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Exhibit 10.1

 

 

CRUDE OIL SALES AGREEMENT

between

PDVSA-PETRÓLEO S.A.

and

NUSTAR MARKETING LLC

dated effective as of

March 1, 2008

 

 

 

Table of Contents

 

                   Page #
Part I DEFINITIONS AND CONSTRUCTION   1
   Article 1 Definitions   1
      1.1    Definitions   1
      1.2    Construction   7
Part II SPECIAL TERMS   7
   Article 2 Purchase and Sale   7
   Article 3 Quantity   7
      3.1    Annual Contract Quantity   7
      3.2    Monthly Contract Quantity   7
   Article 4 Destination; No Resale to Third Parties   9
      4.1    Utilization at the Refineries   9
      4.2    Discharge Documentation   9
   Article 5 Price; Adjustment of Price Mechanism   9
      5.1    Price   9
      5.2    Adjustment of Price Mechanism   9
   Article 6 Limited Market Adjustment   10
      6.1    Calculation of Limited Market Adjustment   10
      6.2    Expiration of Limited Market Adjustment   11
   Article 7 Underlifting   12
   Article 8 Payment Terms   12
      8.1    Currency, Time and Place of Payment; Overdue Payments   12
      8.2    Contents of Invoices; Substantiating Documentation   13
      8.3    Payment Expenses   13
      8.4    Security for Payment   13
      8.5    Suspension of Deliveries   14
   Article 9 Duration   14
      9.1    Term   14
      9.2    Renewal   14
Part III STANDARD TERMS   14
   Article 10 Arrival Procedures and Lifting   14
      10.1    Lifting Program   14
      10.2    Substitution of Vessels   17
      10.3    Advice of ETA   17

 

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      10.4    Notice of Readiness   17
      10.5    Vessel Requirements; Security Regulations   18
   Article 11 Loading Conditions; Demurrage   19
      11.1    Berthing of Vessels; Commencement of Laytime   19
      11.2    Shifting Loading Point of Vessels   20
      11.3    Allowed Laytime   20
      11.4    Adjustments to Laytime and Time on Demurrage   20
      11.5    Demurrage   22
      11.6    Buyer’s Liability for Delay and Damage   23
   Article 12 Quantity Measurements   23
      12.1    Determination of Quantity   23
      12.2    Volume Corrections for Temperature   24
      12.3    Conclusiveness of Measurements   25
   Article 13 Quality   25
      13.1    Determination of Quality   25
      13.2    Analysis of Samples   25
      13.3    NO WARRANTIES   26
   Article 14 Delivery   26
      14.1    Passage of Title   26
      14.2    Port and Loading Expenses   26
      14.3    Loading Port Regulations   26
      14.4    Buyer’s Knowledge of Loading Port Facilities; Standard Procedures   26
      14.5    Hazardous Warning Responsibility   27
   Article 15 No Set-Off   27
   Article 16 Notice of Claims   28
   Article 17 Termination   28
      17.1    Termination   28
      17.2    Termination Not to Relieve Buyer of Obligations   29
      17.3    Acceleration   29
      17.4    Termination for an Insolvency Event   29
      17.5    No Gifts   29
      17.6    Other Rights and Remedies   29
   Article 18 Confidentiality   30
   Article 19 No Third-Party Beneficiaries; Assignment   30
   Article 20 Force Majeure   31
      20.1    Relief from Liability   31
      20.2    Notice   31
      20.3    Payment for Oil Sold and Delivered   31

 

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      20.4    Obligation to Apportion   31
      20.5    No Makeup of Deliveries Excused by Force Majeure   32
      20.6    No Extension of Contract; Right to Terminate   32
   Article 21 Dispute Resolution; Governing Law   32
      21.1    Settlement by Arbitration   32
      21.2    Governing Law   32
      21.3    Buyer’s Waiver   32
   Article 22 Representations and Warranties   32
      22.1    Buyer Representations   32
      22.2    Seller Representations   33
   Article 23 Liquidated Damages and Limitation of Liability   34
      23.1    Failure to Deliver Oil   34
      23.2    Limitation of Liability   34
   Article 24 Compliance with Law   35
   Article 25 No Waiver; Cumulative Remedies   35
   Article 26 Severability of Provisions   35
   Article 27 Notices   36
   Article 28 Satisfactory Documentation   36
   Article 29 Merger   37
      29.1    Exclusive Agreement   37
      29.2    General Terms and Conditions   37
   Article 30 Amendments and Waivers; Counterparts   37
      30.1    Amendments and Waivers   37
      30.2    Counterparts   37

 

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CRUDE OIL SALES AGREEMENT

This CRUDE OIL SALES AGREEMENT (“ Agreement ”) is entered into on March 19, 2008 and dated effective as of March 1, 2008, by and between PDVSA-Petróleo S.A., a corporation organized under the laws of the Bolivarian Republic of Venezuela (“ Seller ”), represented by Mr. Fernando Valera, Executive Director of Supply and Commerce, and NuStar Marketing LLC, a Delaware limited liability company (“ Buyer ”), represented by Mr. Curtis V. Anastasio, its Chief Executive Officer and President. Seller and Buyer may sometimes hereinafter be referred to individually as a “ Party ”, and, collectively, as the “ Parties ”.

