AMENDMENT NO. 1 TO PURCHASE AND SALE AGREEMENT
This Amendment No. 1 to that certain Purchase and Sale Agreement (this
“Amendment”
)
is made on September 13, 2012 by and among BP WEST COAST PRODUCTS LLC, a limited liability company organized and existing under the laws of the State of Delaware
(
“BPWCP’’
),
ATLANTIC RICHFIELD COMPANY, a corporation organized and existing under the laws of the State of Delaware
(
“ARCO”
),
ARCO MIDCON LLC, a limited liability company organized and existing under the laws of the State of Delaware
(
“ARCO Midcon”
),
ARCO TERMINAL SERVICES CORPORATION, a corporation organized and existing under the laws of the State of Delaware
(
“ARCO Terminal”
),
ARCO MATERIAL SUPPLY COMPANY, a corporation organized and existing under the laws of the State of Delaware
(
“ARCO Material Supply”
),
CH-TWENTY, INC., a corporation organized and existing under the laws of the State of Delaware
(
“CH-Twenty”
),
PRODUCTS COGENERATION COMPANY, a corporation organized and existing under the laws of the State of Delaware
(
“Products Cogeneration Company”
),
and ENERGY GLOBAL INVESTMENTS (USA) INC., a corporation organized and existing under the laws of the State of Delaware
(
“Energy Global Investments”
)
(BPWCP, ARCO, ARCO Midcon, ARCO Terminal, ARCO Material Supply, CH-Twenty, Products Cogeneration Company and Energy Global Investments are each a
“Seller”
and collectively the
“Sellers”
)
and TESORO REFINING AND MARKETING COMPANY, a corporation organized and existing under the laws of the State of Delaware (the
“Buyer”
).
WHEREAS,
the Sellers and the Buyer entered into that certain Purchase and Sale Agreement, dated as of August 8, 2012 (the
“PSA”
);
WHEREAS,
pursuant to Section 7.11 of the PSA, Buyer and Sellers must discuss and develop a plan for ensuring an orderly transition of the Purchased Assets on the Closing Date within thirty-six (36) days of the Execution Date. Such discussions shall include an identification of the scope of transition services that Sellers are to provide pursuant to the Transition Services Agreement; and
WHEREAS,
as required under the PSA, the Buyer and Sellers have engaged in such discussions and as part of this process, the Buyer and Sellers have discussed and agreed certain changes and amendments to the Form of Transition Services Agreement, including its accompanying Term Sheets, attached to the PSA as
Exhibit P
.
NOW, THEREFORE,
in consideration of the foregoing recitals and the agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereto, intending to be legally bound, do hereby agree as follows:
1. Definitions.
Capitalized terms used but not defined herein shall have the meanings ascribed to them in the PSA.
2. Amendments.
The Parties hereby agree that
Exhibit P
attached to the PSA is deleted and replaced in its entirety by the Form of Transition Services Agreement attached to this Amendment as Schedule 1.
3. Miscellaneous.
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(a).
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The Parties agree that this Amendment is executed pursuant to Section 19.7 of the PSA.
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(b).
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The Parties hereby ratify and confirm the terms of the PSA as expressly amended or supplemented hereby. Except to the extent this Amendment amends the terms of the PSA, this Amendment shall in all respects remain subject to the terms of the PSA which shall survive the delivery of this Amendment, including without limitation, Sections 19.6 and 19.10.
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(c).
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Any term or provision of this Amendment that is invalid or unenforceable in any situation in any jurisdiction shall not affect the validity or enforceability of the remaining terms and provisions hereof or the validity or enforceability of the offending term or provision in any other situation or in any other jurisdiction.
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(d).
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This Amendment may be executed in counterparts, each of which shall be deemed an original but which together will constitute one and the same instrument. The exchange of copies of this Amendment and of signature pages by facsimile transmission or e-mail of a scanned copy shall constitute effective execution and delivery of this Amendment as to the Parties and may be used in lieu of the original Amendment for all purposes. Signatures of the Parties transmitted by facsimile or e-mail shall be deemed to be their original signatures for all purposes.
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[Signatures follow on next page]
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SELLERS
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BP WEST COAST PRODUCTS LLC,
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a Delaware limited liability company
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By:
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/s/ MARK E. FRENA
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Name:
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Mark E. Frena
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Title:
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Authorized Person
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ATLANTIC RICHFIELD COMPANY,
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a Delaware corporation
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By:
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/s/ MARK E. FRENA
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Name:
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Mark E. Frena
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Title:
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Authorized Person
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ARCO MIDCON LLC,
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a Delaware limited liability company
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By:
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/s/ MARK E. FRENA
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Name:
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Mark E. Frena
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Title:
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Authorized Person
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ARCO TERMINAL SERVICES CORPORATION,
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a Delaware corporation
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By:
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/s/ MARK E. FRENA
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Name:
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Mark E. Frena
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Title:
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Authorized Person
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PSA Amendment No. 1 Signature Page (
1
of 3)
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ARCO MATERIAL SUPPLY COMPANY,
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a Delaware corporation
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By:
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/s/ MARK E. FRENA
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Name:
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Mark E. Frena
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Title:
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Authorized Person
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CH-TWENTY, INC.,
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a Delaware corporation
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By:
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/s/ MARK E. FRENA
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Name:
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Mark E. Frena
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Title:
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Authorized Person
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PRODUCTS COGENERATION COMPANY,
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a Delaware corporation
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By:
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/s/ MARK E. FRENA
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Name:
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Mark E. Frena
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Title:
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Authorized Person
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ENERGY GLOBAL INVESTMENTS (USA) INC.,
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a Delaware corporation
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By:
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/s/ MARK E. FRENA
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Name:
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Mark E. Frena
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Title:
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Authorized Person
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PSA Amendment No. 1 Signature Page (
2
of 3)
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BUYER:
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TESORO REFINING AND MARKETING
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COMPANY
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By:
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/s/ DAN ROMASKO
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Name:
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Dan Romasko
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Title:
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Executive Vice President, Operations
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PSA Amendment No. 1 Signature Page (
3
of 3)
SCHEDULE 1
Form of Transition Services Agreement
[see attached]
TRANSITION SERVICES AGREEMENT
This Transition Services Agreement (this “
Agreement
”) is made and entered into as of this [__] day of [_________], 2012 (the “
Effective Date
”) by and between BP WEST COAST PRODUCTS LLC, a limited liability company organized and existing under the laws of the State of Delaware (“
BPWCP
”) and TESORO REFINING AND MARKETING COMPANY, a corporation organized and existing under the laws of the State of Delaware (the “
Company
”). BPWCP and the Company are each referred to individually as a “
Party
” and referred to collectively as the “
Parties
.”
BPWCP and certain of its Affiliates and the Company have entered into a Purchase and Sale Agreement, dated as of August 8, 2012 (the “
PSA
”), under which BPWCP and certain of its Affiliates have agreed to sell to the Company and the Company has agreed to purchase from them substantially all of the assets, and assume and acquire certain of the rights and liabilities of the Business.
The Parties agreed in the PSA to enter into a transition services agreement in which BPWCP would provide to the Company services with respect to the operation of certain portions of the Business for a limited time period after Closing.
The Parties therefore agree as follows:
ARTICLE 1
SERVICES
(a)
During the term set forth in the Term Sheets, as provided in Article 2, BPWCP shall provide, or cause to be provided, services to the Company in relation to the operation of the Business, upon the terms and subject to the conditions of this Agreement (individually, each a “
Service
” and, collectively, the “
Services
”).
(b)
The Services are comprised of each of the services and functions to be provided to the Business as enumerated in the term sheets appended to
Schedule 1.1(b)
(the “
Term Sheets
”) and any additional activities and functions that are reasonably required for the proper performance of the enumerated services and functions (other than any activities and functions that are expressly excluded), with the intent that the Services shall facilitate the uninterrupted operation of the Business after the Closing to a level and quality of service consistent with that achieved by BPWCP in the conduct of its own operations prior to the execution of the PSA (but subject to Section 7.5 therein).
(c)
BPWCP shall provide consulting Services to the Company pursuant to this Agreement as required pursuant to Section 3.2 of the Technology Agreement for a Term of up to twelve (12) months in an amount agreed to by the Parties pursuant to Section 7.11 of the PSA for a fee equal to BP’s actual cost. In addition, BPWCP shall continue to operate, maintain and
support, for up to twelve months after the Closing and for the benefit of the Company, any IT System that is licensed to BPWCP or an Affiliate pursuant to a Consent Required License (as defined in the Technology Agreement) until the license is assigned or transferred to Company as provided in the Technology Agreement, or until alternative arrangements are made as provided in Section 7.2 or 7.11 of the PSA, but only to the extent that such Services are permitted under the terms of the Consent Required License and the Company pays BP’s actual costs incurred in providing such Services.
(d)
The Services may be provided to the Company, or the Business, from BPWCP directly or through one or more of its Affiliates or Third Party Providers (as defined below). For purposes of this Agreement, (i) with respect to the provision of the Services, it is understood that the term “BPWCP” includes BPWCP, its Affiliates, and any Third Party providing Services to the Company or the Business on BPWCP’s behalf (provided that BPWCP shall remain liable for the performance of BPWCP’s obligations hereunder, whether such obligations are performed by BPWCP, an Affiliate or a Third Party), and (ii) with respect to the receipt of the Services, it is understood that the term “Company” includes the Company (or its permitted successor(s) and assign(s)) and the Business, as the case may be, with respect to any Service described in a Term Sheet.
(e)
The Services are provided solely for the exclusive use and benefit of the Company.
(f)
BPWCP and the Company may, by mutual written agreement, amend the Services to include other services in exchange for additional fees (“
Additional Services
”). Unless specifically stated to the contrary within a Term Sheet, and subject to Article 2, any such Additional Services will be deemed to be a “Service” for the remainder of the Term or, if applicable, the Extended Term.
(g)
In this Agreement:
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(i)
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“Existing”
means existing on the Execution Date of the PSA.
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(ii)
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“
BP Indemnitees
” means BP, each of BP’s Affiliates, and the officers, directors, independent contractors, partners, shareholders, members, managers, employees, agents, and successors and assigns of BP and BP’s Affiliates.
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(iii)
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“
Claim
” means any action, suit, proceeding or demand brought against a Party by a third party that is not an Affiliate of a Party.
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(iv)
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“
Company Indemnitees
” means Company, each of Company’s Affiliates, and the officers, directors, independent contractors, partners, shareholders, members, managers, employees, agents, and successors and assigns of Company and Company’s Affiliates.
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(v)
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“Indemnified Losses”
means (i) any and all damages, penalties, costs and fines that are finally awarded against a Party by a court of
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competent jurisdiction or governmental authority in connection with a Claim and associated costs of defense (including court costs and reasonable attorneys’ fees and expenses), and (ii) any amounts paid in settlement of a Claim.
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(vi)
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“Third Party IP”
means any and all third party software and other Intellectual Property owned by third parties that is used by BPWCP, or provided to the Company by BPWCP, in the course of providing the Services.
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1.2
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Level of Services and Limitations
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(a)
BPWCP will perform the Services with reasonable care and in the manner and at a relative level of service (including type, quality, quantity, and level of priority) (i) substantially similar to the Services provided in the ordinary course of business with respect to the Business in the six month period prior to execution of the PSA, and (ii) in accordance with the specific provisions of each Term Sheet, as applicable. Nothing in this Agreement will require BPWCP to favor the businesses of the Company over its own businesses or those of any of its divisions, business units, or Affiliates. The Company will not be entitled to any new service or to substantially increase its use of any of the Services above the level of use specified in this Agreement or in an applicable Term Sheet, without the prior written consent of BPWCP. To the extent any Services are being provided to the Business by a Third Party on the date of this Agreement, BPWCP will use Reasonable Efforts to provide or procure the provision of the Services to the Company by such Third Party for the applicable term of such Service.
(b)
From the Effective Date and throughout the Term, BPWCP shall:
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(i)
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With respect to Existing BPWCP personnel who have experience with the systems and processes that are included within the Services, use Reasonable Efforts to retain them in the positions they occupied on the Execution Date of the PSA;
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(ii)
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ensure that its personnel whose decisions are necessary for the performance of the Services are available at reasonable times for consultation by the Company on any matter relating to the Services;
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(iii)
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facilitate Company’s communication with Existing third party suppliers and vendors to enable Company to establish its own sources of supply of products and services used in the performance of the Services;
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(iv)
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except as (i) expressly provided otherwise in a schedule to this Agreement or in a Term Sheet or (ii) authorized to do so in advance in writing by the Company, not use, access, attempt to
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access, or interfere with any of the Company’s information technology systems or data;
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(v)
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maintain Existing system controls, system and data backup and recovery procedures, and physical and logical security procedures, controls and safeguards to protect the confidentiality and integrity of Business data that is processed and/or stored by BPWCP as part of the Services; and
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(vi)
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cooperate with the Company in implementing and observing security arrangements, requirements, or protocols that the Company considers reasonably appropriate to prevent BPWCP or any Third Party from using or accessing any of the Company’s information technology systems or data to the extent that such use or access is not in connection with the Services or is otherwise without authorization.
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(c)
In providing the Services, except as required pursuant to Section 2.6 or unless specifically set forth in the PSA or a Term Sheet, BPWCP is not obligated to:
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(i)
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purchase, lease, or license any additional equipment or software;
provided, however
, that if requested by the Company in writing, BPWCP may, in its sole discretion, elect to purchase, lease, or license equipment or software if such equipment or software is reasonably necessary for the provision of Services hereunder, and the Company shall reimburse BPWCP for all costs associated with such purchases, leases, or licenses;
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(ii)
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create or supply any documentation or information not existing as of the date of this Agreement or available through minimal efforts of BPWCP (as reasonably determined by BPWCP);
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(iii)
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enter into additional contracts with Third Parties providing services to BPWCP or any of its Affiliates (“
Third Party Providers
”) or change the scope of current agreements with Third Party Providers. However, if requested by the Company in writing, BPWCP may, in its sole discretion, (A) elect to enter into additional contracts or change the scope of current agreements with Third Party Providers if BPWCP believes that such additional or changed agreements are reasonably necessary for the provision of the Services or (B) undertake such matters as Additional Services under this Agreement. In connection with the foregoing, the Company agrees to reimburse BPWCP for all charges payable to such Third Party Providers and actual incremental costs, if any, incurred by BPWCP and attributable to such additional or changed agreements.
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(d)
BPWCP’s obligation to provide the Services shall be conditioned upon and subject to any legal obligations, prohibitions or restrictions applicable to it, and this Agreement shall not obligate BPWCP to violate, modify or eliminate any such obligation, prohibition or restriction. For the avoidance of doubt, BPWCP is not obligated to provide any Service to the extent and for so long as the performance of such Service: (i) would require BPWCP to violate any applicable Laws; (ii) would result in the breach of any software license or other applicable contract, including any Third Party Provider agreement relevant to the provision of the Services; or (iii) requires information or assistance from the Company that the Company has failed to provide. This Agreement is a purely commercial transaction between the Parties and nothing stated in this Agreement shall operate to create any special or fiduciary duty between the Parties. Notwithstanding anything to the contrary, all matters pertaining to the employment, supervision, compensation, promotion and discharge of any personnel of BPWCP are the responsibility of BPWCP. All such employment arrangements are solely BPWCP’s obligation, and the Company shall have no liability with respect thereto.
(e)
If any Service is performed by a Third Party Provider: (i) all charges from such Third Party Provider that are attributable to the Services provided to the Company are included in the fees payable to BPWCP unless expressly provided to the contrary in a Term Sheet; (ii) BPWCP shall be solely responsible for directing and supervising such Third Party Providers; and (iii) the Company shall not, in any circumstance, attempt to independently direct or instruct such Third Party Provider’s activities without BPWCP’s express, prior written authorization for such direction or instruction.
(f)
Except as may be expressly contemplated by the PSA, BPWCP is not obligated to assign any licenses, rights, or contracts to the Company.
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1.3
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Assumption of Services; Partial Termination
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(a)
The Company will assume performance of all of the Services described in this Agreement as soon as commercially practicable following the Effective Date, with the goal of conducting for itself the Services on or prior to the applicable Term Sheet Termination Date for each Service as set forth in the applicable Term Sheet. BPWCP has no obligation to perform any Services after the termination of such Service pursuant to the terms of the applicable Term Sheet. The Company shall, with BPWCP’s reasonable assistance, obtain all approvals, permits and licenses, complete any registrations, and implement any systems, in each case, as may be reasonably necessary for it to perform the Services independently as soon as commercially practicable following the Closing.
(b)
The Company may terminate any Service by giving BPWCP not less than 20 Business Days’ prior written notice. The termination notice shall specify the effective date of termination, which shall be no more than 60 days after the date of the notice. If the Company terminates some but not all of the Services provided pursuant to a Term Sheet, the parties shall negotiate an equitable adjustment to the fees payable pursuant to that Term Sheet with the intent that any cost savings resulting from the cessation of the terminated Services shall be passed through to the Company. BPWCP shall use Reasonable Efforts to eliminate and/or reduce costs
as Services are terminated so as to minimize the ongoing fees payable by the Company. If the Company terminates a Term Sheet in its entirety, all of the fees payable for Services pursuant to that Term Sheet shall cease to accrue on and from the effective date of termination, and BPWCP shall refund the Company any prepaid Service fees that are attributable to periods of Service on and after the effective date of termination. The Company shall not be required to pay any early termination fees (including breakage fees, demobilization fees or similar early termination charges to Third Party Providers) except as expressly provided in a Term Sheet.
If charges for any Service to the Company are on an hourly time and/or materials basis, then BPWCP shall maintain or cause to be maintained at its offices time and/or cost of materials records as are customarily maintained by or for its own operations relating to the Services rendered under this Agreement. During the Term and, if applicable, the Extended Term, the Company will have the right to request and receive copies of such records of BPWCP no more than once in each two month period following the Effective Date.
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1.5
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Managers and Sponsors
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(a)
During the Term, (i) BPWCP shall appoint one of its employees (the “
BPWCP Manager
”) who will have overall responsibility for managing and coordinating the delivery of the Services and will coordinate and consult with the Company Manager (as defined below) and (ii) BPWCP shall appoint one of its employees (the “
BPWCP Sponsor
”) who will have sole responsibility for receiving and responding to requests from the Company Sponsor (as defined below) for approved Company employees’ access to any BPWCP networks or other external connectivity systems provided by BPWCP as part of the Services. BPWCP may, at its reasonable discretion, following consultation with the Company Manager, select other individuals to serve in the capacity of the BPWCP Manager and/or BPWCP Sponsor during the Term or any Extended Term. The BPWCP Manager and the BPWCP Sponsor are designated in
Schedule 1.5(a)
.
(b)
During the Term, (i) the Company will appoint one of its employees (the “
Company Manager
”) who will have overall responsibility for managing and coordinating receipt of the Services and will coordinate and consult with the BPWCP Manager and (ii) the Company shall appoint one of its employees (the “
Company Sponsor
”) who will have sole responsibility for sending requests to the BPWCP Sponsor for approved Company employees’ access to any BPWCP networks or other external connectivity systems provided by BPWCP as part of the Services. The Company may, at its reasonable discretion, following consultation with the BPWCP Manager, select other individuals to serve in the capacity of the Company Manager and/or Company Sponsor during the Term or any Extended Term. The Company Manager and the Company Sponsor are designated in
Schedule 1.5(b)
.
(c)
The BPWCP Manager and the Company Manager will serve as the respective primary points of contact for BPWCP and the Company between the Parties, and will meet regularly to
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(i)
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discuss and, as reasonably needed, jointly develop, monitor and oversee the implementation of appropriate plans for separating the Business from BPWCP’s businesses and operations, and for preparing the Business for standalone operation not later than the Agreement Termination Date; and
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(ii)
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address issues and attempt to resolve disputes that may arise during the course of this Agreement.
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(d)
Any instruction, direction, or approval given by the Company Manager to the BPWCP Manager will be deemed to be given by the Company, and BPWCP will be entitled to act on such instruction, direction, or approval, provided it is not in conflict with the terms of this Agreement. Any instruction, direction, or approval given by the BPWCP Manager to the Company Manager will be deemed to be given by BPWCP, and the Company will be entitled to act on such instructions, direction, or approval.
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1.6
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Company Obligations
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From the Effective Date and throughout the Term and any Extended Term, the Company shall:
(a)
at its own cost, promptly provide to BPWCP’s personnel and its contractors or agents engaged in providing Services all information (including copies of documents and data) and other assistance reasonably requested by such personnel, contractors, or agents as needed to provide or procure the provision of the Services to the Company;
(b)
ensure that the Company’s personnel whose decisions are necessary for the performance of the Services are available at reasonable times for consultation on any matter relating to the Services;
(c)
except as (i) expressly provided otherwise in a schedule to this Agreement or in a Term Sheet or (ii) authorized to do so in advance in writing by BPWCP, not use, access, attempt to access, or interfere with any of BPWCP’s information technology systems or data;
(d)
cooperate with BPWCP in implementing and observing security arrangements, requirements, or protocols that BPWCP considers reasonably appropriate to prevent the Company or any Third Party from using or accessing any of BPWCP’s information technology systems or data without authorization; and
(e)
provide BPWCP’s personnel and its contractors or agents engaged in providing Services with electronic and physical access to the Company’s premises and facilities as reasonably necessary to perform the Services. The extent of such access will be no less than the access formerly required to properly provide analogous or comparable services to the Business prior to execution of the PSA. All rights of access under this clause will at all times be subject to the Company’s applicable health, safety, security, and environmental policies; and
(f)
perform all other obligations of the Company as specified in the Term Sheets.
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1.7
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Validity of Data and Information
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BPWCP is entitled to rely upon the genuineness, validity, and truthfulness of any data, document, instrument, or other writing furnished by the Company in connection with the performance of the Services unless such document, instrument, or other writing appears on its face to be erroneous, fraudulent, false, or forged.
BPWCP represents and warrants that:
(a)
The performance of the Services will not result in the breach of any license with respect to IT Systems or other Third Party Intellectual Property, or any other applicable contract, including any Third Party Provider agreement relevant to the provision of the Services.
(b)
The only Third Party Provider and Third Party licensor consents that must be obtained in order to permit BPWCP to fully perform the Services as contemplated by this Agreement are listed in Schedule 1.8(b).
ARTICLE 2
TERM AND TERMINATION
(a)
The term of this Agreement will commence on the Effective Date and will continue until all Services rendered pursuant to any Term Sheet have been terminated pursuant to the terms of each such Term Sheet (the “
Term
”). Subject to Sections 2.2 and 2.3, this Agreement will terminate at the end of the Term or, if applicable, the Extended Term (the “
Agreement Termination Date
”).
(b)
Some Services will not necessarily be provided by BPWCP at all times during the entire Term or, if applicable, the Extended Term. Each of the Term Sheets sets out the date on which the Service(s) provided pursuant to such Term Sheet will end (the “
Term Sheet Termination Date
”) during the Term. Unless the Term Sheet Termination Date for a particular Service provided hereunder is extended pursuant to the terms of this Agreement, such date shall be the termination date as to such Service and, for the avoidance of doubt, notwithstanding anything to the contrary contained herein, BPWCP shall have no obligation to provide any Service hereunder after the Term Sheet Termination Date for such Service. Notwithstanding the termination of the provision of any Service prior to the Agreement Termination Date, this Agreement will continue in effect until the Agreement Termination Date or the last date on which the Parties mutually agree that the last Service is to be delivered to the Company, whichever is earlier.
(a)
Company may elect, in its sole discretion, to extend the Term of a Term Sheet by up to 180 days by giving written notice of such extension to BPWCP at least 30 days before the applicable Term Sheet Termination Date. Any further extension of the Term for such Term Sheet is permitted only with the prior written agreement of BPWCP. The period of extension of the Term Sheet is referred to as the
“Extended Term”
and the Services provided during the Extended Term are referred to as the “
Extended Services
”. Company may exercise such extension rights independently for each Term Sheet.
(b)
Other than as set forth in Section 2.2(a), there will be no extensions of any of the Term Sheet Termination Dates for any Services.
(c)
The Fees for any Extended Services will be increased by ten percent (10%) of the Fees applicable to each such Service during the initial term associated with the provision of such Service. Alternatively, in lieu of such increase BPWCP has the right to pass through to the Company any increases in BPWCP’s own direct costs and the Third Party costs to provide such Extended Services relative to such costs during the initial term associated with the provision of such Service. BPWCP shall substantiate any such increase in costs to the Company’s reasonable satisfaction.
(a)
This Agreement and any Term Sheet may be terminated prior to the Agreement Termination Date or Term Sheet Termination Date, respectively, as follows:
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(i)
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by mutual written consent of the Company and BPWCP;
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(ii)
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by the Company, as to any particular Service, under Section 1.3(b);
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(iii)
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by the Company, on the one hand, or BPWCP, on the other hand, if the other Party breaches any of its material covenants or other material obligations in this Agreement, and fails to cure such breach as promptly as commercially practicable but in any event within 20 Business Days after receipt of written notice from the non-breaching Party of such breach (which notice must specify, in commercially reasonable detail, the nature of such breach); at the expiration of such cure period, the non-breaching Party is entitled to immediately, by written notice to the breaching Party, terminate this Agreement, without penalty, liability, or further obligation (except for those obligations that have accrued prior to the termination of this Agreement);
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(iv)
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by either Party upon the occurrence of an Insolvency Event in respect of a Party; or
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(v)
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by either Party pursuant to Section 7.7(c).
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(b)
“
Insolvency Event
” means, in relation to any Party, that such Party:
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(i)
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files a petition commencing a voluntary case under any chapter of the federal bankruptcy laws; or
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(ii)
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files a petition or answer or consent seeking reorganization, arrangement, adjustment or composition under any similar applicable federal law, or consents to the filing of any such petition, answer or consent; or
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(iii)
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appoints or consents to the appointment of a custodian, receiver, liquidator, trustee, assignee or other similar official in bankruptcy or insolvency with respect to such Party of any substantial part of its property; or
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(iv)
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has an order for relief against such Party entered by a court having jurisdiction in the premises under any chapter of the federal bankruptcy laws, and such order remains in force undischarged or unstayed for 30 days; or
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(v)
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has a decree or order of a court having jurisdiction in the premises for the appointment of a custodian, receiver, liquidator, trustee, assignee or other similar official in bankruptcy or insolvency of such Party or any substantial part of its property, or for the winding up or liquidation of its affairs, has been entered, and such decree or order has remained in force undischarged or unstayed for a period of 30 days; or
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(vi)
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has admitted in writing its inability to pay its debts generally as they become due or has made an assignment for the benefit of its creditors; or
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(vii)
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causes or is subject to any event with respect to it which, under the applicable laws of any jurisdiction, has an analogous effect to any of the events specified in (i) to (vi) inclusive.
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For the avoidance of doubt, an Insolvency Event shall not occur in relation to a Party as a result of any proceeding, process or other administrative action taken which is vexatious, frivolous or an abuse of the process of the court.
(c)
If a Party has the right to terminate this Agreement in its entirety (including all Term Sheets) pursuant to Section 2.3(a) then such Party may, in lieu of terminating this Agreement in its entirety, elect to terminate one or more Term Sheets without terminating this Agreement or the remaining Term Sheets.
(d)
If this Agreement is terminated prior to the Agreement Termination Date pursuant to Section 2.3(a), then such earlier date of termination will be deemed to be the Agreement Termination Date.
2.4
Suspension of Services for Non-Payment
. If any undisputed amount exceeding US$250,000 due to BPWCP in respect of Services delivered by BPWCP to the Company is not the subject of a bona fide dispute and is not paid when due (or paid into escrow as provided in Section 3.3(b)), BPWCP may provide written notice to the Company that the amount is due and unpaid and, if the Company has not paid the unpaid amount in full by the date falling seven (7) Business Days from the date of receipt of BPWCP’s written notice, BPWCP may immediately suspend further deliveries of that Service and all dependent Services to which such non-payment relates until payment of such outstanding amount is received by BPWCP.
Notwithstanding anything to the contrary in Sections 2.1, 2.2, or 2.3, (a) the Parties’ obligations in Sections 2.5 and 2.6, Article 5, Article 6, and Article 7 of this Agreement will survive any termination of this Agreement or any Term Sheet and (b) any termination of this Agreement is without prejudice to any rights or obligations arising out of or in connection with this Agreement which have vested, matured, or accrued prior to such termination.
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2.6
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Procedures Upon Termination of Services
.
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(a)
Upon termination of a Service under this Agreement, to the maximum extent permitted by applicable Laws, the Parties shall comply with the following disengagement provisions:
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(i)
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Not less than 90 days before the scheduled Termination Date the Parties shall develop a plan detailing each Party’s responsibilities with respect to the transfer of operational responsibility for the Services to the Company or its designee (the “Transition Plan”). The Transition Plan shall include a plan for the migration of any Company Business Information that is processed and/or stored in BPWCP systems to Company systems. BPWCP shall provide all information reasonably requested by the Company in connection with the development and execution of the Transition Plan, including (i) support for the design, planning and execution of a data migration for Company Business Information stored in BPWCP systems (it being understood that the Company shall be primarily responsible for the migration, and that BPWCP’s role shall be to support the migration); (ii) cooperating with the Company in the preparation for and conduct of migration testing; (iii) delivering Company-requested data files for Company Business Information, with content listings and control file information, in a file format reasonably acceptable to the Company; and (iv) providing parallel processing and support for testing as requested by the Company.
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(ii)
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In accordance with the Transition Plan (or, in the absence of agreement on the timing for data migration, on the effective date of termination of a Service) BPWCP shall deliver to the Company all Business Information of the Company in BPWCP’s possession, including all books, records, contracts, receipts for deposits and all other papers or documents maintained by BPWCP that pertain exclusively to such Service, except that BPWCP may retain archival copies of materials provided to the Company under this Section 2.6;
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(iii)
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In accordance with the Transition Plan (or, in the absence of agreement on the timing for data migration, on the effective date of termination of a Service) the Company shall deliver to BPWCP all Business Information of BPWCP in the Company’s possession that is no longer required in connection with the Company’s use of any continuing Services (excluding any Business Information of the Company that is to be delivered to the Company pursuant to paragraph (ii) and any other BPWCP Business Information that the Company is entitled to retain pursuant to the PSA, except that the Company may retain archival copies of materials provided to BPWCP under this Section 2.5; and
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(iv)
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BPWCP shall provide the assistance and support described in this Section 2.6(a) as far as practicable utilizing existing personnel and resources, at no additional charge to the Company. If additional resources are reasonably required, BPWCP may pass through the actual cost of those resources to the Company without markup. BPWCP shall notify the Company in advance of any additional resources and charges that will be payable pursuant to this paragraph (iv).
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(b)
The Parties’ treatment of any of archival copies retained pursuant to Sections 2.6(a)(i) and 2.6(a)(ii) will continue to be governed by Article 6 of this Agreement, as applicable thereto.
(c)
Upon the expiration or termination of the term for each Service, the Company shall certify to BPWCP in writing that all software for which consents were obtained for use by BPWCP or BPWCP’s Affiliates in connection with the provision of each such Service has either been de-installed or has been licensed by the Company from the applicable Third Party. BPWCP has the right to confirm, at the Company’s expense, that after the expiration or termination of the term for each Service the use by the Company of all such software has either ceased or continues only under license(s) the Company has acquired from the applicable Third Party.
ARTICLE 3
COMPENSATION
As consideration for the Services, the Company shall pay, or cause to be paid, to BPWCP the amount specified for each Service as set forth in the applicable Term Sheet (collectively, the “
Fees
”).
Within 20 Business Days after the end of each calendar month, BPWCP and each of its Affiliates providing Services will submit one invoice to the Company for all Services either provided during such calendar month under this Agreement or to be provided in future months and which are to be paid in advance pursuant to a Term Sheet. The invoices will include a reasonably detailed description of, and specify the amount for, each type of Service.
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3.1
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Time of Payment; Disputes; Interest; No Deductions
.
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(a)
The Company shall pay, or cause to be paid, all amounts due under this Agreement within 20 Business Days after the proper delivery of each invoice (the
“Payment Date”
). Such payment shall be made in immediately available funds by bank wire transfer to an account designated by BPWCP.
(b)
The Company shall promptly notify BPWCP, and in no event later than 10 Business Days following receipt of such invoice, of any objection of the Company with regard to such invoice. If requested by the Company in such notice of any objection, BPWCP shall promptly furnish to the Company reasonable documentation to substantiate the amounts billed including listings of the dates, times, and amounts of the Services in question, where applicable and practicable. Upon delivery of such documentation, the Company and BPWCP shall cooperate in good faith and use Reasonable Efforts to resolve any remaining dispute expeditiously. Upon the request of BPWCP, the Company shall escrow disputed amounts that exceed US$250,000. Neither Party shall place (or allow the placement) of any lien or encumbrances on or against any such escrowed amounts. In connection therewith, each Party hereby agrees to indemnify, defend and hold harmless the other Party against any and all Losses (as defined below) arising in connection with any such lien or encumbrance placed upon the escrowed amounts. Any adjustment payment required to be made in accordance with the resolution of a dispute shall be made within five (5) Business Days of the date of that resolution.
(c)
If the Company has not paid any undisputed amounts of an invoice by its due date, such undisputed amounts will accrue interest at the maximum rate allowed by Law or a rate equal to the Interest Rate and the Company shall pay BPWCP such accrued interest.
(d)
Any amount subsequently determined to have been wrongly withheld and any amount subsequently determined to have been overbilled, shall bear interest at the above rate from (and including) the date when the amount should have been paid if the dispute had not occurred until (but excluding) the date of actual payment in full of such amount and such interest.
(e)
Any fees and charges that are paid by the Company (whether or not disputed) and that are subsequently determined to have been overbilled shall bear interest at the above rate from (and including) the date when the amount was paid until (but excluding) the date of actual payment in full of such amount and such interest.
(f)
Subject to compliance with applicable Law, the Parties shall cooperate so as to minimize the requirement for any such withholding. If the Parties agree to the Payment Date, they may net invoices for all undisputed amounts that are due to each other on the same date pursuant to this Agreement. In that case, prior to the Payment Date, the Parties shall confirm in writing the invoice amounts and the amount remaining, if any, after net out to the Party owed the balance. Notwithstanding the above, payments for any quantity, quality, demurrage or other claims shall not be included in the netting of invoices.
BPWCP and the Company shall each be responsible for fifty percent (50%) of all state, county and local transfer, sales, use, stamp, registration or other similar Taxes resulting from the transactions contemplated by this Agreement.
Either Party, upon at least thirty (30) days prior written notice to the other Party, shall have the right to audit such other Party's records pertaining to performance under this Agreement and the fees charged hereunder, in each case during the prior twelve (12) month period or any portion thereof. The Party conducting the audit shall do so at the offices of the other Party, unless otherwise agreed, during normal business hours, and shall make every reasonable effort to conduct the audit in a manner that will result in a minimum of inconvenience to the Party being audited. The Party audited shall provide reasonable cooperation and assistance in the conduct of the audit and shall reply in writing to an audit report within sixty (60) days after receipt of such report.
ARTICLE 4
FORCE MAJEURE
(a)
Subject to Paragraph (c) below, a Party will not be liable for any failure to perform its obligations under this Agreement, including any transaction, to the extent that such failure or delay may be due to any of the following events (each such event, a “
Force Majeure
” event):
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(i)
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Compliance with any requirement of applicable Laws.
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(ii)
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Restriction or cessation of provision of Services due to the imposition of conditions or requirements by any Government Authority that makes it necessary to cease or to reduce the provision of the Services.
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(iii)
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Hostilities of war (declared or undeclared), embargoes, blockades, civil unrest, riots or disorders, terrorism, or sabotage.
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(iv)
|
Fires, explosions, lightning, maritime peril, collisions, storms, landslides, earthquakes, floods, and other acts of God.
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(v)
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Strikes, lockouts, or other labor difficulties (whether or not involving employees of BPWCP or the Company); provided, however, that settlement of strikes and other labor difficulties shall be wholly within the discretion of the Party having difficulty.
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(vi)
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Disruption or breakdown of production or transportation facilities, equipment, labor or materials, including, without limitation, the closing of harbors, railroads or pipelines.
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(vii)
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Any other cause whether or not of the same class or kind, whether foreseeable or unforeseeable, that is reasonably beyond the control of either Party to the extent such event prevents or interferes with the performance of this Agreement, including any transaction, which, by the exercise of due diligence, such Party could not have been able to remedy, avoid or overcome.
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(b)
For purposes of this Agreement, the term “Force Majeure” expressly excludes (a) a failure of performance of any person other than the Parties, except to the extent that such failure was caused by an event that would otherwise satisfy the definition of a Force Majeure event as set forth in this Article 4, (b) any lack of a market or unfavorable market conditions for any good supplied hereunder, (c) any failure by a Party to apply for, obtain or maintain any permit, approval, or right of way necessary under applicable Law for the performance of any obligation hereunder, (d) a Party’s inability to economically perform its obligations under this Agreement, and (e) any failure of performance that could have been avoided through the use of commercially reasonable alternative sources and workarounds.
(c)
Nothing in Paragraph (a) above shall relieve the Company of the obligation to pay in full any amount due for the Services actually provided hereunder.
(d)
In the event that either Party believes a Force Majeure event has occurred that will require it to invoke the provisions in this Article 4, such Party shall give verbal notice to the other Party as soon as possible followed by written notice, within two (2) Business Days following the occurrence of such event, of the underlying circumstances of the particular causes of Force Majeure, the expected duration thereof and the Services affected. The Party claiming Force Majeure shall also use Reasonable Efforts to give the other Party notice of termination of the event of Force Majeure and the date when performance is expected to resume.
(e)
If provision of the Services are suspended pursuant to this Article 4 and said suspension continues for a period of thirty (30) days or more, such Services may be cancelled at the option of the Party other than the Party claiming Force Majeure by giving written notice to the Party claiming Force Majeure and without further liability of either of the Parties
with respect to such Services (other than any obligations arising pursuant to this Agreement prior to the occurrence of such Force Majeure event).
ARTICLE 5
INDEMNITY AND RELEASE
(a)
Subject to Section 5.1(b), Company agrees for itself, its successors and permitted assigns, to defend and hold the BP Indemnitees harmless from and against all Claims, and pay Indemnified Losses incurred by or imposed on any of them with respect to such Claims, that arise in connection with the Company, its successors, or permitted assigns’ use of any of the Third Party IP in a manner not authorized by this Agreement.
(b)
BP agrees for itself, its successors and permitted assigns, to defend and hold the Company Indemnitees harmless from and against all Claims, and pay Indemnified Losses incurred by or imposed on any them with respect to such Claims, that (i) arise as a result of any breach of this Agreement by BP or any of its Affiliates, or (ii) (provided Company complies with its obligations under this Agreement) are based on an allegation that the possession or use of any Third Party IP by Company, its successors or permitted assigns infringes or constitutes a misappropriation of the Intellectual Property rights or contractual rights of any third party.
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5.2
|
Indemnification Procedures; Determination of Losses; Limitation of Losses
.
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(a)
A BPWCP Indemnitee or Company Indemnitee (each an “Indemnified Party”) may make a claim for indemnification hereunder by giving written notice (a “
Claim Notice
”) to the indemnifying party. Such notice shall briefly explain the nature of the claim and the parties known to be involved, and shall specify the amount thereof to the extent known by the Indemnified Party. The indemnifying party shall respond to any Indemnified Party that has given a Claim Notice (a “
Claim Response
”) within 20 Business Days (the “
Response Period
”) after the date that the Claim Notice is given. Any Claim Notice or Claim Response shall be given in accordance with the notice requirements hereunder, and any Claim Response shall specify whether or not the indemnifying party disputes the claim for indemnification described in the Claim Notice and whether the indemnifying party will defend the Claim specified in such Claim Notice at its own cost and expense. If the indemnifying party fails to give a Claim Response within the Response Period, the indemnifying party shall be deemed to have disputed the claim for indemnification described in the related Claim Notice and to have elected not to defend any Claim specified in such Claim Notice. The aforesaid election or deemed election by the indemnifying party not to assume the defense of Indemnified Party with respect to any Claim specified in such Claim Notice, however, shall, except as contemplated by the following proviso, be subject to the right of the indemnifying party to subsequently assume the defense of Indemnified Party with respect to any such Claim at any time prior to settlement or final determination thereof; provided that the indemnifying party shall not have the right to so assume the defense of Indemnified Party with respect to any Claim which the indemnifying party has (or is deemed to have) previously elected not to defend to the extent that Indemnified Party would be materially prejudiced as a result of such assumption.
(b)
The Losses giving rise to any indemnification obligation hereunder shall be limited to the actual loss incurred by Indemnified Party (i.e., reduced by any Tax benefit afforded to Indemnified Party and insurance proceeds or other payment or recoupment payable to Indemnified Party as a result of the events giving rise to the claim for indemnification). Upon the request of the indemnifying party, Indemnified Party shall provide the indemnifying party with information sufficient to allow the indemnifying party to calculate the amount of the indemnity payment in accordance with this Section 5.2(b). An Indemnified Party shall take all reasonable steps to mitigate damages in respect of any claim for which it is seeking indemnification and shall use Reasonable Efforts to avoid any costs or expenses associated with such claim and, if such costs and expenses cannot be avoided, to minimize the amount thereof.
(c)
NOTWITHSTANDING ANYTHING CONTAINED TO THE CONTRARY IN ANY OTHER PROVISION OF THIS AGREEMENT, NEITHER BPWCP NOR THE COMPANY SHALL BE LIABLE UNDER OR IN CONNECTION WITH THE AGREEMENT OR UNDER ANY OTHER THEORY OF LAW, WHETHER IN CONTRACT, TORT OR OTHERWISE, FOR ANY SPECIAL, INDIRECT, CONTINGENT, INCIDENTAL, EXEMPLARY, PUNITIVE, CONSEQUENTIAL OR OTHER SIMILAR DAMAGES (INCLUDING ANY DAMAGES ON ACCOUNT OF LOST PROFITS OR OPPORTUNITIES OR BUSINESS INTERRUPTION OR DIMINUTION IN VALUE).
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5.3
|
Disclaimer and Release
.
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TO THE MAXIMUM EXTENT ALLOWED BY LAW, AND EXCEPT AS EXPRESSLY PROVIDED IN THIS AGREEMENT OR IN THE PSA: THE BPWCP INDEMNIFIED PARTIES MAKE NO (AND DISCLAIM ANY AND ALL) REPRESENTATIONS AND WARRANTIES, EXPRESS OR IMPLIED, WITH RESPECT TO THE SERVICES AND THE PERFORMANCE THEREOF, INCLUDING ANY WARRANTIES OF FITNESS FOR A PARTICULAR PURPOSE OR MERCHANTABILITY.
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5.4
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Acknowledgement of the Parties; Conspicuousness
.
|
Each Party agrees that it will not contest the validity or enforceability of any provisions of this agreement on the basis that the Party had no notice or knowledge of such provisions or that such provisions are not “conspicuous.” The Parties acknowledge and agree that the provisions contained in this Agreement that are set out in “ALL CAPS” satisfy the requirement of the “express negligence rule” and any requirement at law or in equity that provisions contained in a contract be conspicuously marked or highlighted.
ARTICLE 6
CONFIDENTIALITY
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6.1
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Confidential Information
.
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(a)
For purposes of this Agreement, “
Business Information
” means all proprietary technical, business, and financial data, documents, plans, Intellectual Property, and other information, in whatever form, relating to the operations, businesses, suppliers, customers, personnel or assets of a Party or its Affiliates (the “
Discloser
”) that is disclosed to or received by
the other Party (the “
Recipient
”) in the course of or in connection with this Agreement. Each Recipient shall hold the Business Information of the Discloser, and will cause its Affiliates, directors, officers, employees, agents, representatives, successors, assigns, accountants, and advisors to hold, in confidence, and not use or disclose such Business Information, except as reasonably required for the purposes of this Agreement or otherwise expressly permitted hereunder. The restrictions of this Article 6 shall not apply to Business Information that
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(i)
|
is or becomes generally available to the public through no breach of this section by the Recipient;
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(ii)
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was in the Recipient's possession free of any obligation of confidence prior to the time of receipt of it by the Recipient hereunder;
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(iii)
|
is developed by the Recipient without benefit of any of the Discloser's Business Information;
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(iv)
|
is rightfully obtained by the Recipient from third parties authorized at that time to make such disclosure without restriction; or
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(v)
|
is identified in writing by the Discloser as no longer proprietary or confidential.
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(b)
If a Recipient or any of its respective Affiliates, directors, officers, employees, or agents is requested pursuant to, or required by, Law to disclose any Business Information of the Discloser, such Recipient shall notify the Discloser promptly in writing of such requirement so that the Discloser may seek a protective order or other appropriate remedy or waive compliance with this Article 6, and if no such protective order or other remedy is obtained, or the Discloser waives compliance with this Article 6, the Recipient will disclose only that portion of such Business Information which it is advised in writing by its legal counsel is legally required to be disclosed and will use its Reasonable Efforts to obtain assurances that confidential treatment will be accorded such Business Information.
6.2
Length of Confidentiality Obligation
. Each Party agrees to maintain and protect the confidentiality of any Business Information that constitutes a trade secret for as long as such information remains a trade secret, and to protect all other Business Information of the other Party as set forth in this Article 6 for a period of [five]
years from the Termination Date.
ARTICLE 7
ADDITIONAL MATTERS
7.1
Governing Law
. The Agreement shall be governed by the internal laws of the State of Texas, without giving effect to its provisions relating to choice of law. The United Nations Convention on Contracts for the International Sale of Goods shall not apply to this Agreement.
7.2
Arbitration
. Any unresolved dispute arising out of or relating to this Agreement, or the breach, termination or validity thereof, shall be finally settled in accordance with the American Arbitration Association (“
AAA
”) rules for commercial arbitration in effect on the date of this Agreement. The arbitrators shall be independent and selected by AAA. If the total amount in dispute is less than One Million US Dollars ($1,000,000) there shall be a single (1) arbitrator. If the total amount in dispute is One Million US Dollars ($1,000,000) or greater, there shall be three (3) arbitrators. The award of the arbitrators shall be accompanied by a reasoned opinion. The United States Arbitration Act shall govern the interpretation, enforcement, and proceedings pursuant to the arbitration clause in this Agreement. Judgment upon the award rendered by the arbitrator(s) may be entered by any court having jurisdiction thereof. The place of arbitration shall be Houston, Texas, and the language of the arbitration shall be English. The arbitrators are not empowered to award consequential, indirect, special, punitive or exemplary damages, and each Party hereby irrevocably waives any damages in excess of actual damages. Either Party may apply to the arbitrators seeking injunctive relief until the arbitration award is rendered or the controversy is otherwise resolved. Either Party also may, without waiving any remedy under this Agreement, seek from any court having jurisdiction any interim or provisional relief that is necessary to protect the rights or property of that Party, pending the establishment of the arbitral tribunal (or pending the arbitral tribunal's determination of the merits of the controversy). The United States District Court for the Central District of California and the courts of the State of California located in Los Angeles County shall have jurisdiction to hear any action to compel arbitration or any other judicial proceedings with respect to this Agreement.
7.3
Assignment
.
(a)
Neither of the Parties to this Agreement shall assign this Agreement or any rights or obligations hereunder without the previous consent in writing of the other Party, which shall not be unreasonably withheld or delayed. In the event of an assignment in accordance with the terms of this Section 7.3, the assignor shall nevertheless remain responsible for the proper performance of this Agreement. Notwithstanding the foregoing, either Party may assign this Agreement to any of its Affiliates.
(b)
Any purported assignment other than in accordance with this Section 7.3 is null, void, and of no effect
7.4
Incorporated Terms
.
(a)
The following provisions of the PSA are hereby incorporated by reference into this Agreement (except that references therein to the PSA will be deemed to be references to this Agreement, unless context clearly dictates otherwise): Schedule 1.1 (Definitions and Interpretations); Section 20.2 (No Third-Party Beneficiaries); Section 20.4 (Counterparts); Section 20.5 (Notices); and Section 20.8 (Severability); and, for purposes of convenience, copies of the foregoing are appended hereto as
Exhibit A
.
(b)
Capitalized terms used but not defined in this Agreement have the meanings ascribed to such terms in the PSA.
7.5
Amendment; Entire Agreement
.
(a)
No amendment of any provision of this Agreement (including the Term Sheets) will be valid unless the same is in writing and signed by the Company and BPWCP.
(b)
This Agreement (including the Term Sheets and all schedules hereto) and the applicable Transaction Documents constitute the entire agreement between the Parties and supersede any prior understandings, agreements, or representations by or between the Parties, written or oral, to the extent they have related in any way to the subject matter of this Agreement.
7.6
Conflict or Inconsistency
. In the event of any inconsistency or conflict between provisions in the body of this Agreement and the provisions in a Term Sheet, the provisions in the relevant Term Sheet shall prevail.
7.7
Anti-Corruption
.
(a)
The Company and BPWCP each warrant and undertake to the other that in connection with this Agreement and the performance thereof, they will each respectively comply with all applicable Laws, regulations, rules and requirements of the United States of America, the United Kingdom or any other relevant jurisdiction relating to anti-bribery or anti-money laundering and that they shall each respectively take no action which would subject the other to fines or penalties under such Laws, regulations, rules or requirements.
(b)
The Company and BPWCP each represent, warrant and undertake to the other that they shall not, directly or indirectly pay, offer, give or promise to pay or authorize the payment of, any monies or other things of value to:
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(i)
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a government official or an officer or employee of a government or any department, agency or instrumentality of any government;
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(ii)
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an officer or employee of a public international organization;
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(iii)
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any person acting in an official capacity for or on behalf of any government or department, agency, or instrumentality of such government or of any public international organization;
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(iv)
|
any political Party or official thereof, or any candidate for political office; or
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(v)
|
any other person, individual or entity at the suggestion, request or direction or for the benefit of any of the above-described persons and entities.
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(c)
The Company or BPWCP may terminate this Agreement forthwith upon written notice to the other at any time, if in their reasonable judgment the other is in breach of any of the above representations, warranties or undertakings.
7.8
Compliance with Laws
. In connection with the performance of their duties and obligations hereunder, and the Parties each agree to comply with all applicable Laws, including those related to antitrust and competition law matters; provided however, notwithstanding anything to the contrary in this Agreement, neither Party shall take any action that is prohibited by or penalized under the Laws of the United States.
7.9
Independent Parties
. Notwithstanding anything in this Agreement to the contrary, the Company and BPWCP are not and shall not be considered to be joint venturers, partners or agents (except as specified in this Agreement) of the other and neither shall have the power to bind or obligate the other.
The Parties have executed and delivered this Agreement as of the date first written above.
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BP WEST COAST PRODUCTS LLC
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By:
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Name:
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Title:
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TESORO REFINING AND MARKETING
COMPANY
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By:
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Name:
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Title:
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Schedule 1.1(b) Term Sheets
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Schedule 1.1(b)(i) Base IT Services
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2
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Base IT Services, Subpart 1 Base IT Service 1: I-Link Service
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3
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Base IT Services, Subpart 2 Base IT Service 2: Extranet Service
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5
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Base IT Services, Subpart 3 Base IT Service 3: IT Management Support Service
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7
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Schedule 1.1(b)(ii) Price Book Service
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9
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Schedule 1.1(b)(iii) Shared IT Systems Service
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13
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Schedule 1.1(b)(iv) Business Applications Services
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19
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Business Applications Services, Subpart 1 Applications Service 1: Refining Applications Service
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21
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Business Applications Services, Subpart 2 Applications Service 2: Supply and Optimization Applications Service
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23
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Business Applications Services, Subpart 3 Applications Service 3: Pipelines and Transport Operations Applications Service
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25
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Schedule 1.1(b)(v) Payment Card Processing and Applications
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32
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Schedule 1.1(b)(vi) ABSC Service
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1
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Schedule 1.1(b)(i)
Base IT Services
OVERVIEW:
BPWCP will provide the following services that are considered “
Base IT Services
”:
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•
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Base IT Service 1: I-Link Service
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•
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Base IT Service 2: Extranet Service
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•
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Base IT Service 3: IT Management Support Service
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The following subparts of this Schedule 1.1(b)(i) (the “
Subparts
”) describe each of the Base IT Services in more detail.
Base IT Services, Subpart 1
Base IT Service 1: I-Link Service
The Base IT Service 1 described herein shall be referred to as the “
I-Link Service
.” I-Link is a proprietary connectivity solution of BPWCP that provides secure remote user access to applications and services residing on BPWCP’s global network (the “
Network
”).
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2
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DELIVERABLES AND CONDITIONS
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2.1
A mutually agreed list of named employees and contractors of the Company will be provided with I-Link accounts and given a specific profile of access rights to the Network.
2.2
Provide and manage I-Link account services.
2.3
Provide, manage, support and maintain secure links to sites and applications that will be accessed via I-Link. The applications that will be accessed with I-Link are limited to those applications listed in Schedule 1.1(b)(i), Schedule 1.1(b)(ii), Schedule 1.1(b)(iii), Schedule 1.1(b)(iv), Schedule 1.1(b)(v), and Schedule 1.1(b)(vi).
2.4
Access to the Network through the I-Link Protocol will be implemented in alignment with BPWCP’s applicable digital security policies.
Help desk support for the I-Link Service and applicable application servers will be provided. The Company shall be solely responsible for desktop support of its PC image.
Contact for this service will be through BPWCP’s Service Desk.
Issue escalation for issues with services described in this Subpart will be through the following contacts:
BPWCP Contact
:
Name: David Skudlarek
Telephone: +1 (630) 836-4710
E-Mail: david.skudlarek@bp.com
Company Contact
:
Name: Judy Howard
Telephone: (210) 626-6967
E-Mail: judy.p.howard@tsocorp.com
Starting July 1, 2012 or on Closing, whichever occurs later, the Company will pay BPWCP a US $150 per user per year. This amount includes no more than 30 days of work per month by the number of FTEs initially assigned to the Service by BPWCP. The Company shall make all such payments to BPWCP quarterly in advance. Should the support level required to perform the Service be more than such 30 days of work by such FTEs, then BPWCP will advise the Company of such requirement and request a project be developed and designed and billed in addition to the base payment as an Additional Service. BPWCP will have no obligation to perform such Additional Service unless and until the terms and price for such Additional Service are agreed to in writing by the Company.
Users**
**[Final number of users will be determined prior to Closing.]
The costs set forth in this section do not include Fees to migrate the Business Information and/or related systems of the Company from BPWCP’s systems to the Company’s.
The Term Sheet Termination Date of the Service to be provided pursuant to this Subpart shall be the earlier to occur of: (a) the day on which the 12 month anniversary of the Closing Date occurs; or (b) the effective date of early termination by the Company or BPWCP in accordance with Section 2.3 of the Agreement, with no early termination penalties, provided that such effective date is not earlier than 90 days after BPWCP’s receipt of the termination notice; and further provided however, that the term of this Service shall at all times be co-terminus with the term of the Business Applications Services in Schedule 1.1(b)(iv). Upon signing of the PSA, the Company reserves the right to accept or decline this Subpart. If the Company declines or terminates this Subpart, BP is released from any obligation to provide services under any of the other Subparts of this Schedule 1.1(b)(i).
Base IT Services, Subpart 2
Base IT Service 2: Extranet Service
The Base IT Service 2 described herein shall be referred to as the “
Extranet Service
.” The Extranet Service is a proprietary connectivity solution of BPWCP that provides secure remote access between users and applications on the Company’s network and applications residing on the Network.
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7
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DELIVERABLES AND CONDITIONS
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•
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Provide and manage Extranet Service.
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•
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Provide, manage, support and maintain secure links to sites and applications that will be accessed via BPWCP’s extranet. The Service Provider applications that will be accessed via the Extranet are limited to applications listed in Schedule 1.1(b)(i), Schedule 1.1(b)(ii), Schedule 1.1(b)(iii), Schedule 1.1(b)(iv), Schedule 1.1(b)(v), and Schedule 1.1(b)(vi).
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•
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Access to the Network through BPWCP’s extranet will be implemented in alignment with BPWCP’s applicable digital security policies.
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•
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All costs associated with delivering this service are included in Section 4 of this Subpart.
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Help desk support for the Extranet Service will be provided.
CONTACT FOR THIS SERVICE WILL BE THROUGH BPWCP’S SERVICE DESK. DETAILED CONTACT INFORMATION IS
provided in the Base IT Services, Subpart 3, IT Management Support Service.
Issue escalation for issues with services described in this Subpart will be through the following contacts:
BPWCP Contact
:
Name: David Skudlarek
Telephone: +1 (630) 836-4710
E-Mail: david.skudlarek@bp.com
Company Contact
:
Name: Judy Howard
Telephone: (210) 626-6967
E-Mail: Judy.P.Howard@tsocorp.com
Starting July 1, 2012 or on Closing, whichever occurs later, the Company will pay BPWCP a lump sum payment of US $94,000 per month (US $282,000 per quarter). This amount includes no more than 30 days of work per month by the number of FTEs initially assigned to the Service by BPWCP. The Company shall make all such payments to BPWCP quarterly in advance. Should the support level required to perform the Service be more than such 30 days of work by such FTEs, then BPWCP will advise the Company of such requirement and request a project be developed and designed and billed in addition to the base payment as an Additional Service. BPWCP will have no obligation to perform such Additional Service unless and until the terms and price for such Additional Service are agreed to in writing by the Company. The costs set forth in this section do not include Fees to migrate the Business Information and/or related systems of the Company from BPWCP’s systems to the Company’s.
The Term Sheet Termination Date of the Service to be provided pursuant to this Subpart shall be the earlier to occur of: (a) the day on which the 12 month anniversary of the Closing Date occurs; or (b) the effective date of early termination by the Company or BPWCP in accordance with Section 2.3 of the, Agreement, with no early termination penalties, provided that such effective date is not earlier than 90 days after BPWCP’s receipt of the termination notice; and further provided however, that the term of this Service shall at all times be co-terminus with the term of the Business Applications Services in Schedule 1.1(b)(iv). Upon signing of the PSA, the Company reserves the right to accept or decline this Subpart. If the Company declines or terminates this Subpart, BP is released from any obligation to provide services under any of the other Subparts of this Schedule 1.1(b)(i).
Base IT Services, Subpart 3
Base IT Service 3: IT Management Support Service
The Base IT Service 3 described herein shall be referred to as the “
IT Management Support Service
.” The IT Management Support Service relates to support services from BPWCP provided to the Company in connection with any BPWCP Term Sheets that require the Company’s use of software or IT systems.
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12
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DELIVERABLES AND CONDITIONS
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BPWCP will address and resolve requests from employees and contractors of the Company related to the software and IT systems included in the services in accordance with the level of services and limitations described in the Agreement. Such services can be obtained through BPWCP Contact David Skudlarek at (630) 836-4710 or david.skudlarek@bp.com, which is referred to in BPWCP Term Sheets as “
BPWCP’s Service Desk
.”
The individuals listed below will be the contacts for both the IT Management Support Service and issue escalation for all Base IT Services. These individuals will also be the authorized representatives of the BPWCP Manager and Company Manager, respectively, with regard to the Shared IT Systems Service, Business Applications Services, ABSC Service, and Base IT Services.
BPWCP IT Services Manager
:
Name: David Skudlarek
Telephone: +1 (630) 836-4710
E-Mail: david.skudlarek@bp.com
Company IT Services Manager
:
Name: Judy Howard
Telephone: (210) 626-6967
E-Mail: Judy.P.Howard@tsocorp.com
Starting July 1, 2012 or on Closing, whichever occurs later, the Company will pay BPWCP a lump sum payment of US $55,000 per month (US $165,000 per quarter). This amount includes no more than 30 days of work per month by the number of FTEs initially assigned to the Service by BPWCP. Should the support level required to perform the Service be more than such 30 days of work by such FTEs, then BPWCP will advise the Company of such requirement and request a project be developed and designed and billed in addition to the base payment as an Additional Service. BPWCP will have no obligation to perform such Additional Service unless and until the terms and price for such Additional Service are agreed to in writing by the Company. The costs
set forth in this section do not include Fees to migrate the Business Information and/or related systems of the Company from BPWCP’s systems to the Company’s.
The Term Sheet Termination Date of the Service to be provided pursuant to this Subpart shall be the earlier to occur of: (a) the day on which the 12 month anniversary of the Closing Date occurs; or (b) the effective date of early termination by the Company or BPWCP in accordance with Section 2.3 of the Agreement, with no early termination penalties, provided that such effective date is not earlier than 90 days after BPWCP’s receipt of the termination notice; and further provided however, that the term of this Service shall at all times be co-terminus with the term of the longest duration of any Term Sheet contained herein and agreed to by the Company. Upon signing of the PSA, the Company reserves the right to accept or decline this Subpart. If the Company declines or terminates this Subpart, BP is released from any obligation to provide services under any of the other Subparts of this Schedule 1.1(b)(i).
Schedule 1.1(b)(ii)
Price Book Service
As specified in the Master Franchise Agreement between BPWCP and the Company, the Company (also referred to as the “
Master Franchisee
”) is responsible for providing price book support for
ampm
Mini Markets (as defined in the Master Franchise Agreement) in the Development Area (as defined in the Master Franchise Agreement). This Schedule 1.1(b)(ii) addresses the provision by BPWCP of certain support services relating to the price book (the “
Price Book Service
”) should the Company require these interim services.
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17
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DESCRIPTION OF SERVICE
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2.1
BPWCP will provide the following prior to the Company opening of new sites:
a.
Initial download of active articles currently available in the
ampm
price book for set-up in back office software (BOS) at retail sites
b.
Initial download of known area vendors
c.
Current, active
ampm
promotions
d.
Grand Opening promotions (if requested)
e.
ampm
proprietary coupons offers
f.
Initial keyboard template for point of sale (POS)
g.
Templates for site specific flex articles
2.2
During the Term of this Term Sheet, the Price Book Service will be provided for Company ARCO Sites that continue to use the GSS Retalix POS/BOS/Pocket Office solution (BP POS System). Upon conversion by the Company from the BP POS System to the Company’s POS System at any Company ARCO Site, such Company ARCO Site shall be excluded from the scope of this Term Sheet and Price Book Services shall not be provided hereunder with respect to any such site.
2.3
BPWCP will provide the following on-going maintenance services of price book to existing sites. This includ
es:
a.
Periodic
ampm
price book downloads to the BOS at retail sites with updates to product, and area vendor information
b.
Downloads of new articles including proprietary, and their associated attributes such as costs and suggested retail price, based on ampm planograms
c.
Monthly and ad-hoc promotional pricing downloads as needed
d
.
ampm
Proprietary Coupon offers
e
. Select Manufacturer Coupon set up
f
. Multi-Site Franchise (MSF) price book support including set-up and removal as requested
2.4
BPWCP will provide the Price Book Service, during business regular hours, Monday through Friday, from 8:00 am to 5:00 pm PST.
2.5
BPWCP will provide Company access to and use of the application software listed in Appendix A, attached to this Term Sheet, and certain services in support of the Company’s use of such application software in the Business:
a.
Application License Management – the Company is restricted to use of only the available license numbers listed in this Term Sheet subject to license agreements with Third Parties, as applicable, during the term of the Price Book Service.
b.
Application Access Administration – this service includes setting up access for new users and modifying access for existing users. The Company Sponsor will be solely responsible for approving or denying the access requests BPWCP receives from the Company related to this service and the Company Sponsor will have all accountability for any segregation of duties issues that are created as a result of such approvals.
c.
Implementation of Critical Software Patches and Corrections – this service includes installation of software patches and corrections as required by the relevant licensor of the application software listed in each Subpart of this Term Sheet to address problems that surface due to normal use of the application software; provided, however, such patches and corrections will be provided according to BPWCP’s schedule. This service does not include implementation of new software versions or upgrades.
Sites will receive price book technical support through the Business Service Center (BSC) under Schedule 1.1(b)(viii) for an additional cost.
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18
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ACTIVITIES NOT COVERED BY THE SERVICES
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The Parties agree and acknowledge that the following activities are expressly excluded from the Price Book Services:
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•
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Maintaining franchisees’ price book including item costs, retail prices, taxability, keyboard set-up, and flex article management.
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19
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PRICING AND PAYMENT TERMS
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Payment limited to the Price Book Service, excluding Business Service Center support, shall be a lump sum payment of $165,000 per month ($495,000 per quarter). The Company shall make all such payments to BPWCP quarterly in advance. Should the price book support level extend beyond business hours, the Company will be billed at $85/hr.
The Term Sheet Termination Date of the Price Book Service to be provided pursuant to this Term Sheet shall be the earlier to occur of: (a) the last day of the calendar month in which the 12 month anniversary of the Closing Date has occurred; or (b) the date set forth in a written notice from the Company stating its election to terminate this Term Sheet on such date, provided that such date is no earlier than 90 days from BPWCP’s receipt of such notice. After such termination, BPWCP’s obligation to retain responsibility for providing the
ampm
price book articles, promotions, and coupons to the Company shall be solely pursuant to the Master Franchise Agreement. At such time, BPWCP shall have no responsibility for providing price book support for
ampm
Mini Markets in the Development Area and Master Franchisee will be responsible for providing all such support.
BPWCP Contact
:
Name: Donna Sanker
Telephone: (714) 670-5346
Email: donna.sanker@bp.com
Company Contact
:
Name: Judy Howard
Telephone: (210) 626-6967
E-Mail: Judy.P.Howard@tsocorp.com
Appendix A
Software for use by the Company under the Price Book Service*
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Application Software Name
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Vendor Name
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Note
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MSF Portal
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SAP
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RemoteWare XcelleNet
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Sybase
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Retalix Pocket Office (RPO)
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Retalix
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Included in Retalix support within the Payment Cards Processing and Applications Term Sheet in Schedule 1.1(b)(v)
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S2K (ampm)
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Sigma Oil Company
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This is a list of major applications that will be used by the Company, which are supported by additional software (e.g. middleware) that is included as part of the Services.
Schedule 1.1(b)(iii)
Shared IT Systems Service
This Shared IT Systems Service Term Sheet addresses BPWCP providing certain Administration, Master Data and Integration systems in support of the Company’s use of the application software described in the Business Applications Services Term Sheet, the Price Book Services Term Sheet and the Payment Card Processing and Applications Term Sheet.
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2
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DELIVERABLES AND CONDITIONS
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BPWCP will provide the following services, which constitute the “
Shared IT Systems Service
”:
a. Application License Management – subject to license agreements with Third Parties, as applicable, during the term of the applicable Service.
b. Incident Management and Problem Resolution – specific to the role of these systems in support of the services described in the Business Applications Services Term Sheet, the Price Book Services Term Sheet and the Payment Card Processing and Applications Term Sheet.
c. Implementation of Critical Software Patches and Corrections – this service includes installation of software patches and corrections as required by the relevant licensor of the application software listed in Section 4 of this Term Sheet to address problems that surface due to normal use of the application software; provided, however, such patches and corrections will be provided according to BPWCP’s schedule. This service does not include implementation of new software versions or upgrades.
d. Monitoring of Production Environment – this service includes monitoring of production environments for the purpose of determining if such production environments are operating properly and to advise the Company of any planned maintenance or downtime that BPWCP believes is required to sustain the integrity of such production environments.
Issue escalation for issues with services described in this Term Sheet will be through the following contacts:
BPWCP contact for issue escalation:
Name: Eric Weck
Telephone: (630) 836-4618
E-Mail: Eric.weck@bp.com
Company contact for issue escalation:
Name: Judy Howard
Telephone: (210) 626-6967
E-Mail: Judy.P.Howard@tsocorp.com
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4
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USE OF BPWCP'S SOFTWARE AND SOFTWARE LICENSES
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The list of software that is anticipated to be used under this Service is as follows:
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Software for use under Shared IT Systems Service
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Software Name
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Vendor Name
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EDI Websphere Data Interchange
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IBM
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ETE
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BP
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IL3 / Tibco
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BP
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ISE – Informatica Shared Environment
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Informatica
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SAP Customer Master Data Management MR4 / ER4 / IR4
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SAP
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RS Master
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BP
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RSDB
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BP
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SAP Vendor/Materials Master Data Management IRV
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SAP
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SCDB
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BP
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Tivoli Access Manager – ITIM
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IBM
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Vitria
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Vitria
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This is a list of major applications that will be used by the Company, which are supported by additional software (e.g. middleware) that is included as part of the Services.
Starting on the Closing Date, the Company will pay BPWCP a lump sum payment of US $184,724 per month (US $554,173 per quarter). This amount includes no more than 30 days of work per month by the number of FTEs initially assigned to the Service by BPWCP. The Company shall make all such payments to BPWCP quarterly in advance. Should the support level required to perform the Service be more than such 30 days of work by such FTEs, then BPWCP will advise the Company of such requirement and request a project be developed and designed and billed in addition to the base payment as an Additional Service. BPWCP will have no obligation to perform such Additional Service unless and until the terms and price for such Additional Service are agreed to in writing by the Company.
The dollar amounts set forth in this Section 5 have been determined based on the software listed above; any changes in these items will result in a change in the cost for the Services provided pursuant to this Term Sheet. The costs set forth in this section do not include Fees to migrate the Business Information and/or related systems of the Company from BPWCP’s systems to the Company’s.
The Term Sheet Termination Date of the Service to be provided pursuant to this Term Sheet shall be the earlier to occur of: (a) the day on which the 12 month anniversary of the Closing Date occurs; or (b) the effective date of early termination by the Company or BPWCP in accordance with Section 2.3 of the Agreement, with no early termination penalties, provided that such effective date is not earlier than 90 days after BPWCP’s receipt of the termination notice; and further provided however, that the term of this Service shall at all times be co-terminus with the term of the longest duration of any of the Business Applications Services Term Sheet, the Price Book Services Term Sheet and the Payment Card Processing and Applications Term Sheet. Upon signing of the PSA, the Company reserves the right to accept or decline this Term Sheet. If the Company declines or terminates this term sheet, BP is released from any obligation to provide services under any of the Business Applications Services Term Sheet, the Price Book Services Term Sheet and the Payment Card Processing and Applications Term Sheet.
