EXHIBIT 2.3
ATTACHMENT XXII
----------
ENVIRONMENTAL AGREEMENT
By and Between
UNION OIL COMPANY OF CALIFORNIA
and
TOSCO CORPORATION
----------------------------
Dated as of [Closing Date]
----------------------------
ENVIRONMENTAL AGREEMENT
THIS ENVIRONMENTAL AGREEMENT is dated as of [Closing Date]
("Agreement"), between UNION OIL COMPANY OF CALIFORNIA, a California corporation
and TOSCO CORPORATION, a Nevada Corporation.
RECITALS
WHEREAS, Seller and Purchaser have entered into a Sale and
Purchase Agreement For 76 Products Company dated December 14, 1996 ("Sale and
Purchase Agreement"), pursuant to which Purchaser agreed to buy and Seller
agreed to sell the business and assets that constitute the 76 Products Company
business segment of Seller; and
WHEREAS, the Sale and Purchase Agreement provides that Seller
and Purchaser will enter into an Environmental Agreement at Closing to be the
exclusive statement of the representations, warranties, covenants, agreements
and indemnities with respect to Environmental Laws as they apply to the 76
Products Company business segment.
NOW, THEREFORE, the parties agree as follows:
1. Definitions. For all purposes of this Agreement, the following terms
shall have the following meanings, and such meanings shall be equally applied to
both the singular and plural forms of the terms defined.
(a) "Allocated Overhead Costs" shall have the meaning specified in Section
1(n).
(b) "Baseline" shall mean all Releases in or to the atmosphere, soil,
surface water, subsurface strata or groundwater at or from the 76 Assets that
occurred prior to the Closing and shall include Releases, whenever occurring,
resulting from Hazardous Materials sent prior to Closing from the 76 Assets, as
they are comprised on the Closing Date, to a disposal site designated as a
"Superfund" site under the Comprehensive Environmental Response, Compensation
and Liability Act.
(c) "Baseline Amortizing Amount" shall have the meaning specified in
Section 4(a).
(d) "Baseline Corrective Action Costs" shall have the meaning specified in
Section 4(a).
(e) "Baseline Corrective Action Costs Quarterly Report" shall have the
meaning specified in Section 5(b)(ii).
1
(f) "Baseline Development Period" shall have the meaning specified in
Section 4(b).
(g) "Category I Project" shall have the meaning specified in Section
5(c)(i).
(h) "Category II Projects" shall have the meaning specified in Section
5(c)(i).
(i) "Change Event" shall have the meaning specified in Section 4(a).
(j) "Claim Notice" shall have the meaning specified in Section 8(c).
(k) "Closing" shall mean the date and time that the 76 Assets are purchased
by Purchaser under the Sale and Purchase Agreement.
(l) "Compliance Action" shall mean any expenditure or activity
necessary to operate the 76 Assets in compliance with applicable Environmental
Laws.
(m) "Compliance Action Costs" shall have the meaning specified in Section
4(c).
(n) "Corrective Action" shall mean any expenditure or activity taken
pursuant to Environmental Laws to investigate, monitor and, if required, abate,
clean up, remove, treat, cover or in any other way remediate a Release at or
from the 76 Assets, including reasonably incurred removal, remediation or
cleanup costs, site investigation and assessment costs, government oversight and
response costs and, if applicable, allocated costs of in-house personnel
necessary to directly manage or support such activities ("Allocated Overhead
Costs"), but excluding any allocation of general corporate overhead; provided,
however, such allocated costs shall not exceed ten percent (10%) of Baseline
Corrective Action Costs. Corrective Action shall also mean any payment of a
third party's (including, but not limited to, any federal, state or local
government agency) claim for property damages, losses, expenses, costs,
deficiencies, penalties, liens, interests, fines, assessments, charges,
obligations or liabilities of any kind, including reasonable attorneys' fees and
court costs, arising out of or relating to a Release at or from the 76 Assets;
provided, however, Corrective Action shall not include Compliance Action,
Retained Environmental Liability, payment of a third party's claim for personal
injury (including, but not limited to, any claim for a person's physical,
mental, psychological, chemical or biological response to the exposure to a
Hazardous Substance) or punitive damages.
(o) "Corrective Action Plan" shall have the meaning specified in Section
5(b)(i).