RECITALS

WHEREAS , NuStar Asphalt Refining, LLC, a Delaware limited liability company and an affiliate of Buyer (“ NAR ”), has agreed to acquire from CITGO Asphalt Refining Company (“ CARCO ”) certain asphalt refineries located in Paulsboro, New Jersey and Savannah, Georgia (“ Refineries ”) pursuant to that certain Sale and Purchase Agreement, dated as of November 5, 2007, between CARCO and NAR (“ SPA ”);

WHEREAS , one of the conditions to NAR’s proceeding to a closing of the transactions contemplated by the SPA is the execution and delivery by Seller of this Agreement to supply crude oil to the Refineries during the term;

WHEREAS , Seller desires to sell and deliver to Buyer, and Buyer wishes to purchase and lift from Seller, crude oil for processing at the Refineries in accordance with the terms and conditions hereof;

NOW, THEREFORE , in consideration of the premises and the mutual representations, warranties, covenants, agreements and undertakings hereinafter set forth or referred to in this Agreement, the Parties hereby agree as follows:

PART I

DEFINITIONS AND CONSTRUCTION

Article 1

Definitions

1.1 Definitions . For purposes of this Agreement, the following terms, when capitalized, shall have the meanings indicated below:

 

  (a)

“Affiliate” means with respect to another entity, any entity which, directly or indirectly, controls, is controlled by or is under common control with, such other entity. For purposes of this definition, “control” (including, with correlative meanings, the terms “controlled by” and “under common control with”) means (i) the ownership, directly or indirectly, of at least 50% of the voting securities or other equity interests in such entity and/or

 

 

(ii) the right to determine management direction and policies of such entity, whether through majority representation on the applicable governing board or by contract;

 

  (b) “Aggregate Deliveries” shall have the meaning set forth in Article 23.1;

 

  (c) “Aggregate Nominated Volume” shall have the meaning set forth in Article 23.1;

 

  (d) “Agreed Laydays” shall mean the three-Day range for the arrival of a vessel set forth in an Agreed Lifting Program determined pursuant to Article 10.1;

 

  (e) “Agreed Lifting Program” shall mean a final lifting program for a Month determined pursuant to Article 10.1;

 

  (f) “Agreement” shall mean this Crude Oil Sales Agreement, including this Part I, the Special Terms contained in Part II hereof, the Standard Terms contained in Part III hereof, and all Exhibits attached hereto, as the same may be amended, modified or supplemented from time to time;

 

  (g) “All Fast” shall mean such time as a vessel is completely moored at the cargo transfer point with gangway down and secured;

 

  (h) “Allowed Laytime” shall mean the period of time which Seller shall be allowed, in accordance with Article 11.3, to complete the loading of a vessel without incurring demurrage;

 

  (i) “Annual Accounting” shall have the meaning set forth in Article 23.1;

 

  (j) “Annual Contract Quantity” shall have the meaning set forth in Article 3.1;

 

  (k) “API” shall mean the American Petroleum Institute;

 

  (l) “API-MPMS” shall have the meaning set forth in Article 12;

 

  (m) “ASBA” shall mean the Association of Ship Brokers and Agents;

 

  (n) “Asphalt Season” shall mean the period comprised of the Asphalt Season Months of any Year;

 

  (o) “Asphalt Season Months” shall mean the calendar months of March, April, May, June, July, August and September;

 

  (p) “ASTM” shall mean the American Society for Testing and Materials;

 

  (q) “Barrel” shall mean a quantity of crude oil equal to forty-two (42) Gallons;

 

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  (r) “Banking Day” shall mean any Day other than Saturday, Sunday or a Day on which banking institutions in New York, New York, United States are authorized or required by law to close;

 

  (s) “BCF 13” shall mean crude oil of the Bachaquero BCF-13 type, typically having characteristics within the ranges specified in Exhibit 1 ;

 

  (t) “Boscán” shall mean crude oil of the Boscán type, typically having characteristics within the ranges specified in Exhibit 1 ;

 

  (u) “Business Day” shall mean any Day other than Saturday, Sunday or any national holiday in Venezuela;

 

  (v) “Buyer” shall have the meaning set forth in the Preamble to this Agreement;

 

  (w) “CARCO” shall have the meaning set forth in the Preamble to this Agreement;

 

  (x) “Cargo” shall mean a cargo of Oil to be sold by Seller and loaded by Buyer into one of its vessels during any Lifting Month;

 

  (y) “Contract Year” shall mean, except with respect to the First Contract Year and the Final Contract Year, a Year;

 

  (z) “Credit” shall have the meaning set forth in Article 6.1(c);

 

  (aa) “Cumulative Net Surplus” means the sum of all Quarterly Surpluses less the sum of all Quarterly Deficits since the commencement date of the Agreement;

 

  (bb) This paragraph (bb) is intentionally left blank;

 

  (cc) “Day” shall mean a calendar day;

 

  (dd) “Deliveries” shall have the meaning set forth in Article 23.1;

 

  (ee) “Defaulting Party” shall have the meaning set forth in Article 17.4;

 

  (ff) “ETA” shall mean estimated time of arrival;

 

  (gg) “Final Contract Year” shall mean the period commencing on January 1 of the Year in which the later of the expiration of the Initial Term or the last Renewal Term of this Agreement occurs and ending on the anniversary date of this Agreement occurring in such Year;

 

  (hh) “First Contract Year” shall mean the period commencing on the date of this Agreement and ending on December 31, 2008;

 

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  (ii) “FOB” shall have the meaning ascribed to such term in Incoterms (2000 edition), published by the International Chamber of Commerce; provided , however , that, in the event of any conflict between the provisions of the Incoterms definition and this Agreement, the provisions of this Agreement shall apply;

 

  (jj) Formula Price” shall have the meaning set forth in Article 6.2(a);

 

  (kk) “Force Majeure” shall have the meaning set forth in Article 20.1;

 

  (ll) “Gallon” shall mean a unit of volume, measured at 60°F (equivalent to 15.56°C), equal to 231 cubic inches or 3.7853 liters;

 