Schedule 1.1(b)(iv)
Business Applications Services
1.1 This Business Applications Services Term Sheet addresses BPWCP (a) allowing the Company to access and use certain application software, and (b) providing certain services to the Company in support of the Company’s use of such application software in the Refinery Business, the Carson Logistics and Marketing Terminals Business and/or the Wilmington Calciner Business.
1.2 BPWCP will provide the following services that are considered the “
Business
Applications Services
”:
a.
Applications Service 1: Refining Applications Service
b.
Applications Service 2: Supply and Optimization Applications Service
c.
Applications Service 3: Pipelines and Transport Operations Applications Service
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23
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COMMON DELIVERABLES AND CONDITIONS
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The following deliverables apply to all services described below in the Subparts of this Term Sheet:
a.
Application License Management – the Company is restricted to use of only the available license numbers listed in each Subpart of this Term Sheet subject to license agreements with Third Parties, as applicable, during the term of the applicable Service.
b.
First Level Helpdesk – this service is provided for authorized users of the application software listed in each Subpart of this Term Sheet and includes incident and problem identification and case assignment.
c.
Application Access Administration – this service includes setting up access for new users and modifying access for existing users. The Company Sponsor will be solely responsible for approving or denying the access requests BPWCP receives from the Company related to this service and the Company Sponsor will have all accountability for any segregation of duties issues that are created as a result of such approvals.
d.
Incident Management and Problem Resolution – this service includes helpdesk call tracking and case resolution.
e.
Implementation of Critical Software Patches and Corrections – this service includes installation of software patches and corrections as required by the relevant licensor of the application software listed in each Subpart of this Term Sheet to address problems that surface due to normal use of the application software; provided, however, such patches and corrections will be provided according to BPWCP’s schedule. This service does not include implementation of new software versions or upgrades.
f.
Monitoring of Production Environment – this service includes monitoring of production environments for the purpose of determining if such production environments are operating properly and to advise the Company of any planned maintenance or downtime that BPWCP believes is required to sustain the integrity of such production environments.
3.1 Contact for these services in case of day to day activities will be through BPWCP’s Service Desk. Detailed contact information is provided in the Base IT Services Term Sheet, Subpart 3, IT Management Support Service.
3.2
Issue escalation for issues with services described in this Term Sheet will be through the following contacts:
BPWCP contact for issue escalation
:
Name: David Skudlarek
Telephone: +1 (630) 836-4710
E-Mail: david.skudlarek@bp.com
Company contact for issue escalation
:
Name: Judy Howard
Telephone: (210) 626-6967
E-Mail: Judy.P.Howard@tsocorp.com
3.3 The following subparts of this Business Applications Services Term Sheet (the “
Subparts
”) describe each of the Business Applications Services in more detail.
Business Applications Services, Subpart 1
Applications Service 1: Refining Applications Service
This Service addresses BPWCP (a) allowing the Company to access and use certain application software, and (b) providing certain services to the Company in support of the Company’s use of such application software in the Refinery Business, the Carson Logistics and Marketing Terminals Business, the Watson Cogen Business, and/or the Wilmington Calciner Business.
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26
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ACCESS AND USE OF BPWCP'S SOFTWARE AND SOFTWARE LICENSES
|
The list of application software that is anticipated to be made available to the Company
under this Service is as follows:
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Software for use under Refining Applications Service
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Application Software Name
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Vendor Name
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User License Numbers
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AspenTech Advisor
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Aspen Technology Inc.
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Allocation based on EDC
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BOSS Reporting – Maximo
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SAP
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CCTS
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WorkTechnology Corporation
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Site License
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Maxavera
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Pipeline Software Inc,
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Site License
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Maximo – Refining
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IBM
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1200 maximum
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Meridium
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Meridium Inc,
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Site License
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Primavera
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Oracle
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50 maximum
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Syntempo
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Pipeline Software Inc,
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Site License
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This is a list of major applications that will be used by the Company, which are supported by additional software (e.g. middleware) that is included as part of the Services.
Starting July 1, 2012 or on Closing, whichever occurs later, the Company will pay BPWCP a lump sum payment of US $73,288 per month (US $219,863 per quarter). This amount includes no more than 30 days of work per month by the number of FTEs initially assigned to the Service by BPWCP. The Company shall make all such payments to BPWCP quarterly in advance. Should the support level required to perform the Service be more than such 30 days of work by such FTEs, then BPWCP will advise the Company of such requirement and request a project be developed and designed and billed in addition to the base payment as an Additional Service. BPWCP will have no obligation to perform such Additional Service unless and until the terms and price for such Additional Service are agreed to in writing by the Company.
The dollar amounts set forth in this Section 3 have been determined based on the user license numbers set forth above and the applications listed above; any changes in these items will result in a change in the cost for the Services provided pursuant to this Subpart. The costs set forth in this section do not include Fees to migrate the Business Information and/or related systems of the Company from BPWCP’s systems to the Company’s.
The Term Sheet Termination Date of the Service to be provided pursuant to this Subpart shall be the earlier to occur of: (a) the day on which the 12 month anniversary of the Closing Date occurs; or (b) the effective date of early termination by the Company or BPWCP in accordance with Section 2.3 of the Agreement, with no early termination penalties, provided that such effective date is not earlier than 90 days after BPWCP’s receipt of the termination notice. Upon signing of the PSA, the Company reserves the right to accept or decline this Subpart.
Business Applications Services, Subpart 2
Applications Service 2: Supply and Optimization Applications Service
This Service addresses BPWCP (a) allowing the Company to access and use certain application software, and (b) providing certain services to the Company in support of the Company’s use of such application software in the Refinery Business, the Carson Logistics and Marketing Terminals Business and/or the Wilmington Calciner Business.
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30
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ACCESS AND USE OF SERVICE PROVIDER'S SOFTWARE AND SOFTWARE LICENSES
|
The current list of application software that is anticipated to be made available to the Service Recipient under this Service is as follows:
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Software for use under Supply and Optimization Applications Service
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Application Software Name
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Vendor Name
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User License Numbers
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|
BOSS Reporting – IMOS
|
SAP
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IMOS
|
Aspen Technology Inc.
|
Site License
|
This is a list of major applications that will be used by the Company, which are supported by additional software (e.g. middleware) that is included as part of the Services.
Starting July 1, 2012 or on Closing, whichever occurs later, the Company will pay BPWCP a lump sum payment of US $57,553 per month (US $172,658 per quarter). This amount includes no more than 30 days of work per month by the number of FTEs initially assigned to the Service by BPWCP. The Company shall make all such payments to BPWCP quarterly in advance. Should the support level required to perform the Service be more than such 30 days of work by such FTEs, then BPWCP will advise the Company of such requirement and request a project be developed and designed and billed in addition to the base payment as an Additional Service. BPWCP will have no obligation to perform such Additional Service unless and until the terms and price for such Additional Service are agreed to in writing by the Company.
The dollar amounts set forth in this Section 3 have been determined based on the nature and quantity of the user license numbers set forth above and the applications listed above; any changes in these items will result in a change in the cost for the Services provided pursuant to this Subpart. The costs set forth in this section do not include Fees to migrate the Business Information and/or related systems of the Company from BPWCP’s systems to the Company’s.
The Term Sheet Termination Date of the Service to be provided pursuant to this Subpart shall be the earlier to occur of: (a) the day on which the 12 month anniversary of the Closing Date occurs; or (b) the effective date of early termination by the Company or BPWCP in accordance with Section 2.3 of the Agreement, with no early termination penalties, provided that such effective date is not earlier than 90 days after BPWCP’s receipt of the termination notice. Upon signing of the PSA, the Company reserves the right to accept or decline this Subpart.
Business Applications Services, Subpart 3
Applications Service 3: Pipelines and Transport Operations Applications Service
This Service addresses BPWCP (a) allowing the Company to access and use certain application software, and (b) providing certain services to the Company in support of the Company’s use of such application software in the Refinery Business, the Carson Logistics and Marketing Terminals Business and/or the Wilmington Calciner Business.
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34
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ACCESS AND USE OF SERVICE PROVIDER'S SOFTWARE AND SOFTWARE LICENSES
|
The current list of application software that is anticipated to be made available to the Service Recipient under this Service is as follows*:
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Software for use under Pipelines and Transport Operations Applications Service
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|
Application Software Name
|
Vendor Name
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User License Numbers
|
|
Aspen Fleet Optimizer Order Manager – Voice (IVR)
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AspenTech
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|
|
Aspen Fleet Optimizer (Retail)
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AspenTech
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BOSS Reporting – Aspen Fleet Optimizer and LoadTracker
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SAP
|
|
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Carrier Management System (CMS)
|
BP
|
N/A (BP Bespoke)
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eMOC Pipelines
|
BP
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N/A (BP Bespoke)
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i-maintain
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Monitor Management Control Systems Limited
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LoadTracker
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BP
|
N/A (BP Bespoke)
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Maximo – Pipelines
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IBM
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Maximo Mobile
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IBM
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N/A
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Meridium IRT
|
Meridium Inc
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Site License
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Primavera
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Oracle
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15 maximum
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PRISM
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BP
|
N/A (BP Bespoke)
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TMS Host
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TopTech
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This is a list of major applications that will be used by the Company, which are supported by additional software (e.g. middleware) that is included as part of the Services.
Starting July 1, 2012 or on Closing, whichever occurs later, the Company will pay BPWCP a lump sum payment of US $93,337 per month (US $280,010 per quarter). This amount includes no more than 30 days of work per month by the number of FTEs initially assigned to the Service by BPWCP. The Company shall make all such payments to BPWCP quarterly in advance. Should the support level required to perform the Service be more than such 30 days of work by such FTEs, then BPWCP will advise the Company of such requirement and request a project be developed and designed and billed in addition to the base payment as an Additional Service. BPWCP will have no obligation to perform such Additional Service unless and until the terms and price for such Additional Service are agreed to in writing by the Company.
The dollar amounts set forth in this Section 3 have been determined based on the nature and quantity of the user license numbers set forth above and the applications listed above; any changes in these items will result in a change in the cost for the Services provided pursuant to this Subpart. The costs set forth in this section do not include Fees to migrate the Business Information and/or related systems of the Company from BPWCP’s systems to the Company’s.
The Term Sheet Termination Date of the Service to be provided pursuant to this Subpart shall be the earlier to occur of: (a) the day on which the 12 month anniversary of the Closing Date occurs; or (b) the effective date of early termination by the Company or BPWCP in accordance with Section 2.3 of the Agreement, with no early termination penalties, provided that such effective date is not earlier than 90 days after BPWCP’s receipt of the termination notice. Upon signing of the PSA, the Company reserves the right to accept or decline this Subpart.
Schedule 1.1(b)(v)
Payment Card Processing and Applications
Pursuant to this Transition Services Agreement (the “
TSA
”), BPWCP will provide the card payment processing and applications services (the “
Card Processing Services
”) described in this Payment Card Processing and Applications Term Sheet.
BPWCP will provide the Card Processing Services to (i) those ARCO branded retail sites which are parties to Contract Dealer Gasoline Agreements or functionally similar agreements (the “
Dealer Agreements
”) acquired by the Company pursuant to the PSA and (ii) sites which become ARCO branded marketers of the Company during the Term of this Term Sheet, not to exceed fifty additional sites (collectively, the “
Company ARCO Sites
”). Any additional sites beyond the Company ARCO Sites will be deemed outside the scope of this Term Sheet, and any services which BPWCP agrees to provide to such sites shall be “Additional Services” within the meaning of Section 1.1(e) of the TSA. Pricing for such Additional Services will be subject to the amendment process referred to in Section 1.1(e).
During the Term of this Term Sheet, the Company will negotiate new agreements with a provider(s) of the Company’s choosing to replace the Card Processing Services. Upon the termination of this Term Sheet, the Company will cease using BPWCP’s IT Systems and IT Equipment previously used in connection with the Card Processing Services. Upon the termination of this Term Sheet, Company will provide to BPWCP access to all card programs and card processing services developed by Company for fuel retail service stations that employ the ARCO Marks as set forth in the ARCO License Agreement.
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2.
|
BPWCP Services for the Company
|
2.1 BPWCP shall provide the following Services:
a.
Authorize and settle all payment card transactions directly with the Company ARCO Sites and provide daily settlement reporting to Company ARCO Sites.
b.
Process the consumer convenience fee for PIN Debit transactions at the Company ARCO Sites, to the extent that Visa continues to allow BPWCP to charge that fee. The foregoing sentence shall not be construed as a representation that BPWCP, the Company or any retail sites will be able to charge the consumer convenience fee in the future. Moreover, the Company specifically understands and hereby agrees that neither BPWCP nor any of its Affiliates can make and therefore neither does make any representations or warranties with respect to the Company’s or any entity’s ability to charge a convenience fee to the consumer after the Closing.
c.
Allow the Company to use the application software listed on Appendix A, attached hereto, for the number of users listed on Appendix A. Such use will be limited to the uses permitted by the applicable license agreements, as well as the restriction stated in Section 1.2 and elsewhere in the TSA.
d.
Set up access for new users, modifying access for existing users, and coordination of site systems installation prior to opening of new Company ARCO Sites, to the extent allowed by Third Party agreements and BPWCP and its Affiliates’ security policies (per the ABSC Service Term Sheet). The Company Sponsor shall be solely responsible for approving or denying access requests BPWCP receives from the Company related to this service and the Company Sponsor will have all accountability for any segregation of duties issues that are created as a result of such approvals.
e.
Implement critical software patches and corrections. This service includes installation of software patches and corrections as required by the relevant licensor of the application software listed on Appendix A to address problems that result from normal use of the application software; provided, however, that such patches and corrections will be provided according to BPWCP’s schedule. This service does not include implementation of new software versions or upgrades, unless such implementation of new software versions or upgrades is required by BPWCP. The Company will cause the Company ARCO Sites to allow BPWCP or Third Party Providers to access the sites (physically or remotely) as needed to perform any maintenance and upgrades which is to be provided by those parties.
f.
Monthly financial reporting on card transactions to the Company based on the existing report formats as of the Effective Date.
g.
Monitor the Production Environment. This service includes monitoring of production environments for the purpose of determining if such production environments are operating properly and to advise the Company of any planned maintenance or downtime that BPWCP believes is required to sustain the integrity of such production environments.
h.
Support hardware for payment card services and site systems if there is an existing signed hardware maintenance agreement directly between the Company ARCO Site and BPWCP.
i.
Payment Application Data Security Standards (“
PA DSS
”) compliance for software that is provided by BPWCP, or Payment Card Industry Data Security Standards
(“
PCI DSS
”) compliance upgrades due to new rules and or regulations and/or applicable Laws; provided, however, that BPWCP’s actual costs necessary to perform the aforementioned compliance activities for software necessary to perform the Services hereunder, as determined by BPWCP in its commercially reasonable discretion, shall be paid by the Company in addition to the base payment as an Additional Service.
j.
Compliance with any new applicable Laws (local, state, or federal - e.g., weights & measures); provided, however, that BPWCP’s actual costs necessary to perform the aforementioned compliance activities for software necessary to perform the Services hereunder, as determined by BPWCP in its commercially reasonable discretion, shall be paid by the Company in addition to the base payment as an Additional Service.
k.
Provide 1099 Internal Revenue Service payment cards sales reporting to Company ARCO Sites.
l.
BPWCP to ensure telecommunications service continuity at current service levels to Company ARCO Sites for card payment processing.
2.2 During the Term of this Term Sheet, Card Processing Services will be provided for Company ARCO Sites that continue to use the BP EPS to enable the Card Processing Services. Upon conversion by the Company from the BP EPS to the Company’s POS System at any Company ARCO Site, such Company ARCO Site shall be excluded from the scope of this Term Sheet and Services shall not be provided hereunder with respect to any such site.
2.3 As of April 2, 2012, BPWCP has received a Report on Compliance from a certified third-party auditor verifying that BPWCP, as a Level 1 service provider, is compliant with applicable PCI DSS requirements. Throughout the Term of this Term Sheet, BPWCP will continue to audit such sites in the ordinary course of business and seek an annual Report on Compliance from a certified third-party auditor selected by BPWCP with respect to PCI DSS compliance.
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3.
|
The Company’s Obligations
|
3.1 During the Term of this Term Sheet, the Company shall negotiate its own stand alone usage and support agreements with the appropriate third parties to replace the Card Processing Services and IT Systems and IT Equipment provided under this Term Sheet, including but not limited to the EPS system. The Company is not obligated to negotiate an agreement with BPWCP’s existing processor. The Company shall complete those negotiations no later than six months after Closing, and the Company shall cause the new agreements for its card processing services and its systems to become effective no later than the Term Sheet Termination Date.
3.2 Beginning on the Term Sheet Termination Date, the Company shall, provide BPWCP and its ARCO branded marketers with access to card processing and applications services similar to terms offered to Company ARCO Sites, including all the Company’s existing and developed debit, credit, fleet and gift card programs. Such access will be offered only for POS systems mutually agreed to by both Company and BPWCP.
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4.
|
Activities NOT Covered by the Services
|
4.1 The Parties agree and acknowledge that, notwithstanding anything to the contrary in the TSA, the following activities are expressly excluded from the Services:
m.
Data migration (or historical data reporting) on or after the Termination Date.
n.
Sales program for fleet cards.
o.
Execution of proprietary and Third Party card promotions at retail sites.
p.
BPWCP support for credit acceptance and settlement in any market in which the Company or its affiliates operate.
q.
Changes to BPWCP’s or BP’s proprietary network.
r.
Changes to BPWCP’s existing site systems hardware configuration (e.g., PIC, CRIND, Allied, POS, EPS, PINpad).
s.
Changes to card types as they are defined in the existing card base.
t.
Adding new cards to the authorization/settlement process sites.
u.
PA DSS compliance for software that is not provided by BPWCP.
v.
Providing software maintenance to the Company ARCO Sites, except as stated in Section 1 or the ABSC Service Term Sheet. Without limiting the generality of the foregoing, neither BPWCP nor any of its Affiliates will provide software maintenance or helpdesk support for non-Retalix POS at the Company ARCO Sites.
w.
Providing hardware support for payment card services, except as stated in Section 2 or the ABSC Services Term Sheet. Without limiting the generality of the foregoing, neither BPWCP nor any of its Affiliates will support VeriFone EPS hardware, except as stated in Section 2.1h above.
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5.
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Pricing and Payment Terms
|
5.1 Fixed Fees
Within 30 days after the end of each calendar month in which BPWCP has provided any Services, the Company shall pay BPWCP a fee of $383,075 for card operations, business support and application software support. The amount of the fixed fee shall be decreased if the third-party licensing fees paid by BPWCP with respect to Retalix are reduced below the levels assumed in setting the fixed fee. Any such reduction shall be on a direct pass-through basis of any cost savings by BPWCP.
5.2 Per Transaction / Item Fees
BPWCP shall true-up with the Company, within 30 days after the end of each calendar month, the net amount of the following fees:
x.
Debit: direct pass-through of debit card related processing fees, interchange fees, network/association fees, chargebacks and the ARCO consumer convenience fee (to the extent it is charged).
y.
Fleet: Fleet transactions, direct pass-through as invoiced by FleetCor.
z.
Gift Card: direct pass-through of all gift card processing fees.
5.3 Additional Payment Terms
All fixed fees and per transaction/ item payments will be required regardless of the amount of services utilized during any period under this Term Sheet.
Sites will receive payment card processing and applications support through the Americas Business Service Center (ABSC) under the ABSC Service Term Sheet for an additional cost.
The Term Sheet Termination Date shall be the earlier to occur of:
a.
the date set forth in a written notice from the Company stating its election to terminate this Term Sheet in accordance with Section 2.3 of the Agreement on such date, provided that such date is no earlier than 90 days from BPWCP’s receipt of such notice; or
b.
the last day of the calendar month in which the 12 month anniversary of the Closing has occurred.
c.
no early termination penalties will apply.
d.
Upon signing of the PSA, the Company reserves the right to accept or decline this Term Sheet.
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8.
|
Payment for ARCO Gift Card Plastics Issued Prior to the Closing.
|
The Company shall pay BPWCP an amount for the ARCO gift card plastics which have been issued prior to the Closing equal to the estimated breakage on the gift cards after the Closing (calculated as total estimated breakage minus breakage booked by BPWCP or its Affiliates as of the date of Closing). The appraisal will be made by Card Compliant. Card Compliant will be instructed to render its appraisal within 60 days after the Closing. Payment, if any is owed, shall be made by the Company within 30 days after Card Compliant determines the amount. Card Compliant’s decision will be final and non-appealable by either Party.
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9.
|
Procedure for ARCO Gift Cards during the Term Sheet Period
|
9.1 During the Term of this Term Sheet, the ARCO-branded gift card program will continue to function as it does on the Effective Date with BPWCP supplying both BP and ARCO proprietary gift cards (“
Gift Cards
”) to be sold at all ARCO retail sites and third party distribution outlets. During the Term Sheet Period, the Company will pay BPWCP an amount equal to the total costs of production, activations, and other expenses related to the issuance and operation of ARCO Gift Cards incurred during the Term of this Term Sheet. BPWCP will invoice the Company for the expenses of issuance and operation, and the Company will reimburse BPWCP for such invoiced expenses within 30 days after the end of each calendar quarter.
9.2 During the Term of this Term Sheet, both BP and ARCO Gift Cards will be accepted at ARCO branded sites and BP branded sites.
9.3 During the Term Sheet Period, BPWCP shall use best efforts to cause BPWCP’s current processor to continue its present practice of directly paying branded retail sites for redemptions of ARCO Gift Cards. Any such payments will be made from the funds paid by consumers for those ARCO Gift Cards.
9.4 Within 60 days after the Term Sheet Termination Date, BPWCP will transfer to the Company or to an issuer designated by the Company all funds paid by consumers for ARCO Gift Cards issued prior to Term Sheet Termination Date and not yet fully redeemed or expired as of such termination date. BPWCP shall provide to the Company all data that is available to BPWCP regarding the ARCO Gift Cards that is provided to Card Compliant as part of the appraisal activities set forth in Section 8 above; provided, that the Company shall first comply with all confidentiality restrictions regarding such
data, including entering into confidentiality agreements with the data providers, if required.
9.5 As of the day of the payment in full of the reconciliation amount described in Section 9.4 above, the Company is fully responsible for any applicable Laws now in effect of hereafter enacted which may impact the funds under Section 9.4, including but not limited to, escheatment laws or regulations. In addition, the Company hereby agrees and acknowledges that neither BPWCP nor any of its Affiliates will have any further liability for such funds after the Section 9.4 reconciliation payment is made. BPWCP shall exercise best efforts to provide the Company copies of all terms and conditions for any ARCO Gift Cards with a remaining balance that are in BPWCP’s possession; provided, however, that the Company acknowledges that due to the laws in the State of California that restrict gift cards from expiring, certain gift cards may have been in circulation for several years and as a result BPWCP may not possess copies of the terms and conditions for ARCO Gift Cards with a remaining balance that are more than five (5) years old.
BPWCP will use commercially reasonable efforts to transition its relationship with all active and inactive ARCO proprietary fleet accounts to the Company by the Term Sheet Termination Date.
At Company’s discretion, bounties (to acquire new fleet accounts) paid to the Company ARCO Sites as of the Effective Date will continue during the Term of this Term Sheet. BPWCP to provide 6 months of historical bounty payments to Company.
Cards for the non-ARCO employees and cards which have not been used within the 90 day period prior to the Closing will be terminated upon the Closing, to the extent permitted by the relevant cardholder agreements.
The Company will have all responsibility (and neither BPWCP nor any of its Affiliates will have any responsibility) for activations and deletions of ARCO Premier Cards issued to the Company’s employees and all other administration and services relating to the ARCO Premier Cards.
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12.
|
Termination of Processing at Company ARCO Sites
|
BPWCP specifically reserves the right but not the obligation to terminate or temporarily disable any Company ARCO Site(s) ability to process payment cards during the Term of this Term Sheet if (i) such site(s) is(are) not operating in compliance with the PCI DSS, any payment card type rules, including but not limited to VISA, MasterCard or debit card network rule or regulations(s) or any applicable data security standard, or (ii) the Company ARCO Site fails to allow BPWCP to implement any patch, correction or new software version or upgrade required by BPWCP or a Third Party licensor.
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13.
|
Additional Indemnification Provisions
|
13.1 Without limiting the generality of Section 5.1 of the TSA and notwithstanding anything to the contrary in the TSA or PSA:
aa.
All losses including fees, assessments, forensic investigation and attorney fees and costs related to allegations, claims or investigations incurred by any BPWCP Indemnified Party arising in any way from: (i) the failure by any Company ARCO Site to comply with Section 12.3 of the Dealer Agreements during the Term of this Term Sheet; (ii) the violation or the alleged violation during the Term of this Term Sheet by any Company ARCO Site of the PCI DSS, as modified from time to time, including the failure to use software that is compliant with PA DSS, as modified from time to time, or any similar standards required by payment card associations or networks or the Payment Card Industry Security Standards Council, or any other data security, privacy, breach notification or confidentiality statute, rule, or regulation or any statute, rule or regulation limiting information that can be collected from a consumer, or (iii) the escheatment of any Gift Card during the Term of this Term Sheet, shall be considered “Losses caused by or arising out of or resulting from the provision of the services,” as that phrase is used in Section 5.1 of the TSA.
bb.
If BPWCP or any of its Affiliates incurs any actual losses or damages under its Card Issuing and Operating Agreement with FleetCor dated December 20, 2004, as amended, either because the Company has terminated FleetCor’s services or reduced the number of branded marketers processing under that agreement, the Company will pay BPWCP or the applicable Affiliate the amount of such actual losses or damages pursuant to Section 5.1 of the TSA.
Appendix A
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Software for use by the Company under the Card Processing Service
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Application Software Name
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Vendor Name
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User License Numbers (if applicable)
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Allied Forecourt Controller
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Allied Electronics
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Altiris
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Symantec
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Card Processing Interface
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BP
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EPS / Viper
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VeriFone
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First Data RED Settlement
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First Data
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GSS POS/BOS Software
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Retalix
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Hughes Network
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Hughes
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Omni 1000SE Pinpad
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VeriFone
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Omni 7000 Pinpad
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VeriFone
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PayPoint Aqua Authorization
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First Data
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PIC Software
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FMi
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Solidcore
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McAfee
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SVS
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Stored Value Systems
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This is a list of major applications that will be used by the Company, which are supported by additional software (e.g., middleware) that is included as part of the Services.
Schedule 1.1(b)(vi)
ABSC Service
BPWCP through its Americas Business Service Center (“
ABSC
”) provides services to BPWCP’s and its Affiliates’ marketing businesses in the Americas. The ABSC also owns oversight to certain processes and activity sets that are executed by the Third Party Provider, Accenture LLP. BPWCP, through the ABSC, will provide the services described below to the Carson Logistics and Marketing Terminals Business and/or the Wilmington Calciner Business on the terms set forth below (collectively, the “
ABSC Service
”).
BP’s ABSC is organized by end-to-end process into 5 operational process towers as follows:
2.1 Maintenance and technical support includes site support and retail programs.
a. POS/BOS – Provide support for the Retalix software on the POS and BOS devices. Peripheral support is included.
b. Site Manager PC – Provide support for LAN 2 connectivity.
c. Networking – Provide card processing support for pinpads, eps, satellite, and dsl.
d. Go Live – Provide support for new installs, various site conversions and debrands.
e. Project Support – Provide additional support for upgrades, new hardware installs or any project related work as required per the CRF process.
f. User Acceptance Testing – Provide testing support for new Retalix software releases.
g. Escalation – Provide escalation support via the escalation line.
The ABSC maintenance and technical support activities described above represent a portion of the entire site support model. Information technology (“
IT
”), payment card processing and applications, and price book support are provided under other Term Sheets and are not provided by the ABSC and are therefore not represented in the activity list above but are services required to support the sites. See the applicable IT Term Sheets, the Payment Card Processing and
Applications Term Sheet and Price Book Service Term Sheet for processes and costs of such activities.
2.2 Master Data Maintenance
a. Customer Master support – Add/Edits/Deletes of current master data based on current systems infrastructure and applications to enable Site Technical Support, Payment Card Processing and Applications, Price Book Services and associated Business Application Services Term Sheets
b. Material Master – Add/Edits/Deletes of current material master based on current systems infrastructure to enable associated Business Application Services Term Sheets
c. Plant Master – Add/Edits/Deletes of current plant master based on current systems infrastructure to enable associated Business Application Services Term Sheets
If requested by the Company, support can be made available 24 hours a day, 7 days a week for urgent queries in the site technical support teams by the ABSC. Priority of service will be given with respect to relative urgency of the query and support will be provided pursuant to the terms of this Term Sheet and the Agreement.
Otherwise, services performed in support of Master Data Maintenance will follow the BP US operation hours, aligned with the BP holiday schedule and will be in the English language only, with exceptions to hours of operation during the month-end and year-end close process. ABSC Applications Support
As part of ABSC services we will provide the following call centre systems infrastructure support to enable Site Technical Support activities to be performed including:
a. Incident Management and Problem Resolution – this service includes helpdesk call tracking and case resolution as it directly relates to ABSC call center systems infrastructure.
b. Implementation of Critical Software Patches and Corrections – this service includes installation of software patches and corrections as required by the relevant ABSC call center systems infrastructure to address problems that surface due to normal use of the application software; provided, however, such patches and corrections will be provided according to BPWCP’s schedule. This service does not include implementation of new hardware or software versions or upgrades except for compliance upgrades due to new rules and or regulations and/or applicable Laws; provided, however, that BPWCP’s actual costs necessary to perform the aforementioned compliance activities for software necessary to perform the Services
hereunder, as determined by BPWCP in its commercially reasonable discretion, shall be paid by the Company in addition to the base payment as an Additional Service.
c. Monitoring of Production Environment – this service includes monitoring of production environments as they relate to ABSC call center systems infrastructure for the purpose of determining if such production environments are operating properly and to advise the Company of any planned maintenance or downtime that BPWCP believes is required to sustain the integrity of such production environments.
4 Term Sheet Termination Date
This Term Sheet shall commence on the Closing Date and shall terminate on the earlier to occur of: (a) the date set forth in a written notice received by BPWCP from the Company pursuant to Section 2.3 of the Agreement, provided that such effective date is not earlier than 120 days after BPWPC’s receipt of the termination notice, or (b) the day on which the 12 month anniversary of the Closing Date occurs, with no early termination penalties; and further provided however, that the term of this Service shall at all times be co-terminus with the term of the longest duration of any of the Business Applications Services Term Sheet, the Price Book Services Term Sheet and the Payment Card Processing and Applications Term Sheet. Upon signing of the PSA, the Company reserves the right to accept or decline all or part of this Term Sheet. If the Company declines or terminates this term sheet, BP is released from any obligation to provide services under any of the related Term Sheets that are specifically set forth in the immediately preceding two sentences.
5 Pricing and Payment Terms
On the Effective Date, the Company shall make a payment to BPWCP of $1,325,000 to BPWCP and every 90 days thereafter the Company shall make a similar such quarterly payment for the provision of the Services (the “
Base Price
”).
The Base Price is reflective of BPWCP’s estimation of the resources required to provide the ABSC base services and includes many assumptions given the amount of unknowns that drive costs within the ABSC, including:
• Pooled or dedicated resources
• Demand-volume
• Automated or manual process due to technology platform
• Portfolio of service
If the costs to BPWCP increase materially for any of the resources that are the subject of the assumptions made by BPWCP in calculating the Base Price, then BPWCP may increase the Base Price prospectively by providing the Company with written notice of such increase at least 14 days before the Company’s next quarterly payment is due.
6 Costs not included in the Base Price
6.1 Request for new project work shall be priced at reasonable cost per man day and invoiced to the Company by BPWCP every month for work undertaken in preceding month.
6.2 Requests for additional or change in services will be scoped and negotiated separately utilizing the ABSC change control process.
6.3 All commercially reasonable costs associated with termination or transitional services in support of transferring activity sets to the Company from the ABSC, including but not limited to cross-training, documentation, project management resources, travel, and support costs shall be billed to the Company as charges are incurred.
7. License Costs
7.1 Cost of licenses required to provide the ABSC Service (MTS Service) to the Company are included in the fee set forth in Section 5 of this term sheet.
MEMBERSHIP INTEREST PURCHASE AGREEMENT
by and among
TESORO CORPORATION
TESORO HAWAII, LLC
and
HAWAII PACIFIC ENERGY, LLC
June 17, 2013
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Page
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ARTICLE I DEFINITIONS
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1
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Section 1.1
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Definitions
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1
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Section 1.2
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Construction
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18
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ARTICLE II PURCHASE AND SALE
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18
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Section 2.1
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Transfer of TH Interest
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18
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Section 2.2
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Deposit
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18
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Section 2.3
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Purchase Price
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19
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Section 2.4
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Closing; Closing Date
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19
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Section 2.5
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Deliveries at the Closing
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19
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Section 2.6
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Net Working Capital
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22
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Section 2.7
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Inventories
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23
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Section 2.8
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Earnout Payments
|
26
|
|
|
|
Section 2.9
|
Company Assumed Liabilities; Seller Retained Liabilities
|
31
|
|
|
|
Section 2.10
|
Excluded Assets
|
32
|
|
|
|
Section 2.11
|
Undelivered Refinery Inventory
|
32
|
|
|
|
Section 2.12
|
Committed Refinery Inventory
|
33
|
|
|
ARTICLE III REPRESENTATIONS AND WARRANTIES REGARDING SELLER
|
33
|
|
|
|
Section 3.1
|
Organization and Qualification
|
33
|
|
|
|
Section 3.2
|
Authority; Enforceability
|
34
|
|
|
|
Section 3.3
|
Conflicts and Approvals
|
34
|
|
|
|
Section 3.4
|
Proceedings
|
34
|
|
|
|
Section 3.5
|
Ownership of the TH Interest
|
34
|
|
|
|
Section 3.6
|
Brokers
|
35
|
|
|
ARTICLE IV REPRESENTATIONS AND WARRANTIES REGARDING THE COMPANIES
|
35
|
|
|
|
Section 4.1
|
Organization and Qualification
|
35
|
|
|
|
Section 4.2
|
Authority; Enforceability
|
35
|
|
TABLE OF CONTENTS
(continued)
|
|
|
|
|
|
|
|
|
|
|
|
Page
|
|
|
Section 4.3
|
Conflicts and Approvals
|
36
|
|
|
|
Section 4.4
|
Capitalization of the Company
|
36
|
|
|
|
Section 4.5
|
Capitalization of the Acquired Subsidiary
|
36
|
|
|
|
Section 4.6
|
Financial Statements
|
37
|
|
|
|
Section 4.7
|
Assets
|
38
|
|
|
|
Section 4.8
|
Material Contracts
|
39
|
|
|
|
Section 4.9
|
Authorizations
|
41
|
|
|
|
Section 4.10
|
Compliance With Law
|
41
|
|
|
|
Section 4.11
|
Proceedings and Orders
|
41
|
|
|
|
Section 4.12
|
Employee Matters
|
42
|
|
|
|
Section 4.13
|
Company Plans
|
42
|
|
|
|
Section 4.14
|
Labor Matters
|
43
|
|
|
|
Section 4.15
|
Taxes
|
44
|
|
|
|
Section 4.16
|
Intellectual Property
|
45
|
|
|
|
Section 4.17
|
Absence of Certain Changes
|
45
|
|
|
|
Section 4.18
|
Bank Accounts
|
46
|
|
|
|
Section 4.19
|
Insurance
|
46
|
|
|
|
Section 4.20
|
Customers and Suppliers
|
46
|
|
|
ARTICLE V REPRESENTATIONS AND WARRANTIES REGARDING BUYER
|
47
|
|
|
|
Section 5.1
|
Organization and Qualification
|
47
|
|
|
|
Section 5.2
|
Authority; Enforceability
|
47
|
|
|
|
Section 5.3
|
Conflicts and Approvals
|
47
|
|
|
|
Section 5.4
|
Proceedings
|
48
|
|
|
|
Section 5.5
|
Brokers
|
48
|
|
|
|
Section 5.6
|
Purchase the TH Interest for Investment
|
48
|
|
TABLE OF CONTENTS
(continued)
|
|
|
|
|
|
|
|
|
|
|
|
Page
|
|
|
Section 5.7
|
Financing
|
49
|
|
|
|
Section 5.8
|
Solvency
|
49
|
|
|
|
Section 5.9
|
Personnel Credentials
|
49
|
|
|
ARTICLE VI PRE-CLOSING COVENANTS
|
50
|
|
|
|
Section 6.1
|
Refinery Shutdown, Turnaround and Startup Activities
|
50
|
|
|
|
Section 6.2
|
Operation of the Business
|
53
|
|
|
|
Section 6.3
|
Appropriate Action; Consents; Filings
|
55
|
|
|
|
Section 6.4
|
Breach Notice
|
57
|
|
|
|
Section 6.5
|
Exclusive Dealing
|
57
|
|
|
|
Section 6.6
|
Right of Entry
|
57
|
|
|
|
Section 6.7
|
Condition of the Assets
|
58
|
|
|
|
Section 6.8
|
Independent Investigation
|
59
|
|
|
|
Section 6.9
|
Supplement to Disclosure Schedules
|
60
|
|
|
|
Section 6.10
|
Financing Matters
|
61
|
|
|
|
Section 6.11
|
Company Monthly Financial Statements
|
61
|
|
|
|
Section 6.12
|
Title Insurance and Surveys
|
61
|
|
|
|
Section 6.13
|
Cooperation with respect to Financial Statements
|
62
|
|
|
|
Section 6.14
|
Closing Date Feedstock Inventory
|
62
|
|
|
|
Section 6.15
|
Hawaii Consent Decree
|
63
|
|
|
|
Section 6.16
|
Personnel Credentials
|
63
|
|
|
|
Section 6.17
|
Data Room Documentation
|
63
|
|
|
ARTICLE VII POST-CLOSING COVENANTS; TAX AND EMPLOYEE MATTERS
|
63
|
|
|
|
Section 7.1
|
Retention of Employees
|
63
|
|
|
|
Section 7.2
|
Service Recognition for Post-closing Employees
|
64
|
|
|
|
Section 7.3
|
Pension Plan Coverage
|
64
|
|
|
|
Section 7.4
|
Welfare Plan Coverage
|
65
|
|
TABLE OF CONTENTS
(continued)
|
|
|
|
|
|
|
|
|
|
|
|
Page
|
|
|
Section 7.5
|
Post-Retirement Welfare Benefits
|
65
|
|
|
|
Section 7.6
|
Other Benefits
|
66
|
|
|
|
Section 7.7
|
Liabilities and Indemnities
|
66
|
|
|
|
Section 7.8
|
No Third Party Beneficiaries
|
67
|
|
|
|
Section 7.9
|
Insurance
|
67
|
|
|
|
Section 7.10
|
Tax Matters
|
68
|
|
|
|
Section 7.11
|
No Solicitation/Non-Competition
|
74
|
|
|
|
Section 7.12
|
Third Person Consents Not Obtained Prior to Closing
|
75
|
|
|
|
Section 7.13
|
Multi-Site Contracts
|
76
|
|
|
|
Section 7.14
|
Operation of Business
|
76
|
|
|
|
Section 7.15
|
Seller's Names; Removal of Logos and Signs
|
76
|
|
|
|
Section 7.16
|
Further Assurances
|
77
|
|
|
|
Section 7.17
|
Retention of and Access to Books and Records
|
77
|
|
|
|
Section 7.18
|
Intellectual Property
|
78
|
|
|
|
Section 7.19
|
Releases
|
79
|
|
|
ARTIVLE VIII CLOSING CONDITIONS
|
80
|
|
|
|
Section 8.1
|
Conditions to Obligations of Each Party Under the Agreement
|
80
|
|
|
|
Section 8.2
|
Additional Conditions to Seller's Obligations
|
80
|
|
|
|
Section 8.3
|
Additional Conditions to Buyer's Obligations
|
81
|
|
|
ARTICLE IX CASUALTY OR CONDEMNATION
|
82
|
|
|
|
Section 9.1
|
Notice
|
82
|
|
|
|
Section 9.2
|
Repair or Replacement
|
82
|
|
|
|
Section 9.3
|
Condemnation Awards
|
83
|
|
|
|
Section 9.4
|
Purchase Price Adjustment
|
83
|
|
|
|
Section 9.5
|
Deferral of Closing Date and Termination Date
|
83
|
|
|
ARTICLE X TERMINATION
|
83
|
|
TABLE OF CONTENTS
(continued)
|
|
|
|
|
|
|
|
|
|
|
|
Page
|
|
|
Section 10.1
|
Termination
|
83
|
|
|
|
Section 10.2
|
Deferral of Closing Date and Termination Date
|
84
|
|
|
|
Section 10.3
|
Effect of Termination
|
84
|
|
|
ARTICLE XI INDEMNIFICATION AND REMEDIES
|
84
|
|
|
|
Section 11.1
|
Survival
|
84
|
|
|
|
Section 11.2
|
Indemnification Provisions for the Benefit of Buyer
|
85
|
|
|
|
Section 11.3
|
Indemnification Provisions for the Benefit of Seller
|
87
|
|
|
|
Section 11.4
|
Indemnification Procedures; Matters Involving Third Parties
|
88
|
|
|
|
Section 11.5
|
Determination of Losses
|
90
|
|
|
|
Section 11.6
|
No Multiple Recoveries
|
90
|
|
|
|
Section 11.7
|
Limitations on Liability/ Exclusive Remedies
|
90
|
|
|
|
Section 11.8
|
Governing Law
|
91
|
|
|
|
Section 11.9
|
Jurisdiction; Consent to Service of Process; Waiver
|
91
|
|
|
ARTICLE XII MISCELLANEOUS
|
92
|
|
|
|
Section 12.1
|
Amendment
|
92
|
|
|
|
Section 12.2
|
Notices
|
92
|
|
|
|
Section 12.3
|
Public Announcements
|
93
|
|
|
|
Section 12.4
|
Expenses
|
93
|
|
|
|
Section 12.5
|
Headings
|
93
|
|
|
|
Section 12.6
|
No Strict Construction
|
93
|
|
|
|
Section 12.7
|
Severability
|
94
|
|
|
|
Section 12.8
|
Assignment
|
94
|
|
|
|
Section 12.9
|
Parties in Interest
|
94
|
|
|
|
Section 12.10
|
Failure or Indulgence Not Waiver
|
94
|
|
|
|
Section 12.11
|
Disclosure Schedules
|
94
|
|
|
|
Section 12.12
|
Time of the Essence
|
94
|
|
TABLE OF CONTENTS
(continued)
|
|
|
|
|
|
|
|
|
|
|
|
Page
|
|
|
Section 12.13
|
Entire Agreement
|
94
|
|
|
|
Section 12.14
|
Confidentiality
|
95
|
|
|
|
Section 12.15
|
Specific Performance
|
95
|
|
|
|
Section 12.16
|
Counterparts
|
95
|
|
TABLE OF CONTENTS
(continued)
|
|
|
|
|
|
|
|
EXHIBITS
|
|
|
|
|
|
|
Exhibit A
|
|
Assignment of Contracts
|
|
|
|
|
|
|
|
Exhibit B
|
|
Buyer Guaranty
|
|
|
|
|
|
|
|
Exhibit C
|
|
Environmental Agreement
|
|
|
|
|
|
|
|
Exhibit D
|
|
Knowledge Individuals
|
|
|
|
|
|
|
|
Exhibit E
|
|
Transition Services Agreement
|
|
|
|
|
|
|
|
Exhibit F
|
|
Retail Assets
|
|
|
|
|
|
|
|
Exhibit G-1
|
|
Hydrocarbon Inventory Measurement Procedures
|
|
|
|
|
|
|
|
Exhibit G-2
|
|
Hydrocarbon Inventory Valuation Procedures
|
|
|
|
|
|
|
|
Exhibit H
|
|
Merchandise Inventory Measurement and Valuation Procedures
|
|
|
|
|
|
|
|
Exhibit I
|
|
Parts and Supplies Inventory Measurement and Valuation Procedures
|
|
|
|
|
|
|
|
Exhibit J
|
|
Assignment of Membership Interest
|
|
|
|
|
|
|
|
Exhibit K
|
|
License Agreement
|
|
|
|
|
|
|
|
Exhibit L
|
|
Pre-Closing Transition Services Agreement
|
|
|
|
|
|
|
|
|
|
|
SELLER'S DISCLOSURE SCHEDULES
|
|
|
|
|
|
|
|
Section
|
|
Description
|
|
|
|
|
|
|
|
|
|
1.1(a)
|
|
Excluded Intellectual Property
|
|
|
|
1.1(b)
|
|
Permitted Liens
|
|
|
|
1.1(c)
|
|
Sellers Officers and Directors
|
|
|
|
2.5(a)(i)
|
|
Wire Transfer Instructions
|
|
|
|
3.3(a)
|
|
Seller Third Person Consents
|
|
|
|
3.3(b)
|
|
Seller's Authorizations from Governmental Authorities
|
|
|
|
3.5
|
|
Ownership of the TH Interest
|
|
|
|
4.6
|
|
Financial Statements
|
|
|
|
4.7(d)
|
|
Fixed Assets
|
|
|
|
4.7(e)
|
|
Owned Real Property
|
|
|
|
4.7(f)
|
|
Leased Real Property
|
|
|
|
4.8(b)
|
|
Material Company Contracts
|
|
|
|
4.8(c)
|
|
Seller Contracts
|
|
|
|
4.8(d)
|
|
Excluded Contracts
|
|
|
TABLE OF CONTENTS
(continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4.8(e)
|
|
Material Company Contract Defaults
|
|
|
|
4.9(a)
|
|
Authorizations
|
|
|
|
4.10
|
|
Compliance with Law
|
|
|
|
4.11
|
|
Proceedings and Orders
|
|
|
|
4.12(a)
|
|
Employees
|
|
|
|
4.13(b)
|
|
Company Plans and Company Benefit Obligations and Consents
|
|
|
|
4.14(a)
|
|
CBA's
|
|
|
|
4.14(b)
|
|
Labor Related Administrative Proceedings
|
|
|
|
4.15
|
|
Taxes
|
|
|
|
4.16(a)
|
|
Company Intellectual Property
|
|
|
|
4.16(b)
|
|
Process Licenses
|
|
|
|
4.18
|
|
Bank Accounts/Safety Deposit Boxes
|
|
|
|
4.20(a)
|
|
Top Customers and Suppliers
|
|
|
|
4.20(b)
|
|
Customer and Supplier Terminations
|
|
|
|
|
|
|
|
|
|
|
|
BUYER'S DISCLOSURE SCHEDULES
|
|
|
|
|
|
|
|
Section
|
|
Description
|
|
|
|
|
|
|
|
|
|
5.3(a)
|
|
Buyer Third Person Consents
|
|
|
|
5.3(b)
|
|
Buyer's Authorization from Governmental Authorities
|
|
|
|
|
|
|
|
|
|
|
|
OTHER DISCLOSURE SCHEDULES
|
|
|
|
|
|
|
|
Section
|
|
Description
|
|
|
|
|
|
|
|
|
|
2.8(a)(ii)
|
|
Annual Gross Margin Calculation
|
|
|
|
2.8(k)
|
|
Earnout Dispositions
|
|
|
|
6.1(b)(ii)
|
|
Refinery Startup Criteria
|
|
|
|
6.2
|
|
Operation of the Business
|
|
|
|
6.3(g)
|
|
Credit Support Arrangements
|
|
|
|
7.7(a)
|
|
Description of Severance Plan
|
|
|
|
7.13
|
|
Multi-Site Contracts
|
|
|
|
8.2(c)
|
|
Closing Consents
|
|
|
MEMBERSHIP INTEREST PURCHASE AGREEMENT
This
MEMBERSHIP INTEREST PURCHASE AGREEMENT
(this “
Agreement
”) is entered into effective as of June 17, 2013 (the “
Execution Date
”), by and among
TESORO CORPORATION,
a Delaware corporation (“
Seller
”),
HAWAII PACIFIC ENERGY, LLC
, a Delaware limited liability company (“
Buyer
”), and, for the limited purposes set forth herein,
TESORO HAWAII, LLC,
a Hawaii limited liability company (the “
Company
”). Seller, Buyer and the Company may be referred to herein individually as a “
Party
,” and collectively as the “
Parties
.”
RECITALS
A. Seller is the sole record and beneficial owner of all of the issued and outstanding units representing membership interests in the Company (the “
TH Interest
”);
B. The Company is the record and beneficial owner of all of the issued and outstanding capital stock of Smiley’s Super Service, Inc., a Hawaii corporation (the “
Acquired Subsidiary
”);
C. Seller desires to sell and convey the TH Interest to Buyer and Buyer desires to purchase and acquire the TH Interest; and
D. In order to induce Seller to enter into this Agreement, Buyer Guarantor is willing to execute and deliver the Buyer Guaranty simultaneously with the execution of this Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and the representations, warranties and covenants contained herein, the Parties agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1
Definitions
. As used in this Agreement (including in the Recitals), the following terms shall have the following meanings:
“
Acquired Subsidiary
” has the meaning given such term in the Recitals of this Agreement.
“
Adjusted Net Worth
” means as to any Person, at any time, in accordance with GAAP (except as otherwise specifically set forth below), on a consolidated basis for such Person and its wholly-owned subsidiaries (if any), the amount equal to the difference between: (a) the aggregate net book value of all assets of such Person and its wholly-owned subsidiaries (excluding the value of patents, trademarks, tradenames, copyrights, licenses, goodwill, leasehold improvements, prepaid assets and other intangible assets), calculating the book value of inventory for this purpose on a first-in-first-out basis, after deducting from such book values all appropriate reserves in accordance with GAAP (including all reserves for doubtful receivables, obsolescence, depreciation and amortization) and (b) the aggregate amount of the indebtedness and other liabilities of such Person and its wholly-owned subsidiaries (including tax and other proper accruals).
“
Affiliate
” means, as to any specified Person, any other Person that directly, or indirectly through one or more intermediaries or otherwise, controls, is controlled by or is under common control with the specified Person. For purposes of this definition, control of a Person means the power, direct or indirect, to direct or cause the direction of the management or policies of such Person whether by contract or otherwise, and ownership of 50% or more of the voting securities of another Person shall create a rebuttable presumption that such Person controls such other Person.
“
Affiliated Group
” means any affiliated group within the meaning of Section 1504(a) of the Code, or any similar group defined under a corresponding or similar provision of state, local or foreign Tax Law.
“
Agreement
” has the meaning given such term in the preamble of this Agreement and includes all Exhibits and Schedules attached hereto or delivered pursuant hereto.
“
Allocation Schedule
” has the meaning given such term in
Section 7.10(j)(iii)
.
“
Allocation Schedule Notice of Disagreement
” has the meaning given such term in
Section 7.10(j)(iii)
.
“
Applicable Rate
” means a rate per annum which shall be equal to the sum of LIBOR plus 2.0%, but in no event shall the Applicable Rate be less than an amount equal to 6.5%.
“
Arbiter
” has the meaning given such term in
Section 2.6(e)
.
“
Asset Purchase Allocation Schedule
” has the meaning given such term in
Section 7.10(j)(i)
.
“
Assets
” means the Refinery, the Logistics Assets, the Retail Assets, the Real Property Interests, improvements owned by the Company and the Acquired Subsidiary (except for assets and properties sold, consumed or otherwise disposed of in the ordinary course of business during the period from the Balance Sheet Date until the date of this Agreement) and located on or attached or affixed to the Real Property Interests, and all fixed assets, equipment and all other assets and rights owned or leased by, or licensed to or used by the Company and the Acquired Subsidiary, in each case, used in the day-to-day operation of the Business as it is currently operated, together with any and all rights of the Company and the Acquired Subsidiary under the contracts and agreements to which the Company or the Acquired Subsidiary is a party, and the rights to be assigned to the Company under Seller Contracts pursuant to this Agreement; but in all cases excluding the Excluded Assets.
“
Assignment of Contracts
” means an assignment and assumption of contracts with respect to the Seller Contracts in the form of
Exhibit A
attached hereto.
“
Authorization
” means any franchise, permit, license, authorization, certificate, registration, exemption, concession, approval, variance, waiver, right, settlement, compliance plan or other consent or approval granted or issued by any Governmental Authority (i) under any Law, including any Environmental Law, or (ii) under or pursuant to any Order or Material Contract with any such Governmental Authority;
provided, however
, “Authorizations” shall not include any license or permit issued by a Governmental Authority that grants or authorizes any interest in a right-of-way or easement or similar rights including the Pipeline ROW Interests.
“
Balance Sheet
” means the unaudited consolidated balance sheet of the Companies as of the Balance Sheet Date.
“
Balance Sheet Date
” means March 31, 2013.
“
Base Amount
” has the meaning given such term in
Section 2.3
.
“
Books and Records
” means all files, documents, instruments, papers, plans, drawings, manuals, books and records (including electronically stored information, to the extent reasonably practicable) owned and used by or for Seller or the Companies and relating exclusively to the ownership of the Assets
or the conduct of the Business, excluding in each case any such items (i) included in or relating to the Excluded Assets or Retained Liabilities, (ii) to the extent comprising personnel medical and other records relating to employees which are prohibited by Laws or by Seller’s or its Affiliates’ internal policies from being transferred to Buyer or the Company without consent of the relevant employee, (iii) with respect to all corporate, financial, Tax and legal files, documents, instruments, papers, plans, drawings, manuals, books and records related to the ownership of the Assets or conduct of the Business prior to the Closing Date, (iv) to the extent disclosure or transfer is prohibited or subject to payment of fee or consideration by any license or other agreement with a Person other than Affiliates of Seller (other than the Companies), or by Law, and for which no consent to transfer has been received, until such time as consent has been obtained (at which time such item shall be deemed to be part of the Books and Records) (v) work product and attorney-client communications with any of Seller’s or its Affiliates’ legal counsel (other than the Companies’ legal counsel), (vi) prepared in connection with or relating in any way to the transactions contemplated by this Agreement, including bids received from other parties and analyses relating in any way to the Assets or Business, (vii) whose delivery or transfer would violate any confidentiality agreements or cause a waiver of any attorney-client or work-product privilege available to Seller or its Affiliates (other than the Companies), (viii) relating to Seller’s or its Affiliates’ inter-company or intra-company feedstock and product pricing information, internal transfer prices, hedging activity records and Hydrocarbon Inventory valuation procedures and records, (ix) to the extent that the disclosure of the particular terms of a contract, in the reasonable judgment of Seller, would violate any antitrust or similar Law, (x) containing financial or other data or information that is co-mingled or otherwise integrated with the data or information of Seller and its Affiliates (other than the Companies) and cannot be segregated with Commercially Reasonable Efforts by Seller or its Affiliates (other than the Companies), and (xi) that (a) are archived at locations controlled or managed by third parties and (b) are not clearly, solely, and exclusively related to the Assets or the Business and cannot be readily identified as such through the exercise of Commercially Reasonable Efforts.
“
Breach Notice
” has the meaning given such term in
Section 6.4
.
“
Business
” means the business conducted by the Company and the Acquired Subsidiary in accordance with recent past practices, including the ownership, operation and use of the Refinery, the Logistics Assets, the Retail Assets and other Assets.
“
Business Day
” means a day other than Saturday, Sunday or any day on which commercial banks located in the State of New York are authorized or obligated to close.
“
Buyer
” has the meaning given such term in the preamble of this Agreement.
“
Buyer Guarantor
” means Par Petroleum Corporation, a Delaware corporation.
“
Buyer Guaranty
” means the Guaranty to be executed and delivered simultaneously with the execution of this Agreement from Buyer Guarantor to Seller, in the form of
Exhibit B
attached hereto.
“
Buyer Indemnitees
” means Buyer, its Affiliates (including the Companies post-Closing) and their respective officers, directors, managers, employees, agents, representatives (including any officers, directors, managers, employees, agents or representatives of the Companies appointed or retained by Buyer or the Companies after the Closing or otherwise acting at the direction of Buyer, the Companies or Buyer’s Affiliates after the Closing) and their permitted successors or assigns.
“
Buyer Third Person Consent
” means any Third Person Consent required under (i) any Governing Document of Buyer, or (ii) any contract to which Buyer is a party or by which it or its assets is bound.
“
Buyer’s FSP
” has the meaning given such term in
Section 7.4(b)
.
“
Buyer’s Pension Plan
” has the meaning given such term in
Section 7.3(a)
.
“
Buyer’s Plans
” has the meaning given such term in
Section 7.1(d)
.
“
Buyer’s Savings Plan
” has the meaning given such term in
Section 7.3(b)
.
“
Casualty
” has the meaning given such term in
Section 9.1
.
“
CBAs
” means, collectively, all collective bargaining agreements between the Company and any collective bargaining unit of any employee union and all existing contract extension agreements, memoranda of agreement, letters of understanding and similar agreements and instruments with any such collective bargaining unit.
“
Claim
” means any demand, claim, complaint, notice of violation or any other assertion of an Obligation, whether written or oral, for any Loss, specific performance, injunctive relief, remediation or other equitable relief whether or not ultimately determined to be valid.
“
Claiming Employee
” has the meaning given such term in
Section 7.7(b)
.
“
Closing
” has the meaning given such term in
Section 2.4
.
“
Closing Date
” has the meaning given such term in
Section 2.4
.
“
Closing Date Payment
” has the meaning given such term in
Section 2.5(a)(i)
.
“
Code
” means the Internal Revenue Code of 1986, as amended.
“
Commercially Reasonable Efforts
” means efforts which are commercially reasonable to enable a Person, directly or indirectly, to satisfy a condition to or otherwise assist in the consummation of a desired result and which do not require the performing Person to sell any assets, pursue any litigation or pay, incur, convey, endure or deliver any material monetary payments or other form of consideration, whether tangible or intangible, including any property, detriment, debt, right, license, obligation, waiver or release.
“
Commitment Letters
” has the meaning given such term in
Section 5.7
.
“
Committed Refinery Inventory
” means crude oil, feedstocks, intermediates and blendstocks that Seller and its Affiliates (excluding the Companies) have legally committed to purchase for delivery to the Refinery after the Closing but where title has not yet passed to Seller or its Affiliates (excluding the Companies) as of the Measurement Time.
“
Companies
”
means the Company and the Acquired Subsidiary.
“
Company
” has the meaning given such term in the preamble of this Agreement.
“
Company Assumed Liabilities
” has the meaning given such term in
Section 2.9(a)
.
“
Company Benefit Obligations
” means all Obligations, arrangements, policies, or customary practices (other than those contained in or provided under the Company Plans), whether or not legally enforceable and whether written or oral, to provide benefits (other than salary or wages) to present or
former directors, managers, officers, employees or consultants of the Company, the Acquired Subsidiary or their ERISA Affiliates. Company Benefit Obligations also include consulting agreements under which the compensation paid does not depend upon the amount of the service rendered, sabbatical policies, severance payment policies, fringe benefits within the meaning of Code Section 132, workers’ compensation plans, cafeteria plans, change-in-control benefits, disability benefits, retirement benefits, post-retirement benefits, supplemental unemployment benefits, vacation benefits, deferred compensation, loan, retention, bonus or other incentive compensation, and equity-based rights or compensation.
“
Company Environmental Liabilities
” means any and all Orders, Claims, Losses or Obligations, including required capital expenditures, arising from or related to Environmental Laws or the Hawaii Consent Decree to the extent related to the Company, the Assets or the Business, whether known or unknown, of the Companies or the Business, whether arising before or after the Closing, including those related to Third Party Claims, actual or threatened releases of Hazardous Materials, off-site treatment, storage, recycling, or disposal and off-site migrations of Hazardous Materials or any fine, penalty or other cost assessed in connection with any alleged or actual violation(s) of Environmental Laws.
“
Company Monthly Financial Statements
” has the meaning given such term in
Section 6.11
.
“
Company Plans
” means all pension plans, as defined in Section 3(2) of ERISA (“
Pension Plans
”) and welfare plans, as defined in Section 3(1) of ERISA (“
Welfare Plans
”), which the Company or an ERISA Affiliate maintains, administers, or contributes to, or is required to contribute to, or within the five (5) years prior to the Closing Date, maintained, administered, contributed to or was required to contribute to, or under which the Company or an ERISA Affiliate may incur any liability and which cover any employee or former employee of the Company or any ERISA Affiliate.
“
Compensation Claims
” has the meaning given such term in
Section 7.7(b)
.
“
Confidentiality Agreement
” means the Confidentiality Agreement, dated March 4, 2013 by and between Seller and Buyer Guarantor.
“
Consulting Work
” means the design and planning services, engineering services, and procurement consulting and assistance performed by Seller reasonably necessary to complete the Scope of Work.
“
Credit Support Arrangements
” has the meaning given such term in
Section 6.3(g)
.
“
Current Assets
”
means the current assets of the Companies, on a consolidated basis, determined in accordance with GAAP and the Companies’ past practices (to the extent not inconsistent with GAAP), consistently applied, as of the Measurement Time including, without duplication: (i) accounts receivable, (ii) deposits (regardless of classification) and (iii) assets accounted for as other current assets of the Companies, but excluding (A) book values for Feedstock Inventory, Product Inventory, Merchandise Inventory and Parts and Supplies Inventory to the extent such assets are measured and valued pursuant to
Section 2.7
and (B) any Tax assets. For the avoidance of doubt, Current Assets shall include current assets generated by the operation of the Business prior to the Measurement Time, including credit card receipts, fuel card receipts and fleet sales. Notwithstanding the foregoing, “Current Assets” shall not include any Excluded Assets.
“
Current Liabilities
” means the current liabilities of the Companies, on a consolidated basis, determined in accordance with GAAP and the Companies’ past practices (to the extent not inconsistent with GAAP), consistently applied, as of the Measurement Time, including, without duplication: (i) accounts payable and (ii) liabilities accounted for as other current liabilities of the Companies. For the
avoidance of doubt, Current Liabilities shall include current liabilities generated by the operation of the Business prior to the Measurement Time. Notwithstanding the foregoing, “Current Liabilities” shall not include the current portion of any capital lease obligations to the extent such capital lease obligations are not then due and payable, any Retained Liabilities, Company Environmental Liabilities or any Tax liabilities.
“
Data Room
” means the electronic data room maintained by Intralinks, Inc. on behalf of Seller for the posting of documents for review by Buyer in connection with the transactions contemplated hereby.
“
De Minimis Amount
” has the meaning given such term in
Section 11.2(c)
.
“
Deposit
” has the meaning given such term in
Section 2.2
.
“
Deposit Return Event
” means the occurrence of any of the following: (a) this Agreement is terminated pursuant to
Section 10.1(a)
; (b) this Agreement is terminated by Buyer pursuant to
Section 10.1(c)
and the failure to Close in such circumstance is solely due to a failure to satisfy the Closing conditions set forth in
Section 8.3(a)
or
Section 8.3(b)
(other than the execution and delivery of the Closing certificate from an executive officer of Seller); or (c) this Agreement is terminated pursuant to
Section 10.1(e)
.
“
Diligence Representative
” has the meaning given such term in
Section 6.6(a)
.
“
Direct Claim
” has the meaning given such term in
Section 11.4(g)
.
“
Disclosure Schedules
” means the disclosure schedule letters delivered by Seller to Buyer or Buyer to Seller, as the case may be, on the Execution Date. The Disclosure Schedules have been arranged in sections corresponding to the numbered sections of this Agreement.
“
Dollars
” and the symbol “$” mean the lawful currency of the United States of America.
“
Effective Time
” means 12:01 a.m. Hawaii-Aleutian Standard Time on the Closing Date.
“
Employees
” has the meaning given such term in
Section 4.12(a)(i)
.
“
Environmental Agreement
” means the Environmental Agreement to be entered into by and among Seller, Buyer and the Company on the Closing Date, substantially in the form attached hereto as
Exhibit C
.
“
Environmental Condition
” means any condition at, on, under, within or migrating from any tangible Assets, in each case arising out of the presence or release of any Hazardous Materials on, at or underlying the Real Property Interests or the Pipeline ROW Interests.
“
Environmental Law
” means any Law or Authorization pertaining to public or employee exposure to Hazardous Materials, pollution, the environment or the protection of fish, wildlife or natural resources. For the avoidance of doubt, due to the inclusion of the word “applicable” in the definition of “Law” incorporated into this definition, any references in this Agreement to “any Environmental Law” or “any applicable Environmental Law” shall have the same meaning.
“
Equity Interests
” means capital stock, partnership or membership interests or units (whether general or limited), other equity interests, and any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distribution of assets of, the issuing entity.
“
Equity Securities
” means (i) Equity Interests, (ii) subscriptions, calls, warrants, options or commitments of any kind or character relating to, or entitling any Person to acquire, any Equity Interests and (iii) securities convertible into or exercisable or exchangeable for shares of Equity Interests.
“
ERISA
” means the Employee Retirement Income Security Act of 1974, as amended.
“
ERISA Affiliate
” means any entity which is (or at any relevant time was) a member of a “controlled group of corporations” with, under “common control” with, or a member of an “affiliated service group” with, the Company as defined in Section 414(b), (c), (m) or (o) of the Code, or under “common control” with the Company within the meaning of Section 4001(b)(l) of ERISA.
“
Estimated Hydrocarbon Inventory Value
” has the meaning given such term in
Section 2.7(a)(iii)
.
“
Estimated Merchandise Inventory Value
” has the meaning given such term in
Section 2.7(b)(iii)
.
“
Estimated Net Working Capital
” has the meaning given such term in
Section 2.6(c)
.
“
Estimated Parts and Supplies Inventory Value
” has the meaning given such term in
Section 2.7(c)(iii)
.
“
Estimated
Refinery Startup Reimbursement
” has the meaning given such term in
Section 6.1(d)(v)
.
“
Excluded Assets
” has the meaning given such term in
Section 2.10
.
“
Excluded Asset Transfer
” has the meaning given such term in
Section 2.10
.
“
Excluded Contract(s)
” has the meaning given such term in
Section 4.8(d)
.
“
Excluded Intellectual Property
” means the intellectual property and intellectual technology systems set forth in
Section 1.1(a)
of the Disclosure Schedules.
“
Execution Date
” has the meaning given such term in the preamble of this Agreement.
“
Feedstock Inventory
” means all crude oil, feedstock, intermediates and blendstocks owned by the Companies as of the Measurement Time, whether located at or in the Refinery, the Terminals or the Pipelines, in transit by pipeline or vessel or located elsewhere, whether in the possession of the Companies or any other Person, and regardless of whether such inventory represents wholesale exchange imbalances. For the avoidance of doubt, Feedstock Inventory includes all hydrocarbons located at the Refinery in processing units and interconnecting pipes and hydrocarbons serving as tank bottoms and heels but excluding sludge and bs&w. Additionally, Feedstock Inventory shall include Undelivered Refinery Inventory, if any.
“
Feedstock Inventory Value
” means an aggregate amount equal to the market values for each constituent component of the Feedstock Inventory, calculated as of the Measurement Time in accordance with the provisions of
Section 2.7(a)(ii)
.
“
Final Inventory Value
” has the meaning given such term in
Section 2.7(d)(i)
.
“
Final Net Working Capital
” has the meaning given such term in
Section 2.6(d)
.
“
Final Refinery Startup Reimbursement
” has the meaning given such term in
Section 6.1(d)(viii)
.
“
Financial Statements
” has the meaning given such term in
Section 4.6(a)
.
“
Financing
” has the meaning given such term in
Section 5.7
.
“
Food Supplies
” means all food products, ingredients and miscellaneous items that are intended to undergo further processing, packaging or preparation prior to their sale to customers at the retail sites of the Retail Assets or that are provided to customers at the Retail Assets at no additional charge, including soft drink syrups, coffee, hot chocolate, condiments, cups, lids, straws and napkins.
“
Fuel Credits
” means all credits, allotments, renewable identification numbers (“
RINs
”), certificates or other authorizations relating to any applicable fuel quality standards or renewable fuel standards.
“
Fundamental Representations
” has the meaning given such term in
Section 11.1
.
“
GAAP
” means generally accepted accounting principles in the United States.
“
Governmental Authority
” means any national, federal, regional, state, local or other governmental agency, authority, administrative agency, regulatory body, commission, board, bureau, instrumentality, court or arbitral tribunal having governmental or quasi-governmental powers.
“
Governing Documents
” means the articles of incorporation, certificate of incorporation, charter, bylaws, articles or certificate of formation, regulations, limited liability company agreement, operating agreement, certificate of limited partnership, partnership agreement, and all other similar documents, instruments or certificates executed, adopted, or filed in connection with the formation, organization or governance of a Person, including any amendments thereto.
“
Hawaii Consent Decree
” has the meaning given such term in
Section 6.15
.
“
Hazardous Materials
” means (i) any chemicals, materials or substances in any form, whether solid, liquid, gaseous, semisolid, or any combination thereof, whether waste materials, raw materials, chemicals, finished products, by-products, degradation products or any other materials or articles, which are listed, defined or otherwise designated as hazardous, toxic or dangerous and as such are regulated under any Environmental Law, including asbestos, and lead-containing paints or coatings, (ii) any petroleum (including crude oil), petroleum derivatives, petroleum products or by-products of petroleum refining or any oxygenate (including degradation products) in any fuel, and (iii) any other chemical, substance or waste that is regulated by any Environmental Law.
“
Honolulu Pipeline
” means that certain refined products pipeline running approximately 21.2 miles connecting the Refinery to terminals located at the Honolulu International Airport, terminals located
at certain military facilities, the Tesoro Sand Island Terminal, the Aloha Honolulu terminal and the Chevron terminal.
“
HSR Act
” means the Hart-Scott-Rodino Antitrust Improvement Act of 1976, as amended.
“
Hydrocarbon Inventory
” has the meaning given such term in
Section 2.7(a)(ii)
.
“
Hydrocarbon Inventory Value
” has the meaning given such term in
Section 2.7(a)(i)
.