(p) "Environmental Laws" shall mean any legal requirement relating to
pollution, protection or cleanup of the environment (including, but not limited
to, ambient air, surface water, groundwater, land surface or subsurface strata),
including, without limitation, the Comprehensive Environmental Response,
Compensation and
2
Liability Act of 1980, as amended, the Resources Conservation and Recovery Act
of 1976, as amended, and any other federal, state and local legal requirements,
as such legal requirements exist on the Closing Date (except as such legal
requirements may be amended after the Closing Date to modify existing
remediation standards), relating to: (i) a Release or the containment, removal,
remediation, response, cleanup or abatement of a Hazardous Substance; (ii) the
manufacture, generation, formulation, processing, labeling, distribution,
introduction into commerce, use, treatment, handling, storage, or transportation
of a Hazardous Substance; (iii) exposure of persons, including employees, to a
Hazardous Substance; (iv) occupational safety or health matters; and (v) the
physical structure or condition of a building, facility, fixture or other
structure, including, without limitation, those relating to the management, use,
storage, disposal, cleanup or removal of asbestos, asbestos-containing
materials, polychlorinated biphenyls or any other Hazardous Substance.
(q) "Hazardous Substance" shall mean any toxic substance or waste,
pollutant, hazardous substance or waste, contaminant, special waste, industrial
substance or waste, petroleum or petroleum-derived substance or waste, or any
toxic or hazardous constituent of any such substance or waste, including,
without limitation, any substance regulated under or defined by Environmental
Laws.
(r) "Improvements" shall mean the permanent structures and other
improvements on the Real Property acquired by Purchaser pursuant to the Sale and
Purchase Agreement.
(s) "Indemnified Party" and "Indemnifying Party" shall have the respective
meanings specified in Section 8(c).
(t) "Independent Consultant" shall have the meaning specified in Section
10(b).
(u) "Permit" shall mean any approval, registration, authorization,
certificate, certificate of occupancy, consent, license, order, permit, variance
or other similar authorization of any government agency required by
Environmental Laws in effect on or prior to the Closing for the current
ownership, use or operation of the 76 Assets.
(v) "Purchaser" shall mean Tosco Corporation and its successors in
interest.
(w) "Real Property" shall mean the real property acquired by Purchaser
pursuant to the Sale and Purchase Agreement.
(x) "Release" shall mean any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, escaping, leaching, dumping or disposing of a Hazardous
Substance into the environment of any kind whatsoever, including, but not
limited to, the abandonment or discarding of barrels, containers, tanks or other
receptacles containing or previously containing a Hazardous Substance. Migration
of any pre-Closing Release shall not be considered a new Release for purposes of
this Environmental Agreement.
3
(y) "Remediation Equipment" shall have the meaning specified in Section
7(d).
(z) "Reportable Quantity of a Hazardous Substance" shall mean a Release
which is required, pursuant to Environmental Laws, to be reported to a
government agency.
(aa) "Retail Site" shall mean Real Property and Improvements used for the
retail sale of motor fuel to the general public.
(bb) "Retained Environmental Liability" shall mean any liability imposed by
Environmental Laws arising out of Seller's pre-Closing activities other than
activities associated with the 76 Assets, and shall also include any liability
for any designated "Superfund" site as of the Closing Date under the
Comprehensive Environmental Response, Compensation and Liability Act for which
Seller has been named a "Potentially Responsible Party" as of the Closing Date.
Retained Environmental Liability shall not include Compliance Action or
Corrective Action.
(ac) "Sale and Purchase Agreement" shall have the meaning specified in the
first recital of this Agreement.
(ad) "Seller" shall mean Union Oil Company of California and its successors
in interest.
(ae) "Special Damages" shall have the meaning specified in Section 7(d).
(af) "UST Funds" shall have the meaning specified in Section 9(a).
(ag) "76 Assets" shall mean the business and assets of the 76 Products
Company business segment of Seller acquired by Purchaser pursuant to the Sale
and Purchase Agreement.
(ah) "$200 Million Cap" shall have the meaning specified in Section 4(a).
