EXHIBIT 2.12
SALE AND PURCHASE AGREEMENT
FOR
GOLDEN EAGLE REFINING AND MARKETING ASSETS
BETWEEN
ULTRAMAR INC.
AND
TESORO REFINING AND MARKETING COMPANY
FEBRUARY 4, 2002
TABLE OF CONTENTS
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Article 1 DEFINITIONS................................................................................2
Article 2 SALE AND PURCHASE OF ASSETS...............................................................10
2.1 Refinery......................................................................................10
2.2 Marketing Assets..............................................................................11
2.3 Excluded Property.............................................................................12
2.4 Insurance.....................................................................................13
2.5 Sale of Assets Only...........................................................................14
Article 3 PURCHASE PRICE............................................................................14
3.1 Purchase Price................................................................................14
3.2 Payment.......................................................................................14
3.3 Earnest Money Deposit.........................................................................16
3.4 Valuation.....................................................................................16
3.5 Allocation of Purchase Price..................................................................16
Article 4 SELLER'S RETAINED LIABILITIES; PURCHASER'S ASSUMED LIABILITIES............................17
4.1 Seller's Retained Liabilities.................................................................17
4.2 Purchaser's Assumed Liabilities...............................................................18
Article 5 RELATED AGREEMENTS........................................................................19
5.1 Trademark License Agreement...................................................................19
5.2 Transition Services Agreement.................................................................19
5.3 Agreements Not Effective Prior to Closing.....................................................19
Article 6 CLOSING...................................................................................20
6.1 Time and Place................................................................................20
6.2 Seller's Deliveries...........................................................................20
6.3 Purchaser's Deliveries........................................................................22
6.4 Inventories...................................................................................23
6.5 Apportionment of Taxes and Expenses...........................................................23
6.6 Condition of Assets...........................................................................24
Article 7 CONDITIONS PRECEDENT TO CLOSING...........................................................25
7.1 Conditions to Purchaser's Obligations.........................................................25
7.2 Conditions to Seller's Obligations............................................................26
7.3 Cooperation...................................................................................26
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Article 8 SELLER'S REPRESENTATIONS AND WARRANTIES...................................................26
8.1 Organization..................................................................................26
8.2 Authority; Enforceability.....................................................................26
8.3 Consents......................................................................................27
8.4 No Breach.....................................................................................27
8.5 Real Property.................................................................................27
8.6 Improvements..................................................................................27
8.7 Compliance with Laws..........................................................................27
8.8 Contracts.....................................................................................28
8.9 Permits.......................................................................................28
8.10 Actions and Proceedings.......................................................................28
8.11 Labor Matters.................................................................................29
8.12 Intellectual Property ........................................................................29
8.13 Retail Merchandise............................................................................29
8.14 Brokers.......................................................................................29
8.15 Solvency......................................................................................29
8.16 Absence of Certain Changes....................................................................29
8.17 Returns.......................................................................................30
8.18 Foreign Person................................................................................30
Article 9 PURCHASER'S REPRESENTATIONS AND WARRANTIES................................................30
9.1 Organization..................................................................................30
9.2 Authority; Enforceability.....................................................................30
9.3 Consents......................................................................................30
9.4 No Breach.....................................................................................31
9.5 Actions and Proceedings.......................................................................31
9.6 Brokers.......................................................................................31
9.7 Solvency; Funds...............................................................................31
9.8 Independent Decision..........................................................................31
Article 10 ENVIRONMENTAL LIABILITIES.................................................................31
10.1 Allocation of Environmental Liabilities.......................................................31
10.2 Scope.........................................................................................32
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10.3 Refinery......................................................................................32
10.4 Marketing Assets..............................................................................34
10.5 Survival......................................................................................35
Article 11 TITLE MATTERS.............................................................................36
11.1 Title Commitments and Permitted Encumbrances..................................................36
11.2 Owner or Leasehold Policies of Title Insurance................................................37
11.3 Conveyance of Title; Assignment of Leasehold Interests........................................38
11.4 Title Insurance...............................................................................38
Article 12 RISK OF LOSS..............................................................................38
12.1 Casualty or Condemnation......................................................................38
12.2 Risk of Loss..................................................................................40
Article 13 DEFAULT; REMEDIES.........................................................................40
13.1 Purchaser Default.............................................................................40
13.2 Election of Remedies..........................................................................40
13.3 Seller's Default..............................................................................41
Article 14 CHANGES IN REPRESENTATIONS AND WARRANTIES.................................................41
Article 15 INDEMNIFICATION...........................................................................41
15.1 Indemnification Liabilities...................................................................41
15.2 Procedures....................................................................................42
15.3 Certain Limitations...........................................................................42
15.4 General Release...............................................................................43
Article 16 RECORDS...................................................................................43
16.1 Seller's Rights to Records....................................................................43
16.2 Preservation of Records.......................................................................44
Article 17 ACCESS TO ASSETS AFTER CLOSING............................................................44
Article 18 PURCHASER'S INSPECTIONS...................................................................44
18.1 Access to Refinery............................................................................44
18.2 Access to Marketing Assets....................................................................45
18.3 Post Closing Inspection of Marketing Assets...................................................45
18.4 Purchaser's Right to Install Equipment on Marketing Sites.....................................45
18.5 Purchaser's Entry Shall be at Purchaser's Sole Risk...........................................45
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18.6 NO RELIANCE...................................................................................45
Article 19 COVENANTS.................................................................................46
19.1 General.......................................................................................46
19.2 Operation Pending Closing.....................................................................46
19.3 Assistance Regarding Transfers of Rights......................................................46
19.4 Financial Statement Requests..................................................................46
19.5 Union Negotiations............................................................................47
Article 20 PUBLICITY; CONFIDENTIALITY................................................................47
20.1 Public Statements.............................................................................47
20.2 Confidentiality...............................................................................47
Article 21 EMPLOYEES AND BENEFITS....................................................................48
21.1 Employees in General..........................................................................48
21.2 Represented Employees.........................................................................48
21.3 Non-Represented Employees.....................................................................49
21.4 Inactive Employees............................................................................49
21.5 Terms of Employment...........................................................................50
21.6 Vacation Liability............................................................................50
21.7 Pension Plans.................................................................................50
21.8 Severance.....................................................................................51
21.9 Workers' Compensation and Employment-Related Claims...........................................52
21.10 WARN Act......................................................................................52
21.11 Pay Employees Until Closing Date..............................................................52
21.12 Retention Bonuses.............................................................................53
21.13 Change in Employee Compensation...............................................................54
21.14 Transition of Employees.......................................................................54
21.15 Loans to Employees............................................................................54
Article 22 TRANSFER OF PERMITS AND ASSIGNMENT OF CONTRACTS...........................................54
22.1 Transfer of Permits...........................................................................54
22.2 Delays in Transfer of Permits or Assignment of Contracts......................................54
Article 23 CERTAIN TAX MATTERS.......................................................................55
23.1 Documentary Transfer Taxes and Certain Fees...................................................55
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23.2 Other Taxes...................................................................................55
Article 24 BULK SALES................................................................................55
Article 25 ASSIGNMENT................................................................................56
25.1 Limitation on Assignment......................................................................56
25.2 Assignability to Affiliates...................................................................56
25.3 Scope of Permitted Assignments................................................................56
Article 26 LIKE-KIND EXCHANGE........................................................................56
Article 27 PAYMENTS..................................................................................57
Article 28 ARBITRATION...............................................................................57
28.1 Negotiation of Disputes and Disagreements.....................................................57
28.2 Arbitration Resolution........................................................................57
28.3 Conduct of the Arbitration....................................................................58
28.4 Costs.........................................................................................58
28.5 Breach........................................................................................59
28.6 Arbitral Awards...............................................................................59
Article 29 AMENDMENTS................................................................................59
Article 30 SURVIVAL OF REPRESENTATIONS AND WARRANTIES................................................60
Article 31 GENERAL; ADDITIONAL COVENANTS.............................................................60
31.1 Entire Agreement..............................................................................60
31.2 Construction..................................................................................60
31.3 Captions......................................................................................60
31.4 Attachments, Exhibits and Schedules...........................................................60
31.5 Severability..................................................................................60
31.6 No Waiver.....................................................................................61
31.7 Governing Law; Choice of Forum................................................................61
31.8 Notices.......................................................................................61
31.9 Commercially Reasonable Efforts; Time of Essence..............................................61
31.10 Counterparts..................................................................................61
31.11 Extensions of Time; Waiver....................................................................62
31.12 Further Assurances............................................................................62
31.13 No Presumption Against Drafter................................................................62
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31.14 Expenses......................................................................................62
31.15 Interpretation................................................................................62
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vi
SALE AND PURCHASE AGREEMENT FOR
GOLDEN EAGLE REFINING AND MARKETING ASSETS
This Sale and Purchase Agreement for Golden Eagle Refining and
Marketing Assets (this "AGREEMENT") is entered into as of February 4, 2002 (the
"EFFECTIVE DATE") between ULTRAMAR INC., a Nevada corporation having a principal
place of business in San Antonio, Texas ("SELLER"), and TESORO REFINING AND
MARKETING COMPANY, a Delaware corporation having a principal place of business
in San Antonio, Texas ("PURCHASER").
PRELIMINARY STATEMENT
Seller owns the Golden Eagle refinery, a petroleum coke terminal and
related assets in Contra Costa County, California on which Seller conducts
refining and other business activities and operations (the "REFINERY").
Seller also owns or leases retail assets in California at which fuel
products are marketed to retail customers (the "MARKETING ASSETS").
Under the terms of consent decrees entered into with the U.S. Federal
Trade Commission ("FTC") and the States of California and Oregon dated November
30, 2001, December 18, 2001 and December 18, 2001, respectively, in connection
with the merger (the "MERGER") of Valero Energy Corporation and Ultramar Diamond
Shamrock Corporation ("UDS") (collectively, the "CONSENT DECREES" and
individually the "FTC CONSENT DECREE," the "CALIFORNIA CONSENT DECREE" and the
"OREGON CONSENT DECREE," respectively), Seller has agreed to divest the Refinery
and the Marketing Assets (collectively, as defined in the Consent Decrees and as
more particularly described herein, the "GOLDEN EAGLE REFINING AND MARKETING
ASSETS"). The Golden Eagle Refining and Marketing Assets and certain related
assets are specifically defined in Article 2 and, as so defined, are herein
referred to as the "ASSETS." Purchaser desires to purchase the Assets in
accordance with the terms of this Agreement.
As specified in the Consent Decrees, the purpose of the transactions
contemplated by this Agreement is to provide for the continued use of the Assets
as viable, on-going businesses, in the same businesses in which they were
engaged at the time the Merger was announced. These businesses include the
refining and bulk supply of CARB Gasoline and other petroleum products. The
businesses are to be continued by a firm that has sufficient ability and an
equivalent incentive to invest and compete in the Assets and businesses as UDS
had before the Merger, and to remedy the lessening of competition in the
refining and bulk supply of CARB Gasoline and other petroleum products resulting
from the Merger.
Purchaser recognizes the purpose of the Consent Decrees and
specifically affirms as follows: (a) it has the managerial, operational and
financial capability to compete effectively as a viable, ongoing refiner and
bulk supplier of CARB Gasoline; (b) it intends to use the Assets for
the purpose of competing effectively in the refining and bulk supplying of CARB
Gasoline; and (c) its purchase of the Assets will promote competition.
Purchaser's execution and delivery of this Agreement to Seller shall
constitute a binding and irrevocable agreement to purchase the Assets on the
terms and conditions set forth in this Agreement.
Concurrently with the execution and delivery of this Agreement,
Purchaser is causing Tesoro Petroleum Corporation to execute and deliver to
Seller a Guaranty in the form attached here to as Exhibit J, which guarantees
Purchaser's performance under this Agreement and the Purchaser Note.
Concurrently with the execution and delivery of this Agreement, Seller
is causing Valero Energy Corporation to execute and deliver to Purchaser a
Guaranty in the form attached here to as Exhibit K, which guarantees Seller's
performance under this Agreement.
NOW THEREFORE, in consideration of the matters set forth in the
Preliminary Statement, and the mutual promises and covenants herein set forth,
and subject to the terms and conditions of this Agreement, the parties agree as
follows:
ARTICLE 1
DEFINITIONS
1.1 The following terms shall have the meanings set forth below for all
purposes of this Agreement:
"401(K) ASSETS" has the meaning specified in Section 21.7.1.
"AFFILIATE" means, with respect to a party, any individual or legal
business entity that, directly or indirectly, controls, is controlled by or is
under common control with, such party. The term "control" (including the terms
"controlled by" and "under common control with") as used in the preceding
sentence means the possession, directly or indirectly, of the power to direct or
cause the direction of management and policies.
"AGREEMENT" means this Sale and Purchase Agreement for Golden Eagle
Refining and Marketing Assets.
"ALTA" has the meaning specified in Section 11.1.1.
"APPORTIONMENT REPORT" has the meaning specified in Section 6.5.1.
"APPORTIONMENT SUM PAYABLE" has the meaning specified in Section 6.5.1.
"ASSETS" has the meaning specified in the Preliminary Statement.
"AVAILABLE EMPLOYEES" has the meaning specified in Section 21.3.1.
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"CARB GASOLINE" means gasoline that meets the standards of the
California Air Resources Board as of the Effective Date.
"CASH PURCHASE PRICE" has the meaning specified in Section 3.2.1.
"CALIFORNIA CONSENT DECREE" has the meaning specified in the
Preliminary Statement.
"CASUALTY" has the meaning specified in Section 12.1.1.
"CASUALTY INSURANCE" has the meaning specified in Section 12.1.7.
"CERCLA" has the meaning specified in Section 10.1.
"CLAIM" has the meaning specified in Section 28.1.
"CLOSING" has the meaning specified in Section 6.1.
"CLOSING DATE" means the date on which the Closing occurs.
"COBRA COVERAGE" has the meaning specified in Section 4.1.2.3.
"COLLECTIVE BARGAINING AGREEMENTS" has the meaning specified in Section
21.2.2.
"CONSENT" has the meaning specified in Section 8.3.
"CONSENT DECREES" has the meaning specified in the Preliminary
Statement.
"CONTRACTS" means Refinery Contracts and Marketing Contracts.
"DEPOSITS" has the meaning specified in Section 6.5.1.
"DISCLOSING PARTY" has the meaning specified in Section 15.3.6.
"EARN OUT PAYMENT" has the meaning specified in Section 3.1.6.
"EARNEST MONEY DEPOSIT" has the meaning specified in Section 3.3.1.
"EFFECTIVE DATE" has the meaning specified in the introductory
paragraph of this Agreement.
"EMPLOYEE" has the meaning specified in Section 21.1.2.
"ENVIRONMENTAL INSURANCE ENDORSEMENT" has the meaning specified in
Section 10.3.6.
"ENVIRONMENTAL LAWS" means all applicable federal, state, and local
laws, statutes, ordinances, regulations, common law, standards, prohibitions,
restrictions, directives, interpretations, orders, decrees, notices, demands,
requests for information, guidelines, permits, licenses, approvals and
entitlements that relate to the protection of human health, public or worker
safety, wildlife or the environment (including the air, soil, surface water and
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groundwater) or that create rights or obligations in connection with the
presence or Release of Hazardous Materials or Petroleum Products.
"ENVIRONMENTAL LIABILITY" means any Liability arising out of or related
to Environmental Laws, including any (i) natural resource damage claims and
claims for Remedial Work, (ii) obligation to investigate, monitor, test, report
to Governmental Authorities, remediate or perform Remedial Work in connection
with any onsite or offsite presence or Release of Hazardous Materials or
Petroleum Products or any soil or groundwater condition, and (iii) compliance
order, consent order, cleanup and abatement order and cease-and-desist order.
"ERISA" has the meaning specified in Section 4.1.2.3.
"EXCLUDED PROPERTY" has the meaning specified in Section 2.3.
"EXPENSES" has the meaning specified in Section 6.5.1.
"FEE MARKETING SITES" has the meaning specified in Section 2.2.1.1.
"FINANCIAL STATEMENTS" has the meaning specified in Section 19.4.
"FTC" has the meaning specified in the Preliminary Statement.
"FTC CONSENT DECREE" has the meaning specified in the Preliminary
Statement.
"GOLDEN EAGLE REFINING AND MARKETING ASSETS" has the meaning specified
in the Preliminary Statement.
"GOVERNMENTAL AUTHORITY" means any federal, state, local or foreign
governmental authority, agency, board, commission, judicial body or other body
having jurisdiction over the matter.
"HAZARDOUS MATERIALS" means any substance which is listed, regulated or
defined as a hazardous substance, hazardous material, toxic substance, hazardous
waste, hazardous chemical, hazardous air pollutant, contaminant or pollutant
under any Environmental Laws, including (i) radioactive substances, (ii)
asbestos, (iii) radon, (iv) mercury, (v) lead-based paint and (vi)
polychlorinated biphenyls ("PCBs"), but excluding Petroleum Products.
"IMPROVEMENTS" means the Refinery Improvements and the Marketing
Improvements.
"INACTIVE EMPLOYEES" has the meaning specified in Section 21.1.3.
"INDEMNITEE" has the meaning specified in Section 15.1.
"INDEMNITOR" has the meaning specified in Section 15.1.
"INTELLECTUAL PROPERTY" means all patents, patent rights, trademarks,
service marks, trade names, designs, logos, trade dress, trade styles and
copyrights (whether or not registered), and all applications for the foregoing,
and all trade secrets, know-how, inventions, research records, confidential
information, product designs, engineering specifications and drawings, technical
4
information, formulae, customer lists, supplier lists and market analyses and
other intellectual property rights.
"INVENTORY" means the Refinery Inventory and the Marketing Inventory.
"INVENTORY AND ADJUSTMENT AMOUNT" has the meaning specified in Section
3.2.4.1.
"LATEST TAX RATE" means with respect to each Asset subject to property
taxation, the aggregate property tax rate applicable to such Asset in effect for
the property tax year July 1, 2001 to June 30, 2002.
"LATEST TAX VALUATION" means the valuation for property tax purposes
in effect on January 1, 2002.
"LEASED MARKETING SITES" has the meaning specified in Section 2.2.1.1.
"LIABILITY" means any known, unknown, contingent or non-contingent
loss, claim (including tort claims, claims for personal injury, claims for
property damage, claims for diminution in property value and claims for
injunctive relief), action, proceeding, charge, directive, demand, request for
information or notice of non-compliance or violation, suit, judgment, decree,
order, liability, obligation (civil, criminal or other), damage (including
consequential damages and, in the case of third party claims, punitive damages),
expense (including reasonable attorney and consultant fees and costs for
investigation and defense), capital expenditure, operating expense, cost, fee,
lien, fine or penalty. "Liability" shall include Environmental Liabilities and,
in each instance, shall include all reasonable costs of investigating and
defending any claim.
"MAJOR EQUIPMENT" has the meaning specified in Section 18.2.
"MARKETING ASSETS" has the meaning specified in the Preliminary
Statement.
"MARKETING BOOKS AND RECORDS" has the meaning specified in Section
2.2.1.4.
"MARKETING CONTRACTS" has the meaning specified in Section 2.2.2.1.
"MARKETING IMPROVEMENTS" has the meaning specified in Section 2.2.1.2.
"MARKETING INVENTORY" has the meaning specified in Section 6.4.2.
"MARKETING INVENTORY PRICE" has the meaning specified in Section 6.4.2.
"MARKETING MISCELLANEOUS ASSETS" has the meaning specified in Section
2.2.2.2.
"MARKETING PERMITS" has the meaning specified in Section 2.2.2.3.
"MARKETING PERSONAL PROPERTY" has the meaning specified in Section
2.2.1.3.
"MARKETING REAL PROPERTY" has the meaning specified in Section 2.2.1.1.
5
"MARKETING SITES" means the Fee Marketing Sites and the Leased
Marketing Sites, and shall include the service station business and all
ancillary business located at the Marketing Sites, including any automobile
mechanical service, convenience store, restaurant and car wash business.
"MERCHANDISE" has the meaning specified in Section 6.4.2.
"MISCELLANEOUS ASSETS" means the Refinery Miscellaneous Assets and the
Marketing Miscellaneous Assets.
"NON-REPRESENTED EMPLOYEE" has the meaning specified in Section 21.1.2.
"OPERATIONS" means the business activities and operations conducted on
each of the Assets.
"ORDER" means any judgment, order, writ, injunction or decree of any
Governmental Authority having jurisdiction over the matter.
"OREGON CONSENT DECREE" has the meaning specified in the Preliminary
Statement.
"OUTSIDE CLOSING DATE" means May 31, 2002, as adjusted pursuant to
Article 12.
"PERMIT ASSESSMENTS" means any assessment issued by a Governmental
Authority after the Closing in connection with any Permit regardless of whether
such assessment is based on operating levels at the Refinery or Marketing Sites
prior to, at or after the Closing.
"PERMITS" means Refinery Permits and Marketing Permits.
"PERMITTED ENCUMBRANCES" has the meaning specified in Section 11.1.1.
"PERSONAL PROPERTY" means the Refinery Personal Property and the
Marketing Personal Property.
"PETROLEUM PRODUCT" means petroleum hydrocarbons, including crude oil
and any fraction thereof, and any product made from petroleum hydrocarbons,
together with any additives to such products, including MTBE.
"POST-CLOSING REPORT" has the meaning specified in Section 3.2.4.3.
"PURCHASE PRICE" has the meaning specified in Section 3.1.
"PURCHASE PRICE BALANCE" has the meaning specified in Section 3.2.2.
"PURCHASER" has the meaning specified in the introductory paragraph.
"PURCHASER APPORTIONMENT SUM" has the meaning specified in Section
6.5.1.
"PURCHASER DEFAULT" has the meaning specified in Section 13.1.
6
"PURCHASER NOTE" has the meaning set forth in Section 3.2.4.1.
"PURCHASER RESPONSE" has the meaning set forth in Section 3.2.4.3.
"PURCHASER'S KNOWLEDGE" means the actual knowledge of any of the
employees of Purchaser listed on Schedule 1-P as of the date a particular
representation or warranty is made, without any review of files or other due
diligence on the part of such employees.
"PURCHASER'S PLAN BENEFIT" has the meaning specified in Section
21.7.2.1.
"PURCHASER'S SPECIAL KNOWLEDGE" means the actual knowledge of any of
the employees of Purchaser listed on Schedule 1-P and 1-P-A as of the date a
particular representation or warranty is made, without any review of files or
other due diligence on the part of such employees.
"PURCHASER'S UNION BENEFITS" has the meaning specified in Section
21.2.2.
"PUTATIVE BREACH" has the meaning specified in Section 15.3.6.
"QDRO" has the meaning specified in Section 21.7.2.1(a)(i).
"QUALIFIED INTERMEDIARY" has the meaning specified in Article 26.
"RCRA" has the meaning specified in Section 10.3.2.
"REAL PROPERTY" means the Refinery Real Property and the Marketing Real
Property.
"RECEIVING PARTY" has the meaning specified in Section 15.3.6
"REFINERY" has the meaning specified in the Preliminary Statement.
"REFINERY BOOKS AND RECORDS" has the meaning specified in Section
2.1.1.4.
"REFINERY CONTRACTS" has the meaning specified in Section 2.1.2.1.
"REFINERY IMPROVEMENTS" has the meaning specified in Section 2.1.1.2.
"REFINERY INVENTORY" has the meaning specified in Section 6.4.1.
"REFINERY INVENTORY PRICE" has the meaning specified in Section 6.4.1.
"REFINERY MISCELLANEOUS ASSETS" has the meaning specified in Section
2.1.2.2.
"REFINERY PERMITS" has the meaning specified in Section 2.1.2.3.