“
Indemnification Cap
” has the meaning given such term in
Section 11.2(e)
.
“
Indemnification Deductible
” has the meaning given such term in
Section 11.2(d)
.
“
Indemnified Party
” has the meaning given such term in
Section 11.4(a)
.
“
Indemnifying Party
” has the meaning given such term in
Section 11.4(a)
.
“
Intellectual Property
” has the meaning given such term in
Section 4.16(a)
.
“
Interim Period
” means the period of time from the Execution Date until the earlier of the Closing or the termination of this Agreement pursuant to
Article X
.
“
Inventory Challenged Amount
” has the meaning given such term in
Section 2.7(d)(i)
.
“
Inventory Protest Letter
” has the meaning given such term in
Section 2.7(d)(i)
.
“
Inventory Statement
” has the meaning given such term in
Section 2.7(d)(i)
.
“
Kalaeloa Pipelines
” means, collectively, the four (4) refined products pipelines running approximately 2.2 miles and connecting the Refinery to the loading facility at the Kalaeloa Barbers Point Harbor, the Chevron refinery, Aloha Barbers Point Terminal and HECO.
“
Knowledge
” and “
Known
” mean, in the case of Seller, the actual knowledge of the individuals listed in Part I of
Exhibit D
, obtained in the normal course of their respective duties as officers, employees or consultants of Seller or any of its Affiliates, without independent investigation or inquiry and, in the case of Buyer, the actual knowledge of the individuals listed on Part II of
Exhibit D
, obtained in the normal course of their respective duties as officers, employees or consultants of Buyer or any of its Affiliates, without independent investigation or inquiry.
“
Law
” means any applicable law (including common law), statute or ordinance of any nation or state, including the United States of America, and any political subdivision thereof, including any state of the United States of America, any regulation, policy, protocol, proclamation or executive order promulgated by any Governmental Authority, any rule or regulation of any self-regulatory organization such as a securities exchange, or any applicable Order of any court or other Governmental Authority having the effect of law in any such jurisdiction. For the avoidance of doubt, any references herein to “any Law” shall, as indicated by this definition, be deemed to refer only to such Law as is applicable in the circumstances.
“
Leased Real Property
” has the meaning given such term in Section 4.7(f).
“
LIBOR
” means for each applicable day, the rate stated in the “Money Rates” section of
The Wall Street Journal
published on such day as the one (1) month London Interbank Offered Rate; and if
The Wall Street Journal
is not published on such day, then the aforesaid rate in the most recent edition of
The Wall Street Journal
preceding such day shall be utilized for such day.
“
License Agreement
” means the License Agreement to be entered into by and among Seller, Buyer and the Company on the Closing Date, substantially in the form attached hereto as
Exhibit K
.
“
Licensed Technology Rights
” has the meaning given such term in
Section 7.18(c)
.
“
Lien
” means any mortgage, pledge, security interest, hen, deed of charge, right of first refusal or first offer, floating charge or other charge of any kind (including any agreement to give any of the foregoing), any conditional sale or other title retention agreement, or the filing of or agreement to give any security interest, charge or financing statement under the Laws of any jurisdiction.
“
Logistics Assets
” means, collectively, the Pipeline Assets, the SPM and the Terminals along with two (2) time chartered tug/barge units and one (1) leased tug boat.
“
Long-Term Inactive Employee
” has the meaning given such term in
Section 4.12(a)(ii)
.
“
Loss
” means, subject to
Section 11.5
and
Section 11.7
, any and all damages, penalties, fines, assessments, charges, costs, Obligations, losses, expenses and fees, including costs of investigation, court costs, costs of defense and reasonable fees of attorneys, accountants and other professional advisors and expert witnesses in connection therewith.
“
Management Work
” means the turnaround management, pre-start up and start-up management, operations management, and training services performed by Seller reasonably necessary to complete the Scope of Work.
“
Material Adverse Effect
”
means an effect, event, fact, circumstance or development (“
Effects
”) that, individually or in the aggregate, has had, or would reasonably be expected to have a material adverse effect on the business, properties, financial condition or results of operations of the Companies, taken as a whole;
provided, however
, that in no event shall any Effect that results from any of the following be deemed to constitute a Material Adverse Effect: (a) this Agreement or any actions required to be taken in compliance with this Agreement, the transactions contemplated hereby, or the pendency or announcement thereof, (b) changes or conditions generally affecting the petroleum refining, marketing and transportation industry (including feedstock pricing, refining, marketing, transportation, terminalling and trading, generally or regionally), (c) changes in general economic, capital market, regulatory or political conditions in the United States or elsewhere (including interest rate and currency fluctuations), (d) changes or proposed changes in Law occurring after the Execution Date, (e) changes or proposed changes in accounting principles or GAAP occurring after the Execution Date, (f) acts of war, insurrection, sabotage or terrorism occurring after the Execution Date, other than such acts that are specifically directed towards the Companies or the Assets, or (g) the Company’s or the Acquired Subsidiary’s failure, in and of itself, to meet operational or financial expectations or projections other than as a result of a breach of this Agreement by the Company or Seller; except, in the cases of clauses (b) and (c), to the extent that such Effects have a disproportionate impact on the Company or the Assets, as a whole, relative to other participants in the industry and in the locations in which the Company operates the Business.
“
Material Company Contract
” has the meaning given such term in
Section 4.8(b)
.
“
Material Contract
”
has the meaning given such term in
Section 4.8(a)
.
“
Measurement Time
” means 11:59 p.m. Hawaii-Aleutian Standard Time on the Closing Date.
“
Merchandise Inventory
”
means all merchandise (excluding any Product Inventory) owned by the Companies as of the Measurement Time and acquired for resale or use in the Retail Assets (including Food Supplies), whether in transit or located elsewhere, whether in the possession of the Companies or any other Person.
“
Merchandise Inventory Value
” means the amount to be paid for the Merchandise Inventory, calculated in accordance with the provisions of
Section 2.7(b)(ii)
.
“
Multi-Site Contract
”
has the meaning given such term in
Section 7.13
.
“
Multi-Site License
” has the meaning given such term in
Section 7.18(c)
.
“
Net Working Capital
” means the sum of (a) the Current Assets; less (b) the Current Liabilities.
“
Net Working Capital Statement
” has the meaning given such term in
Section 2.6(d)
.
“
New Seller Information
” has the meaning given such term in
Section 6.9(a)
.
“
NWC Challenged Amount
” has the meaning given such term in
Section 2.6(d)
.
“
NWC Protest Letter
” has the meaning given such term in
Section 2.6(d)
.
“
Obligations
” means, with respect to any Person, any duties, liabilities, covenants and obligations of such Person, whether vested or unvested, absolute or contingent, conditional or unconditional, primary or secondary, direct or indirect, known or unknown, asserted or unasserted, disputed or undisputed, matured or unmatured, accrued or unaccrued, liquidated or unliquidated, secured or unsecured, joint or several, due or to become due, and whether contractual, statutory or otherwise.
“
Order
” means any order, writ, ruling, decision, verdict, decree, assessment, award (including arbitration awards), judgment, stipulation, injunction, or other determination, decision or finding by, before, or under the supervision of any Governmental Authority.
“
Other Tax Contest
” has the meaning given such term in
Section 7.10(d)(iii)
.
“
Owned Real Property
” has the meaning given such term in
Section 4.7(e)
.
“
Parts and Supplies Inventory
” means the warehouse and stores inventory (including tools, spare parts, catalysts, chemicals, precious metals, sulphur and other similar items) owned by the Companies as of the Measurement Time.
“
Parts and Supplies Inventory Value
” means the amount to be paid for the Parts and Supplies Inventory, calculated in accordance with the provisions of
Section 2.7(c)(ii)
.
“
Party
” has the meaning given such term in the preamble of this Agreement.
“
Pension Plan
” has the meaning given in the definition of Company Plan.
“
Permitted
Lien
” means:
(i) inchoate Liens and charges imposed by Law and incidental to the construction, maintenance, development or operation of the Company’s or the Acquired Subsidiary’s properties or the operation of the Business, if payment of the obligation secured thereby is not yet due or if the validity or amount of which is being contested in good faith by the Company or the Acquired Subsidiary by appropriate action, as applicable;
(ii) Liens for Taxes, assessments, Obligations under workers’ compensation or other social welfare legislation or other requirements, charges or levies of any Governmental Authority, in each case not yet delinquent or which are being contested in good faith by the Company or the Acquired Subsidiary by appropriate actions:
(iii) easements, servitudes, rights-of-way and other rights, exceptions, reservations, conditions, limitations, covenants and other restrictions on the Real Property Interests (A) described in the Title Commitments, (B) to the extent related to a Real Property Interest not covered by the Title Commitments, of record or contained in any lease of such Real Property Interest or portion thereof, or (C) that do not materially interfere with, materially impair or materially impede the operation, value or use of the Assets affected thereby;
(iv) pledges and deposits to secure the performance of bids, tenders, trade or government contracts (other than for repayment of borrowed money), leases, licenses, statutory Obligations, surety bonds, performance bonds, completion bonds and other Obligations of a like kind as set forth in
Section 1.1(b)
of the Disclosure Schedules or as otherwise incurred in the ordinary course of business that do not materially interfere with, impair or impede the Business as currently conducted by the Company or the Acquired Subsidiary;
(v) any Liens consisting of (A) rights reserved to or vested in any Governmental Authority to control or regulate any property of the Company or the Acquired Subsidiary, or to limit the use of such property in any manner which does not materially impair the use of such property for the purposes for which it is held by the Company or the Acquired Subsidiary, (B) Obligations to any Governmental Authority with respect to any Authorization and the rights reserved or vested in any Governmental Authority to terminate any such Authorization or to condemn or expropriate any property, or (C) zoning or other land use or environmental laws and ordinances of any Governmental Authority, in each case that do not materially detract from the value or marketability of the property affected or interfere with, impede or impair the Business as currently conducted by the Company or the Acquired Subsidiary;
(vi) mechanics’ and materialmen’s Liens and similar charges not filed of record and not delinquent;
(vii) mechanics’ and materialmen’s Liens and similar charges filed of record but (A) are being contested in good faith by appropriate action, (B) for which the Company or the Acquired Subsidiary is the beneficiary of a contractual indemnity from another Person, or (C) for which the applicable statutory foreclosure period or other enforcement rights have lapsed;
(viii) mechanics’ and materialmen’s Liens and similar charges filed of record and not included in clause (vii) above for which Seller has bonded around on or before the Closing;
(ix) Liens in respect of Orders with respect to which an appeal or other proceeding for review is being prosecuted and with respect to which a stay of execution pending such appeal or such proceeding for review has been obtained;
(x) any Lien or title imperfection with respect to the Assets created by or resulting from any act or omission by, at the direction of or on behalf of Buyer; and
(xi) Liens that will be paid in full or released on or prior to the Closing Date.
“
Person
”
means an individual, partnership, limited liability company, corporation, joint stock company, trust, estate, joint venture, association or unincorporated organization, or any other form of business or professional entity.
“
Pipeline Assets
” means, collectively, the (i) SPM Pipelines; (ii) the Honolulu Pipeline; and (iii) the Kalaeoloa Pipelines, and all current appurtenances, facilities, fixtures, pumps, valves, meters and other equipment related thereto.
“
Pipeline ROW Interests
”
means the parcels of land and waterways which the Company or the Acquired Subsidiary has the right to use, traverse or occupy under easements, rights-of-way, franchises, permits, licenses and other rights to or interests in relating to the installation, construction, ownership, maintenance and repair of the Pipeline Assets.
“
Post-Closing Employee
” has the meaning given such term in
Section 7.1(c)
.
“
Pre-Closing Tax Contest
” has the meaning given such term in
Section 7.10(d)(ii)
.
“
Pre-Closing Tax Period
” means all taxable periods ending on or prior to the Closing Date and the portion of any Straddle Period through the end of the Closing Date.
“
Pre-Closing Tax Return
” has the meaning given such term in
Section 7.10(b)(i)
.
“
Pre-Closing Transition Services Agreement
” means that certain Pre-Closing Transition Services Agreement to be executed and delivered simultaneously with the execution of this Agreement by and between Tesoro Companies, Inc., a Delaware corporation, and Buyer, substantially in the form attached hereto as
Exhibit L
.
“
Pre-Transaction Claims
” has the meaning given such term in
Section 7.19(a)
.
“
Pre-Transaction Matters
” has the meaning given such term in
Section 7.19(a)
.
“
Proceeding
” means any action, case, lawsuit, arbitration, mediation, investigation, hearing, audit, examination or other proceeding (including regulatory or administrative proceedings) at law or in equity, commenced, brought, conducted or heard by or before, any Governmental Authority, or any mediator, arbitrator or board of arbitration.
“
Process Licenses
” has the meaning given such term in
Section 4.16(b)
.
“
Product Inventory
” means all refined products owned by the Companies as of the Measurement Time, whether located at or in the Refinery, the Pipelines, the Terminals or the Retail Assets, whether in transit by pipeline, rail car, vehicle or vessel or located elsewhere, whether in the possession of the Companies or any other Person, and regardless of whether such inventory represents wholesale exchange imbalances. For the avoidance of doubt, Product Inventory includes all hydrocarbons in interconnecting pipes and hydrocarbons serving as tank bottoms and heels.
“
Product Inventory Value
” means an aggregate amount equal to the market values for each constituent component of the Product Inventory, calculated as of the Measurement Time in accordance with the provisions of
Section 2.7(a)(ii)
.
“
Property, Motor Fuels, and Sales Taxes
” has the meaning given such term in
Section 7.10(a)
.
“
Purchase Price
” has the meaning given such term in
Section 2.3
.
“
Real Property Interests
” means the real property interests owned or leased by the Company or the Acquired Subsidiary, together with all fixtures, buildings and other structures, facilities or improvements currently or hereafter located thereon prior to the Closing and all easements, licenses, rights, appurtenances, right-of-way agreements, option agreements, use agreements and similar land-related agreements or interests relating to the foregoing but excluding the Pipeline ROW Interests.
“
Refinery
” means the Company’s petroleum refinery located at the Campbell Industrial Park in Kapolei, Hawaii, with a throughput capacity of 94,000 barrels per day.
“
Refinery Operational Plan
” has the meaning given such term in
Section 6.14(a)
.
“
Refinery Shutdown Activities
” has the meaning given such term in
Section 6.1(a)
.
“
Refinery Startup Completion
” has the meaning given such term in
Section 6.1(b)(i)
.
“
Refinery Startup Deposit
” has the meaning given such term in
Section 6.1(d)(i)
.
“
Refinery Startup Dispute
” has the meaning given such term in
Section 6.1(c)
.
“
Refinery
Startup Expenses
” means any and all expenses incurred by Seller or its Affiliates directly relating to the Refinery Turnaround and Startup Activities, including expenses relating to (i) salary, payroll expenses and benefits for employees of Seller (but excluding salary expenses of employees of the Company), (ii) engineers, (iii) contractors, (iv) third party expenses, (v) materials (including catalysts) and (vi) leased or purchased equipment incorporated into or used in the Refinery Turnaround and Startup Activities.
“
Refinery Turnaround and Startup Activities
” has the meaning given such term in
Section 6.1(b)
.
“
Refund Conditions
” has the meaning given such term in
Section 2.2
.
“
Related Agreements
” means the agreements, documents and instruments listed in
Section 2.5
and any other agreements, documents and instruments executed and delivered pursuant to this Agreement including the Buyer Guaranty and the Pre-Closing Transition Services Agreement.
“
Repair Costs
” has the meaning given such term in
Section 9.2(a)
.
“
Repair Cost Dispute
” has the meaning given such term in
Section 9.2(c)
.
“
Repair Negotiation Period
” has the meaning given such term in
Section 9.2(b)
.
“
Represented Employee
” has the meaning given such term in
Section 4.12(b)
.
“
Retail Assets
” means the retail assets owned by the Company located on the islands of Oahu, Maui and Hawaii at which fuel products and merchandise are marketed and sold to retail customers, and related assets, as set forth in
Exhibit F
to this Agreement.
“
Retained Liabilities
” has the meaning given such term in
Section 2.9(b)
.
“
Retiree Welfare Benefit
” has the meaning given such term in
Section 7.5
.
“
Scope of Work
” means the scope of work set forth in the electronic folder titled “Refinery Turnaround Scope of Work” located in the Data Room as of the Execution Date.
“
Section 338 Allocation Schedule
” has the meaning given such term in
Section 7.10(j)(ii)
.
“
Section 338(h)(10) Election Forms
” has the meaning given such term in
Section 7.10(i)(ii)
.
“
Section 338(h)(10) Elections
” has the meaning given such term in
Section 7.10(i)(i)
.
“
Securities Act
” has the meaning given such term in
Section 3.5
.
“
Seller
” has the meaning given such term in the preamble of this Agreement.
“
Seller Affiliated Group
” means an Affiliated Group which includes the Seller.
“
Seller Captive Insurers
” has the meaning given such term in
Section 7.9(a)
.
“
Seller Contracts
” has the meaning given such term in
Section 4.8(c)
.
“
Seller Indemnitees
” means Seller, its Affiliates (excluding the Companies post-Closing) and their respective officers, directors, employees, agents, representatives (including any officers, directors, managers, employees, agents or representatives of the Companies to the extent acting at the direction of Seller or its Affiliates prior to the Closing), and their permitted successors or assigns.
“
Seller IP
” has the meaning given such term in
Section 7.18(a)
.
“
Seller Officers and Directors
” means those individuals identified as “Seller Officers and Directors” in
Section 1.1(c)
of the Disclosure Schedules, being all individuals holding positions with the Companies.
“
Seller Policies
” has the meaning given such term in
Section 7.9(a)
.
“
Seller Third Person Consent
” means any Third Person Consent required under (i) any Governing Document of Seller, the Company or the Acquired Subsidiary, or (ii) any Material Contract to which Seller, the Company or the Acquired Subsidiary is a party or by which Seller or any of its assets is bound.
“
Seller Transaction Expenses
” means the aggregate amount of all out-of-pocket fees and expenses, incurred by, or to be paid by, the Companies relating to the negotiation, preparation or execution of this Agreement or any documents or agreements contemplated hereby or the performance or consummation of the pre-Closing transactions contemplated hereby and thereby, which shall include (a) any fees and expenses associated with obtaining necessary or appropriate waivers, consents or approvals of any Governmental Authority or third parties on behalf of Seller or the Companies, (b) any fees or expenses associated with obtaining the release and termination of any Liens (other than Permitted
Liens), (c) all brokers’ or finders’ fees, and (d) fees and expenses of counsel, advisors, consultants, investment bankers, accountants, auditors and experts, in all cases, whether payable prior to or on the Closing Date or thereafter. For avoidance of doubt, Seller Transaction Expenses shall
not
include any expenses incurred by the Companies on or after the Closing at the direction or request of Buyer or its Affiliates (including the Companies beginning after the Closing Date).
“
Seller’s Pension Plans
” has the meaning given such term in
Section 7.3(a)
.
“
Seller’s Savings Plans
” has the meaning given such term in
Section 7.3(b)
.
“
Short-Term Inactive Employee
” has the meaning given such term in
Section 4.12(a)(ii)
.
“
SPM
” means that certain floating single point mooring used for petroleum product and crude oil loading and off-loading equipment owned by the Company and located approximately 1.7 miles off the coast of the Kalaeloa Barbers Point Harbor.
“
SPM Pipelines
” means, collectively, the three (3) subsea pipelines running approximately 2.0 miles and connecting the Refinery to the SPM.
“
Startup Criteria
” shall mean the criteria set forth in
Section 6.1(b)(ii)
of the Disclosure Schedules.
“
Startup Deposit Drawn Amount
” means, at a given point in time, the total amount transferred by Seller to its own account pursuant to
Section 6.1(d)(iv)
as of such time.
“
Straddle Period
” has the meaning given such term in
Section 7.10(a)
.
“
Straddle Tax Return
” has the meaning given such term in
Section 7.10(b)(ii)
.
“
Subsidiary Shares
” has the meaning given such term in
Section 4.5
.
“
Taking
” has the meaning given such term in
Section 9.1
.
“
Tax
” means all United States federal, state, provincial, local or foreign income, profits, accumulated earnings, personal holding company, estimated, gross receipts, windfall profits, sales, use, transfer, value added, severance, franchise, capital gains, capital stock, withholding, ad valorem, employment, unemployment, workers’ compensation, occupation, occupancy, production, social security, disability, wage, payroll, stamp, registration, premium, goods and services, real property, personal property, intangible property, severance, excise, general excise, alternative or add-on minimum, customs, or environmental taxes, or any other taxes, charges, fees, imposts, duties, levies, withholdings, escheat payments, or other assessments, imposed by any Taxing Authority, whether or not shown on a Tax Return, together with any interest, fines, penalties, or additions to tax attributable to or imposed with respect thereto, imposed by, or on behalf of any Taxing Authority, whether or not disputed.
“
Tax Contest
” has the meaning given such term in
Section 7.10(d)(i)
.
“
Tax Return
” means any return, declaration, report, claim for refund or information return or statement or similar statement relating to Taxes, including any schedule or attachment thereto.
“
Taxing Authority
” means, with respect to any Tax, the Governmental Authority that imposes such Tax and the Governmental Authority charged with the collection of such Tax, including any
Governmental Authority that imposes, or is charged with collecting, social security or similar charges or premiums.
“
Terminals
” means, collectively, (i) the two (2) refined products terminals leased and operated by the Company located on the island of Hawaii in Hilo, Hawaii; (ii) the one (1) refined products terminal leased and operated by the Company located on the island of Maui in Kahului, Hawaii; (iii) the one (1) refined products terminal leased and operated by the Company located on the island of Oahu in Hawaii; and (iv) the one (1) refined products terminal leased and operated by the Company located on the island of Kauai at the Lihue Airport in Hawaii.
“
Termination Date
” has the meaning given such term in
Section 10.1(d)
.
“
Tesoro Marks
” means any name incorporating “Tesoro” or any derivation thereof that would reasonably be expected to be confused therewith, or any trademarks, service marks, trade dress, trade names, logos, corporate names and domain names, insignia, imprints, brand identifications, and advertising of Seller or its Affiliates (including “2 Go Tesoro”) and other similar indicia of origin, and all goodwill associated therewith, and registrations of and applications to register the foregoing, together with all other legal rights that arise in any of the foregoing under Law.
“
TH Interest
” has the meaning given such term in the Recitals of this Agreement.
“
Third-Party Claim
” has the meaning given such term in
Section 11.4(b)
.
“
Third-Party Estimate
” has the meaning given such term in
Section 9.2(c)
.
“
Third Person Consent
” means any approval, consent, amendment or waiver of a Person that is required in order to effect the transactions contemplated hereby or any of the Related Agreements or any part hereof or thereof, including waivers and consents by lenders and waivers of transfer or change of control restrictions;
provided
that Third Person Consents shall not include Authorizations.
“
Title Commitments
” means those certain Preliminary Reports obtained by Seller issued by the Title Company under Order Nos. 6707000738 for Lot 12765, 6707000740 for Lot 3167-A, and 6707000739 for Lot 3167-B.
“
Title Company
” means Old Republic Title & Escrow of Hawaii.
“
Title Policies
” has the meaning given such term in
Section 6.12
.
“
Transition Services Agreement
” means the Transition Services Agreement to be entered into by and among Tesoro Companies, Inc., a Delaware corporation, Buyer and the Company on the Closing Date, substantially in the form attached hereto as
Exhibit E
.
“
Treasury Regulation
” means the regulations promulgated under the Code by the United States Department of Treasury.
“
Undelivered Refinery Inventory
” means all crude oil, feedstock, intermediates, blendstocks and refined products owned by Seller and its Affiliates (excluding the Companies) as of the Measurement Time that is designated for use at and is in transit by vessel to the Refinery, whether in the possession of Seller, its Affiliates (excluding the Companies) or any other Person.
“
Union
” has the meaning given such term in
Section 4.12(b)
.
“
WARN Act
” has the meaning given such term in
Section 7.7(a)
.
“
Welfare Plan
” has the meaning given in the definition of Company Plan.
Section 1.2
Construction
. Whenever the context requires, the gender of all words used in this Agreement includes the masculine, feminine and neuter and terms defined in the singular have the corresponding meanings in the plural, and vice versa. All references to Articles and Sections refer to articles and sections of this Agreement, all references to Exhibits refer to exhibits to this Agreement and all references to Schedules refer to Schedules to this Agreement, which Exhibits and Schedules are attached hereto or delivered pursuant hereto and made a part of this Agreement for all purposes. Except as this Agreement otherwise specifies, all references herein to any Law defined or referred to herein are references to that Law (and any rules and regulations promulgated thereunder), as the same may have been (or may hereafter be) amended from time to time;
provided
,
however
, that any references to any Law in
Article III
,
Article IV
or
Article V
(or, as used in any Section in any such Article, any references to any Law included in any defined term used in
Article III
,
Article IV
or
Article V
) are references to that Law (and any rules and regulations promulgated thereunder), as the same may have been amended, interpreted and applied through the Closing Date. In the event of any conflict between the main body of this Agreement and the Exhibits and Schedules hereto, the provisions of the main body of this Agreement shall prevail, but only with respect to the application of the provisions hereof or the interpretation of any of the provisions hereof. The word “includes” or “including” means “including, but not limited to,” unless the context otherwise requires. The words “shall” and “will” are used interchangeably and have the same meaning. The words “this Agreement,” “hereof,” “hereby,” “herein,” “hereunder” and similar terms in this Agreement shall refer to this Agreement as a whole and not to any particular Section or Article in which such words appear. If a word or phrase is defined, its other grammatical forms have a corresponding meaning. Whenever this Agreement refers to a number of days, such number shall refer to calendar days unless Business Days are specified. The language used in this Agreement will be deemed to be the language the Parties have chosen to express their mutual intent, and no rule of strict construction will be applied against any Party. A defined term has its defined meaning throughout this Agreement and each Exhibit and Schedule to this Agreement, regardless of whether it appears before or after the place where it is defined. The term “cost” includes expense, and the term “expense” includes cost. All references to a specific time of day in this Agreement shall be based upon Central Standard Time or Central Daylight Savings Time, as applicable, on the date in question unless otherwise specified. The word “or” will have the inclusive meaning represented by the phrase “and/or” unless the context requires otherwise. Time periods within or following which any payment is to be made or an act is to be done shall be calculated by excluding the day on which the time period commences and including the day on which the time period ends and by extending the period to the next Business Day following if the last day of the time period is not a Business Day. For purposes of
Article III
or
Article IV
, the words “delivered to,” “provided to,” “made available to” or words of similar import mean posted to the Data Room or physically delivered to Buyer, in each case, as of the Execution Date.
ARTICLE II
PURCHASE AND SALE
Section 2.1
Transfer of TH Interest
. Subject to and in accordance with the terms of this Agreement, Seller agrees to sell, assign, transfer, convey and deliver the TH Interest to Buyer, and Buyer agrees to purchase and accept the TH Interest from Seller, for and in consideration of the Purchase Price and the other covenants and agreements of the Parties herein.
Section 2.2
Deposit
. On the Execution Date, Buyer shall pay Seller, by wire transfer or delivery of other immediately available funds to an account, or accounts, designated by Seller, a deposit against the Purchase Price of the TH Interest in an amount equal to $25,000,000 (the “
Deposit
”), as consideration
for Seller’s entry into this Agreement. This Agreement will not become a legally binding and enforceable obligation of Seller unless and until the Deposit is received by Seller. As soon as practicable after the Execution Date, but in any event within ten (10) days after Seller receives the Deposit, Seller shall transfer the Deposit into a segregated investment account. Unless Seller and Buyer otherwise agree in writing, Seller shall use Commercially Reasonable Efforts to invest such funds in U.S. Treasury obligations with a maturity of six (6) months or less, or money market funds that invest exclusively in U.S. Treasury obligations. The Deposit shall be non-refundable in that it shall not be returned to Buyer unless all of the following events (the “
Refund Conditions
”) occur: (a) this Agreement is terminated by Buyer or by Seller as permitted herein, and (b) a Deposit Return Event shall have occurred. Within ten (10) days following the occurrence of the Refund Conditions, Seller shall transfer to Buyer, by wire transfer or delivery of other immediately available funds to an account designated by Buyer, a cash amount equal to the Deposit. If the Closing occurs, an amount equal to the Deposit will be applied to the Purchase Price. Seller shall retain all interest or earnings received on the Deposit unless the Parties otherwise agree. Notwithstanding the preceding sentences to the contrary, in the event this Agreement is terminated pursuant to
Section 10.1(e)
then the amount of the Deposit that is to be refunded to Buyer shall be reduced, but not below zero, by the amount of Losses incurred by Seller and its Affiliates related to or arising from the Refinery Turnaround and Startup Activities including Losses related to the disposition of Feedstock Inventory, Undelivered Refinery Inventory and Committed Refinery Inventory.
Section 2.3
Purchase Price
. As consideration for the sale and transfer of the TH Interest, Buyer shall pay to Seller at the Closing SEVENTY FIVE MILLION ($75,000,000) (the “
Base Amount
”), plus or minus the adjustment set forth in
Section 2.6
(Net Working Capital), plus the adjustments set forth in
Section 2.7
(Inventories), and plus the Earnout Payments, if any, payable pursuant to
Section 2.8
(such Base Amount, as finally adjusted, the “
Purchase Price
”).
Section 2.4
Closing; Closing Date
. The closing of the transactions contemplated by this Agreement (the “
Closing
”) shall take place at the offices of Seller in San Antonio, Texas, or at such other place as Buyer and Seller may mutually agree, at 10:00 a.m. at the site of the Closing on the second (2
nd
) Business Day after the satisfaction or waiver of the conditions contained in
Article VIII
(other than those conditions that by their nature are to be fulfilled at Closing), or on such other date as Seller and Buyer may mutually agree (the “
Closing Date
”);
provided, however
, the Closing shall be deemed for all purposes of this Agreement to occur as of the Effective Time on the Closing Date. Buyer shall assume operational control of the Company and the Business on the Closing Date upon Seller’s receipt of the Closing Date Payment by wire transfer of immediately available funds as provided below.
Section 2.5
Deliveries at the Closing
. At the Closing, the following events shall occur:
(a)
Buyer shall deliver, or cause to be delivered, to Seller:
(i)
An amount (the “
Closing Date Payment
”) equal to the Base Amount,
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(2)
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plus or minus
, as applicable, an amount equal to the Estimated Net Working Capital pursuant to
Section 2.6(c)
,
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(3)
|
plus
an amount equal to the Estimated Hydrocarbon Inventory Value pursuant to
Section 2.7(a)(iii)
,
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(4)
|
plus
an amount equal to the Estimated Merchandise Inventory Value pursuant to
Section 2.7(b)(iii)
,
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(5)
|
plus
an amount equal to the Estimated Parts and Supplies Inventory Value pursuant to
Section 2.7(c)(iii)
,
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(6)
|
plus
an amount equal to the Estimated Refinery Startup Reimbursement pursuant to
Section 6.1(d)(v)
, and
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(7)
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less
an amount to be agreed upon, in good faith, by Seller and Buyer prior to the Closing Date for any Taxes required under applicable Law to be deducted or withheld by Buyer which amount deducted or withheld shall be subject to
Section 7.10(n)
,
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such Closing Date Payment to be paid by wire transfer of immediately available funds to the account of Seller set forth in
Section 2.5(a)(i)
of the Disclosure Schedules;
(ii)
resolutions of Buyer authorizing the execution of this Agreement and the Related Agreements to which Buyer is a party and the consummation of the transactions contemplated under this Agreement and the Related Agreements to which Buyer is a party (to the extent required by Buyer’s organizational documents), in each case certified by the Secretary or other executive officer of Buyer as being complete and correct and then in full force and effect;
(iii)
a certificate of incumbency of the signatory officers of Buyer;
(iv)
a certificate as to the good standing of Buyer issued by the Secretary of State of Delaware;
(v)
the certificates referred to in
Section 8.2(a)
and
Section 8.2(b)
;
(vi)
copies of all Buyer Third Person Consents and Authorizations obtained pursuant to
Section 6.3
;
(vii)
the Environmental Agreement in the form attached hereto as
Exhibit C
, duly executed by Buyer on behalf of itself and the Company;
(viii)
the Transition Services Agreement in the form attached hereto as
Exhibit E
, duly executed by Buyer on behalf of itself and the Company; and
(ix)
the License Agreement in the form attached hereto as
Exhibit K
, duly executed by Buyer on behalf of itself and the Company.
In addition, Buyer shall accept the TH Interest from Seller, and duly execute and deliver the Related Agreements to which Buyer is a party.
(b)
Seller shall deliver, or cause to be delivered, to Buyer:
(i)
an Assignment of Membership Interest in the form attached hereto as
Exhibit J
with regard to the transfer of the TH Interest to Buyer and the admission of Buyer as the sole member of the Company;
(ii)
the minute books and any membership records and company seals of the Company and the minute books and any stock records and company seals of the Acquired Subsidiary;
(iii)
executed resignation letters of (or resolutions removing) the Seller Officers and Directors from their respective positions with the Company and the Acquired Subsidiary;
(iv)
resolutions of Seller and the Company authorizing the execution of this Agreement and the Related Agreements to which Seller or the Company, as applicable, is a party and the consummation of the transactions contemplated under this Agreement and the Related Agreements to which Seller or the Company, as applicable, is a party (to the extent required by Seller’s or the Company’s organizational documents), in each case certified by the Secretary or other executive officer of Seller or the Company, as applicable, as being complete and correct and then in full force and effect;
(v)
Governing Documents of the Company, in each case certified by the Secretary or Assistant Secretary of the Company as being complete and correct and then in full force and effect;
(vi)
Governing Documents of the Acquired Subsidiary, in each case certified by the Secretary or Assistant Secretary of the Acquired Subsidiary as being complete and correct and then in full force and effect;
(vii)
certificates of incumbency of the signatory officers of Seller and the Company, as applicable;
(viii)
short form certificates as to the good standing of Seller, the Company and the Acquired Subsidiary issued by the Secretary of State or other applicable Governmental Authority of the state of formation of Seller, the Company and the Acquired Subsidiary;
(ix)
the certificates referred to in
Section 8.3(a)
and
Section 8.3(b)
;
(x)
a certificate from Seller conforming to the requirements of Treasury Regulations Section 1.1445-2(b)(2) stating that Seller is not a “foreign person” within the meaning of Section 1445 of the Code, duly executed by Seller;
(xi)
the Section 338(h)(10) Election Forms referred to
Section 7.10(i)(ii)
.
(xii)
copies of all Seller Third Person Consents and Authorizations obtained pursuant to
Section 6.3
;
(xiii)
Assignment of Contracts for those Seller Contracts for which Third Person Consents have either been obtained as of or prior to Closing or for which no Third Person Consent is required, duly executed by the Company or the Acquired Subsidiary, as applicable, and the applicable Affiliate of Seller;
(xiv)
the Environmental Agreement in the form attached hereto as
Exhibit C
;
(xv)
the Transition Services Agreement in the form attached hereto as
Exhibit E
;
(xvi)
the License Agreement in the form attached hereto as
Exhibit K
;
(xvii)
Certificates of resident status certifying that the Acquired Subsidiary is a “resident person” as such term is used in, and otherwise complying with, Hawaii Revised Statutes Section 235-68; and
(xviii)
A tax clearance certificate (Form A-6) for each of the Company and the Acquired Subsidiary issued by the State of Hawaii Department of Taxation not more than fifteen (15) Business Days before the Closing Date.
Additionally, Seller shall duly execute and deliver (or cause to be executed and delivered) the Related Agreements to which Seller or any of its Affiliates are a party.
Section 2.6
Net Working Capital
.
(a)
If the Net Working Capital as of the Measurement Time is a positive amount, then the Purchase Price shall be increased in an amount equal to the Net Working Capital, and if the Net Working Capital as of the Measurement Time is a negative amount, then the Purchase Price shall be reduced in an amount equal to the Net Working Capital, in each case as calculated in accordance with this
Section 2.6
.
(b)
Except as otherwise provided in this
Section 2.6
, or in the definitions of Current Assets and Current Liabilities, the items included in the components of Current Assets and Current Liabilities shall be determined, and the amounts of such items shall be calculated, in the same manner as the corresponding line items were determined and calculated, and using the same policies, practices, assumptions, procedures, classifications, methods, estimates and judgments as were used in preparing the Balance Sheet.
(c)
At least three (3) Business Days prior to the Closing Date, Seller shall submit in writing to Buyer its good faith estimate of the Net Working Capital as of the Measurement Time (the “
Estimated Net Working Capital
”) along with documentation supporting its good faith calculation of the Estimated Net Working Capital and shall reasonably respond to questions and comments from Buyer regarding such submission prior to the Closing Date. The Base Amount payable by Buyer on the Closing Date shall be increased or decreased, as applicable, by the amount of the Estimated Net Working Capital.
(d)
Within sixty (60) days after the Closing Date, Seller shall submit to Buyer its written calculation (the “
Net Working Capital Statement
”) of the actual Net Working Capital as of the Measurement Time (the “
Final Net Working Capital
”) accompanied by the consolidated balance sheet of the Companies as of the Measurement Time. From the Closing Date through the final determination of the Final Net Working Capital in accordance with this
Section 2.6(d)
,
Buyer shall cause the Companies and their employees to provide Seller and its advisors reasonable access during normal business times to the personnel, properties and books and records of the Companies for the purpose of determining the Final Net Working Capital. Unless Buyer gives notice to Seller (a “
NWC Protest Letter
”) on or before the thirtieth (30
th
) day after Buyer’s receipt
of the Net Working Capital Statement that Buyer disputes the Final Net Working Capital specified in the Net Working Capital Statement and setting forth in reasonable detail the amounts in dispute and the reasons therefor, then the Final Net Working Capital as specified in the Net Working Capital Statement shall become final and binding on the Parties. Except for the matters specifically set out in the NWC Protest Letter, Buyer shall be deemed to have agreed to the Net Working Capital Statement in full. If Buyer gives a NWC Protest Letter to Seller on or before such thirtieth (30
th
) day that it disputes the Final Net Working Capital specified in the Net Working Capital Statement, then Seller and Buyer shall meet by telephone, or at a mutually agreeable location, to discuss in good faith and
attempt to reconcile their differences with respect to the amount of the Final Net Working Capital that is being challenged by Buyer (the “
NWC Challenged Amount
”).
(e)
If the Parties are unable to mutually resolve the NWC Challenged Amount within twenty (20) days after receipt of the NWC Protest Letter by Seller, then PricewaterhouseCoopers, LLP or another mutually acceptable independent accounting firm (the “
Arbiter
”) will be engaged by the Parties to determine the NWC Challenged Amount. The Arbiter: (1) will be jointly engaged by Seller and Buyer; (2) will be provided, within the (10) Business Days of accepting the engagement, with a definitive written statement from Seller and Buyer of their respective positions and a copy of the Net Working Capital Statement and the NWC Protest Letter; (3) will be advised in the engagement letter that the Parties accept the Arbiter as the appropriate Person to interpret this Agreement for all purposes relevant to the resolution of the NWC Challenged Amount; (4) will be granted access to all records and personnel of the Companies and (5) will have forty-five (45) days to carry out a review and prepare a written statement of its decision regarding the NWC Challenged Amount, which shall be binding and final upon Seller and Buyer. In no event shall the Arbiter’s determination be outside of the range of amounts claimed by the respective Parties with respect to those items in dispute. Each Party will be afforded the opportunity to present to the Arbiter any material such Party deems relevant to the determination. The decision of the Arbiter shall be final and binding upon the Parties except in the event of manifest error (when the relevant part of their determination shall be void and the matter shall be remitted to the Arbiter for correction) and shall be in substitution for and precludes the bringing of any Proceedings, including in any court, in connection with any dispute under this
Section 2.6
. The fees and expenses of the Arbiter incurred in resolving the disputed matter shall be shared equally by Seller, on the one hand, and Buyer, on the other hand.
(f)
Not later than the fifth (5
th
) Business Day after the final determination of the Final Net Working Capital is made pursuant to this
Section 2.6
:
(i)
if the Final Net Working Capital is less than the Estimated Working Capital, then Seller shall pay to Buyer, by wire transfer of immediately available funds to the account or accounts designated in writing by Buyer prior to such fifth (5
th
) Business Day, the amount of such difference together with interest thereon at the Applicable Rate from and including the Closing Date to but excluding the date of payment; or
(ii)
if the Final Net Working Capital is greater than the Estimated Net Working Capital, then Buyer shall pay to Seller by wire transfer of immediately available funds to the account or accounts designated in writing by Seller prior to such fifth (5
th
) Business Day, the amount of such difference together with interest thereon at the Applicable Rate from and including the Closing Date to but excluding the date of payment.
Section 2.7
Inventories
.
(a)
Feedstock Inventory and Product Inventory
:
(i)
The Purchase Price shall be increased in an amount equal to the Feedstock Inventory Value plus the Product Inventory Value (collectively, the “
Hydrocarbon Inventory Value
”), in each case as calculated in accordance with this
Section 2.7
.
(ii)
The Feedstock Inventory and the Product Inventory (collectively, the “
Hydrocarbon Inventory
”) shall be measured as of the Measurement Time in accordance with the measurement procedures set forth in
Exhibit G-1
and shall be valued in accordance with the
valuation formulas set forth in
Exhibit G-2
. Each Party shall be permitted to have representatives present to observe any measurements taken of Hydrocarbon Inventories.
(iii)
At least three (3) Business Days prior to the Closing Date, Seller shall submit in writing to Buyer its good faith estimate of the Hydrocarbon Inventory and the Hydrocarbon Inventory Value as of the Measurement Time (the “
Estimated Hydrocarbon Inventory Value
”) setting forth the types, characteristics and volumes, on a tank, truck, pipeline, vessel or other location basis along with documentation supporting its good faith calculation of the Estimated Hydrocarbon Inventory Value and shall reasonably respond to questions and comments from Buyer regarding such submission prior to the Closing Date. The Base Amount payable by Buyer on the Closing Date shall be increased by the amount of the Estimated Hydrocarbon Inventory Value.
(b)
Merchandise Inventory
:
(i)
The Purchase Price shall be increased in an amount equal to the Merchandise Inventory Value as calculated in accordance with this
Section 2.7
.
(ii)
The Merchandise Inventory shall be measured as of the Measurement Time in accordance with the measurement procedures and valued in accordance with the valuation formulas all as set forth in
Exhibit H
. Each Party shall be permitted to have representatives present to observe any measurements taken of Merchandise Inventory.
(iii)
At least three (3) Business Days prior to the Closing Date, Seller shall submit in writing to Buyer its good faith estimate of the Merchandise Inventory and the Merchandise Inventory Value as of the Measurement Time (the “
Estimated Merchandise Inventory Value
”) setting forth the types, quantities and volumes of Merchandise Inventory on a location by location basis along with documentation supporting its good faith calculation of the Estimated Merchandise Inventory Value and shall reasonably respond to questions and comments from Buyer regarding such submission prior to the Closing Date. The Base Amount payable by Buyer on the Closing Date shall be increased by the amount of the Estimated Merchandise Inventory Value.
(c)
Parts and Supplies Inventory
:
(i)
The Purchase Price shall be increased in an amount equal to the Parts and Supplies Inventory Value as calculated in accordance with this
Section 2.7
.
(ii)
The Parts and Supplies Inventory shall be measured as of the Measurement Time in accordance with the measurement procedures and valued in accordance with the valuation formulas all as set forth in
Exhibit I
. Each Party shall be permitted to have representatives present to observe any measurements taken of Parts and Supplies Inventory.
(iii)
At least three (3) Business Days prior to the Closing Date, Seller shall submit in writing to Buyer its good faith estimate of Parts and Supplies Inventory and the Parts and Supplies Inventory Value as of the Measurement Time (the “
Estimated Parts and Supplies Inventory Value
”) setting forth the types, quantities and volumes of Parts and Supplies Inventory on a location by location basis along with documentation supporting its good faith calculation of the Estimated Parts and Supplies Inventory Value and shall reasonably respond to questions and comments from Buyer regarding such submission prior to the Closing Date. The Base Amount
payable by Buyer on the Closing Date shall be increased by the amount of the Estimated Parts and Supplies Inventory Value.
(d)
Post-Closing Inventory Adjustments
:
(i)
Within sixty (60) days after the Closing Date, Seller shall submit to Buyer its written calculation (the “
Inventory Statement
”) of the actual Hydrocarbon Inventory Value, the Merchandise Inventory Value and the Parts and Supplies Inventory Value all as of the Measurement Time (the “
Final Inventory Value
”). From the Closing Date through the final determination of the Final Inventory Value in accordance with this
Section 2.7(d)
,
Buyer shall cause the Companies and their employees to provide Seller and its advisors reasonable access during normal business times to the personnel, properties and books and records of the Companies for the purpose of determining the Final Inventory Value. Unless Buyer gives notice to Seller (an “
Inventory Protest Letter
”) on or before the thirtieth (30
th
) day after Buyer’s receipt
of the Inventory Statement that Buyer disputes the Final Inventory Value specified in the Inventory Statement and setting forth in reasonable detail the amounts in dispute and the reasons therefor, then the Final Inventory Value as specified in the Inventory Statement shall become final and binding on the Parties. Except for the matters specifically set out in the Inventory Protest Letter, Buyer shall be deemed to have agreed to the Inventory Statement in full. If Buyer gives an Inventory Protest Letter to Seller on or before such thirtieth (30
th
) day that it disputes the Final Inventory Value specified in the Inventory Statement, then Seller and Buyer shall meet by telephone, or at a mutually agreeable location, to discuss in good faith and attempt to reconcile their differences with respect to the amount of the Final Inventory Value that is being challenged by Buyer (the “
Inventory Challenged Amount
”).
(ii)
If the Parties are unable to mutually resolve the Inventory Challenged Amount within twenty (20) days after receipt of the Inventory Protest Letter by Seller, then the Arbiter will be engaged by the Parties to determine the Inventory Challenged Amount. The Arbiter: (1) will be jointly engaged by Seller and Buyer; (2) will be provided, within the (10) Business Days of accepting the engagement, with a definitive written statement from Seller and Buyer of their respective positions and a copy of the Inventory Statement and the Inventory Protest Letter; (3) will be advised in the engagement letter that the Parties accept the Arbiter as the appropriate Person to interpret this Agreement for all purposes relevant to the resolution of the Inventory Challenged Amount; (4) will be granted access to all records and personnel of the Companies and (5) will have forty-five (45) days to carry out a review and prepare a written statement of its decision regarding the Inventory Challenged Amount, which shall be binding and final upon Seller and Buyer. In no event shall the Arbiter’s determination be outside of the range of amounts claimed by the respective Parties with respect to those items in dispute. Each Party will be afforded the opportunity to present to the Arbiter any material such Party deems relevant to the determination. The decision of the Arbiter shall be final and binding upon the Parties except in the event of manifest error (when the relevant part of their determination shall be void and the matter shall be remitted to the Arbiter for correction) and shall be in substitution for and precludes the bringing of any Proceedings, including in any court, in connection with any dispute under this
Section 2.7
. The fees and expenses of the Arbiter incurred in resolving the disputed matter shall be shared equally by Seller, on the one hand, and Buyer, on the other hand.
(iii)
Not later than the fifth (5
th
) Business Day after the final determination of the Final Inventory Value is made pursuant to this
Section 2.7
:
|
|
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(1)
|
if the Final Inventory Value is less than the sum of the Estimated Hydrocarbon Inventory Value, the Estimated Merchandise Inventory
|
Value and the Estimated Parts and Supplies Inventory Value, then Seller shall pay to Buyer, by wire transfer of immediately available funds to the account or accounts designated in writing by Buyer prior to such fifth (5th) Business Day, the amount of such difference together with interest thereon at the Applicable Rate from and including the Closing Date to but excluding the date of payment; or
|
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|
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(2)
|
if the Final Inventory is greater than the sum of the Estimated Hydrocarbon Inventory Value, the Estimated Merchandise Inventory Value and the Estimated Parts and Supplies Inventory Value, then Buyer shall pay to Seller by wire transfer of immediately available funds to the account or accounts designated in writing by Seller prior to such fifth (5th) Business Day, the amount of such difference together with interest thereon at the Applicable Rate from and including the Closing Date to but excluding the date of payment.
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Section 2.8
Earnout Payments
.
(a)
Definitions
. This
Section 2.8
uses the following terms with the meanings assigned to them below:
(i)
“
Annual Earnout Cap
” means $20,000,000.
(ii)
“
Annual Gross Margin
” means, for any Earnout Measurement Period, the excess, if any, of (A) the consolidated revenues of the Company and its subsidiaries over (B) the consolidated cost of sales of the Company and its subsidiaries, each as determined pursuant to the Consolidated Income Statement for such Earnout Measurement Period. For the avoidance of doubt,
Section 2.8(a)(ii)
of the Disclosure Schedules sets forth a sample calculation of the Annual Gross Margin.
(iii)
“
Computed Amounts
” means, for each Earnout Measurement Period, each of the following: (A) the consolidated revenues of the Company and its subsidiaries determined pursuant to the Consolidated Income Statement for such Earnout Measurement Period, (B) the consolidated cost of sales of the Company and its subsidiaries determined pursuant to the Consolidated Income Statement for such Earnout Measurement Period, (C) the Annual Gross Margin for such Earnout Measurement Period; and (D) the Earnout Amount, if any, for such Earnout Measurement Period.
(iv)
“
Consolidated Income Statement
” means, with respect to any Earnout Measurement Period, the audited consolidated statement of operations of the Company and its subsidiaries which is prepared (A) from the records of the Company, (B) on the same consolidated basis as and consistent with the financial statements for the year ended December 31, 2011 set forth in
Section 4.6
of the Disclosure Schedules and (C) in accordance with GAAP applied in a consistent basis during the periods set forth therein;
provided, however
, that such consolidated statement of operations will exclude the effects of each item of income, gain or loss, or any revenue, charge or expense, that is: (i) extraordinary or nonrecurring (in either case, as such term is used under GAAP); (ii) not related to the ordinary course of operations of the Business; (iii) in the nature of general corporate overhead of Buyer or its Affiliates; (iv) incurred by the Company or any of its Affiliates before or after the Closing Date in connection with or related to this Agreement or the transactions contemplated by this Agreement or any financing related thereto, including transaction fees, legal, accounting or other professional fees and
expenses; (v) incurred for restructuring or arising out of the voluntary shutdown or closure of any plant or facility, including severance, relocation or facility closure expenses; (vi) incurred for restructuring or arising out of the integration or consolidation of services or facilities subsequent to any acquisition, including severance, relocation or facility closure expenses; (vii) in the nature of a management fee or similar arrangement involving any Obligations to Buyer or any of its other Affiliates; or (viii) associated with the executive compensation arrangements of Buyer or any of its Affiliates or the grant, issuance or exercise of any shares of stock or other Equity Securities of Buyer or any of its Affiliates.
(v)
“
Earnout Amount
” means, with respect to any Earnout Measurement Period, a dollar amount equal to the result of (A) 0.20 multiplied by (B) the positive amount, if any, by which the Annual Gross Margin for such Earnout Measurement Period exceeds the Earnout Threshold.
(vi)
“
Earnout Measurement Periods
” (each an “
Earnout Measurement Period
”) means each of the three (3) calendar years beginning January 1, 2014 through the year ending December 31, 2016.
(vii)
“
Earnout Payment
” means any payment made to Seller in accordance with the provisions of
Section 2.8(b)
.
(viii)
“
Earnout Statement
” has the meaning specified in
Section 2.8(c)
.
(ix)
“
Earnout Threshold
” means, with respect to any Earnout Measurement Period an amount equal to $165,000,000.
(x)
“
Prior Earnout Payments
” means, as of the time of any determination pursuant to this
Section 2.8
, the aggregate amount of all Earnout Payments that have been previously paid by Buyer to Seller in accordance with this
Section 2.8
.
(xi)
“
Post-Closing Earnout Period
” means the period from (but not including) the Closing Date through (and including) the first to occur of (A) December 31, 2016, (B) the date that Buyer indefeasibly makes the payment contemplated by
Section 2.8(f)
, (C) the date that Buyer indefeasibly makes the final Acceleration Payment contemplated by
Section 2.8(j)
, and (D) the date that Buyer pays Earnout Payments that equal, in the aggregate, the Total Earnout Cap.
(xii)
“
Total Earnout Cap
” means an amount equal to $40,000,000.
(b)
Payment Obligation
. With respect to each Earnout Measurement Period, Buyer shall pay (or cause the Company to pay) to Seller an amount equal to the Earnout Amount, if any;
provided, however
, that with respect to any payment pursuant to this
Section 2.8(b)
in no event (i) shall the Earnout Amount exceed the Annual Earnout Cap for any of the Earnout Measurement Periods or (ii) shall the aggregate of all Earnout Payments paid to Seller exceed the Total Earnout Cap. For the avoidance of doubt, in the event the Annual Gross Margin for any Earnout Measurement Period does not exceed the Earnout Threshold then such deficit shall not be carried over to any subsequent Earnout Measurement Period. In the event the Earnout Amount due to Seller with respect to an Earnout Measurement Period, when added to the Prior Earnout Payments, would cause the total of all Earnout Payments paid to and received by Seller to exceed the Total Earnout Cap, then the Earnout Amount due from Buyer to Seller with respect to such Earnout Measurement Period shall be that amount which, when added to the Prior Earnout Payments, causes the total of all Earnout Payments paid to and received by
Seller to equal the Total Earnout Cap. Upon receipt by Seller of Earnout Payments that equal, in the aggregate, the Total Earnout Cap, then Buyer shall have no further Obligation to Seller for additional Earnout Amounts hereunder or otherwise under this
Section 2.8
.
(c)
Earnout Statements
. As soon as practicable after the end of each Earnout Measurement Period, and in any event prior to ninety (90) days after the end of each Earnout Measurement Period, Buyer will cause to be prepared in writing and delivered to Seller (i) the Consolidated Income Statement for such Earnout Measurement Period and (ii) a statement (the “
Earnout Statement
”) setting forth each Computed Amount for such Earnout Measurement Period. Buyer shall provide (or cause the Companies to provided) to Seller and its designees reasonable access during normal business times to all materials, records and personnel of the Companies and the Business necessary for Seller to verify the correctness of each such Consolidated Income Statement and each such Computed Amount and compliance by Buyer with this
Section 2.8
. Subject to
Section 2.8(i),
each Consolidated Income Statement and each Earnout Statement will be final and binding on Buyer and Seller to the extent of information disclosed to Seller at such time unless, within thirty (30) days following the delivery of the Earnout Statement, Seller notifies Buyer in writing that Seller does not accept as correct any one or more of the Computed Amounts set forth in the Earnout Statement (the “
Earnout Protest Letter
”) and setting forth in reasonable detail the amounts in dispute and the reasons therefor. Except for the matters specifically set out in the Earnout Protest Letter, Seller shall be deemed to have agreed to the Earnout Statement to the extent of information disclosed to Seller at such time. If Seller timely delivers an Earnout Protest Letter, then Seller and Buyer shall meet by telephone, or at a mutually agreeable location, to discuss in good faith and attempt to reconcile their differences with respect to the amount of the Computed Amounts that are being challenged by Seller. Buyer shall pay to Seller any amounts that are not in dispute.
(d)
Disputes
. Subject to
Section 2.8(i)
, if Seller and Buyer are unable to mutually agree upon the Computed Amounts within twenty (20) days after receipt of an Earnout Protest Letter by Buyer, the Arbiter will be engaged by Seller and Buyer to determine the Computed Amounts. The Arbiter: (i) will be jointly engaged by Seller and Buyer; (ii) will be provided, within the ten (10) Business Days of accepting the engagement, with a definitive written statement from Seller and Buyer of their respective positions and a copy of the Earnout Statement and the Earnout Protest Letter; (iii) will be advised in the engagement letter that Seller and Buyer accept the Arbiter as the appropriate Person to interpret this Agreement for all purposes relevant to the resolution of the Computed Amounts; (iv) will be granted access to all records and personnel of the Companies and (v) will have forty (45) days to carry out a review and prepare a written statement of its decision regarding the Computed Amounts, which shall be binding and final upon Seller and Buyer. Seller and Buyer shall each submit their proposed Computed Amounts to the Arbiter. In no event shall the Arbiter’s determination be outside of the range of amounts claimed by the respective Parties with respect to those items in dispute. Each Party will be afforded the opportunity to present to the Arbiter any material such Party deems relevant to the determination. For the avoidance of doubt, the Arbiter shall have no authority to interpret the legal provisions of this Agreement except for the calculation of the Computed Amounts and definitions contained (whether directly or indirectly) therein. The decision of the Arbiter shall be final and binding upon the Parties except in the event of manifest error (in which case the relevant part of the Arbiter’s determination shall be void and the matter shall be remitted to the Arbiter for correction) and shall be in substitution for and precludes the bringing of any Proceedings by either Party, including in any court, in connection with any dispute under this
Section 2.8
. The fees and expenses of the Arbiter incurred in resolving the disputed matter shall be shared equally by Seller, on the one hand, and Buyer, on the other hand.
(e)
Payment
. Subject to
Section 2.8(f)
, any Earnout Payment that Buyer is required to pay pursuant to
Section 2.8(b)
shall be paid in full (to the extent not previously paid) no later than five (5) Business Days following the date upon which the determination of the Earnout Payment becomes
final and binding upon the Parties to the extent as provided in
Section 2.8(c)
or
Section 2.8(d)
, by wire transfer of immediately available funds to the account or accounts designated in writing by Seller.
(f)
Early Termination Payment
. Buyer shall have the option at any time to discharge in full its continuing obligation to make the Earnout Payments pursuant to this
Section 2.8
by paying to Seller an amount equal to the positive amount by which the Total Earnout Cap exceeds the aggregate of all Prior Earnout Payments (such amount, as of any applicable date of determination, being the “
Earnout Termination Payment Amount
”). Any such payment shall be made by Buyer, by wire transfer of immediately available funds to an account designated in writing by Seller. Notwithstanding the foregoing provisions of this
Section 2.8(f)
, if any petition or other action is filed by or against Buyer or the Companies under the U.S. Bankruptcy Code, Title 11 of the U.S.C., or any other Law relating to liquidation, insolvency or reorganization of debtors, or any other proceeding involving the estate or assets of Buyer or the Companies, the obligation of Buyer to make the Earnout Payments hereunder will remain effective or be reinstated, as the case may be (even if the payment contemplated by the first sentence of this
Section 2.8(f)
has been made), to the extent such payment is or may be voidable or otherwise subject to rescission or return as a preferential transfer, fraudulent conveyance or otherwise.
(g)
Conduct of the Business
.
During the Post-Closing Earnout Period, Buyer shall (and shall cause the Companies to), in good faith, conduct the Business in the ordinary course and not in a manner intended or reasonably likely to reduce or avoid the payment of any Earnout Payments. Without limiting the foregoing, during the Post-Closing Earnout Period, without the prior written consent of Seller:
(i)
Buyer shall (and shall cause the Companies to) use Commercially Reasonable Efforts to (A) retain and keep available the services of their respective officers and employees and (B) preserve the goodwill of their respective customers, suppliers and others having business relations with them;
(ii)
Buyer shall not (and shall not permit the Companies to) enter into any contracts, agreements or arrangements relating to the Business with any of Buyer’s Affiliates, other than contracts, agreements or arrangements on terms and conditions that are equal to or more favorable than terms and conditions which could be obtained from independent parties in arm’s-length transactions; and
(iii)
In the event Buyer or any of its Affiliates acquire, directly or indirectly, any additional assets, businesses or properties in the State of Hawaii then such assets, businesses and properties shall be owned by the Company or its wholly owned subsidiaries and results of operations of such assets, business and properties shall be included in the Annual Gross Margin calculation.
(h)
No Equity Interest
.
The Parties understand and agree that (i) the contingent rights to receive the Earnout Payments shall not be represented by any form of certificate or other instrument, is not transferable, and does not constitute an equity or ownership interest in Buyer or the Companies, (ii) Seller shall not have any rights as a security holder of Buyer or the Companies as a result of Seller’s contingent right to receive the Earnout Payments hereunder, and (iii) no interest is payable with respect to Earnout Payments made on a timely basis. Seller acknowledges that (A) there is no assurance that Seller will be entitled to receive Earnout Payments and Buyer has not promised or projected the Earnout Payments and (B) the Parties solely intend the express provisions of this Agreement to govern their contractual relationship with regards to the Earnout Payments.
(i)
Separate Records
. Buyer shall (or shall cause the Companies to) maintain separate books and records for the Business in accordance with GAAP and in such detail as to enable Seller to adequately audit the Companies’ performance under the provisions of this
Section 2.8
and the calculations required hereunder. Buyer shall (and shall cause the Companies to) permit Seller to conduct an audit on an annual basis in connection with Seller’s review of the Earnout Statement, at Seller’s cost and expense; provided that Seller shall provide notice to the Company of any such audit (such notice to be provided within thirty (30) days following receipt by Seller of the Earnout Statement for such year) and Seller’s audit activities shall not unreasonably interfere with the operations of the Business. Buyer will promptly deliver (or shall cause the Companies to deliver) to Seller copies of the annual audited consolidated financial statements and the quarterly unaudited consolidated financial statements of the Companies delivered to any lender or any representative of any lender pursuant to the terms and provisions of any agreement or instrument governing or creating any material indebtedness of Buyer or any of its Affiliates. Notwithstanding the provisions of
Section 2.8(c)
and
Section 2.8(d)
to the contrary, in the event Seller elects to conduct an audit as provided above in any year, then delivery of the Earnout Protest Letter and the provisions of
Section 2.8(d)
for such year shall be deferred until such audit is completed.
(j)
Acceleration Event
. In the event the Refinery ceases operations (an “
Acceleration Event
”), Buyer shall notify Seller promptly of such Acceleration Event and Buyer shall, in lieu of Buyer’s obligation to make any other Earnout Payments under this
Section 2.8
, make three (3) additional payments to Seller (collectively, the “
Acceleration Payments
”), each in an amount equal to one-sixth of the positive amount by which the Total Earnout Cap exceeds the Prior Earnout Payments at the time of the Acceleration Event. Any payment by Buyer pursuant to this
Section 2.8(j)
shall be made notwithstanding the Annual Earnout Cap. Such Acceleration Payments shall be made by Buyer with the first payment being due and payable six (6) months after the Acceleration Event and the remaining two (2) payments being due and payable eighteen (18) months and thirty (30) months, respectively, after the Acceleration Event. Each Acceleration Payment shall be by wire transfer of immediately available funds to an account designated in writing by Seller. Upon payment of the final Acceleration Payment by Buyer, Buyer’s obligation to make any payments under this
Section 2.8
will terminate. Notwithstanding the provisions above, Seller shall have the right to elect not to accept the Acceleration Payments in lieu of Buyer’s obligation to make Earnout Payments (such election to be provided within thirty (30) days following receipt by Seller of the notification of the Acceleration Event) in which event Buyer’s obligation to make Earnout Payments shall continue pursuant to this
Section 2.8
during the Post-Closing Earnout Period.
(k)
Dispositions
. If Buyer or the Companies shall (i) dispose, directly or indirectly, of any facility used in the Business or any portion thereof, whether by sale, merger, consolidation, operation of law, lease or otherwise, or (ii) divest, sell, convey, transfer or assign any capital equipment used in the Business (regardless, in any case, of whether such divestiture, sale, conveyance, transfer or assignment is to an unaffiliated third party or to an Affiliate of Buyer), then Buyer shall, in each such case, make an additional Earnout Payment (regardless of the Annual Earnout Cap) in an amount equal to the result of 0.20 multiplied by an amount equal to (a) the original purchase price of such asset or assets as set forth in
Section 2.8(k)
of the Disclosure Schedules minus (b) the sales price of such asset. Any payment by Buyer pursuant to this
Section 2.8(k)
shall be made notwithstanding the Annual Earnout Cap and shall not be credit against the Annual Earnout Cap. The total amount of Earnout Payments paid by Buyer as a result of the foregoing shall not exceed the Total Earnout Cap. Upon such payment by Buyer, Buyer’s obligation to make any Earnout Payments with respect to such assets will terminate.
Section 2.9
Company Assumed Liabilities; Seller Retained Liabilities
.
(a)
Buyer and the Company acknowledge and agree that, except for the Retained Liabilities and Obligations of Seller pursuant to the Environmental Agreement, (i) after the Closing, the Company will continue to retain all of its Obligations (including Company Environmental Liabilities), and (ii) to the extent not already assumed by the Company, the Company hereby unconditionally assumes all Obligations of Seller and its Affiliates in any way arising out of or related to the ownership, use or operation of the Assets or the Business on or after the Effective Time (all such Obligations in clauses (i) and (ii), whether past, present or future, known or unknown, absolute or contingent, and whether in the nature of Orders, Claims, Losses or otherwise, being herein referred to as “
Company Assumed Liabilities
”).
(b)
As of the Closing, Seller hereby assumes and agrees to be liable for the following (collectively, the “
Retained Liabilities
”):
(i)
Obligations arising out of or with respect to (A) Long-Term Inactive Employees’ employment with, or the termination of their employment from, Seller, the Company or the Acquired Subsidiary, whether such employment period is, or termination of employment occurs, prior to, on or after the Closing (except that Seller shall have no liability for Long-Term Inactive Employees who are re-employed by the Company or the Acquired Subsidiary under
Section 7.1(a)(iii)
); (B) Post-Closing Employees’ employment with Seller, the Company, the Acquired Subsidiary or their respective Affiliates prior to the Closing (but not Post-Closing Employees’ employment with, or the termination of their employment from, the Company or the Acquired Subsidiary after the Closing, including severance); (C) Company Plans or Company Benefit Obligations to Post-Closing Employees and other Employees prior to, on, or after the Closing Date only to the extent relating to employment of and eligibility of retirement benefits for the Post-Closing Employees and other Employees prior to and as of the Closing Date; (D) employees formerly employed by the Company, excluding Post-Closing Employees or Long Term Inactive Employees related to their employment with, or the termination of their employment from the Company prior to the Closing Date; and (E) any other Obligations for which Seller or its Affiliates (other than the Company and the Acquired Subsidiary) are responsible for pursuant to
Section 7.1
through
Section 7.7
;
(ii)
any Obligation for which Seller or its Affiliates (other than the Compan
y
and the Acquired Subsidiary) are responsible for pursuant to
Section 7.10
;
(iii)
any Obligation to the extent arising out of or relating to the Excluded Assets or the transfer of the Excluded Assets pursuant to the Excluded Asset Transfer, including any Taxes arising out of or relating thereto;
(iv)
any accounts payable, notes payable or other amounts that are payable by the Companies to Seller or any of its Affiliates (other than the Company and the Acquired Subsidiary);
(v)
any indebtedness of the Company incurred prior to the Closing Date for borrowed money or issued for or in exchange of indebtedness for borrowed money, or (b) indebtedness of the Company incurred prior to the Closing Date that is evidenced by a note, bond, debenture or similar instrument, except (i) trade debt in the ordinary course of business and (ii) indebtedness to Affiliates of the Company that will be settled prior to the Closing (for the avoidance of doubt the provisions of this clause (v) shall not apply to any lease Obligations of the Company);
(vi)
any liabilities to indemnify, reimburse or advance amounts to any officer or director of the Companies in respect of acting in such capacities (including with respect to any breach of fiduciary obligations by same), to the extent such liabilities accrue prior to the Closing Date, even if such Persons do not bring a Claim for indemnity, reimbursement or advancement for such liabilities until after the Closing Date; and
(vii)
Seller Transaction Expenses but excluding such expenses that are taken into account as a liability of the Companies for purposes of the Final Net Working Capital.
For the avoidance of doubt, the Company Environmental Liabilities are included in the Company Assumed Liabilities and are excluded from the Retained Liabilities except to the extent indemnified by Seller pursuant to the Environmental Agreement.
Section 2.10
Excluded Assets
. Each of Seller and Buyer acknowledges and agrees that (i) all rights and Obligations under the Excluded Contracts, (ii) all Excluded Intellectual Property and all of Seller’s and its Affiliates’ (other than the Companies’) proprietary trade names, trademarks and trade dress including the Tesoro Marks, (iii) all rights of the Company related to or arising from trademark registrations for “Tesoro” or “2 Go Tesoro” or any derivations thereof, (iv) all assets and rights owned by third parties, (v) all documents and communications of Seller and its Affiliates (other than the Companies’) that are subject to the attorney-client privilege or that comprise attorney work product or the attorney-client relationship, (vi) all rights on the part of Seller, its Affiliates (other than the Companies’) and their respective counsel to assert or rely upon the attorney-client privilege, (vii) any accounts receivable, notes receivable or other amounts that are receivable by the Company or the Acquired Subsidiary from Seller or any of its Affiliates (subsection (i) through (vii) being collectively referred to as the “
Excluded Assets
”) will be retained by Seller (or one or more of Seller and its Affiliates, as applicable) after the Closing. Immediately prior to Closing, the Companies shall distribute and transfer to Seller or its Affiliates (other than the Companies) or release and discharge all rights to all Excluded Assets (other than those owned by third parties) not already in possession of Seller or its Affiliates (with such distribution and transfer referred to as the “
Excluded Asset Transfer
”). The Excluded Asset Transfer shall be made pursuant to bills of sale, assignment and assumption agreements and such other general conveyance or release instruments as appropriate to transfer and assign title to or release and discharge rights to such Excluded Assets. Excluded Assets includes any Fuel Credits that (A) relate to the ownership or operation of the Business or the Assets and are in existence, acquired, generated, accrued or otherwise attributable to the period prior to the Closing, (B) do not otherwise relate to the operation of the Business or the Assets or (C) relate to the ownership or operation of any business by Seller or any of its Affiliates from and after the Closing. In connection with the Fuel Credits enumerated in subsection (A) in the preceding sentence, Buyer and Seller acknowledge that pursuant to the terms of that certain Product Contract by and between Aloha Petroleum Ltd. and the Company, RINs for 2013 provided for thereunder will not actually be transferred to the Company until after the Closing Date. Upon actual receipt by the Company of such RINs, Buyer agrees to cause the Company to segregate such RINs that arose on or prior to the Closing Date from those RINs that arose after the Closing Date and to transfer such pre-Closing Date RINs for 2013 to Seller through the Environmental Protection Agency’s Moderated Transaction System in accordance with Section 40 CFR 80.1452 of the Renewable Fuel Standard.