2. SELLER'S ENVIRONMENTAL REPRESENTATIONS. To Seller's knowledge, Schedule
2A sets forth an accurate and complete list of all Permits Seller has for
operation of the 76 Assets pursuant to applicable Environmental Laws. Except for
the items set forth in Schedule 2B to this Agreement, to the best of Seller's
knowledge as of the Closing:
(a) All Permits necessary for the operation of the 76 Assets,
as they are currently being operated by Seller, have been obtained and are in
effect and, where required, applications for renewal thereof have been timely
filed, except where the failure to obtain such Permits, individually or in the
aggregate, would not have a significant adverse effect upon the operation of the
76 Assets as they have been operated on a historical basis.
4
(b) The 76 Assets are in compliance with applicable
Environmental Laws and Permits, except where the failure to be in such
compliance would not have a significant adverse effect on the operations of the
76 Assets as they have been operated on a historical basis.
3. PURCHASER'S ENVIRONMENTAL REPRESENTATIONS AFTER DUE DILIGENCE. Based on
Purchaser's inquiry and due diligence prior to the Closing, none of the
representations made above by Seller is inaccurate.
4. ENVIRONMENTAL PROVISIONS.
(a) ALLOCATION OF BASELINE CORRECTIVE ACTION COSTS. Except as
otherwise provided in this Agreement, Seller shall be responsible for Retained
Environmental Liability and the cost of Corrective Action arising out of or
related to the Baseline ("Baseline Corrective Action Costs"), and Purchaser
shall be responsible for all other Corrective Action; provided, however, that
Seller's obligation for Baseline Corrective Action Costs shall expire
twenty-five (25) years after the Closing, except as to unpaid amounts of
Baseline Corrective Action Costs invoiced to Seller for work performed prior to
such expiration and except Baseline Corrective Action Costs for a discrete
project begun prior to such expiration and to be completed within a reasonable
and definite time period (but excluding costs associated with monitoring of
environmental conditions and other ongoing non-remediation costs). Baseline
Corrective Action Costs shall include costs incurred to prevent or abate
migration of a pre-Closing Release at or from a 76 Assets to adjoining real
property owned, leased or used by a third party. Notwithstanding the foregoing,
Purchaser shall pay, during each calendar year, the first $7 million of Baseline
Corrective Action Costs and forty percent (40%) of the amount of Baseline
Corrective Action Costs (and Seller shall pay the remaining sixty percent (60%))
in excess of the $7 million, up to a lifetime aggregate of $200 million ("$200
Million Cap"). Upon and after the occurrence of a Change Event, Seller shall be
charged annually with its allocated share of the Baseline Amortizing Amount in
accordance with the allocation of responsibility for Baseline Corrective Action
Costs provided in this Section 4(a). Purchaser shall be responsible for all
Corrective Action costs in excess of the Baseline Amortizing Amount, and such
costs shall not be included in the calculation of the $200 Million Cap. Only
Purchaser's allocated share of the Baseline Amortizing Amount shall be included
in the calculation of the $200 Million Cap. "Baseline Amortizing Amount" means
the annual Baseline Corrective Action Costs with respect to a facility at which
a Change Event has occurred, estimated in good faith using the Corrective Action
Plan as a guideline and assuming that such Change Event had not occurred.
"Change Event" means: (i) the closure of a 76 Asset site (other than a Retail
Site); and/or (ii) the change in use of a 76 Asset (other than a Retail Site) to
a use outside the petroleum/chemical industry. For purposes of this Section,
closure means the termination of substantially all operations at a site which
results in an acceleration of or additional Baseline Corrective Action from what
is otherwise set forth in the Corrective Action Plan prior to the contemplation
of closure of such site, or if no such Corrective Action Plan exists prior to
such contemplation, Seller's existing plans for such site.
5
(b) BASELINE DETERMINATION. The Baseline shall be determined by
reference to existing information from studies performed by or for Seller, such
as described in Seller's existing Environmental Remediation Services Business
Plans for Real Property and Improvements. Within six (6) months of the Closing
("Baseline Development Period"), the Baseline can be augmented by further
investigation that Purchaser determines in good faith is reasonably necessary to
establish the Baseline. Such further investigation shall be performed during the
Baseline Development Period (or if Seller in its sole discretion agrees to a
longer period than six (6) months, during the period as Seller agrees). Such
further investigation shall be performed at Purchaser's sole expense and shall
not be included in calculation of the $200 Million Cap. Purchaser may further
augment the Baseline after the six (6)-month period with in situ testing of the
76 Assets that Purchaser, during the Baseline Development Period, identifies is
reasonably necessary to establish that a Release should be included in the
Baseline, but only to the extent such testing is required by a lawful order of a
government agency (with jurisdiction) to conduct such testing on such site or
Seller agrees such testing is required under Environmental Laws (such agreement
not to be unreasonably withheld).