  (mm) “General Terms and Conditions” shall mean the Ministry’s General Terms and Conditions for PDVSA FOB Crude Oil Sales (November 2006) attached hereto as Exhibit 6 , as the same may be modified as provided herein;

 

  (nn) “ICC Rules” shall have the meaning set forth in Article 21.1;

 

  (oo) “Investment Grade” shall mean a rating of (i) BBB- or higher by Standard and Poor’s Rating Services, (ii) Baa3 or higher by Moody’s Investors Service, Inc. and (iii) BBB- or higher by Fitch Ratings, Ltd. (or, if any such agency changes its rating system, the equivalent successor rating applied by such agency at the time in question);

 

  (pp) “Governmental Mandate” shall have the meaning set forth in Article 20.1;

 

  (qq) “Initial Term” shall have the meaning set forth in Article 9.1;

 

  (rr)

“Insolvency Event” shall mean that an entity (i) is dissolved (other than pursuant to a consolidation, amalgamation or merger); (ii) becomes insolvent or is unable to pay its debts or admits in writing its inability generally to pay its debts as they become due; (iii) makes a general assignment, arrangement or composition with or for the benefit of its creditors; (iv) (A) institutes a proceeding seeking a judgment of insolvency or bankruptcy or any other relief under any bankruptcy or insolvency law or other similar law affecting creditors’ rights, or a petition is presented for its winding-up or liquidation by it, or (B) has instituted against it a proceeding seeking a judgment of insolvency or bankruptcy or any other relief under any bankruptcy or insolvency law or other similar law affecting creditors’ rights, or a petition is presented for its winding-up or liquidation and such proceeding either (1) results in a judgment of insolvency or bankruptcy or the entry of an order for relief or the making of an order for its winding-up or liquidation or (2) is not dismissed, discharged, stayed or restrained in each case within sixty (60) Days of the institution or presentation thereof; (v) passes a resolution for its winding-up or liquidation (other than pursuant to a consolidation, amalgamation or

 

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merger); (vi) seeks or becomes subject to the appointment of a receiver, bankruptcy trustee, custodian or other similar official for it or for all or substantially all its assets; or (vii) has a secured party take possession of all or substantially all its assets or has a distress, execution, attachment, sequestration or other legal process levied or enforced on or against all or substantially all its assets; provided that such secured party maintains possession, or any such process is not dismissed, discharged, stayed or restrained, in each case within thirty (30) Days thereafter;

 

  (ss) “ISPS Code” shall have the meaning set forth in Article 10.5.2(d);

 

  (tt) “Letter of Credit” shall have the meaning set forth in Article 8.4;

 

  (uu) “Lifting Month” shall mean the Month for which a Cargo is programmed for lifting;

 

  (vv) “Limited Market Adjustment” shall have the meaning set forth in Article 6.1(a);

 

  (ww) “Loading Point” (either standing alone or as part of another defined term) shall mean a terminal, berth, jetty, buoy, dock, anchorage, sea terminal, mooring, submarine loading line, or any other place, including alongside lighters or other vessels, where a vessel can be loaded;

 

  (xx) “Loading Port” shall mean any of Seller’s Loading Points located at Puerto Miranda, La Salina and Bajo Grande;

 

  (yy) “MBD” shall mean a thousand Barrels per Day;

 

  (zz) “Ministry” shall mean the Ministerio del Poder Popular para la Energía y Petróleo of Venezuela ;

 

  (aaa) “Month” shall mean a calendar month;

 

  (bbb) “Monthly Contract Quantity” shall have the meaning set forth in Article 3.2;

 

  (ccc) “NAR” shall have the meaning set forth in the Preamble to this Agreement;

 

  (ddd) “Nominated Volume” shall have the meaning set forth in Article 23.1;

 

  (eee) “Non-Affiliated Buyer Purchases” shall have the meaning set forth in Article 6.2(a);

 

  (fff) “Non-Defaulting Party” shall have the meaning set forth in Article 17.4;

 

  (ggg) “NOR” shall have the meaning set forth in Article 10.4;

 

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  (hhh) “Oil” shall mean Venezuelan crude oil of the types specified in Exhibit 1 ;

 

  (iii) “P&I Club” shall mean a maritime protection and indemnity mutual insurance company;

 

  (jjj) “Parties” shall mean Seller and Buyer, which may sometimes hereinafter be referred to individually as a “Party” and collectively as the “Parties”;

 

  (kkk) “Quarter” means any period of three consecutive Months commencing January 1, April 1, July 1 or October 1 of any Year;

 

  (lll) “Quarterly Deficit” means, with respect to any Quarter, the amount, if any, by which the Formula Price is less than the Maya parity price calculated in accordance with Exhibit 4 ;

 

  (mmm) “Quarterly Surplus” means, with respect to any Quarter, the amount, if any, by which the Formula Price exceeds the Maya parity price calculated in accordance with Exhibit 4 ;

 

  (nnn) “Ratings Agencies” shall mean Standard and Poor’s Rating Services, Moody’s Investors Service, Inc. and Fitch Ratings, Ltd.;

 

  (ooo) “Refineries” shall have the meaning set forth in the Preamble to this Agreement;

 

  (ppp) “Renewal Term” shall have the meaning set forth in Article 9.2;

 

  (qqq) “S & W” shall mean sediments and water;

 

  (rrr) “Security Regulations” shall have the meaning set forth in Article 10.5.2(d);

 

  (sss) “Seller” shall have the meaning set forth in the Preamble to this Agreement;

 

  (ttt) “Specified Loading Port” shall mean a Loading Port specified in an Agreed Lifting Program;

 

  (uuu) “SPA” shall have the meaning set forth in the Preamble to this Agreement;