Section 2.11
Undelivered Refinery Inventory
. In the event and to the extent Undelivered Refinery Inventory exists as of the Measurement Time, Seller and its Affiliates, as applicable, shall transfer and assign title to the Undelivered Refinery Inventory, effective as of the Measurement Time, to the Company. In the event and to the extent Seller or its Affiliates are contractually prohibited from transferring and assigning title to any Undelivered Refinery Inventory to the Company as of the Measurement Time then Seller (and its Affiliates, if applicable) shall continue to retain title to such Undelivered Refinery Inventory until such time as title can be transferred and assigned to the Company at
which time Buyer shall cause the Company to purchase and acquire title to such Undelivered Refinery Inventory. Measurement and valuation of all Undelivered Refinery Inventory shall be made pursuant to
Exhibit G-1
and
G-2
and shall be included in the Hydrocarbon Inventory Value and the Estimated Hydrocarbon Inventory Value. Notwithstanding any other provision in this Agreement to the contrary, Buyer shall indemnify, defend and hold harmless the Seller Indemnitees from and against any and all Claims and Losses related to or arising from the Undelivered Refinery Inventory (and any other Feedstock Inventory acquired by the Company as a result of or in furtherance of the Refinery Turnaround and Startup Activities) regardless of whether the Closing occurs and regardless of any reason that the Closing does not occur;
provided, however
, such indemnification shall not apply in the event (i) all of the conditions to Closing pursuant to
Article VIII
are satisfied (other than those conditions that by their nature are to be performed at Closing) and Seller defaults in its Obligation to consummate the Closing or (ii) Buyer terminates this Agreement pursuant to
Section 10.1(c)
solely due to the breach by Seller of its Fundamental Representations (excluding representations and warranties contained in
Section 4.15
) provided that all of the other conditions to Closing pursuant to
Article VIII
were satisfied at the time of Buyer’s termination (other than those conditions that by their nature were to be performed at Closing).
Section 2.12
Committed Refinery Inventory
. At the Closing, Seller shall transfer and assign (and, as applicable, shall cause its Affiliates (excluding the Companies) to transfer and assign), effective as of the Measurement Time, all of Seller’s and its Affiliates’ rights and obligations with respect to Committed Refinery Inventory which shall be transferred and assigned to the Company and the Company shall assume such rights and obligations. In the event and to the extent Seller or its Affiliates are contractually prohibited from transferring and assigning any rights or Obligations to Committed Refinery Inventory to the Company as of the Measurement Time then Seller (and its Affiliates, if applicable) shall continue to retain such rights and obligations until such time as such rights and Obligations can be transferred and assigned to the Company or title to the commodities represented thereby can be transferred to the Company at which time Buyer shall cause the Company to assume such rights and Obligations or, if applicable, purchase and acquire title to the actual commodities. Notwithstanding any other provision in this Agreement to the contrary, Buyer shall indemnify, defend and hold harmless the Seller Indemnitees from and against any and all Claims and Losses related to or arising from the Committed Refinery Inventory and the commodities represented thereby regardless of whether the Closing occurs and regardless of any reason that the Closing does not occur;
provided, however
, such indemnification shall not apply in the event (i) all of the conditions to Closing pursuant to
Article VIII
are satisfied (other than those conditions that by their nature are to be performed at Closing) and Seller defaults in its Obligation to consummate the Closing or (ii) Buyer terminates this Agreement pursuant to
Section 10.1(c)
solely due to the breach by Seller of its Fundamental Representations (excluding representations and warranties contained in
Section 4.15
) provided that all of the other conditions to Closing pursuant to
Article VIII
were satisfied at the time of Buyer’s termination (other than those conditions that by their nature were to be performed at Closing).
ARTICLE III
REPRESENTATIONS AND WARRANTIES REGARDING SELLER
Except as set forth in the Disclosure Schedules, Seller hereby represents and warrants to Buyer that the statements contained in this
Article III
are complete and correct as of the Execution Date, and will be complete and correct as of the Closing Date (unless any such representation or warranty speaks to an earlier date and
provided
that any such representation or warranty that speaks to a “current” or “currently” dated time period shall be deemed to refer to such representation or warranty as of the Execution Date):
Section 3.1
Organization and Qualification
. Seller is a Delaware corporation, duly organized and validly existing and in good standing under the Laws of the State of Delaware. Seller has the requisite corporate power and authority to carry on its business as it is now being conducted. Seller is duly
qualified as a foreign corporation and in good standing in each jurisdiction where the character of its properties owned or held under lease or the nature of its activities makes such qualification necessary, except where the failure to be so qualified would not, individually or in the aggregate, reasonably be expected to have a material adverse effect on Seller’s ability to execute, deliver and perform its Obligations under this Agreement and the Related Agreements to which it will be a party.
Section 3.2
Authority; Enforceability
. Seller has full corporate power and authority to execute, deliver and perform its Obligations under this Agreement and the Related Agreements to which it will be a party, and to carry out the transactions contemplated hereby and thereby. This Agreement has been and the Related Agreements to which Seller will be a party will be duly and validly executed and delivered by Seller and, assuming the due authorization, execution and delivery by Buyer, this Agreement and the Related Agreements to which Seller will be a party constitute the legal, valid and binding Obligations of Seller enforceable in accordance with their respective terms, except as enforcement may be limited by bankruptcy, insolvency or other similar Laws affecting the enforcement of creditors’ rights generally and except that the availability of equitable remedies, including specific performance, is subject to the discretion of the court before which any Proceeding therefor may be brought.
Section 3.3
Conflicts and Approvals
. Assuming the accuracy of Buyer’s representations and warranties and except for (a) the receipt of the Seller Third Person Consents set forth in
Section 3.3(a)
of the Disclosure Schedules and (b) the effectuation of all filings required under the HSR Act and the other filings and registrations with and the receipt of the Authorizations from Governmental Authorities set forth in
Section 3.3(b)
of the Disclosure Schedules, neither the execution and delivery by Seller of this Agreement or the Related Agreements to which Seller will be a party, nor the performance by Seller of its Obligations hereunder or thereunder will (A) conflict with, result in a breach or violation of the terms of, cause or constitute a default under, give rise to any right of termination, cancellation or acceleration under, or require to be obtained or made any consent, waiver, order, approval, order or authorization of, or declaration, of, or notice to, or filing or registration with, any third party or any Governmental Authority, under, (i) any Law applicable to Seller or to which the TH Interest is subject, (ii) the Governing Documents of Seller, (iii) any Authorizations or Orders binding on Seller or to which the TH Interest is subject or (iv) any contract or other instrument or obligation to which Seller is a party or by which the TH Interest is subject, (B) result in the imposition or creation of any Lien, other than Permitted Liens, on the TH Interest, other than any Liens that may be created by or on behalf of Buyer, or (C) with the passage of time, the giving of notice or the taking of any action, have any of the effects set forth in clauses (A) or (B) of this
Section 3.3
, except for any matters described in clauses (A)(i), (iii) or (iv) that would not reasonably be expected to have a Material Adverse Effect or materially and adversely affect the ability of Seller to execute, deliver and perform its Obligations under this Agreement and the Related Agreements to which it will be a party.
Section 3.4
Proceedings
. There are no Proceedings or Orders pending (for which Seller has received service of process or otherwise notice) or, to Seller’s Knowledge, threatened, against Seller or its assets that would reasonably be expected to materially and adversely affect the ability of Seller to execute, deliver and perform its Obligations under this Agreement or any Related Agreement to which Seller will be a party.
Section 3.5
Ownership of the TH Interest
. Seller is the sole record and beneficial owner of the TH Interest and Seller owns the TH Interest free and clear of any Liens, other than Liens (a) arising under this Agreement, (b) arising under the Governing Documents of the Company or as disclosed in
Section 3.5
of the Disclosure Schedules, and (c) imposed pursuant to the Securities Act of 1933, as amended (the “
Securities Act
”), and applicable state securities or “blue sky” laws. At the Closing, the delivery of the TH Interest to Buyer in accordance with the terms of this Agreement will transfer good and valid title to
the TH Interest free and clear of any Liens, other than the Liens described in clauses (a) through (c) above.
Section 3.6
Brokers
. No broker, finder or investment banker is entitled to any brokerage, finder’s or other fee or commission in connection with the transactions contemplated by this Agreement or the Related Agreements based upon arrangements made by or on behalf of Seller or any of its Affiliates, except any fees and commissions that will be discharged by Seller. For the avoidance of doubt, Seller has engaged Aegis Energy Advisors Corp. as financial advisor to Seller and Seller shall be responsible for the fees and expenses of such financial advisor.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES REGARDING THE COMPANIES
Except as set forth in the Disclosure Schedules, Seller and the Company hereby represent and warrant, jointly and severally, to Buyer that the statements contained in this
Article IV
are complete and correct as of the Execution Date, and will be complete and correct as of the Closing Date (unless any such representation or warranty speaks to an earlier date and
provided
that any such representation or warranty that speaks to a “current” or “currently” dated time period shall be deemed to refer to such representation or warranty as of the Execution Date):
Section 4.1
Organization and Qualification
.
(a)
The Company is an Hawaii limited liability company duly organized and validly existing and in good standing under the Laws of the State of Hawaii. The Acquired Subsidiary is an Hawaii corporation organized and validly existing and in good standing under the Laws of the State of Hawaii.
(b)
Each of the Companies has the requisite power and authority to carry on its respective portion of the Business as currently conducted by such company. Each of the Companies is qualified and in good standing in each jurisdiction where the character of its properties owned or held under lease or the nature of its activities makes such qualification necessary, except where the failure to be so qualified would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. Seller has heretofore made available to Buyer complete and correct copies of the Governing Documents of each of the Companies, each as amended to the Execution Date and each of which is in full force and effect. None of the Companies is in violation of its Governing Documents.
(c)
Other than the Acquired Subsidiary, there are no corporations, partnerships, limited partnerships, limited liability companies, joint ventures or other legal entities in which the Company owns, of record or beneficially, any direct or indirect Equity Securities or any right (contingent or otherwise) to acquire the same.
Section 4.2
Authority; Enforceability
. Each of the Companies has full power and authority to execute, deliver and perform its Obligations under this Agreement and the Related Agreements to which it will be a party, and to carry out the transactions contemplated hereby and thereby. This Agreement has been and the Related Agreements to which each of the Companies will be a party will be duly and validly executed and delivered by the Companies, as applicable, and, assuming the due authorization, execution and delivery by Buyer, this Agreement and the Related Agreements to which each of the Companies will be a party constitute the legal, valid and binding Obligations of each of the Companies, as applicable, enforceable in accordance with their respective terms, except as enforcement may be limited by bankruptcy, insolvency or other similar Laws affecting the enforcement of creditors’ rights generally and
except that the availability of equitable remedies, including specific performance, is subject to the discretion of the court before which any Proceeding therefor may be brought.
Section 4.3
Conflicts and Approvals
. Assuming the accuracy of Buyer’s representations and warranties and except for (a) the receipt of the Seller Third Person Consents set forth in
Section 3.3(a)
of the Disclosure Schedules, (b) the effectuation of all filings required under the HSR Act and the other filings and registrations with and the receipt of the Authorizations from Governmental Authorities set forth in
Section 3.3(b)
of the Disclosure Schedules and (c) for any consents, approvals or notices that may be required related to the Pipeline ROW Interests, neither the execution and delivery by the Companies of this Agreement or the Related Agreements to which each or either of the Companies will be a party, nor the performance by each of the Companies of its Obligations, as applicable, hereunder or thereunder will (A) conflict with, result in a breach or violation of the terms of, cause or constitute a default under, give rise to any right of termination, cancellation or acceleration under, or require to be obtained or made any consent, waiver, order, approval, order or authorization of, or declaration, of, or notice to, or filing or registration with, any third party or any Governmental Authority, under, (i) any Law applicable to either of the Companies or to which any of their assets are subject, (ii) the respective Governing Documents of the Companies, (iii) any Authorizations or Orders binding on either of the Companies or to which any of their respective assets are subject or (iv) any contract or other instrument or obligation of either of the Companies or to which any of their assets are subject, (B) result in the imposition or creation of any Lien, other than Permitted Liens, on any asset of any of the Companies, other than any Liens that may be created by or on behalf of Buyer, or (C) with the passage of time, the giving of notice or the taking of any action by a third Person, have any of the effects set forth in clause (A) or (B) of this
Section 4.3
, except for any matters described in clauses (A)(i), (iii) or (iv) that would not reasonably be expected to have a Material Adverse Effect or materially and adversely affect the ability of each of the Companies to execute, deliver and perform its Obligations, as applicable, under this Agreement and the Related Agreements to which it will be a party.
Section 4.4
Capitalization of the Company
. The TH Interest constitutes the sole issued and outstanding membership interest in the Company and consists of five hundred (500) issued and outstanding units. The TH Interest constitutes all of the Equity Securities of the Company. The TH Interest is uncertificated. The TH Interest is validly issued, fully paid and nonassessable and was issued and remains free of preemptive rights. There are no bonds, debentures, notes or other evidences of indebtedness issued or outstanding having the right to vote on any matters on which the holder of the TH Interest may vote. Other than Buyer’s rights as contemplated by this Agreement, there are no options, warrants, calls or other rights or agreements outstanding obligating Seller or the Company to issue, deliver or sell units representing the Company’s membership interest or debt securities, or obligating Seller or the Company to grant, extend or enter into any such option, warrant, call or other such right or agreement.
Section 4.5
Capitalization of the Acquired Subsidiary
. The authorized capital stock of the Acquired Subsidiary consists of 1,000 shares of common stock, $1.00 par value, of which 1,000 shares (the “
Subsidiary Shares
”) are issued and outstanding. The Subsidiary Shares constitute all of the Equity Securities of the Acquired Subsidiary. The Company owns of record and beneficially all of the Subsidiary Shares free and clear of any Liens, other than Liens (a) arising indirectly under this Agreement, (b) arising under the Governing Documents of the Acquired Subsidiary, and (c) imposed pursuant to the Securities Act and applicable state securities or “blue sky” laws. The Subsidiary Shares are validly issued, fully paid and nonassessable and were issued and remain free of preemptive rights. There are no bonds, debentures, notes or other evidences of indebtedness issued or outstanding having the right to vote on any matters on which the holder of the capital stock of the Acquired Subsidiary may vote. There are no options, warrants, calls or other rights or agreements outstanding obligating the Acquired Subsidiary to
issue, deliver or sell capital stock or debt securities, or obligating the Acquired Subsidiary to grant, extend or enter into any such option, warrant, call or other such right or agreement.
Section 4.6
Financial Statements
.
(a)
Section 4.6
of the Disclosure Schedules sets forth the following financial statements (collectively, the “
Financial Statements
”):
(i)
the audited consolidated balance sheet of the Company (including the Acquired Subsidiary) as of December 31, 2011 and 2010, together with corresponding audited consolidated statements of operations and of cash flows of the Company (including the Acquired Subsidiary) for the fiscal years ended December 31, 2011, 2010 and 2009;
(ii)
the unaudited consolidated balance sheet of the Company (including the Acquired Subsidiary) as of December 31, 2012, together with corresponding unaudited consolidated statements of operations and of cash flows for the twelve-month period ended December 31, 2012; and
(iii)
the unaudited consolidated interim balance sheet of the Company (including the Acquired Subsidiary) as of March 31, 2013, together with corresponding unaudited consolidated interim statements of operations and of cash flows for the three-month period ended March 31, 2013.
(b)
The Financial Statements described in
Section 4.6(a)(i)
have been prepared from the records of the Company (including the Acquired Subsidiary) and present fairly, in all material respects, the consolidated financial position of the Company (including the Acquired Subsidiary) as of the respective dates of the balance sheets included therein and the consolidated results of operations and cash flows of the Company (including the Acquired Subsidiary) for the respective periods set forth therein, all in accordance with GAAP applied on a consistent basis during the periods covered thereby (except as noted in the accompanying footnotes thereto).
(c)
The Financial Statements described in
Section 4.6(a)(ii)
and
Section 4.6(a)(iii)
have been prepared from the records of the Company (including the Acquired Subsidiary) and reflect all adjustments necessary for a fair statement, in all material respects, of the consolidated financial position of the Company (including the Acquired Subsidiary) as of the respective dates of the balance sheet included therein and the consolidated results of operations and cash flows of the Company (including the Acquired Subsidiary) for the respective periods set forth therein, all in accordance with GAAP applied on a consistent basis during the respective period covered thereby (except as noted therein) (subject to the absence of footnote disclosures and to normal and recurring year-end adjustments).
(d)
Historically, financial statements have not been prepared for the Business as it has not operated as a separate, stand-alone enterprise. The Financial Statements for the Business have been prepared from the historical accounting records of the Companies in anticipation of a potential transaction to separate the Business from the other business activities of Seller and its other Affiliates as though the Business had been managed as a separate, stand-alone enterprise for all periods presented. As the Business has been historically managed and financed as part of a larger group, its accounts reflect certain charges for functions provided by Seller and its Affiliates that have been identified as related party transactions. It is possible that the terms of the related party transactions are not the same as the terms that might otherwise result from transactions between unrelated parties. To Seller’s Knowledge, all adjustments have been reflected that are necessary for a fair presentation of the carve-out financial statements for the Business for their respective dates. The allocations have been made on a reasonable
basis and have been consistently applied for each period presented. The Financial Statements may not necessarily reflect the financial position, results of operations or cash flows that the Business might have had in the past, or might have in the future, if it had existed as a separate, stand-alone enterprise.
(e)
The net investment of Seller and its other Affiliates in the Companies has been presented
in lieu
of stockholder’s equity in the Financial Statements. Inter-company transactions associated with the Business that involve Seller and its other Affiliates have been included in the net investment reflected in the Financial Statements since payments are not made with respect to such inter-company transactions. Transfers of asset and liabilities to and from the Companies and Seller and its other Affiliates is reflected as a component of the changes in the net investment identified by the headings “Net change in Parent advances” or “Net cash advances by Parent.”
(f)
Since the Balance Sheet Date, the Companies have not incurred any liabilities that would be required by GAAP to be included on a consolidated balance sheet of the Companies but excluding liabilities (i) reflected or reserved against in the Financial Statements or disclosed in the footnotes thereto, (ii) incurred in the ordinary course of business, (iii) included in the Final Net Working Capital, relate to the Shutdown Activities or the Startup Activities or (v) that have individually or in the aggregate, not had or would not reasonably be expected to have a Material Adverse Effect.
Section 4.7
Assets
.
(a)
To Seller’s Knowledge, the Title Commitments contain legal descriptions of all lands owned in fee simple or leased by the Company and on which the material operations of the Refinery (but not any pipelines or terminals serving it) are located subject in each case to Permitted Liens.
(b)
Subject to the receipt of any Third Person Consent or Authorization for the transfer and assignment from Seller to the Company or the Acquired Subsidiary, as applicable, the Company and the Acquired Subsidiary own, lease or have the legal right to use their respective material Assets (or in the case of the Company’s or Acquired Subsidiary’s contract rights, receive the benefits of their respective Assets) free and clear of all Liens except Permitted Liens.
(c)
The Company and the Acquired Subsidiary have good and marketable title to, or valid leasehold interests in, or license to, all of their tangible personal property, free and clear of all Liens, other than Permitted Liens, except for such nonmaterial properties as are no longer used or useful in the conduct of the Business.
(d)
Section 4.7(d)
of the Disclosure Schedules lists all material fixed assets used in or reasonably necessary for the operation of the Refinery as conducted prior to the Refinery Shutdown Activities other than the Excluded Assets.
(e)
Section 4.7(e)
of the Disclosure Schedules sets forth a complete and correct list of all Real Property Interests owned in fee simple by the Company (the “
Owned Real Property
”). There are no outstanding options or rights of first refusal to purchase or lease the Owned Real Property or any portion thereof or interest therein. There are no pending or, to the Knowledge of Seller, threatened condemnation proceedings (for which Seller or the Company has received service of process or otherwise notice) before any Governmental Authority with respect to any Owned Real Property. The Acquired Subsidiary does not own any Real Property Interests in fee simple.
(f)
Section 4.7(f)
of the Disclosure Schedules sets forth a list of all Real Property Interests leased to the Company (the “
Leased Real Property
”), including the name and address of each landlord for each such lease. Seller has delivered to Buyer complete and correct copies of each such lease.
The Company is not a sublessor or grantor under any sublease or other instrument granting to another Person any right to the possession, lease, occupancy or enjoyment of the Leased Real Property except as set forth in
Section 4.7(f)
of the Disclosure Schedules. The Acquired Subsidiary does not own any leasehold interest in any Real Property Interests, except as a sublessee for certain Retail Assets.
(g)
To the Knowledge of Seller, there are no pending special assessments or reassessments (for which Seller or the Company has received service of process or otherwise notice) of any parcel included in the Real Property Interests that would reasonably be expected to result in a material increase in the real property taxes or other similar charges payable by the Company with respect to any parcel of Owned Real Property or a material increase in the rent, additional rent or other sums and charges payable by the Company under the leases for the Leased Real Property.
Section 4.8
Material Contracts
.
(a)
For purposes of this Agreement, a “
Material Contract
” means, with respect to a Person, any of the following, except for this Agreement, any Excluded Contract, any Company Plan and any contract for the purchase or sale of crude oil feedstocks:
(i)
any contract relating to any indebtedness of such Person for borrowed money in an amount in excess of $500,000, or the granting of any Lien by such Person securing any such borrowing;
(ii)
any contract whereby such Person guarantees an Obligation in excess of $500,000 of any other Person;
(iii)
any contract with an employee or consultant of such Person providing for annual payment by such Person in excess of $500,000 or a change in control severance benefit in excess of $500,000;
(iv)
any contract with any officer, director or manager of such Person;
(v)
other than the CBAs set forth in
Section 4.14(a)
of the Disclosure Schedules, any collective bargaining contract or other contract with a labor union;
(vi)
any contract for the purchase or sale of feedstocks, intermediate stocks or refined products that (A) provides for forward physical delivery on a date more than ninety (90) days in the future or (B) provides for the future payment by or to the such Person of more than $2,500,000;
(vii)
any contract for the supply of goods or services by or to such Person not covered in any other paragraph of this
Section 4.8(a)
that provides for future payments by or to such Person of more than $1,000,000;
(viii)
any contract for the sale of any asset by or to such Person not covered in any other paragraph of this
Section 4.8(a)
that provides for the future payment by or to such Person of more than $1,000,000;
(ix)
any lease covering the Leased Real Property or any other lease under which such Person is the lessor or lessee of real or personal property that provides for an annual base rental to or from such Person of more than $500,000;
(x)
any contract prohibiting such Person from competing with another Person in any business or area or soliciting or hiring any Person with respect to employment;
(xi)
any contract or agreement providing for the direct or indirect merger, consolidation, or other reorganization of the Company or the Acquired Subsidiary;
(xii)
any other contract or agreement (other than a contract or agreement of a type described in clause (vi) above) of such Person not covered in any other paragraph of this
Section 4.8(a)
that provides for the future payment by or to such Person of more than $1,000,000;
(xiii)
any joint venture, partnership, limited liability company or other similar contract;
(xiv)
any contract that grants “most favored nations” pricing to a customer or counterparty; and
(xv)
any contract or agreement to enter into any agreement with respect to any of the matters described in any other paragraph of this
Section 4.8(a)
.
(b)
Section 4.8(b)
of the Disclosure Schedules sets forth a list of each Material Contract to which the Company or the Acquired Subsidiary is a party or to which any of the Assets is bound (the “
Material Company Contracts
”).
(c)
Section 4.8(c)
of the Disclosure Schedules sets forth a list of each Material Contract to which Seller or any Affiliate of Seller (excluding the Companies) is a party, other than the Excluded Contracts, which relate primarily to the Business as currently conducted by the Company or the Acquired Subsidiary (the “
Seller Contracts
”).
(d)
Section 4.8(d)
of the Disclosure Schedules sets forth a list of each material contract or agreement to which the Company, the Acquired Subsidiary, Seller, or any Affiliate of Seller is a party and which are used in the operation of the Business, as currently conducted by the Company or the Acquired Subsidiary, that are to be retained by Seller or its Affiliates (or if the Company or the Acquired Subsidiary is a party, which are to be assigned to Seller or its Affiliates prior to the Closing or terminated as to the Company or the Acquired Subsidiary prior to the Closing) (the “
Excluded Contracts
”).
(e)
Except as set forth in
Section 4.8(e)
of the Disclosure Schedules and as would not reasonably be expected to have a material effect, (i) none of the Company, the Acquired Subsidiary, Seller or any Affiliate of Seller has breached and is continuing the terms of any Material Company Contract or Seller Contract, or received from any third party to any such Material Company Contract or Seller Contract written notification that such contract is not in full force and effect, that the Company, the Acquired Subsidiary, Seller or any Affiliate of Seller, as applicable, has failed to perform, and such failure is continuing, its Obligations thereunder to date, or that any third party thereto has not performed its Obligations thereunder to date, (ii) to Seller’s Knowledge, no event has occurred and no circumstance or condition exists, that (with or without notice or lapse of time) would reasonably be expected to result in a breach or violation of, or a default under, any such Material Company Contact or Seller Contract and (iii) each Material Company Contract or Seller Contract is a legal, valid, binding and enforceable agreement of the Company, the Acquired Subsidiary, Seller or any Affiliate of Seller, as applicable, and, to Seller’s Knowledge, the other parties thereto and is in full force and effect, except as enforcement may be limited by bankruptcy, insolvency or other similar Laws affecting the enforcement of creditors’ rights generally and except that the availability of equitable remedies, including specific performance, is subject to the discretion of the court before which any Proceeding therefor may be brought.
(f)
Seller has provided to Buyer complete and correct copies of each Material Company Contract and Seller Contract relating to the Business as currently conducted by the Company or the Acquired Subsidiary (including all waivers thereunder).
Section 4.9
Authorizations
.
(a)
The Companies possess, as of the Execution Date, all Authorizations (or have timely applied for the renewal, the granting of which is pending) that are materially necessary to carry on the Business, as currently conducted, all of which, to the extent material to the operation of the Business (taken as a whole) as currently conducted, are set forth in
Section 4.9(a)
of the Disclosure Schedules, and, to Seller’s Knowledge, all such Authorizations are in full force and effect (except to the extent affected by the Refinery Shutdown Activities). A complete and correct copy of each material Authorization set forth in
Section 4.9(a)
of the Disclosure Schedules has previously been delivered to or made available for inspection by Buyer or Buyer has been given access thereto;
(b)
To Seller’s Knowledge, (i) no event has occurred and no circumstance or condition exists, that (with or without notice or lapse of time) would reasonably be expected to constitute or result in a violation by any of the Companies of, or a failure on the part of any of the Companies to comply with the terms of, any Authorization set forth in
Section 4.9(a)
of the Disclosure Schedules, (ii) neither of the Companies has received from any Governmental Authority written notification that any Authorization set forth in
Section 4.9(a)
of the Disclosure Schedules (A) is not in full force and effect, (B) has been violated in any respect, or (C) is subject to any suspension, revocation, modification or cancellation, and (iii) there is no Proceeding pending (for which the Companies have received service of process or otherwise notice) or threatened, regarding suspension, revocation, modification or cancellation of any such Authorization.
(c)
Notwithstanding the foregoing, no representation or warranty is made in this
Section 4.9
with respect to (i) Authorizations under Environmental Laws, which are addressed exclusively in Environmental Agreement, (ii) Authorizations under ERISA, which are addressed exclusively in
Section 4.13
or (iii) Authorizations under Tax Laws, which are addressed exclusively in
Section 4.15
.
Section 4.10
Compliance With Law
. Except as set forth in
Section 4.10
of the Disclosure Schedules, to Seller’s Knowledge: (a) the Companies are in compliance in all material respects with all material Laws, (b) neither of the Companies has received any written notification from any applicable Governmental Authority that it is not in compliance in all material respects with any material Laws, and (c) no event has occurred and no circumstance or condition exists, that (with or without notice or lapse of time) would reasonably be expected to constitute or result in a failure of the Companies to comply in all material respects with the terms of any material Law. Notwithstanding the foregoing, no representation or warranty is made in this
Section 4.10
with respect to (A) compliance with Environmental Laws, which are addressed exclusively in the Environmental Agreement, (B) compliance with ERISA, which are addressed exclusively in
Section 4.13
or (C) compliance with Tax Laws, which are addressed exclusively in
Section 4.15
.
Section 4.11
Proceedings and Orders
. Except (i) as set forth in
Section 4.11
of the Disclosure Schedules or (ii) as would not reasonably be expected to have a material effect, there are no Proceedings or Orders pending (for which the Companies have received service of process or otherwise notice) or, to Seller’s Knowledge, threatened, against the Companies or to which the Assets or the Business, as currently conducted by the Companies, are subject, in any court or before or by any other Governmental Authority or any arbitrator. Notwithstanding the foregoing, no representation or warranty is made in this
Section 4.11
with respect to (i) Proceedings or Orders under or involving Environmental Laws, which are
addressed exclusively in the Environmental Agreement, (ii) Proceedings or Orders under or involving ERISA, which are addressed exclusively in
Section 4.13
or (iii) Proceedings or Orders under or involving Tax Laws, which are addressed exclusively in
Section 4.15
.
Section 4.12
Employee Matters
.
(a)
Section 4.12(a)
of the Disclosure Schedules sets forth a list of:
(i)
the regular, full-time and regular, part-time active employees employed by the Company as of the end of the pay period immediately preceding the Execution Date (each, an “
Employee
”, and collectively the “
Employees
”); and
(ii)
the employees of the Company who, as of the Execution Date, are not actively at work, including those who are on inactive employee status or leave of absence, separately identifying those employees classified as Short-Term Inactive Employees and those employees classified as Long-Term Inactive Employees. “
Short-Term Inactive Employee
” means an employee who is not actively at work due to a Company-approved leave of absence of six (6) months or less that entitles such employee to reinstatement upon completion of the leave under the applicable leave policies of the Company or Laws. “
Long-Term Inactive Employee
” means an employee who is not actively at work due to a Company-approved leave of absence that entitles the employee to reinstatement upon completion of the leave or Laws and is not a Short-Term Inactive Employee.
(b)
Section 4.12(a)
of the Disclosure Schedules also sets forth each Employee who is represented by United Steelworkers, Local Union No. 12-591 (the “
Union
”) (each such Employee being a “
Represented Employee
”).
(c)
There are no individual employment agreements governing the employment of Employees. With the exception of Employees represented by the Union, the Employees are employed at will.
(d)
The Acquired Subsidiary does not have any employees.
Section 4.13
Company Plans
.
(a)
With respect to each Company Plan to which the following could apply: (i) no withdrawal liability, within the meaning of Section 4201 of ERISA, has been incurred that would reasonably be expected to result in a material liability to the Company after the Closing, which withdrawal liability has not been satisfied, (ii) no liability to the Pension Benefit Guaranty Corporation that would reasonably be expected to result in a material liability to the Company after the Closing has been incurred by the Company or any ERISA Affiliate, which liability has not been satisfied, (iii) no failure to meet the minimum funding standard, whether or not waived, within the meaning of Section 302 of ERISA or Section 412 of the Code or any funder or other requirement of the Pension Protection Act has been incurred that would reasonably be expected to result in a material liability to the Company after the Closing, (iv) all contributions (including installments) to such plan required by Section 302 of ERISA and Section 412 of the Code and the requirements of the Pension Protection Act have been timely made, (v) neither the Company nor any of its ERISA Affiliates maintains or has an obligation to contribute, either presently or within the past six (6) years, to a “multiemployer plan” within the meaning of Section 3(37) of ERISA, and (vi) no notification to or approval from the Pension Benefit Guaranty Corporation or Internal Revenue Service is required in connection with or as a result of any transactions contemplated by this Agreement.
(b)
Section 4.13(b)
of the Disclosure Schedules sets forth a list of all material Company Plans and Company Benefit Obligations to the extent applicable to the Post-Closing Employees. Seller has made available to Buyer complete and correct copies of each of the following with respect to the Company Plans and the Company Benefit Obligations, to the extent applicable to any Post-Closing Employee: (i) any plan documents and all amendments thereto, the most recent written descriptions thereof which have been distributed to the Employees, (ii) the most recent determination or opinion letter issued with respect to each Company Plan that is intended to be qualified under Code Section 401(a), (iii) the actuarial report prepared for the last three (3) plan years for each Company Plan for which such a report was prepared, (iv) all trust documents, declarations of trust and other documents establishing other funding arrangements and all amendments thereto, and the latest financial statements thereof, (v) all material contracts and agreements relating to each Company Plan and Company Benefit Obligation, and (vi) annual report (Form 5500 series), if applicable, for the three (3) most recent plan years and all schedules thereto. Except as set forth in
Section 4.13(b)
of the Disclosure Schedules, transactions contemplated by this Agreement will not constitute a reportable event under ERISA or require any notice or approval from any trustee or CBA representative or other third party on account of or in connection with any Company Plan or Company Benefit Obligation or collective bargaining agreement. The transactions contemplated by this Agreement will not result in any additional funding obligation under any Company Plan or Company Benefit Obligation by the Company or its successors.
(c)
Each Company Plan and Company Benefit Obligation has been maintained and administered in all material respects in compliance with its terms, ERISA, the Code and all applicable Laws. There are no material claims, causes of actions, penalties, penalty taxes, audit or investigation or events for any of the foregoing with respect to any Company Plan or Company Benefit Obligation.
(d)
No payment, vesting or other benefit that could be received (whether in cash or property or the vesting of property) as a result of the transactions contemplated by this Agreement (alone or in combination with any other event) by any Person who is or was associated with the Company and is a “disqualified individual” (as defined in Treasury Regulation Section 1.280G-1) would be characterized as an “excess parachute payment” (as defined in Section 280G(b)(1) of the Code).
(e)
The consummation of the transactions contemplated by this Agreement, either alone or in conjunction with another event that occurred on or prior to the Closing Date (such as a termination of employment), will result in payments of any kind that would not be deductible under Section 162(m) of the Code.
Notwithstanding any other provisions in this Agreement to the contrary, the representations and warranties contained in this
Section 4.13
are the only representations and warranties made with respect to matters arising under ERISA.
Section 4.14
Labor Matters
.
(a)
Section 4.14(a)
of the Disclosure Schedules sets forth a list of all CBAs to which the Company is a party or is bound. Seller has provided to Buyer complete and correct copies of such CBAs.
(b)
Except as disclosed in (b) of the Disclosure Schedules or except as would not reasonably be expected to have a Material Adverse Effect, to Seller’s Knowledge, (i) there are no arbitrations pending (for which the Company has received notice) pursuant to the CBAs nor are there any unfair labor practice Claims pending (for which the Company has received notice) before any agency having jurisdiction over any of the Employees and there are no union representation Claims involving any of the active Represented Employees and (ii) there are no pending strikes, work stoppages, work
slowdowns, picketing, lockouts or similar labor activity, except for routine grievance matters or complaints by or with respect to any of the active Represented Employees.
Section 4.15
Taxes
. Except as set forth in
Section 4.15
of the Disclosure Schedules:
(a)
There are no audits or other reviews pertaining to Taxes pending or scheduled (for which the Seller, the Company or the Acquired Subsidiary have received written notice) with respect to the Company or the Acquired Subsidiary.
(b)
All Tax Returns which were required to be filed by or with respect to the Company or the Acquired Subsidiary have been duly and timely filed (taking into account any valid extensions) and each such Tax Return was complete and correct in all material respects; all material Taxes that were required to be paid by or with respect to the Company and the Acquired Subsidiary (whether or not shown as due on any such Tax Return) have been timely (taking into account any valid extensions) paid in full.
(c)
The Company and the Acquired Subsidiary have withheld and paid all material Taxes required to have been withheld and paid in connection with any amounts paid or owing to any employee, independent contractor, creditor, member, shareholder or other third party.
(d)
There is no Lien for unpaid Taxes against the property of the Company or the Acquired Subsidiary other than Permitted Liens. Seller has not received any written notice of, and does not otherwise have Knowledge of, any audit, other examination or matter in controversy with respect to Taxes being conducted by a Taxing Authority with respect to the Company or the Acquired Subsidiary.
(e)
There are no waivers of any statute of limitations in respect of Taxes or any extension of time with respect to a Tax assessment or deficiency affecting the Company or the Acquired Subsidiary.
(f)
There are no pending proposed deficiencies or other claims (for which the Companies have received written notice) by a Taxing Authority for unpaid Taxes of or with respect to the Company or the Acquired Subsidiary.
(g)
Neither the Company nor the Acquired Subsidiary has any liability for the Taxes of any Person other than the Company, the Acquired Subsidiary or the Seller Affiliated Group under Treasury Regulations Section 1.1502-6 (or any similar provision of state, local, or foreign Tax Law), as a transferee or successor, or pursuant to any contract, law, rule or regulation.
(h)
Neither the Company nor the Acquired Subsidiary has received a written Claim from any Taxing Authority in a jurisdiction where the Company or the Acquired Subsidiary does not file Tax Returns stating that the Company or the Acquired Subsidiary is or may be subject to taxation by that jurisdiction.
(i)
Neither the Company nor the Acquired Subsidiary is the beneficiary of any extension of time within which to file any Tax Return.
(j)
The unpaid Taxes of the Company and the Acquired Subsidiary did not, as of the Balance Sheet Date, materially exceed the reserve for Tax liabilities shown on the interim balance sheet as of the Balance Sheet Date included in the Financial Statements.
(k)
No power of attorney granted by the Company or the Acquired Subsidiary with respect to any Taxes is currently in force.
(l)
Immediately prior to the Closing, the Company will be disregarded as an entity separate from the Seller for U.S. federal income tax purposes, and no election has been, or will be, made under Treasury Regulations Section 301.7701-3(c) prior to the Closing to treat the Company as an association taxable as a corporation for U.S. federal income tax purposes after the Closing.
(m)
The Acquired Subsidiary has not been a “controlled corporation” or a “distributing corporation” in any distribution of stock intended to qualify for tax-free treatment under Section 355 of the Code occurring during the two-year period ending on the date hereof.
(n)
All Tax returns which were required to be filed by or with respect to the Seller Affiliated Group have been duly and timely filed (taking into account any valid extensions) and each such Tax Return was correct and complete in all material respects; all material taxes that were required to be paid by the Seller Affiliated Group (whether or not shown as due on any such Tax Return) have been timely (taking into account any valid extensions) paid in full.
(o)
The only state or political subdivisions therein in which the Company or the Acquired Subsidiary currently is required to file Tax Returns or pay Taxes is the State of Hawaii and political subdivisions therein.
Notwithstanding any other provisions in this Agreement to the contrary, the representations and warranties contained in this
Section 4.15
are the only representations and warranties made with respect to Tax matters.
Section 4.16
Intellectual Property
.
(a)
Except as set forth in
Section 4.16(a)
of the Disclosure Schedules, (i) the Company or the Acquired Subsidiary owns, or is licensed to use, all material trademarks, tradenames, copyrights, technology, know-how and processes necessary for the conduct of the Business as currently conducted by the Companies (the “
Intellectual Property
”), (ii) no Claim has been asserted and is pending (for which the Companies have received notice) by any Person challenging or questioning the use of any such Intellectual Property or the validity or effectiveness of any such Intellectual Property, nor, to Seller’s Knowledge, is there any valid basis for any such Claim, and (iii) to Seller’s Knowledge, the use of such Intellectual Property by the Company or the Acquired Subsidiary, as applicable, does not infringe on the material rights of any Person.
(b)
Except as would not have a Material Adverse Effect, all payment obligations and royalties accruing prior to the Execution Date under the licenses of Intellectual Property set forth in
Section 4.16(b)
of the Disclosure Schedules (the “
Process Licenses
”) which are used by the Company in connection with the operation of the Refinery process units, have been paid.
Section 4.17
Absence of Certain Changes
. Except as contemplated by this Agreement or as reflected in
Section 4.17
of the Disclosure Schedules, the Business, as currently conducted by the Companies, has not, since the Balance Sheet Date, experienced any occurrence outside of the ordinary course of business which constituted a Material Adverse Effect. Without limiting the generality of the preceding sentence, since the Balance Sheet Date there has not been any:
(i)
offer, sale, issue or grant, or any authorization of any offering, sale, issuance or grant of, any Equity Securities of the Companies;
(ii)
acquisition or disposition, whether by merger or consolidation, by purchasing Equity Securities or otherwise, of (A) any business or any corporation, partnership, association or other business organization or division thereof by the Companies or (B) any material assets or properties of the Companies, in each case, except for the purchase or sale of inventory in the ordinary course of business or pursuant to the Refinery Shutdown Activities or the Refinery Turnaround and Startup Activities;
(iii)
adoption of any amendments to the Governing Documents of the Companies;
(iv)
incurrence by the Companies of any Obligations for borrowed money or purchase money indebtedness, whether or not evidenced by a note, bond, debenture or similar instrument, or entrance into any guarantees, except trade debt in the ordinary course of business;
(v)
change in any accounting principle, policy, method or procedure of the Companies or any revaluation of any material Assets;
(vi)
material damage, destruction or loss to the Assets prior to the Execution Date;
(vii)
destruction of any books or records of the Company or the Acquired Subsidiary other than in the ordinary course of business;
(viii)
the settlement of any Proceeding, other than in the ordinary course of business, in each case in an amount in excess of $1,000,000 or that imposes non-monetary relief that materially adversely affects the ability of the Companies to operate the Business as currently conducted;
(ix)
increase in the salaries or base wages of any Employee except pursuant to regular salary/wage review procedures or pursuant to CBAs;
(x)
acceleration or delay in the collection of material accounts or notes receivable or the payment of accounts or notes payable; or
(xi)
agreement or commitment to do any of the foregoing, or any action or omission that would reasonably be expected to result in any of the foregoing.
Section 4.18
Bank Accounts
.
Section 4.18
of the Disclosure Schedules is a complete and correct list of all bank accounts and safety deposit boxes of the Companies and the names of all the Persons authorized to draw thereon and have access thereto.
Section 4.19
Insurance
. The Companies maintain, or under contractual arrangements are named as an additional insured in, policies or binders of fire, liability, product liability, umbrella liability, real and personal property, workers’ compensation, vehicular, directors’ and officers’ liability, fiduciary liability and other casualty and property insurance relating to the Business which are customarily maintained by Persons engaged in businesses similar to the Business.
Section 4.20
Customers and Suppliers
.
(a)
Section 4.20(a)
of the Disclosure Schedules sets forth the name of (i) each of the top ten (10) customers (as determined by revenue) and (ii) each of the top ten (10) suppliers (as
determined by expenses) of the Business, in each case for the twelve months ended on the December 31, 2012.
(b)
Except as set forth in
Section 4.20(b)
of the Disclosure Schedules, to Seller’s Knowledge, since December 31, 2012 until the Execution Date, no material vendor, exhibitor, advertiser, customer, supplier or distributor of the Business has (i) terminated, or threatened in writing to terminate, its relationship with either of the Companies or (ii) decreased materially, or threatened in writing to decrease materially, its services, supplies or materials to either of the Companies or its usage of either of the Companies’ services or products in connection with the Business except to the extent related to or as a result of the Refinery Shutdown Activities.
ARTICLE V
REPRESENTATIONS AND WARRANTIES REGARDING BUYER
Except as set forth in the Disclosure Schedules, Buyer hereby represents and warrants to Seller that the statements contained in this
Article V
are complete and correct as of the Execution Date, and will be complete and correct as of the Closing Date (unless any such representation or warranty speaks to an earlier date and
provided
that any such representation or warranty that speaks to a “current” or “currently” dated time period shall be deemed to refer to such representation or warranty as of the Execution Date):
Section 5.1
Organization and Qualification
. Buyer is a limited liability company duly organized and validly existing and in good standing under the Laws of the State of Delaware. Buyer has the requisite limited liability company power and authority to carry on its business as it is now being conducted. Buyer is duly qualified as a foreign limited liability company and in good standing in each jurisdiction where the character of its properties owned or held under lease or the nature of its activities makes such qualification necessary, except where the failure to be so qualified would not, individually or in the aggregate, reasonably be expected to have a material adverse effect on Buyer’s ability to execute, deliver and perform its Obligations under this Agreement and the Related Agreements to which it will be a party.
Section 5.2
Authority; Enforceability
. Buyer has full limited liability company power and authority to execute, deliver and perform its Obligations under this Agreement and the Related Agreements to which it will be a party, and to carry out the transactions contemplated hereby and thereby. This Agreement has been and the Related Agreements to which Buyer will be a party will be duly and validly executed and delivered by Buyer and, assuming the due authorization, execution, and delivery by Seller, this Agreement and the Related Agreements to which Buyer will be a party constitute the legal, valid and binding Obligations of Buyer enforceable in accordance with their respective terms, except as enforcement may be limited by bankruptcy, insolvency or other similar Laws affecting the enforcement of creditors’ rights generally and except that the availability of equitable remedies, including specific performance, is subject to the discretion of the court before which any Proceeding therefor may be brought.
Section 5.3
Conflicts and Approvals
. Assuming the accuracy of Seller’s representations and warranties and except for (a) the receipt of the Buyer Third Person Consents set forth in
Section 5.3(a)
of the Disclosure Schedules and (b) the effectuation of all filings required under the HSR Act and the other filings and registrations with and the receipt of the Authorizations from Governmental Authorities set forth in
Section 5.3(b)
of the Disclosure Schedules, neither the execution and delivery by Buyer of this Agreement or the Related Agreements to which Buyer will be a party, nor the performance by Buyer of its Obligations hereunder or thereunder will (A) violate or breach the terms of or cause a default under (i) any Law applicable to Buyer, (ii) the Governing Documents of Buyer, (iii) any Authorizations or Orders binding on Buyer or to which any of its assets are subject or (iv) any Material Contract of Buyer or
(B) with the passage of time, the giving of notice or the taking of any action by a third Person, have any of the effects set forth in clause (A) of this
Section 5.3
, except for any matters described in this
Section 5.3
that would not reasonably be expected to materially and adversely affect the ability of Buyer to execute, deliver and perform its Obligations under this Agreement and the Related Agreements to which it will be a party.
Section 5.4
Proceedings
. There are no Proceedings or Orders pending (for which Buyer has received service of process or otherwise notice) or, to Buyer’s Knowledge, threatened, against Buyer or its assets that would reasonably be expected to materially and adversely affect the ability of Buyer to execute, deliver and perform its Obligations under this Agreement or any Related Agreement to which Buyer will be a party.
Section 5.5
Brokers
. No broker, finder or investment banker is entitled to any brokerage, finder’s or other fee or commission in connection with the transactions contemplated by this Agreement or the Related Agreements based upon arrangements made by or on behalf of Buyer, except any fees and commissions that will be discharged by Buyer.
Section 5.6
Purchase the TH Interest for Investment
.
(a)
The TH Interest, when acquired by Buyer at the Closing, will be acquired from Seller for Buyer’s own account, for investment purposes and Buyer is not acquiring the TH Interest from Seller with a view to, or to make offers of sales for Seller in connection with, any distribution thereof, or to participate or have a direct or indirect participation in any such undertaking, or to participate or have a participation in the direct or indirect underwriting of any such undertaking, in each case within the meaning of the Securities Act, or applicable state securities Laws.
(b)
Buyer understands that (i) the TH Interest has not been registered under the Securities Act by reason of their issuance in a transaction exempt from the registration and prospectus delivery requirements of the Securities Act and has not been qualified under any state securities Laws on the grounds that the offering and sale of securities contemplated by this Agreement are exempt from registration thereunder, and (ii) Seller’s reliance on such exemptions is predicated on Buyer’s representations set forth herein. Buyer understands that the resale of the TH Interest may be restricted indefinitely, unless a subsequent disposition thereof is registered under the Securities Act and registered under any state securities Law or is exempt from such registration.
(c)
Buyer is an “accredited investor” as that term is defined in Rule 501 of Regulation D promulgated under the Securities Act. Buyer is able to bear the economic risk of the acquisition of the TH Interest pursuant to the terms of this Agreement, including a complete loss of Buyer’s investment in the TH Interest.
(d)
Buyer can bear the economic risk of its investment in the TH Interest (including possible complete loss of such investment) for an indefinite period of time and has such knowledge and experience in financial or business matters that it is capable of evaluating the merits and risks of its acquisition of the TH Interest.
(e)
Buyer, together with its representatives and advisors, is familiar with investments of the nature of the TH Interest, understands that the purchase of the TH Interest involves certain risks, and believes that it has adequately investigated the Company, and has substantial knowledge and experience in financial and business matters such that it is capable of evaluating, and has evaluated, the merits and risks inherent in purchasing the TH Interest. Buyer and its representatives and advisors have been afforded access, to the extent not prohibited by Law, to such information concerning the Companies
and have been afforded an opportunity to ask such questions of Seller and the Companies as Buyer has deemed necessary or desirable to evaluate the merits and risks of the prospective investments in the TH Interest contemplated herein.
(f)
For purposes of state “blue sky” Laws, Buyer represents and warrants that Buyer is located in the State of Texas and that the decision by Buyer to acquire the TH Interest shall be deemed to occur solely in the State of Texas.
Section 5.7
Financing
. Prior to the execution of this Agreement, Buyer has delivered to Seller complete and correct copies of executed commitment letters from (i) Deutsche Bank AG New York Branch and Deutsche Bank Securities Inc. and (ii) Barclays Bank PLC (including all schedules, annexes, exhibits or other attachments to such commitment letters other than those documents solely relating to fee arrangements in connection with such letters (collectively, the “
Commitment Letters
”)). The documents relating to such fee arrangements do not contain any conditions precedent relating to the provision of the financing referred to in the Commitment Letters except for the payment of the fees provided therein. Pursuant to the Commitment Letters, such lenders and their affiliates have committed to provide and arrange the financing described therein subject to the terms and conditions set forth therein, the proceeds of which may be used to consummate the transactions contemplated by this Agreement (such financing collectively referred to as the “
Financing
”). The Commitment Letters are in effect as of the Execution Date and Buyer has not agreed to any material amendment or modification to any of the Commitment Letters that would adversely affect the ability of Buyer or its Affiliates to obtain financing as contemplated thereby. As of the date of this Agreement, (i) Buyer has not received from or provided to any counterparty to the Commitment Letters written notification that the Commitment Letters are not in full force and effect or have been withdrawn or terminated or otherwise amended or modified in any respect, that Buyer has failed to perform, and such failure is continuing, its Obligations thereunder to date, or that any counterparty thereto has not performed its Obligations thereunder to date, (ii) to Buyer’s Knowledge, no event has occurred and no circumstance or condition exists, that (with or without notice or lapse of time) has resulted in or would reasonably be expected to result in a breach or violation of, or a default under, the Commitment Letters and (iii) each Commitment Letter is a legal, valid, binding and enforceable agreement of Buyer, and, to Buyer’s Knowledge, the other parties thereto and is in full force and effect, except as enforcement may be limited by bankruptcy, insolvency or other similar Laws affecting the enforcement of creditors’ rights generally and except that the availability of equitable remedies, including specific performance, is subject to the discretion of the court before which any Proceeding therefor may be brought. Buyer and its Affiliates are in a position to satisfy all of their respective conditions to advances under the Commitment Letters to the extent such conditions are within their control. Buyer acknowledges that obtaining the Financing (y) is not a condition to its Obligation to consummate the transactions contemplated by this Agreement and (z) is not to be treated as a provision of
Section 8.3
.
Section 5.8
Solvency
. Buyer is not entering into the transactions contemplated by this Agreement with the actual intent to hinder, delay, or defraud either present or future creditors. Assuming (i) satisfaction of the conditions to the obligations of Buyer to consummate the transactions contemplated by this Agreement and (ii) the accuracy of the representations and warranties in
Article III
and
Article IV
, at and immediately after the Closing, and after giving effect to the Closing and the other transactions contemplated hereby, Buyer will not (A) be insolvent (in that both the fair value of its assets will not be less than the sum of its debts and the present fair saleable value of its assets will not be less than the amount required to pay its probable liability on its debts as they become absolute and matured) and (B) have incurred debts beyond its ability to pay as they become absolute and matured.
Section 5.9
Personnel Credentials
. Buyer or its Affiliates will, as of the Closing Date, have employed, contracted with, or otherwise retained sufficient personnel having the credentials, experience,
training and safety records reasonably necessary for the safe operation of the Refinery from and after the Closing.
ARTICLE VI
PRE-CLOSING COVENANTS
Section 6.1
Refinery Shutdown, Turnaround and Startup Activities
.
(a)
Refinery Shutdown
. Buyer acknowledges that prior to the Execution Date the Company determined and commenced activities to shut down the Refinery and intended to convert the Refinery into an import terminal. The Company ceased refining operations at the Refinery on or about April 23, 2013 pursuant to which the Company shut down those processing units of the Refinery set forth in
Section 6.1(a)
of the Disclosure Schedules including ceasing long-term capital improvement and replacement projects and ceasing routine maintenance and routine preventive maintenance activities necessary for ongoing refining operations (collectively, the “
Refinery Shutdown Activities
”).
(b)
Refinery Turnaround and Startup
. Seller shall use Commercially Reasonable Efforts, beginning promptly after the execution of this Agreement, to provide, to and for the benefit of the Company, the Consulting Work and the Management Work (collectively, the “
Refinery Turnaround and Startup Activities
”). Buyer hereby approves the Scope of Work.
(i)
The Refinery Turnaround and Startup Activities shall be deemed to be complete when the operations of the Refinery satisfy the Startup Criteria (the “
Refinery Startup Completion
”), and Seller shall not be obligated to perform any further Refinery Turnaround and Startup Activities following the Refinery Startup Completion.
(ii)
If Seller and Buyer are unable to agree whether the Startup Criteria have been met, then an independent and experienced third party engineering firm that is mutually agreeable to Seller and Buyer shall be engaged to determine and evaluate the non-legal issues that are in dispute. The cost of retaining such firm shall be borne equally by Buyer and Seller.
(c)
Changes in Scope of Work
. Any amendments or modifications to the Scope of Work shall be in writing signed by an authorized representative of Seller and Buyer, and an authorized representative of Buyer shall be reasonably available during the normal business hours of the Company to make such decisions. In the event that Seller proposes a change to the Scope of Work to which Buyer does not agree, and Seller believes in good faith that such change is necessary for successful and safe completion of the remaining items in the Scope of Work (a “
Refinery Startup Dispute
”), Seller shall provide written notice to Buyer setting forth in reasonable detail the basis of the Refinery Startup Dispute. A member of senior management (vice president level or higher) of Buyer and Seller shall meet by telephone, or at a mutually agreeable location, in good faith to attempt to resolve the Refinery Startup Dispute within five (5) days from the date of the notice. In the event Buyer and Seller are unable to resolve the Refinery Startup Dispute in accordance with the foregoing provisions, Seller may, in Seller’s discretion, cease further Refinery Turnaround and Startup Activities.
(d)
Pricing and Payment; Reimbursement
. Seller shall pay the Refinery Startup Expenses, subject to the reimbursement provisions set forth below. For the avoidance of doubt, Seller shall not be reimbursed by Buyer for Refinery Startup Expenses in excess of $15,000,000 unless and until the Refinery Startup Expenses exceed $20,000,000, in which event Seller shall receive reimbursement from Buyer for amounts in excess of $20,000,000 (whether pursuant to
Section 2.5(a)(i)(6)
at Closing or
Section 6.1(d)(iv)
prior to Closing).
(i)
Within seven (7) days of the Execution Date, Buyer shall pay Seller, by wire transfer of immediately available funds to an account, or accounts, designated by Seller, an initial deposit for the benefit of Seller in the amount of $15,000,000 (the “
Refinery Startup Deposit
”).
(ii)
In the event that the Refinery Startup Expenses incurred by Seller or its Affiliates exceed $20,000,000 in the aggregate, Seller shall so notify Buyer in writing. Within three (3) Business Days of receipt of such notice, Buyer shall replenish the Refinery Startup Deposit by paying Seller, by wire transfer of immediately available funds to an account, or accounts, designated by Seller, an additional deposit for the benefit of Seller in the amount of $7,000,000.
(iii)
As soon as practicable after receipt of any funds attributed to the Refinery Startup Deposit by Seller, but in any event within ten (10) days thereafter, Seller shall transfer the Refinery Startup Deposit into a segregated investment account.
(iv)
Seller may transfer portions of the Refinery Startup Deposit to its own account from time to time as Seller may desire to reimburse Seller for Startup Refinery Expenses. Seller may not transfer any portion of the Refinery Startup Deposit to its own account unless the Refinery Startup Expenses incurred to date exceed the Startup Deposit Drawn Amount. From and after the date the Refinery Turnaround and Startup Activities commence, Seller shall provide, as requested by Buyer, reasonably appropriate records indicating the Refinery Startup Expenses incurred to date with a reasonable level of detail sufficient to allow Buyer to evaluate Seller’s draws on the Refinery Startup Deposit. If Buyer disputes the amount or payment of any Refinery Startup Expenses, at any time (subject to
Section 6.1(d)(viii)
), Buyer shall provide Seller with written notice setting forth in reasonable detail the amounts in dispute and the reasons therefor. If Buyer provides such a notice, a procedure similar to the procedure set forth in
Section 2.6(d)
and
Section 2.6(e)
shall be followed to resolve the dispute.
(v)
At least three (3) Business Days prior to the Closing Date, Seller shall submit in writing to Buyer its good faith estimate, as of the Closing Date, by which the Refinery Startup Expenses will exceed $27,000,000 (the “
Estimated Refinery Startup Reimbursement
”) along with documentation supporting its good faith calculation of the Estimated Refinery Startup Reimbursement and shall reasonably respond to questions and comments from Buyer regarding such submission prior to the Closing Date. The Base Amount payable by Buyer on the Closing Date shall be increased or decreased, as applicable, by the amount of the Estimated Refinery Startup Reimbursement.
(vi)
In the event that the total amount of the Refinery Startup Deposit delivered to Seller exceeds the Refinery Startup Expenses upon the completion of the Refinery Turnaround and Startup Activities, Seller shall refund to Buyer such excess at the Closing (subject to a reasonable amount reserved by Seller for invoices Seller expects to receive after the Closing).
(vii)
Notwithstanding any other provision in this Agreement to the contrary and regardless of whether or not the Closing occurs and regardless of any reason that the Closing does not occur, Buyer shall pay to Seller (1) the Estimated Refinery Startup Reimbursement, either at the Closing pursuant to
Section 2.5(a)(i)(6)
or within ten (10) Business Days of the termination of this Agreement, and (2) the Final Refinery Startup Reimbursement within five (5) Business Days after the Final Refinery Startup Reimbursement becomes final pursuant to
Section 6.1(d)(viii)
.
(viii)
Within sixty (60) days after the payment contemplated in
Section 6.1(d)(vii)
has been delivered by Buyer to Seller, Seller shall deliver to Buyer notice of the amount by which the Refinery Startup Expenses exceeded $27,000,000 (the “
Final Refinery Startup Reimbursement
”). Unless Buyer gives notice to Seller on or before the thirtieth (30th) day after Buyer’s receipt of such notice that Buyer disputes the amount setting forth in reasonable detail the amounts in dispute and the reasons therefor, then the Final Refinery Startup Reimbursement as specified in the notice shall become final and binding on the Parties. If Buyer provides such a notice, a procedure similar to the procedure set forth in
Section 2.6(d)
and
Section 2.6(e)
shall be followed to arrive at a Final Refinery Startup Reimbursement. Buyer shall promptly pay any amounts not in dispute.
(ix)
Seller shall provide, as reasonably requested by Buyer, accounting reports setting forth actual and budgeted amounts for the Refinery Startup Expenses. Seller shall permit a Diligence Representative of Buyer to have reasonable access to the Refinery, subject to
Section 6.6
, to review such reports and monitor the Refinery Turnaround and Startup Activities.
(e)
Course of performance
. To the extent Seller performs the Refinery Turnaround and Startup Activities, during the course thereof:
(i)
Seller shall use its Commercially Reasonable Efforts to perform the Refinery Turnaround and Startup Activities within the time frames indicated in the Scope of Work and to perform the Refinery Turnaround and Startup Activities in a diligent, orderly and professional manner; and
(ii)
Seller shall keep Buyer informed of all material factors which may affect Seller’s progress of the Refinery Turnaround and Startup Activities and the various dates when Seller anticipates completion of the items detailed on the Scope of Work.
(f)
Independent Contractor
. Seller will be an independent contractor with respect to all Refinery Turnaround and Startup Activities performed pursuant to this Section. Neither Seller nor any contractors nor the employees of either shall be deemed to be servants, employees or agents of Buyer.
(g)
Waiver of Warranties
. Notwithstanding any other provision in this Agreement to the contrary, SELLER HAS NOT MADE AND HEREBY DISCLAIMS ANY REPRESENTATION OR WARRANTY, WHETHER EXPRESS OR IMPLIED, AND WHETHER BY COMMON LAW, STATUTE, OR OTHERWISE, REGARDING (I) THE QUALITY, CONDITION, OR OPERABILITY OF THE ASSETS AS MODIFIED BY THE REFINERY TURNAROUND AND STARTUP ACTIVITIES, (II) THE MERCHANTABILITY OF THE ASSETS AS MODIFIED BY THE REFINERY TURNAROUND AND STARTUP ACTIVITIES, (III) FITNESS FOR ANY PARTICULAR PURPOSE OF THE ASSETS AS MODIFIED BY THE REFINERY TURNAROUND AND STARTUP ACTIVITIES, OR (IV) THE CONFORMITY OF THE ASSETS AS MODIFIED BY THE REFINERY TURNAROUND AND STARTUP ACTIVITIES TO MODELS, SAMPLES OF MATERIALS OR MANUFACTURER DESIGN, AND ALL TANGIBLE PURCHASED ASSETS SUBJECT TO THE REFINERY TURNAROUND AND STARTUP ACTIVITIES SHALL BE DELIVERED “AS IS, WHERE IS” WITH ALL FAULTS.
(h)
Release and Indemnification of Seller
. In addition to other indemnifications provided by Buyer elsewhere in this Agreement, Buyer hereby releases and discharges and agrees to indemnify, defend, and hold harmless the Seller Indemnitees from and against any and all Claims and Losses caused by, arising out of, or in any way incidental to or in connection with the performance of the Refinery Turnaround and Startup Activities, whether arising before or after completion thereof, and in
any manner directly or indirectly caused, occasioned or contributed to, in whole or in part, or claimed to be caused, occasioned or contributed to, in whole or in part, by the following:
(i)
The negligence or fault or gross negligence, whether active or passive, (but excluding willful misconduct) of the Seller Indemnitees or their contractors, subcontractors or vendors;
(ii)
The negligence, fault, gross negligence or willful misconduct, whether active or passive, of Buyer or its contractors, subcontractors or vendors or any third parties (or any of its owners, directors, officers, employees or agents);
(iii)
The concurrent negligence or fault, whether active or passive, of any combination of the Seller Indemnitees, Buyer or its contractors, subcontractors or vendors, or any third party (or any of their respective owners, directors, officers, employees or agents); or
(iv)
Where liability with or without fault is imposed, or sought to be imposed, on the basis of any theory of strict liability by operation of law or any violation or failure to comply with any law, rule, regulation, order or requirement of any Governmental Authority.
BUYER UNDERSTANDS, ACKNOWLEDGES AND AGREES THAT SUCH INDEMNIFICATION INCLUDES AN INDEMNIFICATION OF THE SELLER INDEMNITEES FOR AND AGAINST EACH OF THEIR OWN NEGLIGENCE AND GROSS NEGLIGENCE (but excluding to the extent of willful misconduct of the Seller Indemnitees). The provisions of this
Section 6.1(h)
shall survive the termination or completion of the Refinery Turnaround and Startup Activities and the Closing.
Section 6.2
Operation of the Business
. Except (i) as set forth in
Section 6.2
of the Disclosure Schedules, (ii) as otherwise contemplated by this Agreement (including the pre-Closing transfer of any Excluded Assets to Seller or any Affiliate of Seller (other than to the Company or the Acquired Subsidiary) and including the Refinery Shutdown Activities and the Refinery Turnaround and Startup Activities), or (iii) as otherwise consented to by Buyer, such consent not to be unreasonably withheld, conditioned or delayed, during the Interim Period Seller shall (and shall cause the Company and the Acquired Subsidiary) to:
(a)
afford to Buyer and its agents, advisors and representatives reasonable access during normal business hours to the Company’s and the Acquired Subsidiary’s properties, personnel and the books and records and shall furnish such information about the Company and the Acquired Subsidiary’s as Buyer shall reasonably request, all upon reasonable notice to Seller and in a manner that does not interfere in any material respect with the normal operations of the Business and the Company or the Acquired Subsidiary;
(b)
operate the Business and provide routine maintenance of the Assets in the usual and ordinary course consistent with past practice or as otherwise provided in
Section 6.2
of the Disclosure Schedules;
(c)
use Commercially Reasonable Efforts to preserve substantially intact its business organization, and to preserve relationships with agents, lessors, suppliers, customers and employees;
(d)
not offer, sell, issue or grant, or authorize the offering, sale, issuance or grant of, any Equity Securities of the Companies;
(e)
not acquire or sell by or through the Companies, whether by merger or consolidation, by purchasing Equity Securities or otherwise, any business or any corporation, partnership, association or other business organization or division thereof or any material assets or properties of the Companies, in each case, except for the purchase or sale of inventory in the ordinary course of business or assets purchased pursuant to the Refinery Turnaround and Startup Activities;
(f)
not adopt any amendments to the Governing Documents of the Companies;
(g)
not incur any Obligations of the Companies for borrowed money or purchase money indebtedness, whether or not evidenced by a note, bond, debenture or similar instrument, nor enter into any guarantees by the Companies, except (i) trade debt in the ordinary course of business and (ii) indebtedness to Affiliates of the Company and the Acquired Subsidiary that will be settled prior to Closing;
(h)
not destroy any books or records of the Companies other than in the ordinary course of business;
(i)
promptly notify Buyer of any material emergency or other material change in the Business or the Assets (for purposes of this subsection (i) only, “material” shall mean events or circumstances which result or would reasonably be likely to result in Losses equal to or greater than $5 million in relation to the Refinery, $1 million in relation to the Logistic Assets and $250,000 in relation to the Retail Assets);
(j)
not settle any Proceeding related to the Companies or the Business, other than in the ordinary course of business or as contemplated pursuant to
Section 6.15
related to the Hawaii Consent Decree, in each case in an amount in excess of $1,000,000 or that imposes non-monetary relief that materially and adversely affects the ability of the Companies to operate the Business as currently conducted;
(k)
not create any Lien (other than a Permitted Lien the release of which the Companies are pursuing by Commercially Reasonable Efforts) against any of the Assets;
(l)
not make an election under Treasury Regulations Section 301.7701-3(c) to treat the Company as an association taxable as a corporation for U.S. federal income tax purposes;
(m)
except as may be required by GAAP, not change any accounting method or accounting practice of the Companies;
(n)
not enter into, terminate or materially amend or materially modify any Material Company Contract or Seller Contract (excluding Multi-Site Contracts), or otherwise waive, release or assign any material rights, claims or benefits of the Company or the Acquired Subsidiary under any such Material Contract or enter into any derivative, option, hedge or futures contracts in all cases other than in the ordinary course of business;
provided
, that this provision shall not require the Company to seek or obtain Buyer’s consent in order to set or change the prices at which the Company or the Acquired Subsidiary provides goods or services to customers in the ordinary course of business;
(o)
perform and comply in all material respects with the Material Company Contracts;
(p)
comply in all material respects with applicable Laws;
(q)
maintain (or continue to have the benefit of) insurance with respect to the Business, comparable in amount, scope and coverage to that in effect on the Execution Date;
(r)
not adopt, enter into or amend any Company Plan or CBA if the adoption, entry or amendment would reasonably be likely to result in any materially increased cost or expense to either of the Companies after the Closing;
(s)
not enter into or amend any employment, severance, consulting or other compensation agreement or arrangement with any existing or new director, officer, independent contractor or employee of either of the Companies except for offer letters, employment agreements and individual consulting agreements for new hires (other than the hiring of officer-level employees) entered into in the ordinary course of business that are terminable at will and without further liability to either of the Companies;
(t)
not materially increase the salaries or base wages of any Employee, or terminate any individual without cause or except pursuant to a CBA, if applicable;
(u)
not agree, resolve or commit to do any of the actions prohibited in clauses
(d)
through
(h)
, (
j
) through (
n
) or (
r
) through (
t
) that would, or the effects of which would, survive the Closing.
Section 6.3
Appropriate Action; Consents; Filings
. During the Interim Period:
(a)
Subject to Seller’s and Buyer’s additional Obligations in clauses
(b)
,
(c)
and
(d)
of this
Section 6.3
and the other terms and conditions of this Agreement, Seller and Buyer shall each use Commercially Reasonable Efforts to (i) take, or cause to be taken, all actions, and do, or cause to be done, all things that, in either case, are necessary, proper or advisable under Law or otherwise to consummate and make effective the transactions contemplated by this Agreement and the Related Agreements;
provided, however
, that the foregoing shall not require or cause any Party to waive any right it may have under other provisions of this Agreement and (ii) obtain from the relevant Governmental Authorities all Authorizations required to be obtained at or prior to the Closing by Buyer, Seller, the Company or the Acquired Subsidiary in connection with the authorization, execution, delivery and performance of this Agreement and the Related Agreements and the consummation of the transactions contemplated hereby and thereby.