(c) COMPLIANCE ACTION COSTS. Except as otherwise provided in
this Section 4(c), Seller shall be responsible for the cost of Compliance Action
("Compliance Action Costs") which arise out of or result from operations or
conditions before the Closing. Purchaser shall be responsible for Compliance
Action Costs which arise out of or result from operations or conditions after
the Closing. Notwithstanding the foregoing, Purchaser shall be responsible for
Compliance Action Costs associated with the construction and operation of
facilities necessary to achieve selenium effluent limitations at Seller's San
Francisco Refinery and the construction and operation of vapor recovery
equipment at Seller's Los Angeles Refinery Marine Terminal to: (i) comply with
Environmental Laws; or (ii) as may be required in connection with the renewal of
Seller's existing lease for the Terminal.
5. CONDUCT OF BASELINE CORRECTIVE ACTION.
(a) If Baseline Corrective Action is required, Purchaser shall conduct and
pay for such action, and Seller shall reimburse Purchaser in accordance with
Section 4(a). During the time Seller is obligated to pay all or any portion of
Baseline Corrective Action Costs, Purchaser shall, within twenty-four (24) hours
after reporting to the appropriate government agency, notify Seller of any
Reportable Quantity of a Hazardous Substance. If a Reportable Quantity of a
Hazardous Substance is discovered in the soil, surface water, subsurface strata
or groundwater at a 76 Asset after the Closing in an amount not readily
distinguishable from the Baseline, Purchaser shall be responsible for the
incremental Corrective Action costs associated therewith, and such costs shall
not be included in the calculation of the $200 million cap. Purchaser shall
provide to Seller information about such an event sufficient to estimate the
incremental Corrective Action costs attributable thereto. Purchaser and Seller
shall work together in good faith to agree on such incremental costs. In the
event the parties are unable to reach agreement on such incremental costs, the
dispute may be submitted for dispute resolution in accordance with Section 10.
6
(b) Purchaser shall provide to Seller the following reports and information
in conjunction with Baseline Corrective Action conducted or planned to be
conducted by Purchaser:
(i) By September 30 of each calendar year during which Purchaser conducts
Baseline Corrective Action, Purchaser shall provide Seller with an expenditure
plan detailing its planned Baseline Corrective Action expenditures for each of
the next three (3) calendar years ("Corrective Action Plan"). The Corrective
Action Plan shall include separate detail supporting any project with
anticipated expenditures during the three (3)-year period in excess of $250,000
("Category I Project") and a summary total of all other projects with
anticipated expenditures during the three (3)-year period of less than $250,000
("Category II Projects").
(ii) Within thirty (30) days after the end of each calendar quarter,
Purchaser shall provide Seller with a status report of all Baseline Corrective
Action Costs Purchaser has incurred year-to-date ("Baseline Corrective Action
Costs Quarterly Report"). The Baseline Corrective Action Costs Quarterly Report
shall provide a summary of the total expenditures incurred for the previous
quarter, year-to-date and life-to-date for each Category I Project identified in
the Corrective Action Plan and a summary of the total expenditures incurred for
the previous quarter, year-to-date and life-to-date for the Category II
Projects. The expenditures reported shall segregate Baseline Corrective Action
Costs with a breakdown within each category between direct costs and Allocated
Overhead Costs, and a summary of the amount of all Baseline Corrective Action
Costs Purchaser contends should be included in calculating the $200 Million Cap.
The Baseline Corrective Action Costs Quarterly Report for each of the first
three quarters of the year shall include an update to the estimated expenditures
for each Category I Project and for all Category II Projects for the balance of
the current year. The Baseline Corrective Action Costs Quarterly Report for the
fourth quarter shall include an update for the following year (i.e. the 4th
quarter Baseline Corrective Action Costs Quarterly Report of 1997 will estimate
expenditures for each Category I Project and the Category II Projects for the
calendar year 1998). The Baseline Corrective Action Costs Quarterly Report shall
include an invoice to Seller for Seller's share of Baseline Corrective Action
Costs. Purchaser shall provide Seller with any documentation reasonably
requested by Seller that evidences the invoiced amounts.
(c) Seller shall reimburse Purchaser for Seller's share of the invoiced
Baseline Corrective Action Costs within thirty (30) days of Seller's receipt of
such invoice or, within such time, notify Purchaser in writing of disputed
invoiced amounts and withhold payment of those amounts. Only disputed amounts
may be withheld.