"REFINERY PERSONAL PROPERTY" has the meaning specified in Section
2.1.1.3.
"REFINERY REAL PROPERTY" has the meaning specified in Section 2.1.1.1.
7
"RELEASE" means any emission, spill, seepage, leak, escape, leaching,
discharge, injection, pumping, pouring, emptying, dumping, disposing or release
of Hazardous Materials or Petroleum Products into or upon the environment
(including the air, soil, surface water and groundwater).
"REMEDIAL WORK" means any investigation, sampling, analysis,
monitoring, abatement, removal, decontamination, remediation, cleanup,
management, treatment, storage or disposal related to the presence or Release of
Hazardous Materials or Petroleum Products.
"REPAIR COST DISPUTE" has the meaning specified in Section 12.1.2.2.
"REPAIR COSTS" has the meaning specified in Section 12.1.2.
"REPAIR NEGOTIATION PERIOD" has the meaning specified in Section
12.1.2.1.
"REPRESENTED EMPLOYEES" has the meaning specified in Section 21.1.1.
"RETAINED LIABILITIES" has the meaning specified in Section 4.1.
"RETURNS" means all federal, state, local, foreign or other
governmental income and franchise tax returns and reports and all sales, use,
payroll, withholding and other Tax returns, reports, statements and
declarations.
"SELLER" has the meaning specified in the introductory paragraph.
"SELLER APPORTIONMENT SUM" has the meaning specified in Section 6.5.1.
"SELLER CAPTIVE INSURER" has the meaning specified in Section 2.4.1.
"SELLER POLICIES" has the meaning specified in Section 2.4.1.
"SELLER'S KNOWLEDGE" means the actual knowledge of any of the employees
of Seller listed on Schedule 1-S as of the date a particular representation or
warranty is made, without any review of files or other due diligence on the part
of such employees.
"SELLER'S RETAINED ENVIRONMENTAL LIABILITIES" shall mean Seller's
Retained Marketing Environmental Liabilities and Seller's Retained Refinery
Environmental Liabilities.
"SELLER'S RETAINED MARKETING ENVIRONMENTAL LIABILITIES" has the meaning
specified in Section 10.4.1.1.
"SELLER'S RETAINED REFINERY ENVIRONMENTAL LIABILITIES" has the meaning
specified in Section 10.3.1.1.
"SELLER'S UNION BENEFITS" has the meaning specified in Section 21.2.2.
"TAKING" has the meaning specified in Section 12.1.1.
8
"TAXES" means any and all federal, state, local and foreign taxes,
charges, fees, levies, imposts, assessments, withholdings, impositions, or other
similar governmental charges and any interest, liens, additions to tax or
penalties thereon.
"THIRD PARTY ESTIMATE" has the meaning specified in Section 12.1.2.2
"TITLE COMPANY" has the meaning specified in Section 11.1.1.
"TITLE COMMITMENT" has the meaning specified in Section 11.1.1.
"TITLE POLICIES" means the owner's policies of title insurance to be
issued pursuant to the Title Commitment.
"TOSCO" means Tosco Corporation, its Affiliates and/or its successors,
including Phillips Petroleum and its Affiliates.
"TOSCO CONSENTS" means the Tosco Environmental Consent and the Tosco
Retention Consent.
"TOSCO ENVIRONMENTAL CONSENT" has the meaning set forth in Section
10.3.5.
"TOSCO ENVIRONMENTAL INDEMNITY" has the meaning set forth in Section
10.3.5.
"TOSCO INDEMNITIES" means the Tosco Environmental Indemnity and the
Tosco Retention Indemnity.
"TOSCO PURCHASE AGREEMENT" means the Asset Purchase and Sale Agreement
(Refinery) dated as of August 4, 2000 between Seller, as buyer, and Tosco
Corporation, as seller.
"TOSCO RETENTION CONSENT" means the consent of Tosco to making
Purchaser an additional beneficiary under the Tosco Retention Indemnity.
"TOSCO RETENTION INDEMNITY" means Seller's rights under Section
2.04(b)(i) and the related provisions of Section 14.01(a) of the Tosco Purchase
Agreement.
"TRADEMARK LICENSE AGREEMENT" has the meaning specified in Section 5.1.
"TRANSITION SERVICES AGREEMENT" has the meaning specified in Section
5.2.
"UDS" has the meaning specified in the Preliminary Statement.
"UNIONS" has the meaning specified in Section 21.2.2.
"WARN ACT" has the meaning specified in Section 4.1.2.3.
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ARTICLE 2
SALE AND PURCHASE OF ASSETS
2.1 REFINERY.
2.1.1 SALE. In compliance with the Consent Decrees and on the
terms and subject to the conditions of this Agreement and for the consideration
stated herein, at the Closing, Purchaser shall purchase and assume from Seller,
and Seller shall sell and deliver to Purchaser, all of Seller's right, title and
interest in and to the following properties and assets:
2.1.1.1 All real property interests included in the
Refinery, including real property owned in fee or leased, as more particularly
described in Attachment 1-R (the "REFINERY REAL PROPERTY");
2.1.1.2 The improvements located on the Refinery Real
Property, including buildings, docks, facilities, fixtures, aboveground and
underground piping and storage tanks and appurtenances, and also including the
improvements described on Attachment 2-R (the "REFINERY IMPROVEMENTS");
2.1.1.3 All tangible assets used by Seller primarily
in the Operation of the Refinery on the Closing Date, including: (a) all
vehicles, supplies, spare parts, tools, drawings, plats, files, equipment
manuals, and furniture which are used by Seller primarily in the Operation of
the Refinery on the Closing Date, (b) all plans (including proposed and
tentative plans, whether or not adopted), specifications and drawings relating
to the operation of, and improvements, modifications or upgrades to, the
Refinery, but excluding (i) the Refinery Improvements, (ii) the Refinery Books
and Records, and (iii) the Refinery Inventory. The items covered by this Section
2.1.1.3 are herein referred to as the "REFINERY PERSONAL PROPERTY";
2.1.1.4 Subject to Section 16.1, the historical books
and records relating to the Refinery (the "REFINERY BOOKS AND RECORDS"),
including any documents that are stored or maintained in electronic storage
format, such as computer disks or tapes; and
2.1.1.5 The Refinery Inventory.
2.1.2 ASSIGNMENT. In compliance with the Consent Decrees and
on the terms and subject to the conditions of this Agreement and for the
consideration stated herein, at the Closing, Purchaser shall purchase and assume
from Seller, and Seller shall assign to Purchaser, all of Seller's right, title
and interest in and to the following, which will be assigned and assumed
pursuant to the Assignment and Assumption of Permits, Contracts and
Miscellaneous Assets to be executed by the parties at the Closing (the form of
which is attached as Exhibit A):
2.1.2.1 Subject to Article 22, all contracts,
including all of Seller's rights and obligations thereunder, used by Seller
primarily in the Operation of the Refinery, including those identified in
Attachment 3-R (the "REFINERY CONTRACTS");
2.1.2.2 Subject to Article 22, the office leases,
rights-of-way, easements, Deposits, the trade name "Golden Eagle Refinery" (but
only for use in connection with the
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Refinery), the emission reduction credits listed on Schedule 2.1.2.2, trade
secrets, know-how, confidential or proprietary technical information, formulae,
process engineering data, technical designs and other similar data or
information, in each case used by Seller primarily with respect to the Assets
and the Operations, including goodwill, if any, primarily associated with the
Assets and not the Excluded Assets, and any going-concern value related to the
Assets, including those identified in Attachment 4-R, and the Employee loans
referenced in Section 21.15 (collectively, the "REFINERY MISCELLANEOUS ASSETS");
and
2.1.2.3 Subject to Article 22, the permits, licenses,
registrations, certificates, consents, orders, notices, approvals or similar
rights from any Governmental Authority that are necessary to the Operations or
ownership of the Refinery in the manner in which it has been owned and operated
by Seller prior to the Effective Date, as identified in Attachment 5-R (the
"REFINERY PERMITS").
2.2 MARKETING ASSETS.
2.2.1 SALE. In compliance with the Consent Decrees and on the
terms and subject to the conditions of this Agreement and for the consideration
stated herein, at the Closing, Purchaser shall purchase and assume from Seller,
and Seller shall sell and deliver to Purchaser, all of Seller's right, title and
interest in and to the following properties and assets:
2.2.1.1 All real property interests located at
certain operating service stations owned in fee (the "FEE MARKETING SITES") and
certain operating service stations held under lease (the "LEASED MARKETING
SITES"), all as more particularly described in Attachment 1-M (collectively, the
"MARKETING REAL PROPERTY");
2.2.1.2 The improvements located on the Marketing
Sites, including buildings, facilities, fixtures, aboveground and underground
piping and storage tanks, pumps and appurtenances, and also including the
improvements described on Attachment 2-M (the "MARKETING IMPROVEMENTS");
2.2.1.3 All tangible assets used by Seller primarily
in the Operation of the Marketing Sites, including: all supplies, spare parts,
tools, drawings, plats, files, equipment manuals, equipment and furniture which
are located at the Marketing Sites at the Closing Date and used by Seller
primarily in the operation of the Marketing Sites, but excluding (i) the
Marketing Improvements, (ii) the Marketing Books and Records, (iii) the
Marketing Inventory and (iv) the Merchandise. The items covered by this Section
2.2.1.3 are herein referred to as the "MARKETING PERSONAL PROPERTY";
2.2.1.4 Subject to Section 16.1, the historical books
and records relating to the Marketing Sites (the "MARKETING BOOKS AND RECORDS"),
including any documents that are stored or maintained in electronic storage
format, such as computer disks or tapes;
2.2.1.5 The Marketing Inventory; and
2.2.1.6 The Merchandise.
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2.2.2 ASSIGNMENT. In compliance with the Consent Decrees and
on the terms and subject to the conditions of this Agreement and for the
consideration stated herein, at the Closing, Purchaser shall purchase and assume
from Seller, and Seller shall assign to Purchaser, all of Seller's right, title
and interest in and to the following, which will be assigned and assumed
pursuant to the Assignment and Assumption of Permits, Contracts and
Miscellaneous Assets to be executed by the parties at the Closing (the form of
which is attached as Exhibit A):
2.2.2.1 Subject to Article 22, all contracts and
agreements, including all of Seller's rights and obligations thereunder, used by
Seller primarily in the Operation of the Marketing Sites, including those
identified in Attachment 3-M (the "MARKETING CONTRACTS"); and
2.2.2.2 Subject to Article 22, the office leases,
rights-of-way, easements, Deposits and other miscellaneous assets used primarily
in connection with Seller's Operation of the Marketing Sites, as identified in
Attachment 4-M (the "MARKETING MISCELLANEOUS ASSETS").
2.2.2.3 Subject to Article 22, all permits, licenses,
registrations, certificates, consents, orders, notices, approvals or similar
rights from any Governmental Authority that are necessary to the Operations or
ownership of the Marketing Sites in the manner in which they have been owned and
operated by Seller prior to the Effective Date, as described on Attachment 5-M
(the "MARKETING PERMITS").
2.3 EXCLUDED PROPERTY.
Notwithstanding anything else in this Agreement, the Assets (and any
defined term for any property included in the Assets) exclude the following
(collectively, the "EXCLUDED PROPERTY"):
2.3.1 Intra-company accounts and contracts of Seller;
2.3.2 Cash or bank accounts of Seller and any securities held
for investment, including notes receivable (except with respect to currency and
coins on hand in the cash registers (other than checks and charge card tickets)
at the Marketing Sites on the Closing Date);
2.3.3 Defenses and claims that Seller has asserted or could
assert against third parties (except to the extent that such defenses and claims
relate to Liabilities that Purchaser is assuming);
2.3.4 Accounts receivable;
2.3.5 (a) Proprietary trade names (excluding the trade name
"Golden Eagle Refinery"), trademarks, service marks, logos, trade dress,
insignia, imprints, brand identifications, advertising and trade names of Seller
and all signs and other personal property whose primary purpose is to display
any of the foregoing, (b) any proprietary invention, patent, trade secret,
copyright, technological information, software or data of Seller except to the
extent expressly included in the Assets, and (c) all forms and documents which
prominently incorporate any of the foregoing, subject to the rights licensed to
Purchaser pursuant to the Trademark License Agreement;
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2.3.6 The items of excluded property listed on Attachments
6-R, and 6-M;
2.3.7 The Improvements, Personal Property and Inventory
located at the Refinery or the Marketing Sites which are not owned by Seller,
including those listed on Attachments 7-R, and 7-M;
2.3.8 Seller's insurance policies and Seller's rights under
its insurance policies, subject to the terms of the Environmental Insurance
Endorsement;
2.3.9 Seller's interest in the Contracts listed on Schedule
2.3.9;
2.3.10 Anything else that is stated in this Agreement as
remaining the property of Seller;
2.3.11 The emission reduction credits listed on Schedule
2.3.11; provided that Seller agrees to sell to Purchaser, at Seller's cost, such
of those credits listed on Schedule 2.3.11, if any, as Purchaser shall be
required to obtain (in addition to those specified on Schedule 2.1.2.2
designated for the CARB Phase III Project) to complete the CARB Phase III
Project; and
2.3.12 Any property that is owned by Seller and not used
primarily in the Operation of the Refinery or Marketing Sites.
2.4 INSURANCE.
2.4.1 Seller and Purchaser acknowledge that Seller maintains 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 principally of three types of policies: (a) policies issued to Seller
or its predecessors; (b) policies issued directly to Affiliates by one of
Seller's wholly-owned insurance companies ("SELLER CAPTIVE INSURERS"); and (c)
policies issued to Affiliates by locally admitted insurers which are reinsured
by one of the Seller Captive Insurers. 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, except for the policy to which the
Environmental Insurance Endorsement relates, are herein referred to collectively
as the "SELLER POLICIES."
2.4.2 It is understood and agreed by Purchaser that from and
after the Closing:
2.4.2.1 No insurance coverage shall be provided under
the Seller Policies to Purchaser;
2.4.2.2 Any and all policies insured or reinsured by
any of the Seller Captive Insurers which, but for this provision, would have
insured the Refinery or the Marketing Assets shall be deemed terminated,
commuted and cancelled ab initio; and
2.4.2.3 No claims regarding any matter whatsoever,
whether or not arising from events occurring prior to the Closing, shall be made
by Purchaser against or with respect to any of the Seller Policies, regardless
of their date of issuance.
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2.4.3 Purchaser shall indemnify and defend Seller and its
Affiliates against, and shall hold them harmless from, any Liability arising out
of claims made after the Closing against any of the Seller Policies by
Purchaser, any Affiliate of Purchaser or any company or person claiming to be
subrogated to Purchaser's or any Affiliate's rights. Such indemnity shall cover
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.
2.5 SALE OF ASSETS ONLY. The transactions pursuant to this Agreement
constitute only the sale and assignment by Seller to Purchaser of assets and not
the sale of businesses. Purchaser is experienced in the operation of properties
like the Assets and is familiar with the risks involved in owning and operating
properties like the Assets, and is not relying on Seller to furnish Purchaser
any information as to such risks.
ARTICLE 3
PURCHASE PRICE
3.1 PURCHASE PRICE. In consideration of the Assets, Purchaser shall pay
to Seller the total of the following:
3.1.1 For the transfer, sale and assignment by Seller of the
Assets other than those Assets listed elsewhere in this Section 3.1, Nine
Hundred Forty-Five Million Dollars ($945,000,000) as adjusted pursuant to
Sections 12.1.2 and Article 14, if applicable;
3.1.2 For the Refinery Inventory, the Refinery Inventory
Price;
3.1.3 For the Marketing Inventory and Merchandise, the
Marketing Inventory Price;
3.1.4 For the prepaid items described in the Apportionment
Report, the Apportionment Sum Payable;
3.1.5 Amounts due under Section 21.15 (Employee Loans); and
3.1.6 The earn out payments as calculated pursuant to Schedule
3.2.3 (the "EARN OUT PAYMENTS");
3.1.7 minus Five Million Dollars ($5,000,000).
The aggregate amount payable pursuant to this Section 3.1 is referred
to as the "PURCHASE PRICE."
3.2 PAYMENT. The Purchase Price shall be payable as follows:
3.2.1 One Billion, Seventy-Five Million Dollars
($1,075,000,000) shall be paid in cash at the Closing (net of the Earnest Money
Deposit, which shall be applied towards Purchaser's payment obligation pursuant
to this Section 3.2.1) (the "CASH PURCHASE PRICE").
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3.2.2 The balance of the Purchase Price (exclusive of the Earn
Out Payment) (the "PURCHASE PRICE BALANCE") shall be paid as provided in Section
3.2.4.
3.2.3 The Earn Out Payments (if any) shall be paid by
Purchaser in accordance with the provisions of Schedule 3.2.3.
3.2.4 PRINCIPAL AMOUNT OF PURCHASER NOTE; ADJUSTMENTS.
3.2.4.1 Subject to Section 3.2.4.2, Purchaser shall
deliver to Seller at the Closing a promissory note in the form attached as
Exhibit B (the "PURCHASER NOTE") in a principal amount equal to the Inventory
and Adjustment Amount minus One Hundred Thirty Million Dollars ($130,000,000).
The term "INVENTORY AND ADJUSTMENT AMOUNT" shall be calculated as follows:
(a) the sum of
(i) the Refinery Inventory Price;
(ii) the Marketing Inventory Price;
(iii) the amount of the employee
loans pursuant to Section 21.15; plus
(iv) the Apportionment Sum Payable;
minus
(b) the sum of
(i) the amount of any adjustments
made pursuant to Section 12.1.2 and Article 14; plus
(ii) Five Million Dollars
($5,000,000).
3.2.4.2 If the Purchase Price Balance is a negative
number, then Seller will pay to Purchaser in cash an amount equal to the
Purchase Price Balance and no Purchaser Note will be required to be delivered
hereunder. If the Purchase Price Balance is greater than $0 but less than
$25,000,000, then Purchaser shall pay Seller in cash the Purchase Price Balance
and no Purchaser Note will be required to be delivered hereunder. If the amount
of the Purchase Price Balance is in excess of $25,000,000, then Purchaser shall
pay Seller the first $25,000,000 of the Purchase Price Balance in cash and the
remainder of the Purchase Price Balance shall become the principal owing under
the Purchaser Note. Payments contemplated by this Section 3.2.4.2 shall be made
within 20 business days after the date on which Seller delivers the Post-Closing
Report to Purchaser. Notwithstanding the foregoing, any amount disputed in the
Purchaser Response shall be paid within five business days of final resolution
of the disputed amount. All payments made pursuant to this Section 3.2.4.2 shall
include interest from the Closing Date to the date of payment at the interest
rate set forth in Section 27.2.
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3.2.4.3 As soon as practicable following the
Inventory Report Review Period (as defined in Attachment 8), Seller shall
deliver to Purchaser a report setting forth Seller's calculation of the
Inventory and Adjustment Amount (the "POST-CLOSING REPORT"). Purchaser shall
notify Seller in writing (the "PURCHASER RESPONSE") within 15 business days of
its receipt of the Post-Closing Report of any dispute regarding the calculations
set forth in the Post-Closing Report. Purchaser's failure to deliver to Seller
the Purchaser Response within such 15-business-day period shall be deemed for
all purposes to constitute Purchaser's acceptance of the Post-Closing Report.
3.2.4.4 If Purchaser timely delivers to Seller the
Purchaser Response, the parties shall negotiate in good faith a resolution of
such dispute. In the event that the parties are unable to agree on the Inventory
and Adjustment Amount within 30 days of Seller's receipt of the Purchaser
Response, then the parties agree to submit the matter to binding arbitration
under Article 28.
3.3 EARNEST MONEY DEPOSIT.
3.3.1 Simultaneously herewith, Purchaser is delivering to
Seller a deposit in the amount of $53,750,000 (the "EARNEST MONEY DEPOSIT") as
consideration for Seller's entry into this Agreement. In the event the Closing
occurs, the Earnest Money Deposit, together with interest or earnings thereon,
shall be credited against the Cash Purchase Price. In the event the Closing does
not occur by the Outside Closing Date and the failure to close is not the result
of Purchaser Default hereunder, then the Earnest Money Deposit, together with
any interest or earnings thereon, shall be paid to Purchaser on the third
business day following the Outside Closing Date. If the Closing does not occur
by the Outside Closing Date and the failure to close is the result of Purchaser
Default hereunder, then the Earnest Money Deposit shall be retained by Seller in
accordance with Article 13.
3.3.2 As soon as practicable after the Effective Date, but in
any event within ten business days after the Effective Date, Seller shall
transfer the Earnest Money Deposit into a segregated investment account. Unless
Seller and Purchaser otherwise agree in writing, Seller shall use commercially
reasonable efforts to invest such funds in U.S. Treasury Bills with a maturity
of one year or less.
3.4 VALUATION. The parties agree that any property valuations
established by the parties for the Assets are for purposes of (a) establishing
an insured amount for the Title Commitments and title policies; (b) preparing
the Closing statements and escrow instructions; (c) preparing affidavits of
value and transfer tax returns; and (d) calculating recording fees and transfer
taxes, if applicable. Such property valuations are not established necessarily
for tax purposes or for financial or accounting ("book") purposes. Neither party
shall have any liability to the other party with respect to such valuations.
3.5 ALLOCATION OF PURCHASE PRICE. The Purchase Price shall be allocated
among the Assets as of the Closing Date in accordance with a schedule mutually
agreed to by Purchaser and Seller. Purchaser and Seller shall use commercially
reasonable efforts to agree upon such schedule prior to the Closing Date, but
their failure to so agree shall not be a condition to the Closing. Upon such
agreement, if any, such schedule shall be attached to this Agreement as
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Schedule 3.5. Any adjustments to the Purchase Price shall be similarly reflected
in such schedule. For all Tax purposes, Purchaser and Seller agree to report the
transactions contemplated by this Agreement in a manner consistent with the
allocation reflected in Schedule 3.5, (as so adjusted, if any) and will not take
any position inconsistent therewith in any Return , any proceeding before a
taxing authority or otherwise. In the event such allocation is disputed by a
taxing authority, the party receiving notice of such dispute shall promptly
notify and consult with the other party hereto concerning such dispute. Neither
party shall have any responsibility or liability with respect to such allocation
other than the express terms of this Section 3.5.