(b)
As promptly as practicable, Seller and Buyer shall make all necessary filings, including filings under the HSR Act and other filings and registrations referred to in the Disclosure Schedules, and thereafter make any other required submissions, with respect to this Agreement and the transactions contemplated hereby required under any Law at or prior to the Closing. Buyer and Seller shall bear the costs and expenses of their respective filings;
provided
, that Buyer shall pay the filing fee in connection with any such filings. Seller and Buyer shall reasonably cooperate in connection with the making of all such filings and subsequent submissions to any Governmental Authority. Seller and Buyer shall each use Commercially Reasonable Efforts to furnish to the other Party such necessary information and reasonable assistance as the other Party may reasonably request in connection with the foregoing and will keep the other Party reasonably informed with respect to any consent, authorization, order or approval sought from, or exemption, review, investigation or inquiry conducted by, any Governmental Authority in connection with this Agreement and the transactions contemplated hereby. Each Party shall (i) have the right to review in advance, and to the extent practicable consult on, any written materials submitted to any Governmental Authority in connection with the transactions contemplated by this Agreement, and (ii) consult with and consider in good faith the views of the other Party, prior to making
any submission, providing any material correspondence or entering into any agreement with any Governmental Authority with respect to the transactions contemplated hereby.
(c)
Buyer and Seller shall each give prompt notice to the other of the receipt of and if in writing, furnish the others with copies of (or, in the case of oral communications, advise the others of the contents of) any notice or other communication from (i) any Person alleging that the consent of such Person is or may be required in connection with the transactions contemplated hereby, (ii) any Governmental Authority in connection with the transactions contemplated hereby, (iii) any Governmental Authority or other Person regarding the initiation or threat of initiation of any Claims or Proceedings against, relating to, or involving or otherwise affecting the Company, the Acquired Subsidiary, Buyer or Seller that relate to the consummation of the transactions contemplated hereby, and (iv) any Person regarding the occurrence or nonoccurrence of any event the occurrence or nonoccurrence of which would be reasonably likely to (A) cause any condition to the Obligations of the other Party to consummate the transactions contemplated hereby not to be satisfied, (B) cause a breach of the representations, warranties or covenants of such Party under this Agreement, or (C) delay or impede the ability of either Buyer or Seller, respectively, to consummate the transactions contemplated by this Agreement or to fulfill their respective Obligations set forth herein.
(d)
Buyer and Seller each agree to cooperate and to use Commercially Reasonable Efforts to contest and to resist any action, including legislative, administrative or judicial action, and to have vacated, lifted, reversed or overturned any Order (whether temporary, preliminary or permanent) of any court or other Governmental Authority that is in effect and that restricts, prevents or prohibits the consummation of the transactions contemplated by this Agreement or the Related Agreements, including the pursuit of all available avenues of administrative and judicial appeal and all available legislative action. Notwithstanding the foregoing, nothing in this
Section 6.3
shall require, or be construed to require any Party or its Affiliates to agree to (i) sell, hold, divest, discontinue or limit, before or after the Closing Date, any assets, businesses or interests of the Parties or any of their respective Affiliates; (ii) any conditions relating to, or changes or restrictions in, the operations of any such assets, businesses or interests which, in either case, could reasonably be expected to result in a Material Adverse Effect or materially and adversely impact the economic or business benefits to the Parties of the transactions contemplated by this Agreement; or (iii) any material modification or waiver of the terms and conditions of this Agreement. Neither Buyer nor Seller nor any of their respective Affiliates shall purchase or otherwise acquire or agree to purchase or otherwise acquire, whether directly or indirectly, any assets or interest in any assets or Persons that would reasonable be expected to materially and adversely affect the filings made pursuant to
Section 6.3(b)
.
(e)
Buyer and Seller shall each timely give or cause to be given all notices to third Persons and use Commercially Reasonable Efforts to obtain all Third Person Consents (i) set forth in Section 3.3
(a)
and
Section 5.3(a)
of the Disclosure Schedules, (ii) required under any Material Company Contract or Seller Contract in connection with the consummation of the transactions contemplated hereby or (iii) otherwise required to prevent a Material Adverse Effect from occurring prior to or after the Closing.
(f)
Buyer shall use Commercially Reasonable Efforts to secure the release of Seller and its Affiliates from liability for any post-Closing Obligations of the Companies under any Authorizations or Material Contracts assigned or transferred from Seller or its Affiliates to the Companies, and to secure the release of Seller and its Affiliates from any guarantees of the Companies’ post-Closing Obligations under any Authorizations or Material Contracts to which the Companies remain a party after Closing. Buyer’s efforts in this regard shall include, if necessary, causing the Buyer Guarantor to guarantee the Obligations of the Company under the affected Authorizations or Material Contracts. Buyer acknowledges that Seller and its Affiliates shall have the right to cancel or revoke all
guarantees, bonds, letters of credit and similar undertakings provided by them or on their behalf to secure any post-Closing Obligations of the Companies. The provisions of this paragraph shall survive the Closing.
(g)
Notwithstanding
Section 6.3(f)
, prior to the Closing Buyer shall deliver to the applicable beneficiary or counterparty replacement or substitute guaranties, letters of credit, bonds, security deposits, and other surety obligations and evidence of financial capacity, in each case acceptable to Buyer and the relevant beneficiary or counterparty, in substitution and replacement of those credit support arrangements set forth in
Section 6.3(g)
of the Disclosure Schedules (the “
Credit Support Arrangements
”), in form and substance acceptable to Seller, and shall cause the release as of the Closing of Seller and its Affiliates from all Obligations relating to the Credit Support Arrangements.
Section 6.4
Breach Notice
. If, prior to the Closing Date, Buyer obtains Knowledge of a breach of any of Seller’s representations, warranties or covenants contained in this Agreement, Buyer shall notify Seller in writing of such information (the “
Breach Notice
”) as promptly as reasonably possible but in all events no later than two (2) Business Days prior to the Closing Date. The Breach Notice shall contain reasonable details regarding the alleged breach and Buyer’s good faith estimate of the potential Losses associated with such breach.
Section 6.5
Exclusive Dealing
. During the Interim Period, Seller and the Company shall, and each shall cause each of their respective officers, directors, employees and Affiliates to, not discuss, or otherwise enter into any agreements or other arrangements regarding, a possible sale or other disposition (whether by merger, reorganization, recapitalization or otherwise) of all or any part of the Equity Securities or assets of the Companies with any other Person (an “
Acquisition Proposal
”) or provide any information to any third party other than information which is traditionally provided in the ordinary course of such entity’s business operations to third parties where such entity and its officers, directors and Affiliates have no reason to believe that such information may be utilized to evaluate any such possible sale or other disposition of the equity or assets of the Companies. During the Interim Period, Seller and the Company shall, and each shall cause their respective officers, directors, employees and Affiliates to, immediately cease and cause to be terminated any and all contacts, discussions and negotiations with third parties regarding the foregoing. Notwithstanding the foregoing, the provisions of this
Section 6.5
shall
not
apply to or limit or impair any future discussions, plans, negotiations or agreements for the sale, merger or consolidation of Seller.
Section 6.6
Right of Entry
.
(a)
Buyer hereby acknowledges that any access to the Refinery and any other Assets of the Company or the Acquired Subsidiary utilized by Buyer or any representative, consultant or other Person acting by or on behalf of Buyer (“
Diligence Representative
”) shall be at the sole risk, cost and expense of Buyer. Buyer shall comply and shall ensure that each Diligence Representative complies with all safety and similar requirements customarily imposed by the Company or the Acquired Subsidiary on its properties. Before and after the Closing, Buyer shall assume and indemnify, defend and hold harmless the Seller Indemnitees from and against any and all Claims and Losses for personal injury, death, disease, illness or property damage or other Losses arising out of Buyer’s or any Diligence Representative’s entry upon or access to the Refinery and any other assets or other Losses of the Company or the Acquired Subsidiary and all Losses incurred by the Seller Indemnitees with respect to each such Claim. Additionally, any inspection or investigation conducted by or on behalf of Buyer or its Diligence Representatives shall be conducted in accordance with all Laws, including all Environmental Laws, applicable Refinery rules and regulations (including those related to health, safety, security and the environment) and in such manner as not to unreasonably interfere with the Refinery or any other Assets or operations of the Company or the Acquired Subsidiary. During the Interim Period, Buyer shall not be
entitled to conduct any invasive testing or environmental assessments or any other sampling (including air sampling) or testing of soil or ground or surface water at, on or under, any real property associated with the Refinery or any other Assets of the Company or the Acquired Subsidiary, without the prior written consent of Seller, Buyer being limited to the review of Seller’s or its Affiliate’s records or any other publicly available materials or information with regard to these matters.
(b)
Before Buyer or any Diligence Representative is permitted to engage in any activities within the Refinery or at any other locations of Assets, Buyer shall (or shall cause the applicable Diligence Representative to) provide proof or otherwise attest that the following types and minimum amounts of insurance coverage are in effect and cover the activities of Buyer or such Diligence Representative:
|
|
|
|
|
|
|
A.
|
1. Worker’s Compensation
1
2. Employer’s Liability
|
As required by applicable law.
$100,000 each accident
|
|
B.
|
Commercial General Liability:
|
$1,000,000 Combined Single Limit endorsed to cover (i) contractual liability Bodily Injury and Property Damage assumed under this Agreement, (ii) products liability, and (iii) completed operations
|
|
C.
|
Automobile Liability Coverage: endorsed to cover all owned, non-owned and hired vehicles
|
$1,000,000 Combined Single Limit Bodily Injury and Property Damage Combined
|
|
D.
|
Umbrella Liability in excess of A.2., B. & C. Endorsed to provide a drop-down endorsement in the event underlying limits are exhausted by claims. (Not required for Diligence Representatives whose scope of work is limited to low risk activities distant from Refinery operational areas.)
|
$10,000,000
|
Buyer shall furnish (or cause to be furnished) to Seller a certificate of insurance evidencing that the above minimum coverages are in effect. All policies shall contain a waiver of subrogation clause in favor of the Seller Indemnitees. All policies except A.1 above shall be endorsed to name the Seller Indemnitees as additional insureds. The certificate of insurance shall further specify that all coverages are primary over (and not contributory with or secondary to) any insurance carried by the Seller Indemnitees for their own account. Such insurance shall be endorsed with a standard cross liability clause in favor of the Seller Indemnitees. Such insurance shall cover the actions of Buyer and all Diligence Representatives. The certificate of insurance shall state that Seller shall be provided with not less than thirty (30) days prior written notice of any cancellation or material adverse change with respect to any of the policies.
Notwithstanding anything to the contrary contained in this Agreement, the provisions of this
Section 6.6
shall survive the Closing and any cancellation or termination of this Agreement. The insurance required under this paragraph shall operate independent and apart from Buyer’s indemnification Obligations under this Agreement.
Section 6.7
Condition of the Assets
. In consummating the purchase and the sale of the TH Interest contemplated hereunder, Buyer acknowledges that it will become the sole member of the Company and thereby an indirect owner of the Assets including the Subsidiary Shares, and that, and that, except for (and without limiting) the representations and warranties expressly made in
Article III
and
____________________________
1
Not required for individual Diligence Representatives who have no employees.
Article IV
or in any other document delivered pursuant hereto, BUYER ACCEPTS SUCH ASSETS AS MODIFIED IN CONNECTION WITH THE REFINERY TURNAROUND AND STARTUP ACTIVITIES (TO THE EXTENT SUCH ACTIVITIES HAVE BEEN CONDUCTED AS OF THE CLOSING) IN THEIR AS-IS, WHERE-IS, CONDITION, WITH ALL FAULTS, WITHOUT ANY EXPRESS OR IMPLIED COVENANT, WARRANTY AS TO TITLE, CONDITION (INCLUDING ANY ENVIRONMENTAL CONDITION), MERCHANTABILITY, PERFORMANCE, FITNESS (BOTH GENERALLY AND FOR ANY PARTICULAR PURPOSE) OR OTHERWISE (WHICH WARRANTIES SELLER HEREBY EXPRESSLY DISCLAIMS), OR RECOURSE, OTHER THAN AS EXPRESSLY SET FORTH IN THIS AGREEMENT AND THE ENVIRONMENTAL AGREEMENT.
Section 6.8
Independent Investigation
. EXCEPT FOR (AND WITHOUT LIMITING) THE REPRESENTATIONS AND WARRANTIES EXPRESSLY MADE BY SELLER IN
ARTICLE III
AND
ARTICLE IV
OF THIS AGREEMENT, OR IN ANY OTHER DOCUMENT DELIVERED PURSUANT HERETO, BUYER ACKNOWLEDGES AND AGREES THAT: (a) THERE ARE NO REPRESENTATIONS, WARRANTIES, STATEMENTS, ASSURANCES OR GUARANTEES MADE BY SELLER OR ANY OF ITS AFFILIATES, EXPRESS OR IMPLIED, AS TO (i) THE ASSETS, OR (ii) THE LIABILITIES, THE BUSINESS, RESULTS OF OPERATIONS, CONDITION (FINANCIAL, ENVIRONMENTAL OR OTHERWISE) OR PROSPECTS RELATING TO THE BUSINESS, AND THAT IN MAKING ITS DECISION TO ENTER INTO THIS AGREEMENT AND TO CONSUMMATE THE PURCHASE OF THE TH INTEREST, BUYER HAS RELIED AND WILL RELY SOLELY UPON ITS OWN INDEPENDENT INVESTIGATION, VERIFICATION, ANALYSIS AND EVALUATION; (b) SELLER DISCLAIMS ALL LIABILITY AND RESPONSIBILITY FOR ANY OTHER REPRESENTATION, WARRANTY, STATEMENT OR INFORMATION ORALLY OR IN WRITING MADE OR COMMUNICATED TO BUYER INCLUDING ANY OPINION, INFORMATION OR ADVICE WHICH MAY HAVE BEEN PROVIDED TO BUYER BY OR ON BEHALF OF SELLER, THE COMPANY, THE ACQUIRED SUBSIDIARY OR ANY AFFILIATES OF SELLER, INCLUDING (i) ANY MODELS PROVIDED BY SELLER OR ITS AFFILIATES, WHICH HAVE BEEN PROVIDED FOR ILLUSTRATION PURPOSES ONLY, (ii) ANY OTHER INFORMATION PROVIDED IN THE CONFIDENTIAL INFORMATION MEMORANDUM DATED MAY 2012, AS SUPPLEMENTED, IF ANY, TO THE DATE OF THIS AGREEMENT, (iii) ANY CORRESPONDENCE FROM SELLER OR AEGIS ENERGY ADVISORS CORP. OR ANY OF THEIR RESPECTIVE REPRESENTATIVES OR AFFILIATES, (iv) ANY PRESENTATION BY THE MANAGEMENT OF SELLER OR ITS AFFILIATES, AND (v) ANY INFORMATION MADE AVAILABLE TO BUYER, OR STATEMENTS MADE TO BUYER, DURING SITE OR OFFICE VISITS, IN ANY DATA ROOM OR MANAGEMENT PRESENTATION; (c) NEITHER SELLER NOR ANY AFFILIATE, AGENT, OR REPRESENTATIVE OF SELLER HAS MADE, AND SELLER HEREBY EXPRESSLY DISCLAIMS AND NEGATES, ANY IMPLIED OR EXPRESS WARRANTY OF MERCHANTABILITY, FITNESS (BOTH GENERALLY AND FOR A PARTICULAR PURPOSE), OR CONFORMITY TO MODELS OR SAMPLES AND ANY OTHER REPRESENTATION OR WARRANTY, EXPRESS, STATUTORY OR IMPLIED, RELATING TO THE COMPANY, THE ACQUIRED SUBSIDIARY OR THEIR RESPECTIVE ASSETS; AND (d) SELLER MAKES NO REPRESENTATIONS OR WARRANTIES WITH RESPECT TO THE USE OR CONDITION (INCLUDING ENVIRONMENTAL USE OR CONDITION), THE PRESENCE OR ABSENCE OF HAZARDOUS MATERIALS AT, ON, UNDER OR FROM ANY PORTION OF THE REFINERY OR THE OTHER ASSETS, COMPLIANCE WITH APPLICABLE STATUTES, LAWS, CODES, ORDINANCES, REGULATIONS OR REQUIREMENTS RELATING TO LEASING, ZONING, SUBDIVISION, PLANNING, LAND USE, BUILDING, FIRE, SAFETY, HEALTH OR ENVIRONMENTAL MATTERS, COMPLIANCE WITH COVENANTS, CONDITIONS AND RESTRICTIONS (WHETHER OR NOT OF RECORD), OTHER INTERNATIONAL, NATIONAL, REGIONAL, FEDERAL, STATE, PROVINCIAL OR LOCAL REQUIREMENTS OR OTHER
STATUTES, LAWS, CODES, ORDINANCES, REGULATIONS OR REQUIREMENTS, INCLUDING ENVIRONMENTAL HEALTH AND SAFETY LAWS AND PERMITS.
WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, SELLER MAKES NO REPRESENTATION OR WARRANTY REGARDING ANY THIRD PARTY BENEFICIARY RIGHTS OR OTHER RIGHTS WHICH BUYER MIGHT CLAIM UNDER ANY STUDIES, REPORTS, TESTS OR ANALYSES PREPARED BY ANY THIRD PARTIES FOR SELLER OR ANY OF ITS AFFILIATES OTHER THAN COMPANY AND THE ACQUIRED SUBSIDIARY (SHOULD THE CLOSING OCCUR), EVEN IF THE SAME WERE MADE AVAILABLE FOR REVIEW BY BUYER OR ITS AGENTS, REPRESENTATIVES OR CONSULTANTS.
BUYER EXPRESSLY ACKNOWLEDGES AND AGREES THAT BUYER SHALL INDEMNIFY, DEFEND AND HOLD THE SELLER INDEMNITEES HARMLESS AGAINST ALL CLAIMS AND LOSSES CAUSED BY BUYER’S CLAIMING OR ATTEMPTING TO EXERCISE ANY RIGHTS (WHETHER AS A THIRD PARTY BENEFICIARY OR OTHERWISE) UNDER, ANY STUDIES, REPORTS, TESTS OR ANALYSES PREPARED BY ANY THIRD PARTIES FOR SELLER OR ANY OF ITS AFFILIATES.
WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, BUYER EXPRESSLY ACKNOWLEDGES AND AGREES THAT NONE OF THE DOCUMENTS, INFORMATION OR OTHER MATERIALS PROVIDED TO BUYER AT ANY TIME OR IN ANY FORMAT BY SELLER OR ANY OF ITS AFFILIATES CONSTITUTE LEGAL ADVICE, AND BUYER (i) WAIVES ALL RIGHTS TO ASSERT THAT IT RECEIVED ANY LEGAL ADVICE FROM SELLER, ANY OF SELLER’S AFFILIATES, OR ANY OF THEIR RESPECTIVE EMPLOYEES, AGENTS, REPRESENTATIVES OR COUNSEL, OR THAT IT HAD ANY SORT OF ATTORNEY-CLIENT RELATIONSHIP WITH ANY OF SUCH PERSONS, AND (ii) AGREES TO INDEMNIFY, DEFEND AND HOLD THE SELLER INDEMNITEES HARMLESS AGAINST ANY SUCH ASSERTION MADE BY OR ON BEHALF OF ANY OF BUYER’S AFFILIATES.
Section 6.9
Supplement to Disclosure Schedules
.
(a)
Seller may from time to time prior to the Closing, by written notice to Buyer, supplement or amend the Disclosure Schedules (including adding new Sections to the Disclosure Schedules related to provisions of this Agreement that currently do not contemplate qualification by the Disclosure Schedules) with new or updated information with respect to matters that occur or arise after the Execution Date to correct any matter that would constitute a breach of any representation or warranty of Seller in
Article III
or
Article IV
as of the Closing Date (such new or additional information being “
New Seller Information
”). For purposes herein “New Seller Information” shall not include information that is updated in the ordinary course of business during the Interim Period (
e.g
., updated lists of Employees) and is provided to Buyer prior to the Closing.
(b)
For purposes of determining whether Buyer’s conditions set forth in
Section 8.3
have been fulfilled, the Disclosure Schedules shall be deemed to include only that information contained therein on the Execution Date and shall be deemed to exclude the New Seller Information. If Buyer has a right to terminate this Agreement pursuant to
Section 10.1(c)
as a result of the conditions set forth in
Section 8.3
not being satisfied but Buyer elects to proceed with the Closing and the Closing does occur, then the New Seller Information shall be deemed to be accepted by Buyer, and Buyer shall be deemed to have waived and not be entitled to make a Claim thereon under this Agreement (including pursuant to
Article XI
) or otherwise. If, however, Buyer does not have such a right to terminate this Agreement pursuant to
Section 10.1(c)
as a result of the conditions set forth in
Section 8.3
being satisfied and the Closing does occur, then the New Seller Information shall not be deemed to be accepted or waived by
Buyer, and Buyer shall be entitled to make a Claim thereon under this Agreement (including pursuant to
Article XI
) or otherwise.
Section 6.10
Financing Matters
.
(a)
During the Interim Period, Seller and the Companies shall use Commercially Reasonable Efforts to, and shall cause its and their respective accountants, legal counsel, officers and employees to use Commercially Reasonable Efforts to, provide, at Buyer’s expense, reasonable cooperation as may be requested by Buyer in connection with Buyer’s efforts to obtain the Financing provided that (a) the Companies shall not be required to pay any commitment or other similar fee or incur any Obligation in connection with the Financing, except following the Closing, (b) such cooperation does not unreasonably interfere with the ongoing operations of Seller or of the Business, (c) Seller shall not have any Obligation for any statements, materials or information provided by Seller or the Companies or their representatives to Buyer and (d) prior to the Closing, the Companies shall not have any liability for any statements, materials or information provided by the Companies or their representatives to Buyer. For the avoidance of doubt, neither Seller nor the Companies will be requested or required to prepare projections, pro forma statements, information memoranda, offering memoranda or similar documents that may be required of Buyer in connection with the Financing. The foregoing provisions shall not alter or amend Buyer’s Obligation to consummate the transactions contemplated by this Agreement and a breach or purported breach of this
Section 6.10(a)
shall not be treated as a provision of
Section 8.3
.
(b)
During the Interim Period, Buyer shall keep Seller reasonably informed regarding the status of Buyer’s activities (including status of negotiations and documentation) to obtain the Financing.
Section 6.11
Company Monthly Financial Statements
. During the Interim Period, the Company shall deliver to Buyer, as soon as reasonably practicable, but in no event later than twenty (20) Business Days after the end of each calendar month, the unaudited consolidated interim balance sheet and statement of operations and cash flows of the Company and the Acquired Subsidiary as of and for the period for each calendar month ended after the Execution Date (the “
Company Monthly Financial Statements
”). The Company Monthly Financial Statements shall be prepared on a basis consistent with manner in which the Financial Statements of
Section 4.6(a)(iii)
were prepared.
Section 6.12
Title Insurance and Surveys
. Buyer, at its sole cost and expense, may procure owner’s title insurance policies (the “
Title Policies
”) from Title Company with respect to the Owned Real Property or the Leased Real Property insuring title subject only to the Permitted Liens and such other general title exceptions as may be raised by the Title Company;
provided
, that Buyer’s ability or inability to obtain title insurance from the Title Company on the Owned Real Property or the Leased Real Property shall not result in an adjustment to the Purchase Price. If Buyer requests extended coverage policies or any endorsements to the Title Policies, Buyer shall also be responsible for the cost of such extended coverage and endorsements and the delivery of any documentation required by the Title Company in connection with the issuance of such extended coverage and endorsements (including surveys or zoning reports), however, Seller shall deliver the documentation required by the Title Company in connection therewith as described below. At Buyer’s request, Seller and its Affiliates shall cooperate with and assist Buyer with any reasonable request in Buyer’s efforts to obtain the Title Policies and shall execute and deliver to the Title Company such affidavits, certificates and other documentation as are customary and reasonably requested to cause the Title Company to issue CLTA Standard Coverage Policy – 1990 for the Owned Real Property or the Leased Real Property (including assistance to obtain a “non-imputation” or similar endorsement), provided that no such cooperation or assistance and nothing in such affidavits, certificates or documentation shall require Seller or its Affiliates to incur any Obligations to any Person that are not otherwise expressly set forth in this Agreement. Notwithstanding the preceding, Seller shall
use Commercially Reasonable Efforts to provide, in support of any such “non-imputation” or similar endorsement, a legal opinion to the Title Company from the general counsel of the Company, subject to customary assumptions and qualifications, as to such counsel’s opinion, without additional inquiry, as to the status of the title rights of the Company to the Owned Real Property lying within the boundary fence of the Refinery. In no event shall Seller be obligated to seek estoppel certificates in connection with any of the Leased Real Properties. Prior to Closing, Buyer may, at its sole cost and expense, obtain and update any surveys pertaining to the Owned Real Property or the Leased Real Property;
provided, however
, that any such surveys and survey updates shall be performed by a surveyor acceptable to Seller, the approval of which shall not be unreasonably withheld, conditioned or delayed. Neither Buyer’s or any of its lenders’ receipt of any new or updated surveys shall constitute a condition to Closing or form the basis for delaying Closing; however, Seller agrees to reasonably cooperate with Buyer prior to the Closing to permit Buyer to attempt to procure any surveys of the Real Property Interests that Buyer reasonably deems necessary, all at Buyer’s sole risk, cost and expense.
Section 6.13
Cooperation with Respect to Financial Statements
. During the Interim Period and after the Closing, Seller shall (and shall cause the Companies during the Interim Period to) provide such reasonable cooperation as may be requested by Buyer with respect to preparation, at Buyer’s expense, of such other financial information in such form and for such periods as may be required pursuant to the requirements of Regulation S-X of the SEC or other applicable U.S. federal securities Laws relating to Buyer’s acquisition of the TH Interest. Any such cooperation shall be provided at Buyer’s expense for third party fees and expenses.
Section 6.14
Closing Date Feedstock Inventory
.
(a)
During the Interim Period as Buyer may reasonably request, Seller shall meet with Buyer and its representatives to discuss Seller’s plans for nominations for and purchases of Feedstock Inventory in anticipation of the Closing. Seller shall meet with and advise Buyer at least thirty (30) days prior to the anticipated Closing Date regarding Seller’s then operational plan for the Refinery (the “
Refinery Operational Plan
”) including the minimum levels of Feedstock Inventory, Undelivered Refinery Inventory and Committed Refinery Inventory expected to be at the Refinery, in transit to the Refinery or committed in each case as of the anticipated Measurement Time. At or prior to such meeting, Buyer may propose changes to the Refinery Operational Plan and to Seller’s ordinary course of business of handling the Committed Refinery Inventory in order to support Buyer’s planned operation of the Refinery after the Closing. Seller shall take actions during the Interim Period as are necessary to cause the Feedstock Inventory plus the Undelivered Refinery Inventory and the Committed Refinery Inventory, as of the Measurement Time, to include a supply chain of crude oil, feedstock and blendstock in quantities that Seller reasonably expects are sufficient to continue to support the Refinery Operational Plan for sixty (60) days after the Closing Date.
(b)
Buyer understands and agrees that it is the intent of the Parties to make Buyer ultimately responsible, regardless of whether the Closing occurs and regardless of any reason that the Closing does not occur, for the cost of all Undelivered Refinery Inventory and Committed Refinery Inventory under the terms hereof, as well as all Taxes, incidental costs and expenses, and other Obligations, Claims and Losses arising out of, incurred in connection with or relating to activities relating to the Undelivered Refinery Inventory and the Committed Refinery Inventory;
provided, however
, such understanding does not apply in the event (i) all of the conditions to Closing pursuant to
Article VIII
are satisfied (other than those conditions that by their nature are to be performed at Closing) and Seller defaults in its Obligation to consummate the Closing or (ii) Buyer terminates this Agreement pursuant to
Section 10.1(c)
solely due to the breach by Seller of its Fundamental Representations (excluding representations and warranties contained in
Section 4.15
) provided that all of the other conditions to
Closing pursuant to
Article VIII
were satisfied at the time of Buyer’s termination (other than those conditions that by their nature were to be performed at Closing).
(c)
Seller shall use Commercially Reasonable Efforts to nominate shipments of Committed Refinery Inventory for delivery to the Refinery, and shall provide Buyer with confirmations of the scheduled shipments promptly upon receipt by Seller and its Affiliates.
Section 6.15
Hawaii Consent Decree
. During the Interim Period Seller anticipates continuing discussions to enter into final binding settlement(s) whether by judicial decree, judgment, agreement or otherwise, memorializing Seller’s settlement with the United States Environmental Protection Agency and the United States Department of Justice and other applicable entities or agencies, if any, regarding alleged violations of the Clean Air Act related to the ownership and operation of multiple facilities owned by Seller and its Affiliates, including air emissions originating from the Refinery (to the extent such settlement(s) relate to air emissions originating from the Refinery such settlement(s) are referred to herein as the “
Hawaii Consent Decree
”).
Section 6.16
Personnel Credentials
. Prior to the Closing, Buyer shall discuss with and provide information to Seller relating to the credentials, experience and training of personnel employed and expected to be employed by Buyer and its Affiliates to manage and operate the Refinery from and after the Closing.
Section 6.17
Data Room Documentation
. As promptly as practicable after the date of this Agreement (and in any event within five (5) Business Days after the date of this Agreement), Seller shall, at its expense, authorize Intralinks, Inc. to copy to DVDs all documents posted to the Data Room as of the Execution Date and deliver ten (10) copies of such DVDs to Buyer.
ARTICLE VII
POST-CLOSING COVENANTS; TAX AND EMPLOYEE MATTERS
Section 7.1
Retention of Employees
.
(a)
Continued Employment
.
(i)
Buyer shall cause the Company to continue to employ each Employee (excluding Long-Term Inactive Employees, except as set forth in
Section 7.1(a)(iii)
), and subject to the severance provisions in
Section 7.7(a)
.
(ii)
Seller shall assume or retain responsibility and liability, if any, for all Long-Term Inactive Employees, except to the extent that any Long-Term Inactive Employee becomes re-employed by the Company under
Section 7.1(a)(iii)
and Buyer shall assume and retain responsibility and liability, if any, for all Short-Term Inactive Employees, except to the extent Seller may be responsible for providing long-term disability benefits with respect to the disability of any Post-Closing Employee in any case in which the onset of the disability occurred on or prior to the Closing. Any such Short-Term Employee who then becomes eligible for long-term disability benefits provided by Seller as contemplated in the foregoing sentence shall in no event be considered an Employee of Seller after Closing and shall not otherwise be eligible for any other benefits offered to eligible employees of Seller after the Closing. Moreover, such individual shall not be considered a Long-Term Inactive Employee as defined herein.
(iii)
Buyer shall cause the Company to re-employ each Long-Term Inactive Employee on the date such employee is able to return to work,
provided
such return to work is
within twelve (12) months of the initial date of disability. Notwithstanding any provision herein to the contrary, upon re-employment, each such employee shall be considered a Post-Closing Employee for all purposes herein and shall no longer be considered a Long-Term Inactive Employee.
(iv)
The provisions of this
Section 7.1(a)
do not create any new or additional right or expectation of continued employment for Employees with the Company, Buyer, Seller or any of their respective Affiliates or otherwise modifies any employment at will status of any individual.
(b)
Employment Data
. Seller shall, as of thirty (30) days prior to the Closing Date, provide Buyer with employment data, including the name, title, employment history (including years of service), and current salary, base wages, bonus and incentive opportunity, sick or short-term disability pay, exempt or non-exempt status, and the job grade of each Employee that is employed by the Company as of the Closing Date and Company Plans and Company Benefit Obligations in which each such Employee participates.
(c)
Orderly Transition
. Each Employee who continues employment with the Company after the Closing as described above is referred to herein as a “
Post-Closing Employee
.”
(d)
Employment Terms Assurances
. Buyer shall cause benefits to be provided to each Post-Closing Employee who is a not a Represented Employee for a period of at least twelve (12) months beginning on the Closing Date (unless earlier terminated for cause or by resignation) pursuant to Buyer’s employee benefit plans as will be established as of the Closing Date (“
Buyer’s Plans
”). The terms of the Buyer’s Plans, as well as the compensation terms applicable to each such Post-Closing Employee, shall be, in the aggregate, comparable to those offered by the Company, Seller or Seller’s Affiliates, as applicable, to such Post-Closing Employee prior to the Closing Date.
(e)
Union Recognition
. Buyer shall cause the Company to continue to recognize the Union as the exclusive representative of the bargaining unit at the Refinery and adopt the current CBA including existing Memoranda Agreement.
Section 7.2
Service Recognition for Post-Closing Employees
. Except as provided in this
Section 7.2
, Buyer shall ensure that all of Buyer’s Plans in which the Post-Closing Employees participate after the Closing recognize the years of service with the Company or its Affiliates and predecessor employers prior to the Closing of any such Post-Closing Employees (to the extent such past service as reflected in the employment data furnished to Buyer pursuant to
Section 7.1
) for eligibility, vesting and benefit determination purposes to the same extent as such Post-Closing Employee was entitled, before the Closing, to credit for such service under any similar Seller’s Plans, but Buyer shall have no Obligation to recognize such years of service for benefit accrual purposes. Without limiting the foregoing none of the Company, Buyer or their respective Affiliates shall have any Obligation to recognize such past service for the determination of benefit amounts payable under a defined benefit pension plan but will recognize such service for eligibility and vesting purposes under the Buyer’s Plans.
Section 7.3
Pension Plan Coverage
.
(a)
On and after the Closing, Post-Closing Employees shall become participants in a tax-qualified pension plan to be established or maintained by Buyer as of the Closing Date (“
Buyer’s Pension Plan
”) with full credit for eligibility, vesting and benefit entitlement purposes (but not for benefit accrual) for service with the Company or its Affiliates and predecessor employers prior to the Closing as provided for in
Section 7.2
. For the avoidance of doubt, Buyer’s Pension Plan may be a
defined contribution plan. As of the Closing Date, Post-Closing Employees who are participants in the Tesoro Corporation Retirement Plan or the Tesoro Corporation Restoration Retirement Plan (collectively, the “
Seller’s Pension Plans
”) shall be fully vested in their accrued benefits under the Seller’s Pension Plans, and all Obligations under the Seller’s Pension Plans shall remain the obligations of Seller, and none of Buyer, the Company or any of their respective Affiliates shall have any Obligation with respect to Seller’s Pension Plans.
(b)
Buyer shall permit each Post-Closing Employee to elect on the Closing Date (or as soon thereafter as reasonably practicable) a direct rollover of his or her eligible rollover distributions, except to the extent of any outstanding plan loans or as prohibited by applicable Law, under the Tesoro Corporation Thrift Plan, the Tesoro Corporation Retail Savings Plan, and the Tesoro Corporation Executive Deferred Compensation Plan (collectively, the “
Seller’s Savings Plans
”) to a tax-qualified deferred contribution plan to be established by Buyer as of the Closing Date (the “
Buyer’s Savings Plan
”). Any such rollovers shall be made to the Buyer’s Savings Plan in cash. Seller represents, covenants and agrees with respect to the Seller’s Savings Plans, and Buyer represents, covenants and agrees with respect to the Buyer’s Savings Plan, that, as of each date of a rollover described in this paragraph, such plan (i) is intended to satisfy the requirements of Section 401 (a) and (k) of the Code, and (ii) will have received, or an application will be timely filed for, a favorable determination letter from the Internal Revenue Service regarding such qualified status. Buyer will have no Obligation with respect to amounts attributable to Seller’s Savings Plans other than acceptance of the rollovers requested by Post-Closing Employees. Seller shall take (or shall cause its Affiliates to take) any action required to ensure that Post-Closing Employees who are participants in the Seller’s Savings Plans shall be fully vested in their accounts in the Seller’s Savings Plans.
Section 7.4
Welfare Plan Coverage
.
(a)
With respect to each Post-Closing Employee who elects to participate in Welfare Plans to be established by Buyer prior to the expiration of the transition period as contemplated under the Transition Services Agreement, Buyer shall, to the extent allowed under Buyer’s Welfare Plans, waive any pre-existing condition exclusions to coverage, any evidence of insurability provisions, any active at work requirement and any waiting period or service requirements that did not exist or had been waived or otherwise satisfied under Seller’s Welfare Plans, provided the Post-Closing Employee enrolls within the period of time required under the terms of the plan after first becoming eligible to enroll.
(b)
Buyer shall establish a flexible spending plan (“
Buyer’s FSP
”) prior to the Closing. Post-Closing Employees shall be eligible to participate in Buyer’s FSP following the Closing. Buyer and Seller agree to determine an appropriate transition strategy for outstanding balances held by Post-Closing Employees under Seller’s flexible spending plan and the reimbursement of claims thereunder to the extent necessary.
Section 7.5
Post-Retirement Welfare Benefits
. Seller and its Affiliates shall be responsible for all post-retirement medical, dental and life insurance (“
Retiree Welfare Benefit
”) coverage for any Employees eligible for retirement as of the Closing Date or eligible former employees who do not become Post-Closing Employees and none of Buyer, the Company or any of their respective Affiliates will have any Obligation with respect thereto. For the avoidance of doubt, Buyer shall be responsible for all Retiree Welfare Benefit coverage for all Post-Closing Employees that are not eligible for retirement, pursuant to Company Plans, as of the Closing Date under the plan established by the Company or Buyer after the Closing Date.
Section 7.6
Other Benefits
.
(a)
Vacation
. Promptly following the Closing Date, Seller shall pay Post-Closing Employees for vacation that the Post-Closing Employees have accumulated under Seller’s vacation policy up to and including the Closing Date. Post-Closing Employees shall be covered by Buyer’s vacation policy/schedule following the Closing Date and going forward but with recognition of past service to determine vacation entitlement levels such that no Post-Closing Employee shall be provided an annual vacation entitlement less than that provided under Seller’s vacation policy, which shall be pro-rated for the 2013 calendar year for their time of employment with Buyer or its Affiliates. Within thirty (30) days after the Closing Date, Seller will provide to Buyer a list of the annual vacation entitlement for the Post- Closing Employees.
(b)
Bonuses
. Promptly following the Closing Date, Seller shall pay (or cause its Affiliates to pay) to eligible Post-Closing Employees at the time of Closing a pro rata portion of any bonuses payable for 2013 based on the number of days prior to the Closing that the Post-Closing Employees were covered under Tesoro’s bonus plan, such payments to be based on targeted bonus amounts for such employees under Tesoro’s bonus plan.
(c)
Tuition Reimbursement
. Buyer agrees to reimburse Post-Closing Employees for tuition payments incurred by such Employees after the Closing for courses that began before the Closing, but only if such courses qualified for reimbursement under Seller’s Educational Assistance plan.
Section 7.7
Liabilities and Indemnities
.
(a)
Post-Closing Severance
. Buyer shall provide severance in accordance with
Section 7.7(a)
of the Disclosure Schedules for Post-Closing Employees terminated by the Company or any of its Affiliates. Buyer and the Company shall be responsible for, and Buyer shall indemnify the Seller Indemnitees from and against all Claims and Losses arising out of the notification or other requirements of the Worker Adjustment and Retraining Notification Act of 1988, as amended (the “
WARN Act
”) or any state or local law equivalent incurred with respect to Post-Closing Employees after the Closing. However, Seller shall be responsible for, and shall indemnify the Buyer Indemnitees from and against all Claims and Losses arising out of the notification or other requirements of the WARN Act or any state or local law equivalent with respect to Employees who do not become Post-Closing Employees, whether or not the termination occurs prior to, on, or after the Closing.
(b)
Workers’ Compensation
. Seller shall be responsible for workers’ compensation claims with respect to any Post-Closing Employee to the extent the incident or alleged incident giving rise to the claim occurred at or prior to the Closing. Buyer and the Company shall be responsible for any workers’ compensation claims with respect to any Post-Closing Employee to the extent the incident or alleged incident giving rise to the claim occurs after the Closing. In the event of doubt as to the date of the occurrence of the incident or alleged incident, Buyer shall process the claim. With respect to all workers’ compensation or similar claims (hereinafter “
Compensation Claims
”) filed with an appropriate agency by or on behalf of any Post-Closing Employee (such employees are, for purposes of this paragraph, hereinafter collectively referred to as a “
Claiming Employee
”), or by the spouse, dependent(s) or personal representative of such Claiming Employee which is first filed after the Closing, (i) Seller shall process, defend and be responsible for, and shall indemnify the Buyer Indemnitees from and against any such Compensation Claim if the incident or alleged incident giving rise to the claim is alleged to have occurred on or prior to the Closing, (ii) Buyer shall process, defend and be responsible for, and shall indemnify the Seller Indemnitees from and against any such Compensation Claim if the incident or alleged incident giving rise to the claim is alleged to have occurred subsequent to the Closing, and (iii) in the event any such Compensation Claim is filed after the Closing and the incident
or alleged incident giving rise to the claim is alleged to have occurred both prior and subsequent to the Closing, Buyer shall, in consultation with Seller and taking into account Seller’s reasonable suggestions, process such claim (and Seller shall reimburse Buyer for its allocable portion of the reasonable cost of defense), and the liability for such claim as between the Parties shall be based upon the length of exposure to such incident or alleged incident while employed by the Company before and after the Closing. Thus, as between the Parties, the proportionate share of liability shall equal a fraction the denominator of which shall be the Claiming Employee’s total length of exposure to such incident or alleged incident, and the numerator of which shall be in the case of Buyer, the Claiming Employee’s total length of exposure while employed after the Closing, and in the case of Seller, the Claiming Employee’s total length of exposure while employed prior to the Closing.
(c)
None of Buyer, the Company or Affiliates shall have any liability or obligation with respect to any Company Plan or Company Benefit Obligation, and Seller shall take all necessary actions to remove the Company as a participating employer under all such plans after the Closing Date.
Section 7.8
No Third Party Beneficiaries
. No provision of
Section 7.1
through
Section 7.7
, whether express or implied, shall create any third-party beneficiary rights in any Person, including any employee or former employee (and any beneficiaries, dependents or representatives thereof) of the Company, Seller or Buyer or any of their respective Affiliates, and no provision of
Section 7.1
through
Section 7.7
, whether express or implied, shall create such third-party beneficiary rights in any Person (including the Union or any Represented Employee), in either case in respect of any compensation or benefits that may be provided, directly or indirectly, under any employee benefit plan or arrangement of Buyer or its Affiliates or to claim any right to employment or recall, any right to continued employment or any other right of any kind or nature whatsoever and shall not be interpreted to amend any employee benefit plan, policy or program.
Section 7.9
Insurance
.
(a)
Seller and Buyer acknowledge that Seller participates in a program of property and liability insurance coverage for itself and its Affiliates. This program has been designed to achieve a coordinated risk-management package for Seller and all of its Affiliates. The program consists of various types of policies including: (i) policies issued to Seller or its predecessors; (ii) policies issued directly to Affiliates by one of Seller’s wholly-owned insurance companies (“
Seller Captive Insurers
”); (iii) policies issued to Affiliates by one of the Seller Captive Insurers that may or may not be reinsured by third party insurers; and (iv) policies issued under a fronting arrangement policy (or its equivalent) by third party insurers that may or may not be reinsured (including through a guarantee, indemnity, letter of credit or similar undertaking) by Tesoro or its Affiliates. All of the insurance policies through which the program of coverage is presently or has previously been provided by or to Seller, its predecessors or Affiliates (including the Company and the Acquired Subsidiary) are herein referred to collectively as the “
Seller Policies
.
” It is understood and agreed by Buyer that from and after the Closing:
(i)
No insurance coverage shall be provided under the Seller Policies to Buyer, the Company or the Acquired Subsidiary;
(ii)
Any and all policies insured or reinsured by any of the Seller Captive Insurers which, but for this provision, would have insured the Refinery shall be deemed terminated, commuted and cancelled
ab initio
as to the Refinery, the Business, Buyer and its Affiliates (including the Company and the Acquired Subsidiary), but without prejudice to Seller’s and its Affiliates’ rights thereunder; and
(iii)
No Claims regarding any matter whatsoever, whether or not arising from events occurring prior to the Closing, shall be made by Buyer, the Company or the Acquired Subsidiary against or with respect to any of the Seller Policies, regardless of their date of issuance.
(b)
Buyer shall procure, pay for and maintain in effect its own policies of insurance with respect to the Business and the Assets and shall indemnify and defend Seller and its Affiliates against, and shall hold them harmless from, any Orders, Claims, Losses or other Obligations arising out of claims made after the Closing against any of the Seller Policies by the Company, the Acquired Subsidiary, Buyer, any Affiliate of Buyer or any Person claiming to be subrogated to Buyer’s or any of its Affiliates’ rights. Such indemnity shall cover, without limitation, any claim by an insurer for reinsurance, retrospective premium payments, prospective premium increases or any other restitution or funding requirements attributable to any such claim or policy requirements.
Section 7.10
Tax Matters
.
(a)
Straddle Period Allocation
. In the case of any taxable period that includes (but does not end on) the Closing Date (a “
Straddle Period
”), the amount of any Taxes (other than Property, Motor Fuels, and Sales Taxes) of the Company and the Acquired Subsidiary for the portion of the Straddle Period that relates to the Pre-Closing Tax Period shall be determined based on an interim closing of the books as of and including the Closing Date (with exemptions, allowances or deductions that are calculated on an annual basis (including depreciation and amortization deductions) apportioned between the Pre-Closing Tax Period and the portion of such Straddle Period after the Pre-Closing Tax Period based on the number of days in each such period), and the amount of any real property, personal property, ad valorem or similar Taxes, motor fuels Taxes, Hawaii general excise Taxes or sales or use Taxes of the Company and the Acquired Subsidiary (“
Property, Motor Fuels, and Sales Taxes
”) for the portion of the Straddle Period that relates to the Pre-Closing Tax Period shall be deemed to be the amount of such Property, Motor Fuels, and Sales Taxes for the entire Straddle Period,
multiplied
by a fraction, the numerator of which is the number of days in the Straddle Period ending on the Closing Date, and the denominator of which is the number of days in such Straddle Period. For the avoidance of doubt, no election shall be made under Treasury Regulations Section 1.1502-76(b)(2)(ii) to ratably allocate income with respect to Acquired Subsidiary or the transactions or matters contemplated herein.
(b)
Tax Returns
. Except as otherwise provided in
Section 7.10(g)
:
(i)
Seller shall prepare and timely file (taking into account all valid extensions), or shall cause to be prepared and timely filed (taking into account all valid extensions), all Tax Returns of the Company or the Acquired Subsidiary covering a taxable period ending on or prior to the Closing Date that are required to be filed after the Closing Date (each, a “
Pre-Closing Tax Return
”), and each such Pre-Closing Tax Return shall be prepared in a manner consistent with past custom and practice except as otherwise required by applicable Law or fact. Seller shall provide a copy of each such Pre-Closing Tax Return, together with all supporting documentation and workpapers, to Buyer for Buyer’s review and reasonable comment at least thirty (30) days prior to the due date (taking into account all valid extensions) for filing such Pre-Closing Tax Return, and Seller shall include any reasonable comments provided in writing by Buyer to Seller at least five (5) days prior to the due date (taking into account all valid extensions) for filing such Pre-Closing Tax Return;
provided
, that in the case of a Pre-Closing Tax Return which filing deadline (including extensions) is within thirty (30) days after the Closing Date, the Seller (Y) shall in good faith attempt (but shall not have any obligation) to provide a copy of such Pre-Closing Tax Return to Buyer for Buyer’s review and (Z) does not have any obligation to accept any of Buyer’s comments with respect to such Pre-Closing Tax
Return. Subject to Seller’s obligations pursuant to
Section 7.10(b)(iii)
and the indemnification obligations of the Seller pursuant to
Section 11.2(a)(iv)
, the Company or the Acquired Subsidiary, as applicable, shall be responsible for timely paying (taking into account all valid extensions) all Taxes reflected on a Pre-Closing Tax Return to the applicable Taxing Authority.
(ii)
Buyer shall prepare and timely file (taking into account all valid extensions), or shall cause to be prepared and timely filed (taking into account all valid extensions), all Tax Returns of the Company or the Acquired Subsidiary covering a Straddle Period (each, a “
Straddle Tax Return
”), and each such Straddle Tax Return shall be prepared in a manner consistent with past custom and practice except as otherwise required by applicable Law or fact. Buyer shall provide a copy of each such Straddle Tax Return, together with all supporting documentation and workpapers, to Seller for Seller’s review and reasonable comment at least thirty (30) days prior to the due date (taking into account all valid extensions) for filing such Straddle Tax Return, and Buyer shall include any reasonable comments provided in writing by Seller to Buyer at least five (5) days prior to the due date (taking into account all valid extensions) for filing such Straddle Tax Return;
provided
, that in the case of a Straddle Tax Return which filing deadline (including extensions) is within thirty (30) days after the Closing Date, Buyer (Y) shall in good faith attempt (but shall not have any obligation) to provide a copy of such Straddle Tax Return to Seller for Seller’s review and (Z) does not have any obligation to accept any of Seller’s comments with respect to such Straddle Tax Return. Subject to Seller’s obligations pursuant to
Section 7.10(b)(iii)
and the indemnification obligations of Seller pursuant to
Section 11.2(a)(iv),
the Company or the Acquired Subsidiary, as applicable, shall be responsible for timely paying (taking into account all valid extensions) all Taxes reflected on a Straddle Tax Return to the applicable Taxing Authority.
(iii)
To the extent the Taxes reflected on a Pre-Closing Tax Return are the obligation of Seller pursuant to
Section 11.2(a)(iv)
, Seller will pay to Buyer the amount of Taxes reflected on such Pre-Closing Tax Return on the date that such Pre-Closing Tax Return is filed with the applicable Taxing Authority. To the extent Taxes reflected on a Straddle Tax Return are the obligation of Seller pursuant to
Section 11.2(a)(iv),
Seller will pay to Buyer the amount of Taxes reflected on such Straddle Tax Return, as applicable, that are the obligation of Seller pursuant to
Section 11.2(a)(iv)
within five (5) Business Days after the later of (i) a written request by Buyer, or (ii) the date that such Straddle Tax Return was filed with the applicable Taxing Authority.
(iv)
For the avoidance of doubt, the term Pre-Closing Tax Return and Straddle Tax Return shall not include, and this
Section 7.10(b)
shall not apply to, any Tax Return that is not required under applicable Law to be filed by the Company or the Acquired Subsidiary, such as (x) the consolidated U.S. federal income tax return of the Seller Affiliated Group or (y) any state, local or foreign consolidated, combined, affiliated, unitary or aggregate group income or franchise Tax Return of an applicable group or groups of taxable entities which includes or include one or more members of the Seller Affiliated Group and which is required under applicable Law to be filed by a member of the Seller Affiliated Group other than the Company or the Acquired Subsidiary.
(c)
Amended Tax Returns
. Buyer shall not, and shall not cause or permit any of its Affiliates, the Company, or the Acquired Subsidiary to (i) amend any Tax Return of the Company or the Acquired Subsidiary that covers a Pre-Closing Tax Period or (ii) make any Tax election that has retroactive effect to any Pre-Closing Tax Period, in each case without the prior written consent of Seller, which consent shall not be unreasonably withheld, conditioned or delayed.
(d)
Tax Contests
.
(i)
Buyer shall notify Seller in writing within ten (10) days of receipt by Buyer (or any Buyer Indemnitee) of written notice of any pending or threatened audits, adjustments, claims, examinations, assessments or other administrative or judicial proceedings with the purpose or effect of re-determining Taxes of or with respect to the Company or the Acquired Subsidiary (including any administrative or judicial review of any claim for refund) for which Seller may be required to provide indemnification pursuant to this Agreement (a “
Tax Contest
”), and shall provide Seller with a copy of any such written notice. Seller shall notify Buyer in writing within ten (10) days of receipt by Seller of written notice of any pending or threatened Tax Contest, and shall provide Buyer with a copy of any such written notice. The failure of either Buyer or Seller to provide a notification described in this
Section 7.10(d)(i)
shall not release Seller or Buyer, respectively, from its obligations hereunder except to the extent, and only to the extent, that the party that was supposed to receive the notification is prejudiced as a result of such failure.
(ii)
Seller shall have the right to control and defend the conduct of any Tax Contest covering any taxable period ending on or prior to the Closing Date (a “
Pre-Closing Tax Contest
”) with counsel (including, for the avoidance of doubt, accountants) of its choice;
provided, however
, that (A) Seller shall keep Buyer reasonably informed regarding the progress and substantive aspects of the Pre-Closing Tax Contest, (B) Buyer may retain separate co-counsel at its sole cost and expense, and participate in the defense of with respect to the Pre-Closing Tax Contest, including having an opportunity to review and reasonably comment on any written materials prepared in connection with such Pre-Closing Tax Contest and the right to attend and participate in any conferences relating thereto, and (C) Seller will not settle or consent to the entry of any Order or other similar determination or finding with respect to such Pre-Closing Tax Contest without the prior written consent of Buyer (which consent shall not be unreasonably withheld, conditioned or delayed).
(iii)
Buyer shall have the right to control and defend (x) any Tax Contest covering any Straddle Period, (y) any Tax Contest that is not a Pre-Closing Tax Contest, and (z) any Pre-Closing Tax Contest for which Seller has not assumed its right to control and defend such Pre-Closing Tax Contest as contemplated by
Section 7.10(d)(ii)
(each, an “
Other Tax Contest
”) with counsel (including, for the avoidance of doubt, accountants) of its choice,
provided
, that, with respect to any Tax items in the Other Tax Contest for which the resulting Tax liability Seller would be required to provide indemnification pursuant to this Agreement, (A) Buyer shall keep Seller reasonably informed regarding the progress and substantive aspects of such Tax items in the Other Tax Contest, (B) Seller may retain separate co-counsel at its sole cost and expense, and participate in the defense of such Tax items in the Other Tax Contest, including having an opportunity to review and reasonably comment on any written materials prepared in connection with such Tax items in the Other Tax Contest and the right to attend and participate in any conferences relating thereto, and (C) Buyer will not settle or consent to the entry of any Order or other similar determination or finding with respect to such Tax items in the Other Tax Contest without the prior written consent of Seller (which consent shall not to be unreasonably withheld, conditioned, or delayed).
(iv)
For the avoidance of doubt, the term Tax Contest shall not include, and this
Section 7.10(d)
shall not apply to, any audits, adjustments, claims, examinations, assessments or other administrative or judicial proceedings with the purpose or effect of re-determining Taxes of or with respect to any Tax Return of the Seller Affiliated Group (which includes the consolidated U.S. federal income tax return of the Seller Affiliated Group).
(e)
Refunds
. The amount or economic benefit of any refund (whether in cash or as a credit against or offset to any Tax) in respect of any Tax of the Company or the Acquired Subsidiary attributable to any Pre-Closing Tax Period received by Buyer, the Company, the Acquired Subsidiary or any of their respective Affiliates shall be for the account of Seller, and the recipient thereof shall pay such amount (including any interest received thereon) over to the Seller within ten (10) days after any such refund is received, credited or applied as an offset, as the case may be.
(f)
Cooperation
. Each of Buyer and Seller, and each of their respective Affiliates, shall cooperate fully, as and to the extent reasonably requested by the other Party, in connection with the filing of Tax Returns of or with respect to the Company or the Acquired Subsidiary and/or during the course of any audit, litigation or other proceeding with respect to Taxes of or attributable to the Company or the Acquired Subsidiary. Such cooperation shall include the retention and (upon the other Party’s request) the provision of records and information that are reasonably relevant to any such audit, litigation or other proceeding and making employees available on a mutually convenient basis to provide additional information and explanation of any material provided hereunder. Each of Seller and Buyer agrees, (i) that Seller shall retain all books and records with respect to Tax matters pertaining to the Company and the Acquired Subsidiary relating to any taxable period beginning on or before the Closing Date until the expiration of the applicable statute of limitations (and, to the extent notified by Buyer, any extensions thereof) of the respective taxable periods; shall provide copies of the foregoing to Buyer upon Buyer’s request; and shall abide by all record retention agreements entered into with any Taxing Authority, and (ii) to give the other Party (and following the Closing, Buyer agrees to cause the Company and the Acquired Subsidiary to give the Seller) reasonable written notice prior to transferring, destroying or discarding any such books and records and, on receipt of such notice, if the other Party so requests, Seller or Buyer shall, as applicable, allow the other Party to take possession of such books and records. Buyer and Seller further agree, upon request, to use Commercially Reasonable Efforts to obtain any certificate or other document from any Governmental Authority or any other Person as may be necessary to mitigate, reduce or eliminate any Tax that could be imposed (including with respect to the transactions contemplated hereby).
(g)
Transfer Taxes
. All transfer, documentary, sales, Hawaii general excise, use, stamp, registration and other such Taxes, and all conveyance fees, recording charges and other fees and charges (including any penalties and interest), incurred in connection with the transactions contemplated by this Agreement (“
Transfer Taxes
”) shall be paid by Buyer when due, and Buyer will file, or cause to be filed all necessary Tax Returns and other documents with respect to all such Taxes, fees and charges;
provided that
Seller shall reimburse Buyer for 50% of any such Transfer Taxes (excluding any penalties or interest incurred by Buyer).
(h)
Tax Treatment
. For all U.S. federal income Tax purposes (and state, local, and foreign Tax purposes where applicable), each of Seller and Buyer intend for the purchase of the TH Interest to be treated as a sale of all the Assets (and the Subsidiary Stock), subject to all the Company Assumed Liabilities. Seller and Buyer shall each report, and shall cause each of their Affiliates where applicable to report, the purchase of the TH Interest pursuant to this Agreement consistent with such intended treatment for all U.S. federal income Tax purposes (and state, local, and foreign Tax purposes where applicable). Except as otherwise required by applicable Law, each of Seller and Buyer agrees that it will not, and will not permit its Affiliates to, take any position for Tax purposes (whether on any Tax Return, in any Tax proceeding, or otherwise) that is inconsistent with such intended treatment.
(i)
Section 338(h)(10) Elections
.
(i)
Because of the intended treatment set forth in
Section 7.10(h)
, each of Seller and Buyer intend for the deemed purchase and sale of the Assets to result in the deemed
purchase and sale of the Subsidiary Shares and, therefore, intend for such deemed purchase and sale of the Subsidiary Shares to qualify as a “qualified stock purchase” within the meaning of Treasury Regulations Section 1.338(h)(10)-1(c). Seller and Buyer shall make a joint election under Section 338(h)(10) of the Code and under any comparable provision of applicable state, local, and foreign Law with respect to Buyer’s deemed purchase of the Subsidiary Shares (collectively, the “
Section 338(h)(10) Elections
”). Buyer and Seller shall take all necessary steps and cooperate in good faith, including the exchange of information, to effect and preserve valid and timely Section 338(h)(10) Elections. Except as otherwise required by applicable Law, each of Seller and Buyer agrees that (A) it shall, and shall cause each of its Affiliates, to report, act and file all Tax Returns in all respects and for all purposes consistent with the Section 338(h)(10) Elections, and (B) it will not, and will not permit its Affiliates to, take any position that is inconsistent with the Section 338(h)(10) Elections.
(ii)
At least three (3) Business Days prior to the Closing Date, Buyer shall prepare and deliver an Internal Revenue Service Form 8023, Elections Under Section 338 for Corporations Making Qualified Stock Purchases, and any corresponding forms under comparable provisions of applicable state, local or foreign tax Law, in substance reasonably satisfactory to Seller (collectively, the “
Section 338(h)(10) Election Forms
”). At the Closing, Seller shall deliver to Buyer such Section 338(h)(10) Election Forms, duly executed. Seller authorizes Buyer to file each Section 338(h)(10) Election Form with the appropriate Taxing Authority on behalf of Seller and Buyer. Promptly following each such filing, Buyer shall provide Seller with a copy of such filed Section 338(h)(10) Election Forms. As reasonably requested from time to time by Buyer, Seller shall assist Buyer in, and shall provide the necessary information to Buyer, in connection with the preparation of any other forms and documentation required to effect valid and timely Section 338(h)(10) Elections.
(j)
Purchase Price Allocations
.
(i)
Within ninety (90) days after the Final Net Working Capital is finally determined pursuant to
Section 2.6
Buyer shall deliver to Seller an allocation schedule (the “
Asset Purchase Allocation Schedule
”) allocating the Purchase Price (together with the Company Assumed Liabilities and other amounts required to be treated as part of the purchase price for U.S. federal income tax purposes) among the Assets (and the Subsidiary Stock) in accordance with Section 1060 of the Code and the Treasury Regulations promulgated thereunder.
(ii)
Within ninety (90) days after the Final Net Working Capital is finally determined pursuant to
Section 2.6
, Buyer shall deliver to Seller an allocation schedule (the “
Section 338 Allocation Schedule
”) allocating the “aggregate deemed sales price” and the “adjusted grossed-up basis” (as defined under applicable Treasury Regulations) that results from the Section 338(h)(10) Elections among the assets of the Acquired Subsidiary in accordance with Sections 338 and 1060 of the Code and the Treasury Regulations promulgated thereunder.
(iii)
Each of the Asset Purchase Allocation Schedule and the Section 338 Allocation Schedule (each, an “
Allocation Schedule
,” and collectively, the “
Allocation Schedules
”) delivered by Buyer shall become final and binding upon Buyer and Seller on the fifteenth (15th) day following the date that such Allocation Schedule was delivered by Buyer to Seller, unless prior to such date Seller notifies Buyer of any reasonable objections to such Allocation Schedule (an “
Allocation Schedule Notice of Disagreement
”). An Allocation Schedule Notice of Disagreement shall specifically set forth all of Seller’s disputed items to the applicable Allocation Schedule, together with Seller’s proposed changes thereto, including an explanation in reasonable detail of the basis on which Seller proposes such changes. If Seller has
delivered a timely Allocation Schedule Notice of Disagreement with respect to an Allocation Schedule, then Buyer and Seller shall use their good faith efforts to reach agreement on the disputed items to determine the final and binding Allocation Schedule. If all of Seller’s disputed items with respect to an Allocation Schedule have not been resolved by Buyer and Seller by the thirtieth (30th) day following the date that Buyer receives the Allocation Schedule Notice of Disagreement with respect to such Allocation Schedule, then the items that are still disputed shall be submitted to binding arbitration to be determined by the Arbiter. The Arbiter’s determination of the disputed issues shall in no event be more favorable to Buyer than reflected on such Allocation Schedule as proposed by Buyer or more favorable to Seller than reflected in the proposed changes to such Allocation Schedule delivered by Seller in the Allocation Schedule Notice of Disagreement. Following the determination by the Arbiter, such Allocation Schedule shall be revised to include the determination of the Arbiter on the disputed issues, and such revised Allocation Schedule shall be final and binding upon Buyer and Seller. The fees and expenses of any such arbitration shall be borne fifty percent (50%) by Buyer and fifty percent (50%) by Seller.
(iv)
Any adjustment of the Purchase Price, and to any other items of consideration, cost or expense taken into account in the Allocation Schedules for U.S. federal income tax purposes, will be allocated in a manner consistent with the Allocation Schedules that has become final and binding pursuant to this
Section 7.10(j)
. Except as otherwise required by applicable Law, (A) each of Buyer and Seller shall, and shall cause each of its Affiliates, to report, act and file all Tax Returns in all respects and for all purposes consistent with the Allocation Schedules determined to be final and binding pursuant to this
Section 7.10(j)
, and (B) each of Buyer and Seller will not, and will not permit of any of its Affiliates to, take any position that is inconsistent with such final and binding Allocation Schedules.
(k)
Tax Treatment of Indemnity Payments
. Except as otherwise required by applicable Law, each of Buyer and Seller agree that any indemnification payments made under this Agreement shall be treated as Purchase Price adjustments for U.S. federal income tax purposes (and state, local, and foreign Tax purposes where applicable).
(l)
Tax Sharing Agreements
. All Tax sharing agreements or similar agreements with respect to or involving the Company or the Acquired Subsidiary shall be terminated as of the Closing Date, and after the Closing Date, the Company and the Acquired Subsidiary shall not be bound thereby or have any liability thereunder.
(m)
Consolidated Returns for Periods Through the Closing Date
. For the avoidance of doubt, Seller shall include the income of the Acquired Subsidiary (including any deferred items triggered into income by Treasury Regulations Section 1.1502-12 and any excess loss account taken into income under Treasury Regulations Section 1.1502-19) on the Seller Affiliated Group’s consolidated U.S. federal income tax return for all periods through the end of the Closing Date and pay any U.S. federal income taxes attributable to such income, subject to indemnification by Buyer as may be herein provided. The Company and the Acquired Subsidiary shall furnish Tax information to the Seller as necessary or helpful with respect to the foregoing.
(n)
Tax Withholding
. With respect to any amount of Taxes deducted or withheld by Buyer pursuant to
Section 2.5(a)(i)(7)
, Buyer shall timely pay the full amount of any such Taxes deducted or withheld to the applicable Taxing Authority and provide written notice to Seller of such payments when made.
(o)
Conflict
. In the event of conflict between any of the provisions of this
Section 7.10
and any other provision of this Agreement, the provisions of this
Section 7.10
shall control.
Section 7.11
No Solicitation/Non-Competition
.
(a)
To the extent not prohibited by Law, for a period of five (5) years after the Closing, Buyer shall not, and shall not permit any of its Affiliates to, hire, employ or engage, or seek to hire, employ or engage, any employee of Seller or any of its Affiliates without the prior written consent of Seller, which consent may be withheld in the sole discretion of Seller;
provided
, that the provisions of this
Section 7.11
shall not apply to general solicitations not specifically targeted towards such employees, nor shall they apply to Post-Closing Employees.
(b)
In (i) consideration for the purchase by Buyer of the TH Interests and the goodwill, if any, associated therewith, with which Seller is associated and which Seller is causing to be sold, (ii) order to protect the goodwill obtained by Buyer as a result of the acquisition of the TH Interests, and (iii) order to satisfy certain conditions to the consummation of the transactions contemplated by this Agreement, Seller expressly covenants and agrees that, during the Prohibited Period, Seller will refrain from carrying on or engaging directly in the Business (as conducted as of the Closing Date) in the State of Hawaii (the “
Restricted Area
”). Seller agrees and covenants that, because the following conduct would effectively constitute carrying on or engaging in the Business, Seller will not, in the Restricted Area during the Prohibited Period, (1) own, manage, operate or directly participate in any business or Person which, to Seller’s Knowledge, engages in the Business (as conducted as of the Closing Date) or (2) directly loan money (excluding purchase money indebtedness) to any business or Person which, to Seller’s Knowledge, engages in the Business where the purpose of such loan is to promote the Business (as conducted as of the Closing Date) in the Restricted Area. For the avoidance of doubt, the preceding sentence shall not prohibit sales by Seller to wholesale customers of products similar to the Hydrocarbon Inventory that are ultimately resold or used in the Restricted Area by Persons other than Seller or its Affiliates. As used in this Agreement, “
Prohibited Period
” means the period beginning on the Closing Date and ending on the fifth (5
th
) anniversary of the Closing Date.
(c)
To the extent that any part of this
Section 7.11
may be invalid, illegal or unenforceable for any reason, it is intended that such part shall be enforceable to the extent that a court of competent jurisdiction shall determine that such part, if more limited in scope, would have been enforceable, such part shall be deemed to have been so written and the remaining parts shall as written be effective and enforceable in all events and the Parties agree to request that such court enforce this
Section 7.11
as if so written.
(d)
The Parties agree that the limitations as to time, geographic area and scope of activity to be restrained as set forth in this
Section 7.11
are reasonable and do not impose any greater restraint than is necessary to protect the goodwill, if any, that Seller is selling and causing to be sold pursuant to this Agreement and are necessary to protect the legitimate business interests of Buyer and that these limitations are intended to comply with all Laws. The Parties agree that, in the event of a breach or threatened breach of any of the provisions of this
Section 7.11
, Buyer shall be entitled to immediate injunctive relief, as any such breach may cause Buyer irreparable injury for which it would have no adequate remedy at law. Nothing herein shall be construed so as to prohibit Buyer from pursuing or realizing any other remedies available to it under this Agreement, at law or in equity for any such breach or threatened breach.
(e)
Seller acknowledges that the geographic scope and duration of the covenants contained in this
Section 7.11
are the result of arm’s-length bargaining and are fair and reasonable in light of (i) the nature and wide geographic scope of the operations of the Business (as conducted as of the
Closing Date), (ii) Seller’s level of control over, contact with, and association with the goodwill of, the Business (as conducted as of the Closing Date) in all jurisdictions in which it is conducted, (iii) the fact that the Business (as conducted as of the Closing Date) is conducted by the Companies throughout the Restricted Area, and (iv) the consideration that Seller is receiving in connection with the transactions contemplated by this Agreement and the amount of goodwill for which Buyer is paying. It is the desire and intent of the Parties that the provisions of this Agreement be enforced to the fullest extent permitted under Law, whether now or hereafter in effect and therefore, to the extent permitted by Law, the parties waive any provision of Law that would render any provision of this
Section 7.11
invalid or unenforceable.
Section 7.12
Third Person Consents Not Obtained Prior To Closing
.
(a)
Notwithstanding anything to the contrary in this Agreement, this Agreement shall not constitute an agreement to assign any Seller Contract or any benefit arising under or resulting from such Seller Contract if an attempted assignment thereof, without a required Third Person Consent or Authorization, would constitute a breach or other contravention of the rights of such third party, would be ineffective with respect to any party to an agreement concerning such Seller Contract, would violate or otherwise is not permitted by Law or would in any way adversely affect the rights of Seller or, upon transfer, of the Company under or in respect of such Seller Contract. If any transfer or assignment by Seller to, or any assumption by the Company of, any interest in, or Obligation under, any Seller Contract, requires any Third Person Consent or Authorization, then no such assignment or assumption shall be made without such Third Person Consent or Authorization being obtained. To the extent any Seller Contract may not be assigned to the Company by reason of the absence of any such Third Person Consent or Authorization, the Company shall not be required to assume any Obligations arising under such Seller Contract;
provided, however
, that upon the receipt of any such Third Person Consent or Authorization after the Closing, such Seller Contract shall be assigned to the Company and the Company shall assume such Seller Contract.