(d) Seller shall have the right, upon reasonable notice, to
audit the Baseline Corrective Action Costs Quarterly Reports. Any adjustments
identified by Seller through an audit will be presented to Purchaser in writing
for consideration to revise the Baseline Corrective Action Costs Quarterly
Reports and associated invoices. Purchaser and Seller shall together review
Seller's proposed adjustments and negotiate in good faith to resolve those
adjustments. If an agreement cannot be reached within sixty (60) days of the
7
presentment of the proposed adjustments, the unresolved adjustments may be
submitted for dispute resolution in accordance with Section 10.
(e) Upon Seller's reasonable request, Purchaser shall provide Seller with a
copy of any information relating to Baseline Corrective Action, including, but
not limited to, soil assessment data, laboratory reports, field study results,
groundwater monitoring data, and operating and maintenance histories of
groundwater recovery equipment operated by Purchaser relating to Baseline
Corrective Action.
(f) Seller shall have the right, but not the obligation, to notify
Purchaser in writing within thirty (30) days of Seller's receipt of the
Corrective Action Plan of Seller's intent to participate directly in government
agency contacts and the development of a site assessment or remediation plan or
project for any Category I Project. Except in each case to the extent Purchaser
is required to take action pursuant to Environmental Laws before such agreement
can be reached, Purchaser and Seller shall reach agreement on communications
with the government agency and the scope of the plan or project, and Purchaser
shall not agree to a site assessment or remediation plan without Seller's
consent.
(g) If Purchaser's share of Baseline Corrective Action Costs reaches the
$200 Million Cap, Seller shall have the right, but not the obligation, to assume
control over all further Baseline Corrective Action, the cost for which Seller
is responsible under this Agreement, upon giving Purchaser ninety (90) days
prior written notice. Within a reasonable period of time following such notice,
Purchaser and Seller shall agree upon an orderly transition of control over such
Baseline Corrective Action, including, but not limited to, compensation for
equipment previously used by Purchaser in connection with Baseline Corrective
Action.
6. CASHOUT OF CERTAIN BASELINE CORRECTIVE ACTION OBLIGATIONS. Seller shall
have the option to extinguish its share of Baseline Corrective Action Costs for
a 76 Asset in exchange for an agreed lump-sum payment to Purchaser upon the sale
of a 76 Asset owned by Purchaser. Designation of such a 76 Asset shall be made
by written notice to Purchaser. Purchaser and Seller shall negotiate in good
faith in an attempt to agree on the appropriate lump-sum payment. In the event
the parties are unable to agree on the lump-sum payment, Seller shall have the
option to submit the matter for dispute resolution in accordance with Section
10. Upon payment of the agreed upon amount or the amount determined by the
Independent Consultant to be appropriate, Seller shall be released by Purchaser
from any further environmental obligation with respect to Baseline Corrective
Action for such a 76 Asset and shall be entitled to indemnification by Purchaser
pursuant to section 8(b)(vi). Only Purchaser's share of the projected Baseline
Corrective Action Costs used in determining the lump-sum payment shall be
included at that time in calculating the $200 Million Cap and shall not
otherwise be included in calculating the allocation of Baseline Corrective
Action Costs pursuant to Section 4(a).
8
7. ACCESS.
(a) Upon reasonable notice, Purchaser shall permit, under the following
conditions specified in this Section, access to and entry upon a 76 Asset to
Seller and Seller's independent contractors as necessary: (i) to conduct
Baseline Corrective Action, if Seller elects to assume control of such action;
and (ii) to observe and monitor Baseline Corrective Action.
(b) If Seller assumes control of Baseline Corrective Action, except in the
event of an emergency, Seller shall provide Purchaser with at least five (5)
business days notice prior to commencement of any drilling, construction, or
equipment installation, and any other activity that may unreasonably disrupt
normal business operations at a 76 Asset. If any such activity will likely cause
an unreasonable disruption, Seller shall reschedule the activity to a reasonable
mutually convenient time in order to minimize the disruption. Purchaser shall
not unreasonably interfere with Seller while Seller exercises its rights of
ingress and egress to conduct Baseline Corrective Action. Seller shall use
reasonable efforts to conduct Baseline Corrective Action in a manner which
minimizes disruption to the business activities at a 76 Asset. Seller shall take
steps reasonably necessary to prevent injury to persons or damage to property
resulting from or in any way connected with such Baseline Corrective Action it
conducts, including adherence to Purchaser's safety rules and procedures.
