to Kutz Station. LPG will be
                       displaced from the line with nitrogen, check valves will
                       be removed and the line blinded off from the existing LPG
                       system.

     Connections:      Receipt and delivery connections will be in the form of a
                       8", 900# ANSI block valve at the White Lakes Station
                       fence and on the mainline and at the edge of the ROW at
                       terminals constructed by Navajo.

     Pumps:            Piping will be modified at White Lakes, Duran, Edgewood
                       and San Luis pump stations to allow for a dedicated pump
                       on the 8" line to pump products from White Lakes Station
                       to Kutz Station. These pumps are currently identified as
                       the "#1 blue unit" at each pump station

     SCADA:            A communications system will be installed to transmit
                       data from the delivery and receipt meters to Tulsa.

     Energy:           Meters will be installed to measure the energy used by
                       each dedicated pump.

Navajo Modifications

Navajo will make the following installations at its expense:

     Pipeline:         A products pipeline may be installed to the receipt
                       connection at White Lakes Station and to the delivery
                       connections at terminals constructed by Navajo.

     Connections:      Pipeline connections to the receipt and delivery block
                       valves will include cathodic insulation kits for
                       electrical isolation.

     Meters:           Receipt and delivery meters will be installed at Artesia
                       and at terminal interconnects constructed by Navajo.

March 7, 1996                      EXHIBIT B-2

<PAGE>

     SCADA:            Flow, temperature, pressure and gravity information will
                       be provided at the delivery and receipt meters for MAPL's
                       use in pipeline control. Adequate space and location will
                       be given within the facility for locating MAPL's
                       equipment. Electrical power will be provided to power the
                       SCADA equipment.

     Safety:           Over pressure protection devices to protect downstream
                       equipment will be installed at terminal interconnects
                       constructed by Navajo.

Linefill

Linefill from White Lakes Station to Kutz Station is approximately 116,860 bbl
and will be provided by Navajo. Navajo will also be responsible for all costs
and expense (pigs, product, inhibitors, etc.) associated with the linefill. MAPL
will perform all venting, pigging and other operational activities.

Product Quality

All products shipped within the line will meet the specifications as required
under applicable tariffs. MAPL assumes no liability for the quality of product
delivered.

Batching

Product batches will not be separated by pigs, spheres or other physical
devices. MAPL will use its best efforts to minimize interfaces or contamination
of products shipped.

Capacity Expansion

Should Navajo desire to expand the capacity of the 8" pipeline beyond its
existing 100% capacity, Navajo will bear all expenses associated with the
design, engineering, procurement, construction, fabrication, installation and
commissioning of such equipment or modifications. All modifications and or
equipment installed shall be overseen by, with the approval of and in accordance
with the specifications of MAPL.

MAPL shall operate and maintain any and all equipment installed on the 8"
pipeline or at any of the pumping stations. Should any equipment or
modifications provided for capacity expansion require additional operations or
maintenance resources or manpower above current requirements, or require any
additional utilities, consumables or chemicals, or result in an increase in
operating or maintenance expense, these additional or increased expenses shall
be the sole responsibility of Navajo and shall be reimbursed as invoiced by
MAPL. All of these costs and expenses shall be identified and agreed to during
the design phase of any such modifications or installation.

March 7, 1996                      EXHIBIT B-3

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