(b)
If any such Third Person Consent or Authorization is not obtained prior to the Closing Date, Seller shall, to the extent not prohibited by the terms of any applicable Seller Contract or Law and until the receipt of such Third Person Consent or Authorization, hold the Seller Contract, subject to such Third Person Consent or Authorization, together with any proceeds therefrom, in trust for the Company, and Seller and the Company shall cooperate (each at its own expense) in any mutually acceptable, lawful and reasonable arrangement under which the Company shall obtain, to the extent practicable, the economic rights and benefits under such Seller Contract with respect to which the Third Person Consent or Authorization has not been obtained in accordance with this Agreement. Such reasonable arrangement may include the entering into of a subcontract, sublicense, sublease or other similar arrangement between Seller and the Company. During the period from Closing until such Third Person Consent or Authorization is obtained, Seller will use Commercially Reasonable Efforts to enforce such Seller Contracts for the benefit of the Company, on the condition that the Company shall bear all costs and expenses (including legal expenses) related to such enforcement. If the Company is able to receive the economic rights and benefits under such Seller Contract, such economic rights and benefits shall constitute an Asset, and the Obligations, if any, related to such economic rights and benefits under such Asset shall constitute Obligations of the Company (other than any Obligations arising out of or relating to a breach or any operation of the Business or the ownership or operation of the Assets that occurred prior to the Effective Time), as applicable. Seller’s Obligations under this
Section 7.12(b)
shall expire as of the second (2
nd
) anniversary of the Closing Date.
(c)
In the event that any Third Person Consent is not obtained prior to the Closing Date related to those certain Leased Real Properties set forth in the electronic folder titled “Specified Leased Real Property Consents” located in the Data Room and the lack of such Third Person Consents results in a termination of the leases related to such Leased Real Properties within ninety (90) days after
the Closing Date, then Seller agrees to negotiate in good faith with Buyer after the Closing for a refund/reduction in the Purchase Price in an amount equal to the combined discounted value to the Company of the anticipated lost net income associated with the termination of such leases.
Section 7.13
Multi-Site Contracts
.
Section 7.13
of the Disclosure Schedules sets forth a list of certain “master” contracts and agreements that the Company or the Acquired Subsidiary is a party to, or otherwise authorized to utilize, and which pertain to multiple refineries and facilities owned by Seller and its Affiliates in addition to the Assets (each, a “
Multi-Site Contract
” and
collectively, the “
Multi-Site Contracts
”)
.
Some of those Multi-Site Contracts may constitute Seller Contracts or Material Company Contracts. With respect to all Multi-Site Contracts, Buyer acknowledges and agrees that the Company shall not be entitled to remain or become a party thereto, or otherwise make use thereof, after Closing, and it is Seller’s intention to terminate all Multi-Site Contracts as to the Company effective as of Closing. Notwithstanding such termination, the Company shall be obligated to honor any work releases, purchase commitments or other similar commitments made by them under any Multi-Site Contracts prior to Closing, but not yet fully performed or satisfied as of Closing, so long as such commitments were not made in violation of Seller’s Obligations under
Section 6.2
. To the extent a Multi-Site Contract by its terms is not terminable as to the Company, Buyer covenants and agrees to (i) negotiate in good faith with the counterparty(ies) to such Multi-Site Contract in an effort to enter into a new agreement between such counterparty(ies) and the Company as soon as reasonably practicable as possible following Closing, and (ii) until such new agreement becomes effective, honor the terms of the Multi-Site Contract and not make any elective purchases or other elective commitments thereunder. Buyer acknowledges that the terms and conditions of Multi-Site Contracts that relate to other facilities of Seller and its Affiliates other than the Refinery (including rate sheets and other commercial terms and conditions covering such other facilities) are confidential and proprietary information of Seller and its Affiliates, and Buyer shall destroy any such information it may inadvertently obtain, and shall not use such information for any purpose. Without limiting any of Buyer’s other indemnification Obligations under this Agreement, Buyer shall indemnify, defend and hold harmless the Seller Indemnitees against any and all Claims and Losses arising out of Buyer’s breach or utilization of any Multi-Site Contract after Closing.
Section 7.14
Operation of Business
. During the period commencing at the Closing and ending at the Measurement Time, Buyer (with respect to the Companies and the Business) shall, and shall cause the Companies to operate and maintain the properties and assets of the Companies and the Business in the ordinary course of business (including maintenance of appropriate insurance coverages with respect to the assets to be measured hereunder as of the Measurement Time) and not enter into or effect any transaction outside the ordinary course of business;
provided
that the Companies shall be permitted to enter into financing arrangements during such period and the Parties agree that the impact of such financing arrangements shall not be taken into account in the determination of Net Working Capital.
Section 7.15
Seller’s Names; Removal of Logos and Signs
.
(a)
Except as provided in this
Section 7.15
or the License Agreement, following the Measurement Time, Buyer will not (and will cause the Companies not to) use or otherwise exploit the Tesoro Marks in the operation of the Business. As promptly as practicable following the Closing Date, but in no event later than one hundred eighty (180) days after the Closing Date, Buyer will stop (and will cause the Companies to stop) using the Tesoro Marks in any form in the operation of the Business except as permitted pursuant to the License Agreement, including by removing, permanently obliterating or covering all references to the Tesoro Marks that appear on any Assets, including all signage, storage containers, uniforms and clothing, promotional or advertising literature, stationery, purchase order forms, office forms and labels, packaging, manuals, policy books, reference materials and other such documents (including signs displaying Seller’s or its Affiliates’ emergency contact telephone numbers or otherwise using or displaying the Tesoro Marks or the phrase “Tesoro” in whole or in part). As promptly as
practical after the Closing Date, Buyer shall post Buyer’s emergency contact telephone numbers in place of any of Seller’s or its Affiliates’ emergency contact telephone numbers. Without limiting the foregoing restrictions, until such time as the Tesoro Marks are removed or covered by Buyer or the Companies as provided above, in no event will Buyer or the Companies use or display the Tesoro Marks in any way other than in the same manner used by the Business immediately prior to the Closing Date and all signs and graphics incorporating any of the Tesoro Marks shall be maintained by Buyer and the Companies in keeping with a first class operation. During any period that the Company is using the Tesoro Marks as provided in this
Section 7.15
, the Company shall use Commercially Reasonable Efforts to inform customers, suppliers and contractors that Buyer and the Companies are not part of or Affiliates of Seller and that the Companies are using the Tesoro Marks with permission solely to facilitate the transition of the Business or as permitted pursuant to the License Agreement. Notwithstanding anything to the contrary, neither Buyer nor the Companies shall have any right to create any new materials to be used in the operation of the Business containing the Tesoro Marks or any right to transfer, assign, license or sublicense any of the Tesoro Marks except as permitted pursuant to the License Agreement. Neither Buyer nor the Companies shall contest the validity of the Tesoro Marks, claim adversely to Seller or its Affiliates any right, title or interest in or to the Tesoro Marks, or the distinctive features of the designs used in connection with the Tesoro Marks, and shall not register, apply to register or aid a third party in registering any of the Tesoro Marks or a confusingly similar trademark or service mark.
(b)
Within ten (10) days following the Closing Date, Buyer shall (a) cause the Company to file appropriate documentation with the applicable Governmental Authorities to change the legal name of the Company to remove the name “Tesoro” and any name that would reasonably be expected to be confused therewith; (b) provide Seller evidence of such filings; and (c) take such other actions as required to cause the Company and the Acquired Subsidiary to abandon the name “Tesoro” and any derivation thereof that would reasonably be expected to be confused therewith except to the extent expressly permitted pursuant to the License Agreement.
Section 7.16
Further Assurances
. Without limiting
Section 6.3
, Seller and Buyer each agree that from time to time after the Closing Date they will execute and deliver and will cause their respective Affiliates to execute and deliver such further instruments, and take, and cause their respective Affiliates to take, such other actions as may be reasonably necessary to carry out the purposes and intents of this Agreement and the Related Agreements, including with respect to any consent, authorization, order or approval sought from, or exemption, review, investigation or inquiry conducted by, any Governmental Authority in connection with this Agreement and the transactions contemplated hereby;
provided
,
however
that the provisions of this
Section 7.16
shall not impose any Obligation on any Party or its Affiliates greater than (and shall be subject to limitations similar to) the Obligations imposed on the Parties during the Interim Period pursuant to
Section 6.3
.
Section 7.17
Retention of and Access to Books and Records
.
(a)
As promptly as practicable after the Closing Date, Seller will deliver or cause to be delivered to Buyer the Books and Records that are in the possession or control of Seller or its Affiliates other than Books and Records in the possession of the Company. Buyer agrees (and shall cause the Company to agree) to hold and maintain the Books and Records that are transferred to Buyer or the Company so that they may be reasonably retrievable and not to destroy or dispose of any portion thereof for a period of five (5) years from the Closing Date or such longer time as may be required by applicable Law, provided, that, if Buyer or the Company desires to destroy or dispose of such Books and Records during such period, they will first offer in writing at least ninety (90) days before such destruction or disposition to surrender them to Seller, and if Seller does not accept such offer within sixty (60) days after receipt of such offer, Buyer or the Company, as applicable, may proceed with the destruction of such Books and Records.
(b)
Unless in violation of Law, each Party agrees (and shall cause its Affiliates to agree) to afford the other Party and its Affiliates and their respective accountants and counsel, during normal business hours, upon reasonable request, at a mutually agreeable time, full access to and the right to make copies of the Books and Records delivered to Buyer or other information that Seller retains that relates to the Assets or the Business (including those that are not “Books and Records”) at no cost to such Party or its Affiliates (other than for reasonable out-of-pocket copying expenses);
provided, however
, that in the event of any litigation, nothing herein shall limit any Party’s rights of discovery under applicable Law. Without limiting the generality of the preceding sentences, each Party agrees to provide the other Party and its Affiliates reasonable access to and the right to make copies of the Books and Records or other information (excluding confidential, privileged or proprietary information) that Seller retains that relates to the Assets or the Business (including those that are not “Books and Records”) after the Closing Date, for the purposes of assisting such Party and its Affiliates (i) in complying with the Obligations under this Agreement or the Related Agreements (including to comply with any indemnity obligations), (ii) in preparing and delivering any accounting statements provided for under this Agreement or the Related Agreements and adjusting, prorating and settling the charges and credits provided for in this Agreement or the Related Agreements, (iii) in the case of the Seller, in owning or operating the Excluded Assets or Retained Liabilities, (iv) in preparing Tax Returns or in responding to or disputing any Tax audit, Tax appeal, other Tax proceeding, (v) in asserting, defending or otherwise dealing with any Claim, known or unknown, under this Agreement or the Related Agreements or, in the case of the Seller, with respect to Excluded Assets or Retained Liabilities or (vii) in asserting, defending or otherwise dealing with any Third-Party Claim or dispute by or against a Party or its Affiliates relating to the Business or the Assets.
Section 7.18
Intellectual Property
.
(a)
Grants to Intellectual Property Owned by Seller
. Seller shall grant and hereby does grant to the Company effective as of the Closing Date, for use by the Company solely in the internal operations of the Refinery in a manner substantially similar to the operations prior to Closing, a non-exclusive, irrevocable royalty-free, paid-up license (without a right to sublicense or transfer except as expressly provided in this
Section 7.18
) to any Intellectual Property that is owned by Seller or any of its Affiliates, which exists at the Closing Date and which is or has been in use in the operation of the Refinery as currently operated or as operated immediately prior to the Closing (“
Seller IP
”). Such grant is made without representation, recourse or warranty, and any warranties which may be implied by Law are hereby disclaimed. The sole purpose of this paragraph is to prevent Seller or any of its Affiliates from hereafter bringing any Claims against Buyer or the Company seeking payment of royalties for the use of, or alleging unauthorized use by Buyer or the Company of, any Seller IP, so long as such use is solely in the internal operations of the Refinery in a manner substantially similar to the operations prior to the Closing. Buyer and the Company shall have no obligation to grant back to Seller or its Affiliates or otherwise make available to Seller or any of its Affiliates any improvements or enhancement to any Seller IP that may be developed by Buyer or the Company after the Closing.
(b)
Subsequent Transfer of Intellectual Property
. In the event the Company transfers or pledges to any Person, ownership of the Refinery, or any part thereof, the license granted in
Section 7.18(a)
may be extended to such transferee or lender subject to outstanding obligations to third parties and subject to an assumption in writing by such transferee or lender of all relevant duties and obligations under the applicable portions of this Agreement.
(c)
Seller Process Licenses
. Seller shall transfer to the Company or cause the transfer of (A) all licenses of Intellectual Property held by Seller or its Affiliates that are used exclusively in connection with the operation of the Refinery process units or other Assets as currently operated or as operated immediately prior to the Closing, and (B) that portion of any license agreement covering the
Refinery or other Assets as well as other facilities or assets owned by Seller or its Affiliates (a “
Multi-Site License
”) that is allocable to the operation of the Refinery process units or other Assets as currently operated or as operated immediately prior to the Closing (the interests in the foregoing clauses (A) and (B) being herein collectively referred to as the “
Licensed Technology Rights
”), in all cases only to the extent that such Licensed Technology Rights are freely transferable or to the extent that the licensor otherwise agrees to such transfer, it being understood that Seller makes no representations or warranties as to the assignability or transferability of any Licensed Technology Rights. Buyer shall be solely responsible for seeking the consent of the licensor(s) of any such Licensed Technology Rights and for paying any costs associated with the transfer of such Licensed Technology Rights or the issuance of replacement licenses;
provided, however
, that Seller agrees to (i) reasonably cooperate in requesting such transfers and in executing any reasonable transfer or assignment documents that do not impose any Obligations on Seller, and (ii) pay any accrued and unpaid royalties arising out of Seller’s use of the Licensed Technology Rights at the Refinery prior to Closing. Without limiting the foregoing, Buyer agrees that Seller shall not be obligated to transfer any Licensed Technology Rights to the Company where such transfer would require Seller or its Affiliates to surrender any paid-up capacity or other rights allocable to other facilities owned by Seller or its Affiliates (but for the avoidance of doubt, Seller will agree to release any Licensed Technology Rights allocable to the Refinery or other Assets under a Multi-Site License). Effective as of and related to the period on and after the Closing Date, Buyer or the Company shall be solely responsible for complying with all Obligations (including non-disclosure, export control and grant-back obligations) under Licensed Technology Rights used by the Company after Closing and shall indemnify, defend and hold the Seller Indemnitees harmless in accordance with
Section 11.3
against any Losses they may suffer by reason of Buyer’s or the Company’s failure to do so. Without limiting the foregoing, Buyer shall indemnify, defend and hold the Seller Indemnitees harmless in accordance with
Section 11.3
against any Losses they may suffer by reason of Buyer’s or the Company’s use of Licensed Technology Rights beyond the use of such rights by the Company as of the Closing.
(d)
Seller’s obligations under this
Section 7.18
shall expire on the second (2
nd
) anniversary of the Closing Date.
Section 7.19
Releases
.
(a)
Simultaneously with the Closing, Seller, on behalf of itself and its Affiliates (other than the Companies), hereby unconditionally and irrevocably releases and forever discharges, effective as of and forever after the Closing Date, to the fullest extent permitted by Law, each of the Companies from any and all debts, Obligations, Claims, Proceedings, judgments or controversies of any kind whatsoever (collectively, “
Pre-Transaction Claims
”) that Seller and its Affiliates (other than the Companies), may possess, if any, against the Companies to the extent arising out of or based upon any agreement or understanding or act or failure to act (INCLUDING ANY ACT OR FAILURE TO ACT THAT CONSTITUTES ORDINARY OR GROSS NEGLIGENCE OR RECKLESS OR WILLFUL, WANTON MISCONDUCT), misrepresentation, omission, transaction, fact, event or other matter occurring prior to the Closing Date (whether based at law or in equity or otherwise, foreseen or unforeseen, matured or unmatured, known or unknown, accrued or not accrued) (collectively, “
Pre-Transaction Matters
”), including: (a) claims by Seller with respect to repayment of loans or other indebtedness; (b) any rights, titles and interests in, to or under any agreements, arrangements or understandings to which Seller or any of its Affiliates (other than the Companies), is a party; and (c) Claims by Seller and its Affiliates (other than the Companies), with respect to dividends, distributions, violations of preemptive rights and Seller’s status as a stockholder, option holder or other security holder of the Companies;
provided, however
, that this
Section 7.19(a)
shall not apply to any Claim or Obligation pursuant to this Agreement or the Related Agreements or any Obligation of the Companies that is taken into account as a liability of the Companies for purposes of the Final Net Working Capital. Seller, on behalf of itself and its Affiliates (other than the Companies), hereby further agrees, from and after the
Closing Date, not to file or initiate any Proceeding before any Governmental Authority on the basis of or respecting any Pre-Transaction Claim concerning any Pre-Transaction Matter that is released under this
Section 7.19(a)
.
(b)
Simultaneously with the Closing, Buyer, on behalf of the Companies, hereby unconditionally and irrevocably releases and forever discharges, effective as of and forever after the Closing Date, to the fullest extent permitted by Law, Seller and its Affiliates from any and all Pre-Transaction Claims that the Companies may possess, if any, against Seller and its Affiliates to the extent arising out of or based upon any Pre-Transaction Matters, including: (a) claims by the Companies with respect to repayment of loans or other indebtedness; (b) any rights, titles and interests in, to or under any agreements, arrangements or understandings to which either of the Companies, is a party; and (c) Claims by the Companies with respect to dividends and distributions;
provided, however
, that this
Section 7.19(b)
shall not apply to any Claim or Obligation pursuant to this Agreement or the Related Agreements or any Obligation of Seller that is taken into account as an asset of the Companies for purposes of the Final Net Working Capital. Buyer, on behalf of the Companies, hereby further agrees, from and after the Closing Date, not to file or initiate any Proceeding before any Governmental Authority on the basis of or respecting any Pre-Transaction Claim concerning any Pre-Transaction Matter that is released under this
Section 7.19(b)
.
ARTICLE VIII
CLOSING CONDITIONS
Section 8.1
Conditions to Obligations of Each Party Under this Agreement
. The respective Obligations of Buyer and Seller to consummate the transactions contemplated hereby shall be subject to the satisfaction at or prior to the Closing of the following conditions, any or all of which may be waived by the Parties, in whole or in part, to the extent permitted by Law:
(a)
Any waiting or review period applicable to the transactions contemplated by this Agreement under applicable antitrust, trade regulation or foreign investment Laws and regulations, including the HSR Act, shall have expired or been terminated;
(b)
No temporary restraining Order, preliminary or permanent injunction or other Order issued by any court of competent jurisdiction or other statute, rule or legal restraint of a Governmental Authority shall be in effect preventing the consummation of the transactions contemplated hereby; and
(c)
There shall not be pending or threatened in writing any Proceeding instituted by any Governmental Authority to materially restrain, prohibit or otherwise materially interfere with or obtain substantial monetary damages in connection with the consummation of the transactions contemplated by this Agreement.
Section 8.2
Additional Conditions to Seller’s Obligations
. The Obligations of Seller to effect the transactions contemplated hereby shall be subject to the satisfaction at or prior to the Closing of the following conditions, any or all of which may be waived by Seller, in whole or in part, to the extent permitted by Law:
(a)
The representations and warranties of Buyer made in
Section 5.1
(Organization and Qualification) and
Section 5.2
(Authority; Enforceability) shall be complete and correct in all respects when made and on and as of the Closing Date, as though made on and as of the Closing Date (except for representations and warranties that speak only as of a specific date or time, which need be so complete and correct only as of such date or time). The other representations and warranties of Buyer made in
Article V
shall, when read without any qualification as to “materiality” or “material adverse effect” or another similar qualifier shall be complete and correct in all respects when made and on and as of the Closing Date, as though made on and as of the Closing Date (except for representations and warranties that speak as of a specific date or time, which need be so complete and correct only as of such date or time) except where the failure to be so complete and correct, individually and in the aggregate, has not had and is not reasonably likely to have a material adverse effect on the ability of Buyer to consummate the transactions contemplated by this Agreement or to perform its Obligations under this Agreement, and Seller shall have received a certificate of an executive officer of Buyer, dated the Closing Date, to such effect;
(b)
Buyer shall have performed or complied in all material respects with all Obligations required by this Agreement to be performed or complied with by it on or prior to the Closing Date, and Seller shall have received a certificate of an executive officer of Buyer, dated the Closing Date, to such effect;
(c)
All Third Person Consents and all Authorizations specified in
Section 8.2(c)
of the Disclosure Schedules shall have been obtained;
(d)
Since the Execution Date, there must not have been any event or series of events which has had or would reasonably be expected to have a Material Adverse Effect; and
(e)
Buyer shall have provided to Seller reasonable confirmation (which shall include an unaudited balance sheet and bank statements of Buyer) that the Adjusted Net Worth of Buyer immediately prior to the Closing shall equal or exceed an amount equal to One Hundred Fifty Million Dollars ($150,000,000).
Section 8.3
Additional Conditions to Buyer’s Obligations
. The Obligations of Buyer to effect the transactions contemplated hereby shall be subject to the satisfaction at or prior to the Closing of the following conditions, any or all of which may be waived by Buyer, in whole or in part, to the extent permitted by Law:
(a)
The representations and warranties of Seller and the Company, as applicable, made in
Section 3.1
and
Section 4.1
(Organization and Qualification),
Section 3.2
and
Section 4.2
(Authority; Enforceability),
Section 3.5
(Ownership of the TH Interest),
Section 4.4
(Capitalization of the Company), and
Section 4.5
(Capitalization of the Acquired Subsidiary) shall be complete and correct in all respects when made and on and as of the Closing Date, as though made on and as of the Closing Date (except for representations and warranties that speak only as of a specific date or time, which need be so complete and correct only as of such date or time). The other representations and warranties of Seller and the Company, as applicable, made in
Article III
and
Article IV
shall, when read without any qualification as to “materiality” or “Material Adverse Effect” or another similar qualifier shall be complete and correct in all respects when made and on and as of the Closing Date, as though made on and as of the Closing Date (except for representations and warranties that speak as of a specific date or time, which need be so complete and correct only as of such date or time) except where the failure to be so complete and correct, individually and in the aggregate, has not had and is not reasonably likely to have a Material Adverse Effect or a material adverse effect on the ability of Seller to consummate the transactions contemplated by this Agreement or to perform its Obligations under this Agreement, and Buyer shall have received a certificate of an executive officer of Seller, dated the Closing Date, to such effect;
(b)
Seller shall have performed or complied in all material respects with all Obligations required by this Agreement to be performed or complied with by it on or prior to Closing
Date, and Buyer shall have received a certificate of an executive officer of Seller, dated the Closing Date, to such effect;
(c)
All Third Person Consents and all Authorizations specified in
Section 8.2(c)
of the Disclosure Schedules shall have been obtained;
(d)
Since the Execution Date, there must not have been any event or series of events which has had or would reasonably be expected to have a Material Adverse Effect;
(e)
The Startup Criteria shall have been met in all material respects; and
(f)
Seller (or its Affiliates) shall have successfully created a functional SAP “clone” of Seller’s current Hawaii operating system pursuant to the Pre-Closing Transition Services Agreement which shall be hosted and managed by Seller (or its Affiliates) at its datacenter and without any modifications by Buyer.
ARTICLE IX
CASUALTY OR CONDEMNATION
Section 9.1
Notice
. In the event that, prior to the Closing Date, all or any portion of the tangible Assets are damaged or destroyed by fire, theft, vandalism, flood, wind, hurricane, explosion or other casualty for which the associated repair or replacement costs (excluding insurance or other potential third party reimbursements) would reasonably be expected to exceed $5,000,000 (a “
Casualty
”) or taken by condemnation or eminent domain or by agreement
in lieu
thereof with any Person or Governmental Authority authorized to exercise such rights (a “
Taking
”), Seller shall promptly notify Buyer thereof.
Section 9.2
Repair or Replacement
.
(a)
In the event of a Casualty or Taking during the Interim Period affecting the tangible Assets, Seller shall elect (i) to repair or replace or make adequate provision for the repair or replacement of the affected Asset at Seller’s cost prior to the Closing, in which case Buyer’s Obligation to effect the Closing shall not be affected, but the Closing Date shall be deferred until three (3) Business Days after repairs or replacement have been completed and the affected Asset has been restored to performance substantially comparable in all material respects to that prior to the Casualty or Taking or (ii) to negotiate with Buyer to reduce the Purchase Price by an amount agreed to by Seller and Buyer to reflect the cost to repair or replace the affected Assets, as may be mutually agreed to by Buyer and Seller (the “
Repair Costs
”), in which case, in the event of a Repair Cost Dispute, the Closing Date and the Termination Date shall be deferred as provided in
Section 9.5
. Notwithstanding the foregoing, Seller’s election in clause (i) of this
Section 9.2(a)
shall be unavailable and clause (ii) of this
Section 9.2(a)
shall apply if the required repairs or replacements would reasonably be expected to result in an extension of the Closing Date for more than forty-five (45) days.
(b)
If Seller and Buyer agree on the Repair Costs within fifteen (15) days of Buyer’s receipt of Seller’s notice of the Casualty or Taking (the “
Repair Negotiation Period
”), Buyer’s Obligation to effect the Closing shall not be affected, but the Purchase Price shall be reduced by the amount of the Repair Costs so agreed that exceeds $5,000,000.
(c)
If Seller and Buyer do not agree on the Repair Costs within the Repair Negotiation Period (a “
Repair Cost Dispute
”), either party may request an engineering company that shall be mutually agreed to by Buyer and Seller to evaluate the affected Assets and deliver to Buyer and Seller
its written estimate of the Repair Costs (the “
Third-Party Estimate
”) within fifteen (15) days after the end of the Repair Negotiation Period.
(i)
If the Third-Party Estimate is equal to or less than $5 million, Buyer’s Obligation to effect the Closing shall not be affected and the Parties shall submit the Repair Cost Dispute to binding arbitration for resolution after the Closing, with a post-Closing adjustment to the Purchase Price equal to the amount by which the finally-determined Repair Costs exceed $5 million in the aggregate.
(ii)
If the Third-Party Estimate is equal to or greater than $5 million but less than $20 million, Buyer’s Obligation to effect the Closing shall not be affected, but the Closing Date Payment shall be reduced by the amount that the Third-Party Estimate exceeds $5 million in the aggregate and the Parties shall submit the Repair Cost Dispute to binding arbitration after the Closing, with a post-Closing adjustment of the Purchase Price equal to the amount by which the difference between the Third-Party Estimate and the finally-determined Repair Costs exceed $5 million in the aggregate.
(iii)
If the Third-Party Estimate is equal to or greater than $20 million, either Seller or Buyer may elect, by giving the other Party written notice of election within fifteen (15) days of receipt of the Third-Party Estimate, to terminate this Agreement pursuant to
Section 10.1(e)
;
provided, however,
that if within such time period, Buyer is ready and able to proceed to Closing and agrees in writing to (x) waive the closing condition set forth in
Section 8.3(e)
with respect to the Refinery Turnaround and Startup Activities and satisfaction of the Startup Criteria and (y) to hold the Closing within five (5) Business Days of such agreement, then Seller shall not elect to terminate this Agreement pursuant to this Section or
Section 10.1(e)
.
Section 9.3
Condemnation Awards
. In the event of any reduction in the Purchase Price in connection with a Taking at the Refinery, as provided in
Section 9.2(a)
, Buyer shall be entitled to collect from any condemnor the entire award(s) that may be made in any such Proceeding, without deduction, to be paid out as follows: subject to actual receipt of such award(s) by Buyer, (a) Buyer shall pay to Seller all such amounts, up to the amount of such Purchase Price reduction, and (b) Buyer shall be entitled to retain the balance (if any) of such award(s).
Section 9.4
Purchase Price Adjustment
. Any adjustment of the Purchase Price pursuant to
Section 9.2(c)
which is necessary to reflect a final determination of Repair Costs after the Closing shall be made as follows: (a) an adjustment in favor of Buyer shall be paid in cash by Seller; and (b) an adjustment in favor of Seller shall be paid in cash to the extent the Purchase Price had been reduced pursuant to this
Article IX
. Any such reduction, refund or payment shall be made within ten (10) Business Days after such final determination.
Section 9.5
Deferral of Closing Date and Termination Date
. In the event of a Repair Cost Dispute, the Closing Date and the Termination Date shall be deferred until (a) three (3) Business Days after receipt of the Third-Party Estimate, or (b) if Seller elects the option in
Section 9.2(c)(i)
, as provided therein.
ARTICLE X
TERMINATION
Section 10.1
Termination
. This Agreement may be terminated at any time prior to the Closing:
(a)
by mutual written consent of Seller and Buyer;
(b)
by Seller upon notice to Buyer, if any of the conditions in
Section 8.1
or
Section 8.2
shall not have been fulfilled by the Closing Date or are or shall have become incapable of fulfillment on or prior to the Termination Date,
provided
that in each such case the failure to Close is not due,
inter alia
, to any breach by Seller of any of its representations, warranties, covenants or other Obligations contained in this Agreement;
(c)
by Buyer upon notice to Seller, if any of the conditions in
Section 8.1
or
Section 8.3
shall not have been fulfilled by the Closing Date or are or shall have become incapable of fulfillment on or prior to the Termination Date,
provided
that in each such case the failure to Close is not due,
inter alia
, to any breach by Buyer of any of its representations, warranties, covenants or other Obligations contained in this Agreement;
(d)
by Seller or Buyer upon notice to the other Party, if the Closing contemplated hereby shall not have occurred (other than through the failure of any Party seeking to terminate this Agreement to comply with its Obligations under this Agreement) on or before September 30, 2013 (the “
Termination Date
”),
provided
that in each such case the failure to Close is not due,
inter alia,
to any breach by the Party seeking to terminate this Agreement of any of its representations, warranties, covenants or other Obligations contained in this Agreement; or
(e)
by Seller or Buyer upon notice to the other Party, pursuant to
Section 9.2(c)(iii)
.
Section 10.2
Deferral of Closing Date and Termination Date
. Notwithstanding the Termination Date being September 30, 2013 as provided pursuant to
Section 10.1(d)
, Buyer may defer the Termination Date to a date no later than October 31, 2013 solely due to Buyer’s efforts to obtain the Financing provided that Buyer provides written notice to Seller of such election on or before September 16, 2013.
Section 10.3
Effect of Termination
. Except for this
Section 10.3
,
Section 2.11
,
Section 2.12
,
Section 6.1(d)(vii)
,
Section 6.1(h)
,
Section 6.6
,
Section 6.14
,
Section 11.7(c)
,
Section 11.8
,
Section 11.9
,
Section 12.2
,
Section 12.3
and
Section 12.4
, this Agreement shall, upon termination hereof pursuant to
Section 10.1
, forthwith become of no further force or effect and (a) except as provided in this
Section 10.3
and by
Section 2.2
, there shall be no liability on the part of Seller, the Company, the Acquired Subsidiary or Buyer or any of their respective Affiliates, or any of their respective officers, directors or managers, to any other party and (b) all rights and Obligations of any Party shall cease;
provided, however
, that any such termination shall not relieve Seller, the Company, the Acquired Subsidiary or Buyer from liability for any intentional and material breach of this Agreement occurring prior to such termination. The termination of this Agreement shall have no effect on the provisions of the Confidentiality Agreement.
ARTICLE XI
INDEMNIFICATION AND REMEDIES
Section 11.1
Survival
. Subject to the limitations and other provisions of this Agreement, (a) the representations and warranties of the Parties contained in this Agreement shall survive the Closing and shall remain in full force and effect for a period of eighteen (18) months after the Closing Date (except for those contained in
Section 3.1
,
Section 4.1
and
Section 5.1
(Organization and Qualification),
Section 3.2
,
Section 4.2
and
Section 5.2
(Authority; Enforceability),
Section 3.5
(Ownership of the TH Interest),
Section 4.4
(Capitalization of the Company),
Section 4.5
(Capitalization of the Acquired Subsidiary), and
Section 3.6
and
Section 5.5
(Brokers), and
Section 4.15
(Taxes) (the foregoing representations hereinafter referred to as the “
Fundamental Representations
”), which shall survive the Closing until the thirtieth (30
th
) day following the expiration of the applicable statute of limitations, and until the resolution of the
indemnification Claims received by the Indemnifying Party in accordance with the provisions hereof prior to the expiration of the relevant time period, (b) each covenant and agreement of the Parties contained in this Agreement which by its terms requires performance after the Closing Date shall survive the Closing and shall remain in full force and effect until such covenant or agreement is fully performed, and (c) the provisions of
Section 6.7
and
Section 6.8
shall survive the Closing without limit as to time.
Section 11.2
Indemnification Provisions for the Benefit of Buyer
.
(a)
If the Closing occurs and subject to the other provisions of this
Article XI
, Seller shall indemnify, defend, save and hold the Buyer Indemnitees harmless from and against any Claims and Losses actually suffered or incurred by them to the extent arising out of or related to:
(i)
the breach of any representation or warranty of Seller or the Company contained in this Agreement when made or at and as of the Closing Date (or at and as of such different date or period specified for such representation or warranty) as though such representation and warranty were made at and as of the Closing Date (or such different date or period);
(ii)
the breach of any covenants or agreements of Seller contained in this Agreement (other than with respect to the Retained Liabilities and for Taxes, which are covered by clauses (iii) and (iv) below);
(iii)
the Retained Liabilities; and
(iv)
any and all Taxes, without duplication, (A) imposed on the Company or the Acquired Subsidiary for any Pre-Closing Tax Period (as determined in accordance with
Section 7.10(a)
for Straddle Periods); (B) for which the Company or the Acquired Subsidiary becomes liable by reason of being a member of any affiliated group (within the meaning of Section 1504(a) of the Code or any similar group defined under a similar provision of state, local or foreign Tax Law) on or prior to the Closing Date, including pursuant to Treasury Regulations Section 1.1502-6 or any analogous or similar state, local, or foreign Tax Law; (C) for which the Company or the Acquired Subsidiary becomes liable by reason of being a transferee or successor of any Person (other than the Company or the Acquired Subsidiary), by contract or pursuant to any Law, with respect to an event or transaction occurring on or before the Closing Date; and (D) which are the responsibility of Seller as described in
Section 7.10(g)
;
provided, however
, (Y) in the case of subclauses (A), (B), (C), or (D), only if and to the extent that such Taxes are in excess of the amount, if any, of such Taxes that are included as a liability and taken into account in the Final Net Working Capital that has been finally determined pursuant to
Section 2.6
, and (Z) that Seller shall have no obligation to indemnify the Buyer Indemnitees from and against any Claims and Losses arising out of or related to Taxes described in subclause (A) if such Taxes are attributable to transactions occurring after the Closing outside the ordinary course of business (other than any such transactions specifically contemplated by this Agreement).
Notwithstanding anything in this Agreement to the contrary, all Claims and Losses of the Buyer Indemnitees arising under or related to Environmental Laws (including Third-Party Claims arising under or related to Environmental Laws) shall be governed by the Environmental Agreement and not this Agreement.
(b)
No Claim may be asserted nor may any Proceeding be commenced against Seller pursuant to this
Section 11.2
unless written notice of such Claim or Proceeding is received by Seller describing in reasonable detail the facts and circumstances with respect to the subject matter of such
Claim or Proceeding, and with respect to Claims or Proceedings based on the breach of any representation or warranty, on or prior to the date such representation or warranty ceases to survive as set forth in
Section 11.1
;
provided, however
, that no Claim may be asserted nor may any Proceeding be commenced by Buyer against Seller arising out of or related to a breach of any representation or warranty of which Buyer had Knowledge on or prior to the Closing Date and for which Buyer failed to deliver a Breach Notice in accordance with
Section 6.4
. If a Buyer Indemnitee has recovered any Losses pursuant to one subsection of this
Section 11.2(a)
, such Buyer Indemnitee shall not be entitled to recover the same Losses under another subsection of this
Section 11.2(a)
. Notwithstanding the foregoing, a Buyer Indemnitee shall be entitled to seek recovery under such provisions of this Agreement that maximizes its recovery.
(c)
No Claim may be made against Seller for indemnification pursuant to clauses (i) or (ii) of
Section 11.2(a)
with respect to any individual action, occurrence or event subject to the indemnifications thereunder (or group of related actions, occurrences or events) unless (i) such individual action, occurrence or event exceeds $5,000 for a Retail Asset, $25,000 for a Logistics Asset and $100,000 for an asset related to the Refinery (individually, each as applicable, the “
De Minimis Amount
”) (and in such case, no Loss below such De Minimis Amounts be applied to or considered for purposes of calculating the aggregate amount of the Buyer Indemnitees’ Losses) or (ii) such Claim relates to the breach of a Fundamental Representation by Seller.
(d)
No Claim may be made against Seller for indemnification pursuant to clauses (i) or (ii) of
Section 11.2(a)
unless the aggregate amount of all Claims and Losses of the Buyer Indemnitees with respect to clauses (i) and (ii) of
Section 11.2(a)
(excluding individual Claims and Losses less than the De Minimis Amounts) shall exceed an amount equal to $500,000 (the “
Indemnification Deductible
”), after which point Seller shall be obligated only to indemnify the Buyer Indemnitees from and against such aggregate Claims and Losses (excluding individual Claims and Losses less than the De Minimis Amounts) in excess of the Indemnification Deductible,
provided
, that the Indemnification Deductible shall not apply with respect to Losses arising under
Section 11.2(a)(i)
with respect to a breach of a Fundamental Representation by Seller or the Company.
(e)
The maximum amount that Seller shall be required to pay pursuant to clauses (i) and (ii) of
Section 11.2(a)
in respect of all Claims and Losses by all Buyer Indemnitees shall equal $2,500,000 (the “
Indemnification Cap
”), after which point Seller will have no Obligation to indemnify the Buyer Indemnitees from and against further such Claims and Losses;
provided
,
however
, that with respect to a breach of a Fundamental Representation made by Seller or the Company, the maximum amount of Losses that Buyer will be able to recover from Seller pursuant to
Section 11.2(a)(i)
shall not be limited by the Indemnification Cap but shall be limited to an amount not to exceed the Base Amount. In addition, Seller shall have as an affirmative defense to any claim for indemnity under
Section 11.2(a)(i)
arising out of or related to a breach of any representation or warranty of Seller or the Company that Buyer had Knowledge of such breach on or prior to the Closing Date and Buyer failed to deliver a Breach Notice in accordance with
Section 6.4
.
(f)
Amounts paid by Seller that are counted against or applied toward the Indemnification Deductible or the Indemnification Cap shall not count against and be applied toward the Environmental Deductible and the Indemnification Cap (as such terms are defined in the Environmental Agreement) and
vice versa
, amounts paid by Seller that are counted against or applied toward the Environmental Deductible or the Environmental Cap shall not count against and be applied toward the Indemnification Deductible and the Indemnification Cap.
(g)
Seller’s indemnification obligations pursuant to this Agreement shall be reduced in the event and to the extent amounts for such indemnified obligations are taken into account as a liability for purposes of the Final Net Working Capital.
Section 11.3
Indemnification Provisions for the Benefit of Seller
.
(a)
If the Closing occurs and subject to the other provisions of this
Article XI
, Buyer agrees to indemnify, defend, save and hold the Seller Indemnitees harmless from and against any Claims and Losses actually suffered or incurred by them to the extent arising out of or related to:
(i)
the breach of any representation or warranty of Buyer contained in this Agreement when made or at and as of the Closing Date (or at and as of such different date or period specified for such representation or warranty) as though such representation and warranty were made at and as of the Closing Date (or such different date or period);
(ii)
the breach of any covenants or agreements of Buyer contained in this Agreement (other than with respect to employees and employee benefits, Taxes, Multi-Site Contracts, Earnout Payments and Startup Activities, which are covered by clauses (v) through (ix) below, respectively);
(iii)
the Company Assumed Liabilities;
(iv)
the ownership of the TH Interest, the Company, the Acquired Subsidiary, or the Assets after the Effective Time, or the operation of the Business after the Effective Time (in each case excluding the Excluded Assets and the Retained Liabilities and to the extent such Losses are not indemnifiable by Seller pursuant to
Section 11.2
);
(v)
any Obligations of Buyer with respect to employees and employee benefits as provided in
Section 7.1
through
Section 7.7
;
(vi)
(A) the breach of any covenants or agreements of Buyer (or any Affiliate of Buyer, which includes the Companies post-Closing) with respect to Taxes contained in this Agreement, or (B) any Obligations of Buyer (or any Affiliate of Buyer, which includes the Companies post-Closing) with respect to Taxes which are the responsibility of Buyer (or any Affiliate of Buyer, which includes the Companies post-Closing) as provided in
Section 7.10
;
(vii)
any Obligations of Buyer with respect to Multi-Site Contracts as provided in
Section 7.13
;
(viii)
any Obligations of Buyer with respect to Earnout Payments as provided in
Section 2.8
;
(ix)
any Obligations of Buyer with respect to Undelivered Refinery Inventory (including Feedstock Inventory) and Committed Refinery Inventory as provided in
Section 2.11
and
Section 2.12
.
(x)
any Obligations of Buyer with respect to Refinery Turnaround and Startup Activities as provided in
Section 6.1
.
Notwithstanding anything in this Agreement to the contrary, all Claims and Losses of the Seller Indemnitees arising under or related to Environmental Laws (including Third-Party Claims arising under or related to Environmental Laws) shall be governed by the Environmental Agreement and not this Agreement.
(b)
No Claim may be asserted nor may any Proceeding be commenced against Buyer pursuant to this
Section 11.3
unless written notice of such Claim or Proceeding is received by Buyer describing in reasonable detail the facts and circumstances with respect to the subject matter of such Claim or Proceeding, and with respect to Claims or Proceedings based on the breach of representation or warranty, on or prior to the date such representation or warranty ceases to survive as set forth in
Section 11.1
. If a Seller Indemnitee has recovered any Losses pursuant to one subsection of
Section 11.3(a)
, such Seller Indemnitee shall not be entitled to recover the same Losses under another subsection of
Section 11.3(a)
. Seller and Buyer acknowledge and agree that, with respect to any failure by Buyer to comply with its Obligations with respect to Post-Closing Employees as set forth in
Section 7.1
through
Section 7.7
, Seller shall be entitled to specific performance of such Obligations by Buyer and immediate injunctive relief, without the necessity of proving the inadequacy of money damages as a remedy.
(c)
No Claim may be made against Buyer for indemnification pursuant to clauses (i) or (ii) of
Section 11.3(a)
: (i) with respect to any individual action, occurrence or event subject to the indemnifications thereunder (or group of related actions, occurrences or events), except for Claims relating to the breach of a Fundamental Representation, unless the aggregate Claims and Losses of Seller Indemnitees with respect thereto exceeds $10,000 (nor shall any Claim or Loss below such threshold be applied to or considered for purposes of calculating the aggregate amount of Seller Indemnitees’ Losses) and (ii) unless the aggregate amount of all Claims and Losses of Seller Indemnitees with respect to clauses (i) and (ii) of
Section 11.3(a)
shall exceed the Indemnification Deductible (after which Buyer shall be obligated only to indemnify Seller Indemnitees from and against aggregate Losses in excess of the Indemnification Deductible),
provided
, that the Indemnification Deductible shall not apply with respect to Losses arising under
Section 11.3(a)(i)
with respect to a breach of a Fundamental Representation by Buyer. The maximum amount that Buyer shall be required to pay pursuant to clauses (i) and (ii) of
Section 11.3(a)
in respect of all Claims and Losses by all Seller Indemnitees shall equal the Indemnification Cap, after which point Buyer will have no Obligation to indemnify Seller Indemnitees from and against further such Claims or Losses;
provided
,
however
, that with respect to a breach of a Fundamental Representation made by Buyer, the maximum amount of Losses that Seller will be able to recover from Buyer pursuant to
Section 11.3(a)(i)
shall not be limited by the Indemnification Cap but shall be limited to an amount not to exceed the Base Amount. Notwithstanding the preceding sentences to the contrary, the provisions of this
Section 11.3(c)
shall
not
apply to the indemnification Obligations of Buyer set forth in
Section 2.12
,
Section 6.6
,
Section 6.8
,
Section 7.7
,
Section 7.9
,
Section 7.13
, and
Section 7.18
. Additionally, for the avoidance of doubt, any Claims or Losses to be paid by Buyer pursuant to
Section 11.3(a)(iii)
through
Section 11.3(a)(vii)
are
not
subject to the limitations of this
Section 11.3(c)
.
Section 11.4
Indemnification Procedures; Matters Involving Third Parties
.
(a)
A Seller Indemnitee or Buyer Indemnitee, as the case may be (for purposes of this
Section 11.4
, an “
Indemnified Party
”), shall give the indemnifying party under
Section 11.2
and
Section 11.3
, as applicable (for purposes of this
Section 11.4
, an “
Indemnifying Party
”), prompt written notice of any matter which it has determined has given or could give rise to a right of indemnification under this Agreement stating the nature of the Claim and an estimated or actual amount of the Loss, if known, and method of computation thereof, containing a reference to the provisions of this Agreement in respect of which such right of indemnification is claimed or arises;
provided, however
, that the failure to provide such notice shall not release the Indemnifying Party from its Obligations under this
Article XI
except to the extent, and only to the extent, the Indemnifying Party is prejudiced by such failure or to the extent the survival period, if applicable, expires pursuant to
Section 11.1
prior to the giving of such notice.
(b)
If any third party shall notify an Indemnified Party with respect to any matter (a “
Third-Party Claim
”) that may give rise to a claim for indemnification against the Indemnifying Party under this
Article XI
, then the Indemnified Party shall promptly (and in any event within twenty (20) days after receiving notice of the Third-Party Claim) notify the Indemnifying Party thereof in writing;
provided, however
, that the failure to provide such notice shall not release the Indemnifying Party from its Obligations under this
Article XI
except to the extent, and only to the extent, the Indemnifying Party is prejudiced by such failure.
(c)
The Indemnifying Party shall have the right to participate in, or by giving written notice to the Indemnified Party, to assume and thereafter conduct the defense of any Third-Party Claim at the Indemnifying Party’s expense and by the Indemnifying Party’s own counsel, and the Indemnified Party shall cooperate in good faith in such defense. In the event that the Indemnifying Party assumes the defense of any Third-Party Claim, subject to
Section 11.4(d)
, it shall have the right to take such action as it deems necessary to avoid, dispute, defend, appeal or make counterclaims pertaining to any such Third-Party Claim in the name and on behalf of the Indemnified Party. The Indemnified Party shall have the right to participate in the defense of any Third-Party Claim with counsel selected by it subject to the Indemnifying Party’s right to control the defense thereof. The fees and disbursements of such counsel shall be at the expense of the Indemnified Party. The Parties shall cooperate in a manner to preserve in full (to the extent possible) the attorney-client and work-product privileges.
(d)
The Indemnifying Party will not consent to the entry of any judgment or enter into any settlement with respect to the Third-Party Claim without the prior written consent of the Indemnified Party unless the judgment or proposed settlement (i) involves only the payment of money damages and does not impose an injunction or other equitable relief upon the Indemnified Party or would not reasonably be expected to have a material adverse effect on the Indemnified Party and (ii) includes as an unconditional term thereof the giving by the claimant or the plaintiff to the Indemnified Party a complete release from all liability in respect of such Third-Party Claim and does not involve any admission of wrongdoing by the Indemnified Party or any of its Affiliates.
(e)
Unless and until the Indemnifying Party assumes the defense of the Third Party Claim as provided in
Section 11.4(c)
, the Indemnified Party may defend against the Third- Party Claim in any manner it may reasonably deem appropriate.
(f)
In no event will the Indemnified Party consent to the entry of any judgment or enter into any settlement with respect to the Third-Party Claim without the prior written consent of the Indemnifying Party (not to be unreasonably withheld).
(g)
If a claim for indemnification against the Indemnifying Party under this
Article XI
does not relate to a Third-Party Claim (a “
Direct Claim
”), the Indemnifying Party shall have thirty (30) days after its receipt of notice to respond in writing to such Direct Claim. If the Indemnifying Party does not so respond within such thirty (30) day period, the Indemnifying Party shall be deemed to have rejected such claim, in which case the Indemnified Party shall be free to pursue such remedies as may be available to the Indemnified Party on the terms and subject to the provisions of this Agreement with respect to the Losses specified in such notice.
(h)
The provisions of
Section 11.4(b)
through
(g)
shall not apply to Third Party Claims pertaining to Taxes.
Section 11.5
Determination of Losses
.
(a)
The Losses giving rise to any indemnification Obligation hereunder shall be reduced by any insurance proceeds actually received by the Indemnified Party as a result of the events giving rise to the claim for indemnification, net of any expenses related to the receipt of such proceeds, including retrospective premium adjustments, if any. The amount of the indemnity payment shall be computed by taking into account the timing of the loss or payment, as applicable, at the Applicable Rate from the date the Indemnified Party provides notice of the Loss to the Indemnifying Party until the date paid. Upon the request of the Indemnifying Party, the Indemnified Party shall provide the Indemnifying Party with information sufficient to allow the Indemnifying Party to calculate the amount of the indemnity payment in accordance with this
Section 11.5
.
(b)
An Indemnified Party shall take all reasonable steps to mitigate damages in respect of any claim for which it is seeking indemnification and shall use reasonable efforts to avoid any costs or expenses associated with such claim and, if such costs and expenses cannot be avoided, to minimize the amount thereof;
provided
, that an Indemnified Party shall have no Obligation to make a claim for recovery against any insurer of such Indemnified Party with respect to any such Losses.
(c)
For purposes of determining whether a breach has occurred and calculating a Loss in connection with a claim for indemnification under this
Article XI
, each of the representations and warranties that contains any qualifications as to materiality or “Material Adverse Effect” will be determined with regard to such materiality or “Material Adverse Effect” qualifier contained in the terms of such representation and warranty;
provided, however
, that if the representation or warranty is breached (after taking into consideration such materiality or “Material Adverse Effect” qualifier) then the amount of Losses arising out of such breach will be determined without regards to such materiality or “Material Adverse Effect” qualifier.
Section 11.6
No Multiple Recoveries
. Any liability for indemnification hereunder shall be determined without duplication of recovery by reason of the state of facts giving rise to such liability constituting a breach of more than one representation, warranty or covenant.
Section 11.7
Limitations on Liability/Exclusive Remedies
.
(a)
BUYER ACKNOWLEDGES AND AGREES THAT, EXCEPT FOR ACTUAL FRAUD, INTENTIONAL MISREPRESENTATION AND INTENTIONAL BREACH, THE REMEDIES SET FORTH IN
ARTICLE VII
,
ARTICLE X
, THIS
ARTICLE XI
(INCLUDING THE LIABILITY LIMITS AND SURVIVAL PERIODS SET FORTH ABOVE AND SUBJECT TO THE DISCLAIMERS SET FORTH IN
SECTION 6.7
AND
SECTION 6.8
) AND THE ENVIRONMENTAL AGREEMENT, ARE INTENDED TO BE, AND SHALL BE, THE SOLE AND EXCLUSIVE REMEDIES OF THE BUYER INDEMNITEES WITH RESPECT TO ANY ASPECT OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. IF THE CLOSING OCCURS, EXCEPT FOR THE REMEDIES SET FORTH IN
ARTICLE VII
,
ARTICLE X
, AND THIS
ARTICLE XI
, BUYER HEREBY IRREVOCABLY WAIVES, DISCHARGES AND RELEASES (ON BEHALF OF ITSELF AND THE OTHER BUYER INDEMNITEES), TO THE FULLEST EXTENT PERMITTED BY LAW, ANY AND ALL OTHER CLAIMS, OBLIGATIONS AND LOSSES (INCLUDING RIGHTS OF CONTRIBUTION, IF ANY) WHICH EXIST OR MAY ARISE IN THE FUTURE, THAT THE BUYER INDEMNITEES MAY HAVE AGAINST SELLER OR ITS AFFILIATES, AS THE CASE MAY BE, ARISING UNDER OR BASED UPON ANY LAW (INCLUDING ANY SUCH LAW RELATING TO ENVIRONMENTAL LAW OR ARISING UNDER OR BASED UPON ANY SECURITIES LAW, COMMON OR CIVIL LAW OR OTHERWISE) THAT ARE ATTRIBUTABLE TO OR RELATED TO THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, THE
BUSINESS, THE ASSETS, THE TH INTEREST, THE COMPANY OR THE ACQUIRED SUBSIDIARY.
(b)
SELLER ACKNOWLEDGES AND AGREES THAT, EXCEPT FOR ACTUAL FRAUD, INTENTIONAL MISREPRESENTATION AND INTENTIONAL BREACH, THE REMEDIES SET FORTH IN
ARTICLE VII
,
ARTICLE X
, THIS
ARTICLE XI
(INCLUDING THE LIABILITY LIMITS AND SURVIVAL PERIODS SET FORTH ABOVE) AND THE ENVIRONMENTAL AGREEMENT, ARE INTENDED TO BE, AND SHALL BE, THE SOLE AND EXCLUSIVE REMEDIES OF THE SELLER INDEMNITEES WITH RESPECT TO ANY ASPECT OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.
(c)
NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THIS AGREEMENT OR THE ENVIRONMENTAL AGREEMENT, NO PARTY HERETO SHALL BE ENTITLED TO RECOVER FROM ANY OTHER PARTY HERETO OR ANY OF SUCH PARTY’S AFFILIATES ANY AMOUNT IN RESPECT OF EXEMPLARY, PUNITIVE, SPECIAL, INDIRECT OR CONSEQUENTIAL DAMAGES, INCLUDING LOST PROFITS;
EXCEPT
,
HOWEVER
, WITH RESPECT TO ANY OF THE FOREGOING PAID OR OWING TO A THIRD PARTY WITH RESPECT TO A THIRD PARTY CLAIM, WHICH DAMAGES SHALL BE CONSIDERED PART OF LOSSES AND SHALL BE COVERED BY THE INDEMNIFICATIONS SET FORTH IN THIS
ARTICLE XI
AND THE ENVIRONMENTAL AGREEMENT, AS APPLICABLE.
(d)
ALL RELEASES, DISCLAIMERS, LIMITATIONS ON LIABILITY AND INDEMNITIES IN THIS AGREEMENT AND THE ENVIRONMENTAL AGREEMENT, INCLUDING THOSE IN THIS
ARTICLE XI
, SHALL APPLY EVEN IN THE EVENT OF THE SOLE, JOINT OR CONCURRENT, ACTIVE OR PASSIVE NEGLIGENCE, STRICT LIABILITY OR FAULT OF THE PARTY WHOSE LIABILITY IS RELEASED, DISCLAIMED, LIMITED OR INDEMNIFIED.
Section 11.8
Governing Law
. This Agreement shall be construed (both as to validity and performance), interpreted and enforced in accordance with, and governed by, the Laws of the State of Texas, without regard to conflicts of laws rules or principles as applied in Texas.
Section 11.9
Jurisdiction; Consent to Service of Process; Waiver
. Each of the Parties agrees that it shall bring any Proceeding in respect of any claim arising out of or related to this Agreement, whether in tort or contract or at law or in equity, exclusively in any Federal or state court in Harris County, Texas and solely in connection with claims arising under such agreement or instrument or the transactions contained in or contemplated by such agreement or instrument, (i) irrevocably submits to the exclusive jurisdiction of such courts, (ii) waives any objection to laying venue in any such Proceeding in such courts, (iii) waives any objection that such courts are an inconvenient forum or do not have jurisdiction over it and (iv) agrees that service of process upon it may be effected by mailing a copy thereof by registered or certified mail (or any substantially similar form of mail), postage prepaid, to it at its address specified in
Section 12.2
. The foregoing consents to jurisdiction and service of process shall not constitute general consents to service of process in the State of Texas for any purpose except as provided herein and shall not be deemed to confer rights on any Person other than the Parties.
EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY DISPUTE IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE RELATED AGREEMENTS OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT: (i) NO REPRESENTATIVE,
AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER; (ii) EACH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER; (iii) EACH PARTY MAKES THIS WAIVER VOLUNTARILY; AND (iv) EACH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS
Section 11.9
.
ARTICLE XII
MISCELLANEOUS
Section 12.1
Amendment
. This Agreement (including this
Section 12.1
) may not be amended except by an instrument in writing executed and delivered by the Parties. The failure of any Party at any time or times to require performance of any provision hereof shall in no manner affect the right at a later time to enforce the same. No waiver by any Party of any condition, or of any breach of any term, covenant, representation or warranty contained in this Agreement, in any one or more instances, shall be deemed to be or construed as a further or continuing waiver of any such condition or breach or a waiver of any other condition or of any breach of any other term, covenant, representation or warranty. No course of dealing between or among any Persons having any interest in this Agreement shall be deemed effective to modify, amend or discharge any part of this Agreement or any rights or obligations of any Person under or by reason of this Agreement.
Section 12.2
Notices
. All notices and other communications that are required to be or may be given pursuant to this Agreement shall be in writing and shall be deemed to have been duly given if delivered in person or by courier or mailed by registered or certified mail (postage prepaid, return receipt requested) or by a national overnight delivery service to the relevant Party at the following addresses or sent by facsimile (with transmission confirmation) to the following numbers:
If to Seller or to the Company (prior to the Closing for the Company), to
:
Tesoro Corporation
19100 Ridgewood Parkway
San Antonio, Texas 78259
Attention: Executive Vice President and General Counsel
Fax: (210) 745-4659
with a copy to (which shall not constitute notice)
:
Norton Rose Fulbright
1301 McKinney, Suite 5100
Houston, Texas 77010
Attention: Daniel L. Mark
Fax: (713) 651-5246
If to Buyer or to the Company (after the Closing for the Company), to
:
Par Petroleum Corporation
1301 McKinney, Suite 2025
Houston, Texas 77010
Attention: Chief Financial Officer
Fax: (713) 650-0502
with a copy to (which shall not constitute notice)
:
Porter Hedges LLP
1000 Main, 36th Floor
Houston, Texas 77002
Attention: E. James Cowen
Fax: (713) 228-1331
or to such other address or facsimile number as any party may, from time to time, designate in a written notice given in accordance with this
Section 12.2
. Any such notice or communication shall be effective (i) if delivered in person or by courier, upon actual receipt by or on behalf of the intended recipient, (ii) if sent by facsimile transmission, upon actual receipt if received during the recipient’s normal business hours, or at the beginning of the recipient’s next Business Day after receipt if not received during recipient’s normal business hours, or (iii) if mailed in accordance with the foregoing provisions, upon the earlier of the third (3
rd
) Business Day after deposit in the mail or the date of delivery as shown by the return receipt therefor.
Section 12.3
Public Announcements
. No Party shall issue or make any press releases or similar public announcements concerning the transactions contemplated hereby or by the Related Agreements without the written consent of Buyer and Seller (which consent shall not be unreasonably withheld, conditioned or delayed), except as may be required by Law or the rules or regulations of any applicable United States securities exchange or Governmental Authority to which the relevant Party is subject, wherever situated. In the event that a Party believes it is required to issue or make any press release or public announcement, such Party shall (a) give prompt notice thereof to the other Parties, (b) allow such other Parties reasonable opportunity to review and provide comments with respect to the content of such press release or public announcement and (c) use Commercially Reasonable Efforts to incorporate any reasonable comment from any other Party prior to any release or public announcement.
Section 12.4
Expenses
. Except as otherwise expressly provided herein, all costs and expenses incurred by Seller or its Affiliates in connection with this Agreement and the transactions contemplated hereby shall be paid by Seller, and all costs and expenses incurred by Buyer or its Affiliates in connection with this Agreement and the transactions contemplated hereby shall be paid by Buyer. For the avoidance of doubt, in the event Buyer elects to obtain title insurance based upon the Title Commitments then all costs and expenses related to such title insurance shall be paid by Buyer.
Section 12.5
Headings
. The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.
Section 12.6
No Strict Construction
. The Parties acknowledge that each of them has been represented by counsel in connection with this Agreement and the transactions contemplated hereby. Notwithstanding the fact that this Agreement has been drafted or prepared by one of the Parties, the
Parties confirm that they and their respective counsel have reviewed, negotiated and adopted this Agreement as the joint agreement and understanding of the Parties, and the language used in this Agreement shall be deemed to be the language chosen by the Parties to express their mutual intent, and no rule of strict construction shall be applied against any Person and any rule of Law that would require interpretation of any claimed ambiguities in this Agreement against the Party that drafted it has no application and is expressly waived.
Section 12.7
Severability
. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of Law or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect, and the invalid, illegal or unenforceable provision shall be reformed to the minimum extent required to render such provision valid, legal and enforceable and in a manner so as to preserve the economic and legal substance of the transactions contemplated hereby to the fullest extent permitted by Law. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the Parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the Parties as closely as possible in an acceptable manner to the end that transactions contemplated hereby are fulfilled to the extent possible.
Section 12.8
Assignment
. This Agreement shall not be assigned by any Party (including by operation of Law or otherwise) except with the prior written consent of the other Parties. Any purported assignment of this Agreement in violation of this
Section 12.8
shall be null and void.
Section 12.9
Parties in Interest
. This Agreement shall be binding upon and inure solely to the benefit of each Party and its permitted successors and assigns, and nothing in this Agreement, express or implied, is intended to or shall confer upon any other Person any right, benefit or remedy of any nature whatsoever under or by reason of this Agreement; except, that the Seller Indemnitees and the Buyer Indemnitees shall be third party beneficiaries of the indemnifications provided for in
Article XI
.
Section 12.10
Failure or Indulgence Not Waiver
. No failure or delay on the part of any Party in the exercise of any right hereunder shall impair such right or be construed to be a waiver of, or acquiescence in, any breach of any representation, warranty, covenant or agreement herein, nor shall any single or partial exercise of any such right preclude other or further exercise thereof or of any other right.
Section 12.11
Disclosure Schedules
. Any matter disclosed by Seller in the Disclosure Schedules pursuant to any Section of this Agreement shall be deemed to have been disclosed by Seller for purposes of each other Section of this Agreement to which such disclosure is relevant as and to the extent that the relevance of such matter to such other Section is readily apparent on the face of such disclosure. The listing (or inclusion of a copy) of a document or other item in the Disclosure Schedules shall be adequate to disclose an exception to a representation or warranty made herein if the nature and relevance of such exception is readily apparent from the listing (or inclusion of a copy) of such document.
Section 12.12
Time of the Essence
. Time is of the essence in this Agreement. If the date specified in this Agreement for giving any notice or taking any action is not a Business Day (or if the period during which any notice is required to be given or any action taken expires on a date which is not a Business Day), then the date for giving such notice or taking such action (and the expiration date of such period during which notice is required to be given or action taken) shall be the next day which is a Business Day.
Section 12.13
Entire Agreement
. This Agreement and the Related Agreements (together with the Exhibits, the Disclosure Schedules and the other Schedules hereto and thereto) constitute the entire agreement of the parties hereto and thereto, and supersede all prior agreements and undertakings, both
written and oral, among the Parties, with respect to the subject matter hereof (other than the Confidentiality Agreement, which shall continue in full force and effect).
Section 12.14
Confidentiality
. For a period of three (3) years following the Closing Date, Seller shall, and shall cause its Affiliates to, hold, and shall use Commercially Reasonable Efforts to cause its or their respective representatives to hold, in confidence any and all information, whether written or oral, that primarily relates to the Companies or the Business, except to the extent that Seller can show that such information (a) is generally available to or known by the public through no fault of Seller, any of its Affiliates or their respective representatives; or (b) is lawfully acquired by Seller, any of its Affiliates or their respective representatives from and after the Closing from sources which are not prohibited, to Seller’s Knowledge, from disclosing such information by a legal, contractual or fiduciary obligation. If Seller or any of its Affiliates or their respective representatives are compelled to disclose any such information by judicial or administrative process or by other requirements of Law, Seller shall promptly notify Buyer in writing and shall disclose only that portion of such information which Seller is advised by its counsel in writing is legally required to be disclosed.
Section 12.15
Specific Performance
. Each Party acknowledges that the breach of this Agreement by the other Parties would cause irreparable damage to such Party and that money damages or other legal remedies would not be an adequate remedy for any such damages. Therefore, the Obligations of each Party under this Agreement, including Seller’s obligation to sell the TH Interest to Buyer and Buyer’s obligation to purchase the TH Interest from Seller, shall be enforceable by a decree of specific performance and appropriate injunctive relief may be applied for and granted in connection therewith, without the requirement to post any bond or security in connection therewith. Such remedies shall, however, be cumulative and not exclusive and shall be in addition to any other remedies which any Party may have under this Agreement or otherwise.
Section 12.16
Counterparts
. This Agreement may be executed in multiple counterparts and by the different Parties in separate counterparts, each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same agreement. Signed counterparts of this Agreement may be delivered by facsimile and by scanned pdf image;
provided
that each Party uses Commercially Reasonable Efforts to deliver to each other Party original signed counterparts as soon as possible thereafter.
Balance of page intentionally left blank
IN WITNESS WHEREOF, each of the Parties has caused this Agreement to be executed as of the date first written above by their respective officers thereunto duly authorized.
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TESORO CORPORATION
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By:
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/s/ GREGORY J. GOFF
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Gregory J. Goff,
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President and Chief Executive Officer
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HAWAII PACIFIC ENERGY, LLC
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by PAR PETROLEUM CORPORATION, as its
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sole member
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By:
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/s/ R. SETH BULLOCK
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R. Seth Bullock,
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Chief Financial Officer
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For the limited purpose of agreeing to be bound by
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the provisions of
Section 2.8
,
Section 2.9
,
Section
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6.15
,
Article IV
and
Article VII
to the extent
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applicable to the Company:
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TESORO HAWAII, LLC
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By:
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/s/ DANIEL R. ROMASKO
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Daniel R. Romasko,
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Executive Vice President, Operations
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Membership Interest Purchase Agreement
EXHIBIT C
ENVIRONMENTAL AGREEMENT
THIS ENVIRONMENTAL AGREEMENT (this “
Environmental Agreement
”) is entered into as of [_________________], 2013 (the “
Execution Date
”), by and among
TESORO CORPORATION,
a Delaware corporation (“
Seller
”),
HAWAII PACIFIC ENERGY, LLC
, a Delaware limited liability company (“
Buyer
”), and
TESORO HAWAII, LLC,
a Hawaii limited liability company (the “
Company
”). Seller, Buyer and the Company may be referred to herein individually as a “
Party
,” and collectively as the “
Parties
.”
W I T N E S S E T H:
WHEREAS
, the Parties have entered into that certain Membership Interest Purchase Agreement dated June 17, 2013 for the sale of all of the issued and outstanding units representing membership interests in the Company (as such agreement may hereafter be amended, restated, supplemented or otherwise revised) (the “
Purchase Agreement
”); and,
WHEREAS
, in connection with the Closing, the Parties have agreed to enter into this Environmental Agreement in relation to their respective obligations arising under Environmental Laws and certain matters relating thereto.
NOW, THEREFORE
, in consideration of the mutual promises made herein and for other good and valuable consideration, the receipt and sufficiency of which is hereby expressly acknowledged, and subject to the conditions hereinafter set forth, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS AND INTERPRETATIONS
1.01
Definitions; Usage
. Unless the context shall otherwise require, capitalized terms used and not defined herein shall have the meanings assigned thereto in the Purchase Agreement and all rules as to interpretation and usage set forth therein shall apply hereto except that all references herein to Articles, Sections, Exhibits and Schedules are to Articles and Sections of and Exhibits and Schedules attached to and forming part of this Environmental Agreement, unless the contrary is specifically stated. As used in this Environmental Agreement, the following terms shall have the meanings set forth below, unless the context otherwise requires:
“
Acceptable Corrective Action Method
” means the minimum method using a demonstrated and acceptable technology or techniques to Remediate at the minimum required expense allowable under, and which satisfies the requirements of, all Environmental Laws in effect and as interpreted as of the Closing Date for the type of property affected consistent with its use on the Closing Date (i.e., industrial). For the avoidance of doubt, Acceptable Corrective Action Method may include (a) risk assessment or risk reduction principles or programs, (b) natural attenuation of contamination in appropriate circumstances, (c) capping in place, or (d) acceptance of perpetual land use or institutional use restrictions or engineering controls.
“
Acquired Subsidiary
” means Smiley’s Super Service, Inc., a Hawaii corporation.
“
Asbestos
” means any asbestos containing material, the management, maintenance, removal, abatement or disposal of which is regulated under Environmental Laws.
“
BHP Environmental Agreement
” means that certain Environmental Agreement dated as of May 29, 1998, by and among BHP Hawaii Inc., BHP Petroleum Pacific Islands Inc., and Tesoro Petroleum Corporation.
“
BHP Hawaii
” means BHP Hawaii Inc. and its successors and assigns.
“
BHP Pacific
” means BHP Petroleum Pacific Islands Inc. and its successors and assigns.
“
Breach Notice
” has the meaning set forth in
Section 2.02
.
“
Buyer
” has the meaning given such term in the preamble of this Environmental Agreement.
“
Capital Projects
” has the meaning given such term in
Section 3.03(c)
.
“
Change in Control
” means, and shall be deemed to have occurred upon one or more of the following events:
(A) any transaction, or series of related transactions, that results or would result in the transfer of fifty percent (50%) or more of the Equity Interests in Buyer or its subsidiaries (or fifty percent (50%) or more of the Equity Interest in any business entity that owns or controls, directly or indirectly, fifty percent (50%) or more of the Equity Interests of Buyer (the “
Buyer Parent
”)) to a single transferee or multiple transferees under common control (other than transferred to the Buyer Parent or any of its subsidiaries but in such event the Buyer Parent or such subsidiary shall thereafter be subject to the definition of Change in Control);
(B) any transaction that would result in the Company or its subsidiaries (or Buyer or the Buyer Parent) merging, directly or indirectly, with one or more other entities,
provided
, that a merger as a result of which the holders of Equity Interests of the Company, such subsidiary or Buyer or the Buyer Parent, as applicable, immediately prior to such merger possess fifty percent (50%) or more of the voting power, directly or indirectly, of the business entity surviving such merger (or other business entity which is the issuer of the Equity Interest into which the Equity Interest of the Company, such subsidiary or Buyer or the Buyer Parent, as applicable, is converted or exchanged in such merger) shall not be treated as a Change in Control but such surviving entity shall thereafter be subject to the definition of Change in Control; or
(C) any transaction (or series of related transactions) not in the ordinary course of business of the Company, its subsidiaries, Buyer or the Buyer Parent that results in the direct or indirect sale, purchase or other transfer or exchange of assets, including manufacturing facilities and ownership interests in other business entities, representing fifty percent (50%) or more of the fair market value of the assets of Buyer and its subsidiaries, on a consolidated basis, to any Person other than the Buyer Parent or any of its subsidiaries but in such event the Buyer Parent or such subsidiary shall thereafter be subject to the definition of Change in Control.
“
Claim
” means any demand, claim, complaint, notice of violation or any other assertion of an Obligation, whether written or oral, for any Loss, specific performance, injunctive relief, remediation or other equitable relief whether or not ultimately determined to be valid.
“
Closure
” means achieving compliance with the commercial and industrial cleanup standards established by the applicable Governmental Authority such that the Refinery and the other Assets may be used to the same extent as Seller has operated them on a recent historical basis prior to the Closing Date. Compliance shall be established by (i) receipt of a “No Further Action Letter” or similar communication from the applicable Governmental Authority that no further action is required or that the action taken by Seller has been completed (a “
Closure Letter
”); (ii) except for the Refinery Groundwater Remediation, three (3) years after the date Seller has submitted written notice and supporting documentation to such applicable Governmental Authority indicating that Seller considers its action to be complete and in compliance with all applicable Environmental Laws in effect and as interpreted as of the Closing Date (provided that the Governmental Authority has failed to respond during such period and that no adverse status changes attributable solely to Seller occur during the three-year period, which changes would materially alter the conclusion that the action was complete and compliant with Environmental Laws in effect and as interpreted as of the Closing Date); or (iii) except for the Refinery Groundwater Remediation, five (5) years following the date that the applicable Government Authority directs Seller to “monitor only" at the particular location, regardless of whether Seller has submitted a written notice described in subparagraph (ii) above;
provided, however
the time period will terminate after three (3) years if levels of all Hazardous Materials remain constant or are showing a negative downward trend over such three (3) year time period.
“
Company
” has the meaning given such term in the preamble of this Environmental Agreement.
“
Company Assumption
” has the meaning given such term in
Section 4.01(a)
.
“
Company Environmental Liabilities
” means any and all Orders, Claims, Losses or Obligations, including required capital expenditures, arising from or related to Environmental Laws or the Hawaii Consent Decree, whether known or unknown, of the Companies or the Business, whether arising before or after the Closing, including those related to Third Party Claims, actual or threatened Releases of Hazardous Materials, off-site treatment, storage, recycling, or disposal and off-site migrations of Hazardous Materials or any fine, penalty or other cost assessed in connection with any alleged or actual violation(s) of Environmental Laws.
“
Companies
” means the Company and the Acquired Subsidiary.
“
Construction Activity
” has the meaning set forth in
Section 4.01(d)
.
“
Corrective Action
” means all Remediation Activities, whether undertaken pursuant to judicial or administrative Order or otherwise, reasonably necessary to comply with applicable Environmental Laws in effect and as interpreted as of the Closing Date to investigate, monitor and, if required, clean up, remove, treat, cover and protect from human or environmental exposure.
“
De Minimis Amount
” has the meaning given such term in
Section 5.02(c)
.
“
Environmental Authorization
” means any Authorization of any applicable Governmental Authority required by Environmental Laws in effect and as interpreted as of the Closing Date for the ownership, operation or use of the Assets as they are operated by the Company as of the Closing Date.
“
Environmental Cap
” has the meaning given such term in
Section 5.02(e)
.
“
Environmental Claim
” shall mean any administrative, regulatory or judicial action, suit, Order, demand, directive, claim, lien, governmental investigation, proceeding or written or oral notice of noncompliance or violation by or from any Person alleging liability of whatever kind or nature (including
liability or responsibility for the costs of enforcement proceedings, Corrective Action, governmental response, natural resources damages, property damages, personal injuries, medical monitoring, penalties, contribution, indemnification and injunctive relief) arising out of, based on or resulting from (i) the presence or Release of, or exposure to, any Hazardous Materials; or (ii) the failure to comply with any Environmental Laws in effect and as interpreted as of the Closing Date.
“
Environmental Condition
” means any condition at, on, under, within or migrating from any tangible Assets, in each case arising out of the presence or Release of any Hazardous Materials on, at or underlying the Real Property Interests or the Pipeline ROW Interests.
“
Environmental Deductible
” has the meaning given such term in
Section 5.02(d)
.
“
Environmental Law
” means any Law pertaining to public or employee exposure to Hazardous Materials, pollution, the environment or the protection of fish, wildlife or natural resources. For the avoidance of doubt, due to the inclusion of the word “applicable” in the definition of “Law” incorporated into this definition, any references in this Environmental Agreement to “any Environmental Law” or “any applicable Environmental Law” shall have the same meaning.
“
Environmental Testing
” means any environmental site assessment, test, inspection or investigation of the Assets that could reasonably be expected to lead to the discovery, investigation or assessment of an Environmental Condition.
“
EPA Attestations
” means the procedures applicable to the Refinery described in 40 CFR § 80.
“
Hawaii Consent Decree
” has the meaning given such term in
Section 3.03(a)
.
“
Hazardous Materials
” means (i) any chemicals, materials or substances in any form, whether solid, liquid, gaseous, semisolid, or any combination thereof, whether waste materials, raw materials, chemicals, finished products, by-products, degradation products or any other materials or articles, which are listed, defined or otherwise designated as hazardous, toxic or dangerous and as such are regulated under any Environmental Law, including asbestos, and lead-containing paints or coatings, (ii) any petroleum (including crude oil), petroleum derivatives, petroleum products or by-products of petroleum refining or any oxygenate (including degradation products) in any fuel, and (iii) any other chemical, substance or waste that is regulated by any Environmental Law.
“
Indemnified Party
” has the meaning set forth in
Section 5.04
.
“
Indemnifying Party
” has the meaning set forth in
Section 5.04
.
“
Lead-Based Paint
” means any intact paint or other surface coating containing lead or lead-based materials, the application, management, maintenance, removal, abatement or disposal of which is regulated under Environmental Laws.
“
NORM
” has the meaning given such term in
Section 3.01
.
“
Order
” means any order, writ, ruling, decision, verdict, decree, assessment, award (including arbitration awards), judgment, stipulation, injunction, or other determination, decision or finding by, before or under the supervision of any Governmental Authority, including the Hawaii Consent Decree.
“
PCBs
” has the meaning given such term in
Section 3.01
.
“
Pre-Existing Environmental Condition
” means any Environmental Condition (whether known or unknown) at, on, under, or within the Real Property Interests or any Pipeline ROW Interest or any improvements thereon or therein existing as of the Closing Date;
provided, however
, that Pre-Existing Environmental Conditions shall not include Lead-Based Paint, NORM, PCB’s or non-friable Asbestos on or within the buildings or other improvements included in the Assets or migration of Hazardous Materials onto or into the Real Property Interests or any Pipeline ROW from outside sources or locations.
“
Purchase Agreement
” has the meaning given such term in the Recitals of this Environmental Agreement.
“
Refinery Groundwater Remediation
” means the Remediation of groundwater contamination currently being conducted by the Company at the Refinery.
“
Release
” means any spilling, leaking, seeping, pumping, pouring, emitting, emptying, injecting, discharging, escaping, leaching, dumping, disposing or releasing of a Hazardous Material into the environment (including the air, soil, surface water, groundwater, sewer, septic system, or waste treatment, storage, or disposal systems) of any kind whatsoever, including the abandonment or discarding of barrels, containers, tanks or other receptacles containing or previously containing a Hazardous Material.
“
Remediate
,
” “
Remediation
” or “
Remediation Activities
” means testing, investigation, assessment, study, design, monitoring, cleanup, treatment, removal, response, remediation, corrective action, reporting or other similar activities in each case undertaken pursuant to Environmental Laws to address any Environmental Condition or any Release, including any such temporary, interim, emergency or permanent activities involving investigation, study, design, assessment, testing, monitoring, containment, removal, disposal, Closure, corrective action, passive remediation, natural attenuation or bioremediation, the installation and operation of remediation systems, or reporting of released Hazardous Materials to applicable Governmental Authorities.
“
Seller
” has the meaning given such term in the preamble of this Environmental Agreement.
“
Seller Remediation Activities
” has the meaning given such term in
Section 4.01
.
“
Tank Replacements
” has the meaning given such term in
Section 3.04
.
ARTICLE II
SELLER’S ENVIRONMENTAL REPRESENTATIONS AND WARRANTIES
2.01
Representations and Warranties
. Except as set forth in
Schedule 2.01
, Seller represents and warrants to Buyer to Seller’s Knowledge, as follows:
(a) Except as would not reasonably be expected to have a Material Adverse Effect, the Companies, the Business and the Assets are, and for the five (5) years prior to the Execution Date, have been operated in compliance with all applicable Environmental Laws (in each case, as in effect and interpreted at the respective times within such five-year period);
(b) Except as would not reasonably be expected to have a Material Adverse Effect, all Environmental Authorizations required to be obtained, filed or applied for by the Companies under any Environmental Law in connection with the Business or their respective Assets as normally operated prior to the Execution Date have been duly obtained, filed or applied for by the Companies, as applicable, and each of the Companies is and, for the five (5) years prior to the Execution Date, has been in compliance with the terms and conditions of such Environmental Authorizations, as applicable;
(c) Except as would not reasonably be expected to have a material effect, (i) there are no Claims, Proceedings or Orders (including any alleging criminal violations or liability) pending or threatened by or before any Governmental Authority arising under any Environmental Law relating to the Companies, the Assets or the Business, and (ii) neither of the Companies has received written notice of any potential violation of, or liability under, any Environmental Law;
(d) Except as would not reasonably be expected to have a Material Adverse Effect, neither the operations of the Companies nor the operations of the Business prior to the Effective Time has resulted in a Release at concentrations in excess of those allowed for under applicable Environmental Laws or Environmental Authorizations;
(e) Except as would not reasonably be expected to have a Material Adverse Effect, neither of the Companies has assumed by contract any liabilities arising under Environmental Laws of any other Person; and
(f) Seller has prior to the Execution Date provided or made available to Buyer (i) in the Data Room, copies of all material non-privileged environmental site assessments, audits, investigations and studies prepared by third parties that are in the possession, custody or control of Seller or its Affiliates relating to the Companies, the Business, the Assets or properties or assets formerly owned, leased, operated or used by the Companies or the Business, or (ii) by examination of all files in the possession of the Company located at any of its company facilities, copies of material non-privileged environmental site assessments, audits, investigations and studies relating to the Companies, the Business, the Assets or properties or assets formerly owned, leased, operated or used by the Companies or the Business.
2.02
Breach Notice
. If, prior to the Closing Date, Buyer obtains Knowledge of a breach of any of Seller’s representations, warranties or covenants contained in this Environmental Agreement, Buyer shall notify Seller in writing of such information (the “
Breach Notice
”) within three (3) Business Days of such discovery or on the day prior to the Closing Date, whichever is earlier. The Breach Notice shall contain reasonable details regarding the alleged breach and Buyer’s good faith estimate of the potential Losses associated with such breach.
ARTICLE III
ENVIRONMENTAL PROVISIONS
3.01
Incidental Contamination and NORM
. Buyer acknowledges that the Assets may contain
inter alia
Asbestos in pipe coating, undisplaced petroleum hydrocarbon compounds in pipelines, coats of Lead-Based Paints, polychlorinated biphenyls (“
PCBs
”) in transformers or rectifiers, mercury in electrical switches, and Naturally Occurring Radioactive Material (“
NORM
”) in various potential forms. Buyer also expressly understands that special procedures may be required for the Remediation, removal, transportation and disposal of such contained, affixed or attached materials. Notwithstanding any provision to the contrary contained in this Environmental Agreement, Buyer expressly assumes liability for or in connection with the future abandonment and removal of NORM, Lead-Based Paint, undisplaced petroleum hydrocarbon compounds, mercury, Asbestos or PCBs to the extent contained, affixed or attached in or on the Assets;
provided, however,
that nothing in this
Section 3.01
shall in any way affect Seller’s liability for NORM, Lead-Based Paint, petroleum hydrocarbon compounds, mercury, Asbestos or PCBs that have been Released into the environment prior to Closing.
3.02
Reports and Submittals
. For any reports or submittals required by any Governmental Authority that cover periods of both Seller’s and the Company’s ownership or use of the Assets or operation of the Refinery, the Company shall prepare such reports to the extent it is able to do
so, segregated to the extent feasible based on the Closing Date, and send Seller’s portion to Seller for its completion, review, approval and signature (if a separate report from Seller is required by the Governmental Authority or if such report or submittal could reasonably impact Seller’s Obligations under this Environmental Agreement, Seller’s liability under Environmental Laws or Seller’s Obligations to third parties). The Company’s preparation of such report shall not modify, change, alter or diminish any other provision in this Environmental Agreement as applied to the subject matter of such report and the rights, liabilities, responsibilities, obligations and indemnities for any matters contained in such reports shall be as set forth elsewhere herein. Seller agrees to prepare reports responsive to the Hawaii Consent Decree until such time that the Parties agree this should become the Company’s responsibility. Notwithstanding the foregoing, each of Seller and Buyer shall prepare and file the EPA Attestations relating to the ownership and operation of the Assets in 2013 for such Party’s period of ownership of the Assets during such year.
3.03
Hawaii Consent Decree
.
(a) Seller anticipates entering into final binding settlement(s) whether by judicial decree, judgment, agreement or otherwise, memorializing Seller’s settlement with the United States Environmental Protection Agency and the United States Department of Justice and other applicable entities or agencies, if any, regarding alleged violations of the Clean Air Act related to the ownership and operation of multiple facilities owned by Seller and its Affiliates, including the Refinery. Buyer hereby irrevocably authorizes Seller (i) to finalize the negotiations for such settlement related to the ownership and operation of the Refinery even if such negotiations extend beyond the Closing Date and (ii) to cause the Company (prior to Closing) or, if applicable, to have Buyer to cause the Company (after the Closing) to enter into such settlement (the “
Hawaii Consent Decree
”) provided that the terms and conditions of the Hawaii Consent Decree solely relate to air emissions originating from the Refinery and such terms and conditions, as they relate to the Company or the Refinery, are reasonably consistent with the proposed terms as described on
Schedule 3.03(a)
. The Hawaii Consent Decree may be evidenced in a separate agreement between the Company and the applicable Governing Authorities or included in a multi-refinery consent decree between Seller and its Affiliates (including the Company) and the applicable Governing Authorities. To the extent such Hawaii settlement is included in a multi-refinery consent decree then the term “Hawaii Consent Decree” shall refer to the provisions of such multi-refinery consent decree that are applicable to the Company or the Refinery from or after the Closing Date.
(b) The Company shall cooperate with and assist Seller as Seller shall reasonably request in finalizing and executing the Hawaii Consent Decree. Seller shall provide Buyer with monthly oral reports regarding the status of the negotiations and execution of the Hawaii Consent Decree. Seller shall provide Buyer the opportunity, with reasonable advance notice, to attend meetings with, or hearings before, any Governmental Authority regarding the Hawaii Consent Decree to the extent such meetings and hearings relate to the Refinery (Buyer shall not participate in such meetings or hearings to the extent such meetings or hearings do not involve the Company or the Refinery). Seller shall, following any such meeting or hearing with such Governmental Authority, advise Buyer of the substance of any action or position taken by such Governmental Authority during any such meeting or hearing with regards to the Company or the Refinery. Notwithstanding the preceding, Buyer’s decision to attend or not any such meeting or hearing shall not delay or postpone such meetings or hearings with a Governmental Authority. Seller shall promptly provide Buyer with copies of significant reports, plans, correspondence and other substantive communications received by or on behalf of Seller from or submitted by or on behalf of Seller to a Governmental Authority with respect to the negotiation or execution of the Hawaii Consent Decree.
(c) Provided that the Startup Criteria have been met in all material respects as of the Execution Date, Seller shall (or shall cause its Affiliates to) reimburse the Company for reasonable third party capital expenditures incurred by the Company for the construction, installation and
commissioning of capital projects at the Refinery as and when and to the extent required pursuant to the Hawaii Consent Decree (collectively, the “
Capital Projects
”). Seller and Buyer agree to communicate, consult and reasonably cooperate with one another in the design, engineering, procurement, construction, installation and commissioning of the Capital Projects, provided such consultation and cooperation are consistent with the terms of this section. Seller and Buyer (and their Affiliates) shall minimize the capital expenditures for the Capital Projects to the extent necessary to satisfy the obligations of the Hawaii Consent Decree. Seller and the Company agree to use Commercially Reasonable Efforts to work together during the design, engineering, procurement and construction of the Capital Projects to minimize the potential for disruption of Refinery operations during implementation of the Capital Projects. Between Seller and the Company, Seller shall have the primary responsibility, at Seller’s expense, for the design and engineering of the Capital Projects. Buyer shall cause the Company to permit Seller and its Affiliates and their respective representatives (including Seller’s engineering contractors) to have reasonable access to the Refinery (subject to appropriate safety and security standards of the Company) and applicable books and records and reasonable access to and inquiry of employees and other personnel who are employed, retained or controlled by the Company who have relevant information necessary for the designing and engineering of the Capital Projects. Seller and the Company agree to use Commercially Reasonable Efforts to work together to develop the Capital Projects in a cost effective manner while meeting the requirements of the Hawaii Consent Decree and also minimizing the anticipated impact on the Refinery’s operating expenses following implementation.
NOTWITHSTANDING ANY OTHER PROVISIONS IN THIS AGREEMENT TO THE CONTRARY, NEITHER SELLER NOR ANY AFFILIATE, AGENT, OR REPRESENTATIVE OF SELLER HAS MADE, AND SELLER HEREBY EXPRESSLY DISCLAIMS AND NEGATES, ANY IMPLIED OR EXPRESS WARRANTY OF MERCHANTABILITY, FITNESS (BOTH GENERALLY AND FOR A PARTICULAR PURPOSE), OR CONFORMITY TO MODELS, DESIGNS OR SAMPLES OR ANY OTHER REPRESENTATION OR WARRANTY, EXPRESS, STATUTORY OR IMPLIED, RELATING TO THE CAPITAL PROJECTS.
(d) Seller shall retain sole responsibility for the payment of any fines or penalties imposed on the Company arising from the Hawaii Consent Decree to the extent related to acts or omissions of Seller or the Company prior to the Closing Date.
(e) The Company shall be responsible for compliance with the Hawaii Consent Decree except to the extent provided above in this
Section 3.03
.
3.04
Tank Replacements
.
Seller shall cause (or shall cause its Affiliates to cause), at Seller’s expense, the replacement of existing underground storage tanks at the Retail Assets listed on
Schedule 3.04
, including any Corrective Action relating to Pre-Existing Environmental Conditions identified at the time of such tank replacements (the “
Tank Replacements
”). The Company shall provide reasonable assistance and cooperation in order for Seller (or its Affiliates) to complete the Tank Replacements in an efficient and timely manner. The Company shall permit Seller and its Affiliates and their respective representatives (including Seller’s contractors) to have reasonable access to the Retail Assets listed on
Schedule 3.04
(subject to appropriate safety and security standards of the Company) to complete the Tank Replacements.
3.05
Company Environmental Liabilities
. Except as otherwise provided herein, Buyer and the Company acknowledge and agree that after the Closing, the Company will continue to retain all Company Environmental Liabilities.
ARTICLE IV
CORRECTIVE ACTION AND ENVIRONMENTAL TESTING
4.01
Conduct of Corrective Action
.
(a) In the event Corrective Action is necessary after the Closing to Remediate a Pre-Existing Environmental Condition (whether known or unknown as of the Closing Date) and for which Seller has agreed to indemnify, defend and hold Buyer harmless pursuant to
Section 5.02
, then Seller (or its Affiliates) shall control such Corrective Action (the “
Seller Remediation Activities
”) until (i) Seller’s indemnification obligation terminates pursuant to
Section 5.02
or (ii) a Claim is made against Buyer or the Company by a Governmental Authority after the Closing with respect to such Pre-Existing Environmental Condition and Buyer or the Company elects, by providing written notice to Seller, to assume control of such Corrective Action (a “
Company Assumption
”);
provided, however,
that if Buyer or the Company elects to assume control of any Corrective Action, Seller shall have no further obligation to indemnify, defend or hold Buyer harmless for such Corrective Action pursuant to
Section 5.02
. Seller (and its Affiliates) shall take (and shall only be required to take) all actions and make all expenditures reasonably required by applicable Environmental Laws in effect and as interpreted as of the Closing Date in order to Remediate such Pre-Existing Environmental Condition consistent with the Acceptable Corrective Action Method. In determining the Acceptable Corrective Action Method, Seller shall consult with Buyer, consider in good faith any reasonable recommendations or proposals made by Buyer, and take into account the intended usage of the relevant property.
(b) In connection with any Seller Remediation Activities:
(i) The Company shall provide reasonable assistance and cooperation in order for Seller to complete the Seller Remediation Activities in an efficient and timely manner;
provided
, that any third party costs or expenses incurred by or on behalf of Buyer or the Company in connection with such assistance and cooperation shall be borne by Seller to the extent approved by Seller in writing in advance and subject to the limitations of
Section 5.02
;
(ii) Seller shall provide the Company the opportunity, with reasonable advance notice, to attend meetings with, or hearings before, any Governmental Authority regarding such Seller Remediation Activities. Seller shall, following any such meeting or hearing with such Governmental Authority, advise the Company of the substance of any action or position taken by such Governmental Authority during any such meeting or hearing. Notwithstanding the preceding, the Company’s decision to attend or not any such meeting or hearing shall not delay or postpone such meetings or hearings with a Governmental Authority;
(iii) Seller will coordinate the schedule of on-site Seller Remediation Activities with the Company so that disruptions of the Company’s operations of the Assets will be minimized;
(iv) The Company shall permit Seller and its Affiliates and their respective representatives (including Seller’s environmental contractors) to have reasonable access to the Assets (subject to appropriate safety and security standards of the Company) and applicable books and records and reasonable access to and inquiry of employees and other personnel who are employed, retained or controlled by the Company who have relevant information regarding the Assets related to the obligations of Seller for Corrective Action. The Company shall provide Seller, without additional charge, reasonable access to utilities
and available equipment and operations (including wastewater treatment units) used in connection with Seller Remediation Activities;
(v) Seller shall provide the Company with copies of third party reports and studies, notices and filings received or prepared on behalf of Seller prior to the delivery of such submissions to any Governmental Authority and shall allow the Company a reasonable opportunity (which shall not be fewer than ten (10) days to review such filings in advance of any such submission and, if requested, shall consider in good faith all reasonable comments to such submissions made by the Company prior to submitting such materials to such Governmental Authority. The Company shall respond promptly to requests for information by a Governmental Authority with respect to Seller Remediation Activities. The Company shall respond promptly and without unreasonable conditions to reasonable requests by Seller for execution and delivery of any submissions or applications reasonably requested by Seller that are required to be filed by or on behalf of the Company with respect to the Seller Remediation Activities;
(vi) Seller shall promptly provide the Company with copies of significant reports, plans, correspondence and other substantive communications received by or on behalf of Seller from or submitted by or on behalf of Seller to a Governmental Authority with respect to the Seller Remediation Activities;
(vii) The Company shall promptly provide Seller with copies of all reports, plans, correspondence and other substantive communications received by or on behalf of the Company from or submitted by or on behalf of the Company to a Governmental Authority with respect to the Seller Remediation Activities;
(viii) Seller shall be responsible for transportation and offsite disposition of solid wastes generated in connection with Seller Remediation Activities and required to be managed offsite; and
(ix) To the extent that Seller Remediation Activities include land use or institutional use restrictions or engineering controls consistent with an Acceptable Corrective Action Method, the Company shall (at Seller’s cost and expense) execute such commercially reasonable agreements embodying such restrictions as may be required by a Governmental Authority in order to bind the Company and any subsequent owners of any of the Assets to such land use or institutional use restrictions or engineering controls.
(c) In the event of a Company Assumption, Seller shall coordinate with the Company to transition responsibility for such Corrective Action to the Company. Seller shall promptly provide the Company with copies of all reports, studies, plans, data, correspondence and notices relating to the assumed Corrective Action. For the avoidance of doubt, Seller’s indemnification obligations pursuant to
Section 5.02
shall terminate with respect to any Corrective Action that is the subject of a Company Assumption, and Seller shall have no further obligation to indemnify, defend or hold Buyer harmless for such Corrective Action pursuant to
Section 5.02
.
(d) In the event the Company plans after the Closing to conduct construction activity which will or may cause disturbance of soils, sediment or other media containing Hazardous Materials (“
Construction Activity
”) for which Seller may be obligated to conduct Seller Remediation Activities, the Company shall consult with Seller prior to such construction activity and to consider in good faith Seller’s requests and comments with respect to Remediation methods and location of construction, all to the extent reasonably practicable and consistent with an Acceptable Corrective Action
Method and that do not unreasonably interfere with the Company's proposed construction activity. Notwithstanding anything in this Environmental Agreement to the contrary, Seller shall not have any liability to indemnify, defend or hold Buyer Indemnified Parties harmless pursuant to
Section 5.02
for Corrective Action (or other Losses related thereto) required or incurred as a result of Construction Activity to the extent such Corrective Action would not be required (or related Losses incurred) in the event the Construction Activity did not occur.
(e) If a Release shall occur or is continuing after the Closing at a location or in an amount not readily distinguishable from an Environmental Condition existing prior to the Closing for which Seller is required to indemnify, defend and hold harmless a Buyer Indemnified Party pursuant to
Section 5.02
, then the Company shall be responsible for the incremental costs incurred for the Remediation of the post-Closing Release as compared to the costs that would otherwise have been incurred to Remediate such pre-Closing Environmental Condition. The Company and Seller shall negotiate in good faith to allocate all respective obligations arising out of such pre-Closing Environmental Condition and post-Closing Release in question in an equitable manner, which allocation shall take into consideration and reflect all pertinent facts, which pertinent facts may include: (i) the quantity or volume of Hazardous Materials present immediately prior to such post-Closing Release, and present as a result of the post-Closing Release; (ii) differences, if any, in the composition of the Hazardous Materials present immediately prior to such post-Closing Release, and present as a result of the post-Closing Release; and (iii) if and to what extent the post-Closing Release has impacted geographical areas not impacted by the pre-Closing Environmental Condition prior to the post-Closing Release. Seller shall control the Remediation of such commingled Environmental Conditions until Seller’s obligation to indemnify, defend and hold harmless for the pre-Closing Environmental Condition terminates.
(f) The Company shall not cause, suffer or permit the waiver, modification, suspension or termination of any obligation of BHP Hawaii or BHP Pacific to conduct and pay for Remediation Activities at, on, under or within the Real Property Interests or the Pipeline ROW Interests pursuant to the BHP Environmental Agreement and the Company shall use Commercially Reasonable Efforts to assist Seller to enforce BHP Hawaii’s and BHP Pacific’s obligations to conduct and pay for such Remediation Activities under the BHP Environmental Agreement to the extent that such obligations exist as of the date of this Environmental Agreement.
(g) Simultaneously with the execution hereof, Seller will provide Buyer with a list of all third parties currently conducting any Corrective Action at any Asset.
(h) In the event the Company is required pursuant to Environmental Laws to continue Remediation Activities beyond or subsequent to the conclusion of any Seller Remediation Activities, then Seller shall coordinate with the Company to transition responsibility for such Remediation Activities to the Company. Seller shall promptly provide the Company with copies of all reports, studies, plans, data, correspondence and notices relating to the assumed Remediation Activities.
4.02
Closure and Anticipated Use
.
(a) With respect to any Corrective Action that Seller is responsible for under this Environmental Agreement, Seller (and its Affiliates) shall only be obligated to implement and complete such Corrective Action as is necessary to obtain Closure, subject to the limitations of
Section 5.02
. Unless terminated earlier, Seller’s obligations to perform such Corrective Action shall be deemed satisfied and shall terminate once Closure is obtained, and Seller shall have no obligation to perform further Corrective Action with respect to the Environmental Condition or Release to which the Corrective Action relates,
provided
that receipt of Closure shall not impact any other Obligations as between Buyer and Seller, even if such Obligations arise out of such Environmental Condition or Release.
(b) Seller shall not be required to address contamination beyond the Acceptable Corrective Action Method. The Company shall be responsible for any incremental cost associated with changes in Environmental Laws or a more restrictive ongoing use of the Refinery or the other Assets (i.e. commercial or residential use).
4.03
Environmental Testing
.
(a) Until the expiration of Seller’s obligation to conduct Seller Remediation Activities, or until the Company provides notice of a Company Assumption pursuant to
Section 4.01(a)
(but only to the extent necessary to conduct the Corrective Action that is subject to the Company Assumption), the Company shall not directly or indirectly, initiate or conduct Environmental Testing of the Assets. Notwithstanding the preceding sentence, the Company may conduct Environmental Testing of the Assets in the event (i) such Environmental Testing is performed in the ordinary course of business of the Company such as geophysical studies of building foundations or in connection with construction, remodeling or demolition and rebuild work on Assets, (ii) the Company or its Affiliates are ordered or directed to conduct such Environmental Testing by any Governmental Authority having jurisdiction thereof, (iii) such Environmental Testing is conducted as a result of and reasonably necessary to respond to a Release that occurs after the Closing, (iv) there is reasonable evidence that such Environmental Testing is required by applicable Environmental Laws then in effect and interpreted, or (v) such Environmental Testing is conducted as a result of any written Claim by a Person other than a Buyer Indemnified Party. For the avoidance of doubt, the Company may at any time(s) conduct non-intrusive investigations of Environmental Conditions of the Assets, including Phase I environmental site assessments.
(b) Prior to engaging in any Environmental Testing, the Company shall provide Seller with reasonable advance written notice so that Seller may, at its own expense, observe such activities and obtain any split samples it may desire. The Company shall provide Seller with copies of all written, non-privileged reports prepared by third parties related to Environmental Testing. In the event that exigent circumstances (such as responding to a Release) do not allow for reasonable advance written notice of Environmental Testing, the Company will make a good faith attempt to orally advise Seller of such Environmental Testing and shall, within a reasonable time thereafter, provide written notice to Seller describing the Environmental Testing that was conducted.
ARTICLE V
INDEMNIFICATION; SURVIVAL
5.01
Survival
. Subject to the limitations and other provisions of this Environmental Agreement, (a) Seller’s representations and warranties contained in
Article II
shall survive the Closing and shall remain in full force and effect for a period of eighteen (18) months after the Closing Date, and until the resolution of the indemnification Claims received by the Indemnifying Party in accordance with the provisions hereof prior to the expiration of the relevant time period, and (b) each covenant and agreement of the Parties contained in this Environmental Agreement which by its terms requires performance after the Closing Date shall survive the Closing Date and shall remain in full force and effect until such covenant or agreement is fully performed.
5.02
Indemnification Provisions for the Benefit of Buyer
.
(a) Subject to the other provisions of this
Article V
, Seller shall indemnify, defend, save and hold the Buyer Indemnitees harmless from and against any Claims and Losses actually suffered or incurred by them to the extent arising out of or related to:
(i) the breach of any representation or warranty of Seller contained in this Environmental Agreement;
(ii) all Corrective Action relating to Pre-Existing Environmental Conditions other than a Company Assumption (except to the extent addressed specifically in
Sections 5.02(a)(v) or 5.02(a)(vi))
, to the extent and pursuant to the procedures described in
Section 4.01
;
provided
that if the Company causes or permits a change in the use of Assets from industrial use after the Closing, then Seller shall not be required to incur any cost or make any expenditure with respect to Seller Remediation Activities related to such property greater than that which would have been required if such property had continued in its current use as of the Closing Date (i.e., industrial);
(iii) Third Party Claims arising under Environmental Laws (as in effect and as interpreted as of the Closing Date) for personal injury or property damage to the extent arising out of or relating to Releases of Hazardous Materials that occur from the ownership, operation or use of the Assets by the Company prior to the Closing Date;
(iv) except with respect to the Hawaii Consent Decree (which is addressed specifically in
Section 5.02(a)(viii))
, any fine, penalty or other cost assessed by a Government Authority in connection with violations of Environmental Laws by the Company prior to the Closing Date;
(v) the Refinery Groundwater Remediation to the extent and pursuant to the procedures described in
Section 4.01
;
(vi) the replacement of underground storage tanks at the Retail Assets listed on
Schedule 3.04
, including Corrective Action relating to Pre-Existing Environmental Conditions identified at the time of such tank replacements other than a Company Assumption;
(vii) any fines or penalties imposed on the Company arising from the Hawaii Consent Decree to the extent related to the acts or omissions of Seller or the Company prior to the Closing Date; and
(viii) the Pearl City Superfund Site, including the presence or removal of any equipment located thereon, including any storage tanks or associated piping.
(b) No Claim may be asserted nor may any Proceeding be commenced against Seller pursuant to this
Section 5.02
unless written notice of such Claim or Proceeding is received by Seller describing in reasonable detail the facts and circumstances with respect to the subject matter of such Claim or Proceeding, and with respect to Claims or Proceedings based on the breach of any representation or warranty, on or prior to the date such representation or warranty ceases to survive as set forth in
Section 5.01
;
provided, however
, that no Claim may be asserted nor may any Proceeding be commenced by Buyer against Seller arising out of or related to a breach of any representation or warranty of which Buyer had Knowledge on or prior to the Closing Date and for which Buyer failed to deliver a Breach Notice in accordance with
Section 2.02
. If a Buyer Indemnitee has recovered any Losses pursuant to one subsection of this
Section 5.02(a)
, such Buyer Indemnitee shall not be entitled to recover the same Losses under another subsection of this
Section 5.02(a)
.
(c) No Claim may be made against Seller for indemnification pursuant to
Section 5.02(a)(i-iv)
with respect to any individual action, occurrence or event subject to the
indemnifications thereunder (or group of related actions, occurrences or events) unless such individual action, occurrence or event exceeds $5,000 for a Retail Asset, $25,000 for a Logistics Asset and $100,000 for the Refinery (individually, each as applicable, the “
De Minimis Amount
”) (nor shall any Loss below such De Minimis Amounts be applied to or considered for purposes of calculating the aggregate amount of the Buyer Indemnitees’ Losses).
(d) No Claim may be made against Seller for indemnification pursuant to
Section 5.02(a)(i-iv)
unless the aggregate amount of all Losses of the Buyer Indemnitees with respect to
Section 5.02(a)(i-iv)
(excluding individual Losses less than the De Minimis Amounts) shall exceed an amount equal to $1,000,000 (the “
Environmental Deductible
”), after which point Seller shall be obligated only to indemnify the Buyer Indemnitees from and against such aggregate Losses (excluding individual Losses less than the De Minimis Amounts) in excess of the Environmental Deductible.
(e) The maximum amount that Seller shall be required to pay pursuant to
Section 5.02(a)(i)-(v)
and for Corrective Actions relating to Pre-Existing Environmental Conditions pursuant to
5.02(a)(vi)
in respect of all Losses by all Buyer Indemnitees shall equal $15,000,000 (the “
Environmental Cap
”), after which point Seller will have no Obligation to indemnify the Buyer Indemnitees from and against further such Losses;
provided, however
, that Seller’s obligations to pay pursuant to
Section 5.02(a)(vii)-(viii)
shall be excluded from the Environmental Cap. In addition, Seller shall have as an affirmative defense to any claim for indemnity under
Section 5.02(a)(i)
arising out of or related to a breach of any representation or warranty of Seller that Buyer had Knowledge of such breach on or prior to the Closing Date and Buyer failed to deliver a Breach Notice in accordance with
Section 2.02
.
(f) All Claims made against Seller for indemnification pursuant to clauses (ii)- (viii) of
Section 5.02(a)
, other than Claims for reasonable third party capital expenditures incurred by the Company for the construction, installation and commissioning of the Capital Projects pursuant to
Section 3.03(c)
, must be made to Seller on or before the third (3rd) annual anniversary of the Closing Date and to the extent such Claims are made on or before such date, then Seller’s obligation to indemnify for such Claims shall remain in effect beyond such date.
(g) For avoidance of doubt,
Section 5.02(a)(iii)
shall not apply to Third Party Claims arising out of a post-Closing Date fire, explosion or catastrophic incident allegedly occurring as a result of any pre-Closing non-compliance with Environmental Laws.
(h) Seller’s indemnification obligations pursuant to
Section 5.02(a)
shall automatically terminate and be of no further force or effect in the event and to the extent (i) the Company sells, transfers, leases to a third party or exchanges any of the Assets (in which case such indemnification obligations shall terminate only with respect to those Assets that are sold, transferred, leased or exchanged and shall otherwise remain in full force and effect) or (ii) there is a Change in Control after the Closing;
provided, however
, that such limitations on indemnification would not apply to (A) transfers to a wholly owned subsidiary of the Company or (B) transfers of Owned Real Property parcels lying within the boundary fence line of the Refinery provided such Owned Real Property parcels are subject to deed restrictions reasonably acceptable to Seller that restrict the use of such parcels to industrial uses.
(i) Seller’s indemnification obligations pursuant to this Environmental Agreement shall be reduced in the event and to the extent amounts for such indemnified obligations are taken into account as a liability for purposes of the Final Net Working Capital.
(j) Amounts paid by Seller that are counted against or applied toward the Indemnification Deductible or the Indemnification Cap (as such terms are defined in the Purchase
Agreement) shall not count against and be applied toward the Environmental Deductible and the Indemnification Cap and
vice versa
, amounts paid by Seller that are counted against or applied toward the Environmental Deductible or the Environmental Cap shall not count against and be applied toward the Indemnification Deductible and the Indemnification Cap.
5.03
Indemnification Provisions for the Benefit of Seller
.
(a) Subject to the other provisions of this
Article V
, Buyer and the Company agree, jointly and severally, to indemnify, defend, save and hold the Seller Indemnitees harmless from and against any Claims and Losses actually suffered or incurred by them to the extent arising out of or related to:
(i) the breach of any covenants or agreements of Buyer contained in this Environmental Agreement;
(ii) the Company Environmental Liabilities to the extent not indemnified by Seller pursuant to
Section 5.02
; and
(iii) any Claims or Losses under Environmental Laws arising out of or related to the ownership of the TH Interest, the Company, the Acquired Subsidiary, or the Assets after the Closing Date, or the operation of the Business after the Closing Date.
(b) No Claim may be asserted nor may any Proceeding be commenced against Buyer or the Company pursuant to this
Section 5.03
unless written notice of such Claim or Proceeding is received by Buyer or the Company describing in reasonable detail the facts and circumstances with respect to the subject matter of such Claim or Proceeding. If a Seller Indemnitee has recovered any Losses pursuant to one subsection of this
Section 5.03(a)
, such Seller Indemnitee shall not be entitled to recover the same Losses under another subsection of this
Section 5.03(a)
.
(c) No Claim may be made against Buyer or the Company for indemnification pursuant to clause (i) of
Section 5.03(a)
: (i) with respect to any individual action, occurrence or event subject to the indemnifications thereunder (or group of related actions, occurrences or events) unless the such individual action, occurrence or event exceeds the respective De Minimis Amounts (nor shall any Claim or Loss below such threshold be applied to or considered for purposes of calculating the aggregate amount of Seller Indemnitees’ Losses) and (ii) unless the aggregate amount of all Claims and Losses of Seller Indemnitees with respect to clause (i) of
Section 5.03(a)
shall exceed the Indemnification Deductible (after which Buyer and the Company shall be obligated only to indemnify Seller Indemnitees from and against aggregate Losses in excess of the Indemnification Deductible). The maximum amount that Buyer and the Company shall be required to pay pursuant to clauses (i) of
Section 5.03(a)
in respect of all Claims and Losses by all Seller Indemnitees shall equal $15 million, after which point Buyer and the Company will have no Obligation to indemnify Seller Indemnitees from and against further such Claims or Losses. For the avoidance of doubt, any Claims or Losses to be paid by Buyer or the Company pursuant to
Section 5.03(a)(ii)
is not subject to the limitations of this
Section 5.03(c)
.
5.04
Indemnification Procedures; Matters Involving Third Parties.
(a) A Seller Indemnitee or Buyer Indemnitee, as the case may be (for purposes of this
Section 5.04
, an “
Indemnified Party
”), shall give the indemnifying party under
Section 5.02
and
Section 5.03
, as applicable (for purposes of this
Section 5.04
, an “
Indemnifying Party
”), prompt written notice of any matter which it has determined has given or could give rise to a right of indemnification under this Environmental Agreement stating the nature of the Claim and an estimated or actual amount of
the Loss, if known, and method of computation thereof, containing a reference to the provisions of this Environmental Agreement in respect of which such right of indemnification is claimed or arises;
provided, however
, that the failure to provide such notice shall not release the Indemnifying Party from its Obligations under this
Article V
except to the extent, and only to the extent, the Indemnifying Party is prejudiced by such failure or to the extent the survival period, if applicable, expires pursuant to
Section 5.01
prior to the giving of such notice.
(b) If any third party shall notify an Indemnified Party with respect to any matter (a “
Third-Party Claim
”) that may give rise to a claim for indemnification against the Indemnifying Party under this
Article V
, then the Indemnified Party shall promptly (and in any event within five (5) Business Days after receiving notice of the Third-Party Claim) notify the Indemnifying Party thereof in writing;
provided, however
, that the failure to provide such notice shall not release the Indemnifying Party from its Obligations under this
Article V
except to the extent, and only to the extent, the Indemnifying Party is prejudiced by such failure.
(c) The Indemnifying Party will have the right to assume and thereafter conduct the defense of the Third-Party Claim with counsel of its choice reasonably satisfactory to the Indemnified Party;
provided
, that the Indemnifying Party will not consent to the entry of any judgment or enter into any settlement with respect to the Third-Party Claim without the prior written consent of the Indemnified Party (not to be unreasonably withheld) unless the judgment or proposed settlement involves only the payment of money damages and does not impose an injunction or other equitable relief upon the Indemnified Party or would reasonably be expected to have a material adverse effect on the Indemnified Party.
(d) Unless and until the Indemnifying Party assumes the defense of the Third Party Claim as provided in
Section 5.04(c)
, the Indemnified Party may defend against the Third- Party Claim in any manner it may reasonably deem appropriate.
(e) In no event will the Indemnified Party consent to the entry of any judgment or enter into any settlement with respect to the Third-Party Claim without the prior written consent of the Indemnifying Party (not to be unreasonably withheld).
(f) If the Parties are unable to agree as to issues related to Seller’s environmental indemnification, then an independent and experienced third party environmental consulting firm that is mutually agreeable to Seller and Buyer shall evaluate and determine the non-legal issues that are in dispute.
5.05
Determination of Losses
.
(a) The Losses giving rise to any indemnification Obligation hereunder shall be reduced by any insurance proceeds actually received by the Indemnified Party as a result of the events giving rise to the claim for indemnification, net of any expenses related to the receipt of such proceeds, including retrospective premium adjustments, if any. The amount of the indemnity payment shall be computed by taking into account the timing of the loss or payment, as applicable, at the Applicable Rate from the date the Indemnified Party provides notice of the Loss to the Indemnifying Party until the date paid. Upon the request of the Indemnifying Party, the Indemnified Party shall provide the Indemnifying Party with information sufficient to allow the Indemnifying Party to calculate the amount of the indemnity payment in accordance with this
Section 5.05
.
(b) An Indemnified Party shall take all reasonable steps to mitigate damages in respect of any claim for which it is seeking indemnification and shall use reasonable efforts to avoid any
costs or expenses associated with such claim and, if such costs and expenses cannot be avoided, to minimize the amount thereof;
provided
, that an Indemnified Party shall have no Obligation to make a claim for recovery against any insurer of such Indemnified Party with respect to any such Losses.
(c) For purposes of determining whether a breach has occurred and calculating a Loss in connection with a claim for indemnification under this
Article V
, each of the representations and warranties that contains any qualifications as to materiality or “Material Adverse Effect” will be determined with regard to such materiality or “Material Adverse Effect” qualifier contained in the terms of such representation and warranty; provided, however, that if the representation or warranty is breached (after taking into consideration such materiality or “Material Adverse Effect” qualifier) then the amount of Losses arising out of such breach will be determined without regards to such materiality or “Material Adverse Effect” qualifier.
5.06
No Multiple Recoveries
. Any liability for indemnification hereunder shall be determined without duplication of recovery by reason of the state of facts giving rise to such liability constituting a breach of more than one representation, warranty or covenant.
5.07
Limitations on Liability/Exclusive Remedies
.
(a) NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THIS ENVIRONMENTAL AGREEMENT, NO PARTY HERETO SHALL BE ENTITLED TO RECOVER FROM ANY OTHER PARTY HERETO OR ANY OF SUCH PARTY’S AFFILIATES ANY AMOUNT IN RESPECT OF EXEMPLARY, PUNITIVE, SPECIAL, INDIRECT OR CONSEQUENTIAL DAMAGES, INCLUDING LOST PROFITS;
EXCEPT
,
HOWEVER
, WITH RESPECT TO ANY OF THE FOREGOING PAID OR OWING TO A THIRD PARTY WITH RESPECT TO A THIRD PARTY CLAIM, WHICH DAMAGES SHALL BE CONSIDERED PART OF LOSSES AND SHALL BE COVERED BY THE INDEMNIFICATIONS SET FORTH IN THIS ARTICLE V.
(b) ALL RELEASES, DISCLAIMERS, LIMITATIONS ON LIABILITY AND INDEMNITIES IN THIS ENVIRONMENTAL AGREEMENT, INCLUDING THOSE IN THIS
ARTICLE V
, SHALL APPLY EVEN IN THE EVENT OF THE SOLE, JOINT OR CONCURRENT, ACTIVE OR PASSIVE NEGLIGENCE, STRICT LIABILITY OR FAULT OF THE PARTY WHOSE LIABILITY IS RELEASED, DISCLAIMED, LIMITED OR INDEMNIFIED.
5.08
Governing Law
. This Environmental Agreement shall be construed (both as to validity and performance), interpreted and enforced in accordance with, and governed by, the Laws of the State of Texas, without regard to conflicts of laws rules or principles as applied in Texas.
5.09
Jurisdiction; Consent to Service of Process; Waiver
. Each of the Parties agrees that it shall bring any Proceeding in respect of any claim arising out of or related to this Environmental Agreement, whether in tort or contract or at law or in equity, exclusively in any Federal or state court in Harris County, Texas and solely in connection with claims arising under such agreement or instrument or the transactions contained in or contemplated by such agreement or instrument, (i) irrevocably submits to the exclusive jurisdiction of such courts, (ii) waives any objection to laying venue in any such Proceeding in such courts, (iii) waives any objection that such courts are an inconvenient forum or do not have jurisdiction over it and (iv) agrees that service of process upon it may be effected by mailing a copy thereof by registered or certified mail (or any substantially similar form of mail), postage prepaid, to it at its address specified in
Section 6.02
. The foregoing consents to jurisdiction and service of process shall not constitute general consents to service of process in the State of Texas for any purpose except as provided herein and shall not be deemed to confer rights on any Person other than the Parties.
EACH
PARTY ACKNOWLEDGES AND AGREES THAT ANY DISPUTE IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS ENVIRONMENTAL AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS ENVIRONMENTAL AGREEMENT. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT: (i) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER; (ii) EACH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER; (iii) EACH PARTY MAKES THIS WAIVER VOLUNTARILY; AND (iv) EACH PARTY HAS BEEN INDUCED TO ENTER INTO THIS ENVIRONMENTAL AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS
SECTION 5.09
.
ARTICLE VI
MISCELLANEOUS PROVISIONS
6.01
Amendment
. This Environmental Agreement (including this
Section 6.01
) may not be amended except by an instrument in writing executed and delivered by the Parties. The failure of any Party at any time or times to require performance of any provision hereof shall in no manner affect the right at a later time to enforce the same. No waiver by any Party of any condition, or of any breach of any term, covenant, representation or warranty contained in this Environmental Agreement, in any one or more instances, shall be deemed to be or construed as a further or continuing waiver of any such condition or breach or a waiver of any other condition or of any breach of any other term, covenant, representation or warranty. No course of dealing between or among any Persons having any interest in this Environmental Agreement shall be deemed effective to modify, amend or discharge any part of this Agreement or any rights or obligations of any Person under or by reason of this Environmental Agreement.
6.02
Notices
. All notices and other communications that are required to be or may be given pursuant to this Environmental Agreement shall be delivered in accordance with the notice provisions set forth in Section 12.2 of the Purchase Agreement.
6.03
Expenses
. Except as otherwise expressly provided herein, all costs and expenses incurred by Seller or its Affiliates in connection with this Environmental Agreement and the transactions contemplated hereby shall be paid by Seller, and all costs and expenses incurred by Buyer or its Affiliates in connection with this Environmental Agreement and the transactions contemplated hereby shall be paid by Buyer.
6.04
Headings
. The headings contained in this Environmental Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Environmental Agreement.
6.05
No Strict Construction
. The Parties acknowledge that each of them has been represented by counsel in connection with this Environmental Agreement and the transactions contemplated hereby. Notwithstanding the fact that this Environmental Agreement has been drafted or prepared by one of the Parties, the Parties confirm that they and their respective counsel have reviewed, negotiated and adopted this Environmental Agreement as the joint agreement and understanding of the
Parties, and the language used in this Environmental Agreement shall be deemed to be the language chosen by the Parties to express their mutual intent, and no rule of strict construction shall be applied against any Person and any rule of Law that would require interpretation of any claimed ambiguities in this Environmental Agreement against the Party that drafted it has no application and is expressly waived.
6.06
Severability
. If any term or other provision of this Environmental Agreement is invalid, illegal or incapable of being enforced by any rule of Law or public policy, all other conditions and provisions of this Environmental Agreement shall nevertheless remain in full force and effect, and the invalid, illegal or unenforceable provision shall be reformed to the minimum extent required to render such provision valid, legal and enforceable and in a manner so as to preserve the economic and legal substance of the transactions contemplated hereby to the fullest extent permitted by Law. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the Parties shall negotiate in good faith to modify this Environmental Agreement so as to effect the original intent of the Parties as closely as possible in an acceptable manner to the end that transactions contemplated hereby are fulfilled to the extent possible.
6.07
Assignment
. This Environmental Agreement shall not be assigned by any Party (including by operation of Law or otherwise) except with the prior written consent of the other Party. Any purported assignment of this Environmental Agreement in violation of this
Section 6.07
shall be null and void.
6.08
Parties in Interest
. This Environmental Agreement shall be binding upon and inure solely to the benefit of each Party and its permitted successors and assigns, and nothing in this Environmental Agreement, express or implied, is intended to or shall confer upon any other Person any right, benefit or remedy of any nature whatsoever under or by reason of this Environmental Agreement.
6.09
Failure or Indulgence Not Waiver
. No failure or delay on the part of any Party in the exercise of any right hereunder shall impair such right or be construed to be a waiver of, or acquiescence in, any breach of any representation, warranty, covenant or agreement herein, nor shall any single or partial exercise of any such right preclude other or further exercise thereof or of any other right.
6.10
Disclosure Schedules
. Any matter disclosed by Seller in the Schedules pursuant to any Section of this Environmental Agreement shall be deemed to have been disclosed by Seller for purposes of each other Section of this Environmental Agreement to which such disclosure is relevant as and to the extent that the relevance of such matter to such other Section is readily apparent on the face of such disclosure. The listing (or inclusion of a copy) of a document or other item in the Schedules shall be adequate to disclose an exception to a representation or warranty made herein if the nature and relevance of such exception is readily apparent from the listing (or inclusion of a copy) of such document.
6.11
Time of the Essence
. Time is of the essence in this Environmental Agreement. If the date specified in this Environmental Agreement for giving any notice or taking any action is not a Business Day (or if the period during which any notice is required to be given or any action taken expires on a date which is not a Business Day), then the date for giving such notice or taking such action (and the expiration date of such period during which notice is required to be given or action taken) shall be the next day which is a Business Day.
6.12
Entire Agreement
. This Environmental Agreement, the Purchase Agreement and the Related Agreements (together with the Exhibits, the Disclosure Schedules and the other Schedules hereto and thereto) constitute the entire agreement of the parties hereto and thereto, and supersede all prior agreements and undertakings, both written and oral, among the Parties, with respect to the subject matter hereof (other than the Confidentiality Agreement, which shall continue in full force and effect).
6.13
Specific Performance
. Each Party acknowledges that the breach of this Environmental Agreement by the other Party would cause irreparable damage to such Party and that money damages or other legal remedies would not be an adequate remedy for any such damages. Therefore, the obligations of each Party under this Environmental Agreement shall be enforceable by a decree of specific performance and appropriate injunctive relief may be applied for and granted in connection therewith, without the requirement to post any bond or security in connection therewith. Such remedies shall, however, be cumulative and not exclusive and shall be in addition to any other remedies which any Party may have under this Environmental Agreement or otherwise.
6.14
Counterparts
. This Environmental Agreement may be executed in multiple counterparts and by the different Parties in separate counterparts, each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same agreement. Signed counterparts of this Environmental Agreement may be delivered by facsimile and by scanned pdf image;
provided
that each Party uses Commercially Reasonable Efforts to deliver to each other Party original signed counterparts as soon as possible thereafter.
[Balance of page intentionally left blank]
The Parties have executed and delivered this Environmental Agreement as of the date first written above.
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TESORO CORPORATION
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By:____________________________________
Name:
Title:
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HAWAII PACIFIC ENERGY, LLC (on behalf
of itself and on behalf of the Company)
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By:____________________________________
Name:
Title:
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SECOND AMENDED AND RESTATED
MASTER TERMINALLING SERVICES AGREEMENT
This Second Amended and Restated Master Terminalling Services Agreement (the “
Agreement
”) is executed as of May 3, 2013, to be effective as of the Effective Date, by and among Tesoro Refining & Marketing Company LLC, a Delaware limited liability company (“
TRMC
”), Tesoro Alaska Company, a Delaware corporation (“
TAK
” and, together with TRMC, “
Tesoro
”) and Tesoro Logistics Operations LLC, a Delaware limited liability company (“
TLO
”).
RECITALS
WHEREAS
, by virtue of their indirect ownership interests in Tesoro Logistics LP, TLO’s parent entity (the “
Partnership
”), each of TAK and TRMC have an economic interest in the financial and commercial success of the Partnership and its operating subsidiary, TLO; and
WHEREAS
, the Parties (as defined below and in the case of TRMC, its predecessor corporate entity) entered into an Amended and Restated Master Terminalling Services Agreement as of February 22, 2013, and desire to amend and restate that agreement in its entirety as set forth herein to memorialize the terms of their ongoing commercial relationship.
NOW, THEREFORE
, in consideration of the covenants and obligations contained herein, the parties to this Agreement hereby agree as follows:
Capitalized terms used throughout this Agreement shall have the meanings set forth below, unless otherwise specifically defined herein.
“
Additive Facilities
” has the meaning set forth in Section 17(a).
“
Additized Gasoline
” has the meaning set forth in Section 18(a).
“
Adjusted Minimum Volume Commitment
” means Tesoro’s Minimum Throughput Commitment, adjusted by deducting the applicable Stipulated Volume for each Terminal that is no longer subject to this Agreement at any time.
“
Agreement
” has the meaning set forth in the Preamble.
“
Ancillary Services
” means the following services to be provided by TLO to Tesoro: ethanol receipt (rail and truck), ethanol storage, ethanol blending, generic gasoline additization, jet additization, jet certification, lubricity/conductivity additization, Product receipt (barge), proprietary additive additization, red dye additization, transmix loading (truck) and winter flow improver additization.
“
Applicable Law
” means any applicable statute, law, regulation, ordinance, rule, determination, judgment, rule of law, order, decree, permit, approval, concession, grant, franchise, license, requirement, or any similar form of decision of, or any provision or condition
of any permit, license or other operating authorization issued by any Governmental Authority having or asserting jurisdiction over the matter or matters in question, whether now or hereafter in effect.
“
Barrel
” means a volume equal to 42 U.S. gallons of 231 cubic inches each, at 60 degrees Fahrenheit under one atmosphere of pressure.
“
Base Gasoline
” has the meaning set forth in Section 18(a).
“
Blending Instructions
” has the meaning set forth in Section 21(c).
“
bpd
” means Barrels per day.
“
Business Day
” means a day, other than a Saturday or Sunday, on which banks in New York, New York are open for the general transaction of business.
“
Capacity Resolution
” has the meaning set forth in Section 32(c).
“
Carrier
” means a third-party agent or contractor hired by Tesoro, who is in the business of transporting Products via tank trucks.
“
Commencement Date
” has the meaning set forth in Section 2.
“
Confidential Information
” means all confidential, proprietary or non-public information of a Party, whether set forth in writing, orally or in any other manner, including all non-public information and material of such Party (and of companies with which such Party has entered into confidentiality agreements) that another Party obtains knowledge of or access to, including non-public information regarding products, processes, business strategies and plans, customer lists, research and development programs, computer programs, hardware configuration information, technical drawings, algorithms, know-how, formulas, processes, ideas, inventions (whether patentable or not), trade secrets, schematics and other technical, business, marketing and product development plans, revenues, expenses, earnings projections, forecasts, strategies, and other non-public business, technological, and financial information.
“
Curtailment Fee
” has the meaning set forth in Section 30(b).
“
DCA
” has the meaning set forth in Section 18(a).
“
Effective Date
” means May 1, 2013.
“
EPA
” has the meaning set forth in Section 14(a).
“
Ethanol Services
” has the meaning set forth in Section 21(a).
“
Excess Amounts
” means, for any Month, the aggregate volumes throughput by Tesoro in excess of the Minimum Throughput Commitment, multiplied by the weighted average Terminalling Service Fee paid by Tesoro during such Month.
“
Extension Period
” has the meaning set forth in Section 3.
“
First Offer Period
” has the meaning set forth in Section 34(b).
“
Force Majeure
” means circumstances not reasonably within the control of TLO and which, by the exercise of due diligence, TLO is unable to prevent or overcome that prevent performance of TLO’s obligations, including: acts of God, strikes, lockouts or other industrial disturbances, wars, riots, fires, floods, storms, orders of courts or Governmental Authorities, explosions, terrorist acts, breakage, accident to machinery, equipment, storage tanks or lines of pipe, inability to obtain or unavoidable delays in obtaining material or equipment and other similar events.
“
Force Majeure Notice
” has the meaning set forth in Section 31(a).
“
Force Majeure Period
” has the meaning set forth in Section 31(a).
“
Governmental Authority
” means any federal, state, local or foreign government or any provincial, departmental or other political subdivision thereof, or any entity, body or authority exercising executive, legislative, judicial, regulatory, administrative or other governmental functions or any court, department, commission, board, bureau, agency, instrumentality or administrative body of any of the foregoing.
“
Initial Term
” has the meaning set forth in Section 3.
“
LAC
” has the meaning set forth in Section 18(a).
“
Minimum Throughput Commitment
” means the aggregate Stipulated Volume (on a monthly average basis) in bpd as set forth for all Terminals on Schedule A attached hereto; provided however, that the Minimum Throughput Commitment during the Month in which the Commencement Date occurs shall be prorated in accordance with the ratio of the number of days including and following the Commencement Date in such Month to the total number of days in such Month.
“
Month
” means a calendar month.
“
Notice Period
” has the meaning set forth in Section 30(a).
“
Offer Period
” has the meaning set forth in Section 32(g).
“
OPIS
” has the meaning set forth in Section 8(a).
“
Partnership
” has the meaning set forth in the Recitals of this Agreement.
“
Partnership Change of Control
” means Tesoro Corporation ceases to possess, directly or indirectly, the power to direct or cause the direction of the management and policies of the general partner of the Partnership, whether through ownership of voting securities, by contract, or otherwise.
“
Party
” or “
Parties
” means that each of TAK, TRMC and TLO is a “Party” and collectively are the “Parties” to this Agreement.
“
Person
” means any individual, partnership, limited partnership, joint venture, corporation, limited liability company, limited liability partnership, trust, unincorporated organization or Governmental Authority or any department or agency thereof.
“
Product
” or “
Products
” means the petroleum products, ethanol or biofuels, Transmix and intermediate products described herein as being handled under this Agreement.
“
Receiving Party Personnel
” has the meaning set forth in Section 37(d).
“
Red Dye
” has the meaning set forth in Section 19(a).
“
Refineries
” means the Tesoro refineries located in Anacortes, Washington; Kenai, Alaska; Mandan, North Dakota; Salt Lake City, Utah; and Martinez and Los Angeles, California.
“
Restoration
” has the meaning set forth in Section 32(b).
“
Right of First Refusal
” has the meaning set forth in Section 32(g).
“
Shortfall Payment
” has the meaning set forth in Section 7(b).
“
Stipulated Volume
” means the stipulated volume in bpd as set forth for each Terminal on
Schedule A
attached hereto.
“
Storage Contract
” has the meaning set forth in Section 32(g).
“
Subject Tank
” has the meaning set forth in Section 32(g).
“
Suspension Notice
” has the meaning set forth in Section 30(a).
“
Tank Heels
” consist of the minimum quantity of Product which either (a) must remain in a tank during all periods when the tank is available for service to keep the tank in regulatory compliance or (b) is necessary for physical operation of the tank.
“
TAK
” has the meaning set forth in the Preamble.
“
Term
” has the meaning set forth in Section 3.
“
Terminalling Right of First Refusal
” has the meaning set forth in Section 34(b).
“
Terminalling Service Fee
” means, for a particular Terminal, for any Month during the Term, the total fee per Barrel of throughput paid by Tesoro during that Month for terminalling, dedicated storage and Ancillary Services at that Terminal.
“
Terminals
” means the Terminals set forth on
Schedule A
attached hereto.
“
Terminal Service Order
” has the meaning set forth in Section 5(a).
Termination Notice
” has the meaning set forth in Section 31(a).
“
Tesoro
” has the meaning set forth in the Preamble.
“
Tesoro Termination Notice
” has the meaning set forth in Section 31(b).
“
TLO
” has the meaning set forth in the Preamble.
“
Transmix
” has the meaning set forth in Section 13.
“
TRMC
” has the meaning set forth in the Preamble.
The Parties agree that the “
Commencement Date
” was April 26, 2011.
The initial term of this Agreement shall commence on the Commencement Date and shall continue through April 30, 2021 (the “
Initial Term
”); provided, however, that Tesoro may, at its option, extend the Initial Term for up to two (2) renewal terms of five (5) years each (each, an “
Extension Period
”) by providing written notice of its intent to TLO no less than three hundred sixty-five (365) calendar days prior to the end of the Initial Term or the then-current Extension Period. The Initial Term, and any extensions of this Agreement as provided above, shall be referred to herein as the “
Term
.”
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4.
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MINIMUM THROUGHPUT COMMITMENT
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(a)
During the Term and subject to the terms and conditions of this Agreement, Tesoro shall throughput the Minimum Throughput Commitment at the Terminals, and TLO shall make available to Tesoro commingled storage and throughput capacity at each respective Terminal, sufficient to allow Tesoro to throughput the Stipulated Volume of Products at such Terminal.
(b)
Allocation of storage and throughput capacity for separate Products at each Terminal shall be in accordance with current practices, or as otherwise may be set forth in a Terminal Service Order, as described below.
(c)
Tesoro may throughput volumes in excess of its Minimum Throughput Commitment, up to the then-available capacity of each Terminal, net of any third-party commitments, as determined by TLO at any time, which allocation of any excess capacity shall be in accordance with current practices, or as otherwise may be set forth in a Terminal Service Order, as described below.
(d)
In the event at any time this Agreement is terminated as to one or more Terminals, as provided herein, then the Minimum Throughput Commitment shall thereafter be adjusted to be the Adjusted Minimum Volume Commitment.
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5.
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TERMINAL SERVICE ORDERS
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(a)
In addition to the throughput subject to the Minimum Volume Commitment set forth in this Agreement, TLO and Tesoro may enter into terminal service orders substantially in the form attached hereto as
Exhibit 1
(each, a “Terminal Service Order”). Upon a request by Tesoro pursuant to this Agreement or as deemed necessary or appropriate by TLO in connection with the services to be delivered pursuant hereto, TLO shall generate a Terminal Service Order to set forth the specific terms and conditions for providing the applicable services described therein and the applicable fees to be charged for such services. No Terminal Service Order shall be effective until fully executed by both TLO and Tesoro.
(b)
Items available for inclusion on a Terminal Service Order include, but are not limited to, the following:
(i)
allocation of storage and throughput capacity for separate Products at each Terminal, other than pursuant to current practices;
(ii)
per-Barrel fees for the volumes Tesoro throughputs at the Terminals;
(iii)
if dedicated storage tanks are to be utilized and the fees payable by Tesoro therefor;
(iv)
any allocation of excess capacity, other than pursuant to current practices;
(v)
fees to be paid by Tesoro for the use of any allocation of excess capacity;
(vi)
any Ancillary Services for each Terminal and the fees for such Ancillary Services;
(vii)
any surcharge not otherwise imposed by TLO pursuant to Section 6;
(viii)
any capital expenditures and related costs subject to reimbursement pursuant to Section 9;
(ix)
any cleaning of tanks or the conversion of a dedicated tank to storage of a different Product pursuant to Section 9 and the fees related thereto;
(x)
any Transmix handling fees pursuant to Section 13;
(xi)
any special or proprietary additive injection services or higher additive injection rates and the fees for such services pursuant to Sections 16 and 18;
(xii)
any fees to be paid by Tesoro to TLO for lubricity and conductivity additive and injection services (including DCA injection) provided pursuant to Section 17 and 18 for Low Sulfur Diesel/Ultra Low Sulfur Diesel Fuel delivered to trucks for Tesoro’s account;
(xiii)
any fees for the operation of special additive equipment described in Section 20;
(xiv)
the receipt, storage and blending of ethanol into Tesoro’s gasoline pursuant to Section 21;
(xv)
the reimbursement of any costs incurred by TLO for periodic software updates, replacement of loading systems or software or other upgrades pursuant to Section 22; and
(xvi)
any dedicated storage to be provided and applicable fees therefor.
(c)
Any fees set forth in this Agreement and any Terminal Service Order shall be increased on July 1 of each year of the Term, by a percentage equal to the greater of zero or the positive change in the CPI-U (All Urban Consumers), as reported by the U.S. Bureau of Labor Statistics.
(d)
In case of any conflict between the terms of this Agreement and the terms of any Terminal Service Order, the terms of the applicable Terminal Service Order shall govern.
If, during the Term, any existing laws or regulations are changed or any new laws or regulations are enacted that require TLO to make substantial and unanticipated expenditures (whether capitalized or otherwise) with respect to the Terminals, TLO may impose a monthly surcharge, as set forth in a Terminal Service Order, to cover Tesoro’s pro rata share of the cost of complying with these laws or regulations, based upon the percentage of Tesoro’s use of the services or facilities impacted by such new laws or regulations. TLO and Tesoro shall use their reasonable commercial efforts to comply with these laws and regulations, and shall negotiate in good faith to mitigate the impact of these laws and regulations and to determine the level of the monthly surcharge.
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7.
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PAYMENT; SHORTFALL PAYMENTS
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(a)
TLO shall invoice Tesoro on a monthly basis and Tesoro shall pay all amounts due under this Agreement and any Terminal Service Order (including Shortfall Payments and Curtailment Fees, each as defined herein) no later than ten (10) calendar days after Tesoro’s receipt of TLO’s invoices. Any past due payments owed by Tesoro to TLO shall accrue interest, payable on demand, at the rate of eight percent (8%) per annum from the due date of the payment through the actual date of payment.
(b)
If, during any Month during the Term, Tesoro throughputs aggregate volumes less than the Minimum Throughput Commitment for such Month, then Tesoro shall pay TLO an amount (a “
Shortfall Payment
”) for any shortfall. Shortfall Payments shall be equal to the weighted average Terminalling Service Fee paid by Tesoro during that Month across all of the Terminals, multiplied by the aggregate monthly shortfall across all Terminals. The dollar amount of any Shortfall Payment paid by Tesoro shall be posted as a credit to Tesoro’s account and may be applied against any Excess Amounts owed by Tesoro during any of the succeeding three (3) Months. For informational purposes only, attached as
Exhibit 2
hereto is a sample calculation demonstrating the Shortfall Payment and its application. Credits will be applied in the order in which such credits accrue and any remaining portion of the credit that is not used by Tesoro during the succeeding three (3) Months shall expire (
e.g
., a credit that accrues in January will be available in February, March and April, will expire at the end of April, and must be applied prior to applying any credit which accrues in February).
(c)
If at any time during the Term, any tank, rack or other equipment or facility of TLO that is dedicated to Tesoro or otherwise being used to provide services hereunder, is removed from service for reasons other than routine repair and maintenance, and if removal of such tank, rack or other equipment or facility from service restricts Tesoro from being able to throughput its Stipulated Volume and receive associated Ancillary Services at the Terminal where such tank, rack or other equipment or facility is located, then until such tank, rack or other equipment or facility is restored to service, Tesoro’s Minimum Throughput Commitment shall be reduced by the difference between the Stipulated Volume and the amount that Tesoro can effectively throughput at such location without restriction until such tank, rack or other equipment or facility is restored to service
.