(c) Within a reasonable period of time after completion of Baseline
Corrective Action at a 76 Asset where Seller has assumed control of such action,
Seller shall restore such 76 Asset to substantially the condition which existed
immediately prior to Seller's commencement of Baseline Corrective Action. No
claim for special, exemplary, consequential or indirect damages, or for lost
profits, shall be asserted by Purchaser against Seller in connection with
Baseline Corrective Action performed by an independent contractor. Purchaser
shall have the right to pursue such damage claims against the independent
contractor. No contractor, subcontractor, materialman, agent, officer, director
or employee of Seller shall have any right to a lien against a 76 Asset or any
part thereof for any work, labor or materials furnished to Seller for the
actions performed thereon, unless otherwise required by applicable law.
(d) Purchaser shall reimburse Seller for all damages, losses, costs,
penalties, fines and assessments which Seller incurs if reasonable access to a
76 Asset is not granted to Seller in accordance with this Agreement. Purchaser
shall reimburse Seller for any out-of-pocket damages in excess of $1,000 that
Purchaser and its employees, agents, lessees, occupants of a 76 Asset or
contractors cause, as a result of injury to any test or monitoring well,
remediation equipment and/or associated piping, or any other property or
equipment installed or otherwise used by Seller in connection with its Baseline
Corrective Action ("Remediation Equipment"), but no claim for special,
exemplary, consequential or indirect damages, or for lost profit shall be
asserted by Seller in connection therewith against Purchaser. However, Seller
shall have the right to pursue such damage claims against any independent
contractor. All Remediation Equipment owned by Seller shall remain the property
9
of Seller and may be removed from a 76 Asset, upon completion of Baseline
Corrective Action at a 76 Asset.
8. INDEMNIFICATION.
(a) SELLER'S INDEMNIFICATION: Seller shall indemnify, defend and hold
harmless Purchaser from and against: (i) subject to Section 4(a), Baseline
Corrective Action Costs; (ii) Compliance Action Costs, except for that portion
of such costs to be paid by Purchaser pursuant to Section 4(c); (iii) migration
of a Hazardous Substance after the Closing which would not have occurred but for
Baseline Corrective Action conducted by Seller in a manner which constitutes
gross negligence or willful misconduct; (iv) subject to Section 10, any damage
resulting from any inaccuracy in any representation or warranty of Seller in
this Agreement; (v) Retained Environmental Liabilities; and (vi) any other
obligations for which Seller has assumed responsibility pursuant to this
Agreement.
(b) PURCHASER'S INDEMNIFICATION: Purchaser shall indemnify, defend and hold
harmless Seller from and against: (i) Corrective Action costs resulting from the
ownership or operation of the 76 Assets by Purchaser after the Closing which are
not included in Baseline Corrective Action Cost; (ii) Purchaser's share of
Baseline Corrective Action Costs as provided in Section 4(a); (iii) Compliance
Action Costs resulting from the ownership or operation of the 76 Assets by
Purchaser as provided in Section 4(c); (iv) migration of a Hazardous Substance
after the Closing which would not have occurred but for Baseline Corrective
Action conducted by Purchaser in a manner which constitutes gross negligence or
willful misconduct; (v) all Baseline Corrective Action Costs incurred more than
twenty-five (25) years after the Closing, except as provided in Section 4(a);
(vi) subject to Section 10, any damage resulting from any inaccuracy in any
representation or warranty of Purchaser in this Agreement; and (vii) any other
obligations for which Purchaser has assumed responsibility pursuant to this
Agreement.
(c) INDEMNIFICATION PROCEDURES.
Whenever Purchaser or Seller becomes aware of a claim with
respect to a 76 Asset ("Indemnified Party") for which the other party
("Indemnifying Party") is obligated to provide indemnification, the Indemnifying
Party shall, within a reasonable period of time, give prompt notice thereof (a
"Claim Notice"), together with copies of written information relating to such
claim, and shall have the right to assume responsibility for the obligation to
be indemnified. Unless within twenty (20) days after such notice is given to the
Indemnifying Party, the Indemnifying Party gives the Indemnified Party notice of
its election to assume the obligation, the Indemnifying Party shall be deemed to
have waived such right. If the Indemnifying Party elects to assume such
obligation, (i) the Indemnifying Party shall take such action as is reasonably
necessary to protect the Indemnified Party and (ii) the Indemnifying Party will
keep the Indemnified Party fully advised as to such actions. If the Indemnifying
Party elects to assume responsibility for the obligation to be indemnified, the
Indemnified Party may take action that is reasonably necessary to protect it
fully.