ARTICLE 4
SELLER'S RETAINED LIABILITIES; PURCHASER'S ASSUMED LIABILITIES
4.1 SELLER'S RETAINED LIABILITIES. Seller shall retain the following
Liabilities (the "RETAINED LIABILITIES"):
4.1.1 Seller's Retained Environmental Liabilities;
4.1.2 except in each case as otherwise provided in Article 21,
any Liability for:
4.1.2.1 salary, wages, benefits (other than vacation
benefits for Employees) and severance for or on behalf of any current or former
employee of Seller arising out of their employment by Seller prior to the
Closing, except to the extent arising out of Purchaser's failure to carry out
the terms of this Agreement, which shall be Purchaser's sole responsibility, or
4.1.2.2 any injury or exposure suffered by any
current or former employee of Seller (to the extent and in the proportion the
injury or exposure occurred prior to the Closing) in the course of their
employment by Seller, or
4.1.2.3 any violation of law relating to the hiring,
employment or termination of employment (including any violations of the
Employee Retirement Income Security Act ("ERISA"), the Worker Adjustment and
Retraining Notification Act (the "WARN ACT"), continuation coverage ("COBRA
COVERAGE") requirements of Section 4980B of the Internal Revenue Code of 1986,
as amended, or Part 6 of Title I of ERISA, worker's compensation laws, and any
federal, state, local or foreign laws relating to plant closings, termination of
employees and claims regarding discrimination or harassment) of any current or
former employees of Seller arising out of their employment by Seller prior to
the Closing, except to the extent arising from Purchaser's default under this
Agreement, which shall be Purchaser's sole responsibility;
4.1.3 any costs (other than those costs expressly provided for
in another clause in this Section 4.1) for property furnished or services
rendered to or for the benefit of the Assets prior to the Closing, except for
those costs expressly assumed by Purchaser hereunder (excluding those
Liabilities assumed pursuant to Section 4.2.1);
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4.1.4 any Taxes, and any Liabilities relating to Taxes, (a)
based upon the gross or net income or receipts of Seller or any of its
Affiliates or otherwise in the nature of an income or franchise Tax, (b)
relating to the ownership, possession, purchase, lease, use or operation of the
Assets or the Operations by Seller prior to the Closing, (c) relating to Taxes
of third persons of the types described in clause (a) or (b) above for which
Seller or any of its Affiliates is liable as a transferee or successor, by
contract or otherwise or (d) arising during, or relating to, any period (or
portion thereof) ended on or prior to the Closing, excluding in each case Permit
Assessments;
4.1.5 any Liability with respect to any litigation (a) listed
in Schedule 10.3.1, (b) pending against Seller as of the Closing Date (except as
provided in Section 10.3.1.2), (c) to Seller's Knowledge, threatened against
Seller in writing prior to the Closing Date (except as provided in Section
10.3.1.2 and also excluding any litigation arising out of or relating to claims
for indemnification or Environmental Liabilities threatened by any prior owner
of the Refinery or such owner's Affiliate), and (d) based predominantly on state
or federal antitrust statutes and arising out of Seller's conduct prior to the
Closing Date;
4.1.6 any Liability arising out of or relating to the
Operations at the Refinery between the closing date of the Tosco Purchase
Agreement and the Closing Date as to products made and sold during such period
that allegedly create infringement of or allegedly infringe on Unocal's U.S.
Patent Nos. 5,288,393, 5,593,567, 5,653,866, 5,837,126 and 6,030,521; provided,
however, that Seller's liability shall be limited to sums that are payable under
a final decree or judgment, or settlement; and provided further that Seller
shall be liable to Purchaser only to the extent that Purchaser promptly notifies
Seller of any such potential pre-Closing patent liabilities in writing, and
allows Seller to control the defense of any such litigation, and to settle or
compromise all claims and lawsuits; and provided further, however, that Seller
may not settle or compromise any such claim or lawsuit without the written
consent of Purchaser if any settlement or compromise (a) requires Purchaser to
part with any right or make any payment not indemnified, or (b) subjects
Purchaser to any injunction. Subject to the foregoing, Purchaser shall have the
right, at its option and expense, but not the obligation, to retain advisory
counsel to represent its interests and consult with Seller's counsel in
defending any such claim or lawsuit. Purchaser shall render such reasonable
assistance which is requested by Seller without charge to Seller; and
4.1.7 any Liability arising out of or relating to any of the
Excluded Property.
4.2 PURCHASER'S ASSUMED LIABILITIES. In consideration of the transfer
of the Assets, Purchaser shall assume, and shall pay, perform and discharge when
due, and shall indemnify and defend Seller and its Indemnitees against and shall
hold them harmless from:
4.2.1 any Liability with respect to the Assets and any
condition existing with respect to the Assets or the Operations, in each case
whether arising before, at or after the Closing, subject in each case only to
Seller's retention of the Retained Liabilities;
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4.2.2 any Liability for:
4.2.2.1 salary, wages, benefits, vacation, severance,
supplies or overhead for or on behalf of any current or former employees of
Seller arising out of their employment by Purchaser after the Closing, or
4.2.2.2 any injury or exposure suffered by any
current or former employee of Seller (to the extent and in the proportion the
injury or exposure occurred after the Closing) in the course of their employment
by Purchaser at the Refinery or the Marketing Sites, or
4.2.2.3 any violation of law relating to the hiring,
employment, or termination of employment (including any violations of ERISA, the
WARN Act, COBRA Coverage, workers' compensation laws, and any federal, state,
local or foreign laws relating to plant closings or termination of employees) of
any current or former employees of Seller arising out of their employment by
Purchaser;
4.2.3 any costs for property furnished or services rendered
(other than by employees of Purchaser) to or for the benefit of the Assets after
the Closing;
4.2.4 any Liability arising after the Closing under any
Contract or Permit;
4.2.5 the Liabilities assumed by or allocated to Purchaser
pursuant to Article 10;
4.2.6 any Permit Assessments; and
4.2.7 Seller's obligations under Sections 2.04(a)(ii) and
Article 13 and the related provisions of Section 14.01(b)(iii) of the Tosco
Purchase Agreement.
ARTICLE 5
RELATED AGREEMENTS
5.1 TRADEMARK LICENSE AGREEMENT. At or prior to the Closing, Seller and
Purchaser shall enter into a license for up to 180 days to use certain
trademarks used by Seller in connection with the Operations at the Marketing
Sites, in the form attached as Exhibit C (the "TRADEMARK LICENSE AGREEMENT").
5.2 TRANSITION SERVICES AGREEMENT. Seller shall provide, or cause its
Affiliates to provide, to Purchaser, transition services pursuant to the
Transition Services Agreement in the form attached as Exhibit D (the "TRANSITION
SERVICES AGREEMENT"). The parties acknowledge that it is in each party's
respective interest to work together, both during the period following the
Effective Date up to the Closing Date and the period following the Closing Date,
to ensure a smooth transition in ownership. Accordingly, each party will
cooperate with each other and assist each other to facilitate the performance of
the services to be provided under the Transition Services Agreement and to
facilitate Purchaser's ability to terminate use of such services as soon as
practicable following the Closing Date. To this end, each party agrees to
furnish timely any information requested by the other party that is in its
possession and that is reasonably necessary
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for the performance of the services to be provided under the Transition Services
Agreement but which the requesting party does not possess.
5.3 AGREEMENTS NOT EFFECTIVE PRIOR TO CLOSING. Neither of the
agreements described above in this Article 5 shall be effective prior to the
Closing.
ARTICLE 6
CLOSING
6.1 TIME AND PLACE. The closing of the transaction contemplated hereby
(the "CLOSING") shall be held at Seller's offices in San Antonio, Texas or such
other locations as may be mutually agreed to by the parties on the latest of (a)
the date five business days after the conditions to Closing set forth in
Sections 7.1.5 and 7.2.4 have been satisfied, (b) 60 days after the Effective
Date, and (c) the date provided in Article 12, or at such other time or place or
in such other manner, including by mail or facsimile, as Seller and Purchaser
may mutually agree in writing. If the Closing does not occur by the Outside
Closing Date, a party which is not then in material default under this Agreement
may, by written notice to the other party, terminate this Agreement (other than
Sections 8.14, 9.6 and 31.14 and Article 20, which shall continue in effect)
without further obligation to the other party, and if Purchaser is not then in
material default under this Agreement, Seller shall return the Earnest Money
Deposit (together with interest earned thereon) to Purchaser within 3 business
days after giving or receiving notice of termination pursuant to this Section
6.1.
6.2 SELLER'S DELIVERIES. At the Closing, Seller shall do the following:
6.2.1 with respect to the Refinery:
6.2.1.1 deliver to Title Company Corporation Grant
Deeds for the owned Real Properties, in the form attached as Exhibit E, executed
and acknowledged by Seller;
6.2.1.2 deliver to Purchaser Bills of Sale for the
Refinery Personal Property, Refinery Books and Records and Refinery Inventory,
in the form attached as Exhibit F, executed by Seller;
6.2.1.3 to the extent any required consents have been
obtained, deliver to Purchaser (or to Title Company as to leasehold interests to
be covered by the Title Policies) Assignments and Assumption of Lease
Agreements, in the form attached as Exhibit G, executed and acknowledged by
Seller;
6.2.1.4 deliver to Purchaser possession of the
Refinery;
6.2.1.5 deliver to Purchaser counterparts executed by
Seller of the agreements required by Sections 5.1 and 5.2;
6.2.1.6 to the extent any required consents have been
obtained, deliver to Purchaser an executed Assignment and Assumption of Permits,
Contracts and Miscellaneous Assets, in the form attached as Exhibit A;
20
6.2.1.7 to the extent obtained by Seller prior to the
Closing Date, deliver to Purchaser or Title Company, consistent with the
deliveries under Section 6.2.1.3, the written consent of any lessor or landlord,
if the assignment of the lease relating to the Refinery requires such consent;
6.2.1.8 to the extent obtained by Seller prior to the
Closing Date, deliver to Purchaser the written consent of any third party, if
the assignment of the Refinery Permits or Refinery Contracts requires such
consent;
6.2.1.9 to the extent obtained by Seller prior to the
Closing Date, deliver to Purchaser the Tosco Environmental Consent and the Tosco
Retention Consent; and
6.2.1.10 to the extent obtained by Seller prior to
the Closing Date, deliver to Purchaser a copy of the Environmental Insurance
Endorsement.
6.2.2 with respect to the Marketing Sites:
6.2.2.1 deliver to Title Company a Corporation Grant
Deed for each Fee Marketing Site, in the form of Exhibit E, executed and
acknowledged by Seller;
6.2.2.2 to the extent obtained by Seller prior to the
Closing Date, deliver to Purchaser (or to Title Company as to leasehold
interests to be covered by the Title Policies) the written consent of any lessor
or landlord, if the assignment of the lease relating to a Leased Marketing Site
requires such consent;
6.2.2.3 to the extent any required consents have been
obtained, deliver to Purchaser (or to Title Company as to leasehold interests to
be covered by the Title Policies) an executed and acknowledged Assignment and
Assumption of Lease Agreement for each Leased Marketing Site, in the form
attached as Exhibit G;
6.2.2.4 deliver to Purchaser possession of the
Marketing Sites;
6.2.2.5 deliver to Purchaser an executed Bill of Sale
for the Marketing Personal Property, the Marketing Books and Records, the
Marketing Inventory and the Merchandise, in the form attached as Exhibit F;
6.2.2.6 to the extent any required consents have been
obtained, deliver to Purchaser an executed Assignment and Assumption of Permits,
Contracts and Miscellaneous Assets in the form attached as Exhibit A; and
6.2.2.7 to the extent obtained by Seller prior to the
Closing Date, deliver to Purchaser the written consent of any third party, if
the assignment of the Marketing Permits or Marketing Contracts requires such
consent;
6.2.3 With respect to all categories of Assets, deliver to
Purchaser the following:
6.2.3.1 certified copies of appropriate corporate
action by Seller authorizing the transactions contemplated by this Agreement and
authorizing the
21
person(s) executing the documents listed in this Section 6.2 to enter into this
Agreement and such other documents on behalf of Seller (to the extent such
corporate action is required under Seller's constituent documents);
6.2.3.2 such affidavits and certificates as Title
Company shall reasonably require;
6.2.3.3 a certificate that the representations and
warranties made by Seller in this Agreement are true and correct as of the
Closing Date, as though made at and as of the Closing Date, except to the extent
modified pursuant to Article 14;
6.2.3.4 deliver to Title Company a FIRPTA Affidavit
and California Form 597W, in the forms attached as Exhibit H and I,
respectively, executed by Seller; and
6.2.3.5 deliver to Title Company escrow instructions
signed by Seller consistent with this Agreement and required to consummate the
transactions contemplated by this Agreement.
6.3 PURCHASER'S DELIVERIES. At the Closing, Purchaser shall do the
following:
6.3.1 pay to Seller the Cash Purchase Price, in accordance
with Section 3.2;
6.3.2 deliver to Seller counterparts executed by Purchaser of
the agreements required by Sections 5.1 and 5.2;
6.3.3 deliver to Seller executed and acknowledged Assignment
and Assumption of Lease Agreements, in the form attached as Exhibit G;
6.3.4 if the Tosco Environmental Consent is given, deliver to
Seller, for Seller's delivery to Tosco, Purchaser's assumption of the
obligations set forth in Section 4.2.7;
6.3.5 to the extent any required consents have been obtained,
deliver to Seller an executed Assignment and Assumption of Permits, Contracts
and Miscellaneous Assets in the form attached as Exhibit A;
6.3.6 deliver to Seller and Title Company certified copies of
appropriate corporate action by Purchaser authorizing the transactions
contemplated by this Agreement and authorizing the person(s) executing the
documents listed in this Section 6.3 to enter into this Agreement and such other
documents on behalf of Purchaser;
6.3.7 deliver to Seller a certificate that the representations
and warranties made by Purchaser in this Agreement are true and correct as of
the Closing Date, as though made at and as of the Closing Date, except to the
extent modified pursuant to Article 14;
6.3.8 deliver to Seller the executed Purchaser Note; and
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6.3.9 deliver to the Title Company escrow instructions signed
by Purchaser consistent with this Agreement and required to consummate the
transactions contemplated by this Agreement.
6.4 INVENTORIES.
6.4.1 REFINERY INVENTORY. The quantities of the Refinery
inventory (including Petroleum Products stored at the Refinery or in connection
with Operations at the Refinery and warehouse inventory at the Refinery) to be
sold and transferred to Purchaser as of the Closing Date (the "REFINERY
INVENTORY") shall be identified and calculated in accordance with the
definitions and procedures set forth in "Refinery Inventory Quantification
Procedures" as set forth in Attachment 8. The price to be paid for the Refinery
Inventory (the "REFINERY INVENTORY PRICE") shall be calculated in accordance
with the "Refinery Inventory Valuation Protocol" as set forth in Attachment 9.
At the Closing, Seller shall transfer title and custody of the Refinery
Inventory to Purchaser, and Purchaser will accept the Refinery Inventory and pay
the Refinery Inventory Price to Seller, as provided in Section 3.2.4.
6.4.2 MARKETING INVENTORY AND MERCHANDISE. "MARKETING
INVENTORY" means all refined Petroleum Products in bulk storage owned by Seller
on each Marketing Site and all branded lubricants, tires, batteries, accessories
and or other products owned by Seller and held for resale. "MERCHANDISE" means
all merchandise owned by Seller and held for resale in the stores on the
Marketing Sites, including currency and coins on hand in the cash registers at
the Marketing Sites (other than checks and charge card tickets) at the Closing
Date, but excluding Marketing Inventory. The quantities of the Marketing
Inventory and Merchandise to be sold and transferred to Purchaser as of the
Closing Date shall be as reported in accordance with Seller's standard reporting
practices in the PDI database with respect to each Marketing Site as of the
close of business on the Closing Date. The price to be paid for the Marketing
Inventory and Merchandise (the "MARKETING INVENTORY PRICE") shall be calculated
in accordance with the "Marketing Inventory Valuation Protocol" as set forth in
Attachment 9. At the Closing, Seller shall transfer title and custody of the
Marketing Inventory and Merchandise to Purchaser and Purchaser will accept the
Marketing Inventory and Merchandise and pay the Marketing Inventory Price to
Seller, as provided in Section 3.2.4.
6.5 APPORTIONMENT OF TAXES AND EXPENSES.
6.5.1 Seller shall include in the Post-Closing Report a
written statement (the "APPORTIONMENT REPORT") setting forth the amount of each
of the following and a proration of such amounts as of the Closing Date: (a)
general real estate taxes for the then current year relating to each piece of
Real Property, (b) personal property taxes, (c) rents and lease payments, (d)
charges for water, electricity, sewerage, gas and all other utilities or
municipal charges and all energy-related charges imposed by a utility or
governmental agency, (e) all street closure fees payable to Contra Costa County
and (f) other prepaid expenses (including royalty payments) related to the
Assets and their Operations (clauses (a) through (f), collectively, the
"EXPENSES"), and (vii) the amount of all deposits included in the Assets (the
"DEPOSITS"). The sum of amounts of Expenses apportioned to periods on and after
the Closing Date and not paid by Purchaser (or required to be paid by Purchaser
directly to the third party to whom it is owed) and the amount of the Deposits
shall be payable by Purchaser (the "PURCHASER APPORTIONMENT SUM"). The sum
23
of the amounts of Expenses apportioned to periods prior to the Closing Date and
not paid by Seller (or required to be paid by Seller directly to the third party
to whom it is owed) shall be payable by Seller (the "SELLER APPORTIONMENT SUM").
The result of the Purchaser Apportionment Sum minus the Seller Apportionment Sum
shall be referred to as the "APPORTIONMENT SUM PAYABLE." If the Apportionment
Sum Payable is a positive amount, it shall be paid by Purchaser to Seller
pursuant to Section 3.2.4. If the Apportionment Sum Payable is a negative
amount, it shall be treated as a negative number in the calculation set forth in
Section 3.2.4.1.
6.5.2 If the Closing shall occur before property taxes are
finally fixed for the then current year for any Real Property, the apportionment
of property taxes at the Closing shall be based upon the Latest Tax Rate applied
to the Latest Tax Valuation for such Real Property. All special taxes or
assessments applicable to any Real Property prior to the Closing Date shall be
paid by Seller, including all taxes resulting from subsequent assessments for
years or portions thereof prior to the Closing due to change in land usage or
ownership pursuant to existing law. Any property taxes attributable to property
produced or acquired by Purchaser after the Closing Date shall be entirely for
the account of Purchaser.
6.5.3 After the Closing Date, if Purchaser receives a bill for
Taxes assessed that includes Taxes for taxable years or taxable periods on or
before the Closing Date (including Taxes assessed for portions of taxable years
or periods on or before the Closing Date), Purchaser shall pay the bill and
invoice Seller for all such Taxes relating to periods prior to the Closing Date.
Subject to the proration occurring at the Closing, Seller shall promptly
reimburse Purchaser upon receipt of such invoice. After the Closing Date, if
Seller receives a bill for Taxes assessed against the Assets that includes Taxes
for taxable years or taxable periods after the Closing Date (including Taxes
assessed for portions of taxable years or periods after the Closing Date),
Seller shall pay the bill and invoice Purchaser for all such Taxes relating to
periods on or after the Closing Date. Subject to the proration occurring at the
Closing, Purchaser shall promptly reimburse Seller upon receipt of such invoice.
6.5.4 The Apportionment Report shall indicate any Expense that
cannot be finally determined as of the date of the Post-Closing Report. Any such
Expense shall be excluded from the calculation of the Apportionment Sum Payable
for the purposes of the Post-Closing Report and the determination of the
principal amount of the Purchaser Note. The parties shall cooperate in making a
final determination of the amount of any such item and the apportionment
thereof, and shall make appropriate payments to reflect any adjustments arising
out of such final determination. The Post-Closing Report shall be considered
final as to all Expenses to which Purchaser does not object in the Purchaser
Response.
6.5.5 If any of the amounts to be apportioned in Section 6.5.1
are not readily determinable as of the time of the Closing, such apportionments
shall, to the extent necessary, be based on Seller's reasonable estimate
thereof.
6.6 CONDITION OF ASSETS. EXCEPT AS EXPRESSLY PROVIDED IN THIS
AGREEMENT, ALL ASSETS AND RIGHTS (INCLUDING THE REAL PROPERTY, PERSONAL
PROPERTY, IMPROVEMENTS, REFINERY INVENTORY, MARKETING INVENTORY, MERCHANDISE,
REFINERY BOOKS AND RECORDS, MARKETING
24
BOOKS AND RECORDS, REFINERY CONTRACTS, MARKETING CONTRACTS, REFINERY
MISCELLANEOUS ASSETS, REFINERY PERMITS AND MARKETING PERMITS) TO BE CONVEYED OR
LICENSED HEREUNDER WILL BE CONVEYED OR LICENSED ON AN "AS IS," "WHERE IS," AND
"WITH ALL FAULTS" BASIS AT THE CLOSING. SELLER MAKES NO WARRANTIES, EXPRESS OR
IMPLIED, CONCERNING THE PHYSICAL CONDITION, UTILITY, FITNESS OR OPERABILITY OF
ANY OF SUCH ASSETS AND RIGHTS, INCLUDING ANY WARRANTY OF MERCHANTABILITY OR OF
FITNESS FOR PARTICULAR OR ORDINARY USES OR PURPOSES. PURCHASER HEREBY WAIVES THE
UNIFORM COMMERCIAL CODE WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE AND ALL OTHER IMPLIED WARRANTIES WITH RESPECT TO THE ASSETS.
PURCHASER HAS COMPLETED ALL DUE DILIGENCE PRIOR TO THE EFFECTIVE DATE, AND
PURCHASER'S OBLIGATIONS HEREUNDER ARE NOT CONDITIONED ON ITS SATISFACTION WITH
THE RESULTS OF ANY FURTHER INSPECTION, INVESTIGATION, REVIEW OR OTHER DUE
DILIGENCE.
ARTICLE 7
CONDITIONS PRECEDENT TO CLOSING
7.1 CONDITIONS TO PURCHASER'S OBLIGATIONS. The obligations of Purchaser
at the Closing are subject to the following conditions:
7.1.1 Seller shall have performed in all material respects all
covenants required by this Agreement to be performed by it at or prior to the
Closing;
7.1.2 Seller shall have delivered to Purchaser all agreements,
instruments, certificates and documents required to be delivered under this
Agreement, including those listed in Section 6.2;
7.1.3 there shall not be in effect any Order barring the
consummation of the transactions contemplated by this Agreement;
7.1.4 Seller shall have delivered to Purchaser the Tosco
Consents; provided, however, that if Seller is unable to obtain either Tosco
Consent, Seller shall cause this condition to be satisfied by covenanting to
Purchaser at the Closing to indemnify Purchaser against any Liability which
Seller is entitled to recover under the corresponding Tosco Indemnity, or which
Seller would be entitled to recover under the corresponding Tosco Indemnity if
Seller continued to own the Assets at the Refinery, subject to the following
limitations: the amount of Seller's indemnity in this Section 7.1.4 (a) shall be
net of reasonable legal and other enforcement costs actually incurred and not
otherwise recovered from Tosco, (b) shall be limited to amounts actually
received by Seller from Tosco (net of any such costs under clause (a)), and (c)
shall otherwise be non-recourse to Seller. Seller shall covenant to pursue its
claims under the Tosco Indemnities diligently, in good faith and in a
commercially reasonable manner, and shall discuss its pursuit of such claims
with Purchaser and Purchaser's counsel upon Purchaser's reasonable request.
25
7.1.5 Seller shall have obtained the approvals of the FTC and
the Attorneys General of the States of California and Oregon to the consummation
of the transactions contemplated by this Agreement.
7.2 CONDITIONS TO SELLER'S OBLIGATIONS. The obligations of Seller at
the Closing are subject to the following conditions:
7.2.1 Purchaser shall have performed in all material respects
all covenants required by this Agreement to be performed by it at or prior to
the Closing;
7.2.2 Purchaser shall have delivered to Seller all agreements,
instruments, certificates and documents required to be so delivered under this
Agreement or such other agreements or instruments, including those listed in
Section 6.3;
7.2.3 there shall not be in effect any Order barring the
consummation of the transactions contemplated by this Agreement; and
7.2.4 Seller shall have obtained the approvals of the FTC and
the Attorneys General of the States of California and Oregon to the consummation
of the transactions contemplated by this Agreement.
7.3 COOPERATION. From the Effective Date hereof until the Closing,
Seller and Purchaser shall work together in the spirit of continuing cooperation
to (a) cause the conditions to Closing set forth in this Article 7 to be
satisfied as quickly as is reasonably possible, including promptly and fully
responding to and cooperating with the FTC and the Attorneys General of the
States of California and Oregon, and (b) obtain any Consent required by Seller
or Purchaser to consummate the transactions contemplated by this Agreement or
otherwise in connection with Purchaser's ownership of the Assets or its proposed
business operations relating thereto.
ARTICLE 8
SELLER'S REPRESENTATIONS AND WARRANTIES
In order to induce Purchaser to enter into this Agreement, Seller
hereby represents and warrants to Purchaser as follows; PROVIDED, HOWEVER THAT
NO REPRESENTATIONS OR WARRANTIES AS TO ENVIRONMENTAL LIABILITIES ARE GIVEN BY
SELLER PURSUANT TO THIS ARTICLE 8, WHICH ENVIRONMENTAL LIABILITIES ARE PROVIDED
FOR EXCLUSIVELY IN ARTICLE 10:
8.1 ORGANIZATION. Seller is a corporation duly organized, validly
existing and in good standing under the laws of the State of Nevada, and is duly
qualified as a foreign corporation in the State of California.
8.2 AUTHORITY; ENFORCEABILITY. Seller has the power and authority under
applicable corporate law (a) to execute and deliver this Agreement and each
agreement and instrument delivered or to be delivered by Seller pursuant to this
Agreement, and to carry out its obligations hereunder and thereunder and (b) to
own or lease the Assets and to conduct its business thereon. The execution,
delivery and performance of this Agreement and each agreement and instrument
26
delivered or to be delivered pursuant to this Agreement by Seller, and the
consummation of the transactions provided for hereby and thereby, have been duly
authorized and approved by all requisite corporate action of Seller, and no
other corporate act or proceeding on the part of Seller or its Affiliates or
shareholders is necessary to authorize the execution, delivery or performance of
this Agreement or of such other agreements and instruments, or the transactions
contemplated hereby or thereby. This Agreement and each such agreement and
instrument is, or upon its execution and delivery will be, legal, valid, binding
and enforceable against Seller in accordance with its respective terms, subject
to the effects of bankruptcy, insolvency, reorganization, moratorium, fraudulent
transfers, preferential transfers and other laws of general application relating
to creditors' rights and equitable remedies.
8.3 CONSENTS. Other than (a) the consents of the FTC and the Attorneys
General of the States of California and Oregon pursuant to the Consent Decrees,
(b) the consents required in connection with the transfer of any Permits, Real
Property or Miscellaneous Assets to Purchaser, and (c) any other exceptions as
set forth on Schedule 8.3, no material consent, waiver, approval, authorization,
exemption, registration, license or declaration ("CONSENT") of or by, or
material filing with, any Governmental Authority is required with respect to
Seller or any of its Affiliates in connection with (i) the execution, delivery
or enforceability of this Agreement or any material agreement or instrument
delivered pursuant to this Agreement by Seller, or (ii) to Seller's Knowledge,
the consummation of any of the transactions provided for in this Agreement and
in the other documents specified in clause (i).
8.4 NO BREACH. Except as set forth on Schedule 8.4, the execution and
delivery of this Agreement and each agreement and instrument delivered or to be
delivered pursuant to this Agreement by Seller, and the consummation of the
transactions provided for hereby and thereby and the compliance by Seller with
any of the provisions hereof or thereof does not and will not (a) violate, or
conflict with, or result in a breach of, any provisions of, or constitute a
default (or an event which, with notice or lapse of time or both, would
constitute a default) under, or result in the termination of, or accelerate the
performance required by, or result in the creation of any lien upon any of the
Assets under any of the terms, conditions or provisions of (i) the Certificate
of Incorporation or Bylaws of Seller, or (ii) to Seller's Knowledge, any
Contract or other agreement, instrument or obligation to which Seller is a
party, or by which any of the Assets or their Operations otherwise are bound, or
(b) to Seller's Knowledge, violate any order, injunction, statute, rule or
regulation, or (c) trigger any rights of purchase or any buy/sell or similar
rights material to the Refinery or any particular Marketing Site.
8.5 REAL PROPERTY. Attachments 1-R, 1-M, 4-R and 4-M indicate which
pieces of Real Property are under lease to or by Seller. Except as indicated on
Schedule 8.5, (a) to Seller's Knowledge, all such leases are valid, in full
force and effect and enforceable in accordance with their terms, and (b) no
material defaults by Seller or, to Seller's Knowledge, any other party to such
leases, exist with respect thereto.
8.6 IMPROVEMENTS. Attachments 2-R and 2-M list Improvements which are
material to the Operation of the Refinery or the Marketing Assets and identify
those material Improvements that are leased to Seller. Except as indicated in
Schedule 8.6, (a) to Seller's Knowledge, all such leases are valid, in full
force and effect and enforceable in accordance with
27
their terms and (b) no material defaults by Seller or, to Seller's Knowledge,
any other party to such leases, exist with respect thereto.
8.7 COMPLIANCE WITH LAWS. To Seller's Knowledge, except as set forth on
Schedule 8.7, Seller has made no changes in the Assets or Operations since the
closing date of the Tosco Purchase Agreement which violate in any material
respect any judgments, orders, injunctions, statutes, rules, regulations or
other legal requirements applicable to, or required in connection with, the
Assets. Except as set forth in Schedule 8.7, since the closing date of the Tosco
Purchase Agreement, Seller has not received any written notice of violation
which remains unresolved as of the Effective Date, of any such Permit, judgment,
order, injunction, statute, rule, regulation or other legal requirement from any
Governmental Authority.
8.8 CONTRACTS.
8.8.1 Attachments 3-R and 3-M include all Contracts primarily
related to the Operation of the Refinery or the Marketing Sites to which Seller
or any of its Affiliates is party (a) under which Seller or any of its
Affiliates have obtained materials or services in connection with Operation of
the Refinery or the Marketing Sites and for which Seller has spent in excess of
$25,000 over the twelve-month period preceding the Effective Date, or (b) by
which, to Seller's Knowledge, a material portion of the Assets and their
respective Operations are bound.
8.8.2 Except as set forth in Schedule 8.8, (a) Seller is not
in default under any of the Contracts listed on Attachments 3-R and 3-M, nor has
any event occurred which, with the lapse of time or the giving of notice, or
both, would constitute a default by Seller under any such Contract, and (b) to
Seller's Knowledge, no material defaults by any other party exist with respect
to any of the Contracts listed on Attachments 3-R and 3-M, nor has any event
occurred which, with the lapse of time or the giving of notice, or both, would
constitute a default by any other party under any such Contract, except, in each
case, where such a default would not have a material adverse effect upon the
Assets or the Operations.
8.9 PERMITS. Attachments 5-R and 5-M include all material Permits used
by Seller in the Operation of the Refinery or the Marketing Sites. To Seller's
Knowledge, the Permits listed in Attachments 5-R and 5-M are all of the material
Permits required for the Operation of the Refinery or the Marketing Sites.
8.10 ACTIONS AND PROCEEDINGS.
8.10.1 Except as set forth on Schedule 8.10, Seller has
received no written notice of any legal action pending, and, to Seller's
Knowledge, no legal action is threatened, against Seller or any of its
Affiliates, whether or not the defense thereof or liability in respect thereof
is covered by policies of insurance, involving or affecting any of the Assets or
their respective Operations and seeking (a) compensation in an amount in excess
of $100,000 in each case, or $500,000 in the aggregate, (b) compensation in an
unspecified amount, or (c) any injunctive relief, except for such injunctive
relief that if granted would be immaterial, individually and in the aggregate.
8.10.2 Except as set forth on Schedule 8.10, Seller has
received no written notice of any action, suit, proceeding in condemnation or
eminent domain pending, and, to Seller's
28
Knowledge, no such action, suit or proceeding is threatened, seeking to condemn
or acquire all or any material part of any Real Property.
8.10.3 Except as set forth on Schedule 8.10, Seller has
received no written notice of any action, suit, proceeding or claim pending,
and, to Seller's Knowledge, no such action, suit or proceeding is threatened,
seeking to restrain or prohibit this Agreement.
8.11 LABOR MATTERS. Except as described in Schedule 8.11, there are no
material labor-related disputes of any kind asserted against Seller in
connection with the Operation of any of the Assets pending before or, to
Seller's Knowledge, threatened before, any federal, state or local court or
agency. With respect to the Assets and except to the extent set forth in
Schedule 8.11: (i) there is no unfair labor practice charge or complaint against
Seller actually pending or, to Seller's Knowledge, threatened, before the
National Labor Relations Board; (ii) there is no labor strike, slowdown or
stoppage actually pending or, to Seller's Knowledge, threatened against or
affecting the Assets; (iii) none of the Operations of any of the Assets have
experienced any material labor disputes or any material work stoppage due to
labor disagreements within the past three years; and (iv) no attempt to organize
Employees has resulted in an election within the past three years or, to
Seller's Knowledge, is threatened with respect to the Assets. Except for the
Collective Bargaining Agreements, none of the Refinery or the Marketing Sites is
now, nor at any time within the past three years has been, subject to any
collective bargaining agreement, contract, letter of understanding or other
similar arrangement with any labor union or organization.
8.12 INTELLECTUAL PROPERTY. Schedule 8.12 lists all Intellectual
Property that is (a) owned by Seller or licensed to Seller by a third party, (b)
used by Seller primarily in the Operation of the Refinery and (c) material to
such Operation. To Seller's Knowledge and except as set forth on Schedule 8.12,
the Intellectual Property listed in Schedule 8.12 is all of the Intellectual
Property required for the Operation of the Refinery as it is operated by Seller
on the Closing Date.
8.13 RETAIL MERCHANDISE. The Merchandise to be sold and transferred to
Purchaser at the Closing will represent substantially all of the material
saleable merchandise in the stores on the Marketing Sites as of the Closing
Date.
8.14 BROKERS. All negotiations relating to this Agreement, the
agreements and instruments delivered or to be delivered pursuant to this
Agreement and the transactions contemplated hereby and thereby have been carried
on without the intervention of any person acting on behalf of Seller or its
Affiliates in such manner as to give rise to any valid claim against Purchaser
for any broker's or finder's fee or similar compensation in connection with the
transactions contemplated hereby or thereby. Seller shall indemnify and defend
Purchaser and its Affiliates against, and shall hold them harmless from, any
Liability arising out of claims by any person alleging a right to a broker's or
finder's fee based upon any actions of Seller or its Affiliates.
8.15 SOLVENCY. Seller is solvent and is not in the hands of a receiver.
No application of receivership regarding it is pending, and no proceedings are
pending by or against it for bankruptcy or reorganization in any state or
federal court.
29
8.16 ABSENCE OF CERTAIN CHANGES. Since its acquisition by Seller, the
Refinery has only been used, operated and held by Seller in the ordinary course
of business.
8.17 RETURNS. All Returns required to be filed by Seller or its
Affiliates which primarily relate to the Assets or the Operations thereof prior
to the Closing have been timely filed in all material respects. All material
Taxes shown on such Returns to be then due and owing have been paid. No material
adjustment relating to any of such Returns, or to the Taxes shown therein, has
been proposed by any Tax authority which remains pending, and there is no
material suit or proceeding pending or, to Seller's Knowledge, threatened with
respect to the assessment or collection of Taxes against Seller which primarily
relate to the Assets or their Operation by the Seller prior to the Closing.
There are no material Tax liens against any of the Assets, other than liens for
property Taxes which are not yet delinquent.
8.18 FOREIGN PERSON. Seller is not a "foreign person" as defined in
Section 1445 of the Internal Revenue Code and the regulations promulgated
thereunder. Seller's U.S. tax identification number is 94-1126451.
ARTICLE 9
PURCHASER'S REPRESENTATIONS AND WARRANTIES
In order to induce Seller to enter into this Agreement, Purchaser
hereby warrants and represents to Seller that:
9.1 ORGANIZATION. Purchaser is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and is
duly qualified as a foreign corporation in the State of California.
9.2 AUTHORITY; ENFORCEABILITY. Purchaser has the power and authority
under applicable corporate law (a) to execute and deliver this Agreement and
each agreement and instrument delivered or to be delivered by Purchaser pursuant
to this Agreement, and to carry out its obligations hereunder and thereunder and
(b) to own or lease and operate the Assets and to conduct its business thereon.
The execution, delivery and performance of this Agreement and each agreement and
instrument delivered or to be delivered pursuant to this Agreement by Purchaser,
and the consummation of the transactions provided for hereby and thereby, have
been duly authorized and approved by all requisite corporate action of
Purchaser, and no other corporate act or proceeding on the part of Purchaser or
its Affiliates or shareholders is necessary to authorize the execution, delivery
or performance of this Agreement or of such other agreements and instruments, or
of the transactions contemplated hereby or thereby. Each of this Agreement and
such agreements and instruments is, or upon its execution and delivery will be,
legal, valid, binding and enforceable against Purchaser in accordance with its
respective terms, subject to the effects of bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfers, preferential transfers and
other laws of general application relating to creditors' rights and equitable
remedies.
9.3 CONSENTS. Except as set forth on Schedule 9.3, to Purchaser's
Knowledge, no material Consent of or by, or material filing with, any other
person is required with respect to
30
Purchaser or any of its Affiliates in connection with (a) the execution,
delivery or enforceability of this Agreement or any agreement or instrument
delivered or to be delivered pursuant to this Agreement by Purchaser, or (b) the
consummation of any of the transactions provided in this Agreement and the other
documents specified in clause (a).
9.4 NO BREACH. Except as set forth on Schedule 9.4, the execution and
delivery of this Agreement and each agreement and instrument delivered or to be
delivered pursuant to this Agreement by Purchaser, and the consummation of the
transactions provided for hereby and thereby and the compliance by Purchaser
with any of the provisions hereof or thereof does not and will not (a) violate,
or conflict with, or result in a breach of any provisions of, or constitute a
default (or an event which, with notice or lapse of time or both, would
constitute a default) under, or result in the termination of, or accelerate the
performance required under, any of the terms, conditions or provisions of (i)
the Certificate of Incorporation or By-laws of Purchaser or (ii) to Purchaser's
Knowledge, any agreement, instrument or obligation to which Purchaser is a party
or by which a material part of its assets or operations otherwise are bound, or
(b) to Purchaser's Knowledge, violate any order, injunction, statute, rule or
regulation, or (c) to Purchaser's Knowledge, trigger any rights of purchase, or
any buy/sell or similar rights.
9.5 ACTIONS AND PROCEEDINGS. To Purchaser's Knowledge, except as set
forth on Schedule 9.5, no action, suit, proceeding or claim is pending or
threatened seeking to restrain or prohibit this Agreement.
9.6 BROKERS. All negotiations relating to this Agreement, the
agreements and instruments delivered or to be delivered pursuant to this
Agreement and the transactions contemplated hereby and thereby have been carried
on without the intervention of any person acting on behalf of Purchaser or its
Affiliates in such manner as to give rise to any valid claim against Seller for
any broker's or finder's fee or similar compensation in connection with the
transactions contemplated hereby or thereby. Purchaser shall indemnify and
defend Seller and its Affiliates against, and shall hold them harmless from, any
Liability arising out of claims by any person alleging a right to a broker's or
finder's fee based upon any actions of Purchaser or its Affiliates.
9.7 SOLVENCY; FUNDS. Purchaser is solvent and is not in the hands of a
receiver. No application of receivership pending, and no proceedings are pending
by or against it for bankruptcy or reorganization in any state or federal court.
Purchaser will have sufficient funds to deliver the Purchase Price at Closing as
contemplated in this Agreement and has, as of the Effective Date, a commitment
with respect to any necessary funds therefor.
9.8 INDEPENDENT DECISION. Purchaser has made its own independent
analysis and judgment of the commercial potential and usefulness of the Assets,
and is not relying upon any projections from Seller regarding prospective
operations of the Assets.
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ARTICLE 10
ENVIRONMENTAL LIABILITIES
10.1 ALLOCATION OF ENVIRONMENTAL LIABILITIES. The provisions of this
Article 10 are the result of mutual compromise and an allocation of
responsibility and risk for Environmental Liabilities arising out of or related
to the Assets or the Operations of the Assets as between Purchaser and Seller.
Each party has given weight to these matters in entering into the Agreement and
setting the Purchase Price. Purchaser and Seller intend that the allocations of
risk and responsibility for Environmental Liabilities as set forth in this
Article 10 and the other applicable provisions of this Agreement shall be given
full effect and that the rights and remedies in this Article 10 and the other
applicable provisions of this Agreement shall be the exclusive rights and
remedies available to the parties. The parties acknowledge that they expressly
waive and relinquish all other rights and remedies with respect to Environmental
Liabilities, whether based on statute, regulation, common law or otherwise,
including claims under the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended ("CERCLA").
10.2 SCOPE. Section 10.3 shall apply only to the Refinery. Section 10.4
shall apply only to the Marketing Assets.
10.3 REFINERY.
10.3.1 ALLOCATION BETWEEN PURCHASER AND SELLER.
10.3.1.1 SELLER'S RETAINED REFINERY ENVIRONMENTAL
LIABILITIES. Seller shall retain and be solely responsible for the following
matters ("SELLER'S RETAINED REFINERY ENVIRONMENTAL LIABILITIES"):
10.3.1.1.1 penalties assessed for any notice of
violation received from any Governmental Authority related to the Refinery or
the Operations of the Refinery prior to the Closing that is pending and
unresolved as of the Closing Date and the negotiation and final resolution of
any such notice of violation;
10.3.1.1.2 Liabilities with respect to litigation
listed in Schedule 10.3.1 or served on Seller or any Affiliate prior to Closing
with respect to the Refinery or Seller's Operation of the Refinery prior to the
Closing, except for matters referred to in Section 10.3.1.2.2;
10.3.1.1.3 Environmental Liabilities asserted against
Seller in connection with the offsite transportation and disposal prior to the
Closing of wastes containing Hazardous Materials generated by Seller at the
Refinery during its period of Operation of the Refinery; and
10.3.1.1.4 all monetary penalties arising from any
request for information and other proceedings under Section 114 of the federal
Clean Air Act, 42 U.S.C. ss.7401 et seq., as amended. Purchaser hereby (a)
irrevocably authorizes Seller to continue to include the Refinery in Seller's
negotiations with the Federal Environmental Protection Agency
32
concerning Section 114, either nationally or on a stand-alone basis, (b)
irrevocably authorizes Seller to settle or litigate any such matter, and (c)
irrevocably consents to be bound by any settlement or litigation outcome arising
therefrom; provided in each case that, insofar as they affect the Refinery, the
terms of such settlement or litigation outcome are not materially adversely
different from the terms of the pending settlement with the Federal
Environmental Protection Agency as described on Schedule 10.3.1.1.4. Purchaser
shall take all steps reasonably necessary to implement Seller's ongoing
management and control of any Section 114 proceeding regarding the Refinery, and
shall cooperate with Seller in these proceedings as Seller shall reasonably
request. Seller shall consult with Purchaser regarding any material changes in
such proceeding from the terms of the pending settlement with the Federal
Environmental Protection Agency.
10.3.1.2 PURCHASER'S ASSUMPTION OF ENVIRONMENTAL
LIABILITIES. Except for Seller's Retained Environmental Liabilities, Purchaser
shall assume and be solely responsible for, and shall indemnify and defend
Seller and its Indemnitees against, and hold them harmless from, all
Environmental Liabilities relating to or arising out of the Refinery or the
Operation of the Refinery, whether existing or asserted before or after the
Closing Date, whether based on past, present or future conditions or events,
whether or not known to Purchaser on the Closing Date and wherever located,
including the following:
10.3.1.2.1 all obligations arising out of or
related to the Tosco Purchase Agreement;
10.3.1.2.2 all defense settlement, impact
and other obligations arising out of or related to (i) Waterkeepers v. UDS, Case
No. C-01-0692 IS, U.S. District Court, Northern District of California, (ii) CBE
v. CalSWRCB; Ultramar Inc., Real Party-in-Interest, Case No. 319575, San
Francisco Superior Court, and (iii) any orders issued by the Regional Water
Quality Control Board, San Francisco Bay Region relating to the Refinery;
10.3.1.2.3 penalties of any kind assessed
for enforcement action related to the Refinery or the Operation of the Refinery
before or after the Closing; and
10.3.1.2.4 all capital, operating and other
costs, and all implementation and other obligations arising out of or related to
all government-ordered or voluntary Remedial Work at, on, under or offsite from
the Refinery, including Remedial Work undertaken in connection with site
modification, expansion or redevelopment.
10.3.2 PURCHASER'S RELEASE. Effective as of the Closing,
Purchaser hereby unconditionally releases and discharges Seller, Seller's
Affiliates and Seller's employees, officers, directors and contractors and those
of its Affiliates from all Environmental Liabilities relating to or arising out
of the Refinery or the Operations of the Refinery, whether existing or asserted
before or after the Closing Date, whether based on past, present or future
conditions or events, whether or not known to Purchaser on the Closing Date and
wherever located, except for Seller's Retained Refinery Environmental
Liabilities. This release includes, but is not limited to, any Environmental
Liabilities under CERCLA, the Resource Conservation and Recovery Act of 1976, as
amended ("RCRA"), the federal Clean Air Act, as amended, and other Environmental
Laws and Environmental Liabilities for injury, death, destruction, loss or
damage to the person
33
or property of Purchaser and its employees arising out (i) the environmental
condition of the Refinery and the improvements and the equipment at the
Refinery, and (ii) the existence of Hazardous Materials at the Refinery. Nothing
in this release is intended to limit the Seller's Retained Liability set forth
in Section 4.1.
In connection with this release, Purchaser hereby expressly
waives the benefits of any statute limiting the waiver of unknown claims,
including Section 1542 of the California Civil Code which reads as follows:
"A general release does not extend to claims which the
creditor does not know or suspect to exist in his favor at the
time of executing the release which if known to him must have
materially affected his settlement with the debtor."
10.3.3 REFINERY ENVIRONMENTAL DIRECTIVES. Purchaser covenants
to use its best efforts to cause the issuing Governmental Authority to amend all
administrative orders, decrees, directives, notices, requests for information
and demands of any kind regarding Remedial Work at, on, under or offsite from
the Refinery or the management of Releases to air, water and soil at, on, under
or offsite from the Refinery outstanding on the Closing Date in order to
substitute Purchaser as the responsible party thereunder for all purposes as
soon as practicable following the Closing Date.
10.3.4 POST-CLOSING SITE MAINTENANCE. Purchaser shall, at its
expense, take prudent measures to maintain the integrity of any caps and closed
sites where remediation has been completed and to prevent the disturbance of any
residual Hazardous Materials or Petroleum Products remaining after Remedial Work
is completed.
10.3.5 TOSCO ENVIRONMENTAL INDEMNITY AND LIABILITIES. Seller
shall use commercially reasonable efforts to persuade Tosco to consent (the
"TOSCO ENVIRONMENTAL CONSENT") to making Purchaser an additional beneficiary
under Seller's rights under Section 2.04(b)(ii) and Article 13 and the related
provisions of Section 14.01(a) of the Tosco Purchase Agreement (the "TOSCO
ENVIRONMENTAL INDEMNITY"). If the Tosco Consent is given, Purchaser agrees to
reasonably cooperate and negotiate in good faith with Tosco for a potential
post-Closing buy-out of such rights and remaining obligations under the Tosco
Avon Refinery Joint Environmental Investigation and Remediation Agreement dated
July 1, 1993, as amended and supplemented.
10.3.6 ENVIRONMENTAL INSURANCE. At the Closing, Seller shall
use commercially reasonable efforts to deliver to Purchaser a copy of an
endorsement to Seller's environmental insurance policy purchased from American
International Specialty Lines Insurance Company (an AIG Member Company) set
forth in Schedule 10.3.6 which makes Purchaser an additional insured thereunder
or, in the alternative, at Seller's sole election, Seller may cause such policy
to be assigned by such insurer to Buyer subject to Seller being made an
additional insured under such policy (the "ENVIRONMENTAL INSURANCE
ENDORSEMENT").
34
10.4 MARKETING ASSETS.
10.4.1 ALLOCATION BETWEEN PURCHASER AND SELLER.
10.4.1.1 SELLER'S RETAINED MARKETING ENVIRONMENTAL
LIABILITIES. Seller shall retain and be solely responsible for the following
matters ("SELLER'S RETAINED MARKETING ENVIRONMENTAL LIABILITIES"):
10.4.1.1.1 penalties assessed for any notice
of violation received from any Governmental Authority related to the Marketing
Sites or the Operations of the Marketing Sites prior to the Closing that is
pending and unresolved as of the Closing Date and the negotiation and final
resolution of any such notice of violation.
10.4.1.1.2 Liabilities with respect to
litigation listed in Schedule 10.3.1 or served upon Seller or any Affiliate
prior to the Closing with respect to the Marketing Sites or the Operation of the
Marketing Sites prior to the Closing.
10.4.1.1.3 Environmental Liabilities
asserted against Seller in connection with the offsite transportation and
disposal prior to the Closing of wastes containing Hazardous Materials, if any,
generated by Seller at the Marketing Sites during the period of Seller's
Operation of the Marketing Sites.
10.4.1.2 PURCHASER'S ASSUMPTION OF MARKETING
ENVIRONMENTAL LIABILITIES. Except for Seller's Retained Marketing Environmental
Liabilities, Purchaser shall assume and be solely responsible for, and shall
indemnify and defend Seller and its Indemnitees against, and shall hold them
harmless from, all Environmental Liabilities relating to or arising out of the
Marketing Assets or the Operations of the Marketing Assets, whether existing or
asserted before or after the Closing Date, whether based on past, present or
future conditions or events, whether or not known to Purchaser on the Closing
Date and wherever located.
10.4.2 PURCHASER'S RELEASE. Effective as of the Closing,
Purchaser hereby unconditionally releases and discharges, Seller, Seller's
Affiliates and Seller's employees, officers, directors and contractors and those
of its Affiliates from all Environmental Liabilities relating to or arising out
of the Marketing Assets or the Operations of the Marketing Assets, whether
existing or asserted before or after the Closing Date, whether based on past,
present or future conditions or events, whether or not known to Purchaser on the
Closing Date, and wherever located, except for Seller's Retained Marketing
Environmental Liabilities. This release includes, but is not limited to, any
Environmental Liabilities under CERCLA, RCRA, the federal Clean Air Act as
amended and other Environmental Laws and Environmental Liabilities for injury,
death, destruction, loss or damage to the person or property of Purchaser and
its employees arising out (i) the environmental condition of the Marketing Sites
and the improvements and the equipment on the Marketing Sites, and (ii) the
existence of Hazardous Materials on the Marketing Sites.
In connection with this release, Purchaser hereby expressly waives the
benefits of Section 1542 of the California Civil Code which reads as follows:
35
"A general release does not extend to claims which the
creditor does not know or suspect to exist in his favor at the
time of executing the release which if known to him must have
materially affected his settlement with the debtor."
10.4.3 UST CLEANUP FUND. As soon as practicable following the
Closing Date, Seller shall, to the extent allowed by law, assign to Purchaser
all rights (if any) of Seller to recoveries of any funds that may be available
from the California Underground Storage Tank Cleanup Fund with respect to the
Marketing Sites.
10.5 SURVIVAL. This Article 10 shall survive the Closing. Purchaser
shall bind Purchaser's successors and assigns and any tenants, operators or
licensees at the Refinery to the terms and conditions in this Article 10.
Purchaser and Seller intend that the obligations in this Article 10 shall be a
covenant running with the land at the Refinery, and Purchaser agrees to convey
notice of such in any deed, lease or other instrument conveying or creating any
interest in all or part of the Refinery. Purchaser's failure to make the terms
and conditions of this Article 10 binding on its successors and assigns and any
tenants, operators or licensees at the Refinery shall terminate Seller's
obligations under this Article 10.
ARTICLE 11
TITLE MATTERS
11.1 TITLE COMMITMENTS AND PERMITTED ENCUMBRANCES.
11.1.1 Seller has caused First American Title Insurance
Company (the "TITLE COMPANY") to issue an American Land Title Association
("ALTA") Form B Owner's or Leasehold Title Commitment (the "TITLE COMMITMENT")
for each piece of Real Property included in the Assets, which reflects the
condition of title that will be transferred at the Closing. The Title
Commitments are listed on Attachments 1-R and 1-M. All title matters on the
Title Commitments (excluding only those matters Purchaser and Seller have agreed
to remove as set forth in Schedule 11.1.1), together with such other matters as
are provided for in Sections 11.1.1.1 through 11.1.1.7, 11.1.3 and 11.1.4, shall
be deemed "PERMITTED ENCUMBRANCES."
11.1.1.1 mechanics' and materialmen's liens and
notices of rights to lien (and other similar liens and notices) and liens under
operating and similar agreements, to the extent the same relate to expenses
incurred in the ordinary course of business and which are not yet due or payable
and which do not materially interfere with or impair the operation, value or use
of the Real Property affected thereby for the purposes for which it has been
used by Seller or its Affiliates;
11.1.1.2 changes in zoning laws and ordinances
enacted after the Closing;
11.1.1.3 easements, agreements and other matters
contemplated by this Agreement, including the Restriction;
36
11.1.1.4 rights of third parties under temporary
construction agreements, utility relocation agreements and other agreements
listed in Schedule 11.1.1.4;
11.1.1.5 non-delinquent general real estate taxes for
the year of Closing;
11.1.1.6 mineral rights reserved by third parties;
and
11.1.1.7 after the Closing, each of the title and
survey matters disclosed in the Title Policies and surveys referenced therein.
11.1.2 Purchaser acknowledges receipt of the Title
Commitments. Purchaser acknowledges that (a) each of the Title Commitments is
issued by an insurer acceptable to Purchaser; (b) Purchaser has received legible
copies of each of the recorded documents and of the surveys referenced in each
such Title Commitment; (c) each of the surveys is prepared by a surveyor
acceptable to Purchaser; and (d) Purchaser accepts defects, exceptions or other
matters affecting title to or survey of the Refinery Real Property or the
Marketing Real Property disclosed in the Title Commitments (excluding only those
matters Purchaser and Seller have agreed to remove as set forth in Schedule
11.1.1). Purchaser shall be solely responsible from and after the date hereof to
procure such endorsements to the Title Policies as Purchaser deems necessary or
appropriate.
11.1.3 Within three days after discovery, either party shall
inform the other in writing of any new title matter that arises for the first
time after the Effective Date and before the Closing and is not reflected in any
Title Commitment. If the new title matter would negatively affect the Assets or
the Operations by 0.5% of the Cash Purchase Price, or more, and was not caused
directly or indirectly by Purchaser, then Purchaser may object thereto by
written notice to Seller within ten days after Purchaser's initial discovery. If
Purchaser fails to so notify Seller, or if the new title matter does not
negatively affect the Assets or the Operation (as specified above) or was caused
directly or indirectly by Purchaser, then such new title matter shall become a
Permitted Encumbrance. If Purchaser properly objects in writing within the
ten-day period, Seller shall elect to do one of the following: (a) cause such
new exception to be removed; (b) indemnify Title Company against liability from
such new exception so that Title Company insures around such exception; or (c)
indemnify Purchaser against such new exception. Seller shall notify Purchaser of
its election at least five days prior to the Closing. All title matters accepted
or deemed accepted pursuant to this Section 11.1.3 shall become Permitted
Encumbrances.
11.1.4 Purchaser acknowledges receipt of the survey plats
disclosed in the Title Commitments, which are subject to the acknowledgements
from Purchaser set forth in Section 11.1.2. If Title Company requires updates of
these surveys in order to remove any exception for matters that would be
disclosed by a current and correct survey, and for any new surveys of the
Marketing Real Property Title Company requires in order to remove any such
exception, then Seller will cause such update or new ALTA land title survey to
be prepared by a duly licensed land surveyor satisfactory to Title Company at
Purchaser's expense. Upon completion of any update or new survey, there shall be
delivered to Purchaser and Seller three sets each of the update or new survey
and to Title Company one set of the update or new survey. The surveyor shall
certify the accuracy of said update or new survey to Title Company
37
in such form as Title Company requires for purposes of issuing the Title
Policies without any exception for matters that would be disclosed by a current
and correct survey. Any new title matter meeting the criteria set forth in
Section 11.1.3 and arising from an update or new survey undertaken by Seller
pursuant to this Section 11.1.4 shall be subject to the same procedures for new
title matters specified in Section 11.1.3.
11.2 OWNER OR LEASEHOLD POLICIES OF TITLE INSURANCE. At the Closing,
Seller shall cause Title Company to issue, as to each Real Property being
conveyed and transferred by Seller, in an amount selected by Purchaser, and at
Purchaser's expense, Title Policies consistent with the Title Commitments, but
subject to any additional Permitted Encumbrances not shown thereon, so long as
Purchaser timely performs all of Purchaser's obligations specified in the Title
Commitments.
11.3 CONVEYANCE OF TITLE; ASSIGNMENT OF LEASEHOLD INTERESTS. At the
Closing, Seller shall (a) convey to Purchaser, by Corporation Grant Deed in the
form of Exhibit E, Seller's right, title and interest to all Real Property other
than leased Real Property and (b) assign to Purchaser Seller's right, title and
interest in all leased Real Property, and Purchaser shall assume the same, by
Assignment and Assumption of Lease Agreement in the form attached as Exhibit G:
11.4 TITLE INSURANCE. Except as specifically provided in this Article
11, Purchaser shall have sole responsibility for any real estate title or survey
matter. As to matters affecting title to the Real Property, Purchaser is relying
solely upon the Title Policies and not upon any representation or warranty of
Seller. Seller shall have no obligation to indemnify, defend and/or hold
Purchaser and its Indemnitees harmless from or against any claims for
Liabilities relating to any title or survey matter for which Purchaser is
insured under any of the Title Policies.
ARTICLE 12
RISK OF LOSS
12.1 CASUALTY OR CONDEMNATION.
12.1.1 In the event that, prior to the Closing Date, all or
any portion of the Refinery or any Marketing Site is damaged or destroyed by
fire or other casualty (a "CASUALTY") or taken by condemnation or eminent domain
or by agreement in lieu thereof with any person or entity authorized to exercise
such rights (a "TAKING"), Seller shall promptly notify Purchaser thereof.
12.1.2 In the event of a Casualty or Taking between the
Effective Date and the Closing Date affecting the Refinery, Seller shall elect
(a) 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 Purchaser's obligation to effect the Closing shall not be affected,
but the Closing Date and the Outside Closing Date shall be deferred until three
business days after repairs are completed and/or (b) to negotiate with Purchaser
to reduce the Purchase Price by an amount agreed to by Seller and Purchaser to
reflect the cost to repair or replace the affected Assets (the "REPAIR COSTS"),
in which case, in the event of a Repair Cost Dispute, the Closing Date and the
Outside Closing Date shall be deferred as provided in Section 12.1.6.
38
12.1.2.1 If Seller and Purchaser agree on the Repair
Costs within 15 days of Purchaser's receipt of Seller's notice of the Casualty
or Taking (the "REPAIR NEGOTIATION PERIOD"), Purchaser's obligation to effect
the Closing shall not be affected, but the Purchase Price and the Cash Purchase
Price shall be reduced by the Repair Costs so agreed.
12.1.2.2 If the parties do not agree on the Repair
Costs within the Repair Negotiation Period (a "REPAIR COST DISPUTE"), either
party may request Parsons Engineering to evaluate the affected Assets and
deliver to Purchaser and Seller its written estimate of the Repair Costs (the
"THIRD PARTY ESTIMATE") within 15 days after the end of the Repair Negotiation
Period.
12.1.2.2.1 If the Third Party Estimate is
less than $100,000,000, the Purchaser's obligation to effect the Closing shall
not be affected and the parties shall submit the Repair Cost Dispute to binding
arbitration under Article 28 for resolution after the Closing, with a
post-Closing adjustment to the Purchase Price equal to the finally-determined
Repair Costs.
12.1.2.2.2 If the Third Party Estimate is
equal to or greater than $100,000,000 but less than $625,000,000, Purchaser's
obligation to effect the Closing shall not be affected, but the Cash Purchase
Price shall be reduced by the amount of the Third Party Estimate and the parties
shall submit the Repair Cost Dispute to binding arbitration under Article 28 for
resolution after the Closing, with a post-Closing adjustment of the Purchase
Price equal to the difference between the Third Party Estimate and the
finally-determined Repair Costs.
12.1.2.2.3 If the Third Party Estimate is
equal to or greater than $625,000,000, Purchaser may elect, by giving Seller
written notice of election within 15 days of receipt of the Third Party
Estimate, to terminate this Agreement (other than Sections 8.14, 9.6 and 31.14
and Article 20, which shall continue in effect) without further obligation to
Seller, in which event Seller shall return the Earnest Money Deposit (together
with interest earned thereon) to Purchaser within three business days of receipt
of Purchaser's notice of termination.
12.1.3 In the event of a Casualty or Taking between the
Effective Date and the Closing Date affecting a Marketing Site, Seller shall pay
to Purchaser, within five business days of receipt: (a) with regard to a
Casualty, any insurance proceeds actually received by Seller on account of such
Casualty, and (b) with regard to a Taking, any award actually received by Seller
on account of such Taking. Neither a Casualty nor a Taking affecting a Marketing
Site shall affect Purchaser's obligation to effect the Closing.
12.1.4 In the event of any reduction in the Purchase Price in
connection with a Taking at the Refinery, as provided in Section 12.1.2,
Purchaser 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 Purchaser, (a) Purchaser
shall pay to Seller all such amounts, up to the amount of such Purchase Price
reduction, and (b) Purchaser shall be entitled to retain the balance (if any) of
such award(s). Seller hereby expressly assigns to Purchaser all of Seller's
right, title and interest in or to every such award,
39
and agrees to execute any and all documents that may be required in order to
facilitate collection thereof by Purchaser.
12.1.5 Any adjustment of the Purchase Price pursuant to this
Section 12.1 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
Purchaser shall be allocated first to a reduction of the principal amount of the
Purchaser Note and any balance paid in cash by Seller; and (b) an adjustment in
favor of Seller shall be paid in cash to the extent the Cash Purchase Price had
been reduced pursuant to this Section 12.1. Any such reduction, refund or
payment shall be made within 10 business days after such final determination.
12.1.6 In the event of a Repair Cost Dispute, the Closing Date
and the Outside Closing Date shall be deferred until (a) three business days
after receipt of the Third Party Estimate, or (b) if Seller elects the option in
Section 12.1.2(a), as provided therein.
12.1.7 Purchaser may elect to secure contingent business
interruption insurance on customary terms reasonably satisfactory to Seller with
respect to a Casualty at the Refinery between the Effective Date and the Closing
("CASUALTY INSURANCE"). If Purchaser elects to secure Casualty Insurance,
Purchaser will be responsible for the first $500,000 of the premium therefor,
Seller will reimburse the actual premium cost in excess of $500,000 up to a
total premium (including Purchaser's initial $500,000) of $1,000,000, and Seller
will reimburse Purchaser for 50% of any of actual premium cost in excess of
$1,000,000.
12.2 RISK OF LOSS. Subject to this Article 12, Seller shall retain the
risk of loss or damage with respect to each of the Assets until title passes,
which shall occur on the Closing Date.
ARTICLE 13
DEFAULT; REMEDIES
13.1 PURCHASER DEFAULT. In the event of non-performance, default or
breach of this Agreement by Purchaser that results in the failure to consummate
this Agreement (a "PURCHASER DEFAULT"), then Seller may, at its sole option and
as its sole remedy, take any of the following courses of action:
13.1.1 terminate this Agreement and collect liquidated
damages, as follows:
IF PURCHASER DEFAULTS IN ITS OBLIGATION TO PURCHASE THE ASSETS ON OR
BEFORE THE OUTSIDE CLOSING DATE, THEN PURCHASER AGREES THAT SELLER WILL INCUR
DAMAGES BY REASON OF SUCH DEFAULT WHICH ARE IMPRACTICAL AND EXTREMELY DIFFICULT
TO ASCERTAIN OR QUANTIFY. PURCHASER AND SELLER, IN A REASONABLE EFFORT TO
ASCERTAIN SELLER'S DAMAGES, HAVE AGREED BY PLACING THEIR INITIALS BELOW THAT AN
AMOUNT EQUAL TO THE EARNEST MONEY DEPOSIT IN CASH SHALL BE DEEMED TO CONSTITUTE
A REASONABLE ESTIMATE OF SELLER'S DAMAGES UNDER CALIFORNIA CODE OF CIVIL
PROCEDURE SECTION 1671. ACCORDINGLY, IF PURCHASER DEFAULTS IN ITS OBLIGATION TO
PURCHASE THE ASSETS, SELLER
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SHALL HAVE THE RIGHT TO RETAIN THE EARNEST MONEY DEPOSIT AS LIQUIDATED DAMAGES.
/s/ MSC /s/ SLL
------------------- -----------------------
Initials for Seller Initials for Purchaser;
or
13.1.2 enforce specific performance of this Agreement and the
transaction provided for herein according to the terms hereof by all means
available at law or in equity.
13.2 ELECTION OF REMEDIES. In the event Seller elects first to enforce
this Agreement by specific performance and at any time during pursuit of
enforcement elects not to pursue specific performance, then Seller shall be
entitled to pursue its remedies under this Article 13 as if it had elected to do
so as above set forth, and such subsequent election to pursue its courses of
action under this Article 13 shall be deemed to be an election of remedies at
that time and not before.
13.3 SELLER'S DEFAULT. In the event of non-performance, default or
breach of this Agreement by Seller that results in the failure to consummate
this Agreement, then Purchaser may, at its sole option, as its exclusive remedy,
enforce specific performance of this Agreement and the transaction provided for
herein according to the terms hereof by all means available at law or in equity.
ARTICLE 14
CHANGES IN REPRESENTATIONS AND WARRANTIES
If either Seller or Purchaser discovers on or before the Closing that
any representation or warranty made by it or the other party was or becomes not
true and correct in any material respect, it shall so notify the other party in
writing. The representations and warranties made in this Agreement shall be
deemed to be modified by any matter contained in such notice. In the case of any
such change in the representations or warranties by Seller, if the cumulative
changes so made would adversely affect the fair market value of the Assets by
0.5% or more of the Cash Purchase Price, Purchaser may object thereto by written
notice to Seller within ten days after receipt of the notice. If such objection
notice is not given within the ten day period, or the cumulative changes do not
have such adverse effect, then such change shall not give rise to any right or
remedy. If such objection notice is timely given and the effect of the
cumulative changes on the fair market value of the Assets exceeds such amount,
and Seller determines that it cannot cure such adverse effect prior to the
Closing by using commercially reasonable efforts, then the parties shall
negotiate in good faith a reduction of the Purchase Price to fairly reflect the
impact of the change on the fair market value of the Assets. In the event that
the parties are unable to agree on a reduction of the Purchase Price prior to
the Closing, then the parties agree to submit the matter to binding arbitration
under Article 28 for resolution after the Closing.
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ARTICLE 15
INDEMNIFICATION
15.1 INDEMNIFICATION LIABILITIES. Seller and Purchaser ("INDEMNITORS")
each shall indemnify and defend the other and the other's successors, assigns,
directors, employees, subsidiaries, Affiliates and agents ("INDEMNITEES")
against, and shall hold them harmless from, each and every Liability which
results from, arises out of or is attributable in any way to any of the
following:
15.1.1 Liabilities expressly assumed or retained by the
Indemnitor pursuant to this Agreement;
15.1.2 subject to Article 14 and Article 30, any
representation or warranty made by the Indemnitor in this Agreement or in
documents delivered by the Indemnitor at the Closing which is untrue in any
material respect (which term for these purposes shall exclude all qualifications
or exceptions relating to "materiality" in such representations or warranties);
or
15.1.3 any breach of the obligations, covenants or agreements
made by the Indemnitor in this Agreement.
15.2 PROCEDURES.
15.2.1 In the event that any officer or registered agent of
Indemnitee receives actual notice of any written claim by a third person giving
rise to a right of indemnification of such party hereunder, the Indemnitee
shall, within 60 days after receipt of such notice, give written notice thereof
to the Indemnitor setting forth the facts and circumstances giving rise to such
claim for indemnification and shall tender the defense of such claim to the
Indemnitor. If the Indemnitee fails to give such notice and tender such defense
within the 60-day period, the Indemnitee shall be solely responsible for any
Liability with respect to such claim to the extent the Liability is attributable
to failure to give notice within such 60-day period, but such failure shall not
otherwise result in a forfeiture or waiver of any rights to indemnification.
15.2.2 The Indemnitor shall be solely responsible for
selecting the attorneys to defend any matter subject to indemnification and/or
taking all actions necessary or appropriate to resolve, defend, and/or settle
such matters, and shall be entitled to contest, on its own behalf and on the
Indemnitee's behalf, the existence or amount of any obligation, cost, expense,
debt or liability giving rise to such claim. The Indemnitor shall keep the
Indemnitee fully and timely informed as to actions taken on such matters. The
Indemnitee shall cooperate fully with the Indemnitor and its counsel and shall
provide them reasonable access to the Indemnitee's employees, consultants,
agents, attorneys, accountants, and non-privileged files to the extent necessary
or appropriate to defend or resolve the matter, the Indemnitor reimbursing the
Indemnitee with respect to the cost of any such access. The Indemnitee shall
have the right, but not the duty, to participate with attorneys of its own
choosing, at its own expense, in the defense of any Liability for which the
Indemnitor is obligated to defend and indemnify it, and to approve any
settlement that affects it, without relieving the Indemnitor of any obligations
hereunder.
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15.2.3 When any Liability results from, relates to, or arises
out of the conduct of both Seller and Purchaser, the parties shall indemnify
each other in proportion to their respective share of such Liability.
15.3 CERTAIN LIMITATIONS.
15.3.1 Notwithstanding anything to the contrary in this
Article 15 or elsewhere in this Agreement, neither party will have any
obligation with respect to Liabilities as a result of breaches of
representations or warranties hereunder unless (i) the aggregate amount of such
Liabilities as a result of breaches of representations or warranties hereunder
exceeds or is reasonably expected to exceed $5,000,000, in which case only the
excess shall be subject to indemnification under this Article 15 and (ii)
written notice of such Liability, in reasonable detail, is delivered to the
other party within eighteen months of the Closing.
15.3.2 In determining the threshold amount identified above,
and once the threshold is exceeded, no party shall have any obligation for any
individual claim amounting to less than $100,000.
15.3.3 Seller's aggregate liability for indemnification with
respect to all claims under Section 15.1.2 shall not exceed $50,000,000.
15.3.4 Except for any action seeking specific performance
and/or injunctive relief for the breach of any covenant contained in this
Agreement, the indemnification provided an Indemnitee pursuant to this Article
15 shall be such Indemnitee's sole remedy for any breach by the Indemnitor of
any representation, warranty or covenant contained in this Agreement, or in any
certificate or document (to the extent such certificates or documents relate to
matters covered by the representations, warranties or covenants contained
herein) required to be delivered in connection with this Agreement, or any claim
relating to the subject matter of such representations, warranties or covenants,
or otherwise in connection with the consummation of the transactions provided
for hereby.
15.3.5 IN NO EVENT WILL ANY PARTY BE LIABLE TO THE OTHER UNDER
THIS AGREEMENT FOR PUNITIVE OR EXEMPLARY DAMAGES OR LOST PROFITS, EXCEPT TO THE
EXTENT ASSERTED BY ANY THIRD PARTY.
15.3.6 Neither party (the "DISCLOSING PARTY") shall have any
liability to the other party (the "RECEIVING Party") for any breach of
representation or warranty set forth in this Agreement, including all agreements
and documents incorporated herein by reference, if the Receiving Party knew on
the Closing Date that such representation or warranty was incorrect, incomplete
or otherwise breached (a "PUTATIVE BREACH") and had not disclosed such Putative
Breach to the Disclosing Party in writing prior to the Closing Date. No such
Putative Breach shall be deemed to be a breach of any such representation or
warranty by the Disclosing Party. For the purposes of this Section 15.3.6, a
party's knowledge shall be deemed to be Seller's Knowledge or Purchaser's
Special Knowledge, as applicable.
15.4 GENERAL RELEASE. Effective as of the Closing, Purchaser hereby
unconditionally releases and discharges Seller, Seller's Affiliates and Seller's
employees, officers, directors and contractors and those of its Affiliates from
all Liabilities relating to or arising out of the Assets or
43
the Operations of the Refinery and the Marketing Sites, whether or not known to
Purchaser on the Closing Date and wherever located, except for Seller's express
obligations under this Agreement and documents delivered by Seller pursuant to
this Agreement. In connection with this release, Purchaser hereby expressly
waives the benefits of any statute limiting the waiver of unknown claims,
including Section 1542 of the California Civil Code which reads as follows:
"A general release does not extend to claims which the
creditor does not know or suspect to exist in his favor at the time of
executing the release which if known to him must have materially
affected his settlement with the debtor."
ARTICLE 16
RECORDS
16.1 SELLER'S RIGHTS TO RECORDS. Seller shall have the right to remove
and retain copies of (or originals, provided that Seller provides copies to
Purchaser) any records regarding the Assets for which it has, or may have, any
business, technical or legal need. To the extent that those records, or any
other information made available to Purchaser before or after the Closing,
contain proprietary business or technical information of Seller or its
Affiliates, Purchaser agrees to hold such records in confidence and limit their
use to the Assets.
16.2 PRESERVATION OF RECORDS. Purchaser and Seller shall not destroy or
otherwise dispose of any records acquired, removed or retained hereunder for a
period of five years following the Closing Date (except as to Tax records, for
which the period shall be seven years) or such longer period as is required by
applicable regulations, laws, statutes, or court orders, except upon 30 days
prior written notice to the other party. During the specified period, each party
shall make such records available to the other party or its authorized
representatives for any business, legal or technical need in a manner which does
not unreasonably interfere with the record holder's business operations. Without
limiting the generality of the foregoing, Seller shall consult and cooperate
with Purchaser in preparing the business personal property tax statements (Form
571-1) to be filed by Seller with respect to the Assets owned on January 1,
2002, and provide Purchaser with copies of such statements, together with the
workpapers and asset listings relating to such statements.
ARTICLE 17
ACCESS TO ASSETS AFTER CLOSING
Purchaser shall afford duly authorized representatives of Seller, Tosco
and other prior owners reasonable access to the Refinery and the Employees (and,
regarding Seller only, the Marketing Sites) after the Closing Date with respect
to any legal, technical or operational matter relating to (a) Seller's
obligations under this Agreement, (b) the Operation of the Refinery (or,
regarding Seller only, the Marketing Sites) before the Closing, and (c) Seller's
removal of any Excluded Property from the Refinery and Marketing Sites; provided
in each case that Seller, Tosco or the other prior owner, as the case may be,
gives Purchaser reasonable prior notice, and provided further that such access
does not unreasonably interfere with Purchaser's normal operations. It is
understood and agreed that Seller shall remove all Excluded Property from the
44
Refinery and Marketing Sites prior to the Closing, or, if necessary, as soon as
practicable thereafter.
ARTICLE 18
PURCHASER'S INSPECTIONS
18.1 ACCESS TO REFINERY. Prior to the Effective Date, Seller has given
to Purchaser and its representatives access, during normal business hours, to
the Refinery, and Purchaser has conducted the due diligence, if any, it desires.
Subsequent to the Effective Date, but prior to the Closing Date, Seller will,
subject to Seller's safety and security policies for the Assets, permit
Purchaser and its representatives access, during normal business hours, to the
Refinery to (a) facilitate the transition of the Refinery to Purchaser's
ownership at the Closing, and (b) to verify the representations and warranties
of Seller in Article 8. Purchaser's right of access shall be subject to the
following conditions: (i) Purchaser shall give reasonable prior written notice,
(ii) such access shall not unreasonably interfere with normal operations of
Seller or with any ongoing remedial work at the Refinery, and (iii) Seller shall
have the right to accompany Purchaser and its representatives during any such
access. Purchaser acknowledges that it has received, prior to the Effective
Date, all such documents and copies of documents and information with respect to
the Refinery and its Operations as Purchaser has requested from Seller.
18.2 ACCESS TO MARKETING ASSETS. At times mutually agreed by the
parties, Purchaser may inspect each of the Marketing Sites, personally or
through agents, employees, contractors, or subcontractors, at Purchaser's
expense, to ensure that the equipment necessary for the operation of the
Marketing Sites as contemplated hereunder, including product dispensers, pumps,
air compressors, lifts, convenience store coolers, and air conditioners
(collectively, "MAJOR EQUIPMENT"), is present. Seller's representatives may
attend all such inspections. If Purchaser reasonably determines from its
inspections that any of the Major Equipment is missing, Purchaser shall notify
Seller in writing prior to the Closing Date. Seller shall replace such items
with items of equivalent utility, value and quality which are reasonably
acceptable to Purchaser, at Seller's expense.
18.3 POST CLOSING INSPECTION OF MARKETING ASSETS. Within ten business
days after the Closing, Purchaser shall have the right to inspect each Marketing
Site to determine whether the Major Equipment is missing; and whether any
previously identified replacements were made pursuant to Section 18.2. Seller's
representatives shall be afforded the opportunity to attend such inspection. To
the extent that Purchaser reasonably determines from such inspections that any
Major Equipment is still missing, and so notifies Seller in writing within ten
business days after the Closing, Seller shall replace such items at its expense.
If Purchaser does not conduct such inspection of any Marketing Site within ten
business days after the Closing, or fails to notify Seller of any Major
Equipment still missing within ten business days after the Closing in writing,
Seller shall not be obligated to replace any Major Equipment.
18.4 PURCHASER'S RIGHT TO INSTALL EQUIPMENT ON MARKETING SITES.
Purchaser shall have the right, after the Effective Date, personally or through
agents, employees, contractors, or subcontractors, to enter the Marketing Sites,
at Purchaser's expense and at such times as are
45
reasonably acceptable to Seller, to install point-of-sale equipment, telephone
lines and other equipment as needed to effect an orderly transition of
operations after the Closing Date. Purchaser shall not unreasonably interfere
with existing operations on the Marketing Sites. In the event that the Closing
does not occur and Purchaser has installed equipment on any Marketing Site in
accordance with this Section 18.4, Purchaser shall, at Seller's option: (a)
remove the equipment installed by Purchaser and restore the Marketing Site to
its original condition at Purchaser's sole cost; or (b) transfer to Seller for
no consideration, without warranty, express or implied, title to any equipment
installed by Purchaser, after which Seller shall be solely responsible therefor.
18.5 PURCHASER'S ENTRY SHALL BE AT PURCHASER'S SOLE RISK. Each entry by
Purchaser or its representatives onto the Refinery or the Marketing Sites shall
be at Purchaser's sole risk, and Purchaser shall indemnify and defend Seller and
its Affiliates against, and shall hold them harmless from, all Liabilities
arising from or in connection with such entry.
18.6 NO RELIANCE. NOTWITHSTANDING THE FOREGOING, PURCHASER AGREES THAT
IT CANNOT AND WILL NOT RELY ON ANY FACT, CONDITION, OR STATEMENT MADE DURING ITS
ACTIVITIES CONDUCTED PURSUANT TO THIS SECTION UNLESS SUCH FACT, CONDITION, OR
STATEMENT IS REDUCED TO WRITING AND INCORPORATED IN THIS AGREEMENT BY AMENDMENT.
ARTICLE 19
COVENANTS
19.1 GENERAL. Except as contemplated in, or provided for by, this
Agreement or as required by any applicable law, from the Effective Date until
the Closing Date, Seller agrees and covenants that (a) the business operations
of the Assets shall be conducted only in the ordinary course of business,
consistent with past practice, and (b) without limiting the foregoing, Seller
shall not (i) sell, mortgage, or otherwise transfer or convey any material
portion of the Assets, (ii) except in the ordinary course and consistent with
past practice in the conduct of the business operations of the Assets, amend,
modify, terminate or suspend any of such operations (except in immaterial
respects); or (iii) except in the ordinary course and consistent with past
practice in the conduct of such operations, waive or relinquish any right
(except in immaterial respects) under any Contract, Permit or applicable law.
19.2 OPERATION PENDING CLOSING. With respect to the Marketing Assets,
between the Effective Date and the Closing Date, Seller shall not permanently
close any of the service stations on the Marketing Sites, without Purchaser's
approval. Notwithstanding the foregoing, Seller may close any service station
temporarily to repair or rebuild the improvements therein. Seller will use
reasonable commercial efforts to maintain the current operations on, and the
repair and maintenance of, the Marketing Sites between the Effective Date and
the Closing Date.
19.3 ASSISTANCE REGARDING TRANSFERS OF RIGHTS. Seller shall provide
such assistance as Purchaser may reasonably request in Purchaser's efforts to
obtain consents to the assignment of any Contracts and Permits which Seller is
unable to obtain prior to the Closing; provided that Seller shall have no
liability to Purchaser for the failure to obtain such agreements or consents.
46
19.4 FINANCIAL STATEMENT REQUESTS. Subject to Purchaser reimbursing
Seller for its reasonable out-of-pocket expenses in connection therewith, Seller
agrees to (a) request its independent accountant, including providing consents
and authorizations reasonably necessary in connection with such request, (i) to
prepare, within 21 business days of the Effective Date, the Financial Statements
(as defined below) and (ii) to consent to the filing of such Financial
Statements with applicable registration statements and reports filed by
Purchaser under the Securities Act of 1933, including consenting to being named
as an expert therein, or the Securities Exchange Act of 1934, as amended, and
(b) request from Tosco its assistance to and cooperation with Purchaser in
attempting to obtain similar financial statements for the years ended December
31, 2000 and December 31, 1999, including an audited balance sheet as of
December 31, 1999.
For the purposes of this Section 19.4, "FINANCIAL STATEMENTS" shall
mean audited financial statements with respect to the Assets and the Operations
consisting of (i) a balance sheet as of December 31, 2000 and December 31, 2001,
(ii) income statements for the period from Seller's purchase of the Refinery to
December 31, 2000 and for the twelve months ended December 31, 2001, (iii)
statements of cash flow for the period from Seller's purchase of the Refinery to
December 31, 2000 and for the twelve months ended December 31, 2001, and (iv)
all notes to such statements. All Financial Statements shall be requested to be
prepared in accordance with generally accepted accounting practices and
principles, and in form meeting the requirements of Regulation S-X promulgated
by the Securities and Exchange Commission.
19.5 UNION NEGOTIATIONS. Between the Effective Date and the Closing
Date, Seller shall provide Purchaser periodically with information regarding the
status of Seller's negotiation of the renewals of the Collective Bargaining
Agreements and shall have the right to approve the material provisions thereof,
which approval shall not be withheld unreasonably, taking into consideration the
economic interests Purchaser has in the final terms of the Collective Bargaining
Agreements.
ARTICLE 20
PUBLICITY; CONFIDENTIALITY
20.1 PUBLIC STATEMENTS. At no time prior to the Closing will either
party make any press release or other public statement concerning this Agreement
or the transactions contemplated hereby, or disclose the terms hereof or thereof
to any third party, except with the prior written consent of the other party, or
as required by law or regulation (including attachment of this Agreement as an
exhibit to any filing pursuant to the Securities Exchange Act of 1934, as
amended or the Securities Act of 1933, as amended), or in connection with any
Permit application in furtherance of this Agreement. No public statement or
third-party disclosure will be made without advance notice to the other party.
20.2 CONFIDENTIALITY. The parties acknowledge that they are and
continue to be bound by the terms of the Confidentiality Agreement dated January
1, 2002 between Seller and Purchaser. In addition, Seller and Purchaser agree
that they will keep confidential and not disclose to a third party any of the
terms or provisions of this Agreement for a period of four years after the
Closing Date, except for disclosure of information that:
47
20.2.1 is or becomes publicly available by other than
unauthorized disclosure;
20.2.2 is made pursuant to the requirement or request of a
Governmental Authority of competent jurisdiction to the extent such disclosure
is required by a valid law or Order, and sufficient notice is given by the
disclosing party to the other party to permit the other party to seek an
appropriate protective order or exemption from such requirement or request, if
it so desires. If such protective order or other remedy is not obtained, or if
the other party waives compliance with the provisions of this Section 20.2 for
this purpose, the disclosing party shall furnish only that portion of the
information that is legally required and will exercise commercially reasonable
efforts to obtain reliable assurance that confidential treatment will be
accorded the information by the Governmental Authority. Notwithstanding the
foregoing, the parties agree that either party may disclose this Agreement as an
exhibit to its filings pursuant to the requirements of the Securities Exchange
Act of 1934, as amended, or the Securities Act of 1933, as amended, without
notice to the other party.
ARTICLE 21
EMPLOYEES AND BENEFITS
21.1 EMPLOYEES IN GENERAL. Schedule 21.1 contains a list of:
21.1.1 the represented employees working at the Assets as of
the date of this Agreement (each, a "REPRESENTED EMPLOYEE");
21.1.2 the regular, full-time and regular, part-time
non-represented employees working at the Assets as of the date of this Agreement
(each, a "NON-REPRESENTED EMPLOYEE"); which employees are employees of Seller
(collectively Represented Employees and Non-Represented Employees, the
"EMPLOYEES"); and
21.1.3 the employees at the Assets who are classified as not
actively at work as a result of (a) a short term disability, or (b) other leave
of absence (other than for long-term disability), (each such employee an
"INACTIVE EMPLOYEE").
21.2 REPRESENTED EMPLOYEES.
21.2.1 Purchaser shall offer, in accordance with the terms of
the Collective Bargaining Agreements, regular, full-time employment to all
regular, full-time Represented Employees and regular, part-time employment to
all regular, part-time Represented Employees, in each case who are employed by
Seller immediately prior to Closing.
21.2.2 Seller represents that it is bound by the Collective
Bargaining Agreements and the Memoranda of Agreement or Understanding, which are
listed on Schedule 21.2.2 ("COLLECTIVE BARGAINING AGREEMENTS"), between Seller
and the unions identified in items 1-5 of Schedule 21.2.2 (collectively, the
"UNIONS") and, in connection with contractor activities at the Pittsburg Coke
Terminal, the other collective bargaining agreements referenced in Schedule
21.2.2. Purchaser agrees to recognize the Unions as the exclusive representative
for the respective bargaining unit covered by the Collective Bargaining
Agreements. Purchaser shall adopt the Collective Bargaining Agreements and
maintain them in full force and effect for their
48
duration, except for changes mutually agreed to between Purchaser and the Unions
and except that Purchaser shall not be required to continue the existing
employee benefits (as set out on Schedule 21.2.2) ("SELLER'S UNION BENEFITS"),
but shall be entitled to establish such benefits as may be required by the
Collective Bargaining Agreements ("PURCHASER'S UNION BENEFITS") for employees
covered by the Collective Bargaining Agreements and hired by Purchaser on and
after the Closing Date, and such employees shall be entitled to participate in
Purchaser's Union Benefits, subject to the terms of the applicable benefit plans
and further subject to the approval of any third-party plan providers. Purchaser
shall make every reasonable effort to obtain the approval of all third party
plan providers for participation in such plans by said Employees. Purchaser also
agrees to be bound by the other collective bargaining agreements referenced in
Schedule 21.2.2 in connection with contractor activities at the Pittsburg Coke
Terminal.
21.3 NON-REPRESENTED EMPLOYEES.
21.3.1 OFFER OF EMPLOYMENT. Purchaser shall offer regular,
full-time employment to all regular, full-time Non-Represented Employees and
regular, part-time employment to all regular, part-time Non-Represented
Employees, in each case who are employed by Seller immediately prior to Closing.
Seller may make offers of continuing employment with Seller or its Affiliates to
those Non-Represented Employees listed on Schedule 21.3.1 ("AVAILABLE
EMPLOYEES"); provided that Seller shall not make such offers prior to the 22nd
day after the Effective Date; and provided further that any offers made by
Purchaser during the 21 days immediately following the Effective Date shall
remain open for acceptance by the Available Employees at least until the 36th
day following the Effective Date. Purchaser shall give Seller prompt notice upon
making its offers of employment to any Available Employee.
21.3.2 SALARIES AND WAGES. Purchaser shall employ the hired
Non-Represented Employees at the same or greater salaries or wages, including
executive incentive and bonus payments, as were paid by Seller immediately prior
to the Closing Date.
21.3.3 BENEFIT LEVEL. From the Closing Date through the first
anniversary thereof, Purchaser shall provide the hired Non-Represented Employees
with employee benefits substantially similar to those set forth on Schedule
21.3.3, which benefits (based on the employer contribution and determined
separately for exempt salaried and hourly (including non-exempt salaried)
employees) shall be substantially comparable in the aggregate to those benefits
provided by Seller prior to the Closing Date.
21.3.4 SERVICE CREDIT. Each hired Non-Represented Employee
shall receive credit for service from the date of employment by Seller or any
other owner of the Refinery or Marketing Sites, as applicable, which date is
identified in Schedule 21.1, for all purposes, including, but not limited to,
vesting, eligibility, and, except as otherwise provided in Section 21.7.2,
benefit level purposes under all of Purchaser's employee benefit plans,
policies, and programs.
21.3.5 MEDICAL PLAN AND DENTAL PLAN (ACTIVE & RETIREE).
Purchaser shall offer a medical plan and a dental plan as of the Closing Date so
as to ensure uninterrupted coverage of all hired Non-Represented Employees and
eligible dependents referred to in Schedule 21.3.5. Such medical plan and dental
plan shall grant credit for any deductible and co-payment amounts
49
paid by such Non-Represented Employees during the applicable plan year,
including the Closing Date, and shall not exclude pre-existing conditions to the
extent covered under Seller's plans. Subject to Purchaser's right to amend or
terminate its plans after the first anniversary of the Closing Date, Purchaser
shall offer benefits under Purchaser's retiree medical plan to Employees hired
by Purchaser and their dependents, who meet the eligibility requirements of
Purchaser's retiree medical plan.
21.4 INACTIVE EMPLOYEES. As of the Closing Date, all right of an
Inactive Employee to future employment, if any, shall be with Purchaser and not
with Seller. Purchaser shall offer employment to each Inactive Employee who
applies for employment with Purchaser to the extent required by applicable law.
21.5 TERMS OF EMPLOYMENT. Seller shall use commercially reasonable
efforts to retain all Employees to be hired by Purchaser in their current
positions up to the Closing Date. Purchaser shall keep on its payroll all such
Employees, except for those Employees who voluntarily leave, are terminated due
to death or disability, or are discharged for cause, for at least 12 months
after the Closing Date. For purposes of this Article 21, "cause" shall include
(i) any meaning ascribed to "cause" under California law, (ii) the commission of
an illegal act, (iii) negligence or willful misconduct in carrying out (or
failing to carry out) the employee's duties or responsibilities, (iv) failure to
comply with any of Purchaser's existing business conduct policies, (v) any other
violation of Purchaser's policies or practices that could have resulted in
termination of such employee, and (vi) in the case of Represented Employees, the
definition of "cause" in the Collective Bargaining Agreements. In addition, from
the Closing Date and for at least one year thereafter, Employees who are hired
by Purchaser shall be treated no less favorably than similarly situated
employees of Purchaser. Nothing in this Agreement shall (i) prevent Purchaser
from exercising any reserved right contained in any of its employee benefit
plans to amend, modify, suspend, revoke, or terminate any such plan after the
first anniversary of the Closing Date, (ii) apply with respect to any
equity-based compensation scheme of Purchaser, or (iii) require Purchaser to
assume any obligation or liability with respect to any of Seller's existing
employee benefits and pension plans, agreements, arrangements, or plans, whether
or not subject to ERISA. Nothing in this Agreement shall be construed to be a
guarantee of an Employee's continued employment with Purchaser.
21.6 VACATION LIABILITY. Purchaser shall assume liability as of the
Closing Date for the vacation entitlement that each Employee who becomes an
employee of Purchaser has accrued as reflected on Schedule 21.6. Purchaser shall
provide to each Employee who becomes an employee of purchaser, as vacation time
for the remainder of the calendar year 2002 after the Closing Date, a minimum of
two weeks or, if less, the amount of vacation time to which the Employee would
have been entitled after the Closing Date if Seller had remained his or her
employer for the balance of the year 2002 on the terms of employment existing as
of the Closing Date. Purchaser shall pay each such Employee's wages or salary
during their vacation entitlement from Purchaser, when taken. If an Employee
with accrued vacation terminates employment with Purchaser during the year 2002
with vacation entitlements remaining, Purchaser shall pay such Employee a lump
sum in cash equal to such vacation entitlement.
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21.7 PENSION PLANS.
21.7.1 DEFINED CONTRIBUTION PLAN. Purchaser agrees to accept
as a plan-to-plan transfer Employees' account balances (including pre-tax,
post-tax and loan balances) from Seller's savings plans for any Employee who so
elects. Seller shall vest at the Closing Date all Employees' unvested amounts in
Seller's savings plans. Employee account balances so transferred will include
those amounts that are subject to the provisions of Section 401(k) of the
Internal Revenue Code ("401(K) ASSETS"). Purchaser agrees to preserve within its
savings plan all protected benefits, rights and features attributable to
transferred 401(k) Assets in accordance with the requirements of Section
411(d)(6) of the Internal Revenue Code. Employees will also have the option to
leave their accounts in Seller's savings plan or to request distribution of
those portions of the accounts which are currently distributable. Purchaser will
have no obligation with respect to amounts attributable to Seller's savings plan
other than acceptance of the plan-to-plan transfers requested by Employees and
the preservation of the protected benefits, rights and features attributable to
transferred 401(k) Assets.
21.7.2 DEFINED BENEFIT PLAN.
21.7.2.1 Each employee hired by Purchaser who
participated in a defined benefit pension plan sponsored by Seller shall receive
credit for participation, vesting and benefit accrual purposes under Purchaser's
defined pension plans equal to the service credited under Seller's pension plans
for participation, vesting and benefit accrual purposes. The benefit payable to
each such employee from the defined benefit pension plan or plans of the
Purchaser (the "PURCHASER'S PLAN BENEFIT") shall be the greater of:
(a) the result of:
(i) the annual benefit earned as of
the employee's retirement date under Purchaser's plan or plans (including all
service credited by Seller's Plan), calculated as a single life annuity and
adjusted by any applicable early retirement reduction factors but not adjusted
for any qualified domestic relations order, as defined in Section 414 of the
Code ("QDRO"); minus
(ii) the annual benefit payable
under Seller's plan or plans, calculated as a single life annuity and
actuarially adjusted by any applicable early retirement factors as of the
employee's commencement date under Purchaser's plan or plans but not adjusted
for any QDRO or prior lump sum or other benefit payments; and minus
(iii) the annual benefit payable
under Tosco's plan or plans, calculated as a single life annuity and actuarially
adjusted by any applicable early retirement factors as of the employee's
commencement date under Purchaser's plan or plans but not adjusted for any QDRO
or prior lump sum or other benefit payments; or
(b) The annual benefit earned as of the
employee's retirement date under the Purchaser's Plan based solely on service
with Purchaser.
21.7.2.2 Purchaser's Plan Benefit determined in
accordance with this Section 21.7.2 shall be actuarially adjusted for payment in
a form other than single life annuity
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and the application of any early retirement adjustment. Purchaser shall have the
discretion to determine Purchaser's Plan Benefit of each employee in a manner
that is consistent with the foregoing and consistent with the terms of the
Purchaser's Plan.
21.7.2.3 The annual benefit payable from Seller's
pension plan(s) shall be determined on a vested benefit basis as of the Closing
Date.
21.8 SEVERANCE. Purchaser shall establish and maintain for a period of
12 months from the Closing Date, a severance program providing to Employees it
hires and who leave the employ of Purchaser (other than through death,
disability, discharge for cause or the employee's voluntary act), benefits that
in the aggregate are at least equal to Seller's Transition Severance Program (a
complete and correct description of which has been provided to Purchaser), and
Purchaser shall provide the severance benefits as set forth on Schedule 21.8 to
Employees it hires who are covered by such benefit as of the Effective Date and
who leave the employ of Purchaser (other than through death, disability,
discharge for cause or the employee's voluntary act), without any mitigation.
21.9 WORKERS' COMPENSATION AND EMPLOYMENT-RELATED CLAIMS. Seller agrees
that, with respect to claims for workers' compensation arising out of events
occurring prior to the Closing Date and all claims under Seller's employee
benefit programs by, or in respect of, persons employed by Seller at the Assets
arising out of events occurring prior to the Closing Date, regardless of whether
such employment had terminated and regardless of whether such employee is
employed by Purchaser, whether reported or unreported as of the Closing Date,
and whether insured or uninsured (including, but not limited to, workers'
compensation, life insurance, medical and disability programs), Seller shall, at
its own expense, honor, or cause its insurance carriers, if any, to honor, such
claims (to the extent and in proportion to any injury incurred prior to Closing)
in accordance with the terms and conditions of such programs or applicable
workers' compensation statutes, including any construction of such terms or
conditions ultimately made by any court or administrative body having
jurisdiction therefor. Without limiting the scope of the preceding sentence,
Seller shall be responsible for any and all claims and liabilities arising out
of or relating to (i) the employment of the employees or any former employees of
Seller, (ii) except as provided in Section 21.10 (WARN Act), the discharge by
Seller of any such employee or former employee of Seller, and (iii) the
provision of any employee benefits to such employees, former employees,
retirees, or disabled employees of Seller (and their beneficiaries and eligible
dependents) attributable to their employment with, or their participation in any
plans or programs maintained or contributed to, by Seller. Purchaser shall
assume liability for all workers' compensation claims for industrial injuries
and illnesses occurring on or after the Closing Date.
21.10 WARN ACT. Purchaser acknowledges and warrants to Seller that
Purchaser's actions in connection with the transactions contemplated by this
Agreement will not result in a "plant closing" or "mass layoff" within the
meaning of the WARN Act, and Purchaser shall indemnify and defend Seller and its
Affiliates against, and shall hold them harmless from, any Liability expense
incurred by Seller, including attorneys' fees, if applicable, in connection with
the application of the WARN Act to Seller as a result of the transactions
contemplated by this Agreement; provided that, prior to Closing, Seller will not
temporarily or permanently close or shut down any "single site of employment" or
any "facility" or any "operating unit,"
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"department" or "service" within a single site of employment, as such terms are
used in the WARN Act, within or constituting part of the Assets. Seller
represents that none of the Assets have had, and will not have, any such
closures or shutdowns within the period of at least ninety (90) days prior to
Closing. Seller agrees to not take any action or contribute to any liability of
Purchaser under the WARN Act, including not laying off any employee between the
Effective Date and Closing, without Purchaser's written consent, provided that
Seller may discharge employees for cause or poor employee performance consistent
with Seller's practices without such consent.
21.11 PAY EMPLOYEES UNTIL CLOSING DATE. Seller will pay all wages,
salaries, bonuses and other sums due Employees, other than accrued vacation and
payroll taxes thereon, through the close of business on the day prior to the
Closing Date.
21.12 RETENTION BONUSES. As part of Seller's sale of the Assets, Seller
has agreed to make retention payments to Employees who are qualified on the
payment dates, equal to 25% of normal earning in effect at the time of Closing.
The payment will be made to Employees who (a) accept Purchaser's offer of
employment, (b) move directly to employment by Purchaser without a break in
services, and (c) continue employment with Purchaser for the applicable periods.
21.12.1 The retention bonuses will be paid to Employees on the
following schedule: (a) 10% upon Closing and transfer of such Employees directly
to Purchaser's payroll, (b) 5% on the 6-month anniversary of the Closing and (c)
10% on the 12-month anniversary of the Closing.
21.12.2 Seller shall make the first payment of 10% to those
Employees who qualify upon Closing. Purchaser shall make the remaining two
payments to those Employees who qualify on the applicable payment dates. Seller
shall reimburse Purchaser for such payments to such Employees in accordance with
the provisions set forth below.
21.12.3 With respect to these subsequent retention bonus
payments, Seller shall:
21.12.3.1 provide Purchaser with a list of all hired
Employees with their name, social security number, normal earning in effect on
the date of the Closing, and the amount of the remaining two payments of such
retention bonuses;
21.12.3.2 subject to Purchaser providing an estimate
of payments due to Seller 15 days prior to the date such payments are due,
Seller shall provide advance funding to Purchaser for the estimated payments no
later than one day prior to disbursement by Purchaser;
21.12.3.3 reimburse Purchaser for any amounts
Purchaser paid to qualified Employees in excess of the estimated amounts paid to
Purchaser in accordance with Section 21.12.3.2, within 15 days of receipt of
documentation from Purchaser; and
21.12.3.4 reimburse Purchaser for the employer's
portion of the FICA taxes applicable to the remaining two installment payments.
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21.12.4 Purchaser shall:
21.12.4.1 provide Seller with an estimate of each
installment payment due to qualified Employees no later than 15 days prior to
the date such payments are due;
21.12.4.2 provide Seller with a reconciliation of the
total estimated installment payment and the actual installment payment,
including detailed documentation of such actual payments;
21.12.4.3 remit to Seller, within 15 days of the date
such installment payments are due, any advance funding received from Seller in
excess of actual payments or invoice Seller for any amounts due to Purchaser;
and
21.12.4.4 provide the following notation on
statements provided to qualified Employees with each installment: "Retention
installment is funded by Ultramar Inc."
21.13 CHANGE IN EMPLOYEE COMPENSATION. Seller will not increase the
rate of compensation paid, or pay any bonus, to Employees, except for those
increases or bonuses made in the ordinary course of business consistent with
Seller's past practices, contemplated by this Agreement or otherwise disclosed
by Seller prior to the Effective Date. Seller agrees to notify Purchaser of any
increases or bonuses given.
21.14 TRANSITION OF EMPLOYEES. From and after the Closing Date,
Purchaser and Seller shall cooperate to ensure an orderly transition of the
Employees who accept employment with Purchaser.
21.15 LOANS TO EMPLOYEES. Purchaser shall acquire all of Seller's loans
to Employees as set forth on Schedule 21.15. At Closing, Purchaser shall pay to
Seller the then outstanding principal amount remaining in the aggregate on such
loans and the then accrued unpaid interest on the Employee loans as of the
Closing Date. Notwithstanding the foregoing, Purchaser shall not acquire, nor
shall it be liable for payment to Seller with respect to, any loans set forth on
Schedule 21.15 to Employees that do not accept employment with Purchaser on the
Closing Date.
ARTICLE 22
TRANSFER OF PERMITS AND ASSIGNMENT OF CONTRACTS
22.1 TRANSFER OF PERMITS. It shall be Purchaser's responsibility to
obtain the issuance or transfer of all environmental and other Permits;
provided, however, that Seller shall cooperate with any efforts of Purchaser to
complete the actions required in connection with transferring or obtaining the
issuance of all such Permits, including, in the case of the Marketing Assets,
Seller's right, title and interest in all operating permits, including beer and
wine licenses, where applicable.
22.2 DELAYS IN TRANSFER OF PERMITS OR ASSIGNMENT OF CONTRACTS. If there
are prohibitions against, or conditions to, the conveyance of any Contracts,
Permits or Miscellaneous Assets without the prior written consent of third
parties, then any provision contained in this
54
Agreement to the contrary withstanding, the transfer of title to, or assignment
of, such Contracts, Permits or Miscellaneous Assets pursuant to this Agreement
shall not become effective unless and until such consent requirement is
satisfied, waived or no longer applies. When and if such consent requirement is
so satisfied, waived or no longer applies, to the extent permitted by applicable
law, the assignment of such Contracts, Permits or Miscellaneous Assets shall
become effective automatically as of the Closing Date, without further action on
the part of Seller or Purchaser and without payment of further consideration.
Each of Seller and Purchaser agrees to use its commercially reasonable efforts
to obtain satisfaction of any consent requirement on a timely basis; provided
that Seller shall not be obligated to expend any moneys in connection with
satisfying any such consent requirement. To the extent that any consent
requirement for any Contract, Permits or Miscellaneous Assets cannot be
obtained, Seller will, upon request of Purchaser and at Purchaser's expense, use
its commercially reasonable efforts (without infringing upon the legal rights of
any outside party or violating any applicable law) to provide Purchaser with the
benefits of such Contracts or Permits or equivalent contracts or permits
effective as of the Closing Date, provided Purchaser assumes all
responsibilities, liabilities costs and expense under any such Contracts,
Permits or Miscellaneous Assets with respect to the period after the Closing.
ARTICLE 23
CERTAIN TAX MATTERS
23.1 DOCUMENTARY TRANSFER TAXES AND CERTAIN FEES.
23.1.1 Purchaser shall pay all real estate transfer tax
imposed on the consideration from conveyance of Real Property under this
Agreement.
23.1.2 Purchaser shall pay the cost of all recording, filing
and escrow fees and closing costs imposed in connection with the conveyance of
Real Property under this Agreement.
23.2 OTHER TAXES.
23.2.1 Purchaser shall pay when due all sales, use, gross
receipts or excise taxes and any environmental fees imposed upon the transfer of
any part of the Assets pursuant to this Agreement, and shall deliver to Seller
written evidence of such payment. Purchaser shall indemnify and defend Seller
and its Affiliates against, and shall hold them harmless from, and pay, any and
all Liabilities arising out of or resulting from any failure to pay any such
taxes when due.
23.2.2 It is understood between Seller and Purchaser that the
consideration from the sale of certain of Seller's tangible personal property
may be exempt from California sales tax as sale for resale as defined under
California Revenue and Taxation Code Sections 6091-6092. Seller and Purchaser
agree to cooperate with each other to the extent possible to substantiate any
values or claimed exemptions as required by the State of California. Purchaser
shall provide to Seller at the Closing a Resale Exemption certificate regarding
the Refinery Inventory and Marketing Inventory.
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23.2.3 Seller and Purchaser will provide each other with such
cooperation and information as each may reasonably request of the other with
regard to the preparation and filing of Returns, or the conduct of an audit or
other proceeding in respect of Taxes.
ARTICLE 24
BULK SALES
Seller and Purchaser agree to waive compliance with any applicable bulk
sales laws. Seller shall indemnify Purchaser and its Affiliates against, and
shall hold them harmless from, and pay, any and all Liabilities arising out of
or resulting from any failure to comply with or perform any action in connection
with such bulk sales provisions as they apply to the transfer of Assets
consistent with this Agreement, to the extent (and only to the extent) Seller
expressly retains responsibility therefor. Seller shall comply with the bulk
sales tax notice requirement of the State of California.
ARTICLE 25
ASSIGNMENT
25.1 LIMITATION ON ASSIGNMENT. Subject to Section 25.2 hereof, this
Agreement may not be assigned by either party, in whole or in part without the
prior written consent of the other party, which consent shall not be
unreasonably withheld. Notwithstanding the foregoing, Purchaser may not assign
the benefit of Seller's representations and warranties without Seller's prior
written consent, which consent Seller may grant or withhold in its sole
discretion.
25.2 ASSIGNABILITY TO AFFILIATES. 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, 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 proposed obligations hereunder. Any
attempted assignment of this Agreement in violation of this Article 25 shall be
null and void.
25.3 SCOPE OF PERMITTED ASSIGNMENTS. This Agreement shall inure to the
benefit of the parties and their respective heirs, legal representatives,
successors and permitted assigns. This Agreement shall be binding upon the
parties and their respective heirs, legal representatives, successors and
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.
ARTICLE 26
LIKE-KIND EXCHANGE
The parties agree that either party may use a qualified intermediary,
as such term is defined under Treasury Regulation Section 1.1031(k)-1(g)(4)
("QUALIFIED INTERMEDIARY"), for
56
purposes of consummating the transactions contemplated by this Agreement and
effecting a like-kind exchange of property pursuant to and in accordance with
Section 1031 of the Internal Revenue Code of 1986, as amended, and the rules and
regulations promulgated thereunder. Purchaser acknowledges that Seller may
identify a Qualified Intermediary within ten days of the Closing Date, for
purposes of consummating a like-kind exchange under this Agreement, its right
under this Agreement to receive, pledge, borrow or otherwise obtain the benefits
of the Purchase Price (all other rights, remedies, liabilities and obligations
arising under this Agreement are retained by Seller). If Purchaser desires to
use a Qualified Intermediary, it shall give written notice to Seller at least
ten days prior to the Closing Date of its intention to do so, and such notice
shall identify such Qualified Intermediary. The parties agree to execute such
agreements and other documents as may be necessary to complete and otherwise
effectuate the like-kind exchange, provided that: (a) a party's obligations
hereunder shall not be increased; (b) such documents shall not modify a party's
representations, warranties or obligations hereunder; (c) the Purchase Price
paid by Purchaser shall not be different from that which Purchaser would have
paid pursuant to Section 3.1; (d) a party shall not incur any additional cost,
expense or liability as a result of its cooperation in such exchange; (e) Seller
shall indemnify Purchaser and its Affiliates against, and shall hold them
harmless from additional expenses, including taxes and closing costs, and any
other Liability which Purchaser may sustain or become subject to as a result of
the Purchase Price being paid to an intermediary party rather than to Seller and
the intermediary's subsequent use of the Purchase Price; and (f) neither party
shall be required to take title to any real property not part of the Assets.
ARTICLE 27
PAYMENTS
27.1 All references herein to dollars ($) refer to U.S. dollars. Unless
otherwise specified herein, any payment to be made hereunder shall be made in
U.S. dollars by wire transfer of immediately available funds, without discount
or deduction, or by such other means as the parties may agree in writing.
27.2 Any amount not paid by either party when due hereunder shall bear
interest from the date upon which payment was due through the date of payment at
a rate equal to one percent (1%) above the prime rate of interest as announced
by JPMorganChase Bank in New York City from time to time.
ARTICLE 28
ARBITRATION
28.1 NEGOTIATION OF DISPUTES AND DISAGREEMENTS. In the event of any
controversy or claim ("CLAIM"), whether based on contract, tort, statute or
other legal or equitable theory (including but not limited to any claim of
fraud, misrepresentation or fraudulent inducement or any question of validity or
effect of this Agreement including this section) arising out of or related to
this Agreement (including any amendments or extensions and any documents
delivered or to be delivered pursuant hereto), or the breach or termination
thereof, which the parties have
57
been unable to settle or agree upon within a period of 30 days after the dispute
or disagreement arises, each party shall nominate a senior officer of its
management to meet at a mutually agreed time and place not later than 45 days
after the dispute or disagreement has arisen to attempt to resolve such dispute
or disagreement. Should a resolution of such dispute or disagreement not be
obtained within 15 days after nomination of senior officers for such purpose,
either party may then, by notice to the other, submit the dispute to arbitration
in accordance with the provisions of Section 28.2.
28.2 ARBITRATION RESOLUTION. Any Claim shall be submitted to binding
arbitration by a panel of three arbitrators. Seller and Purchaser shall each
appoint one arbitrator from the list of approved arbitrators maintained by the
American Arbitration Association. The third arbitrator shall be a neutral
arbitrator who has not acted for either party (or any Affiliate of either party)
within the prior five years, and will be appointed in accordance with the
American Arbitration Association Rules then in effect. The arbitration shall be
held in San Antonio, Texas, and shall be conducted in accordance with the
Commercial Arbitration Rules of the American Arbitration Association. The
arbitrators shall determine the Claims of the parties and render a final award
in accordance with the substantive law of the State of Texas, excluding the
conflicts provisions of such law, except that matters relating to real estate
law and local and state environmental law should be determined under the
substantive laws of the State of California. The arbitrators shall set forth the
reasons for the award in writing.
28.3 CONDUCT OF THE ARBITRATION. Arbitration shall be subject to the
following additional provisions:
28.3.1 the hearing shall be conducted on a confidential basis
without continuance or adjournment;
28.3.2 any offer made or the details of any negotiation of the
dispute subject to arbitration prior to arbitration shall not be admissible;
28.3.3 each party shall be entitled to all rights and
privileges granted by the arbitrators to the other party;
28.3.4 each party shall be entitled to compel the attendance
of witnesses or production of documents, and for this purpose, the arbitrators
shall have the power to issue subpoenas in accordance with the law of the State
of Texas;
28.3.5 each party shall have the right (upon leave of the
arbitrators) to take depositions and obtain other discovery of the scope and in
the manner which the arbitrators deem reasonably necessary to the preparation
and presentation of the party's case;
28.3.6 the arbitrators shall have the power to impose on any
party such terms, conditions, consequences, liabilities, sanctions and penalties
as they deem necessary or appropriate (which shall be conclusive, final and
enforceable as the award on the merits) to compel or induce compliance with
discovery and the appearance of, or production of documents in the custody of,
any officer, director, agent or employee of a party any Affiliate of such party;
58
28.3.7 the arbitrators are authorized to award reasonable
attorneys' fees and costs, and the costs of arbitration, including the fees
charged by the arbitrators and by the American Arbitration Association, to any
substantially prevailing party unless the arbitrators determine and state in
their decision that they have determined that such an award is inappropriate;
and
28.3.8 the arbitrators shall schedule the arbitration within
90 days after the appointment of the third arbitrator and render their decision
in writing within 60 days after the arbitration is concluded.
28.4 COSTS. Each party shall bear its own costs, expenses and
attorneys' fees; provided that if court proceedings to stay litigation or compel
arbitration are necessary, the party who unsuccessfully opposes such proceedings
shall pay all reasonable associated costs, expenses, and attorneys' fees in
connection with such court proceeding.
28.5 BREACH. The parties recognize that irreparable injury will result
from a breach of any provision of this Agreement and that money damages will be
inadequate to fully remedy the injury. In order to prevent such irreparable
injury, the arbitrators shall have the power to grant temporary or permanent
injunctive or other equitable relief. Prior to its appointment of an arbitrator,
a party may, notwithstanding any other provision of this agreement, seek
temporary injunctive relief from any court of competent jurisdiction; provided
that the party seeking such relief shall (if arbitration has not already been
commenced) simultaneously commence arbitration. Such court-ordered relief shall
not continue more than ten days after the appointment of the arbitrator (or in
any event for longer than 60 days).
28.6 ARBITRAL AWARDS. Judgment on the award rendered by the arbitrators
is final and binding upon the parties, except to the extent it may be challenged
under the law. The parties hereby consent to the non-exclusive jurisdiction of
the state or federal courts of the State of Texas for the enforcement of any
award rendered by the arbitrators.
NOTICE: BY INITIALING IN THE SPACE, BELOW YOU ARE AGREEING TO HAVE ANY DISPUTE
ARISING OUT OF THIS AGREEMENT DECIDED BY NEUTRAL ARBITRATION AND YOU ARE GIVING
UP ANY RIGHTS YOU MIGHT POSSESS TO HAVE THE DISPUTE LITIGATED IN A COURT OR JURY
TRIAL. BY INITIALING IN THE SPACE BELOW, YOU ARE GIVING UP YOUR JUDICIAL RIGHTS
TO DISCOVERY AND APPEAL, UNLESS THOSE RIGHTS ARE SPECIFICALLY INCLUDED IN THIS
Article 28. IF YOU REFUSE TO SUBMIT TO ARBITRATION AFTER AGREEING TO THIS
PROVISION, YOU MAY BE COMPELLED TO ARBITRATE UNDER TEXAS LAW. YOUR AGREEMENT TO
THIS ARBITRATION PROVISION IS VOLUNTARY.
WE HAVE READ AND UNDERSTAND THE FOREGOING AND AGREE TO SUBMIT DISPUTES ARISING
OUT OF THIS AGREEMENT TO NEUTRAL ARBITRATION.
/s/ MSC /s/ SLL
------------------- ----------------------
Initials for Seller Initials for Purchaser
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ARTICLE 29
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 and reduced to
writing in its entirety and signed and delivered by each party.
ARTICLE 30
SURVIVAL OF REPRESENTATIONS AND WARRANTIES
All representations and warranties of the parties contained in this
Agreement shall survive for a period of eighteen months following the Closing
Date. No claim, for indemnity or otherwise, with respect to any representation
or warranty shall be brought unless written notice of such claim, setting forth
the facts and circumstances underlying such claim, is given to the party making
such representation or warranty on or before the end of such survival period. It
is the parties' intent that such surviving representations and warranties shall
not merge in the Closing or in the conveyancing instruments delivered at the
Closing.
ARTICLE 31
GENERAL; ADDITIONAL COVENANTS
31.1 ENTIRE AGREEMENT. This Agreement, including all of the
Attachments, Exhibits and Schedules, constitutes the entire understanding
between the parties with respect to the subject matter contained herein and
supersedes any prior understandings, negotiations or agreements, whether written
or oral, between them respecting such subject matter. There are no
representations and warranties except as expressly set forth in this Agreement.
31.2 CONSTRUCTION. Words of any gender used in this Agreement shall be
construed to include any other gender, and words in the singular number shall
include the plural, and vice versa, unless the context requires otherwise.
31.3 CAPTIONS. The captions used in connection with the Articles and
Sections of this Agreement are for convenience only and shall not be deemed to
enlarge, limit or otherwise modify the meaning or interpretation of the language
of this Agreement. Any references to "Articles," "Sections," "Attachments,"
"Exhibits," and Schedules" are to Articles, Sections, Attachments, Exhibits, and
Schedules of this Agreement.
31.4 ATTACHMENTS, EXHIBITS AND SCHEDULES. Each Attachment, Exhibit, and
Schedule referred to herein is incorporated into this Agreement by such
reference; provided that to the extent of any conflict or inconsistency between
any of the Attachments, Exhibits or Schedules and this Agreement, this Agreement
will prevail.
31.5 SEVERABILITY. If any provision of this Agreement is held to be
illegal, invalid, or unenforceable under any present or future laws, such
provision shall be fully severable; this
60
Agreement shall be construed and enforced as if such illegal, invalid or
unenforceable provision had never comprised a part of this Agreement; and the
remaining provisions of this Agreement shall remain in full force and effect,
unaffected by the illegal, invalid or unenforceable provision or by its
severance from this Agreement. In lieu of such illegal, invalid, or
unenforceable provision, there shall be added automatically as a part of this
Agreement a provision as similar in terms to such illegal, invalid or
unenforceable provision as may be possible and be legal, valid and enforceable.
31.6 NO WAIVER. The failure of any party to insist upon strict
performance of any of the terms or conditions of this Agreement will not
constitute a waiver of any of its rights hereunder.
31.7 GOVERNING LAW; CHOICE OF FORUM. This Agreement shall be governed
by and construed in accordance with the laws of the State of Texas applicable to
agreements made and to be performed entirely in the State of Texas.
Notwithstanding the foregoing sentence, matters relating to real estate law and
local and state environmental law shall be construed and enforced in accordance
with the laws of the State of California. The parties irrevocably submit to the
exclusive jurisdiction of the United States District Court for the Western
District of Texas, San Antonio Division for the purposes of this Agreement,
except for those matters over which that Court does not have subject matter
jurisdiction. Where the United States District Court for the Western District of
Texas, San Antonio Division does not have subject matter jurisdiction, the
Parties irrevocably submit to the exclusive jurisdiction of the state district
court located in Bexar County, Texas.
31.8 NOTICES All notices or other communications required hereunder
shall be in writing, shall be addressed as specified below and shall be deemed
to have been given: (a) at the time of delivery when delivered personally; (b)
upon receipt when sent by Federal Express, or similar overnight service, or (c)
upon completion of successful transmission when sent by facsimile (unless
transmission is completed outside recipient's normal working hours, in which
case such notice shall be deemed given at the start of recipient's next business
day), immediately followed by U.S. posting, postage prepaid.
Seller: Purchaser:
One Valero Place 300 Concord Plaza Drive
San Antonio, Texas 78212 San Antonio, TX 78216
Attention: General Counsel Attention: Corporate Secretary
Facsimile: 210-370-2490 Facsimile: (210) 283-2400
Phone: 210-370-2030 Phone: (210) 283-2248
Either Party may change its address or facsimile number by providing
written notice to the other at least ten days prior to the effective date of
such change.
31.9 COMMERCIALLY REASONABLE EFFORTS; TIME OF ESSENCE. Except as
otherwise specifically provided herein, Purchaser and Seller shall each use
commercially reasonable efforts to satisfy the conditions to Closing and
otherwise consummate the transactions contemplated by
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this Agreement as promptly as practical. Time is of the essence with respect to
the Closing of this Agreement.
31.10 COUNTERPARTS. This Agreement may be executed in any number of
counterparts and any party may execute any such counterpart, each of which when
executed by both parties and delivered shall be deemed to be an original. It
shall not be necessary in making proof of this Agreement or any counterparts
hereof to produce or account for any of the other counterparts.
31.11 EXTENSIONS OF TIME; WAIVER. It is agreed that any party to this
Agreement may extend time for performance by any other party or waive the
performance of any obligation of any other party or waive any inaccuracies in
the representations and warranties of any other party, but any such waiver shall
be in writing, and shall not constitute or be construed as a waiver of any other
obligation, condition, representation or warranty under this Agreement.
31.12 FURTHER ASSURANCES. Purchaser and Seller shall take such
additional action, and shall cooperate with one another, as may be reasonably
necessary to effectuate the terms of this Agreement and any agreement or
instrument delivered pursuant to this Agreement.
31.13 NO PRESUMPTION AGAINST DRAFTER. Purchaser and Seller have each
fully participated in the negotiation and drafting of this Agreement. If an
ambiguity, question of intent or question of interpretation arises, this
Agreement must be construed as if drafted jointly, and there must not be any
presumption, inference or conclusion drawn against either party by virtue of the
fact that its representative has authored this Agreement or any of its terms.
31.14 EXPENSES. Except as otherwise specifically provided in this
Agreement, each party to this Agreement shall bear its own expenses in
connection with this Agreement and the transactions contemplated hereby,
including attorneys' fees and expenses
31.15 INTERPRETATION. The use of the phrase "including," or phrases of
similar import, shall be deemed to include the phrase "without limitation".
[signature page follows]
62
IN WITNESS WHEREOF, the parties have executed this Agreement on the day
and year first written above.
ULTRAMAR INC.
By: /s/ MICHAEL S. CISKOWSKI
-------------------------
Name: Michael S. Ciskowski
Title: Senior Vice President
TESORO REFINING AND MARKETING
COMPANY
By: /s/ SHARON L. LAYMAN
-------------------------
Name: Sharon L. Layman
Title: Vice President and Treasurer
The following are lists of Attachments, Exhibits, and Schedules to this
Agreement:
ATTACHMENTS
<Table>
Attachment 1-R, 1-M: Title Commitments
(Section 2.1.1.1, Section 2.2.1.1)
Attachment 2-R, 2-M: Improvements located on the Real Property
(Section 2.1.1.2, Section 2.2.1.2)
Attachment 3-R, 3-M: Contracts
(Section 2.1.2.1, Section 2.2.2.1)
Attachment 4-R, 4-M: Miscellaneous Assets
(Section 2.1.2.2, Section 2.2.2.2)
Attachment 5-R, 5-M: Permits
(Section 2.1.2.3, Section 2.2.2.3)
Attachment 6-R, 6-M: Excluded Property
(Section 2.3.6)
Attachment 7-R, 7-M: Improvements, Equipment or Inventory NOT owned by
(Section 2.3.7) Seller
Attachment 8: Refinery Inventory Quantification Procedures
(Section 6.4.1)
Attachment 9: Inventory Valuation Protocol for Refinery and
(Section 6.4.1, Section 6.4.2) Marketing Sites
</Table>
EXHIBITS
<Table>
Exhibit A form of Assignment and Assumption of Permits,
Contracts and Miscellaneous Assets
Exhibit B form of Purchaser Note
Exhibit C form of Trademark License Agreement
Exhibit D form of Transition Services Agreement
Exhibit E form of Corporation Grant Deed
Exhibit F form of Bill of Sale
Exhibit G form of Assignment and Assumption of Lease Agreement
Exhibit H form of FIRPTA Affidavit
Exhibit I California Form 594W
Exhibit J form of Purchaser Parent Guaranty
Exhibit K form of Seller Parent Guaranty
</Table>
SCHEDULES
<Table>
Schedule 1 - P List of Purchaser's Employees with actual
knowledge (Article 1)
Schedule 1 - P - A List of Purchaser's Employees with actual
knowledge (for "Special Knowledge")
Schedule 1 - S List of Seller's Employees with actual
knowledge (Article 1)
Schedule 2.1.2.2 Transferred Emission Credits
Schedule 2.3.9 Excluded Contracts
Schedule 2.3.11 Retained Emission Credits
Schedule 3.2.3 Earn Out Provisions
Schedule 3.5 Allocation of Purchase Price
Schedule 8.3 Consents required by Seller
Schedule 8.4 No Breach Exceptions (Seller)
Schedule 8.5 Issues Involving Real Property Leases
Schedule 8.6 Issues Involving Improvements
Schedule 8.7 Compliance with Laws
Schedule 8.8 Issues Involving Contracts
Schedule 8.10 Pending Actions and Proceedings
Schedule 8.11 Labor Matters
Schedule 8.12 Intellectual Property
Schedule 9.3 Consents Required by Purchaser
Schedule 9.4 No Breach Exceptions (Purchaser)
Schedule 9.5 Pending Actions and Proceedings
Schedule 10.3.1 Seller Retained Litigation
Schedule 10.3.1.1.4 Terms of Pending Settlement
</Table>
<Table>
Schedule 10.3.6 Environmental Insurance Policy
Schedule 11.1.1 Title Encumbrances to be Removed
Schedule 11.1.1.4 Rights of Third Parties
Schedule 21.1 Seller's Employees
Schedule 21.2.2 Collective Bargaining Agreements
Schedule 21.3.1 Available Employees
Schedule 21.3.3 Benefits
Schedule 21.3.5 Medical Plan Recipients
Schedule 21.6 Vacation Liability
Schedule 21.8 Severance Benefits
Schedule 21.15 Employee Loans
</Table>
2
PURCHASER PARENT GUARANTY
As an inducement to Ultramar Inc., a Nevada corporation ("ULTRAMAR"),
to enter into a Sale and Purchase Agreement for Golden Eagle Refining and
Marketing Assets (the "AGREEMENT") dated as of February 4, 2002 with Tesoro
Refining and Marketing Company, a Delaware corporation ("PURCHASER"), for the
purchase by Purchaser of Ultramar's Golden Eagle Refinery and Marketing Assets
(as more particularly described in the Agreement, and therein defined as the
"ASSETS"), TESORO PETROLEUM CORPORATION, a Delaware corporation ("GUARANTOR"),
hereby unconditionally guarantees (the "GUARANTY") to Ultramar, its successors
and assigns the due performance of all obligations, and the prompt payment in
full of all amounts, which are now or may hereafter become due and owing when
due (whether at stated maturity, upon acceleration or otherwise) to Ultramar by
Purchaser, its successors and assigns pursuant to the terms of the Agreement and
any documents or instruments delivered pursuant thereto. The obligations and
amounts guaranteed, or intended to be guaranteed, hereby are herein collectively
referred to as the "OBLIGATIONS."
Guarantor acknowledges that, as the direct or indirect sole shareholder
of Purchaser, Guarantor will receive a direct or indirect benefit from
Purchaser's acquisition of the Assets from Ultramar and from the making of this
Guaranty.
This Guaranty is an irrevocable, absolute and continuing guaranty of
payment and not a guaranty of collection. Guarantor's obligation is as a primary
obligor and is not conditioned upon Ultramar's taking action to compel
performance or payment by Purchaser of the Obligations or exhausting its
remedies against Purchaser.
Guarantor waives: (a) diligence and demand for payment; (b) all notices
to Guarantor, Purchaser or any other person or entity (whether of nonpayment,
default under the Agreement or any other matters relating to the Agreement,
whether or not referred to in this Guaranty); (c) all demands whatsoever; (d)
any statute of limitations affecting Guarantor's liability under this Guaranty
or the enforcement of this Guaranty; and (e) all principles or provisions of
law, statutory or otherwise, that are or might be in conflict with the terms of
this Guaranty.
Without affecting this Guaranty or the rights and remedies of Ultramar
in any way, Ultramar may, at any time and from time to time and without notice
or demand of any kind, and notwithstanding that Guarantor's risk under this
Guaranty may be increased thereby and/or Guarantor's subrogation rights may be
prejudiced thereby: (i) amend, extend, increase, reduce, renew, waive,
accelerate or otherwise change the Obligations, (ii) accept collateral and/or
other guarantees and other forms of support for the Obligations, and exercise,
not exercise, perfect, not perfect, waive, compromise or release any rights or
remedies associated therewith and (iii) conduct any transactions of any nature
and amount with Purchaser; and Guarantor hereby waives all rights and remedies
with respect to all of the foregoing. Neither this Guaranty nor any of the
rights and remedies of Ultramar hereunder will be affected in any way by: (A)
any illegality, invalidity or
unenforceability of any of the Obligations or any security, guaranty or other
support therefor; (B) any disability or defense of Purchaser with respect to the
Obligations or the cessation or discharge of Purchaser's liability therefor for
any reason or any counterclaim, set-off or other claim Purchaser or Guarantor
has or alleges to have, including without limitation any arising under or
relating to the Purchase Agreement; (C) any bankruptcy, insolvency,
reorganization or other proceeding or arrangement affecting Purchaser; or (D)
any reorganization, recapitalization or change in control of, any sale of assets
or merger by, or any other transaction, event or circumstance affecting,
Purchaser, Guarantor or any affiliate of either; and Guarantor hereby waives all
rights and remedies with respect to all of the foregoing.
Guarantor represents and warrants that it has made arrangements
sufficient to it to obtain such information as it desires concerning the
financial, business and other affairs of Purchaser at present and on a
continuing basis, and Guarantor agrees that Guarantor is not relying upon
Ultramar, and Ultramar has no obligation of any kind, to furnish any such
information to Guarantor now or in the future, whether or not material and
whether or not known to Ultramar and whether or not Purchaser and Guarantor
continue to be affiliated.
If any payment of or on account of the Obligations is returned to or
recovered by Purchaser on account of any preference, fraudulent transfer,
fraudulent conveyance or other basis, actual or alleged, this Guaranty shall
automatically apply to the payment to Ultramar of the amount returned or
recovered.
Guarantor's obligations hereunder shall apply, without limitation, to
interest accruing under the terms of any of the Obligations after the
commencement of any bankruptcy, insolvency, reorganization or other proceeding
with respect to Purchaser, whether or not such interest continues to accrue in
such proceeding.
Guarantor agrees not to exercise any subrogation, contribution,
indemnity or similar right against Purchaser unless and until all Obligations
have been fully and irrevocably paid to and performed for the benefit of
Ultramar. Guarantor hereby subordinates any obligation of Purchaser to Guarantor
or any affiliate of Guarantor (the "SUBORDINATED OBLIGATIONS") to the prior,
full and irrevocable payment and performance of all Obligations to Ultramar, and
any amount paid, received or recovered by Guarantor or any affiliate of
Guarantor with respect to or on account of the Subordinated Obligations shall be
held in trust for Ultramar and paid over to Ultramar upon demand to be held as
collateral for or for application to the payment of the Obligations.
Upon written demand by Ultramar, Guarantor agrees to pay the full
amount of any indebtedness, damages, costs and expenses incurred by Ultramar, or
claim or demand asserted against Ultramar, arising from Purchaser's failure to
perform any of the Obligations. Payment shall be made to the address stated in
Ultramar's demand for payment.
In any action brought by Ultramar on this Guaranty, no other or further
proof shall be required of Ultramar than to establish the amount or sums of
money or other performance due and
2
owing to Ultramar from Purchaser. When so established, such amount or sums shall
be conclusive and binding on Guarantor.
Whenever the parties desire to give or serve any notice, demand,
request, or other communication with respect to this Guaranty, each must be in
writing and will be effective only if delivered by personal service or
commercial courier, transmitted by facsimile or similar electronic
communication, or mailed by certified or registered mail, postage prepaid,
return receipt requested, in each case addressed as follows:
To Guarantor: 300 Concord Plaza Drive
San Antonio, TX 78216
Attention: Corporate Secretary
(Facsimile) (210) 283-2400
To Ultramar: One Valero Place
San Antonio, TX 78212
Attention: General Counsel
(Facsimile) (210) 370-2490
Every notice, demand, request or other communication under this Guaranty shall
be deemed to have been given: (a) at the time of delivery when delivered
personally; (b) upon receipt when sent by FedEx, or similar overnight courier
service; (c) upon completion of successful transmission when sent by facsimile
(unless transmission is completed outside of the recipient's normal business
hours, in which case such notice shall be deemed given at the start of the
recipient's next business day), immediately followed by U.S. posting, postage
prepaid; or (d) three days after it has been deposited in the United States
Mail, postage prepaid. Each party may change its address by giving written
notice to the other party in conformity with this paragraph.
Ultramar may proceed against Guarantor for any amount guaranteed
hereunder whether action is brought against Purchaser or whether Purchaser is
joined in any such action or not.
This Guaranty shall be governed by and construed in accordance with the
laws of the State of Texas applicable to agreements made and to be performed
entirely within the State of Texas. The parties irrevocably submit to the
exclusive jurisdiction of the United States District Court for the Western
District of Texas, San Antonio Division for the purposes of this Guaranty,
except for those matters over which that court does not have subject matter
jurisdiction. Where that court does not have subject matter jurisdiction, the
parties irrevocably submit to the exclusive jurisdiction of the state district
court located in Bexar County, Texas. Service in any such action may be made by
giving notice in the manner provided herein. Guarantor irrevocably waives any
objection to any such court on the grounds of venue, inconvenient forum or any
other ground.
Every provision of this Guaranty is intended to be severable. In the
event any court of competent jurisdiction determines that any provision of this
Guaranty is illegal or invalid for any
3
reason, such illegality or invalidity shall not affect the balance of the
provisions of this Guaranty that remain binding and enforceable.
All costs and expenses, including attorney's fees, incurred by Ultramar
in seeking to obtain performance or payment from Purchaser shall be deemed an
Obligation for purposes of this Guaranty.
If this Guaranty is referred to a lawyer for enforcement or collection,
Guarantor will pay all attorneys' fees incurred by Ultramar. If Ultramar files
suit to enforce this Guaranty and Ultramar obtains a judgment against Guarantor
then, in addition to attorneys' fees, Guarantor shall pay Ultramar all costs of
suits reasonably incurred by Ultramar.
This Guaranty will inure to the benefit of Ultramar, its successors and
assigns and will be binding upon Guarantor, its successors and assigns.
IN WITNESS WHEREOF, the undersigned has executed this Guaranty this 4th
day of February, 2002.
TESORO PETROLEUM CORPORATION
By:
--------------------------------------
Name:
Title:
4
FIRST AMENDMENT
TO THE SALE AND PURCHASE AGREEMENT
FOR GOLDEN EAGLE REFINING AND MARKETING ASSETS
This First Amendment (the "First Amendment") to the Sale and Purchase
Agreement for Golden Eagle Refining and Marketing Assets between Ultramar Inc.
("Ultramar") and Tesoro Refining and Marketing Company ("Tesoro") is made and
entered into as of the 20th day of February, 2002 between Ultramar and Tesoro.
WHEREAS, Ultramar and Tesoro entered into the Sale and Purchase
Agreement for Golden Eagle Refining and Marketing Assets effective February 4,
2002 (the "Purchase Agreement");
WHEREAS, Ultramar and Tesoro desire to amend the Purchase Agreement as
set forth below; and
WHEREAS, all capitalized terms not defined herein shall have the
meanings assigned to them in the Purchase Agreement;
NOW THEREFORE, in consideration of the following and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
1. Preliminary Statement. The penultimate paragraph of the Preliminary
Statement (regarding Purchaser's parent guaranty) is hereby deleted in its
entirety and replaced with the following provision:
"Concurrently with the execution and delivery of this Agreement,
Purchaser is causing Tesoro Petroleum Corporation to execute and deliver to
Seller a Guaranty in the form attached here to as Exhibit J, which guarantees
Purchaser's performance under this Agreement."
2. Article 1--Definitions.
(a) The following terms are hereby deleted from Article 1 of the
Purchase Agreement:
Earn Out Payment
Purchaser Note
(b) The reference to Section 3.2.2 in the definition for the term
Purchase Price Balance is hereby amended to be Section 3.2.4.
3. Article 3--Purchase Price
(a) Section 3.1.1. Section 3.1.1 of the Purchase Agreement is hereby
deleted in its entirety and replaced with the following provision:
"3.1.1 For the transfer, sale and assignment by Seller of the Assets
other than those Assets listed elsewhere in this Section 3.1, Nine
Hundred Ninety-Five Million Dollars ($995,000,000) as adjusted pursuant
to Section 12.1.2 and Article 14, if applicable;"
(b) Section 3.1.6. Section 3.1.6 is hereby deleted in its entirety.
(c) Section 3.2.1. Section 3.2.1 is hereby deleted in its entirety and
replaced with the following provision:
"3.2.1 One Billion, One Hundred Twenty-Five Million Dollars
($1,125,000,000) shall be paid in cash at the Closing (net of the
Earnest Money Deposit, which shall be applied towards Purchaser's
payment obligation pursuant to this Section 3.2.1) (the "CASH PURCHASE
PRICE").
(d) Section 3.2.2. The two parenthetical phrases "(exclusive of the
Earn Out Payment) (the "Purchase Price Balance")" in Section 3.2.2 are hereby
deleted.
(e) Section 3.2.3. Section 3.2.3 is hereby deleted in its entirety.
(f) Section 3.2.4. Section 3.2.4 is hereby deleted in its entirety and
replaced with the following provision:
"3.2.4 Purchase Price Balance. In accordance with the
provisions set forth below, Purchaser or Seller (as applicable) shall
deliver to the other an amount equal to the Inventory and Adjustment
Amount minus One Hundred Thirty Million Dollars ($130,000,000) (the
"PURCHASE PRICE BALANCE").
3.2.4.1 The term "INVENTORY AND ADJUSTMENT AMOUNT" shall be
calculated as follows:
(a) the sum of
(i) the Refinery Inventory Price;
(ii) the Marketing Inventory Price;
(iii) the amount of the employee loans pursuant to
Section 21.15; plus
(iv) the Apportionment Sum Payable;
minus
(b) the sum of
(i) the amount of any adjustments made pursuant
to Section 12.1.2 and Article 14; plus
(ii) Five Million Dollars ($5,000,000).
3.2.4.2 If the Purchase Price Balance is a negative number,
then Seller will pay to Purchaser in cash an amount equal to the
Purchase Price Balance. If the Purchase Price Balance is a positive
number, then Purchaser shall pay Seller in cash the Purchase Price
Balance. Payments contemplated by this Section 3.2.4.2 shall be made
within 20 business days after the date on which Seller delivers the
Post-Closing Report to Purchaser. Notwithstanding the foregoing, any
amount
2
disputed in the Purchaser Response shall be paid within five business
days of final resolution of the disputed amount. All payments made
pursuant to this Section 3.2.4.2 shall include interest from the
Closing Date to the date of payment at the interest rate set forth in
Section 27.2.
3.2.4.3 As soon as practicable following the Inventory Report
Review Period (as defined in Attachment 8), Seller shall deliver to
Purchaser a report setting forth Seller's calculation of the Inventory
and Adjustment Amount (the "POST-CLOSING REPORT"). Purchaser shall
notify Seller in writing (the "PURCHASER RESPONSE") within 15 business
days of its receipt of the Post-Closing Report of any dispute regarding
the calculations set forth in the Post-Closing Report. Purchaser's
failure to deliver to Seller the Purchaser Response within such
15-business-day period shall be deemed for all purposes to constitute
Purchaser's acceptance of the Post-Closing Report.
3.2.4.4 If Purchaser timely delivers to Seller the Purchaser
Response, the parties shall negotiate in good faith a resolution of
such dispute. In the event that the parties are unable to agree on the
Inventory and Adjustment Amount within 30 days of Seller's receipt of
the Purchaser Response, then the parties agree to submit the matter to
binding arbitration under Article 28."
4. Article 6--Closing.
(a) Section 6.3.8. Section 6.3.8 is hereby deleted in its
entirety.
(b) Section 6.5.4. The phrase "and the determination of the
principal amount of the Purchaser Note" in the second sentence of
Section 6.5.4 is hereby replaced by the phrase "and the determination
of the payments contemplated by Section 3.2.4".
5. Article 12--Risk of Loss. Section 12.1.5 (a) is hereby deleted in
its entirety and replaced with the following provision:
"(a) an adjustment in favor of Purchaser shall be paid in cash
by Seller;"
6. Exhibits and Schedules. Exhibit B (Purchaser Note) and Schedule
3.2.3 (Earn Out Payment) are hereby deleted in their entireties. References to
these items in the listings of Exhibits and Schedules are hereby deleted.
Exhibit J (form of Purchaser Parent Guaranty) is hereby deleted in its entirety
and replaced with the attached Exhibit J. Simultaneously with the parties' entry
into this First Amendment, Seller is returning to Tesoro Petroleum Corporation
the executed original of the Purchaser Parent Guaranty delivered with the
parties' entry into the Purchase Agreement in exchange for an executed
counterpart of a replacement Purchaser Parent Guaranty in the form of Exhibit J
attached to this First Amendment.
7. The Table of Contents is hereby amended to reflect the foregoing
changes.
3
8. All provisions of the Purchase Agreement (including the Attachments,
Exhibits and Schedules thereto) not amended hereby shall remain in full force
and effect. All references in the Purchase Agreement to the "Agreement" shall
refer to the Purchase Agreement as amended by this First Amendment.
IN WITNESS WHEREOF, the parties have executed this First Amendment
effective as of the day and year first written above.
ULTRAMAR INC.
By:
--------------------------------------
Title:
-----------------------------------
TESORO REFINING AND MARKETING COMPANY
By:
--------------------------------------
Title:
-----------------------------------
4
The following, parties to the Seller Parent Guaranty and the Purchaser Parent
Guaranty, respectively, referred to in the Purchase Agreement (as amended by the
foregoing First Amendment, in the case of the Purchaser Parent Guaranty), hereby
consent to the foregoing First Amendment and confirm that references in such
guaranties to the "Agreement" shall refer to the Purchase Agreement as amended
by the foregoing First Amendment and that their respective obligations under
such guaranties shall remain in full force and effect. No implication shall be
drawn from this consent and confirmation that the foregoing First Amendment
would otherwise affect their respective obligations under such guaranties.
VALERO ENERGY CORPORATION
By:
--------------------------------------
Title:
-----------------------------------
TESORO PETROLEUM CORPORATION
By:
--------------------------------------
Title:
-----------------------------------
5