(a)
With respect only to the Anchorage, Boise, Burley, Stockton and Vancouver Terminals and on a per Terminal basis, not based on the aggregate of all Terminals, TLO shall bear the risk of any actual volume losses of each Product to the extent that such losses exceed 0.25% of the volumes of such Product received at the Terminal, to be pro rated among users of such Terminal, during any Month during the Term. Volumes and losses of each Product shall be determined and accounted for as of the end of each Month. To the extent that actual losses of any Product are less than 0.25% during any particular Month, Tesoro shall repurchase from TLO the difference between the actual loss and the 0.25% allowance at a price per Barrel for that Product as reported by the Oil Price Information Service (“
OPIS
”) using the monthly average OPIS unbranded contract rack posting for that Product during the Month in which the volume difference was accounted for.
All such sales shall be “AS IS”, “WHERE IS”, without any warranty, express or implied, including warranties of merchantability, fitness or title, all of which are expressly excluded
. If volume losses of any Product exceed 0.25% during any particular Month, TLO shall pay Tesoro for the difference between the actual loss and the 0.25% allowance at a price per Barrel for that Product as reported by OPIS using the monthly average OPIS unbranded contract rack posting for that Product during the Month in which the volume difference was accounted for. Deliveries on Saturday, Sunday or federal holidays shall be excluded from the calculation for the applicable Month.
(b)
For all other Terminals, TLO shall have no obligation to measure volume gains and losses and shall have no liability whatsoever for physical losses, except if such losses are caused by the gross negligence or willful misconduct of TLO, as further described in Section 27 herein.
(a)
Tesoro shall reimburse TLO for: (i) the actual cost of any regulatory fees incurred by TLO based on Tesoro’s proportionate share of the actual volumes Tesoro throughputs based upon the percentage of Tesoro’s use of the services or facilities impacted by regulatory fees; (ii) the actual cost of any capital expenditures that TLO agrees to make upon Tesoro’s request pursuant to a Terminal Service Order to provide services hereunder, other than capital expenditures required for TLO to continue to provide those services specified hereunder; and (iii) the actual cost of any third-party fees, including port fees, incurred in connection with carrying out the terms of this Agreement or any Terminal Service Order.
(b)
If cleaning of any tanks is performed by TLO at the specific request of Tesoro, a Terminal Service Order shall provide for Tesoro to bear (or reimburse TLO) for all costs to clean, degas or otherwise prepare the tank(s) including, without limitation, the cost of removal, processing, transportation, disposal, of all waste and the cost of any taxes or charges TLO may be required to pay in regard to such waste. For any tanks that are dedicated to Tesoro for segregated storage of Tesoro’s Products as set forth in any Terminal Service Order, Tesoro agrees to reimburse TLO for the reasonable cost of changes necessary to return the segregated storage tanks to TLO on termination of their dedication for segregated storage under this Agreement or any Purchase order, in the same condition as originally received less normal wear and tear. If Tesoro requests that any such dedicated tank be converted to storage of a different Product, then a Purchase order shall provide for Tesoro to be responsible for reimbursing TLO for all costs of such conversion, including all costs to clean, degas or otherwise prepare the tank(s) including, without limitation, the cost of removal, processing, transportation, disposal, of all waste and the cost of any taxes or charges TLO may be required to pay in regard to such waste. Tesoro shall not be responsible to TLO for any throughput fees and dedicated tank storage fees associated with any dedicated storage tanks taken out of service during the period that such tank is out of service.
(c)
All of the foregoing reimbursements shall be made in accordance with the payment terms set forth in Section 7(a) herein.
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10.
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CUSTODY TRANSFER AND TITLE
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(a)
Pipeline
(i)
Receipts
. For Product received into a Terminal by pipeline, custody of the Product shall pass to TLO at the flange where it enters the Terminal’s receiving line. For receipts of Product at a Terminal rack at Mandan, Salt Lake City or Wilmington, custody shall transfer at the point where the pipeline from the Refinery crosses onto the property controlled by TLO.
(ii)
Deliveries
. For Product delivered by a Terminal into pipeline, custody of the Product shall pass to Tesoro at the flange where it exits the Terminal’s delivery line.
(b)
Rail Receipts
. For Product received by rail, custody shall pass to TLO when the locomotive used to transfer Tesoro’s rail cars to the Terminal is uncoupled from such rail cars at the Terminal.
(c)
Truck
. For receipts and deliveries to or from trucks, custody shall pass at the flange where the hoses at TLO’s facility interconnect with the truck.
(d)
Marine
. For receipts and deliveries to or from marine vessel at Vancouver, custody shall pass at the flange where TLO’s facility interconnects with the hoses connected to the marine vessel; for receipts and deliveries to or from marine vessel at Anchorage, custody shall pass at the flange where TLO’s facility interconnects with the Port of Anchorage Valve Yard.
(e)
General
. Upon re-delivery of any Product to Tesoro’s account, Tesoro shall become solely responsible for any loss, damage or injury to person or property or the environment, arising out of transportation, possession or use of such Product after transfer of custody and the loss allowance provisions hereof shall apply to Product while in TLO’s custody. Title to all Tesoro’s Product received in the Terminals shall remain with Tesoro at all times. Both Parties acknowledge that this Agreement and any Terminal Service Orders represent a bailment of Products by Tesoro to TLO and not a consignment of Products, it being understood that TLO has no authority hereunder to sell or seek purchasers for the Products of Tesoro, except as provided in Section 8 above and Section 13 below. Tesoro hereby warrants that it shall, at all times, have good title to and the right to deliver, throughput, store and receive Products pursuant to the terms of this Agreement or any applicable Terminal Service Order.
(a)
Tesoro warrants that all Products delivered under this Agreement or any Purchaser Order shall meet the latest applicable pipeline specifications or otherwise mutually agreed upon specifications for that Product upon receipt at the applicable Terminal and contain no deleterious substances or concentrations of any contaminants that may make it or its components commercially unacceptable in general industry application. Tesoro shall not deliver to any of the Terminals any Products which: (i) would in any way be injurious to any of the Terminals; (ii) would render any of the Terminals unfit for the proper storage of similar Products; (iii) would contaminate or otherwise downgrade the quality of the Products stored in commingled storage; (iv) may not be lawfully stored at the Terminals; or (v) otherwise do not meet applicable Product specifications for such Product that are customary in the location of the Terminal. If, however, there are Products that do not have such applicable specifications, the specifications shall be mutually agreed upon by the Parties. Should Tesoro’s commingled Products not meet or exceed the minimum quality standards set forth in this Agreement or any applicable Terminal Service Order, Tesoro shall be liable for all loss, damage and cost incurred thereby, including damage to Products of third parties commingled with Tesoro’s unfit Products.
(b)
TLO shall have the right to store compatible Products received for Tesoro’s account with Products belonging to TLO or third parties in TLO’s commingled storage tanks. TLO shall handle Tesoro’s fungible Products in accordance with TLO’s prevailing practices and procedures for handling such Products. The quality of all Products tendered into commingled storage for Tesoro’s account shall be verified either by Tesoro’s refinery analysis or supplier’s certification, such that Products so tendered shall meet TLO’s Product specifications. All costs for such analysis shall be borne solely by Tesoro. TLO shall have the right to sample any Product tendered to the Terminals hereunder. The cost of such sampling shall be borne solely by TLO. All Products returned to Tesoro shall meet or exceed Product specifications in effect on the date the Products are delivered to Tesoro. Notwithstanding any other provision herein, any and all Products that leave the Terminals shall meet all relevant ASTM, EPA, federal and state specifications, and shall not leave the Terminals in the form of a sub-octane grade Product.
(c)
TLO shall exercise reasonable care to ensure that all Products delivered by third parties into commingled storage with Tesoro’s Products meet applicable Product specifications for such Product that are customary in the location of the Terminal. In the event that Tesoro’s Products are commingled with third-party Products that do not meet or exceed the minimum quality standards set forth in this Agreement or any Terminal Service Order, TLO shall be liable for all loss, damage and cost incurred thereby.
All quantities of Products received or delivered by or into truck, rail, or marine vessel shall be measured and determined based upon the meter readings at each Terminal, as reflected by delivery tickets or bills of lading, or if such meters are unavailable, by applicable calibration tables. All quantities of Products received and delivered by pipeline at each Terminal shall be measured and determined based upon the meter readings of the pipeline operator, as reflected by delivery tickets, or if such meters are unavailable, by applicable calibration tables. Deliveries to a Terminal rack at Mandan, Salt Lake City or Wilmington from a Refinery shall be deemed to be the same as the corresponding volumes delivered contemporaneously from the Terminal rack. Deliveries by book transfer shall be reflected by entries in the books of TLO. All quantities shall be adjusted to net gallons at 60° F in accordance with ASTM D-1250 Petroleum Measurement Tables, or latest revisions thereof. Meters and temperature probes shall be calibrated according to applicable API standards. Tesoro shall have the right, at its sole expense, and in accordance with rack location procedure, to independently certify such calibration. Storage tank gauging shall be performed by TLO’s personnel. TLO’s gauging shall be deemed accurate unless challenged by an independent certified gauger. Tesoro may perform joint gauging at its sole expense with TLO’s personnel at the time of delivery or receipt of Product, to verify the amount involved. If Tesoro should request an independent gauger, such gauger must be acceptable to TLO and such gauging shall be at Tesoro’s sole expense.
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13.
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PRODUCT DOWNGRADE AND INTERFACE
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Product downgraded as a result of ordinary Terminal or pipeline operations including line flushing, rack meter provings or other necessary Terminals operations shall not constitute losses for which TLO is liable to Tesoro. TLO shall account for the volume of Product downgraded, and Tesoro’s inventory of Products and/or interface shall be adjusted, provided that, in some cases interface volume (“
Transmix
”) received shall be ratably shared between Tesoro and other customers receiving Products in the same shipment or stored in commingled storage. Tesoro shall remove its Transmix upon notice from TLO and shall be subject to applicable Transmix handling fees upon its removal, as provided in a Terminal Service Order. If Transmix is not removed within fifteen (15) Business Days after notification, TLO shall have the right to sell such Transmix at market rates and return any proceeds to Tesoro, less applicable Transmix handling fees and delivery costs in effect at the time of such sale.
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14.
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PRODUCT DELIVERIES, RECEIPTS AND WITHDRAWALS
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(a)
All supervised deliveries, receipts and withdrawals hereunder shall be made within the normal business hours of each Terminal and at such times as may be required by Tesoro upon prior notice and approval by TLO, all in accordance with the agreed-upon scheduling
.
Unsupervised deliveries, receipts and withdrawals shall be made only with TLO’s prior approval and in strict accordance with TLO’s current operating procedures for the Terminals. Tesoro warrants that all vehicles permitted to enter the Terminals on behalf of Tesoro shall meet all requirements and standards promulgated by applicable regulatory authority including the Department of Transportation, the Occupational Safety and Health Administration, and the Environmental Protection Agency (the “EPA”). Tesoro further warrants that it shall only send to the Terminals those employees, agents and other representatives acting on behalf of and at Tesoro’s direction who have been properly instructed as to the characteristics and safe hauling methods associated with the Products to be loaded and hauled. Tesoro further agrees to be responsible to TLO for the performance under this Agreement or any Terminal Service Order by its agents and/or representatives receiving or delivering Products at the Terminals.
(b)
Tesoro shall withdraw from the Terminals only those Products that it is authorized to withdraw hereunder. Tesoro shall neither duplicate nor permit the duplication of any loading device (
i.e.,
card lock access) provided hereunder. Tesoro shall be fully and solely responsible for all Products loaded through the use of the loading devices issued to Tesoro in accordance with this Agreement or pursuant to any Terminal Service Order;
provided, however
; that Tesoro shall not have any responsibility or liability hereunder in the event that the load authorization system provided hereunder fails or malfunctions in any way unless a credit department override is provided, which authorizes Tesoro to load the Products.
(c)
Both Parties shall abide by all federal, state and local statutes, laws and ordinances and all rules and regulations which are promulgated by TLO and which are either furnished to Tesoro or posted at the Terminals, with respect to the use of the Terminals as herein provided. It is understood and agreed by Tesoro that these rules and regulations may be changed, amended or modified by TLO at any time. All changes, amendments and
modifications shall become binding upon Tesoro ten (10) days following the posting of a copy at the affected Terminals or the receipt by Tesoro of a copy, whichever occurs sooner.
(d)
For all purposes hereunder, Tesoro’s jobbers, distributors, Carriers, haulers and other customers designated in writing or otherwise by Tesoro to have loading privileges under this Agreement or any Terminal Service Order or having possession of any loading device furnished to Tesoro pursuant to this Agreement or any Terminal Service Order, together with their respective officers, servants and employees, shall, when they access the Terminals, be deemed to be representatives of Tesoro.
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15.
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DELIVERIES INTO TRANSPORT TRUCKS
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Prior to transporting any Products loaded into transport trucks at the Terminals, TLO shall make or cause to be made, the following certifications on the delivery receipt or bill of lading covering the Products received:
“If required by 49 CFR 172.204, this is to certify that the above-named materials are properly classified, described, packaged, marked and labeled, and are in proper condition for transportation according to the applicable regulations of the Department of Transportation. Carrier hereby certifies that the cargo tank used for this shipment is a proper container for the commodity loaded therein and complies with Department of Transportation specifications and certifies that cargo tank is properly placarded and marked to comply with regulations pertaining to hazardous materials.”
TLO may require each Carrier coming into the Terminals to expressly agree in writing to be bound by the provisions of a carrier access agreement with respect to withdrawals and loading of Products hereunder or thereunder, to conduct its operations at the Terminals in a safe manner, in accordance with all Applicable Law.
At each Terminal, TLO shall provide equipment for the injection of generic additives, as provided below. Subject to the other provisions set forth herein, and the availability of suitable space in a Terminal and its equipment, Tesoro shall have the option of installing its own proprietary additive systems at the Terminals which TLO shall operate, or utilizing the generic additive service provided by TLO, or a combination of both. Tesoro shall designate pursuant to a Terminal Service Order which additive injection service it desires. TLO shall be responsible for providing generic additives as provided herein, and Tesoro shall be responsible for providing any special or proprietary additives requested by Tesoro.
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17.
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LUBRICITY AND CONDUCTIVITY ADDITIVE
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(a)
TLO owns, maintains and operates diesel lubricity and conductivity additive injection facilities (the “
Additive Facilities
”) at each of the Terminals. TLO shall continue to maintain and operate such Additive Facilities in accordance with customary industry standards during the Term or pursuant to an applicable Terminal Service Order, including all required reporting and record keeping prescribed by Applicable Law.
(b)
During the Term or pursuant to an applicable Terminal Service Order, TLO shall arrange for purchase and delivery of any and all required lubricity and conductivity additive for injection through the Additive Facilities at the Terminals.
(c)
During the Term or pursuant to an applicable Terminal Service Order, TLO shall inject into all Ultra Low Sulfur Diesel delivered to Tesoro at the Terminals an amount of lubricity and conductivity additive that TLO determines to be sufficient to comply with current ASTM diesel lubricity and conductivity specifications. TLO shall, upon request, provide Tesoro with documentation of additive specifications and additive injection, which TLO shall keep on file at each Terminal.
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18.
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DCA ADDITIVE INJECTION
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(a)
All gasoline Product leaving the Terminals shall be additized (“
Additized Gasoline
”). As an exception, TLO shall accommodate a request from Tesoro to lift base gasoline from the Terminals. In that case, the bill of lading issued by TLO shall label all such Product as base gasoline (“
Base Gasoline
”). TLO shall provide a generic Deposit Control Additive (“
DCA
”) injection service, including all required reporting and record keeping prescribed by Applicable Law. The additive supplied shall be a an EPA certified DCA. Subject to the other provisions hereof, Tesoro may request TLO to instead inject a different proprietary DCA into certain gasoline delivered hereunder, instead of the generic DCA provided by TLO, and TLO shall accommodate such requests pursuant to a Terminal Service Order specifying the specific additization required and fees to be charged for its injection, subject to Tesoro providing a suitable Additized Gasoline system for such proprietary additive. TLO shall ensure that such additive is injected into all appropriate gasoline Product delivered to Tesoro at a rate no lower than the Lowest Allowable Concentration (“
LAC
”) at which such additive was certified. The gasoline additization rate shall be determined by Tesoro, but shall not be less than 1.1 times the LAC specified by the respective additive manufacturer or supplier.
(b)
Notwithstanding the above, Tesoro shall be solely responsible for registering with the EPA or any other government agency its use of generic or proprietary additive in its fuels, as required by Applicable Law. Tesoro shall submit, to each applicable Terminal, evidence of registration in compliance with 40 C.F.R. Part 80. Tesoro shall also be responsible for full compliance with any quarterly or other regulatory reporting, and any other requirements under Applicable Law, rule or regulation related to use of generic or proprietary additive in Tesoro’s Product.
(a)
TLO shall provide a generic red dye additive (“
Red Dye
”) injection service for diesel, including all required reporting and recordkeeping prescribed by Applicable Law. TLO shall be responsible for determining the injection rates, Red Dye inventory levels, meter readings, and calculations of actual treat rates, in compliance with the minimum levels prescribed by the Internal Revenue Service.
(b)
Tesoro is responsible for designating which of its accounts shall be authorized to use Red Dye diesel injection services. TLO equipment shall enable designated Carriers and accounts to inject Red Dye upon request prior to loading diesel Product at Terminals. Tesoro’s Carrier shall be solely responsible for designating that a load of diesel Product be injected with Red Dye, and TLO shall have no liability with regard to whether a load of Product is additized with Red Dye. TLO shall not be responsible for any loss, damage or liability that arises from Carrier injecting or failing to inject Red Dye into Tesoro’s Product.
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20.
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SPECIAL ADDITIVE EQUIPMENT
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As set forth in a Terminal Service Order, and subject to the other provisions set forth herein and the availability of suitable space in a Terminal, TLO shall install and maintain at the Terminals, at Tesoro’s sole risk, cost and expense, such special additive equipment as may be desirable for Products to be delivered to Tesoro's account hereunder. The engineering and installation of any fixture, equipment or appurtenance placed on the Terminals in respect thereof shall be subject to TLO’s prior approval and supervision. During the Term, TLO shall operate the special additive equipment with any fees therefor to be set forth in a Terminal Service Order.
(a)
Any such gasoline additive system shall include one above ground storage tank (and any necessary modifications thereto), one additive injection pump, any and all necessary piping and injectors. For the avoidance of doubt, the above ground storage tank shall be supplied by Tesoro.
(b)
Subject to the supervision of TLO, TLO or its designee shall install the additive system. Tesoro shall be responsible for 100% of all costs of the Additized Gasoline system, including without limitation, costs associated with any required piping, nozzles, fittings, equipment, injection panels, labor and/or installation thereof, and if any existing load rack equipment will not support such additional additive system, then Tesoro shall bear all costs of enlarging or renovating such load rack to support the additional additive system requested by Tesoro pursuant to a Terminal Service Order. Tesoro shall reimburse TLO for all such costs within ten days after receipt of an invoice from TLO for such costs. Upon completion of the installation of the Additized Gasoline system, the Additized Gasoline system shall become the property of TLO, free and clear of any security interest or lien.
(c)
Tesoro shall reimburse TLO for any and all necessary modifications to an additional additive system required by Tesoro during the Term.
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21.
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ETHANOL BLENDING SERVICES
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(a)
Where ethanol receiving, storage and blending facilities are available at a Terminal, and upon Tesoro’s request pursuant to a Terminal Service Order, TLO shall receive, store and blend ethanol into Tesoro’s gasoline at a Terminal (“
Ethanol Services
”). TLO shall provide and operate all equipment required for the Ethanol Services. The equipment shall consist of truck and/or rail unloading racks, tanks, pumps, motors, injectors, computer control, and any other ancillary equipment necessary for the providing of the Ethanol Services.
(b)
Tesoro shall be solely responsible for supplying inventories of ethanol at its own expense, including the scheduling and transporting of ethanol into the Terminals, subject to mutually agreeable notice and scheduling procedures. TLO shall receive Tesoro’s ethanol into fungible ethanol storage at the Terminal.
(c)
Upon a request from Tesoro for Ethanol Services, a Terminal Service Order shall provide the desired blending ratio of ethanol to gasoline at each applicable Terminal, including the minimum Octane (R+M/2) rating (“
Blending Instructions
”), for each grade of Tesoro’s gasoline Product, prior to blending. TLO shall not change the blending ratios without the prior written authorization of Tesoro.
(d)
TLO shall maintain for a minimum of five (5) years written or electronic records of the type and volume of oxygenate blended into Tesoro’s gasoline.
(e)
TLO shall maintain an industry standard quality assurance oversight program of the ethanol blending process. TLO shall provide Tesoro with an end-of-year report that, at a minimum, summarizes the volume of Tesoro’s gasoline received by TLO, the volume of oxygenate added to Tesoro’s gasoline, and total volume of blended gasoline. TLO will provide such report within fifteen (15) Business Days of Tesoro’s request.
(f)
TLO shall allow Tesoro or its agents to monitor the oxygenate blending operation by periodic audit, sampling, testing and/or records review to ensure the overall volumes and type of oxygenate blended into gasoline is consistent with the oxygenate claimed by Tesoro as required by 40 CFR 80.101(d)(4)(ii)(B)(2). The scope and type of such audits will be negotiated in good faith by the Parties in advance via written notice.
(g)
TLO shall rely on Blending Instructions and data provided by Tesoro in performing its obligations under this Agreement and any Terminal Service Order. Tesoro agrees to be solely responsible for all claims arising from TLO’s use of or reliance on these Blending Instructions and data.
(h)
When performing the Ethanol Services as per Tesoro’s Blending Instructions, TLO shall not certify to Tesoro or any third-party that blended gasoline does or shall meet ASTM D 4814 or any federal, state, or local regulatory specifications. Tesoro agrees that it is receiving from TLO the Blended Gasoline in an “AS IS, WHERE IS” condition without warranties of any kind, including any warranties of merchantability or fitness for a particular purpose, or its ability to meet ASTM or regulatory specifications.
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22.
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ACCOUNTING PROVISIONS AND DOCUMENTATION
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(a)
TLO shall furnish Tesoro with the following reports covering services hereunder involving Tesoro’s Products:
(i)
within ten (10) Business Days following the end of the Month, a statement showing, by Product: (A) Tesoro’s monthly aggregate deliveries into the Terminals; (B) Tesoro’s monthly receipts from the Terminals; (C) calculation of all Tesoro’s monthly storage and handling fees; (D) Tesoro’s opening inventory for the preceding Month; (E) appropriate monthly loss allowance adjustments (as applicable in accordance with Section 8); and (vi) Tesoro’s closing inventory for the preceding Month;
(ii)
a copy of any meter calibration report, to be available for inspection upon reasonable request by Tesoro at the Terminals following any calibration;
(iii)
upon delivery from the Terminals, a hard copy bill of lading to the Carrier for each truck, barge, or rail delivery. Upon reasonable request only, a hard copy bill of lading shall be provided to Tesoro’s accounting group. Upon each truck delivery from the Terminals, bill of lading information shall be sent electronically through
General Electric Information Services Petroex System
or other mutually agreeable system;
(iv)
for each marine shipment, all bills of lading (or other appropriate document in the case of barges) and inspection reports (if conducted by independent inspector); and
(v)
transfer documents for each in-tank transfer.
(b)
TLO shall be required to maintain the capabilities to support truck load authorization technologies at each Terminal. However, costs incurred by TLO for periodic software updates, replacement of loading systems or software or other upgrades made at the request of Tesoro shall be recoverable from Tesoro pursuant to a Terminal Service Order either as a lump sum payment or through an increase in terminalling fees. Notwithstanding the foregoing, if an update, replacement or upgrade is made other than at Tesoro’s request, TLO and Tesoro shall mutually agree pursuant to a Terminal Service Order on a fee for such update, replacement or upgrade.
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23.
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AUDIT AND CLAIMS PERIOD
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Each Party and its duly authorized agents and/or representatives shall have reasonable access to the accounting records and other documents maintained by the other Party which relate to this Agreement and any Terminal Service Order, and shall have the right to audit such records at any reasonable time or times during the Term and for a period of up to three years after termination of this Agreement or any applicable Terminal Service Order. Claims as to shortage in quantity or defects in quality shall be made by written notice within ninety (90) days after the delivery in question or shall be deemed to have been waived.
TLO hereby waives, relinquishes and releases any and all liens, including without limitation, any and all warehouseman’s liens, custodian’s liens, rights of retention and/or similar rights under all applicable laws, which TLO would or might otherwise have under or with respect to the Products throughput, stored or handled hereunder. TLO further agrees to furnish documents reasonably acceptable to Tesoro and its lender(s) (if applicable), and to cooperate with Tesoro in assuring and demonstrating that Products titled in Tesoro’s name shall not be subject to any lien on the Terminals or TLO’s Products throughput or stored there.
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25.
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NEWLY IMPOSED TAXES AND REGULATORY FEES
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(a)
Tesoro shall promptly pay or reimburse TLO for any newly imposed taxes, levies, royalties, assessments, licenses, fees, charges, surcharges and sums due of any nature whatsoever (other than income taxes, gross receipt taxes and similar taxes) imposed by any federal, state or local government or agency that TLO incurs on Tesoro’s behalf for the services provided by TLO under this Agreement or any Terminal Service Order. If TLO is required to pay any of the foregoing, Tesoro shall promptly reimburse TLO in accordance with the payment terms set forth in this Agreement or any Terminal Service Order.
(b)
Upon written request by TLO, Tesoro shall supply TLO with a completed signed original notification certificate of gasoline and diesel fuel registrant as required by the Internal Revenue Service’s excise tax regulation. Tesoro further agrees to comply with all Applicable Law with respect to such taxes.
(c)
If Tesoro is exempt from the payment of any taxes allocated to Tesoro under the foregoing provisions, Tesoro shall furnish TLO with the proper exemption certificates.
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26.
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LIMITATION ON LIABILITY
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Notwithstanding anything to the contrary contained herein, neither Party shall be liable or responsible to the other Party or such other Party’s affiliated Persons for any consequential, incidental, or punitive damages, or for loss of profits or revenues (collectively referred to as “special damages”) incurred by such Party or its affiliated Persons that arise out of or relate to this Agreement, REGARDLESS OF WHETHER ANY SUCH CLAIM ARISES UNDER OR RESULTS FROM CONTRACT, NEGLIGENCE, OR STRICT LIABILITY OF THE PARTY WHOSE LIABILITY IS BEING WAIVED HEREBY; provided that the foregoing limitation is not intended and shall not affect special damages imposed in favor of unaffiliated Persons that are not Parties to this Agreement.
(a)
Notwithstanding anything else contained in this Agreement or any Terminal Service Order, TLO shall release, defend, protect, indemnify, and hold harmless Tesoro from and against any and all demands, claims (including third-party claims), losses, costs, suits, or causes of action (including, but not limited to, any judgments, losses, liabilities, fines, penalties, expenses, interest, reasonable legal fees, costs of suit, and damages, whether in law or equity and
whether in contract, tort, or otherwise) for or relating to (i) personal or bodily injury to, or death of the employees of Tesoro and, as applicable, its Carriers, customers, representatives, and agents, (ii) loss of or damage to any property, products, material, and/or equipment belonging to Tesoro and, as applicable, its Carriers, customers, representatives, and agents, and each of their respective affiliates, contractors, and subcontractors (except for those volume losses of Products provided for in Section 8), (iii) loss of or damage to any other property, products, material, and/or equipment of any other description (except for those volume losses of Products provided for in Section 8), and/or personal or bodily injury to, or death of any other Person or Persons; and with respect to clauses (i) through (iii) above, which is caused by or resulting in whole or in part from the acts and omissions of TLO in connection with the ownership or operation of the Terminals and the services provided hereunder, and, as applicable, its carriers, customers (other than Tesoro), representatives, and agents, or those of their respective employees with respect to such matters, and (iv) any losses incurred by Tesoro due to violations of this Agreement or any Terminal Service Order by TLO, or, as applicable, its customers (other than Tesoro), representatives, and agents;
PROVIDED
THAT
TLO SHALL NOT BE OBLIGATED TO INDEMNIFY OR HOLD HARMLESS TESORO FROM AND AGAINST ANY CLAIMS TO THE EXTENT THEY RESULT FROM THE BREACH OF CONTRACT, GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF TESORO.
(b)
Notwithstanding anything else contained in this Agreement or any Terminal Service Order, Tesoro shall release, defend, protect, indemnify, and hold harmless TLO and, and each of its respective affiliates, officers, directors, shareholders, agents, employees, successors-in-interest, and assignees from and against any and all demands, claims (including third-party claims), losses, costs, suits, or causes of action (including, but not limited to, any judgments, losses, liabilities, fines, penalties, expenses, interest, reasonable legal fees, costs of suit, and damages, whether in law or equity and whether in contract, tort, or otherwise) for or relating to (i) personal or bodily injury to, or death of the employees of TLO and, as applicable, its carriers, customers, representatives, and agents; (ii) loss of or damage to any property, products, material, and/or equipment belonging to TLO and, as applicable, its carriers, customers, representatives, and agents, and each of their respective affiliates, contractors, and subcontractors (except for those volume losses of Products provided for in Section 8); (iii) loss of or damage to any other property, products, material, and/or equipment of any other description (except for those volume losses of Products provided for in Section 8), and/or personal or bodily injury to, or death of any other Person or Persons; and with respect to clauses (i) through (iii) above, which is caused by or resulting in whole or in part from the acts and omissions of Tesoro, in connection with Tesoro’s and its customers’ use of the Terminals and the services provided hereunder and Tesoro’s Products stored hereunder, and, as applicable, its Carriers, customers, representatives, and agents, or those of their respective employees with respect to such matters; and (iv) any losses incurred by TLO due to violations of this Agreement or any Terminal Service Order by Tesoro, or, as applicable, its Carriers, customers, representatives, and agents;
PROVIDED THAT
TESORO SHALL NOT BE OBLIGATED TO INDEMNIFY OR HOLD HARMLESS TLO FROM AND AGAINST ANY CLAIMS TO THE EXTENT THEY RESULT FROM THE BREACH OF CONTRACT, GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF TLO. For the avoidance of doubt, nothing herein shall constitute a release by Tesoro of any volume losses that are caused by the TLO’s gross negligence, breach of this Agreement or any Terminal Service Order or willful misconduct.
(a)
At all times during the Term and for a period of two (2) years after termination of this Agreement for any coverage maintained on a “claims-made” or “occurrence” basis, Tesoro and/or its Carrier (if applicable) shall maintain at their expense the below listed insurance in the amounts specified below which are minimum requirements. Tesoro shall require that Carrier cause all of its contractors providing authorized drivers or authorized vehicles, to carry such insurance, and Tesoro shall be liable to TLO for their failure to do so. Such insurance shall provide coverage to TLO and such policies, other than Worker’s Compensation Insurance, shall include TLO as an Additional Insured. Each policy shall provide that it is primary to and not contributory with any other insurance, including any self-insured retention, maintained by TLO (which shall be excess) and each policy shall provide the full coverage required by this Agreement and any Terminal Service Order. All such insurance shall be written with carriers and underwriters acceptable to TLO, and eligible to do business in the states where the Terminals are located and having and maintaining an A.M. Best financial strength rating of no less than “A-” and financial size rating no less than “VII”; provided that Tesoro and/or the Carrier may procure worker’s compensation insurance from the state fund of the state where the Terminal(s) are located. All limits listed below are required MINIMUM LIMITS:
(i)
Workers Compensation and Occupational Disease Insurance which fully complies with Applicable Law of the state where each Terminal is located, in limits not less than statutory requirements;
(ii)
Employers Liability Insurance with a minimum limit of $1,000,000 for each accident, covering injury or death to any employee which may be outside the scope of the worker’s compensation statute of the jurisdiction in which the worker’s service is performed, and in the aggregate as respects occupational disease;
(iii)
Commercial General Liability Insurance, including contractual liability insurance covering Carrier’s indemnity obligations under this Agreement or any Terminal Service Order, with minimum limits of $1,000,000 combined single limit per occurrence for bodily injury and property damage liability, or such higher limits as may be required by TLO or by Applicable Law from time to time. This policy shall include Broad Form Contractual Liability insurance coverage which shall specifically apply to the obligations assumed in this Agreement and any Terminal Service Order by Tesoro;
(iv)
Automobile Liability Insurance covering all owned, non-owned and hired vehicles, with minimum limits of $1,000,000 combined single limit per occurrence for bodily injury and property damage liability, or such higher limit(s) as may be required by Tesoro or by Applicable Law from time to time. Coverage must assure compliance with Sections 29 and 30 of the Motor Carrier Act of 1980 and all applicable rules and regulations of the Federal Highway Administration’s Bureau of Motor Carrier Safety and Interstate Commerce Commissioner (Form MCS 90 Endorsement). Limits of liability for this insurance must be in accordance with the financial responsibility requirement of the Motor Carrier Act, but not less than $1,000,000 per occurrence;
(v)
Excess (Umbrella) Liability Insurance with limits not less than $4,000,000 per occurrence. Additional excess limits may be utilized to supplement inadequate limits in the primary policies required in items (ii), (iii), and (iv) above;
(vi)
Pollution Legal Liability with limits not less than $25,000,000 per loss with an annual aggregate of $25,000,000. Coverage shall apply to bodily injury and property damage including loss of use of damaged property and property that has not been physically injured; cleanup costs, defense, including costs and expenses incurred in the investigation, defense or settlement of claim; and
(vii)
Property Insurance, with a limit of no less than $1,000,000, which property insurance shall be first-party property insurance to adequately cover Tesoro’s owned property; including personal property of others.
(b)
All such policies must be endorsed with a Waiver of Subrogation endorsement, effectively waiving rights of recovery under subrogation or otherwise, against TLO, and shall contain where applicable, a severability of interest clause and a standard cross liability clause.
(c)
Upon execution of this Agreement and prior to the operation of any equipment by Tesoro, Carrier or its authorized drivers at the Terminals, Tesoro and/or Carrier will furnish to TLO, and at least annually thereafter (or at any other times upon request by TLO) during the Term (and for any coverage maintained on a “claims-made” basis, for two (2) years after the termination of this Agreement or any applicable Terminal Service Order), insurance certificates and/or certified copies of the original policies to evidence the insurance required herein, including on behalf of Carrier’s contractors providing authorized vehicles or authorized drivers. Such certificates shall be in the form of the “Accord” Certificate of Insurance, and reflect that they are for the benefit of TLO and shall provide that there will be no material change in or cancellation of the policies unless TLO is given at least thirty (30) days prior written notice. Certificates providing evidence of renewal of coverage shall be furnished to TLO prior to policy expiration.
(d)
Tesoro and/or Carrier shall be solely responsible for any deductibles or self-insured retention.
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29.
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GOVERNMENT REGULATIONS
|
(a)
Product Certification
. Each Party certifies that none of the Products covered by this Agreement or any Terminal Service Order were derived from crude petroleum, petrochemical, or gas which was produced or withdrawn from storage in violation of any federal, state or other governmental law, nor in violation of any rule, regulation or promulgated by any governmental agency having jurisdiction in the premises.
(b)
Applicable Law
. The Parties are entering into this Agreement and any Terminal Service Order in reliance upon and shall comply in all material respects with all Applicable Law which directly or indirectly affects the Products throughput hereunder, or any receipt, throughput delivery, transportation, handling or storage of Products hereunder or the ownership, operation or
condition of each Terminal. Each Party shall be responsible for compliance with all Applicable Laws associated with such Party’s respective performance hereunder and the operation of such Party’s facilities. In the event any action or obligation imposed upon a Party under this Agreement and any Terminal Service Order shall at any time be in conflict with any requirement of Applicable Law, then this Agreement and any Terminal Service Order shall immediately be modified to conform the action or obligation so adversely affected to the requirements of the Applicable Law, and all other provisions of this Agreement and any Terminal Service Order shall remain effective.
(c)
New Or Changed Applicable Law
: If during the Term, any new Applicable Law becomes effective or any existing Applicable Law or its interpretations is materially changed, which change is not addressed by another provision of this Agreement or any Terminal Service Order and which has a material adverse economic impact upon a Party, either Party, acting in good faith, shall have the option to request renegotiation of the relevant provisions of this Agreement or any Terminal Service Order with respect to future performance. The Parties shall then meet to negotiate in good faith amendments to this Agreement or to an applicable Terminal Service Order that will conform to the new Applicable Law while preserving the Parties’ economic, operational, commercial and competitive arrangements in accordance with the understandings set forth herein.
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30.
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SUSPENSION OF REFINERY OPERATIONS
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(a)
In the event that Tesoro decides to permanently or indefinitely suspend refining operations at any of Tesoro’s Refineries for a period that shall continue for at least twelve (12) consecutive Months, Tesoro may provide written notice to TLO of Tesoro’s intent to terminate that part of this Agreement or any Terminal Service Order relating to the applicable associated Terminal (the “
Suspension Notice
”). Such Suspension Notice shall be sent at any time after Tesoro has publicly announced such suspension and, upon the expiration of the twelve (12)-Month period following the date such notice is sent (the “
Notice Period
”), that part of this Agreement or any Terminal Service Order relating to such Terminal shall terminate. If Tesoro publicly announces, more than two Months prior to the expiration of the Notice Period, its intent to resume operations at the applicable Refinery, then the Suspension Notice shall be deemed revoked and the applicable portion of this Agreement or any Terminal Service Order shall continue in full force and effect as if such Suspension Notice had never been delivered.
(b)
During the Notice Period, for any Month during which Tesoro does not throughput any volumes of Products at an affected Terminal, Tesoro shall be permitted to reduce its Minimum Throughput Commitment by an amount equal to the Stipulated Volume for such affected Terminal(s), provided that Tesoro pays TLO a fee for such Month (a “
Curtailment Fee
”). Curtailment Fees for each applicable Month shall be equal to (i) such Terminal’s Stipulated Volume multiplied by (ii) the number of days in the Month, multiplied by (iii) the weighted average monthly Terminalling Service Fee incurred by Tesoro at such Terminal during the twelve (12) calendar Months immediately preceding the Refinery’s suspension of operations. For avoidance of doubt, for the purposes of calculating Shortfall Payments during any Month in which Tesoro pays TLO a Curtailment Fee, volume shortfalls shall be determined by deducting volumes throughput at the Terminals by TRMC during such Month from the Adjusted Minimum
Throughput Commitment reduced by an amount equal to the Stipulated Volume for such affected Terminal(s).
(c)
Upon the expiration of the Notice Period, Tesoro shall no longer owe TLO any future Curtailment Fees and shall have no throughput obligation with respect to the affected Terminal, and Tesoro’s Minimum Throughput Commitment shall be adjusted to the Adjusted Minimum Volume Commitment for the remaining unaffected Terminals, by deducting the applicable Stipulated Volume for the Terminal removed from this Agreement or any Terminal Service Order under this Section 30. If refining operations at any of the Refineries are suspended for any reason (including Refinery turnarounds and other scheduled maintenance), then Tesoro shall remain liable for Shortfall Payments under this Agreement or any applicable Terminal Service Order for the duration of the suspension, unless and until this Agreement or applicable Terminal Service Order is terminated as provided above.
Schedule B
attached hereto includes a list of the Terminals associated with each of the Refineries.
(a)
As soon as possible upon the occurrence of a Force Majeure, TLO shall provide Tesoro with written notice of the occurrence of such Force Majeure (a “
Force Majeure Notice
”). TLO shall identify in such Force Majeure Notice the approximate length of time that TLO reasonably believes in good faith such Force Majeure shall continue (the “
Force Majeure Period
”). If TLO advises in any Force Majeure Notice that it reasonably believes in good faith that the Force Majeure Period shall continue for more than twelve (12) consecutive Months, then, subject to Section 32 below, at any time after TLO delivers such Force Majeure Notice, either Party may terminate this Agreement or any Terminal Service Order solely with respect to the affected Terminal(s), but only upon delivery to the other Party of a notice (a “
Termination Notice
”) at least twelve (12) Months prior to the expiration of the Force Majeure Period; provided, however; that such Termination Notice shall be deemed cancelled and of no effect if the Force Majeure Period ends prior to the expiration of such twelve (12)-Month period. If this Agreement or any Terminal Service Order is terminated as to a Terminal under this Section 31, then Tesoro’s Minimum Throughput Commitment shall be adjusted to the Adjusted Minimum Volume Commitment for the remaining unaffected Terminals, by deducting the applicable Stipulated Volume for the Terminal so removed from this Agreement or any Terminal Service Order. For the avoidance of doubt, neither Party may exercise its right under this Section 31(a) to terminate this Agreement or any Terminal Service Order as a result of a Force Majeure with respect to any Terminal that has been unaffected by, or has been restored to working order since, the applicable Force Majeure, including pursuant to a Restoration under Section 32.
(b)
Notwithstanding the foregoing, if Tesoro delivers a Termination Notice to TLO (the “
Tesoro Termination Notice
”) and, within thirty (30) days after receiving such Tesoro Termination Notice, TLO notifies Tesoro that TLO reasonably believes in good faith that it shall be capable of fully performing its obligations under this Agreement or any Terminal Service Order within a reasonable period of time, then the Tesoro Termination Notice shall be deemed revoked and the applicable portion of this Agreement or any Terminal Service Order shall continue in full force and effect as if such Tesoro Termination Notice had never been given.
(c)
If either Party terminates a portion of this Agreement or any Terminal Service Order related to one or more specific Terminals, then the Minimum Throughput Commitment shall be reduced by the Stipulated Volume for the applicable Terminal(s).
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32.
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CAPABILITIES OF FACILITIES
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(a)
Interruptions of Service
. Subject to Force Majeure and interruptions for routine repair and maintenance, consistent with customary terminal industry standards, TLO shall use reasonable commercial efforts to minimize the interruption of service at each Terminal and any portion thereof. TLO shall promptly inform Tesoro operational personnel of any anticipated partial or complete interruption of service at any Terminal, including relevant information about the nature, extent, cause and expected duration of the interruption and the actions TLO is taking to resume full operations, provided that TLO shall not have any liability for any failure to notify, or delay in notifying, Tesoro of any such matters except to the extent Tesoro has been materially prejudiced or damaged by such failure or delay.
(b)
Maintenance and Repair Standards
. Subject to Force Majeure and interruptions for routine repair and maintenance, consistent with customary terminal industry standards, TLO shall maintain each Terminal in a condition and with a capacity sufficient to throughput a volume of Tesoro’s Products at least equal to the respective Stipulated Volume for such Terminal. TLO’s obligations may be temporarily suspended during the occurrence of, and for the entire duration of, a Force Majeure or other interruption of service that prevents TLO from terminalling the Minimum Throughput Commitment hereunder. To the extent TLO is prevented from terminalling volumes equal to the full Minimum Throughput Commitment for reasons of Force Majeure or other interruption of service, then Tesoro’s obligation to throughput the Minimum Throughput Commitment and pay any Shortfall Payment shall be reduced proportionately in an amount not to exceed the Stipulated Volume for the affected Terminal. At such time as TLO is capable of terminalling volumes equal to the Minimum Throughput Commitment, Tesoro’s obligation to throughput the full Minimum Throughput Commitment shall be restored. If for any reason, including, without limitation, a Force Majeure event, the throughput or storage capacity of any Terminal should fall below the capacity required for throughput of the Stipulated Volume for that Terminal, then within a reasonable period of time after the commencement of such reduction, TLO shall make repairs to the Terminal to restore the capacity of such Terminal to that required for throughput of the Stipulated Volume (“
Restoration
”). Except as provided below in Section 32(c), all of such Restoration shall be at TLO’s cost and expense, unless the damage creating the need for such repairs was caused by the negligence or willful misconduct of Tesoro, its employees, agents or customers or the failure of Tesoro’s Products to meet the specifications as provided for in Section 11(a).
(c)
Capacity Resolution
. In the event of the failure of TLO to maintain any Terminal in a condition and with a capacity sufficient to throughput a volume of Tesoro’s Products equal to the respective Stipulated Volume for such Terminal, then either Party shall have the right to call a meeting between executives of both Parties by providing at least two (2) Business Days’ advance written notice. Any such meeting shall be held at a mutually agreeable location and will be attended by executives of both Parties each having sufficient authority to commit his or her respective Party to a Capacity Resolution (hereinafter defined). At the meeting, the Parties will
negotiate in good faith with the objective of reaching a joint resolution for the Restoration of capacity on the Terminal which will, among other things, specify steps to be taken by TLO to fully accomplish Restoration and the deadlines by which the Restoration must be completed (the “
Capacity Resolution
”). Without limiting the generality of the foregoing, the Capacity Resolution shall set forth an agreed upon time schedule for the Restoration activities. Such time schedule shall be reasonable under the circumstances, consistent with customary terminal industry standards and shall take into consideration TLO’s economic considerations relating to costs of the repairs and Tesoro’s requirements concerning its refining and marketing operations. TLO shall use commercially reasonable efforts to continue to provide storage and throughput of Tesoro’s Products at the affected Terminal, to the extent the Terminal has capability of doing so, during the period before Restoration is completed. In the event that Tesoro’s economic considerations justify incurring additional costs to restore the Terminal in a more expedited manner than the time schedule determined in accordance with the preceding sentence, Tesoro may require TLO to expedite the Restoration to the extent reasonably possible, subject to Tesoro’s payment, in advance, of the estimated incremental costs to be incurred as a result of the expedited time schedule. In the event the Parties agree to an expedited Restoration plan in which Tesoro agrees to fund a portion of the Restoration cost, then neither Party shall have the right to terminate this Agreement or any applicable Terminal Service Order in connection with a Force Majeure, so long as such Restoration is completed with due diligence, and Tesoro shall pay its portion of the Restoration costs to TLO in advance based on an estimate based on reasonable engineering standards promulgated by the Association for Facilities Engineering. Upon completion, Tesoro shall pay the difference between the actual portion of Restoration costs to be paid by Tesoro pursuant to this Section 32(c) and the estimated amount paid under the preceding sentence within thirty (30) days after receipt of TLO’s invoice therefor, or, if appropriate, TLO shall pay Tesoro the excess of the estimate paid by Tesoro over TLO’s actual costs as previously described within thirty (30) days after completion of the Restoration.
(d)
Tesoro’s Right To Cure
. If at any time after the occurrence of (x) a Partnership Change of Control or (y) a sale of a Refinery, TLO either (i) refuses or fails to meet with Tesoro within the period set forth in Section 32(c), (ii) fails to agree to perform a Capacity Resolution in accordance with the standards set forth in Section 32(c), or (iii) fails to perform its obligations in compliance with the terms of a Capacity Resolution, Tesoro may, as its sole remedy for any breach by TLO of any of its obligations under Section 32(c), require TLO to complete a Restoration of the affected Terminal, subject to and to the extent permitted under the terms, conditions and/or restrictions of applicable leases, permits and/or Applicable Law. Any such Restoration required under this Section 32(d) shall be completed by TLO at Tesoro’s cost. TLO shall use commercially reasonable efforts to continue to provide storage and throughput of Tesoro’s Products at the affected Terminal, during the period while such Restoration is being completed. Any work performed by TLO pursuant to this Section 32(d) shall be performed and completed in a good and workmanlike manner consistent with applicable industry standards and in accordance with all Applicable Law. Additionally, during such period after the occurrence of (x) a Partnership Change of Control or (y) a sale of a Refinery, Tesoro may exercise any remedies available to it under this Agreement or any Terminal Service Order (other than termination), including the right to immediately seek temporary and permanent injunctive relief for specific performance by TLO of the applicable provisions of this Agreement or any Terminal
Service Order, including, without limitation, the obligation to make Restorations as described herein.
(e)
Commingled Storage
. Unless otherwise specified in a Terminal Service Order, all storage and throughput of Tesoro’s volumes shall be on a fungible commingled basis, and TLO may commingle such Products with Products of third parties of like grade and kind. All Tank Heels shall be allocated among all storage users on a pro rata basis. Tank heels cannot be withdrawn from any tank without prior approval of TLO. TLO shall have the right to enter into arrangements with third parties to throughput and store volumes of Products at each Terminal, provided however, that TLO shall not enter into any third party arrangements that would restrict or limit the ability of Tesoro to throughput the Stipulated Volume at each Terminal each Month without proration or allocation, on reasonable schedules consistent with Tesoro’s requirements, and to receive the Ancillary Services provided herein.
(f)
Dedicated Storage
. In the event that the Parties determine to use dedicated storage tanks during the Term pursuant to a Terminal Service Order, such storage tanks and capacities identified on a Terminal Service Order shall be dedicated and used exclusively for the storage and throughput of Tesoro’s Product. For those dedicated tanks, Tesoro shall be responsible for providing all Tank Heels required for operation of such tanks. Tesoro shall pay the fees specified on a Terminal Service Order for the dedication of such tanks. Tank heels cannot be withdrawn from any dedicated storage tank without prior approval of TLO.
(g)
First Refusal
. In the event that TLO desires to enter into a third-party dedicated storage arrangement (a “
Storage Contract
”) for any storage tank subject to this Agreement and existing on the Commencement Date (a “
Subject Tank
”), TLO shall provide Tesoro with (i) written notice of its intent to enter into a Storage Contract and the general terms of such transaction and (ii) a thirty (30)-day period (beginning upon Tesoro’s receipt of such written notice) (the “
Offer Period
”) in which Tesoro may make a good faith offer to enter into a Storage Contract with TLO with respect to such Subject Tank (the “
Right of First Refusal
”). If Tesoro makes an offer on terms no less favorable to TLO than the third-party offer for a Storage Contract with respect to such Subject Tank during the Offer Period, then TLO shall be obligated to enter into a Storage Contract with Tesoro. If Tesoro does not exercise its Right of First Refusal in the manner set forth above, TLO may, for the next ninety (90) days, proceed with the negotiation of the third-party Storage Contract. If no third-party Storage Contract is consummated during such ninety-day period, then the terms and conditions of this Section 32(g) shall again become effective with respect to such Storage Tank.
(a)
A Party shall be in default under this Agreement or any Terminal Service Order if:
(i)
the Party breaches any provision of this Agreement or applicable Terminal Service Order, which breach has a material adverse effect on the other Party, and such breach is not excused by Force Majeure or cured within fifteen (15) Business Days after notice thereof (which notice shall describe such breach in reasonable detail) is received
by such Party (unless such failure is not commercially reasonably capable of being cured in such fifteen (15) Business Day period in which case such Party shall have commenced remedial action to cure such breach and shall continue to diligently and timely pursue the completion of such remedial action after such notice);
(ii)
the Party (A) files a petition or otherwise commences, authorizes or acquiesces in the commencement of a proceeding or cause of action under any bankruptcy, insolvency, reorganization or similar Applicable Law, or has any such petition filed or commenced against it, (B) makes an assignment or any general arrangement for the benefit of creditors, (C) otherwise becomes bankrupt or insolvent (however evidenced) or (D) has a liquidator, administrator, receiver, trustee, conservator or similar official appointed with respect to it or any substantial portion of its property or assets; or
(iii)
if any of the Parties is in default as described above, then (A) if Tesoro is in default, TLO may or (B) if TLO is in default, Tesoro may: (1) terminate this Agreement or applicable Terminal Service Order upon notice to the defaulting Parties; (2) withhold any payments due to the defaulting Parties under this Agreement or applicable Terminal Service Order; and/or (3) pursue any other remedy at law or in equity.
(b)
If a Party breaches any provision of this Agreement or a Terminal Service Order, which breach does not have a material adverse effect on the other Party, the breaching Party shall still have the obligation to cure such breach.
(c)
Tesoro shall, upon expiration or termination of this Agreement or any Terminal Service Order, promptly remove all of its Products including any downgraded and interface Product and Transmix from the Terminals, and TLO shall remove the remaining Tank Heels and deliver them to Tesoro or Tesoro’s designee, within thirty (30) days of such termination or expiration. In the event all of the Product is not removed within such thirty (30) day period, Tesoro shall be assessed a storage fee to all Products held in storage more than thirty (30) days beyond the termination or expiration of this Agreement or applicable Terminal Service Order until such time Tesoro’s entire Product is removed from the Terminals.
(d)
Tesoro shall, upon expiration or termination of this Agreement or any Terminal Service Order, promptly remove any and all of its owned equipment not purchased by TLO pursuant to Section 13 above, and restore the Terminals to their condition prior to the installation of such equipment.
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34.
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RIGHT TO ENTER INTO A NEW TERMINALLING AGREEMENT
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(a)
Upon termination of this Agreement or a Terminal Service Order for reasons other than (x) a default by Tesoro and (y) any other termination of this Agreement or a Terminal Service Order initiated by Tesoro pursuant to Sections 30 or 31. Tesoro shall have the right to require TLO to enter into a new terminalling services agreement with Tesoro that (i) is consistent with the terms set forth in this Agreement, (ii) relates to the same Terminals that are the subject
matter of this Agreement, and (iii) has commercial terms that are, in the aggregate, equal to or more favorable to TLO than fair market value terms as would be agreed by similarly-situated parties negotiating at arm’s length; provided, however; that the term of any such new terminalling services agreement shall not extend beyond April 30, 2031.
(b)
In the event that TLO proposes to enter into a terminalling services agreement with a third party within two (2) years after the termination of this Agreement or any Terminal Service Order for reasons other than (x) by default by Tesoro and (y) any other termination of this Agreement or any Terminal Service Order initiated by Tesoro pursuant to Sections 30 or 31, TLO shall give Tesoro ninety (90) days’ prior written notice of any proposed new terminalling services agreement with a third party, including (i) details of all of the material terms and conditions thereof and (ii) a thirty (30)-day period (beginning upon Tesoro’s receipt of such written notice) (the “
First Offer Period
”) in which Tesoro may make a good faith offer to enter into a new terminalling agreement with TLO (the “
Terminalling Right of First Refusal
”). If Tesoro makes an offer on terms no less favorable to TLO than the third-party offer with respect to such terminalling services agreement during the First Offer Period, then TLO shall be obligated to enter into a terminalling services agreement with Tesoro on the terms set forth in Section 34(a) above. If Tesoro does not exercise its Terminalling Right of First Refusal in the manner set forth above, TLO may, for the next ninety (90) days, proceed with the negotiation of the third-party terminalling services agreement. If no third party agreement is consummated during such ninety-day period, the terms and conditions of this Section 34(b) shall again become effective.
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35.
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ASSIGNMENT; PARTNERSHIP CHANGE OF CONTROL
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(a)
Tesoro shall not assign all of its obligations hereunder or under a Terminal Service Order without TLO’s prior written consent, which consent shall not be unreasonably withheld, conditioned or delayed;
provided
,
however
; that Tesoro may assign this Agreement or any Terminal Service Order, without TLO’s consent, in connection with a sale by Tesoro of a Refinery associated with one of TLO’s Terminals so long as the transferee: (i) agrees to assume all of Tesoro’s obligations under this Agreement and any Terminal Service Order with respect to the associated Terminal(s); and (ii) is financially and operationally capable of fulfilling the terms of this Agreement and any Terminal Service Order, which determination shall be made by Tesoro in its reasonable judgment.
(b)
TLO shall not assign its rights or obligations under this Agreement or any Terminal Service Order without Tesoro’s prior written consent, which consent shall not be unreasonably withheld, conditioned or delayed; provided, however, that (i) TLO may assign this Agreement or any Terminal Service Order without Tesoro’s consent in connection with a sale by TLO of one or more of its Terminals so long as the transferee: (A) agrees to assume all of TLO’s obligations under this Agreement and any Terminal Service Order with respect to the associated Terminal(s); (B) is financially and operationally capable of fulfilling the terms of this Agreement and any Terminal Service Order, which determination shall be made by TLO in its reasonable judgment; and (C) is not a competitor of Tesoro; and (ii) TLO shall be permitted to make a collateral assignment of this Agreement or any Terminal Service Order solely to secure working capital financing for TLO.
(c)
If either Tesoro or TLO assigns its rights or obligations as permitted under this Agreement or any Terminal Service Order relating to a specific Terminal, then: (i) the Minimum Throughput Commitment shall be converted to the Adjusted Minimum Volume Commitment for the Terminals remaining subject to this Agreement or applicable Terminal Service Order by reducing by the amount of the Stipulated Volume for such assigned Terminal, and both Tesoro’s and TLO’s obligations shall continue with respect to the remaining Terminals and the adjusted Minimum Throughput Commitment; and (ii) the rights and obligations relating to the affected Terminal, and its Stipulated Volume, shall be novated into a new agreement with the assignee, and such assignee shall be responsible for the performance of the assigning Party’s obligations relating to the affected Terminal.
(d)
Any assignment that is not undertaken in accordance with the provisions set forth above shall be null and void
ab initio
. A Party making any assignment shall promptly notify the other Party of such assignment, regardless of whether consent is required. This Agreement and any Terminal Service Order shall be binding upon and inure to the benefit of the Parties hereto and their respective successors and permitted assigns.
(e)
Tesoro’s obligations hereunder shall not terminate in connection with a Partnership Change of Control, provided however, that in the case of a Partnership Change of Control, Tesoro shall have the option to extend the Term as provided in Section 3. TLO shall provide Tesoro with notice of any Partnership Change of Control at least sixty (60) days prior to the effective date thereof.
All notices, requests, demands, and other communications hereunder will be in writing and will be deemed to have been duly given: (a) if by transmission by facsimile or hand delivery, when delivered; (b) if mailed via the official governmental mail system, five (5) Business Days after mailing, provided said notice is sent first class, postage pre-paid, via certified or registered mail, with a return receipt requested; (c) if mailed by an internationally recognized overnight express mail service such as Federal Express, UPS, or DHL Worldwide, one (1) Business Day after deposit therewith prepaid; or (d) if by e-mail, one Business Day after delivery with receipt confirmed. All notices will be addressed to the Parties at the respective addresses as follows:
If to TRMC or TAK, to:
c/o Tesoro Refining & Marketing Company LLC
19100 Ridgewood Parkway
San Antonio, Texas 78259
For legal notices
:
Attention: Charles L. Magee, General Counsel
phone: (253) 896-8766
email: Charles.L.Magee@tsocorp.com
For all other notices and communications
:
Attention: Paul E. Carlson, Director of Supply Operations
phone: (210) 626-4389
email: Paul.E.Carlson@tsocorp.com
If to TLO, to:
Tesoro Logistics Operations LLC
19100 Ridgewood Parkway
San Antonio, Texas 78259
For legal notices
:
Attention: Charles S. Parrish, General Counsel
phone: (210) 626-4280
email: charles.s.parrish@tsocorp.com
For all other notices and communications
:
Attention: Rick D. Weyen, Vice President, Logistics
phone: (210) 626-4379
email: Rick.D.Weyen@tsocorp.com
or to such other address or to such other Person as either Party will have last designated by notice to the other Party.
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37.
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CONFIDENTIAL INFORMATION
|
(a)
Obligations
. Each Party shall use reasonable efforts to retain the other Parties’ Confidential Information in confidence and not disclose the same to any third party nor use the same, except as authorized by the disclosing Party in writing or as expressly permitted in this Section 37. Each Party further agrees to take the same care with the other Party’s Confidential Information as it does with its own, but in no event less than a reasonable degree of care. Excepted from these obligations of confidence and non-use is that information which:
(i)
is available, or becomes available, to the general public without fault of the receiving Party;
(ii)
was in the possession of the receiving Party on a non-confidential basis prior to receipt of the same from the disclosing Party (it being understood, for the avoidance of doubt, that this exception shall not apply to information of TLO that was in the possession of Tesoro or any of its affiliates as a result of their ownership or operation of the Terminals prior to the Commencement Date);
(iii)
is obtained by the receiving Party without an obligation of confidence from a third party who is rightfully in possession of such information and, to the receiving Party’s knowledge, is under no obligation of confidentiality to the disclosing Party; or
(iv)
is independently developed by the receiving Party without reference to or use of the disclosing Party’s Confidential Information.
For the purpose of this Section 37, a specific item of Confidential Information shall not be deemed to be within the foregoing exceptions merely because it is embraced by, or underlies, more general information in the public domain or in the possession of the receiving Party.
(b)
Required Disclosure
. Notwithstanding Section 37(a) above, if the receiving Party becomes legally compelled to disclose the Confidential Information by a court, Governmental Authority or Applicable Law, or is required to disclose by the listing standards of any applicable securities exchange, any of the disclosing Party’s Confidential Information, the receiving Party shall promptly advise the disclosing Party of such requirement to disclose Confidential Information as soon as the receiving Party becomes aware that such a requirement to disclose might become effective, in order that, where possible, the disclosing Party may seek a protective order or such other remedy as the disclosing Party may consider appropriate in the circumstances. The receiving Party shall disclose only that portion of the disclosing Party’s Confidential Information that it is required to disclose and shall cooperate with the disclosing Party in allowing the disclosing Party to obtain such protective order or other relief.
(c)
Return of Information
. Upon written request by the disclosing Party, all of the disclosing Party’s Confidential Information in whatever form shall be returned to the disclosing Party upon termination of this Agreement or destroyed with destruction certified by the receiving Party, without the receiving Party retaining copies thereof except that one copy of all such Confidential Information may be retained by a Party’s legal department solely to the extent that such Party is required to keep a copy of such Confidential Information pursuant to Applicable Law, and the receiving Party shall be entitled to retain any Confidential Information in the electronic form or stored on automatic computer back-up archiving systems during the period such backup or archived materials are retained under such Party’s customary procedures and policies;
provided
,
however
, that any Confidential Information retained by the receiving Party shall be maintained subject to confidentiality pursuant to the terms of this Section 37, and such archived or back-up Confidential Information shall not be accessed except as required by Applicable Law.
(d)
Receiving Party Personnel
. The receiving Party will limit access to the Confidential Information of the disclosing Party to those of its employees, attorneys and contractors that have a need to know such information in order for the receiving Party to exercise or perform its rights and obligations under this Agreement or any Terminal Service Order (the “
Receiving Party Personnel
”). The Receiving Party Personnel who have access to any Confidential Information of the disclosing Party will be made aware of the confidentiality provision of this Agreement, and will be required to abide by the terms thereof. Any third party contractors that are given access to Confidential Information of a disclosing Party pursuant to the terms hereof shall be required to sign a written agreement pursuant to which such Receiving Party Personnel agree to be bound by the provisions of this Agreement, which written agreement will expressly state that it is enforceable against such Receiving Party Personnel by the disclosing Party.
(e)
Survival
. The obligation of confidentiality under this Section 37 shall survive the termination of this Agreement for a period of two (2) years.
(a)
Modification; Waiver
. This Agreement or any Terminal Service Order may be terminated, amended or modified only by a written instrument executed by the Parties. Any of the terms and conditions of this Agreement or any Terminal Service Order may be waived in writing at any time by the Party entitled to the benefits thereof. No waiver of any of the terms and conditions of this Agreement or any Terminal Service Order, or any breach thereof, will be effective unless in writing signed by a duly authorized individual on behalf of the Party against which the waiver is sought to be enforced. No waiver of any term or condition or of any breach of this Agreement or any Terminal Service Order will be deemed or will constitute a waiver of any other term or condition or of any later breach (whether or not similar), nor will such waiver constitute a continuing waiver unless otherwise expressly provided.
(b)
Entire Agreement
. This Agreement, together with the Schedules and Terminal Service Orders, constitutes the entire agreement among the Parties pertaining to the subject matter hereof and supersedes all prior agreements and understandings of the Parties in connection therewith.
(c)
Governing Law; Jurisdiction
. This Agreement and any Terminal Service Order shall be governed by the laws of the State of Texas without giving effect to its conflict of laws principles. Each Party hereby irrevocably submits to the exclusive jurisdiction of any federal court of competent jurisdiction situated in the United States District Court for the Western District of Texas, San Antonio Division, or if such federal court declines to exercise or does not have jurisdiction, in the district court of Bexar County, Texas. The Parties expressly and irrevocably submit to the jurisdiction of such Courts and irrevocably waive any objection which they may now or hereafter have to the laying of venue of any action, suit or proceeding arising out of or relating to this Agreement or any Terminal Service Order brought in such Courts, irrevocably waive any claim that any such action, suit or proceeding brought in any such Court has been brought in an inconvenient forum and further irrevocably waive the right to object, with respect to such claim, action, suit or proceeding brought in any such Court, that such Court does not have jurisdiction over such Party. The Parties hereby irrevocably consent to the service of process by registered mail, postage prepaid, or by personal service within or without the State of Texas. Nothing contained herein shall affect the right to serve process in any manner permitted by law.
(d)
Counterparts
. This Agreement and any Terminal Service Order may be executed in one or more counterparts (including by facsimile or portable document format (pdf)) for the convenience of the Parties hereto, each of which counterparts will be deemed an original, but all of which counterparts together will constitute one and the same agreement.
(e)
Severability
. Whenever possible, each provision of this Agreement and any Terminal Service Order will be interpreted in such manner as to be valid and effective under applicable law, but if any provision of this Agreement or any Terminal Service Order or the application of any such provision to any Person or circumstance will be held invalid, illegal or unenforceable in any respect by a court of competent jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision hereof, and the Parties will negotiate in good faith with a view to substitute for such provision a suitable and equitable solution in order to carry out, so far as may be valid and enforceable, the intent and purpose of such invalid, illegal or unenforceable provision.
(f)
No Third Party Beneficiaries
. It is expressly understood that the provisions of this Agreement and any Terminal Service Order do not impart enforceable rights in anyone who is not a Party or successor or permitted assignee of a Party.
(g)
WAIVER OF JURY TRIAL
. EACH PARTY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY PROCEEDINGS RELATING TO THIS AGREEMENT OR ANY TERMINAL SERVICE ORDER OR ANY PERFORMANCE OR FAILURE TO PERFORM OF ANY OBLIGATION HEREUNDER.
(h)
Schedules and Terminal Service Order(s)
. Each of the Schedules and Terminal Service Order(s) attached hereto and referred to herein is hereby incorporated in and made a part of this Agreement as if set forth in full herein.
[Remainder of this page intentionally left blank.]
IN WITNESS WHEREOF
, the Parties hereto have duly executed this Agreement as of the date first written above.
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TESORO ALASKA COMPANY
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TESORO REFINING & MARKETING
COMPANY LLC
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By:
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/s/ GREGORY J. GOFF
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By:
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/s/ GREGORY J. GOFF
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Gregory J. Goff
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Gregory J. Goff
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President
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President
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TESORO LOGISTICS OPERATIONS LLC
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By:
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TESORO LOGISTICS LP,
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its sole member
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By:
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TESORO LOGISTICS GP, LLC,
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its general partner
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By:
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/s/ PHILLIP M. ANDERSON
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Phillip M. Anderson
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President
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SCHEDULE A
STIPULATED VOLUMES
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Terminal
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Stipulated Volume (bpd)
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Anchorage
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9,000
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Boise
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7,200
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Burley
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2,300
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Los Angeles
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33,300
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Mandan
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8,900
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Salt Lake City
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25,300
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Stockton
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16,000
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Vancouver
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6,400
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TOTAL
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108,400
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If there are multiple Terminals at any of the above locations, the reference to that location shall include all of such Terminals.
SCHEDULE B
TERMINALS ASSOCIATED WITH REFINERIES
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Refineries
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Associated Terminal
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Alaska Refinery
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Anchorage Terminal
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Anacortes Refinery
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Vancouver Terminal
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Golden Eagle Refinery
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Stockton Terminal
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Los Angeles Refinery
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Los Angeles Terminal
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Mandan Refinery
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Mandan Terminal
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Salt Lake City Refinery
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Salt Lake City, Boise and Burley Terminals
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EXHIBIT 1
FORM OF PURCHASE ORDER
PURCHASE ORDER PURSUANT TO MASTER TERMINALLING AGREEMENT
This Terminal Service Order is entered as of ___, 20__, by and among Tesoro Refining & Marketing Company LLC, a Delaware limited liability company (“
TRMC
”), Tesoro Alaska Company, a Delaware corporation (“
TAK
” and, together with TRMC, “
Tesoro
”) and Tesoro Logistics Operations LLC, a Delaware limited liability company (“
TLO
”), pursuant to and in accordance with the terms of the Amended and Restated Master Terminalling Agreement dated as of May __, 2013, but effective as of May 1, 2013, among such parties (the “Agreement).
Capitalized terms not otherwise defined herein shall have the meaning set forth in the Agreement.
Pursuant to Section 5 of the Agreement, the parties hereto agree to the following provisions:
[Insert applicable provisions:
Allocation of storage and throughput capacity for separate Products at each Terminal:
Per-Barrel fees for the volumes Tesoro throughputs at the Terminals:
Dedicated storage tanks and applicable fees:
Allocation of excess capacity and applicable fees:
Ancillary Services and applicable fees:
Surcharges pursuant to Section 6 of the Agreement:
Capital expenditures and related costs subject to reimbursement pursuant to Section 9
;
Cleaning of tanks or the conversion of a dedicated tank to storage of a different Product pursuant to Section 9 of the Agreement and applicable fees:
Transmix handling fees pursuant to Section 13 of the Agreement:
Special or proprietary additive injection services or higher additive injection rates pursuant to Sections 16 and 18 and the fees for such services:
Fees for lubricity and conductivity additive and injection services (including for DCA injection) pursuant to Section 17 or 18 of the Agreement:
Fees for operation of special additive equipment pursuant to Section 20:
Receipt, storage and blending of ethanol into Tesoro’s gasoline pursuant to Section 21:
Periodic software updates, replacement of loading systems or software or other upgrades pursuant to Section 22 and applicable costs:
Dedicated storage to be provided and applicable fees:
Other:]
Except as set forth in this Terminal Service Order, the other terms of the Agreement shall continue in full force and effect and shall apply to the terms of this Terminal Service Order.
IN WITNESS WHEREOF
, the parties hereto have duly executed this Terminal Service Order as of the date first written above [to be effective as of the Effective Date].
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TESORO ALASKA COMPANY
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TESORO REFINING & MARKETING
COMPANY LLC
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By:
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By:
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Gregory J. Goff
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Gregory J. Goff
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President
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President
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TESORO LOGISTICS OPERATIONS LLC
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By:
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TESORO LOGISTICS LP,
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its sole member
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By:
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TESORO LOGISTICS GP, LLC,
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its general partner
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By:
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Phillip M. Anderson
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President
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EXHIBIT 2
SHORTFALL PAYMENTS