10
9. UST FUNDS.
(a) Reimbursement claims have been and will continue to be
submitted to the California Petroleum Underground Storage Tank Cleanup Fund and
similar federal, state and local government funds ("UST Funds") to seek
reimbursement of Corrective Action costs. Purchaser and Seller shall have the
right to pursue, control, settle, waive or release reimbursement claims they
have filed with the UST Funds and for which they have paid Corrective Action
costs. Any reimbursement claim not on file as of the Closing shall be filed and
pursued by Seller, if Corrective Action is commenced prior to the Closing.
(b) Seller shall have the right to any reimbursement amount received from a
UST Fund as a result of Corrective Action costs incurred by Seller at a Real
Property prior to the Closing.
(c) Purchaser shall have the right to any reimbursement amount received
from a UST Fund as a result of Corrective Action costs incurred by Purchaser at
a Real Property after the Closing, but such amount shall reduce Purchaser's
share of the aggregate Baseline Corrective Action Costs for purposes of
calculating the $200 Million Cap.
(d) Purchaser and Seller shall cooperate with each other in the filing and
pursuit of their respective reimbursement claims. In the event of a dispute as
to whether a particular reimbursement claim should be submitted by Purchaser or
Seller, Seller shall have the right to submit such claim pending resolution of
the dispute in accordance with the dispute resolution provisions of Section 10.
If Purchaser is determined to have the right to such claim, Seller shall
promptly transfer control of the claim and execute any necessary authorization
in favor of Purchaser. Purchaser and Seller shall pay their respective costs
associated with the submission and pursuit of any reimbursement claim.
10. DISPUTE RESOLUTION AND LIMITATIONS OF LIABILITY.
(a) Purchaser and Seller agree that any disputed claim or demand against
the other arising out of or relating to this Agreement shall be resolved in
accordance with and subject to the procedures and limitations of Section 10.
(b) If a dispute arises between the parties under this Agreement and that
dispute is not resolved within a reasonable period of time, either party may
notify the other in writing that the dispute is to be submitted to arbitration.
Such arbitration shall be held in Los Angeles, California. The parties shall
jointly select an environmental consultant, engineer, or other professional
reasonably qualified (including at least 7 years' experience in the appropriate
environmental field) to arbitrate such dispute ("Independent Consultant"). If
the Independent Consultant is not an attorney, he or she shall have the right to
obtain the assistance of qualified legal counsel in arbitrating the dispute, if
the Independent Consultant determines that such assistance is necessary.
Notwithstanding any other provision hereof, the parties shall each bear their
11
respective legal fees and costs, and one-half of the cost of the Independent
Consultant (and his or her attorney, if necessary). If the parties cannot agree
on the Independent Consultant within sixty (60) days, either party may apply to
the American Arbitration Association in Los Angeles for the appointment of the
Independent Consultant. The Independent Consultant shall establish an expedited
procedure for hearing and resolving the dispute. Each party shall have the right
to conduct discovery pursuant to California Code of Civil Procedure section
1283.05 within sixty (60) days of the appointment of the Independent Consultant.
Unless the parties agree otherwise, the Independent Consultant shall, no more
than one hundred twenty (120) days after the Independent Consultant is retained,
render a decision resolving the dispute, with a written opinion stating the
reasons therefor. The decision of the Independent Consultant shall be final and
binding, and a court of competent jurisdiction may enter judgment thereon.
Except as otherwise provided in Section 10(c), (d) and (e), the dispute
resolution procedures of this Section 10 shall constitute the exclusive remedy
of the parties hereto with respect to any disputes arising out of this
Agreement.
(c) If a dispute arises between the parties prior to Closing concerning any
representation in Section 2(a) or 3 under this Agreement, the dispute shall be
limited by and resolved in accordance with the procedures set forth in Section
21 of the Sale and Purchase Agreement.
(d) Notwithstanding Section 23(b) of the Sale and Purchase Agreement, each
claim against Seller after Closing for breach of representation shall be subject
to the de minimis threshold provisions of Section 23(c) of the Sale and Purchase
Agreement and shall be aggregated with all other claims subject to such Section
for purposes of calculating the $10 million threshold.