 

  (vvv) “Storage Facility” shall have the meaning set forth in Article 6.1(b);

 

  (www) “United States” or “U.S.” shall mean the United States of America;

 

  (xxx) “U.S. Dollars” or “U.S.$” and “cents” shall mean the lawful currency of the United States of America;

 

  (yyy) “Venezuela” shall mean the Bolivarian Republic of Venezuela;

 

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  (zzz) “Worldscale” shall mean, at any relevant time under this Agreement, the applicable standard freight rate stated in the most recent edition of the New Worldwide Tanker Nominal Freight Scale jointly published by Worldscale Association (London) Limited and Worldscale Association (NYC) Inc., expressed in U.S. dollars per metric ton for the route specified;

 

  (aaaa) “Worldscale Assessment” shall mean, at any relevant time under this Agreement, the current assessment published in the most recent edition of Platt’s Oilgram Price Report, under the table representing “Dirty” cargoes of 50,000 metric ton size for Caribbean to U.S. Gulf Coast routes, in the column labeled “WS”; and

 

  (bbbb) “Year” shall mean a calendar year.

1.2 Construction . Terms defined in the singular have the corresponding meanings in the plural, and vice versa. All headings herein are for convenience only and shall not affect the construction or interpretation of this Agreement. Unless otherwise specified, all references herein to Parts, Articles and Exhibits are to the Parts, Articles and Exhibits of this Agreement. The terms “hereof,” “herein,” “hereunder” and words of similar import shall refer to this Agreement as a whole and not to the particular Part, Article or Exhibit in which such term appears.

PART II

SPECIAL TERMS

Article 2

Purchase and Sale

Subject to and in accordance with the terms and conditions of this Agreement, Seller shall sell and deliver, and Buyer shall purchase and lift, Oil of the Boscán type and the Bachaquero BCF-13 type, each having the typical characteristics set forth on Exhibit 1 and in the quantities set forth on Exhibit 2 .

Article 3

Quantity

3.1 Annual Contract Quantity . Except as performance may be expressly excused in accordance with this Agreement, in each Contract Year Seller shall sell and deliver, and Buyer shall purchase and lift, an aggregate quantity of Oil equal to seventy-five thousand (75,000) Barrels times the number of Days in such Contract Year, apportioned between Barrels of Oil of the Boscán type and the BCF-13 type as set forth in Exhibit 2 (the “ Annual Contract Quantity ”), subject to an annual tolerance of three hundred twenty-five thousand (325,000) Barrels for each such grade of Oil; provided that, with respect to the First Contract Year and the Final Contract Year, the annual tolerance shall not be prorated for such partial Year periods.

3.2 Monthly Contract Quantity . In satisfaction of Buyer’s obligation to purchase and lift, and Seller’s obligation to sell and deliver, the Annual Contract Quantity (except as performance

 

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may be expressly excused in accordance with this Agreement) during each Month of each Contract Year, Seller shall sell and deliver, and Buyer shall purchase and lift, such number of Barrels of Oil of the Boscán and BCF-13 type as set forth in Exhibit 2 in respect of such Month (the “ Monthly Contract Quantity ”), subject to the following exceptions:

(a) an operational tolerance of five percent (5%) on each Cargo of Oil Buyer is scheduled to lift due to conditions at the Loading Port or affecting the vessel utilized by Buyer;

(b) notwithstanding Buyer’s obligations under Article 10.1.5 to minimize deadfreight in developing the Agreed Lifting Program for any Month and solely for the purpose of eliminating deadfreight, Seller shall at its option:

 

  (i) permit Buyer to overlift the amount required to accept all vessels as proposed by Buyer in its Lifting Program for such Month; it being understood that Seller shall have no obligation to permit an overlifting in any Month greater than 250,000 Barrels of Boscán and 325,000 Barrels of BCF-13; or

 

  (ii) defer lifting for the last vessel to the first ten (10) Days of the immediately subsequent Month; or

 

  (iii) specify a short load for the last vessel of either or both types of Oil to limit deliveries in such Month to a level at or above the Monthly Contract Quantity;

provided that: (A) if Seller selects clause (i) above, the resulting quantity overlifted shall be subtracted from the Monthly Contract Quantity for the immediately subsequent Month; (B) if Seller selects clauses (ii) or (iii) above, the resulting quantity underlifted shall be added to the Monthly Contract Quantity for the immediately subsequent Month; and (C) if Seller selects clause (iii) above, Buyer shall present a claim for reimbursement to Seller, and notwithstanding any provision herein to the contrary, Seller shall reimburse Buyer for the allocable portion of deadfreight cost based on the unit cost of freight for the subject vessel and Buyer’s proposed lifting volume applied to the short-loaded volume;

(c) notwithstanding the foregoing clauses (a) and (b) to the contrary, solely in respect of the first Month of the First Contract Year, Buyer shall have the option to nominate a Monthly Contract Quantity with a tolerance of thirty percent (30%) for each grade of Oil to enable Buyer to offset any Oil inventory surplus or shortfall at the Refineries.

In the event Buyer overlifts or underlifts the Monthly Contract Quantity in a given Month as a result of any of the exceptions set forth in clauses (a) or (b) above, Buyer shall accumulate and apply the net amount of such overlifted or underlifted quantity toward the Monthly Contract Quantity to be lifted in any subsequent Month.

 

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Article 4

Destination; No Resale to Third Parties

4.1 Utilization at the Refineries . The Oil to be sold by Seller to Buyer is intended to be utilized by Buyer at the Refineries. No Cargo purchased by Buyer under this Agreement may be shipped to any other facility except:

(a) a facility utilized by Buyer for storage of Oil;

(b) a facility with which Buyer has an arrangement to process such Cargo and receive all refined products produced therefrom;

(c) any other U.S. refinery owned by Buyer or its Affiliates; provided , however , that, any delivery to such other U.S. refinery shall not relieve Buyer or its Affiliates from any of its obligations to lift, or receive delivery of, the full quantity of crude oil required to be lifted or received from Seller under any other long-term supply arrangement for such refinery. In the event that Buyer shall deliver any Cargo of Oil purchased from Seller hereunder to any other refinery within Buyer’s or its Affiliate’s U.S. refining system which is located in a geographic market other than that in which the Refineries are located, the prices determined pursuant to the provisions of Exhibit 3 shall be the Seller’s prices applicable for deliveries in such other geographic market; or

(d) with respect to any Cargo lifted by Buyer, any facility with the express written consent of Seller having been first obtained, which consent shall not be unreasonably withheld if it is requested in connection with an event described in Article 20.1.

Buyer shall not resell any Oil purchased under this Agreement to any Person not an Affiliate of Buyer.

4.2 Discharge Documentation . Upon Seller’s request, Buyer shall provide, for any Cargo of Oil delivered hereunder, a discharge certificate, which may consist of: (a) an independent inspector’s certificate of discharge, (b) a customs fees receipt or other government document evidencing the port in which the Cargo of Oil was discharged, (c) the exemption from customs fees at the port of discharge or (d) any other document that Seller deems an appropriate substitute for the foregoing.

Article 5

Price; Adjustment of Price Mechanism

5.1 Price . The price for each type of Oil to be sold by Seller and purchased by Buyer hereunder shall be determined in accordance with the provisions of Exhibit 3 , as adjusted by the Limited Market Adjustment determined in accordance with the provisions of Article 6 and Exhibit 4 .

5.2 Adjustment of Price Mechanism . Seller shall have the right at any time and from time to time, based on (i) discontinuance of the published market markers in the pricing formulas set forth in Exhibit 3 or the Limited Market Adjustment set forth in Exhibit 4 , (ii) changes in circumstances which make the applicability of the published market markers in the pricing

 

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formula or the Limited Market Adjustment inconsistent with a competitive market-based pricing formula, or (iii) changes in the quality of one or more types of Oil, to notify Buyer that it wishes to adjust or amend the pricing provisions of Exhibit 3 and/or the Limited Market Adjustment in Exhibit 4 with the objective of ensuring that the price of Oil reflects market conditions for similar crude oils. Seller’s notice shall state the proposed effective date thereof, which shall be no earlier than thirty (30) Days after the date of its notice; provided , however , that the succeeding provisions of this Article 5.2 shall only apply if such proposed adjustment or amendment is applicable to Seller’s publicly announced pricing formula for deliveries of Oil destined for ports in the United States and that the new price shall not apply to Oil already nominated by Buyer. Buyer shall then have thirty (30) Days in which to accept or reject such proposed changes. If Buyer accepts Seller’s proposal or does not notify Seller within such thirty (30) Day period that it rejects Seller’s proposal, then the provisions of Exhibit 3 and/or Exhibit 4 shall be deemed amended in accordance with Seller’s proposal as of the effective date specified in Seller’s notice. If Buyer rejects Seller’s proposal, then the provisions of Exhibit 3 and/or Exhibit 4 shall remain in effect and unchanged; provided , however , that Seller shall have the right to submit the matter to arbitration pursuant to Article 21.1. In such arbitration, each Party shall submit its proposed alternative pricing mechanism, and the arbitration panel shall determine the appropriate adjustments, if any, to be made to the pricing formulas and/or the Limited Market Adjustment as of the effective date specified in Seller’s notice.

Article 6

Limited Market Adjustment

6.1 Calculation of Limited Market Adjustment .

(a) For each Quarter during the Initial Term, Seller shall set off and deduct, and Buyer shall receive a credit and reduction for, an amount equal to (a) the difference, if any, between (i) the price per Barrel of Oil charged by Seller with respect to each Cargo of Oil lifted during such Quarter calculated in accordance with Exhibit 3 and (ii) the price per Barrel of Oil calculated in accordance with Exhibit 4 , multiplied by (b) the respective quantities of Boscán Oil and BCF-13 Oil delivered to the Refineries with respect to each such Cargo of Oil. Such setoff, deduction, credit and reduction is referred to herein as the “ Limited Market Adjustment ,” and each Limited Market Adjustment shall be determined and applied in accordance with clause (b) below; it being understood that any Cargo of Oil not delivered to either of the Refineries shall be disregarded for purposes of the Limited Market Adjustment.

(b) In the event that Buyer shall deliver any Cargo of Oil to any storage facility (“ Storage Facility ”) for subsequent redelivery to a Refinery, upon the redelivery of such Cargo to a Refinery, such Cargo shall, for purposes of calculating the Limited Market Adjustment, if any, applicable to such Quarter, be deemed to have been delivered to a Refinery in the Quarter within which such redelivery occurs and the prices to be used shall be the prices applicable at the time of the original purchase.

(c) To the extent that, at any time, the sum of all Quarterly Surpluses exceeds the sum of all Quarterly Deficits less any previous Credits (as defined below) by more than U.S.$10 Million, Buyer shall receive a credit (each, a “ Credit ”) against the purchase price of Boscán Oil or BCF-13 Oil delivered to the Refineries or any Storage Facility in the succeeding Quarter equal

 

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to the amount by which the Cumulative Net Surplus, less previous Credits, exceeds U.S.$10 Million, applied at the rate of U.S.$5.00 per Barrel beginning with the first Barrel delivered in such succeeding Quarter.

(d) Within ten (10) Days after each Quarter during the Initial Term, Buyer shall provide to Seller a detailed report including (i) the calculation of the Limited Market Adjustment for the preceding Quarter in accordance with Exhibit 4 , and (ii) the calculation of any Credit for such Quarter. Within ten (10) Days after receipt of such report, Seller shall notify Buyer of any claimed discrepancy therein and any proposed amendment thereto; it being understood that the Parties shall, in such event, undertake in good faith to resolve such discrepancy promptly and in any event prior to the issuance of the first invoice for Oil delivered in such Quarter.

(e) For purposes of calculating any Limited Market Adjustment as well as for purposes of applying any Credit, Oil shall be considered to have been delivered to a Refinery or a Storage Facility on the Day on which the bill of lading for the Cargo in question was issued at the Loading Port, as reflected in such bill of lading.

(f) To the extent that, at the expiration of the Initial Term, the sum of all Quarterly Surpluses exceeds the sum of all Quarterly Deficits less any previous Credits (irrespective of the U.S.$10 Million threshold specified in clause (b) above), such difference, if any, shall be paid in cash by Seller to Buyer or delivered in Oil at the price provided under this Agreement, at the option of Seller, in either case within thirty (30) Days after expiration of the Initial Term.

(g) Any outstanding Credit owing to Buyer shall accrue interest at a per annum rate equal to one percent (1%) above the prime rate in effect from time to time as announced by Citibank, N.A. at its principal office in New York, New York, United States, calculated from the last Day of the Quarter in which such Credit arises until the bill of lading date for the Cargo of Oil to which such Credit is applied.

6.2 Expiration of Limited Market Adjustment .

(a) The Limited Market Adjustment clauses set out above will be deemed to have lapsed once the average volume of Seller’s export sales of heavy crude oils (i.e., crude oils with an API gravity less than 13 degrees and a sulfur content greater than 2.5% by weight) subject to the formula price for each of Boscán Oil or BCF-13 Oil set forth in Exhibit 3 (“ Formula Price ”) for deliveries into the US Gulf Coast, the US East Coast and the Caribbean to non-Affiliated buyers other than Buyer exceeds 60,000 BPD for a period of fourteen (14) consecutive Asphalt Season Months, based on contracts with an average of two (2) or more different customers during the same period provided that (i) such non-Affiliated buyers purchase crude oil from Seller at the Formula Price on a spot basis or pursuant to contracts under which they have the right to terminate upon prior notice of ninety (90) Days or less, (ii) the Formula Price applicable to such non-Affiliated buyers does not include a price protection clause and (iii) any purchases of crude oil by Buyer from Seller pursuant to spot or term agreements in excess of the Annual Contract Quantity shall be deemed to be purchases by non-Affiliated buyers for purpose of (i) and (ii) above (“ Non-Affiliated Buyer Purchases ”). Seller shall report periodically to Buyer on the average volume of crude oil sold under the Formula Price to such non-Affiliated buyers and shall

 

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provide written confirmation to Buyer when such average daily volume conditions have been met.

(b) In the event that, after the Limited Market Adjustment mechanism is deemed to have lapsed, (i) during any six (6) month period, the average volume of Seller’s export sales of heavy crude oils (i.e., crude oils with an API gravity less than 13 degrees and a sulfur content greater than 2.5% by weight) for deliveries into the US Gulf Coast, the US East Coast and the Caribbean to non-Affiliated buyers (including Non-Affiliated Buyer Purchases) other than Buyer at the Formula Price on a spot basis or pursuant to term supply contracts under which such buyers have the right to terminate upon prior notice of ninety (90) Days or less is less than 20,000 BPD, or (ii) the average number of such non-Affiliated buyers of crude oil at the Formula Price (other than Buyer) has been less than two (2) per Asphalt Season, then Seller and Buyer will agree on such alternative pricing mechanism as may be necessary to meet the objective that the price of Oil be market-related in parity with crude oil of the Maya type.

Article 7

Underlifting

Buyer acknowledges that its commitment to purchase the Annual Contract Quantity in each Year is an essential term of this Agreement. Except as otherwise provided in this Agreement and subject to the provisions of Article 20, if, in any Lifting Month, Buyer fails to lift any Cargo scheduled to be lifted during such Lifting Month, Seller shall have the right to recover its damages for Buyer’s breach of its lifting obligation. Notwithstanding the foregoing provisions of this Article 7, Buyer shall not be required to lift, nor be subject to any liability for lifting less than, the Monthly Contract Quantity in any Month if and to the extent that:

(a) such underlifting is due to demonstrated operational reasons concerning only the Loading Ports or the vessels involved and does not in any event exceed ten percent (10%) of the Monthly Contract Quantity for such Month;

(b) such underlifting comes as a consequence of Buyer performing remedial work (whether planned or unplanned) or an annual turnaround at the Refineries, or either of them, provided that Buyer notifies Seller of any planned turnaround at least ninety (90) Days prior to the Month in which the turnaround is planned and of any planned remedial work as soon as reasonably possible;

(c) such underlifting is the result of Buyer decreasing inventories of Oil at the Refineries, or either of them, having previously increased such inventories by lifting in excess of the Monthly Contract Quantity due to increased risk of weather-related interruption of supply; or

(d) such underlifting is due to an underdelivery by Seller.

Article 8

Payment Terms

8.1 Currency, Time and Place of Payment; Overdue Payments . Buyer shall make all payments required to be made by it under this Agreement in immediately available U.S. Dollars, without any discount or deduction whatsoever, by wire transfer to such account at such bank as

 

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may be designated by Seller from time to time. Payments in respect of Oil sold and delivered shall be made within thirty (30) Days after the date of the bill of lading therefor (bill of lading date excluded). All other payments to Seller shall be made fifteen (15) Days after presentation by Seller of a written demand setting forth the provisions of this Agreement giving rise to the payment obligation, the nature of such obligation, and the amount thereof. If any payment hereunder is due on a Day which is not a Banking Day, such payment shall be due on the immediately following Banking Day. In the event that Buyer fails to make any payment when due, then, to the extent permitted by applicable law and without prejudice to the application of any other provision hereof or to any other remedy provided to Seller under this Agreement or otherwise (including, without limitation, Articles 8.4 and 8.5), interest shall accrue daily on the amount of the overdue payment, commencing on the date such payment was due, at a rate per annum equal to one percent (1%) above the prime rate in effect from time to time as announced by Citibank, N.A. at its principal office in New York, New York, United States; it being understood and agreed that each change in the prime rate shall take effect on the Day on which such change is announced by Citibank, N.A. Interest shall be computed for the actual number of Days elapsed on the basis of a year consisting of three hundred sixty (360) Days, payable on demand.

8.2 Contents of Invoices; Substantiating Documentation . Each invoice shall set forth at least the following information: (a) the date(s) of delivery in respect of which the invoice is rendered; (b) the Loading Point(s) for such delivery; (c) the volume of the delivery stated in Barrels; and (d) the purchase price for each type of Oil comprising the delivery, and the terms of payment. Upon request, each Party shall furnish to the other Party all available substantiating documents incident to the delivery, including a satisfactory source document for each volume delivered during any Month. The source documents shall state at least the volume, type and quality of Oil delivered and method of measurement, the corrected API gravity, temperature, and S & W content.

8.3 Payment Expenses . Buyer shall bear all expenses and bank charges in connection with any payments made to Seller under this Agreement, including, without limitation, any costs of establishing and obtaining confirmation of a Letter of Credit referred to in Article 8.4.

8.4 Security for Payment . If at any time (i) Buyer fails to make any payment required to be made by it hereunder when and as the same shall become due and payable, (ii) Buyer defaults in any of its material obligations under this Agreement, or (iii) the senior unsecured long-term debt securities of Buyer for which there is no recourse to or credit enhancement from any party other than NuStar Energy L.P. or its subsidiaries is rated below Investment Grade by at least two of the three Ratings Agencies, then Seller shall have the right to require Buyer (at Buyer’s option) to purchase Oil or make other payments required hereunder by advance payment of immediately available funds or by posting of an irrevocable documentary or standby letter of credit (“ Letter of Credit ”); provided , however , that any such advance payment or Letter of Credit shall no longer be required, and if outstanding, it shall be promptly returned by Seller, when and if such debt securities are rated Investment Grade or better by at least two of the three Ratings Agencies. The amount of the advance payment or Letter of Credit shall be equal to Seller’s reasonable estimate of the value of Oil, calculated in accordance with Exhibit 3 , for which the advance payment or a Letter of Credit is provided (which may be, at Seller’s discretion, for a particular shipment or for some or all shipments in a Month, plus ten percent (10%)), and paid or

 

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posted not later than seven (7) Business Days prior to the first Day of the Agreed Laydays. Any such Letter of Credit shall be opened or confirmed by an international bank having a net asset value of not less than Two Hundred Fifty Million U.S. Dollars (U.S.$250,000,000) and such Letter of Credit shall be otherwise satisfactory in form and substance to Seller.

8.5 Suspension of Deliveries . Without prejudice and in addition to any of Seller’s rights under Article 17 or otherwise, if Buyer fails to make any undisputed payment required to be made by it hereunder when the same shall become due and payable or fails to make an advance payment or post a Letter of Credit as required in accordance with Article 8.4, then Seller shall have the right at its sole discretion to suspend further deliveries of Oil until Buyer makes the required payment, together with any accrued interest thereon, or posts a Letter of Credit as required by Seller in accordance with Article 8.4.

Article 9

Duration

9.1 Term . The term of this Agreement shall commence on the date hereof and shall continue in full force and effect until the seventh (7th) anniversary date of this Agreement, (“ Initial Term ”).

9.2 Renewal . This Agreement shall be renewed for successive two (2) Year terms after the Initial Term (each, a “ Renewal Term ”), unless earlier terminated by a Party in accordance with the provisions of this Agreement. Either Party may terminate the Agreement at the end of the Initial Term or any Renewal Term by delivering written notice of termination at least one (1) year prior to the last Day of the Initial Term or to the Renewal Term in question.

PART III

STANDARD TERMS

Article 10

Arrival Procedures and Lifting

10.1 Lifting Program .

10.1.1 Not later than thirty five (35) Days prior to the beginning of the next programmed Lifting Month, Buyer shall furnish Seller with a proposed lifting program for such Lifting Month, specifying the following:

(a) a Specified Loading Port for each delivery requested for such Lifting Month;

(b) a three-Day period for the arrival of each vessel;

(c) each type of Oil to be lifted by Buyer’s vessels;

(d) the number of Cargos to be lifted and the quantity and type of Oil comprising each Cargo;

(e) the port of discharge of each Cargo;

 

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(f) in respect of the lifting program for the previously programmed Lifting Month, (i) the name, size and dimensions of each vessel designated for lifting during such Lifting Month, together with the completed vetting information required by Seller for each such vessel; (ii) the names of the vessel’s agent and Buyer’s representative, and the vessel’s P&I Club, which shall be a member of the International Group of P&I Clubs; (iii) documentation instructions; (iv) the time required for deballasting (if any, but which, in any event, shall not exceed six hours); (v) the distribution of the Oil to be loaded (e.g., commingled or segregated); (vi) the name of the proposed independent inspector; and (vii) for at least the last ten (10) loading operations for crude oil for each nominated vessel, the volume loaded as measured on shore in shore tanks or by flow meters and the corresponding volume loaded as measured on board, such volume to be evidenced by documentation (including ullage and innage reports and onboard quantity and slop certificates) satisfactory to Seller; and

(g) an estimate of the volumes of the types of Oil that Buyer desires to purchase during the three (3) Lifting Months following such Lifting Month.

If Buyer does not furnish Seller with a proposed lifting program complying with the requirements of this Article 10.1.1 for the following Lifting Month within the period specified above, Buyer shall be required to accept the lifting program for such Lifting Month established by Seller.

Not later than thirty-five (35) Days prior to the beginning of the first programmed Lifting Month of each Contract Year, Seller shall provide Buyer with a list of objective vetting criteria in respect of vessels acceptable to Seller during such Contract Year. Buyer shall obtain completed vetting information for each vessel nominated by Buyer and submit the same to Seller in accordance with Article 10.1.1(f). Seller shall have the absolute right to reject any vessel nominated by Buyer that does not satisfy Seller’s objective vetting criteria.

10.1.2 If the name of a vessel is not known at the time the proposed lifting program for the following Lifting Month is furnished to Seller, Buyer shall notify Seller of such name and other data referred to in Article 10.1.1(f) as soon as possible, but in any event not later than seven (7) Business Days prior to the first Day of the Agreed Laydays for the unspecified vessel. Seller may reject Buyer’s vessel nomination in the event such vessel does not satisfy Seller’s objective vetting criteria, in which case Buyer shall take immediate action to nominate another vessel acceptable to Seller. If the Parties do not reach agreement on nomination of another vessel at least five (5) Business Days prior to the first Day of the Agreed Laydays, Seller shall have the right to cancel that lifting without prejudice to any and all other rights Seller has under this Agreement and without prejudice to Seller’s claim for any losses or expenses caused by Buyer’s failure to nominate an acceptable vessel. If Seller, at its sole option, elects nevertheless to load a vessel agreed on less than five (5) Business Days prior to the first Day of the Agreed Laydays, the loading of the vessel shall be subject to berth, jetty, buoy, loading platform and loading system availability, as applicable. In no event shall laytime or time on demurrage be charged to Seller for delays incurred because the Parties have not agreed on a vessel within five (5) Business Days prior to the first Day of the Agreed Laydays.

10.1.3 Seller shall be deemed to have accepted Buyer’s proposed lifting program for the following Lifting Month unless Seller has notified Buyer of alterations thereto at least fifteen

 

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(15) Days prior to the beginning of such Lifting Month. Notwithstanding any provision herein to the contrary, so long as Buyer’s proposed lifting program for such Lifting Month nominates a quantity of Oil conforming to the Monthly Contract Quantity, as such quantity may be adjusted pursuant to Article 7 and Article 20, and subject to the exceptions set forth in Article 3.2, Seller shall not alter the quantities of Oil described in Buyer’s proposed lifting program. Seller shall in any event notify Buyer within such time period of the Specified Loading Port to be used by Buyer’s vessels, to be narrowed to a specific Loading Point not less than five (5) Days prior to the first Day of the Agreed Laydays (subject to adjustment as provided in Article 10.1.4) and the name(s) of the independent inspector(s) proposed by Buyer and accepted by Seller for purposes of Article 12 and Article 13. If Seller timely notifies Buyer of alterations to the lifting program, Buyer shall be deemed to have agreed to those alterations unless, within five (5) Days after Buyer’s receipt of Seller’s notice, Buyer requests Seller to reconsider such alterations. Seller’s decision following any such reconsideration shall be final and binding on both Parties. If Seller notifies Buyer that it objects to an independent inspector nominated by Buyer, the Parties shall designate another independent inspector by mutual agreement. The lifting program as finally determined pursuant to the provisions of Article 10.1 for any Lifting Month is referred to herein as the “ Agreed Lifting Program ” for such Lifting Month, and the three (3) Day range for the arrival of any vessel contained in any Agreed Lifting Program is referred to herein as the “ Agreed Laydays ” for such vessel.

10.1.4 Seller may notify Buyer that any vessel scheduled in an Agreed Lifting Program shall load the Oil at a Loading Point in the Specified Loading Port different from the Loading Point previously specified pursuant to Article 10.1.3 or shall load the Oil at two (2) Loading Ports, provided that such notice is given by Seller (a) at least seventy-two (72) hours prior to the ETA of such vessel, if Buyer has notified Seller of an ETA falling within or after its Agreed Laydays, or (b) at least seventy-two (72) hours prior to the first Day of the Agreed Laydays, if Buyer has notified Seller of an ETA which is earlier than the first Day of the Agreed Laydays. Seller shall not be liable for any charges or expenses incurred by Buyer, including, but not limited to, deviation, as a result of a shift from one Loading Point to another, or the specification of two (2) Loading Ports; provided , however , if Seller exercises its option to change a previously declared Loading Point or to load at two (2) Loading Ports, (i) Buyer shall be compensated by Seller for any time by which the steaming time to the Loading Port(s) or Point(s) to which a vessel is finally ordered exceeds that which would have been taken if vessel had been ordered to proceed to such Port(s) or Point(s) in the first instance at the deviation rate per running Day and pro rata for a part thereof; and (ii) Seller shall pay for extra bunkers consumed during excess time at documented actual replacement cost at the port where bunkers are next taken, less a credit for daily in port fuel consumption during any period of waiting.

10.1.5 Buyer, taking into account Loading Port constraints, shall use commercially reasonable efforts to


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