(e) Seller's and Purchaser's representations in Sections 2 and 3,
respectively, and all liability with respect thereto, shall expire on the second
anniversary of the Closing.
11. MISCELLANEOUS PROVISIONS.
(a) CONSTRUCTION. This Agreement shall be governed by and construed in
accordance with the laws of the State of California without giving effect to its
conflicts-of-laws principles.
(b) ENTIRE AGREEMENT. This Agreement and the Schedules hereto constitute
the entire agreement among the parties pertaining to the subject matter hereof
and supersedes all prior or contemporaneous agreements relating to the subject
matter hereof. In case of any conflict between the body of this Agreement and
any such Schedule, the terms of the body of this Agreement shall prevail.
12
(c) ASSIGNMENT.
(i) Subject to Section 11(c)(ii), this Agreement shall not be
assigned, in whole or in part, without the prior written consent of the
other party.
(ii) Seller and Purchaser may each assign this Agreement, in whole or
in part, to one or more of their respective affiliates, upon prior notice
to the non-assigning party; provided, however, that the non-assigning party
may require as a condition of such assignment that the assigning party
reasonably demonstrate and/or assure the assignee's financial and technical
capability to perform its obligations hereunder. Any attempted assignment
of this Agreement in violation of this Section 11(c)(ii) shall be null and
void.
(iii) This Agreement shall inure to the benefit of, and be binding
upon, the parties hereto and their respective heirs, legal representatives,
successors and permitted assigns, except that any such assignment shall not
relieve the assigning party of its obligations hereunder. This Agreement is
not intended to, and does not create, any rights in any third parties.
(d) FURTHER ASSURANCES. Each of the parties hereto shall take such
additional action, and shall cooperate with one another, as may be reasonably
necessary to effectuate the terms of this Agreement.
(e) NOTICES.
(i) All written notices required or permitted to be given or made
hereunder shall be deemed to have been duly given or made if delivered
personally, or sent by overnight courier delivery or by telecopy or similar
facsimile transmission (and confirmed in writing thereafter), or mailed by
prepaid registered or certified mail, return receipt requested, to the
other party at the respective address set forth below (or to such other
address as a party shall designate for itself by written notice given or
made in accordance herewith):
(1) if to Seller, to it at:
Unocal Corporation
2141 Rosecrans Avenue, Suite 4000
El Segundo, California 90245
Attn: Neal E. Schmale
Chief Financial Officer
(310) 726-7621 (Phone)
(310) 726-7806 (Fax)
cc: Dennis P.R. Codon, Esq.
General Counsel
(310) 726-7651 (Phone)
(310) 726-7815 (Fax)
13
(2) if to Purchaser, to it at:
Tosco Corporation
72 Cummings Point Road
Stamford, Connecticut 06902
Attn: Wilber McClave III, Esq.
General Counsel
(203) 977-1001 (Phone)
(203) 964-3187 (Fax)
cc: Duane B. Bordvick
Vice President Environmental and External Affairs
Tosco Corporation
2300 Clayton Road
Suite 1100
(510) 602-4050 (Phone)
(510) 602-4018 (Fax)
(ii) Any notice, request or other communication hereunder shall be
deemed delivered and given or made on the seventh business day after the
date of mailing, if mailed by registered or certified mail, or on the first
business day after the date of transmittal, if sent by courier delivery or
by telecopy or similar facsimile transmission (and confirmed in writing
thereafter), or on the first business day after the date of delivery, if
delivered personally.
(f) COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original instrument.
(g) WAIVER. It is agreed that any party to this Agreement may extend time
for performance by any other party hereto or waive the performance of any
obligation of any other party hereto or waive any inaccuracies in the
representations and warranties of any other party, but any such waiver shall be
in writing, unless a non-written waiver is expressly permitted, and shall not
constitute or be construed as a waiver of any other obligation, condition,
representation or warranty under this Agreement.
(h) AMENDMENTS. This Agreement cannot be altered, amended, changed or
modified in any respect or particular unless each such alteration, amendment,
change or modification shall have been agreed to by each of the parties hereto
and reduced to writing in its entirety and signed and delivered by each party.
14
IN WITNESS WHEREOF, the parties have executed this
Environmental Agreement as of the date first above written.
UNION OIL COMPANY OF CALIFORNIA
a California corporation
By
------------------------------
Name:
Time:
TOSCO CORPORATION
a Nevada corporation
By
------------------------------
Name:
Title: